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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Leading today's discussion will be Joe Saffire, Chief Executive Officer of Life Storage; and Andy Gregoire, Chief Financial Officer.\nOur actual results may differ from those projected due to risks and uncertainties with the company's business.\nAdditional information regarding these factors can be found in the company's SEC filings.\nI am pleased to report another outstanding quarter.\nIt has been a very active quarter on a number of fronts.\nFirst, I am pleased to announce that we celebrated a significant milestone during the quarter when we crossed the 1,000 store threshold.\nSecond, I am proud to announce that for the fourth consecutive year, Newsweek has recognized our team for best customer service among storage centers.\nAnd third, we continue to perform at record levels with record occupancy for this time of year and exceptionally strong pricing power.\nWith regards to external growth, we are on pace to achieve record acquisition volume with over $1.7 billion of wholly owned acquisitions, either closed this year or currently under contract and expected to close by year-end.\nThis represents 115 additional stores and nearly 20% growth in our wholly owned portfolio.\nThese acquisitions represent a nice mix of both markets and maturity with roughly 1/3 still in lease-up and approximately 75% in the Sunbelt states.\nWe continue to expand in key markets such as Austin, Atlanta, Tampa, Miami, Phoenix, San Diego, Seattle and Greater New York City.\nDespite 1/3 in lease-up, we still expect the blended year one cap rate to be in the mid-four range as we remain focused on finding both strategic and FFO accretive opportunities.\nOur third-party managed portfolio totaled 357 stores at quarter end and is proving to be the robust acquisition pipeline that we anticipated.\nSpecifically, 27 stores acquired this year were managed by Life Storage, representing 30% -- 36% of our closed acquisition volume so far this year.\nAnd we continue to onboard additional managed stores at a rapid pace, including 30 in the third quarter alone as owners and developers are attracted to our operating performance and innovative technology platforms.\nOur team has evaluated a record number of management opportunities this year, and the pipeline continues to grow.\nWith this strong performance, we are once again increasing our guidance for 2021.\nWe have raised the midpoint of our estimated adjusted funds from operations per share to $4.94 this year, which would be a 24% growth over 2020.\nWe have also nearly doubled the upper end of our acquisition guidance from $1 billion to nearly $2 billion.\nThis report highlights our many ESG initiatives, including our expanded solar, diversity and inclusion and community engagement programs.\nThe report is available on the Sustainability page of our Investor Relations website.\nSo with that, I will hand it over to Andy to provide further details on the quarter and revisions to our guidance.\nLast night, we reported adjusted quarterly funds from operations of $1.37 per share for the third quarter, an increase of 35.6% over the same quarter last year.\nThird quarter same-store revenue accelerated significantly again to 17.4% year-over-year, up from 14.7% in the second quarter.\nSo we've begun to see somewhat of a return to normal seasonal trends in the past couple of months.\nWe remain highly occupied with average same-store occupancy up 220 basis points compared to the same quarter last year.\nThis elevated occupancy has allowed us to continue to be more aggressive with rates on new and existing customers, which has driven a significant increase in our in-place rates per square foot, which were up 14% year-over-year in the third quarter, representing substantial acceleration from the 8% in the second quarter and the 1% in the first quarter.\nSame-store operating expenses grew only 3.5% for the quarter versus last year's third quarter.\nThe largest negative variances occurred in repairs and maintenance and real estate taxes.\nThe increases were partially offset by a 5% decrease in Internet marketing expenses and slightly lower payroll and benefits.\nThe net effect of the same-store revenue and expense performance was a 390 basis point expansion in net operating income margin to 70.7%, resulting in 24.3% year-over-year growth in same-store NOI for the third quarter.\nAdditionally, we increased our dividend 16% in October as we continue to share growth in FFO with our shareholders.\nThis increase follows our 4% dividend bump this past January, and the 7% growth in our dividend last year.\nOur balance sheet remains strong.\nWe supported our acquisition activity and liquidity position by issuing equity securities and pricing a bond offering during the third quarter.\nSpecifically, we completed an underwritten public offering of common stock, generating approximately $350 million and issued an additional $130 million of common stock via our ATM program.\nThe company also issued roughly $90 million of preferred operating partnership units as part of the consideration for our portfolio acquisition during the quarter.\nFinally, we issued $600 million of 10-year 2.4% senior unsecured notes that priced in late September and closed in early October.\nOur net debt to recurring EBITDA ratio was 3.9 times at quarter end and 5.1 times following the completion of the notes offering in October.\nOur debt service coverage increased to a healthy 6.3 times at September 30, and we had $500 million available on our line of credit at quarter end.\nWe have no significant debt maturities until April of 2024 when $175 million becomes due.\nAnd our average debt maturity is 6.3 years.\nWe have substantial liquidity available to continue growing our asset base with investment opportunities that provide our shareholders with attractive risk-adjusted returns.\nRegarding 2021 guidance, we increased our same-store forecast again driven primarily by higher expected revenues and slightly reduced expense expectations.\nSpecifically, we expect same-store revenues to grow between 12.5% and 13.5%.\nExcluding property taxes, we expect other expenses to increase between 1.75% and 2.75% while property taxes are expected to increase 6.75% to 7.75%.\nThe cumulative effect of these assumptions should result in 17% to 18% growth in same-store NOI.\nWe have also increased our anticipated acquisitions by $900 million to between $1.7 billion and $1.9 billion.\nBased on these assumption changes, we anticipate an adjusted FFO per share for 2021 to be between $4.92 and $4.96.\n",
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"content": "q3 adjusted ffo per share $1.37.\nq3 ffo per share $1.37.\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 also thrilled that Lynne Katzmann, Founder and CEO of Juniper Communities is joining us as a special guest.\nWe are including on our call an informative session with Lynne designed to provide insights and an operator's perspective on the challenges caused by the pandemic and the lessons learned while meeting these challenges.\nWith me, they share a strong strategic vision of LTC's future.\nPlease join me in congratulating them for these well-deserved promotions.\nThey have aggressively dealt with unprecedented challenge over the last several months while also solving problems creatively and compassionately.\nSpeaking of creativity, I would like to share this story from one of our memory care communities that recently made national news.\nAfter being separated for more than 100 days from her husband, Steve, who is suffering from early onset Alzheimer's, Mary Daniel was focused on finding a way to reunite with him.\nOur operator, ALG Senior, headquartered in Hickory, North Carolina thought outside of the box and offered Mary a part-time job as a dishwasher.\nBoth Mary and the community are taking this job seriously.\nShe received substantial training on assisted living care and has been tested weekly for COVID-19.\nNow, after each shift, Mary visits Steve in his room where they watch TV and lay in bed together holding hands.\nShe uses her paycheck to buy gift cards for the staff in recognition of the very hard work they are doing to care for her husband and others loved ones.\nThere are similar stories from many of our operators around the country.\nIn fact, I hope Lynne will share some of her own.\nWe commend them for working tirelessly to provide care where it is needed the most and have confidence they will continue to meet this new normal with diligent strength and grace.\nAlthough most states were able to successfully flatten the curve earlier on in the pandemic, COVID-19 cases have spiked around the country, potentially over-taxing our healthcare system.\nIn our industry specifically, uncertainties remain around PPE, sanitizing supplies, testing and staffing.\nDemand for testing has increased resulting in growing lag times between test and results while some testing results have been found to be unreliable.\nThe recent decision by CMS to provide point of care COVID-19 test supplies to skilled nursing facilities should help, but to our knowledge, there is no similar program for private pay communities.\nIt is quite impressive to see how our industry has come together during this time.\nIn addition to the work being done by operators, several industry organizations have launched initiatives including intensive lobbying of Congress for additional relief funding, limited liability protection, and the prioritization of testing, PPE, and access to a vaccine, when available.\nThey have also engaged PR firms and launched media campaigns in an effort to enhance the perception of our industry and refute recent trends of negative press.\nLTC is honored to be an active participant in several of these programs.\nMoving more specifically to LTC's second quarter results.\nMost directly due to COVID costs and other COVID impacts, we have placed our Senior Lifestyle portfolio on a cash basis as of July 1st due to a shortfall in May and June rent payments.\nSenior Lifestyle's total orderly rental obligation to LTC is approximately $4.6 million.\nFor the quarter ended June 30th, 2020, we received a total of approximately $1.8 million.\nIn July, we received approximately $1.1 million.\nWhile recent rent payments have been trending up, at June 30th, Senior Lifestyle owed us $2.8 million for the second quarter of 2020, which is reflected in our receivable balance as of that date and is covered by an undrawn letter of credit that we hold.\nIn cooperation with Senior Lifestyle, we are evaluating our options for the portfolio, which may include seeking new operators for the 23 properties and/or pursuing sales of some of the 23.\nA split of the portfolio among several different regional operators, some of whom could be new to LTC Properties, provides an opportunity to reduce portfolio concentration while building relationships with operators new to LTC with whom we can grow.\nWe have proactively managed operator concentration in our portfolio.\nOur current Senior Lifestyle is one of only two operators where income and asset concentration exceeds 10%.\nNot surprisingly, the quarter has been quiet with respect to new investments.\nHowever, we are continuing to court [Phonetic] potential operating partners and evaluate structured finance opportunities which typically has shorter investment duration and we believe offer better risk-adjusted returns in today's market.\nWhile the market still remains uncertain with respect to 2020, the foundation we have built will serve us well when restrictions loosen and we can again actively engage with potential acquisition candidates.\nBeing well capitalized allows us to more quickly step into situations than some other financing sources.\nAlthough I believe that it is unlikely we will close any major transactions in 2020, I also believe that LTC will continue to play a strategic and important role in seniors housing and care financing over the long-term.\nAs we discussed last quarter, we are not giving 2020 FFO guidance due to COVID-related uncertainties.\nAs Wendy discussed, we have placed Senior Lifestyle on a cash basis as of July 1.\nAdditionally, we wrote-off our straight line rent and lease incentive balances related to Senior Lifestyle as of June 30.\nPrimarily due to this write-off, total revenues decreased $17.8 million from last year's second quarter.\nDecreased rent from Preferred Care was also a contributing factor.\nThese declines were partially offset by acquisitions and completed development projects, increased rent from 2019 lease transitions and higher rent from Anthem.\nInterest income increased $469,000 in the 2020 second quarter due to the funding of additional loan proceeds and expansion and renovation projects.\nIncome from unconsolidated joint ventures decreased $128,000 in 2Q 2020 due to mezzanine loan payoffs and reduced income from our preferred equity investment in a joint venture with an affiliate of Senior Lifestyle.\nDuring the fourth quarter of last year, we recognized a $5.5 million impairment charge related to our $25 million investment in the joint venture.\nIn the second quarter of 2020, the four properties comprising the JV were sold as discussed on our last call.\nAccordingly, we received partial liquidation proceeds of $17.5 million and recognized a loss on liquidation of unconsolidated joint ventures of $620,000.\nWe have a receivable balance of $1 million related to additional proceeds that we anticipate receiving throughout the second half of 2020.\nInterest expense decreased $164,000 due to lower outstanding balances and lower interest rates under our line of credit in 2Q 2020 partially offset by the sale of $100 million of senior unsecured notes in the fourth quarter of 2019.\nG&A expense was comparable year-over-year.\nNet income available to common shareholders decreased $18.6 million due primarily to the write-off of Senior Lifestyle straight line rent receivable and lease incentive balances as well as the loss on the liquidation of our unconsolidated JV.\nNAREIT FFO was $0.31 per diluted share for the second quarter of 2020 and $0.75 per diluted share for the same period last year.\nExcluding the non-recurring items already discussed in the current period, FFO per share was $0.76 this quarter compared with $0.75 in last year's second quarter.\nDuring the 2020 second quarter, we received $17.5 million from the sale of the properties in the JV with an affiliate of Senior Lifestyle as previously discussed and $2.1 million related to the partial paydown of an outstanding mezzanine loan.\nWe funded $2 million of additional proceeds under an existing mortgage loan with an affiliate of Prestige Healthcare, which is secured by four skilled nursing centers with a total of 501 beds.\nThe additional proceeds bear interest at 8.89% increasing 2.25% annually thereafter.\nWe also funded $7.4 million in development and capital improvement projects on properties we own, $200,000 under mortgage loans and paid $22.4 million in common dividends.\nAt June 30, we own one property under development with remaining commitments of $7.4 million.\nWe also have remaining commitments under mortgage loans of $2.7 million related to expansions and renovations on four properties in Michigan.\nAt June 30, we had $50.4 million in cash and cash equivalents.\nWe currently have over $510 million available under our line of credit and $200 million under our ATM program providing LTC with total liquidity of approximately $760 million.\nOur long-term debt-to-maturity profile remains well matched to our projected free cash flow helping moderate future refinancing risk.\nWe have no significant long-term debt maturities over the next five years.\nAt the end of the 2020 second quarter, our credit metrics compared favorably to the healthcare REIT industry average with net debt to annualized adjusted EBITDA for real estate of 4.3 times and annualized adjusted fixed charge coverage ratio of 4.9 times and a debt to enterprise value of 32%.\nThe effect of the economic fallout from COVID-19 on the real estate capital markets has resulted in our debt to enterprise leverage metric being higher than our long-term target of 30%.\nHowever at 4.3 times, we are still comfortably below our net debt to annualized adjusted EBITDA for real estate target of below 5 times.\nI'd like to quickly discuss rent deferrals before turning the call over to Clint.\nFor the second quarter, rent deferrals were less than $1 million or approximately 2% of second quarter rent.\nApproximately $277,000 of this deferred rent has been repaid.\nAccordingly, at June 30, there were $653,000 in rent deferrals outstanding or about 1.5% of rent.\nIn July, we received two deferral requests from operators and granted one in the amount of $80,000 for July and the other totaling $280,000 for August and October rent.\nI will cover several items today starting with our Brookdale renewal.\nOur Brookdale leases, which cover 35 properties in eight states are the only significant lease renewals through 2022.\nGiven the uncertainties caused by COVID-19, we agreed to extend the maturity date by one year to December 31st, 2021.\nIn consideration for the one-year extension, Brookdale agreed to consolidate the four leases we have with them into a single master lease whereby all properties must be renewed together.\nBrookdale now has three renewal periods, consisting of one four-year renewal option, one five-year renewal option and one 10-year renewal option.\nBrookdale's notice period to exercise its first renewal option will open January 1, 2021 and close on April 30th, 2021.\nThe economic terms of rent remain the same as the consolidated rent terms under the previous four separate lease agreements.\nWe have extended a $4 million capital commitment to Brookdale, which is available through December 31st, 2021 at a 7% yield.\nMoving to our development projects, as I mentioned last quarter, construction was completed on our assisted living memory care real estate joint venture project with Fields Senior Living in Medford, Oregon.\nFields has received its license to operate, is conducting tours and plans to open in the fall.\nOur development project with Ignite remains on track to be completed in the fall.\nNext, I'll discuss our portfolio numbers.\nQ1 trailing 12-month EBITDARM and EBITDAR coverage using a 5% management fee was 1.39 times and 1.17 times respectively for our assisted living portfolio and 1.76 times and 1.31 times respectively for our skilled nursing portfolio.\nExcluding Senior Lifestyle from our assisted living portfolio, EBITDARM and EBITDAR coverages increased to 1.49 times and 1.26 times.\nI'd now like to provide some occupancy trends in our portfolio.\nThis data is as of July 17th.\nFor our private pay portfolio, occupancy is as of that date specifically and for our skilled portfolio, occupancy is the average for the month-to-date and because our partners have provided July data to us on a voluntary and expedited basis before the month has closed, the information we are providing encompasses approximately 72% of our total private pay units and approximately 93% of our skilled nursing beds.\nFor additional context, we are also sharing comparative information about occupancy as of March 31, 2020 and June 30, 2020 for the same population used for the July data.\nPrivate pay occupancy at March 31 was 83% and 77% at June 30 and July 17th.\nFor skilled nursing, average monthly occupancy for the same dates respectively was 80%, 72% and 71%.\nI'll finish my remarks today with some brief comments on deal flow.\nWhile the market remains constrained and there are still complexities to be worked through, we are seeing some interesting opportunities and our business development team is continuing to actively source new deals.\nBy analyzing where we believe the market is headed, we are positioning LTC to be ready to strategically deploy capital as soon as practical and beneficial for us and for our shareholders.\nWe believe that our strong and flexible balance sheet is a competitive advantage.\nRight now we see better opportunities in structured finance products such as preferred equity investments, mezzanine loans, bridge loans, and unit ranche loans for their shorter duration and what we believe to be better risk-adjusted returns in today's market.\nOver the longer-term, we are continuing to build and enhance operator relationships so that when the time is right we can return to more standard acquisition and development investments that meet our underwriting criteria and create or enhance growth oriented partnerships with strong regional operating companies.\nAt this time however, we cannot accurately pinpoint when these type of transactions will resume.\nAs I reflect back on the quarter, it was encouraging to see some signs of progress as our operators and the seniors housing and care industry aggressively addressed pandemic-related challenges.\nLTC is continuing to provide support as needed as our operators now have to deal with the repercussions of the recent spike in COVID cases.\nI continue to believe that more and more opportunities will be available to LTC and that we stand prepared to act on them when the time is right.\nNow it's my pleasure to introduce Lynne Katzmann, Founder and CEO of Juniper Communities.\nLynne started Juniper in 1988 and has grown the company to one of the premier regional senior living companies in the United States.\nToday, Juniper operates 21 communities in three states, Colorado, New Jersey, and Pennsylvania.\nOf these 21, Juniper leases two in Colorado and three in New Jersey from LTC.\nThese include all care levels from independent living to memory care to skilled rehabilitation centers.\nJuniper's mission of nurturing the spirit of life is visible in their physical environments and experience through their signature care programs.\nAre we live, now?\nLynne, you are live.\nYes, Lynne, please begin.\nOperator, we can't hear Lynne.\nCan you hear me now?\nYes, we can hear now, Lynne.\nToday, I'm going to be talking about COVID-19, the impact of COVID-19 from an operator's perspective and as Wendy said, Juniper's properties span the continuum.\nHowever, today, I'm going to be focusing primarily on the AL and memory care experience during COVID.\nTo summarize my comments briefly, I want to let you know that I want to share with you an understanding of COVID-19 and its impact on senior housing through a chronology of events.\nI want to talk with you about Juniper's COVID-19 journey, our strategy, as well as a three-phase approach to the pandemic.\nAnd lastly, I'd like to share with you some of the lessons I believe we've learned.\nFirst, I want to talk about the COVID-19 reality.\nThe CDC issued its first public alert to the U.S. on January 8th of this year.\nThe first death in the U.S. occurred at Evergreen Health Care Center in Kirkland, Washington on February 29th.\nOn March 11th, they were 1,100 confirmed cases in the U.S. and it was on that day that the WHO declared COVID-19 to be a global pandemic.\nOn the next day, on March 12th, the Health and Human Services placed their first order for N95 masks.\nAt the time, they expected delivery around the end of April.\nBy the end of March, there were 164,000 confirmed cases with over 3,100 deaths.\nFour months later, as you all know, we stand at 150,000 Americans dead with just 1,200 -- with an additional 1,200 being added yesterday.\nSo the extent of this pandemic is huge and the time frame in which this has happened is incredibly short, which has made it that much more difficult for all of us, but especially operators who care for chronically ill older adults to take action.\nJuniper's COVID-19 journey as I said has three phases.\nOne, we call the crisis phase which started in March -- late March and went through May.\nPhase two is what we are calling our path forward or the beginning of recovery, and Phase three, which we have not yet experienced is what we're dubbing the new normal.\nI want to now tell you a little bit about our 30,000 foot view of our strategy.\nOur goal has been to keep our residents and our associates healthy and safe.\nAnd our approach has been one which we consider to be proactive and has involved primarily a testing and infection control policy.\nPart of our strategy has evolved because of our understanding of what successful countries have done -- other successful countries had done in combating COVID and looking at the infection prevention strategy, which have led them more success.\nAmong those are Germany and South Korea.\nOur crisis management strategy included four key points.\nThe first was testing, contact tracing and isolation where we defined the problem, identified the risk and implemented protective actions that related to what we had identified.\nOur second piece of our crisis management process related to stepped up infection control practices, which included everything from hand washing and social distancing to cleaning and disinfecting, and most importantly, the proper use and availability of personal protective equipment or PPE.\nThe third part of our strategy involved associate training and support particularly to assure widespread adoption of appropriate practices.\nAnd last, but certainly not least, was a new system to ensure enhanced accountability and to document results.\nAs I said before, our testing strategy was patterned after South Korea, which used a test early and universal strategy regardless of someone's symptoms.\nWe initiated testing in late March.\nWe used a private lab and our decision was to test all residents and associates, not just those with significant symptoms, substantially different than what was happening at the time.\nWe started by testing in hots pots in two communities, both of which were LTC Properties, one in Colorado and one in New Jersey.\nRoughly 50% of the people tested were positive, but most notably, of these, 70% to 94% were asymptomatic.\n72% of residents to be specific and 94% of our associates.\nThis is hugely important because it told us that this disease was transmitted without someone having symptoms and that despite what we were being told by the CDC, we needed to do more.\nJuniper used that information to put together what we considered our battle plan, which we believe has been fairly successful.\nI want to also note that the majority of our communities tested 100% negative and in those communities, what we did is essentially sheltered everyone, including our staff in place.\nA fun example of this was something we call Camp Wellspring, which took place in memory care and as many of you may know, memory care residents are harder to isolate.\nThey naturally like to come out of their rooms and often times and so isolating them individually in their suites is often more difficult.\nBy creating a safe environment, by sheltering in place, by creating small cohorts, we were able to keep people safe and healthy.\nMore importantly or equally importantly, I should say is that we created a fun environment, one which had tremendous positive impact on our residents and our team members as well as their families.\nWe created an RV camp in our parking lot and each of the cohorts -- cohorts are like neighborhoods and so we assigned staff to each of those.\nNeighborhoods -- they were not allowed to go to other parts of the building.\nSo similarly, they had to shelter outside of the building in their time off in a distinct location and we created those.\nAt the end of the day, many of our residents felt that they were on vacation.\nThey thought it was great fun and we've now dubbed it Camp Wellspring.\nSo that's a fun story about that.\nI will also just note as I'm telling stories that in the communities that sheltered in place, we now have three new babies of women who sheltered in place and gave birth shortly thereafter.\nI want to let you know that in terms of testing right now, we are doing viral testing weekly, but the key to this strategy working is rapid, accurate, affordable, and regular testing.\nTesting affords us the data to keep people who are likely communicable and who can transmit the disease out of the community.\nThat enables us to create a safer environment which keeps everybody healthy and we've been quite successful in doing that.\nAs of the time we reported to LTC, we have no cases of COVID anywhere in our system among residents and staff.\nMoving along, I want to talk a little bit now about some of our other infection control practices and then briefly about staff issues.\nInfection control practices, including stopping non-essential visitors from coming in, screening at the door, taking temperatures of all people, but some of the other things we did included stratifying our residents in terms of risk, understanding their chronic conditions, and monitoring those who were more susceptible to the disease more often.\nAs I mentioned before, we cohorted residents and staff which was probably one of the more effective measures we took.\nPPE, we had an adequate supply.\nWe spent a lot of money on it.\nOne of the more important things we learned is that we had to train people in the use of PPE and as we all know, wearing a mask is new to many of us, it was to our residents and to our teams and training people in how to use them, how to put them on, how long to keep them on, how not to touch them and then doing compliance audits are all extremely important in proper infection prevention.\nIn terms of disinfecting, we went green, which is something that Juniper has done repeatedly over our 30 years.\nWe used a non-toxic disinfectant which was EPA and FDA approved and utilized foggers to make sure that we disinfected the whole building.\nThe other thing we did that I think was really important, which you may not consider a direct infection control practice, but we considered an infection prevention practice is communication.\nWe communicated early, often, and I believe transparently.\nAs of July 17th, we had communicated 1,980 different times with all of our residents families and their powers of attorney as appropriate.\nSo communication for us has been critical in getting the support of our teams, of our residents, and our families.\nI want to talk briefly about staff issues.\nOne of the things that really impacts all of us as senior living providers is staffing.\nIf someone is sick, obviously, they need to be out of the building.\nIf someone is exposed to someone who is sick, they too need to leave.\nAnd as such, it meant that in several cases all of a sudden, within a very short period of time, the staffing you needed was -- or regular staff were no longer available in the same numbers they were before.\nIf you add to that fear, staffing has become difficult particularly in hot spots.\nThe cost of that staffing has gone up as we've provided appreciation pay, otherwise known as hero pay and some people call it hazard pay as well.\nIn addition, personal protective equipment needs to be accessible, which we were able to do and used properly.\nNow what is the solution to these staffing issues?\nWell, for us, it was to train all of our available associates to be universal workers, to extend pay when people were sick or exposed to protect them and their families, to provide appreciation pay, particularly in areas where we had COVID positive residents, to provide additional incentives for people to shelter in place to essentially create a bubble around our communities, and lastly, we used our salespeople as recruiters and found this to be extremely effective in helping our fill empty positions while people were sick.\nI want to talk to you now about the second phase, which we call the pathway forward for us.\nThe goal of this phase is to restore profitability while keeping residents and associates healthy, safe and engaged.\nOur approach has been to jump start move-ins and implement what we call the five pillars, which in notable Juniper fashion alliterate so they are prevention, people, program, place, and packaging.\nPrevention has to do with our testing strategy and infection prevention, including cleaning, disinfecting, and again cohorting.\nPeople has to do with the schedules for our associates, their assignments, again, relating to cohorting and different pay programs.\nProgramming in the pathway forward is about reopening dining, restoring activities and perhaps most importantly, establishing safe visitation for families.\nIn terms of place we had been working on making sure there are visible signs that we are beginning to return to normal while maintaining successful infection prevention and control strategies and lastly under packaging, which you might consider marketing and sales, we focused on message and the delivery of that message.\nIn terms of driving sales moving forward, I want to tell you a little bit about what we've done and the results to date.\nIn terms of our efforts, we utilize a golden triangle approach, which includes the Executive Director, the Director of Wellness and the Director of Sales and Marketing.\nThose three people come together to focus their effort on outreach and in working together to close sales.\nWe've resituated our sales offices, we've changed our tour protocols and moved our model suites to areas, which they can be easily accessed without going through other parts of the building.\nWe've created new messaging, we've trained for that and then we've also demonstrated competency among the appropriate people.\nWe've added additional sales support for targeted communities who had significant reductions in census over the period.\nWe put together tool kits for rapid movements and we've instituted new rewards.\nWhat have we achieved?\nWell, in terms of digital leads, which is major source of leads at this point in time, our July 2020 digital leads are up 33% over April of 2020 and our July 2020 digital leads are up 48% over July 2019.\nSo we are seeing substantial growth in leads.\nWe have put in place some special campaigns and they are working.\nWe started doing virtual tours, they are catching on.\nOur communities are now able to do backstage tours as well as virtual tours and I'm proud to say that our July 2020 results while not where they were pre-COVID, we are seeing net census gains and we're very happy about that.\nSome of our operator pandemic imperatives that I think you need to know about is that we continue to screen for social isolation issues among our residents.\nWe have expanded telehealth for mental healthcare as well and we've continued to increase access to the Internet and smart devices and just so you know, we have done over 12,000 virtual visits with family since the start of the pandemic.\nWe've added a variety of different ways for people to meet with their healthcare providers online and have done over 1,400 window visits.\nWhat are the lessons learned?\nWell, in terms of leadership, vision, and the ability to use data to set a proactive course has been extremely important.\nI think a second lesson learned is that technology is extremely useful and really critical in generating the data and communicating appropriately in times of crisis.\nSome of the technology that has been increased in its use is of course telehealth.\nWe've used a variety of ways to communicate with residents and families and we've used technology to support activities both social and fitness related.\nSome of you may have seen the joint effort between LTC and Juniper to develop an industry accessible virtual connections program, which provides a whole host of opportunities for people in our communities at varying levels of care and service need as well as in the community.\nIt may not involve massive restructuring of what exists, but it does involve an emphasis on safety, on dedicated staff, on looking at buildings in terms of small neighborhoods, and increasing social engagement through a variety of ways of integrating what we do with the community at large.\nIn terms of phase three, our new normal.\nIt's a work in progress.\nWe're not there yet.\nIt will involve a variety of different things, including continued use of data, of technology that is, for data, communication, provider access, digital marketing, and resident engagement.\nWe will continue to integrate health services with other providers outside of our communities.\nOur neighborhood designs are very important particularly for cohorting and keeping people safe and giving families and prospective residents an understanding -- a visible understanding of how we manage during this type of pandemic.\nThere will be gated entry where we take temperatures and we screen very tightly over who enters the building and of course, cleaning and disinfecting has changed and needs to be visible.\nSo all of those things will be part of our new normal.\nAnd Lynne will be available during our Q&A session.\nSo you can ask her questions about Juniper and about the industry in general.\nSo, we'll now open it up to the Q&A.\n",
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"content": "compname reports q2 ffo per share $0.31.\nq2 ffo per share $0.31.\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: It continues to be a somewhat uneasy road.\nBut our partners have shown amazing resilience and grace.\nOperating through the pandemic has been different from any other cycle in the history of our industry.\nDuring the '08, '09 financial crisis, certain levers could be pulled while waiting out a return to normalcy.\nSimilar levers do not exist in this current cycle.\nBy now, you have read news reports or heard earnings calls of other healthcare REITs citing squeezed margins, moving the challenges, labor exhaustion, decreasing length of stay, home healthcare growth, and holds on elective surgeries, all creating challenges to operators.\nWe do believe that the industry census is close to or has hit bottom.\nAs the current vaccines and hopefully a third from Johnson & Johnson become more widely available and utilized, visitation opens up, communities and facilities continue to aggressively market their services and consumer confidence in these settings improves, we should see the current census stabilize and even improve.\nHowever, visibility to these events remains low.\nSo we can't predict when that might happen or when the industry will be able to fully recover from the effect of the pandemic.\nBecause LTC has built a conservative foundation with a strong and flexible balance sheet, we can continue to provide support to our operators if needed and take advantage of investment opportunities as they arise without placing undue strain on LTC.\nThe need for senior care hasn't abated and states in which we have some of our highest concentration of properties are also states with the highest projected increases in the 80-plus population cohort over the next 10 years.\nGovernment support for our industry remains vitally important and our industry associations have successfully lobbied and are continuing to lobby for much-needed ongoing aid and support.\nWith the new administration likely comes more spending on and attention to the COVID crisis.\nIt remains to be seen how much additional aid and with it, additional governmental regulation will be forthcoming and when it will arrive.\nWe believe this extra support is necessary.\nLast month, the federal public health emergency declaration related to the corona's pandemic was extended through April 20, keeping in place the temporary 6.2% increase in federal Medicaid matching funds, including the three-day hospital stay waiver.\nWe believe a further extension is likely.\nAdditionally, a bipartisan bill was drafted to help ensure that senior care communities and facilities can maintain adequate staffing levels by allowing temporary nurse aids to retain their certification status after the COVID-19 emergency declaration has been lifted.\nIn addition to the new stimulus package being negotiated, about $30 billion of prior earmarked aid remains unallocated, which will hopefully provide some incremental support to operators in the industry.\nMoving now to more LTC-specific discussion, I'll start with rent deferrals and abatements.\nFourth quarter rent and mortgage interest income collections were strong at 98%.\nAs previously disclosed, we provided partial relief to all eligible operators in the form of reduced 2021 rent escalations.\nWe thought it was prudent to proactively offer relief to our partners, so that they had additional funds early in 2021.\nThe rent credit is expected to have an approximate $530,000 impact on our 2021 GAAP revenue and an approximate $1.3 million impact on our 2021 FAD.\nAs we noted when we announced this program, our Board discussed various ways for LTC to provide support while balancing our fiduciary responsibilities to shareholders.\nSo while FAD will be reduced, we are focusing efforts on replacing the funds with accretive transactions this year.\nWe will evaluate requests for additional support from operating partners, as we receive them and we'll review them on a case-by-case basis with careful evaluation of each operator's ongoing operations, rent coverage, corporate financial health, and liquidity.\nPam will provide additional color shortly.\nNext, I'll discuss our Senior Lifestyle portfolio, which is currently a main area of focus for us as we work to transition the 23 communities they have operated for LTC.\nSo far in the first quarter, we have transitioned 11 assisted living communities to two operators.\nOne operator is new to LTC and the other is an existing partner and our goal is to complete all SLC-related transitions by the end of the second quarter.\nClint will spend some time on the specifics.\nThe M&A market remains challenging for the industry.\nWhile there are deals being done, we do not plan to relax our underwriting standards, opting instead to wait until we can complete deals that provide accretive growth for our shareholders.\nWe do not expect to engage in any large transactions for the foreseeable future, but we are seeing interesting opportunities to participate in growth through structured finance deals with reduced risk profiles and strong returns, especially for development projects that are not dependent for success on immediate lease-up or current census.\nWhen the market begins to open up, we plan to use our considerable balance sheet to provide a wide range of regional operating partners with the financing they need to help grow their businesses.\nUntil then, we will continue to develop new relationships and solidify existing ones, so that we're ready to act when we see appropriate opportunities.\nRight now, we see too many uncertainties in 2021 and we feel we cannot reasonably provide guidance at this time.\nTotal revenue declined $190,000 compared with last year's fourth quarter.\nImpacting our results were abated delinquent and deferred rent granted in 2020, a reduction in property tax revenue, and lower rental revenue from the sale of the Preferred Care portfolio in 2020.\nAdditionally, in the fourth quarter of 2019, we collected past due rent from Senior Care.\nPartially offsetting the decline was rent from acquisitions and completed development projects, higher rent payments from anthem, and contractual rent increases.\nMortgage interest income increased $226,000 due to the funding of expansion and renovation projects.\nInterest expense decreased $490,000 due to lower outstanding balances and interest rates under our line of credit in the fourth quarter of 2020 and scheduled principal payments on our senior unsecured notes.\nProperty tax expense decreased $809,000, primarily due to the timing of Senior Lifestyle property tax escrow receipts and the payment of related taxes.\nG&A expense increased $675,000 compared with the fourth quarter of 2019 due to the reimbursement of legal fees from Senior Care in the prior-year period as well as the timing of certain expenditures.\nIncome from unconsolidated joint ventures decreased $270,000 due to a dissolution in 2019 of a preferred equity investment in a joint venture, offset by two preferred equity investments we made in 2020.\nDuring the fourth quarter of 2020, we recorded a $3 million impairment charge associated with a memory care community in Colorado operated by Senior Lifestyle, the impairment related to our release efforts of this property.\nDuring the fourth quarter of 2019, we recognized a $5.5 million impairment charge related to the Senior Lifestyle joint venture.\nThe four properties comprising the JV were sold in the second quarter of 2020.\nAccordingly, we received liquidation proceeds of $17.5 million and recognized a loss on liquidation of unconsolidated joint ventures of $620,000.\nDuring the fourth quarter of 2020, we recognized an additional loss of $138,000 related to the final liquidation of this unconsolidated joint venture.\nIn the fourth quarter of 2019, we recognized a $2.1 million gain from insurance proceeds related to a close skilled nursing center in Texas.\nThis property sustained hurricane damage and rather than rebuild it, we sold it and two other properties in the fourth quarter of 2019, resulting in a cumulative loss of $4.6 million.\nWe provided Senior Lifestyle deferred rent in the amount of $394,000 in April of last year.\nWhile this amount has since been fully repaid, they failed to pay full rent during the second quarter of 2020.\nAs a result, we wrote off a total of $17.7 million of straight-line rent receivable and lease incentives related to this master lease and transitioned rental revenue recognition to a cash basis effective July 2020.\nDuring the fourth quarter of 2020, we applied their letter of credit and deposits totaling $3.7 million to accrued second quarter 2020 rent receivable of $2.5 million and notes receivable of $125,000 with the remaining $1.1 million to third and fourth quarter 2020 rent.\nAt December 31, 2020, Senior Lifestyle's unaccrued delinquent rent balance was $1 million.\nNet income available to common shareholders for the fourth quarter of 2020 increased by $5 million, primarily resulting from acquisitions and completed development projects, rent increases, lower interest expense, the prior year's loss on sale, and the fourth quarter of 2019's $5.5 million impairment charge.\nOffsets included the $3 million impairment charge, decreased rent related to the Preferred Care property sales, abated and deferred rent net of repayment, a decrease in property tax revenue, the 2019 receipt of 2018 past due rent from Senior Care, and the fourth quarter 2019 gain from insurance proceeds.\nNAREIT FFO per fully diluted share is $0.78 in the fourth quarter of 2020 and $0.81 in the prior-year fourth quarter.\nExcluding the gain from insurance proceeds in the fourth quarter of 2019, FFO per fully diluted share was $0.76.\nThe $0.02 increase in FFO excluding the gain was due to lower weighted average shares outstanding in 2020, resulting from the purchase of shares in the first quarter of 2020 under our share buyback program.\nMoving now to our investment activity, during the fourth quarter of 2020, we invested $5 million under our previously announced $13 million preferred equity commitment related to the development of a 267 unit independent and assisted living community in Vancouver, Washington.\nOur investment earns an initial cash rate of 8% and a 12% IRR.\nWe expect to fund our remaining $8 million investment before the end of the first quarter of 2021.\nThe preferred equity investment is accounted for as an unconsolidated joint venture.\nWe also funded $6.3 million in development in capital improvement projects at a weighted average rate of 8% on properties we own and paid $22.4 million in common dividends.\nOur 2020 FAD payout ratio was 77%.\nWe currently have remaining commitments under mortgage loans of $1.7 million related to expansions and renovations on three properties in Michigan.\nWe also paid $7 million in regular scheduled principal payments under our senior unsecured notes.\nSubsequent to the end of the quarter, we borrowed at $9 million under our unsecured line of credit.\nIncluding this borrowing, we have $7.8 million in cash, $501.1 million available on our line of credit, under which $98.9 million is outstanding, and $200 million under our ATM program, providing LTC with liquidity of approximately $709 million.\nAs a reminder, we have no significant long-term debt maturities over the next five years.\nAt the end of the 2020 fourth quarter, our credit metrics remained favorably compared with the healthcare REIT industry average, with net debt to annualized adjusted EBITDA for real estate of 4.3 times and annualized adjusted fixed-charge coverage ratio of 5.3 times and a debt to enterprise value of approximately 30%.\nI'll conclude my remarks with a discussion of rent deferrals and abatement.\nWe collected 98% of fourth-quarter rent and mortgage interest income including the application of Senior Lifestyle's letter of credit and deposit.\nOf the rent not collected, $360,000 related to rent abatements and $369,000 related to rent deferral, net of repayment, which were provided to three private pay operators Clint mentioned on our previous earnings call.\nAs I mentioned earlier, Senior Lifestyle remains delinquent in their 2020 contractual rent by $1 million, and they have paid no rent so far in 2021.\nFor all of 2020, we collected 98% of contractual rent including the application of Senior Lifestyle's letter of credit and deposits.\nOf the 2% we did not collect, 0.7% was abated, 0.7% was net deferred, and the remaining 0.6% was delinquent.\nTo date so far in 2021, rent deferrals totaled $689,000, net of $14,000 of deferred rent repayments.\nThese deferrals relate to the same three private pay operators previously mentioned.\nExcluding the rent credit related to the rent escalation reduction already discussed, abated rent to date in 2021 is $360,000.\nWe did receive rent from the operators who transitioned former SLC operator communities to date.\nClint will provide more detail.\nNow, I'll turn things over to Clint.\nI'll start my discussion with Senior Lifestyle.\nAs Wendy said earlier, thus far in the first quarter of 2021, we have transitioned 11 of the 23 assisted living communities under their master lease.\nSix of these communities were transferred to Randall Residence, a current LTC operator; and five were transitioned to Encore Senior Living, an operator new to us.\nThe Randall communities, five of which are located in Ohio and one in Illinois, were transferred on January 1.\nCombined, these communities contain 344 units.\nWe first began working with Randall in 2019 when we acquired two properties in Michigan, and they are now the operator of eight LTC Properties.\nRandall already operates properties in Ohio and Illinois and has a strong regional presence in the Upper Midwest.\nThe six properties were added to an existing master lease with Randall.\nTerms of the amended master lease were extended by one year with nine years remaining.\nIncremental cash rent under the amended lease is $2.7 million for the first year, $3.7 million for the second year, and $3.9 million for the third year, escalating by 2% annually thereafter.\nOn February 15, we transferred five communities, all in Wisconsin with a total of 374 units to Encore Senior Living.\nEncore, founded in 2011, is a major player in the Wisconsin market, operating 34 locations [Indecipherable] these communities.\nThe new master lease covers a 10-year period with three five-year renewal options.\nCash rent under the lease is $2.6 million for the first year, $3.3 million for the second year, and $3.4 million for the third year, escalating by 2% annually thereafter.\nPartnering with regional operators is an important part of LTC's long-term strategy and expanding our relationship with Randall while building a new one with Encore are great examples of our ability to partner with operators with a solid presence in their local markets and regions.\nThere are now 12 buildings remaining in the Senior Lifestyle portfolio.\nOf those, we will be transferring five and selling three and continue to evaluate options for the remaining four properties.\nOf the five that will be transferred, four are expected to be transferred by the end of Q1 and the fifth by the end of Q2.\nThe three properties we intend to sell are under contract with an expected closing at the end of the second quarter subject to timely completion of due diligence.\nThe four remaining properties have a net book value of approximately $4.5 million.\nOne of those properties is being closed and would be sold for an alternative use and we are evaluating our options for the remaining three.\nNow I'd like to quickly update you on our most recent development projects to come online.\nWeatherly Court, which is located in Medford, Oregon, and operated by Fields Senior Living, began accepting residents last September.\nAs of February 15, occupancy was 23%, up from 10% on October 23.\nThe opening of this community was delayed due to the pandemic.\nAs a result of the delay and because as a newly opened property, Fields was not eligible for government stimulus money.\nWe have agreed to provide them $1.3 million of additional free rent.\nIgnite Medical Resort in Blue Springs, which is located in Independence, Missouri, began welcoming patients last October.\nAt February 15, occupancy was 64%, up from 23% on October 20.\nLast quarter, we discussed Genesis and its disclosed doubt regarding its ability to continue as a going concern.\nGenesis remains current on all of its lease obligations to LTC.\nThey operate six properties for us; five in New Mexico, and one in Alabama.\nBrookdale master lease matures on December 31, 2021.\nThe first renewal option is for a four-year period.\nThe notice period for the renewal option began on January 1, 2021, and ends on April 30, 2021.\nIn 2020, we extended a $4 million capital commitment to Brookdale, which is available through December 31, 2021, at a 7% yield.\nTo date, we have funded $2 million of this commitment.\nOf note, aside from the Brookdale lease renewal, we have only one other lease that expires in 2021.\nThe SNF [Phonetic] operated under this lease is under contract for sale with closing expected in the second quarter.\nNext, I'll discuss our portfolio numbers.\nAs a reminder, given the pandemic and the challenging environment it has created, we don't believe coverage is a good indicator of future performance at this time and are focused mainly on occupancy trends, which I'll discuss shortly.\nQ3 trailing 12-month EBITDARM and EBITDAR coverage using a 5% management fee was 1.14 times and 0.94 times respectively for our assisted living portfolio.\nThese metrics are the same with and without stimulus funds as no operators allocated these funds to their P&L statements.\nExcluding Senior Lifestyle from our assisted living portfolio, EBITDARM and EBITDAR coverages would increase to 1.25 times and 1.04 times, respectively.\nFor our skilled nursing portfolio, EBITDARM and EBITDAR coverage was 1.85 times and 1.39 times, respectively.\nExcluding stimulus funds, EBITDARM coverage was 1.58 times and EBITDAR coverage is 1.23 times.\nNow for some occupancy trends in our portfolio, which is as of January 31.\nAs a reminder, for our private pay portfolio, occupancy is of that date specifically and for our skilled portfolio, occupancy is the average for the month.\nBecause our partners have provided January data to us on a voluntary and expedited basis, the information we are providing includes approximately 71% of our total private pay units and approximately 93% of our skilled nursing beds.\nPrivate pay occupancy was 79% at September 30%, 72% at December 31, and 71% at January 31.\nFor skilled nursing, average monthly occupancy for the same time periods respectively was 70%, 66%, and 66%.\nWe cannot predict when occupancy might begin trending upward.\nRegarding 2021 growth, when we are confident that we can complete deals at the right price for the right return, we will use our liquidity to provide strong regional operators with the growth capital they need.\nUntil that time, we will focus on smaller investments with what we believe to be a better risk-reward profile using vehicles such as mezzanine and preferred equity financing while building new and existing relationships that will serve us far into the future.\nPreferred equity transactions we announced last quarter validate our ability to successfully transact in this market.\nThe pandemic has caused considerable disruption within our industry and we can't determine exactly when things will begin to return to pre-pandemic levels.\nThe rollout of the COVID vaccines, a new administration that is focused on getting the country through the pandemic, and an industry that is working hard to stabilized occupancy and restore consumer confidence give us hope that things are starting to turn and will continue to get better.\nAs a company that has always viewed its operators as partners and a company that has worked hard to build a balance sheet capable of withstanding the very type of crisis through which we have been managing, LTC is ready and able to continue enhancing its portfolio, diversifying its investments and generating new opportunities to allow us to continue to serve as a growth partner of choice as a REIT done differently.\n",
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"content": "compname reports q4 ffo per share $0.78.\nq4 ffo per share $0.78.\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 just a moment, we will share some brief remarks and then open it up for Q&A.\nAnd on our call today, we have our chairman of the board and CEO, Gary Kelly; executive vice president and incoming CEO, Bob Jordan; executive vice president and CFO, Tammy Romo; executive vice president and chief commercial officer, Andrew Watterson; and president and chief operating officer, Mike Van de Ven.\nJust a few quick notes.\nAnd second, we had a few special items in our fourth quarter results, which we excluded from our trends for non-GAAP purposes, and we will reference these non-GAAP results in our remarks today.\nSo, with that, I have the pleasure of turning it over one last time to my friend, Gary Kelly.\nAnd first and foremost, I'm delighted to be able to say there were earnings and better than we thought at Investor Day last month.\nIt's obviously a great way to end a tough, but much improved year, a great way to start a new year.\nWe're, of course, finding our way through the Omicron surge in January, February, and looking forward to a strong rebound in March and thereafter.\nAnd, as always, as barring any unforeseen events, I expect we'll make great progress in 2022 and will enjoy another much improved year.\nAs we all know too well, it will not be without its challenges.\nBut, our people and our leadership are more than up to the task.\nI'm enormously proud of all of them.\nThey've just done a phenomenal job.\nSouthwest is on top, because our people deliver great service, low fares and our business model delivers consistent profits and handsome returns on capital.\nAnd we've emerged from two years of pandemic with our balance sheet strength and our liquidity intact.\nAnd we are perfectly positioned to restore, to expand, and compete aggressively in the coming years.\nAnd I could not be more enthused and more excited about our future.\nWe were last together on December 8th at Investor Day, and a lot has happened since then.\nGary is a phenomenal leader and done so much for Southwest and for me personally.\nAnd I'm thrilled that he will be our executive chairman.\nI'll take over the CEO responsibility for investor meetings going forward.\nSo, this is Gary's last earnings call.\nWell, 2022 has had a challenging start, but that doesn't change our goals for the year, getting properly staffed focusing on our people, making meaningful progress returning to our historic operational reliability and efficiency, providing our legendary hospitality, and returning to consistent profitability.\nWe made significant progress in '21, including a profitable fourth quarter, despite the pandemic and saw strong demand.\n88% of 2019 revenues restored and managed business demand ahead of our expectations for December.\nWhile we don't expect to be profitable this quarter, the omicron impact does appear to be isolated to January and February, and we expect a profit in March, expect to be profitable in the remaining quarters and for the full year 2022 based on our current plans.\nOur people performed just really well during fourth quarter as they always do, and particularly during the holidays and demand held up well through year and despite the omicron variant.\nBeginning in early January, we experienced a very difficult environment due to rapidly rising COVID cases and a decrease in available staffing levels.\nIt's amazing, when in the first three weeks we had roughly 5,000 employees test positive for COVID, with employee cases roughly two and a half times what they were during the delta variant.\nThe resulting staffing shortage combined with winter weather caused a spike in flight cancels and a significant disruption to the operation.\nI'm pleased to report though that over the last few weeks, the operation and staffing has stabilized, and we've seen performance even better than during the holidays.\nYesterday, for example, we were 95% on time, which I'm just usually proud of.\nTo maintain sufficient available staff, we extended incentive pay programs for ops employees through early February.\nWhile that does add temporary cost pressure, it's imperative that we have sufficient staff to operate our schedule and minimize our flight cancellations.\nCOVID case counts are on a downward trend and we intend to normalize our staffing and pay structure as a result.\nHiring is part of the equation, of course, and we met our 2021 hiring goals and we are on track with plans to add at least 8,000 employees this year.\nWe're also raising our starting wage rates to be competitive in the market and due to the impacts from omicron and the variant and recent staffing challenges.\nAnd we're further moderating our first half 2022 capacity plans to provide additional buffer for the operation.\nWe're encouraged by the recent improvement in bookings across the booking curve, especially in the March timeframe and we are hopeful that business travel resume the 2021 trend.\nIt appears that omicron impacts are pretty well contained to January and February from a revenue perspective, and we believe our temporary approach to boost available staffing is working.\nWe'll stay flexible, of course, and we'll be willing to further adjust our plans if needed.\nSo, several things have transpired since Investor Day, all driven by the pandemic though, but for omicron, we would be on our Investor Day Q1 and full year 2022 guidance.\nHowever, I want you to know, make no mistake, we are laser focused on preserving our low cost position in the industry and returning to 2018 productivity and efficiency levels by the end of 2023.\nWe believe Q1 CASM-X as a peak, and our plans call for unit cost to ease from here into 2023.\nLooking at 2023 based on current growth plans, we expect CASM-X to be down as compared to 2022.\nRestoring both, the network and our fleet efficiency are key to returning to historic efficiency levels.\nAnd beyond that, I'm really excited about opportunities that continue network growth as we add gates in key cities such as Denver and Phoenix and Las Vegas, Baltimore, Nashville, and even more.\nBeyond 2023, we see opportunities to meet and then beat our historic productivity and efficiency levels as we continue to grow the company and focus on modernizing our operational tools and processes.\nAnd Mike will talk more about that.\nBut I want to repeat my main message from Investor Day.\nDespite the near-term noise, we have a superb business model, the substantial underlying competitive advantages.\nWe have a great five-year strategy and a strong set of initiatives that will drive significant value.\nOur new co-brand credit card agreement is in place with a partner Chase, our GDS expansion is complete, and our Southwest business team is armed with the tools they need to grow our business customer base.\nWe continue to work on our new fare product and our revenue management system optimization, so more to come there.\nBut both should begin producing value this year.\nAnd as we continue retiring older 737-700 aircraft and taking the MAX aircraft this year, in support of our fleet modernization initiatives as well.\nAll combined, these initiatives are expected to deliver incremental EBIT of 1 to 1.5 billion in 2023, and we continue to expect roughly half of that value this year, given the initiatives in place.\nThere have been all kinds of challenges and they have performed just superbly.\nThey continue to do an incredible job and manage through all of these challenges, and I am just in awe of them.\nAnd together, we will emerge from the pandemic, and we will seize the opportunities in front of us.\nI've worked with Bob for a long time, and I agree with Gary.\nHe is going to be a great CEO.\nAnd I'm not going to say anything else because I will get choked up.\nIt is their hard work, dedication, and focus that enabled us to achieve an important milestone in our recovery with our first quarterly profit since the pandemic began.\nWe reported a $68 million profit in fourth quarter or $0.11 per diluted share.\nAnd excluding special items, we reported an $85 million profit or $0.14 per diluted share.\nAs Bob mentioned, our fourth quarter profit was driven by strong leisure demand during the holidays, business travel momentum, and incremental revenue from our new co-brand credit card agreement with Chase.\nOur fourth quarter results were all within the guidance ranges provided last month at Investor Day.\nFor full year 2021, our net income was 977 million or $1.61 per diluted share, driven by 2.7 billion of payroll support program proceeds.\nExcluding this temporary benefit to salary, wages, and benefits expense, and other smaller special items, our full year net loss was 1.3 billion or a $2.15 loss per diluted share.\nAndrew will cover our revenue trends and outlook here in a minute.\nTaking a look at cost.\nWe continue to experience inflationary cost pressure experienced in fourth quarter, primarily in salary, wages and benefits and airport costs as expected.\nA portion relates to hiring, and we made great strides toward our hiring efforts in 2021 and remain on track with plans this year.\nAnd, of course, the labor market continues to be a challenge, which continues to pressure wage rates across the board.\nSince Investor Day, we have experienced additional cost pressures related to omicron and winter weather.\nAs a result, our first quarter unit cost inflation compared with first quarter 2019 and excluding fuel special items and profit sharing has increased about 10 points.\nRoughly half of that increase is driven by the 150 million of additional incentive pay we are offering to operations employees to early February, and the other half is associated with flying fewer ASMs than we were planning.\nIn light of the significant impact from the omicron wave on available staffing, extending the temporary incentive pay and further reducing our capacity were necessary steps to stabilize the operation.\nAside from these impacts, we would be on track with our previous unit cost outlook.\nMarket fuel prices have continued to rise here, which also resulted in a $0.10 increase in our fuel cost per gallon guidance.\nOur estimated first quarter fuel price in the $2.25 to $2.35 per gallon range is also roughly $0.25 higher than our first quarter 2019 fuel price, and that's inclusive of an estimated $0.35 of hedging gains here in the first quarter.\nTurning to our full year guidance.\nAt Investor Day, we were planning for capacity to be roughly flat versus 2019 levels with no material impact from the omicron variant on either revenues or costs at that time.\nFast forward to today, the impact from the omicron variant on available staffing has led us to reevaluate our first half 2022 capacity plans, in particular March through May.\nOur planned flight schedule adjustments take some capacity upside optimism off the table for this year and reduces our full year 2022 capacity outlook by about four points from roughly flat to down 4% versus 2019.\nI've already covered the 150 million of additional incentive pay in first quarter.\nAnd in order to be more competitive on the hiring front, in particular for ground operations, we are raising starting wage rates from $15 per hour to $17 per hour, which is estimated to be a 20 to $25 million total impact to this year.\nAnd of course, we have contemplated labor rate inflation in our guidance as best we can for this year, understanding that the market is somewhat uncertain.\nThis is clearly not where we hope to be along our recovery curve nearly two years into this pandemic, but we are making great progress.\nWhile we must remain nimble in this environment, it takes the necessary actions to take care of our employees and provide a reliable product for our customers.\nWe are very focused on the long term and determined to get back to 2018 levels of productivity and efficiencies as we shared with you all at Investor Day.\nAs Bob said, our goal is to get there by the end of next year.\nAlthough it is early based on our current plan for 2022 and preliminary plan for 2023, we expect 2023 CASM-X will decline year over year compared with 2022.\nLonger term, our framework that we provided at Investor Day remains unchanged, and that includes a post-pandemic target of mid-single-digit ASM growth accompanied by low single-digit CASM-X growth.\nI want to be clear that our longer-term CASM-X framework includes an estimate for labor rate increases as best we can estimate today.\nWe currently have 77 MAX firm orders and 37 MAX options with Boeing this year.\nWhile our plan assumes we will exercise the remaining 37 options this year, we maintain the flexibility to evaluate that intention as decision points arise.\nWe continue to believe that taking the additional options this year will yield a positive NPV on aircraft replacement if we don't deploy them in the network.\nAs I have mentioned to you all before, we won't incur a material CASM-X penalty from holding on to extra aircraft in the event we temporarily park some of our -700 while capacity is moderated this year.\nAs we work our way back to an efficient utilization of the fleet, we remain in the fortunate position to have the flexibility needed with our retirement plans without a financial penalty.\nI'll wrap up with a quick note on our balance sheet strength.\nWe ended 2021 with liquidity of 16.5 billion, our leverage is at a very manageable 54%, and we continue to be the only U.S. airline with an investment-grade rating by all three rating agencies, which I believe is one of our key competitive advantages.\nWe have ample liquidity that allows us for a further cushion in the event of further COVID wave.\nOverall, our balance sheet strength puts us in a category of one in terms of our ability to withstand shocks and remain financially healthy.\nI'll also start by extending my gratitude to Gary.\nI'll be forever grateful for all that he taught me with his words and its actions.\nLooking back to our last earnings call in October, we were dealing with a delta variant.\nThe negative revenue impact to Q3 was $300 million.\nAt that time, we estimated negative revenue impact to Q4 of $100 million.\nRevenue trends have begun to pick up -- pick back up and stabilize in mid-September, and our outlook called for a sequential monthly improvement in revenues throughout Q4.\nWe reaffirmed this in our early December investor update, and we closed the quarter strong.\nOur operating revenues finished within guidance, down 11.8%.\nAnd managed business revenues came in better than guidance, down 50% in December.\nThe negative revenue impact from the delta variant came in lower than we thought at around $60 million as we saw a continued rebound in demand and yields throughout the quarter.\nHowever, we saw some choppiness in late December from decelerating bookings and increasing cancellations, and we had a $30 million negative revenue impact from the omicron variant as COVID cases increased.\nCombined, this $90 million COVID impact in Q4 was slightly less than our original estimate of $100 million from COVID as we were able to mitigate some of the load factor decrease through higher yields.\nAnd, of course, the most notable item in Q4 was incremental revenue from our new credit card agreement with Chase, which we covered at Investor Day and included in our most recent revenue guidance.\nWhile we can't share the specifics about the incremental revenue from our new credit card agreement, you can see that other revenues in fourth quarter 2021 increased 20% compared with Q4 2019 while outpacing the recovery in passenger revenue, and we are on track for expected benefits in 2022.\nOur new markets continue to develop and perform overall in line with expectations aside from the impacts from the delta and omicron waves.\nHawaiian markets also showed improvement, and all of these markets turned in line with a broad-based improvement we saw across the rest of the network.\nNow, looking at first quarter, we estimate the weather-related and staff-related flight cancellations in January, resulting in a $50 million negative impact to operating revenues.\nAdditionally, bookings have slowed for January and February, which are seasonally low travel periods anyway for leisure.\nAnd trip cancellations were running quite high, beginning in early January but have moderated and are back to normal trends.\nWe expect the omicron-related negative revenue impact to January and February combined to be roughly $330 million.\nLike the delta variant, the impact of omicron-related trip cancellations has been mainly focused in the closed-in window, and we remain optimistic about the likelihood of demand recovery and time for spring break travel.\nOn the corporate travel side, the business demand we experienced in December has slowed, but we continue to believe there is pent-up demand for business travel, and we are hearing from many of our corporate customers that they intend to ramp up travel post-President's Day.\nI think that will depend on where we are with COVID case counts and hospitalizations, but we are encouraged by what we are hearing from our customers in terms of their future travel plans.\nWe expect first quarter managed business revenues to be down 45 to 55% versus 2019, and improve sequentially from January through March.\nAnd our Southwest and GDS business initiatives is also on track for expected benefits in 2022.\nWhen you put all these moving parts together, that gets us to our first quarter operating revenue guidance of down 10 to 15% versus first quarter 2019.\nThis outlook is in line where we were in the fourth quarter, but we are currently expecting a step change in improvement in March.\nAs far as our other initiatives, new fare product remains on track for deployment by midyear, and the new revenue management system continues its progressive rollout.\nAnd lastly, we're in the process of adjusting our published flight schedules in March through May in order to further support the operations and adjust to available staffing trends.\nThe result of this exercise, combined with the flight cancellations we have experienced so far this month, is a three-point reduction in first quarter 2022 capacity from down 6% to down 9% compared with the first quarter 2019.\nAnd for full year 2022, as Tammy mentioned, it's a four-point reduction from roughly flat to down 4% compared with the full year 2019.\nOur flight schedules remain subject to further adjustments, if needed.\nBut while this is a slight delay to our previous capacity plan, we still have time to get back on track.\nAs of March 2022, we are roughly 75% restored based on trips, and we continue to expect to restore the vast majority of our route network by the end of 2023.\nOur people did face quite a bit of adversity in 2021, and I just am really proud of their tremendous finish to the year, and they've built quite a bit of momentum thus far into 2022.\nAs we've all said, we've moderated or we began moderating our capacity in the fourth quarter to provide more staffing cushion in the environment.\nAnd we needed all hands on deck to those periods, and we incented folks, and we urge them or those that were willing to pick up open time or voluntarily work on their days off with premium pay.\nAnd that certainly worked.\nOur people really responded.\nAnd our on-time performance for that period was 87%, and that was better than our five-year average.\nSo, we ran a similar play over the Christmas holiday, and our daily trips there increased to roughly 3,600 a day.\nAnd again, our people responded.\nSo normally, during the Christmas holiday, we deal with weather, but this year, we also saw the beginning of a sudden and the surging spike in COVID cases.\nAnd because we had those people to pitch in to pick up extra shifts during that week of Christmas, we had a completion factor of 99.2%, and we had less than 1% of our flights canceled in the face of that COVID surge.\nAll told, we ended up the fourth quarter with an on-time performance of 72.6%, mainly due to some of the challenges we faced in October.\nThat's certainly not up to our standards.\nWe must do better, and we will.\nBut our holiday performances were very good, and we know that we can operate in our peak travel days when everyone is available.\nSo, we really have momentum to build on.\nSo, in contrast to those previous holiday periods, January started in the face of severe weather and this omicron variant spreading rapidly.\nAnd as Bob mentioned, we had roughly two and a half times the number of employees with COVID cases for omicron than we did with delta.\nAnd we had roughly 5,000 employees become sick in the first three weeks of January.\nAnd so, the biggest impacts were in terms of flight cancellations for the period of time, the first week of January, January 1 through January 7.\nAnd that week, we canceled roughly 3,800 flights.\nAbout 1,900 of those were for weather, and about 1,600 of those were for staffing.\nAnd then our on-time performance of that period was 41.5%.\nSo we reinstated the incentive pay program to encourage again those who would come in and pick up extra shifts and help cover the flight schedule.\nAnd again, the response was superb.\nWe got all that implemented.\nAnd so from January 9th through the 25th, our on-time performance jumped to almost 87%, and that leads the industry for marketing carriers, and the incentive pay program runs through February 8.\nWe're also benefiting from a decline in our employees that were sidelined due to COVID.\nOur case counts peaked in that first week of January.\nAnd just by way of example, we had over 700 pilots and 1,500 flight attendants that were able to work in that time frame.\nAnd thus, the incentive program to help cover those that were out.\nThose COVID numbers have dropped substantially since then to roughly 100 to 150 people for each group, and that's a lot closer to what we originally expected.\nNext, we continue to aggressively hire.\nBob mentioned that getting staffed is one of our key objectives of 2022.\nWe also want to make progress toward our historic operational reliability and efficiency metrics.\nAnd then a lot of ways, those go hand in hand as we're not operating at optimal levels today, nor is our network restored to where we want to be relative to 2019.\nFor the over 8,000 employees that we intend to hire this year, about 40% of them are fly crews, about 40% of them are ground operations.\nSo, it's very heavily operations-focused to support the schedule this year and beyond as we resume the growth.\nAs we restore the route network this year into 2023, that should provide the foundation to recapture better operating leverage.\nAnd we're also working on other initiatives to improve efficiencies.\nOf course, we've got the fleet modernization cost initiative, but we're also working on things like enhancing our turn times, which are already the best in the industry; expanding self-service options for our customers; and investing in daily schedule management tools, which will help us manage regular operations more efficiently.\nSo we've got many items in our technology and process improvement pipeline in order to support our low-cost position within the industry and improve our overall efficiency and our resilience.\nJust in closing, as we move forward into 2022, we have an exceptional order book for the fleet with its economics and its flexibility.\nWe have new technology foundations in place for our maintenance and our airport systems.\nWe have a laser focus on getting staffed and running a reliable operation.\nAnd we're building an operations modernization portfolio of initiatives that I touched on.\nAnd our employees have sacrificed.\nThey've worked hard through a challenging and ever-changing environment.\nAnd I think that positioned us well to carry this January momentum through the first quarter and beyond.\nSo, I am immensely grateful for the grit, their determination and, of course, their care for our customers.\nAnd so, with that, Ryan, back to you.\nI believe we have analysts queued up.\n",
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"content": "compname says qtrly adjusted earnings per share $0.14.\nsouthwest airlines - qtrly earnings per share $0.11; qtrly adjusted earnings per share $0.14.\nsouthwest airlines - with omicron variant and weather impacting our results, expect losses in jan and feb and a return to profitability in march 2022.\nsouthwest airlines - leisure travel demand was strong, particularly during holidays, and business revenues continued to recover compared with 2019 levels.\nsouthwest airlines - experiencing higher unit cost inflation in 2022 as we continue to navigate the pandemic.\nsouthwest airlines - temporarily extended incentive pay for operations employees through early february 2022.\nsouthwest airlines - omicron variant has delayed the demand improvement we were previously expecting in early 2022.\nsouthwest airlines - omicron variant significantly impacted available staffing beginning in early jan 2022.\nsouthwest airlines - sees q1 operating revenue compared with 2019 down 10% to 15%.\nsouthwest airlines - sees q1 asms compared with 2019 down about 9%.\nsouthwest airlines - sees q1 casm-x compared with 2019 up 20% to 24%.\nsouthwest airlines - sees q1 load factor 75% to 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: Joining me on the call today are Rob Goldstein, our chairman and chief executive officer; and Patrick Dumont, our president and chief operating officer.\nAlso joining us on the call today are Dr. Wilfred Wong, president of Sands China; and Grant Chum, chief operating officer of Sands China.\nIn addition, we may discuss non-GAAP measures.\nPlease note that we have posted supplementary earnings slides on our Investor Relations website.\nWe may refer to those slides during the Q&A portion of the call.\nJust some brief comments, and we'll go right to Q&A.\nOur results continue to reflect the pandemic's impact.\nWe did generate positive EBITDA of $244 million per quarter, about the same as the first quarter.\nOur Macao performance reflected sequential improvement, but pandemic-related travel restrictions continue to impact our performance.\nWe do remain confident in the eventual recovery in both Macao and Singapore, and we cannot define the timing of the full recovery that's underway and will continue in 2021.\nSingapore remains in the $500 million to $600 million range annually, although the second quarter was impacted by heightened pandemic-related restrictions for a portion of the quarter.\nWe will also be subject to closures of both portions of MBS from today through August 5 as part of COVID-19-related protocols.\nThis will obviously have a negative impact on Q3 results.\nAnd as if, there remains no visibility as to when air traffic will return in Singapore, unless Macao, it is difficult to project additional EBITDA from MBS until the resumption of air travel.\nOur considerable investments in Macao continues to take shape as the market recovers Four Seasons and Londoner will present growth opportunities, and we continue to have the largest footprint in this incredible market.\nChina continues to demonstrate economic resilience.\nThe spending in Macao's very strong at the premium mass level from both a gaming and retail perspective.\nYou may want to reference Pages 29 and 30 in your deck.\nWe do have great optimism about our ability to form to pre-pandemic levels once the vacation returns.\nOur company is dividing the three areas, the Asian portfolio in Macao and Singapore.\nWhile we believe Macao will accelerate in the second half of this year and lead recovery, Singapore will follow up on the resumption of air travel.\nWe are confident we'll return to a $5 billion plus EBITDA from Asia in the future.\nThe sale of the Las Vegas assets create liquidity and vast optionality to explore large land-based destination resorts in United States and Asia.\nAnd finally, in the early innings of building out our digital presence, we are exploring multiple opportunities at present.\nAnd we are eager to have this effort become entailed to our company in the years ahead.\nWe'll update you at the appropriate time.\nLet's take some questions.\n",
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"content": "property ebitda was positive $244 million, versus negative $425 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: These statements are based on how we see things today.\nActual results may differ materially due to risks and uncertainties.\nSome of today's remarks include non-GAAP financial measures.\nThese non-GAAP financial measures should not be considered a replacement for and should be read together with our GAAP results.\nTom will provide some comments on our performance as well as a brief overview of the current operating environment.\nBernadette will then provide details on our first quarter results and fiscal 2022 outlook.\nWe're pleased with our strong sales growth in the quarter, which reflects the on growing broad recovery in demand across our out of home sales channels as well as continued improvement in our key international markets.\nHowever, our margin improvement lags our volume recovery as a result of the timing of pricing actions to offset cost inflation as well as challenging macro factors that increase our cost and affected our production run rates and throughput.\nThese ongoing challenges combined with the extreme summer's heat negative, negative impact on potato crops in the Pacific Northwest will result in higher costs as the year progresses.\nAs a result, we now expect our gross profit margins will remain below pre-pandemic levels through fiscal 2022.\nWe believe many of these costs and supply chain challenges are transitory and we're taking aggressive actions to mitigate their effects on our operations and financial performance.\nWe're confident that our actions along with our investments to improve productivity and operations over the long-term will get us back on track to deliver higher margins and sustainable growth.\nBefore Bernadette gets into some of the specifics of our first quarter results and outlook, let's briefly review the current operating environment starting with demand.\nIn the U.S., we continue to be encouraged by the pace of recovery in restaurant traffic and demand for fries.\nOverall, restaurant traffic has largely stabilized at about 5% below pre-pandemic levels led by the continued solid performance at quick service restaurants.\nTraffic at full service restaurants continued to rebound in June and July, but it did soften a bit in August as the Delta variant surged across most of the country.\nDemand improved at non-commercial Foodservice outlets especially in the education market, which help to offset the near-term slowdown in full service restaurants.\nThe fry attachment rate in the U.S. which is a rate at which consumers order fries when visiting a restaurant or other Foodservice outlets also continued to help support the recovery in demand by remaining above pre-pandemic levels.\nDemand in U.S. retail channels also remained solid with overall category volumes in the quarter still up 15% to 20% from pre-pandemic levels.\nOutside the U.S., overall fry demand continued to improve in the quarter, although the rate of improvement varied widely among our key international markets.\nDemand in Europe, which is served by our Lamb-Weston/Meijer joint venture gradually recovered as vaccination rates climbed.\nDemand in Asia and Oceania was solid but also softened in August due to the spread of the Delta variant and South America remain challenged especially in Brazil.\nSo overall, we're happy with the recovery in global demand and believe it provides a solid foundation for continued volume growth in fiscal 2022.\nWith respect to the pricing environment, I'm pleased with the progress of our recently implemented pricing actions demanded sharp input costs inflation.\nIn our Foodservice and Retail segments as well as in some of our international business, we'll begin to realize some of the pricing benefits in the second quarter and more fully in the third quarter.\nIn our Global segment, the contract renewables for large chain restaurant customers have largely progressed as we expected and we'll generally begin to see the impact of any pricing actions associated with these contracts in our third quarter.\nIn addition, we'll continue to benefit from price escalators for most of the global contracts that are not up for renewal this year.\nThese price adjustments reset based on the underlying timing of the contract renewals were largely during our physical third quarter.\nOverall, we expect our price increases across our business segments will in aggregate mitigate much of the cost inflation.\nHowever depending on the pace and scope of inflation and the increase of potato cost resulting from this year's poor crop we may take further price action as the year progresses.\nIn contrast to demand and pricing, the manufacturing and distribution environment continues to be difficult.\nOur supply chain costs on a per pound basis have increased significantly due to input and transportation cost inflation as well as labor availability and other macro supply chain disruptions that are continuing to cause production inefficiencies across our global manufacturing network.\nAlthough we're making gradual progress to mitigate these challenges, they have slowed our efforts to stabilize our manufacturing operations during the first half of physical 2022.\nAs a result, we expect the turnaround in our supply chain will take longer than we initially anticipated.\nNow turning to the crop, the early read on this year's crop in the Columbia base in Idaho and Alberta indicates that it will be well below average levels and both yield and quality due to the extreme heat over the summer.\nAs we're still in the middle of the main crop harvest, the extent of the financial impact of the crop condition will be determined over the coming quarter as the harvest is completed.\nWhile we expect this impact will be significant, we're examining a variety of levers to mitigate the effect on our earnings as well as on customer service and supply.\nAs usual we'll provide a more complete assessment of the crop and its impact on earnings when we release our second quarter results in early January.\nSo in summary, I feel good about the overall pace of recovery in French Fry demand especially in the U.S. and believe it provides a solid foundation for future growth.\nI also feel good about the current pricing environment and how we're executing pricing actions in the marketplace.\nWe do expect higher potato costs input and transportation inflation, labor challenges and other industrywide operational headwinds to continue for the remainder of this fiscal year.\nWhile we're taking specific actions to mitigate these challenges they will keep our gross margins below pre-pandemic levels through fiscal 2022.\nAnd finally, I'm confident that we're taking the right steps to get our company back on track to delivering more normalized profit margins.\nAs many of you know, this is my first earnings call as CFO of Lamb Weston.\nI've now been in the role for about nine weeks.\nFor those on the line that I haven't met, it's a pleasure to meet you over the phone.\nI'm looking forward to meeting many of you in person over the coming months as we get back into the cadence of in-person investor meetings and industry events.\nAs Tom discussed, we feel good about the health of the category and our top line performance in the first quarter and expect our gross margins going forward will improve as we benefit from our recent pricing actions, as well as from other actions that we're taking to mitigate some of the macro challenges affecting our supply chain.\nSpecifically in the quarter, sales increased 13% to $984 million, with volume up 11% and price mix up 2%.\nAs expected, volume was the primary driver of sales growth reflecting the ongoing recovery in fry demand outside the home in the U.S. and in some of our key international markets, as well as a comparison to relatively soft shipments in the prior-year quarter.\nLower retail segment sales volume partially offset this growth, largely as a result of incremental losses of low-margin private label business.\nOverall, our sales volume in the first quarter was about 95% of what it was during the first quarter of fiscal 2020 before the pandemic impacted demand.\nMoving to pricing; pricing actions and favorable mix drove an increase in price mix in each of our core business segments.\nAs I'll discuss in more detail later, our pricing actions include the benefit of higher prices charged to customers for product delivery in an effort to pass through rising freight costs.\nThe offset to this is higher transportation costs in cost of goods sold.\nGross profit in the quarter declined $63 million, as the benefit of higher sales was more than offset by higher manufacturing and transportation costs on a per pound basis.\nThe decline in gross profit also includes the $6 million decrease in unrealized mark-to-market adjustments, which includes a $1 million gain in the current quarter compared with a $7 million gain in the prior year quarter.\nThe increase in cost per pound, primarily related to three factors.\nFirst, we incurred double-digit cost inflation for key commodity inputs, most notably edible oils which has more than doubled versus the prior year quarter.\nOther inputs that saw significant inflation include ingredients such as wheat and starches used to make batter and other coatings and containerboard and plastic film for packaging.\nHigher labor costs were also a factor as we incurred more expense from increased unplanned overtime.\nSecond, our transportation costs increased due to rising freight rates as global logistics networks continue to struggle.\nOur costs also rose due to an unfavorable mix of higher costs trucking versus rail as we took extraordinary steps to deliver product to our customers.\nTogether, inflation for commodity inputs and transportation accounted for approximately three quarters of the increase in our cost per pound.\nThe third factor driving the increase in cost per pound was lower production run rates and throughput at our plants from lost production days and unplanned downtime.\nThis resulted in incremental costs and inefficiencies.\nSome of this is attributable to ongoing upstream supply chain disruptions including the timely delivery of key inputs and other vendor supplied materials and services.\nHowever, most of the impact on run rates was attributable to volatile labor availability and shortages across our manufacturing network.\nSo what do we do to mitigate these higher costs and stabilize our supply chain?\nFirst, price; we are executing our recently announced price increases across each of our business segments and implementation of these pricing actions are on track.\nOur price-cost relationship will progressively improve as our pass-through pricing catches up with deflationary cost increases.\nWe'll begin to see some benefit from these actions in the second quarter and it will continue to build through the year.\nIf needed, we will implement additional rounds of price increases to mitigate the impact of further cost inflation.\nWe've also increased the freight rates that we charge customers to recover the cost of product delivery.\nAnd we are adjusting them more frequently to better reflect changes to the market rates.\nThese adjustments have also lagged the cost increases.\nWhile we saw some benefit in the first quarter, we expect to see more of a benefit beginning in the second quarter.\nIn addition, we're significantly restricting the use of higher costs spot rate trucking.\nSecond, we're optimizing our portfolio.\nWe're eliminating underperforming skews to drive savings through simplification in terms of procurement, production, inventory management, and distribution.\nWe're also partnering with our customers to modify product specifications without comprising food, safety and quality.\nThese modifications will help mitigate the impact of lower potato crop yields from this year's crop as well as some of the impact of reduced potato utilization that results from poor raw potato quality.\nThird, we're increasing productivity savings with our Win As One program.\nWhile realized savings to-date have been small given that the initiative is still fairly new we began to execute specific cost reduction programs around procurement, commodity utilization, manufacturing waste, inventory management and logistics as well as programs to improve demand planning and throughput.\nWe expect savings from these and other productivity programs will steadily build as our supply chain stabilizes.\nAnd finally, we're managing labor availability and volatility.\nThis includes changing how we schedule our labor crews, which provides our employees more control and predictability over their personal schedules and reduces unplanned overtime.\nWe're also reviewing compensation levels to make sure we remain an Employer of Choice in each of our local communities.\nThis is in addition to the other recruiting tools and incentives such as signing and retention bonuses.\nMoving on from cost of sales; our SG&A increased $13 million in the quarter.\nThis increase was largely driven by three factors.\nFirst, it reflects the investments we're making behind information technology, commercial and supply chain productivity initiatives that should improve our operations over the long term.\nAbout $4 million this quarter represents non-recurring ERP related expenses.\nSecond, it reflects higher compensation and benefits expense.\nAnd third, it includes an additional $3 million of advertising and promotional support behind the launch of new branded items in our retail segment.\nThis increase compares to a low base in the prior year when we significantly reduced A&P activities at the onset of the pandemic.\nDiluted earnings per share in the first quarter was $0.20, down from $0.61 in the prior year, while adjusted EBITDA including joint ventures was $123 million, down from $202 million.\nMoving to our segments, sales for our Global segment were up 12% in the quarter with volume up 10% and price mix up 2%.\nOverall, the segments' total shipments are trending above pre-pandemic levels due to strength in our North American chain restaurant business especially at QSRs.\nOur international shipments in the quarter also approached pre-pandemic levels, despite congestion at West Coast ports and the worldwide shipping container shortage continuing to disrupt our exports as well as softening demand in Asia due to the spread of the Delta variant.\nThe 2% increase in price mix reflected the benefit of higher prices charged for freight, inflation driven price escalators and favorable customer mix.\nGlobal's product contribution margin, which is gross profit less advertising and promotional expenses declined 45% to $43 million.\nInput and transportation cost inflation as well as higher manufacturing costs per pound more than offset the benefit of higher sales volume and favorable price mix.\nMoving to our Foodservice segment, sales increased 36% with volume up 35% and price mix up 1%.\nThe strong increase in sales volumes largely reflected the year-over-year recovery in shipments to small and regional restaurant chains and independently owned restaurants.\nVolume growth in August was also tempered by the inability to service full customer demand due to lower production run rates and throughput at our plants largely due to labor availability.\nOur shipments to non-commercial customers improved through the quarter as the education, lodging and entertainment channels continued to strengthen.\nOverall non-commercial shipments were up sequentially to 75% to 80% to pre-pandemic levels from about 65% during the fourth quarter of fiscal 2021.\nThe increase in price mix largely reflected pricing actions including the benefit of higher prices charged for freight.\nFoodservices product contribution margin rose 12% to $96 million.\nHigher sales volumes and favorable price mix more than offset input and transportation cost inflation as well as higher manufacturing costs per pound.\nMoving to our Retail segments; sales declined 14% with volume down 15% and price mix up 1%.\nThe sales volume decline largely reflects lower shipments of private label products, resulting from incremental losses of certain low margin business.\nSales of branded products were down slightly from a strong prior-year quarter that benefited from very high in-home consumption demand due to the pandemic, but remained well above pre-pandemic levels.\nThe increase in price mix was largely driven by favorable price including higher prices charged for freight.\nRetails product contribution margin declined 59% to $15 million.\nInput and transportation cost inflation, higher manufacturing cost per pound, lower sales volumes and a $2 million increase in A&P expenses to support the launch of new products drove the decline.\nLet's move to our cash flow and liquidity position.\nIn the first quarter, we generated more than $160 million of cash from operations.\nThat's down about $90 million versus the prior year quarter due primarily to lower earnings.\nWe spent nearly $80 million in capital expenditures and paid $34 million in dividends.\nWe also bought back nearly $26 million worth of stock or about double what we have typically repurchased in prior quarters.\nDuring the quarter, we amended our revolver to increase its capacity from $750 million to $1 billion and extended its maturity date to August 2026.\nAt the end of the first quarter, our revolver was undrawn and we had nearly $790 million of cash on hand.\nOur total debt was about $2.75 billion and our net-debt-to-EBITDA including joint ventures ratio was 2.7 times.\nNow, let's turn to our updated outlook.\nWe continue to expect our sales growth in fiscal 2022 to be above our long-term target of low to mid-single digits.\nIn the second quarter, we continued to anticipate sales growth will be largely driven by higher volume as we lap a comparison to relatively fast shipments during the second quarter of fiscal 2021 due to the pandemic.\nWe expect price mix will be up sequentially versus the 2% that we delivered in Q1 as the execution of pricing actions in all of our segments remain on track.\nFor the second half of the year, we continued to expect our sales growth will reflect more of a balance of higher volume and improved price mix as we begin to lap some of the softer volume comparisons from the prior year and as the benefit from our earlier pricing actions continue to build.\nOur volume growth, however, may be tempered by global logistics disruptions and container shortages that affects both domestic and export shipments.\nIt may also be tempered by lower factory production due to macro industry and labor challenges, as well as a poor quality crop.\nWith respect to earnings, we expect net income and adjusted EBITDA including joint ventures will continue to be pressured through fiscal 2022.\nThat's a change from our previous expectation of earnings gradually approaching pre-pandemic levels in the second half of the year.\nDriving most of this change is our expectation of significantly higher potato costs, resulting from poor yield and quality of the crops in our growing regions.\nWe previously assumed the potato crop that approached historical averages.\nOutside of raw potatoes, we expect double-digit inflation for key production inputs, such as edible oils, transportation and packaging to continue through fiscal 2022.\nWe had previously assumed these costs would begin to gradually ease during the second half of the year.\nWe also expect the macro challenges that have slowed the turnaround in our supply chain to continue through fiscal 2022.\nThat said we expect the labor and transportation actions that I described earlier along with our Win As One productivity initiative will help us continue to gradually stabilize operations, improve production run rates and throughput and manage costs as the year progresses.\nFor the full year, we expect our gross margin may be at least 5 points to 8 points below our normalized annual margin rate of 25% to 26%.\nWhile we recognize this is a wide range, it reflects the volatility and high degree of uncertainty regarding the cost pressures that I've discussed.\nConsistent with prior years, we'll have a better understanding of the crop's financial impact in the next couple of months and we will provide an update when we release our second quarter results in early January.\nBelow gross margin we expect our quarterly SG&A expense will be in the high 90s as we continue our investments to improve our operations over the long-term.\nWhile equity earnings will likely remain pressured due to input cost inflation and higher manufacturing costs both in Europe and the U.S. We've also updated a couple of our other targets for the year.\nFirst, we've reduced our capital expenditure estimate to $450 million from our previous estimate of $650 million to $700 million.\nThis significant reduction is due to the timing of spend behind our large capital projects and effectively shift the spend into early 2023 -- fiscal 2023.\nDespite the shift in expenditures, our expansion projects in Idaho and China remain on track to open in the spring and fall of 2023 respectively.\nAnd second, we're reducing our estimated full year effective tax rate to approximately 22%, down from our previous estimate of between 23% and 24%.\nOur estimates for total interest expense of around $115 million and total depreciation and amortization expense of approximately $190 million remain unchanged.\nSo in summary, the strong recovery in demand helped fuel our top line growth in the first quarter, but higher manufacturing and distribution costs led to lower earnings.\nFor fiscal 2022, we expect net sales growth will be above our long-term target of low to mid-single digit, but that our earnings will continue to be pressured for the remainder of the year due to higher potato costs from a poor crop and persistent inflationary and macro challenges.\nNonetheless, we expect to begin to see earnings improve in the second quarter behind our pricing actions and the steps we're taking to improve our cost.\nNow, here's Tom for some closing comments.\nLet me just sum it up.\nWe feel good about the near-term recovery in demand in the U.S. and our key international markets, as well as the long-term health and growth of the category.\nWe're taking the necessary steps with respect to pricing and continuing to focus on stabilizing our supply chain to mitigate near-term operational headwinds and improve profitability.\nWe're on track with our recently announced capacity investments to support our customer and category growth, as well as our long-term strategic and financial objectives.\n",
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"content": "q1 earnings per share $0.20.\nq1 sales $984 million versus refinitiv ibes estimate of $1 billion.\nsees fy 2022 net sales growth above long-term target range of low-single digits.\nlamb weston holdings - sees net income and adjusted ebitda including joint ventures to be pressured through fiscal 2022.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: These statements are based on how we see things today.\nActual results may differ materially due to risks and uncertainties.\nSome of today's remarks include non-GAAP financial measures.\nThese non-GAAP financial measures should be -- should not be considered a replacement for and should be read together with our GAAP results.\nTom will provide an overview of the current operating environment, while Rob will provide some details on our second quarter results as well as some shipment trends for the third quarter.\nWe delivered solid financial results in the second quarter as our entire Lamb Weston team continues to execute well through this challenging environment.\nThat's only possible because of their ongoing commitment to serving our customers, suppliers and communities.\nOur second quarter results also reflect operating conditions that were generally similar to what we experienced in the first quarter.\nOverall restaurant traffic in the US was resilient by holding steady at around 90% of pre-pandemic levels for much of the quarter.\nHowever, traffic and frozen potato demand rates continued to vary widely by channel.\nTraffic at large chain restaurants were essentially at prior year levels as quick service restaurants continued to leverage drive-through, takeout and delivery formats.\nTraffic at full service restaurants was 70% to 80% of the prior year levels for much of the quarter.\nHowever, traffic began to soften in November as governments reimposed social and on-premise dining restrictions in an effort to contain the resurgence of COVID and as the onset of colder weather tempered outdoor dining opportunities across many markets.\nTraffic and demand at non-commercial customers, which includes lodging, hospitality, healthcare, schools and universities, sports and entertainment, and workplace environment was fairly steady at around 50% of prior year levels for the entire quarter.\nIn retail, consumer demand continued to be strong with weekly category volume growth between 15% and 20% versus the prior year.\nOutside the US, restaurant traffic in fry demand were uneven across markets and varied within the quarter.\nIn Europe, which is served by our Lamb Weston Meijer joint venture, fry demand during much of the quarter was similar to last year, but softened the 75% to 85% of prior year levels during the latter part of the quarter as governments reimposed social restriction and as the weather turn colder.\nAs you may recall, unlike in the US, QSRs in Europe generally have only limited drive-through capabilities.\nDemand in our other key international markets was mixed.\nIn China and Australia, demand was near prior year levels.\nIn our other key markets in Asia and Latin America, overall demand improved sequentially from our first quarter, but remained well below prior year levels.\nGoing forward, we expect many of the softer traffic and demand trends that we began to see in November to carryover into our fiscal third quarter.\nThe sharp resurgence in COVID in the US and Europe has led government to imposed even more rigid social restrictions, In addition, we expect outdoor restaurant dining traffic in our largest markets to fall further as we enter the coldest months of the year in the northern hemisphere.\nNot surprisingly, we expect traffic at full service restaurants will continue to be disproportionately affected.\nMajor QSR chains in the US should be able to continue to hold up well due to their ability to serve customers via drive-through and delivery.\nRetail should also benefit as consumers eat more meals at home.\nAnd as Rob will discuss later, while still early, our shipments to those channels in December support that view.\nSo on one the hand in the near term, we anticipate facing even more challenging and volatile operating conditions than what we experienced in the first half of our fiscal year.\nOn the other hand, we believe this COVID induced shock to demand is temporary.\nWe're confident in the strength of the frozen potato category and do not see any structural impediments to recovery in demand and growth over the long term.\nAs COVID vaccines become more widely available in the coming months and as the virus is more broadly contained, we expect governments will gradually less social restrictions.\nThis should lead to steady growth in restaurant traffic as the year progresses.\nWe believe this growth will lead to overall frozen potato demand approaching pre-pandemic levels on a run rate basis by the end of calendar 2021.\nIn the meantime, we're confident in our business fundamentals, the pricing capacity utilization and potato supply and our ability to manage through the pandemics impacts on our manufacturing operations.\nOur recently announced increase in our quarterly dividend in the planned resumption of our share repurchase program reinforce our conviction in the strength of our business and the category, as well as our commitment to support customers and create value for our stakeholders.\nIn summary, we delivered solid Q2 results and are executing well in a challenging environment.\nWe expect frozen potato demand has softened in the near term due to reduced traffic, following government reimposed, social restrictions as well as the onset of colder weather, and we're optimistic that the increasing availability of COVID vaccines will enable restaurant traffic to gradually improve as the year progresses and that demand will approach pre-pandemic levels by the end of calendar 2021.\nAs Tom noted, we delivered solid financial results in the second quarter, as our teams continued to manage through an ever changing demand environment as well as COVID-related disruptions to our manufacturing and distribution networks.\nFor the quarter, net sales declined 12% to $896 million.\nSales volume was down 14% largely due to fry demand at restaurants and foodservice being negatively impacted following government imposed restrictions to contain the spread of COVID, as well as colder weather beginning to limit outdoor dining across many of our markets.\nOverall, as Tom described earlier, restaurant traffic and our sales volumes in the US stabilized at approximately 90% of pre-pandemic levels, although performance varied widely by sales channel.\nInternational sales were mixed but improved sequentially versus our first quarter.\nPrice mix increased 2% driven by improved price in our Foodservice and Retail segments as well as favorable mix in retail.\nGross profit declined $62 million as lower sales and higher manufacturing costs more than offset the benefit of favorable price mix and productivity savings.\nAs we discussed in our previous earnings call, we expect that our manufacturing cost to increase in the quarter.\nThis was partly due to processing potatoes from the 2019 crop through early September, which is a couple of months longer than usual.\nWe did this in order to manage finished goods inventories in light of the pandemics impact on fry demand.\nProcessing older crop results in increased cost due to significant -- due to higher raw material storage fees and lower recovery rates.\nSince we typically carry upwards of 60 days of finished goods inventory, we realize the impact of these costs in our second quarter income statement as we sold that inventory.\nWe also realized higher manufacturing costs due to input cost inflation, primarily related to edible oils, raw potatoes and other raw ingredients.\nOverall, our input cost inflation was in the low-single digits.\nFinally, we continue to realize incremental costs and inefficiencies resulting from the pandemic's disruptive effect on our manufacturing and supply chain operations.\nAs a reminder, these costs largely relate to labor and other cost to shutdown, sanitize and restart manufacturing facilities impacted by COVID.\nCost associated with modifying production schedules reducing run-times and manufacturing retail products on lines primarily designed for foodservice products and cost per enhancing employee safety and sanitation protocols, as well as for incremental warehousing, transportation and supply chain costs.\nSpecifically in the quarter, we had notable disruptions in our facilities in Idaho, as well as lesser ones in some other facilities.\nWe expect to continue to incur COVID-related costs through at least the remainder of fiscal 2021.\nAs a result, we consider these costs and disruptions as part of our ongoing operations and are no longer disclosing these costs separately.\nSG&A declined by nearly $8 million in the quarter, largely due to lower incentive compensation expense accruals and a $3.5 million reduction in advertising and promotional expense.\nThe decline was partially offset by investments to improve our operations and IT infrastructure, which included about $5 million of non-recurring consulting and training expenses associated with implementing Phase 1 of our new ERP system.\nEquity method earnings were $19 million, which is up $4 million versus last year.\nExcluding the impact of unrealized mark-to-market adjustments equity earnings increased about $2 million due to better performance by our European joint venture.\nHowever, like in the US, our shipments softened during the latter part of the quarter reflecting the effect on restaurant traffic of governments reimposing, social restrictions, as well as colder weather on outdoor dining.\nEBITDA, including joint ventures was $213 million which is down $48 million.\nThe decline was driven by lower income from operations and it was partially offset by higher equity method earnings.\nDiluted earnings per share in the quarter was $0.66, down $0.29 largely due to lower income from operations.\nEPS was also down due to higher interest expense reflecting our higher average total debt and the write-off of some debt issuance costs as we paid off the term loan, a year early.\nThe decline was partially offset by higher equity earnings.\nMoving to our segments.\nSales for our Global segment, which generally includes sales for the top 100 North American based QSR and full service restaurant chains, as well as all sales outside of North America were down 12% in the quarter.\nVolume was down 11% due to softer demand for fries outside the home, especially in our international markets.\nShipments to large chain restaurant customers in the US of which approximately 85% are to QSRs approach prior year levels as QSRs leveraged drive-through and delivery formats.\nHowever, some of that strength also reflected pulling forward sales of customized and limited time offering products from the third quarter.\nInternational sales, which historically comprised about 40% of segment sales, we're at about 80% of prior year levels in the aggregate, but vary by market.\nShipments in China and Australia approached prior year levels.\nOur shipments to other parts of Asia and Latin America, improved sequentially as customers and distributors in many of these markets were able to right-size inventories, however, they remained well below prior year levels.\nPrice mix declined 1% as a result of negative mix.\nPrice alone was flat.\nGlobal's product contribution margin, which is gross profit less A&P expense declined 28% to $93 million.\nLower sales volume, higher manufacturing costs, and unfavorable mix drove the decline.\nSales for our Foodservice segment, which services North American foodservice distributors and restaurant chains generally outside the top 100 North American restaurant customers, declined 21% in the quarter.\nSegments to smaller chain and independent full service and quick service restaurants tracked around 70% to 80% of prior year levels through much of October, but slowed to 60% to 70% in November, following government's reimposing, social restrictions and as colder weather tempered restaurant traffic in some of our markets.\nShipments to non-commercial customers improved modestly since summer but remain at around 50% of prior year levels, with strength in healthcare more than offset by continued weakness in the other channels.\nPrice mix increased 4% behind the carryover benefit of pricing actions taken in the latter half of fiscal 2020.\nMix continued to be unfavorable with some hard hit independent restaurants looking to reduce costs by purchasing more value-added products rather than the premium Lamb Weston branded ones.\nWhile we've regained much of this business since the pandemic first struck last spring on a year-over-year basis, it remains a mix headwind.\nFoodservices product contribution margin declined 21% to $88 million.\nLower sales volumes, higher manufacturing costs and unfavorable mix drove the decline and was partially offset by favorable price.\nSales for our Retail segment increased 7% in the quarter.\nPrice mix increased 7%, primarily reflecting favorable mix benefit of selling more of our higher margin branded portfolio of Alexia, Grown in Idaho and licensed restaurant trademarks.\nSales of our branded products were up about 30% which is well above category growth rates, which ranged between 15% and 20%.\nThe increase in our branded volume was offset by the loss of certain low margin, private label volume that began late in the second quarter of fiscal 2020, as well as an additional amount that began a couple of months ago.\nAs a result, we expect private label losses to continue to be a headwind.\nRetail's product contribution margin increased 6% to $30 million.\nThe increase was driven by favorable mix and lower A&P expense and was partially offset by higher manufacturing costs.\nMoving to our cash flow and liquidity position.\nWe are comfortable with our liquidity positioned and confident in our ability to continue to generate cash.\nIn the first half, we generated nearly $320 million of cash from operations, which is down about $25 million versus last year, due to lower sales and earnings.\nWe spent $54 million in capex, including expenditures for our new ERP system.\nWe paid $67 million in dividends and a few weeks ago, announced a 2% increase in our quarterly dividend.\nIn addition, we plan to resume our share repurchase program this quarter.\nAs you may recall, we temporarily suspended our buyback program in late fiscal 2020 in order to help preserve our liquidity during the early days of the pandemic.\nAs we discussed in our previous earnings call, in September, we amended our credit agreement to put in place a new three-year $750 million revolver.\nAt the same time, using a portion of the more than $1 billion of cash on hand, we prepaid the approximately $270 million outstanding balance on the term loan that was due in November of 2021.\nAt the end of the second quarter, we had more than $760 million of cash on hand and our new revolver was undrawn.\nOur total debt was $2.75 billion and our net debt to EBITDA ratio was 3.1 times.\nNow turning to our shipments so far in the third quarter.\nBroadly speaking, in the US, demand at QSRs and at retail are holding up well, while traffic at full service restaurants continues to soften.\nSpecifically, US shipments in the four weeks ending December 27, were approximately 85% of prior year levels.\nIn our Global segments, shipments to our large QSR and full-service chain customers in the US, were more than 95% of prior year levels.\nWe expect that rate will largely continue for the remainder of the third quarter.\nIn our Foodservice segment, shipments to our full service restaurants regional and small QSRs and non-commercial customers in aggregate were 60% to 65% of prior year levels.\nThat is largely in line with what we realized during the latter part of the second quarter.\nWe anticipate that shipments to full-service restaurants and small and regional QSRs will continue to soften as social restrictions broaden and as winter weather takes a bigger bite out of outdoor dining.\nShipments to non-commercial customers, which have historically comprised about 25% of the segment's volume were roughly half of prior year levels and will likely remain soft for the remainder of the quarter.\nIn our Retail segments, shipments were above prior year levels with strong volume of our branded products, partially offset by a decline in shipments of private label products.\nWe believe that this rate will largely continue for the remainder of the quarter.\nOutside the US, overall demand has slowed, but it's varied by market.\nIn Europe, shipments by our Lamb Weston Meijer joint venture were approximately 85% of prior year levels, continuing the softer demand that we realized during the latter part of the second quarter.\nWe believe that shipments will continue to soften due to severe social restrictions and colder weather.\nShipments to our other international markets, which primarily include Asia, Oceana, Latin America were mixed.\nIn aggregate, international shipments so far in the quarter have been softer than what we realized during the latter half of the second quarter.\nAs a reminder, all of our international sales are included as part of our Global results.\nIn short, other than at US QSRs, which can leverage drive-through access, global demand for fries at restaurants and foodservice will be soft in the third quarter, following government's reimposing restrictions to combat the resurgence of COVID, as well as colder weather in our Northern Hemisphere markets limits outdoor dining opportunities.\nWith respect to contract pricing, after completing discussions for contracts that were up for renewal, we expect pricing across our domestic large chain restaurant portfolio in aggregate to be flat versus prior year.\nOutside of these large chain restaurant contracts, on balance, domestic pricing is holding up well.\nHowever, we continue to see increased competitive activity in more value-added oriented products in some international markets and to a lesser extent in some value tiered domestic market segments.\nWith respect to costs, the potato crop in our growing regions in the Columbia Basin, Idaho, Alberta, and the upper Midwest is consistent with historical averages in aggregate.\nWe don't see any notable impact on cost outside of inflation.\nCrop in our growing areas in Europe is also broadly consistent with historical averages, which should help ease cost pressures there versus last year.\nHowever, we do expect to continue to incur additional cost as a result of COVID's disruptive impact on our manufacturing and supply chain operations and we expect that we'll continue to do so until the virus is broadly contained.\nNow here's Tom for some closing comments.\nLet me just quickly sum up by saying while the near-term environment will be volatile.\nWe believe that the restaurant traffic will gradually recover to pre-pandemic levels by the end of calendar 2021.\nWe'll continue to focus on the right strategic and operating priorities to serve our customers and build upon the long-term health of the category in order to create value for our stakeholders.\n",
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"content": "q2 earnings per share $0.66.\nq2 sales $896 million versus refinitiv ibes estimate of $876.8 million.\nqtrly volume declined 14 percent.\nnorth america and europe shipments will remain soft during remainder of quarter.\nexpect demand will remain soft in the coming months, especially at full-service restaurants.\nlamb weston - believe restaurant traffic may approach pre-pandemic levels later this calendar year if vaccines and other measures are successful.\nplan to resume share repurchase program in january 2021.\nannounced a 2% increase in quarterly dividend.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: These statements are based on how we see things today.\nActual results may differ materially due to risks and uncertainties.\nSome of today's remarks include non-GAAP financial measures.\nThese non-GAAP financial measures should not be considered a replacement for and should be read together with our GAAP results.\nTom will provide some comments on our performance as well as an overview of the current operating environment.\nBernadette will then provide details on our second quarter results and updated fiscal 2022 outlook.\nWe're pleased with the improvement in our manufacturing and supply chain operations as well as the progress in our financial performance in the quarter and I'm proud of how Lamb Weston team has been able to navigate through this difficult macro environment.\nWe generated strong sales and solid demand across our food away-from-home channels drove volume growth and the initial benefits of our recent pricing actions began to offset inflationary pressures.\nIn addition, our efforts to stabilize our manufacturing operations are on track, including increasing staffing in our processing plants to improve production run rates and throughput.\nTogether, our sales and operating momentum drove sequential gross margin improvement in the quarter and have us well positioned to better manage the upcoming cost pressures from this year's exceptionally poor potato crop in the Pacific Northwest.\nWhile our operations and financial results are not yet where we want them to be, we're on track to deliver our financial targets for the year and our investments in capacity and productivity will get us well positioned to deliver higher margins and sustainable growth over the long term.\nBefore Bernadette gets into some of the specifics of our second quarter results and outlook, let's briefly review the current operating environment, starting with demand.\nIn the U.S., overall fry demand and restaurant traffic in the quarter remained solid, especially at quick service restaurants where demand has continued to be strong and above pre-pandemic levels.\nTraffic at full-service restaurants during the quarter was also solid but remained below pre-pandemic levels.\nRestaurant traffic, though, has softened recently as the spread of COVID variants have tempered consumer demand for on-premise dining and as restaurants closed temporarily due to staff shortages.\nWhile we expect that COVID wave will continue to temper demand for on-premise dining in the near term, we do not anticipate that it will have a meaningful effect on traffic or demand at QSRs.\nDemand at noncommercial outlets also improved during the quarter but continued to be below pre-pandemic levels.\nAs with on-premise dining, we expect the spread of COVID variants will affect near-term demand.\nThe fry attachment rate in the U.S., which is the rate at which consumers order fries when visiting a restaurant or other food service outlets, continue to be above pre-pandemic levels.\nThis served to support our out-of-home fry demand in the quarter.\nThe increase in the fry attachment rate has been fairly consistent since the beginning of the pandemic and we do not see that changing in the near term.\nFry demand in U.S. retail channels in the quarter was up mid-teens from pre-pandemic levels and we anticipate it will remain strong in the near term as the pandemic continues to affect demand in out-of-home channels.\nNow, outside the U.S., demand in Asia and Oceania has been solid, although the lack of shipping containers and disruptions to ocean freight networks continues to hinder our ability to fully serve our customers in these markets.\nDemand in Europe, which is served by our Lamb Weston/Meijer joint venture, has also been solid, although consumer reaction and the effect of recently imposed government lockdowns may reverse some of the recovery in restaurant traffic and fry demand in the near term.\nSo overall, we're encouraged by the resiliency of demand and the long-term trends for the category but expect that there will be some near-term softness with another COVID wave in the U.S. and our key international markets.\nWith respect to pricing, we're making good progress in implementing recent pricing actions to manage input cost inflation.\nIn the second quarter, we began to see the initial benefits of the price increases that took effect in the summer in our foodservice and retail segments as well as in some of our international businesses.\nWe expect the benefit of these prices will continue to build as the year progresses.\nIn December, we began implementing another round of pricing actions in our foodservice and retail segments.\nWhile these actions did not affect our second quarter results, we'll see a gradual benefit from them over the next six months.\nIn our global segment, we saw some benefit of pricing actions in the second quarter but expect to see a greater impact during the back half of the year.\nThis reflects price increases related to contract renewals as well as the benefit of price escalators for most of the global contracts that are not up for renewal this year.\nWe expect these price increases across our business segments will in aggregate mitigate much but not all of our cost inflation pressures.\nWe will continue to assess the pace and scope of further cost inflation and we may take further price actions as the year progresses.\nWith respect to costs, input cost inflation remains the primary driver to the increase in our cost per pound in the quarter.\nCommodity and transportation costs were each up double digits and we expect that trend will continue through fiscal 2022, especially as our raw potato costs significantly increased in the second half of the year.\nOutside of cost inflation, we're making good progress to stabilize our supply chain in order to improve cost, production run rates and throughput.\nWe've taken actions to simplify our manufacturing processes and drive savings through a series of productivity initiatives, eliminating underperforming SKUs and increasing potato utilization rates.\nImportantly, after making changes to how we staff production crews, compensation and other incentives, we steadily reduced our staffing shortfall.\nWe're working to continue this positive trend but realize it's difficult in a very challenging labor environment.\nThe pending implementation of government-mandated COVID testing and vaccine regulations may also slow our progress and that of our suppliers in attracting and retaining workers in the near term.\nNow, turning to the crop.\nThe yields and quality of the potato crops in our primary growing regions in the Columbia Basin, Idaho and Alberta are well below average due to the extreme heat over the summer.\nSimilar to prior years, we had contracted with farmers to purchase potatoes to meet our production needs, assuming an average crop year.\nBut because of the extreme heat, the contracted acres yielded fewer potatoes and the quality is also poor.\nAs a result, we're purchasing our remaining potato needs in the open market to meet our production forecast.\nWe were able to reduce the number of potatoes we'd otherwise have been required to purchase in the open market by successfully partnering with our customers to secure changes product specifications.\nGiven that raw potato supply is tight and that fry demand has largely recovered, we've been purchasing open potatoes at a premium to contracted potato prices.\nWhen possible, we've been securing them from our nearby growing regions, but we have also transported potatoes from the Midwest and Eastern North America which results in increased transportation costs.\nWe included an estimate of these additional costs in our updated earnings outlook.\nWe'll begin to see more of the financial impact of this year's poor crop, including the high cost of open market potatoes in our third quarter results.\nSo in summary, we feel good about our financial and operating progress in the quarter.\nThe overall demand environment is solid but may soften in the near term due to another COVID wave and we're pulling the right pricing and operating levers to manage through this challenging environment.\nAs Tom discussed, we're pleased with our progress in the quarter.\nWe generated strong sales and solid demand across our restaurant and foodservice channels in North America, drove volume growth and we implemented pricing actions.\nWe believe our pricing and cost-mitigation actions have us positioned to navigate through this difficult operating environment and to support sustainable profitable growth over the long term.\nSpecifically, in the quarter, sales increased 12% to a little over $1 billion.\nThis is only the fourth time in Lamb Weston's history that we topped $1 billion of sales in a quarter.\nSales volumes were up 6%.\nVolume growth was driven by our foodservice segment, which reflects the continued year-over-year recovery in on-premise dining and by strong shipments to our large chain restaurant customers in North America that is served by our global segment.\nSales volumes of branded products in our retail segment were also up in the quarter, but the segment's overall volume declined due primarily to lower shipments of private label products.\nWhile our overall volume growth in the quarter was strong, it was tempered by industrywide upstream and downstream supply chain constraints, including delays in the availability of spare parts, edible oils and other key materials to our factories as well labor shortages, which impacted production run rates and throughput at our processing plant.\nIn our global segment, volume growth was also tempered by the limited availability of shipping containers and disruptions at ports and in ocean freight networks.\nWe expect these production and logistics challenges as well as the near-term impact of COVID variants to limit our volume growth through at least the end of fiscal 2022.\nPrice mix was up 6% as we realized benefits from our previously announced pricing actions in each of our four segments.\nAs a reminder, we began implementing product pricing actions in the first quarter as the primary lever to offset inflationary cost pressures and it generally takes a couple of quarters before these actions are fully realized in the marketplace.\nWe've also taken actions to more frequently change the freight rates that we charge to customers, so they better reflect market rates.\nHistorically, we only adjusted these rates once or twice a year.\nMost of the increase in price mix in the quarter reflects these product and freight pricing actions with favorable mix providing only a modest benefit.\nGross profit in the quarter declined $18 million as the benefit of increased sales was more than offset by higher manufacturing and transportation costs on a per pound basis.\nDouble-digit inflation for commodities and transportation costs accounted for almost 90% of the increase in cost per pound.\nOf the two, commodities played a bigger role and were again led by edible oils, including canola oil, which nearly doubled versus the prior-year quarter, ingredients such as wheat and starches used to make batter, and other coatings and containerboard and plastic film for packaging.\nFreight costs rose, especially for ocean freight and trucking, as global logistics networks continued to struggle.\nOur costs also increased due to an unfavorable mix of higher cost trucking versus rail in order to meet service obligations for certain customers.\nAs Tom mentioned, we also incurred higher cost per pound versus the prior year due to incremental costs and inefficiencies driven by lower production run rates and throughput at our factories which resulted in fewer pounds to cover fixed overhead.\nLost production days and unplanned downtimes were primarily due to labor shortages across our manufacturing network, including COVID-related absenteeism.\nWhile the cost drivers in the first two quarters of the year have been largely consistent, in the second quarter, we began to realize the initial benefits of the pricing and cost-mitigation actions that we discussed during our last earnings call.\nAs a result of these efforts, gross margin increased sequentially versus the first quarter by 500 basis points to more than 20%.\nWhile pricing actions provided the larger lift to the sequential improvement to gross margins, our production run rates and throughput improved sequentially, primarily due to our efforts to stabilize factory labor.\nWhile still lower than average, labor retention rates improved modestly versus the first quarter and the number of new applicants has been steady.\nWith more stability, we in turn drove more factory throughput.\nFinally, our actions to optimize our portfolio are also providing benefit.\nWe've eliminated underperforming SKUs to simplify our portfolio and increase throughput in our factories.\nWe've also successfully partnered with our large customers to secure changes to product specifications to mitigate a portion of the operating impact of the poor quality of this year's potato crop.\nIn short, while our run rate and cost structure are not yet where we want them to be, we look forward to building on the notable sequential progress that we made in quarter and believe that we've positioned ourselves to manage through this challenging near-term increased cost and poor potato crop environment.\nMoving on from cost of sales.\nOur SG&A increased $7 million in the quarter, largely due to a couple of factors.\nFirst, it reflects higher labor and benefit costs and higher sales commissions associated with increased sales volumes.\nSecond, it includes a $2.5 million increase in advertising and promotional expenses as we stepped up support for our retail products.\nWhile these expenses are up compared with the prior year, they are still below pre-pandemic levels.\nThe increase in SG&A was partially offset by a reduction in consulting expenses associated with improving our commercial and supply chain operations as those consulting projects ended as well fewer expenses in the current quarter related to the design of a new enterprise resource planning system.\nWe had approximately $2 million of ERP-related expenses in the quarter, which consisted primarily of consulting expenses.\nThat's down from about $5 million of similar-type expenses in the prior-year quarter.\nWe're resuming our efforts in the second half of fiscal 2022 to design the next phase of our new ERP system.\nDiluted earnings per share in the quarter was $0.22, down $0.44.\nAbout $0.28 of the decline was related to costs associated with the redemption and write-off of previously unamortized debt issuance costs related to the senior notes that were originally issued in connection with our spin-off from ConAgra in November 2016.\nWe identified these costs as items impacting comparability in our non-GAAP results.\nExcluding the impact of these items, adjusted diluted earnings per share was $0.50, which is down $0.16 due to lower income from operations and equity method earnings.\nMoving to our segments.\nSales for our global segment were up 9% in the quarter.\nprice mix was up 5%, reflecting a balance of higher prices charged for freight, pricing actions associated with customer contract renewals and inflation-driven price escalators.\nVolume was up 4%.\nHigher shipments to large chain restaurant customers in North America drove the volume increase, while logistics constraints temper our international shipments.\nOverall, the global segment's total shipments continued to trend above pre-pandemic levels.\nGlobal's product contribution margin, which is gross profit less A&P expenses, declined 13% to $81 million.\nHigher manufacturing and distribution cost per pound more than offset the benefit of favorable price mix and higher sales volumes.\nMoving to our foodservice segment.\nSales increased 30% with volume up 22% and price mix up 8%.\nThe ongoing recovery in demand from small and regional restaurant chains and independently owned restaurants as well as from noncommercial customers drove the increase in sales volumes.\nThe initial benefits of product and freight pricing actions that we began implementing earlier this fiscal year as well favorable mix drove the increase in price mix.\nFoodservice's product contribution margin rose 19% to $104 million as favorable price mix and higher sales volumes more than offset higher manufacturing and distribution cost per pound.\nMoving to our retail segment.\nprice mix increased 5%, reflecting the initial benefits of pricing actions in our branded portfolio, higher prices charged for freight and improved mix.\nSales volume declined 4% as an increase in branded product volume was more than offset by lower shipments of private label products, resulting from incremental losses of certain low-margin business.\nRetail shipments in the quarter were also tempered by the industrywide supply chain constraints and production disruptions that I discussed earlier.\nRetail's product contribution margin declined 29% to $21 million.\nHigher manufacturing and distribution cost per pound, a $2 million increase in A&P expenses and lower sales volumes drove the decline.\nMoving to our liquidity position and cash flow.\nOur liquidity position remained strong.\nWe ended the first half of fiscal 2022 with almost $625 million of cash and $1 billion of availability on our undrawn revolver.\nIn the first half, we generated more than $205 million of cash from operations.\nThat's down about $110 million versus the first half of the prior year due primarily to lower earnings.\nDuring the first half of the year, we spent nearly $150 million in capital expenditures as we continued construction of our chopped and formed expansion in American Falls, Idaho and our new processing lines in American Falls in China.\nWe continue to put significant effort into managing certain material equipment and labor availability issues to keep our capital projects on track.\nIn the first half of the year, we returned $145 million to shareholders, including nearly $70 million in dividends and $76 million of share repurchases.\nThis includes $50 million of share repurchases in the second quarter alone.\nLast month, we announced a 4% increase in our quarterly dividend rate, which equates to approximately $144 million annually and a $250 million increase to our current share repurchase plan, reflecting our confidence in the long-term potential of our business.\nAs a result, we have about $344 million authorized for share repurchases under the updated plan.\nAs I referenced earlier, during the quarter, we redeemed and issued nearly $1.7 billion of senior notes.\nIn doing so, our average debt maturity increased from four years to more than seven years and we reduced our annual interest expense by approximately $8.5 million.\nWe remain committed to our capital allocation priorities.\nFirst, to reinvest in our business both organically and with M&A.\nAnd then to return free cash flow to shareholders through a combination of dividends and share repurchases over time.\nNow, turning to our updated outlook.\nWe continue to expect our full year sales growth in fiscal 2022 to be above our long-term target of low to mid-single digits.\nIn the third quarter, we anticipate price mix will be up sequentially versus the 6% increase that we delivered in the second quarter as the benefit of previously announced product pricing actions in each of our core segments continues to build.\nWe expect volume growth in the third quarter will decelerate sequentially versus the 6% we delivered in second quarter as a result of the near-term impact of COVID variants on restaurant traffic and demand, the macro industry supply chain constraints and labor challenges that will continue to affect production run rates and throughput in our factories and global logistics disruptions and container shortages that affect both domestic and export shipments.\nWe expect further deceleration in the fourth quarter as we begin to lap some of the higher-volume comparisons from the prior year.\nWith respect to earnings, we continue to expect net income and adjusted EBITDA including joint ventures will be pressured through fiscal 2022 reflecting significantly higher potato costs in the second half of the year, resulting from the poor crop, double-digit inflation for key production inputs and freight and higher SG&A expenses.\nFor the full year, we expect our gross margin will be 600 to 700 basis points below our pre-pandemic margin rate of 25% to 26%, implying a target range of 18% to 20%.\nThat's a change from the 17% to 21% range that we provided in our previous outlook.\nWe narrowed the range for a number of reasons.\nFirst, we're confident about the pace and execution of the product and freight price increases that we are implementing in the market.\nSecond, we expect to build upon the incremental progress that we made in the second quarter to stabilize our supply chain operations and drive savings behind our cost-mitigation initiatives.\nHowever, we expect that the improvement in our run rate, throughput and costs will continue to be gradual, reflecting the broader macro challenges facing the labor market that will likely persist through fiscal 2022.\nAnd third, we have greater clarity on the net cost impact from this year's exceptionally poor potato crop.\nAs a reminder, we'll begin to realize the full financial impact of this year's poor potato crop in the third quarter and will continue to realize its effect through most of the second quarter of fiscal 2023.\nBelow gross margin, we expect our SG&A expenses to step up $100 million to $110 million in the third and fourth quarters as we begin to design the second phase of our new ERP project.\nEquity earnings will likely remain pressured due to input cost inflation and higher manufacturing costs, both in Europe and the U.S.\nWe expect our interest expense to be approximately $110 million, excluding the $53 million of costs associated with the redemption of the senior notes in the second quarter.\nWe previously estimated interest expense to be approximately $115 million.\nOur estimates for total depreciation and amortization expense of approximately $190 million and effective tax rate of approximately 22% and capital expenditures of approximately $450 million remains unchanged.\nSo in sum, we're seeing the benefit of our pricing actions which drove the sequential improvement in our top line and gross margin in the quarter.\nAlong with our pricing actions, we're on track with our other cost-mitigation initiatives, positioning us to manage through the impact of the very poor crop.\nAnd finally, for fiscal 2022, we continue to expect net sales growth will be above our long-term target of low to mid-single digits and we have enough clarity in our sales and cost outlook to narrow our previous target gross margin rate.\nNow, here's Tom for some closing comments.\nLet me just quickly reiterate our thoughts on the quarter by saying we are pleased with our progress in the quarter and we're taking the right steps on pricing actions and in our supply chain operations to navigate through this difficult operating environment.\nWe are on track to deliver on our targets for the year and we believe we're on a path to get back to pre-pandemic profit levels after we get past the impact of the poor crop in the first half of fiscal 2023 and remain committed to investing support growth and create value for our stakeholders over the long term.\n",
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"content": "q2 adjusted earnings per share $0.50.\nq2 earnings per share $0.22.\nq2 sales rose 12 percent to $1.007 billion.\nsees fy 2022 net sales growth above long-term target range of low-to-mid single digits.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: These statements are based on how we see things today.\nActual results may differ materially due to risks and uncertainties.\nSome of today's remarks include non-GAAP financial measures.\nThese non-GAAP financial measures should not be considered a replacement for and should be read together with our GAAP results.\nTom will provide an overview of the current operating environment and our recently announced investment in China, while Rob will provide some details on our third quarter results as well as some shipment trends for the fourth quarter.\nWe delivered solid sales volumes in the third quarter as restaurant traffic and consumer demand improved as governments gradually ease social and on-premise dining restrictions in some markets.\nWhile still down year-over-year, the rate of volume decline improved sequentially in both the US and in our key international markets from what we realized during the first half of our fiscal year.\nAgain, this was largely in response to governments easing restrictions as the quarter progressed and demonstrates that consumers are ready to go out as restaurants expand dining capacity.\nSpecifically, overall restaurant traffic in the US was between 85% and 90% of pre-pandemic levels.\nTraffic at large quick service chain restaurants continued at roughly prior-year levels as they leveraged drive-thru, takeout and delivery formats.\nAfter a slow start to the quarter, traffic at full service restaurants recovered to 70% to 80% of prior-year levels.\nTraffic began to pick up later in the quarter as some governments gradually lifted social and dining restrictions that were put in place, due to the resurgence of COVID and as a relatively mild winter weather provided more outdoor dining opportunities.\nWhile we expect this momentum will continue, we're mindful that some of this performance may be due to customers and distributors restocking inventories prior to an expected boom in restaurant traffic in coming months.\nIn contrast, demand in non-commercial customers, which includes lodging and hospitality, healthcare, schools and university, sports and entertainment, and workplace environments, remain around 50% of prior-year levels for the entire quarter.\nWe're confident that demand from these customers will return, but realize the recovery to pre-pandemic levels may take some time as governments slowly lift restrictions for larger gatherings.\nIn retail, demand in the quarter was strong with weekly category volume at 115% to 125% of prior-year levels as consumers continued to eat more meals at home.\nOutside the US, restaurant traffic and fry demand has been mixed.\nIn Europe, which is served by our Lamb-Weston/Meijer joint venture, fry demand in the quarter was 80% to 85% of prior-year levels.\nHowever, we believe that demand rate is likely to soften as governments reimposed severe social restrictions in response to the resurgence of COVID infections.\nDemand in most of our international markets in Asia, Oceania and Latin America improved in the quarter.\nOur shipments in China were strong.\nDemand in our other key markets in the aggregate remain below prior-year levels, but continue to improve sequentially versus the first half of the year as well as in each month of the quarter.\nSo while demand in Europe remained soft, we feel good about the demand trends in the US and most of our key international markets.\nAnd we expect governments will continue to gradually roll back social restrictions in the months ahead as more of their citizens get access to vaccines.\nThis should serve to unlock pent-up consumer demand to visit restaurants and other food service outlets and ultimately, demand for fries.\nAs a result, we remain optimistic the overall frozen potato demand will steadily approach pre-pandemic levels on a run rate basis by the end of calendar 2021.\nThe progress we made on sales volume in the quarter was offset by the pandemic's continued effect on our supply chain operations.\nAs Rob will discuss later, COVID-related disruption significantly affected our production, transportation, and warehousing networks leading to significantly higher costs as we focused on customer service, while dealing with the pandemic's impact in some of our communities and workforce.\nIn addition, decisions that we made in the first half of the year to defer certain capital, repair and maintenance projects further reduced our flexibility to manage disruptions and drove incremental manufacturing and distribution costs.\nSo in summary, in the third quarter, we delivered solid top line results.\nOperating in a pandemic environment has been and will continue to be challenged, and we expect it will continue to incur our higher costs across our supply chain in the near term.\nFirst, we will provide our normal update for this year's potato crop when we report earnings in July and October.\nSecond, as you may have seen a couple of weeks ago, we announced that we're building a new French fry processing facility in China at a total investment of around $250 million.\nThis greenfield facility will complement our planned Shangdu and is expected to add about 250 million pounds of frozen potato product capacity.\nWe anticipate starting up the plant sometime during the back half of calendar 2023.\nWe chose to build this plant in China because it's a fast-growing 1 billion pound plus market and a key driver to our international growth.\nThis new plant enables us to support customers in China using in-country supply, which is something that our larger customers there increasingly want as they continue to expand.\nIn addition, our new facility will allow us to further diversify our manufacturing base and mitigate risks or potential trade disruptions as we look to drive international growth.\nSo in summary, in the third quarter, we delivered solid top line results as demand continued to gradually recover, but incremental costs related to pandemic-related disruptions pressured earnings.\nWe expect that the increasing availability of COVID vaccines and the easing of government-imposed social restrictions will allow restaurant traffic to gradually improve as the year progresses.\nAnd we remain optimistic that overall frozen potato demand will approach pre-pandemic levels on a run rate basis by the end of calendar 2021.\nAs Tom noted, in the third quarter, we delivered solid sales results as overall demand continued to improve, but the pandemic's disruptive impact on our manufacturing and distribution operations significantly increased our costs.\nSpecifically in the quarter, net sales declined 4% to $896 million.\nSales volume was down 6%, largely due to the pandemic's impact on fry demand, but improved through the quarter after a slow start.\nImportantly, that rate of volume decline improved sequentially from the 14% decline that we realized during the first half of fiscal 2021.\nMost of the sequential improvement was within our Global segment and largely reflects a steady recovery in shipments in our key international markets.\nStronger sales of limited-time offering products in the US also contributed to the Global segment's recovery.\nIn addition, we saw a sequential improvement in our Foodservice segment led by casual dining, as well as continued strength by our branded offerings in our Retail segment.\nImproved price in our Retail and Foodservice segments as well as favorable mix in Retail drove the increase.\nPrice was up in our Global segment, although this was offset by negative mix.\nGross profit declined $54 million as lower sales and higher manufacturing and distribution costs more than offset the benefit of favorable price/mix and productivity savings.\nLet's focus on cost of goods sold.\nAs Tom noted, the higher costs were largely a result of the pandemic's disruptive impact across our supply chain.\nThe resurgence of COVID in many of the communities where our plants are located greatly affected our manufacturing workforce.\nAt times, the combination of infected and quarantined employees significantly affected our ability to staff production lines and other key roles at a number of our facilities.\nThe consequences were: First, we lost days of production, which resulted in a number of our plants operating well below normal utilization rates and reduced our ability to cover fixed overhead costs.\nIn addition, recall that a year ago, we decided to continue paying employees despite production lines being down due to COVID.\nWhile we believe that was a right thing to do to support our production teams, it has had an impact on our cost structure.\nSecond, focusing on maintaining customer service levels required us to quickly adjust production schedules to accommodate workforce and manufacturing line availability.\nThis drove incremental costs and inefficiencies.\nIn many cases, we shifted production from one facility to another even though the alternate facility may not be the most effective in terms of cost or throughput for that specific product.\nThat negatively impacted line speeds, throughput, and raw potato recovery rates.\nAnd third, the number of effective employees and facilities meant that we incurred even more costs related to temporary shutdown and restart of manufacturing facilities.\nCompounding these disruptions in the quarters were our decisions to defer certain capital, repair and maintenance projects on our production lines that were originally scheduled for the first half of fiscal 2021.\nWe planned on undertaking these capital and maintenance projects once the demand environment and our operations were more stable during the second half of the year.\nWhile deferring these projects was prudent in light of the uncertainty surrounding COVID, executing them at the same time as another COVID wave impacted our plants led to additional disruption in our manufacturing capabilities and further limited our flexibility to adjust production schedules across our network.\nThis drove additional costs and inefficiencies on top of the staffing-related issues I described.\nThe pandemic-induced volatility in our production facilities also had a downstream impact on our transportation and warehousing operations.\nWe generally prefer to rely on rail more than trucking to move product from our production facilities and warehouses to our distribution centers and customers across the country.\nHowever, late changes to production schedules required us to switch significant volume from rail to trucking, which is more flexible, but also higher cost in an effort to maintain customer service levels.\nIn addition, we typically employed trucks using contracted carrier rates as opposed to securing spot trucking, which tends to be higher cost.\nSpot trucking has also had significant rate increases over the past six months, but because of the disruption to our production schedules and again to prioritize customer service, we leaned more on expensive spot trucking.\nSo our transportation costs significantly increased because of an unfavorable mix of rail and trucking, as well as an unfavorable mix of contracted and spot trucking.\nAs you would expect, our warehousing costs also increased with the additional handling required across our distribution network.\nFinally, while the pandemic-related effects on our supply chain were the primary drivers of our cost increases, we also realized higher cost due to input cost inflation in the low-single-digits.\nWe expect that rate will begin to tick up in the coming quarters as edible oil and transportation costs continue to increase.\nWhile our costs were higher in the quarter, we are starting to see the benefits of our supply chain team's work around a series of initiatives we call Win As One [Phonetic].\nThese initiatives build upon the Lamb Weston operating culture productivity programs that we have in place.\nBroadly speaking, Win As One seeks ways to reduce our variable and fixed cost, increased production throughput on existing assets and improved working capital, especially inventories.\nIn the couple of the plants where the team has implemented these new ways of working, asset utilization is at or above pre-pandemic utilization rates, and we're seeing the benefit in the cost structures in those facilities.\nAs the team continues to roll out these programs to the rest of the network and as infection and quarantine rates decline through vaccination programs we're supporting for our production employees, we expect our cost structure and utilization rates will begin to normalize.\nLonger term, we expect these initiatives to enhance margins, drive cash flow and strengthen our culture of continuous improvement.\nSince we only began to roll out Win As One at a couple of our plants few months ago, we're not providing any specifics on activities or targets today.\nWe anticipate giving investors more insight into this program as we gain more traction.\nMoving to the segments -- moving on from cost of sales, excuse me, our SG&A increased $8 million in the quarter.\nThe increase was largely due to investments we're making behind the Win As One initiatives I just described.\nEquity method earnings were $11 million.\nExcluding the impact of unrealized mark-to-market adjustments and a comparability item in the prior-year quarter, equity earnings declined about $11 million.\nTwo factors drove the decline.\nFirst, fry demand in Europe fell as much of the region remained in lockdown and as colder weather affected outdoor dining.\nSecond, our joint ventures also realized higher production costs related to COVID disrupting their manufacturing and distribution operations.\nAdjusted EBITDA, including joint ventures, was $167 million, which is down $61 million.\nLower income from operations drove the decline.\nAdjusted diluted earnings per share in the quarter was $0.45, which is down $0.32, mostly due to lower income from operations.\nEPS was also down due to higher interest expense reflecting our higher average total debt resulting from actions we took to -- in late fiscal 2020 and early fiscal 2021 to enhance our liquidity position.\nNow, moving to our segments.\nSales for our Global segment, which generally includes sales for the top 100 North American based QSR and full service restaurant chains, as well as all sales outside of North America, were down 2% in the quarter.\nVolume was down only 2%, which is much better than the minus 12% we realized during the first half of fiscal 2021.\nShipments to large chain restaurant customers in the US, of which approximately 85% are to QSRs, increased nominally versus prior year.\nQSRs continue to perform well as they continue to leverage drive-thru and delivery formats.\nAs I mentioned earlier, US QSRs were also aided by the return of some noteworthy limited-time product offerings.\nInternational shipments, which historically comprise about 40% of the segment's volume, were about 95% of prior-year levels in the aggregate.\nThat's up from around 75% of prior-year levels that we realized during the first half of fiscal 2021.\nIn the third quarter, shipments in China were strong versus the prior year when demand was negatively impacted by COVID.\nShipments to our other key markets strengthened as the quarter progressed and were generally stronger in developed markets than emerging ones.\nPrice/mix was flat with positive price offset by unfavorable mix.\nGlobal's product contribution margin, which is gross profit less A&P expense, declined 27% to $79 million.\nHigher manufacturing and distribution costs as well as unfavorable mix drove the decline.\nSales for our Foodservice segment, which services North American foodservice distributors and restaurant chains generally outside the top 100 North American restaurant customers, declined 22%.\nAfter a slow start, shipments to smaller chain and independent full service and quick service restaurants recovered to about 90% of prior-year levels for the entire quarter as governments gradually ease social and indoor dining restrictions.\nWe believe that some of the sales volumes strengthening during the last few weeks of the quarter may reflect distributors' restocking inventory in anticipation of more governments lifting social restrictions in the spring.\nHowever, it's difficult to gauge the extent of that benefit.\nIn contrast, shipments to non-commercial customers remained at around 50% of prior-year levels, with continued strength in healthcare more than offset by weakness in other channels such as travel, hospitality, and education.\nPrice/mix increased 2% behind the carryover pricing benefit of pricing actions we took in the second half of fiscal 2020.\nThis was partially offset by unfavorable mix versus the prior year due to lower sales of premium products.\nAs we've discussed in previous earnings calls, we've regained much of this business since pandemic first struck last spring, but on a year-over-year basis, it remained a mix headwind for the quarter.\nFoodservice's product contribution margin declined 30% to $70 million.\nLower sales volumes, higher manufacturing and distribution costs, and unfavorable mix drove the decline and was partially offset by favorable price.\nSales for our Retail segment increased 23%, with volume up 13%.\nSales of our branded portfolio, which include Alexia, Grown in Idaho and licensed restaurant trademarks, were up about 45%, continuing the strong growth trend we've seen since the start of the pandemic and well above category volume growth rates that have been between 15% and 25% in the quarter.\nThe increase in our branded volume was partially offset by the loss of certain low-margin private label volume, which will continue to be a headwind on volume through the remainder of the fiscal year.\nPrice/mix increased 10%, primarily reflecting the favorable mix benefit of selling more of our higher-margin branded products.\nRetail's product contribution margin increased 15% to $33 million.\nThe increase was driven by favorable mix and was partially offset by higher manufacturing and distribution costs, as well as $1 million increase in advertising and promotional expense.\nMoving to our cash flow and liquidity position.\nWe continue to be comfortable with our liquidity position and confident in our ability to continue to generate cash.\nAt the end of the third quarter, we had nearly $715 million of cash on hand and our revolver was undrawn.\nOur total debt was more than $2.7 billion and our net debt-to-EBITDA ratio was about 3.5 times.\nIn the first three quarters of fiscal 2021, we generated nearly $375 million of cash from operations, which is down about $60 million versus last year due to lower sales and earnings.\nWe spent $107 million in capex and paid $101 million in dividends.\nIn addition, in the third quarter, we resumed our share buyback program and bought back nearly $13 million worth of stock at an average price of just over $77.00 per share.\nNow, turning to our current shipment trends.\nPlease note that instead of providing a comparison to last fiscal year's fourth quarter, we're providing comparisons to the fourth quarter of fiscal 2019.\nWe're doing this since fourth quarter of fiscal 2020, which includes March, April and May of 2020, includes the severe impact of government-imposed social restrictions at the beginning of the COVID pandemic.\nIt was also the height of personal and economic uncertainty for many businesses and individuals.\nAs such, we believe the fourth quarter of fiscal 2019 provides a more meaningful comparison for investors to understand the current condition of our business.\nBroadly speaking, we're optimistic about the recent restaurant traffic and shipment trends in the US and many of our key international markets other than Europe.\nUS shipments in the four weeks ending March 28 were approximately 90% of levels during a similar period for the fourth quarter of fiscal 2019.\nIn our Global segment, shipments to our large QSR and full service chain restaurant customers in the US were more than 85% of fiscal 2019 levels, and we expect that rate will largely continue for the remainder of the fourth quarter.\nIn our Foodservice segment, shipments to our full service restaurants, regional and small QSRs, and non-commercial customers in aggregate were approximately 90% of fiscal 2019 levels.\nWe anticipate that shipments for these customers will largely continue at similar rate for the remainder of the fourth quarter.\nShipments to non-commercial customers, which have historically comprised about 25% of the segment's volume, remained at around half of fiscal 2019 levels.\nWe expect these shipment rates will likely remain soft for the rest of the quarter and will likely take time to fully recover from pre -- to pre-pandemic levels.\nIn our Retail segment, shipments were approximately 110% of fiscal 2019 levels, with strong volume growth of our branded products partially offset by a decline in shipments of private label products.\nWe believe this rate may gradually decline during the remainder of the fourth quarter, as consumers begin to shift purchases of fries to dining at restaurants as governments lift social restrictions.\nOutside the US, overall demand varies by market.\nIn Europe, shipments by our Lamb-Weston/Meijer joint venture were about 85% of fiscal 2019 levels.\nDemand has softened over the past few months as governments in some of our larger markets such as Italy and France reimposed stricter social restrictions to combat a resurgence in COVID infections.\nIn addition, other than in the UK, vaccination efforts across Europe have lagged well behind rates in the US.\nAs a result, we anticipate shipments may slow during the remainder of the fourth quarter.\nShipments to our other international markets, which primarily include Asia, Oceania and Latin America, were approximately 75% of fiscal 2019 levels in aggregate.\nAs I discussed earlier, international shipment rates have steadily improved over the past few months, and we expect that will continue during the remainder of the fourth quarter as governments slowly ease social restrictions and as the current congestion at shipping ports begins to clear up.\nFor those markets that are currently already operating under more lenient social restrictions, we anticipate that current shipment rates for those countries will largely remain at current levels.\nIn short, although Europe is challenging, we believe overall shipment and restaurant trends in the US and most of our international markets will remain favorable as governments continue to roll back social restrictions and vaccine becomes more widely available.\nThese trends will keep us on a path of steady progress in restaurant traffic, which we believe will lead to overall frozen potato demand approaching pre-pandemic levels on a run rate basis by the end of calendar 2021.\nWith respect to costs, in the fourth quarter, we expect to incur a similar level of incremental pandemic-related manufacturing and distribution costs as we did in the third quarter.\nWe experienced significant disruption in our production facilities, transportation, and warehousing networks in January and February, and this continued into March.\nWe will realize some of the costs related to these disruptions in the fourth quarter as we ship finished goods' inventory produced during these months.\nNow, here's Tom for closing comments.\nLet me just quickly sum up by saying, we continue to prioritize ensuring the health and safety of our employees during these challenging times by adhering to strict COVID protocols in all of our manufacturing locations and encouraging all our workers and their families to get vaccinated as soon as possible.\nWe're confident that the near-term pandemic-related pressures on our manufacturing and distribution networks are temporary and that our cost structure will normalize once we get past COVID.\nIn addition, we believe that the investments we're making in our supply chain will improve our cost structure over the long term.\nWe feel good about the trends in restaurant traffic and frozen potato demand in the US and most of our key international markets and remain optimistic that overall frozen potato demand will approach pre-pandemic levels on a run rate basis by the end of calendar 2021.\nAnd finally, as shown with our investments for a new facility in China and to expand chopped and formed capacity in Idaho, we're focusing on the right strategic and operating priorities to serve our customers and build upon the long-term health of the category in order to create value for all our stakeholders.\n",
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"content": "compname reports q3 earnings per share $0.45.\nfor 4 weeks ended march 28 europe shipments were approximately 85% of q4 fiscal 2019 levels.\nfor 4 weeks ended march 28 north america shipments were approximately 90% of q4 fiscal 2019 levels.\nq3 earnings per share $0.45.\nq3 sales $896 million versus refinitiv ibes estimate of $819.9 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: These statements are based on how we see things today.\nActual results may differ materially due to risks and uncertainties.\nSome of today's remarks include non-GAAP financial measures.\nThese non-GAAP financial measures should not be considered a replacement for and should be read together with our GAAP results.\nTom will provide a brief overview of fiscal 2021 as well as the current operating environment.\nRob will provide some details on our fourth quarter results and Bernadette will discuss our fiscal '22 outlook.\nLet me start by saying that I'm proud of how the entire Lamb Weston team stepped up this year to navigate through the most challenging operating environment in our company's history.\nWe took necessary steps across our organization to focus on the health and well-being of our employees while continuing to focus on supporting our customers.\nAt the same time, we continue to make timely investments to execute on our long-term strategic objectives.\nFor our larger customers in our Global and Foodservice segments, we work through production and distribution challenges to maintain customer service levels and support them as they manage through near-term volatility in demand and inventories.\nWe also partnered with several large chain QSRs to broaden our menus with new products and limited time offerings and to position them for a more aggressive set of offerings in a post-pandemic environment.\nIn our Foodservice segment, despite lower volumes in the near term, we maintained our direct sales force that services independent restaurants.\nWe believe it was important to continue to invest in these sales capabilities to provide these customers with uninterrupted support as they adapted to capacity restrictions in new operating models.\nThat investment is now paying off as sales of Lamb Weston branded products have rebounded.\nIn Retail, the surge in food-at-home consumption during the pandemic provided a strong tailwind to our branded portfolio.\nEach of our Alexia, Grown in Idaho and licensed restaurant brands gained share as compared to pre-pandemic levels.\nOur branded portfolio market share in aggregate has nearly doubled in the past five years, and we've significantly closed the gap with a leading branded competitor.\nIncluding what we produced for private label retail customers, we are now the clear leader in the category.\nIn our supply chain, we're making some significant investments to support long-term growth and profitability.\nFirst, we began construction of a new chopped and formed line in our facility in American Falls, Idaho, that will be available in spring 2022.\nSecond, we announced major capacity expansion projects in China and the U.S.\nWe expect both lines to be operational in the next couple of years, which will have us well positioned to support market growth.\nIn addition, through our joint venture in Europe, Lamb-Weston/Meijer, we announced a capacity expansion project in Russia.\nThese two expansions will be focused on supporting continued growth in their respective primary markets.\nFinally, we began to implement our Win As One series of safety, quality and productivity initiatives in our manufacturing facilities and across our procurement, transportation and distribution networks.\nThis is an ambitious program that adopts and tailors lean manufacturing and other productivity tools that have been successfully used by other world-class manufacturing organizations.\nWe're excited about how these initiatives will further strengthen our Lamb Weston operating culture of continuous improvement and drive financial benefits that should enhance margins and cash flow over the long term.\nWe're targeting up to $300 million of gross productivity savings by reducing variable costs and waste, while also increasing potato and asset utilization.\nWe're also targeting up to GBP300 million of incremental capacity from debottlenecking and other tools to increase throughput on existing assets.\nTo put that into context, GBP300 million is equivalent to a new production line.\nFinally, we're targeting up to a 10% reduction in finished goods inventory, while continuing to target high service levels and case fill rates.\nAs I mentioned, these are long-term targets.\nWe expect benefits from the Win As One initiatives to gradually build as they become fully incorporated across the entire supply chain organization.\nWe completed the initial phase of a new enterprise resource planning system early in the year.\nHowever, we deferred the second phase, which would have had a more direct effect on our manufacturing facilities at a time when those operations were managing through pandemic-related disruptions.\nWe continue to map out Phase II and expect to begin implementation later this fiscal year.\nThis project will tie into our Win As One initiatives to provide better data and systems to drive more efficient execution.\nSo although our results in fiscal 2021 were somewhat choppy due to the pandemic, we focus on the right near-term priorities, while making sure we continue the pursuit of our long-term strategic objectives.\nThe pandemic showed the resilience of the category and our business model, with demand in most of our Foodservice segment channels largely offset by the performance in QSR and at Retail.\nOur operating cash flow and financial liquidity were solid, enabling us to invest in the infrastructure to support growth opportunities.\nAs a result, I'm confident that we are well positioned to drive sustainable profitable growth and create value for our stakeholders over the long term.\nNow turning to the current operating environment.\nWhile the pandemic continues to impact people and economies in the U.S. and around the world, we believe the worst of its direct effect on our business, restaurant traffic in french fry demand is behind us.\nWe're encouraged by the pace of recovery in restaurant traffic in the U.S. While overall restaurant traffic remains below pre-pandemic levels, it's recovered much of the lost ground and continues trending in the right direction.\nIn May, QSR traffic was down low single digits versus pre-pandemic levels, which is a modest improvement versus what we saw earlier in the year.\nThe larger QSR chains have been generally outperforming small and regional ones with chicken-based chains outperforming more burger-oriented chains.\nOverall traffic at full-service restaurants in May was still down mid-teens as compared to pre-pandemic levels.\nBut that's a significant improvement versus down mid-20s that we saw just a few months ago.\nThis reflects fewer social restrictions and consumer's increased willingness to eat on-premises.\nWhat's helped to offset the effect of lower restaurant traffic during the year has been an increase in fry attachment rate.\nSimply put, this is a rate at which consumers order fries when visiting a restaurant.\nThe increase in fry attachment rate has been largely consistent through most of fiscal 2021, and we believe that rate may have some staying power.\nWe believe that if fry orders continue at the higher rate as restaurant traffic normalizes, it would lead to a meaningful amount of additional volume demand in the U.S. annually.\nThe increase in fry attachment rate in part helps to explain how our shipments in most of our key restaurant and food service channels have already reached core or close to pre-pandemic levels on a run rate basis despite restaurant traffic not yet fully recovered it.\nOur shipments to large QSR chains essentially reached at level last fall as customers leverage drive-thru and delivery formats.\nShipments to commercial customers in our Foodservice segment have essentially returned in aggregate to pre-pandemic levels in the last few months behind strength in small and regional QSRs as well as independent restaurants.\nThe recovery shipments to our noncommercial foodservice customers, which include lodging and hospitality, healthcare, schools and universities, sports and entertainment and workplace environment, continues to lag that in restaurants.\nHowever, we expect the rate of improvement will steadily increase through the fall, especially in our education, lodging and entertainment channels.\nWhile restaurant Foodservice demand continues to recover, demand in the Retail channel continues to be strong.\nMay volumes for the category were 15% to 20% above pre-pandemic levels and our shipment of branded products were in line with those trends.\nHowever, we expect category growth will likely slow as it laps strong prior year results and as consumers step up food away from home purchases.\nWe have seen these factors already begin to play out in the fourth quarter and in the first couple of months of fiscal 2022.\nIn short, we feel good about the frozen potato category in the U.S. because of increasing strength in restaurant and Foodservice channels as well as continued solid performance in Retail.\nAs a result, we remain confident that overall U.S. fry demand will return to pre-pandemic levels on a run rate basis by the end of calendar 2021.\nOutside the U.S., it's a more complicated story.\nWhile demand has improved in Europe and our key international markets, the pace of recovery has been much more uneven and generally behind that in the U.S. as a result of slower vaccine availability and rates.\nIn addition, the spread of COVID variants in many markets has also led governments to delay lifting and, in some cases, reimposing social restrictions which has further increased volatility in demand and stretched out the timing of recovery.\nOverall, we expect the pace of recovery outside the U.S. will continue to vary, with Europe and the developed markets in Asia continuing to generate gradual improvement in demand.\nWe expect the pace of recovery in emerging markets in Asia, Latin America and the Middle East to be more volatile and take a bit longer.\nWith respect to supply chain in our cost environment, as with the pandemics impact on fry demand, we believe the worst of its effect on our supply chain is also behind us.\nWe're making progress in stabilizing our manufacturing operations with a number of production days and throughput at most of our plants during the fourth quarter, improving on a year-over-year basis as well as sequentially versus the third quarter.\nHowever, we're not yet consistently operating at targeted levels across our network, and it will take some time as we gradually return to operating and normalized levels.\nIn the near term, we'll realize incremental costs and inefficiencies incurred during and since the fourth quarter as we sell finished goods inventory in the first half of the year.\nGoing forward, the lingering effects of the pandemic and the sharp recovery of the broader economy in the U.S. has disrupted supply chain operations across all industries, including ours, which has resulted in increased costs.\nAs a result, we expect input cost inflation, especially for edible oils, packaging and transportation, to be a significant headwind for fiscal 2022.\nOur goal is to offset inflation using a combination of levers, including pricing.\nTo that end, we just began implementing broad-based price increases in our Foodservice and Retail segments and don't expect to see the most of their benefit until our fiscal third quarter.\nFirst, a few words about the current potato crop.\nWe have recently begun processing early potato varieties in the Pacific Northwest.\nAnd early indications are that the recent high temperatures in the Pacific Northwest did not have a negative impact on yield or quality.\nWith respect to the main crop that we harvest in the fall, we expect the recent heat waves may have some negative effect on yield and quality, but it's too early to tell.\nWe'll provide our usual updates on the crop when we report our first and second quarter earnings.\nSecond, as you may have seen last week, we announced an expansion of our facility in American Falls, Idaho, which will add about 350 million pounds of french fry capacity.\nThe total investment of around $450 million over the next couple of years is for a new production line as well as to modernize the infrastructure at the facility.\nWe anticipate starting up the new line by mid-2023, just as we expect capacity will be needed to support demand growth.\nSo in summary, while this has been a challenging year, I'm proud of how the team has navigated through the pandemic's impact and remained focused on supporting our customers in the near term, while continuing to execute on our long-term strategic priorities.\nWe're pleased by the strong recovery in demand in the U.S. and continue to believe that it will be back to pre-pandemic levels on a run rate basis by the end of calendar 2021.\nAnd finally, while our supply chain is not yet operating where we wanted to be, I'm encouraged by the improvement that we're making toward getting back to normalized levels as well as the actions we're taking to offset input cost inflation.\nFinally, as we announced a couple of months ago, Rob will be retiring after more than four years with Lamb Weston.\nAs part of the leadership team, he's been instrumental in setting up Lamb Weston as an independent company and creating a world-class finance and IT organization.\nWith his past experience in manufacturing companies and capital markets, along with his insights into the business, Rob has been a valuable voice as we drove growth, broaden our global footprint and navigated through the challenges of the pandemic.\nAs you know, Bernadette will be succeeding Rob as CFO on August six after serving as our controller since just before the spin.\nBernadette has been a key member of the leadership team from the beginning and has had a hand in all our major decisions and initiatives.\nThis succession has been long planned, so we expect a smooth transition.\nI'm grateful to have Bernadette stepping into her new role.\nAnd with that, here's Rob to review our fourth quarter results.\nOverall, we delivered solid top line results in the fourth quarter as demand trends improved, while our earnings continue to reflect pandemic's disruptive impact on our supply chain as well as higher inflation.\nSpecifically in the quarter, sales increased 19% to more than $1 billion, which is a company record for the fourth quarter and within about $10 million of our best quarter ever.\nVolume was up 13%, and price/mix up 6%.\nExcluding the benefit of the extra selling week last year, net sales increased 28% and volume was up 21%.\nThe sales volume increase largely reflected the strong recovery in demand in the U.S., especially at full-service restaurants as well as improvement in some of our key international markets.\nIt also reflected the comparison to soft shipments last year due to the pandemic, which included the impact of customers significantly destocking inventories as they adjusted to the abrupt change in the operating environment.\nThe increase in price/mix was driven by favorable price and mix in each of our core business segments.\nFor the year, net sales, exclude benefit of the 53rd week last year, was down 2%, with volume down 6% and price/mix up 4%.\nGross profit in the fourth quarter increased $87 million, driven by higher sales and lower supply chain costs on a per pound basis.\nThe overall reduction in cost per pound as compared to the prior year was largely driven by lower incremental cost and inefficiencies related to the pandemic's disruptive impact on our manufacturing and distribution operations.\nIt also includes a $27 million year-over-year benefit from unrealized mark-to-market adjustments as well as the absence of a $14 million write-off of raw potatoes that we incurred last year.\nThe reduction in per pound cost was partially offset by inflation for key inputs, especially for edible oils and packaging.\nCanola oil prices, in particular, have nearly doubled in the last 12 months.\nOur transportation costs were also up sharply.\nWhile we've reduced pandemics downstream disruptive effect on our distribution network, we continue to use an unfavorable mix of higher cost trucking versus rail as we took extraordinary steps to maintain customer service levels as demand turned up sharply.\nHowever, the significant increase in our transportation cost was also driven by inflation as rail, trucking, and ocean freight suppliers all struggled to keep up with demand as economic activity surged.\nMoving on from cost of sales.\nOur SG&A increased $19 million in the quarter.\nThe increase was largely driven by three factors.\nFirst, it reflects higher incentive compensation expense, which was significantly down in the first quarter -- fourth quarter last year after the pandemic hit.\nSecond, it reflects investments we're making behind our supply chain productivity, commercial and information technology initiatives that should improve our operations over the long term.\nAnd third, it includes an additional $3 million of advertising and promotional support behind the launch of new branded items in our Retail segment.\nEquity method earnings were $10 million.\nExcluding the impact of the unrealized mark-to-market adjustments, equity earnings increased $14 million versus the prior year.\nHigher sales volumes compared to soft shipments in Europe and the U.S. last year as well as lower manufacturing costs per pound drove the increase.\nDiluted earnings per share in the fourth quarter was $0.44 compared to a loss of $0.01 in the prior year.\nThe increase reflects higher sales, income from operations and equity method earnings.\nFor the year, adjusted diluted earnings per share was $2.16, down $0.34.\nAdjusted EBITDA, including joint ventures, was $166 million, which is up $88 million.\nThe increase was driven by higher sales, income from operations and equity method earnings.\nFor the year, adjusted EBITDA, including joint ventures, was $748 million down, $51 million.\nMoving to our segments.\nSales for our Global segment, which generally includes sales for the top 100 North American-based QSR and full-service restaurant chains as well as all sales outside of North America, were up 19% in the quarter, with volume up 16% and price/mix up 3%.\nExcluding the extra selling week last year, sales increased 28% and volume was up 24%.\nThe volume increase largely reflected the year-over-year recovery in demand, especially at large chain QSRs and full-service restaurants in the U.S. Shipments to these customers in the aggregate have essentially returned to pre-pandemic levels.\nShipments to customers in our key international markets also increased in the aggregate but remain below pre-pandemic levels as demand recovery continues to lag the U.S. in some of these markets.\nIn addition, traffic and logistics issues affecting ports along the West Coast hindered our export shipments in the quarter.\nThe 3% increase in price/mix reflected the benefit of inflation-driven price escalators in our multiyear customer contracts as well as favorable customer mix.\nGlobal's product contribution margin, which is gross profit less A&P expense, increased 68% to $56 million.\nHigher sales volumes, favorable price/mix and lower manufacturing and distribution cost per pound drove the increase.\nSales for our Foodservice segment, which services North American foodservice distributors and restaurant chains generally outside the top 100 North American restaurant customers, increased 82% with volume up 64% and price/mix up 18%.\nSales increased 94% and volume rose 74%, excluding the benefit of the extra selling week last year.\nThe strong increase in sales volumes largely reflected the year-over-year recovery in shipments to small and regional restaurant chains and independently owned restaurants as governments further ease social restrictions.\nThe increase also reflected a comparison to soft shipments in the prior year quarter as customers significantly destocked inventories.\nOur shipments to noncommercial customers increased at a more modest rate and currently remain at about 2/3 of pre-pandemic levels.\nAs Tom noted, we expect the rate of improvement to steadily increase through the fall as travel and lodging continues to ramp up and as schools and universities return to full capacity.\nOverall, shipments by our Foodservice segment exited the quarter at around 95% of pre-pandemic volume.\nThe increase in the segment's price/mix largely reflected the benefit of favorable mix from higher sales of Lamb Weston branded and premium products.\nAs you may recall, sales of these products declined sharply in the fourth quarter of fiscal 2020 as customers, which primarily included independent restaurants, destocked inventories or traded down to more value-oriented products during the early days of the pandemic.\nSince then, our direct sales force has steadily rebuilt shipments of Lamb Weston branded products close to pre-pandemic levels.\nFoodservice's product contribution margin rose 127% to $96 million.\nHigher sales volumes, favorable price/mix, lower manufacturing and distribution cost per pound drove the increase.\nSales for our Retail segment declined 28%, with volume down 30% and price/mix up 2%.\nExcluding the extra sales week last year, sales declined 22% and volume declined 24%.\nWe expected this decline as it was against a very strong fourth quarter of fiscal 2020, which included weekly retail sales for the category that were up around 50% on average as consumers switched consumption patterns due to government-imposed stay-at-home orders.\nThe decline in sales also includes the loss of certain low-margin private label volume, which will continue to be a headwind through fiscal 2022.\nWith social and on-premise dining restrictions largely lifted in the U.S., consumer consumption patterns have begun to swing back toward restaurants and away-from-home out flex.\nDespite this trend, the frozen potato category at retail remains strong.\nOverall category sales are currently up about 25% from pre-pandemic levels, and each of our branded equities continued to outperform the category.\nThe Retail segment's price/mix increased 2%, reflecting favorable mix benefit of our branded business.\nRetail's product contribution margin declined 32% to $21 million.\nLower sales volumes and a $3 million increase in A&P expense to support the launch of new products drove the decline.\nMoving to our cash flow and liquidity position.\nWe continued to generate solid cash flow even while the pandemic severely impacted demand.\nIn fiscal 2021, we generated more than $550 million of cash from operations, which is down about $20 million versus last year due to lower sales and earnings, partially offset by lower working capital.\nWe spent $161 million in capex, paid $135 million in dividends and bought back nearly $26 million worth of stock at an average price of just over $78 per share.\nWe continue to be comfortable with our liquidity position.\nAnd at the end of our fiscal year, we had nearly $785 million of cash on hand, and our revolver was undrawn.\nOur total debt was more than $2.7 billion, and our net debt to EBITDA, including joint ventures ratio, was 2.6 times.\nIt's been an incredibly rewarding experience, and I know that this team will continue to drive the company's success.\nIn terms of my successor, I've known and worked with Bernadette for around 20 years on and off.\nAnd I expect that you'll find that she and I approach things in many respects with a similar mindset.\nAs Tom said, she's been deeply involved in all of the key decisions at Lamb Weston, and that's certainly true in developing the broader finance team and strategy.\nI'm excited for Bernadette to step into the role and see the impact that I know she'll deliver.\nNow here's Bernadette to review our fiscal 2022 outlook.\nFor the year, we expect sales growth will be above our long-term target of low to mid-single digits, with the drivers of that growth being somewhat different in the first half versus the second.\nFor the first half, we expect growth to be largely driven by higher volume, although we also anticipate that overall price/mix will be positive.\nThe expected volume increase reflects the continuing recovery in demand in the U.S. and our key international markets as well as the comparison to our relatively soft shipments during the first half of fiscal 2021 due to the pandemic.\nFor the second half of the year, we expect our sales growth will reflect more of a balance of higher volume and improved price/mix.\nWhile the volume drivers should be similar to those in the first half, the benefit of the shipment comparisons will be less pronounced, especially late in the year.\nPricing in the second half will benefit from the broad-based actions in our Foodservice and Retail segments that became effective in mid-July but won't be mostly realized until our fiscal third quarter.\nPrice in the Global segment in the second half should also benefit from price escalators built into multiyear customer agreements.\nIn addition, mix should benefit as our shipments continue to steadily recover in some of our noncommercial channels in our Foodservice segment.\nAnd as Tom mentioned, we continue to expect overall U.S. french fry demand will return to pre-pandemic levels on a run rate basis around the end of calendar 2021, which is essentially the beginning of our fiscal third quarter.\nWith respect to earnings, we expect adjusted EBITDA, including joint ventures and net income to gradually normalize as the year progresses, but it will be pressured during the first half by a step-up in input and transportation cost inflation as well as some residual effects of the pandemic's disruptive impact on our manufacturing and distribution operations.\nAs we noted earlier, we believe the worst of the pandemic's impact on our operations is behind us.\nSo we expect these near-term cost pressures will steadily ease as we progress to the second half of the year.\nAs you may recall, we generally hold about 60 days of finished goods inventory.\nSo production costs that we incurred within the last couple of months are held on our balance sheet until the inventory is sold.\nAccordingly, we already have a good idea about the expected impact on our fiscal first and second quarter results from the disruption in our manufacturing assets in the past few months.\nWe expect inflation to be a headwind throughout fiscal 2022, especially in the first half of the year.\nAs Tom noted, we expect volatility in the broader supply chain as the overall economy continues to recover from the pandemic's impact.\nWe believe this will contribute to significant inflation for key inputs, especially edible oils, transportation and packaging, continuing the trend that we began to see during the latter months of fiscal 2021.\nThat said, we're pulling a combination of levers, which may collectively offset most of these inflationary pressures.\nAs we've discussed, we began implementing a round of broad-based price increases in our Foodservice and Retail segments a couple of weeks ago.\nThese increases generally take three to six months to be mostly realized in the market and will, therefore, lag the impact of inflation by a couple of quarters.\nWe're also not ruling out the possibility of subsequent rounds of price increases based on the pace and scope of inflation.\nIn our Global segment, we're in the middle of negotiating contracts for our larger customers, and the results of those discussions, including price, won't be known until later this year.\nHowever, we will continue to benefit from inflation-driven price escalators built into multiyear customer contracts.\nAs I also mentioned earlier, we expect a continued recovery in shipments to customers and higher-margin foodservice channels.\nAnd third, we expect to steadily drive increased productivity with our Win As One, lean manufacturing initiative.\nSo while the ongoing impact of the pandemic is uncertain, we expect these levers together may largely offset inflation and allow us a more stable manufacturing and distribution operations will enable us to improve gross profit during the second half of fiscal 2022.\nWe expect that some of this improvement will be offset by continued investments in our supply chain, commercial and IT operations, especially in the first half of the year.\nThese investments will increase our operating expenses in the near term but should improve our ability to support growth and margin improvement over the long term.\nIn addition to our operating targets, we anticipate total interest expense of around $115 million.\nWe estimate a full year effective tax rate of between 23% and 24% and expect total depreciation and amortization expense will be approximately $190 million.\nAnd finally, we expect capital expenditures of $650 million to $700 million depending on the timing of spending behind our large capital projects.\nThis capex amount is high relative to our past annual levels and is largely a function of growth capital to complete the construction of our chopped and formed line in Idaho as well as to begin construction of new french fry lines in Idaho and China.\nIt also includes capital associated with the second phase of our ERP implementation.\nSo in sum, we expect net sales growth for the year will be above our long-term target of low to mid-single digits, with growth largely driven by volume in the front half and more of a balance of volume and price/mix in the back half.\nWe expect adjusted EBITDA, including joint ventures, will grow for the year with earnings pressure in the first half and gradual improvements toward more normalized results in the second half as operations stabilize and price/mix improves.\nAt this time, we're taking a prudent approach by not providing a specific earnings growth target, given the increased volatility of key input and transportation costs as well as the potential impact of the recent heat waves in the Pacific Northwest on potato yield and quality.\nNow here's Tom for some closing comments.\nWe feel good about how well the category has been recovering from the pandemic and believe these positive trends provide a good tailwind for above algorithm sales growth in fiscal 2022.\nWe're making progress in stabilizing our manufacturing network, and we're pulling the right levers to gradually normalize operations and offset significant inflationary pressures to improve profitability as the year progresses.\nWith our Win As One productivity initiatives, we're putting in place the lean manufacturing and productivity tools to improve our operations and cost structure so that we can return to or even exceed pre-pandemic margin levels in the coming years.\nAnd finally, I'm confident that we're making the right investments to strategically expand our production capacity so that we can deliver sustainable, profitable growth and create value for our stakeholders over the long term.\n",
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"content": "compname reports q4 earnings per share of $0.44.\nq4 earnings per share $0.44.\nsees 2022 net sales growth above long-term target range of low-to-mid single digits.\nsees net income and adjusted ebitda including joint ventures for 2022 to be pressured during h1 and normalize in h2.\nencouraged by pace of recovery in u.s. restaurant traffic, especially at full-service restaurants.\ncontinue to expect that overall u.s. french fry demand will return to pre-pandemic levels around end of calendar 2021.\nlamb weston - anticipates significant inflation for key production inputs, packaging and transportation in 2022 compared to fiscal 2021 levels.\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: Lexington believes that these statements are based on reasonable assumptions.\nAny references in these documents to adjusted company FFO refers to adjusted company funds from operations available to all equity holders and unitholders on a fully diluted basis.\nOperating performance measures of an individual investment are not intended to be viewed as presenting a numerical measure of Lexington's historical or future financial performance, financial position or cash flows.\nExecutive Vice Presidents Lara Johnson & James Dudley will be available during the question-and-answer portion of our call.\nOur third quarter results were strong in all areas of our business.\nWe have transformed the company's portfolio, delivered revenue and adjusted company FFO above consensus, produced strong underlying portfolio performance and increased the dividend by 11.6%.\nWith 95% of our gross assets now industrial, we have substantially completed our portfolio transformation to a predominantly single-tenant industrial REIT.\nIn addition, we are executing on a number of value-enhancing initiatives, including pursuing prudent external growth, active asset management, and continuing our disciplined capital allocation.\nOur portfolio continues to benefit from healthy fundamentals in the industrial sector, including strong leasing demand and rental growth.\nTenant leasing velocity is being driven by the need to improve supply chain efficiency as transportation costs rise, resulting in a greater desire for additional space to house inventory.\nDemand is still outpacing supply, with vacancy at an all-time low, leading to rental rates continuing to rise across the country.\nClass A warehouse distribution space in our target markets is benefiting from all of these trends.\nIn short, it is a great time to be an industrial real estate company with top-quality assets.\nOur robust third quarter leasing activity is certainly reflective of the strength of our target markets.\nWith 2.6 million square feet of space leased in the quarter, we raised our stabilized lease portfolio 110 basis points to 98.9% and increased base and cash base industrial rents on extensions and new leases 6.5% and 4.7%, respectively.\nFurther, for the nine months ended September 30, we raised base and cash-based industrial rents on extensions and new leases 10.3% and 7%, respectively.\nAverage rent per square foot in our warehouse distribution portfolio is $3.97, which we view as 6% to 8% below market, as market rents continue to grow considerably faster than the escalations built into our leases.\nAnd we note that rents in our target markets have grown on average approximately 8% over the last year.\nOur strategy to purchase vacancy to produce higher stabilized yields is proving successful as evidenced by some notable third quarter leasing activity.\nWe secured a 5.5-year lease with a new tenant who will occupy the 195,000 square foot vacant property that we recently purchased in the Greenville-Spartanburg market as part of a four-property industrial portfolio acquisition.\nThe lease term includes 2.75% annual rental escalations, and the lease produces an initial stabilized yield of 5.3% for the property.\nAdditionally, we leased 68,000 square feet of available space to a new tenant at our Lakeland, Florida warehouse distribution facility for five years, increasing the building's occupancy from 53% to 84%.\nThe starting rent is $5.70 per square foot with 3% annual escalations.\nOther significant leasing outcomes during the quarter that resulted in an increase to cash base rent over the prior lease term included a five-year lease with 3% annual escalations at our 640,000 square foot Statesville, North Carolina warehouse distribution facility and a three-year lease with 2.25% annual escalations at our 1.2 million square foot Olive Branch, Mississippi warehouse distribution facility.\nSubsequent to quarter end, we had a huge success at our 908,000 square foot spec development facility in Fairburn, Georgia, executing a seven-year lease with 3% annual escalations and bringing the stabilized yield to 7.2%, excluding our partner promote, which was well above our underwriting assumptions.\nThis lease illustrates the value creation that our development pipeline is now delivering.\nWe currently have four spec development projects in process, two of which we added during the third quarter, with an estimated total project cost of $358 million and $270 million left to fund.\nSpeculative development and the purchase of non-stabilized properties continued to be a principal focus of our investment strategy and highlight how our platform, market presence and warehouse distribution focus are creating shareholder value.\nOn the purchase front, we acquired $135 million of Class A warehouse distribution product during the quarter, with an additional $76 million purchased subsequently, and we currently have a sizable pipeline under review.\nBrendan will discuss investment activity and the development pipeline in greater detail shortly.\nOur sales volume as of September 30 totaled $219 million at average GAAP and cash cap rates of 7.6% and 7.9%, respectively.\nWe sold an additional $25 million after quarter-end and have two other properties under contract to sell for $29 million.\nAs we focus our strategy on acquiring and developing modern Class A warehouse distribution facilities, we continue to view our manufacturing and cold storage portfolio as a potential source of capital for redeployment.\nWith the sale of our nonindustrial properties substantially complete, our board announced a dividend increase that brings our payout ratio more in line with our peers after several years of focusing more on retaining cash flow and maintaining a low payout ratio during this period of intensive capital recycling.\nThe new declared quarterly common share dividend, which will be paid in the first quarter of 2022, will be $0.12 per share, representing an 11.6% increase over the prior quarterly dividend.\nOur intent to grow the dividend annually, moving forward, reflects our confidence in the direction of market rent growth and our opportunity to raise future rents.\nOn the ESG front, I'd like to highlight how pleased we are to have earned the first place ranking for U.S. industrial listed companies in our first 2021 G-res assessment.\nESG is an ongoing priority for us, and we continue to enhance and strengthen our program.\nWe encourage you to review our most recent ESG disclosures, which highlights many of our 2021 ESG achievements and initiatives.\nIn closing, by transforming LXP into a predominantly single-tenant industrial REIT, we have created a much stronger, more valuable portfolio.\nThe compelling growth opportunities we see ahead of us position us well to continue to drive meaningful long-term financial performance and enhanced shareholder returns.\nDuring the third quarter, we purchased five warehouse distribution assets spanning 1.3 million square feet for $135 million at average GAAP and cash stabilized cap rate of 4.9% and 4.6%, respectively.\nWe briefly discussed the four-property portfolio located in Greenville-Spartanburg on last quarter's call.\nWe purchased that portfolio with the vacant property, which we leased up shortly after our second quarter call.\nEchoing Will, this success demonstrates the value of our strategy of acquiring vacancy in strong markets where we can utilize our market knowledge and expertise to enhance yield.\nWe also acquired a 293,000 square foot stabilized warehouse distribution facility in Columbus, Ohio, a primary distribution market in the central U.S.\nThis facility is a recent build occupied by two tenants with a weighted average lease term of seven years and average annual rental escalations of 2.5%.\nSubsequent to quarter-close, we purchased a three-property, 878,000 square foot portfolio in the Whiteland submarket of Indianapolis.\nIndianapolis is a market we've made a commitment to for several reasons, including its central location and population reach, extensive highway air and rail systems, deep labor pool, business-friendly government and its access to the second largest FedEx hub in the world.\nThe three properties, all recently constructed, sit along I-65 in the Whiteland Exchange Business Park.\nOn the development front, we acquired two land sites during the quarter that, when completed, will comprise five buildings, three in the Greenville-Spartanburg market and two in Phoenix.\nThe 234-acre site in Greenville-Spartanburg is in the Smith Farms Industrial Park, where we own two other warehouse distribution facilities.\nUpon completion, which will be staggered in the first half of 2022, the three buildings will total roughly 1.9 million square feet.\nThe estimated development cost of this project is approximately $133 million, with estimated stabilized cash yields projected to be in the low to mid-5% range.\nThe Phoenix project is a 57-acre site in the Goodyear submarket along the Southwest Valley Loop 303 industrial hub.\nUpon completion, the project will consist of two Class A warehouse distribution facilities totaling 880,000 square feet.\nThe site is in PV 303, the sub-market's premier master-planned business park that is highly desirable for corporate users.\nLike the Greenville-Spartanburg project, the facilities will have varying deliveries in the first half of 2022.\nThe estimated development cost is approximately $84 million, with estimated stabilized cash yield forecasted to be in the high 4% range.\nPhoenix is an area where we've been growing significantly in recent years.\nAnd as a result, we've built a deep knowledge and expertise in this very strong market.\nCurrently, we have 2.4 million square feet of modern Class A industrial space in Phoenix; and, more specifically, two million square feet in Goodyear, and we'll further increase our footprint there with the completion of this development project.\nThis square footage also includes our build-to-suit that is largely complete, with the tenant already occupying and operating in most of the space.\nWe have observed record-breaking activity and continue to like the market's strong fundamentals, driven by Phoenix's fast-growing population, its moderate operating costs, low taxes, affordable labor and proximity to major markets such as Los Angeles, San Diego and Las Vegas.\nWe'll continue to provide regular updates on the progress of these projects, which we believe provide a very attractive risk return profile.\nDuring the third quarter, we produced adjusted company FFO of roughly $54 million, or $0.19 per diluted common share.\nToday, we announced an increase to both the low and top end of our adjusted company FFO guidance range to a new range of $0.75 to $0.78 per diluted common share.\nThe revised range considers the timing of acquisitions and dispositions and positive leasing outcomes.\nRevenues for the quarter were approximately $83 million, with property operating expenses of just over $11 million, of which 84% was attributable to tenant reimbursement.\nG&A for the quarter was $8.4 million, and we expect 2021 G&A to be within a range of $33 million to $36 million.\nOur same-store portfolio was 98.7% leased at quarter end, with overall same-store NOI increasing 0.7%, which would have been approximately 1.9%, excluding single-tenant vacancy.\nIndustrial same-store NOI increased 1.2% and would have been 2.5%, excluding single-tenant vacancy.\nAt quarter-end, approximately 90% of our industrial portfolio leases had escalation, with an average rate of 2.6%.\nOur company's balance sheet remains solid, with net debt to adjusted EBITDA of 5.4 times at quarter-end and unencumbered NOI at 91.5%.\nDuring the quarter, we issued $400 million of senior notes due in 2031 with an attractive rate of 2.375%.\nThe net proceeds and cash on hand were used to fully redeem our 4.25 senior notes due in 2023 and repay the outstanding balance under our revolving credit facility.\nConsolidated debt outstanding as of September 30 was approximately $1.5 billion with a weighted average interest rate of approximately 2.9% and a weighted average term of about eight years.\nFinally, during the quarter, we settled 3.9 million common shares previously sold on a forward basis, leaving $240 million, or 20.8 million common shares, of unsettled common share contracts available at quarter-end.\nThe contracts mature at various states, with the majority of these contracts maturing in May 2022.\n",
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"content": "lexington realty trust increased q4 of 2021 common share dividend by 11.6%.\nlexington realty trust - increasing adjusted ffo per share guidance range for fy21 to $0.75 to $0.78.\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 Bob Patel, our Chief Executive Officer; and Michael McMurray, our Chief Financial Officer.\nPass code for both numbers is 36941.\nDuring today's call, we will focus on first quarter results, the current environment, our near-term outlook and provide an update on our growth initiatives.\nBefore turning the call over to Bob, I would like to call your attention to the noncash lower of cost or market inventory adjustments or LCM that we have discussed on past calls.\nThese adjustments are related to our use of last in, first out or LIFO accounting and recent volatility in prices for our raw materials and finished goods inventories.\nWe appreciate you joining us today as we discuss our first quarter results.\nBefore we get into the discussion of our results, I would like to take a moment to recognize the tremendous progress that has been made in fighting the COVID-19 pandemic and how much hard work still needs to be done around the world to reduce the effects of this disease.\nWhile financial markets are focused on the economic upside enabled by increased vaccination and the eventual reopening, today, our employees, customers, suppliers and the communities where we operate in India, in particular, as well as Brazil and even parts of Europe, are still suffering from terribly high case rates and fatalities.\nWe are working closely with governments around the world to do our part to advance immunity for our employees and their communities and to hasten an end to the devastation brought on by this virus.\nOur thoughts remain with those most affected by this pandemic.\nNow moving into the discussion of our Q1 results.\nLyondellBasell is continuing to build upon the momentum seen in the second half of 2020.\nDuring last year's recession, we advanced on our strategic initiatives to grow our asset base and emerge stronger from the downturn to position our company to capture the benefits of a recovering economy in 2021.\nLet's begin with slide three and review the highlights.\nIn the first quarter, earnings more than doubled from the same quarter of last year to $3.18 per share.\nLyondellBasell's first quarter net income improved by 25% relative to the fourth quarter as we earned approximately $1.6 billion of EBITDA.\nOur businesses benefited from strong demand and tight markets at improved margins across the majority of our segments.\nOur Olefins and Polyolefins-Europe, Asia and International segment achieved their highest quarterly EBITDA since 2018, while the O&P-Americas segment reached a quarterly EBITDA level that has not been seen since 2015.\nStrong cash generation enabled us to pay down $500 million of debt in January and end the first quarter with nearly $5 billion of cash and available liquidity.\nAfter the quarter closed, we paid down an additional $500 million of debt in April.\nWe expect that our robust cash generation should continue throughout the year, and our top priority for capital deployment in 2021 is debt reduction, which will enable meaningful progress toward improving our credit metrics to two turns of total debt-to-EBITDA.\nAs we approach the end of the first month of the second quarter, low inventories and persistently high demand are driving higher margins for most of our products.\nThe unusually cold weather and associated power outages that occurred during February in Texas resulted in approximately one month of downtime or a significant share of total US capacity located within the state.\nDeferred turnarounds from 2020 are resulting in high levels of planned maintenance downtime for many of our competitors during the second quarter.\nLyondellBasell has no major planned maintenance for the second quarter at any of the global assets that we operate.\nWe are focused on running our assets safely, reliably and at maximum rates to supply our customers' needs and capture the opportunities available in these strong markets.\nWe expect markets will remain tight through at least the end of this year due to very high demand, low inventories and the capacity that will be lost during planned downtime.\nWith customer demand exceeding production, the full extent of our customers' backlogs, deferred consumption and unmet demand are unknown.\nIn the days after the Texas freeze, North American PG exports fell by 13% for the month of February, and we expect the March data to reflect further decline in exports.\nIt will likely require quite some time before North American polyethylene industry can fulfill backlogs, satisfy domestic demand and returned to last year's pace of selling 40% of production into the export market to serve global demand.\nAnd this scenario of replenishing inventory over the course of 2021 does not factor in an additional wave of demand that is likely to arise in the second half of this year from restocking and increased activity in the travel, leisure and hospitality sectors as vaccines provide for increased mobility.\nThe reopening and considerable pent-up demand will add another leg of growth across our businesses.\nIncreased mobility and rising demand for transportation fuels should enable our Oxyfuels and Refining businesses to deliver meaningful profit improvements in the second half of '21 and into 2022.\nAt LyondellBasell, the first topic on the agenda for a meeting of our leadership or any group of employees throughout the company is typically oriented toward improving the health and safety of our teams.\nOur consistent emphasis on a culture of safety provides clear and direct benefits toward improving the health and welfare of our employees, contractors and communities.\nWe also believe the attention to detail embedded in our safety culture cascades indirect benefits toward our work to ensure reliable operations, commercial leadership, and ultimately, differential financial performance.\nAs such, I'm pleased to report that in the first quarter of 2021, our employees and contractors achieved the best safety performance we have attained in any prior year.\nWe look forward to continued progress on our journey toward our goal of 0 injuries.\nEarlier this month, we launched our Circulen portfolio of polymers, described on slide five, to enable our customers and brand owners to improve the sustainability of their products.\nCirculenRecover polymers are already in use, producing consumer products such as the Samsonite Magnum Eco suitcase line depicted on the slide.\nWe are stepping up volumes of CirculenRenew polymers in Europe and advancing our proprietary catalyzed pyrolysis technology at our MoReTec molecular recycling pilot facility in Italy, with the goal of bringing this potentially game-changing technology for CirculenRevive polymers to a commercial scale.\nOver the past 70 years, our polymers have played a central role in advancing modern living by reducing food waste with protective packaging, delivering safe drinking water through plastic pipes and advancing healthcare with sterile and affordable devices and equipment.\nWith the introduction of our Circulen product line, we are making further progress toward LyondellBasell's goal of producing and marketing two million metric tons of recycle- and renewal-based polymers annually by 2030.\nOn slide six, we highlight how LyondellBasell's technological advancements can enable our customers to independently improve the sustainability profile of their product formulations.\nOur new Hyperzone HDPE process is capable of producing polyethylene with more than five times the crack resistance of standard polyethylene produced with a chromium catalyst in a slurry loop process.\nThis premium performance of polyethylene from our Hyperzone multi-zone process can be directly leveraged by customers to produce packaging, such as detergent bottles with thinner walls, and less polyethylene that reduces weight without sacrificing durability or performance.\nAs our customers seek to improve the circularity of their business models, many plastics converters have set aggressive goals to increase their utilization of post-consumer recycled, or PCR, plastics in packaging and other applications.\nHyperzone's outstanding performance can also be leveraged to allow for increased blending of PCR without sacrificing performance.\nAs you can see in the chart, Hyperzone HDPE blended with 25% PCR can still exceed the crack resistance of standard polyethylene by 70%.\nOur customers are leveraging LyondellBasell's advanced technology to improve the crack resistance, top load strength, impact resistance and other critical properties for their products while simultaneously improving the sustainability profile of their business models.\nNow let's step back a bit and on slide seven review some of the macroeconomic forces that have been driving LyondellBasell's business performance during the pandemic and the ongoing recovery.\nOne way to think about the trajectory of the economy is to untangle a few of the societal trends that are fueling demand in markets for nondurable goods, durable goods and transportation.\nIn the early days of the pandemic in March, April and May of 2020, we saw elevated demand for nondurable goods as households engaged in pantry stocking to protect against supply disruptions and adapt to the transition toward increased working from home, schooling from home and other lifestyle changes associated with quarantines and societal lockdowns.\nLyondellBasell's Olefins and Polyolefins businesses benefited from the double-digit improvements in packaging demand as increased utilization of nonbulk packaging and e-commerce deliveries boosted demand for our materials.\nIn 2021, consumer packaged goods demand remains elevated by single-digit percentages relative to prepandemic levels.\nWe expect somewhat elevated demand for packaging will persist following the pandemic with some permanent changes in society as a portion of the population continues to work remotely, school remotely and use home delivery for convenience.\nThe second economic driver for our businesses has been the recovery in consumer-, industrial- and construction-related demand for durable goods that began in the third quarter of 2020.\nThis trend can be reflected by the dark blue line that tracks the ongoing recovery in vehicle production in North America.\nWith government stimulus supporting the US economy and limited options for travel, leisure and public dining, consumers remodeled homes and purchased appliances, home entertainment and vehicles that drove recovery for the industrial economy.\nThis trend has been boosting demand for LyondellBasell's propylene oxide from our Intermediates & Derivatives segment that is used in polyurethane foams for furniture and construction insulation as well as polymers from our O&P segments that are used both directly and in plastic compounds produced by our Advanced Polymer Solutions segment.\nThe third significant trend is the increased mobility that is developing around the world as vaccination rates improve and activity in the travel, leisure and hospitality sectors returns to some semblance of normalcy.\nIncreases in vehicle miles traveled are supporting a rebound in crude oil and gasoline prices to bring back margins for our Oxyfuels business in the I&D segment.\nWhile a slower rebound in international air travel is holding back demand for jet fuel, strong demand for diesel and improving demand for gasoline is expected to improve profitability for LyondellBasell's Refining segment during the second half of this year.\nIncreased mobility will also benefit our polymer businesses as the restaurant, hotel and tourism industries restock and begin to address substantial pent-up demand.\nThe sum of these trends points to a strong outlook for both the global economy and LyondellBasell during the remainder of 2021 and well into 2022.\nOn slide eight, these trends can be seen in first quarter global demand growth for our two largest products, polyethylene and polypropylene, relative to prepandemic levels seen two years ago in the first quarter of 2019.\nOver this period, we've seen modest improvements in European demand.\nIn the first quarter of 2021, North American demand was quite strong, but constrained by lack of supply due to the downtime triggered by the cold weather and associated power outages in Texas.\nNortheast Asian demand increased by an astounding 23% driven by the postpandemic strength of the Chinese economy.\nSince imports account for approximately 40% of China's demand needs for polyethylene, China's growth benefited LyondellBasell's production sites in the United States and the Middle East that export polyethylene to China.\nGlobal demand for polyolefins has grown by 14% over the past two years, far above the long-term trends of 4% and 5% annual demand growth for polyethylene and polypropylene, respectively.\nStrong global demand and constrained production have supported polyethylene contract price increases of $950 per metric ton in the US from May 2020 through March of this year, with $420 per ton occurring since November and more than $300 per ton of additional price increases on the table for April and May of 2021.\nAs demand should get even stronger as we progress through the recovery, we expect tight markets and strong margins for polyolefins to persist into next year.\nIn January, we talked about concerns that global polyethylene capacity additions, particularly in China, could outpace global demand and depress operating rates and profitability over the coming years.\nThis quarter, we have updated the chart we discussed during the fourth quarter call to address operating rates for both polyethylene and polypropylene.\nPredictions of reduced operating rates due to new capacity are highly reminiscent of forecasts from consulting reports published in 2016.\nThese are depicted by the dotted blue line, which predicted global operating rates would dip due to capacity additions on the US Gulf Coast from 2017 through 2018.\nMore importantly than delays in capacity, we believe recent forecasts are underestimating demand growth.\nEarly in the pandemic, many predicted declines in PE demand for 2020.\nBy the middle of the year, forecasts improved to flat demand.\nMost consultants now believe that global polyolefin demand grew by approximately 4% in 2020, similar to growth rates seen consistently over the past 30 years.\nAdjusting these forecasts to 4% demand growth for both '20 and '21 results in a predicted operating rate shown by the dotted gray line.\nLast quarter, we suggested that 2021 would likely follow the patterns seen after prior recessions, and this year's demand growth could be higher than the historical trend of 4%.\nA 7% growth in demand during 2021 for only one year with reversion to the historical mean in 2022 and beyond would generate the robust operating rate forecast depicted by the dotted orange line.\nToday, with global polyolefin demand growing in the first quarter by 14% over the past two years, we are even more confident that the recovering economy is likely to facilitate a more orderly absorption of this new capacity by the global market, which should support robust margins.\nOver the last 12 months, LyondellBasell converted almost 80% of our EBITDA into $3.4 billion of cash from operating activities.\nIn the first quarter of 2021, our businesses delivered over 40% more free operating cash flow relative to the same period last year.\nWe expect continued improvement of our LTM performance as we progress through each quarter of 2021.\nAs Bob mentioned, our goal for this year is to accomplish meaningful deleveraging to further strengthen our investment-grade balance sheet.\nIn the first quarter, while paying dividends of $352 million and investing a similar amount in capital expenditures, we reduced the balance on our term loan by $500 million to close the first quarter with cash and liquid investments of $1.8 billion.\nAfter the quarter closed, we repaid an additional $500 million on the term loan in April.\nWe expect that robust cash generation should enable continued progress on deleveraging throughout the year.\nBefore I continue with a more detailed discussion of our segment results, let me provide a brief update on our 2021 modeling guidance.\nWe continue to be on track to invest approximately $2 billion in capital expenditures during 2021, targeted equally toward profit-generating growth projects and sustaining maintenance.\nDue to extremely strong demand for propylene oxide, we have shifted a turnaround at one of our PO/TBA units in Bayport, Texas from the second quarter to the third quarter of this year and reduced the scope and associated downtime for the maintenance.\nWith this change, we expect no major planned maintenance downtime in the second quarter of 2021.\nAnd based on expected volumes and margins, we estimate that the third quarter EBITDA impact due to lost production associated with planned maintenance across the company will increase by $30 million to $75 million.\nIn total, the EBITDA impact associated with all of LyondellBasell's 2021 planned maintenance downtime should decrease by $30 million relative to our original guidance to approximately $140 million for the year.\nIn the first quarter of 2021, LyondellBasell's business portfolio delivered EBITDA of $1.6 billion.\nThis was an improvement of more than $300 million relative to the fourth quarter, exceeding typical first quarter seasonal trends.\nThe upward trajectory of LyondellBasell's profitability reflects improving demand and margins for our products driven by the recovering global economy and tight markets.\nAs Bob mentioned, cold weather and associated power outages resulted in unplanned shutdowns that constrained first quarter production for LyondellBasell and nearly all of our competitors in the state of Texas.\nThis downtime was exacerbated by strong global demand that tightened markets and elevated margins across most of our businesses.\nWhile it's clear that we lost production during the first quarter due to unplanned downtime, the offsetting effects of higher margins and sales from inventory complicates the effort to quantify the impact on first quarter business results.\nIn the second quarter, we plan to operate our assets at nearly full rates as profitability improves for oxyfuels and refining businesses.\nWe expect further EBITDA improvement during the second quarter.\nOn the left side of the chart, our all-time high quarterly EBITDA, excluding LCM of approximately $2.2 billion reported in the third quarter of 2015, provides useful perspective.\nWhile profitability for transportation fuels was quite strong in 2015, today, our company has more earnings power from a larger asset base.\nOver the last six years, we have added ethylene capacity at Corpus Christi, expanded our compounding business through the acquisition of A. Schulman, started a new Hyperzone HDPE plant in Houston and added significant joint venture capacity in Louisiana and China.\nIn 2021, LyondellBasell is poised to capture opportunities that are emerging in the rebounding global economy with a larger asset base.\nNow let's review the first quarter results for each of our segments.\nAs mentioned, my discussion will describe our underlying business results excluding the noncash impacts of LCM inventory changes.\nI will begin with our Olefins and Polyolefins-Americas segment on slide 13.\nThird quarter EBITDA was $867 million, $145 million higher than the fourth quarter.\nTight markets and strong demand resulted in improved margins, driving quarterly results higher than we have seen since 2015.\nOlefin results increased approximately $155 million compared to the fourth quarter.\nOlefins margins increased, with higher ethylene and propylene prices outpacing higher feedstock and utility costs.\nVolumes decreased due to downtime driven by Texas weather events, partially offset by a full quarter of volume from our Louisiana joint venture that we formed in December.\nThe ethylene cracker at the joint venture ran continuously throughout the weather events and exceeded ethylene nameplate operating rates by 9% during March.\nPolyolefin results for the segment decreased by about $15 million during the first quarter.\nPolyethylene margin decreased, while polypropylene margin improved.\nPolyethylene volume increased due to a full quarter of contribution from the Louisiana joint venture, partially offset by lost production during the weather events.\nWe anticipate both volume and margin improvement for our O&P-Americas segment during the second quarter.\nVolumes are expected to rebound in the absence of weather-related downtime.\nTight markets due to high demand, low inventories and customer backlogs are expected to continue to support strong integrated chain margins.\nDuring the first quarter, EBITDA was $412 million, $161 million higher than the fourth quarter.\nStrong demand expanded margins, driving quarter results higher than we have seen for the segment since 2018.\nOlefins results increased $30 million driven by increased margins and volumes.\nEthylene margin improved due to increased ethylene prices and lower fixed costs despite higher feedstock cost.\nDemand was robust during the quarter, and we increased volumes by operating our crackers at a rate of 98%, almost 10% above industry benchmarks for the first quarter.\nCombined polyolefin results increased approximately $150 million compared to the prior quarter.\nStrong polymer demand drove spread improvements for both polyethylene and polypropylene prices relative to monomer.\nMargin improvements at our Middle East and Asia joint ventures were offset by higher LPG feedstock costs, pressuring profitability at our new Bora joint venture in China, resulting in little change in equity income for the segment.\nDuring the second quarter, we expect strong demand in tight markets to drive further margin improvement for our O&P-EAI businesses.\nFirst quarter EBITDA was $182 million, $14 million lower than the prior quarter.\nMargins improved with higher product prices, while volumes declined due to the Texas weather events and planned maintenance in our Propylene Oxide & Derivatives business.\nFirst quarter Propylene Oxide & Derivatives results decreased by approximately $35 million due to lower volumes, offsetting stronger margins driven by tight market supply.\nIntermediate chemical results decreased about $55 million due to lower volumes as a result of the weather events.\nOxyfuels and related products results increased by approximately $25 million as a result of higher margins benefiting from improved gasoline prices that were partially offset by constrained volumes.\nWe expect both volumes and margins to improve for our I&D segment in the second quarter.\nStrong demand for durable goods, coupled with continued tight market supply, are expected to increase profitability across most of the businesses in this segment.\nNow let's move forward and review the results of our Advanced Polymer Solutions segment on slide 16.\nFirst quarter EBITDA was $135 million, $9 million higher than the fourth quarter.\nVolumes improved driven by higher demand for our products, partially offset by lower margins.\nCompounding & Solutions results were relatively unchanged, with higher volumes driven by improved demand being offset by compressed margins due to rising feedstock cost.\nAdvanced Polymer results increased by approximately $15 million due to both higher margins and volumes.\nIn April, North American feedstock costs for our polypropylene compounds rapidly declined to reverse much of the price escalation that occurred during the first quarter.\nWe expect that falling feedstock prices, combined with continued price improvements for our compounded products, will expand margins during the second quarter.\nFirst quarter EBITDA was negative $110 million, a $36 million decrease versus the fourth quarter of 2020.\nHigher cost for renewable fuel credits, or RINs, and lower crude throughput overwhelmed improvements in the Maya 2-1-1 industry crack spread.\nIn the first quarter, the Maya 2-1-1 crack spread increased by $5.21 per barrel to $15.32 per barrel.\nAs a result of the Texas weather event, the average crude throughput at the refinery fell to 152,000 barrels per day.\nIn April, we continue to see improvements in refined product demand, and we are running the refinery at nearly full rates.\nStrong demand for diesel and improving demand for gasoline is expected to improve both volumes and margins at our refinery during the second half of this year.\nHowever, we don't expect a full recovery until there is further progress in vaccination rates and a rebound in global demand for jet fuel driven by increased business and international air travel.\nFirst quarter Technology segment EBITDA was $94 million, $49 million higher than the prior quarter.\nCatalyst profitability increased with customers rebuilding inventories and increased demand from Asia and the Middle East.\nBased on anticipated timing of upcoming licensing milestones and catalyst demand, we expect that second quarter Technology business profitability will be similar to the first quarter.\nLet me summarize our view of current conditions and the outlook for our businesses with slide 19.\nWe began this year with low inventories and increasing demand from a recovering global economy.\nDuring our fourth quarter earnings call in January, we thought that strong February order books, increasing seasonal demand and tight industry supply would support strong margins for at least the first half of 2021.\nSince January, our industry lost several weeks of supply due to Texas weather events during February, and deferred maintenance from 2020 is resulting in higher levels of planned downtime across the industry, particularly in the second quarter.\nNorth American inventories were depleted during the downtime, and European inventories have been pressured by unusually strong first quarter demand.\nWhile our company normally maintains over one month of polyolefin sales inventory, our European PE and PP businesses ended March levels well below those targets, most notably, with less than two weeks of low-density polyethylene inventory.\nLogistics constraints are exacerbating the situation due to shortages of shipping containers on critical routes and escalating freight rates that are limiting opportunities for regional arbitrage.\nChina remains structurally short of polyethylene, and US exports to China have vanished as North American suppliers seek to replenish inventories and address order backlogs from domestic customers.\nBacklogs for finished goods are rising as the recovering global economy continues to be supported by government stimulus and pent-up demand emerges with increased vaccination rates.\nIn summary, we believe that tight global markets are likely to persist well into the second half of this year, and continued improvements in mobility and associated economic activity could sustain strong volumes and margins into 2022.\nIn the years following the 2008 Great Recession, our company nimbly captured the benefits of low-cost feedstocks that arose from the development of North American oil and gas resources.\nLyondellBasell typically delivered between $6 billion to $7 billion of EBITDA over the past 10 years.\nOur EBITDA after LCM inventory adjustments reached $8.1 billion in 2015 during my first year as CEO of our company.\nAt the end of 2019, we thought we might simply be coming to the end of a very long business cycle until we learned more about COVID and the extreme tolls it would take on our society, the economy, and ultimately, in human lives.\nAs we rebound from the pandemic and contemplate how our company could perform through the recovery and the next business cycle, it is worthwhile to consider the factors that should provide additional earnings power relative to our performance last year and in the previous cycle.\nRecovery in automotive and other durable goods demand is rebuilding volumes within our new APS segment back toward 2018 levels.\nIncreased utilization of our capacity should provide greater visibility on the more than $200 million in synergies that we've built into the business since acquiring A. Schulman.\nIn 2020, we added 500,000 tons of polyethylene capacity utilizing our next-generation Hyperzone technology.\nDuring the depths of the pandemic and recession, our strong balance sheet enabled us to move forward and form accretive joint ventures for integrated crackers in China and Louisiana that provided immediate returns on our investments.\nThis quarter, we finalized an agreement to form our second propylene oxide joint venture with Sinopec.\nBeyond the broad-based margin improvements that are currently under way for many of our products, full recovery in demand for transportation fuels still lies ahead and should drive margin improvement for our sizable Refining & Oxyfuels businesses over the coming quarters.\nOur larger asset base is well poised to capture the opportunities of a recovering economy, establish new earnings benchmarks and position LyondellBasell for further growth over the upcoming business cycle.\nLet me close with slide 21.\nThe title of our 2020 annual report is Emerging Stronger, and it is an appropriate description of LyondellBasell's trajectory as the global economy recovers from the pandemic and recession.\nOur leading and advantaged business positions are primed to capture the benefits of a recovering economy.\nIn the second quarter, we have no major planned downtime, and we are operating our highly reliable and low-cost global network of assets at maximum rates to capture rising margins.\nWe have remained steadfast to our disciplined financial strategy.\nOver the coming year, our priority will continue to be deleveraging while supporting shareholder returns with a strong and progressive dividend.\nWe remain committed to an investment-grade credit rating, and our plan is to bolster our credit metrics through increased earnings and additional debt reduction over the coming quarters.\nOur aim is to maximize free cash flow by leveraging our larger asset base, efficiently converting earnings into cash and deploying capital in a prudent manner toward high-return investments.\nAll of this will help drive our ultimate focus on delivering strong shareholder returns.\nThe outlook for our business is quite promising, and we look forward to delivering on our commitments over the coming quarters.\n",
