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I'm on the Slide 2 of the of the deck for those of you following along. So, a couple of months ago, we held our first Investor Day as Raytheon Technologies and that day we laid out our 2025 goals to deliver strong top line growth, margin expansion and at least $10 billion in free cash flow by 2025, all while continuing to invest in our businesses and return significant cash to our shareowners. We continue to be confident in the future because of our strong franchises, the resilient markets in which we operate, our innovative technologies, and our relentless focus on operational excellence and cost reduction, which will drive margin expansion and strong cash flows into the future. And we continue to see encouraging trends across our market. Our confidence in our ability to achieve these targets remain strong and as you saw at the end of May, the Department of Defense released the fiscal year '22 budget request, which was generally in line with our expectations with respect to our portfolio of products and the investments we're making in differentiated technologies, including missile defense, space-based systems, next-generation propulsion and hypersonics. Major RTX programs fared well as -- overall as modernization funding remains at near historic highs. Requested funding for these programs is favorable to the overall DoD modernization request when compared to last year's plan for fiscal year '22. It's also worth noting that the overall classified funding request, which supports a significant part of our Intelligence & Space portfolio was also very well supported. So I'd say we're well positioned with the administration's priorities, driven by our innovative technologies and capabilities to address the evolving threat environment. This is demonstrated of course by the significant awards we received this quarter, which included over $1 billion in classified bookings at RIS and two important franchise wins in our Missiles & Defense business where we were awarded almost $2 billion for the Long-Range Standoff weapon or LRSO, and $1.3 billion for the Next-Generation Interceptor. A thing also we should note that the Patriot franchise remains robust as evidenced by Switzerland becoming the 18th partner nation to select the Patriot air defense system. At the same time, commercial air traffic demand continues to gain momentum across many of our domestic markets as global economies reopen and vaccinations increase. In the U.S. daily travelers throughout the TSA checkpoints have averaged over $2 million per day in July, and that's more than doubled since January of this year. That said, we are monitoring the COVID variants and the impact on travel and there's still work to do on global vaccinations and on international border reopenings. Strong execution against an increasingly favorable backdrop enabled us to deliver top and bottom line growth on both a year-over-year and a sequential basis. So given our performance year-to-date and the recent trends across our end markets, we're going to raise the low end of our full year sales outlook by $500 million to a new range of $64.4 billion to $65.4 billion. And we're also going to raise and tighten our adjusted earnings per share outlook with a new range of $3.85 to $4 per share and we're increasing our free cash flow outlook to a range of $4.5 billion to $5 billion for the year. I'm pleased with the strong orders we saw in the quarter, which grew our company backlog to a record $152 billion and that's a 3% increase since the first quarter. Our defense book-to-bill was a strong 1.12 resulting in a defense backlog of over $66 billion and commercial backlog increased by $3.5 billion in the quarter. On the capital allocation front, we repurchased $632 million on shares bringing us to over $1 billion in share repurchase year-to-date and we're on track to meet our commitment of buying back at least $2 billion of shares for the year. We also continue to execute on the merger integration activities and given our substantial progress and the robust pipeline of opportunities, we're going to raise our gross cost synergy target by another $200 million to $1.5 billion and that $1.5 billion will be realized in the four -- first four years following the merger. That's now 50% more than our original synergy commitment and there's great execution by the team but I would tell you, we're not done yet. Like everything, there's always more to do. In addition to making good progress in our synergy targets, we're also making significant progress on our structural cost reduction projects, which you've heard about back in our May meeting. We have a pipeline with hundreds of opportunities including the previously announced actions that we're working across the business. Let me just give you a couple of examples of what we are doing. And our Collins Aerostructures business has scheduled over 125 lean events this year, and they're focused on specifically reducing the takt time, labor time for the A320neo nacelle. We've invested in lean events such as these throughout the pandemic because they've allowed the Aerostructures business to reduce nacelle manufacturing time by over 75%. Of course, though our normal goal here is about an 87% learning curve, these lean events allow us to exceed that in incredible ways. At Pratt, we continue to build on the overhaul capability and drive turnaround time across the geared turbofan network. The team has made good progress this year, demonstrated a 15% turnaround time, an improvement over the past year. But importantly, they're on track to drive a 30% reduction by the end of this year. These improvements are the direct result to repair infrastructure development and additional productivity improvements across the network, including the application of lean principles in their sharp design as well as automation. Our strong culture of operational excellence is enabled of course, by the core operating system and significant investments in digital technology and other strategic projects. Altogether, these initiatives will save over $5 billion in cost through 2025. So you can see the market fundamentals are strong, we're laser focused on operational excellence and our key franchises are driving strong financial performance. I'm on Slide 4. As you could expect, I'm pleased with where we landed for the quarter. We exceeded our expectations for both adjusted earnings per share and free cash flow. Sales were $15.9 billion, which was at the high end of our outlook range and up 10% organically versus prior year on an adjusted pro forma basis and up 4% sequentially. Our strong performance was driven by the momentum in commercial aerospace and continued growth in defense. Adjusted earnings per share of $1.03 was ahead of our expectations, primarily driven by commercial aftermarket and contract-related settlements at Collins but also better than expected performance at Pratt, RIS and RMD. On a GAAP basis, earnings per share from continuing operations was $0.69 per share and included $0.34 of acquisition accounting adjustments and net significant and/or nonrecurring items. Free cash flow of $966 million exceeded our expectations primarily due to the continuation of better than expected collections and lower than expected capital expenditures. Before I hand it over to Jennifer, let me give you a little color on our synergy progress. We achieved $185 million of incremental gross cost synergies in the quarter, bringing our year-to-date savings to $390 million and given the pace that we realize these synergies on to-date, we're increasing our 2021 cost synergy target by $50 million, which brings our new target to the year -- for the year to $660 million. Collins also achieved nearly $50 million of further acquisition synergies in the quarter, bringing total Rockwell Collins acquisition-related savings to nearly $560 million since the deal closed in November of 2018, and we now expect Collins to meet their $600 million acquisition synergy target in 2021, a year ahead of schedule. So great work by the Collins team on that front. So with that, I'll hand it over to Jennifer to take you through the segment results, and I'll come back and talk a bit about the outlook. Starting with Collins Aerospace on Slide 5. Sales were $4.5 billion in the quarter, up 6% on an adjusted basis driven primarily by the recovery of the commercial aerospace industry, and up 11% on an organic basis. By channel, commercial aftermarket sales were up 24% driven by a 30% increase in parts and repair, a 16% increase in modification and upgrades, and a 15% increase in provisioning. Sequentially, commercial aftermarket sales were up 15% with growth in all three channels most notably provisioning, which grew at 40% and parts and repair, which grew 14%. Commercial OE sales were up 8% from the prior year, driven principally by the recovery of the commercial aerospace industry. Growth in narrow body, regional and business jets was particularly offset by expected declines in wide-body sales. And military sales were down 7% on an adjusted basis to the prior year divestitures and down 1% organically on a tough compare. Recall Collins military sales were up 10% in the same period last year. Adjusted operating profit of $518 million was better than expected and was up $494 million from the prior year, driven primarily by higher commercial aftermarket and OE sales, the benefit of continued cost reduction actions as well as favorable contract settlements that were worth about $50 million. Looking ahead, we continue to expect Collins full year sales to be down-mid to down-low-single digit with higher expected commercial aftermarket volumes offsetting slightly less than expected OE deliveries. And given the favorable mix in the first half of the year, the commercial recovery and the benefit of cost containment measures, we are increasing Collins full-year operating profit outlook to a new range of up $100 million to $275 million versus prior year. Shifting to Pratt & Whitney on Slide 6. Sales of $4.3 billion were up 19% on an adjusted basis and up 21% on an organic basis, primarily driven by the recovery of the commercial aerospace industry. Commercial aftermarket sales were up 41% in the quarter with legacy large commercial engine shop visits up 56% and Pratt Canada shop visits up 18%. As expected, we also saw a continued ramp in GTF shop visits in the quarter. Commercial OEM sales were up 30% driven by higher GTF deliveries within Pratt large commercial engine business and general aviation platforms at Pratt Canada. Military sales were down 3% also on a tough compare given Pratt's military sales were up 11% in the same period last year. A continued ramp in the F135 sustainment was more than offset by lower material inputs on production program. Adjusted operating profit of $96 million was slightly better than expected and was up $247 million from the prior year, driven primarily by higher commercial aftermarket sales and favorable shop visit mix. Looking ahead, we continue to expect Pratt's full year sales to be up low to mid-single digit. And we are increasing the low end of Pratt's full-year operating profit outlook by $25 million to a new range of down $50 million to up $25 million versus 2020. Turning now to Slide 7. RIS sales were $3.8 billion, up 12% versus the prior year on an adjusted basis and adjusted pro forma basis, including the pre-merger stub period, sales were up 6% driven by strength in Airborne ISR Program within sensing and effects as well as strength in the classified cyber programs within cyber training and services. Adjusted operating profit in the quarter of $415 million was slightly better than expected and was up $86 million year-over-year on an adjusted pro forma basis, driven primarily by program efficiencies. The quarter also benefited from a gain on a real estate transaction. RAF had $4 billion of bookings in the quarter resulting in strong book-to-bill of 1.13 and a backlog of $19.4 billion. Significant bookings included approximately $1.1 billion on classified programs as well as several other notable awards, including the STARS follow-on award for the FAA to implement a terminal automation system in their airports, and our first production award for the U.S. Navy Next Generation Jammer Mid-Band system that utilizes RTX industry-leading gallium nitride technology. It's worth noting that we continue to expect RIS full year book-to-bill to be about 1. Turning to RIS full year outlook, we continue to expect sales to grow low to mid single digit, and we are increasing the low end of RIS' operating profit outlook by $25 million to a new range of up $150 million to $175 million versus adjusted pro forma 2020. Turning now to Slide 8. RMD sales were up $4 billion up 15% to prior year on an adjusted basis and adjusted pro forma basis, which again includes pre-merger stub period. Sales were up 9% driven primarily by higher volume on the international Patriot program and on StormBreaker program, both which included liquidation of pre-contract costs. Adjusted operating profit of $532 million was slightly better than expected and was up $121 million versus prior year on adjusted pro forma basis due to favorable mix and higher program efficiencies. RMD had $6.1 billion of bookings in the quarter resulting in an exceptionally strong book-to-bill of 1.55, and a backlog of $29.7 billion. In addition to the franchise awards that Greg discussed, RMD also had a number of other notable awards in the quarter. We also continue to expect RMD's full year book-to-bill to be about 1. Turning to RMD's full-year outlook, we continue to expect sales to grow low to mid single digit, and we are increasing the low end of RMD's operating profit by $25 million to a new range of up $50 million to $75 million versus 2020 on an adjusted pro forma basis. I'm on Slide 9. Let me update you on how we see the current environment as we look to the second half of the year. Starting with our commercial end markets, as I've discussed many times before, the shape of the commercial recovery remains critical to our outlook. That said, we are encouraged by the pace of the vaccine distribution and continued signs of improving air travel demand in many domestic markets. However, we continue to see international air traffic and border reopenings recover slower than we had expected around the world. Keep in mind about 65% of 2019 air travel was international. And while the first half of the year was a little stronger than expected and we're seeing signs of strong summer travel, we still need to see the reopening of international borders and the return of long-haul routes to drive continued sequential aftermarket growth in the second half of the year. Looking longer term, we continue to expect commercial air traffic to return to 2019 levels by the end of 2023 with domestic and narrow-body fleets recovering before International and wide-body fleets. Moving to our defense end markets. We were pleased with what we saw in the fiscal year '22 defense budget request and we remain confident in our ability to grow our defense businesses as we look ahead. Shifting to operational excellence. As Greg mentioned, we're increasing our gross merger cost synergy target to $1.5 billion and that's driven by higher savings from the corporate and segment consolidations as well as additional procurement and supply chain savings. At the same time, we're maintaining a focus on implementing our core operating system and driving structural cost reduction across the businesses. And finally, our financial flexibility is underpinned by our strong balance sheet, which supports our investments in the business and our capital deployment commitments. Following our strong first half, we're confident in our full year outlook. As Greg discussed, we're bringing up the low end of our sales range by $500 million and we're raising our adjusted earnings per share range to $3.85 to $4 per share or up about $0.33 from the midpoint of our prior outlook. About half of the increase comes from the segments, primarily Collins and the other half is from $0.13 of tax improvement and about $0.03 of lower corporate tax items. The $0.13 tax benefit is driven by the ongoing optimization of the company's legal and financing structure that we expect to realize discretely in the third quarter. On the cash side, given the improved earnings outlook, we now expect free cash flow in the range of $4.5 billion to $5 billion for the year. With that, I'll hand it back to Greg to wrap things up. So we're on the final slide here, Slide 11. I just want to reiterate our priorities for 2021 and again, no surprises here. These priorities remain the same that is first and foremost to continue to support our employees, our customers and our suppliers and communities during the pandemic, and to keep our employees safe. Our team is dedicated to solving our customers' most complex problems by investing in differentiated technologies to capitalize on our strong franchises. At the same time we're going to continue to execute on the integration and deliver the cost synergies and we're committed to operational excellence to drive further structural cost reduction across all of our businesses.

compname posts q2 adjusted earnings per share $1.03. q2 adjusted earnings per share $1.03. q2 gaap earnings per share $0.69 from continuing operations. q2 sales $15.9 billion versus refinitiv ibes estimate of $15.84 billion. sees fy adjusted earnings per share $3.85 to $4.00. sees fy sales $64.4 billion to $65.4 billion. sees 2021 free cash flow of $4.5 - $5.0 billion.

A few comments before I turn to the highlights. We continue to feel good about the long-term fundamentals of our business and our ability to drive growth and margin expansion over the next several years. During the quarter, we made great progress on cost reduction, driving operational excellence to our businesses and achieved some notable milestones, which I'll touch on in just a moment. From a market perspective, commercial air traffic continued to recover, despite some regional impacts from the COVID variants, with global ASMs or available seat miles, estimated to have grown about 30% sequentially in Q3. And here in the U.S., passenger traffic through TSA checkpoints averaged about 1.9 million travelers per day in Q3. That's up from about 1.6 million per day in Q2. International borders, as we know, are starting to reopen, and that's another positive. '22 budget request was in line with our expectations. And as we've said, defense spending is nonpartisan, and we're encouraged to see Congress supporting plus ups to the President's budget that are also aligned to our business and our investments in new technologies. Overall, we continue to be cautiously optimistic on both the commercial and defense trends that we're seeing. Let's move to slide two. Some highlights from the quarter. Adjusted earnings per share exceeded our expectations. Free cash flow was in line with what we expected, and we delivered another quarter of top and bottom line growth on both a year-over-year and a sequential basis as we capitalize on the commercial aftermarket recovery, and our defense portfolio continues to grow. Based on our strong performance year-to-date, we're again increasing and tightening our adjusted earnings per share outlook for the year to $4.10 to $4.20 a share. That's up from our prior outlook of $3.85 to $4. Neil Mitchill will get you into the details on sales and free cash flow, where we're also tightening our outlook in both areas. On the capital allocation front, we repurchased about $1 billion of RTX shares during the quarter, bringing our total for the year to $2 billion, which was our commitment that we talked about back in Q2. Let me cover some strategic and operational highlights for the quarter, where we continued to execute on our key programs. Starting with strategic highlights. We'd announced the acquisition of FlightAware, which will become a significant accelerator for Collins connected ecosystem strategy and enhances our capabilities in growth areas like aviation network services, digital solutions and airspace modernization and we're organizing our business around optimizing these capabilities within Collins Aerospace. We also announced the acquisition of SEAKR Engineering, a leading provider of advanced space electronic solutions. SEAKR strengthens our offerings to solve our customers' most complex problems by expanding our space-based capabilities. With the integration of Blue Canyon, this also enhances RIS' competitiveness and reliability of satellite bus hardware and customized space electronics. At the same time, we continue to divest noncore businesses. During the quarter, we announced an agreement to divest of our global training and services business, which is a part of RIS. On the operational side, the Missiles & Defense team and their industry partners successfully completed the first test of a scramjet-powered Hypersonic Air-breathing Weapon Concept, or HAWC, for DARPA and the U.S. Air Force. The HAWC successfully sustained hypersonic speeds, offering faster time on target and greater maneuverability. The successful test puts us on track to deliver a prototype system to the U.S. Department of Defense. And lastly, at Pratt, the Columbus Forge Disc business continues to integrate critical operations to drive further quality, performance and cost reduction. Utilizing our core operating system tools, the team in Columbus reduced the lead time of forgings by up to 35 days and reduced both cost and inventory. As you can see, driving operational excellence through our organization is a key to our success over the long term. I'm on slide three. So I'm pleased with our performance in the quarter, where we saw strong year-over-year sales growth, adjusted earnings growth and free cash flow. Sales of $16.2 billion were up 10% organically versus prior year on an adjusted basis. Our performance was driven by the continued recovery of domestic and short-haul international air travel and continued growth in defense. That was partially offset by some supply chain pressures and lower 787 OE volume. And while we expect these headwinds to continue in the near term, we only see this as a timing issue. Nonetheless, we remain focused on our cost actions and program execution to drive continued earnings and cash flow growth. Adjusted earnings per share of $1.26 was ahead of our expectations, primarily driven by Collins, Pratt and some corporate items. On a GAAP basis, earnings per share from continuing operations was $0.93 per share and included $0.33 of acquisition accounting adjustments and net significant and/or nonrecurring items. It's worth noting that both GAAP and adjusted earnings per share benefited from about $0.16 of lower tax expense related to previously disclosed actions we took to optimize the company's legal entity and operating structure in the quarter as well as pension-related benefit that was worth about $0.05. Free cash flow of $1.5 billion was in line with our expectations, keeping us on track for the full year. Before I hand it over to Jennifer, let me give you a little color on our synergy progress. During the quarter, we achieved about $165 million of incremental merger gross cost synergies. And given our strong performance, we are again increasing our 2021 target and now expect to achieve over $700 million of cost synergies this year. This will bring us to nearly $1 billion in cumulative gross cost synergies since the merger, and we're well on our way to meeting our $1.5 billion commitment. So with that, let me hand it over to Jennifer to take you through the segment results. Starting with Collins Aerospace on slide four. Sales were $4.6 billion in the quarter, up 7% on an adjusted basis and up 9% on an organic basis, driven primarily by the continued recovery in the commercial aerospace end markets. By channel, commercial aftermarket sales were up 38%, driven by a 44% increase in parts and repair, a 43% increase in provisioning and a 22% increase in modifications and upgrades. Sequentially, commercial aftermarket sales were up 4%, roughly in line with our expectations. Commercial OE sales were down 3%, with strength in narrow-body more than offset by lower wide-body deliveries, primarily 787. And military sales were down 5% on an adjusted basis and down 1% organically on a tough compare. Recall, Collins' military sales were up 8% in the same period last year. Adjusted operating profit of $480 million was up $407 million from the prior year. Higher commercial aftermarket sales, favorable mix and synergy capture more than offset lower military volume. Looking ahead, due to expected supply chain pressures and 787 OE delivery headwinds, we now expect Collins full year sales to be down mid-single digit. However, given the continued recovery in the commercial aftermarket and the benefit of cost-containment measures, we are increasing Collins full year operating profit outlook to a new range of up $250 million to $300 million versus 2020. Shifting to Pratt & Whitney on slide five. Sales of $4.7 billion were up 25% on an adjusted basis and up 35% on an organic basis, primarily driven by the continued recovery of the commercial aerospace industry. Commercial aftermarket sales were up 56% in the quarter, with legacy large commercial engine shop visits up 49% and Pratt Canada shop visits up 18%. Sequentially, commercial aftermarket sales were up 17%. Commercial OE sales were up 22%, driven by higher GTF deliveries within Pratt's large commercial engine business. The military business sales were up 2% on another tough compare. Recall, Pratt military sales were up 11% in the same period last year. Growth in the quarter was driven by a continued ramp in F-135 sustainment, which was particularly offset -- input on production and classified development programs. Adjusted operating profit of $189 million was better than expected and was up $232 million from the prior year. Drop-through on higher commercial aftermarket sales, more than offset the impact of higher commercial OE volume and higher SG&A and E&D. Looking ahead, due to the continued commercial aerospace recovery, we now expect Pratt's full year sales to be up mid-single digit. In addition, we are increasing Pratt's full year operating profit outlook to a new range of flat to up $50 million versus 2020. Turning now to slide six. RIS sales of $3.7 billion were in line with prior year results on an adjusted basis and down 1% on an organic basis, driven primarily by the timing of material input from suppliers. Adjusted operating profit in the quarter of $391 million was in line with expectations and was up $41 million year-over-year on an adjusted basis, driven primarily by higher program efficiencies. RIS had $2.9 billion of bookings in the quarter, resulting in a book-to-bill of 0.84, as expected, and a backlog of $18.7 billion. Significant bookings included approximately $1 billion on classified programs. It's worth noting that we expect RIS full year book-to-bill to be greater than 1. Turning to RIS full year outlook. Due to the timing of material inputs from suppliers, we now see RIS sales growing low single digit. However, as a result of improved productivity, we continue to expect RIS' operational -- operating profit to grow $150 million to $175 million versus adjusted pro forma 2020. Turning now to slide seven. RMD sales were $3.9 billion, up 7% on an adjusted basis and up 5% on an organic basis, driven by liquidations of precontract costs on an AMRAAM award received in the quarter and the expected ramp in our NASAMS franchise. Adjusted operating profit of $490 million was in line with our expectations and was up $59 million versus the prior year, primarily on higher sales volume. RMD's bookings in the quarter were approximately $3.9 billion, resulting in a book-to-bill of 1.02 and a backlog of $29.6 billion. Significant bookings in the quarter included AMRAAM Lot 35 for $570 million, a Patriot GEM-T order for $432 million as well as several other notable awards. We also expect RMD's full year book-to-bill to be greater than 1. We remain confident in our full year outlook for RMD, with sales growing low to mid-single digit and operating profit growing $50 million to $75 million versus adjusted pro forma 2020. I'm on slide eight. As we look ahead at the fourth quarter, we continue to be encouraged by the recovery of commercial air travel that has driven sequential aftermarket growth so far this year. However, the recovery of long-haul international traffic continues to lag expectations. And on the OE side, 787 build rates have come down more than we had expected, resulting in a significant impact to our top line outlook for the year. Additionally, we aren't immune to the global supply chain pressures that are seeing some isolated impacts from the supply chain, primarily at Collins and RIS. However, we are working with our suppliers to mitigate these timing issues. And finally, while we anticipate the pending vaccine mandate may put further pressure on the supply chain in the near term, higher vaccination rates will continue to build confidence in the safety of air travel going forward. So with that backdrop, we're adjusting our sales outlook and now see full year sales of about $65 billion, slightly higher than the low end of our prior outlook. However, given the strong performance on cost control, synergy capture and program execution, we are raising and tightening our adjusted earnings per share range to $4.10 to $4.20 per share or up about $0.22 from the midpoint of our prior outlook. About $0.07 of the increase comes from the segments, Collins and Pratt, and the remainder comes from improvements in corporate items. And on the cash side, we are also raising the low end of our free cash flow outlook and now see free cash flow of approximately $5 billion for the full year. With that, I'll hand it back to Greg to wrap things up. So we're on slide nine. And this is just kind of our view of the operating environment that we're facing going into 2022. Now we're not going to give specific guidance on 2022 today, other than to say that the trends that we talked about in our May investor conference are proving to be pretty much on track with what we're seeing for next year. On the positive side, obviously, we expect the commercial aerospace recovery to continue, and we feel good about our ability to grow our defense franchises with our robust $65 billion backlog and the bipartisan support for the fiscal '22 -- fiscal year '22 budget, and of course, the international demand for our products and technologies continues to be strong. We're also laser-focused on driving operational excellence to deliver cost reduction and further margin [expansion]. This is really a part of our core operating system rollout. Again, it gives us confidence so that we can continue to grow the margins along the trajectory that we talked about. On the challenges side, no real surprises here. We anticipate the global supply chain pressure will continue and that lower 787 build rates will carry into next year. Again, none of these are, I guess, new to us. We'll manage through them, but something I think everybody is going to face in the industry. And of course, we are watching and monitoring, if you will, the reopening of international borders. It all looks to be positive so far. But again, the COVID variants could change that in a hurry. Global tax and inflationary environment are also a concern as we think about next year. And lastly, the impact of the COVID vaccine mandate. As you know, all federal contractors are required by December eight to have all of our employees vaccinated. We certainly expect that there will be some disruption in both the supply chain and with our customers as a result of this, but we're going to work our way through it. So before we get to the Q&A, let me just close by saying that I'm really pleased with our performance in the quarter, and I'm confident in the strength of our businesses as we look ahead. I want to reiterate, we remain focused on supporting our employees, customers, suppliers and our communities. But our most important mission is keeping our employees safe. And finally, the strength of our balance sheet, along with the cash-generating capabilities of our business, will continue to provide us with financial flexibility to support investments in our business while still returning capital to shareowners, including our commitment to return at least $20 billion to shareowners in the first four years following the merger.

raytheon technologies q3 gaap earnings per share $0.93 from continuing operations. q3 adjusted earnings per share $1.26. q3 gaap earnings per share $0.93 from continuing operations. q3 sales $16.2 billion. sees fy adjusted earnings per share $4.10 to $4.20.

2021 was an important year for Raytheon Technologies as we laid out our strategy at the beginning of last year. And that strategy, of course, is to drive top-line growth, margin expansion, and robust free cash flows through 2025 and beyond while at the same time continuing to invest in our businesses and returning significant capital to shareowners. Our continued focus on operational excellence and program execution, along with our industry leading technologies, positions us well to continue to capitalize on the commercial aerospace recovery and to grow our defense franchises. That's more than double of what we delivered in 2020 on a pro forma basis. Our performance in 2021 gives us confidence in the long-term fundamentals of our businesses and that we're able to -- and that we're on track to deliver to the 2025 targets that we outlined last May at our investor conference. Before I turn to the highlights, let me first provide some comments on the current market environment. During the quarter, commercial air traffic remained resilient despite the omicron variant, with global available seat miles, ASMs, growing about 1% sequentially in Q4. That's reflecting a continued recovery in air traffic despite the typical seasonal trends. Here in the U.S., passenger traffic through TSA checkpoints also remained steady at about 1.9 million passengers per day. That's up almost 125% versus the fourth quarter of 2020, a remarkable recovery. On the defense side, we're pleased to see the President sign the bipartisan defense authorization bill into law at $740 billion. That's about $25 billion higher than the original Presidential request. And given the global threat environment, we continue to see strong demand internationally for our products and services. Are focus to aerospace and defense portfolio, along with our $156 billion backlog, gives us confidence in our ability to grow the business in 2022 and beyond. Turning to Slide 2, some highlights from the fourth quarter. As I said, we delivered strong financial performance in '21, organic sales grew 1%, which is in line with our expectations, while adjusted earnings per share and free cash flow for the year were both above our initial expectations and importantly, we saw margin expansion in all four of our businesses with strong commercial aftermarket. Our defense backlog remained robust at over $63 billion, where IRS and RMD both ended the year with book-to-bills slightly above 1.0. In addition to several large awards earlier in the year, we also had several notable awards during the fourth quarter, including over $1.3 billion in classified bookings, plus over $670 million for the Electro-Optical Infrared awards at IRS, as well as $730 million in standard Missile 2 production awards in RMD. We also remain focused on operational excellence and program execution to drive structural cost reduction and productivity in our operations. In 2021, we achieved about $760 million in incremental cost synergies from the RTX merger, bringing us to over $1 billion since the completion of the merger in April of 2020. That meets our original merger cost synergy target two years ahead of schedule. And there's always, of course, more to come and more to do there. It's also worth noting that the Rockwell or the Collins Aerospace team achieved over $600 million in total Rockwell-Collins synergies since the acquisition in November of 2018. They're meeting their commitment a year ahead of schedule despite the significant downturn in our commercial aerospace business. We also continue to fine tune our portfolio during the year. As you know, we completed the acquisition of SEAKR Engineering and FlightAware, which will expand and enhance our capabilities in key growth areas, and we completed the divestitures of Forcepoint. And in December, we completed the sale of IRS' global training and services business. On the capital allocation front, we returned $5.3 billion to shareholders in '21 for a total of $7.4 billion since we closed down the merger, well on track to the $20 billion-plus that we've committed to in the first four years after the merger. As you saw in December, our board of directors also authorized a $6 billion share repurchase program, positioning us to continue returning significant capital to shareowners, including at least $2.5 billion of repurchases that we expect to complete in 2022. In addition to our strong financial performance during the year, we also achieved several notable strategic and operational milestones that I'd like to highlight. Let me start with Collins Aerospace. The business completed more than 750 lean events in 2021. By utilizing our best practices from our core operating system, the team was able to reduce labor content on the F-18 heat exchanger by over 30%. That's reducing cost and importantly, creating capacity to support increased demand. At Pratt, the team introduced the GTF Advantage engine, which reduces fuel consumption and CO2 emissions by a total of 17% compared to the prior generation engines. It extends the GTF's lead as the most efficient powerplant for the A320neo family. The engine will also be compatible with 100% sustainable aviation fuels, supporting the aviation industry's goal to significantly reduce emissions in the coming decades. At both IRS and RMD, they achieved significant program milestones in the quarter ahead of schedule. Through strong program execution in IRS, the Joint Precision Approach and Landing System program completed delivery on the first LRIP units 60 days ahead of schedule. This achievement has given the Navy the confidence to certify JPALs on the CVM carrier and two amphibious ship classes. RMD team also successfully completed the initial integration of the SPY-6 radar on the USS Jet -- Jack Lucas in the quarter. This is the first time power was simultaneously applied to the entire radar system, completing a critical milestone for integration of the ship, its combat system, and the SPY-6 radar. I'm on Slide 3. I'm pleased with how we finished the year, as well as our performance in the quarter where we continue to see solid growth in organic sales, adjusted earnings per share, and free cash flow. Sales of $17 billion were in line with our expectations and were up 4% organically versus prior year on an adjusted basis. Our performance was primarily driven by the continued recovery of domestic short-haul international air travel, partially offset by continued supply chain pressures and lower 787 OE volume. It's worth noting that the global training and services divestiture at IRS closed in early December, resulting in a sales headwind of about $100 million versus our prior outlook. Adjusted earnings per share of $1.08 was ahead of our expectations, primarily driven by commercial aftermarket strength at both Collins and Pratt, as well as favorability in our effective tax rate. On a GAAP basis, earnings per share from continuing operations was $0.46 per share and included $0.62 of acquisition accounting adjustments, and net significant and/or non-recurring items. And finally, free cash flow of $2.2 billion was in line with our expectations and resulted in full year free cash flow of $5 billion, which was $500 million better than our expectations at the beginning of the year, primarily driven by higher net income and lower capex. With that, let me hand it over to Jennifer to take you through the segment results, and I'll come back and share our thoughts on 2022. Starting with Collins Aerospace on Slide 4, sales were $4.9 billion in the quarter, up 13% on both an adjusted and organic basis, driven primarily by the continued recovery in commercial aerospace and markets. By channel, commercial aftermarket sales were up 47%, driven by a 59% increase in parts and repair, a 52% in provisioning, and a 17% increase in modification and upgrades. Sequentially, commercial aftermarket sales were up 10%, driven by strength in parts and repair. Commercial OE sales were up 4% with strength in narrowbody, offsetting headwinds from lower 787 deliveries. And military sales were down 3% on another tough compare. Recall, Collins military sales were up 7% organically in the same period last year. The decline in the quarter was driven primarily by lower F-35 volume. Adjusted operating profit of $469 million was up $380 million from the prior year. Drop-through on higher commercial aftermarket sales more than offset higher E&D and SG&A expense. Shifting to Pratt & Whitney on Slide 5, sales of $5.1 billion were up 14% on an adjusted basis and up 15% on an organic basis, driven primarily by the continued recovery of the commercial aerospace industry. Commercial OE sales were up 32% by higher GTF deliveries within Pratt's large commercial engine business, as well as general aviation and biz jet platforms at Pratt Canada. Commercial aftermarket sales were up 28% in the quarter with legacy large commercial engine shop visits up 30% and Pratt Canada shop visits up 37%. Sequentially, commercial aftermarket sales were up 17%. In the military business, sales were down 6% as expected on another difficult compare. Recall Pratt's military sales were up 18% in the same period last year. The decrease in the quarter was driven by lower spare sales on legacy programs. Adjusted operating profit of $162 million was up $57 million from the prior year. Drop-through on higher commercial aftermarket sales volume more than offset lower military volume, higher SG&A, E&D, and the impact of higher commercial OE volume. Turning now to Slide 6, IRS sales of $3.9 billion were down 2% versus prior year on an adjusted basis and down 1% on an organic basis, reflecting four fewer work days in the fourth quarter of 2021 versus the prior year. Adjusted operating profit in the quarter of $400 million was up $39 million versus prior year, primarily driven by higher net program efficiencies. IRS had $3.4 billion of bookings in the quarter, resulting in a book-to-build of 0.97 and a backlog of $18 billion. In addition to the significant bookings that Greg discussed, IRS also booked $227 million for the next-generation Jammer Mid-Band program in the quarter. IRS' book-to-bill for the year was 1.01. Turning now to Slide 7, R&D sales were $3.9 billion, down 10% on an adjusted basis and down 8% on an organic basis, primarily driven by four fewer workdays in the quarter, as well as lower material receipts and expected declines in several international production contracts. Adjusted operating profit of $486 million was $93 million lower than the prior year, driven by lower net program efficiencies and lower sales volume. RMD's bookings in the quarter were approximately $3.2 billion, resulting in a book-to-build of 0.83 and backlog of $29 billion. In addition to the SM2 bookings Greg mentioned, RMD also booked $269 million for Evolved SeaSparrow Missile Block 2. RMD's book-to-build for the year was 1.02. Before moving on, I would also like to comment on the previously disclosed DOJ investigation into Costa County matters at legacy Raytheon's Companies former Integrated Defense System business, or IDS, which is now part of RMD. As you will see in our upcoming 10-K filing, we have made progress in our internal investigation into the matter. And we now have determined that there is a probable risk of liabilities for damages, interest and penalties. In addition to the amount recorded in the first quarter of 2021, in connection with the finalization of purchase accounting, we recorded an incremental accrual in the amount of $147 million during the fourth quarter relating to the matter, bringing our total reserve to approximately $290 million. We still do not currently believe the resolution of this matter will result in a material adverse impact to our financial condition, and we will continue to cooperate with the government's investigation. I'm on Slide 8. So before I get into the specifics of our '22 financial outlook, let me give you some perspective on how we are thinking about the environment as we look ahead. Let me start with the positives. Despite the impact of COVID variants, we expect the commercial aerospace recovery will continue into 2022 with continued growth in commercial, aftermarket and narrowbody deliveries driven by further strength in domestic traffic and growth in international traffic. By the end of the year, we are assuming global RPMs recover to about 90% of 2019 levels, with domestic travel recovering to be approximately in line with the 2019 levels and an international travel recovery to between 75% and 80% of 2019 levels. The reopening of international borders, specifically in the Asia-Pacific region and the related widebody traffic will be a significant factor in the timing and extent of the related aftermarket recovery. Ultimately, the timing and trajectory of the overall recovery this year isn't likely to be linear, and it will depend on our customer's fleet decisions and buying behavior. Looking longer term, we continue to expect commercial traffic to return to 2019 levels by the end of next year. On the defense side, we expect continued organic growth in 2022 as we deliver on our $63 billion backlog, continued bipartisan support for the fiscal '22 defense budget, and international demand for our products and technologies. And across RTX, we remain laser-focused on driving operational excellence to deliver cost reduction and further margin expansion, including $335 million of incremental RTX merger cost synergies during 2022. And this keeps us on track to achieve $1.5 billion in gross cost synergies by Q1 of 2024. On the challenges side, we anticipate that global supply chain and inflation pressures will continue and that 787 build rates will remain low. With respect to the supply chain, we anticipate that COVID-related labor disruptions will persist through the first half of the year but will ease through the second half of the year. And as we've discussed, a significant portion of our material spend is under long-term agreements. That said, we're assuming a level of inflationary pressure across our businesses in our outlook that will be partially offset by productivity improvements. And of course, we're continuing to monitor the U.S. and global tax environment and the current and potentially protracted continuing resolution. So with that backdrop, let me tell you how this translates to our financial outlook for the year. At the RTX level, we expect full year 2022 sales of between $68.5 billion and $69.5 billion. This represents organic growth of between 7% and 9% year over year. Keep in mind, the sale of IRS' global trading and services businesses creates about $1 billion of sales headwind year over year, as well as the associated profit. From an earnings perspective, we expect adjusted earnings per share of $4.60 to $4.80, up 8% to 12% year over year, and we expect to generate free cash flow of about $6 billion. That's up about 20% versus 2021. It's important to note that this free cash flow outlook assumes that the legislation requiring R&D capitalization for tax purposes is deferred beyond 2022, which as we said before,the free cash flow impact of this legislation is approximately $2 billion. It's also worth noting that if the legislation is not deferred, we will see about a $0.10 earnings per share benefit as well from the impacts of the R&D capitalization that would have components -- would have on components of our U.S. taxable income. And as Greg mentioned, we expect to buyback at least $2.5 billion of RTX shares over the year , subject to market conditions. With that, let's move to Slide 10 for the segment outlook. At Collins, we expect full year sales to be up low double digits and adjusted operating profit to grow between $650 million and $800 million versus last year. This is primarily driven by higher narrowbody OE deliveries and growth across all three commercial aftermarket channels, supporting both narrow and wide-body aircraft. And military sales at Collins are expected to be a low single digit for the year. Turning to Pratt & Whitney, we see full year sales growing low double digits versus prior year, principally driven by higher OE deliveries in both Pratt's large commercial engine and Pratt Canada businesses, as well as continued growth in legacy large commercial engine and Pratt Canada shop visits. Military sales at Pratt are expected to be down mid-single digit, driven by lower F135 production inputs, partially offset by higher F135 sustainment volume. With respect to operating profit, we see Pratt's adjusted operating profit growing between $500 million and $600 million versus last year, primarily on higher aftermarket volume and partially offset by higher large commercial OE engine deliveries and lower military volumes. Turning to IRS, we expect full year sales to be down slightly versus prior year on a reported basis and to grow low single digit on an organic basis with strength coming from classified programs and production ramps and airborne ISR and AWS. And we expect year-over-year adjusted operating profit at IRS to be flat to up $50 million, driven by higher net program efficiencies and volume. At RMD, we see sales growing low, single to mid-single digit, driven by growth across multiple programs and for adjusted operating profit to be up in the range of $150 million to $200 million versus prior year, driven by improved program performance and the volume. It's worth mentioning that we expect both IRS and RMD to again have a book-to-bill greater than 1.0 for the year. And finally, we expect intercompany sales volumes to grow in line with total company sales. So turning now to Slide 11 for our '22 adjusted earnings per share walk, starting with the segments, we expect the segments to generate about $0.83 of earnings per share growth at the midpoint of our outlook range. From there, pension will be a headwind, primarily due to lower cash recovery and higher discount rates. Our tax rate in '22 is expected to be between 18.5% and 19.5% versus the 15.5% in 2021, primarily due to onetime tax benefits associated with the prior year optimization of our legal entity and operating structure that we realized in the third quarter that will not repeat. This will result in a $0.19 headwind. We expect corporate expenses to be a $0.06 headwind year over year due to higher investment-related RTX synergy projects and digital transformation initiatives that are partially offset by lower LTAM spend. And finally, lower share count, interest, and other items are expected to be a $0.07 tailwind. All of this brings us to our outlook range of $4.60 to $4.80 per share. Now turning to free cash flow on Slide 12. We expect strong operational growth, along with lower restructuring to contribute about $1.5 billion of free cash flow growth in 2022. These will be partially offset by expected pension headwinds and higher cash taxes to get to our free cash flow outlook of about $6 billion. Again, this outlook assumes the legislation requiring R&D capitalization for tax purposes is deferred. And lastly, before turning it back to Greg, a couple of comments on the first quarter. With respect to sales, we expect sales to be up mid-single digit organically versus prior year, driven by the continued commercial aerospace recovery and partially offset by lower defense sales, driven by continuing supply chain pressures and the impact of omicron. And again, just to remind you, the prior year included Q1 sales of about $200 million, as well as the associated profit for the divested IRS services business. On the adjusted earnings per share side, we see low double digit to mid-teens growth in the quarter versus prior year. And for cash, we expect to see an outflow of about $500 million in the quarter due to typical seasonal factors and the timing of collections. So with that, let me hand it back to Greg to wrap things up. We're on Slide 13. So a lot of moving pieces, as always. But I would tell you, we actually exited 2021 with really good momentum across the businesses, and we expect to make further progress on our priorities here as we enter into 2022. First and foremost, let me repeat that we're focused on keeping our employees safe, keeping our commercial customers flying, and protecting the war fighter while they defend our country and allies. And of course, supporting our suppliers. We're also going to continue to invest in differentiated technology and innovation to maintain our industry leading positions, which will drive growth over the long term. And of course, to capitalize on our growing end markets. At the same time, our leadership team is making significant progress to reduce structural costs, drive operational efficiency through our core operating system and to deliver on our synergy commitments. Finally, we remain disciplined with capital allocation. We've got very strong balance sheet, along with our cash generating capability, supports investments in our businesses and our commitment to returning capital to shareowners, including at least $20 billion in the first four years following the merger, as I said earlier. I'm confident in our ability to deliver both top- and bottom-line growth and margin expansion across our businesses this year as we continue to leverage the growth opportunities that are in front of us.

raytheon technologies corp - sees share repurchase of at least $2.5 billion of rtx shares in 2022. q4 adjusted earnings per share $1.08. q4 gaap earnings per share $0.46 from continuing operations. q4 sales $17 billion. expects continued sales, earnings and free cash flow growth in 2022. outlook for full year 2022 : sales of $68.5 - $69.5 billion. sees fy adjusted earnings per share of $4.60 - $4.80. long-term outlook for our commercial aerospace and defense markets remains strong. sees share repurchase of at least $2.5 billion of rtx shares in 2022.

The non-GAAP financial measures provided should not be utilized in isolation or considered as a substitute for measures of financial performance prepared in accordance with GAAP. A reconciliation between GAAP and non-GAAP financial measures is provided in our first quarter Redwood review available on our website, redwoodtrust.com. Also note that the content of this conference call contains time-sensitive information that is accurate only as of today. The company does not intend and undertakes no obligation to update this information to reflect subsequent events or circumstances. As you probably assumed, we are pleased with Redwood's trajectory thus far in 2021. Morale within our ranks is strong, especially as we start to see conditions for a return to normality with many employees eager to rub elbows again in the office and resume business travel. We're not quite there yet across the board, but it's nice to see the sun shining on our people and our businesses, especially when I think about where things stood a year ago. Driven by strong operating income and continued improvement in portfolio valuations, our GAAP earnings were $0.72 per diluted share for the first quarter as compared to $0.42 per diluted share in the fourth quarter. Our GAAP book value per share increased almost 9% to $10.76 at March 31st as compared to $9.91 at December 31st. GAAP earnings finished well in excess of our $0.16 per share first quarter dividend. While the first quarter introduced the latest chapter of our strategic evolution through the launch of RWT Horizons, the focus of our business hasn't changed. Our mission is to make quality housing accessible to all American households, whether rented or owned. We target borrowers whose needs are not well served by government loan programs, including borrowers are simply not eligible for them. To us, our role in housing finance has never been more important as the second half of 2020 ushered in a dramatic new uptick in home price appreciation and even greater affordability challenges. Simply put, improving access to quality housing entails a combination of consumer loan and rental solutions. Through our leadership role in the private housing sector, we've turned much of our focus toward innovation to expedite the migration of more GSE eligible mortgages to our market. This doesn't just require low cost capital, which our industry seems to be a wash in these days, it requires the speed, automation and the ease of execution necessary to facilitate sustainably high volumes. These traits have not been commonplace in the less commoditized non-agency mortgage sector in part because it continues to be unsupported in Washington and even viewed as a threat to many established market participants who were unincented to change the status quo. Recent regulatory changes in Washington, however, highlight the need for a new way of thinking and present a big opportunity for the private sector. For example, the CFPB QM rules, which are still somewhat fluid, are likely to simplify many underwriting processes and meaningfully reduce the number of loans that require additional risk retention to securitize. Additionally, changes to the PSBA between the U.S. Department of Treasury and the GSEs now limits the acquisition of certain types of mortgages by Fannie and Freddie, including loans for non owner-occupied homes as well as loans with certain combinations of credit features, including higher LTVs and debt-to-income ratios and lower credit scores. For the GSEs to effectively manage compliance with these new limitations, the practical amount of these loans that GSEs can acquire will be well below their prescribed caps. This presents an opportunity for those who can acclimate to the more automated underwriting regimes are eventually needed to facilitate more of these loans moving to the private sector. Our focus is squarely on addressing this need. And we're working toward this goal in a number of innovative ways, including investments in homegrown technology and strategic partnerships. For example, we achieved several milestones and demonstrated significant progress in our technology road map in the first quarter, including through our newly launched venture investment strategy, RWT Horizons. We've now completed three Horizons investments, which Dash will talk about in more detail. During the first phase of investing, we are focused on seeding early to mid-stage companies that leverage automation, digitization and blockchain to reimagine how alone is evaluated by an originator, financed by a lender or securitized by an issuer. In the business purpose lending market, we see opportunities to fund product development in the software space that can streamline property management workflows. This will reduce costs and increase visibility into revenue streams. While these initial investments have not been material to our balance sheet, we believe we're embarking upon a path that can disrupt the mortgage finance landscape and significantly transform our business with innovative solutions that help all stakeholders most importantly, borrowers. With significant momentum on technology, an engaged and talented workforce, regulatory changes and strong competitive positioning, it's exciting to envision the role Redwood can play in the evolution of housing finance. We believe in the long-term durability of our earnings and our ability to deliver unique value to our shareholders. We also believe in the impact we have on our people and communities, such as our new housing Access benefits program that we just launched earlier today. As always, we balance the optimism against economic forces that affect our quarterly production volumes, including a recent dose of interest rate volatility in the past few months. We can't control many of the market forces that affect our business day-to-day, but we can equip our people with the tools necessary to lead Redwood toward its full potential. It was an active and successful quarter across our business lines, supported by continued tailwinds in housing and strengthening an overall housing credit. We believe the diversity in our business model remains responsive to the key trends in housing and supportive of the needs of owner occupants and investors alike. After a year of flexible work arrangements and at-home learning, the evolution in demand for housing continues, even as we gain momentum with vaccinations. The expectation, at least in the medium-term for hybrid work arrangements is keeping both prospective homebuyers and tenants looking for homes that combine added space, functionality and privacy. This is evident in the record velocity that we are seeing in both new and existing home sales and continued strength in single-family rents. Leading third-party data shows new single-family home sales in the first quarter were up approximately 37% year-over-year, with existing home sales up approximately 15% in the same period. The median home sales price rose 11% year-over-year and homes that require a nonconforming mortgage are showing similar trends, particularly in growing secondary metro areas. In a similar vein, demand for single-family homes for rent continues to deepen. Rising prices have further deferred the home buying decision for many consumers, while others still prefer to rent given the associated flexibility. Either way, quality rental homes are an attractive alternative for many demographics who are in search of more space in established neighborhoods. And in many parts of the country, this type of housing stock is in short supply. Occupancy rates also continue to be at record highs with a weighted average of 93% in the top 20 metros. Importantly, sources of equity capital continue to recognize this imbalance as an opportunity to contribute to the creation of quality affordable rental housing, creating a new sleeve of borrowers and allowing our existing ones to keep growing. The macro data, while encouraging also underscores an important reality about housing affordability and accessibility, sharpened by the pandemic. Housing finance needs more creative solutions, driven by technology and a common sense approach to underwriting. That the private markets are equipped to provide. Their durability and diversification of our business model puts us in pole position to continue affecting beneficial change. Turning to our results. Our team's crisp execution resulted in a combined after-tax net operating contribution of $51 million for residential and BPL mortgage banking. This was driven by record residential loan purchase commitments, continued momentum in business purpose lending and execution of three securitizations exceeding $1 billion in issuance across Redwood Residential and CoreVest. Turning to our residential business. Lock volumes in the first quarter rose 22% to $4.6 billion as mortgage rates rose during the quarter, but much less precipitously than benchmark interest rates. This led to a sustained uptick in refinance volumes, which represented 62% of our total locks for the quarter. Despite the interest rate volatility, margins well exceeded those in recent quarters. This was largely driven by strength in the securitization markets, particularly in the first half of the quarter, and the positioning of our pipeline as the curve steepen more than mortgage rates rose. The move-in rates during the quarter underscores a critical barrier to entry in the non-agency market, namely the importance of end-to-end coordination and efficiency across the operation. We were able to place one of our two securitizations during the quarter via reverse inquiry and settled $1.4 billion of whole loan sales. Key to this work is the speed with which we're able to buy loans from our sellers, which requires a well calibrated process internally and with our third-party vendors. Capacity constraints in the system have led to uneven outcomes across the industry and has been an area of outperformance for our team. As an example, the loans underlying our most recent securitization had an average age of approximately 45 days. Less than half of the loans brought to market by others during the same time period. We expect to engage with more reverse inquiry interest in our securitizations throughout the remainder of the year. Given the efficiency in connecting our bonds directly with where demand is most sizable and durable. The flexibility of our securitization program, coupled with whole loan distribution, facilitates added scale as collectively they allow us to be in the market consistently. Overall, the productivity level of our securitization program has never been higher, and the second quarter is already off to a strong start with the recent closing of our third transaction of 2021. This went back by $361 million in jumbo loans. The ability to enhance our processes over time will ensure that we maintain our competitive advantage. To that end, leveraging technology remains a major organizational emphasis. During the first quarter, we achieved several milestones on our technology road map, including the onboarding of the majority of our Sequoia securitizations on to DVO 1, a third-party solution for accessing, reporting and analyzing standardized loan-level data for our Sequoia securitizations. In keeping with our commitment to serve our sellers more quickly, we recently launched Rapid Funding Plus, which includes additional customized funding solutions. This was an important enhancement to our original Rapid funding program rolled out last year, which was successful in facilitating $274 million of purchases from an initial group of participating sellers. In addition, Redwood Live is now available for certain sellers through Apple's app store. Approved users can log in and access dashboards containing various metrics for the loan pipeline they have locked with Redwood. Rapid Funding and Redwood Live are cut from the same cloth, organic efforts to make doing business with Redwood even more efficient and user-friendly with real-time access to data that eases decision-making. As we roll these out further, we are excited about their potential to reduce customer acquisition costs and increase customer retention. To that end, elsewhere in our tech stack, we are exploring other applications with key partners to widen our competitive moat. Earlier this month, through Redwood Horizons, we completed an investment in liquid mortgage, an earlier stage firm focused on providing life of loan infrastructure to digitize, track documentation, facilitate payments and record additional information on blockchain. While there is much to do for the industry to co last around how blockchain can evolve our ecosystem. Our initial work is focused on solutions in the post close environment that we believe could have tangible benefits in the near to medium term. Strategic progress continued to pace during the first quarter as we completed work on an innovative securitization structure and made key advancements in product development. Overall, we originated $386 million of business purpose loans during the quarter, comprised of $253 million of single-family rental loans and $133 million of bridge loans. While SFR loan production was down from a seasonally strong fourth quarter, and bridge fundings rose 33%, driven by increased usage in lines of credit and initial fundings on several recently completed build-for-rent financings. Our origination mix for the first quarter reflected the strength of our multi-product strategy, which drives high rates of repeat borrowers, including those that utilize more than one of our loan products. In all, 71% of originations in the first quarter were from repeat customers. And the near to medium-term pipeline remains robust with a good mix of new loans and refinance opportunities. During the first quarter, we completed the ramp-up of Capital 2020-P1, a privately placed SFR securitization funded with a leading insurance company. We are pleased with the efficiency of the execution and expect to pursue others of its type to complement traditional broadly marketed securitizations. On the follow, we recently priced our first broadly syndicated securitization of 2021, expected to close later this week. The transaction was very well received by the marketplace. And on a blended basis, we achieved all-time tights on credit spreads. As competition ramps up across the BPL market, product development remains a key priority. Last week marked important progress on this front as we announced the strategic investment in Churchill Finance, a vertically integrated real estate finance company. Churchill focuses on the origination, aggregation and asset management of a variety of real estate credit products, including residential and multifamily loans. We expect the partnership to help grow and diversify CoreVest sourcing channels with a particular emphasis on smaller-balanced single-family rental and bridge loans. Partnerships like Churchill will deepen our market penetration and products we believe will remain in high demand by housing investors. Technology is central to CoreVest's competitive advantage, especially as we expand our product reach. There are several key initiatives well under way, including a revamped client portal, which will be rolled out later in 2021, enhancements to our data warehouse and additional automation with respect to capital markets processes to quicken our speed to market. CoreVest marketing position remains a core strength as we expand our leadership position with a combination of organic growth initiatives and strategic partnerships. We are uniquely positioned with a deep multiproduct offering, technology-driven processes and a best-in-class securitization platform and remain excited about the opportunities ahead. As Chris mentioned earlier, the first quarter also marked the formal arrival of Redwood Horizons, a venture investment strategy focused on early and mid-stage companies driving innovation in financial and real estate technology and digital infrastructure. We believe these technologies have the potential to significantly disrupt the mortgage industry in the near and medium term. We also believe the access to data provided by these platforms will help inform our strategy as we expand our leadership position in the market. The blockchain investment I mentioned earlier was preceded by two investments sourced through CoreVest borrower network, which we first announced in March. Rent room and rent butter are each focused on automating various processes from landlords, including tenant decisioning and rental collections. These investments reflect an opportunity to help grow these businesses through deepening their connection to landlords and for us to benefit in addition to the potential investment upside from their data access and growing network effect. Our overall investment portfolio continued to perform well in the first quarter as credit performance strengthened, spreads tightened and total book value grew. In a low-yield environment, where deploying capital in the broader markets remains challenging, the competitive advantage of having two best-in-class operating platforms, producing high-quality assets is of particular importance. We deployed $73 million net of financing into new investments during the quarter, primarily new issue CoreVest SFR securities and newly originated Bridgeland. Delinquencies in our portfolio have fallen continuously since last summer, and new forbearance requests are de minimis. Our asset management teams across the enterprise continue their sterling work. Combined 90-plus delinquencies across our Sequoia and CoreVest securitization platforms now stand below 2%, and 90-plus day bridge delinquencies are below 3.5%, significant outperformance versus the marketplace. Market value has also improved across the portfolio, most notably for certain reperforming loan and multifamily bonds as secondary market prices rose. Total portfolio returns rose slightly, driven by a combination of improved credit and faster prepayment speeds on securities, we hold at a discount to face value. Higher prepayment speeds led us to exercise our first series of Sequoia call options in several years. Since January, we have completed calls on three Sequoia transactions totaling $75 million in loans and plan to call several others throughout the remainder of the year. While the first quarter's results exceeded expectations, our focus remains on sustainably growing and diversifying our business. Benchmark interest rates have moderately fallen since quarter end. But as the economy proceeds in finding its footing and the prospects for additional federal spending come into clearer focus, we are prepared for the markets to respond accordingly. And while increased competition has returned, we remain confident that our agility, commitment to technology and deep relationships will buttress our leading market position. As Chris and Dash discussed, our first quarter earnings and book value benefited from strong results across our operating businesses and investment portfolio. Contributing to GAAP earnings of $0.72 per share for the quarter and generating a 10% economic return on book value for the quarter. After the payment of our $0.16 dividend, which we increased by 14% in the first quarter, our book value increased 9% during the quarter to $10.76 per share. A significant amount of our earnings this quarter were generated from our mortgage banking operations, which are conducted within our taxable subsidiary, giving us the flexibility to retain a portion of that income to continue to reinvest in our business and organically grow book value while maintaining an attractive dividend for shareholders. Focusing in on some of the operating results within the business, as Dash mentioned, our residential mortgage banking team achieved exceptionally strong returns on another quarter of record lock volumes, combined with a meaningful increase in margins. While Dash describes some of the unique factors contributing to the expansion in margins during the quarter. Moving forward, we generally expect margins to normalize back toward levels that still achieve a 20%-plus return on capital. At CoreVest, mortgage banking income normalized during the quarter while continuing to generate very strong operating returns on capital of nearly 30%, driven in part by marginal tightening on securitization execution. As a reminder, fourth quarter results benefited from significant spread tightening on a larger balance of loans held in inventory at the beginning of that quarter. In our investment portfolio, net interest income increased modestly in the quarter due to higher yield maintenance income associated with SFR securities and reduced leverage on our bridge loan portfolio. During the quarter, capital allocated to our investment portfolio increased as deployment into new investments and positive fair value changes were partially offset by sales and paydowns, which remained elevated. These higher prepay speeds, along with strengthening credit performance contributed to spread tightening across our portfolio, benefiting our subordinate securities that we hold at a discount and driving fair value increases. These same dynamics also created the opportunity for us to complete calls on three Sequoia transactions through the first four months of the year. As a reminder, we control the call rights for many of the securities in our investment portfolio, including for Redwood sponsored Sequoia securitizations, CoreVest sponsored SFR securitizations and certain Freddie Mac sponsored RPL securitizations. Most of these call rights are exercisable at par once underlying portfolios pay down to a predetermined size. And in addition to the discount embedded in these securities, at current market conditions, underlying loans generally can be sold or resecuritized above their part value, creating further upside to valuation returns. In relation to the three Sequoia deals we've called through April, we acquired $75 million of jumbo loans on to our balance sheet. Related to these calls, we expect to record GAAP realized gains of $7 million associated with the underlying securities, the majority of which will not flow through book value, and a net book value benefit of approximately $2 million versus our December 31st fair values, which is inclusive of estimated loan premium. Inclusive of these recent calls, we estimate over $600 million in loans underlying our securities could be callable in 2021. Shifting to the tax side, we had REIT taxable income of $0.09 per share in the first quarter and $0.47 per share of taxable income at our TRS, again driven by income from our mortgage banking operations. Turning to our balance sheet. We ended the first quarter with unrestricted cash of $426 million. After allocating additional working capital to our mortgage banking operations during the first quarter to support growing loan volumes, and net of other corporate and risk capital, we estimate we had approximately $225 million of capital available for investment at March 31st. During the quarter, our overall leverage increased as expected and was in line with increased inventory levels at our mortgage banking operations at the end of the first quarter. Our non-recourse leverage ratio increased to 1.9 times at March 31st from 1.3 times at the end of 2020, and total leverage in our investment portfolio remained consistent from the prior quarter at around 0.9 times. Looking forward, we expect to add a modest amount of incremental leverage to the investment portfolio as we refinance certain term facilities that have delevered and become repayable beginning in the second quarter and may also explore adding non-marginal leverage to some assets that are currently unencumbered, such as securities retained from recent CoreVest securitizations. We expect these refinancings to lower our borrowing costs given current market rates and new financings will generate incremental capital that can be redeployed into the business. Moving to our outlook. We remain broadly on track with the 2021 outlook we provided in our fourth quarter 2020 Redwood review. While returns from our operating businesses well exceeded 20% in the first quarter, we expect these returns to normalize during the remainder of the year, particularly for residential mortgage banking as our capital allocation now reflects a more steady state pipeline and levels of loan inventory on balance sheet. For our investment portfolio, returns for the quarter were in line with our outlook and strengthening credit across our portfolio generally provided for incremental improvements to our forward return expectations. Cash flow expectations generally improved across the portfolio, and inclusive of our previously reported 5% fair value increase in our securities portfolio during the quarter, we now estimate go forward returns relative to our March 31st GAAP basis to be between 10% and 11%, inclusive of potential upside from potential borrowing costs in the second half of the year. Given the strong performance in the first quarter, we saw operating expenses, including variable compensation expense increased in line with the growth in net income. Looking forward, general and administrative expenses will continue to trend in sync with overall business returns, and we continue to expect long-term unsecured debt to risk costs over 2021 to remain consistent. For the remainder of 2021, we will continue to focus on growth, technological efficiency and profitability in our operating businesses. Income retained from these businesses should drive further growth in our book value, while increased production will continue to create new and attractive investments for our portfolio, driving higher net interest income over time, supporting a stable and attractive dividend. Operator, please open the call for Q&A.

