Datasets:

---

nyamuda

/

ECTSum

like 0

We earned $1.54 per diluted share versus $1.35 in the year-ago period on revenues of $2.3 billion with operating income margins of 5.1%. We had strong revenue growth in Mechanical Construction segment, up 8.4%. We had strong growth in our U.S. Building Services segment, up 10.3% and had strong growth in our U.K. Building Services segment, up 12.8%. And as expected, we had a significant decline in revenues of over 35.3% in our Industrial Services segment, which was impacted not only by industry conditions but also the Texas Freeze, which in many cases, pushed out our turnaround schedule into the second quarter of 2021. We also had a TRIR or a recordable incident rate of under one at 0.92, which was exceptional performance and again, shows our focus on safety and well-being throughout the pandemic, but really that's everyday at EMCOR because it's one of our core values. At 8.8% in our Electrical Construction segment and 7.2% in our Mechanical construction segment, these operating income margins show that we are earning very good conversion on the work that we win, and we are executing well on our contracts, which are largely fixed-price contracts. Our U.S. Building Services team had an exceptional quarter, earning 5% operating income margins on 10.3% revenue growth. At 7.4% operating income margins and revenue growth of 4.5% without the impact of foreign exchange, we are doing very well. We leave the quarter with increased remaining performance obligations or RPOs at $4.77 billion, up from $4.59 billion at year-end 2020, an increase from the year ago level of $4.42 billion. Consolidated revenues of $2.3 billion are up a modest $4.2 million or 20 basis points over quarter one 2020. Our first quarter results include $29.1 million of revenues attributable to businesses acquired pertaining to the period of time that such businesses were not owned by EMCOR in last year's first quarter. Excluding the impact of businesses acquired, first quarter consolidated revenues declined $24.8 million or 1.1% organically. United States Electrical Construction quarter one revenues of $456.2 million decreased $5.6 million or 1.2% from 2020's comparable quarter. Excluding acquisition revenues of $6.5 million, this segment's revenues declined 2.6% organically as revenue reductions within the manufacturing and transportation market sectors were only partially offset by increased project activities within the commercial and institutional market sectors. United States Mechanical Construction revenues of $903.9 million increased $69.8 million or 8.4% from quarter one of 2020. EMCOR's total domestic construction business first quarter revenues of $1.36 billion increased $64.2 million or 5% and reflects a strong start to the year. United States Building Services record quarterly revenues of $581.8 million increased $54.2 million or 10.3%. Excluding acquisition revenue contribution of $22.6 million, this segment's revenues increased to $31.6 million or 6% organically. United States Industrial Services revenues of $235.4 million decreased $128.5 million or 35.3% as this segment continues to be impacted by the negative macroeconomic conditions and uncertainty within the markets in which it operates. United Kingdom Building Services segment revenues of $126.7 million increased $14.3 million or 12.8% due to growth in project activities across the portfolio as customers began to release projects which were previously on hold due to the COVID -- due to COVID-19. This segment's results additionally benefited by $9.5 million as a result of the strengthening of the pound sterling, given the lifting of uncertainty around the terms of the United Kingdom's trade deal with the European Union that became effective on January 1, 2021. Selling, general and administrative expenses of $224.1 million represent 9.7% of first quarter revenues and reflect a decrease of $2.9 million from 2020. SGandA for the first quarter includes approximately $2.4 million of incremental expenses from businesses acquired inclusive of intangible asset amortization expense, resulting in an organic quarter-over-quarter decline in SGandA of $5.4 million. Reported operating income for the quarter of $117 million compares to $106 million in 2020's first quarter and represents an increase of $11 million or 10.4%. Operating margin of 5.1% has expanded by 50 basis points from the prior year's 4.6% operating margin. Our United States Electrical Construction segment's operating income of $40.3 million is consistent with 2020's quarter one performance. Reported operating margin of 8.8% represents a 10 basis point improvement over last year's first quarter as a result of a modest increase in this segment's gross profit margin. First quarter operating income of our U.S. Mechanical Construction segment of $65 million increased nearly $20 million from the comparable 2020 period, and operating margin of 7.2% represents a 180 basis point expansion year-over-year. Our total U.S. construction business is reporting $105.2 million of operating income and a 7.7% operating margin. This performance has improved quarter-over-quarter by $19.7 million or 23.1%. Operating income for our U.S. Building Services segment of $29.3 million is an $8.1 million increase from last year's first quarter, while operating margin of 5% represents a 100 basis point improvement. Our U.S. Industrial Services segment operating loss of $2.4 million represents a decline of $17.9 million when compared to operating income of $15.4 million in last year's first quarter. On a positive note, this segment was able to partially offset these negative headwinds with a nearly 21% reduction in first quarter selling, general and administrative expenses due to certain cost savings initiatives enacted in calendar year 2020. U.K. Building Services operating income of $9.4 million or 7.4% of revenues represents an improvement of $3.6 million and 230 basis points of operating margin expansion over 2020's first quarter. Additionally, operating income for the quarter benefited from approximately $800,000 of favorable foreign exchange rate movement. Quarter one gross profit of $341.1 million represents 14.8% of revenues, which has improved from the comparable 2020 quarter by $8 million and 30 basis points of gross margin. Diluted earnings per common share in the first quarter is $1.54 as compared to $1.35 per diluted share for the prior year period. This $0.19 or 14.1% improvement establishes a new quarter one record for the company and also ties the all-time quarterly diluted earnings per share record, which we previously achieved in quarter four of 2019. Additionally, we repurchased $13 million of our common stock pursuant to our share repurchase program and utilized nearly $32 million of cash and investing activities, including $24 million to fund the two acquisitions that we completed during the first quarter of this year. Net identifiable intangible assets have decreased as a result of approximately $15 million of intangible asset amortization expense, partially offset by the impact of additional intangible assets recognized in connection with the previously referenced 2021 acquisitions. As a result of our consistent outstanding borrowings and the growth in stockholders' equity due to our net income for the quarter, EMCOR's debt-to-capitalization ratio has reduced to 11.5%. I'm going to be on page 11, remaining performance obligations by segment and market sector. As I mentioned earlier, total remaining performance obligations or RPOs at the end of the first quarter were just under $4.8 billion, up $351 million or 7.9% when compared to the year-ago level of $4.4 billion. And RPOs increased $181 million for the first three months of the year from the year-end level of $4.6 billion. Our domestic construction segments experienced strong project growth in the quarter, with the RPOs increasing $219 million or 6.1% since the year-ago period of March 31, 2020. All but $15 million of that is organic growth. The $15 million belongs to a Chicago-based electrical contractor that really focuses on infrastructure that joined us in February. Building Services segment RPOs increased in the quarter $121 million or 22% from the year ago quarter, a portion of which was the August 2020 acquisition of a Washington D.C. full-service mechanical contractor. However, more representative of what we are now experiencing in this segment, RPOs grew $60 million or up 10% from December 31. Those -- that commercial segment, which also includes the retrofit activity and new build, is 44% of total RPOs. For the year-over-year and sequential quarter-over-quarter comparison, commercial RPOs increased $314 million and $216 million, respectively. It jumped over 50, which is expansion territory in February and was over 55 in March. It's up low double digits at 11% from a year-ago period, pretty much right before the full impact of the pandemic. I'm now going to jump to page 12, and I'm going to give you a little updated commentary on these resilient sectors that we talk about. We're in 60%, 70% of those areas now either electrically or mechanically. That's really what it is in 20 megawatts or less. I'm going to finish now on page 13 and 14. In that initial guidance, we gave you about eight -- seven, eight weeks ago, we expected to earn $6.20 to $6.70 in earnings per diluted share. And if you look at that midpoint, that would be another record year, Mark, after how many, 7? And we expected to do that on $9.2 billion to $9.4 billion in revenue. And so with that, we're going to raise the low end of our guidance range to $6.35". That's a $0.15 movement from the $6.20. And we're going to take the top end of the range up about a $0.05 or $6.75 per diluted share. We're doing this across 4,000 projects of size of $250,000 or more. But if you added up all our projects, we're doing this now over about 12,000 projects and service events. We talked about that we were operating near 100% capability. We told you we expected to have organic reduction of around $15 million, $20 million. If this larger infrastructure package of about 50% of the money, give or take, is stuff we could participate in or projects we could potentially participate in, that for the most part is a late '22, early '23, likely late '23, early '24 event for us. And I think let's all recall late 2008, early 2009.

We earned $1.54 per diluted share versus $1.35 in the year-ago period on revenues of $2.3 billion with operating income margins of 5.1%. Diluted earnings per common share in the first quarter is $1.54 as compared to $1.35 per diluted share for the prior year period. And we expected to do that on $9.2 billion to $9.4 billion in revenue. And so with that, we're going to raise the low end of our guidance range to $6.35".

1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 0 0 0 0 0 0 0 0

On a consolidated basis, the company reported net sales of $450 million, adjusted net income of $9 million, and adjusted EBIT of $50 million. And finally, we maintained ample liquidity of $270 million at quarter end and reduce net debt by another $7 million. Since the beginning of this year, Fastmarkets RISI has reported price increases for the US market that totaled $250 per ton in folding carton and cardstock. This includes a $50 per ton increase in October for both grades. The financial impact from this outage to our adjusted EBITDA was $5 million. In North America, we view tissue demand as being approximately 10 million tons with annual demand growth of 1% to 2%, slightly exceeding population growth. We ship 12.3 million cases in the third quarter, a 21% increase from the 10.2 million cases shipped in the second quarter. This was a bit higher than our guidance of 10% to 15% growth, partly driven by the August demand uptick. In the third quarter 2021, our net income was $2 million, diluted net income per share was $0.11, and adjusted net income per share was $0.55. The impact of the Neenah closure activities in the quarter was $5.4 million, which was related to severance and related expenses. Our costs were impacted by $5 million of major maintenance outage expenses, and higher inflation and maintenance expenses. Our sales have converted products in the third quarter were 12.3 million cases representing a unit decline of 15% versus prior year. Our production of converted product in the quarter was 11.4 million cases are down 25% versus the prior year. Please note that we largely exited the away from home tissue segments in the third quarter of this year, which historically represented 3% to 4% of our overall case volume. Slide 10 outlines our capital structure, our liquidity was $270 million at the end of the third quarter. During the third quarter, we reduced net debt by $7 million. We've continued to target the net debt to adjusted EBITDA ratio of 2.5 times, which we expect to achieve by 2023. But that said, our expectation for the fourth quarter is adjusted EBITDA of $48 million to $56 million. Let me walk you through the build up to that range from our third quarter adjusted EBITDA $50 million. Previously announced SBS prices is expected to positively impact us during the quarter by $7 million to $9 million which is helping to offset inflation. Raw material and freight cost inflation is expected to negatively impact us by $7 million to $12 million. There are no planned major maintenance outages, which will benefit us, given the $5 million Q3 outage. We are expected to achieve the full run rate benefit of the Neenah closure, which we previous previously stated as being more than $10 million annualized. If we take actuals for the first nine months and add our expectations for the first quarter, we expect adjusted EBITDA of $167 million to $175 million for the full year 2021. We are expecting continued positive impact from previously announced SPS price increases, which are expected to result in year-over-year benefits of $53 million to $55 million. In our paper board business, planned major maintenance outages are expected to reduce our earnings for 2021 compared to 2020 by $27 million. Our current view is that our tissue volume decline year-over-year will be above 20%, which is not adjusted for the impact of our exit from the away-from-home business. In total, from 2020 to 2021, input cost inflation, including pulp, packaging, energy, and chemicals, as well as freight is expected to be $80 million to $85 million relative to our previous estimate of $60 million to $70 million. In total, the benefit from the Neenah closure is expected to exceed $10 million annually. Interest expense between $36 million and $38 million; depreciation and amortization between $104 million and $107 million; capital expenditures of approximately $42 million and $47 million, which is lower than our prior expectations; and historical average of around $60 million, excluding extraordinary projects, and our effective tax rate is expected to be 26% to 27%. Private brand tissue share in the US rose to over 30% recently, up from 18% in 2011. As Mike mentioned earlier, with this plan, we will achieve our near-term target leverage ratio of 2.5x by 2023.

On a consolidated basis, the company reported net sales of $450 million, adjusted net income of $9 million, and adjusted EBIT of $50 million. In the third quarter 2021, our net income was $2 million, diluted net income per share was $0.11, and adjusted net income per share was $0.55.

1 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Overall sales were a record $1.39 billion, up 37% over the same period in 2020. Organic sales growth was 25%. Acquisitions added 10 points to growth, while foreign currency added two points. Overall orders in the quarter were a record $1.91 billion, a sharp increase of 92% over the prior year, while organic orders were an impressive 44% up in the quarter. We ended the quarter with a record backlog of $2.5 billion, which is up over $700 million from the start of the year. Second quarter operating income was a record $317 million, a nearly 40% increase over the second quarter of 2020. And operating margins expanded 40 basis points to 22.8%. Excluding the dilutive impact of acquisitions, core margins -- core operating margins expanded an exceptional 160 basis points to 24%. EBITDA in the quarter was $387 million, up 34% over the prior year's second quarter, with EBITDA margins of 27.9%. This operating performance led to earnings of $1.15 per diluted share, up 37% over the second quarter of 2020 and above our guidance range of $1.08 to $1.10. In the second quarter, operating cash flow was $287 million, and free cash flow conversion was 114% of net income. Sales for EIG were a record $934 million, up 44% over last year's second quarter. Organic sales were up 27%. Recent acquisitions added 16%, and foreign currency added nearly two points. EIG's second quarter operating income was $227 million, up 42% versus the same quarter last year. And operating margins were 24.3%. Excluding acquisitions, EIG's core margins were 26.3%, expanding an impressive 170 basis points over the comparable period. EMG's second quarter sales increased 24% versus the prior year to $452 million. Organic sales growth was 21%, and currency added three points to the quarter. EMG's operating income in the second quarter was a record $112 million, up 33% compared to the prior year period. And EMG's operating margins expanded an exceptional 170 basis points to a record 24.9%. In the second quarter, we invested $72 million in RD&E. And for the full year, we now expect to invest more than $300 million or approximately 5.5% of sales. For all of 2021, we now expect to invest approximately $100 million in incremental growth investments. For the full year, we now expect approximately $145 million of operational excellence savings. For the full year, we now expect overall sales to be up approximately 20% and organic sales up approximately 10% over 2020. Diluted earnings per share for 2021 are now expected to be in the range of $4.62 to $4.68, an increase of 17% to 18% over 2020's comparable basis and above our prior guide of $4.48 to $4.56 per diluted share. For the third quarter, we anticipate that overall sales will be up in the mid-20% range versus the same period last year. Third quarter earnings per diluted share are now expected to be between $1.16 to $1.18, up 15% to 17% over last year's third quarter. Second quarter general and administrative expenses were $22.5 million, up $5.6 million from the prior year largely due to higher compensation expense. As a percentage of total sales, G&A was 1.6% for the quarter versus 1.7% in the same period last year. For 2021, general and administrative expenses are now expected to be approximately $15 million -- or expected to be up approximately $15 million on higher compensation costs. The effective tax rate in the second quarter was 20.6% compared to 19.5% in the same quarter last year. For 2021, we continue to expect our effective tax rate to be between 19% and 20%. For the quarter, working capital was 13.9% of sales, down an impressive 570 basis points from the 19.6% reported in the second quarter of 2020. Capital expenditures in the second quarter were $23 million, and we continue to expect capital expenditures to be approximately $120 million for the full year. Depreciation and amortization expense in the second quarter was $75 million. For all of 2021, we continue to expect depreciation and amortization to be approximately $300 million, including after-tax, acquisition-related intangible amortization of approximately $141 million or $0.61 per diluted share. In the second quarter, operating cash flow was $287 million and free cash flow was $264 million, with free cash flow conversion in the quarter a very strong 114% of net income. Total debt at quarter end was $2.96 billion. Offsetting this debt was cash and cash equivalents of $390 million. During the second quarter, we deployed approximately $1.58 billion on the acquisitions of Abaco Systems and NSI-MI. Combined, we have deployed approximately $1.85 billion on five strategic acquisitions thus far in 2021. At quarter end, our gross debt-to-EBITDA ratio and our net debt-to-EBITDA ratio were 1.9 times and 1.6 times, respectively. At quarter end, we had approximately $2 billion of cash and existing credit facilities to support our growth initiatives.

Overall sales were a record $1.39 billion, up 37% over the same period in 2020. This operating performance led to earnings of $1.15 per diluted share, up 37% over the second quarter of 2020 and above our guidance range of $1.08 to $1.10. For the full year, we now expect overall sales to be up approximately 20% and organic sales up approximately 10% over 2020. Diluted earnings per share for 2021 are now expected to be in the range of $4.62 to $4.68, an increase of 17% to 18% over 2020's comparable basis and above our prior guide of $4.48 to $4.56 per diluted share. For the third quarter, we anticipate that overall sales will be up in the mid-20% range versus the same period last year. Third quarter earnings per diluted share are now expected to be between $1.16 to $1.18, up 15% to 17% over last year's third quarter. For 2021, we continue to expect our effective tax rate to be between 19% and 20%.

1 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 1 1 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0

I want to take a moment to highlight a number of partnerships and strategic milestones, and the evolution of our next generation technologies. As part of our alliance, Cummins will be the electrolyzer supplier for a 230 megawatt project for a leading fertilizer producer that will serve as a benchmark for large PEM scale electrolysis globally. As one of the largest hydrogen suppliers in China, Sinopec's annual hydrogen production reaches 3.5 million tons, accounting for 14% of total -- China's total hydrogen production. Following successful demonstration, the project includes ramp-ups, which -- with a total of 2,000 trucks to be delivered by the middle of the decade. We've now deployed more than 2,000 fuel cells and 600 electrolyzers around the world as we continue the development of our hydrogen business. Site selection search within the Guadalajara area of Castilla-La Mancha in Spain is currently underway for Cummins new approximately $60 million PEM electrolyzer manufacturing plant that will house system assembly and testing for approximately 500 megawatts per year of electrolyzer production and will be scalable to more than one gigawatt per year. The JV will initially invest $47 million to locate a manufacturing plant to produce PEM electrolyzers. The plant will open with a manufacturing capacity of 500 megawatts of electrolyzers per year, but will also be scalable to more than one gigawatt per year. We announced the signing of an LOI to acquire a 50% equity interest in Momentum Fuel Technologies. Revenues for the second quarter of 2021 were $6.1 billion, an increase of 59% compared to the second quarter of 2020. EBITDA was $974 million or 15.9% compared to $549 million or 14.3% a year ago. Our second quarter revenues in North America grew 74% to $3.5 billion, driven by higher industry build rates across all on-highway markets. Industry production of heavy-duty trucks in the second quarter was 67,000 units, an increase of 180% from 2020 levels. While our heavy-duty unit sales were $23,000, an increase of 217% from 2020. Industry production of medium-duty trucks was 29,000 units in the second quarter of 2021, an increase of 94% from 2020 levels, while our unit sales were 22,000 units, an increase of 85% from 2020. We shipped 42,000 engines to Stellantis for use in the Ram pickups in the second quarter of 2021, an increase of 272% from 2020 levels. Revenues for Power Generation grew by 48% due to higher demand in recreational vehicle, standby power and data center markets. Our international revenues increased by 42% in the second quarter of 2021 compared to a year ago. Second quarter revenues in China, including joint ventures, were $2.1 billion, an increase of 8% due to higher sales in power generation and mining markets. Industry demand for medium and heavy-duty trucks in China was 566,000 units, a decrease of 4%, but still well above replacement, driven by continued pre-buy of NS V trucks, ahead of the broader implementation of the new NS VI standards in July of this year. Our sales and units, including joint ventures, were 85,000 units, a decrease of 5% versus the second quarter of 2020. The light-duty market in China decreased 8% from 2020 levels to 614,000 units, while our units sold, including joint ventures, were 38,000, a decrease of 28%, driven by supply chain constraints, particularly in these lighter displacement vehicles. Industry demand for excavators in the second quarter was 97,000 units, a decrease of 5% from very high 2020 levels. Our units sold were 16,800 units, a decrease of 7%. The demand for power generation equipment in China increased 47% in the second quarter, driven by growth in data center markets and other standby power markets. Second quarter revenues in India including joint ventures were $392 million, an increase of 219% from the second quarter of 2020, despite experiencing a terrible second wave of COVID-19 during this period. Industry truck production increased by 468%, while our shipments increased 535%, as our joint venture partner continued to gain share. In Brazil, our revenues increased 175%, driven by increased demand in most end markets. Based on our current forecast, we are maintaining full year 2021 revenue guidance of up 20% to 24% versus last year. EBITDA is still expected to be in the range of 15.5% to 16%. And the company expects to return 75% of operating cash flow to shareholders in 2021, in the form of dividend and share repurchases. The business generated revenues of approximately $1.2 billion in 2020, and remains well positioned for continued growth, sustained margin performance and strong free cash flow generation. And any costs associated with the evaluation of these alternatives for the Filtration business has been excluded from our financial outlook. And fourthly, we returned $860 million to shareholders in the quarter through cash dividends and share repurchases and $1.48 billion for the first half of the year, consistent with our plan to return 75% of operating cash flow to shareholders this year. Second quarter revenues were $6.1 billion, an increase of 59% from a year ago when the impact of COVID-19 was at its most severe. Sales in North America grew 74% and international revenues rose 42%. Currency positively impacted revenues by 3%, driven primarily by a weaker US dollar. EBITDA was $974 million or 15.9% of sales for the quarter compared to $549 million or 14.3% of sales a year ago. Gross margin of $1.5 billion or 24.2% of sales increased by $588 million or 110 basis points, primarily driven by the higher volumes, global supply chain tightness continued in the second quarter and resulted in approximately $100 million of additional freight, labor and logistics costs. Selling, general and administrative expenses increased by $130 million or 28% due to higher compensation expenses. And research expenses increased by $87 million or 46% from a year ago. Salary reductions resulted in approximately $75 million of pre-tax savings for the company in the second quarter of 2020 across gross margin, selling, admin and research expenses. Joint venture income was $137 million in the second quarter, up from $115 million a year ago. Other income increased by $30 million from a year ago due to a number of positive items, including a one-time $18 million gain on the sale of some land in India, which benefited our Distribution segment. Net earnings for the quarter were $600 million or $4.10 per diluted share compared to $276 million or $1.86 from a year ago, primarily due to stronger after-tax earnings driven by stronger volumes. The gain on the sale of land in India contributed $0.05 of earnings per share this quarter. The effective tax rate in the quarter was 21.4%. Operating cash flow in the quarter was an inflow of $616 million, compared to an outflow of $22 million a year ago. For the Engine segment, second quarter revenues increased by 75%, driven by increased demand for trucks in the U.S. and construction equipment in U.S. and Europe. EBITDA increased from 10.5% to 16.1% of sales, primarily driven by higher volumes and lower product coverage expense, which more than offset higher costs and inefficiencies associated with global supply chain challenges. We expect full year revenues to be up 23% to 27%, and EBITDA margins to be in the range of 14.5% to 15% for the Engine segment. In Distribution, revenues increased 20% from a year ago. And EBITDA increased as a percent of sales from 10% to 10.5%, primarily due to stronger performance in North America. We have maintained our outlook for segment revenue growth to be up 6% to 10%, and EBITDA margins to be 9% at the midpoint of our guidance. In the Components business, revenues increased 73% in the second quarter, driven primarily by stronger demand for trucks in North America. EBITDA increased from 12.3% of sales to 15.1%, due to the benefits of stronger volumes, partially offset by higher product coverage costs. For the full year 2021, we expect Components revenue to increase 30% to 34% and EBITDA to be 17%, at the midpoint. In the Power Systems segment, revenues increased 47% in the second quarter, driven by stronger global demand for power generation and mining equipment. EBITDA increased from 11.7% to 12.2% of sales, primarily due to the benefits of higher volumes and lower product coverage expenses. We are maintaining our Power Systems guidance of revenues up 16% to 20%, and EBITDA margin in the range of 11% to 11.5% of sales. In the New Power segment, revenues increased to $24 million, up 140%, due to stronger sales of battery electric systems and fuel cells. EBITDA losses for the quarter were $60 million, in line with our expectations, as we continue to invest in new products and scale up ahead of widespread adoption of the new technologies. For Full year, we currently project New Power revenues of $110 million to $130 million and EBITDA losses to be in the range of $190 million to $210 million. Total company guidance remains unchanged, with revenues to grow between 20% and 24%. And EBITDA margin to be between 15.5% and 16%, for the full year. EBITDA perfect for the first half of the year was 16%. We now expect earnings from joint ventures to be up 10% in 2021, compared to our prior year guidance of down 5%. Our effective tax rate is expected to be approximately 21.5%, excluding discrete items, down from our prior guidance of 22.5% due to the mix of geographic earnings, capex -- capital expenditures were $125 million in the quarter, up from $77 million a year ago. And we expect our full year capital expenditures to be at the high end of our range of $725 million to $775 million for the full year. We returned $869 million to shareholders through dividends and share repurchases in the second quarter, bringing our total cash returns to $1.48 billion for the first half -- excuse me for my dry throat.

I want to take a moment to highlight a number of partnerships and strategic milestones, and the evolution of our next generation technologies. Revenues for the second quarter of 2021 were $6.1 billion, an increase of 59% compared to the second quarter of 2020. Based on our current forecast, we are maintaining full year 2021 revenue guidance of up 20% to 24% versus last year. And any costs associated with the evaluation of these alternatives for the Filtration business has been excluded from our financial outlook. Net earnings for the quarter were $600 million or $4.10 per diluted share compared to $276 million or $1.86 from a year ago, primarily due to stronger after-tax earnings driven by stronger volumes. Total company guidance remains unchanged, with revenues to grow between 20% and 24%.

1 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0

Any comparisons made today are based on a comparison to the same period in the prior year, unless otherwise stated. For the quarter, our total revenue was down 11% and we posted a net loss of $150 million or $4.04 per share, which included a pre-tax non-cash impairment charge of $175 million. In response, we have taken decisive and significant actions that will reduce our operating expenses by approximately $100 million this year. PeopleReady's revenue was down 8% during the quarter, which was lower than our outlook of minus 7% to minus 4% due to the effect of COVID-19 late in the quarter. Revenue was down 10% during the quarter, which was lower than our outlook of minus 5% to flat, also due to the effect of COVID-19 late in the quarter. Revenue was down 21% during the quarter, which was within our outlook of minus 26% to minus 18%. We filled 785,000 shifts via JobStack in Q1 2020, representing an all-time high digital fill rate of 51%. Our client users also hit all-time high of 23,500, up more than 50% compared to Q1 2019. How we operate and how we relate to workers and clients matters more than ever in a world where profit, principle and sheer trust are inextricably linked. Total revenue for Q1 2020 was $494 million or down 11% in comparison with our outlook of $503 million to $528 million. The first is the story that covers the first two months, with revenue for January down 9% and February down 6%, which was on track with our expectation. The total company revenue trend during these months was driven by PeopleReady which posted a 7% decline in January and a 3% decline in February with growth of 2% in the last week of February. For March as a whole, total revenue was down 16%. For the first three weeks of March, for our staffing businesses, which make up 90% of total company revenue were down approximately 6%. During the last week of March, revenue was down about 30%. Turning to April, staffing revenue for the first four weeks was down 41%. There are possible signs of stabilization with April weekly revenue results falling within a range of minus 43% to minus 38% but it's admittedly hard to make a call on stabilization at this point. We posted a net loss of $150 million or $4.04 per share in comparison with our outlook of a loss of $0.07 to $0.00. Included in our results is a non-cash impairment charge of $175 million or $152 million net of tax, which translates to $4.08 per share. About $120 million of the pre-tax charge was in PeopleScout and $55 million in PeopleManagement. Adjusted net loss per share was $0.01, which is less than our outlook of net income per share of $0.04 to $0.11 as a result of revenue falling short of the midpoint of our revenue outlook. Adjusted EBITDA was down 73%, primarily due to lower revenue and gross margin, which in combination with the operating leverage in our business, contributed to a drop in adjusted EBITDA margin of 210 basis points. Gross margin of 25.5% was down 110 basis points. About 100 basis points of the decline came from our PeopleScout business due to a previously disclosed client headwind and overall volume declines which outpaced the timing of reductions to our recruiting staff. Our staffing business contributed 50 basis points of headwind from a change in revenue mix associated with larger declines in our higher margin local accounts in comparison with our lower margin national accounts. This was offset by 40 basis points of net benefit from lower Affordable Healthcare Act costs which we do not expect to reoccur, which was somewhat offset by a workers compensation benefit in Q1 2019 associated with prior insurance carriers. SG&A expense improved by $11 million or by 8% compared to Q1 2019. We had an income tax benefit this quarter of 14% as compared to our expectation of income tax expense of 12% due to the pre-tax loss and permanent differences associated with certain aspects of the impairment charge. Turning to our segments, PeopleReady, our largest segment representing 63% of trailing 12-month revenue saw an 8% decline in revenue and segment profit was down 33%. March revenue was down 14%. Revenue declined significantly during the last two weeks of March due to COVID-19 with revenues dropping 20% for the week ended March 22, 32% for the week ended March 29. PeopleManagement, representing 27% of trailing 12-month revenue and 8% of segment profit saw a 10% decline in revenue and segment profit was down 114%. March revenue was down 14%. Revenue declined significantly during the last two weeks of March due to COVID-19 with revenues dropping 15% for the week ended March 22, and 30% for the week ended March 29. PeopleScout, representing 10% of trailing 12-month revenue and 25% of segment profit saw a 21% decline in revenue and segment profit was down 76%. March revenue was down 28%. As previously discussed, the client headwind created 8 percentage points of drag on revenue and 25 percentage points on segment profit. In March, we drew substantially all of the remaining availability on our $300 million revolving credit facility to further enhance our liquidity position. At the end of Q1, we had $265 million of cash on the balance sheet and total debt of $294 million. Our debt-to-capital ratio was 41% or 4% on a net debt basis and our total debt to adjusted EBITDA multiple stood at 3.0, which is higher than the ratio defined by our lending agreement, which includes some different adjustments, including the add-back of stock-based compensation resulting in a ratio of 2.7. While we experienced a significant decline in adjusted EBITDA this quarter, cash flow from operations increased by roughly 25% compared to Q1 last year due to the accounts receivable based deleveraging, which will continue to be a source of capital with future revenue declines. We dedicated $52 million of cash toward the repurchase of common stock in February, $12 million through open market purchases, and $40 million through an Accelerated Share Repurchase program or ASR. On February 28, we executed the ASR and $40 million of cash was provided to an investment bank. In return, $32 million of stock was delivered to the company at a price of $14.88 and these shares were removed from our outstanding share count. The remaining $8 million of stock will be delivered no later than July 2 and the total number of shares repurchased will be trued up based on the volume weighted average price over the four-month term of the agreement, less a discount. Regression analysis suggests that TrueBlue revenue would be down approximately 9% if GDP was flat and would decline approximately 7 percentage points for every additional point of year-over-year GDP decline. For example, if the year-over-year decline for GDP was 5% for a particular quarter, this would imply a decline in TrueBlue revenue of roughly 44%. Based on these actions, we expect SG&A to be about $100 million less in 2020 in comparison with 2019 including a workforce reduction charge of $1 million in Q1 and about $8 million in Q2. All in, this would produce a SG&A decrease of about 20% in 2020. Turning to fiscal year 2020 gross margin, we expect a contraction of 180 basis points to 120 basis points. For capital expenditures, we expect about $22 million for the full year. Please note that our outlook is net of $8 million in build out costs for our Chicago headquarters that will be reimbursed by our landlord in 2020. Our outlook for weighted average shares outstanding for fiscal year 2020 is 35.7 million shares.

Any comparisons made today are based on a comparison to the same period in the prior year, unless otherwise stated. For the quarter, our total revenue was down 11% and we posted a net loss of $150 million or $4.04 per share, which included a pre-tax non-cash impairment charge of $175 million. How we operate and how we relate to workers and clients matters more than ever in a world where profit, principle and sheer trust are inextricably linked. Total revenue for Q1 2020 was $494 million or down 11% in comparison with our outlook of $503 million to $528 million. We posted a net loss of $150 million or $4.04 per share in comparison with our outlook of a loss of $0.07 to $0.00. Included in our results is a non-cash impairment charge of $175 million or $152 million net of tax, which translates to $4.08 per share. Adjusted net loss per share was $0.01, which is less than our outlook of net income per share of $0.04 to $0.11 as a result of revenue falling short of the midpoint of our revenue outlook.

1 1 0 0 0 0 0 0 1 1 0 0 0 0 0 0 0 1 1 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Now for the quarter, revenue was $854 million, an organic increase of 6.6%. Gross margins were 17.34% of revenue, reflecting the continued impacts of the complexity of a large customer program. General and administrative expenses were 7.8% of revenue and all of these factors produced adjusted EBITDA of $83.1 million or 9.7% of revenue and adjusted earnings per share of $0.95, compared to earnings per share of $1.6 in the year ago quarter, included in adjusted earnings per share our incremental tax benefits of $0.10 per share for credits related to tax filings for prior periods. Liquidity was solid at $314.7 million and operating cash flow was strong at $104.3 million, reflecting a sequential DSO decline of 12 days. During the quarter we repaid our remaining 2021 convertible notes in full and subsequent to the end of the third quarter, we received three-year awards for construction services in a number of states valued in excess of $500 million in total. The recently enacted infrastructure investment and Jobs Act includes over $40 billion for the construction of rural communications networks in unserved and underserved areas across the country. During the quarter, organic revenue increased 6.6%, our top five customers combined produced 65.4% of revenue, decreasing 3.5% organically, demand increased for two of our top five customers all other customers increased 32.5% organically. AT&T was our largest customer at 23.4% of total revenue or $199.5 million. AT&T grew 68% organically this was our third consecutive quarter of organic growth with AT&T. Revenue from Comcast was $121 million or 14.2% of revenue, Comcast was Dycom's second largest customer. Lumen was our third largest customer at 12.1% of revenue or $103 million. Verizon was our fourth largest customer at $93.4 million or 10.9% of revenue. And finally revenue from Frontier was $41.3 million or 4.8% of revenue. Frontier grew 118.6% organically. Of note, fiber construction revenue from electric utilities was $53.7 million in the quarter and increased organically 75.3% year-over-year. Backlog at the end of the third quarter was $5.896 billion versus $5.895 billion at the end of the July '21 quarter, essentially flat. Of this backlog approximately $2.938 billion is expected to be completed in the next 12 months. Headcount increased during the quarter to 14,905. Contract revenues were $854 million and organic revenue increased 6.6% for the quarter. Storm work performed in Q3 of last year was $8.9 million, compared to none in Q3 '22. Adjusted EBITDA was $83.1 million or 9.7% of revenue, gross margins of 17.3%, decreased 140 basis points from the year ago period. As expected this decrease reflected higher fuel costs of approximately 50 basis points, as well as the impact from revenue declines from several large customers. G&A expense was at 7.8% of revenue and came in approximately 40 basis points better than our expectations from improved operating leverage. Non-GAAP adjusted net income was $0.95 per share, compared to $1.6 per share in the year ago period. Q3 '22, included approximately $3 million or $0.10 per share of incremental tax benefits for credits related to tax filings for prior periods. In September, we repaid the final balance of $58.3 million of the convertible notes at maturity. We ended the quarter with $500 million of senior notes, $350 million of term loan and no revolver borrowings. Cash and equivalents were $263.7 million and liquidity was solid at $314.7 million. Operating cash flows were strong at $104.3 million in the quarter, capital expenditures were $44.1 million net of disposal proceeds and gross capex was $45.1 million. For the full-year of fiscal 2022, capital expenditures, net of disposals are now expected to range from $135 million to $150 million, an increase of $10 million to $25 million, compared to the high end of approximately $125 million in the prior outlook provided in Q2 '22. The combined DSOs of accounts receivable and net contract assets were at 113 days, an improvement of 12 days sequentially from Q2 '22, as we made substantial progress on a large customer program. Q4 of last fiscal year included 14-weeks of operations, due to the company's 52, 53-week fiscal year and also included $5.7 million of revenues from storm restoration services. Non-GAAP contract revenues adjusted for these amounts in Q4 '21 was $691.8 million. For Q4 of fiscal '22, there will be 13-weeks of operations and the Company expects contract revenues to increase modestly, as compared to the non-GAAP organic contract revenues of $691.8 million in Q4 '21. Total interest expense is expected at approximately $8.8 million during Q4, and we expect a non-GAAP effective income tax rate of approximately 27%.

General and administrative expenses were 7.8% of revenue and all of these factors produced adjusted EBITDA of $83.1 million or 9.7% of revenue and adjusted earnings per share of $0.95, compared to earnings per share of $1.6 in the year ago quarter, included in adjusted earnings per share our incremental tax benefits of $0.10 per share for credits related to tax filings for prior periods. Non-GAAP adjusted net income was $0.95 per share, compared to $1.6 per share in the year ago period. Non-GAAP contract revenues adjusted for these amounts in Q4 '21 was $691.8 million. For Q4 of fiscal '22, there will be 13-weeks of operations and the Company expects contract revenues to increase modestly, as compared to the non-GAAP organic contract revenues of $691.8 million in Q4 '21.

0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 1 1 0

And as you can see on slide three, if you're following along on the deck, net long-term flows were $13.3 billion during the quarter. This represents over 4% annualized long-term organic growth for the quarter. And since the third quarter of last year, we generated $86 billion of long-term inflows and an average quarterly organic growth rate of 6%. ETFs, excluding the Qs, generated long-term inflows of $3.7 billion in the quarter with strong market share gains in our EMEA ETF range. In private markets, we generated net long-term inflows in our direct real estate business, $1.2 billion, and robust bank loan product demand resulted in net long-term inflows of $2 billion during the quarter. We generated net long-term inflows of $11 billion within active fixed income across the platform. And within active global equities, the developing markets fund a key capability that came over when we combined with Oppenheimer, continue to see net long-term inflows of $700 million during the quarter. In addition, our solutions-enabled institutional pipeline, accounts for 38% of the pipeline at quarter end. Third quarter flows included net long-term inflows of $6.8 billion from Greater China. We were an early entrant 20 years ago, and we are benefiting from that commitment and investment, and we expect to see continued growth in the years ahead. Our investment performance was strong in the third quarter with 72% and 74% of actively managed funds in the top half of peers for being benchmarked on a five-year and a 10-year basis. We ended the quarter with $1.529 trillion in AUM, a net increase of $3.6 billion. As Marty noted earlier, our diversified platform generated net long-term inflows in the third quarter of $13.3 billion, representing a 4.4% annualized organic growth rate. Active AUM net long-term inflows were $6.8 billion and passive AUM net long-term inflows were $6.5 billion. Market declines in FX rate changes led to a decrease in AUM of $18.6 billion in the quarter. The retail channel generated net long-term inflows of $1.8 billion, driven by positive ETF flows and inflows in Greater China. The institutional channel demonstrated the breadth of our platform and generated net long-term inflows of $11.5 billion in the quarter, with diverse mandates, both regionally and by capabilities funding in the period. Regarding retail net inflows, our ETF, excluding the QQQ, generated net long-term inflows of $3.7 billion. Our global ETF platform, again, excluding the QQQ, captured a 3.8% market share of flows, which exceeded our 2.7% market share of AUM. Our market share of the revenue pool was 5.6%. Net ETF inflows in the United States does include net long-term inflows of $900 million into our QQQ innovation suite, which crossed $3 billion in AUM, one year after its launch. Our EMEA-based ETF range generated $2.5 billion of net long-term inflows in the quarter, with particular strength from the IBC's S&P 500 UCITS ETF and the gold exchange traded commodity fund. Looking at flows by geography on slide six, you'll note that the Americas had net long-term inflows of $4.8 billion in the quarter driven by net inflows into ETF, as mentioned, as well as our institutional flows. Asia Pacific, again, delivered another strong quarter with net long-term inflows of $9.3 billion. Net inflows were diversified across the region, reflecting $6.8 billion of net long-term inflows from Greater China, most of which arose in our JV and $3.1 billion from Japan. We continue to see broad strength in fixed income in the third quarter with net long-term flows of $11 billion. Net long-term flows and alternatives were $2.3 billion, driven primarily by our private markets business through a combination of inflows from direct real estate, the newly launched CLO that Marty mentioned and senior loan capabilities. When excluding global GTR net outflows of $1.7 billion, alternative net long-term inflows were $4 billion. The strength of our alternatives platform can be seen through the flow that is generated over the past five quarters with net long-term flows totaling $12 billion and organic's growth rate that's averaging nearly 6% per quarter over this time when excluding the impact of the GTR net outflows over this period. Invesco launched the first Sino U.S. JV in China in 2003 as Invesco Great Wall. While we have 49% ownership of the JV, our partner is a Chinese government-backed power company and has been a good partner. In 20 years, it has grown from almost nothing to around $3.5 trillion. It's expected to become the second largest fund management market in the world by 2025 with assets of over $6 trillion. Also, China is estimated to account for over 40% of global net flows through 2024. We have built a diversified business in China with over $99 billion in AUM at the end of September. 60% of the AUM is from retail clients and 40% is institutional. Our long-term commitment and strong track record have put Invesco in an advantageous position and our strategic position and continued investment in China has resulted in a 42% annual growth rate over the last three years to date. Now moving to slide nine to look at the institutional pipeline, which was $32 billion at the end of September. Our solutions capability enabled 38% of the global institutional pipeline and created wins and customized mandates. You'll note that net revenues increased $31 million, or 2.3%, from the second quarter as a result of higher average AUM in the third quarter. The net revenue yield, excluding performance fees, was 34.4 basis points, a decrease of 0.4 on the basis points from the second quarter yield level. The incremental impact from higher discretionary money market fee waivers was minimal relative to the second quarter and the full impact on the net revenue yield for the third quarter was 0.6 of a basis point. Total adjusted operating expenses increased 1.2% in the third quarter. The $10 million increase in operating expenses was mainly driven by variable compensation and property, office and technology expense. This change went into effect in the third quarter and resulted in a $6 million expense increase, which was offset by a corresponding increase in service and distribution revenue. As a reminder, we anticipate that our outsourced administration costs, which we reflect in property, office and technology expense, will increase by approximately $25 million on an annual basis or approximately $6 million per quarter. In the third quarter, we realized $5.8 million in cost savings. $4 million of these savings is related to compensation expense associated with reorganization and $2 million was related to property expense. A $5.8 million in cost savings, or $23 million annualized, combined with $125 million in annualized savings realized for the second in quarter 2021 brings us to $148 million in total, or 74%, of our $200 million net savings expectation. As it relates to timing, we expect to modestly exceed the $150 million target we have set for 2021, with the remainder realized by the end of 2022. We expect the total program savings of $200 million through 2022 would be roughly 65% from compensation and 35% spread across the other categories. In the third quarter, we incurred $18 million of restructuring costs. In total, we recognized nearly $190 million of our estimated $250 million to $275 million in restructuring costs that were associated with the program. We expect the remaining restructuring costs for the realization of this program to be in the range of $60 million to $85 million through the end of next year. Adjusted operating income improved $21 million to $562 million for the quarter, driven by the factors we just reviewed. Adjusted operating margin improved 60 basis points, 42.1% as compared to the second quarter. Most importantly, our degree of positive operating leverage reflected in our non-GAAP results was 1.7 times for the quarter, underscoring our focus on driving scale and profitability across our diversified platform. Nonoperating income was $29 million, driven primarily by unrealized gains in our co-investment portfolio. The effective tax rate for the third quarter was 24.4% compared to 22.8% in the second quarter. We estimate our non-GAAP effective tax rate to be between 23% and 24% for the fourth quarter. Our operating margin in the third quarter of 2019, which was the first full quarter following the acquisition of Oppenheimer, was 40.9%. At that time, we reported a net revenue yield of 40.7 basis points. In the third quarter of 2021, our net revenue yield had declined over six basis points to 34.4 basis points, yet our operating margin has improved to 42.1%. This chart starts at the third quarter of 2019, but in fact, our third quarter 2021 operating margin is the highest since Invesco became a U.S.-listed company in 2007. In fact, the growth of the QQQ over this period is remarkable, almost tripling in size and going from 6% of our AUM mix in the third quarter of 2019 to 12% at the end of this quarter. Even though we do not earn a management fee, as a sponsor of the QQQ, we managed the over $100 million annual marketing budget generated by the product. These two factors alone account for over 40% of the decline in the net revenue yield over this period. Our balance sheet cash position was $1.8 billion on September 30 and approximately $725 million of this cash was held for regulatory requirements. The cash position has improved meaningfully over the past year, increasing by nearly $700 million, largely driven by the improvement in our operating income. Our leverage ratio, as defined under our credit facility agreement, declined from 1.43 times a year ago to under one times at 0.86 turns at the end of the third quarter. If you choose to include the preferred stock, the leverage ratio has declined from just over four times to 2.67 times at the end of the third quarter. Regarding future cash requirements, we recorded an additional downward adjustment to the MLP liability in the third quarter, reducing the liability from our previous estimate of nearly $300 million down to $254 million. As we look toward 2022 and beyond, we will be building toward a 30% to 50% total payout ratio over the next several years as we continue to modestly increase dividends and reinstate a share buyback program in the future.

And since the third quarter of last year, we generated $86 billion of long-term inflows and an average quarterly organic growth rate of 6%. When excluding global GTR net outflows of $1.7 billion, alternative net long-term inflows were $4 billion.

0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

We generated adjusted EBITDA of $2.6 billion and DCF attributable to the partners of Energy Transfer, as adjusted, of $1.3 billion. Our excess cash flow after distributions was approximately $900 million. On an incurred basis, we had excess DCF of approximately $540 million after distributions of $414 million and growth capital of approximately $360 million. As a reminder, we expect the combined company to generate more than $100 million of annual run rate cost synergies, and this is before potential commercial synergies. In early June, we commenced service to provide transportation for approximately 65,000 barrels per day of crude oil from our Cushing terminal to our Nederland terminal, providing access for Powder River and DJ Basin barrels to our Nederland terminal being an upstream connection with our White Cliffs Pipeline. And as we mentioned on our last call, we are moving forward with Phase 2, which will increase the capacity to 120,000 barrels per day. Phase 2 is expected to be in service early in the second quarter of 2022 and is underpinned by third-party commitments. We have commissioned the next significant phase of the Mariner East project, which brings our current capacity on the Mariner East pipeline system to approximately 260,000 barrels per day. Year-to-date, NGL volumes through the Mariner East pipeline system and Marcus Hook terminal are up 12% over the same period in 2020. As a reminder, with the completion of the remaining expansions of our LPG facilities at Nederland, earlier this year, we are now capable of exporting more than 700,000 barrels per day of NGLs from our Nederland terminal. And when combined with our export capabilities from our Marcus Hook terminal, as well as our Mariner West pipeline, which exports ethane to Canada, our total NGL export capacity is over 1.1 million barrels per day, which is among the largest in the world. Year-to-date through September, we have loaded more than 16 million barrels of ethane out of this facility. And in total, our percentage of worldwide NGL exports has doubled over the last 18 months to nearly 20%, which was more than any other company or country for the third quarter of 2021. At Mont Belvieu, we recently brought on a 3 million-barrel high-rate storage well, which takes our NGL storage capabilities at Mont Belvieu to 53 million barrels. This project allows us to move approximately 115,000 Mcf per day of rich gas out of the Midland Basin and to operate existing capacity more efficiently while also providing access to additional takeaway options. In addition, it can easily be expanded to 200,000 Mcf per day when needed. In September, we entered into a 15-year power purchase agreement with SB Energy for 120 megawatts of solar power from its Eiffel Solar project in Northeast Texas. Consolidated adjusted EBITDA was $2.6 billion, compared to $2.9 billion for the third quarter of 2020. DCF attributable to the partners as adjusted was $1.31 billion for the third quarter, compared to $1.69 billion for the third quarter of 2020. While we saw higher volumes across the majority of our segments, including record volumes in the NGL and refined products segment, these benefits do not offset the significant optimization gains in the third quarter of 2020 related to our various optimization groups, as well as the onetime $103 million gain in our midstream segment. On October 26, we announced a quarterly cash distribution of $0.1525 per common unit or $0.61 on an annualized basis. Adjusted EBITDA was $706 million, compared to $762 million for the same period last year. Higher terminal services and transportation margins related to the increased throughput on our Nederland and Mariner East pipelines in the third quarter of 2021 were offset by a $55 million decrease in our optimization businesses at Mont Belvieu and in the Northeast, as well as increased opex and G&A. NGL transportation volumes on our wholly owned and joint venture pipelines increased to a record 1.8 million barrels per day, compared to 1.5 million barrels per day for the same period last year. And our fractionators also reached a new record for the quarter with an average fractionated volumes of 884,000 barrels per day, compared to 877,000 barrels per day for the third quarter of 2020. For our crude oil segment, adjusted EBITDA was $496 million, compared to $631 million for the same period last year. The improved performance on our Bakken and Bayou Bridge pipelines as a result of recovering volumes in the third quarter of 2021 did not offset approximately $100 million of onetime items in the third quarter of 2020. In addition, we had approximately $20 million in other optimization reductions, as well as increased opex and G&A expense year-over-year. For midstream, adjusted EBITDA was $556 million, compared to $530 million for the third quarter of 2020. This was largely the result of a $156 million increase related to favorable NGL and natural gas prices, as well as volume growth in the Permian and the ramp-up of recently completed assets in the Northeast, which were partially offset by a decrease of $103 million due to the restructuring and assignment of certain contracts in the Ark-La-Tex region in the third quarter of 2020. Gathered gas volumes were 13 million MMBtus per day, compared to 12.9 million MMBtus per day for the same period last year due to higher volumes in the Permian, Ark-La-Tex and South Texas regions. In our Interstate segment, adjusted EBITDA was $334 million, compared to $425 million for the third quarter of 2020 primarily due to contract expirations at the end of 2020 on Tiger and FEP, as well as a shipper bankruptcy on Tiger and lower demand on Panhandle and Trunkline partially offset by an increase in transported volumes on Rover due to more favorable market conditions. And for our intrastate segment, adjusted EBITDA was $172 million, compared to $203 million in the third quarter of last year. Our full year 2021 adjusted EBITDA remains $12.9 billion to $13.3 billion. And moving to a growth capital update, for the nine months ended September 30, 2021, Energy Transfer spent $1.08 billion on organic growth projects, primarily in the NGL refined products segment, excluding SUN and USA Compression capex. For full year 2021, we continue to expect growth capital expenditures to be approximately $1.6 billion, primarily in the NGL refined products, midstream, and crude oil segment. After 2022 and 2023, we continue to expect to spend approximately $500 million to $700 million per year. As of September 30, 2021, total available liquidity under our revolving credit facilities was approximately $5.4 billion, and our leverage ratio was 3.15 times per the credit facility. During the third quarter, we utilized cash from operations to reduce our outstanding debt by approximately $800 million. And year-to-date, we have reduced our long-term debt by approximately $6 billion.

Our full year 2021 adjusted EBITDA remains $12.9 billion to $13.3 billion.

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0

Turning to results, third quarter total Company sales of $1.3 billion increased 14% on a constant-currency basis versus the year-ago period. In TAVR, third quarter global sales were $508 and $58 million dollars, up 14% on an underlying basis versus the year-ago period. Globally, our average selling price remained stable. In the U.S., our TAVR sales grew 12% on a year-over-year basis and we estimate that our share of procedures was stable. Our TAVR sales in July benefited from encouraging signs of continued recovery from the pandemic, however procedures were negatively impacted in the last two months of Q3 due to the significant impact Delta had on hospital resources. Outside the U.S. in the third quarter, our sales grew approximately 20% on a year-over-year basis, and we estimate total TAVR procedure growth was comparable. It's worth noting that recently, published guidelines from the European Association of Cardiothoracic Surgery not definitively recommend TAVR for patients over the age of 75. The acknowledgment by the Surgical society the TAVR is preferred for those over 75 is a significant development. We continue to expect underlying TAVR sales growth of around 20% in 2021. The long-term potential reinforces our view that this global TAVR opportunity will exceed $7 billion by 2024, which implies a low double-digit compound annual growth rate. Now, turning to TMTT, we've made meaningful progress across all our platforms with over 6000 patients treated to date, to transform treatment and unlock the significant long-term growth opportunity. In addition, 30-day outcomes for mitral repair with PASCAL from our Miclast, post-market clinical follow-ups study of over 250 patients. Turning to the financial performance in TMTT, despite the impact of Delta in summer seasonality, global sales of $22 million were driven by the continued adoption of PASCAL in Europe. We continue to expect to achieve our previous full-year guidance of $80 million to $100 million and estimate the global TMTT opportunity to triple to approximately $3 billion by 2025. In Surgical Structural Heart, third quarter global sales were $217 million, up 6% on an underlying basis versus the year-ago period. Registry data confirmed excellent real-world outcomes with INSPIRIS RESILIA in patients under the age of 60. In Critical Care, third quarter global sales were $213 million up 17% on an underlying basis versus the year-ago period. Total sales in the third quarter grew 14% on an underlying basis over the prior year. Earnings in the quarter of $0.54 met our expectations as COVID -related constrained spending more than offset lower-than-expected sales. And our October procedure trends, we're projecting total Q4 sales of between 1.30 billion and 1.38 billion. A as it relates to each product line, we are forecasting fourth quarter TAVR sales of $850 million to $910 million and still have the potential to reach underlying TAVR sales growth of around 20% for the full-year 2021. We continue to expect our full-year adjusted earnings per share guidance at the high-end of $2.07 to $2.27 with fourth-quarter adjusted earnings per share of 53 to 59 cents. Our adjusted gross profit margin was 76.3% up from 75.5% in the same period last year when we experienced substantial costs responding to COVID, the improvement was also driven by a more profitable product mix, partially offset by a negative impact from foreign exchange. We continue to expect our 2021 adjusted gross profit margin to be between 76% and 77%. Selling general and administrative expenses in the third quarter were $364 million or 27.8% of sales compared to $307 million in the prior year. We still expect full-year 2021 SGNA expenses as a percentage of sales excluding special items to be 28% to 29%. Research and development expenses in the quarter grew 22% over the prior year to $238 million or 18.2% of sales. For the full-year 2021, we continue to expect R&D expenses as a percentage of sales to be 17% to 18%. Our reported tax rate this quarter was 13% or 13.9%, excluding the impact of special items. We continue to expect our full-year rate in 2021, excluding special items to be between 11% and 15%, including an estimated benefit of four percentage points from stock-based compensation accounting. Foreign exchange rates increased third quarter reported sales growth by 70 basis points for $8 million compared to the prior year. At current rates, we continue to expect an approximate $70 million positive impact, or about 1.5%, to full-year 2021 sales, compared to 2020. Foreign exchange rates negatively impacted our third quarter gross profit margin by 30 basis points compared to the prior year. Free cash flow for the third quarter was $471 million, defined as cash flow from operating activities of $532 million less capital spending of $61 million our year-to-date free cash flow was $1.1 billion. We continue to maintain a strong and flexible Balance Sheet with approximately $3 billion in cash and investments as of September 30th. Average shares outstanding during the third quarter were 632 million and we continue to expect our average diluted shares outstanding for 2021 to be at the lower end of our 630 to 635 million guidance range. We have approximately $1.2 billion remaining under the share repurchase program.

Turning to results, third quarter total Company sales of $1.3 billion increased 14% on a constant-currency basis versus the year-ago period. Globally, our average selling price remained stable. Our TAVR sales in July benefited from encouraging signs of continued recovery from the pandemic, however procedures were negatively impacted in the last two months of Q3 due to the significant impact Delta had on hospital resources. Earnings in the quarter of $0.54 met our expectations as COVID -related constrained spending more than offset lower-than-expected sales. We continue to expect our full-year rate in 2021, excluding special items to be between 11% and 15%, including an estimated benefit of four percentage points from stock-based compensation accounting.

1 0 1 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0

Despite the divestitures, orders were up over 10%. On an organic basis, our sales were up 5.5%. Our first-quarter adjusted EBITDA of $52 million increased 28% year over year, and adjusted EBITDA margin expanded 420 basis points to 18.6%. The Advanced Surface Technologies segment, which includes Alluxa, LeanTeq and the Technetics Semiconductor businesses, posted 49% revenue growth, 137% adjusted EBITDA growth, and adjusted EBITDA margin expansion of over 1,000 basis points to 31.6%. We anticipate continued strong demand for the remainder of the year. The percentage of female promotions in the U.S. has increased 10% since January 2019. In the area of supporting our communities, we announced in December our $1 million funding of the EnPro Foundation focused on advancing education, equality, diversity and the preservation of human dignity. Currently, approximately 7% of our revenue comes from the oil and gas industry, and we anticipate this percentage to decrease over time as our strategic transformation continues. As reported, sales of $279 million for the first quarter decreased 1.2% year over year. Excluding the impact of foreign exchange translation and sales from acquired and divested businesses, organic sales for the quarter grew 5.5% compared to the first quarter of 2020. Sequentially, excluding portfolio reshaping activities, sales were up 7.1%. Gross profit margin of 39.2% increased 550 basis points versus the prior-year period. The year-over-year improvement in gross profit margin was achieved despite a $2.4 million amortization of acquisition-related inventory write-up in the first quarter of 2021. Adjusted EBITDA of $52 million increased 28.1% over the prior-year period as a result of organic sales growth, strategic acquisitions and cost reductions taken across the company. Adjusted EBITDA margin of 18.6% increased approximately 420 basis points compared to the first quarter of 2020. Corporate expenses of $11.6 million in the first quarter of 2021 increased by $3.2 million from last year. Adjusted diluted earnings per share of $1.37 increased 43% compared to the prior-year period. Amortization of acquisition-related intangible assets in the first quarter was $11.3 million compared to $9 million in the prior-year period. We anticipate amortization of acquisition-related intangibles will be between $44 million and $46 million in 2021. As a reminder, our estimated normalized tax rate used in determining adjusted earnings per share is 30%. Moving to the discussion of segment performance, Sealing Technologies, which includes Garlock, STEMCO and the Technetics sealing businesses, reported sales of $146.5 million in the first quarter. The year-over-year decrease of 15.6% was due to portfolio reshaping activities last year. Excluding the impact of foreign exchange translation and sales from divested businesses, sales increased 0.9% versus the prior-year period. For the first quarter, adjusted EBITDA increased 1.2% to $33.9 million and adjusted segment EBITDA margin expanded 380 basis points to 23.1%. Excluding the impact of foreign exchange translation and divestitures, adjusted segment EBITDA increased 6.1% compared to the prior-year period. Turning now to Advanced Surface Technologies, which includes Alluxa, LeanTeq and the Technetics Semiconductor businesses, first quarter sales of $54.7 million increased to 49%, driven primarily by strong demand in the semiconductor market and the acquisition of Alluxa. Excluding the impact of foreign exchange translation and the Alluxa acquisition, sales increased 22.6% versus the prior-year period. For the first quarter, adjusted segment EBITDA increased 137% to $17.3 million, and adjusted segment EBITDA margin expanded from 19.9% a year ago to 31.6%, driven primarily by the Alluxa contribution and growth in the LeanTeq business. Excluding the impact of Alluxa and foreign exchange translation, adjusted segment EBITDA increased 57.5% compared to the prior-year period. In Engineered Materials, which consists of GGB and CPI, first quarter sales of $80.4 million increased 7.1% compared to the prior year, driven by stronger sales in general industrial, automotive and petrochemical markets, partially offset by weakness in the oil and gas and aerospace markets. Excluding the impact of foreign exchange translation and the divestiture of GGB's Bushing Block business, sales for the quarter increased 5.3%. For the first quarter compared to previous year, adjusted segment EBITDA increased 51.8% to $12.6 million, and adjusted segment EBITDA margin expanded 460 basis points to 15.7%. Excluding the impact of foreign exchange translation, adjusted EBITDA increased 39.3% compared to the prior-year period. We ended the quarter with cash of $232 million and with full availability on our $400 million revolver, less $11 million in outstanding letters of credit. At the end of March, our net debt to adjusted EBITDA ratio was approximately 1.4 times, a sequential decline from the 1.6 times reported at the end of the fourth quarter. Free cash flow for the quarter was $14.1 million, up from negative $4.9 million in the prior year. During the first quarter, we paid a $0.27 per share quarterly dividend totaling $5.7 million, a 4% increase versus the prior year. Moving now to 2021 guidance, taking into consideration all the factors that we know at this moment, including the ongoing global economic recovery from the COVID-19 pandemic which is stronger-than-anticipated a quarter ago, we are increasing 2021 adjusted EBITDA to be in the range of 190 million to $200 million, up from our previous guidance of $178 million to $188 million. The updated adjusted EBITDA range is based on sales growth of 7 to 12% over 2020 pro forma sales of $983 million, up from previous guidance range of 6 to 10% growth. We expect adjusted diluted earnings per share from continuing operations to be in the range of $4.74 to $5.08, up from the range of $4.32 to $4.66 provided last quarter. Our guidance assumes depreciation and amortization expense, excluding amortization of acquisition-related intangible assets, in the range of $33 million and $35 million and net interest expense of $15 million to $17 million, both unchanged from prior guidance.

We anticipate continued strong demand for the remainder of the year. Adjusted diluted earnings per share of $1.37 increased 43% compared to the prior-year period. We expect adjusted diluted earnings per share from continuing operations to be in the range of $4.74 to $5.08, up from the range of $4.32 to $4.66 provided last quarter.

0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0

And last but not least, we have recently announced our public commitment to aggressively reduce our greenhouse gas emissions 25% by 2030. On top of that, we also supply 1.5 million tons of automotive-grade blast to ArcelorMittal Nippon Steel in Calvert, Alabama. Even with increasing tons from 3 million to 5 million, we actually reduced our percentage of participation in the auto sector from 70% as AK Steel stand-alone to 40% as the combined Cleveland-Cliffs, allowing us to benefit faster from higher market prices for steel. We also supply 100% of our iron ore needs in-house, and that is extremely important. With that and several other initiatives, we are well on the way to reach our synergy target of $150 million by the end of this year. Additionally, once hydrogen becomes commercially available, our plant is already capable of using up to 30% of hydrogen as a partial replacement for natural gas with no equipment modification needs, and up to 70% with minor modifications, which would even further reduce emissions from the baseline. 6 blast furnace to make up for the lost Middletown production. We currently have 10 blast furnace in our portfolio and are keeping between six and eight points in simultaneous operations. Only as most liked of the recent steel price run-up positively impacted our fourth-quarter adjusted EBITDA performance of $286 million. Due to how contract prices work and usually applies lagging mechanisms and the fact that we only controlled the AM USA assets for the last 23 days toward the end of the year, our steel profitability in the fourth quarter of 2020 has not benefited or improved from these strong prices just yet. China has publicly stated their target of doubling EAF capacity from 100 million metric tons to 200 million metric tons over the next five years. And the only method to achieve that was by using the 35% equity cost provision from the indenture of the notice. The sole focus of issuing the small number of 20 million shares was to use this claw-back provision and retire the maximum amount possible of these high-coupon notes without paying a make-whole panel. We also successfully placed $1 billion of unsecured notes, the lowest coupons we have ever achieved as a high-yield issuer, respectively, 4.625% and 4.875% for eight- and 10-year issue. Finally, in January, we publicly announced our commitment to reduce greenhouse gas emissions by 25% by the year 2030, covering both the Scope one and Scope two emissions. As for our results, our fourth-quarter adjusted EBITDA of 286 million represented 127% increase over last quarter and 158% increase over last year's fourth quarter. In the steelmaking segment, of our 1.9 million net tons of shipments, we shipped 1.25 million net tons from the AK side and picked up the remaining 600,000 from our 23 days of ownership of AM USA. We expect to more than double this amount in the first quarter with total shipments of approximately 4 million net tons. Our shipments during the quarter were 44% coated, 22% hot rolled, 18% cold rolled, and 16% other steel, which includes stainless, electrical, slabs, plate, and rail. Third-party pellet sales during the fourth quarter were about 2.0 million long tons which consists of approximately 1.6 million long tons sold to AM USA prior to the acquisition date. Going forward, our external pellet sales volume should be 3 million to 4 million long tons per year, with the remainder of our output being used internally by our blast furnaces and direct reduction facility. Our steel supply contracts are roughly 45% annual fixed price with resets throughout the year, and 55% HRC index-linked. That latter piece further breaks down to about 40% on pricing lag, split between monthly and quarterly, with the remaining 15% on a spot basis that currently have lead times up to three months for hot-rolled and four months for cold-rolled, and coated products. When we completed the AM USA acquisition, we upsized our ABL facility from 2 billion to 3.5 billion, which is currently more than fully supported by our inventory and receivable balances. This has provided us with a sizable liquidity balance of 2.6 billion as of this week, of which approximately 850 million is earmarked for bond redemptions set to take place in March related to the capital markets transactions we completed earlier in February. Our fourth-quarter capital expenditures of 147 million took into account spending for the AM USA assets during the last 23 days of the year and included $61 million related to the Toledo plant, where we have about 60 million in run-out spend going into 2021. This is included in our 600 million to 650 million capital budget for 2021, which includes about 500 million in sustaining capex, as well as other small projects such as the new precision partners plant in Tennessee, walking beam furnaces at Burns Harbor, and the Powerhouse at Cleveland Works. We are ready to make our market on the industry with our 25,000 employees all rowing in the same direction, and we can't wait to show you what we can accomplish.

We expect to more than double this amount in the first quarter with total shipments of approximately 4 million net tons. Going forward, our external pellet sales volume should be 3 million to 4 million long tons per year, with the remainder of our output being used internally by our blast furnaces and direct reduction facility. This is included in our 600 million to 650 million capital budget for 2021, which includes about 500 million in sustaining capex, as well as other small projects such as the new precision partners plant in Tennessee, walking beam furnaces at Burns Harbor, and the Powerhouse at Cleveland Works.

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 1 0 0 0 0 0 1 0

The Times now has more than 1 million international digital subscriptions. We added a total of 455,000 net new digital subscriptions in the quarter, including 320,000 for News and 135,000 for Games, Cooking and Wirecutter. Total revenues grew 19% in the quarter, with digital subscription revenue rising 28% and advertising up 40% for both print and digital. As a result, adjusted operating profit grew 15%, despite a 20% increase in adjusted operating costs. While COVID remained the dominant story, as it has for the last 20 months, a wide range of topics also captured the public's attention, including the Afghanistan withdrawal and the tragic events in Haiti, the resignation of New York's governor, and our ongoing climate reporting. These are the kinds of stories that our 2,000-person journalism operation is uniquely positioned to cover with depth and thoughtfulness. Net subscription additions to Games were 35% higher in Q3 than the prior quarter, and more than 20% higher than last year. While a relatively small contributor to overall subscription additions, it's off to a promising start, especially among existing Times subscribers, with 10,000 net subscriptions in the first month. It's a single destination for listeners to enjoy the full range of our audio storytelling, which today reaches 20 million listeners a month. While year-on-year growth slowed in the third quarter compared with the second, as expected, digital advertising revenues grew 22% compared with 2019, the same rate of growth as we reported in the second quarter. Adjusted diluted earnings per share was $0.23 in the quarter, $0.01 higher than the prior year. We reported adjusted operating profit of $65 million, higher than the same period in 2020 by $9 million and $21 million dollars higher than 2019, which we continue to believe is an important comparison point given the impact that the pandemic had on our 2020 results. As Meredith noted, we added 320,000 net new subscriptions to our core digital news product and 135,000 net new stand-alone subscriptions to our other digital products, for a total of 455,000 net new digital-only subscriptions. As of the end of the quarter, we had approximately 980,000 Games subscriptions, approximately 900,000 Cooking subscriptions and 10,000 Wirecutter subscriptions, the Wirecutter subscription offering having launched at the beginning of September. The international share of total news subscriptions remained at 18% as of the end of the quarter. Total subscription revenues increased nearly 14% in the quarter with digital-only subscription revenue growing nearly 28% to approximately $200 million. Digital-only subscription revenue grew as a result of the large number of new subscriptions we have added in the past year, continued strength in retention of the $1 dollar-per-week promotional subscriptions who have graduated to higher prices, and to a much lesser extent, the impact from our digital subscription price increase. Digital news subscription ARPU for the quarter increased approximately 5 percentage points compared to the prior year and nearly 1 percentage point compared to the prior quarter. ARPU related solely to domestic news subscriptions increased 6.5 percentage points versus the prior year and approximately 1.5 percentage points versus the prior quarter. Print subscription revenues declined 1% as overall volume declines more than offset the benefit from the first quarter home delivery price increase. Total daily circulation declined approximately 7% in the quarter compared with prior year, while Sunday circulation declined approximately 5%. Compared with 2019, print subscription revenues declined 5%, as single-copy and international bulk sale copies declined, while revenue from domestic home-delivery subscriptions grew 1.7%. Total advertising revenues increased 40% in the quarter, as both digital and print advertising grew approximately 40%, in large part as a result of the impact of the comparison to weak advertising revenues in the third quarter of 2020. Compared with 2019, digital advertising grew more than 22% as a result of higher direct sold advertising, including traditional display and audio. Meanwhile, print advertising increased 39% compared with 2020, primarily driven by growth in the luxury and entertainment categories. However, print advertising remained below 2019 levels by 25%. Other revenues increased 19% compared with the prior year to approximately $56 million, primarily as a result of higher licensing, commercial printing associated with the addition of the Dow Jones family of products to our operations, and Wirecutter affiliate referral revenue. Adjusted operating costs were higher in the quarter by approximately 20% as compared with 2020 and approximately 16% higher than 2019. Cost of revenue increased 9% as a result of growth in the number of newsroom, Games, Cooking and audio employees; higher subscriber servicing costs; a higher incentive compensation accrual and other costs in connection with the production of audio content. Sales and marketing costs increased more than 65%, driven primarily by higher media expenses, which had been reduced last year in light of the historically strong organic subscription demand. When compared to 2019, sales and marketing costs increased more than 30% while media expenses were approximately 54% higher. Product development costs increased by approximately 18%, largely due to growth in the number of engineers and a higher incentive compensation accrual than had been recorded in the third quarter of 2020. General and administrative costs increased by 26%, largely due to a higher incentive compensation accrual and increased headcount in support of employee growth in other areas, stock price appreciation on stock-based awards, and higher consulting costs. We recorded one special item in the quarter, a $27 million gain related to a non-marketable equity investment transaction, which is reflected on the interest income and other line of our income statement. Our effective tax rate for the third quarter was approximately 27%, which is in line with the rate we expect on every dollar of marginal income we report with the possibility of significant variability around the quarterly effective rate. Moving to the balance sheet, our cash and marketable securities balance ended the quarter at $1.043 billion, an increase of $96 million compared with the second quarter of 2021. The company remains debt free with a $250 million revolving line of credit available. Total subscription revenues are expected to increase approximately 12% compared with the fourth quarter of 2020, with digital-only subscription revenue expected to increase approximately 25%. Overall, advertising and digital advertising revenues are expected to increase in the mid-teens compared with the fourth quarter of 2020. Other revenues are expected to increase approximately 15%. Both operating costs and adjusted operating costs are expected to increase approximately 17% to 20% compared with the fourth quarter of 2020 as we continue investment into the drivers of digital subscription growth and compare against another quarter of low spending last year.

Adjusted diluted earnings per share was $0.23 in the quarter, $0.01 higher than the prior year. As Meredith noted, we added 320,000 net new subscriptions to our core digital news product and 135,000 net new stand-alone subscriptions to our other digital products, for a total of 455,000 net new digital-only subscriptions. Total subscription revenues are expected to increase approximately 12% compared with the fourth quarter of 2020, with digital-only subscription revenue expected to increase approximately 25%. Overall, advertising and digital advertising revenues are expected to increase in the mid-teens compared with the fourth quarter of 2020.