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"content": "q1 earnings per share $3.18.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: I'm joined today by Bob Patel, our Chief Executive Officer; and Michael McMurray, our Chief Financial Officer.\nThe passcode for both numbers is 137-21413.\nDuring today's call, we will focus on second quarter results, the current environment, our near-term outlook and provide an update on our growth initiatives.\nGood day to all of you.\nWe appreciate you joining us today as we discuss our second quarter results.\nEvery day, we work diligently to ensure that the colleagues, the friends and most importantly, the families of our employees and contractors never have to receive the calls that went out last Tuesday evening.\nNotifying them for the loss or injury of a loved one.\nOur investigation is underway, and it will be some time before we reach a conclusive determination recovery for all of the injured.\nDespite the increased working capital required by higher prices and volumes, we generated $1.9 billion of cash from operating activities.\nThese results demonstrate how LyondellBasell's disciplined investments in growth and share repurchases over the past few years have enabled us to establish new benchmarks for our company's profitability.\nSecond quarter EBITDA is [Technical Issues] a larger LyondellBasell is now positioned to generate stronger results and higher cash flow through business cycles.\nThe events of this week provide a vivid reminder of the reasons behind our company's commitment to safe and reliable operations.\nAs of the end of June, our year-to-date total recordable incident rate of 0.22 for employees and contractors remained in the top 10% of our industry.\nAs we do with all major incidents, we will investigate the root cause and contributing factors involved in this week's events and share our findings with our contractors, our employees and our industry peers.\nOur aim is to learn from all incidents and achieve a goal 0 work environment that prevents such tragedies from occurring.\nOn slide five, I would like to highlight our most recent sustainability report that we released last month.\nThis report focuses on LyondellBasell's efforts to address three urgent global challenges for our business, eliminating plastic waste in the environment, addressing climate change and supporting a thriving society.\nLyondellBasell is leading work to transform our industry toward more sustainable market for Circular Polymers.\nOn climate change, we support the ambitions of the Paris Climate Agreement and we're moving forward with investments in energy reduction, increased utilization of renewable energy and evaluation of new low-carbon technologies.\nWe will be sharing more details on our carbon reduction plans over the coming months.\nIn our work to advance the thriving society, I'm very pleased to see the enthusiasm from our employees [Technical Issues] with our emphasis on a safe work culture and community engagement, our work to capture the full potential of our diverse global workforce should further enhance the sustainability of our company's performance.\nFollowing an exceptional second quarter, some market observers are predicting a rapid decline in prices and profitability for our industry.\nOn slide six, I would like to point out why we believe that markets will be stronger for longer.\nCOVID vaccinations have been the driving force behind the reopening of societies and the rebounding global economy.\nAs of July, only 14% of the global population is fully vaccinated.\nWhile the U.S. and roughly a dozen other countries have achieved vaccination rates approaching or exceeding 50%, health experts anticipate that vaccines will be rolling out to the rest of the world throughout 2022 and into 2023.\nAs seen by the increased spread among unvaccinated populations and the rise of variants, we still have much work ahead of us to contain the coronavirus and realize the full economic power of global reopening.\nReturning to normalcy is eagerly anticipated by consumers with considerable pent-up demand and increased disposable income.\nThe Bureau of Economic Analysis estimates that U.S. personal savings averaged $3.5 trillion during the first five months of 2021, nearly three times the level seen in 2019.\nWith fiscal stimulus continuing to flow into the economy, consumers are both motivated and well funded to [Technical Issues].\nThis unfulfilled demand will persist to drive strong industrial production and demand for our materials for quite some time.\nOne example is that the average age of an automobile in the U.S. reached an all-time high of 12 years in 2021.\nBusinesses and consumers will eventually need to replace this aging fleet of cars and trucks.\nDespite higher prices and supply chain constraints, demand for our products serving automotive manufacturing are forecast to increase a total of 10% in 2021 and an additional 11% during 2022.\nStrong U.S. household formation during the pandemic has evolved into a robust housing market.\nLyondellBasell benefits from both direct demand for building and construction materials as well as demand for our products used in the myriad of furniture, appliances and other goods that complete a new home.\nAnd as vaccinations facilitate improvements in global mobility, LyondellBasell's products will see increased demand from restocking and consumption by service, entertainment, travel and hospitality industries as well as increased demand for transportation fuels supplied by LyondellBasell's oxyfuels and refining businesses.\nIn short, we remain confident that persistently high demand should support strong markets for our products through 2022.\nIn the second quarter, LyondellBasell generated $1.9 billion of cash from operating activities that contributed toward the more than $4 billion over the past 12 months.\nOur free operating cash flow yield has been 10.1% over the past four quarters and free operating cash flow for the second quarter improved by more than 80% relative to the second quarter of 2019.\nWe expect continued improvement of our last 12 months cash flow performance as we move forward through each quarter of 2021.\nAs I have mentioned during previous calls, a strong and progressive dividend plays a fundamental role in our capital deployment strategy.\nIn the second quarter, we expressed our confidence in our outlook by increasing the quarterly dividend by 7.6% to $1.13 per share.\nWe continue to invest in maintenance and growth projects during the quarter with approximately $430 million in capital expenditures.\nStrong cash flow supported debt repayments of $1.3 billion, bringing our year-to-date debt reduction to $1.8 billion.\nWe closed the second quarter with cash and liquid investments of $1.5 billion.\nLast week, S&P Global Ratings recognize the improvement in our metrics by upgrading our credit ratings and indicating a stable outlook.\nWe expect that robust cash generation and an anticipated tax refund will enable continued progress on our goal to reduce our net debt by up to $4 billion during 2021 and further strengthen our investment-grade balance sheet.\nOne modeling item of note.\nOur original full year net interest expense guidance of $430 million did not include extinguishment costs associated with our accelerated debt repayment program.\nAs a result, our 2021 net interest expense will likely exceed this prior guidance.\nIn the second quarter of 2021, LyondellBasell's business portfolio delivered record EBITDA of $3 billion.\nThis was an improvement of more than $1.4 billion relative to the first quarter.\nOur results reflect robust demand for our products driven by the recovery in global economy and our growth investments.\nMarkets remained tight during the second quarter as the industry returned to normal operation following first quarter disruptions from the winter storm that constrained production for LyondellBasell and nearly all of our competitors with operations in the state of Texas.\nPersistent consumer and industrial demand has met tight markets, leading to seven consecutive months of North American polyethylene contract price increases totaling more than $900 per ton.\nWe expect market conditions to remain robust and that continued progress in global reopening, sizable order backlogs in the increasing demand for transportation fuels will all support strong margins across LyondellBasell's businesses.\nOur previous quarterly EBITDA record set in the third quarter of 2015 was approximately $2.2 billion, with more than $140 million of EBITDA contributed by our Refining segment.\nToday, our growth investments are helping offset a challenging refining environment and enabling us to surpass the 2015 record.\nOur aim is to leverage our larger business portfolio to achieve improved results at all stages of the business cycle.\nNow let's review second quarter results for each of our segments.\nAs mentioned, my discussion will describe our underlying business results, I will begin with our Olefins and Polyolefins Americas segment on slide 10.\nStrong demand, improved margins and our growth investments drove second quarter EBITDA to a record of $1.6 billion, $709 million higher than the first quarter.\nOlefins results increased by approximately $310 million compared to the first quarter due to higher margins and volumes.\nLyondellBasell's cracker operating rates increased to 93% and following the first quarter Texas weather events, about five points above the second quarter industry average.\nMargins improved primarily due to the absence of high cost incurred during the prior quarter's weather events.\nPolyolefin results increased by about $400 million during the second quarter as robust demand in tight markets drove higher prices and margins for polyethylene and polypropylene.\nWe anticipate continued strength in demand and margins for our O&P and Americas businesses during the third quarter.\nWhile consultants are predicting some margin compression for ethylene recent outages have caused prices to quickly rebound and demonstrated that markets remain relatively tight.\nHigh demand, low downstream inventories and customer backlogs are expected to continue and provide ongoing support for strong polymer margins.\nAs of this week, our August order volumes for PE and PP in the Americas segment are stronger than any prior month in 2021.\nSimilar to the Americas, robust demand and improving margins in our EAI markets drove second quarter EBITDA to a record $708 million, $296 million higher than the first quarter.\nOlefins results improved by $100 million as margins increased driven by higher ethylene and coproduct prices.\nDemand was robust during the quarter, and we operated our crackers at a rate of 96%, more than 10% above industry benchmarks.\nCombined polyolefin results increased approximately $180 million compared to the prior quarter.\nStrong polymer demand drove spread improvements with price increases for polyethylene and polypropylene outpacing monomer prices.\nMargin improvements were partially offset by a small decline in polyolefin volume.\nDuring the third quarter, we could see modest rebalancing of tight European markets as customers take downtime for summer holidays.\nRobust demand expanded our margins and increased our sales volumes following the Texas weather events and some plant maintenance during the prior quarter.\nSecond quarter EBITDA was $596 million, more than three times higher than the prior quarter.\nSecond quarter propylene oxide and derivative results increased by $170 million driven by record high margins.\nIntermediate Chemicals results increased by about $170 million, primarily due to higher product prices for most of the businesses.\nOxyfuels and related products results increased by $70 million, driven by higher margins, benefiting from improved demand and higher gasoline prices.\nWe expect continued strength in durable goods and improving transportation fuels demand to increase third quarter volumes for our I&D segment.\nMargins could slightly moderate if industry production rates remain strong.\nDemand for transportation fuels are rebounding from pandemic close.\nTotal gasoline and distillate demand in June was within 5% of prepandemic levels.\nReduced demand in margins for refined products is mostly due to lagging demand for jet fuel associated with business and international travel.\nJet fuel demand remains stubbornly below pre-pandemic levels.\nAs vaccinations in global travel resumes through 2022 and 2023, we expect refining margins will improve and drive additional earnings power for LyondellBasell's Houston refinery.\nThe chart on the left illustrates the Northwest Europe raw material margin for MTBE, which is an industry marker for our oxyfuels products sold into gasoline blending markets around the world.\nWhile Oxyfuels are typically a reliable performing business through the cycle, low demand for gasoline pushed this margin into breakeven or negative territory over the prior four quarters.\nSince the beginning of this year, global demand for gasoline and gasoline blending components such as MTBE and ETBE has improved, increasing the margin to an average of $167 per ton during the second quarter.\nThis is a significant rebound and well within the historical range shown by [Technical Issues] Now let's move forward and review the results of our Advanced Polymer Solutions segment on slide 14.\nThe margin improvement was offset by a decline in volumes as semiconductor shortages reduced demand for our polymers serving automotive and electronic end markets.\nSecond quarter EBITDA was $129 million, lower than the first quarter.\nCompounding & Solutions results decreased by about $25 million as volumes decline for polymers supplied to the automotive sector appliance manufacturing and other industries that were constrained by chip shortages.\nAdvanced Polymer results increased by approximately $10 million due to improved polymer price spreads over propylene raw materials.\nIn July, feedstock cost for our polypropylene compounds produced in Europe have increased and are likely to pressure margins during the third quarter.\nWe only expect gradual volume recovery for compound supply to automotive electronics applications as semiconductor supply constraints decrease over the coming quarters.\nThis resulted in second quarter EBITDA of negative $81 million, an improvement of $29 million relative to the first quarter of 2021.\nIn the second quarter, the Maya 2-1-1 benchmark increased by $6.14 per barrel to $21.46 per barrel.\nThe average crude throughput at the refinery increased to 248,000 barrels per day, an operating rate of 93%.\nIn July, we continue to see improvements in refined product demand and we are running the refinery at nearly full rates.\nStrong demand for diesel and improving demand for gasoline is expected to improve refining margins and could enable our refinery to return to profitability before the end of 2021.\nAnd as mentioned, full margin recovery will require a stronger rebound in jet fuel demand.\nIncreased licensing revenue was offset by a decline in Catalyst margin, resulting in a second EBITDA of $92 million, $2 million lower than the prior quarter.\nWe expect that third quarter profitability for our technology business will be similar to the same quarter last year based on the anticipated timing of licensing revenue and catalyst demand.\nLet me summarize our view of current conditions and the outlook for our businesses with slide 17.\nIn the near to midterm, we are still in the early stages of the global economic recovery.\nAnd despite the challenges from variants, continued progress with vaccinations and reopening should continue to support robust demand and margins for our products.\nPent-up demand is tangible and consumers have ample liquidity to drive purchases of both services and manufactured goods as reopening proceeds globally.\nLow inventories due to supply constraints and logistics disruptions will only serve to extend tight market conditions, downstream customer backlogs and persistent demand bode well for continued strength in LyondellBasell's order books.\nIn polyethylene, strong U.S. and Latin American demand has overtaken volumes that previously flowed from the U.S. to export markets in Asia.\nAs logistics constraints subside, and U.S. PG exports to Asia resume, producers will need to refill a depleted supply chain of 500,000 tons or more that is not fully captured in industry statistics.\nIn North America, we expect markets for PE and PP will remain tight into next year.\nHigher vaccination rates are expected to improve global mobility over the coming year.\nThe return of international travel will drive further recovery in transportation fuels markets to increase profitability for our oxyfuels and refining businesses, providing additional earnings upside for LyondellBasell.\nLet me close with slide 18.\nOur second quarter results provide clear evidence of LyondellBasell's progress in maximizing cash flow performance through all stages of the business cycle.\nWe are leveraging our leading and advantaged positions across a larger asset base to deliver results that far exceed our previous benchmarks.\nIn today's strong markets, our second quarter EBITDA results are 38% higher than our previous record.\nBy 2023, we expect that our recent growth investments will provide an additional $1.5 billion of mid-cycle EBITDA earnings capability relative to 2017.\nOur value-driven growth investments should propel stronger performance in a variety of business environments.\nOur prudent financial strategy remains consistent.\nWe have increased our quarterly dividend and remain confident in our capability to deliver on this commitment throughout business cycles.\nWe are prioritizing deleveraging and our rapid progress on debt repayment will serve to further strengthen our investment-grade balance sheet.\nCapacity expansions are coming online in our industry during a period of extraordinary demand growth and enabling an orderly absorption of this new capacity into the market.\nFurther investments in petrochemicals are proceeding at a manageable rate and recent project cancellations and delays demonstrate capital discipline by market participants.\nAt LyondellBasell, we're focused on providing leadership for our industry to establish a more sustainable future with new circular business models.\nWe will increase our capacity to serve the growing market demand for circulun-branded polymers produced from recycled and renewable feedstocks as we work toward our goal of annually producing two million tons [Technical Issues] robust returns from our growing global business portfolio and look forward to updating you on our progress over the coming quarters.\n",
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"content": "increased quarterly dividend by 7.6 percent to $1.13 per share.\nexpect strong integrated polyethylene margins to continue.\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: When we spoke last in February, I was optimistic that we would soon be returning to live events.\nAnd since then, our confidence has increased for our key markets.\nIn the U.S., over 40% of the population have received at least one vaccine dose, and most states are now fully or partially reopening with more restrictions being lifted daily.\nIn the U.K., over 50% of the population has received at least one vaccine dose, and their reopening road map is tracking to plan.\nAnd although Europe remains a few months behind on vaccinations, they are progressing, and recent discussions about reopening to international visitors this summer are encouraging.\nAround the world, people are showing the need to get out and socialize once again, which reinforces our expectation that a return to concerts will be the logical progression as vaccines are readily available to everyone who wants one.\nThis is generally already in the case in the U.S. where we are confidently planning our reopenings, particularly for outdoor shows.\nAnd we expect other major markets will follow this summer.\nAlongside these trends, we are seeing the effects of significant pent-up demand.\nThe fans are buying tickets, and events are selling out faster than ever.\nIn the U.S., Bonnaroo, Electric Daisy and Rolling Loud festivals all sold out in record times at full capacity.\nIn the U.K., we have 11 festivals planned this summer, including our largest ones, Reading, Leeds and Parklife, where tickets are already sold out.\nNew Zealand, the country's largest festival, Rhythm and Vines, quickly sold out.\nAnd as we get further clarity on reopening time lines, we are announcing more tours for late this summer, including Dave Matthews, Luke Bryan, Maroon five and others to come, showing artists' increasing confidence in performing this summer.\nGiven the longer lead times associated with global arena and stadium tours, we expect these will start later this year and into 2022.\nAs we've discussed, we are already seeing confirmed major tour dates for 2022, up double digits from the same time prepandemic.\nMany of these artists will have multiyear tours spanning in the U.S., Europe and often Asia or Latin America, setting up for a strong multiyear growth run.\nComplementing our event pipeline, Ticketmaster continues to build its global client base to further accelerate its growth.\nThis year, we have already added new clients representing over five million net new fee-bearing tickets, which we expect to grow further throughout the year as more venues prefer for 2022.\nAnd with Ticketmaster's client base increasingly shifting to digital ticketing, we continue to enhance our offering, ranging from upsell and improved advertising opportunities as well as blockchain and NFT ability at the Ticketmaster platform.\nOur brand partners remain engaged and are responding well to our reopening.\nAnd like our concert business, our sponsorship pipeline of committed activity for 2022 is up double digits for next year relative to where it was prepandemic.\nLike so many of you, I'm excited to go back to concerts over the next few months and even more excited to see what I expect to be a nonstop 2022 that continues roaring into '23 and beyond.\nFor the first quarter, all the key costs and cash numbers improved relative to Q4 2020 and are at or better than what we expected at the start of the quarter.\nWe remain confident that our actions taken to cut costs and increase liquidity will provide us with the runway we need until we bring shows back, which will begin to scale in key markets outdoor this summer.\nAs we move toward reopening, we continue to balance strong cost and cash management.\nWe're now making the necessary investments to grow the business.\nWhile we expect the second quarter to be our first year-on-year improvement since Q4 of 2019 and to also be generating positive AOI through the second half of the year, we still plan on reducing costs this year by $750 million and reducing cash spend by $1.5 billion relative to prepandemic plans.\nLooking at our Q1 AOI results.\nOur AOI loss for the quarter was $152 million, which consisted of $323 million in operational fixed costs and $171 million of contribution margin, which included $149 million from operations, along with various onetime items, including insurance recoveries.\nTicketmaster's ticket sales began to pick up at the beginning of March, particularly in the U.S., with weekly ticket sale count significantly ramping as concert on sales have restarted, including the Bad Bunny on sale, which was the top Ticketmaster artist on sale day since 2018.\nAs Michael noted, sales for our Live Nation festivals and concerts have been strong, demonstrating the tremendous pent-up demand for our shows, with many festivals selling out in record time and a number of tours substantially overperforming relative to their historical levels.\nAnd our artist management and merchandise businesses also grew their contribution margin relative to the fourth quarter of last year.\nAnd our artist management businesses, artists continue to generate revenue through nontrain activity, including publishing rights, while our merchandise business has grown its retail and e-commerce businesses.\nLooking at free cash and liquidity.\nWe ended the first quarter with $1.1 billion in free cash compared to $643 million at the end of 2020, an increase of $462 million.\nOur free cash, along with $964 million of available debt capacity, gives us $2.1 billion in readily available liquidity, up from $1.6 billion at the end of 2020.\nBenefiting our free cash position, in January, we raised $417 million of net debt, and we had a $181 million timing benefit, largely associated with deferred revenue classification.\nOur total free cash usage in the quarter was $136 million or $45 million per month, which included $100 million per month of average operational burn, roughly in line with Q4, plus another $4 million per month of nonoperational cash costs to get us to $104 million average per month in gross burn.\nThis gross burn includes the benefits we realized from the sale of a nonstrategic minority investment and timing on interest payments and severance costs.\nAnd in Q1, we had $59 million average cash contribution margin per month, roughly 50% higher CM than we averaged in Q4.\nNow on the other balance sheet items, ticket refunds.\nThe global refund rate for Live Nation concerts that are rescheduled and are in or have gone through a refund window or windows was unchanged from the prior quarter at 17% through the end of Q1.\nFor tours that have gone for a second refund window, the refund levels continue to generally be much lower for the second window as the casual fans requested their refunds during the first window.\nOn our festivals where fans were able to retain their tickets for the next scheduled event, 65% of fans are doing so.\nOn deferred revenue, at the end of the first quarter, event-related deferred revenue for shows that will play in the next 12 months was $1.5 billion, the same as at the end of Q4.\nTicket sales in the first quarter were $200 million, but this was offset largely by a shift of deferred revenue from short term to long term for shows that were rescheduled into 2022.\nThis long-term deferred revenue will then largely shift back to short term during Q2 and Q3, reversing the timing benefit in free cash this quarter.\nFinally, looking forward, as Michael said, we continue to expect concerts to scale this summer in key markets, notably outdoor, and led by the U.S. and U.K. Given this expected activity through Q2, we will continue to ramp up our operations, enabling Ticketmaster to run its own sales, the concerts division to staff up for the amphitheater and festival season, and sponsorship staff to support delivery for brands of these events.\nBetween this ramp-up and the reversion of some of the Q1 timing benefits, we expect the average monthly net burn for the first half of 2021 to be roughly in line with Q4 of last year.\nBefore taking questions, I wanted to cover one other thing.\nKathy Willard, our CFO for the past 15 years, will be retiring as of June 30.\nShe will be then staying on as an advisor throughout the end of the year.\nAs of July 1, the plan is for Joe Berchtold to become CFO.\nKathy, as you know, has been an invaluable part of our executive team for the past 15 years and been with Live Nation for over 20.\nWe are a much stronger company because of her, not just from her role as CFO, but as a champion for women at the company and the industry, an important advisor to me on a range of issues.\nBecause she built such an effective finance organization, I'm confident we will remain in good shape as Joe steps in.\nHe and Kathy have been working together closely for over a decade now, and he has gotten more deeply involved over the past year as we have been planning this transition.\nIn addition, late last year, we elevated Jackie Viato to EVP of Operations to take on greater responsibility and give Joe the bandwidth he will need for the job.\n",
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"content": "$750 million cost reduction and $1.5 billion cash management program targets 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: Live music roared back over the past quarter, driving all our business stipends to positive AOI for the first time in two years with companywide AOI of $306 million.\nThe 2021 summer concert season rebounded quickly, with 17 million fans attending our shows in the quarter has returned to live, reflected tremendous pent-up demand.\nFestivals were large part of our return to live this summer with many of our festivals selling out in record time, and then overall ticket sales for major festivals was up 10% versus 2019.\nThen we had a number of our tours are already sell over 500, 000 tickets for tours this year, including sellout tours by Harry Styles, Chris Stapleton, and others.\nIn addition to increasing attendance, strong demand also enabled improving pricing with average amphitheater and major festival pricing up double-digits relative to 2019, and at our shows, fans spend at record levels with onsite spending per fan up over 20% in both amphitheaters and festivals compared to 2019.\nWe delivered these results with an operating environment that required us to wrap up quickly it's new health and safety protocols, and staff our frontline in a tight labor market.\nOn the health and safety front, we set the industry standard by requiring proof of vaccine or testing for our shows, with no change in fan purchase behavior.\nMore importantly, our protocols proved effective at mitigating major COVID disruptions to our business in the U.S. and UK, and allowed us to work in conjunction with local health officials to mitigate transmission risks from our events.\nOn the labor front, we were able to set staffing requirements for our peak outdoor season without any show disruptions.\nWe also saw strong fan demand in our Ticketmaster results.\nWe delivered its highest AOI quarter ever.\nQ3 was Ticketmaster's fourth highest fee-bearing GTV quarter excluding refunds, led by sports legs restarting and concert on-sales for 2022 ramping up.\nIn addition, Ticketmaster's secondary business delivered its highest GTV month in September, showing continued growth in the segment, even as artists and content owners continue shifting more of the value to primary sales.\nAnd as the fans came back, so did our brand partners who continue to seek to connect to the live music fan.\nAs a result, our sponsorship and advertising business delivered over $100 million in AOI for the quarter, the first time at this level since Q3 of 2019.\nReturn of sponsorship and advertising has been largely driven by historic major partners, along with the addition of new brands, including Truly Hard Seltzer, as well as Coinbase and Solana in the Fintech segment.\nAs we look forward to 2022, we are encouraged by all our leading indicators across each business.\nThrough October our confirmed show count across amphitheaters, arenas, stadium shows are up double-digits, relative to the point in 2019 to 2020 shows.\nAnd through mid-October, we have already sold 22 million tickets for our shows in 2022 and demand has been stronger than ever for many of these on sales, with a million tickets sold for each of the Coldplay and Red-Hot Chili Peppers tours, and several other tours already selling over 500,000 tickets.\nTicketmaster is on sale for 2022 also reinforcing this demand, as we expect Q4 transacted fee-bearing GTV to be at record level, even after already selling 65 million fee-bearing tickets for events next year.\nTicketmaster also added clients represented in over 14 million net new fee-bearing tickets so far this year, further accelerating its growth on a global basis.\nAnd our Sponsorship and Advertising business had similar success, with confirmed pipeline for 2022 up double-digits relative to this time in 2019 to 2020.\nAt the same time, we are continuing our cost focused deliver $200 million in structural savings from our pre -pandemic 2020 plan, making us nimbler and better positioned to invest for future growth.\nAs we get close to turning the page in 2021, I remain more convinced than ever in the power and potential of live entertainment, and the strength of our position.\nNo industry was more impacted by the pandemic over the last two years, and no industry has so proven the durability of its demand in the face of such disruption.\nI fully expect we will continue to have bumps in the road in the coming months.\nAnd it will take some time for international artists maturing on a truly global basis.\nBut the fundamental strength of live entertainment and Live Nation has proven out and expect we will only continue to grow from here.\nWith that, I will let Joe take you through more details on our results.\nBefore getting into the detail on each business, a few points of context for the quarter, first, this is primarily a U.S. and UK driven quarter.\nThese markets accounted for 95% of our fans in Q3 versus 75% in Q3 of 2019.\nAnd they represented 90% of fee-bearing GTV in Q3 versus 80% in Q3 of 2019.\nSecond, our concerts activity primarily ramped up in August with 90% of our attendance for shows occurring in August and September.\nLet me now go into more detail on the divisions.\nFirst concerts, as Michael noted, pricing and onsite spending was up for both our amphitheaters and our major festivals in the U.S. and UK.\nWith almost 1200 amphitheater shows played off, these shows give us the best data set for comparing to 2019.\nSo, give you more detail on trends for these shows, and in general, the same trends also hold for our festivals.\nOn pricing, average ticket pricing at our amphitheaters was up 17% to $63.\nThere are two primary drivers to this.\nFirst, ticket pricing, including more platinum and VIP tickets for shows this year, increased average ticket pricing by $7.\nSecondly, our concert week promotion and other promotions were smaller-scale this year, which had an impact of $2 per ticket.\nThen for onsite spending, average fan spending was up 25% to $36.\nThis growth came from a combination of more orders per fan, more items per order, and higher average spend per order.\nMany of our fans shifted to buying higher-priced products, which was part of our higher spend per order.\nAnd the shift to cashless also helped as card transactions have historically been larger than cash transactions, and this has held up as we shifted to 100% cashless.\nFinally, operating costs, including labor costs were up.\nThese higher labor costs are driven by several factors, fewer shows per building, our accelerated ramp up to open the buildings this summer, new health and safety protocols and a generally tightened labor market.\nAt the same time as noted with increased average ticket price and higher onsite spending, we increased the contribution margin per fan and did so to such a level that our profitability per fan, net of operating expenses rose double digits.\nTurning now to Ticketmaster, as Michael said, Ticketmaster had a record AOI of a $172 million for the quarter, driven by its fourth highest fee-bearing GTV quarter excluding refunds, and lower cost structure from its reorganization.\nAlong with lower ramp-up labor costs as we accelerated activity faster than the return of staff.\nPrimary ticketing was driven substantially by concerts, which accounted for over 70% of fee-bearing GTV, while sports was the second largest category, and together they represented approximately 90% of all fee-bearing GTV.\nGeographically, North America accounted for 80% of fee-bearing GTV as activity remained limited internationally outside the UK.\nIn secondary ticketing, we similarly saw concerts and sports account for over 90% of fee-bearing GTV, though in this case, sports were the primary driver with the launch of new football and basketball seasons.\nAnother contributor to our growth in ticketing is the continued signing of new clients with over 14 million net new fee-bearing tickets added this year through the third quarter.\nThese new client additions have been particularly strong internationally, accounting for 2/3 of our new client tickets.\nFinally, sponsorship AOI surpassed a $100 million in the quarter for the first time in two years as it again had available ad units at scale, both on-site and online.\nLike our other businesses, it was largely U.S. and UK driven together accounting for approximately 90% of total activity.\nAnd as activity resumed, we were also able to engage new sponsors, adding eight new strategic sponsors in the quarter.\nAs we look to Q4, we see a continuation of the same trends we had in Q3.\nWith concerts, we expect North America and the UK to continue ramping toward historical activity levels.\nWhile the rest of Europe and other international markets have limited activity given the lead time to plan concerts.\nWith ticketing we expect a broader recovery as most European markets put stadium and arena tours on sale in Q4, enabling GTV levels that could approach Q4 2019 levels, despite 65 million fee-bearing tickets already being sold for 2022 events.\nAnd while Q4 is typically a seasonally slower period for sponsorship, it too should benefit from concerts and ticketing sales ramping up.\nLet us now turn to our cash and cost management.\nWe have free cash at $1.7 billion at the end of the quarter, which includes $450 million earmarked for the OCESA acquisition.\nThis was our first quarter since 2019 where our cash contribution margin was higher than our cash burn, contributing a net $166 million in free cash.\nWe also added $850 million in cash in the quarter through our $400 million drawdown of our Term A loan and $450 million equity raise for ASESA, mentioned previously.\nWe then had free cash reduced by $370 million, largely resulting from long-term deferred revenue shifting into short-term for show's next summer as we previously indicated would be happening.\nThis improved cash position was also helped by our ongoing cost and cash management program as this year, we expect to reduce costs by $900 million and cash spend by $1.5 billion relative to pre -pandemic plans and on the cash, side excluding ASESA.\nAs we prepare for 2022 plans, we remain confident that we have structurally reduced our operating costs by $200 million relative to our pre -pandemic 2020 plans.\nA few other balance sheet items.\nOur deferred revenue at the end of the quarter was $1.9 billion.\nThis is compared to $950 million at the end of Q3 of 2019, which gives us the best like for like view of the demand pipeline already in place.\nAnd then a reminder on our debt, that we continue with our liquidity covenants until we report Q4 this year, at which point we switch to a more traditional leverage test.\nGiven our current liquidity and expected Q4 and 2022 activity levels, we do not anticipate any covenant issues through next year, and expect to continue investing in growth.\n",
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"content": "through mid-october, we have already sold 22 million tickets for our shows in 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: Kurt will begin and close the call, and Melinda will speak to the financials midway through.\nWe'll then open the call to questions.\nAlthough we believe these statements to be reasonable, our actual results could differ materially.\nThe most significant risk factors that could affect our future results are described in our Annual Report on Form 10-K.\nWe encourage you to review those risk factors as well as other key information detailed in our SEC filings.\nWith that, I'll turn over the call to Kurt Darrow, La-Z-Boy's Chairman, President and Chief Executive Officer.\nFollowing yesterday's close of market, we reported our fiscal 2021 first quarter results.\nWhile still in the midst of the COVID-19 pandemic, we are pleased with how our business is progressing with strong written order trends.\nTo put the quarter in context, let me remind you of the pandemic related retail and plant closures and the subsequent ramp up timeline for La-Z-Boy.\nAs a result of the pandemic, furniture retailers including our La-Z-Boy Furniture Gallery stores were closed for the tail end of March, all of April and most of May with some still closed in June depending on local guidelines.\nRelatedly, the majority of our plants closed for four weeks and restarted in late April at reduced capacity.\nWith our Joybird's Tijuana facility restarting about a month later due to COVID-19 challenges in Mexico.\nWhen we restarted our plants, we initially worked off the pre-pandemic backlog.\nWe then had to wait for order flow as our retailers open throughout May and June and in concert with that, we increased production accordingly.\nBut because of the lag from order entry, the written sale to building and delivering the product and recognizing the delivered sale, we essentially lost the majority of the month of May in terms of delivered sales as we expected when we commented last quarter.\nWe have continued to increase our rate of production -- production weekly and are now operating at about 90% of prior-year levels.\nBut our lag time is currently running at about double our normal rate given strong demand during the quarter and the challenge of hiring additional workers.\nThe real good news is that our written order trends across the business are strong.\nFor the entire La-Z-Boy Furniture Gallery network, which accounts for about half of our wholesale business, written same-store sales increased 14.8% in the first quarter.\nAnd to provide some additional perspective on the quarter, the cadence or written same-store sales by month was a decline of 13% in May, an increases of 30% in June and 32% in July.\nSo now, it's a matter of catching up on moving higher than expected written orders through our production cycle to deliver sales revenue as we continue to increase production.\nNow it's too early to tell for certain, what's driving the strong written sales.\nWhether it's pent-up demand which will eventually tail off or sector rotation with consumer shifting discretionary spending to their homes in an environment of no travel and limits on other leisure-related activity or probably a bit of both.\nThese COVID-19 related closures and reopenings transferred to a 31% sales decline versus a year ago to $285 million for the quarter with GAAP operating income declining to $4 million and non-GAAP operating income to $9 million.\nWe are still -- we were still however able to generate $106 million in operating cash supported partially by strong customer deposits and end the quarter with a balance sheet that remains strong.\nThe remainder of my remarks will detail our non-GAAP numbers, and Melinda will cover the non-GAAP adjustments in her remarks.\nI will start with our Wholesale segment, which now includes both upholstery and casegoods.\nOn a sales decline of 30% to $224 million [Phonetic], non-GAAP operating margin was 9.4%, principally the result of the decline in production for the period and the consequent lower absorption of our fixed cost, partially offset by temporary cost reduction actions related to our COVID-19 action plan, which we announced in March.\nWritten sales for the Wholesale segment were up 2.5% for the quarter with a decline of 38% in May, more than offset by increases of 29% in both June and July, respectively.\nThroughout this unusual and unpredictable period, we are managing our marketing investments with fiscal responsibility, but at the same time, we are very mindful of the increased interest in home furnishings in the core and the power of our brand.\nIn the spring, we did a soft launch of the second wave of the Live Life Comfortably campaign featuring Kristen Bell.\nThis way, focus is on La-Z-Boy's design and customization capabilities, one of our brand pillars, and we are planning for the TV spots to be more frequent and at more frequent rotation beginning this month as we move into what is typically the stronger fall selling season.\nAdditionally, we continue to invest in virtual capabilities as we increase our focus on offering consumers an omnichannel experience and providing seamless integration between our website and our stores.\nFrom a product perspective, our modulars, sectionals and our wireless hand remote option on our power products continue to be in high demand.\nOn the manufacturing side, we continue to hire and train people to meet the unexpected demand surge while following all cohort related safety protocols.\nNow let me turn to the Retail segment.\nWritten same-store sales for the Company-owned stores increased 11% for the quarter, even with the majority of stores closed for the month of May and some and still closed in June.\nAgain for perspective on how the quarter played out by month, written same-store sales for the Company-owned stores were down 26% in May, but up 29% and 37% in June and July, respectively.\nFor the quarter, delivered sales declined 36% to $91 million and non-GAAP operating margin for the segment was a loss of 6.8% due primarily to our inability to increase our production fast enough to meet the unexpected momentum in demand.\nAs we've discussed over the last several quarters, our retail business has become a core competency for the Company and has been performing at a very high level, greatly contributing to the value of the La-Z-Boy enterprise.\nThe first quarter loss was an anomaly, given the dynamic of store closures and the impact of the written and delayed delivered sales.\nEncouragingly, on the temporary decline in traffic, we saw conversion and average ticket improvement as consumers used our website to conduct research before shopping in our stores and our store teams continue to execute at a very high level to close sales.\nAdditionally, we were pleased to see positive traffic trends in July, after declines in May and June.\nIn this environment, we are deploying new ways to engage with our store guests, enable safe and healthy shopping experiences.\nThese range from the ability to book personal shopping appointments, mask wearing by all team members and store capacity management with the queuing system depending on local condition, ordinance and needs.\nFeedback has been very positive from our store teams and customers in terms of creating a safe place to shop.\nI'll now spend a few minutes on Joybird.\nFor the quarter, Joybird sales reported in Corporate & Other declined 22% to $13.4 million.\nHowever, written sales increased 38%.\nThe deliveries expected to catch up in the later part of the second quarter, end of the third, due to the Joybird plant not fully reopening until June due to COVID-19.\nBalancing sales growth with bottom line performance, Joybird reduced its quarterly operating loss on a year-over-year and sequential basis.\nWe expect quarter 2 delivered revenue rate to be restored to more normal levels, but anticipate it will continue to lag the strong written demand due to the short-term labor constraints.\nI'll now turn things over to Melinda.\nLast year's first quarter non-GAAP results excluded a pre-tax charge of $1.5 million or $0.02 per diluted share related to the Company's supply chain optimization initiatives, which included the closure of our Redlands, California facility and a pre-tax purchase accounting charge of $1.5 million or $0.02 per diluted share.\nAdditionally, I would point out a revision to our segment reporting beginning this quarter.\nDue to similar financial structures and customer channels, we aggregated the former Upholstery segment with the former Casegoods segment to form the newly combined Wholesale segment.\nAnd now on to our results.\nMy comments from here will focus on our non-GAAP reporting unless specifically stated otherwise.\nAs noted, on a consolidated basis fiscal '21 first quarter sales declined 31% to $285 million reflecting the continued impact from the COVID-19 pandemic.\nConsolidated non-GAAP operating income was $9 million versus $26 million in last year's quarter and consolidated non-GAAP operating margin was 3.1% versus 6.3%.\nNon-GAAP earnings per share was $0.18 per diluted share in the current quarter versus $0.42 in last year's first quarter.\nConsolidated gross margin for the first quarter increased 30 basis points.\nImproved gross margin was driven primarily by targeted cost reduction actions, including the closure of our Redlands, California facility about a year ago, as well as those temporary actions associated with our COVID-19 action plan announced in March.\nGross margin also benefited from improved performance at Joybird.\nSG&A as a percent of sales increased 350 basis points reflecting the decline in sales relative to fixed costs.\nPartially offsetting the increase in SG&A expense were temporary cost reductions taken as part of our COVID-19 action plan.\nOn a GAAP basis, our effective tax rate for fiscal '21 first quarter was 19.8% versus 22% in last year's first quarter.\nOur effective tax rate varies from the 21% federal statutory rate, primarily due to state taxes.\nAbsent discrete adjustments, the effective tax rate for fiscal '21 first quarter would have been 26.1%.\nFor fiscal year '21, absent discrete items, we continue to estimate our effective tax rate on a GAAP basis, will be in the range of 25% to 26%.\nTurning to cash, we generated $106 million in cash from operating activities in the quarter, including a $61 million increase in customer deposits from written orders for the Company's retail segment and Joybird.\nWe ended the quarter with $337 million in cash, including $50 million in cash proactively drawn on the Company's credit facility to enhance liquidity and response to COVID-19 back in March, compared with $114 million in cash at the end of last year's first quarter.\nWe also held $16 million in investments to enhance returns on cash, compared with $33 million last year.\nDuring the quarter, we repaid $25 million of the original $75 million drawn against our credit line based on business performance and ongoing liquidity.\nAlso during the quarter, we invested $10 million in capital, primarily related to machinery and equipment, upgrades to our Dayton manufacturing facility and investments in our retail stores.\nWe expect capital expenditures to be in the range of $40 million to $45 million for the fiscal year, although spending will be largely dependent on economic conditions, continued business recovery and liquidity trends.\nOur spending for the year will prioritize essential maintenance projects already under way, including plant upgrades to our Upholstery manufacturing facilities, technology upgrades and improvements to several retail stores.\nAs part of our COVID-19 action plan, in an effort to preserve cash in the near term and provides for financial flexibility, we eliminated our expected June dividend and temporarily suspended opportunistic share repurchases.\nWe are pleased to announce -- we have announced that -- we are pleased to announce that yesterday, our Board of Directors elected to reinstate a regular quarterly dividend to shareholders of $0.07 per share.\nThis is 50% of the quarterly dividend amount paid prior to the pandemic, as we continue to monitor current business trends and remain vigilant with respect to the ongoing macroeconomic uncertainty.\nOver time, we will continue to evaluate our dividend level and management may also at its discretion resume share repurchases based on an assessment of business trends.\nThere are currently 4.5 million shares of purchase availability under our authorized program.\nAnd finally, before turning the call back to Kurt, let me highlight several important items for fiscal '21.\nFirst, a reminder that our expected non-GAAP adjustments will continue to include purchase accounting adjustments for acquisitions to date, which are estimated to be in the range of $0.04 to $0.05 for the full year.\nAnd we anticipate pre-tax charges of $0.01 to $0.02 per share in the second quarter related to the completion of our recent business realignment, which included the closure of the Newton assembly plant and the 10% reduction in our global workforce.\nThe total charges for these actions is coming in slightly lighter than anticipated due to lower severance benefits than originally forecast.\nAnd relative to business trends, we are pleased with the progress we've made in Q1 in written sales and restarting our manufacturing facilities.\nBut we remain cautious on future sales trends, given ongoing economic uncertainty and pandemic risks.\nFurther, we continue to aggressively manage our cost structure across the business, but our ability to return to or exceed pre-pandemic margins is largely dependent on increasing our production rate.\nAnd if demand continues at the current pace, in an odd twist, our challenge won't be sales velocity, it will be more about how much we can make during this period of time based on our ability to hire to support demand.\nAnd finally a note on tariffs.\nThe exclusion on tariffs that provided two years of tariff rebates received at the end of fiscal '20 was not renewed.\nSo we will have that expense going forward similar to most quarters in the last two years.\nAnd now back to Kurt for his concluding remarks.\nAs noted, we are pleased with our written order trends and believe there is still some pent-up demand in the marketplace, given the long period of time, retailers were closed as well as some shift in discretionary spending with more money going into the home category.\nAs Melinda noted, because we are mindful that pandemic is still is still upon us, we are cautious in our optimism on demand and our ability to flex our workforce as we move into the fall selling season.\nAs we manage the business tightly day to day, we are focused on providing great service to our customers and maintaining fiscal conservatism through this uncertain period.\nI'm confident, we will emerge a stronger company on the other side of this crisis.\nAnd I'm quite pleased with how well the Company is faring as we move through it.\nWe will continue to capitalize on the strength of our well-known and trusted brand, our vast distribution network, including the vibrant La-Z-Boy Furniture Gallery store system, our world class supply chain and our strong balance sheet to deliver long-term value to all stakeholders.\nAnd now I will turn things over to Kathy to provide instructions for getting into the queue.\nWe'll begin the question-and-answer period now.\nJess, please review the instructions for getting into the queue.\n",
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"content": "q1 non-gaap earnings per share $0.18.\nfor entire la-z-boy furniture galleries network, written same-store sales increased 14.8% for fiscal 2021 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: Kurt will begin and close the call and Melinda will speak to the financials midway through.\nWe will then open the call to questions.\nAlthough we believe these statements to be reasonable, our actual results could differ materially.\nThe most significant risk factors that could affect our future results are described in our Annual Report on Form 10-K.\nWe encourage you to review those risk factors as well as other key information detailed in our SEC filings.\nWith that, I will turn over the call to Kurt Darrow, La-Z-Boy's Chairman, President and Chief Executive Officer.\nFollowing yesterday's close of market, we reported strong operating results for our fiscal 2021 second quarter, reflecting record demand trends and strong execution across all of our businesses.\nI cannot be prouder of the team and every member has my respect and admiration.\nNow on to the results.\nDuring the quarter, we experienced strong written orders as consumers continue to allocate more discretionary dollars to their homes rather than on travel and other leisure related activities.\nThe company delivered increases in sales and operating income with a double-digit consolidated operating margin reflecting excellent performance across all companies.\nAlso contributing this quarter was Joybird, which turned profitable for the first time since acquisition fueling an increase in earnings per share.\nAdditionally, we generated $196 million in cash from operations for the year-to-date period, increased our company-owned store footprint with an acquisition, paid dividend, and ended the quarter with no borrowings outstanding on our credit line.\nAll-in-all for the quarter, these are outstanding results, particularly as our supply chain had to turn on a dime last spring to restart production after the COVID-19 related shutdown and continues to ramp-up capacity to satisfy unprecedented demand levels.\nWhile we are increasing production weekly, demand acceleration continues to outpace capacity acceleration creating a record backlog and extended lead times.\nAcross the La-Z-Boy Furniture Galleries network, written same-store sales increased 34%, demonstrating the strength of our band and its appeal to consumers during uncertain times as well as the ability of our store teams across the network to provide a safe shopping experience for consumers.\nAs I turn to a discussion of our segments, my remarks will detail our non-GAAP GAAP numbers, which we believe reflects underlying operating trends and Melinda will cover the non-GAAP adjustments.\nI'll start with our wholesale segment, which as a reminder now includes both upholstery and case goods companies as well as our international businesses.\nFor the quarter, our backlog grew to record levels, but delivered sales declined 2% to $343 million.\nThis was primarily the result of lower delivery unit volume as our ongoing efforts to significantly increase our production capacity to meet demand were offset by a temporary supply shortage of foam, which reduced sales by more than 2%.\nHowever, even with a decline in sales non-GAAP operating margin increased to 12.2%, reflecting tight cost controls with ongoing cost savings projects roughly offsetting investments in our start-up capacity ramping.\nOperating margin in the period also benefited as we pulled back on our marketing spend, given the strong demand environment and had lower expenses such as travel, cost due to COVID related restrictions and lower salary and wages due to the business realignment plan and reduction enforced announced last quarter.\nWith the surge in product demand, our challenge has been to ramp up capacity at all plants and expand our overall production capacity.\nOur current backlog for the La-Z-Boy branded business is 5 times what it was at the end of Q2 last year and we are quoting lead times of 16 weeks to 26 weeks depending on product category, which also include an estimate of the delivery time to the ultimate customer.\nOur supply team has done an excellent job to increase weekly production while identifying new opportunities, for both short and long term.\nWe have added production sales at our three US-based upholstery manufacturing facilities as well as additional weekend shifts.\nSecondly, we have temporarily reactivated a portion of our Newton, Mississippi assembly plant to service select geographics.\nWe have also added manufacturing cells in available floor space at our Cut-and-Sew Center in Mexico, allowing us to tap into a new labor pool.\nAnd finally, we signed a lease on a 200,000 square-foot facility in Mexico just south of Yuma, Arizona, in San Luis Rio Colorado.\nProduction is expected to start in December with full ramp up extending over the first half of the new calendar year.\nAs part of our longer-term strategic plan, we were looking to expand our manufacturing footprint to more efficiently service the western portion of North America and we are excited to take this first step with the new facility in Mexico, which we will be calling SLRC.\nOnce all of these operations are producing at expected capacity likely later in our fiscal year, these moves will significantly increase our capabilities and capacity to support long-term growth.\nHowever during our second quarter, the industry experience temporary supply shortages of foam due to disruption in TDI production, a key component of this product.\nAs a result we were limited in our ability to fully utilize our existing capacity for almost two weeks during the quarter.\nWe have recently learned of new issues with form supply in November, which will again temporarily limit our ability to maximize output in the third quarter.\nWhile these disruptions -- while we believe these disruptions are temporary in nature, they effect the entire industry and other industries that use form and they highlight the volatility of the global supply chain in these unusual times.\nNow let me pivot to the commercial side of the La-Z-Boy branded business.\nDuring the pandemic related shutdown, as you would imagine, we saw a significant increase in our online business.\nWhile it peaked during that time, today our [Indecipherable] e-comm business remains up some 300% versus pre-pandemic levels, concurrent with an increase in store traffic and sales.\nI would note that our e-commerce business is still a very small percentage of our overall business, we recognize it's critical to have a robust online presence in today's environment.\nWhile the core La-Z-Boy customer continues to demonstrate a preference to shop-in-store, she typically starts by spending time on our site to research product and our goal is to facilitate a seamless cross channel experience.\nFor example, if the consumer wants to come into the store for a higher level of service, wants to touch and feel the product and possibly work with a designer, but prefers to make the final purchase from the comfort of her own home, we are working to make that entire process to seamless as possible.\nWe are also making a series of ongoing enhancements to the omnichannel experience from internal process improvements to enable scale to customer facing enhancement that simplify and broaden the online experience.\nAs an example, we are working to simplify the ability to customize online, ensure all products sold in store are available on our website, enhance consumer visibility to available inventory and order progress, and drive better pricing consistency between online and in store.\nThis will be a journey and we are excited about growing with the changes in consumer behaviors in the omnichannel space.\nOn the marketing side, we continue to be very pleased with the Kristen -- with Kristen Bell as our brand ambassador.\nOne of our objectives is to increase consideration among a new generation of consumers, 35 year old to 44 year old, which we view as our opportunity customers.\nAt the same time we want to ensure our marketing campaign continues to resonate with our core 45 year old to 65 year old customers, who have more disposable income and tend to purchase furniture at higher price points.\nKristen is equally appealing to both consumer groups.\nIn particular, young -- younger consumers view her as having a great sense of style and being relatable to them.\nThis makes our marketing dollars work harder and be more efficient.\nNow turning to the product side, last month was the high point furniture market.\nWhile we did have some customers visit our showrooms both during pre-market and regular market, our merchandising and marketing teams did a fantastic job of putting together an interactive virtual market for our customers to see and learn about products and marketing initiatives, while maintaining personal safety during the pandemic.\nSectionals and power motion continue in popularity and we introduced a comprehensive new stationary leather program that allows for customization and quicker delivery times of the imported product, which was very well received.\nWe also introduced a antimicrobial fabric collection as part of our expensive iClean line.\nNow let me turn to the retail segment.\nFor the quarter, delivered sales increased 9% to $162 million and written same-store sales for the company-owned La-Z-Boy Furniture Galleries stores increased 36%, reflecting strong traffic trends and demand as well as stellar execution at store level, including an increase in conversion and average ticket driven by increased units and more design sales.\nFor the period, delivered same-store sales for the core base of 150 stores increased 6.3%.\nNon-GAAP operating margin for the segment improved to 9.4% from 5.8% in last year's comparable quarter resulting from fixed-cost leverage on a higher delivered sales volume, lower spending on marketing due to the already strong demand environment and reduced expenses including travel related spending due to COVID.\nAlso during the quarter, in September, we completed the acquisition of six Seattle-based La-Z-Boy Furniture Galleries stores, which had approximately $30 million in annual retail sales in calendar '19 and one distribution center.\nAs the company is already recording a portion of the Seattle-based store volume in its Wholesale segment, the acquisition of these six stores is expected to contribute approximately $15 million of additional sales annually to the company on a consolidated basis, based on their calendar year 2019 sales.\nFor the current second quarter, they added $3.5 million of sales to our retail volume segment.\nThe Seattle stores have historically performed above the network average and we believe they are great prospects for the company in this dynamic market.\nOver time, we plan to make investments in the operation with store remodels and potential new stores so that the business can continue to grow and expand its potential.\nI now want to spend a few minutes on Joybird, which delivered its first profitable quarter.\nSince purchasing Joybird, we have been on a journey to build and strengthen the Joybird business and integrate systems to take advantage of the synergies between Joybird and La-Z-Boy.\nOn the front end, Joybird gives us a new customer and channel and on the back end our supply chain has delivered value through our regional distribution centers, manufacturing Joybird product at our Dayton facility and combined purchase power.\nWhile these synergies took longer than anticipated, they now have come to fruition and were very evident in the results for the period.\nSales for the second quarter, which are reported in corporate and other, increased 42% to $29 million.\nFor the period Joybird improved its gross margin significantly and lowered SG&A costs, driven primarily by a lower marketing spend and other expense reductions.\nWritten sales increased 25% in the quarter, reflecting the ongoing strong demand trends that we are seeing across all of our businesses.\nWe are encouraged by Joybird's performance for the quarter and optimistic about its trajectory for accelerated growth as we move through the year.\nWe believe Joybird is on a run rate to be a $90 million to $100 million business this fiscal year and expect it will be profitable for the full year.\nMoving forward, we will continue to balance investments in top line growth, while watching bottom line performance.\nAs always, let me remind you that we present our results in both the GAAP and non-GAAP basis.\nLast year's second quarter non-GAAP results exclude a pre-tax charge of $2.8 million, or $0.04 per diluted share related to the company's supply chain optimization initiative, which included the closure of our Redlands, California facility and relocation of our Newton, Mississippi leather cut-and-sew operation, a pre-tax purchase accounting charge of $1.6 million, or $0.03 per diluted share primarily related to Joybird and pre-tax income of $1.9 million, or $0.03 per diluted share related to the 2019 termination of the company's defined benefit pension plan.\nNow on to our results.\nMy comments from here will focus on our non-GAAP reporting unless specifically stated otherwise.\nOn a consolidated basis, fiscal '21 second quarter sales increased 2.7% to $459 million, reflecting record demand across all businesses.\nConsolidated non-GAAP operating income increased to $51 million versus $34 million in last year's quarter and consolidated non-GAAP operating margin increased to 11.1% versus 7.5%.\nNon-GAAP earnings per share was $0.82 per diluted share in the current year quarter versus $0.52 in last year's second quarter.\nConsolidated gross margin for the second quarter increased 240 basis points.\nChanges in our consolidated sales mix due to growth in our retail segment and contribution from Joybird, both of which carry a higher gross margin than our wholesale businesses drove the biggest change in margin.\nAdditionally, Joybird experienced a significant improvement in gross margin primarily resulting from supply chain synergies and improved plant performance.\nSG&A as a percent of sales decreased 120 basis points, reflecting ongoing expense management, a decrease in advertising spend given strong order rates, reduced spending including travel and limited furniture market events due to COVID-19 related restrictions and a decline in salaries and wages related to our business realignment plan, including the 10% reduction in force announced in June.\nThis was partially offset by changes in our consolidated mix due to the growth in our retail segment in Joybird, both of which carry higher SG&A costs than our wholesale business, as well as an increase in selling expenses on strong written order trends.\nOn a GAAP basis, our effective tax rate for fiscal '21 second quarter was 26% versus 26.6% in last year's second quarter.\nOur effective tax rate varies from the 21% federal statutory rate, primarily due to state taxes.\nFor the full fiscal 2021, absent discrete items, we continue to estimate our effective tax rate on a GAAP basis, will be in the range of 25% to 26%.\nTurning to cash, year-to-date we generated $196 million in cash from operating activities, reflecting strong operating performance and $100 million increase in customer deposits from written orders for the company's retail segment and Joybird.\nWe ended the period with $353 million in cash, nearly triple the $120 million in cash at the end of last year's second quarter.\nIn addition, we held $27 million in investments to enhance returns on cash, compared with $33 million last year.\nDuring the quarter, we repaid the $50 million remaining balance on our credit line drawn back in March in conjunction with our COVID-19 action plan.\nWe ended the quarter with no borrowings outstanding.\nYear-to-date, we have invested $15 million in capital, primarily related to machinery and equipment, upgrades to our Dayton manufacturing facility, which have now been completed, and investments in our retail stores.\nWe expect capital expenditures to be in the range of $40 million to $45 million for fiscal 2021, although spending will be largely dependent on economic conditions, continued business recovery, and liquidity trends.\nOur spending for the year will include upgrades to upholstery manufacturing facilities and costs for the new production capacity in Mexico, technology upgrades and improvements to several retail stores.\nAlso during the quarter, given solid business trends and our strong cash position, we reinstated our 401(k) match for employees, as well as full salaries for remaining senior management, thereby reinstating all ongoing cash uses for operations that were temporarily suspended as part of our COVID-19 action plan.\nRegarding cash return to shareholders.\nYesterday, our Board declared a quarterly dividend of $0.14 per share, restoring the dividend to the full amount that was in place prior to the pandemic.\nRecall, as part of our COVID-19 action plan to preserve cash and provide for financial flexibility, we eliminated our expected June dividend and temporarily suspended opportunistic share repurchases.\nIn August, our Board of Directors elected to reinstate a regular quarterly dividend to shareholders of $0.07 per share, 50% of the quarterly dividend amount paid prior to the pandemic, paying $3.2 million to shareholders in the second quarter.\nWe are pleased to now reinstate the full dividend of $0.14 per share, which will be paid in December.\nAnd finally, going forward we will continue to monitor and assess business conditions to determine when it may be appropriate to resume share repurchases.\nThere are 4.5 million shares of purchase availability under our authorized program.\nBefore turning the call back to Kurt, let me highlight several important items for the remainder of fiscal 2021.\nFirst, a reminder that our expected non-GAAP adjustments will continue to include purchase accounting adjustments for acquisitions to date, which are estimated to be in the range of $0.09 to $0.11 per share for the full year.\nThis excludes any further adjustments to the Joybird contingent consideration liability, dependent on Joybird's ongoing business trajectory.\nOn our non-GAAP results, let me provide a bit more perspective on what we anticipate for the back half of fiscal '21.\nWe are optimistic about our business trajectory and confident we will deliver a strong second half based on the factors we can control.\nHowever, there is still extreme uncertainty with respect to COVID-19, including the risk of related shutdowns impacting our facilities and impacts of global supply chain volatility such as the recent industry wide foam issues.\nWhat we do know is we have a significant backlog and we are working hard to ramp our production, shortening delivery times as we work to service our customers with high quality products and quick delivery.\nWith the initiatives undertaken to expand output, we will continue to significantly increase production capacity throughout the back half of the fiscal year.\nFurther to cover raw material cost increases that we are experiencing now, we have announced pricing on new La-Z-Boy written orders beginning in October, which will be realized on orders delivered beginning in the fourth quarter given our significant backlog.\nConsidering all of these factors, accounting for our best current understanding of new foam availability issues and provided there are no significant shutdowns [Indecipherable] facilities related to the pandemic, we expect to deliver consolidated sales growth in the third quarter of flat to 4% above last year's record high third quarter.\nFor the fourth quarter of fiscal '21, accounting for continued growth in production capacity, announced pricing, and the effects of last year's April pandemic related shutdown in the prior year's fourth quarter base period, we anticipate fiscal '21 fourth quarter sales growth of 40% to 45% versus last year's fourth quarter.\nOn profit, we expect to continue to deliver historically high consolidated operating margins of approximately 9% to 11% for the balance of the year, providing the strong delivered sales volume is achieved.\nIncluded in these margin expectations, is the anticipation that Joybird will sustain profitable operations even as we test investment effectiveness to optimize top line growth.\nWe do expect some volatility in margins quarter-to-quarter as we manage multiple factors, including input cost increases that we are experiencing now without the benefits of pricing until late in the year.\nBeyond the current fiscal year, we have even more unknowns and a continued pandemic effects, demand trends, and supply challenges, but our business is strong and we are optimistic for the future.\nHowever, I would note that there will eventually come a time when we will have to once again invest more in marketing to drive demand, similarly to pre-pandemic times.\nWe've been a benefactor of the sector rotation that has taken place over the last several months, which play well for us.\nAlthough this has allowed us to keep our marketing spend at reduced levels, in time it will be necessary to increase it.\nThere will be other costs that will resume over time as the pandemic is brought under control as well including those for travel, furniture market and spending for other discretionary projects that were canceled or postponed due to COVID-19.\nThat said, we do anticipate being able to deliver strong margin performance over the long term as incremental investments related to bringing on new capacity are completed and we return to more stable operating pattern.\nAs you can see we are very pleased with the agility our entire organization has demonstrated as it responds to the new operating environment.\nOur supply team is pulling out all stops to drive production, our merchandising and marketing teams have pivoted to find new ways to showcase product, highlight the La-Z-Boy brand and its attributes, and target consumers in a manner that will drive growth for the long term.\nAnd our retail team is performing at a very high level, providing a great store experience for customers while keeping them safe.\nAnd all of our other operating companies including Joybird, England, Casegoods, and our international business are also adapting to the landscape and performing very well.\nWe believe the strength of the La-Z-Boy brand carries great weight in this environment as consumers tend to gravitate to brands, they know and trust during uncertain time.\nWith our vast distribution including the vibrant La-Z-Boy Furniture Galleries stores and thousands of other distribution points, our world class supply chain, successful marketing platform, focused on expanding omni channel offering, and our strong balance sheet, we believe we are extremely well positioned to continue to navigate and thrive in this environment, capture market share, and return long-term value to our shareholders.\nWe will begin the question-and-answer period now.\nJim, can you please review the instructions for getting into the queue to ask questions.\n",
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"content": "q2 non-gaap earnings per share $0.82.\nqtrly written same-store sales for entire la-z-boy furniture galleries network increased 34%.\ncompany anticipates fiscal 2021 fourth-quarter sales growth of 40% to 45% versus prior-year quarter.\nboard declared a quarterly cash dividend on co's common stock of $0.14 per share.\nexpects consolidated sales growth in q3 of flat to 4%.\noptimistic company will deliver strong results in second half of fiscal 2021.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Kurt will open and close the call and Melinda will speak to the financials midway through.\nWe'll then open the call to questions.\nAlthough we believe these statements to be reasonable, our actual results could differ materially.\nThe most significant risk factors that could affect our future results are described in our Annual Report on Form 10-K.\nWe encourage you to review those risk factors, as well as other key information detailed in our SEC filings.\nI'm very excited about the new La-Z-Boy leadership team and what they will accomplish in the future.\nBut first let's review the quarter and then I'll circle back to discussions on the transition of roles.\nFor the quarter, we experienced strong written trends across the entire La-Z-Boy enterprise as consumers continue to allocate more discretionary dollars to their homes in an environment with travel and other leisure related restrictions.\nThis continues to translate to a build in our record level backlog even as we add more capacity.\nDespite the strong written business delivered sales declined slightly versus the prior year quarter, due to greater than anticipated impacts from COVID-19, which I'll detail more in a minute.\nAnd we delivered strong consolidated non-GAAP operating margin of 9.5%, including another profitable quarter for Joybird.\nAll of this on a base of last year's third quarter, which was the strongest quarter in the company's recent history for both the sales and consolidated operating margin.\nIn addition, our strong cash generation enabled us to return more than $7 million to shareholders through dividends and share repurchases and we declared an increase in the dividend to 15% -- to $0.15 per share.\nNow I'll take them out to explain the specific COVID-19 impact to the business.\nWith strict safety protocols in place, including contact tracing, we experienced a higher than anticipated level of absenteeism in our manufacturing facilities as in volumes -- as employees quarantine, which limited our ability to increase production to plant levels.\nThe impact on sales was further exacerbated by COVID-19 absenteeism disproportionately affecting our most mature US plants were our most complicated and higher price furniture is billed.\nSo for the quarter with lower-than-expected units made particularly at our mature US facilities, there was a mix shift in production with fewer sectionals and other high-priced items manufactured, even though we have the orders for the.\nAnd because our La-Z-Boy Furniture Galleries stores tend to sell a higher proportion of custom product, sofas and sectionals with higher selling prices, our retail segment was particularly impacted by the shift in mix.\nAdditionally, we were affected by demand and COVID issues impacting shipping routes around the globe and -- an experienced delays and overseas shipments of finished product to our international and case goods business.\nAnd of component parts to our manufacturing operations during the period, which impacted all of our business.\nAs an example, we were short of supply of electronic components for our highest margin power units and this two contributed to the shift in mix.\nOur supply chain challenges affected our quarter and we'll continue to drive uncertainty in the near-term.\nThey will be remediated over time.\nOur backlog remains strong and we are scaling production as quickly as possible and working with our partners in Asia and domestically to address disruptions in supply, so that we can improve service to our customers and deliver strong financial results as we focus on the health and safety of our employees.\nNow in the midst of all these challenges written sales momentum remains very strong.\nAcross the La-Z-Boy Furniture Galleries network written same-store sales increased 6.3% in the quarter of the strongest momentum in January.\nThis is on top of last year's third quarter written same-store sales increasing 10.5%.\nAnd for some additional context, stripping out the Canadian stores that were closed at various points during the third quarter due to COVID restrictions, written same-store sales would have increased to 8.2% for the network.\nWritten same-store sales for fiscal '21 year-to-date increased 18%.\nAnd for calendar year 2020 written same-store sales with the La-Z-Boy Furniture Galleries network increased 6% and the average revenue per store increased to $4.4 million from $4.1 million in calendar '19.\nEven with some of the stores being closed for the better part of two months last year, due to the pandemic.\nThese results continue to demonstrate the strength of our brand and its appeal to consumers during these uncertain times, as well as the ability for store teams across the network to provide a safe shopping experience for the consumer.\nAs I turn to a discussion of our segments my remarks will detail our non-GAAP numbers, which we believe better reflect underlying operating trends and Melinda will cover the non-GAAP adjustments.\nI'll start with our wholesale segment and as a reminder it now includes both our upholstery and our case good companies, as well as our international business.\nDuring the quarter, our wholesale backlog grew to over $600 million, 4.5 times what it was at the end of Q3 last year, and up another 25% since the second quarter.\nHowever, delivered sales declined 4% to $351 million, reflecting the COVID-19 production and delivery challenges and a change in mix, as I detailed a moment ago.\nNon-GAAP operating margin for the wholesale segment was 10.2%, reflecting the temporary COVID impacts to our supply chain and increased cost to expand manufacturer capacity, as well as for raw materials.\nThese factors were partially offset by lower promotional activity, due to the strong demand environment.\nWith the surgeon product demand, our challenge has been to ramp up capacity at all of our plants and expand overall production capabilities, and we have put many pieces in place.\nRecall, we have added manufacturing cells and weekend in third production shift at all of our US plants.\nWe have temporarily restarted a portion of our Newton, Mississippi assembly plant to service select geographic.\nAnd we have also added sales and available floor space at our cut and sew center in Mexico.\nAnd finally, we opened a new manufacturing facility in Mexico just south of Yuma, Arizona and San Luis Rio Colorado, where production started in December with full ramp-up extending over the first half of the calendar year allowing us to tap into a new labor pool.\nAnd we are already in the process of increasing the number of cells in both Mexican-based locations.\nOur supply chain team is ramping production capacity as quickly as possible to shorten lead times, which today stands at an unprecedented five to nine months depending on the product category.\nNow let me turn to the retail segment.\nFor the quarter delivered sales decreased 1% to $166 million, reflecting the COVID-related product delays.\nHowever, written same-store sales for the company-owned stores increased 9% with the strongest momentum in January, reflecting positive trends across all sales metrics, including traffic, conversion and average ticket by increased in both three units and design sales.\nFor the period delivered same-store sales decreased 6.3%.\nNon-GAAP operating margin for the segment was 8.9% slightly down from 9.8% in last year's comparable quarter, primarily related to lower delivered sales relative to fixed cost and higher selling expenses driven by commissions paid on increased written sales, partially offset by decreased spending for the market -- for marketing given the strong demand environment and some lower travel-related spending due to COVID restrictions.\nWe continue to see our Furniture Galleries as an integral part of our omni-channel offering and are investing in robust plans for new stores, remodels, relocations and technology upgrades.\nFor fiscal '21 and 2022 each year will include more than 20 projects and they will be completed across the network with more than half of them in our company-owned retail.\nSo the broad array of styles and accessories, as well as free design services, the stores provide the consumer with our most comprehensive offering in a welcoming safe and inspiring shopping experience.\nSo it is critical that we keep the store systems up-to-date and engaging.\nFinally, I'd like to spend a few moments on Joybird, which turned in another solid and profitable quarter.\nSales for the second quarter, which are reported in corporate and other increased 30% to $29 million.\nWritten sales increased 79% in the quarter versus the prior year, reflecting ongoing strong demand trends and the strength of the brand in the online marketplace.\nJoybird again delivered profitable growth improving the gross margin and investing in marketing to drive customer acquisition.\nAnd one last note before turning over the call to Melinda, last week we announced the expansion of our Board of Directors to 10 members with the addition of Jim Hackett, he currently serves as a Special Advisor to Ford Motor Company and was President and CEO of Ford from 2017 to 2020.\nJim spent most of his career at Steelcase serving as a CEO for 20-years.\nA true visionary, Jim will undoubtedly make a significant contribution to La-Z-Boy, and we look forward to his guidance and perspective as we move into the next phase of growth.\nMelinda now over to you.\nAs always, let me remind you that we present our results on both a GAAP and non-GAAP basis.\nLast year's third quarter non-GAAP results exclude purchase accounting charges of $1.4 million pre-tax or $0.02 per diluted share.\nA charge of $6 million pre-tax or $0.10 per diluted share related to an impairment for one investment and a privately held start-up company and income of $8.7 million pre-tax or $0.14 per diluted share related to the Company's supply chain optimization initiative, which included the closure of our Redlands, California facility and relocation of our Newton, Mississippi leather cut-and-sew operation.\nNow on to our results.\nMy comments from here will focus on our non-GAAP reporting unless specifically stated otherwise.\nOn a consolidated basis fiscal '21 third quarter sales decreased 1.2% to $470 million, primarily due to temporary supply chain impacts from COVID-19.\nConsolidated non-GAAP operating income was essentially flat at $45 million versus last year's quarter and consolidated non-GAAP operating margin improved to 9.5% versus 9.4%, mainly driven by strong performance by Joybird.\nNon-GAAP earnings per share was $0.74 per diluted share in the current quarter versus $0.72 in last year's third quarter.\nConsolidated gross margin for the third quarter increased 60 basis points, changes in our consolidated sales mix, primarily driven by the growth of Joybird, which carries a higher gross margin than our wholesale businesses drove the biggest change in margin.\nAdditionally Joybird experienced a significant improvement in gross margin, primarily resulting from product pricing actions taken, an increase in average ticket and favorable product mix.\nPartially offsetting these increases were higher costs related to expanding our manufacturing capacity across the company.\nSG&A as a percent of sales increased 50 basis points, primarily reflecting the changes in our consolidated sales mix, due to growth in Joybird, which carries higher SG&A costs than our wholesale businesses.\nAnd non-operating income in the quarter was primarily due to unrealized gains on investments and contributed $0.02 per diluted share to earnings per share in the third quarter on both a GAAP and a non-GAAP basis.\nOur effective tax rate on a GAAP basis for fiscal '21 third quarter was 27.7% versus 26% in last year's third quarter.\nThe increase is due mainly to the increase in the Joybird contingent consideration liability, which is not tax deductible.\nOur effective tax rate varies from the 21% federal statutory rate, primarily due to state taxes.\nFor the full fiscal '21 year, absent discrete items, we estimate our effective tax rate on a GAAP basis to be between 26% and 27%, and on a non-GAAP basis we estimate it will be in the range of 24% to 25% after adjusting out the effects of the non-deductible Joybird contingent consideration.\nTurning to cash, year-to-date we generated $250 million in cash from operating activities, reflecting strong operating performance and a $122 million increase in customer deposits and orders for the Company's retail segment and Joybird.\nWe ended the period with $393 million in cash, more than doubled our $168 million in cash at the end of last year's third quarter.\nIn addition, we held $31 million in investments to enhance returns on cash, compared with $30 million last year.\nAs we have managed the business through COVID-19, we've been conservative with cash and in the process have strengthened our resources to capitalize on future value creating opportunities to grow out of the pandemic.\nYear-to-date, we have invested $27 million in capital, primarily related to investments in our retail stores, new production capacity in Mexico, machinery and equipment and upgrades to our Dayton, Tennessee manufacturing facility, which have now been completed.\nAs we make investments in the business to strengthen the company for the future, we expect capital expenditures in the range of $35 million to $40 million for the full fiscal year, which will include investments in new manufacturing capacity in Mexico, technology upgrades, improvements to retail store facilities and technology and upgrades to our Neosho, Missouri manufacturing facility.\nRegarding cash return to shareholders fiscal year-to-date, we paid $9.7 million in dividends to shareholders and spent approximately $1 million purchasing 22,000 shares of stock in the open market, since reinstating our program in December under our existing authorized share repurchase program, leaving 4.5 million shares of purchase availability in the program.\nAnd yesterday, our Board of Directors increased the quarterly dividend to $0.15 per share, demonstrating its confidence in the strength of our business.\nBefore turning the call back to Kurt, let me highlight several important items for the upcoming fourth quarter.\nFirst, I remind you that our effective non-GAAP adjustments for the fourth quarter will include purchase accounting and related tax adjustments for acquisitions to-date, which are expected to be a $0.02 per share benefit in the fourth quarter.\nThis excludes any further adjustments to the Joybird contingent consideration liability, which is dependent on estimates of Joybird's ongoing business trajectory.\nSecond, I remind you that last year's fourth quarter included a one-time $16 million benefit in cost of sales for the rebate of previously paid tariffs, which was included in both our GAAP and non-GAAP results and which was mostly offset by a bad debt expense of $13.5 million, due to the Art Van Furniture bankruptcy and a provision for potential credit losses in the COVID-19 environment also included in both our GAAP and non-GAAP results.\nOur non-GAAP results for last year's fourth quarter excluded a non-cash, non-tax deductible Joybird goodwill impairment charge of $27 million, mostly related to the future financial projections at the beginning of the pandemic, and a $6 million pre-tax benefit from purchase accounting, primarily related to the reversal of the Joybird contingent consideration liability by its full carrying value also based on financial projections at that time.\nAnd now looking at our ongoing business.\nLet me update the perspective previously provided for the fiscal '21 fourth quarter.\nBut we think it important to offer it in the near-term given the unusual business trends, driven by the pandemic.\nWe have a significant order backlog that will have a long tail in terms of production and deliveries.\nWe are expanding output, and we will continue to increase production capacity.\nWe are optimistic about our business trajectory and confident we will deliver strong results in the fourth quarter and beyond.\nWith respect to raw materials, we took pricing on written orders beginning in October to cover cost increases given slower progress to work through our backlog in Q3, we will experience less of that benefit in Q4 than originally expected.\nMeanwhile with cost for raw materials continuing to escalate, as well as those for freight, we continue to evaluate the need for further pricing actions.\nAlso, as we saw in Q3, we are still experiencing extreme uncertainty with respect to COVID-19, including related shutdowns and absenteeism affecting our plants, hiring challenges, impacts of global supply chain volatility impacting availability and timing of component parts and finished good shipments and most recently weather challenges.\nConsidering all of these factors, we now expect fiscal '21 fourth quarter consolidated sales growth of 34% to 39% versus the prior year fourth quarter, which included the month long pandemic shutdown.\nWe expect non-GAAP consolidated operating margin at the lower end of the 9% to 11% range.\nIncluded in these margin expectations is the anticipation that Joybird will sustain profitable operations, even as we test investment effect in this to optimize topline growth.\nAnd looking to next fiscal year.\nWith our existing backlog of written orders and the capacity increases we have under way, we will not experience our usual seasonality in Q1 and Q2.\nAnd instead, we expect to continue to make moderate sequential improvement in wholesale capacity from Q4 throughout the first half of next fiscal.\nFurther as we increase efficiencies, we will focus on reinvesting a portion of returns back into our business to strengthen our capabilities for longer-term results beyond the pandemic.\nAnd of course, we expect the impacts of COVID and the global supply chain disruptions to continue to cause uncertainty and some temporary volatility as we move forward.\nAnd now back to Kurt.\nWe feel very positive about our business for the long-term.\nWe have always had one of the strongest brands in the industry and we believe we have further strengthened this over the past year allowing us to build market share and a more solid foundation from which to grow.\nAt the same time we have build a sizable cash position, which provides us the mean and flexibility to invest in opportunities that will drive long-term growth and return for all of our stakeholders.\nI have made the decision to step down as President and CEO of La-Z-Boy after 42-years associated with this great company and I will remain Chairman of the Board.\nThis decision was not taken lightly and has been in the works for some time.\nI believe a thoughtful and dedicated leader should be responsible along with the Board of Directors for a well planned and comprehensive leadership transition.\nso the company may continue to move forward with this view of bumps in the road as possible.\nI believe we have accomplished that.\nThese types of things have a timeline of their own and for La-Z-Boy, the timing is right.\nWe are rounding the corner on the pandemic, all the company's business units are growing and very profitable, we have a fortress balance sheet, our backlog is at an all-time high and our stock price is just about at an all time high as well.\nFor some perspective in March of 2009, our market cap was around $30 million and now is approaching $2 billion.\nBut most importantly, we have the right leader and Melinda Whittington, who has earned the respect of our entire organization and a seasoned leadership team that has been battle tested and a successfully dealt with everything that has been thrown out them.\nAnd now it is my distinct pleasure to introduce the new President and CEO of La-Z-Boy, Melinda Whittington.\nI am honored to have the opportunity to lead this amazing company through the next phase of our journey.\nAs Kurt said, we have a great team and a bright future ahead, as we leverage our strong foundation and build our next chapter.\nI'm also thrilled today to introduce our new CFO Bob Lucian, who is joining us for today's call.\nAnd while we still have several months of transition ahead of us and I know I can count on.\nI wish him the very best in his retirement.\nWe'll begin the question-and-answer period now.\nHolly, please review the instructions for getting into the queue to ask questions.\n",
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"content": "compname reports q3 non-gaap earnings per share $0.74.\nq3 non-gaap earnings per share $0.74.\nsees q4 sales up 34 to 39 percent.\nla-z-boy - for entire la-z-boy furniture galleries network, written same-store sales increased 6.3% for fiscal 2021 q3 compared with fiscal 2020 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: Kurt will begin and close the call, and Melinda will speak to the financials midway through.\nWe'll then open the call to questions.\nAlthough we believe these statements to be reasonable, our actual results could differ materially.\nThe most significant risk factors that could affect our future results are described in our annual report on Form 10-K.\nWe encourage you to review those risk factors as well as other key information detailed in our SEC filings.\nFollowing yesterday's close of market, we reported our fiscal 2020 fourth quarter and full year results.\nFiscal '20 was indeed a tale of two cities.\nOur performance through the first ten months of the year was one of the best in our Company's history, with strong retail results, great product introductions and supply chain excellence, all translating into solid sales and earnings growth.\nHowever, all of that changed in March when the COVID-19 pandemic and related retail closure forced us to cease production, close our own stores, and wait for the economy to reopen.\nNow, given our philosophy of fiscal conservatism, we entered the crisis with a strong balance sheet, which positioned us to successfully move through this uncertain period.\nWith the health, safety and well-being of our employees, customers and communities our top priority, we responded quickly and rolled out an action plan on March 29th, that included a series of elements essential to ensure La-Z-Boy not only weathers the unprecedented storm, but emerges with strength.\nIn addition to temporary plant and store closes, our COVID-19 action plan included a temporary furloughing 70% of our workforce, eliminating all non-essential operating expenses, significantly reducing capital expenditures, suspending the June dividend and share repurchase program, and temporarily reducing pay by 50% for senior management and 25% for all other salaried employees, with our Board of Directors foregoing the cash portion of their compensation.\nWe also proactively drew down $75 million on our credit facility to ensure liquidity through this period.\nAs we continue to analyze and prepare for success in the new economic landscape earlier this month, we took some additional actions to strengthen and align La-Z-Boy to the new external environment.\nWhile we were pleased to have brought back some 6,000 furloughed workers, we made the decision to permanently close our Newton, Mississippi La-Z-Boy branded manufacturing facility and reduce our global workforce by approximately 10%.\nAll of these actions impacted our various stakeholders and everyone throughout the La-Z-Boy organization was affected in some way.\nTo level set where we are today, we started calendar 2020 with 9,800 employees, and during the worst of the pandemic, temporarily furloughed about 6,800.\nIn the end about 10% became permanent reductions.\nWe deeply regret the impact to those employees, but our decisions are in the long-term best interest of the Company.\nHowever, as we now move forward, our manufacturing facilities and Company-owned stores are open.\nThe vast majority of our workforce will be back to work by the beginning of July and our employees are back to full pay without -- with the exception of the executive officers and Board members.\nOn the manufacturing side, for the La-Z-Boy branded business, we have been ramping up production weekly.\nWhen we restarted our plans from a complete shutdown, we ramped up to about 50% in May versus May of 2019.\nAnd as we head into July, we expect to be operating at 80% of year ago volumes.\nI'm so proud of how our team rapidly geared up once we restarted production to meet the demand we are experiencing.\nWith no notice, we announced difficult furloughs for a broad population.\nAnd when we restarted operations and brought people back, they returned with enthusiasm and hit the ground running, without missing a beat.\nWe have an amazing workforce that has my admiration.\nI'd also like to say how proud I am of the work we did throughout the pandemic to provide support to many organizations including manufacturing and donating hundreds of thousands of masks for health-care workers and tens and thousands for our suppliers.\nThey certainly are our true heroes.\nBalancing the two very different chapters of the year, the Company turned in solid financial performance.\nWe closed fiscal 2020 with $1.7 billion in sales, generated $164 million in cash from operations and returned $68 million to shareholders through dividends and share repurchases.\nNow turning to the results of the fourth quarter.\nAs noted earlier, the Company performed very well through February.\nHowever, the shutdown of North America [Technical Issues] COVID-19 has a significant impact on our results for the fourth quarter, with many retailers across the country closed for the last four weeks of the period and for even longer during the quarter as well as our manufacturing operations closed for the last four weeks of our year.\nTo provide some perspective, with respect to one component of our distribution, for the entire La-Z-Boy Furniture Gallery network, written same-store sales increased 10.5% in the third quarter and increased 20% in the month of February, only to drop 44% in March, and 90% in April, in concert with the pandemic.\nAs a result, for the quarter, we experienced a 19% decline in consolidated Company sales to $367 million and the GAAP operating income for the period was $13 million and non-GAAP operating income was $34 million.\nEven with this dramatic impact, for the quarter, we were still able to generate $44 million in cash and returned $14 million to shareholders through dividends paid and share purchases made prior to the shutdown.\nLooking at our business by segment, we will start with retail, which has become a core competency for the organization, and is greatly contributing to the value of the La-Z-Boy enterprise.\nThroughout the year, prior to COVID, the team executed at a very high level with increased conversion, and design sales with improved engagement with our consumers.\nFor the quarter, on an 8% sales decline to $140 million, the segment posted a double-digit operating margin driven primarily by prior period written sales delivered during the quarter and lower operating expenses related to the Company's COVID-19 action plan.\nLet me give you some more context.\nFor the first three quarters of fiscal 2020, written sales for our Company-owned stores were up 8.1%.\nFor that same period, delivered same-store sales were up 3.6% with both metrics, written and delivered, driven by improved traffic trends, conversion and strong execution at the store level.\nAfter an extremely strong February start, which delivered same-store sales for the Company-owned stores with -- delivered same-store sales for the Company-owned stores, increasing 15%, they were only up 2% in March and declined 52% in April, culminating in a fourth quarter delivered same-store sales decrease of 10%.\nAs the majority of the stores were closed in the last four weeks of the quarter, as state and local restrictions limited our ability to deliver product.\nHowever, many are working on reduced schedule in terms of hours open, and number of employees depending on traffic.\nWe have implemented a series of health and safety procedures to keep our employees and consumers safe.\nIt is essential for our customers to feel comfortable in our store environment, and we are also offering private shopping appointments outside of regular store hours if they prefer to shop that way.\nAs stores reopen, we manage our spend on marketing and overhead in more short-term iterations remaining very nimble as we anticipate what would happen each week.\nIn the meantime, our teams are rapidly adapting to improve e-commerce sales through the shutdown and executed a virtual design program.\nNow for the broader store network, includes both Company-owned and dealer-owned stores, written same-store sales for the 354 La-Z-Boy Furniture Gallery stores in North America decreased 35% in the fourth quarter.\nAs we noted, even with a 20% increase for the month of February, it was hard to overcome the effect of store closures throughout the period with many stores closed for a part of March and the majority of stores closed in April as per local guidelines, driving written sales, same-store sales down in March and April 44% and 90% respectively.\nThe challenging fourth quarter impacted the full '20 year with written same-store sales down 3.6% even after a 6.4% increase for the first three quarters of the year.\nThe La-Z-Boy Furniture Gallery store system is the cornerstone of our distribution, and we along with our dealer base are committed to investing in the stores to keep them updated and appealing to the consumer.\nWe ended the year with 354 stores including one net new and 166 in the new concept design.\nPresuming business trends continue to improve, we anticipate adding four net new stores over the course of fiscal 2021 bringing our total store count to 358.\nNow, onto our wholesale business.\nIn the upholstery segment on sales -- on a sales decline of 22% to $253 million, non-GAAP operating margin increased to 11.8%.\nMargins benefited from a one-time $16 million rebate of previously paid tariffs and favorable commodity costs, mostly offset by higher bad debt expense due to the Art Van furniture bankruptcy and the provision for potential credit losses in the COVID-19 environment in SG&A.\nAlso, our SG&A dollar spent for the period were lower due to COVID-19 action plan, but higher as a percentage of sales due to decline in volume related to the pandemic.\nThroughout this period we have right-sized our marketing investment to balance fiscal responsibility with regaining sales volume in what appears to be increased interest in living room furniture as consumers spend more time at home and shift discretionary dollars to furniture.\nDuring uncertain and challenging times, consumers tend to return to brands they know and trust, and we are building on that momentum -- on the momentum of our Live Life Comfortably campaign featuring brand ambassador Kristen Bell who continues to be a highly effective spokesperson for us.\nBefore turning to Casegoods, I'd like to take a moment and talk about la-z-boy.com.\nAs discussed in the past, our core consumer has consistently demonstrated a preference to shop-in-store.\nWithout that ability during the pandemic, we did see an uptick in traffic and an increase in sale on www.\nla-z-boy.com and are happy to provide consumers this option as part of our omni channel offering.\nDuring the year, we strengthened our digital presence and consumer experience, introducing a number of innovations that further simplify browsing, researching and purchasing, including various selling tools that allow consumers to view products in their own home virtually.\nSuch innovations facilitate easier virtual engagement and were particularly helpful while all the stores were closed.\nGoing to our Casegoods segment, with a 20% decline in sales, our non-GAAP operating margin decreased to 1.9% primarily reflecting the impact of COVID-19, and related temporary manufacturing facility and retail closures and an increase in bad debt expense given the current economic environment.\nAlthough the segment faced a number of headwinds throughout fiscal 2020, we are better positioned now with more occasional tables sourced from countries other than China, freight rates starting to ease, and a series of new product introductions that have been well received.\nHowever, we do expect some disruption to continue in the import, supply chain over the next several months as suppliers come back online following the COVID-19 shutdowns in Asia.\nI'll now spend a few moments on Joybird.\nFor the quarter, Joybird's sales reported in Corporate and Other declined 30% to $15.4 million as the business posted a larger operating loss than the prior year period.\nOperating performance impacted in the quarter by the temporary closure of the Joybird manufacturing facility, and our inability to deliver product to consumers due to the state and local restrictions related to the pandemic.\nOn a more positive note, Joybird's written sales for the quarter were very strong and a higher order rate for the first -- for first time visitors to the site.\nWith their Mexico-based manufacturing facility reopening in phases throughout May, and working its way up to pre-risk production levels in June, Joybird will have a longer tail for deliveries versus the La-Z-Boy branded business, and expects to deliver these written orders at the end of the first quarter and some into the second quarter.\nWe are continuing to make improvements across the Joybird business model with the objective to balance investments and growth, with bottom line performance and expect to Joybird to deliver value to the La-Z-Boy enterprise over the long term.\nAs always, let me remind you that we present our results in both the GAAP and non-GAAP basis.\nIn addition to these items, also excluded from our non-GAAP reporting for the full year and discussed in previous quarters are, pre-tax charges from purchase accounting adjustments from the first three quarters of the year, a non-cash impairment charge for an investment in a privately held start-up Company, a net benefit related to our supply chain optimization initiative, and the benefit related to the prior year termination of the Company's defined benefit pension plan.\nFiscal 2019 non-GAAP results for the fourth -- full year and fourth quarter, exclude a charge for the termination of the Company's defined benefit pension plan, and purchase accounting charges.\nMy comments from here will focus on our non-GAAP reporting.\nOn a consolidated basis, fourth quarter sales declined 19% to $367 million in fiscal '20, Q4 versus the prior-year period, reflecting two months of dramatic, temporary impacts from the COVID pandemic.\nConsolidated non-GAAP operating income was $34 million versus $39 million in last year's quarter and consolidated non-GAAP operating margin was 9.3% versus 8.6% reflecting increases in the upholstery and retail segments, offset by a decline in Casegoods margins.\nResults for the quarter include a 440 basis point benefit related to a rebate of previously paid Chinese tariffs, almost entirely offset by higher bad debt expense.\nFiscal 2019 fourth quarter results include a 40 basis point charge related to changes in employee benefit policies.\nNon-GAAP earnings per share was $0.49 per diluted share in the current quarter versus $0.64 in last year's fourth quarter.\nMoving on to full year results for fiscal 2020, sales decreased 2.4% to $1.7 billion, again reflecting strong performance through February and two months of impact from COVID-19.\nConsolidated non-GAAP operating income increased to $139 million from $137 million in fiscal 2019, and consolidated non-GAAP operating margin was 8.2% versus 7.8% in the prior year, with results reflecting improvement in our upholstery and retail segments.\nDiluted non-GAAP earnings per share for fiscal 2020 were $2.16 versus $2.14 in fiscal 2019.\nConsolidated gross margin for the full fiscal year increased 230 basis points.\nImproved gross margin was driven by rebates on previously paid duties which provided a 100 basis point increase to gross margin and changes on our consolidated business mix due to growth in our retail segment and the contribution from Joybird, both of which carry a higher gross margin than our wholesale businesses, which accounted for 90 basis point increase.\nWe also benefited from lower raw material costs in the upholstery segment with most of that offset by the temporary shutdown in our manufacturing facilities in Q4 due to COVID-19, and inflationary pressures in the broader supply chain.\nMoving on to SG&A for the full fiscal, on lower sales volume for the year, SG&A as a percent of sales increased 190 basis points.\nChanges in our consolidated mix with Retail and Joybird composing a higher percentage of our business increased SG&A as a percent of sales by 130 basis points for the year.\nBad debt expense drove an 80 basis point increase on the year, primarily due to the Art Van bankruptcy as well as a provision for credit losses given the current economic environment.\nIn fiscal 2019, we recognized a one-time $3.8 million benefit due to changes in employee vacation policies, the absence of which resulted in a comparative 20 basis point increase in SG&A as a percent of sales for fiscal 2020.\nPartially offsetting these increases was a 90 basis point decrease in SG&A as a percent of sales related to lower incentive compensation costs as we fell short of our targets due to the impact of COVID-19.\nOn a GAAP basis, our effective tax rate for fiscal 2020 was 31.4% versus 26.4% last year.\nImpacting this year's effective tax rate was a net tax expense of $4 million primarily from the tax effect of the non-deductible goodwill impairment charge related to Joybird, and tax expense of $1.3 million from deferred tax attributable to undistributed foreign earnings no longer permanently reinvested.\nAbsent discrete adjustments, the effective tax rate in fiscal 2020 would have been 26.4%.\nOur effective tax rate varies from the 21% federal statutory rate, primarily due to state taxes and for fiscal '21 absent discrete items, we continue to estimate our effective tax rate on a GAAP basis, will be in the range of 25% to 26%.\nTurning to cash, we generated $164 million in cash from operating activities in fiscal 2020.\nWe ended the year with $264 million in cash, cash equivalents and restricted cash, including $75 million proactively drawn on the Company's credit facility to enhance liquidity in response to COVID-19, as well as $29 million in investments to enhance returns on cash.\nThis compares with the $132 million in cash, cash equivalents and restricted cash and $31 million in investments to enhance returns on cash at the end of fiscal 2019.\nDuring the year, we invested $46 million in capital, primarily related to machinery and equipment upgrades to our Dayton manufacturing facility, and investments in our retail stores.\nOver the fiscal year, we also paid $25 million in dividends and spent $43 million purchasing 1.4 million shares of stock in the open market under our existing authorized share repurchase program, which leaves 4.5 million shares in purchase availability under that authorization.\nOur longer-term capital allocation priorities remain to invest in the business to drive growth, and then provide returns to shareholders with our dividends and discretionary share buyback.\nHowever, as part of our COVID-19 action plan, in an effort to preserve cash in the near term and provide for a financial flexibility, we eliminated our expected June dividend and temporarily suspended our share buyback program.\nAs the Company's performance continues to recover, we will look to return value to our shareholders through dividends and share buybacks, once we have evaluated the business recovery for a meaningful period.\nWe expect capital expenditures for fiscal '21 to be in the range of $25 million to $40 million, largely dependent on economic conditions and business recovery.\nOur spending for the year will prioritize essential maintenance, projects already under way including plant upgrades to our upholstery manufacturing and distribution facilities, technology upgrades, improvements to several retail stores, and other projects as business conditions permit.\nAnd we anticipate one time pre-tax charges of $5 million to $7 million or $0.08 per share to $0.11 per share related to our recently announced closure of the Newton assembly plant and the 10% reduction of our global workforce.\nThe majority of which will be realized in the first quarter.\nMoving forward, savings realized from these closures will be reinvested to drive business recovery.\nAnd finally, I'd like to spend a moment to address the ongoing impact of COVID-19 on our business.\nIndeed, there was a dramatic hit to our fiscal 2020 fourth quarter due to plant and retail closures, which we have addressed in detail.\nBut importantly, there is a continued tail to the retail and manufacturing shutdowns, which will impact, at least, our first quarter, which is already our seasonally slowest period for sales and earnings.\nAs all of the written sales we didn't have in March and April and even early May during the shutdown, resulting no deliveries and no related revenue recognition for May and June.\nAnd then, a dip in cash until those receivables are collected even later in the summer.\nAlthough we incur expenses to reopen and ramp up.\nEven with the positive recovery trends, results for at least Q1 will be extremely challenged.\nThe good news is that stores are open and plants are up and running, while we're cautiously optimistic, we will need to remain as agile as possible to manage through this near-term period.\nMore broadly speaking, I would note that no trend should be drawn from our fiscal 2020 fourth quarter margin performance, given the many dramatic and unique impacts of COVID-19 shutdown.\nWhile our plants are ramping up production on a weekly basis, we still have not reached prior-year volume levels or even critical sales levels to support our historically strong margins.\nOnly time will tell if what we are seeing in terms of volume increases is solely pent-up demand, the impact of federal stimulus money or longer term sector rotation with discretionary spending moving from travel and leisure to home and furnishing.\nAll may be playing a role in the bounce back of the home furnishings industry that we are experiencing.\nWhether that demand is sustainable and what the new normal will be are still questions.\nThus, we continue to balance meeting customer demand for our product with financial prudence.\nWhile most retailers now are open, thus far, we are pleased with consumer traction.\nHowever as Melinda alluded [Phonetic] to, there is some uncertainty with respect to future trends and it will be a while before we have a better idea of the continuing, ongoing run rate.\nThat said, with solid positioning in the marketplace through our well-known and trusted brand, our vast distribution network, including the vibrant La-Z-Boy Furniture Gallery stores system, world class supply chain and a strong balance sheet, I have every confidence we will emerge with strength and have the potential for additional market share gains, as demand environment improves.\nIn my more than 40 years at La-Z-Boy, I have seen the Company manage its way through many crisis, but never seen an event the magnitude of COVID-19 where we were in a no revenue environment for an extended period of time.\nNow that made our path forward complex and even unpredictable.\nWe are now focused on ramping up the business, and importantly, we will take as much from this experience as possible to further strengthen La-Z-Boy and make it more competitive.\nAnd I am confident we will emerge as a stronger, wiser and more resilient Company and will provide long-term value and returns to our many stakeholders.\nSteve led the Casegoods Group through a comprehensive transition from a domestic manufacturer to an import model as the wood industry primarily moved offshore.\nHe was a gentleman's gentleman, was highly respected within the industry, a man of great integrity and a friend of all.\nHe truly cared about every single employee at every level at Kincaid, and was a great leader.\nHe will be sorely missed by many of us.\nWe will begin the question-and-answer period now.\nKristie, please read the instructions for getting into the queue to ask questions.\n",
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"content": "q4 non-gaap earnings per share $0.49.\nla-z-boy - have called back some 6,000 furloughed workers, who have returned or will return to work by july 1.\nla-z-boy - permanently closed newton, mississippi manufacturing facility, reduced global workforce by about 10%.\nla-z-boy - written same-store sales for la-z-boy furniture galleries network decreased 35% 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: Melinda will open and close the call and Bob will speak to the financials midway through.\nWe'll then open the call to questions.\nAlthough we believe these statements to be reasonable, our actual results could differ materially.\nThe most significant risk factors that could affect our future results are described in our annual report on Form 10-K.\nWe encourage you to review those risk factors as well as other key information detailed in our SEC filings.\nWith that, I'll now turn over the call to Melinda Whittington, La-Z-Boy's President and CEO.\nWhat a difference a year makes.\nWhen we started the fiscal year, the world was still in the early stages of COVID-19 and things seemed pretty dire.\nWe had just restarted our plants after a month-long shutdown, and most retailers were still closed or just beginning to reopen.\nThen as the year progressed, we experienced unprecedented demand for our products.\nWe strengthened our business by significantly expanding production capacity in response to this demand, enhanced our retail platform, acquired the Seattle-based La-Z-Boy Furniture Galleries and turned Joybird profitable, all while navigating a multitude of challenges, including multiple supply chain disruptions, raw material price increases and macroeconomic uncertainties.\nThrough it all, our highest priority was and continues to be the health and safety of our employees and our consumers.\nThe global pandemic tested everyone in just about every way.\nAnd I am so proud of the La-Z-Boy team for it's unbelievable perseverance, dedication and resiliency; qualities that enabled us to deliver excellent results even in the midst of these historic challenges.\nAnd I want to take this opportunity to express my sincere gratitude to everyone of our employees and business partners, all of whom contributed to our success.\nTurning to our financial results.\nFull fiscal year consolidated sales grew to $1.7 billion and consolidated GAAP operating margin increased to 7.9%.\nNon-GAAP operating margin reached 9%, the highest margin level achieved in recent history.\nOver the year, we generated $310 million in cash from operations and returned $61 million to shareholders through share repurchases and dividends; truly outstanding results, particularly considering the challenges of the fiscal year.\nSpecifically in the fourth quarter, consumer demand across all business units continued to be robust, reflecting the ongoing allocation of consumers' discretionary dollars to the home, the strength of our brands in the marketplace where we are disproportionately winning and excellent execution from our retail and sales teams.\nFor the quarter, record sales of $519 million led to all-time record profits, driven by increased production capacity, excellent performance by our company-owned La-Z-Boy Furniture Galleries and continued profit growth at Joybird.\nAdditionally, our cash generation enabled us to return $50 million to shareholders through dividends and share repurchases in the quarter.\nAnd fiscal '22 is off to a great start with continued strong written order rates and a record backlog setting us up well for a strong year of shipments ahead.\nWritten sales momentum continued to be very strong in the fourth quarter.\nAcross the La-Z-Boy Furniture Galleries network, written same-store sales doubled, increasing 100% in the quarter versus a year ago.\nAnd to provide some additional context, written same-store sales for the quarter increased 29% compared with our pre-COVID fiscal 2019 fourth quarter for a compound annual growth rate of about 14% over the two years.\nAs I turn to the discussion of our segments, my remarks will detail our non-GAAP numbers, which we believe better reflect underlying operating trends, and Bob will cover the non-GAAP adjustments.\nStarting with our Wholesale segment, which includes our upholstery and casegoods companies as well as our international business, delivered sales for the quarter grew 40% to $384 million compared with prior year quarter, which was impacted by COVID-related shutdowns.\nSequentially, sales increased 9.5% from fiscal '21's third quarter as we continued to increase production capacity.\nNon-GAAP operating margin for the Wholesale segment was a healthy 10.2%.\nDisciplined cost management on advertising helped offset higher raw material and freight costs as well as expenses to expand production capacity to service record backlog.\nAlso, last year's fourth quarter benefited from a one-time $16 million rebate of previously paid tariffs, partially offset by higher bad debt expense.\nWe continued to expand capacity to service demand.\nHowever, continued strong written growth is still outpacing production increases, translating to an expansion of backlog and lead times for the La-Z-Boy-branded business.\nFor perspective, today, our backlog is about 8 times higher than in pre-COVID and 16 times higher than at the end of last fiscal year.\nOur supply chain team has demonstrated great agility over the past year and has been relentless in taking actions to increase capacity, including adding manufacturing cells, second shift, overtime and weekend production at our U.S. plants; temporarily reactivating a portion of our Newton, Mississippi assembly plant; adding manufacturing cells in available for space at our cut-and-sew center in Mexico; opening a new manufacturing facility in Mexico in San Luis Rio, Colorado or SLRC where production started in December and continues to increase as new cells are added and new employees are trained; and recently opening an additional fabric-sewing site in Paras, Mexico with plans to increase capacity over time.\nOur supply chain team has done excellent work establishing new capacity.\nAnd given continued strong product demand, we are increasing the number of cells at these new locations to shorten lead times, which today range between four to nine months for the La-Z-Boy-branded business, depending on the product category versus our normal four to six weeks.\nBeyond capacity challenges, we continue to face raw material price increases due to supply and demand trends and supply chain disruptions.\nInput materials such as foam, steel and plywood are up 2 to 4 times their pre-pandemic prices.\nWhile we have taken several rounds of pricing in new written -- on new written orders, as cost have continued to escalate, our significant backlog results in taking several quarters for pricing actions to flow through to delivered sales and our financials.\nAnd as we continue to monitor costs, and we'll take further actions when and if necessary, we've taken additional pricing just last week.\nOur procurement team is also actively managing product availability challenges, including shipping container issues that have delayed deliveries of finished products to our international and casegood businesses and component part availability, such as electrical components for our higher margin power units.\nDespite continuing supply chain disruptions, the team has done a great job keeping us in stock for major raw material inputs, including wood, foam and steel.\nWhile we actively focus on increasing production and managing supply chain challenges, our demand remains very strong.\nThe La-Z-Boy brand continues to meet the test of time with enduring attributes of comfort and quality.\nOver the past year, all product categories have performed well with sectionals and modular sofas continuing to be very strong.\nAt the most recent High Point Furniture Market, we announced that La-Z-Boy has teamed up with Tempur Sealy to create a proprietary material unlike ordinary memory foam called TEMPUR-Response that is specifically designed for our seating and sleeper mattresses.\nWith two iconic brands banding together, we have seen great interest from our customers.\nAnd on the marketing side, with Kristen Bell as our brand ambassador, we are seeing increased consideration for La-Z-Boy among younger consumers, underscoring her broad appeal to both our core and target consumer.\nNow let me turn to the Retail segment, which produced excellent results.\nFor the quarter, delivered sales increased 39% to a record $194 million and delivered same-store sales increased 35% versus year ago, on strong execution by the team.\nNon-GAAP operating margin increased to 12.2% from 10.8% in last year's comparable quarter, primarily driven by fixed cost leverage on higher delivered sales volume.\nLast year's fourth quarter was marked by a reduction in sales due to COVID-related store closures in the last four weeks of the quarter.\nWritten same-store sales for the company-owned La-Z-Boy Furniture Galleries stores more than doubled, increasing 114% in the quarter, reflecting positive trends across all sales metrics, including traffic, conversion and average ticket.\nFor perspective, against the fiscal 2019 fourth quarter when we were in a pre-COVID environment, written same-store sales increased 40%.\nThat's about an 18% compound average growth rate over the two years, which again demonstrates the strength of our business and brand in the marketplace and that consumers feel safe shopping in our stores.\nOur primary focus is to service and delight consumers at all touch points, providing them with a great end-to-end experience every time.\nAs part of this, we are committed to enhancing our omnichannel presence to offer an easy and comprehensive experience to meet consumers wherever they want to shop, whether online, in store or a combination of both.\nAs we invest in technology enhancements to make the online experience more robust and engaging, we will continue to invest in the La-Z-Boy Furniture Galleries store system to provide consumers with modern, bright and inspiring stores.\nFor fiscal '22, approximately 30 projects, including new stores, remodels and relocations, will be completed across the network, with two-thirds of the projects within our company-owned portfolio.\nAlso, in addition to the Seattle acquisition that closed last September, this week, we signed an agreement to acquire three stores in the vibrant Long Island, New York market.\nI'll now spend a few minutes on Joybird, which turned in a great quarter.\nDelivered sales for the period, which are reported in Corporate and Other, more than doubled, increasing 144% to $38 million, reflecting strong end-to-end execution.\nWritten sales increased 125% in the quarter versus the prior year period, reflecting ongoing strong order trends and the strength of the brand in the online marketplace.\nJoybird again delivered profitable growth and improved its gross margin.\nOur Joybird team continues to do an excellent job in terms of marketing effectiveness.\nWe've increased our marketing spend to drive consumer acquisition, bringing the right consumer to the site and providing an excellent online experience leading to improved conversion.\nAs a reminder, we present our results on both GAAP and non-GAAP basis.\nFor the full fiscal 2021 year, non-GAAP results exclude purchase accounting charges totaling $17 million pre-tax or $0.33 per diluted share, primarily due to a write-up for the Joybird contingent consideration liability based on forecast performance.\nTwo, a change of $3.8 million pre-tax or $0.07 per diluted share related to the company's business realignment initiative announced in June of 2020.\nAnd finally, income of $5.2 million pre-tax or $0.08 per diluted share for employee retention payroll tax credits the company qualified for under the CARES Act.\nNow on to our results.\nMy comments from here will focus on our non-GAAP reporting, unless specifically stated otherwise.\nOn a consolidated basis, fiscal '21 fourth quarter sales increased 41% to a record $519 million, reflecting strong demand and a comparison to the fiscal '20 fourth quarter, which was impacted by COVID-related plant and retail closures.\nConsolidated non-GAAP operating income increased to $52 million.\nAnd consolidated non-GAAP operating margin improved to 10% versus 9.3%.\nNon-GAAP earnings per share was $0.87 per diluted share in the current year versus $0.49 in last year's fourth quarter.\nStrong operating margins in the quarter benefited from disproportionate growth in fixed cost leverage in the Retail segment and at Joybird as well as reduced marketing, advertising and administrative spend as a percentage of sales, which more than offset rising commodity costs in the quarter.\nMoving on to full year results for fiscal 2021.\nSales increased 1.8% to $1.7 billion, a strong result given the slow start to the fiscal year, with many retailers closed, including most of our company-owned La-Z-Boy Furniture Galleries and our plants just restarting production at limited capacity.\nFor the year, non-consolidated -- I'm sorry, excuse me.\nFor the year, consolidated non-GAAP operating income increased to $157 million and consolidated non-GAAP operating margin reached 9%, an all-time high in recent history.\nNon-GAAP earnings per share increased to $2.62 per diluted share versus $2.16 in fiscal 2020.\nConsolidated gross margin for the full fiscal '21 year increased 10 basis points versus the prior year.\nChanges in our consolidated sales mix, driven by the growth of Retail end Joybird, which carry a higher gross margin than our Wholesale businesses, drove the biggest change in margin.\nAdditionally, Joybird experienced a significant improvement in gross margin, primarily resulting from product pricing actions, an increase in average ticket, favorable product mix and synergies as Joybird was integrated into our broader supply chain.\nPartially offsetting these gross margin increases were higher costs related to expanding our manufacturing capacity across the company, a shift in product mix related to those capacity increases and rising raw material costs.\nIt's important to note that last year's gross margin was positively impacted by rebates on previously paid tariffs, which provided 100 basis point benefit to gross margin.\nSG&A as a percentage of sales decreased 70 basis points for fiscal '21 versus fiscal '20, primarily reflecting cost reduction initiatives taken throughout the year, including lower marketing and advertising spend given strong demand trends.\nFiscal year '20 results included bad debt expense due to the Art Van bankruptcy in fiscal '20 as well as a provision for credit losses last year due to the uncertain economic environment caused by COVID.\nPartially offsetting these decreases were increased incentive compensation costs related to the company's performance and changes to our consolidated sales mix due to the growth of our Retail segment and Joybird, which both carry higher SG&A costs than our Wholesale businesses.\nOur effective tax rate on a GAAP basis for fiscal '21 was 26.3% versus 31.4% in fiscal '20.\nImpacting our effective tax rate for fiscal '20 was a net tax expense of $4 million, primarily from the tax effect of a non-deductible goodwill impairment charge related to Joybird and tax expense of $1.3 million from deferred tax attributable to undistributed foreign earnings no longer permanently reinvested.\nAbsent discrete adjustments, the effective tax rate in fiscal '20 would have been 26.4%.\nFor the year, we generated $310 million in cash from operating activities, reflecting strong operating performance and a $140 million increase in customer deposits from written orders for the company's Retail segment and Joybird.\nWe ended the period with $395 million in cash and no debt, up from $264 million in cash at the end of fiscal '20 and $75 million drawn on our credit facility.\nIn addition, we held $32 million in investments to enhance returns on cash compared with $29 million last year.\nAs we have managed the business through COVID-19, we've been conservative with cash, and in the process, have strengthened our resources to capitalize on future value-creating opportunities to grow out of the pandemic.\nDuring the year, we invested $38 million in capital, primarily related to machinery and equipment, improvements to select retail stores, cost for new production capacity in Mexico and upgrades to our Dayton, Tennessee manufacturing facility, which have now been completed.\nRegarding cash return to shareholders, for the year, we paid $16.5 million in dividends to shareholders and spent approximately $44 million, purchasing 1.1 million shares of stock in the open market under our existing authorized share repurchase program.\nThis leaves $3.4 million -- 3.4 million shares of purchase availability in this program.\nOur capital allocation strategy remains to first invest in the business to deliver long-term results followed by returns to shareholders through a consistent dividend and share repurchases.\nBefore returning the call to Melinda, let me highlight several important items for fiscal 2022.\nWe expect our non-GAAP adjustments for fiscal '22 will include purchase accounting adjustments for previous acquisitions estimated to be at $0.01 to $0.03 per diluted share.\nThis excludes any further adjustments that may be made to the Joybird contingent consideration liability depending on updated estimates of Joybird's ongoing business trajectory.\nRegarding seasonality, incoming order rates and a large backlog will mitigate the usual seasonal slowdown associated with the first quarter.\nHowever, as usual, the first quarter is limited to 12 weeks of production and shipments to enable our shutdown week in July for maintenance for most of the company's plants compared to the usual 13 weeks of production shipments in quarters two and four.\nRegarding production capacity, demand trends remained strong across the business with backlog at record levels, providing for a long tail.\nWe anticipate ongoing incremental increases in capacity through fiscal 2022 as new assembly cells are added and efficiencies improve, which will result in continued incremental progress on delivered sales.\nHowever, we expect temporary significant pressures on profit margins in the first half of fiscal '22 compared to the very strong profit margin of this Q4.\nWe expect to face ongoing global supply chain disruptions and escalating raw material and freight costs, which will cause volatility in results and will eventually be offset by our already announced pricing actions in the back half of the year as we work through our backlog.\nFurther, we intend to continue investing in our business to ensure we play offense and strengthen the business and its brands for the long-term even as we weather these short-term challenges.\nThe full impact of these factors may result in a temporary impact to profit, which could be in the range of 300 basis points in the first two quarters compared to our very strong Q4 levels, but still in line with or above our historical levels for the summer months.\nFinally, as we make investments in the business to strengthen the company for the future, we expect capital expenditures to be in the range of $55 million to $65 million for fiscal 2022.\nSpending will support updating our La-Z-Boy Furniture Galleries stores, updating and expanding our plants and investments in technology solutions across the organization.\nThe dynamics of the past year have been profoundly challenging, but also educational.\nThese events affirm our prudent financial culture which served us well during this uncertain period, and our strong cash position provides opportunities for investment in our next chapter of growth.\nThat said, we are stepping back and evaluating our strengths and our opportunities and we are investing in the company to emerge stronger in a post-pandemic environment and even more able to deliver long-term profitable growth.\nAlthough this is not an easy time, it is truly an exciting one; marked by change, incredibly strong demand and the ability to play offense.\nWe'll begin the question-and-answer period now.\nMelinda, please review the instructions for getting into the queue to ask questions.\n",
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"content": "q4 non-gaap earnings per share $0.87.\nanticipates ongoing incremental increases in manufacturing capacity throughout fiscal 2022 that will enable higher delivered sales.\nincoming order rates and backlog will mitigate usual seasonal slowdown associated with 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: Before we begin, however, I will remind you that this conference call might include statements that are forward looking in nature.\nDuring the call today we might also discuss non-GAAP financial measures.\nJim, over to you.\nWhat a difference a year makes.\nTwelve months ago we were all facing tremendous uncertainty about the future.\nA year later, all the personal, social and economic effects of COVID-19 are still impacting each of us individually and collectively.\nThe outlook at Loews has significantly improved.\nEach of our subsidiaries has been affected differently by the pandemic, but across the board, their responses have been extraordinary and each business has found its footing in 2021.\nFirst, let's look at our largest subsidiary, CNA.\nThe company's operational strength and resilience is evident not only in its underlying combined ratio and rate increases, but also on its ability to respond nimbly to ongoing challenges.\nIn the first quarter, CNA did experience higher-than-usual cat losses from what I call the Texas Freeze-Off, but its basic business continued to perform well.\nCNA's underlying combined ratio of 91.9% improved nearly 2 points over the prior year quarter of 93.7%, with a 1.6 percentage point improvement in the expense ratio.\nRate continues to be strong with an 11% increase in the quarter.\nCNA's investment portfolio ended the quarter with $4.3 billion in unrealized gains, down from a high of $5.7 million last quarter, primarily due to higher interest rates.\nOver the long term, higher interest rates will be beneficial to CNA, allowing it to invest its cash flow at higher rates than today.\nBoardwalk Pipelines has substantial operations in Texas, but the February storm had little financial impact on the company.\nBoardwalk's revenues slightly increased due to higher system utilization during the freeze-off as was the case with other companies in the natural gas transportation industry.\nThe company's solid performance during this crisis was not a lucky accident.\nRather, it was a result of significant preparation, planning and hard work by the Boardwalk team.\nThe company's considerable efforts paid off and Boardwalk was able to deliver gas to its customers with minimal disruption.\nBoardwalk's revenue increased to $370 million in the first quarter of 2021 that was due to growth projects that had been placed into service and the colder winter weather.\nOf all our subsidiaries, Loews Hotels has been hit the hardest by the pandemic.\nHowever, as travel picks up across the country, we are seeing gradual progress at Loews Hotels, especially at the company's resort destinations.\nBy the end of the first quarter of '21, 23 of the company's 27 hotels were open.\nIn further good news, the company expects to have hotels opened in all its markets by the end of the second quarter.\nComparing the first quarter of 2021 to the final quarter of 2020, we saw continued improvement in trends.\nThe average daily room rate of our owned and JV hotels that are open increased by 25% to $234.\nLeisure travel continues to improve at a faster pace than business travel, and while we expect that circumstances will vary by hotel property, occupancy at hotels should increase gradually as the economy recovers from the pandemic.\nLoews Hotels has an ownership interest in nearly 15,000 rooms, approximately 11,000 of which are located in resort destinations.\nSo we think that Loews Hotels is well positioned to benefit from this leisure-led recovery.\nWhen acquiring a subsidiary, our long-term goal is to have that subsidiary return capital to Loews when the time is appropriate.\nLoews acquired Altium in 2017 for $1.2 billion; that was $600 million in equity and $600 million in debt at the Altium level.\nIn February of 2021, Altium refinanced its term loans and replaced its roughly $850 million of debt with a new $1.05 billion seven-year term loan, allowing the company to pay $200 million dividend to Loews.\nAnd a month later, on April 1, Loews sold 47% stake in Altium to GIC, the Singapore wealth fund, for gross cash proceeds of $422 million.\nWith these two transactions, Loews has recouped its entire initial investment in Altium while still retaining a 53% ownership interest in the company.\nFrom a portfolio optimization standpoint, we felt the time was right for us to monetize a portion of Loews's ownership stake in Altium.\nWe believe strongly in the long-term prospects of Altium's business and it's our opinion that the Altium management team is second to none in the industry.\nBy retaining a majority ownership position, Loews will be able to capitalize on the future growth trajectory of the company.\nAdditionally, we have gained a strong and like-minded partner in GIC.\nUnder the new ownership structure, Altium has increased in financial flexibility when it comes to larger acquisitions.\nFinally, so far in 2021 Loews has purchased more than 6,150,000 shares of our common stock at an average price of $49.58 per share for a total of $305 million, representing 2.3% of our outstanding shares.\nMany a time you've heard me bemoan the discount at which Loews trades.\nSo I'll spare you the rant this time and just let our repurchase activity speak for itself.\nDavid, over to you.\nFor the first quarter, Loews reported net income of $261 million or $0.97 per share, a sharp rebound from last year's first quarter net loss of $632 million or $2.20 per share.\nAs a reminder, last year's net loss had two main drivers.\nOne, investment results at CNA and the Loews parent company stemming from financial market disruptions as the pandemic spread; and second, rig impairments at our former consolidated subsidiary, Diamond Offshore.\nThis year's first quarter benefited from dramatically improved investment results at CNA and the parent company; strong P&C underwriting income at CNA before catastrophe losses; and favorable results posted by Boardwalk Pipelines.\nAlso, the year-over-year comparison benefited from the absence of losses from Diamond Offshore.\nConversely, losses at Loews Hotels reduced quarterly results as the pandemic continued to mute travel and thus hotel demand.\nAdditionally, earnings in the corporate segment were reduced by some items related to Altium, our packaging subsidiary.\nLet me get into more detail about the quarter.\nCNA contributed net income of $279 million, up dramatically from a $55 million net loss in Q1 2020.\nThe year-over-year turnaround was driven primarily by investment results, both net investment income and net investment gains.\nBut before I discuss investment results, I wanted to highlight CNA's continued solid property/casualty underwriting performance.\nCNA's core property/casualty business posted terrific underwriting results before catastrophe losses.\nNet earned premium was up almost 6% year-over-year, and the combined ratio, excluding cat losses, was 91.3%, 1.7 points better than last year's first quarter and 1.1 points better than full year 2020.\nThe loss ratio, excluding cats, was 59.5%, an excellent result that was in line with last year's first quarter and with full year 2020.\nI would note that prior-year development was comparable this year and last, with less than 1 point of favorable development in both periods.\nCNA's expense ratio, which, together with the loss ratio, makes up the combined ratio, declined to 31.5%, which was 1.6 points better than in Q1 2020.\nThe Company's expense ratio improvement is notable and results from both expense management and premium growth.\nAs an historical footnote, the Company's expense ratio in, say, 2017, was over 34%, so you can see how far CNA has come in a few short years.\nCNA booked 6.8 points of cat losses in Q1, up from 4.3 points in last year's first quarter.\nAs a result, the Company's overall combined ratio was up slightly to 98.1% from 97.3% last year.\nI would highlight that CNA's Q1 cat losses were essentially in line with its market share in the affected areas.\nCNA's after-tax net investment income increased $133 million or 48% from last year, with common stocks and limited partnership investments accounting for the entire improvement.\nThe S&P 500 returned 6.2% in this year's first quarter as compared to a negative 19.6% total return in Q1 of last year.\nThe turnaround in CNA's net investment gains were substantial, swinging from net pre-tax investment losses of $216 million in Q1 '20 to investment gains of $57 million in Q1 '21.\nLast year's large losses were mainly attributable to market value declines of non-redeemable preferred stock as well as impairment losses on corporate bonds.\nTaken together, the uplift in CNA's net investment income and the turnaround in its net investment gains benefited Loews' year-over-year net income by $306 million.\nIn summary, CNA's investment and non-cat underwriting results were strong during the quarter, with CNA and its peers impacted by an unusually high level of natural catastrophes.\nBoardwalk posted an over 8% increase in net revenue and a net income contribution of $85 million, up from $65 million in last year's first quarter.\nTurning to Loews Hotels.\nWhile the company continues to suffer from the COVID-induced downturn in travel, business is gradually improving, as Jim described.\nThe company posted a net loss of $43 million in the quarter versus a net loss of $25 million in Q1 '20.\nGAAP operating revenue was $39 million, down from $109 million last year, and the pre-tax equity loss from joint venture properties was $12 million as opposed to a $4 million loss last year.\nIn last year's first quarter, business was quite strong during January and February and into the first week of March, only to decline precipitously thereafter; so precipitously, in fact, that most properties suspended operations between March '19 and the end of the quarter.\nTo provide a comparative sense of the hotel company's results, let's look at adjusted EBITDA, which is defined and reconciled in our earnings supplement.\nIt includes all properties and excludes non-recurring items.\nAdjusted EBITDA was $61 million in Q1 of 2019 and declined to $17 million in Q1 of 2020 and was a loss of $13 million in this year's first quarter.\nThe low point for profitability was last year's second quarter when Loews Hotels posted an adjusted EBITDA loss of $54 million.\nAdjusted EBITDA has improved steadily since that low point as business has steadily come back.\nFor a good snapshot of this operational improvement, I would encourage you to review page 11 of our quarterly earnings supplement, which shows the increase in available rooms, occupancy and average daily rate since Q2 last year.\nWe currently expect, absent any divestitures or development projects, to make a net cash contribution to Loews Hotels of less than $80 million in 2021, down materially from our earlier estimates, given better-than-anticipated cash flow.\nDuring the first quarter, we invested $32 million in Loews Hotels.\nTurning to the Corporate segment.\nThe parent company's investment portfolio generated net pre-tax income of $46 million as compared to a loss of $166 million last year.\nLike at CNA, equities and alternatives led the decline last year and the rebound this year.\nThe remainder of the corporate sector generated a $75 million pre-tax and $106 million after-tax loss in the quarter.\nTwo main factors, both connected to Altium, drove this larger than normal loss.\nOne, Altium undertook a recapitalization during the quarter, refinancing its existing term loans with a single $1.05 billion term loan; the company booked a $14 million pre-tax debt extinguishment charge in connection with the recap.\nAnd second, the sale of a 47% stake in Altium to GIC, which was pending at quarter-end, required Loews to book a $35 million deferred tax liability which impacted net income but not pre-tax income.\nDiamond Offshore materially affected our year-over-year earnings comparison, given Diamond's $452 million net loss in last year's first quarter, driven largely by rig impairments.\nDiamond was consolidated effective April 26, 2020 and had no impact on our results this past quarter.\nA few words about the parent company.\nAs always, we remain determined to maintain a strong and liquid balance sheet.\nDuring the quarter, we repurchased 5.6 million shares of our common stock for $274 million, and we received about $274 million in dividends from CNA in the quarter, including the $0.38 regular quarterly dividend and the $0.75 special dividend.\nWe also received, as Jim mentioned, $199 million dividend from Altium pursuant to its recapitalization.\nThe parent company portfolio of cash and investments stood at $3.6 billion at quarter-end, with about 80% in cash and equivalents.\nAfter quarter-end, we received about $410 million in net proceeds from the sale of 47% of Altium and have repurchased another 599,000 shares of common stock for about $32 million.\nFinally, let me clarify some details relating to the sale of a stake in Altium to GIC.\nThe transaction price implied a total enterprise value of $2 billion for the company and a total equity value of about $900 million.\nAs a reminder, we purchased the company for a total enterprise value of $1.2 billion in 2017 and have not invested any additional capital in Altium since the acquisition.\nIn the second quarter, upon deconsolidation, we will book a net pre-tax gain of approximately $560 million, which reflects both the net realized gain on the stake sold to GIC and the unrealized gain on our retained 53% stake.\nThe 53% stake will be held as an equity investment in a non-consolidated subsidiary at approximately $475 million, reflecting the valuation implied by the price paid by GIC for its 47% stake.\nI will now hand the call back to Mary.\nMoving on to the Q&A portion of the call.\n",
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"content": "compname reports net income of $261 mln.\ncompname reports net income of $261 million for the first quarter of 2021.\nq1 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: CNA's strategic discussion is hosted by its CEO, Dino Robusto and its interim CFO, Larry Haefner.\nDuring the call today, we might also discuss non-GAAP financial measures.\nJim, over to you.\nAndrew Tisch has decided to step away from his executive responsibilities at Loews Corporation at the end of December.\nI could not have asked for a better partner than Andy who has served Loews with complete dedication for the last 50 years.\nDuring his tenure, he has successfully led a number of our subsidiaries and functional areas, while also fostering open communication, collaboration and respect throughout the organization.\nWe are all fortunate to have been the beneficiaries of his wisdom and expertise and we are grateful that he will continue to serve as Co-Chairman of the Loews Board and as a member of the CNA Board.\nLoews had another strong quarter across the board with good performance from each of our consolidated subsidiaries.\nCNA continues to be a success story for Loews.\nThe company's underlying combined ratio decreased by 1.5 points, driven by the expense ratio, which was 30.7% compared to 31.8% in the prior year quarter.\nThe underlying loss ratio was also lower at 60.2% compared to 60.5% in the prior year.\nCNA's P&C gross written premiums increased by 10% and net written premiums increased by 5%.\nNote that the increase in net written premiums is lower than for gross written premiums due to additional reinsurance that the company has purchased in its strategy to protect the insurance portfolio from large loss events.\nThe value of this incremental protection was fully on display this past quarter with the mitigated losses CNA reported on Hurricane Ida.\nCNA had pre-tax investment income of $513 million, pretty much flat with the prior year's quarter.\nLimited partnerships had a great quarter and the fixed income portfolio continues to provide consistent earnings even with headwinds from the historically low interest rate environment.\nWe continue to be very pleased with CNA's results.\nIn other news, Loews Hotels made an exciting announcement in early October.\nThe company broke ground on the Loews Arlington Hotel and Convention Center, a new project in the tried and true entertainment hub of Arlington, Texas, which sits between Dallas and Fort Worth.\nWhen it opens in early 2024, the hotel will have 888 rooms and over 250,000 square feet of meeting and event space.\nFor those not schooled in the hotel industry, that's a whole lot of rooms and a whole lot of meeting space.\nOnce again, Loews Hotels is acting both as the owner and the operator of this project.\nIndustry dynamics generally do not allow for companies in the hotel space to perform this double role, and as a result, Loews Hotels is a leader within this niche of the market.\nPlaying to these strengths has served Loews Hotels well and we believe it will continue to do so.\nThis will be Loews Hotels' second property in Arlington following in the strong footsteps of Live!\nby Loews which has had a successful opening in 2019 and whose occupancy rate has generally remained strong throughout the pandemic; a testament to this market's resilience and the team's focus.\nThe new hotel is consistent with Loews Hotels growth strategy, which is built on two pillars.\nThe first pillar is owning and operating hotels associated with immersive destinations.\nLoews Hotels' two decades long partnership with Universal Orlando is a great example of the strength of this pillar.\nOur hotels in Arlington will also clearly benefit from built-in demand drivers since our guests will have access to all the sports and entertainment destinations close to the hotels, including the Dallas Cowboys AT&T Stadium and the Texas Rangers Globe Life Field.\nThe second pillar of Loews Hotels growth strategy is the company's focus on owning and operating hotels with 300-plus keys that have strong group business and ample meeting space.\nLoews Hotels has a well-earned reputation for successfully operating hotels that cater to this type of business.\nThe two Arlington Hotels combined will offer nearly 1,200 guestrooms and more than 300,000 square feet of meeting and event space and these properties offer unique local experiences and are equally attractive to leisure and good customers.\nLoews Hotels has continued to see strong demand for leisure travel and improving interest for group travel.\nFor the third quarter, the occupancy rate for owned and joint venture hotels was almost 72% as opposed to about 35% in the first quarter of this year.\nOur resort hotels continue to do considerably better than our properties in urban settings, and about 60% of Loews Hotels' rooms are in resort destinations.\nAs the U.S. economy and the hotel industry continue their recovery, we are confident that Loews Hotels will once again be a growth engine for Loews Corp.\nNext I wanted to talk about Boardwalk.\nThe demand for natural gas is increasing and Boardwalk is well-positioned to take advantage of this change.\nWe see the increased demand coming from increased domestic consumption and from international markets via LNG exports.\nBoardwalk transports natural gas under fixed fee take-or-pay contracts with mostly investment-grade customers which limits its commodity and volumetric risk.\nThe company currently has $9 billion of revenue backlog with a weighted average contract life of seven years.\nAs the transition toward clean energy unfolds, we believe that gas will continue to be an important fuel used the world over.\nFinally, let me update you briefly on share repurchases.\nFrom July 1 through last Friday, we repurchased 6.2 million shares of Loews common stock for just over $337 million.\nYear-to-date, we've bought back 15.7 million shares for $830 million, which is 5.85% of the shares outstanding at the beginning of the year.\nAs I've often said, we believe that Loews still trades at a significant discount to our view of its intrinsic value so we'll continue to let our share repurchase activity speak for itself.\nAnd with that, let me hand the call over to David.\nFor the third quarter, Loews reported net income of $220 million or $0.85 per share compared to net income of $139 million or $0.50 per share in last year's third quarter.\nLet me describe the quarter in a nutshell before getting into more detail.\nCNA's performance was driven by strong property casualty underwriting income before catastrophe losses, healthy net investment income, and a net reserve release in the Life & Group segment.\nThese positives were partially offset by significant weather-related catastrophe losses.\nBoardwalk's operating results benefited from strong transportation revenues generated by its growth projects and increased utilization throughout its system.\nAnd Loews Hotels continue to emerge from the COVID-induced downturn with its resort properties, especially those in Florida, leading the charge.\nLoews Hotels generated positive net income for the first time since the fourth quarter of 2019.\nLet me now dig more deeply into the third quarter and the year-over-year comparison.\nAll three of our consolidated subsidiaries, CNA, Boardwalk and Loews Hotels, recorded materially higher year-over-year net income contributions, with CNA leading the charge.\nI would encourage you to review the transcript for more details.\nIn the meantime, let me provide a few highlights.\nCNA contributed net income of $229 million, up from $192 million in Q3 2020.\nThe main drivers of the year-over-year increase were higher property casualty underwriting income before cat losses and the absence of three charges that occurred last year, two of which were in the Life & Group segment, a charge from the unlocking of the long-term care active life reserve, a charge from strengthening the structured settlement claim reserve, and a less significant charge from the early retirement of debt.\nConversely, higher catastrophe losses than in last year's third quarter detracted from the year-over-year comparative results.\nFocusing on property casualty underwriting income.\nThe combination of a 6% increase in net earned premium and a 1.5 point improvement in the underlying combined ratio led to a 27% increase in CNA's underlying underwriting gain, which excludes cat losses and prior year development.\nNet cat losses in the quarter were $178 million pre-tax, including $114 million for Hurricane Ida.\nLast year's Q3 cat losses were modestly lower at $160 million pre-tax driven by three Southeast hurricanes and the Midwest derecho.\nCNA's expense ratio, which just a few years ago hovered in the mid-30s, came in below 31%, down from 31.8% in Q3 2020 and 31.6% last quarter.\nThis is the lowest expense ratio posted by CNA in about 13 years.\nCNA's consolidated after-tax net investment income was essentially flat year-over-year as returns on limited partnership and common stock investments were robust in both periods.\nCNA conducts its annual reserve reviews for its Life & Group segment in the third quarter.\nLast year, the company booked a net reserve charge of $83 million pre-tax for its long-term care and structured settlement books of business.\nThis year, the comparable number was a net reserve release of $38 million pre-tax as CNA had no change in its long-term care active life reserve, a $40 million pre-tax release from its long-term care claims reserve, and a de minimis charge related to structured settlements.\nWe consider this favorable outcome a further indication of CNA's enhanced insight into and prudent reserving around the long-term care business.\nCNA ended the quarter with total assets of $66.5 billion, shareholders' equity of $12.7 billion and consolidated statutory surplus of approximately $11.1 billion.\nBoardwalk contributed net income of $38 million, up from $20 million in Q3 2020.\nThe main driver of the year-over-year increase was higher natural gas transportation revenue, driven, like last quarter, by growth projects recently placed in service and higher system utilization.\nBoardwalk's EBITDA, which is shown and defined in our quarterly earnings supplement, was $186 million in the quarter and $635 million year-to-date.\nThrough nine months, natural gas transportation throughput increased by more than 11% year-over-year across the system.\nTurning to Loews Hotels.\nLoews Hotels contributed net income of $13 million; a dramatic improvement from the $47 million net loss posted in Q3 2020.\nAdjusted EBITDA, which is defined in our earnings supplement and excludes non-recurring items, rebounded from a $38 million loss last year to a positive $59 million in Q3 2021; close to $100 million swing.\nThe year-over-year improvement was driven by a dramatic revenue increase as all properties, including all 9,000 rooms at the Universal Orlando Resort, were open for the full quarter.\nThis was the first time all 9,000 rooms in Orlando were open for a full quarter.\nOn Page 11 of our quarterly earnings supplement, there is a good snapshot of Loews Hotels year-over-year and sequential operational improvement, which highlights the drivers of the company's revenue increases during this COVID period.\nWith more available rooms, higher occupancy and healthy average daily rates, revenues have climbed markedly since the depths of the pandemic.\nWe have invested $32 million in Loews Hotels year-to-date, all in the first quarter.\nGiven the company's stronger than expected cash flow, the parent company does not expect to invest any further cash in Loews Hotels during the remainder of this year.\nTurning to the Corporate segment.\nThe parent company's investment portfolio generated a pre-tax net investment loss of $30 million as compared to income of $23 million last year.\nThe loss stemmed from the performance of the equity portfolio.\nThe parent company portfolio of cash and investments stood at $3.6 billion at quarter end with about 80% in cash and equivalents.\nDuring the quarter, as Jim mentioned, we repurchased 6.2 million shares of our common stock for $333 million and we received about $92 million in dividends from CNA.\nAfter quarter end, we spent less than $5 million repurchasing our stock.\nAs of last Friday, there were under 254 million shares of Loews common stock outstanding, down about 6% since the beginning of the year and about 25% over the past five years.\nLoews continues to be characterized by strong cash flow into the parent company and an extremely liquid balance sheet with cash and investments far exceeding parent company debt.\nI will now hand the call back to Jim.\nWe've got plenty more time with David as CFO, so more about him and Jane at a later date.\nAnd now, Mary, back to you.\n",
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"content": "compname reports net income of $220 mln for the third quarter of 2021.\ncompname reports net income of $220 million for the third quarter of 2021.\nq3 earnings per share $0.85.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: During the call today, we might also discuss non-GAAP financial measures.\nJim, over to you.\n2020 was a year of extraordinary challenges.\nThe coronavirus changed our lives with astonishing speed and what began as a promising year quickly and dramatically morphed into a global health and economic crisis.\nIn addition to the harsh toll on human lives and livelihoods, the pandemic has brought about changes in society and business that are likely to be felt for years to come.\nWhile we can never sufficiently express our gratitude for their bravery and their compassion, Loews and our subsidiaries have provided philanthropic support to various organizations supplying relief and aiding recovery efforts in their community.\nWe also want to recognize our Loews corporate and subsidiary employees who rose to this ongoing challenge with determination, focus, and professionalism.\nAcross the organization, our people have done their part to make sure that businesses had insurance and claims were paid that natural gas was available to heat homes, schools, and medical facilities, that packaging was available for water and medicine bottles where that a meal was delivered to a family in a hotel room.\nEach of our subsidiaries went to impressive lengths to ensure the health and safety of their employees and customers.\nThese efforts enabled us to meet the needs of our customers and communities at a critical time while continuing to move Loews forward.\nLet's look at the operational impact of COVID on each of our subsidiaries over the course of 2020 starting with CNA.\nOperationally CNA's performance continues to be quite strong, while the events of 2020 were unprecedented including impacts not only from COVID, but also from civil unrest and hurricanes.\nThe overall trend in the property casualty insurance industry has been upwards toward a hardening market.\nNot only did CNA have good growth in new business, the Company also benefited from higher P&C rates, leading to higher overall premium growth.\nThroughout the year, CNA has continued to focus on underwriting discipline, partnerships and talent.\nThis focus has resulted in continued improvements in CNA's underlying performance which excludes catastrophe losses and prior-year development.\nIn 2020, CNA had an underlying combined ratio of 93.1% compared to 94.8% in 2019 and 95.4% in 2018.\nThat represents a more than 2 point improvement over two years reflecting progress in both the expense and loss ratios.\nEarlier today, CNA declared a special dividend of $0.75 in addition to raising its quarterly common dividend to $0.38 per share.\nThe increase in the common dividend is reflective of the CNA Board's confidence in the ongoing operational improvements at CNA.\nCNA paid total dividends of around 90% of its 2020 earnings.\nCNA's ability to return capital to shareholders even after the extensive cat losses the Company absorbed this year underscores its financial strength and fortress balance sheet.\nAt Boardwalk in 2020, the Company met the challenge of operating its pipelines without service interruptions to its customers, not only during COVID-19, but also through the hurricanes that hit the Gulf Coast.\nBoardwalk has completed the recontracting of its pipelines originally put into service between 2008 and 2010.\nWhile future growth projects could become more difficult to green light in the current environment, Boardwalk continues to benefit from its long-term fixed fee contracts.\nDuring 2020, the Company added approximately $1.3 billion of new contracts and the contractual backlog ended the year at over $9 billion or seven times Boardwalk's annual 2020 revenues.\nBoardwalk reported EBITDA of $819 million for the year, essentially flat from 2019.\nAs for our packaging Company, Altium, demand for its products continues to be strong overall and even stronger for product segments such as household, household chemicals and beverages.\nOn the flip side, as a result of the pandemic, demand is somewhat weaker in segments such as automotive, commercial foodservice and school dairy.\nAdditionally, the Company's recycling business, Envision has been experiencing its best performance since it was acquired by Altium in 2014 driven by stronger demand for recycled products also known as post-consumer resin.\nAltium's focus on new business is bearing fruit and should benefit results in future periods.\nThe Company continues to be successful in gaining new accounts by demonstrating reliability, continued innovation and customer focus during this difficult COVID period.\nOf all our subsidiaries Loews Hotels has been the hardest hit by the pandemic.\nIn February, the Company had occupancy rates of around 80% for its owned and joint venture hotels.\nBy April, only three of these hotels were operational and occupancy rates had plummeted to about 9%.\nThe Company responded quickly to the COVID-induced downturn in a number of ways.\nTo better align to reduced level of demand, Loews Hotels aggressively cut expenses.\nThey rightsize capital spending, worked with lenders to defer interest and principal paydowns and reevaluated opening dates for new developments.\nImportantly, in the face of this crisis, Loews Hotels continue to look out for its team member's safety and well-being, putting programs in place to assist those negatively affected as well as implementing extensive COVID protocols in hotels as they resumed operations.\nDuring December of 2020, occupancy rates for owned and JV hotels that were operational had risen to almost 38% with 22 out of 27 Loews Hotels once again welcoming guests.\nAt this point in time, leisure travel is recovering at a somewhat faster pace than business travel, but it is still difficult to predict when Loews Hotels will resume normal operations.\nWe expect that circumstances will vary by hotel property with the occupancy at hotels increasing gradually as the travel industry recovers from the pandemic.\nThat being said, we believe properties such as those in Orlando, Miami Beach and Arlington, Texas are well positioned to participate in the early stages of the travel resurgence.\nIt bears mentioning that throughout the pandemic Loews and its subsidiaries continued to have ample access to the capital markets.\nLoews, CNA and Boardwalk each issued $500 million in bonds between May and August of 2020, taking advantage of the low rates available in the credit markets.\nAltium Packaging completed a debt recapitalization in January of 2021, which resulted in a $199 million payment to Loews basically returning a third of our equity and we still own a 100% of the business.\nThis is our first dividend from Altium since acquiring the Company in 2017.\nThe success of these offerings is a testament of the strength of Loews' corporate and subsidiary balance sheets and investor's confidence in our credit worthiness.\nBefore I hand the call over to David, I want to talk about capital allocation.\nThroughout this year, I have emphatically stated my strong belief that the market has been significantly undervaluing Loews' shares.\nI also stated that while Loews plans to maintain a substantial liquidity position as our rainy day fund.\nWe would still take advantage of the markets discount and continue to buyback our shares.\nWith our stock trading considerably below our view of its intrinsic value, share repurchases have recently been our most attractive capital allocation option.\nThat being said, our decision to buyback stock has not come at the expense of any of our subsidiaries.\nWe provided about $150 million to Loews Hotels in 2020 to help it right out the effects of COVID on the hospitality industry.\nWe will continue to support Loews Hotels in 2021 as it prepares for travel and tourism to come back with the expectation of a return to more normalized operations in 2022.\nDuring the fourth quarter, we purchased almost 6 million shares of Loews stock for about $244 million while preserving ample liquidity and ending the quarter with about $3.5 billion in cash.\nOver the course of the year, Loews repurchased nearly 22 million of our own shares for an average cost of below $42 per share, which is lower than Loews' current market price and considerably lower than what we believe to be the intrinsic value of the company.\nIn my view that's a great use of capital in order to create value for all shareholders over the long-term.\nAnd now David over to you.\nToday we reported fourth quarter net income of $397 million or $1.45 per share compared to $217 million or $0.73 per share in last year's fourth quarter.\nFor the full year, we reported a net loss of $931 million or $3.32 per share while in 2019 our net income was $932 million or $3.07 per share.\nI will briefly summarize our strong fourth quarter results and then turn to the full year.\nCNA drove the year-over-year increase in our fourth quarter income with an assist from Boardwalk.\nThe absence of results from Diamond Offshore which last year posted a fourth quarter loss also helped.\nLet me share some highlights on CNA's fourth quarter.\nFor more details, check out the transcript from today's CNA Investor Call.\nCNA's net income contribution to Loews rose 42% to $346 million making up the bulk of our consolidated fourth quarter net income of $398 million.\nThe core P&C business performed extremely well.\nNet written premium grew 12% year-over-year.\nThe combined ratio improved 2.1 points to 93.5 driven by lower expense and underlying loss ratios as well as reduced cat losses.\nAfter tax P&C net investment income was down slightly, as higher returns on LP and common stock investments were not able to fully offset the impact of lower yields on the fixed income portfolio.\nNet investment gains, however, were greater than during the prior-year quarter.\nThe Life & Group segment posted strong results.\nBoardwalk pipelines net income contribution rose from $48 million in last year's fourth quarter to $83 million which included $26 million after-tax of settlement proceeds related to a customer bankruptcy.\nFourth quarter net revenues excluding these proceeds were up 4% driven by growth projects recently placed into service.\nLoews Hotels posted a net loss of $68 million in Q4 2020 versus a net loss last year of $59 million.\nThis year's net loss was caused by the continuing revenue challenges stemming from the pandemic with operating revenue, down 81% year-over-year.\nIn last year's fourth quarter, Loews Hotels incurred a $69 million after-tax charge from the impairment of two hotel properties as well as some pre-opening expenses on properties under development.\nBefore turning to the full year, one last observation on the quarterly comparison.\nThe fourth quarter of 2019 included a $38 million net loss from Diamond Offshore.\nDiamond is no longer one of our consolidated subsidiaries and thus did not affect our Q4 2020 earnings.\nNow for our full year results.\nWe reported a net loss of $931 million or $3.32 per share.\nLet me start by recapping the drivers of the loss, which primarily relate to Diamond and Loews Hotels.\nDiamond filed for a Chapter 11 bankruptcy protection on April 26, 2020.\nThrough that date, Diamond had contributed net losses of $476 million to Loews mainly attributable to rig impairment charges.\nFurther because of the bankruptcy filing, in the second quarter, we deconsolidated Diamond, wrote down the carrying value of our investment in the Company and booked a $957 million after-tax investment loss.\nIn total, Diamond accounted for $1.43 billion of net losses to Loews in 2020.\nLoews Hotels has been severely impacted by the COVID-19 pandemic with operating revenue, down 71% for the full year.\nSimilarly, income in joint ventures swung from positive $69 million in 2019 to a $73 million loss in 2020.\nThis dramatic change in Loews Hotels operating environment caused the Company to incur a net loss of $212 million for the year.\nLoews' net income declined even after entirely excluding the impact of Diamond in the Loews Hotels from our results in both years.\nThis decline was entirely attributable to higher catastrophe losses at CNA and lower results from investment-related activities at CNA and the parent Company.\nCNA booked pre-tax catastrophe losses of $550 million in 2020, up from $179 million in 2019.\nWeather related events comprised 50% of the year's cat losses with COVID-19 and civil unrest making up the remainder.\nThe negative year-over-year impact to Loews of CNA's unusually elevated catastrophe losses was $262 million after-tax.\nAfter-tax net investment income in CNA's P&C business fell year-over-year because of lower returns on fixed income securities and limited partnership in common stock investments.\nThis accounted for $148 million decline in Loews' net income.\nSimilarly, the Loews parent company's net investment income declined $141 million after-tax, driven mainly by lower returns on LP and equity investments.\nFinally, CNA swung from net investment gains in 2019 to net investment losses in 2020.\nThis swing reduced our net income by $60 million.\nIn total, these items, cat losses net investment income at CNA and Loews and CNA's net investment losses accounted for a year-over-year decline in Loews' net income of $611 million.\nCNA's core P&C business excluding catastrophes performed extremely well.\nNet written premium increased 6% on the back of new business growth, solid retention and rate increases averaging 11%.\nThe underlying combined ratio for the full year, which excludes cat losses and prior year development was $93.1 million down from $94.8 million in 2019, with improvement in both the loss and expense ratios.\nAll of this led to a 38% increase in pre-tax underlying underwriting income.\nCNA's long-term care business continues to benefit from active, operational, and risk management of the block.\nEven including the impact of this year's active life and claim reserve reviews, the Life & Group business generated positive results driven by better than expected morbidity in long-term care.\nCNA's balance sheet remains rock solid.\nMoreover, it continues to reduce its risk profile, most recently with the agreement signed last week to cede a legacy portfolio of excess workers' compensation policies to a subsidiary of Enstar.\nBoardwalk had a good year operationally.\nNet operating revenues excluding the settlement proceeds from a customer bankruptcy in each year were down less than 1% reflecting the last vestiges of expirations and renewals at lower rates of long-term contracts put in place 10 plus years ago.\nThe Company's growth projects together with a strong market for storage and park and loan services made up for most of the falloff, and Boardwalk continues to effectively manage its expenses.\nAltium Packaging, which is included in our corporate segment had a strong year operationally with revenues up almost 10% driven by organic growth, new business, exceptional results in its recycled plastics business, the full year impact of acquisitions made in 2019 and higher year-over-year resin prices.\n2020 was a record year for new business awards for Altium, further highlighting its reputation for quality, reliability, innovation and customer service.\nAs I've mentioned in the past, Altium's results have had little effect to-date on our net income, while Altium generate healthy EBITDA and free cash flow, its GAAP income has been weighed down by depreciation and amortization from recent acquisitions and accelerated trade name amortization.\nLast week, Altium completed a recapitalization, issuing a $1.05 billion seven-year secured term loan.\nThe proceeds of which went to refinance its existing debt and pay Loews' a dividend of $199 million.\nAs Jim mentioned, this is the first distribution Loews has received from Altium since we acquired the company in 2017.\nImportantly, this transaction in no way hamstrings Altium's ability to continue pursuing tuck-in acquisitions.\nAs a reminder, our initial equity investment in Altium was slightly more than $600 million.\nTurning to the parent company.\nThe parent company portfolio of cash and investments stood at $3.5 billion at year-end, with about 77% in cash and equivalents.\nDuring the fourth quarter, we received $192 million in dividends from our subsidiaries, $90 million from CNA, and $102 million from Boardwalk, which represented Boardwalk's only dividend to Loews in 2020.\nFor the full year, we received total dividends of $947 million from CNA and Boardwalk.\nToday, CNA declared a $0.75 per share special dividend and a regular quarterly dividend of $0.38 per share up a penny from $0.37.\nCombining the two, Loews will receive $275 million in dividends from CNA this quarter as well as the $199 million received from Altium last week.\nWe repurchased 5.8 million shares in the fourth quarter for $244 million and 22 million shares during the full year for $917 million.\nSince year-end, we have repurchased an additional 2.2 million shares for a total of $100 million.\nI will now hand the call back to Mary.\n",
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"content": "compname posts q4 earnings per share $1.45.\ncompname reports net income of $397 million for the fourth quarter of 2020.\nq4 earnings per share $1.45.\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 Tim Argo, Senior Vice President of Finance for MAA.\nActual results may differ materially from our projections.\nWe are encouraged with the solid start to the year as core FFO results were well ahead of our expectations.\nA recovery in rent growth is clearly getting started.\nOur overall blended rents on a lease-over-lease basis are running slightly ahead of last year, and our forecast is for continued improvement.\nA combination of the recovery within the Sunbelt economies that is just starting to build, coupled with the continued migration of employers and jobs to this region, are driving higher level of demand across our portfolio.\nWe like the trends that we're seeing as we head into the important summer leasing season.\nOur teams are off to a strong start this year with our unit interior redevelopment program, the rollout of our Smart Home technology platform as well as several new projects aimed at full repositioning of communities to higher price points.\nWe're excited about the upside in rent growth to capture from all three of these programs.\nIt was about this time last year when we hit the pause button on these projects in order to protect residents and staff during the initial months of COVID, and we expect to make solid progress this year.\nOur new development platform continues to expand, and we're excited to have closed this month on our first opportunity in the Salt Lake City market.\nWe see continued strong job growth and positive migration trends to this market and look forward to expanding our presence there.\nSupported by our strong balance sheet and growing demand for apartment housing across our Sunbelt markets, we believe we are poised to capture increasing earnings contribution from our development pipeline over the next few years.\nAs the Sunbelt market economies begin to reopen, it seems clear that based on the trends that we're seeing, that the worst of the pressures associated with COVID are behind us.\nMAA's unique approach to diversifying across the Sunbelt has clearly worked to soften some of the pressures surrounding the recession and the slowdown in leasing over the past few quarters.\nHowever, we're frankly more excited about the prospects for outperformance over the coming recovery cycle, the growing appeal of the Sunbelt markets, the upside that we have to capture in redevelopment within our existing portfolio, higher efficiencies, we expect to harvest from several new technology initiatives, and finally, a growing impact from our external growth pipeline, all combined to put MAA in a solid position for the coming recovery cycle.\nYour commitment to our mission of serving those who depend on our company is much appreciated.\nThe recovery continued across the portfolio for the first quarter.\nLeasing volume for the quarter was up 16%.\nThis drove blended pricing achieved during the quarter up 2.7%.\nThis is even with the very strong start we had in the first quarter of 2020 and up 200 basis points from the fourth quarter.\nIn addition, we were able to maintain strong average daily occupancy of 95.7%, and all-in place rents or effective rent growth on a year-over-year basis improved to 1.3% in the first quarter.\nCollections during the quarter were strong.\nWe collected 99.1% billed rent in the first quarter.\nWe've worked diligently to identify and support those who need help because of COVID-19.\nThe number of those seeking assistance has dropped over time.\nIn April of last year, we had 5,600 residents on relief plans.\nThe number of participants has decreased to just 325 for the April of this year rental assistance plan.\nThis represents only 20 basis points of April billed rent.\nWe saw steady interest in our product upgrade initiatives.\nWe're off to a strong start for the year on our interior unit redevelopment program as well as installation of our Smart Home technology package that includes mobile controlled lights, thermostat in security as well as leak detection.\nWe completed 964 redevelopment units and 13,975 Smart Home packages.\nFor the full year of 2021, we expect to complete just over 6,000 interior unit upgrades and install 22,000 Smart Home packages.\nWe are also in the final stages of completing the repositioning work on our first six full reposition properties and have another eight that will begin this year.\nApril's collections are in line with the good results we saw in the first quarter.\nAs of April 27, we've collected 98.7% of rent billed, which is at least 10 basis points ahead of each of the comparable numbers for January, February and March of this year.\nLeasing activity for April is strong.\nNew lease-over-lease pricing in April is running close to 4% of rent on the prior lease.\nRenewal lease pricing in April is running 6.5% ahead of the prior lease.\nOur resident satisfaction scores remained strong and are actually ahead of last year by 120 basis points, which should support continued strong renewal lease pricing.\nWe still have a few down units in April as a result of the winter storm, and including the impact of those, average daily occupancy for the month of April is currently 96.1%, which is 100 basis points better than April of last year.\nExposure, which is all vacant units plus notices through a 60-day period, is just 7.2%.\nThis is 180 basis points better than the prior year and supports our ability to continue to prioritize our focus on rent growth.\nWe are well positioned as we move into our busy leasing season.\nLed by job growth, which is expected to increase 4.9% in 2021 versus the negative 5% in 2020 for our markets, we expect to see the broad recovery in our region of the country continue.\nWe expect Phoenix, Tampa, Raleigh and Jacksonville to be our strongest markets and expect Houston, Orlando and DC to recover but at a slower rate.\nThey've shown tremendous adaptability and resilience over the last year.\nI'm proud of them and excited about their strong start to 2021.\nInvestor demand for multifamily product within our region of the country remains strong.\nHowever, a lack of properties for sale is causing a supply demand imbalance that continues to drive already aggressive pricing.\nThis robust investor demand supported by continued low interest rates has further compressed cap rates, which are frequently in the mid-3% and low 4% range for high-quality properties in desirable locations within our markets.\nTransaction cap rates on closed projects that we underwrote were down 25 basis points from last quarter and down 50 basis points from first quarter of 2020.\nWe remain active in the transaction market, but as outlined in our guidance, we are not forecasting executing on any acquisitions of existing communities between now and year-end.\nWhile acquiring existing assets is a challenge, we continue to make progress on the expansion of our development pipeline.\nAs noted in our release, we closed on two land parcels in April as part of our prepurchase program, where we partner with third-party developers.\nWe expect to start construction on both of these projects in the second quarter.\nOur Atlanta project is a 5-story mid-rise development located along the belt line extension in the West Midtown area of Atlanta, less than two miles from Microsoft's recently announced campus.\nWe also closed on a 4-story surface park project in the Daybreak master-planned community of Salt Lake City, one of the top five master-planned communities in the United States.\nWe are excited to expand our footprint into Salt Lake City, a market that shares many of the attributes that characterize our overall footprint: good job growth, great migration trends and a highly educated workforce.\nIn addition to these two projects, we have several other project -- or development sites within our footprint, owned or under contract, that we hope to start construction on later this year and into next year.\nWe have seen material run-up in construction costs, and specifically lumber.\nBut our construction team as well as our partners have done a good job helping us to mitigate some of this increase.\nWe continue to see some supply chain disruptions on appliances, cabinets, windows and other items, but on the majority of our projects, we've been able to work around these issues with minimal impact to our delivery schedules.\nWe continue to see strong leasing demand in our region of the country, and our two lease-up properties in Dallas and Fort Worth as well as our under construction property in Phoenix, all continue to perform very well, with rents and leasing velocity in line with or ahead of our pre-COVID expectations.\nAs part of our planned dispositions for 2021, we took our Jackson, Mississippi properties to market in the first quarter and received very strong investor interest, with the strongest bidding coming from portfolio buyers wanting all four properties.\nThe properties are currently under contract with our buyers inspection period ending soon.\nWe expect this transaction to close in the third quarter.\nWe are also on track to execute on the remainder of our 2021 disposition plan in the fourth quarter.\nOur view of new supply remains unchanged with the expectation that 2021 looks very similar to 2020.\nBased on 2020's permitting trends, we still expect new deliveries to start trending down late this year and into next year before possibly increasing in 2023, reflecting the recent increase in permitting and starts data.\nThat's all I have in the way of prepared comments.\nCore FFO per share performance of $1.64 for the first quarter was $0.05 per share ahead of the midpoint of our guidance.\nAs expected, operating trends continued to improve through the quarter, producing same-store revenue and NOI performance that was slightly ahead of our forecast, providing about $0.01 per share on favorability for the quarter.\nWe continue to expect stable occupancy and strong pricing trends to have a growing impact on effective rents over the remainder of the year.\nBut keep in mind that only about 20% of our leases were effective in the first quarter, and we still have the majority of our leases to be signed during the summer leasing season in the second and third quarter.\nThe remaining favorability came from overhead and interest expense, which were both lower than projections for the quarter.\nSo overhead costs are expected to grow more in line with our original projections as the year progresses as our travel and other activities move toward more normalized levels.\nWinter storm Uri impacted a portion of our portfolio during the quarter, where unusually cold temperature and electrical outages led to frozen pipes and damage at a number of our Texas communities.\nOur operating teams worked hard to take care of our residents and get affected units back online quickly.\nWe incurred some casualty losses during the first quarter related to the storm.\nWe established a receivable for the vast majority of the costs, which are expected to be reimbursed through insurance coverage.\nNet earnings impact to MAA during the quarter was only about $765,000, primarily related to down units.\nOur balance sheet remains in great shape.\nDuring the quarter, we paid off the $118 million of secured mortgages at an expiring rate of 5.1%.\nWe also funded an additional $64 million of cost toward completion of our development pipeline, which, at quarter end, included seven communities with total projected cost of $528 million, of which $193 million remains to be funded.\nAs Brad mentioned, we acquired two land parcels in April as part of repurchase development deals, which should begin construction later this year.\nAnd as discussed previously, we expect our development pipeline to grow to around $800 million by year-end, which is well within our development autonomous limits.\nAs Tom mentioned, we also continue to make good progress during the quarter on our three internal investment programs: interior redevelopment, property repositioning projects and Smart Home legislations.\nWe funded a total of $22.7 million toward these programs during the first quarter, which are expected to begin contributing to our growth more strongly in late 2021 and 2022.\nWe ended the quarter with low leverage, debt-to-EBITDA of only 4.9 times and with $644 million of combined cash and borrowing capacity under our line of credit.\nAnd finally, in a way to reflect the first quarter earnings performance, we increased our full year guidance range for core FFO by $0.05 to a range of $6.35 to $6.65 per share.\nOur same-store performance trends were essentially in line with our forecast, and we expect pricing trends to continue to improve over the remainder of the year, with the most favorable prior year revenue comparisons coming in the second quarter due to the initial impact of COVID-19 last year.\nWe plan to revisit guidance after the second quarter when we'll have more clarity on several key assumptions.\nSo that's all we have in the way of prepared comments.\nChristy, are you there?\n",
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"content": "qtrly core ffo per share $1.64.\nsees 2021 core ffo per share $6.35 to $6.65.\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: This is Tim Argo, Senior Vice President of Finance for MAA.\nActual results may differ materially from our projections.\nAs detailed in our fourth quarter earnings report, MAA ended 2020 on a positive note, results were ahead of expectations, and we carry good momentum into calendar year 2021.\nDuring the fourth quarter, leasing traffic was strong, and we captured 6% higher move-ins as compared to prior year.\nAnd despite the normal seasonal slowdown during the holidays, we were able to capture positive blended lease-over-lease rent growth that equaled the prior third quarter with particularly strong renewal lease pricing averaging 5.2% in Q4.\nAverage physical occupancy also remained strong at 95.7% in the fourth quarter, a slight improvement from the performance in Q3.\nWe believe these trends supported by improving employment conditions and the positive migration trends across our footprint positions MAA for continued outperformance into the coming spring and summer leasing season.\nOverall, conditions are setting up for a solid recovery cycle for apartment leasing fundamental across the Sun Belt over the next three years or so as demand recovers and supply levels moderate a bit into 2022.\nI believe for several reasons that MAA is in particularly strong position as we head into the recovery part of the cycle.\nFirst, we expect that our Sun Belt markets will continue to capture job growth, migration trends and demand for apartment housing that will be well ahead of national trends.\nWhile there were clearly favorable Sun Belt migration trends by both employers and households prior to COVID, this past year the trends accelerated.\nThe primary reasons behind these favorable migration trends, including enhanced affordability, favorable business climates and lower taxes will still be with us well past the point we get the pressures associated with COVID behind us.\nSecondly, the efforts we have under way this past year implementing change to a number of our processes involving new technology and web-based tools will continue to drive more opportunity for margin expansion.\nSpecifically, steps taken to automate aspects of both our leasing and maintenance service operations will drive more efficiency with personnel cost.\nWe expect to begin harvesting some of those early benefits later this year.\nOur redevelopment operation aimed at upgrading and repositioning many of our existing properties continues to capture very attractive rent growth and returns on capital.\nThese higher levels of -- the higher levels of new apartment supply introduced into a number of markets over the past year will actually expand this redevelopment opportunity for us over the next couple of years.\nOur external growth pipeline executed through in-house development, prepurchase of joint venture development projects and the acquisition of existing properties will continue to expand over the next year.\nFinally, and importantly, our balance sheet remains in a very strong position with ample capacity to support both our redevelopment and our new growth initiatives.\nCalendar year 2020 was certainly not the year we expected, but MAA's full cycle strategy with a uniquely diversified portfolio across the Sun Belt supported by a strong operating platform and balance sheet position the company to hold up well.\nOur strategy is working and our platform capabilities are strong.\nHowever, it's your intensity and passion for serving those who depend on our company that enables us to truly excel.\nThe recovery we saw beginning in May and June continued across the portfolio through the fourth quarter.\nLeasing volume for the quarter was up 6%.\nThis allowed us to improve average daily occupancy from 95.6% in the third quarter to 95.7% in the fourth quarter.\nIn addition to the improvement in occupancy, we were able to hold blended rents in the fourth quarter, in line with the third quarter and an 80 basis point increase.\nAll in-place rents or effective rent growth on a year-over-year basis improved 1.3% for the fourth quarter.\nAs noted in the release, collections during the quarter were strong.\nWe collected 99.2% of build rent in the fourth quarter.\nThis is the same result we had in the third quarter of 2020.\nWe've worked diligently to identify and support those who need help because of COVID-19.\nThe numbers of those seeking assistance has dropped over time.\nIn April, we had 5,600 residents on relief plans.\nThe number of participants has decreased to just 491 for the January rental assistance plan.\nThis represents less than 0.5% of our 100,000 units.\nWe saw steady interest in our product upgrade initiatives.\nDuring the fourth quarter, we made progress on our interior unit redevelopment program as well as the installation of our Smart Home technology package that includes mobile control of lights, thermostat and security as well as leak detection.\nFor the full year 2020, we installed 23,950 Smart Home packages and completed just over 4,200 interior unit upgrades.\nJanuary's collections are in line with the good results we saw in the fourth quarter.\nAs of January 31, we've collected 98.7% of rent build which is comparable to the month end number for the third and fourth quarters of 2020.\nLeasing volume in January was strong, up 4.9% from last year.\nBlended lease-over-lease rent growth effective during January exceeded last year's results for the first time since March.\nEffective blended lease-over-lease pricing for January was positive 2.2%, 40 basis improvement from the prior year.\nEffective new lease pricing for January was negative 1.8%.\nThis is a 70 basis point improvement from January of last year.\nJanuary renewals effective during the month were up 6.3%.\nOur customer service scores improved 110 basis points over the prior year.\nThis aids to our retention trends, which are positive for January, February and March, as well as lease-over-lease renewal rates for those months, which are in the 5.5 to 6.5 range.\nAverage daily occupancy for the month of January is 95.4%, which is even with January of last year.\n60-day exposure, which is all vacant units plus notices through a 60-day period, is just 7.8%.\nWe're well positioned as we move into 2021.\nLed by job growth, which is expected to increase 3.4% in 2021 versus the 6.1% drop we saw for our markets in 2020, we expect to see the broad recovery in our region and the country continue.\nWe expect Phoenix, Tampa, Raleigh and Jacksonville to be our strongest markets and expect Houston, Orlando and D.C. to recover at a slower rate.\nThey served and care for our residents and our associates, and they have adapted to new business conditions that drive -- and they drive our recovery.\nWhile most buyers have returned to the market, the lack of available for sale properties continues to restrict transaction volume.\nInvestor demand for multifamily product within our region of the country is very strong.\nAnd this supply/demand imbalance is driving aggressive pricing.\nDue to the robust demand, supported by continued low interest rates, cap rates have compressed further and are frequently in the high 3% and low 4% range for high-quality properties in desirable locations within our markets.\nWe expect to remain active in the transaction market this year.\nSo based on pricing levels we're currently seeing, we're not optimistic that we will succeed in finding existing communities that will clear our underwriting hurdles in 2021.\nWhile acquiring will be a challenge, as noted in the earnings guidance, we do plan to come to market with $200 million to $250 million of planned property dispositions this year.\nWe will redeploy those proceeds into our growing development pipeline, which currently stands at $595 million with eight projects in just over 2,600 units.\nIn the fourth quarter, we started construction on the MAA Windmill Hill in Austin, Texas as well as Novel Val Vista, a prepurchase in Phoenix, Arizona.\nBoth of these are lower density suburban projects that we expect to deliver stabilized NOI yields around 6%, well in excess of our current acquisition cap rates.\nDespite increased construction costs as well as some supply chain issues related specifically to cabinets and appliances, our development and prepurchase projects remain on budget with no significant delay concerns at this point.\nWe have several other development sites owned or under contract that we hope to start construction on in 2021 and into 2022.\nWe are encouraged that despite facing some supply pressure, our Phase two lease-up property located in Fort Worth continues to lease up at our original expectations as does our soon to be completed Phase two in Dallas, where over 90% of the units have been delivered.\nTurning to the outlook for new supply deliveries in 2021.\nBased on our assessment and the projection data we have, new supply deliveries across our major markets are projected to remain flat with 2020 levels, at 2.8% of existing inventory.\nConsistent with previous year's, we expect delayed starts, extended construction schedules, canceled projects and overall construction capacity constraints to continue to impact actual supply deliveries to some degree.\nWhile clearly, new supply does have an impact on our business, it's just one side of the equation with demand playing a significant role as well.\nAnd for reasons Eric mentioned in his comments, we believe the demand for multifamily housing within our region of the country will remain strong and improve this year as the economy continues to recover.\nWhen looking at the ratios for expected job growth to new supply deliveries in 2021, we expect leasing conditions in our footprint to improve from last year.\nEncouragingly, the data on permitting activity and construction starts for our region of the country continue to show activity below prepandemic levels.\nThis group -- this drop in activity will likely lead to a moderating level of new supply deliveries into 2022, setting up for what we believe will be an improved leasing environment beyond this year.\nThat's all I have in the way of prepared comments.\nCore FFO of $1.65 per share for the fourth quarter produced full year core FFO of $6.43 per share, which represented a 2.7% growth over the prior year and is well above our internal expectations following the breakout of the pandemic.\nStable occupancy, strong collections and positive pricing performance were the primary drivers of continued same-store revenue growth for the fourth quarter, which is 1.8% and for the full year, which is 2.5%.\nAs expected, same-store operating expenses for the fourth quarter were impacted by growth in real estate taxes, insurance costs and the continued rollout of the bulk internet program, which is included in utilities expenses.\nAnd though some of this pressure will carry into 2021, we expect overall same-store operating expenses to begin moderating this year, which I'll discuss just a bit more in a moment.\nOur balance sheet remains in great shape.\nWe had no significant refinancing activity during the fourth quarter, but we continue to fund the development pipeline and internal redevelopment programs.\nAs Brad mentioned, our development pipeline has increased to eight deals with total projected costs of $595 million.\nDuring the quarter, we funded $104 million of development costs, leaving less than half or another $259 million remaining to be funded toward the completion of the current pipeline.\nThough still growing, our pipeline is still is only about 3% of our enterprise value, which is a modest risk, given the overall strength of our balance sheet and a diversified portfolio strategy.\nAs Tom mentioned, we also made good progress toward the -- during the quarter on our internal programs, funding a total of $40 million toward the interior unit redevelopments, Smart Home installations and external amenity upgrades, bringing our full year funding for lease programs to $76 million, which is expected to begin contributing to our growth more strongly late in 2021 and 2022.\nWe ended the year with low leverage, debt-to-EBITDA of only 4.8 times and with $850 million of combined cash and borrowing capacity under our line of credit.\nFinally, we provided initial earnings guidance for 2021 with our release, which is detailed in our supplemental information package.\nCore FFO for the full year is projected to be $6.30 to $6.60 per share, which is $6.45 at the midpoint.\nThe primary driver of earnings performance is same-store revenue growth, which is projected to be around 2% for the year.\nThis growth is based on the expectation of continued improving economic trends and job growth in our markets, as Tom outlined, and we believe these trends will support both stable occupancy levels, averaging around 95.5% for the year.\nAnd modestly improving pricing trends through the year, driving effective rent growth for the year of around 1.7%.\nAn additional contribution of 30 to 40 basis points of projected revenue growth for the year is related to the final portion of our Double Play bulk internet program.\nWe do expect the first quarter to be our lowest revenue growth for the year as it will bear the full impact of 2020's pricing performance growing from there as the -- head from there as improving leasing trends take full effect.\nSame-store operating expense growth is projected to moderate some as compared to 2020, will continue to be impacted by the rollout of Double Play and higher insurance costs with these costs combining for an estimated 1.4% of the same-store expense growth in 2021.\nBut excluding Double Play and insurance, all other same-store expenses are expected to increase in a more modest 2.5% to 3% range for the full year.\nAnd this includes real estate tax growth of 3.75% at the midpoint, which is moderating, but still somewhat elevated.\nOverhead costs for 2021 are projected to be more normalized, with total overhead expenses expected to be about $107 million for the year, which is a 2.8% increase over the midpoint of our original guidance for 2020.\nOur forecast also assumes development funding of $250 million to $350 million for the year, primarily provided by projected asset sales of $200 million to $250 million.\nAnd given our current forecast, we have no current plans to raise additional equity, and we expect to end the year with our debt-to-EBITDA just below 5 times.\nSo that's all we have in the way of prepared comments.\n",
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"content": "sees 2021 core ffo per share – diluted $6.30 to $6.60.\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: Joining us today are Tom O'Hern, chief executive officer; Scott Kingsmore, senior executive vice president and chief financial officer; and Doug Healey, senior executive vice president of leasing.\nAs we pass the midpoint of the year, we find ourselves at an inflection point.\nAs we said on our last call, we also expected that occupancy hit a low point at March 31, 2021, and that appears to be the case.\nAs we look today, almost all of our operating metrics have started to trend positive, including occupancy.\nAnd many of these metrics are even trending positive compared to pre-pandemic second-quarter 2019.\nImproving operating results, including leasing volumes, occupancy gains and most importantly, tenant sales, which have trended very positively.\nIn fact, to give you some month-by-month numbers, March tenant sales were up 8.6%, April sales were up 9.9%, May and June were both up a strong 15%.\nThose increases are versus the same periods in 2019.\nAnd we're not comparing sales to 2020.\nThose are compared to 2019.\nTraffic is still lagging a bit at around 90% of pre-COVID levels on average.\nSo what we're seeing is an improved capture rate for the retailers compared to pre-COVID.\nWe do expect for traffic to continue to increase in the second half of the year.\nI would say brick-and-mortar mall-based retail is back with a vengeance, albeit helped to some degree by stimulus checks and revenge buying.\nBecause of the robust leasing environment, and it feels much better to us than when we emerged from the great financial crisis in 2009 and 2010.\nSo some of these second-quarter highlights include, on a sequential basis, occupancy gains of 90 basis points.\nLeasing volumes for the quarter and year-to-date were in excess of 2019 levels.\nWe saw same-center NOI growth in 11.5%.\nWe expect the second half of 2021 to be even better.\nWe raised the bottom end of FFO guidance range and moved the midpoint up, even factoring in the impact of issuing equity during the second quarter.\nIn terms of balance sheet activity, we also used the ATM to a small degree in June.\nSince our last earnings call, we issued 6.4 million shares at an average price of $18.20.\nWe raised $114 million of capital, and that was used to reduce debt.\nTrading was good for us in the quarter and in June, and ended the second quarter as the second best performing REIT, up 58%.\nIn other balance sheet activity, in addition to our sale of Paradise Valley Mall in March, we're still expecting to close on the sale of another noncore asset or two in the second half of 2021, and that's in our guidance.\nNet proceeds expected to be in the $100 million range.\nThe balance sheet moves we made in the first half to significantly improved our leverage metrics.\nYear-to-date, we've paid down over $1.3 billion of debt.\nFocusing for a moment now on leasing.\nWe are seeing incredible demand for space, including big box space and perimeter locations.\nAnd that includes multifamily, healthcare fitness, wellness uses, food and beverage and other traditional -- of nontraditional retail uses.\nA great example of the latter is that during this past quarter, we announced a 222,000 square foot SCHEELS sporting goods lease in the former Nordstrom's box at Chandler Fashion Center.\nThis store will be their first in the Arizona and will feature 16,000 gallons of saltwater aquarium, a wildlife mountain, a restaurant and more.\nNontraditional mall retail demand in smaller format also continues to accelerate with the digitally native brands getting active again on our brick-and-mortar locations after a hiatus during COVID.\nOther interesting additions include a host of new electric car companies taking space in many of our malls, including Polestar and Lucid.\nThey've done multiple deals with us this year.\nSo many of our traditional retailers are back with even greater demand for space than pre-pandemic, and Doug will elaborate on that in a few moments.\nWe are very optimistic about our business as we move forward to the balance of the year and into year 2022.\nFor the most part, in the U.S., with 58% of the population vaccinated, the worst of the pandemic is now behind us.\nThe leasing environment is strong and getting better by the month, and we expect significant gains in occupancy, net income and FFO growth as we then move on through the year and into next year.\nBefore I report on the financial highlights of the quarter, I would like to make an announcement.\nAt the end of this year, Jean Wood will be hanging up her Investor Relations cleats and stepping gracefully into retirement.\nJean has been an incredible asset to Macerich for the past 27-plus years.\nHer dedication to the company started within just a few months after Macerich's IPO in 1994, and we sincerely appreciate her contributions, her partnership, and her friendship over these many, many years.\nOver the coming months, Jean will be transitioning her role to Samantha Greening, our new director of investor relations.\nSamantha has been with Macerich for over nine years in various capacities.\nNow on to the highlights of the financial results for the quarter.\nSame-center NOI rebounded very well in the quarter, increasing 11.5% relative to the second quarter of 2020, including our lease termination income.\nGiven the prevalence of retroactive rent relief adjustments within our 2021 results, we believe it is now an appropriate measure of our 2021 same-center operating performance by including rather than excluding lease termination income.\nIf we were to exclude lease termination income, same-center NOI growth still increased 10.4%.\nFunds from operations for the second quarter of 2021 was $0.59 per share, up $0.20 or 51% from second-quarter 2020 at $0.39 per share.\nEBITDA margin has increased over 6% to 63.9% relative to 57.7% at the end of the second quarter in 2020 and is approaching pre-COVID EBITDA margin of 65.3% at the end of the second quarter in 2019.\nAs Doug will soon explain, portfolio occupancy rate has increased in the quarter, and our leasing spreads showed sequential improvement relative to the end of the first quarter of 2021.\nSuffice to say, this was a relatively noisy earnings quarter with many moving pieces supporting our positive earnings news that we've also released today.\nTo expand on those, the primary factors contributing to these NOI and FFO gains are as follows: On the NOI front, one, the quarter increased in the -- the quarter increases include a $0.06 increase in percentage rents resulting from the dramatic increase in sales that we reported earlier today.\nAnd two, common area income has contributed another $0.04 of NOI and FFO, including from our urban parking garages.\nOur common area business has also proven that -- to be quite elastic and resilient and is recovering very well.\nIn fact, our common area revenue performance has exceeded our expectations from when we entered into 2021.\nAnd three, our bad debt expense represents a comparative $50 million or $0.23 improvement quarter-over-quarter, including a $40 million bad debt expense incurred during the second quarter of 2020 at the onset of COVID and a net $10 million bad debt reversal within last quarter, the second quarter of 2021.\nOffsetting these NOI factors were: one, $46 million or $0.21 in reduced minimum rent and recovery income from reduced occupancy as well as approximately $15 million retroactive rent abatements and rent relief of primarily 2020 rents.\nTo pause on this point, the previously mentioned $10 million bad debt reversal in the quarter should be viewed in tandem with a negative $15 million impact of rent abatements from our second quarter.\nIn other words, the net impact of COVID workout deals on same-center NOI in the second quarter was a negative $5 million when considering both line items.\nAnd so if you want to normalize same-center NOI for what is essentially the majority of the remaining COVID workout deals, then add back $5 million or 3% roughly to same-center NOI.\nNote also that as I mentioned last quarter, we expected a reduced amount of retroactive rent abatements in the second quarter, and that was, in fact, the case.\nI also expect that we are in -- and I also said that we expect a very negligible impact in the second half of the year from such retroactive abatement concessions, and we still expect that to be the case.\nSecondly, the shopping center expenses increased by approximately $0.06.\nThis is driven by the widespread closures of our center in the second quarter of last year relative to the full operational status of our portfolio throughout the second quarter of 2021.\nAnd lastly, a few other factors included: one, second quarter included increases of positive $0.09 in valuation adjustments, net of provision for income taxes from our indirect investments in various retailers that we at Macerich have previously invested in through a venture capital firm.\nThis positive impact shows up in other income from unconsolidated joint ventures, and it is worth noting that this was into thinking when we last updated our guidance at the end of the first quarter.\nAnd two, the second quarter also included an increase in land sale income totaling approximately $0.05, which was factored into our original guidance and planning as we entered into 2021.\n2021 FFO is now estimated in the range of $1.82 to $1.97 per share, which represents a $0.03 increase at the midpoint.\nWhile certain guidance assumptions are provided within our supplemental filing, here are some further anecdotes.\nThis guidance range assumes no further government-mandated shutdowns of the retail properties.\nThis guidance factors in the issuance of common equity to date, which I will further describe in a few moments, and Tom also mentioned previously.\nSo as I mentioned during the prior two quarterly calls, we anticipate strong double-digit growth in the second half of 2021, and we still anticipate that to be the case.\nAnd in fact, we have increased the midpoint by $0.03 per share, which is also $0.04 or 2% greater than consensus estimates.\nThis is now due to -- primarily to a much stronger operating environment as reflected within the second-quarter results.\nAnd then as for our balance sheet, within the first-quarter filings, again, we disclosed that we had sold $732 million of common equity through our ATM programs again last quarter.\nSince then, we sold an additional $116 million at an average price of $18.20.\nAs part of our continuing commitment to deleveraging our balance sheet, since the end of our first quarter and through today, we have repaid approximately $1.3 billion debt.\nSources to accomplish this include common stock sold through our ATM programs and dispositions of various assets, including Paradise Valley at the end of March and some numerous sales of undeveloped land parcels in the Phoenix marketplace.\nOur EBITDA continues to improve.\nAnd as our deleveraging efforts continued in the second quarter, the company's debt service coverage ratio improved to two and a half times at the end of the second quarter of '21.\nAnd as previously stated on many occasions, we still do expect to harvest positive operating cash flow after recurring capex and dividends of well over $200 million per year from 2021 through 2023, which supports a path to continued leverage reduction in the range of 8x by the end of 2023.\nThis is relative to our leverage in the quarter of mid-11s at the end of 2020 on the heels of COVID.\nIncluding undrawn capacity on our revolving line of our credit, of which $200 million of the $525 million aggregate capacity is currently outstanding, we have approximately $500 million of liquidity today.\nSo from a secured financing standpoint, we are working on an extension of the loan on Danbury Fair through the middle of 2022, and we are currently marketing the shops at Atlas Park for a refinance loan.\nThose are the company's final two remaining loan leases -- maturities that are within 2021.\nAs the year has progressed and as reported to you last quarter, we continue to see green shoots in the debt capital markets with the execution of a growing number of retail deals on sequentially improving terms.\nThe leasing environment continues to improve with leasing productivity outpacing COVID 2019 levels.\nAnd 2019 was our highest leasing volume year since 2015.\nSales were strong in June, and on top of a very productive April and May.\nJune small shop sales were up 15% when compared to June 2019.\nMost importantly, all categories, including our food and beverage, showed positive comps for the first time since the beginning of the pandemic.\nLooking at the quarter, the second-quarter small shop sales were up 13% over the second quarter of 2019.\nAnd year-to-date through June, small shop sales were up 5% when compared to the same period in 2019.\nOccupancy at the end of the second quarter was 89.4%.\nThis is up 90 basis points from 88.5% in the first quarter.\nOn our last call, we stated that we thought the first quarter would be our trough and we still believe that to be the case, given the healthy retailer environment that exists today, coupled with our strong leasing pipeline, we also anticipate that occupancy to continue to increase throughout the remainder of this year and into 2022 and beyond.\nPace of bankruptcies continues to decrease.\nIn fact, year-to-date, bankruptcies within our portfolio are the lowest we've seen since 2015.\nAnd in the second quarter, only two tenants filed for bankruptcy.\nOne of the two tenants was a theater chain and had just two locations with us.\nBoth locations were rejected and one of those locations has already been released.\nThe other was a small tenant that had eight locations with us to a total of just 9,000 square feet.\nOur trailing 12-month leasing spreads were negative 0.2%, and that's an improvement from negative 2.1% last quarter.\nAverage rent for the portfolio was $62.47 as of June 30, 2021, and that's flat for a year-over-year basis.\n2021 lease expirations remain an important focal point, and we continue to make progress.\nTo date, we have commitments on 81% of our 2021 expiring square footage with another 19% or the balance in the letter of intent stage.\nAnd with -- well on our way into 2022 business with 27% of the expiring square footage committed and 64% at the letter of intent stage.\nIn the second quarter, we opened 251,000 square feet of new stores, resulting in this total annual rent rate of $6.5 million.\nNotable openings in the second quarter include lululemon at Fashion Outlets of Chicago; American Eagle's new concept OFFLINE by Aerie at Freehold Raceway Mall; Indochino at Washington Square; Starbucks at Fashion District, Philadelphia; Blue Nile and Psycho Bunny, Scottsdale Fashion Square; Faherty and the UpWest at Village at Corte Madera; and Vuori at Twenty Ninth Street.\nWe also opened 7 locations with Charming Charlie and 4 locations with FYE.\nWe opened a 24,000 square foot office for the county of San Bernardino at Inland Center.\nSo lastly, we opened the 95,000 square foot Shoppers World at Fashion District Philadelphia in the former Century 21 space, which we lost last year due to a bankruptcy liquidation.\nNow let's look at leases that we signed in the second quarter, and this is where it gets really exciting because unlike our store openings, which represent past leasing, recent signed leases represent what we're doing really well in real time.\nSigned leases define leasing velocity and are the leading indicator of the leasing environment that exists today.\nAnd with that said, we see that the leasing environment as robust and dynamic.\nThis is confirmed by our leasing activity, which is stronger than it's been in recent history.\nAnd let me be clear, and when I say that in recent history, I'm not talking about the 16 months we've been dealing with COVID.\nI'm comparing back to 2019, which, again, was our highest leasing volume year since 2015.\nSo said another way, we're currently on pace for our highest volume leasing year since 2015.\nIn the second quarter, we signed 223 leases for 692,000 square feet, resulting in $37 million in total annual rent.\nIn the first half of this year, we signed 488 leases for some 1.9 million square feet, resulting in $88.7 million in total annual rent.\nNow this represents 18% more leases, 34% more square footage and 11% more rent during the same period from 2019.\nNoteworthy leases signed in the second quarter that includes several new to Macerich retailers, including Versace at Fashion Outlets of Chicago; Christian Louboutin, Alo Yoga and FORWARD at Scottsdale Fashion Square; and Avacado at Village at Corte Madera.\nThese and others bring the total square footage of new to Macerich deals either signed or in lease in the last 12 months to just over 530,000 square feet.\nIn addition to Shoppers World opening at Fashion District Philadelphia, which I mentioned earlier, we signed a second lease with the -- to take over the 72,000 square foot location at Green Acres Mall that Century 21 also rejected to bankruptcy.\nSo by the end of this year, we will have filled the two Century 21 boxes that we lost in the bankruptcy, and this totals approximately 170,000 square feet, an impressive feat considering Century 21's liquidation occurred just 10 months ago.\nOther notable leases signed in the second quarter include Free People Movement at Kierland Commons; Warby Parker at Washington Square; La Encantada and Williams-Sonoma and Lucid Motors at The Village at Corte Madera; Zwilling [Inaudible] at the Tysons Corner Center; and Peloton at Washington Square.\nTurning to our leasing pipeline.\nAt the end of the second quarter, we had signed leases for just over 500,000 square feet of new stores still to open in 2021.\nAnd looking into 2022 and 2023, we have signed these leases for another 935,000 square feet of new stores to open.\nIn addition to these signed leases, we're currently negotiating leases for new stores totaling 1.1 million square feet.\nThe majority of which will open in 2021 or in early 2022.\nIn total, that's over the 2.5 million square feet of signed and in-process leases for new store openings throughout the remainder of this year and into 2022 and 2023.\nAs stated on our last call, and this is our -- the trajectory that we expected and it's only going to improve as we are constantly reviewing and improving new deals on a regular basis.\nSo in conclusion, sales are higher than they were pre-COVID.\nOccupancy is up from last quarter and is expected to continue to increase.\nBankruptcies are at their lowest levels since 2015.\nLeasing velocity is as strong as it's been in recent history.\nSo if I sound overly optimistic, it's because I am.\nMaybe it's the stats and the metrics we talked about.\nThey don't lie, and maybe it's the mood out there in the field.\nIt feels really good.\nMaybe it's the many different uses we now have to choose for them to fill our space.\nMaybe it's just the best-in-class portfolio of shopping centers that we have.\nMaybe it's all of the above, I don't know but what I do know is we find ourselves in a very good place and extremely well positioned to take advantage of the really strong leasing environment that we -- that exists out here today.\n",