q1 gaap earnings per share $0.72.

The non-GAAP financial measures provided should not be utilized in isolation, or considered as a substitute measures of financial performance prepared in accordance with GAAP, and reconciliation between GAAP and non-GAAP financial measures are provided in our third quarter Redwood review available on our website at redwoodtrust.com. Also note that the content of this conference call contains time sensitive information that is accurate only as of today. The company does not intend and undertakes no obligation to update this information to reflect subsequent events or circumstances. Finally, today's call is being recorded and will be available on the company's website later today. After restored first half of the year, our team continued on our path toward transformative growth. After having communicated an ambitious second half of 2021 forecast, our third quarter results still managed to exceed our expectations. The entire organization has been energized to see the durability of our business model as we produce strong financial results and risk adjusted portfolio returns. Our GAAP earnings were $0.65 per diluted share for the third quarter, and our GAAP book value increased 4.7% in the quarter to $12 per share at September 30th. This contributes to an overall year-to-date increase in our GAAP book value of 21% despite having raised our dividend each quarter of the year thus far. When combined our GAAP book value growth in dividends paid resulted in a 27% economic return to shareholders year-to-date. Operationally speaking, you'll hear more from Dash and Brooke on our third quarter results. But suffice it to say it was a very strong quarter, several in-house records broken. I'm particularly proud of a series of strategic and innovative transactions across our firm that were both accretive to earnings and foundational for future operating progress. This included the first private label RMBS securitization to leverage blockchain technology, completed in collaboration with liquid mortgage and early horizons investment partner. We also completed our first ever bridge loan securitization through our BPL platform, which provides a meaningful new distribution alternative to us. Next, our investment portfolio team co-sponsored the first ever securitization backed entirely by residential home equity investments. Finally, these deals are rounded out by six new venture investments by RWT Horizons in the third quarter. I'm also pleased that after following strict health and safety protocols, we're able to successfully host our third Investor Day in September, the first since the onset of the pandemic. During the event, we affirmed our commitment to our corporate mission to make quality housing, whether rented or owned accessible to all American households. We also unveiled a much bolder strategic vision, become the leading operator and strategic capital provider driving sustainable innovation and housing finance. As we showed in New York, opportunities for transformative scale are clear and now attainable, based on the strategic progress we've made in recent years. Our vision is built upon an immense multi-trillion dollar addressable market that transcends the traditional mortgage lending space. We're already attacking antiquated processes in our markets with technology enabled solutions, and over time, we plan to completely reimagine how the non-agency housing finance market works. Across the Redwood enterprise, we've cultivated a talented and engaged workforce that as you might expect, believes in our mission, and is inspired to innovate and help us realize our strategic vision and goals. Our role is not a typical one for REIT, much less one, one of the longest tenured publicly traded REITs in the country. But that should not come as a surprise as we never defined our business by way of our Federal tax election. Those who do, risk missing the growth potential of our platform, particularly as we continue to analyze our optimal long-term corporate structure. Run into bend toward the end of the year, we remain very optimistic about our business, but we are proceeding cautiously. We see several macro and market risks ahead, COVID-19 variants, rising inflation, Central Bank tapering, and Federal debt ceiling stripe to name a few. More fundamentally, recent trends and unemployment claims suggest that we're still in a recovery phase, and the current economic situation is far from stable, notwithstanding the consistent upward pressure on home prices and rents that we've all observed in recent quarters. Our interest rate capital and broader risk management posture reflects this view. While we've generated strong earnings thus far this year, we've done so with record amounts of cash on hand, putting $557 million at September 30. Going forward, our stakeholders should expect that we will continue to work to fulfill our broadly conceived mission focused on the significant addressable market in front of us and run a business grounded in fundamentals and sound analysis. All while nurturing and diverse and talented bench team members were engaged and aligned with our values. As Chris describe, the third quarter was another prolific one across our platform with increases in purchase and origination volumes complemented by innovative work across technology and capital markets. Our teams are operating at a highly productive and sustainable level, as the foundation we have laid drives efficiency gains and demand for our products remains robust. Notwithstanding the recent uptick in benchmark rates, excess capital in the market is still in search of yield. We remain the partner of choice for whole loan and securities investors alike and continue to expand our distribution channels creatively to our capital efficiency and bottom line. Our third quarter results reflect continued execution of the strategic goals we laid out at the beginning of the year. As Chris referenced, we are seeing meaningful progress in a number of the initiatives that we presented at our recent Investor Day, both organically and through new investments and partnerships already bearing fruit. In this vein, we strive to innovate daily in addressing the issues facing the housing market, but also look to take advantage of our strategic positioning in the markets we serve, to continue to grow profitably and sustainably. Our progress also underscores important realities about housing affordability and accessibility, themes we focused on at Investor day. Housing finance needs more creative solutions, driven by technology, a common sense approach to underwriting and most importantly, leadership and bringing market constituents together in pursuit of common goals. During the third quarter, we took important steps in this direction. Our results reinforce this broader backdrop and the opportunity across our platforms to continue serving growing areas in housing. And the recent path of home prices, coupled with the evolution in consumer demand and important trends in industry regulation has created ample room for other creative solutions to help consumers monetize equity in their homes. Our third quarter results represent another step in the path toward transformative growth that we laid out at Investor Day, with our core operating businesses leading the way and notable strategic progress across the enterprise. The durability and diversification of our business model, coupled with our crisp execution and technological innovation, puts us in a unique position to drive change that benefits all stakeholders. With this in mind, it's important to unpack the key drivers of profitability across our platforms. Our residential business continued executing in the third quarter, and we believe is well positioned heading into year end, facing several market headwinds, including renewed inflation fears and meaningful rate volatility. The team drove margins and volumes higher and once again broke new ground in our Sequoia securitization program. We generated a record $4.7 billion of lock volume during the quarter, making quick work of our prior record of $4.6 million two quarters earlier. Overall, locks were up 22% versus the second quarter, 59% of which were on purchase money loans, an important statement about the quality of our pipeline and our sellers, given the benchmark rates during the quarter hit lows not seen since February. The volume of choice locks remained steady versus the second quarter. And now the current mortgage rates are approximately 30 basis points higher versus the lows of Q3. It is a helpful reminder that we have locked choice loans with over 100 different sellers thus far this year, important groundwork that we believe will bear fruit as we head into next year. The depth of our distribution channels was another highlight during the quarter, as we sold $2.4 billion of loans alongside our securitization activities. RMBS issuance remained elevated in the third quarter, with September a particularly crowded month. As expected during any substantial uptick in supply, we witnessed more noticeable price tearing from investors across transactions, differentiation that we once again benefited from during the quarter. Our third quarter issuance, Sequoia 2021-6 was $449 million in size and executed well inside competing transactions marketed during a similar period. At time of securitization, the loans underpinning the deal were on average just one month old, compared to three to four months for our competitors, a testament to our efficiency and turning inventory. A key hallmark of the transaction was the first of its kind use of blockchain based technology within private label RMBS for enhanced remittance reporting for bond investors. Liquid Mortgage, an early partner through Redwood Horizons, is acting as distributed ledger agent, or DLA, on the transaction, providing an added and more real time remittance reporting option for investors who choose to leverage it. Liquid Mortgage has integrated with Redwood subservicer to receive payment information that will be published on the blockchain daily. This is a significant first step toward applying technological advancements and transparency to an area of the mortgage industry that has historically been less advanced. We are excited to be leading the market in this effort and expect to implement this enhanced functionality going forward. In fact, liquid mortgages also acting as DLA on our most recent Sequoia securitization, which closed in October and is backed by $407 million of jumbo residential loans. Leveraging technology remains a major organizational focus and we continue to achieve milestones on our organic technology roadmap. Rapid funding through which we provide accelerated settlement timelines for sellers, recently eclipsed $1 billion in purchases since program inception one year ago. Our Redwood Live app has also gained significant traction recently, and we expect seller adoption to increase and allow us to continue growing wallet share with our seller base. The third quarter was also another high point for CoreVest our business purpose lending platform, the third quarter $639 million in fundings were the highest since late 2019 and reflected a consistent balance between single family rental and bridge SFR fundings totaled $394 million, up 26% from the second quarter. Production deposition does the price and SFR securitization in early October, backed by approximately $304 million in loans and CoreVests 19th securitization overall. CoreVest continues to deepen its operational moat. And during the third quarter we achieved a T capital markets milestone as well when completing our inaugural transaction backed by bridge loans. CoreVests has long been an industry leading bridge lender and we expect structures like this to further drive our competitive advantage. The transaction creates $300 million of financing capacity of which we sold liabilities representing 90% of the capital structure. Procuring additional leverage on a non-recourse, non-marginal basis at a cost of funds of less than 2.5% on the issued bonds. Importantly, the transaction was structured with a 30 month reinvestment period for loan payoffs. The longest of its kind to date for this type of transaction, making it another important liquidity management tool for the business as we expand originations. Operating momentum in the Bridge business means we will likely use these types of structures and others likely going forward. As third quarter fundings total $245 million, an increase of 14% from the second quarter. As competition ramps up across the BPL market, product development remains a key priority. We continue to expand our channels and BPL through a combination of direct lending and sourcing loans from third party originators. To that end, during the third quarter, we made key progress in our correspondent loan business and further capitalize on our strategic investment in Churchill. Our technology initiatives also continued to advance in the quarter furthering this expansion. We launched an initial release of our refresh client portal with strong initial feedback and remain focused on creating more efficiencies at the front end of the underwriting process. The fourth quarter has traditionally been our most prolific for BPL originations and we feel confident about our capacity to manage higher volumes entering 2022. Our investment portfolio remained in step with our operating progress and continue to generate strong returns with our securities book appreciating in value by approximately 15 % [Phonetic] during the third quarter, and our bridge portfolio helping to drive net interest income higher. As Brooke will discuss in more detail, we believe there remains significant value to be unlocked from our investments based on the remaining discount in the book, coupled with continued execution of our call ride strategy. As Chris noted, our portfolio team delivered its own first of its kind transaction during the third quarter cosponsoring a securitization backed entirely by residential home equity investments. Completed in partnership with Point Digital, a fintech originator. The hallmark transaction is backed by a product that enables consumers to monetize equity in their homes, without having to sell or incur additional debt. Of the $34 trillion in total estimated US home value that we mapped out and invest today, approximately $23 trillion is in home equity, either backing existing debt or held for cash by a growing cohort of zero LTV borrowers, while Point and others have made progress and unlocking a small portion of this value. The opportunity demands additional product creativity and flexible capital. In parallel with a securitization, we reupped our flow purchase arrangement with Point, providing us with a continued acquisition source and the opportunity to explore adjacent products. Point and Liquid Mortgage were too early Redwood Horizons investments and are now part of a growing suite of portfolio companies that we believe will be a driver of long-term value creation for Redwood. Horizons continued it's strong investment pace during the third quarter completing six investments in total. The go forward pipeline is highlighted by an array of technology solutions, including several opportunities and climate analytics, particularly busy areas, firms attempt to evolve traditional methods of predicting how climate change impacts property valuation, insurability and overall credit performance. With a direct nexus to our firmwide ESG work, we expect to continue dedicating focus to this area. Our efforts to drive scale in our current businesses while executing on initiatives to innovate and reimagine the industry, drove another strong quarter financial results. We report a GAAP earnings of $0.65 per diluted share, representing a 27% annualized return on equity for the quarter, which significantly outpaced our dividends. As a result, book value increased $0.54 or 4.7% to $12 per share on the quarter. We've had an outstanding 2021 today and are pleased to have built on the momentum from the first half of the year. We delivered our third consecutive dividend increase of 17% to $0.21 per share ahead of market expectations. We have consistently generated annualized economic returns in excess of 20% over the last five quarters. Our economic return spotlights not only the evolution of our dividends, but more importantly, the expansion in our book value. Our results reflect the operating leverage of the platform. In the first nine months of the year, transaction volumes and our mortgage banking businesses have already surpassed the average annual volumes of the past several years. On a combined basis, our operating businesses generated an annualized after-tax operating return of 31% in Q3. They utilized roughly 450 million of average capital or 30% of our total allocated capital that produced two-thirds of our adjusted revenue for the quarter. As a reminder, these earnings can be retained in the business, driving the differential between the nearly 5% increase in book value and 2% increase contributed from the investment portfolio. This underscores our ability to create organic capital, which we've been continuing to convey to the market. The residential mortgage banking team generated a 26% after tax operating return on capital during the quarter. Income from mortgage banking activities net was 12 million higher than the second quarter as loan purchase commitments of $3.3 billion increased 20% from the second quarter, and our gross margins improved approximately 25 basis points, which is above the high end of our historical range. Margin expansion was attributable to improved execution on securitization during the quarter and hedge outperformance into a rising rate environment. We saw continued strength from our business purpose mortgage banking operations, which delivered a 43% after-tax operating return on capital. Spreads continued to tighten in Q3, but the pace moderated, resulting in a lower increase in the price of loans and inventory at the beginning of the quarter relative to second quarters change. Aside from this, BPL mortgage banking results benefited from a 22% increase in funding volume, as well as strong execution on the securitizations completed in the quarter. Next, I'll turn to the investment portfolio, which has been a consistent source of value creation in 2021. Following the $95 million of investment fair value changes we booked through the second quarter. We had another $26 million in Q3 from further improvement in credit performance and spread tightening, particularly in our third-party reperforming loan and retain for best securities. Additional positive fair value changes were realized through the first ever securitization of home equity investments. Separately, during the quarter, we settled call rights on to Sequoia securitization, acquiring 66 million of season jumbo loans at par, which had a small benefit to book value. Portfolio net interest income increased by roughly nine million, driven by lower interest expense on bridge loan financing and increased discount accretion income on our available-for-sale securities. The increase in accretion was driven by expectations for certain of our retains Sequoia securities to be called over the next several quarters, benefiting our cash flow forecasts and effective yields for those investments. But it is important to note that there is no impact book value from these changes. Looking ahead, net of our third quarter gains, there remains potential upside of roughly $3 per share in our portfolio through a combination of accretable market discount and call REITs that we control. We estimate $1.2 billion of loans can become callable across capital and Sequoia through the end of 2022. Should current market conditions persist, these callable loans can generally be sold or resecuritized well above their par value. REIT taxable income increased to $0.14 per share from $0.11 in the second quarter due to higher net interest income. Our taxable REIT subsidiaries earned $0.32 per share in Q3 up from $0.27 in Q2. We recognized a lower income tax provision compared to the second quarter from the release of valuation allowance on a portion of our deferred tax assets, partially offset by an increase in state taxes. Our balance sheet and funding profile remain in excellent shape with unrestricted cash of $557 million, which equates to over 75% of our outstanding marginable debt. We also had investable capital of $350 million to deploy into new investments. During the quarter, we added $350 million of financing capacity to support growth of our operating platform. We also completed the bridge securitization and a new $100 million non-marketable term financing collateralized by retain capital securities in our investment portfolio, each of those which contributed roughly -- to a roughly 20 basis point reduction in the cost of funds of our business purpose lending segment. Our recourse leverage was unchanged at 2.2 times, as we incurred additional warehouse borrowings to finance higher loan inventories, while rotating certain financings into non-recourse debt and experiencing appreciation of our equity base. One central tenet of our strategic plan is to continue enhancing our capital and operating efficiencies. During the third quarter, we maintain cost per loan for our residential mortgage banking operations of 28 basis points, compared with our historical average of 35 basis points during 2013 to 2019. Our business purpose mortgage banking operations also delivered improved efficiencies, with a lower net cost to originate relative to the second quarter. Even with higher general and administrative expenses on the quarter, due to increased variable compensation tied to our strong year to date financial performance, various efficiency ratios, such as pre-tax margin or operating expense as a percentage of GAAP net income, demonstrate very positive trend lines and our efficiency gains. And finally, we are embedding sustainability across our operations and investment strategy. We are committed to transparency and further integrating ESG into our financial reporting going forward. We recently provided a comprehensive ESG review at our Investor Day event in September, including new disclosure of human capital metrics, and programs and an overview of our key priorities and top commitments over the near to intermediate term. As Dash mentioned, we are analyzing opportunities within horizon, which will aid our evaluation of various environmental and social impacts and risks within the portfolio. It has the potential to further evolve our risk management policies and build our upper regional resilience.

q3 gaap earnings per share $0.65. gaap book value per common share was $12.00 at september 30, 2021, up 4.7% from june 30, 2021.

They are also referenced on page two of our financial supplement. With that, let's start our teleconference with opening comments from Dave Nunes, President and CEO. First, I'll make some high-level comments before turning it back over to Mark to review our consolidated financial results. Then I'll ask Doug Long, our Senior Vice President of Forest Resources, to comment on our U.S. and New Zealand timber results. And following the review of our timber results, Mark will discuss our real estate results as well as our outlook for the balance of 2021. We started 2021 with encouraging momentum across all our businesses, a testament to the strength and diversity of our timber markets and the positioning of our real estate portfolio. In the first quarter, we generated adjusted EBITDA of $70 million and pro forma earnings per share of $0.08 per share. Adjusted EBITDA exceeded the prior year quarter by 47% as favorable results in the New Zealand Timber, Pacific Northwest Timber and Real Estate segments more than offset a modest decline in adjusted EBITDA from our Southern Timber segment. As we reflect on the first quarter, we're pleased with how our team worked collaboratively to capitalize on strong domestic markets, improving real estate market trends and growing demand for logs from China. Drilling down to our different operating segments. Our Southern Timber segment generated adjusted EBITDA of $32 million for the quarter, which was 5% below the prior year first quarter. A 7% increase in net stumpage prices and stronger nontimber sales were more than offset by 18% lower harvest volumes due to the front-loaded timing of 2020 harvest activity as well as weather-related disruptions we experienced earlier this year. In our Pacific Northwest Timber segment, we achieved adjusted EBITDA of $18 million, an improvement of 81% versus the prior year quarter. This strong result is attributable to a sharp increase in log pricing given strong domestic demand and robust lumber markets as well as higher volumes from the acquisition of Pope Resources. In our New Zealand Timber segment, first quarter adjusted EBITDA more than doubled to $21 million. This year-over-year increase in adjusted EBITDA was due to significantly higher harvest volumes and sawtimber pricing as the first quarter of 2020 was severely impacted by COVID-19-related headwinds. Lastly, in our Real Estate segment, we generated adjusted EBITDA of $5 million. This year-over-year improvement was driven by an increase in acres sold, excluding the large disposition in 2020 amid growing buyer demand as well as a 9% increase in weighted average prices. While improved versus the prior year quarter we anticipated coming into the year, Q1 Real Estate activity was relatively light in the context of our full year expectations due to the timing of closings. Let's start on page five with our financial highlights. Sales for the quarter totaled $191 million, while pro forma sales totaled $180 million. Operating income was $29 million and net income attributable to Rayonier was $11 million, or $0.08 per share. Adjusting for the operating income attributable to the noncontrolling interest in our Timber Funds segment, pro forma operating income was $27 million. First quarter adjusted EBITDA of $70 million was above the prior year quarter as higher results in our New Zealand Timber, Pacific Northwest Timber, and Real Estate segments more than offset a modestly lower contribution from our Southern Timber segment. On the bottom of page five, we provide an overview of our capital resources and liquidity at quarter end as well as a comparison to year-end. Our cash available for distribution, or CAD, for the quarter was $47 million compared to $27 million in the prior year quarter, primarily due to higher adjusted EBITDA and lower capital expenditures, partially offset by higher cash taxes and interest. A reconciliation of CAD to cash provided by operating activities and other GAAP measures is provided on page seven of the financial supplement. Consistent with our nimble approach to capital allocation, we raised $37 million through our at-the-market, or ATM, equity offering program during the first quarter at an average price of $33.31 per share. As previously discussed, we view the ATM program as a cost-effective tool to opportunistically raise capital, strengthen our balance sheet and match fund bolt-on acquisitions. In sum, we closed the quarter with $78 million of cash and $1.3 billion of debt, both of which exclude cash and debt attributable to the Timber Funds segment, which is nonrecourse to Rayonier. Our net debt of $1.2 billion represented 21% of our enterprise value based on our closing stock price at the end of the first quarter. Let's start on page eight with our Southern Timber segment. Adjusted EBITDA in the first quarter of $32 million was $2 million below the prior year quarter. The decline relative to the prior year quarter was largely driven by an 18% decrease in harvest volumes due to the front-loaded timing of 2020 activity as well as weather-related disruptions incurred earlier this year. Specifically, winter snowstorms in the Gulf region and wet ground conditions in Georgia resulted in lost production days compared to the first quarter of 2020. The decline in volumes during the first quarter was partially offset by higher net stumpage prices and nontimber income. Specifically, average sawlog stumpage pricing was roughly $28 per ton, a 3% increase compared to the prior year quarter. Sawlog pricing is gradually improving as we are successfully leveraging continued lumber market strength into higher sawlog prices in certain U.S. South markets. Furthermore, increased pricing tension due to the growing demand for export-grade logs are becoming more visible in our coastal markets. However, pricing trends continue to vary considerably by region, underscoring the importance of local timber market dynamics. Pulpwood pricing climbed 7% from the prior year quarter, reflecting the weather conditions that constricted supply during the first quarter as well as a favorable mix shift toward our coastal Atlantic markets. Overall, weighted average pine stumpage prices were up 8% versus the prior year quarter based on higher sawtimber and pulpwood prices as well as a more favorable mix of sawtimber. First quarter nontimber sales of $8 million were $2 million above the prior year quarter. A large pipeline easement sale drove the increase as compared to prior year quarter. Moving to our Pacific Northwest Timber segment on page nine. Adjusted EBITDA of $18 million was $8 million above the prior year quarter. The year-over-year improvement was largely attributable to robust domestic lumber markets, driving significantly improved pricing. First quarter harvest volume was 13% above the prior year quarter. The year-over-year increase was largely driven by the incremental volume from last year's acquisition of Pope Resources. At $91 per ton, our average delivered sawlog price during the first quarter was up 21% from the prior year quarter. Strong pricing was sustained throughout the quarter even as domestic mills in the region maintained ample log inventories. Meanwhile, pulpwood pricing fell 23% in the first quarter relative to the prior year quarter as sawmill residuals remain plentiful amid increased lumber production. Notably, the Pacific Northwest is seeing some improved demand from the export market. Transportation constraints restricting the flow of European spruce salvage logs coupled with the ban on Australian log imports into China are translating into improved demand for exports from the Pacific Northwest. With domestic log demand already at very healthy levels due to the strength in domestic lumber markets, we believe stronger export market demand will create additional pricing support, particularly for whitewood species. I'd also like to offer a few brief comments on the impact of last year's wildfires in Pacific Northwest. As a reminder, none of our feed timber properties were directly impacted by the fires, although roughly 10,000 acres of Timber Fund properties sustained some fire damage. Consistent with the update we provided in February, our operations in the region have not been materially impacted from the salvage efforts conducted by others. There have been some localized hauling cost increases in the areas directly impacted by the fires. However, the location of our timberland, the solid demand for green logs from many of our customers and the steady business we have been able to provide to our logging crews in the region has resulted in minimal impact to our operations. Overall, we remain well positioned to capitalize on solid domestic demand trends, improving export market conditions and favorable pricing environment we currently see in Pacific Northwest, especially following last year's potential integration of Pope Resources. Page 10 shows results and key operating metrics for our New Zealand Timber segment. Adjusted EBITDA in the first quarter of $21 million was more than double the $10 million that we reported in the prior year quarter. The increase in adjusted EBITDA was driven by much stronger pricing and a more normalized level of harvest activity versus a prior year period constrained by COVID-19 disruptions. Increased volumes and pricing were partially offset by reduced carbon credit sales. We opted to defer carbon credit sales during the quarter as we expect that the value of these credits is poised for further price depreciation due to recent changes to New Zealand's climate change goals and proposed changes to the country's emissions trading scheme. Average delivery prices for export sawtimber climbed 28% from the prior year quarter to $120 per ton, reflecting improved trade demand as well as escalating trade tensions between China and Australia. New Zealand log export pricing continues to benefit from the ban on Australian log imports in China. As we have previously noted, prior to the ban, Australia was applying approximately 10% of the total volume imported by China. Furthermore, while the abundant supply of European spruce continues to compete for market share in China, availability has at least temporarily been constrained by higher shipping costs and the lack of container availability. In turn, we have seen tremendous pricing upside in New Zealand on the export front, albeit partially offset by materially higher shipping costs. We expect these costs to remain elevated given the global economic recovery and shipping demand for a wide range of commodities. Shifting to the New Zealand domestic market. Average delivered sawlog prices increased 16% from the prior year period to $81 per ton. The increase in U.S. pricing was driven primarily by foreign exchange rates as New Zealand domestic pricing improved by a more modest 4% in the first quarter versus the prior year quarter. Average domestic pulpwood pricing climbed 19% as compared to the prior year quarter. In sum, despite the recent increase in shipping costs, we believe our New Zealand operations are well positioned to capitalize on further strengthening of the Chinese economy and any prolonged reduction in log imports from Australia as well as continued healthy domestic demand. I'll now briefly discuss the results from our Timber Funds segment. Highlighted on page 11, the Timber Funds generated consolidated EBITDA of $7 million in the first quarter on harvest volume of 145,000 tons. Adjusted EBITDA, which reflects the look-through contribution from the Timber Funds was $1 million. Lastly, in our Trading segment, we reported $200,000 of adjusted EBITDA in the first quarter. As a reminder, our trading activities typically generate low margins and are primarily designed to provide additional economies of scale to our feed timber export business. As detailed on page 12, real estate closings were relatively light during the first quarter, which was consistent with our expectations and guidance we provided earlier this year. Specifically, sales totaled just over $10 million on roughly 2,400 acres sold at an average price of nearly $4,200 per acre. Real estate adjusted EBITDA was $5 million in the first quarter. The bulk of first quarter sales were in the rural category. Rural sales totaled roughly $2,400 -- 2,400 acres at an average price of nearly $4,100 per acre. Overall, we have seen a meaningful uptick in demand for rural land as the space, privacy and recreational opportunities offered by these properties are attracting buyers. We expect this positive momentum to continue, and we remain focused on achieving price realizations well above timberland values. Sales in the improved development category totaled roughly $250,000 and consisted of three residential lots in our Wildlight development project north of Jacksonville, Florida, for an average price of $84,000 per lot, or $406,000 per acre. While development closings were limited in the quarter, we are very encouraged by the pipeline that we built for the balance of 2021. Overall, the team is capitalizing on growing demand for rural land as well as residential lots and commercial parcels within our development projects. We remain optimistic that a combination of demographic trends, historically low mortgage rates and an increased need for space will benefit our various real estate sales categories. Relative to the first quarter, we expect a significant increase in the EBITDA contribution from our Real Estate segment over the next few quarters. Specifically, on the development front, there is currently healthy demand from homebuilders for lots and entitled infrastructure served land. In February, we are excited to announce that, Publix, a popular supermarket chain based in Florida, is set to anchor a new shopping center in Wildlight. We believe that as this community continues to get more established, interest from builders will continue to grow. We're also encouraged by the pipeline of opportunities for our properties in Richmond Hill, Georgia and the West Puget Sound area of Washington. Now moving on to our outlook for the year. Based on our solid start to 2021 and our expectation that there will be a significant pickup in real estate closings as the year progresses, we believe we are on track to achieve full year adjusted EBITDA toward the upper end of our prior guidance range of $285 million to $315 million. In our Southern Timber segment, we expect to achieve our full year volume guidance of 6.2 million to 6.4 million tons as we anticipate the demand from lumber mills will remain strong and that select U.S. South markets will continue to benefit from improving export demand. Further, we continue to expect a modest improvement in weighted average pricing relative to the prior year, with quarterly fluctuations largely driven by geographic mix. In our Pacific Northwest Timber segment, we expect to achieve our full year volume guidance of 1.7 million to 1.8 million tons. However, given we pulled forward some volume into the first quarter to capture favorable demand and pricing, we anticipate lower quarterly harvest volumes for the balance of the year. We further expect that strong domestic lumber markets and a pickup in export demand will hold pricing at or above first quarter average prices through the rest of the year. In our New Zealand Timber segment, we expect to achieve our full year volume guidance of 2.6 million to 2.8 million tons with increased quarterly harvest volumes for the balance of the year. We expect continued strong export and domestic demand, and we further expect that the restriction on Australian log imports into China will constrain competing log supplies. We anticipate this positive operating momentum will translate into log prices remaining near or above levels realized in the first quarter, which will be partially offset by elevated shipping costs. In our Real Estate segment, we expect a significant pickup in closings over the balance of the year based on our current pipeline of opportunities. Our pipeline has grown substantially as we have progressed through 2021, driving our increasingly optimistic sales outlook for residential and commercial properties within our real estate development projects. While first quarter closings were relatively light as expected, we remain confident that we will achieve or exceed our prior full year adjusted EBITDA guidance. As we approach the one year anniversary of the Pope Resources acquisition, which closed last May, we remain very pleased with the integration process and the benefits realized from this transaction. The addition of these high-quality assets and the integration of Pope's personnel into the Rayonier family has meaningfully increased our operational flexibility and market reach within the Pacific Northwest. We've leveraged these improvements to our team and our portfolio as market conditions continue to improve over the past year. Alongside the Pope integration, we've also continued to focus on other opportunities to grow and improve our portfolio. To this end, we closed on $30 million of negotiated bolt-on timber acquisitions across the U.S. South to start 2021. We also published our inaugural carbon report in March. This report detailed the 5.7 million metric tons of net carbon sequestered by our forest operations in 2019 and demonstrates the important role that working for us play in fighting climate change. Rayonier's business model provides a natural climate change solution. Our trees remove carbon from the atmosphere during their growth cycle. And after harvesting, a significant portion of this carbon remains stored for an extended period of time within downstream wood products. Building on our inaugural carbon report, we plan to release a comprehensive sustainability report this summer. We believe our mission of providing industry-leading returns, financial returns to our shareholders while serving as a responsible steward of our lands is well aligned with the holistic approach embodied by greater adherence to ESG principles. And we're proud of the progress we've made to date on enhancing our ESG disclosures. We look forward to further engagement on these important topics with our shareholders and other stakeholders going forward. In summary, we are benefiting from strengthening end markets and continuing to make progress on several important strategic priorities. I'm very proud of the accomplishments of our people and their unwavering commitment to building long-term value for our shareholders. Despite the unprecedented challenges encountered over the past year, our team is working hard to better position the company for long-term success.

q1 earnings per share $0.08. in our southern timber segment, we expect to achieve our full-year volume guidance. in our pacific northwest timber segment, expect to achieve full-year volume guidance. anticipate lower quarterly harvest volumes for remainder of year in pacific northwest timber segment. in new zealand timber segment, expect to achieve full-year volume guidance.

They are also referenced on page 2 of our financial supplement. With that, let's start our teleconference with opening comments from Dave Nunes, President and CEO. First, I'll make some high level comments before turning it over to Mark McHugh, our Senior Vice President and Chief Financial Officer to review our consolidated financial results. And then we'll ask Doug Long, Senior Vice President of Forest Resources to comment on our U.S. and New Zealand Timber results. And following the review of our Timber segments, Mark will discuss our real estate results as well as our outlook for 2021. We finished 2020 with encouraging momentum across all businesses, generating adjusted EBITDA of $75 million and pro forma earnings per share of $0.08 per share in the fourth quarter. Adjusted EBITDA exceeded the prior year quarter by 15% with favorable results in the Pacific Northwest Timber, New Zealand Timber and Real Estate segments, more than offset a decline in adjusted EBITDA from the Southern Timber segment. As we reflect on 2020 in its entirety, we are pleased with our performance across all our business lines, especially given the significant disruption and uncertainty created by the COVID-19 pandemic. The diversity of our timber markets, the positioning of our real estate portfolio and the resiliency of our people during challenging operating conditions all contributed to our solid performance. Moreover, despite the logistical challenges created by the pandemic, we successfully closed and integrated the Pope Resources acquisition. We continue to believe the assets acquired as well as the expertise and dedication of the Pope team that has now joined Rayonier will play a critical role in our pursuit of long-term value creation for shareholders. For the full year, we generated GAAP earnings per share of $0.27 per share and pro forma earnings per share of $0.25 per share. Full year adjusted EBITDA of $267 million increased 8% versus the prior year. In our Southern Timber segment, we achieved full year adjusted EBITDA of $109 million, which represents a decrease of 9% versus the prior year. Core timber results were stable year-over-year with slightly higher volumes more than offsetting a slight decline in weighted average stumpage pricing. However, non-timber income declined significantly due to lower pipeline easement income following a record year in 2019. In our Pacific Northwest Timber segment, we generated full year adjusted EBITDA of $37 million. This result represents a more than doubling of the prior-year result, which is attributable to a partial year contribution of our Pope Resources acquisition as well as a sharp increase in log pricing given strong domestic demand and robust lumber markets. In our New Zealand timber segment, full year adjusted EBITDA declined 27% to $55 million. The year-over-year decline in adjusted EBITDA was primarily driven by lower volumes due to the government mandated lockdown in the first half of the year as well as lower log pricing amid COVID-related export headwinds. Lastly, our real estate segment, we generated full year adjusted EBITDA of $91 million, an increase of over 50% from the prior year result. This year-over-year improvement was driven by an increase in acres sold amid growing buyer demand for rural land as well as residential lots and commercial properties within our real estate development project areas. While the bulk of our real estate sales activity garnered significant premiums to timberland hold values, the successful completion of some low value non-strategic sales in 2020 brought down our weighted average sales price. These non-strategic sales reflect our ongoing focus on improving the quality of our portfolio through both addition and subtraction. Let's start on page 5 with our financial highlights. Sales for the quarter totaled $206 million while pro forma sales totaled $196 million. Operating income was $22 million including $700,000 of costs related to the Pope merger. Net income attributable to Rayonier was $10 million or $0.07 per share. Excluding these costs and adjusting for the operating income attributable to the non-controlling interest in our Timber Fund segment, pro forma operating income was also $22 million. Pro forma net income was $11 million or $0.08 per share. Fourth quarter adjusted EBITDA of $75 million was above the prior year quarter primarily due to significantly higher results in our Real Estate and Pacific Northwest Timber segments, partially offset by a lower contribution from our Southern Timber segment. On the bottom of page 5, we provide an overview of our capital resources and liquidity at year-end as well as the comparison to the prior year. Our Cash Available for Distribution or CAD for the year was $162 million compared to $149 million in the prior year, primarily due to higher adjusted EBITDA and lower cash taxes, partially offset by higher capital expenditures and higher cash interest. A reconciliation of CAD, the cash provided by operating activities and other GAAP measures is provided on page 8 of the financial supplement. Consistent with our nimble approach to capital allocation, we raised over $30 million through our at-the-market or ATM equity offering program during the fourth quarter at an average price of $30.26 per share. As discussed on our last earnings call, we view the ATM program as a cost effective tool to opportunistically raise capital, strengthen our balance sheet and match fund bolt-on acquisitions. In sum, we closed the year with $81 million of cash and $1.3 billion of debt, both of which exclude cash and debt attributable to the Timber Fund segment, which is nonrecourse to Rayonier. Our net debt of $1.2 billion represented 23% of our enterprise value based on our closing stock price at year-end. Let's start on page 9 with our Southern Timber segment. Adjusted EBITDA in the fourth quarter of $23 million was $5 million below the prior year quarter. The declines in adjusted EBITDA relative to the prior year quarter was largely attributable to lower volumes due to the timing of harvest activity in 2020 as well as lower non-timber sales. For the full year, harvest volumes totaled 6.2 million tons, an increase of 2% from 2019 and consistent with the high end of the revised guidance range we provided in August, however following notable year-over-year increases during both the second and third quarter, fourth quarter harvest volumes of 1.3 million tons or 15% below the prior-year quarter. A decline in volumes during the fourth quarter was partially offset by stronger pricing. Specifically, average sawlog stumpage pricing was roughly $25 a ton, a 10% increase compared to the prior-year quarter. We are encouraged to see evidence of increased pricing tension in multiple U.S. south markets during the quarter amid robust lumber markets, growing competition among those for logs and improved demand for expert grade logs in our coastal markets. Geographic mix also contributed to stronger average pricing as the contribution from our higher priced coastal Atlantic markets increased considerably year-over-year. Pulpwood pricing climbed 6% from the prior-year quarter, also reflecting a favorable mix shift toward our Atlantic coastal markets. Fourth quarter non-timber income of $5 million was $2 million below the prior-year quarter. Recall that 2019 marked a record high year for our non-timber income business. Moving to our Pacific Northwest Timber segment on page 10, adjusted EBITDA of $40 million was $6 million above the prior-year quarter. The year-over-year improvement was driven by substantially higher sawlog pricing as market dynamics improved under the historic surge in lumber prices. Fourth quarter harvest volume was 5% below the prior-year quarter. The drop in volume was partially attributable to our decision to defer some stumpage sales in the region. Sawmills in the region continued to run at full capacity during the quarter but export market demand remained sluggish. We attribute the continued softness in the export market to the availability of Europeans spruce salvage logs for construction applications in China as well as the increased price of logs from Pacific Northwest. For the full year, harvest volumes in the Pacific Northwest totaled 1.6 million tons. A 32% increase from 2019 was largely driven by the partial year contribution from the Pope Resources acquisition and was in line with the revised guidance range we provided in August. At $96 per ton, our average delivered sawlog price during the fourth quarter was at its highest level since 2018 and up 23% from the prior year quarter. Meanwhile, pulpwood pricing fell 14% in the fourth quarter relative to the prior year quarter as sawlog residuals remained plentiful amid increased lumber production and soft chip export demand. I'd also like to offer some comments on the impact of last year's wildfires in the Pacific Northwest. Importantly, none of our fee timber properties were directly impacted by the fires although roughly 10,000 acres of timber farm properties sustained some fire damage. Overall, our operations in the region have not been materially impacted from the salvage efforts conducted by others thus far although we are seeing some localized impact on market conditions in Oregon primarily related to lumber producers that also own timberland. While these producers have been harvesting burnt wood on their own timberland to feed their mills, the impacts on overall market conditions has not been as widespread as we initially thought it could be. We continue to closely monitor the situation but note that the quality of burnt logs deteriorate over time likely limiting any incremental impact in the first half of 2021. Given the location of our timberland, the solid demand for green logs from many of our customers, the steady business we have been able to provide to our logging crews in the region, we are optimistic that the impact for operations from fire salvage efforts in the region were made minimal. In sum, we believe we are well-positioned to capitalize from the solid demand trends and favorable pricing conditions we currently see in the Pacific Northwest, especially given our increased presence and operational flexibility in the region following the successful integration of Pope Resources. Page 11 shows results in key offering metrics for our New Zealand Timber segment. Adjusted EBITDA in the fourth quarter of $17 million was slightly above the $16 million that was reported a year ago. Fourth quarter harvest volume of 702,000 tons was up 2% compared to the prior year quarter. As discussed on previous earning calls, following the expiration of the government-mandated lockdown, our team did an excellent job of ramping up production. For the full year, we were pleased to see harvest volumes in New Zealand total approximately 2.5 million tons, consistent with the high end of the revised guidance range we provided in August. Turning to pricing, average delivered prices for export sawtimber increased 2% in the prior quarter to $105 per ton, largely reflecting improved China demand. In addition, escalating tensions between China and Australia resulted in China implementing a ban on Australian log imports during the fourth quarter further increasing the demand for New Zealand logs. For context, prior to the ban, Australia was exporting approximately 400,000 cubic meters of softwood logs a month to China or roughly 10% of the total volume imported by China. Shifting to the market -- the domestic market in New Zealand, average delivered prices for domestic sawtimber increased 6% from the prior year period to $74 per ton. The increase in U.S. dollar pricing was driven primarily by foreign exchange rates as New Zealand dollar domestic pricing was relatively flat in the fourth quarter versus the prior quarter. Average domestic pulpwood pricing slipped 2% as compared to the prior year quarter. As we enter 2021, we are pleasantly surprised to see a more moderate seasonal slowdown in demand from China, ahead of Chinese New Year. While we've seen a slight increase in inventories as we enter the Chinese New Year, we don't believe the build will be nearly as significant as last year when China was battling COVID. We are currently seeing stronger demand with some of those even running through the holiday to employees returning to their home cities and risking exposure to COVID. As demand improves seasonally past the holidays, we believe we're well-positioned to capitalize on further strengthening the Chinese economy as well as any prolonged reduction in log imports from Australia. I'll now briefly discuss the results for our Timber Funds segment. Highlighted on page 12, the Timber Funds segment generated consolidated EBITDA of $5 million in the fourth quarter on harvest volumes of 115,000 tons. Adjusted EBITDA, which reflects the look-through contribution from Timber Funds was $900,000. Lastly in our Trading segment, we reported breakeven adjusted EBITDA in the fourth quarter. As reminder, our trading activities typically generate low margins and are primarily designed to provide additional scale to our fee timber export business. As detailed on page 13, our Real Estate team capitalized on growing demand for rural land as well as finished lots and commercial parcels within our development projects. After a very slow start to 2020, given the uncertainty created by the pandemic, we saw a sharp rebound in activity and finished the year with encouraging momentum across our Real Estate categories. In the fourth quarter, sales totaled $32 million or roughly 12,500 acres sold at an average price of over $2,400 per acre. Real Estate adjusted EBITDA was $26 million in the fourth quarter, marking our second strongest quarter since 2018. Sales in the improved development category totaled $6.7 million. Specifically, we sold the Parcel and the Belfast Commerce Park Development Project, south of Savannah, Georgia, for $4.6 million. In our Wildlight Development Project north of Jacksonville, Florida, we sold 25 five residential lots for $1.6 million or $64,000 per lot. In addition, we sold a small development property in Washington State from the Pope Real Estate portfolio for roughly $500,000. In the rural category, fourth quarter sales totaled $14 million or roughly 3,600 acres sold at an average price of $3,900 per acre. Interest in rural recreation and residential lots in the 5 to 40 acre size range continues to build as households are planning for more permanent work-from-home arrangements and desire to leave crowded urban and suburban areas. The space, privacy and recreational opportunities offered by these properties are attracting buyers and we believe this momentum will continue into 2021. Timberland and non-strategic sales of $9.6 million comprise just over 8,700 acres in total. These properties were non-strategic to our core timber operations as they consisted of numerous scattered parcels with a relatively high percentage of non-plantable lands. Overall, we believe favorable tailwinds for our real estate business are growing and remain optimistic that a combination of demographic trends, historically low mortgage rates and an increased need for space will benefit our various real estate sales categories. On the development front, we've been encouraged by homebuilder demand for finished lots and entitled infrastructure surge land. We believe we are well-positioned to meet this demand with a building pipeline of opportunities in Wildlight, Florida, Richmond Hill, Georgia and the West Puget Sound area of Washington. With 2020 marking our fourth year of development in Wildlight, this project is looking increasingly like an established community with a growing list of amenities helping to drive additional interest from builders. Meanwhile in Richmond Hill, the new I-95 interchange embedded within our landholdings recently opened. We view the interchange as an important catalyst for real estate holdings in the area and have been encouraged by recent interest in land entitled for industrial uses at the Belfast Commerce Park as well as land entitled for commercial and residential uses adjacent to the interchange. Now, moving on to our guidance for the year. For full year 2021, we expect total adjusted EBITDA of $285 million to $315 million, net income attributable to Rayonier of $44 million to $56 million, an earnings per share of $0.32 to $0.41. The projected year-over-year increase in adjusted EBITDA is driven by our expectation that the contribution from each of our key Timber segments will increase in 2021. However, we believe this will be partially offset by a lower contribution from the Real Estate segment following an exceptionally strong 2020. Overall, we are encouraged by the positive momentum across our business segments to start the year. In our Southern Timber segment, we expect to achieve full year harvest volumes of 6.2 million tons to 6.4 million tons. As we start 2021, we are seeing some upward momentum in grade timber pricing driven by increased mill capacity, strong lumber prices and improved log export markets. In addition, we are seeing strong demand for pulpwood in our core markets driven by continued positive trends in containerboard and tissue markets. Overall, we expect a modest improvement in our weighted average pricing relative to full year 2020 driven by these demand trends as well as a higher mix of sawtimber partially offset by an increased proportion of planned harvest volume from relatively lower priced markets. In sum, we expect that Southern Timber will contribute 2021 adjusted EBITDA of $114 million to $120 million. In our Pacific Northwest Timber segment, we expect to achieve full year harvest volumes of 1.7 million tons to 1.8 million tons as we realize a full year contribution from the Pope Resources acquisition. We further anticipate higher average sawtimber prices in 2021 versus 2020 as we expect continued strong domestic demand trends given the favorable outlook for lumber prices. That said we expect that this increased log pricing coupled with continued competition from European spruce salvage will limit China export demand growth. Overall, we expect 2021 adjusted EBITDA in the Pacific Northwest Timber segment of $50 million to $55 million. In our New Zealand Timber segment, we expect to achieve harvest volumes of 2.6 million tons to 2.8 million tons up modestly year-over-year following the operational disruptions imposed by the pandemic in 2020. We believe strong demand from both China and local markets, coupled with reduced supply from Australia will lead to improved export and domestic prices. That said we anticipate some increase in shipping costs due to reduced ship availability. Overall, we expect 2021 adjusted EBITDA in the New Zealand Timber segment of $71 million to $75 million. In our Real Estate segment, we continue to focus on unlocking the long-term value of our HBU development and rural property portfolio. Following the exceptionally strong real estate results in 2020, we currently anticipate more normalized transaction activity in 2021. As such, we expect that our Real Estate segment will contribute adjusted EBITDA of $70 million to $85 million in 2021. We anticipate a relatively light first quarter this year with a heavy proportion of our Real Estate activity concentrated in the second half of the year. Reflecting back on our earnings call a year ago, we certainly couldn't have imagined the events that would unfold in 2020. I'm very proud of how our team responded to all the unforeseen and unprecedented challenges associated with the COVID-19 pandemic. We figured out new ways to work together in a safe yet distant manner and rose to the many challenges posed by the pandemic, while at the same time remaining intensely focused on our strategic priorities. As such, I want to take a moment to recap some of the key milestones we achieved in 2020 despite the extraordinary circumstances we faced. Underscoring our focus on always looking to improve our portfolio through active portfolio management, we executed several transactions that we believe better position us to create value for our shareholders. First and foremost, in May, we successfully completed the acquisition of Pope Resources announced last January. The addition of these high-quality Pacific Northwest Timberlands as well as an attractive real estate portfolio improved our species mix, smoothed out our age-class distribution and increased our proportion, increased our operational flexibility and market reach within the region. Moreover, we believe the operating structure we employed as part of the transaction has great potential to be used in other Timberland transactions in the future. While dedicating significant resources to ensure Pope's successful integration, we also executed on some smaller acquisitions throughout the year totaling roughly $25 million. In addition, we executed a large disposition of 67,000 acres in Mississippi for $116 million. These transactions reflect our unwavering commitment to nimble capital allocation and active portfolio management as well as our focus on maintaining balance sheet flexibility. As it relates to capital allocation, we also took advantage of opportunities to both issue and repurchase shares in 2020. We repurchased a modest amount of stock early in the year amid the turmoil in the financial markets but also established and utilized an at-the-market equity offering program in late 2020. We believe that the symmetry afforded by maintaining both buyback and issuance optionality will allow us to deploy these tools opportunistically to build NAV per share over the long term. We've also continued to reinvest in our business, particularly in technology and systems designed to optimize our long-term performance. Despite the social distancing necessitated by the pandemic, our investments in technology allowed us to push forward and achieve goals related to improving efficiencies, reducing costs and enhancing our market intelligence and proprietary analytical tools. Furthermore, selective and measured real estate investments continued throughout 2020, leaving us increasingly well positioned to optimize returns of our portfolio in the years to come. As we look back over a very challenging year, I'd like to highlight the importance and durability of our culture, which is the cornerstone of Rayonier's financial and strategic success. Collectively, we remain focused on our mission to provide industry-leading returns while being a responsible steward of our lands. I'm proud of the dedication and accomplishments of our people and their unwavering commitment to building long-term value for our shareholders.

compname reports q4 earnings per share $0.07. q4 pro forma earnings per share $0.08 excluding items. q4 earnings per share $0.07. in 2021, expect to achieve net income attributable to rayonier of $44 to $56 million.