0 0 0 0 0 0 0 0 0 0 1 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 0 0

Against that backdrop in comparison for the third quarter of 2021, we were able to post $1.85 and earnings per diluted share, versus $1.76 of adjusted diluted earnings per share in the year ago period. We grew revenues to $2.52 billion, with 14.5% overall revenue growth and 12.2% organic revenue growth. We posted 5.4% operating income margins despite strong headwinds from supply chain issues and labor disruptions caused by the Delta Variant. We grew remaining performance obligations or RPOs 18.7% from the year ago period to $5.38 billion. We generated operating cash flow of $121 million, despite the strong organic revenue growth. However, we have seen cost increases of 10% to 20% and anticipate that such increases will continue in the near future. We still post a decent operating income marked as a 5% against the year ago period of 6.9%. Further, this segment also bears the brunt of the dollar per gallon increase in the fuel, which gasoline and diesel year-over-year due to its large fleet and this had an impact of 20 to 30 basis points on operating income margins. Consolidated revenues of $2.52 billion are up $320 million or 14.5% over Quarter 3, 2020 and represent a new all-time quarterly revenue record for EMCOR. Excluding $50.3 million of revenues attributable to businesses acquired, pertaining to the time that such businesses are not owned by EMCOR and last year's quarter, revenues for the third quarter of 2021 increased nearly $270 million or a strong 12.2% when compared to the third quarter of 2020, which was still somewhat impacted by the effects of the COVID-19 pandemic. The specifics of each reportable segment are as follows: United States Electrical Construction revenues of $527.9 million increased $55.9 million or 11.8% from 2020s third quarter. Excluding acquisition revenues within the segment of $29.5 million this segment's revenues grew organically 5.6% quarter-over-quarter. United States mechanical construction segment revenues of $999.6 million increased $108.1 million or 12.1% from Quarter 3, 2020. Third quarter revenues from EMCOR's combined United States construction business of $1.53 billion increased $164 million or 12%, with 9.9% of such revenue growth being organic. United States Building Services Quarterly revenues of $632.5 million increased $75.9 million or 13.6%. Excluding acquisition revenues of $20.8 million the segment's revenues increased at 9.9% organically. EMCOR's industrial services segment revenues of $232.2 million increased $60.7 million or 35.4% due to improve demand for both field and shop services, as we are beginning to see some resumption of maintenance and small capital spending in the energy sector. United Kingdom Building Services revenues of $129.5 million increased $19.4 million or 17.6% from last year's quarter. Additionally, the segment's revenues were positively impacted by $8 million, a favorable foreign exchange rate movements within the quarter. Selling, General, Administrative expenses of $243.9 million represent 9.7% of third quarter revenues and compared to $226.8 million or 10.3% of revenues in the year ago period. The current year's quarter includes approximately $5.3 million of incremental expenses from businesses acquired, inclusive of intangible asset amortization, resulting in an organic quarter-over-quarter increase in SG&A of $11.9 million. Reported operating income for the quarter of $137.4 million or 5.4% of revenues, compares to operating income of $135.9 million or 6.2% of revenues in 2020's third quarter. The 80 basis point reduction in operating margin loss due to reductions in gross profit margin within several reportable segments due to a less favorable revenue mix, which I will elaborate on during my individual segment commentary. Despite this reduction in quarter-over-quarter operating margin, EMCOR's $137.4 million of operating income represent a new third quarter record. Specific quarterly performance by segment is as follows: Our U.S. Electrical Construction segment operating income of $44.1 million decreased $1.9 million from the comparable 2020 period. Reported operating margin of 8.3% represents a reduction from the 9.7% margin reported in 2020's third quarter. In addition, and as disclosed in last year's third quarter, the results from the prior year period benefited from the settlement of final contract value on two projects, which favorably impacted this segments Q3, 2020 operating income and operating margin by $4.4 million and 70 basis points respectfully. Third quarter operating income for U.S. Mechanical Construction Services segment of $82.3 million represents a $2.3 million increase from last year's quarter, while operating margin of 8.2% represents an 80 basis point reduction from the 9% earned in 2020's 3rd quarter. Our combined U.S. Construction business is reporting $126.4 million of operating income with an 8.3% operating margin. Operating income for U.S. building services is $31.6 million or 5% of revenues. This represents a reduction of $6.9 million and 190 basis points of operating margin quarter-over-quarter. Our U.S. Industrial Services segment operating loss of $3 million represents a $5.9 million improvement from the $8.9 million loss reported in 2020's 3rd quarter. U.K. Building Services operating income of $6.6 million or 5.1% of revenues represents an increase of $1.3 million and a 30 basis point improvement and operating margin quarter-over-quarter. Approximately $400,000 of this period-over-period improvement is due to positive foreign exchange movement, with the remainder attributable to an increase in project activity primarily within the commercial market sector. Additional financial items of significance for the quarter not addressed in the previous slides are as follows: Quarter three gross profit of $381.3 million is higher than the comparable quarter by $18.2 million or 5%, gross margin of 15.1% as lower than the 16.5% and last year's third quarter due to the shift in revenue mix in each of our U.S. Electrical and Mechanical Construction segments as well as their U.S. building services segment as I just referenced during my segment operating income discussion. Diluted earnings per common share of $1.85 represents a new quarterly record for the company and compares to $1.11 per diluted share in last year's third quarter. Non-GAAP diluted earnings per share for the quarter ended September 30, 2020 was $1.76 when compared to our current quarter's performance, we are reporting a $0.09 or 5.1% quarter-over-quarter earnings per share improvement. Revenues of $7.26 billion represent an increase of $747.8 million, or 11.5%, of which 9.4% of such revenue growth was generated by organic activities. Operating income of $387.8 million or 5.3% of revenues represents a significant increase from reported operating income for the first nine months of 2020 and a double digit increase from the corresponding adjusted non-GAAP operating income figure for that period. Year-to-date diluted earnings per share is $5.17 and represents an increase of approximately 14% over 2020's adjusted non-GAAP earnings per share for the nine month period. For the first nine months of 2021, we have generated approximately $114 million of operating cash flow, which is well below 2020s record performance. Further, it is important to note that last year's nine month operating cash flow was favorably impacted by $82.3 million due to government stimulus measures that allow for the deferral of certain tax payments in both the United States and the United Kingdom. As previously communicated, my expectation for full year 2021 was operating cash flow in excess of $300 million. With our upward revision in 2021 revenue expectations, I am still targeting the same level of operating cash flow performance, but it is possible that we may not eclipse the $300 million target should our working capital investment be greater than expected during the fourth quarter. Cash on hand is down from year-end 2020 driven by cash used in financing activities are approximately $213 million, inclusive of $183 million used for the repurchase of our common stock and cash used in investing activities of $137.5 million, most notably due to payments for acquisitions that have cash acquired totaling approximately $114 million. These uses of cash were partially offset by cash provided by operations of $114 million as I noted just a few moments ago. Working capital has increased by nearly $20 million. Net identifiable intangible assets increased by $19 million as the impact of additional intangible assets recognize the connection with the previously referenced acquisitions which was largely offset by $48 million of amortization expense during the year-to-date period. As a reference point, on a full year basis we anticipate depreciation and amortization expense, including both depreciation of property, plant and equipment, as well as amortization of intangible assets to be approximately $112 million for 2021. And EMCOR's debt-to-capitalization ratio has reduced to 11.4% from 11.9% at year-end, 2020. And I'm going to be on page 12 remaining performance obligations by segment and market sector. As mentioned earlier, total company RPOs at the end of the third quarter were just under $5.4 billion, up $849 million or 18.7% when compared to the year ago level of $4.5 billion. Organic RPO growth was strong 15.6%. Year-to-date for the nine months completed in 2021 total RPOs have increased $784 million, or just over 17%. Our two domestic construction segments experienced strong construction project growth in the quarter, with RPOs increasing $606 million or 16.5% from the same period last year. Building Services or RPO levels increased 180 million or almost 29% from the year ago quarter, 142 million and 180 million was organic. Our Industrial Services segments, our RPO increase of $53 million from September 2020. I'm now going to finish our discussion on pages 15 and 16. Our new guidance is diluted earnings per share of $6.95 to $7.15 and we now expect our revenues between $9.80 billion and $9.85 billion. To date into 2021, we have repurchased $183 million in EMCOR stock, paid $21 million in dividends and invested $114 million in acquisitions that will continue to position EMCOR for long term and sustained growth. Our board of directors just authorized a new and our largest share repurchase authorization of an additional $300 million.

Against that backdrop in comparison for the third quarter of 2021, we were able to post $1.85 and earnings per diluted share, versus $1.76 of adjusted diluted earnings per share in the year ago period. We grew revenues to $2.52 billion, with 14.5% overall revenue growth and 12.2% organic revenue growth. Consolidated revenues of $2.52 billion are up $320 million or 14.5% over Quarter 3, 2020 and represent a new all-time quarterly revenue record for EMCOR. Diluted earnings per common share of $1.85 represents a new quarterly record for the company and compares to $1.11 per diluted share in last year's third quarter. As previously communicated, my expectation for full year 2021 was operating cash flow in excess of $300 million. With our upward revision in 2021 revenue expectations, I am still targeting the same level of operating cash flow performance, but it is possible that we may not eclipse the $300 million target should our working capital investment be greater than expected during the fourth quarter. Our new guidance is diluted earnings per share of $6.95 to $7.15 and we now expect our revenues between $9.80 billion and $9.85 billion. Our board of directors just authorized a new and our largest share repurchase authorization of an additional $300 million.

1 1 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 1

This was a big change that we made in Win Strategy 2.0 2015, and we recognized the strong correlation between safety, engagement and business performance. 60% of our revenue comes from customers who buy four or more of these technologies. This is $3 billion of acquired sales. The organic growth came in at 21% decline. So we clearly felt that impact we paid down debt by $687 million. But if you look at the adjusted growth there, 18.1% versus 17.6%. So 50 bps increase in Q4 as a 16% decremental, just fantastic. If you go down to the last row, 20.4%, 160 basis points improvement, probably the first time, at least in recent memory that we've ellipsed 20% EBITDA margin. And on safety, 35% reduction in recordable incidents. So that's an all-time record in the history of the company, $2.1 billion. You can see the CFOA margins at 15.1%, free cash flow conversion 152%. You can see that we improved on our gross debt, down to 3.6 to 3.8 times. And then on a net debt stand point, is at 3.3 from 3.5. What we're very proud of is the cumulative debt reduction in FY 2020 was $1.3 billion, approximately 25% of the transaction debt. And then moving on 14 to the full year. So the full year organic was down about 10%. and again, same methodology without acquisitions, look at the operating margin that, to us, simply hold out flat at 17.2%, which is very hard to do on a volume drop and came in at a 17% decremental, which is a best-in-class performance. With acquisitions, looking at EBITDA adjusted, we raised it to 19.3%, again, showing the combination of the Win Strategy and acquiring companies that are accretive on margins to help out the total business. So if you go to page 16, all roads lead to the Win Strategy. It was approximately $270 million of restructuring. Immersed simplification on a broad standpoint is a structure and organization design on 80/20 and on Simple by Design. But just from a structure standpoint, you can see that we reduced 1/3 of the divisions of the company. Building on the success of the original Win Strategy, we did 2.0 in 2015 and of course, 3.0, just recently and we're very excited about that because we have a ton of potential. And if you go to 19, this was a look at top line resilience and go to 19. And we took the worst period that happened in the Great recession happened to be Q4 as well, and FY '09 was down 32%, and then what did we do last quarter? We did minus 21. First, the CLARCOR acquisition is now part of our organic performance, and it has 80% aftermarket. And then you've heard us talk about how we changed the mix in the international distribution by raising that by 500 bps over this period of time. I mentioned the CFOA record at $2.1 billion. Good times and bad times, you've seen 19 consecutive years up to double-digit CFOA and greater than 1% free cash flow conversion. So then if you go to 22, a big part of our success in Q4 was our actions on costs. So you can see the little donut chart in Q4 of FY 2020, 12% permanent, and that's going to move to 55% permanent in FY 2021. It was $25 million. And you see the $175 million of savings that was less than what we told you. We told you a range of $250 million to $300 million. We didn't necessarily give you specific guidance last quarter, but we in our own internal planning, we were projecting a 30% decline in volume. And hence, that's why we gave you the range in discretionary, came in at minus 21%, which we were grateful for, and we didn't need to do as many discretionary actions. Then when you move to 2021, you see discretionary of $200 million. But then you see a permanent action rising to $250 million. So we did $65 million we're proposing $65 million of restructuring in FY 2021. We did $60 million in the second half of FY 2020. So that's $125 million, of what I would call COVID-related restructuring that's going to generate this $250 million of savings. Current year adjusted earnings per share of $2.55 compares to $3.31 last year. Adjustments from the 2020 as reported results netted to $0.28, including business realignment expenses of $0.37 and lowered acquisition integration and transaction expenses of $0.05. These were offset by the tax effect of these adjustments of $0.09 and the result of a favorable tax settlement of $0.05. Prior year fourth quarter earnings per share had been adjusted by $0.14. You'll find the significant components of the $0.76 walk from prior year fourth quarter adjusted earnings per share to $2.55 for this year. With organic sales down 21%, adjusted segment operating income decreased the equivalent of $0.61 per share or $99 million. Decremental margins on a year-over-year basis were 19%. Decremental margins without the impact of acquisitions were just 16%, demonstrating excellent cost containment and productivity by the teams. Offsetting this decline, we gained $0.07 from lower corporate G&A as a result of salary reductions taken during the quarter and tight cost controls on discretionary spending. Interest expense cost an additional $0.15 of earnings per share as debt is currently at a higher level because of the acquisitions. Income taxes accounted for an additional $0.08 of expense because we had fewer favorable discrete tax credits in the current quarter. The fourth quarter organic sales decreased year-over-year by 21.1%, and currency had a negative impact of 1.1%. Acquisition impact of 8.1% partially offset these declines. Total adjusted segment operating margins were 17.4% compared to 17.6% last year. This 20 basis point decline is net of the company's ability to absorb approximately 100 basis points or $33 million of incremental amortization expense from the acquisitions. Sales from the acquisitions were $298 million and operating income on an adjusted basis were $32 million. The operating income for LORD and Exotic includes $35 million in amortization expense. I'd like to point out that the improvement of 50 basis points in legacy Parker operating income despite the $818 million drop in sales. The great work the teams did on controlling costs resulted in a 16% decremental margin for the quarter within the legacy businesses. For the fourth quarter, North America organic sales were down 24.7% while acquisitions contributed 7.6%. Operating margin for the fourth quarter on an adjusted basis was 16.5% of sales versus 18.4% last year. This 190 basis point decline includes absorbing approximately 60 basis points or $9 million of incremental amortization. North America's legacy businesses generated an impressive decremental margin of 24%, reflecting the hard work of diligent cost containment and productivity improvements, a favorable sales mix together with the impact of our Win Strategy initiatives. Organic sales for the fourth quarter in the industrial international segment decreased by 15.4%. Acquisitions contributed 5.4%, and currency had a negative impact of 2.9%. Operating margin for the fourth quarter on an adjusted basis increased to 16.8% of sales versus 16.4% last year. This 40 basis point improvement is net of the additional burden of approximately 110 basis points or $12 million of incremental amortization expense. The legacy businesses generated a very good decremental margin of just 9.8%, again, reflecting diligent cost containment, a favorable mix and the impact of the Win Strategy. Organic sales decreased 22.3% for the fourth quarter, partially offset by acquisitions contributing 14.3%. Operating margins for the current fourth quarter increased to 20.4% of sales versus 17.9% last year. This is net of the incremental amortization expense impact of approximately 190 basis points or $12 million, a favorable mix, proactive realignment actions, cost containment and lower engineering development costs contributed nicely to the quarter. Sales from the acquisitions for the year totaled $949 million and operating income on an adjusted basis contributed $114 million. The LORD team was able to pull forward synergy savings, reaching a run rate of $40 million by the end of the year. These savings plus a great deal of hard work by the teams on integration, productivity and adjusting to lower volume due to the pandemic, helps the acquisitions be $0.04 per share accretive for the year after absorbing $100 million of amortization expense. Adjusted EBITDA from LORD and Exotic is 26.3%. With this meaningful contribution from acquisitions, fiscal year 2020 total Parker adjusted EBITDA has increased to 19.3% as compared to 18.2% for fiscal year 2019. Note that the legacy Parker business was able to improve EBITDA margin 60 basis points to 18.8% despite lower sales of nearly $1.6 billion. We had strong cash flow this year, resulting in record cash flow from operating activities of $2.1 billion or 15.1% of sales. This compares to 13.5% of sales for the same period last year. After last year's number has adjusted for a $200 million discretionary pension contribution. Free cash flow for the current year is 13.4% of sales, and the conversion rate to net income is 152%. Based on the continued strong free cash flow generation, and effective working capital management, we made a sizable $687 million reduction to our debt during the quarter, which brought our full year debt reduction to $1.3 billion, which is approximately 25% of the debt issued for the LORD and Exotic Metals acquisition. I apologize for a typo on the slide, the second bullet should be $1.3 billion rather than $1.3 million. With this reduction, our gross debt EBITDA leverage metric at the end of the quarter was 3.6 times, down from 3.8 times at March 31, despite a drop in EBITDA. Our net debt-to-EBITDA reduced to 3.3 times from 3.5 times at March 31. We've continued to suspend our 10b5-1 share repurchase program and we remain committed to paying our shareholders a dividend, and we intend to uphold our record of annually increasing the dividend paid. Total orders decreased by 22% as of the quarter ending June. This year-over-year decline is a consolidation of minus 29% within Diversified Industrial North America, minus 21% within Diversified Industrial International and minus 5% within Aerospace Systems orders. In today's pandemic environment, total sales for fiscal year 2021 are expected to decrease between 10.7% and 6.7% compared to the prior year. Anticipated organic decline for the full year is forecasted at a midpoint of 11.3%. Acquisitions are expected to benefit growth at a midpoint of 2.7% while currency is projected to have a marginal negative 0.1% impact. At the midpoint, total Parker adjusted margins are forecasted to decrease approximately 80 basis points from prior year. For guidance, we are estimating adjusted margins in a range of 17.8% to 18.4% for the full fiscal year. The full year effective tax rate is projected to be 23%. For the full year, the guidance range on an as-reported earnings per share basis is $7.41 to $8.41 or $7.91 at the midpoint. On an adjusted earnings per share basis, the guidance range is $9.80 to $10.80 or $10.30 at the midpoint. The adjustments to the as-reported forecast made in this guidance, at a pre-tax level, include business realignment expenses of approximately $65 million for the full year fiscal 2021 with the associated savings projected to be $120 million in the current year. We anticipate integration costs to achieve of $19 million. Synergy savings for LORD are projected to hit a run rate of $80 million and for Exotic, a run rate of $2 million by the end of the year. And in addition, acquisition-related intangible asset amortization expense of $321 million will be included in our adjustments. Some additional key assumptions for full year 2021 guidance at the midpoint are: sales will be divided 47% first half, 53% second half; adjusted segment operating income is divided 43% first half, 57% second half; adjusted earnings per share first half/second half is divided 40%, 60%. First quarter fiscal 2021 adjusted earnings per share is projected to be $2.15 per share at the midpoint, and this excludes to $0.67 per share or $115 million of projected acquisition-related amortization expense, business realignment expenses and integration costs to achieve. On slide 36, you'll find a reconciliation of the major components of fiscal year 2020 adjusted earnings per share compared to the adjusted fiscal year 2021 guidance of $10.3 at the midpoint. Fiscal year 2020, adjusted earnings per share was reported at $10.79. To make it comparable to the fiscal year 2021 guidance, which includes an adjusted for which includes an adjustment for acquisition-related asset amortization expense, we show the adjustment of $1.68 to get to a comparable $12.47. With organic sales down over 11%, adjusted segment operating income is expected to drop approximately $1.95. This would result in decremental margins of 27% on a year-over-year basis. Corporate G&A and other expense is projected to negatively impact earnings per share by $0.36 because of gains achieved in fiscal year 2020 that are not anticipated to repeat. Offsetting these declines, interest expense is projected to be $0.29 lower in fiscal year 2021. An income tax rate of 23% will reduce earnings per share by $0.10 year-over-year. And the assumption of a full year of suspending share buybacks is projected to result in a $0.05 dilution due to an increase in average shares outstanding. While the top line revenue that Cathy articulated in IR Day was $16.4 billion, that will be very hard to hit. The margin targets of 21% at the op margin and EBITDA free cash flow conversion and EPS, barring a recession in FY '23 and recognize that we have three full fiscal years left to get here and provided we get some modest growth as we go in FY '22 and '23, we believe we can hit these numbers.

Current year adjusted earnings per share of $2.55 compares to $3.31 last year. You'll find the significant components of the $0.76 walk from prior year fourth quarter adjusted earnings per share to $2.55 for this year. For the full year, the guidance range on an as-reported earnings per share basis is $7.41 to $8.41 or $7.91 at the midpoint.

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Along those lines, recall two adjustments during 2020, including a non-cash charge in the first quarter of 2020 related to the sale of 703 locomotives for $385 million and a $99 million impairment charge in the third quarter of 2020 related to an equity method investment. 2021 serves as the pinnacle of the plan and is marked by the achievement of our 60% full year operating ratio and record productivity levels across our operation. We've grown earnings per share by 27%, reduced our operating ratio by 530 basis points and returned nearly $10 billion back to our shareholders in the form of share repurchases and dividends. Revenue growth of 11% outpaced our expense increase of 8%, producing an 18% improvement in earnings per share and a fourth-quarter record operating ratio of 60.4%. For the full year, revenues improved 14%, which more than offset the 6% increase in operating expenses. We delivered the hallmark 60% operating ratio for the full year, an improvement of 430 basis points over the adjusted full year 2020 results and our sixth consecutive year of improvement. Pronounced changes in business mix were evidenced by the unit volume decline of 4% while GTMs were up 1%. Productivity gains were key to handling volumes in the quarter as the transportation workforce contracted by 8%. The reduction in crew starts of 4%, growth in train weight of 10%, and growth in train length of 8% were critical elements of this productivity formula as well. Where active locomotive count increased by 5% as the network slowed, we kept focus on efficiently deploying those locomotives on the larger trains, which helped drive the 3% improvement in fuel efficiency. We've improved average train weight and length 21% and 20%, respectively, since mid-2019 when TOP21 was launched. We have efforts in the pipeline to continue this trend: first, on the infrastructure front, in 2021, we launched work on 9 siding extensions, one of which was quickly completed and in service by the fourth quarter. In 2021, we improved our fleet composition to nearly 60% AC power and 65% of our road fleet is capable of distributed power. Total revenue improved 11% year over year to $2.9 billion as strong demand and favorable price conditions more than offset the 4% volume decline in the fourth quarter. Pricing and strength across all markets contributed to the 15% increase in revenue per unit, and we reached record revenue per unit less fuel across all of our markets. Gains in our metals business also contributed to growth with volume in these markets up 6% year over year on sustained high demand from the strengthening manufacturing sector. Partially offsetting merchandise growth was a decline in automotive shipments, which were down 9% year over year due to slower velocity coupled with strong comps in the fourth quarter of 2020 when the industry was boosted by pent-up demand. Merchandise revenue per unit increased 6% year over year, driving total revenue growth of 8% to $1.7 billion for the quarter. We've demonstrated year-over-year growth in this metric for 26 of the last 27 quarters, which further demonstrates our ability to drive sustainable revenue growth. Our intermodal franchise continued to face pressure from supply chain volatility, resulting in a volume decline of 7% year over year. But despite these headwinds, we achieved record intermodal revenue in the quarter, up 14% year over year, and that was driven by increased fuel revenue, storage revenue, and price gains. Revenue increased 21% year over year in the fourth quarter, which was driven by price gains and higher demand in a tightly supplied market. Coal revenue per unit reached near-record levels and increased 16% year over year. Full year 2021 revenue grew 14% to $11.1 billion on 5% volume growth. In addition, industrial production is projected to grow 4% in 2022, which will drive demand for most of our markets, particularly for our steel markets. Residential construction spending is forecasted to grow more than 6% this year, following the sharp increase in 2021, supporting continued gains in several of our industrial markets. U.S. light vehicle production is expected to reach 10.3 million units this year, which is approaching pre-pandemic levels of 2019. Durable goods consumption is expected to improve 3% and that's on top of the near-record 19% growth in 2021. As Ed noted, revenue was up 11% despite a 4% volume decline. This more than offset an 8% increase in operating expense, which led to 140 basis points of operating ratio improvement to a fourth-quarter record of 60.4%. Improvements in RPU, coupled with strong productivity led to a record Q4 operating income with growth of 15% or $145 million. And we set another record for free cash flow, up 30% or $642 million for the full year. While operating expense grew $134 million or 8%, it is up less than 3% or $44 million, apart from fuel cost increases. The $90 million headwind for fuel is driven almost entirely by price. You'll see purchase services and rents of $46 million with the majority of the year-over-year increase driven by the same drivers we talked about on the Q3 call, higher expenses associated with Conrail, higher technology spend associated with our technology strategy, higher drayage expense associated with more hourly drivers used to alleviate terminal congestion primarily in Chicago, and we continue to see inflationary pressure on lift expenses going forward as it relates to contractor labor availability. It is up 2%, but you'll note the $33 million in savings from 6% lower headcount and that more than offset increases in pay rates and overtime. Meanwhile, incentive compensation comparisons in the quarter are a headwind of $24 million. Taking a look at the rest of the P&L below op income, you will see that other income of $21 million is unfavorable year over year by $22 million, due in part to lower net returns from company-owned life insurance, but also fewer gains on the dispositions of nonoperating properties. Our effective tax rate in the quarter was in our expected range at 23% and similar to last year. Net income increased 13%, while earnings per share grew by 18%, supported by 3.3 million shares we repurchased in the quarter. Increased demand across all markets and strong results through yield-up resulted in 14% year-over-year revenue improvement. Expenses increased at less than half that rate, up 6% compared to 2020 as we continued our operational transformation while responding to market changes. We produced record operating income of over $4.4 billion, up 28% or $961 million versus the adjusted 2020 results. That is 430 basis points of year-over-year improvement in line with the guidance we provided. Rounding out the results, net income increased 27%, while diluted earnings per share increased 31%, augmented by our strong share repurchase program, enabled a record-free cash flow that we will wrap with on Slide 22. Free cash flow is a record $2.8 billion for 2021, up 30% year over year and we reported a strong 93% free cash flow conversion for the year. Property additions were about $100 million lower than our $1.6 billion guidance due to timing issues related to the continued supply chain disruptions. The sharply higher profitability in the company in '21 allowed for an over $2 billion increase in shareholder distributions for the year. And I'll point out, we just increased our dividend again by $0.15 or 14% rolled in 2022. With this positive momentum in revenue, productivity, and efficiency and based on our current expense projections, we expect to achieve greater than 50 basis points of OR improvement in 2022 and we won't stop there. In addition, we expect a dividend payout ratio range of 35% to 40% and capital expenditures in the range of $1.8 billion to $1.9 billion.

Revenue growth of 11% outpaced our expense increase of 8%, producing an 18% improvement in earnings per share and a fourth-quarter record operating ratio of 60.4%. This more than offset an 8% increase in operating expense, which led to 140 basis points of operating ratio improvement to a fourth-quarter record of 60.4%.

0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

The accolade marks the eighth consecutive time our company has earned this honor, and it's our 19th J.D. Power award overall, when you include the 11 straight No. 1 rankings we've received for mortgage origination. This approach resulted in Rocket's forbearance rate being 41% lower than the industry. Rocket Companies generated $84 billion in closed loan volume and $2.8 billion of revenue in the second quarter of 2021. Our Q2 EBITDA of $1.3 billion was more than triple the same period two years ago, demonstrating the sheer power and scalability of the Rocket platform. Just last month, Rocket Homes announced an important milestone, hosting home listings in all 50 states. Rocket Companies is now the only residential real estate ecosystem that has mortgage licenses, real estate broker licenses, home search listings, real estate agents, and real estate agent partners spanning all 50 states. With nationwide coverage, Rocket Homes is performing at scale with traffic growing sixfold year over year to reach nearly 2 million unique monthly visitors in the second quarter. In addition, Rocket Homes drove a record $2 billion in second-quarter real estate transaction value, representing the value of homes purchased and sold through our real estate agent network. Rocket Homes draws in-process clients into the Rocket ecosystem even earlier in the funnel and regularly engages with our pool of nearly 2.4 million servicing clients, representing $0.5 trillion in servicing value. From the beginning of the year, roughly 70% of Rocket Homes' transactions involve both an agent and the Rocket Homes real estate agent network and in Rocket Mortgage, representing an attach rate among the highest in the industry. In fact, Amrock serves as the appraisal management company for approximately 65% of appraisals ordered for our direct-to-consumer mortgages, illustrating the power of our ecosystem. According to third-party research, the current solar energy market is expected to quadruple by 2030, with roughly one in eight homes adopting solar power. Looking at Rocket Auto, the company drove record performance in the second quarter with both auto unit sales growth of 140% and in gross merchandise value more than tripling year over year. During 2021, intelligent client targeting models were deployed to more than 80% of our client contacts, ensuring that our Rocket Cloud force is reaching out to clients at the exact moment they're most ready to engage with us. By tailoring the experience to the client, we have lifted conversion resulting in approximately $4 billion in incremental application volumes so far this year. The number of real estate agents leveraging Rocket Pro insights more than tripled to 50,000, up from just 14,000 two quarters ago. Over the past month, more than 20,000 unique mortgage professionals relied on our interactive broker tools to move mortgage applications to the finish line and their clients to the closing table. We recently launched our new integration with Credit Karma, allowing their 110 million users to apply for our Rocket Mortgage directly inside their app. This new relationship will allow the company's 9,000-plus agents to originate home loans through Rocket Mortgage. In 2018, we originated $83 billion in mortgage volume. In 2019, that grew to $145 billion, and we ended 2020 with $320 billion in mortgage value. In addition, we expect our servicing local grow more than 30% this year to over $600 billion, driving a recurring cash revenue stream of more than $1 billion. Under these market conditions, Rocket exhibited the scalability of our platform, with our loan origination volume growing 121% in 2020 year over year, while our expenses grew only 47%. During the second quarter of 2021, Rocket Companies generated $2.8 billion of adjusted revenue, which represents a 110% increase from Q2 2019 and $1.3 billion of adjusted EBITDA, up more than 220% compared to Q2 2019, representing a 46% adjusted EBITDA margin. We generated net income of $1 billion, which exceeded full-year 2019 net income, and we generated adjusted net income of $920 million in Q2 '21, which was more than triple Q2 of 2019 levels, representing a 33% adjusted net income margin. Our adjusted earnings per share was $0.46 for the quarter. Rocket Mortgage generated $84 billion of closed loan origination volume during the quarter, up more than 160% from $32 billion in Q2 2019 and in line with the midpoint of our Q2 guidance. We estimate that the largest retail purchase lender did $60 billion of purchase origination volume in 2020, excluding correspondent volume. With the success we have had during the first half of 2021 and the momentum we have going into the third quarter, we expect that our full-year 2021 purchase volume will exceed $60 billion. 1 retail purchase lender by 2023. For the quarter, our rate lot gain on sale margin was 278 basis points, which is in line with our expectations at the midpoint of our guidance and substantially higher than most multi-channel mortgage originators. Generating $484 million of gross merchandise value during the second quarter, up nearly 35% as compared to Q1 2021. Through the first half of 2021, we have generated $844 million of GMV, and are on track to more than double 2020 levels. However, we're successful in generating record real estate transaction value of $2 billion, which represents the value of homes purchased and sold through our real estate agent network during the second quarter. We also saw record traffic to rockethomes.com during the second quarter or nearly 2 million monthly unique visitors, expanding an important top-of-the-marketing funnel. Within Rocket, we have more than 3,000 team members dedicated to building proprietary technology. We then maintain ongoing loan servicing relationships with 2.4 million clients, representing over $500 billion in outstanding loan principal. Mortgage servicing drives a recurring cash revenue stream for Rocket Companies that now exceeds $1 billion on an annual basis with service unpaid principal balance of 34% in the last 12 months, and net retention north of 90%. For the third quarter, we currently expect closed loan volume in the range of $82 billion to $87 billion and rate lock volume between 83 billion and $90 billion. We expect third-quarter gain on sale margin to be in the range of 270 to 300 basis points. We exited the second quarter with $2 billion of cash on the balance sheet, and an additional $2.4 billion of corporate cash used to self-fund loan originations for a total available cash of $4.4 billion. Total liquidity stood at $7.8 billion as of June 30th, including available cash plus undrawn lines of credit and undrawn MSR lines. This year, we expect to generate more than $320 billion in closed loan volume, exceeding last year's record. Keep in mind, even at these origination levels, we need less than $1 billion of cash on hand to properly operate our business. With $7.8 billion in available liquidity, the $4.4 billion in total cash is largely held for investments, dividends, and share buybacks. Over the past 24 months, we have generated $16.3 billion in adjusted EBITDA. Our MSR portfolio has a fair value of $4.6 billion, and our balance sheet has total equity of $8.2 billion.

Our adjusted earnings per share was $0.46 for the quarter.

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

We hit a significant milestone that many companies aspire to, achieving non-GAAP revenues of over $1 billion in 2020. We grew non-GAAP revenues by 9% year over year for the full-year 2020 and 6% year over year in Q4. We delivered an adjusted EBITDA margin of 48% for each of the full year and in Q4. Our non-GAAP subscription revenue grew by 22% for the full-year 2020, and our net retention rate was approximately 105% on a trailing 12-month basis. We sustained strong maintenance renewal rates north of 90% in 2020, and the fourth-quarter renewal rates held up well despite the cyberattacks on SolarWinds, which we announced on December 14. Additionally, our MSP business again delivered double-digit 15% growth in both the fourth quarter and the full year, surpassing $300 million in revenue in 2020. We ended the year with more than 25,000 MSP partners that service over 500,000 small, medium enterprise customers, reflecting our status as a leading provider of remote monitoring and management, security, data protection and business management solutions for MSPs around the world. In December, we announced the confidential submission of a Form 10 registration statement with the SEC for the potential spin-off of our MSP business. Additionally, after extensive investigation, we have not found SUNBURST in any of our more than 70 non-Orion products. One update that I believe is critical to share is that we previously disclosed that the number of customers that may have installed an affected version of the Orion software platform was fewer than 18,000. This is consistent with statements by National Security Advisor for Cyber and Emerging Technology, Anne Neuberger, that as of February 17, nine federal agencies and about 100 private sector companies were compromised. We finished near the high end of the range of our outlook for the fourth quarter for non-GAAP total revenue, ending the quarter with $265.5 million in revenue, representing year-over-year growth of approximately 6%. Non-GAAP maintenance revenue was $124.3 million in the fourth quarter, up 8% versus the prior year, driven by consistent maintenance renewal bookings and reflecting sequential acceleration in maintenance revenue growth since the second quarter, which was impacted the most by the pandemic. This growth was driven by solid customer retention as evidenced by maintenance renewal rates of over 90% in the fourth quarter. For the fourth quarter, non-GAAP license revenue was $34.5 million, which represents a decline of approximately 23% as compared to the fourth quarter of 2019. Total non-GAAP license and maintenance revenue was $158.8 million in the fourth quarter, down 1% versus the prior year. Total ARR reached approximately $960 million as of December 31, 2020, reflecting year-over-year growth of 14%, which includes approximately 2 percentage points of contribution from our SentryOne acquisition in the fourth quarter. Subscription ARR grew 17%, reaching $435 million at the end of the quarter. Fourth-quarter non-GAAP subscription revenue was $106.6 million, up 20% year over year, which was driven by 16% year-over-year growth in our MSP business, as well as solid performance in our core IT management subscription business. Our subscription net retention rate for the year was 105%. Total non-GAAP revenue for the year ended December 31, 2020, was $1.02 billion, which represents a major milestone as we broke the $1 billion mark in annual revenues threshold while delivering 9% growth over 2019 total revenue of $938.5 million. For the year ended December 31, 2020, non-GAAP subscription revenue was $399 million, which represents growth of 22% year over year. Non-GAAP license and maintenance revenue for the full year in 2020 increased 2% year over year to $622.7 million. Non-GAAP maintenance revenue grew at a rate of 7%, reaching over $478 million. This growth was driven by solid customer retention as evidenced by a maintenance renewal rate of 91.5% in 2020. We finished 2020 with 1,057 customers that have spent more than $100,000 with us in the last 12 months, which is an 18% improvement over year-end 2019. Fourth-quarter adjusted EBITDA was $127.1 million, representing an adjusted EBITDA margin of 48%, exceeding the high end of the outlook for the fourth quarter. And for the year ended December 31, 2020, adjusted EBITDA was $489.7 million representing an adjusted EBITDA margin of 48% for the full year as well. Unlevered free cash flow for the full year totaled $431 million, which reflects an adjusted EBITDA conversion rate of 88%. Net leverage at December 31 was 3.2 times our trailing 12 months adjusted EBITDA, despite the use of $142 million of cash on the acquisition of SentryOne in the fourth quarter. For the full year in 2020, we reduced our net leverage ratio from 3.9 times to 3.2 times, reflecting the power of our model to complete an acquisition the size of SentryOne and still delever significantly over the course of the year. With $370.5 million in cash at December 31, we are well-positioned from a financial standpoint to continue to invest in the future growth of our business. For the first quarter of 2021, we expect non -- total non-GAAP revenue to be in the range of $247 million to $252 million, representing year-over-year growth of negative 1% to positive 1%. Adjusted EBITDA for the first quarter is expected to be $98 million to $101 million, which implies an approximately 40% EBITDA margin. As it relates to 2020 and 2021 adjusted EBITDA, we expect our investments in security-related initiatives to be approximately $20 million to $25 million. Non-GAAP fully diluted earnings per share is projected to be $0.19 to $0.20 per share, assuming an estimated 318 million fully diluted shares outstanding. Our outlook for the first quarter assumes a non-GAAP tax rate of 22%, and we expect to pay approximately $17.2 million in cash taxes during the first quarter of 2021. dollar exchange rate of 1.34. Increasing the percentage of our recurring revenue has been a focus of ours over the past five years, and recurring revenue is now 86% of our total revenue.

We finished near the high end of the range of our outlook for the fourth quarter for non-GAAP total revenue, ending the quarter with $265.5 million in revenue, representing year-over-year growth of approximately 6%. With $370.5 million in cash at December 31, we are well-positioned from a financial standpoint to continue to invest in the future growth of our business. For the first quarter of 2021, we expect non -- total non-GAAP revenue to be in the range of $247 million to $252 million, representing year-over-year growth of negative 1% to positive 1%. Non-GAAP fully diluted earnings per share is projected to be $0.19 to $0.20 per share, assuming an estimated 318 million fully diluted shares outstanding.

0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 0 0 1 0 0 0

They worked tirelessly to ensure the successful combination of these 2 high-quality and complementary real estate platforms. It all goes back to our 3 Ps, Properties, Processes and People and we absolutely excel on all 3 fronts. We signed approximately 5,000 square feet in the third quarter including 7 anchor leases, 3 lease for grocers. In the past 2 quarters, we leased over 1.2 million square feet which are unprecedented levels for our legacy portfolio. Blended lease spreads were 20.7% and 13.4% on a GAAP and cash basis respectively. It is now at 92.8% for the portfolio. This 130 basis point increase from last quarter is another indication of the continuing recovery in our operation and -- operational and financial performance. The outsize leasing volume continues to widen our total retail portfolio leased to occupied spread to 400 basis points with current sign not-open NOI of approximately $14 million. Together with the legacy RPAI portfolio, we have signed not-open NOI of approximately $33 million. We signed another 5 anchor leases this quarter for a cumulative total of 12 anchor leases since the program's inception. These 12 leases are expected to generate average cash yields of over 26% with comparable spreads of 14% on a cash basis. We now have nearly 60% of our ABR in warmer and cheaper markets, 40% of which belongs in Texas and Florida alone. The combined portfolio now has 26% of value in superzip [Phonetic] neighborhoods, the second highest percentage in the sector. A final benefit, I'd like to point out is that KRG is now a top 5 open-air shopping center REIT. We entered into a 50-50 joint venture to develop 285 apartment units and 24,000 square feet of ground floor retail. We believe the approximate value of this entitled land as is with no additional spend is between $125 and $180 million. We were able to hit the ground running on day 1 due to our pre-close planning. No integration of 2 companies is flawless but we are very pleased where we are to date. Turning to KRG's stand-alone third quarter results, we generated $0.25 of NAREIT FFO and $0.33 of FFO as adjusted. As set forth on page 19 of our supplemental, the net 2022 collection impact in the third quarter was minimal with the collection of $2.4 million of prior bad debt, offset by $300,000 of accounts receivable we now deemed uncollectible. Our same property NOI growth for the third quarter is 10.8% primarily driven by a reduction in bad debt as compared to the prior year period. This includes the benefit of approximately $2.1 million of previously written-off bad debt that we collected in the third quarter. Excluding those amounts, our same-store NOI growth would be 6%. With respect to outstanding accounts receivable items as of last Friday, the balance on our outstanding deferred rent stands at $1.7 million as compared to $6.1 million as of December 31, 2020. Our net debt to EBITDA was 6.1 times, down from 6.4 times last quarter. Pro forma for the merger, third quarter net debt to EBITDA is 6 times along with roughly $1 billion of liquidity, adding in $33 million of signed not-open NOI for the combined portfolio, our net debt to EBITDA would be 6 times. As a reminder, we estimated stabilized cash synergies of $27 million to $29 million and stabilized GAAP synergies of $34 million to $36 million. In fact, as of the closing approximately $21 million of annualized GAAP savings have already been achieved. It is important to note that we anticipate realizing on the additional annualized $13 million to $15 million of GAAP synergies over the next 12 to 18 months. Finally, due to the timing of the closing of the merger and the challenge in -- challenge of determining correct guidance for a partial quarter we are suspending our 2021 guidance.

Turning to KRG's stand-alone third quarter results, we generated $0.25 of NAREIT FFO and $0.33 of FFO as adjusted. Finally, due to the timing of the closing of the merger and the challenge in -- challenge of determining correct guidance for a partial quarter we are suspending our 2021 guidance.

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 1

Now, I've been with the company for 18 years, much of it in operations. It's our 8,500 coworkers who are committed to excellence, delivering the highest value to our customers at the lowest cost possible. Our adjusted earnings per share growth of 6% to 8% combined with our dividend provides a premium total shareholder return of 9% to 11%. In 2020, we delivered adjusted earnings per share of $2.67, up 7% from 2019 and achieved operating cash flow of almost $2 billion, excluding $700 million of voluntary pension contributions in 2020. Today, we're raising our adjusted earnings per share guidance for 2021 by $0.01 to $2.83 to $2.87 with a focus on the midpoint. This reflects annual growth of 6% to 8% from our 2020 results. Last month, we announced our 15th dividend increase in as many years, $1.74 per share, up 7% from the prior year. We continue to target long-term annual earnings and dividend per share growth of 6% to 8%, again with a focus on the midpoint. Today, we're also increasing our five-year capital plan to $13.2 billion, up $1 billion from our prior plan. 18 consecutive years of industry-leading financial performance. We were able to provide over $80 million of support to our customers and communities in 2020 through support programs, low-income assistance, donations to foundations and reinvestment to improve safety and reliability. This quite change in our work practices as a result of the pandemic, we maintained first quartile, employee engagement, achieved first quartile customer experience and attracted 126 megawatts of new load to our state, which brings with it significant investment and over 4,000 new jobs. We added over 800 megawatts of new wind and are executing on 300 megawatts of new solar. Furthering our commitment, over $700 million of investments were made to advance our clean energy transition, additionally, our demand response and energy efficiency programs continue to save our customers money, reduce carbon and earn an incentive. And last but certainly not least we finished the year with more than $100 million in cost savings driven by the CE Way. We will continue to lead the clean energy transition with support from our new five-year $13.2 billion capital investment plan, which translates to over 7% annual rate base growth and focuses on enhancing the safety and reliability of our systems, as we move toward net zero carbon and methane emissions. In fact, 40% of our plan directly supports our clean energy transition and includes our renewable generation, electric distribution investment to support this generation, grid modernization as well as programs like our main invented service replacement programs which reduce methane emissions. We have unique cost saving opportunities relative to peers and two above market PPAs, Palisades and MCV, which will generate nearly $140 million of power supply cost recovery savings. This coupled with the future retirement of our remaining coal facilities provides over $200 million or 5% cost savings for our customers. What makes us unique is our engaged coworkers, we value our best-in-sector employee engagement and our 8,500 coworkers who work every day to deliver the best value for our customers. We're pleased to report our 2020 adjusted net income of $764 million or $2.67 per share, up 7% year-over-year off our 2019 actuals. To avoid being repetitive with Garrick's earlier remarks, I'll just note that we invested $2.3 billion of capital in our electric and gas infrastructure to the benefit of customers, including investments in wind farms, which add approximately $500 million of RPS related rate base, which I'll remind you earns a premium return on equity of 10.7%. I'll also note that our treasury team had a banner year successfully raising approximately $3.5 billion of cost effective capital which includes roughly $250 million of equity while navigating turbulent capital market conditions over the course of 2020. Turning the page to 2021, as mentioned, we are raising our 2021 adjusted earnings guidance to $2.83 to $2.87 per share, which implies 6% to 8% annual growth off our 2020 actuals. All in, we will continue to target the midpoint of our consolidated earnings per share growth range of 7% at year-end, which is in excess of the sector average. To elaborate on the glide path to achieve our 2021 earnings per share guidance range, as you'll note in the waterfall chart on Slide 15, we'll plan for normal weather, which in this case amounts to $0.06 per share of positive year-over-year variance given the mild winter weather experienced in 2020. Additionally, we anticipate $0.41 of earnings per share pickup in 2021 attributable to rate relief net of investment costs largely driven by the orders received in the second half of 2020. As we look at our cost structure in 2021 you'll note approximately $0.27 per share of negative variance attributable to incremental O&M approved in our recent rate cases to support key initiatives around safety, reliability customer experience and decarbonization, needless to say we have underlying assumptions around productivity and waste elimination, driven by the CE Way and we'll always endeavor to overachieve on those targets while delivering substantial value for our customers. And as usual, we didn't make excuses instead we offer transparency, devise our course of action and counted on the perennial will of our 8,500 co-workers to deliver for our customers, the communities we serve, and for you, our investors. To summarize our financial objectives in the near and long term, we expect 6% to 8% adjusted earnings per share and dividend growth and strong operating cash flow generation. Given the increase in our five-year capital plan, we anticipate annual equity need of up to $250 million in 2021 and beyond, which we are confident that we can comfortably raise through our equity dribble program to minimize pricing risk. And two additional items I'll mention with respect to our financial strength as we kick off 2021 that are not on the page but no less important are that we concluded 2020 with $1.6 billion of net liquidity, which positions our balance sheet well as we execute our updated capital plan going forward. The latter of which benefits roughly 3,000 of our active co-workers and 8,000 of our retirees.

Today, we're raising our adjusted earnings per share guidance for 2021 by $0.01 to $2.83 to $2.87 with a focus on the midpoint. Turning the page to 2021, as mentioned, we are raising our 2021 adjusted earnings guidance to $2.83 to $2.87 per share, which implies 6% to 8% annual growth off our 2020 actuals.

0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0

Developing our working-together-from-anywhere initiatives to enable our global workforce to collaborate in new ways, increasing the number of females and minorities on our senior leadership team to 35%, creating and filling a diversity, and inclusion leadership position to further strengthen our commitment to equality for everyone, and developing a platform for small groups to talk openly about biases, belief systems, and the importance of valuing different perspectives. Despite the continued challenges created by the pandemic and further lockdowns across much of Europe, our fourth-quarter adjusted EBITDA margin expanded 230 basis points to 17.4% with adjusted EBITDA of $48.1 million, an increase of 11% year over year. With approximately $230 million of cash on the balance sheet at the end of the quarter, an untapped revolver, and our relentless focus on cash generation, we're well positioned to consider additional bolt-on acquisition opportunities. And third, we have made significant progress over the last 18 months, stabilizing our financial results and evolving our portfolio toward more profitable businesses in higher-growth markets to improve cash flow return on investment. Our nimble response to the COVID pandemic and robust cost mitigation initiatives, together with our portfolio reshaping actions, enabled our company to achieve flat year-over-year adjusted EBITDA despite a nearly 11% decline in sales during 2020. This represents an adjusted EBITDA margin expansion of 170 basis points for the full year, a tremendous feat for the EnPro team amid 2020 macroeconomic challenges. With these actions, we anticipate our heavy-duty truck business annual sales will range from $125 million to $175 million, reducing the percentage of our total sales in trucking from the mid-20s to the mid-teens. This resulted in a 30% increase in backlog mainly driven by an increased order flow from heightened demand for clean room services. Over the past year, the business has maintained its high-profit margins while increasing revenue approximately 40% driven by continued demand for advanced node semiconductor chip. In the fourth quarter, sales of $276 million decreased 3.7% year over year, reflecting weakness in oil and gas, general industrial, and aerospace markets. Excluding the impact of foreign exchange translation, and sales from acquired and divested businesses, sales for the quarter declined 1.6% compared to the fourth quarter of 2019. On a sequential basis, sales in the fourth quarter increased 2.9% over the third quarter in markets where we saw the greatest sequential sales improvement included general industrial, automotive, power generation, and food and pharma. Gross profit margin of 37.5% increased 330 basis points versus the prior-year period driven by the benefit of divesting low-margin businesses as well as initiatives supported by the EnPro Capability Center, including supply chain and other companywide cost reduction programs. The year-over-year improvement in gross profit margin was achieved despite a $3 million amortization of acquisition-related inventory write-up in the fourth quarter of 2020. Adjusted EBITDA of $48.1 million increased 11.1% over the prior-year period as a result of strategic acquisitions and previously announced cost reductions taken across the company in response to COVID. Adjusted EBITDA margin of 17.4% increased approximately 230 basis points compared to the fourth quarter of 2019. Corporate expenses for the quarter were $10.6 million, a decline of 2.8% compared to the prior-year period. Adjusted income from continuing operations attributable to EnPro Industries was $25.4 million, an increase of 27% compared to the fourth quarter of 2019. Adjusted diluted earnings per share of $1.24 increased 27.8% compared to the prior-year period. Amortization of acquisition-related intangible assets in the fourth quarter was $10.9 million compared to $11.1 million in the prior-year period. We have also updated our estimated normalized tax rate used in determining adjusted net income, and adjusted earnings per share to 30% from the previously used normalized rate of 33%. In the fourth quarter, we recognized environmental charges of $22 million, which led to our GAAP net loss in the fourth quarter. The responsibility for these matters was contributed to EnPro at the time of the 2002 spinoff from Goodrich Corporation. Cash outlays for all environmental matters were $33.8 million in 2020. For 2021, we expect environmental cash payments to decline to approximately $13 million. Sealing Technologies, which includes Garlock, STEMCO, and the Technetics sealing business, had sales of $154.7 million in the fourth quarter. The year-over-year decline of 11.3% was due to softer demand in general industrial and aerospace markets, offset in part by stronger performance in food and pharma and heavy-duty truck markets. Excluding the impact of foreign exchange translation and sales from acquired and divested businesses, sales decreased 2.9% versus the prior-year period. On a sequential basis, sales in the fourth quarter decreased 2%. For the fourth quarter, adjusted segment EBITDA increased 5.4% to $34.9 million despite the decline in sales. And adjusted segment EBITDA margin expanded 360 basis points to 22.6%. Excluding the impact of foreign exchange translation, acquisitions and divestitures, adjusted segment EBITDA increased 10.6% compared to the prior-year period. Fourth-quarter sales of $49.9 million increased 27.3% driven primarily by the acquisition of Alluxa and continued strength in the balance of the segment. Excluding the impact of foreign exchange translation and sales from acquired businesses, sales increased 10.7% versus the prior-year period. On a sequential basis, fourth-quarter sales increased by approximately 12% from the third quarter driven by the acquisition of Alluxa at the end of October. For the fourth quarter, adjusted segment EBITDA increased 57.1% to $15.4 million, and adjusted segment EBITDA margin expanded 590 basis points to 30.9% driven primarily by the Alluxa acquisition and growth in the balance of the segment. Excluding the impact of acquisitions, divestitures, and foreign exchange translation, adjusted segment EBITDA increased 10.2% compared to the prior-year period. In Engineered Materials, which consists of GGB and CPI, fourth-quarter sales of $73.6 million decreased 2.5% compared to the prior year, primarily due to weakness in oil and gas, general industrial, and petrochemical markets, partially offset by strength in the automotive and power generation markets. Excluding the impact of foreign exchange translation, sales for the quarter decreased 5.6%. Sequentially, sales increased approximately 9% as we saw demand rebound in automotive and general industrial markets. For the fourth quarter, adjusted segment EBITDA decreased 2.6% and adjusted segment EBITDA margin of 15.5% was flat versus the prior-year period. Excluding the impact of foreign exchange translation, adjusted segment EBITDA decreased 7.7% compared to the prior-year period. We ended the quarter with cash of $230 million and had full availability of our $400 million revolver, plus $11 million in outstanding letters of credit. At the end of December, our net debt to adjusted EBITDA ratio was approximately 1.6 times. During the fourth quarter, we financed the Alluxa acquisition through a combination of $238 million of cash, and rollover equity from Alluxa executives equating to 7% of the acquisition price. 2020 free cash flow of $39.3 million was down from $109.2 million in the prior year, primarily driven by higher 2020 payments related to environmental settlements and a third-quarter legal settlement, both of which we discussed on our third-quarter earnings call as well as significantly higher year-over-year tax payments, resulting largely from the gain on the sale of Fairbanks Morse. Excluding environmental and legal settlements as well as tax payments in both years, free cash flow increased 12% from the prior year. During the fourth quarter, we paid a $0.26 per share quarterly dividend, totaling $5.5 million. Last week, our board of directors approved a 4% increase in the quarterly dividend from $0.26 per share to $0.27 per share. Under this authorization, we may repurchase up to $50 million in shares, providing us with the flexibility to return capital to shareholders, subject to balance sheet and growth investment considerations. As shown on the slide, on a full-year basis, our 2020 pro forma sales are $983 million or 8.5% lower than reported sales. 2020 pro forma adjusted EBITDA is $167.5 million or relatively flat with reported adjusted EBITDA, resulting in a net adjusted EBITDA margin increase of approximately 130 basis points to 17%. We expect 2021 adjusted EBITDA to be in the range of $178 million to $188 million on sales growth of 6% to 10% over 2020 pro forma sales of $983 million. We expect adjusted diluted earnings per share from continuing operations to be in the range of $4.32 to $4.66.

In the fourth quarter, sales of $276 million decreased 3.7% year over year, reflecting weakness in oil and gas, general industrial, and aerospace markets. Adjusted diluted earnings per share of $1.24 increased 27.8% compared to the prior-year period. We expect adjusted diluted earnings per share from continuing operations to be in the range of $4.32 to $4.66.

0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1

We achieved $1.82 in adjusted earnings per share, a 7% increase over Q1 of 2020. Adjusted EBITDA increased 3% to $104 million. As for our growth metrics, as expected, the average number of paid worksite employees in Q1 of 2021 declined by 2% compared to Q1 of 2020 and included the loss of one large enterprise account that we referred to in our previous earnings call. It's also important to note that during the challenges of the pandemic over the past year, we've increased the number of clients by 8%. Now, as most of you are aware, the year-end transition from 2020 to 2021 in which we enroll new clients from our fall sales campaign and renew approximately 45% of our existing clients is important to our 2021 starting point and, therefore, our full year growth expectations. Worksite employees paid from new client sales were in line with our budget and we're 93% of Q1 of 2020, a period prior to the onset of the pandemic. Excluding this one account, attrition totaled 9%, an improvement over Q1 of 2020's attrition of 11%. Now let's move on to gross profit, which increased by 7% over Q1 of 2020 on the 2% decline in worksite employees. In addition, the Q1 upside resulted from lower on -- Q1 upside resulting from the lower SUTA rates during the quarter, we received a $6 million federal payroll tax refund related to the prior year. We continue to grow our sales force at targeted levels with a 7% increase in the average number of trained business performance advisors. In total, operating expenses increased 13% over Q1 of 2020, however were flat when excluding performance-based compensation. During the quarter, we repurchased 340,000 shares of stock at a cost of $30 million, paid out $15 million in cash dividends and invested $12 million in capital expenditures. We ended Q1 with $197 million of adjusted cash and $370 million of debt. This quarter, our paid worksite employees from prior bookings reflected our solid fall campaign sales and came in at 93% at the same period in 2020, which was largely pre-pandemic. Our sales team is off to an impressive start to the year achieving 102% of our budgeted bookings in this quarter. The number of trained business performance advisors was up 7% and this team increased discovery calls by 16% and business profiles by 21%. The number of new clients sold also increased 16% over the same period last year, which is notable since most of Q1 last year was pre-pandemic. However, the pipeline is rebuilding rapidly with a 27% increase in leads and a 13% increase in proposal opportunities over last year. WX proposals increased 90% over the same period last year and book sales more than doubled in both the number of accounts and employees sold. Our WX initiative is an important long-term plan to increase sales efficiency, providing a traditional employment HR bundle alternative at a lower price point is designed to capitalize on the investment we've already made in our team of more than 650 BPAs across the country that are calling on more than 40,000 small businesses each year. Our goal over time is to convert some portion of the nine out of 10 prospects that we do not sell WO into WX clients and ultimately upgrade them to WO, increasing our sales efficiency. Our workforce optimization client retention was also a highlight this quarter, improving by 15% over last year, excluding the large client loss discussed last quarter. As we entered the new year, our average size client was down approximately 8% in the number of worksite employees after trimming back during the pandemic. When asked how optimistic you are with the outlook for your business this year, 86% were very or somewhat optimistic compared to 48% late last year and 72% in late 2019. Further, 81% of those surveyed expect organizational performance to be better than last year and 53% expect to add employees and 35% expect to increase compensation. Only 3% expect to reduce staff and only 1% expect to decrease compensation. In fact, when asked about last year's results, 71% said they were better or as expected and only 10% said their results were worse than expected, which we believe reflects the quality of our client base and the success of our strategy to target the best, small and mid-sized businesses. Most notable this quarter was commission up over 11% from the same period last year, a double-digit increase for the second consecutive quarter. We generally see when commissions are up over 6% from the prior year, hiring and compensation increases subsequently trend upwards. Current trends in sales retention and hiring in the client base, combined with the comparison to Q2 2020 shutdown-related layoffs, has us on track to move from minus 2% year-over-year growth in the first quarter to 5% to 6% growth in the second quarter. We are now forecasting 4% to 6% worksite employee growth for the full year, an improvement over our initial guidance of 2% to 6% growth. We are forecasting Q2 paid worksite employee growth of 5% to 6% over Q2 of 2020, a period which was significantly impacted by the onset of the pandemic. So when taking into account these factors, we are forecasting adjusted EBITDA in a range of $250 million to $280 million, up from our initial guidance of $225 million to $275 million. As for full year 2021 adjusted EPS, we are now forecasting a range of $3.83 to $4.40, up from our previous guidance of $3.27 to $4.20. As for Q2, we are forecasting adjusted EBITDA in a range of $44 million to $49 million and adjusted earnings per share from $0.60 to $0.70.

We achieved $1.82 in adjusted earnings per share, a 7% increase over Q1 of 2020. As for full year 2021 adjusted EPS, we are now forecasting a range of $3.83 to $4.40, up from our previous guidance of $3.27 to $4.20. As for Q2, we are forecasting adjusted EBITDA in a range of $44 million to $49 million and adjusted earnings per share from $0.60 to $0.70.

1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1

For the second quarter of 2021, Prosperity had strong earnings, core loan growth, deposit growth, continued sound asset quality, impressive cost controls, our return on average tangible common equity of 17.49% and remains well reserved. Prosperity Bank has been ranked as the number two Best Bank in America for 2021 and has been in the top 10 of Forbes America's Best Banks since 2010. Our earnings were $130.6 million in the second quarter for 2021 and compared with $130.9 million for the same period in 2020. The second quarter of 2020 included a tax benefit for net operating losses of $20.1 million or $0.22 per diluted common share as a result of the enactment of the CARES Act. Diluted earnings per share were $1.41 for the second quarter of 2021 and for the same period in 2020. Earnings per share for the second quarter of 2020, included the $0.22 tax benefit, partially offset by a $0.06 charge merger-related expense and a $0.03 charge for the write-down of fixed assets related to the merger and some CRA investment funds. The net effect was a positive $0.13 in earnings per share for the second quarter of 2021, a 10.2% increase after considering the adjustments in the second quarter of 2020. Loans on June 30, 2021, were $19.2 billion, a decrease of $1.7 billion or 8.4% compared with $21 billion on June 30, 2020. Our linked quarter loans decreased $387 million or 2% from $19.6 billion on March 31, 2021, primarily due to $359 million decrease in the PPP loans. On June 30, 2021, the company had $780 million of PPP loans compared with $1.4 billion of the PPP loans on June 30, 2020, and $1.1 billion of PPP loans on March 31, 2021. The linked quarter loans, excluding the Warehouse Purchase Program and PPP loans increased $148 million or nine basis points, 3.7% annualized from the $16.2 billion on March 31, 2021. Our deposits on June 30, 2021, were $29.1 billion, an increase of $2.9 billion or 11.3% compared with $26.1 billion on June 30, 2020. Our linked quarter deposits increased $347 million or 1.2%, 4.8% annualized from the $28.7 billion on March 31, 2021. Our nonperforming assets totaled $33.7 million or 11 basis points of quarterly average interest-earning assets as of June 30, 2021, compared with $77.9 million or 28 basis points of quarterly average interest earning assets as of June 30, 2020, a 56.8% decrease from last year. Nonperforming assets were $44.2 million or 15 basis points of quarterly average interest-earning assets as of March 31, 2021. Net interest income before provision for credit losses for the three months ended June 30, 2021, was $245.4 million compared to $259 million for the same period in 2020, a decrease of $13.6 million or 5.2%. The current quarter net interest income includes $12.2 million in fair value loan income compared to $24.3 million in the second quarter 2020, a decrease of $12.1 million. The net interest margin on a tax equivalent basis was 3.11% for the three months ended June 30, 2021, compared to 3.69% for the same period in 2020 and 3.41% for the quarter ended March 31, 2021. Excluding purchase accounting adjustments, the net interest margin for the quarter ended June 30, 2021, was 2.96% compared to 3.33% for the same period in 2020, and 3.19% for the quarter ended March 31, 2021. Noninterest income was $35.6 million for the three months ended June 30, 2021, compared to $25.7 million for the same period in 2020 and $34 million for the quarter ended March 31, 2021. Noninterest expense for the three months ended June 30, 2021, was $115.2 million compared to $134.4 million for the same period in 2020. On a linked-quarter basis, noninterest expense decreased $3.9 million from $119.1 million for the quarter ended March 31, 2021. The current quarter benefited from gains on sale of ORE assets of $1.8 million and a decrease in salary and benefits. For the third quarter 2021, we expect noninterest expense of $118 million to $120 million. The efficiency ratio was 41% for the three months ended June 30, 2021, compared to 46.6% in for the same period in 2020, which included $7.5 million in merger-related expenses and 41.3% for the three months ended March 31, 2021. During the second quarter 2021, we recognized $12.2 million in fair value loan income. This amount includes $4.3 million from anticipated accretion, which is in line with the guidance provided last quarter and $7.9 million from early payoffs. We estimate fair values -- sorry, we estimate fair value loan income for the third quarter of 2021 to be around $3 million to $4 million. The remaining discount balance is $25 million. Also, during the second quarter 2021, we recognized $10.3 million in fee income from PPP loans. As of June 30, 2021, PPP loans had a remaining deferred fee balance of $28.3 million. The bond portfolio metrics at 6/30/2021, showed a weighted average life of 3.9 years and projected annual cash flows of approximately $2.3 billion. Our NPAs at quarter end June 30, '21 totaled $33,664,000 or 0.17% of loans and ORE compared to $44,162,000 or 0.22% at March 31, '21. This represents approximately a 24% decline in NPAs. The June 30, '21 NPA total was comprised of $33,210,000 in loans, $310,000 in repossessed assets and only $144,000 in ORE. Of the $33,664,000 in NPAs, $8,378,000 or 25% are energy credits, all of which are service company credits. Since June 30, '21, 1,448 -- I'm sorry, $1,448,000 in NPAs have been put under contract for sale. Net charge-offs for the three months ended June 30, '21 were $4,326,000 compared to $8,858,000 for the quarter ended March 31, '21. The average monthly new loan production for the quarter ended June 30, '21, was $641,000. This includes a total of $73.8 million in PPP loans booked during the second quarter. Loans outstanding at June 30, '21 were approximately $19.3 billion, which includes approximately $780 million in PPP loans. The June 30, '21 loan total is made up of 39% fixed-rate loans, 36% floating and 25% variable resetting at specific intervals.

Diluted earnings per share were $1.41 for the second quarter of 2021 and for the same period in 2020. Net interest income before provision for credit losses for the three months ended June 30, 2021, was $245.4 million compared to $259 million for the same period in 2020, a decrease of $13.6 million or 5.2%.

0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

But despite the challenges at the start of the third quarter, we ended strong, delivering an adjusted earnings per share of $0.78 with Chili's sales returning to positive territory from an absolute perspective. When we look at our more normalized performance of fiscal '19, Chili's sales are up 10%, and nearly three-quarters of our restaurants are generating meaningful positive results, even though we're still social distancing and wearing masks in all of our restaurants and we're still operating under capacity restraints across the country. It's Just Wings continues to perform well, and we're on track to hit that $150 million target we set at the beginning of the year. Wings is now in nine countries and 160 locations outside the U.S., making it a formidable brand in just its first year. For the third quarter of fiscal 2021, Brinker reported total revenues of $820 million with consolidated comp sales of negative 3.3%. Our adjusted diluted earnings per share for the quarter was $0.78. Chili's recorded flat comp sales and positive 4% traffic for the quarter, with the year-over-year performance improving throughout the quarter. Regional performance is strong nationwide with a broad range of state markets rebuilding their dining room sales back to higher levels, above 75%, let's say when compared to pre-COVID performance. First, we had a holiday flip the first week, with Christmas moving into the quarter, resulting in a negative 1% comp sales impact. In February, we experienced Uri, a most unique winter storm that hit with historic subzero temperatures and power outages for more than a week, affecting approximately 30% of our restaurants. The material impact of the storm resulted in an estimated $10.5 million in lost revenues, a negative impact to consolidated comp sales of 1.2%, and reduced adjusted earnings per share of approximately $0.06. In this regard, the consolidated two-year comp results for Brinker for the first four weeks of April was a positive 6.3%, driven by Chili's results of a positive 10.1% for the same time frame. I would note that Chili's is lapping off of a positive 2.9% in the third quarter of F '19. Increasing sales volumes also favorably impacted margins, resulting in a consolidated restaurant operating margin for the third quarter of 13.9% compared to 12.8% for the third quarter of fiscal '20. Again, the winter storms had a negative impact on ROM, reducing the margin by an estimated 30 basis points. Food and beverage expense as a percent of company sales was 70 basis points favorable to prior year, primarily driven by menu mix as we featured steak on three for $10 in the prior year. Labor expense, again as a percent of company sales, was favorable 70 basis points as compared to the prior year. During the quarter, we meaningfully increased our manager bonus payout, impacting margins by approximately 60 basis points as we move to reward this critical leadership level for outstanding performance. Restaurant expense was unfavorable year over year by 30 basis points, a reflection of increased off-premise costs such as packaging and fees, driven by our successful off-premise sales channels. Year to date, we have generated $268 million in operating cash flow. During the third quarter, we used a portion of that cash flow to repay $115 million in revolver borrowings, bringing the outstanding balance to under $300 million. Capital expenditures year-to-date totaled approximately $62 million. We opened two new Chili's during the third quarter and two additional locations in April, bringing our total for this fiscal year to 10. We continue to target expanding new restaurant development to a range of 18 to 22 restaurants a year. In fiscal 2021, we will invest approximately $20 million of capital and technology that enhances our digital guest connectivity, supports our virtual brand growth, and improves our in-restaurant dining experience. Total revenue is estimated to be in the $950 million to $1 billion range. Adjusted earnings per diluted share are estimated in the $1.55 to $1.70 range. Weighted average diluted shares are estimated to be in the 47 million to 48 million share range.

But despite the challenges at the start of the third quarter, we ended strong, delivering an adjusted earnings per share of $0.78 with Chili's sales returning to positive territory from an absolute perspective. Our adjusted diluted earnings per share for the quarter was $0.78. The material impact of the storm resulted in an estimated $10.5 million in lost revenues, a negative impact to consolidated comp sales of 1.2%, and reduced adjusted earnings per share of approximately $0.06. Total revenue is estimated to be in the $950 million to $1 billion range. Adjusted earnings per diluted share are estimated in the $1.55 to $1.70 range.

1 0 0 0 0 1 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 0

Net income in the second quarter of $29.6 million produced core earnings per share of $0.31, a core pre-tax pre-provision ROA of 1.82% and a core efficiency ratio of 53.1%. Importantly, pre-tax pre-provision net revenue of $42.9 million was slightly ahead of the consensus estimate, reflecting good underlying second quarter momentum in our key businesses. Lending rebounded in the second quarter, increasing year-to-date loan growth to 5.3% annualized rate, and that excludes PPP loans. Bucking national trends, our branch team has originated $209 million in home equity loans year-to-date, which represents a 12% increase year-over-year. Consumer and small business household growth helped fuel noninterest income, which remained strong at $26.1 million, even as mortgage gain on sale income tapered. Card-related interchange income at $7.4 million was a quarterly company record by a wide margin. At $2.7 million, trust revenue was a quarterly record as well. Our SBA business contributed $1.6 million to gain on sale income and SBA pipelines have never been stronger. Expenses remain well controlled, and the core efficiency ratio was an impressive 53.21%. The second quarter, our active mobile users increased an annualized 22%. Our net interest margin for the second quarter was 3.17%, down from 3.40% last quarter. Loan yields fell by 11 basis points, but we were able to offset most of that by reducing the cost of interest-bearing liabilities by seven basis points. For example, we began the quarter with $479 million in PPP loans. By June 30, that figure had shrunk to $292 million. Similarly, excess cash dropped from $414 million to $189 million over the period. First, the first quarter NIM had the benefit -- excuse me, the first quarter NIM had the benefit of $7.9 million of PPP income, while second quarter PPP income was only $5.5 million. Second, we put excess cash to work by purchasing approximately $300 million of securities in the second quarter. Those investments will generate about $3.9 million of net interest income annually or about $0.03 per share, but they still yield us than what we were earning on the PPP loans, and it's still a layer of thin margin assets on top of the balance sheet that drags down the NIM. Our previous guidance was for our core NIM to fall between 3.20% and 3.30%, and our core NIM for the second quarter came in at 3.20%, which was within that range, albeit at the bottom of that range. As a result, we are reiterating our core NIM guidance of 3.25% plus or minus five basis points. First, we realized that deferrals were the number one topic a year ago, but our deferrals have all but disappeared from a peak of over $1 billion during the pandemic to $138 million last quarter to only $59.5 million this quarter or just 88 basis points of total loans. Second, nonperforming loans are just 0.82% of total loans ex PPP, and the reserve coverage of nonperforming loans is 182.9%. Third, we just completed our regular semiannual loan review process in which we review every commercial credit in excess of $350,000. This involved a review of about 1,000 relationships totaling $2.4 billion out of a $3.9 billion commercial loan portfolio. At the conclusion of that exercise, there were 0 downgrades to special mention or substandard in the portfolio. Classified loans, for example, dropped from $72.3 million to $56.3 million, a level very close to the pre-pandemic level of $52.5 million at the end of 2019. Fourth, delinquencies, which are sometimes seen as an early warning sign of trouble ahead, not only went down from last quarter, but they are at an all-time low for our bank at just 11 basis points of total loans ex PPP. Fifth and finally, our reserves remain at 1.50% of total loans ex PPP protecting our capital and our earnings stream going forward. As for fee income, even with mortgage income slowing down a bit in the second half, we anticipate being able to sustain the pace of $26 million to $27 million per quarter in noninterest income for the remainder of 2021 due to favorable trends we are seeing in SBA, swap and trust income. NIE came in at $51.5 million in the second quarter, down slightly from $51.9 million last quarter. Our previous NIE guidance was $52 million to $53 million per quarter, so we've been comfortably below that. We do, however, expect some expense associated with returning to a more normal work and travel environment, elevated hospitalization expense that we have been seeing, new hires in revenue-producing and credit positions and the new recently announced equipment finance effort, bringing our NIE guidance to $53 million to $54 million per quarter for the remainder of the year. Finally, we repurchased 72,724 shares in the second quarter at an average price of $13.95.