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"content": "compname posts quarterly loss per share $0.06.\nquarterly loss per share $0.06.\nsame center net operating income, including lease termination income, increased 11.5% in q2 2021.\nffo, excluding financing expense in connection with chandler freehold, was $0.59 per share-diluted during q2 2021.\nsees fiscal year 2021 eps-diluted from loss of $0.06 to earnings of $0.09.\nsees fiscal year 2021 ffo per share – diluted, excluding financing expense in connection with chandler freehold $1.82 - $1.97.\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: Joining us today are Tom O'Hern, chief executive officer; Scott Kingsmore, senior executive vice president and chief financial officer; and Doug Healey, senior executive vice president of leasing.\n2020 was an extraordinarily tough year in so many ways for all of us.\nOnce COVID stormed the U.S. in mid-March, all of our centers closed, and our tenants quit payment.\nWe quickly adopted significant measures to conserve liquidity, much as we had done during the Great Financial Crisis.\nWe persevered through those dark days of the second quarter, we got most of our centers opened by mid-summer, and all of our centers opened by early October with no further closures.\nIt was a herculean effort by the Macerich team, and I'm very proud of their efforts.\nThere were not a lot of good days, but we battled through it.\nRent collections, for example, during April and May were 35%, that grew to 80% in the third quarter.\nAnd as of today, the fourth-quarter rent collections were at 92% and rising by the week.\n2020 was a year of crisis, but we made it through the year, and things are improving by the week.\nThe COVID daily infection cases are down significantly throughout our markets.\nThe positivity rate is dropping, and hospitalizations are down significantly compared to a month ago.\nWe now have two vaccines in distribution with a third on the way.\nCurrently, 10% of the U.S. population has had at least one dose of the vaccine, and distribution is accelerating.\nNot that the COVID battle is over, but it is much, much better than it was even three months ago, some level of normalcies returning, including restaurant dining and going to the mall.\nOur shoppers have returned.\nIn fact, December sales were approaching 85% of pre-COVID levels even in the midst of a surge in COVID cases.\nGradually, restrictions on capacity and indoor dining are being lifted, and that will help both our traffic and our sales.\nCOVID, among many other things, had the impact of accelerating bankruptcies of dozens of retailers that otherwise likely would have gone into bankruptcy over the next several years but instead, we're accelerated into 2020.\nThe result is our occupancy level is at 90%, which is the lowest since the Great Financial Crisis.\nHowever, within two years post-GFC, we were back to full occupancy.\nWe expect a similar recovery post-COVID.\nWe have worked through most of the bankruptcies from 2020.\nAnd fortunately, the vast majority of those have been reorganizations, not liquidations.\nThe biggest bankruptcy of the year was JCPenney.\nOf our 27 JCPenney locations, only two locations closed, Green Acres and Kings Plaza, both in New York.\nI'm happy to report that we have leases out for signature on both of those locations and should be able to make announcements in the very near future.\nAs you say goodbye to 2020 and gladly watching in the rearview mirror, we are very optimistic about 2021 and the recovery of our business.\nAlthough '21 is going to be a transitional year, it will be much better than 2020 in almost every respect.\nMost of the tenant COVID workout agreements will have some impact on us in '21, both in terms of rent relief, as well as higher-than-normal vacancy rates.\nThat being said, we expect to see occupancy gains in the second half of the year and a gradually improving leasing environment.\nRent collections have improved significantly, up from a September collection rate of 77%, and are now above 90% in the fourth quarter.\nJanuary is also trending above 90%.\nWe have come to agreement on COVID workouts with over 93% of our top 200 tenants.\nLeasing activity picked up significantly in the fourth quarter.\nVolumes, in fact, were 90% of pre-COVID levels of the fourth quarter of 2019.\nWe even have a variety of gated attractions that are planning to open this year, including, Candytopia, ModelLand, and the Museum of Ice Cream.\nMany of our replacement tenants in the former Sears locations will also open in 2021.\nOur 2021 lease expirations are 60% leased today, with the majority of the balance in the letter of intent stage.\nLooking at the balance sheet, most of our 2021 loan maturities have been successfully extended, and negotiations are well under way to renew our line of credit, which matures in the third quarter.\nRetailer traffic and sales continue to pick up with traffic at 80% of pre-COVID traffic and sales, on average, 85% of pre-COVID levels.\nWe expect improvements in both traffic and sales as we progress through 2021.\nThe cost-reductions and cost-containment measures we adopted when COVID hit will be continued into 2021.\nAnd the final point for me, once again, we have been recognized as a leader in sustainability and have achieved the No.\n1 Global Real Estate Sustainability Benchmark Ranking in the North American retail sector.\nThat makes six straight years for that honor.\nHighlights of the financial results for the quarter are as follows.\nFunds from operations for the fourth quarter was $0.45.\nThat's down from the fourth quarter of 2019 at $0.98 per share.\nSame-center net operating income for the quarter was down 33%, and year to date is down 22%.\nAs you will see, these results are unchanged relative to what was filed last week on February 1.\nChanges between the fourth quarter of 2020 versus the fourth quarter of 2019 were driven primarily by the continuing impact of COVID-19 and are as follows, and the figures I'm citing are at the company's pro-rata share.\nOne, $38 million decline from COVID-related rent abatements across permanent and temporary leasing revenue line items.\nFourth-quarter abatements were elevated relative to the third-quarter abatements of $28 million, and this was largely due to the protracted summer closures of several large properties in New York and in California.\nThis resulted in delayed negotiations with tenants at those properties.\nCumulatively for the year, in 2020, we granted $56 million of abatements.\nNumber two, $19 million of COVID-related decline in common area and ancillary revenues, including specialty leasing and temporary tenant revenue, percentage rent revenue, business development revenue, and parking revenue.\nThese declines were generally a continuation of what we experienced in the second and third quarters but were exacerbated in the fourth quarter given the seasonal nature of these types of income.\nHowever, looking forward into '21, we do anticipate growth in each of these more transient income line items, assuming conditions at our properties improve as we do expect.\nIn total, for all of 2020, these line items were down $43 million.\nNumber three, general top-line revenue decrease is totaling approximately $12 million, driven primarily by COVID-related occupancy decreases.\nNumber four, $6 million of bad debt expense in the form of reversals of lease revenue for tenants on a cash basis pursuant to GAAP, that was about $5 million, and then bad debt expenses of about $1 million.\nAs a result of the COVID-related disruption to our business, the bad debt expense line item was significantly elevated in 2020 at $62 million.\nThis was a $52 million increase versus $10 million of bad debt expense in 2019.\nNumber five, there was an $8 million decrease from loss or gain on un-depreciated asset sales or writedowns on consolidated assets.\nThis included a $5 million impairment charge in the fourth quarter of 2020 for undeveloped land that is currently under contract for sale and is expected to close in 2021.\nAnd lastly, offsetting these items, straight-line rent increased $19 million in the fourth quarter.\nThis was driven by applying straight-line rent averaging to all rental assistance lease amendments executed during the fourth quarter.\nSo to summarize some of the major impacts of COVID that impacted real estate NOI in 2020, and again, all these figures are at the company's share, we highlight the following: number one, $56 million of one-time retroactive abatements of rent.\nThese concessions were granted to local business owners and entrepreneurs, to restaurants and other food uses, and then selected cases to national tenants in order to secure near-term lease expirations and to achieve other landlord favorable concessions.\nNumber two, a $43 million of decline in common area and ancillary revenues, percentage rent and temporary -- or excuse me, and parking revenues.\nAgain, these are transient line items, and we would expect those to bounce back.\nAnd number three, we wrote-off an extra $52 million of bad debt expense relative to 2019.\nPlus, in addition, we had another $11 million of rent that was reversed for tenants that are accounted for on a cash basis.\nSo when you add all that up, collectively, it's roughly $162 million of pandemic-driven NOI decline just among those three categories.\n2021 FFO is estimated in the range of $2.05 per share to $2.25 per share.\nWhile certain guidance assumptions are provided within our supplemental filing, I'd like to provide some further details.\nThis guidance range assumes no further government-mandated shutdowns of our retail properties.\nWe are not providing same-center NOI guidance at this time given continued expected impacts of COVID-19 in early 2021.\nBut we do anticipate growth in the same-center NOI starting in the third quarter of '21.\nAnd in fact, at this time, we expect strong double-digit growth in the second half of 2021.\nAnticipated progress on vaccination efforts, continued fiscal stimulus from the federal government, significant pent-up demand from our market consumers, and softer comparables in the last half of the year informed this thinking for ramped up growth later in 2021.\nIn terms of FFO by quarter, we estimate the following cadence: 21% in the first quarter, 24% in 2Q, 25% in 3Q, and the balance 30% in the last quarter.\nWe view 2021 as a transitional year as we pivot away from the disruption and widespread closures caused by COVID during 2020.\nWe do expect that the first-quarter '21 will include lingering effects of COVID, including from retroactive rent adjustments relating to 2020.\nTrough occupancy appears to have been contained to roughly 88%, which we estimate to be at the end of the first quarter.\nAnd we do believe there's an opportunity to grow occupancy later part in the year and certainly over the coming years, which should fuel future operating growth.\nAgain, more details of the guidance assumptions are included in the company's Form 8-K supplemental financial information.\nNow, on to the balance sheet.\nAs addressed in detail within our recent filings, over the last few months, we have successfully extended four secured mortgage loans, totaling over $660 million for extension terms ranging up to three years.\nThose loans included mortgages on Danbury Fair, Fashion Outlets of Niagara, FlatIron Crossing, and Green Acres Mall.\nWe do anticipate securing similar extensions on remaining mortgages that mature in 2021, including from Green Acres Commons, for which we are currently working on a two-year extension.\nIn November, the company financed the previously unencumbered Tysons Vita, this is a residential tower at Tysons Corner.\nThe loan is a $95 million mortgage loan, bearing fixed interest at 3.3% for 10 years.\nAt closing, this generated $45 million of incremental liquidity to the company, and there is some incremental funding capacity remaining under this line item.\nAs mentioned in our recent filings, we continue to make progress on the renewal of our line of credit.\nCash on hand at year-end was $555 million.\nAs Tom previously noted, collection efforts are now over 90%.\nThis improved collection environment is a direct byproduct of the extensive efforts by a vast many within the company to negotiate thousands of agreements with our retailers.\nI can tell you, we are extremely proud of those efforts, as Tom has already noted.\nAs a result, we do anticipate further improvement in collections into 2021.\nAnd in addition, we estimate the collections of both contractually deferred and delayed rent collections in 2021 that relate to 2020 billed rents in the approximate range of $60 million to $75 million.\nDuring 2021, we expect to generate over $200 million of cash flow from operations, and this is after recurring operating and leasing capital expenditures and after dividend.\nThis assumption does not include any potential capital generated from dispositions, refinancings, or issuances of common equity.\nThis operating cash flow surplus will be used to delever the balance sheet, as well as to fund our development pipeline.\nAnd as for development, we expect to spend less than $100 million in 2021, excluding further development expenditures on One Westside, which recall, is independently funded by a construction loan facility.\nIn the fourth quarter, much of our focus, again, was working with retailers to secure rental payments and improve our collection rates.\nLooking at our top 200 rent-paying national retailers, we now have commitments with 176, which is up considerably from last quarter.\nBut more importantly, we now have received payments, or we've worked out deals totaling 93% of the total rent these top 200 pay.\nAnd as a result, our collections continued to improve.\nAs of today, collection rates increased to 89% in the third quarter and 92% in the fourth quarter of 2020.\nOccupancy at the end of the third quarter was 89.7%, that's down 110 basis points from last quarter and down 4.3% from a year ago.\nThis is primarily due to store closures from the unprecedented amount of bankruptcies and early abandonments that occurred throughout 2020.\nTemporary occupancy was 5.9%, and that's down 50 basis points from this time last year.\nTrailing 12-month leasing spreads were a negative 3.6%, and that's down from 4.9% last quarter and down from 4.7% in 2019.\nAverage rent for the portfolio was $61.87 as of December 31, 2020, and this represents a 1.3% increase compared to $61.06 as of December 31, 2019, and a 0.7% decrease compared to $62.29 at September 30, 2020.\n2021 lease expirations continue to be an important focal point.\nAnd to date, we have commitments on 60% of our expiring square footage, with another 40%, or the balance, in the letter of intent stage, disregarding tenants who have closed or have indicated they intend to close.\nIn the fourth quarter, we signed 217 leases for 900,000 square feet.\nThis represents 80% more leases and 1.5 times the square footage when compared to the third quarter of 2020.\nThis also represents 90% of the square footage that we signed in the fourth quarter of 2019.\nNoteworthy leases signed in the fourth quarter include Athleta at Danbury Fair, Louis Vuitton at Scottsdale Fashion Square, Swarovski at La Encantada and Los Cerritos, Madison Reed at SanTan, four renewals with Sephora at Eastland, FlatIron Crossing, Vintage Faire, and Pacific View, as well as a five-store package with Charming Charlie's at Green Acres, FlatIron, Fresno, La Encantada, and Pacific View.\nTurning to openings in the fourth quarter.\nWe opened 59 new tenants in 236,000 square feet, resulting in a total annual rent of over $10 million.\nHenckels at Fashion Outlets of Chicago.\nIn the international arena, we opened another three stores with Lovisa at Deptford Mall, Queens Center, and Kings Plaza, along with Quay Australia at Los Cerritos.\nIn the large-format category, we opened DICK's Sporting Goods at Vintage and Round 1 at Deptford Mall, both in former Sears locations.\nThe digitally native and emerging brands continue to open bricks-and-mortar stores.\nIn the fourth quarter, we opened Amazon 4-Star and Madison Reed at 29th Street, Amazon Books at Los Cerritos, and Purple at Tysons Corner.\nNow, let's move to 2021 and our pipeline.\nOur pipeline remains strong, vibrant, and exciting.\nWe already have signed leases totaling approximately 494,000 square feet, all scheduled to open in 2021, and this list continues to grow.\nLater this year, we look forward to opening an amazing two-level, 11,000-square-foot flagship Dior store at Scottsdale Fashion Square, the first and only Dior in all of Arizona.\nAnd joining Dior will be Louis Vuitton Men, further marking Scottsdale Fashion Square as the one and only true luxury destination in the market, and the state for that matter.\nPrimark is well under construction and will open its highly anticipated 50,000 square foot store at Fashion District Philadelphia in September of this year.\nOther impactful openings to look forward to this year include Dave & Buster's at Vintage Faire, Kids Empire, and Madison Reed at SanTan, Tyra Banks' ModelLand at Santa Monica Place, XLanes at Fresno Fashion Fair, San Bernardino County offices at Inland Center, Bourbon & Bones at SanTan Village, Cooper's Hawk Winery at Boulevard Shops, Shake Shack at 29th Street, Uncle Julio's at South Plains, Faherty at Village of Corte Madera, Lucid Motors at Tysons Corner, and Scottsdale Fashion Square and Marine Layer at Broadway Plaza.\nAnd that's just to name a few.\nAnd when we look at deals still in lease negotiation, we have yet another 435,000 square feet to open in 2021, and this number grows daily.\nLastly, I'm often asked during this unprecedented time of bankruptcies and store closures, who's left to fill this space?\nWhat we need to remember is this pandemic only accelerated the demise of those retailers who are already struggling pre-pandemic.\nWhat's not talked about are those retailers who were strong going into the pandemic and actually came out stronger on the other end.\nPerhaps it's because they had great product and offered great value or perhaps it's because they had strong omnichannel business and used their online strategy to actually increase customer awareness and acquisition.\nThink Lululemon, DICK'S Sporting Goods, Target, Peloton, and Blue Nile, and there are so many others.\nOr how about the strong traditional retailers with significant open-to-buys looking to capitalize on some great new available space in some of the best centers in the country?\nI'm talking about retailers such as Aerie, Madewell, Free People, Levi's, Sephora, Arhaus, Aritzia, Old Navy, Athleta, just to name a few.\nOr brand extensions such as Offline by American Eagle, Gilly Hicks by Abercrombie & Fitch, or DICK's Sporting Goods' new experiential concept.\nOr new and emerging brands like Alo Yoga, Faherty, Psycho Bunny, and Tonal or new electric car manufacturers such as Lucid, Polestar, and VinFast.\nAnd we're deep in discussions with all these retailers and many, many more.\nHowever, we know our shoppers want more than just traditional retail.\nAnd that's why we continue to focus on bringing alternative uses to our campuses and not just retail, uses like office, residential, hospitality, medical, wellness, education, fitness, grocery, service, and even storage.\nAnd that's why we continue to refer to our properties as town centers because that's what they're becoming.\nThey're transformational, and they'll be something for everyone.\nAnd they have to be because that's what our modern-day shopper wants.\n",
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"content": "compname posts quarterly ffo per share $0.45 excluding items.\nquarterly ffo per share $0.45 excluding items.\nmall portfolio occupancy was 89.7% at december 31, 2020 compared to 94.0% at december 31, 2019.\nsees 2021 ffo per share-diluted $2.05 - $2.25.\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 by going through some of the highlights of the quarter, then Jack will go through the operating results and the segments, our balance sheet and cash flow, and guidance for the second quarter.\nI will then share some concluding thoughts before we start our Q&A session.\nBut before we proceed, Jack will now cover the safe harbor language.\nThese statements are based on management's current expectations or beliefs.\nIt has been one year since we first referred to the unfolding uncertainty of COVID-19 and the resulting lockdowns in many of our markets.\nAt that time, we all had little idea of the magnitude of what lay ahead or what the road to recovery in the most challenging operating environment in our history would look like.\nFrom that moment on we were determined to mitigate the impact on our financial results with early and strong actions and continue our investments in strategic initiatives, so we emerge stronger when the pandemic ends.\nThose priorities have enabled us to start 2021 in a good position as we see that the signs of recovery continue to play out in many markets.\nThat said, the recovery is uneven and although many markets are steadily strengthening other markets, particularly in Europe, continue to experience COVID-19 related difficulties, which are resulting in the need for more restrictions and which is impacting the rate of recovery.\nOverall, we believe we are heading in the right direction and expect continued improvement.\nTurning to our financial results.\nIn the first quarter revenue was $4.9 billion, up 1% year-over-year in constant currency.\nWe saw increased demand in many of our key markets and this resulted in a better than expected financial performance.\nOn a reported basis, we recorded an operating profit for the quarter of $98 million.\nExcluding restructuring charges in the prior year, operating profit was up 8% in constant currency, marking a significant sequential improvement from the operating profit decline of 24% in the fourth quarter.\nOperating profit margin was 2%, up 120 basis points from the prior year on a reported basis, and after excluding restructuring charges in the prior year operating profit margin increased 10 basis points.\nEarnings per diluted share was $1.11.\nExcluding restructuring charges in the prior year period, this reflects a constant currency increase of 28%.\nThe improving demand for our services also correlates to the recent results of our Q2 2021 ManpowerGroup Employment Outlook Survey, which indicated broad-based improvements in hiring intentions by employers.\nOur survey of 42,000 employers in 43 countries noted positive net employment trends across the majority of markets, a markedly different and improved outlook compared to the same time last year.\n77% of employers anticipate returns to pre-pandemic hiring levels before the end of 2021, which is also a significant improvement from previous quarter surveys.\nAmong the major markets, the U.S. topped the list in terms of overall hiring intentions for the second quarter.\nAs the demand for skilled workers continues to strengthen, technology-related roles continue to be in demand as has been the case throughout much of the crisis.\nHowever, we are now seeing strengthening demand also for talent within the manufacturing sectors as evidenced by the strong manufacturing PMI data in March.\nEven the industries most impacted by the pandemic, hospitality, entertainment, and airlines are showing positive signs of rehiring with indications they will see significant increases in the second half of this year.\nLogistics also shows no signs of reverting back to pre-crisis levels as the consumer shift to online retail is likely structural.\nAs workplaces reopen and workers return in phases, we are seeing demand for HR skills, especially with a greater focus on hiring and wellbeing.\nAnd this is evidenced in the significantly improved demand for our RPO services.\nOrganizations that were reducing staff levels in 2020 are now seeking strategic and operational flexibility as they optimize their workforce plans, reassess talent needs, and implement hybrid work models.\nWe are well-positioned to provide the expertise and services to meet this rising demand.\nRevenues in the first quarter came in above our constant currency guidance range.\nOur gross profit margin came in at the midpoint of our guidance range.\nOur operating profit was $98 million representing an increase of 161% or 146% on a constant currency basis.\nExcluding restructuring charges in the prior year, operating profit increased 14% or 8% on a constant currency basis.\nThis resulted in an operating profit margin of 2%, which was 50 basis points above the high end of our guidance.\nBreaking our revenue trend down into a bit more detail, after adjusting for the positive impact of currency of about 6%, our constant currency revenue increased 1%.\nAfter considering net dispositions and fewer billing days, the organic days adjusted revenue increase was 2%.\nThis represented a significant improvement from the fourth quarter revenue decline of 6.5% on a similar basis.\nTurning to the earnings per share bridge on Slide 4.\nEarnings per share was $1.11, which significantly exceeded our guidance range.\nWalking from our guidance mid-point, our results included improved operational performance of $0.42, slightly lower than expected foreign currency exchange rates, which had a negative impact of $0.01, a slightly better than expected effective tax rate that added $0.01 and a lower weighted average share count from share repurchases that also added $0.01.\nLooking at our gross profit margin in detail, our gross margin came in at 15.6%.\nUnderlying staffing margin contributed to a 10 basis point reduction.\nA lower contribution from permanent recruitment also contributed 10 basis points of GP margin reduction, which was offset by a higher mix of MSP gross profit on very strong growth in the quarter.\nNext, let's review our gross profit by business line.\nDuring the quarter, the Manpower brand comprised 63% of gross profit, our Experis professional business comprised 21% and Talent Solutions brand comprised 16%.\nDuring the quarter, our Manpower brand reported an organic constant currency gross profit growth of 2%.\nThis was a significant improvement from the 11% decline in the fourth quarter.\nGross profit in our Experis brand declined 6% year-over-year during the quarter on an organic constant currency basis, which represented an improvement from the 14% decline in the fourth quarter.\nTalent Solutions includes our global market-leading RPO, MSP, and Right Management offerings.\nOrganic gross profit increased 6% in constant currency year-over-year, which is an improvement from the 1% growth in the fourth quarter.\nThis was primarily driven by our MSP business with double-digit GP growth.\nOur RPO business experienced significant improvement during the quarter and crossed back to low single-digit percentage growth in gross profit.\nOur Right Management business continues to see a run-off in previous outplacement activity as recovery strengthens and experienced a reduction in gross profit of about 1% year-over-year.\nOur SG&A expense in the quarter was $670 million and represented a 2% decline on a reported basis from the prior year.\nExcluding restructuring charges in the prior year, SG&A was flat on a constant currency basis.\nCurrency changes reflected an increase of $35 million.\nThe remaining underlying decrease was driven by $1 million from net dispositions and $2 million of operational cost reductions.\nSG&A expenses as a percentage of revenue represented 13.6% in the first quarter reflecting first quarter seasonality in revenues.\nThe Americas segment comprised 20% of consolidated revenue.\nRevenue in the quarter was $1 billion, an increase of 1% in constant currency.\nOUP was $44 million.\nExcluding restructuring costs in the prior year, OUP increased 52% in constant currency and OUP margin increased 150 basis points to 4.4%.\nThe U.S. is the largest country in the Americas segment, comprising 61% of segment revenues.\nRevenue in the U.S. was $609 million, representing a flat trend compared to the prior year.\nAdjusting for franchise acquisitions and days, this represented a 1% increase, which is an improvement from the 5% decline in the fourth quarter.\nExcluding restructuring charges in the prior year, OUP for our U.S. business increased 122% year-over-year to $29 million in the quarter.\nOUP margin was 4.8%.\nWithin the U.S., the Manpower brand comprised 35% of gross profit in the quarter.\nRevenue for the Manpower brand in the U.S. increased 7% when adjusted for days and franchise acquisitions, which represents a significant improvement from the 2% decline in the fourth quarter.\nThe Experis brand in the U.S. comprised 29% of gross profit in the quarter.\nWithin Experis in the U.S., IT skills comprised approximately 80% of revenues.\nExperis U.S. revenues declined 11% on a days-adjusted basis during the quarter, representing an improvement from the 14% decline in the fourth quarter.\nThe U.S. Experis business experienced revenue trend improvement during the quarter and exited the quarter in single-digit percentage declines and we expect to cross over to growth late in the second quarter.\nTalent Solutions in the U.S. contributed 36% of gross profit and experienced revenue growth of 6% in the quarter.\nThis was driven by RPO, which experienced significant double-digit revenue growth as hiring programs continued to strengthen.\nMSP business continued to perform well and experienced mid-to-high single digit revenue growth in the quarter.\nCareer transition activity continued to run off, which contributed to revenue reductions in Right Management in the U.S., as other Talent Solutions offerings experienced solid growth.\nProvided there are no significant business restrictions impacting our clients across the U.S., in the second quarter, we expect ongoing underlying improvement and revenue growth for the U.S. in the range of 23% to 27% year-over-year.\nOur Mexico operation experienced a revenue decline of 4% in constant currency in the quarter, representing an improvement from the 6% decline in the fourth quarter.\nAs discussed last quarter, Mexico is in the process of advancing labor legislation that could prohibit certain types of temporary staffing not considered specialized services.\nThe proposed legislation is in the process of review by the Senate.\nWhen the legislation is adopted in final form, we will assess the potential impact on our business.\nIt is possible the legislation could be finalized before the end of April, and we would expect the effective date would be a number of months following enactment of the new law.\nWe will provide a further update during our second quarter earnings call.\nMexico represented between 2.5% and 3% of our global revenues in 2020.\nRevenue in Canada increased 3% in days-adjusted constant currency during the quarter.\nThis represented an improvement from the fourth quarter days-adjusted revenue decline of 10%.\nRevenues in the Other Countries within Americas increased 9% in constant currency reflecting improvement from the 4% increase in the fourth quarter.\nThis was driven by significant constant currency revenue growth in Argentina, Brazil, and Chile.\nSouthern Europe revenue comprised 44% of consolidated revenue in the quarter.\nRevenue in Southern Europe came in at $2.2 billion, crossing over to growth of 2% in constant currency.\nThis reflects ongoing improvement from the fourth quarter trend driven by France, Italy, and Switzerland.\nOUP equaled $73 million.\nExcluding restructuring costs in the prior year, OUP increased 2% in constant currency and OUP margin was flat at 3.4%.\nFrance revenue comprised 55% of the Southern Europe segment in the quarter and increased 1% in days-adjusted constant currency.\nAlthough increased restrictions slowed the rate of underlying revenue improvement, the French business performed well in a challenging environment.\nThis reflects a days-adjusted constant currency decline of about 9% to 10% in January and February and growth of 27% in March as we began to anniversary the onset of the pandemic.\nOUP was $43 million in the quarter and OUP margin was 3.6%.\nAs we begin the second quarter, despite the increased restrictions in France, we are holding associates on assignment relatively steady and cautiously anticipate modest improvement in activity during the quarter.\nWe are estimating a year-over-year constant currency increase in revenues in the range of 68% to 72% in the second quarter overall, as we anniversary the bottom of the pandemic.\nComparing estimated second quarter revenues to pre-crisis levels in constant currency, this represents an 11% decline compared to 2019 levels in the second quarter using the midpoint of our guidance.\nRevenue in Italy equaled $403 million in the quarter, reflecting an increase of 14% in days-adjusted constant currency, which was a significant improvement from the 3% growth in the fourth quarter.\nExcluding restructuring costs in the prior year, OUP increased 13% year-over-year in constant currency to $19 million and OUP margin was flat to the prior year.\nItaly is already performing above pre-crisis 2019 levels in the first quarter.\nWe estimate that Italy will continue to perform very well in the second quarter with year-over-year revenue growth in the range of 42% to 46%.\nRevenue in Spain increased 5% in days-adjusted constant currency from the prior year.\nThis represents a reduction from the significant growth in the fourth quarter, which reflected significant seasonal year-end logistics activity.\nRevenue in Switzerland increased 7% in days-adjusted constant currency from the prior year in the quarter.\nThis represents a significant improvement from the 14% decrease in the fourth quarter.\nOur Northern Europe segment comprised 23% of consolidated revenue in the quarter.\nRevenue declined 2% in constant currency to $1.1 billion, representing a significant improvement from the 11% decline in the fourth quarter driven by all major markets.\nExcluding restructuring costs in the prior year, OUP decreased 14% in constant currency and OUP margin decreased 10 basis points to 0.4%.\nOur largest market in Northern Europe segment is the U.K., which represented 38% of segment revenue in the quarter.\nDuring the quarter, U.K. revenues grew 6% in days-adjusted constant currency, which represented a significant improvement from the 7% decline in the fourth quarter.\nOur U.K. business continues to see strong public sector activity and increased demand across all brands.\nThe U.K. is already performing above pre-crisis 2019 levels in the first quarter.\nWe expect growth in the 30% to 35% constant currency range year-over-year in the second quarter, which also reflects significant new customer activity.\nIn Germany, revenues declined 16% in days-adjusted constant currency in the first quarter, which represented a significant improvement from the 31% decline in the fourth quarter on the same basis.\nAlthough Germany continues to be a difficult market for our industry, we expect to see ongoing revenue improvement in Germany with year-over-year growth in the second quarter.\nIn the Nordics, revenues declined 1% in days-adjusted constant currency, representing an improvement from the 6% decline on the same basis from the fourth quarter.\nRevenue in the Netherlands decreased 4% in days-adjusted constant currency, representing an improvement from the 12% decline on the same basis in the fourth quarter.\nBelgium experienced a days-adjusted revenue decline of 14% in constant currency during the quarter, which also reflects improvement from the 25% decline on the same basis from the fourth quarter.\nOther markets in Northern Europe crossed over to growth in the quarter.\nRevenue increased 18% in constant currency, which represents ongoing improvement from the fourth quarter increase of 9% in constant currency.\nThis was driven by strong revenue growth in Poland, Russia, and Ireland.\nThe Asia Pacific Middle East segment comprises 13% of total company revenue.\nIn the quarter, revenue was flat in constant currency to $627 million.\nOUP was $19 million.\nExcluding restructuring costs in the prior year, OUP decreased 7% in constant currency and OUP margin decreased 30 basis points to 3%.\nRevenue growth in Japan was up 6% in days-adjusted constant currency, which represents a slight improvement from the 5% growth rate in the fourth quarter.\nOur Japan business continues to perform very well and we expect ongoing revenue growth in the second quarter.\nRevenues in Australia were flat in days-adjusted constant currency.\nThis represented an improvement from the 2% decline on the same basis in the fourth quarter.\nRevenue in Other Markets in Asia Pacific Middle East declined 7% in constant currency, which was equal to the rate of revenue decline in the fourth quarter.\nNow that ManpowerGroup Greater China Limited has released their 2020 Annual Report, we'd like to provide a brief update on their results.\nAs we previously disclosed, we remain the largest shareholder and record our approximate 37% share of earnings below operating profit.\nIn 2020, the company successfully managed an extremely challenging environment and recorded year-over-year revenue growth of 6%, which included 28% staffing revenue growth in Mainland China and achieved an increase in profits attributable to owners.\nWe are very pleased with the progress of ManpowerGroup Greater China Limited.\nI'll now turn to cash flow and balance sheet.\nDuring the first quarter, free cash flow equaled $128 million compared to $172 million in the prior year quarter, reflecting more significant accounts receivable declines in the prior year quarter.\nAt quarter end, days sales outstanding decreased year-over-year by almost four days to 56 days.\nCapital expenditures represented $13 million during the quarter.\nDuring the first quarter, we purchased 1.1 million shares of stock for $100 million.\nAs of March 31st, we have 2.2 million shares remaining for repurchase under the 6 million share program approved in August of 2019.\nOur balance sheet was strong at quarter-end with cash of $1.52 billion and total debt of $1.08 billion representing a net cash position of $440 million.\nOur debt ratios at quarter end reflect total gross debt to trailing 12 months adjusted EBITDA of 2.33 and total debt to total capitalization at 31%.\nOur debt and credit facility did not change in the quarter.\nIn addition, our revolving credit facility for $600 million remained unused.\nNext, I'll review our outlook for the second quarter of 2021.\nOur guidance continues to assume no material additional lockdowns or business restrictions impacting our clients in any of our largest markets beyond those that exist today.\nOn that basis, we are forecasting earnings per share for the second quarter to be in the range of $1.36 to $1.44, which includes a favorable impact from foreign currency of $0.10 per share.\nOur constant currency revenue guidance growth range is between 27% and 31%.\nThe midpoint of our constant currency guidance is 29%.\nA slight increase in billing days in the second quarter is partially offset by the slight impact of net dispositions, and as a result, our outlook for organic days adjusted revenue growth is also 29% at the midpoint.\nAdding the context with comparisons to pre-crisis activity levels, this would represent a second quarter organic constant currency decline in the range of minus 4% to minus 6% compared to 2019 revenues.\nWe expect our operating profit margin during the second quarter to be up 180 basis points at the midpoint compared to the prior year.\nThis reflects another quarter of continued strong sequential underlying improvement.\nWe estimate that the effective tax rate in the second quarter will be 34%.\nBased on improved earnings mix, we are now estimating the full-year effective tax rate will be approximately 34%, a 1% improvement from our previous estimate of 35%.\nAs usual, our guidance does not incorporate restructuring charges or additional share repurchases and we estimate our weighted average shares to be 55.4 million.\nThe challenging operating environment has not slowed our investments and plans to accelerate our diversification, digitization, and innovation initiatives.\nOur plans to simplify and prioritize or helping us realize improved efficiencies.\nAmidst all the disruption, what we knew all along has been confirmed and it is the combination of technology and people-first approach of our teams that allows us to confidently manage global uncertainty, deliver locally and collaborate both personally and remotely as necessary.\nA good example of this is the recent recognition by industry analyst ALM for our Digitally Enabled, Data Driven Workforce Solutions in ManpowerGroup Talent Solutions.\nWe are the only company in our industry to have received the Pacesetter designation and it serves as a good example of the strength of our Powersuite technology platforms.\nESG is a very important component of our strategy and we're also proud to have been recognized around the globe for our commitment to driving positive change for people and societies and for our responsible business practices.\nWe have been awarded the highest recognition by EcoVadis, a provider of trusted business sustainability ratings.\nOur France and Norway businesses achieved the global Platinum Award level placing us in the top 1% of all companies assessed.\nWe now have platinum, gold and silver EcoVadis ratings in more than 20 countries.\nFor the 12th year, ManpowerGroup has also been recognized by Ethisphere as a World's Most Ethical Company, again we are the only company in the industry to earn this award.\nThese recognitions are testament to the dedication and commitment of our people to keep the world of work turning in a sustainable and ethical way placing millions of people into jobs during a global pandemic, living our purpose that meaningful and sustainable employment has the power to change the world.\nI'd now like to open the call for Q&A.\n",
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"content": "sees q2 earnings per share $1.36 to $1.44.\nq1 earnings per share $1.11.\nq1 revenue rose 7 percent to $4.9 billion.\n$100 million of common stock repurchased during 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 will start by going through some of the highlights of the third quarter, then Jack will go through the operating results and the segments, our balance sheet and cash flow and guidance for the fourth quarter.\nI will then share some concluding thoughts, before we start our Q&A session.\nBefore we proceed, Jack will now cover the safe harbor language.\nThese statements are based on management's current expectations or beliefs.\nSince our last earnings call in July, much has happened in the world, and I'm pleased to say that we see the early shoots of a global recovery taking hold during the third quarter.\nAnd our results reflect the stronger market environment than we anticipated a few months ago.\nAs a result of the COVID-19 pandemic, we're seeing some of the fastest changes to the global economy with industries like retail, hospitality and aviation previously more resilient than others impacted in ways never seen before.\nOther industries, such as tech, e-commerce and logistics are benefiting from new ways of working and new consumer preferences.\nAt the same time, job protection initiatives have been implemented worldwide and have helped support jobs, livelihoods and households.\nAs a result of the learnings from the first waves of the pandemic, we do not anticipate a repeat of the widescale and sudden shutdowns that we saw in the first phase.\nHowever, recent increases in COVID-19 cases in many parts of the world will force countries to implement new restrictions to mitigate the spread of COVID-19, this time more targeted and localized than prior lockdowns.\nThese factors will make the recovery uneven and our experienced management team is prepared to confidently manage the volatility as circumstances dictate.\nIn fact, we are leveraging the opportunity in this rapidly changing environment to reaffirm our commitment to our strategy of growth through diversification, digitization, and innovation and are continuing to fund investments in these areas.\nAt the same time, we continue to exercise cost controls and drive further efficiency through restructuring actions.\nWe are also continuing to adjust our geographic footprint.\nWe are proud of our transformative shift during this crisis and are now even more ambitious about the speed of our future transformation given the lessons we have learned during the pandemic.\nIn the third quarter, revenue was $4.6 billion, down 14.5% year-over-year in constant currency.\nOn a same day organic basis, our underlying constant currency revenue decreased 15%, a significant improvement from the 27% decline in the second quarter on the same basis.\nOn a reported basis, we recorded an operating profit for the quarter of $62 million.\nExcluding restructuring charges and a special item consisting of impacts from divesting select small country operations, operating profit was $117 million, down 38% in constant currency, excluding the prior year special item.\nReported operating profit margin was 1.3%, down 280 basis points from the prior year and, after excluding the restructuring and other special items, operating profit margin was 2.6%, down 100 basis points from the prior year.\nReported earnings per diluted share of $0.18 reflects the impact of restructuring charges, the loss on dispositions and a discrete tax item.\nExcluding the restructuring and other special items, our earnings per diluted share was $1.20 for the quarter representing a decrease of 39% in constant currency.\nBased on the many conversations I am having with our clients and insights from our thought leadership and proprietary data, I will take a few minutes to share my perspective on what is happening in the labor markets right now and as we look ahead in the near term.\nEarlier this year we asked more than 30,000 employers across 40 plus countries when they predicted hiring would return to pre-pandemic levels.\nAt that point, most were anticipating a sharp shock and swift return to normal, the V shaped recovery.\nThe same survey we conducted three months later shows that 60% now think it will take even longer, toward the end of '21, the much talked about U shaped recovery.\nWith our global perspective across industries, we see more of a two-speed recovery, some industries and in-demand roles bouncing back faster than others, like technology, some manufacturing, professional services and construction, while others including aviation, travel and hospitality impacted for the medium to long-term.\nFor example, we are seeing manufacturing ramp up again yet shipping and ports still causing a lag, and in light manufacturing, especially related to healthcare and PPE products, demand for staff is at a peak.\nIn retail we would be usually expecting the traditional seasonal holiday demand, but with restrictions and shutdowns, retailers are taking a wait and see approach to shopper behavior this season.\nOur logistics clients plan to grow as e-commerce retail growth continues at pace and the demand for cyber security, data analysts and cloud-native software developers is consistently high.\nLooking at labor demand, we believe we'll see a two-speed recovery also here, with the higher skilled workforce recovering quicker than the lower and unskilled workforce, exacerbated by the impact of COVID-19 pandemic has had on some industries that employ lower skilled service workers.\nWe are seeing an accelerated pace of transformation and the trends we have anticipated for some time are happening at a scale and speed we might not have previously thought possible.\nClients in all industries are continuing to deal with this current crisis, responding right now to shifting demand and challenging supply chains, together with technology transformation at rates that they were not prepared for, all while planning for 2021.\nWe believe employers will look for operational and strategic flexibility in an uneven economic recovery, and that policy makers will be focused on measures encouraging jobs markets to rebound as quickly as possible.\nIn this current climate especially, we are confident that our strategy of digitization, diversification and innovation is the right one.\nOur investment to grow Experis, our professional resourcing and IT expertise sets us up for even stronger growth following the pandemic as companies continue to accelerate technology investments.\nTalent Solutions, the brand we launched in January combining our higher value, global market-leading offerings, RPO, Right Management and TAPFIN MSP continues to help clients with customized workforce solutions in this downturn while preparing them for future growth.\nWe are proud of our global leadership in this space.\nIn August our TAPFIN MSP offering was the only company in our industry to be recognized by the Everest Group as both a Star Performer and Global Leader in its Contingent Workforce Management Index, scoring highly for vision, strategy and innovation.\nThis impressive accolade also recognizes TAPFIN's analytics platform IntelliReach, part of ManpowerGroup's best-in-class tech stack PowerSuite, which offers advanced data analytics and benchmarking to provide clients with talent attraction, retention and development for both contingent and permanent talent.\nOur Manpower brand's market leading footprint will enable many organizations to leverage operational and strategic workforce flexibility as they navigate the short and long-term effects of the pandemic.\nWe are also continuing to make good progress in our technology roadmap and the scaling at speed of our Top Down and Bottom Up Innovation initiatives.\nOne of our main innovation initiatives is our MyPath program which is now scaling to 14 markets this year and next across both our Manpower and Experis brands.\nThe data and learnings to date on how to identify adjacent skills, assess, coach and upskill have allowed us to shift and reskill people at speed from declining to high demand sectors during this pandemic.\nWe have also upskilled more than 2,000 of our own Talent Agents to be expert in assessment and data-driven recruitment and continue to improve on reassignment rates, improved utilization rates and increased satisfaction levels with those clients and candidates that engage in MyPath.\nWe also continue to invest in our Center of Excellence in People Analytics and Assessment, led by our Chief Talent and Data Scientist and a 40 plus strong global innovation team.\nWe are accelerating the deepening, widening and refining of our proprietary data.\nWe know data on its own does not bring value.\nWe also know that our vast access to people, workers, clients and jobs together with our aggregate data around interactions, experiences and outputs, combined with our meaningful interpretations are what create the insights and actions that can bring data-driven changes in behavior.\nThis is how we are accelerating our progress around AI-driven recruitment and skilling up, to ensure our recruiters can use data-based decision-making for the best match, to help clients better predict performance and to support our candidates by knowing more about their skills and potential.\nRevenues in the third quarter came in above our constant currency guidance range.\nOur gross profit margin also came in above our guidance range.\nOn a reported basis, our operating profit was $62 million.\nExcluding special items consisting of restructuring charges and a loss on dispositions, our operating profit was $117 million, representing a decline of 37%, or a decline of 38% on a constant currency basis.\nThis resulted in an operating profit margin of 2.6% before restructuring charges and other special items, which was above the high end of our guidance.\nI will cover the restructuring charges and the dispositions in more detail by segment.\nBreaking our revenue trend down into a bit more detail, after adjusting for the positive impact of currency of about 2%, our constant currency revenue declined 14.5%.\nThe impact of acquisitions and billing days were minor resulting in an organic days adjusted revenue decrease of 15%.\nThis represented a significant improvement from the second quarter revenue decline of 27% on a similar basis.\nThis also represents five consecutive months of improvement beginning in May when governments began lifting countrywide lock-down requirements.\nOn a reported basis, earnings per share was $0.18, which included the restructuring charges of $50 million which represented a negative $0.72, certain discrete tax charges of $12 million and a loss from dispositions of $6 million which combined had a $0.30 negative impact.\nExcluding the restructuring and other special items, earnings per share was $1.20, which exceeded our guidance range.\nIncluded within this result was improved operational performance of $0.47, $0.03 on better than expected foreign currency exchange rates before restructuring and other special items, $0.04 on an improved effective tax rate and $0.03 on improved interest and other expenses.\nLooking at our gross profit margin in detail.\nOur gross margin came in at 15.8%.\nUnderlying staffing margin contributed to a 20 basis points reduction and a lower contribution from permanent recruitment contributed to a 30 basis point reduction.\nThis was offset by 20 basis points of increased gross profit margin from career transition growth within Right Management.\nOther and accrual adjustments include about 20 basis points of favorable direct cost adjustments in France partially offset by decreased margin in our Proservia managed services business.\nNext, I'll review our gross profit by business line.\nDuring the quarter, the Manpower brand comprised 65% of gross profit, our Experis professional business comprised 20%, and Talent Solutions brand comprised 15%.\nDuring the quarter, our Manpower brand reported an organic constant currency gross profit decrease of 17%.\nThis was a significant improvement from the 37% decline in the second quarter.\nGross profit in our Experis brand declined 19% year-over-year during the quarter on an organic constant currency basis which represented a slight improvement from the 20% decline in the second quarter.\nAlthough Experis revenues were only down in the very low double-digits percentage range during the quarter, the lower contribution from perm gross profit combined with a higher mix shift to enterprise clients and lower utilization of consultants within our Germany IT end-user support business drove a more significant gross profit decline.\nTalent Solutions includes our global market leading RPO, MSP and Right Management offerings.\nOrganic gross profit growth in the quarter decreased 2% in constant currency year-over-year which is a significant improvement from the 12% decline in the second quarter.\nThis was primarily driven by our career transition activity within our Right Management business which increased double-digit percentages year-over-year during the quarter and our MSP business which grew mid-single-digit percentages while our RPO business improved the rate of revenue decline significantly during the third quarter from the second quarter trend.\nOur reported SG&A expense in the quarter was $664 million including the restructuring charges of $50 million and the loss on dispositions of $6 million.\nExcluding the special items, SG&A of $608 million represented a decrease of $46 million from the prior year after excluding the prior year gain on the China IPO.\nThis underlying decrease was driven by $60 million of operational cost reductions offset by an increase of $12 million from currency changes and $2 million from acquisitions.\nOn an organic constant currency basis, excluding special items, SG&A expenses decreased 9% year-over-year.\nSG&A expenses as a percentage of revenue in the quarter represented 13.3%, excluding restructuring and other special items, which continued to reflect the significant deleveraging on the material drop in revenues year-over-year.\nAs a result of strong cost management actions across all of our businesses, the impact of the revenue and gross profit declines was significantly offset by SG&A decreases.\nThe Americas segment comprised 20% of consolidated revenue.\nRevenue in the quarter was $929 million, a decrease of 11% in constant currency.\nIncluding restructuring costs, OUP equaled $32 million and OUP margin was 3.4%.\nExcluding restructuring costs, OUP was $48 million and OUP margin was 5.2%.\nOf the $17 million of restructuring costs, $15 million related to the US primarily representing the closure of real estate as we eliminate fixed costs based on accelerated digitization activities.\nThe balance of the restructuring costs related to Canada and were real estate related.\nThe US is the largest country in the Americas segment, comprising 62% of segment revenues.\nRevenue in the US was $579 million, representing a decrease of 13% compared to the prior year.\nAdjusting for billing days and franchise acquisitions, this represented a 16% decrease which is an improvement from the 23% decline in the second quarter.\nDuring the quarter, OUP for our US business decreased 14% to $34 million, excluding restructuring charges.\nOUP margin was 5.9%, excluding restructuring charges, and reflected the benefit of higher margin career transition activity within Right Management.\nWithin the US, the Manpower brand comprised 33% of gross profit during the quarter.\nRevenue for the Manpower brand in the US was down 21% when adjusted for days and franchise acquisitions.\nThe Experis brand in the US comprised 30% of gross profit in the quarter.\nWithin Experis in the US, IT skills comprise approximately 80% of revenues.\nRevenues within our IT vertical within Experis US declined 15% during the quarter and total Experis US revenues declined 16.5% as the Finance and Engineering verticals experienced more significant decreases.\nTalent Solutions in the US contributed 37% of gross profit and experienced revenue growth of 7% in the quarter.\nWithin Right Management in the US, revenues increased 30% year-over-year driven by significant career transition activity during the quarter.\nThe US MSP business continues to perform very well in the current environment and again experienced year-over-year increased revenues during the third quarter.\nThe US RPO business experienced a significant improvement in the rate of revenue decline during the third quarter moving to low double-digit declines in the third quarter and also recently added new RPO clients which we expect will drive further improvement in future periods.\nProvided there are no significant reversals of reopening activity across the US, in the fourth quarter we expect ongoing improvement and an overall rate of decline in the US of minus 8% to minus 13%.\nOur Mexico operation experienced a revenue decline of 9% in constant currency in the quarter representing a slight improvement from the 10% decline in the second quarter.\nThe business environment in Mexico continues to be challenging as a result of the COVID-19 crisis.\nRevenue in Canada declined 10% in constant currency during the quarter.\nAdjusting for billing days, this represented a 11% decrease which was a further decrease from the second quarter and reflected the exit of certain lower margin enterprise clients during the quarter.\nRevenue in the Other Countries within Americas declined 6% in constant currency.\nSouthern Europe revenue comprised 46% of consolidated revenue in the quarter.\nRevenue in Southern Europe came in at $2.1 billion, a decrease of 15% in constant currency.\nThis is a significant improvement from the second quarter trend driven by France and Italy.\nOUP including restructuring costs and the loss on dispositions equaled $72 million.\nExcluding restructuring costs and the loss on dispositions, OUP decreased 30% from the prior year in constant currency and OUP margin was down 90 basis points.\nThe dispositions represent the sale of our Serbia, Slovenia, Bulgaria and Croatia businesses to a franchisee which should be beneficial for the profit margin of the region going forward.\nOf the $8 million of restructuring costs in the region, just under half relates to Spain for real estate optimization and streamlining of operations, about a quarter relates to Italy for real estate optimization, about 20% relates to Switzerland for real estate optimization and the small remaining balance related to streamlining in other Southern Europe countries.\nFrance revenue comprised 57% of the Southern Europe segment in the quarter and was down 17% from the prior year in constant currency.\nThis reflects a progressive improvement over the course of the quarter.\nOUP was $51 million in the quarter and OUP margin represented 4.3%.\nAs I mentioned earlier, France benefited from direct cost accrual adjustments in the quarter which improved their OUP by approximately $10 million.\nAlthough improvement has been steady in France, the rate of improvement in the revenue trend has slowed in recent weeks.\nWe are cautiously estimating a gradual improvement in the rate of decline for the fourth quarter of between minus 10% to minus 15% on a constant currency basis.\nRevenue in Italy equaled $351 million in the quarter representing a decrease of 12% in constant currency after adjusting for billing days.\nThis reflects a progressive improvement over the course of the quarter.\nExcluding restructuring charges, OUP declined 29% year-over-year in constant currency to $17 million and OUP margin decreased 130 basis points to 4.9%.\nWe estimate that Italy will continue to see gradual improvement in the rate of revenue decline during the fourth quarter with a decline within a range of minus 7% to minus 12%.\nRevenue in Spain decreased 6% on a days-adjusted constant currency basis from the prior year in the quarter.\nThis represents a significant improvement from the 13% decrease in the second quarter.\nRevenue in Switzerland decreased 13% on a days-adjusted constant currency basis from the prior year in the quarter.\nThis represents a significant improvement from the 19% decrease in the second quarter.\nOur market leading Swiss business has been performing well in a challenging environment.\nOur Northern Europe segment comprised 21% of consolidated revenue in the quarter.\nRevenue declined 22% in constant currency to $948 million.\nOUP including restructuring costs represented a loss of $23 million.\nExcluding restructuring costs, OUP was $2 million and OUP margin was 20 basis points.\nOf the $24 million of restructuring costs, two-thirds relates to Germany where we have streamlined our operations, notably within our Proservia business, and have taken additional actions to reduce finance and shared services back office costs, about a quarter related to the Netherlands where we have streamlined our operations, and the balance relates to the UK and Sweden where we have also streamlined operations.\nOur largest market in the Northern Europe segment is the UK, which represented 34% of segment revenue in the quarter.\nDuring the quarter, UK revenues decreased 22% in constant currency which was unchanged from the second quarter trend.\nWe are cautious in our outlook for the UK business and estimate a slight improvement in the rate of revenue decline in the fourth quarter.\nIn Germany, revenues declined 32% on a constant currency adjusted for billing days basis in the third quarter which was unchanged from the second quarter trend.\nThe restructuring actions we took in the third quarter will improve the profitability of this business in future periods.\nWe remain very cautious on our Germany business in the near term and only expect a very slight improvement in the revenue trend in the fourth quarter.\nIn the Nordics, revenues declined 15% on a days-adjusted constant currency basis.\nThe two primary businesses in the Nordics are Norway and Sweden.\nOn a days-adjusted constant currency basis, Norway experienced a decline of 11% and Sweden declined 21%.\nBoth countries experienced a significant improvement in the rate of decline from the second quarter trend.\nRevenue in the Netherlands decreased 23% in constant currency which represents a very slight improvement from the second quarter trend on a days-adjusted basis.\nBelgium experienced a days-adjusted revenue decline of 29% in constant currency during the quarter which reflects significant improvement from the second quarter trend.\nOther Markets in Northern Europe had a revenue decrease of 5% in constant currency.\nThis reflects significant improvement from the second quarter.\nThe Asia Pacific Middle East segment comprises 13% of total company revenue.\nIn the quarter, revenue decreased 6% in constant currency to $596 million.\nThe APME region continues to perform relatively well during this crisis.\nExcluding restructuring charges and prior year gain on the China IPO, OUP margin decreased 90 basis points.\nAll of the $1.5 million of restructuring costs involve Australia where we continue to simplify the business after exiting certain low margin staffing clients.\nRevenue growth in Japan was up 5% on a constant currency basis and, after adjusting for billing days, this represented a 6% growth rate which was equal to the growth rate in the second quarter.\nOur Japan business continues to perform very well and we expect a revenue trend of flat to low single-digit growth in the fourth quarter.\nRevenues in Australia declined 7% in constant currency on a days adjusted basis.\nThis represented a significant improvement from the 21% decline in the second quarter as we anniversaried the exiting of certain low margin business.\nRevenue in Other Markets in Asia Pacific Middle East declined 10% in constant currency.\nI'll now turn to cash flow and balance sheet.\nFree cash flow equaled $685 million for the first nine months of the year.\nThis compared to underlying free cash flow in the prior year of $356 million after excluding the sale of the France CICE receivable.\nDuring the third quarter, free cash flow equaled $108 million compared to $206 million in the prior year quarter.\nAt quarter end, days sales outstanding decreased by about three days.\nCollection activities continue to be one of our top priorities.\nCapital expenditures represented $31 million during the first nine months of the year.\nWe did not purchase any shares of stock during the third quarter and our year-to-date purchases stand at 871,000 shares of stock for $64 million.\nAs of September 30, we have 5.9 million shares remaining for repurchase under the 6 million share program approved in August of 2019.\nOur balance sheet was strong at quarter-end with cash of $1.59 billion and total debt of $1.09 billion, resulting in a net cash position of $500 million.\nOur debt ratios remain comfortable at quarter-end with total gross debt to trailing 12 months EBITDA of 2.21 times and total debt to total capitalization at 29%.\nOur debt and credit facilities did not change in the quarter and the earliest Euro note maturity is not until September of 2022.\nIn addition, our revolving credit facility for $600 million remained unused.\nNext, I'll review our outlook for the fourth quarter of 2020.\nOur guidance continues to assume no material lockdowns impacting economic activity in any of our largest markets.\nOn that basis, we are forecasting earnings per share for the fourth quarter to be in the range of $1.06 to $1.14, which includes a favorable impact from foreign currency of $0.03 per share.\nOur constant currency revenue guidance range is between a decline of 10% to a decline of 12%.\nThe mid-point of our constant currency guidance, a decline of 11%, also reflects the organic days-adjusted rate of decline as billing days for Q4 are only very slightly higher year-over-year and the impact of net dispositions is also very slight.\nThis represents an improvement of about 4% from the organic days adjusted constant currency decline of 15% in the third quarter.\nWe expect our operating profit margin during the fourth quarter to be down 130 basis points compared to the prior year.\nThis reflects continued strong cost actions but at lower levels of year-over-year SG&A reductions as activities levels progressively increase.\nWe expect our income tax rate in the fourth quarter to approximate 39% which continues to reflect an outsized impact of the French Business Tax effect that I discussed in previous quarters.\nLate September, the government of France issued their preliminary budget for 2021.\nFrance is planning to reduce the French Business Tax, known as CVAE, by 50% in 2021.\nIf the budget is approved as drafted, this would improve our pre-crisis level global effective tax rate by 3% to 3.5%.\nThis improvement in the effective tax rate would be partially offset by higher compensation costs attributed to profit sharing schemes in France.\nAdditionally, France has indicated that they will continue with their multi-year corporate tax reform schedule which is expected to separately reduce the France corporate tax rate by about 3% next year and the impact to the consolidated effective tax rate is a reduction between 50 and 75 basis points.\nI will give a further update on the anticipated impacts from these items at our fourth quarter earnings call after the French budget is formally approved by their government.\nAs usual, our guidance does not incorporate restructuring charges or additional share repurchases and we estimate our weighted average shares to be 58.6 million.\nWe are very well-positioned to leverage the lasting legacy of the pandemic, new work models with more flexible and remote work, more focus on health and wellbeing, greater use of technology and faster changing skill shifts, and the need for strategic and operational workforce transformation, at scale and speed.\nLet me also say how incredibly proud I am of the critical work our talented teams have provided by helping people and companies around the world respond and reset following these unprecedented crises.\nFrom redeploying and reskilling catering and hospitality workers to new roles in in-demand sectors like logistics, virtual customer service and pharmaceuticals, to redeploying financial programmers to install and program COVID testing robots, and providing the skilled IT talent, lab technicians, and skilled workers for PPE production.\nWe have remained steadfast in our purpose and committed to providing our clients, candidates and our communities around the world with skilled talent and meaningful employment, all with health and safety at the center.\nWe can be certain too, that helping people adapt from declining industries and jobs to growth sectors and future proof roles will be critical in this next normal.\nAnd it will be the responsibility of business, government and educators to support people with swift, targeted upskilling programs so that value creation is shared with the many, not just the few, for the benefit of us all.\nAt ManpowerGroup we are fully committed to being part of the solution and the actions we are taking to digitize, diversify and innovate will position our company for further success in 2021 and beyond.\nI would now like to open the call for Q&A.\n",
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"content": "manpowergroup sees q4 total revenue down 8-10%.\nmanpowergroup - sees q4 total revenue down 8-10%, down 10-12% in constant currency - presentation.\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'll start by going through some of the highlights of the quarter.\nThen Jack will go through the operating results in the segments, our balance sheet and cash flow and guidance for the first quarter.\nI will then share some concluding thoughts before we start our Q&A session.\nBut before we proceed, Jack will now cover the safe harbor language.\nThese statements are based on management's current expectations or beliefs.\nDuring our earnings call in October, we talked about signs of recovery in the third quarter.\nPleased to say we saw this trend of slow and steady recovery continuing into the fourth quarter.\nDespite experiencing a series of new COVID-19-related restrictions around the world, our results reflect a stronger market environment than we had anticipated with revenue growth and new opportunities in select markets.\nWe're now seeing clear signs of a case shaped to speed recovery.\nThe bifurcation is evident between industries able to adjust to the uncertain environment than others like travel, hospitality and entertainment industries being significantly impacted by the lockdowns.\nThis is also reflected in the labor market divide where demand for workers has improved in some industries and in others remain stalled with high unemployment rates.\nOrganizations investing in digitization and automation are already emerging stronger.\nAnd that is driving an acceleration in the polarization of the workforce between the skilled and the unskilled, creating a risk of continued post-pandemic skills-based polarization of labor markets in many countries.\nThis is also captured in our recent Skills Revolution thought leadership series, Renew, Reskill and Redeploy, conducted across 26,000 employers in 40-plus countries.\nThose companies that plan to speed up the digitization plans as a result of the pandemic are maintaining or increasing their headcount in contrast to others who've put their plans on hold.\nMany of the trends we've been predicting have accelerated significantly.\nAdversity can often be a force for society to change at an accelerated pace.\nCompanies have digitized better speed and scale they could never have imagined and we expect these actions will continue into 2021.\nWith that context, I would now like to turn to our financial results.\nIn the fourth quarter, revenue was $5.1 billion, down 6% year-over-year in constant currency, a significant improvement from the 14% decline in the third quarter on the same basis.\nOn a reported basis, we recorded an operating profit for the quarter of $138 million.\nExcluding restructuring charges, operating profit was $151 million, down 24% in constant currency.\nReported operating profit margin was 2.7%, down 100 basis points from the prior year.\nAnd after excluding restructuring, operating profit margin was 3%, down 70 basis points from the prior year.\nReported earnings per diluted share of $1.33 reflects the impact of restructuring charges.\nExcluding the restructuring charges, our earnings per diluted share was $1.48 for the quarter, representing a decrease of 39% in constant currency.\nTurning to the full year results for a moment.\nReported earnings per share for the year was $0.41.\nExcluding restructuring charges and special items, earnings per share was $3.67 and represented a constant currency decrease of 53% year-over-year.\nRevenues for the year decreased 14% in constant currency to $18 billion and reported operating profit was $188 million.\nExcluding restructuring and special items, operating profit was $377 million, which represented a 48% constant currency decline year-over-year.\nAlthough 2020 was one of the most challenging years in recent history, we were able to reduce operational SG&A to significantly offset gross profit declines while remaining committed to our strategic investments for digitization, diversification and innovation.\nIn our Manpower business, logistics demand was strong in the fourth quarter driven by the shift in how consumers are buying and an extended holiday delivery peak.\nWhile we are seeing increases -- increasing cases of COVID-19 in several places, we're also seeing strong safety protocols, increased testing advanced by technology, allowing companies to avoid full shutdowns, manage plant productivity by segregating production lines, all reducing the infection risks and ensuring a safe work environment.\nIn Experis, our IT and resourcing and solutions business, we're seeing positive trends in many industries.\nAnd there continues to be good demand for a range of IT skills in a number of markets.\nMany organizations that put investments on hold or made cuts in 2020 are beginning to rebuild and reinvest.\nOthers are seeking the offerings of our Talent Solutions business as they look to optimize their supplier management and delivery solutions and shift more to full-service HR providers with the tools and tech across markets to build just-in-case resilience and flexibility.\nGoing back to the quarterly results on slide three, revenues in the fourth quarter came in above our constant currency guidance range.\nOur gross profit margin came in at the low end of our guidance range.\nOn a reported basis, our operating profit was $138 million.\nExcluding restructuring charges, our operating profit was $151 million, representing a decline of 21% or a decline of 24% on a constant currency basis.\nThis resulted in an operating profit margin of 3% before restructuring charges, which was above the high end of our guidance.\nBreaking our revenue trend down into a bit more detail.\nAfter adjusting for the positive impact of currency of about 4%, our constant currency revenue declined about 6.5%, which rounds to 6% on a single-digit percentage basis.\nAs acquisition and billing days had no net effects, the organic days adjusted revenue decline was also about 6.5%.\nThis represented an improvement from the third quarter revenue decline of 15% on a similar basis and two consecutive quarters of significant improvement from the second quarter of 2020.\nTurning to the earnings per share bridge on slide five.\nOn a reported basis, earnings per share was $1.33, which included the restructuring charges of $12 million, which, including related tax impacts, represented a negative $0.15.\nExcluding the restructuring charges, earnings per share was $1.48, which exceeded our guidance range.\nIncluded within this result was improved operational performance of $0.38; better-than-expected foreign currency exchange rates, which added $0.03; a lower weighted average share count from share repurchases that added $0.02, offset by higher other expenses that had a negative impact of $0.05.\nLooking at our gross profit margin in detail.\nOur gross margin came in at 15.8%.\nUnderlying staffing margin contributed to a 40 basis points reduction.\nThe anniversary of the incremental fee-owned subsidies in France in October and the mix of higher seasonal year-end enterprise activity within the Manpower brand drove the overall additional year-over-year staffing margin decline from the third quarter result of down 20 basis points year-over-year.\nA lower contribution from permanent recruitment also contributed 30 basis points of GP margin reduction.\n10 basis points of increased gross profit margin from career transition growth within Right Management was offset by a 10 basis point decline driven by a higher mix of seasonal other nonstaffing activity.\nNext, let's review our gross profit by business line.\nDuring the quarter, the Manpower brand comprised 65% of gross profit, our Experis Professional business comprised 20% and Talent Solutions brand comprised 15%.\nDuring the quarter, our Manpower brand reported an organic constant currency gross profit decrease of 11%.\nThis was an improvement from the 17% decline in the third quarter.\nGross profit in our Experis brand declined 14% year-over-year during the quarter on an organic constant currency basis, which represented an improvement from the 19% decline in the third quarter.\nThe lower contribution from perm gross profit drove a more significant gross profit decline compared to the revenue decline in Experis.\nTalent Solutions includes our global market-leading RPO, MSP and Right Management offerings.\nOrganic gross profit crossed back over to growth in the quarter at 1% in constant currency year-over-year, which is an improvement from the 2% decline in the third quarter.\nThis was primarily driven by our MSP business, which had a very strong fourth quarter with double-digit GP growth and increased year-over-year career transition activity within our Right Management business.\nOur RPO business experienced a significant improvement in the rate of decline during the fourth quarter from the third quarter, reaching single-digit percentage declines in the fourth quarter.\nOur reported SG&A expense in the quarter was $661 million, including the restructuring charges of $12 million.\nExcluding the restructuring charges, SG&A of $649 million represented a decrease of $19 million from the prior year.\nThis underlying decrease was driven by $40 million of operational cost reductions, a decrease of $2 million from net dispositions, partially offset by an increase of $22 million from currency changes.\nOn an organic constant currency basis, excluding restructuring, SG&A expenses decreased 6% year-over-year, which represented a very strong recovery against the 10% gross profit decline.\nSG&A expenses as a percentage of revenue continued to improve sequentially and represented 12.8% in the fourth quarter, excluding restructuring.\nThe Americas segment comprised 20% of consolidated revenue.\nRevenue in the quarter was $1 billion, a decrease of 3% in constant currency.\nOUP was $48 million and OUP margin was 4.7%.\nThe U.S. is the largest country in the Americas segment, comprising 61% of segment revenues.\nRevenues in the U.S. was $622 million, representing a decrease of 4% compared to the prior year.\nAdjusting for franchise acquisitions, this represented a 5% decrease, which is a significant improvement from the 16% decline in the third quarter.\nDuring the quarter, OUP for our U.S. business decreased 11% to $30 million.\nOUP margin was 4.8%.\nThe U.S. continued to benefit from higher-margin career transition activity within Right Management year-over-year but at a reduced level from the third quarter.\nWithin the U.S., the Manpower brand comprised 36% of gross profit during the quarter.\nRevenue for the Manpower brand in the U.S. was down 2% when adjusted for days and franchise acquisitions, which reflects a material improvement from the 21% decline in the third quarter.\nWe expect the Manpower business to cross over to growth on a quarterly basis in Q1.\nThe Experis brand in the U.S. comprised 27% of gross profit in the quarter.\nWithin Experis in the U.S., IT skills comprised approximately 80% of revenues.\nRevenues within our IT vertical within Experis U.S. declined 13% during the quarter and total Experis U.S. revenues declined 14% as the finance and engineering verticals experienced greater decreases.\nThis trend reflects a slight improvement from the third quarter year-over-year rate of revenue decline.\nTalent Solutions in the U.S. contributed 37% of gross profit and experienced revenue growth of 6% in the quarter.\nWithin Right Management in the U.S., revenues increased 8% year-over-year driven by career transition activity during the quarter.\nMSP business continues to perform very well in the current environment and again experienced year-over-year increased revenues during the fourth quarter.\nThe U.S. RPO business crossed back over to revenue growth during the fourth quarter, moving to a low double-digit revenue increase driven by RPO client wins as well as additional projects during the fourth quarter.\nProvided there are no significant business restrictions impacting our clients across the U.S., in the first quarter, we expect ongoing improvement in an overall rate of decline in the very low single digits for the quarter overall.\nOur Mexico operation experienced a revenue decline of 6% in constant currency in the quarter, representing an improvement from the 9% decline in the third quarter.\nDuring the fourth quarter, the President of Mexico introduced the labor proposal that would prohibit certain types of temporary staffing outside of specialized services.\nIf enacted, we expect this could significantly restrict our activity in Mexico.\nThe bill is still under development in the Mexican legislator and could be finalized in March or April.\nWe will provide an update during the first quarter earnings call, at which time we expect to have greater clarity on the likelihood of adoption and the specific restrictions as they would apply to us.\nMexico represented between 2.5% and 3% of our global revenues in 2020.\nRevenue in Canada declined 10% in constant currency during the quarter.\nThis represented a slight improvement from the third quarter billing days adjusted revenue decline of 11%.\nRevenue in the other countries within Americas crossed back over to growth with a 4% increase in constant currency, reflecting a significant improvement from the 6% decline in the third quarter.\nThis was driven by significant revenue growth in Argentina, Brazil and Chile.\nSouthern Europe revenue comprised 46% of consolidated revenue in the quarter.\nRevenue in Southern Europe came in at $2.3 billion, a decrease of 7% in constant currency.\nThis is a significant improvement from the third quarter trend driven by France, Italy and Spain.\nOUP, including restructuring costs, equaled $100 million.\nExcluding restructuring costs, OUP decreased 25% from the prior year in constant currency and OUP margin was down 100 basis points.\nThe $4 million in restructuring costs represented France real estate optimization.\nFrance revenue comprised 56% of the Southern Europe segment in the quarter and was down 11% from the prior year in constant currency.\nThis reflects a steady rate of improvement over the course of the quarter.\nOUP, including restructuring costs, was $62 million in the quarter.\nExcluding restructuring costs, OUP was $66 million and OUP margin was 5%.\nAlthough improvement was steady in France during the fourth quarter, January has experienced a softening in the revenue trend as COVID-19 concerns have increased and the government has imposed more restrictions.\nWe are cautiously estimating ongoing sequential improvement in the revenue trend and are estimating a constant currency decline in revenues in the mid-single-digit percentage range in the first quarter overall.\nRevenue in Italy equaled $423 million in the quarter as Italy crossed back over to growth.\nRevenues increased 3% in constant currency during the quarter, which was a significant improvement from the 12% days-adjusted decline in the third quarter.\nThis reflects a progressive improvement over the course of the quarter and a particularly strong December driven by large year-end seasonal logistics activity from enterprise clients.\nOUP declined 25% year-over-year in constant currency to $24 million and OUP margin decreased 200 basis points to 5.6%.\nWe estimate that Italy will have low single-digit year-over-year revenue growth in the first quarter.\nRevenue in Spain also crossed over to significant revenue growth in the fourth quarter also driven by enterprise seasonal activity.\nRevenue increased 18% on a days-adjusted constant currency basis from the prior year in the quarter.\nThis represented a significant improvement from the 6% decrease in the third quarter.\nConsidering the drop-off of the year-end seasonal activity, we estimate that Spain will have revenue growth in the mid-single-digit constant currency range in the first quarter.\nRevenue in Switzerland decreased 14% on a days-adjusted constant currency basis from the prior year in the quarter.\nThis represents a slight decline from the 13% decrease in the third quarter as our Switzerland business did not experience the year-end seasonal increases that the other large markets in Southern Europe experienced.\nOur Northern Europe segment comprised 22% of consolidated revenue in the quarter.\nRevenue declined 11% in constant currency to $1.1 billion, representing a significant improvement from the 22% decline in the third quarter driven by the U.K. and the Netherlands.\nOUP, including restructuring costs, represented $9 million.\nExcluding restructuring costs, OUP was $18 million and OUP margin was 1.6%.\nThe $9 million in restructuring cost relates to Germany, where we restructured a majority-owned venture with a third-party partner.\nOur largest market in Northern Europe segment is the U.K., which represented 36% of segment revenue in the quarter.\nDuring the quarter, U.K. revenues decreased 7% in constant currency, which represented a significant improvement from the 22% decline in the third quarter.\nThe improvement was driven by significant year-end public sector activity particularly in December.\nWe are cautious in our outlook for the U.K. business and estimate a rate of constant currency revenue decline in the high single digits range during the first quarter, representing the nonrecurrence of certain year-end activity.\nIn Germany, revenues declined 31% in constant currency adjusted for billing days in the fourth quarter, which did not represent a significant change from the 32% decline in the third quarter.\nWe remain very cautious on our Germany business in the near term and expect improvement in the revenue trend in the first quarter.\nIn the Nordics, revenues declined 6% on a days-adjusted constant currency basis.\nThe two primary businesses in Nordics are Norway and Sweden.\nOn a days-adjusted constant currency basis, Norway experienced a decline of 6% and Sweden declined 4%.\nBoth countries experienced a significant improvement in the rate of decline from the third quarter trend.\nRevenues in the Netherlands decreased 12% on a days-adjusted constant currency basis, which represents a significant improvement from the third quarter decline of 23%.\nBelgium experienced a days-adjusted revenue decline of 25% in constant currency during the quarter, which also reflects improvement from the third quarter trend.\nOther markets in Northern Europe crossed over to growth in the quarter.\nRevenue increased 9% in constant currency, which represents a significant improvement from the third quarter decrease of 5% in constant currency.\nThis was driven by strong revenue growth in Poland, Russia and Ireland.\nThe Asia Pacific Middle East segment comprises 12% of total company revenue.\nIn the quarter, revenue decreased 1% in constant currency to $617 million.\nOUP represented $18 million and OUP margin decreased 70 basis points year-over-year.\nRevenue growth in Japan was up 5% on a constant currency basis, which represents a slight decrease from the 6% growth rate in the third quarter.\nOur Japan business continues to perform very well.\nAnd we expect the constant currency revenue trend of low single-digit growth in the first quarter.\nRevenues in Australia declined 2% in constant currency on a days-adjusted basis.\nThis represents an improvement from the 7% decline in the third quarter.\nRevenue in other markets in Asia Pacific Middle East declined 7% in constant currency, also representing an improving trend from the third quarter.\nI'll now turn to cash flow and balance sheet.\nFree cash flow equaled $886 million for the year.\nDuring the fourth quarter, free cash flow equaled $201 million compared to $302 million in the prior year quarter.\nAt quarter end, days sales outstanding decreased by about 3.5 days to 54 days.\nOur businesses have displayed outstanding collection and cash management practices throughout this crisis.\nCapital expenditures represented $51 million during 2020.\nDuring the fourth quarter, we purchased 2.5 million shares of stock for $201 million.\nOur purchases for the full year totaled 3.4 million shares for $265 million.\nAs of December 31, we have 3.4 million shares remaining for repurchase under the six million share program approved in August of 2019.\nAs previously announced, we also increased the semiannual dividend paid in December 2020 by 7.3%.\nOur balance sheet was strong at quarter end with cash of $1.57 billion and total debt of $1.12 billion, resulting in a net cash position of $443 million.\nOur debt ratios remain comfortable at quarter end, with total gross debt to trailing 12 months adjusted EBITDA of 2.48 and total debt to total capitalization at 31%.\nOur debt and credit facilities have not changed in the quarter and the earliest euro note maturity is not until September of 2022.\nIn addition, our revolving credit facility for $600 million remained unused.\nNext, I'll review our outlook for the first quarter of 2021.\nOur guidance continues to assume no material additional lockdowns or business restrictions impacting our clients in any of our largest markets beyond those that exist today.\nOn that basis, we are cautiously forecasting earnings per share for the first quarter to be in the range of $0.64 to $0.72, which includes a favorable impact from foreign currency of $0.07 per share.\nOur constant currency revenue guidance range is between a decline of 4% to a decline of 6%.\nThe midpoint of our constant currency guidance is a decline of 5%.\nOn a days-adjusted basis, we note there is about one less billing day in Q1, which would improve the days-adjusted rate of revenue decline.\nThis is offset slightly by the impact of net dispositions.\nAt the midpoint, this would yield an organic days-adjusted rate of revenue decline of 3% for the first quarter, representing an ongoing improvement from the 6.5% decline in Q4.\nWe expect our operating profit margin during the first quarter to be down 50 basis points compared to the prior year, reflecting a third consecutive quarter of sequential improvement in the year-over-year rate of adjusted operating margin decline.\nThis reflects continued strong underlying cost actions within the businesses and higher corporate expenses year-over-year based on increased technology investment.\nRegarding the effective tax rate, the government of France finalized their budget with the expected 50% reduction in the French business tax and a continuation of the corporate income tax reductions.\nCombined, this serves to reduce our underlying effective tax rate by about 4%.\nHowever, we will continue to have an elevated tax rate until we are closer to precrisis levels of pre-tax earnings and are estimating a full year 2021 effective tax rate of approximately 35%.\nThe effective tax rate in the first quarter will be slightly lower at 34% based on the inclusion of certain discrete items.\nAs usual, our guidance does not incorporate restructuring charges or additional share repurchases.\nAnd we estimate our weighted average shares to be 56.2 million.\nWe're well positioned to be able to provide the strategic and operational workforce expertise and flexibility our clients and candidates are looking for: sourcing and developing in-demand talent across the globe and delivering new work models across the HR solution spectrum.\nWe strengthened our brand portfolio during 2020 and launched Talent Solutions as a separate brand to include our RPO, MSP and Right Management offerings.\nThis accelerates our diversification strategy by focusing on higher-margin, high-growth market segments in all brands.\nWe also remain laser-focused on delivering our digitization plans with our PowerSuite technology and continued this investment even during the pandemic.\nWe have already implemented PowerSuite in our front office and in businesses across 17 countries, are in the process of implementation in another wave of businesses across 17 more countries.\nBased on this progress, we expect to have the majority of our businesses on our New PowerSuite front office by the end of this year.\nOur PowerSuite front office is improving efficiency and productivity enabled by technology by cloud, mobile and analytics.\nWe also continue to roll out our new web platform for candidates.\nOur B2C digital investments build off the success of Mon Manpower, our French associate app, which has had more than 1.3 million downloads, the most downloaded and the most highly rated in the French market.\nIn France, 1/3 of our applicants are sourced via the app with an average of 150,000 active users a month enjoying a full portfolio of B2C services, including on-demand access to current targeted assignment opportunities, time management and payroll technology and other services, including online carpooling.\nThe success of this market-leading tool is helping us to scale and expand our B2C technology elsewhere as well.\nWe continue to invest in and advance our analytics capability, laying strong foundations for the creation of our data lake.\nIt will be our data science and database decision-making that will continue to create new value, helping clients better predict performance and supporting candidates so they know more about their skills and potential.\nThese, together with our investments in next-gen infrastructure programs, will continue to be critical enablers for the next step of our process transformation and growth.\nAnd what we knew all along has been confirmed as well.\nIt is the combination of tech and our people-first approach, the talent, the skills and dedication of our teams with last-mile delivery capability that allows us to confidently manage uncertainty, volatility and collaborate remotely to deliver the solutions and talent organizations need while being more agile than we ever believe possible.\nAs we execute our strategic priorities, we remain committed to our values and broader purpose that meaningful, sustainable employment has the power to change the world.\nAs a member of the International Business Council, we have committed to the IBC's new stakeholder capitalism metrics developed by the Big four global accounting firms, focused on people, planet, prosperity and governance.\nThis important framework will enable our organization and others to be more explicit on our commitments and progress we're making to create long-term value to shareholders and operate a sustainable business model that addresses the long-term imperatives of society.\nOur social impact report that we released in December is the demonstration of the critical role we already play in being part of the solution.\nCase in point, in 2020, we were recognized as a catalyst for change among 70-plus companies, outpacing our global peers and advancing women, particularly women of color, along with being placed on the Dow Jones Sustainability Index for the 12th year, helping people and companies respond and reset, redeploy and reskill.\nAnd this skills revolution remains the defining challenge of our time.\nAnd it is what our clients, candidates and employees expect us to help them with today and even more so in the future.\nFinally, I'm very proud and grateful for the relentless resilience and commitment of our people to support and deliver to each of our stakeholders during these challenging times, our employees, associates, clients, shareholders and the communities in which we operate.\nAs digitization continues at pace, we're confident that our strategy is even more relevant as structural changes take hold in a post-pandemic world and as we continue to execute our strategy to diversify, digitize and innovate.\nIt is positioning ManpowerGroup for greater success, improved returns and profitable growth in the future.\nI'd now like to open the call for Q&A.\n",
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"content": "sees q1 earnings per share $0.64 to $0.72.\nq4 earnings per share $1.48 excluding items.\nq4 earnings per share $1.33.\nq4 revenue $5.1 billion versus refinitiv ibes estimate of $4.76 billion.\nended quarter with $1.6 billion of cash and cash equivalents and $600 million of untapped revolving credit facility.\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: Following our remarks, we will open the call for analyst questions.\nPlease limit yourself to one question with one follow-up.\nWe describe these risks and uncertainties in our risk factors and other disclosures in our Form 10-K and our Form 10-Q that we filed with the Securities and Exchange Commission.\nOur statements will also include non-GAAP financial metrics.\nI hope everyone is staying safe and healthy.\nWhile we are well over a year into this pandemic, the effects are still being felt.\nWe are encouraged by the rollout of vaccines, but many areas around the globe, continue to experience a surge in cases.\nThrough the efforts of our employees and the robust demand we continue to experience for our products, we delivered another outstanding quarter.\nWe had a strong start to 2021 and our ability to effectively navigate this highly dynamic environment resulted in exceptional top and bottom line growth.\nFor the quarter, sales increased 25%.\nExcluding acquisitions and currency, sales increased 19%.\nOperating profit increased 61% to $366 million, principally due to strong volume leverage and reduced spending in the form of lower travel, entertainment, and marketing expenses across our segments.\nEarnings per share increased an outstanding 89%.\nTurning to our plumbing segment, sales grew 27% excluding currency, driven by strong volume growth at Hansgrohe, Delta, and Watkins.\nOur two recent plumbing acquisitions performed well in the quarter and contributed 5% to Plumbing's growth.\nNorth American Plumbing grew 28% led by our wellness business which continue to experience strong demand and begin to comp their March shutdown of 2020.\nDelta faucet delivered another quarter of double-digit growth with strength across all channels, particularly e-commerce which showed exceptional strength as consumers continue to shift their buying patterns to online.\nInternational Plumbing grew 37% in the quarter as many of our markets returned to strong growth with particular strength in Central Europe and China.\nAnd our Decorative Architectural segment sales grew 15% against a healthy 9% comp from Q1 of 2020.\nAcquisitions contributed 2% to our Decorative growth.\nOur Lighting, Bath and Cabinet Hardware and Paint businesses, each posted double-digit growth during the quarter.\nDIY Paint grew high teens in the quarter, which is impressive considering it was facing a strong double-digit comp in Q1 of 2020.\nWhile PRO paint was down low-single digits for the quarter as it faced a tough comp in Q1 of 2020, we did see a return to positive growth in the back half of the quarter and we're encouraged by the momentum we are now seeing in this business as we move into Q2.\nLastly, we actively continued our share repurchases during the quarter by repurchasing 5.5 million shares for $303 million.\nWe anticipate deploying approximately $800 million toward share repurchases or acquisitions for the full year as we guided on our 4th quarter call.\nIn addition, we anticipate receiving approximately $160 million for our preferred stock in Cabinetworks, resulting from their recently announced transaction, assuming it closes as expected.\nWe intend to deploy these funds toward share repurchases or acquisitions, which would be in addition to the $800 million that I just mentioned.\nNow let me discuss two issues that are top of mind right now, inflation and supply chain tightness.\nWe have seen significant inflation of raw materials, namely copper, zinc, and resin used in both our paint and plumbing businesses as well as increases in freight costs.\nAll in, we expect our raw material and freight costs to be up in the mid single-digit range for the full year for both our Plumbing and Decorative segments with inflation likely reaching high single-digit levels in both segments in the 3rd and 4th quarters.\nTo mitigate these impacts, we have secured price increases across both segments to begin offsetting these costs.\nWe have further actions planned including additional price increases and productivity improvements while continuing to work with our customers and suppliers to offset [Technical Issues] full year margin expectations in both segments that we provided on our 4th quarter call.\nWith respect to supply chain tightness in addition to the strain caused by robust demand, we have been impacted by significant disruption in the supply of resins and [Technical Issues] products in both our plumbing and paint businesses due to the severe weather that Texas experienced in February.\nAdditionally, ocean container availability and timeliness continues to be a constraint.\nThis has temporarily reduced output of certain spot products during the month of April and limited our ability to build certain -- to build inventory of certain architectural coatings and other products.\nHowever, the availability of resins is improving and our teams have done an outstanding job utilizing Masco's size, scale, and agility to countermeasure these issues by working with our key suppliers to increase availability of certain materials by leveraging our purchasing power to increase container availability for our products and by working around-the-clock to adjust production to meet the needs of our customers.\nThis once again shows the competitive advantage that comes from being part of Masco's portfolio.\nWith our strong [Technical Issues] performance, the actions we have taken and will take to offset persistent inflation, the interest savings from our recent bond transaction and the continued strong demand for our products and innovative -- and products brands, products and brands, excuse me, we are increasing our full year expectations of earnings per share to be in the range of $3.50 to $3.70 per share.\nThis is up from our previous expectations of $3.25 to $3.45.\nAs Dave mentioned, most of my comments will focus on adjusted performance excluding the impact of rationalization and other one-time items.\nTurning to slide 7, we delivered a very strong start to the year as first quarter sales increased 25%, currency increased sales by 2% in the quarter and the 3 recently completed acquisitions contributed an additional 4% to growth.\nIn local currency, North American sales increased 21% or 17% excluding acquisitions.\nThis outstanding performance was driven by strong volume growth in North American faucets, showers and spas as well as DIY paint.\nIn local currency, international sales increased 27% or 23% excluding acquisitions.\nGross margin was 35.6% in the quarter, up 80 basis points as we leveraged the increased volume.\nOur SG&A as a percentage of sales improved 340 basis points to 17% in the quarter.\nThis was primarily due to operating leverage, decreases in certain costs such as travel and entertainment and trade shows and the deferral of certain marketing and other spend.\nWe expect SG&A as a percent of sales to increase throughout the year to a more normalized 18%, a certain cost come back along with additional investments in our brands, service, and innovation to fuel future growth.\nWe delivered outstanding first quarter operating profit of $366 million, up $138 million or 61% from last year with operating margins expanding 420 basis points to 18.6%.\nOur earnings per share was $0.89 in the quarter, an increase of 89% compared to the first quarter of 2020.\nTurning to slide 8, Plumbing grew 31% in the quarter.\nCurrency contributed 4% to this growth and acquisitions contributed another 5%.\nNorth American sales increased 27% in local currency or 22% excluding acquisitions.\nThis was led by Delta's double-digit growth in the quarter as they continue to drive strong consumer demand across all their product categories and channels.\nWatkins, our wellness business, was also a significant contributor to growth in the quarter, and both demand and our backlog remains strong.\nWatkins' performance also benefited from a softer comp in the first quarter of last year as government mandated COVID lockdowns resulted in two of their manufacturing plants being temporarily shut in 2020.\nInternational Plumbing sales increased 27% in local currency or 23% excluding acquisitions.\nHansgrohe delivered year-over-year increases across most of their markets with continued double-digit growth in both Germany and China.\nDemand remain strong in Central Europe despite continued COVID restrictions and we are starting to see improvement in the UK.\nOperating profit was $253 million in the quarter, up $94 million or 59% with operating margins expanding 370 basis points to 28.3%.\nThis performance was driven by incremental volume, cost productivity initiatives and lower spend on items such as travel and entertainment, trade shows, and marketing.\nThis favorability was partially offset by an unfavorable price cost relationship.\nWe expect raw material inflation in this segment to peak in the 3rd quarter.\nDuring the quarter, we entered into an agreement to divest our Huppe business, a small shower enclosure business based in Germany as we determined it did not align to our strategic direction.\nHuppe sales were approximately EUR70 million in 2020, net proceeds will not be material.\nGiven our first quarter results and the current demand trends, we now expect plumbing segment sales growth for 2021 to be in the 15% to 18% range with 10% to 13% organic growth, another 3% net growth from the recent acquisitions and then divestiture of Huppe.\nAnd given current exchange rates, we anticipate foreign currency to favorably benefit plumbing revenue by approximately 2% or $70 million.\nWe continue to anticipate full year margins will be approximately 18%.\nTurning to slide 9, Decorative Architectural grew 15% for the first quarter or 13% excluding acquisitions.\nThis exceptional performance was driven by low-teens growth in our paint business.\nOur DIY paint business grew high teens against a strong double-digit comp in the first quarter of 2020.\nOur PRO business also faced strong comp decline to low single digits in the quarter.\nDespite this decline in our PRO paint business, delivered positive year-over-year PRO growth in the back half of the first quarter and anticipate high single-digit growth for the PRO paint business for the full year as consumers continue to become more comfortable with paint contractors in their homes.\nOur builders' hardware and lighting businesses each delivered double-digit growth as their new products and programs capitalized on increased consumer demand.\nOperating profit in the quarter was $142 million, up $46 million or 48%.\nThis outstanding performance was driven by incremental volume, cost productivity initiatives, and lower spend partially offset by an unfavorable price cost relationship.\nFor 2021, we are raising our outlook and now expect architectural segment sales growth will be in the range of 4% to 9% with 3% to 7% organic growth and another 1.5% from acquisitions.\nWe continue to expect segment operating margins of approximately 19%.\nTurning to slide 10, our balance sheet remains strong with net debt to EBITDA at 1.3 times and we ended the quarter with approximately $1.8 billion of balance sheet liquidity which includes full availability of our $1 billion revolver.\nWorking capital as a percent of sales including our recent acquisitions is 17.5%.\nDuring the first quarter, we continued our focus on shareholder value creation by deploying approximately $303 million to repurchase 5.5 million shares.\nIn mid-February, we completed a significant bond refinancing.\nIn this transaction, we called our 2022, our 2025 and our 2026 debt maturities which aggregated $1.3 billion and refinanced these with a combination of new 7 year, 10 year, and 30 year notes totaling $1.5 billion [Technical Issues].\nFrom an interest perspective, the net effect is a $35 million annualized interest savings.\nDue to the timing of this transaction, interest expense will be approximately $110 million compared to our previous guidance of $135 million for 2021 and will be approximately $100 million in 2022.\nFrom a maturity perspective.\nThis transaction also means we have taken out all our near-term maturities and our next debt maturity is not until 2027.\nAnd two reminders for everyone; first, we will be terminating and annuitizing our US defined benefit plans in the second quarter and we will have an approximate $140 million final cash contribution to these plans to complete this activity.\nAnd second, our Board previously announced its intention to increase our annual dividend by 68% to $0.94 per share starting in the second quarter of 2021.\nThis will increase our targeted dividend payout ratio from 20% to 30%.\nWe have summarized our updated expectations for 2021 on slide 13 in our earnings deck.\nBased on Q1 performance and current robust demand for our products, now anticipate overall sales growth of 10% to 14% up from 7% to 11% with operating margins of approximately 17%.\nLastly, as Keith mentioned earlier, our updated 2021 earnings per share estimate of $3.50 to $3.70 represents 15% earnings per share growth at the midpoint of the range.\nThis assumes a 254 million average diluted share count for the year.\nAdditional modeling assumptions for 2021 can be found on slide 14 of our earnings deck.\nOur markets remain strong and housing fundamentals are supportive of continued long-term growth.\nYear-over-year home price appreciation increased over 17% in March and existing home sales were up over 12%.\nBoth of these metrics have a strong correlation with our sales on a lag basis.\nFurthermore, the US consumer is healthy with estimated built up savings of nearly $2 trillion even before the new stimulus money and consumers continue to invest in their homes.\nWe believe these factors along with the increased demand from the large millennial demographic will lead to continued growth in the repair and remodel markets.\nWith our market leading brands, history of innovation, and strong management teams, we are well positioned to capitalize on these growth drivers, serve our customers and deliver value to the shareholders.\n",
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"content": "q1 adjusted earnings per share $0.89 from continuing operations.\nanticipate 2021 earnings per share in range of $1.52 - $1.72, and on an adjusted basis, in range of $3.50 - $3.70.\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: Following our remarks, we will open the call for analyst questions.\nPlease limit yourself to one question with one follow up.\nWe describe these risks and uncertainties in our risk factors and other disclosures in our Form 10-K and our Form 10-Q that we filed with the Securities and Exchange Commission.\nOur statements will also include non-GAAP financial metrics.\nI hope everyone is staying safe and healthy.\nWe performed exceptionally well in the second quarter, and demand for our products was strong.\nThis resulted in our fourth consecutive quarter of double digit sales growth and sixth consecutive quarter of both margin expansion and double digit earnings-per-share growth.\nI'm extremely proud of our entire team as we successfully navigated numerous supply chain challenges to enable this growth.\nFor the quarter, sales increased 24%.\nExcluding acquisitions, divestitures and currency, sales increased 18%.\nOperating profit increased 27% and margins expanded 60 basis points to 20.1%, principally due to strong volume leverage.\nEarnings per share increased an outstanding 34%.\nOur overall performance demonstrates the strength of our portfolio of lower ticket, repair and remodel products that are diversified across geographies and channels, serving both the consumer and the professional.\nTurning to our plumbing segment, sales increased 48%, excluding currency, led by exceptional growth from our North American and international faucet and shower businesses and our spa business.\nInternational plumbing grew 50% in the quarter, excluding currency, as Hansgrohe sales rebounded sharply in nearly all of its markets.\nStrong operational execution and new products such as Hansgrohe's Rainfinity shower systems led to share gains in many of these markets.\nNew product introductions will continue as we launched the award-winning AXOR One collection in the second half of the year.\nThis collection was designed by Barber Osgerby, an award-winning internationally acclaimed London-based industrial design studio.\nThis continues Hansgrohe's legacy of combining leading contemporary design with innovative functionality.\nNorth American plumbing posted strong growth of 47%, excluding currency, in the second quarter, led by approximately 75% growth at Watkins Wellness and robust double digit growth at Delta.\nDelta faucet delivered another record quarter with growth across all channels, and particularly strength in the professionally oriented trade channel.\nWe continue to invest in new products in North American plumbing as well.\nAnd two days ago, we introduced a Frank Lloyd Wright collection by Brizo that furthers the brand's commitment to distinctive design and innovative products.\nLastly, in plumbing, at the beginning of July, we acquired Steamist, another bolt-on acquisition for Delta.\nSteamist is a leading manufacturer of residential steam bath products that will complement our strong trade and e-commerce product offering and is consistent with our bolt-on acquisition strategy.\nIn our decorative architectural segment, sales declined 5% against the healthy 8% comp for the second quarter of 2020.\nWhile bath and cabinet hardware, lighting and propane grew in the quarter, demand moderated for DIY paint.\nMaterial availability and other supply chain issues also impacted our overall coatings business, as nearly all of our resin suppliers were operating under a force majeure declaration during the second quarter.\nBecause of these issues, sell-through on our coatings products was better than sell-in and inventories in the channel were reduced during the quarter.\nDue to lower than expected second quarter sales and our expectation that material availability issues will persist but slowly improve, we are lowering our DIY sales expectation from flat to down low-single digits for the full year.\nHowever, with the acceleration we saw in our propane business in the quarter, we are incrementally more optimistic and are raising our expectations to low-double digit growth from high-single digit for the full year for our propane business.\nFor the decorative segment overall, we now expect growth to be in the range of 2% to 5% for the full year.\nWith respect to innovation in the decorative segment, we continue to invest in new products and are excited to launch a new high end line of paint in the third quarter at the Home Depot called Behr Dynasty for both DIY and pro painters.\nDynasty is our most durable, stain-resistant, scuff resistant, one-coat hide paint ever.\nIt's low VOC, Greenguard and LEED certified, fast drying and has an anti-microbial mildew-resistant paint finish.\nThis is yet another example of how our innovation teams continue to focus on the voice of the customer to deliver leading innovation and value for both the consumer and the professional.\nMoving on to capital allocation.\nWe continued our aggressive share buyback during the quarter by repurchasing 6.6 million shares for $447 million.\nAs part of the accelerated share repurchase agreement that we executed during the quarter, we will additionally receive approximately 900,000 shares in July to complete that agreement, bringing our total shares repurchased year-to-date to 13.1 million shares for $750 million.\nThis is approximately 5% of our outstanding share account at the beginning of the year.\nUnderscoring our strong financial position and confidence in the future, we now anticipate deploying another $250 million in the second half of the year for share repurchases and acquisitions for a full year total of approximately $1 billion.\nFinally, like I did last quarter, let me give you an update on what we are experiencing with inflation and supply chain tightness.\nWe continue to see escalating inflation across most of our cost basket, including freight, resins, TiO2 and packaging.\nInbound freight container costs nearly tripled during the quarter.\nWe now expect our all-in cost inflation to be in the high-single digit range for the full year for both our plumbing and decorative segments, with low-double digit inflation in the second half of the year.\nInflation in coatings will likely be in the mid-teens later in the fourth quarter.\nTo mitigate this inflation, we have secured price increases across both segments, and are taking further pricing action across our business to address these continued cost escalations.\nWe're also working with our suppliers, customers and internal teams to implement further productivity measures to help offset these costs.\nDespite the increased inflation, we still expect to achieve price/cost neutrality by year-end.\nWhile cost inflation has clearly been an issue, material availability has also impacted our business.\nOur teams have done a tremendous job of qualifying new suppliers, developing material substitutions, and shifting production to adapt to this dynamic environment and to serve our customers.\nHowever, these raw material constraints have limited our ability to build inventory of many of our products and the channels that we serve.\nWe anticipate material availability to slowly improve in the second half of the year, and we expect to replenish inventory to the appropriate levels over time.\nThe demand for our products remains strong.\nAnd with an improved outlook for plumbing based on the continued strength of both our North American and international operations, we are increasing our full year expectations of earnings per share to be in the range of $3.65 to $3.75 per share, up from our previous expectations of $3.50 to $3.70.\nAs Dave mentioned, my comments today will focus on adjusted performance, excluding the impact of rationalization and other one-time items.\nTurning to Slide 7.\nWe delivered another exceptional quarter as we capitalized on strong consumer demand, resulting in continued growth and increased backlogs.\nAs a result, sales increased 24% with currency and net acquisitions, each contributing 3% to growth.\nIn local currency, North American sales increased 15% or 12%, excluding acquisitions.\nStrong volume growth in North American faucets, showers and spas led this outstanding performance.\nIn local currency, international sales increased a robust 50% or 49%, excluding acquisitions and divestitures.\nGross margin was 36.3% in the quarter, up 50 basis points as we leverage the strong volume growth.\nOur SG&A as a percentage of sales improved 10 basis points to 16.2% due to our operating leverage.\nDuring the quarter, certain expenses such as headcount, marketing, and travel and entertainment increased as planned.\nWe expect SG&A as a percent of sales to increase in the third and fourth quarters, as these costs normalize.\nWe delivered strong second quarter operating profit of $438 million, up $94 million or 27% from last year, with operating margins expanding 60 basis points to 20.1%.\nOur earnings per share was $1.14 in the quarter, a 34% increase compared to the second quarter of 2020, due to volume leverage, lower interest expense and lower share count.\nTurning to Slide 8.\nPlumbing growth accelerated in the quarter with sales up 53%.\nCurrency contributed 5% to this growth and acquisitions, net of divestitures, contributed another 4%.\nNorth American sales increased 47% in local currency or 41%, excluding acquisitions.\nDelta led this outstanding performance, delivering another quarter of robust double digit growth.\nWith a strong brand recognition and market leadership, Delta continues to drive strong consumer demand across all its product categories and channels.\nWatkins Wellness also significantly contributed to growth in the quarter with both demand and our backlog remained strong.\nInternational plumbing sales increased 50% in local currency or 49%, excluding acquisitions and divestitures.\nHansgrohe delivered robust growth as demand continues to improve across Europe and numerous other countries.\nHansgrohe's key markets of Germany, China, UK and France, all grew strong double digits in the quarter.\nSegment operating margins expanded 230 basis points to 20.6% in the quarter, with operating profit of $274 million, up $115 million or 72%.\nThe strong performance was driven by incremental volume, favorable mix and cost productivity initiatives, partially offset by an unfavorable price/cost relationship and higher spend on items such as travel and entertainment, marketing and growth initiatives.\nDuring the quarter, we also completed the divestiture of HUPPE, a small shower enclosure business based in Germany.\nHUPPE sales were approximately EUR70 million in 2020.\nThis transaction closed on May 31, and net proceeds were not material.\nGiven our second quarter results and current demand trends, we now expect plumbing segment's sales growth for 2021 to be in the 22% to 24% range, up from our previous guidance of 15% to 18%.\nFinally, due to our improved sales outlook, we are increasing our full year margin expectations to approximately 18.5%, up from our previous guide of approximately 18%.\nTurning to Slide 9.\nDecorative architectural declined 5% for the second quarter and was 6%, excluding the benefit from acquisitions.\nDIY paint business declined double digits in the quarter against the healthy high-teens comp due to moderating demand and raw material supply tightness as resin plants affected by storms in the Texas Gulf Coast region in the first quarter continued to face production challenges.\nWe expect these raw material headwinds to persist in the third quarter and now anticipate our DIY paint business to be down low-single digits for the full year.\nTo help mitigate these challenges, we are working with our existing suppliers and qualifying new sources for materials to meet the demand of our customers which remains strong.\nOur PRO paint business delivered strong double digits growth in the quarter, as consumers are increasingly willing to allow professional paint contractors in their homes.\nWe expect demand in this channel to remain strong and now anticipate low-double digit growth for the PRO paint business for the full year, up from our previous expectation of high-single digits as PRO paint contractors' order books continue to grow.\nOur builders' hardware and lighting businesses each delivered growth in the quarter, as they continue to capitalize on increased consumer demand.\nSegment operating margins were 22.1% and operating profit in the quarter was $188 million due to lower volume, partially offset by cost productivity initiatives.\nFor full year 2021, we now expect decorative architectural segment's sales growth will be in the range of 2% to 5%, down from 4% to 9% due to lower than expected second quarter sales and persistent raw material constraints.\nWe continue to expect segment operating margins of approximately 19% as productivity initiatives in pricing help offset higher input costs.\nTurning to Side 10.\nOur balance sheet is strong with net debt to EBITDA at 1.3x.\nWe ended the quarter with approximately $1.8 billion of balance sheet liquidity, which includes full availability of our $1 billion revolver.\nWorking capital as a percent of sales, including our recent acquisitions, was 16.9%, an improvement of 120 basis points over prior year.\nAs we discussed last quarter, we terminated and annuitized our U.S. qualified defined benefit plans in the second quarter and had an approximate $100 million final cash contribution to the plans to complete this activity.\nThis removes approximately $140 million of pension liabilities from our balance sheet, and it will benefit our free cash flow by approximately $50 million through reduced cash contributions, starting in 2022.\nAlso, we received approximately $166 million from the redemption of our preferred stock related to the recent sale of our former cabinet business.\nFinally, as Keith mentioned earlier, as of today, we repurchased 13.1 million shares in 2021 for $750 million.\nWe expect to deploy an additional $250 million for share repurchases or acquisitions for the remainder of this year.\nCollectively, these actions demonstrate our confidence in our business and our commitment and ability to further strengthen our balance sheet, while aggressively returning capital to our shareholders.\nTurning to our full year guidance, we have summarized our updated expectations for 2021 on Slide 11.\nBased on our second quarter performance and continued robust demand, we now anticipate overall sales growth of 14% to 16%, up from 10% to 14% with operating margins of approximately 17.5%, up from 17%.\nLastly, as Keith mentioned earlier, our updated 2021 earnings per share estimate range of $3.65 to $3.75 represents 19% earnings per share growth at the midpoint of the range.\nThis assumes the 252 million average diluted share count for the full year.\nAdditional modeling assumptions for 2021 can be found on Slide 14 in earnings deck.\nWe had an outstanding second quarter driven by our strong brands, our innovation pipelines and most of all, our people, as demonstrated by outstanding execution by our supply chain teams.\nOur strong performance demonstrates the strength of Masco's balanced and diversified business.\nMasco is a broad portfolio of lower ticket, repair and remodel-oriented home improvement products.\nOur products are broadly distributed across geographies and channels for both consumers and professionals.\nAdditionally, our markets remain strong, and we expect home remodeling expenditures to drive growth in 2022.\nThe fundamentals of our repair and remodel business are strong, with year-over-year home price appreciation of over 15% in May and existing home sales up over 23%.\nBoth metrics have a strong correlation with our sales on a lag basis.\nAnd the consumer is strong, with nearly $2 trillion in savings and an increased desire to invest in their homes.\nLastly, we continue to invest in our business and are well positioned for long-term growth.\nWe are bringing new, innovative products to market, fueling our growth and expanding our leading market share.\nAnd with our leading margins and strong free cash flow, we will continue to deploy capital to reinvesting in our business, acquiring complementary bolt-on companies and returning cash to shareholders in the form of dividends and share repurchases all to drive long-term shareholder value.\nWith that, I'll now open up the call to questions.\n",
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"content": "compname says q2 adjusted earnings per share $1.14 from continuing operations.\nq2 adjusted earnings per share $1.14 from continuing operations.\nanticipate 2021 adjusted earnings per share to be in the range of $3.65 to $3.75 per share, increased from our previous expectation of $3.50 to $3.70/share.\nqtrly sales increased 24 percent to $2,179 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: Following our remarks, we will open the call for analyst questions.\nPlease limit yourself to one question with one follow-up.\nWe describe these risks and uncertainties in our risk factors and other disclosures in our Form 10-K and our Form 10-Q that we filed with the Securities and Exchange Commission.\nOur statements will also include non-GAAP financial metrics.\nI'm proud of the way our team continues to execute in these dynamic times.\nIn the third quarter, sales increased to 11%, our fifth consecutive quarter of double-digit top line growth.\nThis was against a strong 16% comp from last year.\nThis growth came as we continue to face significant supply chain challenges.\nCertain raw materials were hard to come by, such as resins, microchips and even pallets.\nFreight congestion in ports and lack of trucking capacity contributed to increased delays in shipping and receiving goods and labor shortages, continue to be a challenge.\nThey have kept our plants running, and our customers supplied, resulting an outstanding top line performance.\nOperating margin for the quarter was 17.5% as we executed our planned transition to a more normalized level of SG&A expense to support our brands, innovation and new products.\nMoving to our segment performance, beginning with Plumbing.\nSales increased 15% excluding currency, led by exceptional growth in North America and international faucets and showers and our spa business.\nThese results highlight the strength of our plumbing platform diversity across geographies and channels.\nTo support our continued international growth, Hansgrohe recently announced plans to invest in a new manufacturing facility in Serbia.\nThis additional capacity will enable further growth and further strengthen Hansgrohe's capabilities to serve its customers.\nWe plan to invest approximately $100 million in this project over the next three years.\nAnd our Decorative Architectural segment sales grew 4% against a robust 19% comp from the third quarter of 2020.\nPropane had an exceptional growth of over 45% in the quarter, helping to offset moderating demand in DIY paint.\nDIY paint declined mid single-digits against a tremendous comp of over 25% in the third quarter of 2020.\nWe continue to see indications of DIY paint demand stabilization as demand was fairly consistent throughout the quarter.\nWhen compared to our third quarter 2019 sales, our DIY paint sales were up over 20%, a clear indication of a reengaged homeowner and strong home improvement fundamentals.\nLastly, Behr Paint was recently recognized as the Home Depot Partner of the Year in the paint department.\nThis recognition was a result of successfully keeping the Home Depot on stock during the DIY surge last year.\nOur continued investment in our joint effort to grow the PRO paint category, and our commitment to bringing new and innovative products such as our recently launched Behr Dynasty to The Home Depot, each of these has contributed to tremendous growth for both Behr Paint and the Home Depot.\nAnd this recognition is a testament to the strength of our partnership.\nMoving on to capital allocation.\nWe continued our share buyback activity during the quarter by repurchasing 2.2 million shares for $128 million.\nIn addition, we anticipate deploying approximately $150 million in the fourth quarter, bringing our total share repurchases to over $1 billion for the year.\nNow let me give you an update on what we are experiencing with inflation.\nThe second half of 2021 is largely unfolding as anticipated.\nWe experienced low double-digit inflation in the third quarter and we expect mid teens inflation in the fourth quarter.\nWe have taken pricing actions across both segments, and expect to achieve price cost neutrality by year-end.\nIt has been an extremely dynamic year and our supply chain and commercial teams have done an exceptional job managing through the many challenges.\nBecause of this outstanding execution and continued strong demand for our products, we are maintaining the midpoint of our previous guide and expect to achieve earnings -- full-year earnings per share in the range of $3.67 to $3.73.\nThis report demonstrates our commitment to environmental, social and governance responsibility.\nDuring a year of unparalleled change, our team members remained committed to maintaining our strong reputation for ethical business practices, reducing our environmental impact and enhancing our DE&I efforts.\nI'm proud of the hard work we are doing every day to ensure that our employees feel a sense of inclusion, belonging and support.\nOur progress in ESG is a priority for our Board and our executive leadership team.\nI hope you will take the time to read more about how our long-term sustainability influences the way we run our business, operate our facilities and contribute to the community.\nAs Dave mentioned, my comments today will focus on adjusted performance excluding the impact of rationalization and other one-time items.\nTurning to slide seven.\nDemand for our industry-leading brands remains strong and our teams executed exceptionally well in a dynamic environment.\nThis resulted in another strong quarter of double-digit top line growth.\nSales increased to 11% against an impressive 16% comp in the third quarter of last year.\nNet acquisitions contributed 2% growth and currency had a minimal impact.\nIn local currency, North American sales increased 9% or 6% excluding acquisitions.\nThe strong performance was driven by outstanding execution to achieve volume growth in propane, faucets, showers and spas, and by increased selling prices.\nIn local currency, international sales increased a robust 15% or 18% excluding acquisitions and divestitures against the healthy 9% comp.\nGross margin of 34.2% is impacted by higher commodity and logistics cost in the quarter.\nWe expect this inflation will have peak impact on our P&L in the fourth quarter.\nWe will offset these costs with additional pricing actions and productivity initiatives.\nWe expect the exit this year price cost neutral.\nSG&A as a percentage of sales was 16.7%.\nAs planned during the quarter, we increased certain expenses such as headcount, advertising and marketing to a more normalized level to support our brands.\nWe expect this increase to continue into the fourth quarter and these costs continue to normalize.\nOperating profit in the third quarter was $385 million, with an operating margin of 17.5%, our earnings per share was $0.99.\nTurning to slide eight.\nPlumbing growth continued to be strong with sales up 16% against the 13% comp in the third quarter of last year.\nNet acquisitions contributed 2% to its growth and currency contributed another 1%.\nNorth American sales increased 16% or 10%, excluding acquisitions.\nDelta led this outstanding performance, delivering another quarter of robust double-digit growth driven by strength in e-commerce and trade channels.\nWith strong brand recognition and channel relationships, Delta continues to drive consumer demand for its products.\nWatkins Wellness also contributed to growth in the quarter with both demand and our backlog remained strong.\nInternational plumbing sales increased 15% in local currency or 18%, excluding net acquisitions.\nHansgrohe delivered strong growth and demand continue to improve across Europe and numerous other countries.\nHansgrohe's key markets of Germany, China and the UK, all grew double-digits in the quarter.\nSegment operating profit in the third quarter was $248 million and operating margin was 18.7%.\nOperating profit was impacted by the planned increases in SG&A that I mentioned earlier, as well as an unfavorable price/cost relationship.\nThis was partially offset by strong incremental volume.\nWe anticipate additional SG&A increases in commodity inflation will most significantly impact this segment's operating margins in the fourth quarter.\nWe will mitigate the commodity inflation with additional pricing and productivity actions, we expect to be price cost neutral as we enter 2022.\nFor full-year 2021, we continue to expect Plumbing segment sales growth to be in 22% to 24% and operating margins of approximately 18.5%.\nTurning to slide nine.\nDecorative Architectural sales increased 4% for the third quarter and 3% excluding acquisitions.\nOur DIY paint business declined mid single-digits in the quarter against more than 25% comp in the third quarter of last year.\nDespite this decline, DIY paint demand appears to be stabilizing, as we have seen relatively consistent demand since July.\nWhen comparing to Q3 2019, our third quarter DIY sales are up over 20%.\nOur propane business delivered exceptional growth of more than 45% in the quarter, as paint contractors are applying top rated Behr paint to more commercial and residential projects.\nWe expect demand in this channel to remain strong as propane contractors report growing demand for their services.\nWhen comparing to Q3 2019, our third quarter PRO sales are up over 35%.\nSegment operating margin in the third quarter was 19% and operating profit was $166 million.\nOperating profit was impacted by lower volume, with increased commodity costs and higher marketing expense to support the new Behr Dynasty product launch, partially offset by higher net selling prices.\nFor full-year 2021, we continue to expect Decorative Architectural sales growth will be in the range of 2% to 5%, and operating margin to be approximately 19%.\nTurning to slide 10.\nOur balance sheet is strong with net debt-to-EBITDA at 1.3 times.\nWe ended the quarter with approximately $1.9 billion of balance sheet liquidity, which includes full availability of our $1 billion revolver.\nWorking capital as a percent of sales, including our recent acquisitions, was 17%.\nFinally, we repurchased more than 15.2 million shares in 2021 for $878 [Phonetic] million.\nThis is approximately 6% of our outstanding share count at the beginning of the year.\nWe expect to deploy approximately $150 million for share repurchases or acquisitions in the fourth quarter as we continue to aggressively return capital to shareholders.\nAnd turning to our full year guidance, we have summarized our expectations for 2021 on slide 11.\nWe continue to anticipate overall sales growth of 14% to $16, and operating margin of approximately 17.5%.\nLastly, we are maintaining our 2021 earnings per share estimate midpoint, but narrowing the range to $3.67 to $3.73 growth at the midpoint of the range.\nThis assumes the 252 million average diluted share count for the year.\nAdditional modeling assumptions for 2021 can be found on slide 14 of our earnings deck.\nDemand for our products and home renovation remained strong at at a much higher levels than experienced in 2019.\nWhen you compare our third quarter performance to Q3 2019, revenue is 28% higher, operating profit is 29% higher, operating margin is 10 basis points higher and adjusted earnings per share is an outstanding 62% higher.\nWith our demonstrated supply chain excellence and our ability to offset inflation with price, we believe we are well positioned to carry this momentum into 2022 and deliver margin expansion and double-digit growth consistent with our long-term outlook.\nWe look forward to sharing our details for 2022 outlook on our fourth quarter call in February.\nI'll now open the call up to questions.\n",
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"content": "q3 adjusted earnings per share $0.99 from continuing operations.\nq3 sales rose 11 percent to $2.204 billion.\nsees fy adjusted earnings per share $3.67 to $3.73.\nq3 adjusted earnings per share $3.67.2021 expected earnings per share to be in range of $1.67 - $1.73.\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: Following our remarks, we will open the call for analyst questions.\nPlease limit yourself to one question with one follow-up.\nWe describe these risks and uncertainties in our risk factors and other disclosures in our Form 10-K and our Form 10-Q that we filed with the Securities and Exchange Commission.\nOur statements will also include non-GAAP financial metrics.\nI hope you and your families are safe and healthy.\n2020 was a challenging year for all of us as the virus started reshaping our lives, our economy, and our business we established 3 priorities to guide us throughout the year.\nNumber 1, keep our employees safe; 2, meet the needs of our customers; and 3, position Masco to outperform the recovery.\nOur employees across our business units did a tremendous job to deliver on all of these priorities.\nOur performance in 2020 was a testament to Masco's culture of solving problems, serving customers, and delivering better solutions.\nNow, let me provide you some brief comments on our 4th quarter before I turn to our full year results and conclude with our thoughts on 2021.\nTurning to slide 4, our top line increased 12% excluding the impact of currency in the 4th quarter.\nWe saw growth across our entire portfolio, led by strong growth in North American plumbing, international plumbing and our paint business.\nOperating profit increased 20% and our operating margin expanded 90 basis points to 16.6% in the quarter as we leveraged our strong volume growth.\nOur earnings per share for the quarter increased an outstanding 36%.\nTurning to our segments, Plumbing grew 12% excluding currency, with 14% growth in North American plumbing and 8% growth in International plumbing.\nNorth American plumbing was led by Delta faucet company with 18% growth.\nOur Spa business also achieved growth in the 4th quarter as we continued to effectively manage covered related restrictions.\nHansgrohe drove strong growth in Germany in China as those markets have recovered nicely from earlier in the year.\nIn our Decorative Architectural segment, Behr continued its tremendous year with high teens DIY paint growth and mid-single digit propane growth in the 4th quarter.\nOur lighting and our Bath & Cabinet Hardware businesses also contributed nicely to growth in the quarter.\nIn regards to capital allocation, we resumed our share repurchase program by repurchasing 2.3 million shares for $125 million during the quarter.\nAnd we executed 3 bolt-on acquisitions, which we expect to contribute approximately 3% top line growth in 2021.\nThe largest was the acquisition of Kraus, an online plumbing fixture company focused on modern high quality sinks, faucets, and related products.\nKraus will operate as an affiliate of Delta faucet company.\nThis leading digitally native brand will complement our online capabilities in the fast growing e-commerce channel.\nAlso in our plumbing segment, Hansgrohe in January acquired a 70% interest in easy sanitary solutions or ESS, a Netherlands based developer and manufacturer of high-style linear drain solutions.\nESS shares Hansgrohe's focus on innovation, design, and responsibility and will further expand our strong presence in the shower space.\nIn our Decorative Architectural segment we acquired Work Tools international, a leading manufacturer of high quality precision paint tools and accessories, including brushes rollers, and mini rollers for both DIY and professional painters under the WHIZZ, and Elder & Jenks brand names.\nThese acquisitions are consistent with our M&A criteria in that they are leaders in their respective categories, have a strong fit with our existing strategy, increase our market share and complementary or adjacent product categories and meet our bolt-on acquisition return criteria, which is to exceed our risk-adjusted cost of capital within a 3-year timeframe.\nNow let's review our full year performance.\nFor the full year, sales grew 7%, led by double-digit growth from Delta faucet, Behr paint and Liberty Hardware.\nDelta gained share with double-digit growth across its retail, trade, and e-commerce channels.\nHansgrohe gained share in its two largest markets of Germany and China.\nAnd our Spa business, which was the most impacted by shut down orders and limits on employees in its Mexican facilities, overcame significant obstacles to end the year down only mid single digits and enters 2021 with a record backlog, due to the tremendous demand for its products.\nIn our Decorative Architectural segment, we were well positioned with our leading brands Behr and Kilz and our strong channel partners to capitalize on the powerful resurgence in DIY paint.\nThis resulted in full-year growth of over 20% in DIY paint.\nPropane demand was soft in Q2 and Q3 but returned to growth in the 4th quarter and is accelerating into 2021.\nWhile total company sales grew 7%, operating profit increased 18% as we leveraged the strong volume growth and enacted significant cost reduction across the organization including hiring and wage freeze for part of the year, significantly lower brand and marketing spend, a freeze on certain growth investments for part of the year, and obviously drastically reduced travel and entertainment expense.\nThese actions coupled with our strong volume leverage resulted in significant operating margin expansion of 170 basis points in 2020.\nOur strong cash generation allowed us to deploy nearly $1.1 billion in capital during the year.\nWe repurchased $727 million of our stock at an average price of approximately $39 per share.\nWe returned approximately $145 million in dividends to shareholders.\nWe completed 4 bolt-on acquisitions for $227 million and we finished the year with over $1.3 billion in cash on hand and net leverage of one-time.\nThis strong operating profit growth combined with our significant capital deployment resulted in exceptional financial results, 37% earnings-per-share growth to $3.12 per share exceeding our 2019 Investor Day guidance for 2021, a full year earlier than planned.\nFree cash flow of over $1 billion with a conversion rate of 118% and a return on invested capital of approximately 42%.\nNow turning to '21.\nWhile precise forecasting is a significant challenge in this dynamic environment, I would like to share with you our view of the markets where we compete.\nFor the North American repair and remodel market, we expect a market growth to be in the low to mid single digit range with strong growth in the first half, followed by difficult comps in the second half.\nFor the paint market, a subset of the repair and remodel market for us, we expect the DIY paint market to be down low to mid single digits and the propane market to grow mid single digits.\nAnd for our international markets, principally Europe, we expect a low single-digit growth environment.\nWhile the US market will face challenging comps in the back half of '21, leading indicators remain robust.\nHome price appreciation was up nearly 30% in December and existing home sales were up over 22% compared to prior year.\nEach of these metrics has a strong correlation with our sales on a lag basis.\nBased on these assumptions and our expectation that we will continue to gain share and outperform the market, we anticipate Masco's growth to be in the range of 5% to 9% excluding currency for 2021, and 7% to 11% including currency.\nThis is based on expected organic growth of 2% to 6% excluding currency, growth from our completed acquisitions of approximately 3%, and growth from foreign currency translation of approximately 2%.\nWe expect margins to be approximately 17% and earnings per share to be in the range of $3.25 to $3.45 for 2021.\nTurning to capital allocation.\nOur Board announced its intention to increase our annual dividend to $0.94 per share beginning in the second quarter of 2021, a 68% increase.\nAs we have raised our targeted dividend payout ratio from 20% to 30% based on the strength of our business model and cash generation capabilities.\nIn addition to announcing its intention to increase our annual dividend, our Board also approved a new $2 billion share repurchase authorization.\nOur strategy remains unchanged to deploy our free cash flow after dividends to share repurchase or acquisitions and based on our strong liquidity position of over $1.3 billion in cash at year-end and then our projected free cash flow, we expect to deploy approximately $800 million to share repurchases or acquisitions in 2021.\nAs Dave mentioned, most of my comments will focus on adjusted performance from continuing operations, excluding the impact of rationalization and other one-time items.\nTurning to slide 7, we delivered a strong finish to our record year.\nFourth quarter sales increased a robust 12% excluding currency.\nIn local currency, North American sales increased 13%.\nThis outstanding performance was mainly driven by strong volume growth in North America -- North American faucets and showers as well as DIY paint.\nIn local currency, international sales increased 8%.\nGross margin was 35.6% in the quarter, up 100 basis points as we leveraged increased volume, partially offset by higher rebates and program costs.\nOur SG&A as a percentage of sales was 19% in the quarter.\nThis was primarily due to increases in certain variable costs such as incentive compensation, program costs, advertising, and legal accruals.\nWe delivered a strong 4th quarter operating profit of $309 million, up $52 million or 20% from last year with operating margins expanding 90 basis points to 16.6%.\nOur 4th quarter earnings per share increased 36% to $0.75.\nPlease note that this performance is based on a normalized tax rate of 25% versus the previously guided 26% tax rate.\nChanges to IRS guidance in late 2020 and how certain foreign income is taxed in the US lowered our normalized tax rate to 25%.\nAs this change was retroactive, restated adjusted earnings per share numbers for 2019 and the first 3 quarters of 2020 can be found in the appendix on slide 28.\nTurning to the full year 2020, sales increased 7% excluding currency.\nForeign currency translation favorably impacted the full-year by $13 million.\nIn local currency, North American sales increased 9% and international sales decreased 1% as many European markets were slower to recover from the impacts of COVID-19.\nOur SG&A as a percentage of sales decreased 100 basis points to 17.9% for the full year as a result of our rapid pandemic related cost containment.\nFor the full year, operating profit increased $196 million or 18% with operating margins expanding 170 basis points to 18.2%.\nLastly, our earnings per share increased 37% to $3.12 for the full year.\nTurning to slide 8, Plumbing grew 12% in the quarter, excluding the impact of currency.\nNorth American sales increased 14% in local currency led by Delta's 18% growth in the quarter.\nDelta continues to drive robust consumer demand across our wholesale, retail, and e-commerce customers as Keith mentioned Watkins, our Spa business, delivered high single-digit growth in the quarter, as they continued to experience strong demand for their products.\nThey have a record backlog despite operating at less than 100% capacity due to ongoing government mandated employee limitations in our Mexican facilities.\nInternational plumbing sales in the 4th quarter increased 8% in local currency.\nHansgrohe once again led growth driving double-digit growth in both Germany and China.\nOperating profit was $224 million in the quarter, up $44 million or 24% with margins expanding 160 basis points 19.1%.\nThe strong performance was driven by incremental volume and cost containment initiatives, partially offset by higher year-end program costs, marketing and other increased variable expenses.\nTurning to the full year 2020, sales increased 3% excluding currency.\nForeign currency translation favorably impacted full year sales by approximately $15 million.\nIn local currency, North American plumbing sales grew 6% and international plumbing sales decreased 1%.\nFull-year operating profit was $813 million, up $92 million or 13% with margins expanding an outstanding 160 basis points to 19.7%.\nTurning to 2021, we expect plumbing segment sales growth to be in the range of 11% to 14% with 47% organic growth, another 4% growth from the recent acquisitions and given current exchange rates foreign currency to favorably benefit plumbing revenue by approximately 3% or $112 million.\nWe anticipate full year margins will be approximately 18% given that in 2020 we delayed approximately $40 million in costs and investments due to COVID.\nWe expect a significant portion of this to return in 2021 in the form of investments in our brands, service, innovation to fuel future growth.\nWe will also have increased amortization expense of approximately $11 million due to purchase accounting.\nSegment operating margins will decline by approximately 60 basis points due to this incremental amortization in the 2 recent acquisitions.\nTurning to slide 9.\nDecorative Architectural grew 12% in the 4th quarter driven by mid-teens growth in our paint business.\nOur DIY paid business continued its strong year with high-teens growth and our propane business rebounded nicely in the quarter with mid single-digit growth.\nOur builders' hardware and lighting business also benefited from increased consumer demand and each contributed to the segment's results by delivering solid growth.\nOperating profit in the quarter increased 9% driven by incremental volume, partially offset by an unfavorable price-cost relationship as well as higher variable compensation and legal accruals of approximately $10 million.\nTurning to full year 2020, sales increased 12% driven by the resurgence in DIY paint in the year.\nWhile our Pro business declined slightly over the prior year, we saw solid improvement in demand in the 4th quarter.\nFull-year operating income increased $98 million or 20% percent with operating margins expanding 120 basis points to 19.2%.\nIn 2021, we expect Decorative Architectural segment sales to grow in the range of 2% to 7% with 0% to 5% organic growth and another 1.5% from the acquisition.\nWe also expect segment operating margins of approximately 19%.\nLooking specifically at paint growth for 2021, we currently anticipate our DIY business to be approximately flat with 2020 and our pro business to increase to high single digits.\nIn addition, the acquisition completed at the end of 2020 will add approximately $3 million of incremental amortization expense due to purchase accounting.\nTurning to slide 10, our year-end balance sheet was strong with net debt to EBITDA at 1 times and we ended the year with approximately $2.3 billion of balance sheet liquidity, which includes full availability of our $1 billion revolver.\nWorking capital as a percentage of sales finished the year at 15.2% excluding acquisitions and an improvement of 50 basis points over prior year.\nThis performance was excellent.\nAs we enter 2021, our inventory levels will require some reinvestment to sustain our outstanding delivery performance.\nWith our strong operating and working capital performance, and lower than normal capex, adjusted free cash flow was extremely strong at $1 billion representing 118% of adjusted net income from continuing operations.\nDuring 2020, we repurchased 18.8 million outstanding shares for approximately $727 million and we increased our annual dividend by 4% to $0.56 per share.\nFinally, I'm pleased to report that Moody's recently upgraded our credit rating to Baa2 based on our improved credit metrics and strong financial performance.\nWe have summarized, our expectations for 2021 on slide 11.\nWe expect overall sales growth of 7% to 11% with operating margins in the range of approximately 17%.\nWe currently expect that growth will be more heavily weighted toward the first half of the year as we will obviously face our impressive 2020 comps in the second half of 2021.\nOne thing to keep in mind is that in 2021, we expect to annuitize in Germany, certain of our US defined benefit plans and as the second or 3rd quarter.\nAs a result, we will incur a non-cash settlement charge of approximately $450 million when we terminate the plans.\nWe will adjust out this charge for purposes of our adjusted earnings per share calculation.\nAdditionally, we will make a final one-time cash pension contribution of approximately $140 million to settle these plans.\nThis amount will reduce our cash from operations, similar to the approximate $50 million of defined benefit contributions made to these plans in the past several years.\nThis also means that beginning in 2022 cash from operations will increase by approximately $15 million as compared to prior years improving our already strong free cash flow conversion.\nLastly, as Keith mentioned earlier, our 2021 earnings per share estimate of $3.25 to $3.45 cents represents 7% earnings per share growth at the midpoint of the range.\nThis assumes a 255 million average diluted share count for the year.\nAdditional modeling assumptions for 2021 can be found on slide 17 in our earnings deck.\n2020 was a disruptive year on many fronts and these uncertain times are far from over.\nWhile there is clearly much focus on these short-term dynamics, let me share with you how we are thinking about Masco for the long term.\nThe Repair and Remodel industry is attractive with favorable fundamentals.\nGrowth on average is approximately GDP plus 1% to 2%, and is less cyclical than the new home construction market.\nFavorable demographics will help drive repair and remodel demand and we are on the leading edge of the large millennial cohort forming households.\nOlder homes require more repair and remodel spending and the average age of housing has increased due to significant under-building of homes since the downturn of 2008 and the COVID-19 pandemic has clearly increased the desire for more enjoyable living space, which has led to increased home demand and remodeling expenditures.\nMasco has a low-ticket repair and remodel focus business with market leading brands with product and geographic diversification, which provides growth and stability through an economic cycle.\nWe leverage our customer insights broad channel relationships, scale, diversification, and our Masco operating system to drive innovation and make our businesses better.\nWith our market leading brands, history of innovation, strong management teams, and focus on serving our customers in this attractive industry combined with our strong free cash flow and capital deployment, our long-term expectation is to grow earnings per share on average by approximately 10% each year.\nThis is comprised of above market organic growth in the range of 3% to 5% annually.\nGrowth from acquisitions in the range of 1% to 3%, margin expansion each year through cost productivity and volume leverage and continued capital deployment in the form of share buybacks, which should contribute approximately 2% to 4% earnings per share growth and dividends, which should add approximately 1% to 2% return on top of the earnings per share growth.\nWhile 2020 was an extremely challenging year, we responded exceptionally well and are poised to continue to drive shareholder value creation in the future.\n",
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"content": "compname posts q4 adjusted earnings per share $0.75 from continuing operations.\nq4 adjusted earnings per share $0.75 from continuing operations.\nanticipate 2021 adjusted earnings per share to range from $3.25 to $3.45 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: Following comments from Michael and Sachin, the operator will announce your opportunity to get into the queue for the Q&A session.\nBoth the release and the slide deck include reconciliations of non-GAAP measures to their GAAP reported amounts.\nSo let me start by giving you the highlights of the quarter.\nStrong revenue and earnings growth continued.\nThe net revenue up 29% and earnings per share up 48% versus a year ago, as always, on a non-GAAP currency-neutral basis.\nOn this same basis, Quarter 3 net revenues are now 11% above pre-COVID levels in 2019.\nWe're seeing continued strength in domestic spending and overall cross-border volumes are now back at 2019 levels, though there still remains significant room for growth in cross-border travel.\nWe're continuing to execute against our strategic priorities with good progress on the product and deal fronts this quarter.\nAnd we're excited about our acquisition of CipherTrace in the crypto services area and our planned acquisition of Aiia in open banking.\nSo those are the highlights.\nLooking at the broader economy, domestic spending levels continue to improve, even though economies are facing supply chain constraints, rising energy prices and some other inflationary pressures.\nretail sales ex auto, ex gas were up 5% versus a year ago and 12% versus 2019, reflecting the return to in-person shopping and the ongoing e-commerce strength.\nSpendingPulse also indicated that the overall European retail sales in Quarter 3 were up 5% and 6% versus 2019.\nAs it relates to COVID specifically, the outlook continues to get better with case numbers generally improving, new therapeutics in the pipeline, progress on vaccinations and businesses becoming more agile in the face of remaining restrictions.\nand some easing of restrictions in Asia.\nNow, turning to our business.\nWhile the pandemic is not fully behind us, we're now in the growth phase in most markets domestically and in many markets in cross-border spending as well.\nWe will, therefore, turn the page and move beyond the four-phased framework that guided us through the last 19 months and focus on managing the business for the growth opportunities ahead of us.\nLooking at Mastercard's spending trends.\nSwitched volumes improved quarter over quarter.\nWe saw particular strength in consumer and commercial credit.\nDebit spend remains elevated, although it has moderated in recent weeks in part due to waning stimulus benefits.\nIn terms of how people are spending, card-present volumes continue to improve as people are getting out and shopping more while we are still seeing sustained strength in card-not-present spend.\nSo regardless of whether people want to shop online or in-person, our solutions support that choice and position us well to participate in both trends.\nNow, let's take a look at cross-border.\nOverall, cross-border returned to 2019 levels in August, driven by improvements in consumer and commercial travel, as well as the ongoing strength of cross-border card-not-present spending ex travel.\nOur cross-border travel improved from 48% of 2019 levels in the second quarter to 72% this quarter with substantial upside potential still remaining as and when borders open.\nAgainst this backdrop, we're investing in the growth of our business, including the enhancing end of our leading technology capabilities, like expanding our network edge to connect directly with our customers through the cloud, providing faster and easier access to our products and services.\nAnd of course, we remain focused on our strategic priorities: number one, rolling out core products while driving the shift to digital; two, differentiating and diversifying with our services; and three, leveraging our multi-rail capabilities to offer choice across payment applications.\nNow, let's take them one-by-one and turn to how we're growing our core products and driving the shift through digital: through Mastercard Installments, by winning core deals and by continuing our momentum in the fintech space.\nFirst, let me tell you about our recently announced Mastercard Installments, our scalable, open loop, buy-now-pay-later solution.\nMastercard Installments is differentiated in that it enables banks, lenders, fintechs and wallets to seamlessly bring buy-now-pay-later solutions to consumers and merchants at scale and in a secure, tokenized manner.\nWith little to no integration for merchants, our solution avoids the need for lenders to engage merchants one-by-one to roll this out, enables them to deliver more payment options to more consumers faster.\nOur solution brings choice at scale, delivered through the Mastercard network.\nOur consumers will be able to access buy-now-pay-later offers through their bank's mobile banking app at the point of checkout and soon directly through Click to Pay.\nThe embedded power of Finicity will help lenders with credit positioning and enable consumers to easily choose different repayment options.\nMastercard Installments will power our core payments and enable us to provide additional value through services, such as data analytics, loyalty and fraud tools.\nWe've seen strong interest from players on all sides of the ecosystem and look forward to growing our partnerships in this area.\nAs always, we remain focused on continuing to grow share.\nAnd we've won deals across the globe this quarter.\nIn the U.K., we're partnering with Chase as the preferred debit partner of their new digital retail bank.\nIn Canada, we've extended our exclusive co-brand with Costco Canada.\nAnd in Brazil, we signed a deal with Autopass to issue more than 10 million cards to mass transit users in the Sao Paulo area, and along with that, open, contactless acceptance across their subway trains and city buses.\nWe're also building our leading position with fintechs and mobile money providers.\nHere are a few recent examples.\nPayPal has extended its PayPal Business Debit card into our four markets in Europe.\nPayPal will also directly leverage Mastercard Send for domestic wallet cash-outs and P2P transactions in the U.S. We're partnering with Vodafone in Egypt across all of their mobile money use cases, including cash-outs, P2P and bill payments.\nWe expanded our strategic partnership with Yandex in Russia and we'll be their preferred international partner for all of their fintech initiatives.\nbanks and fintechs to get cards and financial products into the market, will leverage our digital-first Finicity, Mastercard Send and cybersecurity assets.\nNow, shifting to services.\nOur services support and differentiate our core products and have played a critical role in enabling many of the wins I just mentioned.\nThey, of course, also diversify our business.\nWe had many wins in this area this quarter.\nStarting with the cybersecurity space.\nEthoca is helping multiple players, including AT&T and Mercado Libre, reduce charge-backs through collaboration, thereby creating purchase transparency.\nBanco de Bogotá is using our artificial intelligence capabilities to improve consumer experiences, increase profitability and identify new opportunities.\nAnd in Europe, the term is leveraging NuData's behavioral biometrics to help thousands of new banks authenticate online transactions.\nThe tourism agencies in Greece, Hungary and elsewhere are using services like tourism insights and managed services to gather greater visibility of trends and drive deeper insights to support their tourism campaigns.\nIn the UAE, HSBC is leveraging our test-and-learn capabilities to innovate, experiment and roll out new products for better customer engagement.\nAnd we're having success in the loyalty space with our innovative digital solutions, driving wins with players like the global fitness chain, Barry's and First and Saudi National Bank.\nNow, let's turn to the progress we've made in offering choice to consumers across payment applications with our multi-rail capabilities, including open banking, B2B and crypto.\nIn open banking, we're happy about our planned acquisition of Aiia.\nAiia is a leading European open banking player, whose platform expertise, strong API connectivity and payment capabilities complement our existing open banking assets.\nWe will combine Aiia's European footprint with Finicity's connectivity in the U.S. and our expansion into other markets like Australia.\nThis will allow us to extend each organization's best-in-class capabilities, such as credit decisioning, credit scoring, account information services and payment applications across markets.\nWe continue to make progress with our open banking product in Europe with players like Entercard, one of Scandinavia's leading credit card companies.\nAnd in the U.S., Finicity is working with UGO to enable account opening verifications, along with future plans to expand into payments.\nWe're also adding new functionality to Track DBS and are partnering with Demica to launch a supply chain finance capability.\nThis functionality empowers payment agents to provide their business customers with access to affordable working capital directly through the Mastercard Track DBS platform.\nAnd in the U.K., HSBC will be the first to issue a Mastercard Track Card to Account Transfer product, an innovative B2B payment solution that allows businesses to use their commercial card program to make payments to any supplier, even if that supplier does not accept card payments.\nAgain, a true multi-rail offering.\nAnd finally, in the crypto space, we're making it easier for crypto players to connect to our network.\nWe signed up a number of new crypto wallet providers and exchanges this quarter, including Bit2Me, [Inaudible], Kanga by ZEN.COM, Coinmotion and CoinJar.\nOur crypto program, which is based on [Inaudible] principles of engagement, allows consumers to easily buy crypto assets with their Mastercard, spend their crypto balances wherever Mastercard is accepted, cash out their proceeds with Mastercard Send and earn rewards in the form of crypto or even NFT.\nWe're also seeing a growing services opportunity in this space.\nEarlier this month, we acquired CipherTrace, a security and fraud monitoring company with expertise, technologies and insights into more than 900 cryptocurrencies.\nOur recently announced agreement with Bakkt will also add to our expanding crypto services portfolio.\nSo let me sum this up one more time.\nWe delivered strong revenue, earnings growth this quarter.\nWe are seeing continued strength in domestic spending in most markets.\nAnd while overall cross-border volumes are back at 2019 levels, there remains significant room for growth in cross-border travel.\nWe're executing against our strategic priorities with good progress on the product and deal front, as you heard, we're doing all of that while carefully managing our expenses.\nThat's it for me.\nSachin, over to you.\nSo turning to Page 3, which shows our financial performance for the quarter on a currency-neutral basis, excluding special items and the impact of gains and losses on our equity investments.\nNet revenue was up 29%, reflecting the continued execution of our strategy and the ongoing recovery in spending.\nAcquisitions contributed 3 ppt to this growth.\nOperating expenses increased 23%, including an 8 ppt increase from acquisitions.\nOperating income was up 34% and net income was up 45%, both of which include a 1 ppt decrease related to acquisitions.\nFurther, net income growth was also positively impacted by 6 ppt due to the recognition of higher one-time discrete U.S. tax benefits versus a year ago.\nEPS was up 48% year over year to $2.37, which includes $0.02 of dilution related to our recent acquisitions, offset by a $0.04 contribution from share repurchases.\nDuring the quarter, we repurchased $1.6 billion worth of stock and an additional $361 million through October 25, 2021.\nSo now, let's turn to Page 4, where you can see the operational metrics for the third quarter.\nWorldwide gross dollar volume or GDV increased by 20% year over year on a local-currency basis.\nWe are seeing continued strength in both debit and credit.\nU.S. GDV increased by 20% with debit growth of 9% and credit growth of 36%.\nOutside of the U.S., volume increased 20%, with debit growth of 23% and credit growth of 16%.\nTo put this in perspective, as a percentage of 2019 levels, GDV is at 121%, up 2 ppt sequentially, with credit at 111%, up 4 ppt sequentially, and debit at 131%, flat quarter over quarter.\nCross-border volume was up 52% globally for the quarter with intra-Europe cross-border volumes up 47% and other cross-border volumes up 60%, reflecting continued improvement and the lapping of the pandemic last year.\nIn the third quarter, cross-border volume was at 97% of 2019 levels with intra-Europe at 112% and other cross-border volume at 83% of 2019 levels.\nNotably, cross-border volumes averaged at or above 100% of 2019 levels in the months of August and September.\nTurning now to Page 5.\nSwitched transactions grew 25% year over year in Q3 and were at 131% of 2019 levels.\nCard-not-present growth rates remained strong and card-present growth continue to improve.\nCard-present growth was aided in part by increases in contactless penetration in several regions.\nIn Q3, contactless transactions represented 48% of in-person purchase transactions globally, up from 45% last quarter.\nIn addition, card growth was 8%.\nGlobally, there are 2.9 billion Mastercard and Maestro-branded cards issued.\nThe increase in net revenue of 29% was primarily driven by domestic and cross-border transaction and volume growth, as well as strong growth in services, partially offset by higher rebates and incentives.\nAs previously mentioned, acquisitions contributed approximately 3 ppt to net revenue growth.\nLooking quickly at the individual revenue line items.\nDomestic assessments were up 21% while worldwide GDV grew 20%.\nCross-border volume fees increased 59% while cross-border volumes increased 52%.\nThe 7 ppt difference is primarily due to favorable mix as higher-yielding ex intra-Europe cross-border volumes grew faster than intra-Europe cross-border volumes this quarter.\nTransaction processing fees were up 26%, generally in line with switched transaction growth of 25%.\nOther revenues were up 35%, including a 10 ppt contribution from acquisitions.\nThe remaining growth was mostly driven by our cyber and intelligence and data and services solutions.\nFinally, rebates and incentives were up 34%, reflecting the strong growth in volume of transactions and new and renewed deal activity.\nMoving on to Page 7.\nYou can see that on a currency-neutral basis, total operating expenses increased 23%, including an 8 ppt impact from acquisitions.\nExcluding acquisitions, operating expenses grew 16%, primarily due to higher personnel costs as we invest in our strategic initiatives, including -- sorry, increased spending on advertising and marketing and increased data processing costs.\nTurning to Page 8.\nLet's discuss the specific metrics for the first three weeks of October.\nWe are seeing continued strength in growth rates across our operating metrics versus 2020, in part due to the lapping effects related to the pandemic that began last year.\nTo provide you better visibility into current spending levels, we are, once again, showing 2021 volumes and transactions as a percentage of the 2019 amounts, when we were not experiencing the impact of the pandemic.\nSo if you look at spending levels as a percentage of 2019 for switched volumes, through the first three weeks of October, the recent trends have continued with overall switched volumes at 134% of 2019 levels, up 3 ppt versus Q3.\nThe U.S. has held steady with some moderation in growth from earlier levels due to the roll-off of stimulus.\nAnd outside the U.S., we have seen continued improvement.\nTrends in switched transactions remain steady and are generally tracking the trends we are seeing in switched volumes.\nIn terms of cross-border, as I noted earlier, spending levels as a percentage of 2019 were back to pre-pandemic levels, starting in August.\nThat improving trend has continued through the first three weeks of October.\nAnd we are now at 105% of 2019 levels.\nThis improvement is driven by increases in both travel and non-travel cross-border volumes.\nAs it relates to travel, we have seen it picking up in all regions, notably within and to Europe and recently into Canada as well.\nTurning to Page 9.\nI wanted to share our current thoughts looking forward.\nFirst off, our deal momentum and service lines continue to position us well for growth and diversify our revenues.\nAnd we continue to make strong progress against our strategic objectives.\nDomestic spending levels remain healthy.\nAnd we are encouraged by the recent resurgence in international travel.\nWe are optimistic about the announced relaxation of border restrictions in places like the U.S. and the U.K., given that we have seen travel pickup when borders have opened in the past.\nFurther, the airlines have recently reported increased travel bookings, including long-haul travel.\nWith this as context, assuming domestic and cross-border spending trends relative to 2019 continue to improve, we would expect Q4 net revenues to grow at a low 20s rate year over year on a currency-neutral basis, excluding acquisitions.\nAs a reminder, spending recovered progressively in 2020, so we will be facing a more difficult comp of approximately 7 ppt in the fourth quarter relative to the third quarter.\nIt is also important to point out that this is just one potential scenario as the level of uncertainty remains related to the pandemic and therefore the pace of recovery may not be linear.\nIn terms of operating expenses for the fourth quarter, we expect operating expenses to grow at the low end of low double digits versus a year ago on a currency-neutral basis, excluding acquisitions.\nThis reflects our disciplined approach to expense management while advancing our innovation agenda across payments, services and promising new adjacencies and continued investment in brand and product marketing.\nWith respect to acquisitions, we are pleased to now have closed on the CipherTrace transaction.\nAnd we expect acquisitions will contribute about 2 to 3 ppt to revenue and 8 ppt to operating expense growth in Q4.\nThis reflects the integration of several acquisitions in the open banking, digital identity and real-time payment areas.\nOther items to keep in mind.\nForeign exchange is expected to be about 0.5 ppt headwind to both net revenue and operating expenses in Q4.\nOn the other income and expense line, we are at an expense run rate of approximately $120 million per quarter, given the prevailing interest rates.\nThis excludes gains and losses on our equity investments, which are excluded from our non-GAAP metrics.\nAnd finally, we expect a tax rate of approximately 18% to 19% for the fourth quarter.\nWe look forward to discussing our future plans with you at that time.\n",
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"content": "mastercard inc sees q4 forecasted growth for revenue of mid 20's.\nmastercard inc - sees q4 forecasted growth for revenue of mid 20's.\nmastercard inc - sees q4 forecasted non-gaap revenue growth, currency-neutral, excluding acquisitions of low 20's.\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: At the heart of McDonald's is the experience we offer.\nAnd for 65 years, we've created iconic experiences for billions of people around the world.\nAlong the way, we've always focused on following our customers' needs, finding the most convenient and engaging ways for them to enjoy McDonald's.\nAt our founding, the restaurant experience was relatively simple: Customers would walk up to the front counter, place their orders and get hot, delicious fresh food served to them quickly.\nIn the early 1970s, McDonald's pioneered the drive-thru as a new service channel for customers.\nAnd in the last few years, we've added even more service channels with delivery, curbside pickup, kiosks and table service.\nAt the heart of each of these innovations was our global mobile app, which has evolved our customer experience from the physical world to the digital world.\nAs this evolution continues, our digital offerings will become even more important to serving, interacting with and delighting our customers around the world, and the insights generated from these platforms will help us further improve their experience.\nOur marketing power and scale will continue to be critical throughout this journey, turning the various customer touch points into a holistic and compelling brand experience.\nBut our aspirations are even higher.\nAnd to reach these goals, we need to create a more frictionless customer experience across all our service channels.\nOur customers should be able to move seamlessly between the in-store, takeaway and delivery service channels so that we offer even more convenience and better personalization.\nThat's why we were excited to announce earlier this week the creation of a team that has oversight for the end-to-end customer experience under the leadership of our first Chief Customer Officer in McDonald's history, Manu Steijaert.\nManu will oversee everything from the physical restaurants that we design and build to the digital experiences that we embed along each step of the customer journey.\nAs we finished the global rollout of EOTF, Manu and his team will now be focused on what's next to drive a new layer of sustained growth for our system that leverages the foundations that we've built.\nFor the past 18 months, our digital customer engagement, global marketing, data analytics and restaurant solutions teams have worked to standardize our infrastructure and align the system against some common frameworks.\nThese efforts ultimately paved the way for MyMcDonald's Rewards, our first global digital offering that we are now deploying across our largest markets.\nMyMcDonald's Rewards is just the first example of how we will lead as a digital innovator by leveraging our scale and engaging with our customers in a truly integrated way.\nManu is the ideal choice to integrate these teams and take their work to the next level, with an intense focus on driving incomparable customer-centric innovation.\nHe's been an important part of the McDonald's system for more than 20 years at every level.\nManu knows these teams well and has an incredibly deep understanding of the needs of our customers, one rooted in his early experience as a crew member in his parent's McDonald's franchise in his native Belgium.\nWe believe that connecting these teams will enable us to deliver the seamless omnichannel experience that our customers want and only McDonald's can provide, transforming the way customers connect with, interact with and experience our brand.\nFurther strengthening our ways of working to better serve our customers is one of many ways we're working to accelerate the Arches today.\nThis complements the work underway to accelerate the Arches with investments in customer-centric creative marketing that only McDonald's can offer so fully.\nThat marketing made a measurable impact in the second quarter with the global debut of our incredibly successful Famous Orders marketing platform.\nI'll have more to say about that a bit later.\nWe're accelerating the Arches by committing to our core menu.\nWe're tapping into customer demand for the familiar and making the chicken, burgers and coffee our customers love even more delicious.\nWe're borrowing from what has worked well in other markets like the growing success of the McSpicy Chicken Sandwich.\nMcSpicy launched in China over 20 years ago, and customers can now enjoy this great-tasting sandwich in multiple markets around the world.\nLate last year, we launched McSpicy in Australia as part of their new chicken sandwich lineup.\nAnd earlier this month, it debuted in the U.K. to great fanfare.\nWe also continue to leverage our familiar favorites and create new ones to make our menu even more craveable.\nIn the U.S., the momentum from the successful launch of our Crispy Chicken Sandwich continued into the second quarter as we supported the platform with culturally relevant advertising, just one more way that our beloved core menu continues to drive growth while anchoring a customer experience that is second to none.\nWe also know that the customer experience today reaches beyond the physical walls of our restaurants.\nAnd that's why we're accelerating the Arches to better serve our digitally connected customers.\nTo give you a sense of the growing digital connection we have to our customers, we have the most downloaded QSR app in the United States.\nAnd earlier this month, we were proud to launch our new loyalty program, MyMcDonald's Rewards, in the U.S. The loyalty of every McDonald's fans has been unmatched for 65 years.\nAnd with these new digital connections, we're able to do an even better job of rewarding them for it.\nWe already have over 22 million active MyMcDonald's users in the U.S., with over 12 million enrolled in our new loyalty program, MyMcDonald's Rewards.\nAnd that's before national advertising for loyalty, which began earlier this week.\nWell, it is a good example of how our core menu and personalized marketing come together through digital channels to build a stronger relationship with our customers.\nOur digital systemwide sales across our top six markets were nearly $8 billion in the first half of 2021, a 70% increase versus last year.\nAnd that's why we're moving aggressively to bring MyMcDonald's Rewards to our top six markets.\nWe currently have loyalty programs in place in France and the U.S. Germany and Canada plan to launch MyMcDonald's Rewards before the end of this year, followed by the U.K. and Australia in 2022.\nWe're just as excited about our drive-thrus through which much of our business has come from this year and about delivery.\nOver 80% of our restaurants across 100 markets globally now offer delivery.\nWe're excited about our success with multiple 3PO partners.\nAnd as I said last quarter, we continue to innovate.\nOverall, our recent successes show that our M, C and D growth pillars working in concert can deliver unmatchable experiences for our customers and drive growth unlike anything else in customer retail.\nOf course, our work to accelerate the Arches is built on the foundation of the very core of McDonald's success: running great restaurants.\nAs we open our dining rooms, return to regular hours and get back to full staffing, we know that world-class execution will be more important than ever.\nWhile the Delta variant has brought more stops and starts to the COVID story around the world, people are venturing out and establishing new routines.\nThat includes a return to in-person dining.\nToday, about 70% of our dining rooms in the U.S. are open.\nBy Labor Day, barring resurgences, it will be nearly 100%.\nInternationally, the majority of our restaurants are now operating all channels, including dine-in, but many continue to operate with limited hours or restricted capacity.\nWe're working hard to get back to normal.\nNot only are we more resilient today than we were heading into the pandemic.\nAs Kevin will tell you, we are building from a position of strength.\nI'm pleased to share that global comp sales were up 40% in the second quarter or 7% on a two-year basis.\nOur performance has continued demonstration of the broad-based strength and resiliency of our business.\nWe've surpassed 2019 sales levels for the second consecutive quarter and now at an accelerated rate.\nTurning to the segment performance for the quarter.\nWe grew comp sales across all segments versus 2019 levels as business recovery progresses at varying degrees around the world.\nIn the U.S. our momentum continued with Q2 comp sales up 26% or 15% on a two-year basis, our strongest quarterly two-year growth in over 15 years.\nAnd we saw double-digit positive comps across all dayparts on a two-year basis, while at the same time, franchisees continue to achieve record-high operating cash flow.\nOur performance in the U.S. is the result of an accumulation of decisions that we've made over the last 18 months.\nThis includes bold marketing initiatives, investing in the core menu and strengthening our digital offerings with an underlying focus on running great restaurants.\nAs customers in the U.S. began to venture out more during the second quarter, we continued to see strong average check growth driven by larger order sizes and menu price increases.\nThat's been bolstered by growth in delivery and digital platforms as well as robust menu and marketing programs.\nThis includes an advertising rehit of our Crispy Chicken Sandwich, which continues to perform at an elevated level and the success of our BTS meal.\nBoth initiatives attracted customers and drove incremental sales in the quarter.\nIn our International Operated Markets segment, which has been historically strong, recovery is taking hold.\nComp sales were up 75% in the quarter or nearly 3% on a two-year basis as we lapped the peak in 2020 restaurant closures.\nRemember, in some cases, full country operations were shut down in Q2 last year due to the pandemic.\nAlthough we're continuing to monitor recent resurgences of COVID in countries around the world, Western Europe began to reopen during the quarter, allowing us to bring back indoor dining, still with some restrictions in place.\nIOM segment comp sales began exceeding 2019 levels in May.\nStrong performance continued in Australia.\nThe market benefited from continued growth in delivery and successful marketing and core menu news, including the BTS Famous Orders and 50th Birthday Big Mac promotion.\nWhile Australia produced strong results for the quarter, outbreaks of the COVID-19 Delta variant throughout the country have led to recent lockdowns and reduced customer mobility.\nMomentum accelerated in both the U.K. and Canada in Q2.\nIn the U.K., the national lockdown ended, and the market reopened dining rooms in mid-May.\nThe market saw record digital engagement with a significant portion of sales coming through digital channels, where customers place delivery orders and used self-order kiosks as dining rooms reopened.\nCanada benefited from strong marketing activity featuring our core menu, including the BTS Famous Orders meal.\nIn France and Germany, comp sales were still below 2019 levels for the quarter.\nWhile some restrictions are still in place, indoor dining reopened for both markets in June, and we've seen steady improvement since then.\nAs we look ahead to Q3, we expect comps to surpass pre-pandemic levels across all of our big five international markets.\nThe past year has shown us that when markets reopen, customer demand for McDonald's returns quickly.\nComp sales in the International Developmental Licensed segment were up 32% for the quarter or relatively flat on a two-year basis.\nPerformance was largely driven by positive results in Brazil, Japan and China.\nJapan maintained momentum in Q2 with comps up nearly 10%, achieving an impressive 23 consecutive quarters of comp sales growth.\nThe market's performance was driven by strong menu and marketing promotions, delivery growth and our ability to continue serving customers their favorites safely and conveniently throughout state of emergency waves across the country.\nIn China, comps were strong for the quarter but have yet to return to 2019 levels due to COVID resurgences in Southern China, resulting in operating restrictions.\nThe market continues to build its digital member base with a successful MyMcDonald's app launch and focused delivery expansion in the breakfast and evening dayparts.\nIn addition, China surpassed the 4,000-restaurant mark in June and is now on pace to open over 500 new restaurants this year.\nGiven our slightly quicker recovery and continued momentum around the world, we now expect full year systemwide sales growth in the mid- to high teens in constant currencies.\nHowever, there's still some uncertainty as we continue to see pandemic-related stops and starts in markets around the world, especially now with the Delta variant.\nAs we look ahead to the rest of 2021, we're finding ways to capitalize on our strengths.\nAs we've seen, the growth pillars of accelerating the Arches are deeply interconnected, reinforcing and bolstering one another.\nIt is at the intersection of our MCD that we continue to deepen our connection with customers and create a consistent and enjoyable experience, proving that the whole is greater than the sum of its parts, which brings us back to our Famous Orders platform.\nWhen it launched in the U.S. last year, our goal was to create an ambitious marketing campaign, one that would leverage our customers' favored core menu items, speak to a new generation in authentic ways and increase digital engagement without adding any restaurant complexity, all while positioning us for the longer term.\nThe Famous Orders platform was based on a simple idea but unites all our customers, including famous celebrities, is everyone has their go-to McDonald's order.\nThe Travis Scott then J Balvin Famous Orders broke records in the U.S.\nThis quarter, the BTS Famous Order took that ambition global, connecting our marketing, core menu and digital strategies in 50 markets.\nAnd it was our first Famous Order with custom packaging and app-exclusive content.\nIt has been, to borrow a BTS lyric, Dynamite.\nWe saw significant lifts in McNuggets sales and record-breaking levels of social engagement.\nMcDonald's customers and BTS fans all over the globe downloaded our app, ordered Chicken McNuggets with delicious sweet chili and cajun dipping sauces and posted about it on social media, leading McDonald's to trend number two on Twitter globally and number one in the U.S. And then the BTS ARMY took it a step further and memorialized the partnership, creating shoes, accessories and frame memorabilia from our packaging.\nThey were so appreciative of the meal that the BTS ARMY went out of their way to prepare snacks for our crew and managers in Malaysia, the Philippines and Vietnam to support them on launch day.\nThe Famous Order platform is the M, C and D in action.\nBoth Famous Orders and MyMcDonald's Rewards are also reminders of the unrivaled convening power of McDonald's.\nAnd this is just the beginning of the digital customer journey at McDonald's.\nAs we create more personal and seamless McDonald's experiences and make it easier for our crew to connect with our customers, we're giving customers multiple reasons to continue to come back to McDonald's.\nBy using digital, we'll also leverage our advantages in value and convenience, daypart and menu breadth and our biggest advantage, our size and scale.\nNow for more on the financial performance in Q2, I'll pass it back to Kevin.\nAdjusted earnings per share in Q2 was $2.37, which excludes a gain on the further sale of some of our ownership in McDonald's Japan and a onetime income tax benefit in the U.K. In year-to-date, adjusted operating margin was 43%, reflecting improved sales performance across all segments and higher other operating income compared to last year.\nTotal restaurant margin dollars grew $1.3 billion in constant currencies with improvement in both franchised and company-operated restaurant margins, mostly driven by higher comp sales as a result of COVID-19 impact last year.\nCompany operating margins in the U.S. were strong as we continue to see top line growth driven by higher average check.\nIn the IOM segment, company operating margins improved significantly in Q2 as sales have recovered to pre-pandemic levels.\nG&A decreased 1% in constant currencies for the quarter, primarily due to lapping our $160 million incremental marketing investment last year, offset by higher incentive-based compensation and increased spend in restaurant technology.\nOur adjusted effective tax rate was 21.7% for the quarter.\nAnd we're projecting the tax rate for the back half of 2021 in the range of 21% to 23%.\nAnd finally, foreign currency translation benefited Q2 results by $0.13 per share.\nBased on current exchange rates, we expect FX to benefit earnings per share by about $0.03 to $0.05 for Q3, with an estimated full year tailwind of $0.20 to $0.22.\nAs usual, this is directional guidance only as rates will likely change as we move through the year.\nI'm proud of all that we've accomplished during the past 18 months.\nIt's a remarkable testament to the resiliency of the McDonald's system.\nBut as we turn our focus to the incredible opportunities that lie ahead of us, it's also reminded us of where we must go.\nFor 65 years, the one unassailable truth about McDonald's is that we get better together.\nThere's a reason why it's one of our core values.\nContinually finding ways to better ourselves and our system is how we keep our business relevant, not just for this generation but the next.\nHow do we get better together today?\nWe get better together by focusing on our people.\nIn this highly competitive market for talent, successful employee recruitment and retention is fundamental to drive growth.\nThat's why in May, we announced a 10% increase in the average hourly wage at our company-owned restaurants in the U.S., with the goal to get to a $15 an hour wage by 2024.\nWe get better together through diversity, equity and inclusion.\nToday, 23% of our U.S.-based suppliers come from diverse backgrounds, more than double the industry average.\nWe have set a goal to increase purchases of goods and services from diverse-owned suppliers by 10% over the next four years.\nThat will put us in a position where 1/4 of our U.S. spend is with diverse-owned suppliers by 2025.\nAnd we've committed to doubling our national advertising spend with diverse-owned media here in the United States between 2021 and 2024.\nWe get better together by serving our customers but also serving a larger purpose in communities across the world.\nOur part in the national We Can Do This campaign continues this month with McDonald's hot McCafe cups and McDelivery seal stickers, both of which lead customers to vaccines.gov.\nIn Canada, we're doing something similar around This Is Our Shot.\nIt's a national campaign through which McDonald's will supply information in restaurant and drive-thru orders, while supporting a digital campaign to replace vaccine hesitancy with confidence.\nFinally, we get better together through our commitment to our planet.\nIn May of 2014, we were one of the first major corporations of our size to publicly commit to a sustainability framework.\nWe promised that we would report on our progress against our 2020 sustainability goals by the fall of this year.\nAs we prepare to release our impact report, I've never been prouder of the difference we are making in the world.\nWe are working closely with partners across the globe today to source food locally and responsibly, to expand our use of sustainable packaging and to power our restaurants with renewable energy sources.\nIt's the ultimate example of our three-legged stool in action, where owner-operators, suppliers and employees each play a critical role in our efforts to protect the planet.\nWe're working every day to set ambitious goals and to hold ourselves accountable, to be known not just for what we do as a company but how we do it.\nIt's part of our broader commitment to transparency and to following clear science-based guidelines from the experts.\nWe know we still have much work to do, but our internal strategy and the external landscape are converging to create a moment unlike any other.\nWe are aware of our unique role in the world.\nWe are inspired by all the opportunities that lie ahead.\nOver the back half of this year, I'm looking forward to getting back into the restaurants around the world and spending more face time with our people.\nI'm amazed with everything that our system has accomplished over the past 18 months, and we can't wait to write the next great chapter of the McDonald's story together.\nWith that, we'll begin Q&A.\n",
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"content": "mcdonald's - qtrly earnings per share $2.95; qtrly adjusted earnings per share $2.37.\nmcdonald's - crispy chicken sandwich, bts famous order promotion, growth in delivery, digital platforms contributed to qtrly u.s. comparable sales growth.\nmcdonald's - for international operated markets, qtrly results reflected strong positive comparable sales in the u.k. and france.\nmcdonald's - foreign currency translation benefited earnings per share by $0.13 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: With me on the call today are President and Chief Executive Officer, Chris Kempczinski; and Chief Financial Officer, Kevin Ozan.\nAs the largest restaurant business in the world our size and scale are competitive advantage that we've built and nurtured for over six decades.\nOur 40,000 restaurants in over 100 countries are predominantly run by local owner operators, connecting the business to the 40,000 communities in which we operate.\nThese local connections and better level of agility that complements our size and scale, enabling local teams to adapt and adjust to operating conditions that vary by country, community and even restaurant in real time.\nIt's what makes McDonald's special.\nIt's also how we're able to use the scale and agility.\nHow we can be both big and nimble to achieve something truly unique.\nFrom restrictions driven by new COVID variance, to supply chain pressures and labor shortages across industries, to any other unknown, unknowns.\nWe're approaching the one-year anniversary of Accelerating the Arches, which took shape in response to changing customer needs early in the pandemic.\nRooted in the inherent strengths of the McDonald's system and brand, it's proving to be the right strategy with the right focus at the right time.\nWe're evolving the customer experience in ways both large and small to meet changing customer needs and maintain our market leadership.\nOur three growth pillars known as our MCDs marketing core menu and the 3Ds of digital, delivery and drive-thru guide our business.\nThis includes amplifying contactless channels like delivery and drive-thru and creating digital experiences that are seamless personalized and easy to use.\nOur third quarter topline results represent a continuation of our broad-based business momentum around the world with global comp sales, up nearly 13% or 10% on a two-year basis.\nOur International Operated Markets have continued to recover accelerating two-year comp trends in the third quarter to nearly 9% as most markets operated with fewer government restrictions.\nThere is still varied performance across the big five markets within the IOM segment ranging from strong double-digit two-year growth in the UK and Canada to low single-digit two-year growth in Australia, Germany and France.\nAs those countries have been slower to recover from the pandemic.\nThe UK continue to leave the segment in the third quarter, driven by growth in delivery and digital channels, as well as strong menu and marketing promotions like monopoly.\nIn Canada, the strong two-year comp momentum was driven by successful marketing activity, including core extensions like the Grand Mac and Spicy Nuggets and growth in the 3Ds of drive-thru delivery and digital.\nEven as dine-in restrictions have lifted.\nIn France and Germany, comp sales exceeded 2019 levels for the first time in the third quarter.\nGermany's positive performance was supported by expanded deployment of delivery.\nThe national launch of our loyalty program My McDonald's rewards and a taste of McDonald's promotion featuring value offerings like McChicken.\nFrance benefited from continued strength in delivery and strong menu and marketing promotions with a focus on family.\nMarket conditions are challenging with the adoption of vaccine past restrictions for both customers and crew in France and several other countries.\nPerformance in Australia was impacted by significant stay at home restrictions affecting over half of the restaurants for nearly the entire quarter.\nWhile comp sales were relatively flat for the quarter, the market was positive on a two-year basis and continued to grow its delivery channel achieving record delivery sales for the quarter.\nAs we look ahead to the fourth quarter, we expect the IOM segment to maintain a relatively similar two-year comp trend as Q3.\nIn the US, we maintained our momentum with Q3 comp sales, up nearly 10% or 14.6% on a two-year basis.\nWe continue to see positive comps across all day-parts on a two-year basis with sustained double-digit comps at dinner and breakfast.\nAt the same time franchisees continue to achieve record high restaurant cash flow.\nOur US franchisees have never been better positioned to weather the labor and inflation pressures, while still investing in growth.\nPerformance in the US remains driven by strong average check growth reflecting larger order sizes and menu price increases.\nThe big bets we've made during the pandemic are paying dividends across the business and enabling us to maintain our QSR leadership.\nMenu and marketing efforts with products like the Crispy Chicken Sandwich and successful Famous Orders like the Saweetie Meal have elevated our brand and help drive underlying sales growth across the business.\nThe launch of our loyalty program in the US has exceeded expectations and is driving increased digital adoption.\nIn just a few short months, we already have over 1 million members enrolled with over 15 million active loyalty members earning rewards, and we expect that number to continue to grow.\nChris will share more loyalty headlines in a few minutes.\nWe've reopened nearly 80% of our dining rooms in the US, roughly 3,000 dining rooms remain closed in high risk COVID areas, as we continue to prioritize the health and safety of our customers and crew.\nIn restaurants where we have reopened dining rooms front counter in kiosk sales remain below pre-pandemic levels, but we're seeing that even modest increases in these channels help to relieve operational pressure in the drive-thru.\nThe strong performance in the US has continued into October, we're currently seeing low double-digit comps on a two-year basis and we expect that to continue through the rest of the fourth quarter.\nTurning to the International Developmental Licensed segment.\nComp sales were up nearly 17% for the quarter, or about 5% on a two-year basis.\nPerformance was largely driven by positive results in Japan and Latin America, partly offset by negative comps in China.\nJapan maintained momentum in Q3 with comps, up 13% achieving an impressive six consecutive years of quarterly comp sales growth, despite restaurants operating with government restrictions.\nThe market's performance is being driven by a continued commitment to serve customers safely and conveniently through our drive-thru and digital channels, as well as strong marketing and limited time promotions.\nChina continues to be impacted by both COVID resurgences, which restarted in June and lasted throughout the quarter and a softening economy.\nWhile comps for the quarter were negative, the market continues to build its digital presence as they now have over 100 million active digital members.\nIn addition, we've accelerated new restaurant growth in China, with over 500 new restaurants already opened this year, we now expect to open roughly 650 restaurants for the year, exceeding our original plan.\nChina remains a critically important market for us and one where we have confidence in the long-term opportunity.\nSo we plan to get even more aggressive in opening new restaurants in this market.\nWith our strong overall sales performance for the first three quarters of the year, we now expect systemwide sales to be up in the high teens in constant currencies for the full-year.\nOur results are a testament to the focus of our teams on driving growth through our MCDs and we're confident that momentum will continue.\nAfter playing a pivotal role in building out our fan truth strategy in the US, we're going to slightly as transitioning into the role of Global Chief Marketing Officer.\nFollowing the instantly iconic global campaign Morgan developed with BTS, Famous Orders again cross-borders with both Russia and Spain launching successful campaigns with local celebrities in the third quarter.\nThese markets leaned into the idea that truly no matter how big or famous you are or where you are in the world, everyone has their go to McDonald's order.\nI've known Tariq for many years and I'm confident Tariq will maintain our marketing momentum in the US.\nBehind our marketing success as McDonald's craveable core menu.\nIn the US Crispy Chicken Sandwich sales continue to exceed expectations.\nThis translated into significant growth in QSR Chicken market share as we continue to support the Crispy Chicken Sandwich platform with culturally relevant marketing.\nIn the UK, we launched our McSpicy sandwich, which generated the market's best Chicken promotional results on record.\nAnd in Canada, our Spicy McNuggets promotion had a halo effect on McNuggets sales.\nThis quarter, we introduced the McPlant team, which in Austria and the Netherlands as a limited time offer.\nAnd both the UK and Ireland launched the McPlant in a limited number of restaurants.\nWith a goal to rollout nationwide in January.\nMcPlant is available for other markets to pull down based on customer demand.\nAs always we'll do what McDonalds does best, listen to our customers, when people are ready for the McPlant will be ready for them.\nBeing customer driven is about more than just menu items.\nIt's also about delivering feel good experiences when and where our customers want McDonald's, so we can bring the Golden Arches to as many customers as possible.\nThat means continuing to increase our engagement across drive-thru, digital and delivery.\nAs we do that, we're seeing an increase in sales mix across these channels.\nIn our top six markets over 20% of sales or about $13 billion year-to-date came through digital channels, whether it was through our app, kiosk in our restaurants or delivery.\nOur loyalty program has been an instant fan favorite and delivers great value to our most loyal customers.\nIt also creates another touch point to increase engagement and take our relationship with customers to more responsive, more personalized places.\nWe're already seeing increased customer satisfaction and higher frequency among digital customers, compared to non-digital.\nIn September, we launched our loyalty program in Germany quickly amassing millions of active reward to customers.\nAnd we're on track to bring MyMcDonald's Rewards to Canada by the end of the year and the UK and Australia in the first half of 2022, which means that by mid-2022 loyalty programs will be in our top six markets inclusive of France, which has had a strong loyalty program for many years.\nDelivery is another bet we made long before COVID and one that we believe will continue to be a staple for consumers for years to come.\nOver the past five years, our delivery footprint has grown from just 3,000 of our restaurants to more than 32,000 restaurants across 100 countries.\nAs the needs of our customers who continue to change delivery has enabled us to increase our reach and gross sales around the world.\nWe're actively engaged in discussions with our largest delivery providers to support the extraordinary growth in our delivery business.\nWe look forward to sharing more information on these global partnership soon, but this is yet another example of where our scale confers upon us competitive advantages.\nLastly, our drive-thrus, with the drive-thru presence that is second to none, our drive-thru sales across our top six markets continue to stay elevated versus pre-pandemic levels even as dining rooms reopened.\nWe previously shared that we have been testing automated order-taking in the drive-thru at several restaurants in the US.\nThis was enabled by our acquisition of Apprente now known as McD Tech Labs in 2019.\nThese tests have shown substantial benefits to customers and the crew experience.\nTo enable development and scale deployment of this program, McDonald's has now entered into a strategic relationship with IBM.\nIn my mind, IBM is the ideal partner for McDonald's given their expertise in building AI powered customer care solutions and voice recognition.\nIBM will now acquire McD Tech Labs to further accelerate the development of automated order taking.\nWe're in a strong position today, focused on executing our plan, running great restaurants and taking advantage of our unique size and scale to feed and foster communities.\nOur strong performance for the quarter resulted in adjusted earnings per share of $2.76, which excludes the gain as we completed the partial divestiture of our ownership in McDonald's Japan.\nOur strong sales generated an increase in restaurant margins of about $500 million for the quarter.\nG&A increased about 20% in constant currencies for the quarter, driven by higher incentive-based compensation expense as a result of company performance exceeding our plan this year.\nWe still expect G&A to be about 2.4% of systemwide sales for the full-year.\nYear-to-date adjusted operating margin was 44.3%, reflecting the improved restaurant margins across all segments and higher other operating income, compared to last year.\nForeign currency translation benefited Q3 results by $0.04 per share.\nBased on current exchange rates, we expect currency to have a minimal impact on fourth quarter EPS, with an estimated full-year benefit of $0.21 to $0.23.\nAs usual, this is directional guidance only as rates will likely change as we move through the rest of the year.\nAnd finally in September, our Board of Directors approved a 7% dividend increase to the equivalent of $5.52 annually.\nThis marked 45-years of increasing our dividend for shareholders, further reinforcing our confidence in accelerating the Arches.\nWe also announced the resumption of our share repurchase program.\nAs a reminder, we had suspended share buybacks at the beginning of the pandemic as we took on additional debt to provide liquidity support to the McDonald's System.\nSince then, we've been focused on returning to pre-COVID debt ratios that support our strong investment grade credit rating.\nGoing forward, we're confident that our operating performance will continue to fuel growth in our already strong free cash flow profile.\nAs a result, we're committed to our historical capital allocation priorities: first, to invest in new restaurants, existing restaurants and opportunities to grow the business.\nThen we expect to return all free cash flow to shareholders through a combination of dividends and share repurchases over time.\nWe've accomplished so much the past 20-months and even though the pandemic has greatly altered so much in our business and our world, it hasn't changed the simple fact that we're better together than we are apart.\nFor a long time we had a bridge physical separation with technology and new ways of working, but as vaccines have reached critical mass of people in the US and some places around the world, we're beginning to see a different future taking shape.\nFinally, we're coming together again in our communities and cities around the world are beginning to open up and get back to a new normal.\nThe same is true for our global McFamily, after being closed for over a year and a half the McDonald's headquarters reopened on October 11th and it was inspiring to see teams collaborating again in person.\nTo protect the health and safety of our staff, we required all US-based corporate employees to get vaccinated.\nAnd we're continuing to monitor local data and seek guidance from public health officials.\nEven though we've only been back for a few short weeks, we have found that working in the office together spurs a level of collaboration, creativity, and connectedness that simply could not be replicated from behind our screens.\nAnd we're going to be doing the same thing with our global system soon.\nNext April in Orlando franchisees, suppliers and employees will convene for our worldwide convention in person for the first time in four years.\nIt's already shaping up to be an experience unlike any other.\nTogether we'll showcase McDonald's bright future, we'll demonstrate the power of technology for our restaurants, learn how innovation is enhancing the customer experience and discuss plans in the pipeline to drive our Accelerating the Arches Growth plan.\nAs I've said before, it's not only important that we grow, it's equally important that we grow sustainably and in ways that positively impact the communities we serve.\nDriving climate action has been a centerpiece of our long-term strategy for a while now.\nAnd our focus has sharpened.\nIn fact in 2014, we established public commitments intended to make our entire system more sustainable by 2020.\nAmong our goals were to sustainably source 100% of key ingredients, including coffee and beef.\nLooking back this was just the beginning of what would become a much bolder agenda that we are pursuing with urgency.\nAs the threats to our planet have grown, we are responding with a more ambitious plan for ourselves and for the entire industry.\nWe achieved many of our 2020 goals ahead of schedule and we built upon that momentum to set new ambitious targets.\nJust this past September, we announced that we would reduce the use of conventional virgin plastics and Happy Meal Toys by 90% by 2025.\nWe recently announced our ambition to achieve net zero emissions across global operations by 2050 and we joined the UN Race to zero.\nAnd I look forward to sharing more of our sustainability story with climate delegates at the United Nations Climate Change Conference known as COP26 in Glasgow next week.\nWe believe we have both a privilege and a responsibility to help lead on issues that matter most and communities.\nAnd there is no issue more globally important and locally impactful than protecting our planet for generations to come.\nThis is why I continue to remain optimistic about what lies ahead for McDonald's.\nAccelerating the Arches fortified by our purpose and guided by our values makes me confident, not just in the future success of our business, but also for the future of the communities that we serve.\nWith that, we'll begin Q&A.\n",
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"content": "mcdonald's - excluding strategic gains of $0.10 per share in 2021, $0.13 per share in 2020, qtrly earnings per share was $2.76.\nmcdonald's - qtrly u.s. comp sales benefited from strong average check growth driven by larger order sizes, menu price increases.\nmcdonald's - qtrly international operated markets performance was led by very strong positive comp sales in uk, positive comp sales in canada, france.\nmcdonald's - qtrly international developmental licensed markets performance reflected strong comp sales across most regions, led by japan and latam.\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, I'm joined by; Brian Tyler, our Chief Executive Officer; and Britt Vitalone, our Chief Financial Officer.\nBrian will lead off, followed by Britt, and then we will move to a question-and-answer session.\nWe are pleased to be reporting a strong start to our fiscal 2022, which reflects continued operating momentum across our businesses despite the fact that our markets are still recovering from the impacts of COVID-19.\nWe're also making significant progress against our strategic priorities and our commitment to do what's in the best interest of you, our shareholders.\nBefore we get to our first quarter results, I want to provide an update on the progress made toward a broad resolution of governmental opioid-related claims.\nOn July 21, we announced that McKesson, along with two other distributors, negotiated a comprehensive proposed settlement agreement, which, if all conditions are satisfied, would result in a settlement of a substantial majority of opioid lawsuits filed by state and local governmental entities.\nThis broad resolution if this broad agreement becomes effective, the agreement reached between the distributors and the state of New York and its participating subdivisions to settle opioid-related claims will become part of this broader settlement agreement.\nUnder the negotiated proposed settlement agreement and subject to final state territorial and political subdivision participation, McKesson will pay up to $7.9 billion over a period of 18 years.\nOver the next several months, we will monitor participation of the eligible governmental entities to determine, if participation levels are sufficient to proceed.\nThis is an important development, and I am pleased with the progress, we've made after years of negotiations.\nIf we're able to reach a final settlement, it would provide immediate relief to thousands of communities across the United States that have been impacted by this public health crisis.\nWhile we strongly dispute the allegations made in these lawsuits, we believe that bringing resolution to these outstanding claims is in the best interest of those impacted by this crisis.\nWe also believe resolution is in the best interest of our shareholders, and will allow us to further focus on the business and our role in protecting the safety and the integrity of the pharmaceutical supply chain.\nWe remain committed to doing our part to fight against the opioid epidemic, through efforts to continuously enhance our anti-diversion programs and to advocate for reform at the state and national level.\nIf the settlement cannot be finalized or plaintiffs instead choose to pursue their claims in court, we are prepared to litigate against those claims, and we remain confident in our defenses.\nWe also recently announced that we entered into an agreement to sell several of our McKesson Europe businesses to the PHOENIX Group, who we believe is the right and natural successor to McKesson and the ideal leader of these European businesses going forward.\nThe agreement includes our McKesson Europe businesses in France, Italy, Ireland, Portugal, Belgium and Slovenia, as well as our German AG headquarters in Stuttgart, our shared service center in Lithuania, our German wound care business and our equity stake in our joint venture in the Netherlands.\nThis transaction is expected to close in fiscal 2023, subject to customary closing conditions, including the receipt of required regulatory approvals.\nOur remaining European businesses in the UK, Norway, Austria and Denmark were not included in this transaction and will continue to be operated by McKesson.\nHowever, we are exploring strategic alternatives for these remaining businesses as we align future investments to our growth strategies outside of Europe.\nWe believe fully exiting Europe is another step toward becoming a more streamlined and efficient organization.\nLet me turn now to our performance in the quarter.\nWe are continuing to see the operating momentum we discussed on our fourth quarter fiscal 2021 earnings call.\nToday, we're reporting adjusted earnings per diluted share of $5.56 ahead of our original expectations, resulting from the strength across our businesses and our roles in the COVID-19 response efforts across the geographies in which we operate.\nOur US and international distribution businesses are playing an integral role in the pandemic response and our operational excellence and capabilities continue to be highlighted through our evolving partnership with the US government's COVID-19 vaccine distribution efforts.\nThrough July, our US Pharmaceutical business has successfully distributed over 185 million Moderna and J&J COVID-19 vaccines to administration sites across the United States, and our medical business has now assembled enough kits to support the administration of more than 785 million doses for all vaccine types.\nAlso in the quarter, the US government asked McKesson to support their mission of sending millions of COVID-19 vaccines to countries in need all around the globe.\nWe are picking and packing Moderna and Johnson & Johnson COVID-19 vaccines into temperature-controlled coolers and preparing these vaccines for pickup by international partners, all with the direction of the US government.\nMcKesson is not managing the actual shipments of vaccines to other countries.\nThrough July, we successfully prepared over 65 million COVID-19 vaccines for shipment abroad.\nWe are humbled and honored to serve the US government in this expanded role.\nOur roles in Europe and Canada are also continuing to evolve, and we're partnering with local governments to distribute and administer COVID-19 vaccines there as well.\nThrough July, we've distributed over 45 million vaccines to administration sites in select markets across these geographies.\nBased on our first quarter results, our evolving roles in the COVID-19 response efforts and our confidence in our outlook for the remainder of our fiscal 2022, we are raising our adjusted earnings per diluted share guidance to $19.80 to $20.40 from a previous range of $18.85 to $19.45.\nWe're simplifying the portfolio and increasing our focus on areas where we have deep expertise and that are central to our long-term growth strategy.\nOur progress to date is underpinned by execution against our top company priorities.\nThe first is a focus on the people and the culture.\nThe second is our commitment to strengthen the core pharmaceutical and medical supply chain businesses.\nThe third, our intentional efforts to simplify and streamline the business, and finally, we continue to invest to advanced our differentiated oncology and biopharma services ecosystems.\nLet me now touch briefly on the progress we're making across each of these priorities.\nFirst and foremost, we're prioritizing our people and advancing our company's culture as we strive to be recognized as an impact-driven organization and the best place to work in healthcare.\nWe've been hard at work to transform and energize our company's culture.\nOur ICARE and ILEAD values serve as the foundation as we work toward our common goal, advancing health outcomes for all.\nAs an organization, we're committed to advancing diversity, equity and inclusion.\nFor the sixth consecutive year, McKesson was named a Best Place to Work for Disability Inclusion.\nMcKesson earned a top ranking score of 100 on the 2021 Disability Equality Index.\nOur second company priority is to strengthen our core distribution businesses where we have market-leading scale and capabilities across North America.\nSuccess in the core enables strong cash flow generation, which we in turn use to reinvest in the business and to return capital to our shareholders.\nIn addition to our work to help our customers and government partners and their pandemic response efforts, our pharmaceutical and medical surgical distribution businesses are continuing to improve, and the recovery from the effects of the COVID-19 pandemic has been in line with our expectations.\nElective procedures and primary care visits have improved throughout our first quarter and prescription volume trends are showing signs of improvement as well.\nAlso, positive are the trends we've seen across specialty and oncology patient visits, which were at or above pre-COVID baselines in the first quarter.\nAnd distribution volumes to our specialty provider customers continue to drive and support our growth.\nIn our Canadian distribution business, our operational excellence and scale was recently recognized through a new partnership with one of Canada's largest retailers as a primary distribution customer.\nThis is a testament to the strength of our supply chain in Canada.\nOver the past several years, we've committed to transforming our operating model.\nWe've centralized back-office functions across North America and Europe to further rationalize costs through a reduction of our owned retail pharmacy footprint and a commitment to lower spend across the organization.\nThroughout our enterprise, there's an initiative we called Spend Smart, which helped us achieve our three-year cost reduction target of $400 million to $500 million of annual cost savings by the end of our fiscal 2021.\nOver time, we've identified businesses that are not central to McKesson's current strategic priorities or direction, as was the case in our exit of our position in Change Healthcare and the creation of a German wholesale joint venture with Walgreens Boots Alliance.\nWe will continually review our portfolio to ensure tight and focused alignment to our strategy.\nAll of this work has enabled us to focus our time and investments on our strategic growth pillars, where we're working to build connected ecosystems in the growth areas of oncology and biopharma services, which serve to advance our already differentiated positions.\nWe continue to be confident in the long-term outlook of businesses that operate in these high-growth markets.\nStarting with oncology, an ecosystem that McKesson has strategically built over a period of nearly 15 years, beginning with our acquisition of oncology therapeutics network all the way back in 2007, which added at that time, core specialty distribution capabilities.\n10 years ago, we deepened the breadth and the depth of our offering with the acquisition of US Oncology Network, which gave us practice management, site management for research and the iKnowMed EHR, which is one of the foundational pieces of Ontada.\nFast-forward to today, and we're now supporting over 14,000 specialty physicians through distribution and GPO services.\nWe're also the leading distributor in community oncology space and have over 1,400 physicians in the US oncology network spread over approximately 600 sites of care in the US.\nAs innovative specialty therapies come to market, our leading position in oncology distribution enables us to grow our connected oncology ecosystem in parallel.\nAs we grow our non-affiliated and our US oncology provider basis, we accelerate the growth of our oncology assets, such as GPO services, practice management, site management for clinical research, specialty pharmacy and our value proposition for Ontada, where we're providing real-world insight to both manufacturers and providers.\nAlthough in its infancy, Ontada's value is being recognized through expanded partnerships with manufacturers such as Amgen, and its leading role in a large-scale real-world research study known as Mylan, which aims to improve treatments and outcomes for non-small cell lung cancer.\nNew therapies coming to market can also provide additional challenges for patients, providers and our biopharma partners.\nOur Prescription Technology Solutions business invests in innovation and aims to provide access, adherence and affordability solutions for over 500 brands across nearly every therapeutic area.\nOur connectivity to over 50,000 pharmacies, 750,000 providers and 75% of EHRs in the US helps enable over five billion prescription -- $5 billion of prescription savings for patients each year.\nPrescription Technology Solutions ended fiscal 2021 with solid momentum.\nIn the first quarter of fiscal 2022, we saw organic growth in the business and encouraging signs that patient engagement levels and prescription volume trends are continuing to improve.\nOur market-leading technology offerings are helping patients get access to therapies they need more quickly and efficiently and stay on those therapies longer to get better health outcomes.\nIn closing, we believe that we've made significant strides against our strategic priorities of strengthening the core, simplifying the business and investing in our growth areas of oncology and biopharma services.\nAnnouncing the proposed opioid settlement agreement is an important development.\nIn addition, our strategic intent to exit the European region positions us to become a more focused and agile company.\nWe believe both are in the best interest of our employees, in the best interest of our customers and in the best interest of our shareholders.\nWhile it's early in the fiscal year and the pandemic continues to present unknowns, I'm confident in the fundamentals of the business and believe we are positioned well for long-term growth, and we'll look to build upon this momentum over the remainder of our fiscal 2022.\nI'm pleased to speak with you today about our strong first quarter results, which reflect the importance of the products and services McKesson delivers, the execution and momentum across our business, which includes supporting the US government's COVID-19 domestic and international vaccine and kitting efforts, and the recovery of prescription volumes and patient visits impacted by the COVID pandemic in the prior year.\nI'll begin my remarks today by sharing an update on our European businesses, followed by our first quarter results, and I'll close with an update to our fiscal 2022 outlook.\nIn early July, we announced an agreement to sell our European businesses in France, Italy, Ireland, Portugal, Belgium and Slovenia to the PHOENIX Group.\nThis transaction includes our German AG headquarters in Stuttgart and our European shared service center in Lithuania.\nThe purchase price for the transaction was approximately US$1.5 billion.\nThe ultimate proceeds for this transaction are subject to certain adjustments under the agreement.\nTherefore, the proceeds may differ from the purchase price.\nThe assets involved in this transaction contributed approximately $12 billion in revenue and $75 million in adjusted operating profit in fiscal 2021.\nWe've determined that this transaction shall not qualify for discontinued operations.\nThe net assets included in the transaction we've classified as held for sale.\nThe held-for-sale accounting was effective at the start of our second quarter of this fiscal year.\nWe will remeasure the net assets to the lower carrying amount or fair value, less cost to sell, and we estimate that this will result in a GAAP-only charge of between $500 million to $700 million in our second quarter of fiscal 2022.\nDue to held-for-sale accounting treatment, we'll discontinue recording depreciation and amortization on the assets involved in the transaction.\nAs a result of the held-for-sale accounting, we would guide to approximately $0.26 adjusted earnings accretion in fiscal 2022.\nThis will be included in our updated outlook, and I'll outline those later in my remarks.\nMcKesson will operate these businesses and record revenue and income until the transaction is closed, which is expected to occur in fiscal 2023.\nWe're committed to exploring strategic alternatives for our remaining European businesses, and we'll provide details on the plans for the remaining businesses as they become available.\nExiting Europe at this time is the right course of action for McKesson and our shareholders, and it will sharpen the focus on our growth strategies of oncology and biopharma services as we develop and grow our connected ecosystem.\nLet me now turn to our first quarter results.\nBefore I provide more details on our first quarter adjusted results, I want to point out two items that impacted our GAAP-only results in the quarter.\nFirst, during the June quarter, we committed to donate certain personal protective equipment and related products to charitable organizations to assist in COVID-19 recovery efforts.\nIn the quarter, we recorded $155 million of pre-tax inventory charges within our Medical Surgical Solutions segment for inventory which we no longer intend to sell and will instead direct the previously mentioned charitable organizations.\nAnd secondly, on our May six earnings call, we outlined an initiative to rationalize office space in North America to increase efficiencies and support increased employee flexibility.\nThese actions will result in the realization of annual operating expense savings of approximately $60 million to $80 million when fully implemented.\nOur guidance does not assume a material benefit in fiscal 2022.\nIn the June quarter, we reported approximately $95 million of charges associated with this initiative.\nMoving now to our adjusted results for the first quarter, beginning with our consolidated results, which can be found on slide seven.\nFirst quarter adjusted earnings per diluted share was $5.56, an increase of 101% compared to the prior year.\nThis result was driven by the recovery in prescription volumes in primary care patient visits from the COVID-19 pandemic, as we lap the most significant pandemic impacts and lockdowns in Q1 of fiscal 2021.\nIt also included a lower tax rate and the contribution from COVID-19 vaccine distribution and kitting programs with the US government.\nConsolidated revenues of $62.7 billion increased 13% to the prior year, driven by growth in the US Pharmaceutical segment, largely due to higher volumes from retail national account customers and price increases on branded and specialty pharmaceuticals, which is partially offset by branded to generic conversions.\nAdjusted gross profit was $3.1 billion for the quarter, up 19% compared to the prior year.\nAdjusted operating expenses in the quarter increased 6% year-over-year, led by higher operating expenses to support growth in our core businesses and strategic investments, partially offset by the contribution of our German wholesale business to the joint venture with Walgreens Boots Alliance.\nAdjusted operating profit was $1.1 billion for the quarter, an increase of 55% compared to the prior year, which reflects double-digit growth in each segment.\nInterest expense was $49 million in the quarter, a decline of 18% compared to the prior year, driven by the retirement of approximately $1 billion of long-term debt in fiscal 2021.\nOur adjusted tax rate was 11.3% for the quarter due to discrete tax items that were recorded during the quarter.\nOur full year adjusted effective tax rate guidance of 18% to 19% remains unchanged.\nAnd our first quarter diluted weighted average shares were 158 million, a decrease of 3% year-over-year driven by $1 billion of shares repurchased in the first quarter.\nMoving now to our first quarter segment results, which can be found on slides eight through 12, and I'll start with US Pharmaceutical.\nRevenues were $50 billion, an increase of 12% and driven by higher volumes from retail national account customers and price increases on branded and specialty pharmaceuticals, partially offset by branded to generic conversions.\nAdjusted operating profit in the quarter increased 16% to $682 million, driven by the contribution from COVID-19 vaccine distribution and growth in specialty products distribution, to our providers and healthcare systems, which was partially offset by higher operating costs in support of the company's oncology growth initiative.\nTurning to Prescription Technology Solutions.\nWe're very pleased with the strong growth and scale that we're building in this higher-margin segment.\nThe drivers for our Prescription Technology Solutions businesses continue to move in the right direction.\nFirst, we're seeing expansion in many of our services businesses as we continue to add more manufacturing partners and programs for our existing solutions such as electronic prior authorization, our access and adherence services and 3PL.\nSecond, our technology-based platforms, like Relay Health support, 19 billion clinical and financial transactions annually, from claims routing in the growing discount card market to alerts and edits to make the practice of pharmacy clinically safer and administratively more efficient.\nAnd we continue to invest and innovate to build a connected ecosystem of biopharma services, our next-generation access and adherence solution, AMP, is showing accelerated adoption and growth with new brands.\nThis year, AMP is bringing its network-enabled approach to hub services to support our oncology and specialty drugs covered under the medical benefit.\nWe also continue to expand our clinical decision support capabilities in provider office workflow across every major EHR.\nOur technology network spans every touch point in the patient journey, from doctor's office to benefit verification to dispensing pharmacy, which allows us to address barriers in the patient journey by adding unique automation that accelerates time to therapy and lowers patients out-of-pocket costs.\nIn the June quarter, revenues were $881 million, an increase of 34%.\nAnd adjusted operating profit increased 62% to $139 million, driven by higher volumes of technology and service offerings to support biopharma customers, organic growth from access and adherence solutions and recovery of prescription volumes on the COVID-19 pandemic.\nMoving now to Medical-Surgical Solutions.\nRevenues were $2.5 billion in the quarter, up 40%, driven by improvements in primary care patient visits and increased sales of COVID-19 tests.\nThe contribution for our contract with US government to prepare and distribute ancillary supplies, related to the COVID-19 vaccine provided a benefit of approximately $0.25 in the quarter and were above our original expectations.\nFor the quarter, adjusted operating profit increased 107% to $257 million, driven by improvements in primary care patient visits and the contribution from kitting and distribution of ancillary supplies for the US government's COVID-19 vaccine program.\nNext, let me speak about International.\nRevenues in the quarter were $9.2 billion, an increase of 8% year-over-year.\nExcluding the impact from the divestiture of our German wholesale business, Segment revenue increased 28% year-over-year and was up 14% on an FX-adjusted basis.\nRevenue was primarily driven by the contribution of our German wholesale business to the joint venture with Walgreens Boots Alliance, which was completed during the third quarter of fiscal 2021, and the recovery of pharmaceutical distribution and retail pharmacy volumes from the COVID-19 pandemic.\nFirst quarter adjusted operating profit increased 133% year-over-year to $170 million.\nOn an FX-adjusted basis, adjusted operating profit increased 107% to $151 million, led by the recovery of pharmaceutical distribution and retail pharmacy volumes from the COVID-19 pandemic, and distribution of COVID-19 vaccines and test kits in Europe and Canada.\nMoving on to Corporate.\nFor the quarter, adjusted corporate expenses were $154 million, a decrease of 7% year-over-year, driven by decreased opioid litigation expenses.\nWe reported opioid-related litigation expenses of $35 million for the first quarter.\nWe continue to estimate fiscal 2022 opioid-related litigation expenses to approximate $155 million.\nI would remind you that, while we've negotiated a comprehensive proposed settlement agreement, until we know the scope of participation in proposed settlement, we are not in a position to revise our opioid litigation expenses outlook.\nLet me now turn to our cash position, which can be found on slide 14.\nWe ended the quarter with a cash balance of $2.4 billion.\nDuring the quarter, we had negative free cash flow of $1.8 billion.\nAs a reminder, our working capital metrics and resulting free cash flow vary from quarter-to-quarter and are impacted by timing, including the day and the week that marks the close of a given quarter.\nWe made $159 million of capital expenditures in the quarter, which includes investments in technology, data and analytics to support our strategic initiatives on the -- of oncology and biopharma services.\nAs our business performed at a very high level, we were also able to return $1.1 billion of cash to our shareholders in the June quarter.\nThis included $1 billion of share repurchases, pursuant to an accelerated share repurchase program, which resulted in an initial delivery of 4.3 million shares in the quarter.\nAdditionally, we paid $69 million in dividends.\nWe have $1.8 billion remaining on our share repurchase authorization, and we're updating our guidance for diluted weighted shares outstanding to range from $154 million to $156 million for fiscal 2022, which incorporates plans to repurchase an additional $1 billion of stock over the remainder of the fiscal year.\nLet me transition and speak to our outlook for the balance of fiscal 2022.\nI'll begin by reiterating a couple of key macro level assumptions that underpin our fiscal 2022 outlook.\nWe expect prescription and patient engagement volumes will demonstrate steady improvement from the levels at the end of our fiscal 2021 through the first half of our fiscal 2022 and returned to pre-COVID levels in the second half of our fiscal 2022.\nFor fiscal 2022, our updated guidance for adjusted earnings per diluted share is a range of $19.80 to $20.40, up from our previous range of $18.85 to $19.45, approximately equally split between our first and second half of the fiscal year.\nOur updated outlook for adjusted earnings per diluted share reflects 15% to 18.5% growth from the prior year, and our guidance assumes core growth across all of our segments.\nIn the US Pharmaceutical segment, we now expect revenue to increase 5% to 8% and adjusted operating profit to deliver 4.5% to 7.5% growth over the prior year.\nOur US Pharmaceutical segment continues to exhibit stable fundamentals.\nOur outlook for branded pharmaceutical pricing remains consistent with the prior year from mid single-digit increases in fiscal 2022.\nAnd the generics market remains competitive yet stable as volumes have shown signs of recovery.\nCOVID-19 vaccine contribution contributed approximately $0.30 in the first quarter of fiscal 2022.\nWe are updating our full year outlook to approximately $0.45 to $0.55.\nThe $0.45 to $0.55 range reflects anticipated contribution of earnings for the fair value of services performed as the US government's centralized distributor of COVID-19 vaccines, including work preparing vaccines for international missions.\nOur current outlook remains aligned to the volume distribution schedule provided by the CDC and the US government, which excludes booster shots and vaccines for pediatrics, which have not been approved by the FDA.\nWe will continue to invest in our leading and differentiated position in oncology.\nThese investments will represent an approximate $0.20 headwind in fiscal 2022.\nNormalizing for the COVID-19 vaccine distribution and our ongoing growth investments, we continue to expect approximately 5% to 8% core adjusted operating profit growth.\nIn our Prescription Technology Solutions segment, we see revenue growth of 20% to 25% and adjusted operating profit growth of 17% to 22%.\nThis growth reflects the opportunities we see to accelerate service and transaction contributions benefiting from our technology platforms.\nNow transitioning to Medical Surgical.\nWe continue to partner with the US government under our contract for the kitting and distribution of ancillary supplies, and are updating our outlook to $0.35 to $0.45 of contribution in the segment related to kitting and distribution.\nThis program's scope and duration is evolving, and our updated assumptions reflects the current outlook provided by the US government.\nOur revenue outlook assumes a 3% decline to 3% growth, and adjusted operating profit to deliver 6% to 12% growth over the prior year.\nWe continue to expect year-over-year core adjusted operating profit growth of approximately 10% to 16%.\nFinally, in the International segment, our revenue guidance was a 1% decline to 4% growth as compared to the prior year.\nAnd as a reminder, this reflects the contribution of our German wholesale business to a joint venture with Walgreens Boots Alliance.\nFor adjusted operating profit, our guidance has growth in the segment of 26% to 30% due to the previously mentioned benefit from the discontinuation of depreciation and amortization, which followed the announcement of our agreement to sell certain European assets.\nOur strong performance in the first quarter and the contribution from COVID-19 vaccine distribution in the segment.\nTurning now to the consolidated view.\nOur guidance assumes 4% to 7% revenue growth and 7% to 10% adjusted operating profit growth compared to fiscal 2021.\nAnd we continue to expect corporate expenses in the range of $670 million to $720 million.\nLet me now turn to cash flow and capital deployment.\nWe were pleased to recently announce the completion of a cash-funded upsized tender offer.\nThis successful tender offer resulted in the early retirement of $922 million of our outstanding debt.\nAdditionally, we announced the early retirement of a 600 million note for a total reduction in debt of approximately $1.6 billion.\nThese actions occurred during the beginning of our second quarter.\nIt further strengthened our balance sheet and financial position and they are in line with our previously stated intent to modestly delever.\nAnd as a result of these actions, we're updating our interest expense guidance for fiscal 2022 to $180 million to $200 million.\nWe're also reiterating our free cash flow guidance of approximately $3.5 billion to $3.9 billion, which is net of property acquisitions and capitalized software expenses.\nLast quarter, I mentioned that we anticipated a use of cash to purchase shares in McKesson, Europe through exercises of a put rate option available to non-controlling shareholders that expired in June of fiscal 2022.\nThe remaining put rate options resulted in payments of approximately $1 billion in the quarter, which was generally in line with our expectations.\nAs a reminder, this is reflected in the financing activity section of our cash flow statement.\nAs a result of this activity, McKesson holds approximately 95% of McKesson Europe's outstanding common shares, and we anticipate income attributable to non-controlling interest in the range of $175 million to $195 million in fiscal 2022.\nOur commitment to return cash to shareholders through dividends and share repurchases was recently highlighted by our Board's approval of a 12% increase to our quarterly dividend to $0.47 per share.\nAnd our fiscal 2022 guidance continues to include share repurchases of approximately $2 billion for the full year.\nIn closing, we're pleased with the strong results of our first quarter.\nWe remain focused on driving growth as we invest against the strategic high-growth opportunities in oncology and biopharma services.\nThis focus, combined with our commitment to further evolve the portfolio, will drive significant value to our customers, shareholders and patients.\nOur outlook for fiscal 2022 reflects this focus and execution with healthy adjusted operating profit and adjusted earnings-per-share growth and return of capital to our shareholders.\nIn the interest of time, I ask that you limit yourself to just one question to allow others an opportunity to participate.\n",