These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to changes in economic, business, competitive, market, political and regulatory factors. John was most recently President of Fleet Management Solutions and brings a wealth of experience to the CFO role, having held various senior operational and financial roles during his 20-year tenure at Ryder. Tom brings a great depth of experience to the leadership role in FMS from his 28-year career at Ryder, having most recently served as Senior Vice President and Global Chief of Operations for the FMS business. John will take you through our second-quarter results, which exceeded our expectations. I'll then review our updated outlook for 2021, discuss the significant progress we're making on actions to achieve our ROE target, and review our initiatives to mitigate the impact of future cyclical downturns on our business. With that, let's turn to our strategic update. Secular trends continue to support our strategy to accelerate growth in our supply chain and dedicated businesses while targeting moderate growth and increased returns in our fleet management business. We're seeing strong sales and pipeline growth across all our businesses, driven by secular trends that favor outsourcing as well as increased focus by customers on supply chain resiliency and the use of innovative technology solutions. Trends that we saw accelerate during the pandemic, such as e-commerce, and the demand for last-mile delivery of big and bulky items remain strong and support the strategic investments we're making in these fast-growing areas. We remain focused on increasing returns and are pleased with the significant progress we're making to achieve our ROE target. Multiple years of lease pricing increases that began with a focus on de-risking our portfolio through lower residual assumptions and cost updates are benefiting returns. Most recently, we began implementing additional pricing actions to improve future lease returns using data analytics around customer segmentation, application, equipment type, and other key drivers of lease returns. Strong freight conditions combined with our initiatives, resulted in better-than-expected results in used vehicle sales and rental. We're seeing the benefits of dynamic pricing in used vehicle sales and rental as well as our prior investments to increase retail used vehicle sales capacity. We now expect to achieve ROE in the range of 16% to 17% this year, above our long-term target of 15%. Later in the call, we'll review additional enhancements we're making to our playbook to improve returns over the cycle. Moving on to cash flow. Our year-to-date free cash flow is $602 million, down $10 million from the prior year as higher vehicle capital spending was largely offset by higher proceeds from the sale of used vehicles and property. We're increasing our full-year free cash flow forecast to $650 million to $750 million, up from $400 million to $700 million, primarily to reflect the anticipated impact from delays for new vehicle deliveries from the OEMs. We're encouraged by our performance and by the market trends we're seeing in the areas that we're investing for future growth. We continue to invest in technology and other areas to address industry disruption in order to enhance our business model and position the company for long-term success. Slide five provides an overview of the investments we're making to drive accelerated growth in our supply chain and dedicated business, a key element in our strategy to generate higher returns and long-term profitable growth, developing new and enhanced products, such as Ryder Last Mile, e-commerce fulfillment and freight brokerage is critical for us to leverage growth trends in supply chain and dedicated. Innovative technology enables us to deliver value-added logistics solutions that are in high demand. RyderShare, our visibility and collaboration tool, is a strategic differentiator for us, and its capabilities have moved to the forefront of our sales discussions. RyderView is our proprietary customer interface that supports self-scheduling and delivery execution for Ryder Last Mile. Enhanced order management and fulfillment software supports our growing presence in e-commerce fulfillment. Sales and marketing effectiveness is key to our brand awareness and communicating the broad array of logistics and transportation solutions we offer. Our Ever better campaign and increased digital marketing presence have driven an increase in qualified sales leads. We're also expanding our sales force and investing in the capabilities and their capabilities to drive additional growth opportunities. RyderVentures, our corporate venture capital fund, aims to invest $50 million over the next five years through direct investment in start-ups, primarily where we can partner to develop new products and services for our customers. We've invested in areas including e-commerce micro fulfillment, a tech-enabled hub and spoke transportation network, and an AI-enabled dispatch product for small- to medium-sized fleets. In addition, we continue to evaluate strategic M&A opportunities focused on adding new capabilities, geographies, and our industry verticals, which we view as another important way to accelerate growth, especially in our supply chain and dedicated business. Slide six takes a closer look at Ryder Last Mile, which provides final mile delivery of big and bulky goods through a nationwide network of hub and agent locations that service every ZIP code in the Continental U.S. The Ryder Last Mile offering was launched in 2018 as a result of a strategic acquisition. Since then, online purchases of big and bulky goods, such as furniture, exercise equipment, and home appliances have accelerated, driving demand for a seamless home delivery experience. We've been pleased with the strong revenue growth in Ryder Last Mile. RyderView is our proprietary customer-facing technology that allows consumers to self-schedule their deliveries and provide them with real-time delivery updates. Our centralized customer support team is key to the execution of a qualified delivery experience. We carefully monitor customer delivery feedback to ensure that service levels are maintained. We're making strategic investments in this area in order to continue to enhance the capabilities and customer experience for this important product offering. We're enhancing RyderView's capabilities and plan to launch Version 2.0 later this year. Enhancements include easier and more convenient self-scheduling and rescheduling of deliveries as well as the option to schedule those deliveries at the point of sale. We're enhancing the software used for the delivery route optimization. We're also rolling out a customer experience that is branded for our customers, the retailer so that RyderView 2.0 serves as an extension of their brand. We continue to expand our geographic footprint in order to place us closer to the end customer and improve delivery speed. We recently announced the addition of two new fulfillment centers in Milwaukee and Philadelphia. In addition to future geographic expansion, we'll also look at opportunities to add new services and capabilities or industry verticals through strategic M&A or RyderVentures. We're confident that RyderView 2.0 will be a market differentiator that will enhance the customer experience and propel further profitable growth for Ryder Last Mile. Total company results for the second quarter on Page seven. Comparisons reflect COVID effects in the prior year, which most significantly impacted second quarter 2020 results in used vehicle sales, rental, and SCS automotive, all which have recovered quite well since then. Operating revenue of $1.9 billion in the second quarter increased 18% from the prior year, reflecting double-digit revenue growth across all three of our business segments. Comparable earnings per share from continuing operations was $2.40 in the second quarter as compared to a loss of $0.95 in the prior year. Higher earnings reflect improved performance in FMS from higher gain on the sale of used vehicles, a decline in depreciation expense impact related to prior residual value estimate changes, and improved rental and lease results. Return on equity increase, reflecting the declining depreciation impact, higher gains, and improved lease and rental results. We expect continued improvement in ROE, our primary financial metric, as we move past the earnings impacts from prior residual value estimate changes and COVID, and continue to benefit from our actions to increase returns. Year-to-date free cash flow was $602 million below prior year as planned. Turning to FMS results on Page eight. Fleet Management Solutions operating revenue increased 14%, primarily reflecting higher rental and lease revenue. Rental revenue increased 58%, driven by higher demand and pricing. Rental pricing increased by 13%, which is significantly higher than we've seen historically, reflecting pricing actions taken over the past year, prior year COVID effects, and a larger mix of higher-return pure rental business in the current quarter. ChoiceLease revenue increased 5%, reflecting higher pricing and miles driven, partially offset by smaller fleet. FMS realized pre-tax earnings of $158 million are up by $262 million from the prior year. $131 million of this improvement resulted from lower depreciation expense related to the prior residual value estimate changes and higher used vehicle sales results. Improved rental and lease results also significantly contributed to increased FMS earnings. Higher lease pricing and miles driven were partially offset by a smaller fleet. In rental, higher demand and pricing drove higher results. Rental utilization on the power fleet was 80% in the quarter, significantly above the prior-year 56%, which included COVID impact, and was close to historical second quarter high. FMS EBT as a percentage of operating revenue was 12.9% in the second quarter and surpassed the company's long-term target of high single digits. For the trailing 12-month period, it was 6.3%, primarily reflecting higher depreciation expense from prior residual value estimate changes. Page nine highlights global used vehicle sales results for the quarter. Used vehicle market conditions continue to be robust with strong demand meeting tight supply. Globally, year-over-year proceeds were up 73% for tractors and 72% for trucks. Sequentially, tractor proceeds were up 22% and truck proceeds were up 27% versus the first quarter. Higher sales proceeds primarily reflect significantly improved market pricing. As you may recall, in the second quarter of last year, we provided a sensitivity noting that a 10% price increase for trucks and a 30% price increase for tractors in the U.S. would be needed by 2022 in order to maintain current policy depreciation residual estimates. Since the second quarter 2020, U.S. truck proceeds were up 59% and tractor proceeds were up 67%. Although these increases are not age or mix-adjusted, they are generally indicative of pricing improvements that have occurred since the second quarter of 2020. As such, with these improvements, average pricing in the U.S. for trucks and tractors is above residual values applied for depreciation purposes. During the quarter, we sold 6,000 used vehicles, down 5% versus the prior year, reflecting lower trailer sales. Sequentially, sales volumes declined due to lower inventory levels. Used vehicle inventory held for sale was 4,300 vehicles at quarter-end and is below our target range of 7,000 to 9,000 vehicles. Inventory is down by 9,700 vehicles from the prior year and down by 1,900 vehicles sequentially. Turning to supply chain on Page ten. Operating revenue versus the prior year increased 32% due to new business and increased volumes and COVID effects in the prior year. Growth was driven by double-digit percentage increases in the automotive, retail, consumer packaged goods, and industrial sectors. SCS automotive business experienced intermittent customer plant shutdowns in the quarter due to a global shortage of parts. We have included an estimated impact from potential shutdowns in our balance of year forecast as the situation remains fluid. SCS pre-tax earnings increased 11%, benefiting from revenue growth, partially offset by strategic investments in marketing and technology as well as increased incentive compensation and medical costs. SCS EBT as a percent of operating revenue was 7.7% for the quarter and below the company's long-term target of high-single digits. However, it was 8.2% for the trailing 12-month period, in line with our long-term target of high single digits. Moving to dedicated on Page 11. Operating revenue increased 12% due to new business and higher volumes. Revenue growth from new DTS business can be largely attributed to wins from competitors and private fleet conversions. DTS earnings before tax decreased 38%, reflecting increased labor costs, higher insurance expense, and strategic investments. Labor costs are being impacted by an exceptionally tight driver market. Driver turnover is up significantly, and open positions are taking longer to fill. We're working with customers to adjust rates where needed to recoup the incremental wage and other costs, and this will take some time to address. We're also continuing to implement automatic contract triggers that allow for more real-time wage cost adjustments. We've increased our recruiting headcount and remain focused on maintaining a quality work environment, where most drivers get home every day while providing competitive wages and benefits. Our strategic investments are positively impacting sales performance, and we expect this to provide accretive earnings in the future. DTS EBT as a percentage of operating revenue was 5.1% for the quarter. It was 6.9% for the trailing 12-month period, below our high single-digit target. Turning to Slide 12. Lease capital spending of $501 million was above prior year as planned due to increased lease sales activity. Lease returns are benefiting from pricing initiatives and support a more normalized lease capital investment. Rental capital spending of $397 million increased significantly year-over-year, reflecting higher planned investment in the rental fleet. We plan to grow the rental fleet by approximately 13% in 2021, mostly in light- and medium-duty vehicles in order to capture increased demand expected from strong e-commerce and free-market activity. Our full-year 2021 forecast for gross capital expenditures of $2.2 billion to $2.3 billion is at the high end of our initial forecast range and is shown in the chart at the bottom of the page. This is up from 2020 when spending was well below normalized replacement levels primarily due to COVID. Turning to Slide 13. Our 2021 free cash flow forecast has increased to a range of $650 million to $750 million from our previous forecast of $400 million to $700 million. This reflects the expected impact from OEM vehicle delivery delay due to the chip shortage. 2021 forecasted free cash flow is below prior year's record level under COVID conditions but is well above our historic levels. It also reflects our strategy to balance growth in the capital-intensive FMS business, with generating positive free cash flow over the cycle. Balance sheet leverage this year is expected to finish below 250%, which is the bottom end of our target range. Importantly, as Robert mentioned, we now expect to achieve ROE of 16% to 17% this year, with a declining depreciation impact and a stronger-than-expected recovery in the used vehicle sales market. Rental demand recovery and lease pricing initiatives are also expected to contribute to our increased ROE forecast. Higher year-to-date comparable EBITDA, which excludes the impact of gains and losses on used vehicle sales, reflects revenue growth and improved operating performance. Turning now to our earnings per share outlook on Page 14. We're raising our full-year comparable earnings per share forecast to $720 million to $750 million from a prior forecast of $550 to $590 and well above a loss of $0.27 in the prior year, which included COVID effects. We're also providing a third-quarter comparable earnings per share forecast of $1.95 to $2.05, significantly above our prior year of $1.21. Third-quarter earnings are expected to be down sequentially, reflecting lower expected gains from fewer used vehicles sold due to lower inventory levels as well as the estimated impact on SCS automotive due to the chip shortage and plant retooling. Our forecast assumes that strong freight and economic conditions continue into 2022 and a continuation of the current tax policy. Lease, rental, and used vehicle sales performance are the key drivers of higher expected results. We expect lease to benefit from our pricing actions, increased sales activity, and improved operating performance. We also expect pricing in rental and used vehicle sales to remain strong. We're forecasting quarterly gains around $35 million for the balance of the year, reflecting higher pricing, partially offset by fewer vehicles sold due to low inventory levels. In FMS, the depreciation impact from prior residual value estimate changes is expected to continue to decline, resulting in a year-over-year benefit of approximately $40 million in the third quarter of 2021. This benefit does not include any potential impact from gains or losses on sale or valuation adjustments, accelerating outsourcing trend in supply chain, including growth in e-commerce and last-mile delivery, support strategic investments in new products and technology aimed at driving future growth opportunities. We expect labor markets to remain under pressure, particularly with drivers. Private fleets are also experiencing this pain point, which we expect will continue to drive additional sales opportunities for our dedicated offering. We are focused on initiatives to attract and retain drivers and be the employer of choice. In supply chain and dedicated, we're on track to meet or exceed our high single-digit revenue growth targets. Supply chain and dedicated returns are also anticipated to be impacted by higher labor costs as well as strategic investments in new technology and our brand awareness campaign. Finally, the semiconductor shortage is expected to delay the delivery of some vehicles in FMS. We expect the impact of delivery delays to be offset by higher lease sales activity in the first half of the year as well as higher rental utilization and pricing. Turning to Slide 15. I'd like to provide a brief reminder regarding our planned actions to increase returns and achieve our ROE target. As shown on the chart, the biggest driver is moving past higher levels of depreciation impact related to prior residual value estimate changes. Slide 16 highlights the progress we're making on the five key areas from the prior page. Strong used vehicle market conditions are expected to continue in 2021, and we're capitalizing on those trends through pricing actions and our expanded retail sales channel. We expect the earnings benefit from the declining depreciation impact to continue. In rental, strong year-to-date performance and our planned rental fleet growth are supported by strong pricing and demand trends. In FMS, results continue to benefit from our lease pricing initiatives. Revenue on leased vehicles increased year-over-year by mid-single digits, reflecting these pricing actions with additional opportunity going forward as we replace expiring leases at higher pricing levels. Our multi-year maintenance cost initiative delivered more than $50 million in annual savings through the end of last year, and we are on track to achieve an additional $30 million in savings in 2021. Cost actions also include exiting underperforming assets in locations that we expect will improve our long-term returns. We're investing in strategic initiatives to accelerate growth in our higher return supply chain and dedicated businesses. Slide 17 provides an updated view of the expected performance of our lease portfolio as a result of the pricing actions taken. Substantially, all leases, with the exception of those signed in 2013, are expected to perform above our target return. The leases signed in 2013 represent only 8% of our lease fleet. The majority of the power fleet in this cohort will be replaced in the balance of 2021 at higher pricing. As a result of our pricing and cost actions since 2014 as well as the analytics-driven pricing changes we are incorporating now, we expect the returns on our lease portfolio to continue to increase as the portfolio turns over to more recent and higher returning vintage years. Although we are encouraged that we expect to exceed our target ROE of 15% in 2021, we remain focused on taking action -- additional actions to position our business to generate long-term returns of 15% ROE over the cycle. As such, we're implementing actions to mitigate the impact on returns from future cyclical downturns. These actions include maintaining balance sheet flexibility through a disciplined capital allocation strategy that will enable us to pursue higher return investments and strategic M&A opportunities as well as share repurchases. In ChoiceLease, we're replacing certain leased vehicles prior to contract expiration during an upcycle in order to reduce the number of used vehicles that we need to sell during a downturn. In rental, we're planning to shift our asset mix for better returns by growing our light- to medium-duty truck fleet, as we view this asset class as less susceptible and heavy-duty tractors to the impacts of the freight downturn. This quarter, we completed an analysis of our residual values and life expectancies of our entire fleet, which included, among other factors, reviewing vehicles by class, condition, expected sales, availability of equipment, and technology changes. As part of this review, we also factored in a potential future cyclical downturn on used vehicle prices. As a reminder, in recent years, we significantly lowered the residual value estimates for our entire fleet to a level where used tractor prices have only been below these estimates in four of the last 21 years. However, based on our most recent analysis, we made an additional modest reduction in residual values, primarily for certain tractors. This change is intended to further reduce the probability of losses or need for accelerated depreciation during a potential cyclical downturn, even if tractor pricing returns to historical trough levels like they did in the early 2000s and in 2020. We expect these changes will increase depreciation expense in 2021 by $18 million, representing approximately 1% of total depreciation expense for the year. Before we go to questions, please note that we expect to file our 10-Q later today.

q2 non-gaap earnings per share $2.40 from continuing operations. sees q3 non-gaap earnings per share $1.95 to $2.05. sees 2021 capital expenditures of $2.2 billion - $2.3 billion. ryder system - in scs & dts, on track to meet/exceed revenue growth targets, but anticipate returns to be impacted by increased labor, insurance costs. now expect nearly all of our leases to perform above target returns.

This is Sonic Automotive. That was very choppy from our perspective. I want to be sure that the listeners can hear. That must a bad connection. I'm David Smith, the Company's CEO. Joining me on the call today is our President, Mr. Jeff Dyke; our CFO, Mr. Heath Byrd; our Executive Vice President of Operations, Mr. Tim Keen; our Chief Digital Retail Officer, Mr. Steve Wittman; and our Vice President of Investor Relations, Danny Wieland. During the first quarter of 2021, we continue to build on our strong momentum coming off record adjusted earnings in 2020. We generated record first quarter total revenues of $2.8 billion, up 21% on a year-over-year basis and record first quarter earnings per share of $1.23 per share, tripling our adjusted earnings per share of $0.40 per share in the first quarter of last year. These results were driven by strong performance in our franchise dealerships, and another all-time record quarter for our EchoPark business, reflecting increasing consumer demand and continued execution by our team. I'm pleased to report positive trends in the first quarter have continued into the second quarter, and we continue to see strength in all facets of our business. We remain extremely confident in our long-term growth targets based on our current results and near-term outlook and the increasing number of Americans that are receiving vaccinations and beginning a return toward normalcy. Given these trends in our progress to date, we are confident we can attain our goal of more than doubling total revenues to $25 billion by 2025. And significantly increasing profitability going forward. In our core franchise dealership segment, first quarter revenues were $2.3 billion, a 15% increase from last year. Total franchise pre-tax income was $70.5 million, an increase of $47.9 million or 211% compared to last year. On a two-year comparison compared to the first quarter of 2019, same-store franchise dealership revenues increased 14% and pre-tax income increased by $49.8 million, which is a 240% increase, reflecting the impact of our lower expense structure as a result of strategic actions that was taken last year. Turning now to EchoPark. We continue to experience rapid growth during the first quarter, achieving all time record quarterly revenues of $507 million, which is up 53% compared to the same period last year. We also achieved record quarterly retail sales volume of nearly 19,700 units, which is up 41% year-over-year and ahead of 18,000 to 19,000 units we guided to on our February call. In addition to top line growth, we have to -- build of our EchoPark model that currently use vehicle pricing environment during the total gross profit per unit of $2,339 and above our target of $2,150. Our first active part delivery center in Greenville, South Carolina continues to outperform our model selling 160 vehicles in March at nearly $1,750 in total gross profit per unit. Generally $100,000 and store level profit for the month. Our outlook in the EchoPark stores and delivery centers also continue to ramp aggressively. With our Phoenix hub selling 228 vehicles in its full month in March, driving $125,000 of store level profit. The unit ratio of December's used car acquisition is already ramping up nicely selling 300 plus in total gross profit per unit. And we continue to apply our learnings to each new EchoPark store we opened or acquired. And results are proving the scalability and momentum of the EchoPark model. We believe these results showcase the flexibility, value proposition and consumer demand or EchoPark's unique pre-owned vehicle shopping concept as more guests choose to visit our stores and or shop echopark.com for the incredible inventory selection on diesel pricing and a unique guest experience that we offer. As an update on our expansion of EchoPark's nationwide distribution network and omnichannel retailing platform, we opened five new locations in the first quarter. In April, we opened our latest retail hub in Birmingham, Alabama and our third delivery center in Charleston, South Carolina. We remain committed to opening 25 new EchoPark locations in 2021 and we're on track for our 140 plus point nationwide distribution network by 2025, which we expect to retail over 0.5 million pre-owned vehicles annually by that time. With our progress to-date and the continuing development of our omnichannel retailing platform, we are confident that we can reach $14 billion in EchoPark revenue by 2025. It's important to recall that Sonic actually grew earnings per share in the first quarter of last year compared to 2019 due to the strength of our January and February results despite the initial impact of the pandemic in March of 2020. Since that time, we have substantially improved our expense structure, which was reflected in the current quarter's profitability and operating margins and our expectations for the remainder of 2021 and beyond. In the first quarter of 2021, total SG&A expenses as a percentage of gross profit were 72.2% representing a 830 basis point improvement compared to the first quarter of last year and 790 basis points better than the first quarter of 2019 which in dollar terms, while same store franchise gross profit increased 34.5 [Phonetic] last year, same-store franchise SG&A expenses decreased $7.5 million, demonstrating the permanent expense reductions we had previously [Technical Issues]. Turning now to our balance sheet, we ended the first quarter with $435 million in available liquidity and set an all time high liquidity mark in April at $570 million which included over $300 million in cash on hand. More recently, the Company closed a new four-year $1.8 billion credit facility. The credit facility was substantially oversubscribed with strong support from both new and incumbent financial partners. We are very pleased with this transaction which has extended our debt maturities, improved our borrowing costs and raised our total available liquidity and fore-playing capacity to facilitate our growth plans. Reflecting our current business momentum, expansion of liquidity resources, I'm very pleased to report that our Board of Directors recently approved 20% increase to the Company's quarterly cash dividend to $0.12 per share payable on July 15, 2021 to all shareholders of record on June 15, 2021. Additionally, the Board increased our share repurchase authorization by $250 million, bringing our total remaining authorization to $277 million. In summary, our record first quarter performance reflects steadily increasing automotive retail demand as well as constantly improving operating conditions. EchoPark has rapidly become one of the leading success stories in the pre-owned automotive retail industry, and we look forward to continuing its rapid expansion in 2021. We expect to see continued strong demand for both new and pre-owned vehicles in the near term, which should drive further growth for our franchise dealerships and the EchoPark brand. At the same time, our efficiency improvements have enabled us and had enabled us to operate in a much leaner more profitable manner. Despite the challenges we all faced in the last year during this global pandemic, Sonic and EchoPark has emerged as much stronger, more efficient organization. We are encouraged by our successes to-date and remain confident in our long-term strategic plans.

sonic automotive q1 adjusted earnings per share $0.40 from continuing operations. q1 revenue $2.8 billion. q1 adjusted earnings per share $0.40 from continuing operations. board of directors approved a 20% increase to company's quarterly cash dividend, to $0.12 per share.

As she said, I'm David Smith, the company's CEO. Joining me on the call today is our President, Jeff Dyke; our CFO, Mr. Heath Byrd; our Executive VP of Operations, Mr. Tim Keen; and our Chief Digital Retail Officer, Mr. Steve Wittman; and our Vice President of Investor Relations, Mr. Danny Wieland. We're very excited to announce another record-breaking quarter. This performance would not have been possible without the amazing effort and execution by our Sonic and EchoPark teammates. During the third quarter of 2021, Sonic delivered another quarter of record revenue and an 11th consecutive quarter of year-over-year earnings per share growth. On a consolidated basis, we posted record third quarter revenues of $3.1 billion, up 21% and record third quarter gross profit of $472 million, up 25%, driven by strong performance across the board and new used fixed operations in F&I. Going beyond our top line growth, our third quarter results continue to validate our permanent expense reductions, achieving record third quarter SG&A expense as a percentage of gross profit of just 68.1%. On a Franchised Dealerships segment basis, though, SG&A as a percentage of gross profit was just 60.1%, a 760-basis point decrease year-over-year and down from 76.9% in the third quarter of 2019. Turning to earnings, we reported record third quarter pre-tax income from continuing operations of $112 million, up 39% year-over-year and earnings from continuing operations of $85 million or $1.96 per diluted share. Diving deeper into our core Franchised Dealerships segment, third quarter 2021 revenues were $2.4 billion compared to $2.2 billion in the prior year, which reflects the ongoing recovery in consumer demand we've seen since the high since pandemic. On a same-store basis, Franchised Dealerships third quarter revenues were up 11% year-over-year, while gross profit improved by 27%, driven by a record new and used vehicle gross per unit, a 21% increase in customer pay fixed operations gross profit and all-time record Franchised segment F&I gross profit per retail unit, up $2,303, up 27% from the third quarter of 2020. As a result of ongoing supply chain disruptions that limited new vehicle production and inventories, we believe that third quarter new vehicle unit sales volume was negatively impacted by the low supply of new vehicle inventory despite continued consumer demand. Our Franchised Dealerships new vehicle inventory was approximately 2,400 units or just a 10-day supply down from nearly 13,000 new vehicles at this same time last year. Comparatively, used vehicles inventory was in line with our target level of 27 days supplying or 8,200 units. Turning now to our EchoPark business. We reported all-time record quarterly revenues of $663 million, up 72% from the prior year and representing our fifth consecutive quarter of record EchoPark revenues. We achieved record third quarter EchoPark retail sales volume of 21,255 units, up 41% year-over-year. During the third quarter of 2021, EchoPark market share increased 110 basis points to approximately 4% of the one to four year-old vehicle segment in our current markets. At the end of the quarter, EchoPark used vehicle inventory was approximately 9,800 units for a 41-day supply. For the third quarter, we reported an EchoPark pre-tax loss of $32.9 million and adjusted EBITDA loss of $28.5 million. This includes new market-related losses of $18 million and $16.8 million, respectively. The effects of new vehicle inventory shortages have continued to drive used vehicle wholesale pricing higher, which negatively impacted EchoPark margins and profitability in the near term. While we continue to strategically manage our pricing and volume amid this temporary disruption in the used market pricing environment, we remain very confident that EchoPark margins and profitability will rebound once these market conditions normalize, which we anticipate will occur in mid-2022. Despite these short-term challenges, we continue to believe in the long-term potential of the EchoPark brand and remain very committed to growing our nationwide distribution network. With our progress today, we remain confident in attaining our goals of 25% population coverage by the end of 2021 and 90% population coverage by 2025. In addition, the launch of our proprietary digital retail platform at EchoPark continues to progress, and we remain on track to go live by the end of this year and roll out to our entire network in early 2022. The addition of these key roles to our team reflects our continued focus on executing our long-term growth plans at EchoPark, and we are excited to see their expertise contribute to EchoPark's promising future. Returning now to our franchise business. We recently announced several strategic acquisitions to further accelerate our growth plans In September, we signed a definitive agreement to acquire RFJ Auto Partners, a top 15 U.S. dealer group by total revenues. With 33 locations in seven states and a portfolio of 16 automotive brands, the transaction will add six incremental states to Sonic's geographic coverage and five additional brands to our portfolio, including the highest volume, Chrysler Dodge Jeep RAM dealer in the world and Dave Smith Motors. This acquisition, which is expected to close in December of this year, is projected to add $3.2 billion in annual revenues to the company, which are an incremental to Sonic's previous stated target of $25 billion in total revenues by 2025. In addition to RFJ Auto during the third quarter, we announced the acquisition of Bobby Ford, Audi Subaru and Volkswagen franchises in Colorado, further enhancing our automotive sales and service network in that state. More recently, we continued the expansion of our Franchised Dealerships network with the acquisition of Bobby Ford, Chrysler Dodge Jeep RAM in the Greater Houston market. Turning now to our balance sheet. We ended the third quarter with $618 million in available liquidity, including approximately $320 million in cash and 425 was on hand. More recently in connection with our pending acquisition of RFJ Auto, we announced a significant upside to our credit facilities, increasing total capacity to $2.95 billion and completed an oversubscribed senior note offering with an aggregate principal amount of $1.15 billion, capitalizing on the favorable market conditions and an upgraded corporate credit rating to refinance our existing debt maturities at attractive terms with lower borrowing costs. These transactions demonstrate the strength of our business and positive outlook for the future as we continue to expand our nationwide reach and maximize operating efficiencies across our operations. With our improved balance sheet and additional liquidity resources, we believe Sonic is well positioned to pursue further growth opportunities in our Franchised Dealerships business, as well as to keep executing on our EchoPark growth plans. Lastly, given our strong balance sheet, I'm pleased to report that our Board of Directors approved a quarterly cash dividend of $0.12 per share, payable on January 14, 2022, to all stockholders of record as of December 15, 2021. In summary, our quarterly results reflect Sonic's continued operating improvements despite industrywide challenges stemming from the pandemic. These results demonstrate ongoing strong consumer demand, tremendous improvements in our Franchised Dealerships performance, our success in maximizing operating efficiencies throughout our operations and our teammates unwavering dedication to delivering for our guests. Going forward, we will continue to execute on our strategic growth plans in both our Franchised Dealerships and EchoPark business segments, including the rollout of our new digital platform beginning this quarter. We believe that by following this course, we will continue to achieve strong revenue growth, increased profitability and build long-term value for our shareholders.

q3 revenue rose 20.6 percent to $3.1 billion. record q3 earnings from continuing operations of $84.7 million ($1.96 per diluted share).

And special note, everybody, I was caught in Texas in this unprecedented snow and ice storm and temperature storm. We're low on electricity. So if for some reason I cut out, Heath Byrd will take over my speaking notes. I'm Jeff Dyke, the company's President. Joining me on the call today is our CFO, Mr. Heath Byrd; our Executive Vice President of Operations, Mr. Tim Keen; our Vice President of Investor Relations, Mr. Danny Wieland; and our Chief Digital Retail Officer, Mr. Steve Wittman, who recently joined our team to drive the expansion of our omnichannel digital retail platform. Earlier today, we reported the highest quarterly revenues and earnings in our Company's history, with record fourth quarter revenues of $2.8 billion and an adjusted earnings per share of $1.50, up 54.6% from the fourth quarter of 2019. In addition, the full year 2020 was our second consecutive year of all-time record adjusted earnings, with adjusted earnings per share of $3.85, up 45.3% from $2.65 in 2019. These record results reflect the strength of our diversified business model, the dedication of our teammates and the support of our manufacture and vendor partners in the face of unprecedented challenges as we faced together this year. During 2020, we took targeted measures to improve operating efficiencies and manage expense throughout our entire organization, fundamentally improving our cost structure. As a result, we achieved all-time record adjusted SG&A expenses as a percentage of gross profit of 68.1% for the fourth quarter of 2020, down 560 basis points from 73.7% in the fourth quarter of 2019. Full year 2020 adjusted SG&A expenses as a percentage of gross profit were 72.9%, 400 basis points better than 2019. For 2021, we expect to continue to see a benefit of our permanent SG&A reductions. However, the rapid rate of expansion at EchoPark may drive an increase in SG&A as a percentage of gross profit, while still being accretive to the bottom line overall. Turning to our core franchise dealership segment. Fourth quarter revenues were $2.4 billion, down 1.2% from the prior year and up 11.5% sequentially from the third quarter of 2020. Franchise dealership segment income increased $37.1 million or 68.2% compared to the fourth quarter of last year, driven by strong new vehicle and F&I gross profit per unit and a $30.3 million reduction in adjusted SG&A expenses. Franchise dealership segment adjusted SG&A as a percentage of gross profit was 65.2%, down 810 basis points from the fourth quarter of 2019. For the fourth quarter, revenues were an all-time record of $386.9 million, up 25.4% from the prior year quarter. This growth was driven by a 17.1% increase in used vehicle unit sales volume to 14,841 units. For the full year 2020, EchoPark revenues were $1.4 billion, a 22.1% increase compared to 2019, with retail sales volume of 57,161 units, up 15.4% from 2019. For the first quarter of 2021, we expect to retail between 18,000 and 19,000 units at EchoPark on our way to delivering between 100,000 and 105,000 units for the full year of 2021. As part of our EchoPark expansion strategy, we recently completed the acquisition of two pre-owned businesses in Maryland and New York, expanding our geographic footprint into the Mid-Atlantic and Northeast. These include Carbiz serving the greater Baltimore Washington Metro area and Used Car King, a Syracuse-based pre-owned group serving car buyers throughout New York state. Each of these businesses already embraces the same culture and values that define EchoPark, with a highly qualified team focused on providing an exceptional experience and incredible value to their guests. We're in the process of transitioning these acquisitions into our EchoPark model and expect them to generate total annual revenues in excess of $350 million at maturity before any revenues from future delivery and buy centers that these markets will support. By way of update, our delivery and buy center concept, our first market in Greenville, South Carolina, retailed 166 units and was profitable in January in its six full months of operation. Our second delivery and buy center in Knoxville, Tennessee, opened in late December and retailed 55 units in its first full month, nearly mirroring what we saw in Greenville in month one. For comparison, before entering these markets with the delivery and buy center model, we sold an average of 10 to 12 units per month in Greenville and two to three units per month in Knoxville from our nearest hubs, demonstrating that these truly are incremental sales into the adjacent markets. The opening of four new EchoPark locations in the fourth quarter and seven for the full year of 2020 brings our total at year-end to 16. These, plus the two acquisitions completed to date, the opening of our Phoenix, Arizona store next week and the additional openings in 2021 will give us over 40 points in place by the end of 2021. As you can see, we are well under way in establishing our 140-plus point EchoPark nationwide distribution network, which is expected to retail over 0.5 million pre-owned vehicles annually and drive $14 billion in annual revenue -- annual EchoPark revenues by 2025. In the meantime, we're focused on addressing the tremendous growth opportunity and untapped value in EchoPark's unique pre-owned vehicle sales concept. Car buyers nationwide continue to discover the exceptional pricing, inventory selection, purchase experience that EchoPark offers. The guest-centric in-store experience, combined with our omnichannel tools and delivery center model, offers EchoPark shoppers a full range of buying options to meet their needs. Our consumer studies, including a Harris Insights poll commissioned in September of 2020 continued to reaffirm our belief in an omnichannel approach matches the ideal purchase experience for the vast majority of car buyers. When we launch our new digital retail platform in the fourth quarter of this year, we expect to provide our guests with an online experience that sets a new standard of excellence in this industry. The new vehicle sales momentum and elevated margins from the fourth quarter had carried into 2021, and the industry slowdown in used vehicle demand in November and December has steadily improved in January and February to date. While the pressure on used vehicle margins at EchoPark persisted longer than we expected in the fourth quarter, January total gross per unit was back in line with our model and our expectations for 2021. Our franchise dealerships, parts and service business continues to recover more slowly than we'd like, but is showing signs of improvement. Adjusted for calendar differences year-over-year, our fixed operations gross was down roughly 4% in January compared to nearly 6% for the fourth quarter. We believe as the vaccine rollout continues to gain momentum and Americans feel more comfortable resuming daily activities as the year progresses, our parts and service business will bounce back. F&I continues to be a highlight of our business as we eclipsed $2,000 per unit for the first time in the fourth quarter and continue to expect growth in this area in 2021. In closing, 2020 was a challenging year in many ways. However, our fourth quarter and full year results show the strength and resiliency of our franchise and EchoPark models. We are much leaner, we're more efficient and we're a stronger company than we were prior to 2020, and we believe each of our business segments is well-positioned for both near-term and long-term success. The stage is set for an exciting 2021 for Sonic Automotive, with 25 new EchoPark locations to open and roll out -- and the rollout of our new omnichannel digital retail platform by the end of the year. As always, we look forward to keeping you updated on our progress throughout the year. As Jeff mentioned, these numbers and this outlook is in line with what we're seeing in January and February. Also keep in mind, as Jeff mentioned -- he's in the middle of a storm -- some of these numbers, the first quarter, we're going to have some impact from the storms. This impacts Texas, which you guys know is one of our largest franchise markets. It is our largest EchoPark market. It's also going to affect Birmingham, Nashville. And so hopefully, it [Indecipherable] up quickly, but obviously, there'll be some impact. Those stores right now are closed. It's also important to note that the outlook I'm going to go over real quickly, the majority of the growth is weighted to the second half of the year. Obviously, we believe that things will pick up dramatically as vaccines are rolling out and we get back to normal. So on the franchise side, on new, we expect the growth rate to be up double digits on volume. GPU, we think it will continue to be elevated. We're also aware of the shortage of inventory through the first half and start to normalize in the second half of the year. Franchise used, we are expecting and looking to a low double-digit growth in volume. The GPUs, as Jeff mentioned, are normalizing, and we expect those to normalize at approximately $1,300 for the full year. Fixed, we are forecasting full year to be up single -- high single digits. This is definitely weighted to the second half of the year. We still have, as you all know, large portfolio is related in California, and we still see some closing there. So we think that will ramp up more in the second half of the year. F&I gross, low double-digit growth. We continue to see opportunity to increase our GPU and continue to surpass the $2,000 per unit. On the EchoPark segment, as Jeff mentioned, we had 16 stores at the end of the year. We actually opened up four in the fourth quarter. That will grow to 40 locations by the end of 2021. That's 2.5 times our current footprint, so very busy with new stores. Units, we expect growth of 75% to 85% in units year-over-year. As a percent of the total revenue, EchoPark was about 15% of total revenue in 2020. We expect that to grow to 20% to 25% in 2021 as it continues to be a higher percentage of the business here at Sonic. EchoPark EBITDA was approximately $11 million in 2020. That includes the drag of $6.6 million from the new stores. We expect that to be approximately double that in 2021, and that includes a drag of about $12 million to $14 million of EBITDA related to the new stores that are opening in 2021. And that EBITDA growth is definitely weighted to the second half of the year as we open up new stores and they start maturing. From a capex perspective, on EchoPark, we have budgeted $75 million in capex for that growth. You can see treating all those or developing all those locations at such a low capex spend. This is a capital-light strategy, and this allows us to take that free cash flow that is being generated on the franchise side and increase our liquidity and also increase our opportunities for growth on the franchise side. So you can see very low capex to get to that 40 new stores at EchoPark. So from a consolidated standpoint, a couple of things to keep in mind. I think it's very important we talk about this each year. The profit cadence at Sonic because our portfolio mix, about 15% to 20% of our profitability will come in the first quarter, 25% in the second, 25% in the third, and 30% to 35% in the fourth quarter. Again, that's that luxury brand mix that has such a big fourth quarter. SG&A perspective, on a consolidated basis, 2020 was 72.9%. We expect that to be flat to slightly up in 2021. The franchise SG&A will continue to lever. We've mentioned the $84 million that we continue to see in reduced expenses, but that will be offset -- that lowering of SG&A on the franchise side will be offset due to the new stores that we're opening at EchoPark. EBITDA, we expect that to be low double-digit growth in EBITDA. Tax rate and shares, we are modeling an expected tax rate of approximately 26% to 28%. Share count, we'll maintain approximately 44 million. We will do share repurchase to ensure there's no dilution from the investments that will happen in 2021.

compname posts quarterly revenues of $2.8 billion, up 1.8%. q4 adjusted earnings per share $1.50 from continuing operations. quarterly revenues of $2.8 billion, up 1.8%. quarterly adjusted earnings from continuing operations of $1.50 per diluted share.

This is Jim Koch, Founder and Chairman, and I'm pleased to kick off the 2020 first quarter earnings call for The Boston Beer Company. Joining the call from Boston Beer are Dave Burwick, our CEO; and Frank Smalla, our CFO. As the world is grappling with the COVID-19 pandemic, our primary focus is on operating our breweries and our business safely and supporting our partners in the beer industry. We have a strong cash position and balance sheet and feel very fortunate to be in a position where we can help others. Supporting the communities in which we live and work is one of our core values. After all, our business got its start in bars and restaurants, and we recognize the role we can play right now in giving back. We're proud to share some of the initiatives we've gotten off the ground in a very short period of time that we hope will make a difference. We've established the Samuel Adams Restaurant Strong Fund and donated over $2.1 million to support bar and restaurant workers that have been impacted by pandemic-related closures in 20 states. In addition, we're a founding partner of Restaurant Relief America, which is committed to helping the restaurant industry workers experiencing hardship in the wake of COVID-19. Both funds will distribute 100% of their proceeds through grants to bar and restaurant workers. Also, to support our internal needs as well as local hospitals, we have begun production of hand sanitizer at our Dogfish Head distillery in Milton, Delaware. The Company's depletions increased 36% in the first quarter, of which 30% is from Boston Beer legacy brands and 6% is from the addition of Dogfish Head brands. Our business in the first quarter was strong, but there remains significant uncertainty due to COVID-19. These uncertainties include our continued ability to operate our breweries at a level of safety that meets our standards, the continued ability to distribute to the off-premise retail locations, the duration of the current on-premise shutdown, and how long consumer pantry loading will continue in the weeks ahead. We will continue to work hard throughout the COVID-19 pandemic and prioritize safety above everything else. I'm proud of the passion, creativity and commitment to community that The Boston Beer Company has demonstrated during this pandemic. I'm now going to pass over to Dave for more detailed overview of our business. Before I review our business results, I'll start with our disclaimer, which given the current circumstances we modified. Now, let me share a deeper look at our business performance. Consistent with the first quarter of last year, our first quarter shipments volume was significantly higher than depletions volume, as we took active steps to ensure that our distributor inventory levels are adequate to support drinker demand. Our depletions growth in the first quarter was a result of increases in our Truly Hard Seltzer and Twisted Tea brands and the addition of the Dogfish Head brands that were only partially offset by decreases in our Angry Orchard and Samuel Adams brands. The growth of the Truly brand and the recently launched Truly Hard Lemonade have accelerated and continue to grow beyond our expectations. Since early January, Truly has accelerated its velocity and has maintained its market share, while other national hard seltzer brands have ceded share. We will continue to invest heavily in the Truly brand and evolve our brand communications and work to improve our position in the hard seltzer category, even as more competitors enter. We are ready to launch an exciting new Truly advertising campaign, but have postponed the launch due to the uncertainties surrounding COVID-19. Twisted Tea continues to generate double-digit volume growth rates that are above full year 2019 trends. We see significant distribution and volume growth opportunities for our Truly and Twisted Tea brands and are looking to continue to expand distribution of our Dogfish Head brand. Pursuing these opportunities in 2020 remains a top priority. Samuel Adams and Angry Orchard's volumes continue to decline, as they are more deeply impacted by the on-premise shutdown. We continue to work hard on returning these brands to growth, but do not expect them to grow during 2020. We reacted decisively to COVID-19 and continue to work to control what we can control, with our primary focus being the safety of our coworkers, our distributors, retailers and our drinkers. We worked aggressively to put in place many safety protocols at our breweries, including entrance screening and temperature checks, face mask requirements, reorganizing work to increase social distancing between and among shifts, and adding cleaning time to each shift. Additionally, we closed all of our hospitality locations beginning on March 13. We are working hard to rebalance our supply chain to address additional demand in can and bottle packages at off-premise retailers against very low demand for kegs, given the shutdown of on-premise venues. This shift in volume mix is likely to come at a higher incremental cost due to the increased usage of third-party breweries, which negatively impacts our gross margin. We have deferred some of our new marketing campaigns, as we closely assess and manage this situation. Drinker demand for our brands continues to be very strong, particularly our Truly and Twisted Tea brands. Pre-COVID, our depletions growth through the nine-week period ended February 29 was approximately 32% from the comparable period in 2019, and we saw a further acceleration in demand for our brands beginning in the second half of March. It's not possible for us to estimate the amount of the new demand that's a temporary reaction to COVID-19. We're in a very competitive business and we're optimistic for continued growth of our current brand portfolio and we remain prepared to forsake short-term earnings as we invest to sustain long-term profitable growth, in line with the opportunities that we see. Based on information in hand, year-to-date depletions reported to the Company through the 15 weeks ended April 11, 2020 are estimated to have increased approximately 32% from the comparable weeks in 2019. Excluding the Dogfish Head impact, depletions increased 27%. Now, Frank will provide the financial details. For the first quarter, we reported net income of $18.2 million or $1.49 per diluted share, a decrease of $0.53 per diluted share from the fourth quarter of last year. Net income decreased as higher net revenue was more than offset by increases in operating expenses and lower gross margins. We began seeing the impact of the COVID-19 pandemic on our business in early March. Prior to then, we were on track to maintain our full year fiscal 2020 financial guidance. Given the many rapidly changing variables related to the pandemic, we are currently not in a position to accurately forecast the future impacts of the pandemic and are therefore withdrawing our full year fiscal 2020 financial guidance. To date, the direct impact of the pandemic has primarily shown in significantly reduced keg demand from the on-premise channel and higher labor and safety related costs at our breweries. In the first quarter of 2020, we recorded COVID-19 pre-tax related reductions in net revenue and increases in other costs totaling $10 million. This amount consists of a $5.8 million reduction in net revenue for estimated keg returns from distributors and retailers and $4.2 million of other COVID-19 related direct costs, of which $3.6 million are recorded in cost of goods sold and $600,000 are recorded in operating expenses. In addition to these direct financial impacts, COVID-19 related safety measures resulted in a reduction of internal capacity. This has shifted more volume to third-party breweries, resulting in increased production costs and lower gross margins. Shipment volume was approximately 1.42 million barrels, a 32.2% increase from the first quarter of 2019. Excluding the addition of the Dogfish Head brands beginning July 3, 2019, shipments increased 27.5%. Shipment volume for the quarter was significantly higher than depletions volume and resulted in significantly higher distributor inventory as of March 28, 2020 when compared to March 30, 2019. We believe distributor inventory as of March 28, 2020 averaged approximately six weeks on hand and was at an appropriate level based on the supply chain capacity constraints and inventory requirements to support the forecasted growth of Truly and Twisted Tea brands over the summer. We expects wholesaler inventory levels in terms of weeks on hand to return to more normal levels of approximately four weeks on hand later in the year. Our first quarter 2020 gross margin of 44.8% decreased from the 49.5% margin realized in the first quarter of last year. The decrease was primarily the result of higher processing costs due to increased production at third-party breweries and higher processing costs and finished goods keg inventory write-offs at Company-owned breweries, partially offset by price increases and cost saving initiatives at Company-owned breweries. Excluding our current assessment of the impact of COVID-19 keg returns and other related direct costs, first quarter gross margin was 46.8%. First quarter advertising, promotional and selling expense increased by $26.2 million in the first quarter in 2019, primarily due to increased investments in media, production and local marketing, the addition of Dogfish Head brand-related expenses beginning July 3, 2019, higher salaries and benefits costs, and increased freight to distributors due to higher volumes. General and administrative expenses increased by $3.6 million from the first quarter in 2019, primarily due to increases in salaries and benefits costs and the addition of Dogfish Head general and administrative expenses beginning July 3, 2019. We drew down $100 million from our existing line of credit in March 2020 to enhance our cash position and our ability to address the impact of the COVID-19 pandemic. We expect that our March 28, 2020 cash balance of $129.5 million, together with future operating cash flows and the $50 million remaining in our line of credit, will be sufficient to fund future cash requirements.

q1 earnings per share $1.49. withdrawing its full-year fiscal 2020 financial guidance. direct impact of pandemic has primarily shown in significantly reduced keg demand from on-premise channel. boston beer company - depletions through 9-week period ended february 29 estimated to have increased about 32%.