Net income in the second quarter of $29.6 million produced core earnings per share of $0.31, a core pre-tax pre-provision ROA of 1.82% and a core efficiency ratio of 53.1%. By June 30, that figure had shrunk to $292 million.

1 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

From a balance sheet perspective, our combination of operating performance and sale of noncore assets allowed us to add over $0.5 billion to the balance sheet by the end of our third quarter. Our shareholders benefited significantly as well as our share price rose by over 100% for the year, greatly outstripping our public company and industry competitors. Since inception, we've averaged over 100 applicants for every internship position we've created, and these numbers continue to rise each year. Our efforts bore fruit in the fourth quarter with the release of the -- of three new powder bed printing systems, including our SLS 380 polymer-based system as well as our DMP Flex 200, and DMP 350 Dual metal-based printers, the latter of which is a dual-laser version of our top-selling single-laser system. By the end of 2021, with these acquisitions having closed, we exited with roughly $800 million in cash on our balance sheet for the future. This scale has a tremendous advantage, not only increasing our operating efficiencies, but also in providing critical ongoing customer application support as well as 24/7 service to our customers, no matter where they're located, over the life of their investments. We're proud to say that our installed base currently prints over 700,000 parts per day, which is more than the rest of the industry combined. With an open system architecture, a Titan printer has available to it hundreds of standard polymer formulations, allowing customers to not only select the ideal material for their application, but also realize potential cost savings of up to 75% versus traditional filament extrusion. So in summary, with our tremendous progress over the last 18 months, our continued strong momentum, our breadth of technology combined with our clear application leadership, and the benefits of scale as one of the largest pure-play additive manufacturing companies, we entered 2022 with a great deal of optimism. Specifically, we'd expect that over the next 18 months, we will refresh our entire lineup of metal and polymer hardware platforms while continuing to release record numbers of new materials and improvements to our software products offered through Oqton. In the coming years, we're confident that this focused approach and simple business model will result in consistent year over year double-digit organic growth with expanding gross margins, our goal of which is to exceed 50% over time. Revenue for 2021 was $615.6 million, an increase of 10.5% compared to the prior year. When adjusted for those divestitures, 2021 revenue increased 31.8% as compared to 2020, and versus pre-pandemic 2019, revenue increased 16.9%. Gross profit margin for 2021 was 42.8%, compared to 40.1% in the prior year. Non-GAAP gross profit margin was 43%, compared to 42.6% in the prior year. Operating expenses for 2021 on a GAAP basis decreased 13.3% to $296.8 million compared to the prior year. On a non-GAAP basis, operating expenses were $214.7 million, a 9.4% decrease from the prior year. We had GAAP earnings per share of $2.55 for 2021, compared to a GAAP loss per share of $1.27 in 2020. Our non-GAAP earnings per share for 2021 was $0.45, compared to non-GAAP loss per share of $0.11 in 2020. For the fourth quarter, we generated revenue of $150.9 million, a decrease of 12.6% compared to the fourth quarter of 2020. When adjusted for divestitures, we saw strong double-digit growth of 13.1% versus Q4 2020, a 10.4% increase over Q3 2021, and impressively, a 21.9% increase versus pre-pandemic Q4 2019. In the fourth quarter, we had GAAP loss per share of $0.05, compared to GAAP loss per share of $0.16 in the fourth quarter of 2020. Non-GAAP earnings per share was $0.09, flat to non-GAAP earnings per share of $0.09 in the fourth quarter of 2020. On a full year basis, adjusted for divestitures, revenue in 2021 for healthcare increased 40.1% and industrial increased by 24.4% as compared to 2020. Industrial revenue in the fourth quarter 2021 outpaced Q4 2020 by 22.2% and Q3 2021 by 12.4% after adjusting for divestitures. GAAP gross profit margin was 43.9% in the fourth quarter 2021, bringing the full year GAAP gross profit margin to 42.8%, as compared to 40.1% for the full year 2020. Non-GAAP gross profit margin in the fourth quarter was 44.1%, bringing the full year non-GAAP gross profit margin to 43%, compared to 42.6% for the full year 2020. GAAP operating expenses decreased 2.3% to $70.1 million in the fourth quarter of 2021 compared to the same period a year ago. On a non-GAAP basis, operating expenses were $54.3 million, a 6.4% decrease from the same period a year ago, driven primarily by lower SG&A expenses due to restructuring efforts and divestitures. GAAP operating expenses for the full year 2021 decreased 13.3% to $296.8 million compared to the prior year, primarily as a result of a goodwill impairment charge of $48.3 million and cost optimization charges of $20.1 million that both occurred in 2020. On a non-GAAP basis, operating expenses were $214.7 million in 2021, a 9.4% decrease from the prior year. Adjusted EBITDA, defined as non-GAAP operating profit plus depreciation, was $74.1 million for full year 2021 or 12% of revenue, compared to $28.7 million for full year 2020 or 5.2% of revenue. I will begin by noting that we issued a $460 million five-year convertible bond in the fourth quarter. The marketing of our bond met with a very healthy demand, and we were able to issue our bond at a 0% coupon, providing the company with a significant arsenal for investment with very low carrying costs. After completing this bond offering and combined with our previous activities of divesting noncore assets, making strategic organic investments and generating $48.1 million of cash from operations, we ended the year with $789.7 million of cash on hand, an increase of $705.3 million from the beginning of 2021. For full year 2022, we expect revenue to be within a range of $570 million and $630 million, non-GAAP gross margins to be between 40 and 44%, and non-GAAP operating expenses to be between 225 million and $250 million.

For the fourth quarter, we generated revenue of $150.9 million, a decrease of 12.6% compared to the fourth quarter of 2020. In the fourth quarter, we had GAAP loss per share of $0.05, compared to GAAP loss per share of $0.16 in the fourth quarter of 2020. Non-GAAP earnings per share was $0.09, flat to non-GAAP earnings per share of $0.09 in the fourth quarter of 2020. For full year 2022, we expect revenue to be within a range of $570 million and $630 million, non-GAAP gross margins to be between 40 and 44%, and non-GAAP operating expenses to be between 225 million and $250 million.

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 1 1 0 0 0 0 0 0 0 0 0 0 0 0 1

Generating over $1 billion of adjusted EBITDA in 2020, our business portfolio is well positioned to sustain above market growth and strong cash flows over time. Recent notable examples include, we are increasing all US hourly wages to at least $15 per hour by July, which supports the financial well-being of our employees. With HYLA, we recently passed a significant milestone repurposing our 100 million device. Recently, we surpassed $100 million invested through Assurant Ventures, our venture capital arm. We continue to see strong growth in Global Lifestyle, increasing earnings by 7% year-over-year. Collectively, all of our investments have helped lead the 15 new client program launches in 2015. We're now providing over 30 trading programs around the world. In Global Automotive, we continue to benefit from our scale and expertise as we now cover over 50 million vehicles. Net operating income excluding reportable catastrophes grew 17% as we benefited from favorable non-GAAP loss experience, including improved underwriting results. Within our Lender-placed business, we continue to play a vital role in supporting the mortgage industry as we track over 31 million loans. Multifamily housing increased policies by 9% year-over-year to almost $2.5 million as we continue to grow through our affinity partnerships and PMC channel, including seven of the top 10 largest PMCs in the US. Over the last two years through our partnership with market leaders and on-demand delivery, we tripled the number of deliveries we protect over 1 billion deliveries. Net operating income excluding cats grew by 13% to $182 million and earnings per share increased 16% to $3.03, demonstrating improved results in Global Housing and continued momentum in Global Lifestyle. We now expect 10% to 14% growth in operating earnings per share excluding catastrophes versus our initial expectation of 9% earnings per share growth. EPS expansion from the $9.88 in 2020 will be driven by high single-digit earnings growth mainly from Global Lifestyle and the lower corporate loss. Results will also benefit from share repurchases, including the completion of our three-year $1.35 billion objective in the initial return of net proceeds from the Global Preneed sale. Looking at adjusted EBITDA, excluding catastrophes, the first quarter generated $302 million, an increase of 15% year-over-year. We ended March with $332 million of holding company liquidity, after returning $80 million to shareholders through common stock dividends and buybacks during the quarter. In March, we announced our plan to sell the business for $1.3 billion to CUNA Mutual Group. This segment reported net operating income of $129 million in the first quarter, an increase of 7% driven by Global Automotive and Connected Living. In Global Automotive, earnings increased $7 million or 18%, results included a $4 million one-time benefit as well as a gain on investment income related to a specialty asset class from our TWG acquisition, which we don't expect to recur. Connected Living grew earnings by 3%. However, this was muted by a $7 million favorable client recoverable with an extended service contracts in the prior year period. For the quarter Lifestyle's adjusted EBITDA increased 11% to $193 million, four points above net operating income growth. Lifestyle revenue decreased by $85 million. This was driven mainly by a $98 million reduction in mobile trade-in revenue, primarily due to the contract change we disclosed last year. For the full year, we continue to expect Lifestyle revenues to be in line with last year at approximately $7.3 billion. Since year-end, we've increased covered mobile devices by 600,000 subs driven by continued growth in North America and Asia-Pacific. For 2021, we still expect Global Lifestyle's net operating income to grow in the high single-digits compared to the $437 million reported in 2020. Net operating income for the first quarter totaled $67 million compared to $74 million in the first quarter of 2020. The decrease was largely due to $22 million of higher reportable catastrophes mainly related to the extreme winter weather particularly from areas like Texas. Excluding catastrophe losses, earnings increased $50 million or 17%. Looking at the placement rate, the modest sequential increase to 1.6% was attributable to a shift in business mix and is not an indication of a broader macro housing market shifts. Revenue decreased 2% related to a reduction in our specialty product offerings, which included the impact from the exit of small commercial as well as lower REO volume. This decrease was partially offset by growth in multifamily housing, which grew 8% year-over-year, driven mainly by our affinity partners. At Corporate, the net operating loss was $22 million, which was flat year-over-year. For the full year, we continue to expect the Corporate net operating loss to improve to approximately $90 million as we eliminate enterprise support costs associated with Global Preneed. With Preneed moving to discontinued operations, our investment portfolio is now approximately $7.9 billion, excluding cash and cash equivalent. Given Preneed's relatively longer average duration of around 10 years compared to the rest of our business, following the sale of Preneed, our go-forward duration will drop to between 4.5 years to 5 years. Turning to holding company liquidity, we ended the first quarter with $332 million, which is $107 million above our current minimum target level. In the first quarter, dividends from our operating segments totaled $183 million. $42 million of share repurchases, $43 million in common and preferred stock dividends, and $10 million mainly related to the acquisition of TRYGLE and Assurant Venture Investments. Also in January, we redeemed the remaining $50 million of our March 2021 note. And our mandatory convertible shares converted to approximately 2.7 million common shares during the quarter. We've now completed over 70% of our $1.35 billion capital return objective from 2019 to 2021 and remain confident that we will meet this objective by the end of this year. In the second quarter through April 30, we repurchased an additional 95,000 shares for $14 million.

Net operating income excluding cats grew by 13% to $182 million and earnings per share increased 16% to $3.03, demonstrating improved results in Global Housing and continued momentum in Global Lifestyle. We now expect 10% to 14% growth in operating earnings per share excluding catastrophes versus our initial expectation of 9% earnings per share growth. This segment reported net operating income of $129 million in the first quarter, an increase of 7% driven by Global Automotive and Connected Living. For 2021, we still expect Global Lifestyle's net operating income to grow in the high single-digits compared to the $437 million reported in 2020.

0 0 0 0 0 0 0 0 0 0 0 0 1 1 0 0 0 0 0 1 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

With many of the country's Gulf Coast and Mid-Continent refineries offline due to the storm, there was a significant 60 million barrel drawdown of surplus product inventories in the U.S., bringing product inventories to normal levels. Our wholesale operations also continue to see positive trends in U.S. demand, and we expanded our supply into Mexico with current sales of over 60,000 barrels per day, which should continue to increase with the ramp-up of supply through the Vera Cruz terminal. The system is expected to be capable of storing 5 million metric tons of CO2 per year. In our Diamond Green Diesel 2 project at St. Charles remains on budget and is now expected to be operational in the middle of the fourth quarter of this year. The expansion is expected to increase renewable diesel production capacity by 400 million gallons per year, bringing the total capacity at St. Charles to 690 million gallons per year. The expansion will also allow us to market 30 million gallons per year of renewable naphtha from DGD 1 and DGD 2 into low-carbon fuel markets. The renewable diesel project at Port Arthur or DGD 3 continues to move forward as well and is expected to be operational in the second half of 2023. With the completion of this 470 million gallons per year capacity plant, DGD's combined annual capacity is expected to be 1.2 billion gallons of renewable diesel and 50 million gallons of renewable naphtha. We're already seeing a strong recovery in gasoline and diesel demand at 93% and 100% of pre-pandemic levels, respectively. For the first quarter of 2021, we incurred a net loss attributable to Valero stockholders of $704 million or $1.73 per share, compared to a net loss of $1.9 billion or $4.54 per share for the first quarter of 2020. The first quarter 2021 operating loss includes estimated excess energy costs of $579 million or $1.15 per share. For the first quarter of 2020, adjusted net income attributable to Valero stockholders was $140 million or $0.34 per share. The adjusted results exclude an after-tax lower of cost or market, or LCM, inventory valuation adjustment of approximately $2 billion. The refining segment reported an operating loss of $592 million in the first quarter of 2021, compared to an operating loss of $2.1 billion in the first quarter of 2020. The first-quarter 2021 adjusted operating loss for the refining segment was $554 million, compared to adjusted operating income of $329 million for the first quarter of 2020, which excludes the LCM inventory valuation adjustment. The refining segment operating loss for the first quarter of 2021 includes estimated excess energy cost of $525 million related to impacts from Winter Storm Uri. Refining throughput volumes in the first quarter of 2021 averaged 2.4 million barrels per day, which was 414,000 barrels per day lower than the first quarter of 2020 due to scheduled maintenance and disruptions resulting from Winter Storm Uri. Throughput capacity utilization was 77% in the first quarter of 2021. Refining cash operating expenses of $6.78 per barrel were higher than guidance of $4.75 per barrel, primarily due to estimated excess energy costs related to impacts from Winter Storm Uri of $2.21 per barrel. Operating income for the renewable diesel segment was a record $203 million in the first quarter of 2021, compared to $198 million for the first quarter of 2020. Renewable diesel sales volumes averaged 867,000 gallons per day in the first quarter of 2021. The ethanol segment reported an operating loss of $56 million for the first quarter of 2021, compared to an operating loss of $197 million for the first quarter of 2020. The operating loss for the first quarter of 2021 includes estimated excess energy costs of $54 million related to impacts from Winter Storm Uri. First quarter of 2020 adjusted operating loss, which excludes the LCM inventory valuation adjustment, was $69 million. Ethanol production volumes averaged 3.6 million gallons per day in the first quarter of 2021, which was 541,000 gallons per day lower than the first quarter of 2020. For the first quarter of 2021, G&A expenses were $208 million and net interest expense was $149 million. Depreciation and amortization expense was $578 million, and the income tax benefit was $148 million for the first quarter of 2021. The effective tax rate was 19%. Net cash used in operating activities was $52 million in the first quarter of 2021. Excluding the favorable impact from the change in working capital of $184 million and our joint venture partner's 50% share of Diamond Green Diesel's net cash provided by operating activities, excluding changes in DGD's working capital, adjusted net cash used in operating activities was $344 million. With regard to investing activities, we made $582 million of total capital investments in the first quarter of 2021, of which $333 million was for sustaining the business, including costs for turnarounds, catalysts and regulatory compliance, and $249 million was for growing the business. Excluding capital investments attributable to our partner's 50% share of Diamond Green Diesel and those related to other variable interest entities, capital investments attributable to Valero were $479 million in the first quarter of 2021. On April 19, we've sold a partial membership interest in the Pasadena marine terminal joint venture for $270 million. Moving to financing activities, we returned $400 million to our stockholders in the first quarter of 2021 through our dividend. And as you saw earlier this week, our board of directors approved a regular quarterly dividend of $0.98 per share. With respect to our balance sheet at quarter end, total debt and finance lease obligations were $14.7 billion and cash and cash equivalents were $2.3 billion. The debt-to-capitalization ratio net of cash and cash equivalents was 40%. At the end of March, we had $5.9 billion of available liquidity, excluding cash. We expect capital investments attributable to Valero for 2021 to be approximately $2 billion, which includes expenditures for turnarounds, catalysts and joint venture investments. About 60% of our capital investments is allocated to sustaining the business and 40% to growth. For modeling our second-quarter operations, we expect refining throughput volumes to fall within the following ranges: Gulf Coast at 1.65 million to 1.7 million barrels per day; Mid-Continent at 430,000 to 450,000 barrels per day; West Coast at 250,000 to 270,000 barrels per day; and North Atlantic at 340,000 to 360,000 barrels per day. We expect refining cash operating expenses in the second quarter to be approximately $4.20 per barrel. With respect to the renewable diesel segment, with the start-up of DGD 2 in the fourth quarter, we now expect sales volumes to average 1 million gallons per day in 2021. Operating expenses in 2021 should be $0.50 per gallon, which includes $0.15 per gallon for noncash costs such as depreciation and amortization. Our ethanol segment is expected to produce 4.1 million gallons per day in the second quarter. Operating expenses should average $0.38 per gallon, which includes $0.05 per gallon for noncash costs such as depreciation and amortization. For the second quarter, net interest expense should be about $150 million, and total depreciation and amortization expense should be approximately $590 million. For 2021, we still expect G&A expenses, excluding corporate depreciation, to be approximately $850 million, and the annual effective tax rate should approximate the U.S. statutory rate. Lastly, as we reported last quarter, we expect to receive a cash tax refund of approximately $1 billion later this year.

The renewable diesel project at Port Arthur or DGD 3 continues to move forward as well and is expected to be operational in the second half of 2023. For the first quarter of 2021, we incurred a net loss attributable to Valero stockholders of $704 million or $1.73 per share, compared to a net loss of $1.9 billion or $4.54 per share for the first quarter of 2020. The first quarter 2021 operating loss includes estimated excess energy costs of $579 million or $1.15 per share. For the first quarter of 2020, adjusted net income attributable to Valero stockholders was $140 million or $0.34 per share. Refining throughput volumes in the first quarter of 2021 averaged 2.4 million barrels per day, which was 414,000 barrels per day lower than the first quarter of 2020 due to scheduled maintenance and disruptions resulting from Winter Storm Uri. The debt-to-capitalization ratio net of cash and cash equivalents was 40%.

0 0 0 0 0 0 1 0 0 1 1 1 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0

As a result, we had a record second quarter 2021, and our focus remains on leasing and more leasing, which fuels our growth and supports our dividends to a core payout ratio of 41%. Our second quarter leasing activity brought our total occupancy to 89.9% up 120 basis points from the first quarter, highlighting the increased demand from new businesses entering our markets, where an average between 15 to 20 new tenants represent 1% increase in occupancy. We achieved net income per share of $0.12 up from $0.03 in the prior quarter, and up from $0.01 from the prior year. And FFO core per share increase 13% to $0.26 a share from $0.23 in the prior quarter and increased to 18% from $0.22 in the prior year. This is best evidenced by almost 18% increase in foot traffic at our 59 centers in the first half of the year. We install outdoor misting systems in Arizona for customer comfort during the three months hottest months of the year, where temperatures can average 100 degrees. We currently have five million square feet of space that generates 30.6 million in revenue for Q2. With more than 1400 tenants serving customers from the surrounding neighborhoods, our properties stay vibrant 18-hours a day, seven-days a week. On a given Saturday during each month, we accommodate upwards of 150 cars in each location, whose owners and admirers return as customers for our local tenants. Our tenants occupy an average of 3,000 square feet of space and provide e-commerce resistance services. Our culture of service produced leasing spreads on a weighted-average by 6.8% on new and renewal leases in the second quarter. We expect this trend to continue, as we receive annual lease increases of 2% to 3%, on new and renewal tenant leases and pass-through triple net expenses, helping us to hedge against inflation. We have approximately 230 million of development and redevelopment opportunities in our portfolio that we believe will add significant value. For Whitestone, those single tenants can impact our revenues by more than 2.9%. During the second quarter, as our earnings increase, we strengthened our balance sheet and improved our debt-to-EBITDA ratio by 1.2 turns to 8.2 turns. In the second quarter, G&A as a percent of revenue was 14.6%, improving from 15.7% one year-ago. The purchase price of Lakeside Market was 53.2 million, and it has significant upside from leasing up the current 19% vacant square footage. Our dividend is well funded, with a payout ratio in the second quarter of 41% of FFO Core. We have a solid record of paying 131 consecutive monthly dividends since our IPO in 2010 and in total paid our shareholders more than 300 billion in dividends during the same time. In March of 2021, we increased our dividend by $0.01, or 2.4% reflecting our strong recovery. We started with a relatively small asset base of approximately 150 million and has expanded to 59 properties in eight major cities in over 1,400 tenants and approximately 1.5 billion in real estate and value today. Total revenue for the second quarter was 30.6 million, up 5% from the first quarter and up 11% from the second quarter of 2020. The revenue growth was driven by sequential 1.2% increase in occupancy, and a 0.7% improvement, compared to Q2 2020. We are also benefiting from our ABR per square foot, rising 1.2% sequentially, and 1.9% from a year-ago, along with lower uncollectibility reserves. Property net operating income was $22 million for the quarter, up 4% sequentially and 10% from the second quarter of 2020. Our Q2 same-store net operating income increased 8.4% from Q2 of 2020. Net income for the quarter was $0.12 per share, up from $0.03 per share in the first quarter and $0.01 per share in the prior year quarter. Funds from operations core was $0.26 per share in the quarter, an increase of 13% from the first quarter, and an increase of 18% from the 2020 second quarter. Our leasing activity in the quarter continued to build on our very strong first quarter with 35 new leases, representing 75,000 square feet of newly occupied square footage. Our new lease activity for the six months is 100% higher on a square foot basis than 2020, and 40% higher than 2019. Leasing spreads on a GAAP basis have been positive 8% over the last 12-months, and second quarter leasing spreads increased by 3.1% on new leases, and 7.9% on renewal leases signed. Our annualized base rent per square foot on a GAAP basis at the end of the quarter grew 1.2% to $19.95 from $19.71 in the previous quarter, and a 1.9% increase from a year-ago. Total occupancy stood at 89.9%, all of our markets saw increased quarter-over-quarter occupancy, led by our Dallas market at a 3.6% increase. Austin and Phoenix both grew 0.8% from the first quarter, and Houston grew point 6% from the first quarter. Reflecting the high collection levels, our reserve for uncollectible revenue for the quarter was $143,000, or approximately 1.5% of our revenue, down from 529,000 or 1.8% of revenue in the first quarter, and 2.3 million or 7.9% of revenue in the second quarter of 2020. Our total tenant receivables improved 8.4% from the first quarter and 13.5% from a year-ago. Our interest expense was 5% lower than a year-ago, reflecting our lower debt levels. At quarter end, we had 21.3 million in accrued rents and accounts receivable. Included in this amount is 16.4 million of accrued straight line rents and 1.5 million of agreed upon deferrals. Our agreed upon deferral balance is down 34.4% from year end, reflecting tenants honoring their payment plans. Our total net debt is 601.3 million down 48 million from a year-ago, improving our debt to gross book real estate cost ratio to 52% and improvement from 56% a year-ago. Our debt-to-EBITDA ratio also improved 1.2 times from the first quarter to 8.2 times. At quarter end, we have 160.5 million of undrawn capacity, and 55.1 million of borrowing availability under our credit facility. During the second quarter, we sold approximately three million common shares under our ATM program, resulting in 25.4 million in net proceeds to the company. After the quarter, we acquired Lakeside market in Plano, Texas for 53.2 million financing the acquisition with approximately 30 million in equity, 10 million in debt from our corporate credit facility, and 13 million from cash flow and cash on hand.

And FFO core per share increase 13% to $0.26 a share from $0.23 in the prior quarter and increased to 18% from $0.22 in the prior year. Total revenue for the second quarter was 30.6 million, up 5% from the first quarter and up 11% from the second quarter of 2020. Funds from operations core was $0.26 per share in the quarter, an increase of 13% from the first quarter, and an increase of 18% from the 2020 second quarter.

0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

In Q3, we reported worldwide net sales of $1.4 billion, a decline of 6% compared to the prior year period. On a two year stack basis, net sales grew 15% compared to the third quarter of 2019. For the third quarter, we reported earnings per share of $1.09 per diluted share and net income of $117.4 million. Adjusted diluted earnings per share of $1.21 was above the top end of our revised Q3 guidance. Adjusted EBITDA of $222.4 million also exceeded the high end of our guidance range. For the quarter, the number of new distributors and preferred customers joining the business was down 19% compared to record numbers of new entrants in Q3 2020, but it was still up 28% compared to Q3 of 2019, excluding China. In Q3, the number of sales leaders actively selling in the channel was up 10% compared to the prior year period, excluding China. The Asia Pacific region had another quarter of double-digit net sales growth, up 11% compared to the prior year. The region was led by continued strength in India, which grew 46%. Over 220,000 new preferred customers joined the business in India, a record number, and a reflection of the momentum that we are seeing in that market. In Vietnam, government COVID restrictions forced our Nutrition Clubs to close for the quarter, which contributed to growth of 13%, which was lower than the growth rates we had recently experienced in that market. Additionally, a third wave of COVID-19 throughout Indonesia resulted in community restrictions in all provinces, and impacted our nutrition club utilization, resulting in a sales decline of 10%. We saw a decline in net sales of 11%. The two year stacked growth rate in the region increased 38% compared to Q3 of 2019. Similar to the North America region, EMEA experienced a challenging year-over-year comparison, resulting in a 4% decline. However, in the region, we have seen a 16% year-over-year increase in the number of active supervisors, which reflects the continued strength and solid foundation of the EMEA business. Looking at the two year stack in the region, EMEA grew 33% compared to the third quarter of 2019. Although the combined new distributor and preferred customer numbers are lower than Q3 2020, we saw growth of 24% compared to the more normalized 2019 comparison period. In China, net sales declined 30% compared to the third quarter of 2020. And this has contributed to impressive growth in the energy, sports and fitness category, which has increased at an 18% three year CAGR from 2017 through 2020 and growth of 31% year-to-date. Currently, products introduced in the prior three years represent only 14.5% of volume points in 2020. Our strategic objective is to increase sales attributable to new product development within the last three years to 25% over the next five years by localizing product development and improving speed to market. Third quarter net sales of $1.4 billion represents a decrease of 6% on a reported basis compared to the third quarter in 2020. This was in line with updated guidance we provided in September, and a 15% increase on a two year stack basis compared to Q3 2019. We had year-over-year net sales growth in three of our five largest markets, consisting of the U.S., which decreased 11%. China, which was down 30%. And Vietnam, up 13%. Currency was a tailwind to net sales in the quarter, representing a benefit of approximately 165 basis points, excluding Venezuela. Reported gross margin for the third quarter of 78.7% decreased by approximately 10 basis points compared to the prior year period. Third quarter 2021 reported and adjusted SG&A as a percentage of net sales were 34% and 33.6%, respectively. Excluding China member payments, adjusted SG&A as a percentage of net sales was 27.6%, approximately 100 basis points unfavorable compared to the third quarter 2020. For the third quarter, we reported net income of approximately $117.4 million or $1.09 per diluted share. Adjusted earnings per share of $1.21 was above the high end of our Q3 guidance, and was an increase of approximately 5% compared to the prior year period. Currency was a benefit of $0.04 in the quarter versus the prior year period. Adjusted EBITDA of $222 million also exceeded the high end of our guidance range. Over the first nine months of the year, the company has generated over $409 million of net income and $740 million of adjusted EBITDA. We are reiterating our fiscal year 2021 guidance for the top and bottom line. Our fiscal year 2021 capex guidance has been updated to a range of $145 million to $175 million. Currency remains a tailwind, and we project an approximate 200 basis points tailwind due to currency for the full year compared to the expected 220 basis points benefit from a quarter ago. For the full year, our guidance includes a projected currency tailwind of approximately $0.11 per diluted share, which is $0.04 lower than the currency benefit included in our prior guidance. Through the first nine months of the year, we have generated approximately $375 million of operating cash flow. At the end of the quarter, we had $678 million of cash on hand. During the third quarter, we completed approximately $162 million in share repurchases. Given the level of our share price, we were able to opportunistically accelerate our repurchases ahead of our initial expectation of $100 million for the quarter. Our fully diluted share count as of the end of Q3 was approximately $105.3 million. We expect to complete approximately $100 million of share repurchases during the fourth quarter, which will result in just under $1 billion of share repurchases for the full year 2021.

In Q3, we reported worldwide net sales of $1.4 billion, a decline of 6% compared to the prior year period. For the third quarter, we reported earnings per share of $1.09 per diluted share and net income of $117.4 million. Adjusted diluted earnings per share of $1.21 was above the top end of our revised Q3 guidance. Third quarter net sales of $1.4 billion represents a decrease of 6% on a reported basis compared to the third quarter in 2020. For the third quarter, we reported net income of approximately $117.4 million or $1.09 per diluted share. Adjusted earnings per share of $1.21 was above the high end of our Q3 guidance, and was an increase of approximately 5% compared to the prior year period. We are reiterating our fiscal year 2021 guidance for the top and bottom line.

1 0 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 1 1 0 0 0 1 0 0 0 0 0 0 0 0 0

During the quarter, we took steps to fortify our balance sheet and proactively issued $1.3 billion of senior notes in an effort to further diversify our funding sources, term out our debt maturities, and lower our overall cost of debt. The combination of these events has allowed us to accelerate 2 million square feet of development in our core MPCs, and we continue to look for additional opportunities ahead. Within our MPC segment, new home sales, a leading indicator for future land sales, increased a staggering 35%, selling 929 new homes, 241 homes above the same period last year. MPC earnings before tax, or EBT, increased 44% to $63 million in Q1 of 2021 compared to Q1 of 2020, largely driven by higher custom lot sales in Summerlin and an increase in the number of units closed at The Summit, our joint venture with Discovery Land Company. On our fourth quarter earnings call, we provided MPC EBT guidance for 2021 in a range of $180 million to $200 million. Following the results of the first quarter, we are now targeting a range of $210 million to $230 million. Our operating assets performed well during the quarter with a 10% sequential increase in NOI across the portfolio. One of the leading drivers of this increase was retail, which improved by 20% compared to the fourth quarter of 2020. The largest factors contributing to this increase were driven by our two largest retail footprints, Ward Village and Downtown Summerlin with NOI rising 55% and 44%, respectively. During the first quarter, collections improved to 78%, the highest retail collection rate since the onset of the pandemic. During the quarter, we nearly broke-even as we recorded a net operating loss of $147,000 compared to a net operating loss of $236,000 last quarter. In addition to these positive improvements, we received the annual distribution from our 5% ownership stake in the Summerlin Hospital totaling $3.8 million, which further fueled the sequential rise. Office NOI declined 8% compared to the fourth quarter of 2020 largely attributed to space reductions by select tenants in The Woodlands in Columbia. In total, our stabilized office occupancy dropped 3% since the fourth quarter. The NOI generated by our multi-family assets declined 12% sequentially, largely due to favorable property tax true-ups realized during the fourth quarter of 2020 that were not repeated this quarter. Our stabilized operating asset NOI target increased to $379 million in the first quarter, an increase of $17 million compared to the first quarter of 2020. We contracted 46 units during the quarter, marking a sequential increase of 64%. We closed on our $368 million construction loan for the development. The pace of presales for this project is the fastest Ward Village has ever seen, with 85% of the tower already presold. Said differently, we have only 15% of the tower left to sell between now and the time of completion, which is expected to be in 2024. During the first quarter, we served over 38,000 guests and had an average daily wait list of 3,000 people, while generating over $2 million in revenue. At Pier 17, we rebranded Bar Wayo, a JV owned restaurant with David Chang, which opened as Ssam Bar last month, and we're close to opening our two new concepts by Andrew Carmellini, Mister Dips and Carne Mare. At the Fulton Market Building, we're preparing the former 10 Corso Como space for two new concepts announced last quarter, The Lawn Club and a restaurant for acclaimed chefs, Wylie Dufresne and Josh Eden. Finally, last week, we passed a significant hurdle in the land use approval process for 250 Water Street that Jay will describe in more detail, in addition to providing updates on our Strategic Developments segment. As of the end of April, we have commenced construction on the 2 million square feet of development that was announced in February, and so far, secured $494 million in construction loans to finance these projects. With 85% of the tower already presold, we could not be more pleased with the results of our local Hawaiian team. This mixed-use product will comprise 472 apartment units and 32,000 square feet of ground floor retail. Juniper was delivered back in the first quarter of 2020 and is already 80% leased, which has exceeded our projections. This is only our second multi-family project in Bridgeland and like Marlow in Columbia follows on the success of Lakeside Row, which opened during the fourth quarter of 2019, and is already 94% leased only after one year in operations. Our multi-family product, Tanager Echo and our next office building, 1700 Pavilion. We look forward to bringing these assets online quickly as their predecessor projects, Tanager and two Summerlin office buildings are both 100% leased. At the Seaport, as David mentioned, we received approval last week from the New York City Landmarks Preservation Commission on our proposed design for a building on the site of the surface parking lot at 250 Water Street. During the quarter, the Seaport reported an operating loss of $4.4 million, which was largely unchanged from the same quarter last year. Foot traffic has declined within our retail locations and social distancing requirements limited our ability to maximize the entire space of the Pier 17 Rooftop. We have several new concepts gearing up to launch soon at Pier 17 and the Fulton Market Building. With 2 million square feet of new development under way, we are actively seeking out future opportunities where we can put our capital to work. New home sales accelerated quickly during the first quarter with 929 new homes sold in our community, 35% more compared to the first quarter of 2020 and 34% higher than the fourth quarter of 2020. Land sales, however, were down 5% in the first quarter with 54 acres sold versus 57 acres sold in the first quarter of last year. The fact that land sales were only down 5% without closing on a single super-pad highlights the strength of the quarter for our MPC. MPC EBT, which is a metric of profitability we look at for the segment, increased 44% compared to the same period last year. During the quarter, The Summit closed on 19 units versus six units closed during first quarter of 2020, a substantial increase that helped drive quarterly MPC EBT to $63 million. Summerlin had a breakout quarter with new home sales higher by 41% in the first quarter of 2021 versus the same period in 2020. In addition, price per acre in Summerlin residential land grew 13% or $199,000 to $1.7 million per acre for the first quarter of 2021, as compared to the first quarter of 2020. This also compares very favorably with the $762,000 per acre achieved last quarter. New home sales grew 33% when compared to the same quarter last year, and price per acreage of residential land increased from $439,000 in the first quarter of 2020 to $459,000, a 5% increase. In Woodlands Hills, new home sales more than doubled from 41 homes in the first quarter of 2020 to 84 homes this quarter. Similarly, The Woodlands Hills sold 16 acres of land during the quarter, representing a 92% increase when compared to the same period last year. Price per acre of residential land increased from $303,000 in the first quarter of 2020 to $307,000 this quarter. We contracted 46 units during the quarter, of which 30 units were from Victoria Place. The sales pace at this tower has been incredible with 85% of the units presold, and we are only just starting construction. During the quarter, we closed on a $368 million construction loan for this project at LIBOR plus 500 basis points with an initial maturity date of September 2024, and two one-year extension options. This 85% presold tower has hard deposits from buyers that can be used to fund construction. Our other two towers under construction, 'A'ali'i and Ko'ula, are making strong progress and are 86% and 79% presold with estimated completions expected at the end of 2021 and 2022, respectively. During the quarter, we closed on five units between Waiea and Anaha generating $35 million in sales. It is important to note that $20 million was charged during the quarter related to additional anticipated costs to repair construction defects previously identified at Waiea. This is comparison to the $98 million charge in the first quarter of 2020 for the estimated repair costs related to this matter. For the first three months ended March 31, 2021, we reported a net loss of $67 million or $1.20 per diluted share, compared to a net loss of $125 million or $2.88 per diluted share during the first quarter of 2020. The year-over-year improvement was accredited to a stronger result in our MPC and Strategic Developments segments, in addition to no impairment charges during the quarter compared to a $49 million impairment charge against the outlet collection at Riverwalk during the same period last year. This was partially offset by a loss on the early extinguishment of debt due to the repurchase of the company's $1 billion senior notes due 2025 and the repayment of the loans for 1201 Lake Robbins and The Woodlands Warehouse in February following our $1.3 billion bond offering. Excluding our loss on the early extinguishment of debt and non-recurring items, HHC would have reported a net loss of $31 million or $0.56 per diluted share during the first quarter of 2021. This successful issuance allowed the company to reduce its annual interest expense by $11 million with the refinancing of its 2025 notes and extended out its maturities by an additional two years. The offering includes a $650 million eight-year issuance due 2029 at a rate of 4.125% and a $650 million 10-year issuance due 2031 at a rate of 4.375%. This bond offering increased our unencumbered book value of assets by over $300 million, further reduced our cost of debt and extended our maturity profile. Our nearest debt maturity is not due until October of 2021, which is our $28 million loan on the outlet collection at Riverwalk. In April, we secured a $43 million construction loan for Starling at Bridgeland, which bears an interest at LIBOR plus 275 basis points and matures in May of 2026 with an option of a one-year extension. We also closed on an $83 million construction loan for Marlow, which bears an interest of LIBOR plus 295 basis points and matures in April of 2025 with an option of a one-year extension. In Summerlin, we also closed on a $59 million loan, which replaces the existing construction loan for Tanager. This loan was closed in April and bears interest at 3.13% and matures in May of 2031. Finally, we closed out the quarter with over $1 billion of liquidity, which includes $976 million of cash on hand and $185 million of availability under our lines of credit. Our net equity requirement for projects under construction totaled $504 million at the end of the first quarter. When you account for the construction loans we closed in April, this equity commitment drops further to $379 million.

For the first three months ended March 31, 2021, we reported a net loss of $67 million or $1.20 per diluted share, compared to a net loss of $125 million or $2.88 per diluted share during the first quarter of 2020.

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0

And we expect the call to last about 60 minutes. At this time last year, during our 2020 third quarter call, we laid out a long-term goal of our pathway to achieving annual revenues of $10 billion plus. It's important to remember, at that time, MasTec was on a path to generate just over $6 billion of revenue in 2020. Fast forward 12 months, this year, we expect to generate $8 billion in revenue. And our long-term goal of reaching annual revenues exceeding $10 billion is now within reach in what we hope will be a much shorter time frame. Since becoming CEO in 2007, we've been able to grow MasTec from $900 million in revenue to $8 billion today. Revenue for the quarter was $2.404 billion. Adjusted EBITDA was $278 million. Adjusted earnings per share was $1.81. And backlog at quarter end was $8.5 billion, a year-over-year increase of $821 million. Our Communications revenue for the quarter was $670 million. The second quarter of this year represented the largest quarterly sequential segment backlog increase in the company's history, and in the third quarter, we were again able to sequentially grow segment backlog by over $200 million. Margins for the segment were 10.7% in the third quarter; and were impacted by both lower wireless revenues than expected, along with project closeouts related to a large fiber build that is nearing completion. Over the last few quarters, we've talked about the opportunities related to the Rural Digital Opportunity Fund or RDOF, which will provide $20 billion of funding over the next 10 years to build and connect gigabit broadband speeds in underserved rural areas; and the 5G Fund for Rural America, which will provide up to $9 billion in funding over the next decade to bring 5G wireless broadband connectivity to rural America. In addition to these programs, the current pending infrastructure bill has another $65 billion allocated for broadband infrastructure. Revenue was $365 million versus $129 million in last year's second (sic) third quarter. The increase was driven by organic growth of nearly 50% in the quarter on a year-over-year basis; and the first full-quarter contribution of INTREN, which we acquired during the second quarter. Margins for the segment were 9.5%, which exceeded our expectations. Revenue was $858 million and margins remained strong. As a reminder: Last year, we forecasted a longer-term recurring revenue target of $1.5 billion to $2 billion a year, assuming a continued depressed oil and gas market. Pipe materials often account for nearly 50% of project costs. Revenue was $518 million for the third quarter. Backlog at quarter end in Clean Energy was $1.570 billion versus $891 million at the end of last year's third quarter, a year-over-year increase of nearly $700 million and a slight sequential reduction of over $100 million from the second quarter. Since quarter end, we've either signed or been verbally awarded another roughly $800 million in projects. In summary, we had strong third quarter results with revenue of approximately $2.4 billion, a 42% increase over last year; adjusted EBITDA of approximately $278 million; and adjusted EBITDA margin rate at 11.6% of revenue. Yesterday, we announced a new and increased credit facility of $2 billion, which adds to our ample liquidity, improves pricing and eliminates security requirements. Our strong cash earnings profile, coupled with our focus on working capital management during 2021, has allowed us to easily fund organic working capital needs associated with approximately $1.5 billion in year-to-date revenue growth while investing approximately $600 million in strategic acquisitions. At the end of our third quarter, we maintained a strong balance sheet and capital structure with liquidity approximating $1.3 billion, comfortable leverage metrics and with net debt at only 1.3 times adjusted EBITDA at quarter end. Third quarter Communications revenue was $670 million, approximately 4% growth compared to last year. Our third quarter Communications segment adjusted EBITDA margin rate was 10.7% of revenue, an 80 basis point sequential decline primarily related to the overhead impacts of lower-than-expected third quarter revenue levels. Our annual 2021 Communications segment expectation is that revenue will range somewhere between $2.5 billion to $2.6 billion, with annual 2021 adjusted EBITDA margin rate approximating 11%. Third quarter Clean Energy and Infrastructure segment or clean energy revenue was $518 million. And adjusted EBITDA was approximately $14 million or 2.7% of revenue, below our expectation. At one point during this project, approximately 1/3 of the project field crew and 50% of critical path electricians were either infected with COVID or in quarantine, effectively stopping project production. We believe the issues that have negatively impacted our clean energy segment year-to-date adjusted EBITDA margin performance are largely behind us and, based on project timing, expect that fourth quarter segment revenue will be the largest revenue quarter of the year with over 60% year-over-year revenue growth and strong fourth quarter adjusted EBITDA margin rate improvement to a high single-digit level. As we have previously indicated, our clean energy segment has grown from $300 million of revenue in 2017 and will approach $2 billion in revenue during 2021. Third quarter Oil and Gas segment revenue was $858 million, and adjusted EBITDA was $171 million. This increased our third quarter revenue by approximately $100 million, accelerating revenue previously expected to occur in the fourth quarter. We currently expect annual 2021 Oil and Gas segment revenue will range between $2.5 billion to $2.6 billion, with annual 2021 adjusted EBITDA margin rate for this segment expected in the high-teens to low-20% range. Third quarter Electrical Transmission segment revenue was $365 million, and adjusted EBITDA margin rate of 9.5% of revenue. Third quarter results reflected a full quarter of electrical distribution and storm services from INTREN, which contributed revenue of approximately $175 million to the quarter. Excluding INTREN, organic segment revenue during the third quarter grew $64 million and adjusted EBITDA margin performance was strong. We expect annual 2021 revenue for the Electrical Transmission segment to approximate $1 billion and annual 2021 adjusted EBITDA margin rate to range somewhere between 6.5% to 7% of revenue. This expectation includes the assumption that second half of 2021 segment adjusted EBITDA margin rate will approximate a low-8% range, a significant improvement when compared to first half 2021 performance. Now I will discuss a summary of our top 10 largest customers for the third quarter period as a percentage of revenue. Enbridge was 21% of revenue, reflecting the previously mentioned pipeline project acceleration. Newly defined AT&T services totaled 7% of revenue. NextEra Energy was 6% of revenue, comprising services across multiple segments including clean energy, Communications and Electrical Transmission. Equitrans Midstream was 5%. Entergy and Comcast were each 4% of revenue. Duke Energy, DIRECTV and Exelon reached 3%; and Enel Green Power was 2%. Individual construction projects comprised 63% of our third quarter revenue, with master service agreements comprising 37%. As of September 30, 2021, we had total backlog of approximately $8.5 billion, up approximately $821 million when compared to last year. And we continue with the expectation that 2022 segment revenue will range somewhere between $1.5 billion to $2 billion, with potential sizable growth opportunities in 2023 and beyond. As I mentioned earlier in these remarks, yesterday, we announced closing of a new unsecured $2 billion credit facility, which reflects a $250 million increase from our prior facility with improved pricing and extended term. During the third quarter, we managed to reduce our net debt levels by approximately $80 million despite the working capital associated with approximately $450 million in sequential revenue growth. We ended the quarter with $1.3 billion in liquidity; and net debt, define as total debt less cash and cash equivalents, at $1.26 billion, which equates to a very comfortable 1.3 times leverage metric. 2021 year-to-date cash provided by operating activities was approximately $500 million. We ended the third quarter with DSOs at 72 days compared to 85 days in Q3 last year. Assuming no Q4 acquisition activity, net debt at year-end is expected to approximate $1.2 billion, leaving us with ample liquidity and an expected book leverage ratio slightly over one times adjusted EBITDA. We predict an annual 2021 revenue of $8 billion, with adjusted EBITDA of $930 million or 11.6% of revenue; and adjusted diluted earnings of $5.55 per adjusted diluted share, which is a $0.10 per share increase over our prior expectation of $5.45 per adjusted diluted share. This translates into a fourth quarter revenue expectation of $1.85 billion, with adjusted EBITDA of $218 million or 11.7% of revenue; and earnings guidance of $1.33 per adjusted diluted share. As previously mentioned, our fourth quarter revenue view includes approximately $100 million in lower revenue expectations for the Oil and Gas segment due to the acceleration of project revenue during the third quarter. We anticipate net cash capex spending in 2021 at approximately $120 million, with an additional $160 million to $180 million to be incurred under finance leases. We expect annual 2021 interest expense levels to approximate $54 million, with this level including approximately $600 million in year-to-date acquisition funding activity. For modeling purposes: Our estimate for 2021 share count continues at 74 million shares. We expect annual 2021 depreciation expense to approximate 4.3% of revenue, inclusive of year-to-date 2021 acquisition activity. We expect annual 2021 corporate segment adjusted EBITDA to be a net cost of slightly under 1% of overall revenue. And lastly, we expect that annual 2021 adjusted income tax rate will range approximately 22%, with our third and fourth quarter adjusted income tax rates ranging in the 19% to 20% range primarily due to the benefits of income mix and tax true-up adjustments.

In summary, we had strong third quarter results with revenue of approximately $2.4 billion, a 42% increase over last year; adjusted EBITDA of approximately $278 million; and adjusted EBITDA margin rate at 11.6% of revenue. This translates into a fourth quarter revenue expectation of $1.85 billion, with adjusted EBITDA of $218 million or 11.7% of revenue; and earnings guidance of $1.33 per adjusted diluted share.

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0

In the third quarter of 2021, sales grew 20% year-over-year, with strong performances across North America and the International segments and with growth across all brands, channels and price points. Adjusted earnings per share for the third quarter was $0.88, an increase of 19% versus the same period last year. I should also note that we've grown sales and adjusted earnings per share double digits for nine out of the last 10 quarters. During the last 12 months, we've allocated over $1 billion in capital acquiring Dreams, repurchasing shares, paying dividends and investing in our ongoing operations. In the third quarter, we opportunistically repurchased $190 million of our shares, bringing our total share repurchase over the last 12 months to approximately $700 million at an average price of $36 per share. Regarding recent investments in the business, over the last 12 months, we've opened three new manufacturing facilities. The next highlight is our worldwide wholesale business, which grew a robust 11% this quarter as compared to the same period last year. Across both brands, our total backlog has increased from the end of the second quarter by about $100 million as of September 30, 2021. Our direct-to-consumer business had another record quarter, growing 79% over the third quarter of 2020 and growing 17% excluding the Dreams acquisition. With this quarter's strong performance, our third quarter direct-to-consumer sales has grown a compound annual growth rate of 45% over the last five years. On an annual run rate basis, our direct channel is now on track to generate over $1 billion of sales. We estimate that it was about $100 million. Considering this and the unrealized sales from our increased backlog, our sales could have been higher by over $200 million this period. I'm pleased to reaffirm our expectations that 2021 sales will grow approximately 60% over 2019, a period not impacted by COVID. Another 35% of our growth is derived from our M&A activities and share gains from previously untapped addressable markets. We estimate only about 15% of our expected two-year growth comes from the broader industry. Sales increased 20% to over $1.3 billion. Adjusted EBITDA increased seven percent to $298 million. And adjusted earnings per share increased 19% to $0.88. This accounts for 350 basis points of the year-on-year change in consolidated gross margins for the quarter. Net sales increased 13% in the third quarter. On a reported basis, the wholesale channel increased 12% and the direct channel increased 20%. North American adjusted gross profit margin declined 490 basis points to 39.9%. We have implemented several pricing actions over the last 12 months to offset rising input costs. North America third quarter adjusted operating margin was 21.2%, a decline of 260 basis points as compared to the prior year. Net sales increased 73% on a reported basis, inclusive of the acquisition of Dreams. On a constant currency basis, International sales increased 72%. As compared to the prior year, our International gross margin declined to 54.6%. Our International operating margin declined to 22.1%. We generated strong third quarter operating cash flows of $285 million. At the end of the third quarter, consolidated debt less cash was $1.9 billion, and our leverage ratio under our credit facility was 1.7 times. Second, we issued an $800 million three 7/8% 10-year bond, which was significantly oversubscribed by the market. This bond secures our long-term flexibility at historically low rates and resulted in record liquidity of $1.2 billion at the end of the third quarter. This transaction will have the near-term impact of an incremental $7 million of interest in Q4 2021. We currently expect 2021 sales growth to exceed 35% and adjusted earnings per share to be between $3.20 and $3.30, for a growth rate of 70% at the midpoint. I want to note that this expectation on adjusted earnings per share includes a headwind of $0.03 from the increase in interest expense I noted before. At the midpoint of our guidance, this implies EBITDA to grow over 30% in the fourth quarter versus the prior year Lastly, I'd like to flag a few modeling items. For the full year 2021, we currently expect total capex to be between $140 million and $150 million, D&A of about $180 million, interest expense of about $62 million, a tax rate of 25% and a diluted share count of 204 million shares. In 2020, we recognized whitespace opportunity for Tempur Sealy in the OEM market and successfully generated $150 million in sales in our first year. We believe that we can grow our sales by 400% to $600 million by 2025 due to continuing -- continuation of utilizing our best-in-class manufacturing and logistics capabilities to manufacture non-branded product. This will allow us to earn our fair share of approximately 20% of the bedding market we believe is serviced by OEM. We currently operate over 600 retail stores worldwide and see opportunities to further increase our store count organically, about double digits annually for the next several years. We also expect our new U.S. foam-pouring facility to allow us to hire approximately 300 local employees. Our average annual salary for our U.S. manufacturing employees is above the national average, and it's about $42,000 a year.

Adjusted earnings per share for the third quarter was $0.88, an increase of 19% versus the same period last year. Another 35% of our growth is derived from our M&A activities and share gains from previously untapped addressable markets. Sales increased 20% to over $1.3 billion. And adjusted earnings per share increased 19% to $0.88. We currently expect 2021 sales growth to exceed 35% and adjusted earnings per share to be between $3.20 and $3.30, for a growth rate of 70% at the midpoint.

0 1 0 0 0 0 0 0 0 0 0 0 0 0 1 0 1 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0

Overall, we are extremely pleased with the continued acceleration of our improving operating trends in the third quarter, which exceeded our initial expectations and resulted in more than a 25% increase in RevPAR from the second quarter. Demand growth accelerated broadly during the quarter as we sold nearly 7% more room nights in the third quarter than we did in the second quarter, peaking during a historically strong summer travel season in July when occupancy in the portfolio was above 72%. Although August demand pulled back modestly as expected, we saw a reacceleration in the back half of September when occupancy averaged nearly 70% during the last two weeks of the quarter. Negotiated room revenue increased approximately 28% in the third quarter over the second quarter. We reported third quarter pro forma RevPAR of $98, which was more than double our RevPAR in the third quarter of last year and was 24% lower than what was achieved in the third quarter of 2019, a significant improvement from the first half of the year when RevPAR was nearly 43% lower in the second quarter and 59% lower in the first quarter than the comparable 2019 periods. As ADR across our portfolio increased 19% compared to the second quarter, and weekday ADR growth outpaced weekend growth by nearly 200 basis points. Average rates in our urban portfolio increased 24% from the second quarter, and weekday urban ADR grew 27% from the second quarter, which encouragingly reflects some level of rate accretive remixing of our business with corporate travel. Weekend occupancy was an impressive 80% during the third quarter and averaged 82% in July and September as the recovery continues to clearly be led by exceptionally strong leisure demand. However, mid-week occupancy also continues to steadily improve, climbing to 64% during the first quarter, a full five percentage points higher than the second quarter and the gap between weekday and weekend occupancy continues to narrow. During the third quarter, we completed the previously announced acquisition of the newly built 110 guestroom residence in Steamboat Springs for $33 million. The extended-stay hotel is the newest hotel in Steamboat, one of only six other hotels that have opened in the market since the year 2000, and the first Marriott-branded extended stay product in the market. Since acquisition, the hotel has performed exceptionally well, generating occupancy and RevPAR of nearly 87% and $161, respectively, and hotel EBITDA margin of 49% for the third quarter. On an annualized basis, this equates to a 9% net operating income yield and less than three months of ownership, despite the hotel having been open for less than one year. During the third quarter, we invested approximately $4.2 million in our portfolio on items primarily related to planned maintenance capital. We expect to spend between $15 million and $20 million in capital expenditures for the year on a consolidated basis. And between $14 million and $19 million on a pro rata basis. During the third quarter, our resort and other nonurban hotels continued to show robust sequential improvement with RevPAR growth of 12% relative to the second quarter of this year, and a nominal RevPAR value exceeding $100. This subset of the portfolio illustrates Summit's diversification and broad exposure to the overall lodging recovery as ADR increased 13% to $135 relative to the second quarter on stable occupancy of 74%. RevPAR at our urban hotels increased 43% from second quarter 2021 to approximately $94, primarily on the strength of rate, which increased 24%. As an additional point of reference, in third quarter 2020, our urban portfolio posted a RevPAR of $37, further evidence of the strong rebound experienced year-over-year. As a final point on our urban portfolio, we believe business travel is now in the early stages of its recovery as urban midweek occupancy increased 10 percentage points from the second quarter to 57%, and ADR increased more than $30 to $144 or a 27% increase for the quarter. This translates to a RevPAR growth rate of 54% versus second quarter for the urban portfolio. Full week group RevPAR for the company's total portfolio increased by 76% relative to second quarter 2021, while weekday group RevPAR increased by 100% during the same time frame. Similarly, full week negotiated RevPAR increased by 28% relative to second quarter, while weekday negotiated RevPAR increased by 32%. For example, transient room nights booked within 24 hours this day, declined from 23% of total bookings in the second quarter to 21% of bookings in the third quarter. But importantly, nights booked more than 30 days out, increased by 19% during that same period. From a cash flow perspective, continued growth in demand, combined with thoughtful expense management, enabled Summit to generate positive corporate cash flow of $18.5 million in Q3, which was more than triple the corporate cash flow of Q2 2021. Pro forma hotel EBITDA was $38.8 million in the third quarter, exceeding the previous two quarters combined by approximately $5 million. Operating costs per occupied room declined nearly 10% compared to 2019, which drove third quarter gross operating profit margin and hotel EBITDA margin to an impressive 47% and 35%, respectively. We continue to operate our hotels utilizing a very lean staffing model, which consists of approximately '19 FTEs on average or slightly more than 55% of free pandemic staffing levels. Despite these challenges and increasing occupancy levels, our asset management team has done a great job controlling operating expenses, leading to hotel EBITDA retention of 54% when compared to the third quarter of 2019. Additionally, we accessed the capital markets in August, taking advantage of a favorable preferred equity market with the issuance of $100 million of five and seven, eight Series A perpetual preferred paper. Proceeds from this opportunistic offering were used to accretively refinance our $75 million, 6.45% Series B preferred stock and to reduce the outstanding balance on our November 2022 term loan to its current balance of $62 million. We're thrilled to announce the acquisition of a 27 hotel portfolio from NewcrestImage, which is comprised of approximately 3,700 guest rooms located across 10 high-growth Sunbelt markets in Texas, Oklahoma City and New Orleans. These hotels are highly complementary to our existing portfolio with premium brand affiliations, excellent locations in strong markets and comprise a relatively new portfolio with approximately 70% of the guest rooms opening since 2015 and more than 1/3 of the guestrooms built in the last three years. The hotel portfolio's allocated value of $776.5 million equates to approximately $209,000 per key, which reflects a significant discount to replacement costs and results in a stabilized NOI yield of 8% to 8.5%, including underwritten capital expenditures. Our increased exposure to Sunbelt markets, which will be approximately 60% of our pro forma room count, positions the combined hotel portfolio to benefit from the favorable migration patterns, labor dynamics, corporate relocation activity, return to office trends and general pro business climates in these markets. In addition to the hotel portfolio, we will be acquiring two parking structures, totaling approximately 1,000 parking spaces that serve two triplex hotel clusters, one in Downtown Dallas and the other in the emerging mixed-use development of Frisco Station, a thriving North Dallas suburb. Our joint venture with GIC will acquire the assets for a total consideration of $822 million, and we will finance the investment with a new $410 million credit facility. GIC's 49% equity interest will be a cash contribution totaling approximately $208 million, and our 51% controlling interest will come from a combination of common and preferred op units. We will issue 15.9 million shares of common op units valued at $160 million. Based on our common stock's 10-day [Indecipherable] as of Tuesday's closing price equal to $10.09 per share. NewcrestImage ownership will be approximately 13% of our total shares outstanding. The preferred op units totaling $50 million will be issued at a standard $25 par value and pay an annual coupon equal to 5.25%. The transaction would increase our combined room count by over 30% and our total enterprise value by approximately 20%. Acting as a general partner, on behalf of the joint venture, we will continue to earn fees for our asset management services and expect our stabilized fee stream earned through the joint venture will cover approximately 17% of our in-place cash corporate G&A. The utilization of common and preferred op units for our 51% equity interest will preserve nearly all of our liquidity of $450 million, leaving us ample runway to pursue additional growth opportunities.

We're thrilled to announce the acquisition of a 27 hotel portfolio from NewcrestImage, which is comprised of approximately 3,700 guest rooms located across 10 high-growth Sunbelt markets in Texas, Oklahoma City and New Orleans. Our joint venture with GIC will acquire the assets for a total consideration of $822 million, and we will finance the investment with a new $410 million credit facility. GIC's 49% equity interest will be a cash contribution totaling approximately $208 million, and our 51% controlling interest will come from a combination of common and preferred op units. The utilization of common and preferred op units for our 51% equity interest will preserve nearly all of our liquidity of $450 million, leaving us ample runway to pursue additional growth opportunities.

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 1 1 0 0 0 0 0 0 1

Today's remarks are governed by the safe harbor provisions of the 1995 Private Securities Litigation Reform Act. Despite the headwinds, we achieved solid results for fiscal 2019 with sales of $284 million and adjusted operating margin of 11.7% and adjusted earnings per share of $1.69 and $20.4 million of adjusted free cash flow. For the fourth quarter, sales of $69.1 million were at the high end of our expectations and grew 2.6% sequentially. Bookings were strong as total orders for the fourth quarter of $79.8 million grew 24% from the third quarter and reflected growth in all three segments. The result was an overall book-to-bill of 1.15 in the fourth quarter, an improvement from 0.96 in Q3. In transportation, where we focus on track in one market orders for our VPG onboard weighing solutions were solid in both the avionics, military and space market or AMS and steel market trends continue to be directionally positive, but our orders reflected the project-driven nature of our products. First, our results include -- included $1.7 million of an acquisition-related charges and costs associated with the addition of Dynamic Systems, Inc. or DSI in November of 2019. Second, we recorded a restructuring charge of $1.7 million which primarily relates to the closing and downsizing of facilities as part of our ongoing strategic initiative to align and consolidate our manufacturing operations. Third, our margins were further affected by approximately $1.1 million related to inventory reductions as well as one-time inventory adjustments, mainly for manufacturing relocations and system implementations. The results of these factors was an operating income in the fourth quarter of $1.8 million or 2.5% of revenues, and adjusted operating income was $5.2 million or 7.5% of revenues. Fourth-quarter earnings per diluted share was $0.28. And adjusted net earnings per diluted share was $0.27. Sales of foil technology products of $29.6 million declined 7.7% sequentially and were 19.3% lower than the fourth quarter a year ago. The result was a book-to-bill ratio of 1.18 for foil technology products in the fourth quarter which was up significantly from 0.91 in the third quarter. Gross margin for foil technology products of 34.9% declined from 37.3% for the third quarter due to lower sales volume of $1.5 million, unfavorable product mix of $300,000 and the one-time inventory adjustment of $200,000 which was partially offset by a reduction in manufacturing costs of $700,000. Looking at the force sensors segment, sales in the fourth quarter of $15.1 million declined 7.1% sequentially and were down 11.4% from the fourth quarter of 2018. Book-to-bill for force sensors was 1.11 which grew from 0.94 in the third quarter of 2019. Fourth-quarter gross profit margin for force sensors of 24.2% decreased from 30.4% in the third quarter of 2019. The lower sequential gross profit reflected lower volume of $600,000, approximately $400,000 related to inventory reductions and $200,000 of one-time inventory adjustments. For the Weighing and Control Systems segment, fourth-quarter sales of $24.4 million increased 28.1% from the third quarter and were 5.2% higher than the fourth quarter a year ago. Book-to-bill for weighing and controls was 1.15 which compared to 1.04 in the third quarter of 2019. The fourth-quarter gross profit margin for WCS segment of 41.6% or 46.8% excluding the purchase accounting adjustments of $1.3 million for the DSI acquisition, was in line with prior quarter's profit margins. We expect these moves to yield approximately $1.6 million of cost savings in 2020 excluding normal inflation and wage increases. We expect to incur approximately $2 million of start-up costs in the second half of this year as we complete the transition. We continue to have a good customer engagement with respect to our advanced sensors as we grew sales of these products, 20% in 2019 compared to 2018. Another key initiative relates to our TruckWeigh and VanWeigh overload protection technology which grew 30% in 2019 from the prior year. In the fourth quarter of 2019, we achieved revenues of $69.1 million, operating income of $1.8 million or 2.5% of revenues and net earnings per diluted share of $0.28. On an adjusted basis which exclude $1.7 million of costs and purchase accounting adjustments related to the DSI acquisition and $1.7 million of restructuring costs, our adjusted operating margin was $5.2 million or 7.5% of sales and adjusted net earnings per diluted share was $0.27. Our fourth-quarter 2019 revenue of $69.1 million increased by 2.6% as compared to $67.4 million in the third quarter, and we were down 10.2% as compared to $77.0 million in the fourth quarter a year ago. Foreign exchange negatively impacted revenues by $500,000 for the fourth quarter of 2019 as compared to a year ago and had no impact as compared to the third quarter of 2019. Our gross margin in the fourth quarter was 35%. Excluding $1.3 million related to purchase accounting adjustments for the DSI acquisition, our gross margin on adjusted basis was 36.8% which declined from 38.3% in the third quarter. Our operating margin was 2.5% for the fourth quarter of 2019. If we exclude the above-mentioned purchase accounting adjustments, acquisition cost of $400,000 and restructuring expense of $1.7 million related to the facility closures and downsizing, as Ziv mentioned, our fourth-quarter adjusted operating margin was 7.5% as comparted to 10% in the third quarter of 2019. The adjusted gross margin for the fourth quarter of 2019 included approximately $1.1 million of inventory reductions and inventory-related adjustments which are not expected to reoccur. Excluding these inventory-related factors, adjusted gross margin would have been 38.5%, above the 38.3% we reported in the third quarter of 2019. Selling, general and administrative expenses for the fourth quarter of 2019 were $20.2 million or 29.2% of revenues. This compared to $20.9 million or 27.2% for the fourth quarter last year and $19.1 million or 28.3% in the third quarter. The adjusted net earnings for the fourth quarter of 2019 were $3.7 million or $0.27 per diluted share compared to $5.0 million or $0.37 per diluted share in the third quarter of 2019. While impact of foreign exchange rates for the fourth quarter was modest compared to the third quarter, they had a much bigger effect compared to the fourth quarter a year ago, impacting net earnings by $900,000 or $0.07 per diluted share. We generated adjusted free cash flow of $4.1 million for the fourth quarter of 2019 as compared to $4.8 million for the third quarter of 2019. We define free cash flow as cash generated from operations which was $6.3 million for the fourth quarter of 2019, less capital expenditures of $2.6 million and sales of fixed assets of $400,000. We recorded a tax benefit of $3.4 million in the fourth quarter of 2019 related to the acquisition of DSI, utilizing our deferred tax liabilities against deferred tax assets. We are assuming an operational tax rate in the range of 27% to 29% for our 2020 planning purposes. Reflecting the $40.5 million paid for DSI, we ended the fourth quarter with $86.9 million of cash and cash equivalents and total long-term debt of $44.5 million. We currently expect net revenues in the range of $63 million to $70 million for the first fiscal quarter of 2020 which reflect the portions of our project-driven business and customers longer lead time orders that are expected to ship in the quarter and assumes constant fourth-quarter 2019 exchange rates.

In transportation, where we focus on track in one market orders for our VPG onboard weighing solutions were solid in both the avionics, military and space market or AMS and steel market trends continue to be directionally positive, but our orders reflected the project-driven nature of our products. Third, our margins were further affected by approximately $1.1 million related to inventory reductions as well as one-time inventory adjustments, mainly for manufacturing relocations and system implementations. Fourth-quarter earnings per diluted share was $0.28. And adjusted net earnings per diluted share was $0.27. In the fourth quarter of 2019, we achieved revenues of $69.1 million, operating income of $1.8 million or 2.5% of revenues and net earnings per diluted share of $0.28. On an adjusted basis which exclude $1.7 million of costs and purchase accounting adjustments related to the DSI acquisition and $1.7 million of restructuring costs, our adjusted operating margin was $5.2 million or 7.5% of sales and adjusted net earnings per diluted share was $0.27. Our fourth-quarter 2019 revenue of $69.1 million increased by 2.6% as compared to $67.4 million in the third quarter, and we were down 10.2% as compared to $77.0 million in the fourth quarter a year ago. The adjusted net earnings for the fourth quarter of 2019 were $3.7 million or $0.27 per diluted share compared to $5.0 million or $0.37 per diluted share in the third quarter of 2019. We currently expect net revenues in the range of $63 million to $70 million for the first fiscal quarter of 2020 which reflect the portions of our project-driven business and customers longer lead time orders that are expected to ship in the quarter and assumes constant fourth-quarter 2019 exchange rates.

0 0 0 0 0 1 0 0 1 0 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 1 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 1

We have over 2,000 people on the wait list who are looking to be the first to sign up for Shaka. Product benefits include the opportunity to get your paycheck up to two days early, a reimbursement of ATM fees up to $20 a month and a higher than average return on funds in the account. Our statewide vaccination rate has risen to over 70%, as many employers in the state have mandated vaccinations to protect their employees, their customers and the community in general. The state of Hawaii unemployment rate declined to 6.6% in the month of September and is forecasted by the Department of Business Economic Development and Tourism to decline further to 6.4% in 2022. The housing market in Hawaii remained very hot with our median single-family home price surpassing the $1 million mark this past quarter. Our asset quality continues to be strong with non-performing assets at just 10 basis points of total assets as of September 30th. Additionally, total classified assets were less than 1% of total loans. As of September 30th, we have just $1.3 million in loans remaining on deferral. Finally, net charge-offs declined to just $0.2 million in the third quarter. Shifting to our employees, we are very pleased that 95% of our employees are now fully vaccinated against COVID-19. We also offered a $500 cash incentive for un-vaccinated employees who got vaccinated after September 1st. In the third quarter, our loan portfolio increased by $184 million or 4% sequential quarter, which was offset by PPP forgiveness paydowns of $216 million. Year-over-year, our core loan portfolio increased by 7%. Approximately $58 million or 32% of the quarter's loan growth came from Mainland consumer loans. Our residential mortgage production continue to be very strong with total production in the third quarter of nearly $245 million and total net portfolio growth in residential mortgage and home equity of $72 million from the previous quarter. PPP forgiveness continues to progress well with 93% of the loan balances originated in 2020 and 40% of the balances originated in 2021, already forgiven and paid down through September 30th. During the third quarter, we purchased an auto loan portfolio for about $20 million from one of our Mainland auto loan origination partners, and we continued consumer unsecured purchases on an ongoing flow basis based on our established credit guidelines. The purchase during the quarter had a weighted average FICO score of 750. As of September 30th, total mainland consumer, unsecured and auto purchase loans were approximately 5% of total loans. Our target range for total Mainland loans, including commercial and consumer is around 15% of total loans. On the deposit front, we continue to see strong inflow of deposits with total core deposits increasing by $267 million or 4.6% sequential growth. On a year-over-year basis, total core deposits increased by $1.1 billion or 21.6%. Additionally, our average cost of total deposits dropped in the third quarter to just 5 basis points. Net income for the third quarter was $20.8 million or $0.74 per diluted share, an increase of $2.1 million or $0.08 per diluted share from the prior quarter. Return on average assets in the third quarter was 1.15%, and return on average equity was 14.83%. Net interest income for the third quarter was $56.1 million, which increased by $4 million from the prior quarter due to core loan and investment portfolio growth, loan and investment yield improvements and slightly higher PPP fee recognition. Net interest income included $8.6 million in PPP net interest income and net loan fees compared to $7.9 million in the prior quarter. At September 30th, unearned net PPP fees was $7.9 million. The net interest margin increased to 3.31% in the third quarter compared to 3.16% in the previous quarter. The NIM normalized for PPP was 2.96% in the third quarter compared to 2.93% in the prior quarter. Third quarter other operating income remained relatively flat at $10.3 million. During the quarter, there was a decrease in bank-owned life insurance income of $0.7 million driven by market fluctuations. Other operating expense for the third quarter was $41.3 million, which was in line with the prior quarter. The efficiency ratio decreased to 62.3% in the third quarter due to higher net interest income. We expect annual future savings of approximately $800,000 from this consolidation. At September 30th, our allowance for credit losses was $74.6 million or 1.55% of outstanding loans, excluding PPP loans. In the third quarter, we recorded a $2.6 million credit to the provision for credit losses due to improvements in the economic forecasts and our loan portfolio. The effective tax rate was 24.7% in the third quarter. Going forward, we continue to expect the effective tax rate to be in the 24% to 26% range. Our capital position remains strong and during the third quarter we repurchased 234,700 shares at a total cost of $5.9 million or an average cost per share of $25.12. Finally, on October 26, our Board of Directors declared a quarterly cash dividend of $0.25 per share, which was an increase of $0.01 or 4.2% from the previous quarter.

Net income for the third quarter was $20.8 million or $0.74 per diluted share, an increase of $2.1 million or $0.08 per diluted share from the prior quarter. Net interest income for the third quarter was $56.1 million, which increased by $4 million from the prior quarter due to core loan and investment portfolio growth, loan and investment yield improvements and slightly higher PPP fee recognition.