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"content": "qtrly total revenues of $62.7 billion increased 13%.\nqtrly adjusted earnings per diluted share of $5.56 increased 101%.\nboard of directors increased the quarterly dividend by 12% to $0.47 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: Today, I'm joined by Brian Tyler, our Chief Executive Officer; and Britt Vitalone, our Chief Financial Officer.\nBrian will lead off, followed by Britt, and then we will move to a question-and-answer session.\nWe are happy to report another strong quarter for McKesson, driven by continued market improvements and underlying fundamentals of our businesses.\nWe achieved double-digit adjusted operating profit growth in all four segments based on a strong operating performance and alignment across the enterprise.\nAs a result of our second quarter performance our confidence in the second half of the fiscal year and McKesson's continue to role in the COVID-19 response efforts, we are raising our guidance range for fiscal 2022 adjusted earnings per diluted share from $19.80 to $20.40 to a new range of $21.95 to $22.55.\nWe continue to believe we will see a return to pre-COVID pharmaceutical prescription and patient engagement levels in the second half of our current fiscal year.\nWe're encouraged by the trends we continue to see across primary care, specialty, and oncology patient visits in addition to overall prescription volumes.\nWe are pleased to see our markets are recovering in line with our original expectations.\nOur enterprisewide focus on our company priorities is driving operating performance and furthering the advancement of our long-term growth.\nI'd like to take the time today to talk about each of our company's priorities.\nFirst, we have a focus on our people and the culture, which is guided by our ICARE and ILEAD values.\nThese values include a commitment to both our local and global communities, our customers and the healthcare industry to innovate and deliver opportunities that make our customers more successful.\nAll for the better health of patients.\nAlong with these values, we're committed to fostering an inclusive workplace that celebrates our differences and respects the diverse world in which we live and work.\nAs an organization, we continue to be committed to diversity, equity and inclusion.\nThrough a more diverse and inclusive workplace we are a stronger, a more creative and a more productive team.\nAt McKesson our priority has been the health and safety of our employees and we're deeply committed to supporting our team members across the organization, which why I'm incredibly pleased to have announced McKesson's first ever day of wellness, which we call Your Day, Your Way.\nThis will take place this Friday, November 5th.\nWe understand that mental, physical and emotional well-being are at most importance to our team, so we made the decision to set aside a special day to help ensure our employees can rest, recharge and take time for themselves.\nWe're so grateful for all the contributions from the team over the last 19 months.\nMcKesson employees continue to be in the center of the fight against COVID-19 and we want to make sure everyone gets a chance to take a well-deserved break.\nOur second priority is to strengthen our core pharmaceutical and medical supply chain businesses across North America, we have a best-in-class pharmaceutical supply chain.\nAs a reminder, in the US, we have a scaled distribution presence that delivers roughly one-third of prescription medicines each day.\nOur operational excellence and our ability to leverage our scale with global suppliers is one of the many reasons why McKesson continues to be the partner of choice for hospitals, health systems and pharmacies of all size.\nWe strengthen our business when we strengthen our customers and partners.\nThis past quarter we held our Annual McKesson ideaShare educational event which brought together independent pharmacy operators to help them learn new skills, how to grow strategically and how to operate efficiently.\nThe virtual experience helped 2,000 independent pharmacies, prioritize education and networking, which we believe will shape the future of community, pharmacy and strengthen the independent business for the better.\nIn Canada, we've been the leader in healthcare-related logistics and distribution for 100-years and we support hospitals, community and retail pharmacies to ensure that medication is always available.\nWe're a leader in medical distribution to alternate site markets and our footprint in the US healthcare is underpinned by our strong sourcing and supply chain capabilities, we deliver medical and surgical supplies and services to over 250,000 customers.\nOur pharmaceutical and medical distribution businesses continue to play an integral role in the pandemic response efforts, and our capabilities have been highlighted through our evolving partnership with US government's COVID-19 vaccine distribution, kitting and storage programs.\nI'm glad to say that the Fundamentals in our core business remain solid and our execution has continued to improve as we accelerate our growth and work to deliver high quality resilient supply chains to our customers.\nOur third company priority is to simplify and streamline the business.\nWe're prioritizing the areas where we have deep expertise and are central to our long-term growth strategies, largely within the North American market.\nAs a result we made the decision to fully exit McKesson's businesses in the European region.\nIn July, we announced that we have entered into an agreement to sell our European businesses in France, Italy, Ireland, Portugal, Belgium and Slovenia to the PHOENIX Group.\nToday, we're announcing that McKesson has made the decision to sell our UK retail and distribution businesses as a whole.\nThe transaction is expected to close in Q4 of fiscal 2022 subject to customary closing conditions, including receipt of required regulatory approvals.\nWe believe this step toward a full exit of our European business is an important milestone in our strategy as a streamlined, efficient focused organization.\nBuilding upon the foundation of a strong company culture and a stable business the last company priority encompasses our two strategic growth pillars.\nWe are investing to advance our oncology and biopharma services, which includes building integrated ecosystem that leverage our differentiated assets and capabilities and our strategic focus on these two pillars is important as both of these areas have good inherent growth opportunities.\nMcKesson's oncology ecosystem supports over 14,000 specialty physicians through distribution and GPO services, and we are the leading distributor in the community oncology space.\nWe have over 1,400 physicians in the US Oncology Network spread over approximately 600 sites of care in the US.\nWithin our oncology ecosystem Ontada generates insights at the intersection of technology and data and supports community providers with precise cancer care by improving patient outcomes and delivering evidence and insights to help accelerate life sciences research.\nThe ecosystem helps the clinicians to provide better care in an increasingly complicated oncology care landscape, by helping them grow their businesses, attract more patients and produce better health outcomes.\nWe can then leverage interconnected technology and real world insights to feed data back upstream to manufacturers, which can help them, think about identifying new products, innovations and new markets.\nWithin the biopharma ecosystem the Prescription Technology Solutions businesses leverage technology networks and access to provider workflows, to serve biopharma and life sciences partners and patients.\nWe have built this ecosystem over many years as it includes assets like RelayHealth Pharmacy, CoverMyMeds and RxCrossroads, it allows us to connect providers, payers and patients together to focus on access, adherence and affordability solutions.\nOur two strategic pillars of oncology and biopharma services are not just businesses or products, but fundamentally a suite of solutions that solve long-standing problems in ways that bring more speed, impact and efficiency.\nWe will continue to invest and accelerate the execution against those strategies, which support a long-term growth for McKesson.\nI'm confident in the progress against our company's priorities that they will enable the advancement of our growth.\nBefore I turn to our second quarter results just a brief update on our Board of Directors.\nDr. Carmona has a strong focus on improving public healthcare and extensive experience in clinical sciences, healthcare management and emergency preparedness, which led to his nomination and unanimous senate confirmation as the 17th Surgeon General of the United States from 2002 until 2006.\nCurrently, Dr. Carmona is Chief of Health Innovations at Canyon Ranch and a Professor of Public Health at the University of Arizona.\nHis hands on healthcare experience will be invaluable for McKesson's Board of Directors.\nNow I want to turn to the business performance within the second quarter.\nWe are pleased with our strong second quarter performance and we remain encouraged by the underlying fundamentals in our business.\nLet me start with US Pharmaceutical, while our solid results for the second quarter reflected continued improvement of prescription trends, which were in line with our expectations.\nWithin specialty oncology visits, we saw an exit rate of pre-COVID levels, which again was in line with our expectations.\nThe US Pharmaceutical segment saw a 12% adjusted operating profit growth, which was underpinned by the distribution of specialty products to providers and health systems and the contribution from our successful COVID-19 vaccine distribution operations.\nWe are in a strong position to continue to support the government and private enterprise in the future for distributing COVID and flu vaccines and our investments in the distribution business continue to be showcased through our successful vaccine response.\nThrough October 28th, our US Pharmaceutical business has successfully distributed over 311 million Moderna and Johnson & Johnson COVID-19 vaccines to administration sites across the United States and to support the US government's international donation mission.\nIn Prescription Technology Solutions, the business continued to perform well this quarter as our technology and service offerings have accelerated the support and growth of our biopharma customers, and we've been successful in adding new brands to our platforms.\nThe segment had excellent momentum and delivered a 38% increase to adjusted operating profit growth during the second quarter.\nIn addition to the operational strength, I'm proud to say that we are helping patients get access to the therapies through our market leading technology offerings in this patient care visits and we announced we are expanding our work with the US government through a new kitting and storage contract.\nOur Medical-Surgical business remains well positioned to continue to support the government as needed.\nThe growth in our Medical-Surgical segment is reflective of strong topline performance and underlying business improvement.\nAs it relates to international, the segment had solid adjusted operating profit growth, benefiting from both local COVID programs and a new partnership with one of Canada's largest retailers.\nDistribute and administer COVID-19 vaccines and through September, we've distributed over 58 million vaccines to administration sites in select markets across our international geographies.\nAs a reminder, excluding our planned divestitures in Europe, we have businesses in Norway, Austria, Denmark and Canada in our international segment.\nFor our remaining European businesses, we are exploring strategic alternatives as we align future investments to our growth strategies.\nBefore I close, I would like to update you on the status of the proposed opioid settlement.\nRecently, we announced that enough states have agreed to settle to proceed to the next phase, which is the subdivision sign-on period.\nDuring this phase, each participating state will offer its political subdivisions, including those that have not sued the opportunity to participate in the settlement for an additional 120-day period, which ends January 2nd, 2022.\nWe are pleased with this important step and we believe the settlement framework will allow us to focus our attention and resources on the safe and secure delivery of medications and therapies, while expediting the delivery of meaningful relief to the affected communities.\nIn closing, I am encouraged as we continue to make progress and accelerate growth as we advance our company priorities.\nOur underlying distribution business have stable fundamentals, great teams and strong execution.\nWe are investing in what we believe are two good growth markets where we have differentiated capabilities and we look forward to sharing more of those successes and proof points with you at our upcoming Investor Day.\nI'm pleased to be here today to discuss our fiscal second quarter results, which reflect strong performance and momentum across the business, driven by operational excellence and execution against our growth strategies.\nThis momentum could be seen in each of our segments.\nLet me start with an update on Europe.\nThe ultimate proceeds from this transaction are subject to certain adjustments under the agreement.\nTherefore, the proceeds may differ from the announced purchase price.\nThe customer will continue to operate these businesses and record revenue and income until the transaction is closed, which is expected to occur in our fourth quarter of fiscal 2022, pursuant to the satisfaction of customary closing conditions, including receipt of regulatory approvals.\nThe assets involved in this transaction contributed approximately $7.8 billion in revenue and $64 million in adjusted operating profit in fiscal 2021.\nThe net assets included in the transaction will be classified as held for sale, and held for sale accounting will be effective beginning with our fiscal 2022 third quarter.\nWe will remeasure the net assets to the lower of carrying amount or fair value, less cost to sell, and we estimate that this will result in a GAAP only charge of between $700 million to $900 million in our third quarter of fiscal 2022.\nDue to held for sale accounting treatment, we will discontinue recording depreciation and amortization on the assets involved in the transaction.\nThis impact is not included in the fiscal 2022 outlook provided today.\nThis transaction provides us the focus to pursue the growth strategies of oncology and biopharma services in North America and as Brian mentioned, we remain committed to a full exit of our European businesses, which includes announced transactions to the Phoenix Group and Aurelius, as well as our remaining operations in Norway, Austria and Denmark.\nLet me now turn to our second quarter results.\nBefore I provide more details on our second quarter adjusted results, I want to point out two additional items that impacted our GAAP only results in the quarter.\nFirst, we recorded a GAAP only after tax charge of $472 million related to our agreement to sell certain European businesses to the Phoenix Group to account for the remeasurement of the net assets to lower of carrying amount or fair value, less cost to sell.\nThis transaction is expected to close within the next 12-months.\nAlso during the quarter we recorded an after-tax loss of $141 million on debt extinguishment related to the successful completion of a bond tender offer.\nMoving now to our adjusted results for the second quarter, beginning with our consolidated results, which can be found on Slide seven.\nOur second quarter results were highlighted by strong operating performance, which included record revenue and double-digit adjusted operating profit growth across all segments.\nWe are encouraged by the ongoing market improvement in both prescription volumes and patient visits, which we observed in our second quarter.\nThese improvements are supported by our strategic agenda setting us on a path of disciplined approach.\nAnd our work to support US government's COVID-19 domestic and international vaccine and kitting efforts continues to contribute to growth in addition to the momentum we have built across the business.\nSecond quarter adjusted earnings per diluted share was $6.15, an increase of 28%, compared to the prior year.\nThis was -- this result was driven by the contribution from COVID-19 vaccine and kitting distribution and growth in the Medical-Surgical Solutions segment partially offset by a higher tax rate.\nSecond quarter adjusted earnings per diluted share, also includes net pre-tax gains of approximately $97 million or $0.46 per diluted share associated with McKesson Ventures equity investments, as compared to $49 million in the second quarter of fiscal 2021.\nConsolidated revenues of $66.6 billion increased 9% above the prior year.\nPrincipally driven by growth in US Pharmaceutical segment, largely due to increased pharmaceutical volumes, including growth in specialty products and our largest retail national account customers to partially offset by branded to generic conversions.\nAdjusted gross profit was $3.3 billion for the quarter, up 12% compared to the prior year.\nComparable adjusted gross margins for the quarter was up 10 basis points versus the prior year.\nAdjusted operating expenses in the quarter increased 4% year-over-year.\nand adjusted operating profit of $1.3 billion for the quarter was an increase of 34%, compared to the prior year and reflected double-digit growth in each segment.\nInterest expense was $45 million in the quarter, a decline of 10%, compared to the prior year driven by the net reduction of debt in the quarter.\nOur adjusted tax rate was 18.8% for the quarter, which was in line with our expectations.\nIn wrapping up our consolidated results second quarter diluted weighted average shares were 155.8 million, a decrease of 5% year-over-year.\nMoving now to our second quarter segment results, which can be found on Slides eight through 13, and I'll start with US Pharmaceutical.\nRevenues were $53.4 billion, an increase of 11% year-over-year as increased pharmaceutical volumes, including growth in specialty products and our largest retail national account customers were partially offset by branded to generic conversions.\nAdjusted operating profit increased 12% to $735 million, driven by growth in the distribution of specialty products to providers and health systems and the contribution from COVID-19 vaccine distribution.\nThe contribution from our contract with the US government-related to the distribution of COVID-19 provided a benefit of approximately $0.28 per share in the quarter, which is above our original expectations.\nIn the Prescription Technology Solutions segment revenues were $932 million, an increase of 40% driven by higher biopharma service offerings, including third-party logistics services and increased technology service revenue, partially resulting from the growth of prescription volumes.\nAdjusted operating profit increased 38% to $144 million, driven by organic growth from access and adherence solutions.\nMoving now to Medical-Surgical Solutions, revenues were $3.1 billion, an increase of 23%, driven by increased sales of COVID-19 tests and growth in the primary care business.\nAdjusted operating profit increased 52% to $319 million, driven by growth in the primary care business, increased sales of COVID-19 tests, and the contribution from kitting, storage and distribution of ancillary supplies for the US governments COVID-19 vaccine program.\nThe contribution from our contract with US government-related to the kitting, distribution and storage of ancillary supplies for COVID-19 vaccines provided a benefit of approximately $0.14 per share in the quarter, which was above our original expectations.\nNext, let me address our international results.\nRevenues in the quarter were $9.1 billion, a decrease of 5%, primarily driven by the contribution of McKesson's German wholesale business to a joint venture with Walgreens Boots Alliance, partially offset by volume increases in the pharmaceutical distribution and retail businesses.\nExcluding the impact from the contribution of our German wholesale business, which was completed in the third quarter of fiscal 2021.\nSegment revenue increased 13% year-over-year and was up 9% on an FX adjusted basis.\nAdjusted operating profit increased 41% year-over-year to $163 million.\nOn an FX adjusted basis adjusted operating profit increased 34% to $155 million, driven by the discontinuation of depreciation and amortization on certain European assets classified as held for sale beginning in the second quarter of fiscal 2022.\nThe held for sale accounting in our international business contributed $0.13 to adjusted earnings in our second quarter of fiscal 2022.\nMoving on to Corporate.\nAdjusted corporate expenses were $83 million, a decrease of 39% year-over-year, driven by gains of approximately $97 million or $0.46 from equity investments within our McKesson Ventures portfolio.\nThis quarter we had fair value adjustments related to multiple portfolio companies within McKesson Ventures, compared to fiscal 2021 gains from McKesson Ventures contributed $0.24 year-over-year.\nAs previously discussed it's difficult to predict when gains or losses on our Ventures portfolio companies may occur and therefore our practice has been, it will continue to be to not include Ventures portfolio impacts in our guidance.\nWe also reported opioid related litigation expenses of $36 million for the second quarter and anticipate that fiscal 2022 opioid-related litigation expenses will be approximately $155 million.\nConsistent with the proposed settlement announced in July, we also made the first annual payment into escrow of approximately $354 million during the quarter.\nLet me now turn to our cash position, which can be found on Slide 14.\nWe ended the quarter with a cash balance of $2.2 billion for the first six months of the fiscal year, we had negative free cash flow of $109 million.\nIn Q2, we completed several debt transactions.\nIn July, we redeemed EUR600 million denominated note prior to maturity.\nIn August, we completed a cash funded upsize tender offer, which resulted in the redemption of $922 million principal outstanding debt.\nAnd finally, we completed a public offering of a note in the principal amount of $500 million at 1.3%.\nThese actions aligned with our previously stated intent to modestly delever and to further strengthen our balance sheet and financial position.\nYear-to-date, we made $279 million of capital expenditures, which included investments to support our strategic pillars of oncology and biopharma services.\nFor the first six months of the fiscal year, we returned $1.4 billion in cash to our shareholders through $1.3 billion of share repurchases and the payment of $134 million in dividends.\nWe have $1.5 billion remaining on our share repurchase authorization and continue to expect diluted weighted average shares outstanding to range from 154 million to 156 million for fiscal 2022.\nLet me transition now and speak to our outlook for the remainder of fiscal 2022.\nAs a result of our strong first half performance and our outlook for the remainder of the year, we are raising our previous adjusted earnings per share guidance range for fiscal 2022 to $21.95 to $22.55, which is up from our previous range of $19.80 to $20.40.\nOur updated outlook for adjusted earnings per diluted share reflects 27.5% to 31% growth from the prior year.\nAnd our guidance assumes growth across all of our segments.\nAdditionally, fiscal 2022 adjusted earnings per diluted share guidance includes $2.30 to $3.05 of impacts attributable to the following items: $0.50 to $0.70 related to the US governments COVID-19 vaccine distribution, which is an increase from the previous range of $0.45 to $0.55; $0.80 to $1.10 related to the kitting storage and distribution of ancillary supplies, an increase from the previous range of $0.50 to $0.70 as discussed at recent conference; $0.50 to $0.75 related to COVID-19 tests impairments for PPE related products; and approximately $0.49 from gains or losses associated with McKesson Ventures equity investments within our corporate segment year-to-date.\nExcluding the impact of these items from both fiscal 2022 guidance and fiscal 2021 results this indicates 20% to 29% forecasted growth.\nLet me provide a few additional assumptions related to our guidance.\nWe continue to expect prescription and patient engagement volumes will return to pre-COVID levels in the second half of our fiscal 2022, which is in line with our original guidance.\nIn US Pharmaceutical segment, we now expect revenue to increase 8% to 11% and adjusted operating profit to deliver 4.5% to 7.5% growth over the prior year.\nWe continue to see stable fundamentals.\nSpecifically, our outlook for branded pharmaceutical pricing remains consistent with our original guidance and the prior year of mid single-digit increases in fiscal 2022 and our views that the generics market remains competitive yet stable, as our volumes have continued to improve in the September quarter.\nOur guidance includes contribution related to our role as a centralized distributor for the US governments COVID-19 vaccine distribution.\nThis includes we're preparing vaccines for international missions.\nOur current outlook remains in mind to the volume distribution schedule provided by the CDC and the US government.\nThe current guidance excludes booster shots, due to the timing of the recent approvals, as well as vaccines for pediatrics, which have not been approved by the CDC.\nWe will continue to update you on the progress and contribution from this program.\nWhen excluding COVID-19 vaccine distribution in the segment, we expect approximately 3% to 6% adjusted operating profit growth.\nIn addition, our investments in our leading and differentiated position in oncology will continue to represent an approximate $0.20 headwind in fiscal 2022.\nIn our Prescription Technology Solutions segment, we see revenue growth of 31% to 37%, and adjusted operating profit growth of 23% to 29%, this growth reflects the strong service and transaction momentum in the business.\nNow transitioning to Medical-Surgical our revenue outlook assumes a 8% to 14% growth and adjusted operating profit to deliver 35% to 45% growth over the prior year.\nAs mentioned previously, our outlook includes $0.80 to $1.10 related to the contribution from the US government's distribution of ancillary supply kits and storage programs, and $0.50 to $0.75 related to COVID-19 tests and PPE impairments related products.\nExcluding the impacts from these items from both fiscal 2022 guidance and fiscal 2021 results, this indicates 13% to 19% forecasted growth.\nOne additional note related to our US distribution businesses.\nOne of the pillars of our enterprise strategy is talent, the ability to attract and retain the best workforce in healthcare.\nThe labor market remains competitive and we have assumed a modest expense impact to ensure there is continued service continuity through the holiday season and the back half of our fiscal year.\nTherefore, the guidance that we're providing today includes approximately $0.10 to $0.20 of adjusted operating expense impact for labor investments in our US distribution businesses in the second half of the year.\nFinally in the international segment, our revenue guidance is 1% decline to 4% growth as compared to the prior year.\nAs a reminder, this reflects the impact of the contribution of our German wholesale business to a joint venture with Walgreens Boots Alliance.\nFor adjusted operating profit our guidance reflects growth in the segment of 39% to 43%, which includes approximately $0.38 of expected adjusted earnings accretion in fiscal 2022, as a result of the held for sale accounting related to our agreement to sell certain European assets to the Phoenix Group.\nIt also includes our strong performance in the second quarter and the contribution from COVID-19 vaccine distribution in the segment.\nTurning now to the consolidated view.\nOur increased guidance assumes a 8% to 11% revenue growth and 18% to 22% adjusted operating profit growth, compared to fiscal 2021.\nOur full-year adjusted effective tax rate guidance of 18% to 19% remains unchanged.\nAnd we anticipate corporate expenses in the range of $610 million, $660 million.\nOn our May 6th earnings call we outlined an initiative to rationalize office space in North America to increase efficiencies and to support employee flexibility.\nWe've made good progress against this initiative.\nAnd based on this progress we now expect earlier benefits from these actions, resulting in the realization of annual operating expense savings of approximately $15 million to $25 million in the second half of fiscal 2022, with annual savings of $50 million to $70 million, when fully implemented.\nThese savings will be realized across all of our segments.\n[Technical Issues] which is net of property acquisitions and capitalized software expenses.\nAs a reminder, historically we generate the majority of our cash flows in the fourth quarter of our fiscal year.\nThis strong cash flow generation provides the financial flexibility to execute a balanced capital allocation approach; investing in our strategies of oncology and biopharma services; positioning our business for long-term growth, while remaining committed to returning capital to shareholders through our dividend and share repurchases.\nOur investment grade credit rating remains a priority and underpins our financial flexibility.\nIn closing, we are encouraged by our strong performance in the first half of our fiscal year.\nThe momentum across the business, including our partnership with the US government positions us to deliver the updated fiscal 2022 outlook provided here today.\nFinally, we're looking forward to providing additional details on our strategies and the strength of our businesses at our upcoming Investor Day on December 8th.\n",
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"content": "compname posts quarterly revenue of $66.6 billion.\nqtrly adjusted earnings per diluted share of $6.15.\nqtrly total revenues of $66.6 billion increased 9%.\nincreased fiscal 2022 adjusted earnings per diluted share guidance range to $21.95 to $22.55.\nfiscal 2022 adjusted earnings per diluted share guidance includes approximately $2.30 to $3.05 of impacts.\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 Shivani Kak, Head of Investor Relations.\nI'm going to begin by providing a general update on the business, including Moody's third quarter 2021 financial results.\nAnd then following my commentary, Mark Kaye will provide further details on our third quarter 2021 performance as well as our revised 2021 outlook.\nMoody's delivered robust financial results in the third quarter of 2021.\nRevenue of $1.5 billion grew 13% due to strong customer demand for our mission-critical products and insights.\nIn both operating segments, revenue increased in the double-digit percent range.\nFor MIS, attractive market conditions continue to drive opportunistic refinancing and M&A activity for leveraged loans and structured finance issuance.\nMeanwhile, MA experienced strong growth across our subscription-based products, which now comprise 93% of total MA revenue on a trailing 12-month basis.\nWe remain focused on delivering our integrated risk assessment strategy through innovation and investment in high-growth markets, and I'll spotlight a few examples later in the call.\nAs a result of our strong third quarter performance, we've revised our full year 2021 guidance and now forecast Moody's revenue to grow in the low teens percent range.\nAdditionally, we've raised and narrowed our adjusted diluted earnings per share guidance to be in the range of $12.15 to $12.35, which, at the midpoint of $12.25, represents an approximate 21% annual growth rate.\nIn the third quarter, MIS revenue was up 12% from the prior year and MA revenue was up 13%.\nOrganic MA revenue increased 8%.\nMoody's adjusted operating income rose 2% to $737 million.\nDuring the third quarter, expense growth was higher than revenue as we invested significantly in our capabilities and product development in order to better serve a number of high-growth use cases.\nAdjusted diluted earnings per share was $2.69, flat to the prior year period, and Mark will provide some additional details on our financials shortly.\nFavorable market conditions led to the strongest third quarter in over a decade in terms of both MIS revenue and rated issuance.\nLeveraged loan issuance was very strong, supported by low default rates and robust private equity activity and investor appetite for floating rate debt amid higher inflation and rising interest rate expectations.\nAs we anticipated in our prior guidance, investment-grade supply moderated given the tough prior year comparable.\nHowever, volumes were still substantial and remained above the 10-year historical average for MIS-rated debt.\nAdditionally, after a muted 2020, structured finance issuance reverted back to levels seen in 2017 and '18.\nOngoing favorable market conditions, including tight spreads, drove both CLO refinancing activity and new CLO creation as well as new CMBS and RMBS issuance.\nAs you can see on the chart on the left, tight credit spreads combined with low default rates created an attractive environment for opportunistic refinancing and M&A activity in the third quarter.\nThe U.S. default rate is forecast to fall below 2% by year-end.\nThat's a significant reduction from a pandemic high of nearly 9%.\nAnd while the uses of proceeds were weighted toward refinancing earlier in the year, heightened M&A activity continued in the third quarter as issuers used acquisitions to support growth.\nWe frequently comment on our views on long-term issuance drivers, which include GDP growth, ongoing disintermediation trends and upcoming refinancing needs.\nBased on our annual research published by Moody's Investors Service earlier this month, refunding walls over the next four years for U.S. and European issuers have increased 9% to approximately $4.1 trillion.\nInvestment-grade supply remains the biggest asset class despite the recent surge in leveraged loans.\nThis is slightly above the historical compound annual growth rate and is supported by 19% growth in U.S. leveraged loan forward maturities and 7% growth in U.S. investment-grade forward maturities, providing a solid underpinning for medium-term issuance.\nNow moving to Moody's Analytics.\nMA's recurring revenue grew 18% in the quarter.\nAnd as I mentioned earlier, now represents 93% of total MA revenue on a trailing 12-month basis.\nThis is supported by new customer demand and strong retention rates, which is really a testament to the mission-critical nature of our product suite.\nThe chart on the right illustrates the strong organic recurring revenue growth on a trailing 12-month basis across some of our key operating units.\nEach of these businesses currently represent at least $100 million of annual revenue with growth rates above 10% versus the prior year.\nStarting with credit research and data feeds.\nRecurring revenue improved in the low double-digit percent range through a combination of increased yields and sales to new and existing customers.\nRecurring revenue in banking solutions within the ERS business grew at a similar pace as customers continue to leverage our products to support a wide range of functions, everything from lending to portfolio management and accounting and reporting requirements.\nRecurring revenue for our insurance and asset management business within ERS increased in the mid-20s percent range and was driven by ongoing demand for our actuarial modeling and IFRS 17 solutions.\nAnd finally, KYC and compliance built on its strong start to the year, also growing in the mid-20s percent range.\nThis continues to be an important growth driver for Moody's that I'll expand on further.\nLast quarter, I summarized a few key trends underpinning growth in the KYC market.\nAnd I described how our differentiated offerings are driving organic growth rates north of 20%.\nAnd let me give you a few examples that illustrate the value that we provide across a variety of customer applications.\nIn banking, one of our core use cases is to support customer due diligence requirements by providing transparency into counterparty relationships and beneficial ownership structures.\nAnd the accuracy, quality and linkage of our data enables us to be a trusted partner with banks in complying with the regulatory requirements and managing reputational risk across the financial sector.\nTurning to a large automotive leasing company.\nThey previously relied on manual processes but now have automated their supplier due diligence activities by using our Orbis database to onboard and monitor tens of thousands of suppliers and their beneficial owners.\nAnd last, a worldwide transportation company was looking for an integrated supplier of risk solution to comply with anti-bribery and corruption laws and automate the risk assessment procedures.\nThey chose our Compliance Catalyst solution to help them onboard and monitor almost 20,000 suppliers, primarily because it provided them with a single tool from which to source high-quality compliance, financial and ESG data.\nLast month, we closed on the RMS acquisition.\nAnd our teams have begun to work to jointly advance our integration plans.\nRecently, I had the opportunity to spend a couple of days together with the MA and RMS management teams to get to know each other and to align on priorities.\nAnd it's clearly a great cultural fit.\nAnd we see interesting opportunities across our combined life and P&C businesses, potential for new solutions that empower integrated risk assessment and an opportunity to sync and upgrade our technology platforms.\nWe're focused on three key areas to drive incremental revenues and achieve our targets.\nFirst is cross-selling to our respective customers.\nAnd we've already begun conducting joint customer meetings to start to identify opportunities.\nAnd I have to say, the dialogues are encouraging.\nSecond is the transition of RMS customers to their new SaaS platform, where RMS will benefit from MA's recent experience and which represents an opportunity for some revenue uplift.\nAnd third is new product development and integration.\nWhen I was with the team, they identified a wide range of opportunities, from simple integration to enhance our insurance analytics, to new products serving new customer segments.\nIn fact, we have a team working specifically on identifying opportunities for corporates and governments across climate and cyber.\nSo our work with RMS has begun and we're looking forward to the future together.\nAt the beginning of this year, I highlighted our strategic priorities as a global integrated risk assessment firm.\nThat included collaborating, modernizing and innovating to meet our customers' rapidly changing needs.\nAnd I want to showcase a few examples of how we're delivering on our strategy across the company.\nBeginning with ESG and climate, we recently launched new capabilities to help customers using our credit scoring tools so that they can integrate and understand the financial impact of physical and transition risks.\nThat new module enhances our award-winning models and covers 40,000 public companies and millions of private firms.\nWithin our ratings business, we recently expanded our ESG credit impact scores to include financial institutions.\nThis is the next step in building out comprehensive coverage on our rated universe and furthering our efforts to help investors clearly understand the impact of E, S and G factors on credit.\nIn MA, we're leveraging cloud and SaaS technologies to improve the customer experience.\nFor example, as part of our Data Alliance consortia, we recently released our first set of CECL dashboards.\nAnd that enables banks to benchmark themselves against their peers and enhances the value of our product.\nAnd we're integrating commercial property data and cash flow analytics into our CreditLens suite of solutions to help commercial real estate lenders make better decisions.\nAnd this marks an important expansion of our offerings serving the commercial real estate sector.\nFinally, the exponential increase in cyberattacks and ransomware has threatened the stability and reputation of businesses across the world.\nAnd to help our customers understand this evolving risk, we made a significant investment in BitSight, a leader in cybersecurity ratings space.\nWe see many potential opportunities for us to integrate their data and analytics into our products and solutions.\nAnd together, we will help market participants better measure and manage their cyber risk across supply chains and portfolios.\nWith COP26 beginning in a few days, I want to underscore the importance of ESG and climate to both our stakeholders and to the Moody's organization.\nAnd this is evident in the way that climate considerations are embedded across our company.\nWithin our products, we offer market participants the tools they need to better identify, measure and manage climate resilience.\nWe've developed a comprehensive suite of climate risk data, scores and insights to measure physical exposure to climate hazards, to analyze the company's transition risk and also to understand how climate risk translates into credit risk.\nAnd the addition of RMS will meaningfully enhance the quality of our offerings to help deliver world-class analytics to the market.\nAnd as part of Moody's corporate commitment to sustainability, we announced several significant actions in the quarter.\nWe brought forward our commitment to achieve net zero across our operations and value chain to 2040, and that's 10 years earlier than our original target.\nAdditionally, we're very proud to have achieved recognition as a 2021 Global Compact LEAD company, a major distinction from the world's largest corporate sustainability initiative.\nAnd as founding member of the Glasgow Financial Alliance for Net Zero, we're committed to align all of our relevant products and services to achieve net zero greenhouse gas emissions.\nAll these efforts underscore our strong commitment to address the climate crisis and to drive positive change.\nIn the third quarter, MIS revenue and rated issuance increased 12% and 11%, respectively, on elevated leveraged loan and CLO activity.\nCorporate finance revenue grew 6% compared to a 2% increase in issuance.\nHeightened demand continued for leveraged loans as issuers opportunistically refinanced debt and funded M&A transactions.\nAdditionally, we observed lighter investment-grade activity compared to the record levels in the prior year period as well as a decline in high-yield bonds as investors pivoted to floating rate debt.\nFinancial institutions revenue rose 14%, supported by 25% growth in issuance.\nTransaction revenue was up 24% as infrequent bank and insurance issuers took advantage of the attractive rate and spread environment.\nRevenue from public, project and infrastructure finance declined 2% compared to a 17% decrease in issuance as U.S. public finance issuers largely fulfilled their funding needs in prior periods.\nStructured finance revenue was up 63%, supported by strong recovery in issuance.\nWhile this was primarily attributable to CLO refinancing activity, the third quarter also had a high level of new deals driven by a surge in leveraged loan supply.\nIn addition, CMBS and RMBS formation further bolstered overall results.\nMIS' adjusted operating margin benefited from approximately 190 basis points of underlying expansion, more than offset by the impact of higher incentive compensation associated with our improved full year outlook, a legal accrual adjustment in the prior year and a charitable contribution via The Moody's Foundation.\nThird quarter revenue rose 13% or 8% on an organic basis.\nOngoing demand for our KYC and compliance solutions as well as data feed drove a 15% increase in RD&A revenue or 12% organically.\nThis was further supported by mid-90s percent retention rate and robust renewal yield for our credit research and data products.\nERS revenue rose 8% in the quarter.\nOrganic recurring revenue grew 13% driven by customer demand for our banking products as well as insurance analytics solutions.\nThis was more than offset by an expected decline in onetime revenue and led to a 2% decrease in overall organic revenue.\nAs a result of our strategic shift toward SaaS-based solutions, recurring revenue comprised 90% of total ERS revenue in the third quarter, up 12 percentage points from the prior year period.\nMA's adjusted operating margin benefited from approximately 210 basis points underlying expansion, more than offset by acquisitions completed in the last 12 months, nonrecurring transaction costs associated with RMS and the charitable contribution via The Moody's Foundation.\nTurning to Moody's full year 2021 guidance.\nMoody's outlook for 2021 is based on assumptions regarding many geopolitical conditions, macroeconomic and capital market factors.\nThese include, but are not limited to, the impact of the COVID-19 pandemic; responses by governments, regulators, businesses and individuals as well as the effects on interest rates, inflation, foreign currency exchange rates, capital markets liquidity and activity in different sectors of the debt market.\nOur full year 2021 guidance is underpinned by the following macro assumptions.\n2021 U.S. GDP will rise in the range of 5.5% to 6.5%, and Euro area GDP will increase in the range of 4.5% to 5.5%.\nBenchmark interest rates will gradually rise, with U.S. high-yield spreads remaining below approximately 500 basis points.\nThe U.S. unemployment rate will remain below 5% through year-end, and the global high-yield default rate will fall below 2% by year-end.\nOur guidance also assumes foreign currency translation at end of quarter exchange rates.\nSpecifically, our forecast for the balance of 2021 reflects U.S. exchange rates for the British pound of $1.35 and $1.16 for the euro.\nThese assumptions are subject to uncertainty and results for the year could differ materially from our current outlook.\nWe have updated our full year 2021 guidance for several key metrics.\nMoody's revenue is now projected to increase in the low teens percent range, and we have maintained our expectation for expenses to grow approximately 10%.\nAs such, with an improved revenue outlook and ongoing expense discipline, we have expanded Moody's adjusted operating margin forecast to be approximately 51%.\nWe raised and narrowed the diluted and adjusted diluted earnings per share guidance ranges to $11.65 to $11.85 and $12.15 to $12.35, respectively.\nWe forecast free cash flow to remain between $2.2 billion and $2.3 billion and anticipate that full year share repurchases will remain at approximately $750 million, subject to available cash, market conditions, M&A opportunities and other ongoing capital allocation.\nMoving to the operating segments.\nWithin MIS, we now forecast full year revenue to increase in the low teens percent range and rated issuance to grow in the high single-digit percent range.\nMIS' issuance guidance assumes that full year leveraged loan and structured finance issuance will both increase by approximately 100%, up from our prior assumption of 75% growth for each of these asset classes.\nInvestment-grade issuance is forecast to decline by approximately 35%, an improvement from our prior assumption of a 40% decrease.\nHigh-yield bond issuance is expected to increase by approximately 20%, slightly lower than our prior outlook.\nAdditionally, we are raising our guidance for first-time mandates to a range of 1,050 to 1,150.\nThis is significantly above recent levels and will enable us to generate incremental revenue through future annual monitoring fees.\nWe're also increasing MIS' adjusted operating margin guidance to approximately 62%, which implies approximately 200 basis points of margin expansion compared to 2020's full year result.\nThis operating leverage is driven by continued top line outperformance and well-controlled expenses.\nFor MA, we are maintaining our revenue growth projection in the mid-teens percent range, supported by our strong retention rates and the continued growth of SaaS and subscription products.\nWe are also reaffirming the adjusted operating margin guidance of approximately 29%.\nThese metrics include the impact of a deferred revenue haircut related to the RMS acquisition as well as the nonrecurring transaction-related expenses I noted earlier.\nExcluding the impact of acquisitions completed in the prior 12 months, MA revenue is anticipated to increase in the high single-digit percent range, and the adjusted operating margin is forecast to expand by approximately 300 basis points.\nAs I mentioned previously, we are reaffirming our full year 2021 expense growth guidance of approximately 10%.\nFor the third quarter, operating expenses rose 19% over the prior year period, of which approximately 16 percentage points were attributable to operational and transaction-related costs associated with recent acquisitions, including RMS, as well as higher incentive and stock-based compensation accruals, a $16 million charitable contribution via The Moody's Foundation and movement in foreign exchange rates.\nThe remaining expense growth of approximately 3% was comprised of organic investments as well as operating costs such as hiring and salary increases and was partially offset by ongoing cost efficiency initiatives.\nWe are on track to reinvest approximately $110 million back into the business in 2021.\nThese organic investments are concentrated in the areas we've mentioned throughout the year, including ESG and climate, KYC and compliance, CRE as well as technology improvement and geographical expansion.\nBefore turning the call back over to Rob, I would like to underscore a few key takeaways.\nFirst, we're pleased to have raised our full year guidance across several key metrics, primarily due to robust third quarter performance.\nSecond, economic recovery and constructive market conditions continue to support issuance levels and refunding activity.\nThird, MA's high proportion of recurring revenue and retention rates, along with growing customer demand for our award-winning product suite, positions Moody's for sustainable long-term success.\nFourth, our ongoing key organic investments in high-growth markets accelerate our integrated risk assessment strategy across a wider range of use cases.\nAnd finally, our focus on innovation and product enhancement delivers best-in-class ESG and climate solutions to our stakeholders, enabling them to make better decisions.\n",
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"content": "q3 revenue rose 13 percent to $1.5 billion.\nsees fy adjusted earnings per share $12.15 to $12.35.\nq3 adjusted earnings per share $2.69.\nfy 2021 earnings per share guidance $11.65 to $11.85.\nsees 2021 revenue increase in the low-teens percent range.\nsees 2021 capital expenditures about $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: We'll also post our Regulation G disclosures when applicable on our website at www.\nSo, with that behind us, let's begin, and I'll follow a similar format, I'm going to start by spending a few minutes briefly sharing a few numbers from our quarter with you, and I'll also discuss our balance sheet liquidity.\nYou've seen the numbers, essentially 100% of our theaters were closed for the first two months of the quarter and the 80% that we reopened for the final month of the quarter, we're only operating with a limited number of new films.\nAs a result, after adjusting for non-recurring items, including an impairment charge, our operating income and adjusted EBITDA from this division was pretty much equal to our second quarter results, when we were completely closed.\nIn Hotels & Resorts segment, we had four hotels opened in the entire third quarter and three hotels reopened during portions of the quarter, all as significantly reduced occupancies.\nWhile the numbers from this division weren't great, they were much better than the second quarter when we were essentially completely closed and they were overall better than we'd expected.\nWe incurred approximately $1.6 million of additional property closure and subsequent reopening expenses with the majority of the expenses in our Theater division.\nThe reopening expenses this quarter related to extensive cleaning costs, supply purchases and employee training, among other items related to the reopening of selected Theater & Hotel properties and implementing new operating protocols.\nWe also incurred an impairment charge of nearly $800,000 this quarter related to several theater properties and an impairment charge of another $800,000 related to an investment in hotel joint venture.\nOur effective income tax rate was 26.9% during the third quarter and 37.3% for the first three quarters of the year.\nAs we discussed last quarter, our year-to-date fiscal 2020 income tax benefit was favorably impacted by an adjustment of approximately $17.4 million resulting from several accounting method changes and the March 27, 2020 signing of the CARES Act.\nOne of the provisions of the CARES Act specifically designed to help otherwise healthy tax paying companies like us that were significantly impacted by the COVDI-19 pandemic, allows our 2019 and 2020 taxable losses to be carried back to prior fiscal years, during which our federal income tax rate was 35% compared to the current statutory federal income tax rate of 21%.\nExcluding this favorable adjustment to income tax benefit, our effective income tax rate for the first three quarters of fiscal 2020 was 24.5%.\nWe anticipate that our effective income tax rate for the remaining quarter fiscal 2020 may be in the 28%, 29% range due to an expected taxable loss during fiscal 2020 that will continue to allow us to carry back a portion of the loss for years that had a 35% federal income tax rate.\nOf course, our actual fiscal 2020 effective income tax rate may be different from our estimated quarterly rates depending upon actual facts and circumstances.\nShifting gears away from the earnings statement just for a moment, our total cash capital expenditures during the first three quarters of fiscal 2020 totaled approximately $19 million compared to approximately $80 million last year, which included the cash component of the Movie Tavern acquisition.\nMost of this year's dollars were spent in the Theater division on several projects that we started during the first quarter.\nWe only spent about $2.8 million during the third quarter.\nWe continue to have most future capital expenditures on hold for the time being.\nNow since the majority of our Theater & Hotel properties were open for at least a portions of the reported quarter, I'm going to provide some financial comments on our operations for the third quarter and first three quarters beginning with theaters.\nNow our overall attendance was down over 95% compared to the prior year third quarter because we were closed for two of the three months, attendance at comparable theaters, same theaters opened and same weeks opened, was down approximately 85%.\nOur average admission price at our comparable theaters during the weeks we were opened increased 0.6% during the third quarter and 2% for the first three quarters of fiscal 2020 compared to the prior year period.\nOur average admission price was unfavorably impacted by the fact that we continue to charge only $5 for older library film product and we only apply our regular pricing to new films.\nWe are very pleased to report an increase in our average concession and food and beverage revenues per person at our comparable theaters of 28% for the third quarter, and 7.2% for the first three quarters of fiscal 2020.\nNow our investments in non-traditional food and beverage outlets continue to contribute to higher per capita spending, but there were other factors in the play this quarter that likely contributed to the large percentage increase.\nWe've always believed that long lines at the concession stand can result in some customers choosing the skip the lines and that by concessions.\nThe reality is that with reduced attendance lines are not long, and that has likely contributed to our higher per capita revenues.\nWe also believe that the emphasis we are placing an encouraging guests to purchase their concessions and food and beverage ahead of time either online or using our mobile app is also contributing to our increased per capita revenues.\nWhile the first reason will eventually go away as attendance increases.\nThe second reason is the potential will be long lasting, which is very encouraging.\nFinally, I'll point out that we were not able to compare our box office revenues limited as they were to the industry this quarter as data provided to Rentrak, the box office reporting service was also very limited, and not useful for accurate comparisons.\nShifting to our Hotels & Resorts division, our total revenue per available room or RevPAR for our seven comparable owned hotels for the third quarter and first three quarters decreased 58.2% during the third quarter and 44.3% during the first three quarters of fiscal 2020 compared to the last year's same periods.\nNow to be clear, this math only includes the weeks that the various hotels were opened because as I mentioned three of our hotels were reopened for only portions of fiscal 2020 third quarter.\nThe Saint Kate was not opened during the third quarter at all and thus was not included in these results.\nNow according the data received from Smith Travel Research and compiled by us in order to compare our fiscal quarter results, comparable upper upscale hotels throughout the United States experienced a decrease in RevPar of 67.1% during our fiscal 2020 third quarter and were down 59.7% year-to-date.\nMeanwhile, competitive hotels in our collective markets experienced a decrease in RevPar of 71.4% and 68%, respectively, during our third quarter and first three quarters.\nThus our hotels outperformed both the industry and our competitive sets during both the third quarter and first three quarters of fiscal 2020.\nBreaking out the numbers for all seven of our open hotels more specifically, our fiscal 2020 third quarter overall RevPAR decreased was due to an overall occupancy rate decrease of 46.4 percentage points, and a 5.3% decrease in our average daily rate or ADR. Year-to-date, our fiscal 2020 first three quarters overall RevPAR increase -- or decrease was due to an overall occupancy rate decrease of 28.6% -- 28.6 percentage points and a 10.2% decrease in our ADR. Our third quarter occupancy rate for our seven comparable hotels for the weeks that they were opened was 36.6%.\nI will remind you once again that we entered this crisis from a position of strength.\nOur debt-to-capitalization ratio at the end of 2019 was a very modest 26%.\nEven after reporting the two worst quarters we've ever experienced in our 85-year history, our net debt-to-capitalization ratio at the end of the third quarter was still a very low 35%.\nOf course, we also own the underlying real estate for seven of our company-owned hotels in the majority of our theaters, representing over 60% of our screens and even larger percentage of our revenues and cash flow, thereby reducing our monthly fixed lease payments.\nThis is a significant advantage for our company relative to our peers, as it keeps our monthly fixed lease payments relatively low and provide significant underlying credit support for our balance sheet.\nWe also shared with you last quarter that we filed our income tax refunds of $37.4 million in early August, with the primary benefit derived from the accounting method changes, I referenced earlier.\nAnd the new rules for qualified improvement property and net operating loss carry bags that came out of the CARES Act.\nI'm pleased to tell you that we've received approximately $31 million of those refunds in October after the end of the third quarter, with an additional $6 million expected soon.\nWe also expect to apply a significant portion of our anticipated tax loss to be incurred in fiscal 2020 to prior year income, which may also result in a refund that we expect may approximate $21 million in fiscal 2021, when our fiscal 2020 tax return is filed, with possible tax loss carry-forwards that may be used in future years as well.\nYou'll also note that we begun reporting assets held for sale on our balance sheet, primarily -- related primarily to the book value of surplus real estate that we believe will monetized during the next 12 months now.\nNow we actually have significantly more real estate that we have the potential to monetize in the next 12 months to 18 months.\nBut our accounting policy is to only classify as assets for sale, the book value of assets that we actually have letters of intent or contracts to sell in place.\nWe'll continue to update this number in our balance sheet in future quarters as we make additional progress in our efforts to monetize surplus real estate.\nWe're not going to speculate on what the possible sale proceeds might end up being, but as the potential to be in the tens of millions of dollars, depending upon the strength of the real estate market and how active we might choose to be.\nAs we have previously reported in light of the COVID-19 pandemic, we've been working to preserve cash and ensure sufficient liquidity to endure the impacts of the global crisis even if prolonged.\nAs you know, on April 29, 2020 we amended our existing credit agreement and issued a new $90.8 million, 364-day senior term loan A to further support our already strong balance sheet.\nOn September 22, we extended the maturity date of the term loan to September in 2021 amended our debt covenants and issued $100.05 million in convertible senior notes.\nWe used a portion of the proceeds from this issuance to purchase capped call transactions that effectively increase the conversion rate of the convertible senior notes from 22.5% to 100%, significantly reducing potential dilution related to the convertibles.\nThus, after deducting cost of the debt issuance, we added an additional $78.6 million in liquidity to our balance sheet.\nWe use the net proceeds from the convertible issuance to pay down revolver borrowings under our credit agreement.\nAs a result, as of September 24, 2020, we had cash and revolving credit availability of over $218 million and that's not counting the $31 million of income tax refunds received in October.\nSo you can do the math.\nOur adjusted EBITDA during the second quarter when we were essentially completely closed was a negative $30 million and our adjusted EBITDA during the third quarter was a negative $26 million.\nEven when you add interest expense to that number, with a combined nearly $250 million in cash and revolving credit availability when you add in the October income tax refunds received, plus future income tax refunds remaining in 2020 and future potential income tax refunds in 2021, you can see why we indicate that we believe the additional financing positions us to continue to sustain our operations throughout fiscal 2021, even if our properties continue to generate significantly reduced revenues or have to reclose for a period due to the effects of the COVID-19 pandemic.\nAnd we'll continue to pursue additional opportunities to fortify our balance sheet and reinforce our liquidity in the future, that will include seeking additional government support as appropriate.\nFor example, we're very pleased to see the States of Wisconsin and Nebraska recently recognized the need to support those businesses, most impacted by the pandemic and introduced grant programs that include the theater and hotel industries.\nOur trade groups will continue to lobby for additional support at the federal level as well.\nI'm going to begin my remarks where Doug left off.\nDiscussing our balance sheet.\nThis is my first chance to comment on the actions we took in late September to further strengthen our balance sheet and liquidity and I think it would be helpful to explain our thinking.\nWe have an 85-year history of prudently managing our balance sheet.\nAs Doug shared earlier, we entered this crisis from a position of strength with a debt to capitalization ratio of 26%.\nThat conservative approach to our balance sheet has proved to be particularly important during this current environment.\nWe always have been and will continue to be thoughtful and opportunistic when managing our balance sheet.\nImmediately upon the onset of the pandemic, we went to our banks and increased our liquidity via a 364-day term loan, closing on that financing in April 2020.\nWith a significant number of unknowns in those first months of the pandemic, we believe adding this short-term borrowing was the prudent thing to do.\nBut we now have the majority of our theaters and hotels opened, there remains uncertainty regarding the pace of the recovery.\nWe continue to be confident that both our businesses will recover.\nBut our thinking always has been and always will be long-term, focused.\nWith that long-term focus in mind, we also have always had the philosophy with our debt portfolio should match our asset base.\nOur assets consist primarily of fixed and long-lived assets.\nAnd thus, we've always tried to have a significant portion of our debt fixed and long as well.\nWith the 364-day term loan scheduled to mature in April 21, we are presented with an opportunity to amend our current bank agreements, extend our term loan by another five months and adjust our covenants to provide for future near-term and medium-term uncertainty in our businesses.\nA key component of amending our bank agreements was opportunistically raising attractive capital that would ultimately replace the short-term term loan.\nWith that in mind, we believe the issuance of convertible unsecured notes was the most attractive capital raising alternative at that time and had the following advantages.\nWe can effectively replace short-term borrowings with five-year junior capital.\nFive years is a long time and with minimal debt maturities before 2025, it has given us a lot of flexibility and time for the recovery to take hold.\nCash interest payments will be significantly lower than other long-term options.\nWe were able to size the issuance appropriately, particularly for a company our size.\nAs an example, high yield debt, another long-term option many borrowers, including some of our peers have availed themselves of typically requires a minimum sizing $300 million range.\nBut purchasing the cap call in conjunction with our issuance, we were able to effectively increase the strike price of the convertible from 22.5% of our closing stock price to 100% of our closing stock price, significantly reducing any dilution concerns that would typically arise from a convertible issuance.\nIn addition, we have the option to settle these notes at maturity with cash, equity or a combination thereof, providing the further ability to reduce any actual dilution of maturity.\nI think those last two points are particularly important and may not have been completely understood by the market.\nWhile we have the option of settling the convertible notes at maturity in any combination of cash and/or stock.\nIt is our stated intend to settle the principal amount of the convertible notes in cash and only settle any of the in-the-money portion of the notes with stock.\nOur capped call transactions effectively increased the strike price of the convertible notes to $17.98 -- $18 almost which significantly reduces the potential dilution arising from these notes.\nFor example, at a $20 future stock price dilution is estimated to be only approximately 3% and a $25 future price dilution claims to a very modest 8.2% level.\nAnd if the price is higher than that, while the dilution would increase.\nI think we would all agree that everyone would be pretty happy.\nYou can be confident that we will continue to prudently manage our balance sheet in the future in order that not only will we come out of this current environment in a strong position, but that we will also be in a position to grow and thrive once more in the years ahead.\nWith that, I'll turn my attention to our operating businesses, focusing my remarks and where we are today.\nWhat we have done to date and are continuing to do to manage through this crisis and what some of our plans are for the future.\nAs you can imagine, there are a lot of unknowns yet about what the future months will look like.\nSo our plans will continue to evolve as the situation unfolds.\nI said this last quarter, but it is worth repeating in this rapidly changing truly unprecedented environment there was one thing that is not changed and will not change.\nOur priority as it has been throughout our history is the safety and well-being of our associates, customers, and communities.\nThis is guided everything we've done so far and will guide us in the weeks and months ahead as well.\nThey continue to work day and night developing and executing strategies that we believe will get us through this crisis and put us in a strong position for continued growth over the long term.\nAnd as we have brought, many of our associates back they too have worked extremely hard under very difficult circumstances in order to continue to provide an outstanding experience for our guests.\nI am so proud of each and every one of our associates.\nSo let's start with our hotels, since they are further along in the reopening process.\nDoug shared some of the numbers with you, including the fact that the data suggests, we outperformed both the industry and our competitive sets this quarter.\nIt certainly wasn't a good quarter from any historical sense, but frankly, it was better than we expected when we first started reopening our hotels with very little advanced bookings in place.\nIt wasn't that we didn't have any group business.\nAs the summer unfolded, we did have weddings at several locations and return of Major League Baseball helped our Pfister hotel.\nBut the majority of our customers were transient leisure customers, who were just looking to get away and change their scenary after months of staying home.\nAs a result, not surprising, week end business was the strongest and properties like the Geneva Resort & Spa and Timber Ridge Lodge performed the best among our hotels, as they are well suited for families looking to get away.\nGolf revenues at the Grand Geneva for example were actually higher than they were last year.\nAnd overall, 37% occupancy rate is nothing to get too excited about compared to what we are used to during our third quarter.\nBut it's certainly justified our decision to reopen our hotels.\nAs we shared with you last quarter in many ways reopening our hotels was a mathematical exercise.\nWe made the bet, we'd be better off opened and closed and proved to be a good bet.\nWe were particularly pleased that our ADR held relatively strong during the quarter.\nAdmittedly, it's hard not to wonder what the quarter might have been like in non-COVID world with the Democratic National Convention in the Ryder Cup, but it was not to be.\nIt also is important to note that the customer response to our new operating protocols has been very positive.\nWe're also particularly pleased with our recent announcement that Saint Kate-The Arts Hotel is reopening this week.\nWe reopened the first floor common areas including the bar and Pizza restaurant in late July and now we're reopening the rooms.\nThis amazing hotel is earned an incredible number of awards since it opened last summer, including most recently being named the number six top hotel in the Midwest and the top hotel in Milwaukee, by Conde Nast Readers.\nIt's fair to say, it is Milwaukee's most recognized hotel, with the Saint Kate reopening all eight of our company-owned hotels will be opened.\nLooking to future periods, overall occupancy in the US has slowed -- has slowly increased since the initial onset of the COVID-19 pandemic in March.\nHigher and hotels, like the ones we generally operate have been impacted more than lower-end hotels.\nMost current demand continues to come from the drive to leisure segment, most organizations implement to travel bans at the onset of the pandemic, and are currently only allowing the essential travel, which will likely limit business travel in the near term.\nOur company-owned hotels have experienced a significant decrease in group bookings for the remainder of fiscal 2020 compared to the same period last year.\nAs of the date of this report, our group room revenue bookings for fiscal 2021 commonly referred to in the Hotels & Resorts industry as group pace is running significantly behind where we were last year at this time for fiscal 2020.\nAnd a large portion of that decline is because last year's group bookings included bookings in anticipation of Milwaukee hosting the DNC, Democratic National Convention in July 2020.\nBanquet and catering revenue pace for fiscal 2021 is also running behind where we were last year at this time for fiscal 2020, but not as much as group room revenue is due in part to increases in weeding bookings.\nMany of our canceled group bookings due to COVID-19 are rebookings for future dates.\nExcluding one-time events that could not rebooked for future dates, such as those connected to the DNC.\nHowever, some group bookings for the first half of fiscal 2021 have subsequently canceled or postponed their event and we cannot predict to what extent any of our hotel bookings will be canceled or rescheduled due to COVID-19 or otherwise.\nWe were pleased to see the Ryder Cup rescheduled for 2021 and it is contributing to our 2021 group pace.\nLooking further out, the Wisconsin district just approved financing for the expansion of its convention center here in Milwaukee.\nThe expansion is currently expected to be completed in late 23 -- 2023 or early 2024.\nForecasting what future RevPAR growth or decline will be during the next 18 months to 24 months is very difficult at this time.\nThe non-group booking arrival is very short, with most bookings occurring within three days of arrival, making even short-term forecast of future RevPAR growth very difficult.\nHotel revenues have historically tracked very closely with traditional macroeconomic statistics, such as the gross domestic product.\nSo we will be monitoring the economic environment very closely.\nAfter past shocks to the system, such as 9/11 and the 2008 financial crisis, hotel demand took longer to recover than other components of the economy.\nConversely, we now anticipate that hotel supply growth will be limited for the foreseeable future, which can be beneficial for our existing hotels.\nMost industry experts believe the pace of recovery will be steady, but relatively slow.\nWe continue to believe it will be very important to have our marketing message focus on the health and safety of our associates and guests.\nOverall, we generally expect our revenue trends to track or exceed the overall industry trends for our segment of the industry, particularly in our respective markets.\nRegardless of how this unfolds, I am confident that Hotel division President, Michael Evans and his outstanding team will effectively manage our hotel operations during these turbulent times.\nOur associates are working tirelessly so that every guest can rest easy knowing that they are receiving the highest standards of service and cleanliness, while still enjoying the best our award winning hotels and resorts have to offer.\nSo let's shift to our Theater division.\nDoug went over the numbers with you.\nAnd since we were closed for the majority of the quarter, the numbers are pretty similar to the second quarter obviously challenging.\nIn the midst of this unique time, however, there were some encouraging signs during the quarter that bode well for us in future periods.\nFirst off, we're thrilled with our customer reaction to the new protocols we put in place.\nTo get 96% of a group of people to agree on anything is virtually impossible these days.\nIf that is what percentage of our first loyalty members told us, they had a safe and comfortable experience at our theaters.\nAll the credit goes to our leadership team for developing smart and effective new operating protocols and to our managers and theater associates for executing on them and providing a great experience for our guests.\nWe expect policies and guidelines will continue to evolve the time and will be assessed and updated on an ongoing basis.\nOur goal continues to be to build consumer confidence and trust as quickly as possible.\nWe know it is a process, but word-of-mouth will help and we're off to a good start.\nWe also didn't know for sure what customers' behavior -- what customer behavior would be once they arrived, would they adapt to the new protocols, would they use our industry-leading technology to order more of their concessions and food and beverage online, would they even by concessions?\nThe answer to these questions was a resounding, yes.\nAnd we were very pleased with the increases we experienced in our concession revenues per person.\nUnfortunately, with restriction still in place in New York and California, in particular, not long afterwards studios started changing the new release schedule once again.\nThus like I mentioned in my hotel remarks, it once again became a little bit of a math exercise.\nWe want to be open.\nBut being open has a certain level of fixed costs associated with it.\nSo we also don't want to lose more money being opened and closed.\nAs a result, we made the difficult decision to reclose 17 theaters in early October and reduced our operating hours and operating days at our remaining open theaters.\nRight now, our theaters are open on Tuesdays, Fridays, Saturdays and Sundays which better aligns with current demand.\nThe industry received some good news a couple of weeks ago when it was announced the New York State would begin reopening theaters, that allowed us to reopen our movie theater -- our Movie Tavern locations in Syracuse.\nAnd as an indication of pent-up demand that location was the number one theater in the country for the new film Honest Thief when it first reopened.\nWe've since reopened three theaters in Nebraska as well meaning that as I speak to you today, 59 theaters opened representing approximately 66% of our circuit.\nSo now it really comes down to two interrelated topics, both necessary to increase customer demand for going to the movies.\nFirst and foremost, we need new films to be released.\nWe've seen first-hand that when new films come out our attendance increases.\nAnd in fact, when we pulled our guests, our loyalty club 60% of them said the reason they weren't coming because there was, there were no movies to see.\nAttendance in the last couple of weeks has been the best we've experienced since the first two weeks of reopening and is not a coincidence that they coincide with the fact that we are showing an increased number of new films, as well as an increased variety of films shown.\nWe do best when all the film genres are represented.\nWe continue to have regular conversations with all our studio partners regarding the need for them to commit to film release dates and continue to release new films theatrically.\nHaving said that, we also need the country on an incremental basis to get the pandemic under control, not only will that increase consumer willingness to go to the movies, but it will further encourage the studios to follow through and release their films with confidence that there will be a willing audience ready to attend and see their content, the way it was meant to be seen.\nIt is particularly heartening to take a look at what is going on in Asia.\nThe Chinese box office is coming back.\nAnd a recent new release in Japan just shattered the record for the biggest opening in Japanese history after initially struggling to attract audiences.\nIt was an anime film.\nIt did $44 million in its first weekend that compared to give you an idea of the relative performance to Frozen 2, which did $30 million.\nSo it was a significant outperformance.\nThere are multiple films still scheduled to be released during the remaining two months of the year that may generate substantial box office interest.\nThe anticipated film slate for 2021, which will also now include multiple films originally scheduled for 2020 is currently expected to be very strong.\nAnd despite some continued experimentation with alternative releasing strategies, which we believe are generally directly -- are generally directly related to the current COVID-19 environment, the fact remains, the vast majority of films have been delayed to future periods.\nClear indication in our view of the importance of the theatrical experience for the studios they seek to monetize their content.\nJust as we've had to adapt our plans in the recent months, we recognized that we will need to be prepared for new challenges and opportunities in the weeks and months ahead.\nWell, I won't share the exact numbers, when we first began reopening theaters, we did the math and we believed -- we needed a certain attendance level in order to perform better than being closed.\nAs we manage through the past few months, we found additional ways to reduce fixed cost and operate at lower levels of attendance.\nIn other words, our math has improved and we have 66% of our theaters opened today because we think it is better to be open, better for the customer sake, better for the associates sake and better for the overall business sake.\nAnd of course, we have an advantage that Doug alluded to earlier, we own the majority of our theaters, reducing our monthly fixed costs and making it easier for us to stay opened.\nThere is always the possibility of the film's schedule could change again or that we could see renewed restrictions from select local or state jurisdictions.\nBut I am certain that Rolando Rodriguez and his incredibly talented team will be prepared to adapt and manage us through this reopening process and ultimately position us to once again lead the industry into what we believe will be a very bright future.\nAnd while I'm on it, I want to publicly congratulate Rolando on recently being elected, Chairman of the Board for our industry trade group, the National Association of Theater Owners or NATO.\nIt is a tremendous honor for Rolando and a recognition for his leadership, not only for us, but for the entire industry.\nIn conclusion, in this continually changing environment you can rest assured that we are constantly reviewing the situation in both our businesses and making changes to our plans as warranted.\nA company is built for challenging times like this.\nOur leadership team, managers and associates are stepped up to the challenge in ways that go way above and beyond and for that we are most grateful.\nWe also continue to appreciate the confidence and support of our lenders in the investment community during this challenging time and always.\nWith that, at this time, Doug and I will be happy to open the call up for any questions you may have.\n",
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"content": "marcus theatres temporarily closed 17 previously reopened theatres in early october due to lack of new film releases.\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 Gabe Tirador, President and CEO.\nOn the phone, we have Mr. George Joseph, Chairman; Ted Stalick, Senior Vice President and CFO; Jeff Schroeder, Vice President and Chief Product Officer; and Chris Graves, Vice President and Chief Investment Officer.\nBefore we take questions, we will make a few comments regarding the quarter.\nNet income in the second quarter was $228.2 million or $4.12 per share, which includes a $125.2 million of after-tax gains on our investment portfolio.\nThe rebound in the markets in the second quarter, helped to partially offset first quarter after-tax losses of $198.5 million on our investment portfolio.\nYear-to-date, net income was $89 million or $1.61 per share, which includes $73.4 million of after-tax losses on our investment portfolio.\nMost of the year-to-date investment losses are mark-to-market adjustments on securities that continue to be held by the Company.\nOur second quarter operating earnings were $1.86 per share compared to $0.74 per share in the second quarter of 2019.\nThe improvement in operating earnings was primarily due to a reduction in the combined ratio from 98.3% in the second quarter of 2019 to 88.2% in the second quarter of 2020.\nCatastrophe losses in the quarter was $12 million compared to $9 million in the second quarter of 2019.\nThe Company recorded $12 million in unfavorable reserve development in the quarter compared to $9 million in the second quarter of 2019.\nThe improvement in the combined ratio in the quarter was primarily due to improved results in our private passenger auto line of business.\nLower frequency in the quarter as a result of less driving from the COVID-19 pandemic was the primary reason for the improved results.\nThe lower frequency in the quarter was partially offset by an increase in severity and the give back of $100.3 million of premiums to personal auto customers as a result of less driving from the COVID-19 pandemic.\nPartially offsetting the improved results in our private passenger auto line of business were worst results in our commercial auto, homeowners and commercial multi-payer lines of business.\nAlthough our commercial auto line of business also saw a decline in frequency in the quarter, increases in severity, unfavorable reserve development of $7 million and the give back of $5.5 million of premiums to commercial auto customers negatively impacted our commercial auto results in the quarter.\nIn our homeowners line, both frequency and severity increased in the quarter.\nIn addition, $3 million of unfavorable reserve development negatively impacted our homeowners results this quarter.\nTo improve our homeowners results, a 6.99% rate increase in our California homeowners line went into effect in April.\nIn addition, a 6.99% rate increase was recently approved by the California Department of Insurance.\nWe expect to implement the recently approved rate increase in October.\nCalifornia homeowners premiums earned represent about 87% of companywide direct homeowners premiums earned and 15% of direct companywide premiums earned.\nOur commercial multi-payer results in the quarter were negatively impacted by a large $5 million fire loss net of reinsurance.\nIn the second quarter, we launched two new programs.\nIn June, we introduced our new personal auto usage-based insurance product MercuryGO in Texas.\nEarly adoption rates are encouraging and above our expectations.\nWe also introduced Phase 1 of our new commercial multi payroll product and system in California in the second quarter.\nThe new product and system have been well received by our agents.\nWe recently completed our catastrophe reinsurance treaty renewal effective July 1, 2020.\nThe total reinsurance limit purchased increased from $600 million in the prior period to $717 million for the July 2020 through June 2021 period.\nIn addition, the new reinsurance program has wildfire coverage in all layers.\nOur retention remains the same at $40 million.\nTotal annual premiums on a new reinsurance program are approximately $50 million.\nFor the prior reinsurance treaty, total premiums were $38 million.\nMore details of the catastrophe reinsurance treaty renewal will be included in our second quarter 10-Q filing.\nThe expense ratio was 27.2% in the second quarter of 2020 compared to 24.4% in the second quarter of 2019.\nThe higher expense ratio in the quarter was primarily due to the reduction of premiums earned of $106 million due to premium refunds and credits to eligible policyholders for reduced driving and business activities as a result of the COVID-19 pandemic.\nExcluding the premium refunds and credits, the expense ratio would have been 24.1%.\nPremiums written declined 12.5% in the quarter primarily due to the $106 million in premium refunds and credits.\nExcluding the $106 million in premium refunds and credits, premiums written declined by 1.2%.\nIn addition, we plan on returning $22 million of July 2020 monthly premiums to eligible policyholders in August.\nAccordingly, we expect third quarter premiums written and earned to be reduced by approximately $22 million.\nWe will continue to monitor the extend and duration of the economic impact related to COVID-19 and make further adjustments as necessary.\nWe expect our underwriting and loss adjustment expense ratios to remain elevated in the third quarter as premiums declined from give backs without a proportionate reduction in expenses.\nWith that brief background, we will now take questions.\n",
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"content": "qtrly earnings per share $4.12.\ncompname posts quarterly net income per diluted share $4.12.\nqtrly net income per diluted share $4.12.\nqtrly operating income per diluted share $1.86.\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 Gabe Tirador, President and CEO.\nIn the room with me is Mr. George Joseph, Chairman; Ted Stalick, Senior Vice President and CFO; Jeff Schroeder, Vice President and Chief Product Officer; and Chris Graves, Vice President and Chief Investment Officer.\nBefore we take questions, we will make a few comments regarding the quarter.\nOur third quarter operating earnings were $0.78 per share compared to $1.11 per share in the third quarter of 2018.\nThe deterioration in operating earnings was primarily due to an increase in the combined ratio.\nThe combined ratio was 98.6% in the third quarter of 2019 compared to 95.6% in the third quarter of 2018.\nThe deterioration in the combined ratio in the quarter was primarily from worst results in our private passenger auto business outside of California and our California commercial auto business which together added 2.8 points to the companywide combined ratio in the third quarter of 2019 compared to the third quarter of 2018.\nFor states outside of California, we posted a private passenger auto combined ratio of 101% in the third quarter of 2019 compared to 82% in the third quarter of 2018.\nThose results include approximately $2 million of favorable prior-year reserve development on $86 million of earned premium compared to $12 million of favorable prior-year reserve development on $88 million of earned premium in the third quarter of 2018.\nOur California commercial auto business posted a combined ratio of approximately 120% in the third quarter of 2019 compared to 90% in the third quarter of 2018.\nThose results include approximately $6 million of unfavorable prior-year reserve development on $34 million of earned premium compared to $1 million of unfavorable prior-year reserve development on $29 million of earned premium in the third quarter of 2018.\nOur California private passenger auto combined ratio deteriorated slightly to approximately 97.6% in the third quarter of 2019 from 97.4% in the third quarter of 2018.\nOverall, frequency was relatively flat and severity was up approximately 7% compared to the third quarter of 2018.\nPartially offsetting the year-over-year increase in loss severity in the quarter were recent rate increases.\nIn California, a 6.9% personal auto rate increase for California Automobile Insurance Company was implemented in March 2019 and a 6.9% personal auto rate increase for Mercury Insurance Company was implemented in May of 2019.\nCollectively, these represent two-thirds of companywide direct premiums earned.\nApproximately 81% of the California Automobile Insurance Company rate increase was earned during the quarter and about 53% of the Mercury Insurance Company rate increase was earned during the quarter.\nOur third quarter 2019 California private passenger auto frequency and severity, each increased by about 4% compared to the second quarter of 2019.\nThe sequential increase in frequency and severity was the primary reason our California private passenger auto combined ratio deteriorated from approximately 96.7% in the second quarter of 2019 to 97.6% in the third quarter of 2019.\nThe sequential increase in frequency and severity in the quarter was partially offset by our recent rate increases.\nOur year-to-date accident year combined ratio for California personal auto is approximately 96.1%.\nOur California homeowners combined ratio was 97.5% in the third quarter of 2019 compared to 101.2% in the third quarter of 2018.\nA 6.99% rate increase in our California homeowners line was approved by the California Department of Insurance and was implemented in August 2019.\nWe also recently filed for another 6.9% rate increase in our California homeowners line of business.\nCalifornia homeowners premiums represent about 13% of direct companywide premiums earned.\nCompanywide, we recorded $1 million of favorable prior-year reserve development in the quarter compared to $6 million of unfavorable reserve development in the third quarter of 2018.\nCatastrophe losses, primarily from Hurricane Imelda in Texas, were $3 million in the quarter compared to $13 million in the third quarter of 2018, primarily from the Carr Wildfire in Redding, California.\nThe expense ratio was 24.2% in the third quarter compared to 24% in the third quarter of 2018.\nThe slightly higher expense ratio was primarily due to a $6 million increase in accrued expense related to our previously announced settlement with the California Department of Insurance, partially offset by a decrease in profitability-related accruals, slightly lower acquisition costs and cost efficiency savings.\nPremiums written grew 8.6% in the quarter, primarily due to higher average premiums per policy and an increase in homeowners policies written.\nSeveral wildfires earlier in October and wildfires currently burning have caused damage in California.\nAt this time, it's too early to estimate our losses from these wildfires.\nOur catastrophe reinsurance treaty provides coverage for wildfire catastrophe losses in excess of Mercury's $40 million retention has a total wildfire limit of $508 million and allows for one full reinstatement.\nLoss occurs for a wildfire event includes all losses within 150-mile radius and within a 10-day period.\nBoth the radius point and the 10-day window are at the choice of Mercury.\nLastly, we generally expect the combined ratio for the fourth quarter, excluding catastrophes, to be higher than the rest of the year, due to increased loss frequency and higher severity caused by seasonal driving weather.\nThat said, it is hard to predict with certainty, whether the underlying combined ratio will be higher as there are many factors currently unknown or beyond our control.\nWith that brief background, we will now take questions.\n",
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"content": "compname reports qtrly operating earnings per share $0.78.\nquarterly operating earnings per share $0.78.\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: At this time, all participants are in a listen-only mode.\nPlease note that this conference is being recorded and will be available for replay.\nFor information on how to access the replay, please visit our website at mdcholdings.com.\nThese and other factors that could impact the companys actual performance are set forth in the companys third quarter 2021 Form 10-Q, which is expected to be filed with the SEC today.\nIt should also be noted that SEC Regulation G requires that certain information accompany the use of non-GAAP financial measures.\nMDC generated net income of $146 million or $1.99 per diluted share in the third quarter of 2021, driven by a combination of strong revenue growth, continued price increases and improving overhead leverage.\nOur home sales gross margin of 23.5% represented a 300 basis points improvement over the prior year period as our new home pricing stayed ahead of cost inflation.\nWe also made further improvements to our fixed cost leverage as our SG&A expense fell 80 basis points year-over-year to 9.6%.\nWe are extremely pleased with our financial results this quarter, particularly in light of the supply chain issues that continue to affect our industry.\nOrder activity remained healthy during the quarter at 4.1 sales per community per month.\nThis represents the second highest third quarter order pace for the company in the last 15 years.\nBuyers continue to be drawn to our more affordable price new home offerings, which allow for personalization through our build-to-order strategy.\nWe believe this operating model is a more prudent and capital-efficient way to run the business and leads to better risk-adjusted returns over time.\nWe also believe that results in fewer cancellations as homebuyers naturally become more invested in their purchase when they played an active role in designing and furnishing their home.\nThis is an important differentiator for our company, particularly in light of the lengthening cyclical times.\nFrom a capital standpoint, MDC continues to be in great financial shape.\nWe ended the quarter with a debt-to-capital ratio of 39.7% and a net debt-to-capital ratio of 23.7%.\nDuring the quarter, we issued $350 million of senior notes due in 2061 [phonetic] 0:05:40 at an interest rate of 3.966 and made a tender offer for over $120 million of our senior notes due 2024, which carry an interest rate of 5.5%.\nAnd while the early retirement of debt resulted in a $12.2 million charge this quarter, we now have a lower cost of capital and a debt maturity schedule that extends out 40 years.\nOur total liquidity position at the end of the quarter stood at just over $2 billion, giving us plenty of capital to scale our operations in the coming years.\nIt will also allow us to continue paying our industry leading dividend, which currently stands at $2 per share on an annualized basis.\nAs Larry mentioned, we continue to see robust demand for our homes across our geographic footprint.\nWith the West region posting the best order pace during the quarter at 4.9 homes per community per month, followed by the East at 3.7 and our Mountain region at 3.0.\nPricing remained firm within our communities, and we did not win this any widespread use of incentives or discounting in our markets as each of the segments posted home sales gross margins in excess of 20%.\nAs our existing operations continue to thrive, we have started to move into new markets that exhibit similar strong housing fundamentals.\nEarlier this year, we announced our expansion to Boise and Nashville.\nAnd in this quarter, we are pleased to announce our entry into Austin, Texas and Albuquerque, New Mexico.\nWe have land deals in place in both markets and look forward to establishing profitable operations in the years to come.\nAs we head into the end of the year, MDC is focused on delivering homes and backlog while setting the stage for additional growth in 2022.\nOur lots owned and controlled at the end of the third quarter increased by 37% year-over-year, giving us a great opportunity to capitalize on the positive housing fundamentals in our markets.\nWe have several new communities scheduled to open in the coming quarters, which Bob will give in more detail in a moment.\nWhile we expect the current supply chain issues to persist for the foreseeable future, we also expect the current demand drivers to remain in place as well, giving us a great opportunity to finish the year on a high note and build on our success in 2022.\nAs a result, we are optimistic about the future of our company.\nDuring the third quarter, we generated net income of $146 million or $1.99 per diluted share, representing a 48% increase from the third quarter of 2020.\nHome sale revenues grew 26% year-over-year to $1.26 billion, while gross margin from home sales improved by 300 basis points.\nThe growth in home sale revenues and margin expansion resulted in a 62% increase in pre-tax income from our homebuilding operations to $165.2 million.\nAs Larry mentioned, we accelerated the retirement of $123.6 million of our unsecured notes due in January 2024 through a cash tender offer during the quarter.\nThe retirement resulted in a loss of $12.2 million, which is included in homebuilding pre-tax income.\nFinancial services pre-tax income increased 13% year-over-year to $27.5 million.\nAll of our financial services companies benefited from the increased volume of our homebuilding operations during the quarter.\nOur mortgage company also benefited from a $3.5 million gain recognized on the sale of conventional mortgage servicing rights during the period.\nThis increase was mostly offset by increased competition in the primary mortgage market, increased compensation-related costs and a temporary decrease in our capture rate.\nOur tax rate increased from 21.5% to 24.3% for the 2021 third quarter.\nThe increase in rate was primarily due to a decrease in tax windfalls recognized upon the vesting and exercise of equity awards, which was partially offset by a year-over-year increase in home energy tax credits.\nFor the remainder of the year, we currently estimate an effective tax rate of approximately 24.5%, excluding any discrete items and not accounting for any potential changes in tax rates or policy.\nHomes delivered increased 13% year-over-year to 2,419 during the third quarter, driven by an increase in the number of homes we had in backlog to start the quarter.\nOur ability to convert backlog and closings continues to be negatively impacted by increasing permitting times and labor and material shortages.\nAs a result, we saw cycle times increase by approximately two weeks sequentially from the second to third quarter of 2021.\nThe number of homes delivered during the quarter was below our previously estimated range of 2,500 to 2,700 units and was a direct result of the extended cycle times that we experienced.\nThe average selling price of homes delivered during the quarter increased 12% to about $520,000.\nThe increase was a result of price increases implemented across the majority of our communities over the past 12 months.\nFor the fourth quarter, we are anticipating home deliveries to reach between 27,300 units, with an average selling price between $530,000 and $540,000.\nGross margin from home sales improved by 300 basis points year-over-year to 23.5%.\nWe experienced improved gross margin from home sales across each of our segments, with our West segment showing the largest increase year-over-year as well as having the highest absolute level overall.\nThese improvements were driven by price increases implemented across nearly all of our communities over the past year, which have been partially offset by increased building material and labor costs.\nWhile we have seen lumber prices decrease in recent months, we continue to experience cost pressures on other building materials and labor costs.\nGross margin from home sales for the 2021 of fourth quarter is expected to increase to between 23.5% and 24%, assuming no impairments or warranty adjustments.\nOur total dollar SG&A expense for the 2021 third quarter increased by $16.5 million from the 2020 third quarter, driven primarily by increased general and administrative expenses.\nOur SG&A expense as a percentage of home sale revenues decreased 80 basis points year-over-year to 9.6%.\nGeneral and administrative expenses totaled $59.9 million during the third quarter due to increases in compensation related expenses, including increased bonus and stock-based compensation accruals.\nWe currently estimate that our general and administrative expenses will grow to between $65 million and $70 million for the fourth quarter of 2021.\nMarketing expenses increased $900,000 as a result of increased master marketing fees relating to increased closings volume.\nHowever, marketing expenses as a percentage of home sale revenues were down 50 basis points year-over-year as we were able to continue limiting advertising expenses in this high demand environment.\nOur commission expense as a percentage of home sale revenues decreased 60 basis points year-over-year as we have taken steps to control these costs during this period of strong demand for new housing.\nThe dollar value of our net orders decreased 21% year-over-year to $1.31 billion due to a 32% decrease in unit net orders.\nThis decrease was driven by a 33% year-over-year reduction in our monthly sales absorption pace.\nOur sales absorption pace for the third quarter of 2021 was a healthy 4.1 orders per community per month.\nWhile this represented a year-over-year decrease from the third quarter of 2020, it was a 14% increase from the pre pandemic levels experienced in the third quarter of 2019.\nThe year-over-year decrease in our sales absorption pace was due to the return of more normal seasonal patterns as well as our efforts to moderate sales activity, as we have mentioned on prior calls.\nOverall, we believe demand levels remained highly favorable during the third quarter.\nWere also pleased with the start of the fourth quarter from a demand standpoint based on the net orders weve seen to this point in October.\nThe average selling price of our net orders increased 16% year-over-year as we have raised prices across most of our communities over the past 12 months.\nWhile price increases slowed during the third quarter, pricing remained firm and continues to more than offset the higher input costs related to building materials and labor.\nLooking at backlog metrics on slide 11.\nThe dollar value of homes in backlog increased 38% year-over-year despite the decrease in third quarter activity.\nWhile cycle times remain the biggest challenge to our backlog conversion efforts, we believe we are well positioned entering the fourth quarter with construction started on 84% of our backlog and 42% at frame stage of construction or beyond.\nWe approved 5,892 lots for acquisition during the quarter, representing a 54% increase year-over-year.\nThis brings the total number of lots approved for acquisition during the year to 15,978 lots and marks the third time in the last four quarters, our approval activity exceeded to 5,000 lots.\nWe closed on 3,214 lots during the third quarter, which included about a 100 finished lots within our first subdivision in Austin, Texas.\nTotal land acquisition and development spend for the quarter was $420 million.\nAs a result of our land acquisition and approval activity, our total lot supply to end the quarter was nearly 37,000 lots, representing a 37% increase from the prior year quarter.\nIn addition, 34% of our lot supply was controlled via option as of period end.\nWe believe that this lot supply, combined with the continued lot approval and acquisition activity, provides us with a solid platform for growth in 2022 and beyond.\nOur active subdivision count was at 203 to end the quarter, up 5% from 194 a year ago.\nWe saw an increased number of active subdivisions in both the East and West segments with the East segment experiencing the largest increase.\nActive subdivisions in the Mountain segment were down 8% year-over-year.\nWere actively selling out of our first Boise subdivision as of quarter end.\nAnd with the acquisition of finished lots in Austin during the third quarter, we expect to be open for sales in this new market by the end of the year.\nNew community openings remain challenging in the current environment due to delays in municipal approvals and the strain on the available resources to complete development work.\nAlso, we have a number of legacy communities on the verge of closing out, as you can see from the number of soon to be inactive communities as of September 30, 2021.\nThis indicates that our active subdivision account could decrease over the next few months as we work to open and begin selling out of our new communities.\nDue to this potential short-term volatility in our active subdivision count, we are not reiterating any year-end guidance for this metric.\nHowever, we do expect to see an increase from our 203 active communities at the end of the third quarter before we reached the end of the 2022 first quarter in time for the spring selling season.\nWhile we expect further active subdivision growth from that point through the end of 2022, we will wait to provide further guidance until we have more visibility as to the timing of these community openings.\nIn summary, we are pleased with our financial results for the third quarter and believe the housing backdrop remains favorable.\nWhile we expect the current supply chain issues to continue in the near term, our current backlog and land position have us poised for continued growth into 2022.\nOur financial position remains strong with over $2 billion of total liquidity and a net debt-to-capital ratio of 23.7% as of quarter end, providing us with the ability to continue to grow our business and invest in our new markets.\nWithout their efforts, we would not be in the position we are today, poised to deliver more than 10,000 new homes to our homebuyers for the 2021 full year.\n",
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"content": "compname says q3 home sale revenue up 26% to $1.26 bln.\nqtrly home sale revenue increased 26% to $1.26 billion from $1 billion.\nqtrly average selling price of deliveries up 12% to $519,900.\nqtrly dollar value of net new orders decreased 21% to $1.30 billion from $1.65 billion.\nq3 earnings per share $1.99.\nquarter-end dollar value of ending backlog up 38% to $4.24 billion from $3.08 billion.\nsees projected home deliveries for 2021 q4 between 2,700 and 3,000.\nsees average selling price for 2021 q4 unit deliveries between $530,000 and $540,000.\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: At this time, all participants are in a listen-only mode.\nPlease note that this conference is being recorded and will be available for replay.\nFor information on how to access the replay, please visit our website at mdcholdings.com.\nThese, and other factors, that could impact the company's actual performance are set forth in the company's 2020 Form 10-K, which is expected to be filed with the SEC today.\nIt should also be noted that SEC Regulation G requires that certain information accompany the use of non-GAAP financial measures.\nMDC delivered strong results in the fourth quarter of 2020, highlighted by fully diluted earnings per share of $2.19, representing a 54% increase over the fourth quarter of 2019.\nHome sales revenues increased 10% year-over-year, and home sales gross margin expanded 350 basis points to 22%.\nWe continue to experience robust demand across our homebuilding operations as the dollar value of our net new orders increased 92% for the quarter on a sales pace of 4.7 homes per community per month.\nThe strong order activity resulted in backlog value of $3.26 billion, our largest year-end backlog ever.\nThe size and quality of our backlog gives us great visibility into 2021 and allows us to enter the new year in a position of strength.\nAdding to our communities' position of strength is our current financial condition.\nIn December, we successfully increased the size of our unsecured revolving credit facility from $1 billion to $1.2 billion.\nShortly thereafter, we issued $350 million of senior notes due in 2031 with a coupon of 2.5%, the lowest rate ever achieved by a non-investment grade company for 10-year issuance.\nThese two transactions greatly increased our liquidity position and improved our cost of capital putting us in a great position to grow our presence in our existing markets, and potentially expand into new ones.\nWith respect to new markets, I'm pleased to announce that MDC has made the strategic decision to establish a presence in Boise, Idaho.\nBoise exhibits many of the characteristics we look for in a new market, such as a diverse and growing local economy, rising income levels and a strong population of buyers.\nWe recently signed our first lot deal in the market and expect to deliver our first home by the end of 2021.\nBoise presents a great opportunity for our company and we are actively seeking similar expansion opportunities in other parts of the country.\nOur goal has been to design innovative homes that allow for personalization with an eye toward better affordability and the response has been tremendous.\nSeveral of our operation in places like California, Florida and the Pacific Northwest have reached volume levels that allow for better economics of scale, which has translated into better margin contributions for those areas, while our established positions in places like the Mountain West continues to generate strong margins and returns for our company.\nIn terms of broader macroeconomic factors that affect our industry, we continue to see an extremely positive landscape as we enter the new year.\nWe believe demand will remain in place after the threat from the virus subsides due to the sheer size of buying population and the structural shift that occurred as a result of the pandemic, which place a greater emphasis on now and where to live.\nIn summary, the fourth quarter of 2020 capped a remarkable year for our company, culminating in a 54% increase in our annual net income as compared to 2019.\nWe responded to the challenges brought about by the pandemic with heightened safety protocols, modified sales techniques and innovative operational procedures, all of which contributed to the strong rebound we experienced in the back half of the year.\nThese changes to our business practice required the coordinated efforts of all of our team members and I could not be more proud of how they performed.\n2020 provided to be a challenging year for our country and economy, but I'm optimistic about the direction of both in the new year.\nOur build-to-order business model and more affordable product focus have proven to be ideally situated for the current market conditions, and I believe this will be true going forward.\nOn behalf of the company, I would like to extend my sincere gratitude to our employees and sub-contractors for making 2020 an incredibly successful year in spite of the immense challenges we faced.\nWe ended 2020 with another strong quarter as pre-tax income from our homebuilding operations increased $48.9 million or 52% from the prior year quarter to $142.3 million.\nAs Larry mentioned, this increase was driven mostly by higher gross margins.\nTo a lesser extent, our homebuilding profits also benefited from improved home sale revenues, which increased by 10% to $1.18 billion.\nOur financial services pre-tax income increased $10.2 million or 54% to $29 million.\nThe increase was driven by our mortgage business, which continues to benefit from the increased volume generated by our homebuilding operations.\nOur mortgage business has further benefited from year-over-year improvements in capture rate and profit margin on loans originated.\nAs a result, overall net income increased 59% to $147.5 million or $2.19 per diluted share for the fourth quarter of 2020.\nOur tax rate decreased from 17.5% to 13.9% for the 2020 fourth quarter.\nThe decrease in rate was primarily due to a larger benefit from federal energy efficient home tax credits in the 2020 fourth quarter due to an increase in the estimated amount of energy tax credits to be received.\nFor 2021, I would roughly estimate an effective tax rate of 24%, excluding any discrete items, and not accounting for any potential changes in tax rates or policy.\nTurning to Slide 6.\nHomes delivered increased 7% year-over-year to 2,564, driven by an increase in the number of homes, we had in backlog to start the quarter.\nBacklog conversion for the quarter was significantly lower than the fourth quarter of 2019 as a result of the considerable year-over-year increase in net orders during the back half of 2020, most of which remained in backlog as of year-end.\nThe average selling price of homes delivered during the quarter increased 2% to about $461,000 and 61% of the units we closed were a part of our more affordable collections.\nWe are anticipating home deliveries for the first quarter of 2021 to reach between 2,200 and 2,400 units.\nThe corresponding backlog conversion will be lower than the first quarter of 2020 as a result of the strong year-over-year increase in orders during the 2020 fourth quarter and, to a degree, construction delays we are experiencing in certain markets as a result of the pandemic.\nWe expect the average selling price for 2021 first quarter deliveries to be between $470,000 and $480,000.\nGross margin for home sales improved by 350 basis points year-over-year to 22%, which is our best gross margin in over a decade.\nWe experienced improved gross margin from home sales across each of our segments on both build-to-order and spec home deliveries, driven by price increases implemented across nearly all of our communities over the past 12 months.\nHome deliveries in the first quarter of 2021 will be negatively impacted by the lumber price increases experienced in the latter half of 2020.\nAs a result, the gross margin for home sales for the 2021 first quarter is expected to be approximately 21.5% assuming no impairments and no warranty adjustments.\nThis would still be 150 [Phonetic] basis points higher than the prior year.\nAdditionally, we currently expect that gross margin for the remainder of the year will improve from our 21.5% estimate for Q1.\nOur total dollar SG&A expense for the 2020 fourth quarter increased $12.8 million from the 2019 fourth quarter.\nGeneral and administrative expenses increased $7.1 million due to an increase in stock-based compensation expense related to performance-based awards, consulting fees related to energy tax credits recognized during the quarter, and a $2.2 million charitable contribution approved by our Board of Directors during the quarter.\nThe increase in marketing and commission expenses was due to variable selling and marketing expenses that increased in line with the 10% increase in home sale revenues during the period.\nLooking forward to the first quarter of 2021, we currently estimate our general and administrative expense to be approximately $55 million, which is a slight increase from what we just recognized in the fourth quarter.\nThis increase is primarily due to increased headcount as we continue to prepare for growth in 2021.\nIn the fourth quarter alone, we saw a 5% increase in our headcount.\nAs always, our actual results for the first quarter may differ from our estimate for a variety of reasons, such as changes in the amounts or timing of various accruals.\nLet's take a look at Slide 9.\nThe dollar value of our net orders increased 92% year-over-year to $1.32 billion and unit net orders increased by 72%, driven by a 67% increase in our monthly absorption rate to 4.7.\nThe average selling price of our net orders increased by 12% year-over-year, driven by price increases implemented over the past 12 months.\nDemand was broad-based from both a geographical and product perspective during the quarter.\nWe experienced significant year-over-year increases in our absorption pace in each of our markets, as well as on both more affordable and traditional product types.\nOur net new orders remained strong through each month of the fourth quarter and were well above the prior year.\nIn addition, our cancellation rates were also lower than last year.\nSales through January also remained strong and are significantly above the prior year.\nHowever, we do not expect to see the typical seasonal jump in sales when comparing the first quarter of 2021 to the fourth quarter of 2020 due to the unseasonably high orders that occurred in the fourth quarter.\nMoving on to backlog on Slide 10.\nAs a result of the strong sales we just discussed, we ended the quarter with an estimated sales value for our homes in backlog of $3.26 billion, which was up 87% year-over-year and, as Larry mentioned, was our highest year-end backlog dollar value ever.\nThe average selling price of homes in backlog increased 7% due to price increases implemented over the past 12 months, decreased incentives and a shift in mix to California.\nThese factors were slightly offset by a shift in mix to our lower-priced communities consistent with our ongoing strategic focus on our more affordable home plan.\nAs Bob just previously noted, backlog conversion for the first quarter of 2021 will be lower than the first quarter of 2020.\nThis is largely the result of the construction status of our homes in backlog as of year-end.\nOnly 38% of homes in backlog at December 31, 2020 had reached the frame stage of construction compared to 52% of homes in backlog at December 31, 2019.\nWe ended 2020 with 194 active subdivisions, up 5% from 185 at the end of 2019.\nFor 2021, we are currently targeting an active subdivision increase of at least 10% year-over-year.\nNaturally, our actual active subdivision count to end 2021 may differ from this target for a variety of reasons, such as the timing of community close-outs and delays opening new communities due to the impact of the pandemic.\nWe acquired 4,976 lots during the quarter, a 51% increase from the prior year, reflecting our confidence in market conditions and our focus on continued growth for our company.\nWe spent $359 million on land acquisition and $124 million on land development during the period, making our total land spend $483 million.\nAs a result of our recent land acquisitions, our total lot supply to end the year was 8% higher than at the end of 2020, nearly reaching the 30,000 lot mark.\nWe believe that this lot supply, combined with continued lot approval and acquisition activity, provides us with a solid platform to meet our growth targets for 2021.\nIn summary, while 2020 presented many challenges, the resilience of the housing market afforded us the opportunity to deliver one of our strongest years ever.\nOur build-to-order model and focus on affordability continue to prove successful during these unprecedented times.\nLooking forward to 2021, we believe it has the potential to be an even stronger year based on the dollar value and gross margin of our current backlog and the ongoing strength of demand.\nTo that end, our current target for home deliveries in 2021 is between 10,000 and 11,000 units.\nFrom a strategic perspective, we remain focused on continuing to expand our operating margin, as well as growing our homebuilding operations in 2021.\nAs previously mentioned, we are targeting a 10% increase in active subdivisions during the year, and we are expanding our geographic footprint with the addition of the Boise market.\nIn anticipation of this growth, we increased our liquidity to roughly $1.7 billion at the end of the year and further enhanced that liquidity with our $350 million senior note issuance in January.\nEven with a solid balance sheet and a strong demand environment, risk continue to exist that could impact the execution of our strategic initiatives for 2021.\nThese risks will be closely monitored as we work to grow our company and the safety of our employees, subcontractors and customers will remain a top priority.\nLast week, we were pleased to announce that our Board of Directors declared a $0.40 per share cash dividend and a special 8% stock dividend.\nThis demonstrates our continued commitment to rewarding our shareholders for their ongoing support.\n",
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"content": "q4 earnings per share $2.19.\nqtrly home sale revenues increased 10% to $1.18 billion from $1.07 billion.\nqtrly average selling price of deliveries up 2% to $461,000.\nqtrly dollar value of net new orders increased 92% to $1.32 billion from $684.9 million.\nbacklog dollar value at december 31, 2020 up 87% year-over-year to $3.26 billion.\nsees full year 2021 home deliveries between 10,000 and 11,000.\nsees home deliveries for 2021 q1 between 2,200 and 2,400.\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 felt the short-term impacts of omicron in January, particularly in the U.S., causing our Q3 revenue to fall short of our expectations.\nThe COVID resurgence affected not only procedure volumes but also created acute periods of worker absenteeism with our customers, suppliers, and in our own operations and field teams.\nNow that said, COVID infections in the U.S. are declining.\nAvailable hospital ICU capacity is increasing and procedure volumes are picking up.\nWhile some of the impacts from the pandemic, like inflation, supply chain issues, and healthcare worker shortages will linger, we do expect that our markets, our customers, and our industry are on the path to recovery.\nOver the last 18 months, we've made significant changes to our operating model, moving to 20 focused operating units as well as making major enhancements to our culture and incentives.\nThese changes have improved our pace of innovation and our competitiveness, as evidenced by recent product filings and approvals that came faster than expected.\nAnd we're not finished driving change.\nWe're accelerating improvements to our global supply chain and operations, leveraging our scale to further improve quality, increase product availability, and reduce costs.\nIn addition, we've enhanced our portfolio management and capital allocation processes.\nOur new operating model is giving us line of sight into what is required to compete and win over the long term in each of our businesses.\nAs a result, we're looking at our portfolio with a more critical eye, with a focus on growth, and creating shareholder value.\nI'd be surprised if there weren't changes over the coming fiscal year, but I don't know yet if they will be smaller or more significant.\nNow let's look at our third quarter results, starting with our market share performance.\nNow market share is an important metric and a reflection of the culture and incentive changes that we're making in the company.\nAbout 60% of our businesses held or won share in the last calendar quarter.\nWhile that's down slightly from last quarter due to some supply constraints and where certain businesses are in their product cycles, it is a significant improvement from where Medtronic was just 18 months ago.\nSo starting with our cardiovascular portfolio.\nIn cardiac rhythm management, one of our largest businesses, we continue to build on our category leadership, adding over 1.5 points of share.\nWe're winning share in both high and low power devices.\nAnd we recently launched our Micra AV leadless pacemaker in Japan and Micra VR in China, resulting in international Micra growth of over 50% in Q3.\nIn Peripheral Vascular Health, we won about a point of share with strong growth in our Abre deep venous stents and venous seal closure system.\nAnd in Cardiac Surgery, we gained over a point of share on the strength of our extracorporeal life support products.\nIn our medical surgical portfolio, we estimate we gained share in GI, driven by momentum from the recently launched Emprint HP Generator and our Beacon endoscopic ultrasound franchise.\nIn Respiratory Interventions, despite the year-over-year headwind as ventilator sales continue to return to pre-pandemic levels, we estimate we gained about 400 basis points of share.\nWe won share in premium ventilation with our Puritan Bennett 980, in video laryngoscopes with our McGRATH MAC, and in core airways with our Taperguard endotracheal tubes.\nIn our neuroscience portfolio, we increased our market share in Cranial, Spinal technologies.\nWe're launching new spine implants that enhance the overall value of our ecosystem of preoperative planning software, imaging, navigation, and robotic systems as well as powered surgical instruments, all of which are transforming care in spine surgery.\nIn Neuromodulation, we have great momentum from new products in both Pain Stim and Brain Modulation.\nIn Pain Stim, despite the headwinds from omicron, we estimate we gained over a point of share, driven by both our Intellis with DTM technology and Vanta recharge-free systems.\nAnd in Brain Modulation, while we continue to face headwinds from replacement devices, our business grew 15% on strong adoption of our Percept Neurostimulator with BrainSense technology, paired with our SenSight directional lead.\nMedtronic is the only company with sensing capabilities on our deep brain stimulators, which drove about 10 points of new implant share and over a point of overall DBS share in Q3, and we expect this momentum to continue.\nAnother business with momentum is our Neurovascular business, where we are back to winning share, picking up about two points this quarter.\nWe're seeing strength from our pipeline family of flow diverters for treating intracranial aneurysms.\nOur flow diversion launches in Japan, CE Mark countries, and the United States, coupled with broader portfolio growth in China, propelled neurovascular to 12% growth this quarter.\nNow while the majority of our businesses are winning share, we have some businesses that lost share in Q3 where we are focused on improving our performance.\nIn cardiac diagnostics, despite year-over-year share loss, we gained share sequentially for the first time in many quarters.\nWe've made good progress increasing our manufacturing capacity for our LINQ II insertable cardiac monitor, and we began our rollout of our Accurythm artificial intelligence algorithms, which were just enabled for all LINQ II patients in the U.S.\nWe expect ongoing supply improvement and additional AI detection algorithms along with new indications to expand the market and drive growth.\nIn our structural heart and aortic business, we lost share in Aortic due to supply constraints and continued pressure from our Valiant Navion recall and competitive launches.\nAt the same time, though, we maintained our TAVR share in Q3, growing in the mid-teens.\nIn our surgical innovations business, we lost a little over 0.5 points of share overall due to acute resin shortage that impacted our flagship LigaSure vessel sealing portfolio.\nThis was partially offset by increased share in advanced stapling given strong market adoption of our Tri-Staple reinforced reloads as well as share gains in hernia and sutures.\nThe good news here is that our teams have improved our resin supply, and we expect to be able to meet demand in Q4.\nInpatient monitoring, we estimate we lost a few points of share due to a difficult comparison from the strength we had last year in pulse oximetry and capnography monitor sales.\nHowever, our share has been relatively consistent for the past four quarters.\nIn pelvic health, procedures slowed this past quarter and we lost some share.\nWe expect this market to recover, and we are well-positioned to compete.\nIn ENT, we lost share for the first time in a long time, given some temporary supply chain disruptions that we expect to have resolved going forward.\nAnd in diabetes, we continue to lose share, predominantly in the U.S. Look, we're extremely focused on resolving our warning letter and bringing new products to the U.S. market although timing is difficult to predict.\nIn December, CMS expanded coverage for our CGM sensors, including those integrated with our insulin pumps, and we're pleased that this will take effect for Medicare patients at the end of this month.\nIn the international markets, we launched the 770G in Japan last month, making it the first hybrid closed loop system available in that country.\nAnd in Europe, we continue to see success and strong adoption of our 780G with the Guardian 4 sensor.\nNext, let's turn to our product pipeline.\nWe've launched over 200 products in the U.S., Western Europe, Japan, and China in the last 12 months, and these are having an impact across our businesses.\nAt the same time, we continue to advance new technologies that are in development with increased investments in R&D.\nWe're expecting these investments to create new markets, disrupt existing ones, and accelerate the growth profile of Medtronic.\nNow starting with our cardiovascular portfolio.\nWe continue to make progress in cardiac rhythm Management on disrupting the ICD market with our Aurora extravascular ICD.\nOur U.S. pivotal study is fully enrolled.\nWe continue to expect CE Mark approval later this calendar year and U.S. approval next calendar year.\nOur EV ICD can both pace and shock without any leads inside the heart and veins.\nAnd it does this in a single device that is the same size as a traditional ICD.\nWe believe Aurora will accelerate adoption of EV ICDs and make this a $1 billion market by 2030.\nIn cardiac ablation solutions, we're advancing a number of technologies to become a leader in the $8 billion EP ablation market.\nWe're rolling out our DiamondTempt RF ablation system as well as our exclusive first-line paroxysmal AF treatment indication using our cryoablation system.\nWe also continue to make progress with our Anatomical PulseSelect PFA system, which has breakthrough device designation from the FDA.\nOur global pivotal trial completed enrollment back in November, and we're very excited about how our PFA system could disrupt the EP ablation market.\nLast month, we announced our intent to acquire Affera.\nAffera has several development programs underway, including a differentiated mapping and navigation system that closes a competitive gap in our product portfolio and a focal PFA system that is a separate and complementary platform to our anatomical PFA system.\nWe're looking forward to welcoming the Affera team into Medtronic.\nMoving to our Symplicity renal denervation procedure for hypertension.\nWe continue to enroll our ON MED study and expect to complete the six-month follow-up in the second half of this calendar year.\nWe'll then submit the data to the FDA as ON MED is the final piece of our submission to seek approval for Symplicity.\nAdding to our body of evidence, three-year data from our ON MED pilot study will be presented at the ACC scientific sessions in April.\nIn structural heart, we now expect to begin the limited U.S. market release of our Evolut FX valve in Q1, followed by a full market release later in fiscal '23.\nEvolut FX enhances ease-of-use improvements in deliverability, implant visibility, and deployment stability.\nIn China, we expect to launch our Evolut PRO valve this quarter, our first entry into this large and underpenetrated TAVR market.\nWe also continue to advance our transcatheter mitral and tricuspid development programs.\nIn our APOLLO pivotal trial for TMVR, we just had the first implant using our transfemoral delivery system, and we expect this new system to meaningfully accelerate patient enrollment.\nMoving to our medical surgical portfolio and our surgical robotics program, we've made progress improving our supply chain and manufacturing and remain focused on scaling production.\nAt the same time, we continue to add regulatory approvals and expand our limited market release, most recently in Canada, Australia, and Israel.\nAnd we intend to start our U.S. urology clinical trial soon.\nIn addition to uro and GYN cases, surgeons in Panama, Chile, and India are now performing general surgery procedures with Hugo, including advanced cases like colorectal and lower anterior resection surgeries.\nAnd we announced earlier this month the first Hugo procedures in Europe.\nIn diabetes, our MiniMed 780G insulin pump, combined with our Guardian 4 sensor, continue to be under active review with the FDA, with approval subject to our warning letter.\nWhen approved and launched in the U.S., we expect this system to be highly differentiated and accelerate growth in our diabetes business.\nWe continue to expect submission of our next-generation sensor Simplera to the FDA this quarter.\nSimplera is fully disposable, easy to apply and half the size of Guardian 4.\nFinally, we're making progress on multiple next-gen sensor and pump programs, including patch pumps, although we haven't disclosed details for competitive reasons.\nWhile it will take time, we expect the technology pipeline investments we're making will result in our diabetes business being accretive to total company growth and eventually grow with this important market.\nNow turning to our neuroscience portfolio.\nWe were pleased to receive FDA approval for our diabetic peripheral neuropathy indication for our Intellis and Vanta spinal cord stimulators last month.\nThis came following the FDA's rigorous review of our clinical submission and years earlier than we had previously communicated.\nThe approval represents the beginning of a multiyear market development process which we are uniquely suited to execute given our presence in both the pain stim and the diabetes markets.\nWe believe that DPN market opportunity will reach $300 million by FY '26, and with an annual TAM of up to $1.8 billion, making DPN for SCS one of the biggest market opportunities in med tech.\nIn addition to DPN, we also continue to make progress on expanding indications for SCS and to nonsurgical refractory back pain and upper limb and neck chronic pain.\nIf that was not enough for Pain Stim, we're also excited about our inceptive ECAPs closed-loop spinal cord stimulator which we submitted to the FDA late last year.\nWe expect inceptives closed-loop therapy that optimizes pain relief for patients to revolutionize the SCS market.\nFinally, in pelvic health, we're expecting FDA approval for our next-gen InterStim recharge-free device in the first half of this calendar year.\nWith its designed best-in-class battery, constant current, and full-body MRI compatibility at both 1.5 and 3 Tesla, we expect this device will extend our category leadership in sacral neuromodulation.\nOur third quarter organic revenue increased 2%.\nWhile we were tracking to our quarterly guidance in early January, the impacts from this latest wave of COVID affected our revenue in the last month of the quarter.\nDespite the challenging revenue, we controlled expenses and delivered adjusted earnings per share in line with our guidance and $0.01 ahead of consensus.\nFrom a geographic perspective, our U.S. revenue was flat, and non-U.S. developed markets grew 1%, given the impacts of omicron.\nOur emerging markets were relatively stronger, growing 7%, with strength in South Asia, Latin America and the Middle East, and Africa.\nConverting our earnings into strong free cash flow is a priority.\nOur year-to-date free cash flow was $4.3 billion, up 23% from last year, and we continue to target a full year conversion of 80% or greater.\nAnd we remain focused on allocating our capital to generate strong future growth and shareholder returns.\nWe are increasing our organic R&D investments broadly across the company to fuel the pipeline that Geoff walked through earlier, and we are supplementing this with attractive tuck-in acquisitions.\nSince the beginning of last fiscal year, we've announced eight acquisitions totaling over $3.2 billion in total consideration, including last month's acquisition of Affera in our cardiac ablation business.\nAt the same time, we're increasing our minority investments in companies that could become future acquisitions, as was the case with Affera.\nWe have a commitment to return more than 50% of our free cash flow to our shareholders, primarily through our attractive and growing dividend.\nWe are an S&P dividend aristocrat.\nAnd fiscal year to date, we paid over $2.5 billion in dividends to our shareholders.\nAnd finally, particularly in periods where we see share price dislocation, we look to execute opportunistic share repurchases, as was the case this quarter.\nFiscal year to date, we've repurchased over $1.1 billion of our stock.\nWhile procedure volumes are still impacted from omicron in the first few weeks of February, we are beginning to see improvement.\nOur outlook assumes continued procedure volume recovery through March and April.\nAnd we expect to be back to pre-COVID levels in most of our markets before the end of the fourth quarter.\nAssuming that holds, for the fourth quarter, we're comfortable with current Street consensus for our organic revenue growth of approximately 5.5%.\nAt recent foreign exchange rates, currency would be a headwind on fourth quarter revenue of approximately $185 million.\nBy segment, we would model cardiovascular at 7% to 8% growth, neuroscience at 2.5% to 3.5% growth, medical surgical at 7.5% to 8.5% growth, and diabetes down 6% to 7%, all on an organic basis.\nOn the bottom line, we expect fourth quarter non-GAAP diluted earnings per share in the range of $1.56 to $1.58, in line with current consensus.\nAnd at recent rates, we expect currency to have a flat to slightly positive impact on the bottom line.\nI am truly grateful for the perseverance that both healthcare workers and our employees have demonstrated to ensure patients receive our life-changing therapies around the world.\nBack to you, Geoff.\nFor the last few quarters, I've been closing by commenting on the progress the company is making in various areas of ESG, or environmental, social, and governance impacts.\nToday, I want to highlight that we recently released our global inclusion, diversity, and equity 2021 annual report entitled Zero Barriers.\nThe report shares how we are accelerating our efforts to remove barriers to opportunities by creating an inclusive work environment, doubling down or removing bias, and amplifying our impact in our local communities.\nOur commitments to ID&E and the UN sustainable development goals compel us to solve health and equities faster.\nSystemic socioeconomic, racial, geographic, and even generational factors all contribute to a person's ability or inability to achieve good health and reach their full potential as a contributing member of society.\nWe're committed to urgently addressing barriers to education, diagnosis, and treatment, as the global crisis of health and equity can be solved by accelerating access to healthcare technologies.\nOne such inequity is mortality from colorectal cancer.\nWhile colorectal is one of the most preventable cancers, low screening rates make it one of the deadliest, with mortality rates 40% higher for the black population in the United States.\nIn addition, Hispanic and Latino adults are more likely to be diagnosed in later stages of the disease when it's more difficult to treat.\nToday, I'm pleased to announce that Medtronic is collaborating with Amazon Web Services and the American Society for Gastrointestinal Endoscopy to place GI Genius modules at facilities that support low-income and underserved populations across the United States.\nOur GI Genius system improves the quality of colonoscopies using AI to assist physicians in detecting both precancerous and cancerous growth.\nIncreasing access to technology that can improve clinical outcomes through earlier and more accurate detection can provide a significant positive impact for communities most vulnerable to colorectal cancer.\nWe continue to look for creative solutions like this one to address health inequities.\nNow let me close on this note.\nWhile the pandemic and its associated impacts have affected our revenue in the past couple of quarters more than we expected, we haven't lost sight of the big picture.\nWe've made significant changes in the company, and we're strengthening our operations, supply chain, and global quality systems.\nWe're also laser-focused on capital deployment and portfolio management processes, with a deep commitment to creating shareholder value.\nAnd we have several exciting growth catalysts in our pipeline.\nWe expect to benefit as market procedures reaccelerate post omicron and as we lead in high-growth MedTech markets.\nWhile it's been a bumpier ride than I would have liked and we still have challenges to work through.\nI'm confident in our organization's ability to accelerate and sustain our growth profile over the long term to grow at or above our markets and, as we do so, create value for our stakeholders.\nAs a result of your efforts, we can fulfill the Medtronic mission: alleviating pain, restoring health, and extending life for millions of people around the world.\nNow let's move to Q&A.\n[Operator instructions] With that, Win, can you please give the instructions for asking a question.\n",
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"content": "sees q4 non-gaap earnings per share $1.56 to $1.58.\nissues q4 revenue and earnings per share guidance.\nqtrly revenue of $7.8 billion was flat year-over-year as reported and grew 2% organic.\nqtrly cardiovascular revenue of $2.745 billion increased 1% as reported and 3% organic.\nqtrly cranial & spinal technologies revenue of $1.102 billion increased 2% as reported and 3% organic.\nexpects q4 organic revenue growth of approximately 5.5%.\nqtrly neuroscience revenue of $2.144 billion increased 1% as reported and 2% organic.\nq3 revenue results reflect unfavorable market impact of covid-19 and health system labor shortages on medical device procedure volumes.\nqtrly medical surgical revenue of $2.290 billion decreased 1% as reported and increased 1% organic.\nimpact of covid-19 resurgence on healthcare procedure volumes, particularly in u.s., peaked in final weeks of our quarter in january.\nexpect healthcare procedures to reaccelerate post-omicron.\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: mdu.com, under the Investors tab.\nLeading our quarterly earnings discussion today are Dave Goodin, President and CEO of MDU Resources and myself.\nAlthough the company believes that its expectations and beliefs are based on reasonable assumptions, actual results may differ materially.\nFor second quarter of 2021, we delivered earnings of $100.2 million or $0.50 per share compared to second quarter 2020 earnings of $99.7 million or also $0.50 per share.\nDuring the quarter, our results were impacted by higher stock-based compensation and healthcare costs of approximately $4.2 million after tax.\nFurther impacting our second quarter consolidated results was a $5.4 million lower investment returns on certain benefit plans compared to the same quarter in 2020.\nWhile these items had an impact on the quarter's results, all of our operations performed very well throughout the first six months of the year, growing consolidated revenues by 3.5% and increasing earnings $27.5 million year-to-date.\nOur utility business are $9.6 million for the second quarter compared to earnings of $11.2 million in the second quarter of 2020.\nFor the Electric Utilities segment, reported earnings of $10.3 million for the quarter compared to $12.2 million for the same period in 2020.\nHigher operation and maintenance expense, largely the result of higher labor-related costs, including the increased stock-based compensation expense and healthcare costs, as we previously discussed, as well as increased generating station expenses drove the decrease in earnings.\nLower benefit plan investment returns also negatively impacted the results.\nPartially offsetting the decrease was higher adjusted gross margin driven by a 6.9% increase in retail sales volumes.\nSales volumes increased for industrial and commercial customers during the quarter and were offset in part by lower residential volumes as the impacts of the COVID-19 pandemic start to reverse and individuals are returning to work as businesses reopen.\nHigher demand revenues and higher revenues associated with transmission interconnect projects also had a positive impact on the adjusted gross margin.\nOur natural gas utility segment reported a seasonal loss of $700,000, improved from a seasonal loss of $1 million for the same period in 2020.\nAdjusted gross margin increased during the quarter from approved rate recovery and 2% customer growth.\nTransportation revenues also increased from higher volumes transported to the company's electric generation customers.\nPartially offsetting the decreased loss was higher operation and maintenance expense, primarily labor-related costs, as previously discussed, as well as lower returns on certain benefit plan investments.\nThe pipeline business had earnings of $9.2 million in the second quarter compared to $9 million in the second quarter of 2020.\nHigher nonregulated project revenues and increased allowance for funds used during construction were the primary drivers of the increase in earnings.\nPartially offsetting this was higher operation and maintenance expense relating to the previously measured increase in nonregulated projects as well as higher payroll.\nNow turning to the construction businesses.\nConstruction services reported record second quarter earnings of $28.9 million compared to the prior year's record of $27.9 million.\nRevenues increased 6% on a year-over-year basis to second quarter -- to a second quarter record of $525.6 million.\nDemand for construction services remains high for both the inside and outside specialty contracting.\nInside specialty contracting saw strong demand for commercial and industrial work, specifically in the manufacturing industry and outside contracting workloads increased with high demand from the utility industry.\nLower depreciation, depletion and amortization expense resulting from decreased intangible amortization related to prior acquisitions also contributed to the increase in earnings.\nOur construction materials business reported second quarter earnings of $51.4 million compared to the prior year's $53 million in the second quarter.\nRevenues increased 2% to $633.8 million.\nThe decrease in earnings was primarily the result of higher selling, general and administrative expenses from increased labor-related costs as we had previously discussed.\nLower returns on certain benefit plans also impacted the quarter.\nPartially offsetting these items was lower interest expense due to lower average interest rates.\nThat summarizes the financial highlights for the quarter.\nToday, I'll walk through each of our business lines to highlight some notable drivers in the quarter and go into greater detail about some of the organic growth items covered in yesterday's news release.\nStarting with our regulated energy delivery platform.\nWe now have approximately 1.15 million customers across our electric and natural gas utility businesses.\nAnd our utility employees remain focused on organic growth and infrastructure improvements that help to safely and efficiently serve our customers.\nWe continue to expect strong customer growth across our service territory, outpacing the national average and in the range between 1% and 2% compounded annually.\nThe electric utility finished the precommissioning -- decommissioning activities on the coal-fired Unit I at the Lewis & Clark generating station here in the second quarter and commenced decommissioning here in July.\nWe expect to retire Units I and II at Heskett Station near Mandan, North Dakota early next year, which are the last of the company's wholly owned coal-fired facilities.\nOur generation portfolio in regards to nameplate capacity prior to the commencement of the retirements -- these retirements was 48% coal and will decrease to 31% in 2023 upon completion of the proposed Heskett IV natural gas-fired peaking unit.\nOur natural gas utility, along with our pipeline business, WBI Energy, recently announced a project that will increase natural gas service to Wahpeton, North Dakota, while also being able to offer natural gas service for the first time to Kindred, North Dakota.\nThis project is driven by customer contracts requiring more firm natural gas supply that our current infrastructure can provide to Eastern North Dakota.\nThe project involves constructing approximately 60 miles of 12-inch pipeline from our existing facilities at Mapleton, North Dakota to Wahpeton.\nIt will add 20 million cubic feet per day of natural gas capacity and is expected to cost approximately $75 million.\nDepending on regulatory approvals, construction is expected to begin in early 2024 with the completion date later that year.\nSpeaking of our pipeline business, we're excited that in early July, WBI Energy received final FERC approval, allowing construction to begin on the North Bakken expansion project in Western North Dakota.\nThis $260 million project will add 250 million cubic feet of daily natural gas transportation capacity to our system, bringing WBI's total pipeline capacity to more than 2.4 Bcf per day, while helping to reduce natural gas flaring in the region and allowing Bakken producers to move natural gas to market.\nConstruction began here in mid-July.\nAnd with favorable weather during the construction season, we expect the project to be in service by end of this year.\nNow moving on to Construction.\nOur Construction Services Group had an outstanding second quarter as demand for both inside and outside specialty contracting remains very strong.\nCSG reported record second quarter revenues and earnings and an all-time record backlog now standing at $1.32 billion as of the end of June.\nBidding remains highly competitive in all areas, but we are confident that our relationships with existing customers, our skilled workforce and our high quality of service will aid in securing and executing on profitable projects.\nAs a reminder, revenue guidance at this business for 2021 continues to be in the range of $2.1 billion to $2.3 billion, with margins comparable to or slightly higher than 2020 levels.\nAnd finally, at our construction materials business, while earnings were down slightly year-over-year, Knife River is operating at near-record levels, falling just short of the prior year's record second quarter earnings while continuing to produce record revenues.\nDemand and pricing for aggregates and ready-mix concrete is strong across a number of markets.\nConstruction materials reported backlog at the end of the quarter at $912 million, an increase of over 4% from the prior year.\nRevenue guidance for this business is also in the range of $2.1 billion to $2.3 billion, with margins comparable to our 2020 levels.\nWe remain optimistic about our construction businesses and continue to evaluate strategic acquisition opportunities that will enhance our existing footprint and appropriately expand our business, all while earning attractive returns on invested capital.\nAs mentioned in our news release yesterday, we feel very positive about the conversation surrounding infrastructure funding packages at the federal level as well as at various state levels across our footprint.\nWith combined construction backlog at an all-time record at $2.23 billion as of June 30, we believe we are well positioned to take advantage of these multiyear growth opportunities.\nWhile we believe these infrastructure proposals will provide additional opportunities to some of our core areas of business, such as surface transportation improvements, renewable energy, power grid modernization, broadband and much more, these infrastructure proposals are not included in our earnings per share guidance of $2 to $2.15 for this year of 2021 or in our 5-year capital investment plan for that matter as well.\nOverall, we are very pleased with our performance throughout the first half of the year.\nOur focus at MDU Resources has been and continues to be to produce significant long-term value as we execute on our business plans, our organic growth projects and our targeted acquisitions.\nWe continue to maintain a strong balance sheet, solid credit ratings and a good liquidity position.\nFor the last 83 consecutive years, we provided a competitive dividend for our shareholders and have been increasing it for the last 30 years.\nAs always, MDU Resources is committed to operating with integrity and a focus on safety while creating superior shareholder value, and we continue to act along our tag line of Building a Strong America.\n",
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"content": "mdu resources affirms earnings guidance.\nq2 earnings per share $0.50.\nsees fy 2021 earnings per share $2.00 to $2.15.\nsees fy construction materials revenues in range of $2.1 billion to $2.3 billion.\nsees fy construction services revenues in range of $2.1 billion to $2.3 billion.\nqtrly total operating revenues $1,423.7 million versus $1,362.9 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: mdu.com under the Investors tab.\nPresident and CEO, Dave Goodin and I will be leading today's discussion.\nAlthough the company believes that its expectations and beliefs are based on reasonable assumptions, actual results could differ materially.\nYesterday, we announced third quarter earnings of $139.3 million or $0.68 per share compared to third quarter 2020 earnings of $153.1 million or $0.76 per share.\nOn a year-to-date basis, we have earned $291.6 million or $1.44 per share compared to the prior year's $277.9 million or $1.39 per share.\nLet's look at some of the details by segment starting with the quarterly comparison of our construction operations.\nConstruction Services reported third quarter earnings of $23.1 million compared to the prior year's record third quarter earnings of $29.8 million.\nEBITDA at this business decreased $10.9 million from the same period in 2020 to $35.9 million.\nResults were negatively impacted by $5.5 million after-tax for changes in estimates on a construction contract during the quarter.\nThis business also had decreased margins from higher employee cost attributed to a shortage of available skilled labor.\nWhile we saw less storm recovery work this quarter in the prior year the demand for our general utility work has remained very strong.\nOur Construction Materials business reported earnings of $96.3 million for the third quarter, down from the prior year's $107.3 million.\nEBITDA decreased $13.4 million from the same period last year to $158.9 million.\nThe primary drivers behind the decreased earnings were lower asphalt and related product sales and margins, as well as lower contracting revenues.\nAsphalt products and contracting margins were impacted by an increase in asphalt oil and diesel fuel costs as well as less available highway paving work in certain regions when you compare that to the strong third quarter we experienced in 2020.\nPartially offsetting these impacts were lower selling, general administrative expense primarily from lower incentive accruals and lower benefit-related costs.\nTurning to our Regulated Energy Delivery business, our Combined Utility business reported net income of $5.2 million for the quarter compared to a net loss of $800,000 in the third quarter of 2020.\nThe Electric Utility segment reported strong third quarter earnings of $20.6 million compared to $16.8 million for the same period in 2020.\nWarmer weather helped drive an 11.1% increase in electric retail sales volumes, along with more businesses being open when compared to last year due to pandemic-related impacts.\nIncreased MISO revenues and transmission interconnect upgrades also had a positive impact on earnings of this business.\nOur natural gas segment reported an expected seasonal loss of $15.4 million for the quarter, which was a $2.2 million improvement from the previous year.\nHigher adjusted gross margin from rate relief and a 2% increase in retail and natural gas sales volumes drove the decreased loss, partially offset by higher O&M expense.\nThe pipeline business had earnings of $10.6 million in the third quarter compared to $8 million in the third quarter of 2020 primarily from higher AFUDC on the company's North Bakken Expansion project.\nAlso during the quarter MDU Resources experienced lower income tax benefits of approximately $4.6 million when compared to the third quarter of 2020 related to the timing of recognition of our consolidated annualized estimated tax rate.\nThat summarizes the key financial highlights from the quarter.\nThe strength of our two platform business model was evident during the third quarter as the strong results from our regulated energy delivery business helped offset some of the headwinds our construction businesses faced.\nMDU Resources remains well positioned for a strong end to 2021 and beyond.\nTo summarize activity by business unit, I'll start off with the regulated energy delivery businesses.\nThird quarter highlights for our utility operations include significantly high earnings on a year-over-year basis.\nThe utility continues to seek regulatory recovery for the costs associated with providing safe and reliable electric and natural gas service to our growing customer base.\nOn a combined basis, we saw 1.7% customer growth since the same period in 2020 and in the third quarter our natural gas utility refiled in the State of Washington for a $13.7 million annual rate increase that is currently pending.\nWe continue preparing to kick off construction in early 2020 on our Hesket Station Unit IV, which is expected to be in service in early 2023.\nAs a reminder, Hesket IV is a natural gas peaking unit that will aid in partially replacing the generation loss with the pending retirements of our coal-fired Hesket Station Units I and Unit II and the coal-fired Lewis & Clark Unit I that was retired in the first quarter of this year.\nAt our pipeline business also performed very well throughout the third quarter and reported earnings just shy of its third quarter 2018 record.\nConstruction is well underway on the North Bakken Expansion project.\nWe expect this fully subscribed project will be in service in early 2022 with capacity to transport 250 million cubic feet of natural gas per day for our customers.\nWhile a portion of the first year customer committed volumes are delayed one year as we discussed last time at this -- last year at this time, the project is well-positioned in the Bakken and can be readily expanded in the future for forecasted natural gas production growth.\nI recently had the opportunity to visit the construction site in North Western North Dakota with other members of our management team and I can tell you first hand, it was an impressive to see over 700 employees and contractors are safely and efficiently working together to complete this $260 million project.\nOur pipeline business also received FERC approval during the third quarter to use the pre-filing review process for its Wahpeton Expansion Project.\nThis project involves constructing approximately 60 miles of 12-inch pipeline from our existing facilities at Mapleton, North Dakota, extending to Wahpeton, North Dakota.\nIt will add 20 million cubic feet per day of natural gas capacity and is expected to cost approximately $75 million.\nDepending on regulatory approvals, construction is expected to begin in early 2024 with the completion date later that same year.\nWhen the North Bakken and Wahpeton expansion projects are complete, WBI's total system capacity will be more than 2.4 billion cubic feet of natural gas per day, which will help to reduce natural gas flaring in the region and allow producers to move more natural gas to markets.\nNow I'd like to move on to our construction platform.\nOur Construction Services Group results were impacted by changes in estimates on a construction project contract as well as higher labor costs for the quarter.\nIn 2021, the markets where Construction Services operates have experienced labor shortages that have in turn caused the increased employee-related costs as we continue to focus on the attraction and the retention of skilled specialized labor.\nStorm-related utility repair work was down compared to last year, but we continue to see strong demand overall for utility-related work.\nDemand for sales and leasing of the transmission line equipment that this business manufactures remains very high.\nCoupled with the strong capex budgets that we see across utility industry, our outlook for the outside specialty contracting remains positive.\nOpportunities for inside specialty contracting also remain high, especially in the commercial sector.\nConstruction Services ended the quarter with a backlog of $1.27 billion, down just slightly from the prior year's third year record of $1.28 billion.\nBidding remains competitive across the company's footprint and we do expect that our relationships with existing customers combined with our high quality of service and effective cost management will continue to aid us in securing profitable projects.\nWhile Construction Services had a very strong first half of the year, we have adjusted our revenue and margin guidance for this segment to reflect the impacts of here in the third quarter.\nWe now expect revenues to be in the range of $2.0 billion to $2.2 billion with margins comparable to 2020 levels.\nAnd finally our Construction Materials business; Knife River had a solid third quarter although down from last year's record third quarter earnings.\nThe primary impacts to earnings at this business were higher costs for asphalt oil and diesel fuel as commodity costs return to levels closer to what we saw in 2019.\nAs you may remember, decreased energy related cost pushed our asphalt and asphalt related product line margins to a near all-time high last year.\nKnife River has also been impacted by labor constraints largely for truck drivers as the COVID-19 pandemic amplified a prior and existing labor shortage.\nWhile labor challenges continue to impact many construction companies, Knife River is actively engaged in attracting the next generation to the construction industry.\nThe company is nearly finishing building a training center on a 270-acre track of property in the Pacific Northwest.\nThat is designed to enhance the skills of its current employees and those of partner organizations, as well as provide training to new comers to the industry.\nThe Knife River training center features and 80,000 square foot heated indoor arena for training on trucks and heavy equipment and an attach 16,000 square foot office with classroom and lab facility.\nThe center already is holding classes helping students build marketable skills through both classroom education and hands on experience.\nIn addition to developing individual talents, the goal of the center is to showcase construction as a true career of choice.\nThe facilities and classes are open to all construction companies beyond even Knife River.\nGiven the third quarter results we have adjusted our margin guidance for this business.\nRevenues are still expected to be in the range of $2.1 billion to $2.3 billion.\nHowever, margins are now projected to be slightly lower than those seen in 2020.\nKnife River backlog as of September 30 was $651.7 million, a 14% increase from the prior year's $571.3 million.\nWe are seeing more bidding opportunities in certain regions from strong economic conditions.\nWe have exceptional employees from entry-level to management level with a number of our employees spending their entire careers in the industry.\nI am confident that our management teams will continue to navigate through the labor challenges we are seeing.\nOver the last year and a half our teams have managed through numerous challenges presented by the COVID-19 pandemic and we continue to produce solid results.\nOverall MDU Resources and our companies had solid performance through the third quarter and while results did not reach the level we anticipated our operations continue to operate safely and effectively.\nBased on our results through the third quarter, we have adjusted our earnings per share guidance to now a range of $1.90 to $2.05 per share.\nLooking forward, both our Construction Materials and Construction Services businesses are well positioned to benefit from the allocation of the American Rescue Plan Act Funds along with a federal infrastructure plan.\nAs the bipartisan bill progresses, the focus on traditional infrastructure projects including the construction of roads and bridges, electric vehicle and broadband build out an upgraded power infrastructure will provide significant upside for our construction companies.\nAnd we'll also provide funding certainty for our customers and the coming years.\nWe also continue to seek acquisition opportunities that will enhance market share for our construction operations.\nAs always MDU Resources is committed to operating with integrity and with a focus on safety, while creating superior shareholder value as we continue providing essential services to our customers and delivering on our tag line of Building a Strong America.\nI appreciate your interest in and commitment to MDU Resources and ask now that we open the line to questions.\n",
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"content": "mdu resources adjusts guidance.\nsees fy earnings per share $1.90 to $2.05.\nq3 earnings per share $0.68.\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 today's remarks by management, we will be discussing non-GAAP financial metrics.\nI'm, of course, pleased with our results for the quarter, which were ahead of what we could have foreseen when we talked to you in February.\nOur patient volume strengthened through the quarter, ramping up to March and into April.\nI'm sure most of you saw the statistics published this week by the CDC, which indicated a sharp downturn in nationwide births in the fourth quarter of 2020.\nAs you know, we experienced the same trajectory at the end of last year, but to a significantly lesser degree.\nWe believe this reflects the typical profile of the hospitals where we provide neonatology services, which tend to be larger and bigger markets and with extensive labor and delivery services, including robust neonatal ICUs.\nIt may also reflect our geographic footprint, which has a heavier weighting in faster-growing states and markets.\nNow through into the first quarter and the roughly 400 hospitals that make up our own births statistics, this downward trajectory on price did not continue.\nAdjusting for the leap year, total births at the hospitals where we provide NICU services were essentially unchanged in Q1, which is better than what we reported in late 2020.\nLastly, while it's too early to make a final call, the improvement in our payer mix so far suggests that the volatility we experienced in November and December could have been more of an anomaly.\nTo give me one quick insight into how this rebound in trends impacted our results, our revenue for the quarter, excluding the CARES money we recorded, was over $30 million ahead of our internal expectations, which translated into meaningful year-over-year growth in adjusted EBITDA versus the expectation we shared with you in February that it could easily be down versus 2020.\nLooking ahead to our full year 2021 expectations, we expect that our 2021 adjusted EBITDA will be at or above $220 million.\nI said last quarter that we'll listen closely at our 2019 adjusted EBITDA of $265 million before the pandemic as the best available benchmark for how our business is recovering as well as backing out our estimate that the 2020 impact of the pandemic was roughly $40 million to $50 million.\nIf you look at the first quarter of 2021, our adjusted EBITDA of $45 million was still below the first quarter of 2019.\nAnd when we reported -- and that's when we also reported $50 million in adjusted EBITDA.\nAnd when you exclude the roughly $4 million in contribution from the CARES fund we recorded this quarter, we were roughly 18% below Q1 2019.\nSo while I'm certainly pleased with our results, it's still clear that we're not back to normal and, in fact, that our first quarter results reflect a similar run rate of COVID impact to what we experienced last year.\nI don't think this should be surprising, given the unique nature of the services we provide and the time led of this COVID impact and since much of our patient volume is based on pregnancies and trial birth timing.\nLastly, I'll add that our operating results for the past two quarters have been unusually volatile.\nSo we're also mindful of the still uncertain nature of how fast or consistently we'll see things recover.\nNow I've talked for a couple of quarters about my confidence that we can achieve a run rate of $270 million in adjusted EBITDA once we move past the impact of COVID-19 pandemic.\nOur results bolster our confidence that we will reach and exceed that run rate.\nBut I'm not confident just because we saw better trends over the past couple of months.\nI'm confident because we continue to push our operating plans and because we are reshaping how we do things here.\nOur singular focus at MEDNAX is to reinforce our position as the formal provider of women's and children's healthcare in the markets we serve and to do so efficiently and as the best partner we can be to the patients we serve as well as to the payers and health systems we work with.\nSo let me talk about what we've been focused on and speak to you about our core Pediatrix and Obstetrix.\nIt's all about the patient.\nSince MEDNAX first began caring for mothers and babies in their most challenging times about 40 years ago, the only absolute imperative that our founder and Board member, Dr. Medel, prescribed has been take great care of the patient.\nMuch of my time is spent with our clinicians, hospital partners, prospective partners, and of course, with my team.\nAnd I can attest to this unwavering commitment.\nThere's an unshakable conviction at MEDNAX that we always take great care of the patients, everything else will follow.\nNow that's easier said than done.\nTo take the best care of the patients, the mothers, babies and children required a lot of work and investment.\nFirst, we have to recruit and retain the finest physicians and clinicians.\nSecond, to do this, we try to provide more support for our affiliated clinicians than anyone else in our field.\nThird, we have a foremost independent research organization in our field of medicine, including complex newborn screenings.\none in four babies in the U.S. are patients of ours.\nWe have more knowledge and data in these areas than anyone else.\nAnd since our care is provided, of course, at a very local level, we have to provide more support for our affiliated clinicians in each market where we are than anyone else.\nFinally, we must always lead in our field.\nFor example, one of the most critical and active parts of our organization is our clinical support group.\nThis grew along with our full support team, make sure that we can continue to advance our skill and knowledge for the sake of our patients.\nIn two weeks, as we did even during the depth of the pandemic last year, we will be holding our Annual Medical Directors Meeting, where over 2,000 clinicians will actively participate and will learn from research, quality and clinical experts.\nOn top of these areas, we provide system support, recruiting support and every other kind of health to allow our clinicians to, again, take great care of the patients.\nThis long-winded tour of what we do is what I believe makes a de-choice among our nation's hospitals.\nThis is what makes us a lead employee, a partner to great medical brands.\nThis is what makes us the leading referral choice of physicians who want their patients to be in our care during their most difficult minutes, days and weeks.\nI've spoken about our drive to employ our practice data and dashboards to improve patient access.\nThis has and continues to be a paramount importance to us.\nIt's a steady drumbeat.\nWe want to be certain that a patient who needs care from one of our affiliated physicians gets that care as soon as possible.\nAnd we know as business leaders and owners the effect that this can have on volume.\nSo we're working with all of our practices to help them make scheduling as driven and efficient as we can, making sure their appointments are kept and immediately rescheduling no-shows, backfilling cancellations, using our scheduling tools to open additional slots staggering staff, outreach and referral management.\nThey're all part of this necessary equation.\nWe've already seen improvements in many practices, particularly in terms of higher percentages of kept appointments and reductions in no-shows.\nThis focus is also helping us to share best practices and create benchmarking capabilities so we can measure how effective our data has on practice scheduling in every measurable factor beyond just the post COVID recoveries we've recently seen.\nWe all know that a physical visit is not always needed or possible.\nAnd we will make our telehealth process fluid to help our patients and attract new patients.\nThis efficiency and effectiveness also applied to our growth plans.\nOur sales and business development team has reengineered a focused market-by-market approach that's driven by local intelligence and relationships.\nWe've also added resources to this team to make sure that we're highly integrated, not just in intensifying and winning new business but providing services quickly and seamlessly to the partners who put their trust in us and in pediatrics affiliated physicians.\nIn my view, we've lapped until now two other major ingredients to propel us forward.\nFirst, our patient relationships have not extended path to our subspecialty practices.\nWe need to make sure as well as we can that when a patient needs to see a physician in our network, they can do so as quickly as easily as possible.\nWe're moving forward in pediatric urgent care to develop plans for expansion of their business in markets where we have a significant presence, and we will expand with our brand name pediatrics.\nWe believe that providing pediatric primary and urgent care and patient-friendly dedicated clinics will allow us to give patients easier access to the exceptional specialists across our organization when they need it and will also help strengthen our relationships with the communities where we provide services and with our hospital partners.\nAnd maybe most significantly, we believe nobody knows how to care for babies, children and mothers like we do.\nAnd we want to fully extend the types of relationships we currently have.\nWhen a mother on trial want to find the best primary and urgent care practice, our answer should be and will be right here with us at Pediatrix.\nSecond, our brands, Pediatrix and Obstetrix, are not widely known.\nWe do believe our hospital partners know our name very well.\nAnd more importantly, they know that they can rely on us for what we can do for their patients.\nBut patients learn about us and count on us at their most challenging times, and then they move on.\nOur prospective practices and clinicians do not always think of who we are and what we provide as they cross their career paths.\nTo address this, and all of our work, we've launched a marketing campaign and its obvious key theme is trust.\nOur ads are going to be widespread, and they're completely authentic.\nThey feature only our own doctors who speak about why people should trust them and trust us.\nWe will continue to reach out to reinforce the very unique importance of Pediatrix and Obstetrix.\nIn hospitals, Pediatrix and Obstetrix mean trust, life saving, world-class clinicians.\nOur brand will be known to that.\nWe're working to ensure that MEDNAX can be the best possible partner to the patients we serve and to the physicians, payers and health systems we work with, all driven by our mission to take great care of the patient while, at the same time, taking great care of the business.\nThis isn't always easy, but we have a long track record of working hard to the best solution when we need to.\nI'll add some detail for our first quarter results, including some of the bench making versus 2019 that Mark mentioned and touch on some of our G&A expectations as we move through the second quarter.\nLastly, I'll touch on our financial position as it stands today.\nTurning to the quarter.\nAt the top line, our net revenue grew by $5.5 million or just over 1% year-over-year.\nWe recorded about $8 million in revenue from the provided relief fund established by the CARES Act during the quarter.\nOverall, same unit revenue increased by 2.5% year-over-year, or 3.6% after excluding the additional calendar day in February 2020 for the 2020 leap year.\nSame unit volumes declined 2.5% year-over-year or 1.4% adjusted for the leap year, compared to a 6.6% year-over-year decline in the 2020 fourth quarter.\nFirst, as Mark mentioned, patient volumes improved throughout the quarter, such that we saw same unit growth in March across all of our service lines with the exception of PICU and pediatric hospitalist services.\nSecond, our NICU days for the quarter as a whole were down slightly more than total births at the hospitals where we provide NICU coverage.\nThis reflects a modest year-over-year decline in average length of stay, partially offset by a year-over-year increase in the rate of admission.\nI know that the rate of admission was an area of interest for many of you following our fourth quarter release.\nSo I'll point out that in Q1, our admit rate reverted to its historical level after being modestly lower through the latter part of 2020.\nLastly, I'd like to address our 2021 volume relative to 2019.\nOur first quarter same unit volume was down approximately 3% as compared to the same period in 2019, with hospital-based volume down to a greater degree than office-based volume.\nWe'll continue to look at this two year comparison throughout this year since it's likely that comparisons to 2020 will not be relevant based on the pandemic-related disruptions we experienced last year.\nOn the pricing side, we had a couple of favorable items in addition to our usual rate growth, which has been typically in the 1% to 2% range based on managed care and administrative fee revenues.\nFirst, the cares revenue we recorded added little under 2% to our pricing growth.\nOn the expense side, our practice level, salary, wage and benefit expense was up by $2.7 million or about 85 basis points year-over-year.\nThis increase mostly reflects variable incentive compensation tied to practice level revenues, partially offset by a decrease in malpractice expense, which was higher in 2020.\nOur G&A expense was down nearly $1 million year-over-year, despite incurring approximately $5 million of costs related to transitional services we provided to the buyers of our anesthesia and radiology medical groups.\nThe reimbursement for those expenses is reflected in our investment and other income line item.\nSo there's minimal impact to our adjusted EBITDA, but those costs do inflate our reported G&A expense.\nIn the near term, I'll note that while the radiology PSA arrangement has concluded, we do anticipate that we'll continue providing services under our anesthesiology PSA, at least through the second quarter of this year.\nSo you should expect a similar expense and reimbursement dynamic in the second quarter.\nWe expect to wind down the Anesthesiology PSA services sometime after the second quarter, at which point we'll also be able to begin winding down the expenses we're incurring and move toward that future state expectation for G&A.\nAgain, there may be some period of time when we're still incurring some of those expenses but not being reimbursed for them.\nLastly, our balance sheet reflects our reduced leverage profile and strong liquidity position.\nWe ended the quarter with $270 million in cash and net debt of $730 million, implying leverage just north of three times.\nAnd I think we are ready to take questions.\n",
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"content": "q1 same store sales rose 2.5 percent.\nduring 2021 q1, mednax's operations were negatively impacted by reductions in patient volumes and revenue from covid-19 pandemic.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Revenue increased 79% to $394 million in the quarter, driven by growth in the number of independent OPTAVIA Coaches coupled with further improvements in coach productivity.\nThe number of active earning OPTAVIA Coaches reached approximately 59,200 at the end of the second quarter, a record high, that is 62% above the same quarter last year and up nearly 13% sequentially.\nRevenue per active earning OPTAVIA Coach was $6,662, another new record, up nearly 14% versus last year and 3% sequentially.\nThe continued productivity gains we are seeing has been fueled by the development of infrastructure and education to help coaches learn how to support a greater number of clients than has historically been possible.\nThis field-led training approach leverages social media and communication technology platforms to engage clients and support and train coaches.\nWe've been investing substantially in technology and digital processes, with an emphasis on creating unique infrastructure and education to help OPTAVIA Coaches leverage their time and talent to efficiently serve clients.\nWhile it's still very early, we can already see the benefits from these efforts based on the strong trends in coach level productivity.\nOur digital product teams have been developing two apps.\nThe first is the OPTAVIA app, which primarily targets clients and features lean and green recipes, self-service options related to OPTAVIA Premier orders and returns and other key information to stay engaged.\nThe OPTAVIA app went live in April for coaches and in July for clients.\nThe second is the Connect App, which is for coaches on the go, who need data and insights to help them manage their business efficiently.\nThe beta version of the Connect app went live in April and is currently being utilized by nearly one-third of coaches with a broader rollout expected over the balance of the year.\nIn addition, to our proprietary apps, OPTAVIA Coaches continue to refine our social media and other communication platform to manage their business to drive deeper connections to serve existing customers to attract new clients.\nIt's clear that interest in health and wellness across the board continues to be extremely strong.\nA recent study of consumer health priorities and motivators commissioned by Medifast found that 93% of U.S. adults of health and wellness goals and 84% are actively working toward achieving them.\n2/3 of Americans say the biggest motivator for staying consistent with health and wellness goals is feeling good mentally and physically, defined by having more energy and reducing stress and anxiety.\nOPTAVIA's unique model has proven effectiveness in helping people achieve their individual goals around health and wellness and the resonance of this model has demonstrated clearly results we've announced today.\nAs we drive further demand through a growing number of coaches, it's important that we continue to develop our supply chain capabilities to be able to meet the needs of the field.\nWe achieved our $2 billion manufacturing capacity target in the second quarter, six months ahead of the original goal through the expansion of relationships with co-manufacturers.\nGiven our growth trajectory and outlook for the future, this additional capacity is crucial to meeting the needs of our coaches and clients as well as continuing to deliver strong returns for shareholders.\nScaling our fulfillment capacity to an equivalent level is also in process, with an expected completion date in the third quarter of this year, three months ahead of the original goal.\nWe added an internally managed fulfillment center in April 2021 and for partnerships with 3PL companies to ensure that we are able to efficiently move everything through our supply chain network.\nThere were no promotions in the quarter as the strength of our coach-based model and field-led training continue to drive strong engagement and activation.\nImportantly, since we were lapping the essential start promotion from last year's second quarter, the absence of promotion provided a nice lift to gross margins, which improved by 210 basis points in the same quarter last year.\nThis underscores a key differentiator in our model versus other direct selling models.\nThat is that we focus on empowering coaches to serve clients by educating them on the Habits of Health system, using a holistic community-based approach to help them transform their lives one healthy habit at the time.\nLooking at the third quarter, we will repeat our business builder program and expect this to further grow the number of OPTAVIA Coaches helping our business as we move ahead into 2022.\nLast week, we concluded our biggest ever annual convention which was held in the new hybrid format and saw more than 15,000 global registrants.\nRecall that the 2020 event was modified to be virtual only due to the global pandemic.\nWhile partnering with the Georgia World Congress Center in Atlanta and following statewide COVID-19 safety regulations for the in-person experience, we also offered a live stream component for attendees who participated from home.\nAttendants experienced valuable coach-led educational sessions, panel discussions and company updates along with celebrations of their success in transforming lives around the world.\nThis year's event also placed an increased focus on community engagement and team building following the 2020 virtual event.\nWe believe OPTAVIA's unique offer complete with the support of a coach community Habits of health transformation system.\nAnd our clinically proven plans and scientifically developed OPTAVIA brand nutritional products provides a holistic solution consumers need to make their health goals a reality.\nBefore turning the call over to Jim, I want to share some comments on corporate social responsibility.\nWe continue to join forces with the OPTAVIA community to support our philanthropic initiative, Healthy Habits For all, which empowers generations through education and access to healthy habits.\nAs part of 2021 convention registration and outside donation opportunities, the OptiView community gave back through the company's philanthropic initiative, Healthy Habits For All.\nThis coach-led fundraising initiative raised over $100,000 of worthy nonprofits and advance the company's mission of providing children with education and access to resources that support healthy habits.\nTo date, alongside with our OPTAVIA community, the company has funded up to eight million nutritious mills for children facing hunger.\nMedifast's commitment to lifelong transformation is not just the result of the work our OPTAVIA Coaches do but also a result of our active support of the communities in which we live and work.\nRevenue in the second quarter of 2021 increased 79.2% to $394.2 million from $220 million in the second quarter of 2020, reflecting continued growth in the number of active earning OPTAVIA Coaches and higher per coach productivity which resulted in more clients participating in our optimal weight five & one Plan.\nWe achieved another record for active earning OPTAVIA Coaches, ending the quarter with approximately 59,200 and generating sequential growth of 12.8% compared to Q1 and an increase of 62.2% from last year's second quarter.\nAverage revenue per active earning OPTAVIA Coach for the second quarter was $6,662, setting another record and up 3.2% from the prior high set just last quarter.\nVersus a year ago, revenue per active earning of OPTAVIA Coach was up 13.9%.\nGains in productivity per active earning OPTAVIA Coach for the quarter continued to be driven by an increase in both the number of clients supported by each coach as well as an increase in average client spend.\nThe growth we're seeing in new coaches and in per coach productivity is closely related to our approach that better leverages field-led coach training and social media and communication technology platforms.\nGross profit for the second quarter of 2021 increased 84.4% to $293.7 million compared to $159.3 million in the prior year period.\nGross profit as a percentage of revenue was 74.5%, up 210 basis points compared to 72.4% in the second quarter of 2020.\nWe did not offer any promotions during the second quarter as we lap the essential start promotion from last year, and that was the primary factor that drove the year-over-year improvement in gross margin.\nWith the anticipated acceleration in demand of OPTAVIA branded products, we expect pressure on gross profit margin through the remainder of 2021 due to the planned higher level of use of co-manufacturers.\nAdditionally, we are seeing higher levels of inflation in raw ingredients, freight and labor costs that will add pressure to our gross profit margin for the second half of 2021.\nTo protect our overall profit margins in the short term, we will continue to focus and manage our costs while investing in supply chain and technology for our long-term growth objectives.\nWe believe gross profit margin as a percentage of revenue will improve in the longer term as we develop pricing strategies, enhance our distribution network, reduce freight costs by shortening shipping lanes and gain productivity improvements in our supply chain processes as we scale our business.\nSG&A for the second quarter of 2021 increased 77% to $232.3 million compared to $131.2 million for the second quarter of 2020.\nThe increase was primarily due to higher OPTAVIA commissions, increased salary and benefit-related expenses for employees, increased consulting costs related to technology projects and increased credit card fees resulting from higher sales.\nSG&A as a percentage of revenue decreased 70 basis points year-over-year to 58.9% versus 59.6% in the second quarter of 2020.\nIncome from operations increased $33.3 million to $61.4 million from $28.1 million in the prior year period, reflecting significant improvement in gross profit margin coupled with leverage of SG&A expenses.\nIncome from operations as a percentage of revenue was 15.6% for the quarter, an increase of 280 basis points from the year ago period.\nThe effective tax rate was 23.4% for the second quarter of 2021 compared to 22.1% in last year's second quarter.\nNet income in the second quarter of 2021 was $47 million or $3.96 per diluted share based on approximately 11.9 million shares of common stock outstanding.\nThis compares to net income of $21.9 million or $1.86 per diluted share based on approximately 11.8 million shares of common stock outstanding in last year's second quarter.\nOur balance sheet remains very strong with cash, cash equivalents and investment securities of $197.4 million as of June 30, 2021, compared to $174.5 million at December 31, 2020.\nThe company remains free of interest-bearing debt and believes it is well positioned to execute its growth strategy.\nOn the first quarter call, I provided additional detail around our capital allocation priorities and discussed that we expect higher levels of capital expenditures over the next 24 months to expand our technology and supply chain capabilities.\nAdditionally, we expect that stock repurchase was going to increase relative to our dividend.\nTo that end, during the second quarter, we repurchased $12.2 million of stock, which is up from $7.5 million of repurchase activity in the first quarter, bringing our year-to-date total to $19.7 million through the first half of 2021.\nGiven our strong financial condition, expectations for future cash flow growth and the relative valuation of our stock, we anticipate continuing to prioritize buybacks as a means of adding value for shareholders in the foreseeable future.\nFinally, in June 2021, our Board of Directors declared a quarterly cash dividend of $16.9 million or $1.42 per share, which is payable on August 6.\nTurning to our guidance, which we reinstated last quarter.\nFor the full year 2021, we expect revenue in the range of $1.425 billion to $1.525 billion and diluted earnings per share to be in the range of $12.70 to $14.17.\nOur guidance also assumes a 23.25% to 24.25% effective tax rate.\nAs discussed, we are expecting pressure on gross profit margin in the second half of 2021 due to the increased levels of use of co-manufacturers in the coming months to meet accelerated demand in OPTAVIA-branded products and due to inflation factors.\nIn Q3 this year, we successfully returned to an in-person convention that will increase SG&A expenses in Q3.\nFinally, in Q3, we will be repeating our business builder program and expect this to further grow the number of independent OPTAVIA Coaches and help our business as we head into 2022.\nThe business builder program will be recorded in SG&A expenses in Q3.\nIn closing, second quarter results were strong, and we remain confident in our business model and are well positioned to capitalize on the opportunities that lie ahead.\n",
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"content": "q2 earnings per share $3.96.\nq2 revenue $394.2 million versus refinitiv ibes estimate of $359.5 million.\nsees fy earnings per share $12.70 to $14.17.\nsees fy revenue $1.425 billion to $1.525 billion.\ntotal number of active earning optavia coaches increased 62.2% to 59,200 compared to 36,500 for 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: This has been another strong quarter for Medifast, with positive trends across our business and solid growth in both revenue and earnings.\nCompared to the same time period last year, revenue increased 52.3% to $413.4 million in the third quarter, while earnings per diluted share rose 22.3% to $3.56.\nAs planned, we ran our business dealer promotion in August, consistent with the prior two years.\nThis promotion focuses on driving coach growth by incentivizing sponsorship at the time when coach leaders are deeply engaged and focused on broadening their reach following our annual convention.\nThe number of independent active earning OPTAVIA Coaches exceeded 61,000 at the end of the third quarter, with growth of 44.9% from the same period last year and up 3% sequentially.\nBoth coaches and the company had to adjust to the new scale of the business, and that's caused some to be expected bottlenecks that were manifest in product delivery delays in our supply chain in the second quarter and early into the third quarter, which impacted coaches and client experience.\nConsequently, the sequential growth rate in active earning coaches decelerated as existing coaches spend more time supporting the record number of new clients who have entered the OPTAVIA ecosystem rather than onboarding as many new coaches.\nAs planned, we brought new fulfillment capacity fully online at the beginning of August 2021, and this had a significant positive impact on both coach and client experience in the back half of the quarter and is expected to continue going forward.\nPromotional activity directed a client acquisition during the third quarter included the essential start promotion we ran in September.\nLast year, this program ran in the April-May time frame, and it was an important catalyst to the sharp acceleration we experienced starting in the summer of 2020.\nAs this year's event was later in the quarter, the initial revenue benefit is expected to occur more in the fourth quarter, while some of the costs negatively affected the margins in the third quarter.\nThe key takeaway from our third quarter client acquisition results is that it will put us in a very strong position as we move into the final quarter of the year and moving to next year.\nOur coach based model is driven by activation of new clients who then go on to be new coaches.\nNew client numbers are up about 50% year-over-year in the month of September due to the essential start promotion and the continued strong demand for our coach supported health and wellness plan.\nAs a result of new client acquisition, productivity hit a record high for the company with revenue per active earning coach reaching $6,773.\nThis is up 7% from a year ago and up 1.7% from Q2, the prior high.\nCoaches are continuing to leverage our infrastructure, advanced digital tools and field-led training to amplify their engagement across social media as well as other technology platforms, enabling them to support a greater number of clients.\nOur strategic investments in expanding supply chain and fulfillment capacity have proven invaluable in supporting our growth since 2017 when we decided to double down on the clinically proven coaching model through OPTAVIA.\nThis was accomplished three to six months in advance of the respective target dates.\nGiven our expected growth over the next several years, we are continuing to allocate capital and investments to this critical infrastructure and have already started work on an additional distribution center in Fort Worth, Texas in partnership with a leading third-party logistics company.\nThis comes on the heels of the new warehouse and distribution center in Maryland that came online in Q2 and to which we continue to add capacity through Q3.\nAdditionally, in October, we held an event with top coach leaders at Sundance, Utah, to reinforce alignment and provide planning and alignment sessions around major initiatives for 2022.\nDuring the meeting, we aligned our plans for the fourth quarter, which supported their field-led training events over the final months of 2021 in preparation for Q1 of next year.\nConsistent with last year, we will execute our Holiday Dash program, which will begin in December and carry over into the first week of January.\nThis promotion rewards coaches to attract new clients during the program period.\nWe continue investing in our digital lab in Utah to pioneer exciting growth and productivity tools for existing coaches as well as developing additional pathways for attracting new clients and encouraging and engaging new coaches.\nDeployment of the two proprietary apps we've been developing is advancing and the early metrics are encouraging.\nThe OPTAVIA app targets clients and features healthy recipes, self-service options related to the OPTAVIA Premier orders and other key information to stay engaged.\nIt's broadly available in the U.S., while select users have access now in our Asia markets, where it is on track to go live within the next few weeks.\nThrough mid-October, there have been over 217,000 unique downloads and daily average usage has averaged approximately 50,000 over the past month.\nOur Connect app is designed for OPTAVIA coaches to provide a powerful tool to help them efficiently manage and grow their business with instant access to key data and insights.\nAnd that recently went live with approximately 2,000 business leaders and business coaches and will be rolled out across the broader coach population of 61,000-plus OPTAVIA coaches during the fourth quarter.\nFor some time now, many people have been looking at their health more holistically with a specific focus on developing healthy habits in every area of their life.\nOur latest survey findings revealed that a large majority of U.S. adults have guidance from someone who has had similar experiences in helping them not only to reach their goals, but also to develop healthy habits.\nWe found that 66% of adults say having support helped them throughout their health and wellness journey and that more than four in five or 81% of U.S. adults believe that they would be more successful in creating healthy habits if they had support from someone who had been in their shoes.\nThis is true of our clients who are supported by independent OPTAVIA coaches, the majority of whom have undergone their own transformation on program and therefore, understand the clients what the clients are going through.\nCoach support continues to be a critical component of the OPTAVIA program and a key differentiator of our unique model.\nOur competitive position has never been stronger.\nOPTAVIA's unique model and holistic approach incorporating coach and community to support helps people achieve their individual goals around health and wellness.\nAbout 91.9% of our revenue is subscription-based and 100% of our orders are DTC, ships directly to consumers.\nWe now support over one million clients on an annual basis and the number of people we consider as part of our client community is increasing at a rapid rate.\nInvestments in technology and infrastructure have made us more efficient and has created a more powerful, scalable platform.\nThe strong consistent growth in revenue and profits that we have delivered in the third quarter as well as over the past several years is a testament to the strength of our business and continues to reinforce our confidence in the future.\nIn 2019, I shared the goal with our investment community of Medifast generating $1 billion in revenue by the end of 2021.\nIn Q3, we are pleased to announce we surpassed that full year revenue goal three months ahead of the original projection, allowing OPTAVIA to join an elite group of brands as it exceeded $1 billion in annual revenue.\nAccording to a study by the Boston Consulting Group, there are around 290 $1 billion FMCG brands with U.S. sales and only around 20 of those brands were introduced after the year 2000.\nLess than five years ago, we partnered with our coach community to introduce the lifestyle brand, OPTAVIA.\nToday, OPTAVIA joins that select group of $1 billion brands.\nIt's a rare achievement that only a handful of brands can claim and further demonstrates the power of our unique coach model.\nHowever, our proudest achievement lies in the human aspect.\nIt's the countless personal stories we hear from our OPTAVIA community each day and the two million lives we have impacted to date that underscores our mission of Lifelong Transformation, One Healthy Habit at a Time.\nWe remain confident in our ability to continue to drive long-term sustainable growth.\nDemand for health and wellness products and services is strong with a particularly high addressable market for approaches that favor healthy habit building over dining or other weight loss approaches.\nThis achievement is a reflection of the strength of our independent coaches and the team that supports our community on a daily basis.\nI'm extremely proud of what we've accomplished, and I look forward to achieving many more growth milestones ahead.\nLastly, I'll close my remarks with an update on our initiatives around corporate social responsibility, which is a key priority for the entire Medifast organization and closely aligned with our overall mission.\nLast month, we hosted our third annual Healthy Habits For All week, a week dedicated to helping underserved communities around the globe adopt healthy habits through improved education and expanded access to resources.\nThe event kicked off near our headquarters in Baltimore, Maryland, where employees assembled back-to-school bags for after-school students at the Living Classrooms Foundation.\nWe closed the day by distributing those bags to the community and donated Chromebooks to the kids, providing critical access to technology that will allow them to adapt to changing environments throughout the school year.\nWe concluded the week with a virtual cooking class for our OPTAVIA community benefiting our nonprofit partner, No Kid Hungry.\nThe class was led by celebrity chef Fabio Viviani and our own OPTAVIA Co-Founder and independent OPTAVIA coach, Dr. Wayne Andersen.\nTogether, they taught attendees how to create two restaurant-inspired lean and green dishes.\nWe're proud of the impact we've made through Healthy Habits for All thus far, but we're just getting started.\nOur community has a clear passion for making a difference and has demonstrated an impressive commitment to transforming communities around the world.\nRevenue in the third quarter of 2021 increased 52.3% to $413.4 million from $271.5 million in the third quarter of 2020, reflecting continued growth in the number of active earning OPTAVIA coaches and higher per coach productivity.\nWe ended the quarter with over 61,000 active earning OPTAVIA coaches, another new record, up 3% sequentially compared to Q2 and an increase of 44.9% from last year's third quarter.\nAverage revenue per active earning OPTAVIA Coach for the third quarter was 6,773, also a new record and a 1.7% higher than the previous record set in Q2 of 2021.\nVersus a year ago, revenue per active earning OPTAVIA Coach was up 7%.\nGains in productivity per active earning OPTAVIA Coach for the quarter continued to be driven by an increase in both the number of clients supported by each coach as well as an increase in average client spend.\nGross profit for the third quarter of 2021 increased 50.5% to $307.1 million compared to $204 million in the prior year period, primarily as a result of increased revenue, partially offset by increased cost of sales.\nGross profit margin was 74.3%, down 90 basis points compared to 75.2% in the third quarter of 2020.\nThe primary reason for the year-over-year decline in gross margin was due to the essential start promotional activity and higher product and shipping costs.\nWe continue to expect pressure on gross profit margin through the remainder of 2021 due to planned higher use of co-manufacturers to keep up with demand along with inflation in raw ingredients, freight and labor costs and investments in supply chain and technology to achieve our growth objectives in 2022 and thereafter.\nWe believe gross profit as a percentage of revenue will improve in the longer term as we develop pricing strategies, enhance and reduce cost in our distribution network and gain productivity improvements in our procurement and manufacturing processes.\nSG&A expenses for the third quarter of 2021 increased 57.9% to $251.9 million compared to $159.5 million for the third quarter of 2020.\nSG&A as a percentage of revenue increased 220 basis points year-over-year to 60.9% versus 58.7% in the third quarter of 2020.\nThe increase was primarily due to higher OPTAVIA commissions expense, increased salaries and benefits related expenses for employees, incremental consulting costs related to information technology, increased credit card fees resulting from higher sales as well as costs associated with our annual convention held at the end of July 2021.\nAs the OPTAVIA Convention in July 2020 was a virtual event in response to the COVID-19 pandemic, the costs were significantly lower.\nIncome from operations increased $10.6 million to $55.2 million from $44.6 million in the prior year period, reflecting higher gross profit, partially offset by increased SG&A expenses.\nIncome from operations as a percentage of revenue was 13.3% for the quarter compared to 16.4% in the same period last year.\nThe effective tax rate was 23.9% for the third quarter of 2021 compared to 22.8% in last year's third quarter, reflecting higher state income tax rates and limitations on deductibility of officer compensation along with the tax benefit of stock compensation.\nNet income in the third quarter of 2021 was $42 million or $3.56 per diluted share based on approximately 11.8 million shares of common stock outstanding.\nThis compares to net income of $34.5 million or $2.91 per diluted share based on approximately 11.9 million shares of common stock outstanding in last year's third quarter.\nWith approximately $160 million of cash, cash equivalents and investment securities and no interest-bearing debt, our balance sheet remains strong.\nWe have substantial capital and liquidity to continue executing our strategy, including prioritizing growth investments focused on technology and capacity expansion.\nIt's also important to note that we have been steadily increasing our share buyback activity, including repurchasing $26.3 million of stock in the third quarter, bringing the total for the first nine months of 2021 to approximately $46 million.\nGiven our expected trajectory for revenue and earnings growth over the next several years, we believe share repurchase remains a compelling way to enhance stockholder value.\nFinally, in September 2021, our Board of Directors declared a quarterly cash dividend of $16.6 million or $1.42 per share, which is payable on November 8, 2021, to stockholders of record as of September 21, 2021.\nTurning to our guidance.\nFor the full year 2021, we expect revenue to be in the range of $1.51 billion to $1.53 billion and diluted earnings per share to be in the range of $13.27 to $13.96.\nOur guidance also assumes a 23.25% to 24.25% effective tax rate.\nWe have been able to increase our guidance multiple times this year due to the strength of our business.\nOur revised earnings guidance from our last earnings call reflects strong revenue gains as well as increased investment in key growth initiatives, focused in supply chain and technology, which support us achieving our long-term objective in 2022 and thereafter.\nIn closing, third quarter results were strong, and we remain confident in our business model as we move into the fourth quarter and get ready for 2022.\nWe continue to target 15% top line growth and 15% operating income margin in the long term, and we remain confident in our ability to deliver long-term sustainable growth at those levels.\n",
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"content": "q3 earnings per share $3.56.\nq3 revenue rose 52.3 percent to $413.4 million.\nsees fy earnings per share $13.27 to $13.96.\nsees fy revenue $1.51 billion to $1.53 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: Such factors may include, without limitation, the following: impact from pandemics such as the COVID-19 pandemic; dependence on the automotive, appliance, commercial vehicle, computer and communications industries; dependence on a small number of large customers, including two large automotive customers; recognition of goodwill and long-lived asset impairment charges; costs associated with restructuring activities; international trade disputes resulting in tariffs and our ability to mitigate tariffs; timing, quality, cost of new program launches; ability to withstand price pressure, including pricing reductions; failure to attract and retain qualified personnel; ability to successfully market and sell Dabir Surfaces products; currency fluctuations; customary risks related to conducting global operations; costs associated with environmental, health and safety regulations; ability to withstand business interruptions; ability to successfully benefit from acquisitions and divestitures; investment in programs prior to the recognition of revenue; dependence on the availability and price of materials; dependence on our supply chain; judgments related to accounting for tax positions; income tax rate fluctuations; ability to keep pace with rapid technological changes; breaches to our information technology systems; ability to avoid design or manufacturing defects; ability to compete effectively; ability to protect our intellectual property; success of recent acquisitions and/or our ability to implement and profit from new applications of the acquired technology; ability to manage our debt levels and any restrictions thereunder; and impact to interest expense from the replacement or modification of LIBOR.\nI'm joined today by Ron Tsoumas, our Chief Financial Officer.\nLet's begin on Slide 4 with the business highlights from the first quarter.\nI'll start with the situation with COVID-19.\nI continue to be proud of our employees' incredible commitment to Methode and to supporting our efforts to provide a safe work environment.\nAll of our facilities have remained open to some degree through this challenging period and most of our hourly employees have returned to a full work week.\nOur offices have systematically begun to reopen, but we're also still making prudent use of work-from-home for our office staff.\nWe anticipate that we will see some level of headwind risk and uncertainty from the COVID-19 pandemic throughout the fiscal year.\nHowever, as I stressed last quarter, we will continue to invest in our business for long-term growth.\nTurning to the business performance.\nWhile the quarter was clearly down due to the pandemic, we saw significant rebound in automotive demand in the latter half of the quarter.\nAs you recall, most of the auto OEMs were effectively shut down in the first half of the quarter.\nAnd when we reported our fourth quarter results, we were concerned about the stability of OEM production schedules based on the pandemic circumstances.\nMethode's first quarter sales decreased 29.3%.\nOur net income decreased 26.9%.\nAnd our diluted earnings per share decreased 28% for the fiscal quarter ended August 1st of 2020.\nThe resulting decremental net income margin of 10% was helped by cost reductions and operational efficiency initiatives.\nThe net income in the quarter was also aided by discrete tax benefit of $7.8 million.\nAdding back the discrete tax benefit, the decremental net income margin would have been 19%.\nRon will provide more detail on these tax items later.\nReturning to the automotive business on Slide 6.\nIt was a particularly strong quarter for awards in EV and hybrid applications.\nWe received award of a total annual expected sales of approximately $30 million.\nGiven our ongoing strategy to cross-sell our technologies into the space, we now expect a high-single digit percentage of our fiscal 2021 consolidated sales to come from EV and hybrid programs.\nThis is an area where we are globally well positioned and we anticipate continued growth.\nI will share more on our new awards a little later.\nLooking at our non-automotive markets, we saw strength in data centers and appliances on a year-over-year basis.\nHowever, other markets were negatively impacted by the pandemic, including industrial equipment and commercial vehicles, which while down are seeing forecasts improve.\nOperationally, we took significant S&A cost saving actions in the quarter to help mitigate the impact from the pandemic despite incurring $1.5 million in S&A restructuring costs, S&A expenses were reduced by $5.8 million year-over-year.\nIn regard to our balance sheet, we continue to have positive free cash flow and continue to reduce our debt in the quarter.\nOur liquidity is strong and our leverage stable.\nThe strength and flexibility of our balance sheet allows us to consider multiple paths to invest in the business in order to drive growth and shareholder return.\nMoving to Slide 7.\nDuring the first quarter, Methode booked a number of awards capitalizing on the strategic trends in vehicle electrification, LED lighting and data centers.\nThe awards identified here represent a cross-section of the business wins in the quarter and represent over $36 million in annual business.\nIn electric vehicles, we won awards for lighting, overhead console and busbar programs totaling over $22 million annually.\nIn hybrid vehicles, we were awarded lead frame and busbar programs totaling approximately $9 million annually.\nI would like to emphasize that these -- we are winning programs with OEMs in the US, Europe and Asia.\nIn non-EV LED lighting, we were awarded programs for both auto and commercial vehicle applications.\nLastly, we're also participating in the building of data centers driven by cloud computing with programs for busbars and pluggable modules.\nAs we have stated before, Methode will continue to evolve its business with innovative, new technology and products for emerging applications and growing markets.\nIn the medical segment, our efforts to grow the Dabir product line in the quarter continue to be hampered by the postponement of elective surgeries due to COVID-19.\nWe are seeing some increased activity and believe that this business will return to a growth trajectory in the near future.\nLooking forward, we're only providing sales guidance and only for our fiscal 2021 second quarter due to the market risk and uncertainty from the ongoing pandemic.\nWhile we are not providing annual guidance at this time, we do intend to reassess annual guidance as soon as demand stabilizes and we are confident with our customers' forecasts.\nWhile we have certainly seen strong demand over the last several months, it is not clear how much consumer confidence has returned versus the industry just satisfying pent-up demand, hence we remain cautious.\nAs I shared last quarter, Methode took actions in the first quarter to consolidate operations and further streamline our organization in order to improve efficiencies and set the stage for continued growth.\nThese actions and any potential future actions will allow us to further improve our execution and be in a better position to grow.\nTo conclude, given the current global macroeconomic situation and the significant headwinds faced by Methode throughout this past quarter, I am extremely pleased that our strategy and team were able to deliver these results, generate positive free cash flow and maintain a strong balance sheet.\nOur focus is on navigating the pandemic situation, while continuing to execute our long-term strategy.\nFirst quarter sales decreased 29.3% or $79.3 million to $190.9 million in fiscal '21 from $270.2 million in fiscal '20.\nSales in the first quarter were negatively impacted by COVID-19, especially in the May through mid-June timeframe.\nThe production shutdowns mostly impacted the automotive and industrial segments.\nThe impact of foreign currency on sales was not significant in the quarter.\nFirst quarter net income decreased $7.6 million to $20.7 million or $0.54 per share from $28.3 million or $0.75 per share in the same period last year.\nFirst quarter net income benefited from a discrete tax benefit of $7.8 million and higher other income of $3.4 million, primarily due to COVID-19 assistance of $2.9 million.\nThe sales drivers from fiscal '20 first quarter to fiscal '21 first quarter were a net $92 million sales reduction due to the impact of COVID and other lower volumes, partially offset by $14 million of new launches.\nForeign currency translation reduced sales by $1 million.\nThe impacted segments were mostly automotive and industrial.\nMoving to Slide 10.\nFirst quarter gross margins were lower in fiscal '21 as compared to fiscal '20, mainly due to the reduced sales due to the impact of COVID.\nProduct mix was also unfavorable as 26.6% decrease in sales in the higher-margin industrial segment negatively impacted consolidated gross margins.\nFiscal '21 first quarter margins were 23.6% as compared to 28.1% in the first quarter of fiscal '20.\nThe fiscal '21 first quarter margins included $1.9 million of restructuring expense.\nWithout the restructuring expense, fiscal '21 first quarter gross margins would have been 24.6%.\nFirst quarter selling and administrative expenses as a percentage of sales increased 190 basis points year-over-year to 13.9% compared to 12% in the fiscal '20 first quarter.\nThe fiscal '21 first quarter figure was attributable to decreased sales and restructuring expense of $1.5 million, partially offset by lower stock-based compensation expense, lower wages and associated benefits due to salary reductions and four-day work weeks and much lower travel expense.\nThere was no restructuring expense in the first quarter of fiscal '20.\nWithout the $1.5 million of restructuring expense, the selling and administrative expense as a percentage of sales for the first quarter of fiscal '21 would have been 13.1%.\nThe company continues to monitor market factors and trends and will continue to evaluate possible additional actions to reduce overall costs and improve operational profitability, especially in the current COVID-19 environment.\nIn addition to the $3.4 million incurred in the first quarter from actions taken in the first quarter, the company currently expects an additional expense of $2 million in the second quarter from those first quarter actions.\nThe company may take additional actions in future period based upon business conditions as required.\nMoving to slide 11.\nNet income was $20.7 million in the first quarter of fiscal '21 as opposed to $28.3 million in the first quarter of fiscal '20.\nThe main drivers between the fiscal years were lower sales due to COVID, a favorable change in discrete tax items of $9.1 million, an unfavorable change in restructuring expense of $3.4 million and the receipt of $2.9 million of foreign government assistance due to COVID.\nShifting to EBITDA, a non-GAAP financial measure, fiscal first quarter '21 EBITDA was $29.3 million versus $50.3 million in the same period last year.\nEBITDA was negatively impacted by the significant headwinds from the COVID-19 pandemic and included $3.4 million of restructuring expense.\nA few other financial items to review.\nYear-over-year depreciation and intangible asset amortization expense increased slightly in the first quarter of fiscal '21 to $12.1 million from $11.8 million in the first quarter of fiscal '20.\nIn the first quarter of fiscal '21, we invested approximately $11.6 million of capex as compared to $13.2 million in the first quarter of fiscal '20.\nThe first quarter investment represents an approximate $45 million run rate for the current fiscal year, but it is too early to tell if the rate will be maintained throughout the remainder of the year.\nHowever, we have a strong balance sheet and intend to utilize it during this COVID impacted year to make continued investment in our businesses to grow them organically in the future.\nIn addition, we continue to pursue opportunities for inorganic growth.\nOur intent is to come out of the COVID pandemic stronger than we were when we went into the crisis by judiciously using our strong balance sheet to our long-term advantage.\nWe had an income tax benefit of $5.1 million as compared to a tax expense of $7.3 million in the fiscal '20 first quarter.\nThe main driver of the benefit in fiscal '21 was $7.8 million of discrete tax items recorded during the quarter, mainly due to investment tax credits and other credits earned in foreign jurisdictions.\nIn the fiscal first quarter of '20 -- fiscal year '20, there was a discrete tax expense of $1.3 million.\nWithout the discrete tax items, the fiscal '21 first quarter effective tax rate would have been 17.2% as compared to 16.6% in the same period last year.\nAs shown on Slide 12, we did leverage gross debt by $2.3 million in the first quarter.\nSince our acquisition of Grakon when adjusting for the $100 million precautionary credit facility draw in March of 2020, we have reduced gross debt by nearly $108 million.\nNet debt increased by $4 million in the first quarter of fiscal '21 as compared to the fiscal '20 year end.\nWe ended the first quarter with $211 million in cash, which includes $100 million precautionary draw on the credit facility in March.\nOur debt-to-EBITDA ratio, which is used for our bank covenants, is approximately 1.9.\nThis figure includes the impact of the precautionary $100 million draw.\nWithout the draw, the ratio would have been approximately 1.3.\nLet's move to Slide 13.\nFree cash flow, a non-GAAP measure, which is now defined as cash provided from operating activities minus capex as opposed to prior to fiscal '21 where it was defined as net income plus depreciation and amortization less capex.\nFor the fiscal '21 first quarter, free cash flow was $4.8 million as compared to $5.9 million in fiscal '20.\nAs Don mentioned in his remarks, we are providing revenue guidance for the second quarter.\nThe revenue range for the second quarter will be between $230 million and $250 million.\nDon, that concludes my comments.\nMelinda, we're ready to take questions.\n",