This is Jim Koch, Founder and Chairman and I'm pleased to kick off the 2021 first quarter earnings call for the Boston Beer Company. Joining the call from Boston Beer are Dave Burwick, our CEO; and Frank Smalla, our CFO. As the world slowly reopens and the COVID pandemic winds down, our primary focus continues to be on operating our breweries and our business safely and working hard to continue to innovate and meet customer demand. Before I turn to our key first quarter operational achievements, I want to note that working with the Greg Hill Foundation, our Sam Adams Restaurant Strong Fund has raised over $7.5 million dollars thus far to support bar and restaurant workers who were experiencing hardships in wake over COVID-19 and it committed to continue to distribute 100% of its proceeds through grants to bars and restaurant workers across the country. The company's depletions increased 48% in the first quarter and we achieved double-digit volume growth for the 12th consecutive quarter. This just would not have been possible without the outstanding coworkers in our breweries and our sales force and the frontline workers and our distributors and retailers. Early in 2021, we launched Truly ice tea Hard Seltzer and during the second quarter, we plan to launch Truly Punch hard seltzer, both buying refreshing hard seltzer and bold flavors, and we believe these new launches continue to demonstrate our innovation leadership within the hard seltzer category. We are also making steady progress in improving our brand support and messaging for a beer and cider brands to position them for long-term sustainable growth in the face of the difficult on-premise environment. We're optimistic that our on-premise business will significantly improve in 2021 as restrictions are lifted. We're excited about the response, the introduction in early '21 of several new Sam Adams beer including Sam Adams Wicked Hazy, Sam Adams Wicked Easy and Samuel Adams Just The Haze, our first non-alcoholic beer as well as the positive reaction to our Samuel Adams Your Cousin from Boston advertising campaign. We are confident in our ability to innovate and build strong brands that complement our current portfolio and help support our mission of long-term profitable growth. I will now pass over to Dave for a more detailed overview of our business. Before I review our business results, I'll start with our disclaimer. Okay, now let me share a deeper look at our business performance. We are happy with our strong start to the year and our record first quarter shipment and depletion volumes. Our depletions growth in the first quarter was the result of increases in our Truly Hard Seltzer and Twisted Tea brands, partly offset by decreases in our Samuel Adams, Angry Orchard and Dogfish Head brands. The recently launched Truly Iced Tea Hard Seltzer has accelerated Truly brand growth, which has more than doubled since last year. In the first quarter in measured off-premise channels, the Truly brand outgrew the hard seltzer category by nearly 2 times or 50 percentage points, resulting in a share increase of 6.5 percentage points. The Truly brand has now reached a market share of over 28%, accounting for approximately 40% of all growth cases in the hard seltzer category year-to-date, which is two times greater than the next largest growth brand. Truly Iced Tea Hard Seltzer has achieved a 4.3 percentage point market share in measured off-premise channels, well ahead of all other new entrants to the entire beer category. We expect the launch of Truly Punch Hard Seltzer during the second quarter to continue this positive momentum. Brand, evolve our brand communications, and further improve our position in the hard seltzer category as more competitors enter. Truly Tea continues to generate double-digit volume growth rates that is significantly above full year 2020 trends. In the first quarter in measured off-premise channels, case growth in Twisted Tea brand products was almost three times higher than its closest competitor and we believe, Twisted Tea is on its way to becoming the number one flavored malt beverage by year's end. We see significant distribution and volume growth opportunities for our Truly and Twisted Tea brands and are looking to continue to expand distribution of our Dogfish Head brand. Pursuing these opportunities in 2021 remains a top priority. Our Samuel Adams, Angry Orchard and Dogfish Head brands were hit the most by COVID-19 and the related on-premise closures. We continue to work hard on returning these brands to growth and are optimistic that they will return to growth in 2021. Overall, given the trends for the first three months and our current view of the remainder of the year, we've adjusted our expectations for higher 2021 full year volume and earnings growth, which is primarily driven by the strong performance of our Truly and Twisted Tea brands. During the quarter, we have taken various steps to ensure we have capacity to support this accelerating growth. We continue to work hard on our comprehensive program to transform our supply chain with the goal of making our integrated supply chain more efficient, reduce costs, increase our flexibility to better react to mix changes, and allow us to scale up more efficiently. We expect to complete this transformation over the next two to three years. We will continue to invest in capacity to take advantage of the fast-growing hard seltzer category and deliver against the increased demand through a combination of internal capacity increases and higher usage of third-party breweries, although meeting these higher volumes through increased usage of third-party breweries has a negative impact on our gross margins. Margin improvements in 2021, our gross margins and gross margin expectations will continue to be impacted negatively until our volume growth stabilizes. Brand portfolio and innovations, and we remain prepared to forsake short-term earnings as we invest to sustain long-term profitable growth, in line with the opportunities that we see. Based on information in-hand, year-to-date depletions reported in the company through the 15 weeks ended April 10, 2021, our estimated depletion is approximately 49% from the comparable weeks in 2020. Now Frank's going to provide the financial details. For the first quarter, we reported net income of $65.6 million or $5.26 per diluted share, an increase of $3.77 per diluted share in the first quarter of last year. This increase was primarily due to increased net revenue, partially offset by higher operating expenses. In the first quarter of 2020, we recorded pre-tax COVID-19-related reduction in net revenue and increases in costs, that total $10 million or $0.60 per diluted share. In 2021 going forward, we've chosen not to report COVID-19-related direct costs separately as they have used to be a normal part of operation. For the first quarter of 2021, shipment volume was approximately 2.3 million barrels, a 60.1% increase from the first quarter of 2020. Shipment volume for the quarter was significantly higher than depletions volume and resulted in significantly higher distributor inventory as of March 27, 2021 when compared to March, 28 2020. We believe distributor inventory as of March 27, 2021 average approximately seven weeks on-hand, and was an appropriate level based on the supply chain capacity constraints and inventory requirements to support the forecasted growth of our Truly and Twisted brands over the summer. We expect wholesaler inventory levels in terms of weeks on-hand to be between three and seven weeks for the remainder of the year. Our first quarter 2021 gross margin of 45.8% increase in the 44.8% margin realized in the first quarter of last year. The increase was primarily a result of price increases, the absence of the COVID-19-related direct cost incurred in the first quarter of 2020 and cost saving initiatives company-owned breweries, partially offset by higher processing costs due to increased production at third-party breweries. First quarter advertising, promotional and selling expenses increased by $43 million in the first quarter of 2020, primarily due to increased brand investment of $21 million, mainly driven by higher media and production costs. Higher salaries and benefits costs and increased freight to distributors of $21.9 million due to a higher volume and rate. General and administrative expenses increased by $4.9 million from the first quarter of 2020, primarily due to increases in salaries and benefits costs. During the first quarter, we recorded an income tax expense of $11 million, which consists of income tax expenses of $19.6 million partially offset by $8.6 million fixed benefit related to stock option exercises in accordance with ASU 2016-09. The effective tax rate for the first quarter, excluding the impact of ASU 2016-09 increased to 25.6% and was 23.6% in the first quarter of 2020. Based on information of which we are currently aware, we are targeting 2021 earnings per diluted share of between $22 and $26, an increase from the previously communicated range of between $20 and $24, excluding the impact of ASU 2016-09, but actual results could vary significantly from our target. We are currently planning increases in shipments and depletions of between 40% and 50%, an increase from the previously communicated range of between 35% and 45%. We're targeting national price increases per barrel of between 1% and 3%, an increase from the previously communicated range of between 1% and 2%. Full year 2021 gross margins are currently expected to be between 45% and 47%. We plan increased investments in advertising, promotional and selling expenses of between $130 million to $150 million for the full year 2021, an increase from the previously communicated range of between $120 million and $130 million. These amounts do not include any increases in freight costs for the shipment of products to our distributors. We estimate our full year 2021 effective tax rate to be approximately 26.5% excluding the impact of a ASU 2016-09. We're not able to provide forward guidance on the impact of ASU 2016-09 [Indecipherable] 2021 financial statements and full year effective tax rate as this will mainly depend upon unpredictable future events, including the timing and value realized upon the exercise of stock options versus the fair value with those options were granted. We're continuing to evaluate 2021capital expenditures and currently estimate investments of between $250 million and $350 million, a decrease in our previously communicated range of between $300 million and $400 million. The capital will be mostly spent on continued investments in capacity to supply chain efficiency improvement. We expect that our March 27, 2021 cash balance of $144.7 million together with the future operating cash flows and the $150 million remaining under the line of credit, will be sufficient to fund future cash requirements. Before we go there, similar to the last couple of calls, Dave will be the MC on our side and coordinate the answers when needed since we are in different locations.

compname reports q1 earnings per share $5.26. q1 earnings per share $5.26.

This is Jim Koch, Founder and Chairman. And I'm pleased to kick off the 2020 second quarter earnings call for The Boston Beer Company. Joining the call from Boston Beer are Dave Burwick, our CEO; and Frank Smalla, our CFO. And then hand over to Dave who will provide an overview of our business. As our world continues to grapple with this COVID-19 pandemic, a primary focus at Boston Beer Company continues to be on operating our breweries and our overall business safely and supporting our partners in the beer industry. Supporting the communities in which we work and live is one of our core values. And we're very happy that our Samuel Adams Restaurants Strong Fund has raised over $5.4 million so far to support bar and restaurant workers who are experiencing hardship in the wake of COVID-19. Working with the Greg Hill Foundation, this fund is committed to distributing 100% of its proceeds to grants to bar and restaurant workers across the country. While doing this, we also achieved depletions growth of 46% in the second quarter of which 42% is from Boston Beer legacy brands and 4% is from the addition of the Dogfish Head brands. Our business in the second quarter was strong, but uncertainties due to COVID-19 do remain. These uncertainties include our ability to continue to operate our breweries at a level of safety that meets our standards, the continued ability to distribute to off-premise retail locations and the timing of the reopening of on-premise retail locations. We will continue to work hard through the COVID-19 pandemic and prioritize safety above all else. I'm proud of the passion, creativity, and commitment to community that our company and coworkers have demonstrated during this pandemic. We remain positive about the future growth of our brands and are happy that our diversified brand portfolio continues to fuel double-digit growth. I will now pass over to Dave for a more detailed overview of our business. Before I review our business results, I'll start with the usual disclaimer. Now let me share a deeper look at our business performance. Our depletions growth in the second quarter was a result of increases in our Truly Hard Seltzer and Twisted Tea brands and the addition of the Dogfish Head brands that were only partially offset by decreases in our Samuel Adams and Angry Orchard brands. The growth of the Truly brand led by Truly Hard Lemonade has accelerated and continues to grow beyond our expectations. Since early January, Truly has significantly grown its velocity and has sequentially grown its market share while many other hard seltzer brands have entered the category. Truly is the only hard seltzer not introduced earlier this year to grow its share during 2020. We'll continue to invest heavily in the Truly brand and further improve our position in the hard seltzer category as competition continues to increase. We're excited about our new Truly advertising campaign that showcases coverage variety enjoy to hard seltzer drinkers through four different ads. Because we delayed the premiere of this campaign to June given the consumer environments surrounding COVID-19, it's too early to know if it will resonate with drinkers. Twisted Tea continues to generate double-digit volume growth rates that are well above full year 2019 trends. We expect to increase our brand investments in the second half compared to the first half and see significant distribution in volume growth opportunities for our Truly, Twisted Tea and Dogfish Head brands. Samuel Adams and Angry Orchard's volumes continue to decline as they are more deeply impacted by the effect of COVID-19 on on-premise retailers. We're encouraged however that Samuel Adams Boston Lager and Angry Orchard Crisp Apple both have experienced double-digit growth in the measured off-premise channels during the quarter. We continue to work on returning these brands to growth, but don't expect them to grow during 2020 because of on-premise closures. I am pleased that our overall business has shown great momentum and depletion improvements during the first half of the year. Given our trends for the first half and our current view of the remainder of the year, we've adjusted our expectations for higher 2020 full-year earnings, depletions and shipment growth, which is primarily driven by the strong performance of our Truly and Twisted Tea brands. We've adjusted our business to the COVID-19 environment and continue to work to control what we can control, with our primary focus being the safety of our coworkers, distributors, retailers and drinkers. We've deployed many safety protocols across our business and at our breweries, including entrance screening and temperature checks, face mask requirements, reorganized work spacing to increase physical distancing between and among shifts, and adding more cleaning and sanitation time to each shift. We're slowly reopening our hospitality locations, which were closed since March, with a focus on outdoor service and takeout. Our accelerated depletions growth has been challenging operationally. We've been experiencing out of stocks and we expect wholesaler inventories to remain very tight for the rest of the summer. We've been operating at capacity for many months and have further increased our usage of third-party breweries in response to the growth. In particular, the additional Truly volumes have come at a higher incremental cost, due to an increased usage of third-party breweries, which is negatively impacting our gross margin expectation for the year. We're investing significantly in our supply chain but do not expect these pressures to be relieved in the second half of the year. We'll continue to invest to increase capacity as appropriate to meet the needs of our business and take full advantage of the fast-growing hard seltzer category. We're a very competitive business, but we're optimistic for continued growth of our current brand portfolio. We remain prepared to forsake short-term earnings, as we invest to sustain long-term profitable growth in line with the opportunities that we see. Based on information in hand, year-to-date depletions reported to the company through the 28 weeks ended July 11, 2020, are estimated to have increased approximately 42% from the comparable weeks in 2019. Excluding the Dogfish Head impact, depletions increased 37%. Now, I'm going to hand it over to Frank who will provide the financial details. For the second quarter, we reported net income of $60.1 million, an increase of $32.3 million or 116% from the second quarter of 2019. Earnings per diluted share were $4.88, an increase of $2.52 per diluted share from the second quarter of 2019. This increase was primarily due to increased revenue driven by shipment growth of 39.8% partly offset by lower gross margins and higher operating expenses. We began seeing the impact of COVID-19 pandemic in our business in early March. To-date, the direct financial impact of the pandemic has primarily shown in significantly reduced keg demand from the on-premise channel and higher labor and safety related cost at our breweries. In the first half of 2020, we reported COVID-19 pre-tax-related reductions in net revenue and increases in other costs totally $14.1 million, of which $10 million was recorded in the first quarter and $4.1 million was recorded in the second quarter. The total amount consists of a $5.8 million reduction in net revenue for our estimated keg returns from distributors and retailers, and $8.3 million of other COVID-19 related direct costs, of which $5.6 million are recorded in cost of goods sold and $2.7 million are recorded in operating expenses. In addition to these direct financial impacts, COVID-19 related safety measures resulted in a reduction of brewery productivity. This has shifted more volume to third-party breweries, which increased production costs and negatively impacted gross margins. In April 2020, we withdrew full year fiscal 2020 financial guidance due to uncertainties around COVID-19. Despite the continued uncertainties related to the COVID-19 pandemic, we feel our business outlook has stabilized and that it is now appropriate to give full year fiscal 2020 financial guidance. Shipment volume was approximately 1.9 million barrels, a 39.8% increase from the second quarter of 2019. Excluding the addition of the Dogfish Head brand beginning July 3, 2019, shipments increased 35.3%. We believe distributor inventory as of June 27, 2020 averaged approximately 2.5 weeks on hand and was lower than prior year levels due the supply chain capacity constraints. We expect wholesale inventory levels in terms of weeks on hand to remain lower than prior year levels for the remainder of the year. Our second quarter 2020 gross margin of 46.4% decreased from the 49.9% margin realized in the second quarter of 2019 primarily as a result of higher processing cost due to increased production in third-party breweries, partially offset by price increases and cost-saving initiatives at company-owned breweries. Second quarter advertising, promotional and selling expenses increased by $6.3 million in the second quarter of 2019 primarily due to increases in salaries and benefits cost, increased brand investments in media and production, the addition of Dogfish Head brand related expenses beginning July 3, 2019, and increased freight to distributors due to higher volumes partially offset by decreased investments in local marketing and national promotions due to timing of these costs compared to the prior year. General and administrative expenses increased by $2.9 million in the second quarter of 2019, primarily due to increases in salaries and benefits cost and the addition of Dogfish Head general and administrative expenses beginning July 3, 2019, partially offset by the non-recurrence of $1.5 million in Dogfish Head transaction-related fees incurred in the second quarter of 2019. Based on information which we're currently aware, we are now targeting full year 2020 earnings per diluted share of between $11.70 and $12.70. However, actual results could vary significantly from this target. This projection excludes the impact of ASU 2016-09. Full year 2020 depletions growth including Dogfish Head is now estimated to be between 27% and 35% of which between 1% and 2% are due to the addition of the Dogfish Head brand. We project increases in revenue per barrel of between 1% and 2%. Full year 2020 gross margins are expected to be between 46% and 48%. We plan to increase investments in advertising, promotional and selling expenses of between $70 million and $80 million for the full year 2020. This does not include any increases in freight cost for the shipment of products to our distributors. We estimate our full year 2020 non-GAAP effective tax rate to be approximately 26%, which excludes the impact of ASU 2016-09. We are continuing to evaluate 2020 capital expenditures and currently estimate investments of between $180 million and $200 million. The capital will be spent mostly on continued investments in our breweries and could be higher if deemed necessary to meet future growth. We expect that our cash balance of $86.7 million as of June 27, 2020 along with our future operating cash flow and unused line of credit of $150 million will be sufficient to fund future cash requirement. Before we do that though, I would like to remind everybody that we are still in different locations due to COVID-19.

q2 earnings per share $4.88. sees fy 2020 non-gaap earnings per share $11.70 to $12.70. began seeing impact of covid-19 pandemic on its business in early march. began seeing the impact of the covid-19 pandemic on its business in early march. boston beer company- direct financial impact of pandemic primarily shown in significantly reduced keg demand from on-premise channel. boston beer- in 1st half of 2020, co recorded covid-19 related pre-tax reductions in net revenue, increases in other costs that total $14.1 million. boston beer- given trends for 1st half of year, co adjusted expectations for higher 2020 earnings.

This is Jim Koch, Founder and Chairman, and I'm pleased to be here to kick off the 2021 second quarter earnings call for The Boston Beer Company. Joining the call from Boston Beer are Dave Burwick, our CEO and Frank Smalla, our CFO. During the second quarter, we saw a significant growth in the on-premise channel and reopened all of our retail locations as most COVID-19 restrictions have been lifted across the country. However, our 24% depletions growth for the second quarter decelerated from our first quarter growth of 48% and was below our expectations as the hard seltzer category and the overall beer industry were softer than we had anticipated. Hard seltzer category growth was negatively impacted by several developments. First, slowing growth in household penetration as the market matures and there is less new trial. Second, a gradual transition of industry volume to the on-premise channel as hard seltzers became more regular option in that channel. Third, new hard seltzer brands at retail that have resulted in a proliferation of choices and consumer confusion. And fourth, a challenging comparative period of significant pantry loading related to on-premise restrictions in the second quarter of 2020. We are encouraged that four of our five major brands grew in the second quarter and we continued to expand our market share. In measured off-premise channels in the first half of this year where our brand portfolio represented 4% of total industry volume, we delivered over 45% of industry volume growth. By far the highest of all brewers. We will continue to invest behind our brands with a particular emphasis on fueling the momentum behind Truly and Twisted Tea. We recently announced plans to develop new innovative beverages with Beam Suntory that we are planning to launch in early 2022. We believe these new beverages will further demonstrate our ability to innovate and grow our business as drinker preferences evolve. We remain highly positive about the future growth of our brands and that our diversified brand portfolio will continue to fuel double-digit growth. I will now pass over to Dave for a more detailed overview of our business. Before I review our business results, I will start with the usual disclaimer. Okay, now let me share a deeper look at our business performance. Our depletions growth in the second quarter was a result of increases in our Truly hard seltzer, Twisted Tea, Samuel Adams and Dogfish Head brands. They were only partially offset by decreases in our Angry Orchard brand. Twisted Tea continues to generate double-digit volume growth rates and is the fastest-growing flavored malt beverage brand family in measured off-premise channels during the first half of this year. Early in 2021, we launched Truly Iced Tea hard seltzer and during the second quarter we launched Truly Punch hard seltzer. Similar to the Truly Lemonade, these new products deliver against drinkers' interest in both their flavor profiles and demonstrate Truly's distinctiveness and innovations leadership within the hard seltzer category. In measure off-premise channels, Truly Iced Tea is the number one innovation in the overall beer industry over the first half of this year and Truly Punch is the number two innovation over the past four weeks. The overall Truly brand growth rate improved to 2.7 times the hard seltzer category growth rate in the latest 13 weeks, resulting in a 4 point share gain and closing the share gap to the number one brand to single digits. We are excited about our new Truly advertising campaign "No One Is Just One Flavor" featuring Grammy award winner and pop icon, Dua Lipa and showcasing Truly's superior variety of flavors and the colorful and adventurous nature of Truly drinkers. Based on the brand's innovation leadership, strong brand building and growing cultural relevance, we believe Truly is well positioned to continue to grow share. We overestimated the growth of the hard seltzer category in the second quarter and the demand for Truly, which negatively impacted our volume and earnings for the quarter and our estimates for the remainder of the year. We increased our production of Truly to meet our summer peak and have had lower-than-anticipated demand for certain Truly brand styles, which has resulted in higher than planned inventory levels at our breweries and increased supply chain costs and complexity. At the same time, we've been experiencing out-of-stocks on certain of our can [Phonetic] products, most significantly on our Twisted Tea brand family. We expect wholesaler inventories of Twisted Tea to remain tight for the rest of the summer. Our outlook for the hard seltzer category in the second half of 2021 is uncertain, and we planned our capacity and spending based upon several volume scenarios. We'll continue to manage our capacity requirements through a combination of internal capacity increases and higher usage of third party breweries. We continue to work hard on our comprehensive program to transform our supply chain with the goal of making our integrated supply chain more efficient, reduce costs, increase our flexibility to better react to mix changes and allow us to scale up more efficiently. While we're in a very competitive business, we're confident in the continued growth of our current brand portfolio and innovations, and we remain prepared to forsake short- term earnings as we invest to sustain long-term profitable growth. Based on information in hand, year-to-date depletions reported to the Company to the 28 weeks ended July 10, 2021 are estimated to have increased approximately 32% from the comparable weeks in 2020. Now Frank will provide the financial details. For the second quarter, we reported net income of $59.2 million, a decrease of $0.9 million or 1.6% from the second quarter of 2020. Earnings per diluted share were $4.75, a decrease of $0.13 per diluted share from the second quarter of 2020. This decrease was primarily due to increases in operating expenses, lower gross margins and the higher tax rate, partially offset by increased revenue growth driven by shipment growth. Shipment volume was approximately 2.45 million barrels, a 27.4% increase from the second quarter of 2020. Shipment volume for the first half was significantly higher than depletions volume and resulted in higher distributor inventory as of June 26, 2021 when compared to June 27, 2020. The Company believes distributor inventory as of June 26, 2021, averaged approximately five weeks on hands and was an appropriate level for each of its brands, except for Twisted Tea, which has significantly lower than planned distributor inventory levels for certain styles and packages. Our second quarter 2021 gross margin of 45.7% decreased from the 46.4% margin realized in the second quarter of 2020, primarily as a result of higher processing and other costs due to increased production at third party breweries, partially offset by price increases and cost saving initiatives at company owned breweries. Second quarter advertising, promotional and selling expenses increased by $61.3 million from the second quarter of 2020, primarily due to increased brand investments of $41.2 million, mainly driven by higher media, production and local marketing costs and increased freight to distributors of $20.1 million that was primarily due to higher rates and volumes. General and administrative expenses increased by $3.3 million from the second quarter of 2020, primarily due to increases in external services and salaries and benefits costs. Based on information of which we are currently aware, we are now expecting full year 2021 earnings per diluted share of between $18 and $22, a decrease from the previously communicated range of between $22 and $26. Excluding the impact of ASU 2016-09, the actual results could vary significantly from this target. We're currently planning increases in shipments and depletions of between 25% and 40%, a decrease from the previously communicated range of between 40% and 50%. We're targeting national price increases per barrel of between 1% and 3%. Full year 2021 gross margins are currently expected to be between 45% and 47%. We plan increased investments in advertising, promotional and selling expenses of between $80 million and $100 million for the full year 2021, a decrease from the previously communicated range of between $130 million and $150 million. These amounts do not include any increases in freight costs for the shipment of products to our distributors. We estimate our full year 2021 non-GAAP effective tax rate to be approximately 26 % excluding the impact of ASU 2016-09. We're not able to provide forward guidance on the impact that ASU 2016-09 will have on our 2021 financial statements and full year effective tax rate, as this will mainly depend upon unpredictable future events, including the timing and value realized upon the exercise of stock options versus the fair value when those options are granted. We're continuing to evaluate 2021 capital expenditures and currently estimate investments of between $180 million and $230 million, a decrease and a narrowing from the previously communicated range of between $250 million and $350 million. The capital will be spent, mostly on continued investments in our breweries and could be higher if deemed necessary to meet future growth. We expect that our cash balance of $103 million as of June 26, 2021 along with our future operating cash flow and unused line of credit of $150 million will be sufficient to fund future cash requirements.

compname reports q2 earnings per share $4.75. q2 earnings per share $4.75. in 2021 and going forward, company has chosen not to report covid-19 related direct costs separately.

This is Jim Koch, Founder and Chairman and I'm pleased to kick off the 2020 third quarter earnings call for the Boston Beer Company. Joining the call from Boston Beer are Dave Burwick, our CEO; and Frank Smalla, our CFO. We achieved depletions growth of 36% in the third quarter. We believe that our depletions growth is attributable to our key innovations, quality and strong brands as well as sales execution and support from our distributors. As the COVID-19 pandemic continues, our primary focus continues to be on operating our breweries and our business safely and working hard to meet customer demand. I'm very proud of the patient, creativity and commitment to community that our company has demonstrated during this pandemic. We remain positive about our future growth of our brands and are happy that our diversified brand portfolio continues to fuel double-digit growth for the 10th consecutive quarter. We planned some major innovations to be introduced in 2021 for our brands. These include Twisted Iced Tea Hard Seltzer, Samuel Adams, Just the Haze, our first non-alcoholic beer, Dogfish Head Scratch-Made Canned Cocktails and Angry Orchard Fruit Cider. We're confident in our ability to continue to innovate and build strong brands to help support our mission of long-term profitable growth. I will now pass over to Dave for a more detailed overview of our business. Before I review our business results, I'll start with the usual disclaimer. Now, let me share a deeper look at our business performance. Our depletions growth in the third quarter was a result of increases in our Truly Hard Seltzer and Twisted Tea brands, partly offset by decreases in our Sam Adams, Angry Orchard and Dogfish Head brands. The growth of the Truly brand, led by Truly Lemonade Hard Seltzer, continues to be very strong and we expect the Truly brand to continue to lead the growth of the business into 2021. In early 2021, we will launch Truly Iced Tea Hard Seltzer, Truly Extra, a higher ABV version of Truly, and other new Truly flavors and package sizes, as we continue to lead innovation in the hard seltzer category. We believe that Truly Iced Tea Hard Seltzer, which combines the refreshment of hard seltzer with real brewed tea and fruit flavor at only 100 calories and 1 gram of sugar, will further strengthen our position in the category. Since early in 2020, Truly has grown its velocity and its market share sequentially despite other national, regional and local hard seltzer brands entering the category. Truly is the only national hard seltzer, not introduced earlier this year, to grow its share during 2020. We will continue to invest heavily in the Truly brand and work to improve our position in the hard seltzer category as competition continues to increase. We will also continue to invest heavily in our Live Truly advertising campaign that showcases, variety, colors and joy to hard seltzer drinkers. Twisted Tea has benefited greatly from increased at-home consumption and continues to generate consistent double-digit volume growth, even as new entrants have been introduced and competition has increased. Our Samuel Adams, Angry Orchard and Dogfish Head brands have been most negatively impacted by COVID-19 and the related On-Premise closures, but we are pleased that they all finished the month of September with strong growth in the measured Off-Premise channels compared to last September. For the remainder of 2020 and into 2021, we plan to build upon our success and work to drive our brands to their full potential, with a particular focus on our Truly brand. We've adjusted our expectations for 2020 full-year depletions growth and our earnings guidance to reflect our trends for the first nine months and our current view of the remainder of the year, which is primarily driven by the year-to-date performance of Truly. We are expecting all of our brands to grow in 2021 and are targeting overall volume growth rates to be between 35% and 45%. We have closely managed our operating costs through the COVID-19 pandemic and achieved our planned cost synergies from the Dogfish Head merger. In 2021, based on our current spending and volume assumptions, we are planning for the growth rate of our operating expenses to be below our top line growth rate, delivering leverage to our operating income. We have been operating our breweries at full capacity for many months and, like our competitors, we have had out of stocks during the quarter. We expect wholesaler inventories to return to normal levels in the fourth quarter, as we recover from our summer seasonal peak. Improving our supply chain performance continues to be our top priority and we are in the process of doubling our internal and third-party brewery can packaging capacity for 2021. Our new can line at our Cincinnati Brewery began production late in the third quarter and we have recently added additional third-party brewery sleek can capacity. As reflected in our 2020 and 2021 capital spending guidance, we will continue to invest heavily to increase capacity as appropriate to meet the needs of our business and take full advantage of the fast-growing hard seltzer category. However, the increased usage of third-party breweries and an increasing percentage of variety packs in the company's overall product mix come at a higher incremental cost. As a result, our gross margins and gross margin expectations will be negatively impacted until the volume growth stabilizes. We began a multi-year supply chain transformation project in 2020 to automate and change internal processes to increase efficiency and reduce costs. The timing of the benefits of this program will depend on the timing and amount of our future volume growth. We will continue to prioritize volume delivery over margin optimization in this high-growth environment. While we are in a very competitive business, we are optimistic for continued growth of our current brand portfolio and innovations and we remain prepared to forsake short-term earnings as we invest to sustain long-term profitable growth, in line with the opportunities that we see. Based on information in hand, year-to-date depletions reported to the company through the 42 weeks ended October 17, 2020 are estimated to have increased approximately 39% from the comparable weeks in 2019. Now, Frank, will provide the financial details. For the third quarter, we reported net income of $80.8 million, an increase of $36 million or 80.6% from the third quarter of 2019. Earnings per diluted share were $6.51, an increase of $2.86 per diluted share for the third quarter of 2019. This increase was primarily due to increased revenue driven by higher shipments, partially offset by lower gross margins and higher operating expenses. Shipment volume was approximately 2.1 million barrels, a 30.5% increase from the third quarter of 2019. We believe distributor inventory as of September 26, 2020 average approximately 2 weeks on hand and was lower than prior year levels due to depletions outpacing supply constrained shipments. We expect wholesaler inventory levels in terms of weeks on hand to remain between one and four weeks for the remainder of the year. Our third quarter 2020 gross margin of 48.8% decreased from the 49.6% margin realized in the third quarter of 2019, primarily as a result of higher processing costs due to increased production at third-party breweries, partially offset by cost saving initiatives at company-owned breweries and price increases. Third quarter advertising, promotional and selling expenses increased by $11.5 million from the third quarter of 2019, primarily due to increased investments in media and production, increased salaries and benefits costs and increased freight to distributors because of higher volumes. General and administrative expenses decreased by $1.1 million from the third quarter of 2019, primarily due to non-recurring Dogfish Head transaction-related expenses of $3.6 million incurred in the comparable 13-week period in 2019, partially offset by increases in salaries and benefits costs. Based on information of which we are currently aware, we are now targeting full-year 2020 earnings per diluted share of between $14 and $15, an increase of the previously communicated estimate of between $11.70 and $12.70. However, actual results could vary significantly from this target. This projection excludes the impact of ASU 2016-09. Full year 2020 depletions growth is now estimated to be between 37% and 42%, an increase and narrowing from the previously communicated estimate of between 27% and 35%. We project increases in revenue per barrel of between 1% and 2%. Full year 2020 gross margins are expected to be between 46% and 47% and narrowing down of the previously communicated estimate of between 46% and 48%. We plan to increase investments in advertising, promotional and selling expenses of between $55 million and $65 million for the full year 2020, a change from the previously communicated estimate of between $70 million and $80 million primarily due to lower selling expenses. This does not include any increases in freight costs for the shipment of products to our distributors. We estimate our full-year 2020 non-GAAP effective tax rate to be approximately 26%, which excludes the impact of ASU 2016-09. We are continuing to evaluate 2020 capital expenditures and currently estimate investments of between $160 million and $190 million, a change from the previously communicated estimate of between $180 million and $200 million. Most of which relates to continued investments in the company's breweries. Looking forward to 2021 we are in process of completing our 2021 plan and will provide further detailed guidance when we present our full-year 2020 results. Based on information of which we are currently aware, we are targeting depletions and shipments percentage increases of between 35% and 45%. We project increases in revenue per barrel of between 1% and 2%. Full year 2021 gross margins are expected to be between 46% and 48%. We plan increased investments in advertising, promotional and selling expenses of between $130 million and $150 million for the full year 2021, not including any changes in freight costs for the shipment of products to our distributors. We estimate our full-year 2021 non-GAAP effective tax rate to be approximately 26% excluding the impact of ASU 2016-09 line. We are currently evaluating 2021 capital expenditures and our initial estimates of between $300 million and $400 million, which could be significantly higher if deemed necessary to meet future growth. We expect that our cash balance of $157.1 million as of September 26, 2020 along with our future operating cash flow and unused line of credit of $150 million will be sufficient to fund future cash requirements. Since we are in different locations, Dave will be the MC on our side, similar to last time and coordinate the answers.

compname posts q3 earnings per share of $6.51. q3 earnings per share $6.51. began seeing impact of covid-19 pandemic on its business in early march. full-year 2020 shipments and depletions growth is now estimated to be between 37% and 42%. boston beer company -targeting overall volume growth rates in 2021 to be between 35% and 45%. sees 2021 depletions and shipments percentage increase between 35% and 45%.

This is Jim Koch, Founder and Chairman, and I'm pleased to kick off the 2020 fourth quarter earnings call for the Boston Beer Company. Joining the call from Boston Beer are Dave Burwick, our CEO; and Frank Smalla, our CFO. As the COVID-19 panic slowly winds down, our primary focus continues to be on operating our breweries and our business safely and working hard to meet consumer demand. I'm very proud of the passion, creativity, and commitment to community that our company has demonstrated during this pandemic. We achieved depletions growth of 26% in the fourth quarter and 37% for the full year. We remain positive about the future growth of our diversified brand portfolio and we believe that our depletions growth is attributable to our key innovations, the quality of our products, and our strong brands. We see significant distribution and volume growth opportunities in 2021 for our Truly, Twisted Tea, and Dogfish Head brands, which remain our top priorities for 2021. Early in 2021, we launched Truly Iced Tea Hard Seltzer, which combines refreshing hard seltzer with the real brewed tea and fruit flavor. The launch has been well received by distributors, retailers and drinkers, but it is too early to tell if it will be successful. We are working hard to further develop our brand support and messaging for our Samuel Adams and Angry Orchard brands to position them for long-term sustainable growth, in the face of the difficult on-premise environment. We are excited about the response to the introduction in early 2021 of several new beers, Samuel Adams Wicked Hazy, Samuel Adams Wicked Easy and Samuel Adams Just the Haze, our first non-alcoholic beer, as well as the positive reaction to our Samuel Adams Your Cousin from Boston advertising campaign. We are confident in our ability to innovate and build strong brands that complement our current portfolio and help support our mission of long-term profitable growth. I will now pass over to Dave for a more detailed overview of our business. Before I review our business results, I'll start with the usual disclaimer. Now, let me share a deeper look at our business performance. Our depletions growth in the fourth quarter was the result of increases in our Truly Hard Seltzer and Twisted Tea brands, partly offset by decreases in our Samuel Adams, Angry Orchard and Dogfish Head brands. The growth of the Truly brand, led by Truly Lemonade Hard Seltzer, continues to be very strong and well ahead of hard seltzer category growth. Truly Lemonade was the most incremental new product in the entire beer industry in measured off-premise channels in 2020. The Truly brand overall generated triple-digit volume growth in 2020 and grew its velocity and its market share sequentially despite other national, regional and local hard seltzer brands entering the category. In 2020, Truly increased its market share in measured off-premise channels from 22 points to 26 points and was the only national hard seltzer, not introduced in 2020, to grow share. There remain many opportunities to expand package, channel and geographic distribution and we expect the Truly brand to continue to lead the growth of the business as it has come to stand for a great-tasting, refreshing, pure-play hard seltzer brand. In early 2021, we launched Truly Iced Tea Hard Seltzer and, while it's still in the early stages, we're encouraged by the support our wholesalers have provided, the trial we are generating as a result of the brand's established equity, and the social media response from consumers. We will continue to invest heavily in the broader Truly brand and work to improve our position in the hard seltzer category, as competition continues to increase. Our Twisted Tea brand has benefited greatly from increased at-home consumption and continues to generate accelerating double-digit volume growth, even as new entrants have been introduced and competition has increased. Our Samuel Adams, Angry Orchard and Dogfish Head brands have been most negatively impacted by COVID-19 and the related on-premise closures. For 2021, we plan to build upon our success and work to drive our brands to their full potential, with a particular focus on our Truly and Twisted Tea brands. We are expecting all of our brands to grow in 2021 and for the growth rate of our operating expenses to be below our top line growth rate, delivering leverage to our operating income. During the fourth quarter, as we increased our brand spend, we also made investments in our supply chain to ensure we are prepared for increased competitive activity in the hard seltzer category. We have invested to increase our can and automated variety pack capacity, but these capacity increases keep on getting eclipsed by our depletions growth, resulting in higher than expected usage of third-party breweries. We will continue to take advantage of the fast-growing hard seltzer category and deliver against the increased demand through this combination of internal capacity increases and higher usage of third-party breweries, although meeting these higher volumes through increased usage of third-party breweries has a negative impact on our gross margins. We have begun a comprehensive program to transform our supply chain with the goal of making our integrated supply chain more efficient, reduce costs, increase our flexibility to better react to mix changes, and allow us to scale up more efficiently. We expect to complete this transformation over the next two to three years. While we anticipate the program to start delivering margin improvements in 2021, our gross margins and gross margin expectations will continue to be impacted negatively until the volume growth stabilizes. While we are in a very competitive business, we are optimistic for continued growth of our current brand portfolio and innovations and we remain prepared to forsake short-term earnings as we invest to sustain long-term profitable growth, in line with the opportunities that we see. Based on information in hand, year-to-date depletions reported to the company through the 6 weeks ended February 6, 2021 are estimated to increase approximately 53% from the comparable weeks in 2020. Now, Frank will provide the financial details. For the fourth quarter, the reported net income of $32.8 million or $2.64 per diluted share, an increase of $1.52 per diluted share or 136% from the fourth quarter of last year. This increase was primarily due to increased net revenue, partially offset by lower gross margins and higher operating expenses. Shipment volume was approximately 1.94 million barrels, a 54% increase from the fourth quarter of 2019. Shipments for the quarter increased at a higher rate than depletions and resulted in higher distributor inventory as of December 26, 2020, when compared to December 28, 2019. The Company believes distributor inventory as of December 26, 2020 averaged approximately 5 weeks on hand and was at an appropriate level, based on supply chain capacity constraints and inventory requirements to support the forecasted growth. Our fourth quarter 2020 gross margin of 46.9% decreased from the 47.4% margin realized in the fourth quarter of last year, primarily as a result of higher processing costs due to increased production at third party breweries, partially offset by cost saving initiatives at Company-owned breweries and price increases. Fourth quarter advertising, promotional and selling expenses increased $48.1 million from the fourth quarter of 2019, primarily due to increased investments in media and production, increased salaries and benefits costs and increased freight to distributors because of higher volumes. General and administrative expenses were flat from the fourth quarter of 2019, primarily due to non-recurring Dogfish Head transaction-related expenses of $2.1 million incurred in the comparable 13-week period of 2019, partially offset by increases in salaries and benefits costs. Our full-year net income per diluted share of $15.53 increased $6.37 or 70% compared to the prior year. This increase was primarily due to increased revenue, partially offset by lower gross margins and increases in advertising, promotional and selling expenses. Our full-year 2020 shipment volume was approximately 7.37 million barrels, a 38.8% increase from the prior year. Looking forward to 2021. Based on information of which we are currently aware, we are targeting 2021 earnings per diluted share of between $20 and $24, but actual results could vary significantly from this target. This projection excludes the impact of ASU 2016-09. We are currently planning increases in shipments and depletions of between 35% and 45%. We're targeting national price increases per barrel of between 1% and 2%. Full year 2021 gross margins are currently expected to be between 45% and 47%, a decrease from the previously communicated estimate of between 46% and 48%. We plan increased investments in advertising promotional and selling expenses of between $120 million and $140 million for the full year 2021, a decrease from the previously communicated estimate of between $130 million and $150 million, not including any increases in freight costs for the shipment of products to our distributors. We estimate our full-year 2021 effective tax rate to be approximately 26.5%, excluding the impact of ASU 2016-09. This effective tax rate also excludes any potential future changes to current federal income tax rates and regulations. We are not able to provide forward guidance on the impact of ASU 2016-09 will have on our 2021 financial statements and full-year effective tax rate, as this will mainly depend upon unpredictable future events including the timing and value realized upon exercise of stock options versus the fair value of those options were granted. We are continuing to evaluate 2021 capital expenditures and currently estimate investments of between $300 million and $400 million. The capital will be mostly spent on continued investments in capacity and efficiency improvements at our breweries. Similar to the last couple of calls, Dave will be the MC on our side and coordinate the answers when needed since we are in different locations.

compname reports q4 earnings per share $2.64. q4 earnings per share $2.64.

With me on the call today are Chris Brickman, President and Chief Executive Officer; and Marlo Cormier, Chief Financial Officer. I want to start by commending our teams for their commitment to the business during these remarkable times. We're all pleased to see store closures and restrictions, easing in certain markets, but the global environment remains dynamic and requires that we continue to operate with added discipline, and agility. Our teams continue to perform at a high level in Q2, and most importantly, they remain focused on serving our customers. Due to their hard work and dedication, we achieve net sales growth of 6% despite store closures in many of our international territories, and the shutdown of California salons in January. Traffic and sales trends, started picking up in the latter part of February, and accelerated more substantially in the final month of the quarter, resulting in stronger than expected performance across the P&L. There are a few key factors that drove the topline. First, we saw increased demand and Sally US from Improving consumer confidence, and government stimulus actions. Next, reopenings in Canada, and easing restrictions in the US, drove stronger than expected pent up demand, as both Sally and BSG. As you may have seen the Province of Ontario subsequently shut down again in early April, but this is a Q3 dynamic. Lastly, in the final month of the quarter, we saw a significant shift in trend at BSG as salons were permitted to operate at higher capacity levels. At the same time, we continue to see a trend toward more independent stylists, as they are displaced from their salons and moved to booth or sweet rental, these stylists are increasingly likely to become BSG store customers. The combination of strong consumer demand and the effectiveness of our promotional strategy, allowed us to maintain solid gross margins above our target level of 50% in the quarter. Additionally, expense favorability also helped drive strong earnings and cash flow. We ended Q2 with a strong liquidity position, including $408 million of cash on the balance sheet, and zero balance outstanding our $600 million ABL credit facility. Subsequent to the close of the quarter, we fully repaid the outstanding balance on our 5.5% senior notes due 2023, making further progress toward our goal of bringing our leverage ratio close to 2.5 times by the end of fiscal 2021. Looking at the business by category. During the quarter, we saw ongoing strength in hair color, including vivid. Color increased 27% and vivid colors grew by 53% at Sally US and Canada versus the prior year. Then it continued to be an important driver and represented 27% of our total color sales for Sally US and Canada in the quarter. In addition, BSG also saw strengthen in the color category, which was up 17% versus the prior year. Other categories also performed well, with nails up 20% and hair care up 9% at Sally US and Canada, and hair care up 16% at BSG. Notably, as the quarter progressed, we saw a pickup at Sally in going out core categories such as styling and tools, which really speaks to the improving consumer confidence and vaccine optimism that was building. Our e-commerce business was also an important growth driver, delivering of sales increase up 56% versus a year ago. Looking at our expanded digital capabilities, we're really starting to see our investments bear fruit this year. We're currently offering multiple fulfillment options, including buy online pickup in store, ship from store and curbside pickup at Sally Beauty and same day delivery and curbside pickup at our BSG stores. For the second quarter, approximately 40% of our e-commerce sales for Sally US and Canada were fulfilled by our stores, which speaks to the value of our large store portfolio when combined with our enhanced digital capabilities. To that end, we are closely monitoring customer behavior and evaluating key learnings across all of our fulfillment options. At the same time, we are mindful of macro factors such as wage inflation and balancing that with the need to maintain highly productive store economics. In the coming months, we will be testing a small number of store closures to analyze sales transfer and purchasing patterns, which will help inform our future plans for the portfolio. The initial test will consist of approximately 90 stores, roughly 70 Sally Beauty and 20 BSG locations, and will be spread across the country to provide us with a range of learnings in various markets. Our teams remain focused on the three major priorities for fiscal 2021 that we outlined on our last earnings call. As a reminder, those include the following. We expect to substantially complete the remaining elements of our transformation. We expect to be leveraging all of our new capabilities and tools in service of our core mission to recruit and retain color customers, and we expect to bring our debt leverage ratio closer to our target of 2.5 times. In support of these priorities, we are working on four key initiatives. First, I'll talk about our expanded delivery service model. We are pleased to see adoption rates rising on our most profitable fulfillment option, focus, which accounted for 20% of Sally US and Canada's total e-commerce sales during Q2, up from 11% in the prior quarter. Ship from store represented an additional 20% of Sally US and Canada's total e-commerce sales for the quarter. Next month we will begin offering highly competitive same-day delivery times for both our Sally and BSG customers. Our Sally customers will be able to get product to their front-door in as little as three hours, and our Salon Pros will have the ability to receive product within two hours. We believe that BSG has a unique competitive advantage and its ability to provide this high value options to its pro customers based on its nationwide store footprint. In the second half, we'll be adding another convenience option for our BSG customers with the rollout of BOPIS, which is currently slated to commence in the June timeframe. A second initiative we've been focused on is the replatforming of the BSG digital storefront, which I'm pleased to tell you is on schedule to be completed this month. This new more robust platform will be a game changer in terms of how we recruit and engage with our stylists. Equally important, we are now able to offer our stylists new value-added features like product reorders, bulk orders and navigation enhancements that ultimately improve efficiency and strengthen the profitability of their businesses. A third and important area of focus is loyalty and CRM. As you may recall, we relaunched our Sally Beauty rewards loyalty program just over two years ago, and BSG just launched its first loyalty program last fall with our private label rewards credit card. As we've layered on the private label reward card, and added CRM capabilities and tools we are really poised to increase customer interaction along the entire purchasing journey, and ultimately drive incremental sales. In Q2 purchases from our loyalty members at Sally US and Canada exceeded 72% of sales total sales and BSG US surpassed 7% of total sales. The fourth key initiative for fiscal 2021 is continuing the rollout of JDA, which represents an important step in our multi-year transformation journey. We continue to expand the operations and functionality of our North Texas distribution center, and remain on track to bring JDA to the majority of our remaining VCs, by the end of the calendar year. At the core of all of our strategic initiatives is our mission to be the leader in color with an underlying focus on customer centricity. To that end, we are currently executing a full reset of our color offerings in all Sally US stores that will be completed in May. This initiative, which really puts color at the heart of every Sally location, included the relocation of all hair color, including visits to the front of the stores. We also brought a new brands and skews added eight feet to the color aisle, and dedicated four feet specifically to lightning and blonding, which has become a high volume category over the past year. We designed the new layout to create a better experience for our color customers. Looking at the second half of fiscal 2021, we believe the business is well-positioned, especially within the context of an improving external environment. Consumer demand for our core categories is robust, both the Sally Beauty and BSG segments are strengthening as consumer confidence improves, our gross margins remain strong and our teams are executing well against our key initiatives. That said, our expectations are somewhat tempered by ongoing store closures in international markets and Salon capacity restrictions in the US. Notwithstanding any incremental disruptions from the pandemic, we are expecting Q3 net sales growth in the high double digits, primarily reflecting the easy comparisons to last year when we experienced broad based store in salon closures, more specifics on this shortly from Marlo. Before turning the call to Marlo, I would like to briefly touch on our ESG initiatives. First and foremost, we recognize the importance of our social and corporate responsibilities, ESG issues, and the essential role they play in our long term performance and value creation. Our strategy is focused on five key areas, where we believe we can have a meaningful impact, our employees, diversity and inclusion, energy in the environment, product development and sourcing and data protection and security. We're pleased to deliver strong results across the P&L during our second quarter. The outperformance on the topline primarily reflects the combination of improving consumer optimism, easing restrictions in the US, including California salon reopenings during the latter half of the quarter, and US government stimulus actions. Net sales were up 6.3% versus prior year. And same store sales increased 6.5%. Similar to last quarter, in our open locations, traffic decreased versus prior year, while other key measures increased, including units per transaction, average unit retail and average ticket. Our global e-commerce business remains strong with consolidated sales up 56% on a year over year basis. We're pleased to see the investments we've made our digital capabilities continue to bear fruit, particularly as our team work to deploy and scale our new fulfillment options and enhance tools. From a gross profit perspective, we continue to deliver margins in line with our 50% plus target levels. Second quarter gross margin came in at 50.4%, up 110 basis points to last year. Adjusted Gross margin was 51.2% and excludes a $7 million, writedown of PPE inventory. For perspective, when the pandemic hit in early 2020, w took immediate steps to build a position in PP inventory to ensure we could protect our associates, assist our salon professionals to help them safely open their businesses and serve our retail customers and communities who came to us for in demand items like masks, gloves, and sanitizers. As pandemic headwinds began to abate, we are taking steps to bring our PPE levels in line with anticipated demand. In addition to the $7 million writedown, we also made the decision to donate approximately $31 million of PPE inventory that will be disseminated to organizations in need during the second half of fiscal 2021. This portion has been expensed in SG&A, and accrued as a liability on the balance sheet. Turning to Q2 expenses. SG&A expense totaled $391 million. That includes the PPE donation of $31.2 million, partially offset by $2.2 million of Canadian wage and rent subsidy credits. On an adjusted basis, SG&A decreased by approximately $6 million, reflecting lower advertising and field labor costs, and our focus on expense control while pandemic headwinds persist. As a percentage of sales, adjusted SG&A improved by 320 basis points, coming in at 39.1%. In the second half of the year, we expect SG&A dollars to increase versus prior year, reflecting a combination of wage inflation and incremental spend on marketing and IT, as well as the test compares to last year's furloughs and rent abatement. Turning to earnings are strong performance on the top line flowed through to the bottom line. In Q2, adjusted operating margin expanded by 510 basis points to 12.1%. Adjusted EBITDA increased 55% to $141 million, and adjusted diluted earnings per share more than doubled to $0.57. Moving to segment results at Sally Beauty same store sales increased 4.9%. Consumer optimism strengthened and government stimulus took effect in the US, we saw pickup and sales during the latter part of the quarter. The combination of strong sales and gross margin expansion drove a significant increase in segment operating margin, which expanded 750 basis points to 18.4%. We also delivered strong e-commerce sales at Sally, up 46% versus a year ago. In our BSG segment, same store sales increased 9.9%, reflecting a strong rebound as restrictions ease coupled with higher operating capacity in salon and the reopening of California salons in February. E-commerce remained strong posting growth at 68% on a year-over-year basis. Excluding the write down of PPE inventory, gross margin was approximately flat to last year, and operating margin expanded 80 basis points to 12.5%. Looking at the balance sheet and cash flow. We ended the quarter with $408 million of cash on the balance sheet and a zero balance on our $600 million revolving line of credit. Inventory at quarter in totaled $950 million, essentially flat to last year, inclusive of the $31 million in PPE inventory that we expect to donate by fiscal year end. Looking at the balance of the year, we expect to close this fiscal year with inventory in the low 900. As a reminder, we exited fiscal 2020 with inventory at sub-optimal levels and successfully rebuilt our position in the first half of this year. We generated strong cash flow from operations of $93 million in Q2 and capital expenditures totaled $12 million, putting free cash flow at $81 million. At the end of the quarter, our net debt leverage ratio stood at 2.34. For comparison purposes, the leverage ratio that we often say, as defined in our loan agreements, where the impact of cash on hand is capped at $100 million for net debt calculation purposes was 2.95. Given our strong liquidity position, subsequent to the end of the quarter we fully repaid the outstanding balance of $197 million on our 5.5% unsecured notes. We expect to continue utilizing excess cash to deleverage the balance sheet, with the goal of bringing our leverage ratio closer to 2.5 times this year. We expect the business to generate strong cash flow from operations of more than $100 million in the second half of this fiscal year. Based on the timing of working capital requirements around inventory receipts, we anticipate the Q3 operating cash flow will approximately -- be approximately flat the prior year. We are maintaining our focus on liquidity and will continue to balance that with strategic growth investments in debt pay down in the near term. Importantly, as the macro environment stabilizes, we will evaluate optimal paths for returning value to shareholders. Looking at the second half of the year, we expect the environment to remain dynamic with restrictions and closures continuing to be fluid. In the third quarter, we are up again, particularly, easy comparison. Keep in mind that net sales were down 28% in Q3 of last year, which reflected significant pandemic impacts in store closures globally. Against that comparison and as Chris previously stated, assuming no incremental pandemic disruptions. We expect net sales growth of 35% to 40% in Q3 of this year, reflecting strengthening consumer demand in the US, partially offset by ongoing choppiness from pandemic headwinds in international markets. Looking at the fourth quarter comparisons normalized substantially. For perspective in Q4 of 2020, net sales were down less than 1%, as restrictions lifted in store and salon reopenings took hold. In Q4 of this year, we anticipate that net sales will be approximately flat compared to the prior year. For context, we view net sales as the best measure of our performance in the pandemic environment, and anticipate that we'll return to providing same-store sales guidance when macro conditions stabilize. We feel good about our positioning and our ability to continue navigating from both an operational and financial perspective.

compname reports q2 adjusted earnings per share $0.57. q2 adjusted earnings per share $0.57. q2 same store sales rose 6.5 percent. qtrly consolidated same store sales increased 6.5%.