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Mortgage production quadrupled, fee income grew across the board and deferrals dropped to 2% of loans from 30% in the second quarter. Let's turn to Page 4. P2P volume is up 40%, digital money transfers have increased 55%, online loan payments are up 87%, retail and commercial photo deposits have doubled, and we scheduled more than 34,000 COVID-safe appointments with customers through our online mobile tool, almost all of them in the second and third quarters. Let's start on Page 5 to talk about our financial results. We reported earnings per share of $0.50, a 28% increase from the second quarter and more than four times the year-ago quarter. The effective tax rate was 19% compared to 25% in the second quarter. Total core revenues were $127 million, excluding one-time interest recoveries from acquired Scotiabank loans. Net interest income of $99 million was level with the second quarter, while fee income rose 19% to $27 million. Net interest margin was 4.3%. When you exclude interest recoveries in both quarters, net interest margin was 4.28% versus 4.5% in the second quarter. Non-interest expenses of $83 million fell more than $2 million compared to the second quarter and that number includes merger and COVID-related costs. Excluding those in both periods, the efficiency ratio improved 369 basis points compared to the second quarter as increased operating leverage from the Scotiabank acquisition began to kick in. Customers' deposits grew more than $212 million from June 30 to $8.5 billion. Due to the increased deposits, as well as repayments of loans and securities, cash increased $383 million to $2.3 billion. As a result, total assets grew $84 million to $10 billion. Loan production was strong, totaling $458 million. Excluding Paycheck Protection Program loans in the second quarter and third quarter, production increased $228 million. The allowance coverage increased to 3.64%, excluding PPP loans. Capital continued to build, shareholders' equity increased to $1.06 billion, all regulatory capital ratios remained significantly above requirements for a well-capitalized institution. The CET1 ratio was 12.55% on September 30, 2020. Please turn to Page 6. These increased $0.50 in the third quarter to $16.51. Efficiency ratio improved to 65.69% on a reported basis. On an adjusted basis, it was 62.17%. Return on average assets was 1.11%, and return on average tangible common stockholders equity was 12.23% and 12.10% on an adjusted basis. Please turn to Page 7 for our operational highlights. Average loan balances declined $54 million from the second quarter, reflecting net loan repayment in mortgage, commercial and consumer; auto increased. Average core deposits, excluding brokered, grew $524 million from the second quarter. End of period core deposits are now up more than $1 billion from the end of the last year, that is on top of the $2.8 billion that came with the Scotiabank acquisition. Loan generation, excluding PPP loans, by order of magnitude was driven by $174 million in commercial lending, $156 million in auto, $94 million in residential mortgage and $24 million in consumer. Loan yield at 6.57% declined 40 basis points from the second quarter. Non-PCD loan yield declined only 16 basis points. The cost of core deposits declined 5 basis points to 56 basis points. Please turn to Page 8 to review credit quality. The net charge-off rate declined 30 basis points from the second quarter, mainly due to declines in auto. Provision declined $4 million, largely due to a decline in COVID-related provisioning. The non-performing loan rate increased 52 basis points quarter-over-quarter, mainly mortgage and auto. As for our customer relief program, if you recall, as of June 30, we had processed relief for more than 44,000 retail customers for $1.4 billion or 32% of our retail loans. For our commercial customers, we had processed relief on $685 million in loans or about 27% of our commercial portfolio. As I mentioned earlier, our deferrals are now down to 2% of total loans. Most of that relates to about $112 million of commercial loans, mostly long-standing solid customer relationships in the hospitality industry. Please turn to Page 9. The allowance for loan and lease losses increased $2.6 million from the second quarter and is now equal to 3.48% of total loans. Excluding SBA guaranteed PPP loans, the allowance was 16 basis points higher than in the second quarter. Please turn to Page 10. Our CET capital ratio is now up 164 basis points since last year after the Scotiabank acquisition. Please turn to Page 11. We have $8.5 billion of sticky core deposits with an excess of more than $1 billion giving us significant amount of dry powder.

We reported earnings per share of $0.50, a 28% increase from the second quarter and more than four times the year-ago quarter. Total core revenues were $127 million, excluding one-time interest recoveries from acquired Scotiabank loans. These increased $0.50 in the third quarter to $16.51.

0 0 0 0 1 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

And our centers have significant adjacency advantages with 186 life science companies within a 10-mile radius of the four Boston properties that will soon be part of the portfolio. Once the remainder of our deals close and net of expected parcel sales, Boston will become our third largest market at just under 8% of ABR. Let me give you a few highlights on our investments in Boston that will fit in nicely with our previously acquired Wegmans-anchored Northborough Crossings property and collectively boast a robust $148,000 household income within a 3-mile radius. Bedford Marketplace in the Boston MSA is situated in a highly affluent suburb right outside the 128 loop with a 3-mile average household income of $193,000. This is a center where Whole Foods is doing over $1,000 per square foot and has a fresh, newly renewed 15-year lease term. Marshalls has been here since 1973 and is also doing extremely well. Shoppes of Canton, this has $133,000 household income within a 3-mile radius. The expected NOI CAGR on this asset is about 4%. Lastly, we are in negotiations on a true infill grocery-anchored center inside the 128 loop with above-average household incomes and population densities versus our portfolio averages with the potential for future densification opportunities, given its size and proximity to Boston. In total, since our last call, we closed or are under contract on eight multi-tenant deals and are in advanced contract negotiations on a ninth asset with a gross value of $500 million, covering 2.6 million square feet, which will increase our AUM by over 20%. To put this in context, this level of activity equates to almost 50% of our equity-marketed cap, which is quite remarkable. RPT's pro rata share of all this activity and after expected parcel sales are complete will be around $285 million. We were only able to execute at this scale because of the power of the platforms that we put together over the last 18 months. As we discussed last quarter, Northborough is a $104 million deal we might not have pursued without RGMZ, given the large ticket size. In the Southeast region, we acquired $115 million 4-property portfolio that was split between all three platforms: RPT, R2G and RGMZ. This center is anchored by a high-volume Walmart neighborhood market and over 65% essential or investment-grade tenancy. We are selling the Home Depot and LongHorn to RGMZ and RPT is left with an Aldi-anchored center at an 8.6% yield with almost 80% essential or investment-grade tenancy. Woodstock has also demonstrated great stability over the years and has retained its original anchor tenants since it was developed in 2001. We signed 58 leases covering 442,000 square feet in the second quarter, which is 59% above the trailing 12-month quarterly average leasing volume we reported last quarter, highlighting the strong demand for our high-quality open-air centers. Our increased guidance and the 60% increase in our quarterly dividend reflects our accelerated growth trajectory. Against the backdrop of an improving macro environment, second quarter operating FFO per share of $0.22 was up $0.03 from last quarter, driven by lower rent not probable collection and abatements of $0.02 and the reversal of prior period straight-line rent reserves of about $0.01 per share. For some context, our rent not probable collection, including abatements, peaked at $5.9 million in the second quarter 2020 and have fallen quickly to the $1.1 million we reported this quarter. We continue to experience accelerating leasing demand with one million square feet signed year-to-date, which is just below the 1.2 million we completed for the entire year in 2019. Our positive leasing momentum resulted in sequential increases for our leased and occupancy rates of 50 and 40 basis points, respectively. Blended releasing spreads on comparable leases signed in the quarter were 6.6%, including another strong new lease spread of 17.8%, reflecting once again the embedded mark-to-market opportunity in the portfolio. Over the past four quarters, our comparable new lease spread was 30%. These products were completed in an average return on capital of 17%. We also started our new REI remerchandising project at Town & Country and an expansion project for Burlington at the Shoppes at Lakeland, where we expect returns of 9% to 13%. We ended the second quarter with net debt to annualized adjusted EBITDA of 7.0 times, down from 7.2 times last quarter. Leverage should fall toward our target range of 5.5 to 6.5 times as our bad debt reserve normalizes to pre-COVID levels and we restabilize occupancy. From a liquidity perspective, we ended the second quarter with a cash balance of $38 million and our fully unused $350 million unsecured line of credit. Subsequent to the end of the quarter, we drew down $135 million on the revolver to fund acquisitions, which we expect will be repaid by the end of the year as we close on parcel sales to RGMZ that are expected to generate roughly $142 million in proceeds. During the quarter, we repaid our $37 million private placement note with cash on hand. Looking ahead, we have no remaining debt maturing in 2021 and only $52 million maturing in 2022. We updated our operating FFO range to $0.88 to $0.92, which is up $0.05 or 6% than last quarter's guidance and about 10% from our initial 2021 guidance provided back in February. We have closed on or under contract or are in advanced contract negotiation on $285 million of acquisitions at our share, which is above the $100 million of acquisition that was embedded in our prior guidance. Also, given the strength in our core business and our accretive acquisitions, our Board of Trustees has increased the dividend by 60% to $0.12 per share quarterly.

Against the backdrop of an improving macro environment, second quarter operating FFO per share of $0.22 was up $0.03 from last quarter, driven by lower rent not probable collection and abatements of $0.02 and the reversal of prior period straight-line rent reserves of about $0.01 per share.

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

We delivered better than expected consolidated revenue in the third quarter with reported revenue down 32% compared to the prior year, a substantial improvement compared to the 55% decline we reported in the second quarter. Excluding China and FX, the decline would have been 27% better than the low 30% decline guidance we have provided in early August. The recent mobility restrictions in our European markets, most notably in the UK and France in the past 10 days have created volatility in customer booking activity significantly limiting our visibility. So please turn to Page 4. In the Americas segment, year-over-year revenue was down 32% in the quarter, which is an improvement compared to the 39% decline reported in the second quarter. Our Americas business is centered around the top 20 markets, which contributed to the significant growth we were delivering up to and including the first quarter of this year prior to COVID-19. However, even though our audience levels are returning to normal, the largest markets in the top 20 are those most impacted by advertisers pulling back on our out-of-home spending, especially on the East and West Coast, where national advertisers are most likely to be focused. Please turn to Page 5. Europe supported revenue was down 13% against prior year and excluding foreign exchange adjustment was down 18%, which as I noted at the beginning of my remarks is a substantial improvement compared to the 62% decline we saw in the second quarter. The improvement in digital, which accounts for approximately 30% of European revenue and declined 17% excluding FX impact was even larger due to the speed at which advertisers were able to launch campaigns as business quickly returned once lockdowns were eased. We also benefited from our strategic focus on roadside locations, which historically account for about two-thirds of our total European revenue and are far less affected by COVID-19 driven restrictions than the transit environment which account for approximately 10% of our European revenue. Our UK business was a great example of this, where about 80% of revenue is historically from roadside inventory. Moving on to Page 6, and the Americas business. Moving on to Page 7 for a review of the Americas technology initiatives and new contracts. We added 19 new digital billboards this quarter for a total of 57 new digital billboards this year, giving us a total of more than 1,400 digital billboards. The contract is for 12 years and is contingent upon execution by both parties, which we expect to occur in mid-November. Moving on to Page 8. Turning to our European technology investments on Page 9. We continue to expand our digital footprint this year, adding 383 digital displays in the third quarter and 699 year-to-date for a total of over 15,000 screens now live. Please turn to Page 10. Consolidated revenue for the quarter decreased 31.5% from last year to $448 million. Adjusting for foreign exchange, it was down 33.1%. If you exclude China and adjusted for foreign exchange, the decline in revenue was 27%, which was better than the low 30% decline we had projected in early August. Consolidated net loss declined $77 million to $136 million in the third quarter of 2020 as compared to $212 million in the third quarter of 2019. Adjusted EBITDA was $31 million in the quarter, down 78.4% and excluding FX, was down 78.9%. Now on to Page 11 to discuss the Americas results. The Americas revenue was down 31.8% during the third quarter from $328 million in 2019 to $224 million. As William mentioned, this is an improvement over the second quarter results, which were down 39%. Local, which accounted for 64% of revenue was down 27.6%, and national, which accounted for 36% of revenue was down 38.2%. Digital accounted for 30% of revenue and was down 34.8%. This compares to a 53.7% decline in the second quarter. Both direct expenses and SG&A were down 19% in the quarter, primarily due to lower site lease expenses and lower compensation costs, as a result of the decline in revenue and cost reduction initiatives. Adjusted EBITDA was $71 million, down 48% from the prior year. Please move on to Page 12 to review Europe. Europe revenue was down 13.4%. Excluding foreign exchange revenue, was down 17.9% in the third quarter. This is a substantial improvement from the 62% decline reported in the second quarter, with all markets contributing to the improvement. Digital revenue accounted for 30% of total revenue that was down 16.6%, excluding FX, slightly less than the overall decline. Adjusted direct operating expenses and SG&A expenses were down 8.9%. Adjusted EBITDA was a loss of $8 million, due to the decline in revenue and high fixed cost base. As I just discussed, Europe and CCI B.V. revenue decreased $34 million during the third quarter of 2020, compared to the same period of 2019, $217 million. After adjusting for an $11 million impact from movements in foreign exchange rates, Europe and CCI B.V. revenue decreased $45 million. CCI B.V. operating loss was $38 million in the third quarter of 2020, compared to operating loss of $16 million in the same period of 2019. On to Page 13 for a quick review of other. Latin America revenue was $7 million in the third quarter, down $15 million from the prior year. Direct operating expenses and SG&A were $13 million in the third quarter, down $4 million from the prior year. Now on to Page 14 to discuss capex. Capital expenditures totaled $26 million in the third quarter, down $34 million from the prior year, as we proactively reduced our capital spend to preserve liquidity and sold our stake in Clear Media. Even with this substantial reduction, we did continue to invest in digital in key locations with 19 new digital billboards in the US, and 383 new digital displays in Europe. Please move to Page 15. Clear Channel Outdoor's consolidated cash and cash equivalents, as of September 30, 2020, totaled $845 million, including $417 million of cash held outside the US by our subsidiaries. Our debt was $5.6 billion, an increase of just over $500 million during the year, as a result of our drawing on our cash flow revolver at the end of March, and issuing the CCI B.V. notes in August. Cash paid for interest on the debt during the third quarter was $147 million, up slightly from the prior year, due to the timing of interest payments, partially offset by lower interest rates. The company anticipates having approximately $21 million of cash interest payments in the fourth quarter of 2020, and $350 million in 2021, including the interest on the new CCI B.V. secure notes, with the first interest payment in April of 2021. Moving on to Page 16. Plans are expected to generate annualized pre-tax savings of approximately $32 million upon completion, with total charges for the plans in the range of $23 million to $26 million to achieve these savings. Additionally, during the third quarter, as previously discussed, we issued $375 million in senior secured notes in August through our indirect wholly owned subsidiary CCI B.V. We generated rent abatements of $24 million during the third quarter and $53 million year-to-date. We obtained European government support and wage subsidies of $7 million in the third quarter and $15 million year-to-date. From a liquidity standpoint given what we know today, we believe that we have sufficient liquidity, including the $845 million of cash at the quarter end, to fund the needs of the business as the economy and our business recover. Please move to Page 17.

We delivered better than expected consolidated revenue in the third quarter with reported revenue down 32% compared to the prior year, a substantial improvement compared to the 55% decline we reported in the second quarter. In the Americas segment, year-over-year revenue was down 32% in the quarter, which is an improvement compared to the 39% decline reported in the second quarter. The Americas revenue was down 31.8% during the third quarter from $328 million in 2019 to $224 million. Plans are expected to generate annualized pre-tax savings of approximately $32 million upon completion, with total charges for the plans in the range of $23 million to $26 million to achieve these savings.

1 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0

For the quarter, we generated record adjusted earnings per share of $1.18 and segment EBIT of $140 million. China was the only major economy to avoid a recession in 2020 and the market there was very strong for us in Q1 as PMI hit 57 and industrial production surged. Given that almost 40% of the world's tires are produced in China and 50% of the world's silicones, our differentiated position there means we are extremely well-positioned for growth. The segment delivered EBIT in the first fiscal quarter of $54 million, up 32% compared to the first fiscal quarter of 2020. Customer adoptions and sales with the top 10 global battery producers continue to build momentum and we believe this business will grow to become a meaningful profit contributor for Cabot. And our Platinum rating confirms that Cabot is ranked among the top 1% of companies in its peer group in the manufacturing of basic chemicals. This is the second year that Cabot has received this recognition, which was developed in 2020 to highlight the most responsible companies in the United States across 14 industries. The Reinforcement Materials segments delivered record operating results with EBIT of $88 million compared to the same quarter of fiscal 2020 driven by improved pricing and product mix in our calendar year 2020 tire customer agreement and with spot customers in the Asia region. Globally volumes were up 1% in the first quarter as compared to the same period of the prior year primarily due to 13% growth in Europe and 9% higher volumes in the Americas as key end market demand continue to recover along with some level of inventory replenishments from the drawdowns earlier in the calendar year. Asia volumes were down 8% year-over-year largely due to a schedule planned turnaround and our decision to balance pricing and volume in order to improve margin levels. Now turning to Performance Chemicals, EBIT increased by $13 million as compared to the first fiscal quarter of 2020 primarily due to higher volumes and improved product mix in specialty carbons and compounds product lines. Year-over-year volumes increased by 9% in both the Performance Additives and Formulated Solutions businesses driven by increases across all of our key product lines from higher demand levels and some level of customer inventory replenishment during the quarter. Looking sequentially, we expect EBIT will moderate somewhat from the first quarter as raw material costs increase and specialty carbons and compounds product lines and we expect higher costs associated with the draw-down of inventory levels in the quarter. We ended the quarter with a cash balance of $147 million, and our liquidity position remains strong at approximately $1.5 billion. During the first quarter of fiscal 2021, cash flows from operating activities were $21 million, which included a working capital increase of $99 million. The change in net working capital also included the final payment of $33 million related to the prior year respirator settlement. Capital expenditures for the first quarter of fiscal 2021 were $29 million. For the full year, we expect capital expenditures to be between $175 million and $200 million. Additional uses of cash during the quarter included $20 million for dividend. Our operating tax rate was 30% for the first quarter of fiscal 2021, and we continue to anticipate the fiscal year rate will be between 28% and 30%. Based on the underlying business performance, we expect adjusted earnings per share in the second quarter to be in the range of $0.90 to a $1. January volumes were strong and we anticipate the underlying demands in our key end markets will remain robust during the quarter driving year-over-year EBIT growth across all segments.

For the quarter, we generated record adjusted earnings per share of $1.18 and segment EBIT of $140 million. Looking sequentially, we expect EBIT will moderate somewhat from the first quarter as raw material costs increase and specialty carbons and compounds product lines and we expect higher costs associated with the draw-down of inventory levels in the quarter. We ended the quarter with a cash balance of $147 million, and our liquidity position remains strong at approximately $1.5 billion. Based on the underlying business performance, we expect adjusted earnings per share in the second quarter to be in the range of $0.90 to a $1. January volumes were strong and we anticipate the underlying demands in our key end markets will remain robust during the quarter driving year-over-year EBIT growth across all segments.

1 0 0 0 0 0 0 0 0 0 0 0 1 1 0 0 0 0 0 0 1 1

Cash flow of $22 million was down 3% compared to Q2 of 2019, while free cash flow increased 2% to $21 million. Our parts and consumables revenue made up 64% of total revenue comparable to the period -- to the prior year period. After the initial surge in packaging and tissue demand early in the second quarter, these markets have returned to levels more indicative of the general economic environment. While demand for our aftermarket parts was solid and made up 72% of total revenue in the quarter, customer delays in capital project execution, postponed service work and the inability of our employees to engage face-to-face with customers and prospects due to the pandemic negatively affected both our bookings and revenue performance. Revenue in this segment declined 14% to $66 million year-over-year, but was up slightly compared to Q1 of this year. Parts and consumables revenue, on the other hand, was solid and made up 62% of total revenue in the second quarter. Encouragingly, U.S. housing starts in June were up 17% sequentially to $1.2 million, which followed a boost in May housing starts, up 14% compared to April. As a result, lumber of prices for July delivery increased 8% above pre-pandemic high and demand is providing support for higher price levels. Adjusted EBITDA increased 8% to $6 million and our adjusted EBITDA margin was nearly 18% in the second quarter as a result of solid execution and product mix. Therefore, we will not be providing guidance at this time. Our GAAP diluted earnings per share was $1 in the second quarter, down 30% compared to $1.42 in the second quarter of 2019. Our GAAP diluted earnings per share in the second quarter includes $0.03 of restructuring costs and $0.03 of acquisition costs associated with our acquisition of Cogent, which was completed in June. In addition, our second quarter results include pre-tax income of $2.1 million or $0.14 net of tax attributable to government-sponsored employee retention programs related to the pandemic. Consolidated gross margins were 43.5% in the second quarter of 2020, up 150 basis points compared to 42% in the second quarter of 2019. Approximately 80 basis points of the increase was due to the receipt of government-sponsored employee retention programs related to the pandemic and the remainder was due to the negative effect from the amortization of acquired profit in inventory that was included in the results for the second quarter of 2019. Parts and consumables revenue, as a percentage of revenue, remained fairly consistent with the prior year at 64% in the second quarter of 2020 compared to 63% last year. SG&A expenses were $45.1 million or 29.5% of revenue in the second quarter of 2020 compared to $48.5 million or 27.4% of revenue in the second quarter of 2019. The $3.4 million decrease in SG&A expense included $1.1 million decrease from a favorable foreign currency translation effect and a $0.8 million benefit from government-sponsored employee retention programs. Adjusted EBITDA decreased to $26.6 million or 17.4% of revenue compared to $32.7 million or 18.5% of revenue in the second quarter 2019 due to declines in profitability at our Flow Control segment, and to a lesser extent, our Industrial Processing segment. Operating cash flows were $22 million in the second quarter 2020, which included a modest positive impact of $0.3 million from working capital compared to operating cash flows of $22.6 million in the second quarter of 2019. We paid down debt by $13.8 million, paid $6.8 million for the acquisition of Cogent, paid a $2.8 million dividend on our common stock, and paid $0.9 million for capital expenditures. Free cash flow increased significantly on a sequential basis to $21.1 million compared to $3.5 million in the first quarter of 2020 as our first quarter typically is the weakest of the year. In addition, the second quarter of 2020 free cash flow was $0.5 million higher than the second quarter of 2019. In the second quarter of 2020, GAAP diluted earnings per share was $1 and our adjusted diluted earnings per share was $1.06. The $0.06 difference was due to $0.03 of acquisition expenses and $0.03 of restructuring costs. In comparison, the second quarter of 2019, both our GAAP and adjusted duty diluted earnings per share was $1.42. We had $0.10 of acquisition-related expenses, which were fully offset by a discrete tax benefit. As shown in the chart, the decrease of $0.36 in adjusted diluted earnings per share in the second quarter 2020 compared to the second quarter of 2019 consists of the following; $0.71 due to lower revenues and $0.08 due to a higher effective tax rate. These decreases were partially offset by $0.24 due to lower operating costs, $0.11 due to lower interest expense, and $0.08 due to higher gross margin percentages. Collectively included in all the categories I just mentioned, was an unfavorable foreign currency translation effect of $0.05 in the second quarter of 2020 compared to the second quarter of last year due to the strengthening of the U.S. dollar. Our cash conversion days, which we calculate by taking days in receivables plus days in inventory and subtracting days in accounts payable, was 128 at the end of the second quarter of 2020 compared to 117 at the end of the second quarter of 2019. Working capital as a percentage of revenue was 14.8% in the second quarter of 2020 compared to 14.2% in the first quarter of 2020 and 15.4% in the second quarter of 2019. Our net debt, that is debt less cash, decreased $11.1 million or 5% to $222 million at the end of the second quarter of 2020 compared to $233 million at the end of the first quarter of 2020. We repaid $13.8 million of debt in the second quarter and have repaid $16.4 million of debt in the first six months of 2020. After quarter end, we repaid our real estate loan, which had a remaining principal balance of $18.9 million by borrowing from our revolving credit facility. This effectively swapped debt with an annual interest rate of 4.45% under the real estate loan for a revolver debt currently at 1.68%, which at current interest rates, would reduce interest expense by over $500,000 on an annual basis. Our leverage ratio, calculated in accordance with our credit facility, decreased to 2.01 at the end of the second quarter 2020 compared to 2.03 at the end of 2019. After repaying the real estate loan in July, we currently have over $130 million of borrowing capacity available under our revolving credit facility, which matures in December of 2023, and have access to an additional $150 million of uncommitted borrowing capacity under this agreement. We also have access to $115 million of uncommitted borrowing capacity through the issuance of senior promissory notes under our note purchase agreement. We anticipate the third quarter will likely be our weakest quarter of the year. And as a result, sequential revenue could decrease approximately 5% to 9%. Our revenue for the year could decrease roughly 11% to 14% compared to 2019. During the second quarter, we recognized $0.5 million in restructuring costs related to reduction of employees across our businesses. We expect these restructuring activities will reduce our cost structure by approximately $3.7 million annually. On a positive note, we now expect net interest expense for 2020 to be under $8 million compared to our last earnings call estimate of $9 million to $9.5 million.

After the initial surge in packaging and tissue demand early in the second quarter, these markets have returned to levels more indicative of the general economic environment. Therefore, we will not be providing guidance at this time. Consolidated gross margins were 43.5% in the second quarter of 2020, up 150 basis points compared to 42% in the second quarter of 2019. In the second quarter of 2020, GAAP diluted earnings per share was $1 and our adjusted diluted earnings per share was $1.06. We anticipate the third quarter will likely be our weakest quarter of the year.

0 0 1 0 0 0 0 0 0 1 0 0 0 1 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0

We had a remarkable year in 2021, producing revenue growth in excess of 35% and an increase in our earnings per share of more than 90%. We achieved our objectives of expanding our scale and profitability, driving our return on equity up by over 800 basis points to 20%. Our backlog value of $5 billion, which grew 67% year over year provides a strong base to support our roughly $7.4 billion in expected revenues in 2022. This represents substantial top-line expansion, which combined with our expectation of a dramatic increase in our gross margin to nearly 26% will drive our return on equity meaningfully higher. With respect to the fourth quarter, we generated total revenues of $1.7 billion and diluted earnings per share of $1.91, representing a year-over-year increase of more than 70% on the bottom line. We achieved an operating income margin approaching 12%, resulting in a 28% expansion in our operating profit per unit to over $56,000. And in 2021, we put over $2.5 billion to work in land acquisition and development. We expanded our lot position to nearly 87,000 lots under control, which is almost 30% higher from year-end 2020. In addition to reinvesting in our business, we returned over $240 million in cash to stockholders through the share repurchases that we completed in our third quarter, along with our quarterly dividend, and we reduced our debt during the year by over $60 million. This dynamic continued in our fourth quarter contributing to a rise in our net order value of 12% year over year despite net orders decreasing 10%, a level similar to the decline in our community count. This increase in net order value contributed to a backlog value that is more than 65% higher. All of these factors combined are driving our expectation of a gross margin of nearly 26% for this year. We successfully opened 130 new communities in 2021, our largest number in many years, including 33 in the fourth quarter. As a result, we now expect to end 2022 with about 265 communities, up over 20% year over year and ahead of our initial projection that we shared in September. In addition of supporting our roughly 30% increase in revenue planned for 2022, our community count expansion will also contribute to our growth in 2023. Our monthly absorption per community of 5.5 net orders during the fourth quarter, reflected a typical seasonal pattern sequentially. For the year, our absorption pace averaged 6.3 net orders per community per month, the best annual rate we have seen in more than a decade. Our average selling price on deliveries rose about 9% year over year in 2021, well below the reported increase for overall pricing levels nationally, highlighting the affordability of our locations and products. Although we offer floor plans below 1,600 square feet in about 80% of our communities, buyers continue to choose larger footage homes. Over the past year, our deliveries have averaged between 2,000 and 2,100 feet, consistent with our historical trend. On a combined basis, buyers spent about $48,000 per home in these two categories in the fourth quarter, a solid enhancement to our revenues. Their average FICO score in the quarter was 732, an all-time high. In addition, about two-thirds of our buyers qualified for a conventional mortgage, and our buyers overall are averaging a down payment of over $67,000. We started over 3,800 homes during the quarter as we worked to position our production for growth in 2022 deliveries. At year-end, we had over 9,100 homes in production with 90% of these homes already sold. Generally, our cancellation rate once we start the home is extremely low, and at 5% in the fourth quarter, it remains so. Our backlog is comprised of over 10,500 homes with a value of $5 billion, representing the bulk of our revenues expected for 2022. In fact, our backlog includes almost 1,900 homes from 150 sold-out communities that will deliver approximately $1 billion in 2022 revenues. While we have not seen a slowdown in demand across our geographic footprint in the past couple of months, and we foresee a strong spring selling season ahead, a combination of factors has resulted in a negative year-over-year net order comparison for the first six weeks of this quarter at 17%. As a result of these and many other factors, KB Home was named to the list of the 250 most effectively managed companies in the U.S., a ranking that was developed by the Drucker Institute in conjunction with The Wall Street Journal. As we look to the year ahead, during which we will celebrate our 65th anniversary, we anticipate another year of remarkable growth, which we expect will ultimately drive a return on equity of more than 26%. We finished 2021 with strong fourth-quarter results, including significant year-over-year growth in revenues and a 310-basis-point expansion in our operating margin that drove a 71% increase in our diluted earnings per share. With a robust 2021 ending backlog value of nearly $5 billion and 29% year-over-year expansion in the number of lots owned or controlled, we are well-positioned for continued meaningful growth in revenues, community count, earnings per share, and returns in 2022. In the fourth quarter, our housing revenues of $1.66 billion were up 39% from a year ago, reflecting a 28% increase in homes delivered and a 9% increase in their overall average selling price. Housing revenues were up significantly in all four of our regions, ranging from a 28% increase in the Central region to 114% in the Southeast. For the 2022 first quarter, we expect to generate housing revenues in the range of $1.43 billion to $1.53 billion. For the 2022 full year, assuming no change in supply chain dynamics, we are forecasting housing revenues in the range of $7.2 billion to $7.6 billion, up over $1.7 billion or 30% at the midpoint as compared to 2021. Having ended our 2021 fiscal year with our highest year-end backlog level since 2005, along with our expectations for a higher community count and continued strong housing market conditions, we believe we are well-positioned to achieve this top-line performance for 2022. In the fourth quarter, our overall average selling price of homes delivered increased to approximately $451,000. Reflecting our higher average selling price per net order in recent quarters, we are projecting an average selling price of approximately $472,000 for the 2022 first quarter. For the 2022 full year, we believe our overall average selling price will be in the range of $480,000 to $490,000. Homebuilding operating income for the fourth quarter totaled $214.4 million, up 85% as compared to $115.7 million for the year-earlier quarter. The current quarter included inventory-related charges of approximately $700,000 versus $11.7 million a year ago. Our operating margin was 12.8%, up 310 basis points from the 2020 fourth quarter. Excluding inventory-related charges, our operating margin was 12.9% as compared to 10.7% a year ago, reflecting improvements in both our gross margin and SG&A expense ratio. We anticipate our 2022 first quarter homebuilding operating income margin, excluding the impact of any inventory-related charges, will be approximately 12%, compared to 10.4% for the year-earlier quarter. For the 2022 full year, we expect this metric to be in the range of 15.7% to 16.5%, which represents a significant year-over-year improvement of 450 basis points at the midpoint, reflecting continued positive momentum in both our gross margin and SG&A expense ratio. Our 2021 fourth-quarter housing gross profit margin improved 230 basis points from the year-earlier quarter to 22.3%. Excluding inventory-related charges, our gross margin for the quarter reflected a year-over-year increase of 140 basis points to 22.4%. We are forecasting a housing gross profit margin for the first quarter in the range of 22% to 22.6%, representing the low point for the year. For the full year, we expect this metric will be in the range of 25.4% to 26.2%, an increase of 400 basis points at the midpoint as compared to 2021. Our selling, general, and administrative expense ratio of 9.8% for the fourth quarter improved 50 basis points from a year ago, mainly reflecting enhanced operating leverage due to higher revenues, partly offset by increased performance-based compensation expenses and costs to support our expanding scale. We are forecasting our 2022 first quarter SG&A ratio to be approximately 10.4%, an improvement of 30 basis points versus the prior year as expected favorable leverage impact from an anticipated year-over-year increase in housing revenues are partially offset by increased investments in personnel and other resources to support a projected meaningful expansion in community count. We expect that our 2022 full-year SG&A expense ratio will be in the range of 9.4% to 9.9%. Our income tax expense of $49.7 million for the fourth quarter, which represented an effective tax rate of approximately 22%, was favorably impacted by $7 million of federal energy tax credits, reflecting another benefit of our industry-leading sustainability initiatives. We currently expect our effective tax rate for the 2022 first quarter and full year to be approximately 25%, both excluding any favorable impacts from energy tax credits. If the Section 45L tax credit is extended at its current level, our 2022 effective tax rate would be favorably impacted by approximately 200 basis points. Overall, we reported net income of $174.2 million or $1.91 per diluted share for the fourth quarter, a notable improvement from $106.1 million or $1.12 per diluted share for the prior-year period. We increased our housing revenues by 37% to nearly $5.7 billion, expanded our operating margin by 400 basis points to 11.6% with measurable improvements in both our gross margin and SG&A expense ratio, and reported $6.01 of diluted earnings per share, an increase of 92%. We also completed $188 million of share repurchases, refinanced $390 million of our senior notes, resulting in annualized savings of $16 million of incurred interest, and improved our year-end leverage ratio by 380 basis points. Our fourth quarter average of 214 was down 9% from 234 in the corresponding 2020 quarter and up 4% sequentially. We ended the year with 217 communities down 8% from a year ago and up 3% sequentially. We anticipate ending the year with a 20% to 25% increase in our community count, supporting additional top-line growth in 2023 and beyond. During the fourth quarter, to drive future community openings, we invested $622 million in land and land development with $258 million or 41% of the total representing land acquisitions. In 2021, we invested over $2.5 billion in land acquisition development, compared to $1.7 billion in the previous year. At year-end, our total liquidity was approximately $1.1 billion including $791 million of available capacity under our unsecured revolving credit facility. Our debt-to-capital ratio improved to 35.8% at year-end 2021, compared to 39.6% the previous year. Our 2021 year-end stockholders' equity was $3.02 billion as compared to $2.67 billion a year ago, and our book value per share increased by 18% to $34.23. Finally, one of the most notable 2021 achievements was our significant improvement in return on equity to 19.9% for the full year, a year-over-year expansion of over 800 basis points. In summary, using the midpoints of our guidance ranges, we expect a 30% year-over-year increase in housing revenues and significant expansion of our operating margin to 16.1% driven by improvements in both gross margin and our SG&A expense ratio. These in turn should drive our return on equity of over 26% up and excess of 600 basis points from 19.9% in 2021.

We had a remarkable year in 2021, producing revenue growth in excess of 35% and an increase in our earnings per share of more than 90%. With respect to the fourth quarter, we generated total revenues of $1.7 billion and diluted earnings per share of $1.91, representing a year-over-year increase of more than 70% on the bottom line. We achieved an operating income margin approaching 12%, resulting in a 28% expansion in our operating profit per unit to over $56,000. In the fourth quarter, our housing revenues of $1.66 billion were up 39% from a year ago, reflecting a 28% increase in homes delivered and a 9% increase in their overall average selling price. For the 2022 full year, we believe our overall average selling price will be in the range of $480,000 to $490,000. Overall, we reported net income of $174.2 million or $1.91 per diluted share for the fourth quarter, a notable improvement from $106.1 million or $1.12 per diluted share for the prior-year period.

1 0 0 0 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0

Second quarter of 2021, revenues increased to $188.8 million compared to $89.3 million in the second quarter of the prior year. Operating loss for the second quarter was $1.2 million compared to an adjusted operating loss of $35.9 million in the second quarter of the prior year. EBITDA for the second quarter of this year was $17.3 million compared to adjusted EBITDA of negative $17.8 million in the same period of the prior year. We approached breakeven per share results in the second quarter of 2021 compared to an adjusted loss per share of $0.10 in the second quarter of 2020. Cost of revenues during the second quarter of 2021 was $145.8 million or 77.2% of revenues compared to $80 million or 89.6% of revenues during the second quarter of the prior year. Selling, general and administrative expenses increased to $29.4 million in the second quarter of this year compared to $28.8 million in the second quarter of the prior year. Depreciation and amortization decreased slightly to $17.9 million in the second quarter of 2021 compared to $19.6 million in the second quarter of the prior year as capex has remained relatively low. Our Technical Services segment revenues for the quarter increased to 118.7% compared to the same quarter in the prior year due to significantly higher activity and some pricing improvement. Segment operating profit in the second quarter of 2021 was $1.4 million compared to $34.1 million operating loss in the second quarter of the prior year. Our Support Services segment revenues for the quarter increased 44.1% compared to the same quarter in the prior year. Segment operating loss this year was $2.4 million compared to an operating loss of $1.9 million in the second quarter of the prior year. On a sequential basis, our second quarter revenues increased 3.4% from $182.6 million in the prior quarter due to activity increases in most of our service lines. Cost of revenues during the second quarter of 2021 was $145.8 million, relatively unchanged from the prior quarter. As a percentage of revenues, cost of revenues decreased from 80.1% in the first quarter of this year to 77.2% to the second quarter due to a favorable job mix in several service lines as well as the impact of the CARES Act employee retention credit that we recognized during the quarter. Selling, general and administrative expenses during the second quarter of 2021 decreased 3.9% to $29.4 million from $30.6 million in the prior quarter, and this was also due to the impact of the retention tax credit. RPC incurred an operating loss of $1.2 million during the second quarter of 2021 compared to an operating loss of $10.5 million in the prior quarter. RPC's EBITDA was $17.3 million during the quarter compared to EBITDA of $7.8 million in the first quarter. Our Technical Services segment revenues increased by $3.5 million or 2% to $176.1 million in the second quarter due to increased activity levels in most of the segment's service lines. RPC's Technical Services segment generated a $1.4 million operating profit in the current quarter compared to an operating loss of $5.8 million in the prior quarter. Support Services segment revenues increased by $2.7 million or 26.8% to $12.6 million during the second quarter. Operating loss was $2.4 million compared to an operating loss of $2.9 million in the previous quarter. Second quarter 2021 capital expenditures were $14.1 million, and we currently estimate full year 2021 capital expenditures to be approximately $65 million, comprised primarily of capitalized maintenance of our existing equipment and selected growth opportunities. At the end of the second quarter, RPC's cash balance was $121 million, and we remain debt-free.

Second quarter of 2021, revenues increased to $188.8 million compared to $89.3 million in the second quarter of the prior year. We approached breakeven per share results in the second quarter of 2021 compared to an adjusted loss per share of $0.10 in the second quarter of 2020.

1 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

We also accomplished a great deal over the last 12 months. Specifically, we signed Truist Financial Corporation, the sixth largest commercial bank in the United States, a competitive win twice over [Phonetic]; entered a new collaboration with AWS, our preferred provider of issuer cloud services to launch a unique go-to-market distribution strategy coupled with transformative cloud-native technologies; expanded and extended our partnership with CaixaBank by increasing ownership of our joint venture and executing a new referral agreement through 2040; renewed agreements with a number of the most complex and sophisticated financial institutions globally, including TD Bank in North America, HSBC in Europe and CIBC in Canada; assisted in a rapid distribution of more than $2.5 billion in stimulus funds for our net spend customers' days faster than other financial technology participants; and announced today a new partnership with Google to deliver innovative and seamless digital services to all manner of merchants worldwide. Cameron will provide more detail on Google in a minute, but it's worth noting that in the six last months, we have struck significant and unique distribution relationships with two of the world's largest and most respected technology companies with a combined market capitalization of nearly $3 trillion. We already have reached the threshold of 60% of our business coming from technology enablement, a goal we set in March 2018 for year-end 2020 and achieved early last July. And roughly 25% of our business is now related to our e-commerce and omni-channel initiatives. Our omni-channel partnered software and own software vertical markets businesses collectively represent nearly 60% of merchant adjusted net revenue. We also reached an agreement with Wolverine to consolidate their U.K. and European acquiring across 32 countries. Moving to Global Payments Integrated, which drives another nearly 20% of our merchant adjusted net revenue. The strength of our combined integrated offerings allowed us to exceed our budgeted new sales forecast for calendar 2020, with new partner production increasing 171% versus 2019. Our own software businesses represent the remaining roughly 20% of our merchant-adjusted net revenue. Lastly, our enterprise QSR business continued its success with Xenial's Cloud POS [Phonetic] and omni solutions, nearly over 100 million transactions and $1.5 billion in sales for the year. In addition to serving 26 of the Top 50 QSR brands, we are also pleased to announce the signing of Xenial for cloud-based SaaS solutions, extending our addressable market to the fast casual category. For example, our U.S. business is seeing significant uptake of its SaaS point-of-sale solutions with adjusted net revenue and new sales both exceeding 20% growth in 2020. We currently have 11 letters of intent with financial institutions worldwide, six of which are competitive takeaways. In the last 18 months, we have had 36 competitive wins across North America and international markets. During the first quarter of 2021, we will complete the first phase of the conversion of over 4 million accounts from a competitor for one of our largest customers. That shift is under way without any compromise in execution, as we also achieved adjusted net revenue in excess of $200 million for the first time in the fourth quarter. Since late December, we have processed more than 1 million deposits, accounting for just over $1 billion in stimulus payments to American consumers dispersed by the IRS. In combination with the 2020 stimulus payments, we will have disbursed more than $2.5 billion in aid to customers through the first quarter of 2021. Specifically, Google Workspace serves as the cloud-native operating backbone for small and medium-sized businesses as well as many of the most sophisticated enterprise organizations globally, while Global Payments provides payments technology solutions to roughly 3.5 million merchant locations, in addition to some of the most complex multi-national corporations across 60 countries. Today, Google executes approximately 3 billion transactions annually and Global Payments is well positioned to meet the complex payment needs of one of the world's largest and most sophisticated technology companies by leveraging our Unified Commerce Platform. For the full year, we delivered adjusted net revenue of $6.75 billion, down 5% compared to 2019 on a combined basis. Importantly, our adjusted operating margin increased 210 basis points on a combined basis to 39.7%, as we benefited from the broad expense actions we implemented to address the impact of the pandemic and the realization of cost synergies related to the merger, which continue to track ahead of plan. The net result with adjusted earnings per share of $6.40, an increase of 3% over 2019. Moving to the fourth quarter, adjusted net revenue was $1.75 billion, a 3% decline relative to 2019 as underlying trends in our business continued to recover from third quarter levels. Adjusted operating margin was 41.5%, a 320 basis point improvement from the fourth quarter of 2019. Adjusted earnings per share was $1.80 for the quarter, an increase of 11% compared to the prior year period, an impressive outcome that highlights the durability of our model and momentum we have heading into 2021. Merchant solutions achieved adjusted net revenue of $1.1 billion for the fourth quarter, a 4% decline from the prior year, which marked a 200 basis point improvement from the third quarter. Notably, we delivered an adjusted operating margin of 47.5% in this segment, an increase of 250 basis points from 2019, as our cost initiatives, expense synergies and the underlying strength of our business mix more than offset topline headwinds from the macro environment. Moving to issuer solutions, we delivered $457 million in adjusted net revenue for the fourth quarter, which was essentially flat to the prior year period. Excluding our commercial card business, which represents approximately 20% of our issuer portfolio and is being impacted by the slow recovery in corporate travel, this segment delivered low single-digit growth for the quarter. Notably, this business achieved record adjusted operating income and adjusted segment operating margin expanded 450 basis points from the prior year, also reaching a new record of 44.7% as we continue to benefit from our efforts to drive efficiencies and the business. Finally, our business and consumer solutions segment delivered adjusted net revenue of $205 million, a record fourth quarter result, representing growth of 3% from the prior year. Gross dollar volume increased more than 5% for the quarter, a result including little impact from the late December incremental stimulus, which we expect to primarily benefit us in Q1. We are particularly pleased with trends with our DDA products, which includes an acceleration in active account growth of 29% compared to the prior year. Adjusted operating margin for this segment improved 260 basis points to 24.1%, as we benefited from our efforts to drive greater operational efficiencies, as well as favorable revenue mix dynamics toward higher margin channels. As a result, we are pleased to again raise our estimate for annual run rate expense synergies from the merger to at least $400 million within three years, up from the previous estimate of $375 million. Additionally, our early success in leveraging our complementary products and capabilities worldwide also gives us the confidence to increase our expectation for annual run rate synergies again to $150 million, up from our previous forecast of $125 million. From a cash flow standpoint, we generated adjusted free cash flow of roughly $780 million for the quarter and approximately $2 billion for the year. This is after reinvesting $107 million of capex for the quarter and $436 million for the year. As you may recall, we indicated we expected to invest between $400 million and $500 million of capex back into the business following the onset of the pandemic. Consistent with our announcement on our last call, we are also pleased to have now returned to our traditional capital allocation priorities, and during the quarter, repurchased 1.2 million of our shares for approximately $230 million. Our balance sheet is extremely healthy, and we ended 2020 with roughly $3 billion of liquidity and a leverage position of roughly 2.6 times on a net debt basis. Further, our Board of Directors has again approved an increase to our share repurchase authorization to $1.5 billion. As part of this program, we intend to execute an accelerated share repurchase program for $500 million in the coming days. Based on our current expectations for continued recovery from the COVID-19 pandemic worldwide, we expect adjusted net revenue to range from $7.5 billion to $7.6 billion, reflecting growth at 11% to 13% over 2020. Considering this topline forecast, we would expect to deliver normalized adjusted operating margin expansion of up to 450 basis points, given the natural operating leverage in our business and expense synergy actions related to the TSYS merger. Therefore, we are currently forecasting adjusted operating margin expansion of up to 250 basis points compared to 2020 levels on a net basis. Regarding segment margins, we expect up to 250 basis points of adjusted operating margin improvement for the total Company to be driven largely by merchant solutions, while we expect issuer and business and consumer to deliver normalized margin expansion consistent with the underlying leverage profile of these businesses. This follows the 500 basis points and 400 basis points of adjusted operating margin expansion, delivered by issuer and business and consumer respectively in 2020. We currently expect net interest expense to be slightly lower in 2021 relative to 2020, while we anticipate our adjusted effective tax rate to be relatively consistent with last year and expect our capital expenditures for 2021 to be in the $500 million to $600 million range. Putting it all together, we expect adjusted earnings per share for the full year in a range of $7.75 to $8.05, reflecting growth of 21% to 26% over 2020. This is consistent with the adjusted earnings per share target of roughly $8.00 that we provided on our third quarter call, despite the incremental adverse impact of additional lockdowns and social distancing protocols in a number of our markets since late October.

Adjusted earnings per share was $1.80 for the quarter, an increase of 11% compared to the prior year period, an impressive outcome that highlights the durability of our model and momentum we have heading into 2021. As you may recall, we indicated we expected to invest between $400 million and $500 million of capex back into the business following the onset of the pandemic. As part of this program, we intend to execute an accelerated share repurchase program for $500 million in the coming days. This follows the 500 basis points and 400 basis points of adjusted operating margin expansion, delivered by issuer and business and consumer respectively in 2020. We currently expect net interest expense to be slightly lower in 2021 relative to 2020, while we anticipate our adjusted effective tax rate to be relatively consistent with last year and expect our capital expenditures for 2021 to be in the $500 million to $600 million range. Putting it all together, we expect adjusted earnings per share for the full year in a range of $7.75 to $8.05, reflecting growth of 21% to 26% over 2020.

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 1 0 0 0 0 1 1 1 0

Our Environmental Services segment outperformed our expectations, driven by a combination of factors, including the level of high-value waste in our disposal network, greater-than-expected COVID decontamination work and ongoing cost controls. Adjusted EBITDA in Q4 increased to $136.1 million, which included $5.6 million in benefits from government programs, primarily from Canada. For the full year, adjusted EBITDA grew by 3% to $555.3 million, with annual margins growing to 17.7%. We generated record adjusted free cash flow of $265 million, a noteworthy accomplishment considering the economic disruption caused by the pandemic. Typically, Q4 is a seasonally weaker quarter for us, but the $18 million increase from Q3 is evidence that many of our markets are on the road to recovery. Adjusted EBITDA grew by 13% from a year ago, with margins up nearly 400 basis points. This was driven by a combination of business mix, cost savings and $3.9 million in benefits from government assistance programs in Q4. Revenue from our COVID-19 decon work totaled $31 million in Q4. For the full year, our team completed nearly 14,000 responses and was an essential resourcing and protecting our customers' people and facilities. This resulted in an average price per pound increase of 16% from the year earlier period when we saw more bulk streams. Incineration utilization in the quarter was 84% due to a higher-than-expected number of maintenance days. Landfill volumes were down 37% in the quarter as the lack of remediation and waste projects opportunities intensified with the resurgence of the pandemic. However, our strong base landfill business largely offset that decline with a 42% increase in our average price per ton. Safety-Kleen revenue was down 15% from a year ago, but was flat sequentially as the ongoing recovery offset normal year-end seasonality. Safety-Kleen's adjusted EBITDA declined 21%, mostly due to the lower revenue and business mix. This decline was partly offset by our cost reductions initiatives as well as the government assistance programs that provided $1.4 million of benefits in Q4. Waste oil collections were 49 -- no, excuse me, were 49 million gallons in Q4 with a healthy average charge for oil, given the lack of available outlets for generators. We expect Field Services to generate $25 million to $35 million of COVID-related revenues in 2021. The document highlights the integral role that sustainability plays in our business decisions as well as our environmental, social and government goals and benchmarks for 2030. Revenue declined 9% year-over-year, but was up in the third quarter despite Q4 typically being a sequentially lower quarter due to seasonality. Our efforts to control costs and grow our highest margin businesses, combined with some further government program assistance, resulted in 180 basis point improvement in gross margin. Adjusted EBITDA grew 3% to $136.1 million. Our Q4 adjusted EBITDA margin rising 190 basis points from last year speaks to the effectiveness of the actions we have taken this year. We have improved our adjusted EBITDA margins on a year-over-year basis for 12 consecutive quarters. For the full year, our adjusted EBITDA margins grew 17.7% -- grew to 17.7%. If you excluded the $42.3 million of government assistance, those margins would have been 16.3% or a 50 basis point improvement from 2019. For the full year, SG&A as a percentage of revenue was 14.3%, which beat our target of 14.5%. Depreciation and amortization in Q4 was down to $71.4 million. For the full year, our depreciation and amortization was $292.9 million, which was within our expected range. For 2021, we expect depreciation and amortization in the range of $280 million to $290 million. Income from operations in Q4 increased by 18%, reflecting a higher gross profit, cost controls and mix of revenue. For the full year, our income from operations rose 10% to $251.3 million. Cash and short-term marketable securities at December 31 were $571 million, up nearly $40 million from the end of Q3. Our debt was at $1.56 billion at year-end, with leverage on a net debt basis at 1.8 times, our lowest level in a decade. Our weighted average cost of debt is 4.2%, with a healthy mix -- healthy blend of fixed and variable debt. Cash from operations in Q4 was $113.2 million. capex, net of disposals, was up slightly to $43.6 million. That combination resulted in adjusted free cash flow in Q4 of $69.6 million. For the year, we hit our net capex target, excluding the purchase of our headquarters, with $165.6 million of spend. That helped us deliver record annual adjusted free cash flow of $265 million, which is toward the high end of our guidance range. For 2021, we expect net capex in the range of $185 million to $205 million, which is higher than prior year. During the quarter, we increased the level of our share repurchases as we bought back 500,000 shares at an average price just under $71 for a total buyback of $35 million. In 2020, we repurchased slightly over 1.2 million shares of our authorized $600 million share repurchase program, we have just under $210 million remaining. Based on our 2020 results and current market conditions, we expect 2021 adjusted EBITDA in the range of $545 million to $585 million. That amount in 2021 should be about $16 million to $18 million compared with $18.5 million in 2020. Looking at our guidance from a quarterly perspective, we expect Q1 adjusted EBITDA using our revised definition to be 5% to 10% below prior year levels given the record Q1 results we posted in 2020 prior to the pandemic taking hold and the deep freeze we are experiencing in the Midwest and the Gulf here in February. We expect to benefit from growth and profitability within incineration, a rebound in the majority of our service businesses, along with our comprehensive cost measures, but not enough to fully offset the decline in high-margin decontamination work as well as the large contribution from government assistance programs in 2020 that totaled $27.1 million in this segment. Despite the fact this segment received $12.2 million in government assistance last year. In our Corporate segment, we expect negative adjusted EBITDA to be flat with 2020, which includes $3 million of governance assistance. For 2021, our EBITDA guidance assumes receiving $2 million to $3 million of Canadian government assistance. Based on our EBITDA guidance and working capital assumptions, we now expect 2021 adjusted free cash flow in the range of $215 million to $255 million. The Chemical Activity Barometer, published by the American Chemistry Council, show that industry levels have been climbing sequentially from May to January, and January was the first time in 10 months that the activity levels were above the prior year, which is a great sign for us.

Our Environmental Services segment outperformed our expectations, driven by a combination of factors, including the level of high-value waste in our disposal network, greater-than-expected COVID decontamination work and ongoing cost controls. Based on our 2020 results and current market conditions, we expect 2021 adjusted EBITDA in the range of $545 million to $585 million.

1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0

While our bottom line has grown by more than 20 fold. And in fact, we were able to repay the entire $665 million purchase price of the Kosmos acquisition during the fiscal year, providing us with significant balance sheet firepower and financial flexibility going forward. The paper mill expansion added 20% additional capacity, allowing Eagle to set a monthly production record for Wallboard paper in March. Our safety culture has never been stronger with leading indicators of safety observations increasing by 114%, resulting in all of Eagle's businesses outperforming industry metrics yet again, and this gap is widening. These two items drive approximately 80% of the demand for Gypsum Wallboard and about 30% of the demand for cement. In fact, remarkably, state and local tax revenue grew by 1.8% in 2020. This is largely because state and local personal income tax receipts rose 3.4% and state and local property tax receipts were up 3.9%. This decision is important one in the context of our capital allocation priorities, which I might add, remain unchanged. In fact, over the past three years we have invested just over $625 million in share repurchases and dividends. This compares with nearly $700 million in growth acquisitions and $300 million inorganic improvement investments over that same time period. Currently, over 7 million shares remain under the current repurchase authorization. As such, I would like to announce that we are reinstating our quarterly cash dividend of $0.25 per share on our common stock. This amount represents a 150% increase over the quarterly dividends that had been paid preceding the suspension. Fiscal Year 2021 revenue was a record $1.6 billion, up 16% from the prior year. The Kosmos Cement business contributed approximately $176 million of revenue during the year. Revenue for the fourth quarter was up 12% to $343 million, reflecting a very strong end to our fiscal year. Annual diluted earnings per share increased 46% to $7.99, reflecting the contribution from the Kosmos Cement business, improvement in the organic businesses, and a gain of approximately $0.98 per share on the sale of our Northern California businesses during the first quarter. The fourth quarter earnings per share comparison was affected by the CARES Act, which generated a $37 million or $0.76 per share benefit in the prior year period. The total financial impact from the winter storm was approximately $12 million during the fourth quarter. Annual revenue in the sector increased 19%, driven primarily by the acquired Kosmos Cement business and higher cement sales volume and pricing. Operating earnings increased 27%, again reflecting the acquired business and increased sales volume and pricing. And margins improved 140 basis points to 23%. The impact of this sector was approximately $6 million and mostly reflects higher energy costs. The price increases range from $6 to $8 per ton and were effective in most markets in early April. Annual revenue in our Light Materials sector increased 5%, reflecting improved Wallboard sales volumes and prices. Annual operating earnings increased 2% to $193 million, reflecting higher net sales prices, partially offset by higher input prices, namely recycled fiber costs and the impact of starting up the paper mill after the expansion project. During fiscal 2021, operating cash flow increased 61% to $643 million, reflecting earnings growth, disciplined working capital management and the receipt of our IRS refund. Meanwhile, capital spending declined to $54 million. in fiscal 2022, we expect capital spending to increase to a range of $95 million to $105 million as we restart several projects that were delayed because of the COVID-19 pandemic. At March 31, 2021, our net debt to cap ratio was 36%, down from 60% at the end of the prior year, and our net debt to EBITDA leverage ratio was 1.3 times. We ended the year with $264 million of cash on hand and total liquidity at the end of the quarter was approximately $1 billion, and we have no near-term debt maturities.

This decision is important one in the context of our capital allocation priorities, which I might add, remain unchanged. Revenue for the fourth quarter was up 12% to $343 million, reflecting a very strong end to our fiscal year. Annual operating earnings increased 2% to $193 million, reflecting higher net sales prices, partially offset by higher input prices, namely recycled fiber costs and the impact of starting up the paper mill after the expansion project. Meanwhile, capital spending declined to $54 million.

0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 1 0 1 0 0 0

First and foremost, this was a record quarter for our company with earnings per share of $1.29. Paper mill operating rates in Normerica have reached nearly 95%. Our refractory segment also had an impressive quarter marked by steel utilization rates, which are now above 80%. A combination of these positive trends and business development actions in our segments yielded sales of $456 million, with growth in every segment and geography. We drove these higher sales into operating income of $64 million, up 53% compared to 2020, and margins expanded to above 14% as we expected. Through the first half of the year, cash from operations and free cash flow were both up 25% over last year. In addition, we've continued with our returns to shareholders through our $75 million buyback program and anticipate fully completing the program under the authorized time frame. On the front, we are ramping up production at our new satellites in Asia, which came online at the end of 2020 and represent 200,000 tons of new capacity on an annualized basis. We have another approximately 130,000 tons of capacity coming online now through the middle of next year, including our 40,000 ton expansion for a packaging application in Europe, where we will begin realizing the volume benefit in the third quarter. We are finalizing the construction of our 40,000 ton satellite in India, which will start-up late next quarter, and we have also begun construction on a new 50,000 ton satellite in China, which should be operational in the first half of 2022. For background on Normerica, the company was founded in 1992, headquartered in Toronto, Canada, and is a leading supplier of branded and private label Pet Care products in North America. Normerica has about 320 employees, and in 2020, generated revenue of approximately $140 million. The purchase price for the transaction was $185 million on pre-synergy EBITDA of approximately $20 million. On a post-synergy basis, we expect the transaction to be about 7.5 times EBITDA, similar to the Sivomatic transaction and earnings accretion to begin in the fourth quarter of this year. We expect to fully integrate the business, employees, systems and processes over the next few quarters, and accretion will ramp up to 5% to 7% on a full year basis in 2022. And with the addition of Normerica and Sivomatic, our Pet Care business has grown from $78 million to $350 million, and our household and personal care business is now the largest product line at MTI. Sales in the second quarter were 28% higher than the prior year and 1% higher sequentially as demand remained strong across the majority of our end markets, and we started to see higher levels of activity in our project-oriented businesses. Operating income, excluding special items, was $64.1 million, 53% higher than the prior year and 9% higher sequentially. Operating margin improved from 13% in the first quarter to 14.1% in the second quarter. Meanwhile, we continue to control overhead expenses with SG&A as a percentage of sales at 11.3% versus 11.7% in the first quarter and 13.1% in the prior year. Earnings per share, excluding special items, was $1.29, a record quarter for the company and represented 52% growth above the prior year and 10% above the first quarter. Our effective tax rate for the quarter was 18.9%, excluding special items, and we expect our effective tax rate to be approximately 20% going forward. Second quarter sales for Performance Materials were $238.4 million, 24% higher than the prior year and 3% higher sequentially. Metalcasting sales grew 52% versus the prior year as foundry demand remained strong in North America and China. Household, Personal Care and Specialty Products, our most resilient product line last year, grew 17% versus a relatively strong prior year quarter. Environmental product sales grew 6% versus the prior year and were 53% higher sequentially, driven by improving demand for environmental lining systems, water and soil remediation and wastewater treatment. Building Materials sales grew 17% versus the prior year and were up 12% sequentially on higher levels of project activity. Operating income for the segment grew 55% from the prior year to $34.7 million and was 16% higher sequentially. Operating margin was 14.6% of sales versus 11.7% in the prior year and 12.9% in the first quarter as higher volumes and our strong operating performance drove incremental margin improvement. As Doug stated earlier, we expect modest earnings per share accretion to begin in the fourth quarter this year as we move through the integration period, ramping up to full run rate accretion over the next 12 months. Specialty Minerals sales were $142.7 million in the second quarter, 30% higher than the prior year and 3% lower sequentially. Paper PCC sales grew 31% versus the prior year on recovering paper demand and the continued ramp-up of three new satellites. Specialty PCC sales grew 24% versus the prior year and higher demand from automotive, construction and consumer end markets. Overall, PCC sales were 5% lower sequentially, primarily due to temporary paper mill outages in India related to COVID-19 and the typical seasonal paper mill outages we experienced in North America. Process Mineral sales were 31% versus the prior year and 2% sequentially on continued strength in residential construction and consumer end markets. Operating income for this segment grew 31% to $20 million and represented 14% of sales. Refractory segment sales were $74.5 million in the second quarter, 33% higher than the prior year and 1% higher sequentially, as steel utilization rates continue to strengthen in the second quarter. Segment operating income was $11.7 million, 98% higher than the prior year and 3% lower sequentially, and operating margin was strong at 15.7% of sales. Steel utilization rates have improved to 84% in North America and 77% in Europe, up from 78% and 72%, respectively, in the first quarter. We've now signed a total of seven new contracts worth $80 million over the next five years, which will provide $16 million of incremental annual revenue ramping up through 2022. Second quarter cash from operations was $67 million versus $64 million in the prior year, bringing year-to-date cash from operations to $118 million versus $94 million last year. This was a 25% increase. We deployed $22 million of capital during the quarter on sustaining our operations, mine development and other high return opportunities. We continue to expect capital expenditures in the range of $80 million to $85 million for the full year, split evenly between sustaining and growth capital. Year-to-date, we have used free cash flow to repurchase $37 million of shares. And in total, we have repurchased $54 million under our current $75 million share repurchase program. As of the end of the second quarter, total liquidity was over $700 million, and our net leverage ratio was 1.6 times EBITDA. For the acquisition of Normerica, we used $85 million of cash on hand and $100 million of our revolving credit facility. This will initially bring our net leverage ratio to approximately 2 times EBITDA on a pro forma basis, and we expect to pay down the incremental borrowing over the next 12 months. We expect strong cash flow generation to continue in the second half of the year, and we see free cash flow in the range of $150 million for the full year. You'll see in the report that we've already exceeded our reduction goals in four of six targets -- or six targets related to emissions, energy and water and are on pace to achieve the other 2.

First and foremost, this was a record quarter for our company with earnings per share of $1.29. A combination of these positive trends and business development actions in our segments yielded sales of $456 million, with growth in every segment and geography. Earnings per share, excluding special items, was $1.29, a record quarter for the company and represented 52% growth above the prior year and 10% above the first quarter.

1 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Organic net sales were down 4% for the quarter, driven by the expected lapping of prior year retailer inventory replenishment, as well as constrained supply in the current quarter. We were however, up 5% versus fiscal 2020 and consumption was, up 2% versus prior year and up 9% versus two years ago, signaling strong persistent consumer demand. This dynamic resulted in a 6 point difference in net sales versus consumption in measured channels, a relationship we do not expect to continue through the remainder of the year. Our ingredient and packaging spend, we are now over 85% covered, thereby reducing the variability in the upcoming quarters, while we continue to deliver on our supply chain productivity improvements and our cost savings initiatives. We expect this to be evident, particularly through the second quarter as we cycle through recovery on labor and supply. Organic net sales were down 6% versus prior year, lapping 11% growth in the prior year and up 5% versus fiscal 2020. Consumption though flat year-over-year was, up 9% versus two years ago, reflecting the strength of demand for our products. US Soup consumption grew 2% over elevated levels in the prior year. Bringing growth versus two years ago to 9%. Ready-to-serve increased share in the quarter, including over 3 points of share gains among millennials. Within ready-to-serve Chunky had a very strong quarter, increasing consumption 8% on top of 2% growth in the prior year quarter and grew share by 0.6 points versus prior year. On Swanson broth, we also grew share by 1.6 points, representing the third consecutive quarter of growth as supply recovery continued. Turning to Sauces, Prego remain the number one share leader for 30 straight months. We see pace continuing to improve throughout the year. The percentage of buyers under the age of 35 has increased versus the prior year quarter on nearly all key brands. Specifically on US Soup, the percentage of buyers under 35 increased almost 2 points this quarter and the average age of Campbell Soup consumers are getting younger. Organic net sales were, down 1%, primarily due to labor-related supply constraints, but grew 4%, compared to fiscal 2020, in-market performance was strong growing 5% over the prior year quarter and 9% on a two-year basis. Our power brands continue to fuel performance with in-market consumption growth of 6% this fiscal year and 13% on a two-year basis, driven by double-digit consumption growth across the majority of our brands. We also continue to increase the relevance additional [Phonetic] kids audience with 60% of new buyers being households with our kids. We continued to drive share growth on other brands as well, including Snack Factory pretzel crisps by 2.5 points, Kettle Brand potato chips by more than a point and Cape Cod potato chips 2.6 points. Given our solid first quarter results and their consistency with our expectation [Technical Issues] our full-year guidance. For the first quarter as we left 8% growth in the prior-year, organic net sales declined 4%, due to the anticipated cycling of year ago retailer inventory recovery and supply pressures. As Mark highlighted earlier consumer demand remains strong in [Technical Issues] basis were 5% higher, compared to two years ago or the first fiscal quarter of 2020. Adjusted EBIT decreased 15%, compared to prior year, it was 1% higher on the two-year basis, despite the significant levels of inflation on ingredients, packaging, labor, warehousing and logistics. Our adjusted EBIT margin was 17.4%, compared to 19.5% in the prior year and slightly down from fiscal 2020. Adjusted earnings per share from continuing operations decreased $0.12 or 12% versus prior year to $0.89 per share, but remains well ahead of fiscal 2020. Organic net sales decreased 4% during the quarter, driven by a 6 point volume headwind, which reflects lapping of the prior year retailer inventory recovery and the before mentioned supply constraints. Favorable price and sales allowances drove a 4 point gain in the quarter, which was partially offset by a 2 point headwind due to some spend back on promotional spending in the quarter closer to pre-pandemic levels. The impact of the sale of Plum subtracted 1 point. All in our reported net sales declined 4% from the prior year. Our first quarter adjusted gross margin decreased by 200 basis points from 34.5% last year to 32.5% this year. Mix had a negative impact of approximately 70 basis points on gross margin as we cycled last year's retail inventory recovery and favorable operating leverage. Net price realization drove a 190 basis point improvement, due to the benefits of our recent pricing actions, partially offset by increased promotional spending. Inflation and other factors had a negative impact of 470 basis points with the majority of the decline driven by cost inflation as overall input prices on a rate basis increased by approximately 6%. That said, our ongoing supply chain productivity program contributed 120 basis points to gross margin, partially offsetting these inflationary headwinds. Our cost savings program, which is incremental to our ongoing supply chain productivity program added 30 basis points to our gross margin. As you saw on the previous page, the progress we made in the first quarter to mitigate these inflationary pressures reduced the impact to 130 basis points on our adjusted gross margin. We have achieved $15 million in incremental year-over-year savings and remain on track to deliver our cumulative savings target of $850 million by the end of fiscal year. We are working toward expanding our plan to $1 billion and we'll share more details next week at our Investor Day. Marketing and selling expenses decreased $38 million or 18% in the quarter on a year-over-year basis. Although, A&C declined 31% as investment was moderated to reflect supply pressure, we expect it to normalize as supply strengthened throughout the year. Overall, our marketing and selling expenses represented 7.6% of net sales during the quarter and 130 basis point decrease, compared to last year. Adjusted administrative expenses increased $17 million or 12% largely, due to expenses related to the settlement of certain legal claims as higher general administrative costs were largely offset by the benefits of cost savings initiatives. Adjusted administrative expenses represented 6.9% of net sales [Technical Issues] to summarize the key drivers of performance this quarter. As previously mentioned adjusted EBIT decline 15% as the net sales declined and the 200 basis points gross margin contraction, resulted in a $36 million and $44 million EBIT headwinds respectively, partially offsetting this was lower marketing and selling expenses, contributing 130 basis points to our adjusted EBIT margin. Higher adjusted administrative and R&D expenses had a negative impact of 110 basis points and lower adjusted other income had a 30 basis point impact. Overall, our adjusted EBIT margin decreased year-over-year by 210 basis points to 17.4%. The following chart breaks down our adjusted earnings per share change between our operating performance and below the line items, a $0.17 impact of lower adjusted EBIT was partially offset by a $0.02 favorable impact from lower interest expense and a $0.04 impact of lower adjusted taxes, due to the favorable resolution of several tax matters in the quarter. This resulted in better-than-expected adjusted earnings per share of $0.89, which was down $0.25 per share, compared to the prior year. Turning to the segments, in Meals & Beverages organic net sales decreased 6%, as favorable price and sales allowances in the quarter were more than offset by volume declines across US retail products, including V8 beverages, Prego pasta sauces and US Soup, as well as in Canada. Sales of US Soup decreased 2%, cycling 21% increase in the prior year quarter. Operating earnings for Meals & Beverages decreased 17% to $280 million, the decrease was primarily due to a lower gross margin and sales volume declines, partially offset by lower marketing selling expenses. Overall, within our Meals & Beverage division, the first quarter operating margin decreased year-over-year by 260 basis points to 22.1%. Within Snacks, organic net sales decreased 1% to $1 billion, as favorable price and sales allowances were more than offset by volume declines and increased promotional spending, compared to moderated levels in the prior year quarter. Sales of power brands increased 30%. Operating earnings for Snacks decreased 5% for the quarter, driven by increased administrative expenses, due to the settlement of certain legal claims and a slightly lower gross margin, partially offset by lower marketing and selling expenses. Overall within our Snacks division first quarter operating margin decreased year-over-year by 60 basis points to 13.2%. Fiscal 2022 cash flow from operations increased from $180 million in the prior year to $288 million, primarily due to lower working capital related to outflows mostly from accounts payable and accrued liabilities, partially offset by lower cash earnings. Our year-to-date cash outflows for investing activities were reflective of the cash outlay for capital expenditures of $69 million, which was comparable to prior year. In light of the current operating environment, we are reducing our planned full-year capital expenditures from $330 million to approximately $300 million for fiscal 2022. Our year-to-date cash outflows for financing activities were $220 million, the vast majority of which are $179 million, represented the return of capital to our shareholders, including a $160 million of dividends paid and $63 million of share repurchases during the quarter. At the end of the first quarter we had approximately $475 million remaining under the current $500 million strategic share repurchase program. We also have $250 million anti-dilutive share repurchase program, of which approximately $176 million is remain. We ended the first quarter with cash and cash equivalents of $69 million. For the full-year, we expect organic net sales to be minus 1% to plus 1%. Adjusted EBIT of minus 4.5% to minus 1.5% and adjusted earnings per share of minus 4% to flat versus the adjusted fiscal 2021 results. The sale of Plum is estimated to have an impact of 1 percentage point of fiscal 2022 net sales.

Organic net sales were down 4% for the quarter, driven by the expected lapping of prior year retailer inventory replenishment, as well as constrained supply in the current quarter. We expect this to be evident, particularly through the second quarter as we cycle through recovery on labor and supply. We see pace continuing to improve throughout the year. Organic net sales were, down 1%, primarily due to labor-related supply constraints, but grew 4%, compared to fiscal 2020, in-market performance was strong growing 5% over the prior year quarter and 9% on a two-year basis. Given our solid first quarter results and their consistency with our expectation [Technical Issues] our full-year guidance. For the first quarter as we left 8% growth in the prior-year, organic net sales declined 4%, due to the anticipated cycling of year ago retailer inventory recovery and supply pressures. Adjusted earnings per share from continuing operations decreased $0.12 or 12% versus prior year to $0.89 per share, but remains well ahead of fiscal 2020. Organic net sales decreased 4% during the quarter, driven by a 6 point volume headwind, which reflects lapping of the prior year retailer inventory recovery and the before mentioned supply constraints. Favorable price and sales allowances drove a 4 point gain in the quarter, which was partially offset by a 2 point headwind due to some spend back on promotional spending in the quarter closer to pre-pandemic levels. All in our reported net sales declined 4% from the prior year. We have achieved $15 million in incremental year-over-year savings and remain on track to deliver our cumulative savings target of $850 million by the end of fiscal year. This resulted in better-than-expected adjusted earnings per share of $0.89, which was down $0.25 per share, compared to the prior year. Adjusted EBIT of minus 4.5% to minus 1.5% and adjusted earnings per share of minus 4% to flat versus the adjusted fiscal 2021 results.