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"content": "compname reports q1 earnings per share $0.54.\nq1 earnings per share $0.54.\nq1 sales $190.9 million versus $270.2 million.\nsees q2 sales $230 million to $250 million.\nnot providing annual guidance due to mid-term market uncertainty as a result of ongoing pandemic.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: I'm joined today by Ron Tsoumas, our Chief Financial Officer.\nLet's begin with the business highlights on Slide 4.\nOur sales for the quarter were $288 million.\nExcluding favorable currency translation, our organic growth was up 45% from the prior year.\nHowever, it should be noted that our prior year first quarter was significantly impacted by the pandemic.\nIn this year's first quarter, our team faced customer demand fluctuations and supply chain challenges.\nThese included the ongoing semiconductor chip shortage, pandemic-related supply chain disruptions and port congestion, all of which created both sales and margin pressure.\nOnce again, our team worked diligently to mitigate many of these challenges and we were able to deliver results within our guidance ranges for the quarter.\nHowever, these demand fluctuations and supply chain disruptions continued to require remedial actions, such as expedited shipping and premium component pricing.\nAs of today, our expectation is that these conditions will last at least until the end of the calendar year.\nWhile we have reaffirmed our guidance for the full year, persistent headwinds could cause our performance to be below the midpoint of the ranges as the situation is very fluid and will remain very challenging.\nThe sales growth that we realized in the first quarter was due to increased demand across most of our businesses, but was especially focused on the auto and commercial vehicle markets.\nWe also realized growth in our Dabir business.\nHowever, that business is still being hampered by the pandemic, thus limiting our production or product evaluation opportunities in hospital operating rooms and ICUs.\nOn an order basis, we had solid awards for EV, cloud computing and e-bike applications.\nFocusing on EV, last quarter, we reported that sales into EV applications were 13% of consolidated sales.\nThis quarter, EV sales were 16% of consolidated sales and we continue to expect that number to be in the mid-teens for fiscal 2022.\nMethode's combination of user interface, LED lighting and power distribution solutions is a winning formula in EV.\nIn the quarter, we further reduced debt, generated positive operating cash flow and continued to return capital to our shareholders.\nWe have ample liquidity, which also allows us to execute our stock buyback program, under which we purchased $7.6 million of shares in the quarter, and to pay our dividend, which rose from $0.11 to $0.14 per share in the quarter.\nWe continued to allocate capital per our balanced approach.\nMoving to Slide 5.\nMethode had another solid quarter of business awards.\nThese awards continue to capitalize in key market trends like vehicle electrification and cloud computing.\nThe awards identified here represent some of the key businesses -- business wins in the quarter and represent over $30 million in annual business at full production.\nIn vehicle electrification, we won awards for power distribution and LED lighting programs.\nWe continue to win programs with OEMs globally in both auto and commercial vehicle applications.\nIn non-EV automotive, we were awarded programs for power, lighting and traditional switch applications.\nIn cloud computing, we saw demand for our power distribution and transceiver products and data center applications.\nLastly, we continue to participate in the growth of e-bikes, which utilizes our proprietary magneto elastic sensor technology.\nBuilding on the prior year, our business awards are delivering on our strategic priority to drive both customer and geographic diversity.\nTurning to Slide 6.\nAs I've mentioned in recent quarters, our business awards over the last couple of years have put us on track in aggregate to replace the sales from the roll off of our largest auto program.\nAs such our customer and program diversity continues to improve.\nOur EV, as well as our commercial vehicle and cloud computing businesses have helped drive our customer diversification.\nWhile GM and Ford have been and are expected to continue to be good customers that have fueled Methode's historical growth, in recent years, we have strategically and systematically broaden our customer base.\nOur business outside of GM and Ford grew to two-thirds of our fiscal 2021 total sales.\nTo conclude, despite the ongoing demand fluctuations and supply chain challenges, we are still in a position to deliver strong organic growth for fiscal 2022.\nFirst quarter sales were $287.8 million in fiscal year '22 compared to $190.9 million in fiscal year '21, an increase of $96.9 million or 50.8%.\nThe year-over-year quarterly comparisons include a favorable foreign currency impact on sales of $10.3 million in the current quarter.\nThe increase was mainly due to lower sales in the prior year quarter from the impact of the COVID-19 pandemic and to higher sales of electric and hybrid electric vehicles, which amounted to 16% of sales in the first quarter of fiscal year '22, which was in line with our previous communication that electric vehicles and hybrid electric vehicle sales would comprise mid teens of our fiscal year '22 consolidated sales.\nIn addition, stronger commercial vehicle sales contributed to the robust sales growth.\nFirst quarter net income increased $8.4 million to $29.1 million or $0.76 per share diluted from $20.7 million or $0.54 per diluted share in the same period last year.\nNet income benefited from increased sales and favorable currency translation, partially offset by higher income tax expense, higher costs from supply chain disruption, higher selling and administrative expenses and lower other income.\nFirst quarter gross margins were higher in fiscal year '22 as compared to fiscal year '21, mainly due to increased sales, partially offset by higher material costs, higher logistic costs, including freight and supply chain shortages.\nFiscal year '22 first quarter margins were 24.9% as compared to 23.6% in the first quarter of fiscal year '21.\nThe negative impact of the supply disruption and higher logistics costs, including freight, on the first quarter of fiscal year '22 gross margin was nearly 300 basis points.\nThese higher costs that were experienced in the first quarter are expected to continue further in fiscal year '22.\nIn addition, we anticipate a degree of cost inflation in the remainder of the current fiscal year.\nFirst quarter selling and administrative expenses as a percentage of sales decreased to 11.4% compared to 13.9% in the fiscal '21 first quarter.\nThe fiscal year '22 first quarter percentage decrease was attributable to increased sales related to the negative impact of COVID-19 pandemic on fiscal '21 sales, partially offset by higher stock-based and performance-based compensation expenses.\nThe first quarter of fiscal year '22 selling and administrative expenses percentage was in line with our historical norm, which should yield an efficient flow-through from gross margin to operating income.\nIn addition to the gross margin and selling and administrative items mentioned above, two other non-operational items significantly impacted net income in the first quarter of fiscal year '22 as compared to the comparable quarter last fiscal year.\nFirst, income tax expense in the first quarter of fiscal year '22 was $5.7 million or 16.4% as compared to a net tax benefit of $5.1 million in the first quarter of fiscal year '21.\nThe effective tax rate was lower in the first quarter of fiscal year '21 due to discrete tax benefits of $7.8 million in the quarter or $0.20 per diluted share.\nWithout the discrete tax benefits, the effective rate would have been 17.2%.\nThe year-over-year tax expense increase was $10.8 million.\nSecond, other income net was lower by $1.6 million, mainly due to lower international government assistance between the comparable quarters.\nShifting to EBITDA, a non-GAAP financial measure.\nFiscal year '22 first quarter EBITDA was $48.5 million versus $29.3 million in the same period last fiscal year.\nEBITDA was positively impacted by higher operating income, partially offset by lower other income.\nFree cash flow, a non-GAAP financial measure, is defined as net cash provided from operating activities minus capex.\nFor fiscal year '22 first quarter free cash flow was a negative $6.2 million as compared to a positive $4.8 million in the first quarter of fiscal year '21.\nThe decrease was mainly due to negative working capital changes, especially inventory, resulting from difficult logistics and higher capital expenditures.\nWhile we experienced negative free cash flow in the first quarter of fiscal year '22, we expect improvement the remainder of the fiscal year.\nWe anticipate continuing our proven history of consistently generating reliable cash flows, which allow for ample funding of future organic growth, inorganic growth and return of capital to shareholders.\nIn the first quarter of fiscal year '22, we invested approximately $15.9 million in capex as compared to $11.6 million in the first quarter of fiscal year '21.\nThe higher first quarter capex is in line with our expectation that capex in fiscal year '22 would be higher than the investment in the prior year estimated to be in the range of $53 million to $57 million.\nWe have a strong balance sheet and we'll continue utilizing it by continuing investment in our businesses to grow them organically in the future.\nIn addition, we continue to actively pursue opportunities for inorganic growth and have a measured return of capital to the shareholders.\nIn the first quarter of fiscal year '22, we reduced gross debt by $4.7 million.\nSince our acquisition of Grakon in September 2018, we reduced gross debt by nearly $123 million.\nRegarding capital allocation, we recently announced two initiatives.\nFirst, on March 31st, we announced the $100 million share repurchase program, which we executed $7.6 million of repurchases during the first quarter of fiscal year '22.\nSince the authorization's approval, we have purchased $15.1 million worth of shares at an average price of $46.45.\nIn addition, we increased our quarterly dividend from $0.11 to $0.14 per quarterly share, an increase of 27%.\nWe ended the first quarter with $207.9 million in cash.\nAs Don mentioned in his remarks, we reaffirmed our previously issued guidance and earnings per share annual guidance.\nExternal events and their related potential impact on our financial results remain an ongoing challenge.\nWhile we have reaffirmed our guidance for the full year, persistent headwinds could cause our performance to be below the midpoint of the ranges as the situation is fluid and will likely remain very challenging.\nThe revenue range for the full fiscal year '22 is between $1.175 billion to $1.235 billion.\nDiluted earnings per share range is between $3.35 to $3.75 per share.\nThe range is due to the uncertainty from the supply chain disruption for semiconductors and other materials on both Methode and its customers.\nFrom a sales perspective, lower sales could result from the supply disruption to us and/or our customers, which could result in lesser demand for our products or our ability to meet customer demand.\nContinued supply chain disruption would also negatively impact gross margins due to additional costs incurred from premium freight, factory inefficiencies and, to a lesser extent, tariffs and other logistic factors, including port congestion.\nHigher costs for materials, freight and labor are a constant and dynamic battle, and we are uncertain as to when things will stabilize.\nDon, that concludes my comments.\nKen, I believe we're ready to take questions.\n",
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"content": "q1 earnings per share $0.76.\nreaffirms fy earnings per share view $3.35 to $3.75.\nsees fy sales $1.175 billion to $1.235 billion.\nq1 sales $287.8 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 joined today by Ron Tsoumas, our Chief Financial Officer.\nLet's begin on Slide 4 with a brief summary of our financial results for our fiscal second quarter, which ended on October 31.\nMethode's second quarter sales increased 17% to nearly $301 million.\nOur net income increased 62%, and our diluted earnings per share increased 60%.\nRon will provide more detail on financial results a bit later.\nTurning to the business highlights on Slide 5.\nThe $301 million in net sales, as well as our $45 million in income from operations, were both records for Methode.\nThe resulting operating income margin was 15%.\nThese record results -- these record results are validation of our strategy and the product of the relentless efforts and commitment of our global team.\nIn the quarter, we saw significant rebound in automotive demand as compared to the first quarter, which has been impacted by the pandemic and created uncertainty in OEM production schedules.\nThe Automotive segment sales for the quarter were also a record at $216 million.\nIt was another strong quarter for our EV businesses, as well.\nSales for EV applications were over 9% of our total consolidated sales.\nWe also saw continued strength for EV bookings during the quarter with the annual expected sales from those awards totaling over $28 million.\nAs many of you know, much of Methode's historical growth came from our user interface products.\nWith our move into vehicle LED lighting and with our long-standing reputation and capabilities in power distribution, in conjunction with user interface, Methode is uniquely qualified as a three-pronged solution provider for electric vehicles.\nWe are globally well positioned and anticipate continued growth in this market.\nRegarding our balance sheet, we continued to generate strong free cash flow and reduced our net debt in the quarter.\nWe have ample liquidity and our net leverage ratio continues to be low.\nThe strength and flexibility to our balance sheet allows us to consider multiple paths to invest in the business in order to drive growth and shareholder return.\nOn COVID-19, I continue to take pride in our employees' incredible commitment to Methode and supporting our efforts to provide a safe work environment.\nAll of our facilities are currently open and we are making prudent use of work-from-home where possible.\nWe do anticipate seeing some level of uncertainty from COVID-19 throughout the remaining fiscal year.\nHowever, as I stressed since the beginning of this pandemic, we will continue to invest in our businesses for long-term growth.\nMoving to Slide 6.\nDuring the second quarter, Methode booked a number of awards capitalizing on the strategic trends in vehicle electrification, LED lighting and data centers.\nThe awards identified here represent a cross-section of the business wins in the quarter and represent over $40 million in the annual business.\nIn vehicle electrification, we won awards for ambient and functional lighting, overhead console and busbar programs totaling over $28 million annually.\nAs I highlighted last quarter, we continued to win programs with OEMs in the US, Europe and Asia.\nEV is a global growth driver for Methode.\nIn non-EV LED lighting, we were awarded programs for several auto applications.\nWe also continued to participate in the growth of the data centers driven by cloud computing with programs for busbars and pluggable modules.\nLastly, we experienced a bounce in aerospace with defense program award.\nOf note, in the first half of the fiscal year, Methode booked awards approximately $100 million in annual sales.\nLooking forward, we are providing sales and earnings per share guidance for only the fiscal 2021 third quarter due to the market risk and uncertainty from the ongoing pandemic.\nTurning to Slide 7.\nWe recently presented at an investor conference, and I would like to share our key messaging from it.\nOur strategic focus is on diversification, growth and financial improvement.\nGiven the progress that we've made, diversifying our product portfolio into power, lighting and sensors, we are now actively capitalizing on key market trends like EVs, commercial vehicles and cloud computing.\nWith our technology solutions portfolio, we are able to address customer needs while increasing content per vehicle, penetrating non-auto markets and cross-selling into existing customers.\nThis will allow us to drive organic growth, something we were clearly demonstrating in fiscal 2020 until forwarded by the UAW strike at General Motors and COVID-19.\nAt the same time, we expect to continue to augment our technology and product portfolios through acquisitions that build on our strategy.\nWe believe these actions will further improve our product mix, and combined with operational efficiencies, will help to drive margin expansion.\nLastly, through our lean manufacturing capabilities, we are targeting further improvement in working capital.\nMoving to Slide 8.\nAs I mentioned earlier, much of Methode's historical growth came from our user interface products.\nWith our move into vehicle interior and exterior LED lighting, and with our long-standing experience and capabilities in power distribution, Methode has become uniquely qualified as a three-pronged solution provider for electric vehicles.\nIn addition to our user interface offerings such as overhead consoles, integrated center consoles and switches, for our second prong, we are leveraging the powerful combination of our auto grade manufacturing operations, our auto pedigree, and our distribution expertise to supply various busbars, connectors and battery disconnect units to the EV OEMs. Our third prong in our approach to the EV market is lighting.\nWe are able to supply our Pacific Insight ambient lighting technology and our Grakon LED technology to provide both interior and exterior lighting solutions.\nOur energy-efficient led is an ideal fit for EVs and their need to minimize power consumption.\nTurning to Slide 9.\nWith the growing shift from internal combustion engines to electric vehicles, method has a clear opportunity to grow our content per vehicle.\nAdditional content in an EV could range from 20% to over 100% above our current content on internal combustion vehicle.\nWe expect EV applications to be a high-single-digit percentage of our current fiscal year total sales, and we have an order pipeline that should easily drive that to low-double-digit percentage in our next fiscal year.\nEV is a clear tailwind for Methode.\nNext, I'd like to comment on our new five-year long-term incentive plan, as described in our September 8-K filing, which includes time based and performance-based awards.\nThe performance-based awards may be earned based on fiscal 2025 EBITDA with threshold target and maximum performance goals.\nOn Slide 10, you can find the EBITDA target performance.\nAs some of you know, the Methode team concluded two such plans, when ending in fiscal year 2015 and the other in fiscal year 2020.\nThe more recent plan resulted in over 7% annual EBITDA growth, and our new plan targets just under 8% annual growth.\nWhile we always have to contend with programs going end of life, and we may exit businesses for strategic reasons, we are confident that we have a path via organic growth, operational improvements and acquisitions to achieve the target of $300 million in EBITDA in fiscal year 2025.\nTo conclude, given the recent macroeconomic and pandemic situations, I am extremely pleased that our strategy and team were able to deliver record results, generate significant free cash flow and win additional EV awards in the quarter.\nSecond quarter sales increased 17% or $43.6 to $300.8 million in fiscal '21 from $257.2 million in fiscal '20.\nThe sales in the second quarter were positively impacted by the increased demand in all of our reporting segments as we recover from the lower first quarter production levels due to the COVID-19 pandemics.\nThe year-over-year quarterly comparisons benefited from the $32 million impact of the UAW strike on General Motors in the second quarter of fiscal '20.\nIn addition, the favorable impact of foreign currency on sales was $6.5 million in the current quarter.\nThe company generated year-over-year organic growth.\nSecond quarter net income increased $14.8 million to $38.6 million, or $1.01 per diluted share, from $23.8 million or $0.63 per diluted share in the same period last year.\nIn addition to the flow-through from higher sales and leveraging of SG&A expenses, second quarter net income also benefited from other income from foreign governmental COVID-19 assistance of $3.3 million, partially offset by $4.2 million of restructuring costs.\nSecond quarter gross margins were slightly higher in fiscal '21 as compared to fiscal '20, mainly due to higher sales volumes.\nFiscal '21 second quarter margins were 26.9% as compared to 26.7% in the second quarter of fiscal '20.\nFrom a sales growth perspective, segment growth mix was unfavorable as a 4% increase in sales in the highest margin industrial segment was partially muted by the 19.8% and 37.8% increases in the automotive and interface segments, respectively.\nThese segments have a lower gross margin profile as compared to the industrial segment.\nThe fiscal '21 second quarter gross margins included $2.7 million of restructuring expense and the second quarter of fiscal '20 gross margins included $200,000 of restructuring costs.\nSecond quarter selling and administrative expenses as a percentage of sales decreased 270 basis points year-over-year or 10.2% compared to 12.9% in the fiscal '20 second quarter.\nThe fiscal '21 second quarter figure was attributable to leverage gained from increased sales, lower stock-based compensation expense, lower wages and associated benefits due to the COVID-related salary reduction and shorter work weeks, and much lower travel expense, partially offset by restructuring expense of $1.5 million.\nThere was $300,000 of restructuring expense in the second quarter of fiscal '20.\nRegarding our restructuring activities, the company continues to monitor market factors and trends and will continue to evaluate possible additional actions to reduce overall costs and improve future operational profitability, especially in the current COVID-19 environment, which has seen an alarming increase in cases globally.\nThe company currently expects an additional restructuring expense of $700,000 in fiscal '21 resulting from the second quarter actions.\nThe company may take additional actions in the future based on conditions as required.\nNet income was $38.6 million in the second quarter of fiscal '21 as opposed to $23.8 million in the second quarter of fiscal '20.\nThe main drivers between the fiscal periods were higher sales, receipt of $3.3 million of foreign government assistance due to COVID, lower selling and administrative expenses, partially offset by higher restructuring costs.\nShifting to EBITDA, a non-GAAP financial measure.\nFiscal '21 second quarter EBITDA was $60.2 million versus $43.6 million in the same period last year.\nEBITDA was positively impacted by increased sales, foreign governmental COVID assistance and the benefit from restructuring actions taken in prior fiscal years.\nA few other financial items to review.\nIn the second quarter of fiscal '21, we invested approximately $3.6 million in capex as compared to $13.6 million in the second quarter of fiscal '20.\nThe fiscal '21 year-to-date second quarter investment represents an approximately $30 million run rate for the current fiscal year.\nThe lower second quarter capex was simply due to timing as opposed to a conscious effort to curtail capex.\nWe have a strong balance sheet and intend to utilize it during this COVID-impacted fiscal year to make continued investments in our businesses to grow them organically in the future.\nIn addition, we continue to pursue opportunities for inorganic growth.\nOur intent is to emerge from the COVID pandemic stronger than we went into this crisis by judiciously using our strong balance sheet to our long-term advantage.\nIncome tax expense in the second quarter of fiscal '21 was $7.6 million as compared to a tax expense of $5.2 million in the second quarter of fiscal '20.\nThe fiscal '21 second quarter tax rate was 16.5% as compared to 17.9% in the same period last fiscal year.\nThis relatively minor difference in effective tax rate was due to jurisdictional earnings and not discrete income tax activity.\nWe deleveraged gross debt by $2.2 million in the second quarter.\nSince our acquisition of Grakon in September of 2018, when adjusting for the $100 million precautionary credit facility draw in March of 2020, we have reduced gross debt by $110 million.\nNet debt decreased by $29.5 million in the second quarter of fiscal '21 as compared to the fiscal '20 year-end from $134.8 million, to $105.3 million.\nWe ended the second quarter with $242.3 million in cash, which includes the $100 million precautionary draw on the credit facility in March.\nIn November, we repaid $50 million of the March precautionary draw, and we'll continue to evaluate the landscape in the third quarter and may pay down the precautionary draw even further.\nOur debt to trailing 12 months EBITDA ratio, which is used for our bank covenants, is approximately 1.7.\nThis figure includes the impact of the precautionary $100 million draw we initiated in March.\nWithout the draw, the ratio would have been approximately 1.2.\nOur net debt to trailing 12 months EBITDA ratio was a strong 0.5.\nFree cash flow, a non-GAAP financial measure, which effective in fiscal '21 is defined as cash provided from operating activities minus capex.\nPrior to fiscal '21, it was defined as net income plus depreciation and amortization less capex.\nFor the fiscal '21 second quarter, free cash flow was $36.7 million as compared to $35.1 million in the second quarter of fiscal '20.\nAs Don mentioned in his remarks, we are providing revenue and earnings per share guidance for the third quarter, which is subject to disruption at any time due to a variety of factors including the ongoing COVID-19 pandemic situation.\nPlease note that the third quarter of fiscal '21 contains 13 work weeks, whereas the third quarter of fiscal '20 had 14 work weeks.\nThe revenue range for the third quarter is between $265 million and $285 million.\nDiluted earnings per share range is between $0.69 and $0.85 per share.\nDon, that concludes my comments.\nOperator, we are ready to take questions.\n",
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"content": "compname posts q2 earnings per share $1.01.\nq2 earnings per share $1.01.\nq2 sales $300.8 million.\nsees q3 earnings per share $0.69 to $0.85 including items.\nsees q3 sales $265 million to $285 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's begin with the highlights on the Slide 4.\nOur sales for the quarter were $296 million.\nWe had a significant headwind in our automotive segment, due to the ongoing supply chain disruptions, particularly the semiconductor shortage.\nThat shortage led to Auto OEM production slowdowns and some cases production shutdowns.\nThis in turn led directly to lower sales in our Automotive segment, especially in North America.\nHelping to offset that auto headwind were near record sales in our Industrial segment.\nThere was strength in sales across all our industrial product categories, but in particular, we saw growth in electric vehicle busbars, commercial vehicle lighting and radio remote controls.\nRespectively, these products are benefiting from the macro growth trends of electrification, e-commerce and automation.\nThe industrial sales in our portfolio relative our Automotive sales continue to grow.\nAs I mentioned, our team continuing to face supply chain challenges.\nThese include the ongoing semiconductor chip shortage, pandemic-related supply chain disruptions and port congestion, all of which are increasing costs and consequently negatively impacting margins.\nOur team has worked diligently to mitigate these challenges, which in many cases require remedial actions such as expedited shipping and premium component pricing.\nIn addition, we are working relentlessly with our customers to share in the absorption of these costs.\nThe timing of these cost recoveries is not certain.\nAt this point, our expectation is that these conditions will last until the end of our fiscal year.\nThis extended period of demand recovery and margin pressure is a driver of our revised guidance for the full fiscal year.\nThe situation is fluid and our mitigation efforts are ongoing, but we are confident that we will continue to execute and meet our customers' requirements.\nRon will provide more detail on our guidance later in the call.\nOn the new order front, we were encouraged by the diversity of awards across key applications.\nIn addition to our traditional automotive market, we secured awards of cloud computing, commercial vehicle and EV applications.\nFocusing on EV, last quarter, we reported that sales into EV applications were 16% of the consolidated sales.\nThis quarter, EV sales were again 16% of consolidated sales.\nHowever, on a dollar basis, they were higher and in fact, we were a record for Methode.\nOur expectation for that percentage for the full year continues to be in the mid-teens.\nIn the quarter, we further reduced debt, generated positive operating cash flow and continued to return capital to shareholders.\nOur free cash flow was positive even though we invested in inventory to support our deliveries to customers and to help mitigate supply chain disruptions.\nWhile our debt was down, we did have an increase in net debt as we utilized a portion of our available cash to execute a $35 million share buyback in the quarter.\nWe have now executed half of $100 million stock buyback authorization since it was announced last March.\nBefore I provide detail on our business awards, I want to provide some information on an existing program.\nI can now share with you a little more detail on our largest truck center console program.\nWe expect a small portion of that sales from this program to start to roll off late this fiscal year, which was included in our original full-year guidance.\nThen in fiscal 2023, we expect the bulk of the remaining truck program sales to roll off in the range of $90 million to $100 million.\nThe fiscal 2024 impact is negligible.\nAs I've mentioned in recent quarters, our business awards over the last couple of years have put us on track in aggregate to replace the sales from the roll off of this truck program.\nMoving to Slide 5.\nMethode had another solid quarter of business awards.\nThese awards continue to capitalize in key market trends like cloud computing and vehicle electrification.\nThe awards identified here represent some of the key business wins in the quarter and represent $25 million in annual sales at full production.\nIn non-EV automotive, we're awarded programs for lighting and user Interface applications.\nIn cloud computing, we saw demand for our power distribution products in data center applications.\nIn commercial vehicles where signs of an upcycle continue, we were awarded programs for exterior lighting solutions.\nIn EV, we want awards for switch, lighting and power distribution programs.\nOverall, our business are delivering on our strategic priority to drive customer product and geographic diversity.\nTo conclude, despite the ongoing demand fluctuations and supply chain challenges, we are still in a position to deliver solid organic growth sales for fiscal 2022, while generating positive free cash flow.\nSecond quarter net sales were $295.5 million in fiscal year '22 compared to $300.8 million in fiscal year '21, a decrease of $5.3 million or 1.8%.\nThe year-over-year quarterly comparisons included a favorable foreign currency impact on sales of $2.8 million in the current quarter.\nSequentially, sales increased by $7.7 million or 2.7% from the first quarter of fiscal year '22.\nThe decrease in second quarter sales was mainly due to lower automotive sales, especially in North America as compared to the same period in fiscal '21, which benefited from the rebound from the depths of the impact of COVID-19 pandemic experience in our first quarter of fiscal year '21.\nThe sales decrease was partially offset by higher sales of electric hybrid vehicle products, which amounted to 16% of sales in the second quarter of fiscal 2022, which was in line with our previous communication at electric and hybrid vehicles sales would comprise a mid-teens percentage of our fiscal year '22 consolidated sales.\nIn addition, stronger commercial vehicle sales contributed to the robust industrial segment sales growth.\nSecond quarter net income decreased $11.1 million to $27.5 million or $0.72 per diluted share from $38.6 million or $1.01 per diluted share in the same period last year.\nNet income was negatively impacted from decreased sales, the impact of higher materials and logistics costs and other operating costs in the efficiencies, due to the global supply chain shortages and logistics challenges, higher stock-based compensation cost, and lower other income, partially offset by lower restructuring costs and favorable foreign currency translation.\nSecond quarter gross margins were lower in fiscal year '22 as compared to fiscal year '21, mainly due to higher material and logistics costs, including freight and supply chain shortages and unfavorable product mix.\nFiscal year '22 second quarter margins were 23.4% as compared to 26.9% in the second quarter of fiscal year '21.\nThe negative impact of supply chain disruption and higher logistics costs, including freight on the second quarter fiscal year '22 gross margin was approximately 250 basis points.\nUnfavorable product mix also impacted gross margins.\nThese higher costs that were experienced in the second quarter are expected to continue and further into fiscal year '22.\nIn addition, we had anticipated a degree of cost inflation in the remainder of the current fiscal year.\nFiscal year '22 second quarter selling and administrative expenses, as a percentage of sales, increased to 10.6% compared to 10.2% in the fiscal year '21 second quarter.\nThe minor fiscal year '22 second quarter percentage increase was achieved, but all to higher stock-based compensation, partially offset by lower professional fees and restructuring costs.\nThe second quarter of fiscal year '22 selling and administrative expenses percentage is in line with our historical norm, which should yield an efficient flow-through from gross margin to operating income.\nIn addition to the gross margin and selling and administrative items mentioned above, one other non-operational items significantly impacted net income in the second quarter of fiscal year '22 as compared to the comparable quarter last fiscal year.\nOther income net was down by $1.7 million, mainly due to lower international government assistance between the comparable quarters and increased foreign exchange losses from remeasurement.\nThe effective tax rate in the second quarter of fiscal year '22 was 16.7% as compared to 16.5% in the second quarter of fiscal year '21.\nThe fiscal year '22 full-year estimate, which does not include any discrete items, is estimated to be between 17% and 18%, tightening the high end of the range down from 19% to 18%.\nShifting to EBITDA, a non-GAAP financial measure, fiscal year '22 second quarter EBITDA was $47.4 million versus $60.2 million in the same period last fiscal year.\nEBITDA was negative negatively impacted by lower operating income and lower other income.\nIn the second quarter of fiscal year '22, we reduced gross debt by $12.3 million, and we ended the second quarter with $177.2 million in cash.\nDuring the first six months of fiscal year '22, net debt a non-GAAP financial measure, increased by $39 million, mainly due to the share repurchases of $42.4 million and unfavorable working capital changes, especially related to inventory, which increased by nearly $26 million due to the supply chain-related challenges.\nRegarding capital allocation on March 31, we announced a $100 million share repurchase program, which we executed nearly $35 million of purchases during the second quarter of fiscal year '22.\nSince the authorization's approval, we purchased nearly 50 million worth of shares at an average price of $44.04.\nFree cash flow, a non-GAAP financial measure as defined as net cash provided from operating activities, minus capex.\nFor the fiscal year '22 second quarter, free cash flow was $21.6 million compared to $36.7 million in the second quarter of fiscal year '21.\nThe decrease was mainly due to negative working capital changes, especially from the inventory items we discussed prior.\nWe experienced sequentially improved free cash flow in the second quarter of fiscal '22 as compared to the first quarter of fiscal '22.\nWe anticipate our proven history of generating reliable cash flows, which allows for ample funding of future organic growth, inorganic growth and continued return of capital to the shareholders.\nIn the second quarter of fiscal year '22, we invested approximately $5.4 million in capex as compared to $3.6 million in the second quarter of fiscal year '21.\nThe higher capex is in line with our expectation that capex in fiscal year '22 would be higher than the investment in the prior fiscal year.\nWe now estimate fiscal year '22 capex to be in the $45 million to $50 million range, which is lower than the prior estimates for the current fiscal year of $50 million to $55 million we provide earlier.\nThe decrease is simply the result of the timing of the cash outflows of approved projects as opposed to a concerted effort to slow or reduce the guidance of capital investment.\nInvesting for future organic growth and vertical integration remains a key priority from a capital allocation strategy perspective.\nWe do have a strong balance sheet, and we'll continue to utilize it by continuing investment in our businesses to grow them organically.\nIn addition, we continue to pursue opportunities for inorganic growth in a measured return of capital to the shareholders.\nRegarding guidance, it is managed -- it is based on management's best estimates.\nExternal events and the related potential impact on our financial results remain an ongoing challenge.\nAs Don mentioned in his remarks, we lowered our previously issued revenue and earnings per share guidance, largely due to the persistent headwinds from the ongoing negative impact of the chip shortage and logistics challenges.\nAs you recall in our September conference call, we noted that the persistent headwinds could call our performance to be below the midpoint of the ranges of our original guidance as a situation was fluid and would likely remain challenging.\nThese headwinds continue to adversely impact our second quarter results and will likely be with us for the remaining six months of our fiscal year.\nThe revenue range for full fiscal year '22 is between $1.14 billion and $1.16 billion, down from a range of $1.175 billion to $1.235 billion.\nDiluted earnings per share range is now between $3 per share and $3.20 per share, down from $3.35 to $3.75 per share.\nThe range is due from the uncertainty from the supply chain disruption for semiconductors and other materials on both Methode and as customers.\nFrom a sales perspective, lower sales could result from a supply disruptions to us or our customers, which could result in lesser demand for our products or our ability to meet customer demand.\nContinued supply chain disruption would also negatively impact gross margins, due to additional costs incurred from premium freight, factory inefficiencies and a lesser extent, other logistic factors such as port congestion.\nHigher costs for materials, freight and labor are a constant and a dynamic battle, and we remain uncertain as to when things will stabilize.\nDon, that concludes my comments.\nMatt, we are ready to take questions.\n",
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"content": "q2 earnings per share $0.72.\nq2 sales $295.5 million.\nsees fy earnings per share $3.00 to $3.20.\nsees fy sales $1.14 billion to $1.16 billion.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: I'm joined today by Ron Tsoumas, our Chief Financial Officer.\nLet's begin with the business highlights on Slide 4.\nOur sales for the quarter were $301 million.\nExcluding favorable currency translation, our organic growth was up 37% from the prior year.\nIt should be noted, however, that our prior-year quarter was significantly impacted by the pandemic.\nIn this year's fourth quarter, our team faced multiple challenges, first with the chip shortages and then with the plastic resin shortages, resulting from the freeze in Texas.\nThese issues, along with the ongoing port congestion, created meaningful headwinds.\nIn response the Methode team did what it does best, recognize the challenge early, work with the customers and suppliers to develop solutions and then execute.\nAs a result, we were able to meet the high end of our sales guidance for the quarter.\nHowever, the supply chain disruptions required remedial actions such as expedited shipping and premium component pricing that significantly impacted our margins.\nMoving forward, these challenges are lingering into the first quarter and some may continue until the end of this calendar year.\nHowever, we have confidence in the situation improving as evidenced by our guidance for the full fiscal year.\nThe growth that we realized in the fourth quarter was due to increased demand across most of our businesses that was especially focused in auto and commercial vehicle.\nWe also saw growth in our Dabir business as a result of a major hospital system order.\nOverall, we had strong awards for EV, LED, lighting and e-Bikes.\nLast quarter we reported that sales into EV applications were over 12% of consolidated sales.\nThis quarter, EV sales were over 13% of consolidated sales and we continue to expect the number to be in the mid-teens for fiscal 2022.\nMethode's combination of user interface, LED lighting and power distribution solutions is a winning formula in EV, but we are especially seeing growth in our power offering.\nRegarding our balance sheet.\nWe generated $31 million in free cash flow and further reduced our net debt in the quarter.\nWe continue to have ample liquidity and our net leverage ratio is now near zero.\nThe strength and flexibility of our balance sheet allows us to consider multiple paths to invest in the business in order to drive growth and ultimately shareholder return.\nAs an example, this quarter, we initiated a stock buyback program and purchased $7.5 million in Methode shares.\nAfter the quarter end, we also announced a 27% increase to our dividend.\nMethode's business model continues to generate excellent free cash and we are allocating capital per our balanced approach.\nMoving to Slide 5.\nMethode finished the fiscal year with another strong quarter of business awards.\nThese awards continue to capitalize on key market trends like vehicle electrification, LED lighting in auto and cloud computing.\nThe awards identified here represent a cross-section of the business wins in the quarter and represent over $40 million in annual business at full production.\nIn vehicle electrification, we won awards for power distribution, user interface and LED lighting programs.\nWe continue to win programs with OEMs globally in both auto and commercial vehicle applications.\nIn non-EV LED lighting, we were awarded programs for automotive and motorcycle applications.\nIn cloud computing, we continue to see demand for our power distribution products and data center applications.\nAdditionally, we continue to participate in the growth of e-bikes which utilizes our proprietary magnetoelastic technology.\nWe also won two awards for traditional user interface solutions as well as secured a power distribution award for our wind farm application.\nTurning to Slide 6.\nDespite having one less week, we were able to deliver year-over-year organic growth and finished with our good sales of $1,088 million for the year.\nAlso a record for the year was our free cash flow of $155 million.\nThe team's disciplined focus on working capital improvements throughout the year made this result possible.\nThe strong fourth quarter drove our EV sales for the full year to over 12% of total consolidated sales.\nAll of our key solutions, user interface, LED lighting and power distribution contributed to our EV growth.\nLastly, for the full year Methode's business awards were over $200 million in estimated annual sales at full production with the majority being in our target markets of EV, commercial vehicle, e-bike and cloud computing.\nAs I mentioned last quarter, our business awards over the last couple of years have put us on track in aggregate to replace the sales from the roll off of our largest auto program.\nAs such our customer and program concentrations continue to improve and our foundation for organic growth is building.\nOn a sidenote, moving to Slide 7, you will see that we recently celebrated our 75th anniversary.\nMethode Electronics was founded in 1946 by William J. McGinley in Chicago.\nThe Company started with the production of tube-sockets used in radios and early television sets.\nIt was named from an anagram of a good manufacturing method and the electrode and cathode of a vacuum tube, forming the word Methode.\nToday, Methode has grown into a world-class manufacturer and continues to develop new technology and innovative solutions for our customers worldwide.\nThe entire Methode team is proud to carry on the legacy of Mr. McGinley.\nTo conclude, given the recent supply chain challenges, I am extremely pleased that our team was able to deliver at the high end of our guidance, generate solid free cash flow and win substantial program awards in the quarter.\nAs I articulated earlier, these supply chain issues are still present and are impacting our first quarter.\nHowever, we believe they will diminish over the course of our fiscal year, which would put us in a position to deliver strong organic growth for fiscal 2022.\nFourth quarter sales were $301 million in fiscal year 2021 compared to $210.6 million in fiscal year 2020, an increase of $90.4 million or 42.9%.\nThe year-over-year quarterly comparisons included a favorable foreign currency impact on sales of $11.5 million in the quarter.\nThe increase was mainly due to lower sales in the prior-year quarter from the impact of the COVID-19 pandemic and to higher sales of electric and hybrid vehicle products.\nFourth quarter net income increased $1 million to $31.1 million or $0.81 per diluted share from $30.1 million or $0.79 per diluted share in the same period last year.\nNet income benefited from lower income tax expense and favorable foreign currency translation, offset by higher costs from supply chain shortages, higher sales and administrative expenses and lower other income.\nFourth quarter gross margins were lower in the fiscal year '21 as compared to fiscal year '20, mainly due to higher material costs, higher logistics costs, including freight and supply chain shortages.\nFiscal year '21 fourth quarter margins were 25.1% as compared to 28.1% in the fourth quarter of fiscal year '20.\nThis supply disruption accounted for over 200 basis points of the margin decrease.\nThe higher logistics costs, including freight and supply chain shortages that were experienced in the fourth quarter, are expected to continue into fiscal '22.\nIn addition, we anticipate a degree of cost inflation continuing into fiscal year '22.\nFourth quarter selling and administrative expenses as a percentage of sales increased to 12.3% as compared to 8.6% in the fiscal year '20 fourth quarter.\nThe fiscal year '21 fourth quarter percentage increase was attributable to higher stock-based and performance-based compensation expenses, mainly as a result of compensation accrual reversals in the prior-year quarter related to the negative impact of the COVID-19 pandemic on the fiscal 2020 financial performance measures.\nThe fourth quarter fiscal '21 SG&A percentage is more in line with the historical norm which should still yield an efficient flow-through from gross margin to operating income.\nIn addition to the gross margins and SG&A items mentioned above, two other non-operational items significantly impacted net income in the fourth quarter of fiscal year '21 as compared to the comparable quarter last fiscal year.\nFirst, other income net was lowered by $2.1 million mainly due to lower international government assistance between the comparable quarters.\nSecond, income tax expense in the fourth quarter of fiscal year '21 was $5.5 million or 15% as compared to a tax expense of $10 million or 24.9% in the fourth quarter of fiscal year '20.\nThe effective tax rate was higher in the fourth quarter of fiscal year '20 due to an increase in tax reserves in the quarter.\nShifting to EBITDA, a non-GAAP financial measure, fiscal '21 fourth quarter EBITDA was $50.8 million versus $54.5 million in the same period last year.\nEBITDA was negatively impacted by lower operating income and lower other income.\nNet sales increased by $64.1 million to $1.088 billion of which $26.7 million was attributable to foreign exchange.\nThe $1.088 billion in sales was a record for Methode.\nNet income was virtually flat as supply chain disruptions, higher performance-based compensation and increased restructuring, contributed to lower pre-tax income, which was partially offset by the lower income tax rate.\nIn fiscal year '21, we reduced gross debt by $112 million resulting from the full repayment of the $100 million precautionary draw we initiated in March 2020.\nSince our acquisition of Grakon in September 2018, we have reduced gross debt by $118 million.\nNet debt, a non-GAAP financial measure, decreased by $127.9 million to $6.9 million in the fiscal year '21 from $134.8 million at the end of fiscal year '20.\nWe ended the fourth quarter with $233.2 million in cash.\nOur debt to trailing 12-month EBITDA ratio, which is used for our bank covenants, is approximately 1.25.\nOur net debt to trailing 12-months EBITDA ratio was 0.04, virtually nil.\nFree cash flow, a non-GAAP financial measure, which effective in fiscal year '21 is defined as net cash provided from operating activities less capex.\nFor fiscal year '21 fourth quarter, free cash flow was $31.2 million as compared to $47.8 million in the fourth quarter of fiscal '20.\nThe decrease was mainly due to higher working capital in the quarter to support year-over-year increased sales.\nFor the full fiscal year '21, we produced record net cash provided by operating activities of nearly $180 million and record free cash flow of $155 million.\nWhile we don't expect to equal the fiscal year '21 free cash flow results in fiscal '22, largely due to increased working capital to support fiscal year '22 sales growth and increased capex, we do expect to generate sizable free cash flow.\nWe anticipate continuing our proven history of consistently generating reliable cash flows which allow for ample funding of future organic growth, inorganic growth and return of capital to the shareholders.\nIn the fourth quarter of fiscal year '21, we invested approximately $4.8 million in capex as compared to $10.2 million in the fourth quarter of fiscal year '20.\nThe lower fourth quarter capex was simply due to timing as opposed to a conscious effort to curtail capex.\nWe approved capex during the quarter and the full fiscal year that is not yet reflected in the cash flow statement as the actual cash outlay for these approved expenditures will occur in future reporting periods.\nWe have a strong balance sheet and we'll continue utilizing it by continuing investment in our businesses to grow them organically in the future.\nIn addition, we continue to pursue opportunities for inorganic growth.\nRegarding capital allocation, we recently announced two initiatives.\nFirst, on March 31 we announced a $100 million share repurchase program, which we executed $7.5 million of repurchases during the fourth quarter of fiscal year '21.\nIn addition, last week we announced a 27% increase in our quarterly dividend from $0.11 per share to $0.14 per share.\nWe are confident in our cash-generating ability to simultaneously invest in organic growth, inorganic growth and provide an ample return of capital to the shareholders.\nDon mentioned in his remarks, we are providing revenue and earnings per share guidance in the first quarter of fiscal '22 due to the uncertain direct and indirect impacts from the ongoing semiconductor supply shortage and the continued challenges from other supply disruptions, including port congestion.\nThe revenue range for the first quarter of fiscal year '22 is between $285 million and $300 million.\nDiluted earnings per share range is between $0.68 per share to $0.80 per share.\nThe revenue range for the full fiscal year '22 is between $1.175 billion and $1.235 billion.\nDiluted earnings per share ranges between $3.35 per share to $3.75 per share.\nThe midpoint of the range represents an 11% increase over fiscal '21 despite having a significantly higher tax rate in fiscal year '22.\nThe wider range is due to the uncertainty from the supply chain disruption for semiconductors and other materials on both Methode and its customers.\nFactors that could result in us moving toward the higher end of the sales range include higher sales due to lesser disruption of supply to us and/or our customers which would result in higher demand for our products.\nLesser disruption would also minimize the cost of sales impact from premium freight, factory inefficiencies and, to a lesser extent, tariffs and other logistic factors such as port congestion.\nDon, that concludes my comments.\nKathryn, we are ready to take questions.\n",
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"content": "methode electronics inc - q4 sales $301 mln.\nsees q1 earnings per share $0.68 to $0.80.\nq4 earnings per share $0.81.\nsees q1 sales $285 million to $300 million.\nq4 sales $301 million.\ncompname says for fy 2022, co expects net sales in range of $1.175 billion-$1.235 billion.\ncompname says for fy 2022, co expects earnings per share to be in range of $3.35 to $3.75.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: We appreciate you joining us for MetLife's first quarter 2021 earnings call.\nLast night, we released a set of supplemental slides, which addressed the quarter.\nThey are available on our website.\nJohn McCallion is under the weather today.\nWe are going to let him rest his voice, and I will speak to the supplemental slides following Michel's remarks.\nAn appendix to the supplemental slides features outlook sensitivities, disclosures, GAAP reconciliations and other information, all of which you should also review.\nIn fairness to all participants, please limit yourself to one question and one follow-up.\nWith that, over to Michel.\nAs we reported last evening, MetLife delivered very strong financial results for the first quarter of 2021.\nOur diverse business mix, sound investment strategy and strong expense discipline combined to generate earnings well above consensus expectations.\nBy the numbers, we reported first quarter 2021 adjusted earnings of $2 billion or $2.20 per share, up 39% from $1.58 a year ago.\nThe primary driver was exceptionally strong variable investment income or VII, partially offset by elevated COVID-19 related claims.\nNet income for the quarter was $290 million, down from $4.4 billion a year ago, primarily due to losses on derivatives that protect our balance sheet from declines in equity markets and interest rates.\nSuch gains and losses are the result of GAAP accounting rules that require us to mark certain of our derivative hedges to market through net income without similar treatment for the assets and liabilities being hedged.\nWe believe the economics and the free cash flow of our business are captured than adjusted earnings.\nRegarding variable investment income, the key driver of gains in the first quarter was our private equity portfolio, which delivered returns of 13.3%.\nRecall that private equity returns are reported on a one quarter lag.\nThe strong performance in the fourth quarter was driven primarily by three private equity sectors, domestic leveraged buyout funds, European LBOs, and venture capital.\nIn the second half of 2020, IPOs from US-based LBOs and venture capital firms more than doubled over the prior year and the market rewarded many entrants with strong valuations.\nVenture capital was our best performer across the three sub sectors, largely due to the market's appetite for tech companies.\nWe see deal volumes hit a record in 2020 and the increase in digital activity spurred by the pandemic drove attractive valuations for early stage tech firms positioned to capitalize on that trend.\nWhile our private equity portfolio return in the quarter was robust, it was in line with industry benchmarks, most notably, Cambridge Associates private equity index.\nWe are confident this asset class will continue to be a significant source of alpha for MetLife in the future.\nTurning to the performance of our business segments, I'll begin with our US Group Benefits results.\nAdjusted earnings were down 70% year-over-year on elevated COVID-19 life claims.\nIn the US, overall COVID-19-related deaths were 40% higher in the first quarter of 2021, than they were in the fourth quarter of 2020.\nFor MetLife, our Group Life mortality ratio was 106.3%, well above the high end of our target range of 85% to 90% with approximately 17 percentage points attributable to COVID -19 claims.\nThe top line performance of the Group Benefits business was strong with sales up 46% year-over-year.\nWe are doing especially well with national accounts and if trends hold, we expect the group business to deliver a record sales year.\nAdjusted PFO growth was also solid at 16% with the addition of Versant Health being a large contributor.\nIn retirement and Income Solutions or RIS, adjusted earnings were up 92% year-over-year, driven by higher VII.\nBeyond VII, adjusted earnings were still strong on favorable underwriting and volume growth.\nLooking ahead, we continued to see a robust pension risk transfer pipeline.\nRising equity markets and interest rates have improved pension plan funding levels and lowered the cost for plan sponsors to transact with an insurer.\nWithin Asia, we saw a similar earnings pattern to RIS.\nAdjusted earnings were up 70% year-over-year on a constant currency basis, driven by higher VII.\nHowever, even allowing for VII, adjusted earnings were strong, driven by favorable foreign exchange rates, volume growth, and underwriting.\nSales in the region were up 12% on a constant currency basis, even with the COVID resurgence in certain markets.\nIn Latin America, adjusted earnings were down 57% year-over-year on a constant currency basis, primarily due to the pandemic.\nCOVID-related claims in the quarter totaled approximately $150 million, mainly in Mexico.\nIn EMEA, adjusted earnings of $71 million were down 11% on a constant currency basis on higher COVID-related claims as well as higher expenses compared to the favorable prior-year quarter.\nSales were up 4% on a constant currency basis with strong momentum in the UK employee benefits space.\nTo finish my business segment discussion, I think a theme is clear.\nIf you look past higher VII and mortality in the quarter, the underlying performance of the business was very solid.\nOn the fundamentals, we continue to demonstrate consistent execution with strong earnings power across a range of different economic scenarios.\nTurning to cash and capital management, MetLife ended the first quarter with cash at the holding company of $3.8 billion near the top end of our $3 billion to $4 billion target buffer.\nOur two-year average free cash flow ratio remains within our guidance range of 65% to 75%.\nCurrently, our cash balances are much higher following the receipt of $3.94 billion of proceeds on the sale of our US P&C business.\nDuring the quarter, we were pleased to return $1.4 billion of capital to shareholders, $1 billion in share repurchases, and approximately $400 million in common stock dividends.\nSo far in Q2, we have bought back an additional $210 million of common shares, and we have roughly $1.6 billion remaining under our current repurchase authorization.\nLast week, our Board of Directors approved a second quarter 2021 common stock dividend of $0.48 per share, up 4.3% from the first quarter.\nOver the last decade, we have increased our common dividend at a 10% compound annual growth rate.\nOur consistent execution continues to generate strong free cash flow that allows us to invest in growth and return capital to our shareholders, all with the goal of driving long-term value creation.\nAs we look ahead, we see a path to a brighter future from both an economic and health perspective.\nIn the United States conditions look promising for a period of employment growth, which is always good for our group business.\nOn the pandemic front, we believe the worst of the underwriting effects on our Company are behind us as the vaccine rollout continues to advance.\nThe progress is not yet uniform across the world, and certain areas are still struggling, but the trend line is clear, a slow but steady return to something we can call normalcy.\nFor our customers, we continue to accelerate our digital transformation to meet their evolving needs.\nIn Japan, for example, 95% of our policy submissions are now done digitally.\nFor our employees, we will be implementing a more flexible workplace model in Q3, which for most will be a hybrid approach.\nWhile our people have performed exceptionally well working from home during the pandemic, we believe the office will continue to play a critical role in fostering collaboration, innovation, and career development.\nWe are equally confident that by incorporating more virtual work into our model, we will enhance productivity, gain access to a broader talent pool, and strengthen employee engagement.\nAs I said in my annual letter to shareholders, consistent execution is our new baseline.\nContinuous improvement is our new aspiration and expectation.\nI will start with the 1Q 2021 supplemental slides, which provide highlights of our financial performance and an update on our cash and capital positions.\nStarting on page 3, we provide a comparison of net income to adjusted earnings in the first quarter.\nNet income in the quarter was $290 million or approximately $1.7 billion lower than adjusted earnings.\nThis variance was primarily due to net derivative losses as a result of the significant rise in long-term interest rates as well as stronger equity markets in 1Q 2021.\nOur investment portfolio and our hedging program continued to perform as expected.\nOn page 4, you can see the year-over-year comparison of adjusted earnings by segment.\nThere were no notable items for either period.\nAdjusted earnings per share benefited from exceptionally strong returns in our private equity portfolio and were up 39% and 38% on a constant currency basis.\nMoving to the businesses, starting with the US group benefits, adjusted earnings were down 70% year-over-year, largely driven by unfavorable group life mortality due to elevated COVID-19-related life claims.\nFavorable non-medical health underwriting and volume growth were partial offsets.\nOverall, results for Group Benefits were mixed.\nAdjusted earnings were down, but underlying fundamentals including top line growth and persistency were strong.\nGroup Benefits sales were up 45% year-over-year primarily due to higher jumbo case activity.\nWe believe that we are on track to deliver a record sales year in 2021.\nAdjusted PFOs were $5.6 billion, up 16% year-over-year due to solid volume growth across most products, the addition of Versant Health and roughly five percentage points related to higher premiums from participating contracts, which can fluctuate with claims experience.\nI will discuss Group Benefits underwriting in more detail shortly.\nRetirement and Income Solutions or RIS adjusted earnings were up 92% year-over-year.\nThe primary driver was higher variable investment income, largely due to strong private equity returns.\nIn addition, elevated COVID-19 mortality and volume growth were positive contributors.\nRIS investment spreads were 234 basis points up 120 basis points year-over-year primarily due to higher variable investment income.\nSpreads excluding VII were 88 basis points, up 5 basis points year-over-year primarily due to the decline in LIBOR rates.\nRIS liability exposures including UK longevity reinsurance grew 12% year-over-year due to strong volume growth across the product portfolio, as well as separate account investment performance.\nWith regard to UK longevity reinsurance, we have continued to see strong growth since completing our initial transaction in 2Q 2020.\nThe notional balance stands at $8.8 billion at March 31, up nearly $5 billion from year end 2020.\nAs previously announced, first quarter results for property and casualty are reflected as a divested business in our quarterly financial statements.\nThe sale of the Auto and Home Business to Farmers Insurance closed on April 7, and we expect to record an after-tax gain of approximately $1 billion in 2Q 2021.\nMoving to Asia, adjusted earnings were up 78% and 70% on a constant currency basis, primarily due to higher variable investment income as well as volume growth and favorable underwriting margins.\nAsia's solid volume growth was driven by higher general account assets under management on an amortized cost basis, which were up 6% and 4% on a constant currency basis.\nAsia sales were up 12% year-over-year on a constant currency basis with growth across most markets.\nLatin America, adjusted earnings were down 58% and 57% on a constant currency basis, primarily driven by unfavorable underwriting, partially offset by the improvement in equity markets.\nElevated COVID-19-related claims primarily in Mexico impacted Latin America's adjusted earnings by approximately $150 million after tax.\nLooking ahead, we expect COVID-19 claims to decrease throughout the year more significantly in the second half and adjusted earnings to return to 2019 levels in 2022, which is consistent with our outlook.\nLatin America adjusted PFOs were down 6% year-over-year on a constant currency basis due to lower single premium immediate annuity sales in Chile.\nEMEA adjusted earnings were down 9% and 11% on a constant currency basis, primarily driven by higher COVID-19-related claims as well as higher expenses compared to the favorable prior-year quarter.\nEMEA adjusted PFOs were down 5% on a constant currency basis, but sales were up 4% on a constant currency basis due to strong growth in UK employee benefits.\nMetLife Holdings adjusted earnings were up 123%.\nThis increase was primarily driven by higher variable investment income, largely due to private equity returns.\nAlso favorable equity markets and long-term care underwriting were positive drivers.\nLong-term care benefited from higher policy and claim terminations as well as lower claim incidences.\nThe life interest adjusted benefit ratio was 54.8%, higher than the prior year quarter of 51% and at the top end of our annual target range of 50% to 55% due to elevated COVID-19 mortality.\nCorporate and other adjusted loss was $171 million.\nThis result is consistent with our 2021 adjusted loss guidance range of $650 million to $750 million.\nThe Company's effective tax rate on adjusted earnings in the quarter was 20.8% and within our 2021 guidance range of 20% to 22%.\nNow, I will provide more detail on Group Benefits 1Q 2021 underwriting performance on page 5.\nThere were approximately 200,000 COVID-19-related deaths in the US in the first quarter, the highest single quarter since the pandemic began and up nearly 40% versus the fourth quarter of 2020.\nIn addition to the higher number of claims, there were more deaths at younger ages below 65, which resulted in increased claims severity.\nApart from COVID-19, the number of life insurance claims of greater than $2 million nearly doubled versus a typical quarter.\nThe Group Life mortality ratio was 106.3% in the first quarter, which included roughly 17 percentage points related to COVID-19 life claims.\nThis reduced Group Benefits adjusted earnings by approximately $280 million after tax.\nFor group non-medical health, the interest adjusted benefit ratio was 71.1% in the first quarter with favorable experience across most products.\nThe 1Q 2021 ratio was below the prior year quarter of 71.7% and at the low end of our annual target range of 70% to 75%.\nNow let's turn to VII in the quarter on page 6.\nThis chart reflects our pre-tax variable investment income over the last five quarters, including approximately $1.4 billion in the first quarter of 2021.\nThis very strong result was mostly attributable to the private equity portfolio, which had a 13.3% return in the quarter.\nAs we have previously discussed, private equities are generally accounted for on a one-quarter lag.\nOur first quarter results were essentially in line with private equity industry benchmarks.\nWhile all private equity classes performed well in the quarter, our venture capital funds, which account for roughly 20% of our PE account balance of $10.3 billion were the strongest performer across subsectors with roughly 25% quarterly return due to a broad increase in tech company valuations.\nOn page 7, first quarter VII of $1.1 billion post-tax is shown by segment.\nThe attribution of VII by business is based on the quarterly returns for each segment's individual portfolio.\nAs noted previously, RIS, MetLife Holdings and Asia generally accounted for approximately 90% or more of the total VII and are split roughly one-third each, although it can vary from quarter to quarter.\nVII results in 1Q 2021, were more heavily weighted toward RIS, and MetLife Holdings as Asia's portfolio has a smaller proportion of the venture capital funds that I referenced earlier.\nTurning to page 8, this chart shows our direct expense ratio over the prior five quarters and full year 2020 including 11% in the first quarter of 2021.\nAs we have highlighted previously, we believe our full year direct expense ratio is the best way to measure performance due to fluctuations in quarterly results.\nIn 1Q 2021, our favorable direct expense ratio benefited from solid top line growth and ongoing expense discipline as well as delayed investment spending in the quarter.\nWe expect the direct expense ratio for the remainder of 2021 to be consistent with our full year outlook.\nNow, I will discuss our cash and capital position on page 9.\nCash and liquid assets at the holding companies were approximately $3.8 billion at March 31, which is down from $4.5 billion at December 31, but well within our target cash buffer of $3 billion to $4 billion.\nThe sequential decrease in cash at the holding companies was primarily due to the net effects of subsidiary dividends, payment of our common stock dividend, share repurchases of approximately $1 billion in the first quarter as well as holding company expenses and other cash flows.\nLooking ahead, we expect HoldCo cash will be significantly higher in the second quarter as a result of the sale of our Auto and Home Business to Farmers Insurance.\nNext, I would like to provide you with an update on our capital position.\nFor our US companies, our combined NAIC RBC ratio was 392% at year end 2020 and comfortably above our 360% target.\nFor our US companies.\nexcluding our property and casualty business, preliminary first quarter 2021 statutory operating earnings were approximately $1.5 billion while statutory net income was approximately $570 million.\nStatutory operating earnings increased by roughly $2.3 billion year-over-year driven by lower VA rider reserves and increase in interest margins, higher net investment income, and lower operating expenses.\nStatutory net income excluding our P&C business increased by roughly $430 million year-over-year, driven by higher operating earnings, partially offset by an increase in after tax derivative losses.\nWe estimate that our total US statutory adjusted capital excluding P&C was approximately $16.7 billion as of March 31, down 2% compared to December 31.\nFavorable operating earnings were more than offset by after tax derivative losses and dividends paid to the holding company.\nFinally, the Japan solvency margin ratio was 967% as of December 31, which is the latest public data.\nIn summary, MetLife delivered another strong quarter, which benefited from exceptional private equity returns, solid business fundamentals and ongoing expense discipline.\nWhile higher mortality in the US and Mexico dampened adjusted earnings in Group Benefits and Latin America, our financial performance demonstrates the benefits of our diverse set of market-leading businesses and capabilities.\nIn addition, our capital, liquidity, and investment portfolio are strong, resilient, and position us for success.\nWe are confident that the actions we are taking to be a simpler, more focused company will continue to create long-term sustainable value for our customers and our shareholders.\n",
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"content": "quarterly adjusted earnings per share $2.20.\nquarter-end book value of $70.08 per share, down 3% from $72.62 per share at march 31, 2020.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Last night, we released a set of supplemental slides which address second quarter results.\nThey are available on our website.\nAn appendix to these slides features additional disclosures, GAAP reconciliations and other information which you should also review.\nIn fairness to all participants, please limit yourself to one question and one follow-up.\nWith that, over to Michel.\nMetLife's outstanding financial results in the second quarter provides further evidence of the tremendous progress we're making on the pillars of our Next Horizon strategy.\nWe're continuing to focus with the right capital allocation and investment decisions.\nWe're continuing to simplify with exceptional expense discipline and we're continuing to differentiate with enhancements to our market-leading Group Benefits platform that are helping to drive record sales.\nWhen it comes to our strategy, we've transitioned from a period of execution risk to one of additional opportunity.\nNet income in the second quarter was $3.4 billion, up from $68 million a year ago.\nThe primary drivers were growth in adjusted earnings, the gain we booked on the sale of our Auto and Home Business and derivative gains in the current quarter relative to derivative losses a year ago.\nStrong net income drove book value per share, excluding AOCI, other than FCTA growth, of 8%.\nAdjusted earnings in the second quarter were $2.1 billion or $2.37 per share, up 186% from $0.83 per share a year ago.\nAs in the first quarter, our investment portfolio generated exceptionally strong variable investment income.\nPrivate equity remained the key driver of VII.\nAs you know, private equity returns are reported on a one quarter lag, so the strong Q2 performance reflected gains from Q1.\nWe reported private equity gains of 9.7% in the second quarter compared with a negative 8.2% a year ago.\nEquity markets continued to perform well from April through June, which we anticipate being reflected in our Q3 earnings.\nWhen we unveiled our Next Horizon Strategy at Investor Day in December 2019, we pointed to the scale and expertise that we have in investments as a competitive advantage for MetLife.\nThe strategic approach we have taken on private equity is a case in point.\nOur decision to sell most of our $2.5 billion hedge fund portfolio and increase the allocation to private equity has provided a better match for our long-dated liabilities, while creating significant value for our shareholders.\nThis was no accident, but the latest in a series of successful investment decisions from de-risking our portfolio ahead of the financial crisis to selling Peter Cooper Village/Stuyvesant Town nearer [Phonetic] market top.\nTurning to our reporting segments.\nJohn McCallion will provide a complete overview shortly.\nI would like to focus on how our results show that COVID-19 is both still with us but lessening in its impact.\nFrom an underwriting perspective, we've seen a sizable improvement, but we are still experiencing excess mortality.\nIn the quarter, the Group Life mortality ratio was 94.3%, below the 106.3% from last quarter but still above the top end of our guidance range.\nIn Latin America, we had $66 million of COVID losses, again, below the $150 million of COVID losses from Q1, but still above normal.\nYet, at the same time, COVID-19s economic grip is easing somewhat.\nAt MetLife, we see this emerging in sales trends.\nIn the U.S. Group business, sales through the first half of 2021 are 39% higher than they were in the first half of 2020 and if current trends hold, 2021 will be a record sales year.\nIn Latin America, sales are up 55% year-over-year.\nOn a year-over-year basis, Asia sales are up 42%, while EMEA sales are up 20%.\nSo while we are not out of the woods, we are starting to see a clearing in the trees ahead.\nThe path of the pandemic is something outside of our control, but as we have demonstrated over the past year and a half, we are not standing still.\nWe are moving ahead with urgency to accelerate our strategy.\nTo further differentiate our Group Benefits business, we acquired Versant Health and immediately became the third largest vision care provider in the United States.\nVersant has now been part of our results for two quarters and in Q2, it contributed 6 points of year-over-year growth in U.S. Group premiums, fees and other revenues, consistent with our expectations.\nYear-over-year request for vision care proposals are up more than 20% among our national account customers.\nWe are pleased with how our new vision care offering is performing in the marketplace and expect it to contribute meaningfully to growth going forward.\nSimilarly, we have enhanced our pet insurance offering to make it even more attractive to customers.\nWe now offer telehealth concierge services, rollover benefits from the prior year, and family plans covering multiple pets.\nIn what we believe is a first for the industry, we also cover pre-existing conditions when an employee switches to MetLife pet Insurance from another carrier as long as the condition was covered by the prior plan.\nMore than 500 employers now offer MetLife pet insurance as a voluntary benefit to their employees and we believe our best-in-class product will continue to make gains in this highly attractive and underpenetrated market.\nTo strengthen our focus, we made a decision to sell our businesses in Poland and Greece to NN Group.\nThis was another promise we made at Investor Day to continue to look at our portfolio through the lens of strategic fit and ability to achieve scale and clear our hurdle rate.\nSince that time, we have sold or reached agreements to sell our businesses in four markets and we will continue to apply this disciplined approach.\nIn early April, we also closed on the sale of our Auto and Home Business to Farmers Insurance for $3.94 billion in cash.\nThe 10-year strategic partnership we forged allows each company to focus on its core strengths: Farmers' 90 years of P&C underwriting and service excellence and MetLife's unrivaled distribution reach in the U.S. Group Benefits space.\nThe simplified pillar of our strategy was evident in our exceptional expense management.\nIn the quarter, we delivered a direct expense ratio of 11.4% and we now expect to beat our 12.3% target ratio, not only for all of 2021, but for 2022 as well.\nWe are making this commitment despite selling our Auto and Home Business, which operated at a lower expense ratio than the overall enterprise.\nAs we have said many times, we are embedding an efficiency mindset across everything we do that is central to our ability to deliver continuous improvement.\nAt MetLife, we no longer have expense reduction programs.\nWe do not need them.\nWhat we have instead is a publicly disclosed direct expense ratio target that we have brought down by 200 basis points over the past five years and promise to keep there.\nThis is how we hold ourselves accountable and this is how investors can hold us accountable as well.\nOur strategic decision to sell Auto and Home contributed to a $6.5 billion cash buffer as of June 30, well above our target range.\nWe repurchased $1.1 billion of common shares in the second quarter and another $248 million of common shares so far in the third.\nAnd yesterday, our Board approved a new $3 billion share repurchase authorization.\nThis is on top of the $475 million we have remaining on our December 2020 authorization.\nWe believe that investing in responsible growth, steadily increasing our common dividend, and buying back common stock are all vital parts of a balanced approach to creating long-term shareholder value.\nCOVID-19 continues to present MetLife with the opportunity and the obligation to step up for our employees, our customers and our communities.\nThat work is ongoing.\nWe are in a new phase of the pandemic.\nThe primary focus now is on vaccinating as many people as possible.\nNothing will do more to prevent needless tasks and a potential resurgence of the lockdown measures that caused so much economic harm.\nAs we did over 100 years ago with our visiting nurses program, MetLife has mobilized to make a positive contribution to advance public health.\nFirst and foremost, this means doing all we can to give our own employees and their families access to the vaccines.\nExamples from our markets include giving employees paid leave to get vaccinated, covering vaccine-related expenses such as travel and child care, and holding free vaccine clinics for employees and their families in locations as varied as Oriskany, New York and Osaka, Japan.\nBut it also means helping to vaccinate the broader population as well.\nIn Nagasaki, Japan, we've opened 6,500 square feet of our headquarters as a free vaccination site.\nMetLife Foundation has committed $500,000 to delivering vaccines to underserved communities across the U.S. and our medically trained staff are volunteering to administer doses at vaccine sites.\nIn closing, to perform as well as we have through a pandemic highlights some fundamental truths about MetLife.\nWe have an all-weather strategy that holds up well to stress.\nWe have an investment portfolio that captures meaningful upside.\nWe have competitive advantages that enable us to grow in the most attractive markets and we have a relentless focus on execution.\nAt our 2019 Investor Day, we said our Next Horizon Strategy would generate tangible benefits for shareholders: a 12% to 14% adjusted ROE; $20 billion of distributable cash over five years; and an additional $1 billion of operating leverage to self-fund growth.\nWe are on track to meet every one of those commitments.\nI will start with the 2Q '21 supplemental slides which provide highlights of our financial performance and an update on our cash and capital positions.\nPlease note, in the appendix, we have also provided an updated 25 basis points sensitivity for our U.S. long-term interest rate assumption.\nStarting on Page 3.\nWe provide a comparison of net income to adjusted earnings in the second quarter.\nNet income in the quarter was $3.4 billion or approximately $1.3 billion higher than adjusted earnings.\nThis variance was primarily due to the net investment gains of $1.3 billion, of which $1.1 billion relates to the sale of our Property & Casualty business to Farmers Insurance.\nOur investment portfolio and our hedging program continue to perform as expected.\nAdditionally, adjusted earnings include one notable item of $66 million related to a legal reserve release.\nOn Page 4 you can see the year-over-year comparison of adjusted earnings by segment excluding notable items.\nAs I previously noted, there was one notable item of $66 million in 2Q of '21 and no notable items for the prior year period.\nAdjusted earnings per share, excluding the notable item, was $2.30, benefiting from strong returns in our private equity portfolio but show most of the year-over-year variance.\nMoving to the businesses, starting with the U.S., Group Benefits adjusted earnings were flat year-over-year as volume growth and the Versant Health acquisition largely offset unfavorable underwriting margins.\nGroup Life mortality improved sequentially but remained elevated in the quarter.\nI will discuss in more detail shortly.\nRegarding non-medical health, the interest adjusted benefit ratio was 73.8% in 2Q of '21, within its annual target range of 70% to 75%, but higher than the prior year quarter of 58.5%, which benefited from extremely low dental utilization and favorable disability incidence.\nWe've seen a return to more normal utilization rates for non-medical health and expect this trend to continue.\nTherefore, we expect the interest adjusted benefit ratio to remain within its annual target range for the remainder of the year.\nOverall, business fundamentals for Group Benefits remained healthy, highlighted by strong top-line growth and persistency.\nGroup Benefits sales were up 39% year-to-date, primarily due to higher jumbo case activity and remain on track to deliver a record sales year in 2021.\nAdjusted PFOs were $5.6 billion, up 29% year-over-year.\nSeveral factors contributed to the strong year-over-year growth, including a $500 million impact relating to dental premium credits and the establishment of a dental unearned premium reserve, both reducing premiums in the second quarter of 2020, which collectively contributed 13 percentage points to the year-over-year growth rate.\nIn addition, 4 percentage points were related to higher premiums in the current quarter from participating contracts, which can fluctuate with claim experience.\nAfter considering these factors, underlying PFO growth for Group Benefits was roughly 12%, driven by solid volume growth across most products, including continued strong momentum in voluntary and the addition of Versant Health.\nLooking ahead to the second half of the year, while Group Benefits reported PFO growth rates will be impacted by the dental unearned premium reserve release in Q3 and Q4, we expect the underlying PFO growth to maintain its strength and resilience for the remainder of 2021.\nRetirement and Income Solutions or RIS adjusted earnings were $654 million, up $462 million year-over-year.\nThe primary driver was higher variable investment income, largely due to strong private equity returns.\nThis was partially offset by less favorable underwriting margins compared to 2Q of '20.\nRIS investment spreads were 224 basis points, up 199 basis points year-over-year, primarily due to higher variable investment income.\nSpreads, excluding VII, were 98 basis points, up 13 basis points year-over-year due, in part, to sustained paydowns in our portfolios of residential mortgage loans and residential mortgage-backed securities, a partial recovery in real estate equities and lower LIBOR rates.\nRIS liability exposures, including U.K. longevity reinsurance, grew 8% year-over-year due to strong volume growth across the product portfolio, as well as separate account investment performance.\nWith regards to pension risk transfers, we continue to see a robust PRT pipeline.\nAdjusted earnings were up 103% and 91% on a constant currency basis, primarily due to higher variable investment income.\nAsia's solid volume growth also contributed to the strong performance driven by higher general account assets under management on an amortized cost basis, which were up 7% and 6% on a constant currency basis.\nAdditionally, while against a weak 2Q of '20, Asia sales were up 42% year-over-year on a constant currency basis, demonstrating the resiliency in the business.\nLatin America adjusted earnings were down 27% and 38% on a constant currency basis, primarily driven by unfavorable underwriting and unfavorable equity markets related to the Chilean encaje, which had a negative 1.5% return in the quarter versus a positive 14% in 2Q of '20.\nThis was partially offset by favorable investment margins.\nCOVID-19-related claims improved sequentially.\nThe impact on Latin America's second quarter adjusted earnings was approximately $66 million after tax.\nWhile Latin America's bottom line has been dampened by the elevated COVID-19-related claims, the underlying fundamentals of the business remain robust as evidenced by strong sales and persistency throughout the region.\nLatin America adjusted PFOs were up 12% year-over-year on a constant currency basis and sales were up 55% driven by solid growth in all markets.\nEMEA adjusted earnings were down 19% and 23% on a constant currency basis, primarily driven by higher COVID-19-related claims in the current period compared to low utilization in the prior year period.\nSolid volume growth was a partial offset.\nThe current quarter has also benefited from a favorable refinement to an unearned premium reserve positively impacting adjusted PFOs and adjusted earnings by approximately $15 million after tax.\nIn addition, Poland increase contributed roughly 10% to run rate earnings that will be reported in divested businesses beginning in the third quarter.\nEMEA adjusted PFOs were up 8% on a constant currency basis and sales were up 20% on a constant currency basis, primarily due to higher credit life sales in Turkey and solid growth in U.K. employee benefits.\nMetLife Holdings adjusted earnings were up $515 million year-over-year.\nThe increase was primarily driven by strong private equity returns.\nIn addition, life underwriting margins were favorable.\nThe life interest adjusted benefit ratio was 47.1%, lower than the prior year quarter of 59.1% and below our annual target range of 50% to 55%.\nCorporate and Other adjusted loss, excluding the favorable notable item of $66 million related to a legal reserve release, was $126 million.\nThis result compared favorably to the adjusted loss of $289 million in 2Q of '20 due to higher net investment income, lower expenses and lower preferred stock dividends.\nThe company's effective tax rate on adjusted earnings in the quarter was 21.6% and within our 2021 guidance range of 20% to 22%.\nNow, I will provide more detail on Group Benefits mortality results on Page 5.\nThe Group Life mortality ratio was 94.3% in the second quarter of 2021, which is above our annual target range of 85% to 90%.\nCOVID reported claims in 2Q of '21 were roughly 4.5 percentage points, which reduced Group Benefits adjusted earnings by approximately $75 million after tax.\nAdditionally, the quarter included a higher level of life claims above $2.5 million and an additional level of excess mortality that appears to be COVID-related.\nThese, collectively, impacted the ratio by an additional 2.7 percentage points or $40 million after tax.\nThere were approximately 50,000 COVID-19-related deaths in the U.S. in the second quarter of '21.\nWhile still elevated, total debts have moderated versus the prior year and sequential quarters.\nLooking ahead, we expect COVID-19-related deaths in Group Benefits to continue to trend lower.\nNow let's turn to Page 6.\nThis chart reflects our pre-tax variable investment income over the last five quarters, including approximately $1.2 billion in the second quarter of 2021.\nThis very strong result was mostly attributable to the private equity portfolio, which had a 9.7% return in the quarter.\nAs we have previously discussed, private equities are generally accounted for on a one quarter lag.\nOur second quarter results were essentially in line with PE industry benchmarks.\nWhile all private equity asset classes performed well in the quarter, our venture capital funds, which accounted for roughly 22% of our PE account balance of $11.3 billion with the strongest performer across subsectors with a roughly 19% quarterly return.\nOn Page 7, second quarter VII of $950 million post-tax is shown by segment.\nThe attribution of VII by business is based on the quarterly returns for each segment's individual portfolio.\nAs we have previously noted, RIS, MetLife Holdings and Asia generally account for approximately 90% or more of the total VII and are split roughly one-third each, although it can vary from quarter-to-quarter.\nVII results in 2Q of '21 were more heavily weighted toward RIS and MetLife Holdings, as Asia's private equity portfolio is less mature and has a smaller proportion of the venture capital funds that I referenced earlier.\nTurning to Page 8.\nThis chart shows our direct expense ratio over the prior five quarters and full year 2020, including 11.4% in the second quarter of '21.\nAs we have highlighted previously, we believe our full year direct expense ratio is the best way to measure performance due to fluctuations in quarterly results.\nIn 2Q of '21, our favorable direct expense ratio benefited from solid top-line growth and ongoing expense discipline, as well as lower employee-related benefits in the quarter.\nWe expect the direct expense ratio for the remainder of 2021 to be elevated compared to the first half of 2021 due to timing of investments and seasonality.\nBut as Michel noted, we expect full year '21 and '22 direct expense ratio to be our 12.3% guidance.\nNow I will discuss our cash and capital position on Page 9.\nCash and liquid assets at the holding companies were approximately $6.5 billion at June 30, which is up from $3.8 billion at March 31 and well above our target cash buffer of $3 billion to $4 billion.\nThe sequential increase in cash at the holding companies was primarily due to the proceeds received from our P&C sale to Farmers Insurance of $3.9 billion.\nIn addition, HoldCo cash includes the net effects of subsidiary dividends, payment of our common stock dividend, a $500 million redemption of preferred stock, share repurchases of $1.1 billion, as well as holding company expenses and other cash flows.\nNext, I would like to provide you with an update on our capital position.\nFor our U.S. companies preliminary second quarter year-to-date 2021, statutory operating earnings were approximately $2.8 billion, while net income was approximately $1.6 billion.\nStatutory operating earnings increased by approximately $1.2 billion year-over-year, driven by lower variable annuity rider reserves and an increase in investment margin.\nYear-to-date 2021, net income decreased by $286 million as compared to the first half of 2020.\nThe primary drivers were derivative losses, mostly offset by increases in operating earnings and net investment gains in the current six-month period compared to large derivative gains in the prior year's six-month period.\nWe estimate that our total U.S. statutory adjusted capital was approximately $18.5 billion as of June 30, 2021, up 9% compared to December 31, 2020 when excluding our P&C business sold to Farmers.\nFavorable operating earnings and net investment gains were partially offset by derivative losses and dividends paid to the holding company.\nFinally, the Japan solvency margin ratio was 873% as of March 31, which is the latest public data.\nThe sequential decline in the Japan SMR from 967% at December 31 reflects seasonal dividends and the rise in U.S. interest rates in the quarter ending March 31.\nIn summary, MetLife delivered another strong quarter, driven by exceptional private equity returns, good business fundamentals, ongoing expense discipline, and the benefits of our diverse set of market-leading businesses and capabilities.\nWhile higher mortality due to COVID-19 has masked the earnings power of Group Benefits in Latin America, the strength of these franchises remain healthy and intact.\nIn addition, our capital, liquidity and investment portfolio are strong, resilient and position us for success.\n",
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"content": "q2 adjusted earnings per share $2.37.\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 a set of supplemental slides which address third quarter results.\nThey are available on our website.\nAn Appendix to these slides features additional disclosures, GAAP reconciliations and other information which you should also review.\nIn fairness to all participants, please limit yourself to one question and one follow-up.\nWith that, over to Michel.\nAs I reflect on the journey MetLife has been on these past two years, I am more convinced than ever that we are focused on what matters most.\nWe are a purpose-driven company at a time when stakeholders will accept nothing less.\nWe have the right strategy to see us through even the most turbulent environments and we have a strong culture of execution that gives our shareholders confidence.\nAll of these attributes were on display in the third quarter of 2021.\nStarting with our financial results, adjusted earnings were $2.1 billion, up 31% year-over-year.\nAdjusted earnings per share were $2.39, up 38% year-over-year.\nExcluding total notable items in both periods, adjusted earnings were up 24% and adjusted earnings per share was up 31%.\nLooking at the quarterly performance of the enterprise as a whole, variable investment income was outstanding, underlying PFOs were strong, and expense discipline held firm.\nThe main area where we have seen headwinds is from elevated COVID claims.\nIn key respects, the third quarter of 2021 looks very much like the first quarter with exceptionally strong VII more than offsetting excess mortality.\nOn the investment side, our private equity portfolio returned $1.5 billion in Q3, its highest quarterly contribution in 2021 and the major contributor to VII, which was well above the top end of our implied quarterly guidance range.\nOn underwriting, in our U.S. business, the Group Life mortality ratio was elevated at 106.2% in Q3 on higher claim severity and frequency due to a shift younger in the age distribution of COVID death.\nOur Latin America business incurred COVID losses of $137 million in Q3.\nTwo aspects of our underwriting results are noteworthy.\nFrom a social perspective, paying COVID claims is precisely how life insurance companies make a positive difference in the world.\nThe human toll of the pandemic on families is catastrophic but where life insurance is present, the financial burden is eased.\nThis is our purpose to help prepare the financial damage after life's most destabilizing moments.\nPandemic to-date in our U.S. Group business, which incurred U.S. life claims of around $2.1 billion.\nLife insurance is not like other businesses where losses are just losses.\nEvery underwriting claim represents a beneficiary who is receiving the financial help they were promised.\nFrom a financial perspective even though our Life businesses have been hit with the most severe pandemic in more than a 100 years, they remain profitable.\nMetLife has actually paid out more in COVID-related claims in 2021 than we did in 2020 and yet our adjusted earnings per share are higher this year than last year as is our adjusted return on equity.\nWhat has enhanced MetLife's capacity to pay outsized claims while still generating exceptional earnings is our strategic decision to allocate a prudent portion of our investment portfolio to private equity.\nWhile not a direct COVID offset, the valuation of our PE and VC funds with significant technology exposure has benefited from global capital flows to this growth sector.\nThe return on our PE portfolio in the quarter was an outstanding 12.6% and stands at approximately 36% year-to-date.\nThe gains on our well-seasoned portfolio are not mere accounting marks.\nYear-to-date we have received $1.9 billion in cash distributions from our PE funds.\nSince 2016, the figure is $7.6 billion.\nWhile we often reinvest PE cash proceeds as funds mature and terminate, the cash generated is steady and significant.\nTurning to the underlying performance of MetLife's businesses, we are seeing solid momentum.\nIn U.S. Group Benefits, adjusted PFOs grew 13% year-over-year.\nExcluding Versant Health, PFO growth was 6.2% on strong jumbo sales and persistency.\nAnd we expect to end the year near the top end of our guidance range.\nIn voluntary benefits, which for us consists of accident and health, legal plans and pet insurance we saw strong double-digit PFO growth in the third quarter.\nThe trend in sales is even stronger.\nYear-to-date sales are up 40% over the prior period and we remain on track for a record sales year.\nWhile Group sales can fluctuate from year-to-year due to jumbo cases, we believe the robust U.S. job market and the competition for talent are creating a strong tailwind.\nIn connection with open enrollment season this fall, we conducted consumer research on benefit preferences among millennials who are now the largest age group cohort in the U.S. with more than 70 million members.\nMillennials are expressing strong interest in both traditional benefits such as life insurance and dental and in voluntary benefits such as legal plans and pet insurance.\nAnother top desire is for help with financial planning.\nMetLife entered this space in late September with a digital financial wellness tool called Upwise, which helps us connect with employees directly.\nThe app is designed to address the emotional barriers to financial progress and help people tackle debt, save more or even create a digital will.\nWithin our RIS business, after a quiet first three quarters, we have already booked four cases totaling $3.5 billion of pension risk transfer deals in the first month of the fourth quarter.\nNext Tuesday, marks the 100th anniversary of the first group annuity contract MetLife ever write with the William Rudge Printing Company.\nWe are pleased to be a leader in the business of helping companies honor their retirement promises they have made to their workers.\nLast month, MetLife released the results of our Annual Pension Risk Transfer Poll.\nWe only survey companies that want to derisk.\nOf the 253 respondents, nearly seven in tenth have pension plan assets of $500 million or more and 93% intend to divest all of their defined benefit pension liabilities at some point in the future, up from 76% in 2019.\nElsewhere in RIS, excluding PRTs from both periods, adjusted PFOs were up 70% year-over-year.\nThere were two main drivers.\nThe first was longevity reinsurance, a market we entered in the UK last year.\nThe second was post retirement benefits where we take on blocks of retiree life insurance from employers.\nThis is an attractive adjacency to our Group business that play's to MetLife's competitive advantages.\nIn Latin America, we delivered exceptional sales growth in the quarter, up 45% year-over-year on a constant currency basis.\nIn fact, sales were higher in Q3 2021 than they were in Q3 2019 before the COVID pandemic began.\nIn most markets across the region we saw double-digit growth in both sales and PFOs.\nMoving to cash and capital, MetLife ended the third quarter with $5.1 billion of cash at its Holding company.\nDuring the quarter, we paid $400 million in common stock dividends, and repurchased $1 billion worth of outstanding common shares with another $233 million repurchased so far in Q4.\nWe have $2.5 billion remaining on the $3 billion share repurchase authorization we announced in August.\nWe are on track to return more than $5.5 billion of capital to shareholders in 2021 and we continue to strive for a balanced mix between business investment and capital return.\nIn 2020 for example, we returned $2.8 billion to shareholders and invested approximately $5 billion in organic growth and M&A.\nOur test for capital deployment remains consistent.\nDoes it clear our risk adjusted hurdle rate?\nAs John will describe in greater detail, the new business we wrote in 2020, a period when interest rates were at all-time lows was the most attractive of the past five years.\nIt had the shortest payback period, the highest internal rate of return, and the highest value of new business relative to the amount of capital deployed.\nThis was the natural outgrowth of our accelerating value initiative.\nBy optimizing our portfolio of businesses, shifting our product mix to be more capital efficient and fully embracing an efficiency mindset, we have consistently improved VNB over time and it is now an integral part of our capital allocation process.\nThis year, in addition to organic growth, we increased the stake in our India joint venture, PNB MetLife to 47% from 32%.\nIndia is one of the five secular growth markets we identified in our Next Horizon Strategy.\nConsistent with that strategy, we are increasing our exposure to a market where PNB MetLife has access to more than 200 million customers across 15,000 sales locations.\nIn September, we held an in-depth session with our Board of Directors to pressure test every aspect of our Next Horizon Strategy.\nWe've done this each year on my tenure as CEO.\nAs representatives of our shareholders and shareholders themselves, our Board challenged us to make sure we are positioned and on track to deliver on our goals.\nI believe the alignment between the Board and management is as strong as it's ever been and our shared commitments remain clear, focus on deploying capital to its best use, simplify the company to improve efficiency and the customer experience and truly differentiate ourselves in the marketplace.\nI'll start with the 3Q '21 supplemental slides, which provide highlights of our financial performance, details of our annual global actuarial assumption review and updates on our valued new business metrics and our cash and capital positions.\nStarting on page 3, we provide a comparison of net income to adjusted earnings.\nNet income in the third quarter was $1.5 billion or $541 million lower than adjusted earnings.\nNet derivative losses of $172 million were primarily driven by the strengthening of the U.S. dollar in the quarter.\nIn addition, our actuarial assumption review accounted for $76 million of the variance between net income and adjusted earnings.\nIn total, the assumption review reduced net income by $216 million, including a notable item to adjusted earnings of $140 million.\nThe table on page 4 provides highlights of the actuarial assumption review with the breakdown of the adjusted earnings and net income impact by business segment.\nWe have kept our U.S. mean reversion interest rate unchanged at 2.75% and maintain our long-term mortality assumptions despite the near-term impacts from COVID-19.\nMost of the net income impact was in MetLife Holdings and Asia.\nFor MetLife Holdings, the primary driver was a refinement to the variable annuity lapse rate function to better reflect policyholder behavior based on withdrawal status.\nIn Asia, the largest impact was due to the lowering of the earned rate assumption in Japan where we assume current earned rates for a long-term rate assumption.\nOn page 5, you can see the year-over-year comparison of adjusted earnings by segment excluding notable items in both periods.\nAdjusted earnings, excluding notable items were $2.2 billion, up 24% and up 23% on a constant currency basis, primarily driven by strong returns in our private equity portfolio.\nAdjusted earnings per share excluding notable items was $2.56, up 31% year-over-year on both a reported and constant currency basis aided by Capital Management.\nMoving to the businesses starting with the U.S.; Group Benefits adjusted earnings were down 72% year-over-year driven by unfavorable underwriting margins in Group Life, which I'll discuss in more detail shortly.\nRegarding non-medical health, the interest adjusted benefit ratio was 70.7% in 3Q of '21 at the low end of its annual target range of 70% to 75% but higher than the prior year quarter of 67.4%, which benefited from extremely low dental utilization and favorable disability incidence.\nVolume growth, the addition of Versant Health and favorable expense margins were partial offsets to the decline in year-over-year results.\nGroup Benefits continues to have strong topline growth.\nYear-to-date sales were up 40% primarily due to higher jumbo case activity.\nAdjusted PFOs in the quarter were up 13% year-over-year driven by solid volume growth across most products, including voluntary and the addition of Versant Health.\nRetirement Income Solutions or RIS adjusted earnings were up 60% year-over-year.\nThe primary driver was higher variable investment income, largely due to strong private equity returns.\nFavorable underwriting margins and volume growth also contributed to year-over-year performance.\nRIS investment spreads were 256 basis points, up 100 basis points year-over-year due to higher variable investment income.\nSpreads excluding VII were 93 basis points, down 5 basis points year-over-year and sequentially primarily due to lower paydowns in our portfolios of residential mortgage-backed securities and residential mortgage loans.\nRIS liability exposures including UK longevity reinsurance increased 4% year-over-year due to solid volume growth across the product portfolio.\nWith regards to pension risk transfers as Michel noted, we have already completed $3.5 billion of transactions in the fourth quarter and continue to see an active market.\nMoving to Asia, adjusted earnings were up 31% on both a reported and constant currency basis, primarily due to higher variable investment income.\nAsia's solid volume growth also contributed to the strong performance driven by higher general account assets under management on an amortized cost basis, which were up 7% on a constant currency basis.\nLower accident and health utilization in the prior period was a partial offset.\nAsia sales were down 12% year-over-year on a constant currency basis, reflecting pressure from COVID-related lockdowns in the regions.\nAsia year-to-date sales were up 10% on a constant currency basis and remain on target to achieve double-digit growth in 2021.\nLatin America adjusted earnings were down 35% and down 38% on a constant currency basis, primarily driven by unfavorable underwriting margins due to elevated COVID-19 related claims mainly in Mexico.\nThe impact to Latin America's third quarter adjusted earnings was approximately $137 million.\nWhile the situation remains fluid, we have seen COVID-related hospitalizations and deaths in Latin America significantly decline in October.\nFavorable investment and expense margins as well as lower taxes versus the prior year quarter were partial offsets.\nWhile Latin America's adjusted earnings have been pressured by elevated COVID-19 related claims, sales and persistency throughout the region remains strong.\nLatin America adjusted PFOs were up 22% year-over-year on a constant currency basis and sales were up 45% on a constant currency basis, driven by solid growth across most markets.\nEMEA adjusted earnings were up 20% on both a reported and constant currency basis, primarily driven by volume growth across the region and favorable underwriting margins, primarily in the Gulf.\nWe expect EMEA adjusted earnings to decline in the fourth quarter due to the timing of certain technology investments across the region.\nEMEA adjusted PFOs were down 2% on a constant currency basis and sales were down 5% on a constant currency basis, reflecting divested businesses, partially offset by growth in Turkey and Europe.\nMetLife Holdings adjusted earnings, excluding notable items in both periods were up $271 million year-over-year.\nThe increase was primarily driven by strong private equity returns.\nUnderwriting margins did reflect higher life claims severity than expected during the third quarter of 2021.\nHowever, the life interest adjusted benefit ratio of 53.3% was within our annual target range of 50% to 55%.\nIn addition, LTC new claims returned to more normal levels in the quarter versus very low new claims submissions in the prior year quarter.\nCorporate and other adjusted loss was $131 million in both periods.\nLower tax benefits were mostly offset by higher net investment income year-over-year.\nThe company's effective tax rate on adjusted earnings in the quarter was 20.6% and within our 2021 guidance range of 20% to 22%.\nNow, I'll provide more detail on Group Benefits mortality results on page 6.\nThis chart reflects our Group Life mortality ratio for the first three quarters of 2021, including the COVID-19 impact on the ratio and on Group Benefits adjusted earnings.\nGroup Life mortality ratio 106% in the third quarter of 2021, which is well above our annual target range of 85% to 90%.\nCOVID reported claims in 3Q of '21 were roughly 18 percentage points, which reduced Group Benefits' adjusted earnings by approximately $290 million.\nThe primary drivers were higher claim frequency and severity.\nApproximately 40% of U.S. COVID deaths in the quarter were under age 65, about double the rate of the first quarter of this year and the highest percentage in any quarter since the pandemic began and therefore having a greater proportional impact on the working-age population.\nIn addition, we estimate that the quarter included roughly 1 to 2 incremental percentage points impact on the mortality ratio from claims that appear to be COVID-related, but were not specifically identified as COVID on the death certificate.\nDespite the impact from COVID, Group Benefits remains a profitable and growing business for MetLife.\nGroup Benefits reported adjusted earnings of roughly $450 million year-to-date and adjusted PFO growth of 13%.\nNow let's turn to page 7.\nThis chart reflects our pre-tax variable investment income over the last five quarters, including approximately $1.8 billion in the third quarter.\nThis very strong result was mostly attributable to the private equity portfolio, which had a 12.6% return in the quarter.\nAs we have previously discussed, the private equities are generally accounted for on a one quarter lag.\nWhile all private equity asset classes performed well in the quarter, our venture capital funds, which account for roughly 23% of our PE account balance of $12.8 billion were the strongest performer across subsectors with a roughly 18% quarterly return.\nPage 8 highlights VII by segment for the first three quarters of 2021 including $1.4 billion post tax in the third quarter.\nThe attribution of VII by business is based on the quarterly returns for each segment's individual portfolio.\nAs we have previously noted, RIS MetLife Holdings, and Asia generally account for 90% or more of the total VII and are split roughly one-third each although it can vary from quarter-to-quarter.\nThe VII results in the quarter were more heavily weighted toward RIS and MetLife Holdings as Asia's private equity portfolio is less mature and has a smaller proportion of venture capital funds I referenced earlier.\nTurning to page 9, this chart shows our direct expense ratio over the prior five quarters and full year 2020 including 11.1% in the third quarter of '21.\nAs we have highlighted previously, we believe our full year direct expense ratio is the best way to measure performance due to fluctuations in quarterly results.\nOur third quarter direct expense ratio benefited from solid top line growth and ongoing expense discipline.\nThis did include approximately 20 basis points from premiums that relate to participating cases and 20 basis points from a single premium Group Life sale in RIS.\nIn addition, the impact from seasonal enrollment costs and timing of certain technology investments are expected to be more heavily weighted to the fourth quarter.\nTherefore, we do expect the direct expense ratio to be elevated in 4Q.\nNow let's turn to page 10; this chart reflects new business value metrics from MetLife major segments for the past five years, including an update for 2020.\nConsistent with our Next Horizon Strategy, we continue to have a relentless focus on deploying capital and resources to the highest value opportunities.\nAs evidence of that commitment, MetLife's invested $3.2 billion of capital in 2020 to support new business, which was deployed at an average unlevered IRR of approximately 17% with a payback period of six years.\nNew business written in 2020 reflects our disciplined approach to building profitable growth while creating value, generating cash and mitigating risk.\nDespite the sales challenges in 2020 associated with lockdowns related to the pandemic, we were able to increase our value of new business and IRR while lowering our cash payback period versus 2019.\nNow, I will discuss our cash and capital position on page 11.\nCash and liquid assets at the Holding companies were $5.1 billion as of September 30, which is down from $6.5 billion at June 30, but still well above our target cash buffer of $3 billion to $4 billion.\nThe sequential decrease in cash at the Holding companies include the net effects of share repurchases of $1 billion, payment of our common stock dividend of roughly $400 million, subsidiary dividends as well as holding company expenses and other cash flows.\nIn addition, we had a long-term debt repayment of $500 million in the third quarter.\nOur next long-term debt maturity is not until September 2023.\nNext, I would like to provide you with an update on our capital position.\nFor our U.S. companies, preliminary third quarter year-to-date 2021 statutory operating earnings were approximately $4 billion, while net income was approximately $3 billion.\nStatutory operating earnings increased by approximately $1 billion year-over-year primarily driven by higher variable investment income and lower variable annuity rider reserves.\nYear-to-date 2021 net income increased by roughly $400 million as compared to the first nine months of 2020.\nThe primary drivers were higher operating earnings and net investment gains, which was partially offset by derivative losses.\nWe estimate that our total U.S. statutory adjusted capital was approximately $19.7 billion as of September 30, 2021, up 16% compared to December 31, 2020.\nFavorable operating earnings and net investment gains were partially offset by derivative losses and dividends paid to the holding company.\nFinally, the Japan solvency margin ratio was 960% as of June 30, which is the latest public data.\nIn summary, MetLife delivered another very strong quarter, driven by exceptional private equity returns, solid top line growth, ongoing expense discipline and the benefits of our diverse set of market-leading businesses and capabilities.\nWhile earnings power of our Group Benefits and Latin America businesses has been dampened by COVID-19 excess mortality, we are pleased with the momentum behind these market-leading franchises.\nIn addition, our capital, liquidity and investment portfolio remains strong and position us for further success.\nFinally, we are confident that the actions we are taking to be a simpler and more focused company will continue to create long-term sustainable value for our customers and our shareholders.\n",
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"content": "qtrly earnings per share $1.77; qtrly adjusted earnings per share $2.39.\nbook value of $77.24 per share at quarter-end, up 1% from $76.20 per share at september 30, 2020.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: These types of statements are subject to various known and unknown risks, uncertainties, assumptions and other factors, including those described in MFA's annual report on Form 10-K for the year ended December 31, 2019 and other reports that it may file from time to time with the Securities and Exchange Commission.\nLittle did I know that I would have to compete for airtime with Chairman Powell who is testifying in the Senate at 10:00 AM.\nI apologize for those of you who drew the short straw and get stuck on our call.\nBefore we begin, I want to give a shout out to our entire MFA team.\nThe last three months have obviously been extremely challenging and made exponentially more so by the fact that all of our efforts have been remote.\nThe Company fully implemented our business continuity plan during the third week of March and successfully completely transitioned to our remote work environment to address the operating risks associated with the global COVID-19 pandemic.\nThe effort and commitment displayed by our entire team over the last three months has been extraordinary and I've been humbled by their dedication.\nBefore we discuss the first quarter of 2020 financial results, which frankly at this point seems like ancient history, I'd like to spend some time discussing what other important work streams have been taking place at MFA since March 23 and I think it will be obvious why we've been silent on so many of these activities.\nThese critical efforts have been comprised primarily of three things.\nOne, forbearance; two, balance sheet and liquidity management; and three, sourcing third-party capital.\nAs arduous that these forbearance agreements have been to negotiate and operate through, they have provided us with the time to manage our balance sheet and liquidity while also working to source third-party capital and we are grateful to our lending counterparties that stuck with us through three versions of forbearance plans.\nDuring April and May, we significantly reduced our balance sheet in an effort to raise liquidity and delever.\nImportantly, because we entered into these forbearance plans, we were able to manage our balance sheet in a more judicious fashion, given the time allowed through forbearance.\nMany of our asset sales, particularly on mortgage-backed securities, were at prices significantly higher than the price levels that existed in late-March.\nOur sales during the month of April alone of legacy non-agencies, CRTs, and MSR-related assets generated over $150 million of realized gains versus March 31 marks.\nNow, while still down significantly from values at the end of February, the patience permitted through forbearance enabled us to work hard to lessen book value erosion.\nWe were also able to manage the sale of a large non-QM whole loan portfolio that traded in late-April and closed in mid-May.\nWhile we realized a significant loss on the sale, we are confident that we achieved a much better execution by controlling and managing the trade than we would have realized had the lender just liquidated the pool.\nIn the end, all of our lenders will have been fully repaid with no deficiencies, which is another of the design goals of the forbearance plan.\nIt was clear to us in late March that our situation was not due to bad assets, but the fragile funding and the path forward would require more durable forms of financing.\nWe also recognize that term financing, margin holiday and/or non-mark-to-market financing would necessarily require higher haircuts and therefore more capital.\nOur method for seeking third-party capital began somewhat passively during the last week of March with fielding incoming indications of interest.\nAs this process intensified with more and more parties together with negotiating NDAs and then responding to voluminous data requests, all the while with our hair on fire negotiating a forbearance agreement while managing our balance sheet and liquidity and we engaged Houlihan Lokey at the end of March to manage this process for us.\nInitial indications of interest from a number of capital providers came back in mid-April, but as we continue to delever and raise liquidity, it became evident that our third-party capital needs have already changed.\nWe extended our initial forbearance agreement at the end of April to June 1 and as we entered May, we began to obtain better price discovery, particularly on our loan portfolio, which gave us more clarity as to our path forward.\nWe started a second round of proposals from third-party capital providers in mid-May.\nAnd as we held due diligence and informational calls with many of these institutions, we found that there was a competitive dynamic at work and a keen interest in pursuing a transaction with MFA.\nWe signed a term sheet over Memorial Day weekend and have been working since to negotiate and document this agreement.\nFor obvious reasons, we could not communicate publicly about these activities and it was frustrating not to be able to provide the public disclosure and transparency on which we pride ourselves.\nWe signed these agreements last night and we're happy to announce today that we have entered into an agreement with Apollo and Athene, an insurance company affiliate of Apollo, to raise $500 million in the form of a senior secured note.\nBut this $500 million note is only part of a holistic solution for MFA and a very strategic partnership with Apollo and Athene.\nApollo and Athene together have arranged a committed term borrowing facility with Barclays of approximately $1.65 billion that includes over $500 million for participation from Athene.\nThis term non-mark-to-market facility will provide us with durable financing for a large portion of our loan portfolio.\nIn addition, Athene has committed to purchase, subject to certain pricing conditions, a portion of our first securitization of non-QM loans.\nAnd finally, Apollo and Athene are engaged with another of our lenders to structure an additional similar lending facility for our fix and flip portfolio in which Athene also intends to participate.\nPro forma for these facilities, approximately 60% of the Company's financing will be in the form of non-mark-to-market funding, providing shareholders with significant downside protection in the event of future market volatility.\nWe expect that upon closing and funding of these transactions, we'll be able to satisfy remaining margin calls, which were only $32 million as of June 12 and exit from the current forbearance agreement on or before June 26.\nWe also anticipate using some of the proceeds to pay accumulated unpaid dividends on our Series B and C preferred stock issues.\nAnd finally, we expect that this transaction will provide us with substantial capital to once again begin to pursue attractive investment opportunities.\nAs part of this transaction, Apollo and Athene will receive warrants to purchase MFA common stock at varying prices over a five-year period and will appoint a non-voting observer to our Board of Directors.\nApollo and Athene have also committed to purchase the lesser of 4.9% or $50 million of MFA stock in the open market over the next 12 months.\nWe are extremely excited about this transaction, which we consider to be much more than a capital raise and very much a strategic alliance.\nMoving on to the financial results for the first quarter of 2020.\nAs others have described before us, the first quarter of 2020 was literally a tale of two distinct and utterly different periods in time.\nJanuary, February and the first two weeks of March were very normal and a good start to the new year.\nAnd in only a few days, the financial markets and the mortgage market in particular completely collapsed.\nWith the onset of the COVID-19 pandemic, pricing dislocations for markets and residential mortgage assets was so extreme that liquidity evaporated.\nPrices of legacy non-agencies, which had not changed by more than 3 points in the last two to three years, were suddenly lower by 20 points.\nCRT securities dropped as much as 20 points to 50 points and MSR-related asset prices were lower by 20 points to 30 points, all in a few days.\nMFA received almost $800 million in margin calls during the weeks of March 16 and March 23 and over $600 million of these were on mortgage-backed securities.\nIn contrast, we received $7 million of margin calls on these portfolios during the entire week of March 2 and $37 million during the week of March 9.\nAnd during the months of December, January, and February, we received a total of six margin calls, all related to factor changes with a total aggregate amount of $4 million.\nDuring those same three months, we initiated 10 reverse margin calls totaling $14 million, meaning we received net $10 million more from our lenders due to price increases.\nWhile we began selling assets during the week of March 16, the dearth of liquidity made this difficult.\nWe announced on March 24 that we had not met margin calls on March 23 and that we had initiated forbearance discussions with our financing counterparties.\nAs we began these negotiations, we continued to sell assets to raise liquidity and reduce leverage.\nOur first quarter financial results were profoundly affected by realized losses, impairment losses, unrealized losses on loans accounted for at fair value, provisions for credit losses under the new CECL standard and valuation adjustments on assets designated and held-for-sale and resulted in a loss of $914 million or $2.02 per share.\nBook value decreased to $4.34 per share at March 31 and economic book value decreased to $4.09 per share.\nSteve Yarad will be available to discuss the financial results from the first quarter during the question-and-answer session.\nI would now like to spend some time discussing balance sheet changes since March 31 and provide some perspective on what we envision after funding of the Apollo and Athene transaction and exit from forbearance.\nPage 7 of the earnings deck shows portfolio activity from December 31 to March 31 and then again from March 31 to May 31.\nAs you can see from the pie charts, we have sold substantially all of our mortgage-backed securities and our $6.6 billion portfolio is approximately 94% whole loans.\nThis should not be a surprise as almost all of our portfolio growth and new acquisitions over the last two to three years has been in whole loans.\nMortgage-backed securities are admittedly more liquid and were therefore easier to sell, but we saw improvement in securities pricing through April and May whereas loan pricing changes were less defined and slower to occur, both on the way down and on the way back up.\nMore importantly, it is more difficult to get non-market -- non-mark-to-market financing on mortgage-backed securities than it is on loans due to certain regulatory issues.\nSo, the decision was relatively easy.\nWe view loans as generally more attractive assets and -- than securities and loans are more conducive to more durable financing arrangements.\nIn rough numbers, our whole loan portfolio today is comprised of non-QM loans, $2.4 billion, loans at fair value, $1.2 billion, fix and flip loans, $850 million, purchase credit impaired or reperforming loans, $660 million, single family rental, $500 million, season performing loans, $150 million, and REO or real estate owned of $375 million.\nLooking forward, we will finance a significant portion of this portfolio through term non-mark-to-market financing, including securitization.\nWith the committed $1.65 billion in our existing securitizations of approximately $500 million, we will have over $2 billion of such financing.\nAnd as mentioned previously, we are working on a similar committed line with Athene and another dealer for our fix and flip portfolio.\nWe will continue to pursue securitization, particularly for non-QM loans.\nSpreads for AAA securities widened out from the 100 area, that's 100 over swaps in early March to as wide as plus 400 at the depth of the crisis, but they've been slowly grinding tighter and are now back to mid-100 levels.\nWe expect that following the closing and funding of these transactions, we will be able to declare and pay the accumulated dividends on our Series B and Series C preferred stock issues.\nAs we have disclosed previously, the terms of the forbearance agreement prohibited payments of dividends on any equity interests, including preferred stock.\nOnce the preferred stock dividends are current, we will no longer be prohibited from paying a common dividend.\nAs far as the dividend on MFA's common stock, the Board of Directors will determine our dividend policy going forward.\nWhile we do not provide guidance as to expected future dividends, I will share several pertinent facts that will clearly be given consideration in framing dividend discussions with the Board.\nOne, at present we have undistributed REIT taxable income from 2019 of $0.05 per share.\nIn order to avoid paying corporate income tax, we are required to declare a dividend for this income prior to filing of our 2019 REIT tax return, which we do in October of this year and pay such dividend before the end of the year.\nTwo, estimated REIT taxable income or ordinary income for the first quarter of 2020, is approximately $0.10 per share.\nIn order to avoid paying a 4% excise tax on this amount, we are required to declare dividends in 2020 for at least 85% of our estimated 2020 REIT taxable income.\nAnd three, capital losses, again for tax purposes, generated from sales of residential mortgage assets to date in 2020 are carried forward and offset future capital gains.\nHowever, these capital losses do not offset ordinary REIT taxable income.\nWhile we cannot forecast ordinary REIT taxable income for the balance of 2020, any such income generated will be added to the $0.10 in the first quarter in determining the threshold necessary to avoid the 4% excise tax.\nOur other brief update.\nAt June 12, our unrestricted cash was $242 million.\nBook value as of May 31 -- GAAP book value is estimated to have increased by approximately 2% to 3% versus March 31.\nEconomic book value is estimated to be flat versus March 31.\nThis is primarily because carrying value loan marks were lower in April than in March and while we have seen some appreciation from April to May, the May loan marks for carrying value loans, which is what determines economic book value for the difference between GAAP and economic book value, those marks are still below the March marks.\n",
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"content": "compname posts q1 loss per share of $2.02.\ncompname announces $500 million capital raise with apollo and athene and $1.65 billion committed term borrowing facility.\nq1 loss per share $2.02.\napollo and athene have committed to purchase lesser of 4.9% or $50 million of co's stock in open market over a 12-month period.\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 types of statements are subject to various known and unknown risks, uncertainties, assumptions, and other factors including those described in MFA's annual report on Form 10-K for the year ended December 31, 2020, and other reports that it may file from time to time with the Securities and Exchange Commission.\nAs we sit here today to talk about the first quarter of 2021, it's impossible not to recall where we were a year ago, and the difference between the two time periods could not be more stark.\nA tenacious defensive stance is now a spirited and determined offense.\nToday, we are reporting strong financial results, continued execution of a strategic plan that we implemented early last fall and a new exciting initiative that we announced today.\nWith vaccinations becoming more prevalent and the gradual easing of restrictions beginning to occur, we have reason to be optimistic about an eventual return to some semblance of ordinary.\nWhile it is undoubtedly months away, we are cherishing brief snippets of limited normalcy, and it's great to see our colleagues at work in person rather than on video calls as we have for the last year.\nA strong economic outlook, additional fiscal stimulus, and the expectation of more government spending pushed loan rates higher in the first quarter of 2021.\n10-year treasuries backed up 83 basis points to 1.74 at the end of Q1, which by the way, is where they were in late January of 2020, and the curve steepened with two 10s widening by about 80 basis points to 158 basis points at March 31.\nShort rates remain firmly anchored at very low levels, with twos only 4 basis points wider during the quarter.\nInterestingly, although 10-year rates at 170 are back to levels seen in late 2019 and early 2020, two-year rates in the low to mid-teens have barely changed in the last year.\nBut twos were at 160 back in late 2019.\nSo clearly, the market anticipates some inflationary pressure in the future but sees fed policy as anchoring short rates at or around current levels for 2021 and 2022.\nAgency origination crowded out nonconforming production for much of 2020.\nBut even with a modest increase in agency eligible mortgage rates, we've seen an increase in production from non-QM and business purpose loans in 2021.\nWith short rates at particularly low levels and credit spreads tight, suffice to say there are no cheap assets out there.\nHowever, these same market conditions have pushed yields on issued securities to very low levels.\nSo while it is a difficult period for assets, it's an extremely attractive one for liabilities.\nAnd MFA has taken advantage of this opportunity to lock in low cost, term, nonrecourse debt, which will substantially reduce interest expense in the future.\nIn addition, a strong housing market, together with our ability to actively manage residential mortgage credit assets has also been reflected in our financial results as we achieved better-than-expected results on credit-sensitive assets, resulting in reversals of prior credit reserves and sales of OREO properties at attractive levels.\nPlease turn to Page 4.\nWe reported GAAP earnings of $0.17 per share in the first quarter.\nThese results were driven by continued price appreciation of loans held at fair value and by further improvement in credit leading to credit loss reserve reversals.\nGAAP book value was $4.63, up 2% from December 31s, and economic book value was $5.09, up 3.5% from December 31st.\nGAAP economic return for the quarter was 3.6%, but economic book value economic return was up 5% for the quarter.\nWe repurchased 10.8 million common shares at an average purchase price of $4.14 or 80% of economic book value from March 1st through April 30th.\nOur leverage declined slightly over the quarter to 1.6:1, and we paid a $0.075 dividend to shareholders on April 30.\nPlease turn to Page 5.\nOur efforts to lower interest expenses through securitizations had visible impact on our first-quarter earnings as interest expense declined by 27% from the fourth quarter of 2020.\nAnd the securitizations executed in Q1 had limited impact on the full quarter because they were closed in early February and late March.\nNet interest income for the first quarter increased by $4 million versus the previous quarter and by $13 million versus Q3 of 2020 after adjusting for a large interest income contribution of $8 million from the payoff of a single non-agency bond with a very low amortized cost during the first quarter.\nPlease turn to Page 6.\nAgain, continuing the theme of aggressively taking advantage of available market opportunities, we have executed three additional securitizations on nearly $1 billion of UPB at attractive levels.\nAs you can see on this page, AAA yields on bonds sold on the INB-1 deal was 83 basis points and 112 basis points on the non-QM One deal with the blended cost of debt for both deals in the low 1s.\nThe NPL deal that closed in March replaces securitizations sold in 2018 at a blended cost of debt that's over 150 basis points cheaper than that -- they replaced.\nPlease turn to Page 7.\nRobust increases in housing prices and strengthening credit fundamentals provide obvious tailwinds for MFA's mortgage credit exposure.\nHome price increases in the last year are the largest, in some cases, in 20 years, and housing supply is at extremely low levels.\nSo this trend is not likely to abate soon.\nWe liquidated 177 OREO properties in the first quarter, generating $50 million in proceeds and $2.2 million in gains.\nThese strong housing fundamentals also support the performance of our nonperforming loans as we see more full payoffs and better prices on liquidated properties.\nFinally, for borrowers, still negatively impacted by COVID, we can offer modifications and/or repayment plans to allow them to stay in their homes, restore their status to current, and keep the equity in their homes.\nPlease turn to Page 8.\nUnder our share repurchase program, we instituted a 10b5-1 plan in March that permits share repurchases at any time.\nPrevious to instituting a 10b5-1 plan, we were permitted to purchase shares only during open window periods.\nAnd because our 10-K is filed later in the quarter than our 10-Qs, our open window period after our fourth quarter earnings call would have been very short.\nAnd again, from early March through April 30th, we repurchased 10.8 million shares at an average price of $4.14.\nPlease turn to Page 9.\nWe illustrate our investment portfolio and summarize our asset-backed financing on this slide.\nThe investment portfolio has not changed materially since December 31.\nWe did purchase $253 million of loans in the first quarter.\nAnd just to review, loans held at carrying value on our balance sheet are represented in three slices of this pie chart.\nThe purple section PCD or purchased credit deteriorated loans that's accounting speak for reperforming loans and other loans included in this purple slice are seasoned performing loans.\nThe gray slice business purpose loans, which are fixed and flip, and single-family rental loans and the red section, which is Non-QM loans.\nOn the financing side, you can see that 68% of our asset-based financing is non mark-to-market with the Non-QM securitization that we closed in April, it's now over 70%.\nPlease turn to Page 10.\nThis transaction will significantly enhance our ability to deploy capital in the business purpose space, and we believe that our capital base will fortify Lima One's already strong market presence.\nWe expect that this transaction will be accretive to MFA's earnings by $0.08 to $0.12 per year.\nMFA currently owns a 43% equity stake in Lima One, and we have purchased over $1 billion of business purpose loans from Lima One since 2017.\nWe acquired our initial strategic minority ownership interest in Lima One in 2018, and our partnership with Lima One has grown over the years since.\nThis acquisition includes the Lima One operating platform as well as their $1 billion servicing book.\nIn reviewing our results this quarter, I guess I could say what a difference a year makes, but this simply doesn't do it justice.\nA year ago, I had the unpleasant task of talking through a myriad of negative numbers on this slide, including realized and unrealized losses on securities and loans, impairment charges, CECL reserves, and other large and unusual items.\nThis quarter I am very pleased to be able to provide a much more positive report.\nMuch of the noise reported in our net income over the past several quarters, resulting from volatile changes in asset prices and cash flow estimates, driven by uncertainty related to the longer-term effects of COVID-19 have dissipated and hopefully are largely behind us.\nWhile not fully reflecting MFA's normalized earnings for the short to medium term, I believe that Q1 results do provide a clearer picture of what the key drivers of our earnings will be for the next several quarters.\nSpecifically, our earnings will be driven by net interest income and gains on loans held at fair value.\nThis is -- there is also some potential for further adjustments to decrease CECL reserves if unemployment rates and home prices stabilize or continue to improve.\nBut absent any significant future macroeconomic shocks in the near term, I would anticipate that CECL reserve changes going forward will be primarily driven by net increases or decreases in our portfolio of carrying value loans.\nAdditionally, in anticipation of the successful completion of the acquisition of Lima One, starting in Q2, we plan to elect fair value accounting on all future whole loan purchases.\nThis should facilitate appropriate reporting of the economics of Lima One origination and servicing activities while still properly capturing the performance of loans originated and held on MFA's balance sheet.\nNote that this accounting will only apply prospectively.\nWe are not able to retrospectively apply fair value accounting to loans that we currently report at carrying value.\nSo for the intermediate term until the majority of this portfolio of loans runs off, we expect to continue to report both GAAP and economic book value measures.\nTurning now to the detail of our Q1 2021 results.\nNet income to common shareholders was $77.3 million or $0.17 per share.\nThe key items impacting our results are as follows: net interest income of $31.8 million was $12.4 million higher sequentially.\nThis included approximately $8 million of accretion on a non-agency bond that we hold a significant discount par that was redeemed during the quarter.\nIt should be noted that gains of this nature are expected to occur somewhat less frequently going forward as our remaining portfolio of securities that we hold at a discount to par continues to run off.\nOne other point to highlight is the impact of the successful execution of securitization and other debt refinancing activity on our cost of financing.\nAs Craig noted, interest expense this quarter fell 27% sequentially and our overall cost of funds fell to 2.92% from 3.63% in Q4 2020.\nWe reduced our overall CECL allowance on our carrying value loans to $63.2 million, reflecting lower estimates of future unemployment and higher home price appreciation in our credit loss modeling as well as lower loan balances.\nThis reversal and other net adjustments to our CECL reserves positively impacted net income for the quarter by $22.8 million.\nAfter the initial significant increase in CECL reserves taken in Q1 2020, when uncertainty related to COVID-19 economic impacts were at their highest, we have reduced our CECL reserves by more than $80 million in the subsequent four quarters.\nActual charge-off experience continues to remain very modest, with approximately $1.2 million of net charge-offs taken in the first quarter.\nOnce again, our loans held at fair value performed strongly this quarter.\nNet gains of $49.8 million were recorded.\nThis overall gain is unchanged from the prior quarter.\nAnd its components, which include $32.1 million of market value increases and $17.7 million of interest payments, liquidation gains and other cash income were also essentially unchanged quarter over quarter.\nFinally, our operating and other expenses were $22.5 million for the quarter.\nThis is much closer to our expected normal run rate, but was elevated primarily due to costs related to replacing warehouse financing with securitization.\nI will point out that following the confirmation of the Lima One acquisition, our overall G&A cost as a ratio of our stockholders' equity will rise.\nWe will endeavor to provide some additional color on the potential impacts on a future earnings call.\nTurning to Page 12.\nHousing has performed exceedingly well throughout the pandemic, and prices have accelerated in recent months.\nThe Zillow median home value was up 10.6% in March from a year ago.\nDemographic trends, historically low rates and a severe lack of supply have all contributed to the rising prices.\nThe unemployment rate continues to recover from a peak of almost 15% down to 6% as the economy reopens.\nWith the vaccination rollout under way, the pace of reopening should pick up in the coming months, lowering the unemployment rate further.\nAll these factors, combined with monetary and fiscal support, have played a part in keeping mortgage credit performance strong and bode well for continued credit performance.\nTurning to Page 13.\nNon-QM origination volume increased over the quarter as rates offered to borrowers have been dropping.\nWe purchased over $200 million over the first quarter, which is more than double our acquisitions from the prior quarter.\nPrepayment speeds remained elevated over the quarter as mortgage rates for Non-QM loans have come down in recent months.\nThe three-month average CPR for the portfolio remains around 30%.\nWe closed on another minority investment in an originator over the quarter, raising the number of Non-QM originators we have invested into three.\nWe believe the strategy of aligning our interest with select origination partners will allow us to effectively grow our portfolio over time while ensuring loan quality.\nWe executed on an additional securitization at the beginning of April, bringing a total amount of collateral securitized to approximately $1.75 billion.\nThese securitizations have lowered our financing costs and at the same time have provided additional stability to our borrowings.\nSecuritization, combined with non mark-to-market term facility has resulted in over 80% of our non-QM portfolio financed with non mark-to-market leverage.\nWe expect to continue to be a programmatic issuer of securitizations as it is currently the most efficient form of financing for our portfolio.\nTurning to Page 14.\nThe significant percentage of our borrowers in the non-QM portfolio have been impacted by the pandemic.\nMany of our borrowers are owners of small businesses, that were affected by shutdowns across the nation.\nWe instituted a deferral program at the onset of the pandemic in an effort to help our borrowers manage through the crisis.\nThrough our servicers, we granted almost 32% of the portfolio of temporary payment relief, which we believe helped put our borrowers in a better position for long-term payment performance.\nSubsequent to June, we reverted to a forbearance program instead of a deferral as the economy opened up.\nThe forbearance program instituted are largely now determined by state guidelines.\nFor clarity, a deferral program tax on the payments missed to the maturity of the loan as a balloon payment.\nForbearance requires the payments missed to be repaid at the conclusion of the forbearance period.\nIf those amounts are unable to be paid in one-month sum, we allow for the borrower to spread the amounts over an extended period of time.\nOver the first quarter, we saw a stable 60-plus delinquency rate as compared to the fourth quarter of 7.9%.\nIn addition, over 25% of those delinquent loans made a payment in March.\nMany delinquent borrowers are in repayment plans, which will cause them to cure their delinquency status over the next six to 12 months.\nAs the economy -- as the economic recovery continues, the portfolio's credit performance should continue to improve.\nOur strategy of targeting lower LTV loans should mitigate losses under a scenario with elevated delinquencies.\nIn many cases, borrowers, which no longer have the ability to afford their debt service, will sell their home in order to get the return of their equity.\nTurning to Page 15.\nOur RPL portfolio of $1 billion has been impacted by the pandemic but continues to perform well.\n80% of our portfolio remains less than 60 days delinquent.\nAnd although the percentage of the portfolio is 60 days delinquent and status is 20%, a quarter of those borrowers continue to make payments.\nPrepaid fees in the first quarter continued to rise to a one-month CPR of 20 as mortgage rates continue to be historically low and more borrowers gain equity with the increase in home prices.\nAnd while 30% of our RPL borrowers were impacted by COVID, we have worked with our servicers to provide assistance to borrowers and have seen improvement in delinquency levels over the quarter.\nTurning to Page 16.\nOur asset management team continues to drive performance of our NPL portfolio.\nThe team has worked in concert with our servicing partners to maximize outcomes on our portfolio.\nThis slide shows the outcomes for loans that were purchased prior to the year ended 2019, therefore, owned for more than one year.\n37% of loans that were delinquent at purchase are now either performing or paid in full.\n46% are either liquidated or REO to be liquidated.\nOur REO sale -- our REO properties have continued at an accelerated pace at advantageous prices, selling 52% more properties over the last 12 months as compared to the year prior, and 17% are still on nonperforming status.\nModifications have been effective as almost three-fourths are either performing or is paid in full.\nAnd we are pleased with these results as they continue to outperform our assumptions at the time of purchase.\nTurning to Page 17.\nFirst of all, I would like to say that we are very excited about the acquisition of Lima One.\nThe acquisition enhances our position as a long-term capital provider on the business purpose lending space, which we believe continues to benefit from positive fundamental and structural trends and offers one of the most attractive options to deploy capital in the residential mortgage credit space.\nWe have worked closely with Lima One since 2017, first as a loan buyer and later as an equity investor, and have seen firsthand the quality of their loan origination and servicing operations.\nFrom our extensive experience in the BPL space, we know that Lima is one of the best operators in the space and look forward to collaborate with Lima's talented management team.\nLima One is a leading nation and originator of business purpose loans with a strong brand recognition in the BPL borrower community with over 50% of loan origination coming from repeat borrowers.\nTheir product offerings are diverse, serving the needs of short and long-term strategies within the BPL space.\nThey have an established track record of originating fix and flip and new construction loans, longer-term rental loans, and small balance multifamily value-add and bridge loans.\nLima has originated over $3 billion since inception and has shown that they can reliably originate over $1 billion annually.\nWe believe that by combining MFA's firm capital and capital markets expertise with Lima's capabilities, we can create a differentiated platform capable of providing best-in-class financing options to investors with a clear path to grow well beyond $1 billion in annual volume.\nThis acquisition will provide MFA with a reliable access to high-quality, high-yielding assets that are difficult to source in the marketplace.\nWe believe based on current market conditions, that loans originated by Lima and retained on MFA's balance sheet will provide mid-teens ROE with appropriate leverage, either in the form of warehouse financing or MFA sponsored securitizations.\nNow we'll turn to portfolio activities in the quarter.\nWe continued to experience large principal pay downs in our fix and flip portfolio in the first quarter.\nThe strong housing market with home prices rising more than 10% annually has allowed many of our borrowers to successfully complete their projects and sell quickly into a strong market.\nThis combined with the seasoned nature of our portfolio, currently at a weighted average loan rates of 20 months, led to us receiving $144 million of principal payments in the quarter.\nWe expect this trend to continue in 2021.\nMFA's fix and flip portfolio declined $117 million to $464 million UPB at the end of the first quarter.\nPrincipal paydowns were $144 million, which is equivalent to a quarterly pay down rate of 69 CPR on an annualized basis.\nWe advanced about $12 million of rehab draws and converted $5 million to REO.\nWe purchased $20 million UPB of fix and flip loans in the first quarter.\nPurchase activity has picked up in the second quarter as we have committed to acquire over $30 million so far in the second quarter and expect purchase volume to pick up meaningfully with the acquisition of Lima One.\nThe average yield on the portfolio was 4.93%, and all of our fix and flip financing is non mark-to-market debt with the remaining term of 15 months.\n60-plus day delinquency declined $13 million to $149 million at the end of the first quarter.\nAnd so far, in the second quarter, we continue to see positive delinquency trends.\nFix and flip loan loss reserves continued to trend down in the first quarter, declining by $4.7 million, primarily due to improved economic expectations and the strong housing market.\nTurning to Page 18.\nSeriously delinquent fix and flip loans decreased $13 million in the quarter to $149 million at the end of the first quarter.\nIn the quarter, we saw $18 million of loans payoff in full, $5 million cured to current or 30-day delinquent pay status, $5 million converted to REO while $15 million became new 60-plus delinquent.\nAs mentioned previously, we've continued to see positive delinquency spends in the second quarter.\nApproximately half of the seriously delinquent loans are either completed projects or bridge loans where limited or no work is expected to be done, meaning these properties should be in generally salable conditions.\nIn addition, approximately 13% of the seriously delinquent loans are already listed for sale, potentially shortening with time until resolution.\nWhen loans pay off in full from serious delinquency, we often collect default interest, extension fees and other fees of payoff.\nFor loans, where there is a meaningful equity in the property, these can add up.\nSince inception, we've collected approximately $3.7 million in these types of fees across our fix and flip portfolio.\nThe housing market continues to be extremely strong with record low mortgage rates and low levels of inventories supporting annual home price appreciation in excess of 10%.\nIn addition, we continue to see unemployment declining and overall economic activity improving across the country.\nWe believe that the efforts of our experienced asset management team, combined with the recent strong economic trends, can lead to acceptable outcomes on our delinquent loans.\nTurning to Page 19.\nOur single-family rental loan portfolio continues to exhibit very strong performance.\nDue to strong prepayment section and solid credit profile, the portfolio yield has remained steady in the mid-5% range post COVID and was 5.61% in the first quarter.\nThat number does not include prepayment penalties, which are a feature of almost all of our rental loans and are recorded in other income.\nAnd including those, the single-family rental portfolio yield was 6.33% in the first quarter.\nAfter temporarily increasing the fourth-quarter prepayments trended back down to the historical low mid teens range with the first quarter three-month prepayment rate at 12 CPR.\n60-plus day delinquencies were relatively unchanged in the quarter in the mid- to high 5% area.\nWe acquired $20 million of rental loans in the first quarter.\nSecond quarter is off to a strong start with us committing to purchase over $35 million so far in the second quarter.\nWe expect purchase activity to continue to accelerate with the acquisition of Lima One.\nWe closed our first securitization, consisting solely of business purpose rental loans in the first quarter.\nApproximately $218 million for loans were securitized.\nWe sold approximately 91% of the bonds at a weighted average coupon of 106 basis points.\nThis transaction lowered the funding rate of the underlying assets by over 150 basis points and increased the percentage of SFR financing that's non mark-to-market to 75% at the end of the first quarter.\nLima One originated rental loans that represented about two-thirds of the collateral in our inaugural rental securitization.\nWe believe that MFA's experience in the capital markets can provide meaningful funding advantages to Lima's origination activities and will significantly improve Lima's competitiveness in the BPL space.\nWe are pleased with the results of the first quarter of 2021 and even more excited about the future at MFA.\nWe are continuing to execute our strategic plan to lower and trim out borrowing costs, and we're beginning to see the results of this activity in our income statement.\nThe strength of the housing industry has obvious positive implications for our mortgage credit investments.\nWe have repurchased nearly 25 million shares of our common stock at levels that are accretive to book value and earnings.\nAnd today's announcement of our acquisition of Lima One is an important initiative that will enhance our ability to deploy future capital in the BPL sector and grow our future earnings power.\n",
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"content": "compname announces q1 earnings per share of $0.17.\nq1 gaap earnings per share $0.17.\ngaap book value at march 31, 2021 was $4.63 per common share.\nqtrly net interest income $31.8 million versus $61.7 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: These types of statements are subject to various known and unknown risks, uncertainties, assumptions, and other factors, including those described in MFA's annual report on Form 10-K for the year ended December 31, 2020, and other reports that it may file from time to time with the Securities and Exchange Commission.\nThe second quarter of 2021 was a difficult period for mortgage investors, particularly for those invested in agencies, strong economic data and early fed chatter about tapering, pushed mortgage spreads wider and a rally in rates, coupled with the flattening curve, caused prepayment levels to remain elevated, while never completely immune to general mortgage market trends, MFA's investment strategy intentionally mitigates many of these interest rate risks.\nThrough asset selection that emphasizes credit versus interest rate sensitivity and shorter-duration assets that again limit interest rate risks, our portfolio performed quite well during the second quarter of 2021, and our book value was stable.\nOn the credit side, continued very strong housing trends have bolstered the value of the underlying assets, securing the mortgages that we own, thus, lowering LTVs.\nRobust housing prices have also created a strong tailwind for delinquent mortgages and REO properties as these trends lead to improved resolution and outcomes.\nMFA's tireless efforts to find new attractive investments were also rewarded in the second quarter as our asset acquisitions exceeded runoff for the first time since late 2019.\nThis progress is due to continued growth from many of our origination partners as well as our ability to analyze and source new investment opportunities.\nWith financial markets awash in liquidity, sourcing attractive investment opportunities have been very challenging this year.\nBut we are starting to fire on all cylinders, and we feel good about our continued growth prospects.\nPlease turn to Page 4.\nWe reported GAAP earnings of $0.13 per share for the second quarter, largely driven by a solid increase in net interest income.\nContributions from credit loss reserve reversals were more modest this quarter versus Q1, $8.8 million versus $22.8 million as were unrealized gains on fair value loans, $6 million in Q2 versus $31 million in Q1.\nGAAP book value was $4.65, up $0.02 from March 31, and economic book value was $5.12, up $0.03 from March 31.\nEconomic return, both GAAP and economic for the second quarter, was 2.6%.\nAnd this follows economic returns in Q1 of 3.6% and 5%, respectively.\nOur leverage ticked up slightly over the quarter to 1.8 to one versus 1.6 to one, and we paid $0.10 dividend to shareholders on July 30, which is a 33% increase from the dividend paid in April.\nPlease turn to Page 5.\nDigging into the numbers a little more.\nOur efforts to lower interest expense through securitizations had a visible impact on our second-quarter earnings as interest expense declined by $4.5 million or 15% from the first quarter.\nAnd the larger of the two securitizations executed in the second quarter had limited impact on the full quarter because it priced on June 10.\nNet interest income for the second quarter increased by $8 million or 16% versus the prior quarter.\nWe continue to make excellent progress in liquidating REO properties as we capitalize on strong housing trends.\nAnd for borrowers who are still negatively impacted by COVID, we've been able to offer modifications and/or repayment plans to allow them to stay in their homes, restore their payment status to current and retain the equity in their homes.\nPlease turn to Page 6.\nWe expect that this transaction will significantly increase our purchase of business purpose loans and by providing a strong capital base and expertise in securitization we will also further enhance Lima One's already existing profitability and growth potential.\nPlease turn to Page 7.\nAgain, continuing the theme of aggressively taking advantage of available market opportunities, we executed 2 additional securitizations on over $850 million of UPB at attractive levels in the second quarter.\nAs you can see on this page, AAA yields on bonds sold for the Non-QM1 deal was 112 basis points and 110 basis points on the RPL1 deal.\nAnd the blended cost of debt for both deals is in the 130s.\nWe expect to complete at least two additional securitizations in the third quarter.\nPlease turn to Page 8.\nWe illustrate our investment portfolio and summarize our after-tax financing on this slide.\nOur investment portfolio grew by $300 million in the second quarter, which is a milestone of sorts as it is the first quarter in the last six quarters that our portfolio has increased.\nNew loan acquisitions in the second quarter were $857 million, which is more than two times the last three quarters combined.\nThe composition of our portfolio has not changed materially since March 31, other than for the addition in Q2 of agency-eligible investor loans, which Bryan will discuss shortly.\nOn the financing side, you can see that two-thirds of our asset-backed financing is nonmark to market with over 70% of the nonmark-to-market financing in the form of securitizations as we continue to term out and reduce the cost of nonmark-to-market debt.\nAs Craig has already noted, MFA delivered solid results for the second quarter, highlighted by higher net interest income on our residential whole loan investments.\nBefore diving into the details, I want to point out two important changes that impact the way our results are presented this quarter.\nFirstly, we changed the way we present interest income on residential whole loans on which we have elected the fair value option at acquisition.\nPrior to this quarter, we presented the coupon payments received, along with noninterest income from fair value loans in other income on our income statement.\nWe now present interest income on loans accounted for at fair value as part of net interest income.\nWhile noninterest income, which primarily reflects market value changes, continues to be presented in other income.\nSecondly, as we noted in our last earnings call, starting this quarter, we decided to elect the fair value option for all acquisitions of the purchased performing loans.\nThis includes acquisitions of Non-QM, fix and flip, single-family rental, and agency-eligible investor loans.\nPurchase performing loans acquired prior to this quarter continue to be accounted for at carrying value, so we will continue to present the economic book value metric to capture the impact of fair value changes for these loans.\nFurther, we can now present interest yield and net interest spread information for all loans in our portfolio, which should make our results easy to review and more comparable to our peers.\nIn addition, we believe that using fair value accounting is the best way to properly capture the impact of Lima One's origination and servicing activities for loans originated by Lima and held on MFA's consolidated balance sheet.\nTurning now to the details of our Q2 2021 results.\nNet income to common shareholders was $58.5 million or $0.13 per share.\nThe key items impacting our results are as follows: net interest income of $59 million was $8 million or 16% higher sequentially.\nAs Craig also noted interest expense again declined primarily due to the ongoing efforts to use securitization and other forms of more durable and lower-cost financing.\nInterest income on our loan portfolio was also approximately $5 million higher, primarily driven by higher prepayments and lower delinquency levels on purchase credit deteriorated and purchased nonperforming loans.\nSimilarly to the prior quarter, interest income from our securities investments included approximately $8 million of accretion on an MSR term note investment that was redeemed at par but that we have taken an impairment charge on in Q1 of 2020.\nOur net interest spread increased to an impressive 3.02% this quarter.\nAnd while additional securitizations will continue to meaningfully benefit funding costs, overall spread levels should moderate in future periods as prepayment speeds declined in line with seasonal factors.\nWe reduced our overall CECL allowance on carrying value loans to $54.3 million, reflecting lower loan balances and adjustments to estimated levels of future unemployment and home price appreciation used in our credit loss modeling.\nThis reversal and other net adjustments to our CECL reserves positively impacted net income for the quarter by $8.9 million.\nAfter the significant increase in CECL reserves taken in Q1 2020 when uncertainty related to COVID-19 economic impacts were at their highest, we reduced our CECL reserves by approximately $90 million in the subsequent five quarters.\nActual charge-off experience continues to remain very modest, with approximately $1.6 million of net charge-offs taken in the six-month period ended June 30, 2021.\nPricing on loans held at fair value continues to be firm.\nNet gains of $6 million were recorded, primarily reflecting the impact of market value changes.\nFinally, our operating and other expenses were $22.8 million for the quarter, in line with the previous quarter.\nAnd with that, I will now turn the over to Bryan Wulfsohn.\nTurning to Page 10.\nHousing has continued to push higher over the quarter.\nThe pace of annual home price increases have reached levels not seen in over 40 years.\nHistorically low rates, demographic trends, and a severe lack of supply have all contributed to the rise in prices.\nUnemployment rate has broken through 6% and is expected to continue to move lower with the economy reopening.\nAll of these factors, combined with monetary and fiscal support have played a part in keeping mortgage credit performance strong and bode well for the continued credit performance in the near term.\nTurning to Page 11.\nNon-QM origination volume increased over the quarter as rates offer to borrowers have been dropping.\nWe purchased over $370 million over the second quarter, which is an increase of 85% over the previous quarter.\nPrepayment speeds increased over the quarter with the drop in rates to Non-QM borrowers.\nThe 3-month average CPR for the portfolio was 40.\nWe executed on the securitization in the second quarter, bringing the total amount of collateral securitized to approximately $1.75 billion.\nWe expect to bring another securitization of Non-QM loans in the third quarter.\nThese securitizations have lowered our financing costs, and at the same time, have provided additional stability to our borrowings.\nSecuritization, combined with nonmark-to-market term facility has resulted in over 70% of our Non-QM portfolio to be financed with nonmark-to-market leverage.\nWe expect to continue to be a programmatic issuer of securitization as it is currently efficient form of financing for our portfolio.\nTurning to Page 12.\nCOVID impacted our borrowers significantly as many of our borrowers are owners of small businesses that were affected by shutdowns across the country.\nWe instituted a deferral program at the onset of the pandemic in an effort to help our borrowers manage through the crisis.\nThrough our servicers, we granted almost 32% of the portfolio temporary payment relief, which we believe help put our borrowers in a better position for long-term payment performance.\nSubsequent to June of 2020, we reverted to a forbearance program instead of a deferral as the economy opened up.\nThe forbearance program instituted is largely now determined by state guidelines.\nIn the second quarter, we saw serious delinquency rates improved by 0.1% and 30-day delinquencies drop by 1.4%.\nIn addition, almost 40% of those delinquent loans made a payment in June.\nMany delinquent borrowers are on repayment plans, which will cause them to cure their delinquency status over the next six to 12 months.\nAs the economic recovery continues, the portfolio's credit performance should continue to improve.\nOur strategy of targeting lower LTV loans should mitigate losses under a scenario with elevated delinquencies.\nIn many cases, borrowers which no longer have the ability to afford their debt service will sell their home in order to get the return on their equity.\nTurning to Page 13.\nUpdated letter agreements between the treasury and the GSEs relating to the 2008 senior preferred stock purchase agreement restricted the percentage of loans purchased by the GSEs backed by investor properties and second homes to 7%.\nThis change created a dislocation in the marketplace, acquiring originators to look for alternative outlets for their loans backed by investor properties.\nWe were able to source over $300 million of this product in the second quarter from our existing originator relationships at attractive prices.\nWe expect to execute on our first securitization of this collateral in the third quarter with more to follow should the opportunity persist.\nThis is another example of our ability to adapt to an ever-changing environment and a testament to our strong originator relationships in a competitive market environment.\nTurning to Page 14.\nOur RPL portfolio of $1 billion has been impacted by the pandemic but continues to perform well.\nEighty-one percent of our portfolio remains less than 60 days delinquent.\nAnd although the percentage of 60 -- the portfolio 60 days delinquent in status was 26%, a quarter of those borrowers continue to make payments.\nPrepayment speeds in the second quarter moderated a bit, but continue to be elevated at a three-month CPR of 15 as mortgage rates continue to be historically low and more borrowers gained equity with the increase of home prices.\nWhile 30% of our RPL borrowers were impacted by COVID, we have worked with our servicers to provide assistance to borrowers and have seen improvement in delinquency levels over the quarter.\nTurn to Page 15.\nOur asset management team continues to push performance of our NPL portfolio.\nThe team has worked in concert with our servicing partners to maximize outcomes on our portfolio.\nThis page shows the outcomes for loans that were purchased prior to the year ended 2019.\nThirty-eight percent of loans that were delinquent at purchase are now either performing or paid in full.\nForty-seven percent are either liquidated or REO to be liquidated.\nOur sales of REO properties have continued at an accelerated pace at advantageous prices.\nWe have been able to cut the REO portfolio in half since the pandemic began.\nFifteen percent are still in nonperforming status.\nOur modifications have been effective as almost three-quarters are either performing or paid in full.\nWe are pleased with these results as they continue to outperform our assumptions at the time of purchase.\nTurning to Page 16.\nWe closed the previously announced acquisition of Lima One on July 1.\nWe're very excited about this transaction, and I would like to give a shout-out to the entire MSA and Lima One teams that work diligently and collaboratively toward closing this transaction quickly.\nLima One is a leading nationwide originator of business purpose loans, or BPLs, with a strong brand recognition in the BPL borrower community.\nThey serve the needs of short- and long-term borrowing strategies in the BPL space by offering a diverse set of products, including fix and flip and new construction loans, longer-term rental loans, and small balance multifamily value-add and bridge loans.\nLima's originated over $3 billion since inception and has shown that they can reliably originate over $1 billion annually with a clear path to grow significantly beyond that.\nThe acquisition enhances our position as a significant capital provider to the BPL space, which we believe offers some of the most attractive opportunities to deploy capital in the residential mortgage space.\nThis acquisition will provide MFA with reliable access to high-quality high-yielding assets that are difficult to source in the marketplace.\nAt closing of the acquisition, we added $152 million of business purpose loans to our balance sheet.\nThe integration of Lima One into the MFA family has been smooth and efficient.\nThe working relationship we've built over the last four years across our organizations has been a tremendous asset in the integration and allowed Lima One to continue to originate high-quality loans and service customers without any issues.\nOne of the key initiatives has been to quickly use MFA's balance sheet and reputation to substantially improve the financing of Lima's assets and origination going forward.\nWe've already refinanced expensive financial, a BPL securitization, and subordinated debt that Lima needed to put in place during 2020, which will save over 500 basis points in financing costs over time.\nAnd we are in the process of adding additional financing lines to meet the expected growth of business going forward.\nTurning to Page 17, where we will discuss the fix and flip portfolio.\nOur portfolio declined modestly by about $32 million in the second quarter as principal paydowns continue to exceed loan acquisitions.\nLimited acquisitions last year led to our current seasoned loan portfolio where we see completed projects getting sold quickly into a strong housing market, leading to high repayment rates.\nWe expect this trend to change going forward as purchase activity has picked up meaningfully.\nSecond-quarter loan acquisitions more than doubled from the first quarter as we acquired $68 million in UPB and $118 million in max loan amount in the quarter.\nAs a reminder, fix and flip loans financed the acquisition, rehabilitation, and construction of homes.\nTypically, a certain amount of the loan is held back in the form of a construction holdback, which explains the difference between UPB on day one and the max loan amount, which represents the fully funded loan at the completion of project.\nThird-quarter acquisitions are on track to increase even further as we've already added in excess of $150 million max loan amount of fix and flip loans and fuel others.\nWith the acquisition of Lima as well as other seller relationships, we expect purchase activity to be strong going forward and expect the fix and flip portfolio to grow again in the third quarter.\nThe fix and flip portfolio delivered strong income in the second quarter with average portfolio yield of approximately 6.4% in the quarter.\nThe housing market continues to be extremely strong with record-low mortgage rates and low levels of inventory supporting annual home price depreciation in excess of 15%.\nIn addition, we continue to see unemployment declining and overall economic activity improving across the country.\nThe combination of these positive economic fundamentals, low initial LTVs on our loans, and the efforts of our experienced asset management team continues to lead to acceptable outcomes on our delinquent loans.\nSixty-plus day delinquent loans continue to decline and dropped $29 million to $120 million at the end of the second quarter.\nAnd what is really encouraging is that we continue to see a solid amount of loans pay off in full out of 60-plus.\nThe loans paid off in full from serious delinquency we often collect default interest, extension fees, and other fees of payout.\nFor loans where there is meaningful equity in the property, these can add up.\nSince inception, we have collected approximately $4.8 million in these types of fees across our fix and flip portfolio.\nSixty-plus day delinquency as a percentage of UPB declined 4% to 28% and remains elevated.\nBut keep in mind that we have purchased over $2.1 billion of fix and flip loans and had over $1.5 billion pay off in full.\nDue to the short-term nature of fix and flip loans with expected payoff in about six to 12 months, delinquent loans can be outstanding for longer than performing loans due to the time it takes to complete foreclosure.\nAs our purchase activity was limited last year and performing loans paid off, the delinquency percentage increase as one would naturally expect as our portfolio shrank.\nAs we now grow our portfolio again and continue to have positive outcomes on seriously delinquent loans, we expect those in dollar amount as well as the percentage delinquency to continue to decline going forward.\nAnd so far in the third quarter, we continue to see positive delinquency trends.\nFinally, the fix and flip loan reserves continued to trend down in the second quarter, declining by $2.1 million, primarily due to improved economic expectations and a strong housing market.\nTurning to Page 18.\nOur single-family rental loan portfolio continues to deliver attractive yields and strong credit performance.\nThe portfolio yield has remained steady in a mid- to high 5% range post-COVID and was 5.76% in the second quarter.\nUnderlying credit trends remained solid and 60-plus day delinquency declined 90 basis points to 4.9% at the end of the second quarter.\nPurchase activity increased significantly from the first quarter as we purchased $102 million of single-family rental loans in the second quarter and grew the single-family rental portfolio for the second quarter in a row.\nThe pace of acquisitions has continued to accelerate into the third quarter, and we have already added approximately $100 million in the month of July.\nThe acquisition of Lima One will significantly bolster our ability to source single-family rental loans.\nAnd we believe that we will be able to continue to grow our acquisition volume as well as our single-family rental portfolio in the near future.\nOver two-thirds of our single-family rental portfolio is financed with nonmark-to-market financing and over 15% through securitizations.\nWe priced our first single-family rental securitization in the first quarter of 2021, where the weighted average coupon of bond sold was only 106 basis points.\nGoing forward, we expect to programmatically execute single-family rental securitizations to finance our rental loans with the next deal expected in the fourth quarter.\nWe are pleased with the results of the second quarter of 2021 and even more excited about the future at MFA.\nOur investment initiatives are picking up steam as our asset acquisitions outpace runoff for the first time since late 2019.\nWe're continuing to execute our strategic plan to lower and term out borrowing costs, and we're beginning to see the results of this activity in our income statement.\nThe strength of the housing industry has obvious positive implications for our mortgage credit investments.\nAnd our acquisition of Lima One is an important initiative that will enhance our ability to deploy future capital in the BPL sector and grow our future earnings power.\n",
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"content": "q2 earnings per share $0.13.\nqtrly net interest income increased on a sequential quarter basis by over 16% to $59.0 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: These types of statements are subject to various known and unknown risks, uncertainties, assumptions, and other factors, including those described in MFA's annual report on Form 10-K for the year ended December 31, 2019, and other reports that it may file from time to time with the Securities and Exchange Commission.\nBefore we begin, I want to again recognize our entire MFA team.\nThis has obviously been a very challenging year and despite what the world has thrown at us, our team continues to persevere regardless of the circumstances.\nTheir dedication and commitment has been extraordinary.\nFrom a financial-results standpoint, the third quarter of 2020 was unquestionably the most normal quarter of 2020, but that's not really saying very much.\nFinancial markets continue to be awash in liquidity and the interest rate environment continues to feature historically low rates and muted volatility.\nYet the third quarter of 2020 was also very much the story of market uncertainty.\nBetween the looming election still not decided, government stimulus measures or not, the second wave of COVID-19 diagnoses, and the possibility of future lockdowns, shutdowns, or other economically restrictive measures, it's clear that we are not out of the woods and it seems almost impossible to fathom what the upcoming holiday season will be like, given this backdrop.\nRecall that MFA entered the third quarter of 2020 only four days out of forbearance with a fortified balance sheet and substantial liquidity.\nGiven our experience over the prior four months, we were understandably not inclined to immediately and aggressively pursue new investments and to add leverage.\nBut that decision was even easier, given the investment environment, which was challenging both in terms of investment availability and relative cheapness.\nHowever, as we mentioned in our second-quarter earnings call, we saw significant opportunities to improve our earnings capability through liability management, and I'm happy to report that we have made substantial progress on this front.\nWhile the results of these efforts are largely absent from our third-quarter financial results, they will be somewhat in evidence in the fourth quarter and very much in evidence in 2021.\nWhat is apparent in our third-quarter financial results is the continued price appreciation of our whole loan portfolio that we fought so hard to retain through the crisis months earlier in the year, contributing to both material economic book value appreciation on carrying value assets and income on fair value assets.\nIn addition, our abilities to actively manage residential mortgage credit assets, a capability that we began to develop as early as 2013 has also been reflected in our financial results as we achieved better-than-expected results on credit-sensitive assets, resulting in reversals of prior credit reserves which flow through income.\nOverall, we are pleased with our progress since July 1 of this year.\nWe have taken definitive steps to enhance our go-forward earnings capability and have a clear path to continue this success over the next several quarters.\nOur asset-based liabilities are still largely of a very durable nature.\nWe continue to actively manage credit-sensitive assets to achieve good results, and we look forward to continuing to enhance shareholder value.\nPlease turn to Page 4.\nWe reported GAAP earnings of $0.17 per share for the third quarter.\nUnlike the prior two quarters of this year, our third-quarter income was influenced by more normal factors and less by one-time noisy elements.\nThese results were largely driven by unrealized gains on our whole loan assets, as well as the reversal in a credit loss provision on whole loans held at carrying value.\nGAAP book value was up modestly, but economic book value was up over 10% for the quarter as our carrying value whole loans continued to retrace the writedowns that began with the onset of the pandemic.\nOur leverage at September 30 was still quite low at 1.9 to 1 and two-thirds of our asset-based financing was non-mark-to-market.\nWe caught up on all preferred dividends in the third quarter and we paid a $0.05 common dividend on October 30.\nPlease turn to Page 5.\nOur portfolio, which is also shown in the appendix on Page 20, is primarily comprised of residential whole loans, which have experienced substantial value appreciation since the liquidity-induced sell-off in March and April.\nHousing prices are very strong, particularly, in suburban neighborhoods outside of major cities.\nThis is obviously a good trend for our credit-sensitive assets, but we've been able to take advantage of this in real time, recording over $90 million of REO sales during the third quarter, which is a record quarter for us.\nPlease turn to Page 6.\nWe have also taken advantage of, one, the extremely low-rate environment; two, the paucity of non-QM product available for securitization; and three, the demand for short, high-quality assets by executing two non-QM securitizations totaling approximately $960 million, one in early September and the other closing just last week.\nAs you can see on this page, AAA yields on bonds sold were 1.48% and 1.38%, respectively, and the blended cost of debt sold was between 165 and 180 basis points below the cost of borrowing we replaced.\nAlso noteworthy is that while some of this replaced financing was non-mark-to-market, the securitized debt is similarly non-mark-to-market, non-recourse, and term.\nSo we actually increased the amount of this more durable financing while substantially lowering the cost.\nBonds sold generated cash of approximately 94% and 95% of UPB on the two transactions, which produced a little over $200 million of additional liquidity.\nPlease turn to Page 7.\nWe are also happy to report that we have fully paid off the $500 million 11% senior secured term note from Apollo and Athene.\nThis so-called rescue financing was critical to our forbearance exit, negotiation of non-mark-to-market financing on our loan portfolio, and to fortify our balance sheet.\nObviously, this was high-cost debt, but critically, the loan terms permitted repayment without penalty or any yield maintenance provision.\nAlso noteworthy is the fact that we did not refund this debt with cheaper debt.\nThe liquidity generated by our portfolio was largely the source of these funds.\nAnd clearly, the ROE in this investment of paying down this debt was a compelling one.\nThe results of this paydown will be partially realized in the fourth quarter but will be fully reflected in financial results in subsequent quarters to the tune of approximately $0.03 per share per quarter.\nI can honestly tell you that when we closed on this loan on June 26, I did not expect that we would be announcing its full payoff on our third-quarter earnings call.\nPlease turn to Page 8.\nSo although we have made good progress on the securitization front, we still have additional wood to chop.\nA rated SFR securitization will transition current financing on these assets to cheaper debt while producing additional liquidity.\nSimilarly, we still have approximately $1.5 billion of non-QM loans that will hopefully lend themselves to similar securitization executions as we achieved on our first two deals.\nAnd finally, we have three outstanding nonrated NPL securitizations that can be called and relevered.\nAnd at current market levels, this would offer us additional liquidity while also lowering [Audio gap] Please turn to Page 9.\nWe announced today that our board has authorized a $250 million common stock repurchase program.\nThis authorization replaces a scale existing authorization for only about $20 million of stock.\nAs many of you likely recall, MFA has historically not pursued aggressive share repurchases.\nThis was primarily because even when our stock traded at a discount to book, it was rarely a considerable discount to book value.\nWith our stock trading around 60% of economic book value, we feel that the current market price represents a substantial disconnect versus value.\nMFA's economic book value calculation is relatively straightforward.\nOur assets, primarily residential whole loans with a small mortgage-backed securities portfolio, are not difficult to value.\nWe own neither a large MSR book nor an operating company, both of which are inherently more difficult to value with precision.\nA share repurchase at current market levels is substantially accretive to both book value and earnings.\nAnd just to be clear, there's no conflict of interest in this action.\nAs an internally managed mortgage REIT, we believe that our motivation is completely aligned with shareholders.\nBuying back MFA stock does not reduce any management fee.\nAnd finally, to address available liquidity to execute this stock buyback, our cash liquidity as of last Friday after paying off the balance of the Apollo-Athene loan and the October 30 dividend was approximately $641 million.\nOur net income to common shareholders of $79 million or $0.17 per share primarily reflects the continued recovery in residential mortgage asset valuations, a net reduction in our CECL credit loss reserves, and lower operating and other expenses as we have put forbearance negotiations behind us.\nHowever, our results continue to include some items that we don't expect to reoccur in future periods.\nFor this reason, we continue not to present core earnings metric.\nNet interest income for the quarter was $10.1 million and reflects the following: firstly, higher net interest spreads for both our residential whole loan and securities portfolios.\nThe net interest spread on our loans held at carrying value rose to 1.24% for the quarter as our overall cost of funds declined post forbearance and due to the positive impact of the non-QM securitization transaction that closed in early September.\nIt should also be noted that interest income for the quarter was impacted by an increase in the amount of nonaccrual loans.\nIn particular, at September 30, 2020, non-QM loans with a UPB of approximately $175 million were on nonaccrual status.\nUnder our nonaccrual accounting policy, we stopped recognizing interest income in the period where the loans become 90 days delinquent and reversed any income recognized in the prior period.\nAccordingly, no interest income was recognized on these loans in the third quarter.\nIn addition, as loans with a UPB of approximately $145 million became 90 days delinquent during the third quarter, interest income was adjusted by approximately $1.7 million to reverse income accrued on these loans in prior periods.\nSecondly, interest expense for the third quarter on the $500 million loan from Apollo and Athene was approximately $14 million.\nExcluding this expense and the cash borrowed that was held on our balance sheet for the entire quarter on a pro forma basis, the net spread generated by our interest-earning assets for the third quarter would have been approximately 1.15%.\nAs Craig has also noted, we reduced our CECL allowance on our carrying value loans to approximately $106 million, primarily reflecting adjustments to macroeconomic assumptions used for credit loss modeling purposes but also partially due to lower loan balances.\nThis reversal and other net adjustments to our CECL reserves positively impacted net income for the quarter by approximately $27 million.\nWe continue to take a cautious approach in making our estimates for credit losses given the uncertainty in the U.S. economic outlook due to the ongoing COVID-19 pandemic and given the current political environment.\nOur loans held at fair value performed strongly for the quarter.\nNet gains of $76.9 million were recorded, including $58.9 million of market value increases and $18 million of cash income.\nIn the second and third quarters of 2020, our portfolio of loans held at fair value has recovered more than 80% of the market value declines that were recorded in the first quarter of 2020.\nFinally, our operating and other expenses were $27.3 million for the quarter, down significantly from the prior quarter as we did not incur any further expenses related to exiting from our forbearance arrangement.\nHowever, it should also be noted that expenses this quarter included a one-time severance accrual of approximately $3.6 million related to a workforce reduction.\nIn addition, we anticipate that all else remaining equal, our compensation expense going forward should be approximately $1 million lower each quarter as a result of actions taken to rightsize our workforce.\nGoing forward, we anticipate that annualized G&A expenses to equity should run at about 2% each quarter.\nTurning to Page 11.\nNon-QM origination volume is gaining momentum and market demand for paper is strong.\nThis increased demand partially due to improved execution in the securitization market in addition to the overall low-yield environment.\nWe were able to purchase approximately $40 million in the third quarter and have a growing acquisition pipeline.\nWe successfully closed our first non-QM securitization in the third quarter and the second subsequent to quarter-end.\nIn total, nearly $1 billion of our non-QM portfolio has been securitized to date.\nFinancing of our non-QM portfolio is very stable as over three-quarters of our non-QM borrowings are now financed with multiyear non-mark-to-market leverage.\nWe will continue to be a programmatic issuer of securitization, which will further increase the percentage of our non-mark-to-market funding, providing stability in addition to lowering our cost of funds.\nTurning to Page 12.\nThe significant percentage of borrowers in our non-QM portfolio have been impacted by the pandemic.\nMany of our borrowers are owners of small businesses that were affected by shutdowns across the nation.\nWe instituted a deferral program at the onset of the pandemic in an effort to help our borrowers manage through the crisis.\nThrough our servicers, we granted almost 32% of the portfolio temporary payment relief, which we believe help put our borrowers in a better position for the long-term payment performance.\nSubsequent to June, we've reverted to a forbearance program instead of a deferral as the economy opened up.\nThe forbearance program instituted are largely now determined by state guidelines.\nAnd for clarity, deferral program, tax on the payments missed and the maturity of the loan has a balloon payment.\nForbearance requires the payments missed to be repaid at the conclusion of the forbearance period.\nIf those amounts are unable to be paid in one-month sum, we allow the borrower to spread the amounts over an extended period of time.\nOver the third quarter, we saw a much lower level of delinquencies than one might have expected given the high percentage of deferrals granted and have seen improvement in those levels subsequent to quarter-end.\nCurrent state of affairs is unique as although we have seen economic stress and high unemployment, home values have been increasing as low levels of supply, combined with low mortgage rates, have supported the market.\nIn addition, our strategy of targeting low LTV loans should mitigate losses under a scenario with elevated delinquencies.\nIn many cases, borrowers which no longer have the ability to afford their debt service will sell their home in order to get the return of their equity.\nTurning to Page 13.\nOur RPL portfolio of $1.1 billion has been impacted by the pandemic, which continues to perform well.\n80% of our portfolio remains less than 60 days delinquent.\nAlthough the percentage of portfolio, 60 days delinquent in status, 20%, over 23% of those borrowers continue to make payments.\nPrepay speeds in the third quarter rebounded from the slower speed seen in the second quarter.\nThis portfolio exhibited a similar percentage impacted by COVID as the non-QM portfolio, and we are working with our servicers to ensure positive outcomes post forbearance.\nTurning to Page 14.\nOur asset management team continues to drive performance of our NPL portfolio.\nThe team has worked through the pandemic in concert with our servicing partners to maximize outcomes on our portfolio.\nThis slide shows the outcomes for loans that were purchased prior to the third quarter ended 2019, therefore owned for more than one year.\n35% of loans that were delinquent at purchase are now either performing or paid in full.\n44% have either liquidated or REO to be liquidated.\nWe have significantly increased activity or activity liquidating REO properties, selling 67% more properties versus the third quarter a year ago.\n21% are still in nonperforming status.\nOur modifications have been effective as three-quarters are either performing or paid in full.\nWe are pleased with these results as they continue to outperform our assumptions at the time of purchase.\nTurning to Page 15.\nWe saw an improvement in delinquencies and an increase in paydowns on the fix-and-flip portfolio in the third quarter as the strong housing market supported by record-low mortgage rates and large monitoring and fiscal stimulus positively influenced home sales and credit conditions in the quarter.\nMFA's fix-and-flip portfolio declined $164 million to $699 million in UPB at the end of the third quarter.\nPrincipal paydowns were $175 million as project completions and the pace of home sales increased in the quarter.\nThe quarterly paydown is equivalent to about 59% CPR on an annualized basis.\nWe advanced about $18 million of rehab draws and converted $7 million to REO and made no new investments in the quarter.\nThe average yield on the fix-and-flip portfolio in the quarter was 5.41%.\nAnd importantly, all of our fix-and-flip financing is non-mark-to-market debt with the remaining term of 21 months.\nThe total amount of seriously delinquent fix-and-flip loans declined $39 million in the quarter.\nDue to lower delinquencies, lower fix-and-flip holdings in general, and improved credit conditions, loan loss reserves on the fix-and-flip portfolio declined $7 million in the quarter.\nWe have maintained strong relationships and an ongoing dialogue with our originating partners throughout the pandemic and started acquiring new fix-and-flip loans in the month of October.\nTurning to Page 16.\nAs previously noted, seriously delinquent fix-and-flip loans declined $39 million in the quarter as we sell out $51 million of loans either pay off in full or cured to current of 30-day delinquent pay status.\nWhile we completed foreclosure on $7 million of loans and $19 million became new 60-plus day delinquent loans.\nWe are pleased with the improvement and believe it is due to the efforts of our asset management team, as well as a strong housing market where the pace of home sales has increased recently, which is helpful for fix-and-flip loans where the payoff is often dependent on the sale of a property.\nApproximately two-thirds of the seriously delinquent loans are either completed projects or bridge loans where limited or no work is expected to be done, meaning these properties should be in generally salable conditions.\nIn addition, approximately 20% of the seriously delinquent loans are already listed for sale, potentially shortening the time until resolution.\nWe believe that our experienced asset management team gives us a tremendous advantage in loss mitigation.\nAnd combined with the term non-mark-to-market financing of our fix-and-flip portfolio, we believe we will be able to patiently work through our delinquent loans to achieve acceptable outcomes.\nIn addition, we believe recent macroeconomic trends have been helpful for loss mitigations as fiscal and monetary policies continue to be supportive of the housing market.\nTurning to Page 17.\nOur single-family rental loan portfolio continues to perform really well through these challenging times.\nIn addition to benefiting from strong fiscal and monetary support, it continues to benefit from short- to medium-term demographic trends as the push for people to move out of apartments in densely populated cities to single-family homes for more space, as well as long-term trends toward increased rental percentage of single-family households supports this asset class.\nThe portfolio yields have remained relatively stable and was a healthy 5.65% in the third quarter.\nAfter rising modestly in the second quarter, delinquencies have stabilized, and 60-plus-day delinquency declined 10 basis points to 4.9% at the end of the third quarter.\nPrepayments have remained relatively muted due to strong prepayment protection, a three-month CPR of 12% in the third quarter.\nWe made no new SFR investments in the quarter but have maintained strong relationships with our origination partners throughout the pandemic and resumed SFR loan acquisitions in October.\nFinally, as Craig alluded to earlier, we are exploring a possible securitization of a portion of our SFR portfolio, which could meaningfully lower our cost of funds given current market condition.\nI believe that MFA has made great strides since July 1 of this year.\nSignificant asset price appreciation, which drove earnings and book value, substantial progress in moving our asset-based financing from expansible, durable debt to equally durable but materially cheaper securitized debt and, most recently, the payoff of $500 million of 11% debt.\nConsiderable market uncertainty still exists, and the world continue to face challenges around the pandemic, politics, and monetary and fiscal policy.\nMFA is well-positioned to weather these uncertainties, respond to opportunities as they arise, and we are taking proactive steps to further position our company to thrive in the future.\n",
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"content": "compname announces $250 million stock repurchase program.\nq3 earnings per share $0.17.\ncompname announces $250 million stock repurchase program.\ncompname announces repayment of $500 million loan from apollo and athene.\nqtrly net interest income $10.1 million versus $56.9 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: These types of statements are subject to various known and unknown risks, uncertainties, assumptions and other factors, including those described in MFA's Annual Report on Form 10-K for the year ended December 31, 2020, and other reports that it may file from time to time with the Securities and Exchange Commission.\nThe third quarter was a transformational quarter for MFA, and as we sit here today, we are excited about our company and enthusiastic about our future.\nWe continue to execute on our strategy to grow our portfolio and reduce and term out liabilities.\nOur third quarter financial results featured strong earnings and book value growth.\nOn the credit side, continued strong housing trends have bolstered the value of the underlying assets, securing the mortgages we own thus lowering LTVs.\nRobust housing prices have also created a strong tailwind for delinquent mortgages and REO properties as these trends lead to improved resolution and outcomes.\nMFA's tireless efforts to find new attractive investments were also rewarded in the third quarter as record asset acquisitions exceeded runoff and led the portfolio growth of $1.5 billion.\nPlease turn to Page 4.\nWe reported GAAP earnings of $0.28 per share for the third quarter, largely driven by gains of $43.9 million or $0.10 per share related to our acquisition of Lima One.\nThese gains resulted from the difference between the fair value of our Lima One purchase relative to our basis in our previous investments, in both common equity and preferred equity of Lima One, both of which were impaired early on in the pandemic.\nOur net interest income from our loan portfolio increased by 15%, over the second quarter to $55 million from $48 million.\nGAAP book value was $4.82, up $0.17 or 3.7% from June 30 and economic book value was $5.27, up $0.15 or 2.9% from June 30.\nEconomic return was also strong for the quarter.\n5.8% GAAP and 4.9% economic book value.\nOur leverage picked up slightly over the core to 2.2 to 1 versus 1.8 to 1 at June 30.\nAnd we paid a $0.10 dividend to shareholders on October 29.\nPlease turn to Page 5.\nWe acquired $2 billion of loans in third quarter, the highest quarterly loan purchase volume in our history, and we grew our loan portfolio by $1.5 billion to $7 billion.\nThese purchases included $820 million of agency eligible investor -- sorry about that.\nSo these loan purchases included $820 million of agency eligible investor loans and $485 million of business purpose loans.\nIn fairness, it's likely that purchases of agency eligible investor loans will taper somewhat in future quarters, given the recent removal of the cap on GSE investor loan purchases.\nThe business purpose loan acquisitions included approximately $170 million of loans that were on Lima One's balance sheet at July 1.\nBut as Gudmundur will discuss shortly, Lima One's origination volume continues to grow and their October production was their highest month ever.\nSo while $1.5 billion of portfolio growth was an extraordinary quarter, we believe that we are well positioned with our originator partners to continue to grow our portfolio.\nOur net interest income increased versus Q2 by 5% to $61.8 million.\nWe continue to make excellent progress in liquidating REO properties, as we capitalize on strong housing trends.\nAnd for borrowers still negatively impacted by COVID, we can offer modifications and/or repayment plans to allow them to stay in their homes, restore their payment status to current and retain their equity in their home.\nPlease turn to Page 6.\nThis slide illustrates the components of our investment portfolio and also the nature of our asset-based financings.\nThe increase of approximately $1 billion in mark-to-market financing versus last quarter is primarily related to our agency eligible investor loans, which are financed with traditional repo as a bridge to securitization.\nPlease turn to Page 7.\nDespite the normal challenges associated with the corporate acquisition, Lima One did not miss a beat in the third quarter as they originated over $400 million of loans during the quarter.\nWe have an excellent relationship with Jeff Tennyson and his team at Lima One having worked closely with them for over four years now.\nAs many of you probably know, there have been two recent announcements of acquisitions of similarly large business purpose lenders.\nWe're confident that we can provide Lima with the resources to continue to grow and excel at their business.\nThere are no doubt efficiencies that we can cultivate over time to lower costs.\nAnd to that point, we've already taken steps to reduce Lima's interest expenses.\nSteve Yarad will review some of the accounting aspects of this transaction shortly.\nPlease turn to Page 8.\nWe continued to execute on our securitization strategy in the third quarter, pricing our fifth non-QM deal in August.\nAs luck would have it, we priced this deal when yields were at their lowest levels in the quarter.\nSubsequent to quarter end, we priced our first agency eligible investor securitization in October.\nWe structured $312 million bonds and we retained a 5% vertical slice of the deal.\nPlease turn to Page 9.\nFinally, you may have noticed that we've added a corporate responsibility section to our website.\nEnvironmental, social and governance issues have never been as prevalent as they are today.\nAnd the focus on ESG in investment decisions is real and growing.\nMFA has been committed to these principles for years, but we have been remiss in communicating our endeavors and policies to support these principles publicly.\nWe will always continue to improve our efforts, but we are proud to finally communicate our substantial progress to date.\nCraig has already noted, MFA delivered strong results for the quarter that were driven by record quarterly loan portfolio growth and certain purchase accounting adjustments related to the Lima One acquisition, as well as the inclusion of Lima One earnings in MFA's consolidated results.\nBefore discussing the core portfolio results in more detail, I'd like to take a minute to discuss the impact of Lima One purchase accounting on our income statement for the third quarter, as well as on their quarter end balance sheet.\nFirstly, earnings include gains totaling $43.9 million that relate to the Lima One purchase transaction.\nThis includes the following: $38.9 million gain arising from revealing our previously held investment of approximately 43% of Lima One's common equity.\nGAAP purchase accounting requires at the previously held interest is adjusted at closing to the fair value implied by the current transaction.\nWe impaired the value of our prior investment by $21 million back in March of 2020, when valuations of mortgage originators were highly uncertain.\nConsequently, the $38.9 million gain includes a reversal of its prior impairment charge, while the remaining $18 million represents the incremental adjustment to reflect the prior investment at the fair value implied by the current transaction.\nAn additional gain was recorded as Lima repaid its outstanding preferred equity in full, of which MFA held roughly half.\nThe gain recorded reflects $5 million impairment reversal.\nThat impairment was also initially recorded in March of 2020.\nSecondly, under the required GAAP purchase accounting to consolidate Lima One onto MFA's balance sheet, we recorded $28 million of intangible assets and $61.6 million of residual goodwill.\nIntangible assets include the value allocated to customer relationships, the Lima One brand name and internally developed technology.\nThese assets are amortized over their estimated useful lives with $3.3 million of amortization expense recorded this quarter.\nThe residual goodwill asset represents the difference between the purchase price paid to acquire Lima One.\nAnd the fair value of the net assets acquired including the intangible assets.\nGoodwill is not amortized under current GAAP, but is subject to periodic impairment testing.\nFurther detail on the purchase accounting for Lima One is provided in our 10-Q, which we expect to file later today.\nTurning now to the core components of our Q3 2021 results, the key items to highlight are as follows.\nNet interest income of $61.8 million was $2.8 million higher or 5% higher sequentially.\nAs Craig noted residential whole loan net interest income again increased, this quarter by 15%, primarily due to impressive portfolio growth and the ongoing impact of securitizations to lower the cost of financing.\nNow, net interest spread was essentially flat to last quarter at 2.98%.\nThe CECL allowance in our carrying value loans decreased for the six quarter in a row, and at September 30, this $44.1 million down from $54.3 million at June 30.\nThe decrease reflects continued runoff of the carrying value loan portfolio and adjustments to macroeconomic and loan prepayment speed assumptions used in our credit loss modeling.\nThis reversal to our CECL reserves positively impacted net income for the quarter by $9.7 million.\nActual charge-off experience continues to remain very modest with approximately $2.1 million of net charge-offs taken in the nine-month period ended September 30, 2021.\nPricing on loans held at fair value was higher than the end of the second quarter, particularly on purchased non-performing loans and business purpose loans.\nThis primarily drove the net gains recorded of $21.8 million.\nApproximately $11.3 million of this amount relates to business purpose loans originated at par by Lima One during the third quarter, because we elect the fair value option on these loans.\nAt quarter end, they're mark-to-market based on estimated third-party sale process.\nIn addition to the fair value gains on originated loans, Lima One also contributed $9.6 million of origination, servicing and other fee income during the quarter, reflecting strong origination volumes.\nGudmundur will discuss this in more detail shortly.\nFinally, our operating and other expense, excluding the amortization of Lima One intangible assets was $30.1 million for the quarter.\nThis includes approximately $10.3 million of expenses, primarily compensation related at Lima One.\nMFA's G&A expenses this quarter were approximately $14.5 million, which is in line with our normal run rate.\nMoving forward, we would expect our consolidated G&A expense to run at around $25 million per quarter, up since significant changes in Lima One origination volumes.\nOther loan portfolio related costs meaning those not related to Lima One loan origination servicing are expected to run at around $5 million to $7 million a quarter, but will fluctuate based on the level of loan at acquisition activity, REO portfolio management expenses and costs incurred to the extent we continue to favor securitization over warehouse financing.\nTurning to Page 11, home prices showed continued strength over the quarter.\nWe saw prices increased at year-over-year rate of 18%.\nWe have however seen the pace of month-over-month increases moderate a bit, as of the dramatic increase in home prices have had a slight impact on affordability.\nAll of the same fundamental factors remain at play, such as low inventory, demographic trends and historically low rates.\nThe unemployment rate is now down below 5% as economic activity continues to increase.\nAll of these factors combined with monetary and fiscal support, continue to keep mortgage credit performance strong and should bode well for continued credit performance in the near term.\nTurning to Page 12, non-QM origination volume remained elevated over the quarter and we were able to purchase almost $700 million of loans, which represents another significant quarter-over-quarter increase.\nPrepayment speeds remain elevated over the quarter as the three month average CPR for the portfolio was 39%.\nWe executed on our fifth securitization in the third quarter, bringing the total amount of collateral securitized to over $2 billion.\nAnd we expect to bring another securitization of non-QM loans in the fourth quarter.\nThese securitizations continue to lower our financing cost and at the same time, have provided additional stability to our borrowings.\nSecuritizations combined with non-mark-to-market term facility have resulted in approximately 50% of our non-QM portfolio funded with non-mark-to-market leverage at the end of the quarter.\nWe expect to continue to be a programmatic issuer of securitizations as it's currently the most efficient form of financing for our portfolio.\nTurning to Page 13.\nThe non-QM portfolio has exhibited strong performance coming back from the uncertainty created by the onset of the pandemic.\nWe've seen steady improvement and delinquency percentages as our loss mitigation tactics employed have been effective.\nWe instituted a deferral program at the onset of the pandemic in an effort to help our borrowers manage through the crisis.\nCurrently, have a very small handful of non-QM borrowers in forbearance or deferral plans.\nFor borrowers that did receive forbearances, many of them are either current today or on a repayment plan to be current within one to two years' time.\nIn the third quarter, we saw 60-plus-day delinquency rates improved by two anda half percent and 30 day delinquencies dropped by 0.3%.\nIn addition, approximately 30% of those delinquent loans made a payment in the most recent months.\nAs the economic recovery continues, we expect the portfolio's credit performance to improve.\nOur strategy of targeting lower LTV loans should mitigate losses under a scenario with elevated delinquencies, in many cases, borrowers, which no longer have the ability to afford their debt service will sell their home in order to get the return of their equity.\nTurning to Page 14.\nIn September, the FHFA and treasury suspended the 7% cap on investor loan purchases for Fannie Mae and Freddie Mac for at least one year.\nWe took advantage of the opportunity over the quarter acquiring over $2 billion or acquiring over $1 billion in loans since we started purchasing these loans in the second quarter, from our existing originator relationships at attractive prices.\nThis new announcement limits the opportunity size for the time being, but could arise again in the future.\nWe executed on our first securitization of this collateral subsequent to quarter end and expect to execute another before the end of the year.\nThis is another example of our ability to adapt to an ever-changing environment and a testament to our strong originator relationships in a competitive environment.\nTurning to Page 15.\nOur RPL portfolio of approximately $700 million continues to perform well.\n81% of our portfolio remains less than 60 days delinquent.\nAnd although the percentage of the portfolio of 60 days delinquent in status was 19%, almost 30% of those borrowers continue to make payments.\nPrepaid speeds in the third quarter continue to be elevated at a three month CPR of 17.\nMore and more of our borrowers are gaining equity with the increase in home prices and are taking advantage of the low interest rate environment.\nWe have a small amount of borrowers still receiving COVID assistance and believe the impact from COVID will be de minimis on our RPL portfolio going forward.\nTurning to Page 16.\nOur asset management team continues to push performance of our NPL portfolio.\nThe team has worked in concert with our servicing partners to maximize outcomes on our portfolio.\nThis slide shows the outcomes for loans that were purchased prior to the year ended 2020.\n38% of loans that were delinquent at purchase are not either performing or have paid in full.\n48% have either liquidated or REO to be liquidated.\nOur sales of REO properties have continued at an accelerated pace at advantageous prices.\nOver the quarter, we sold almost three times as many properties as a number of loans we converted to REO.\n14% are still a non-performing status.\nOur modifications have been effective as almost three quarters are either performing or have paid in full.\nWe are pleased with these results as they continue to outperform our assumptions at the time of purchase.\nTurning to Page 17.\nWe closed our acquisition of Lima One, a leading nationwide business purpose originator at the beginning of the quarter.\nThis acquisition solidifies MFA's position as a leading capital provider to the BPL space, which we believe offers some of the most attractive opportunities to deploy capital in the residential mortgage space.\nOur teams wasted no time utilizing our collective strengths to take the business to new heights.\nLima One originated over $400 million of business purpose loans in the third quarter, a record quarter for the company and a 34% increase over second quarter origination levels.\nWe saw strong demand for all of Lima's products and continue to experience the benefits of Lima's diversified product offerings, which offer financing solution to residential real estate investors with short and long-term investment strategies in the single family and small balance multi-family markets.\nSeptember origination of over $150 million was a record month for the company, but that record was short-lived as the fourth quarters off to a strong start with October volume setting a new record with origination of over $170 million.\nOne of the key benefits of this transaction is Lima's ability to provide MFA with a reliable flow of high quality, high yielding assets that are difficult to source in the marketplace.\nWhen we announce the transaction in May, we also mentioned that we believe that Lima had the potential to grow substantially beyond the run rate at the time of $1.2 billion annual origination.\nWe are already seeing that play out as we now expect full 2021 origination volume of between $1.4 billion to $1.5 billion.\nAnd the third and fourth quarter volume suggests continued growth in 2022.\nIn addition to the benefit of adding assets to our balance sheet Lima as profitable company.\nLima generated $10.6 million of net income from origination servicing activities in the quarter, representing an annualized return on allocated equity of approximately 30%.\nWe have been very impressed by Lima's operational efficiency as they've consistently closed over 450 loan units in the last few months, up from about 300 units per month in the first quarter.\nWe believe the team's experience with closing large volume of loans and scaling up operational capacity quickly sets us up nicely for future growth.\nWe added $600 million of BPL financing capacity in the quarter – in the third quarter, as we close on two new financing facilities.\nThese facilities allow for financing of a broad range of BPL assets, it will support the continued growth of our BPL strategy.\nAnd finally, the increased rent to loan acquisition volume from the Lima One acquisition has accelerated our timeline for our next business purpose rent to loan securitization, which we now expect to close in the fourth quarter.\nTurning to Page 18.\nHere we will discuss the fix and flip portfolio.\nThe portfolio grew by over $160 million or 37% in the quarter.\nPurchase activity picked up significantly as we closed on the Lima acquisition, including loans on their balance sheet and benefited from very strong origination activity.\nIn total, we purchased approximately $230 million UPB with $350 million max loan amount in the quarter and have added over $95 million maximum loan amounts so far in the fourth quarter.\nAs a reminder, flix and flip loans finance the acquisition, rehabilitation and construction of homes.\nTypically, a certain amount of the loan is held back in the form of a construction holdback, which explains the difference between UPB on day one and the max loan amount, which represents the fully funded loan at the completion of projects.\nThe flix and flip portfolio delivered strong income in the third quarter with an average portfolio yield of 7.11% in the quarter, a 67-basis-point increase from the second quarter.\nThe housing market remains extremely strong with record low mortgage rates and low levels of inventory supporting annual home price appreciation in excess of 15%.\nIn addition, we continue to see unemployment declining and overall economic activity improving across the country.\nThe combination of these positive economic fundamentals, low initial LTVs in our loans and the efforts of our experienced asset management team continues to lead to acceptable outcomes on our delinquent loans.\n60-plus-day delinquent loans continue to decline and drop $13 million or about 10% to $107 million at the end of the third quarter.\nAnd we continue to see a solid amount of loans payoff in full out of 60 plus.\nWhen loans payoff in full from serious delinquency, we often collect default interest, extension fees and other fees of payoff.\nFor loans where there's meaningful equity in the property, these can add up.\nSince inception, we have collected approximately $5.6 million and these types of fees across our fix and flip portfolio.\n60-plus-day delinquency as a percentage of UPB declined 10% to 18% and remain somewhat elevated.\nOne thing to note here is that Lima originated fix and flip loans held by MFA have approximately 5% 60 day delinquency, speaking to the quality of origination and servicing.\nAlmost all of the 60-plus-day delinquent loans were originated prior to March of 2020 and are simply working the way through the appropriate loss mitigation activities.\nDue to the short term nature of fix and flip loans with expected payoff in about six to 12 months, delinquent loans can be outstanding for longer than performing loans due to the time it takes to complete foreclosure.\nKeep in mind that we acquired over $2.2 billion of fix and flip loans and have had over $1.6 billion payoff in full.\nAs our purchase activity was limited last year and performing loans paid off, the delinquency percentage increased as one would naturally expect as our portfolio's rank.\nAs we now grow our portfolio again and continue to have positive outcomes on seriously delinquent loans, we expect both dollar amount as well as percentage delinquency to continue to decline going forward.\nTurning to Page 19.\nOur single family rent to loan portfolio continues to deliver attractive yields and strong credit performance.\nThe portfolio yield has remained steady in a mid-to-high 5% range post-COVID and was 5.76% in the second quarter.\nUnderlying credit trends remain solid and 60-plus-day delinquency declined 140 basis points to 3.5% at the end of the third quarter.\nPurchase activity more than doubled from the second quarter, as we acquired over $250 million of single family rental loans in the quarter, a record quarterly acquisition volume.\nThe SFR portfolio group by 39% to $717 million at the end of the third quarter.\nAcquisition activities have remained robust in the fourth quarter, as we've already added over $70 million in the month of October.\nThe acquisition of Lima One has significantly boosted our ability to source single family rent to loans, and we believe, and we will be able to continue to grow our single family rental portfolio in the near future.\nApproximately, 50% of our single family rental portfolio is financed in non-mark-to-market financing and slightly over one-thirds of securitizations.\nWe price our first single family rental securitization in the first quarter of 2021 and expect to close another one in the fourth quarter.\nWe expect to programmatically execute single family rental securitizations to efficiently finance our portfolio.\nWe are pleased with the results of the third quarter of 2021 and even more excited about the future at MFA.\nOur investment initiatives are picking up steam and contributing to portfolio growth.\nWe're continuing to execute our strategic plan to securitize our assets and term out durable financing.\nLima One is firing on all cylinders and the strength of the housing industry has obvious positive implications for our mortgage credit investments.\n",
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"content": "qtrly earnings of $0.28 per basic common share.\nqtrly net interest income increased on a sequential quarterly basis to $61.8 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: Actual results may differ materially from those contemplated in these statements.\nExcept as required by law, we undertake no obligation to update these statements as a result of new information or otherwise.\nDuring the call, we'll also discuss non-GAAP financial measures in talking about our performance.\nOver the past few months, we've had the honor and the privilege of welcoming back guests back to our properties at a remarkable pace, both in Las Vegas and our regional markets.\nIt's been rewarding to see our guests taking in all the world-class gaming and entertainment experiences that only MGM Resorts can provide, and it's been equally gratifying to witness the tremendous effort of our employees delivering these experiences.\nWe have an amazing team of people here at MGM Resorts, the best in the business.\nI can't say enough how critically important they have been, will continue to be to our success as we carry out our vision to be the world's premier gaming and entertainment company.\nIn fact, investing in our people and our planet is the foundation upon which we've built our strategic plan for the company's long-term vision.\nOur strategic plan consists of the following four priorities: investing in our people and our planet, providing unique experiences for our guests by leveraging data-driven customer insights and digital capabilities, delivering operational excellence at every level, and allocating our capital responsibly to drive the highest returns for our shareholders.\nIn driving our vision, we have long discussed our goals of simplifying our corporate structure and monetizing our real estate premium valuations to become asset light.\nWe've been busy on this front.\nAnd over the past 90 days, we've meaningfully advanced this strategy.\nIn May, we announced an agreement to sell and lease back MGM Springfield, underlying real estate to MGM Growth Properties.\nWe followed that news in July with an agreement to purchase Infinity World's 50% interest in CityCenter and then to subsequently sell and lease back the underlying real estate to Blackstone at an unprecedented cap rate for gaming asset.\nAnd we're very excited to become the full owners of Aria and Vdara operations soon.\nHe's been a great partner for many years, and we wish him the very best in the future.\nAnd finally, as you know, we have spent significant time and effort working on the best solutions for our stated goal of de-consolidating MGP.\nThis is a great win for MGM and MGP, and we're excited by our new long-term partnership with VICI.\nAgain, I'm incredibly proud of our finance, operating and legal teams, who have been accomplishing an astonishing amount in a short order to get these transactions across the finish line.\nCombining these transactions grant us greater financial flexibility by the means of $11.6 billion in domestic liquidity and importantly, they allow us to intensify our focus on maximizing growth in our core business and pursuing opportunities that align to our long-term vision.\nIn terms of such opportunities, we remain committed to our sports betting and iGaming joint venture, BetMGM, which continues to impress.\nHaving expanded its net revenues and its leadership position in the second quarter, BetMGM is the No.\n2 operator in the space nationwide, and in the second quarter, it commended 24% share of its live markets.\nBetMGM remains a clear leader in iGaming, having reached a 30% market share in the second quarter, and we also continue to see the benefits of customer acquisition cross pollinization between MGM and BetMGM.\nIn the second quarter, 15% of BetMGM's new players came from MGM and 31% of MGM M life sign-ups came from BetMGM.\nWe'll strategically invest in our digital capabilities and customer growth strategies, driving innovation and a deeper customer loyalty throughout technology led customer-centric experiences, products and services.\nThese efforts will be led by Tilak Mandadi, who we recently hired as our chief strategy, innovation and technology officer.\nTilak is a visionary, a results-driven leader who has spent several decades of experience at both Disney and American Express, where he led similar initiatives.\nTilak will also be leading our relationship with BetMGM joining its board of directors.\nHe's another fantastic addition to our senior leadership team and complementary to the deep bench we've now built with recent additions of Jonathan as CFO, and Jyoti Chopra as our chief people, inclusion and sustainability officer.\nI have no doubt that will be invaluable to the company's future.\nWe'll also increase our diversification into Asia through the footprint expansion in Macau and the integrated resort opportunity in Japan.\nAs a matter of fact, we officially submitted our RFP as a sole bidder for the Osaka license a couple of weeks ago, which starts the clock on a three-month review process.\nWe and our local partners, ORIX, remain excited by the opportunity, which we expect will yield very attractive returns.\nWe look forward to Osaka reviewing our proposal, and hopefully, I'm confident, we'll ultimately be named Osaka's designee operator early this fall.\nAnd lastly, we continue to study key regional markets of significance, including commercial gaming license at Empire City in New York.\nWe reported a great second quarter at our domestic properties, driven by pent-up consumer demand and high domestic casino spend, as well as our ability to yield our business and maintain our cost discipline efforts.\nIn fact, we delivered all-time record margins in both Las Vegas and regional segments, as well as all-time record EBITDA quarters at our regional properties.\nFurther, 11 of our 17 domestic properties had all-time record quarters and slot gross win.\nAnd that momentum continued into July with another record month that exceeded June.\nI can't tell you enough under these circumstances how pleased and proud I am of our entire team.\nWe have righted the ship, and we're going full steam ahead.\nIn Las Vegas, our weekend volumes are back to normal, driven by leisure and domestic casino customers with ADRs now surpassing 2019 levels.\nThe weekday while improving continued to lag the weekends in the second quarter due to lower level of group business.\nThat being said, June kicked off a series of citywide events coming to town such as World Of Concrete and Surfaces, and we anticipate a return of groups here in the third and fourth quarter.\nFeedback from meeting participants have been very positive.\nOur lead volumes in the year for the year, production is now close to normal levels, which we expect will help midweek occupancy uplift in the back half of the year.\nWe continue to believe that full convention business recovery will be post '21 event, solidifying itself in the second half of 2022, and we remain pleased with how our '22 and '23 group calendar is shaping up, as well as contract commitments for the future.\nIn July, we relaunched entertainment with a great line of events that was met with overwhelming demand and now with Allegiant Stadium hosting large-scale entertainment, we can now drive more meaningful compression, especially at the mid to south end of the strip.\nConsider the entertainment programming a few weekends ago, we had Garth Brooks at Allegiant Stadium, we had a McGregor fight at T-Mobile and Bruno Mars at Park MGM, selling over 98,000 tickets within our properties distance situated to capture significant amount of this foot traffic.\nWhile our conviction in the long-term viability of our business remains stronger than ever, the recent rising number of COVID cases and the subsequent actions taken by the CDC and local regulators and our reinstituted mask mandates here in Las Vegas of note is a reminder that the pandemic is not completely behind us.\nIn Las Vegas, we continue to facilitate vaccinations among our employee base and have partnered with the Governor's Office to host multiple vaccination clinics including one at T-Mobile Arena, another on the strip at The Park, and we're using the full weight of our business and resources as part of this effort, including significant incentive offers to both guests and employees, who get vaccinated or bring friends and family to get vaccinated.\nWe've also invested in ongoing educational employee campaigns, as well as providing easy access to all three vaccines on pop-up clinics at all of our properties.\nIn July, we implemented a mandatory COVID testing program for all of our Las Vegas employees, who have not proven proof of vaccination.\nWe've taken the virus very seriously, and as always, the health and safety of our guests and employees is our top priority.\nAt this time, it's too early to speak to any meaningful impact to our business, but we are monitoring the situation closely.\nAnd we'll continue to proactively work safely to accommodate guests and our properties.\nJuly, as I mentioned before, was the best month this year and by far in terms of operating performance, we ultimately feel great about our long-term positioning in Las Vegas.\nThe last few months have inevitably proven that the city remains resilient to a top destination for both business and specifically for tourism.\nOur regional properties that I mentioned earlier, delivered their best quarter to-date yet in terms of EBITDA.\nWe are encouraged by the stability of demand we saw at our properties as restrictions further eased into July, and I'm also pleased that our focus on cost and productivity across labor, player reinvestment and other streamline initiatives remain a key priority for our regional teams.\nAnd finally, on Macau, in the second quarter, we delivered sequential improvements over the first, amid a choppy GGR environment that remains well below pre-pandemic levels.\nDespite this, MGM China, given our strength in premium mass, continued to outperform our former position in the marketplace.\nWe believe the rate of Macau's recovery will continue to hinge on broader sentiment as we pace the vaccinations rollout throughout the regions, which will ultimately lead to sustainable easing of travel restrictions.\nWith the Guangdong outbreak quickly contained, July was off to a better start when we saw visitation and business volumes striking a pickup again.\nAnd while the region had felt some additional speed bumps in recent days, with the government's expeditions efforts to contain the outbreak and border restrictions easing over time, we expect gradual growth demand for travel to Macau throughout the end of the second half of the year.\nWe remain committed to elevating our footprint in Macau and will soon be increasing our upscale suite inventory.\nWe have finalized the construction and fitting in the South Tower suites and MGM Cotai and are pleased with the final product, which we believe will be well received by our premier mass clients.\nWe are now in soft opening in order to make final adjustments to our product and to achieve a level of service that meets our high-quality of standards.\nWe expect to officially open it later this month, and further, we completed the gaming space refresh in MGM Macau and are now looking at remodeling our villas.\nAt both properties, we're enhancing our F&B options focused on the gaming floors, and over time, we have the ability to build out another hotel tower at MGM Cotai, along with meaningful entertainment assets to diversify our offerings.\nI am confident in Macau's longer-term growth prospects and firmly believe our investment in premium product positions us well for a broader recovery.\nWith that, I'll turn this over to Jonathan to discuss our second quarter in more detail.\nLet's first discuss our second-quarter results.\nOur consolidated second quarter net revenues were $2.3 billion, significantly better sequentially over our first-quarter results.\nOur net income attributable to MGM Resorts was $105 million, and our second-quarter adjusted EBITDAR improved sequentially to $607 million -- $617 million, once again, heavily driven by our domestic operations.\nOur Las Vegas strip net revenues in the second quarter were $1 billion, 31% below the second quarter of 2019 and 28% below, excluding Circus Circus Las Vegas, which was sold at the end of 2019.\nDespite the lower top line, we delivered far superior EBITDAR results.\nOur second-quarter adjusted property EBITDAR was $397 million, which is 5% below the second quarter of 2019 and just 1% lower, excluding Circus.\nHold had a $6 million negative impact to our EBITDAR this quarter, so Hold-adjusted strip EBITDAR in Las Vegas was $403 million.\nOur strip margins improved almost 1,100 basis points to an all-time record of 39.5%.\nAnd this does not include the results of CityCenter, which generated $120 million of EBITDAR at a 46% margin.\nAs Bill mentioned in his remarks, our margin improvement was driven by a combination of strong leisure and casino demand, continued cost control and the operating leverage inherent in our business.\nNaturally, with limited convention business and entertainment, we are driving more visitation from customers that we know.\nAnd our second-quarter casino room mix was 9 points above pre-COVID levels.\nFurthermore, our second-quarter casino revenues were 15% above 2019 levels and contributed to 35% of our overall net revenues in the second quarter.\nThis compares to roughly 22% in all of 2019.\nWe're seeing particular strength in the slot customer.\nOur second-quarter slot handle was 23% greater than that of the second quarter of 2019 on an apples-to-apples basis, excluding Circus Circus.\nAnd for the first time since being impacted by COVID, we are now attracting the older 65-plus demographic to our strip properties at levels commensurate with what we were seeing pre-pandemic.\nOur second-quarter occupancy was 77%, an improvement from 46% in the first quarter with weekends and weekdays at 94% and 70%, respectively.\nJune occupancy was 83%, with weekends and weekdays at 96% and 79%, respectively.\nJuly occupancy was 86%.\nAs pent-up demand -- as pent-up leisure demand stabilizes longer term, we believe this will be offset by ramping group business, and I echo Bill's comments that we're very pleased with the current trajectory of that segment's rebound.\nI'll close on Las Vegas with some thoughts on margins.\nLonger term, we believe that the 40% margins we achieved this past quarter will stabilize a bit lower as casino spend and overall business mix normalizes, and also as we ramp up staffing to more sustainable levels in order to serve our guests more fully.\nHowever, I know that we have further upside in overall profit dollars as our top line continues to rebound with group business and entertainment.\nI'm also confident that our focus on operational excellence and cost efficiency efforts will allow us to achieve strip margins well above 2019 levels long term.\nNow, on to our regional operations.\nOur second-quarter regional net revenues of $856 million were aided by the continuing easing of statewide restrictions, and we're just 6% below that of the second quarter in 2019.\nWe delivered adjusted property EBITDAR well over 2019 levels, 22% to be exact, to $318 million.\nMuch like in Las Vegas, we're driving success in casino, with second-quarter casino revenues outpacing 2019 levels by 8%, primarily due to slots and our higher-end customer base.\nOur 50 to 64 age demographic, of which I'm a proud member, is now at 2019 levels, and we're attracting more of the 65-plus age demographic.\nOur second-quarter regional margin of 37% was also an all-time record, growing 855 basis points over the second quarter of 2019 and sequentially by 316 basis points over the first quarter.\nOur regional margin growth is a continued testament to all the great work that our teams have put into maximizing the effectiveness of our operating model and rethinking how we run our business.\nThis ranges from marketing reinvestment to procurement, from energy utilization to labor management.\nAnd the breadth of our efforts gives me confidence that we will deliver on the $450 million of cost savings domestically, which we previously identified.\nOur margins of the regions will likely normalize a bit lower from second-quarter levels longer-term as casino spend adjusts over time and as we reintroduce F&B and entertainment, especially in our destination markets.\nWe also expect to rightsize labor in the near term, which has certainly had a favorable impact on our margins, but it's also become a bottleneck in certain segments of our operations, negatively impacting our EBITDAR.\nStill, similar to Las Vegas, I know that we can achieve regional margins well above 2019 levels longer term.\nOur joint venture BetMGM is clearly the No.\niGaming and has solidified its No.\n2 position nationwide in U.S. sports betting and iGaming.\nNet revenues associated with BetMGM operations grew 19% sequentially from the first quarter to $194 million in the second quarter.\nThis was driven by growth in both iGaming and online sports betting verticals as a result of increased customer acquisition and strong retention that yielded more first-time deposits and actives.\nThese results are especially impressive during the quarter with arguably minimal exogenous catalysts, no major state launches, a seasonally low sports calendar and a further reopening of brick-and-mortar casinos.\nOur share of BetMGM's losses in the second quarter amounted to $46 million, which is reported as a part of unconsolidated affiliates line of our adjusted EBITDA calculation.\nWe remain excited about BetMGM's strong positioning in this fast-growing marketplace and both partners remain committed to its long-term success.\nFinally, in Macau, marketwide GGR sequentially improved 7% in the second quarter, but still remained depressed at only 35% of second-quarter 2019 levels.\nNevertheless, as Bill mentioned earlier, MGM China outperformed the market, with its GGR having recovered to 43% of pre-pandemic levels.\nMGM China's second-quarter net revenues were $311 million, up slightly from the first quarter.\nAdjusted property EBITDAR of $9 million also improved quarter over quarter from $5 million in the first quarter.\nHold adjusted EBITDAR was $13 million on 2.75% VIP win in second quarter compared to 3.29% in the first quarter.\nMass Hold was also lower sequentially.\nOur second-quarter corporate expense, excluding share-based compensation, was $90 million, which included $6.5 million in transaction costs.\nWe expect that our quarterly net corporate expense will run a bit higher going forward as we ramp our investments in IT, our digital offerings and our IR efforts in Japan.\nIn the near term, we also expect to incur incremental costs related to our recently announced transactions.\nWe were active share repurchasers in the second quarter, having repurchased 5.6 million shares for $220 million.\nWe believe our shares are attractively valued and we've purchased an additional 6.8 million shares for $263 million in the third quarter through today, bringing us to $615 million of share repurchases year to-date.\nBill talked about our recent milestones in simplifying our story and becoming asset light.\nWe sold MGM Springfield's underlying real estate to MGP for $400 million at a 13.3 times rent multiple or a 7.5% cap rate.\nWe also transacted on CityCenter, effectuating a high watermark on the sale of real estate assets at an 18.1 times rent multiple or a 5.5% cap rate and acquiring ownership of 100% of the operations of ARIA and Vdara at an implied multiple of 8.9 times based on CityCenter's 2019 adjusted EBITDA from resort operations of $425 million.\nCityCenter's second-quarter results demonstrate the premium quality of the property, the excellence of its management team and its cash flow generating potential with adjusted EBITDA of $120 million, 13% above the second quarter of 2019 and with margins of 46%.\nAnd finally, we announced today the transaction with VICI, whereby we will receive $43 per unit or approximately $4.4 billion in cash for a majority of our MGP OP units.\nAs part of the agreement, we'll hold an approximately 1% stake in the newly combined company valued at nearly $400 million.\nWe will enter into an amended and restated master lease with VICI, with initial year's rent at $860 million.\nThe transaction values MGP at an implied 17.5 times pro rata EBITDA multiple for a 5.8% cap rate.\nSo it's been a busy and a productive quarter.\nWe expect to close on CityCenter by the end of the third quarter and Springfield by the end of the year, and our transaction with VICI will likely take us into the first half of next year to close, and all of these transactions are subject to regulatory approvals.\nThe end result is a cleaner, more focused company, a streamlined reporting structure and a stronger deployable cash position to maximize shareholder value and advance our vision to be the world's premier gaming entertainment company.\nAs of June 30, our liquidity position, excluding MGM China and MGP, was 6.5 billion and 11.6 billion adjusted for the aforementioned announcements.\nOn last quarter's call, I highlighted our approach to capital allocation, and it is certainly worth reiterating today.\nFirst, we'll maintain a strong balance sheet with adequate liquidity.\nSecond, we'll return cash to shareholders, which we have done convincingly thus far this year.\nWe will continue to take a disciplined and programmatic approach to shareholder -- share repurchases for the balance of the year.\nAnd third, when assessing potential growth opportunities, we'll invest where we have clear advantages.\nAnd will exercise discipline in measuring prospective returns for our shareholders.\nAs we evaluate uses of our shareholders' capital over time, these priorities will act as a blueprint for our decision-making process.\nWe're very pleased, obviously, with all we've accomplished thus far this year.\nOur strategic actions, together with the improving domestic backdrop, continued focus on operational excellence, and strong conviction in Macau's recovery, positions us very well for the future.\nThere's a lot to be excited about when we think about our path on delivering our long-term vision.\nWe remain focused, disciplined and ultimately transparent.\n",