With me on the call today are Denise Paulonis, our new President and Chief Executive Officer and Marlo Cormier, Chief Financial Officer. I'm thrilled to be here with a little over a month under my belt and I'm looking forward to meeting and talking to our analysts and shareholders in the coming months. Having served in the Sally Beauty board since 2018, I'm fortunate to be bringing the first hand perspective and a deep working knowledge of the business on day one. I see a significant opportunity to utilize my leadership skills and retail and finance background to drive the business into a new era of profitable growth, capitalizing on all the new capabilities enabled by the transformation of the business over the past four years. Virtually every aspect of the company's infrastructure has been retooled across technology, marketing, merchandising, supply chain, HR, finance, and talent, creating a robust platform from which we will grow. I'm incredibly proud of our exceptional team who took on this challenge and helped us evolve into a modern dynamic omnichannel beauty retailer that is now set up for long-term success. Before talking a bit more about our future, let me share a few highlights from last year. In fiscal 2021 full year net sales grew 10%, gross margins exceeded 50% and adjusted earnings per share was up over 97%. Additionally, we generated strong cash flow from operations of $382 million. We delivered consistent performance throughout the year and concluded fiscal 2021 with fourth quarter results ahead of expectations, reflecting strong operational execution. We're particularly pleased to see ongoing momentum and consistency across the business despite the various impact of the pandemic. As we embark on our new fiscal year, our mission to recruit and retain color customers remains a core component of our roadmap and continued tailwinds around self-expression through hair, product sustainability and innovation and the growing number of independent stylists continue to reinforce the strength of our color and care business. Putting the customer first and enhancing their experience with us is critical to our success. We're continuing to prioritize the customer through personalization, inspiration, education and training. We're also focused on creating the easiest shopping experience for our customers through our robust omnichannel platform and multiple fulfillment options our customers can get product, how they want it and when they want it, faster than ever before. Against that backdrop, we'll be focusing on four strategic growth pillars to drive the top line in fiscal 2022. Leveraging our digital platform, driving loyalty and personalization, delivering product innovation and advancing our supply chain. First, I'll talk about digital. As we increasingly become the unrivaled forced for color inspiration, education and training, our goal is to create an easy, reliable omnichannel platform for our DIY enthusiasts and stylists. At BSG, we completed a critical set of strategic initiatives in fiscal 2021 that positioned us to become the go-to-platform for stylists. We redesigned the CosmoProf website, introduced new value-added services around ordering and rolled out focus into our delivery. In addition, we'll be connecting our store network to the CosmoProf app this month to further enhance focus into our delivery. In short, our BSG stylists can now access everything sold by CosmoProf on their phone and within two hours. Bringing together all these initiatives, truly positions BSG as a compelling resource for the stylist community, providing them with the tools they need to run their businesses most efficiently and profitably. At Sally, we've seen a positive customer response to our expanded fulfillment model and we're continuing to gain traction across BOPIS, ship from store and rapid two-hour delivery. In our most recent quarter, Sally U.S. and Canada stores fulfilled 34% of e-commerce sales as BOPIS fulfilled the 34% of e-commerce sales, as BOPIS comprised 22% and ship from store accounted for 8%. Rapid two-hour delivery was launched in the middle of the quarter and represented 4% of Sally U.S. and Canada E-commerce sales. Additionally, the adoption of these new fulfillment options exhibits our power of scaling our new tools and capabilities to meet the strong desire our customers have for this incredible convenience. We're also laser focused on improving in stocks across our store and DC network through our new JDA platform. So our customers are able to access our inventory. However, they choose to shop and get most products in just two to three hours. As we continue to scale and optimize a full suite of omnichannel services for both our Sally and BSG customers, we believe e-commerce can reach 15% or more of sales in the coming years. In fiscal 2021, global e-commerce sales penetration was just over 7%. Importantly, we know that an omnichannel customer at Sally U.S. and Canada spends approximately 75% to 80% more with us annually than a brick and mortar customer. So this is not just a sales channel shift, it is a tremendous opportunity for growth. Moving now to our second growth pillar: loyalty and personalization, which [Technical Issues] directly to our digital strategy. As many of you know, the rise of personalization has changed the table stakes in retail. With our rapidly growing loyalty program and a new push toward personalization, we have a significant opportunity to drive and increase customer engagement in sales. At Sally U.S. and Canada, approximately 74% of our fourth quarter sales came from our loyalty program. At BSG, because stylist have to register a shop with us, we have data on 100% of our customers. Additionally, approximately 8% of our BSG's sales in the quarter came from our Rewards Credit Card that was launched about a year ago. These are remarkable numbers and we've only scratched the surface in leveraging this asset. In fiscal 2022, we'll be utilizing data science to engage our customers with inspiration, education and personalized offers at every touch point. At Sally, this includes recommendations on product usage, reminders to replenish on time and incorporating DIY an educational component at key moments in their journey. At BSG, this mean showcasing new product arrivals, reminding stylist to restock their backbar and notifications to replenish key styles products. We believe these actions will drive higher customer lifetime value by minimizing attrition, growing spend per transaction and increasing purchase frequency. Fiscal 2022 will also see us investing further in digital marketing and social media campaigns to drive traffic and sales. Our current marketing campaign YOU by Sally continues to generate a tremendous amount of attention from customers and the trade. Celebrating the transformative power of hair color, the campaign has received extensive coverage from Beauty editors and generated millions of views on social media. Our third growth pillar is product innovation. Fiscal 2022 will be highlighted by a big infusion of innovation across Sally and BSG and we'll be driving a large part of that ourselves. The pipeline of new products is robust and includes our own and third-party brands across multiple categories. We will continue to emphasize and support sustainable and clean products, which are increasingly being selected and commanding a premium from customers. Importantly, we believe our authority in color and care provides a logical path and powerful platform for standing up new brands that go beyond our four walls. The first initiative is our new exclusive brand line of vivid colors of Sally called Strawberry Leopard launched to positive response in October, this is a useful Gen Z focused brand that speaks to our ability to increasingly attract younger consumers through value of self-expression. Concurrently with the launch, we created an individual digital platform for Strawberry Leopard that immersed the consumers in the brand ethos, enables a direct shopping experience. As the brand gains velocity, we expect to unlock potential opportunities for expansion into additional distribution channels, including math, beauty and third party e-commerce. The innovation pipeline at BSG is equally exciting, starting with Olaplex's new toning shampoo that just launched in September. Olaplex is a great example of a high-profile brand that continues to innovate and remains a key partner to us. Looking ahead, we're continuing to focus on being at the forefront of innovation with new product and brand launches to excite the consumer planned for 2022 and beyond. Turning now to our fourth growth pillar, another critical element of our focus on putting the customer first is supercharging our supply chain to ensure that we are in stock in color and care every time. A great deal of the heavy lifting has been done and we're now executing the final phase of JDA implementation. The system is up and running in all BSG's locations and the majority of our Sally stores. We're currently rolling out JDA to our remaining locations and fully integrating with our North Texas, DC. Once completed, we'll have a highly automated integrated network with the best-in-class capabilities across inventory forecasting, localized assortment, pricing and promotions and in stock. We believe that our initiatives underneath four growth pillars will allow us to drive top line growth of 3% to 4% and generate strong operating cash flows this year. This reflects our ability to maintain strong gross margins, while mitigating inflationary pressures through careful cost controls, pricing levers and store optimization. To that end, our 90-store optimization pilot remains in progress. We are continuing to gather and analyze data from the sample and I'm pleased to note that we are significantly exceeding our sales transfer targets. In fiscal 2022, we expect to launch a multi-year program designed to maximize the value of our large store portfolio, while offsetting inflationary headwinds. By rationalizing the fleet, we can improve productivity and profitability, while delivering a convenient omnichannel experience that benefits our customers. We're entering fiscal 2022 with solid infrastructure, a well-defined roadmap for growth and favorable industry dynamics that support the significant opportunity in front of us. In the coming months, I look forward to working with the team to build out additional growth opportunities that will fuel our business and create meaningful shareholder value in 2023 and beyond. We're pleased to conclude the year with strong fourth quarter performance, which exceeded the expectations we provided on our last earnings call and reflect strong consumer demand coming out of the pandemic. Topline growth, solid gross margins and careful cost control, drove strong earnings and cash flow. Net sales increased 3.4% and same-store sales rose 2.1% reflecting strong consumer demand with only some minor impact from pandemic related restrictions in Europe. Fourth quarter traffic and conversion trends remain consistent with what we've experienced throughout the pandemic. Traffic was down, but units per transaction, average unit retail and average ticket all increased versus prior year. Basically, customers are still shopping less frequently, but are buying more when they transact with us. Global e-commerce sales were $71 million, representing 7.1% of total net sales as compared to $63 million in the prior year. The year-over-year increase reflects ongoing strength as we continue to scale our digital capabilities and implement our strategic initiatives around fulfillment and customer engagement. Looking at gross profit, we achieved fourth quarter gross margin of 50.6%, reflecting our ability to maintain solid performance above our 50% target level. On a year-over-year basis, gross margin deleveraged by 50 basis points, reflecting a higher mix of BSG sales, which carried a lower margin profile in the quarter. Moving to operating expense, fourth quarter SG&A totaled $387 million, up 5% versus a year ago, primarily reflecting higher labor costs and planned increases in marketing spend. Looking at the new fiscal year, we anticipate that SG&A dollars will increase and rate will be up slightly on a year-over-year basis. Our expectation takes into account increased labor and freight costs, increased expense planned in our international markets related to a full reopening in 2022, as well as investments across our growth pillars that Denise discussed earlier. We believe our store optimization program will serve as an important offset to wage inflation beginning in the latter part of 2022 and then more significantly in 2023. Turning now to earnings. We delivered strong profitability in Q4. Adjusted operating margin came in at 11.7%, adjusted EBITDA margin was 14.5% and adjusted diluted earnings per share increased to $0.64. Looking at segment results. At Sally Beauty, we saw strong consumer demand in the U.S. Same-store sales increased 2.3% and e-commerce sales totaled $29 million for the quarter. For Sally U.S. and Canada, the color category increased 4%, while vivid colors grew 5%, representing 28% of our total color sales as comparisons normalized to prior year. Other categories also performed well. Styling tools increased by 31% and textured hair was up 16%. Gross margin declined slightly at Sally, which reflected strong product margins, offset by higher distribution and freight costs. Segment operating margin increased to 18.1% compared to 18% in the prior year. In the BSG segment, same-store sales increased 1.7% as salons returned to more normalized capacity levels in virtually all of our U.S. markets. E-commerce sales totaled $42 million for the quarter. The color category grew 9%, hair care was up 5% driven by Olaplex and styling tools increased 9%. Gross margin and profitability at BSG reflected same dynamics we saw in Q3. Specifically, we're experiencing higher sales from our larger volume, full service customers coming out of the pandemic and those customers tend to be lower margin. Segment operating margin was down slightly versus prior year at 13.3%. Moving to the balance sheet and cash flow. We ended fiscal 2021 in strong financial condition. For the full fiscal year, we generated $308 million of free cash flow and retired approximately $420 million of debt. We ended the quarter with $401 million of cash and cash equivalents and a zero balance outstanding under our asset-based revolving line of credit. Inventories at September 30th totaled $871 million, up 7% versus a year ago as we reinvested in our inventory levels coming out of the disruptions from the pandemic. In addition, we were pleased that our strong performance over the course of fiscal 2021 helped drive our net debt leverage ratio down to 1.69 times at the end of September. Now turning to our full year fiscal 2022 guidance. We are confident about how the business is positioned heading into 2022 and we expect to achieve the following: net sales growth in the range of 3% to 4%, net store count to decrease by approximately 1% to 2% driven primarily by Sally U.S. stores as we continue to optimize our portfolio. Gross margin expansion of 40 to 60 basis points, GAAP operating margin growth of 90 to 110 basis points, and adjusted operating margin approximately flat to 2021. The business has demonstrated remarkable resilience during the past 18 plus months and our teams have done a terrific job of navigating the dynamic macro environment. As the business continues to strengthen and generate strong cash flows, you can expect to see us prioritize strategic growth investments, as well as return cash to shareholders through the restart of our share buyback program. As a reminder, during the fourth quarter, our Board of Directors approved an extension of our share repurchase program through September of 2025, which currently has over $700 million remaining under the authorization. Additionally, we are evaluating opportunities to further optimize our capital structure, which could result in incremental interest expense savings. Finally, I want to call out a housekeeping item related to disclosure. Beginning in fiscal 2022, we will be replacing our same-store sales metric with comparable sales, which will include sales from our full-service divisions and franchise operations including any related e-commerce sales. In 2022, for each quarter. We will disclose both current and prior-year comparable sales under the new definition. Now, I'll ask the operator to open the call for Q&A.

q4 adjusted earnings per share $0.64. q4 sales rose 3.4 percent to $990 million. sees fy sales up 3 to 4 percent. qtrly same store sales increase of 2.1%. beginning in fiscal 2022, company will be replacing same store sales metric with comparable sales. sees fy 2022 gross margin expected to expand by 40 to 60 basis points compared to prior year.

Those factors are described in Sally Beauty Holdings' filings with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K. With me on the call today are Chris Brickman, President and Chief Executive Officer; Aaron Alt, President of Sally Beauty Supply and Chief Financial Officer; and Marlo Cormier, Senior Vice President of Finance and Chief Accounting Officer. Chris will start by offering some thoughts on our very respectable fourth quarter. He will also touch on our thoughts about the current economic environment and our outlook on fiscal year 2021 and finish with our focus on our key focus and investments in fiscal year 2021 as we move toward the completion of our transformation plan. Aaron will then discuss our fourth quarter and full-year financial results, touch on our cash liquidity and also provide some perspective on fiscal year 2021. Your efforts have turned us into an agile operator with real strength in both digital and physical retail. And you have set us up well for the future. I could not be more proud of our team and what they accomplished in spite of the countless challenges we experienced in fiscal year 2020. During our last earnings call, we discussed the nimbleness and agility displayed by our teams and associates during the third quarter. As our business responded to store closures and consumer uncertainty, our our teams quickly pivoted to launch new e-commerce capabilities and service models. In June, we saw strong sales as a majority of our stores reopened. As we moved into July and the fourth quarter, we continued to see strong sales with the business normalizing. Of course, the environment continued to evolve around us as exemplified by California shutting down salons in many counties for parts of July and August. 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. Here are some of the key highlights regarding our fourth quarter. Our Sally Beauty retail business in the U.S. and Canada delivered same-store sales growth of 3.7% for the quarter. We saw continued strength in our core category of hair color, where we continue to gain share in the retail and pro channels. 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 continue to see solid stream and growth in our global e-commerce business. We delivered the highest gross margin in SBH history, driven primarily by the U.S. and Canadian retail business and our strategy of Fewer, Deeper, Bigger promotions. We grew adjusted earnings per share over the prior year by 9%. We ended the quarter with less debt and a strong balance sheet. And we continued our focus on cost controls, cash management and liquidity, and generated over $131 million in free cash flow. Operationally, we also continue to invest in our business and launch new programs. 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 launched the second addition of Cultivate, which offers financial support, product distribution and mentorship for female-owned beauty brands. We executed a number of small acquisitions on the BSG side, gaining brand distribution rights, a small number of stores and new customers. We expanded our Ship-From-Store capabilities to 2,400 stores in the U.S. and nine provinces in Canada. And we successfully placed our new North Texas distribution center into service in August. Now, let's turn to our thoughts on the current economic environment and our outlook for next year. Looking ahead to fiscal 2021, we will have to remain agile as our consumers continue to deal with the impacts of COVID-19. While our business is certainly defensive and more resilient than many retail peers, we expect an increased level of volatility, particularly in the first half of the year. Regardless of COVID-19, we remain confident in the direction we are headed, the investments we have made in our transformation plan over the past few years, and the resiliency of our categories. As we stated on our last earnings call, we feel we are well-positioned to handle the uncertainty of the near term due to three key factors. First, our businesses are on trend. The Sally Beauty business is the industry leader of professional color for home use, and is perfectly aligned with the increasing DIY trends. Our customers can find all of their needed solutions or products for hair, nail and skin either online or in our stores. Additionally, they can find How-To content on our digital sites, starting with Hair Color 101 all the way through more complex application techniques. Alternatively a consumer can talk to a Sally associate at a store, who has been trained in hair color. We plan to retain and build on the new customers who have discovered us as they experiment with DIY hair and nails and try out new exciting colors. And we are ready to serve our traditional customers with more convenient service options as they become increasingly comfortable with returning to stores over time. On the BSG side, while the salon business seems to be recovering more slowly, we are the industry leader in stylists' safety with our largest assortment of PPE including hand sanitizer, barbicide, gloves, masks and case. In addition, we have added more convenience -- we have more convenient store locations, more DSC's that are now digitally enabled and many of which are now trained and certified in salon safety protocols. And now we offer improved delivery service options to ensure we are convenient and safe for our professional customers. We will continue to build on this leadership position. Second, we have the ability to operate effectively in an environment that will continue to be impacted by COVID-19. Customers and team members can feel confident in our stores, which have instituted the protocols required to operate safely. We have proven that we can rapidly evolve our service model to provide our customers with more choice on how they interact with us and more access to our inventory chainwide. Third, we are sitting in an excellent liquidity position, with strong cash flow and cash on the balance sheet. Aaron will discuss this more during his remarks. Finally, I will spend a few minutes talking about the key projects and investments that we will focus on in fiscal year 2021. First, we will continue our digital transformation by optimizing the guest experience and service offerings such as 'Buy Online / Pickup In-Store', which is rolling out across all Sally stores in the U.S. in November, and optimizing the impact of digital to the income statement by addressing operating changes, which will lead to cost savings. 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. Second, now that we have completed the rollout of our Private Label Rewards Credit Card Program in the U.S., we will be intensely focused on growing and optimizing the portfolio and program. On the Sally side, the program will enhance the existing Sally Beauty Rewards loyalty program by adding additional reward points to the customer spend. Additionally, the Sally e-commerce site is already set up to provide instant credit for online applications and accessibility to shop with their card online. 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. Through benchmark data, we know that private label credit card holders typically spend more per transaction, as well as having better retention rates. Therefore, our focus will be on driving activations while increasing basket size and share of wallet. This also translates to the P&L benefits related to interchange relief from traditional bank cards, as well as adding royalties from new account openings. 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. In fiscal year 2021, we have committed to growing these successful partnerships and expanding our offering to additional black-owned brands across both the Sally Beauty and BSG businesses. Fourth, now that we have JDA, our new merchandising and supply chain platform, and our new North Texas distribution center, both up and live on a limited scale, our focus will be on expanding both of these initiatives. Once fully rolled out, JDA will improve product assortment by store location, improve out-of-stocks and greatly improve visibility and forecasting of inventory. Once fully functional, the North Texas DC will be our first distribution center that services all channels for both business segments and will deliver the benefits of increased speed to market, lower operating costs and will reduce the demand on our other DCs in our network. In summary, while we continue to operate in an uncertain environment, at Sally Beauty Holdings, we believe we are a stronger company with even greater ability to deliver long term sustainable growth, driven by our enhanced capabilities and how we connect with our customers digitally, through our loyalty and credit card programs and expanded differentiated offerings, our enhanced infrastructure and omnichannel capabilities, and increased talent base, all of which are supported by a strong balance sheet and cash flow. The bottom line, the challenges we faced in 2020 has simply made us better. They pushed us to accelerate our digital transformation to simplify and focus our business strategy and build a team that is prepared to win in a transformed retail environment. I am delighted to be here to talk about the great work that the Sally Beauty Pro-Duo and Beauty Systems Group teams accomplished during the fourth quarter. Consolidated same-store sales went up. 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. During the quarter, brick-and-mortar traffic was choppy and was down from the prior year due to the lingering impact of COVID-19, but average basket remained up due to an increase in units per transactions and an increase in average unit retail, which happened alongside an increase in units in our core differentiated category of hair color. As expected, customers are generally making fewer trips but buying more when they do come in and shop. In contrast, we did see increased traffic to our digital channels. At the start of the quarter, even with the vast majority of our store network back open, our global e-commerce business grew rapidly. 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%. Last quarter, we mentioned that during the peak of the COVID crisis, we had new e-commerce customers in our online U.S. retail channel that had signed up for our Sally Beauty Rewards loyalty program. 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. Let's turn now to gross margin, which is a simple story. It went up dramatically. 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. The improvement was expected and is a signal of our increasing retail fundamental capabilities. It was driven primarily by better coordination and execution of fewer promotions across all businesses and an intentional positive mix shift toward higher margin categories like hair color in the quarter, but partially offset by a reduction in vendor allowances from fewer promotions and reduced inventory purchases. 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. Both GAAP and adjusted diluted earnings per share in the fourth quarter went up. 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. Stronger gross margin rate, lower income tax expense and a lower average share count all contributed, partially offset by modestly higher selling, general and administrative expenses, and an increase in interest expense. 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%. Now, turning to segment performance. 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. Now turning to our Beauty Systems Group segment. Total segment same-store sales increased by 0.6% for the quarter. While we had higher expectations for the quarter from Beauty Systems Group, there were a number of headwinds impacting comp sales. 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. We also tested a variety of techniques in stores, which will set us up for success in subsequent quarters. Net sales for the segment were $381 million in the quarter, a decrease of 3.3% compared to the prior year. The decline in non-comp sales was driven by COVID-19. COVID-19 and the necessary social distancing guidelines forced the cancellation of a significant trade show at which BSG sells goods. It also constrained the reopening and velocity of customer appointments at our national chain customers. We also saw the creation of full service back orders during the quarter resulting from some inventory gaps. 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. Let's talk about cash. We generated a lot of it. 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. Investments in the quarter included further work on our digital capabilities and e-commerce platforms, and optimizing our supply chain through our JDA and North Texas distribution center efforts. Free cash flow was $131 million in the quarter, which represented a 67% increase as compared to the prior year. I should note that we saw a significant cash benefit from a reduction in inventory, which carried over from Q3 into Q4. The combination of our efforts to manage cash, purposeful SKU rationalization as part of our merchandising transformation, and some soft supplier disruption put us in a position where our inventory levels came down too far, and we are acting during Q1 to fix that. More on that to come. 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. Turning to our consolidated full year financial results. 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. Let's turn now to observations on fiscal year 2021. Whether it is lingering COVID-19 concerns or how long it will take the economy to fully recover or possible follow on from the November elections, fiscal year 2021 will certainly present its share of twists and turns. We can already see this in the current operational status of the fleet. All stores in the United States and Canada are currently operating. However, stores in the few metropolitan areas, like El Paso, can only operate as curbside locations. Additionally, we are seeing occupancy restrictions in parts of New Mexico and Colorado. Europe has been more aggressive. We have seen stores in Belgium, Northern Ireland and Wales closed due to local restrictions, only to reopen shortly afterwards. 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. The majority of the closures currently are in England and France. The result is we are seeing e-commerce accelerate again in Europe, similar to what we saw back in the third quarter. Given all of this, we are not able to provide detailed financial guidance for fiscal 2021. However, the company can offer a couple of broad observations. Without adjusting for the impact of COVID restrictions, which are impossible to predict, the company would expect that sales in 2021 should be higher than 2019, even with the fewer stores in the fleet. While we can't predict COVID, we are far better prepared than we were in fiscal '19 or even in March of fiscal 2020. Regarding our store fleet, the company has revised its short-term plans with respect to new stores. The company now expects that net store count will be approximately flat for the year, with a small number of new stores being added to the footprint, which will be offset by a similar number of store closures as we optimize core locations. The company will, however, take advantage of the current leasing environment and relocate approximately 70 stores. Remodels were mostly put on hold for the time being. We expect our digital business to continue to grow and are continuing to invest in that area. The company expects continued strength in gross margins, particularly in the first three quarters compared to last year, and particularly in Sally Beauty U.S. and Canada. The company expects SG&A investments will, on a full-year basis, rise to reflect our continued investments, particularly in labor and e-commerce distribution. However, the company is working hard on offsets to those investments and use it as an area of opportunity with more work for us to do. The company expects to continue to generate strong cash flow, so also expect to be back-end loaded, given the company's significant upfront investment in inventory that I referenced earlier. Finally, let's address capital allocation. Our priorities are relatively unchanged. The company will invest in this business. As I noted earlier in Q1, this will take a formidable investing in new inventory. We will also continue our business transformation, though, with some efforts to scale back to reflect the uncertain environment until a vaccine is available. We will continue to hold significant cash on our balance sheet while we monitor how COVID-19 plays out over the first and second quarters. 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. That all being said, as we look at the stock price versus our underlying business fundamentals, we may smartly consider share repurchases from time to time. We have not repurchased any shares so far this fiscal year.

q4 gaap earnings per share $0.62. q4 adjusted earnings per share $0.63. will not be providing formal guidance at this time. will provide perspective on outlook for coming quarters during earnings conference call. qtrly positive same store sales growth of 1.3% for enterprise; up 3.7% for sally beauty u.s. and canada. $445 million of debt reduction in quarter, with ample liquidity remaining. to rollout 'buy online / pickup in-store' at all sally u.s. retail stores in november. expanding 'buy online / pickup in-store' to beauty systems group stores in second half of fiscal year 2021.

This is Debbie Young, director of investor relations for SCI. With that out of the way, I'll now pass it on to our chairman and CEO, Tom Ryan. We hope you and your families are staying safe and healthy these days. It is your courage and commitment that positioned us for the results we posted this quarter. You have continued to stay relentlessly focused on what we do best, helping our client families gain closure and healing through the process of breathing, remembrance, and celebration. I want to assure you that your health, safety, and well-being continue to be a top priority for us. Now on the quarter. For the first quarter, we generated adjusted earnings per share of $1.32, compared to $0.43 in the prior year for an extraordinary increase of more than 200%. This strong earnings-per-share growth was driven by two factors: significant funeral volume increases, which we anticipated based upon December volume increases of 31%, and a substantial increase in cemetery property sales, particularly preneed cemetery property sales, which exceeded our expectations and significantly enhanced our earnings per share results for the first quarter of 2021. At a high level, both the funeral and cemetery segments in the quarter had margin improvement of over 1,000 basis points, driven by double-digit top-line percentage growth, coupled with a more efficient cost structure. We also benefited from a lower share count and lower interest expense, which was more than offset by a higher adjusted tax rate. Let's take a look at the funeral results for the quarter. Total comparable funeral revenues grew $109 million or almost 22% over the same period last year. These favorable results were driven by our core funeral businesses as well as SCI Direct. Core funeral revenues grew $95 million due to a 22% increase in the number of core funeral services performed and a 0.5% improvement in the core funeral sales average. In the first three months of the year, we continue to see a meaningful increase in the number of services performed due to COVID-19, with January and February showing very strong year-over-year growth and then tapering off somewhat in March as comparisons to the prior year became more challenging and as the effects of the vaccine rollout began to impact this year. For over a year now, our frontline team has been serving record numbers of client families and continues to do so with compassion, commitment, professionalism, and agility. We were very pleased with the core funeral sales average growth of 0.5% in the quarter. This was achieved despite a modest 20 basis point increase in the core cremation rate which is well below our typical annual expectation of 100 to 150 basis points. In March, the funeral average rose an impressive 8% when compared to the prior year and more than offset the more difficult pre-pandemic comps in January and February. Additionally, when you look at the core average in absolute dollars in the month of March, it is pretty much in line with pre-COVID levels. I believe this is a testament to the value our families continue to place on remembrance and celebration, which is very encouraging to us. As restrictions are easing in both our client families and their guest comfort levels, about larger gatherings improved due in part to the vaccine rollout, we should expect that improvement to continue. Preneed funeral sales production for the first quarter grew an impressive $35.3 million or 16%, which exceeded our expectations. Both our core funeral homes and SCI direct businesses posted strong increases after a challenging 2020. The growth predominantly came in the month of March. And we did have an easier comp in the back half of March, but we also saw significant growth in leads from digital and direct mail, increased location traffic due to a higher at-need services performed and from the gradual return of in-person seminars. From a profit perspective, funeral gross profit increased $85 million and the gross profit percentage increased more than 1,000 basis points to 31%, realizing a 78% incremental margin on our revenue growth. We continue to benefit from growth in our higher incremental margin core business, coupled with the efficiencies that have favorably impacted our cost structure. Now shifting to cemetery. Like I referenced earlier in the quarterly overview, we experienced significant growth in cemetery revenues in the back half of 2020 in anticipated carrying momentum into the first quarter of 2021. But our cemetery performance this quarter even exceeded our loyalty expectations. Comparable cemetery revenue increased almost $161 million or 54% in the first quarter. In terms of breakdown, at-need cemetery revenue accounted for $40 million or about 25% of the growth, driven by more interments performed due in part to the effects of COVID-19. And recognized preneed revenues accounted for about $120 million or the remaining 75% of the revenue growth due to higher-than-expected preneed cemetery sales production during the quarter. Preneed cemetery sales production grew an astounding $130 million or 67% in the first quarter. The majority of this growth where about $85 million was driven by an increase in core velocity or the number of preneed contracts sold. The remaining growth of about $45 million was about evenly split between increases in large sales activities, as well as a higher quality core average sale. Consumer reception and demand for our products and services remained very strong. We saw significant lead growth this quarter which was the combination of higher traffic from our at-need services and acceleration of leads from multiple lead channels, including digital and traditional lead sources as well as a record impact in certain markets from the Ching Ming holiday that drove elevated preneed cemetery sales from our Asian communities. We also continue to see a more productive and efficient sales force, with better utilization of our customer relationship management system and improved conversion rates from our lead campaigns. Cemetery gross profit in the quarter grew by approximately $111 million. And the gross profit percentage increased more than 1,500 basis points to nearly 41%, realizing a 69% incremental margin. Now I'll speak to our revised outlook and provide a little color. Back in February, recall that we issued adjusted earnings per share guidance of $2.50 to $2.90 per share. We had qualified this guidance and provided a wider range than we have historically as we felt it was difficult to predict the timing and the efficacy of the vaccine rollout [Audio gap] funeral volume comparisons the rest of the year, resulting in down mid-single-digit percentages for the entire 2021 and a favorable remaining nine months of funeral sales average, resulting in the return to 2019 pricing levels, showing low to mid-single-digit percentage growth over 2020 averages. However, based upon our preneed cemetery sales production for the first four months of the year, we are increasing our guidance for the year from a decline in the mid-single digits, to finish the year in a range of flat to potentially low single-digit percentage growth. Primarily, from this preneed cemetery sales production guidance increase, we are adjusting our annual earnings per share guidance to $2.70 to $3, thereby raising our midpoint by $0.15. As we noted in our guidance from last quarter, we still expect future periods of earnings per share and cash flow results to be negatively impacted temporarily by the pull forward of funeral case volumes and at-need cemetery sales into 2020 and early 2021. Still, the efficiencies we have gained by improving processes and leveraging technology have allowed us to produce a more competitive and profitable operating platform. This, combined with the capital structure improvements we have made over the last 15 months, are expected to allow us to produce earnings per share, compounded annual growth returns in the low or even potentially mid-teen percentage range for 2022 and 2023, off of a pre-COVID 2019 earnings per share base of $1.90, even while absorbing these temporary pull forward effects. From there, we anticipate that we will begin to see the impact of baby boomers entering their late 70s and realize the benefits of our investments in technology to stay relevant with the next generation of consumers. These investments will enhance our ability to drive market share, to improve both the physical and digital customer experience, and in a more effective and efficient manner. In closing, I just want to say what an honor it is to work with such a great team and that I am proud to call my SCI family. Your selfless dedication to our families and communities is so appreciated, especially in times like these. We are so proud of all 24,000 of our colleagues that have managed through the challenges of the past year and a half. Looking forward, I remain hopeful as it appears, we finally might be emerging from the worst of this pandemic and soon be able to return to a more normal future. So we generated operating cash flow of nearly $300 million during the quarter, representing an impressive increase of $118 million or 65% over the prior year. Strong preneed cemetery sales, increased number of funeral services performed, as well as increased at-need cemetery interment volume led to the robust growth in operating earnings, which translated to strong operating cash flow results. Cash flow was also affected by cash interests that increased $10 million, predominantly as a result of timing of payments related to the recent debt refinancing transactions, somewhat offset by lower rates on our floating rate debt. Cash taxes also increased $12 million in correlation with the higher earnings. Finally, we experienced a net use of working capital in the quarter, resulting from the tremendous growth in cemetery preneed property sales. While this drove our earnings, these sales are mostly paid for on an installment basis which means that cash will be collected over time, including positively impacting cash for the remainder of this year. We also experienced a timing difference of cash related to an additional payroll that was funded this quarter when compared to the first quarter of last year. So now let us discuss our capital deployment of approximately $270 million during the quarter, covering reinvestment into our businesses, followed by growth capital, opportunistically reducing debt balances, and finally, returning capital to our shareholders. So again, we invested $34 million into our businesses through $24 million of maintenance capital and almost $10 million of cemetery development capital spend. Our cemetery development capital was almost $15 million lower than the prior-year quarter. And it was lower than our expectations, primarily due to extended cold weather in certain areas of the country that delayed several of our cemetery development projects. From a growth capital perspective, we invested about $9 million on growth capital toward the new build and expansion of several funeral homes. These new builds should provide us with great low double-digit percentage returns going forward and expand our footprint into desirable markets. We also deployed almost $6 million toward real estate purchases. We only spent a small amount of acquisition capital during the quarter, which we believe is just timing as we continue to be confident in our targeted deployment range for acquisitions for the full year of $50 million to $100 million. We also paid down our credit facility by a net amount of $80 million during the quarter as cash flow generation during the quarter, as I've said, was very robust. Finally, we deployed over $140 million of capital to shareholders through dividends and share repurchases. Dividend payments in the first quarter totaled about $36 million or $0.21 per share. So let's shift into a few comments on our outlook and our financial position. Earlier, Tom, as you heard, highlighted the earnings strength of our business with a strong start to this year, driving the need for us to adjust our guidance after the first quarter. Our cash flow outlook has similarly changed. So we're adjusting our cash flow guidance up from $600 million to $700 million to a revised guidance range of $650 million to $725 million. This represents an increase of about $40 million at the midpoint of our guidance. Higher cash earnings, as well as some positive working capital expectations that I just mentioned, are expected to be somewhat offset by higher cash taxes. And on that note, we're now expecting $180 million of cash taxes in 2021 or an additional $20 million over the $160 million we guided to in February, driven by the increase in earnings. We also continue to expect the full-year normalized effective tax rate between 24% and 25%. So, therefore, our expectations and guidance do not contain any federal statutory tax rate changes at this time. Our expectations for maintenance and cemetery development capital spending in 2021 remain unchanged at $235 million to $255 million. Additionally, we continue planning for the deployment of $50 million to $100 million toward acquisitions and around $50 million in new funeral home construction projects. Supporting these capital deployment expectations is our strong balance sheet. We continue to be very well positioned with a significant amount of liquidity of roughly $765 million at the end of the quarter, consisting of approximately $245 million of cash on hand, plus just over $520 million available on our long-term bank credit facility. On the continued growth in EBITDA, our leverage at the end of the quarter fell below three times to 2.61 times. This leverage level was somewhat less than our expectations as EBITDA came in stronger than expected during the first quarter. This calculation now reflects a full four quarters of strong pandemic impacts to our EBITDA. So as we look beyond the impacts of this pandemic, we expect to settle into our targeted leverage range of three and a half to four times. So in closing, we're off to a great start to 2021. Our teams across the company continue to deliver great care to our client families and communities we serve in this challenging environment. We began 2021 on very firm footing, reporting even stronger earnings and cash flow results than initially expected. I am pleased that we're able to increase our 2021 guidance. And looking forward, I'm also impressed with how much we have learned and adapted during these trying times as an organization. We have evolved to become a much stronger organization. And while there are some expected headwinds in the near future, as we look forward to '22 and '23, I expect our improved foundation will continue to add even more value going forward than we initially expected. Finally, we're most honored to be able to help our client families and our communities during their most difficult days in these very unusual times and deliver peace of mind to those who wish to develop plans for their future.

q1 adjusted earnings per share $1.32. sees 2021 diluted earnings per share excluding special items $2.70-$3.00.

This is Debbie Young. With that out of the way, I'll now pass it on to Tom Ryan, our chairman and CEO. As a broad overall comment, let me just say that 2021 has certainly exceeded our expectations. What we have been able to accomplish in the last two years has been remarkable. Our services and care for our communities has been needed more than ever. And in these unprecedented times, our team has risen to the challenge with grace and unwavering commitment. I am so proud of our team and continue to be amazed by their dedication and support. Now for an overview of the third quarter. Let's start by taking you back to our mindset the last time we spoke in mid-July. We were seeing a declining trend of COVID deaths that began during the second quarter. This downward trend, coupled with the IHME's outlook, was reflected in our earnings guidance for the back half of 2021. Shortly thereafter came the impact of the Delta variant, and we saw an unexpected surge in COVID and non-COVID mortality that began in August and has continued into October. Therefore, we have seen funeral volumes and cemetery revenues that have exceeded our previous expectations. Now diving into the highlights of the third quarter. We generated adjusted earnings per share of $1.16, a 47% increase over the prior-year quarter. The primary driver of the earnings-per-share growth was high funeral results driven by increases in both volume and sales average. The cemetery segment also delivered strong revenue growth, which was generated by both atneed cemetery revenue growth and continued strength in preneed cemetery property sales production. At a high level, adjusted operating income grew $74 million and contributed over 85% of the increase in adjusted earnings per share. The remaining increase was primarily the result of fewer shares outstanding. Now let's take a deeper look into the funeral results for the quarter. Overall, the funeral segment performed better than we expected. Total comparable funeral revenues grew $70 million or 14%, primarily due to improvements in the sales average as well as continued strong volumes from the Delta variant COVID impact and from excess non-COVID deaths, which tended to skew younger and more pronounced in smaller markets. Recall that third quarter 2020 volumes were up about 19% year over year, and we grew another of 3% on top of that this third quarter, which we had not anticipated in our guidance from the second quarter call. Core funeral revenues grew by $48 million led by an impressive 8% increase in the funeral sales average and a 3% increase in funeral volume. The sales average continued to climb sequentially and is up about 4% over the 2019 pre-COVID third quarter. Our percentage of family selecting services has essentially returned to pre-COVID levels. And the funeral sales average is also being positively impacted by an uptick in ancillary revenues such as flowers, catering, and by a lower discount rate. The favorable impact of these positive trends has been slightly reduced by a modest 60-basis-point increase in the core cremation rate. Preneed funeral sales production for the third quarter grew $50 million or nearly 22%, which exceeded our expectations. Both our core funeral home and SCI Direct businesses posted strong production increases against an easier comparison quarter in 2020. The higher insurance production component also generated a $7.5 million increase in general agency revenue. We continued to see growth in marketing leads from both digital and seminars that have not only very successfully generated preneed sales production, but have done it at a lower cost. On the core funeral home sales production front, we saw average revenue per contract increase by almost 8% to over $6,000 as an increasing percentage of our preneed customers are choosing some form of service. From a profit perspective, funeral gross profit increased $40 million and the gross profit percentage grew 400 basis points to 28%. The incremental margin percentage generated from the core revenue increase was slightly reduced by an increase in lower-margin ancillary revenues and elevated staffing and service levels as compared to the somewhat more limited service structure we operated under during the third quarter of 2020. Additionally, we experienced elevated fuel and energy-related costs. Now shifting to cemetery. Comparable cemetery revenue increased more than $42 million or 11% in the third quarter. In terms of the breakdown, atneed cemetery revenue generated $20 million or 47% of the growth, driven primarily this quarter by a higher quality core average sale, an impressive increase in atneed large sales; and by a modest increase in contract velocity. Recognized preneed revenues generated about $16 million or 37% of the revenue growth, primarily due to higher-than-expected preneed cemetery property sales production as well as higher recognized preneed merchandise and service revenue. Additionally, we achieved a $7 million increase in perpetual care trust fund income primarily due to the timing of capital gains. Preneed cemetery sales production grew $25 million or 8% in the third quarter, which exceeded our expectations. The higher-quality core sales average accounted for the majority of the increase, followed by growth in large sale activity. Although we expected a tougher comp on the velocity side, the number of training contracts sold actually grew modestly in the quarter, which also contributed to the increase. As I mentioned in my preneed funeral discussion earlier, we continued to see production growth from our marketing-generated leads program that very successfully generated preneed sales production. Additionally, we are seeing improvements in key sales metrics such as appointment and close rates. Cemetery gross profits in the quarter grew by approximately $28 million, and the gross profit percentage increased 300 basis points to 38%. Similar to the funeral segment, the incremental margin percentage on the revenue increases was slightly reduced by elevated staffing and maintenance costs associated with operating full-service cemeteries as compared to the limited-service structure during the third quarter of 2020. Now let's talk about our revised outlook for 2021. Based upon better-than-expected results in the third quarter, we are again raising our guidance to an earnings per share range of $4.15 to $4.45 for the full year 2021. This increases the midpoint by an additional $0.95 and represents a 33% increase from our 2020 results. This raise in our guidance is primarily due to the earnings per share outperformance delivered in the third quarter. Additionally, we have increased our projected earnings per share for the fourth quarter, primarily due to higher than originally anticipated funeral volumes and higher-than-anticipated atneed cemetery revenues, both being impacted by an increase in Delta variant morbidity and non-COVID excess death. The midpoint of our fourth quarter guidance, $0.89 per share, would still be a decline in earnings per share as compared to the $1.13 earned in the fourth quarter of 2020. Within our funeral segment, we are anticipating a comparable volume decrease in the high single-digit percentage range in the fourth quarter of this year versus a very strong prior-year quarter, which was up over 17%. Meanwhile, we expect the average revenue per case to continue to compare favorably, growing at a mid-single-digit percentage range for the last quarter of the year. Finally, we forecast preneed funeral sales production to grow in the high single-digit percentages for the fourth quarter versus the prior-year quarter. On the cemetery side of the business, we expect atneed cemetery revenues for the fourth quarter to be relatively flat compared to the prior-year quarter. This is comparing against a phenomenal 2020 fourth quarter that delivered a 30% increase in 2019. As far as preneed cemetery sales production goes, we expect a flat to low single-digit percentage increase in the fourth quarter when compared to a very robust fourth quarter 2020, which was up over 16%, culminating in back-to-back years of impressive 20-plus percent growth in 2021 -- I'm sorry, in 2020 and 2021. When looking out over the next couple of years, we expect COVID to have a negative pull-forward effect on revenues and earnings temporarily. Like many other companies, we also expect to experience mild wage and supply chain cost pressures in the near term. Having said all that, this crisis has accelerated the utilization of technologies resulting in enhancements, which improved our effectiveness and resulting cost efficiencies in our field operations, within our sales teams and our support functions. We compound that with improvements in our capital structure through share buybacks and managing our debt maturity profile, and we expect to generate impressive earnings per share compounded annual growth rate both in the next two years and well beyond. To emphasize the strength of our post-COVID operating platform and capital structure, I will again give you an example utilizing the $1.90 in earnings per share we reported in 2019 as our pre-COVID base. In 2022, we expect the impact of COVID to begin to wane, thereby bearing the brunt of the pull-forward effect. Even with funeral volumes down double-digit percentages and now we're thinking roughly 15,000 funeral cases less than we did in 2019, we believe at the midpoint of our model our 2022 earnings per share can reflect a 14% compounded growth rate over the three-year period, resulting in a $2.80 earnings per share for 2022. Beyond 2022, we believe that the pull-forward effects should begin to wane and a trend of year-over-year growth should begin as we approach an aging baby boomer cohort with a leaner and more technologically efficient and effective operating model. We continue to believe that we will see 2023 earnings per share approaching $3.25, which would maintain that 14% earnings per share CAGR over the four-year period. I wish I'd never heard of COVID-19, but it is the reality of our company, country, and world have had to deal with and are dealing. I am so very proud of our team, what they have done in helping our communities while finding a way to make our company an even better one in a post-COVID world, all the while generating such impressive earnings-per-share growth for our stakeholders. I think I'm going to start off the same way Tom just ended with the most important message of the day. The months of August and September were very busy months for us. And I continue to personally be amazed, and I have to say also humbled, at how well our teams are able to take care of our client families and our communities when they need it the most. I want you to know that we appreciate each and every one of you on the Dignity Memorial and SCI team. And then just like Tom did, I'll briefly discuss our '22 and '23 outlook. So let's start with the quarter. Adjusted operating cash flow increased $37 million to $232 million, compared to $195 million in the prior year. So the drivers for this growth were the impacts from the Delta variant that drove unexpected increase in COVID deaths, but we also did see unexpected increase in non-COVID deaths that were impacting both our funeral and our cemetery operations. In addition to the strong adjusted EBITDA growth, which amounted to about $60 million, we also benefited by a decrease in cash tax payments of about $28 million. So remember, in the third quarter of last year, cash taxes were unusually high. We had to pay approximately $50 million of federal and state income taxes that were deferred from the second quarter of 2020. So these positive cash flow items were somewhat offset by a net use of working capital in the quarter, which primarily related to an increase in payroll taxes. And again, we'll have to remember this. Remember, last year, they were able to defer quarterly payroll taxes under the CARES Act, which totaled approximately $42 million for SCI for the full year of 2020. So in this current year quarter, we are required to pay half of that amount or about $21 million. And keep in mind, the remaining half, the other $21 million, will be paid in the fourth quarter of next year of 2022. So during the quarter, we also deployed about $280 million of capital, which is the second-highest quarterly capital deployment that we've seen really in recent history. This capital went to reinvest it in our businesses first, then expanding our footprint and ultimately returning capital to our shareholders. So now in terms of the breakdown. We invested $65 million in our businesses with $40 million of maintenance capital and $25 million of cemetery development capital. Our maintenance capital not only reflects improvements made to our facilities, but also investments in more contemporary customer- and noncustomer-facing technology. For the cemetery development capital spend, we started this quarter making up some ground to our annual target, but continued to experience some construction delays, primarily on the permitting side for some of our larger development projects. But at this point, I still believe we'll end the year with around $100 million of capital development spend. From a growth capital perspective, during the quarter, we invested about $20 million consisting of $10 million to funeral home new-build opportunities, $5 million on business acquisitions as well as $5 million on real estate acquisition. So just touching on that acquisition pipeline for a moment, we're excited as we look at the opportunities we are working on for the remainder of 2021. And by the way, we remain confident that we'll be able to close several transactions during the fourth quarter that I believe will get us to our $50 million to $100 million annual acquisition target that we've been describing during the year. Then, finally, we deployed just under $200 million of capital to shareholders through dividends and share repurchases. The dividend payments in the third quarter totaled just under $40 million and this reflects the 9.5% increase to $0.23 per share per quarter that we announced in August. So shifting to a few comments on our updated outlook. So the guidance went from $775 million to a newly revised annual guidance range of $850 million to $925 million. So when we compare back to 2020, this new midpoint of $888 million represents an increase of about 10% or $83 million over last year. So let's talk about a little color on this $150 million increase. It is primarily driven by an approximate $210 million increase in cash earnings, and these are associated with the $0.95 increase at the midpoint in today's revised earnings per share guidance. And as noted earlier, this increase is primarily due to the outperformance in earnings during the third quarter on increased mortality as well as expected cash flow increases in the fourth quarter on higher funeral volume and atneed cemetery expectations. The increase in cash earnings was partially offset by about $50 million increase in cash taxes and other working capital uses that are expected. So we're now expecting closer to $260 million of cash tax payments in '21 or an additional $50 million over the $210 million that we talked about in August, again, because of these higher expected earnings. So looking forward to 2022 next year, while there's still a lot of variables to try to predict, you should expect our cash flow to decrease in 2022, in line with the earnings expectations that Tom just described as the impact of COVID wanes. However, our expected cash flow decline should be buffered by lower cash taxes on these lower cash earnings. And then looking forward to 2023, we expect to be on an increasing growth trajectory as we approach an aging baby boomer cohort utilizing our services, and again, along with a leaner, more technologically efficient, and effective operating model. So the underlying stability of our cash flows as well as the strong financial position we have gives us the confidence and flexibility to continue being opportunistic in deploying capital to the highest relative return opportunities for many years, at least for the next several years. In closing, we continue to have a solid balance sheet bolstered by a tremendous amount of liquidity, consisting of about $400 million of cash on hand plus about $1 billion available on our long-term bank credit facility. Early in the year, we completed a debt refinancing transaction that not only refinanced the notes that would have been done later this year in '21, but also allowed us to repay the outstanding balance on our revolver, which will provide us with plenty of flexibility to fund a future pipeline of acquisitions or other capital deployment for several years. Additionally, this transaction reduced our interest rate risk as we increased our proportion of fixed rate debt now to just over 80%. On the continued growth in EBITDA, our leverage ratio at the end of the quarter remains below three times. It's actually about 2.4 times. As we have noted in the past, looking beyond the impacts of this pandemic, we continue to expect to naturally lever back up to our targeted leverage range of three and a half to four times net debt-to-EBITDA, and I think this will happen toward the end of 2022. We intend to finish the year strongly and we believe we are very well-positioned for future growth.

q3 adjusted earnings per share $1.16. sees 2021 diluted earnings per share excluding special items $4.15 - $4.45.