1 0 0 0 1 0 0 0 0 0 0 0 0 1 0 0 1 0 0 0 1 1 0 0 0 1 1 1 0 1 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0

Taken a look at our third quarter financial results, total sales were 4.8 billion up 10% from last year and up 11% from Q3 of 2019. As a result, segment profit increased 14% and our segment margin improved 30 basis points to 9.3%. This represents our strongest margin in 2 decades and confirms our key initiatives are driving meaningful improvements. Net income was 229 million or a $1.59 for diluted share and adjusted net income was 270 million or a $1.88 per share. This is a 15% increase from 2020 and establishes a new record for GPC's quarterly earnings, so just an outstanding job by the GPC team. Total sales for global automotive also set a new record at 3.2 billion for the quarter. This represents an 8% increase from Q3 2020, and a 15% increase from Q3 of 2019. On a comp basis, sales were up 5% from last year and up 7% on a two-year stack, with our strongest year-over-year automotive comps coming from the U.S. business. As examples, we recently finalized an exclusive partnership in the education space for technician recruitment with over 10,000 active tech students in the process of earning their credentials. This battery will be available to all consumers with a focus on the over 62 million AAA cardholders and 5,400 approved auto repair centers. Looking next at our automotive highlights by region, total U.S. sales were up 9%. Comp sales increased 8% from last year and are up 5% on a 2 year stack. In Canada, total sales were up 1% with comp sales essentially flat both year-over-year and on a two-year stack as lockdowns in major markets have slowed the recovery. it's been encouraging to see these restrictions of easing of late, which should lead to stronger demand through the final 3 months of 2021. NAPA online, B2C sales continue to grow at a rapid pace, up over 40% from the third quarter, and up 2x from 2019. We would add that our NAPA AutoCare membership has surged with the reopening of markets and includes nearly 400 shop upgrades thus far in 2021. Our AAD team in Europe continue to perform well with total Q3 sales up 8%, were up a strong 23% on a two-year stack. Comp sales increased 2.5% from last year and were up 14% on a 2-year stack. While the UK and Benelux continue to stand out with really strong results, we were pleased with the solid results in each of our 7 European markets. Now looking at our Asia-Pac business, total sales were up 2% from 2020 and up 18% on a 2-year stack. Comp sales were up slightly from last year and up 15% on a 2-year stack. Total sales for this segment were 1.6 billion, a strong 15% increase from last year, and a 5% increase from 2019. Comp sales were up 13% and up 4% on a 2-year stack. We partner with the best manufacturers in the industry to provide Tier 1 brand, our customers demand. With these fundamentals of our business in mind, our focus on continued profitable growth in this segment remained grounded in 5 key initiatives. As examples, Motion.com and our inside sales center, which has grown from 15 to now, 35 reps in just 6 months continue to drive incremental sales from new motion customers. Similarly, approximately 70 of our motion Executive and field leaders from around the country, recently had the chance to meet in person for the first time since early 2020, to detail business performance and review strategic initiatives priorities. In Europe, our AAG executive leadership team recently met together in person for the first time in nearly 2 years. Our Atlanta-based GPC and U.S. NAPA field support teams also hosted an employee appreciation event for 400 teammates, that included a well-received visit from our celebrity NAPA racing teammates, including Chase Elliott. Recapping revenues, total GPC sales were 4.8 billion in the third quarter, up 10%. Gross margin improved to 35.5%, an increase of 50 basis points from 35%, last year. Our team was positioned to address these increases with effective pricing and global sourcing strategies and price inflation improve neutral to gross margin. On a total Company basis, we estimate a 3% inflationary impact on Q3 sales, consisting of 3.5% inflation in global automotive, and 1% to 2% in industrial. Our total adjusted operating and non-operating expenses were 1.35 billion in the third quarter, up 11% from 2020 and at 28% of sales. The increase from last year is due to several factors, including the prior-year benefit of approximately 60 million and temporary savings related to the pandemic. Additionally, our third quarter expenses reflect the increase in variable costs on the 450 million in additional year-over-year sales, as well as cost pressures in areas such as wages, Incentive compensation flight, rent, and health insurance. Our total segment profit in the third quarter was 447 million up 14%. Our segment profit margin was 9.3% compared to 9% last year, a 30 basis point year-over-year improvement, and up a 130 basis points from 2019. Looking ahead, we raised our margin expectations for the full year and we currently expect segment profit margin to improve 40 to 50 basis points from 2020 or 80 to 90 basis points from 2019. This would be our strongest full year margin in more than 20 years. Our tax rate for the third quarter was 24.9% on an adjusted basis, up from 23.4% last year, with the increase in rate primarily related to income mix shift to higher tax jurisdictions. Our third quarter net income from continuing operations was 229 million, with diluted earnings per share of a $1.59. Our adjusted net income was 270 million or a $1.88 per diluted share, which compares to 237 million or a $1.63 per adjusted diluted share in the prior year, a 15% increase. So turning to our third quarter results by segment, our total automotive revenue was 3.2 billion up 8% from last year. Our segment profit increased 6% to 281 million with profit margin as solid 8.8%. While down 20 basis points from 2020 due to the prior-year benefit of temporary savings, this represents an 80 basis point margin improvement over 2019 and reflects the underlying progress in our operations. For the 9 months profit margin is 8.6% up 80 basis points from 2020 and up 90 basis points from 2019, driven primarily by margin expansion in our U.S. and European operations. Our industrial sales were 1.6 billion up 15% from 2020. Segment profit of a 166 million was up a strong 32% from a year ago and profit margin improved to a 10.3%. This is a 140 basis points from 2020 and up 220 basis points from 2019 and the first double-digit margin for industrial since the Fourth Quarter of 2006. Year-to-date profit margin for this segment is 9.4% up a 120 basis points from 2020 and up a 150 basis points from 2019. At September 30th, total accounts receivable is down 3.5%, primarily due to the timing of the 300 million in accounts receivables sold in October of 2020. Inventory was up 10% in line with our sales increase and a reflection of our commitment to having the right parts, in the right place, at the right time. Accounts payable increased 20% from last year due to the increase in inventory and favorable payment terms with certain suppliers. Our AP to inventory ratio improved to 129% from 118% last year. Our total debt is 2.4 billion down 474 million or 16% from September of last year, and down 245 million from December 31 of 2020. We closed the third quarter with available liquidity of 2.4 billion and our total debt to adjusted EBITDA improved to 1.5 times from 2.2 times last year. We also continue to generate strong cash flow with another 300 million in cash from operations in the third quarter and 1 billion for the 9 months. We expect our earnings growth and working capital to drive 1.2 billion to 1.4 billion in cash from operations. And free cash flow of 950 million to 1.15 billion. For the 9 months we have invested a 138 million in capital expenditures, and we have plans for additional investments to drive organic growth and improve efficiencies and productivity in our operations through the balance of the year. In addition, we have used approximately a 143 million in cash for strategic acquisitions to accelerate growth. Consistent with our long-standing dividend policy, we have also paid a total cash dividend of more than 349 million to our shareholders through the 9 months. The Company has paid a dividend every year since going public in 1948 and has increased the dividend for 65 consecutive years. And as part of our share repurchase program, we have also been active with share buybacks dating back to 1994. In the third quarter, we used a $100 million to purchase 800,000 shares, and year-to-date we have used 284 million to purchase 2.2 million shares. The Company is currently authorized to repurchase up to 12.2 million additional shares, and we expect to remain active in this program in the quarters ahead. We expect total sales for 2021 to be in the range of +12 to +13%, an increase from our previous guidance of +10 to +12%. By business, we are guiding to +14 to +15 total sales growth for the Automotive segment, an increase from +11 to +13% and a total sales increase of +10 to +11% for the industrial segment. An increase + plus 6% to +8% On the earnings side, we're raising our guidance for adjusted diluted earnings per share to a range of $6.60 to $6.65, which is up 25% to 26% from 2020. This represents an increase from our previous guidance of $6.20 to $6.35.

Net income was 229 million or a $1.59 for diluted share and adjusted net income was 270 million or a $1.88 per share. Recapping revenues, total GPC sales were 4.8 billion in the third quarter, up 10%. Our team was positioned to address these increases with effective pricing and global sourcing strategies and price inflation improve neutral to gross margin. Our third quarter net income from continuing operations was 229 million, with diluted earnings per share of a $1.59. Our adjusted net income was 270 million or a $1.88 per diluted share, which compares to 237 million or a $1.63 per adjusted diluted share in the prior year, a 15% increase. And free cash flow of 950 million to 1.15 billion. We expect total sales for 2021 to be in the range of +12 to +13%, an increase from our previous guidance of +10 to +12%. An increase + plus 6% to +8% On the earnings side, we're raising our guidance for adjusted diluted earnings per share to a range of $6.60 to $6.65, which is up 25% to 26% from 2020.

0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 1 0 0 0 0 0 0 0 0 0 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 1 0 1 0

These benefits ensure that the value our customers receive from their 3D Systems solution grow substantially over the life of their ownership, which can often exceed 15 years from the initial purchase. The 3D Systems technology provides over a 0.5 million production parts every 24 hours, 365 days a year, which is more than the rest of the industry combined. Last summer, we announced a restructuring program that was designed to ultimately yield a $100 million of run rate cost savings with $60 million to be achieved by the end of 2020. I'm pleased to say that we achieved our $60 million savings target by year-end and that our efforts are continuing unabated. Looking ahead, we have detailed plans within our core additive business to deliver an additional $20 million in savings this year, with the balance of $100 million linked to our analysis of future divestitures. Based upon our initial analysis, these new markets that Roadrunner will open for us are in excess of $400 million and we'll expand from there as the full capabilities of the new platform are adopted. 2020 revenue of $557.2 million decreased 12.4% compared to the prior year, primarily due to the impacts of COVID-19, the effects of which occurred most severely at the onset of the pandemic, with a strong rebound in activity in the second half of the year. As such, excluding $44.4 million of revenue from businesses that were divested last year or at the beginning of this year, baseline 2020 revenue would have been approximately $512.8 million. Gross profit margin on a GAAP basis for the full year 2020 was 40.1% compared to 44.1% in the prior year. Non-GAAP gross profit margin was 42.6% compared to 44.8% in the prior year. Gross profit margin decreased primarily due to the under-absorption of supply chain overhead resulting from lower production and end-of-life inventory changes of $12.4 million and mix. Operating expenses for the full year 2020 on a GAAP basis increased 1.4% to $342.3 million compared to the prior year. On a non-GAAP basis, operating expenses were $236.9 million, a 16.2% decrease from the prior year. For the fourth quarter, we expect revenue of $172.7 million, an increase of 2.6% compared to the fourth quarter of 2019 and an increase of 26.8% compared to the third quarter of 2020, driven by growth in both Healthcare and Industrial. We expect a GAAP loss of $0.16 per share in the fourth quarter of 2020 compared to a GAAP loss of $0.04 in the fourth quarter of 2019. We expect non-GAAP income of $0.09 per share in the fourth quarter of 2020 compared to non-GAAP income of $0.05 per share in the fourth quarter of 2019. Revenue from Healthcare increased 48% year-over-year and 42.4% quarter-over-quarter to $86.6 million, driven by all parts of the Healthcare business: dental, medical devices, simulators and regenerative medicine. Excluding dental applications, revenue in the balance of the Healthcare business, which we refer to broadly as medical applications, increased 27.7% year-over-year. Industrial sales decreased 21.6% year-over-year to $86 million as demand has not fully rebounded to pre-pandemic levels. On a sequential quarter-over-quarter basis, we saw broad-based revenue improvement of approximately 14.2% in our Industrial business, with no single customer or segment responsible for the improvement. We expect gross profit margin of 42% in the fourth quarter of 2020 compared to 44.1% in the fourth quarter of 2019. Non-GAAP gross profit margin was 42.9%, compared to 44.3% in the same period last year. While revenue in these two businesses were expected to decline, their divestiture is expected to negatively impact gross margins going forward by about 300 to 400 basis points, while our restructuring and transformation activities will benefit gross margins. Net, going forward in 2021, we expect non-GAAP gross margins in a range of 40% to 44%. Operating expenses for the fourth quarter were $71.7 million on a GAAP basis, a decrease of 9.2% compared to the fourth quarter of 2019, including an 11.2% decrease in SG&A expenses and a 3.1% decrease in R&D expenses. Importantly, our non-GAAP operating expenses in the fourth quarter were $58 million, a 15.8% decrease from the fourth quarter of the prior year as we saw the benefits from our restructuring efforts. The primary differences between GAAP and non-GAAP operating expenses are $6.1 million in restructuring charges as well as $4 million in amortization of intangibles and stock-based compensation and $3.7 million in legal and divestiture-related charges, consistent with our historical GAAP to non-GAAP adjustments. Recall that in 2020 we announced a restructuring to reduce operating costs by $100 million per year, with $60 million of annualized cost reduction by the end of 2020. As Jeff mentioned, we were pleased that we delivered on our objective of $60 million cost reduction in 2020. In addition, we have plans for an additional $20 million of cost reductions in 2021. Therefore, the plans to achieve the remaining $20 million toward our $100 million cost-reduction plan will be achieved by divestitures or through further cost reductions that we will implement once we have finalized our divestiture analysis. Adjusted EBITDA, defined as non-GAAP operating profit plus depreciation, was $28.7 million or 5.2% of revenue in 2020, compared to $31.2 million in 2019 or 4.9% of revenue. For the fourth quarter of 2020, adjusted EBITDA improved materially to $22.9 million or 13.2% of revenue, compared to $12.9 million or 7.7% of revenue in the fourth quarter of 2019. We ended the quarter with $84.7 million of cash on hand, including restricted cash and cash and assets held for sale. Cash on hand decreased $50 million since the beginning of 2020. Importantly, our cash on hand increased $8.4 million from Q3 2020 to Q4 2020. Our term loan at the end of the year was $21 million. We have a $100 million revolver that was undrawn as of December 31, 2020, and has approximately $62 million of availability based on terms of the agreement.

For the fourth quarter, we expect revenue of $172.7 million, an increase of 2.6% compared to the fourth quarter of 2019 and an increase of 26.8% compared to the third quarter of 2020, driven by growth in both Healthcare and Industrial. We expect a GAAP loss of $0.16 per share in the fourth quarter of 2020 compared to a GAAP loss of $0.04 in the fourth quarter of 2019. We expect non-GAAP income of $0.09 per share in the fourth quarter of 2020 compared to non-GAAP income of $0.05 per share in the fourth quarter of 2019. Net, going forward in 2021, we expect non-GAAP gross margins in a range of 40% to 44%.

0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 1 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0

In fact, we've met or exceeded our guidance 46 times in the last 50 quarters. Cash flow from our operations totaled $418 million, $1.7 billion over the last 12 months, and we have also reduced debt by $1.1 billion over the last year. Therefore, we increased our commitment to returning excess cash to our shareholders with an additional $600 million of share repurchases. Global components book-to-bill was 1.07 exiting the second quarter. Second quarter sales were $6.61 billion. Sales increased 4% quarter-over-quarter and decreased 8% year-over-year as adjusted. Global components sales were $4.72 billion. This was above the high end of our prior guidance and represents an 8% year-over-year decrease as adjusted. Global components operating margin was 3.8%, down 10 basis points year-over-year. This was mainly due to regional mix with Asia contributing 45% of global component sales, up from 37% in the first quarter and 38% last year. Enterprise computing solutions sales of $1.89 billion decreased 8% year-over-year as adjusted and were above the midpoint of our prior expected range. Global enterprise computing solutions operating income margin decreased by approximately 60 basis points year-over-year to 4.3%. Interest and other expense of $32 million was below our prior expectation due to lower borrowings and lower interest rates. The effective tax rate of 24.1% was in line with our expectations. Earnings per share were $1.59 on a diluted basis, exceeding the high end of our prior expectation. We reported strong operating cash flow of $418 million. During the second quarter, we reduced borrowings by approximately $257 million, principally through the maturity of a $209 million 6% note retirement. Current committed and undrawn liquidity stands at over $3.2 billion, excluding the $206 million cash balance that we have on hand. We returned approximately $75 million to shareholders during the quarter through our share repurchase plan. The remaining authorization under our existing plan is approximately $113 million. The new $600 million authorization increases the total to $713 million.

Second quarter sales were $6.61 billion. Earnings per share were $1.59 on a diluted basis, exceeding the high end of our prior expectation.

0 0 0 0 1 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0

Taking a look at our second quarter financial results, total sales were $4.8 billion, up 25% from last year and improved sequentially from plus 9% in the first quarter. For your additional perspective our second quarter sales were 12% higher than in Q2 2019. As a result, segment profit increased 35% and our segment margin improved 65 basis points to 9.2% which represents our strongest margin in two decades. Adjusted net income was $253 million and adjusted diluted earnings per share were $1.74, up 32%. Total sales for Global Automotive were a record $3.2 billion, a 28% increase from 2020, and up 15% from the second quarter of 2019, and marks the first quarter in our 93-year history with auto sales exceeding the $3 billion mark. On a comp basis sales were up 21% and on a two-year stack comp sales were up 8.5%. Automotive segment profit margin improved to 9.1%, up 30 basis points from 2020 and an increase of 90 basis points from 2019. Turning next to our regional highlights, our GPC teammates in Europe built on their excellent start to the year achieving the strongest sales growth among our operations with comp sales up 34%. The NAPA network continues to build and we have now more than 50 NAPA locations operating across Australia and New Zealand, in addition to our 400 plus Repco stores. In North America, comp sales increased 20% in the U.S. and were up 12% in Canada, where lockdowns in key markets such as Quebec and Ontario have been headwinds for several quarters now. The strengthening commercial sales environment is significant for us, as it accounts for 80% of our total U.S. Automotive revenue. Total sales for this group were $1.6 billion, a 20% increase from last year, and up 7% from 2019. Comp sales rose 16% and reflect the fourth consecutive quarter of improving sales trends. A strong sales environment combined with the execution of our operational initiatives drove a 9.5% segment margin, which is up a 130 basis point from both 2020 and 2019. The ongoing market recovery over the last 12 months is in-line with the strengthening industrial economy and the overall increase in activity we have seen across much of our customer base. The Purchasing Managers Index measured 60.6 in June, reflecting healthy levels of industrial expansion and marrying trends we have seen throughout the majority of this year. Likewise, industrial production increased by 5.5% in the second quarter representing the fourth consecutive quarter of expansion. Several industry sectors stood out as their sales increased by 30% or more over last year, including equipment and machinery, automotive, aggregate and cement, equipment rental and oil and gas. He comes to GPC with more than 25 years of technology experience with companies such as Macy's, Home Depot, Target and FedEx. We visited a best-in-class distribution facility in the Netherlands that increased operating productivity by approximately 20% over the past few years with the automation investments and process excellence initiatives. We received an update on the consolidation of 10 back office shared service centers in France to one national location in France to drive cost and process efficiencies, and we saw first hand the power and differentiation of the NAPA brand in the local market. The M&A environment is active and we remain disciplined to pursue strategic and value creating transactions. Total GPC sales were $4.8 billion in the second quarter up 25%. Our gross margin improved to 35.3%, an increase from 33.8% last year or up a 120 basis points from an adjusted gross margin of 34.1%. We estimate a 1.5% impact of inflation in automotive sales for the quarter and a 1% impact in industrial. Our total adjusted operating and non-operating expenses are $1.3 billion in the second quarter, up 28% from last year and 28.1% of sales. The increase in last year reflects the impact of several factors including the prior-year benefit of approximately a $150 million in temporary savings related to the pandemic. The balance primarily relates to the increase in variable costs on the $1 billion in additional year-over-year sales. On a segment basis, our total segment profit in the second quarter was $441 million, up a strong 35%. Our segment profit margin was 9.2% compared to 8.6% last year a 65 basis point year-over-year improvement and up a 100 basis points from 2019. We would add that for the full year, we continue to expect our segment profit margin to improve by 20 to 30 basis points from 2020 or 60 to 70 basis points from 2019. Our tax rate for the second quarter was 27.2% on an adjusted basis up from 24.1% last year. Second quarter net income from continuing operations was $196 million with diluted earnings per share of $1.36. Our adjusted net income was $253 million or $1.74 per share, which compares to $191 million or $1.32 per share in the prior year, a 32% increase. Our automotive revenue was $3.2 billion, up 28% from last year. Segment profit was $291 million, up 33%, with profit margin improved to 9.1%, up 30 basis points from 2020 and a 90 basis point increase from 2019. Our Industrial sales were $1.6 billion in the quarter, up 20% from 2020. Segment profit of $150 million was up 38% from a year ago and profit margin improved to a strong 9.5%, a 130 basis point increase from both 2020 and 2019. At June 30th, our total accounts receivable is up 4% despite the strong sales increase, this is primarily due to the additional sale of $300 million in receivables in the second half of 2020. Inventory was up 10%, consistent with our commitment to provide for inventory availability and our accounts payable increased 26%. Our AP-to-inventory ratio improved to 129% from 112% last year. Our total debt is $2.5 billion, down $700 million or 22% from June of 2020 and down $160 million from December 31 of 2020. We closed the second quarter was $2.5 billion in available liquidity and our total debt-to-adjusted EBITDA has improved to 1.6 times from 2.9 times last year. We continue to generate strong cash flow with another $400 million in cash from operations in the second quarter and $700 million for the six months. For the full year, we expect our earnings growth and working capital to drive $1.2 billion to $1.4 billion in cash from operations and free cash flow of $900 million to $1.1 billion. We have invested $90 million in capital expenditures thus far in the year and we expect these investments to pick up further in the quarters ahead, as we execute on additional investments to drive organic growth and improve efficiencies and productivity in our operations. We've used approximately $97 million in cash for acquisitions through these six months and we continue to cultivate a strong pipeline of targeted names and expect to make additional strategic and bolt-on acquisitions to complement both our Global Automotive and Industrial segments as we move forward. Consistent with our long-standing dividend policy, we have also paid a total cash dividend of more than $232 million to our shareholders through the first half of this year. This reflects a 2021 annual dividend of $3.26 per share and represents our 65th consecutive annual increase in the dividend. Finally, as part of our share repurchase program, we have been active with share buybacks since 1994. In the second quarter, we used $184 million to acquire 1.4 million shares. The company is currently authorized to repurchase up to 13 million additional shares and we expect to remain active in this program in the quarters ahead. With these factors in mind, we expect total sales for 2021 to be in the range of plus 10% to plus 12%, an increase from our previous guidance of plus 5% to plus 7%. By business, we are guiding to plus 11% to plus 13% total sales growth for the Automotive segment, an increase from the plus 5% to plus 7%, and a total sales increase of plus 6% to plus 8% for the Industrial segment an increase from the plus 4% to plus 6%. On the earnings side, we are raising our guidance for adjusted diluted earnings per share to a range of $6.20 to $6.35, which is up 18% to 20% from 2020. This represents an increase from our previous guidance of $5.85 to $6.05. This quarter's 25% total sales growth reflects the benefits of the strengthening global economy and positive sales environment in both our automotive and industrial businesses.

Adjusted net income was $253 million and adjusted diluted earnings per share were $1.74, up 32%. The M&A environment is active and we remain disciplined to pursue strategic and value creating transactions. Total GPC sales were $4.8 billion in the second quarter up 25%. We would add that for the full year, we continue to expect our segment profit margin to improve by 20 to 30 basis points from 2020 or 60 to 70 basis points from 2019. Second quarter net income from continuing operations was $196 million with diluted earnings per share of $1.36. Our adjusted net income was $253 million or $1.74 per share, which compares to $191 million or $1.32 per share in the prior year, a 32% increase. For the full year, we expect our earnings growth and working capital to drive $1.2 billion to $1.4 billion in cash from operations and free cash flow of $900 million to $1.1 billion. With these factors in mind, we expect total sales for 2021 to be in the range of plus 10% to plus 12%, an increase from our previous guidance of plus 5% to plus 7%. On the earnings side, we are raising our guidance for adjusted diluted earnings per share to a range of $6.20 to $6.35, which is up 18% to 20% from 2020.

0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 0 0 0 0 0 0 0 1 0 1 1 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 1 0 1 0 0

We were very excited to be the first issuer of a social bond of the US regional banks, a $1.25 billion bond that was well, well-received 120 investors, very favorable pricing. And we received 100% score on Human Rights Campaign's Corporate Equality Index, and we were named the Best Place to Work in '21. We also continue to make great progress in terms of executing on our $60 billion Community Benefits agreement and we are already at 114% of our annual target. We did close 226 branches in the first quarter, which was part of our strategy. We had strong adjusted net income of $1.6 billion, or $1.18 per share adjusted, both up 42% versus the first quarter of '20. We had adjusted ROTCE of 19.36%. Strong expense discipline, as our adjusted non-interest expense decreased $57 million sequentially, and our merger-related and restructuring charges decreased $167 million. We significantly had lower provision for credit losses of $48 million versus $177 million in the fourth quarter. So we had a reserve release of $190 million. NPAs decreased $88 million, or 6.3%, which we were very happy about. We completed $506 million of the share repurchases. So we had a total payout for the quarter of about 83%. We did redeemed $950 million of preferred stock during the quarter at an after-tax cost of $26 million, or $0.02 per share, which was not excluded in terms of our adjustment to net income. So overall, if you look at Slide 8, you will see how the adjustments worked with the merger-related charges having a diluting impact of $0.08, incremental operating expenses related to the merger that are not in our ongoing recurring charges going forward was $0.10 and an acceleration for cash flow hedge unwind expense of $0.02. If you can see from Page 9, our clients continue to adopt digital at a rapid pace. Since last March, the population of active mobile app users has increased 11% to more than 4 million users, and that marks an important milestone along our digital journey of the Company. Our digital commerce data bear this out as digital client needs have met -- digital client needs met have improved 44% since the first quarter of 2020 and represent more than one-third of total bank production of core bank products. Average loans decreased $8.2 billion, compared to the fourth quarter, primarily due to a $4.5 billion reduction in commercial balances and $3 billion of residential mortgage run off. Approximately $3.3 billion of PPP loans were repaid during the quarter, impacting average commercial balances by $1.8 billion. Average consumer loans decreased $3.6 billion as ongoing refinance activity impacted residential mortgage, home equity and direct loan balances. Average deposits increased $7.9 billion sequentially and are up more than $28 billion from the first quarter of 2020, reflecting government stimulus and pandemic-related client behaviors. During the first quarter, average total deposits cost decreased 2 basis points to 5 basis points and average interest-bearing deposit cost declined 4 basis points to 7 basis points. Net interest income decreased $81 million linked quarter due to fewer days, lower purchase accounting accretion and lower earning asset yields. Reported net interest margin was down 7 basis points, reflecting a 4 basis point impact from lower purchase accounting accretion. Core net interest margin decreased 3 basis points as deposit inflows resulted in higher combined Fed balances and securities. Non-interest income decreased $88 million despite record income from insurance and investment banking and trading. Insurance income increased $81 million linked quarter, reflecting seasonality, $28 million from recent acquisitions, and $19 million due to a timing change related to certain employee benefit accounts. Organic revenue grew 6.4% due to strong new business, stable retention and higher property and casualty rates. Investment banking and trading rose $32 million, benefiting from strength in high-yield, investment-grade and equity originations, as well as a recovery in CVA. Residential mortgage income decreased $93 million due to lower production margins and volumes. Commercial real estate income decreased $80 million due to seasonality and strong fourth quarter transaction activity. Other income was down $18 million as lower partnership income was partially offset by gains from a divestiture. Non-interest expense was down $223 million linked quarter, reflecting a $167 million decrease in merger-related and restructuring charges. Adjusted non-interest expense decreased $57 million, primarily due to lower professional fees and non-service-related pension costs offset by personnel expense. Personnel expense increased $34 million, reflecting higher equity-based compensation, higher incentive compensation and payroll tax resets, partially offset by lower salaries and wages. As we said in January, we continue to expect total combined merger costs of approximately $4 billion. This consists of merger-related and restructuring charges of approximately $2.1 billion and incremental operating expenses related to the merger of approximately $1.8 billion. Since the merger was announced, we have incurred $1.3 billion of merger-related and restructuring charges and $900 million incremental operating expenses related to the merger. Non-performing assets were down $88 million, or 2 basis points as a percentage of total loans, largely driven by decreases in the commercial and industrial portfolio. Net charge-offs came in 33 basis points, which was at the lower end of the guidance range. The provision for credit losses was $48 million, including a reserve release of $190 million due to lower loan balances and improved economic outlook. The allowance for credit losses was relatively stable at 2.06% of loans and leases. Our exposure of COVID sensitive industries was essentially flat at $27 billion. Truist has strong capital and ended the first quarter with a CET1 ratio of 10.1%. With respect to capital return, we paid a common dividend of $0.45 per share and had $506 million of share buybacks. We also redeemed $950 million of preferred stock, resulting in an after-tax charge of $26 million, or $0.02 per share that was not excluded from the adjusted results. We have $1.5 billion in repurchase authorization remaining under the share repurchase program the Board approved in December. We intend to maintain approximate 10% CET1 ratio after taking into account strategic actions, stock repurchases and changes in risk-weighted assets. As a result, we anticipate second quarter repurchases of about $600 million. This slide shows excellent progress toward the net cost saves of $1.6 billion. Through fourth quarter, we reduced sourceable spend 9.3% and are closing in on our 10% target. In terms of retail banking, we closed 226 branches in the first quarter, bringing the cumulative closures to 374. We are on track to close approximately 800 branches by the first quarter of '22. We've reduced our non-branch facilities by approximately 3.5 million square feet and are making progress toward the overall target of approximately 5 million square feet. Average FTEs are down 9% since the merger announcement. We expect technology savings of $425 million by the end of 2022 compared to 2019. We are highly committed to our $1.6 billion cost savings target. Beginning with adjusted non-interest expense and then adjusting for the non-qualified plan and the insurance acquisition expenses, we arrive at a core expense of $3.65 billion. If you adjust for seasonality of high payroll taxes, equity compensation and variable commissions, core expenses would approach fourth quarter target of $2.94 billion. Our adjusted return on tangible common equity was 19.36% for the first quarter. We expect reported net interest margin to be down high-single-digit, driven by a mid-single-digit decrease in core margin and 3 basis points to 4 basis points of purchase accounting accretion run off. We anticipate net charge-offs in the range of 30 basis points to 45 basis points and a tax rate between 19% to 20%. And I'm going to take us to Page 20. Referrals to insurance have increased more than 2.3 times compared to the first quarter of 2020 and more than 50% sequentially.

We had strong adjusted net income of $1.6 billion, or $1.18 per share adjusted, both up 42% versus the first quarter of '20.

0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

This transaction is accretive to our consolidated operating margin profile by approximately 200 points. In fiscal 2020, the Scientific segment reported $57 million in revenue and in excess of 20% operating margin. During the quarter, we realized $4.2 million from productivity and expense actions, and expect $7 million in annual savings in fiscal 2021. We generated free cash flow of $19.5 million in the fourth quarter of 2020 and repaid $13 million in debt. The company ended the quarter with approximately $200 million in available liquidity and a net debt to adjusted EBITDA ratio under 1. Also, Standex repatriated approximately $19 million in the quarter and $39 million in fiscal 2020 from foreign subsidiaries, ahead of our prior forecast of $35 million. The Electronics segment revenue decreased approximately $5 million or 10% year-over-year as we experienced weakness in both North American and European markets, associated with the economic impact of COVID-19 pandemic. Operating income decreased approximately $2.8 million or 32.3% year-over-year in the quarter. In addition, the funnel of new business opportunities continues to be active, and is at a very healthy $40 million as we work with our customers on their new product designs. Our Electronics business has dramatically transformed in recent years growing from a $40 million largely North American business into an integrated global player. At the Engraving segment, revenue decreased approximately $6.5 million or 17% year-over-year, primarily due to delays in the receipt of tools from customers as we indicated in our fiscal third quarter conference call. Engraving operating income declined $2.7 million or 51% year-over-year, reflecting volume declines associated with the economic impact of COVID-19 mitigated partially by productivity and expense savings in the quarter. Laneway remained healthy with a 9% year-to-date increase to $43 million, driven by soft trim tools, laser engraving and tool finishing. We have spent the last 2.5 years moving all Engraving sites with [Phonetic] common [Phonetic] ERP. When we acquired Horizon Scientific in October 2016 and combined it with our own Scientific Refrigeration business, we had a business with $34 million of sales. Sales grew to $57 million in fiscal year '20 even with the fourth quarter deceleration from the COVID-induced slowdown. Scientific revenue decreased approximately $2.6 million or 17% year-over-year with operating income declining approximately $900,000 or 24.8% year-over-year. Engineering Technologies revenue decreased $7.3 million or 21.7% year-over-year in the fiscal fourth quarter 2020, reflecting lower aviation-related sales offset partially by increased sales in the space end market. Operating income margin increased from 13.6% in fiscal fourth quarter 2019 to 15.8% in the fourth quarter of 2020 despite the sales headwinds due to favorable product mix, cost actions and manufacturing efficiencies. Specialty Solutions revenue decreased approximately $8 million or 25% year-over-year in the fourth quarter of fiscal '20. Segment operating income decreased $2.3 million or 39% year-over-year, reflecting lower volume, partially mitigated by cost actions including headcount reductions and temporary plant slowdowns. We expect fiscal first quarter '21 revenue and operating income to be similar to fiscal fourth quarter 2020. We realized $4.2 million in savings in the fourth quarter and expect $7 million in annualized savings from these efforts in fiscal '21. On a consolidated basis, total revenue declined 17.4% year-on-year. Acquisitions had a nominal contribution of 0.1% to overall growth in the quarter, while FX was a headwind with a negative impact of 1.1%. Gross margin decreased 200 basis points year-on-year to 33.7%, primarily reflecting the volume decline, partially offset by productivity and expense actions. Our adjusted operating margin was 8.7%, compared to 12.6% a year ago. In addition, the tax rate of 26.7%, represented a 210 basis point increase year-on-year due to the mix of US and non-US earnings. Adjusted earnings were $0.65 in the fourth -- fiscal fourth quarter of 2020 compared to $1.10 in the fiscal fourth quarter of 2019. We reported free cash flow of $19.5 million compared to $27.8 million in the fourth quarter of 2019. This decrease reflects the lower level of net income year-on-year, partially offset by a reduction in capital expenditures from $15.6 million in fourth quarter of 2019 to $5.7 million in fourth quarter of 2020 as we focused our spending on maintenance, safety and the company's highest priority growth initiatives. Standex had a net debt of $80.3 million at the end of the fourth quarter compared to $102.8 million at the end of the third quarter of 2020. This decrease primarily reflects the repayment of approximately $13 million of debt in the quarter, along with an increase in our cash balance due to operating cash flow generation in the quarter. The company's net debt to adjusted EBITDA leverage ratio was 0.8% with a net debt to total capital ratio of 14.8% and interest coverage ratio of approximately nine times. We also had approximately $200 million of available liquidity at the end of the fourth quarter. We repatriated $19 million of cash in the fourth quarter of 2020 and $39 million in fiscal 2020 compared to our prior $35 million expectation. We plan to repatriate an additional $35 million in fiscal '21. During the fourth quarter, we also repurchased approximately 30,000 shares for $1.4 million. We have repurchased now approximately 172,000 shares since the end of fiscal 2019. There is approximately $43 million remaining under the Board's current repurchase authorization. In addition, in July, we declared our 224th consecutive dividend of $0.22 per share, a 10% year-on-year increase. Subsequent to the end of the fourth quarter, we announced the acquisition of Renco Electronics for approximately $28 million, which we financed with cash on hand. In fiscal 2021, we expect capital expenditures to be between $28 million to $30 million compared to $19 million in fiscal '20 as capital spending returns to more normalized levels with continued emphasis on safety, maintenance and growth investments. In the appendix on Page 17, we have also presented all four quarters of fiscal '20 under the new reporting segment structure. Capturing cost structure efficiencies will remain a priority, with $7 million in cost savings in fiscal 2021, expected from the actions we have already announced.

We expect fiscal first quarter '21 revenue and operating income to be similar to fiscal fourth quarter 2020. Adjusted earnings were $0.65 in the fourth -- fiscal fourth quarter of 2020 compared to $1.10 in the fiscal fourth quarter of 2019.

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

In the first quarter, we participated in nearly 40 public market transactions that raised more than $22 billion in total proceeds. Global and US announced M&A dollar volume increased 95% and 164% respectively compared to the first quarter of 2020 and increased 3% and 13% respectively from a strong fourth quarter. First quarter adjusted net revenues of $669.9 million grew 54% year-over-year. First quarter advisory fees of $512.1 million was 43% year-over-year. Based on current consensus, estimates and actual results, we expect to maintain our number-four ranking on advisory fees among all publicly traded investment banking firms for the last 12 months and to grow our market share relative to these same firms. Our first quarter underwriting fees of $79.3 million more than tripled year-over-year. First quarter commissions and related revenue of $53.5 million decreased 4% year-over-year as volumes declined relative to the elevated levels in the first quarter of 2020. First quarter asset management and administration fees of $17.8 million increased 16% year-over-year on higher AUM, which was $10.6 billion at quarter end, an increase of 11% year-over-year. Turning to expenses, our adjusted compensation revenue for the first quarter is 59%. First quarter non-comp costs of $72.7 million declined 12% year-over-year. Our non-compensation ratio for the first quarter is 10.9%. First quarter adjusted operating income and adjusted net income of $201.8 million and $162.5 million increased 145% and 181% respectively. We delivered a first quarter adjusted operating margin of 30.1% and a first quarter adjusted earnings per share of $3.29 increased 172% year-over-year. We returned $275.3 million to shareholders during the quarter through dividends and the repurchase of 1.9 million shares. Our Board declared a dividend of $0.68, an increase of 11.5%. Our Board also approved a refresh of our share repurchase authority to $750 million. On top of our strong financial performance, we sustained our number-one league table ranking in the dollar volume of announced M&A transactions both globally and in the US among independent firms for the last 12 months ending March 31 and in the first quarter of 2021. We served as the lead advisor on Grab's $40 billion IPO buyer, a SPAC merger, the largest tech merger this year, the largest SPAC merger in history and the largest pipe issued in conjunction with a SPAC merger at a little over $4 billion. And we also served as the sole advisor to Nuance on its pending $19.7 billion sale to Microsoft, the second largest tech merger this year. When we first acquired ISI almost seven years ago, we identified one of the most important opportunities created by that transaction to be our ability to increase our underwriting revenues to perhaps $75 million to a $100 million of revenue per year over the ensuing few years. In fact, three of the past four quarters, including the first quarter of 2021, where in just one quarter, within that $75 million to a $100 million target that we had set for the full year. Our investments in ECM have earned us a place in the top 20 for underwriting revenue as estimated by Dealogic when bot deals are excluded. The breaking into the Top 10 currently seems challenging given our aversion to block trades and our independent balance sheet light approach. First, we are intensely focused on continuing to position our business for sustaining long-term growth by number one, providing outstanding advice and execution of our clients as we continue to advise them on their most important strategic financial and capital decisions; number two, by continuing to enhance our coverage of the most significant client groups, including our initiatives around the Evercore 100 and financial sponsors; number three, investing to further deepen and broaden our capabilities by continuing to build out certain industry groups, geographies and product capabilities. For the first quarter of 2021, net revenues, net income and earnings per share on a GAAP basis were $662 million, $144 million and $3.25 respectively. Our GAAP tax rate for the first quarter was 16.1% compared to 25.8% for the prior year period. On a GAAP basis, our share count was 44.5 million shares for the first quarter. The share count for adjusted earnings per share was $49.4 million for the quarter. Firmwide non-compensation costs per employee were approximately $40,000 for the first quarter, down 9% on a year-over-year basis. On March 29th, we issued $38 million of aggregate principal amount of unsecured senior notes with a 1.97% coupon through a private placement. And finally, at the end of the quarter, we held $411 million in cash and cash equivalents and $873 million in investment securities down from year-end due to compensation-related payments and strong return of capital.

First quarter adjusted net revenues of $669.9 million grew 54% year-over-year. We delivered a first quarter adjusted operating margin of 30.1% and a first quarter adjusted earnings per share of $3.29 increased 172% year-over-year. Our Board declared a dividend of $0.68, an increase of 11.5%. For the first quarter of 2021, net revenues, net income and earnings per share on a GAAP basis were $662 million, $144 million and $3.25 respectively.

0 0 1 0 0 0 0 0 0 0 0 0 1 0 1 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0

In the fourth quarter, Cullen/Frost earned $101.7 million or $1.60 per share, compared with earnings of $117.2 million and $1.82 a share reported in the same quarter a year ago. For the full year, Cullen/Frost earned $435.5 million or $6.84 a share compared with earnings of $446.9 million or $6.90 a share reported in 2018. Our return on average assets was 1.21% in the fourth quarter compared to 1.48% in the fourth quarter of last year. Average deposits in the fourth quarter of $27.2 billion were up 2.6% compared to the fourth quarter of last year, while average loans were up 5.4%. Our provision for loan losses was $8.4 million in the fourth quarter compared to $8 million in the third quarter of this year and $3.8 million in the fourth quarter of 2018. Net charge-offs for the fourth quarter were $12.7 million compared with $6.4 million in the third quarter and $9.2 million in the fourth quarter of last year. Fourth quarter annualized net charge-offs were 34 basis points of average loans. Non-performing assets were $109.5 million at the end of the fourth quarter compared with $105 million in the third quarter and $74.9 million in the fourth quarter of last year. Overall delinquencies for accruing loan at the end of the fourth quarter were $58.2 million and that was 39 basis points of period end loans. Total problem loans, which we define as risk grade 10 and higher were $511 million at the end of the fourth quarter compared to $487 million in the third quarter of this year and $477 million in the fourth quarter of last year. Energy related problem loans were $132.4 million at the end of the fourth quarter compared to $87.2 million for the third quarter and $115.4 million in the fourth quarter of last year. Energy loans in general represented 11.2% of our portfolio at the end of the fourth quarter, up from the previous quarter but well below our peak of more than 16% in 2015. Our focus for commercial loans continues to be on consistent, balanced growth, including both the core component, which we define as lending relationships under $10 million in size as well as larger relationships, while maintaining our quality standards. The balance between these relationships went from 52% larger and 48% core at the end of 2018 to 57% larger and 43% core at the end of 2019. New relationships increased 4% versus the fourth quarter of a year ago. The dollar amount of new loan commitments booked during the fourth quarter was up sharply, increasing 75% from a year ago and 44% from the prior quarter. Even excluding the strong energy growth we saw in the fourth quarter, new loan commitments grew 42% versus a year ago and 20% from the prior quarter and represented good increases in both C&I and CRE. In 2019, we booked just 3% more loan commitments compared to 2018 despite looking at 16% more deals. In CRE, we saw our percentage of deals lost to structure increase from 63% in 2018 to 69% in 2019. Our weighted current active loan pipeline in the fourth quarter was up by about 9% overall compared to the prior quarter and was driven by a 20% growth in C&I opportunities. Of the 10 new financial centers that we've opened so far in the Houston region, four were opened in the fourth quarter. We expect to open one more Houston area financial center in the current quarter on our way to a total of 25 new financial centers and we've already hired more than 150 of the approximately 200 employees we expect to staff this expansion. We added almost 13,000 net new customers -- consumer customers in 2019, an increase of 48% from a year ago. That represented a 3.8% increase in the total number of consumer customers, all of it representing organic growth. In the fourth quarter 32% of our account openings came from our online channel which includes our Frost Bank mobile app. In fact, online account openings were 30% higher compared to the fourth quarter of 2018. The consumer loan portfolio averaged $1.7 billion in the fourth quarter, increasing by 1.2% compared to the fourth quarter last year. Texas job growth was a very strong 4% in November and the Dallas Fed now estimates 1.9% Texas job growth for full year 2019. December statewide unemployment of 3.5% uptick slightly from the historically low 3.4% level seen in each of the six months through November. In terms of employment growth by industry, as of November, construction had the strongest employment growth in Texas with 11.5% growth for the month and growth of 5% for the year-to-date period through November. Financial activities was the industry with the second fastest job growth at 3.5% year-to-date through November. Energy was the only sector that showed meaningfully negative Texas job growth, down 2.7% year-to-date through November. According to the Dallas Fed surveys, activity in the Texas services sector accelerated again in the fourth quarter and revenue growth in this sector has remained in positive territory every month since December of 2009. Job growth in the Houston region accelerated to a 2.8% rate in the three months through November, compared to a more modest 1.6% rate for the full year through November professional and business services and education and health services led Houston job growth over the three months through November growing at 8.2% and 7.7% respectively over the same period a year earlier. Regarding the DFW Metroplex the Dallas Business Cycle Index maintained by the Dallas Fed expanded at a 5% annual rate in the fourth quarter compared to 4.8% in the third quarter, while the Fort Worth Business Cycle Index expanded at a consistent 4.1% rate in the second half of the year. For the DFW Metroplex, November job growth remains strong at a 4.8% annualized rate, and area unemployment remained near multi-year lows at 3.2% in Dallas and 3.3% in Fort Worth. The Austin economy has also remained healthy in November and the Dallas Fed's Austin Business Cycle Index has now been in expansion territory for more than 10 years with index growth remaining at or above the region's historical 6% average for the past nine years. In the three months ending in November, Austin area job growth moderated to 2.4%. Austin's unemployment rate remained at 2.7% in November for the fourth consecutive month. The San Antonio Business Cycle Index grew at a 5.5% rate in November and San Antonio job growth was 4.7% for the three months through November with area unemployment remaining at 3.1%. Despite the lack of job growth in the Permian region, November unemployment remained low at 2.4% for the second consecutive month. Our net interest margin percentage for the fourth quarter was 3.62%, down 14 basis points from the 3.76% reported last quarter. The taxable equivalent loan yield for the fourth quarter was 4.88%, down 28 basis points from the third quarter, impacted by the lower rate environment with September and October Fed rate cuts. The total investment portfolio averaged $13.6 billion during the fourth quarter, up about $197 million from the third quarter average of $13.4 billion. The taxable equivalent yield on the investment portfolio was 3.37% in the fourth quarter, down 6 basis points from the third quarter. Our municipal portfolio averaged about $8.4 billion during the fourth quarter, up about $193 million from the third quarter. The municipal portfolio had a taxable equivalent yield for the fourth quarter of 4.8%, flat with the previous quarter. During the fourth quarter, approximately $1.4 billion of our treasury securities that were yielding about 1.51% matured. During the fourth quarter, we purchased about $1.5 billion in securities to replace the treasuries that matured. During the quarter, we purchased $500 million in 30 year treasuries yielding about 2.27%, approximately $700 million in agency mortgage-backed securities yielding about 2.37% and about $300 million in municipal securities with a TE yield of 3.3%. As a result of the maturities and purchases I just mentioned, the duration of the investment portfolio at the end of the quarter was 5.4 years compared to 4.3 years last quarter. Looking at our funding sources, the cost of total deposits for the fourth quarter was 29 basis points, down 10 basis points from the third quarter. The combined cost of -- the cost of combined Fed funds purchased and repurchase agreements which consists primarily of customer repos decreased 32 basis points to 1.21% for the fourth quarter from 1.53% in the previous quarter. Those balances averaged about $1.42 billion during the fourth quarter, up about $126 million from the previous quarter. Moving to non-interest expense; total non-interest expense for the quarter increased approximately $21.1 million or 10.6% compared to the third quarter -- excuse me, the fourth quarter last year. Excluding the impact of the Houston expansion and the operating costs associated with our headquarters move in downtown San Antonio, non-interest expense growth would have been approximately 6.3%. So again, regarding the estimates for full year 2020 earnings, we currently believe that the FactSet mean of $6.13 is reasonable.

In the fourth quarter, Cullen/Frost earned $101.7 million or $1.60 per share, compared with earnings of $117.2 million and $1.82 a share reported in the same quarter a year ago.

1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

We are very pleased with our record-setting third quarter results as we increased revenues 31% to $3.9 billion, which resulted in adjusted net earnings growth of 39% to $604 million, both as compared with the 2020 third quarter. Importantly, we grew our holding company cash balance by 25% to $1.5 billion as compared to $1.2 billion at the end of the second quarter of 2021. During the quarter, we took advantage of exceptional interest rates and issued $450 million of 3.2% senior notes with a 30-year maturity. We also funded a $400 million intercompany loan with F&G to fund their growth. We delivered adjusted pre-tax title earnings of $669 million, with an adjusted pre-tax title margin of 21.7% in the 2021 third quarter compared with adjusted pre-tax title earnings of $528 million and an adjusted pre-tax title margin of 21.2% in the 2020 comparable quarter. We continue to be very pleased with the results this quarter as we open new channels of distribution and accelerate our sales growth, driving assets under management at the end of the third quarter to nearly $35 billion, an increase of 9% in the quarter. Total assets under management have grown 31% since we closed the acquisition, and we are well on our way toward our goal of more than doubling assets under management in five years. Share buybacks are an important component of our strategy, and we were active once again, having purchased 1.3 million shares for $61 million at an average price of $46.29 per share through the third quarter. In the first week of October, we reached our $500 million share buyback target, which we announced in the fourth quarter of 2020. Lastly, we announced yesterday a quarterly cash dividend of $0.44 per share, an increase of 10% from our previous quarterly dividend. For the third quarter, we had generated adjusted pre-tax title earnings of $669 million, a 27% increase over the third quarter of 2020. Our adjusted pre-tax title margin was 21.7%, a 50 basis point increase over the prior year quarter. The results were driven by a 25% increase in average fee per file, a 9% increase in daily purchase orders closed and a 31% increase in total commercial orders closed, partially offset by a 21% decrease in daily refinance orders closed. Total commercial revenue was a record $366 million compared with the year-ago quarter of $216 million due to the 31% increase in closed orders and a 28% increase in total commercial fee per file. For the third quarter, total orders opened averaged 10,800 per day, with July at 11,000, August at 11,000 and September at 10,300. For October, total orders opened were 9,300 per day, as we saw solid demand and purchase activity, while the refinance market continues to moderate as compared with last year's robust levels. Daily purchase orders opened were up 1% in the quarter versus the prior year. And for October, daily purchase orders opened were up 4% versus the prior year. Refinance orders opened decreased by 33% on a daily basis versus the third quarter of 2020. For October, daily refinance orders opened were down 38% versus the prior year. Lastly, total commercial orders opened per day increased by 15% over the third quarter of 2020. For October, total commercial opened orders per day were up 15% over October of 2020. Importantly, commercial opened orders per day have exceeded 1,000 orders each of the last nine months, having consistently been in record territory and will provide momentum as we close out 2021 and begin 2022, given the longer tail for closings in commercial as compared with residential. Looking forward, while refinance volumes may continue to moderate, it is important to note that direct refinance revenue only contributed approximately 19% of total direct revenue in the third quarter compared with 27% in the third quarter of last year. On a sequential basis, refinance revenue contributed 21% of total direct revenue in the second quarter and 33% in the first quarter of this year. Additionally, refinance fee per file in the third quarter was approximately $1,000 as compared with nearly $3,400 for purchase, providing a strong counterbalance to declines in refinance revenue. During the quarter, we reached a significant milestone as more than two million consumers have now been invited to begin their transactions on our digital inHere Experience Platform through Start inHere, and more than 1.3 million have chosen to do so. We achieved record sales in the third quarter, surpassing $3 billion in total sales for the quarter and $7 billion in total sales for the first nine months of the year, which in turn have boosted ending assets under management to nearly $35 billion as of September 30, as Randy mentioned previously. In the third quarter, annuity sales in our retail channel were $1.5 billion, up 43% from the third quarter of 2020 and down slightly from the record sequential quarter. F&G has issued $1.2 billion of funding agreement-backed notes in September, following our inaugural $750 million issuance in June. F&G has also successfully entered the pension risk transfer market, closing $371 million of transactions in the third quarter and securing an additional $564 million of transactions in the fourth quarter. Based on transactions secured to date, F&G will assume approximately $900 million in pension liabilities and provide annuity benefits to over 22,000 retirees. Overall, institutional sales were $2.6 billion for the first nine-month period. And with the additional $500 million pension risk transfer volume secured in the fourth quarter, we're on track to achieve $3 billion of institutional sales in 2021. With these strong top line results, average assets under management, or AAUM, has reached $32.7 billion, driven by approximately $2.3 billion of net new business flows in the third quarter. Total product net investment spread was 285 basis points in the third quarter and FIA net investment spread was 335 basis points. Adjusting for favorable notable items, total product spread was 248 basis points and FIA spread was 293 basis points, both in line with our historical trends and consistent with our disciplined approach to pricing. First, F&G's net earnings attributable to common shareholders of $373 million for the third quarter included a $224 million onetime favorable adjustment from an actuarial system conversion, reflecting modeling enhancements and other refinements and represents less than 1% of reserves. Next, F&G's adjusted net earnings for the third quarter were $101 million. Net favorable items in the period were $27 million. Adjusted net earnings, excluding notable items, were $74 million, up from $70 million in the second quarter. We generated $3.9 billion in total revenue in the third quarter, with the Title segment producing $2.9 billion, F&G producing $927 million and the Corporate segment generating $44 million. Third quarter net earnings were $732 million, which includes net recognized losses of $154 million versus net recognized gains of $73 million in the third quarter of 2020. Excluding net recognized gains and losses, our total revenue was $4 billion as compared with $2.9 billion in the third quarter of 2020. Adjusted net earnings from continuing operations were $604 million or $2.12 per diluted share. The Title segment contributed $521 million. F&G contributed $101 million. And the Corporate segment had an adjusted net loss of $18 million. Excluding net recognized losses of $169 million, our Title segment generated $3.1 billion in total revenue for the third quarter compared with $2.5 billion in the third quarter of 2020. Direct premiums increased by 22% versus the third quarter of 2020. Agency premiums grew by 34%. And escrow title-related and other fees increased by 14% versus the prior year. Personnel costs increased by 15%. And other operating expenses increased by 17%. All in, the Title business generated a 21.7% adjusted pre-tax title margin, representing a 50 basis point increase versus the third quarter of 2020. Interest and investment income in the Title and Corporate segments of $27 million declined $4 million as compared with the prior year quarter due to decreases in bond interest, dividends received on preferred stock and a slight decrease in income from our 1031 Exchange business. In September, we closed an issuance of $450 million of 3.2% senior notes due September of 2051. We also put in place a $400 million intercompany loan to fund F&G's growth and to better optimize their capital structure. FNF debt outstanding was $3.1 billion on September 30 for a debt-to-total capital ratio of 24.9%. Our title claims paid of $55 million, were $45 million lower than our provision of $100 million for the third quarter. The carried reserve for title claim losses is currently $95 million or 5.9% above the actuary's central estimate. We continue to provide for title claims at 4.5% of total title premiums. Our title and corporate investment portfolio totaled $6.7 billion at September 30. Included in the $6.7 billion are fixed maturity and preferred securities of $2.2 billion with an average duration of 2.8 years and an average rating of A2, equity securities of $1.2 billion, short-term and other investments of $500 million and cash of $2.8 billion. We ended the quarter with $1.5 billion in cash and short-term liquid investments at the holding company level. Our current level of cash generation supports the following: first, FNF's $500 million annual common dividend; next, our $100 million annual interest expense on F&F debt; third, our $400 million 5.5% senior notes, which are due in September of 2022; and finally, our share repurchases. During the quarter, we purchased 1.3 million shares at an average purchase price of $46.29 per share. And in the first week of October, we completed our previously announced $500 million share repurchase plan. In total, we repurchased 12 million shares at an average price of $41.62 since announcing the plan in October of last year. Capital funding for this growth includes $400 million in debt capital from FNF in the third quarter as well as third-party financial reinsurance with an existing partner in the fourth quarter. Based on current forecasts, we expect to contribute $200 million to $300 million of new equity capital in 2022. And with F&G's 25% debt-to-capital target, we believe F&G has ample financial flexibility to execute on our growth strategy and capture market opportunities. Beyond that horizon and subject to ongoing sales momentum, there may be an additional capital investment required in 2023, which could take the form of converting our existing $400 million term loan to equity capital.

We delivered adjusted pre-tax title earnings of $669 million, with an adjusted pre-tax title margin of 21.7% in the 2021 third quarter compared with adjusted pre-tax title earnings of $528 million and an adjusted pre-tax title margin of 21.2% in the 2020 comparable quarter. We generated $3.9 billion in total revenue in the third quarter, with the Title segment producing $2.9 billion, F&G producing $927 million and the Corporate segment generating $44 million. Adjusted net earnings from continuing operations were $604 million or $2.12 per diluted share.

0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Our online revenue was 34% of our domestic revenue, and while it declined versus last year, it was up 115% or $8.8 billion compared to two years ago. Over the past 24 months, they have flexibly dealt with rapidly changing store operations as we responded to impacts of the pandemic. Our comparable sales growth was 10.4% on top of a very strong 9.7% last year, growing $8 billion over the past two years. Our non-GAAP earnings per share was just over $10, up 27% compared to last year. And compared to two years ago, we expanded our non-GAAP operating income rate by 110 basis points. Our non-GAAP return on investment improved 840 basis points compared to two years ago, and we drove more than $6.5 billion of free cash flow in the last two years. In fiscal '22, we returned $4.2 billion of that to shareholders in the form of dividends and share repurchases. We committed to spend at least $1.2 billion with BIPOC and diverse businesses by 2025. We also committed to opening 100 Teen Tech Centers by fiscal '25. During fiscal '22, we opened nine to end the year with a total of 44. Online sales were almost 40% of domestic revenue compared to 43% last year and 25% in Q4 of fiscal '20. We reached our fastest holiday delivery times ever, shipping products to customer homes more than 25% faster than last year and two years ago. Our Q4 revenue was $16.4 billion. Our domestic comparable sales declined 2.1%, and our enterprise comp sales declined 2.3%. Revenue grew 8% versus two years ago. Our non-GAAP gross profit rate decreased 50 basis points to 20.2%. This was about 20 basis points lower than we expected primarily due to increased promotionality. Lastly, our International gross profit rate improved 210 basis points to last year, which provided a weighted benefit of approximately 20 basis points to our enterprise results. Our enterprise non-GAAP SG&A dollars grew 5% versus last year, less than our guide of 8% growth primarily due to lower-than-anticipated incentive compensation. Within our domestic segment, our SG&A dollars increased $139 million. First, at $199, the stand-alone membership is profitable. Our guide is anchored around a comparable sales decline in the range of 1% to 4% and a 5.4% non-GAAP operating income rate. Our non-GAAP diluted earnings per share outlook is $8.85 to $9.15. Our non-GAAP effective tax rate is planned at a more normalized level of 24.5% in fiscal '23 compared to 19% rate in fiscal '22. As you may recall, our Q2 results this past year included a $0.47 diluted earnings per share benefit from the resolution of certain discrete matters. In addition, we anticipate the number of store closures to be in the range of 20 to 30, which is consistent with the trend over the past five years. As I mentioned, our fiscal '23 guidance assumes non-GAAP operating income rate of approximately 5.4% compared to 6% in fiscal '22. As I mentioned earlier, in the past two years, we have delivered more than $8 billion of revenue growth and improved our operating income rate by 110 basis points to 6%. We now expect to generate approximately $1 billion more in operating income than our original targets. I already mentioned our fiscal '22 online business was 34% of our Domestic sales. That is more than $16 billion in sales compared to just $3.5 billion in fiscal '15. And our My Best Buy program now has more than 100 million total members. 40% of Americans use digital technology or the Internet in new or different ways compared with before the pandemic, and the use of telemedicine is triple what it was in just Q1 of 2020. That could be between a $400 and $500 value. Just in the first year, that's just under $120 of value. That's a $30 value. For televisions, you get a full 10 inches more in screen size, almost no Bezel and the ability to navigate your TV with voice if you'd like to. In fact, when we look at our customers' behavior, we're seeing a 7% to 15% reduction in the amount of time it takes a customer to get back into a category. Previously, our customers would tell us when they wanted to upgrade a computing product, it would take them 60 minutes to get it the exact way they'd want to that would be moving their icons, their data, just getting it the way the old one was and having the features of the new. Today, with cloud, you simply put in your credentials and in 10 to 15 minutes, it's actually exactly the way you want. As we look over the past decade, we've had over $12 billion in sales growth with the vast majority coming from large categories like TVs, computing and appliances and a third coming from new categories like wearables and VR, just to name a few. For the next 12 to 24 months, we'll continue to focus on these five areas of expansion. This is a $34 billion industry that we are uniquely positioned to compete in with our Blue Shirts but also our large product fulfillment network that was built for televisions and appliances. Our assortment has grown by 650% in the last 12 months, and we are implementing a larger, more premium experience in 90 stores over the next 18 months with dedicated zones for vendors. This is a $3 billion industry with rapid growth. We've introduced 250 new products this holiday with 500 additional accessories around those products. We'll be adding physical assortment to 900 stores and a more premium experience in 90 stores over the next 18 months. This is over a $30 billion industry, and our acquisition of Yardbird, a leading premium outdoor furniture company, provides the ability for us to accelerate this business across a nationwide network. I am incredibly happy to say that we are indeed seeing increased interactions with our Totaltech customers to the tune of about 60%. Also, when we look at NPS surveys specifically from customers who are Totaltech members, they are running about 1,400 basis points higher than nonmembers. From a spend perspective, it's difficult to calculate with precision given the early stage of the membership and our historical customer frequency, but we currently believe customers who sign up for the membership are spending about 20% more than they would have if they did not have the membership. We already have 4.6 million members. Now, to be transparent, we auto converted 3.7 million Totaltech support and other legacy support programs. We have actively enrolled more than 1 million members since launching nationwide in October, and we see a path to double the number of members by the end of fiscal '25. First, the connection between our online sales, which expanded to 34% of our total domestic revenue, and the 150% growth we've seen in our virtual interaction across video, chat and voice. Today, 84% of Best Buy customers use digital channels throughout their shopping journey. Second, and also connected to our customers using digital channels throughout their shopping journey, is we've seen a 72% growth in customers who are using our app while in our stores. At the same time, we will optimize our store portfolio, and as Matt mentioned, we will maintain the trend of closing 20 to 30 stores per year. We've seen a more than 100 basis point improvement in store domestic labor expense as a percentage of revenue compared to FY '20. We've increased our average wage rate 20% in the last two years by raising our minimum wage to $15 an hour and shifting some of our employees into higher-skilled, higher-paying roles. In fact, our average wage for our field employees this year will be over $18 an hour. Since we've started our flexible workforce initiative in 2020, 80% of our talented associates are now skilled to support multiple jobs inside and outside of our stores, and we're proud of the fact that our field turnover rates remain significantly below retail average and are near our pre-pandemic turnover rates. As I showcased earlier, we have nearly 21 million services interactions across in-store and in-home services. In fact, 35% of our mobile phone customers are new reengaged with Best Buy. This is enabled by a technical workforce that has an average tenure of almost nine years and a retention rate at 86%. And after we complete the repairs, customers spend 1.7 times more and engage 1.6 times more often across all Geek Squad services. Employees who have the skill sets to complete the consultation has grown by 78% last year. Customers spend 17% more across their lifetime value and they purchase more often when engaged for a consultation. When surveyed 92% of customers say they will likely continue working with their expert. So looking ahead, we believe our annual consultations will grow by more than 200% by fiscal '25. As you saw earlier, we had 45 million virtual interactions across all channels, creating opportunities to engage our customers differently. To date, our virtual store in comparison to historical chat experiences is generating higher close rate, higher sales and a 20% improvement in customer satisfaction. We started with 17 vendors onboard, and we will end fiscal '23 with over 60 vendors investing in our virtual store. And we will remodel 50 locations in fiscal '23 and about 300 locations expected by fiscal '25. Now, I want to highlight our 16 outlet stores that are sort of open box, clearance, end-of-life, and otherwise distressed large product inventory across major appliances and televisions which might otherwise be liquidated at a significantly lower recovery rate. 16% of customers are new and 37% of customers are reengaged. Within the test, we are looking at how a variety of store formats across 15,000, 25,000 and 35,000-square-feet locations can serve the customer's needs. And this summer, we will be introducing a 5,000-square-foot store into the marketplace. When you look at the before and after map of the Charlotte market, you can see we have reduced our overall square footage by 5% and yet, we've increased our customer coverage in the marketplace from 76% to 85%. We've also added 260 access points where customers can get their gear and employee delivery covers nearly half of the metro. We recognize an $80 billion market opportunity for health technology and the desire for consumers to use technology to manage their health. By 2025, an estimated $265 billion in Medicare services will move into the home and 61% of patients say they would choose hospital care at home. 70% of the U.S. population lives within 10 miles of a Best Buy store, able to shop health and wellness products, speak with our expert blue shirts and utilize our distribution hubs to fulfill their health technology needs. Geek Squad makes 9 million home visits annually, helping consumers set up technology and perhaps more importantly, teaching them how to use it. Our Lively monthly subscription service provides a consistent revenue stream, and last year, we drove 15% year-over-year growth by adding 348,000 new lives served. Our caring center agents connected with our customers over 9 million times last year, offering a variety of health and safety services. Our revenue in fiscal year '22 was $525 million. We're growing 35% to 45% a year, and we are accretive in fiscal year '27 as the health industry has a longer return on investment. Our current target set in 2019 is to achieve an additional $1 billion in annualized cost reductions and efficiencies by the end of fiscal '25. We achieved approximately $200 million during fiscal '22, taking our cumulative total to $700 million toward the $1 billion goal. We expect our revenue in fiscal '25 to be in the range of $53.5 billion to $56.5 billion. This range reflects a three-year compound annual growth rate of approximately 1% to 3%, despite the anticipated decline in sales in fiscal '23. I would also note that due to expected store closures, our comparable sales CAGR would be approximately 2% to 4%. As it relates to Totaltech, we believe that the combination of membership revenue and incremental purchases by members will add approximately $1.5 billion in revenue by fiscal '25 compared to fiscal '23. As we move to our fiscal '25 operating income rate outlook, we expect to expand our rate to a range of 6.3% to 6.8%. As Damien shared earlier, our outlook assumes closing 20 to 30 stores per year through fiscal '25. This assumption reflects our belief that the online channel mix will grow approximately to 40% in fiscal '25. Our average annual free cash flow over the past five years is more than $2.3 billion. We expect our annual capital expenditures to increase to a range of $1 billion to $1.2 billion over the next three years. Our targeted dividend payout remains in the range of 35% to 45% of prior year's non-GAAP diluted earnings per share. Lastly, this year marked a record level of share repurchases at $3.5 billion. In fiscal '23, we plan to spend approximately $1.5 billion on share repurchases. Extraordinary ecosystems have formed over the past 20, 30, 40 years as digital has transformed every aspect of how we all do business. And with that, we will break for 10 minutes before beginning our Q&A session. We are excited to begin the Q&A portion of our event, which we expect to run approximately 45 minutes.

Our domestic comparable sales declined 2.1%, and our enterprise comp sales declined 2.3%. Our non-GAAP diluted earnings per share outlook is $8.85 to $9.15.

0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

For the quarter, we posted organic sales growth of 9.3%, reflecting growth versus 2019 for all our major businesses. International organic growth outpaced the U.S. at 14.2% despite COVID challenges in some countries. With our first half organic growth of 7.1%, combined with continued recovery of electric procedures, a strong order book across our capital businesses and new product innovations, we have increased confidence in the full year outlook. This is reflected in our upward narrowing of organic sales guidance to 9% to 10% compared to 2019. Our sales performance carried through the rest of our results with strong margin performance and adjusted earnings per share growth and cash flow conversion of over 100% in the quarter. Our bullish sales outlook, combined with ongoing execution on margins and continued progress on Wright Medical integration has resulted in a raised full year adjusted earnings per share guidance of $9.25 to $9.40 a share. During the quarter, our combined worldwide Trauma and Extremities business, including Wright Medical had a strong performance, growing 7% compared to 2019. The upper extremities performance in the quarter was enhanced by the continued adoption of our BLUEPRINT planning software with approximately 50% of total shoulder cases completed using BLUEPRINT. As a result of the strong performance of our Trauma and Extremities business, which grew approximately 5% in the first half of the year, we are confident in the combined business to grow at least 6% for the full year when compared to 2019. Our organic sales growth was 9.3% in the quarter. Compared to 2019, pricing in the quarter was unfavorable, 0.6% versus Q2 2020, pricing was 5% unfavorable. Foreign currency had a favorable 1.5% impact on sales. For the quarter, U.S. organic sales increased by 7.5%, reflecting the recovery of our procedural business and continued strong demand for Mako, medical products and neurovascular products. International organic sales showed strong growth of 14.2%. Our adjusted quarterly earnings per share of $2.25 increased 13.6% from 2019, reflecting sales growth and operating margin expansion, partially offset by higher interest charges resulting from the Wright Medical acquisition and a somewhat higher quarterly effective tax rate. Our second quarter earnings per share was positively impacted from foreign currency by $0.04. Orthopaedics had constant currency sales growth of 26% and an organic sales growth of 6.7%, including an organic growth of 8% in the U.S. Our knees business grew 7.5% in the U.S., reflecting the strong bounce back as the COVID-related restrictions were lifted. Other Orthopaedics grew 26.5% in the U.S., primarily reflecting strong demand for our Mako robotic platform, partially offset by declines in bone cement. Internationally, Orthopaedics grew 4% organically, which reflects sequential improvement as the COVID-19 impacts have started to ease in Europe, strong momentum in Mako internationally and strong performances in Australia. For the quarter, our Trauma and Extremities business, which includes Wright Medical, delivered 7% growth on a comparable basis. In the U.S., comparable growth was 12.5%, and which included double-digit growth in our Upper Extremities and Trauma businesses. In the quarter, MedSurg had constant currency and organic sales growth of 8.3%, which included 6.4% growth in the U.S. Instruments had a U.S. organic sales growth of 0.9%, primarily related to growth in smoke evacuation, lighted instruments and skin closure products partially offset by slower growth in power tools. As a reminder, during the second quarter of 2019, Instruments had a very strong growth of approximately 19%. Endoscopy had U.S. organic sales growth of 6%, reflecting strong performances in our Sports Medicine, general surgery and video products. The Medical division had U.S. organic growth of 13.4%, reflecting continued double-digit performance in our emergency care business. Internationally, MedSurg had organic sales growth of 15.9% and reflecting strong growth in the Endoscopy, Instruments and Medical businesses across Europe, Canada and Australia. Neurotechnology and Spine had organic growth of 15.5%. It also reflects very strong growth in our neurovascular business of approximately 30%. Our U.S. Neurotech business posted an organic growth of 17.3% and highlighted by strong product growth in Sonopet IQ, bipolar forceps, max space, cryotherapy and nasal implants. Internationally, Neurotechnology and Spine had organic growth of 28.8%. Our adjusted gross margin of 66% was a favorable approximately 15 basis points from second quarter 2019 compared to the second quarter in 2019, gross margin was primarily impacted by business mix and acquisitions, primarily offset by price. Adjusted R&D spending was 6.6% of sales, reflecting our continued focus on innovation. Our adjusted SG&A was 33.4% of sales, which was slightly better than the second quarter of 2019. In summary, for the quarter, our adjusted operating margin was 25.9% of sales, which is five basis points improvement over the second quarter of 2019. Based on our positive momentum, we continue to reiterate our op margin guidance for the year of 30 to 50 basis points improvement over 2019, excluding the impact of Wright Medical. Our second quarter had an adjusted effective tax rate of 17% and was impacted by our mix of U.S. non-U.S. income and some adverse discrete tax items included in our provision to return adjustments. Our year-to-date effective tax rate is 15.2%. For the full year, we expect an adjusted effective tax rate of 15% to 15.5% with some variability in the remaining quarters, including a slightly lower rate in the third quarter and a more normalized rate in the fourth quarter. Focusing on the balance sheet, we ended the first quarter with $2.3 billion of cash and marketable securities and total debt of $12.7 billion. During the quarter, we fully repaid the $400 million of term loan debt related to the borrowings incurred for the acquisition of Wright Medical. Year-to-date, we have paid down $1.15 billion of debt. Our year-to-date cash from operations was approximately $1.3 billion. Based on our performance in sales ramp in the second quarter as well as our capital orders pipeline, we expect 2021 organic net sales growth to be in the range of 9% to 10%. As it relates to sales expectations for Wright Medical, we now expect comparable growth for Trauma and Extremities to be at least 6% for the full year when compared to the combined results for 2019. If foreign currency exchange rates hold near current levels, we expect net sales in the full year will be positively impacted by approximately 1%. Consistent with the upper range of our previous guidance, net earnings per diluted share will be positively impacted by foreign exchange by approximately $0.10 in the full year, and this is included in our revised guidance range. Based on our performance in the first six months and including consideration of our improved full year Wright Medical performance impact, controlled spend ramp to facilitate growth and continued positive recovery outlook, we now expect adjusted net earnings per diluted share to be in the range of $9.25 to $9.40.

This is reflected in our upward narrowing of organic sales guidance to 9% to 10% compared to 2019. Our bullish sales outlook, combined with ongoing execution on margins and continued progress on Wright Medical integration has resulted in a raised full year adjusted earnings per share guidance of $9.25 to $9.40 a share. Our adjusted quarterly earnings per share of $2.25 increased 13.6% from 2019, reflecting sales growth and operating margin expansion, partially offset by higher interest charges resulting from the Wright Medical acquisition and a somewhat higher quarterly effective tax rate. Based on our performance in sales ramp in the second quarter as well as our capital orders pipeline, we expect 2021 organic net sales growth to be in the range of 9% to 10%. If foreign currency exchange rates hold near current levels, we expect net sales in the full year will be positively impacted by approximately 1%. Consistent with the upper range of our previous guidance, net earnings per diluted share will be positively impacted by foreign exchange by approximately $0.10 in the full year, and this is included in our revised guidance range. Based on our performance in the first six months and including consideration of our improved full year Wright Medical performance impact, controlled spend ramp to facilitate growth and continued positive recovery outlook, we now expect adjusted net earnings per diluted share to be in the range of $9.25 to $9.40.