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"content": "qtrly mgm china net revenues of $311 million, an increase of 836% compared to prior year quarter.\nqtrly consolidated net revenues of $2.3 billion, an increase of 683% compared to prior year 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: Actual results may differ materially from those contemplated in these statements.\nExcept as required by law, we undertake no obligation to update these statements as a result of new information or otherwise.\nDuring the call, we will also discuss non-GAAP financial measures in talking about our performance.\nWell, we delivered another quarter of strong domestic results with our Las Vegas Strip and regional segments, reaching all-time adjusted property EBITDA records in the third quarter.\nI remain in awe of what our talented teams have accomplished this year given the ongoing COVID pandemic.\nWe are emerging from it a stronger company with a sharpened focus on operational efficiencies and providing the best experiences for our guests as we carry out the vision to become the world's premier gaming entertainment company.\nI continue to express my sincere pride and gratitude of the tremendous effort of our employees, who are the foundation upon which we built our strategic plan and long-term vision.\nAs a reminder, our strategic plan consists of the following four key elements: investing in our people and planet, providing unique experiences for guests by leveraging data-driven consumer insights and digital capabilities, delivering operational excellence at every level, and allocating our capital responsibly to yield the high returns to our shareholders.\nOn last earnings call, we discussed the meaningful steps our company has taken to simplify our story and monetize our real estate.\nWe have reached a number of milestones in this regard.\nIn August, we announced a transaction with VICI and MGP to redeem the majority of our operating partnership units and deconsolidate MGP within our financial reporting structure.\nIn September, we acquired the other 50% interest in CityCenter, monetizing its underlying real estate and are now proud owners of 100% of its operations.\nIn October, we monetized MGM Springfield's underlying real estate as well.\nAnd these transactions grant us the financial flexibility to take foothold of front-footed actions to invest in our core business and to maximize growth and pursue opportunities that align to our long-term vision.\nFor example, this quarter, we announced an agreement to acquire the operations of the Cosmopolitan of Las Vegas, a high-quality resort with enviable product offerings, strong brand awareness and complementary customer base making it an ideal addition to our Las Vegas Strip portfolio.\nWe also believe that the synergies we have identified are highly achievable.\nNow I've mentioned in the past that we are happy with the amount of exposure we currently have in Las Vegas.\nAs such, we are currently in the early stages of a process to sell the operations of the Mirage.\nDoing so will allow us to maintain our existing Las Vegas exposure, while focusing on the complementary and diverse nature of our offerings in our hometown.\nI spent the early part of my career at Mirage, I've been a part of that team's opening of the property in 1989.\nIt's a stored property with great brand recognition and a strong customer and loyal following.\nThe campus also sits on approximately 77 acres that provides attractive development opportunities to capture large amounts of foot traffic.\nMirage has served us well over the years, and we are certain it will remain a success with a new operator in the future.\nThey're an integral part of what makes that property so special, and I know they will remain strong ambassadors of the brand during this transition.\nWe also remain keen on diversifying our business and further expanding our operations globally.\nTo that end, in September, we announced that our MGM Orix consortium had achieved a milestone in Japan having been selected as a Osaka's partner to build and operate a world-class integrated resort.\nWe are now working with Orix in the city to submit an area development plan to the central government in the coming months and are hopeful and confident that we'll be awarded a license next year.\nregional markets of significance.\nThis includes the commercial gaming license in New York, for which we believe MGM is well-positioned given our existing operations at Empire City.\nMoving on to BetMGM.\nOur sports betting and iGaming venture continues to build on its success every quarter.\nIn the third quarter, BetMGM launched in three new states: Arizona, South Dakota and Wyoming.\nAnd within a short nine-day period, BetMGM is now live in 16 markets and is well on its way to 20 by the end of the first quarter of 2022.\nIn the three months ending August, BetMGM commanded 23% share nationwide in both U.S. sports and betting and iGaming.\nAnd in the month of August, we believe BetMGM was competing for first place driven by iGaming in which BetMGM remains the clear leader with a 32% market share.\nWe're in the middle of the NFL season and the market remains competitive, however, the team has performed exceptionally well, focusing on ROI-positive marketing spend, and we are encouraged to see early signs of a more rational environment as the season progresses.\nBetMGM continued momentum through this year has been extraordinary, and we expect full year 2021 net revenues associated with BetMGM will be in excess of $800 million.\nFinally, we think about opportunities for organic growth in our core business.\nWe have a great network of premier properties across the U.S. that we believe we can better leverage to drive customer choice, increase loyalty and maximize wallet share over time.\nFor example, we recently launched a new tailgating experience at Mandalay for events at Allegiant Stadium.\nWe've hosted Bruno Mars and Lady Gaga's concert of Park MGM, and completed our room remodels at Bellagio's main tower, as well as the pyramid at Luxor with additional remodels ongoing at Aria suites and villas.\nWe also continue to focus on targeting strategies that draw on our competitive advantage to acquire and drive sustainable growth from high-value customers in our business.\nOver the years, we will invest in customer-centric products and services to execute these strategies, which we will be enabled by advanced marketing practices and enhanced physical and digital experiences.\nI must say it's simply great to be in Las Vegas right now.\nWe've kicked off the quarter exceptionally strong, anchored by a great fourth of July holiday, better than pre-pandemic casino spend levels, and pent-up demand for the city's wide-scale entertainment relaunch that drew large crowds in the town, especially on the weekends.\nWhile the Delta variant impacted our group business during the quarter, we have been able to offset with leisure and casino customers.\nWith cases on the downswing, we have built -- quickly, we built momentum into October.\nAnd the level of demand in the marketplace, especially on the weekends, has simply been incredible, October will be another all-time record month.\nGroups are still coming to town.\nWe have a healthy amount of group room nights on the books through the rest of the year.\nAnd we look ahead -- and as we look ahead, we feel good about our group business coming together, anchored by the back half of this year and what's already on the books for '23 and 2024.\nWith the relaunch of large-scale entertainment in July, these offerings are driving visitation to Las Vegas.\nAllegiant Stadium brings fans to the Strip for events, and we've had some of the best weekends around these events.\nThe Raiders estimate that roughly 60% of tickets are sold to out-of-state fans.\nAnd with the majority of the 50,000 to 60,000 people walking to and from Allegiant Stadium over the Hacienda Bridge between Mandalay Bay and Luxor, we are seeing significant broad-based uplift at both properties on event days and even more so on Raiders games.\nWe're also driving our own destiny with a fantastic line of events across our venues, which have been met with great enthusiasm whether it was the McGregor fight at T-Mobile, which by the way, produced our second highest single day for table games win in the company's history, or the debut of our new Americas Got Talent Show At Luxor this week.\nWe continue to demonstrate that the city, and MGM Resorts is a leading destination for exceptional entertainment.\nTurning to our regional properties.\nAs I mentioned earlier, our regional operations delivered another all-time record EBITDAR and margin quarter driven by continued strength in our rated gaming spend levels as we yield to our higher net worth customers.\nWith the easing of statewide restrictions, we have begun to strategically reintroduce entertainment and F&B at all of our regional properties.\nAnd I'm gratified that our customers can once again enjoy the quality experience for which MGM is known.\nOn the cost side, our team continues to focus on productivity across labor, player reinvestment and other streamlining initiatives, and this gives us great confidence in our ability to sustain strong margins as we head into 2022.\nI'll conclude with some final thoughts on Macau.\nThe market continues to operate well below pre-pandemic levels as varying forms of travel restrictions have limited visitation to the region.\nThe obvious catalyst to Macau's recovery is a sustained resumption of frictionless travel between Macau, Hong Kong and Mainland China, which heavily relies on the higher vaccination rates that will take some time.\nWhen the market does rebound more meaningfully, we believe MGM China is well-positioned given its strength in premium mass.\nMacau remains an important part of our business, and we have high conviction in the future success of this region.\nWe will continue to work with the government, and we are highly confident in ultimately getting our license renewed.\nOngoing discussions with the government give us a greater confidence in our belief that the process will be both judicious and fair.\nWe look forward to further promoting the long-term development of Macau's gaming industry and to supporting the government's tourism and diversification goals for the region.\nI certainly join Bill in gratitude to our entire team for outstanding results this quarter.\nWhat a difference in performance and momentum as we have moved through the course of the year.\nAnd now with only 60 days until the start of 2022, I could not be more excited about our prospects for the year ahead, and it's all due to the heroic efforts of our thousands of colleagues here at MGM Resorts.\nNow let's talk about our third quarter results in some detail.\nOur consolidated third quarter net revenues were $2.7 billion, a 19% sequential improvement over our second quarter results.\nOur net income attributable to MGM Resorts was $1.4 billion driven by a $1.6 billion net gain from the consolidation of CityCenter.\nOur third quarter adjusted EBITDAR improved sequentially to $765 million, led once again by our domestic operations.\n12 of our 18 domestic properties achieved either all-time or third quarter EBITDAR records, and 15 achieved either all-time or third quarter margin records.\nThis performance was driven by strong leisure, transient and domestic casino demand.\nWe have demonstrated our ability to improve and expand our operations while maintaining cost discipline, all against the backdrop of ramping nongaming revenues and a stabilizing workforce complement.\nOur Las Vegas Strip net revenues were $1.4 billion, just 8% below the third quarter of 2019.\nAdjusted property EBITDAR for the Strip was $535 million, 21% above the third quarter of 2019.\nHold had a $20 million positive impact on our EBITDAR this quarter.\nSo Hold Adjusted Strip EBITDAR was approximately $514 million.\nOur Strip margins were 39% in the third quarter, a 943 basis point improvement over the third quarter of 2019 and a slight decline on a sequential basis over the second quarter of 2021.\nThis was driven by a combination of effective casino marketing efforts and continued cost discipline across the business.\nAvailability of labor also improved sequentially each month in the third quarter, and our payroll per FTE remained in line with the third quarter of 2019.\nWe continue to attract strong casino demand and drive healthy performance in the third quarter.\nHere are a few data points.\nThird quarter Strip casino room nights were 27% greater than in the third quarter of 2019.\nCasino revenues per casino room night was up 10% above the third quarter of 2019.\nAnd not surprisingly, our slot handle was an all-time quarterly record.\nAll of this translated into third quarter casino revenues increasing to 26% above the third quarter of 2019, contributing 31% of our total Strip revenues in the third quarter, and that compares to our casino revenue mix of 22% back in 2019.\nOur Strip hotel occupancy was 82% in the third quarter, improving from 77% in the second quarter.\nAnd for the first time since reopening, the third quarter's room rates ran higher than pre-pandemic levels, with ADR 10% above that of the third quarter of 2019 or 5% when we exclude Circus Circus.\nWe finished a strong October with occupancy of 92%, the highest since reopening, and we expect November and December to be strong but also to follow seasonal slowdowns as we typically do every year heading into the holidays.\nAs we ramp staffing and our nongaming revenues increasingly become larger contributors to our overall business, I expect margins to come in a bit in our Las Vegas operations.\nOur customers demand, and are willing to pay for the breadth of offerings we provide here at MGM Resorts.\nAnd while healthy margins are an important feature of our business model and financial health, we are focused on growing our absolute EBITDAR dollars, a goal well supported by future upside from the recovery in group events and international visitation.\nWe expect our margins to stabilize well above pre-pandemic levels, resulting from our efficiency and cost-saving efforts.\nFinally, it's important to note that we closed the CityCenter transactions toward the end of the quarter.\nAnd as a result, we started consolidating CityCenter within our Las Vegas Strip results beginning on September 27.\nOur third quarter Strip numbers include four days of Aria and Vdara's results.\nLed by Anton Nikodemus and his team, the CityCenter joint venture reported quarter to date ended September 26, adjusted EBITDA of approximately $120 million, with 40% margins.\nHad CityCenter been consolidated for the full quarter, our Las Vegas Strip EBITDAR would have been approximately 22% higher than what we reported in the third quarter.\nIts magnitude and growth potential makes CityCenter a difference maker for us financially.\nOur third quarter regional net revenues were $925 million, just 1% below that of the third quarter in 2019.\nWe delivered adjusted property EBITDAR of $348 million, which was 29% above 2019 levels and 9% above what we achieved in the second quarter of 2021.\nOur regional casino business further strengthened in the third quarter with our slots and table games volumes improving sequentially by 6% and 11%, respectively, from the second quarter this year.\nWe measure rated player spend levels through theoretical win or theo per day, net of promotions.\nOur net theo per day for our rated customers reached record levels in the third quarter, led by our younger demographic despite fewer trips as compared with their visitation pre-COVID.\nUnlike the younger crowd, visitation and spend from our -- from our 65-plus demographic has not yet fully recovered but we're encouraged with the resiliency in this segment's demand, especially through the Delta variant outbreak.\nOur third quarter regional margins of 38% were another all-time record growing 886 basis points over the third quarter of 2019.\nWhile our strong EBITDAR margin has benefited from elevated casino spend, and importantly, also validates the great work that our teams have put into maximizing the effectiveness of our operating model and rethinking how we run our business.\nDisciplined customer reinvestment is a key component of this, where we track marketing efficiency across all of our properties against specific goals.\nWith the return of more nongaming amenities, we'll continue to exercise prudence in our marketing reinvestment strategies, taking a test-and-learn approach to ensure intended returns on any increases in reinvestment.\nWe're also rightsizing labor in the near term, which has had a near-term favorable impact on our margins, but it's also caused capacity constraints in certain segments of our operations.\nOverall, I believe our regional margins will stabilize well above 2019 levels.\nMoving on to BetMGM.\nOur 50% share of BetMGM's losses in the third quarter amounted to $49 million, which is reported as a part of the unconsolidated affiliates line of our adjusted EBITDAR calculation.\nNet revenues associated with BetMGM operations were $227 million in the quarter, exhibiting a 17% sequential growth from the second quarter, led by the continued strength in iGaming.\nThis was partially offset by heavier customer acquisition and reactivation spend from BetMGM's successful Arizona launch and the return of football, resulting in September first-time deposits growing to over five times, five times that of September 2020.\nWe know that an omni-channel customer is worth more than a single channel customer.\nWe're particularly excited about the mutually beneficial advantages of our omnichannel strategy with BetMGM, and we remain its top partner for driving new players.\nIn the third quarter, 16% of BetMGM's new players were attributed to MGM, meaning they were active with MGM in the last 12 months.\nThis percentage has remained in a relatively stable range while BetMGM has significantly broadened its reach, illustrating our ability to continually optimize the conversion of M life members to BetMGM.\nThe BetMGM team previously disclosed during their April Investor Day that MGM-sourced players have much lower customer acquisition costs and over five times the marketing ROI when compared to non-MGM-sourced players.\nWhat's also encouraging is that in New Jersey, our most mature market, based upon preliminary data, we found that MGM-sourced omni customers are spending more on property at Borgata than they did when they were exclusively land-based.\nAnd clearly, the benefit goes both ways.\nIn the third quarter, 42% of our new M life sign-ups have come from BetMGM, which plays a crucial role in our database expansion, a database, which currently stands at over 37 million members.\nFinally, in Macau, third quarter marketwide gross gaming revenues sequentially declined 26% from the second quarter and was 27% of the third quarter 2019.\nMGM China's third quarter results were also sequentially lower from the second quarter with net revenues of $289 million and adjusted property EBITDAR of $7 million.\nHold adjusted EBITDAR was a $2 million loss.\nWhile the latest hurdles surrounding the local outbreaks in Macau negatively impacted travel in September and most of October, the situation has now largely been contained.\nAnd with quarantine-free travel having resumed on October 19, the market has seen daily visitation rebound from less than 1,000 in the first 18 days to over 26,000 for the remainder of the month.\nOur third quarter corporate expense, excluding share-based compensation, was $105 million, which included approximately $18 million of transaction costs for both MGM and MGP.\nWe expect that our net corporate expense will run at a similar level in the fourth quarter, heavily driven by our ramping Japan effort, as well as our investments in IT and digital.\nIn the near term, we also expect to incur incremental costs related to our recently announced transactions.\nWe believe repurchasing our shares is an attractive use of capital.\nIn the third quarter, we repurchased 17.2 million shares for $687 million, and we purchased an additional 1.8 million shares for $80 million in the fourth quarter through today.\nThat's $1.1 billion of share repurchases year to date, or approximately 5% of our market cap, and that is this year since March.\nOver the past few months, we announced some significant deals that simplify our corporate structure, further bolster our liquidity position and advance our vision to be the world's premier gaming entertainment company.\nWe closed the CityCenter transactions in the third quarter.\nIn October, we closed the MGM Springfield transaction for cash proceeds of $400 million.\nOur transaction with VICI is on track to close in the first half of next year, subject to regulatory approval, at which point we will bring in an additional $4.4 billion in proceeds.\nIn September, we announced an agreement to acquire the operations of The Cosmopolitan of Las Vegas for $1.625 billion.\nThis represents a multiple of approximately eight times adjusted EBITDA, inclusive of expected operational synergies, and revenue growth opportunities that we have identified.\nThe transaction is expected to close in the first half of next year, subject to regulatory approvals.\nAs of September 30, our liquidity position, excluding MGM China and MGP, was $6.4 billion, or $9.6 billion when adjusted for the Springfield, VICI and The Cosmopolitan transactions.\nSo our approach to capital allocation is critical.\nAnd our approach to capital allocation will be as follows.\nFirst, we'll maintain a strong balance sheet with adequate liquidity.\nSecond, we will return cash to our shareholders.\nAnd finally, when assessing potential growth opportunities, we'll invest where we have clear advantages, and will exercise discipline in measuring prospective returns for our shareholders.\nBut as you can all tell, we have a lot going on.\n",
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"content": "qtrly consolidated net revenues of $2.7 billion, an increase of 140% compared to prior year quarter.\nqtrly mgm china net revenues of $289 million, an increase of 517% compared to prior year 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: My name is Nestor Makarigakis.\nParticipating on the call for Mistras will be Dennis Bertolotti the company's President and Chief Executive Officer; Ed Prajzner Senior Vice President Chief Financial Officer and Treasurer; Dr. Sotirios Vahaviolos Founder and Executive Chairman; and Jon Wolk Senior Executive Vice President and Chief Operating Officer.\nThe company's actual results could differ materially from those projected.\nThe discussion in this conference call will also include certain financial measures that were not prepared in accordance with U.S. GAAP.\nI will now turn the conference over to Dennis Bertolotti.\nDuring today's call we will provide an update on Mistras' business performance.\nOur financial results for the third quarter and first nine months of 2019 as well as discuss our lower outlook for the remainder of the year.\nThird quarter results continue to reflect the progress being achieved toward our long-term strategic initiatives.\nRevenues were up margins expanded and earnings increased on a year-over-year basis.\nWe also generated strong cash flow a hallmark of Mistras.\nLet me note some key highlights for the quarter.\nGross margin increased across all 3 segments.\nSG&A decreased by 100 basis points as a percentage of revenue generated strong cash from operations of $19.4 million and free cash flow of $13.4 million.\nOn a per share basis free cash flow was $0.46 for the third quarter.\nAdditional highlights for the first nine months of the year.\nConsolidated gross margin increased 160 basis points.\nCash from operations of $40.5 million with free cash flow of $22.5 million.\nDebt paydown of $23.3 million exclusive of the $4.8 million paid for New Century Software our latest acquisition.\nRevenue and operating earnings were ahead of fiscal 2018 on a year-to-date basis through the first nine months indicators of a robust business.\nHowever our strong momentum developed over the past 2 quarters encountered some headwinds coming into the fourth quarter of 2019.\nIn particular a note of caution unexpectedly rose among our oil and gas customers attributable primarily to increased macroeconomic uncertainty.\nAlthough our long-term outlook remains intact.\nThese factors are clearly influencing current activity in the oil and gas market with pushouts in demand.\nMost of our oil and gas exposure is predominantly in the up and downstream sectors.\nThe downstream being driven by capital spend including turnarounds and modestly in the run and maintain opex spend.\nConsequently we feel well positioned with our strategy focused on growing our run and maintain revenue a sector of the market that we dominate.\nI feel very good about where we are in our look for the long term of this unexpected pause and the oil gas in markets has created some immediate challenges that will affect our performance through the end of 2019 and may drag into the first quarter of next year.\nConsequently, you can understand why our full year with is not lower than originally anticipated.\nAnd why we are accordingly lowering our guidance for 2019.\nWe view this as a timing issue.\nAs we expect most of the work will return to the market over the next couple quarters.\nAnd we'll walk you through a detailed update in a few minutes.\nBut looking out into 2020 and beyond, our underlying oil and gas business remains strong.\nAnd our plans and strategies to grow profitably over a long term are unaffected.\nBased on what we are seeing and hearing underground we believe we are gaining market share and except for a few locations we have retained a vast majority of the customers served by our close to 90 labs across the U.S. Canada and Europe.\nEach of these locations remain staffed with our experienced professionals so that we are well positioned to serve customers and capitalize on current opportunities as well as to continue to grow our market share in 2020 and beyond.\nEven by conservative estimates we serve a $14 billion industry within the NDT spend of the business not counting the greater spend generated in the data and mechanical sectors in which we participate.\nThese markets are growing at healthy rates and support our growth aspirations.\nOur product line expansions into adjacent markets such as mechanical and pipeline inspection that increase that opportunity.\nAnd are quickly evolving MISTRAS Digital platform is providing us even greater opportunity.\nThough quite large it is a highly fragmented industry.\nAnd many of our smaller competitors simply can't match the depth of our resources or the breadth of our services and valuable experience.\nThis builds strong relationships with our customers because we save them unnecessary spend.\nWe are also utilizing our resources to create new products and services, and to make strategic acquisitions, all of which help diversify or in markets provide additional stability to our results in further distance ourselves from the competition.\nBefore turning the call over to Ed let me offer a few comments on some of the key developments in the quarter.\nPerformance at Onstream continues to reflect a strong U.S. growth but a relatively weak Canadian market.\nThe recent commercialization of their 20-inch tool and the impending introduction of their larger 24-inch tool slowly increased their contribution.\nAnd with the geospatial technology from the New Century acquisition providing an excellent complement to Onstream's Stream data view analytics we believe there are strong synergies that will open up new possibilities in the future as well as benefit our complementary PCMS software.\nWe see this acquisition as a strong strategic fit in one of our stated pillars for growth that being the midstream sector of the energy market.\nWe view this as a growth market driven by increased regulatory oversight and rising customer demand due to more vigilant mechanical integrity programs all needs Mistras is uniquely qualified to deliver.\nWest Penn has good momentum and should outperform the fourth quarter as of last year.\nWe expect them to continue to ramp up utilization at a second facility.\nIn aerospace we also continue to benefit from the strength of our French operations.\nOverall aerospace remains a key corporate growth pillar where the outlook for the industry over the next few years continues to be strong.\nData management is also one of our strategic objectives and MISTRAS Digital is a discrete way to integrate our vast data capabilities.\nOnstream Streamview PCMS software our ruggedized MISTRAS Digital field tablets sensing and monitoring capabilities and now the New Century Software are just some of the various ways that are weaving -- that we are weaving together our data management capabilities to establish a leading position as the asset-protection market enters the age of the industrial Internet of Things.\nAs the market gets more sophisticated we want to be the leader in the market for more data and predictive analytics which we think are the industry big growth drivers.\nAn exciting endorsement of our strategy has been the rapid adoption of our MISTRAS Digital tablet rollout that we've been piloting at a growing number of refineries.\nThese customers value this technology so much so that they are asking us to open up the app to let other on-site vendors piggyback on the software hence we are reviewing the monetization of this application to other third parties.\nWe expect to continue to roll out our MISTRAS Digital tablet to other customers in an accelerating rate to more of our locations throughout the fourth quarter and especially in 2020.\nThis quarter we acquired New Century Software which forms another element of MISTRAS Digital.\nMore importantly this acquisition is another example of forward thinking about the direction of the midstream sector and the opportunity to leverage technology to grow.\nNew Century is a leading provider of pipeline integrity management software and services to energy transportation companies.\nNew Century provides software solutions data management expertise and extensive pipeline experience to enable a global network of customers in the oil and gas industry to manage pipeline integrity meet regulatory compliance requirements and maximize safety and reliability.\nThis acquisition aligns with MISTRAS' mission of delivering value-added integrated smart data solutions to its customers.\nLooking at results for the third quarter consolidated revenues were up 5.5% to $192 million.\nOrganic growth was 2.1% with acquisitions contributing 4.4% offset by a 1% decline due to unfavorable currency translation.\nConsolidated gross profit for the quarter was $57.8 million a 10% increase over the year ago quarter.\nConsolidated gross profit margins improved significantly to 30.1% for the third quarter compared with 28.7% in the prior year quarter an increase of 140 basis points.\nThe ongoing expansion of our gross profit margin is indicative of the success of our underlying strategy focusing on more profitable opportunities in our core operations shedding less profitable businesses and making strategic acquisitions that help to improve margins.\nWe believe that our year-to-date gross margin in 2019 can be maintained into 2020 even with short-term volatility in revenue volumes.\nOperating income improved for the third quarter to $10.8 million compared with $3 million in the comparable period last year.\nOn a non-GAAP basis adjusted operating income was $11.2 million compared to $10.1 million last year an increase of 10%.\nNet income for the third quarter was $3.1 million compared with a net loss of $1 million for the same period last year.\nAdjusted EBITDA was up 7% to $22.4 million for the third quarter of 2019.\nAs a percentage of revenue adjusted EBITDA improved to 11.6% for the third quarter compared to 11.4% in the same period last year.\nThe improvement in adjusted EBITDA is reflective of the success being achieved by focusing on higher-value operations and better leveraging our global infrastructure.\nAs Dennis mentioned earlier the company is a strong cash generator.\nWe stated last quarter that we had anticipated a continued strengthening of our cash flow generation coming into the back half of the year and we achieved that with third quarter cash from operations of $19.4 million and free cash flow of $13.4 million.\nOn a per share basis free cash flow was $0.46 for the third quarter this was consistently strong on a sequential basis over the second quarter and a significant improvement over the prior period last year.\nStrong cash flow this year has benefited in part from our commitment to improved working capital management.\nNow looking more closely at our segments.\nServices revenue increased by almost 8% in the third quarter.\nOrganic revenue grew a little over 2%.\nAnd acquisitions primarily Onstream incrementally added nearly 6% to revenue growth.\nThe Services segment generated a gross profit margin of 28.4% for the quarter an improvement of 90 basis points compared to the year ago period of 27.5%.\nMargin expansion is a key corporate strategy and we are pleased to see our margins continue to expand in our largest segment driven by pruning low-margin operations and growing higher margin operations including acquisitions such as West Penn and Onstream.\nWe have a strong operating leverage in this segment with significant contribution margins on incremental revenue.\nInternational revenues in the third quarter were up 5.4% organically offset by 4.4% unfavorable currency rates for a 1% nominal increase.\nThe growth organically is noteworthy in that it was achieved despite the previously disclosed run-off of the low-margin German staff leasing business.\nFor the third quarter International reported a 31.6% gross profit margin compared to 29.7% a year ago which represents a 190 basis point improvement.\nWe attribute that improvement largely to higher labor utilization which is a result of increased visibility and visibility that was a key focus in this past year.\nProducts and Systems revenue decreased slightly in the third quarter to $5.5 million due to the sale of a subsidiary that was divested in 2018.\nGross profit margin increased for this segment to 49.6% compared with 45.6% in the prior year due to a favorable product sales mix.\nWe had another prudent quarter in maintaining strong cost control with a below inflation increase of 1% in SG&A year-over-year.\nAs a percentage of revenue SG&A was down 22% from 23% in the same period last year a decrease of 1 full percentage point once again reflecting our focus on improving operating leverage.\nConsidering expenses this year contain those assumed in the inclusion of the Onstream acquisition the ongoing investment we are making in sales and marketing as well as with developing and launching MISTRAS Digital we believe our efforts are beginning to reflect the many efficiency initiatives under way at MISTRAS.\nSpending in the quarter was consistent with our expectation that the first half 2019 levels represented what we felt would be the run rate for the full year.\nWe continually review and rationalize our companywide overheads for savings to make sure we maintain a flexible and efficient footprint to support and invest in our growing business.\nThe company's net debt defined as total debt less cash and cash equivalents was $252.9 million as of September 30 2019 compared to $265.1 million at December 31 2018.\nThe company has paid down over $23 million of total debt during the first nine months of this year.\nThe company additionally paid a total of $7.7 million for acquisitions and income taxes related to the net settlement of share-based awards during the nine months ended September 30 2019.\nAs defined in our credit agreement our leverage ratio was approximately 3.6x as of September 30 2019.\nOur goal is to reduce this ratio to below 3x by no later than the end of fiscal 2020.\nGiven our cash flow annual interest expense and net debt we believe our balance sheet is strong and will support the funding of both our organic growth objectives as well as any selective tuck-in acquisitions such as New Century Software.\nOur effective tax rate was approximately 61% for the third quarter of 2019 including a $1.4 million or $0.05 per share write-off of certain deferred tax assets.\nAs Dennis mentioned earlier we are seeing a weak oil and gas market coming into the fourth quarter and we experienced an overall fall season that ended much sooner than anticipated.\nIn particular the oil and gas turnaround sector slowed attributed to factors such as supply buildups early in the year as well as refinery shifting resources to prepare for IMO 2020.\nThe note of caution that unexpectedly arose among oil and gas customers toward the middle of September 2019 into October 2019 is attributable primarily to increased macroeconomic uncertainty.\nIt is the same note of caution that is being heard in various sectors stemming from many factors including trade tensions negative European interest rates and the slowdown of domestic GDP growth.\nAlthough the long-term outlook remains intact these factors are clearly influencing current activity in the oil and gas market resulting pushouts of demand.\nConsequently the company's full year outlook is now lower than originally anticipated for the fourth quarter and accordingly the company is lowering its guidance for full year 2019 as follows: total revenues are expected to be between $740 million to $750 million; adjusted EBITDA is expected to be between $70 million to $75 million; capital expenditures are expected to be under $25 million; and free cash flow is expected to be between $28 million to $32 million.\nWe are still developing our full year 2020 budget but preliminarily we anticipate modest single-digit top line growth while maintaining year-to-date 2019 gross profit operating margins and cash flow levels.\nThere are also a number of additional growth opportunities all of which will be incremental to our current expectations.\nWe will provide our outlook for full year 2020 on our next scheduled call.\nWe are confident in our sustainable business model which has proven to be nimble in responding to sudden and severe cyclical changes in the oil and gas sector.\nWe remain firmly committed to diversifying our end markets over the long term while at the same time embracing our current end markets with an evolving differentiated solution.\nAs we implement our long-term strategy we recognize there may be some bumps along the road.\nHowever these distractions are not a hindrance to achieving our ultimate objective of becoming the partner of choice in the NDT market and its adjacencies.\nWe continue to steadily transform Mistras with our basic principles always at the forefront that being delivering value meeting our promises innovating to drive productivity for our customers and developing industry-leading productivity tools.\nI am confident and continue to see signs that our customers' operations see value in the span with us as a true ROI.\nThe enthusiastic reception of our MISTRAS Digital tablet initiative further illustrates the partnerships we are forming with our clients.\nI also believe that we do this better than our competition and this will be evidenced by our relatively stronger performance than our market as we exit 2019 and head into 2020.\nWe are keenly focused on differentiating ourselves in the market particularly through our expanding service lines which solve for customers' needs of reduced overall labor to accomplish a given project involving digital solutions as I mentioned earlier.\nWe also remain firmly committed to maintaining our position at the forefront of leading the development of advanced inspection tools utilizing proprietary technology.\nWe add value and this enables us to price at market and generate solid operating profit with predictable attractive cash flow.\nIn the process we serve our customers with an exceptional return on their investment by delivering top-quality results with superior economic value.\nI am confident that we are on the right path executing on our strategy and creating value over the short mid and long-term for Mistras shareholders.\nBrian please open up the phone line.\n",
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"content": "sees fy 2019 revenue $740 million to $750 million.\ncompname says fy 2019 adjusted ebitda is expected to be between $70 million and $75 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'll update you on the company's first quarter results.\nIn the first quarter, we had all-time record sales of almost $2.7 billion, an increase of 17% as reported or 9% on a constant basis with adjusted operating income of $329 million, our highest ever first quarter earnings per share of $3.49.\nOur business continued to strengthen in the first quarter and did not reflect the industry's normal seasonality.\nAround the world, consumers are continuing to invest in their homes and new flooring plays a major role in most remodeling projects.\nWe're also starting to see moderate improvement in commercial demand as global economies expand and businesses begin to invest in an anticipation of a return to normal.\nIn most countries, construction is considered an essential business, so our sales have been less impacted by government restrictions.\nThose specific regions have interrupted our customers' businesses.\nOur Flooring Rest of World segment continues to outperform with strong residential sales of our flooring, improved mix from our premium products and less exposure to commercial channels.\nThe segment benefited from lower marketing expenses, product mix and increased days, which resulted in a greater margin in the first quarter.\nOur other segments also performed well with strong growth in residential products and expanding operating margins, while their results were impacted by low commercial sales and severe storms in the United States.\nMarket demand strengthened as the period progressed, and our order backlog remains robust going into the second quarter.\nMost of our businesses are running at high production rates, though inventories remain lower than we would like.\nOur production and operating costs were impacted in the period by supply limitations in many of our markets as well as absenteeism, new employee training and severe winter weather in the United States.\nOur margins have benefited from stronger consumer demand, our restructuring and productivity actions and leverage our SG&A costs.\nWith increased prices in most product categories and geographies, reflecting inflation in raw materials, labor, energy and transportation.\nGlobal transportation capacity has been limited, increasing our cost and delaying receipt of our imported products.\nWe've seen similar constraints on local shipments and are increasing our freight rates to respond.\nThe investments we made in our U.S. trucking fleet and local delivery systems have enabled us to provide our customers with more consistent service while improving our efficiencies.\nEven with COVID surges in some markets, we anticipate continued strengthening of economies around the world.\nGovernment actions and monetary policies are stimulating higher economic growth rates and stronger housing markets, and vaccination program should reduce the risk of COVID related disruptions.\nRecent U.S. stimulus actions as well as proposed infrastructure spending should further expand economic growth and employment level.\nThough government investments are lower than in the U.S. Other countries are beginning to see their economies expand, which should support ongoing demand in our product categories.\nWe continue to implement our restructuring plans, which have achieved $75 million of our anticipated $100 million to $110 million in savings.\nThe balance of the savings will be spread over the next three quarters as specific projects are completed.\nIn the first quarter, we purchased $123 million of our stock at an average price of $179 for a total of $686 million since we initiated our purchasing program.\nOur balance sheet remains strong with net debt less short-term investments of $1.3 billion.\nOur leverage is now below onetime adjusted EBITDA.\nGiven our higher sales and operating levels, we are reviewing additional investment opportunities to expand our business and capacity.\nJim will you review the first quarter financials.\nSales in Q1 2021 were $2,669 billion.\nThat's a 17% increase as reported and 9% on a constant basis.\nAll segments showed positive volume growth with Flooring Rest of the World being the strongest.\nAs a reminder, Q1 had three additional shipping days and Q4 will have four fewer days.\nGross margin was 29.7% as reported or 30.1% excluding charges, increasing from 27.5% in the prior year.\nThe year-over-year increase was driven primarily by higher volume and productivity, greater manufacturing uptime, improved price mix and favorable FX, partially offset by increased inflation.\nThe actual detailed amounts of these items will be included in the MD&A section of our 10-Q, which will be filed later today.\nSG&A, as reported, was 17.\n8% or 17.7% versus 20.3% in the prior year, both excluding charges, as we saw strong leverage on the increased volume and productivity actions, partially offset by inflation in FX.\nGives us an operating income, as reported, of 11.9% of sales.\nRestructuring charges for the quarter were $11 million, and our savings, as Jeff said, are on track as we have recorded approximately $75 million of the plan.\nOperating margin excluding charges of 12.3%, improving from 7.2% in the prior year or 510 basis points.\nSimilar to gross margin, the increase was driven by stronger volume productivity actions, improved price/mix and FX, greater manufacturing uptime, partially offset by the increased inflation.\nInterest expense of $15 million includes the full impact of the 2020 bond offerings.\nOther income of $2 million, mainly the result of favorable transactional FX.\nOur non-GAAP tax rate was 22% versus 20% in the prior year, and we expect the full year to be 21.5% to 22.5%.\nGiving us an earnings per share as reported of $3.36 or excluding charges, $3.49, which is 110% improvement versus prior year.\nNow turning to the segments.\nGlobal Ceramic had sales of $930 million, a 10% increase as reported, or approximately 5% on a constant basis with strong geographic growth, especially in Brazil, Mexico and Russia, while the U.S. was unfavorably impacted by the February ice storm.\nOperating income, excluding charges of 9.6%, that's up 400 basis points versus prior year, and this improvement was from strengthening volume and price/mix increased manufacturing uptime and productivity, partially offset by unfavorable inflation.\nIn Flooring North America, sales of $969 million or a 14% increase as reported or 9% on a constant basis, driven by strong residential demand with commercial beginning to recover from its trough.\nOperating income excluding charges of 9.3%, that's an increase of 410 basis points versus prior year.\nThe improvement similar to global ceramic was driven by increased volume and productivity, less temporary shutdowns, partially offset by higher inflation.\nAnd finally, Flooring Rest of the World with sales of $770 million.\nThat's an increase of 31% as reported or 15% on a constant basis as our focus on the residential channel drove improvement across product -- all our product groups led by laminate, LVT and soft surface business in Australia and New Zealand.\nThe operating margin excluding charges of 20.9%, an increase of 740 basis points versus prior year, driven by the higher volume, favorable impact of price/mix and productivity, partially offset by the increase in inflation.\nCorporate and eliminations came in at $11 million, and I expect for the full year 2021 to be approximately $40 million to $45 million.\nTurning to the balance sheet; cash and short-term investments are approximately $1.3 billion, with free cash flow in the quarter of $145 million.\nReceivables at just over $1.\n8 billion, giving us a DSO improvement to 54.\n4 days versus 57 days in the prior year.\nInventories were just shy of $2 billion.\nThat's a decrease of approximately $200 million or 9% from the prior year, with the marginal sequential increase of 4% from Q4 or approximately $80 million.\nInventory days remained historically low at 105.5 days versus almost 130 in the prior year.\nProperty plant equipment just over $4.4 billion with CapEx for the quarter of $115 million versus D&A of $151 million.\nFull year CapEx is currently estimated at $620 million with us reevaluating our plan, and we will most likely see an increase from that level.\nFull year D&A is projected to be $583 million.\nAnd lastly, the overall balance sheet and cash flow remained very strong with gross debt of $2.7 billion.\nAs I said, total cash and short-term investments of over $1.3 billion, giving us a leverage of 0.9 times adjusted EBITDA.\nFirst quarter sales of our Flooring Rest of World segment increased 31% as reported or 15% on a constant basis, exceeding our expectations.\nSales across all our product categories and geographies were strong as housing and residential renovation continued at a brisk pace.\nMargins expanded over last year to approximately 21% due to higher volume, favorable price and mix and positive leverage on SG&A, partially offset by inflation.\nDuring the period, most of our facilities ran at high levels, though some supply constraints limited our utilization.\nAt this point, we anticipate some material shortages continuing into the second quarter.\nOur backlog has increased as customer inventories remain low.\nWe have raised prices across all product categories and have announced additional increases where material inflation has continued to expand.\nOur laminate business, the segment's largest product category continues to record significant growth as consumers embrace our more realistic visuals and superior performance.\nOur leadership in premium laminate products and our higher volumes drove improved margins during the period.\nOur unique manufacturing methods create proprietary products that cannot be duplicated.\nOur next-generation laminate technology provides premium wood consumers with features that exceed traditional wood in beauty and durability.\nIn the second quarter, we are installing additional manufacturing assets to support future growth.\nDuring the period, our LVT sales rose substantially with significant growth in rigid LVT.\nOur margins expanded from enhanced formulations and operational improvements that increased our production speeds.\nIn the period, our sales were restricted by material supply disruptions that caused unscheduled shutdowns.\nWe anticipate continued improvement in our operations as the material supply normalizes and production increases to expand our new rigid LVT collections.\nOur sheet vinyl sales were limited in the period by COVID lockdowns of our retailers in Europe.\nWe anticipate sheet vinyl sales improving as government restrictions are lifted and our customers reopen their shops.\nOur Russian sheet vinyl business continues to expand rapidly as we broaden our customer base and product offering.\nWe have initiated a third shift at the plant to support higher sales volumes.\nOur insulation business continues to grow as our panels provide the best option for energy conservation.\nSales growth was robust in most of our geographies, though COVID restrictions in Ireland impacted our plant operations and results.\nChemical supply problems have limited our production and dramatically increased our costs.\nWe have announced our third price increase to offset the continued inflation and chemical shortages are expected to last through the second quarter.\nOur wood panels business delivered improved performance with our plant running full and operating margins expanding.\nAs market demand for panels grows, we are allocating our production.\nWe improved our mix during the period with increased sales of our higher-value decorative products and mezzanine floors.\nWe're installing a new melamine press to expand production of our higher-value products and increased efficiencies.\nOur new plant that uses waste to create energy for the facilities is operating well and benefiting our results.\nSales in both Australia and New Zealand increased significantly and margins expanded due to higher volume, improved productivity and favorable price mix, partially offset by inflation.\nSales grew in soft and hard surfaces with a strong residential performance driven by high levels of remodeling and a solid housing market.\nOur updated carpet collections and SmartStrand and Wolf have enhanced our sales and mix.\nWe increased our sales by leveraging our comprehensive soft and hard service collections, strong sales organization, and industry-leading service.\nThe commercial performance was stronger, primarily driven by projects that were postponed.\nFor the period, our Flooring North America sales increased 14% as reported or 9% on a constant basis.\nAdjusted margins expanded to 9% due to higher volume, productivity gains and mix improvements, partially offset by inflation.\nOur performance was seasonally stronger than historical first quarters with consumers increasing investments in residential remodeling and new construction.\nOur commercial business continued to improve sequentially from its trough with growing investments in new projects.\nOur order rates remain strong and our backlog is higher than normal.\nWe have increased prices as a material and transportation costs have escalated and we'll adjust further as required.\nAll of our operations are maximizing their output to support higher sales and improve our service.\nIn the period, we managed through interference from labor shortages and supply constraints, which impacted our production levels.\nOur inventories and service levels have also been impacted by delayed shipment of our imported products due to bottlenecks in ocean freight.\nWe are continuing to execute our restructuring initiatives, which will provide ongoing benefit to our results as they are completed this year.\nOur residential carpet sales improved as consumers desire more comfortable, quieter spaces in their homes.\nRetail remodeling was our strongest channel, improving our mix through increased sales of our premium products.\nWe are expanding our proprietary SmartStrand franchise with new collections that offer superior design and performance.\nWe have significantly reduced operational complexity by simplifying our yarn and product strategies and reducing low-volume SKUs.\nSo that our workforce to meet higher market demand, we have implemented extensive training processes and are relocating assets to increase production where necessary.\nOur commercial sales are recovering as business remodeling increases along with the economic improvement.\nWe are also seeing increasing volume of higher-value products as larger specified projects are commencing.\nThe April Architectural Billing Index reflects the highest level of project inquiries since 2019.\nWe have increased carpet tile production in anticipation of the commercial markets improving.\nIn our commercial LVT business, we are managing supply limitations and import delays.\nOur laminate sales are setting records as the appeal of our realistic visuals and waterproof performance expands across all channels.\nThrough numerous process improvements, we have significantly increased our domestic production and are supplementing it with imports from our global operations.\nWe are installing additional production at the end of this year to further expand our sales.\nOur new line will also produce the next generation of Redwood, which is already being well accepted by European consumers.\nWe have completed upgrades and streamlined our MDF board facility to enhance our volume and cost.\nWe are ramping up production of our premium ultra wood, the first waterproof natural wood flooring that also features industry-leading scratch, dent and fade resistance.\nUltra wood is being well received as a superior alternative to traditional engineered wood flooring.\nOur LVT and sheet vinyl sales continue to increase in the new construction and residential retail channels.\nWe are upgrading our LVT offering with enhanced visuals unique water type joints and improved stain and scratch resistance.\nOur local manufacturing has continued its improvement and production output increased as we implemented processes similar to those proven to work in our European operations.\nOur service has been impacted by material supply disruptions in the U.S. and delays in shipments of sourced products.\nWe anticipate our supply will increase and we will see further improvements in our domestic offering and production output.\nIn the quarter, our Global Ceramic sales rose 10% as reported and 5% on a constant basis, with sales increases in each of our markets, driven by growth in residential remodeling and new construction.\nThe segment's adjusted margin expanded to approximately 10% due to volume, price, mix and productivity gains, partially offset by inflation.\nOur Russian, Brazilian and Mexican ceramic businesses delivered strong results though they were limited by their capacities and are allocating production as necessary.\nAll of our businesses are facing rising material, energy and transportation costs, and we have taken pricing actions to offset.\nOur U.S. ceramic residential sales grew from remodeling and new construction and commercial sales are improving from their low levels.\nOur strongest growth was in new residential construction, and we are seeing activity strengthen with contractors at our service centers.\nWe are introducing higher-value products, including polished, mosaic, decorative wall and antimicrobial collections to improve our mix.\nWe are focusing on the fastest-growing channels and implementing advanced technologies to make doing business with us faster, easier and more profitable for our customers.\nAcross the business, our plants are running at higher levels, and we have increased our productivity with our restructuring actions.\nEscalating freight costs have hurt our margins, and we are raising prices to offset.\nOur quartz plant is improving its productivity, and we are introducing more sophisticated bank collections, which are increasing our mix and should enhance our margins.\nIn the period, the ice storm that hit the Southwest temporarily stopped production at most of our manufacturing facilities by interrupting our electricity and natural gas supply.\nThe facilities have all recovered and are operating as expected, improving our service.\nOur European ceramic business delivered a strong performance in the quarter, risk productivity, improving mix and greater consumer demand.\nSales grew substantially in Southern Europe and in our export markets, led by a robust residential business and with some improvement in commercial projects.\nOur operations are running at high rates to satisfy the greater demand and improve service, leveraging our cost and enhancing our results.\nWe are increasing our production levels through improvements in our processes and equipment as well as optimizing product flows to support growth and enhance our mix.\nOur ceramic businesses in Mexico, Brazil and Russia are all benefiting from lower interest rates and expanded credit, which are driving greater home remodeling and housing sales.\nIn all three businesses, our order backlog is high, and we are allocating production as necessary.\nWe have streamlined our product offering and enhanced our planning strategies to optimize service.\nOur inventory levels are low, and we are maximizing our output by enhancing our manufacturing and scheduling processes.\nIn Brazil and Mexico, we are increasing capacity this year to improve our sales and mix.\nIn Russia, we are optimizing our tile production and ramping up our new premium sanitary ware plant to meet growing demand.\nSanitary Ware complements our floor and wall tile offering and allows our owned and franchised stores to provide a more complete solution to satisfy our customer needs.\nGiven higher market demand and our increased sales, we are reviewing the expansion of our ceramic capacities.\nAs we progress through the year, we anticipate that historically low interest rates, government actions and fewer pandemic restrictions should improve our markets around the world, which we see the present robust residential trends continuing with commercial sales slowly improving in the second period.\nAcross the enterprise, we will increase product introduction to provide additional features to strengthen our offering and margins.\nWe're enhancing our manufacturing operations to increase our volume and efficiencies while executing our ongoing cost savings programs.\nOur suppliers indicate that material availability should improve from the first quarter though some operations could still face supply constraints.\nWe are managing challenging labor markets in some of our U.S. communities and supplemental federal unemployment programs could interfere with staffing to maximize those operations.\nIf raw materials, energy and transportation costs continue to rise, further price increases could be required around the world.\nGiven these factors, we anticipate our second quarter adjusted earnings per share to be $3.57 to $3.\n67 excluding any restructuring charges.\nCurrently, our strong backorder -- backlog reflects the escalated levels of residential demand across the globe.\nWe're introducing new product innovations to enhance our offering and optimizing our production to improve our service.\nWe're preparing for an improvement in commercial projects, anticipating an economic expansion and a return to normal business investments.\nWith strong liquidity and historically low leverage, we will increase our capital investments and take advantage of opportunities to expand.\n",
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"content": "compname reports q1 earnings per share of $3.49 excluding items.\nq1 earnings per share $3.49 excluding items.\nsees q2 adjusted earnings per share $3.57 to $3.67 excluding items.\nq1 earnings per share $3.36.\nq1 sales rose 16.8 percent to $2.7 billion.\nanticipate some material shortages continuing at least in q2.\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'll update you on the company's second quarter results.\nIn the second quarter, we generated revenue of approximately $3 billion, the highest quarterly sales of any period in our company's history.\nOur sales increased significantly over last year when the pandemic interrupted the global economy.\nOur adjusted earnings per share of $4.45 was the highest on record for any quarter.\nOur success is the result of the extraordinary efforts of all of our team members across the world.\nThey have shown their dedication and resilience to overcome the challenges that we have faced.\nWe greatly appreciate what they have been able to achieve.\nOur second quarter results were significantly stronger than we had anticipated across all of our businesses with sales building on a momentum from our first period.\nIn the quarter, our operating margin expanded to their highest level in the last four years as we leveraged our operational and SG&A expenses.\nThe actions we have taken to simplify our product offering, enhance our productivity and restructure our costs are benefiting our results.\nWe've delivered almost $95 million of the anticipated $100 million to $110 million in savings for our restructuring initiatives.\nAcross the enterprise, we continue to respond to rising material, energy and transportation costs by increasing prices and optimizing manufacturing and logistics.\nDuring the quarter, most of our manufacturing ran at capacity or we were limited by material supply and labor availability.\nRaw material constraints and many of our operations led to unplanned production shutdowns during the period.\nOverall, we've successfully managed interruptions that impeded our normal operations as well as regional manufacturing and customer closings related to COVID regulations in local areas.\nOur inventory levels increased slightly in the period, primarily reflecting higher material costs.\nRising freight cost and limited shipping capacity impacted our material costs, availability of imported products, local shipments to customers and international exports.\nPresently, we do not anticipate near-term abatement of these constraints.\nAll of our markets continue to show strength, with robust housing sales and remodeling investments across the world.\nCommercial projects are increasing as the global economy improves and businesses gain confidence to expand and remodel.\nInventory levels in most channels remain low, and our sales backlogs are above our historical levels.\nTo improve our sales mix and efficiencies, we will introduce more new products with enhanced features and lower production complexity in the second half of the year.\nTo alleviate manufacturing constraints, we have approved new capital investments of approximately $650 million to increase our production, with most taking 12 to 18 months to fully implement.\nIn the second quarter, we purchased $142 million of our stock at an average price of $2.08 (sic) $208 for a total amount of approximately $830 million since we initiated the program.\nWith our strong balance sheet and historically low leverage, we're reviewing additional investments to expand our sales and profitability.\nJim will now cover the second quarter financials.\nFor the quarter, our sales were $2.954 million, an increase of 44% as reported and 38% on a constant basis.\nAll segments showed significant year-over-year growth versus Q2 of 2020, which was a period we were most impacted by the pandemic shutdowns.\nGross margin for the quarter was 30.5% as reported or 30.7%, excluding charges, increasing from 21.4% in the prior year.\nThe increase in gross profit was a result of higher volume and productivity, improved price/mix, reduction of last year's temporary shutdowns due to the pandemic and favorable FX, partially offset by the increasing inflation.\nSG&A, as reported, was 16.9% of sales or 16.8% versus 19.7% in the prior year, both excluding charges as a result of strong leverage by the business on the sharp increase in volume.\nThe absolute year-over-year dollar increase was primarily due to higher volume, normal operating costs previously curtailed by the pandemic, impact of FX, increased product development costs and inflation.\nOperating margin as reported was 13.7%, with restructuring charges of approximately $7 million.\nOur restructuring savings are on track as we have recorded approximately $95 million of the planned $100 million and $110 million of savings.\nOperating margin excluding charges, 13.9%, improving from 1.7% in the prior year.\nThe increase was driven by the stronger volume, improved price/mix, productivity actions, the reduction of the temporary shutdowns and favorable FX, partially offset by the higher inflation and increased product development costs.\nInterest for the quarter was $15 million.\nOther income, other expense was $11 million income, primarily a result of a settlement of foreign non-income tax contingency and other miscellaneous items.\nIncome tax rate, as reported, was 16% and 22.5% on a non-GAAP basis versus a credit of 2.5% in the prior year.\nWe expect the full year rate to be between 21.5% and 22.5%.\nThat leads us to a net earnings as reported of $336 million or an earnings per share of $4.82.\nEarnings per share excluding charges was $4.45 percent -- or $4.45, excuse me.\nTurning to the segments.\nThe Global Ceramic segment had sales of just over $1 billion, an increase of 38% as reported or 34% on a constant basis, with strong geographic growth across our business led by Mexico, Brazil and Europe.\nOperating margin, excluding charges was 13.2%, a significant increase from the low point of 2020 at 0.5%.\nThe earnings improvement was a result of strengthening volume and productivity, favorable price/mix and a reduction of temporary shutdowns, partially offset by increasing inflation.\nFlooring North America had sales of just under $1.1 billion for a 35% increase, driven by a strong residential demand with commercial channel continuing its growth versus prior year, but still below historic levels.\nThe segment experienced solid growth across all product lines, led by residential carpet, LVT and laminate.\nOperating income, excluding charges, was 11.2% and similar to Global Ceramic, a significant increase from the 2020 margin trough.\nThe operating income improvement was also driven by the increase in volume, strengthening productivity, improvement in price/mix, with a reduction in temporary shutdowns, partially offset by higher inflation.\nLastly, Flooring Rest of the World with sales of just over $830 million, a 68% improvement as reported or 50% on a constant basis, as continued strength in residential remodeling and new home construction drove improvement across all product groups, led by resilient, panels, laminate and our soft surface business in Australia and New Zealand.\nOperating margin, excluding charges of 19.7%, and similar to our other segments, was a significant increase from prior year's low point of 11.9%.\nAnd again, the main drivers were consistent in that they had higher volume, favorable impact from price/mix with a reduction of temporary shutdowns, favorable FX, partially offset by increasing inflation.\nCorporate and eliminations came in at $12 million and expect full year 2021 to be approximately $45 million.\nTurning to the balance sheet.\nCash and short-term investments are approximately $1.4 billion with free cash flow of $226 million in the quarter.\nReceivables of just over $2 billion, an improvement in DSO to 53 days versus 64 days in the prior year.\nInventories for the quarter were just shy of $2.1 billion, an increase of approximately $160 million or 8% from the prior year or increasing $85 million or 4% compared to Q1 2021.\nInventory days remain historically low at 99 days versus 126 in the prior year.\nProperty, plant and equipment were just shy of $4.5 billion and capex for the quarter was $113 million with D&A of $148 million.\nFull year capex has been increased to approximately $700 million to strengthen future growth with full year D&A projected to be approximately $580 million.\nOverall, the balance sheet and cash flow remained very strong, with gross debt of $2.7 billion, total cash and short-term investments of approximately $1.4 billion and a leverage at 0.7 times to adjusted EBITDA.\nFor the period, our Flooring Rest of the World segment, sales increased 68% as reported and 50% on a constant basis.\nOperating margins expanded to 19.7% due to higher volume, pricing and mix improvements and a reduction of COVID restrictions, partially offset by inflation.\nFlooring Rest of the World outperformed our other segments with all our major product categories significantly as residential sales expanded in all regions.\nWe have implemented multiple price increases in most product categories to cover inflation in materials and freight.\nRaw material supplies are problematic and have impacted our LVT production and sales the most.\nWe anticipate material and freight challenges will continue to impact our business in the third quarter.\nSales of our high-end laminate continue to grow dramatically as our proprietary products are being widely accepted as waterproof alternative to LVT and wood.\nWe are beginning to introduce our next-generation of laminate at premium levels with collections featuring handcrafted visuals.\nWe are increasing our production in Europe, with new capacity coming online and further capacity expansion projects are being initiated.\nOur laminate business in Russia and Brazil are growing strongly as we enhance our offering and expand our distribution.\nWe recently completed the acquisition of a laminate distributor in the U.K. that will improve our position in the market.\nOur LVT sales growth was strong during the period and would have been higher if material shortages had not interrupted manufacturing.\nTo compensate for material inflation, we have increased prices and we expect further increases will be required as our costs continue to rise.\nWe are significantly expanding sales of our rigid LVT collections with our patented water-tight joints that prevent moisture from penetrating the floor.\nOur manufacturing operations have made substantial progress improving throughputs, material costs and yields.\nOur production in the third quarter will continue to be limited by material availability.\nOur sheet vinyl sales rebounded strongly as retail stores opened in our primary markets.\nOur sheet vinyl distribution in Russia has expanded, and we are maximizing production to meet the growing demand.\nOur wood plant in Malaysia has been idle since the government instituted lockdowns to address surging COVID rates.\nWood is a small product category for us, so the sales impact in the third quarter will be limited.\nWe are awaiting permits to complete the acquisition of a plant that reduces wood veneers to lower our cost.\nOur Australian and New Zealand flooring businesses delivered excellent results with sales and margins exceeding our expectations.\nThe residential business was strong, with hard surface products leading the growth.\nCarpet sales are strengthening with our national consumer advertising, enhanced merchandising and the launch of a new high-end wool and triexta collections that improved our mix.\nMost of our facilities operated at a high level with increased volumes benefiting our results.\nAs in all of our markets, commercial sales have not recovered to their pre-pandemic levels.\nThough the Australian government has locked down specific regions to contain the spread of COVID, it has not meaningfully impacted our business.\nOur European insulation sales grew even though chemical shortages limited our production.\nOur margins are recovering after we implemented price increases to cover rising material costs.\nWe have announced an additional price increase for the third quarter to offset further raw material inflation.\nWe anticipate chemical supplies to remain tight and could impact our future sales.\nTo expand our existing insulation business in Ireland and the U.K., we have signed an agreement to acquire an insulation manufacturer, which is pending government approval.\nOur panels business is running at full capacity, and so far, we've been able to manage material shortages without interruptions to our operations.\nWe have raised prices and improved our mix with higher value decorative products.\nTo enhance our results, we are expanding our offering of premium products as well as our project specification team.\nTo enhance our panel offering, we are commissioning a new line that creates unique surfaces and visuals to differentiate our offering in the market.\nFor the period, our Flooring North America segment sales increased 35%, and adjusted margins expanded to 11.2% due to higher volume, productivity, pricing and mix improvements and fewer COVID interruptions, partially offset by inflation.\nOur business trends continued from the first quarter with sales growth being driven by residential remodeling and new construction.\nCommercial sales continued to improve, though the channel remains below pre-pandemic levels.\nThrough the period, our order rate remains strong and our sales backlog remains above historical levels.\nWe are maximizing output at our facilities to support higher sales and improve our service.\nDuring the quarter, our production levels were hindered by local labor shortages and material supply, particularly in LVT, sheet vinyl and carpet.\nOcean freight constraints delayed receipt of our imported products, impacting our sales, inventories and service levels.\nWe implemented price increases as a material and transportation cost increase and we have announced additional pricing actions as inflation continues.\nOur restructuring initiatives are improving efficiencies as planned, and we should realize additional savings in the third quarter.\nOur residential carpet sales continued their growth trend across all channels with consumers investing in home improvement projects.\nSales of our proprietary SmartStrand franchise expanded with our new collections being well accepted.\nOur EverStrand polyester collections are expanding by providing enhanced value, styling and environmental sustainability.\nOur carpet sales have been limited by personnel shortages in our operations, and we are implementing many actions to increase our staffing and productivity.\nWe have improved our efficiencies by rationalizing low volume SKUs and streamlining our operational strategies.\nOur commercial sales have improved as businesses increased remodeling and new construction projects.\nBoth carpet, tile and hard surface products grew with healthcare, senior living, education and government recovering faster.\nThough down slightly from record levels, the June Architecture Billing Index had a fifth consecutive month of expansion, indicating the continued strengthening of new commercial development and renovation projects.\nWith realistic visuals and waterproof performance, our premium laminate collections are growing substantially.\nTo support higher demand, we have implemented many process improvements to maximize our U.S. production and are importing product from our global operations.\nOur laminate expansion remains on schedule and should be operational by the end of this year.\nOur new line will produce the next-generation of RevWood which is already being introduced in Europe.\nTo support the growth of our laminate business, our U.S. MDF operation completed investments to increase our volume and lower our cost.\nOur new waterproof Ultrawood collections are being launched as a high-performance alternative to typical engineered wood floors.\nOur LVT and sheet vinyl sales continue to increase, with growth in the residential, retail and new construction channels.\nOur LVT and sheet vinyl growth and plant productivity were impacted by disruptions in supply that stopped our operations and delays in imported LVT caused by transportation constraints.\nWe have enhanced our LVT offering with more realistic visuals, proprietary water-tight joints and improve stain and scratch resistance.\nOur U.S. operations implemented process enhancements that have increased our speeds and throughput.\nWhen material availability increases, we should see further improvements in our domestic manufacturing, which will support our recent product launches.\nFor the period, our Global Ceramic segment sales increased 38% as reported and 34% on a constant basis.\nAdjusted margins expanded to 13.2% due to higher volume, productivity, pricing and mix, improvements and fewer COVID disruptions, partially offset by inflation.\nOur ceramic businesses around the world have greatly improved with strength in the residential channel and increasing commercial sales.\nAll of them have low inventories, which impacted our sales growth and service levels.\nWe have initiated expansion plans to increase our capacity in mix in Mexico, Brazil, Russia and Europe.\nOur ceramic businesses continue to raise prices to cover material, energy and transportation inflation.\nOur U.S. ceramic business is strengthening, and we are implementing price increases to cover material and freight inflation.\nWe are improving our product mix with new shapes, sizes and service structures.\nWe are reengineering our products to improve material cost and productivity.\nOur restructuring projects have been fully implemented and are growing the expected -- providing the expected benefits.\nOur countertop sales and mix continue to improve as we expand our premium offer with new technologies.\nIn the period, a mechanical failure temporarily reduced production, which has been repaired.\nWe have initiated the expansion of our plant to further grow our countertop business.\nOur Mexican and Brazilian ceramic businesses are very strong, with our residential business in both regions at historically high levels and commercial still recovering.\nDue to capacity constraints, our facilities could not fulfill customer demand, so we are allocating our production.\nWe have executed multiple price increases to offset energy and material inflation.\nWe are expanding operations in Mexico this quarter, and we have initiated new investments to increase capacity in Brazil.\nOur European ceramic business delivered strong sales and profitability as pricing, product mix, and productivity improved our margins.\nWe increased sales of our premium products, including slabs, small sizes, outdoor and antibacterial collections.\nCommercial sales trends are starting to improve though they remain below historical levels.\nWe are selectively increasing prices to recover material, energy and freight inflation.\nDuring the period, our operations ran at high levels with improved efficiencies and increased throughputs.\nWe continue to rationalize low volume SKUs to optimize our operations.\nTo support our sales of high-end collections, we have initiated expansion projects, some of which will take through next year to complete.\nOur ceramic sales in Russia were robust across all channels with our direct sales to customers through our own stores and new construction projects outperforming.\nWe have announced price increases to cover rising inflation.\nDuring the period, our manufacturing operations ran at capacity to respond to accelerated sales with inventory remaining below historical levels.\nDue to present capacity limitations, we are focusing on optimizing our product mix.\nWe have initiated expansion plans with new production expected in the second half of next year.\nSales of our new sanitaryware products are expanding primarily through our owned and franchised retail stores as our manufacturing ramps up.\nThe global economy should continue to improve due to low interest rates, government stimulus and the success of COVID vaccines.\nAround the world, flooring sales trends remain favorable, with residential remodeling and new construction at high levels and commercial projects strengthening.\nIn the third quarter, we expect our strong sale to continue, with our typical seasonal slowing from the second quarter.\nWe will expand the introduction of new products with additional features and increase our investments to enhance our future sales and mix.\nMaterial, energy and transportation inflation is expected to continue and will require further pricing actions to offset.\nMost of our facilities will operate at high utilization rates, though ongoing material and local labor constraints will limit our production.\nOur Global Ceramic and Flooring Rest of the World segments will observe the European vacation schedules in the third quarter, which reduces production and increases cost in the period.\nIn many countries, future government actions to contain COVID remain a risk and could impact our business.\nGiven these factors, we anticipate our third quarter adjusted earnings per share to be between $3.71 and $3.81, excluding any restructuring charges.\nWe entered this year with uncertainty about COVID, the economic recovery, home renovation and new construction.\nOur business is stronger than we had anticipated, and we are increasing investments to support additional growth and improve efficiencies.\nLonger term, housing sales and remodeling are expected to remain at historical high levels.\nApartment renovation should accelerate as rent deferment expires, and investments in commercial projects should continue to strengthen.\nWe're expanding our operations and introducing new innovations to maximize our results.\nOur balance sheet is strong, and we're exploring additional internal projects and acquisition opportunities.\n",
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"content": "q2 earnings per share $4.45 excluding items.\nsees q3 adjusted earnings per share $3.71 to $3.81 excluding items.\nq2 earnings per share $4.82.\nlonger term, housing sales and remodeling are expected to remain at a high level.\nlonger term, apartment renovation should accelerate as rent deferment expires.\naround the world, flooring sales trends remain favorable.\nmaterial, energy and transportation inflation is expected to continue and will require further pricing actions to offset.\nmohawk industries - most of our facilities should operate at high utilization rates though ongoing material, labor constraints will limit production.\nexpanding operations in mexico this quarter, and we have initiated new investments to increase capacity in brazil.\napproved new capital investments of about $650 million to increase production with most taking 12 to 18 months to implement.\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'll update you on the company's third quarter results.\nAs we previously disclosed, we received subpoenas from the Department of and the Securities and Exchange Commission related to allegations in a class action lawsuit filed against us.\nWith the assistance of outside legal counsel, our Audit Committee completed a thorough internal investigation into these allegations of wrongdoing and concluded that they are without merit.\nWe are cooperating fully with the ongoing governmental investigations and will continue to vigorously defend against the lawsuit, which we do not believe has merit.\nOur third quarter results significantly exceeded our expectations, with sales recovering and operating income substantially increasing from last year's levels.\nUnder continued pandemic conditions, people all over the world are spending more time in their homes and working remotely.\nGlobally, this trend increased investments in home remodeling as well as driving new home purchases.\nAll of our businesses and geographies were stronger due to higher demand and customers increasing inventory in our distribution channels.\nFlooring Rest of World delivered the strongest results in the quarter as our Northern European, Russian and Australian businesses were less impacted by the pandemic.\nOur Global Ceramic and Flooring North America segments also improved substantially while being more affected by COVID and postponed commercial projects.\nOur laminate, LVT and sheet vinyl outperformed our other categories, and our new plants improved their output and efficiencies.\nFluctuations in worldwide exchange rates negatively impacted our EBIT by about $7 million, with declines in most currencies offsetting the strengthening euro.\nDuring the period, demand for our products exceeded our productions, and inventory declined by about $80 million as we ramped up plants across the world.\nOur increase in manufacturing in the period was limited by challenges with hiring, training and capacity.\nTo cover higher operating material and logistics costs, we have announced selective price increases in some markets and product categories.\nWe've made significant progress on our previously announced restructuring actions and are in line with our planned schedule and savings.\nThough in response to higher demand levels, we have postponed some restructuring projects while we assess future conditions.\nOur business is responding to the COVID crisis as our focus has remained on keeping our employees safe.\nThroughout our offices, operations and distribution systems, we've implemented procedures that exceed the public health guidelines.\nWe're tracking all identified cases, testing all contacts and successfully containing the spread within our operations.\nThroughout the pandemic, our people have collaborated to protect each other and support our customers around the world.\nEven with our improved performance in the period, our visibility of the future remains very limited.\nAs COVID cases increase, governments may expand restrictions on commerce and reduce stimulus activities.\nIn addition, future consumer spending is uncertain.\nBusiness investments remain low, and inventory growth in the channels could change.\nWe continue to monitor health information and market trends to respond to the evolving conditions in our market.\nIn the second quarter, we took advantage of the favorable rate environment to pay off $1.1 billion of short-term debt and prefund our future long-term maturities.\nIn the third quarter, we generated about $530 million of cash, bringing our cash balance to $1.2 billion at the end of the period.\nWe will pursue additional investment opportunities, including internal growth, acquisitions and stock purchases as the pandemic and economies improve.\nWe believe our stock represents an attractive investment, and our Board of Directors recently approved a plan to repurchase $500 million of the company's stock.\nSales for the quarter were $2.575 billion or up 2% as reported and on a constant basis, with the Rest of World segment performing best.\nAs a note for next quarter, our sales will be impacted by two more days compared to the previous year.\nOur gross margin was 27.4% as reported or 28.3% excluding charges, increasing from 27.8% last year.\nThe year-over-year increase was driven primarily by higher volume, productivity and lower inflation, partially offset by price/mix.\nThe actual amounts of these items will be included in the 10-Q filed later today.\nOur SG&A as reported was $443 million or 17.2% of sales or 16.9% versus 17.8% in the prior year, both excluding charges.\nThis was primarily impacted by favorable productivity of $21 million.\nOur restructuring charges were $32 million for the quarter, of which $6 million was cash.\nAll of our restructuring and other savings are on track with our original plans.\nOur operating margin excluding charges was 11.5%, improving from 9.9% last year.\nThe increase was driven by stronger volume, productivity and declining raw materials, partially offset by unfavorable price and mix.\nInterest expense was $15 million, and we expect interest next quarter to be approximately $16 million.\nOur income tax rate was at 17% this year compared to 18% last year.\nWe expect the fourth quarter to be approximately 5% and then returning to historical levels, ranging from 20% to 21% next year.\nOur earnings per share excluding charges was $3.26, up 18% from last year.\nTurning to the segments.\nIn the Global Ceramic segment, sales were $911 million, down 1% as reported, with business up almost 2% on a constant basis.\nThe non-U.S. businesses turned in our best performances in this segment.\nOur operating margin excluding charges was 10.3%, up 110 basis points compared to the 9.2% last year.\nOur increase was from productivity and volume, partially offset by unfavorable price/mix.\nIn the Flooring North American segment, sales were $982 million, down 2% as reported, with growth in all major categories, except the more profitable commercial end market, which remains challenging with postponed projects and slower office and hospitality.\nOur operating margin excluding charges was 8.2% compared to 8.7% last year.\nThe decrease in earnings was driven by lower margin and price/mix, partially offset by favorable productivity and lower inflation.\nIn the Flooring Rest of World segment, sales were $681 million, up 13% as reported and increased by almost 10% on a constant basis.\nA lower exposure to our commercial end markets, along with a larger presence in Northern Europe, supported strong top line growth in this segment.\nOur operating margin excluding charges was 19.3%.\nThat's up 480 basis points from 14.5% last year.\nThe main drivers were higher volume, favorable productivity and lower raw materials, partially offset by unfavorable price/mix.\nIn the Corporate and Eliminations segment, the operating loss excluding charges was $10 million.\nWe expect the total year to come in at a loss of about $40 million.\nThen jumping to the balance sheet.\nOur receivables ended the quarter at $1.711 billion.\nOur days sales outstanding improved to 56 from 61 days last year.\nOur inventories ended the quarter to $1.842 billion and dropped almost $500 million or 21% from last year as all businesses saw significant reductions in inventory with production lagging sales.\nOur inventory days were at 100 versus 127 days last year.\nFixed assets at the end of the quarter were $4.405 billion and included capital expenditures during the quarter of $69 million and depreciation and amortization of $151 million.\nWe estimate the annual capital expenditures to be about $420 million, with D&A estimated at $595 million.\nAnd finally, the balance sheet and cash flow remains strong with total debt of $2.6 billion, total cash and short-term investments of almost $1.2 billion and leverage at 1.1 times to adjusted EBITDA.\nFor the quarter, our Global Ceramic segment sales increased 2% on a constant days and currency basis.\nOur operating income grew 11% with a margin of 10% excluding restructuring costs compared to last year.\nAll of our ceramic businesses improved substantially in the third quarter, with low inventories limiting both our sales and service.\nThe residential sector experienced a more significant rebound in the period, while commercial demand remained sluggish.\nMost of our plants have stepped up to run all of their capacity to meet present demand and increased inventories in the fourth quarter.\nOverall, demand was solid, but our visibility is hampered by COVID, the sustainability of residential sales growth and postponed commercial projects.\nIn the U.S., we are seeing increased traffic in our showrooms and galleries as well as our customers' retail shops.\nWe have shifted sales focus from commercial to new home construction, which is expected to increase through next year.\nCommercial sales improved from the prior period but are still lagging.\nOur inventories decreased slightly during the quarter, even as we increased our production levels.\nWe have announced price increases to cover higher freight and operations costs.\nOur quartz countertop plant is performing as planned, and we are increasing our higher style collections to improve our mix.\nOur restructuring initiatives are being executed as we planned.\nWe have closed two tile manufacturing facilities and consolidated distribution points.\nWe've also reduced SG&A and labor cost and discontinued lower-performing products.\nOur Mexican ceramic business is experiencing many of the same trends as the U.S.\nOur plants in Mexico are operating near capacity to reduce order backlogs, running shorter production quantities and optimizing our SKU offering.\nTo replace higher-end imports, we are manufacturing new porcelain collections in larger sizes.\nWe are expanding our sales footprint with exclusive Daltile-branded shops being opened by our customers.\nOur Brazilian ceramic business had its best quarter in its history, with significant growth in both its domestic and export markets.\nWe are presently operating at full capacity and allocating production as consumer demand increased and inventories are rebalanced.\nTo offset rising inflation, we have announced a price increase that will go into effect later this year.\nWe are continuing our investments to upgrade our Brazilian assets, create higher-value products and reduce our cost.\nOur European ceramic business delivered strong results in the period as residential sales improved and inventories in the channel are replenished.\nOur performance was hindered by substantial reduction in higher-value commercial category and lower exports for projects around the world.\nWe achieved higher manufacturing levels by reducing the traditional August shutdown periods.\nAs production rose during the period, our service improved, and we will continue to increase inventories to enhance our service.\nIncreased pricing pressures during the period were offset by higher volumes and productivity, lower inputs and SG&A leverage.\nOur major markets in Europe are increasing restrictions due to recent spikes in COVID cases, which could impact future demand.\nOur Russian ceramic business recovered and is performing better than last year, even with the political crisis in the Eurasian Union lowering our exports.\nThe growth was driven by our strong results in the new construction channel and company-owned retail stores.\nLike our other businesses, low inventories constrained our sales in the period.\nOur new sanitary ware plant is operating as planned and will support our premium strategy with products that coordinate with other offerings.\nDuring the quarter, our Flooring North America segment sales decreased approximately 2% as reported, with operating income margin exceeding 8% excluding restructuring charges.\nThe segment's performance improved substantially from the prior period due to improving residential sales.\nRevenue in the quarter were limited by our low inventory levels and difficulties increasing production due to staffing shortages and higher employee absentee rates.\nCommercial demand improved from the prior period but remains weak, with the hospitality, retail and office impacted the most.\nInventories in the period continued to fall, though we expect them to increase through the end of the year.\nAs our production aligns with demand, our service levels are improving.\nOur restructuring programs are progressing and achieving the expected cost savings in manufacturing, logistics and SG&A.\nOur residential carpet business improved from the prior period, with retail remodeling performing best.\nOur polyester products are outperforming other fiber categories, which is impacting our mix and average selling price.\nAs we progressed through the period, we achieved higher manufacturing rates, which improved our productivity and cost.\nIncreased overtime in shorter runs improved our service but raised our production cost.\nTo cover higher costs, we are implementing price increases in the market.\nOur rug sales increased as consumers use them as an easy way to update their home decor.\nIn the period, we are allocating our rug production as demand increased and retailers restock their inventories.\nCommercial flooring remains depressed as businesses reduce remodeling and postpone construction projects.\nWhile our commercial sales improved from the deep second quarter decline, we anticipate a slower recovery in the sector.\nDuring the period, laminate had strong growth with expanding distribution and sales in all channels.\nThe beauty of our waterproof laminate collections are attracting more consumer interest and has enhanced our mix.\nEven with our laminate operations running at full capacity, we are unable to satisfy demand and have postponed our new product introductions.\nTo increase our laminate production and provide new features, we are installing a new line that should begin production in the fourth quarter of next year.\nWe have reduced our commodity wood manufacturing and are repurposing our operations to produce premium wood collections with unique features.\nSales of our residential LVT collections continued to expand at a rapid pace, with rigid products increasing their share and our new product launches improving our mix.\nTo compensate for higher tariffs on sourced collections, we implemented price increases in the period.\nWe are continuing to make significant progress in our U.S. manufacturing facilities.\nOutput is increasing, although some of our productivity initiatives fell behind schedule due to COVID-related interruptions in travel from Europe.\nWe have recently relocated European engineers to the U.S. to implement enhanced LVT processes that are being used in our Belgian operations.\nOur sheet vinyl collections continue to take market share, and our cost in the category improved due to greater efficiencies.\nFor the quarter, our Flooring Rest of World segment sales increased approximately 13% as reported.\nThe segment's operating income grew 56% with a margin of 19% as reported.\nDuring the period, the segment outperformed in all of its geographies as home sales and remodeling expanded with people spending more time at home and reducing other discretionary spending.\nOur inventories remain low in all product categories as order rates exceeded our increasing production levels.\nTo meet higher consumer demand, our plants took less time off in the August vacation period to maximize production levels and service.\nWith higher service and lower marketing expenditures, we leveraged our SG&A cost across the business.\nOur Flooring Rest of the World segment has less participation in commercial end markets that more negatively affected our other two segments.\nOur laminate sales growth was limited by manufacturing capacity in Europe.\nWe began shipping laminate from Russia to support higher demand in Europe.\nOur strong brands and industry-leading innovations continue to attract the consumer, and our differentiated products are improving our mix.\nWe postponed new product launches and reduced our marketing and promotional activities in the period.\nDuring the quarter, sales of our LVT collections grew the most as our production levels, efficiencies and costs improved as we anticipated.\nWe expect our productivity and cost to continue improving as we expand the utilization of our operations and enhance our material yields and efficiencies.\nThe rigid LVT category is also growing faster in Europe, and we will be adding a weekend shift to support the increased demand.\nIn the fourth quarter, we will begin shipping our next generation of rigid LVT products with new features that will strengthen our market position.\nOur sheet vinyl provides the best flooring value in the market, and our sales increased as our retail customers reopened.\nHigher production volumes positively impacted our cost and better leveraged our SG&A.\nOur Russian sheet vinyl plant performed well with higher utilization and margins.\nWe're adding another shift in the plant to satisfy our expanding business.\nWe completed the consolidation of our wood manufacturing operations in Malaysia and significantly reduced our cost.\nWe have improved our output, allowing us to satisfy increasing demand.\nWe are gradually lowering our material costs through our initiatives to vertically integrate.\nOur insulation products rebounded with increased volumes after our markets reopened.\nEven though our selling prices have declined, our margins remain strong as material costs were lower as well.\nOur raw material costs are now rising, and we have announced price increases to compensate.\nOur boards business benefited from strong demand, improved product mix and lower material prices.\nWe also reduced our cost with the investments we made in expanding our glue manufacturing and new energy plant.\nOur Australia and New Zealand business performed very well with strong sales growth, improved product margins and the success of our updated product offering.\nThe company is well positioned with its strong branding in both carpet and hard surface.\nWe entered the fourth quarter with improved sales and margin trends and have a solid order backlog across the enterprise.\nResidential remodeling and new home construction are forecasted to remain strong as the pandemic has transformed our living spaces into schools and offices and as participation in other activities has fallen.\nThe fourth quarter is slower for our industry due to normal seasonality, and we expect lower growth in channel inventory levels.\nOur higher-margin commercial channels will continue to be slow, with completed projects likely to outpace new starts.\nWe anticipate service improving with our inventories rising as production levels exceed sales.\nWe are implementing our restructuring plans and are on track to reduce costs as expected.\nOur visibility continues to be limited by many uncertainties, including how government restrictions and demand will evolve.\nAssuming the current economic trends continue, we anticipate our fourth quarter earnings per share to be $2.75 to $2.87 with a nonrecurring tax rate of approximately 5% for the period.\nOur business has responded effectively to the COVID crisis, changing government restrictions and varying market conditions.\nResidential remodeling and new construction are expected to improve next year.\nThe commercial business should increase from its present low levels as economies recover going forward.\nOur strong balance sheet, cash generation and liquidity will allow us to move from a defensive posture to a more aggressive growth strategy.\n",
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"content": "compname posts q3 adj earnings per share $3.26.\nq3 earnings per share $3.26 excluding items.\nq3 earnings per share $2.87.\nq3 sales $2.6 billion versus refinitiv ibes estimate of $2.49 billion.\nsees q4 earnings per share $2.75 to $2.87.\naudit committee completed internal investigation into allegations of wrong doing.\ncooperating fully with the ongoing governmental investigations.\naudit committee concluded the allegations are without merit.\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'll update you on the company's third quarter results.\nOur third quarter results exceeded our expectations as net sales rose 9% over the prior year to approximately $2.8 billion.\nOur adjusted earnings per share was $3.95 per share.\nAll of our businesses performed well, managing through a changing environment in a period COVID directly and indirectly impacted many economies, creating supply chain difficulties that disrupted production as well as leading the government lockdowns in Australia, New Zealand and Malaysia that halted manufacturing and retail.\nDespite these and other headwinds, our third quarter sales trends continued in most regions, with Europe's results reflecting more normal summer seasonality.\nHome sales were robust across most geographies and consumers continued remodeling investments at a strong pace.\nYear-over-year, the commercial sector showed improvement though at a slower rate as COVID concerns delayed the timing of some projects.\nOur strategy is to enhance organizational flexibility, reduce product and operational complexity and align pricing with cost improved our results in the period.\nWe continue to implement lean processes and reduce complexity in manufacturing and logistics.\nWe're managing our investments in SG&A to support new products that will expand our future revenues and margins.\nEven with greater external constraints, we ran most of our operations at high levels and we successfully managed many interruptions across the enterprise.\nRather than improving as we expected, the availability of labor, materials and transportation became more challenging, resulting in higher costs in the period.\nTight chemical supplies, in particular, reduced the output of our LVT, carpet, laminate and board panels.\nWhile we are presently seeing COVID cases declining in most of the regions, many of our operations experienced increased absenteeism during the period, affecting our efficiencies in production.\nFor the near term, we do not see any significant changes in these external pressures.\nDue to supply shortages, government regulations and political issues, natural gas costs in Europe are presently about 4 times as high than they were earlier in the year.\nThis has a temporary challenge to our European businesses as higher costs are reflected in gas, electricity and other materials.\nThough our inventories increased during the period, mostly due to higher material costs and transportation delays on customer orders, our service levels remained below historical norms.\nMost of our businesses are carrying significant order backlogs, and we plan to run our operations at high levels during the fourth quarter to improve our service and efficiencies.\nCurrently, some of our fastest-growing products are being limited by material and capacity constraints.\nWe have initiated additional investments to increase our production of those and increase our sales and service.\nCompletion of those projects is being extended due to longer lead times on building materials and equipment.\nOur results have improved significantly during 2021 and we generated over $1.9 billion of EBITDA for the trailing 12 months.\nGiven this in our current valuations, our Board increased our stock purchase program by an additional $500 million.\nSince the end of the second quarter, we bought approximately $250 million of our stock at an average price of $193 per share.\nWith our current low leverage, we have the capital to pursue additional investments and acquisitions to expand our sales and profitability.\nJim will now review our third quarter financials.\nSales for the quarter exceeded $2.8 billion and 9.4% increase as reported and 8.7% on a constant basis.\nAll segments showed growth, primarily due to price and mix actions as volume was generally constrained by supply, labor, transportation and COVID disruptions.\nGross margin, as reported, was 29.7% or 29.8% excluding charges, increasing from 28.3% last year.\nThe year-over-year increase was driven primarily by improved price and mix, which offset the increasing rate of inflation.\nIn addition, gains in productivity, less year-over-year downtime and favorable FX improved our margins.\nThe actual detailed amounts of these items will be included in the MD&A section of our 10-Q, which will be filed after the call.\nSG&A as reported was 16.9% and flat versus prior year, excluding charges.\nIncreased SG&A dollars versus prior year as a result of costs that were curtailed due to the COVID-19 pandemic, higher sales, increased inflation, new product development and price and mix.\nOperating margin as reported was 12.8%.\nRestructuring charges were approximately $1 million, and we have reached our original savings goal exceeding $100 million in annual savings.\nWe continue, though, to pursue other initiatives to lower our costs.\nOperating margins, excluding charges, were also 12.8%, improving from 11.5% in the prior year or 130 basis points.\nThe increase was driven by improved price and mix, offsetting increasing inflation as well as gains in productivity, favorable FX and greater year-over-year manufacturing uptime, improving our results.\nWe were partially offset by impact of constrained volume and increased cost in product development.\nInterest expense was $15 million in the quarter, flat versus prior year.\nOur non-GAAP tax rate was 21.4% versus 16.9% in the prior year, and we still expect the full year rate to be between 21.5% and 22.5%.\nEarnings per share as reported were $3.93, and excluding charges were 3.95% -- $3.95, excuse me, increasing by 21% versus prior year.\nNow turning to the segments.\nGlobal ceramic sales came in just under $1 billion, a 9.6% increase as reported or approximately 9.1% on a constant basis, led by strengthening price and mix across our geographic regions.\nBrazil, Mexico and the U.S. countertop business saw the strongest volume gains while other products performed well against a difficult year-over-year Q3 comparison, which had an abnormal seasonality.\nOperating margin excluding charges was 11.9%, up 160 basis points versus prior year due to the favorable price/mix offsetting increasing inflation, which improved -- with improved productivity and limited year-over-year shutdowns strengthening our results, partially offset by increased costs in new product development.\nFlooring North America sales just exceeded $1 billion, a 6.9% increase as reported.\nThe sales growth was driven by price and mix actions to offset rising costs as our sales volumes were impacted by supply, transportation and labor constraints.\nOperating margin excluding charges was 11.4%.\nThat's an increase of 320 basis points versus prior year.\nThe improvement was driven by positive price and mix offsetting the increasing inflation and volume constraints.\nIn addition, productivity gains and less temporary shutdowns favorably impacted our results.\nIn Flooring Rest of the World, sales exceeded $760 million, a 12.7% as reported increase or 10.5% on a constant basis, driven again by price and mix actions while volumes here were constrained by material disruptions, especially in LVT, a return to a normal summer seasonality and COVID restrictions, which caused lockdowns in Australia, New Zealand and Malaysia.\nOperating margin, excluding charges, was 17.4%.\nThis is a decrease versus prior year as a result of the return to a normal summer holiday, along with material constraints and COVID lockdowns which increased our costs and lower productivity, volume and increased the temporary shutdown.\nImproved price and mix, which offset the increase in inflation and favorable FX benefited our results.\nCorporate and eliminations were $11 million, and I would expect that to be $45 million for the full year.\nTaking a look at the balance sheet.\nCash for the quarter exceeded $1.1 billion with free cash flow of $351 million in the quarter and over $720 million in third quarter year-to-date.\nReceivables were just shy of $1.9 billion with a DSO of just under 57 days.\nInventories were just over $2.2 billion, an increase of approximately $374 million or 20% from the prior year.\nThat's an increase of about 16% if you compare to the year-end balance.\nInventory days just under 107 days compared to our low point last year at just under 100 days and 103 days at the year-end.\nProperty, plant and equipment exceeded $4.4 billion with capex for the quarter at $148 million, in line with our D&A.\nFull year capex is currently projected to be $650 million, with D&A projected at $586 million.\nLooking at the current debt.\nOne note on October 19, the company redeemed at par their January 2022 EUR500 million 2% senior notes plus unpaid interest, utilizing cash on hand.\nThe balance sheet overall and cash flow remained very strong with gross debt as of the end of Q3 of $2.3 billion and leverage at 0.6 times to adjusted EBITDA.\nFor the period, our Flooring Rest of World segment sales increased 12.7% as reported and 10.5% on a constant basis.\nOperating margins were 17.4% as a result of pricing and mix improvements, offset by inflation and a return to more normal seasonality in the period.\nDuring the quarter, sales were strong across our product categories and geographies outside those affected by government lockdowns.\nOverall, raw material supplies continue to impact our operations, with LVT production affected the most during the quarter.\nWe expect that material, energy and transportation inflation will continue and chemical costs that rely on gas will accelerate in upcoming periods.\nDuring the period, COVID shutdowns in Malaysia, Australia and New Zealand interrupted our production and sales.\nThese restrictions have now been lifted, and we are ramping up production to meet demand.\nOur laminate collections continue to have strong sales growth with consumers embracing our proprietary waterproof products for their performance and realistic visuals.\nOur new premium laminate introductions feature unique services that replicate handcrafted wood floors.\nOur sales volume increased during the period, though our margins were pressured by higher-than-anticipated raw material and transportation inflation.\nWe added new capacity in Europe to meet demand, and we are initiating other projects to support further sales growth.\nIn Russia and Brazil, our laminate businesses are growing as we expand distribution with our leading collections.\nAs anticipated, our LVT sales were lower during the period, given material shortages and lower production that reduced our output.\nWe minimized the impact by improving our product mix and raising prices to pass through inflation.\nSales of our higher-value rigid LVT collections with patented water-type joint outperformed and benefited our mix.\nWe anticipate improved material availability in the fourth quarter to support higher LVT production levels and improve our service.\nWe have announced additional price increases as our energy and material costs continue to rise.\nOur sheet vinyl production and sales were impacted by tight material supply and transportation bottlenecks and outbound shipments.\nOur Russian sheet vinyl business performed well with sales growing as our distribution expanded.\nOur wood plant in Malaysia resumed full operations in September after 12 weeks of government lockdowns due to COVID.\nSales of our wood products will be down in both the third and fourth quarters as our inventories have been depleted.\nWe have acquired a European wood veneer plant to improve supply, yields and cost of our wood flooring.\nWe're introducing waterproof wood collections with our patented Wet Protect Technology in our markets after its successful launch in the U.S. Production stops in Australia and New Zealand reduced our sales and margins, and we are scaling up our operations to meet demand as the markets reopen.\nOur new premium collections, enhanced merchandising and consumer advertising will benefit our business as the markets return to normal.\nWe are increasing pricing to offset inflation and transportation costs.\nSales of our European insulation panels grew in the period as we implemented another price increase to offset rising material inflation.\nOur income improved with disruptions in manufacturing due to tight material supplies.\nWe acquired an insulation manufacturer in Ireland and have begun integrating their operations with our existing business.\nDuring the third quarter, our panels business grew and margins expanded as we increased our price mix and pricing.\nWe're introducing a new decorative range to enhance our participation in specified markets.\nWe have added new press that will increase our capacity and add more differentiated features to our products.\nOur ongoing pricing actions offset rapidly rising material prices, and we will increase prices further in response to inflation.\nIn the fourth quarter, we will complete the acquisition of an MDF manufacturer in France to expand our capacity in Western Europe.\nThe company is a pioneer in bio-based resins, which will enhance our sustainability position.\nIn the third quarter period, our Flooring North America segment sales increased 6.9% and operating margins were 11.3% as reported as a result of productivity, pricing and mix improvements, partially offset by inflation.\nFlooring North America had strong results given the material, transportation and labor constraints impacting our sales and production during the period.\nSupplies of most oil-related chemicals were restricted, creating unscheduled production stops that lowered our sales and raised our costs.\nWe implemented additional price increases across most product categories as inflationary pressures intensified.\nWe continue to streamline our product portfolio and reduce operational complexity, benefiting our efficiencies and quality.\nIn residential carpet, limited material and labor availability are affecting our production and manufacturing costs.\nWe continue to increase prices to recover continued inflation.\nVolume and efficiencies are being negatively impacted by low inventories, shorter runs and labor challenges.\nWe are replacing older assets with more efficient equipment, which is improving our labor productivity.\nWe have an elevated backlog, and we plan to run our operations at high levels in the fourth quarter to improve service and replenish inventories.\nWe are enhancing our sales and mix as consumers upgrade their homes with our premium SmartStrand and luxury nylon collections.\nCommercial sales improved in the period, though the rate of growth has slowed as COVID cases increased.\nThe government, education and healthcare sectors outpaced office, retail and hospitality channels which are recovering more slowly.\nOur hard surface sales are growing as we expand our offering and increase specifications in commercial projects.\nWe are investing in more efficient assets to improve cost, enhance styling and reduce labor requirements.\nOur laminate and wood business continues to grow, though our sales were restricted by our capacities.\nOur new laminate line should be operational by the end of this year to expand our sales and provide more advanced features.\nChemical shortages limited our laminate production in the period as we responded by reengineering our formulations to maximize our output.\nWe are reducing complexities to simplify our operations and improve our efficiencies and production.\nOur new high-performance UltraWood collections are increasing our mix in wood and the productivity of our new plant is improving as volume increases.\nOur LVT sales increased in the period, even with material supplies limiting production and shipping days in our sourced products.\nWe have improved our mix with enhanced features and lowered our costs by streamlining our processes.\nOur plant has increased throughput and yields despite disruptions from a lack of material supply.\nTo support future growth, we are expanding our LVT operations adding approximately $160 million of production, with the initial phase beginning at the end of this year.\nWe are also increasing our sheet vinyl plant's production to satisfy expanding sales of our collections.\nIn the quarter, our Global Ceramic segment sales increased 9.6% as reported and 9.1% on a constant basis.\nOperating margins were 11.9% as a result of higher volume, productivity, pricing and mix improvements, partially offset by inflation.\nOur U.S. Ceramic business grew during the period with the residential sector remaining strong and commercial continuing to show improvement.\nOur margins improved in the quarter as we implemented price increases to offset higher transportation and raw material costs, enhanced our mix and increased output from our plants.\nAdditional pricing actions are being taken to offset continuing inflation.\nWe are reducing our manufacturing costs by reengineering our products, utilizing alternative materials and enhancing our logistics strategies.\nWe are introducing higher-value products with new printing technologies, textured finishes and polished services to provide alternatives to premium imported tile.\nWe are growing our studio direct program that focuses on high-end remodeling and exterior collections that sell-through outdoor specialists and home centers.\nOur quartz countertop sales continue to grow substantially as our production recovered during the period.\nOur countertop mix is improving as sales of our higher-end visuals grow at a faster rate.\nOur Mexican and Brazilian ceramic businesses are growing as we increased prices to offset inflation in both countries.\nWe are refining our product offering, improving our efficiencies and increasing our output.\nWe have expanded our participation in residential projects and commercial sales.\nWe are increasing the number of retailers that exclusively sell our products.\nWe are investing in new manufacturing assets in both countries to expand our production and enhance our product offering.\nSales in our European ceramic business remained strong as vacation schedules return to normal.\nIncreases in price, mix and productivity enhanced our results, though they were more than offset by rising inflation.\nOur new products with enhanced visuals, unique shapes and large slabs increased our average selling price and improved our mix.\nWe are upgrading production lines to further enhance our styling and improve our efficiencies.\nIn the period, natural gas and electricity prices in Europe rose to unprecedented levels due to anticipated shortages.\nOur margins will be negatively impacted until our prices align with energy cost in the future.\nSales and margins increased in our Russian ceramic business as enhanced mix and increased prices offset higher inflation.\nLower inventories and capacity limitations impacted our sales volume in the period, and we will continue to manage our mix until new capacity is operational.\nDue to an equipment delay, our production expansion will not be ready until the third quarter of next year.\nOur sanitary ware sales are growing significantly as we expand production and operate -- and our operations.\nThroughout 2021, Mohawk has delivered exceptional results with higher sales growth, margin expansion and robust cash generation.\nFor the fourth quarter, we anticipate that industry seasonality will be more typical unlike last year when demand was unusually high.\nIn the period, we'll run our operations at high levels to support our sales, improve our service and increase our inventory.\nOur sales in some categories are being limited by our manufacturing capacities, and we're increasing investments to expand the production of these growing categories.\nWe are continuing to implement additional price increases and manage staffing, supply and transportation constraints across the business.\nWe're maintaining aggressive cost management, leveraging technology and enhancing our strategies across the enterprise.\nIn Ceramic Europe, record gas prices are increasing the net cost by approximately $25 million in the fourth quarter, and it will take some time for the industry to adjust to the higher cost.\nIn addition, our fourth quarter calendar has 6% fewer days than the prior year.\nGiven these factors, we anticipate our fourth quarter adjusted earnings per share to be $2.80 to $2.90, excluding any restructuring charges.\nDespite temporary challenges from inflation and material availability, our long-term outlook remains optimistic with new home construction and residential remodeling projected to remain robust, and the commercial sector improving as businesses invest and grow.\nNext year, our sales should grow with capacity expansions and new innovative product introductions.\nOur strategies to optimize our results continue to evolve with the economic and supply chain conditions.\nOur balance sheet is the strongest in history and it supports increased internal investments and strategic acquisitions.\n",
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"content": "q3 earnings per share $3.95 excluding items.\nsees q4 adjusted earnings per share $2.80 to $2.90 excluding items.\nq3 earnings per share $3.93.\nq3 sales rose 9.4 percent to $2.8 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: Today, we'll update you on the Company's fourth quarter results.\nJim has been our Corporate Controller since 2009 and was recently announced as my successor.\nFirst, I want to congratulate Jim on his new position.\nI've worked with him for more than 10 years and look forward to Jim further enhancing our business strategies and results in his new role.\nWe had a very strong first[Phonetic] quarter and delivered record sales of $2.6 billion, an increase of 9% as reported, with adjusted operating earnings and earnings per share of $305 million and $3.54.\nThe business was stronger than we had anticipated with residential markets outperforming around the globe.\nOur free cash flow for the fourth quarter was about $248 million after capital investments of $160 million.\nFor the year, we generated a record cash flow of more than $1.3 billion.\nIn the first half of last year, our industry was under enormous stress as the pandemic spread, and we responded to this disruption by minimizing costs, lowering inventory levels, initiating restructuring actions, and reinforcing our liquidity.\nIn the second half, the residential flooring demand recovered significantly faster than expected, as people spent more time at home.\nMeanwhile, commercial flooring demand remains depressed due to business investments being postponed or canceled.\nOur inventory levels decreased in the second and third periods as sales strengthened and production was limited by capacity, workforce absenteeism and labor shortages.\nSG&A investments and promotional activities were curtailed during the year to improve our margins.\nThe pandemic created substantial differences between our segments due to varying restrictions, stimulus, consumer responses and our ability to raise production levels.\nOur revenues and operating income rebounded and surpassed the prior year for both the fourth quarter and the second half.\nOur fourth quarter results exceeded our expectations as we posted our highest-ever quarterly sales, even with increasing COVID cases around the world.\nAll of our markets saw strengthening residential purchases with laminate, LVT and sheet vinyl outperforming other flooring categories.\nOur residential performance was partially offset by a weak commercial market in the regions where we have more significant business in that channel.\nOur results were improved by higher volumes, restructuring and greater leverage on costs while being adversely affected by lower production runs and inventory, absenteeism and labor shortages in some operations.\nWe are also seeing greater inflationary pressures in many product categories, and we are increasing prices to recover.\nOur Flooring Rest of the World segment continued to outperform with significant sales growth, higher operating leverage and improved productivity.\nThe segment delivered further improvements in LVT production and cost, which enhanced our performance in the period.\nOur Global Ceramic and Flooring North America segments also improved, although both experienced a greater impact from commercial headwinds.\nThrough the fourth quarter, we achieved about $50 million of the projected $100 million to $110 million in anticipated savings from our restructuring initiatives.\nWe continue to assess some projects based on changing market conditions.\nAfter paying off our short-term debt and pre-funding our longer-term maturities in the second quarter, our net debt leverage is at historical low.\nOur strong financial position gives us flexibility to pursue additional opportunities, including internal investments, acquisitions and stock purchases.\nSince the third quarter, we've acquired approximately 1 million shares of our stock for $130 million as part of our share repurchase plan.\nAs the pandemic began, our organization has been protecting one another and supporting our customers around the world.\nWe are mitigating the spread of COVID utilizing best practices while testing and tracking employees with potential contacts.\nI would like to add that I am both honored and excited about the opportunity to lead Mohawk's very talented global finance team.\nNow let's review our financial performance for Q4 2020.\nSales exceeded $2.6 billion for the quarter, a 9% increase as reported or 5.5% on a constant basis, with our Flooring Rest of World segment outperforming.\nQ4 had two additional shipping days in most businesses.\nAnd as you consider 2021's financial projections, please remember to take into account the following items.\nAcross most of our businesses, Q1 has three additional days or approximately 5% more, and Q4 has four fewer days or approximately 6% less compared to prior year.\nThis year sales should continue higher growth and full-year operating margin should improve.\nOur Q2 comps were very low and the second half comps are more difficult with the rebound that occurred last year.\nAlso last year, in Q3 and Q4, there was less time off for holidays for our customers and us.\nTime off should be greater this year.\nNow coming back to the P&L.\nGross margin was 27.9% as reported or 28.8% excluding charges, increasing 120 basis points from 27.6% in the prior year.\nThe year-over-year increase was driven primarily by higher volume of $51 million, productivity of $50 million, and lower inflation of $21 million, partially offset by price/mix of $30 million.\nSG&A as reported was 17.2% or 17.3% versus 19.1% in the prior year, both excluding charges.\nThe lower SG&A percent was driven by improved leverage on increased volume and stronger productivity of $21 million.\nOperating income as reported was 10.7%.\nRestructuring charges for the quarter were $22 million and our restructuring initiatives are on track with year-to-date savings accounting for approximately $50 million of our announced $100 million to $110 million plan.\nOperating margin, excluding charges, $305 million or 11.6%, improving from 8.4% last year or 320 basis points.\nThis increase was driven by productivity of $71 million, stronger volume of $42 million, and reduced inflation of $12 million, partially offset by the previously noted unfavorable price/mix of $30 million.\nInterest expense of $16 million, including the impact of our new 2020 bond offerings, and we expect Q1 to be approximately $16 million to $16.5 million.\nOther income of $7 million driven by favorable transactional FX and short-term investment returns.\nOur Q4 non-tax -- non-GAAP tax rate at 14.8% versus 18.9% in the prior year, benefiting in part from the U.S. CARES Act.\nWe expect Q1 2021 to be approximately 21%.\nEarnings per share as reported of $3.49 or excluding charges of $3.54, growing 57% year-over-year.\nNow turning to the segments.\nGlobal Ceramic had sales of $920 million, a 7% increase as reported with the business up 6% on a constant basis, with growth across all geographies, the largest increase being in Brazil and Russia.\nOperating income, excluding charges, of $88 million, a 9.5% return.\nThat's up 65% or 330 basis points versus prior year.\nThe increase was from productivity of $28 million, volume of $16 million, and lower shutdown expense of $4 million, partially offset by unfavorable price/mix of $12 million and unfavorable FX of $4 million.\nFlooring North American sales of $963 million or 3% increase as reported were flat on a constant basis, led by strength in our residential-focused products, offset by the weakness in the commercial channel.\nOperating income, excluding charges, of $91 million or 9.5%.\nThat's an increase of 27% or 180 basis points compared to prior year.\nThis increase was driven by higher productivity of $26 million, lower inflation of $7 million, and increased volume of $3 million, partially offset by price/mix of $18 million.\nAnd Flooring Rest of the World with sales of $759 million, a 20% increase as reported or 13% on a constant basis, driven by our resilient, laminate and panels businesses in Europe and our carpet business in Australia and New Zealand.\nOperating income, excluding charges, of $138 million or 18.2%, up 420 basis points or 57% versus prior year.\nThe main drivers were the higher volume of $23 million, improved productivity of $16 million, and lower inflation of $8 million, partially offset by unfavorable FX of approximately $4 million.\nCorporate and eliminations came in at $12 million and you would expect 2021 to be approximately $40 million.\nTurning to the balance sheet.\nCash and short-term investments increased over $1.3 billion, driven by the Q4 free cash flow of $248 million, bringing the full-year 2020 -- full-year cash flow -- free cash flow to approximately $1.3 billion.\nReceivables were just over $1.7 billion with DSO improving to 59 days versus the prior year 62 days.\nInventories just over $1.9 billion, dropped almost $400 million or 16% from prior year with a marginal sequential increase of approximately $30 million adjusting for FX from Q3.\nInventory days are at 103 days versus 134 days in the prior year.\nProperty, plant and equipment just under $4.6 billion with capex of $116 million for the quarter, in line with our D&A.\nAnd full-year capex was $426 million with D&A of just over $600 million.\nWe estimate that 2021 annual capex to be in line with our D&A of approximately $590 million.\nAnd lastly, the balance sheet and cash flow remained very strong with gross debt of just over $2.7 billion, total cash and short-term investments, as previously noted, over $1.3 billion, leading us to a leverage of 1 time adjusted EBITDA.\nSales for our Flooring Rest of World segment increased 20% in the period as reported or 13% on a constant basis, significantly exceeding our forecast.\nMargins expanded over last year to 17.5% as reported or 18.2% excluding restructuring charges, due to higher volume and positive leverage on SG&A and operations, partially offset by currency headwinds.\nSales and margins were strong in most categories and geographies, with most of our plants operating near capacity in the fourth quarter.\nRaw material costs began to rise in many of our product categories and we were taking pricing actions to respond to the increases.\nLaminate, the segment's largest flooring category, delivered significant growth in the period across most of our markets.\nOur margins increased as higher volumes drove greater absorption of manufacturing and SG&A costs while increased productivity and better throughput enhanced our results.\nWe continue to focus on our premium collections that feature superior visuals and waterproof technology.\nOur service levels showed improvement during the period though they remain below our standards.\nTo satisfy higher demand for existing products, we chose to postpone introductions of our next-generation laminate collections in most markets.\nOur LVT sales increased substantially in the quarter, led by accelerated growth of our rigid collections.\nBoth our LVT margins and profitability improved, due to increased volume, lower production costs and SG&A absorption.\nWe have increased staffing to operate all LVT line seven days per week.\nWe are introducing new collections with enhanced visuals and exclusive water-tight joints that better prevent water damage.\nWe are implementing price increases in our LVT collections to compensate for rising material costs.\nOur sheet vinyl business rebounded as our retailers reopened their shops and our export markets picked up.\nOur plants ran at high production levels that reduced our operating cost, though unfavorable currency partially offset.\nAll of our European sheet vinyl plants were running near capacity and we've announced price increases.\nOur greenfield Russian sheet vinyl plant's volume has grown to a level that its margins are in line with our other businesses.\nWe have completed the consolidation of our wood operations in Malaysia.\nDuring the period, our production was impacted by equipment installation and transportation challenges due to COVID.\nThe equipment from our closed European plant has now been installed and we are improving our throughput and wood sourcing strategies.\nOur wood panels performed well in the period, with sales limited by our capacity and low inventories.\nOur productivity improved in the quarter, increasing our volume and throughput.\nDemand for our customized mezzanine floors is growing, as greater e-commerce sales have increased the need for warehouse space.\nTo cover rising material costs for our wood panels, we're also implementing price increases.\nProduct mix continues to improve due to a higher share of stylized products, due to sales investments to increase project specifications.\nWe are expanding our capacity in melamine products to further improve our margins.\nIn insulation, volume was good, though our margins were impacted by significant material inflation due to supply constraints.\nWe have implemented a price increase and have announced another to keep pace with the rising costs.\nDemand for the category remained strong, enhanced by government incentives for energy savings.\nSales in Australia and New Zealand were strong in the fourth quarter and margins improved with higher volume and lower material costs from our longer supply chain.\nWe enhanced our market position with more aggressive sales initiatives and by providing more consistent service under difficult circumstances.\nWe have leveraged our relationship with carpet retailers to expand sales of our hard surface products.\nOur results are benefiting from upgrades to our carpet and hard surface offering, manufacturing assets, and distribution capabilities that we've implemented since we acquired Godfrey Hirst.\nFor the quarter, our Global Ceramic segment sales rose 7% as reported with improved results across the world, led by growth in the residential channel from heightened remodeling and home sales.\nOperating margins for the segment expanded to 8.7% as reported or 9.5% excluding restructuring costs, due to higher volume and improved productivity somewhat reduced by commercial product mix and currency.\nOur Brazilian and Mexican businesses delivered record quarterly sales and expanded margins, even with inflationary headwinds.\nManufacturing constraints and low inventories limited growth in most of our regions.\nMaterial, energy and transportation costs are rising, and we are increasing prices in most markets to offset these pressures.\nOur U.S. ceramic business delivered strong residential sales growth while commercial remained challenged as businesses defer investments.\nOur service centers are experiencing improved customer traffic due to higher home sales and remodeling activity.\nThe home center channel outperformed with increased demand and inventory replenishments.\nTo provide additional features and benefits, we are expanding our higher value collections with high gloss polished tiles, antimicrobial treatments, and matching floor and wall combinations.\nWe have announced price increases across most of our collections to pass through higher transportation costs.\nOur ceramic plant productivity and cost improved during the period, due to higher volumes and continued process improvements.\nOur restructuring initiatives are progressing and we should complete our ceramic plant consolidations by the end of the first quarter.\nOur countertop business is increasing substantially with sales of our quartz products growing significantly.\nOur quartz countertop production, cost and margins continue to improve our results and we are increasing our mix with higher value stylized products.\nOur Mexican ceramic business delivered its best quarterly sales and performance, even with capacity constraints.\nOur margins improved with higher productivity, partially reduced by inflation and product mix.\nOur inventories declined and our backlog remained high as we ended the period.\nOur customers have opened 30 exclusive Dal-Tile stores in the country, which will enhance our sales and strengthen our brand.\nTo cover rising inflation, we have announced price increases.\nBrazil also delivered record sales in the period with all channels performing well.\nOur margins improved due to increased volume and productivity, partially offset by inflation and product mix.\nOur Brazilian plants are operating at capacity and have been allocating production to customers.\nOur backlog remains high and we are increasing price to recover inflation.\nWe are investing to further upgrade our manufacturing assets this year.\nFor the quarter, our European ceramic sales and profitability were above last year.\nSome Southern European economies were more affected by COVID and have remained softer than other regions.\nOur residential sales were stronger, with more competitive pricing and lower commercial sales negatively impacting our product mix and margins.\nWe are launching differentiated collections to improve our mix with small sizes, large porcelain slabs, outdoor products, and enhanced design technology.\nIn the period, our service levels improved with the plants operating at higher rates, though inventories remained low due to higher demand.\nOur Russian ceramic business delivered strong results during the period, even with inflation and currency headwinds.\nSales rose significantly in all channels, led by new residential construction, which benefited from historically low interest rates.\nTo meet higher demand, we ran more production by limiting holiday shutdowns.\nWe are successfully ramping up our new premium sanitaryware manufacturing and will expand it further this year.\nThe sanitaryware complements our ceramic tile collections and will enhance our product offering in our owned and franchised stores.\nFor the period, our Flooring North America sales increased 3% as reported, and our adjusted margins expanded 8.6% as reported or 9.5% excluding restructuring costs.\nWe had strong growth in the residential channel, offset by lower commercial, which improved from its low base in prior periods.\nOur service levels improved as we increased production in the period, though high demand required allocating some products.\nDue to higher demand and COVID disruptions in our plants, our inventories did not grow as we anticipated.\nTo improve our margin and mix, we're launching many innovative products that address the needs of families spending more time at home.\nWe are taking pricing action in most products due to rising material, labor and transportation costs.\nWe have executed a large part of our restructuring initiatives, which is benefiting our results, with some of the savings flowing through inventory in future periods.\nSome of our operations were inhibited by increased absenteeism and labor shortages due to COVID, and we anticipate higher production levels will improve our service and our inventory positions.\nOur residential carpet sales grew during the period as comfort and noise reduction have become more important to consumers.\nThe demand for residential carpet is strong, and our sales momentum should be solid.\nWe have taken many actions to improve our productivity, including rationalizing our product offering and reducing our operational complexities.\nOur restructuring actions have lowered our overhead and improved our cost and yields.\nOur new carpet collections will provide improved margins while offering superior styling, features and value.\nWe are introducing SmartStrand collections with a new patented hypoallergenic packing, making installation faster and recycling easier.\nWe're adding new pattern technologies and expanding our unique Continuum polyester collections made from recycled bottles.\nWe've announced price increases due to increasing inflation in materials, labor and transportation.\nOur commercial business has improved from its bottom, but remains depressed along with their retail, hospitality, office and aviation sectors.\nOur commercial hard surface sales are outperforming carpet, and we have improved our online tools to make it easier for designers to select and customize our products.\nWe are managing our cost structures, which have been deleveraged by lower volume, and we have announced price increases across our product offering.\nOur laminate business is growing substantially in all channels as our unique visuals and waterproof technology have become desirable alternatives to both natural wood and LVT.\nOur plants are running at capacity to meet the exceptional demand, and we're supplementing domestic production with laminate sourced from our worldwide operations.\nWe have executed numerous process enhancements to increase our laminate and board production, and by the end of the year, a new line should be operational with additional capabilities.\nWe announced a price increase on our laminate collections because of rising cost.\nWe have repurposed a plant in Virginia to manufacturer a premium wood flooring collection that has been in development for four years.\nApplying our exclusive technologies, we created a truly waterproof wood flooring with dramatically improved scratch, dent and wear resistance for today's active households.\nWe've also updated our other wood collections to align with evolving market trends.\nSales of both our LVT and sheet vinyl improved substantially during the period, supported by strength in new housing starts and residential remodeling.\nWe have multiple engineers from our European business working in our U.S. operations to implement demonstrated improvements to increase output, reduce material cost, and enhance product visuals and performance.\nWe're introducing updated residential and commercial products with our new water-tight technology that will improve our mix and margins.\nAs in other categories, we've announced price increases due to rising material and transportation costs.\nOur fourth quarter sales and operating performance were much stronger than we had anticipated.\nWe ran our plants around the world at high levels during the period, but fell short of the inventory build we anticipated.\nOur operations are taking actions to optimize throughput and reach our desired service levels.\nGiven present trends, the momentum of our residential business should remain strong, while commercial should slowly improve from its trough.\nWe will benefit from structural improvements in our costs and innovative new products that will enhance our mix.\nMost of our COVID -- most of the COVID restrictions around the world have not directly impacted the sales or installation of our products.\nContinued government subsidies and low interest rates should support economic recoveries, new home construction and residential remodeling.\nWe see increasing inflation in most of our product categories and are raising prices in response.\nAssuming current conditions continue, we anticipate our first quarter adjusted earnings per share to be between $2.69 and $2.79, excluding restructuring charges.\nThe strength of our organization was demonstrated by our management of last year's historic decline in sales and the subsequent spike in demand while protecting our employees and customers.\nOur strategies and initiatives remain flexible to adapt to changing economic conditions.\nWith improving sales and cash flows and a strong balance sheet, we are well positioned to take advantage of future opportunities.\n",
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"content": "q4 earnings per share $3.54 excluding items.\nq4 sales $2.6 billion versus refinitiv ibes estimate of $2.49 billion.\nsees q1 adjusted earnings per share $2.69 to $2.79 excluding items.\nq4 earnings per share $3.49.\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 is Bob Schottenstein, our CEO and President; Tom Mason, EVP; Derek Klutch, President of our Mortgage Company; Ann Marie Hunker, VP, Corporate Controller; and Kevin Hake, Senior VP.\nWe had an outstanding first quarter, perhaps the best quarter in company history.\nSetting records on many fronts, including new contracts, deliveries, revenues, and pre-tax income.\nHousing conditions in all of our markets are very strong.\nThe robust demand for new housing is being driven by a number of factors including low mortgage rates, historically low inventory levels, a rapidly growing number of millennials joining the ranks of home ownership, and the shift in buyer preference away from renting in favor of single-family homes.\nIn addition, the quality of buyers is in as good a shape as we've ever seen.\nOur average buyer is putting more than 15% down and has a credit score in excess of 740.\nTaken together, all of these factors have created an excellent environment for new home sales that has contributed to our record setting performance.\nWe are proud of our results as we continue to gain market share and improve our profitability throughout every one of our 15 markets.\nDuring the quarter we sold an all-time quarterly record of 3,109 homes, 49% better than a year ago.\nOur absorption pace per community improved significantly to 5.3 sales per community compared to 3.1 sales per community a year ago.\nAnd we continue to experience very strong results with our Smart Series, which represents our most affordably priced line of homes.\nSmart Series sales comprised nearly 35% of total companywide sales during the quarter compared to 30% a year ago and just 16% in 2019.\nWe are selling our Smart Series product in all 15 of our divisions and in roughly one-third of our communities.\nAs we've shared before on average our Smart Series communities are larger with more lots and our Smart Series homes produce better monthly sales pace, higher gross margins, faster cycle time, and overall better returns.\nHomes delivered during the quarter increased 35% and were a first quarter record.\nRevenues increased 43% and also represented a first quarter record.\nGross margins improved by 420 basis points to 24.4% and our overhead expense ratio improved by 120 basis points.\nAs a result, our pre-tax income was an all-time quarterly record of $110 million, 167% better than a year ago with a pre-tax income percentage of 13.3% compared to 7.2% last year.\nThese strong returns resulted in a 25% return on equity improving from the 22% full year return on equity we had in 2020.\nOur first quarter results continued our trend of strong growth in both revenues and earnings.\nSpecifically, since 2013 our revenues have grown at a compounded annual rate of 19% and our pre-tax income has grown at an even more impressive annual rate of 43%.\nCompanywide, our backlog sales value at the end of the quarter was a record $2.4 billion, 82% better the last year.\nAnd our units in backlog increased by 68% to an all-time record 5,479 homes, with an average price in backlog of $433,000, nearly 10% higher than the average price in backlog last year at this time.\nAs I indicated earlier, all 15 of our homebuilding divisions contributed significantly to our first quarter performance.\nAnd as you'll soon hear, our financial services, mortgage and title operations also had a record quarter, highlighted by strong income and excellent mortgage capture rate and very solid across the board execution.\nNow, I will provide a few brief comments on our markets.\nWe divide our 15 markets into two regions.\nThe Northern region consists of six of our markets, namely Columbus, Cincinnati, Indianapolis, Chicago, Minneapolis and Detroit.\nWhile the Southern region consists of the remaining nine markets, Charlotte and Raleigh, Orlando, Tampa and Sarasota, and Houston, Dallas, Austin and San Antonio.\nNew contracts in the Southern region increased 46% during the quarter.\nIn the Northern region, new contracts increased 53% during the quarter.\nOur deliveries increased 34% in the Southern region during the quarter to 1,218 deliveries or 60% of the total.\nThe Northern region contributed the balance 801 deliveries, an increase of 36% over last year.\nOur owned and controlled lot position in the Southern region increased by 35% compared to last year and increased by 8% in the Northern region compared to last year.\nWhile we are selling through communities somewhat faster than expected, we are very well positioned to handle the current level of demand.\n35% of our owned and controlled lots are in our Northern region, while the balance roughly 65% are located in the Southern region.\nWe have a strong land position.\nCompanywide we own approximately 16,800 lots, which is roughly -- slightly less than a two-year supply.\nOn top of that, we control via option contracts an additional 2500 lots.\nSo, in total, our owned and controlled lots approximate 42,000 single-family lots, which is just under a five-year supply.\nImportantly and worth noting, 60% of those lots of controlled under option contracts, which gives M/I Homes significant flexibility to react to changes in demand or individual or unexpected market conditions.\nWe had 100 communities in the Southern region at the end of the quarter, which is down from 125 a year ago.\nIn the Northern region, we had 87 communities at the end of the quarter, which is down 11% from the 98 we had last year at this time.\nClearly, this decline in community count is a result of our accelerated sales pace, but it's also important to recognize that over one-third of our communities are now are offering our Smart Series homes and that these communities often have more lots in total, but they also produce a greater sales pace.\nWe are managing our sales pace as well as our pricing in our communities to take advantage of the strong demand and to assure delivery of a high return on our investment.\nOur financial condition is very strong with $1.4 billion of equity at the end of the quarter and the book value of $46.37 per share.\nWe ended the first quarter with a cash balance of $293 million and zero borrowings under our $500 million unsecured revolving credit facility.\nThis resulted in a 32% debt to cap ratio, down from 39% a year ago and a net debt to cap ratio of 21%.\nWe are very excited about our business.\nOur financial condition has never been better.\nWe have important operating momentum throughout the company.\nAnd the quality of our product along with the quality of our communities and our land position positions us for continued growth, continued gains in market share and strong results.\nWe fully expect to have an outstanding year in 2021.\nAs far as our financial results, new contracts for the first quarter increased 49% to 3,109, an all-time quarterly record compared to last year's first quarter 2,089.\nOur new contracts were up 68% in January, up 21% in February and up 64% in March and our sales pace was 5.3 for the first quarter compared to last year's 3.1.\nAnd our cancellation rate for the first quarter was 7%.\nAnd as Bob stated, we continue to manage sales pace and returns in our communities closely.\nAs to our buyer profile, about 56% of our first quarter sales were to first time buyers compared to 53% in the fourth quarter of last year.\nIn addition, 43% of our first quarter sales were inventory homes, the same as 2020's fourth quarter.\nOur community count was 187 at the end of the first quarter compared to 223 at the end of 2020's first quarter.\nThe breakdown by region is 87 in the Northern region and 100 in the Southern region.\nDuring the quarter, we opened 21 new communities, while closing 36.\nAnd last year's first quarter, we opened 17 new communities.\nWe delivered a first quarter record of 2,019 homes, delivering 46% of our backlog compared to 56% a year ago.\nProduction cycle times are being lengthened by supply issues.\nRevenue increased 43% in the first quarter, reaching the first quarter record of $829 million and our average closing price for the first quarter was $395,000, a 6% increase when compared to last year's first quarter average closing price of $374,000 and our backlog average sale price is $433,000, up from $399,000 a year ago and our backlog average sales price of our Smart Series is $335,000.\nOur first quarter gross margin was 24.4%, up 420 basis points year-over-year.\nOur construction and land development costs continue to increase with our biggest impact from lumber.\nOur first quarter SG&A expenses were 11% of revenue, improving a 120 basis points compared to 12.2% a year ago, reflecting greater operating leverage.\nInterest expense decreased $3.5 million for the quarter compared to the same period last year and interest incurred for the quarter was $10.2 million compared to $11.9 million a year ago and the decrease is due to lower outstanding borrowings in this year's first quarter as well as a lower weighted average borrowing rate.\nWe are pleased with our improved returns for the first quarter.\nOur pre-tax income was 13.3% versus 7.2% a year ago and our return on equity was 25% versus 15% a year ago.\nDuring the quarter, we generated $125 million of EBITDA compared to $59 million in last year's first quarter and we generated $75 million of positive cash flow from operations in the first quarter compared to using $24 million a year ago.\nWe have $22 million in capitalized interest on our balance sheet, about 1% of our total assets and our effective tax rate was 23% in this year's first quarter, the same as last year's first quarter.\nAnd we estimate our annual effective rate this year to be around 24%.\nAnd our earnings per diluted share for the quarter increased to $2.85 per share from $1.09 per share last year.\nNow, Derek Klutch will address our mortgage company results.\nOur mortgage and title operations achieved record first quarter results in pre-tax income, revenue and number of loans originated.\nRevenue was up 120% to $29.6 million due to a higher volume of loans closed and sold, along with higher pricing margins than we experienced last year.\nFor the quarter, pre-tax income was $19.7 million, which was up 250% over 2020's first quarter.\nThe loan to value on our first mortgages for the quarter was 84%, same as 2020's first quarter.\n78% of the loans closed in the quarter were conventional and 22% FHA or VA.\nThis compared to 72% and 28%, respectively, for 2020's first quarter.\nOur average mortgage amount increased to $328,000 compared to $306,000 last year.\nLoans originated increased to a first quarter record of 1,575 loans, 39% more than last year.\nAnd the volume of loans sold increased by 50%.\nOur borrower profile remains solid with an average down payment of over 15% and an average credit score on mortgages originated by M/I Financial of 746, up from 745 last quarter.\nOur mortgage operation captured over 84% of our business in the first quarter, which was in line with 85% last year.\nWe maintain two separate mortgage warehouse facilities with combined availability of $215 million that provide us with funding for our mortgage originations prior to the sale to investors.\nAt March 31, we had a total of $176 million outstanding under these facilities which expire in May and October of this year.\nBoth facilities are typical 364-day mortgage warehouse lines that we extend annually.\nWe have requested an extension of the Warehouse agreement that expires in May and we expect the banks to approve the extension shortly with closing anticipated prior to expiration.\nAs far as the balance sheet, our total homebuilding inventory at March, 31 was $2 billion, an increase of $138 million from March 31, '20.\nOur unsold land investment at March 31 of this year is $742 million compared to $809 million a year ago.\nAt March 31, we had $426 million of raw land and land under development and $316 million of finished unsold lots.\nWe owned 4,227 unsold finished lots with an average cost of $75,000 per lot and this average lot cost is 17% of our $433,000 backlog average sale price.\nOur goal is to own a two to three-year supply of land.\nDuring this year's first quarter, we spent $92 million on land purchases and $71 million on land development for a total of $163 million, which was up from $138 million in last year's first quarter.\nAnd in the first quarter of this year, we purchased 2,500 lots of which 75% were raw.\nIn last year's first quarter, we purchased 1,800 lots of which 70% were raw.\nIn general, most of our Smart Series communities are raw land deals and have above average company pace and margin.\nWe have a strong land position at March 31, controlling 42,000 lots, up 24% from a year ago, and of the lots controlled, 40% are owned about a five-year supply.\nAnd at the end of the quarter, we had 98 completed inventory homes and 708 total inventory homes and of the total inventory 423 homes are in the Northern region and 285 are in the Southern region.\nAt March 31 last year, we had 556 completed inventory homes and 1,322 total inventory homes.\nWe'll now open the call for any questions or comments.\n",
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"content": "q1 earnings per share $2.85.\nquarterly revenue increased 43% to $828.8 million.\nhomes in backlog at march 31, 2021 had total sales value of $2.4 billion, 82% increase from a year ago.\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 is Bob Schottenstein, our CEO and President Derek Klutch, President of our Mortgage Company Ann Marie Hunker, VP Chief Accounting Officer.\nand Kevin Hake, Senior VP.\nFirst to address regulation fair disclosure.\nWe had a record setting second quarter highlighted by a 97% increase in net income, a 23% increase in homes delivered a 35% increase in revenue, and a return on equity of 27%.\nAll of this is a result of a high level of performance across all 15 of our housing operations, as well as from our mortgage and title business.\nMore our margins for the quarter were very strong.\nDespite significant cost pressures.\nOur gross margins improved by 320 basis points over last year, and improved sequentially by 70 basis points from the first quarter to a second quarter level of 25.1%.\nOur overhead expense ratio improved by 110 basis points from a year ago to 10.4% of revenues, reflecting greater operating leverage.\nAnd most importantly, our pre tax income percentage improved significantly to 14.7% versus 10% a year ago.\nRecord second quarter results continue our trend of strong growth in both revenues and earnings that we have achieved over the past decade.\nSince 2013, our revenues have grown at a compounded annual rate of 19%.\nAnd our pre tax income has grown at an even more impressive annual rate of 43%.\nDemand for new homes continues to be very good.\nAnd as reflected in our year to date new contracts increasing by 24%.\nAnd our record set second quarter new contracts just slightly better than a year ago, with 2267 homes sold during the quarter.\nWe achieved record second quarter sales notwithstanding that we are operating in nearly 20% fewer communities than a year ago.\nAnd we are intentionally limiting sales and majority of our communities to control margins and better manage delivery times.\nGiven the drop in our community count and the difficult sales comps posed by this quarter in particularly the next quarter the third quarter, I wanted to provide a little more color on our sales results.\nLast year was to say the least a most unusual year for our industry.\nNo one could have predicted how our economy would fare when faced with one of the worst health crisis of our time.\nKnowing what we know now, it is clear that comparisons between 2021 and 2020 need to be viewed carefully.\nOur second quarter sales comps more quick, were clearly more challenging due to the unusually strong sales pace, which began in May and June of last year, as our industry as a whole experienced a dramatic rebound in sales after the extreme initial COVID related sales.\nslowed down in March and April of last year.\nFor EMI homes, we sold 31% more homes and last year second quarter, aided by the strength of last May in June.\nThe increased sales pace continued and even got better.\nAs you all recall, as we moved into last year's third quarter, where our sales grew by 71% over 2019.\nIt was in the late stages of last year, third quarter and frankly, in all of the fourth quarter of last year, when we first began to limit sales in many of our communities.\nAnd of course, we were raising our prices to try and meet the market demand.\nDespite these efforts, we began to sell out of communities much faster than expected.\nOn top of that, new community openings within our industry occurred slower than expected, due in part to delays in the governmental approval and inspection process, largely because of COVID related work from home protocols.\nThus, a greater than anticipated drop in our community count.\nLooking ahead, we are very well positioned to grow our communities.\nWe expect to open more new communities in the second half of this year than we did in the first half.\nAnd importantly, we expect to open a record number of new communities in both the first half of 2022 and the second half of 2022.\nAll in support of our growth goals.\nFinally, let me just say that our slowdown or decline in order growth is not indicative of demand.\nThese are perhaps the best housing conditions.\nWe've seen, considering demand, buyer demographics and buyer sentiment, and the very strong credit credit quality of our buyers.\nWe will continue to manage or limit sales in many of our communities on a go forward basis in order to control deliveries and maximize margins.\nAnd today we've seen little if any evidence of pushback on price on all of our product lines from attached townhomes to our diverse single family lineup of homes, as well as our homes geared to empty nesters have performed at or above expectations.\nSpeaking of our product line, our smart series, which represents our most affordable line of homes, continues to perform at a very high level.\nSmart Siri sales in the second quarter accounted for just under 40% of total company sales compared to about 35% a year ago.\nWe are selling our smart series homes and 35% of our communities compared to 30% of the communities a year ago.\nThe average price of our smart series Homes is now just under $350,000 compared to roughly $330,000 at the end of the first quarter.\nAs we've said repeatedly over the last several years when discussing our smart series line of homes.\nOn average, our smart series communities produce better sales pace, better margins, faster cycle time, and thus better returns.\nOur backlog sales value at the end of the quarter was $2.5 billion and all time quarterly record and 70% better than last year.\nunits in backlog increased by 49%.\nTo an all time record 5488 homes with an average price of homes in backlog equal to $454,000.\nThis is 15% higher than a year ago.\nNow I'd like to provide a few comments on our markets.\nAs I mentioned at the beginning of the call, we experienced strong performance from each of our 15 homebuilding divisions, with substantial income contributions for most of our markets led by Orlando, Tampa, Minneapolis, Dallas, Columbus, and Cincinnati.\nOur deliveries increased by 18% over last year in our southern region, reminding you that our southern region consists of our four Texas markets, three Florida markets and two North Carolina markets.\nDeliveries in the southern region increased to 1297 homes, or 57% of the total.\nThe northern region, which is the balance of our markets, six to be exact in Ohio, Indiana, Illinois minutes Soda in Michigan contributed 961 deliveries, which is roughly 31% better than a year ago.\nnew contracts in our southern region increased by 3% for the quarter and decreased by 4%.\nIn our northern region, our owned and controlled lot position in the nine markets representing our southern region increased by 35%, compared to last year, and increased by 15%.\nAnd the six markets that comprise our northern region 34% of our owned and controlled lots are in the north, with the balance roughly 66%.\nIn the south, we have a very strong land position.\ncompany wide, we own approximately 18,300 lots, which is roughly a two year supply.\nOn top of that, we control the option contracts, and additional nearly 26,000 lots.\nSo in total, are owned and controlled lots are slightly slightly more than 44,000 lots, which is just below a five year supply.\nPerhaps most important 59% of those near 44,000 lots are controlled under an option contract, which gives me my home's significant flexibility to react to changes in demand or individual market conditions.\nFirst, our financial condition is very strong with one and a half billion dollars of equity at June 30, and a book value slightly over $50 a share.\nWe ended the second quarter with a cash balance of $372,000,000.00 borrowings under our $550 million unsecured revolving credit facility.\nThis resulted in a very healthy net debt to cap ratio of 16%.\nWe believe our low leverage in substantial cash generation allows us to allocate capital to share repurchases, while also continuing to make significant investments in replenishing our land position for the continued growth of our company.\nThis replaces our existing $50 million share repurchase authorization which had roughly $17 million of remaining availability.\nThe $100 million share repurchase authorization reflects our expectation of the ongoing strength in our business and our commitment to creating long term shareholder value, while always maintaining low debt leverage.\nFinally, in closing, our company is an actual is in excellent shape.\nGiven the strength of our backlog, as well as the strength of our land position, we are poised to have an outstanding 2021.\nAnd with our planned new community openings, we are equally excited about our prospects for a strong 2022.\nnew contracts and second quarter increased to 2267.\nA second quarter record 2261 for last year second quarter.\nAnd last year second quarter was up 31% versus 2019.\nYear today, we have so 5376 homes 24% better than last year.\nOur new contracts were up 103% in April, down 11% in May and down 33% in June.\nOur sales pace was 4.2 in the second quarter compared to last year is 3.4.\nAnd our cancellation rate for the second quarter was 7%.\nWe continue to manage sales to closely align ourselves with our ability to start and deliver our homes along with focus on our margins, especially given our record backlog of 5500 houses.\nAs to our buyer profile.\nAbout 51% of our second quarter sales were to first time buyers, compared to 56% in the first quarter.\nIn addition 43% of our second quarter sales for inventory homes, the same percentage as the first quarter.\nOur community count was 175 at the end of the second quarter compared to 220 at the end of last year second quarter, and the breakdown by region is 79 in the northern region and 96 in the southern region.\nDuring the quarter we opened 16 new communities while closing 20 During last year of second quarter we opened 22 new stores and close 25.\nWe delivered an all time quarterly record of 2250 and homes in the second quarter.\nAnd year today we have delivered 4277 homes, which is 28% more than last year.\nproduction cycle times continue to lengthen.\nAnd we have started over 5000 homes in the first half of this year, which is 1500 more homes than the first half of last year.\nrevenue increased 35% in the second order, reaching an all time quarterly record of 961 million.\nAnd our average closing price for the quarter was 411,008% increase compared to last year second quarter average of 379,000.\nOur second quarter gross margin was 25.1%.\nUp 320 basis points year over year.\nOur construction and land development costs continue to increase.\nRecently we have seen some we have seen lumber costs decline in some of our markets.\nAnd our second quarter SG and a expenses were 10.4 revenue, improving 110 basis points compared to 11.5 a year ago.\nThis reflects greater operating leverage, and it was our lowest second quarter leverage in our company history.\nInterest expense decreased 2.1 million for the quarter compared to last year.\nInterest incurred for the quarter was 10 point 1 million compared to 10 point 3 million a year ago.\nThis decreases due to lower outstanding borrowings in the second quarter, and also higher interest capitalisation due to more inventory being under development.\nWe are very pleased with our improved returns for the quarter.\nOur pre tax income was 14.7 versus 10 last year, and our return on equity was 27% versus 17%.\nAnd during the quarter we generated 156 million of EBITDA compared to 86 million in last year second quarter.\nwe generated 174 million of positive cash flow from operations in the second quarter compared to generating 83 million a year ago.\nAnd we have 22 billion in capitalized interest on our balance sheet about 1% of our assets.\nAnd our effective tax rate was 24% in the second quarter, same as last year, second quarter, and we estimate our annual rate for the year to be around 24%.\nAnd our earnings per diluted share for the quarter increased to $3.58 per share from $1.89 per share last year.\nOur mortgage and title operations achieved record second quarter results in pre tax income, revenue and number of loans originated revenue was up 50% to $28.6 million due to a higher volume of loans closed and sold, along with higher pricing margins.\nAnd we experienced in the second quarter of last year.\nPre tax income was $18 million, which was up 66% over 2000 and 22nd quarter.\nThe loan to value on our first mortgages for the second quarter was 84% compared to 83%.\n78% of loans closed in the quarter were conventional, and 22%, FHA or VA.\nThis compares to 77% and 23%, respectively, for 2000 and 22nd quarter.\nOur average mortgage amount increased to $336,000 in 2021 second quarter compared to $311,000.\nLoans originated increased to a second quarter record of 1704 loans 24% more than last year, and the volume of loans sold increased by 48%.\nOur borrower profile remains solid, with an average down payment of over 16% and an average credit score of 747 up from 746 last quarter.\nOur mortgage operation captured over 84% of our business in the second quarter, compared to 83% last year.\nFinally, we maintain two separate mortgage warehouse facilities that provide us with funding for mortgage originations.\nPrior to the sale to investors.\nat June 30, we had $134 million outstanding under the MIF warehousing agreement, which is a $175 million commitment that was recently extended and expires in May 2022.\nAnd we also had $34 million outstanding Under a separate $90 million repo facility, which expires in October of this year.\nBoth facilities are typical 364 day mortgage warehouse lines that we extend annually.\nAs far as the balance sheet we ended the second quarter with a cash balance of 372 million and no borrowings under our unsecured revolving credit facility.\nAnd during the second quarter, we extended the maturity of our credit facility to July 2025, and increased the total commitment to 550 million.\nTotal homebuilding inventory at June 30, was 2.1 billion, an increase of 250 million from last year, and our unsold land investment at June 37 or 82 million compared to 810 million a year ago.\nWe had 497 million of raw land and land under development, and 285 million of finished unsold lots.\nWe owned 3872, unsold finished lots, with an average cost of 74,000 per lot.\nAnd this average lock cost is 16% of our Foreign Earned 54,000 backlog every sale price.\nOur goal is to own a two to three year supply of land.\nAnd during the second quarter, we spent 150 million on land purchases, and 87 million on land development for a total of 237 million, which was up from 156 million in last year, second quarter.\nAnd in the second quarter, we purchased about 4000 lots of which 78% were all in 2,022nd quarter, we purchased about 2100 lots of which 67% were all in general, most of our smart series communities are rolling deals, and have above average company pace and margin.\nAnd at the end of the quarter, we had 59 completed inventory homes, and 169 total inventory homes.\nAnother total inventory 498 are in the northern region in 371 are in the southern region.\nAnd at the end of the first quarter, we had 98 completed inventory homes, and 708 total inventory homes.\nWe're now open the call for any questions or comments.\n",
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"content": "compname reports q2 earnings per share of $3.58.\ncompname reports 2021 second quarter results and $100 million share repurchase authorization.\nq2 earnings per share $3.58.\nq2 revenue $961 million.\nbacklog units increased 49% to 5,488 in quarter.\nbacklog sales value reached $2.5 billion in quarter.\nqtrly homes delivered increased 23% to 2,258.\nalso announced board has approved a $100 million share repurchase authorization.\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 is Bob Schottenstein, our CEO and President; Tom Mason, EVP; Derek Klutch, President of our Mortgage Company; Ann Marie Hunker, VP, Corporate Controller; and Kevin Hake, Senior VP.\nWe had an outstanding record-setting quarter, highlighted by a 71% increase in new contracts, a 29% increase in homes delivered and a 94% increase in net income.\nFor the quarter, we sold 2,949 homes.\nYear-to-date through September, we have sold 7,299 homes, 43% better than last year and more than we sold all of 2019.\nOur sales were strong across the board and throughout all of our markets.\nOur absorption pace improved significantly to 4.6 sales per community per month compared to 2.6 a year ago.\nA number of factors contributed to our strong sales performance: low interest rates, low inventory levels, a shift in buyer preference toward single-family homes and an increasing number of millennials opting for homeownership.\nAll of these are fueling a robust housing market.\nIn addition, we continue to gain market share in most of our markets based upon the strength and quality of our communities, the quality of our online marketing execution and generating online leads and converting those online leads into sales and the continued strong market acceptance of our most affordably priced Smart Series line of homes.\nOur Smart Series sales comprised nearly 36% of total companywide sales during the quarter compared to 28% a year ago.\nWe are now selling our Smart Series homes in all 15 of our divisions.\nAnd on average, our Smart Series communities produce better sales pace, better gross margins, better cycle time and better returns.\nWe delivered 2,137 homes in the quarter.\nYear-to-date through September, we have now delivered 5,467 homes, which is 25% more than last year.\nOur backlog sales value at September 30 equaled $1.8 billion, an all-time record, and units in backlog increased 54% to a record 4,503 homes.\nOur margins and returns during the quarter were also very strong.\nGross margins during the third quarter improved by 240 basis points to 22.9%, and our SG&A expense ratio improved by 60 basis points to 11.6%, and our pre-tax income percentage significantly improved to 11.2%.\nAll of this resulted in a greater than 90% improvement in both pre-tax and net income for the quarter.\nOur financial services business also had a record quarter, highlighted by strong income and excellent capture rate and very solid across-the-board execution.\nNow I will provide some additional comments on our markets.\nAs you know, we divide our 15 markets into two regions.\nThe Northern region consists of six of our 15 markets: Columbus, Cincinnati, Indianapolis, Chicago, Minneapolis and Detroit.\nOur Southern region consists of the remaining nine markets: Charlotte and Raleigh, North Carolina, Orlando, Tampa and Sarasota, Florida and Houston, Dallas, Austin and San Antonio, Texas.\nAs I indicated earlier, we experienced strong sales performance in the third quarter across all of our markets.\nNew contracts in the Southern region increased 63% for the quarter while new contracts in the Northern region increased 85%.\nOur deliveries increased by 27% over last year in the Southern region to 1,269 deliveries or 59% of company total.\nThe Northern region posted 868 deliveries, an increase of 33% over last year and 41% of total.\nWe also had substantial income contributions from most of our markets led by Orlando, Dallas, Minneapolis, Columbus, Charlotte, Tampa and Cincinnati with Indianapolis, Houston and Austin also having a very strong third quarter.\nOur controlled lot position in the Southern region increased by 49% compared to a year ago and increased by 17% in the Northern region.\nWhile we are selling through a number of our communities faster than anticipated, we are nonetheless very well positioned to handle demand.\n35% of our owned and controlled lots are in the Northern region with a balance roughly 65% in the Southern region.\nWe have an outstanding land position companywide.\nIn total, we own and control approximately 40,000 lots or about a 4.5- to five year supply.\nImportantly, roughly 60% of our lots are controlled under option contracts, which, with more than half of our lots controlled by option, gives us tremendous flexibility to react to changes in demand or individual market conditions.\nWe had 121 communities in the Southern region at the end of the quarter, which is down from 132 a year ago and also down from 126 at the end of this year's second quarter.\nWe had 86 communities in the Northern region at the end of the third quarter, down slightly from a year ago and down from 94 at the end of this year's second quarter.\nThe pandemic continues to affect our operations, though our teams have managed through it very well.\nWe continue to focus on building and selling quality homes, and we continue to manage our operations and our business with the highest standards for our employees, customers and their accompanying work environment.\nFinally, let me conclude by saying that in addition to having a record-shattering quarter, our company is in the best shape ever.\nOur financial condition is strong.\nOur balance sheet is healthy.\nWe have meaningful operating momentum and are poised to have an outstanding year.\nAs far as financial results, new contracts for the third quarter increased 71% to 2,949, an all-time quarterly record compared to 1,721 for last year's third quarter.\nOur new contracts were up 75% in July, up 94% in August and up 44% in September.\nOur sales pace was 4.6 in the third quarter compared to last year's 2.6.\nOur cancellation rate for the third quarter was 10%.\nAs to our buyer profile, about 53% of our third quarter sales were to first-time buyers compared to 50% in the second quarter.\nIn addition, 40% of our third quarter sales were inventory homes compared to 45% in the second quarter.\nOur community count was 207 at the end of the third quarter compared to 221 at the end of '19 third quarter.\nThe breakdown by region is 86 in the Northern region and 121 in the Southern region.\nDuring the quarter, we opened 12 new communities while closing 25, and we opened 51 new communities during the nine months ended 9/30 this year.\nWe delivered a third quarter record 2,137 homes, delivering 58% of our backlog, which was the same percentage as a year ago.\nAnd revenue increased 30% in the third quarter, reaching a third quarter record of $848 million.\nOur average closing price for the third quarter was $380,000, a 1% decrease when compared to last year's third quarter average closing price of $382,000.\nOur backlog sales price is $404,000, up from $390,000 a year ago, and the backlog average sales price of our Smart Series is $315,000.\nOur third quarter 2020 operating gross margin was 22.9%, up 240 basis points year-over-year and up 100 basis points from the second quarter.\nAnd our third quarter SG&A expenses were 11.6% of revenue, increasing -- improving 60 basis points compared to 12.2% a year ago, reflecting greater operating leverage.\nInterest expense decreased $3.4 million for the quarter compared to last year.\nInterest incurred for the quarter was $10 million compared to $12.9 million a year ago.\nThe decrease is due to lower outstanding borrowings in this year's third quarter as well as a lower weighted average borrowing rate.\nDuring the third quarter, we generated $111 million of EBITDA compared to $67 million in last year's third quarter.\nWe have $22 million in capitalized interest on our balance sheet, which is about 1% of our total assets.\nOur effective tax rate was 23% in the quarter compared to last year's 24% in the third quarter.\nOur third quarter rate benefited from energy tax credits that were retroactive to 2019, and we estimate our annual effective rate this year to be around 23%.\nAnd our earnings per diluted share for the quarter increased to $2.51 per share from $1.32 last year.\nNow Derek will cover our mortgage company results.\nOur mortgage and title operations achieved record third quarter results in pre-tax income, revenue and number of loans originated.\nRevenue was up 115% to $28.9 million due to a higher volume of loans closed and sold along with significantly higher pricing margins.\nFor the quarter, the pre-tax income was $19.2 million, which was a 241% increase compared to 2019's third quarter.\n76% of the loans closed in the quarter were conventional and 24% FHA or VA compared to 78% and 22%, respectively, for 2019's third quarter.\nOur average mortgage amount increased to $314,000 in 2020 third quarter compared to $312,000 last year.\nLoans originated increased to a third quarter and all-time record of 1,636 loans, 32% more than last year, and the volume of loans sold increased by 39%.\nOur borrower profile remains solid with an average down payment of over 15%.\nAnd for the quarter, the average credit score on mortgages originated by M/I Financial was 747, up slightly from 745 last year.\nOur mortgage operation captured over 85% of our business in the third quarter, which was in line with last year.\nWe maintained two separate mortgage warehouse facilities that provide us with funding for our mortgage originations prior to the sale to investors.\nAt September 30, we had $136 million outstanding under these facilities.\nWe extended our repo line this month through October of 2021 and increased the commitment amount from $65 million to $90 million.\nBoth facilities are typical 364-day mortgage warehouse lines that we extend annually.\nAs far as the balance sheet, our total homebuilding inventory at 9/30 was $1.8 billion, an increase of $16 million over last year.\nOur unsold land investment at 9/30/20 is $762 million compared to $821 million a year ago.\nAt September 30, we had $362 million of raw land and land under development and $400 million of finished unsold lots.\nWe own 4,942 unsold finished lots with an average cost of $81,000 per lot, and this average lot cost is 20% of our $404,000 backlog average sale price.\nOur goal is to maintain about a one year supply of finished lots and to own a two to three year supply.\nLots owned and controlled as of 9/30/20, totaled 39,600 lots, 15,100 of which were owned and 24,500 under contract.\nWe own 6,900 lots in our Northern region and 8,200 lots in our Southern region.\nA year ago, we owned more than 14,800 lots and controlled an additional 14,200 lots for a total of more than 29,000 lots.\nAnd during this year's third quarter, we spent $107 million on land purchases and $89 million on land development for a total of $196 million.\nYear-to-date, we have spent $267 million on land purchases and $222 million on land development for a total year-to-date land spend of $489 million, and about 48% of our purchase amount was raw land.\nAt the end of the quarter, we had 266 completed inventory homes, about one per community, and 1,113 total inventory homes.\nAnd of the total inventory, 550 are in the Northern region and 563 are in the Southern region.\nAt September 30, '19, we had 531 completed inventory homes and 1,513 total inventory homes.\nWe'll now open the call for any questions or comments.\n",
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"content": "q3 earnings per share $2.51.\nnew contracts increased 71% to 2,949 contracts in quarter.\nbacklog units increased 54% to 4,503 in quarter.\nbacklog sales value reached $1.8 billion in quarter.\nhomes delivered in 2020's q3 increased 29% to a record 2,137.\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 is Bob Schottenstein, our CEO and President, Derek Klutch, President of our Mortgage Company, Ann Marie Hunker, VP, Chief Accounting Officer Controller and Kevin Hake, Senior VP.\nWe are pleased with our third quarter performance highlighted by the number of records including record revenue of $904 million, revised record third quarter pre-tax income of $116.2 million, 22% better than a year ago and a very strong return on equity of 27%.\nWe sold 1,964 homes during the quarter, a decline of 33% from the record sales reported during last year's third quarter.\nDespite the decline in sales, housing demand throughout most of our markets remains very strong.\nOur decline in sales is due to the fact that we are operating in 15% fewer communities than the year ago and we continue to limit sales in the majority of our communities in order to better manage deliveries and control costs.\nOur third quarter monthly sales pace was 3.7 homes per community other than last year, this is the highest monthly per community sales pace we've seen in over 10 years and reflects the underlying strength of demand.\nYear-to-date, we have sold 7,340 homes, 1% ahead of last year's record, despite as noted, community count being down 15% and continuing to limit sales in the majority of our communities.\nWe ended the quarter with 176 active communities.\nWe will be opening a record number of new communities in 2022.\nSpecifically, we expect to grow our community count next year by 15% or more and end 2022 with between 200 and 220 communities.\nWe closed 2,045 homes during the quarter, a 4% decrease from last year.\nClearly, our closings were negatively impacted by the well documented supply chain disruptions that continue to stretch our build times and impact the entire industry.\nOn average, it is taking us 45 days longer to get homes closed.\nWe have always been focused on achieving fast and efficient build times, while assuring that homes are properly complete and ready to be delivered.\nWe will continue to manage in this way.\nOur backlog is very strong.\nWe ended the quarter with an all-time record backlog of $2.5 billion, 40% better than last year.\nAnd units in backlog increased by 20% to a third quarter record of 5,407 homes with an average price and backlog of $471,000 which is 17% higher than a year ago.\nIn addition to reporting record third quarter income, our returns were also very strong.\nGross margins improved by 160 basis points year-over-year to 24.5%.\nAnd our SG&A expense ratio improved by 90 basis points to 10.7%.\nExcluding the one-time charge for debt extinguishment, our pre-tax income percentage improved from 11.2% last year to nearly 14%.\nAnd as noted all of this resulted in a very strong return on equity of 27%.\nNow I will provide some additional comments on our markets.\nFirst, let me begin by stating that I'm very excited to announce that we are commencing homebuilding operations in Nashville, Tennessee, one of the nation's most dynamic and fastest growing housing markets, ranking 11th nationally in 2020 based on single-family permits.\nNashville continues to benefit from a very healthy economy, significant population growth and job growth and we look forward to building our competitive position in the market over the next few years.\nAs our 16th market, Nashville will for reporting purposes be included in our southern region together with Charlotte and Raleigh, our four Texas markets into our three Florida markets.\nWe experienced strong performance from our homebuilding divisions in the third quarter led by Orlando, Tampa, Minneapolis, Dallas, Chicago, Columbus and Charlotte.\nIn fact, all of our markets produced strong results.\nOur deliveries decreased 8% from last year in the southern region to 1,169 deliveries or 57% of the total.\nThe northern region contributed 876 deliveries, an increase of 1% over last year.\nOur owned and controlled lot position in the southern region increased by 11% compared to last year and increased by 5% in the northern region compared to a year ago.\n34% of our owned and controlled lots are in the northern region, while the balance roughly 66% is in the southern region.\nWe have a very strong land position.\nCompanywide, we own approximately 22,700 lots, which equates to a roughly two and a half year supply.\nOn top of that we control the option contracts and additional 20,300 lots.\nSo in total, our owned and controlled lots are approximately 43,000 lots or about a five year supply.\nBased on a record backlog, we expect to finish out the year with another very strong performance.\nOur financial condition is strong with $1.5 billion of equity at September 30th and a book value of $53 per share.\nWe ended the quarter with a cash balance of $221 million and zero borrowings under our $550 million unsecured revolving credit facility.\nThis resulted in a net debt to net cap ratio of 24%.\nOur company is in excellent shape, the best shape ever and we are poised to have an outstanding fourth quarter and an outstanding full year in 2021.\nNew contracts for the third quarter decreased to 1,964 compared to 2,949 for last year's third quarter.\nAnd in last year's third quarter our new contracts were a record and we're up 71% from the prior year.\nOur new contracts were down 32% in July down 41% in August and down 24% in September and our cancellation rate was 8% in the third quarter.\nAs to our buyer profile about 50% of our third quarter sales were the first time buyers compared to 51% in the second quarter.\nIn addition, 39% of our third quarter sales were inventory homes compared to 43% in the second quarter.\nOur community GAAP was 176 at the end of the quarter, compared to 207 at the end of last year's third quarter and the breakdown by region is 85 in the northern region and 91 in the southern region.\nDuring the quarter, we opened 26 new communities while closing 25 and during last year's third quarter we opened 12 new communities.\nWe have opened 63 new communities in the first nine months of this year compared to 51 last year.\nWe delivered 2,045 homes in the third quarter, delivering 37% of our backlog compared to 58% a year ago.\nYear-to-date, we delivered 6,322 homes, which is 16% more than a year ago.\nWe now have 5,300 homes in the field, which is 20% more than the 4,000 we had this time last year.\nRevenue increased 7% in the third quarter reaching a third quarter record $904 million.\nOur average closing price for the quarter was $430,000, a 13% increase when compared to last year's third quarter average closing price at $380,000.\nAnd our backlog average sale price is an all-time record of $471,000 up from $404,000 a year ago and our backlog average sale price for our smart series is $374,000.\nOur third quarter gross margin was 24.5%, up 160 basis points year-over-year.\nAnd our third quarter s SG&A expenses were 10.7 of revenue improving 90 basis points compared to 11.6 a year ago, this reflects greater operating leverage and it was our lowest third quarter percentage in our company history.\nInterest expense decreased $1.3 million for the quarter compared to last year.\nInterest incurred for the quarter was $9.3 million compared to $10 million a year ago.\nThis decrease is due to lower outstanding borrowings and higher interest capitalization due to higher levels inventory under development than last year.\nAnd during the third quarter we issued $300 million of senior notes due 2030 and used the majority of the proceeds to redeem all of our $250 million of senior notes that were due in 2025.\nThis resulted in the $9.1 million loss on early extinguishment of debt.\nWe are very pleased with our returns for the third quarter.\nOur pre-tax income was 13% and 14% excluding our debt charge versus 11% a year ago, and our return on equity was 27% versus 19% a year ago.\nDuring the quarter, we generated $132 million of EBITDA compared to $111 million last year's third quarter.\nAnd we used $34 million of cash flow from operations for the first nine months compared to generating $197 million a year ago, primarily due to our increased land purchases.\nWe have $23 million of capitalized interest on our balance sheet this is about 1% of our total assets.\nAnd our effective tax rate was 22% in the third quarter compared to 23% in last year's third quarter.\nWe currently estimate our annual effective rate this year to be around 22%.\nAnd our earnings per diluted share for the quarter increased to $3.03 per share from $2.51 per share last year.\nDuring the quarter we repurchase 243,000 of our outstanding common shares for $16 million, and we have $84 million available under our current repurchase authority.\nOur current plans based on the existing market conditions are to continue repurchasing our shares.\nOur mortgage and title operations achieved pre-tax income of $9.9 million, compared with $19.2 million in 2020 third quarter.\nRevenue decreased 28% from last year to $20.8 million.\nThis was due to a lower volume of loans closed and sold and due to more competitive market conditions significantly lower pricing margins than we experienced in last year's third quarter.\nThe loan to value on our first mortgages was 82% compared to 84% in 2020 third quarter, 81% of the loans closed were conventional and 19% FHA or VA compared to 76% and 24% respectively 2020 third quarter.\nOur average mortgage amount increased to $349,000 compared to $314,000 last year.\nHowever, loans originated decreased to 1,554 loans down 5% from last year and the volume of loans sold decreased by 8%.\nOur borrower profile remains solid with an average down payment of almost 18% and an average credit score on mortgages originated by M/I Financial of 751 up from 747 last quarter.\nOur mortgage operation captured 85% of our business in the third quarter, the same as last year.\nWe maintain two separate mortgage warehouse facilities that provide us with funding for our mortgage originations prior to the sale to investors.\nAt September 30, we had $142 million outstanding under the M/I warehousing agreement which expires in May of 2022.\nWe also had $70 million outstanding under a separate $90 million repo facility which we recently extended through October 2020.\nBoth facilities are typical 364 day mortgage warehouse lines that we extend annually.\nAs far as the balance sheet we ended the third quarter with cash of $221 million and no borrowings under our unsecured revolving credit facility.\nTotal homebuilding inventory at 9/30/21 was $2.4 billion, an increase of $0.5 billion from September 30 of last year.\nAnd our unsold land investment at 9/30/21 is $991 million compared to $762 million a year ago.\nAt 9/30, we had $663 million of raw land and land under development and $328 million of finished unsold lots.\nWe own 4,343 unsold finished lots with an average cost of $75,000 per lot and this average lot cost is about 16% of our $471,000 backlog average sale price.\nOur goal is to own a two to three years supply of land and we now own 23,000 lots, which is about a two and a half year supply.\nDuring the third quarter we spent $231 million on land purchases and $124 million own land development for a total of $355 million, which was up from $196 million in last year's third quarter.\nAnd at the end of the quarter, we had 62 completed inventory homes and 1,042 total inventory homes.\nAnd of the total inventory 658 are in the northern region and 384 in the southern region.\nLast year at 9/30, we had 266 completed inventory homes and 1,113 total inventory homes.\n",
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"content": "q3 earnings per share $3.03.\nq3 revenue rose 7 percent to $904.3 million.\nqtrly homes delivered decreased 4% to 2,045.\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 is Bob Schottenstein, our CEO and President; Tom Mason, EVP; Derek Klutch, President of our Mortgage Company; Ann Marie Hunker, VP, Corporate Controller; and Kevin Hake, Senior VP.\nWe are extremely pleased with our fourth quarter and full year results, highlighted by significant growth and record-setting financial achievements across the board.\nBy every measure, 2020 was an outstanding year for M/I Homes.\nWe nearly doubled our net income, increasing our bottom line by 88% over 2019, resulting in a very strong return on equity of 22%.\nA number of factors contributed to our strong returns.\nWe achieved record revenue of $3 billion, an increase of 22% over 2019.\nRecord closings of 7,709 homes, 22% better than a year ago.\nVery strong gross margins that reached 23% in the fourth quarter and 22.2% for the full year, a 260 basis point improvement over 2019.\nAnd our full year pre-tax income percentage improved 360 basis points to 10.2%.\nThese results continue the trend of strong growth in revenues and earnings that we've achieved, frankly, since coming out of the recession.\nSpecifically, since 2012, our revenues have grown at a compounded annual rate of 19%, and our pre-tax income has grown at an even more impressive compound annual rate of 49%.\nIn addition, the strong performance of our mortgage and title operations as well as improved SG&A operating leverage also contributed to our record earnings.\nWe also had an outstanding sales year.\nNew contracts for the year improved by 39% to a record 9,427 homes sold.\nFourth quarter sales continued the strong pace of sales that began in late April.\nDuring the quarter, we sold 2,128 homes, a fourth quarter record and 27% better than a year ago.\nOverall, housing demand remains very strong, driven by a number of factors, including historically low mortgage rates, low inventory levels, and increasing number of millennials joining the ranks of homeownership and a shift in buyer preference away from renting in more densely populated areas, in favor of single-family homes.\nIn addition, a number of other factors also helped drive our strong sales performance.\nAmong them are the quality of our locations, our ability to execute on many fronts, including successfully managing a rapidly increasing number of online leads and the continued success and growth of our Smart Series line of homes.\nWith respect to our Smart Series, let me remind you that this is our most affordably priced product offering.\nAt the end of 2020, our Smart Series was being offered in all 15 of our housing markets, comprised 62 of our total communities or 31% of total and accounted for more than 35% of total company sales.\nOur Smart Series communities continue to provide a better monthly sales pace, better margins, faster cycle time and, as a result, better overall returns.\nWe fully expect the sale of our Smart Series homes to grow further within our markets and likely approach 40%-plus of total M/I sales in the coming year.\nAnd in terms of demand and traffic as we begin 2021, housing conditions continue to be very robust throughout all 15 of our markets.\nOur year-end backlog increased 64% in units to 4,389 homes, and the dollar value increased by 74% to an all-time company record of $1.8 billion.\nNow I will provide some additional comments on our markets, which we divide into two regions.\nThe Northern region, which consists of Columbus, Cincinnati, Indianapolis, Chicago, Minneapolis and Detroit.\nAnd the Southern region, which consists of the balance of our markets: Charlotte, Raleigh, Orlando, Tampa, Sarasota, Houston, Dallas, Austin and San Antonio.\nWe experienced strong performance in the fourth quarter across both the Northern and Southern regions, with new contracts in the Southern region increasing by 31% for the quarter and 21% in the Northern region.\nOur closings or deliveries increased 16% over last year's fourth quarter in the Southern region and increased 19% over last year's fourth quarter in the Northern region.\nOur owned and controlled lot position in the Southern region increased by 23% compared to a year ago and increased by 12% in the Northern region compared to last year.\nWhile we are selling through communities somewhat faster than expected, it's important to underscore that we are very well positioned to open new communities in 2021 and well into 2022.\n37% of our owned and controlled lots are in the Northern region with the balance, 63%, in the Southern region.\nWe have a very strong land position.\nCompanywide, we own and control approximately 40,000 lots, up 19% from last year, which equates to about a four to five year supply.\nPerhaps more important, over half of the lots that we own and control or about 57% are controlled under option contracts and not yet on our books.\nThis gives us significant competitive flexibility to react to changes in demand or individual market conditions.\nWe had 112 communities in the Southern region at the end of the quarter, down from 129 a year ago.\nAnd we had 90 communities in the Northern region at the end of the quarter, down from 96 a year ago.\nAs I mentioned, the decline in community count is partially a result of our accelerated sale pace.\nBut it's also important to recognize that nearly 1/3 of our communities are now offering our Smart Series homes.\nAnd that these communities not only often have more lots in total, but as noted earlier, generally produce a greater sales pace.\nBefore turning the call over to Phil, let me just make a few concluding comments.\nFirst, our financial condition is very strong with $1.3 billion of equity at December 31 and a book value of $44 per share.\nWe ended 2020 with a cash balance of $261 million and 0 borrowings under our $500 million unsecured revolving credit facility.\nThis resulted in a 34% debt-to-cap ratio, down from 38% a year ago and a net debt-to-cap ratio of 23%.\nSecond, 2020 was a year of unprecedented challenge and severe hardship caused by the global pandemic.\nAs an industry, we have been very fortunate that our business and the business of our competitors has held up exceptionally well.\nAs it relates to M/I Homes, I could not be more proud of our company as we came together to safely and carefully provide quality homes to so many.\nFinally, as we move forward into 2021, we are very optimistic about our business.\nOur backlog is strong.\nOur sales pace has been terrific.\nWe have an excellent land position, and housing conditions, including both demand and traffic continue to be very good.\nWe have a lot of operating momentum and are positioned for another strong year in 2021.\nAs far as financial results, new contracts for 2020 increased 39% to 9,427, an all-time record compared to 6,773 for last year.\nOur new contracts were up 14% in October, up 36% in November and up 35% in December for a 27% improvement in the quarter compared to last year's fourth quarter.\nOur sales pace was 3.5 in the fourth quarter compared to 2.5 in last year's fourth quarter.\nAnd our cancellation rate for this year's fourth quarter was 10%.\nWe are also pleased to say that our buyer demand continued to be very strong in January.\nAs to our buyer profile, about 53% of our fourth quarter sales were to first-time buyers compared to 49% a year ago.\nIn addition, 43% of our fourth quarter sales were inventory homes compared to 44% in last year's fourth quarter.\nOur community count was 202 at the end of the year compared to 225 at the end of 2019, and the breakdown by region is 90 in the Northern region and 112 in the Southern region.\nDuring the quarter, we opened 18 new communities while closing 23.\nAnd for the year, we opened 69 new communities and closed 92.\nWe delivered a record 2,242 homes in the fourth quarter, delivering 50% of our backlog compared to 66% a year ago.\nThere are a couple of factors that led to this decline in backlog conversion rates when compared to last year.\nFirst, our extremely strong sales and significantly higher backlog levels in the back half of 2020 led to longer times for getting homes started.\nSecondly, we have been selling spec homes nearly as fast as we can get them started, which leads to lower spec home inventories, especially those which are closer to completion and could contribute to closings within 90 days.\nRevenue increased 22% in the fourth quarter of this year, reaching a fourth quarter record $906 million.\nAnd our average closing price for the fourth quarter was $389,000, a 3% increase when compared to last year's fourth quarter average closing price of $377,000.\nOur backlog average sale price is $419,000, up 6% from a year ago, and our backlog average sale price of our Smart Series is $322,000.\nWe recorded $8.4 million of impairment charges in the fourth quarter compared to $5 million in last year's fourth quarter.\nAnd our operating gross margins, excluding impairments for the fourth quarter, was $24.1 million, up 420 basis points year-over-year and up 120 basis points from 2020's third quarter.\nOur higher margins in our Texas operations were a big driver of our margin improvement.\nAnd for the full year of 2020, our operating gross margin was 22.5% versus last year's 19.8%.\nOur construction costs increased by about 3% in the fourth quarter, with the biggest impact from lumber.\nAnd our fourth quarter and full year SG&A expenses were 11.7% of revenue, a 40 basis points improvement compared to 2019.\nAnd 2020 is our third consecutive year of improved SG&A efficiency.\nInterest expense decreased $3.5 million for the quarter compared to the same period last year and decreased $11.7 million for the 12 months of this year.\nThe decrease for the year is due to lower outstanding borrowings as well as a lower weighted average borrowing rate.\nAnd interest incurred for the quarter was $10 million compared to $12.5 million a year ago.\nAnd for the year, interest incurred was $40 million versus $49 million a year ago.\nWe are pleased with our improved returns for the year.\nOur pre-tax income was 10.2% versus 6.6% last year, and our return on equity was 22% versus 14% a year ago.\nDuring the fourth quarter, we generated $127 million of EBITDA compared to $75 million in last year's fourth quarter.\nAnd for the full year 2020, we generated $383 million of EBITDA, up 60% over last year.\nDespite a significant amount of reinvestment into our business, we generated $168 million of positive cash flow from operations in 2020 compared to $66 million last year.\nWe have $21 million in capitalized interest on our balance sheet.\nThis is about 1% of our total assets.\nAnd our effective tax rate was 21% in this year's fourth quarter compared to 19% in last year's fourth quarter.\nOur annual effective rate this year was 22.6% compared to 23.2% for 2019.\nOur fourth quarter and annual tax rate benefited from energy tax credits from prior years.\nAnd we expect 2021's effective tax rate to be around 24%.\nOur earnings per diluted share for the quarter increased 88% to $2.71 per share from $1.44 per share in last year's fourth quarter and increased 83% for the year to $8.23 from $4.48 per share last year.\nNow Derek Klutch will address our mortgage company results.\nOur mortgage and title operations achieved record fourth quarter results in 2020, including record pre-tax income of $14.8 million, up $8.4 million or 131% over 2019.\nAnd record revenue of $25.6 million, which was up 62% over last year due to a higher volume of loans closed and sold along with significantly higher pricing margins.\nWe also set a record for the number of loans originated.\nFor the year, pre-tax income was $50.5 million and revenue was $87 million, both all-time records.\nThe loan-to-value on our first mortgages for the fourth quarter was 83% in 2020, up from 2019's fourth quarter of 82%.\n74% of the loans closed in the fourth quarter were conventional and 26% were FHA/VA compared to 76% and 24%, respectively, for 2019's same period.\nOur average mortgage amount increased to $319,000 in 2020's fourth quarter compared to $303,000 in 2019.\nThe number of loans originated increased 25% from 1,398 to an all-time quarterly record of 1,746, and the volume of loans sold increased by 15%.\nOur borrower profile remains solid with an average down payment of over 15%.\nFor the quarter, the average borrower credit score on mortgages originated was 745, a slight decline from 747 last quarter.\nOur mortgage operation captured over 85% of our business in the fourth quarter, an increase from 84% one year ago.\nWe maintain two separate mortgage warehouse facilities that provide us with funding for our mortgage originations prior to sale to investors.\nAt December 31, we had a total of $226 million outstanding under these facilities, which expire in May and October this year.\nDue to our typical high-volume of fourth quarter closings, we include a seasonal increase in our warehouse facilities, which provides temporary availability of $275 million through February 4, 2021.\nAfter which time, total availability returns to $215 million.\nBoth facilities are typical 364-day mortgage warehouse lines that we extend annually.\nAs far as the balance sheet, total homebuilding inventory at 12/31/20 was $1.9 billion, an increase of $147 million over December '19 levels.\nDuring 2020, we spent $415 million on land purchases and $318 million on land development for total land spending of $733 million, which was up from $600 million in 2019.\nIn 2020, we purchased about 11,500 lots, of which 77% were raw with about 150 average lots per community.\nIn 2019, we purchased about 7,500 lots, of which 63% were raw with about 100 average lots per community.\nIn general, most of our Smart Series communities are raw land deals and have above-average company pace and margin.\nWe have a strong land position at 12/31/20, controlling almost 40,000 lots, up 19% from a year ago.\nAnd of the lots controlled, 43% are owned.\nBased on 2020's record closings, this is about a five year supply of inventory with just over two years owned.\nAnd at the end of the year, we had 225 completed inventory homes, about one per community and 1,131 total inventory homes.\nAt 12/31/19, we had 668 completed inventory homes and 1,459 total inventory homes.\nWe'll now open the call for any questions or comments.\n",