This is Debbie Young, director of investor relations at SCI. With that out of the way, I'll now pass it on to our chairman and CEO, Tom Ryan. I'm so very proud of your resolve. You've never wavered from your mission. You've continued to do what we do best, helping our client families gain closure, comfort, and healing through the process of grieving, remembrance, and celebration. And a special shoutout to our frontline teammates, who provide peace of mind to our preneed customers, comfort and support to our grieving families, and to our maintenance teams that make every effort to ensure our locations and parks are world class. Our team gets it. It's the details that matter. Now to the business at hand. Then I will offer some commentary on our 2022 outlook. Keeping in mind, we must be flexible as we navigate the uncertainty of another year impacted by COVID. First, in terms of the full year 2021 results. We ended the year with a strong performance in both our cemetery and funeral segments. For the year, we grew revenue $632 million, or 18%; and adjusted earnings per share to $4.57, or 57% compared to the prior year. While we saw 4% comparable funeral volume growth, even growing over a COVID-impacted 2020, the primary drivers of our revenue was mid-20% growth in both preneed and atneed cemetery revenues, combined with a strong 7% increase in our funeral sales average. Timely, meaningful action in our share repurchase program and debt refinancing also drove healthy increases in our full year 2021 earnings per share. Now, shifting to the fourth quarter. We generated adjusted earnings per share of $1.17, a 4% increase over the prior year quarter and a 95% increase over a pre-pandemic fourth quarter of 2019. Compared to the 2020 fourth quarter, funeral results drove the earnings per share increase as a healthy 8% increase in the funeral sales average offset slightly lower volumes and cost increases associated with staffing and energy. On the cemetery side, profitability was relatively flat as revenue growth from atneed cemetery sales and preneed cemetery sales was offset by lower impact from new construction on cemetery projects and increased costs from staffing and maintenance. Below the line, the benefit of fewer shares outstanding offset higher general and administrative, and interest expense, as well as a higher tax rate. Now, let's take a deeper look into the funeral results for the quarter. Total comparable funeral revenues grew $47 million, or about 9% over the prior year quarter, exceeding our expectations as core revenues, non-funeral revenues from SCI Direct and general agency revenues all saw impressive growth in the fourth. Comparable core funeral revenues were $32 million, led by an impressive 8.4% increase in the comparable funeral sales average, The core sales average continues to climb sequentially and is up about 5% over the 2019 pre-COVID fourth quarter. Our percentage of families selecting to have funerals and celebrations of life has essentially returned to pre-COVID levels, and the funeral sales average is being further positively impacted by an uptick in ancillary revenues, such as flowers and catering. This increase in average was achieved despite a 120-basis-point increase in the core cremation rate. Comparable core funeral volume declined 1.5% compared to the prior year quarter, slightly offsetting the positive impact of the funeral sales average. Keep in mind, the 2020 fourth quarter we were comparing against was acutely impacted by COVID and saw a 17% higher core funeral volume increase over the 2019 fourth quarter. From a profit perspective, general gross profit increased $10 million while the gross profit percentage dropped 60 basis points to 27%. Fixed costs in the funeral segment include salaries, fringe, vehicles, facilities, and general and administrative expenses. In the fourth quarter of 2020, those costs were actually down 2% versus the 2019 fourth quarter even with 17% more volume as the pre-vaccine era of the virus restricted both the consumers and our ability to provide a full service funeral. In the 2021 fourth quarter, these costs increased by 8% compared to the 2020 fourth quarter. So overall, our fixed costs have increased 6% over the two-year period, or let's say, 3% on a compounded annual basis while we are caring for 17% more customers than we did in 2019. So bottom line, I believe we're managing our costs very well against an unusual and difficult 2020 fourth quarter comparison. Preneed funeral sales production for the quarter exceeded our expectations, growing $30 million from nearly 14% over the fourth quarter of 2020. Both our core funeral homes and SCI Direct businesses posted strong production increases against an easier fourth quarter comparison in 2020. Our core preneed funeral average revenue per contract [Inaudible] the backlog now is over $6,300. This is an 8% increase over 2020 and more than $300 higher than our atneed average for the quarter. We continue to see positive momentum in generating significantly more high-quality marketing leads at a lower cost through increased focus on digital leads, as well as more sophisticated data targeting for our direct mail and seminar programs. Now shifting to cemetery. Comparable cemetery revenue increased $21 million, or 5%, in the fourth quarter. In terms of the breakdown, atneed cemetery revenue generated $13.5 million of the growth, driven by a higher quality core average sale and a modest increase in contract velocity. Recognized preneed revenues generated about $8 million of the revenue growth, primarily due to higher recognized preneed merchandise and service growth. So preneed cemetery sales production grew 30 -- $39 million or 13% in the fourth quarter. This growth is on top of a 2020 fourth quarter, which grew by 16% over 2019. A higher core sales average accounted for the majority of the increase. However, we were still able to grow the velocity of contract sold by almost 5%, which accounted for the remainder of the sales production. As I mentioned in my preneed funeral discussion earlier, we continue to see production growth from marketing generated leads program that very successfully led to preneed sales production. Additionally, we're seeing improvements in key sales metrics, such as the number of appointments set and our close rate. I want to take a moment to recognize the tremendous efforts of our entire cemetery sales team. For the full year 2021, they produced $1.3 billion cemetery preneed sales production. This represents a 28% increase over and above the very strong 15% growth in 2020. This could not be accomplished without a tremendous sales organization that is supported by the tireless efforts for cemetery management, administration, and especially our talented grounds maintenance associates that keep our parks beautiful. Cemetery gross profits in the quarter declined slightly by $1 million and the gross profit percentage dropped 200 basis points to 36.8%. Recall that in the prior year quarter, no vaccine exists and we saw fewer visitors to our cemeteries, so labor and maintenance costs were temporarily low. Now, as we normalized staffing levels and make enhancements in our park's appearance, these costs combined with higher selling costs, higher energy costs, reduced margins as compared to the prior year. Now let's shift to a discussion about our outlook for 2022. At the midpoint, this represents a 20% increase from our previously mentioned model midpoint $2.80 in our third quarter conference call. The $3 midpoint reflects a $0.165 compounded annual growth rate over the pre-COVID earnings per share base in 2019 of $1.90, well above our historical guidance range. As you think about the cadence for the year as we compare back to a $4.57 2021, we would expect negative comparisons for each quarter. We should see continued elevated earnings in the first quarter due to COVID as we are continuing to experience increased demand with funeral volume and atneed cemetery sales. As the year goes on, we would anticipate that the COVID impact becomes immaterial and that we should begin to see the pull-forward impact from 2020 and 2021 having a mildly negative effect on funeral volumes and atneed cemetery revenue, thereby making the quarterly comparisons increasingly more difficult. For the year, we believe the favorable COVID impact from the fourth quarter and the pull-forward effect later should effectively offset into an impact that will not be material. So how are we going to grow earnings per share at a 16.5% compounded annual growth rate from the 2019 base? First, we reduce the share count with accelerated share repurchases during the uncertainty of the last two years. The pandemic also forced us to quickly leverage and implement technology in ways that would have taken many years to take hold in an organization of our size. We believe these accelerated changes have made us more productive with our processes, staffing, and other efficiencies. On the sales side, we had to lean on our technological tools to manage, allocate leads, and develop and train our counselors, which has resulted in a much more productive organization. Now, let's discuss some of the segment assumptions. Within our funeral segment, we know we're going to have to transition period where volumes are affected by the pull-forward of services into 2020 and 2021 that I just described. Our expectations for the pull forward continue to diminish as we see a larger number of the younger population being affected by these latest surges in COVID and COVID-related mortality. For funeral volumes, we're anticipating a possible volume decrease in the mid-teen percentage range from 2021, but at levels that are flattish to a pre-COVID 2019 after considering the full-forward impact. Meanwhile, we expect the average revenue per case to continue to compare favorably, growing at a low single digit range. And finally, we forecast preneed funeral sales production to grow in a 3% to 5% range for the year. On the cemetery side of the business, cemetery atneed revenue should correlate strongly with funeral volume so we expect them to also be down in the mid-teen percentage range. We expect preneed cemetery sales production to fare much better as we can drive activity with marketing leads so e expect a decline in the mid to high single digit percentage range when compared to a very robust 2020 and then returning to a more normalized growth in 2023 but on a much higher base. Beyond 2022, as I just mentioned, we believe the pull-forward effects will wane, and the trend of year-over-year growth should begin as we approach this aging baby boomer cohort with a leaner, more technologically efficient, and effective operating model. We continue to believe that after establishing a new base here in 2022, we will return to earnings growth in the 8% to 12% range in 2023. And with demographic tailwinds and the improvements we have made and planned to continue to make to our operating platform, we expect to capture upside opportunities in the years ahead. As we reflect over the past seven or eight quarters during this pandemic, we're so proud of all of our associates, especially those who have been on the frontlines with the families and communities we've had the privilege to serve. We're all hopeful we are closer to the end of this pandemic, which will enable us to return to some form of normalcy for all of us. So with that, I'd now like to transition to walking you through our cash flow results and capital for the quarter and full year of '21 and then provide some comments on our outlook for 2022. So operating cash flow is approximately $190 million in the current quarter, compared to $245 million in the prior year with the primary decline due to an increase in cash tax payments during the quarter of $97 million versus the $36 million in the fourth quarter of last year. Excluding cash taxes in both periods, operating cash flow before taxes increased almost $6 million to $287 million in the fourth quarter, driven by modest increases in earnings and favorable working capital, partially offset by $6 million of higher cash interest payments. So as we step back and look at the full year of 2021, we generated $912 million in adjusted operating cash flow, representing a substantial increase of $108 million or 13% over the prior year. Deducting recurrent capex of $260 million, which again represents maintenance, capex and cemetery development capex, we calculate free cash flow for the full year to be an impressive $652 million in 2021, up $33 million from $619 million in 2020. So capital deployment has really been a highlight all year for us. And the fourth quarter was no exception, deploying nearly $500 million, which is the highest quarterly capital deployment we have seen in recent history. This capital went to reinvesting in our businesses first, expanding our footprint through key acquisitions and new funeral home builds and returning capital to shareholders. Now let's talk about the breakdown. We invested $110 million in our businesses with $65 million of maintenance capital and $45 million of cemetery development capital spend during the fourth quarter. From a growth capital perspective, and as I mentioned on our October call, recall that we were very excited about the acquisition candidates we're working with late in 2021. So I'm happy to report, as you've seen, that those acquisitions closed, bringing the total investments during the quarter to $112 million and again expecting low double digit to mid-teen IRRs on each of these transactions. These businesses added almost $40 million of full year revenues from 28 funeral homes and two cemeteries in Ohio, California, Illinois, Oregon, and Rhode Island. We also deployed about $16 million toward new builds in Texas, Colorado, Washington, and Florida. This brings total 2021 spend on new builds to $43 million with again low double digit to maintain IRRs, which also helped drive additional earnings and cash flow growth for the company. Finally, we deployed $248 million of capital during the quarter to shareholders through dividends and share repurchases and $700 billion for the full year of 2021. For the last two years alone, we meaningfully reduced our outstanding shares by about 10% through timely execution on our repurchasing strategy. Since the inception of our repurchase program, we have now reduced our shares outstanding by just over 50%. So now let's shift to our outlook for '22 in terms of cash flow and capital. As Tom mentioned, at the midpoint of our earnings guidance range of $3, we expect to meaningfully exceed our 8% to 12% earnings growth framework for earnings per share when comparing back to pre-COVID 2019 base of $1.09. So from a cash flow perspective, our 8% to 12% earnings growth framework generally translate historically into about a 4% growth in adjusted cash flow before cash taxes. So adjusting for $150 million of expected cash taxes in '22, our adjusted cash flow from operations before cash taxes is expected to be about an $850 million at the midpoint. This equates to a 6.5% CAGR over our pre-COVID 2019 adjusted cash flow from operations before cash taxes of $700 million, which is similarly in excess of this normalized 4% annual growth that we normally expect. So there are also a couple of items that I'd like to highlight when we think about our adjusting cash flow in 2022. First, we'll be required to pay the remaining half for about $20 million of payroll taxes that were deferred in 2020 as allowed under the CARES Act. And as I just mentioned, cash tax payments in '22 are anticipated to be about $150 million based on the midpoint of our earnings guidance, or $115 million lower than the $265 million of 2021. And from an effective tax rate standpoint, we continue to model in the range of 24% to 25% in 2022. One other topic I'd like to address for 2022 as we look forward for the full year is our corporate G&A expectations. Now historically, we've guided to around $125 million to $130 million of annual recurring corporate general administrative expenses. Recently, we have begun a process to reevaluate our overhead structure with all of the initiatives we currently have underway. As a result of this review that is ongoing, we have identified about $20 million to $25 million of costs, which we believe may be more appropriately characterized as corporate in nature versus field-related expenses that is primarily related to certain technology, risk, and governance areas. Therefore, when you're modeling 2022 at this point, I would expect annual corporate G&A to increase to maybe around $145 million to $150 million per year with the corresponding dollar for dollar decrease in costs and the segment margins. So therefore, with no effect on our bottom line or our cash flows. So looking forward to 2023, we expect to return to a normalized cash flow growth trajectory with an expected 4% growth and adjusted cash flow from operations before cash taxes, which again is in line with our 8% to 12% earnings growth framework per share that we just mentioned. So in terms of capital deployment, moving on to some thoughts in 2022. Our expectations for maintenance and cemetery development capital spending is $270 million to $290 million for the year. At the midpoint, cemetery development capex comprises about $120 million of this amount, and maintenance capex makes up the remaining $160 million. This maintenance capex of $160 million includes about $110 million of normal routine maintenance capital used at our funeral and cemetery operating locations, as well as another $50 million for field and corporate support capital. This $50 million is primarily being deployed toward technology to not only improve the customer experience with ultimately customer-facing technology, but also toward network infrastructure at our operating locations. In addition to these recurring capital expenditures of $280 million at the midpoint, we expect to deploy $50 million to $100 million toward acquisitions, and roughly $50 million more in new funeral home construction opportunities, which together, as I continue to say, drive meaningful after-tax IRRs, well in excess of our cost of capital. So to summarize this for a capital deployment strategy for 2022, we really expect to continue much of the same as you've seen from us over the past several years. We follow a disciplined and balanced approach, deploying capital to the highest relative value for our shareholders. And of course, this strategy is predicated on our stable free cash flow, our robust liquidity, which is over $1 billion at the end of the year, as well as our favorable debt maturity profile. Lending additional support to this strategy, our leverage ratio at the end of the quarter landed just under 2.6 times from a net debt to EBITDA perspective. And as we've noted in the past, looking beyond the impacts of this pandemic, we continue to expect to increase back to our targeted leverage range of 3.5 to 4 times toward the latter part of this year as we lap stronger EBITDA quarters moving forward. So in closing, after a very strong 2020, we're very pleased that we exceeded those results in 2021. We are most proud of our team has persevered over the last two very challenging years. The compassion and professionalism our teams have demonstrated is truly remarkable and we appreciate each and every one of our team members. As we look forward to another year, I'm very excited about the momentum we have moving forward into 2022.

q4 adjusted earnings per share $1.17. qtrly revenue grew $73 million, or 8%, over prior year quarter to $1,043 million. sees 2022 adjusted earnings per share $2.80 - $3.20.

stepan.com under the Investors section of our website. Although many parts of the world are slowly improving, the Delta Variant continues to spread, and vaccine rates in much of the developed world have stalled. Global supply chain disruptions are impacting commerce and many of the products we all use every day have been impacted. At Stepan, our team continues to navigate through the turbulent environment to help our customers serve the market. Adjusted third quarter net income was $36.4 million flat with prior year. The negative impact of the global supply chain disruptions and inflationary pressures was offset by one-time tax benefits. Year-to-date adjusted net income was $121 million or $5.20 per diluted share. Both adjusted net income and adjusted earnings per share were up 22% versus the first nine months of 2020. Surfactants was also negatively impacted by lower consumer demand for cleaning, disinfection and personal wash products which have dropped since the pandemic peak in 2020. In the third quarter, each of our Company's three global business segments was negatively affected by raw material price inflation and significant supply chain disruptions including raw material shortages and logistics constraints. Surfactant operating income was down 16% largely due to higher North American supply chain cost, driven by inflation, higher planned maintenance costs and the $2.2 million insurance recovery related to the Millsdale plant in 2020. Our Polymer operating income was down 12%, mostly due to the non-recurrence of the insurance recovery and the compensation received from the Chinese government in the third quarter of 2020. Global Polymer sales volume rose 27% and was largely driven by the INVISTA acquisition. Our Specialty Product business rose by 53%, and was mainly due to order timing differences within our food and flavor business. Our Board of Directors declared a quarterly cash dividend on Stepan's common stock $0.335 per share payable on December 15, 2021. With this 9.8% increase, Stepan has now increased and paid its dividend for 54 consecutive years. The Board also authorized the Company to repurchase up to $150 million of its common stock, further demonstrating our commitment to deliver stockholder value through disciplined capital allocation. Our strong balance sheet and cash generation will allow us to invest in our current business and pursue strategic opportunities while we return capital to our stockholders. Luis will now share some details about our third quarter and year-to-date results. Let's start with the Slide 4 to recap the quarter. Adjusted net income for the third quarter of 2021 was $36.4 million or $1.57 per diluted share, basically flat versus the third quarter of 2020. Because adjusted net income is a non-GAAP measure, we provide full reconciliations to the comparable GAAP measures. Specifically, adjustment to reported net income this quarter consists of adjustment for deferred compensation, environmental reserves increase, and minor restructuring expenses. Adjusted net income for the quarter exclude deferred compensation income of $1.1 million or $0.05 per diluted share compared to deferred compensation expense of $2.6 million or $0.11 per diluted share in the same period last year. The deferred compensation numbers represent the net expense related to the Company's deferred compensation plan as well as cash-settled stock appreciation rights for our employees. Because these liabilities change with the movement in the stock price, we exclude these items from our operational discussion. Slide 5 shows the total Company earnings bridge for the third quarter, compared to last year's third quarter, and breaks down the increase in adjusted net income. Because this is net income, the figures noted here are on an after-tax basis. We will cover each segment in more detail. But to summarize, Surfactants and Polymers were down, while Specialty Product was up versus the prior year. Corporate expenses and all others were slightly higher due to inflation. The Company's effective tax rate was 20% for the first nine months of 2021 compared to 24% in the same period last year. This year-over-year decrease was primarily attributable to a favorable tax benefit recognized in the third quarter of 2021. The tax benefits are related to the merger of the Company's three Brazilian entities into a single entity and more favorable R&D tax credits. We expect the full year 2021 effective tax rate to be in the 20% to 22% range. Slide 6, focuses on Surfactants segment results for the quarter. Surfactant net sales were $388 million, a 16% increase versus the prior year. Selling prices were up 20% primarily due to improved product and customer mix as well as the pass-through of higher raw material costs. The effect of foreign currency translation positively impacted sales by 2%. Volume decreased 6% year-over-year. Most of this decrease reflect the lower volume sold into the North America consumer product end market as demand for cleaning, disinfection and personal wash products dropped from the peak of the pandemic. This was partially offset by very strong growth in our functional product end markets and solid growth in the industrial and institutional cleaning market. Surfactant operating income for the quarter decreased $6.7 million or 16% versus the prior year, primarily due to supply chain disruption impacts and the one-time insurance payment of $2.2 million recognized in the third quarter of 2020. We estimate the supply chain disruption had a negative impact of approximately $4 million during the current quarter. We implemented price increases in October to continue recovering our margins. Latin America operating results were lower due to planned maintenance and expansion activities. Europe results increased slightly due to higher demand in functional products, partially offset by a decrease in consumer products. Now turning to Polymers on Slide 7, net sales were $199 million in the quarter, up 70% from prior year. Selling prices increased 44% primarily due to the pass-through of higher raw material costs. Volume grew 27% in the quarter driven by 33% growth in global rigid polyol. This volume growth is mostly related to the INVISTA acquisition. Global rigid polyol volume excluding INVISTA was flat, driven by supply chain disruptions. Higher demand within the Specialty polyol business also contributed to the volume growth. Polymer operating income decreased $2.6 million or 12%, driven by one-time benefits of $4 million in the third quarter of 2020 and significant supply chain disruptions in the current quarter. We estimate the supply chain disruptions had a negative impact of approximately $3 million during the quarter. North America polyol results decreased due to one-time benefit recognized in the third quarter of 2020 and supply chain disruptions, partially offset by higher volume. In October, we implemented price increases in the market to recover our margins. Europe results increased driven by the INVISTA acquisition. China results decreased due to the one-time benefit recorded in the third quarter of 2020 as well as higher supply chain costs. The Specialty Product net sales were up 15% driven by volume up 9% between quarters. Operating income increased $0.8 million or 53% due to order timing differences within our food and flavor business and improved margins within our MCT product line. Moving on to Slide 8. Our balance sheet remains strong, and we have ample liquidity to invest in the business. Our leverage and interest coverage ratios continues at very healthy levels. We had a strong cash from operations in the first nine months of 2021 which we have used for capital investments, dividends, share buybacks and working capital given the strong sales growth and raw material inflation. We executed a $50 million private placement note at a very attractive and fixed interest rate of around 2%. We will use a new cash to fund our organic and inorganic growth opportunities and for other general corporate purposes. For the full year, capital expenditures are expected to be in the range of $200 million to $220 million. This new estimate includes today's announced alkoxylation investment at our Pasadena, Texas facility. Beginning on Slide 10, Scott will now update you on our 2021 strategic priorities. As we wrap up the first nine months of 2021, we believe our business will remain relatively strong despite the supply chain challenges we and our customers are experiencing. We continue to prioritize the safety and health of our employees as we deliver products that contribute to the fight against COVID-19. Consumer habits have changed and these new behaviors include the higher use of disinfection, cleaning and personal wash products. We believe our Surfactant volumes in the consumer product end market will remain higher versus pre-pandemic levels, however, lower than peak pandemic demand in 2020. We are seeing institutional cleaning and disinfection volumes grow as economies around the world reopen and people demand higher standards for cleaning and disinfection in public settings. Our diversification strategy into functional markets continues to be a key priority for Stepan. During the first nine months of the year, global agricultural volume increased double-digits. High commodity prices for corn and soybeans coupled with higher planted acreage in the 2021 growing season drove the demand for crop protection products in North America. Latin America and Asia sales continue to grow in the post-patent pesticide segment with new products being launched throughout the world. Oilfield volume was up strong double-digits during the first nine months of the year due to higher oil prices and a depressed 2020 base. We remain optimistic about future opportunities in this business as oil prices have recovered to the $80 per barrel level, and we continue to promote our new cost-effective product solutions that improve oilfield operator ROI and protect their wells. We will continue working on improving operational productivity as well as product and customer mix to improve Surfactant operating income and margins. Globally, we are increasing capacity in certain product lines, including biocides and amphoteric to ensure we can meet higher requirements from our customers. As discussed previously, we are increasing North American capability and capacity to produce low 1,4-dioxane sulfates. 1,4-dioxane is the minor byproduct generated in the manufacture of ether sulfate surfactants which are key cleaning and foaming ingredients used in consumer product formulations. Through a combination of process optimization and additional manufacturing equipment, Stepan will be prepared to supply customers ether sulfates that meet the new January 2023 regulatory requirements. This project, along with our announcement today to invest $220 million to build under an EPC contract 75,000 metric tons per year Alkoxylation production facility at our Pasadena, Texas site are the primary drivers of our 2021 capital expenditure forecast of $200 million to $220 million. We are excited about the capability and future growth that these investment projects will deliver to Stepan Company. Tier 2 and Tier 3 customers continue to be a focus of our Surfactant growth strategy. We added 300 new customers during the quarter and approximately 800 customers during the first nine months of the year. We finished our consulting work in our Millsdale plant and are focusing now on executing the recommended changes. We accelerated investments in both expense and capex to improve productivity and to increase capacity. We expect this project and the investment level to continue through the remainder of the year, and we should see benefits including productivity enhancements, increased capacity in several high margin product lines and improved service levels to our customers next year. Polymers had good performance during the first nine months of the year as market demand recovered after a challenging year in 2020 due to COVID restrictions. The business has also benefited from the INVISTA acquisition which closed in January. However, in the third quarter, we saw significant impact to our margins due to raw material availability and cost escalation while orders from customers remained restrained by their own raw material availability and other supply chain issues. For perspective, we had suppliers declare force majeure on critical raw materials, while our customers experienced market shortages on MDI and flame retardants, which are used in their finished foam insulation formulations. We are currently working to recover our margins in the fourth quarter. The long-term prospects for our polyol business remain attractive as energy conservation efforts and more stringent building codes should increase demand. The integration of the business acquired from INVISTA is going well and expect this acquisition to deliver more than $20 million of EBITDA in 2021. Given the strength of our balance sheet, we plan to continue to identify and pursue acquisition opportunities to fill gaps in our portfolio, and to add new platform chemistries aligned with our Company's growth strategy. The Company delivered record first nine month earnings in 2021. Looking forward, we believe our Surfactant volumes in North American consumer product end markets will continue to be challenged by raw material and transportation availability. While we believe, industrial and institutional cleaning volume will grow versus prior year, we do not believe it will compensate for lower consumer consumption of cleaning, disinfection and personal wash products. We believe that the demand for Surfactants in the agricultural and oilfield markets will exceed prior year demand. We believe our Polymer business will deliver growth versus prior year due to the ongoing recovery from pandemic-related delays and our first quarter acquisition of INVISTA's aromatic polyester polyol business. We continue to believe the long-term prospects for rigid polyols remain attractive. We anticipate our Specialty Products business will improve slightly year-over-year. Despite continued raw material sourcing issues, raw material price increases, higher planned maintenance expenses and supply chain challenges, we believe underlying market demand remains strong and we are optimistic about delivering full-year earnings growth this year. Low inventories across the value chain should provide opportunities in 2022. Frank, please review the instructions for the question portion of today's call.

stepan co increases quarterly cash dividend. stepan co - board authorized company to repurchase up to $150 million of its common stock. stepan co - approved an increase of $0.030 per share, or 9.8%, on its quarterly cash dividend to $0.335 per share. compname posts q3 adjusted earnings per share $1.57. q3 adjusted earnings per share $1.57. stepan - surfacant volumes in north american consumer product end markets will continue to be challenged by raw material, transportation availability.

These statements are based solely on information that is now available to us. Additionally, our future performance may differ due to a number of factors. We also discuss financial measures that do not conform to U.S. GAAP. We appreciate your interest in SEE and hope you and your families are staying safe and healthy. We're working through very exciting and challenging times as we transform SEE. We're accelerating our strategy to take us to world-class in everything we do. As you can see on Slide 3, we're in the business to protect, to solve critical packaging challenges and to make our world better than we found it. I'll share our strategy for growth in automation, digital and sustainability within our global markets. Chris will review our financial results and outlook in more detail. I will then end with closing remarks and before opening the call for Q&A. Net sales increased 15% with 9% volume growth, led by strength in Americas, in Europe, Middle East and Africa regions. Adjusted EBITDA increased 1%, and margins were under pressure at 19.8% compared to 22.6% last year. This year, we experienced higher volumes, additional productivity gains and pricing actions against dramatic inflationary cost pressures and supply disruption. Also, relative to last year, we had pandemic-induced surges in essential products and minimized expenses due to lockdowns. On a per-share basis, earnings of $0.79 were up $0.03 compared to last year. We generated free cash flow of $102 million in the first six months of the year, which compared to $129 million in the first half of last year. We are raising our full year sales and adjusted earnings per share outlook and reiterating our prior guidance for adjusted EBITDA and free cash flow. Our SEE Operating Engine is delivering sales growth and productivity gains mitigated the adverse supply environment in the second quarter. This engine, coupled with expected price realization, is enabling us to maintain our adjusted EBITDA guidance for the full year and drive continuous improvement going forward. I want to highlight our SEE operating model on Slide 5, which clearly defines where we're taking SEE in the future and what you should expect us to deliver. Our organic sales target is built up in a historically stable packaging market that grows 1% to 3%. We've been adding to this base with our innovations in automation, digital and sustainability to take us to an organic sales growth target of 3% to 5%. Our operating leverage target is over 30%, which drives adjusted EBITDA growth to 5% to 7%. We're targeting adjusting earnings-per-share growth of greater than 10% and free cash flow conversion of more than 50%. Our SEE operating model delivers significant cash for our disciplined capital allocation. We are fueling growth opportunities with our investments in innovation and capex. Through SEE Ventures investments, we're utilizing our balance sheet to incubate disruptive technologies and new business models to accelerate our future growth. We're also returning value to our shareholders through share repurchase and dividends. We approved a new $1 billion share repurchase program and recently increased our dividend by 25%. Our approach to capital allocation reflects our confidence in our vision, strategy and execution of our SEE Operating Engine. We encourage you to visit our website where you can read about our innovation and customer success stories. We create measurable value for our customers through automated and sustainable solutions that are designed to maximize safety, minimize waste, protect goods and deliver productivity savings. In the second quarter, we had strong growth across our end markets. We are leading a dramatic shift to a touchless, automated environment for all customers, resulting in more than 30% growth in our SEE automation portfolio. We're ahead of our plan to double our equipment business in the next three years. For our food customers, our SEE Automation growth is a result of our integrated touchless systems with our high-performance Cryovac materials. Bookings for AUTOBAG and auto box equipment were up more than 50% in the first half of the year, and we're investing more than $30 million in capacity expansion to help meet the strong demand for our equipment solutions. Our automated solutions address labor shortages, productivity and employee safety. We're at the table with our customers, providing connectivity from our operations to theirs, which is helping all of us exceed our sustainability commitments. Restaurants, sporting events, conferences and other large public menus are cautiously reopening. Our solutions with high exposure to food service returned to growth for the first time since Q1 2020. We are seeing growth in our Cryovac Barrier Bags utilized across all proteins, including cheese and seafood; and Cryovac pouches for soups, sauces, beverages and other liquids. Our industrial markets were up double digits in the Americas, Europe, Middle East and Africa regions compared to last year when there were pandemic-related shutdowns. We continue to capitalize on global e-commerce growth and increased demands for recyclable materials, fiber-based solutions and automated packaging that minimizes waste. In medical, pharma and life sciences, we play a key role in the COVID-19 vaccine distribution benefit from growth in online shipments of medical equipment and pharmaceuticals. Now turning to Slide seven for an update on SEE Automation. In the first half of the year, equipment, systems and service sales were up 26% and accounted for 8% of our net sales. We're on track to achieve approximately $425 million or 12% growth in 2021, of which more than $250 million will come from equipment and systems. Our bookings for automated equipment are strong. We're confident in our ability to exceed $500 million by 2025. When you factor in a 3 times plus solutions multiplier, including growth in parts and service from the installed base and the flow-through of materials, this results in a $5 billion plus potential growth opportunity over the 10-year solutions life cycle. The solutions multiple is why we are so excited about SEE Automation. Sustainability is in everything we do and fueling our growth. We are making significant progress on our 2025 sustainability pledge with nearly 50% of our solutions already designed for recyclability. Our innovation strategy is focused on maintaining the high-quality standards that our customers are accustomed to in food safety, minimizing waste and protecting goods. We are continuously optimizing our high-performance materials and incorporating more recycled and/or renewable content to drive circularity and make sustainability more affordable. We're also collaborating and investing with partners on mechanical and advanced recycling. As part of SEE Ventures, we recently joined the Closed Loop Circulars Plastics Fund. This fund invests in scalable recycling technology, equipment upgrades and infrastructure solutions to advance the recovery of plastics in the U.S. and Canada. You can see a handful of our solutions designed for recyclability on this slide with many more shared on our website. Earlier this year, we established a net-zero carbon emissions goal across our operations by 2040. We're taking many actions to reduce our energy consumption, such as investing in touchless automation, upgrading air compression systems and utilizing LED lighting. We're also investing in renewable energy sources, including solar and wind. Between 2012 and 2020, our greenhouse gas emissions intensity decreased by a remarkable 50%. We'll share more details in our upcoming annual sustainability report that will be available on our website in the early fall. I'll now pass the call to Chris to review our results in more detail. Let's start on Slide nine to review our quarterly net sales growth by segment and by region. In the second quarter, net sales totaled $1.3 billion, up 15% as reported, up 11% in constant dollars. Food was up 6% in constant dollars versus last year, and protective increased 20%. EMEA and the Americas were both up double digits: EMEA up 16%; and the Americas up 13%. APAC was flat versus last year with a modest decline in volumes, offset by favorable price. On Slide 10, you see organic sales volume and pricing trends by segment and by region. In the second quarter, overall volume growth was up 9% on favorable price of 3%. Let's start with volumes. Food volumes were up 4%; with the Americas, up 7%; and EMEA up 2%. This was offset by a 3% decline in APAC, largely related to Australia herd rebuilding. Protective volumes were up 15%; with the Americas, up 13%; and EMEA up 36%, while APAC had a modest decline. Q2 price was favorable 3%. You can see that Protective had 5% in favorable pricing, and Food was 1% due to timing of pricing actions and formula pass-throughs. We have implemented several price increases and expect 2021 price realization to be $275 million. On Slide 11, we present our consolidated sales and adjusted EBITDA walks. Having already discussed sales, let me comment on our adjusted EBITDA performance in Q2. We delivered adjusted EBITDA of $263 million, up 1% compared to last year, and margins of 19.8%, down 280 basis points, reflecting the impact of the current inflationary environment and supply chain disruptions. We are leveraging our higher volumes at 40% as we experienced a more favorable product mix. Despite favorable pricing in the quarter, you can see how higher input costs weighed on our EBITDA performance with an unfavorable price/cost spread of $36 million. Operational costs increased approximately $13 million relative to last year. This increase reflects investments to support growth, inflation on labor and indirect material costs as well as the normalization of spend in the quarter. This was partially offset by $13 million in Reinvent SEE productivity benefits. We expect our price/cost spread to improve sequentially in the third quarter. However, we do not expect to see positive price/cost spread until Q4. Adjusted earnings per share in Q2 was $0.79 compared to $0.76 in Q2 2020. Our adjusted tax rate was 25.6%, reflecting a more favorable mix of foreign earnings. Our weighted average diluted shares outstanding in the quarter were 153 million. We exited the quarter with 150 million shares outstanding. Turning to Slide 12. Here, we provide an update on Reinvent SEE. We have achieved $28 million of benefits in the first half of the year and remain on track to realize approximately $65 million in 2021. Our commercial work stream is accelerating innovation and driving new customer wins in core and adjacent markets. Turning to segment results on Slide 13, starting with Food. In Q2, Food net sales of $737 million were up 6% on a constant dollar basis. Cryovac Barrier Bags and pouches returned to growth, increasing approximately 10% and accounting for nearly 50% of the segment sales. This growth reflects the beginning of food service recovery relative to last year when protein plants and restaurants, sporting events and other large venues were shut down. Sales in case-ready and roll stock retail applications, which accounts for just over 40% of segment sales, were down low single digits as supply disruptions impacted our results. In addition, this is against the backdrop of tough comps given the surge in demand from shutdowns a year ago. Equipment parts and sales -- and service sales, which accounts for 8% of the segment, were up nearly 40% in the quarter. We are experiencing increased demand for our automated solutions as our customers around the world invest in their processing plants to upgrade aged equipment and drive productivity. Adjusted EBITDA in Food of $158 million in Q2 declined 6% compared to last year with margins at 21.5%, down 360 basis points. This decline was related to elevated input costs, supply disruptions and the timing of pricing actions. On Slide 14, we highlight Protective segment results. In constant dollars, net sales increased 20% to $592 million. Industrial was up approximately 30% relative to last year when automobile and general manufacturers were forced to temporarily shut down their operations. Fulfillment, which is largely driven by e-commerce growth, was up approximately 10% on a global basis, led by double-digit growth in automated equipment, inflatable solutions, paper and temperature assurance. We leveraged our broad portfolio and global scale to meet increased demand despite ongoing supply issues, such as industry-related chip shortages out of Asia. The $30 million investments in capacity that Ted referenced earlier will help us meet increased customer demands for automation equipment. As a reminder, approximately 55% of our Protective sales are derived from industrial end markets and the remaining 45% from fulfillment and e-commerce. Adjusted EBITDA of $107 million increased 17% from Q2 with margins at 18.1%, down 100 basis points versus last year. Higher sales and productivity gains helped mitigate higher input and supply disruption costs. Now let's turn to free cash flow on Slide 15. In the first half of 2021, we generated $102 million of free cash flow. Relative to the same period last year, higher earnings and lower restructuring payments were offset by higher employee-related costs and capex investments to support growth and innovation. On Slide 16, we outline our capital allocation strategy. We will maintain a strong balance sheet while driving attractive returns on invested capital and supporting profitable growth initiatives. In addition, we have a healthy acquisition pipeline that aligns with our growth strategy. On this slide, I want to highlight our growth investments. We are focusing our capex on breakthrough processes, automation, digital and sustainability. With SEE Ventures, we have invested approximately $40 million in early stage disruptive technologies and business models that are expected to accelerate our strategy and innovation efforts. As it relates to returning capital to shareholders, in Q2, we were an active buyer of our stock. We repurchased 6.1 million shares for $299 million during the first six months of 2021, reflecting confidence in our vision, strategy and execution. And as Ted noted, today, we announced a new $1 billion share repurchase program, continuing our commitment to return value to shareholders. This new program has no expiration date and replaces the previous authorization. During the second quarter, we also announced an increase to our quarterly cash dividend of 25%. We are raising our net sales guidance, reflecting strong first half sales performance and outlook for the remainder of the year. For net sales, we estimate $5.4 billion to $5.5 billion or 10% to 12% as-reported growth and 8% to 10% in constant dollars compared to our previously provided $5.25 billion to $5.35 billion range. At the midpoint, the $150 million increase in constant dollar sales largely reflects additional pricing. We continue to anticipate adjusted EBITDA to be in the range of $1.12 billion to $1.15 billion. On a reported basis, adjusted EBITDA is expected to grow 7% to 9%. Higher sales are expected to help offset increased material and supply disruption costs. Given the timing of pricing actions, we anticipate a modest sequential improvement in EBITDA in Q3 with a more meaningful improvement in Q4. We are raising our 2021 outlook for adjusted earnings per share to $3.45 to $3.60, and we continue to expect a 45-55 first half, second half percentage split. Our outlook assumes 153 million average shares outstanding, one million reduction from our prior guidance, given share repurchases in the first half, and an adjusted effective tax rate of approximately 26%. And lastly, our free cash flow outlook continues to be $520 million to $570 million. There is no change to our outlook for 2021 capex of approximately $210 million and Reinvent SEE restructuring and associated payments of approximately $40 million. As you can see on the slide, we wanted to provide a few variables as it relates to our 2021 guidance range. The low end of our range would assume the magnitude and duration of material inflation and supply chain headwinds persist longer than anticipated and a slower pace of food service recovery. The high end implies market and geographic share gains; continued strength in automation, industrials, e-commerce and food; and overperformance of our SEE Operating Engine. With that, let me now pass the call back to Ted for closing remarks. We are clearly defining where we are taking SEE in the future and what you should expect us to deliver with our SEE operating model. We differentiate ourselves in the markets we serve with a broad set of innovative packaging solutions, global service scale, entrepreneurship and agility. Our people are working hard to exceed our customers' expectations. This is core to who we are. Our talent is driving our transformation to world-class. We will continue to focus on 0 harm and protecting our people as the pandemic continues. We are reinventing everything we do from how we innovate to how we solve our customers' most critical packaging challenges. Our strategy is working. We are creating sustainable long-term value for our stakeholders in making our world better than we found it. Operator, we would like to begin the Q&A session.

sees fy adjusted earnings per share $3.45 to $3.60. q2 sales $1.3 billion versus refinitiv ibes estimate of $1.28 billion. sees fy sales $5.4 billion to $5.5 billion. q2 adjusted earnings per share $0.79. raising 2021 sales and earnings per share outlook.

Before we begin our call today. These statements are based solely on information that is now available to us. Additionally, our future performance may differ due to a number of factors. We also discuss financial measures that do not conform to US GAAP. We appreciate your interest in SEE and hope you and your families are staying safe and healthy. We're working through very exciting and challenging times as we continue to transform SEE. You can see on Slide 3, our strategy to become a world-class digitally driven company, automating sustainable packaging solutions. I'll share our strategy for growth and automation, digital, and sustainability, within our global core markets. Chris will review our financial results and outlook in more detail. I will end with closing remarks before opening the call for Q&A. Net sales increased 13% in constant dollars with volume growth of 5% and price realization of 8%. Adjusted EBITDA increased 4%, higher volumes and pricing efforts helped mitigate inflationary pressures and supply disruptions, yet our industry-leading margins were still under pressure at 19.2% compared to 21% last year. On a per-share basis, adjusted earnings of $0.86 were up $0.04 compared to last year. We generated free cash flow of $223 million in the first nine months of the year, which compared with $292 million in the first nine months of last year. Our SEE Operating Engine is performing. SEE Touchless Automation & Sustainable Packaging Solutions are generating demand, growth, and delivering productivity savings. I want to highlight our SEE Operating Model on Slide 5, which defines where we're taking SEE and what you should expect us to deliver. Our innovations in Automation, Digital and Sustainability continue to gain momentum and are driving our growth above our traditional packaging markets. We are targeting adjusted earnings-per-share growth of greater than 10% and free cash flow conversion of more than 50%. Our SEE Operating Model generates significant cash from our purpose-driven approach to capital allocation. To fuel our growth, we are increasing our Capex investments for innovation in Touchless Automation. Through SEE Venture's Investments, we're using our balance sheet to incubate disruptive technologies and new business models to accelerate our pace of innovation and speed to market. We continue to return value to our shareholders through share repurchases and dividends. We further strengthened our capital structure with a $600 million new bond issuance in the third quarter. For SEE, this is our first secured, investment-grade bond in the company's history. The proceeds were used to pay down existing debt. We encourage you to visit our website, where you can read about our innovation and customer success stories. We create measurable value for our customers through automated and sustainable solutions that are designed to maximize food safety, minimize waste, protect goods and deliver productivity savings. Sales in our Automation portfolio, which includes equipment, services and spare parts, have increased approximately 20% [Phonetic] year-to-date, accounting for 8% of our total sales. Autobag Systems, our fastest-growing automated solution, with year-to-date sales up more than 25%, and bookings up approximately 50%. For proteins, equipment, spare parts and service, sales are up double digits, year-to-date. Our protein automation pipeline continues to grow across all regions, with major food producers committing to our SEE Touchless Automation future. Our automated equipment in service sales have a strong pull-through for a high-performance sustainable materials. Our unique approach to automation has strengthened, with our digital solutions. Through our SEE Mark Smart Packaging, enabled with our patented digital printing, we are creating Touchless Digital Connectivity from our operations to our customers, and to consumers' homes. This level of connectivity is transformational for our customers. It enables us to be embedded into our customers' operations, where we can drive significant savings to their bottom line. Our customers are buying into our automation future. In addition to growth in automation, the recovery in foodservice and our innovations and fluids are driving increased demand for our high-performance, sustainable Cryovac barrier bags pouches in case-ready applications across all regions. In the quarter, our fastest growing Food Solutions was our Cryovac Pouches, designed for fluids and liquids with double-digit sales growth. We continue to benefit from the industrial recovery and strength automation designed for e-commerce fulfillment. We're seeing significant shift in our fulfillment portfolio toward automation and sustainable solutions. In Industrials, we delivered mid-to-high single-digit volume growth. In Fulfillment, we experienced double-digit volume growth in automation, paper systems, and temperature assurance solutions. Although, we face global supply challenges across our business, our team is doing a nice job of minimizing disruptions and delivering on increased demands. I'd also want to highlight that we recently launched a new innovative BubbleWrap on-demand inflator system, designed for industrial and fulfillment customers. You can see the illustration of this system, on the right side of this Slide. It features smart technology that recognizes the type of film that's loaded and easily switches between material types, whether it's inflatable cushioning, pouches, or air pillows. SEE is becoming an automation company. On Slide 7, you can see how we are making this happen. For the full year, we expect to exceed our $425 million sales target or over 12% growth in Equipment, System and Service. We're confident in our ability to exceed our 2025 target of over $750 million, which is more than $500 million will come from Equipment and Systems. Over the last 12 months, our bookings are up significantly, even though supply disruptions persist. The pandemic accelerated demand for automation. As I noted earlier, we're highlighting the success of our Autobag systems portfolio, with bookings up approximately 50% year-to-date, and more than 60% since the start of the pandemic. The accelerated systems demand will drive up to 7 times, future pull-through for Materials and Services over the equipment lifecycle. We currently are experiencing a significant increase in all Autobag material orders and we're investing in innovation and capacity expansions to meet this increased demand. Our year-over-year bookings growth in Auto box is also notable. Our Touchless Automation value proposition resonates with customers as we're generating significant operational savings and taking our strategic partnerships to the next level. Sustainability is in everything we do and it starts with our purpose-driven culture and values to how we innovate and invest to generate growth. Sustainability is core to our responsible sourcing of raw materials, our carbon footprint, as well as our efforts to advance circularity of packaging materials with our customers and suppliers. You can see on this Slide, our environmental goals and our sustainability pledge. Our long-term targets are ambitious and lead the industry toward a better future. As it relates to climate change, we are doing our part with an ambitious pledge to achieve net-zero carbon emissions across our operations by 2040. We continue to take actions in our own facilities to reduce energy consumption, with incremental investments in Touchless Automation and renewable energy sources. We are making significant progress on our 2025 Sustainability Pledge, with approximately 50% of our solutions already designed for recyclability, which have reached approximately 20% recycled into a renewable content in those solutions. We designed our high-performance materials with recyclability in mind, to make sustainability more affordable, and to create a pathway for a circular economy. You can see on this Slide how Touchless Automation is transforming our operations, our customers' operations, and enabling a circular economy. We're innovating in smart packaging, incorporating digital technology and delivering supply chain efficiency, sustainability, and brand engagement with our customers. We are excited to share that in early October, we published our Global Impact Report that highlights our ESG priorities and commitments, related initiatives, our progress, and performance. We highlight how SEE is shaping the future of the packaging industry and progressing toward our bold environmental targets. I'll now pass the call to Chris to review our results in more detail. Let's start on Slide 9 to review our quarterly net sales growth by segment and by region. In Q3, net sales totaled $1.4 billion, up 14% as reported, up 13% in constant dollars. Food was up 12% in constant dollars versus last year, and Protective increased 13%. The Americas and EMEA were both up double digits, with Americas up 14% and EMEA up 13%. APAC was up 6% versus last year. On Slide 10, you see organic sales volume and pricing trends by segment and by region. In Q3, overall volume growth was up 5%, with favorable price of 8%. Let's start with volumes. Food volumes were up 6% with growth across all regions. Americas up 5%, EMEA 6%, and APAC 7%. Protective volumes were up 4%, led by EMEA with 16% growth, followed by APAC up 4%, and Americas, essentially flat to prior year. Q3 price was favorable 8% with the Protective at 10%, and food at 7%. Formula-based pass-throughs, primarily in Food North America, are now better aligned with input costs. For the full year 2021, we now expect to realize more than $275 million in price, given additional pricing announcements since our last call, as well as timing of formula-based pricing. As we head into 2022, we will be announcing additional price increases, effective December 1, and in response to continued inflationary pressures. This increase will vary based on region and product offering and will average between 5% and 10%. We are engaging directly with our customers to meet increased demand with automation and alternative solutions that drive productivity savings. On Slide 11, we present our consolidated sales and adjusted EBITDA walks. Having already discussed sales, let me comment on our Q3 adjusted EBITDA performance of $271 million, which was up 4% compared to last year. Margins of 19.2% were down 180 basis points. Despite favorable pricing in the quarter, you can see how the inflationary environment and supply challenges weighed on our results with an unfavorable price cost spread of $18 million. Operational cost decreased approximately $3 million relative to last year, with Reinvent SEE productivity gains and a $5 million benefit related to an indirect tax recovery in Brazil. Our SEE Operating Engine is performing with 40% leverage on our higher volumes. In the month of September, price cost spread turned favorable. In Q4, we expect this favorable trend to continue. Adjusted earnings per diluted share in Q3 was $0.86 compared to $0.82 in Q3 2020. Our adjusted tax rate was 24.9% compared to 20.6% in Q3 2020. The prior-year tax rate included a benefit of US GILTI regulations issued in 2020. Our weighted average diluted shares outstanding in the quarter were $151 million. Turning to Slide 12. Here we provide an update on Reinvent SEE, which is now the foundation of our SEE Operating Engine. We have achieved $43 million of benefits in the first nine months of the year, and remain on track to realize approximately $65 million in 2021. Turning to segment results on Slide 13, starting with food. In Q3, food net sales of $797 million were up 12% in constant dollars. Cryovac Barrier Bags and pouches were up for the second consecutive quarter versus last year, and combined, accounted for nearly 50% of the segment sales. Sales in case-ready and roll stock applications were also up as food service recovers and retail demand remained strong. Equipment, Parts and Service sales, which account for 7% of the segment, were up low-single-digits in the quarter. As Ted noted, we are experiencing strong demand in protein automation, and continue to build our pipeline. Adjusted EBITDA of $169 million in Q3 increased 11% compared to last year, with margins at 21.2% and 40 basis points. Higher volumes, favorable pricing, and productivity gains offset elevated costs. On Slide 14, we highlight Protective segment results. In constant dollars, net sales increased 13% to $609 million. Relative to last year, Industrial was up more than 15% and fulfillment up approximately 7%. We faced supply chain disruptions throughout the quarter and leveraged our broad portfolio and global footprint to meet customer demands where possible. As a reminder, approximately 55% of our Protective sales are derived from industrial end markets and the remaining 45% from fulfillment and e-commerce. Adjusted EBITDA of $103 million decreased 5.5% in Q3, with margins at 16.9%, down 350 basis points versus last year. We incurred transitory headwinds, including non-material inflation and labor challenges, which more than offset higher volumes and pricing actions. Let's turn to free cash flow on Slide 15. In the first nine months of 2021, we generated $243 million of free cash flow. Relative to the same period last year, higher earnings and lower restructuring payments were offset by the impact of higher employee-related costs, cash tax payments, and Capex investments to support growth and innovation. On Slide 16, we outline our purpose-driven capital allocation strategy, focused on creating economic value. We maintain a strong balance sheet while driving attractive returns on invested capital and supporting profitable growth initiatives. As Ted mentioned, I want to highlight that during Q3, we executed a $600 million five-year senior secured bond at 1.573%. The proceeds of this offering were used to pay down $425 million senior unsecured notes at 4.875%, due in 2022, and $175 million pre-payable term loan debt. To support our growth initiatives, we are focusing our Capex on Touchless Automation, Digital, and Sustainability. We are expanding our capacity in equipment to align with customer demands and support continued growth. We are investing in smart packaging and digital printing and see opportunities to expand our presence in attractive growth markets and geographies. We are managing our product portfolio with discipline to ensure alignment with our growth strategy. As it relates to returning capital to shareholders, we have repurchased 6.6 million shares, for $329 million year-to-date September, reflecting confidence in our future growth. At quarter-end, we have approximately $970 million remaining under our authorized repurchase program. Our net sales we now estimate are approximately $5.5 billion or up approximately 12% as reported growth to reflect the favorable demand environment and pricing actions. This compares to our previous range of $5.4 billion to $5.5 billion. We expect a favorable currency impact of approximately 1.5%. Given the current environment, we now anticipate adjusted EBITDA in the range of $1.12 billion to $1.4 billion. On a reported basis, adjusted EBITDA is expected to grow 6.5% to 8.5%. This compares to our previous guide of $1.12 billion to $1.5 billion. For adjusted EPS, we expect to be in the range of $3.50 to $3.60, the higher end of our previous guidance. This assumes depreciation and amortization of $230 million and adjusted effective tax rate of approximately 26%, and approximately 152.5 million average shares outstanding. And lastly, our outlook for free cash flow is expected to be in the range of $520 million to $540 million. There is no change to our outlook for 2021 Capex of approximately $210 million, and Reinvent SEE restructuring associated payments of approximately $40 million. For cash taxes, we anticipate approximately $110 million, which is net of a $24 million tax refund associated with the retroactive application of the revised US GILTI regulations. As we close out the year and enter 2022, we are executing on our growth strategy, driving productivity and aligning our business with our SEE Operating Model. With that, let me now pass the call back to Ted for closing remarks. Demonstrating our ability to grow and expand our presence globally, considering the inflationary pressures in global supply disruptions, is a true reflection of the talent we have at SEE. We are differentiating ourselves in the markets we serve with a can-do, get-it-done culture. We're reinventing where we are taking SEE and driving our performance to world-class, where we're [Phonetic] at the table with our customers, solving their most critical packaging challenges with automated and sustainable solutions. Our strategy is working and continues to gain momentum. We are purpose-driven to create long-term value for our stakeholders and making our world better than we found it.

sees fy adjusted earnings per share $3.50 to $3.60. q3 sales rose 14 percent to $1.4 billion. sees fy sales about $5.5 billion. q3 adjusted earnings per share $0.86. sees full year adjusted ebitda to be in range of $1.12 billion to $1.14 billion. sees free cash flow in 2021 to be in range of $520 million to $540 million.