0 0 0 1 0 1 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 1 1 1

We achieved decremental margins of 25% for the year through value-based pricing and difficult but necessary cost actions of $45 million. Aerospace and defense improved their margins by 290 basis points despite lower volume. Notably, aerospace and defense won 20 new programs, including 60 defense and four in commercial. We continue to invest in innovation, launching 49 new products in 2020 versus 33 in 2019. We delivered on our free cash flow commitments throughout the year and ended with strong free cash flow of $20 million in the fourth quarter. And finally, we reduced our debt by $126 million or 22%. We booked orders of $168 million in the quarter, which was flat sequentially and down 25% organically. Sequentially, industrial was up 12% in the quarter. A&D had lower orders sequentially, down 21% and due to the timing of large naval program orders that pushed into 2021. Revenue in the quarter was $208 million, up 10% sequentially, driven by strong defense deliveries, mainly on U.S. Naval programs and moderate growth across most end markets in industrial. Adjusted operating income was $23 million, representing a margin of 11.2%, up 200 basis points from the prior quarter. As a result of improved operating income, the company delivered $0.66 of adjusted earnings per share. Finally, we generated strong free cash flow of $20 million during the fourth quarter, as we exited the year with operational cash flow unencumbered by transformation disbursements. In Q4, industrial segment orders were up 12% sequentially, down 22% organically. Revenue in the quarter was $131 million, up 4% from prior quarter and down 13% organically. We exited the year with an operating margin of 9%, a sequential improvement of 160 basis points, driven by price increases and cost actions taken throughout the year. Our aerospace and defense segment booked orders of $47 million in the quarter, down 21% sequentially and down 33% versus prior year. Revenue in the quarter was $78 million, up 25% from prior quarter. Strong defense deliveries mostly offset the COVID-19 impact, on commercial Aerospace, resulting in only 3% lower revenues versus by year. Finally, operating margin was 24% in the quarter, roughly flat sequentially and year over year. Pricing, up 3%, combined with factory and cost actions drove strong margins in line with prior year despite lower revenue. For Q4, the effective tax rate was approximately 14%. The company took a non-cash charge of approximately $15 million to record a valuation allowance against its remaining deferred tax assets in Germany. Looking at special items and restructuring charges, we recorded a total pre-tax charge of $13.4 million in the quarter. The acquisition-related amortization and depreciation was a charge of $12 million with the remaining charges associated with restructuring activities in the quarter. Interest expense for the quarter was $8.5 million, down $2.3 million compared to last year as a result of lower debt balances. Other income was approximately $1 million, primarily driven by pension income. Finally, corporate costs were $7.8 million in the quarter. As Scott mentioned previously, our free cash flow was $20 million in the fourth quarter, up 11% compared to 2019. We used the proceeds from the sale of our instrumentation and sampling business to reduce our net debt to $443 million, a reduction of $126 million or 22% year over year. We're expecting Q1 industrial revenue to come in between down 1% and up 4% year over year. Pricing is expected to be a benefit of roughly 1%, consistent with prior quarters. Revenue in the first quarter is expected to be down 7% to 12% versus prior year. defense revenue is expected to be down 1% to 5% due to the timing of large defense shipments and lower U.S. defense spares orders leading into the quarter. We anticipate growth of 5% to 10% from our other OEM group, which includes products for drones, missiles and helicopters. Commercial revenue is expected to be down between 35% and 40%, in line with the broader commercial aerospace market. Pricing is expected to be a benefit of 1% in the quarter, but in line with 2020 for the full year. In addition to the revenue guidance that Scott provided, we're expecting incremental margins of 30% to 35% in industrial and decremental margins of 30% to 35% in aerospace and defense. We're also planning for corporate cost of $8.5 million, higher than our expected full-year run rate, due to the timing of certain expenses, such as RFPs. Interest expense is expected to be roughly $8.5 million in Q1. We are expecting organic revenue growth of 0% to 4%, and with aerospace and defense expected to grow at low to mid-single digits and industrial at low single digits. We're expecting adjusted earnings per share of $2 to $2.20, a 40% to 54% increase versus 2020. Finally, we're planning to deliver free cash flow as a percent of adjusted net income of 85% to 95%.

Revenue in the quarter was $208 million, up 10% sequentially, driven by strong defense deliveries, mainly on U.S. Naval programs and moderate growth across most end markets in industrial. As a result of improved operating income, the company delivered $0.66 of adjusted earnings per share. We are expecting organic revenue growth of 0% to 4%, and with aerospace and defense expected to grow at low to mid-single digits and industrial at low single digits. We're expecting adjusted earnings per share of $2 to $2.20, a 40% to 54% increase versus 2020.

0 0 0 0 0 0 0 0 0 1 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 0

In the fourth quarter of 2021, we had net income on a GAAP basis of $292 million or $7.34 per diluted share as compared to $198 million or $5 per share in the previous quarter. Adjusting for certain items, but primarily the mark-to-market of our hedging transactions, we had adjusted net income of $168 million or $4.23 per diluted share in the fourth quarter as compared to $142 million or $3.57 per share for the previous quarter. Adjusted EBITDAX was $226 million compared to $201 million in the previous quarter. Our production on a barrels of oil equivalent basis remain relatively flat quarter-over-quarter, averaging 92,800 BOE per day compared to a third quarter production of 92,100 BOE per day. Oil production for the fourth quarter averaged 52,900 barrels of oil per day, which is up slightly from 51,800 barrels of oil in the third quarter. And NGL prices continued to be strong in the fourth quarter at an average percentage of WTI oil of around 37%. Just for context, this compares to less than 20% that we were experiencing in the same quarter last year. The company invested capex of about $66 million during the fourth quarter to bring 16 gross, 12 net wells on to production and we drilled 17 gross, 10.4 net operated wells. We ended the quarter with 34 gross, 20.2 net drilled and uncompleted wells. Lease operating expense was $62 million for -- or $7.31 per BOE for the fourth quarter of '21. Our cash G&A expenses were $12 million for the fourth quarter and for the year totaled about $39 million, averaging right around $1.16 per BOE for 2021. We did see a dramatic increase year-over-year with the estimated total proved reserves totaling 326 million BOEs with a pre-tax PV10 value of $4.4 billion at year-end compared to 260 million BOE and $1.2 billion at the year-end 2020. Pricing under SEC rules increased by approximately $27 per barrel to $66.56 per barrel at December 31, 2021, compared to December 31, 2020. Gas increased to $3.60 per MMBtu compared to $1.99 for the same two periods. Obviously, these price changes were the biggest factor in the year-over-year changes, but we also added 20.3 million BOE through the drill bit and 16 million BOE with acquisitions, which more than offset the decrease from selling our Colorado assets. Lastly, I'll point out that our proved developed properties accounted for roughly 80% of our total proved reserves with approximately $3.6 billion in value. It's worth noting that this value is at SEC pricing of around $67 per barrel of oil as compared to spot prices today. As such, the board approved a quarterly dividend of $0.25 per share that will be paid beginning in March, which was only the first step of our capital return program. When we look out over the next four years and consider a $70 price environment for WTI crude, we see our company generating free cash flow in an amount approximately the same as our current market cap. With our current hedges in place and using the $70 price for WTI and $4 for gas, we model over $900 million in EBITDA, resulting in over $500 million of adjusted free cash flow, which demonstrates that we can continue to grow our return to capital program while also continuing to pursue acquisition opportunities that will compete with our current profile.

In the fourth quarter of 2021, we had net income on a GAAP basis of $292 million or $7.34 per diluted share as compared to $198 million or $5 per share in the previous quarter. Adjusting for certain items, but primarily the mark-to-market of our hedging transactions, we had adjusted net income of $168 million or $4.23 per diluted share in the fourth quarter as compared to $142 million or $3.57 per share for the previous quarter.

1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Diluted earnings per share were $0.97, or $0.94 adjusted. Adjusted earnings per share was down 3% sequentially and up 3.1% year-over-year. Period-end loan growth was $745 million or 8.1% annualized resulting from total funded loan production of $3.6 billion. Period-end deposit growth was $972 million or 10.3% annualized. Core transaction deposits increased $373 million and total deposit cost declined 13 basis points from the prior quarter. Net interest margin was 3.65%, a decline of 4 basis points from the prior quarter. Excluding the impact of purchase accounting adjustments, the net interest margin was 3.40%, down 2 basis points from the prior quarter. Non-interest income was $98 million in the fourth quarter, an increase of $9.2 million from the prior quarter and $30 million from the prior year quarter, led by capital markets and fiduciary activities. And credit quality metrics remain solid with the non-performing loan ratio and the non-performing asset ratio declining by 5 basis points from the prior quarter to 0.27% and 0.37% respectively. The net charge off ratio was 0.10%. We repurchased $36.5 million in common stock or 1.1 million shares during the quarter which completed our 2019 share repurchase authorization of $725 million. Outstanding shares were reduced 11% from the beginning of the year. Our 2020 share repurchase authorization should allow us to continue operating with the CET1 ratio around 9%. I'm also pleased to report that our Board approved a 10% increase in the quarterly dividend to $0.33 per share of common stock effective with the April 1 dividend. We had another strong quarter of loan growth with a net increase of nearly $750 million on production of $3.6 billion. This strategic focus support continued reductions in the total cost of deposits, which fell 18 basis points from the peak in July and 13 basis points from the previous quarter. As you can see on Slide 6, the core net interest margin decreased 2 basis points to 3.4%. Excluding purchase accounting accretion, lower interest rates resulted in an 18 basis point reduction in loan yield and a 13 basis point reduction in the cost of deposits. As a reminder, GAAP margin at 3.65% benefited from purchase accounting accretion which was $26 million in the fourth quarter. The benefit to NII from purchase accounting will decline substantially in 2020 to a full-year total of approximately $8 million. On Slide 7, you will see we have had continued success in fee revenue growth, which increased to $98 million or $92 million adjusted. Included in our GAAP non-interest income is an $8 million increase in the fair value of certain equity investments. In the fourth quarter, fee revenue growth was led by capital markets and fiduciary activities of $2 million and $1 million respectively, which more than offset reductions in areas such as mortgage banking income. An example of this success includes a 29% year-over-year increase and implementations by Treasury & Payment Solutions. Slide 8 shows adjusted expenses of $265 million which is an increase of $6 million from the previous quarter. Significant increases noted on this slide reflect a $3 million increase in FDIC expense associated with the reclassification of certain loan categories over the past four years. There was also a $2 million increase in servicing expense that was more than offset with higher revenue resulted from a renegotiation of a third-party consumer lending partnerships. Key credit quality metrics on Slide 9 remains favorable, including NPL and NPA ratio that each declined by 5 basis points. These reductions were achieved with a net charge off ratio of 10 basis points for the quarter. The net charge off rate was 16 basis points for the year. Provision expense of $24.5 million included the costs associated with a $466 million increase in net loan growth from the prior period. Onto Slide 10, we remain confident in our overall capital position and are pleased to report that we completed the $725 million share repurchase authorization in 2019. This included fourth quarter repurchase activity of $37 million, which reflected a reduction of an additional 1.1 million shares. Total shares were reduced 11% from the beginning of the year. In 2019, we added 58 net new revenue producing team members across our foot print, in many of the fastest growing markets in which we serve. We also experienced strong growth in banker productivity during the year with funded loan production of $11.1 billion, up $3 billion or 37% from 2018. Moreover, the increase in production led to a 5.5% pro forma outstandings growth in total loans with C&I, CRE and consumer asset classes all increasing. In 2019, we also delivered 10.6% fee income growth versus 2018 on a pro forma Synovus FCB basis. Strong growth was delivered across multiple businesses including mortgage, capital markets, card and our fiduciary and asset management businesses which saw assets under management grow 21%, as we continue to expand our capabilities and presence across the footprint. As a result of the growth in these categories, we saw the percentage of our revenue derived from fee income increase throughout the year, now totaling 19% in the fourth quarter. The legacy FCB wholesale team continued on a path of growth with loans increasing $350 million during the year. Deposit accounts growing by 8% and record levels of capital market income of $18 million, up 38% year-over-year. The legacy FCB branch network also saw performance gains in 2019 with branch unit sales per month of 51, slightly higher than the legacy Synovus branches. In the middle of 2019, the Synovus structured lending division was formed and in a very short period of time has already generated a $150 million in loan commitments. We have reviewed over 20 initiatives that provide opportunities for incremental growth from the revenue side as well as additional efficiencies. We are pleased with the positive momentum in the balance sheet growth which has been driven by new talent, the enhancement of capabilities and sales tools, as well as stronger growth in our larger Tier 1 markets. Our approach and the momentum is expected to continue to support asset growth of 4% to 7% in 2020. One of the most significant headwinds to the 2020 income statement is purchase accounting adjustments, which are expected to reduce revenues by approximately $90 million from 2019. Excluding PAA, adjusted net interest income should increase 0% to 3% as we continue to actively manage our balance sheet to optimize the margin as well as returns. Adjusted non-interest income is expected to increase 3% to 6% with broad-based growth. Adjusted non-interest expense is expected to increase 3% to 5%. The 2019 tax rate of 26% was negatively impacted by significant non-deductible, merger-related expenses that are not expected in 2020 as well as certain discrete items that were also negative. We expect the net charge off ratio of 15 basis points to 25 basis points as the credit cycle matures and recovery subside. Given our current profile of loan growth and expectations for the economy, we anticipate adding up to 10 basis point to the allowance for credit losses ratio throughout 2020 to account for the change in provisioning to the life of loans. Moving on to capital; in 2019, we completed subordinated debt and preferred stock issuances and purchased 20 million shares, which effectively optimized the capital stack, given the current balance sheet size and risk profile. We reiterated our comfort with a CET1 ratio of 9% under the current conditions and are committed to first funding organic growth; second, maintaining a competitive dividend; and third, effective capital deployment. As such, we will be increasing the common dividend by 10% in 2020 targeting a payout ratio of 35% to 40%.

Diluted earnings per share were $0.97, or $0.94 adjusted. Net interest margin was 3.65%, a decline of 4 basis points from the prior quarter. I'm also pleased to report that our Board approved a 10% increase in the quarterly dividend to $0.33 per share of common stock effective with the April 1 dividend. These reductions were achieved with a net charge off ratio of 10 basis points for the quarter. Given our current profile of loan growth and expectations for the economy, we anticipate adding up to 10 basis point to the allowance for credit losses ratio throughout 2020 to account for the change in provisioning to the life of loans. As such, we will be increasing the common dividend by 10% in 2020 targeting a payout ratio of 35% to 40%.

1 0 0 0 0 1 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 1

In the fourth quarter, net income was $187 million or $1.69 per share, compared to $165 million or $1.45 per share a year ago. Net operating income for the quarter was $188 million or $1.70 per share, a per share increase of 9% from a year ago. On a GAAP reported basis, return on equity for the year was 11.6%, and book value per share was $66.02. Excluding unrealized gains and losses on fixed maturities, return on equity was 14.5%, and book value per share grew 9% to $48.26. In our life insurance operations, premium revenue increased 5% to $631 million, and life underwriting margin was $177 million, up 6% from a year ago. In 2020, we expect life underwriting income to grow around 4% to 5%. On the health side, premium revenue grew 7% to $275 million, and health underwriting margin was up 5% to $61 million. In 2020, we expect health underwriting income to grow around 4% to 6%. Administrative expenses were $61 million for the quarter, up 7% from a year ago. As a percentage of premium, administrative expenses were 6.7%, the same as a year ago. For the full year, administrative expenses were $240 million or 6.7% of premium, compared to 6.5% in 2018. In 2020, we expect administrative expenses to grow approximately 6%, and to be around 6.7% of premium. At American income, life premiums were up 8% to $297 million. And life underwriting margin was up 9% to $98 million. Net life sales were $59 million, up 9%. The average producing count for the fourth quarter was 7,631, up 10% from the year-ago quarter and up 1% from the third quarter. The producing agent count at the end of the fourth quarter was 7,551. Net life sales for the full-year 2019 grew 6%. At Liberty National, life premiums were up 3% to $72 million, and underwriting margin was up 4% to $18 million. Net life sales increased 13% to $15 million, and net health sales were $7 million, up 12% from the year-ago quarter. The average producing agent count for the fourth quarter was 2,534, up 17% from the year-ago quarter and up 6% from the third quarter. The producing agent count at Liberty National ended the quarter at 2,660. Net life sales for the full-year 2019 grew 9%. Net health sales for the full-year 2019 grew 11%. And our direct-to-consumer division at Globe Life, life premiums are up 4% to $209 million, and life underwriting margin was flat at $39 million. Net life sales were $30 million, up 2% from the year-ago quarter. At Family Heritage, health premiums increased 8% to $76 million, and health underwriting margin increased 7% to $19 million. Net health sales were up 19% to $18 million due to an increase in both agent productivity and agent count. The average producing agent count for the fourth quarter was 1,228 up 9% from the year-ago quarter and up 8% from the third quarter. The producing agent count at the end of the quarter was 1,286. Net health sales for the full-year 2019 grew 9%. At United American General Agency, health premiums increased 11% to $108 million, while margins increased 12% to $15 million. Net health sales were $32 million, up 7% compared to the year-ago quarter. We expect the producing agent count for each agency at the end of 2020 to be in the following ranges: American Income, 5% to 7% growth; Liberty National, 5% to 13% growth; Family Heritage, 2% to 7% growth. Net life sales for the full-year 2020 are expected to be as follows: American Income, 5% to 9% growth; Liberty National, 8% to 12% growth; direct-to-consumer, down 2% to up 2%. Net health sales for the full-year 2020 are expected to be as follows: Liberty National, 9% to 13%; Family Heritage, 8% to 12%; United American individual Medicare Supplement, relatively flat. Excess investment income, which we define as net investment income less required interest on net policy obligations and debt was $63 million, a 1% increase over the year-ago quarter. On a per share basis, reflecting the impact of our share repurchase program, excess investment income increased 6%. For the year, excess investment income grew 5%, while on a per share basis, it grew 8%. In 2020, due to the impact of lower interest rates, we expect excess investment income to decline by 2% to 3%, but on a per share basis, be flat to up 1%. Now regarding the investment portfolio, invested assets are $17.3 billion, including $16.4 billion of fixed maturities and amortized cost. Now the fixed maturities $15.7 billion are investment-grade with an average rating of A-, and below investment-grade bonds were $674 million, compared to $666 million a year ago. The percentage of below investment-grade bonds to fixed maturities is 4.1%, compared to 4.2% a year ago. Bonds rated BBB are 55% of the fixed maturity portfolio, down from 58% at the end of 2018. Finally, we had net unrealized gains in the fixed maturity portfolio of $2.5 billion, $97 million lower than the previous quarter. In the fourth quarter, we invested $449 million in investment-grade fixed maturities, primarily in the municipal, industrial and financial sectors. We invested at an average yield of 4.11%, an average rating of A+ and an average life of 31 years. For the entire portfolio, the fourth-quarter yield was 5.41%, down 15 basis points from the yield of fourth-quarter 2018. As of December 31, the portfolio yield was approximately 5.41%. For 2020, at the midpoint of our guidance, we assumed an average new money yield of 4.10% for the full year. Fortunately, the impact of lower new money rates on our investment income is somewhat limited as we expect to have an average turnover of less than 2% per year in our investment portfolio over the next five years. The parent began the year with liquid assets of $41 million. In addition to these liquid assets, the parent generated excess cash flow in 2019 of $374 million, as compared to $349 million in 2018. Thus, including the assets on hand at the beginning of the year, we had $415 million available to the parent during the year. As discussed on our prior calls, we accelerated the repurchase of $25 million of Globe Life shares into December of 2018, with commercial paper and parent cash. We utilized $20 million of the 2019 excess cash flow to reduce the commercial paper for those repurchases, that left $395 million available for other uses, including the $50 million of liquid assets we normally retain as a parent. In the fourth quarter, we spent $93 million to buy 930,000 Globe Life shares at an average price of $99.82. For the full-year 2019, we spent $350 million of parent company cash to acquire 3.9 million shares at an average price of $89.04. So far in 2020, we have spent $33.5 million to buy 322,000 shares at an average price of $104.20. The parent ended the year with liquid assets of approximately $45 million. While our 2019 statutory earnings have not yet been finalized, we expect excess cash flow in 2020 to be in the range of $375 million to $395 million. Thus, including the assets on hand at January 1, we currently expect to have around $420 million to $440 million of cash and liquid assets available to the parent in 2020. As noted on previous calls, Globe Life has targeted a consolidated company-action-level RBC ratio in the range of 300% to 320% for 2019. For 2020, we will continue to target a consolidated company-action-level RBC ratio in the range of 300% to 320%. As Gary previously noted, net operating income per share for the fourth quarter of 2019 was $1.70. In addition, net operating income per share for the full-year 2019 was $6.75. This was $0.01 above the midpoint of our previous guidance. For 2020, we are projecting that net operating income per share will be in the range of $7.03 to $7.23. The $7.13 midpoint of this guidance is slightly lower than previous guidance due to higher-than-expected employee pension and healthcare costs in 2020.

In the fourth quarter, net income was $187 million or $1.69 per share, compared to $165 million or $1.45 per share a year ago. Net operating income for the quarter was $188 million or $1.70 per share, a per share increase of 9% from a year ago. As Gary previously noted, net operating income per share for the fourth quarter of 2019 was $1.70. For 2020, we are projecting that net operating income per share will be in the range of $7.03 to $7.23.

1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 1 0

To put this in perspective, an average weighted earnings index I checked recently for oil tankers came in just over $6,000 per day in Q2 '21, the lowest print in more than 20 years. Anyway, at Frontline, we do the hard work and managed to achieve $15,000 per day on our VLCC fleet; $11,000 per day on our Suezmax fleet; and $10,600 per day on our LR2/Aframax fleet in the second quarter of this year. So far in Q3, we have booked 70% of our VLCC days at $14,000 per day; 64% of our Suezmax days at $9,800 per day; and 63% of our LR2/Aframax days at $11,800 per day. They are in a total amount of just $247 million. All facilities will finance 65% of the market value. They will carry an interest rate of LIBOR plus a margin of 170 basis points. And they will have an amortization profile of 20 years, starting from delivery date from the yard. Frontline achieved total operating revenues, net of voyage expenses, of $80 million and adjusted EBITDA of $28 million in this quarter. And we report a net loss of $26.6 million or $0.13 per share and an adjusted net loss of $23.2 million or $0.12 per share. The adjustments this quarter consist of a $4.7 million loss on derivatives; a $0.8 million gain on marketable securities; and a $1.3 million amortization of acquired time charters; and lastly, a $0.8 million share of losses of associated companies. The adjusted net loss in the second quarter decreased $32 million compared with the first quarter. And the decrease was driven by a decrease in our time charter equivalent earnings due to the lower TCE rates, as Lars mentioned; an increase in ship operating expenses of $9.3 million, mainly as a result of higher dry-docking costs; offset by a gain on marketable securities sold in the quarter of $4 million. The total balance sheet numbers have increased with $64 million in this quarter. The balance sheet movements in the quarter are primarily related to taking delivery of the LR2 tanker from Future and the acquisition of 6 VLCC newbuilding contracts in addition to ordinary debt repayments and depreciation. As of June 30, Frontline has $257 million in cash and cash equivalents, including undrawn amounts under our senior unsecured loan facilities, marketable securities, and minimum cash requirements. We estimate risk cash cost per daily rate for the remainder of 2021 of approximately $21,800 per day for the VLCCs; $7,500 per day for the Suezmax tankers; and $15,400 per day for the LR2 tankers. And the fleet average estimate is about $18,000 per day. The highly attractive terms on the updated financing commitments on four of the acquired VLCCs, which I mentioned earlier, decreases the daily cash breakeven rates with approximately $1,400 per vessel per day compared to existing financing terms of similar vessels. In the quarter, we recorded opex expenses of $7,600 per day for VLCCs; $8,500 per day for Suezmax; and $9,000 per day for LR2. The graph on the right-hand side of this slide shows that if we assume $30,000 on top of the daily fleet average cash cost per daily rate of $18,000, Frontline will generate a cash flow per share after the service cost of $3.51 per year. So global oil consumption averaged 96.7 million barrels per day in Q2 '21. That's up 2.1 million barrels per day from Q1 '21. Production averaged 94.9 million barrels per day. Hence, the world continued to draw about 1.8 million barrels from inventories. And as a rule of thumb on tanker utilization, you need about 30 VLCC equivalents in order to transport 1 million barrel of oil per day. So this kind of draw represents a loss of 30 to 35 VLCC equivalents in demand. OPEC+ did increase supply by more than 1 million barrels per day during Q2 '21. U.S. and Brazil added another 900,000 barrels per day. The overall tanker order book for VLCCs, Suezmax, and LR2 has shrunk 10% year to date. The overall order book for tankers above 10,000 deadweight tons stands at 8% of the existing fleet. And this is, in fact, comparable to levels seen in Q1 1997. In absolute deadweight terms, we are at a 20 years low. Twenty years ago, the global oil consumption was around or at 76 million barrels per day. A normalized market now is closer to 100 million, if not above. So it means that the oil market is 30% larger now than in early 2000 and the order book is just about the same size. The VLCC order book is now at 81 units, give or take. At the same time, 124 VLCCs will be above or past 20 years in the same period. For Suezmax, we are at 41 units and 123 passing 20 years on the same metrics. As an example of this, EIA are currently estimating us to build 1 million barrels of oil per day for September. That gives you a delta of 1.5 million barrels, which then needs to be transported. That's equivalent to the demand for 45 to 48 VLCC equivalents. And mind you, 51 vessels are above 20 years as we speak. The average recycling price in Asia has risen 70% in the same period and is now close to $25.5 million for a VLCC. So far this year, we've seen three VLCC spot fixtures reported on a vessel that's either 20 years or older than that. And this is out of the 660 VLCC fixtures we recorded. OPEC+ plan to add about 400,000 -- no. 400,000 barrels per day each month until the end of the year. This means in total 2 million barrels per day of increased supply. And go back to the math for -- we then would need 60 to 65 VLCC equivalents by the end of the year.

And we report a net loss of $26.6 million or $0.13 per share and an adjusted net loss of $23.2 million or $0.12 per share.

0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

As 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. With 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. We are cooperating fully with the ongoing governmental investigations and will continue to vigorously defend against the lawsuit, which we do not believe has merit. Fluctuations in worldwide exchange rates negatively impacted our EBIT by about $7 million, with declines in most currencies offsetting the strengthening euro. During the period, demand for our products exceeded our productions, and inventory declined by about $80 million as we ramped up plants across the world. In 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. In the third quarter, we generated about $530 million of cash, bringing our cash balance to $1.2 billion at the end of the period. We 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. Sales 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. Our gross margin was 27.4% as reported or 28.3% excluding charges, increasing from 27.8% last year. Our 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. This was primarily impacted by favorable productivity of $21 million. Our restructuring charges were $32 million for the quarter, of which $6 million was cash. Our operating margin excluding charges was 11.5%, improving from 9.9% last year. Interest expense was $15 million, and we expect interest next quarter to be approximately $16 million. Our income tax rate was at 17% this year compared to 18% last year. We expect the fourth quarter to be approximately 5% and then returning to historical levels, ranging from 20% to 21% next year. Our earnings per share excluding charges was $3.26, up 18% from last year. In the Global Ceramic segment, sales were $911 million, down 1% as reported, with business up almost 2% on a constant basis. Our operating margin excluding charges was 10.3%, up 110 basis points compared to the 9.2% last year. In 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. Our operating margin excluding charges was 8.2% compared to 8.7% last year. In the Flooring Rest of World segment, sales were $681 million, up 13% as reported and increased by almost 10% on a constant basis. Our operating margin excluding charges was 19.3%. That's up 480 basis points from 14.5% last year. In the Corporate and Eliminations segment, the operating loss excluding charges was $10 million. We expect the total year to come in at a loss of about $40 million. Our receivables ended the quarter at $1.711 billion. Our days sales outstanding improved to 56 from 61 days last year. Our 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. Our inventory days were at 100 versus 127 days last year. Fixed 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. We estimate the annual capital expenditures to be about $420 million, with D&A estimated at $595 million. And 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. For the quarter, our Global Ceramic segment sales increased 2% on a constant days and currency basis. Our operating income grew 11% with a margin of 10% excluding restructuring costs compared to last year. During the quarter, our Flooring North America segment sales decreased approximately 2% as reported, with operating income margin exceeding 8% excluding restructuring charges. For the quarter, our Flooring Rest of World segment sales increased approximately 13% as reported. The segment's operating income grew 56% with a margin of 19% as reported. Assuming 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.

As 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. With 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. We are cooperating fully with the ongoing governmental investigations and will continue to vigorously defend against the lawsuit, which we do not believe has merit. Our earnings per share excluding charges was $3.26, up 18% from last year. And 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. Assuming 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.

1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 1

Under 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. Today, 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. Through 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. Through July, we successfully prepared over 65 million COVID-19 vaccines for shipment abroad. Through July, we've distributed over 45 million vaccines to administration sites in select markets across these geographies. Based 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. McKesson earned a top ranking score of 100 on the 2021 Disability Equality Index. Throughout 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. Starting 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. 10 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. Fast-forward to today, and we're now supporting over 14,000 specialty physicians through distribution and GPO services. We'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. Our 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. Our 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. The purchase price for the transaction was approximately US$1.5 billion. The assets involved in this transaction contributed approximately $12 billion in revenue and $75 million in adjusted operating profit in fiscal 2021. We 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. As a result of the held-for-sale accounting, we would guide to approximately $0.26 adjusted earnings accretion in fiscal 2022. In 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. These actions will result in the realization of annual operating expense savings of approximately $60 million to $80 million when fully implemented. In the June quarter, we reported approximately $95 million of charges associated with this initiative. First quarter adjusted earnings per diluted share was $5.56, an increase of 101% compared to the prior year. Consolidated 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. Adjusted gross profit was $3.1 billion for the quarter, up 19% compared to the prior year. Adjusted 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. Adjusted 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. Interest 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. Our adjusted tax rate was 11.3% for the quarter due to discrete tax items that were recorded during the quarter. Our full year adjusted effective tax rate guidance of 18% to 19% remains unchanged. And 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. Moving now to our first quarter segment results, which can be found on slides eight through 12, and I'll start with US Pharmaceutical. Revenues 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. Adjusted 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. Second, 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. In the June quarter, revenues were $881 million, an increase of 34%. And 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. Revenues were $2.5 billion in the quarter, up 40%, driven by improvements in primary care patient visits and increased sales of COVID-19 tests. The 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. For 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. Revenues in the quarter were $9.2 billion, an increase of 8% year-over-year. Excluding 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. First quarter adjusted operating profit increased 133% year-over-year to $170 million. On 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. For the quarter, adjusted corporate expenses were $154 million, a decrease of 7% year-over-year, driven by decreased opioid litigation expenses. We reported opioid-related litigation expenses of $35 million for the first quarter. We continue to estimate fiscal 2022 opioid-related litigation expenses to approximate $155 million. We ended the quarter with a cash balance of $2.4 billion. During the quarter, we had negative free cash flow of $1.8 billion. We 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. As 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. This 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. Additionally, we paid $69 million in dividends. We 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. For 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. Our 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. In 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. COVID-19 vaccine contribution contributed approximately $0.30 in the first quarter of fiscal 2022. We are updating our full year outlook to approximately $0.45 to $0.55. The $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. These investments will represent an approximate $0.20 headwind in fiscal 2022. Normalizing for the COVID-19 vaccine distribution and our ongoing growth investments, we continue to expect approximately 5% to 8% core adjusted operating profit growth. In our Prescription Technology Solutions segment, we see revenue growth of 20% to 25% and adjusted operating profit growth of 17% to 22%. We 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. Our revenue outlook assumes a 3% decline to 3% growth, and adjusted operating profit to deliver 6% to 12% growth over the prior year. We continue to expect year-over-year core adjusted operating profit growth of approximately 10% to 16%. Finally, in the International segment, our revenue guidance was a 1% decline to 4% growth as compared to the prior year. For 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. Our guidance assumes 4% to 7% revenue growth and 7% to 10% adjusted operating profit growth compared to fiscal 2021. And we continue to expect corporate expenses in the range of $670 million to $720 million. This successful tender offer resulted in the early retirement of $922 million of our outstanding debt. Additionally, we announced the early retirement of a 600 million note for a total reduction in debt of approximately $1.6 billion. And as a result of these actions, we're updating our interest expense guidance for fiscal 2022 to $180 million to $200 million. We'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. The remaining put rate options resulted in payments of approximately $1 billion in the quarter, which was generally in line with our expectations. As 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. Our 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. And our fiscal 2022 guidance continues to include share repurchases of approximately $2 billion for the full year.

First quarter adjusted earnings per diluted share was $5.56, an increase of 101% compared to the prior year. Consolidated 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. Our 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.

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0

Our underlying Q4 earnings per share was $1.04, our ROTCE was 12.9%. Both are up from a year ago quarter, and we delivered 2% operating leverage year-on-year. Note that the full-year operating leverage was 4% and our PPNR growth was 12%. Q4 credit provision was $124 million versus $110 million a year ago on a pre-CECL basis as the normalization of provision to more front book origination levels helped drive our strong returns. On the capital front, we maintained a strong ACL ratio of 2.24%, ex-PPP loans and our CET1 ratio was 10%. We announced a $750 million share purchase authorization today and we will commence activity during the quarter. With respect to our guidance for 2021, we assume a steadily improving economy and GDP growth of around 5%. We see NCOs at 50 basis points to 65 basis points for 2021 which is relative to 56 basis points in 2020. For the full year, we delivered record underlying PPNR, up 12% against the challenging backdrop, driven by record fee income, up 24% with record results across mortgage, capital markets and wealth. We achieved the ambitious TOP6 goal to deliver approximately $225 million of run rate expense savings, including approximately $140 million of in year benefits which supported our ongoing investments in strategic initiatives and financial performance targets. To this end, we improved our efficiency ratio over 200 basis points to 56% by delivering 4% positive operating leverage for the year. We expect further expense benefit of approximately $205 million to $225 million in 2021, which puts the program on track to deliver our total pre-tax run-rate benefit of $400 million to $425 million by the end of 2021. Strong loan growth of around 6% reflects increased demand in education and point-of-sale financing as well as PPP loans. Average deposits grew even faster at 13%, a result of government stimulus impact on consumers and commercial clients building liquidity. ROTCE for the full year was 7.5%, which includes a negative 5.4% impact associated with our reserve build under CECL. Our ACL at year-end 2020 more than doubled compared with last year, but our year-end CET1 ratio of 10% was unchanged on the year. Strong PPNR funded the ACL bill 6% loan growth and stable dividends. And finally, our tangible book value per share was $32.72 at quarter end, up 2% compared with a year ago. We reported underlying net income of $480 million, earnings per share of $1.04 and revenue of $1.7 billion. Our underlying ROTCE was 12.9%, up around 400 basis points as a result of our strong revenue performance, expense discipline and improvements in credit as the economy recovers. Net interest income on Slide 6 was down only 1% linked quarter due to lower commercial loan balances and lower NIM. However, despite the challenging rate backdrop, our margin held up well with the 8 basis point decline in linked quarter, driven by 9 basis point impact from elevated cash balances and strong deposit flows. Lower asset yields were offset by our improved funding mix as we grew low-cost deposits with DDA up 4% and we continue to lower interest bearing deposit costs down 8 basis points to 27 basis points. On Slide 7 and 8, we delivered solid fee results again this quarter reflecting our ongoing efforts to invest in and diversify our revenue streams. Mortgage fees were down approximately 30% this quarter due to declines in margins and volumes from exceptional levels last quarter. Capital market fees hit record levels, up 52% linked quarter and 33% year-on-year, driven by strong results from M&A advisory and accelerating activity in loan syndications. Foreign exchange and interest rate products revenue is also strong, up 30% linked-quarter with higher customer activity levels tied to increased variable rate loan originations. We delivered positive operating leverage of 2% year-over-year and improved our efficiency ratio to 56.8% as expenses were well controlled. Average core loans on Slide 10 were down 1% linked quarter reflecting commercial payoffs and decline in loan yields -- line utilization to about 32% versus a historical average of roughly 37%. Looking at year-over-year trends core loans were up approximately 4% due to PPP education and mortgage. Average deposits were up 3% linked quarter and 16% year-over-year as consumers and small businesses benefited from government stimulus and clients built liquidity. We are very pleased with our progress on deposit costs, which declined 24% or 6 basis points to 19 basis points during the quarter. Interest-bearing deposit costs were down 8 basis points to 27 basis points. We continue to drive a shift toward lower-cost categories with average DDA growth of 4% on a linked quarter basis and 42% year-over-year. Net charge-offs were down 9 basis points to 61 basis points linked quarter. Nonaccrual loans decreased 20% linked quarter with a $302 million decrease in commercial driven by charge offs, returns to accrual and repayment activity. In addition, our commercial criticized loans decreased 18% from $5.7 billion in 3Q to $4.6 billion in 4Q. Given the performance of the portfolio and improvement in the macroeconomic outlook, our reserves came down slightly, but remain robust ending the quarter at 2.24% excluding PPP loans compared with 2.29% at the end of the third quarter. But I'll note that our reserve coverage for commercial excluding PPP was 2.5% at the end of the year, slightly up from the third quarter. And within that our coverage for identified sectors of concern increased to a prudent 8.2% at the end of the year from 7.7% at the end of the third quarter. Increasing our CET1 ratio from 9.8% in 3Q to 10% at the end of the year, which is at the top of our target operating range. Given positive credit trends in capital strength, our Board of Directors has authorized the company to repurchase up to $750 million of common stock beginning in first quarter of 2021. We've seen our Active Mobile Households increased 15% year-over-year and the majority of our deposit transactions, continue to be executed outside of the branch. Loans should be up mid to high single-digits on a spot basis with acceleration in the back half of the year with average loans, up approximately 2%. Overall, interest earning assets should be up about 1.5% to 2%. Non-interest expense is expected to be up just 1.5% to 2% given benefits from our TOP program, partly offset by higher volume related expenses in mortgage and reinvestment in strategic initiatives. We expect net charge-offs will be in the range of 50 basis points to 65 basis points of average loans with a meaningful reserve release to provision. Non-interest expense is expected to be up 2% to 3%, reflecting seasonality and compensation. We expect net charge-offs to be in the range of 50 basis points to 60 basis points of average loans.

Q4 credit provision was $124 million versus $110 million a year ago on a pre-CECL basis as the normalization of provision to more front book origination levels helped drive our strong returns. We announced a $750 million share purchase authorization today and we will commence activity during the quarter. Average core loans on Slide 10 were down 1% linked quarter reflecting commercial payoffs and decline in loan yields -- line utilization to about 32% versus a historical average of roughly 37%. Given positive credit trends in capital strength, our Board of Directors has authorized the company to repurchase up to $750 million of common stock beginning in first quarter of 2021.

0 0 0 1 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0

We shared five growth levers that will deliver at least 400 basis points of outgrowth above IP by our fiscal 2023. We also shared a structural cost initiative that we yield at least 200 basis points in operating expense to sales ratio improvements by fiscal 2023 powering ROIC back into the high teens during that time. Overall sales were down 6.3%, and gross margin was down 30 basis points versus the prior-year period. Our operating margin on a GAAP basis was 7% and was significantly influenced by a nonrecurring asset impairment charge which I'll describe in greater detail shortly. As you can see on Slide 5, excluding this impairment charge and adjustments related to severance and cost associated with mission critical, our adjusted operating margin was 11%, down 30 basis points from the prior year despite lower sales and supported by mission critical. All of this resulted in earnings per share of $0.69 for the quarter, or $1.10 on an adjusted basis. Tales of safety and janitorial products anchored by our PPE program continued growing at over 20% for the quarter. The improving trends extended into December with total company sales growth estimated at 2.4%. Cutting tools represent roughly 30% to 40% of the $12 billion to $15 billion metalworking market. And while we're benefiting from a PPE tailwind, we are nonetheless pleased with our progress in the fiscal first quarter as the business grew over 35%. In our fiscal first quarter, we increased our sales headcount by 50, including roles such as business development or hunting, metalworking specialists, and government. Our first-quarter sales were $772 million, or $12.5 million on an average daily sales basis. Both a decline of 6.3% versus the same quarter last year. Moving to gross margins, our first-quarter gross margin was 41.9%, a decline of 30 basis points compared to the first quarter of last year. Sequentially, gross margin improved 30 basis points, compared to the fourth quarter 2020. Total operating expenses in the first quarter were $243 million, or 31.4% of sales, versus $257 million, or 31.2% of sales in the prior year. This includes about $4 million of costs related to severance and the review of our operating model both related to mission critical. Excluding these costs, operating expenses as a percent of sales were 30.9% in the prior year, excluding $2.6 million of costs related to severance. Operating expenses were also 30.9% of sales. Including the asset impairment charge that Erik mentioned earlier, all of this resulted in GAAP operating margin of 7%, compared to 11% in the same period last year. Excluding the impairment charge, severance, and other related costs, our adjusted margin was 11%, versus an adjusted 11.3% in the prior year. GAAP earnings per share were $0.69 adjusted for the impairment charge as well as severance and other related costs. Adjusted earnings per share were $1.10. We achieve a free cash flow of $95 million in the first quarter, as compared to $72 million in the prior year. As of the end of fiscal Q1, we were carrying $521 million of inventory down $22 million from last quarter. Roughly $60 million of that is related to PPE products and over half of that is specific to disposable masks. During the quarter, we continued to manage our liquidity very closely and we paid down $130 million of our revolving credit facility in Q1. Our total debt as of the end of the first quarter was $490 million, comprised primarily of $120 million balance on our revolving credit facility; $20 million of short-term, fixed-rate borrowings; and $345 million of long-term, fixed-rate borrowings. Cash and cash equivalents were $53 million resulting in net debt of $437 million at the end of the quarter. Since then in December, we paid a special dividend of approximately $195 million which we funded primarily from our revolver. On Slide 8, you can see our original program goals of $90 million to $100 million of cost takeout through fiscal 2023 and as versus fiscal 2019. On our last call, we shared that we had taken out $20 million of cost in fiscal 2020 and that our goal for fiscal '21 was to take out another $25 million to achieve cumulative savings of $45 million by the end of fiscal '21. I'm pleased to report that we achieved an additional $8 million of savings in the first quarter, bringing our cumulative savings to $28 million against our goal of $45 million by the end of this year. This is growth savings and does not reflect investments of roughly $2 million to $3 million in the first quarter, and $15 million expected in fiscal '21. This 170,000-square-foot facility on 17 acres served as one of our co-headquarters. We will be relocating late this spring to a smaller 26,000-square-foot space nearby, which will accommodate our new hybrid working model. Once the sale of our current location is complete, we will save roughly $3 million annually in operating expenses. Our company's sights are firmly set on two goals referenced on Slide 12 to be achieved by the end of our fiscal '23: first, growing at least 400 basis points above IP, and second, returning ROIC back into the high teens. We have five growth initiatives powering our market share aspirations and we are executing significant structural cost reductions that we expect to improve operating expenses as a percentage of sales by at least 200 basis points.

All of this resulted in earnings per share of $0.69 for the quarter, or $1.10 on an adjusted basis. GAAP earnings per share were $0.69 adjusted for the impairment charge as well as severance and other related costs. Adjusted earnings per share were $1.10.

0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Today, we reported a 15% increase in operating revenue for the first quarter with strong momentum in both Financial Advisory and Asset Management. In Financial Advisory, first quarter revenue of $317 million increased 8% from last year's period, reflecting broad-based activity across the business. Our volume of publicly announced M&A transactions is up significantly from last year's first quarter, with particularly strong activity in the $1 billion to $10 billion range, as well as in Europe. In Asset Management, first quarter operating revenue of $328 million increased 22% from last year's period. As of March 31, we reported AUM at a record -- at a quarter end record level of $265 billion, 37% higher than last year's period and 2% higher on a sequential basis. Average AUM for the first quarter also reached a record high of $261 billion, 18% higher than a year ago, and 6% higher on a sequential basis. As of April 23, AUM increased to approximately $274 billion, driven primarily by market appreciation of $6.7 billion, positive foreign exchange movement of $2.7 billion and net outflows of $0.2 billion. During the first quarter, $1.7 billion in net outflows were driven primarily by the emerging markets and equity platform. At the corporate level, in February, we launched Lazard Growth Acquisition Corp I, a SPAC that raised $575 million. In the first quarter, we accrued compensation expense at a 59.5% adjusted compensation ratio compared to 60% in the first quarter of last year. Non-compensation expenses were 9% lower than the same period last year, reflecting continued lower travel and business development costs. Our adjusted non-compensation ratio for the first quarter was 15.8% compared to 20% in the first quarter of last year. Our effective tax rate in the first quarter, as adjusted, was 28.6%, in line with last year's first quarter. We expect this year's annual effective tax rate to be in the mid-20% range. In the first quarter, we returned $237 million, including $49 million in dividends, and $123 million in share repurchases. During the first quarter, we bought back 2.9 million shares of our common stock at an average price of $42.30 per share. Yesterday, we declared a quarterly dividend on our common stock of $0.47 per share. Yesterday, our Board of Directors authorized a $300 million increase in our share repurchase authorization. Our total outstanding share repurchase and authorization is now $439 million. We entered the second quarter with a record level of assets under management and market conditions that are increasingly favorable for global active management.

Today, we reported a 15% increase in operating revenue for the first quarter with strong momentum in both Financial Advisory and Asset Management. In Financial Advisory, first quarter revenue of $317 million increased 8% from last year's period, reflecting broad-based activity across the business. As of March 31, we reported AUM at a record -- at a quarter end record level of $265 billion, 37% higher than last year's period and 2% higher on a sequential basis. We entered the second quarter with a record level of assets under management and market conditions that are increasingly favorable for global active management.

1 1 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1

Today, we have had direct dialogue with all borrowers with over $3 million in exposure or 86% of our portfolio, and substantial dialogue below this level. We have dedicated over a quarter of our workforce to avail our clients of this important program and have successfully approved over 2,600 applications totaling $1.5 billion today. We anticipate funding approximately $150 million per day. Our approach to loan modifications and deferment request is to look for resourceful ways to partner with our clients along with assessing their willingness and capacity to support their business interests. This negotiation process has likely slowed our modification pipeline as approximately $400 million has been processed today. Despite a uniquely challenging operating and rate environment, I am proud to report that in the first quarter, Western Alliance generated $163.4 million of operating pre-provision net revenue, up 10% year-over-year and 3% quarter-to-quarter. We continued with the adoption of CECL accounting changes this quarter, which resulted in a provision for credit losses of $51.2 million for the quarter, 47% of which was driven by our robust balance sheet growth. Dale will go into more detail in a bit on how the unique features of CECL drove our provisions, but our ACL to funded loan ratio now stands at 1.14%. WAL generated net income of $84 million or $0.83 per share and tangible book value per share was $26.73. This quarter, we produced a NIM of a 4.22% and had net recoveries of $3.2 million and continue to improve our operating leverage. Deposits grew $2 billion to $24.8 billion as we gained market share in several of our key business lines as well as traction in one of our recently launched deposit initiatives, which added over $400 million. Continuing on our strong momentum from 2019, total loans increased $2 billion to $23.1 billion. Approximately $1.5 billion of this was through organic loan growth from new client projects and another $500 million was credit line drawdowns, of which approximately half was redeposited into the bank. At quarter end, asset quality was stable with a decline in totally adverse graded loans and OREO to assets of 1.2% from 1.27% in Q4. We stopped making loans to the quick service restaurants sector several years ago with current exposure of only $150 million. Our construction and land and development portfolio is now under 9% of our loan book. In our institutional lot banking business, which makes up 30% of the CLD portfolio, we have not received any deferral request at this time. Single family residential construction, which composes another 27%, were still experiencing positive absorption trends through March. During the quarter, we repurchased 1.8 million shares at an average price of $35.30. Additionally, consistent with our 10b5 plan, we repurchased 270,000 shares thus far in Q2. We remain well capitalized and highly liquid with the CET1 ratio of 9.7% and ample liquidity -- total liquidity resources of over $10 billion. For the first quarter, Western Alliance generated net income of $84 million or $0.83 earnings per share. Net income was reduced by a $51.2 million provision for credit losses driven by the adoption of CECL, balance sheet growth as well as the change in the economic outlook due to pandemic. Strong ongoing balance sheet momentum, coupled with diligent expense management, drove operating pre-provision net revenue to $163.4 million, up 10% from a year ago, which we believe is the most relevant metric to evaluate the ongoing earnings power of the company. Net interest income and fee income remain relatively stable producing net operating revenue of $285.3 million, primarily a result of lower yields on loans, which was partially offset by lower rates on deposits and borrowings. Non-interest income declined $10.9 million to $5.1 million from the prior quarter due to mark-to-market of preferred stock holdings of primarily large money center banks of $11.3 million, partially offset by $3.8 million equity investment gain. To-date, of the $11.3 million mark, $3.5 million has been recovered. Finally, non-interest expense declined $9.3 million as compensation and other operating expenses declined by $7 million. Regarding implementing CECL in our allowance for credit losses, in our 10-K, we disclosed the adoption impact of $37 million, $19 million of which was attributable to funded loans, $15 million for unfunded commitments and $2.6 million for held-to-maturity securities. This resulted in a combined January 1st allowance of $214 million. During Q1, loan growth drove an additional $24 million of required reserves and another $30 million was driven by changes in the economic outlook as a result of the pandemic. In total, reserve availed during the first quarter was $91 million, an increase of 50% from the year-end reserve. The quarter end ACL of $268 million was 1.14% of funded loans, up 30 basis points. Provision expense for the quarter was $51.2 million, which is over 10 times the average quarterly provision during 2019. Net interest income for the quarter declined a modest $3 million from the prior quarter to $269 million as there was one less day during the quarter compared to Q4 and margin compression was offset by loan to deposit growth. Investment yield showed a modest improvement of 2 basis points from the prior quarter to 2.98%. However, on a linked quarter basis, loan yields increased 31 basis points due to the lower rate environment. The average yield of our portfolio at quarter end or the spot rate was 5.02%. Interest bearing deposit cost increased 18 basis points in Q1 to 90 basis points as a result of immediate steps taken to reduce our deposit costs after the FOMC cut rates twice in March. The spot rate of total deposits at quarter end was 29 basis points. Total funding costs decreased 11 when all of the company's funding sources are considered, including non-interest bearing and borrowings. Through the transition to a substantially lower rate environment during the quarter, net interest income was $269 million, a decline of 1.1% from Q4. Net interest margin declined 17 basis points to 4.22% during the quarter as their earning asset yield fell 28 basis points, partially offset by 19 basis points funding cost decrease. Presently, 82% or $8.1 billion of variable rate loans with floors are at the floors. With the addition of our mix shift primarily to fixed rate residential loans, $16.2 million or 70% of loans are now behaving as a fixed rate portfolio. This has reduced our interest rate risk on a 100 basis point parallel shock lower scenario to 3% at March 31st from 6.5% one year ago and assumes that rates are held flat at zero across the term structure. On a linked quarter basis, our efficiency ratio decreased 200 basis points to 41.8%. Our core underlying earnings power remains strong as pre-provision net revenue ROA was 2.38%, flat from the prior quarter, while return on assets was down 70 basis points to 1.22% directly related to our provision expense in excessive charge-offs of $54.4 million. During the quarter, loans increased $2 billion to $23.2 billion and deposits also grew $2 billion to $24.8 billion. Loan to deposit ratio increased to 93.2% from 92.7% in the fourth quarter. Shareholders equity declined by $17 million as dividends and share repurchases were matched by net income. Tangible book value per share increased $0.19 over the prior quarter to $26.73 per share as our share count declined. Q1 is a seasonally strong deposit quarter, and coupled with the roll out of our deposit initiatives, deposits grew $2 billion. The increase was driven by growth of $1.3 billion in non-interest bearing DDA primarily from market share gains in our mortgage warehouse operations. Additionally, HOA continues to perform well and contributed $330 million of low cost deposits. During the quarter, the relative proportion of non-interest bearing DDA grew to nearly 40% of deposits from 37.5% on a linked quarter basis. In line with the industry, the vast majority of growth was driven by increases in C&I loans totaling $1.8 billion, followed by $107 million in construction and land development, and $92 million in residential. Residential homes now comprise 9.7% of our portfolio, while construction loans decreased as a relative proportion of the portfolio to 8.9% from 9.2% in the fourth. At the segment level, Tech & Innovation loans grew $626 million, with $124 million from capital call and subscription lines and $176 million from existing technology loan draws, in turn bolstering technology-related deposits by $383 million. Corporate finance loans grew $408 million, which was primarily due to line draws, two-thirds of which were from investment grade borrowers bringing utilization rates to 38% from 13% during the prior quarter. Mortgage warehouse also contributed to loan growth of $550 million, approximately 50% of which was due to line draws. Across the bank, one quarter or about $500 million of our net new loan growth was driven by drawdowns on existing loan commitments from the beginning of the quarter. In all, total loan growth of $2.2 million for the quarter was fully funded by deposit growth for the same amount. Overall, asset quality was stable during the quarter with total adversely graded assets increasing $10 million during the quarter to $351 million, while non-performing assets comprised of loans on non-accrual and repossessed real estate increased $27 million to $97 million or 0.33% of total assets, and is now held-for-sale. This quarter, we also -- we saw the cumulative impact of our efforts of managing certain special mention and substandard loans as several resolved in our favor with no losses, a $100 million of adversely graded loans resolved during the past quarter, 37 loans or $50 million paid-off in full, while the other $50 million were upgraded to pass. We only incurred $100,000 of gross credit losses during the quarter, which was more than offset by $3.3 million in recoveries, resulting in net recoveries of $3.2 million. In all, the ACL-to-funded loans increased 30 basis points to 1.14% in Q1 as a result of CECL adoption and the result in provision expense related to Q1 loan growth and changes in the economic outlook. We continue to generate capital and maintain strong regulatory capital ratios with tangible common equity, the total assets of 9.4% and a CET1 ratio of 9.7%. In Q1, a reduction of TCE-to-total assets was mainly driven by $2.3 billion increase in tangible assets due to our significant loan growth, while the tangible common equity was affected by $15.4 million of provisions in excess of charge-offs due to CECL adoption. In spite of reduced quarterly earnings and the payment of quarterly cash dividends of $0.25 per share, our tangible book value per share rose $0.19 in the quarter to $26.73 and is up 15.2% in the past year. Overall, we have access to over $10 billion in liquidity, primarily through our $4.7 billion investment portfolio, of which $2.7 billion are investment grade readily marketable and not pledged on any borrowing base. Additionally, we have $7 billion in unused borrowing capacity with the Fed, Federal Home Loan Bank and Correspondent. Going into the pandemic, 75% of the portfolio had an LTV under 65% and more than 73% had a debt service coverage ratio of 1.3 times. Fully 66% of the portfolio is with large sponsors who operate more than 25 hotels and 90% operate 10 or more properties with top franchises or flags. Now, regarding our Tech & Innovation business, we primarily financed established growth technology firms with a strong risk profile, mainly companies classified as Stage 2 with an established business model, validated product, multiple rounds of investment, and a path to profitability. 99% of the borrowers have revenues greater than $5 million and have strong institutional backing with 86% backed by one or more DC or PE firms. During the quarter the portfolio grew $495 million to $2 billion or 8.8% of the total portfolio, which was attributed to $175 million of existing line drawdowns in the technology division and an additional $124 million from capital call lines, a product that historically has had zero losses. Tech & Innovation commitments grew $284 million in Q1 and utilization rates increased to 60% from 49% in Q4 2019. The portfolio is fairly granular with average loan size of $6 million and these borrowers are generally liquid with more than 2:1 deposit coverage ratio. Additionally, since 2007, warrant income has covered cumulative net charge-offs 2 times over. Currently 14% of technology loans or $164 million has less than six months remaining liquidity, which is in line with historical trends.

Our approach to loan modifications and deferment request is to look for resourceful ways to partner with our clients along with assessing their willingness and capacity to support their business interests. We continued with the adoption of CECL accounting changes this quarter, which resulted in a provision for credit losses of $51.2 million for the quarter, 47% of which was driven by our robust balance sheet growth. WAL generated net income of $84 million or $0.83 per share and tangible book value per share was $26.73. For the first quarter, Western Alliance generated net income of $84 million or $0.83 earnings per share. Net income was reduced by a $51.2 million provision for credit losses driven by the adoption of CECL, balance sheet growth as well as the change in the economic outlook due to pandemic. Provision expense for the quarter was $51.2 million, which is over 10 times the average quarterly provision during 2019. This has reduced our interest rate risk on a 100 basis point parallel shock lower scenario to 3% at March 31st from 6.5% one year ago and assumes that rates are held flat at zero across the term structure.

0 0 0 1 0 0 1 0 1 0 0 0 0 0 0 0 0 0 0 0 0 1 1 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Our organic growth for the fourth quarter was 9.5%, and was broad-based across geographies and disciplines. The full year finished at 10.2% organic growth. Our operating profit margin for the fourth quarter was 16.1%, resulting in full year margin of 15.4%. Earnings per share for the quarter was $1.95, up 6% versus 2020. For the full year, earnings per share increased 49%. Looking forward, we're forecasting organic revenue growth of between 5% to 6% for the full year 2022, and we anticipate delivering the same strong margin that we delivered in 2021. The Precision Marketing discipline grew by 19% in 2021. Combined with the resumption of our share buyback program, we had 6% growth in diluted earnings per share. Dividends grew 7.7% in 2021, and we're pleased to resume this growth after maintaining our dividend payments throughout the pandemic. Our total revenue growth in the quarter was 2.6%, while our organic growth for the quarter was 9.5% or $358 million. The impact of foreign exchange rates decreased our revenue slightly in the quarter by just 30 basis points. However, if rates stay where they were at January 31, we estimate that the impact of foreign exchange rates will reduce our revenue by approximately 2% in both the first and second quarters of 2022. The impact on revenue from our net acquisitions and dispositions decreased revenue by 6.6%. Based on transactions completed to date, we estimate the impact of acquisitions net of dispositions will reduce our revenue by approximately 9% in the first quarter and by approximately 5% in the second quarter of 2022, and we expect positive acquisition growth in the second half of 2022. Advertising, our largest category, posted 7.4% organic growth in the quarter. Precision Marketing grew 19.6% organically in the quarter and is now 8% of our total revenues. Commerce and Brand Consulting was up 12.4%, with widespread strength across our larger agencies. Experiential's growth in excess of 50% benefited from a return of some in-person events throughout the fourth quarter before the Omicron variant took hold, and we expect continued growth in 2022, although likely choppy, as brands look to engage with consumers in person. Execution and support was up 5.2%, with growth in the U.S. businesses exceeding the performance of our businesses in Europe, where our field marketing business was impacted by the new variant. PR was up 4.4% and healthcare was up 4.5%. In the U.S., our 7.8% organic growth was slightly higher than last quarter, led by advertising and media, as well as precision marketing, where growth remains over 20%. It's worth mentioning the strong organic growth of 48% for the Middle East and Africa, our smallest region. Revenue in Q4 of 2020 was down over 35%. Relative to full year 2020, there was a two-point increase in our revenue mix from technology clients, offset by a 1 point reduction in the revenue mix from pharma and health. Salary-related service costs, our largest category, increased by 11.1%. The next line item, third-party service costs, were down 11.2%. They decreased by approximately $220 million from dispositions and were offset by an increase of approximately $100 million from growth in our businesses. Occupancy and other costs, which are less directly linked to changes in revenue, were up 4.2% year on year due to higher general office expenses as we return to the office, offset by lower rent and other occupancy costs as we continue to use our spaces more efficiently. SG&A expenses were up 8.4% on a year-over-year basis due to an increase in marketing, professional fees and new business costs. In total, our operating expense levels were up slightly, less than 3% from the fourth quarter 2020 to 2021. For the quarter, operating profit increased 1.3% and represented a 16.1% operating margin. For the full year, operating profit was up 37.5% with a margin of 15.4%, and EBITDA was up 35.4% with a margin of 15.9%. As John mentioned earlier, for the full year 2022, we anticipate delivering the same strong reported operating profit margin of 15.4% that we delivered in 2021. Free cash flow of $1.8 billion, grew 5.4%. Regarding our uses of cash, we used $592 million of cash to pay dividends to common shareholders and another $113 million for dividends to noncontrolling interest shareholders. We maintained our dividend throughout the pandemic in 2020 and increased it by 7.7% in 2021 to a quarterly rate of $0.70 per share. Additionally, in the fourth quarter of 2021, we had a very unique opportunity to purchase our primary office building in London for approximately $575 million. Subsequent to the purchase during the fourth quarter of 2021, we issued GBP 325 million sterling notes due in 2033, with an attractive 2.25% coupon. To give you some background, we have more than 5,000 people at work there for multiple agencies. We've been consolidating space in London for some time and have exited 31 buildings since 2015. Acquisitions picked up relative to 2020 at $202 million. Jump 450 Media, a performance media agency that is now part of Omnicom Media Group; and BrightGen, a digital business transformation specialist that is a significant implementation partner for the Salesforce marketing stack. And lastly, we ramped up our stock repurchases during the fourth quarter, bringing the year to $518 million. As you know, our pre-pandemic annual range was $500 million to $600 million. At year-end, our total leverage was 2.4 times. In addition to the $5.3 billion of cash on the balance sheet at year-end, we also have a USD 2 billion commercial paper program backstopped by our $2.5 billion revolving credit facility. We chose our strong return on invested capital of 33.4% for the fiscal year 2021 and 44.3% return on equity.

Earnings per share for the quarter was $1.95, up 6% versus 2020. Our total revenue growth in the quarter was 2.6%, while our organic growth for the quarter was 9.5% or $358 million.

0 0 0 1 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

In total, our companies and foundations donated more than $20 million dollars to non-profits across our service area, including more than $2 million to direct Covid19 relief efforts. We spent a record $303 million with diversifiers during the year, and through our Board refreshment, 46% of our Board members now are women and minorities. In fact, I'm pleased to report that based on preliminary data for 2020, reduced carbon dioxide emissions by 50% or (technical difficulties) 2005 levels. And we have, as you know, a well-defined plan to achieve a 55% reduction by the end of 2025. Over the longer term, expect to reduce carbon emissions by 70% by 2030, and as we look out to the year 2050, the target for our generation fleet is net-zero carbon. It calls for investment in efficiency, sustainability, and growth, and it drives average annual growth in our asset base of 7% with no need for additional equity. Highlights of the plan include 1,800 megawatts of wind, solar, and battery storage that would be added to our regulated asset base in Wisconsin. And we have allocated an additional $1.8 billion to our infrastructure segment, where we see a robust pipeline of high-quality renewable projects, projects that have long-term contracts with strong creditworthy customers. The latest available data show Wisconsin's unemployment rate of 5.5%. For example, Green Bay Packaging is building a major expansion of its mill in northeastern Wisconsin, the $500 million addition, and is expected to be completed later this year. At the end of 2020, our utilities were serving approximately 11,000 more electric and 27,000 more natural gas customers compared to a year ago. Retail electric and natural gas sales volumes are shown beginning on Page 17 of the earnings packet. Overall retail deliveries of electricity, excluding the iron ore mine, were down 2.1% compared to 2019, and on a weather normal basis, deliveries were down 2.9%. Natural gas deliveries in Wisconsin decreased 7.9% versus 2019. And by 2.4% on a weather normal basis. Meanwhile, large commercial industrial sales excluding the iron ore mine were down 7.1% for the full year compared to 2019, on a weather normal basis. However, these sales were only down 4.6% for the fourth quarter. We are using 2019 as a base for 2021 retail projections. We are forecasting a decrease of 1.5% in weather normal retail electric deliveries, excluding the iron ore mine compared to 2019. This would represent a 1.4% increase compared to 2020. For our natural gas business, we project weather normalized retail gas deliveries to decrease by 2.4% compared to 2019, this leaves the projected sales outlook compared to 2020, relatively flat. We lowered operations and maintenance cost by more than 3% in 2020 and we continue to adopt new technology and apply best practices. We plan to reduce our operations and maintenance expense by an additional 2% to 3% in 2021. We accept -- expect [Phonetic] this segment to contribute an incremental $0.08 to earnings in 2021. As we've mentioned, the very large project, in fact, just days after achieving commercial operation this past November, our share of this project accounted for more than 20% of the solar output in the entire MISO generation market. If approved, we expect to be in construction in the fall of this year and to invest approximately $370 million in total to bring the facilities in operation in 2023. And as Gale just mentioned, our ESG progress plan includes 1,800MW of wind, solar, and battery storage. As you may recall, we were in the midst of a rate review for one of our smaller subsidiaries, North Shore Gas, which serves approximately 160,000 customers in the northern suburbs of Chicago. We're confident that we can deliver our 2021 earnings guidance in the range of $3.99 a share to $4.03 a share. This represents earnings growth of between 7% and 8% of our 2020 base of $3.73 a share. And you may have seen the announcement that our Board of Directors at its January meeting raised our quarterly cash dividend to $0.6775 a share for the first quarter of 2021. That's an increase, folks, of 7.1%. The new quarterly dividend is equivalent to an annual rate of $2.71 a share and this marks the 18th consecutive year that our company will reward shareholders with higher dividends. We continue to target a payout ratio of 65% to 70% of earnings, right smack dab in the middle of that range now, so I expect our dividend growth will continue to be in line with the growth in our earnings per share. Our 2020 earnings of $3.79 per share increased $0.21 per share compared to 2019. Starting with our utility operations, grew [Phonetic] our earnings by $0.22 compared to 2019. This includes $0.08 from lower day-to-day O&M expenses and $0.09 from lower sharing amounts in 2020 at our Wisconsin utilities. Second, despite the impact of Covid19 and reduced wholesale and other margins, rate adjustments at our Wisconsin utilities continue -- continued capital investment, and fuel drove a net 21% increase in earnings. Third, we had $0.12 of higher depreciation and amortization expense and an estimated $0.05 decrease in margins related to mild winter weather year-over-year. Overall, we added $0.22 year-over-year from utility operations. Earnings from our investment in American Transmission Company increased $0.08 per share compared to 2019. Recall that $0.07 of the $0.08 were driven -- were due to ROE changes from FERC orders issued in November, 2019, and May, 2020. $0.04 resulted from the November 2019, order and $0.03 from the May 2020, order. Earnings at our energy infrastructure segment improved $0.05 in 2020 compared to 2019, primarily from production tax credits related to wind farm acquisitions. Additional 10% ownership of the Upstream Wind Energy Center and the Blooming Grove Wind Farm came online in early December. Finally, you'll observe that we recorded a $0.09 charge in Corporate and Other to account for the make-whole premiums we incurred in the fourth quarter as we refinanced certain holding company debt to take advantage of lower interest rates. The remaining $0.05 decrease is related to some tax and other items, partially offset by lower interest expense. In summary, WEC improved on our 2019 performance by $0.21 per share. Our effective income tax rate was 15.9% for 2020, excluding the benefit of unprotected taxes flowing to customers, our rate was 20.2%. Looking to 2021, we expect our effective income tax rate to be between 13% and 14%. Excluding the benefit of unprotected taxes flowing to customers, we project our 2021 effective tax rate to be between 19% and 20%. Looking now at the cash flow statement on page 6 of the earnings packet. Net cash provided by operating activities decreased $149.5 million. Total capital expenditures and asset acquisitions were $2.9 billion in 2020, a $345 million increase from 2019. In terms of financing activities, in the fourth quarter of 2020, we opportunistically refinanced over $1 billion of holding company debt, reducing the average interest rate of these notes from 3.3% to 1.5%. As expected, our FFO to debt ratio was 15.4% in 2020. Adjusting for the impacts of voluntary pension contributions and customer arrears related to Covid19, our FFO to debt was 16.9% in 2020. At the end of 2020, our ratio of holding company debt to total debt was 28%, below our 30% target. Last year we earned a $1.43 per share in the first quarter. We project first quarter 2021 earnings to be in the range of $1.45 per share to $1.47 per share. For full year 2021, we are reaffirming our annual guidance of $3.99 to $4.03 per share.

We are using 2019 as a base for 2021 retail projections.

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Most notably, the continued improvement in our end markets and the value creation potential of our environmental services businesses that represent about 80% of our revenue. Third, increasing the enterprise value of our rail business through further operational improvements and backlog growth; and fourth, reducing our financial leverage to a level much closer to our target of about 2.5 times. We anticipate incremental benefits of about $20 million this year, also or about double those realized in 2020. We still expect total benefits of $40 million to $50 million by the end of 2022 on a run rate basis. Although external integration costs are behind us, we will incur about $10 million of cost this year for branding and IT initiatives that will not repeat in 2022. In Harsco Environmental, it's terrific to have following seas after 18 months of medicine head seas. Nonetheless, the growth and cash flow trends in the business are favorable, and we are targeting free cash flow generation of 8% to 9% of revenue in 2022 on a path to 10-plus percent in future years. Harsco's revenues totaled $508 million and adjusted EBITDA totaled $62 million in the fourth quarter. Our revenues increased 27% over the prior year quarter, with ESOL contributing most of the growth followed by revenue increases within both our Environmental and Rail segments. Our fourth quarter adjusted EBITDA of $62 million was near the high end of our previously disclosed guidance range. Harsco's adjusted earnings per share from continuing operations for the fourth quarter was $0.12, this adjusted figure excluded costs for the ESOL integration and the severance costs related to additional restructuring actions in environmental. Lastly, our free cash outflow was $8 million in the fourth quarter. Revenues totaled $246 million and adjusted EBITDA was $52 million, representing a margin of 21%. This EBITDA figure of $52 million compared to $51 million in the prior year quarter and $40 million in the third quarter of 2020. The LST or steel production volume increase from the third quarter was strong, more than 10% sequentially. I would also emphasize that the industry continues to operate well below its normal utilization rates, which for our customers, averaged just over 75% in Q4. Lastly, Harsco Environmental's free cash flow totaled $5 million in the quarter and totaled $69 million for the year. This full year figure compares with free cash flow of $13 million in the prior year, with the improvement during 2020 driven by lower capex and cash generated from working capital. For the quarter, revenues were $185 million, and adjusted EBITDA totaled $16 million. Relative to the third quarter of 2020, revenues were approximately 5% lower, and adjusted EBITDA declined to $16 million. The segment's free cash flow totaled $17 million in the quarter and for the year, it totaled $55 million versus adjusted EBITDA of $58 million. ESOL contributed approximately $20 million of EBITDA in the second half of the year, which represents a meaningful improvement year-on-year. The benefits realized from synergy or improvement initiatives now total approximately $10 million, with the largest improvements coming from disposal optimization and commercial levers. Rail revenues reached $77 million while the segment's adjusted EBITDA totaled approximately $2.5 million in the fourth quarter. This EBITDA figure compares with a loss of $2 million in the prior year quarter. Lastly, let me highlight that our rail backlog remains healthy at just over $440 million, representing a slight decrease from the prior quarter as we continued production under our long-term contracts. For the full year, revenues increased to $1.9 billion, and adjusted EBITDA totaled $238 million. Also, our free cash flow was $2 million. From a financial point of view, we trimmed the capital spending by roughly $65 million and pushed out project spending. We also took actions to reduce our cost structure by more than $20 million with some of these being permanent savings, as I mentioned earlier. We ended the year with net debt of $1.2 billion, a leverage ratio of 4.6 times and liquidity of more than $300 million. Starting with Harsco Environmental, revenue is projected to increase 10% to 15%. Adjusted EBITDA is projected to increase approximately 20% at the guidance's midpoint. Next, for Clean Earth, we are guiding to adjusted EBITDA of $72 million to $78 million for the year on revenues of approximately $790 million. We anticipate that CE's pro forma revenue growth will be within a range of 3% to 5%, while we expect double-digit pro forma EBITDA growth for the business. We expect to realize an uplift of roughly $20 million from our actions taken to date and those contemplated in 2021. And it's important to note, a portion of these expenses, approximately $6 million to $8 million, comprising largely duplicative costs for IT integration and branding will not recur in 2022. We've also allocated an additional $3 million of corporate costs to Clean Earth. This allocation and the nonrecurring expenditures will total approximately $10 million for the year. Lastly, for Rail, we project top line growth of 15% to 20% and adjusted EBITDA growth of 25% at the guidance's midpoint. And lastly, corporate costs are anticipated to be within a range of $33 million to $34 million. Our adjusted EBITDA is expected to increase to within a range of $275 million to $295 million. This guidance translates to adjusted earnings per share of $0.59 to $0.76. The earnings per share range contemplates interest expense of $63 million to $66 million and an assumed effective tax rate of 36% to 38%. Lastly, we are targeting free cash flow before growth capital spending of $100 million. And after considering all capex, our full year free cash flow should range from $30 million to $50 million. This forecast anticipates net capital spending will be within a range of $155 million to $175 million. And this amount compares with net capex of $114 million in 2020, with most of the increase attributable to growth and renewal expenditures in environmental that were deferred in 2020. Also note that our projected free cash flow ranges include cash payment deferrals from 2020, including those related to the CARES act of roughly $12 million to $15 million. We expect to see consolidated run rate free cash flow generation in excess of 6% to 8% of revenue by the end of 2022. Q1 adjusted EBITDA is expected to range from $52 million to $58 million.