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"content": "q4 earnings per share $2.71.\nhomes delivered increased 17% to 2,242 in quarter.\nbacklog units increased 64% to 4,389 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 Kasey Jenkins, Vice President of McCormick Investor Relations.\nWe'll begin with remarks from Lawrence Kurzius, Chairman, President and CEO; and Mike Smith, Executive Vice President and CFO.\nDuring our remarks, we will refer to certain non-GAAP financial measures.\nThese include information in constant currency as well as adjusted gross margin, adjusted operating income, adjusted income tax rate and adjusted earnings per share that exclude the impact of special charges, transaction and integration expenses related to the acquisitions of Cholula and FONA.\nIn our comments, certain percentages are rounded.\nActual results could differ materially from those projected.\nIt is important to note, these statements include expectations and assumptions which will be shared related to the impact of COVID-19 pandemic.\nIt is now my pleasure to turn the discussion over to Lawrence.\nStarting on slide 4.\nOur first quarter results were outstanding.\nAs we said in our year-end earnings call in January, we have confidence in our strategies and are well positioned to deliver another year of differentiated growth in 2021.\nFollowing an extraordinary year in 2020, in 2021 we expect strong underlying base business performance and recent acquisitions to drive significant sales growth as well as strong operating income growth, even considering extraordinary COVID-19 cost and business transformation investments highlighting our focus on profit realization.\nDuring the first quarter, we delivered double-digit sales, adjusted operating income and earnings growth.\nWe expect growth to vary by quarter in 2021 given 2020's level of demand volatility and the pace of COVID-19 recovery.\nBut importantly, we have started the year with outstanding first quarter performance, giving us confidence in an even stronger outlook for 2021.\nAs seen on slide 5, we have a broad and advantaged global flavor portfolio with compelling offerings for every retail and customer strategy across all channels.\nThe breadth and reach of our portfolio across segments, geographies, channels, customers and product offerings creates a balanced and diversified portfolio to drive consistency in our performance, as evidenced again by our first quarter results.\nThe sustained shift in consumer behavior to cooking and eating more at home continued to drive substantial increases in our Consumer segment demand in all regions as well as increases in our packaged food company customers in our Flavor Solutions segment.\nOn the other hand, in our Americas and EMEA regions, we continued to experience reduced demand from our restaurant and other foodservice customers given the pressure on away-from-home consumption driven by continued COVID-19 government imposed restrictions which in several areas increased during the first quarter.\nNotably, our APZ region had substantial growth in both segments, driven not only by lapping the significant disruption last year caused by the COVID-19 related lockdown in China, but also by the sustained increase in at-home consumption and an increase in away from home consumption as restrictions have eased and the recovery momentum is building.\nFinally, with the addition of our Cholula and FONA acquisitions, we have further extended the reach and breadth of our portfolios, with new product offerings, channels and customers and are excited about their contributions to our first quarter and beyond.\nThese impacts continue to demonstrate the strength and diversity of our offering, and we are confident our balanced portfolio will continue to differentiate McCormick and sustainably position us for growth.\nAfter that, Mike will go more in depth on our first quarter results and provide an update on our 2021 guidance.\nStarting with our outstanding first quarter results, as seen on slide 6.\nTotal sales grew 22%, including a 2% favorable impact from currency.\nIn constant currency, we grew total sales 20%, with increases in both segments.\nBase business growth, new products and acquisitions, our three long-term growth drivers, all contributed to the increase.\nIn addition to our top line growth, adjusted operating income increased 35%, including a 3% favorable impact from currency, and adjusted operating margin expanded by 160 basis points.\nGrowth from higher sales, favorable mix and CCI-led cost savings more than offset COVID-19 related costs and higher planned brand marketing investments.\nOur first quarter adjusted earnings per share was $0.72 compared to $0.54 in the prior year, driven by our strong operating performance, partially offset by a higher adjusted tax rate.\nTurning to our first quarter segment business performance.\nStarting on slide 7.\nIn our Consumer segment, we grew sales by 35%; on constant currency, 32%, with double-digit increases across each of our three regions.\nOur Americas constant currency sales growth was 30% in the first quarter, with incremental sales from our Cholula acquisition contributing 5%.\nThe momentum Cholula carried in from last year continues to be strong, with consumption growing at twice the category rate.\nExcluding Cholula, our total McCormick US branded portfolio, as indicated in our IRI consumption data and combined with unmeasured channels, grew 15%, which reflects the strength of our categories as consumers continued to cook more at home.\nFor the first time in several quarters, our sales increase was higher than our US IRI consumption growth.\nWe are realizing the benefit of our capacity expansion at the end of last year.\nThe difference between shipments and consumption is attributable to beginning to catch up on the undershipment of consumption across all quarters of last year that resulted in depleted retailer and consumer pantry inventories.\nDemand has remained high as the steps we've taken to increase supply are beginning to show.\nAs we mentioned in our January earnings call, after experiencing real pressure on our US manufacturing operations throughout 2020 due to elevated demand levels, we ended the calendar year with considerable incremental capacity and restoration plans for products which had been suspended.\nThroughout our first quarter, we removed products from suspension and continued to see service levels improve, which, combined with our overshipping consumption, indicates we are beginning to rebuild the inventory pipeline.\nAs we've said previously, inventory replenishment will progress throughout the year.\nWe continue to work with all our customers on improving shelf conditions and estimate more than half the suspended products are now back on shelf.\nThe level of restoration is very customer specific.\nFocusing further on our US branded portfolios.\nIn spice and seasonings and all other categories, excluding dry recipe mixes, we grew first quarter consumption at double-digit rates and again increased our household penetration and repeat buy rates.\nIn the first quarter, we continued to gain share in categories less impacted by supply constraints, including snacks and broths, barbecue sauce, wet marinates and Asian products.\nThe categories most impacted affected by supply constraints, spice and seasonings and dry recipe mix, we know there is a high correlation between our share performance and the shelf conditions resulting from product suspension or allocation.\nProducts that have had strong supply and remained on shelf have performed well, and as suspended products are restocked on shelf, we're seeing similar performance.\nWe anticipate regaining share as conditions continue to improve.\nAll of our key categories continued to outpace the center of store growth rates favorably impacting not only the McCormick brand, but smaller brands as well such as Stubb's, Lawry's, Simply Asia, Thai Kitchen, Zatarain's and Kitchen Basics.\nAnd in e-commerce, we had strong double-digit pure-play growth, with McCormick branded consumption outpacing all major categories.\nWe continue to use our strong category management capabilities in working with our customers as inventory is replenished throughout the supply chain to optimize category shelf sets, drive both growth for our customers and for McCormick.\nWe are well positioned for success in 2021 and have implemented efficient long-term solutions and strengthened our supply chain resiliency to support continued growth.\nNow turning to EMEA, which continued its momentum with outstanding performance in the first quarter.\nOur constant currency sales rose 26%, with broad-based growth across the region.\nEach of our markets drove double-digit total branded consumption growth, with market share gains across the region.\nSpices and seasonings consumption was strong in all markets, driving market share gains across total EMEA region.\nAnd our Vahine brand in France again had strong consumption growth and outpaced the homemade desserts category.\nIn the UK, both Frank's RedHot and French's Mustard also had strong consumption and gained share.\nSince the beginning of the pandemic, our EMEA supply chain has been very well positioned to meet the elevated demand and this has contributed to our ability to grow share across the region.\nIn EMEA, our household penetration and rate of repeat buyer increased again in the first quarter for the fourth consecutive quarter across our major brands and markets compared to last year, and we continue to work closely with our customers to ensure that elevated consumer demand will be met, even obtaining incremental placement for our branded portfolio as other manufacturers and private label faced supply challenges.\nWe're excited with our growth trajectory in EMEA following challenging market conditions in the past.\nIn the Asia-Pacific region, our constant currency sales grew 55%.\nDuring the first quarter of last year, China's consumption was disrupted by the COVID-19 related lockdown.\nRecovering from that disruption increased sales in the first quarter of 2021 versus last year.\nNotwithstanding that recovery, the region still had double-digit growth, driven by strong China consumer and branded foodservice demand, partially fueled by the Chinese New Year holiday as well as strong consumer consumption in the rest of the region.\nFor instance, in Australia, we continued to see elevated consumption in the brands where we gained household penetration last year such as Frank's RedHot, Gourmet Garden and Grill Mates.\nAcross all regions, we know second quarter consumption will start to be compared to the highly elevated levels from last year.\nAnd while we do not expect consumption at those same levels, we do expect continued and long-lasting growth from the increase in consumers' cooking more at home.\nConstant currency sales in our Flavor Solutions segment grew 3%, driven by our Americas and APZ regions.\nIn the Americas, we drove constant currency sales growth of 2%, driven by our FONA and Cholula acquisitions as well as growth with our consumer packaged food customers or our at-home base.\nWith strengthened base business as well as new product momentum, we continued to shift our portfolio to more value-added and technically insulated products, not only with the combination of FONA's flavor portfolio, but also with considerable growth from snack seasonings in the US and Mexico as well as flavors from both savory and beverage applications.\nDemand from our away from home customer base, the branded foodservice and restaurant customers declined and continue to be impacted by the COVID-19 environment.\nSales in our EMEA region were comparable to the first quarter of last year for Flavor Solutions, with demand declines in our away from home customer base, offset by strong sales for our consumer packaged food customers.\nThis growth was driven by a significant increase in new product growth versus last year as well as continued strength in the base business, partially from our customers' promotional activities.\nOur sales growth in the Asia Pacific region was outstanding, up 18% in constant currencies.\nBoth China, excluding the recovery impact from last year's lockdown, and Australia delivered double-digit growth from quick service restaurants or QSR customers.\nThis growth was driven by significant momentum in limited time offers as well as strength in the core business.\nI mentioned our results related to Cholula and FONA.\nAnd now I'd like to provide a brief update on their integration status.\n, For both acquisitions, our integration activities are progressing according to our plan.\nWe continue to deliver on opportunities quickly and aggressively to drive growth and are pleased with our momentum on capturing our synergy opportunities.\nWe remain on track to achieve synergies according to plan.\nAs expected, our integration of the business has been straightforward.\nAs of March 1, all functions have been integrated into our McCormick processes, and importantly, we are now servicing customers from our McCormick US distribution center.\nFrom a consumer commercial perspective, we are expanding distribution and are fueling growth, with robust brand marketing investments.\nWe'll be activating both digital, where Cholula was underpenetrated, and in-store merchandising in the next few weeks for our exciting Cinco de Mayo campaign.\nIn Flavor Solutions, we're also expanding distribution with new and existing branded foodservice customers and are leveraging Cholula's authentic Mexican flavor for increased menu participation, particularly in Cinco de Mayo menu offers.\nThe employees of FONA have been part of building a great business, and we are excited to be working with them to collectively integrate the business and drive plans to capitalize on growth opportunities.\nOur functional integration is very much on track and is using a best of both approach to ensure we optimize our operating model, similar to the approach we have with our RB Foods integration.\nThe alignment of our organization is well under way, and we have had significant commercial collaboration yielding quick wins and identifying long-term strategic opportunities.\nCustomer reaction has been extremely positive.\nThey were impressed with our early collaboration and excited about the increased customer value proposition created by the combination of McCormick and FONA, a more comprehensive product offering, broader technical platform, deep technical and flavor talent and best-in-class customer collaborations.\nAnd we were excited with FONA's performance starting the year, with great results and a robust momentum across the business.\nFor both Cholula and FONA, we are pleased with our progress so far and our contribution to our results.\nOur enthusiasm for these acquisitions and our confidence that we will deliver on our acquisition plans, accelerate growth of these portfolios and drive shareholder value has only increased over the last few months.\nNow I would like to briefly comment on the conditions we're seeing in our markets, their potential impact and our 2021 organic growth plans, starting on slide 10.\nLocal demand for flavor remains the foundation for our sales growth.\nWe are capitalizing on the growing consumer interest in healthy flavorful cooking, trusted brands as well as digital engagement and purpose-minded practices.\nThese long-term trends have only accelerated during the pandemic, and our alignment, combined with the breadth and reach of our portfolio, sustainably positions us for continued growth.\nThese underlying trends, current market conditions and our robust 2021 plans position us well to successfully execute on our growth strategies in both segments.\nTurning to slide 11.\nStarting with our Consumer segment, around the world, we continue to experience sustained elevated consumer demand, which is real incremental consumption and reflects the trend of consumers cooking more at home.\nAcross our APZ region, consumer demand continues to be strong.\nIn China, consumer consumption remains strong, and we continue to see recovery in foodservice, which, in China, is in our Consumer segment, with approximately 90% of restaurants open during the Chinese New Year period.\nIn Australia, even with restaurant restrictions eased and away from home demand increasing, at-home consumption has remained elevated.\nAnd as I mentioned earlier, we are retaining households that came into our brands last year.\nAnd we're also realizing growth with our away from home customer.\nIn many of our largest markets in EMEA, restrictive COVID-19 measures are still in place, further fueling at-home consumption, and we are seeing sustained levels of demand.\nIn the Americas, as restrictions are easing and vaccinations are continuing, consumption remains elevated.\nConsumers are continuing to come to our brand, having a good experience and buying our products again.\nConsumers are cooking more from scratch and adding flavor to their meal occasions is a key long-term trend which has accelerated during the pandemic.\nAs we've shared previously, our proprietary consumer survey data, supported by external research indicates consumers are enjoying the cooking experience as it provides a creative outlook, reduces stress and connects the family.\nAnd consumers feel meals prepared at home are safer, healthier, better tasting and cost less.\nIn our recent consumer survey from February, these positive sentiments are not only still true but have strengthened.\nConsumers' interest in cooking has increased in recent months versus the end of last year because they want to cook versus have to cook.\nFor example, approximately 50% of the consumers surveyed indicated they are cooking more now because they want to try new recipe, ingredient, cooking method or tool or simply just cook from scratch, and approximately 40% also indicated they're trying to recreate restaurant meals at home.\nImportantly, over two-thirds of consumers surveyed claim they would maintain or increase their current level of cooking at home even if life were to return to normal next week, whatever normal may be.\nWe continue to believe that consumer behavior and sentiment driving an increased and sustained preference for cooking at home will continue globally and persist beyond the pandemic, further driving consumer demand for our products in 2021 and beyond, fueled by robust brand marketing, differentiated new products and our strong category management initiatives.\nOur category management initiatives are designed to continue to strengthen our category leadership by driving growth for both us and our customers.\nIn the US, in 2020 we began our initiative to reinvent the in-store experience for spices and seasonings consumers by introducing new merchandising elements to improve navigation and drive inspiration, transforming and at times confusing shelves with three shoppable sections.\nOur rollout has continued in 2021, with plans to implement in thousands of stores, and the early indication is positive, with the category and McCormick branded growth outpacing the rest of the market in transformed stores.\nWe are also investing in e-commerce to drive McCormick and category growth.\nIn the first quarter, we delivered over 90% global e-commerce growth, with particular strength in omnichannel.\nWe are investing in content, retail research and innovation specifically for e-commerce, trialing new items of packaging in the direct-to-consumer channel first.\nFor example, in the Americas we've launched unique flavor inspiration products such as Frank's RedHot Everything Bagel Seasonings, and in China we are launching a ready to eat chili paste on our direct to consumer platform.\nIn EMEA, following the successful launch of the innovative street food seasonings the last year, we are now accelerating online growth with variety, bundle packs and multi-buy offers on our main e-commerce channels.\nTurning to global brand marketing.\nWe continue to increase our investments across our entire portfolio as evident in our 17% increase in the first quarter and plan for another significant increase in the second quarter.\nOur investments have proven to be effective, and we will continue to connect with consumers online, turning real-time insights into actions by targeting messaging focused on providing information and inspiration.\nWe expect our brand marketing investments, combined with the valuable brand equities and strong digital consumer engagement will continue to drive growth with existing consumers and the millions of consumers gained in 2020.\nHighlighting some of our first quarter investments in the Americas and EMEA regions on slide 12.\nStarting with the Americas.\nWe continued our advertising campaign, It's Gonna Be Great, with a focus on consumers' continuing traditions and preparing the families' signature holiday dishes even if their celebrations look different.\nOur Frank's Super Bowl campaign integrated across digital, social, online, video and TV featured fan favorite Eli Manning promoting Frank's RedHot as approachably hot and was our best Super Bowl campaign yet garnering record high impressions.\nAs part of our Zatarain's Bold Like That campaign, we partnered with New Orleanian author and poet Cleo Wade to promote virtual Mardi Gras celebrations with authentic New Orleans flavors, #Zatarain'sPorchParty, and recognizing virtual celebrations replace live Mardi Gras events, we supported Culture Aid NOLA, an organization which distributes food to hospitality workers impacted by pandemic restrictions.\nTurning to EMEA, where we have invested a substantial portion of our brands' marketing, our digital marketing and promotional activities included our holiday campaign featuring a festive gold cap limited edition packaging which drove strong holiday results in our major markets.\nIn the UK, with our New Year flavor resolutions campaign, we inspired consumers with recipes and products to flavor their healthy kick, whether it be through the heat of Frank's or spicing it up through Schwartz.\nAnd in France, we're giving families another reason to celebrate in 2021.\nIn 2020, birthday celebrations were not just a piece of cake.\nSo with the inspiration of our Half-py Birthday marketing campaign, consumers can celebrate their half birthdays, complete with Vahine's launch of a decimal comma-shaped candle to top their cakes made with our Vahine baking products.\nLooking at just a few of our second quarter plans, in the Americas we'll inspire restaurant quality cooking with our It's Gonna Be Great campaign.\nOur Vahine brand in EMEA is sponsoring a prime-time French baking program which will showcase our homemade dessert line.\nIn both regions, we launched Easter campaigns, bringing the family together with baking and crafting ideas.\nFinally, our plans include support of our robust new product launches.\nNew products are integral to our growth.\nIn our Consumer segment, new product innovation differentiates our brands and strengthens our relevance with our consumers.\nOur 2020 launches have made exceptional trials and are providing significant momentum into this year.\nAnd in 2021, we have a robust global pipeline of new product launches, and I'm happy to share some of our first half launches as seen on slide 13.\nWe're meeting consumers at the intersection of flavor and health.\nWe're launching Just 5 dry recipe mixes in the US, dips and dressing mixes in flavors like French onions and Homestyle Ranch, the clean and short ingredient statements, five simple ingredients delivering a classic flavor experience.\nAnd in France, we are expanding our range of organic products in our Vahine homemade dessert line.\nWhen it comes to heat, we're continuing to broaden our French portfolio globally.\nIn the US, we're expanding French green sauces, with a milder tangy Buffalo flavor and a garlic Buffalo flavor or combining savory garlic with spicy eats.\nAlso in the US, we have just launched Cholula wing sauces in two flavors: Mexicali Cilantro Lime and Caliente Spicy Arbol Peppers in a unique bottle with the iconic wooden cap.\nAnd in the UK, we're launching Frank's craft additions, capitalizing on interest in Frank's heat with differentiated flavors such as roasted Jalapeno and raw [Phonetic] Habanero.\nWe are responding to consumers' demand for convenience and flavor.\nIn the US, our launch of frozen appetizers, providing hot chicken bites and Buffalo chicken dips with Frank's flavor that are ready in minutes is gaining momentum with one of our best new product starts.\nWe're excited at the launch of new Grill Mates all-purpose grilling seasonings for consumers who want to respect the need.\nSimple course ground seasonings for the open flame that cling to the meat and lock in juiciness.\nFinally, our innovation is not only all about flavor but also staying relevant with our consumers through our packaging innovation.\nWe're continuing the rollout of our first choice bottle with its consumer preferred transparent and functional design, modern look and a reinforcement of fresh flavor into our Eastern European markets.\nThese markets have predominantly been sachet markets for spices and seasonings and perceive the bottle packaging as a premium offering.\nAnd in Canada, we're beginning the relaunch of our gourmet line in the First Choice bottle as well as adding new flavor varieties.\nIn the UK, not only are we building on our Schwartz recipe mix momentum with the introduction of flavorful line extensions.\nWe're also advancing on our sustainable packaging commitment with sachet packaging that is 100% recyclable.\nSchwartz will be the first brand in the UK dry recipe mix category with recyclable packaging.\nAnd in France, with the redesign of our Ducros grinder.\nIts appearance not only has greater consumer appeal, but it also reduces our carbon footprint.\nTurning to Flavor Solutions.\nIn this segment, we have a diverse customer base, and have seen various stages of recovery.\nFrom a food at home perspective, our Flavor Solutions' growth varies by packaged food customer.\nOverall, we are carrying our growth momentum with these customers into 2021, driven by strength in their iconic core products as well as new products and bigger-bet innovation in 2021.\nOverall, the sell-in of our new product launches and big bet innovations from these customers slowed in 2020 due to the focus on keeping core items on shelf.\nThere are still new product launches, and in many cases they are smaller expansions of the core and more channel oriented.\nMoving into 2021, we're excited about the momentum of the 2020 launches, but even more excited about the robust 2021 pipeline.\nOur customers have bigger bet innovations in their plans.\nI would look forward to collaborating with them and driving growth from those launches.\nThe key enablers driving our success and developing winning flavors for our customers is our insight on consumer and culinary trends.\nWe've been at the forefront forecasting emerging flavors for 21 years.\nThrough the McCormick flavor forecasts, we have a history of identifying the top trends in ingredients, catering to future of flavor, many of which have stood the test of time, whether it was Ma Turmeric or pumpkin pie spices, the flavor of Chipotle or dishes with [Indecipherable].\nIn April, we'll be launching our newest addition that will shake up the way we cook, flavor and eat.\nWe'll feature new trends, flavors and recipes that will not only flavor our Consumer segment innovation, but also drive wins with our Flavor Solutions' customer.\nIn our away from home portion of this segment, as I mentioned earlier, we are seeing growth from our restaurant and other foodservice customers in our APZ region as restrictions have eased.\nThe QSR demand momentum continues to strengthen, particularly as they continue to expand their menu options with limited time offers and are increasing promotional activities.\nBranded foodservice demand as it relates to entertainment, stadium for hospitality venues, for instance, is recovering at a slower pace.\nIn EMEA and the Americas, during the first quarter our restaurants and other foodservice customers were still impacted by government imposed COVID-19 restrictions in many markets.\nThere is now optimism with many of these customers related to restrictions' easing and reopening plans.\nFocus has shifted from adapting operating model to the supply chain preparedness for the second half of the year.\nWe're collaborating with our customers to ensure a strong recovery with pent-up demand being met.\nWe expect the recovery of some of our branded food customers will start to begin, similar to what we've seen in APZ.\nAs QSR customers are oriented less to dine-in, their recovery will be at a faster pace than the rest of the restaurant and foodservice industry.\nWe have positive fundamentals in place to navigate through this period and are excited about the recovery momentum.\nAcross our entire Flavor Solutions portfolio, we were advantaged by our differentiated customer engagement and plan on driving further wins for both us and our customers in fiscal 2021.\nWith our customer intimacy approach, we will continue to drive new product wins, collaborate on opportunities and solutions, manage through recovery plans and, importantly, further strengthen our customer partnerships.\nWhen we collaborate with our customers and our technical innovation center, we have a high win rate.\nSince we could not connect in person during 2020, we adapted to new ways of collaborating through creative, digital and virtual solutions.\nThe interactive experience for our customers build their excitement, awareness and confidence in our unique capabilities in an engaging and inspiring way.\nWe continue to not only strengthen our engagement in 2020, but we also proved we could maintain a high win rate whether physically in our innovation centers or not, and have carried that momentum into 2021.\nIn our Flavor Solutions segment, the execution of our strategy to migrate our portfolio to more technically insulated and value-added categories will continue in 2021.\nThe top-line opportunities gained from our investments to expand flavor scale, our momentum in flavor categories as well as opportunities from our FONA acquisition, we expect to realize further results from this strategy.\nLastly, we continue to be recognized for our efforts for doing what's right for people, communities and the planet, our purpose-led performance.\nFollowing being named by Corporate Knights in their 2021 Global 100 Most Sustainable Corporations Index as number one in the packaged food and processed foods and ingredients sector, McCormick was also recently named to Barron's 2021 100 Most Sustainable Companies list for the fourth consecutive year.\nAs we continue our sustainability journey, I'm excited to announce that later this week we will begin using 100% renewable electricity in all our Maryland and New Jersey-based facilities.\nThis includes our manufacturing operations, distribution centers, offices and technical innovation center and will result in an 11% reduction in our global greenhouse gas emissions.\nMoving to slide 16.\nIn summary, we continue to capture the momentum we have gained in our Consumer segment and with our Flavor Solutions' at home customers, have positive fundamentals in place to navigate through the Flavor Solutions away from home recovery and are excited about our Cholula and FONA acquisitions, all of which bolster our confidence for continued growth in 2021.\nOur fundamentals, momentum and growth outlook are stronger than ever.\nOur achievements in 2020, our effective strategies, our robust operating momentum and the breadth and reach of our portfolio reinforce our confidence in delivering another strong year of growth and performance in 2021.\nFollowing an extraordinary year in 2020, our 2021 outlook reflects both our strong underlying base business performance and acquisitions driving significant sales growth as well as strong operating income growth, even considering extraordinary COVID-19 costs and our business transformation investments which highlights our focus on profit realization.\nOur top-tier long-term growth objectives remain unchanged and we're positioned for continued success.\nI'll now provide some additional comments on our first quarter performance and an update on our 2021 outlook.\nAs Lawrence mentioned, our first quarter results were outstanding.\nStarting with our top line growth.\nAs seen on slide 18, we grew sales 20% in constant currency during the first quarter.\nOur volume and product mix, acquisitions and pricing each contributed to the increase.\nOur organic sales growth was 16%, driven by our Consumer segment, and incremental sales from our Cholula and FONA acquisitions contributed 4% across both segments.\nThe Consumer segment sales grew 32% in constant currency, with double-digit growth in all three regions.\nThe sustained shift in consumer consumption continues to drive increased demand for our consumer product, fueled by our brand marketing, new products and category management initiatives and resulted in higher volume and mix in each region.\nOn slide 19, Consumer segment sales in the Americas increased 30% in constant currency versus the first quarter of 2020, with 5% of the increase from the acquisition of Cholula.\nThe remaining increase from higher volume and product mix was broad based across majority of categories and brands as well as private label products, with particular strength in the McCormick, Frank's RedHot, French's, Zatarain's, Lawry's, Simply Asia and Gourmet Garden brands.\nIn EMEA, constant currency Consumer sales grew 26% from a year ago, with double-digit growth in all countries and categories across the region.\nThe most significant volume and mix growth drivers were Schwartz and Ducros branded spices and seasonings.\nVahine homemade dessert products, packing products and our Kamis branded products in Poland.\nConsumer sales in the Asia Pacific region increased 55% in constant currency, driven primarily by the recovery from the disruption in China consumption last year, as Lawrence mentioned.\nExcluding that recovery impact, the region had double-digit growth due to strong China consumer and branded foodservice demand, partially driven by the timing of Chinese New Year and related holiday promotions as well as continued strength in Australia.\nTurning to our Flavor Solutions segment on slide 22.\nWe grew first quarter constant currency sales 3%.\nIn the Americas, Flavor Solutions constant currency sales grew 2%, driven by the FONA and Cholula acquisitions, a 7% increase, as well as pricing to offset cost increases.\nVolume and product mix declined due to a reduction in demand from branded foodservice and other restaurant customers, partially offset by higher demand from packaged food companies, with particular strength in snack seasonings and savory flavors.\nIn EMEA, constant currency sales were comparable to last year as pricing actions offset cost increases.\nVolume and product mix declined due to lower sales to branded foodservice and other restaurant customers, partially offset by sales growth with packaged food companies, with strength in snack seasonings.\nIn the Asia Pacific region, Flavor Solutions sales rose 18% in constant currency, driven by higher sales to QSRs in China and Australia, partially due to our customers' limited time offers and promotional activities as well as the China recovery impact from last year's COVID-19 related lockdown.\nAs seen on slide 26, adjusted operating income, which excludes transaction and integration costs related to the Cholula and FONA acquisitions as well as special charges, increased 35% or, in constant currency, 32%, in the first quarter versus the year ago period.\nThe Consumer segment adjusted operating income grew 59% to $190 million.\nThe 54% constant currency growth from higher sales, favorable mix and CCI-led cost savings more than offset COVID-19 related costs and a 17% increase in brand marketing.\nIn the Flavor Solutions segment, adjusted operating income declined 4% to $73 million with minimal impact from currency.\nHigher sales and CCI-led cost savings were more than offset by unfavorable manufacturing costs.\nAs seen on slide 27, adjusted gross profit margin expanded 60 basis points in the first quarter versus the year ago period due to favorable mix, both within the Consumer segment and due to the sales shift between segments.\nIn addition, CCI-led cost savings were partially offset by COVID-19 related costs.\nOur selling, general and administrative expense as a percentage of net sales was down year-on-year by 100 basis points from the first quarter of last year.\nLeverage from sales growth drove the decline, partially offset by the increase in brand marketing I mentioned a moment ago.\nWith the gross margin expansion and SG&A leverage, adjusted operating margin expanded 160 basis points from the first quarter of 2020.\nTurning to income taxes on slide 28.\nOur first quarter adjusted effective tax rate was 22.7% compared to 18.4% in the year ago period.\nThe first quarter adjusted tax rate in 2020 was significantly impacted by a favorable discrete item related to a refinement of our entity structure.\nIncome from unconsolidated operations increased 28% in the first quarter of 2021 due to strong underlying performance of our joint venture in Mexico.\nAt the bottom line, as shown on slide 30, first quarter 2021 adjusted earnings per share were $0.72 as compared to $0.54 for the year-ago period.\nThe increase was due to our higher adjusted operating income performance, partially offset by a higher adjusted income tax rate.\nOn slide 31, we summarize highlights for cash flow and the balance sheet.\nOur cash flow from operations was an outflow of $32 million for the first quarter of 2021 compared to an inflow of $45 million in the first quarter of 2020.\nThis change was primarily due to a lower level of cash generated from working capital associated with increased sales, higher incentive compensation payments and the payment of transaction and integration costs related to our recent acquisitions.\nIn February, we raised $1 billion through the issuance of five year 0.9% notes and 10 year 1.85% notes.\nWe took the opportunity in a low interest rate environment to optimize our long-term financing following our Cholula and FONA acquisitions.\nWe also returned $91 million of cash to our shareholders through dividends and used $49 million for capital expenditures this quarter.\nWe expect 2021 to be another year of strong cash flow, driven by profit and working capital initiatives, and our priority is to continue to have a balanced use of cash: funding investments to fuel growth, returning a significant portion to our shareholders through dividends and paying down debt.\nNow I would like to discuss our 2021 financial outlook on slides 32 and 33.\nWith our broad and advantaged flavor portfolio and robust operating momentum and effective growth strategies, we are well positioned for another year of differentiated growth and performance.\nIn our 2021 outlook, we are projecting top line and earnings growth from our strong base business and acquisition contribution, with earnings growth partially offset by incremental COVID-19 costs and ERP investments as well as a higher projected adjusted effective tax rate.\nWe also expect there will be an estimated 2 percentage point favorable impact of currency rates on sales, adjusted operating income and adjusted earnings per share.\nAt the top line, due to our first quarter results and robust operating momentum, we are increasing our expected constant currency sales growth to 6% to 8% compared to 5% to 7% previously, which continues to include the incremental impact of the Cholula and FONA acquisitions at the projected range of 3.5% to 4%.\nWe anticipate our organic growth will be primarily led by higher volume and product mix, driven by our category management, brand marketing, new products and customer engagement growth plans.\nAs Lawrence mentioned earlier, we expect sales growth to vary by region and quarter in 2021, given 2020's level of demand volatility and the pace of the COVID-19 recovery, but importantly, we continue to expect we will drive overall organic sales growth with the full year in both of our segments.\nWe're now projecting our 2021 adjusted gross profit margin to be comparable to 2020 due to increasing inflationary pressure, mainly due to transportation costs.\nBut our inflation expectation for the full year remains a low single-digit increase.\nOur adjusted gross margin projection reflects margin accretion from the Cholula and FONA acquisitions as well as unfavorable sales mix in both segments and COVID-19 costs.\nOur estimate for COVID-19 costs remains unchanged at $60 million in 2021 as compared to $50 million in 2020 and weighted to the first half of the year.\nAs a reminder, fiscal 2021's COVID-19 costs are largely from third-party manufacturing costs.\nReflecting the increase in our sales outlook, we are also increasing our expected constant currency adjusted operating income growth.\nOur adjusted operating income growth rate reflects expected strong underlying performance from our base business and acquisitions projected to be 11% to 13% constant currency growth compared to 10% to 12% previously.\nThis is partially offset by a 1% impact from increased COVID-19 costs compared to 2020 and a 3% impact of the estimated incremental ERP investment.\nThis results in total projected adjusted operating income growth rate of 7% to 9% in constant currency, increase from 6% to 8% previously.\nThis projection reflects the inflationary pressure I just mentioned as well as our CCI-led cost savings target of approximately $110 million.\nWe also continue to expect a low single-digit increase in brand marketing investments, which will be heavier in first half of the year.\nWe also reaffirm our 2021 adjusted effective income tax rate projected to be approximately 23%.\nThis outlook versus our 2020 adjusted effective tax rate is expected to be a headwind to our 2021 adjusted earnings-per-share growth of approximately 4%.\nWe are increasing our 2021 adjusted earnings per share expectations to growth of 5% to 7%, which includes a favorable impact from currency.\nThis increase reflects our higher adjusted operating profit outlook and the impact from optimizing our long-term financing, which I mentioned earlier.\nOur guidance range for the adjusted earnings per share in 2021 is now $2.97 to $3.02 compared to $2.91 to $2.96 previously.\nThis compares to $2.83 of adjusted earnings per share in 2020.\nThis growth reflects strong base business and acquisition performance growth of 11% to 13% in constant currency, partially offset by the impacts I just mentioned related to COVID-19 costs, our incremental ERP investments and the tax headwind.\nBased on the expected timing of some expense items such as COVID-19 costs and brand marketing investments as well as a low tax rate in the first half of last year, we expect our earnings growth to be weighted to the second half of the year.\nOur first quarter performance was a strong start to the year, and we are optimistic for the balance of the year, though we recognize we are lapping a very strong earnings performance in the second quarter of 2020 while also making investments to drive growth in 2021.\nIn summary, we are projecting strong underlying base business performance and growth from acquisitions in our 2021 outlook, with earnings growth partially offset by incremental COVID-19 costs, the ERP investments as well as a higher projected effective tax rate.\nNow that Mike has shared our financial results and outlook in more detail, I would like to recap the key takeaways, as seen on slide 34.\nOur first quarter results, with double-digit sales, adjusted operating income and earnings growth bode an outstanding start to the year and bolster our confidence in a stronger 2021 outlook.\nWe have a strong foundation and a balanced portfolio, which drives consistency in our performance.\nWe are confident the sustainability of higher at-home consumption will persist beyond the pandemic and we are well positioned to capitalize on accelerating consumer trends as well as prepared for away from home consumption recovery.\nCholula and FONA have both started the year with strong momentum in results.\nOur enthusiasm for these acquisitions and our confidence that we will deliver on our plan has only strengthened over the last few months.\nOur fundamentals, momentum and growth outlook are stronger than ever.\nOur 2021 outlook reflects another year of differentiated growth and performance while also making investments for the future.\nWe are confident we will continue on our growth trajectory in 2021 and beyond.\n",
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"content": "q1 sales rose 22 percent.\nq1 adjusted earnings per share $0.72 excluding items.\nsees fy sales up 8 to 10 percent.\noperating income in 2021 is expected to grow by 5% to 7% from $1.00 billion in 2020.\nexpects to drive organic sales growth in both its consumer and flavor solutions segments in 2021.\nsees fy 2021 adjusted earnings per share $2.97 to $3.02 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: We will begin with remarks from Lawrence Kurzius, Chairman, President and CEO; and Mike Smith, Executive Vice President and CFO, and we'll close with a question-and-answer session.\nI will now turn the discussion over to Lawrence.\nOur third quarter performance demonstrates again that the combination of our balanced portfolio with the effective execution of our strategies to capitalize on accelerating consumer trends and strong engagement with our employees have positioned us well to drive differentiated growth.\nRemarkably, we delivered an 8% sales increase versus last year and 17% versus 2019.\nOur third quarter results reflect a robust and sustained growth momentum, as we delivered organic sales growth on top of our exceptional third quarter performance last year.\nOur third quarter results also included strong contributions from our Cholula and FONA.\nSales growth in our Flavor Solutions segment was broad-based, with the at-home products in our portfolio, flavors and seasonings growing at approximately the same rate as our away from home products, which was primarily driven by a robust recovery from last year's lower demand from our restaurant and other foodservice customers attributable to COVID-19 restrictions and consumers' reluctance to dine out.\nOur Consumer segment results reflect the lapping of the year-ago elevated demand in the lockdown phase of the pandemic, from consumers eating and cooking more at home, as well as the sustained shift to consumer at-home consumption higher than pre-pandemic levels.\nTaken together, these results continue to demonstrate the strength and diversity of our offering, the breadth and reach of our portfolio with compelling offerings for every retail and customer strategy across all channels creates a balanced and diversified portfolio that enables us to drive consistency in our performance even in a volatile environment.\nTurning to slide 5.\nTotal third quarter sales grew 8% from the year-ago period or 5% in constant currency.\nSubstantial constant currency sales growth in our Flavor Solution segment more than offset a slight constant currency sales decline in our Consumer segment, driven by the factors I just mentioned.\nAdjusted operating income was comparable to the third quarter of last year, including a 3% favorable impact from currency.\nThe benefit of higher sales was more than offset by higher cost inflation and industry logistics challenges as well as by a shift in sales between segments.\nOn the bottom line, our third quarter adjusted earnings per share was $0.80 compared to $0.76 in the year-ago period, driven by higher sales and a lower tax rate, partially offset by cost pressures.\nAs we have stated previously, we expect growth to vary by quarter in 2021.\nImportantly, we have delivered outstanding year-to-date performance.\nSales and adjusted operating income are up 13% and 9% year-over-year respectively, both of which include a 3% favorable impact from currency and we've grown adjusted earnings per share of 8%.\nYear-to-date versus 2019, we've driven sales, adjusted operating income and adjusted earnings-per-share growth of nearly 20% across all three metrics.\nI'd like to say a few words about the current cost environments impact on our third quarter results as well as our outlook, which Mike will cover in more detail.\nWe stated in our July earnings call we are operating in a dynamic cost environment and like the rest of the industry experiencing cost pressures, we're seeing broad-based inflation across our raw and packaging materials as well as transportation costs to partially offset rising costs, we have raised prices where appropriate, but as usual, there is a timeline associated with pricing, particularly with how quickly costs are escalating and therefore the phasing of most of our actions has taken place during the fourth quarter.\nThose pricing actions are on track and we appreciate our customers working with us to navigate this environment.\nIn the last few months, inflation has continued to ratchet up, mainly with packaging and transportation cost.\nWe are experiencing the highest inflationary period of the last decade or even two.\nWe, along with our peers and customer are also facing additional pressure on our supply chain due to strained transportation capacity and labor shortages and distribution.\nThese pressures not only impact costs but also negatively impact sales as the addition of further supply chain complexity makes it harder to get order shipped and received by customers.\nAnd this pressure is amplified by continued elevated demand.\nOverall, we have a demonstrated history of managing through inflationary period with a combination of pricing and cost savings and we expect to manage through this period as we have in the past.\nNow let's turn to our third quarter segment business performance, which includes comparisons to 2019 pre-pandemic levels as we believe these will be more meaningful than the comparison for 2020 given the dramatic shift in consumer consumption between at-home and away from home experienced in the year-ago period.\nStarting on Slide 7, Consumer segment sales grew 1%, including a 2% favorable impact from currency and incremental sales from our Cholula acquisition compared to the highly elevated demand levels of the year-ago period.\nOur Consumer segment organic sales momentum on a two-year basis was up double digits, highlighting how the sustained shift in consumer consumption continues to drive increased demand for our products and outpaces pre-pandemic level.\nOur Americas constant currency sales declined 1% in the first quarter, with incremental sales from our Cholula acquisition contributing 3% growth.\nOur total McCormick U.S. branded portfolio consumption as indicated in our IRI consumption data and combined with unmeasured channels declined 10% following a 31% consumption increase in the third quarter of 2020, which results in a 19% increase on a two-year basis.\nAnd that has remained high and we are realizing the benefit of our U.S. manufacturing capacity expansion, although some products remain stressed by sustained high demand.\nShelf conditions are improving and we're seeing sequential improvement in our share performance.\nThat said, as I mentioned a moment ago, the current issues related to logistics pressures continue to make it challenging for market leaders like McCormick to keep high demand products and stock, which has prevented us from making further progress in replenishing both retailer and consumer inventories in the third quarter.\nImportantly though, we are better positioned than we were last year entering the holiday season and are confident in our holiday merchandising plans.\nFocusing further on our U.S. branded portfolio, our 19% consumption growth versus the third quarter of 2019 was led by double-digit growth in spices and seasonings, hot sauces, both Cholula and Frank's RedHot, and barbecue sauce, as well as our Asian frozen product.\nIn pure play e-commerce, we delivered triple-digit growth compared to 2019, with McCormick branded consumption outpacing all major categories.\nThis is the sixth consecutive quarter our U.S. branded portfolio consumption grew double digits versus the same period two years ago, which reflects continuation of consumers cooking and using flavor more at home and the strength of our brands.\nOur key categories continued to outpace the center of store growth rates versus the same period of two years ago, favorably impacting not only the McCormick brand but our smaller brands as well.\nHousehold penetration and repeat rates have also grown versus 2019.\nAnd when our consumers shop, they're buying more of our products than they were pre-pandemic.\nMcCormick continues to win in hot sauce.\nAcross our brands, McCormick grows to be the number one hot sauce manufacturer globally earlier this year.\nIn the third quarter, Frank's RedHot, the number one brand in the U.S., was joined at the top of the category by Cholula, which we have driven to the number two ranking.\nNow turning to EMEA, which has continued its outstanding momentum.\nWe had strong market share performance in the third quarter versus last year, maintaining or gaining share across the region and key categories following our strong gains in the third quarter last year.\nCompared to the third quarter of 2019, our total EMEA region we drove double-digit consumption growth in herbs, spices and seasonings.\nAnd turning up the heat, Frank's RedHot has grown consumption 75% and had gained a significant share versus the two year-ago period.\nAcross the region, our household penetration and repeat rates have also grown versus the two year-ago period.\nOur year-to-date higher brand marketing investments in EMEA are proving to be effective as evidenced by the metrics I just discussed, as well as our achieving above benchmark rates, the reach, engagement and click-through for instance in our digital marketing.\nIn the Asia-Pacific region, third quarter sales were strong, reflecting our continued recovery from China's lower branded foodservice sales last year.\nOur consumer product demand in the region declined due to lapping significant growth last year.\nThe region is also experienced supply chain challenges with ocean freight capacity constraints impacting the quarter's growth.\nIn Australia, we continue to see strong consumption growth versus 2019, with key brands recently turning back toward 2020 levels, with Frank's RedHot already higher than the last year's elevated consumption.\nAcross all regions in our Consumer segment, we are continuing to fuel our growth with our strong brand marketing, new product launches and our category management initiatives.\nWe're making brand marketing investments across our portfolio to connect with our consumers, particularly online.\nEarly in the third quarter in the Americas, we began our search for the first Director of Taco Relations.\nThis was a dream opportunity for the over 5,000 applicants to showcase their Taco expertise and enthusiasm for our product and their video application.\nTo date, we have garnered over 1 billion earned impressions related to our search, and these will continue to grow upon the announcement of our new Director of Taco Relations next week, on October 4th, in celebration of National Taco Day.\nWe are not only creating buzz through our digital marketing, but also with our e-commerce direct to consumer new product launches.\nIn the Americas, we drove new passionate users to our brands and digital properties with the launch of Sunshine All Purpose Seasoning, a new product developed in partnership with social media influencer Tabitha Brown, inspired by her joyful personality and health and wellness focused recipes, the salt-free and gluten-free Caribbean inspired blend sold out in just 39 minutes, generating record sales from e-commerce driven innovation and over 700 million earned impressions.\nOur new product launches differentiate our brands and strengthens our relevance with consumers.\nAnd with our global leadership position in our sauce, we are in the perfect position to capitalize on consumers' rising demand for hot and spicy flavors through a global heat platform.\nOur recent launches of Frank's RedHot frozen appetizers and Cholula Wing sauces in the Americas, as well as Frank's RedHot craft flavors in EMEA have made strong contributions to growth in the third quarter.\nJust in time for Halloween, EMEA is introducing dead hot gift sets for e-commerce, featuring Frank's RedHot.\nAnd in China, our recently launched ready to eat chili paste as the highest 30-day repeat rate of all McCormick direct to consumer products on Tmall.\nTurning to category management.\nOur initiatives are designed to strengthen our category leadership by driving growth for both McCormick and retailers.\nThese initiatives include simply changing shelf placement.\nFor instance, increasing Cholula velocity over 30% or changing the tile [Phonetic] placement at a large retailer, to reinventing the spice and seasoning of shopping experience.\nIn the U.S., we are anticipating a cumulative implementation of our spice aisle [Phonetic] program, so it began in 2020 at 10,000 stores by year-end versus 2019 to remove year over year noise, sales in the beginning of August show retailers that have adopted the spice aisle changes are growing the category faster than those who have not, and McCormick branded spices and seasoning portfolio is growing solid mid-single digits faster in implemented stores versus stores which have not the adopted the changes.\nAnd in Eastern Europe, the rollout of our first choice bottle, which has perceived this premium and what was predominantly sachet only market is elevating the spices and seasoning category and driving increased share in our Eastern European market.\nMoving forward, we are confident that we will continue the momentum of our Consumer segment.\nWe have more consumers than pre-pandemic.\nThey have come into our brands, are having a good experience and our buying our products again.\nWe are excited about our growth trajectory and expect long lasting growth from the sustained shift to consumers cooking more at home, fueled by our brand marketing, new products and category management initiatives.\nTurning to Slide 9, our Flavor Solutions segment grew 21% or 17% in constant currency, reflecting both strong base business growth and contributions from our FONA and Cholula acquisition.\nOur third quarter results includes the robust recovery from last year's lower demand from our restaurant and other foodservice customers, many of which are lapping the curtailment approach of away from home dining, as well as strong continued momentum with our packaged food and beverage customers.\nNotably, growth was driven equally from both the at-home and the away from home products in our portfolio.\nOn a two-year basis, our sales also increased double digits, with strong growth in all three regions.\nIn the Americas, our FONA and Cholula acquisitions made a strong contribution to our significant third quarter growth, and we're executing on our strategy to shift our portfolio to more value-added and technically insulated products.\nWe continue to see outstanding growth momentum with our consumer packaged food customers to new products and base business constrain.\nConsumers' rising global demand for hot and spicy flavors is driving growth for both our customer and for our seasonings that flavor them.\nCompared to last year's third quarter, snack seasonings grew high single digits with strong growth in core iconic product as well as new products, and the innovation pipeline continues to be robust.\nOur confidence will accelerate our global flavors platform continues to be reinforced by their excellent performance with double-digit sales growth compared to last year.\nBeverages are driving significant growth with particular strength in the fast growing Performance Nutrition category.\nAnd finally in the Americas, branded foodservice contributed significant growth for the quarter and our [Indecipherable] channel has continued to strengthen as more dining options reopen.\nIn EMEA, we had strong growth versus both last year and 2019 across all markets and channels.\nQuick service restaurants or QSRs are driving growth through increased promotional activities and limited time offers.\nOur branded foodservice sales with easing restrictions in the hospitality industry increased at a double-digit rate versus the third quarter of last year and as packaged food and beverage companies our performance was strong on top of last year's strong growth, but the hot and spicy trends fueling growth in snack seasonings particularly through new product innovation.\nOur sales growth in the Asia Pacific region was partially impacted by the timing of our QSR customers strong limited time offers and the promotional activities in the third quarter of last year, which increased restaurant traffic as COVID-19 restrictions lifted.\nAs we've said in the past, limited time offers and promotional activities and cause some sales volatility from quarter to quarter.\nWe recognize a part of our third quarter Flavor Solutions results were due to the comparison to low away from home demand last year.\nNotably, our growth also includes strong contributions from FONA and Cholula, robust growth with packaged food and beverage customers both in the base business and the new product wins, driven by our differentiated customer engagement and continuing momentum with QSR.\nYear-to-date versus 2019, we delivered 13% constant currency growth, including FONA and Cholula and 6% constant currency organic growth.\nThese results combined with our effective growth strategies bolster our confidence and a continuation of our robust growth trajectory in our Flavor Solutions segment.\nNow on Slide 10, I'm excited to share some important purpose-led performances.\nJust a few days ago, we were named as a global compact lead company by the United Nations for our ongoing commitment to the UN Global Compact and its 10 principles for responsible business.\nWe are honored by this recognition for our commitment to sustainability and to be one of only 37 companies in the world and the only U.S.-based food producer to be included on this prestigious list.\nSustainable sourcing is the top priority and we've been actively working on initiatives such as our sustainability-linked financing partnership with IFC and Citi, which provides our urban spice suppliers in Indonesia and Vietnam with financial incentives linked to improvements in measures of social and environmental sustainability, as well as our partnership with Heifer International on the launch of the Cardaforestry project, which aims to increase smallholder farmer resilience and improve the quality of cardamom and all spice in Guatemala.\nIn addition, Latina Style, Inc. recently named us as one of the top 50 best companies for Latinos to work in the U.S.\nWe are thrilled to be recognized for our continued efforts for our diversity and inclusive.\nWe are committed to the long-term vitality of the people, communities and the planet we share and are proud of our impact in these areas.\nWe look forward to sharing more about these accomplishments as well as many others with you through our purpose-led performance report, which will be issued early next year.\nBefore turning it over to Mike, I'd like to make some qualitative comments regarding 2022.\nTo be clear, we are not providing 2022 guidance at this time.\nWe are a growth company and we expect to grow in both of our segments next year.\nAt the foundation of our sales growth is the rising consumer demand for flavor, fueled by younger generations.\nWe've intentionally focused on great categories that are growing and generating a long-term tailwind.\nWe are capitalizing on the long-term consumer trends that accelerated during the pandemic and for successfully executing on our strategies and initiatives.\nIn this dynamic and fast-paced environment, we are ensuring that we remain focused on long-term sustainable growth.\nRecently, cost pressures have rapidly accelerated and we are preparing for that to remain in 2022.\nWe plan to mitigate these costs, which we expect to fully offset over time through a combination of CCI-led cost savings, revenue management initiatives and pricing actions as needed.\nIn addition, we're taking prudent steps to reduce discretionary spend where possible.\nWe also expect the impact of COVID-19 to persist into 2022, which will create continued broad-based supply chain challenges.\nWe successfully demonstrated in the past our ability to manage through inflationary environment and cost pressures.\nImportantly, our strong growth trajectory supports our confidence that our long-term financial algorithm to drive continuous value creation to top line growth and margin expansion.\nWe have a strong foundation and remain focused on the long-term goals, strategies and values that have made us so successful.\nFor the reasons Lawrence mentioned, my comments will also include comparisons to 2019.\nStarting on Slide 13.\nOur top line growth continues to be strong.\nWe grew constant currency sales 5% during the third quarter compared to last year with incremental sales from our Cholula and FONA acquisitions contributing 4% across both segments.\nHigher volume and mix drove our organic sales increase with Flavor Solutions growth offset any decline in the consumer segment.\nVersus the third quarter of 2019, we grew sales 15% in constant currency with both segments growing double-digits.\nDuring the third quarter, our Consumer segment continued to lap last year's exceptionally high demand.\nVersus 2020, our third quarter Consumer segment sales declined 1% in constant currency, which includes a 3% increase from the Cholula acquisition.\nCompared to the third quarter of 2019, Consumer segment sales grew 14% in constant currency.\nOn Slide 14, Consumer segment sales in the Americas declined 1% in constant currency, lapping the elevated lockdown demand in the year-ago period, as well as the logistics challenges Lawrence mentioned earlier.\nIncremental sales from the Cholula acquisition contributed 3% growth.\nCompared to the third quarter of 2019, sales increased 17% in constant currency, led by significant growth in the McCormick, Lawry's, Grill Mates, Old Bay, Frank's RedHot, Cholula, Zatarain's, Gourmet Garden, Simply Asia, Stubb's and [Indecipherable] branded products, that's a lot of brands, partially offset by a decline in private label.\nIn EMEA, constant currency consumer sales declined 11% from a year-ago, also due to lapping the high demand across the region last year.\nNotably, this decline includes strong growth in our Eastern European market, on top of their significant volume growth last year, which was more than offset by declines in the region's other markets.\nOn a two-year basis, sales increased 10% in constant currency, driven by strong growth in our Kamis, Schwartz, and Frank's RedHot branded products.\nConsumer sales in the Asia Pacific region increased 11% in constant currency due to the recovery of branded foodservice sales with a partial offset from the decline in consumer demand as compared to the elevated levels in the year-ago period.\nSales increased 4% compared to the third quarter of 2019, including a sales decline in India, resulting from a slower COVID-19 recovery.\nTurning to our Flavor Solutions segment and Slide 17, we grew third quarter constant currency sales 17%, including an 8% increase from our FONA and Cholula acquisitions.\nThe year-over-year increase, led by the Americas and EMEA regions, was due to strong growth with both packaged food and beverage customers and in away from home products.\nCompared to the third quarter of 2019, Flavor Solutions segment sales grew 16% in constant currency.\nIn the Americas, Flavor Solutions constant currency sales grew 19% year-over-year with FONA and Cholula contributing 12%.\nVolume and product mix increased, driven by significantly higher sales to branded foodservice customers together with growth for packaged food and beverage companies, with strength in snack seasonings.\nOn a two-year basis, sales increased 15% in constant currency versus 2019, with higher sales from acquisitions and packaged food and beverage companies, partially offset by the exit of some lower margin business.\nIn EMEA, constant currency sales grew 19% compared to last year due to increased sales to QSRs and branded foodservice customers, as well as continued growth momentum with packaged food and beverage companies.\nConstant currency sales increased 23% versus the third quarter of 2019, driven by strong sales growth with packaged food and beverage companies and QSR customers.\nIn the Asia Pacific region, Flavor Solutions sales rose 1% in constant currency versus last year and increased 8% in constant currency versus the third quarter of 2019, was driven by QSR growth and partially impacted by the timing of our customers limited time offers and promotional activities.\nAs seen on Slide 21, adjusted operating income, which excludes transaction and integration costs related to the Cholula and FONA acquisitions as well as special charges, was comparable to the third quarter of last year, including a 3% favorable impact from currency.\nAdjusted operating income in the Consumer segment declined 10% to $180 million or in constant currency 12%, driven by the cost pressures from inflation and logistics challenges, partially offset by CCI-led cost savings.\nThese logistics challenges not only impacted cost, but also negatively impacted sales.\nIn the Flavor Solutions segment, adjusted operating income rose 32% to $84 million or 27% in constant currency.\nHigher sales, CCI-led cost savings and favorable product mix as we continue to migrate our portfolio more than offset the cost pressures in this segment.\nAcross both segments, incremental investment spending for our ERP program was offset by lower COVID-19 costs compared to last year.\nDuring the quarter, we invested in brand marketing ahead of last year and notably we have increased our investments 11% on a year-to-date basis.\nAs seen on Slide 22, adjusted gross profit margin declined 260 basis points, driven primarily by the cost pressures we are experiencing and the lag in pricing.\nOur selling, general and administrative expense as a percentage of sales declined 110 basis points, driven by leverage from sales growth.\nThese impacts netted to an adjusted operating margin declined 150 basis points.\nIn addition to the factors I mentioned a few moments ago, the sales shift between segments unfavorably impacted both gross and operating margins.\nTurning to income taxes.\nOur third quarter adjusted effective tax rate was 14.1% compared to 19.3% in the year-ago period.\nBoth periods were favorably impacted by discrete tax items, with the larger impact this year due to the favorable impact of a reversal of a tax accrual.\nAdjusted income from unconsolidated operations declined 5% versus the third quarter of 2020.\nBased on our year-to-date results, we now expect a mid single-digit increase in our adjusted income from unconsolidated operations for 2021, up from our previous projection, but a low single-digit decrease.\nThis improvement is driven by strong performance from our McCormick de Mexico joint venture.\nAt the bottom line, as shown on Slide 25, third quarter 2021 adjusted earnings per share was $0.80 compared to $0.76 for the year-ago period.\nThe increase was primarily driven by lower adjusted income tax rate.\nAs compared to the third quarter of 2019, our 10% increase in adjusted earnings per share was primarily driven by sales growth.\nOn Slide 26, we summarize highlights for cash flow in the quarter end balance sheet.\nThrough the third quarter of 2021, our cash flow from operations was $373 million, which is lower than the same period last year.\nThe decrease was primarily due to the payment of transaction integration costs and higher use of cash associated with working capital.\nThis includes the impact of planned higher inventory levels to support significantly increased demand and to mitigate supply and service issues, as well as buffer against cost volatility.\nThrough the third quarter, we returned $272 million of this cash to our shareholders through dividends and used $190 million for capital expenditures.\nOur priority is to continue to have a balanced use of cash, funding investments to drive growth, returning a significant portion to our shareholders through dividends and paying down debt.\nNow turning to our 2021 financial outlook on Slides 27 and 28.\nWith our broad and advantaged flavor portfolio, our robust operating momentum and effective growth strategies, we are well positioned for another year of differentiated growth and underlying performance, tempered by the higher inflation ahead of pricing and the logistic challenges we previously mentioned.\nFor 2021, we are projecting topline and earnings growth from our strong base business and acquisition contribution with earnings growth partially offset by incremental COVID-19 costs and ERP investment, as well as a higher projected adjusted effective tax rate.\nWe continue to expect an estimated 3 percentage point favorable impact of currency rates on sales.\nAnd for the adjusted operating income and adjusted earnings per share, a 2 percentage point favorable impact with currency rates.\nAt the topline, due to our strong year-to-date results and robust operating momentum, we now expect to grow constant currency sales 9% to 10%, which is the high end of our previous projection of 8% to 10%, and includes a 40% incremental impact from the Cholula and FONA acquisitions.\nWe had initially projected an incremental acquisition impact in the range of 3.5% to 4%.\nWe anticipate our organic growth will be led by higher volume and product mix, driven by our category management, brand marketing and new products, as well as pricing.\nWe're now projecting our 2021 adjusted gross profit margin to be 150 basis points to 170 basis points lower than 2020 due to the increase in cost pressures I mentioned earlier.\nWhile we continue to expect a mid single-digit increase in inflation for the year, it has moved higher and is now approaching a double-digit increase in the fourth quarter.\nOverall, our projected adjusted gross margin compression reflects unfavorable impact from sales mix between segments, cost inflation and COVID-19 costs, partially offset by pricing and margin accretion from the Cholula and FONA acquisitions.\nAs a reminder, we price to offset cost increases, we do not margin up.\nOur estimate for COVID-19 costs remains unchanged at $60 million in 2021 versus $50 million in 2020, and is weighted to the first half of the year.\nReflecting the change in gross profit margin outlook, we are lowering our expected constant currency adjusted operating income growth.\nOur adjusted operating income growth rate reflects expected strong underlying performance from our base business and acquisitions projected to be 8% to 10% constant currency growth, which includes the higher inflation ahead of pricing and logistics challenges and partially offset by a 1% reduction from increased COVID-19 costs compared to 2020 and a 3% reduction from the estimated incremental ERP investment.\nThis results in a total projected adjusted operating income growth rate of 4% to 6% in constant currency.\nThis projection includes the mid-single digit inflationary pressure as well as our CCI-led cost savings target of approximately $110 million.\nIt also includes an expected low single-digit increase in brand marketing investments.\nConsidering the year-to-date impact from discrete items, we now project our 2021 adjusted effective income tax rate to be approximately 21% as compared to our previous projection of 23%.\nThis outlook versus our 2020 adjusted effective tax rate is expected to be a headwind to our 2021 adjusted earnings-per-share growth of approximately 1%.\nWe are lowering our 2021 adjusted earnings per share expectations to 5% to 7% growth, which includes a favorable impact from currency.\nThis reflects our lower adjusted operating profit outlook and lower adjusted income tax rate, as well as the higher adjusted income from unconsolidated operations.\nOur guidance range for adjusted earnings per share in 2021 is now $2.97 to $3.02.\nThis compares to $2.83 of adjusted earnings per share in 2020 and represents 8% to 10% growth in constant currency from our strong base business and acquisition performance, partially offset by the impacts related to COVID-19 costs, our incremental ERP investment and the tax headwind.\nNow that Mike the shared our financial results and outlook in more detail, I would like to recap the key takeaways as seen on Slide 29.\nOur third quarter results reflect a robust and sustained growth momentum as we drove strong sales growth despite a challenging year-over-year comparison.\nYear-to-date versus 2019, we have driven significant double-digit growth rates for sales, adjusted operating profit and earnings per share.\nWe have a strong foundation and a balanced portfolio which drives consistency in our performance.\nWe expect higher at-home consumption will persist beyond the pandemic and are continuing the momentum we are gaining in away from home consumption.\nWe're are confident the growth and momentum of our business is sustainable.\nAs a reminder, McCormick has grown and compounded that growth successfully over the years regardless of short-term pressures.\nOur strong growth trajectory supports our confidence in our long-term growth algorithm to drive continuous value creation to topline growth and margin expansion.\nWe're driving McCormick forward and building value for our shareholders.\n",
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"content": "q3 sales rose 8 percent.\nq3 adjusted earnings per share $0.80 excluding items.\nfor fiscal 2021, mccormick updated its sales outlook to expected growth of 12% to 13%, or 9% to 10% in constant currency.\noperating income in 2021 is expected to grow by 2% to 4% from $1.0 billion in 2020.\nprojects 2021 adjusted earnings per share to be in range of $2.97 to $3.02.\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: Starting on Slide 4.\nOur fourth quarter completed another year of robust and sustained growth.\nIn 2021, we remained focused on growth, performance and people, driving another year of strong results and continuing our momentum.\nThe profit driven by our strong sales growth in 2021, while tempered by the well-known headwinds of higher inflation and broad-based supply chain challenges, was also strong.\nOur 2021 operating performance underscored the strength of our business model, the value of our products and capabilities, and the resilience of our employees.\nWe have a demonstrated history of managing through short-term pressures and did so again in the fourth quarter.\nAnd we expect to do the same through this inflationary environment using pricing and other levers to fully offset cost pressures over time.\nThe breadth and reach of our global flavor portfolio ideally position us to fully knowing demand for flavor around the world and drive continued differentiated growth.\nThis has never been more evident than over the last two years as consumers adapted to the ever-changing environment.\nOur compelling offerings in our Consumer and Flavor Solutions segment for every retail and customer strategy across all channels create a balanced and diversified portfolio to drive growth and consistency in our performance.\nIt also gives us significant flexibility to adapt to changing conditions, wherever they may arise, and continue on our growth trajectory.\nThis is a significant differentiator in the dynamic environment in which we currently operate.\nWe are delivering flavor experiences for every meal occasion regardless of whether the occasion is consumed at home or away from home through our products and our customers' products.\nWe are end-to-end flavor.\nNow turning to Slide 6 and our fourth quarter results.\nOur performance was at the high end of the guidance range we provided for sales and adjusted operating profit on our last earnings call and exceeded the guidance range we provided for adjusted earnings per share.\nOn our top line versus the year-ago period, we grew fourth quarter sales 11%.\nBoth of our segments delivered strong growth with contributions from base business growth, driven by higher volume and pricing actions as well as new products and acquisitions.\nOur fourth quarter adjusted operating income and adjusted earnings per share both increased 6%, driven by growth from higher sales and CCI-led cost savings, partially offset by cost inflation.\nLet's turn to our fourth quarter segment business performance, which includes some comparisons to 2019 pre-pandemic levels, which we believe are meaningful, given the level of demand volatility from quarter to quarter experienced in 2020.\nStarting on Slide 7.\nConsumer segment sales grew 10%, including incremental sales from our Cholula acquisition.\nThe increase was driven by strong volume growth and the impact of pricing actions phased in during the quarter as we discussed on our last earnings call.\nOur Consumer segment organic sales momentum on a two-year basis was up double digits, highlighting how the sustained shift in consumer consumption continues to drive increased demand for our product and outpace its pre-pandemic level.\nOur Americas sales growth was 13% in the fourth quarter, with incremental sales from our Cholula acquisition contributing 3% growth.\nOur total McCormick U.S. branded portfolio consumption, as indicated in our IRI consumption data and combined with unmeasured channels, grew 1%, following a 17% consumption increase in the fourth quarter of 2020, which results in a 19% increase on a two-year basis.\nAs we previously discussed, in the year-ago period, elevated demand challenged our supply chain whereas in 2021 with the actions we took to add capacity and increase resilience, we were far better positioned and able to ship in line with consumption.\nDemand has remained high, and we continue to realize the benefit of our U.S. manufacturing capacity expansion, although some products remain stretched by sustained high demand.\nShelf conditions are improving as is our share performance with another sequential improvement in the fourth quarter, as we expected.\nWe continue to see further improvement in our recent performance as we begin 2022.\nImportantly, and as I just mentioned, we are better positioned than we were a year ago and are confident in our continued momentum.\nFocusing further on our U.S. branded portfolio, our 19% consumption growth versus the fourth quarter of 2019 was the seventh consecutive quarter that our U.S. branded portfolio consumption grew double digits versus the two-year ago period.\nOur key categories also continued to outpace the center-of-store growth rates versus the two-year ago period.\nHousehold penetration and repeat rates have also grown versus 2019.\nAnd when consumers shop, they are buying and therefore using more of our products than they were pre-pandemic.\nNow turning to EMEA.\nDuring the fourth quarter, we continued our momentum with strong consumption growth in key categories compared to the fourth quarter of 2019.\nFor the full year, we gained market share in key categories and across the region.\nSimilar to the U.S., our household penetration and repeat rates have also grown versus the two-year ago period.\nAnd when consumers shop, they are buying more than they were pre-pandemic.\nAnd in the Asia Pacific region, our fourth quarter performance continued to reflect the recovery of China's lower branded foodservice sales last year as well as consumer consumption growth across the region.\nTurning to Slide 9.\nOur Flavor Solutions segment grew 14%, reflecting higher base volume growth in new products as well as pricing actions to partially offset cost inflation and contributions for our FONA and Cholula acquisitions.\nOn a two-year basis, our sales also increased double digits with strong growth in all three regions.\nIn the Americas, our FONA and Cholula acquisitions made a strong contribution to our fourth quarter growth.\nAdditionally, we continued to see robust growth momentum with our consumer packaged food customers as well as the recovery of demand from branded foodservice customers as more dining out options are open versus a year ago.\nWe continued to execute on our strategy to shift our portfolio to more value-added and technically insulated products in the region, both through the addition of FONA and Cholula to our portfolio as well as the exit of some lower-margin business.\nTurning to EMEA, which has continued its strong momentum.\nWe are winning in all channels with double-digit fourth quarter growth to quick-service restaurants or QSRs, branded foodservice customers and packaged food and beverage customers.\nRecovery has been robust in the away-from-home part of the portfolio, and growth in our at-home offerings has been outstanding.\nNotably, for the full year, on a two-year basis, we have driven 19% constant currency growth across the portfolio.\nIn APZ, our momentum with our QSR customers remained strong, driving double-digit growth versus 2020 as well as on a two-year basis.\nAs for the fourth quarter and in line with what we have said in the past, limited time offers and promotional activities can cause some sales volatility from quarter to quarter.\nMoving from our fourth quarter results.\nI'm pleased to share highlights of our full fiscal year, including an update on our Cholula and FONA acquisitions, starting on Slide 10.\nWe drove record sales growth in 2021, growing sales 13% to $6.3 billion with strong organic sales growth and a 4% contribution from our Cholula and FONA acquisitions.\nNotably, on a two-year basis, we grew sales 18%, reflecting a robust and sustained growth momentum in both of our segments.\nOur Consumer segment sales growth of 9% was driven by consumer sustained preference for cooking more at home fueled by our brand marketing, strong digital engagement and new products, as well as growth from Cholula.\nVersus 2019, we grew sales 20%, which reflects the continuation of consumers cooking and using flavor more at home and the strength of our brands.\nOur Flavor Solutions segment growth of 19% reflected the strong continued momentum with the at-home products in our portfolio, including a record year of new product growth and a robust recovery from last year's lower demand for away-from-home products as well as contributions from FONA and Cholula.\nNotably, growth was driven equally from both the at-home and away-from-home products in our portfolio.\nOn a two-year basis, we grew sales 15%, driven by the at-home part of our portfolio with demand for the away-from-home portion recovering to pre-pandemic levels.\nWe have consistently driven industry-leading sales growth resulting in McCormick being named to the latest Fortune 500.\nWe're proud of our sustained performance and for being included in this prestigious group of industry-leading companies.\nAt year end, our board of directors announced a 9% increase in our quarterly dividend, marking our 36th consecutive year of dividend increases.\nWe have paid dividends every year since 1925 and are proud to be a dividend aristocrat.\nFinally, we continue to be recognized for doing what's right for people, communities and the planet.\nDuring the year, McCormick was named the United Nations Global Compact LEAD Company and awarded the inaugural Terra Carta seal from his Royal Highness, the Prince of Wales, for our industry leadership in creating a sustainable future.\nAnd just last week, Corporate Knights ranked McCormick in their 2022 Global 100 Sustainability Index as the world's 14th most sustainable corporation, and for the sixth consecutive year, No.\n1 in the food products sector.\nMoving to the one-year anniversary of our two fantastic recent acquisitions.\nCholula and FONA are creating value, achieving synergies and delivering results according to our plans.\nImportantly, we've achieved our one-year sales and earnings per share accretion expectations for both Cholula and FONA.\nI'd like to share some comments about the successful execution of our growth plans.\nAnd then in a few moments, Mike will cover in more detail our delivery on acquisition plans.\nStarting with Cholula on Slide 12.\nThe addition of this beloved iconic brand with authentic Mexican flavor is accelerating the growth of our global condiment platform.\nIn our Consumer segment, we're unlocking Cholula's significant growth potential by using our category management expertise, leveraging e-commerce investments, launching new products, and optimizing brand marketing spend.\nWe executed on initiatives this past year, including optimizing shelf placement and assortment; expanding into new channels; gaining momentum in e-commerce where Cholula had been under-penetrated; increasing awareness, both through brand marketing investments and brand partnerships such as with DoorDash; and leveraging promotional scale across McCormick brands.\nWe are excited about the results our initiatives are yielding.\nDuring 2021, we gained significant momentum on top of lapping elevated growth in 2020, adding over one million new households and growing Cholula's consumption 13% in 2021 versus last year.\nCholula is continuing to outpace category growth and gain share.\nCombined with 19% total distribution point growth in the fourth quarter of 2021, it is clear our plans are driving accelerated growth.\nAnd notably, we drove Cholula to the No.\n2 hot sauce brand in the U.S., joining Frank's RedHot, the No.\n1 ranked brand, at the top of the category.\nWe are just as excited about Cholula's performance as part of our Flavor Solutions portfolio.\nWith our broad presence across foodservice channel, we have strengthened Cholula's go-to-market model through 2021.\nWe continued to build on Cholula's strong front-of-house presence, which builds trial and brand awareness beyond foodservice with significant double-digit growth of portion control packs as more restaurant meals are now consumed as delivery or takeaway.\nLeveraging our culinary foundation and insights on menu trends, we've also driven double-digit growth in our back-of-house foodservice penetration through recipe inspiration and increasing Cholula's menu participation.\nWe are growing with big national accounts and smaller independent restaurants, as well as expanding distribution through leveraging the strength of our distributor relationships where Cholula was less developed.\nWe are succeeding with new menu items, including both permanent ones and limited time offers.\nOur momentum with Cholula is very strong.\nAnd we are confident our initiatives will continue to build on consumers' growing passion for heat and drive further growth of this fantastic brand.\nNow turning to FONA.\nThe addition of this leading North American flavor manufacturer is accelerating the growth of our global flavors platform.\nWe are thrilled our first year of owning FONA has been a record year for the business, with double-digit sales growth compared to last year.\nBeverages, with particular strength in the fast-growing performance nutrition category, continued to drive significant growth for FONA up 15% compared to last year.\nFONA's new product wins and its pipeline potential have also hit record high, fueling future growth.\nWe are continuing to drive growth and create new opportunities with our global footprint.\nWe are leveraging Giotti's infrastructure to expand FONA's flavors into the EMEA region.\nIn our APZ region, the combination of our infrastructure, which includes our recent flavor capability investments in China and FONA's local application and flavor creation talent is unlocking further potential to accelerate flavor growth in that region.\nAnd just a few months ago, we began our expansion of FONA's footprint to increase our Americas flavor manufacturing capacity, an investment we planned as part of our acquisition model, enabling us to deliver the future growth we expect.\nBy expanding our breadth and depth in developing flavors while also combining our infrastructures to provide greater scale as well as increasing our manufacturing capacity and technical bench strength, we are providing our collective customers with a more comprehensive product offering and fueling more opportunities for growth across our entire portfolio.\nWe are cross-selling products across our customer base, and we've also realized the benefit of our combination within our own portfolio.\nFor instance, with FONA now leveraging McCormick's USDA savory flavors and developing flavors for pet food applications.\nThe combination of our capabilities has created new opportunities to participate on briefs that capitalize on core strength across McCormick and FONA, enabling us to build a robust pipeline of opportunities, and importantly, win and grow with our customers.\nWe are thrilled with both Cholula and FONA.\nOur enthusiasm for these acquisitions, as well as our confidence that we will continue to achieve our plan, accelerate growth of these portfolios and drive shareholder value has only continued to strengthen.\nIn summary, for 2021, we continued to capture the momentum we have gained in our Consumer segment and the at-home part of our Flavor Solutions segment.\nWe have successfully navigated through the pandemic-related disruption in the away-from-home portion of our Flavor Solutions segment, and Cholula and FONA have proven to be fantastic additions to our portfolio.\nAll of this reinforces our confidence for continued growth in 2022.\nGlobal demand for flavor remains the foundation of our sales growth and we have intentionally focused on great, fast-growing categories and will continue to differentiate our performance.\nWe are capitalizing on the long-term consumer trends that accelerated during the pandemic: healthy and flavorful cooking, increased digital engagement, trusted brands, and purpose-minded practices.\nThese long-term trends and the rising global demand for great taste are as relevant today as ever with the younger generations fueling them at a greater rate.\nOur alignment with these consumer trends, combined with the breadth and reach of our global portfolio, and the successful execution of our strategies, sustainably positions us for future growth.\nIn this current dynamic and fast-paced environment, we remain focused on long-term, sustainable growth.\nAs I mentioned earlier, we continue to experience cost pressures from higher inflation and broad-based supply chain challenges similar to the rest of the industry.\nTo partially offset rising costs, we raised prices where appropriately last year and began to realize the impact of those actions in our fourth quarter sales growth.\nAs costs have continued to accelerate, we are raising prices again where appropriate in 2022.\nThese pricing actions are on track, and we appreciate our customers working with us to navigate this environment.\nAdditionally, our plans to mitigate cost pressures include our CCI-led cost savings, revenue management initiatives and taking prudent steps to reduce discretionary spend where possible.\nThroughout our history, we have grown and compounded our growth regardless of short-term pressures and plan to do so again in 2022 as we continue to accelerate our momentum and drive growth from a position of strength.\nAcross our Consumer segment, our 2022 plans include continuing to build consumers' confidence in the kitchen, inspire their home cooking and flavor exploration, and accelerate flavored usage, including delivering on the global demand for heat.\nWe also plan to strengthen our consumer relationships at every point of purchase as well as create delicious, healthy, and sustainable future.\nWith our investments in brand marketing, category management and new products, we expect to drive further sales growth.\nFor our Flavor Solutions segment, the execution of our strategy to migrate our portfolio more technically insulated and value-added categories will continue in 2022.\nOur plans include targeting opportunities to grow with our customers at attractive, high-growth categories, continuing to leverage our broad technology platform to develop clean and natural solutions that taste great and strengthening our leadership in heat.\nWith our culinary-inspired innovation and our passion for creating a flawless customer experience, we plan to continue our new product momentum and drive further sales growth.\nOur achievements in 2021, our effective growth strategies, as well as our robust operating momentum, all bolster our confidence in delivering another strong year of growth and performance in 2022.\nWe're looking forward to sharing more details regarding our 2022 growth plan in just a few weeks at CAGNY.\nIn summary, we have a strong foundation and are well equipped to navigate through this ever-changing environment, responding with agility to volatility and disruptions, while remaining focused on the long-term objectives, strategies, and values that have made us so successful.\nWe are in attractive categories and are capitalizing on the long-term consumer trends that are in our favor.\nA combination of our strong business model, the investments we've made, the capabilities we've built, and the power of our people position us well to continue our robust growth momentum.\nImportantly, our strong growth trajectory supports our confidence in our long-term financial algorithm to drive continuous value creation through top line growth and margin expansion.\nOur fundamentals, momentum and growth outlook are stronger than ever.\nMcCormick's employees around the world have done a tremendous job of navigating this past year's volatile environment.\nBefore I provide additional remarks on our fourth quarter and full year results, I would like to build upon Lawrence's comments on Cholula and FONA and highlight how we have delivered on our acquisition plans now that we have completed the first year.\nStarting on Slide 19.\nAs Lawrence already shared, we have created value by driving sales growth according to our plans.\nIn addition, Cholula was margin accretive to the gross and operating margins in both of our segments and FONA was accretive to the margins in the Flavor Solutions segment.\nWe are delivering against our synergy and onetime cost estimates, in fact, doing better than our acquisition plan.\nStarting with our original synergy targets.\nFor Cholula, we have achieved the targeted $10 million to be fully realized by 2022.\nFor FONA, we are on track to achieve our targeted $7 million by the end of 2023.\nWe are also achieving revenue synergies as expected.\nOur transaction and integration costs for Cholula and FONA are both lower than our acquisition plans.\nEarly in 2021, we took the opportunity in a low interest rate environment to optimize our long-term financing following the acquisitions, raising $1 billion through the issuance of five-year 0.9% notes and 10-year 1.85% notes, and therefore, realized lower interest expense than we originally projected.\nAdditionally, our ongoing amortization expense is favorable to both of the acquisition models.\nIn summary, we executed our year one acquisition plans in line with, and in some areas, better than our modeled including the adjusted earnings per share accretion we expected.\nSuccessful acquisitions are a key part of our long-term growth strategy.\nImportantly, we have a proven track record of driving value through acquisitions and increasing the performance of acquired businesses, and Cholula and FONA are adding to that history.\nNow for our fourth quarter and full year performance, starting on Slide 20.\nOur fourth quarter capped off a year of record sales growth.\nDuring the fourth quarter, we grew constant currency sales 10%, with higher volume and product mix.\nAcquisitions and pricing each contributing to the increases in both segments.\nOur organic sales growth was 6%, driven by strong growth in both the Consumer and Flavor Solutions segments.\nAnd incremental sales from our Cholula and FONA acquisitions contributed 4% across both segments.\nVersus the fourth quarter of 2019, we grew sales 15% in constant currency with both our Consumer and Flavor Solutions segments growing double digits.\nDuring the fourth quarter, our Consumer segment sales grew 9% in constant currency, driven by higher volume and product mix, pricing actions and a 2% increase from our Cholula acquisition.\nThe year-over-year increase was led by double-digit growth in the Americas and Asia/Pacific regions.\nCompared to the fourth quarter of 2019, sales grew 14% in constant currency, led by the Americas.\nOn Slide 21, Consumer segment sales in the Americas increased 13% in constant currency, driven primarily by higher volume and product mix as the sustained shift to at-home consumption continues to drive increased demand as well as lapping last year's capacity constraints.\nPricing actions and a 3% increase from the Cholula acquisition also contributed to sales growth.\nCompared to the fourth quarter of 2019, sales increased 19% in constant currency, driven by broad-based growth across branded products as well as an increase from the Cholula acquisition.\nA decline in private label sales partially offset the branded growth.\nIn EMEA, constant currency consumer sales declined 5% from a year ago due to lapping the high demand across the region last year.\nOn a two-year basis, sales increased 5% in constant currency driven by growth in spices and seasonings, hot sauce and mustard.\nConsumer sales in the Asia/Pacific region increased 11% in constant currency due to the recovery of branded foodservice sales in China or away-from-home products and higher sales of cooking at-home products across the region.\nCompared to the fourth quarter of 2019, sales were flat with growth across the region offset by a sales decline in India due to the exit of some lower-margin business.\nTurning to our Flavor Solutions segment on Slide 24.\nWe grew fourth quarter constant currency sales 12%, including a 7% increase from our FONA and Cholula acquisitions.\nThe year-over-year increase was led by double-digit growth in the Americas and EMEA regions.\nCompared to the fourth quarter of 2019, Flavor Solutions segment sales grew 16% in constant currency.\nIn the Americas, Flavor Solutions constant currency sales grew 13% year over year, with FONA and Cholula contributing 11%.\nOrganic sales growth was driven by the recovery of demand from branded foodservice and other restaurant customers, higher sales to packaged food and beverage companies, with strength in snack seasonings and pricing.\nOn a two-year basis, sales increased 15% in constant currency versus 2019, driven by higher sales from acquisitions and packaged food and beverage companies, partially offset by the exit of some lower-margin business in other parts of the portfolio.\nIn EMEA, constant currency sales grew 16% compared to last year due to increased sales to QSRs and branded foodservice customers, as well as continued growth momentum with packaged food and beverage companies.\nConstant currency sales increased 26% versus the fourth quarter of 2019, driven by strong sales growth with packaged food and beverage companies and QSR customers.\nIn the Asia/Pacific region, Flavor Solutions sales rose 1% in constant currency versus last year and increased 8% in constant currency versus the fourth quarter of 2019, both driven by QSR growth and partially impacted by the timing of our customers' limited time offers and promotional activities.\nAs seen on Slide 28, adjusted operating income, which excludes transaction and integration costs related to the Cholula and FONA acquisitions as well as special charges, increased 6% in the fourth quarter versus the year-ago period with minimal impact from currency.\nAdjusted operating income in the Consumer segment increased 14%, or in constant currency, 13%.\nThe higher sales and CCI-led cost savings more than offset cost pressures from inflation and logistics challenges.\nBrand marketing investments, as planned, were 10% lower in the quarter, following an 18% Consumer segment increase in the fourth quarter of last year.\nFor the full year, we increased our brand marketing investments 3%.\nIn the Flavor Solutions segment, adjusted operating income declined 16% or 15% in constant currency.\nHigher sales and CCI-led cost savings were more than offset by the cost pressures in this segment, unfavorable product mix and costs related to supply chain investments.\nAcross both segments, incremental investment spending for our ERP program was offset by lower COVID-19 costs compared to last year.\nAs seen on Slide 29, adjusted gross profit margin declined 150 basis points, driven primarily by the net impact of cost pressures we are experiencing and the phase-in of our pricing actions.\nOur selling, general, and administrative expense as a percentage of sales declined 70 basis points, driven by leverage from sales growth and the reduction in brand marketing I just mentioned.\nThese impacts netted to an adjusted operating margin decline of 80 basis points, as we had expected.\nFor the fiscal year, adjusted gross profit margin declined 140 basis points, primarily driven by the cost pressures we experienced in the second half of the year and the lag in pricing.\nAdjusted operating income grew 6% in constant currency with the Consumer segment's adjusted operating income increasing 1% and the Flavor Solutions segment 23%.\nBoth segments were driven by higher sales and CCI-led cost savings, partially offset by cost pressures and incremental strategic investment spending.\nAdjusted operating margin declined 80 basis points for the fiscal year, driven by the adjusted gross profit margin decline.\nTurning to income taxes.\nOur fourth quarter adjusted effective tax rate was 21.3%, compared to 22.9% in the year-ago period.\nBoth periods were favorably impacted by discrete tax items.\nFor the full year, our adjusted tax rate was 20.1%, comparable to 19.9% in 2020.\nAdjusted income from unconsolidated operations declined 40% versus the fourth quarter of 2020 and 5% for the full year.\nThe elimination of higher earnings associated with minority interest impacted both comparisons unfavorably.\nOur adjusted income from operations was also unfavorably impacted by the elimination of ongoing income from Eastern Condiments following the sale of our minority stake earlier this year.\nFor the fiscal year, this was partially offset by strong performance from our McCormick de Mexico joint venture.\nAt the bottom line, as shown on Slide 32, fourth quarter 2021 adjusted earnings per share increased to $0.84 from $0.79 in the year-ago period.\nAnd for the year, adjusted earnings per share increased 8% to $3.05 for fiscal year 2021.\nThe increases for both comparisons were driven by higher adjusted operating income attributable to strong sales growth.\nOn Slide 33, we summarize highlights for cash flow and the year-end balance sheet.\nOur cash flow from operations for the year was $828 million.\nThe decrease from last year was primarily due to the higher use of cash associated with working capital and the payment of transaction and integration costs.\nThe working capital comparison includes the impact of higher inventory levels to support significantly increased demand and to mitigate supply and service issues as well as buffer against cost volatility.\nWe've returned $363 million of this cash to our shareholders through dividends and used $278 million for capital expenditures in 2021.\nOur capital expenditures included growth investments and optimization projects across the globe.\nFor example, our new U.K. Flavor Solutions manufacturing facility, our ERP business transformation, additional hot sauce capacity in the U.S. and our new U.S. Northeast distribution center.\nIn 2022, we expect our capital expenditures to be higher than 2021 as we continue to spend on the initiatives we have in progress, as well as to support our investments to fuel future growth.\nWe expect 2022 to be a year of strong cash flow driven by profit and working capital initiatives.\nAnd our priority is to continue to have a balanced use of cash funding investments to drive growth, returning a significant portion to our shareholders through dividends and paying down debt.\nNow turning to our 2022 financial outlook on Slide 34.\nWe are well positioned for another strong year of growth and performance in 2022.\nWe are projecting strong top line and operating performance with earnings growth partially offset by a higher projected effective tax rate.\nWe also expect there will be an estimated one percentage point unfavorable impact of currency rates on sales, adjusted operating income and adjusted earnings per share.\nOn the top line, we expect to grow constant currency sales 4% to 6%.\nAs Lawrence mentioned, we are taking further pricing actions in 2022, and as a result, expect pricing to be a significant driver of our growth.\nWe expect volume and product mix to be impacted by elasticities, although at a lower level than we have experienced historically.\nWe plan to drive growth through the strength of our brands as well as our category management, brand marketing, new products and customer engagement growth plans.\nOur volume and product mix will also continue to be impacted by our pruning of lower-margin business from our portfolio.\nOur 2022 adjusted gross margin is projected to range between comparable to 2021 to 50 basis points lower than 2021.\nThis adjusted gross margin compression reflects the anticipated impact of a mid-teens increase in cost inflation, an unfavorable impact of sales mix between segments, a favorable impact from pricing and CCI-led cost savings.\nAs a reminder, we price to offset dollar cost increases.\nWe do not margin up.\nThis has a dilutive impact on our adjusted gross margin and is the primary driver of our projected compression.\nWe expect to grow our adjusted operating income 8% to 10% in constant currency, which reflects our robust operating momentum, a reduction in COVID-19-related costs and our continuing investment in ERP business transformation.\nThis projection includes inflationary pressure in the mid-teens, a low single-digit increase in brand marketing investments and our CCI-led cost savings target of approximately $85 million.\nOur cost savings target reflects the challenges of realizing commodity and packaging cost savings in the current inflationary environment.\nImportantly, we believe there continues to be a long runway to achieve cost savings in 2022 and beyond.\nBased on the expected timing of certain items, we expect our profit growth to be weighted to the second half of the year.\nOur additional 2022 pricing actions are expected to be phased in during the second quarter.\nCost inflation will have a more significant impact in the first half of 2022 as cost pressures accelerated in the back half of last year.\nWe also expect our ERP investment to be higher earlier in the year versus 2021.\nAs a reminder, we are also lapping a very strong business performance in the first quarter of 2021.\nOur 2022 adjusted effective income tax rate is projected to be 22% to 23% based upon our estimated mix of earnings by geography as well as factoring in a level of discrete impacts.\nThis outlook versus our 2021 adjusted effective tax rate is expected to be a headwind to our 2022 adjusted earnings-per-share growth of approximately 3%.\nOur 2022 adjusted earnings per share expectations reflect strong operating profit growth of 8% to 10% in constant currency, partially offset by the tax headwind I just mentioned.\nThis results in an increase of 4% to 6% or 5% to 7% in constant currency.\nOur guidance range for adjusted earnings per share in 2022 is $3.17 to $3.22 compared to $3.05 of adjusted earnings per share in 2021.\nIn summary, we are well positioned with our broad and advantaged flavor portfolio, our robust operating momentum and effective growth strategies to drive another year of strong growth and performance.\nNow that Mike Has shared our financial results and outlook in more detail, I would like to recap the key takeaways as seen on Slide 35.\nWe drove record sales growth in 2021.\nOur strong operating performance underscores the strength of our business model, the value of our products and capabilities and the resilience of our employees.\nWe achieved our one-year Cholula and FONA acquisition plans.\nCholula and FONA have proven to be fantastic additions to our portfolio.\nWe have a demonstrated history of managing through short-term pressures on driving growth, as we did in the fourth quarter.\nMcCormick has grown and compounded that growth successfully over the years regardless of the environment.\nWe have a strong foundation, we are in attractive categories and we're capitalizing on the long-term consumer trends that are in our favor.\nWe are confident that our broad and advantaged flavor portfolio, our robust operating momentum, and effective growth strategies, we will drive another year of strong growth in 2022 and build value for our shareholders.\n",
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"content": "q4 adjusted earnings per share $0.84.\nq4 sales rose 11 percent.\nsees fy adjusted earnings per share $3.17 to $3.22.\nfor fiscal year 2022, mccormick expects to increase year-on-year sales by 3% to 5%, or 4% to 6% in constant currency.\nmccormick & company q4 sales rose 11 percent.\nq4 revenue $6.3 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: Today's earnings call will begin with Ward Nye, whose remarks will focus on our second quarter operating performance, as well as current and emerging market trends.\nJim Nickolas will then review our financial results and liquidity position, and Ward will then provide some closing comments.\nWe sincerely hope that you and your families are remaining safe and healthy as we continue to manage through these unprecedented times.\nThis performance is a testament to our company's commitment to our values, the world-class attributes of our business and the disciplined execution of our strategic plan.\nMartin Marietta established new profitability records for both the second quarter and the first half of the year, driven by favorable pricing and proactive cost management across the Building Materials business.\nFor the second quarter specifically, consolidated gross margin expanded 200 basis points despite slightly lower revenues as compared with the prior year period.\nSelling, general and administrative, or SG&A, expenses as a percentage of total revenues improved 10 basis points to 5.6%.\nAdjusted earnings before interest, taxes, depreciation and amortization, or adjusted EBITDA, increased 7.5% to $407 million.\nAnd fully diluted earnings per share was $3.49, a 16% improvement.\nIn addition to record financial performance and despite the challenging conditions, we also achieved the best safety performance in our history.\nCompanywide, both our lost time and total injury incident rates are better than world-class safety levels.\nThese superior results are directly attributable to our dedicated and talented employees who've continued to demonstrate resiliency during these uncertain times.\nI'm extraordinarily proud of how our team has adapted to our new health protocols, while remaining steadfastly focused on caring for one another, working safely and efficiently, and seamlessly meeting our diverse stakeholders' needs.\nThough Martin Marietta, along with many of our customers, has operated as a designated essential business throughout the COVID-19 shutdowns and subsequent phases, we still experienced impacts from the macroeconomic slowdown.\nDespite these challenges, second quarter product demand for our Building Materials business remained strong across a number of our key geographies, including North Texas and the Front Range of Colorado, two of our leading vertically integrated markets.\nContractors continued construction on projects already under way and have, in some instances, benefited from jobs that were accelerated to better leverage lower traffic volumes during shelter-in-place orders and new projects.\nIn addition, we saw aggregate shipments growth in Georgia and Florida, despite above average rainfall in these states during the quarter, and in Indiana.\nOverall, quarterly aggregate shipments declined approximately 4% compared with near record prior year period volume.\nAs a reminder, our second quarter 2019 results benefited from weather-deferred carryover work, sizable energy sector projects and Midwest flooding repair activity.\nAggregates pricing improved 3.3%.\nAll divisions contributed to this growth, underscoring the health of our markets and the importance of our locally driven pricing strategy.\nBy region, the West Group posted a 5.5% increase, reflecting favorable product mix.\nPricing for the Mid-America Group improved 2%.\nThe Central Division, which has selling prices below the corporate average, contributed a higher percentage of the Mid-America Group's shipments, consistent with the first quarter trends.\nProduct mix limited Southeast Group's pricing growth, as a higher percentage of lower-priced fines and base stone were shipped.\nUnderlying demand for our Texas-based cement business remains largely stable.\nHowever, second quarter cement shipments decreased 3%, driven primarily by the decline in energy sector activity that has resulted from lower oil prices.\nWest Texas oil well cement shipments were down over 75% from pre-COVID expectations, a trend expected to continue until oil prices stabilize at a level that fosters additional investment and drilling activity in the Permian Basin.\nThroughout the quarter, we saw attractive and consistent pricing strength in our North and Central Texas cement operations.\nSpecifically, cement prices in Dallas and San Antonio, the markets most proximate to our Midlothian and Hunter facilities, were up 4%.\nThat said, notably, lower shipments of higher-priced oil well specialty cement products bound for West Texas limited overall pricing growth.\nTurning to our targeted downstream businesses, the ready mixed concrete shipments increased nearly 9%, excluding prior year shipments from our Southwest Ready Mix Division's Arkansas, Louisiana and Eastern Texas business, known generally as ArkLaTex, which we divested earlier this year.\nOverall, concrete pricing increased modestly, but was hindered by unfavorable product mix.\nOur Colorado asphalt and paving business established a new quarterly record for asphalt shipments.\nShipments increased 35% to 1.1 million tons, benefiting from market strength and pent-up demand following a weather-challenged 2019.\nAsphalt pricing declined 1% as customer segmentation was weighted more heavily toward publicly bid municipal projects as opposed to negotiated private work.\nThe Company's Magnesia Specialties business experienced the most pronounced COVID-19 headwinds during the second quarter.\nDomestic and international chemicals demand declined as customers confronted COVID-19 related disruptions.\nDemand for our lime and periclase products also slowed significantly, as steel producing customers temporarily idled their facilities in response to the COVID-19 induced shutdown of certain domestic auto manufacturers.\nIt is worth highlighting that the Enterprise achieved a second quarter adjusted EBITDA margin of 32%.\nThis is the highest EBITDA margin in the Company's history.\nThe driving force behind this accomplishment was the Building Materials, which achieved record second quarter products and services revenues of $1.1 billion, a 1% increase from the prior year quarter, and gross profit of $359 million, a 9% increase.\nNotably, all of our Building Materials product lines contributed to this record profitability.\nSolid pricing gains, production efficiencies and lower diesel fuel costs drove a 230 basis point improvement in aggregates product gross margin to 35.5%, also an all-time record.\nThis was accomplished despite lower volumes, demonstrating the cost flexibility and resiliency of our aggregates-led business.\nOur Texas cement operations benefited from improved kiln reliability, as well as lower raw material and fuel costs.\nProduct gross margin of 39.7% expanded 210 basis points despite a nearly 3% decline in cement revenues.\nAs Ward mentioned, our targeted downstream businesses delivered outstanding operational performance during the quarter.\nReady mixed concrete product gross margin improved 270 basis point to 10.6%, driven by increased shipments, pricing improvement and lower delivery costs.\nEqually impressive, our Colorado asphalt and paving business established second quarter records for both revenues and gross profit.\nProduct revenues for the Magnesia Specialties business decreased 31% to $49 million, reflecting lower demand for chemicals and lime products.\nLower revenues resulted in a 420 basis point reduction of product gross margin to 37.3%.\nWhile we expect this business will face similar headwinds in the third quarter, a gross margin in the high-30s is impressive and indicative of superb cost management.\nConsolidated SG&A expenses included $3 million for COVID-19 related expense, which included enhancements to cleaning and safety protocols across our over 100 sites.\nTurning now to capital allocation and liquidity.\nWe continue to balance our long-standing disciplined capital allocation priorities to responsibly grow our business, while maintaining a healthy balance sheet and preserving financial flexibility to further enhance shareholder value.\nOur priorities remain focused on value-enhancing acquisitions, prudent organic capital investment and a consistent return of capital to shareholders, while maintaining our investment-grade credit rating profile.\nFull year capital expenditures are now expected in the range of $350 million to $375 million, a slight upward revision from the guidance provided last quarter, as US businesses were in the early stages of responding to the pandemic.\nOur current prioritized projects are expected to improve efficiency, capacity and safety, all core principles and the foundation of our strong financial performance.\nWhile we typically invest in the business, we also look for appropriate opportunities to divest non-operating assets to maximize value.\nIn this regard, earlier this month, we entered into an agreement to sell a depleted sand and gravel location in Austin, Texas for nearly $100 million.\nSince our repurchase authorization was announced in February 2015, we have returned nearly $1.8 billion to shareholders through a combination of share repurchases and meaningful sustainable dividends.\nShare repurchase activity remained temporarily paused during the quarter.\nHowever, repurchases can resume at management's discretion.\nIn May, we repaid $300 million of floating rate notes that matured using proceeds from our first quarter bond issuance.\nThe Company has no additional bond maturities until July 2024.\nWe are confident in our balance sheet strength.\nWe have ample liquidity and financial flexibility to continue to profitably growing our business.\nNet cash, combined with nearly $970 million available on our existing revolving facilities, provided total liquidity of $1 billion as of the end of the quarter.\nAdditionally, at a net debt to EBITDA ratio of 2.2 times, we remain well within our target leverage range as of the end of the second quarter.\nWith the successful completion of an outstanding first half of 2020, we remain laser focused on managing our business through the macroeconomic upheaval from COVID-19 and related governmental responses.\nWhile July product demand and pricing trends across our markets remain broadly consistent with the second quarter, we feel it's premature to reinstate full year 2020 earnings guidance, given the uncertainty regarding the pandemic, potential Phase 4 stimulus and infrastructure reauthorization.\nNonetheless, we remain highly confident in the fundamental strength and underlying drivers of our business, guided by our Strategic Operating Analysis and Review, or SOAR, plan.\nWe expect pricing resiliency and disciplined cost management to continue supporting the Company's near-term performance.\nAs the economy resets from COVID-19, we believe favorable pricing trends for our products will continue, supported by our disciplined locally driven pricing strategy and attractive geographic footprint.\nFor aggregates specifically, we anticipate full year 2020 pricing will increase 3% to 4% from the prior year.\nThis range is slightly below our pre-COVID-19 expectations, given year-over-year geographic and product mix trends and slightly delayed price increases in certain markets.\nTexas cement pricing is also expected to remain resilient due to the State's tight supply demand dynamics and the fact that our key markets are, by design, largely insulated from waterborne imports.\nHealthy aggregates and cement pricing trends should benefit our targeted downstream operations.\nExisting customer backlogs support the Company's shipment levels in the near term.\nIn certain regions where we operate, this year's weather has been more disruptive of construction activity and project cadence than the pandemic.\nYet, we believe the industry will likely see a gradual but not precipitous temporary slowing in product demand over the next few quarters, as businesses and governments address budget shortfalls resulting from COVID-19.\nThat said, the degrees of decline and recovery will vary by end-use market and geography and will be influenced by future governmental actions.\nInfrastructure construction, particularly for aggregates-intensive highways, roads and streets, is expected to be the most near-term resilient, as contractors advance projects that have been awarded and funded.\nHowever, state Departments of Transportation, or DOTs, may decrease the scale or postpone the timing of future construction as they balance lower revenue collections and other short-term funding needs relating to the COVID-19 impact, particularly if there is no near-term federal assistance.\nThese impacts will vary by state.\nFor example, Texas DOT scheduled lettings for fiscal year 2021, which began September 1, are currently planned at $7 billion, comparable to fiscal year 2020 lettings.\nEarlier this month, Texas DOT also reiterated its $77 billion 10-year unified transportation planned [Phonetic].\nTo ease funding shortfalls to its DOT budget, Colorado will issue certificates of participation to advance planned projects, the majority of which are concentrated along the megaregion, following the I-25 corridor, which has been the strategic focus of our Rocky Mountain business.\nOf our Top 10 states, North Carolina DOT faces the toughest near-term funding challenges.\nAs a reminder, NCDOT temporarily suspended awards for certain projects in response to pre-COVID-19 funding issues and other factors.\nSince then, new contract advertisements have been further delayed.\nIn the near term, NCDOT will benefit from $700 million in Build NC Bond revenues to fund existing transportation programs.\nLonger term, we anticipate additional transportation ballot initiatives, as well as new revenue-enhancing recommendations from the NC FIRST Commission, which is tasked with evaluating North Carolina's growing transportation investment needs and ensuring that critical financial resources are available.\nDespite some near-term DOT headwinds, the passage of a reauthorized comprehensive federal infrastructure package will provide multi-year upside.\nWhile it's unlikely a successor bill will be agreed upon and signed into law prior to the Fixing America's Surface Transportation Act's expiration on September 30, we feel confident new legislation will be enacted and provide the first sizable increase in federal transportation funding in more than 15 years.\nWhen this occurs, it will be a big win for our industry and for Martin Marietta.\nWhile nonresidential construction activity on existing projects has continued, some commercial and institutional projects in the design or planning stages are being delayed or canceled.\nThe Dodge Momentum Index, or DMI, a monthly measure of the first report for nonresidential building projects in planning, which has historically led construction spending for nonresidential building by a full year, is down 20% from its most recent peak in July 2018.\nHowever, to contextualize the June reading, the Great Recession's peak to trough DMI decline was 62%.\nImportantly, since the Great Recession, Martin Marietta has purposefully shifted our nonresidential exposure to be more heavy industrial-focused as we've expanded our geographic footprint along major commerce corridors.\nAggregates-intensive warehouses, distribution centers and data centers are expected to lead nonresidential activity as businesses increase capacity for e-commerce activity, secure regional supply chains and become more reliant on cloud and network services.\nFurther, large liquefied natural gas, or LNG, projects along the Texas Gulf Coast that are actively under way have broadly continued.\nHowever, start dates for the next wave of projects have been postponed.\nLonger term, we believe nonresidential construction activity could benefit from more companies streamlining their supply chains and repatriating manufacturing operations back to the United States, providing potential multi-year upside to heavy industrial construction.\nResidential construction is rebounding more quickly than anticipated by homebuilders and third-party forecasters.\nAfter decline in April, the National Association of Home Builders Housing Market Index, a widely recognized survey designed to measure sentiment for the US single-family housing market, returned to pre-pandemic levels in July, signaling that residential growth may lead to an overall economic recovery.\nConsistent with recent homebuilder commentary, activity has strengthened as Martin Marietta states have reopened, demonstrating pent-up housing demand following the COVID-19 related pause in the spring selling season.\nNationally, housing starts remain below the 50-year annual average of 1.5 million despite notable population gains.\nFreddie Mac estimates the 2.5 million housing units are needed to address the current nationwide housing shortage.\nThis situation is particularly evident in states with significant under-supply, including Texas, Colorado, North Carolina and Florida, which are all in our Top 10 states.\nThese trends, along with historically low mortgage rates, bode well for future expansion in single-family housing activity, which is two to three times more aggregates-intensive than multi-family housing, given the typical ancillary nonresidential and infrastructure construction activity.\nAlso, longer term, we expect Martin Marietta to benefit across all three of our primary end-users from accelerated deurbanization trends, as stay-at-home orders and the shift to remote work encourage more prospective homebuyers to move to smaller metro or suburban locations.\nOur leading Southeastern and Southwestern footprint provides us a distinct competitive advantage in regions with diverse employment opportunities, land availability, favorable climates and a lower cost of living.\nMoving forward, we are confident in Martin Marietta's opportunities to build on our successful track record of financial and operational outperformance.\nSOAR 2025, our strategic plan for the next five years, will be finalized this year and provides the framework to support our capital deployment, price discipline, cost management, sustainable practices, talent development and succession planning initiatives.\nWe've already made great strides on these endeavors.\nEarlier this month, we streamlined our business structure into five operating divisions: East, Central, Southwest, West and Magnesia Specialties.\nThis new structure better aligns our business product offerings and geographies, provides experienced executives with increased responsibilities and opportunities, strengthens our ability to provide outstanding customer service, and further enhances our industry-leading cost profile.\nIn closing, we're all living an unprecedented and dynamic times, and that will likely persist as the pandemic continues unabated.\nMoving forward, our attractive underlying fundamentals, strategic priorities and world-class teams position Martin Marietta to responsibly navigate today's challenging environment and to drive sustainable long-term growth and shareholder value.\nOverall, we continue to feel confident about the future and our plan to continue building on Martin Marietta's long track record of success in delivering sustainable value creation and superior returns for investors.\n",
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"content": "martin marietta materials inc - qtrly earnings per diluted share $ 3.49.\nmartin marietta materials inc - will reinstate full-year earnings guidance when co has sufficient visibility.\nmartin marietta materials - believes co's industry will likely experience lower overall product demand over next few qtrs due to covid-19 pandemic.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Effective July 1, in connection with us streamlining our operating structure, we also changed our reportable segments.\nOur Building Materials business now consists of the East Group, whose operations were previously reported in the mid-America and Southeast groups.\nAnd the West Group, which had no significant changes.\nIn addition, the Magnesia Specialties business comprises our third reportable segment.\nPrior year results have been revised to conform with this new reporting structure.\nToday's earnings call will begin with Ward Nye, who will discuss our third quarter operating performance and market trends as we move toward 2021.\nJim Nickolas will then review our financial results and liquidity position, and then Ward will provide some closing comments.\nWe sincerely hope that you and your families are safe and healthy.\nMartin Marietta's strong business execution and commitment to operational excellence provide the foundation for our company to consistently deliver record financial, operational and safety performance.\nAs highlighted in today's release, we established new profitability and safety records for the first nine months of 2020.\nYear-to-date, gross profit increased to $927 million and adjusted earnings before interest, taxes, depreciation and amortization or adjusted EBITDA surpassed the $1 billion mark.\nWe have also achieved the best safety performance in Martin Marietta's history with a companywide lost time and total entry incident rates exceeding world class levels.\nFor the third quarter, increased pricing across all product lines and disciplined cost management helped mitigate anticipated shipment declines driven by the COVID-19 pandemic.\nThird quarter financial highlights as compared with the prior year period included consolidated gross margin increased 100 basis points to a record 30.6%, despite a 7% reduction in revenues, demonstrating the resiliency of our business and our focus on cost control.\nSelling, general and administrative, or SG&A, expenses as a percentage of total revenues improved 10 basis points to an industry-leading 5.4%.\nAdjusted EBITDA was $502 million, inclusive of $70 million of nonrecurring gains.\nAnd diluted earnings per share was $4.71.\nFor clarity, the nonrecurring gains contributed $0.87 per diluted share.\nThese results are a testament to our dedicated and talented employees who are managing through today's challenging public health and economic environment as well as the proactive steps we have taken to adjust the company's cost profile.\nNow for a review of our third quarter operating performance.\nAggregate shipments declined nearly 9% versus a robust prior year comparison.\nAs anticipated, given the widespread COVID-19 disruptions across the United States, shipment declines were experienced across our footprint, with the East Group down 9% and the West Group down 8%.\nAdditionally, the East Group shipments were impacted by weather delayed projects in the Carolinas, Georgia and Florida, anticipated lower infrastructure shipments in portions of North Carolina and reduced wind energy activity in Iowa.\nWet weather in Texas and lower energy sector demand negatively impacted West Group shipments.\nIn line with broader macroeconomic trends, aggregate shipments to both the infrastructure and nonresidential markets declined.\nShipments to the residential market improved modestly.\nAggregates average selling price increased 2.7% or 4% on a mix-adjusted basis, underscoring this product line's resilient pricing power.\nBy region, the East Group posted a 4.4% pricing increase with strength in our key geographies of North Carolina, Georgia, Iowa, Indiana and Maryland.\nThe West Group average selling price declined slightly, reflecting a lower percentage of higher price shipments from distribution yards.\nWe continue to see attractive pricing in both Texas and Colorado.\nOn a mix-adjusted basis, the West Group average selling price improved nearly 4%.\nAs a reminder, we anticipate overall full year 2020 aggregates pricing growth of 3% to 4%.\nUnderlying demand for our Texas-based cement business remains positive, supported by diversified customer backlogs and large project activity.\nThird quarter cement shipments, however, decreased 4%, reflecting continued energy sector headwinds.\nReported cement pricing increased 1%.\nWhile average selling prices for our core cement products, namely, type one and type two cement were up $4 over the prior year period.\nLower shipments of oil well and lightweight specialty cements bound for West Texas disproportionately impacted overall price and growth.\nAs a reminder, specialty cements can sell for over $200 per ton.\nOn a mix-adjusted basis, overall cement pricing increased 3.4%.\nTurning to our targeted downstream businesses.\nReady-mixed concrete shipments decreased 4% and excluding acquired shipments and third quarter 2019 shipments from our Southwest division's concrete business in Arkansas, Louisiana and Eastern Texas, which we divested earlier this year.\nTexas construction activity was hindered by wet weather.\nBy contrast, Colorado shipments benefited from favorable weather and continued activity on a large Amazon fulfillment center.\nFavorable geographic mix from robust Colorado shipments was the primary driver of the 2% increase in third quarter concrete pricing.\nAsphalt shipments for our Colorado asphalt and paving business decreased 3% following near record levels in the prior year period.\nAsphalt pricing increased 6%, reflecting a higher percentage of attractively priced specialty asphalt mix sales.\nFor our Magnesia Specialties business, weakness in chemicals and lime demand began to moderate during the quarter as steel utilization rebounded from June's trough.\nWe expect continued improvement through the balance of the year.\nFor the third quarter, the Building Materials business delivered products and services revenues of $1.2 billion, a 6% decrease from the prior year period.\nAnd product gross profit of $384 million, a 3% decrease.\nAggregates product gross margin expanded 130 basis points to 36.4%, an all-time record despite lower shipment volume.\nStrong mix-adjusted pricing gains, disciplined cost management and lower diesel fuel costs contributed to the 6.5% growth in aggregates unit profitability.\nThese results demonstrate the cost flexibility and resiliency of our aggregates led business.\nCement product gross margin was 40.2%, a 40 basis point decline.\nDespite lower revenues, the cement business benefited from lower fuel costs and prior year tail investments that have improved reliability and throughput.\nFor our downstream businesses, ready-mixed concrete product gross margin declined 90 basis points, 9.7%, attributable to higher costs for raw materials.\nAsphalt and paving achieved record gross profit of $32 million and a 140 basis point improvement in margin despite lower revenues.\nMagnesia Specialties' third quarter product revenues increased $10 million to $55 million, reflecting lower demand for chemicals and lane products.\nLower revenues and reduced fixed cost absorption resulted in a 240 basis point decline and product gross margin to 38%.\nOur consolidated results included $7 million of gains on surplus, noncore land sales and divested assets.\nThese gains which were recorded in other operating income net are nonrecurring and should not be extrapolated in a run rate calculation.\nAs a reminder, surplus land sales were part of the value proposition of our TXI acquisition, and that's exactly what you're seeing this quarter.\nSince 2016, we have sold nearly $200 million of excess land that was not used for operations and did not contain operating assets.\nWhile we cannot predict the timing of any future land sales, we expect additional noncore real estate divestitures as favorable opportunities develop.\nWe achieved the highest adjusted EBITDA margin in Martin Marietta's history, both inclusive and exclusive of the previously discussed nonrecurring gains.\nWe anticipate adjusted EBITDA to range from $1.35 billion to $1.37 billion, inclusive of the $70 million of nonrecurring gains for full year 2020.\nNow turning to capital allocation and liquidity.\nWe continue to balance our long-standing disciplined capital allocation priorities to responsibly grow our business while maintaining a healthy balance sheet and preserving financial flexibility to further enhance shareholder value.\nOur priorities remain focused on value-enhancing acquisitions and prudent organic capital investment and a consistent return of capital to shareholders while maintaining our investment-grade credit rating profile.\nIn August, we acquired an exits and ready mixed concert company in Dallas/Fort Worth Metroplex.\nThese acquired operations complement our existing geographic footprint and expand our customer base.\nThey also enhance our aggregate and cement throughput to drive incremental upstream value.\nWe have widened our full year capital expenditures guidance and now expect it to range from $350 million to $400 million.\nWe are exploring additional life-kind exchange opportunities that would defer the package who would otherwise paid on this year's sizable land sales.\nSince our repurchase authorization announcement in February 2015, we have returned $1.8 billion to shareholders through a combination of share repurchases and in meaningful, sustainable dividend.\nOur Board of Directors recently approved a 4% increase in our quarterly cash dividend paid in September, underscoring its continued confidence in our future performance and cash generation.\nOur annualized cash dividend rate is now $2.28.\nShare repurchase activity remained temporarily paused during the quarter.\nHowever, the purchases can resume at management's discretion.\nWith a debt-to-EBITDA ratio of 2 times, we are at the lower end of our target leverage range of two to 2.5 times.\nWe remain confident in our balance sheet strength, with $1.2 billion of total liquidity.\nWith our low leverage and ample liquidity to retain the financial flexibility to continue to profitably grow our business.\nWe're confident that our favorable pricing dynamics will continue and that attractive underlying fundamentals and long-term secular growth trends across our key geographies will remain intact.\nTo offer some specific color on how this is playing out, it's notable that both our upstream and downstream businesses have seen improvements in data shipment trends since July lows with October average daily shipments above prior year levels.\nWhile we're cautiously optimistic about these trends, we believe COVID-19-related uncertainty will likely persist through the winter and spring seasons.\nKeeping that in mind, we currently anticipate product demand will remain modest through the first half of 2021, and product pricing will remain strong.\nAs the U.S. economy resets from COVID-19 disruptions, the longer-term macroeconomic indicators, such as underbuild conditions, historically low interest rates and hourly workforce availability are favorable and should support a construction-led recovery.\nWe're seeing encouraging long-term trends across our three primary end-use markets and key geographies, including bipartisan support for a robust multiyear federal surface transportation reauthorization, heavy industrial activity to support e-commerce and remote work needs, and single-family housing expansion driven by accelerated de-urbanization.\nWe believe these trends bode well for a more aggregates intensive construction cycle than experience during the slow but steady recovery from the Great Recession.\nInfrastructure activity, particularly for aggregates intensive highways, roads and streets, continues to be resilient.\nWith gas and tax sales revenue shortfalls less than originally anticipated, state departments of transportation, or DOT, budgets are in better condition than expected at the pandemic's onset.\nFor example, Texas DOT scheduled lettings for fiscal year 2021, which began September 1, and are currently planned at $10 billion, an increase of 35% over the comparable fiscal year 2020 lettings.\nUpdated Colorado DOT projections indicate relatively flat transformation spending levels for 2021.\nAnd North Carolina DOT, which temporarily suspended awards for certain projects in response to pre-COVID-19 funding issues and other factors, recently revised its letting schedule upward and resume bidding for resurfacing work earlier this month.\nAs a reminder, these three key states represent over 60% of our Building Materials business revenues.\nOn the federal front, the President recently signed at the law, a continuing resolution that included a one-year extension of the Fixing America's Surface Transportation Act, or FAST Act, at current funding levels, which was consistent with our expectations.\nIn our view, this provides state and local governments the visibility needed to plan, design and let transportation projects through the 2021 construction season.\nOver the medium to long-term future, we expect the industry to benefit from the passage of a reauthorized comprehensive federal surface transportation package, which we anticipate will be enacted by mid-2021.\nBoth the United States House and Senate of advanced federal highway legislation, underscoring bipartisan support to remedy the nation's crumbling surface transportation infrastructure.\nNotably, both bills provide the first sizable increase in federal transportation funding in more than 15 years.\nRegardless of the upcoming election outcomes, increased infrastructure investment should provide volumes stability and drive aggregate shipments closer to 45% of our total shipments, moving us toward our 10-year historical average.\nFor reference, aggregate shipments to the infrastructure market accounted for 38% of third quarter shipments.\nAlthough certain sectors of nonresidential construction remain challenged in the near term, COVID-19 is driving a paradigm shift that should promote more diverse nonresidential demand than the previous cycle, fueling long-term aggregates growth.\nAccelerating technology, e-commerce and remote work trends require increased investment in heavy industrial warehouses and data centers, which are generally more aggregates intensive than light commercial construction due to the size and scale of these projects.\nImportantly, we have purposely shifted our nonresidential exposure over the last 10 years or so to be more heavily industrially focused as we've expanded our geographic footprint along major commerce carters.\nAdditionally, light commercial construction, despite its current weak demand, should benefit in the longer-term from the drag-along effects of strong single-family residential trends.\nAggregate shipments of the nonresidential market accounted for 33% of third quarter shipments.\nSingle-family housing is expected to lead this economic recovery as de-urbanization accelerates.\nProspective homebuyers are increasingly moving from large metropolitan cities to smaller metro or suburban areas amid the pandemic.\nRecently, North Carolina, our third largest state by revenues, was identified as a top migration destination, ranking number seven among states that experienced the most inbound moves from March through August of this year, according to data from United Van Lines.\nThese trends extend beyond those moving from one state to another.\nThey also include existing residents opting to move farther out from city centers.\nAcross our Southeastern and Southwestern footprint, underbuilt conditions and favorable population and unemployment dynamics provide Martin Marietta with a distinct competitive advantage for outsized secular growth in single-family housing development.\nImportantly, single-family housing is two to 3 times the aggregates intensity of multifamily housing given the ancillary nonresidential and infrastructure needs of new suburban communities.\nAggregate shipments to the residential market accounted for 24% of third quarter shipments.\nIn summary, as our third quarter and year-to-date results demonstrate, navigating challenging times and emerging from them stronger are hallmarks of our company.\nWe've executed a thoughtful strategy and taken deliberate steps to position Martin Marietta as a resilient, efficient and cash flow generative business that can consistently drive shareholder value creation.\nWe will continue to do what we do best: manage our business safely and responsibly, ensuring that we're prepared to seize profitable growth opportunities for the benefit of our stakeholders.\nMartin Marietta remains well-positioned to capitalize on the emerging growth trends that are expected to support steady and sustainable construction activity over the long term.\nWith our attractive underlying fundamentals, strategic priorities and best-in-class teams, we're excited about our bright prospects for driving long-term sustainable growth and shareholder value in the fourth quarter, in 2021 and well into the future.\n",
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"content": "qtrly earnings per share $4.71.\nqtrly revenue $1,321.4 million versus $1,420.2 million.\nremains confident that its favorable pricing trends are sustainable and durable.\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 a reminder, today's discussion may include forward looking statements as defined by United States securities laws in connection with future events, future operating results or financial performance.\nWe undertake no obligation, except as legally required, to publicly update or revise any forward looking statements whether resulting from new information, future developments or otherwise.\nWard and I will begin today's earnings call with a discussion of our third quarter operating performance and our recently completed acquisition of Lehigh Hanson's West Region.\nJim Nickolas will then review our financial results.\nAfter which, Ward will discuss market trends as we look ahead to 2022.\nA question-and-answer session will follow.\nMartin Marietta's continued growth and record results demonstrate our industry leading performance and disciplined execution of our proven strategic operating analysis and review, or SOAR plan.\nAnd with fewer reportable and lost time incidents than this time last year, our company wide safety incident rates are surpassing world class levels.\nI'm proud to report that we're on track to deliver the most profitable and safest year in our company's history.\nWe're also excited by the progress we're making on our SOAR 2025 initiatives to further position our company for sustainable, long term operational and financial success.\nWith this outstanding team, strong business and key assets now are part of our offering.\nWe're well positioned to benefit from favorable market dynamics and accelerating public and private construction activity in important California and Arizona regions, including San Francisco, Los Angeles, San Diego and Phoenix.\nIt also provides new growth platforms for our continued geographic expansion.\nI'm grateful to our colleagues for their dedication and perseverance in their efforts to complete the acquisition, the second largest in our company's history.\nWe look forward to working together to seamlessly integrate the Lehigh West operations, quickly realize synergies and deliver significant stakeholder value.\nIntegration activities are progressing as planned from both an operational and customer-facing perspective.\nAs highlighted in today's release, we once again established record results for revenues and gross profit for both the quarter and year-to-date.\nTo recap, for the first nine months of 2021, our adjusted EBITDA increased 7% to a record $1.1 billion.\nBoth our Building Materials and Magnesia Specialties businesses continue to capitalize on the ongoing economic recovery.\nDuring the quarter, organic shipment and pricing growth combined with value enhancing acquisitions more than offset higher than expected energy related costs and contributed to our record-setting results.\nSpecifically, on a consolidated basis, Products and Services revenues increased 18% to $1.5 billion.\nAdjusted gross profit increased 11% to $450 million.\nAdjusted EBITDA of $490 million increased 13% on a comparable basis, and adjusted diluted earnings per share of $4.25 grew 11% on a comparable basis.\nAs a reminder, the prior year quarter included $70 million or $0.87 per diluted share of non recurring gains on surplus land sales and divested assets that affect quarter over quarter comparability.\nNow for a review of our third quarter operating performance.\nWe continue to experience growing product demand across our three primary end use markets.\nOrganic aggregate shipments increased 6%, notwithstanding contractor capacity constraints and wet weather in several markets that govern the overall pace of construction activity.\nNotably, all divisions contributed to this solid growth, demonstrating our ability to capitalize on the strong underlying demand trends across our geographic footprint.\nTotal aggregate shipments, including shipments from acquired operations, increased 10%.\nOrganic aggregates average selling price increased 2%, reflecting a higher percentage of lower-priced base stone shipments during the quarter.\nAdditionally, our East division, which has selling prices in excess of our corporate average, had the opportunity to meet customer needs with a low priced excess fuel product that had we not shipped we otherwise would have incurred costs to relocate.\nWe expect shipments of this excess fill material, which are profitable and not a substitute for higher value products, to continue through the remainder of the year.\nThat's why we updated our full year 2021 organic pricing growth guidance to now range from 2.5% to 3.5%.\nTo be clear, aggregates pricing fundamentals remain very attractive.\nIn fact, supported by strong underlying demand and rapid cost inflation in the broader economy, we successfully implemented midyear price increases in the Carolinas and Texas.\nThese actions, combined with overall customer confidence and demand visibility, bode well for meaningful pricing acceleration in 2022.\nOur Texas Cement business established a new quarterly record for shipments, which increased 4% to over one million tonnes.\nLarge and diversified projects, recovering energy sector activity and incremental pull through from our internal downstream customers, supported record monthly shipment levels in both August and September.\nCement pricing increased 8% as the second round of price increases this year went into effect on September first.\nTurning to our targeted downstream businesses.\nReady mixed concrete shipments increased 23%, driven by large nonresidential projects and operations acquired late last year in Texas.\nConcrete pricing grew 2% following the implementation of midyear price increases in Texas.\nAdditionally, we've announced a third price increase in the Dallas/Fort Worth market effective October first.\nAsphalt shipments increased 116% overall, driven by contributions from our Minnesota based operations acquired earlier this year.\nOur Colorado asphalt and paving business experienced shipment declines and supply disruptions from mid-summer liquid asphalt allocations throughout the Rocky Mountains.\nThis circumstance has now been resolved.\nDespite these short-term issues, market fundamentals remain strong across the Colorado front range.\nOrganic asphalt pricing improved modestly.\nBoth the Building Materials and Magnesia Specialties businesses contributed to our double digit growth in product revenues and increased profitability.\nThat said, increased energy expense continues as a headwind, temporarily pressuring margins.\nFor the third quarter alone, total energy costs increased $28 million or nearly 50% company wide as compared with last year.\nAbsent this headwind, our consolidated adjusted gross margin would have outpaced the record set in the prior year quarter.\nAggregates product gross margin of 34.2% included higher diesel and other production costs as well as a $6 million negative impact from selling acquired inventory that was marked up to fair value as part of acquisition accounting.\nExcluding the acquisition impact, adjusted aggregates product gross margin was 34.9%, a 150 basis point decline versus prior year.\nCement product gross margin declined 250 basis points driven by higher raw material cost and a $6 million increase in natural gas and electricity costs.\nReady-mixed concrete product gross margin improved modestly to nearly 10% as shipment and pricing gains offset higher costs for raw materials and diesel.\nMagnesia Specialties continued to benefit from improving domestic steel production and global demand for magnesia chemical products, generating product revenues of $72 million, a 30% year over year increase.\nRevenue growth more than offset higher costs for energy and contract services, driving a 100 basis point improvement in product gross margin to 39%.\nAs part of our long-standing capital allocation priorities, we continue to balance value enhancing acquisitions with prudent capital spending and returning cash to shareholders while preserving a healthy balance sheet, financial flexibility and investment-grade credit rating profile.\nConsistent with SOAR 2025, we acquired a crushed concrete aggregates producer in the Houston area in late July.\nThese acquired aggregates operations expand our customer base and product offerings in one of the nation's largest addressable markets.\nWe have raised our full year capital spending guidance to $475 million to $525 million to include anticipated Lehigh West region capital expenditures.\nWe continue to prioritize high return capital projects, focused on growing sales and increasing efficiency to drive margin expansion.\nAdditionally, our Board of Directors approved a 7% increase in our quarterly cash dividend paid in September, underscoring its confidence in our future performance and a resilient and growing free cash flow generation.\nOur annualized cash dividend rate is now $2.44.\nSince our repurchase authorization announcement in February 2015, we have returned nearly $2 billion to shareholders through a combination of meaningful and sustainable dividends as well as share repurchases.\nIn early July, we issued $2.5 billion of senior notes with a weighted average interest rate of 2.2% and a weighted average tenor of 15 years, primarily to finance Lehigh West region transaction.\nOur net debt to EBITDA ratio was 1.9 times as of September 30.\nLeverage on a pro forma basis, inclusive of reach acquisitions, is modestly above 3 times debt to EBITDA.\nConsistent with our practice of repaying debt following significant acquisitions, we are committed to return into our target leverage range of two to 2.5 times within the next 18 months.\nAs detailed in today's release, we have updated our full year 2021 guidance to reflect our year to date results that factor in higher energy costs and the fourth quarter contribution from the newly acquired Lehigh West business.\nWe now expect full year adjusted EBITDA to range from $1.500 billion to $1.550 billion.\nLooking beyond 2021, Martin Marietta remains well positioned to capitalize on attractive market fundamentals and secular demand trends across our geographic footprint, expanded federal and state level infrastructure investment, single family housing strength, heavy industrial projects of scale and like nonresidential recovery should support growing construction activity and contribute to attractive pricing acceleration for heavy side building materials for years to come.\nImportantly, we have both the ability and the capacity to supply these needed products and supported by our locally led pricing strategy will do so in a manner that emphasizes value over volume.\nWhile navigating an imperfect legislative process, our nation is nonetheless on the cusp of achieving the most significant infrastructure action of this century.\nThe Infrastructure Investment and Jobs Act, which contains a five year surface transportation reauthorization and provides $110 billion in new funding for roads, bridges and other hard infrastructure projects passed the United States Senate in August with 69 bipartisan votes.\nThough the United States House of Representatives did not take up the bipartisan infrastructure bill last week before the then current short term extension of the federal highway and public transportation programs expired on October 31, The House and Senate did approve a short-term program extension, keeping surface transportation funds flowing to the states through December 3.\nThe consensus opinion with which we strongly agree is that this important legislation will be signed into law before year end.\nAside from the overall economic growth, we expect to occur with the increased federal transportation investment, the steps we've taken over the past decade to responsibly grow and expand our footprint will also benefit Martin Marietta's near and long term outlook.\nProject lettings for our company's top five states Department of Transportation, or DOTs, continue to positively trend.\nTexas, Colorado, North Carolina, Georgia and Florida, which accounted for over 70% of our 2020 Building Materials revenues, are well positioned from both the DOT funding and resource perspective to efficiently deploy increased federal and state transportation dollars in advance the growing number of projects in their backlogs.\nNotably, California, the nation's most popular state and the world's fifth largest economy becomes a top state for Martin Marietta, following the Lehigh West acquisition.\nCaltrans, California's Department of Transportation, manages a $17 billion annual budget.\nAdditionally, the Road Repair and Accountability Act of 2017, commonly referred to as Senate Bill one or SB1, provides $54 billion or approximately $5 billion annually through 2030 to fund state and local road, freeway and rail projects.\nFor reference, aggregate shipments to the infrastructure market accounted for 36% of third quarter organic shipments, showing sequential growth since this year's second quarter, but still well below our 10 year historical average of 43%.\nNonresidential construction continues to benefit from increased investment in aggregates intensive heavy industrial warehouses and data centers.\nWe've also seen early signs of recovery in light commercial and retail sectors, notably in key markets such as Atlanta, Denver and the Texas triangle.\nLike nonresidential activity should be a more significant demand driver in 2022, given that it typically follows single family residential development.\nAggregate shipments to the nonresidential market accounted for 35% of third quarter organic shipments.\nAcross our coast to coast footprint, single family residential starts are expected to remain robust despite higher home prices and longer material delivery times.\nSignificant underbuilding in commensurate with notable population gains over the past decade and accelerated the organization to support these trends.\nImportantly, single family housing is two to three times more aggregates intensive than multifamily construction given the ancillary nonresidential and infrastructure needs to build out new or expanding suburban communities.\nAggregates to the residential market accounted for 24% of third quarter organic shipments.\nIn summary, we believe our industry is about to see public and private sector construction activity coalesce for the first time since its most recent 2005 peak, supporting both increased shipments and an attractive pricing environment for construction materials.\nFor 2022, our preliminary view anticipates organic aggregate shipments will increase in the low to mid-single digits as contractor labor shortages and logistics challenges continue to impact an otherwise robust demand environment.\nUnderpinned by our value over volume pricing strategy, we anticipate mid to high single digit growth in 2022 organic aggregates pricing.\nTo conclude, we're extremely proud of our record setting safety, operational and financial performance and look forward to continuing to build on that momentum into the fourth quarter and 2022.\nAs a result of our thoughtfully developed and consistently executed strategic priorities, our company's future is bright.\nWith our steadfast commitment to employee health and safety, commercial and operational excellence, sustainable business practices and store execution, Martin Marietta intends to build the safest, best performing and most durable aggregates led public company poised to deliver attractive growth and superior value for all of our stakeholders.\n",
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"content": "qtrly total revenues $1,557.3 million versus $1,321.4 million.\nqtrly adjusted earnings per diluted share $4.25.\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 are pleased to discuss our fourth quarter and full year results with you today.\nThis has been a record-breaking year for Miller Industries as we achieved the highest full year revenue and net income in our Company's history.\nWe finished the year with strong top line growth, gross margin expansion, and an increase in earnings per share.\nRevenue during the fourth quarter increased 12.9% to $203.1 million versus $180 million a year ago, driven by broad-based demand across our portfolio.\nOur domestic business continued its strong performance during the quarter as new order rates remained steady and our distributors continued to work at full capacity to deliver existing orders.\nOur international business also performed in line with our expectations on a year-over-year basis.\nAdditionally, our fourth quarter results benefited from a catch-up related to supply chain delays we experienced during the third quarter.\nQuarterly gross profits increased by 21.6% year-over-year to $26.9 million and our gross margin expanded 100 basis points year-over-year to 13.3%, which reflects strong demand, favorable mix and other cost reduction measures.\nAdditionally, during the quarter we continue to realize benefits from our cost control initiatives as SG&A expenses as a percentage of sales decreased by approximately 20 basis points from the prior year period.\nNet income was $11.7 million or $1.03 per share compared to net income of $10.8 million or $0.95 per share in the fourth quarter of 2018.\nAs we move into the first quarter of 2020, our backlog remains healthy in both our domestic and international markets, and we remain committed to providing best-in-class customer services while continuing to invest in our business and generating shareholder value.\nFurther, our balance sheet remains healthy, as we continue to pay down debt and strategically deploy our resources to drive sustainable long-term growth.\nAfter that, I'll be back with comments about the market environment and some closing remarks.\nNet sales for the fourth quarter 2019 were $203.1 million versus $180 million for the fourth quarter of 2018, a 12.9% year-over-year increase driven by broad-based demand across our portfolio, as well as some additional sales that were included in the fourth quarter as a result of supplier delay issues we experienced in the preceding quarter.\nCost of operations increased 11.7% to $176.2 million for the fourth quarter 2019 compared to $157.8 million for the fourth quarter 2018, driven by our top line sales growth.\nHowever, cost of operations as a percentage of net sales contracted approximately 100 basis points to 86.7% from the prior year period.\nGross profit was $26.9 million or 13.3% of net sales for the fourth quarter 2019 compared to $22.2 million or 12.3% of net sales for the fourth quarter 2018, reflecting a favorable product mix.\nSG&A expenses were $11.8 million for the fourth quarter 2019 compared to $10.8 million for the fourth quarter 2018.\nAs a percentage of sales, SG&A decreased approximately 20 basis points to 5.8% from 6% in the prior year period, driven by our effective cost controls and increased operational efficiency across the organization.\nInterest expense, net, for the fourth quarter 2019 was $565,000 compared to $449,000 for the fourth quarter 2018, as an increase in customer floor plan financing cost more than offset lower long-term debt-related interest expense.\nOther income expense for the fourth quarter 2019 was a net gain of $211,000 compared to a net expense of $465,000 for the fourth quarter 2018, due primarily to currency exchange rate fluctuations.\nNet income for the fourth quarter 2019 was $11.7 million or $1.03 per diluted share.\nNet income for the fourth quarter 2018 was $10.8 million or $0.95 per diluted share.\nNow, let me briefly review our results for the 12 months ended December 31, 2019.\nNet sales for the year were $818.2 million compared to $711.7 million in the prior year period, an increase of 15%.\nGross profit for the year was $96.5 million or 11.8% of net sales compared to $83.3 million or 11.7% of net sales for 2018.\nSG&A expenses were $43.4 million for 2019 or 5.3% of net sales compared to $39.5 million or 5.6% of net sales for 2018.\nNet income for the year was $39.1 million or $3.43 per diluted share, an increase of 15.9% compared to net income of $33.7 million or $2.96 per diluted share in 2018.\nNow, turning to our balance sheet.\nCash and cash equivalents as of December 31, 2019 was $26.1 million compared to $27.5 million as of September 30, 2019 and $27 million at December 31, 2018.\nAccounts receivable at December 31, 2019 totaled $168.6 million compared to $165.8 million as of September 30, 2019 and $149.1 million at December 31, 2018.\nInventories were $88 million as of December 31, 2019, compared to $98.1 million as of September 30, 2019 and $93.8 million at December 31, 2018.\nAccounts payable at December 31, 2019 was $95.8 million compared to $114.9 million as of September 30, 2019 and $98.2 million at December 31, 2018.\nDuring the quarter, we reduced our long-term debt by approximately $5 million from the prior quarter, bringing the balance to approximately $5 million as of December 31, 2019.\nOverall, our balance sheet remained strong and we continue to generate solid free cash flow, which provides us with financial flexibility to invest in our business and continue to drive long-term shareholder value.\nLastly, the Company also announced that its Board of Directors approved our quarterly cash dividend of $0.18 per share payable March 23, 2020 to shareholders of record at the close of business on March 16, 2020.\nWe are very proud of our performance this quarter and our record setting year.\nOur performance this quarter was very encouraging as we returned solid year-over-year growth on both the top and bottom lines.\nOur steadfast commitment to operational excellence, disciplined cost control measures and strategic capital deployment grant us flexibility to invest in long-term growth of our business while generating shareholder value.\nOur quarterly dividend of $0.18 per share underscores our continued commitment to returning capital to our shareholders.\nAs we transition into this turbulent first quarter of 2020, we remain confident in the strength of our backlog and our underlying fundamentals in all our end markets.\nWe will continue to monitor the developing situation with COVID-19, and the impact it may have on our supply chain and operations.\nFinally, we are confident that our previous and ongoing capital investments in conjunction with our strong cash flows and healthy balance sheet have positioned us to best serve our customers, while providing us with the financial flexibility to pursue any future opportunities to grow our business.\nI'd like to close by welcoming our two new Board members, Leigh Walton and Deborah Whitmire.\nLeigh Walton is an independent director and she has more than 40 years of experience, advising public companies on -- in the areas of corporate governance and corporate finance.\nDebbie Whitmire, as the Company's Executive Vice President, Chief Financial Officer and Treasurer, and has provided invaluable expertise and leadership to our senior management team over the last several years as a member of our executive committee.\nThe leadership they will bring will be a valuable contribution, and I hope you all join me in congratulating them and welcoming them on the Board.\nIn addition, I'd like to just take one second to congratulate all the employees at Miller Industries and all of our vendors, suppliers and other partners, distributors for a phenomenal year, a record-breaking year after 30 years of $818 million in sales.\n",
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"content": "compname reports q4 earnings per share of $1.03.\nq4 earnings per share $1.03.\nq4 sales rose 12.9 percent to $203.1 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 Dan Glaser, President and CEO of Marsh McLennan.\nJoining me on the call today is Mark McGivney, our CFO, and the CEOs of our businesses; John Doyle of Marsh; Peter Hearn of Guy Carpenter; Martine Ferland of Mercer and Scott McDonald of Oliver Wyman.\nMarsh McLennan had an outstanding start to 2021.\nOur first quarter results were excellent.\nAnd we are well positioned for a very good year.\nEven though the pandemic is ongoing, our underlying revenue growth of 6% is the highest in over 6 years and accelerated sequentially across every business.\nWe also grew adjusted earnings per share by 21% and generated significant margin expansion.\nOur business has proven resilient throughout the pandemic and with the global economy now beginning to turn the corner, we saw an acceleration in our growth.\nWith 6% underlying growth to begin the year, we now expect full year 2021 underlying revenue growth to be at the high end of our 3% to 5% guidance range and possibly above.\nAs we look ahead, the outlook for the U.S. and many of the countries we operate in is encouraging.\nHowever, many parts of the world continue to suffer with high levels of infection, and there is still a significant amount of uncertainty.\nGDP in the U.S. was close to flat in the first quarter and strong levels of growth are expected starting in the second quarter due to a rebound in demand as the impact of vaccines takes hold along favorable economic comparisons to a year ago.\nMeanwhile, in India, Brazil and many other parts of the world, case counts continue to rise and broad levels of vaccination remain a long way off.\nOur proprietary Pandemic Navigator now forecast that the U.S. will achieve the herd immunity threshold by early to mid-summer, and we see a fairly similar timeline in the UK.\nThese milestones bring hope for reopening and economic growth, although it will vary by country.\nWe are also mindful that the risks exists and that there still are many unknowns such as variants of the virus, the efficacy of vaccines on the variants, the duration of immunity and vaccine hesitancy, but we are resilient and are confident we will be able to adapt to a wide range of scenarios, just as we have since the beginning of this crisis.\nOur colleagues are our single largest competitive advantage.\nWe have world-class talent that has delivered for clients and one another throughout the crisis.\nWe continue to invest in hiring.\nWe are an employer of choice for smart, hard-working talented individuals and are adding to what is already the deepest talent pool in the industry.\nWe are also pressing ahead with acquisitions.\nMMA made a significant acquisition on April 1st, PayneWest.\nPayneWest was one of the largest independent agencies in the U.S. with more than 700 employees in 26 locations.\nThe acquisition adds nicely to our geographic footprint in the middle market space and brings the Northwest hub.\nOverall, we are on track for a very good year.\nDemand for our advice and solutions is strong.\nThe economy is recovering.\nP&C insurance pricing remains firm, and we are benefiting from industry disruption.\nAlthough the outlook remains uncertain, we are more optimistic than we were when we started the year and our efforts are focused on resurgence rather than recovery.\nAt the end of the first quarter, Marsh McLennan released our inaugural Environmental Social & Governance report.\nTruly great companies must deliver both exceptional financial performance and be good employers and global citizens, and we are working on many fronts to advance the interests of all of our stakeholders.\nWe believe that starts with transparency.\nOur report provides enhanced disclosure in a variety of ESG related areas from how we measure our own carbon footprint to how we use data to manage our workforce.\nOur report highlights our commitment to a diverse and inclusive workplace.\nIn 2020, we launched our Leading the Change initiative to underscore the need to continuously nurture our inclusive culture and serve the fundamental principles of human dignity, equality, community and mutual respect.\nWe also strengthened our commitment to a better sustainable future through our pledge to be carbon-neutral this year along with the commitment to reduce our carbon emissions by 15% by 2025.\nESG issues are among the most critical challenges facing our clients today.\nWe are creating solutions for our clients related to complex business issues, such as climate change, diversity and inclusion, affordable healthcare, cyber security and responsible investing.\nMarsh and Guy Carpenter are helping clients build resilience to flood risk and the documented increase in natural catastrophe perils witnessed in recent years.\nMarsh and Guy Carpenter's experience in the alternative energy space has sparked innovation and been a growth driver.\nMarsh designed in place the first of its kind policy for a European utility which set lower upfront premium payments based on the client's achievement of sustainability targets.\nOliver Wyman is actively advising its clients across sectors including banking, energy, industrials and transportation and managing the risks and capturing the opportunities associated with climate change and the transition to a low-carbon economy to a new climate and sustainability practice.\nAway from climate risk, Mercer is helping address the gender pay gap, diversity and inclusion in the workplace, the workforce of the future and consulting on new normal strategies in the wake of the pandemic.\nOverall, we see significant growth potential in the areas of ESG as well as an opportunity to benefit our clients, colleagues and communities.\nLet me spend a moment on current P&C insurance market conditions.\nThe first quarter marks the 14th consecutive quarter of rate increases in the commercial P&C insurance marketplace.\nThe Marsh Global Insurance Market Index showed price increases of 18% year-over-year versus 22% in the fourth quarter.\nThe pace of price increases moderated sequentially in the first quarter after accelerating for 11 straight quarters.\nHowever, the 18% increase is still one of the highest since we started publishing the index in 2012.\nGlobal property insurance was up 15% and global financial and professional lines were up 40% while global casualty rates were up 6% on average and U.S. workers compensation rates were modestly negative.\nKeep in mind, our index skews to large account business.\nHowever, U.S. small and middle market insurance pricing continues to rise as well, although the magnitude of price increases is less than for large complex accounts.\nTurning to reinsurance, the Guy Carpenter's Global Property Catastrophe Rate on Line index increased just under 5% at the January 1st reinsurance renewals.\nFor the April 1st renewals, Japanese property catastrophe pricing increased for the third year in a row, but at a more moderate pace versus prior years.\nMeanwhile, pricing in terms and conditions in the U.S. on April 1st business were largely a continuation of the January 1st pricing environment.\nCapacity is more than adequate and demand remains high.\nHowever, reinsurance capacity remains constrained on certain lines of business, most notably for cyber risk.\nOverall price increases continue to persist in both the P&C insurance and reinsurance markets.\nLow interest rates, elevated loss activity and continued uncertainty related to the pandemic present challenges for underwriters.\nTimes of uncertainty underscore the need for our advice and solutions, and we are working hard to help our clients navigate these challenges.\nNow let me turn to our first quarter financial performance, which represents an excellent start to 2021.\nWe generated adjusted earnings per share of $1.99, which is up 21% versus a year ago, driven by a combination of strong growth and the continuation of the suppressed environment for travel and entertainment expenses as we continue to operate largely remotely.\nTotal revenue increased 9% versus a year ago, and rose 6% on an underlying basis.\nUnderlying revenue grew 7% in IRS, and 3% in consulting.\nMarsh grew 8% in the quarter on an underlying basis, the highest quarterly underlying growth since 2003, and benefited from double-digit new business growth.\nGuy Carpenter grew 7% on an underlying basis in the quarter.\nMercer underlying revenue was flat in the quarter, which showed sequential improvement from the fourth quarter.\nOliver Wyman underlying revenue grew by 11% as demand accelerated.\nOverall, the first quarter saw adjusted operating income growth of 20%, and our adjusted operating margin expanded 250 basis points year-over-year, reflecting positive operating leverage and favorable expense comparisons.\nAs we look out for the remainder of 2021, we are well positioned, given the strong demand for our advice and solutions, and our expectation for an improving economic backdrop.\nAs we mentioned, we now expect 2021 underlying revenue growth to be at the high end of our 3% to 5% range, and possibly above.\nWe also expect to generate margin expansion and strong growth in adjusted EPS.\nAs we mentioned last quarter, 2021 represents the 150th anniversary of Marsh McLennan.\nAs we look back on our storied history, once theme runs through it all.\nThis company steps up in the moments that matter, at times of war and peace, in eras of transcending innovation,in serving the public good.\nIn March, we changed our name from Marsh & McLennan Companies to Marsh McLennan.\nIt was a small, but important change that better reflects the way that our company has come together.\nOne company with 4 global businesses, united by a shared purpose to make a difference in the moments that matter.\nThe challenges before us all our vast.\nIt sower the possibilities, climate resilience, systemic risk, digital disruption, the protection gap, affordable healthcare, the future of work.\nAs we face this new world together, one thing will never change.\nMarsh McLennan will be at our clients' side finding opportunity and navigating uncertainty in the areas of risk, strategy and people.\nOur first quarter results were outstanding, and we are well-positioned for a very good 2021, despite the continued uncertainty associated with the pandemic.\nUnderlying growth accelerated across all of our businesses, and our margin expansion in earnings growth were impressive.\nConsolidated revenue increased 9% in the first quarter to $5.1 billion, reflecting underlying growth of 6%.\nOperating income and adjusted operating income were both approximately $1.4 billion.\nOur adjusted operating margin increased 260 basis points to 29.6%.\nGAAP earnings per share was $1.91, and adjusted earnings per share was $1.99, up 21% compared with the first quarter a year ago.\nLooking at Risk & Insurance Services.\nFirst quarter revenue was $3.2 billion, up 11% compared with a year ago, or 7% on an underlying basis.\nIt marks the highest level of underlying growth since 2012.\nAdjusted operating income increased 17% to $1.1 billion, and our adjusted operating margin expanded 210 basis points to 36.6%.\nAt Marsh, revenue in the quarter was $2.3 billion, up 13% compared with a year ago, or 8% on an underlying basis.\nThis was Marsh's highest level of underlying growth in nearly 2 decades.\nGrowth in the quarter was broad based, and driven by double-digit new business growth, and solid retention, and was impressive considering Marsh's strong growth in the first quarter of last year.\nThe U.S. and Canada division delivered another exceptional quarter with underlying revenue growth of 9%.\nThis is the highest quarterly underlying growth U.S. and Canada has achieved since we began reporting their results.\nAnd they have now averaged 6% underlying growth over the last 12 quarters.\nIn international, underlying growth was strong at 6%, marking the highest underlying growth since 2013.\nEMEA was up 6% with strong results in each region, including in the UK.\nAsia Pacific was up 8%, a strong rebound from the fourth quarter, and comes on top with 6% growth in the first quarter of 2020.\nAnd Latin America grew 6% on an underlying basis, continuing to show sequential improvement.\nGuy Carpenter's revenue was $895 million, up 8% or 7% on an underlying basis, driven by strong growth in North America, EMEA, Global Specialties and Latin America treaty.\nGuy Carpenter has now achieved 5% or higher underlying growth in 12 of the last 14 quarters.\nIn the Consulting segment, revenue in the quarter was $1.9 billion, up 6% from a year ago, or 3% on an underlying basis.\nAdjusted operating income was $370 million, and the adjusted operating margin expanded by 330 basis points to 20.5%.\nAt Mercer, revenue in the quarter was $1.3 billion, which was flat on an underlying basis.\nMercer's top line performance improved each month in the first quarter, and we expect Mercer to return to underlying growth in the second quarter.\nWealth increased 1% on an underlying basis, reflecting strong growth in investment management, offset by a modest decline in defined benefits.\nOur assets under delegated management grew to approximately $380 billion at the end of the first quarter, up 42% year-over-year, or 6% sequentially, benefiting from net new inflows and market gains.\nHealth underlying revenue was flat in the quarter, but faced a tough comparison to 8% growth in the first quarter of last year.\nAnd Career grew 1% on an underlying basis, reflecting strong sequential improvement.\nAt Oliver Wyman, revenue in the quarter was $585 million, an increase of 11% on an underlying basis.\nFirst quarter results were a continuation of the momentum we started to see materializing in the fourth quarter.\nAdjusted corporate expense was $57 million in the quarter.\nForeign exchange added approximately $0.06 to our adjusted EPS.\nAssuming exchange rates remain at current levels, we expect FX to be a slight benefit in the second quarter with limited impact thereafter.\nOur other net benefit credit was $71 million in the quarter.\nFor the full year 2021, we continue to expect our other net benefit credit will increase modestly year-over-year.\nInvestment income was $11 million in the first quarter on a GAAP basis, or $10 million on an adjusted basis, and mainly reflects gains in our private equity portfolio.\nInterest expense in the first quarter was $118 million compared to $127 million in the first quarter of 2020, reflecting lower debt levels in the period.\nBased on our current forecast, we expect approximately $114 million of interest expense in the second quarter.\nOur effective adjusted tax rate in the first quarter was 24.3% compared to 23.2% in the first quarter of last year.\nOur tax rate benefited from favorable discrete items, the largest of which was the accounting for share-based compensation, similar to a year ago.\nExcluding discrete items, our effective adjusted tax rate was approximately 25.5%.\nWhen we give forward guidance around our tax rate, we do not project discrete items, which can be positive or negative.\nBased on the current environment.\n, it is reasonable to assume a tax rate between 25% and 26% for 2021.\nOur current outlook for 2021 assumes the global economy returns to growth in the second quarter, with a strong recovery in the U.S. Based on this outlook and our strong first quarter performance, we now expect underlying revenue growth to be at the high end of our 3% to 5% underlying growth guidance, and possibly above.\nWe currently expect we will deliver margin expansion for the full year.\nBut as you think through the quarterly cadence, keep in mind, we have tough expense comparison in the second and third quarters.\nThis view is based on our outlook today and it goes without saying that conditions could turn out materially different than our assumptions, which would affect our projection.\nTurning to capital management and our balance sheet.\nSo far this year, we have completed our JLT-related deleveraging, enhanced our short-term liquidity flexibility and seen S&P, Moody's and Fitch restore our rating outlook to stable.\nWe ended the quarter with $11.3 billion of total debt, which was consistent with the level at December 31st.\nIn April, we repaid $500 million of senior notes scheduled to mature in July, taking advantage of a prepayment option.\nThis repayment brought our debt down to $10.8 billion and completed our planned deleveraging, marking an important milestone for us.\nOur next scheduled debt maturity is in January 2022 when $500 million of senior notes will mature.\nEarlier this month, we entered into a new 5-year revolving credit agreement.\nUnder this new facility, we increased the credit available to $2.8 billion from $1.8 billion.\nIn addition, we increased the size of our commercial paper program and now have capacity to issue $2 billion, up from $1.5 billion previously.\nWe view these changes as prudent steps that enhance our liquidity profile and provide additional flexibility.\nIn the first quarter, we resumed share repurchases, reflecting our strong financial position and outlook for cash generation.\nWe repurchased 1 million shares of our stock for $112 million.\nWe continue to expect to deploy approximately $3.5 billion of capital in 2021 across dividends, debt reduction, acquisitions and share repurchases.\nThe ultimate level of share repurchases will depend on how the M&A pipeline develops.\nAs we've consistently said, we favor attractive acquisitions over share repurchases as we view high quality acquisitions is the better value creator for shareholders and the company over the long term.\nNow that our deleveraging is behind us, we are back to our normal focus for capital management.\nOur capital management strategy reflects balance and supports our consistent focus on delivering solid performance in the near term while investing for sustained growth over the long term.\nFor the capital we generate and target to deploy, we prioritize reinvestment in the business, both through organic investments and acquisitions.\nHowever, we also recognize that returning capital to shareholders generate meaningful returns for investors over time, and each year we target raising our dividend and reducing our share count.\nOur cash position at the end of the first quarter was $1.1 billion.\nUses of cash in the quarter totaled $392 million and included $237 million for dividends, $112 million for share repurchases and $43 million for acquisitions.\nOverall, we had an outstanding first quarter positioning us well to deliver strong growth in both underlying revenue and adjusted earnings in 2021.\nOperator, we are ready to begin Q&A.\n",
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"content": "q1 adjusted earnings per share $1.99.\nq1 gaap earnings per share $1.91.\nq1 revenue rose 9 percent to $5.1 billion.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: I'm Dan Glaser, President and CEO of Marsh McLennan.\nJoining me on the call today is Mark McGivney, our CFO; and the CEOs of our businesses, John Doyle of Marsh; Peter Hearn of Guy Carpenter; Martine Ferland of Mercer; and Nick Studer of Oliver Wyman.\nNick has led many of Oliver Wyman's major practices in his 23 years with the business and I look forward to seeing Oliver Wyman continue to grow and thrive under his leadership.\nMarsh McLennan had an outstanding second quarter.\nWe are well positioned in benefiting from the abundance of opportunities.\nWe are stronger and have broader capabilities post the JLT acquisition.\nWe are benefiting from what may be the strongest economic rebound in nearly four decades, led by our largest region, the U.S. There is high demand for our advice and solutions in this time of uncertainty and in the face of challenging market conditions.\nWe are seeing a flight to quality and stability, which is contributing to high levels of new business growth and client retention and is helping us to attract talent.\nAnd there is a long runway for growth as we think about major protection gaps around the world, new emerging risks, digitization, workforce of the future and underpenetrated markets such as small commercial.\nWe are focused on capitalizing on these opportunities, and I am proud of our execution in the quarter.\nWe generated record second quarter revenue and earnings, the best underlying growth of any quarter in two decades, and we are poised for an excellent year.\nThe strength of our results was broad-based with each of our businesses and virtually all of our major geographies seeing an acceleration in growth.\nOur adjusted earnings per share increased by an impressive 33%, and we generated margin expansion despite challenging expense comparisons.\nAs we look ahead, the economic outlook for the U.S. and most of the major countries we operate in is encouraging.\nHowever, the pandemic is not over yet.\nVaccine hesitancy creates risk and there are many parts of the world where vaccine availability is limited.\nAs a result, much of the world is experiencing another wave of the pandemic with rising case counts due to the spread of variants.\nIn addition, the shape of this economic recovery is very different from any we have seen before.\nSome industries are thriving, while others are being impacted by supply chain disruption, inventory issues and labor shortages.\nNavigating this dynamic landscape is challenging, even confounding for some businesses.\nThe growth opportunity for Marsh McLennan is significant during this time of uncertainty and recovery.\nWe are aiding and guiding our clients through the complexities of the new normal as well as helping them tackle issues like climate risk, cyber, diversity and inclusion, employee safety and well-being and workforce disruption.\nOur ability to provide differentiated high-quality solutions to our clients rest on our talent and expertise.\nOur colleagues are our Number one competitive advantage.\nAnd with the potential for industry consolidation, we see a meaningful opportunity to invest in hiring and deepen our world-class talent pool.\nWe have strong momentum.\nAnd as we mentioned last quarter, our efforts are focused on resurgence and expansion.\nLet me provide some examples of how we are helping our clients address complex issues of the day, specifically two major challenges: cybersecurity and climate change.\nCybersecurity is one of the greatest risks facing society.\nSupply chain and ransomware attacks continue to rise with a number of recent high-profile attacks affecting organizations across all sectors and segments from technology to critical infrastructure and healthcare.\nMarsh & McLennan is helping clients manage cyber risk.\nIncreasingly, we are bringing our businesses together to leverage all of our expertise, data and relationships with public and private partners to help clients become more resilient.\nOur growth in participation in cyber extends well beyond the placement of insurance, under the leadership of Tom Doyle, we are leveraging the collective capabilities of Marsh, Guy Carpenter and Oliver Wyman to bring cyber solutions from across our enterprise to clients.\nNot only are we helping clients with risk transfer through our insurance businesses, but through our cyber risk assessment tools, we help clients measure and quantify their cyber risk exposure to better inform decisions about cybersecurity, risk mitigation and transfer strategies.\nWe also help clients with incident response before, during and after events as well as part of our broader efforts to help clients build resilience in the face of a constantly evolving threat landscape.\nA second defining challenge of our time is climate change.\nClimate and the broader topic of ESG are complex multidimensional challenges, virtually all companies face.\nThe threats to the changing time may present obvious questions for companies touching everything from strategy to resilience to their workforce and how they communicate.\nEven if climate change is a long-term threat, the issue is proximate and has immediate consequences as firms deal with calls for action, strategies to respond and more input from various stakeholders.\nLed by Nick Studer, we are bringing together our businesses to help our clients anticipate climate risks and opportunities.\nFor example, Oliver Wyman is working with our insurance businesses to support clients in the transition to a low-carbon economy and manage climate risk.\nWe are assisting clients with the development of carbon-light business models and to derisk investment in sustainable technologies.\nAt Marsh and Guy Carpenter, we are helping to develop innovative climate solutions to bridge protection gaps.\nWe assist clients with stress testing models, outline the impact of climate change, and providing risk management and insurance services to protect against climate impacts.\nAnd Mercer's responsible investment business helps steward the fiduciaries of investment pools understand how a change in climate could impact investment returns in the future and anticipate them today.\nOverall, we are uniquely positioned to help our clients with their most pressing challenges.\nLet me spend a moment on current P&C insurance market conditions.\nThe second quarter marks the 15th consecutive quarter of rate increases in the commercial P&C insurance marketplace.\nThe Marsh Global Insurance Market Index showed price increases of 13% year-over-year versus 18% in the first quarter.\nThe pace of price increases continue to moderate but still remains high, reflecting elevated loss activity and concerns about inflation and low interest rates.\nGlobal property insurance was up 12% and global financial and professional lines were up 34%, driven in part by steep cyber increases, while global casualty rates are up 6% on average and U.S. workers' compensation rates declined modestly in the quarter.\nKeep in mind, our index skews to large account business.\nHowever, U.S. small middle market insurance pricing continues to rise as well, although the magnitude of price increases is less with the large complex accounts.\nGuy Carpenter's global property catastrophe rate online index increased 6% at midyear.\nIn the second quarter, the market was more orderly and balanced than a year ago, reflecting adequate capital and an increased willingness to deploy capacity.\nMeasured and moderate single-digit rate increases were typical after two years of double-digit rate increases.\nHowever, programs that had significant losses saw higher increases and capacity remains constrained on certain lines of business, most notably, cyber.\nConcerns remain around inflation, losses in certain lines, extreme weather events and the beginning of a new hurricane season.\nIt is in times like these where our expertise and capabilities shine.\nWe are working hard to help our clients navigate the current environment.\nNow let me turn to our fantastic second quarter financial performance.\nWe generated adjusted earnings per share of $1.75, which is up 33% versus a year ago, driven by strong top line growth and continued low levels of T&E.\nTotal revenue increased 20% versus a year ago and rose 13% on an underlying basis, the highest quarterly growth in two decades.\nUnderlying revenue grew 13% in RIS and 12% in consulting.\nMarsh grew 14% in the quarter on an underlying basis, the highest quarterly underlying growth in nearly two decades and benefited from stronger business and renewal growth.\nGuy Carpenter grew 12% on an underlying basis in the quarter, continuing its string of excellent results.\nMercer underlying revenue grew 6% in the quarter, the highest in almost a decade.\nOliver Wyman posted record reported underlying revenue growth of 28%.\nOverall, the second quarter saw adjusted operating income growth of 24%, and our adjusted operating margin expanded 90 basis points year-over-year.\nAs we look out for the rest of 2021, we are well positioned.\nWith 9% underlying revenue growth year-to-date, our full year growth will be strong.\nWe expect favorable market dynamics to persist for at least the remainder of the year.\nAlthough the pace of growth could moderate versus the second quarter as year-over-year comparisons become more challenging.\nWe also expect to generate margin expansion for the full year and strong growth in adjusted EPS.\nOur results were excellent with record second quarter revenue to earnings, the best quarterly underlying growth in two decades, meaningful margin expansion, and significant growth in adjusted earnings.\nHighlights from our second quarter performance included the strongest underlying growth at Marsh since the first quarter of 2003; the strongest at Guy Carpenter in 15 years; solid rebound at 6% at Mercer; and record reported underlying growth at Oliver Wyman.\nSecond quarter growth in adjusted earnings per share was also impressive, rising at the fastest pace of any quarter in more than a decade.\nConsolidated revenue increased 20% in the second quarter to $5 billion, reflecting underlying growth of 13%.\nOperating income in the quarter was $1.2 billion, an increase of 39% over the prior year.\nAdjusted operating income increased 24% to $1.2 billion, and our adjusted operating margin increased 90 basis points to 26.4%.\nGAAP earnings per share was $1.50 in the quarter and adjusted earnings per share increased 33% to $1.75.\nFor the first six months of 2021, underlying revenue growth was 9%, and adjusted operating income grew 22% to $2.6 billion.\nOur adjusted operating margin increased 170 basis points.\nOur adjusted earnings per share increased 26% to $3.74.\nLooking at Risk Insurance Services.\nSecond quarter revenue was $3.1 billion, up 21% compared with a year ago or 13% on an underlying basis.\nOperating income increased 37% to $950 million.\nAdjusted operating income increased 22% to $927 million, and our adjusted operating margin expanded 30 basis points to 32.4%.\nFor the first six months of the year, revenue was $6.4 billion, with underlying growth of 10%.\nAdjusted operating income for the first half of the year increased 19% to $2 billion with a margin of 34.5%, up 110 basis points from the same period a year ago.\nAt Marsh, revenue in the quarter was $2.7 billion, up 23% compared with a year ago, 14% on an underlying basis.\nEven excluding the impact of the revenue adjustment we reported a year ago, underlying revenue at Marsh was up 12%.\nGrowth in the quarter was broad-based and was driven by robust new business growth and solid retention.\nThe U.S. and Canada region delivered another exceptional quarter with underlying revenue growth of 15%, the highest result since we began reporting this segment.\nIn international, underlying growth was 13%, EMEA was up 16%, Asia Pacific was up 10% and Latin America grew 2%.\nFor the first six months of the year, Marsh's revenue was $5 billion, with underlying growth of 11%.\nU.S. and Canada underlying growth was 12% and international was up 9%.\nGuy Carpenter's second quarter revenue was $488 million, up 13% compared with a year ago or 12% on an underlying basis.\nGrowth was broad-based across all geographies and specialties.\nGuy Partner has now achieved 7% or higher underlying growth in six of the last eight quarters.\nFor the first six months of the year, Guy Carpenter generated $1.4 billion of revenue and 8% underlying growth.\nIn the Consulting segment, revenue in the quarter was $1.9 billion, up 17% from a year ago or 12% on an underlying basis.\nOperating income increased 35% to $344 million.\nAdjusted operating income increased 34% to $356 million, and the adjusted operating margin expanded by 220 basis points to 19.5%.\nConsulting generated revenue of $3.8 billion for the first six months of 2021, representing underlying growth of 8%.\nAdjusted operating income for the first half of the year increased 31% to $726 million.\nMercer's revenue was $1.3 billion in the quarter, up 6% on an underlying basis, representing a meaningful acceleration from the first quarter.\nCareer grew 15% on an underlying basis, reflecting the rebound in the economy and business confidence.\nWealth increased 4% on an underlying basis, reflecting strong growth in investment management offset by a modest decline in defined benefit.\nOur assets under delegated management grew to $393 billion at the end of the second quarter, up 28% year-over-year and 3% sequentially, benefiting from net new inflows and market gains.\nHealth underlying revenue growth was 4% in the quarter, driven by strength internationally.\nOliver Wyman's revenue in the quarter was $618 million, an increase of 28% on an underlying basis.\nThe second quarter results represent a sharp rebound from the contraction we saw in the second quarter last year.\nFor the first six months of the year, revenue at Oliver Widen was $1.2 billion, an increase of 19% on an underlying basis.\nAdjusted corporate expense was $62 million in the second quarter.\nForeign exchange was a modest benefit to earnings in the quarter.\nAssuming exchange rates remain at current levels, we expect FX to have a minimal impact on earnings per share for the remainder of the year.\nHowever, the net benefit credit was $71 million in the quarter.\nFor the remaining two quarters of the year, we expect our other net benefit credit will be mostly consistent with the level in the second quarter.\nInvestment income was $19 million in the second quarter on a GAAP basis and $18 million on an adjusted basis and mainly reflects gains on our private equity portfolio.\nInterest expense in the second quarter was $110 million compared to $132 million in the second quarter of 2020, reflecting lower debt levels in the period.\nBased on our current forecast, we expect approximately $110 million of interest expense in the third quarter.\nOur adjusted effective tax rate in the second quarter was 24.4% compared with 25% in the second quarter last year.\nOur tax rate benefited from favorable discrete items, the largest of which was the accounting for share-based compensation.\nExcluding discrete items, our effective adjusted tax rate was approximately 25.5%.\nOur GAAP tax rate was 31.6% in the second quarter, up from 26.2% in the second quarter of 2020.\nThe increase reflects a $100 million impact from the revaluation of deferred tax liabilities due to an increase in the U.K. statutory tax rate that goes into effect in 2023.\nThrough the first half of the year, our adjusted effective tax rate was 24.4% compared with 24% last year.\nBased on the current environment, we continue to expect an adjusted effective tax rate between 25% and 26% for 2021, excluding discrete items.\nAs we currently look out for the balance of the year, we expect our top line growth to remain strong, reflecting the economic rebound and favorable environment.\nKeep in mind the second quarter faced the most favorable year-over-year comparison for revenue growth.\nAs we progress through the rest of the year, this, combined with continued normalization of expenses will result in more challenging comparisons.\nHowever, our businesses have momentum, and we expect positive trends to continue, resulting in strong performance in the second half and a terrific full year.\nTurning to capital management, our balance sheet.\nWe ended the quarter with $10.8 billion of total debt.\nThis reflects repayment of $500 million of senior notes in April, which completed our JLT-related deleveraging.\nOur next scheduled debt maturity is in January of 2022 when $500 million of senior notes mature.\nWe continue to expect to deploy approximately $3.5 billion and possibly more capital in 2021, of which at least $3 billion will be deployed across dividends, acquisitions and share repurchases.\nThe ultimate level of share repurchases will depend on how the M&A pipeline develops.\nLast week, we raised our dividend 15%, which is the largest increase since the third quarter of 1998.\nWe also repurchased 2.4 million shares of our stock for $322 million in the second quarter.\nOur cash position at the end of the second quarter was $888 million.\nUses of cash in the quarter totaled $993 million and included $241 million for dividends, $322 million for share repurchases and $430 million for acquisitions.\nFor the first six months, uses of cash totaled $1.4 billion and included $478 million for dividend, $434 million for share repurchases and $473 million for acquisitions.\nOverall, we had an exceptional second quarter, positioning us well to deliver strong growth in both revenue and adjusted earnings in 2021.\nAnd operator, we are ready to begin Q&A.\n",
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"content": "q2 adjusted earnings per share $1.75.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: During today's conference call, we will make certain predictive statements that reflect our current views about 3M's future performance and financial results.\n3M's performance in the second quarter was strong as we posted organic growth across all business groups and geographic areas.\nOur team executed well and delivered increased earnings, expanded margins and robust cash flow.\nFrom a macro perspective, the global economy continues to improve, though uncertainty remains due to COVID-19 and heightened concern over the increase in Delta variant cases.\nWe saw ongoing strength in many end markets, including home improvement, oral care and general industrial, along with a pickup in healthcare electric procedures.\nWe continue to work to mitigate ongoing inflationary pressures and supply chain challenges, as well as end-market dynamics such as the semiconductor shortage impacting automotive build rates and electronics.\nWe are also beginning to see a decline in pandemic-related demand for disposable respirators, which I will discuss on the next slide.\nLooking forward, we will stay focused on investing in emerging growth opportunities, improving productivity and advancing sustainability.\nWe are confident in our ability to continue executing well in the face of COVID-19 uncertainties and are raising our full-year guidance for organic growth to 6% to 9%, and earnings per share to $9.70 to $10.10.\nIn the second quarter, we delivered total sales of $8.9 billion.\nWe posted organic growth of 21% versus a 13% decline in last year's second quarter, along with earnings of $2.59 per share.\nWe expanded adjusted EBITDA margins to over 27% and increased adjusted free cash flow to $1.6 billion with a conversion rate of 103%.\nStrong cash flow allowed us to further strengthen our balance sheet while returning $1.4 billion to shareholders through dividends and share repurchases.\nI am proud of our team's execution in a dynamic environment.\nWe are finding new ways to innovate for customers and improve our operational performance.\nIn addition to our strong day-to-day execution, we are investing to capitalize on favorable market trends and serve emerging customer needs.\nI want to share a few impactful examples.\nIn healthcare, our innovative PREVENA therapy incision management system is the first and only medical device indicated by the U.S. FDA to help reduce surgical site infections in high-risk patients, helping lower the costly financial burden of complications, delivering on both improved clinical outcomes and cost savings for the healthcare system.\nIn automotive electrification, we are building on 3M's long history in consumer electronics and now expanding our solutions for the future of transportation, including new display technologies for both electric and internal combustion engines, helping us drive above-market growth in our automotive business.\nIn home improvement, we are building out a suite of innovations to help consumers personalize their homes, including our fast-growing line of command damage-free hanging solutions, $500 million franchise that leverages our world-class adhesive platform with even greater opportunities ahead.\nWe have increased opportunities across our businesses to apply 3M science and drive long-term growth, and we will continue to invest and win in those areas.\nAs you all have seen, the ongoing impact of COVID-19 is highly variable across geographies.\nSince the onset of the pandemic, we have increased our annual respirator production fourfold to $2.5 billion by activating idle surge capacity and building additional lines, while shifting 90% of distribution into healthcare to protect nurses, doctors and first responders.\nOne of our strengths is to quickly adapt to changing marketplace needs.\nGlobal demand reached its peak in Q1 of this year, which included stockpiling from governments and hospitals.\nWe are now seeing a deceleration in overall healthcare demand and our adjusting production, increasing supply to industrial and consumer channels while continuing to prioritize healthcare workers in the geographies seeing increased COVID-19 cases and elevated hospitalization rates.\nAs we do this, we are reducing overall output to meet end-market trends.\nLike we have in the past, we are prepared to rapidly increase production in response to COVID-19-related needs or future emergencies when needed.\nAs I reflect on the first half, I am pleased with our performance.\nWe delivered strong sales and margin growth, along with good cash flow while building for the future and advancing sustainability with significant new carbon, water and plastic commitments.\nIn the second half, in addition to investing in growth, productivity and sustainability, we also must navigate ongoing COVID-19 impacts and continue taking actions to address inflationary pressures and supply chain challenges.\nWe will do this by driving an unrelenting focus on operational performance, which includes improving service, quality, operating costs and cash generation.\nThat wraps up my opening comments.\nCompanywide second-quarter sales were $8.9 billion, up 25% year on year or an increase of 21% on an organic basis.\nSales growth, combined with operating rigor and disciplined cost management, drove adjusted operating income of $2 billion, up 40%, with adjusted operating margins of 22%, up 240 basis points year on year.\nSecond-quarter GAAP and adjusted earnings per share were $2.59, up 44% compared to last year's adjusted results.\nOn this slide, you can see the components that impacted both operating margins and earnings per share as compared to Q2 last year.\nA strong year-on-year organic volume growth, along with ongoing productivity, restructuring efforts and other items, added 4.1 percentage points to operating margins and $0.89 to earnings per share year on year.\nIncluded in this margin and earnings benefit were a few items of note.\nFirst, during the quarter, the Brazilian Supreme Court issued a ruling that clarified the calculation of Brazil's federal sales-based social tax, essentially lowering the social tax that 3M should have paid in prior years.\nThis favorable ruling added $91 million to operating income of 1 percentage point to operating margins and $0.12 to earnings per share.\nNext, as you will see later today in our 10-Q, we increased our other environmental liability by nearly $60 million and our respiratory liabilities by approximately $20 million as part of our regular review.\nIn addition, we also incurred a year-on-year increase in ongoing legal defense costs.\nWe are currently scheduled to begin a PFAS-related trial in Michigan in October, along with the next step in the combat arms year plug multi-district litigation with one trial in September and one in October.\nAnd finally, during the second quarter, we incurred a pre-tax restructuring charge of approximately $40 million as part of the program we announced in Q4 of last year.\nSecond-quarter net selling price and raw materials performance reduced both operating margins and earnings per share by 140 basis points and $0.17, respectively.\nThis headwind was larger than forecasted as we experienced broad-based cost increases for chemicals, resins, outsourced manufacturing and logistics as the quarter progressed.\nAs a result of these increasing cost trends, we now forecast a full-year raw materials and logistics cost headwind in the range of $0.65 to $0.80 per share versus a prior expectation of $0.30 to $0.50.\nAs we have discussed, we have been and are taking multiple actions including increasing selling prices to address these cost headwinds.\nAs a result, we expect continued improvement in our selling price performance in the second half of the year.\nHowever, given the pace of cost increases, we currently expect a third-quarter net selling price and raw materials headwind to margins in the range of 50 to 100 basis points, which we anticipate will turn to a net benefit in the fourth quarter as our selling price and other actions start catching up to the increased costs.\nMoving to divestiture impacts.\nThe lost income from the sale of drug delivery in May of last year was a headwind of 10 basis points to operating margins and $0.02 to earnings per share.\nForeign currency, net of hedging impacts, reduced margins 20 basis points while benefiting earnings by $0.08 per share.\nFinally, three nonoperating items combined had a net neutral impact to earnings per share year on year.\nThis result included a $0.06 earnings benefit from lower other expenses, that was offset by higher tax rate and diluted share count, which were each a headwind of $0.03 per share versus last year.\nWe delivered another quarter of robust free cash flow with second-quarter adjusted free cash flow of $1.6 billion, up 2% year on year, along with conversion of 103%.\nOur year-on-year free cash flow performance was driven by strong double-digit growth in sales and income, which was mostly offset by a timing of an income tax payment of approximately $400 million in last year's Q3, which is traditionally paid in Q2.\nThrough the first half of the year, we increased adjusted free cash flow to $3 billion versus $2.5 billion last year.\nSecond-quarter capital expenditures were $394 million and approximately $700 million year to date.\nFor the full year, we are currently tracking to the low end of our expected capex range of $1.8 billion to $2 billion, given vendor constraints and the pace of capital projects.\nDuring the quarter, we returned $1.4 billion to shareholders through the combination of cash dividends of $858 million and share repurchases of $503 million.\nYear to date, we have returned $2.5 billion to shareholders in the form of dividends and share repurchases.\nOur strong cash flow generation and disciplined capital allocation enabled us to continue to strengthen our capital structure.\nWe ended the quarter with $12.7 billion in net debt, a reduction of $3.5 billion since the end of Q2 last year.\nAs a result, our net debt-to-EBITDA ratio has declined from 1.9 a year ago to 1.3 at the end of Q2.\nOur net debt position, along with our strong cash flow generation capability, continues to provide us financial flexibility to invest in our business, pursue strategic opportunities and return cash to shareholders while maintaining a strong capital structure.\nI will start with our safety and industrial business, which posted organic growth of 18% year on year in the second quarter, driven by improving industrial manufacturing activity and prior pandemic impacts.\nFirst, starting with our personal safety business, we posted double-digit organic growth in our head, face, gearing and fall protection solutions as demand in general industrial and construction end markets remains strong.\nHowever, this growth was more than offset by a decline in our overall respiratory portfolio due to last year's strong COVID-related demand resulting in an organic sales decline of low single digits for our personal safety business.\nWithin our respiratory portfolio, second-quarter disposable respirator sales increased 3% year on year but declined 11% sequentially as COVID-related hospitalizations declined.\nLooking ahead, we anticipate continued deceleration in disposable respirator demand through the balance of this year and into 2022.\nTurning to the rest of safety and industrial.\nOrganic growth was broad-based, led by double-digit increases in automotive aftermarket, roofing granules, abrasives, adhesives and tapes and electrical markets.\nSafety and industrial's second-quarter operating income was $718 million, up 15% versus last year.\nOperating margins were 22.1%, down 130 basis points year on year as leverage on sales growth was more than offset by increases in raw materials, logistics and ongoing legal costs.\nMoving to transportation and electronics, which grew 24% organically despite sustained challenges from semiconductor supply chain constraints.\nOrganic growth was led by our auto OEM business, up 76% year on year, compared to a 49% increase in global car and light truck builds.\nThis outperformance was due to several factors.\nFirst, the regional mix of year-on-year growth in car and light truck builds were in regions where we have high dollar content per vehicle.\nSecond, a year-on-year increase in sell-in of 3M products versus the change in build rate.\nLastly, we continue to apply 3M innovation to vehicles, gaining penetration onto new platforms.\nOur electronics-related business was up double digits organically with continued strength in semiconductor, factory automation and data centers, along with consumer electronic devices, namely tablets and TVs.\nLooking ahead, we continue to monitor the global semiconductor supply chain and its potential impact on the electronics and automotive industries.\nTurning to the rest of transportation and electronics.\nAdvanced materials, commercial solutions and transportation safety each grew double digits year on year.\nSecond-quarter operating income was $546 million, up over 50% year on year.\nOperating margins were 22%, up 340 basis points year on year, driven by strong leverage on sales growth, which was partially offset by increases in raw materials and logistic costs.\nTurning to our healthcare business, which delivered second-quarter organic sales growth of 23%.\nOrganic growth was driven by continued year on year and sequential improvements in healthcare electric procedure volumes as COVID-related hospitalizations decline.\nOur medical solutions business grew mid-teens organically or up approximately 20%, excluding the decline in disposable respirator demand.\nI am pleased with the performance of Acelity, which grew nearly 20% organically in the quarter as it helps us build on our leadership in Advanced Wound Care.\nSales in our oral care business more than doubled from a year ago as patient visits have nearly returned to pre-COVID levels.\nThe separation and purification business increased 10% year on year due to ongoing demand for biopharma filtration solutions for COVID-related vaccine and therapeutics, along with improving demand for water filtration solutions.\nHealth information systems grew high single digits, driven by strong growth in clinician solutions.\nAnd finally, food safety increased double digits organically as food safety activity returns, along with continued strong growth from new product introduction.\nHealth care's second-quarter operating income was $576 million, up over 90% year on year.\nOperating margins were 25.3%, up 880 basis points.\nSecond-quarter margins were driven by leverage on sales growth, which was partially offset by increasing raw materials and logistics costs, along with increased investments in growth.\nLastly, second-quarter organic growth for our consumer business was 18% year on year with strong sell-in and sell-out trends across most retail channels.\nOur home improvement business continues to perform well, up high teens organically on top of a strong comparison from a year ago.\nThis business continued to experience strong demand in many of our category-leading franchises, particularly Command, Filtrete and Meguiar's.\nStationery and office grew strong double digits organically in Q2 as this business laps last year's COVID-related comparisons.\nWe continue to see strength in consumer demand for scotch branded packaging and shipping products, along with improved sell-in trends in Post-it Solutions and Scotch branded home and office tapes as retailers prepare for back to school and return to workplace.\nOur home care business was up low single digits organically versus last year's strong COVID-driven comparison.\nAnd finally, our consumer health and safety business was up double digits as we lap COVID-related impacts from a year ago, along with improved supply of safety products for our retail customers.\nConsumer's operating income was $311 million, up 12% year on year.\nOperating margins were 21%, down 160 basis points as increased costs for raw materials, logistics and outsourced hard goods manufacturing, along with investments in advertising and merchandising more than offset leverage from sales growth.\nWhile uncertainty remains, we expect global economic and end-market growth to remain strong, however, continue to be fluid as the world wrestles with ongoing COVID-related impacts that we all see and monitor.\nTherefore, there are a number of items that will need to be navigated as we go through the second half of the year.\nFor example, we anticipate continued sequential improvement in healthcare elective procedure volumes.\nAlso, we expect ongoing strength in the home improvement market and currently anticipate students returning to classrooms and more people returning to the workplace.\nNext, we remain focused on driving innovation and penetration with our global auto OEM and electronics customers.\nThese two end markets continue to converge as highlighted by the well-known constraints in semiconductor chip supply.\nThis limited chip supply is expected to reduce year-on-year automotive and electronics production volumes in the second half.\nAs mentioned earlier, we expect demand for disposable respirators to wane and negatively impact second-half revenues by approximately $100 million to $300 million year on year.\nTurning to raw materials and logistics.\nAs noted, we anticipate a year-on-year earnings headwind of $0.65 to $0.80 per share for the full year or $0.40 to $0.55 in the second half due to rising cost pressures.\nWe are taking a number of actions, including broad-based selling price increases to help mitigate this headwind.\nAnd finally, the restructuring program we announced last December remains on track.\nAs part of this program, we expect to incur a pre-tax charge in the range of $60 million to $110 million in the second half of this year.\nThus, taking into account our first-half performance, along with these factors, we are raising our full-year guidance for both organic growth and earnings per share.\nOrganic growth is estimated to be 6% to 9%, up from the previous range of 3% to 6%.\nWe now anticipate earnings of $9.70 to $10.10 per share against a prior range of $9.20 to $9.70.\nAlso, as you can see, we now expect free cash flow conversion in the range of 90% to 100% versus a prior range of 95% to 105%.\nThis adjustment is primarily due to ongoing challenges in global supply chains, raw materials and logistics, which are expected to persist for some time.\nTurning to the third quarter, let me highlight a few items of note.\nFirst, we currently anticipate continued improvement in healthcare electric procedure volumes across most parts of the world.\nGlobal smartphone shipments are expected to be down high single digits year on year, while global car and light truck builds, I expect to be down 3% year on year.\nRelative to disposable respirators, we anticipate a year-on-year reduction in sales of $50 million to $100 million due to continued decline in global demand.\nAs mentioned earlier, we are anticipating a third-quarter year-on-year operating margin headwind of 50 to 100 basis points from selling prices, net of higher raw materials and logistic costs.\nOn the restructuring front, which I previously discussed, we expect a Q3 pre-tax charge in the range of $50 million to $75 million as a part of this program.\nAnd finally, we expect higher investments in growth, productivity and sustainability in the quarter, along with higher legal defense costs as proceedings progress.\nTo wrap up, our team has delivered a strong first-half performance, including broad-based growth, good operational execution, robust cash flows and an enhanced capital structure.\nWith that being said, there's always more we can do and will do.\nWe continue to prioritize capital to our greatest opportunities for growth, productivity and sustainability, while remaining focused on delivering for our customers, improving operating rigor and enhancing daily management.\n",
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"content": "3m sees fy earnings per share $9.70 to $10.10.\nq2 sales $8.9 billion versus refinitiv ibes estimate of $8.56 billion.\nsees fy earnings per share $9.70 to $10.10.\nq2 adjusted earnings per share $2.59.\nqtrly transportation and electronics sales of $2.5 billion, up 28.1 percent in u.s. dollars.\nexpects 2021 total sales growth of 7 to 10 percent with organic local-currency sales growth in range of 6 to 9 percent.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: During today's conference call, we'll make certain predictive statements that reflect our current views about 3M's future performance and financial results.\nIn a dynamic environment, our performance throughout 2021 has shown the skill of our people around the world, the resiliency of our business model and the relevance of our technologies.\nIn the third quarter and year to date, we have delivered broad-based organic growth across all business groups and geographic areas, along with good margins and strong cash flow.\nQ3 organic growth was over 6% as we drove innovation across our market-leading businesses, with margins of 20% and earnings of $2.45 per share.\nGeographically, growth in the quarter was led by the Americas, up 7%, with the United States up 6%.\nGrowth in APAC was 6%, with China up 3%, and Japan up 6%, while EMEA grew 4%.\nWith respect to the macro environment, overall end market demand remains strong, though the semiconductor shortage continues to impact many markets, most visibly in electronics and automotive.\nAs we navigate near-term uncertainty, we continue to invest in growth, productivity and sustainability, which I will discuss shortly.\nWe are also actively managing disruptions in the global supply chain with a relentless focus on customer service.\nLooking at our performance through nine months, we have executed well and delivered 11% organic growth with all business groups above 10%, along with margins of 22% and earnings of $7.81 per share.\nToday, we are updating full-year expectations for organic growth to a range of 8% to 9% and earnings per share to a range of $9.70 to $9.90, reflecting our results to date and ongoing supply chain challenges.\nI would like to make a few comments on how 3M is actively managing those challenges.\nAs you know, many companies are facing supply chain disruptions.\nthe result of a convergence of issues, including the Delta variant, strong demand, energy, and labor shortages and extreme weather events.\nFor example, ocean freight costs have more than doubled over the last year and the number of containers on the water is up 70% because of port congestion.\nSuppliers are challenged to provide consistent and predictable supply.\nOn any given day, we are working with more than 300 suppliers with critical constraints.\nWith manufacturing sites in 35 countries around the world and as a $5 billion annual exporter out of the United States, we are working tirelessly to serve our customers.\nThe cornerstone of 3M's response is our expertise and deep relationships across the supply chain, along with our local for local manufacturing and supply chain strategy, which helps us move with agility and keep our factories running.\nWe have daily meetings with suppliers to strengthen our planning, and in some instances, are strategically prioritizing geographies, end markets, and portfolios; hard but necessary decisions to ensure we meet the most critical needs of our customers.\nWe are moving product in different ways, such as expanding our use of rail, shipping out of more flexible ports, and increasing our use of charter flights by over 40%, while deploying new capabilities to better track our flow of goods in real time.\nMaintaining talent is also key, and we are using several tactics to attract new workers while protecting the health and safety of all of our employees.\nSome of our actions have impacted our productivity and gross margins, which Monish will touch on.\nBut we will do what is necessary to take care of customers.\nThe combination of strong demand along with supply chain challenges is also contributing to broad-based inflation.\nWe are taking multiple actions to help offset inflationary pressures, including price increases, dual sourcing and improving factory yields with more work to do.\nUltimately, the duration of these supply chain challenges is difficult to predict.\nWe remain focused on serving customers, managing backlogs and making good on our commitments, delivering the unique high-quality products that are the hallmark of 3M.\nWhile we execute day to day, we are investing to drive long-term growth and capitalize on trends in large attractive markets.\nIn home improvement, for example, we have multiple $0.5 billion-plus franchises that keep families healthier and more productive, including our fast-growing Command damage-free hanging solutions and Filtrete home filtration products.\nThese brands leverage 3M's deep expertise in adhesives and nonwoven materials.\nThe same technology is helping drive success in our automotive business, which consistently outgrows build rates.\nAuto electrification sales are up 40% year to date on the strength of new innovations including advanced display technologies as automobiles become the next consumer electronic device.\nIn healthcare, the biopharma market is growing more than 10% annually, with our business up more than 30% year to date as 3M Science has supported the unprecedented pace of advancement over the past 18 months to develop therapeutics and vaccines and scale manufacturing to help address the pandemic.\nThe fundamental strengths of 3M, our unique technology platforms, advanced manufacturing, global capabilities and leading brands position us to win, and we will continue to invest in these areas.\nIn a similar way, we are driving productivity by advancing digital capabilities across our operations, allowing us to expand our use of data and data analytics.\nIn sustainability, we have achieved 50% renewable electricity use in our operations, four years ahead of our timeline, on our way to 100%.\nWe are advancing the environmental goals we announced earlier in the year, making the investments to accelerate our ability to achieve carbon neutrality, reduce water use and improve the quality of water returned to the environment from our industrial processes.\nIn addition, we are proactively managing PFAS, making our factories and communities stronger and more sustainable.\nIn Cottage Grove, Minnesota, we recently announced that we are closing our incinerator and partnering with a leading disposal company to more efficiently manage our waste streams.\nWe just broke ground to add new filtration technology in Cordova, Illinois.\nIn Zwijndrecht, Belgium, we are working with government officials to resolve issues related to PFAS and we'll invest up to EUR 125 million over the next three years to improve water quality around our factory.\nThese proactive initiatives and others are accelerating 3M's ability to go beyond current regulatory standards and deliver on our commitments.\nWith respect to the PFAS strategic road map announced last week, 3M remains committed to working with the Biden administration, EPA and others in taking a science-based approach to managing PFAS.\nLet me also touch on a few litigation updates.\nLast week, we announced a collaborative agreement to resolve litigation related to PFAS near our facility in Decatur, Alabama.\nThe impact is included in our previously disclosed reserves.\nOn combat arms, there have been four bellwether trials so far, with six additional trials here in the fourth quarter.\nWe are early in this litigation, and we'll continue to actively defend ourselves, including through the appeal process.\nAs always, we encourage you to read our 10-Q for updates on all litigation matters.\nTo wrap up, we are driving strong results in a challenging environment, investing in attractive end markets and positioning 3M for continued growth.\nI am proud of our 3M team, which is united by a common purpose, unlocking the power of people, ideas and science to reimagine what's possible and create what's next.\nAs I look back on the quarter, the 3M team demonstrated the resilience of our business model and the relevance of our technologies as we executed well in a very challenging environment, effectively navigating the supply chain disruption while serving and innovating for our customers.\nThough manufacturing, raw materials and logistics challenges persisted throughout the quarter, we continue to invest in the business while driving operating rigor and managing costs.\nTurning to the third-quarter financial results.\nSales were $8.9 billion, up 7.1% year on year, or an increase of 6.3% on an organic basis.\nOperating income was $1.8 billion, down 6%, with operating margins of 20%, coming in at the top end of the range, which we had previously communicated in mid-September.\nThird-quarter earnings per share were $2.45, which was similar to last year.\nOn this slide, you can see the components that impacted both operating margins and earnings per share as compared to Q3 last year.\nOur strong year-on-year organic volume growth was more than offset by the headwinds resulting from the global supply chain challenges, investments in growth and sustainability, and litigation-related costs.\nCombined, these impacts lowered operating margins by 1.4 percentage points and earnings per share by $0.02 year on year.\nThe restructuring program we announced in Q4 of last year remains on track.\nAs part of this program, we incurred a pre-tax restructuring charge of $50 million in the third quarter.\nThis charge was offset by the benefits we achieved this quarter.\nMoving to price and raw materials.\nAs expected, increases in selling price gained traction as we went through the quarter, with year-on-year selling prices up 140 basis points in Q3 versus 10 basis points in Q2.\nHowever, we continue to experience higher cost for raw materials, logistics and outsourced manufacturing, which outpaced the increase in selling prices.\nThus, third-quarter net selling price and raw materials performance reduced both operating margins and earnings by 130 basis points and $0.12 per share, respectively versus Q3 last year.\nLooking at Q4, we expect our selling price actions to continue to gain traction as we work to mitigate the raw material and logistics inflationary pressures we have experienced throughout the year.\nNext, foreign currency net of hedging impacts reduced margins 20 basis points and earnings by $0.01 per share.\nAlso, three other non-operating items impacted our year-on-year earnings per share performance.\nFirst, lower other expenses resulted in an $0.08 earnings benefit.\nConsistent with prior quarters, non-operating pension was a $0.05 benefit, along with a $0.02 benefit from net interest due to a proactive early redemption of debt.\nSecondly, a lower tax rate versus last year provided a $0.09 benefit to earnings per share.\nThe tax rate was lower due to favorable adjustments this year related to impacts of U.S. international tax provisions.\nOur year-to-date tax rate is 18.8%.\nTherefore, we now expect our full-year tax rate in the range of 18.5% to 19.5% versus 20% to 21% previously.\nAnd finally, average diluted shares outstanding increased 1% versus Q3 last year, lowering per share earnings by $0.02.\nThird quarter adjusted free cash flow of $1.5 billion was down 29% year on year, with conversion of 107%.\nAdjusted free cash flow year to date was $4.5 billion, which was similar to last year, with free cash flow conversion of 98%.\nThe decline in our year-on-year free cash flow performance was primarily driven by higher inventory balances due to strong customer demand, along with raw material inflation and more goods in transit as a result of the ongoing global supply chain challenges.\nThird-quarter capital expenditures were $343 million and $1 billion year to date.\nFor the full year, we now expect capex investments in the range of $1.5 billion to $1.6 billion versus being at the low end of our prior range of $1.8 billion to $2 billion.\nWe continue to step up investments in growth, productivity and sustainability.\nHowever, the pace of projects continues to be impacted by supply chain and vendor constraints.\nDuring the quarter, we returned $1.4 billion to shareholders through the combination of cash dividends of $856 million and share repurchases of $527 million.\nYear to date, we have returned $3.8 billion to shareholders in the form of dividends and share repurchases.\nOur net debt position, strong cash flow generation capability and disciplined capital allocation continues to provide us financial flexibility to invest in our business, pursue strategic opportunities and return cash to shareholders while maintaining a strong capital structure.\nI will start with our safety and industrial business, which posted organic growth of 6.1% year on year in the third quarter.\nOrganic growth was driven by continued robust industrial manufacturing activity, along with prior-year pandemic-related impacts.\nFirst, our personal safety business declined 4% organically, up against a 40% pandemic-driven comparison a year ago.\nThird-quarter disposable respirator sales decreased 7% organically year on year and 15% sequentially.\nLooking ahead, we anticipate continued deceleration in disposable respirator demand through the balance of this year and into 2022.\nTurning to the rest of safety and industrial.\nOrganic growth was led by double-digit increases in adhesives and tapes, abrasives and electrical markets.\nIn addition, closure and masking systems was up high-single digits, automotive aftermarket up low-single digits, while roofing granules declined against a strong comparison from last year.\nSafety and industrial's third-quarter operating income was $620 million, down 20% versus last year.\nOperating margins were 19.2%, down 650 basis points year on year as leverage on sales growth was more than offset by ongoing increases in raw materials, logistics, and litigation-related costs, along with manufacturing productivity impacts.\nMoving to transportation and electronics, which grew 5.1% organically despite the continued impact of semiconductor supply chain constraints.\nOur auto OEM business was flat year on year, compared to the 20% decline in global car and light truck builds.\nThis outperformance was due to a few factors: First, we continue to grow our penetration by driving 3M innovation onto new automotive platforms.\nSecond, we saw a notable increase in channel inventories at tier suppliers given the dramatic reductions in OEM's build forecast through the quarter.\nLastly, we benefited from a vehicle model mix standpoint as auto OEMs produce more premium vehicles which tend to have higher 3M contact.\nOur electronics-related business declined low single digits organically, with declines across consumer electronics, particularly smartphones and TVs as OEMs faced production challenges due to ongoing semiconductor constraints and COVID-related impacts.\nThese declines were partially offset by continued strong demand for our products and solutions in semiconductor and factory automation end markets.\nTurning to the rest of transportation and electronics.\nAdvanced materials and commercial solutions each grew double digits year on year, while transportation safety grew low-single digits.\nThird-quarter operating income was $465 million, down 9% year on year.\nOperating margins were 19%, down 320 basis points year on year, driven by strong leverage on sales growth, which was more than offset by increases in raw materials and logistics costs along with manufacturing productivity impacts.\nTurning to our healthcare business, which delivered third-quarter organic sales growth of 3.3%.\nOur medical solutions business declined low-single digits organically, impacted by the continued decline in demand for disposable respirators along with the pace of hospital elective procedure volumes, which came in at the low end of industry expectations of 90% to 95% for the quarter.\nSales in our oral care business grew low double digits year on year as dental procedures continue to be near pre-COVID levels.\nThe separation and purification business increased high single digits year on year due to ongoing demand for biopharma filtration solutions for COVID-related vaccines and therapeutics, Health information systems grew low double digits driven by strong growth in clinician solutions.\nAnd finally, food safety increased double digits as food service activity returns.\nHealth care's third-quarter operating income was $529 million, up 7% year on year.\nOperating margins were 23.5%, up 70 basis points.\nThird-quarter margins were driven by leverage on sales growth, which is partially offset by the increasing raw materials and logistics costs, manufacturing productivity impacts, along with increased investments in growth.\nLastly, third-quarter organic growth for our Consumer business was 7.6% year on year with continued strong sell-in and sell-out trends across most retail channels.\nOur home improvement business continues to perform well, up high-single digits on top of a strong comparison from a year ago.\nThis business continued to experience strong demand, particularly in our Command and Filtrete category-leading franchises.\nStationery and office grew double digits organically in Q3 as this business laps last year's COVID-related comparisons.\nWe also had strong back-to-school consumer demand and holiday-related sell-in for Scotch-branded packaging and shipping products, Post-it solutions and Scotch-branded home and office states.\nOur home care business was up low single digits versus last year's strong COVID-driven comparison.\nAnd finally, our consumer health and safety business was up high single digits as we lap COVID-related impacts from a year ago.\nConsumer's operating income was $332 million, down 3% year on year.\nOperating margins were 21.7%, down 260 basis points as increased cost for raw materials, logistics and outsourced hard goods manufacturing more than offset leverage from sales growth.\nAs we reflect on the macroeconomic environment, we expect demand to remain strong across most end markets.\nHowever, uncertainty persists given the ongoing impacts of the pandemic along with a well-known global supply chain, raw materials and logistics challenges that all companies are working through.\nLooking ahead, we remain focused on our customers and doing what is necessary to serve them as we continue to navigate the fluid environment.\nWe are increasing the bottom end of our expectations for organic growth.\nWe now project our full-year organic growth to be in the range of 8% to 9% versus a prior range of 6% to 9%.\nWith respect to earnings, we anticipate a range of $9.70 to $9.90 per share as compared to a prior range of $9.70 to $10.10.\nAnd finally, we expect to continue to generate strong free cash flow.\nTherefore, we are maintaining our free cash flow conversion range of 90% to 100%.\nThis updated outlook implies a wider than normal fourth-quarter range, accounting for ongoing impacts of COVID and the uncertain supply chain environment.\nFor example, from a growth perspective, the well-known constraints in semiconductor chip supply are impacting more and more end markets, most notably, automotive and consumer electronics as reflected in the lower production forecast for the year.\nWe anticipate global elective healthcare procedure volumes to stabilize with recent trends.\nRelative to disposable respirators, we expect continued impacts from the decline in healthcare-related demand, along with elevated inventory levels in the industrial channel.\nAnd finally, we expect our pricing actions to continue to gain traction as we work to mitigate raw material and logistics cost pressures.\nAs we have discussed, we are actively managing inefficiencies in global supply chains with a relentless focus on customer service.\nTherefore, we are adjusting demand plans with greater frequency and as a result, incurring more manufacturing production changeovers along with expediting shipments.\nAll of these actions are impacting both cost and productivity, but we are taking the necessary steps to ensure we meet the most critical need of our customers.\nWe continue to make progress relative to December 2020 restructuring announcement.\nTo date, we have incurred over $240 million in pre-tax restructuring charges and anticipate an additional $25 million to $50 million in Q4.\nWe now expect total pre-tax restructuring charges of $300 million to $325 million versus our original expectations of $250 million to $300 million.\nWe expect the remaining actions under this program to be initiated by the first quarter of 2022.\nIn addition, we expect to incur higher costs related to our ongoing litigation matters, along with increases in our other indirect related costs like travel expense.\nAnd finally, we continue to invest in the business for the long term, and therefore, anticipate increased investments in growth, productivity, and sustainability.\nWe have a very steady eye on the long term to deliver growth, margin and cash through strong operating rigor while continuing to navigate the uncertainty in the short run.\n",