In addition to our results and outlook, Ted will go through a deep dive on SEE Automation. These statements are based solely on information that is now available to us. Additionally, our future performance may differ due to a number of factors. We discuss financial measures that do not conform to U.S. GAAP. Chris and I will discuss our Q4 and year-end results, our 2022 outlook, and we'll be introducing a deep dive into our SEE Automation three-year plan. On Slide 3, you can see our vision: to become a world-class digitally driven company, automating sustainable packaging solutions, and we'll show you how we're getting it done. In 2021, we delivered strong sales and earnings, overcoming dramatic inflationary supply and COVID challenges. Our results are a testament to our culture, people, and powerful SEE operating Engine. We're building a world-class digitally empowered company acting like a start-up to disrupt the markets we serve, our industry, and ourselves. These are exciting times for us. We're taking bold steps investing in our people, operations, and customers to create significant value for our stakeholders. You can see how our SEE operating engine performed in the fourth quarter. Net sales were up 14% to $1.5 billion and adjusted EBITDA was up 18% to $330 million. For the full year, we generated free cash flow of $497 million. As part of our strategic portfolio realignment, we successfully completed the divestiture of Reflectix, a maker of insulated materials for the construction market, and generated additional after-tax proceeds of $65 million. On Slide 5, we're raising our SEE operating model growth goals for sales and adjusted EBITDA by 200 basis points. Our higher above-market growth goals are led by our confidence in our strategy, disruptive innovations, and investments, and our execution across markets and geographies. Through M&A and SEE ventures, we're looking to expand into attractive markets, technologies, and disruptive business models to accelerate our speed to market. Under SEE ventures, we recently completed the acquisition of Foxpak, a pioneer in digital printing. While Chris will give you more detail on our geographic performance, I'll focus on activities in our top markets. In proteins and fluids, we experienced strong growth in automation with equipment, parts, and services, up double digits in the fourth quarter and the year. In 2021, our e-commerce fulfillment portfolio shifted toward automation and sustainable solutions. Sales for Autobag, which is illustrated on this slide, an Auto box, were up double digits in the quarter and the year, reflecting the increased demands for automated solutions from e-commerce and logistics. You can see an example of our Auto Wrap solution on this slide as well, with Continental Tires and our partnership with UPS, we're enabling a fully automated tire packaging and sorting solution that creates an enhanced customer experience. This is creating significant savings for Continental Tires and new business for UPS. Turning to Slide 7, we'll take you through a deep dive on SEE Automation. Our plan is to more than double our automation business to over $1 billion by 2025. Our solutions model starts by identifying savings for our customers and converting those savings into solutions with a faster than three-year payback. Our solutions multiplier, as materials and service flow through the installed base, is key to our growth. We are digitally connecting more than 100,000 installed assets. Our SEE Automation solutions resonate with our customers as we address their needs to reduce labor dependency, build more resilient operations, increase productivity, reduce costs and deliver flawless quality. SEE Automation solutions drive margin expansion for SEE, as compelling customer savings and operational improvements allow for the best solutions at the right price, and we are making them sustainable. We're investing to double our equipment production and service capacity over the next three years to match our ambition. We recognize we have to go faster, and we are relentless in this pursuit. The chart to the left shows how customer savings are behind our growth in automation. The chart to the right illustrates our bookings trends of our fastest-growing automation platforms, giving you transparency into the strength of our business. Solving customer challenges and driving tangible savings are the central pillars of our sustainable competitive advantage, creating an inimitable ecosystem. On Slide 8, we are showcasing our SEE Automation solutions. This is an example of a $7 million automated protein system, with less than a three-year payback, providing a step-change improvement for our customers' operations. We start with the most labor-intensive processes in repacking facilities. SEE Auto Load automates the process of loading the meat in the bag. We're integrating cobots, robots, and other automated systems to increase line speed while producing flawless quality with Autobag and Auto Pack. We continue to innovate in high-performance Cryovac materials, making them more sustainable, recyclable, and effective. Our state-of-the-art vision systems for quality control can see what humans cannot and our artificial intelligence and machine learning continuously makes the process smarter. We use our SEE Mark to validate and certify quality. Our advancements in digital printing will enable customers to improve their operations and at the same time, digitally connect with their consumers. A key point of differentiation for SEE is how we leverage our internal touchless automation capabilities and our OpEx teams to improve customer operations. Our industry-leading experts are working with customers and their facilities to simplify the process, eliminate waste, remove people from harm's way, and then automate, putting in practice the principle of you get what you measure. Let's talk about what automation means for growth. On Slide 9, we use the ways of the SEE Mark to illustrate the value to solutions multiplier. We are changing from our past to being a materials-first to leading with an automation-first solutions model. We start with the value of the initial equipment order equaling 1x. We continue with parts and services being 2x over the equipment life cycle, and the automation and integration opportunities represent 3x as our high-performance materials such as paper and films, along with digital graphics, flow through the system, that takes us well over 10 times the value of the original equipment order. Our strategy is to make sustainability an integral part of our business. We continue to make significant progress on our 2025 sustainability pledge, with approximately 50% of our solutions already designed for recyclability, and we reached approximately 20% recycled and/or renewable content in those solutions. Approximately 15% of our solutions are fiber-based. We designed our high-performance materials with recyclability in mind, to make sustainability more affordable and to create a pathway for circularity. It starts with our touchless operations, where we actively measure every touchpoint from pellet to bag and aggressively work to simplify the process, eliminate waste, and millions of touches. We're investing in automation and robotics to make it happen. We're linking our own automation to our customers' operations and leveraging the same productivity processes we use internally. Our digital initiative is critical to our sustainability and automation efforts. Next quarter, we plan to feature in detail how our proprietary digital printing technology and SEE Mark connect consumers and customers to build brands and close the loop on the circular economy. I'll now pass the call to Chris to review our results in more detail. Let's start on Slide 11 to review our quarterly and year-end net sales growth by segment and by region. In Q4, net sales were up 14% to $1.5 billion. In constant dollars, net sales were up 15%, with 17% growth in food and 13% growth in Protective. The Americas and EMEA were both up double digits, with Americas up 19% and EMEA up 13%, while APAC was up 4% versus last year. In 2021, net sales were up 13% to $5.5 billion. In constant dollars, net sales were up 11%, with 9% growth in food and 15% in Protective. Growth was led by the Americas and EMEA, which were up 13% and 12%, respectively, with APAC up 6% versus last year. On Slide 12, you can see organic sales volume and pricing trends by segment and by region. In Q4, overall volume growth was up 4%, with favorable price of 12%. In 2021, volume growth and favorable price were both 6%. Let's start with volume trends and focus on Q4 performance and 2021 trends. In the quarter, food volumes were up 6%, with growth across all regions. Americas up 5%; EMEA, up 10%; and APAC up 6%. The Protective volumes were up 1% led by EMEA with 7% growth, flat in Americas and APAC declined 4%. We experienced accelerating volume in food in the second half, with higher sales and automation and growth in materials as food service continued to recover and retail demand remains strong. Protective volumes surged in the first half of 2021 on the heels of 2020 industrial shutdowns and growth in fulfillment around the world, particularly in EMEA. We faced tougher comps in the second half of 2021. However, fulfillment automation sales were up and industrial demand was favorable. Starting in Q2 2021, in response to inflationary pressures, we accelerated pricing actions. Q4 price was a favorable 12%, with Protective at 13% and food at 11%. For the full year 2021, we realized nearly $300 million in price, of which more than half was realized in Q4 as a result of timing of pricing actions and formula pass-throughs. Given ongoing inflationary environment, we will be announcing additional price increases with care. These increases will vary based on region and product offering and will average between 5% and 10%. We will work directly with our customers to meet increased demand and help them drive productivity and operational savings. On Slide 13, we present our consolidated sales and adjusted EBITDA walks. Having already discussed sales, let me comment on our Q4 and full year adjusted EBITDA performance. Q4 adjusted EBITDA of $330 million, up 18% compared to last year, with margins of 21.5%, up 70 basis points. Full year adjusted EBITDA of $1.132 billion was up 8%, compared to 2020 with margins of 20.4%, down 100 basis points. Higher volume contributed $23 million to Q4 adjusted EBITDA. Full year volume contributed $109 million to adjusted EBITDA. For the first time since Q3 2020, price/cost spread was favorable in the quarter, contributing $36 million to earnings. In 2021, price/cost spread was unfavorable $37 million. Reinvent SEE benefits totaled $21 million in Q4 and $64 million in 2021. Operating costs include labor and other non-raw material cost inflation of about $20 million in Q4, which compares to $13 million in the same period a year ago and $69 million for the full year, which is up from $52 million in 2020. Adjusted earnings per diluted share in Q4 was $1.12, compared to $0.89 in Q4 2020. In 2021, we delivered adjusted earnings per share of $3.55, compared to $3.19 in 2020, an increase of 11%. Our adjusted tax rate was 26%, compared to 24.5% in 2020. Our weighted average diluted shares outstanding in 2021 were 152 million, compared to 156 million, given we were an active buyer of our stock throughout the year, purchasing 7.9 million shares for $403 million or approximately $51 per share. At year-end 2021, we had $896 million remaining under our authorized repurchase program. Turning to Slide 14. Here, we provide an update on Reinvent SEE. We achieved $64 million of benefits in 2021, bringing the cumulative benefits of our Reinvent SEE program to $354 million. Cash payments associated with Reinvent SEE were $28 million in 2021 and $193 million since the start of the program. To complete this program, we anticipate $20 million to $25 million in cash payments in 2022, half of which is carryover from 2021. We anticipate $60 million of productivity gains in 2022, of which approximately one-third is coming from Reinvent SEE initiatives. The remaining two-thirds is our SEE Operating Engine, which is designed to drive continuous productivity improvements. With that said, inflationary pressures, coupled with costs associated with supply disruptions, are expected to continue. The combination of volume growth, pricing, and SEE operating engine productivity gains are expected to mitigate these headwinds in 2022. Turning to segment results on Slide 15, starting with food. My comments will focus on our Q4 results. In Q4, food net sales of $877 million were up 17% in constant dollars. Volume growth of 6% was led by double-digit growth in automation and strong growth in materials. Adjusted EBITDA of $204 million in Q4 increased to 20% compared to last year, with margins at 23.3%, up 90 basis points. Higher volumes, pricing, and productivity gains offset elevated costs. On Slide 16, we highlight Protective segment results. Net sales increased 14% on an organic basis to $655 million. Volume in the quarter was up 1% as we faced tougher comps and managed through supply disruptions. Adjusted EBITDA of $126 million increased 10% in Q4, with margins at 19.3%, down 40 basis points versus last year. Now let's turn to free cash flow on Slide 17. In 2021, we generated $497 million of free cash flow relative to the same period last year, higher earnings and lower restructuring and interest payments were offset by working capital needs, and incremental capex investments to support strong growth. On Slide 18, we outlined our purpose-driven capital allocation strategy, focused on creating economic value. We maintain a strong balance sheet while driving attractive returns on invested capital and supporting profitable growth initiatives. We are focusing our capex on touchless automation, digital, and sustainability. We are expanding our capacity and equipment to align with customer demand and support continued growth. We are investing in smart packaging in digital printing and see opportunities to expand our presence in attractive growth markets and geographies. We are managing our portfolio with the discipline to ensure alignment with our growth strategy. For net sales, we estimate $5.8 billion to $6 billion, an increase of 5% to 8%. Our organic growth forecast is 7% to 11%, of which at the midpoint assumes approximately 3% in volume and approximately 6% in price. We anticipate adjusted EBITDA to be in the range of $1.2 billion to $1.24 billion. Adjusted EBITDA is expected to grow 6% to 10%, and implies an EBITDA margin of approximately 21%. For adjusted EPS, we expect to be in the range of $3.95 to $4.15. This assumes depreciation and amortization of approximately $245 million, an adjusted effective tax rate of approximately 26%, net interest expense of approximately $155 million, and approximately 150 million shares outstanding. And lastly, our outlook for free cash flow is expected to be in the range of $510 million to $550 million. We are increasing capex to $240 million to $260 million to increase capacity to support growth initiatives. For cash tax payments, we anticipate to pay $205 million to $215 million in 2022, reflecting expected earnings growth, $17 million tax payments on the gain from sale of Reflectix, and approximately $30 million impact related to the R&D provision requiring R&D expenses to be deducted over five years versus the prior immediate expensing allowance. Additionally, as previously disclosed, our 2021 cash tax payments were reduced by approximately $24 million refund associated with the retroactive application of the revised U.S. GILTI regulations. We are executing on our growth strategy, driving productivity, and cash generation, and aligning our business around the operating model. This is reflected in our 2022 outlook for sales, earnings, and cash flow. To fuel our engine and drive accelerated growth beyond 2022, we are increasing our capex and R&D investments for innovation and automation. We have a strong balance sheet and we will continue to focus on generating attractive returns on invested capital. With that, let me now pass the call back to Ted for closing remarks. This is how we're making our vision a reality. Our SEE operating engine is performing and gaining momentum. We'll continue to invest in our 4Ps of Reinvent SEE. Next quarter, we'll provide a deep dive on digital. We're creating long-term value for our stakeholders and making our world better than we find it. Operator, we'd like to begin the Q&A session.

sees fy adjusted earnings per share $3.95 to $4.15. q4 adjusted earnings per share $1.12. sees fy sales $5.8 billion to $6.0 billion. q4 earnings per share $1.12. qtrly net sales of $1.5 billion increased 14% as reported in q4 2021. in quarter currency had an unfavorable impact of $11 million, or 1.5%.

First, I'd like to say we're very pleased with the results of this quarter. Our inpatient businesses, including our critical illness recovery hospitals and our inpatient rehabilitation hospitals, realized significant growth in revenue, EBITDA and occupancy rates. Occupancy rates in both business segments grew 500 basis points on a same-quarter year-over-year basis. Our Concentra business segment has continued the trend we saw in Q4 with nice growth in revenue, EBITDA and EBITDA margins. And while our outpatient rehabilitation business experienced double-digit negative variance in patient visits in both January and February, we saw a surge of visits in March, and this has continued through April. All in all, it was a stellar quarter for Select. We will continue to outline this information as long as we believe it provides insight to the impact of COVID-19 on the company's financial performance. Overall, our net revenue for the first quarter increased 9.3% to $1.55 billion. Net revenue in our critical illness recovery hospital segment in the first quarter increased 18.9% to $595 million, compared to $501 million in the same quarter last year. Patient days were up 8.4% compared to same quarter last year with over 293,000 patient days. Occupancy in our critical illness recovery hospital segment was 75% in the first quarter, compared to 70% the same quarter last year. Net revenue per-patient day increased 10.1% to $2,024 per-patient day in the first quarter. We continue to see strong referrals and higher acuity patients, which is driving both volume and rate in our critical illness recovery hospitals. Case mix index in our critical illness recovery hospitals was 1.35 in the first quarter, compared to 1.27 in the same quarter last year. Net revenue in our rehabilitation hospital segment in the first quarter increased 14.2% to $208 million, compared to $182 million in the same quarter last year. Patient days increased 8.3% compared to same quarter last year with over 102,000 patient days. Occupancy in our rehabilitation hospitals was 84% in the first quarter, compared to 79% same quarter last year. Net revenue per-patient day increased 7% to $1,853 per day in the first quarter. Net revenue in our outpatient rehab segment for the first quarter declined 1.3% to $252 million, compared to $255 million in the same quarter last year. Patient business were down 1.1% with 2.1 million visits in the quarter. Our net revenue per visit was $104 in both the first quarter this year and last year. We did have one fewer operational days in the first quarter this year compared to the same quarter last year. Our visits per operational day this quarter increased slightly compared to the same quarter last year. Net revenue in our Concentra segment in the first quarter increased 6.1% to $423 million, compared to $399 million in the same quarter last year. For the centers, patient business were down 2.8%, a 2-point [Technical difficulty] in business in the quarter. Net revenue per visit in the centers increased slightly to $125 in the first quarter, compared to $123 in the same quarter last year. While patient visit volumes in our centers was down, we realized increases in revenue from COVID screening and testing services, offset in part by sale of the veterans administration community-based outpatient clinics last year. I also want to highlight that we recorded $34 million in other operating income in the first quarter this year. This included $16.1 million related to payments received under the CARES Act for incremental costs incurred as a result of COVID. The adjusted EBITDA results for our operating segments do not include any recognitions of these funds. They are included in our other activities. It also included $17.9 million related to the positive outcome of litigation with CMS. The adjusted EBITDA results for our critical illness recovery hospital segment included the recognition of this income. Total company adjusted EBITDA for the first quarter increased 37.9% to $258.3 million, compared to $187.3 million in the same quarter last year. Our consolidated adjusted EBITDA margin was 16.7% for the first quarter, compared to 13.2% for the same quarter last year. Our critical illness recovery hospital segment adjusted EBITDA increased 27.9% to $113.3 million, compared to $88.6 million same quarter last year. Adjusted EBITDA margin for the segment was 19% in the first quarter, compared to 17.7% in the same quarter last year. Our rehab hospital segment adjusted EBITDA increased 31% to $50.5 million, compared to $38.6 million the same quarter last year. Adjusted EBITDA margin for the rehab hospital segment was 24.3% in the first quarter, compared to 21.2% in the same quarter last year. Our outpatient rehab adjusted EBITDA was $26.3 million, compared to $27.1 million in the same quarter last year. Adjusted EBITDA margin for the outpatient segment was 10.4% in the first quarter, compared to 10.6% same quarter last year. Our Concentra adjusted EBITDA increased 33.4% to $82 million, compared to $61.5 million in the same quarter last year. Adjusted EBITDA margin was 19.4% in the first quarter, compared to 15.4% in the same quarter last year. Earnings per common share increased 105% to $0.82 for the first quarter, compared to $0.40 for the same quarter last year. Adjusted earnings per common share was $0.37 in the first quarter last year. Adjusted earnings per common share excludes the nonoperating gain as related tax effects for the first quarter last year. The proposed inpatient rehab rule, if adopted, would see an increase in the standard payment amount 2.47% and an increase in the high-cost outlier threshold. The proposed long-term acute care rule, if adopted, would see an increase in the standard federal rate of 2.45% and an increase in the high-cost outlier threshold. We expect these rules to be finalized in August after the required comment period. Additionally, the Medicare Sequester Relief bill extended temporary suspension of the 2% Medicare sequestration cut that was set to expire March 31 through the end of 2021. That concludes my remarks. For the first quarter, our operating expenses, which include our cost of services and in general and administrative expenses, were $1.33 billion or 85.9% of net revenue. For the same quarter last year, operating expenses were $1.23 billion and 87.3% of net revenues. Cost of services were $1.29 billion for the first quarter. This compares to $1.2 billion in the same quarter last year. As a percent of net revenue, cost of services were 83.6% for the first quarter. This compares to 84.9% in the same quarter last year. G&A expense was $35.4 million in the first quarter. This compares to $33.8 million in the same quarter last year. G&A as a percent of net revenue was 2.3% in the first quarter. This compares to 2.4% of net revenue for the same quarter last year. As Bob mentioned, total adjusted EBITDA was $258.3 million, and the adjusted EBITDA margin was 15.7% for the first quarter. This compares to total adjusted EBITDA of $187.3 million and adjusted EBITDA margin of 13.2% in the same quarter last year. Depreciation and amortization was $49.6 million in the first quarter. This compares to $51.8 million in the same quarter last year. We generated $9.9 million in equity and earnings [Technical difficulty] subsidiaries during the first quarter. This compares to $2.6 million in the same quarter last year. We also had a nonoperating gain of $7.2 million in the first quarter last year. Interest expense was $34.4 million in the first quarter. This compares to $46.1 million in the same quarter last year. We recorded income tax expense of $45.1 million in the first quarter this year, which represents an effective tax rate of 24.7%. This compares to the tax expense of $21.9 million and an effective rate of 23.7% in the same quarter last year. Net income attributable to noncontrolling interest were $26.7 million in the first quarter. This compared to $17.3 million in the same quarter last year. Net income attributable to Select Medical Holdings was $110.5 million in the first quarter, and earnings per common share was $0.82. At the end of the first quarter, we had $3.4 billion of debt outstanding and over $750 million of cash on the balance sheet. Our debt balances at the end of the quarter included $2.1 billion in term loans, $1.2 billion and 6.25% senior notes and $75 million of other miscellaneous debt. Net leverage based on our credit agreement EBITDA dropped to 3.02 times at the end of the first quarter. This is down from 3.48 times at the end of the year and 4.76 times at the end of the first quarter last year. Operating activities provided $239.9 million of cash flow in the first quarter. This compares to $44.1 million in the same quarter last year. Our day sales outstanding, or DSO, was 56 days at the end of March. This compares to 56 days at the end of December of 2020 and 53 days at March 31 of 2020. Investing activities used $52.6 million of cash in the first quarter. The use of cash included $39.7 million -- $39.7 million in the purchase of property and equipment and $12.9 million in acquisition and investment activities in the first quarter. Financing activities used $14.1 million of cash in the first quarter. This includes $13.7 million in payments and distributions to noncontrolling interest of $400,000 in net repayments of other debts in the quarter. Our total available liquidity at the end of the first quarter was $1.25 billion, which includes $75 million of cash and close to $500 million in revolver availability under the Select and Concentra credit agreements. For the full-year 2021, we now expect revenue in the range of $5.7 billion to $5.9 billion, expected adjusted EBITDA to be in the range of $870 million to $900 million and expected earnings per common share to be in the range of $2.41 to $2.58.

sees fy earnings per share $2.41 to $2.58. q1 adjusted earnings per share $0.82. sees fy revenue $5.7 billion to $5.9 billion. q1 revenue rose 9.3 percent to $1.547 billion. q1 earnings per share $0.82.

We are very pleased with the financial results of the quarter, as well as a number of other business goals that we accomplished during the quarter. We experienced top-line growth in all four of our business segments compared to both the same quarter last year and pre-pandemic same quarter in 2019. The volumes in our inpatient/outpatient business segments are trending very nicely and are well above pre-pandemic volume numbers. In addition to the volume growth, the inpatient and outpatient rehabilitation hospitals and clinics posted their highest quarters for adjusted EBITDA in the history of the company. Concentra has made nice strides with volume improvement as more industries such as airlines, hospitality, municipalities and schools reopen. On the development front, on May 1, Scripps Healthcare entered into our existing joint venture partnership with UC San Diego Health on our 110-bed critical illness recovery hospital in San Diego, California. In June, we closed on a new outpatient joint venture with Mon Health in West Virginia, which marked our entry into the state for outpatient rehab. On July 1, we entered into a new long-term acute care hospital joint venture with Ascension Saint Thomas in Nashville, contributing our 70-bed Nashville hospital to the joint venture and moving forward with plans to add a 30-bed satellite hospital within a hospital at their Saint Thomas West Campus later this year. Also on July 1, we entered into a new joint venture with CHS Northwest Healthcare in Tucson, Arizona, and acquired a 47-bed long-term acute care hospital, here at Tucson, which we plan to relocate to Northwest Medical Center later this year. And earlier the -- earlier this week, we entered into a new outpatient rehab joint ventures with Cedars-Sinai in Los Angeles, California, contributing our 26 outpatient clinics in that market to the joint venture. We continue to work on finalizing the acquisition of Acuity Healthcare, which operates five long-term acute care hospitals through joint venture partnerships in New Jersey and West Virginia. We expect the deal to close sometime late Q3 or early Q4. Our development pipeline remain strong as we continue to look for opportunities to expand our footprint and partner with leading healthcare institutions throughout the country. In addition, last week, U.S. News & World Report released our annual rankings of top rehabilitation hospitals in the country. Our Kessler Institute of Rehabilitation in New Jersey was ranked No. 4 in the country, it's 29th consecutive year of being named among the nation's best. In addition, this year, for the first time, we have three of our joint venture partner hospitals making the list. They are Baylor Scott & White Institute for Rehabilitation in Dallas at No. 13, Emory Rehabilitation Hospital in Atlanta at No. 26 and OhioHealth Rehabilitation Hospital in Columbus, Ohio at No. I couldn't be more proud of our clinician, clinical and operational teams at these hospitals and throughout the rest of our portfolio of hospitals for their hard work, expertise and dedication to the care and treatment of our patients. Two other items I wanted to note are the Centers for Disease and Control the CDC and Select Medical collaborated on a clinical study regarding long-term impact of COVID-19, which was recently published in the morbidity and mortality weekly report. This quarter, we also included monthly results from 2019 to provide a data point, where each of our business segments were prior to the pandemic compared to where they are currently. We will continue to include this information as long as it provides meaningful insight to the impact of COVID-19 on the company's financial performance. Overall, for the second -- revenue for the second quarter increased 26.9% to $1.56 billion and for year to date has increased 17.5% to $3.11 billion. Revenue in our critical illness recovery hospital segment in the second quarter increased 4.7% to $544 million, compared to $520 million in the same quarter last year. Patient days were down 1.4%, compared to the same quarter last year with 273,000 patient days in the quarter. Occupancy in our critical illness recovery hospital segment was 69% in the second quarter, compared to 72% in the same quarter last year and 69% in the second quarter of 2019. Revenue per patient day increased 6.4% to $1,986 per patient day in the second quarter. Case mix index in our critical illness recovery hospitals was 1.33 in the second quarter, compared to 1.32 in the same quarter last year. As we had mentioned in our most recent earnings call, staffing remains an issue in the critical illness recovery hospitals and it did have an impact on the number of patients we were able to admit for the quarter. We had a number of our hospitals that were unable to accept patients due to lack of clinician availability. This cap in census represents a reduction of occupancy of approximately 1.5%. I would like to point out that these staffing challenges have been isolated to our critical illness recovery hospitals, and we have not experienced this issue in any of our other business segments. Revenue in our rehabilitation hospital segment in the second quarter increased 26.1% to $213 million, compared to $169 million in the same quarter last year. Patient days increased 24.8%, compared to the same quarter last year, with almost 105,000 patient days. Occupancy in our rehab hospitals was 85% in the second quarter, compared to 71% in the same quarter last year and 75% in the second quarter of 2019. Revenue per patient day increased $0.01 to $1,840 per day in the second quarter. Revenue in our outpatient rehab segment in the second quarter increased 67.8% to $280 million, compared to $167 million in the same quarter last year. Patient visits were up 79.2% with 2.4 million visits in the quarter, compared to 1.3 million visits in the same quarter last year and 2.2 million visits in the second quarter of 2019. Our revenue per visit was $102 in the second quarter, compared to $106 per visit in the same quarter last year. This reduction in rate is due to a change in our payer mix caused by the pandemic and related lockdowns. Revenue in our Concentra segment in the second quarter increased 46.1% to $456 million, compared to $312 million in the same quarter last year. For the centers, patient visits were up 40.9% to 3 million visits, compared to 2.15 million visits in the same quarter last year and 3.1 million visits in the second quarter of 2019. Revenue per visit in the centers increased to $125 in the second quarter, compared to $124 in the same quarter last year. I also want to recognize $98 million in other operating income in the second quarter related to the fund we received under the CARES Act Provider Relief for incremental costs and lost revenues incurred as a result of the COVID pandemic. Last year, we recognized $55 million in other operating income related to these funds. The adjusted EBITDA result for our critical illness recovery hospital, rehabilitation hospital and outpatient rehab segments do not include any recognition of this income. We record other operating income related to those segments under our other activities. Adjusted EBITDA results for our Concentra segment included recognition of this income, including $32.3 million in the second quarter of this year and $800,000 in the same quarter last year. Total company adjusted EBITDA for the second quarter increased 91.3% to $342 million, compared to $178.8 million in the same quarter last year. Our consolidated adjusted EBITDA margin was 21.9% for the second quarter, compared to 14.5% for the same quarter last year. Our critical illness recovery hospital segment adjusted EBITDA was $72.9 million in the second quarter, compared to $89.7 million in the same quarter last year. Adjusted EBITDA margin for the segment was 13.4% in the second quarter, compared to 17.3% in the same quarter last year. We experienced a deterioration of EBITDA margin in the quarter due to significantly higher nursing cost, which was driven by both an increase of both hours and rates of agency staffing. Our rehabilitation hospital segment adjusted EBITDA increased 83.9% to $50.8 million in the second quarter, compared to $27.6 million in the same quarter last year. Adjusted EBITDA margin for the rehab hospital segment was 23.9% in the second quarter, compared to 16.4% in the same quarter last year. Our outpatient rehab adjusted EBITDA was $45.6 million in the second quarter, compared to adjusted EBITDA loss of $6.3 million in the same quarter last year. Adjusted EBITDA margin for the outpatient segment was 16.3% in the second quarter. Our Concentra adjusted EBITDA increased 230.3% to $137.1 million in the second quarter, including the $32 million in CARES Act payments recognized in the quarter. This compares to $41 million in the same quarter last year, which included $800,000 in CARES' payment recognition. Adjusted EBITDA margin was 30% in the second quarter, compared to 13.3% in the same quarter last year. Excluding the $32.3 million of CARES Act payments, the adjusted EBITDA margin would have been 23% for the quarter. Earnings per common share increased 213% to $1.22 for the second quarter, compared to $0.39 for the same quarter last year. In both periods, our earnings per common share was positively affected by the CARES Act Provider Relief Funds recognized in the respective quarters. Excluding the CARES Act income, earnings per share would have been $0.72 in the second quarter this year and $0.09 per share in the same quarter last year. On the regulatory front, last week, CMS issued the final inpatient rehab rules for fiscal 2022, effective October 1 of this year. The final rule includes a 2.3% increase in the standard payment amount, which is slightly less than the 2.5 % included in the proposed rule. In addition, the high-cost outlier threshold increased by 20%, which was slightly worse than what was in the proposed rule. The CMG relative weight and average length of stay values were also updated in the final rule. Finally, this week, CMS also issued the final LTAC rules for fiscal '22. The final rule included a 2.2% increase in the federal base rate, again, slightly less than the 2.5% increase outlined in the proposed rule. The high-cost outlier threshold was increased 21% and the MS-LTC-DRG relative weights and expected length of stays were also updated in the final rule. For the second quarter, our operating expenses, which include our cost of services and general administrative expense were $1.33 billion or 84.9% of revenue. For the same quarter last year, operating expenses were $1.12 billion and 90.5% of revenues. Cost of services were $1.29 billion for the second quarter. This compares to $1.08 billion in the same quarter last year. As a percent of revenue, cost of services were 82.6% in the second quarter. This compares to 87.8% in the same quarter last year. G&A expense was $35.7 million in the second quarter. This compares to $33.5 million in the same quarter last year. G&A as a percent of revenue was 2.3% in the second quarter, compared to 2.7% of revenue for the same quarter last year. As Bob mentioned, total adjusted EBITDA was $342 million, and adjusted EBITDA margin was $21.9 million for the second quarter. This compares to total adjusted EBITDA of $178.8 million and an adjusted EBITDA margin of 14.5% in the same quarter last year. Excluding the CARES Act income recognized in the quarter, adjusted EBITDA margins would have been 15.6% in the second quarter this year and 10% in the same quarter last year. Depreciation and amortization was $51 million in the second quarter. This compares to $52.3 million in the same quarter last year. We generated $11.8 million in equity and earnings of unconsolidated subsidiaries during the second quarter. This compares to $8.3 million in the same quarter last year. Interest expense was $33.9 million in the second quarter. This compares to $37.4 million in the same quarter last year. We recorded income tax expense of $65.7 million in the second quarter this year, which represents an effective tax rate of 25.1%. This compares to the tax expense of $23.3 million and an effective rate of 25.7% in the same quarter last year. Net income attributable to noncontrolling interest were $31.3 million in the second quarter. This compares to $15.8 million in the same quarter last year. Net income attributable to Select Medical Holdings was $164.9 million in the second quarter and earnings per common share were $1.22. At the end of the second quarter, we had $3.4 billion of debt outstanding and over $800 million of cash on the balance sheet. Our debt balance at the end of the quarter included $2.1 billion in term loans, $1.2 billion in 6.25% senior notes and $70 million of other miscellaneous debt. Net leverage based on the credit agreement EBITDA dropped to 2.51 times at the end of the second quarter. This is down from 3.02 times at the end of the first quarter and 3.48 times at the end of the year. On June 2, we completed an amendment to Select and Concentra revolving loans. We increased the availability on Select's revolving loan from $450 million to $650 million and simultaneously canceled the $100 million Concentra revolving loan, which was set to mature in March of next year. Neither revolving loans had any borrowings outstanding. Operating activities provided $123.1 million of cash flow in the second quarter. Our days sales outstanding, or DSO, was 54 days at June 30, 2021. This compared to 56 days at both March 31, 2021 and December 31, 2020. During the second quarter, we repaid $73 million of Medicare advances. And as of June 30, 2021, we have $251 million remaining on the balance sheet. We expect similar quarterly recruitments until the advancements are fully repaid. Investment activities used $35.7 million of cash in the second quarter. The use of cash included $36.7 million in the purchase of property and equipment and $8.4 million acquisition and investment activity in the quarter. We also generated $9.4 million in proceeds from the sale of assets in the quarter. Financing activities used $34.3 million of cash in the second quarter. This included $16.9 million in dividend payments, $9.8 million in net payments and distributions to noncontrolling interest, and $6 million in repayments of other debt in the quarter. Our total available liquidity at the end of the second quarter was almost $1.4 billion, which includes the $800 million of cash, and close to $595 million in revolver availability under the Select credit agreement. For the full year of 2021, we now expect revenue in the range of $5.85 billion to $6.05 billion. Expected adjusted EBITDA to be in the range of $970 million to $1 billion and expected earnings per common share to be in the range of $2.91 to $3.08.

select medical sees fy earnings per share $2.91 to $3.08. sees fy earnings per share $2.91 to $3.08. q2 adjusted earnings per share $1.22. sees fy revenue $5.85 billion to $6.05 billion. q2 earnings per share $1.22.

During today's call, Bob and Eric will provide some corporate and strategic updates, and Mark will discuss our results. Many of these factors are beyond the company's ability to predict or control. As a result of these and other factors, the company's past financial performance should not be relied on as an indication of future performance. During the course of today's call, words such as expect, anticipate, believe and intend will be used in our discussion of goals or events in the future. We encourage you to read Safeguard's filings with the SEC, including our Form 10-K, which describe in detail the risks and uncertainties associated with managing our business. With that, here's Bob. The second quarter was a challenging period due to the COVID-19 pandemic and the follow-on impacts to our economy. In a few cases, the pandemic has provided a tailwind and has accelerated certain trends which were under way prior to the outbreak. Overall, we continue to assess the value and timeframe for our exits and work with the management teams to drive value regardless of the macro-environment. Safeguard holds a value portfolio of ownership interest in companies operating in exciting sectors of our economy and where we remain dedicated to maximizing ultimate value for our shareholders. I continue to be encouraged by the direction and activities of many of our ownership interests, which we believe will eventually lead to valuable exit transactions. Eric and Mark will now review our recent activities and this quarter's results. While the current operating environment has been heavily impacted by the pandemic, we are happy to report that our companies are by and large tracking ahead of their COVID-19 plans. And in some cases, we're seeing pockets of strength and even tailwinds. Overall, we are at the early stages of recovery, but are substantially more encouraged today than we were when we spoke to you in April. We'd like to start by reviewing with you five areas we've been focused on since the last earnings call. The first is making sure our companies have sufficient liquidity to operate in the current environment. The second is working at the board level of our companies to drive operating and financial performance. Three is helping the management teams position our companies for the most attractive exit opportunities. Fourth is at the Safeguard level driving down our cost to operate and taking steps to ensure we can support our companies. And fifth is, at the shareholder level, providing greater visibility engagement with Safeguard investors. On the company liquidity front, our companies have been able to weather the COVID-19 storm reasonably well. This was achieved through a combination of cost-cutting, improved working capital management, business model alignment, access to PPP funds and securing other sources of capital. To provide greater detail, the majority of our companies are operating at cash flow breakeven or are funded with the expectations that they will get to cash flow breakeven. The remaining companies are exploring capital raises at different stages. Three of our companies are currently in the term sheet phase that may involve participation by Safeguard. We are evaluating these opportunities and if we do participate in these financings, we expect total investments in 2020 to fall within the guidance range we previously provided. Our second area of focus has been supporting our companies. As you know, we take an active role with our companies and we have spent considerable time over the past few months with our management teams and co-investors. We and they have had to make hard decisions, decisions that test the leadership and capabilities of management at all levels, headcount reductions, furloughs, product and market alignment, capital allocation, decisions on credit extension to customers, pushing to collect accounts receivables early, personnel issues and others. These have required thoughtful consideration and deliberation at the Board level. As mentioned at the outset, we are pleased with how the teams have performed and are looking forward to shifting our attention for managing crisis to focusing on growth. The third area I'd like to touch on is exits. We are working to exit our companies at fair values, which will drive shareholder returns and will allow us to return value to Safeguard's shareholders. There are two basic ways to exit. One is what we call a natural exit, and the second is secondary exit. A natural exit is when the company is sold through a banker process and we sell a loan in the deal. The secondary exit is when we sell our minority stake to a third party, but there is no control premium and there is usually an embedded discount in the transaction. While natural exits generally provide greater values and secondary sales, we are open to exploring secondary deals as long as we can get reasonable value as compared to what we believe we can achieve in a natural exit, factoring in time and risk. We had conversations with a couple of secondary buyers in Q2 but did not find their indicative interest levels attractive versus what we expect to get in a natural sale over a reasonable timeframe. We had no exits in Q2, but we currently have one company under LOI with a PE buyer and another company about to launch a process after a robust banker selection. We are cautiously optimistic on both of these processes, but deal risks obviously remain and these risks are magnified in the current M&A environment. The fourth area is Safeguard's costs in our capital that we have to support our companies. We continue to focus on bringing our cost to operate down, and we've made a lot of progress on this front. We are currently running at mid-$5 million a year to operate with corporate expenses down 36% year-on-year. We are not done and continue to look at both internal and third-party costs. Mark will provide more detail in his section. On the capital front, we believe we currently have sufficient funds to operate and support the expected needs of our companies over the next 12 months. We expect sales of our companies will fund needs beyond that period. Given the uncertainty of exit timing, we will prudently explore contingency plans to ensure we have sufficient liquidity to meet our needs as necessary. On our shareholder engagement, we remain committed to improve the level of engagement and transparency with our investors as well as providing better exposure and insight into our companies. We held our first fireside chat with Jan Bruce of meQuilibrium on July 30th, and the replay is on our website. If you haven't listened to it, we would highly recommend you do so. This was the first in a series of fireside chats that we are launching, where you can meet the CEO and you can ask questions via the Zoom webinar. Beyond that, please feel free to reach out to Bob, Mark or me with questions or suggestions. I'd like to provide some detail on our companies and provide some company level [Phonetic] highlights. We selected five companies that are among the top 10 in expected exit values. To be clear, these are not necessarily the top 5 positions in exit value, but they are among the top 10. So they are meaningful for us, and we thought they'd be meaningful for you to learn more about them. To walk you through them briefly, we've looked at these in four different categories. We'll provide a very quick business subscription, what we like about the opportunity, the impact of COVID-19 on the business and some Q2 highlights that we can say publicly. And just to run through these companies, we'll talk about meQuilibrium, Prognos, Zipnosis, Clutch and Flashtalking. You heard about meQuilibrium on our webinar, so I won't go into too much detail, but meQuilibrium stock falls in our revenue bucket of $5 million to $10 million with SaaS talent development solution using predictive analytics to support resilient, engaged and agile workforce. Their customers are Fortune 500s and SMBs, and we like the opportunity because they're well positioned in the growing HR tech and human capital management space. The impact of COVID-19 on their business has been mixed to positive. There has been some accelerated demand for talent development and employee engagement solutions, particularly among disrupted workforces. In terms of highlights, they had very strong Q2 bookings with activity across renewals and new logos. Company also closed a $4 million Series C extension funding. The next company is Prognos. Prognos falls in our $15 million to $20 million revenue bucket. The company takes clinical and diagnostic data, and analyzes this information for pharma companies and payers to better track and predict disease activity. We like the company because they're a leader in this emerging area of drawing insights from clinical and diagnostic test data. COVID has had a mixed to positive impact on Prognos. The sales process has been disrupted in terms of their ability to meet with pharma sales teams, but there has been increased interest in their digital marketing offering. Some highlights over the quarter is, they launched a Prognos Factor platform, a new analytics platform for pharma customers, and they announced a partnership with Livongo to leverage Prognos's lab data capabilities. The next company is Zipnosis. Zipnosis falls in the $5 million to $10 million revenue bucket. Zipnosis is a white-labeled virtual care platform offering patients convenient access to care while improving clinician efficiency. We like the opportunity because they're obviously in a growing telehealth space and they enable health systems to improve the patient experience and decrease time to treatment decisions. The impact of COVID-19 has been a positive. It greatly expanded interest in telemedicine in the use of virtual care solutions. Some Q2 highlights are that they've recorded their highest number of virtual visits in company history, and Zipnopsis launched a ZipCheck product, which is an end-to-end return to work solution for employees to test COVID-19. The next company that we'll highlight is Clutch. Clutch falls in the $10 million to $15 million revenue bucket. And Clutch is a data-driven marketing and customer relationship management platform focusing on loyalty, gifts in channel marketing to marketers. What we like about it is the platform that provides deep insights into customer behaviors, and they have a industry-leading product. COVID-19 has had a negative impact on Clutch because many of their customers are in the retail, travel and hospitality sector, which is obviously in different levels of disruption. The company is doing a good job to pivot to other sectors, and they are seeing growth in development with their channel partners. In Q2, [Indecipherable] COVID-19 plan, they won two new strategic accounts and they have achieved SOC 2 compliance and completed a new release of the platform. The last company I'll touch on is Flashtalking. Flashtalking is the above $20 million revenue bucket. They are an independent ad-serving identity management analytics platform. What they do is, they drive ad relevance and campaign performance for major brands. We like the opportunity because it's a large and growing addressable market at a strong ROI and they've been growing market share. COVID-19 has had a mixed impact on their business. They have some exposure to retail, travel and hospitality, but they have other -- they also have exposure to other sectors, which are more resilient through the pandemic. They successfully rolled out the first of 14 countries for Procter & Gamble, a large new customer. And as part of that rollout, they successfully launched an API-based trafficking integration with The Trade Desk and a division of Oracle. After COVID dip in April and May, the company has returned to year-over-year revenue growth in June. So we hope this helps frame our thinking on some of the companies, what we plan to do is, next quarter we will review the other five companies which sit within the top 10, and estimated exit values to provide you some greater insight into how we're thinking about the companies and what we like about these opportunities as well as how they're performing in the current quarter or, in this case, we'll be choosing Q3 highlights. For the quarter ended June 30th, 2020, Safeguard's net loss was $9.9 million or $0.48 per share compared with a net income of $36.1 million or $1.75 per share for the same period of 2019. Safeguard's cash, cash equivalents and restricted cash at June 30th totaled $13.6 million, and we have no debt obligations. Our funding to existing ownership interest continued this quarter, including $3.8 million to Syapse, which resulted in $4.4 million during the year-to-date period with the Syapse [Phonetic] after considering bridge loans during the first quarter. We made two other small deployments during the quarter, and we continue to expect that deployments for the full year of 2020 will be between $8 million to $12 million. However, we expect to evaluate deployment activity for only three to four companies for the remainder of the year due to the circumstances Eric described earlier. The quarter's results also included impairments of $5.7 million related to the lowering of our estimate of fair value for our ownership interest in Sonobi, T-Rex, Beta and in other ownership interest. These declines in fair value were impacted by our outlook for transaction values as well as other company-specific factors. Our general and administrative expenses were $2 million for the three months ended June 30th, 2020 as compared to $2.6 million in the second quarter of 2019. Our G&A expenses benefited from lower employee compensation, lower professional fees, lower office rental cost, lower depreciation and other costs. Corporate expenses for the second quarter, which represent general and administrative expenses, excluding depreciation, stock-based compensation, severance and retirement costs and other non-recurring or other items, were $1.2 million as compared to $1.9 million in 2019. In addition to the G&A reductions mentioned above, corporate expense has benefited from the reflection of director fees as a stock-based compensation item as well as a change that will result in a portion of management's estimated incentive bonus compensation will also be paid invested equity instead of cash. Note that we made this change in the second quarter, but it will be applicable for the year-to-date period. So approximately $0.1 million of the decline is attributable to this catch-up of the first quarter's portion. As we've mentioned before, we will continue to look for ways to reduce our cost structure. Some of the steps that we are making now or plan to make are relatively small, but we understand every step counts. So, as an example, we are continuing to seek to minimize our office-related costs as we've been able to effectively work remotely over the last few months. As a result, we expect that our corporate expenses for the full year of 2020 will be at the low-end or below our previously disclosed range of $5.6 million to $6.0 million as compared to $7.1 million reported for the full year of 2019. With respect to ownership interests at June 30th, 2020, we have an aggregate carrying value of $61.4 million. As we've discussed before, this is a GAAP carrying value, which results from the application of equity method accounting. It typically reduces the carrying value for our share of the losses of the underlying companies, and generally does not represent the fair value or expected exit value of those same ownership interests. Only when the fair value declines below our carrying value would we consider making a downward adjustment to the carrying value of our equity method investments. We also have a few ownership interests that are accounted for under the other method, which can have upward or downward adjustments resulting from observable price changes if there are transactions in their securities. Our share of the losses of our equity method ownership interest for the three months ended June 30th, 2020 was $3.1 million as compared to $8.3 million for the comparable period in 2019. The decrease is the result of fewer companies being accounted for under the equity method due to exits, changes in the basis of accounting in two companies that move from the equity method to the other method, as well as lower losses on a net basis from our equity method ownership interest. There is also a benefit recorded resulting from a technical accounting change, the new revenue recognition standard, at one of our ownership interests. This benefit essentially offset the cumulative effect of that same accounting change that was also required to be recorded directly to one of our ownership interests. So while this accounting change resulted in an income statement benefit for the quarter, there was not a significant cumulative impact to our ownership interest balance as of the end of the quarter. I would also like to remind everyone that we report our share of the losses from the equity method companies on a one quarter lag. So, this quarter share of the losses reflect the calendar first quarter for those companies. While many companies saw some impact from COVID-19 in the first quarter, their results in the second quarter will reflect the full quarter of operating in this environment, which we will report to you as part of our third quarter results due to the one quarter lag policy. So now, it is time for us to turn to the Q&A segment of the call. So, operator, please open the phones up, which I know you've already done, so we can answer a few questions.

q2 loss per share $0.48.