Harsco's revenues totaled $508 million and adjusted EBITDA totaled $62 million in the fourth quarter. Harsco's adjusted earnings per share from continuing operations for the fourth quarter was $0.12, this adjusted figure excluded costs for the ESOL integration and the severance costs related to additional restructuring actions in environmental. Our adjusted EBITDA is expected to increase to within a range of $275 million to $295 million. This guidance translates to adjusted earnings per share of $0.59 to $0.76. And after considering all capex, our full year free cash flow should range from $30 million to $50 million.

0 0 0 0 0 0 0 1 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 0 0 1 0 0 0 0 0

Total revenues for the first quarter of fiscal 2021 were $108.5 million compared to $109.4 million in the same quarter last year. Net earnings for the quarter were $7.1 million or $0.65 per diluted share compared to net earnings of $8.3 million or $0.77 per diluted share in the prior year. Net earnings for the quarter included an income tax benefit of approximately $1.7 million or $0.16 per diluted share related to the release of a valuation allowance in a foreign tax jurisdiction. Irrigation segment revenues of $87.4 million for the first quarter increased $4.1 million or 5% compared to $83.3 million in the same quarter last year. North American irrigation revenues were $52.8 million compared to $53.6 million in the same quarter last year. In the international irrigation markets, revenues of $34.6 million increased $4.8 million or 16% compared to $29.7 million in the same quarter last year. Increase resulted from higher unit sales volumes in several regions, which were partially offset by the unfavorable effects of differences in foreign currency translation rates compared to the prior year that totaled approximately $2.4 million. Total irrigation segment operating income for the first quarter was $10.6 million, an increase of 9% compared to $9.8 million in the same quarter last year. And operating margin improved to 12.2% of sales compared to 11.7% of sales in the prior year. Improved [Phonetic] margins were supported by higher irrigation equipment sales volume. However, this improvement was tempered somewhat by the impact of higher raw material costs and also from higher freight costs that resulted from reduced availability of commercial trucking resources. Market prices for all types of steel products began to rise rapidly during the quarter with steel coil prices increasing over 70% from September to the end of December. Infrastructure segment revenues for the first quarter were $21.1 million compared to $26.1 million in the same quarter last year. Infrastructure segment operating income for the first quarter was $4.3 million compared to $8.7 million in the same quarter last year. Infrastructure operating margin for the quarter was 20.1% of sales compared to 33.5% of sales in the prior year. During the quarter, we generated free cash flow of almost $10 million, representing 138% of net earnings. Our total available liquidity at the end of the first quarter was $196.4 million with $146.4 million in cash and marketable securities and $50 million available under our revolving credit facility. Our total debt was $115.9 million at the end of the first quarter, almost all of which matures in 2030. Additionally, at the end of the quarter, we were well within the financial covenants of our borrowing facilities, including a funded debt to EBITDA leverage ratio of 1.5 compared to a covenant limit of 3.0.

Total revenues for the first quarter of fiscal 2021 were $108.5 million compared to $109.4 million in the same quarter last year. Net earnings for the quarter were $7.1 million or $0.65 per diluted share compared to net earnings of $8.3 million or $0.77 per diluted share in the prior year. Improved [Phonetic] margins were supported by higher irrigation equipment sales volume. However, this improvement was tempered somewhat by the impact of higher raw material costs and also from higher freight costs that resulted from reduced availability of commercial trucking resources.

1 1 0 0 0 0 0 0 0 1 1 0 0 0 0 0 0 0 0

Regarding our Q3 performance, our revenues were $4.29 billion, approximately $90 million above the top end of our guidance. Concerning adjusted EBIT margin, we delivered 7%, also higher than the top end of our guidance. Book-to-bill for the quarter was 1.13, underscoring the success of bringing the new DXC, which focuses on our customers and people to the market. This is the third straight quarter that we've delivered a 1.0 or better book-to-bill, and we also expect this trend to continue in Q4. We will achieve our goal of $550 million of cost savings this year. Our cost optimization program was responsible for our strong adjusted EBIT margin of 7% in Q3. We were able to expand margins despite a 200 basis point headwind from the sale of the U.S. state and local health and human services business. The 1.13 book-to-bill number that we delivered this quarter is consistent evidence that our plan is working. In Q3, 55% of our bookings were new work and 45% were renewals. Our ability to deliver a consistent book-to-bill number of over 1.0 in the first three quarters of FY '21 is clear evidence that our transformation journey is not only working but we can absolutely win in the IT services market. We are on track to complete the sale of this business and use the roughly $450 million of net proceeds to pay down debt, further strengthening our balance sheet. GAAP revenue was $4.29 billion and $88 million better than the top of our guidance range. Currency was a tailwind of $58 million sequentially and $118 million year over year. On an organic basis, revenue increased 1.7% sequentially. Organic revenue declined 10.5% year over year due to previously disclosed runoffs and terminations. Adjusted EBIT was $300 million. Our adjusted EBIT margin was 7%, a sequential improvement of 80 basis points despite an approximate 200 basis point headwind from the HHS sale. Non-GAAP income before taxes was $246 million. Non-GAAP diluted earnings per share was $0.84 due to a lower-than-expected tax rate of 10.2%. Using our guidance tax rate of 30%, non-GAAP earnings per share was $0.65. This was $0.10 higher than the top end of our guidance range. In Q3, bookings were $4.9 billion for a book-to-bill of 1.13. Like Mike mentioned earlier, we are encouraged to see three consecutive quarters with a book-to-bill greater than 1.0. GBS revenue was $1.92 billion or 45% of our total Q3 revenue. Organic revenues increased 2.2% sequentially, primarily reflecting the strength of our analytics and engineering business. Year over year, GBS revenue was down 7% on an organic basis. GBS segment profit was $273 million and profit margin was 14.2%. Margins improved 10 basis points sequentially despite a headwind of about 300 basis points from the HHS sale. GBS bookings for the quarter were $2.7 billion for a book-to-bill of 1.35. Revenue was $2.37 billion, up 1.3% sequentially and down 13.2% year over year on an organic basis. GIS segment profit was $88 million with a profit margin of 3.7%, a 210 basis points margin expansion over Q2. GIS bookings were $2.2 billion for a book-to-bill of 0.95. IT outsourcing revenue was down 1.8% sequentially, an improvement as compared to Q2 where it was down 4.7%. ITO revenues declined 17.7% year over year due to the previously disclosed runoffs and terminations. Book-to-bill was 0.96 in the quarter. Cloud and security revenue was up 4.7% sequentially and down 1% year over year. Book-to-bill was 1.0 in the quarter. Moving up the stack, the applications layer posted 2.6% sequential revenue growth and was down 9.3% year over year. Analytics and engineering was up 4.6% on a sequential basis and flat compared to the prior year. Analytics and engineering book-to-bill was 1.2 in the quarter. The modern workplace and BPS businesses increased 2.6% sequentially and was down 12.6% compared to the prior year. Our cash flow from operations totaled an outflow of $187 million, and adjusted free cash flow for the quarter came in at negative $318 million. As discussed on our prior earnings call, we had cash disbursements of $332 million that impacted free cash flow related to the HHS sale. Our effort to normalize our supplier and partner payments is not expected to reoccur and had an approximate $400 million negative cash flow impact in the quarter and $500 million negative cash flow impact through the first three quarters of our fiscal year. If these two items had not occurred, our free cash flow would have been more than $700 million higher in the quarter. As we previously disclosed, we utilized $3.5 billion of net proceeds from our HHS sale to reduce debt. Cash at the end of the quarter was $3.9 billion. Total debt, including capitalized leases, was $6.2 billion for a net debt of $2.3 billion. We expect to make tax payments of approximately $900 million in Q4 related to our divestitures. As you can see, our net debt to EBITDA improved more than one full turn from 2.4 times at the end of September 2020 to 1.2 times at the end of December. We are targeting Q4 revenues of $4.25 billion to $4.3 billion, adjusted EBIT margins of 7% to 7.4%, non-GAAP diluted earnings per share of $0.65 to $0.70, net interest expense of $60 million and an effective non-GAAP tax rate of about 28%.

Regarding our Q3 performance, our revenues were $4.29 billion, approximately $90 million above the top end of our guidance. GAAP revenue was $4.29 billion and $88 million better than the top of our guidance range. Non-GAAP diluted earnings per share was $0.84 due to a lower-than-expected tax rate of 10.2%. We are targeting Q4 revenues of $4.25 billion to $4.3 billion, adjusted EBIT margins of 7% to 7.4%, non-GAAP diluted earnings per share of $0.65 to $0.70, net interest expense of $60 million and an effective non-GAAP tax rate of about 28%.

1 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1

The net result of our well-positioned in-place portfolio and the continued execution of our active and accretive investment program was a 5.8% increase in total revenues, a 13.2% increase in adjusted funds from operations, and a 6.4% increase in AFFO per share. We invested $61.1 million in 25 properties during the quarter, and another $8.8 million just after quarter-end, bringing our year-to-date total investment activity to more than $144 million. In addition, rent commenced on three redevelopment projects during the quarter including our second and third projects, with 7-Eleven for remodeled C&G locations in the Baltimore and Dallas-Fort Worth MSAs, bringing our completed projects to 22 since the inception of our redevelopment program. We also announced yesterday that we successfully amended and extended our $300 million credit agreement, which now will mature in October 2021. When combined with our active ATM program, which we've used to raise more than $50 million this year, and our strong balance sheet, we continue to have access to capital and the right credit profile to support our growth objectives. Given our performance year-to-date, I am pleased that our Board approved an increase of 5.1% in our recurring quarterly dividend to $0.41 per share. As of the end of the third quarter, our portfolio includes 1,011 net lease properties, five active redevelopment sites, and five vacant properties. Our weighted average lease term was approximately 8.8 years, and our overall occupancy, excluding active redevelopments, remains constant at 99.5%. Our portfolio spans 36 states across the country plus Washington, D.C., and our annualized base rents, 63% of which come from the top 50 MSAs in the U.S., continue to be well covered by our trailing 12-month tenant rent coverage ratio of 2.6 times. In terms of our investment activities, we had a highly successful quarter in which we invested $61.1 million in 25 properties. Subsequent to the quarter-end, we acquired two additional properties for $8.8 million, bringing our year-to-date investment activity to $144.5 million across 82 properties. The first was a 15 property sale-leaseback with Flash Market, a subsidiary of Transit Energy Group. In this transaction, we invested $35.1 million to acquire the properties, which are located throughout the Southeast United States with a concentration around the Raleigh-Durham, North Carolina MSA. Properties acquired have an average store size of 3,600 square feet and an average property size of 1.7 acres. In addition, 53% of the properties have sub-tenancies with either quick-serve restaurants or auto service operators. Our total investment in the project was $4.5 million, including our final investment of $1.1 million during the third quarter. We acquired two newly constructed properties from WhiteWater Express carwash in Michigan for $7 million. We also acquired two additional properties for an aggregate purchase price of $8 million, which are leased to Go Car Wash in San Antonio, Texas, and Las Vegas, Nevada MSAs. Our purchase price was $4 million for the property. We invested $4.6 million to acquire the properties in the Chicago, Illinois MSA. Getty also advanced $1.2 million of development funding from three new industry convenience stores with Refuel in the Charleston, South Carolina MSA, bringing the total amount funded by Getty for these projects to $8.9 million at quarter-end. The weighted average initial lease term of our completed transactions for the quarter was 14.6 years, and our aggregate initial cash yield on our third quarter acquisitions was 6.7%. Purchase price was $8.8 million, and the cap rate was consistent with our year-to-date acquisition activity. During the quarter, we invested approximately $331,000 in both completed projects and sites, which remain in our pipeline. In aggregate, we invested $0.5 million in these three projects and generate a return on investment capital of 43%. In total, we have invested approximately $1.9 million in eight redevelopment projects in our pipeline and estimate that these projects will require a total investment by Getty of $7.4 million. We sold one property during the quarter, realizing $2.3 million in gross proceeds, and exited five lease properties. AFFO, which we believe best reflects the company's core operating performance, was $0.50 per share for the third quarter, representing a year-over-year increase of 6.4%. FFO was $0.48 per share for the quarter. Our total revenues were $40.1 million, representing a year-over-year increase of 5.8%. Rental income, which excludes tenant reimbursements and interest on notes and mortgages receivables was 7.5% to $34.3 million. Strong acquisition activity over the last 12 months and recurring rent escalators in our leases were the primary drivers of the increase, with additional contribution from rent commencements at completed redevelopment projects. We ended the quarter with $567.5 million of total debt outstanding, including $525 million of long-term fixed-rate unsecured notes and $42.5 million outstanding on our $300 million revolving credit facility. Our weighted average borrowing cost was 4% and the weighted average maturity of our debt was 6.3 years. In addition, our total debt to total market capitalization was 29%. Our total debt to total asset value was 37%, and our net debt-to-EBITDA was 5.1 times. As Chris mentioned, yesterday, we announced the amendment and extension of our $300 million revolving credit facility, which is now set to mature in October 2025, with two 6-month extensions, where we have the option to extend to October 2026. In addition to extending the term, we were able to reduce the interest rate by 20 to 50 basis points, depending on where we are in the leverage-based pricing grid, and amend certain covenant provisions to align with those generally applicable to investment-grade rated REITs. With the credit facility extended, our nearest debt maturity is now the $75 million of senior unsecured notes that come due in June of 2023. We continue to be selective with our equity issuance during the quarter, raising $19.8 million at an average price of $31.12 per share. Year-to-date, we raised a total of $50.1 million through the ATM. With respect to our environmental liability, we ended the quarter at $47.8 million, which was a decrease of approximately $300,000 from the end of 2020. For the quarter, net environmental remediation spending was approximately $1.3 million. And finally, as a result of our investment in capital markets activities in the first nine months of the year, we are raising our 2021 AFFO per share guidance to a range of $1.93 to $1.94 from our previous range of $1.89 to $1.91.

AFFO, which we believe best reflects the company's core operating performance, was $0.50 per share for the third quarter, representing a year-over-year increase of 6.4%. FFO was $0.48 per share for the quarter. And finally, as a result of our investment in capital markets activities in the first nine months of the year, we are raising our 2021 AFFO per share guidance to a range of $1.93 to $1.94 from our previous range of $1.89 to $1.91.

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1

Our strategy and efforts are clearly yielding results as we delivered a 70% increase in fee revenue with really strong profitability, earnings per share of $1.37 and an adjusted EBITDA margin of 20.7%, and these results are the continuation of our momentum over recent quarters and our performance speaks to our agility and importantly to the purpose for decisions and deliberate actions we've taken not only over the last few quarters but over the last several years, and now they've come together in a critical mass of opportunity. We're going to continue to drive an integrated go-to-market strategy through our marquee and regional accounts, which represent about 35% of our portfolio. In the quarter, about 30% of our revenue was driven by cross referrals, an all-time high, which I think demonstrates the effectiveness of our go-to-market strategy. As Gary mentioned, fee revenue in the first quarter was up $241 million or 70% year-over-year and $30 million or 5% sequentially, and that's reaching an all-time high of $585 million. Consolidated fee revenue growth in the first quarter measured year-over-year was up 81% in the Exe Search, 103% in RPO and Pro Search, 50% in Consulting and 44% in Digital. In the first quarter, revenue from our marquee and regional accounts was up 70% year-over-year and 4% sequentially. And as Gary mentioned, in the first quarter, over 35% of our consolidated fee revenue was generated from these accounts. In the first quarter, about 30% of fee revenue was generated from cross line of business referrals, which is up from 25.5% and 28.5% in the first and fourth quarters of fiscal '21, respectively. Adjusted EBITDA grew $111 million year-over-year and $8.5 million or 7.5% sequentially to $121 million, with an adjusted EBITDA margin of 20.7%. Now, that's our third consecutive quarter with an adjusted EBITDA margin over 20%. Fully diluted earnings per share also reached a record level in the first quarter, improving to $1.37, which was up from $1.56 compared to adjusted fully diluted earnings per share in the first quarter of fiscal '21 and up $0.16 or 13% sequentially. I would like to point out that in the first quarter our fully diluted earnings per share benefited by $0.07 to $0.08 from a lower tax rate of 23.8%. Now, currently we don't believe that this rate is sustainable, and for all of fiscal '22 we're projecting an effective tax rate in the range of 26% to 27%. We're pleased to share that our new business generation in each of the last six months is in our top 10 ever with three of the months occupying spots, one, two and three. Now more specifically on a consolidated basis, new business awards, excluding RPO were up 59% year-over-year and up approximately 2% sequentially. New business growth was strongest for Professional Search, which was up 14% from the fourth quarter of fiscal '21. RPO new business had another strong quarter in the first quarter with $113 million of total contract awards. At the end of the first quarter, cash and marketable securities totaled $904 million. Now when you exclude amounts reserved for deferred comp arrangements and for accrued bonuses, the global investable cash balance at the end of the first quarter was approximately $614 million, which is up $103 million or 20% year-over-year. Now of that amount, approximately $220 million was in the United States. Over the last quarter, total new fee earner consultants grew by 127, which includes both new hires in recent promotions. Additionally, consistent with our balanced approach to capital allocation, we repurchased approximately $3 million of stock in the first quarter and paid a quarterly cash dividend of approximately $6.9 million. Global fee revenue for KF Digital was $81 million in the first quarter, which was up nearly 44% year-over-year and flat sequentially. In the first quarter, subscription and license fee revenue was $24 million, which was up approximately 14% year-over-year. More importantly, global new business for KF Digital in the first quarter was $108 million, with 36% of this new business related to subscription and license services, up 69% year-over-year -- on a year-over-year basis. Earnings and profitability remained strong for KF Digital in the first quarter with adjusted EBITDA of $25.6 million and a 31.8% adjusted EBITDA margin. In the first quarter, Consulting generated $148.5 million of fee revenue, which was up approximately $49 million or 50% year-over-year. Fee revenue growth was broad-based across all solution areas and strongest regionally in North America, which was up over 70% year-over-year. Consulting new business was also very strong in the first quarter, growing approximately 36% year-over-year and 2% sequentially to a new all-time high. Additionally, while the volume of engagements over $500,000 has remained strong, in the first quarter the volume of smaller assignments, those under $500,000 in value grew sequentially, potentially signaling a rebound in demand and spending by our smaller regional clients who tend to buy focus point solutions. Adjusted EBITDA for Consulting in the first quarter was $26.8 million with an adjusted EBITDA margin of 18.1%. Globally, fee revenue was $139.3 million, which was up 103% year-over-year and approximately $19 million or 16% sequentially. RPO fee revenue grew approximately 98% year-over-year and 11% sequentially, while Professional Search fee revenue was up approximately 112% year-over-year and up 24% sequentially. Professional Search new business was up 14% sequentially and RPO was awarded $113 million of new contracts consisting of $45 million of renewals and extensions and $68 million of new logo work. Adjusted EBITDA for RPO and Professional Search continue to scale in the first quarter, improving to $34 million with an adjusted EBITDA margin of 24.4%. Finally in the first quarter, global fee revenue for Executive Search reached a new all-time high of $217 million, which was up 81% year-over-year and 8% sequentially. Growth was also broad based and led by North America, which grew 100% year-over-year and over 6% sequentially. Fee revenue in EMEA and APAC were up approximately 4% and 22%, respectively. The total number of dedicated Executive Search consultants worldwide at the end of the first quarter was 565, up 55 year-over-year and up 41 sequentially, including 22 colleagues who were recently promoted. Annualized fee revenue production per consultant in the first quarter improved to a record $1.59 million and the number of new search assignments opened worldwide in the first quarter was up 57% year-over-year and 2% sequentially to 1,745. In the first quarter, global Executive Search adjusted EBITDA grew to approximately $61.6 million, which was up $53.5 million year-over-year and up $11.7 million or 23.5% sequentially. Adjusted EBITDA margin in the first quarter was 28.4%. Now August is historically a seasonal month influenced by summer vacations, but new business for August was up approximately 41% year-over-year and was in line with our expectations. Now assuming no major Delta variant related lockdowns or changes in worldwide economic conditions, financial markets or foreign exchange rates, we expect our consolidated fee revenue in the second quarter of fiscal '22 to range from $585 million to $615 million and our consolidated diluted earnings per share to range from $1.30 to $1.44.

Our strategy and efforts are clearly yielding results as we delivered a 70% increase in fee revenue with really strong profitability, earnings per share of $1.37 and an adjusted EBITDA margin of 20.7%, and these results are the continuation of our momentum over recent quarters and our performance speaks to our agility and importantly to the purpose for decisions and deliberate actions we've taken not only over the last few quarters but over the last several years, and now they've come together in a critical mass of opportunity. Fully diluted earnings per share also reached a record level in the first quarter, improving to $1.37, which was up from $1.56 compared to adjusted fully diluted earnings per share in the first quarter of fiscal '21 and up $0.16 or 13% sequentially. Now assuming no major Delta variant related lockdowns or changes in worldwide economic conditions, financial markets or foreign exchange rates, we expect our consolidated fee revenue in the second quarter of fiscal '22 to range from $585 million to $615 million and our consolidated diluted earnings per share to range from $1.30 to $1.44.

1 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1

And as a result of the strong indication, we're going to -- we're going to raise our guidance, our 2021 guidance. Normally we have 2. We are as bullish now on those rights as we were when we went into the prior negotiations, which saw an increase in the U.S. from 130 million a year AAV to 470 million a year AAV for Raw and SmackDown. As an example, we know the English Premier League is looking to get $300 million a year annually versus U.S. rights, doubling the $150 million a year average annual value currently paid by NBCU. Yesterday, Fox announced on its earnings call that they closed a multiyear deal with UEFA for its next two European Championships in 2024 and 2028 and for over 1,500 soccer matches, a rights package in excess of which Disney currently pays for its portion of it. The partnership jump starts us in this all-important space while allowing us to leverage the resources and reach of Spotify and its 165 million subscribers. In 2016 at AT&T Stadium, we had over 100,000 fans in attendance for WrestleMania. Over 400,000 people are expected to travel to Las Vegas that weekend to celebrate the Fourth. What we found from this past SummerSlam in Las Vegas, of the 50,000 plus who attended, not one ticket was purchased from Tennessee, not 1. That is no longer happening on Saturdays late in the season with the NFL's new 18-week regular season, and over 350,000 people are expected in Atlanta for that New year's weekend. He did make it to the top 10, and his weekly appearance was seen by nearly six million viewers on ABC, raising awareness for both Miz and WWE. For example, SummerSlam was held at Allegiant Stadium, the first time SummerSlam has ever been held in an NFL stadium, attracting a record 51,000 fans and drawing a record gate. As Nick mentioned, more than 4 times greater than the last SummerSlam held with fans in 2019. Merchandise was up 155% year-over-year and more people watched SummerSlam across Peacock and WWE networks than any other SummerSlam in WWE history, with a viewership increase of 55% from 2020. John Cena became our top-selling talent for merchandise, especially with youth audiences, and he increased ratings for audiences two to 17 and 18 to 49 by 20% and 10% during his appearances on Raw and SmackDown. An Instagram video featuring Cena became WWE's most watched native Instagram video with 4.3 million views. Brock's return broke Cena's Instagram record at 4.5 million. Sales and sponsorship revenues for SummerSlam were up 18% year-over-year and 25% over 2019, featuring our first-ever official water with Blue Triton's Pure Life and our first-ever official beer with Constellation's Victoria beer brand. Just as WWE's overall business is nearly 80% contractual, we have shifted our sales and sponsorship strategy from transactional to contractual, pivoting to multiyear seven-figure deals. In 2021, the number of these deals has increased 60%. Additionally, our client spend has increased 44% year-over-year with over 50% returning partners. In the quarter, gross sponsorship sales are up over 20%, excluding a 2020 YouTube bonus payment and partnership allocation. We produced 16 pieces of original content that delivered over 0.5 billion impressions and 40 million views with 96% of our audience saying they would take action toward Old Spice. Digital consumption increased to a quarterly record of 410 million hours, and video views increased 38% to 12.8 billion as compared to a prior year period that had benefited from COVID-19-related viewing trends. And with our renewed emphasis on producing more content for emerging platforms and younger audiences, our video views on Snapchat and TikTok are up 22% and 29%, respectively, year-over-year. Speaking of TikTok, while it is a tight race, we are the number one sports brand on TikTok over the NBA with 14.5 million followers. And I would be remiss if I didn't recognize how excited we are for the launch of our console game 2K 22 in March 2022. Total WWE revenue was $255.8 million, an increase of 15%, driven by higher ticket and vending merchandise sales associated with our return to live event touring, including SummerSlam. Adjusted OIBDA declined 8% to $77.9 million as the growth in revenue was more than offset by higher television and event-related production expenses. Adjusted OIBDA was $85.6 million, a decline of 16%, primarily due to the increase in production expenses, which I just described. Live Events adjusted OIBDA was $9.3 million, an increase of more than 3 times or $13.5 million due to a 39 times increase in revenue with the return to live event touring, including the staging of SummerSlam. During the third quarter, average attendance for our 38 events in North America was significantly above 2019, reflecting heightened consumer demand for our live events. During the third quarter, WWE generated approximately $45 million in free cash flow, declining $66 million primarily due to the timing of collections associated with our large-scale international events in the prior year quarter and to a lesser extent, an increase in capital expenditures. Notably, during the third quarter, WWE returned $31 million of capital to shareholders, including approximately $22 million in share repurchases and $9 million in dividends paid. To date, we've repurchased approximately $200 million of stock, representing approximately 40% of the authorization under our $500 million repurchase program. As of September 30, 2021, WWE held approximately $449 million in cash and short-term investments. Debt totaled $221 million, including $200 million associated with WWE's convertible notes. The company has no amounts outstanding under its revolving line of credit and estimates related debt capacity of approximately $200 million. In January, WWE issued adjusted OIBDA guidance of $270 million to $305 million for the full year 2021. Adjusted OIBDA is now expected to be within a range of $305 million to $315 million with the staging of one large-scale international event. The revised full year guidance implies fourth quarter adjusted OIBDA of $75 million to $85 million as compared to $51.2 million in the fourth quarter of 2020. Through the first nine months of 2021, WWE has incurred about $24 million in capital expenditures, primarily to support our technology infrastructure and restart the construction of our new headquarters. For the full year 2021, total capital expenditures are expected to be within a range of $60 million to $75 million, lower than the previous guidance of $85 million to $105 million.

And as a result of the strong indication, we're going to -- we're going to raise our guidance, our 2021 guidance. Total WWE revenue was $255.8 million, an increase of 15%, driven by higher ticket and vending merchandise sales associated with our return to live event touring, including SummerSlam. Adjusted OIBDA is now expected to be within a range of $305 million to $315 million with the staging of one large-scale international event. For the full year 2021, total capital expenditures are expected to be within a range of $60 million to $75 million, lower than the previous guidance of $85 million to $105 million.

1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 1 0 0 1

Diluted GAAP earnings per common share were $3.41 for the second quarter of 2021, improved from $3.33 in the first quarter of 2021 and $1.74 in the second quarter of 2020. Net income for the quarter was $458 million, compared with $447 million in the linked quarter and $241 million in the year-ago quarter. On a GAAP basis, M&T's second-quarter results produced an annualized rate of return on average assets of 1.22% and an annualized rate of return on average common equity of 11.55%. This compares with rates of 1.22% and 11.57%, respectively, in the previous quarter. Included in GAAP results in the recent quarter were after-tax expenses from the amortization of intangible assets amounting to $2 million or $0.02 per common share, little changed from the prior quarter. Also included in the quarter's results were merger-related charges of $4 million related to M&T's proposed acquisition of People's United Financial. This amounted to $3 million after tax or $0.02 per common share. Results for this year's first quarter included $10 million of such charges amounting to $8 million after-tax effect or $0.06 per common share. M&T's net operating income for the second quarter, which excludes intangible amortization and the merger-related expenses, was $463 million, compared with $457 million in the linked quarter and $244 million in last year's second quarter. Diluted net operating earnings per common share were $3.45 for the recent quarter, up from $3.41 in 2021's first quarter and up from $1.76 in the second quarter of 2020. Net operating income yielded annualized rates of return on average tangible assets and average tangible common shareholders' equity of 1.27% and 16.68% for the recent quarter. The comparable returns were 1.29% and 17.05% in the first quarter of 2021. Taxable equivalent net interest income was $946 million in the second quarter of 2021, compared with $985 million in the linked quarter. The net interest margin for the past quarter was 2.77%, down 20 basis points from 2.97% in the linked quarter. Compared with the first quarter of 2021, average earning assets increased by some 2%, reflecting a 13% increase in money market placements, primarily cash on deposit at the Fed and a 6% decline in investable securities. Average loans outstanding declined just under 1%, compared with the previous quarter. Looking at the loans by category on an average basis compared with the linked quarter, overall, commercial and industrial loans declined by $668 million or 2.4%. Dealer floor plan loans declined by $859 million, reflecting the well-documented auto production and inventory issues experienced by the industry. Due to the late first quarter timing of round two originations and delays in forgiveness of loans over $2 million in size, average PPP loans declined by less than $50 million from the prior quarter. All other C&I loan categories grew slightly over 1%. Commercial real estate loans declined by about 0.5%, similar to what we saw in the first quarter. Residential real estate loans declined by 2%. Consumer loans were up 3%, consistent with recent quarters, as growth in indirect auto and recreation finance loans has been outpacing declines in home equity lines and loans. On an end-of-period basis, total loans were down 2%, reflecting the same factors I just mentioned. PPP loans totaled $4.3 billion at June 30, compared with $6.2 billion at the end of the first quarter. Average core customer deposits, which exclude deposits received at M&T's Cayman Islands office and CDs over $250,000 increased over 3% or $4 billion, compared with the first quarter. That figure includes $2.6 billion of noninterest-bearing deposits. On an end-of-period basis, core deposits were up by just under $700 million. Noninterest income totaled $514 million in the second quarter, compared with $506 million in the linked quarter. The recent quarter included $11 million of valuation losses on equity securities, largely on our remaining holdings of GSE preferred stock, while the prior quarter included $12 million of such valuation losses. Mortgage banking revenues were $133 million in the recent quarter, compared with $139 million in the linked quarter. Revenues for our residential mortgage business, including both origination and servicing activities, were $98 million in the second quarter, compared with $107 million in the prior quarter. In addition, residential mortgage loans originated for sale were down about 5% to $1.2 billion, compared with the first quarter. Commercial mortgage banking revenues were $35 million in the second quarter, compared with $32 million in the linked quarter. Trust income rose to $163 million in the recent quarter, improved from $156 million in the previous quarter. This quarter's results included $4 million of seasonal fees arising from tax preparation work we undertake for clients, as well as the result of the growth in assets under management in the wealth and institutional businesses. Service charges on deposit accounts were $99 million, compared with $93 million in the first quarter. Operating expenses for the second quarter, which exclude the amortization of intangible assets and merger-related expenses, were $859 million. The comparable figure was $907 million in the linked quarter. Salaries and benefits declined by $62 million to $479 million from the prior quarter. Recall that the first quarter's results included $69 million of seasonal salary and benefit costs. Our deposit insurance increased by $4 million to $18 million during the quarter, primarily reflecting higher levels of criticized loans, which factor into the FDIC's assessment calculation. Other costs of operations for the past quarter included an $8 million addition to the valuation allowance on our capitalized mortgage servicing rights. Recall there was a $9 million reversal from the allowance in 2021's first quarter. The efficiency ratio, which excludes intangible amortization from the numerator and securities gains or losses from the denominator was 58.4% in the recent quarter, compared with 60.3% in 2021's first quarter, which included the seasonally elevated compensation costs. The allowance for credit losses declined by $61 million to $1.6 billion at the end of the second quarter. That reflects a $15 million recapture of previous provisions for credit losses, combined with $46 million of net charge-offs in the quarter. The allowance for credit losses as a percentage of loans outstanding declined to 1.6% -- 1.62%. That ratio was little changed from 1.65% of loans at the end of the prior quarter. Annualized net charge-offs as a percentage of loans were 19 basis points for the second quarter, compared with 31 basis points in the first quarter. Our forecast assumes the national unemployment rate continues to be at elevated levels, on average, 5.4% through 2021, followed by a gradual improvement, reaching 3.5% by mid-2023. The forecast assumes that GDP grows at a 7.4% annual rate during 2021, resulting in GDP returning to pre-pandemic levels during 2022. Nonaccrual loans increased by $285 million to $2.2 billion or 2.31% of loans at the end of June. This was up from 1.97% at the end of March. Loans 90 days past due, on which we continue to accrue interest, were $1.1 billion at the end of the recent quarter, and 96% of these loans were guaranteed by government-related entities. M&T's common equity Tier 1 ratio was an estimated 10.7%, compared with 10.4% at the end of the first quarter, and which reflects lower risk-weighted assets and earnings net of dividends.

Diluted GAAP earnings per common share were $3.41 for the second quarter of 2021, improved from $3.33 in the first quarter of 2021 and $1.74 in the second quarter of 2020. Diluted net operating earnings per common share were $3.45 for the recent quarter, up from $3.41 in 2021's first quarter and up from $1.76 in the second quarter of 2020. Taxable equivalent net interest income was $946 million in the second quarter of 2021, compared with $985 million in the linked quarter.

1 0 0 0 0 0 0 0 0 1 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Despite the ongoing challenges caused by COVID-19, the demand for EnerSys products was clear during the period as we reported strong third quarter fiscal '21 adjusted earnings of $1.27 per diluted share, which included a $0.10 benefit from the settlement of our claim related to the September 29 fire in our Richmond, Kentucky facility less $0.03 per share in foreign currency losses. Although those restructuring benefits have not yet impacted our earnings, they will grow in magnitude throughout calendar year 2021, reaching nearly a $20 million annual run rate by the end of fiscal year 2022. Our third quarter net sales decreased 2% over the prior year to $751 million due to a 3% decrease from volume, net of a 1% increase from currency. On a line of business basis, our third quarter net sales in the motive power were down 4% to $304 million, while Energy Systems net sales were down 2% at $337 million, while specialty increased 7% in the third quarter to $109 million. Motive power suffered a 5% decline in volume due to the pandemic, net of a 1% increase in FX. Energy Systems had a 4% decrease from volume, net of a 2% improvement from currency. Specialty added 6% in volume improvements and 1% increase from currency. On a geographical basis, net sales for the Americas were down 1% year-over-year to $499 million, with a 1-point decrease from currency. EMEA was down 4% to $194 million on a 9% volume decline, net of a 5% improvement in currency, while Asia was flat at $58 million. On a sequential basis, third quarter net sales were up 6% compared to the second quarter, driven by volume improvements. On a line of business basis, Specialty increased 5%, with NorthStar continuing to contribute its capacity for transportation sales. And motive power was up 15% as it rebounds from the pandemic, while Energy Systems was down 1%. On a geographical basis, Americas was up 4%, EMEA was up 13% and Asia was up 4%. On a year-over-year basis, adjusted consolidated operating earnings in the third quarter increased approximately $15 million to $78 million, with the operating margin up 210 basis points. On a sequential basis, our third quarter operating earnings improved $12 million or 110 basis points to 10.4%. We settled our claim for the Richmond fire, which was -- which resulted in a $6 million benefit in the quarter. $4 million was a gain on the replacement of equipment reflected in operating expenses from the property policy, while $2 million was a final recovery on the business interruption policy and is credited to cost of sales. Operating expenses when excluding highlighted items were at 14.8% of sales for the third quarter compared to $16.4 million in the prior year as we reduced our spending by $15 million year-over-year and by 100 basis points sequentially. Excluded from operating expenses recorded on a GAAP basis in Q3, our pre-tax charges of $22 million, primarily related to $6 million in Alpha and NorthStar amortization and $12 million in restructuring charges for the previously announced closure of our flooded motive power manufacturing site in Hagen, Germany. Excluding those charges, our motive power business achieved operating earnings of 13.3% or 330 basis points higher than the 10% in the third quarter of last year, due primarily to the insurance claim recovery of $6 million described earlier. On a sequential basis, motive power's third quarter OE also increased 420 basis points from the 9.2% posted in the second quarter, due primarily to sequential increases of nearly $5 million in recovery of the business interruption and other proceeds from the Richmond fire. OE dollars for motive power increased nearly $9 million from the prior year despite lower volume due to its lower operating expenses and $6 million in insurance recovery, while OE increased $16 million from the prior quarter on higher volume and $5 million for more in insurance recovery. Meanwhile, Energy Systems operating earnings percentage of 7.4% was up from last year's 6.3%, but down from last quarter's 8.8%. OE dollars increased $3 million from the prior year, primarily from lower operating expenses, but decreased $5 million from the prior quarter on lower volume and higher operating expenses. Specialty operating earnings percentage of 11.9% was up from last year's 10.1% and up from last quarter's 11.4%. OE dollars increased nearly $3 million from the prior year on higher volume and lower operating expenses while increasing $1 million from the prior quarter on higher volume. As previously reflected on slide 10, our third quarter adjusted consolidated operating earnings of $78 million was an increase of $15 million or 23% from the prior year. Our adjusted consolidated net earnings of $55 million was nearly $11 million higher than the prior year. Improvements in the adjusted net earnings reflect the rise in operating earnings, net $3 million in foreign currency losses, primarily on unfavorable rate changes on intercompany borrowings. Our adjusted effective tax rate of 17% for the third quarter was slightly higher than the prior year's rate of 16%, but in line with the prior quarter's rate of 17%. Fiscal 2019's full year rate was 17%, while our fiscal 2020 rate was 18%, which is consistent with our current expectations for fiscal 2021. EPS increased 22% to $1.27 on higher net earnings. As a reminder, we still have nearly $50 million of share buybacks authorized, but have no immediate plans to execute any repurchases with perhaps the exception of the modest annual repurchase made to offset employee stock plan dilution. We have also included our year-to-date results on slides 12 and 13 for your information, but I do not intend to cover these in detail. We now have nearly $489 million of cash on hand, and our credit agreement leverage ratio is below 2.0 times, which allows over $600 million in committed additional borrowing capacity. We expect our leverage ratio to remain below 2.0 times for the balance of fiscal 2021. We generated over $218 million in free cash flow through three quarters of fiscal 2021. Our Q3 free cash flow generation was very strong at $41 million despite the drag of rising working capital from increased revenue. Capital expenditures year-to-date of $54 million were at our expectations. Our capital expectation for fiscal 2021 of $75 million has expanded again slightly as the economic outlook improved. So we believe we will begin enjoying about half of the expected $20 million per year of savings next fiscal year, with the full benefit thereafter. We anticipate our gross profit rate to remain near 25% in Q4 of fiscal 2021 as lower utilization in some of our factories over the holidays and from enhanced COVID restrictions will impact our P&L in Q4. With some of the uncertainty from our election and the pandemic behind us, we currently feel we have enough visibility to provide guidance in the range of $1.25 to $1.31 in our fourth fiscal quarter.

Despite the ongoing challenges caused by COVID-19, the demand for EnerSys products was clear during the period as we reported strong third quarter fiscal '21 adjusted earnings of $1.27 per diluted share, which included a $0.10 benefit from the settlement of our claim related to the September 29 fire in our Richmond, Kentucky facility less $0.03 per share in foreign currency losses. EPS increased 22% to $1.27 on higher net earnings.

1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0

Earnings per share jumped 31% to a record $3.62 per share on a 32% increase in net income. Sales grew 16% or nearly $250 million during the quarter to a record $1,780 million. Gross profit increased 29% with gross margins expanding 280 basis points. Operating income increased $50 million or 32% to a record $207 million. Operating margins expanded 100 basis points to a record 11.6%, and cash flow for the quarter was a record $238 million. We also ended the quarter with a strong balance sheet with virtually no debt and cash for $137 million.

Earnings per share jumped 31% to a record $3.62 per share on a 32% increase in net income. Sales grew 16% or nearly $250 million during the quarter to a record $1,780 million.

1 1 0 0 0 0

We reported another quarter of record revenues of $6 billion, record net income of $1.3 billion and record adjusted EBITDA of over $1.9 billion, ahead of the guidance we recently set of $1.8 billion. Our 42% quarter-over-quarter growth in adjusted EBITDA was primarily driven by continued price increases on our index linked and spot shipments. 7, the largest blast furnace in North America. And even though it was clearly a one timer, we did not add back to EBITDA, the vaccination bonus payment of $45 million that was awarded and paid out to our workforce under our very successful vaccination incentive bonus program, which resulted in over 75% of our workforce fully vaccinated against COVID-19. In the Steelmaking segment, we sold 4.2 million net tons of steel products with a mix of 32% hot-rolled, 18% cold rolled and 31% coated steel, with the remaining 19% consisting of stainless, electrical, plate, slab, and rail. Our automotive percentage of revenue was 20% compared to 33% just two quarters ago, clearly reflecting the reduced volumes and the legacy annual prices from that sector. All these events considered, our fourth quarter production should be reduced by approximately 300,000 net tons compared to the third quarter. Our free cash flow generation came in at $1.3 billion for the quarter, slightly lower than our original guidance due to slow demand pull from automotive, leaving more inventory to close out the quarter than we expected. This free cash flow generated during Q3 was returned entirely to shareholders in the form of a stock buyback, executed via the complete redemption of our $58 million common share equivalent preferred stock. I will note that because of the weighted average calculation and the fact that the prefs were outstanding during a portion of Q3, the full $58 million share reduction is not baked into our Q3 earnings per share just yet, we will see a further reduction of diluted share count in the fourth quarter. In only the last three weeks since the end of Q3, we have already generated approximately $500 million in free cash flow and have allocated all of it toward debt repayment under the ABL. Because of our strong profitability this year, at some point in the fourth quarter, we will have utilized the majority of our tax NOL balance, leading to an expected Q4 cash tax rate of around 10%. Prior to the acquisitions of AK Steel and AM USA, we once expected to be utilizing these NOLs for several more years, but the significantly higher profit generation following the acquisitions will result in the consumption of the majority of the $2.5 billion NOL balance within a year of closing the December 2020 transaction. The $775 million price of the previously announced acquisition of FPT is equivalent to less than two months of our free cash flow generation. Therefore, even under the current bearish futures curve for HRC, our average selling price should be much higher next year than it has been this year, leading to the expectation of another year of outstanding EBITDA, cash flow generation and debt reduction in 2022. We were a $2 billion revenue company in 2019, became a $5.3 billion revenue company in 2020 and expected to be a $20 billion-plus company in 2021. All this growth was achieved preserving and enhancing our profitability as demonstrated by our Q3 numbers of $1.9 billion of adjusted EBITDA and $6 billion in revenues for an EBITDA margin of 32%. These numbers have gone primarily from the 55% of our business that is linked to an index price with a smaller contribution from the fixed price contracts that were signed before the market price recovery of last year. We have seen a looming shortage of this type of scrap coming for several years, which partially motivated our $1 billion investment in our direct reduction plant four years ago. While the majority of scrap companies we looked at had a prime scrap mix of 10%, 15%, FPT stood out with an outsized 50% of prime scrap in the mix. FPT is actually one of the largest processors of prime scrap in the country, representing 15% of the entire merchant market in the United States. On top of that, during the last 50 years, the supply of prime scrap in the United States has been steadily shrinking. That is very conservatively another nine million tons or 40% growth of demand for these products over the next four years. Pig iron may be the most likely alternative but they still choose emissions that comes attached to pig iron, whether imported or mainly in North America, effectively create a negative impact to the Scope 3 emissions associated to these EAFs. In that regard, we fully expect that in a not-so-distant future, the Scope 3 emissions will have to be reported as much as our Scope 1 and 2 already are reported today. For example, our hot-dipped galvanizing line at Rockport Works was built in the '90s, and it's 80 inches wide and that is six foot, eight inches wide, or 2,032 millimeters before a metric system, more than two meters wide. But the PLTCM and the hot-dipped galvanizing line are only 10 years old. That's why Cleveland-Cliffs supplies 2.5 times more steel to the automotive industry than the second largest supplier or more than the second plus the third combined. Case in point, our all-in cash cost of HBI in Q3 was $187 per net ton, a number much better than the cost projected when we first approved the construction of the plant a few years ago. The $45 million that we paid in vaccination bonus this quarter was by far our best use of cash. And we are pleased that we reached above 75% vaccination rate across our entire footprint, beating by a large margin the percentage of vaccinated local population in all communities we operate. Soon, we look forward to welcoming another 600 Cliffs employees from the FPT acquisition.

Therefore, even under the current bearish futures curve for HRC, our average selling price should be much higher next year than it has been this year, leading to the expectation of another year of outstanding EBITDA, cash flow generation and debt reduction in 2022.

0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Automation as a percentage of service desk ticket volume increased 500 basis points sequentially and 300 basis points year-over-year in the second quarter. During the second quarter, strong revenue growth continued in C&I, with cloud revenue specifically growing 28% year-over-year. We're seeing early stage traction with ECS services expansion, with revenue from these services up 2% year-over-year. We signed a contract with one of the largest financial services institutions in Brazil during the quarter, for consulting and application services for their ClearPath Forward and related application environment, including development and modernization relating to the integration of more than 90 systems to support the institution's mortgage processing operations. Our efforts across segments resulted in total company TCV being up 50% year-over-year in the second quarter and 24% sequentially. Total company Pipeline was up 2% sequentially, though down 3% year-over-year. However, as of the end of July, Pipeline was up 8% versus the end of the first quarter this year and 2% versus the end of the second quarter last year. Although total company last 12 months voluntary attrition was 12.9% in the second quarter, versus 10.4% in the first quarter, the second quarter level was 210 basis points lower than the prior-year period, and 480 basis points lower than the pre-pandemic level in the second quarter of 2019. Our open positions filled internally increased 13% since year-end 2020. Applicants for open position increased 30% sequentially. Our time-to-fill positions decreased 25% since year-end 2020, and referral based hiring has increased significantly relative to last year. Revenue grew 18% year-over-year and 1% sequentially, supported by revenue growth in each of our segments. DWS revenue grew 10% year-over-year, driven in part by growth in revenue from our new proactive experienced solutions and the early results of the new partnerships that Peter mentioned. DWS revenue was also up 4% sequentially. Our emphasis within C&I on cloud work for our targeted sectors is also yielding positive results, demonstrated by revenue growth for the segment of 10% year-over-year and 1% sequentially. Within C&I, cloud revenue was a key driver of growth, up 28% year-over-year in the quarter. ECS segment revenue grew significantly year-over-year, up 40% and showed a 1% sequential increase. The growth was driven in part by higher license revenue than anticipated based on higher volumes than projected in the quarter, Additionally, ECS services revenue grew 2% year-over-year. As we've previously noted, we expect ECS license revenue to be split 55% and 45% between the first and second half of the year, with the third quarter assumed to be the lightest of the year. As a reminder, the prior year first half/second half split was 40% and 60%, with 40% of the full year segment revenue coming in the fourth quarter. Total company backlog was $3.3 billion as of the end of the second quarter relative to $3.4 billion as of the end of the prior quarter. Of the $3.3 billion, we anticipate $375 million will convert into revenue in the third quarter. As a result, we're reaffirming our full year guidance range of 0% to 2% year-over-year revenue growth. This metric was up 950 basis points year-over-year to 9.7%, supported by year-over-year improvements to gross margin in each of the segments. DWS gross margin increased 840 basis points year-over-year to 15.2%. DWS gross margin was also up 210 basis points sequentially. C&I gross margin improved 730 basis points year-over-year to 12.5% and was up 280 basis points sequentially, helped by higher cloud revenue and the same real estate and workforce management cost efficiencies that I note for DWS. ECS gross margin increased 1,430 basis points year-over-year to 61.3%, helped by flow-through of strong ECS license revenue driven by the renewals and volume increases that I noted earlier against the relatively fixed cost base. ECS gross margin was roughly flat sequentially with both periods over 61%. I've highlighted in previous discussions that pre-reinvestment, we were targeting $130 million to $160 million of run rate savings exiting 2021. Approximately $35 million of the annualized actual savings was included in the second quarter results, and we believe the full amount of savings will be realized by the end of next year. The metric was down 80 basis points sequentially in the quarter, even factoring in retention-focused salary increases that we implemented during the period. During the second quarter, we also successfully achieved our goal of removing $1.2 billion in gross pension liabilities from the balance sheet. In conjunction with the final actions to achieve this, we recognized a non-cash settlement charges of approximately $211 million or $2.37 per diluted share, which was the only reason that our net loss from continuing operations was $140.8 million or $2.10 per diluted share. The improvements to non-GAAP operating profit also flowed through to adjusted EBITDA, which increased 125% year-over-year to $94.4 million. Adjusted EBITDA margin increased 860 basis points year-over-year to 18.2%, and non-GAAP diluted earnings per share increased significantly to $0.68 from a loss of $0.15 in the prior year period. capex for the second quarter was $23 million, down 35% year-over-year, reflecting the continuation of our capital-light strategy and our focus on integrating best-of-breed solutions to enhance our client offerings and help optimize software development costs. Cash from operations improved $56 million year-over-year and was positive at $42 million. Free cash flow improved $69 million year-over-year to a positive $19 million, and adjusted free cash flow improved $92 million to a positive $55 million. As a result, and in addition to affirming revenue guidance, we're also reaffirming our guidance ranges for these two metrics at 9% to 10% and 17.25% to 18.25%, respectively. We're also forecasting our capex spend for the year to be lower than initially anticipated and now is expected to be approximately $115 million. Other full year cash flow expectations are the following: we anticipate cash taxes to be approximately $45 million to $55 million, and we expect restructuring payments to be approximately $65 million to $70 million. Additionally, as we noted in January, working capital is currently at a run rate use of approximately $20 million to $30 million, which we still believe will improve over time.

We're seeing early stage traction with ECS services expansion, with revenue from these services up 2% year-over-year. Total company Pipeline was up 2% sequentially, though down 3% year-over-year. However, as of the end of July, Pipeline was up 8% versus the end of the first quarter this year and 2% versus the end of the second quarter last year. The growth was driven in part by higher license revenue than anticipated based on higher volumes than projected in the quarter, Additionally, ECS services revenue grew 2% year-over-year. As a result, we're reaffirming our full year guidance range of 0% to 2% year-over-year revenue growth. In conjunction with the final actions to achieve this, we recognized a non-cash settlement charges of approximately $211 million or $2.37 per diluted share, which was the only reason that our net loss from continuing operations was $140.8 million or $2.10 per diluted share. Adjusted EBITDA margin increased 860 basis points year-over-year to 18.2%, and non-GAAP diluted earnings per share increased significantly to $0.68 from a loss of $0.15 in the prior year period.

0 0 1 0 0 1 1 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 1 0 1 0 0 0 0 0 0 0

Organic growth declined by 11.7% or $424 million, which includes a decline in our third-party service costs of $194 million. Our EBIT margin in the third quarter was 15.6% as compared to 13.1% in the third quarter of 2019, driving year-over-year growth in operating profit and net income. Year-to-date, we generated $1.1 billion in free cash flow and paid dividends of $423 million. Creative precision marketing and strategy teams from across 17 different markets put together the winning proposal. Our OPEN2.0 actions focus on four key tenets, culture, collaboration, clients and community, and is organized into eight action items. To date, through a combination of new hires and promotions, we've expanded the OPEN leadership team from 15 to 25 diversity champions and we're making good progress on our initiatives. Turning to slide 4 for a summary of our revenue performance for the third quarter, our organic revenue performance was negative $424 million or 11.7% for the quarter. The decrease was an improvement from the unprecedented decrease of 23% in the second quarter and was in line with our internal expectations throughout the quarter. The impact of foreign exchange rates increased our revenue by 0.5% in the quarter versus a slightly negative impact we anticipated. And the impact on revenue from acquisitions net of dispositions was relatively flat or a decrease of 0.3%. As a result, our reported revenue for the third quarter decreased 11.5% to $3.2 billion when compared to Q3 of 2019. Turning back to slide 1, our reported operating profit for the quarter was $501 million, up from $473.3 million in Q3 of last year. The results for the quarter included the benefit of reductions in salary and related costs, which increased operating profit by $68.7 million, related to reimbursements and tax credits under government programs in several countries, including the U.S., Canada, the U.K., Germany, France and others. Operating margin for the quarter increased 250 basis points to 15.6% compared to point 13.1% in Q3 of last year. Excluding the benefit of the reductions in salary and related costs from the government reimbursements and tax credits, operating margin for the quarter increased 40 basis points to 13.5%. EBITA for the quarter was $522 million and EBITA margin was 16.3% compared to 13.6% in Q3 of last year. Excluding the benefit of the reductions in salary and related costs previously referred to, EBITA margin for the quarter increased 50 basis points to 14.1%. You will recall we estimated that the severance and real estate actions taken in the second quarter would generate approximately $230 million in savings over the second half of 2020. We also expected to generate additional savings in excess of $75 million in the second half from reductions in discretionary costs. As for the details, our salary and service costs are variable and fluctuate with revenue. Salary and related service costs declined by $223 million in the quarter, reflecting both the impact of our staffing reductions during the second quarter and the impact of the benefits from government reimbursements and tax credits discussed previously. Third-party service costs, which include expenses incurred with third-party vendors when we act as a principal, when we're performing services for our clients, primarily related to our events, field marketing and merchandising and media businesses, decreased by $194 million in the quarter or 20%. In comparison, the decrease in third-party service costs in the second quarter year-over-year was nearly $400 million or 40%. Occupancy and other costs, which are less linked to changes in revenue, declined by approximately $18 million, again reflecting the decrease in the cost structure from the actions taken in the second quarter and from our people not being in our offices during the quarter for the most part. And SG&A expenses declined by $7 million in the quarter. Net interest expense for the quarter was $48.5 million, down $800,000 versus Q3 last year and up $1.3 million compared to Q2 2020. When compared to the third quarter of 2019, our gross interest expense was down $8.4 million resulting from debt refinancing actions over the last 12 months. This includes the impact of the additional $600 million of 10-year 4.2% senior notes that we issued as liquidity insurance in early April of this year. As we've discussed on our previous calls this year, these actions reduce the effective interest rate on our senior debt by 60 basis points when compared to Q3 of 2019. This reduction was offset by a decrease in interest income of $7.6 million versus Q3 of 2019, primarily due to lower interest rates. When compared to the second quarter of 2020, interest expense increased slightly by $700,000, while interest income was down $600,000. As we enter the final quarter of the year, we expect that our refinancing activity over the past year plus will continue to more than offset the increase in interest expense, resulting from the issuance of the 4.2% notes this past April. We expect net interest expense to increase in Q4 of 2020 by approximately $10 million compared to Q4 of 2019, largely driven by an estimated reduction in interest income. Our effective tax rate for the quarter was 26.7% in line with our expectations. For the nine months ended September 30, 2020, the rate was 28.5%, an increase from 26% for the comparable period in 2019. Excluding the impact of these items, the year-to-date effective rate was 26.3%, which was in line with our expectations. We anticipate that our effective tax rate for the fourth quarter will approximate 27%, excluding the impact of share-based compensation items, which we cannot predict because it is subject to changes in our share price. Earnings from our affiliates totaled $2.9 million for the quarter, up a bit versus Q3 of last year. And the allocation of earnings to the minority shareholders was $21.6 million during the quarter, relatively flat with the prior year. As a result, net income for the third quarter was $313.3 million, up 8% or $23.1 million when compared to Q3 of 2019. Our diluted share count for the quarter decreased 1.6% versus Q3 of last year to 215.8 million shares, resulting from share repurchases prior to the suspension of our share repurchase program, which we announced toward the end of March. As a result, our diluted earnings per share for the third quarter was $1.45, which is an increase of $0.13 or 9.8% when compared to our Q3 earnings per share for last year. These repositioning charges totaled $278 million, which reduced our year-to-date net income by $223 million and diluted earnings per share by $1.03. Additionally, our results for the nine-months ended September 30 include the benefit of reductions in salary and related costs, which increased operating profit by $117.8 million related to reimbursements and tax credits under the government programs we've previously discussed. Our reported revenue for the third quarter was $3.2 billion, down $417 million or 11.5% from Q3 of 2019. These third-party service costs, which fluctuate directly with changes in revenue, declined across all of our disciplines by just under $200 million in Q3 of 2020 versus Q3 of 2019. The impact of changes in exchange rates increase reported revenue by 0.5% or $18 million in revenue for the quarter. Looking forward, if currencies stay where they currently are, we anticipate that the FX impact would slightly increase our reported revenue by approximately 50 basis points in Q4. And for the full year, the FX impact would be negative by about 50 basis points. The impact of our recent acquisition of DMW in the U.K. that we completed at the beginning of the third quarter, net of our disposition activity, decreased revenue by $11.3 million in the quarter or 0.3%, which was in line with the estimate we made entering the quarter. Inclusive of the disposition activity through September 30 and not including any acquisitions or dispositions we may complete before the end of the year, we estimate the projected net impact of our acquisition and disposition activity will reduce reported revenue by approximately 50 basis points in the fourth quarter of 2020. Our organic revenue decreased approximately $424 million or 11.7% in the third quarter when compared to the prior year. For the second quarter, the split was 56% for advertising, and 44% for marketing services. As for the organic change by discipline, advertising was down 11.7%, with our media businesses seeing a significant improvement organically compared to the second quarter, when media activity slowed considerably. CRM consumer experience was down 19% for the quarter. The strongest performance in the discipline came from our precision marketing agencies, which were down globally around 5%. CRM execution and support was down 19.4% as our field marketing and non-profit consulting businesses lagged for the quarter. PR, while mixed by market, was down 3.4%. And our healthcare agencies continued to turn in strong performances across the portfolio, this quarter up organically 3.8% with growth across all geographic regions. You can see the quarterly split was 55% in the U.S., 3% for the rest of North America, 10% in the U.K., 17% for the rest of Europe, 12% for Asia-Pacific, 2% in Latin America and 1% for the Middle East and Africa. In reviewing the details of our performance by region on slide seven, organic revenue in the second quarter in the U.S. was down $227 million or 11.4%, which is an improvement over the Q2 results when organic revenue fell by over 20% domestically. Outside the U.S., our other North American agencies were down just under 8% or $8 million. Our U.K. agencies were down $43 million or 12.5%. The rest of Europe was down 9.6% organically, a significant improvement over Q2 when organic revenue fell nearly 30%. Ireland, the Netherlands and Spain were down between 10% and 20%, while France continued to lag behind the other markets. Organic revenue growth in Asia-Pacific for the quarter was negative 12.8%. Latin America was down 22.3% or $22 million organically in the quarter, driven by the continuing weakness from our agencies in Brazil. Turning to slides eight, nine and 10, we present our mix of revenue by our clients' industry sector. Turning to our cash flow performance on slide 11, you can see that in the first nine months of 2020, we generated $1.14 billion in free cash flow, excluding changes in working capital, down when compared to the same period in 2019. But the $412 million generated in the third quarter was up a bit versus the $394 million generated during Q3 of 2019. As for our primary uses of cash on slide 12, dividends paid to our common shareholders were $423 million, effectively unchanged when compared to last year. Dividends paid to our noncontrolling interests shareholders decreased to $58 million. Capital expenditures in the first nine months of the year were $50 million, down when compared to last year. Acquisitions, including earnout payments, totaled just under $105 million and stock repurchases, net of the proceeds received from stock issuances under our employee share plans, totaled just over $216 million, a decrease compared to last year, reflecting the suspension of our share repurchase program in mid-March. As a result of our continuing efforts to prudently manage the use of our cash, we were able to generate $284 million in free cash flow during the first nine months of 2020, $141 million of which was generated in the third quarter alone. Turning to our capital structure as of September 30, our total debt was a little under $5.8 billion, up $670 million since this time last year. Major components of the change were the retirement of $600 million of dollar-denominated senior notes, which were due earlier this year, replacing those borrowings with $1.2 billion of 10-year senior notes due in 2030, along with the FX impact of converting the EUR1 billion of euro-denominated borrowings into dollars at the balance sheet date. Versus December 31, 2019, gross debt at the end of the quarter was up $641 million, primarily as a result of the $600 million issuance of U.S.-denominated senior notes in early April. Our net debt position at the end of the quarter was just over $2.5 billion, up about $1.7 billion compared to year-end December 31, 2019, an improvement of $166 million for the comparative prior-year last 12-month period, reflecting the results of our improved cash management. The increase in net debt since December 31, 2019 was a result of the use of working capital of about $1.8 billion, plus the impact of FX on our cash and debt balances, which increased net debt by $120 million. Partially offsetting those increases was the free cash flow we generated during the first nine months of the year of $284 million. Over the past 12 months, our net debt is down $166 million, primarily driven by our excess free cash flow of approximately $500 million. Offsetting this was the reduction in operating capital during the past 12 months of approximately $230 million and the negative impact of FX, which totaled around $55 million. As for our debt ratios, our total debt-to-EBITDA ratio was 3.1 times and our net debt-to-EBITDA ratio was 1.4 times. And finally moving to our historical returns on page 14. For the last 12 months, our return on invested capital ratio was 17.7%, while our return on equity was 37.7%, both reflecting the decline in operating results, driven by the economic effects of the pandemic, as well as the impact of repositioning charges we took back in the second quarter.

Organic growth declined by 11.7% or $424 million, which includes a decline in our third-party service costs of $194 million. Our EBIT margin in the third quarter was 15.6% as compared to 13.1% in the third quarter of 2019, driving year-over-year growth in operating profit and net income. Turning to slide 4 for a summary of our revenue performance for the third quarter, our organic revenue performance was negative $424 million or 11.7% for the quarter. The impact of foreign exchange rates increased our revenue by 0.5% in the quarter versus a slightly negative impact we anticipated. As a result, our reported revenue for the third quarter decreased 11.5% to $3.2 billion when compared to Q3 of 2019. Operating margin for the quarter increased 250 basis points to 15.6% compared to point 13.1% in Q3 of last year. As for the details, our salary and service costs are variable and fluctuate with revenue. As we enter the final quarter of the year, we expect that our refinancing activity over the past year plus will continue to more than offset the increase in interest expense, resulting from the issuance of the 4.2% notes this past April. As a result, our diluted earnings per share for the third quarter was $1.45, which is an increase of $0.13 or 9.8% when compared to our Q3 earnings per share for last year. The impact of changes in exchange rates increase reported revenue by 0.5% or $18 million in revenue for the quarter. Our organic revenue decreased approximately $424 million or 11.7% in the third quarter when compared to the prior year. As for the organic change by discipline, advertising was down 11.7%, with our media businesses seeing a significant improvement organically compared to the second quarter, when media activity slowed considerably.

1 1 0 0 0 0 1 0 1 0 1 0 0 1 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 1 0 0 0 0 1 0 0 0 0 1 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Consolidated sales of almost $232 million improved 2.3% versus the prior year or 4.1% when adjusted for the divestiture of SMS last year. metal coatings generated another excellent quarter with sales up 15.4% to over $133 million and infrastructure solutions sales down 11% at about $99 million. We generated net income of over $21 million and earnings per share of $0.85 per diluted share, reflecting the resiliency of our businesses and the dedication of our people. We also benefited from lower interest expense and a lower tax rate of 22% for the third quarter. In line with our strategic commitment to value creation, we repurchased over 148,000 shares for $7.6 million and distributed $4.2 million in dividends. In metal coatings we achieved 24.5% in operating margins on sales of $133 million. This resulted in operating income being up over 14% from the previous year. We were down about 8% when considering the impact of the SMS divestiture. The infrastructure solutions segment delivered operating income of over $9 million, with operating margins improved 140 basis points to 9.3% as compared to the prior year. We anticipate annual sales to be in the range of $865 million to $925 million and earnings per share at $3 to $3.20 per diluted share. Bookings or incoming orders in the third quarter were $248 million, a $53.6 million or 28% increase over the third quarter of the prior year. Our bookings-to-sale ratio remained consistent with last quarter, 107% and well above the book-to-sales ratio of 0.86 for the same quarter last year. Third quarter fiscal 2022 sales were $231.7 million, $5.1 million or 2.3% higher than the prior-year third quarter sales of $226.6 million. Year over year, for the third quarter, metal coatings segment sales were up $17.8 million and were partially offset by lower sales in the infrastructure solutions segment, mostly in the industrial segment where we took significant actions to restructure the business in the middle of last year. The business generated gross profit of $57 million compared with gross profit of $54.7 million in the third quarter of the prior year. Our gross margin was 24.6% for the third quarter compared with gross margin of 24.1% in the third quarter of last year as business in both the segments continue to improve. Operating income for the quarter was $30.1 million compared with $27.9 million in the third quarter of the prior year, a $2.2 million or 8% improvement year over year. Our earnings per share was $0.85 or $0.09 higher than last year's third quarter reported earnings per share of $0.76 and adjusted earnings per share of $0.80 in the prior-year third quarter. The prior year was impacted by our loss on the divestiture of southern mechanical services or SMS. Third quarter EBITDA of $39.8 million was flat compared with EBITDA in the third quarter of the prior year. Year-to-date sales through the third quarter of fiscal 2022 were $678 million, a 5.4% increase from last year's third quarter, year-to-date sales -- from last year's third quarter year-to-date sales of $643 million. Excluding the impact of SMS divestitures, sales would have increased 8.6% year over year on a pro forma basis. Fiscal 2022 year-to-date net income of $62.4 million was $38.9 million or 166% above the prior year-to-date reported net income of $23.5 million and $23.1 million or 58.9% above the adjusted net income from the prior year-to-date period, wherein the company had recorded impairment and restructuring charges net of tax of $15.8 million. EPS on a year-to-date diluted share basis is $2.48 compared with $0.90 reported in the prior year and $1.50 on an adjusted basis. Current year-to-date earnings per share improved $0.98 or 65.3% over the year-to-date 2021 results. On a gross basis, outstanding debt at the end of the quarter was $192 million, consisting of $150 million on our 7- and 12-year senior notes and $42 million outstanding on our revolving credit facility. This reflects a $13 million increase in borrowings from the end of the last fiscal year. Year to date, we have deployed $19.1 million in capital investments and anticipate capital investments of roughly $32 million this year, slightly below our previous estimate of $35 million. We repurchased 7.6 million in outstanding stock during the quarter and year-to-date have repurchased 712,000 shares or $28.9 million. Through the nine months ended November 30, 2021, cash flows generated from operations was $49.7 million, down $9.7 million or 16.4% from the same period in the prior year. We remain committed to our growth strategy around metal coatings and achieving 21% to 23% operating margins with galvanizing performance being quite steady, while we continue to improve Surface Technologies.

We generated net income of over $21 million and earnings per share of $0.85 per diluted share, reflecting the resiliency of our businesses and the dedication of our people. We anticipate annual sales to be in the range of $865 million to $925 million and earnings per share at $3 to $3.20 per diluted share. Third quarter fiscal 2022 sales were $231.7 million, $5.1 million or 2.3% higher than the prior-year third quarter sales of $226.6 million. Our earnings per share was $0.85 or $0.09 higher than last year's third quarter reported earnings per share of $0.76 and adjusted earnings per share of $0.80 in the prior-year third quarter.

0 0 1 0 0 0 0 0 0 1 0 0 1 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0

Total sales from continuing operations were $1.7 billion, a decrease of 19.4%, same-restaurant sales decreased 20.6% and diluted net earnings per share from continuing operations were $0.74. The last two weeks of the quarter negatively impacted our same-restaurant sales by approximately 200 basis points as we quickly went from 97% of our dining rooms being opened in the middle of the quarter to only 80% being open at the end of the quarter. Our teams have been operating in this environment for 10 months, and they have become very adept at adjusting to the ever-changing COVID restrictions, but it's still not easy. Our brands benefit from the technology platform Darden provides, allowing each of them to compete more effectively by harnessing the power of our digital tools, including the 25 million email addresses in our marketing database. More than 55% of our off-premise sales during the quarter were fully digital transactions where guest ordered and paid online. And at Olive Garden, 20% of our total sales for the quarter were digital. Olive Garden same-restaurant sales declined 19.9% as capacity restrictions continue to limit their top-line sales. Olive Garden began November with 56 dining rooms closed, and that number accelerated to 208 by the end of the month. However, they were able to deliver strong average weekly sales during the quarter of more than 73,000 per restaurant, retaining 80% of last year's sales. Additionally, off-premise sales grew 83% in the quarter, representing 39% of total sales. Same-restaurant sales declined 11.1%. Almost 20% of their restaurants grew same-restaurant sales in the quarter. Finally, LongHorn grew off-premise sales by more than 175%, representing 22% of total sales. For the second quarter, total sales were $1.7 billion, a decrease of 19.4%. Same-restaurant sales declined 20.6%, EBITDA was $206 million and diluted net earnings per share from continuing operations were $0.74. We estimate that this downward shift in sales over the last two weeks negatively impacted operating income by approximately $15 million. Food and beverage expense was 30 basis points higher than last year, primarily driven by investments in food quality and increased to-go packaging. Restaurant labor was 140 basis points lower than last year with hourly labor improving by over 310 basis points, driven by operational simplification. This was partially offset by deleverage and management labor due to sales declines and $3 million of emergency pay net of retention credits as we reinstated our emergency pay program for our team members impacted by dining room closures. Restaurant expense per operating week was 13% lower than last year, driven by lower repairs, maintenance and utilities expenses. However, sales deleverage resulted in restaurant expense as a percent of sales coming in 170 basis points higher than last year. We reduced marketing spend by almost $50 million this quarter with total marketing 210 basis points favorable to last year. Restaurant level EBITDA margin was 17.9%, 140 basis points above last year despite the sales decline of 19%. General and administrative expenses were negatively impacted by $8 million of mark-to-market expense on our deferred compensation. Our hedge reduced income tax expense by $6.4 million, resulting in a net mark-to-market reduction to earnings after-tax this quarter of $1.7 million. The effective tax rate of 8.3% this quarter was lower by 5.1 percentage points due to the tax benefits from the deferred compensation hedge I just mentioned. After adjusting for this, the normalized effective tax rate for the second quarter would have been 13.4%. Our Fine Dining segment profit margin of 18.8% was impressive, although below last year, driven by a 30% sales decline. We ended the second quarter with $770 million in cash and another $750 million available in our untapped credit facility, giving us over $1.5 billion of available liquidity. We generated over $150 million of free cash flow in the quarter and improved our adjusted debt to adjusted capital to 58% at the end of the quarter, well within our debt covenant of 75%. The board declared a quarterly cash dividend of $0.37 per share, 50% of our Q2 diluted earnings per share within our long-term framework for value creation. As of today, we have approximately 77% of our restaurants operating with at least partial dining room capacity versus a peak of 97% in the middle of the second quarter. We expect total sales to be between 65% and 70% of prior year levels, resulting in total sales of between $1.53 billion and $1.65 billion, EBITDA between $170 million and $210 million and diluted net earnings per share from continuing operations between $0.50 and $0.75 on a diluted share base of 132 million shares. And consistent with our messaging last quarter, we continue to believe we can achieve 100% of our pre-COVID EBITDA dollars at approximately 90% of pre-COVID EBITDA -- pre-COVID sales, while continuing to make appropriate investments in our business. He joined Darden as a Buster at Red Lobster 1984 and has worked extremely hard mastering many functions. Raj began his career at Darden in 2003, and has done an exceptional job in every role he has held.