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"content": "compname reports q3 earnings per share of $2.45.\nq3 earnings per share $2.45.\nq3 sales rose 7.1 percent to $8.9 billion.\nqtrly organic local-currency sales increased 6.3 percent.\nupdates full-year 2021 outlook.\nsees fy total sales growth 9% to 10%.\nsees fy earnings per share $9.70 to $9.90.\nqtrly consumer sales of $1.5 billion, up 8.1 percent in u.s. dollars.\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 would like to announce our next two investor events.\nAlso, please mark your calendars for our first quarter earnings conference call, which will take place on Tuesday, April 26.\nDuring today's conference call, we will be making certain predictive statements that reflect our current views about 3M's future performance and financial results.\nThese changes are a result of discussions we have had with many of you over the last few years, along with recent benchmarking work that we have done.\nFirst, we recognize that dual credit reporting has presented some challenges.\nFor example, having a clear understanding of the impact of disposable respirator performance over the past two years on our segment results, particularly safety and industrial and healthcare.\nTherefore, we have decided to eliminate dual credit reporting and will no longer report dual credit within our business segments starting in Q1 2022.\nWe will provide a Form 8-K ahead of our February 14 meeting with updated history for the past three years reflecting this change.\nAnd second, we will be providing organic sales change components in aggregate as opposed to reporting separate volume and price components.\nWith this change, we will also be updating the descriptor to organic sales versus organic local currency sales.\nPlease note, this change will be reflected in our 2021 Form 10-K filing.\nWe remain committed to providing strong transparency of reporting our financial performance.\n3M delivered a solid performance in the fourth quarter, closing out a strong year as we focused on serving customers in a dynamic external environment.\nOur revenue in the quarter finished better than we expected across all businesses, including an increase in respirator demand due to the impact from the Omicron variant.\nOrganic growth companywide was 1% on top of 6% in last year's Q4, with earnings of $2.31 per share driven by a good December strong execution and a lower-than-anticipated tax rate.\nI am pleased with how we effectively managed production operations to meet customer demand despite ongoing logistics and raw material challenges that are impacting many companies.\nWhile focusing on customers, we also saw good benefits from our actions to drive productivity, improve yields and control costs, which helped offset the margin impact of supply chain disruptions, inflation and COVID-19.\nIn addition, our selling price actions continued to gain traction with a year-on-year increase of 2.6% in Q4 versus 1.4% in Q3.\nWe expect this to be a tailwind for the full year in 2022.\nOverall, demand remains strong across our market-leading businesses, and we are continuing to prioritize growth investments in large attractive markets.\nWe also took actions to strengthen our portfolio and advance our commitment to sustainability.\nI will highlight examples of our progress later in the call.\nIn summary, we delivered a good finish to the year and are well-positioned to drive growth in 2022.\nAs Bruce noted, we will provide full year guidance along with strategic updates from our business leaders at our February 14 meeting.\nMonish will now take you through the details of the quarter.\nLooking back on the fourth quarter, the 3M team continued to manage through a challenging environment.\nAs Mike noted, revenues for December were better than previously expected across all the businesses, including disposable respirators as the Omicron variant increased near-term demand.\nThough manufacturing, raw materials, and logistic challenges persisted throughout the quarter, the 3M team executed well by driving operating rigor and managing costs while continuing to invest in the business.\nTurning to the fourth-quarter financial results.\nSales were $8.6 billion, up 0.3% year-on-year or an increase of 1.3% on an organic local currency basis against our toughest quarterly comparison last year.\nOperating income was $1.6 billion with operating margins of 18.8% and earnings per share of $2.31.\nOn this slide, you can see the components that impacted our operating margins and earnings per share performance as compared to Q4 last year.\nThe biggest impact to fourth-quarter results was the ongoing effects from the well-known global supply chain, raw materials, and logistics challenges, which persisted throughout the fourth quarter.\nOur enterprise operations teams continue to work tirelessly through ever-evolving changes in customer demand while navigating these challenges to keep our factories running, serve our customers and protect the health and safety of our employees.\nWe continue to experience significant productivity headwinds in our factories due to shorter production runs and more frequent production changeovers throughout the quarter as we focused on serving our customers.\nAs forecasted at the start of last year, we also had higher year-on-year compensation and benefits costs.\nThese impacts were partially offset through strong spending discipline along with benefits from restructuring and lower legal-related expenses versus last year's Q4.\nWe also continue to prioritize investments in growth, productivity and sustainability to drive long-term performance and capitalize on trends in large, attractive markets, including automotive, home improvement, safety, healthcare, and electronics.\nAll in, these impacts lowered operating margins by 2.4 percentage points and earnings per share by $0.33 year on year.\nMoving to price and raw materials.\nAs expected, our selling price actions continue to gain traction as we went through the quarter.\nOn a year-on-year perspective, Q4 selling prices increased 260 basis points as compared to 140 basis points in Q3 and 10 basis points in Q2.\nIn dollar terms, higher year-on-year selling prices offset raw material and logistics cost inflation in Q4, which resulted in an increase in earnings of $0.03, however, remained a headwind of 20 basis points to operating margins.\nNext, foreign currency, net of hedging impacts, was a headwind of 10 basis points to margins and $0.04 per share year on year.\nThere were three other nonoperating items that impacted our year-on-year earnings per share performance.\nFirst, a reduction in other expenses resulted in a $0.10 earnings benefit.\nThis included a $0.06 benefit from non-operating pension, which was similar to prior quarters.\nWe also have been proactively managing our debt portfolio, including the early redemption of $1.5 billion, which helped drive a $0.04 benefit year on year from lower net interest expense.\nSecond, a lower tax rate versus last year provided a $0.12 benefit to earnings per share.\nOur Q4 tax rate was benefited by geographic income mix and favorable adjustments related to impacts of U.S. international tax provisions.\nAnd for the full year, our tax rate was 17.8%.\nAnd finally, average diluted shares outstanding decreased 1% versus Q4 last year, increasing per-share earnings by $0.02.\nFourth-quarter adjusted free cash flow was $1.5 billion or down 30% year on year, with conversion of 110%.\nFor the full year, adjusted free cash flow was $6 billion with adjusted free cash flow conversion of 101%.\nThe decline in our Q4 year-on-year free cash flow performance was driven primarily by lower non-cash legal and restructuring expenses versus Q4 last year, along with higher litigation-related payments and capex investments, which was partially offset by improvements in working capital velocity.\nFourth-quarter capital expenditures were $556 million, up $134 million year on year and $213 million sequentially as we continue to invest in growth, productivity and sustainability.\nLooking at the full year, capital expenditures totaled $1.6 billion.\nDuring the quarter, we returned $1.8 billion to shareholders through the combination of cash dividends of $848 million and share repurchases of $938 million.\nFor the full year, we returned $5.6 billion to shareholders in the form of dividends and share repurchases.\nOur strong fourth-quarter cash flow generation and disciplined capital allocation enabled us to continue to maintain a strong capital structure.\nWe ended the year with $4.8 billion in cash and marketable securities on hand and reduced net debt by $1.2 billion or 8% versus year-end 2020.\nAs a result, we exited the year with net debt-to-EBITDA of 1.4 times.\nOur strong balance sheet and cash flow generation capability, along with disciplined capital allocation, continues to provide us the financial flexibility to invest in our business, pursue strategic opportunities and return cash to shareholders while maintaining a strong capital structure.\nI will start with our Safety and Industrial business, which posted an organic sales decline of 1.3% year on year in the fourth quarter.\nThis result included a disposable respirator sales decline of approximately $110 million year on year, which negatively impacted Safety and Industrial's Q4 organic growth by nearly 4 percentage points.\nOur personal safety business declined mid-teens organically versus last year's 40% pandemic-driven comparison.\nLooking ahead, we anticipate that COVID-related disposable respirator demand will decline as we move through 2022.\nHowever, we remain prepared to respond to changes in demand as COVID-related impacts continue to evolve.\nTurning to the rest of safety and industrial.\nOrganic growth was led by a double-digit increase in closure and masking.\nIn addition, the abrasives business was up high single digits.\nIndustrial adhesives and tapes and electrical markets were each up mid-single digits.\nAutomotive aftermarket was flat, while roofing granules declined against a strong comparison from last year.\nSafety and industrial's fourth-quarter operating income was $543 million, down 22% versus last year.\nOperating margin was 17.7%, down 440 basis points versus Q4 last year.\nYear-on-year operating margin performance was impacted by a decline in sales volumes, higher raw materials, logistics, and litigation-related costs, manufacturing productivity impacts, along with last year's gain on sale of property.\nPartially offsetting these impacts were selling price increases, strong spending discipline, net benefits from restructuring, and a smaller increase to our respirator mask reserve.\nMoving to transportation and electronics, which declined slightly on an organic basis due to the continued impact of the semiconductor supply chain constraints.\nOur auto OEM business was down mid-teens organically year on year, compared to the 13% decline in global car and light truck builds.\nAs we mentioned last quarter, we experienced an increase in channel inventory levels with the tier suppliers in Q3 as auto OEM production volumes decelerated from 18.5 million builds in Q2 to 16.3 million in Q3.\nDuring the fourth quarter, OEM production volumes increased to 20.2 million builds or up over 20% sequentially.\nThis sequential increase in build activity drove a reduction of channel inventory levels with the tier suppliers during the quarter, which negatively impacted Q4 organic growth for our automotive business by approximately 10 percentage points.\nFor the full year, our auto OEM business was up low double digits, as compared to global car and light truck builds growth of 2%.\nThroughout the year, we continued our track record of success of winning with our customers and gaining penetration on new internal combustion and electric vehicle platforms.\nOur electronics-related business declined low single digits organically, with declines across consumer electronics, particularly smartphones and TVs.\nThese declines were partially offset by continued strong demand for our products and solutions in semiconductor and factory automation end markets.\nTurning to the rest of transportation and electronics.\nCommercial solutions grew low double digits, advanced material was up high single digits, while transportation safety declined high single digits.\nFourth-quarter operating income was $406 million, down 15% year on year.\nOperating margins were 17.6%, down 270 basis points year on year.\nOperating margins were impacted by higher raw materials and logistics costs, manufacturing productivity impacts along with an increase in comp and benefits costs.\nThese year-on-year headwinds were partially offset by increases in selling price, strong spending discipline, and net benefits from restructuring actions.\nTurning to our healthcare business, which posted a fourth-quarter organic sales increase of 1.6%.\nThis result included a nearly four-percentage-point drag from the year-on-year sales decline in disposable respirators.\nOur medical solutions business declined low single digits organically, which included a six-percentage-point impact from the year-on-year sales decline in disposable respirators.\nFourth-quarter elective medical procedure volumes were approximately 90% of pre-COVID levels, which is similar to Q3 and last year's Q4.\nSales in our oral care business grew low single digits year on year as patient visits continue to be near pre-COVID levels.\nThe separation and purification business increased high single digits year on year with sustained demand for biopharma filtration solutions for COVID-related vaccines and therapeutics.\nHealth information systems grew mid-single digits, driven by strong growth in revenue cycle management and clinician solutions.\nAnd finally, food safety increased high single digits despite continued COVID-related impacts of the global hospitality industry.\nIn December, we announced the planned separation of this business, which will be combined with Neogen.\nHealth care's fourth-quarter operating income was $536 million, down 2% year on year.\nOperating margins were 23.6%, down 50 basis points.\nYear on year, operating margins were negatively impacted by raw materials and logistics costs, manufacturing productivity, compensation and benefits costs, and food safety deal-related costs.\nThese impacts were partially offset by benefits from leverage on sales growth, strong spending discipline, and restructuring actions.\nFor the quarter and full year, healthcare's adjusted EBITDA margins were strong, coming in at nearly 31%.\nLastly, our consumer business finished out the year strong with organic growth of 4.9% year on year on top of last year's 10% comparison.\nOur home improvement business continued to perform well, up low single digits on top of last year's strong double-digit comp.\nThis business continued to deliver strong growth with our home improvement retail customers in our category-leading Filtrete, Command, and Scotch Blue brands.\nStationery and office, along with the consumer health and safety business, each grew low double digits organically in Q4 as both of these businesses continue to lap last year's COVID-related comparisons.\nThe holiday season demand drove strong growth for our Scotch-branded products during the quarter.\nWe also posted strong growth in Post-it-branded products despite workplace reopenings being pushed out due to the resurgence of COVID cases.\nAnd finally, our home care business was up low single digits versus last year's strong COVID-driven comparison.\nDuring the quarter, we took a small portfolio action to divest our flow care business in Europe, which is expected to close in Q1.\nConsumer's operating income was $316 million, flat compared to last year.\nOperating margins were 21.4%, down 100 basis points year on year.\nOperating margins were impacted by higher raw materials, logistics, and outsourced hard goods manufacturing costs, manufacturing productivity impacts, along with increased compensation and benefit costs.\nThese impacts were partially offset by leverage on sales growth, which included good price performance, strong spending discipline, and net benefits from restructuring actions.\nThat concludes my remarks for the fourth quarter.\nThe macro-environment in 2021 was defined by strong but fluid end markets, semiconductor constraints, supply chain, and logistics challenges, along with ever-evolving impacts from COVID-19, particularly on the global healthcare industry.\nThese dynamics were further compounded by winter storm Uri in mid-February, which led to significant disruptions to raw material supply and logistics availability, which further disrupted global supply chains.\nAll of these factors collectively helped contribute to broad-based and accelerating inflationary pressures throughout the year.\nAgainst this backdrop, the 3M team kept a relentless focus on serving customers, ensured continuity of raw material supply, managed ever-changing manufacturing production plans, navigated logistic constraints, and delivered strong full-year organic growth of 9%, with all business segments posting high single-digit growth.\nWe also worked hard to raise selling prices, control spending, and drive improvements in operating rigor through daily management, leveraging data and data analytics while continuing to execute on our restructuring actions.\nThese actions, combined with strong organic growth, helped to deliver full-year operating margins of 20.8% or down 50 basis points year on year on an adjusted basis.\nThis result included an 80-basis-point headwind from raw materials and logistics inflation net of selling price actions, along with increased spending to advance our sustainability efforts and higher legal-related expenses.\nIn addition, we continue to focus on working capital improvement, which helped contribute to another year of robust adjusted free cash flow coming in at $6 billion.\nWe made good progress in 2021 and are well-positioned for 2022.\nAnd in the spirit of continuous improvement, there is always more we can do and will do.\nAs I look back at 2021, I am proud of our team and our performance.\nOur results demonstrated the strength of the 3M model and our investments in growth, productivity and sustainability advanced our company.\nIn the face of an uncertain environment, we delivered strong organic growth of 9%, with strength across all business groups, along with margins of 21%.\nThis drove a 14% increase in adjusted earnings per share.\nThese results exceeded our original guidance that we communicated in January of 2021 and recent updates to that guidance.\nWe generated robust free cash flow of $6 billion with an adjusted conversion rate of 101%, enabling us to invest in the business, reduce net debt by $1 billion and return significant cash to shareholders.\nAll in, 3M returned $5.6 billion to our shareholders through dividends and share repurchases, and 2021 marked our 63rd consecutive year of dividend increases.\nWe continue to help the world respond to COVID-19 with 2.3 billion respirators distributed last year for a total of 4.3 billion since the onset of the pandemic, while engaging with governments on how to prepare for future emergencies.\nWe stepped up our commitments to ESG, including sustainability as we made progress on new goals to achieve carbon neutrality, reduce water use, improve water quality and reduce plastics.\nAs part of our ongoing sustainability commitments, we proactively manage PFAS and deploy capital to make our factories and communities stronger and more sustainable.\nAs one example, we are on track to complete a new water filtration system in Cordova, Illinois by the end of 2022.\nIn Zwijndrecht, Belgium, we installed and activated a treatment system last month to reduce PFAS discharges by up to 90%.\nThis is part of a EUR 125 million commitment to improve water quality and support the local community.\nAs disclosed in our 8-K in November, we continue to work with local authorities related to a safety measure that shut down certain operations in Zwijndrecht.\nWe are also appealing and discussing with local authorities a new change to our wastewater discharge permit that if implemented, could have a material impact and potentially interrupt production at the entire site, impacting customers and the supply of material to other 3M factories.\nWe are actively working to address current and future potential impacts, and we'll update you as appropriate.\nWith respect to litigation, we reached settlements last year in certain PFAS cases and continue to vigorously defend ourselves on combat arms.\nAs always, we encourage you to read our SEC filings for updates on these matters.\nAs we advance our ESG priorities, we also continue to take actions to improve diversity, equity, and inclusion.\nThis includes multiple programs to make STEM education more available to underrepresented groups and achieve our goal to deliver 5 million learning experiences.\nOur businesses have also made commitments.\nSafety and industrial, for example, is focusing on access to skilled trades, and we are increasing transparency through an annual diversity, equity, and inclusion report.\nAt the same time, we are advancing our strategic priorities for long-term growth and value creation.\nWe are innovating faster and differently, including new ways to collaborate with customers and partners virtually, while investing $3.6 billion in the combination of R&D and capex to strengthen 3M for the future.\nTo make the most of long-term growth opportunities, we also continue to prioritize investments in large, fast-growing areas like automotive, home improvement, safety, healthcare, and electronics.\nIn 2021, for example, our automotive electrification platform grew 30% organically, and our biopharma business grew 26%.\nOur home improvement business grew 12% on top of 13% growth in 2020, driven by iconic brands, including our Command damage-free hanging solutions and Filtrete home filtration products.\nTo accelerate our ability to meet increasing demand for Command and Filtrete, last week, we announced a nearly $500 million investment to expand our operations in Clinton, Tennessee, adding nearly 600 manufacturing jobs by 2025.\nWe look forward to sharing more about how we are capitalizing on growth trends and winning in these markets at our February meeting.\nLast year, we also continued to reposition our portfolio to maximize value across the enterprise, including an agreement to divest and combine our food safety business with Neogen, creating a global leader that is well-positioned to capture long-term profitable growth.\nWe continue to make progress in transforming 3M, accelerating our digital capabilities, and expanding our use of data and analytics to better serve customers and improve our operational agility and efficiency.\nThis includes the ongoing deployment of our ERP system, which went live in Japan in Q4, and also moving more than 60% of our enterprise applications and global data center infrastructure to the cloud, while streamlining our business group-led operating model.\nTo help our people be at their best, we also introduced new employee work models rooted in flexibility and trust, along with investments to support their health and well-being.\nAs we enter 2022, I'm confident we will continue to grow our businesses, improve our operational performance and find new ways to apply science to improve lives, delivering for our customers, shareholders, and all stakeholders who have placed their trust in us.\n",
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"content": "qtrly earnings per share of $2.31.\nqtrly sales of $8.6 billion, up 0.3 percent year-on-year.\nqtrly organic local-currency sales increased 1.3 percent.\neffectively managed supply chain disruptions, made good progress on pricing actions and controlled costs.\nqtrly health care sales of $2.3 billion, up 0.7 percent in u.s. dollars.\nqtrly transportation and electronics sales of $2.3 billion, down 1.5 percent in u.s. dollars.\nqtrly consumer sales of $1.5 billion, up 4.1 percent in u.s. dollars.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: With me is Bruce Caswell, President and Chief Executive Officer; and Rick Nadeau, Chief Financial Officer.\nPlease remember that such statements are only predictions.\nActual events and results may differ materially as a result of the risks we face, including those discussed in Item 1A of our annual report on Form 10-K.\nManagement uses this information in its internal analysis of results and believes this information may be informative to investors in gauging the quality of our financial performance, identifying trends in our results and providing meaningful period-to-period comparisons.\nAnd with that, I'll hand the call over to Rick.\nRevenue for the first quarter was in line with our expectations.\nOur revenue growth was principally driven by new work related to the COVID pandemic response where Maximus continues to play an integral role in contact tracing, disease investigation, vaccination support, unemployment insurance programs and other key initiatives.\nFor the first quarter of fiscal 2021, our COVID response work contributed approximately $160 million in revenue.\nAs expected, top and bottom line growth were offset by ongoing impacts of the global pandemic tied to program changes on volume-based contracts that were implemented at the direction of our customers.\nAs we discussed last quarter, these changes, including halting Medicaid redeterminations in the United States, are designed to ensure that beneficiaries have uninterrupted access to vital government benefits during this global health crisis.\nTotal company operating margin was 9.3% for the first quarter of fiscal 2021.\nDiluted earnings per share were $1.03 per share.\nBoth operating margin and earnings were in line with our expectations with some variability by segment.\nOur operations outside the United States delivered results favorable to our expectations, which offset lower operating income from the U.S. Federal Segment due to the timing of finalizing a contract which will now be recorded in the second quarter.\nLet me review segment financial results in our typical order starting with U.S. Services.\nFirst quarter revenue in the U.S. Services Segment increased 23.3% to $384.9 million.\nWhile revenue growth was driven by an estimated $114 million of COVID response work, the operating margin was depressed by temporary program changes and lower revenue from performance based contracts as a result of the global pandemic.\nOperating margin for the U.S. Services Segment was 16% for the first quarter.\nAs discussed last quarter, we continue to experience a significant revenue and profit headwind resulting from lower volumes on some of our largest Medicaid programs.\nAs a reminder, many state customers are currently utilizing enhanced U.S. federal matching funds for Medicaid.\nHowever, they must adhere to certain conditions, including a pause in Medicaid redeterminations to ensure beneficiaries have continued access to vital healthcare services during a global public health crisis.\nThose redeterminations are a significant level of activity within certain programs we operate.\nOur full year expectations for the U.S. Services Segment remain unchanged with a 16.5% to 17.5% full year margin predicted.\nRevenue for the first quarter of fiscal 2021 for the U.S. Federal Services Segment increased 10.6% to $405.2 million.\nThe Census contract contributed $60 million, which was $10 million less than the prior year.\nExcluding the Census contract, organic growth for this segment was 13.5% and driven principally by an estimated $46 million of revenue from COVID response work as we continue to provide needed support to government in responding to the pandemic.\nThis includes work with the IRS supporting the Cares Act, which, as a reminder, is the first time the IRS has used contracted agents on this large of a scale.\nThe U.S. Federal Services Segment had approximately $4 million of revenue and profit shift out of the first quarter due to a delay in executing a contract.\nIt has been signed, and we will record the benefit in the second quarter of fiscal 2021.\nThe operating margin was 7.5%, which was slightly short of our expectations for a strong first quarter in this segment.\nOur full year expectations for the U.S. Federal Services Segment remain the same with a 6% to 7% full year margin predicted.\nLooking to the second quarter, including the aforementioned $4 million of revenue and profit we will recognize, the segment's margin is expected to step down.\nThis illustrates how we continue to have more overall variability in results due to the pandemic.\nWe are pleased to have secured COVID-response work to backfill some of the temporary shortfalls created by reduced volumes, revenue and profit from accretive performance-based contracts.\nRevenue for the first quarter of fiscal 2021 for the Outside the U.S. Segment increased 11.5% to $155.4 million.\nOrganic growth, excluding the effects of currency, was at 4.8%.\nOperating income for the segment in the first quarter of fiscal 2021 was positive $4.5 million for an operating margin of 2.9%.\nThe better-than-expected results for the quarter was primarily due to job placement activities in Australia, driven by a seasonal spike in demand for qualified job seekers.\nAs Australia started to emerge from the pandemic during our first quarter, employers needed to quickly fill many retail and travel-related jobs during the busy holiday and travel season.\nThe Australian team did an extraordinary job in successfully managing this influx of demand, but we view this seasonal spike as unique to the first quarter of fiscal 2021.\nWe continue to see strong demand for employment services in all of our international operations.\nWe have had positive developments since our last earnings call related to increasing demand and rising volumes for employment services.\nWe anticipate that volumes from current programs, most notably in Australia, and supplemented by new work, will drive revenue growth in the second half of fiscal 2021.\nIt is important to note that the new work consists of outcomes-based arrangements for employment services.\nThey are designed to ensure that contractors can be held accountable and incentivized to achieve the job placement and retention outcomes that matter to government.\nThis new employment services work drives our revenue estimates upward, but these programs are expected to generate losses in their early stages.\nHowever, we target operating margins within our desired corporate average over the life of such programs.\nWe presently estimate that these start-ups will put the Outside the U.S. Segment in a loss position in the second quarter with steady improvement through the remainder of the year.\nWe now expect that the segment will be approximately breakeven for fiscal 2021.\nMaximus enjoys a long history, strong reputation and demonstrated success in delivering employment services.\nWe believe the investment required will position us for favorable economics over the life of the contracts, which outweighs the temporary adverse impact in profit for the remainder of fiscal 2021.\nWe believe such programs are a good avenue to create substantial long-term shareholder value.\nLet me turn to cash flow items and the balance sheet.\nWe had no draws on our corporate credit facility at December 31, 2020, and $132.6 million of cash and cash equivalents.\nCash from operations and free cash flow of $98.1 million and $89 million, respectively, were strong and contributed to our already strong balance sheet.\nDSO was 75 days at December 31, 2020, compared to 77 days at September 30, 2020.\nLet me touch briefly on capital allocation.\nWhile we generally operate under an essential provider designation, we remain aware of budget pressures impacting our customers.\nHowever, with our corporate credit facility and the aforementioned strong cash flows and balance sheet, liquidity is not a concern.\nWe continue to have a bias toward M&A as a means to drive long-term organic growth.\nOur M&A program continues to evaluate prospects while we remain prudent stewards of capital and selective in our evaluations.\nOur strong balance sheet and good cash from operations provides us good access to capital to fund acquisitions.\nWe remain committed to future quarterly cash dividends and share repurchases will continue to be made opportunistically.\nWhile it is still early in the year, recent awards, scope increases and contract extensions have provided us with cautious optimism as we consider our full year guidance.\nAs a result of these positive developments, we are raising our full year guidance for fiscal 2021.\nFor the full year, we expect revenue will now range between $3.4 billion and $3.525 billion for fiscal 2021, driven by new work in support of government's ongoing response to COVID.\nAdditionally, we expect diluted earnings per share will range between $3.55 and $3.75 for fiscal 2021.\nOur fiscal 2021 cash from operations are projected to now be between $350 million and $400 million and free cash flow between $310 million and $360 million.\nOur expectations for our effective income tax rate is between 25.75% and 26.50% and for weighted average shares to be between 62.1 million and 62.2 million.\nAs we have long said, we often experience fluctuations in our quarterly financial results, which has only been exacerbated by the pandemic.\nHowever, the management team aims to provide as much transparency into our work as reasonably possible.\nSo based on what we know today, we still expect a decrease in revenue and earnings for the second quarter of fiscal 2021 compared to the first quarter.\nCurrent second quarter consensus estimates show revenue of $773 million and diluted earnings per share of $0.73.\nAt the present time, we expect to be above consensus revenue and earnings estimates for the second quarter.\nConsequently, fourth quarter consensus revenue of $875 million and diluted earnings per share of $1.02 are above our current expectations.\nWhile the new COVID-response work is providing a short-term positive tailwind, it has shorter periods of performance than our core contracts.\nAs we have cautioned previously, there is no assurance that the tailing off of the positive impacts of the COVID-response work will coincide with the return of our core contracts to previous volume and performance levels.\nOur bottom line continues to be somewhat tempered by unfavorable headwinds related to the pandemic and the temporary changes on mature core programs, most notably in the United States and United Kingdom.\nThe result has been a reduction in accretive revenue, which continues to temper operating income margins and diluted earnings per share.\nWe anticipate that as we emerge from the pandemic, many of these programs will begin to return to historical volume levels.\nFactors such as the end of the Public Health Emergency declaration in the United States and when we resume face-to-face assessments in the United Kingdom are particularly important to the pattern of expected recovery.\nThe effects of budget challenges, further relief packages and other changes in policies or legislation are some, but not necessarily all, factors that can impact our assumptions for fiscal 2021 and beyond.\nI would like to end by saying that Bruce and I are proud of the team at Maximus for remaining on track to deliver solid performance this fiscal year.\nFollowing the outbreak of COVID, there were many unknowns that we had to work through.\nUnknowns remain, and we are not free from the impacts of the pandemic, but we have a solid footing, which gave us the confidence to raise guidance.\nLast month, Maximus announced the planned retirement of our friend and trusted colleague, Rick Nadeau.\nDavid Mutryn, Senior Vice President of Finance, will assume the role of CFO effective December 1, 2021.\nI look forward to working with both Rick and David over the next nine months as we continue to execute our corporate strategy.\nWith the election of President Biden, we're cautiously optimistic regarding the stated policy initiatives from the administration and the potential favorable tailwinds that may be created for companies like Maximus.\nThe administration has already taken actions to increase access to affordable insurance for Americans through the Affordable Care Act and Medicaid.\nOver the course of the administration, we will likely see a meaningful increase in funding for social welfare programs and, of course, public health programs.\nImproving access to affordable healthcare is a top priority of the Biden administration, and the President has advocated building upon the Affordable Care Act, among other measures, to broaden coverage options for Americans.\nAdditionally, as we navigate through the pandemic, we believe we will see further policy initiatives that strengthen the public health infrastructure and a corresponding effort to more broadly support vulnerable populations.\nPresident Biden has already expressed intent to tackle these challenges, and indeed, many of his early executive orders look to expand the public health workforce to provide vital services to individuals.\nWhile it's still early days in the Biden administration, we're cautiously optimistic that the areas we have seen emphasized thus far will be reflected in subsequent budget and legislative priorities that set the stage for capitalizing on opportunities to partner with government in helping to achieve their policy initiatives.\nOur COVID response work is a prime example of the demonstrated value of our services and the relationships we've developed with our clients.\nIn a time of unprecedented challenges, we are grateful to have earned the opportunity to provide needed assistance.\nThese contracts have served as a revenue driver, offsetting some of the unfavorable impacts on operations that are experiencing a pandemic-related temporary slowdown or pause.\nInitially, our COVID work centered around more immediate pandemic-driven needs, such as contact tracing, disease investigation and unemployment insurance programs.\nOur work has expanded as government demand has increased into new areas.\nWe launched efforts to support states in responding to public questions about vaccination registration, scheduling and administration quickly, efficiently and equitably.\nWe have hired several thousand employees to support these state and local efforts.\nAt the federal level, as you know, we also operate the CDC help line, known as CDC Info.\nWe recently added another 150 individuals as we scale up our operations yet again to answer questions regarding vaccinations.\nSupporting several states and the CDC, we are the most experienced government partner in the market to provide vaccine administration citizen services.\nAdditionally, our U.S. Federal Services Segment scaled up to 3,200 agents from 1,500 to support the IRS with the next round of the economic incentive payments.\nFurther, in order to improve the user experience and drive efficiency, we implemented our interactive virtual agent system in response to the increased demand.\nAs Rick noted, we are also experiencing increased demand for our employment support services around the globe.\nThe economic impacts of the global pandemic have left many unemployed and in need of vital support in finding work.\nIt's important to remember that the pace at which different countries are emerging from the pandemic varies widely.\nSome countries have progressed further in managing the spread of the pandemic and are now turning their attention to tackling the many residual challenges, including the economy and unemployment.\nMaximus has a proven track record in delivering employment services and an earned reputation as a trusted long-term partner who delivers outcomes that matter.\nOur continued investments support our position as a partner of choice over the long term, outweighing any temporary and short-term profit impacts in fiscal year 2021.\nWhile the COVID work itself is comparatively short-term in nature, crisis support itself has a longer trajectory.\nWhile this pandemic was certainly unprecedented, this is not our first nor our last call to action in a time of public health or economic crisis.\nWe will continue to be there to support our clients and citizens in times of need with critical services and solutions.\nOur work is portable, adaptable from agency to agency and department to department, whether it's the IRS, CDC, FEMA, state health departments or others around the world.\nWe adapt from crisis to crisis, whether a global health pandemic, a natural disaster or economic challenges.\nAlong with the launch of Maximus Public Health, we view our capabilities in contingency planning for our government customers and the rapid implementation of citizen assistance services as a core competency and elemental to the long-term relationships that underpin our business.\nLooking outside of the pandemic, I have previously talked about our solutions that are authorized under the Federal Risk and Authorization Management Program, or FedRAMP.\nOur FedRAMP certifications meet the most stringent security requirements of federal agencies as we aim to deliver innovative and cost-effective cloud-based solutions that support mission objectives and provide the highest quality of citizen services, thereby transforming the user experience.\nWe fielded a survey of government technology leaders across federal, state and local agencies to gain insights about where agencies are in their cloud adoption journey and how they perceive the use of FedRAMP authorized cloud solutions to support their modernization and transformation initiatives.\nThe vast majority of respondents recognized benefits from moving to a FedRAMP authorized solution beyond adhering to mandates.\nThis survey further affirmed our solid positioning to provide a range of FedRAMP secured cloud solutions as well as our clients' demand for this service.\nI will now turn to new awards and pipeline as of December 31.\nFor the first quarter of fiscal 2021, signed awards were $594 million of total contract value at December 31.\nFurther, at December 31, there were another $1.14 billion worth of contracts that had been awarded but not yet signed.\nLet's turn our attention to our pipeline of addressable sales opportunities.\nOur total contract value pipeline at December 31 was $31.6 billion compared to $33.0 billion reported in the fourth quarter of fiscal 2020.\nOf our total pipeline of sales opportunities, 71.1% represents new work.\nI want to reiterate the continued difficulty in predicting the impact that the global health pandemic may have on our pipeline, timing of new work and return to previous operational levels.\nHowever, our strong reputation, flexibility and agility has cemented our position as a go-to partner for government.\nWe have navigated administration transitions for decades, and we firmly believe that the foundation is laid for continued opportunities to assist governments through these extraordinary times.\nI wanted to wrap up my comments today reflecting on the events and protests that occurred in January at the U.S. Capitol in Washington, D.C. and in other areas of the country.\nLike many of you, I was shocked and saddened by these events.\nMaximus engages in the bipartisan political process in order to better understand our government clients' long-term goals.\nOur Board's Nominating and Governance Committee has oversight of the company's policies pertaining to political contributions and compliance.\nWe remain committed to the fundamental principle of our engagement in the political process, which is, and will continue to be, to never support or fund candidates or elected officials who encourage or support violence against the Government of the United States.\nThe macro trends for our business remain unchanged.\nAs the pandemic has underscored, governments around the world need better solutions to deliver on policy priorities that can change rapidly.\nSocial welfare programs that reflect long-term societal commitments and priorities, increasingly face rising demand, shifting demographics and unsustainable program costs.\nMaximus is well positioned to address these challenges and be a transformative partner.\nWe offer scalable, cost-effective and operationally efficient services for a wide range of government programs.\nWe continue to believe our portfolio mix of core business, new adjacencies and new growth platforms will allow us to achieve a healthy growth trajectory for years to come.\nAnd with that, we will open the line for Q&A.\n",
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"content": "q1 earnings per share $1.03.\nraises fiscal 2021 guidance due to covid-response work.\nfiscal 2021 revenue expected to range between $3.400 billion and $3.525 billion.\nsees fiscal 2021 diluted earnings per share to range between $3.55 and $3.75 per share.\nfy cash from operations are expected to range between $350 million and $400 million.\nsees fy free cash flow between $310 million and $360 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: With me is Bruce Caswell, president and chief executive officer; and Rick Nadeau, chief financial officer.\nPlease remember that such statements are only predictions.\nActual events and results may differ materially as a result of the risks we face, including those discussed in Exhibit 99.1 of our SEC filings.\nManagement uses this information in its internal analysis of results, and we believe this information may be informative to investors, engaging the quality of our financial performance, identifying trends in our results, and providing meaningful period-to-period comparisons.\nAnd with that, I'll hand the call over to Rick.\nFirst, let me say that since the COVID-19 pandemic, Bruce and I have never been prouder to lead an organization with such heart, dedication, ingenuity, and collaboration at all levels.\nUnderscoring the critical nature of our work, many of our core program operations in the United States and abroad, have been deemed essential to ensure that vital government programs continue to operate and citizens continue to receive critical assistance at a time when the need for healthcare and safety net programs is rising.\nThe entire MAXIMUS team has met this challenge and worked tirelessly to ensure that we continue to support citizens during this unprecedented health pandemic.\nOur employees are accomplishing extraordinary things during the COVID-19 pandemic.\nBruce will discuss in greater detail, but I would like to highlight some important accomplishments.\nFirst and foremost, we implemented robust pay leave options to ensure the safety and well-being of those employees who experienced COVID-19-related absences.\nWe mandated social distancing across all operations, significantly enhanced our sanitation measures, and most importantly, we continue to transition more employees to work from home.\nOutside the United States, we have partnered with the government in the United Kingdom to redeploy some of our healthcare professionals directly into the National Health Service, as well as case management and administrative staff into the Department for Work and Pensions to provide vital frontline support.\nOur priority has been the health and safety of our employees and ensuring that we can continue to support our government clients in whatever model that takes, as demand for government services surges.\nNo one can predict with certainty the scale or length of disruption from the COVID-19 pandemic or how deep and severe economic impacts will be.\nWe completed our normal bottoms-up quarterly review in April and reinstating guidance for fiscal 2020.\nWe think it is important to give our investors a sense of our current expectations for the fiscal year.\nPlease note, however, that our actual results could vary from the guidance due to numerous factors, including a worsening of the pandemic; erosion due to budgetary pressures; additional steps were taken by federal, provincial, state, or local governments to restrict business operations or limit office occupancy; delayed or missed payments by customers or supply chain disruptions affecting IT or safety equipment.\nThe ranges we have used are wider than typical at the midpoint of the year and reflect the increased risk and variability we face.\nIt is possible that actual results could vary materially from our current expectations.\nWe anticipate that fiscal 2020 revenue will range between 3.15 to $3.25 billion and diluted earnings per share to range between $2.95 and $3.15 per share.\nCash from operations is now expected to range between 250 and $300 million and free cash flow between 200 to $250 million.\nWhile we feel comfortable with this cash flow range, I will point out that delays in collections of receivables can cause significant variation at year end.\nFor the remainder of the fiscal year, we anticipate continued disruption across all segments with some offsetting favorability from new work.\nThis disruption is expected to be most pronounced in our outside the US segment.\nWe expect some positive impacts in the two US segments from opportunities that in some cases we have won and in other cases are pursuing.\nBruce will provide more detail in his remarks.\nLet me touch on second-quarter results, COVID-19 impacts, as well as the challenges and opportunities that lie ahead.\nRevenue for the second quarter of fiscal 2020 totaled $818.1 million, which included the full ramp-up of the Census contract in the US federal services segment.\nTotal company operating margin was 4.6% and diluted earnings per share were $0.43, reflecting two substantial impacts in the quarter.\nFirst, we had a pandemic-related writedown of approximately $24 million or $0.28 per share related to the decline in estimates for future period outcomes-based payments on welfare-to-work programs in the United Kingdom and Australia.\nSecond, a change order for approximately $9 million or $0.11 per share was signed after quarter end in the US health and human services segment.\nThe related costs were incurred in the first two quarters of fiscal 2020, but the revenue will be recognized in the third quarter, which falls to the bottom line in that period.\nI will now review the segments.\nSecond-quarter revenue for the US health and human services segment increased 6.2% over the prior year and all growth was organic, resulting from new contracts and the expansion of existing work.\nBoth revenue and the 15% operating margin were tempered largely by the change order previously discussed.\nThe COVID-19 pandemic impacted the last three weeks of March 2020.\nDisruption to our US health and human services business has varied as local and state governments imposed different working requirements designed to ensure worker safety, leading us to, in some cases managed through temporary site closures.\nTo address social distancing requirements in our call centers, our work from home capabilities was scaled at a rapid pace to enable continued support of essential services and to meet deliverables on the predominantly performance-based contracts in this segment.\nOur current assumptions indicate economics for this segment will continue to experience minor disruption, and we expect an operating margin between 17% and 18% for the full year.\nLooking ahead, not only have the MAXIMUS operational teams been able to manage core operations in an ever-evolving environment, but they have also taken on new work associated with unemployment insurance and a variety of COVID-related work.\nFurther, the business development teams have launched rapid action plans to help states address needs, resources, and gaps with support services.\nRevenue for the second quarter of fiscal in the US federal services segment increased to $393.4 million.\nAll growth in this segment was organic.\nExcluding the citizen engagement centers' contracts, organic growth was 6.7%, driven by new work and growth on existing contracts.\nThe operating margin for this segment in the second quarter of fiscal 2020 was 7.7%, which was tempered by unfavorable impacts from the COVID-19 pandemic on performance-based work and ongoing investments in business development.\nThe majority of revenue in this segment is generated by cost plus contracts, which means that we can recover certain COVID-related costs, such as increased facility cleaning incurred on these contracts.\nThe Census contract is now approaching its peak level of operations and delivered approximately $140 million of revenue in the second quarter, yielding year-to-date revenue of approximately $210 million.\nThe teams have continued to solve unique challenges for our clients in our Census contract is no exception.\nWe implemented operational changes to ensure that our support is available to citizens so they can complete their census questionnaires and we will continue providing assistance through the Census Bureau's extended response period which now ends October 31.\nAs a result, our contract has expanded to support the new deadline and we now estimate that the Census contract will deliver between $430 and $450 million for the full year.\nThis is an increase from our previously expected revenue of $360 million in fiscal 2020 from this contract.\nThe economics of this segment are largely intact through fiscal 2020.\nThe US federal services segment is estimated to deliver a full-year operating margin between 8% and 9% resulting from a slightly greater mix of cost plus work from previously anticipated, as well as our continued investment in both business development and technical capability.\nThe COVID-19 pandemic has had the most pronounced effect on our outside the US segment.\nSecond-quarter revenue was $116.0 million and this segment had a loss of $26.7 million.\nAs a reminder, this segment has several significant performance-based contracts where payments are tied directly to job seeker outcomes with the primary goal of placing individuals into long-term, sustained employment to achieve economic independence.\nRevenue was recognized based on our estimate of the number of individuals who we anticipate reaching these milestones.\nAs a result of the pandemic, we reduced our estimates of those job seekers who are likely to achieve employment outcomes.\nThe accounting rules require us to record our best estimate of the future outcomes and therefore the impact of those reestimates immediately.\nThis resulted in a pandemic related writedown of approximately $24 million or $0.28 per share related to a decline in estimates for future period outcomes-based payments on welfare-to-work programs in the United Kingdom and Australia.\nAlthough we are continuing to service participants in these programs where we can, many participants have underlying health conditions that require them to self-isolate at home and the pool of available employment opportunities is currently significantly lower than before.\nThe remainder of fiscal 2020 is expected to experience impacts from the COVID-19 pandemic related to our HAAS contract in the UK.\nWhile our face-to-face assessments work is currently suspended, we are working to introduce telephone assessments and continuing to process paper-based assessments.\nWe are proud to partner with the government to be a part of the solution to this worldwide health crisis.\nIn the last few weeks, many of our healthcare professionals have volunteered to be seconded to the National Health Service.\nWe will act in an agency capacity for those employees on secondment and will receive reimbursement of most of our costs, but we will not earn revenue or profit.\nThis segment is expected to end the full year in an operating loss position.\nTo give you more color, we expect the fourth quarter for this segment to come in a little below break-even.\nOur objective is for a progressive improvement in the third quarter with an aim to cut the second-quarter loss in half.\nLooking ahead, we are starting to see new opportunities develop to address the significant impact of the pandemic on global labor markets.\nIn fiscal 2021 and beyond, we anticipate we will see an expanded need for our services as we help our government's expand and adapt their employment programs to cope with widespread unemployment.\nIn the UK, we are in the process of transitioning some of our outcomes-based employment services contracts that are currently in a loss position to cost recovery contracts which should provide considerably more stability and flexibility.\nWe expect these contract changes will be temporary, as we work with the Department on transitioning to a new model with rising unemployment.\nTurning to the balance sheet.\nWe finished the second quarter with cash and cash equivalents of approximately $126 million.\nCash provided by operations was $22 million.\nFree cash flow was $13.4 million in the quarter.\nSecond-quarter cash provided by operations was tempered by a combination of lower income and a higher proportion of income taxes paid in the quarter and accounts receivable grew in the first half of the fiscal-year 2020 due to increased revenue levels.\nDSOs were 72 days.\nWe are continuing to monitor collections closely and I would like to point out that one day of DSO is roughly $9 million receivables, which directly impacts estimated cash provided by operations and free cash flow.\nWe entered the COVID-19 pandemic with a strong balance sheet and a resolve to manage liquidity and maintain flexibility.\nWhile we face uncertainties including state budgetary pressures, payments to date from our customers have continued without disruption.\nOur historical experience during economic downturns is that our designation as an essential service provider in the United States puts us in a favorable position in working with our clients on invoicing and payments.\nHowever, we recognize that our customers are experiencing significant disruption to their tax receipts, and we will continue to manage the company in a conservative manner.\nGoing forward, the management team and the board of directors intend to take a prudent and constructive approach to deployment over the coming months.\nCurrently, we do not anticipate disruption to our future quarterly cash dividends.\nOur quarterly 10b5-1 Share Purchase Plan expired naturally in March when the cap embedded in the program was met.\nWe have paused share purchases in significant M&A activity until we see an easing of the uncertainties resulting from the COVID-19 pandemic.\nWe continue to work on smaller, tuck-in transactions that will support future organic growth in a meaningful way.\nBruce and I are optimistic the MAXIMUS will emerge from this disruption as a stronger company.\nWe have been able to demonstrate that we can navigate, innovate, and showcase our operational effectiveness during challenging events while continuing to support the most vulnerable populations and protecting our workforce during this world crisis.\nWe believe that our efforts over the past two months have further cemented our position as a trusted reliable partner that brings scale, talent and real business solutions to bear.\nAnd with that, I will hand the call over to Bruce.\nLike Rick, I could not be more proud of our employees' efforts during these unprecedented times.\nCOVID-19 is a global pandemic that impacts all of us.\nWe are working around the clock to ensure we protect our employees, while still serving government and the vulnerable populations who rely on the health and human services programs we operate; a demand, which is only increasing under the impacts of this pandemic.\nIn mid-March, we rapidly developed a response to fast-moving COVID-19 challenges and implemented new policies emphasizing paid sick leave, social distancing, and significantly enhanced cleaning regimens to keep our employees safe and healthy.\nAnd I'll touch on some of the most salient actions taken in my remarks.\nIf you hover over each box, additional details will be highlighted for each initiative.\nAs part of our efforts, we are following the more restrictive recommendations outlined in the Federal Families First Coronavirus Response Act, and in some cases, we are exceeding the Act.\nWhile the Act does not apply to MAXIMUS because we have more than 500 employees, we felt it provided a good benchmark for supporting and safeguarding our employees.\nOur income continuity plans are fully funded by MAXIMUS and cover a variety of scenarios, including quarantine, child care, government-mandated restrictions, office closure, and employees who are in high-risk categories.\nUnder these leave options, an employee's health insurance is also protected and we are not requiring them to take their accrued paid time off or PTO in order to access these leave options.\nWe also realize that employee stress and anxiety is heightened during this time.\nBalancing the strains of normal life during the crisis has been difficult for us all.\nConsistent, frequent, and transparent communications to our staff remain vital.\nTo further support our team members, we've launched topical videos from our chief medical officer, mental health seminars, virtual development training classes, as well as wellness apps such as Headspace and Wellbeats.\nMoving on to the next slide, one of the most impressive things we've done is the systematic and ongoing transition of employees to work from home.\nThis has been a heroic effort in procuring new equipment, increasing network capacity, and deploying new services, all while keeping operations running to meet program needs.\nThere are significant IT challenges in transitioning to a work from a home model, ranging from information security and privacy requirements to ensuring continuity of services.\nMany government programs were never designed to be carried out in a remote environment, presenting high hurdles to immediately enable a remote workforce.\nThis transition is also taking place during a pandemic is driven global IT equipment supply chain shortage.\nEquipment such as laptops and headsets are imperative for our customer service representatives to effectively serve citizens.\nBut we've been working diligently with suppliers and have made great progress.\nMAXIMUS has also been able to overcome these challenges by capitalizing on the strategic investments we've made in our IT infrastructure including emerging technologies such as secure remote network platforms and cloud-based omnichannel telephony environments.\nFor example, we leveraged our planned migration to Amazon Web Services or AWS to provision nearly 9000 secure agent desktops through the Amazon WorkSpaces as a service model thus far, in addition to approximately 7500 VPN connection users.\nOur ability to deploy HIPAA-compliant work from home capabilities enabled us to maintain operational continuity and assist program participants remotely for more complex services including clinical and social assessments required to access important government benefits and services.\nMost importantly, we believe we are forging a path forward for government services longer term.\nThe pandemic offers us a unique opportunity to test and learn new models with full support from our clients.\nIt gives us the opportunity to trial new ways of serving and engaging citizens who now, more than ever, need access to vital services.\nWe also have gained an entirely new dataset related to citizen engagement, channel preferences, and agent performance, which enables us to optimize this model.\nThis also allows us long term to evaluate the optimal environment for each individual employee.\nWhile not every employee is best matched to a remote work environment, the results of early pilots indicate no statistically significant reduction in agent performance on the contracts being measured.\nThis type of robust data will be meaningful in solutioning new delivery methods.\nAs we move into the next phase of this pandemic, we believe one of the most important ways to safeguard employees, keep operations running and ensure citizens can access the services they need is to implement an employee wellness check before and during their workday.\nOur digital team developed a health assessment mobile application called Clear To Work.\nAn employee will use the app before coming to work each day, the app takes them through a series of questions, including a self-administered temperature check.\nThe app either clears the employee to come to work or instructs them to stay at home that day.\nIf the employees are cleared, they are given a time-limited digital credential to show when they arrive at work, and then complete a second temperature check during their day.\nThe app was developed and implemented in roughly two weeks and is being systematically deployed across operational sites to review other geographic rollouts based on local health guidance and requirements.\nIn concert with this, we've also implemented a mandatory face-covering policy across our US operations, while ensuring our servicing approach protects supplies to front-line health professionals.\nAnd while we've talked about the operational disruptions and how we're tackling those, I've been pleased with how our teams have responded to the calls for support from our clients as they rapidly design and procure solutions to address the pandemic.\nOur ability to quickly pivot has underscored the resilience of our business model and our position as a trusted partner to governments worldwide.\nOver the last four weeks, we've been helping our clients solve real challenges of rising caseloads and reduced resources.\nTo this end, we've won a number of COVID-related contracts, as well as new work associated with rising unemployment.\nLet's start with our Federal team, as you may recall Maximus was already supporting the CDC's information line.\nAt the beginning of the pandemic, the CDC requested that MAXIMUS provide bilingual support for COVID-19 phone lines and emails.\nThis 24/7 coverage began with 50 agents and has grown 250 plus more than 40 nurses.\nOur most recent statistics show that we are responding to more than 16, 000, and 2000 emails per day.\nWe were also selected to deliver the Federal Health and Human Services community-based testing centers or result center.\nUnder this contract, MAXIMUS provides COVID-19 test results to patients that are tested at various federal testing centers across the nation.\nOur team did an astounding job in solutioning a turnkey contact center in less than six days which has since seen enormous growth.\nThe contract launched with 260 call center agents, making outbound calls to patients to deliver test results from 47 emergency facilities across the US Today, a team of more than 2,000 agents now contacts 10,000 individuals per day and provides real-time geo-mapping of COVID-19 test results to the US Department of Health and Human Services.\nMAXIMUS has played a critical role in supporting Federal agencies following the Cares Act implementation.\nFirstly, MAXIMUS supported the IRS to ensure that the economic impact payments were paid in a timely manner while continuing our normal tax season support.\nSecondly, as you may be aware, MAXIMUS operates the debt management project at Federal Student Aid.\nWe waived payment on student loans during the pandemic.\nWithin 10 days of this waiver, MAXIMUS sent more than 2 million letters to student loan holders and made system changes to support the waivers.\nOn the state level, we've partnered with the California Department of Public Health to answer phone calls from state residents and provide basic, general, non-medical information about COVID-19.\nWe are in the process of working to potentially expand our offerings to include digital channels such as webchat to further engage and support California residents.\nImportantly, this project is using an entirely work from a home model, protecting our staff and helping employ residents who may have experienced job loss during the crisis.\nSince mid-April, MAXIMUS has been providing New York State with dedicated COVID-19 support including ramping up the state's COVID-19 hotline to screen and schedule tests for New Yorkers, as well as helping the state manage outbound calls to reach healthcare workers to volunteer to help with the COVID-19 crisis.\nOur call center representatives have managed to successfully connect more than 30,000 New Yorkers to critical COVID-19 testing resources and obtain more than 14,500 responses from healthcare workers through surveys.\nAnd just last week, we won our first state contract in Indiana to centralize contact tracing for Hoosiers who test positive for COVID-19.\nWe'll hire and train an estimated 500 people under the supervision of the Indiana State Department of Health epidemiologists.\nThe remote call center is anticipated to be operational by May 11, and we'll support individuals at least through the end of the year, if not longer, dependent upon the pandemic needs of the state and its citizens.\nOur Canadian team also quickly adapted and in only two days launched a COVID-19 information line for our British Columbia provincial government client.\nThose team members answer important questions about testing locations, employment concerns, quarantine non-compliance reports, and the like.\nAcross the globe, unemployment benefit claims have skyrocketed.\nAs of May 1st, more than 30 million people in the United States filed claims triggered by the COVID-19 pandemic.\nThis forewarns of more downstream implications to governments at all levels.\nSafety net programs like Medicaid, SNAP and others are expected to face similar surges in applications.\nGovernment programs face staffing, process, and system challenges in meeting the demand.\nGovernments also face the daunting task of governing under a new normal, enabling citizens to return safely to a normal life under the continuing threat of new outbreaks and the consequences of a damaged economy.\nMAXIMUS has rapidly responded to meet the immediate demand for information and application assistance while positioning to provide longer-term services as the economy recovers.\nLet me give you a few examples of new work with compressed time scales that we have met with our response.\nIn only eight days, we launched a contact center to support the District of Columbia office of unemployment compensation.\nIn North Carolina, we launched a new project to support questions pertaining to the unemployment insurance program.\nThis was done in less than a week to support the division of economic security and has rapidly scaled to 1800 agents.\nWe are also doing similar work in Arkansas, Rhode Island, and Vermont, responding to frequently asked questions and assisting residents with their unemployment applications.\nAcross the country, other team members continue to support our health and human services clients, ensuring vitally important services are delivered to the public.\nMoving on to new awards in the pipeline.\nOur reported numbers reflect the status as of March 31st and much has changed since then.\nBefore I address some of these dynamics, I'll briefly cover the awards in the pipeline at March 31st.\nFor the second quarter of fiscal-year 2020, signed awards were $729.8 million of the total contract value at March 31st.\nFurther, at March 31st, there were another $215.8 million worth of contracts that had been awarded, not yet signed.\nLet's turn our attention to our pipeline of addressable sales opportunities.\nOur total contract value pipeline at March 31st was $29.2 billion, compared to $30.6 billion reported in the first quarter of FY '20.\nOf our total pipeline of sales opportunities, 65.7% represents new work.\nIn regard to pipeline dynamics, we cannot accurately predict the pattern this pandemic may follow nor the timing and form of the recovery.\nCertain clients impacted by COVID-19 are making awards in record time and relying heavily on existing contract relationships and trusted partners like MAXIMUS.\nThis comes in some cases at the cost of delaying other prior procurements that were in process.\nIn other instances, particularly in Federal, agencies not impacted significantly by the pandemic have stuck closely to procurement schedules.\nTherefore, it's important to put all of this in context.\nWhile we are excited about the new work, many of the new COVID-related programs are expected to be temporary, but provide flexibility to scale and extend services as circumstances warrant.\nWe also must be mindful that many of our government clients will likely face budgetary pressures as a result of a pandemic driven economic recession.\nWhile we're cautiously optimistic, it's difficult to predict what impact these events may have on erosion, timing on new work, and simply getting some of our operations back to somewhat of a normal cadence.\nThe updated guidance, of course, incorporates all of these dynamics, based on what we know today.\nWe actively manage a portfolio of work and have earned a reputation as a trusted long-term partner, all of which enables us to adapt to changing economic times.\nI've been inspired by the dedication, selflessness, and resilience seen across our business in recent weeks.\nThe resilience of our business model has also been impressive and of our employees, even more so.\nAs Rick mentioned, one of the most inspiring stories comes from our colleagues in the United Kingdom, where we're in the process of deploying nearly 1,000 volunteer doctors, nurses, and other clinicians to the NHS to provide vital support on the front line.\nDr. Paul Williams, division president of MAXIMUS, UK, volunteered to serve along with our team members.\nIn addition, non-clinical colleagues are preparing for redeployment in support of the national effort.\nThis represents the true heart of MAXIMUS and our more than 35,000 employees around the world.\nIt has been remarkable to witness how our colleagues are coming together to support the global effort against this pandemic, and the safety and well-being of our employees will continue to remain our top priority.\nGovernments are also planning for the time when as we emerge from this crisis, our core capabilities in finding jobs for the unemployed, ensuring access to healthcare, and administering critical safety net programs will be needed more than ever.\nThe world will be a different place for sure, but so will the landscape for services and how they are delivered.\nThe work we've done in helping clients innovate, scale, and still meet citizens' needs will be a game-changer.\nNew opportunities will also emerge and we are well-positioned to respond.\nWith that, we'll open up the line for Q&A.\n",
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"content": "sees fy 2020 earnings per share $2.95 to $3.15 .\nq2 earnings per share $0.43.\nsees fy 2020 revenue $3.15 billion to $3.25 billion.\nq2 revenue $818.1 million versus refinitiv ibes estimate of $770.3 million.\nmaximus - reinstated guidance for fiscal 2020 with diluted earnings per share to range between $2.95 and $3.15.\nmaximus - experienced in quarter, covid-19 pandemic related write-down of approximately $24 million or $0.28 of diluted eps.\nchange order for about $9 million or $0.11 of diluted earnings per share was signed after march 31, 2020, in u.s.\nhealth & human services segment.\nsees 2020 cash flows from operations to range between $250 and $300 million, free cash flow between $200 and $250 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 remind everyone that a number of statements being made today will be forward looking in nature.\nPlease remember that such statements are only predictions.\nActual events and results may differ materially as a result of risks we face, including those discussed in Item 1A of our most recent Forms 10-Q and 10-K.\nManagement uses this information internally to analyze results and believe that may be informative to investors in gauging the quality of our financial performance, identifying trends and providing meaningful period-to-period comparisons.\nAnd with that, I'll hand the call over to Rick.\nRevenue for the third quarter of fiscal year 2021 was $1.24 billion, and diluted earnings per share were $1.51.\nThe company's operating margin was 11.2% for the quarter.\nOperating income margin is calculated after the expense for amortization of intangible assets, which increased significantly due to the two acquisitions.\nExcluding the amortization expense, results in an operating margin of 12.2%.\nCOVID response work contributed an estimated $460 million of revenue in the quarter, which was approximately $185 million higher than our projection for the third quarter.\nThe profitability of this work has been steadily improving and now delivers operating income margins above our corporate average.\nThe CDC vaccination hotline contract and, to a lesser extent, the other COVID response work are responsible for the overperformance in this third quarter.\nCOVID response work has contributed $860 million of revenue on a year-to-date basis, and our full year estimate is approximately $1 billion.\nThis implies the beginning of the expected wind down of this work and a step down in the fourth quarter.\nIt is worth noting our revenue estimate for COVID response work for the fourth quarter is relatively unchanged from our previous forecast.\nThe estimated organic revenue growth for fiscal 2021 adjusted to exclude the Census contract and COVID response work is 2.6%, assuming the midpoint of our new guidance range disclosed today.\nThis is hampered by contraction due to the negative impact of the COVID-19 pandemic on some core programs.\nAnd while it is still early, the two acquisitions we completed during the fiscal year are both performing in line with our projections.\nThe attained federal revenue for the three months ended June 30, 2020, was $56 million, which equates to approximately $224 million on an annualized basis.\nVES contributed $46 million of revenue, beginning from the acquisition date of May 28, 2021, which equates to approximately $515 million of revenue on an annualized basis.\nLet me briefly touch on the balance sheet and cash flow items.\nAt June 30, 2021, and we had gross debt of $1.71 billion, and we had unrestricted cash and cash equivalents of $96.1 million.\nAt June 30, 2021, our receivables were $1.13 billion resulting from the inclusion of VES acquired receivables and a substantial increase in revenue in the quarter.\nThe DSO of 77 days includes VES on a pro forma basis and was skewed by the high level of revenue in June as compared to April and May.\nDSO was 75 days at December 31, 2020 and 70 at March 31, 2021, which included Attain Federal on a pro forma basis.\nCash from operations of negative $33 million and free cash flow of negative $41.6 million for the three months ended June 30, 2021, were significantly impacted in the quarter due to this additional investment in working capital.\nAssuming the midpoint of our new revenue guidance range and assuming 72 days DSO, we expect the cash from operations to be in the range of $425 million to $455 million for the full year.\nThe fourth quarter should be a strong quarter for cash inflow.\nI would like to note that collections often occur toward the end of a month and slipping by only a few days can impact our cash flow forecast.\nCash flows from investment activities report significant activity, including almost $1.8 billion of cash outflows for the two acquisitions.\nCash flows from financing activities showed the draw of $1.7 billion on our new credit facility in May.\nThe credit facility is flexible and at $2.1 billion in total provides us an additional $400 million for liquidity and to fund smaller acquisitions.\nCompletion of the new facility runs a milestone for the company and adds substantial capacity to enable larger transactions such as VES.\nIt supports our strategy to be acquisitive for purposes of driving long-term organic growth, which we believe leads to creation of shareholder value.\nOn June 1, we announced completion of the VES acquisition, which follows the March one acquisition of Attain Federal.\nWe view these acquisitions as major milestones for Maximus, as they represent execution of our acquisitive strategy and puts the company in a favorable position to achieve our future organic growth goals.\nThis pro forma assumes Attain Federal and VES had been acquired on July 1, 2020, and therefore, included for a full 12 months in our operating results.\nThe operating income and operating margin for the 12-month period, excluding amortization of intangible assets, was $591.3 million and 12.7%, respectively, for the combined company inclusive of Attain Federal and VES.\nBoth acquisitions blend up our gross profit margin and are accretive to our results from operations.\nWhile the acquisitions are positive, we continue to experience a drag on earnings from the impact of the health crisis on some of our core programs.\nAs we have noted in previous quarters, we assume that the public health emergency will persist through the remainder of fiscal 2021, as signaled by the January 22 letter from the then Secretary of the Department of Health and Human Services to U.S. governors.\nWe continue to believe that it is not a matter of if, but rather a matter of when these core programs will return to a more normal state of operations.\nAs for the remainder of fiscal 2021, our expectation for the full year is for revenue to range between $4.2 billion and $4.25 billion and for diluted earnings per share to range between $4.65 and $4.75.\nWe expect cash from operations to range between $425 million and $455 million and free cash flow between $375 million and $405 million for the fiscal year 2021.\nAs I noted, we are seeing evidence of the COVID response work tapering off, and that is reflected in our guidance for fiscal year 2021.\nThe midpoint of guidance implies an operating income margin of 9.8%.\nOperating income is after amortization of purchased intangibles, while finalization of the valuation of the intangible assets is still pending.\nOur best estimate for fiscal 2021 amortization expense is $44 million and reflects the increase due to the two acquisitions.\nThe operating income margin, excluding the amortization of purchased intangible assets, implied by the guidance for the full fiscal year ending September 30, 2021, is 10.9%.\nThe fourth quarter results for fiscal 2021 will be negatively impacted by the start-up contracts outside the U.S., which are expected to have operating losses in the range of $13 million to $15 million within the fourth quarter.\nOur effective income tax rate for the full year ended September 30, 2021 is expected to be between 25% and 25.5%.\nWe expect interest expense to be approximately $14 million for fiscal 2021 and approximately $10 million in the fourth quarter.\nThis interest expense reflects the successful financing that we completed on May 28, 2021.\nWe included a table showing diluted earnings per share, excluding the amortization of intangible assets for fiscal 2019, fiscal 2020 and the fiscal 2021 forecast, assuming the midpoint of guidance.\nThe fiscal '21 diluted earnings per share guidance would be $0.53 higher, excluding the projected amortization of intangible assets.\nAs the COVID response work begins its wind down and now that the Census contract is complete, it is worth reflecting on the shorter duration work.\nBoth scopes of work created significant learning opportunities for us as well as our gaining significant new customer relationships, including this year's projection, inception-to-date census and COVID response work combined revenues are estimated to be approximately $2 billion.\nThe cash realized from the Census contract and the COVID response work was significant to our ability to acquire both Attain Federal and VES and still maintain a total debt to adjusted EBITDA ratio below 3:1.\nWe believe that Maximus is a stronger company as a result of performing the Census contract and the COVID response work.\nAs we announced in January, I am planning to retire on November 30, and David Mutryn will assume the CFO role on December 1.\nThird quarter fiscal 2021 revenue in the U.S. Services Segment increased to $436.3 million, driven by an estimated $164 million of COVID response work.\nThe segment operating income margin was 14.3%, reflecting the negative impact on some core programs, including those impacted by the pause of Medicaid redeterminations as well as push out of non-COVID planned new work.\nThese factors also impact our fiscal 2021 full year expectations for the U.S. Services Segment operating income margin, which is expected to range between 16% and 17%.\nRevenue for the third quarter of fiscal 2021 for the U.S. Federal Services Segment increased to $617.6 million from $450.1 million in the prior year period due to particularly strong COVID response work and contributions from the two acquisitions offset by the lower revenue from the Census contract.\nCOVID response work contributed an estimated $280 million of revenue to the Segment.\nResults in the quarter included a full period of Attain Federal and operations for VES from the acquisition date of May 28.\nThe operating income margin for U.S. Federal was 13.9%.\nThe quarter benefited from higher-than-expected volumes on the COVID response work.\nOur full year fiscal 2021 guidance for the U.S. Federal Services Segment is between a 10% and 11% segment operating income margin.\nFor the fourth quarter of fiscal 2021, we expect a margin between 11% and 12% for the segment.\nTurning to Outside the U.S. Segment, revenue for the third quarter of fiscal 2021 was $189.6 million, Operating income was $8.3 million, resulting in a margin of 4.4%.\nThe better-than-expected results for the Outside the U.S. Segment were largely due to good performance in Australia.\nOn our May six call, we noted contracts with start-up losses to be incurred in the third and fourth quarters in the Outside the U.S. Segment as the revenue ramps into the next fiscal year.\nThe UK Restart contract is responsible for the largest share of the incremental start-up loss.\nThese start-up losses are more heavily weighted to the fourth quarter of fiscal 2021.\nAs a reminder, the profitability for each of these Outside the U.S. start-up contracts is expected to exceed 10% operating income margin, and we expect significant improvement to the financial contribution from these contracts in the second half of fiscal 2022.\nWith the start-up losses, the fiscal 2021 full year margin for Outside the U.S. is expected to be in the low single digits with the fourth quarter swinging to a loss as activity picks up on the UK Restart program.\nTurning to capital allocation.\nThe ratio of debt, net of allowed cash to pro forma EBITDA for the 12 months ended June 30, 2021, calculated in accordance with our credit agreement is 2.4:1.\nOur expectation for the remainder of fiscal year 2021 and into fiscal year 2022 is to use our free cash flow to continue to pay our regular quarterly dividend and to pay down our debt.\nOur stated aim is to use most of our free cash flow over the next few quarters to push this ratio closer to 2:1.\nDuring this period, we will continue to search for and execute tuck-in transactions that are accretive, deliver good value and have a strong potential to drive future organic growth.\nLonger term, we will continue to prioritize strategic acquisitions as our preferred use of capital.\nWe are often asked to comment on our dividend policy.\nOur plan is to continue to pay a regular quarterly dividend that is fixed regardless of short-term earnings fluctuations, but that increases over time as our earnings increase.\nWe target a dividend yield between 1% and 2% of our stock price.\nBased on our stock price over the last several months, the current annual dividend of $1.12 per year has ranged between 1.2% and 1.4% yield.\nThis cash yield is consistent with the peer groups we study.\nTurning to fiscal 2022, I would like to share some early thoughts that are shaping our thinking for next year.\nWe remain in a period with higher-than-usual uncertainty due to the pandemic and several unknowns persist that we have already mentioned.\nOn the plus side, we feel less uncertainty going into fiscal 2022 as compared to this time last year, which gives visibility to the following: number one, we expect the acquired businesses of Attain Federal and VES to deliver approximately $750 million of revenue in fiscal 2022.\nThis compares to $320 million to $330 million forecasted for the two acquisitions in fiscal 2021.\nNumber two, we currently expect the revenue in fiscal 2022 from COVID response work to be in the range of $150 million to $200 million.\nThis is an expected reduction of profitable work, which, as Rick noted, is now earning above our corporate average operating income margin.\nNumber three, our expectation is that revenue from the star-tup contracts Outside the U.S. will be at least $150 million higher in fiscal 2022 as compared to fiscal 2021.\nNumber four, we expect amortization expense to be between $80 million and $85 million.\nNumber five, we expect interest expense to be between $30 million and $33 million, and the effective income tax rate, assuming no change in U.S. Federal rates, should be between 25% and 26%.\nNumber six, finally, we anticipate that earnings are back loaded in fiscal 2022, with the first quarter expected to be the low point, followed by sequential improvement.\nThere are two reasons for this: first, we are seeing signs that some core programs, which have been negatively impacted by the pandemic should see performance improvements between the first and second quarters.\nWe expect the associated costs to be ramping up in the first quarter and the revenue to follow, which is typical with our contracts.\nSecond, we expect the first quarter to be negatively impacted by the start-up contracts Outside the U.S.\nWe currently expect the star-tup contracts to achieve breakeven in the first half of the year and to make strong contributions in the back half of the year, setting the Outside the U.S. Segment up for improved margins exiting the year.\nConsistent with our past practice, we will provide guidance for fiscal year 2022 in November, including additional color around the quarterly profile.\nAs the Attain Federal and VES acquisitions settle into our business, we are in a solid position to execute on our long-term organic growth goals across all three segments.\nOur position is bolstered by the benefits and new capabilities of the two recent acquisitions and our team's unprecedented efforts throughout this past year, which have deepened our relationships with key clients and brought new clients.\nWith two months left to go in fiscal year 2021, it's natural for us to be looking toward next year when we expect to see not only macro trends, bringing improvement to our core programs, but also momentum through new programs, such as the UK Restart and additional clinical and digital IT services work afforded by Attain Federal and VES.\nPrior to VES, 15% of our work was clinical in nature, whereas it now accounts for approximately 25% of our portfolio.\nFurther, the additional capabilities from Attain Federal meaningfully expand our technology consulting and growing systems integration skills, increasing our ability to address the most pressing IT needs of our federal clients, while providing internal opportunities to improve the quality and efficiency of our business process services operations.\nI'm pleased that we are already seeing the anticipated benefits of these acquisitions to the combined companies and to our clients.\nWe are increasing the capacity of VES to deliver on the excess inventory reduction goals of the VA, while working to identify opportunities for greater process efficiencies through new digital solutions.\nAs an example, we have already enhanced the VES contact center to increase capacity and improve veteran outreach and exam scheduling.\nOur Attain Federal colleagues are delivering on complex program challenges for critical clients, while gaining the ability to bid on larger opportunities through newly available contract vehicles.\nAs Maximus moves forward, program administration work, particularly the delivery of citizen services in an independent and conflict banner, will continue to underpin our business.\nOver time, we anticipate technology playing a larger role in this area and the work continuing to evolve to include more clinical assessments and related services.\nOur maturing portfolio of digital solutions and increasing systems integration capabilities will enable us to make greater use of the data underlying our operations, provide improved decision support tools to our employees and enable a more seamless and high quality customer experience.\nLooking at our segment profile in the wake of the recent acquisitions, U.S. Federal Services now delivers approximately half of our revenue.\nThrough the team's ongoing efforts as well as the recent acquisitions, the platform capabilities are in place to further our long-term organic growth goals and advance our corporate strategy across all three segments.\nOur digital strategy started several years ago with what has now become table stakes, including mobile applications, streamlining program application and enrollment, RPA automating processes and chat and text functions providing additional channels for citizen engagement.\nMaximus must routinize these capabilities and create a solid foundation upon which the next generation of digital solutions can be built.\nI am proud of our organization's accomplishments in driving cost out of routine transactions and improving the quality and timeliness of our citizen services.\nHowever, we must constantly advance our skills and solutions to meet and exceed client expectations.\nOur previous technology investments, such as application and telephony with cloud migration, have created an infrastructure that enables a secure, hybrid work environment and deliver significant value to our clients as demonstrated during the pandemic.\nOur platform provides Maximus and our clients more readily available access to valuable data and vast amounts of compute capacity.\nThrough our current and planned investments in data governance, our rapid innovation and delivery methodology and continued growth of digital competencies across the organization, we are well positioned to deliver new solutions underpinned by AI and machine learning and leveraging other cognitive computing capabilities as part of the next phase of our digital strategy.\nThrough this client-focused approach, we intend to provide even better decision support tools for our employees and lower costs, while accomplishing more complex transactions for citizens at scale.\nServing as a platform upon which we will grow our federal IT services.\nMaximus Attain brings needed skills and experience and enables us to systematize how we conduct digital projects.\nWith the addition of Attain, we are driving a cultural shift toward thinking in a digital-first fashion moving forward.\nTo give you more color on the increasing role of AI in our business, let me provide two examples that illustrate use cases focused on creating a better citizen experience and improving the decision support tools available to our clients and employees.\nOur speech analytics capabilities, implemented within our California vaccine information line project, enable us to understand customer sentiment and improve call resolution determine certain reasons for long silences that impact handle time and quality, an increased call deflection by assessing why individuals are calling, especially during a surge.\nFurthermore, our topic mining solution empowers our state clients to effectively disseminate critical public health information, particularly important capability during the pandemic.\nAt U.S. Citizenship and Immigration Services, or USCIS, the Maximus Attain team looked at how we could improve efficiency, implementing AI to automate routine tasks, enabling agency employees to focus on other critical work.\nThis human-plus strategy augments individuals by driving automation, increasing efficiency and supporting a better decision-making process.\nI'm also pleased to share the recent award of two modernization contracts from the Internal Revenue Service were a combined $151 million awarded on the GSA Alliant two contract vehicle.\nOur team's efforts to support the agency's modernization program have been expanded through the Development, Infrastructure, Security and modernization, or DISM contract, with the technology integration office of the IRS.\nThis office is responsible for all new technologies brought into the IRS.\nWe have a long-standing relationship with the IRS, which initially began in 1991 and are uniquely positioned to support the agency as they focus on modernization projects and build solutions to meet their mission-critical needs.\nOur people have the knowledge and skills critical to the IRS mission and have been proud to support their government counterparts achievements, particularly during the pandemic.\nOur clinical strategy concentrates on execution of the capabilities platforms that are now in place.\nAs I mentioned, our immediate focus remains in support of VES, the VA and the veterans we serve to increase capacity and address the excess examination inventory.\nAs a result, we are still targeting the end of the calendar year and into early 2022 for integration to ensure no disruption in service.\nMeanwhile, we're working closely with our team to identify and deliver streamlined processes and new digital solutions, which likely will draw, in part, on software development capabilities gained through Attain, an added benefit of these recent combinations.\nOutside the U.S., as Rick noted, our margin profile for Restart UK will improve over the next several quarters with OUS start-ups collectively anticipated to achieve 10% or higher operating income margin over the life of the contracts and provide us at least $150 million of additional revenue in FY '22.\nI'm also pleased to share that the Maximus UK team has received an extension on the Health Assessment Advisory Service contract through August 2023.\nIn March of 2020, the Department for Work and Pensions halted all face-to-face assessments, resulting in reduced activity levels and financial performance.\nSince that time, the team has worked with the department to adapt, develop and implement alternative services, including both telephone and video assessments.\nThis approach has enabled us to provide support for thousands of customers, and we anticipate will remain an element of program delivery going forward.\nTurning to new awards and pipeline as of June 30.\nFor the third quarter of fiscal year 2021, year-to-date signed awards were $3.2 billion of total contract value at June 30.\nThis includes the UK Restart Award that we announced on April 26 and the CDC Vaccination Hotline Award for which we have assumed a $300 million total contract value.\nFurther, at June 30, there were another $1.38 billion worth of contracts that have been awarded, but not yet signed.\nLet's turn our attention to our pipeline of addressable sales opportunities.\nOur total contract value pipeline at June 30 was $33.6 billion compared to $35.6 billion reported in the second quarter of fiscal 2021.\nThe June 30 pipeline is comprised of approximately $4.2 billion in proposals pending, $6.8 billion in proposals and preparation and $22.6 billion in opportunities tracking.\nOf the total pipeline, 63.6% represents new work opportunities.\nApproximately $1 billion of the pipeline reduction is due to the UK Restart program award with the remainder largely a result of government delays or cancellation of work that pushes opportunities out past the 2-year horizon for pipeline reporting.\nWe have observed that some of this delay is a residual effect of COVID-19 altering procurement priorities.\nAs Rick noted, we primarily beat our revenue expectations as a result of higher-than-anticipated volumes on COVID-19 response work in the U.S. Federal Segment.\nIllustrating the capabilities we demonstrated during the pandemic, we quickly ramped up approximately 13,000 agents on one contract alone, which required initially hiring nearly 20,000 prospective staff.\nWe saw our largest starting class ever on one day, comprising more than 12,500 remote agents as part of this effort.\nThe cloud-based telephony infrastructure built and stress tested for this same contract was among the largest ever constructed for government, capable of handling up to 0.5 million calls per hour or 160 calls per second.\nResponding to the changing needs of our clients, our team was able to rapidly scale down the operation as directed.\nThe highly variable cost structure of our model, coupled with an expansive labor supply chain, enhanced through the Census contract and cloud-based technology gives us the ability to capitalize on sizable opportunities of a short-term nature without stranding capital assets when the programs wind down.\nAs our results have demonstrated, this both underscores our value to governments and times of need and provides returns that can be invested toward longer-term growth objectives.\nThe execution of our strategy is maturing as Attain Federal and VES become more fully integrated into our business, and we work to leverage the platforms and capabilities they bring.\nThis will complement the foundation we have built across clinical services and digital technologies previously and our existing organic growth efforts.\nAs Rick and I have cautioned this year, the COVID-19 work is tapering off quickly, while, with some exceptions like Australia, our core programs have not yet returned to their prepandemic activity levels.\nHowever, we expect these activities to ultimately return.\nWe believe it's a matter of timing and not a shift in long-term market characteristics.\nIndeed, the fundamental macro trends and long-term needs of governments worldwide that have supported our business for decades remain firmly in place.\nWith the acquisitions we have completed, the agility we have demonstrated during COVID and the desirable financial attributes of our business model, we find ourselves in well positioned to respond to these trends and meet the growing needs of our government clients.\nAnd with that, we'll open the line for Q&A.\n",
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"content": "compname says fy2021 diluted earnings per share to range between $4.65 and $4.75.\nq3 earnings per share $1.51.\nq3 revenue $1.24 billion versus refinitiv ibes estimate of $1.09 billion.\ncompany is raising guidance for fiscal year 2021 to account for strong q3 results.\nfy 2021 revenue expected to range between $4.2 billion and $4.25 billion and diluted earnings per share to range between $4.65 and $4.75.\nfor fiscal 2021, cash from operations is expected to range between $425 million and $455 million.\nsees 2021 free cash flow between $375 million and $405 million.\nrevenue attributable to covid-19 response work is anticipated to be approximately $1 billion for fiscal 2021.\ncovid-19 response work is tapering off as expected, resulting in a lower q4 forecast as compared to q3 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 have a lot of good news to reward.\nSo I'll start with a brief summary of the highlights.\nQ2 results were significantly ahead of our expectations, including higher earnings, margins and cash flow.\nBetter market conditions combined with significant cost control resulted in a 40% adjusted EBITDA increase.\nIn addition, we generated $73 million of year-to-date free cash flow, bringing our leverage ratio back to pre-pandemic levels.\nNext, we made significant progress on our strategic initiatives this quarter, including an agreement to sell our liquid-cooled automotive business, which makes up the majority of our automotive segment.\nOur Board authorized a $50 million share repurchase program.\nThis is timely, given our improved liquidity position and provides additional flexibility to manage our future cash flows.\nAnd finally, I'd like to make a quick comment on the CEO search.\nThe process has been going very well, with very good outside candidates.\nWe are in the final stages of the search and anticipate completing the process within the coming weeks.\nNow before turning to the quarterly results, I would like to provide some more details about our automotive announced on page four.\nEarlier this week we announced an agreement to sell the majority of our automotive business, which is a significant step in our strategic transformation.\nThis transaction provides our company with a number of benefits including reallocating capital and resources, the higher-returning industrial businesses, especially those within our building HVAC segment, eliminating significant liabilities relating to future restructuring along with pension costs and additional cash investments.\nAnd finally, this transaction will lower our future capital spending, improving our cash profile.\nThe transaction includes seven manufacturing locations around the globe, including several in Western Europe and our headquarters in Germany.\nIt also includes the assets and liabilities associated with these locations.\nWhile not expecting significant proceeds, we are foregoing significant future cash investments, including ongoing capital spending in future liabilities along with pension and other employee-related costs.\nAlso I want to highlight that this is a leverage-neutral transaction from a covenant standpoint, consistent with the provisions in our credit agreement.\nAnd last, we expect the transaction to close in the first half of calendar 2021 subject to regulatory approvals and customary closing condition.\nI would like to provide some additional details on both the liquid-cooled business that we're selling and the air-cooled business that we're planning to address next as part of our overall auto strategy.\nStarting with the liquid-cooled business, it's averaged about $300 million in revenues over the last several years.\nAnd has been recently running below that level due to general economic conditions.\nAs we've discussed in the past, this has historically been a negative cash flow business with the annual capital spending offsetting cash earnings.\nIn addition, this business has required significant restructuring and would require additional investments going forward.\nGiven the a large amount of historical investment the liquid-cooled business carries a significant amount of net asset.\nBased on the transaction, we anticipate a large non-cash impairment charge in Q3.\nOur view is then that this business is back in the hands of the strategic owner that has the size, scale and desire to make the required investments.\nNow, moving onto the air-cooled business, which is the remaining business in our automotive segment and includes a plant in Austria and Germany.\nThis business represents approximately $100 million of revenue and it's currently running at a lower rate due to the global pandemic.\nThe majority of this business is comprised of automotive condensers, which are produced in Austria.\nAgain, as previously discussed, this business runs much closer to breakeven on an adjusted EBITDA basis and will require minimal capital going forward.\nWe're actively exploring alternatives for portions of this business.\nAnd are currently engaged in discussions with interested strategic buyers.\nFor the right partner, this business has value due to a relatively new facility, industry leading products and intellectual property along with a solid order book.\nWe have some more work to do, but much of the heavy lifting is complete with the automotive separation done and the recent sale announcement.\nWe're optimistic about addressing the small amount of remaining business and further reducing future liabilities and cash needs.\nBalance cover and second quarter segment results on page six.\nCIS sales were down 14% from the prior year, primarily due to COVID-related declines in our commercial HVAC and refrigeration markets along with lower data center sales.\nApproximately half the decline relates to lower sales to our largest data-center customer.\nAs we have previously discussed, the pullback is due to one customer's reduction in construction and is expected to continue through Q4, after which we will begin to see the recovery.\nWe're actively working on the testing of a next-generation product and are encouraged by the recent order outlook for next year.\nWe continue to invest in our coating business, where we're receiving positive feedback from our OEM customers on a new coding process.\nAdjusted EBITDA was down 7% on lower sales.\nBut I'm pleased to report the margin improved 70 basis points despite lower revenue.\nGood downside conversion was due to cost-savings initiatives taken earlier in the year.\nAnd a good trend with regards to coils margin improvement.\nIn fact, if we adjust for the negative effect of lower data center sales, the margin would have improved by approximately 300 basis points versus the prior year and lower sales.\nThe Building HVAC segment had another great quarter with sales up 11% from the prior year.\nThis was primarily driven by a significant increase in data center sales due to our aggressive growth plans.\nLooking forward, we expect continued growth in our data center sales in the coming quarters and projects.\nWe'll finish the fiscal year up more than 50%.\nIn addition, we also had a strong preseason orders of heating products, which was partially offset by lower sales of ventilation and air conditioning products.\nOn the ventilation side, sales for the hospitality market have been hard hit by COVID-19 causing us to shift focus to both the schools and healthcare markets.\nWe see future growth opportunities with our valuation products given the growing focus on the benefits of proper ventilation.\nI want to highlight that adjusted EBITDA increased 42% from the prior year, primarily due to higher sales volume and favorable product mix.\nThis resulted in a 500 basis point improvement in EBITDA.\nThe recent performance of this segment also demonstrates the potential for Modine after we complete the exit of the auto business and continue to reallocate capital.\nFor example, we're leveraging our success in brand in the UK to produce data center products in mainland Europe.\nAnd equally exciting are the increasing opportunities in the US.\nWe're industrializing computer room air handlers and chillers in our existing US manufacturing sites and are planning to be in production next fiscal year.\nSales in the HDE or heavy duty equipment were down 12% from the prior year but a significant improvement from Q1 as markets continue to stabilize.\nAlthough sales decreased the most of our major end markets, we actually had higher sales to commercial vehicle and off-highway customers in Asia, partially offsetting the declines in North America.\nAdjusted EBITDA was up 42% on a 460 basis point margin improvement despite lower sales.\nHDE significantly benefited from temporary cost reductions along with permanent actions, including head count reductions taken earlier in the year procurement savings and improved operational performance.\nWe're cautiously optimistic about further market recoveries in this segment, while balancing the impact of higher material costs and recently announced tariff.\nSales were down 5% from the prior year, which also represents a large sequential improvement from the first quarter.\nAuto sales recovered faster than most people anticipated as we saw lower sales in North America and Europe, partially offset by higher sales in Asia.\nAdjusted EBITDA improved significantly, up $5.7 million from the prior year, primarily due to cost reductions and other temporary COVID-related savings actions.\nGiven the large amount of temporary cost reductions, we expect that the auto segment margins will return to more normal levels in the second half of the year.\nI want to point out that we do not anticipate that the recent announcement will change how we report our earnings in this segment.\nObviously things can change, but for now, we expect to report segment sales and earnings in a consistent manner until the transaction closes.\nAs I mentioned at the beginning, our team adjusted to the challenging economic environment earlier in the year by quickly implementing significant cost reductions.\nWe prepared for the worst case, but we're pleased to see sales rebound and somewhat more quickly than expected.\nSecond-quarter sales declined by $39 million or 8% compared to the prior year, driven mostly by the global pandemic and associated economic conditions.\nOverall, our results benefited from a combination of the markets recovering better than we anticipated and aggressive cost-cutting measures resulting in both temporary and permanent savings.\nI'm very pleased to report our gross profit was $81 million, which was higher than the prior year by $5 million on lower sales.\nAnd the gross margin increased by 240 basis points to 17.5%.\nSG&A was $17 million or 25% lower than the prior year.\nGiven the significant uncertainties surrounding the pandemic, we maintain strict cost controls over spending and benefited from previous FTG savings.\nSome of the reductions should be viewed as largely temporary, representing about a third of the SG&A savings this quarter.\nAnother driver of lower SG&A was a significant reduction in auto separation costs.\nAdjusted EBITDA of $55 million was better than the prior year by $16 million or 40%.\nPlease see our appendix for itemized list of adjustments and a full reconciliation to our US GAAP results.\nOur second quarter adjustments totaled $7.6 million including $5.5 million from CEO transition costs, mostly related to severance and benefit-related expenses owed to the previous CEO.\nMost of these will be paid over multiples.\nWe also incurred $1.5 million of restructuring expenses related to plant consolidation activities.\nAnd our adjusted earnings per share was $0.43, higher than the prior year by over 200%.\nLet's turn to cash flow and debt on slide 11.\nI'm pleased to report our free cash flow for the first six months of fiscal '21 was $73 million, which represents a $97 million improvement over the prior year.\nThe positive cash flow is driven by numerous items including lower spending on the automotive exit strategy, favorable working capital and nominal capital spending.\nWe used cash in the quarter to repay debt, increasing our available liquidity.\nAnd I'm very pleased to report that our resulting leverage ratio was 2.2, back to pre-pandemic levels and within our target range.\nWe expect slightly positive cash flow for the remainder of the year, resulting in full year free cash flow of $70 to $80 million.\nAnticipated lower second half cash is due to a number of timing factors including the deferral of certain cash items.\nFor example, we have approximately $20 million in pension contributions along with the phase-out of payroll tax deferral under the care of that.\nWe also expect higher capital spending in the second half of the fiscal year along with some working capital growth in-line with the recovery.\nOverall, the cash-and-debt position is a great story for Modine, especially given the current economic environment.\nLike many companies, we're hesitant to provide full-year guidance, especially given the ever-changing dynamics prior of COVID.\nBased on the recent results, our full-year outlook is clearly improved.\nBut we want to be careful not to extrapolate all of the Q2 upside through the balance of the year.\nWe have a reasonable amount of visibility into our third fiscal quarter ending December 31.\nOur Q4 is more uncertain, especially as it expands into calendar 2021.\nWe expect our net sales to be down between 7% and 12% from the prior year.\nAnd for adjusted EBITDA to be in a range of $155 to $165 million.\nWhile the markets are changing continuously, we expect sequential revenue improvement in the third and fourth quarters.\nPositives include good momentum as we enter the heating season and a solid data center order book, plus strong vehicular market trends we also see some higher costs in the second half, particularly related to employee compensation expenses as we reverse some of the temporary cost control measures taken earlier in the year.\nAs well as higher metals prices, including the negative impact of the newly announced tariffs in the US.\nI also want to point out that our outlook includes the automotive business that is subject to the recent sale announcement.\nOur full-year results could be different if this or another transaction is completed before fiscal year-end.\n",
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"content": "q2 adjusted earnings per share $0.43.\nq2 sales fell 8 percent to $461.4 million.\nsees fiscal 2021 year-over-year sales down 7 to 12 percent.\nsees fiscal 2021 adjusted ebitda of $155 million to $165 million.\nexpect some cost increases in second half of our fiscal 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: During our call today, unless otherwise stated, we're comparing results to the same period in 2020.\nFuture dividend payments and share repurchases remain subject to the discretion of Altria's board.\nAltria reports its financial results in accordance with U.S. generally accepted accounting principles.\nToday's call will contain various operating results on both a reported and adjusted basis.\nAdjusted results exclude special items that affect comparisons with reported results.\nFinally, all references in today's remarks to tobacco consumers or consumers within a specific tobacco category or segment, refer to existing adult tobacco consumers 21 years of age or older.\nWe're off to a strong start to the year and believe our businesses are on track to deliver against their full-year plans.\nAgainst a challenging comparison, our tobacco businesses performed well in the first quarter and we continue to make progress advancing our noncombustible product portfolio.\nWe now have full global ownership of on!\noral nicotine pouches as we recently closed transactions to acquire the remaining 20% global interest.\nWe are excited about the opportunity we have with on!\nto convert smokers and we have talented teams supporting the global plans for the brand.\nBefore discussing our first-quarter results in more detail, we would like to honor the memory of Tom Farrell, our late chairman of the board.\nTom served 13 distinguished years on our board, offered valuable insights and guidance during his tenure, and was a true visionary.\nWe will miss his leadership, contributions, and friendship.\nThe board will appoint a new chair at its meeting following our Annual Shareholders Meeting in May.\nLet's now turn to our first-quarter results.\nOur first-quarter adjusted diluted earnings per share declined 1.8%, primarily driven by unfavorable timing of interest expense and a higher adjusted income tax rate.\nIn the smokeable products segment, we continue to execute our strategy of maximizing profitability in combustibles while appropriately balancing investments in Marlboro, with funding the growth of noncombustible products.\nSegment adjusted OCI margins expanded and Marlboro continued its retail share momentum from the back half of 2020.\nFor volumes, reported smokeable segment domestic cigarette volume declined 12% in the first quarter, reflecting year-over-year trade inventory movements, one fewer shipping day and other factors.\nWhen adjusted for these factors, cigarette volume declined by an estimated 3.5%.\nWe believe that in the first quarter of 2020, wholesalers built inventories by approximately 900 million units, driven in part by COVID-19 dynamics, compared with a depletion of approximately 300 million units in the first quarter of 2021.\nAt the industry level, we estimate that first-quarter adjusted domestic cigarette volume declined 2%.\nLooking at smoker retail dynamics, we estimated that total cigarette trips in the first quarter remained below pre-pandemic levels.\nAlso, estimated expenditures per trip remained elevated when compared to pre-pandemic levels and were steady sequentially.\nWe are continuing to monitor the impacts from external factors on tobacco consumer purchasing patterns and behavior.\nIn March, the federal government passed a third stimulus package.\nAn increasing number of people became vaccinated and consumability improved sharply.\nWe're keeping a close eye on the tobacco consumer and we will continue to provide our insights on the underlying factors as the year progresses.\nMoving to our noncombustible products.\nWe are pleased to now have full ownership of on!\noral nicotine pouches globally.\nWe completed transactions in December and April to acquire the remaining 20% of the global on!\nbusiness for approximately $250 million.\nWhen we made the initial 80% acquisition in 2019, the oral nicotine pouch category in the U.S. was rapidly growing off of a small base.\nSubsequently, oral nicotine pouch growth has exceeded our original estimates.\nIn the first quarter of 2021, we estimate that retail share for all nicotine pouches was approximately 13% of the total oral tobacco category, double its share in the year ago period.\nWe expect continued growth from the oral nicotine pouch products and estimate that category volume in the U.S. will grow at a compounded annual growth rate of approximately 25% over the next five years.\nSince 2019, Helix, supported by the enterprise, significantly increased on!\nmanufacturing capacity, broadened retail distribution, grew tobacco consumer awareness, and followed PMTAs for the entire product portfolio.\nHelix achieved an annualized manufacturing capacity of 50 million cans by the end of last year, and as of the end of the first quarter, on!\nwas sold in approximately 93,000 stores.\nIn the U.S. market, on!\nIn the first quarter, on!\nshare of the total oral tobacco category grew significantly to 1.7%.\nOn a 12-month moving basis, in-store selling and providing point-of-sale data, on!\nretail share was 3.1%, an increase of seven-tenth from the 2020 full-year share.\nGoing forward, we intend to report on!\nshare of the total U.S. oral tobacco category as Helix expects to be in stores covering 90% of the industry's oral tobacco volume by midyear.\nOur primary focus continues to be on increasing on!\ngrowth in the U.S. Internationally, we see potential to strengthen on!\nin the Swedish market.\nWe also see longer-term prospects in Europe to expand on!\nand gain consumer feedback on potential noncombustible products for the U.S. To explore these additional opportunities, we have expanded the international on!\npresents a compelling noncombustible alternative for smokers and we look forward to supporting their conversion journey.\nWe estimate that total category volume increased 24% versus the year ago period.\nAs a reminder, in Q1 2020, the FDA restricted the sales of all flavored e-vapor products among pod systems with the exception of tobacco and menthol.\nSequentially, we estimate that the category volume increased 7% as competitive marketplace activity continued.\nAs a result of these dynamics, JUUL's first-quarter retail share of the total e-vapor category decreased to 33%.\nWe continue to believe that a responsible e-vapor category, consisting solely of FDA authorized products can play an important role in tobacco hard reduction.\nAs for our JUUL investment, the FTC trial is now scheduled for June of this year and we remain committed to vigorously defending our investment.\nIn heated tobacco, PM USA is continuing to expand IQOS and Marlboro HeatSticks.\nBeginning this month, HeatSticks are available in retail stores statewide across Georgia, Virginia, North Carolina, and South Carolina.\nMarlboro HeatSticks retail volume and share continued to grow in the first quarter.\nIn Atlanta stores with distribution, Marlboro HeatSticks retail share of the cigarette category was 1.1%, an increase of two-tenth sequentially and in Charlotte, HeatSticks retail share was 1%, an increase of three-tenth sequentially.\nLast month, PM USA began selling the IQOS 3 device, which offers a longer battery life and faster recharging, as compared to the 2.4 version.\nThe new device is being offered through device and HeatSticks bundles and through the lending program, which has been effective at generating trial and driving purchase.\nWe're encouraged to see that many consumers are upgrading their 2.4 devices, representing approximately 25% of all IQOS 3 device sales in the first quarter.\nAlong with geographic expansion, PM USA is increasing the use of its digital platforms like Marlboro.com and getiqos.com to engage with smokers and communicate the benefits of IQOS, including the MRTP claim on the IQOS 2.4 system.\nFor Marlboro.com, IQOS content is now available nationwide.\nSmokers can sign up to receive communications and be notified when IQOS is available in their area.\nPM USA is also using its Marlboro's Rewards program to drive IQOS awareness and value delivery.\nSmokers can earn Marlboro rewards points by learning about IQOS and can also redeem their points for discounts on the IQOS device.\ncigarette volume by year end.\nWe are making progress in driving awareness and availability of on!\nand IQOS while investing in future innovative noncombustible products and we continue to acquire more tobacco consumer insights to inform our strategies to actively transition smokers to our noncombustible portfolio.\nOur smokeable products segment continues to support our vision, generating significant cash that can be invested in noncombustible products and return to shareholders.\nTurning to our financial outlook.\nWe reaffirm our 2021 guidance to deliver adjusted diluted earnings per share in a range of $4.49 to $4.62.\nThis range represents an adjusted diluted earnings per share growth rate of 3% to 6% from a $4.36 base in 2020.\nThe guidance includes continued investments to support the transition of adult smokers to a noncombustible future.\nWe will continue to monitor various factors that could impact our guidance.\nOur employees continue to drive the success of our businesses.\nThey've risen to the challenge together to deliver results and are supporting each other and their communities.\nOver the past years, the challenges associated with the pandemic have been compounded by the continued social injustice and in equities that black and brown Americans still face every day.\nAnd the Asian American community is hurting as violent and hateful attacks on Asians skyrocketed.\nWe condemn any form of hatred and discrimination against any person.\nThrough our Asian, black, and brown employees, we will continue to stand with you and we stand for you.\nWe recently released our report on supporting our people and communities, which details the many ways we're making progress, enhancing our culture and positively impacting our communities.\nIt is part of a series of corporate responsibility progress reports that we are issuing this year, and it is available on altria.com.\nMoving to our results.\nOur tobacco businesses continue to perform well in the first quarter.\nThe smokeable products segment delivered over $2.3 billion in adjusted OCI and expanded adjusted OCI margins by 2.2 percentage points to 57.5%.\nPM USA's revenue growth management framework supported the segment's strong net price realization of 8% for the quarter.\nWe continue to be pleased with Marlboro's performance and category leadership.\nIn the first quarter, Marlboro's retail share was 43.1%, an increase of four-tenth versus prior year.\nWe believe that Marlboro is continuing to benefit from smoker preferences for familiar products during disruptive times and is lapping the year ago comparison quarter where we observed the older consumers coming back to cigarettes from e-vapor.\nIn the first quarter, Marlboro's price gap to the lowest effective price cigarette increased to 37%, primarily driven by heavy competitive promotional activity in the branded discount segment.\nDespite this activity, branded discount share declined by four-tenth in the first quarter as deep discount gained share.\nThe total discount segment retail share was 25.3%, an increase of one-tenth versus the year ago period.\nIn cigars, Black & Mild continued its long-standing leadership in the profitable tipped cigar segment.\nMiddleton's reported cigar shipment volume increased over 11% in the first quarter.\nOral tobacco products segment, adjusted OCI grew by 3.1%, and adjusted OCI margins declined by 0.9 percentage points to 72.1%.\nAdjusted OCI results were driven primarily by higher pricing, partially offset by higher investments behind on!\nTotal reported Oral Tobacco Products segment volume increased 0.6%, driven by on!\nWhen adjusted for trade inventory movements, calendar differences and other factors, segment volume increased by an estimated 0.5%.\nFirst-quarter retail share for the oral tobacco products segment was 48.1%, down 2.3 percentage points due to the continued growth of oral nicotine pouches.\nCopenhagen continue to be the leading MST brand and on!\ngained traction in the oral nicotine pouches.\nMichelle's first-quarter adjusted OCI increased approximately 46% to $19 million, driven primarily by higher pricing and lower costs.\nAnd in beer, we recorded $190 million of adjusted equity earnings in the first quarter, which was unchanged from the year-ago period and represents Altria's share of API fourth-quarter 2020 results.\nMoving to our equity investment in Cronos.\nWe recorded an adjusted loss of $27 million representing Altria's share of Cronos' fourth-quarter 2020 results.\nWe continue to support our investment in Cronos by advocating for a federally legal, regulated, and responsible U.S. cannabis market.\nWe joined the recently launched Coalition for Cannabis Policy, Education, and Regulation.\nThis coalition is comprised of members across diverse industries and public policy experts who plan to inform the development of comprehensive cannabis policy that prevents underage use, advance of science, creates quality and safety standards and addresses social inequity.\nAnd finally, on capital allocation, we paid approximately $1.6 billion in dividends and repurchased approximately 6.9 million shares, totaling $325 million in the first quarter.\nWe have approximately $1.7 billion remaining under the currently authorized $2 billion share buyback program, which we expect to complete by June 30, 2022.\nOur balance sheet remains strong and as of the end of the first quarter, our debt-to-EBITDA ratio was 2.5 times.\nIn the first quarter, we executed a series of transactions to take advantage of favorable market conditions to adjust our debt maturity profile and extend the weighted average maturity of our debt.\nWe issued new long-term notes totaling $5.5 billion and repurchased over $5 billion in outstanding long-term notes.\nIn May, we expect to retire $1.5 billion of notes coming due with available cash.\nWe've also posted our usual quarterly metrics, which include pricing, inventory and other items.\nLet's open the question-and-answer period.\nOperator, do we have any questions?\n",
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"content": "compname reports 2021 first-quarter results; reaffirms 2021 earnings guidance; acquires remaining 20% of global business.\nreaffirms fy adjusted earnings per share view $4.49 to $4.62.\nreaffirms guidance for 2021 full-year adjusted diluted earnings per share to be in range of $4.49 to $4.62, representing growth rate of 3% to 6%.\nas of march 31, 2021, fair value of altria's juul investment was $1.5 billion.\nabi did not provide earnings guidance for 2021 given continued uncertainty.\nexpects 2021 adjusted diluted earnings per share growth in last three quarters 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: During our call today, unless otherwise stated, we're comparing results to the same period in 2020.\nFuture dividend payments and share repurchases remain subject to the discretion of Altria's board.\nAltria reports its financial results in accordance with U.S. generally accepted accounting principles.\nToday's call will contain various operating results on both a reported and adjusted basis.\nAdjusted results exclude special items that affect comparisons with reported results.\nFinally, all references in today's remarks to tobacco consumers or consumers within a specific tobacco category or segment refer to existing adult tobacco consumers 21 years of age or older.\nAltria delivered outstanding results in 2021 across our businesses, including strong financial performance, progress toward our vision and advancements in our ESG efforts.\nFirst, Altria grew its 2021 adjusted diluted earnings per share by 5.7% driven in part by the resiliency of our cigarette, cigar and moist smokeless tobacco businesses.\nAdditionally, we returned more than $8.1 billion in cash to shareholders through dividends and share repurchases.\nThis total represents the third largest single year cash return in Altria's history and the largest annual return since 2002.\nWe have continued to make progress toward our vision of responsibly leading the transition of adult smokers to a smoke-free future.\nOur teams took several steps forward in 2021, including accelerating the retail share growth of on!\nand further enhancing the capabilities to expand heated tobacco and other new U.S. tobacco products.\nAdvancing the science, research and development behind our smoke-free products, advocating for tobacco harm reduction by encouraging the FDA and other stakeholders to address the widely held nicotine misperceptions in society and we made excellent strides in establishing a best-in-class consumer engagement system to support smoker transition to smoke-free products.\nOur system leverages robust transactional data and our advanced analytic capabilities to engage with consumers at the point of purchase.\nFinally, some of our achievements across our responsibility focus areas,included publishing six corporate responsibility reports, summarizing our progress in critical areas, such as harm reduction and underage prevention and publishing our inaugural task force on climate-related financial disclosures report.\nWe were recognized for the second consecutive year with a AA rating from CDP for climate and water stewardship.\nAnd we advanced our internal talent and cultural goals, embraced workplace flexibility and embedded inclusion and diversity considerations within our performance review process to hold our leaders accountable.\nWe're excited to share more about our responsibility efforts and our consumer engagement system next month at CAGNY.\n2021 was a dynamic year for the U.S. tobacco industry and total industry volumes were influenced by several factors, including pandemic-induced shifts in consumer purchasing behavior and tobacco usage occasions, a continued trend toward smoke-free alternatives and an evolving regulatory and legislative landscape.\nDespite year-over-year volatility due to pandemic-related factors, total tobacco volume trends remained stable.\nIn fact, we estimate that overall tobacco space volumes have decreased by 0.3% annualized for the past two years and by 0.8% over the last five years on a compounded annual basis.\nDiving deeper, total estimated equivalized volumes for smoke-free products in the U.S. grew to 3.8 billion equivalized units in 2021 and represented approximately 24% of the total tobacco space.\nWe estimate the year-over-year increases in smoke-free volumes were driven by the e-vapor category, which result -- resumed its growth after a temporary pause in 2020 and on!\nnicotine pouches, which continue to grow rapidly from a small base.\n2021 smoke-free volumes also benefited from the geographic expansion of IQOS in the heated tobacco category, but we're pressured by modest declines in the MST category due to shifts in consumer purchasing behavior and movement to other smoke-free categories.\nAnd in combustibles, volume declined to approximately 11.8 billion equivalized units driven by several factors, which Sal will discuss later in his remarks.\nTurning to our smoke-free product portfolio.\nWe're excited by the exceptional performance of on!\nretail share of oral tobacco increased by nearly a full share point sequentially, reaching 3.9 share points for the fourth quarter and nearly doubling its share over the past six months.\nThese strong results were primarily driven by an increase in multi can purchases.\nAs of the end of the year, on!\nwas available for sale in approximately 117,000 U.S. retail stores.\nnicotine pouch category reached a total oral tobacco retail share of 17.9 percentage points in the fourth quarter, growing 7.4 share points year over year.\nWe're encouraged that on!\nrepresented more than one-third of this growth and the brand is proving to be a highly competitive product in the space.\nOur premarket tobacco applications for the entire on!\nportfolio remained pending with the FDA and we believe that the FDA should determine that the marketing of these products is appropriate for the protection of public health.\nWe are actively working on modified risk tobacco product applications for on!\nand expect to submit these applications to the FDA by the end of this year.\nWe believe an MRTP claim would be an impactful point of differentiation for the brand and an important tool in educating and ultimately transitioning smokers to less harmful products.\nIn heated tobacco, our teams made excellent progress with IQOS in the Northern Virginia market, with Marlboro HeatSticks achieving a 1.9% retail share of the cigarette category in stores with distribution for the month of October.\nUnfortunately, PM USA had to remove IQOS from the market in November due to the International Trade Commission's importation ban and cease and desist orders.\nPMI is responsible for IQOS manufacturing and we have been in contact regarding product availability.\nAt the present time, we do not expect to have access to IQOS devices or Marlboro HeatSticks in 2022.\nHowever, we remain focused on returning IQOS to the market as soon as possible.\nOur teams are actively working on reentry plans and we expect to be ready to bring IQOS back to U.S. consumers when available.\nOur agreement with PMI contemplates disruptions, such as those caused by the ITC orders and requires the parties to negotiate in good faith to amend the agreement appropriately.\nIn the second quarter of 2020, we disclosed two milestones in our IQOS agreement with PMI necessary for PM USA to maintain its exclusive license and distribution rights for IQOS in the U.S. and to earn the renewal option for an additional five-year term.\nThe initial five-year term does not expire until April of 2024, but we believe that PM USA has already met these milestones based on the strong performance of IQOS in the Charlotte and Northern Virginia markets.\nPMI has communicated that it disagrees with our position.\nWe expect to continue discussing these matters with PMI.\nWe firmly believe that heated tobacco products can play an important role in U.S. harm reduction and we are continuing our efforts to support the category's growth.\nWe have gained significant knowledge from our IQOS commercialization efforts, which we expect to use going forward.\nOur teams learned how to educate U.S. smokers on a brand-new tobacco category and how to effectively support their transition journey to smoke-free alternatives.\nWe demonstrated improved performance in each successive market and gained valuable knowledge on leveraging MRTP claims to transition smokers.\nAdditionally, we have built a robust post-market surveillance system, all of which we believe will position us to successfully achieve our objective of moving beyond smoking.\nMoving to the e-vapor category.\nThe 2021 Monitoring the Future study was recently released and the data showed positive improvements in underage usage trends.\nBoth underage use of nicotine vaping products and JUUL specifically show continued signs of decline.\nThe latest data shows that JUUL underage usage is down by 70% from 2019, with total underage nicotine vaping down 27% over the same period.\nWe are encouraged by the progress, but more still needs to be done and we remain committed to continuing our work to reduce underage use of all tobacco products.\nTurning to the regulatory environment.\nThe FDA is currently weighing several decisions that we believe will shape the future of harm reduction in the U.S. In the e-vapor category, the FDA has issued marketing denial orders for many e-vapor PMTAs, predominantly, applications for open systems and flavored e-liquids.\nThese denial orders have resulted in significant litigation across the country.\nIn the meantime, PMTAs for most leading e-vapor products, including JUUL, are still on an FDA review.\nThe FDA granted its first e-vapor market order last year for the tobacco variant of a cigar-like product.\nThe FDA has not reached a final decision for that manufacturer's menthol variant, but did deny its submissions for its other flavored cartridges.\nIn oral tobacco, PMTAs for the leading oral nicotine pouch products including on!\n, remain pending with the FDA.\nLast year, the FDA granted the first market authorizations among innovative oral tobacco products for our Verve discs and chews in the flavors of Green Mint and Blue Mint.\nThese were also the first flavored product authorizations for newly deemed tobacco products.\nAdditionally, MRTP applications previously submitted for Copenhagen Snuff and competitive snus products remain in FDA review.\nFinally, in combustibles, the FDA has stated that they are on track to issue proposed product standards by April 2022 regarding menthol in cigarettes and characterizing flavors in cigars.\nAs a reminder, the FDA rule-making process for these and all potential product standards has multiple steps and provide several opportunities for stakeholders to provide input.\nThere are formal requirements related to public notice and comment and steps requiring the office of management and budget to assess economic consequences at several points in the process.\nImportantly, if the FDA chooses to move forward with their final rules, they must address all comments received throughout the rule-making process.\nOf course, any final rule must take into account the potential for unintended consequences and would be subject to legal challenges.\nWe plan to review the proposed rules in detail and intend to engage with the FDA throughout the rule-making process on each of these issues.\nWe remain optimistic about the future of harm reduction in the U.S.\nWe believe we have an unprecedented opportunity to lead the way in shifting millions of smokers away from cigarettes, if we follow the science and foster innovation with the support of reasonable regulation.\nWe are encouraged that the FDA has authorized a product in each of the three major smoke-free categories.\nGoing forward, this year, we expect the FDA to carefully consider the scientific merits of each remaining application and we're hopeful for significant progress in product marketing and claim authorizations.\nI would like to end my commentary regarding 2021 with the message to Altria's employees.\nWe experienced several challenges last year in both our professional and personal lives and I admire your resiliency and fortitude.\nYou are a driving force in moving beyond smoking and we are very appreciative of your efforts and commitment.\nLet's now move to our financial outlook for 2022.\nOur plans for the year ahead include a continuation of our strategy to balance earnings growth and shareholder returns, with investments toward our vision.\nFor 2022, our planned investment areas include digital consumer engagement, smoke-free product research, development and regulatory preparations and marketplace activities in support of our smoke-free products.\nThe external environment remains dynamic, however and we're monitoring various factors such as the economy, including the impact of increased inflation; the impact of current and potential future COVID-19 variants and mitigation strategies; tobacco consumer dynamics, including tobacco usage occasions and available disposable income and regulatory and legislative developments.\nTaking these factors into consideration, we expect to deliver 2022 full year adjusted diluted earnings per share in a range of $4.79 to $4.93.\nThis range represents an adjusted diluted earnings per share growth rate of 4% to 7% from a $4.61 base in 2021.\nWe expect 2022 adjusted diluted earnings per share growth to be weighted toward the second half of the year.\nOur guidance includes anticipated inflationary increases in master settlement agreement expenses and direct materials expenses and our current expectation that we will not have access to the IQOS system in 2022.\nI'd like to begin with an update on consumer disposable income, mobility and retail store traffic.\nWe believe rising gas prices, inflation and the reduction of COVID-19 relief programs led to a decrease in disposable income on a sequential and year-over-year basis.\nIn addition, increased consumer mobility versus the prior-year offered consumers more options for their discretionary spending and led to fewer tobacco usage occasions.\nAt retail, fourth quarter trends were unchanged sequentially.\nWe estimate that compared to pre-pandemic levels, the number of tobacco consumer trips to the store continued to be depressed, but tobacco expenditures per trip remained elevated.\nMoving to our businesses.\nThe smokeable product segment delivered excellent financial performance once again.\nOur strategy for this segment continues to be maximizing profitability, while balancing investments in Marlboro, with funding the growth of our smoke-free portfolio.\nWe believe our teams are successfully executing this strategy and the segment has delivered strong profit growth and stable Marlboro marketplace performance throughout the pandemic period.\nIn the fourth quarter, the segment grew its adjusted OCI by 4.9% and expanded its adjusted OCI margins to 56.2%.\nThe segment also reported strong net price realization of 8.8%.\nFourth quarter smokeable segment reported domestic cigarette volumes decline by 5.9%.\nWhen adjusted for trade inventory movements and other factors, we estimate that segment domestic cigarette volumes for the fourth quarter declined by 8% and that industry volumes declined by 6.5% over the same period.\nAs a reminder, adjusted cigarette volumes were strong in the fourth quarter of 2020, with our smokeable segment adjusted cigarette volumes declining by just 1% and industry volumes growing by one half percent.\nFor the full year, smokeable segment adjusted OCI grew 3.1% to $10.4 billion.\nAdjusted OCI margins expanded by 1.2 percentage points to 57.6%.\nThese strong full year results were supported by robust net price realization up 9.1%.\nFull year smokable segment reported domestic cigarette volumes declined 7.5% due to the strong comparison period and the continuation of pandemic driven changes in the consumer behavior.\nWhen adjusted for trade inventory movement, calendar differences and other factors, we estimate that smokable segment cigarette volumes declined by 6% and that the full industry declined by 5.5%.\nWe believe it's important to analyze cigarette volume trends over the longer term as decline rates in any one year can be influenced by various factors.\nThe COVID-19 pandemic has certainly been one of these distorting factors and we believe the best way to assess cigarette volumes during this period is looking at 2020 and 2021 volumes combined.\nIn fact, the two-year average decline rates for adjusted smokable segment and industry cigarette volume declines were 4% and 3%, respectively, well within the range of historic norms.\nTurning to marketplace performance.\nMarlboro remains strong and has demonstrated resilience.\nThe cigarette category remains very competitive.\nAfter market share gains in the first half of 2021, Marlboro did see share in the fourth quarter.\nWe believe the sequential share decline occurred due to macroeconomic pressures on consumer disposable income.\nWhile the vast majority of Marlboro consumers are highly brand loyal, we do know that cigarette brand selection for a subset of smokers is dependent on economic conditions.\nThese consumers are more likely to select premium brands during economic upswings, as demonstrated by Marlboro share gains in the first half of 2021, but they are also more likely to trade down in tougher economic situations.\nWe remain focused on the long-term strength of Marlboro and we are very pleased that its full year share grew 0.2 to 43.1% and that the brand remained stable since the beginning of the pandemic.\nIn discount, total segment retail share in the fourth quarter continued to fluctuate, increasing 0.7 sequentially to 26% driven primarily by deep discount products.\nWe believe the share increases observed in the discount segment are due to the previously mentioned macroeconomic factors that pressured the consumer in the fourth quarter.\nFor the full year, discount segment share increased five-tenths to 25.4%, which was at the high end of its historical ranges.\nWe expect fluctuation in discount segment shares to continue as the cohort of price sensitive consumers react to their short-term economic conditions.\nAnd in cigars, Middleton provided strong contributions to smokable segment financial results.\nReported cigar shipment volume was essentially unchanged for the year, as Middleton maintained the strength of the iconic Black & Mild brand and successfully managed the supply chain during a challenging year.\nTurning to the oral tobacco product segment.\nAdjusted OCI and adjusted OCI margins contracted for the full year primarily due to increased investments behind on!\nTotal segment reported shipment volume was unchanged for the year.\nWhen adjusted for trade inventory movements and calendar differences, we estimate that total oral tobacco segment volumes declined by 0.5%.\nWe remain pleased with the overall performance of the segment as Copenhagen continues to generate significant income in the high-margin MST category and we're excited about the growth demonstrated by on!\nOral tobacco product segment retail share for the fourth quarter was down slightly sequentially as strong share gains from on!\nnearly offset declines in MST. The segment declined 1.6 percentage points versus the fourth quarter last year due to the continued growth of the oral nicotine pouch category.\nTurning to our investment in ABI.\nWe recorded $172 million of adjusted equity earnings in the fourth quarter, representing Altria's share of ABI's third quarter results.\nFor the full year, we recorded $639 million in adjusted equity earnings, up 18.3% versus 2020.\nAs we shared in our previous earnings call, we view our ABI stake as a financial investment and our goal is to maximize the long-term value of the investment for our shareholders.\nIn our all other operating category, we continue to make progress on our wind down of Philip Morris Capital Corporation.\nAt year-end, the net finance assets balance was $114 million, down more than $200 million since the end of 2020 due to rents received and asset sales.\nAs previously announced, we expect to complete the PMCC wind down by the end of 2022.\nTurning to capital allocation.\nWe remain committed to creating long-term shareholder value through the pursuit of our vision and our significant capital returns.\nThese record cash returns included paying $6.4 billion in dividends, raising the dividend for the 56th time in 52 years and repurchasing nearly 36 million shares during the year totaling $1.7 billion.\nWe also sold Ste.\nMichelle Wine Estates and expanded our share repurchase program from $2 billion to $3.5 billion.\nWe have approximately $1.8 billion remaining under this expanded program, which we expect to complete by December 31, 2022.\nWe continue to have a strong balance sheet and our goal is to maintain an investment-grade credit rating.\nAs of year-end, our debt to EBITDA ratio was 2.3 times and our weighted average coupon was 4%.\nWe've also posted our usual quarterly metrics, which include pricing, inventory and other items.\nLet's open the question-and-answer period.\nOperator, do we have any questions?\n",
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"content": "sees fy adjusted earnings per share $4.79 to $4.93.\nexpect to deliver 2022 full-year adjusted diluted earnings per share in a range of $4.79 to $4.93.\nqtrly net revenues $6,255 million, down 0.8%.\naltria's tobacco businesses have not experienced a material adverse impact to date due to covid-19 pandemic.\naltria group - expects 2022 capital expenditures to be between $200 million and $250 million.\nabi continued to be impacted by covid-19 pandemic in 2021, including effects of covid-19 variants, supply-chain constraints, others.\naltria group - as of december 31, 2021, altria's net finance assets balance was $114 million, down $206 million since end of 2020 due to rents received and asset sales.\nexpects 2022 adjusted diluted earnings per share growth to be weighted toward second half of year.\nqtrly total cigarette shipment volumes 22.42 billion, down 5.9%.\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: We invite you to read the safe harbor statements on Slide 2.\nActual results may differ.\nBefore we get into our results for the quarter, I wanted to provide a brief update on the macro environment.\nDuring the fourth quarter, despite the widespread surge in omicron variant cases, gasoline demand held up well.\nAnd on diesel, we're seeing highway trucking volumes continuing to meet or exceed seasonal records.\nWhile jet demand reached post-pandemic highs in the fourth quarter, it's still roughly 15% below 2019 levels as business travel remains suppressed, but we expect to see recovery in that this year as well.\nWhen we spoke with you in November, we were cautious about rising COVID cases this winter and the potential impact.\nBased on the trends over the last few months, we've become less concerned about the pace of recovery in transportation fuels demand.\ndemand continues to recover.\nWe believe that refining margins will be well-positioned for 2022.\nOn the aspects of the business that are within our control, this quarter, we made continued progress on our priorities.\nSince our last earnings call at the beginning of November, we've repurchased approximately $3 billion of shares.\nThat puts us at approximately 55% complete on our initial $10 billion share repurchase program.\nFurther reinforcing our commitment to return capital to shareholders, we obtained board approval for an additional $5 billion in share repurchase authorization.\nThis brings our total outstanding authorization to approximately $9.5 billion.\nToday, we announced our 2022 capital spending outlook.\nWe expect MPC will have approximately $1.7 billion in capital expenditures, with approximately 50% of the $1.3 billion growth capital for our Martinez refinery conversion.\nTotal costs for the Martinez refinery conversion is estimated at $1.2 billion.\nApproximately $300 million has been spent to date, $700 million for 2022 and $200 million for 2023.\nThis competitive capital cost is driven by the fact that Martinez' assets are conducive to retrofit, and we can leverage existing infrastructure and logistics.\nAt Martinez, the project reached another milestone as a 60-day comment period for the Environmental Impact Report concluded on December 17, 2021.\nWe remain committed to progressing the conversion to a renewable fuels facility, engineering is complete and we're ready to begin construction.\nOur plan is to have the first phase start-up in the second half of '22.\nWe've already sourced some advantaged feedstocks for the Martinez facility and are engaged in negotiations with multiple parties for the balance.\nOur strategy is multifaceted, including long-term arrangements, joint ventures, and alliances, all of which are common in this space.\nA recent example of our success would be our joint venture with ADM.\nWe're also leveraging existing capabilities that are currently supporting Dickinson to optimize between the two facilities.\nWe remain confident in our progress and ability to secure feedstocks for Martinez.\nOn Kenai, we have been working at sales process since we last communicated.\nWe'll be back to you when we have additional details that we can share.\nIn 2021, we progressed all three of our strategic initiatives, and Slide 4 highlights this execution.\nOn the portfolio, we completed the Speedway sale, receiving $17.2 billion of proceeds from that transaction and securing the 15-year fuel supply agreement with 7-Eleven.\nOur Dickinson renewable diesel facility started up, reached capacity, and we've been successfully optimizing the operation.\nWe made two strategic decisions to idle our Gallup refinery and to convert Martinez to a renewable fuels facility.\nAnd this year, MPLX produced exceptionally strong cash flow, which provided $2.2 billion of contributions to MPC.\nAs we look at cost reduction, what began as a $1.5 billion cost-reduction initiative is being embraced by the organization and now a low-cost culture is becoming embedded in how we conduct our business.\nWhile I've been reluctant to share too much, I wanted to highlight a few items that have commercial significance in our portfolio.\nIn March of 2021, we started up the Beatrice pretreatment facility, which processes about 3,000 barrels a day of advantaged feedstock for the Dickinson renewable diesel plan.\nIn December, we closed on a joint venture with ADM, which will provide approximately 5,000 barrels a day of logistically advantaged feedstock for Dickinson when the new soybean crush plant comes online in 2023.\nAnd in January of this year, we successfully started up our Cincinnati pretreatment facility, which will process about 2,000 barrels per day for our Dickinson renewable diesel plant.\nWe converted this facility from its original configuration as a biodiesel plant.\nOur team's execution on these three strategic priorities builds a foundation for continued value creation and we look forward to sharing updates each quarter as we continue to advance these initiatives.\nShifting to Slide 5.\nWe remain focused on challenging ourselves to leading in sustainable energy.\nWe have three companywide targets on GHG, methane and freshwater intensity than many of our investors and stakeholders know well.\nIn the coming weeks, we look forward to providing an update on our progress against these targets and some of our accomplishments in 2021.\nSlide 6 provides a summary of our fourth quarter financial results.\nAdjusted earnings exclude $132 million of pre-tax charges related to make-whole premiums for the $2.1 billion in senior notes we redeemed in December.\nAdditionally, the adjustments include an incremental $112 million of tax expense, which adjusts all results to a 24% tax rate.\nBeginning with our first quarter 2022 results, we will be reporting our effective tax rate on an actual basis and will no longer adjust our actual results to a 24% tax rate.\nAdjusted EBITDA was $2.8 billion for the quarter, which is approximately $400 million higher from the prior quarter.\nCash from operations, excluding working capital, was $2 billion, which is an increase of almost $300 million from the prior quarter.\nFinally, during the quarter, we returned $354 million to shareholders through dividend payments and approximately $2.7 billion in share repurchases.\nIn the three months since our last earnings call, we have repurchased approximately $3 billion of shares.\nSlide 7 illustrates the progress we have made toward lowering our cost structure over the past two years.\nAs we think about our strategy on cost structure, I want to emphasize a few things.\nWe will never compromise the safety of employees or the integrity of our assets.\nAnd we are committed to ensure the current cost reductions are sustainable, even during periods of general cost pressures.\nSince the beginning of 2020, we have been able to maintain roughly $1.5 billion of cost reductions that have been taken out of the company's total cost.\nRefining has been lowered by approximately $1 billion.\nOur refining operating costs in 2020 began at $6 per barrel.\nWhile we were able to finish 2021 with a full year operating cost per barrel that was $5.\nAdditionally, midstream was reduced by $400 million and corporate cost by about $100 million.\nHowever, regardless of the margin environment, our EBITDA is directly improved by this $1.5 billion.\nThis improvement is expected to make the company more resilient in future downcycles, while having more bottom-line profitability and upcycles.\nTurning to Slide 8.\nWe would like to highlight our financial priorities for 2022.\nFirst, sustaining capital as we remain steadfast in our commitment to safely operate our assets, protect the health and safety of our employees and support the communities in which we operate.\nSecond, we're committed to the dividend.\nAs we continue to purchase shares, we will reduce the share count and increase the potential of returnable cash flow.\nThird, we continue to believe this is both a return on and return of capital business and we will continue to invest capital where we believe there are attractive returns.\nIn traditional refining, we're focused on investments that are resilient and reduce cost.\nIn renewables, current spend is primarily focused on our Martinez renewable fuel conversion.\nWe believe that share repurchases can be used to meaningfully return capital to shareholders.\nIn order to successfully execute the strategies guided by these priorities, MPC needs a strong balance sheet as a foundation.\nWe continue to manage our balance sheet to an investment-grade credit profile.\nMoving to another key focus area.\nSlide 9 highlights our focus on strict capital discipline.\nToday, we announced our 2022 capital outlook for MPC.\nMPC's 2022 capital investment plan totals approximately $1.7 billion.\nAs we continue to focus on strict capital discipline, our overall spend remains approximately 30% below 2019 spending levels.\nSustaining capital is approximately 20% of capital spend, underpinning our commitment to safety and environmental performance.\nOf the remaining 80% for growth, approximately 50% of this $1.3 billion supports the conversion of Martinez into a renewable fuels facility.\nThe remainder of the growth capital is for other projects already underway.\nAt our refineries, the growth capital is primarily for projects that enhance returns at MPC's large coastal assets with a focus on completing Galveston Bay STAR project, as well as smaller projects at Garyville and Los Angeles.\nGoing forward, we expect growth capital will continue to have a significant portion for renewables and projects that will help us reduce future operating cost.\nSlide 10 shows the reconciliation from net income to adjusted EBITDA, as well as the sequential change in adjusted EBITDA from the third quarter 2021 to fourth quarter 2021.\nAdjusted EBITDA was higher quarter over quarter, driven primarily by a $354 million increase from Refining & Marketing.\nThe adjustment column reflects $132 million of pre-tax charges for make-whole premiums for debt redemption during the quarter, which has also been excluded from the interest column.\nMoving to our segment results.\nSlide 11 provides an overview of our Refining & Marketing segment.\nThe business reported continued improvement from last quarter with adjusted EBITDA of $1.5 billion.\nFourth quarter EBITDA increased $354 million when compared to the third quarter of 2021.\nThe increase was driven primarily by higher refining margins in the U.S. Gulf Coast and West Coast regions.\nGulf Coast production increased by 14%, recovering from storm-related downtime last quarter, and solid margin per barrel increased 31% due to higher export sales and higher sales of light product inventory.\nThe West Coast margin per barrel increased 40% associated with increased demand and refinery outages.\nUtilization was 94% for the quarter, slightly improved from the third quarter.\nThe higher Gulf Coast throughput was offset by lower throughput in the Mid-Con for planned turnaround activity.\nOperating expenses were higher in the fourth quarter, primarily due to higher natural gas prices.\nThere was also higher routine maintenance and planned project expense.\nAdditionally, we saw natural gas prices softened during the quarter, coming off highs in the $5 to $6 range and ending in the $3 to $4 range.\nSlide 12 shows the change in our midstream EBITDA versus the third quarter of 2021.\nOur midstream segment continues to demonstrate earnings resiliency and stability with consistent results from the previous quarter.\nSlide 13 presents the elements of change in our consolidated cash position for the fourth quarter.\nOperating cash flow was approximately $2 billion in the quarter.\nThis excludes changes in working capital and also excludes the cash we received for our CARES tax refund in the quarter, which was approximately $1.6 billion source of cash and is included in the income tax part of the chart.\nWorking capital was an approximate $1.3 billion source of cash this quarter, driven primarily by reduction in crude and product inventory.\nAs we announced on last quarter's call, MPC redeemed $2.1 billion in senior notes in December.\nUnder income taxes, we received approximately $1.6 billion of our CARES tax refund in the fourth quarter.\nWe also used about $300 million to offset against our Speedway tax obligation.\nThere is about $60 million of the refund remaining, which we expect in the first half of 2022.\nWe paid approximately $1.2 billion for our Speedway income tax obligation.\nAll that remains is about $50 million of state and local taxes.\nWith respect to capital return during the quarter, MPC returned $354 million to shareholders through our dividend and repurchased approximately $2.7 billion worth of shares.\nAt the end of the quarter, MPC had approximately $10.8 billion in cash and short-term investments.\nSlide 14 provides our capital investment plan for 2022 which reflects our continuing focus on strict capital discipline.\nMPC's investment plan, excluding MPLX, totals approximately $1.7 billion.\nThe plan includes $1.6 billion for Refining & Marketing segment, of which approximately $300 million or roughly 20% is related to maintenance and regulatory compliance spending.\nOur growth capital plan is approximately $1.3 billion, split between renewables and ongoing projects.\nWithin renewable spending, the majority is allocated for the Martinez conversion.\nOngoing projects in our Refining & Marketing segment will enhance the capability of our refining assets, particularly in the Gulf Coast, and also support our focus on growing the value recognized from our Marathon and ARCO marketing brands.\nAlso included is approximately $100 million of corporate spending to support activities we believe will enhance our ability to lower future costs and capture commercial value.\nTheir plan includes approximately $700 million of growth capital, $140 million of maintenance capital, and $60 million for the repayment of their share of the Bakken Pipeline joint venture's debt due in 2022.\nOn Slide 15, we review our progress on our return of capital.\nSince our last earnings call at the beginning of November, we have repurchased approximately $3 billion of company shares.\nThis puts us at approximately 55% complete on our initial $10 billion repurchase program commitment, leaving approximately $4.5 billion remaining.\nWe remain committed to complete the $10 billion program by the end of 2022.\nAnd as we are ahead of pace given our recent repurchases, could foresee completion sooner than initially planned.\nAs part of our long-term commitment to return capital, we announced an incremental $5 billion share repurchase authorization today, increasing our recent repurchase authorizations to $15 billion.\nWe plan to continue using open market repurchase programs, although all of the programs we have previously discussed remain available to us to complete our commitment.\nWe intend to use programs that allow us to buy on an ongoing basis, and we will provide updates on the progress during our earnings call.\nAs we have said many times, we believe a strong balance sheet is essential to being successful in a competitive commodity business.\nIt's the foundation allowing us to execute our strategy.\nSlide 16 highlights some of the key points about our balance sheet.\nMPC ended the year with approximately $10.8 billion of cash and short-term investments.\nBut longer term, we believe that we will need to maintain about $1 billion of cash on the balance sheet.\nAdditionally, we will always ensure that we have enough liquidity to endure market fluctuations.\nCurrently, we have a $5 billion bank revolver that is undrawn.\nWe continue to manage our balance sheet to an investment-grade profile.\nAt year end\\, MPC's gross debt-to-capital ratio is 21% and our long-term gross debt-to-capital target is approximately 30%.\nAs we continue to execute our share repurchase program, we will see that ratio increase.\nAfter the recent redemption in December, our current structural debt is approximately $6.5 billion, and we do not have any maturities until 2024.\nSlide 17, we provide our first quarterly outlook.\nWe expect total throughput volumes of roughly 2.9 million barrels per day.\nPlanned turnaround costs are projected to be approximately $155 million in the first quarter.\nThe majority of the activity will be in the Gulf Coast region.\nOur 2022 planned turnaround activity is back half-weighted this year.\nTotal operating costs are projected to be $5.10 per barrel for the quarter.\nDistribution costs are expected to be approximately $1.3 billion for the quarter.\nCorporate costs are expected to be $170 million.\nIf time permits, we will reprompt for additional questions.\nAnd with that, operator, we'll open it to questions.\n",
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"content": "r&m segment income from operations was $881 million in q4 2021 versus a loss of $1.6 billion.\non feb 2, company announced that its board approved incremental $5 billion share repurchase authorization.\ncapital spending outlook for 2022 is $1.7 billion.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: These documents can be found on our website at marathonoil.com.\nWe'll also hear from Mike, Dane and Pat before we get to our question-and-answer session.\nWhile I get the privilege of talking about our company's impressive results and outlook today, it is their hard work that makes all of this possible.\nThrough our commitment to capital discipline and our differentiated execution, we are successfully delivering outsized financial outcomes for our shareholders, highlighted by more than $1.3 billion of free cash flow year to date.\nFor our $1 billion full year 2021 capital budget, at forward curve commodity pricing, we now expect to generate well over $2 billion of free cash flow this year, at a reinvestment rate below 35% and a free cash flow breakeven below $35 per barrel WTI.\nWe are successfully delivering on all of our financial and operational objectives and achieving bottom line results that we will put head-to-head against any other energy company and against any other sector in the S&P 500.\nThis strong financial performance has enabled us to pull forward our balance sheet targets.\nAnd this further improvement to our already investment-grade balance sheet has given us the confidence to dramatically accelerate the return of capital to equity holders.\nUnder our unique return of capital framework, our shareholders get the first call on cash flow, a minimum of 40% of our total cash flow from operations in the current price environment.\nConsistent with our commitment to shareholder returns and our objective to pay a competitive and sustainable base dividend, we have raised our base dividend by 20% this quarter.\nThis is the third quarter in a row that we have increased our base dividend, representing a cumulative 100% increase since the end of 2020, a sign of the increased confidence we have in our business.\nWe are also targeting approximately $500 million of share repurchases during the fourth quarter with $200 million already executed.\nAt a free cash flow yield north of 20%, we believe our equity offers tremendous value.\nAdditionally, there remains a dislocation between our equity and strengthening commodity prices coupled with a more mature business model that underwrites repurchases through the cycle.\nFurther, buying back our stock for good value provides the added potential of significantly reducing our share count, meaningfully improving all of our per-share metrics even under a maintenance scenario and increasing our longer-term capacity for continued per share base dividend increase.\nLooking ahead to fourth quarter, including our base dividend and planned share repurchases, we expect to return approximately 50% of our total cash flow from operations to equity holders, fully consistent with our return of capital framework that prioritizes the shareholder first.\nOur financial flexibility and the power of our portfolio in the current commodity price environment provided the confidence for our board to also increase our total share repurchase authorization to $2.5 billion, to ensure we can continue executing on our return of capital plans as we progress through 2022.\nAnd perhaps most importantly, everything that we are doing is sustainable, backed by our five-year benchmark maintenance scenario and our ongoing pursuit of ESG excellence through top quartile safety performance, significant reductions to our GHG intensity and best-in-class corporate governance.\nThird quarter operations were again solid, demonstrating that we remain on track to achieve or outperform all of the key 2021 financial, operational and ESG-related objectives that we established at the beginning of the year.\nFirst and foremost, our consistent execution is translating to outsized financial outcomes, highlighted by over $2 billion of expected free cash flow, with a material sequential increase expected in the fourth quarter, a full year 2021, reinvestment rate below 35% and full year corporate free cash flow breakeven $35 per barrel WTI.\nOur gas capture during third quarter also exceeded 99%, as we continue to reduce our GHG emissions intensity.\nThere is no change to our $1 billion full year 2021 capital budget.\nRaising our spending levels this year has never been a consideration, consistent with our commitment to capital discipline.\nThere is also no change to the midpoint of our full year total company oil or total company oil equivalent production guidance.\nWe're also raising our full year 2021 EG equity method income guidance for the second consecutive quarter to a new range of $235 million to $255 million due to stronger commodity prices.\nThis is a 30% increase from the guidance we provided last quarter and a 120% increase relative to our initial guidance at the beginning of the year.\nOur full year production and EG equity method income guidance truly contemplate an unplanned outage we experienced in EG late in the third quarter.\nLooking ahead to fourth quarter, we expect to finish the year strong with our total company oil production increasing to between 176,000 and 180,000 barrels of oil per day in comparison to 168,000 barrels of oil per day during the third quarter.\nOur quarterly production volumes are all subject to some normal variability associated with well timing.\nBut this more significant sequential increase is due largely to deferred Bakken production associated with third-party midstream outages, strongly well performance and solid base production management.\nWe also expect our fourth quarter total company oil equivalent production to be similar to the third quarter at 345,000 barrels of oil equivalent per day, with a sequential increase in the U.S. offsetting a sequential decrease in Equatorial Guinea associated with the previously referenced outage.\nAs I noted last quarter, our financial priorities are clear and unchanged, generate strong corporate returns with significant sustainable free cash flow, all prove our already investment-grade balance sheet and return significant capital to shareholders.\nEarly in the third quarter, we retired $900 million in debt, bringing total 2021 gross debt reduction to $1.4 billion and achieving our targeted $4 billion gross debt level.\nWith this milestone, we no longer feel the need to accelerate additional debt reduction.\nAnd going forward, we plan to simply retire debt as it matures.\nAnd please note that we have no significant maturities in 2022.\nThis balance sheet repositioning was achieved well ahead of our original schedule, which opened the door to begin returning a significant amount of capital to equity holders.\nTo be clear, these are returns beyond our base dividend which we just increased for the third consecutive quarter.\nOur base dividend is actually up 100% over that time period, now at $0.06 a share per quarter and the $50 million of annual interest savings were realized due to lower gross debt will help fund a significant portion of this base dividend increase.\nOur equity return framework calls for delivering a minimum of 40% of cash from operations to shareholders when WTI is at or above $60 a barrel.\nThis is a peer-leading return of capital commitment.\nIt is also competitive with any sector in the S&P 500.\nOur fourth quarter is shaping up to be an exceptionally strong free cash flow quarter due to a combination of higher commodity prices and oil volumes quite a bit stronger than the third quarter.\nAt recent strip pricing, this could take our operating cash flow to approximately $1.1 billion or about a 25% sequential increase versus the third quarter.\nAdd to that an expected increase in dividend distributions from EG and lower capex relative to the third quarter peak and fourth quarter free cash flow could almost double to north of $850 million.\nSo in Q4, we expect to have lots of flexibility to exceed our 40% of operating cash flow, a minimum threshold for equity returns.\nIn fact, through our base dividend and approximately $500 million of share repurchases, we expect to return approximately 50% of our operating cash flow to investors during the fourth quarter while further improving our cash balance and net debt position.\nAs we also mentioned, we believe that buying back our stock in a disciplined fashion makes tremendous sense.\nThere are many opportunities in the market right now that provide a sustainable free cash flow yield north of 20%.\nStepping back, the full year 2021 financial delivery is exceptional, $140 million in base dividends, $1.4 billion in debt reduction and $500 million of share repurchases representing a total return to investors combined debt and equity of over $2 billion or over 60% of our expected full year operating cash flow at strip commodity prices.\nOur actions in 2021 have successfully repositioned the balance sheet and kicked off a strong track record of equity returns.\nGoing forward, we're going to stay laser-focused on our financial priorities and our return of capital framework, taking into account our cash flow outlook when making return decisions.\nBecause our framework is based on a minimum percentage of cash flow from operations and not free cash flow, the equity investor will have the first call on cash, not to drill a bit.\nWe recently completed our 2021 REx drilling program, which was focused on the continued delineation of our contiguous 50,000 net acre position in our Texas Delaware oil plant.\nAs a reminder, this is a new play concept for both the Woodford and Meramec that was secured through grassroots leasing at a very low cost of entry and with 100% working interest.\nThis is essentially an exploration bolt-on that is complementary to our already established position in the Northern Delaware.\nWe brought online our first multi-well pad during the third quarter.\nAnd while it is still very early, initial production rates in both Woodford and Meramec are exceeding our predrill expectations.\nMore specifically, one of the Woodford wells achieved an IP30 of almost 2,100 barrels of oil per day at an oil cut of 66%.\nThis appears to be the strongest Woodford oil well ever drilled in any basin.\nAnd while we don't yet have 30-day rates for the other two wells, early indicators, including IP24s are all very positive.\nA primary objective of this three-well pad was to execute our first spacing test in the playing.\nTo date, we are seeing no evidence of interference between the Woodford and Meramec, consistent with our expectations due to over 700 feet of vertical separation between the two zones.\nAs I stated, it's still early and we need more production history to draw stronger conclusions, but we are certainly encouraged by the initial results from this first spacing test, including the record Woodford productivity.\nThe second objective was to continue to progress our learnings and cost improvements and completed well costs.\nWe expect to ultimately deliver well costs comparable to those achieved in the SCOOP and are aggressively leveraging our substantial experience in Oklahoma to that end.\nIn total, we have now brought online nine wells since play entry that have successfully delineated our position.\nThe six wells with longer dated production have collectively demonstrated strong long-term oil productivity.\nOil cuts greater than 60%, low oil ratios below one and shallow declines.\nLooking ahead to 2022, you should expect us to continue to integrate our learnings and progress our understanding of this promising play.\nHowever, we will do so in a disciplined manner and within our strict reinvestment rate capital allocation framework.\nI will close with a quick summary of how we have positioned our company for success and a preview of what to expect from us in 2022.\nSpoiler alert, there will be no surprises in 2022 and no compromise with respect to our capital return framework.\nIf we focus on the financial benchmarks that matter, we are delivering top-tier capital efficiency, free cash flow yield and balance sheet strength.\nOur 2021 capital rate of sub-35% and capital intensity as measured by capex per barrel of production are both the lowest in our independent E&P peer group, a strong validation of our leading capital and operating efficiency.\nWe are also one of the few E&Ps expecting to deliver a 2021 reinvestment rate at or below the S&P 500 average.\nWe're also delivering top quartile free cash flow yield this year among our peer group and well above the S&P 500 average.\nAnd we are doing all of this with an investment-grade balance sheet at sub-onetime net debt to EBITDA, a 2021 leverage profile also well below both our peer group and the S&P 500 average.\nIn short, we are successfully delivering outsized financial performance versus our peer group and the broader market with the commodity price support we are experiencing this year.\nYet perhaps more importantly, we are well positioned to deliver competitive free cash flow and financial performance versus the broader market at much lower prices than we see today, all the way down to the $40 per barrel WTI range.\nThis is the power of our sustainable cost structure reductions, our capital and operating efficiency improvements and our commitment to capital discipline, all contributing to a sub-$35 per barrel breakeven.\nLooking ahead to 2022, our differentiated capital allocation framework that prioritizes the shareholder at the first call on cash flow generation will not change.\nOur commitment to capital discipline will not waver with maintenance oil production, the case to beat, as we finalize our 2022 budget.\nWe believe the right business model for a mature industry prioritizes sustainable free cash flow, a low reinvestment rate and meaningful returns to equity investors, not growth capital.\nRecall that we introduced a unique five-year maintenance scenario earlier this year that featured $1 billion to $1.1 billion of annual spending, $1 billion of annual free cash flow at $50 WTI and a 50% reinvestment rate.\nGiven we are no longer living in a $50 per barrel environment and that prices are currently north of $80 per barrel, it is both prudent and reasonable to consider some level of limited inflation up to about 10% that would yield modest pressure on the maintenance scenario capital range.\nYet importantly, this modest level of inflation pales in comparison to the uplift to our financial performance in the current environment, with a 2022 maintenance scenario free cash flow potentially on the order of $3 billion at recent strip pricing or nominally three times the $50 benchmark outcome.\nAnd under such a maintenance scenario, we are positioned to lead the peers once again with a 2022 free cash flow yield above 20%, far in excess of the S&P 500 free cash flow yield of approximately 4%.\nOur minimum 40% of cash flow target translates to about $1.6 billion of equity holder returns next year.\nBut that is a minimum and we see significant headroom to drive that number higher.\nAt the expected 4Q run rate of 50% of CFO, 2022 equity holder returns would increase to approximately $2 billion, while still improving our cash balance and net debt position.\nEven at a more conservative $60 per barrel oil price environment, our minimum 40% of cash flow targets still translates to about $1.1 billion of equity holder returns in 2022.\nAnd applying 2022 consensus estimates to the return frameworks disclosed by our peers, only confirms our leading return of capital profile, with a double-digit cash distribution yield to our equity investors in 2022.\nThe confidence in this outsized delivery is further supported by recent board action to increase our share repurchase authorization to $2.5 billion to ensure we have sufficient runway to continue delivering on our return of capital commitment next year.\nTo close, our company was among the first to recognize the need to move to a business model that prioritizes returns, sustainable free cash flow, balance sheet improvement and return of capital.\nWe have also led the way in better aligning executive compensation to this new model and with investor expectations.\nWe are successfully executing on our model today, delivering both financial outcomes and ESG excellence that are competitive not just with our direct E&P peers but also the broader market.\nWith that, we can open up the line for Q&A.\n",
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"content": "q3 oil-equivalent production of 345,000 net boed.\nno change to midpoint of 2021 total company oil or oil-equivalent production guidance.\nmarathon oil's 2021 capital expenditure guidance of $1 billion remains unchanged.\nmarathon oil - raising its fy 2021 equatorial guinea equity method income guidance for second consecutive quarter to new range of $235 million to $255 million.\ncompany expects q4 total oil-equivalent production to be similar to q3 production of 345,000 net boed.\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: Those documents can be found on our website at marathonoil.com.\nWe'll also hear from Dane and from Mike today before we move to our question-and-answer session.\nI can best describe 2021 as a year of comprehensive delivery against our framework for success, highlighted by financial results that are not only superior to our E&P peers, but more importantly, superior to any other sector of the S&P 500.\nAnd we are carrying that momentum forward into 2022, fully expecting another year of outstanding delivery.\nThere are a few key messages I want to highlight today.\nFirst, after accelerating our balance sheet objectives through gross debt reduction, fourth quarter transitioned to a focus on returning a compelling amount of capital to our equity investors.\nOur cash flow-driven return of capital framework uniquely prioritizes our shareholders as the first call on cash flow generation, not the drill bit.\nAnd our recent actions underscore both our commitment to prioritizing our shareholders and the power of our portfolio in a constructive price environment.\nThe outcomes speak for themselves.\nDuring the fourth quarter, we returned over 70% of our cash from operations or more than $800 million to our equity investors, significantly exceeding our minimum 40% commitment.\nTo clarify, that 70% of our cash flow from operations, not our free cash flow.\nThat $800 million actually equates to around 90% of our free cash flow during the fourth quarter.\nIn total, we have now executed $1 billion of share repurchases since October, driving an 8% reduction to our outstanding share count in just four and a half months.\nWhile others in our space may once again be focused on growing their production, we are focused on growing the per share financial metrics that matter most to our equity valuation, our cash flow per share and our free cash flow per share.\nFurther, we continue to believe buybacks remain an excellent use of capital.\nDane will discuss our perspective in more detail, but to summarize, we see good value in our shares.\nWe are driving significant underlying per share growth, and buybacks are highly synergistic with base dividend growth over time.\nSpeaking of our base dividend.\nWe recently raised our quarterly base dividend for the fourth consecutive quarter, fully consistent with our objective to pay a competitive and sustainable base dividend to our shareholders.\nMy second key point today is that we are successfully executing on our mandate to deliver financial outcomes that are not only superior to our E&P peer group, but are superior to the broader S&P 500 as well.\nAs I've said before, for our company and for our sector to attract a broader universe of investors, we must deliver competitive financial performance with other investment opportunities in the market as measured by free cash flow generation and return of capital even when commodity prices are much lower than they are today, all the way down to $40 to $50 WTI range.\nWe believe we have built that type of resilience into our business.\nAnd we must deliver truly outsized free cash flow and return of capital versus the S&P 500 when we experienced constructive commodity price support as we are seeing today.\nOur 2021 results are a strong testament to this mandate.\nOver $2.2 billion of free cash flow at a reinvestment rate of 32% in 2021, including over $900 million of free cash flow at a 22% reinvestment rate during the fourth quarter alone, a peer-leading return of capital profile driving significant per share growth, a tremendous balance sheet following $1.4 billion of gross debt reduction last year and a demonstrated capital efficiency advantage relative to other E&P no matter how you want to analyze the publicly available data.\nMy third key message today is that this peer-leading financial and operational performance we have been delivering is sustainable.\nOur $1.2 billion 2022 capital program is fully consistent with our disciplined capital allocation framework that prioritizes sustainable free cash flow generation and per share accretion over production growth.\nWe expect to deliver over $3 billion of free cash flow at a reinvestment rate of less than 30%, assuming $80 WTI and $4 Henry Hub prices at a discount to the current forward curve.\nThese financial outcomes are sustainable for years to come and are underpinned by over a decade of high-return, high-confidence inventory, and it's further supported by our bottoms-up five-year benchmark maintenance scenario, which has now been extended out to 2026 and which delivers annualized financial outcomes similar to 2021 and 2022 on a price-normalized basis.\nWhile our five-year benchmark scenario is based on a well-by-well execution-level model, our longer-term portfolio modeling extends the maintenance scenario out 10 years and shows that we can deliver the same peer-leading financial outcomes for at least a decade.\nImportantly, we retained significant upside leverage to commodity prices that differentiates us versus our peers for three distinct reasons.\nFirst, we will remain disciplined and will not add production growth capital to our budget in 2022.\nOur focus will remain on free cash flow generation, return of capital and per share financial metrics.\nSecond, we have an attractive hedge book that preserves our cash flow upside.\nAnd third, we don't expect to pay U.S. federal cash income taxes until the second half of the decade, an advantaged outlook versus most peers.\nMy fourth and final key point today is that Marathon Oil is fully committed to meeting global energy demand while delivering comprehensive ESG excellence, focusing on each element of ESG.\nSuffice to say, I believe our employees should be just as proud of our ESG delivery in 2021 as they are of our peer-leading financial and operational results.\nI'll speak to Slide 7 through 9 of our deck, largely focusing my comments on our return of capital accomplishments and outlook.\nGrounding our discussion, our return on capital framework is summarized on Slide 7, and that is unchanged.\nAs a reminder, our framework calls for delivering a minimum of 40% of cash flow from operations to our equity holders when WTI is at or above $60.\nThis represents a return of capital commitment at the top of our E&P peer space and that is competitive with any sector in the S&P 500.\nImportantly, as Lee mentioned, our return on capital targets are based on our cash flow from operations and not on our free cash flow.\nThis is purposeful, intended to make clear that our shareholders will get the first call on cash generation.\nAdditionally, it's consistent with our reinvestment rate-driven approach to capital spending.\nBy staying disciplined and by maintaining a low reinvestment rate, we protect a significant percentage of our CFO for shareholder distributions.\nWhile frameworks and commitments are important, we believe establishing a consistent track record of delivery quarter in and quarter out, is ultimately key to building and maintaining trust and credibility with the marketplace.\nWe have a multiyear track record of returning significant capital to our shareholders and are especially proud of our accomplishments in 2021.\nWe started 2021 with the top priority of balance sheet improvement, accelerating $1.4 billion of gross debt reduction during the first three quarters of the year.\nAfter taking our net debt to EBITDA comfortably below one time at strip and below 1.5 times at our conservative longer-term planning basis of $50 WTI, we have no longer need to accelerate additional debt reduction.\nSo going forward, we plan to simply retire debt as it matures.\nOur balance sheet repositioning opened the door for us to begin returning a significant amount of capital to equity holders during the fourth quarter, and that returns beyond our base dividend.\nStepping back and looking at full year 2021 demonstrates our commitment to allocating cash flow to shareholder friendly purposes.\nIn total, we directed over 70% of our full year 2021 CFO, that's $2.3 billion to debt reduction, share repurchases and our base dividend.\nThat's a peer-leading track record of return of capital execution.\nSlide 9 highlights that we are well-positioned to lead the market again and returning significant capital to shareholders in 2022.\nSince October, we've already executed $1 billion of share repurchases, reducing our outstanding share count by 8% in just four and a half months and driving significant growth to our underlying per share metrics.\nOur current outstanding buyback authorization is $1.7 billion, and we continue to believe that buying back our stock in a disciplined manner is a good use of our capital.\nThe efficiency of a discipline of a ratable share repurchase program is really a function of free cash flow generation relative to market value.\nIn other words, your free cash flow yield.\nAnd while our equity value has appreciated since we kicked off our buyback program in October, we continue to trade at a free cash flow yield north of 20%, and that's at $80 WTI, which is a discount to the current forward curve.\nThat's roughly four times the free cash flow yield of the S&P 500 and even using a more conservative, say, $60 WTI price assumption, our free cash flow yield on our current equity value is around 10%, at still 2.5 times that of the S&P 500.\nSo these are strong indicators that five times remain a very good use of cash.\nWe also believe the disciplined share repurchases offer clear strategic advantages.\nThey can drive strong underlying growth in per share metrics that are correlated with shareholder value, including cash flow per share and free cash flow per share.\nWe also offer clear synergies with our base dividend as the reduction in shares outstanding creates capacity, incremental base dividend growth without raising our free cash flow breakeven.\nAnd given the tremendous downside resilience we've built into our business, we can continue to repurchase shares through the cycle, including when we experienced commodity price pullbacks, and that's a very different dynamic than during past cycles.\nPaying a competitive and sustainable base dividend also remains a top priority for us as evidenced by the fact that we have now raised our base dividend four quarters in a row for a cumulative increase of 133%.\nWith regard to the 2022 outlook at an $80 WTI and $4 Henry Hub price deck, our minimum return of capital commitment translates to $1.8 billion, a number that stacks up well against our E&P peers and even better against the broader market.\nWith no material debt maturities in 2022, a constructive commodity price backdrop, our commitment to capital discipline and expected reinvestment rate of less than 30%, we see potential to meaningfully outperform our minimum 40% of CFO commitment.\nWe are on pace to return over 50% of our CFO to equity investors in the first quarter.\nFor the full year, upside potential at the same $80 WTI and $4 Henry Hub deck could be as high as 70% of our CFO, the level at which we executed during the fourth quarter.\nThat would represent a return to equity investors of around $3.1 billion or close to 20% of our current market capitalization.\nIn 2022, we fully expect to once again deliver peer-leading financial and operating results.\nOur $1.2 billion capital program with details summarized on Slide 13, is fully consistent with our disciplined capital allocation framework that prioritizes corporate returns and free cash flow generation over production model.\nWe expect our 2022 program to deliver over $3 billion of free cash flow at a reinvestment rate of less than 30%, assuming $80 WTI and $4 Henry Hub.\nAs Dane just mentioned, by staying disciplined and maintaining a low reinvestment rate, we expect to exceed our minimum return of capital commitment of 40% of cash flow from operations.\nWe will continue our investment in reducing our GHG intensity targeting a 40% reduction relative to our 2019 baseline.\nIn addition, the gas capture of 99% or better.\nAt basin level, consistent with prior indications around our capital allocation mix, we will be spending approximately 75% for capital budget in the Eagle Ford and Bakken with the balance going to the Permian and Oklahoma.\nIncluded within our Permian program is the continued disciplined progression of our emerging Texas Delaware oil fleet with a planned four-well appraisal plan later in the year.\nI'm excited about the restart of a more steady activity level in both Permian and Oklahoma and the strong economics associated with these opportunities.\nWe are not allocating any production growth capital in 2022 and expect our total company oil and oil equivalent production to be flat with the 2021 full year averages.\nYet, while we aren't growing absolute production levels, the 8% reduction to our share count we've already achieved is driving significant growth to our production per share cash flow per share and free cash flow per share.\nMetrics we believe are highly correlated with shareholder volume.\nWhile we expect our full year 2022 average production for both oil and oil equivalent to be flat versus the prior year.\nThere will be some natural variability from one quarter to the next, largely a result of well timing that is typical for our short-cycle business.\nFor any given quarter, it is reasonable to expect a plus or minus 5% variance around the midpoint of our full year production guidance.\nNot similar from what you saw from us in 2021.\nOur focus will remain on maximizing our capital efficiency and free cash flow generation sustainably over time, not the production output of any single quarter in isolation.\nFor first quarter 2022 due to the timing of our wells to sales and some typical winter weather downtime, we expect our total company oil production to be at the lower end of our annual guidance range at around 168,000 barrels of oil per day for improving into the second quarter.\nRegarding our capital spending profile, our full year capital will be slightly weighted to the first half of the year with approximately $350 million of capex expected during 1Q '21.\nI want to make clear that should commodity prices continue to surprise to the upside, we will remain disciplined and have no plans to allocate production growth capital.\nWith a balanced exposure to oil, natural gas and NGLs, our company retains significant leverage to commodity price upside with a $1 per barrel increase in oil price, translating to around $60 million incremental free cash flow.\nWe believe preserving this upside is important for our investors.\nThe resilience of our 2022 program is underscored by a free cash flow breakeven well below $35 per barrel WTI, assuming conservative gas and NGL prices.\nA hedge book that preserves our upside commodity exposure and an advantaged U.S. cash tax position with no U.S. federal cash income taxes expected until the second half of the decade.\nAs I've stated before, strong ESG performance is foundational to our framework for success and our long-term value proposition in the marketplace.\nWe believe that we have a clear and much-needed role to play in the longer-term energy landscape.\nOil and gas are essential to a thoughtful and orderly transition to a lower carbon future and to protect the standard of living we have all come to enjoy and to which others around the world strive to attain.\nAccess to responsible, reliable and affordable energy is the great social equalizer and is the foundation upon which the world's modern economy is built.\nWe must take on the dual challenge of meeting the world's growing energy needs while also prioritizing all elements of our ESG performance, including efforts to address climate change.\nThis is not an either/or proposition and failure on either front is not acceptable.\nHowever, our approach must be pragmatic and grounded in the free market, innovation and an all-of-the-above energy approach.\nWe are unfortunately experiencing firsthand the impacts of misguided energy policy and the dramatic role it can play on energy affordability, as well as geopolitical stability.\nSlide 16 provides a comprehensive progress report across each of the elements of ESG.\nWhen viewed in totality, the progress our company has made is not only compelling, but is a point of pride for our entire organization.\nFor us, it always starts with safety.\nI'm, therefore, especially proud that we delivered our second best safety performance in our company's history in 2021 as measured by total recordable incident rate for employees and contractors.\nWe realized significant progress against our core environmental objectives, achieving our GHG intensity reduction target of at least 30% relative to our 2019 baseline and improving our total company gas capture to 98.8% for the full year.\nDuring the third and fourth quarters of 2021, we achieved a gas capture of approximately 99%, and we expect to perform at or above this level in 2022 and beyond.\nAs we previously announced, we've also recently introduced new quantitative goals for the near, medium and the long term horizon across our core environmental focus areas: GHG intensity, methane intensity and gas capture.\nThese goals complement our existing 2025 GHG intensity reduction objective of 50% versus our 2019 baseline.\nThey represent a pragmatic road map to realizing significant improvement in our environmental performance through the end of this decade, driving significant GHG intensity reductions consistent with the trajectory called for by the Paris Climate Agreement.\nOur environmental objectives will promote transparency and accountability, while enhancing the internal alignment and innovation that will be necessary to deliver such strong performance.\nImportantly, our 2030 GHG and methane intensity objectives represent industry-leading improvement and will contribute to absolute performance that is competitive with the very best oil and gas producers globally.\nMoving from environmental to our social accomplishments, we invested thoughtfully and strategically in our local areas of operations to build healthier, safer and stronger communities in alignment with core UN sustainable development objectives.\nOn governance, we believe we have taken a leadership role in aligning executive compensation with the most important drivers of shareholder value.\nI've covered the comprehensive changes we made for the 2021 compensation cycle previously, including quantum reductions and redesign short-term and long-term incentive programs.\nSo I won't revisit all of those details today.\nHowever, I will remind everyone that we've eliminated production metrics from all scorecards and have included unique free cash flow performance stock units and our executive long-term incentive design.\nFinally, we have also taken a leadership role in ensuring strong board of directors' oversight, refreshment, independence and diversity, highlighted by the addition of two new directors and the appointment of a new lead director in 2021.\nBefore we move to our question-and-answer session, I want to wrap up with the compelling investment case for Marathon Oil.\nWe fully recognize that investors have options, so why MRO.\nFirst, we have instituted a transparent capital framework that uniquely prioritizes our shareholders as the first call on cash flow generation.\nOur shareholder-friendly framework is complemented by a track record of delivery.\nAnd it is my expectation that we will lead our pure space in returning capital to shareholders in 2022.\nSecond, we are committed to capital discipline.\nIf commodity prices continue to outperform, we won't introduce production growth capital into our budget.\nWe will remain focused on free cash flow generation and return of capital.\nWhen it comes to growth, our focus is not on growing production.\nIt's on growing the per share metrics that matter most and $1 billion of buybacks in just the last four and a half months, driving 8% underlying per share growth is a strong statement of our commitment.\nThird, due to our balanced production mix, low corporate free cash flow breakeven, attractive hedge book and advantaged U.S. federal cash income tax position, our company retains differentiated upside leverage to commodity outperformance, and we will protect this upside for our investors.\nAnd finally, we believe the peer-leading financial and operating results we are delivering today are sustainable, underpinned by over a decade of high-quality, high-return inventory by our five- and 10-year benchmark maintenance scenarios and by our commitment to comprehensive longer-term ESG excellence.\nWith that, we can open up the line for Q&A.\n",
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"content": "2022 capital budget of $1.2 billion.\nhas no material debt maturities due in 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: Joining me on the call today are Nish Vartanian, Chairman, President and CEO; and Ken Krause, Senior Vice President, CFO and Treasurer.\nThese risks, uncertainties and other factors are detailed in our Form 10-K filings with the SEC.\nAs you've seen, we've accomplished a lot in the second quarter.\nMost importantly, we closed the acquisition of Bacharach on July 1, which I'll discuss after a brief overview of the quarter.\nWe had a pretty good quarter.\nOur revenue returned to growth, up 5% from a year ago.\nCore product revenue was up 12%.\nMargins are on track as we effectively manage through inflation we see in our supply chain.\nI mentioned on the April call that we were optimistic that the worst was behind us from a demand perspective.\nI'm glad to reiterate that sentiment today.\nNot only did revenue come in a bit higher than our expectations, our order book continued to strengthen throughout the quarter and drove significant increase in backlog.\nOur fire service business remains strong, and we're seeing improved demand for gas detection and industrial products.\nOverall, our U.S. business continues to lead the recovery.\nEurope is starting to recover as the vaccine situation improves.\nLike everyone, we continue to manage through supply chain issues, which is a dynamic situation that requires daily attention.\nOur most challenging areas are electronic components used in our SCBA and gas detection products.\nOur level of revenue indicates we've done a good job of managing through these issues.\nStill, we did have pockets of production starts and stops and extended lead times that contributed to our backlog bill.\nBut even with those challenges, I remain very confident in our ability to enhance our market positions as business conditions improve.\nKen will provide more color on the quarter.\nI'd like to now provide more insight into three areas that support my confidence in the long-term future of MSA as the leader in advanced safety technology.\nFirst, we continue to launch safety technologies that solve our customers' toughest safety challenges, and I'll talk about those in a moment.\nSecond, our continuous improvement culture is driving efficiencies for our organization.\nThe strong execution of our international margin expansion road map is one example.\nAnd third, we're using our balance sheet to make strategic acquisitions and investments that strengthen our leadership positions in key markets.\nWe recently closed the acquisition of Bacharach and the integration of our two organizations is off to a strong start.\nStarting with the first area, our innovation engine and R&D pipeline.\nWe're bringing innovation to the fire service market in the form of connected technologies.\nWe officially launched LUNAR this spring, and our Q2 results include about $1 million of revenue related to product sales.\nLUNAR, for those of you who haven't seen or read about it, is a handheld device that uses cloud technology to deliver fire scene management capabilities for incident commanders.\nThe feedback we're getting from early adopters provides encouragement that we've hit the mark with this new technology.\nWe're also using our strong balance sheet to invest in other forward-thinking organizations who share similar mission to protect firefighters.\nWe established this partnership to improve firefighter safety and enhance their capabilities when it comes to fire seeing situational awareness and decision making.\nFotokite is the brand name for a tethered drone system that gives incident commanders a bird's eye perspective of a fire scene without requiring a pilot.\nThis collaboration is an exciting venture for us because it represents a new avenue to advance the MSA mission through revolutionary technology for firefighters.\nThe second area I want to highlight is our culture of continuous improvement and our margin expansion progress in the international business segment.\nOur entire international team continues to execute a playbook focused on three areas; driving growth in select markets, optimizing our channels approach and delivering operational efficiencies.\nWe've been executing this playbook for three years now, and it's encouraging to see the margin improvement as revenue starts to recover from the pandemic.\nIn the second quarter, the International segment operating margin rose 70 basis points to 16.5%.\nAnd looking back to Q2 of 2019, segment margin is up more than 350 basis points.\nWith the pipeline of programs we have in place, we remain confident in our ability to continue driving margin expansion in international.\nThe third area I want to highlight is how we use our balance sheet to make acquisitions that strengthen our leadership position in key markets.\nOn July 1, we closed the acquisition of Bacharach.\nBacharach is a leader in gas detection technologies, which is used in the HVAC refrigeration markets.\nWith annual revenue of about $70 million, it's headquartered here in Pittsburgh, not far from our gas detection center of excellence, where we've recently made significant investments.\nBacharach aligns well with our product and manufacturing expertise.\nMoreover, it provides a strong brand and access to attractive end markets that build further diversification in our gas detection business.\nFrom an integration perspective, we'll be focused broadly on growing the business and reducing complexity.\nI'm very confident in our team's ability to capture value from the acquisition while strengthening the brands at both Bacharach and MSA.\nFrom a balance sheet perspective, our leverage remains healthy.\nIf we add Bacharach into our quarter end net leverage, the pro forma would be about 1.7 times net.\nSo we're well positioned to continue investing in our business.\nOne additional topic I'd like to mention is our approach to ESG.\nSocial responsibility is not new to MSA.\nFor 17 years, we've been dedicated to helping protect the world's workers.\nSo we help our customers achieve their own ESG goals by enhancing workplace safety.\nBut we also focus internally on ESG objectives that help us to build greater resiliency and adaptability into our overall business model to safeguard the value that we've created.\nIt's become clear to me that our investments in worker safety, talent, environmental sustainability, supply chain resiliency and various risk mitigation programs all help to create a better business model.\nAnd I believe that companies who do these things effectively will be the ones to prosper and be fit for the future.\nWe're prioritizing areas specific to our strategy.\nFor example, we know that attracting and retaining a quality workforce through broad talent pipelines is not just the top business challenge for any organization today, but particularly for manufacturing companies.\nFor that reason, we invest a lot of time and resources into talent development and retention.\nAnd for the first time, MSA was recently recognized by Forbes as one of the best employers for diversity in 2021.\nThis recognition was based on a survey of more than 50,000 employees around the country.\nWe were also ranked number 16 on the Forbes Best Midsize Employers list, and we were number one for engineering and manufacturing industry category.\nSo it's encouraging to see further recognition of our efforts to create a top workplace.\nSo to summarize, there are three areas that give me confidence in MSA's future.\nOur innovation engine is very strong, and it continues to power new and exciting developments in safety technology.\nOur continuous improvement culture across all areas of our business is yielding strong results, especially in the International segment and we're effectively using our balance sheet to grow and strengthen our business.\nI'll start the discussion with financial highlights centered on revenue, profitability and cash flow.\nWe returned to revenue growth in the second quarter with total sales up 5% in constant currency.\nI'm pleased that our Q2 order pace tracked well above 2020 and increased high single digits from 2019.\nBoth fire service and industrial-related products are contributing to the stronger order book.\nThat momentum provides confidence around demand for our products as we look at the coming quarters.\nSecond, our operating margin of 17.2% showed a nice sequential uptick from Q1 despite $4 million of higher stock compensation expense related to our recently announced acquisition and its expected revenue and profitability contributions over the coming years.\nThe expenses, noncash and negatively impacted operating margin by approximately 130 basis points in the quarter.\nAnd third, our cash flow performance was healthy.\nReceivable performance was excellent on the increase in revenue, and our inventory levels position us to deliver a stronger second half compared to the first half.\nWe completed the Bacharach acquisition earlier this month for $337 million with an after-tax cost of debt of less than 2%.\nAnd as Nish had indicated, our balance sheet is strong, and we are positioned very well to invest in our business.\nNow let's take a closer look at the financial results in the second quarter.\nI'll start with a focus on revenue.\nQuarterly revenue was up 9%, reaching $341 million.\nRevenue was up 5% on a constant currency basis.\nWhile we saw about a 2.5% benefit associated with the addition of Bristol, our APR business presented a 5% headwind on a year-over-year basis.\nIn constant currency, revenue in the Americas was up 6%, while international revenues were up 3%.\nThe international performance reflects a lag in vaccine deployment and economic recovery, which is tracking a few months behind the U.S. Core product revenue was up 12% on growth across fire service and industrial PPE, partially offsetting a lower FGFD business.\nThe strong core recovery was partially offset by a difficult comparison in air purifying respirators.\nLooking at industrial PPE, it's great to see the strong growth rates in these areas, upwards of 20% or 30% compared to 2020.\nIt was also good to see head protection sales back at 2019 levels in the second quarter.\nTouching on fire service, backlog remains very healthy, and we're excited about the recent product launches for LUNAR and connected firefighter.\nThe mission-critical nature of our products and our strategic investments provide a healthy outlook for the global fire service business.\nI should note that the SCBA revenues came in ahead of 2019 levels.\nOur FGFD business declined 4% compared to last year on challenging comps in the Middle East.\nHowever, we continue to see incoming business strengthen through the second quarter.\nIn June, we booked one of the largest FGFD orders in our history.\nOur FGFD backlog is back to pre-pandemic levels heading into the second half.\nFor MSA overall, quarterly incoming orders surpassed 2019 levels.\nAt the same time, supply chain constraints with electronic components are presenting challenges to our ability to deliver in certain areas.\nThis has resulted in backlog increasing 15% from the end of Q1, particularly in gas detection products.\nWhile it's difficult to predict how long the supply chain challenges will last, we expect the constraints around electronic components will persist into the second half.\nGross profit was relatively consistent compared to last year.\nPricing and stronger throughput in our factories offset higher material costs.\nDespite a number of headwinds in margins associated with input costs, gross margins were roughly in line with prior year levels.\nWe have implemented an off-cycle price increase to respond to the inflation that we are seeing in the U.S. across electronic components, resins and other inputs.\nWe will continue to evaluate additional pricing opportunities through the second half as we navigate these inflationary pressures.\nSG&A expenses was -- were $83 million or 24.4% of sales and was up $12 million from a year ago in constant currency.\nAs I had indicated on the April call, we expected a difficult SG&A comp in the second quarter because of the variable comp resets at the onset of the pandemic.\nThis trend played out as expected and impacted the quarterly comparison in SG&A by about $3 million.\nQuarterly SG&A also includes about $8 million of costs related to Bacharach and and Bristol acquisitions, including the stock compensation of about $4 million adjustment that I spoke about previously.\nBacharach transaction costs of about $2 million and the remainder being the Bristol base SG&A.\nOur cost savings from restructuring programs effectively offset discretionary costs coming back into the business.\nWe continue to control the controllables and bring costs back into the business at a slower pace than revenue improvements.\nWe expect SG&A to approximate 23.5% of sales for the second half of 2021.\nWe invested $7 million in restructuring programs in the quarter, primarily in our International segment as we continue to execute on our margin expansion road map.\nOur restructuring actions have produced excellent results to date and position us well for the economic recovery.\nTogether with the programs we had discussed in 2020, we continue to expect to deliver approximately $15 million of savings across the income statement in 2021 and annual savings of $25 million thereafter.\nOur quarterly adjusted operating margin was down 150 basis points from a year ago.\nThe decline reflects the impact of the Bristol noncash stock compensation adjustment I mentioned earlier, which is booked in our corporate segment.\nLooking at our segment performance.\nInternational margins were up 70 basis points to 16.5% of sales.\nOur cost reductions and pricing programs remain very much on track.\nIt's great to see the return to margin expansion for the segment as the volume starts to improve.\nAmerica margins were down 140 basis points to 22.6% of sales.\nVariable compensation resets associated with the improved revenue performance drove 140 basis point decline in the quarter.\nAnd we continue to navigate the inflationary pressures and are assessing additional levers that will help mitigate these pressures in future quarters.\nOur quarterly tax rate was 27.8% on a GAAP basis or 27.4% on an adjusted basis.\nThere were two discrete items that drove the quarterly rate up.\nFirst, the statutory tax rate increase in the U.K. from 19% to 25% drove a onetime adjustment to our deferred taxes.\nSecond, we incurred higher nondeductible expenses associated with the acquisition of Bacharach.\nFrom a cash flow and capital allocation perspective, quarterly free cash flow conversion was more than 100% of net income.\nWhile overall working capital performance was strong on improvements in receivables, we did build some inventory in the quarter, which aligns with our backlog build as well as managing supply chain risks.\nOur strong balance sheet positions us well to gain share as the market rebounds.\nWe continue to execute on a balanced capital allocation strategy.\nIn the second quarter, we paid down $25 million of debt, funded $17 million of dividends to shareholders and invested $11 million in capex programs.\nSince we completed the Bacharach acquisition on July 1, its impact is not yet reflected on our balance sheet.\nOn a pro forma basis, following the acquisition, net debt-to-EBITDA would be 1.7 times compared to 0.6 times at June 30.\nWe continue to expect Bacharach to provide $0.10 to $0.15 of adjusted earnings per share in the second half of 2021.\nIn line with our existing methodology, adjusted earnings will exclude purchase accounting amortization.\nIn connection with the acquisition, we funded $200 million of 15-year senior notes with a fixed interest rate of 2.69%.\nThe remainder of the transaction was funded with our revolving credit facility, which we amended and extended in May to provide greater borrowing capacity and flexibility.\nWe also included a sustainability-linked pricing structure on our revolver.\nOur borrowing cost flexes up or down based on our performance on certain ESG metrics.\nWith the pro forma debt for Bacharach, we'd expect interest expense to be in the range of $3.5 million to $4 million in Q3 and Q4 of this year.\nWe also completed a buyout of our minority partner in our China business for about $19 million in July.\nChina is a key market for us, and it's an important part of our growth strategy moving forward.\nChina has consistently been accretive to MSA's growth over time.\nAs a result, we continue to invest in this business, and this buyout represents a key strategic milestone for us.\nWe funded the investment with local cash balances.\nAnd as part of this deal, we expect to repatriate between $10 million to $15 million of cash back to the U.S. in the third quarter.\nThe transaction provides full ownership of our business in a highly strategic market as well as helping us optimize foreign cash balances.\nBefore we move on, let's touch on the adjustment to the product liability reserve, which drove $12 million of expense in the quarter.\nWe increased our product liability reserve as a result of an increase in the number of asserted cumulative trauma claims pending against our subsidiary, MSA LLC\nWe continue to monitor development and filing rates.\nWe plan to conduct our annual review process later this year, where we will evaluate many factors, including the potential developments in filing trends.\nAs we look ahead, we're operating in a very dynamic environment.\nWhile the strong rebound in order pace in the second quarter and elevated backlog provide a sense of optimism heading into the second half, the supply chain challenges we are facing are having an impact.\nFrom where we operate today, the supply chain constraints are the largest variable for us.\nRaw material availability as well as the cost of those inputs can be difficult to predict.\nWe're closely monitoring the situation, and we're laser-focused on executing initiatives to mitigate the impact of this on our business, both on the top line and our margin profile.\nOur market positions have never been stronger, and we continue to invest in growth programs and acquisitions that support our position as the safety technology leader.\nWe've taken a number of steps through this recession to position ourselves for strong performance upon the recovery.\nThe Bristol and Bacharach acquisitions, significant cost takeout programs, midyear pricing actions and expanding our borrowing capacity at historically low rates are just a few examples.\nI remain very confident that these actions will benefit our shareholders and stakeholders as conditions continue to improve.\nThe return to revenue growth and improving order book positions us well for the future in the second half of 2021.\nMy level of optimism about demand is higher today and has been since the onset of the pandemic.\nIn the coming months, we'll remain focused on acquisition integration, evaluating additional pricing opportunities, navigating supply chain constraints and improving our leadership positions across core markets and geographies.\nAt this time, Ken and I will be glad to take any questions you may have.\nPlease remember, MSA does not give guidance.\n",
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"content": "q2 revenue $341 million versus refinitiv ibes estimate of $329.2 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 Nish Vartanian, Chairman, President and CEO; and Ken Krause, Senior Vice President, CFO and Treasurer.\nThese risks, uncertainties and other factors are detailed in our Form 10-K filings with the SEC.\nI appreciate your interest in MSA.\nI'm tremendously proud of the efforts of our team, which stayed focused on our mission, our people, our customers and communities.\nI've often said, our greatest asset is our employee engagement and commitment to our mission of protecting workers' lives.\nAnd I've never had greater appreciation for what our company contributes to society each and every day.\nWe finished a challenging year with a very strong fourth quarter realizing record high revenue of $388 million and double-digit improvements in free cash flow.\nFrom a full-year perspective, our revenue declined 3%.\nStrength in our fire service market and air purifying respirators was offset by weakness in industrial products.\nBut there is no question that diversification of our product provided support through the downturn.\nDespite the revenue challenges in certain areas, our annual adjusted operating margin reached 18%, that's up 10 basis points from a year ago.\nWe've talked about our long-term aspiration to get our operating margins into the 20% range over the coming years.\nOur performance in this challenging environment provides me with a great deal of optimism for the future.\nWith that in mind, there were three key areas I'd like to discuss today that support my confidence.\nFirst, MSA's innovation engine is stronger than ever.\nWe're launching safety technologies that solve our customers' toughest safety challenges.\nSecond, our continuous improvement culture across all areas of our business is yielding strong results, especially in the International segment.\nThird, we're committed to using our balance sheet to make strategic acquisitions that strengthen our leadership positions in key markets.\nStarting with the first area, MSA's innovation engine and R&D pipeline.\nThe accomplishments of our founders back in 1914 reflects what happens every day in MSA's product development labs around the world.\nAt the turn of the century, they partnered with Thomas Edison to develop a battery-powered miners' cap lamp.\nThis electric lamp helped reduce mining fatalities by 75% over the next 25 years.\nThat same passion for innovation exist throughout MSA today, so we continue to invest in new product development to drive organic growth.\nWe do this to provide our customers with leading safety technologies that solve complex challenges.\nIn 2020, we invested nearly $70 million in R&D to bring the most advanced safety solutions to our global customer base.\nOne example is our new Advantage 290 reusable respirator.\nThe Advantage 290 is the first government-approved reusable respirator designed without an exhalation valve.\nIt filters both inhale and exhale breath that gives health-care workers increased flexibility, adding yet another option to the available supply of respiratory protection.\nAnd it can be stored for long periods of time.\nThe work we're doing in the fire service is another great example.\nThe MSA Connected Firefighter platform includes the breakthrough G1 or M1 SCBA as well as our soon-to-be-launched LUNAR system.\nLUNAR is a handheld device that uses cloud technology to deliver breakthrough fire scene management capabilities for incident commanders.\nIt also uses real-time direction in distance data to help search and rescue teams locate a separated firefighter and it's a personal thermal imaging camera.\nWhile system-oriented products like LUNAR can have a longer adoption period, we continue to be very excited about the future possibilities that this technology has to offer on a global scale.\nQuite simply, our goal is to protect firefighters from head to toe, the same passion for innovation that led to the G1 to M1 in our LUNAR system is being applied to firefighter software solutions, helmets, turnout gear and boots.\nAt the end of the day, it comes down to this.\nWe understand our customers at a deep level.\nWe listen, watch and learn from them.\nWith this knowledge, we use the latest technology to keep them safe, solve their problems and simplify their day.\nLooking beyond the fire service, I'm also encouraged by the trends associated with our safety mission, a mission I believe is more relevant than ever.\nAs an example, in one of his first acts in office, President Biden signed an executive order calling on OSHA issue guidelines related to COVID-19 in the workplace.\nIt's reflective where COVID is bringing safety to the forefront of the national discussion.\nAn example is our International segment.\nOur entire international team continues to execute a playbook focused on three areas: driving growth in select markets, optimizing our channel's approach and delivering efficiencies.\nWe've been executing on this international playbook for three years now, and it's encouraging to see the continued margin improvement.\nAs an example, our long-term goal was to improve operating margin in the International segment by 500 basis points over 2017.\nIn 2020, the International segment operating margin rose to 15%.\nThis is a 270-basis-point improvement compared to 2019 despite the 3% revenue decline.\nAnd to-date, we've achieved 400 basis points of segment margin expansion.\nWith the pipeline of programs we have in place, we're very confident in our ability to surpass our original goal over time.\nAnd that leads me to the third area I want to discuss today, which is our balance sheet to make strategic acquisitions that strengthen our leadership position in key markets.\nIn January of this year, we closed the acquisition of Bristol Uniforms.\nBristol is the UK leader for firefighter turnout gear.\nAnd so, Bristol enhances our position as a global leader in fire service PPE.\nThis acquisition builds on our 2017 North American turnout gear leader Globe, so it's a great fit strategically and culturally.\nIt also expands our footprint in a defensive area of our portfolio.\nOur fire service business increased 10% in the fourth quarter of 2020, even in the face of the pandemic.\nSo to summarize, there are three key areas that give me confidence in MSA's future.\nFirst, MSA's innovation engine is stronger than ever.\nSecond, our continuous improvement culture across all areas of our business is yielding strong results, especially in the International segment.\nAnd third, we're effectively using our balance sheet to make strategic acquisitions that strengthen our leadership positions in key markets.\nOur integration plan for Bristol is well under way and we continue to move forward with an M&A pipeline focused on evaluating assets that align with our safety mission.\nFirst, looking at overall growth, I was very pleased to see the team execute well and deliver record revenue for the fourth quarter despite the challenges we all face throughout the year.\nSecond, our profitability was strong as adjusted operating margin expanded by 10 basis points.\nThis equates to a 14% decremental operating margin.\nWe delivered on our goal to manage decremental margins at a lower rate than our incremental margins, improving overall operating margins to 18% on lower revenue volume is another step in the right direction for reaching our long-term margin aspirations.\nAnd third, we generated more than $200 million of operating cash flow in 2020 or 25% higher than a year ago.\nThrough the downturn, we've continued to execute a balanced capital allocation strategy focused on growing our business and returning value to our shareholders.\nWe invested $49 million in capex projects.\nWe paid down $44 million of debt.\nWe funded $67 million in dividends to our shareholders and deployed $20 million for share repurchases.\nAnd just last month, we deployed approximately $60 million for the acquisition of Bristol Uniforms.\nOur net leverage continues to track below 1 times as we enter 2021.\nSo although 2020 was a year unlike any other, our growth, profitability and cash flow demonstrated the resilience of our business model and the disciplined execution of our teams around the world.\nNow let's take a closer look at the financial results in the quarter.\nLet's start with the focus on growth.\nQuarterly revenue was a record high of $388 million, growing over 3% from a year ago or 2% in constant currency.\nFrom a geographic perspective, revenue increased 5% in the Americas segment and decreased 2% in the International segment in constant currency.\nAs I had indicated on the October call, we entered the third quarter with a large backlog in SCBA and air purifying respirators.\nWe started to see a recovery in our business, especially in the fire service, in the latter part of Q3 that carried into Q4.\nOrder activity was healthy to finish the year and we exited the quarter with a very healthy book-to-bill ratio and an overall backlog that was consistent with the end of Q3 despite the record invoicing.\nThe fire service market was a key driver of results in the fourth quarter on strong SCBA growth.\nWe continue to convert competitive SCBA accounts in the US and had good order flow in key geographies around the world, including Germany, China and Latin America.\nWhile we've had production constraints at Globe due to COVID, we continue to focus on driving operational improvements, and it's great to see continued wins with key pillar cities in the United States.\nFirefighter safety is a resilient business and has performed well through various business cycles.\nWe continue to extend the breadth and depth of our market position in fire service through organic and/or inorganic investments like the upcoming launch of LUNAR and the recent acquisition of Bristol.\nShifting gears to the employment-based industrial PPE products, which were down 4% year-over-year after declining by 25% in the third quarter.\nWhile we are most likely not out of the woods just yet, it was good to see such sequential growth versus the third quarter.\nOur FGFD business was down 7% in the quarter on tough comparisons in both the Americas and International segments.\nFor the full year, we had a 2% decline in FGFD, reflecting the support from that recurring revenue streams in the product line that we've discussed with you previously.\nWith that said, while we have seen a recent uptick in oil prices, which could provide some support for projects going forward, we have a challenging comparison to start the first quarter of 2021.\nRevenues from air purifying respirator lines increased 32% from a year ago.\nAs expected, we have largely delivered on our backlog from the pandemic surge of 2020 and we are well prepared to pursue new opportunities with healthcare and government end markets.\nIn the near-term, we are planning for a difficult comparison in the first quarter of 2021.\nIf you recall, our Q1 results a year ago included approximately $10 million of incremental revenue from APR at the onset of the pandemic.\nThe landscape continues to evolve as stimulus packages are allocated to enhance PPE supply for workers in a range of industries and we stand ready to help and fulfill our mission of protecting workers' life and health.\nTurning to profitability and earnings.\nGross profit declined 350 basis points from a year ago as we incurred about $11 million of higher costs in the quarter.\n$5 million of these costs were associated with lower throughput in certain factories and $6 million is primarily associated with inventory-related charges, which we don't expect to continue into 2021.\nTo a much lesser degree, the less favorable revenue mix was a headwind to margins.\nThese items had the most significant impact on our Americas segment margin in the quarter and for the full year.\nSG&A expense of $76 million was down 10% from a year ago.\nWe delivered $6 million to $8 million of savings from previously executed restructuring programs and discretionary cost savings in the quarter associated with reduced travel, controlled hiring, professional services and other costs, and $3 million of savings from variable compensation on a year-over-year basis.\nSimilar to past cycles, we invested in restructuring programs throughout 2020 to improve our margin profile in the downturn and to position MSA for strong incremental margins during the recovery.\nWe incurred $9 million of quarterly restructuring expense to accrue for cost reduction programs related to footprint rationalization and business model optimization, primarily in the International segment where operating margin is up 270 basis points for the year.\nTogether with the programs we've discussed throughout 2020, we expect to deliver approximately $15 million of savings across the income statement in 2021 and annual savings of $20 million thereafter.\nThese savings will partially offset the impact of variable compensation resets and other discretionary costs coming back into the P&L in 2021.\nQuarterly adjusted operating margin was flat with the prior year at 17.3% as the cost discipline and SG&A was offset by the gross profit headwinds.\nInternational margins were up 320 basis points and were 17.5% in the quarter, which very much reflects the results the team are driving in pricing and cost reduction initiatives.\nAmericas' margins were down 260 basis points and were 20.8%.\nThe $11 million of higher cost in gross profit that I mentioned a moment ago was incurred primarily in the Americas segment.\nPricing is holding up well and we expect improvements in this segment margin going forward.\nJust stepping back and looking at margins over the long-term, it is good to see improvements each and every year in operating margins since 2015, despite some challenging economic cycles along the way.\nFrom a cash flow and capital allocation perspective, quarterly free cash flow conversion was well north of 100%.\nWe saw strong performance across working capital, which declined 320 basis points as a percentage of sales.\nAs I had indicated on the October call, we were planning for our improvement in the inventory balance through year-end.\nOur strong balance sheet and inventory position at the end of the third quarter enabled us to deliver record high revenue in the fourth quarter.\nWe continue to focus on improving our performance in AR and AP and are seeing very strong results on that front as well.\nConsistent with past years, we completed our annual cumulative trauma evaluation in the fourth quarter.\nAs part of that review, we reflected changes in underlying assumptions in our model that increase our product liability reserve and resulted in a pre-tax charge of $34 million, net of insurance recoveries on the income statement.\nWhile the timing of cash flows for product liability and insurance receivable vary from quarter to quarter in MSA LLC, we've been successful in establishing cash flow streams that have allowed us to fund these liabilities without a material impact on our capital allocation priorities.\nFor example, over the past five years, our average cash conversion has exceeded 100% of net income both with and without the impact of product liability and insurance receivables.\nWe continue to focus on growth as our primary capital allocation priority, most recently completing the acquisition of Bristol Uniforms in January.\nWe're excited about the opportunity to build our position in turnout gear and expand MSA's addressable market globally.\nWe're also well positioned to realize a range of synergies from the transaction over the coming years.\nFrom a financial standpoint, the acquisition provides attractive returns and aligns with the criteria we've shared in the past.\nWhile we are in the midst of finalizing our purchase accounting for the acquisition, we expect earnings accretion in the first year of ownership, excluding acquisition-related amortization of about $0.03 to $0.05 per share.\nWith the closing date of January 25, we will recognize just over two months of Bristol results in our first quarter 2021 financial statements within our International business segment.\nThe acquisition does not have a material impact on our leverage.\nSo we remain very active in pursuing opportunities as well as funding organic R&D and capex projects that drive long-term growth for MSA.\nAs we turn the page to 2021, we're operating in a very dynamic environment.\nThere is a number of evolving macro level factors that will have an impact on our revenue outlook in 2021.\nThese factors include, among other things, the effectiveness of the vaccine rollout, risk of additional COVID lock-downs, the pace of economic recovery as well as the potential for government stimulus.\nWhile the outcome is certainly hard to predict, the steps we are taking to improve our business model positions us to emerge as a much stronger company as macro conditions improve.\nOur investments in organic and inorganic growth programs are driving an improved market position and that will be beneficial helping us return to growth as we see conditions improve.\nAgain, our ability to deliver revenue growth in 2021 is very much influenced by a range of external factors.\nAs a result, we are approaching the first half cautiously and are positioned for a stronger second half of 2021 as compared to the first half.\nWith that said, we remain committed to executing our strategy and advancing our mission, which has never been any more important.\nWe remain confident in our ability to maintain and grow our market share positions, improve our margin profile and drive strong cash flow performance.\nThe team delivered a strong Q4 with record revenue and strong working capital improvement.\nThroughout the year, we funded the R&D portfolio and strategic capex projects.\nWe also executed on restructuring programs to make sustainable improvements in our business model.\nAnd most recently, we completed an acquisition that positions us as a global leader in firefighter turnout gear.\nTo wrap up, I'm very confident that MSA is well positioned to advance our mission and create value for all -- all of our stakeholders.\nAt this time, Ken and I will be glad to take any questions you may have.\nPlease remember that MSA does not give guidance.\n",
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"content": "qtrly revenue was $388 million, increasing 3 percent from a year ago on a reported basis.\n",
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