Total sales from continuing operations were $1.7 billion, a decrease of 19.4%, same-restaurant sales decreased 20.6% and diluted net earnings per share from continuing operations were $0.74. Olive Garden same-restaurant sales declined 19.9% as capacity restrictions continue to limit their top-line sales. Same-restaurant sales declined 20.6%, EBITDA was $206 million and diluted net earnings per share from continuing operations were $0.74. We expect total sales to be between 65% and 70% of prior year levels, resulting in total sales of between $1.53 billion and $1.65 billion, EBITDA between $170 million and $210 million and diluted net earnings per share from continuing operations between $0.50 and $0.75 on a diluted share base of 132 million shares.

1 0 0 0 0 0 1 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0

All in, we delivered enterprise positive same-store sales of 1.3% with strength in retail, helping to compensate for soft, but still positive same-store sales in the wholesale business. Our Sally Beauty retail business in the U.S. and Canada delivered same-store sales growth of 3.7% for the quarter. For the fourth quarter, hair color was up over 22% in Sally Beauty's U.S. and Canadian retail business, with unit growth and increased AUR. We also saw strength in the nail category for Sally Beauty's U.S. and Canadian retail business, which was up 11%. We grew adjusted earnings per share over the prior year by 9%. And we continued our focus on cost controls, cash management and liquidity, and generated over $131 million in free cash flow. Following our fast launch of Ship-From-Store and Same-Day Delivery in Q3, we launched 'Buy Online / Pickup In-Store' at Sally Beauty and it will reach all U.S. stores nationwide within a few weeks. We completed the national rollout of our new Private Label Rewards Credit Card Program to both Sally and BSG customers in the U.S. In just the first month, we had approvals for over 80,000 new card members with a slight weighting to the professional stylists over the retail consumer. We expanded our Ship-From-Store capabilities to 2,400 stores in the U.S. and nine provinces in Canada. Now, let's turn to our thoughts on the current economic environment and our outlook for next year. Additionally, they can find How-To content on our digital sites, starting with Hair Color 101 all the way through more complex application techniques. We will also replatform the BSG digital experience focused firmly on the pro and add further fulfillment options for BSG in the second half of fiscal year 2021. On the BSG side, card benefits include an additional 3% discount on purchases and adds better flexibility for stylists and pros to manage their cash flow and business. Third, as a significant part of our company's history, growth, and current assortment, our Sally Beauty division is partnered with over 25 black-owned brands in our current textured hair category. They increased by 1.3%. Consolidated revenue was $958 million for the quarter, a decrease of less than 1% from the prior year. The increase in same-store sales, led by our Sally Beauty U.S. and Canadian retail business was offset by COVID-19's modest impact on parts of our Beauty Systems Group business during the quarter, and a smaller store base with 23 fewer stores compared to the prior year. Finally, we saw a favorable impact from foreign currency translation of approximately 20 basis points on reported sales. For the fourth quarter, e-commerce sales were $63 million, representing growth of 69% over the prior year, led by our Sally U.S. and Canadian e-commerce platform which delivered growth of over 113%. Retaining these new customers was obviously a key focus for us and in the fourth quarter, we saw repeat purchases from approximately 60% of that new customer group. Similarly, last quarter we saw opportunity from competitor disruptions in the pro-channel where BSG saw 40,000 new hair color customers walk into our stores during the quarter. During the fourth quarter, we saw repeat purchases from approximately 50% of those new customers. Consolidated gross margin for the quarter was 51.1%, which is the highest gross margin rate in at least eight years. This represented a 150 basis point increase as compared to the prior year. Consolidated gross profit for the fourth quarter was $489.1 million, an increase of approximately $10 million from the prior year. As a percentage of sales, selling, general and administrative expenses were 38.3% compared to 37.7% in the prior year, driven primarily by higher e-commerce delivery expenses, which were expected and are something that we're working speedily upon, continued transformation investments and the deleveraging impact of lower sales volume compared to the prior year. GAAP operating earnings and operating margin in the fourth quarter were $119.7 million and 12.5%, respectively, compared to $116.1 million and 12%, respectively in the prior year. After excluding charges related to the company's previously announced restructuring efforts in both years and COVID-19-related income in the current year from a Canadian wage subsidy, adjusted operating earnings and adjusted operating margin were $120.3 million and 12.6%, respectively compared to $115.3 million and 11.9%, respectively in the prior year. GAAP diluted earnings were $0.62 per share and adjusted diluted earnings were $0.63 per share, both compared to $0.58 in the prior year, representing growth of approximately 7% and 9%, respectively as compared to the prior year. In the fourth quarter, the company had net earnings of $70.2 million compared to $69 million in the prior year, an increase of 1.7%. Adjusted EBITDA was modestly higher at $146.6 million in the quarter compared to $144 million in the prior year. Adjusted EBITDA margin also increased to 15.3%. Global Sally Beauty segment same-store sales increased by 1.7% for the fourth quarter. The Sally Beauty business in the U.S. and Canada, which represent 80% of the segment sales for the quarter had a same-store sales increase of 3.7% in Q4. Europe had a decrease in same-store sales for the quarter, while Latin America had a significant decline in same-store sales, given approximately 15% of the stores were closed for more than half the quarter due to COVID-19. Our global Sally Beauty segment generated revenue of $577 million in the quarter, an increase of about 1% compared to the prior year, driven primarily by the increase in same-store sales, a favorable foreign exchange impact of approximately 40 basis points, partially offset by 42 fewer stores compared to the prior year. Our global Sally Beauty e-commerce business continued to show strength with growth of 86% in the quarter, led by our U.S. and Canadian e-commerce platforms, which delivered growth of 113%. For the quarter, gross margin for the accounting segment landed at 57.6%, an increase of 180 basis points compared to the prior year. We saw Sally Beauty business in the U.S. and Canada also hitting a record gross margin level of 61%. Segment operating earnings were $103.9 million in the quarter, an increase of 10.6% compared to the prior year, for all the reasons that I've just discussed. Segment operating margin increased to 18% compared to 16.4% in the prior year. Total segment same-store sales increased by 0.6% for the quarter. First, the COVID-19-related shut-downs of California salons in many counties in July and August had an unfavorable impact of approximately 90 basis points on the segment's same-store sales. Net sales for the segment were $381 million in the quarter, a decrease of 3.3% compared to the prior year. Finally, we saw an unfavorable foreign exchange impact of approximately 10 basis points. BSG's e-commerce platform grew by 55% for the fourth quarter driven by consistent demand throughout the quarter. BSG's gross margin increased by 60 basis points to 41.2% in the quarter, driven primarily by fewer promotions, but partially offset by lower vendor allowances. Segment operating earnings for BSG were $50.6 million, a decrease of 14.4% compared to the prior year, driven primarily by the decrease in net sales, but partly offset by the increased gross margin rate. Segment operating margin declined to 13.3% compared to 15% in the prior year. During the fourth quarter, the company delivered cash flow from operations of $153 million, an increase of 31% compared to the prior year. Payments for capital expenditures in the quarter totaled $21 million as we continued to invest against our business transformation. Free cash flow was $131 million in the quarter, which represented a 67% increase as compared to the prior year. During the fourth quarter, the company used a portion of its cash to reduce its debt levels by $445 million, including paying off its outstanding balance on its revolving line of credit by $375 million, the entire FILO loan balance of $20 million and $50 million of the fixed portion of its Term Loan B. The company did not repurchase any shares during the quarter. In addition, the company also completed a small acquisition in Quebec, Canada, which added 10 stores, 17 direct sales consultants and exclusive distribution rights to premier professional hair color and hair care brands such as Wella Professional and Goldwell. At the end of the fourth quarter, the company remains in a very strong liquidity position with $514 million cash on the balance sheet and a zero balance on its $600 million revolving line of credit. Generally, the company ended the quarter with a leverage ratio of 2.88 times, reflecting our significant cash balance. For comparison purposes, the leverage ratio that we often cite, as defined in our loan agreement, where the impact of cash on hand is capped at $100 million for net debt calculation purposes was 3.79 times. For the full fiscal year, consolidated same-store sales decreased by 8.1% due almost entirely to COVID. Consolidated net sales were $3.51 billion, a decrease of 9.3%, driven primarily by the impact of COVID-19 shut-downs, operating 23 fewer stores and an unfavorable impact from foreign currency translation of approximately 10 basis points. Global e-commerce sales grew by 103% compared to the prior year, once again led by our U.S. and Canadian e-commerce platforms, which delivered growth of 184%. GAAP diluted earnings per share for the full fiscal year were $0.99, a decline of 56.2% compared to the prior year, driven primarily by the disrupted operations caused by COVID-19. Adjusted diluted earnings per share, excluding COVID-19 net expenses in the current year and charges related to the company's transformation efforts in both years, were $1.22, a decline of 46% compared to the prior year. For the full fiscal year, cash flow from operations was $427 million, an increase of 33% compared to the prior year. Net payments for capital expenditures totaled $111 million. Operating free cash flow was $316 million, an increase of 39% compared to the prior year. For the full fiscal year, the company repurchased 4.7 million shares at an aggregate cost of $61.4 million. Currently, of our 450 stores in Europe, approximately 180 stores are completely closed due to COVID-19 restrictions with the remaining stores either fully open or operating curbside, where permissible. Given all of this, we are not able to provide detailed financial guidance for fiscal 2021. The company will, however, take advantage of the current leasing environment and relocate approximately 70 stores. As we grow increasingly confident that the environment has stabilized to our satisfaction, we will consider deploying additional excess cash to reduce our debt levels in the direction of moving our leverage ratio to 2.5 times.

Our Sally Beauty retail business in the U.S. and Canada delivered same-store sales growth of 3.7% for the quarter. Following our fast launch of Ship-From-Store and Same-Day Delivery in Q3, we launched 'Buy Online / Pickup In-Store' at Sally Beauty and it will reach all U.S. stores nationwide within a few weeks. Now, let's turn to our thoughts on the current economic environment and our outlook for next year. We will also replatform the BSG digital experience focused firmly on the pro and add further fulfillment options for BSG in the second half of fiscal year 2021. GAAP diluted earnings were $0.62 per share and adjusted diluted earnings were $0.63 per share, both compared to $0.58 in the prior year, representing growth of approximately 7% and 9%, respectively as compared to the prior year. During the fourth quarter, the company used a portion of its cash to reduce its debt levels by $445 million, including paying off its outstanding balance on its revolving line of credit by $375 million, the entire FILO loan balance of $20 million and $50 million of the fixed portion of its Term Loan B. The company did not repurchase any shares during the quarter. Given all of this, we are not able to provide detailed financial guidance for fiscal 2021.

0 1 0 0 0 0 1 0 0 1 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0

Adjusted earnings per share totaled $1.30, up 34% year-over-year, marking the best third quarter in our company's history. Net revenues totaled a record $1.8 billion and, on a pro forma basis, increased 11% versus last year, with all three of our business segments contributing to the strong year-over-year growth. Total transaction revenues grew 13%, while total recurring revenues, which accounted for nearly half of our business, increased by 10%. Third quarter adjusted operating expenses totaled $755 million, including $35 million related to Bakkt, which, after successfully completing its merger with Victory Park, recently began trading on the NYSE. Adjusting for Bakkt, third quarter operating expenses would have been $720 million, in the middle of our guidance range, while operating -- or while our adjusted operating margin would have been 60%, up over 100 basis points year-over-year. Looking to the fourth quarter, we expect adjusted operating expenses to be between $737 million to $747 million. Relative to the full year outlook provided on our second quarter call, the fourth quarter is now expected to include approximately $10 million related to the Bakkt stub period and $10 million to $15 million of performance-related compensation as we expect to reward our employees for their contribution to the strong results we are once again on track to achieve in 2021. Record year-to-date free cash flow has totaled nearly $2 billion. These strong cash flows, along with the divestment of our $1.2 billion stake in Coinbase, has enabled us to reduce leverage to under 3.25 times at the end of September, nearly a full year ahead of schedule. As a result, we expect to resume share repurchases, including up to $250 million in this year's fourth quarter. In addition, we announced in October that we have agreed to sell our stake in Euroclear for EUR709 million or approximately $820 million. Third quarter net revenues totaled $959 million, an increase of 16% year-over-year. This strong performance was driven by a 30% increase in our interest rate business and a 38% increase in our energy revenues, including 34% increase in our oil complex, a 73% increase in European natural gas revenues and a 72% increase in revenues related to global environmental products. Importantly, total open interest, which we believe to be the best indicator of long-term growth, is up 18% versus the end of last year, including 11% growth in energy and 28% growth across our financial futures and options complex. Recurring revenues, which include our exchange data services and NYSE listings, increased 6% year-over-year, including 10% growth in our listings business. Looking to the fourth quarter, we expect recurring revenues in our Exchange segment to be between $330 million and $335 million. Third quarter revenues totaled $477 million, a 6% increase versus a year ago. Recurring revenue growth, which accounted for nearly 90% of segment revenues, also grew 6% in the quarter. Within recurring revenues, our fixed income, data and analytics business increased by 5% year-over-year, including another double-digit growth in our index franchise, while other data and network services grew 9% driven by continued customer demand for additional network capacity. Looking to the fourth quarter, we expect that our recurring revenues will improve sequentially to a range of $415 million to $420 million and that full year revenue growth will be approximately 6%, at the high end of our guidance range. Despite a double-digit decline in industry origination volumes, our Mortgage Technology business grew 7% year-over-year and achieved record revenues of $366 million. While third quarter transaction revenues declined slightly, they were more than offset by a 33% growth in our recurring revenues, which, at $143 million, once again exceeded the high end of our guidance range and accounted for nearly 40% of total segment revenues. While these secular growth trends have been a clear tailwind for our recurring revenues, there is also opportunity to drive accelerating adoption across our transaction-based businesses such as our closing solutions, where revenue increased by 30% in the third quarter. Looking to the fourth quarter guidance, we expect that recurring revenues will once again grow sequentially and be in a range of $147 million to $152 million. At the midpoint, this represents growth of approximately 25% year-over-year, which is on top of 20% growth achieved in last year's third quarter. We also generated strong cash flows, reduced leverage to under 3.25 times, announced the divestment of our stake in Euroclear and successfully took back public on the NYSE. And today, cleaner energy sources, including global natural gas and environmentals, make up approximately 40% of our energy revenues and have grown 12% on average over the past five years. Revenues in our TTF markets have grown 38% on average over the last five years, including 84% growth in the third quarter. Energy consumption is expected to double over the next 30 years, yet carbon emissions are expected to be reduced by half. Our comprehensive offering and the efficiencies that it delivers positions us well to execute on what we believe to be a $1 billion opportunity. Today, only a fraction of Mortgage Technology customers take our AIQ solution, and we continue to have strong sales success cross-selling to existing customers even if they're not on our loan origination system, including one of the largest depositories in the U.S. And while still an early opportunity at under $100 million in revenue today, the efficiencies that our data analytics provide position us well to continue executing against what we think is a $4 billion opportunity. Flywheel effect that our leading technology and data provides, combined with the cross-sell that our broad connectivity offers, generates an array of opportunities for us to grow a business that at $1.4 billion today is only a fraction of the $10 billion opportunity. It's collaborative efforts, innovative solutions and strategic capital allocation like this that have driven our growth for the past 20 years and which lay the foundation for continued growth well into the future.

Adjusted earnings per share totaled $1.30, up 34% year-over-year, marking the best third quarter in our company's history. Net revenues totaled a record $1.8 billion and, on a pro forma basis, increased 11% versus last year, with all three of our business segments contributing to the strong year-over-year growth. Third quarter net revenues totaled $959 million, an increase of 16% year-over-year. Looking to the fourth quarter, we expect recurring revenues in our Exchange segment to be between $330 million and $335 million. Looking to the fourth quarter, we expect that our recurring revenues will improve sequentially to a range of $415 million to $420 million and that full year revenue growth will be approximately 6%, at the high end of our guidance range. Looking to the fourth quarter guidance, we expect that recurring revenues will once again grow sequentially and be in a range of $147 million to $152 million.

1 1 0 0 0 0 0 0 0 0 0 1 0 0 0 1 0 0 0 1 0 0 0 1 0 0 0 0 0 0 0 0 0

A global Fortune 500 CPG company headquartered in Europe connected to Teradata Vantage on Azure in the quarter. And finally, we brought in a significant Vantage on Azure win when that Fortune 100 CPG company. As an example, our customers can combine data and vantage with customer sentiment data from social media and the opportunity information in Salesforce, as well as support and call logs from ServiceNow to build a complete customer 360 profile that can help them and their customers increase sales and reduce churn. Saudi Telecom continues to drive success with its Teradata platform and has tripled its capacity for analytics to Teradata over the last 18 months. We were named by IDC in the FinTech top 100 Rankings as number 34, Inclusion and Netflix, recognizing our compelling value proposition, as the leading supplier of technology to the financial services industry. We delivered $365 million in recurring revenue, which was above our guidance range, and was 6% growth year-over-year. We generated $47 million in incremental ARR this quarter, and exited the quarter with a total ARR balance of $1.501 billion, an 8% increase over Q3 of 2019. Perpetual revenue came in as expected at $17 million, slightly up from the prior year. Consulting revenue declined to 28% as expected, as we continue to refocus our consulting business on higher margin engagements to drive increased software consumption within our customer base. Turning to gross margins, recurring revenue gross margin was 70.4%, up 70 basis points from the third quarter of 2019 and up 60 basis points sequentially from Q2. Perpetual revenue gross margins came in well ahead of our expectations at 58.8%, driven by a large US customer purchasing hardware on a perpetual basis. Consulting margin was 13.9% versus 9% in the third quarter of 2019, as improved utilization, improved cost management, and better price realization helped drive significant improvement over last year. Total gross margin came in at 61%, up 500 basis points year-over-year and ahead of our expectation. We expect Q4 gross margins to sequentially decline and be approximately 400 basis points higher than Q4 of the prior year. Total operating expenses were down 2% year-over-year, and came in lower than expectations, primarily due to certain expenses shifting to Q4, as well as our focus on expense management. Free cash flow in the third quarter was $58 million, which contributed to year-to-date free cash flow of $171 million, well ahead of prior year, actual full year free cash flow of $89 million and our beginning of the year expectations of $150 million. From these actions, we expect to incur restructuring charges of approximately $70 million to $80 million, of which approximately $28 million was recorded in Q3 and the remaining balance to be recognized in Q4 and 2021, with the vast majority of it in Q4 of 2020. Cash usage for these restructuring actions is expected to be approximately $75 million, of which approximately $50 million is expected to be used in the fourth quarter of 2020. We currently estimate these actions will reduce annual expenses by approximately $80 million to $90 million. As a result of our strong free cash flow quarter in Q3, and our expectation for another strong cash flow generation quarter in Q4, we expect our Q4 free cash flow after including the aforementioned Q4 restructuring cash payments to be breakeven to slightly positive, resulting in our full year free cash flow to be approximately $170 million to slightly higher for the full year, which is a significant increase over the prior year free cash flow of $89 million. For Q4, we expect recurring revenue in the range of $371 million to $373 million. We continue to expect our full year tax rate to be approximately 23% and our full year share count of approximately 111 million weighted average shares. Taking all this into account, we expect non-GAAP earnings per share in the $0.23 to $0.25 range. In terms of ARR, we expect another quarter of strong incremental ARR growth and expect ARR to grow 8% or higher for the full year.

We delivered $365 million in recurring revenue, which was above our guidance range, and was 6% growth year-over-year. For Q4, we expect recurring revenue in the range of $371 million to $373 million. Taking all this into account, we expect non-GAAP earnings per share in the $0.23 to $0.25 range.

0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 1 0

Our 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. We 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. But this $500 million note is only part of a holistic solution for MFA and a very strategic partnership with Apollo and Athene. Apollo 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. Pro 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. We 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. Apollo 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. Prices 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. CRT 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. MFA 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. In 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. And 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. During 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. Our 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. Book value decreased to $4.34 per share at March 31 and economic book value decreased to $4.09 per share. Page 7 of the earnings deck shows portfolio activity from December 31 to March 31 and then again from March 31 to May 31. As 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. In 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. With the committed $1.65 billion in our existing securitizations of approximately $500 million, we will have over $2 billion of such financing. Spreads 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. One, at present we have undistributed REIT taxable income from 2019 of $0.05 per share. Two, estimated REIT taxable income or ordinary income for the first quarter of 2020, is approximately $0.10 per share. In 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. While 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. At June 12, our unrestricted cash was $242 million. Book value as of May 31 -- GAAP book value is estimated to have increased by approximately 2% to 3% versus March 31.

Apollo 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. Apollo 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. Our 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. With the committed $1.65 billion in our existing securitizations of approximately $500 million, we will have over $2 billion of such financing.

0 0 0 1 0 0 1 0 0 0 0 0 0 1 0 0 0 0 1 0 0 0 0 0 0 0

Reconciliations of the non-GAAP metrics to the nearest GAAP metrics are included in ZipRecruiter's public S-1 filing and in our Form 10-Q. GDP growth exceeded 6%. According to July's jobs report released on August 6, 2021, we've now recovered almost 75% of the jobs lost during the pandemic. We responded to the increased demand from employers by scaling up our sales and marketing efforts, resulting in nearly 170,000 quarterly paid employers participating in our marketplace, an all-time high. Revenue of $183 million this quarter was also the highest in ZipRecruiter's history. Specifically, we grew headcount in the second quarter by 140, which is a record high for our company. We now have over 1,000 ZipRecruiter employees. As Ian mentioned, our second-quarter revenue of $183 million represented a record quarter, exceeding the midpoint of our guidance range by $23 million. This represents a 109% growth year over year and 46% growth over the first quarter of 2021. At almost 170,000, this represented an improvement of 120% year over year, an another all-time high for ZipRecruiter. GAAP net loss was $53 million in the second quarter of 2021 compared to net income of $21 million in the prior year. Adjusted EBITDA loss was $2 million with a negative 1% margin compared to $26 million in adjusted EBITDA or a 29% margin in the prior year. In the second quarter of 2021, we incurred $64 million in stock-based compensation expense, $42 million of which related to the modification and expense of employee RSUs to allow for vesting in the direct listing, which impacted net loss. Similarly, in the second quarter of 2021, we incurred $32 million in general and administrative expenses related to the direct listing completed during the quarter, which impacted both net loss and adjusted EBITDA loss. Even with the investments discussed earlier and onetime expenses for our direct listing, we ended the quarter with over $153 million in cash, an increase of $18 million from the first quarter of 2021. Additionally, we secured a $250 million line of credit, none of which was drawn as of the quarter end. Following the largest increase in quarterly revenue in ZipRecruiter's history, we expect $185 million of revenue in Q3 of 2021 at the midpoint, which translates to 80% year-over-year growth. We're pleased to increase our midpoint guidance for the full year to $658 million, up from the $590 million shared last quarter. This increased 2021 revenue guidance equates to 57% growth over 2020 at the midpoint. Our full-year midpoint guidance for adjusted EBITDA of $34 million equates to an adjusted EBITDA margin of 5%. This is above our pre-COVID adjusted EBITDA margin of 2% back in 2019 despite our investments to achieve substantially higher growth rate this year.

Revenue of $183 million this quarter was also the highest in ZipRecruiter's history. As Ian mentioned, our second-quarter revenue of $183 million represented a record quarter, exceeding the midpoint of our guidance range by $23 million.

0 0 0 0 1 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0

For the second consecutive quarter, we delivered net sales growth of 17%, and we maintained our gross profit margin at 41.7%, consistent with the first quarter. And compared to last year, we increased diluted earnings per share by 22%. At the same time, these teams have also managed to introduce around 220 new, or significantly upgraded, lighting and lighting control products over the last two years. This quarter, the board of directors authorized additional capacity for share repurchases to increase our remaining authorization from 3 million to 5 million shares. Since May of 2020, we have repurchased approximately 13% of our shares outstanding. Net sales were $909 million, an increase of 17% compared to the prior year. Gross profit was $379 million, an increase of $43 million or 13% over the prior year. Gross profit as a percent of sales was 41.7%, a decrease of 170 basis points from 43.4% in the prior year, but flat sequentially from the first quarter of 2022. Reported operating profit was $102 million, an increase of $11 million or 12% over the prior year. Reported operating profit margin was 11.3% of net sales for the second quarter of fiscal 2022, a decrease of 40 basis points over the prior year. Adjusted operating profit was $123 million, an increase of $14 million or 13% over the prior year. Adjusted operating profit margin was 13.5% of net sales, a decrease of 50 basis points against the prior year. Diluted earnings per share of $2.13 increased $0.39 or 22% over the prior year. And adjusted diluted earnings per share of $2.57 increased $0.45 or 21% over the prior year. Our share repurchase program favorably impacted adjusted diluted earnings per share by $0.06. During the quarter, our Lighting and Lighting Controls segment saw sales increase, 17% to $863 million over the prior year. This was driven by the improvements within our independent sales network, which grew approximately 12%, and an increase of 5% in our direct sales network. Additionally, sales in the corporate account channel increased approximately 105% over the prior year. We also had growth in our other channel of 83% over the prior year, due primarily to the acquisition of OSRAM. Sales in the retail channel declined approximately 2% in the current quarter. ABL's operating profit for the second quarter of 2022 was $117 million, an increase of 14% versus the prior year, with operating margin declining 30 basis points to 13.5%. Adjusted operating profit of $127 million improved 13% versus the prior year, with adjusted operating profit margin declining 50 basis points to 14.7%. For the second quarter of 2022, sales in Spaces increased approximately 16% to $50 million, reflecting growth in both the Distech and Atrius. Spaces operating profit in the second quarter of 2022 increased approximately $400,000 to $1.2 million. Adjusted operating profit of $6 million increased approximately $1 million versus the prior year as a result of the strong sales growth and continued investment in the business. Our business model continues to be highly productive, generating $127 million of net cash flow from operating activities in the first half of fiscal 2022. This was a decrease of $85 million compared to the prior year due primarily to an increased investment in working capital primarily related to inventory. We also invested $24 million or 1.3% of net sales and capital expenditures during the first six months of fiscal 2022. As a result, since May of 2020, we have bought back approximately 13% of our company shares at an average price of approximately $120 per share. In the last 15 months, we have strategically introduced six price increases in addition to driving product and productivity improvements.

Diluted earnings per share of $2.13 increased $0.39 or 22% over the prior year. And adjusted diluted earnings per share of $2.57 increased $0.45 or 21% over the prior year.

0 0 0 0 0 0 0 0 0 0 0 0 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

As you saw from the numbers, Chubb had an outstanding quarter, highlighted by record operating earnings and underwriting results, expanded margins and double-digit premium revenue growth globally, the best in over 15 years, powered by commercial P&C and supported by continued robust commercial P&C rate movement. We have averaged double-digit commercial P&C growth over the past 10 quarters. Core operating income in the quarter was $1.62 billion or $3.62 per share, again, both records. The published P&C combined ratio was 85.5% and current accident year was 85.4% compared to 87.4% prior year. Current accident year underwriting income of $1.2 billion was up 27%. While on the other side of the balance sheet, adjusted net investment income of $945 million, also a record, was up nearly 9.5% from prior year. P&C premiums were up 15.5% globally, with commercial premiums, excluding agriculture, up nearly 21%. The 15.5% growth for the quarter and 12.6% for the first six months were the strongest growth we have seen since 2004. In North America, Commercial P&C net premiums grew over 16%. New business was up 24%, and renewal retention remained strong at 96.5% on a premium basis. In our North America major accounts and specialty commercial business, net premiums grew over 13%, with each division, major accounts, Westchester and Bermuda having its largest quarter in history in terms of written business. And the standout was our middle market and small commercial division, which had the biggest quarter in about 20 years, driven by record new business growth and strong retentions. Overall rates increased in North America commercial by a strong 13.5%, which is on top of a 14.7% rate increase last year for the same business, making the two-year cumulative increase over 30%. Loss costs are currently trending about 5.5% and vary up or down depending upon line of business. General commercial lines loss costs for short-tail classes are trending around 4%, while long-tail loss costs, excluding comp, are trending about 6%. In major accounts, rates increased in the quarter by about 16% on top of almost 18% prior year for the same business, making the two-year cumulative increase over 36%. Risk management-related primary casualty rates were up almost 9%. General casualty rates were up 21% and varied by category of casualty. Property rates were up nearly 12% and financial lines rates were up almost 20%. In our E&S wholesale business, the cumulative two-year rate increase was 39%, comprised of an increase of circa 18% this quarter on top of 18% prior year second quarter. Property rates were up about 16.5%. Casualty was up about 21%, and financial lines rates were up over 21%. In our middle market business, rates increased in the quarter over 9.5% on top of over 9% last year, making the two-year cumulative increase 20%. Rates for property were up over 10.5%. Casualty rates were up 11%, excluding workers' comp, and comp rates were down at about 0.5%. Financial Lines rates were up over 17.5% in our middle market business. Commercial P&C premiums grew an astonishing 33% on a published basis or 24% in constant dollars. International retail commercial grew 27% and our London wholesale business grew 60%. Retail commercial P&C growth varied by region, with premiums up 36.5% in our European division, with equally strong growth in both the U.K. and on the continent. Asia Pacific was up over 29%, while our Latin America commercial lines business grew over 14.5%. In our international retail commercial P&C business, the two-year cumulative rate increase was 35% comprised of increases this quarter and prior year of 16% each. In our U.K. business, rates increased in the quarter by 18%, on top of a 26% rate increase prior year for the same business, making the two-year cumulative increase 48%. In Australia, the two-year cumulative rate was 42%, comprised of an increase of 23% this quarter, on top of 16% prior year. In our London wholesale business, rates increased in the quarter by 13%, on top of a 20% rate increase prior year, so making the two-year cumulative 36%. Outside the U.S., loss costs are currently trending 3%, so that varies by class of business and country. Our international consumer business grew 13% in the quarter, and that's on a published basis. It grew 5% in constant dollars. Breaking that down for you, international personal lines grew 20% on a published basis, while our international A&H grew 6.5%, but it was essentially flat in constant dollar. Net premiums in our North America high net worth personal lines business were up over 2.5%. Our network client segment, the heart of our business, grew almost 8% in the quarter. Overall retention remains strong at over 94%. And we achieved positive pricing, which includes rate and exposure of 13% in our homeowners portfolio. Loss cost inflation in homeowners is currently running about 11%. Lastly, in our Asia-focused international life insurance business, net premiums plus deposits, were up 55% in the quarter, while net premiums in our Global Re business grew up -- grew over 32%. We have over $75 billion in capital and a AA-rated portfolio of cash and invested assets that now exceeds $123 billion. Our record underwriting and investment performance produced strong positive operating cash flow of $3.1 billion for the quarter. Among the capital-related actions in the quarter, we returned $2.3 billion to shareholders, including $1.9 billion in share repurchases and $352 million in dividends. Through the six months ended June 30, we returned $3.1 billion, including $2.4 billion in share repurchases and dividends of $704 million. We recently announced a onetime incremental share repurchase program of up to $5 billion through June 2022. As Evan said, adjusted pre-tax net investment income for the quarter was a record $945 million, higher than our estimated range, benefiting from increased corporate bond call activity and higher private equity distributions. We increased the size of our investment portfolio by $2.4 billion in the quarter after buybacks due to strong operating cash flow and high portfolio returns, including $694 million in pre-tax unrealized gains from falling interest rates. At June 30, our investment portfolio remained in an unrealized gain position of $3.3 billion after tax. Based on the current interest rate environment and a normalization of bond calls and private equity distributions, we continue to expect our quarterly run rate to be approximately $900 million. Our annualized core operating ROE and core operating return on tangible equity were 11.5% and 17.7%, respectively, for the quarter. The gain from the fair value mark this quarter of $712 million after tax, we have increased core operating ROE by five percentage points to 16.5% and core operating income by $1.59 per share to $5.21. Book and tangible book value per share increased by 4.2% and 5%, respectively, from the first quarter due to record core operating income and realized and unrealized gains of $1.4 billion after tax in our investment portfolio, which again primarily came from declining rates and mark-to-market gains on private equities. The increase in book value per share also reflects the impact of returning over $2 billion to shareholders in the quarter. Our pre-tax P&C net catastrophe losses for the quarter were $280 million, principally from severe U.S. weather-related events. We had favorable prior period development in the quarter of $268 million. This included a charge from molestation claims of $68 million pre-tax compared with $259 million in the prior year. Excluding this charge, we had favorable prior period development in the quarter of $336 million pre-tax, split approximately 30% in long-tail lines, principally from accident years 2017 and prior and 70% short-tail lines. For the quarter, our net loss reserves increased $1.1 billion in constant dollars and our paid-to-incurred ratio was 80%. Our core operating effective tax rate was 15.8% for the quarter, which is within our expected range of 15% to 17% for the year.

As you saw from the numbers, Chubb had an outstanding quarter, highlighted by record operating earnings and underwriting results, expanded margins and double-digit premium revenue growth globally, the best in over 15 years, powered by commercial P&C and supported by continued robust commercial P&C rate movement. Core operating income in the quarter was $1.62 billion or $3.62 per share, again, both records. The published P&C combined ratio was 85.5% and current accident year was 85.4% compared to 87.4% prior year. P&C premiums were up 15.5% globally, with commercial premiums, excluding agriculture, up nearly 21%. The 15.5% growth for the quarter and 12.6% for the first six months were the strongest growth we have seen since 2004. Our pre-tax P&C net catastrophe losses for the quarter were $280 million, principally from severe U.S. weather-related events.

1 0 1 1 0 0 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0

The good news is that Polaris continues to outperform as evidenced by our record year-to-date sales and earnings performance, with sales and earnings up 24% and 59%, respectively, versus 2020. Additionally, our PG&A and International businesses performed well, with PG&A sales growing 8% and our International business delivering strong sales growth of 21% in Q3. We are taking aggressive steps to combat these headwinds, but given we are 10 months into the year, the impact of any additional countermeasures may not be realized until sometime next year. Our third-quarter North American retail sales were down 24% from the positive 15% reported in the third quarter of 2020. This resulted in retail being down 13% on a two-year basis. Snowmobiles retail was down 30% in the quarter. Dealer inventory levels ended the quarter down 46% on a year-over-year basis and down 75% when compared to pre-COVID levels in Q3 of 2019. That's over $300 million of additional costs that we did not anticipate when the year began. During the quarter, we introduced 15 new ORV models, product enhancements and limited edition models, including a new midsized RANGER with more comfort, storage and a noticeably quieter ride. And for our younger riders, we introduced a new RZR 200 EFI with industry-leading safety and technology features, including standard hard doors and high visibility front and rear LED lights, digital speed limiting to control top speeds and geo-fencing to allow parents to control where the vehicle is allowed to go. Third-quarter sales were flat on a GAAP and adjusted basis versus the prior year, finishing at $1.96 billion. Third-quarter earnings per share on a GAAP basis was $1.84. Adjusted earnings per share was $1.98, which was down from the $2.85 we reported in Q3 last year as expected. Adjusted gross margins were down approximately 360 basis points on a year-over-year basis, mostly due to increased input costs from logistics, commodities, plant inefficiencies and labor. Adjusted operating expenses were up 4%, primarily due to increased research and development expenditures and, to a lesser degree, increased selling and marketing costs during the quarter. Income from financial services declined 38% during the quarter, primarily due to lower retail credit income. And finally, the tax rate finished at 20.5%, compared to 23.7% in the third quarter last year due to favorable adjustments related to research and development credits taken in the quarter. Average selling prices for all segments were up, ORV increased about 5%; Motorcycles were up approximately 10%; Adjacent Markets increased about 1%; and Boats was up approximately 30% for the quarter. Our International sales increased 21% during the quarter, with all regions and segments growing sales as many economies continued to gain traction as they recovered from earlier COVID shutdowns. Currency added 3 percentage points to the International growth for the quarter. Parts, garments and accessories sales increased 8% during the quarter, with strong demand across all segments and categories in that business, particularly parts and accessories. Total company sales are now expected to finish at approximately $8.15 billion for the year. At this projected sales level, full-year adjusted earnings per share guidance for 2021 is expected to finish at approximately $9 per diluted share. While we are disappointed that we have to update our guidance, keep in mind, this is $0.25 per share higher than the high end of our original 2021 guidance range. Moving down the P&L, we have made the following revisions: adjusted gross profit margins are now expected to be down approximately 70 basis points, which is at the lower end of our previous guidance. Mike mentioned the $300 million-plus increase in input costs since the beginning of the year, but just in the third quarter alone, our input costs from logistics, ocean and truck rates, commodities, labor rates and plant inefficiencies increased over $100 million or approximately 580 basis points when compared to the prior-year third quarter. Adjusted operating expenses are now expected to improve 90 basis points as a percentage of sales versus last year, again, at the lower end of our previous guidance range, driven by the lower sales growth expectations, partially offset by prudent cost management. And we're adjusting our income tax provision rate expectations for the full year to be in the range of 22% to 22.5%, an improvement over our previously issued guidance, reflecting the flow-through of favorable tax adjustments related to the R&D credit. We are expanding our Monterrey facility by over 400,000 square feet, adding approximately 35% more capacity for RZR in general over the next year to accommodate the model year '22 vehicles, the new RZRs coming in Q4 and additional ORV models expected to launch over the next couple of years. For Boats, we added approximately 55,000 square feet of manufacturing capacity in Elkhart, Indiana to meet the demand for Bennington, and we brought the Syracuse, Indiana facility back online to support strong demand for our Hurricane deck boats. Year-to-date third quarter operating cash flow finished at $153 million, down significantly, compared to the same period last year. As such, we've made the decision to divest our GEM and Taylor-Dunn businesses, with the expectation that the transaction will be completed by year-end.

Third-quarter earnings per share on a GAAP basis was $1.84. Adjusted earnings per share was $1.98, which was down from the $2.85 we reported in Q3 last year as expected. Average selling prices for all segments were up, ORV increased about 5%; Motorcycles were up approximately 10%; Adjacent Markets increased about 1%; and Boats was up approximately 30% for the quarter. Total company sales are now expected to finish at approximately $8.15 billion for the year. At this projected sales level, full-year adjusted earnings per share guidance for 2021 is expected to finish at approximately $9 per diluted share. As such, we've made the decision to divest our GEM and Taylor-Dunn businesses, with the expectation that the transaction will be completed by year-end.

0 0 0 0 0 0 0 0 0 0 0 1 1 0 0 0 0 1 0 0 0 1 1 0 0 0 0 0 0 0 0 1

Today, we will discuss our operational and financial results for the three and 12 months period ended December 31, 2020. Despite the challenges of the global pandemic, we were able to increase our global customer base by 66,000 RCEs during the year to reach 440,000 RCEs at year-end, a 17% increase and a record for our Company. In the fourth quarter, historically our slowest sales quarter, RCEs decreased slightly from 442,000. Nevertheless, we added 28,000 domestic RCEs during the year to end the year with 337,000 RCEs despite a fourth quarter decline from 350,000 RCEs. At GRE International, we increased our RCEs served by 58% during 2020 and a 12% during the fourth quarter to reach 103,000 RCEs at year-end. That imbalance led the PUC to manipulate spot market prices, moving them from the usual sub-$50 per megawatt hour to $9,000 per megawatt hour, where they were artificially maintained by ERCOT, a Texas grid manager, for five full days around the clock. Just to give you an idea of how completely unprecedented this was, in the previous 10 years, energy prices only hit $9,000 without government interference for a total of 16 hours. For reference, in the week before the storm, ancillary charges amounted to approximately $2 per megawatt hour, while during the storm the prices spiked to over $20,000 per megawatt hour. While we were fully hedged for colder-than-normal seasonal weather having bought power well in excess of what our customers demand on a normal winter day, the unprecedented increase in ancillary charges, the artificially sustained period of $9,000 per megawatt hour supply pricing and the extraordinarily high usage led to significant losses. At this moment, the information we received to date from our supplier BP indicates that our costs as a result of the storm stand at approximately $12.8 million. Prices on the Japan Electric Power Exchange surged to $2,390 per megawatt hour, becoming, for a while, the most expensive market in the world. With only four of its 33 nuclear power plants operating, the country is heavily relying on LNG to meet short-term burst in demand. We have better information on the cost in Japan and our RCE base is smaller than in Texas, so we can say with some confidence that the hit in Japan will be approximately $2.5 million. My remarks today cover our financial results for the three and 12 months ended December 31, 2020. Fourth quarter 2020 consolidated revenue increased by $21 million to $103 million, primarily reflecting the consolidation of Orbit Energy in the fourth quarter of this year. Quarterly revenue at Genie Retail Energy, or GRE, our domestic REP segment, decreased $4 million to $70 million, primarily on decreased gas sales. At GRE International, the segment that comprises our REP operations outside of the U.S., revenue in the fourth quarter increased by $26 million to $32 million, reflecting the inclusion of Orbit results, following its consolidation and increases in meters served at Lumo Energia, our Scandinavian REP. Genie Energy Services fourth quarter revenue decreased from $1.2 million to $876,000 as revenue realized in the year ago quarter pursuant to Prism Solar's contract for solar panels with JPMorgan Chase was not repeated. Full year 2020 consolidated revenue increased $64 million to $379 million, a record for our Company. GRE contributed $19 million of the consolidated revenue increase, posting revenue of $305 million as the COVID-driven shift to work-from-home drove higher per meter electricity consumption. GRE International revenue increased $33 million to $50 million in 2020, primarily reflecting the consolidation of Orbit results in the fourth quarter. Genie Energy Services revenue increased $12 million to $24 million in 2020, almost exclusively because of the JPMorgan contract revenues that were recognized in the first half of 2020. Consolidated gross profit in the fourth quarter, predominantly generated by GRE, was $22 million, unchanged from the year ago quarter. Gross profit at GRE decreased by $4.3 million to $17.7 million as gross profit per kilowatt hour sold decreased and was only partially offset by increases in per meter electricity consumption. GRE International contributed $4.4 million in gross profit compared to negative gross profit of $288,000 in the year ago quarter. Full year consolidated gross profit increased $14.8 million to $97.7 million. Gross profit increased $7.6 million at GRE on the strength of increased per meter consumption post-COVID, which was offset by a decrease in gross profit per kilowatt hour. GRE International's growth and the consolidation of Orbit drove a $6.8 million increase in the segment's full-year margin contribution to $7.2 million. SG&A spend in the fourth quarter of 2020 increased $3.4 million to $22.7 million and full year 2020 SG&A increased $4.3 million to $77 million. Our fourth quarter consolidated loss from operations was $1.1 million, compared to income from operations of $2.3 million in the year ago quarter, primarily as a result of the decrease in margin per kilowatt hour sold at GRE. GRE generated income from operations of $5.1 million, a decrease from $8.2 million in the year ago quarter, reflecting the decrease in margin per kilowatt hour sold as well as decreased gas sales. GRE International's loss from operations was $2.9 million compared to $3.2 million in the year ago quarter. Full year 2020 income from operations increased $9.5 million and $19.3 million. The improvement was primarily generated at GRE, where income from operations increased $9.2 million to $36.4 million on increased consumption, partially offset by narrowed margin per kilowatt hour sold. GRE's loss from operations narrowed to $7.6 million from $8.1 million. Consolidated adjusted EBITDA in the fourth quarter was $693,000 compared to $815,000 in year ago quarter. For the full year, the increase in residential electricity consumption in GRE drove an increase in GRE's full-year adjusted EBITDA to $37.3 million, which in turn [Indecipherable] consolidated adjusted EBITDA by $13.9 million to $24 million. Genie Energy's earnings per diluted share increased to $0.01 from nil in the year ago quarter and for the full year 2020 increased to $0.44 from $0.10 in 2019. At December 31, we had cash, cash equivalents, restricted cash and short-term investments totaling $48.3 million. Working capital totaled $38.2 million. We again have no debt at quarter end and non-current [Phonetic] liabilities totaled just $3.8 million.

Quarterly revenue at Genie Retail Energy, or GRE, our domestic REP segment, decreased $4 million to $70 million, primarily on decreased gas sales.

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Year-to-date, free cash is up over 60% from prior-year levels and over 200% of adjusted net income. Combined, the year-over-year organic sales decline of 10.5% in the quarter, improved from 13.5% decline last quarter. The positive sales momentum has continued into the early part of fiscal third quarter with organic sales through the first 17 days of January down a mid-single digit percent over the prior year. Our technical position and long-term opportunity is further supplemented by the progress we are making in expanding our next-generation automation solutions following three acquisitions in the past 16 months. Unusual items in the quarter include a $49.5 million pre-tax non-cash impairment charge on certain fixed, leased and intangible assets, as well as non-routine costs of $7.8 million pre-tax related to an inventory reserve charge, facility consolidations and severance. Now turning to our results, absent these in our non-routine charges during our second quarter, consolidated sales decrease 9.9% over the prior year quarter. Acquisitions contributed a half point of growth and foreign currency was favorable by 0.1%. Netting these factors, sales decreased 10.5% on an organic basis with a light number of selling days year-over-year. While still down as compared to the prior year quarter, sales exceeded our expectations with average daily sales rates at nearly 3% sequentially on an organic basis and above the normal seasonal trends for the second straight quarter. Following a slow start to the quarter in early October, sales activities strengthened sequentially and remained firm late in the quarter, despite typical seasonal slowness and rising COVID cases across the U.S. Comparative sales performance was relatively consistent across both segments as highlighted on slide 6 and 7. Sales in our Service Center segment declined 10.4% year-over-year or 10.5% on an organic basis when excluding the modest impact from foreign currency. The year-over-year organic decline of 10.5% improved notably relative to the mid-teens to low 20% declines we saw of the prior two quarters, while the segment's average daily sales rates increased nearly 4% sequentially from our September quarter and over 8% from the June quarter. Within our Fluid Power and Flow Control segment, sales decreased 8.5% over the prior year quarter, with our recent acquisition of ACS contributing 1.6 points of growth. On an organic basis, segment sales declined 10.1%, reflecting lower demand across various industrial, off-highway mobile and process-related end markets. Moving to gross margin performance, as highlighted on Page 8 of the deck, adjusted gross margin of 28.9% declined 8 basis points year-over-year, or 19 basis points when excluding non-cash LIFO expense, $0.9 million in the quarter and $1.9 million in the prior year quarter. On an adjusted basis, selling, distribution and administrative expenses declined 11.2% year-over-year or approximately 12% when excluding incremental operating cost associated with our ACS acquisition. For your reference, our second quarter depreciation and the amortization expense of $13.5 million is a good quarterly run rate to assume going forward. Adjusted EBITDA in the quarter was $68.3 million, down 8.4% compared to the prior year quarter, while adjusted EBITDA margin was 9.1%, up 14 basis points over the prior year or virtually flat when excluding non-cash LIFO expense in both periods. On a GAAP basis, we reported an operating loss of $0.14 per share, which includes the previously referenced non-cash impairment and non-routine charges. On a non-GAAP adjusted basis, excluding these items, we reported earnings per share of $0.98, which compared to $0.97 in the prior year quarter. Our adjusted tax-rate during the quarter of 18.6% was below prior year levels of 23%, as well as our guidance of 23% to 25%. We believe the tax rate of 23% to 25% for the second half of fiscal 2021 is appropriate assumption near-term. Cash generated from operating activities during the second quarter was $77.5 million, while free cash flow totaled $72.7 million or approximately 190% of adjusted net income. This was up from $55 million and $48 million respectively, as compared to the prior year quarter and represents record second quarter cash generation. Year-to-date, free cash generation of $151 million is up over 60% for prior year levels and represents a 206% factor of adjusted net income. Given the strong free cash flow performance in the quarter, we ended December with approximately $289 million of cash on hand. Net leverage stood at 2.1 times adjusted EBITDA at quarter-end, consistent with the prior quarter and below the prior year level of 2.5 times. In addition, our revolver remains undrawn with approximately $250 million of capacity and an additional $250 million accordion option. Based on month-to-date trends in January and assuming normal sequential patterns, we would expect fiscal third quarter 2021 organic sales to decline by 3% to 4% on a year-over-year basis. In addition, we expect our recent acquisitions at ACS and Gibson Engineering to contribute approximately $10 million to $11 million in sales during our fiscal third quarter. As it relates to operating costs, based on the 3% to 4% organic sales decline assumption, we would expect selling, distribution and administrative expense of between $170 million and $175 million during our fiscal third quarter. We remain confident on our cash generation potential and reiterate our normalized annual free cash target of at least 100% of net income over a cycle. This includes record cash generation and a 30% reduction in our net debt, our strong cost execution supporting relatively stable EBITDA margins despite the meaningful end market slowdown. We are delivering on our requirements and commitments while moving the organization toward our longer-term next milestone financial objectives of $4.5 billion of revenue and 11% EBITDA margins.

On a GAAP basis, we reported an operating loss of $0.14 per share, which includes the previously referenced non-cash impairment and non-routine charges. On a non-GAAP adjusted basis, excluding these items, we reported earnings per share of $0.98, which compared to $0.97 in the prior year quarter. Based on month-to-date trends in January and assuming normal sequential patterns, we would expect fiscal third quarter 2021 organic sales to decline by 3% to 4% on a year-over-year basis. As it relates to operating costs, based on the 3% to 4% organic sales decline assumption, we would expect selling, distribution and administrative expense of between $170 million and $175 million during our fiscal third quarter.

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 0 0 0 0 0 0 0 0 1 0 1 0 0 0

Driven by solid operations and interest savings from our recent bond financing, first quarter FFO per share, as adjusted for comparability, of $0.56 met the high end of guidance and is 10% higher than the first quarter results in 2020. Additionally, NOI from real estate operations in the quarter was up 6% from a year ago. And AFFO increased an impressive 26%. First quarter leasing results were solid, totaling 258,000 square feet, and second quarter leasing is off to a blistering start. In April, we've completed 662,000 square feet of renewals and vacancy leasing, eclipsing first quarter volume by 2.5 times. Development leasing in the quarter totaled 11,000 square feet. However, we're in advanced negotiations on nearly 900,000 square feet that should close in the coming months. The $600 million 10-year issuance has a 2.75% coupon and was the strongest debt financing in the company's history. The improved outlook for same-property cash NOI and interest savings from the bond refinancing are driving the $0.03 increase in the midpoint of 2021 guidance for FFO per share as adjusted for comparability, which at the midpoint implies 4.7% growth over the elevated 2020 results. First quarter total leasing of 258,000 square feet included 154,000 square feet of renewals. Renewal economics were in line with expectations, with cash rents rolling down 2.2%, annual escalations averaging 2.6% and leasing capital being only $1.93 per square foot per year of term. This month, we renewed 596,000 square feet of expiring leases, achieving an 88% renewal rate. Cash rents on April renewals rolled up 0.5% and carried an average lease term of 4.8 years. To date, we have completed 750,000 square feet of renewal leasing with a 77% retention rate and average lease term -- or an average term of 4.5 years and cash rents rolling flat. Based on our renewal achievement to date, we are increasing our full year retention guidance to a new range of 70% to 75%. We completed 93,000 square feet of vacancy leasing in the quarter and 66,000 square feet in April, bringing our total to 159,000 square feet, and our leasing activity ratio remains strong. One lease to highlight from the quarter was a 2-floor 55,000 square foot lease at 6721 Columbia Gateway with Rekor Systems, a provider of real-time technology to enable AI-driven decisions. Recall that the nonrenewal of that building's anchor tenant a year ago left it 20% leased. This property is now 80% leased with strong demand for the remaining availability. In April, we completed a 7,000 square foot expansion with IntelliGenesis, a cybersecurity defense contractor at 6950 Columbia Gateway, bringing that 2020 redevelopment to 100% leased. Development leasing in the quarter was light at 11,000 square feet at Redstone Gateway. So far in the second quarter, we have 265,000 square feet of development leasing out for signature, and are in advanced negotiations for another 610,000 square feet. We are tracking up to 2.1 million square feet of development opportunities, and are confident we will meet or exceed our one million square foot development leasing goal. During the quarter, we placed 7100 Redstone Gateway into service. Our pipeline of active developments totals 1.4 million square feet that are 85% leased. During the remainder of the year, we expect to place 739,000 square feet of these projects into service, bringing our total for the year to 785,000 square feet. Regarding DC-6, our discussions with the 11.25-megawatt customer continue to progress. First quarter FFO per share as adjusted for comparability of $0.56 met the high end of guidance, driven primarily by operations and interest savings from the recent bond refinancing. Our original plan and guidance for 2021 assumed a $450 million bond issuance to repay or refinance some higher coupon debt. On March 3, we launched a new 10-year offering at initial price talk on credit spreads of 175 basis points. The offering was 8 times oversubscribed with an order book that totaled close to $3.5 billion. Strong demand from many high-quality investors allowed us to upsize the offering to $600 million and significantly drive down the credit spread. The deal priced at 140 basis points over the 10-year treasury, resulting in a 2.75% coupon and a 1% discount. We used the proceeds to retire two higher-cost issuances, blocking in annual interest savings of $7 million. Based on current negotiations, we expect several positive leasing outcomes that increase our forecast of same-property cash NOI from our original midpoint of negative 1% to a new range that is flat at the midpoint. Our increased midpoint of full year FFO guidance of $2.22 implies 4.7% growth over the elevated 2020 results and 4.8% compound growth from 2019.

Driven by solid operations and interest savings from our recent bond financing, first quarter FFO per share, as adjusted for comparability, of $0.56 met the high end of guidance and is 10% higher than the first quarter results in 2020. The improved outlook for same-property cash NOI and interest savings from the bond refinancing are driving the $0.03 increase in the midpoint of 2021 guidance for FFO per share as adjusted for comparability, which at the midpoint implies 4.7% growth over the elevated 2020 results. First quarter FFO per share as adjusted for comparability of $0.56 met the high end of guidance, driven primarily by operations and interest savings from the recent bond refinancing. Our increased midpoint of full year FFO guidance of $2.22 implies 4.7% growth over the elevated 2020 results and 4.8% compound growth from 2019.

1 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 1

Both revenue and adjusted operating income exceeded pre-pandemic levels increasing 14% and 346%, respectively, over fiscal year '20 two years ago and higher operating profit delivered a record Q2 earnings per share of $1.5, compared with a loss of $1.23 last year and positive $0.15 two years ago all on an adjusted basis. Additional highlights include delivering another strong quarter of digital results with double-digit operating profit to achieve a 19% digital penetration. This was driven by a 97% increase in digital revenue compared to fiscal year '20 as we retained almost 80% of last year's volume, which was elevated due to store closures. Next, driving much higher conversion and transaction size to deliver store sales that were almost at pre-pandemic level, increasing gross margin by 640 basis points versus last year and 50 basis points compared to fiscal '20, driven primarily by higher full-price selling, leveraging adjusted SG&A by 230 basis points compared to pre-pandemic levels and further strengthening of our already strong balance sheet and cash position, enabling a balanced approach of investing in our business while also returning capital to shareholders going forward. The current fashion cycle, which has been shifting more to casual products, plays into Journeys' wheelhouse with strengthened the assortment across the board highlighted by the balance in its top 10 brands evenly split in the quarter between casual and fashion athletic. Resulting in online contributing almost 45% of total sales. At the same time, e-commerce revenue grew strongly increasing over 50% compared to pre-pandemic levels, as customers chose the digital channel to engage with the brand. These efforts have helped contribute to an increase of new online customers of more than 100% compared to pre-pandemic levels. Journeys marketing efforts are gaining leverage by focusing on influencers who the team consumer viewed as more authentic creating a more organic experience that further builds upon the trust Journeys have established with this customer This content is being delivered through social media channel and SMS helping to drive a significant increase of 50 plus percent of new online customers. In Q2 adjusted earnings per share of $1.5 compared to $0.15 in fiscal '20. In terms of the specifics for the quarter, consolidated revenue was $555 million up 14% compared to fiscal '20 driven by continued strength in the e-commerce, which is up 97% versus fiscal '20 taking overall digital sales to 19% of our retail business compared to 10% in fiscal '20. With stores open for 97% of the possible days in the quarter, overall store revenue was down only 1% versus fiscal '20. Consolidated gross margin was 49.1% up 50 basis points from fiscal '20 driven by full-price selling partially offset by the mix shift toward licensed brands and higher shipping costs from higher penetration of e-commerce while e-commerce puts pressure on our gross margin rate. Journeys' gross margin increased 220 basis points driven by lower markdowns in both stores and online. Schuh's gross margin decreased 200 basis points due entirely to the higher shipping expense from the shift in the e-commerce channel mix. J&M's gross margin increased 570 basis points, benefiting from fewer markdowns taken on pack and hold inventory and higher full-price selling. Finally the revenue growth of licensed brands typically our lowest gross margin rate negatively impacted the overall mix by 90 basis points. Adjusted SG&A expense was 45.3% a 230 basis point improvement compared to fiscal '20, as we leverage from higher revenue and ongoing actions around expense management. Year to date through Q2, we have negotiated 75 renewals and achieved a 29% reduction in rent expense in North America. This is on top of a 22% reduction for 123 renewals last year. With over 40% of our fleet coming up for renewal in the next couple of years. In summary, the second quarter's adjusted operating income was $21.1 million versus fiscal '20s $4.7 million. All operating divisions achieved higher operating income compared to fiscal '20 led by Journeys nearly 170% increase. Our adjusted non-GAAP tax rate for the second quarter was 25%. Turning now to the balance sheet, Q2 total inventory was down 27% compared to fiscal '20 on sales that were up 14%. Our ending net cash position was $284 million, $70 million higher than the first quarter's level driven by strong cash generation from operations. As a reminder we currently have $90 million remaining on our board authorized share-repurchase plan and we have a solid track record of returning cash to our shareholders. Capital expenditures were $8 million as our spend remains focused on digital and omnichannel and depreciation and amortization was 11 million. For taxes we expect the Q3 tax rate to be around the 25% we saw in Q2. The annual tax rate is expected to be approximately 30%. As a reminder, our target for the year is to identify savings in operating expenses of $25 million to 30 million on an annualized basis or approximately 3% of total operating expenses. The teams have identified over $20 million in savings with the largest amount coming from rent and the remainder in several areas, including increased, selling salary productivity, travel conventions, inner store freight, marketing compensation, and other overheads.

This was driven by a 97% increase in digital revenue compared to fiscal year '20 as we retained almost 80% of last year's volume, which was elevated due to store closures. In terms of the specifics for the quarter, consolidated revenue was $555 million up 14% compared to fiscal '20 driven by continued strength in the e-commerce, which is up 97% versus fiscal '20 taking overall digital sales to 19% of our retail business compared to 10% in fiscal '20. With stores open for 97% of the possible days in the quarter, overall store revenue was down only 1% versus fiscal '20.

0 0 1 0 0 0 0 0 0 0 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

For the fiscal 2022 second quarter, consolidated sales increased 10.3% to $1.64 billion driven by continued robust demand for paints, coatings, sealants, and other building materials. Our second quarter sales growth could have been even stronger if not for continuing supply chain challenges that limited access to certain raw materials and cost us roughly $200 million of lost or deferred sales in the quarter. Organic sales growth was 8.6%, foreign currency translation provided a tailwind of 0.4% and acquisitions contributed 1.3%. Adjusted earnings per share was $0.79 decreasing 26% compared to the strong adjusted diluted earnings per share growth of nearly 40% in the prior-year period. Consolidated adjusted EBIT for the quarter was a $157.3 million decrease of 21%, which was in line with our outlook and as a result of continued material, wage, and freight inflation, as well as supply chain disruptions that were exacerbated by hurricane Ida. We lost the equivalent of nearly 300 production days across RPM facilities globally during the second quarter, which was similar to our lost production days in the first quarter. We partially offset these challenges with price increases, which average in the high single digits across RPM, and continued operational improvements from our map to growth program, which provided $19 million in incremental cost savings. It's also worth noting that we face a difficult comparison to the prior year when consolidated adjusted EBIT increased nearly 30%. Combined sales in these three segments increased more than 18% with roughly 10% being unit volume growth year over year while our Construction Products and Performance Coatings Group generated strong adjusted EBIT growth especially products and consumer group faced extreme supply chain constraints that put pressure on their earnings. In addition, the consumer group faced a difficult comparison to the prior-year period when sales increased more than 21% and adjusted EBIT was up 66%. Case in point 178,000 square foot plant we purchased in September, which is located on 120 acres in Texas. Our Construction Products Group generated all-time record sales of $614.2 million. Sales grew 22% for the quarter the highest rate among our four segments,19.9% was organic. Foreign currency translation provided at 0.3% tailwind and acquisitions contributed 1.8%. The segments adjusted EBIT increased 16.5% to a record level due to volume growth, operational improvements, and selling price increases, which helped offset material inflation. Sales grew 16.9% to a record level reflecting organic growth of 12.2%, a foreign currency translation tailwind of 0.8% and a 3.9% contribution from acquisitions. Adjusted EBIT increased 41.3% to a record level as a result of pricing, volume growth, operational improvements, and product mix. Our specialty products group reported a sales increase of 10% to a record level as its businesses capitalized on the strong demand in the outdoor recreation, furniture, and OEM markets they served. Organic sales increased 9%. Recent acquisitions added 0.4% and foreign currency translation increased sales by 0.6%. Adjusted EBIT decreased 29.4% due to higher raw material and conversion costs from supply disruptions, as well as unfavorable product mix. The resulting production outages negatively impacted segment sales by approximately $100 million. Segment sales decreased 3.3% with organic sales down 3.5% and foreign currency translation of 0.2% despite raw material shortages. The segments fiscal 2022 second quarter sales were still 17.4% above the pre-pandemic levels of the second quarter of fiscal 2020. As Frank mentioned in his opening comments, the consumer group also faced a challenging comparison to the prior-year period when sales increased 21.4% and adjusted EBIT increased 65.8%. In spite of these challenges, we expect to generate double-digit consolidated sales growth in the fiscal 2022 third quarter versus last year's record third quarter sales, which increased 8.1%. The Consumer Group faces a tough comparison to the prior-year period when its sales increased 19.8% and as a result, its sales are anticipated to increase by low single-digit. Consolidated adjusted EBIT for the third quarter of fiscal 2022 is expected to decrease 5% to 15% versus the same period last year when adjusted EBIT was up to 29.7%. We anticipate that earnings will be affected by ongoing raw material, freight, and wage inflation, as well as the impact of raw materials shortages, on sales volume, plus the renewed COVID disruption from the surging Omicron variant.

For the fiscal 2022 second quarter, consolidated sales increased 10.3% to $1.64 billion driven by continued robust demand for paints, coatings, sealants, and other building materials. Adjusted earnings per share was $0.79 decreasing 26% compared to the strong adjusted diluted earnings per share growth of nearly 40% in the prior-year period. In spite of these challenges, we expect to generate double-digit consolidated sales growth in the fiscal 2022 third quarter versus last year's record third quarter sales, which increased 8.1%. We anticipate that earnings will be affected by ongoing raw material, freight, and wage inflation, as well as the impact of raw materials shortages, on sales volume, plus the renewed COVID disruption from the surging Omicron variant.

1 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 1

Our first-quarter adjusted EBITDA of $513 million represented a 79% increase over last quarter, reflecting our first full quarter of results from the former AM USA assets, as well as stronger steel pricing, offset by reduced third-party pellet sales due to the annual maintenance of the Great Lake flocks. In the Steelmaking segment, we sold 4.1 million net tons of steel products, which included 28% hot rolled, 18% cold-rolled, and 33% coated, with the remaining 21% consisting of stainless, electrical, plate, slab, and rail. Our aggregate average selling price of $900 per ton in Q1 is certainly the low point for the year in our forecast, and is lower than our Q4 2020 average, solely because of the different mix associated with the former AM USA plants. DD&A was $217 million for the quarter, and we expect about $840 million on a full-year basis now that purchase price accounting has been further refined. This short-term anomaly had a negative impact on our first quarter of approximately $50 million and will be a $40 million headwind in Q2. After that, the impact will be negligible, creating nearly a $100 million EBITDA tailwind going forward in comparison to the first half of 2021. As for synergies, we have already identified and set in motion $100 million in cost synergies from the AM USA acquisition, some of which will take effect later this year. We are well-positioned to reach our target of $150 million of annual run-rate savings by the end of this year for a total of $310 million from the two combined acquisitions. As was contemplated in the acquisition of AM USA, we had a significant investment in working capital of nearly $650 million during the quarter, due, first, to the completion of the unwind of the ArcelorMittal AR factoring agreement, as well as other acquisition-related cash impacts. Also, we made our deferred pension contribution related to the CARES Act of $118 million in January. With the passage of the most recent stimulus bill and the extended amortization feature, future cash pension contributions will be reduced by an average of $40 million per year over the next seven years. Sustaining capex will be approximately $525 million annually. And by the end of March, we had enough pricing visibility to disclose a $1.2 billion adjusted EBITDA guide for Q2. On the liquidity side, we currently have $200 million in cash and $1.6 billion of availability under our current credit facility. Our ABL debt balance is currently $1.6 billion, and we expect to have this paid off by the end of the year. Based on what we are seeing in the market, we believe our estimates supporting $4 billion of adjusted EBITDA for the year are conservative relative to today's forward curve. Our attitude toward commercial and steel pricing is the main reason behind the massive numbers we are showing for the quarter and guiding for the balance of the year, including $513 million of EBITDA in Q1, $1.2 billion EBITDA next quarter, and $4 billion EBITDA for 2021. For the record, from our proximate years, the median yearly pay of our 25,000 Cleveland-Cliffs employees is $102,000. Since December 9, 2020, we have already added 710 new employees to our workforce. Of all the world CO2 emissions from the steel industry, the U.S. comprises just 2%, while China is responsible for 64%. EAFs make up more than 70% of steel production in our country. Meanwhile, we at Cleveland-Cliffs, will continue to enjoy the steady cost structure of our iron feedstock, our own 100% internally sourced pellets, with decades of iron ore reserves ahead, and our in-house production of HBI, fed by our online and pellet plant. We produced 120,000 tons of recast in the month of March and expect to reach our annual run rate of 1.9 million tons this quarter. Particularly at our EAFs, HBI currently makes up between 20% and 30% of their melt. We completed the blast furnace repair in less than 14 days. Under our latest forecast, we expect to generate a record level of free cash flow in the last nine months of 2021, which will put us at a figure of less than 1 times EBITDA leverage by the end of the year.

Based on what we are seeing in the market, we believe our estimates supporting $4 billion of adjusted EBITDA for the year are conservative relative to today's forward curve. Our attitude toward commercial and steel pricing is the main reason behind the massive numbers we are showing for the quarter and guiding for the balance of the year, including $513 million of EBITDA in Q1, $1.2 billion EBITDA next quarter, and $4 billion EBITDA for 2021.

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 0 0 0 0 0 0 0 0 0

Please turn to Page 4 for a review of the key themes from our third quarter. On a year-over-year basis, our volume and mix was down only 5% compared to a 20% decline in global light vehicle unit production. Planning ahead, we have initiated new structural cost actions that will add to the $35 million benefit from the Accelerate+ program that are expected to carry over in 2022. Our Performance Solutions segment is launching 34 BEV and hybrid programs expected to yield annualized revenues of $200 million. Turning to Page 5. Revenue was $4.3 billion, up 2% year-over-year, driven by our diversified end market mix and includes $1 billion of pass-through substrate sales. Excluding substrates, our value add revenue was $3.3 billion, down 2% year-over-year, excluding the impact of foreign currency exchange rates. As I highlighted on the previous page, this compares favorably to the industry light vehicle production decline of 20% and includes material cost recovery of $110 million. In the third quarter, just over 50% of our business was generated from aftermarket and commercial truck off-highway and industrial applications. Adding the light vehicle portion of our Performance Solutions business, which is agnostic to the vehicles powertrain, 65% of our value-add revenue is unrelated to OE light vehicle ICE technologies. We expect this mix to expand to 80% plus by the end of the decade. Adjusted EBITDA was $279 million and adjusted EBITDA margin was 8.5%. Despite the volatile production environment, we maintained strong liquidity and our third quarter net leverage ratio improved 1.1 times since the end of 2020. On Page 6, we show our enterprise performance. We estimate the value-add revenue impact of the semiconductor shutdowns during the quarter was approximately $400 million and our most important geographies experienced the largest adjustment. Also, our third quarter value-add revenues included $110 million of material cost recovery via price in the quarter, although no margin dollars came with that contribution. On the right side of the page, adjusted EBITDA was $279 million at a value-add margin rate of 8.5%, down 330 basis points with almost half of the year-over-year margin rate decline due to temporary cost actions put in place last year that were not expected to repeat this quarter. In the box on the right, you can see our Accelerate+ restructuring savings more than offset manufacturing inefficiencies associated with the supply chain shortages, which resulted in positive other operating performance of 60 basis points versus the prior year. Let's turn to our motor parts business performance on Page 8. Aftermarket revenue was $769 million, up 4% year-over-year on a constant currency basis on continued strong demand and relative to the second quarter, it is in line with normal seasonality. Adjusted EBITDA for the quarter was $115 million, delivering a 15% EBITDA margin. In addition, the late notice on OE customer production schedule changes, trapped inventory of approximately $250 million as of quarter end. Let's turn to our Performance Solutions segment on Page 9. Third quarter revenue was $686 million, down slightly year-over-year in constant currency. Light vehicle applications, representing approximately two-thirds of the business, were down 10% excluding currency, outperforming industry production by 10 percentage points. Commercial truck off-highway and other applications were up 58% year-over-year and made up almost 20% of revenues. Adjusted EBITDA was $38 million in the third quarter for a margin of 5.5%. Lastly, approximately 80% of our alternative propulsion launches in 2021 are battery electric vehicles. On Page 10, we show Clean Air's results. Clean Air value-add revenues were $897 million and fell 8% year-over-year, excluding foreign currency effects. Light vehicle value-add revenues declined 22% year-over-year. However, commercial truck off-highway and industrial value-add revenues increased 48% year-over-year. Commercial truck off-highway and industrial comprised 27% of the segment's value-add revenues in the third quarter, compared to 19% for all of 2020. Adjusted EBITDA was $137 million. Value-add adjusted EBITDA margin was 15.3% compared to 15.6% in the prior year period. Page 11 has a summary of Powertrain. CTOHI and OE service revenues both expanded more than 20% year-over-year, which helped offset a 13% decrease in light vehicle revenues. Adjusted EBITDA was $74 million and adjusted EBITDA margin was 7.9%. I'll begin my comments on Page 13. As of September 30th, our net leverage ratio was 3.2 times, which represented a 1.1 times improvement from our year-end ratio. Our mid-term net leverage target range is 1.5 to 2 times. We ended the quarter with strong liquidity of $2.1 billion with our revolver undrawn and no significant near-term debt maturities. Page 14 shows our updated 2021 guidance. We have revised our fiscal year 2021 value-added revenue guidance to a range of $13.55 billion to $13.65 billion, which compares to our prior range of $13.8 billion $14.1 billion. Our guidance assumes Q4 global light vehicle production volumes of approximately 16.5 million units, flat with the third quarter, which is more conservative than IHS's most recent Q4 update. We have reduced our 2021 adjusted EBITDA range from $1.25 billion to $1.28 billion from a range of $1.36 billion to $1.44 billion. For the full year 2021, we continue to expect year-over-year savings of $110 million from our Accelerate+ Cost Reduction program. We expect our net debt to improve to approximately $4.3 billion at year-end. As Kevin mentioned, we estimate the trapped inventory approximately $250 million in the third quarter. We have reduced our estimate for full year capex spend by $50 million due to the softer operating environment and our cash taxes are estimated to be approximately $140 million, $10 million lower than prior expectation. Turning to Page 15. We have identified and initiated new projects that we expect will contribute meaningfully in 2022 on top of the $35 million of carryover savings from Accelerate+. In the mid-to-long term, we target a free cash flow to EBITDA ratio in the neighborhood of 25% to 30%. On a go-forward basis, we believe the 65% of our revenue base, not associated with light vehicle IC applications, can outgrow the market and drive above market value-add revenue growth for the entire enterprise as the company transitions to a predominantly non-light vehicle IC revenue mix by the end of the decade.

Revenue was $4.3 billion, up 2% year-over-year, driven by our diversified end market mix and includes $1 billion of pass-through substrate sales. We have revised our fiscal year 2021 value-added revenue guidance to a range of $13.55 billion to $13.65 billion, which compares to our prior range of $13.8 billion $14.1 billion. We have reduced our 2021 adjusted EBITDA range from $1.25 billion to $1.28 billion from a range of $1.36 billion to $1.44 billion.

0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 1 0 0 0 0 0 0 0 0