During today's call, Brian will provide a corporate and strategic update and review recent highlights and Mark will discuss our results. Many of these factors are beyond the Company's ability to predict or control. As a result of these and other factors, the Company's past financial performance should not be relied on as an indication of future performance. During the course of today's call, words such as expect, anticipate, believe and intend will be used in our discussions of goals or events in the future. We encourage you to read Safeguard's filings with the SEC, including our Form 10-K which describes in detail the risks and uncertainties associated with managing our business. With that, here is Brian. We continued to do in 2019 what we started to pursue early in 2018. We continue to diligently pursue our goals to prudently manage and support our portfolio of private company ownership interests, to maximize the value of our interests and to monetize and return the value of the portfolio to you in the most efficient manner possible. Today, we want to reiterate our focus and convey to you the strong belief we have regarding the current and the anticipated exit values of our remaining portfolio of companies. We believe 2019 was a year full of important milestones that we would like to revisit as we look forward to the opportunities in front of us. The most significant milestone in 2019 was the return of capital dividend that we paid in December. That dividend was made possible by the successful completion of the first stage of our return of capital strategy, accomplishing a series of successful exits, including Propeller and Transactis earlier in 2019 and the repayment of our $85 million in debt. The six major exit transactions that we have executed since the beginning of 2018 have allowed us to not only repay our debt but also to continue to support our portfolio as and where appropriate as it has grown and matured. In aggregate, to date, we have returned over $187 million to our balance sheet, including over $104 million in 2019 via exit transactions since we began our new strategic direction in 2018. The disciplined approach to managing our portfolio and realizing exit proceeds has not only resulted in Safeguard being debt free and initiating our return of value transactions, but also provided us with $25 million of cash today that is sufficient to fund our scaled down operations and expected deployments. Most importantly, Safeguard continues to hold a valuable portfolio of ownership interests, representing approximately $230 million of deployed capital in 15 tech-enabled companies and our other ownership interests. Our companies as a whole are growing and are being positioned for exits. Six of our companies have run rates of between $5 million and $10 million of annual revenue. Another six have run rates of over $10 million. And the average growth rate of the non-digital media companies is 54%. As with all growth stage portfolios, there remain challenges and obstacles that we will need to overcome before exits occur, but we are encouraged by our group of entrepreneurial companies and the progress they are each making toward their strategic goals. Safeguard's return of value to shareholders plan going forward continues to be straightforward. Whenever we have cash and cash equivalents exceeding our minimum required capital, currently $25 million, we will evaluate a return of value to our shareholders in the most efficient manner in the form of either share repurchases and/or dividends. We are also continually evaluating different opportunities to exit partner companies either through the sale of entire companies, the sale of SFE stakes, recapitalization and other methods. To preserve cash and in a continuing effort to downsize all facets of our cost structure and to further align interest with our shareholders, our Board will be reduced from six to four directors as of our 2020 Annual Meeting, and director compensation is now being paid entirely in Safeguard equity. While we are pleased with what we've accomplished over the last two years, we realize that there is much work left to be done and significant value yet to be realized for our shareholders. We remain committed to being good stewards of Safeguard's assets and continuing our pursuit of additional exit transactions that will monetize our ownership interests and return value to shareholders. We continue the pursuit of individual company exits while considering all alternatives as circumstances dictate, including the sale of individual partner company interests in secondary market transactions, the sale of entire companies or a combination thereof. We will also continue to consider financing transactions which could expedite the return of value to our shareholders. We are constantly dialoging with our partner companies, other investors and board members of those companies concerning exit opportunities. A significant number of our companies have active bank relationships in place to assist in those discussions. We remain bullish regarding our portfolio of companies, and we continue to believe that the current value of our ownership interests and our cash and cash equivalents significantly exceed our current share price. We've accomplished a lot under our new strategy, including streamlining our internal operations to reduce costs, repaying our debt and moving forward with strategic transactions involving our companies that have returned significant capital back to Safeguard, which has also allowed us to retire our debt and implement our return of capital program. We are pleased with what we have accomplished, but much work is left to be done. We continue to work with our other companies on potential exits, and we hope to have more news to share in the coming months. We believe that our companies will continue to mature and attract strategic and financial buyer attention as we continue to explore the exit alternatives we referenced above. For the year ended December 31, 2019, Safeguard's net income was $54.6 million or $2.64 per share. That's compared with a net loss of $15.6 million or $0.76 per share for the same period in 2018. Our fourth quarter resulted in a net loss of $0.7 million or $0.03 per share as compared with a net loss of $16.6 million or $0.81 per share for the same quarter in 2018. Two large elements impacting the financial results and our financial position for the fourth quarter included the continued downward trajectory of our general and administrative costs as compared to prior periods and of course the $1 per share return of capital dividend. We'll speak to those further later in the call, but let me first comment on our liquidity position. Safeguard's cash, cash equivalents, restricted cash and securities at December 31, 2019 totaled $25 million, and we have no debt obligations. As we've discussed on prior calls, this is the initial targeted level of minimum capital we have determined necessary in order to fund follow-on deployments to support our existing ownership interests and to fund our scaled down corporate structure for multiple years. We are eager to continue our process of returning value to shareholders as soon as we have additional cash to do so. As we've also previously discussed, the Board declared a $1 per share special dividend that was paid on December 30. Our year-end results have confirmed our previous analysis that our cumulative and year-to-date earnings and profits allow this dividend to be characterized as a return of capital for federal tax purposes. Now I'll move back to our results of operations for the 2019 year, which includes the previously disclosed successes such as a $35.1 million gain from the exit of Propeller and a $50.7 million gain related to the exit from Transactis. In addition, we have recorded aggregate gains of $4.3 million for additional amounts received for holdbacks and escrows related to the other prior transactions, including $2.6 million of which occurred in the fourth quarter of 2019. Our 2019 results also included the impairment we disclosed in the second quarter of $3 million with respect to our interest in NovaSom. Our general and administrative expenses were $2.1 million and $10 million for the three months and year ended December 31, 2019 respectively. Both of these compared favorably to the comparable prior year period and were the result of our scaled-down level of staffing. The decrease relative to the prior year is primarily due to a decrease in employee compensation from a lower overall level of staffing, the absence of $3.8 million in severance charges and lower professional fees. For the fourth quarter, corporate expenses, which represent general and administrative expenses, excluding depreciation, stock-based compensation, severance and retirement costs and other nonrecurring or other items, were $1.4 million compared with $1.9 million in the fourth quarter of 2018. For the ended December 31, 2019, those same expenses were $7.1 million as compared to $9.9 million in 2018. The quarter-to-quarter reduction is a result of lower office costs resulting from the relocation to a smaller office space, lower compensation costs, lower professional fees and the reflection of director fees as a stock-based compensation item. The annual reductions similarly reflect the net benefit from our office move to lower cost facilities, lower overall compensation costs, lower professional fees and lower cash director fees during 2019 as well as the shift to equity-based compensation that impacted the fourth quarter's results. Note that we have also begun to include the quarterly and year-to-date impact of accruals related to our LTIP program as an Other item within the reconciliation to general administrative costs. We view that program as transactional cash costs rather than a measure of regular quarterly spending. Overall, we believe these results reflect the ongoing benefit from the significant cost reduction activities throughout 2018 and 2019 for our shareholders. We will continue to look for ways to continue cost reductions where possible. Our quarterly results also included $2.2 million of other income that was primarily the result of the removal of the estimates of our liabilities under the previous commitments to our former CEO, Mr. Musser who passed away in late 2019. Other income for the 2019 annual period also included previously disclosed non-cash gain from the credit derivative of $5.1 million and $4.5 million of observable price changes from a variety of our ownership interests. I should also note that our annual results included interest expense of $14 million related to the credit facility that was repaid in July of 2019. We do not expect to incur any interest expense during 2020. We also benefited during 2019 from the recognition of $2 million of interest income from our cash, marketable securities and convertible loans. This income was primarily the result of short-term securities held during the first half of 2019 and earnings from a money market account. We expect this income to decline in 2020 due to our lower overall level of investable assets and due to the low interest rate environment. As a reminder, our priority related to our cash and marketable securities assets is focused on capital preservation and liquidity. With respect to our ownership interests at December 31, 2019, we have a carrying value of $77.1 million, which is a reduction from 2018 primarily from exits, impairments and the application of equity method accounting. During the fourth quarter, we limited deployments to $2.2 million to three existing companies, bringing 2019 follow-on funding to $16.7 million. We expect that we will make additional deployments in 2020 so that we can continue to support our ownership interests, but in the aggregate, we expect those deployments to be between $5 million and $10 million. Our share of the losses of our equity method ownership interest for the three months ended December 31, 2019, was $4.2 million as compared to $8.9 million for the comparable period in 2018. The decrease is the result of less companies being accounted for under the equity method due to exits, impairments or changes in the basis of accounting as well as lower losses net from our equity method ownership interests. Similarly, for the annual 2019 period, we experienced a reduction of $20.6 million related to our losses from our share of the losses of our equity method companies. We are also pleased that a number of our companies have reduced their operating losses, which contributes to these improvements in our results. We believe this is an illustration of the health of our overall group of ownership interests. Aggregate annual revenue for 2019 of Safeguard's 15 remaining ownership interests, which we have previously referred to as partner companies, was $357 million. Aggregate revenue for the same companies was $330 million for 2018, representing a growth 8% for the group. We have continued to see slower growth in the digital media category. Excluding those digital media companies, the aggregate year-over-year revenue of Safeguard's portfolio of partner companies grew at 41%. Note that the revenue from other ownership interests that you may see in the summary table, including our release, are excluded from this total. So we remain optimistic about the portfolio, as Brian indicated earlier in the call. Also with respect to our aggregated revenue disclosures, we will no longer provide estimates of the projected revenue amounts. We believe that by highlighting our ownership interests that are progressing through each of the revenue stages that we have defined provides investors with better indications of the relative size and growth across our ownership interests. Also, this allows us to retain an appropriate level of confidentiality with respect to individual companies as the portfolio continues to get smaller. Now here's Brian to lead us through the Q&A segment of the call. Operator, let's open the phone for a few questions, please.

compname reports q4 loss per share of $0.03. q4 loss per share $0.03. safeguard scientifics - follow-on funding requirements for full year of 2020 are forecasted to be between $5 and $10 million.

I would start the call by briefly going through the highlights of the quarter. Private Securities Litigation Reform Act of 1995. The announced dividend of $0.15 per share represents a dividend yield of around 8% based on closing price yesterday, and this is our 67th consecutive quarter with dividends. In light of the continued uncertainty surrounding Seadrill and outcome of their pending financial restructuring, the Board decided to adjust the dividend down to $0.15 and thereby effectively exclude all contribution from offshore rigs for the time being. We believe that the market has already discounted this in the SFL share price as we, prior to this dividend adjustment, were trading at more than 13% yield based on the prior dividend, which is a very high number in the current low interest rate environment. When the Seadrill situation is resolved, the Board will reassess the situation and possibly reinstate contribution from the rigs and the dividend again. And our focus will be on building the portfolio with accretive transactions in order to build the distribution capacity also by adding new assets going forward. Over the years, we have paid more than $27 per share in dividends or $2.3 billion in total, and we have a significant and fixed rate charter backlog, supporting continued dividend capacity in the future. The total charter revenues of $157 million in the quarter was in line with the previous quarter, with more than 90% of this from vessels on long-term charters and less than 10% from vessels employed on short-term charters and in the spot market. The EBITDA equivalent cash flow in the quarter was approximately $117 million. And last 12 months, the EBITDA equivalent has been approximately $481 million, similar to the situation the last 12 months in the prior quarter. Excluding cash in the rig owning subsidiaries, the consolidated cash position at quarter end was more than $200 million, up from around $150 million at the end of the second quarter. In addition, we had $33 million in marketable securities at quarter end. And after quarter end, we have used some of the cash to take out the financing of the drilling rig West Taurus, but we still have a strong cash position with more than $100 million remaining. Our fixed rate backlog stands at approximately $3.2 billion after recent charter extensions and vessel sales, providing significant cash flow visibility going forward. Of this, $2.4 billion relates to shipping assets alone and excludes revenues from 16 vessels trading in the short-term market and also excludes future profit share optionality. The profit share contribution, which I mentioned, adds optionality value was around $6 million in the third quarter. This was primarily from the two VLCCs on charter to Frontline, but also from fuel savings from container vessels with scrubbers and a small contribution from bulkers. Following the immediate impact of COVID-19, some trades, including the car carrier market came to a virtual halt. We have two vessels in this market, and they were due to come off charters in May and in August this year. And consequently, we put them in lay-up in order to save costs as we believed at the time that it would take some quarters before the market would recover again. We are very happy to see that it happened much quicker than anyone anticipated and both vessels are now trading out chartered out again on one on 100-day charter and one for 11 months. And the charter rates are essentially back to pre-COVID-19 levels already. While the Seadrill restructuring is pending, we have already addressed the bank structures on two of the rigs. We have repurchased all the debt on the idle rig West Taurus at the discount essentially limited to the $83 million corporate guarantee, the cash in the rig owning subsidiary, which was already pledged to the banks anyway for some margin. We have also agreed to guarantee the financing on West Linus in exchange for more flexible financing terms. And with a large fleet of assets, it will always be acquisitions and disposals, and the remaining vessel on charter to the Hunter Group has been repurchased by them and delivered earlier this month. The Hunter deal was designed to give us a very high return on a low-risk profile in exchange for flexibility on Hunter's part. This is a good example of cost of capital arbitrage, where we could utilize our premium access to low-cost funding, and at the same time, give flexibility that Hunter was willing to pay for. The delivery took place yesterday and net cash to us is more than $10 million after repayment of the associated financing, and the proceeds are expected to be reinvested in new accretive transactions. Excluding the drilling rigs, which I will cover on the next page, the backlog from shipping assets was $2.4 billion at the end of the quarter. Over the years, we have changed both fleet composition and structure, and we now have 81 shipping assets in our portfolio and no vessels remaining from the initial fleet in 2004. We have gone from a single asset class chartered to one single customer to a diversified fleet and multiple counterparties. And over time, the mix of the charter backlog has varied from 100% tankers to nearly 60% offshore at one stage to container market being the largest right now. In addition, we have 16 vessels traded in the short-term market, which we define as up to 12-month charters and also from time to time, as I mentioned earlier, significant contributions from profit shares on assets. We do not have a set mix in the portfolio. Focus is on evaluating deal opportunities across the segments and try to do the right transactions from a risk-reward perspective. Over time, we believe this will balance itself out, but we try to be careful and conservative in our investments and not invest just because money is burning in our pocket. Our strategy has been to maintain a strong technical and commercial operating platform in cooperation with our sister companies in the Seatankers group. This gives us the ability to offer a wider range of services to our customers, from structured financings to full serve risk time charters, which is the bigger part of our portfolio. But more importantly, we also believe it gives us unique access to deal flow in our core segments. And with full control over vessel maintenance and performance, including energy efficiency and emission minimizing efforts, we can impact improvements to our vessels through the life of the assets and not only be passively owning vessels employed on bareboat where the customers may not always have an incentive to make such improvements. So unlike most of the companies with a financing profile in the maritime world, more than three-fourths of our shipping charters revenues comes from vessels on time charter and a smaller proportion from bareboat chartered assets. And even if we include the drilling rigs, which are all on bareboat charters, the time charter portion is still more than two-thirds. SFL owns three drilling rigs chartered to subsidiaries of Seadrill. All three rigs were employed on bareboat charters of Seadrill and generated approximately $24 million in charter hire in the third quarter. Net of interest and amortization, the contribution was approximately $8 million or around $0.07 per share. The harsh-environment jack-up rig West Linus has been subchartered to ConocoPhillips until the end of 2028, while the harsh-environment semisubmersible rig West Hercules is employed on consecutive subcharters to Equinor in the North Sea. The semisubmersible rig West Taurus has been stacked since 2015. Seadrill has disclosed that it is currently engaged in discussions with its financial stakeholders with regard to a comprehensive restructuring of its balance sheet and that such a restructuring may involve the use of a court supervised process similar to the 2017 restructuring. At that time, the loan balance on the rigs was much higher and we have reduced leverage by more than 50% in this three-year period as we illustrate on this slide. At the end of the second quarter, Seadrill reported a cash position of $1 billion, and while Seadrill did pay full charter hire in the third quarter, no charter hire has been received so far in the fourth quarter. Seadrill has also not paid interest on its bank debt recently and announced a forbearance agreement with its financial banks and some other stakeholders in mid-September, which was subsequently extended through October. The nonpayment of charter hire by Seadrill does constitute an event of default under the leases and in certain of the corresponding financing agreements. Unless cured away, this could result in enforcement of such default provisions. From the start of the transaction with Seadrill all the way back from 2008, all the revenues from the subcharters of these assets, and in this instance, more importantly here now from the two drilling rigs that are working, the West Linus and West Hercules, the revenues from the subcharter have been paid into accounts pledged to SFL's rig owning entities and refinancing banks. As a result of the current event of default situation caused by Seadrill, Seadrill will need prior approval to access these funds to pay for operating expenses and other expenses, and we'll have to source this from their cost cash position until the situation is resolved. The gross hire is significantly higher than the bareboat hire to us and keep accumulating on the pledged account for now. We can, unfortunately, not make any further comments relating to the pending restructuring. But our objective is, as always, to maximize long-term value for our shareholders. In the meantime, we have adjusted the quarterly distribution to exclude all distribution from these offshore assets. And when the Seadrill situation is resolved, the Board will reassess the situation and possibly reinstate contribution from the rigs in the future. And with that, I will give the word over to our CFO, Aksel Olesen, who will take us through the financial highlights of the quarter. On this slide, we have shown a pro forma illustration of cash flows for the third quarter. GAAP and also net of extraordinary and noncash items. The company generated gross charter hire of approximately $157 million in the third quarter, with more than 90% of the revenue coming from our fixed charter rate backlog, which currently stands at $3.2 billion. And while the current charter backlog relating to our offshore assets may be impacted by the pending Seadrill restructuring, the backlog from our shipping portfolio stands at a solid $2.4 billion, providing us a strong visibility on our cash flow going forward. At quarter end, SFL has a liner fleet of 48 container vessels and two car carriers. The liner fleet generated gross charter hire of approximately $80 million. Of this amount, approximately 98% was derived from our vessels on long-term charters. At quarter end, SFL's liner fleet backlog was approximately $1.8 billion, with an average remaining charter term for approximately four and a half years or approximately seven years if weighted by charter revenue. Approximately 84% of the liner backlog is the world's largest liner operators, Maersk Line and MSC, with a balance of approximately 16% to Evergreen. Our tanker fleet generated approximately $24 million in gross charter hire during the quarter, including $4.8 million in profit split contribution from our two VLCCs on charters to Frontline. The vessels are fixed on profitable subcharters until the end of the quarter, ensuring stability on a quarterly profit split also for the fourth quarter. The net contribution from the company's two Suezmax tankers was approximately $3.3 million in the third quarter, and the vessels are traded in the short-term market for the time being. On November 11, the company redelivered the last VLCC to the Hunter Group after declaration of a purchase option. After repayment of associated financing, the transaction increased SFL's cash balance by approximately $10.7 million. In the third quarter, our dry bulk fleet generated approximately $28.4 million in gross charter hire. Of this amount, approximately 70% was derived from our vessels on long-term charters. During the quarter, the company had 10 Handysize vessels employed in spot and short-term markets. The vessels generated approximately $7 million in net charter hire compared to $2.4 million in the previous quarter. At the end of the third quarter, SFL owned three drilling rigs. All of our drilling rigs are long-term bareboat charters to fully guaranteed affiliates of Seadrill Limited and generated approximately $24.4 million in charter hire during the quarter. This summarizes to an adjusted EBITDA of approximately $170 million for the third quarter or $1.08 per share. We then move on to the profit and loss statement as reported under U.S. GAAP. As we have described in previous earnings calls, our accounting statements are different from those of a traditional shipping company. And as our business strategy focuses on long-term charter contracts, a large part of our activities are classified as capital leasing. As a result, significant portions of our charter revenues are excluded from U.S. GAAP operating revenues and instead booked as revenues classified as repayment of investments in finance leases and vessel loans, results in associate and long-term investments and interest income from associates. So for the third quarter, we report total operating revenues according to U.S. GAAP, approximately $160 million, which is less than approximately $157 million of charter hire actually received for the reasons just mentioned. In the quarter, the company reported profit split income of $4.8 million from our tanker vessels on charter to Frontline and $800,000 from profit split arrangements related to fuel savings on some of our large container vessels. Beginning in 2020, assets classified as financial assets, including several of SFL's vessels and rigs on long-term leases, are subject to general credit loss provisions similar to those requirements for banks and financial institutions. The net change in such provisions is recorded in the income statement each quarter. In the third quarter, the credit loss provisions increased by approximately $6.2 million, primarily in wholly owned nonconsolidated subsidiaries. Furthermore, the company recorded nonrecurring and noncash items, including negative mark-to-market effects relating to interest hedging, currency swaps and equity investments of $600,000 and amortization of deferred charges of $2.3 million. So overall, and according to U.S. GAAP, the company reported a net profit of $16 million or $0.15 per share. Moving on to the balance sheet. At quarter end, SFL had approximately $206 million of cash and cash equivalents, excluding $22 million of cash held in wholly owned nonconsolidated subsidiaries. Furthermore, the company had marketable securities of approximately $33 million, based on market prices at the end of the quarter. This included 1.4 million shares in Frontline, four million shares in ADS Crude Carriers and other investments in marketable securities, in connection with the sale of 3 older VLCCs to ADS Crude Carriers back in 2018 as well to shares in the company as part payment. ADS has now sold all the vessels at attractive prices. And it's expected that the net proceeds from the vessel sales will be returned to investors. When including the dividend received, the value is estimated approximately $12 million illustrating how SFL, from time to time, takes steps to maximize value for our shareholders. At quarter end SFL had five debt-free vessels with a combined charter value of approximately $40 million based on average broker appraisals. So based on Q3 2020 figures, the company had a book equity ratio of approximately 26%. Then to summarize, the Board has declared a cash dividend of $0.15 per share for the quarter. This represents a dividend yield of approximately 8% based on the closing share price yesterday. This is the 67th consecutive quarterly dividend, and since inception of the company in 2004, more than $27 per share or $2.3 billion in aggregate have been returned to shareholders through dividends. And while we continue to collect revenue from our fixed charter rate backlog, we also have upside from profit split arrangements from our VLCCs in addition to profit split arrangements related to fuel savings on some of the large container vessels. Despite a relatively volatile market in 2020, we have added more than $250 million per fixed charter rate backlog over the last 12 months. And we actively continue to explore new business opportunities. And while risk premiums on energy and shipping investments have increased with the recent volatility in financial markets, SFL has, at the same time, with new attractive financing, has expanded its group of lending banks, especially in the Far East to now represent more than 40% of our lending volume. SFL's business model has been continuously tested throughout its 16 years of existence and has previously been highly successful in navigating periods of volatility.

compname reports preliminary q3 2020 results and quarterly cash dividend of $0.15 per share. sfl - preliminary q3 2020 results and quarterly cash dividend of $0.15 per share. board has decided to effectively exclude all cash flow earned from offshore assets for time being.

I'm joined on the call today by our Chairman and Chief Executive Officer, Ron Kruszewski; our Co-Presidents, Victor Nesi and Jim Zemlyak; and our Chief Financial Officer, Jim Marischen. This audiocast is copyrighted material of Stifel Financial Corp. and may not be duplicated, reproduced or rebroadcast without the consent of Stifel Financial. Our value as a company is and always will be our people. So let me give some highlights of our quarter, have Jim Marischen review our balance sheet and expenses, and I will wrap up with our outlook before Q&A. As you can see on Slide one, the first quarter of 2021 was another record for Stifel as we continue to benefit from our ongoing investment in our firm as well as the strength of the operating environment. Our revenue in the first quarter was a record of nearly $1.14 billion, an increase of 24% and surpassed last quarter's record by more than $75 million, driven by record revenue in both our Global Wealth Management and Institutional Groups. The growth in revenue and our focus on expense management resulted in non-GAAP earnings per share of $1.50, which was up 88% year-on-year and represented the second highest quarterly earnings per share in our history. The investments that we've made in our business have enabled us to participate to a far greater magnitude than we would have had we not invested in the business. Our record results were driven by our past recruiting success to growth in our balance sheet and robust capital markets. Other highlights for the quarter. Pretax margins of more than 21%, annualized return on tangible common equity of over 28% and tangible book value, which increased 32%. Turning to the next slide. As I stated, our first quarter net revenue increased 24% to a record surpassing $1.1 billion. Compensation as a percentage of net revenue came in at 60.9%, which was just above the high end of our annual range, yet is consistent with our policy of accruing for compensation conservatively early in the year. Our operating expense ratio was about 18%. But excluding credit provision and investment banking gross-ups, our operating expense ratio totaled approximately 16%. This came in below our full year guidance due to the strength of our revenue and strong expense management. As the economic outlook improves, we, like other banks, have updated our economic models. This, coupled with strong credit performance in our loan portfolio, resulted in a relief of $5 million of our credit provisions during the quarter. As you recall, our provision expense last year was driven by the adoption of CECL, and more specifically, the negative economic outlook that was a key input into the calculation. So neutralizing the impact of credit provisions, Stifel's pre-tax pre-provision income totaled $238 million, which increased 61% from the first quarter of 2020. Moving on to our segment results and starting with Global Wealth Management. First quarter revenue totaled a record $631 million, up 8% year-on-year. While this increase is impressive, I believe it understates the strength of our business as it includes a nearly $24 million decline in net interest income at our bank subsidiary. Excluding the impact of lower bank NII, our private client business improved 13%, driven by the strength in asset management as well as growth in brokerage revenue, as we benefited from enhanced client activity levels and continued success in recruiting. We again finished the quarter with record client asset levels. Total assets under administration of nearly $380 billion increased $21 billion from the prior quarter. Additionally, fee-based assets of $138 billion rose 7% sequentially, which should drive further growth in the asset management and service fees line item in the second quarter of this year. The next slide highlights the strength of our recruiting and the growth drivers of our platform. We had a solid quarter in terms of advisor additions as we added 15 advisors with total trailing 12-month production of $13 million. While this was fewer advisors than we've typically recruited in recent quarters, I'd remind you that recruiting is cyclical and is best examined over a longer time frame. Since the beginning of 2019, we've added 300 financial advisors with cumulative production of approximately $233 million. As I look at the remainder of the year, our recruiting pipelines remain at robust levels and I anticipate another strong year. In the first quarter, we announced that we were rebranding Century Securities, which we've operated since 1990 as Stifel Independent Advisors. Given the growth in this industry channel and the fact that we already have the legal and supervised restructure in place plus an outstanding platform, we believe that our overall recruiting efforts will be enhanced by our renewed focus on this market channel. Moving on to our Institutional Group. This quarter represented our second consecutive record quarter for Institutional Group. Net revenue totaled $506 million, which was up 52% from the prior year and surpassed last quarter's record by approximately $15 million. Our performance was strong across all of our major revenue lines as our business continues to benefit from strong market activity, the recent investments in our business and contributions from both Canada and Europe. We generated a 23% pre-tax operating margin, which was up more than 1,000 basis points from the same period a year ago. Looking at the revenue components of our institutional business, I would note that our equities business totaled $226 million, up 74%; while fixed income totaled $146 million, which increased 10% from the comparable first quarter of 2020. With respect to our trading businesses, we generated record equity brokerage revenue in the first quarter, surpassing our prior record set a year ago by 13% as strong activity levels continued and trading gains increased. Additionally, I'd note that our electronic brokerage businesses, which include our ATS and algo products are now fully launched, and we would expect to see increased contributions from these products as the year progresses. Fixed income brokerage revenue in the quarter was up 12% sequentially and represented our third highest quarterly revenue, trailing only the first and second quarter of last year. Similar to my comments last quarter, our fixed income trading continues to be driven by increased activity across the board as well as non-CUSIP businesses. On Slide seven, investment banking revenue of $339 million was our second consecutive quarterly record, surpassing last quarter's record by a few million dollars, driven primarily by record capital raising revenue. Equity underwriting revenue was standout in the quarter, coming in at $160 million and surpassing the record we set last quarter by nearly $50 million. This is a good example of how, by investing in our business over the last several years, we've become a more significant player as we were a book runner on more than 50% of the IPOs we participated in the quarter. Our strongest verticals were healthcare, technology, financials and consumers. As widely reported, there was an incredible amount of SPAC-related activity within our industry during the first quarter. However, SPACs accounted for a little more than 15% of our equity underwriting revenue in the quarter. So whether the recent slowdown in SPAC activity represents a pause or a saturation point, we are confident about the strength of our more traditional pipeline. While our equity business was quite robust, we also recorded great results in fixed income. Our fixed income underwriting revenue of $49 million was a record for the first quarter and was up 43% year-on-year. Our municipal finance business rebounded from challenging market conditions in the first quarter of 2020 as we lead manage 236 municipal issues, which represented an increase of 42%. While we are off to a strong start for the year, we believe that if Congress were to pass an infrastructure bill, we would see additional tailwinds to our public finance business. We also continue to see solid contributions from our growing corporate debt issuance business. Regarding our advisory business, revenue of $130 million represented our third highest quarterly revenue and a record by almost 25% for any first quarter. In terms of verticals, we benefited from the expected pickup in financials and continue to see broad-based results from technology, consumer and healthcare. Looking forward to our second quarter, based upon anticipated closings of some larger previously announced transactions and of course, barring a substantial change in the market or the economy, we expect to see a solid increase in our advisory revenue. In terms of our overall pipelines, they are up double digits compared to where we began the year, and I remain very optimistic for our investment banking business in 2021. Let me begin by making a few comments regarding our GAAP earnings. In the quarter, we generated the second highest GAAP earnings per share in our history at $1.40, which was only surpassed by the results generated last quarter. We again generated strong returns on equity with an ROE of 18% and ROTCE of nearly 27%. Similar to last quarter, the strong GAAP earnings resulted in increases in our book value and tangible book value. This was accomplished while increasing assets by $1.5 billion, resuming our open market share buyback program and given the seasonal impact of stock compensation on equity in the first quarter. And now let's turn to net interest income. For the quarter, net interest income totaled $113 million, which was up $8 million sequentially. Our firmwide net interest margin increased to 200 basis points, and our bank's net interest margin improved to 240 basis points. Both NII and NIM benefited from the remix of bank assets out of our securities portfolio and into our loan portfolio as well as growth in our average interest-earning asset levels by 6% during the quarter. I would also note that we did see some more episodic loan fees earned during the quarter that contributed to NII. We expect this contribution to decline somewhat in the second quarter, but the loan and securities growth that occurred in the first quarter will more than offset this decline. As such, in terms of the second quarter, we expect net interest income to be in a range of $110 million to $120 million and with a similar NIM to the first quarter. Further, while we have produced a stabilized NIM over the last few quarters, we continue to be very asset sensitive. As an update to what we discussed last quarter, assuming a 100 basis point increase in rates across the curve and a 30% deposit beta, we would generate an additional $150 million to $175 million of pre-tax earnings. I would note that our deposit betas have been and will continue to be driven by the competitive environment. But for this analysis, we used a 30% deposit beta. This represents an estimate from what actually happened to Stifel over the entire last rate cycle, but I would highlight that beta was very much weighted to the latter portion of the cycle. Moving on to the next slide. I'll go into more detail on the bank's loan and investment portfolios. We ended the period with total net loans of $12.2 billion, up approximately $1 billion from the prior quarter. We saw growth in both the consumer and commercial portfolios. Our mortgage portfolio increased by $200 million sequentially, and as we continue to see demand for residential loans from our wealth management clients despite the increase in interest rates during the quarter. Our securities-based loan portfolio increased by approximately $170 million. Growth in these loans continues to be strong as FA recruiting momentum continues to drive increased loan balances. Our commercial portfolio accounts for 39% of our total loan portfolio and is primarily comprised of C&I loans, which increased by 15% during the quarter. Our portfolio is well diversified with our highest sector exposure in fund banking and PPP loans, each representing approximately 5% of the portfolio. PPP loans accounted for more than $400 million of C&I growth, while fund banking accounted for $260 million. But given its size, we felt it made sense to break this out as an individual line item. We will look to continue to be active in the fund banking space as we view this as an attractive risk-adjusted return. Moving to the investment portfolio, which continues to be dominated by AAA and AA CLOs. We've not seen any material change in the underlying credit subordination provided by these securities and continue to be pleased with their performance. This can be seen in the fair value of the portfolio, which was at an average price of 99.9% of amortized cost at quarter end. We increased our CLO holdings by 7% from last quarter in anticipation of some payoffs expected to occur in the second quarter. Turning to the allowance. We had a $5 million reversal of our allowance through a negative provision expense as additional reserves tied to loan growth were more than offset by the improved economic scenario in our CECL calculation. As a result of the reserve release and the composition of our loan growth during the quarter, our ratio of allowance to total loans declined to 118 basis points, excluding PPP loans. It is important to look at the level of reserves between our consumer and commercial portfolios given their relative levels of inherent risk. At quarter end, the consumer allowance to total loans was 31 basis points, while the commercial portfolio was at 174 basis points. We also continue to see strong credit metrics with nonperforming assets and nonperforming loans remaining at seven basis points. Further, we did take the opportunity to derisk from our commercial book by selling or reducing positions by $83 million on five C&I loans, which resulted in less than $1 million of charge-offs. This equates to a roughly 1% discount to bar. All five of these loans were in sectors more impacted by COVID and carried reserves well in excess of where we sold them. Moving on to capital and liquidity. Our risk base and leverage capital ratios came in at 19.4% and 11.5%. The decline in our capital ratios was driven by balance sheet growth and the $68 million impact in equity to net settle taxes on our issues in the first quarter. This was offset by the strength of our retained earnings. We also resumed our open market share repurchase program late in the first quarter. We repurchased approximately 195,000 shares at an average price of $61.79 per share. Our book value per share increased to $35.96, up modestly from the prior quarter as the impact of net income on equity was offset by the aforementioned vesting of restricted stock. Our tangible book value per share increased to $23.93. We continue to feel good about our financial position as our liquidity remains strong. The total third-party cash REIT program increased by approximately 5% during the quarter, which was used to fund the aforementioned bank growth. I would also highlight that S&P recently improved Stifel Financial's outlook to positive based on our strong operating results and overall financial position. On the next slide, we go through expenses. In the first quarter, our pre-tax margin improved 730 basis points year-on-year to more than 21%. The increase was the result of strong revenue growth, lower compensation accruals and our continued expense discipline. Our comp-to-revenue ratio of 60.9% was down 160 basis points from the prior year. That ratio came in above our full year range of 58.5% to 60.5% and is consistent with our strategy to be conservative in our compensation accruals early in the year given the transactional nature of a large portion of our business. That said, assuming market conditions stay strong, we anticipate that our conservative accruals early in the year could lead to added flexibility in the back half of the year. Noncomp opex, excluding the credit loss provision and expenses related to investment banking transactions, totaled approximately $184 million and represented approximately 16% of net revenue. This was also below our recent guidance, primarily due to stronger-than-expected revenue. The effective tax rate during the quarter came in at 24.1%, which was driven by the impact of the excess tax benefit related to stock compensation. Absent any other discrete items, we would expect to see the effective rate to be in the 25% to 26% range in the second and third quarters as we have limited RSU vesting that occurs before the fourth quarter. In terms of our share count, our average fully diluted share count was up 1% primarily as a result of the increase in our share price. Absent any assumption for additional share repurchases and assuming a stable stock price, we'd expect the second quarter fully diluted average share count to total 118.7 million shares. As I said at the beginning of the call, this year is off to a very strong start. Looking back at our guidance for 2021, many of the expectations for economic and market conditions that we then highlighted have not only played out as we expected but in some cases, has happened much faster. Our business is benefiting from past recruiting success, higher equity markets, increased levels of interest-bearing assets, robust trading activity for debt and equity, record equity issuance, solid credit metrics and a strong investment banking pipeline. As vaccinations increase and the economy continues its recovery, we continue to expect a very strong operating environment for the remainder of 2021. Additionally, looking forward to our second quarter, for many of the same factors already cited, our business is off to a good start. With respect to our full year revenue guidance of $3.8 billion to $4 billion, based on what I'm seeing in our outlook, we are tracking above the high end of our full year guidance. And if favorable market conditions continue, we see a path to exceed our full year revenue guidance. With that said, I'll make some comments about what we're seeing so far in the second quarter and our expectations. Global Wealth Management is off to a strong start. Our asset management fees will benefit from the 7% increase in fee-based assets last quarter. And the midpoint of our NII guidance is above first quarter levels, and we continue to see client engagement. For Institutional Group, our investment banking pipelines remain at robust levels. While timing will always play a factor in our investment banking revenue in any given quarter, we'd expect to see a greater contribution from our advisory business given the expectation for increased M&A, particularly in financials. Additionally, as I look forward, we have a number of large transactions that are scheduled to close, and this increases my confidence for the remainder of the year. In terms of underwriting, activity levels so far in the quarter have pulled back from the torrid pace experienced in the first quarter but still remains strong. Moving on to expenses. Our full year compensation guidance remains in place, and we would expect to see the typical sequential decline in the compensation ratio in the second quarter, assuming market conditions remain stable. Our noncomp operating expenses should be similar to those in the first quarter as we continue to see relatively modest increases in travel and entertainment expenses. In terms of capital deployment, as always, we will continue to focus on risk-adjusted returns. In the first quarter, we took advantage of good credit conditions to deploy capital into growing our balance sheet. The $1.5 billion in balance sheet increase represents 75% of our full year guidance. If we continue to see similar credit conditions, we could grow our balance sheet more than our initial guidance as we see solid returns from this use of capital. We will continue to repurchase shares to offset dilution, but otherwise, we're likely to continue to be opportunistic with our repurchase activity. Lastly, we will continue to look at acquisition opportunities and investments into our business as Stifel is and always has been a growth company and investing in our franchise has historically generated strong returns. So let me sum all this up by saying our business is in a great position to not only capitalize on the current strength of the operating environment but has proven to have the flexibility to successfully adapt to changes that could occur.

q1 non-gaap earnings per share $1.50. q1 earnings per share $1.40. q1 revenue rose 24.3 percent to $1.1 billion.

I'm joined on the call today by our Chairman and CEO, Ron Kruszewski; our Co-Presidents, Victor Nesi and Jim Zemlyak; and our CFO, Jim Marischen. This audio cast is copyrighted material of Stifel Financial. It may not be duplicated, reproduced or rebroadcast without the consent of Stifel Financial Corp. I'll start the call with some highlights from our quarterly and first half results, then I'll discuss our revised outlook for the full year. Jim Marischen will review our balance sheet expenses and then I'll wrap up with some concluding thoughts. Before I get into the specifics of our quarterly results, let me start by saying that overall, Stifel business in the first half of 2021 has surpassed any six-months stretch by a wide margin and rivals some of our most recent full-year results. Our record six-month net revenue was the result of records in both of our major operating segments. The strength of our top line and our continued focus on operating efficiency resulted in record quarterly and six months revenue, as well as record-earnings per share. As we head into the back half of this year, we are well-positioned to continue our strong performance, which is illustrated by our increased full year guidance, which I'll discuss in greater detail in a few minutes. So, looking at our quarterly and year-to-date snapshot, the numbers really speak for themselves and are the result of the investments over the last several years and a strong operating environment, especially for our Investment Bank. Revenue in the second quarter was a record of more than $1.5 billion, an increase of 29%. For the six-month period, revenue was nearly $2.3 billion, up 27% and further illustrating our growth was roughly as much as our 2015 full year revenue. The growth in revenue and lower expense ratios resulted in record non-GAAP earnings per share of $1.70, which was up 65% year-on-year and $3.20 year-to-date, which is up 75% and when compared to our past full year results would rank as the fourth best in our history. I'm also pleased with our operating leverage as we generated record pre-tax margin of 24% and our annualized return on tangible common equity was nearly 31%. Tangible book value per share increased 29% in the last year. Turning to the next slide. Our record second quarter net revenue was driven by global wealth management and increased 26% in our institutional business, which posted a 31% improvement. Compensation as a percentage of net revenue declined sequentially to 59.5%, which was in-line with our guidance on last quarter's call. Our operating expense ratio of 17% and excluding credit provision in investment banking grow subs, our operating ratio totaled 16%. This was again well below our full year guidance due to the strength of our revenue and expense management. As the economic outlook improves, we, like other banks have updated our economic models. This, coupled with strong credit performance in our loan portfolio resulted in a reversal of more than $9 million of credit provisions during the quarter. I would note that this was comprised of a $4 million release of credit provisions due to improving economic outlook and approximately $5 million relating to loan sales. As it relates to the loan sales, Jim Marischen will provide more color in his remarks. Neutralizing the impact of credit provisions, Stifel's pre-tax, pre-provision income totaled $270 million, which increased 31% year-on-year and 13% sequentially. While the strength of the operating environment, particularly in investment banking has been a primary driver of our results, I do not want to understate the importance of the investments we've made in our business as a meaningful contributor to our performance. Stifel is and will continue to be a growth company. Our focus on investing in our business and making us more relevant to our clients has resulted in not only impressive topline growth, but significant operating leverage. As you can see from the numbers on the slide, our total net revenue on an annualized basis in 2021 has doubled since 2015 and was driven by both our wealth management and institutional businesses, essentially doubling in that timeframe. What is particularly interesting is not only as our revenue growth doubled, but our growth rate has accelerated. To illustrate some of the numbers, at the end of 2015, our net revenue total approximately $2.3 billion, with nearly $1.4 billion from Wealth Management and roughly $1 billion from our institutional group. Since that time, we've grown our Wealth Management business by hiring experienced financial advisors and more than doubling our balance sheet. This has led to a more than 70% increase in total client assets and annualized global wealth revenue that would surpass 2015 results by 84%. Our institutional business, we've made six acquisitions and our total Managing Directors have increased 67% and our investment banking business contributing an 111% increase in our institutional revenue since 2015. While our revenues are on an impressive trajectory, our ability to generate operating leverage, I think is even more outstanding. In the first half of 2021, our pre-tax margin increased to 23% from 10% in 2015, while our return on tangible common equity improved to 30% from 10% in that same time period. Looking at our operating leverage another way, our earnings per share has quadrupled on a doubling of revenue since 2015. This increase in our scale and the fact that we continue to be more relevant to our clients are the primary drivers behind my optimism for the back half of this year. Now before I go into details of our updated guidance, I want to note that our revised outlook is based on continued favorable market conditions. There are always risks such as market corrections or geopolitical crisis that could negatively impact the operating environment and particularly our investment banking business. But given the strength of our results in the first half of the year, the current strength of our pipelines and my visibility into the beginning of this quarter, we believe that it is appropriate to increase our full year guidance at this time. We now expect net revenue to be in the range of $4.5 billion to $7 billion, up 13% to 18% from the high end of our prior guidance. This is a reflection of the strength of our investment banking and Wealth Management businesses. We are tightening our net interest income guidance to $465 million to $485 million as the benefits of the growth in our balance sheet has helped to offset the decline in short-term rate. In the second half of 2021, we anticipate an additional $2 billion of asset growth at our bank. As a result of our increased revenue expectations, we are lowering our expense ratio guidance. Our comp ratio is lowered to 58% to 60%, given our expected NII results and strong investment banking. Our operating non-comp expense ratio expectations has declined to 16.5% to 18.5% as we continue to see improved operating leverage in our business. I would note that the midpoint of our revenue guidance would suggest that Stifel achieve second half revenue essentially equal to our first six months of revenue, the current market environment, our pipelines clearly support this guidance and further historically the second half of the year, especially the fourth quarter are strong seasonal periods for Stifel. I would also note that not only is our updated guidance, significantly above our original expectations, but also well above the current 2021 Street expectations of $4.3 billion in revenue and $5.57 of earnings per share. And with that, let me move on to the results of our operating segments, starting with Global Wealth Management. Second quarter revenue totaled a record of $638 million, up 26% year-on-year and with six-month revenue of $1.3 billion, also a record and up 17%. Our growth was driven by increased asset management, revenue and net interest income. The continued growth in our asset management revenue was driven by higher market valuations and increased client assets, which finished the quarter at record level. Total assets under administration were $402 billion and fee-based assets of $149 billion rose 8% sequentially. These asset levels should drive further growth in asset management revenue in the current quarter. Net interest income increased 3% year-over-year, primarily, given our continued ability to grow loans and produce a stable net interest margin. The next slide highlights the strength of recruiting in the growth drivers of our platform. We added 26 advisors, including 14 experienced advisors with total trailing 12-month production of $12 million. The gross number of recruits is down compared to last year as the return of advises to their offices have slowed recruiting. In addition, there was increased competition from larger firms offering, what is in our opinion very high transition packages. That said, as our inflation experts in Washington like to say, we view the situation as transitory as our pipeline remains robust. Additionally, we definitely are seeing activity within Stifel independent advisors and look forward to recruiting to pick up in this channel. Moving onto our institutional group. We posted our third consecutive record quarter in our institutional business as we continue to benefit from increased activity levels and the scale of our business. Our quarterly net revenues total a record $521 million, which was up 31% from the prior year. Six-month revenue increased 41% over $1 billion. Quarterly advisory revenues more than doubled to $207 million while capital raising posted revenue of $158 million, which was up 42%. These results more than offset a 17% decline in our trading revenue. While the decline in trading revenue was expected as compared to the robust activity in the second quarter of 2020, I am pleased with our results relative to The Street, at least to the reported numbers that I have seen. As noted on previous earnings calls, we've been investing in our institutional business with the objective of becoming more relevant to our clients and the market as a whole. The leverage in these investments was on display this quarter as our pre-tax margins improved by 630 basis points to 27%. Looking at the revenue components of our institutional business, our equities business posted record first half results of $391 million, up 52% while our second quarter revenue totaled $163 million, up 29% year-on-year. Our fixed income business posted quarterly revenue of $147 million, while down 13% year-over-year was up sequentially. On this slide, our focus on the trading businesses of these segments and discuss capital raising on the next slide when I talk about investment banking. With respect to our trading businesses, equity quarterly revenue totaled $61 million, down 22% from record levels in the first quarter, which was slightly better than the overall market volume declines which we witnessed. Six-month revenue was $141 million, which was up 5% from 2020. Fixed income trading revenue of $92 million was down 7% sequentially. Similar to my comments regarding Institutional Equities, our fixed income trading was impacted by lower industry volumes. While an industrywide slowdown in credit trading was the primary driver of our revenue decline, I want to say that our rates of muni revenue experienced solid improvement. On slide 9, investment banking revenue of $376 million was our third consecutive quarterly record, an increase of 73%, driven primarily by record advisory revenue. First half revenue of $716 million increased 81% as we generated record capital raising in the first quarter and record advisory revenue in the second quarter of this year. I noted on last quarter's call that we expected a strong second quarter for our advisory business and that is exactly what we got. Record revenue of $207 million surpassed our prior quarterly record by 19%. In terms of verticals, financials was a standout as KBW had its best quarter since our merger back in 2013. Since the beginning of 2020, KBW has advised on 8 of the 10 largest bank mergers and has the highest market share in the firm's illustrious history. Additionally, we saw strong contributions from technology, consumer and diversified services as well as in the fund placement business from Eaton partners. Looking at our third quarter, borrowing [Phonetic] a substantial change in the market or economy, we expect to see continued strength in advisory revenue. Moving on to capital raising. Our equity underwriting business posted revenue of $112 million, up 61% and our second best quarter in history, trailing only the first quarter of this year. Strongest verticals were consumer, healthcare, technology and financials. In addition to the strength of our equity business, we generated record results in our fixed income underwriting business of $57 million, which was up 16%. Our municipal finance business posted another great quarter, as we lead managed 244 municipal issues. For the first 6 months, our market share in terms of number of transactions increased to 12.5% from 10.9% in the first half of 2020. I think it is noteworthy that in the first half of 2021, non-public finance revenue which was minimal just a few years ago now accounts for nearly 20% of our fixed income underwriting. This is a result of our efforts to diversify both domestically and internationally. In terms of our overall pipelines, they continue to build and remain at record levels, we expect strong performance from all of our major verticals and as our updated guidance indicates, I am very optimistic for our investment banking business in 2021. With that let me turn off the call over to our CFO, Jim Marischen. Before getting into our net interest income and balance sheet, I want to make a few comments on our GAAP earnings and non-GAAP charges. I the quarter, we saw a $0.10 differential between our GAAP and non-GAAP results. To add some color to these items, the differential is almost entirely related to three basic deal-related expenses including stock-based compensation, intangible amortization expense, and an additional true up on an earn out from an acquisition has performed better than our original projections. And now let's turn to net interest income. For the quarter, net interest income totaled $190 million, which was up $6 million sequentially. Our firmwide and bank debt interest margins remained at 200 basis points and 240 basis points respectively. As expected, our NIM did not change from the prior quarter. While net interest income, benefited from a 6% increase in interest earning assets. I'll touch at this growth in more detail on the next slide. In terms of our third quarter expectations, we see a net interest income in a range of $115 million to $125 million and with a similar NIM to the second quarter. We noted last quarter the significant improvement in our asset sensitivity when compared to just a few years ago. We are maintaining our prior guidance of $150 million to $175 million of incremental pre-tax income as a result of 100 basis point increase in rates. This assumes the same set of assumptions discussed last quarter applied to our quarter end balance sheet. Moving on the next slide. I'll go into more detail on the bank's loan and investment portfolios. We ended the quarter with total net loans of $12.9 billion, which is up approximately $700 million from the prior quarter and was primarily driven by growth in our consumer channel. Our mortgage portfolio increased by $400 million sequentially as we continue to see demand for residential loans from our Wealth Management clients. Our securities based loan portfolio increased by approximately $240 million. Growth in these loans continues to be strong as FA recruiting momentum continues to drive increased loan balances. Our commercial portfolio accounts for 37% of our total loan portfolio, it is primarily comprised of C&I loans, which were up slightly from the prior quarter. Our portfolio is well-diversified with our highest sector exposure in Fund Banking, which increased outstanding balances by $325 million during the quarter. We believe these loans continue to represent an attractive risk-adjusted return and we expect to continue to be active in this space. I also want to note that we had a nearly $200 million reduction in our PPP loans during the quarter. This is expected as a good portion of these loans were originated as part of a third party origination platform. We also expect to see further reduction of PPP loans in the third quarter. Moving to the investment portfolio, which increased by $300 million sequentially. About two-thirds of this increase was seen within CLOs, while the remainder of the growth was primarily and shorter duration corporate bonds. Turning to the allowance. For the second straight quarter, we recorded a reserve release. In the second quarter, we had a $9 million reversal of our allowance through a negative provision expense as additional reserves tied to loan growth we're more than offset by the improved economic scenario in our CECL model. I would also highlight that approximately $5 million of the negative provision expense was tied to $200 million of loans that are being sold at a premium. As we entered into agreement to sell these loans at a premium, the accounting guidance dictates that these loans be reclassified to held for sale and the allowance tied to these loans reversed. We continually look at our retained loan portfolio and determine this specific pool of loans was not a core area of growth for the bank. And as such, we made the decision to sell. As a result of the reserve release in the composition of our loan growth during the quarter, our ratio of allowance to total loans declined to 99 basis points, excluding PPP loans. As I've stated last quarter, it's important to look at the level of reserves between our consumer and commercial portfolios given the relative levels of inherent risk. At quarter end, the consumer allowance to total loans was 35 basis points, while the commercial portfolio was 142 basis points. We also continue to see strong credit metrics with non-performing assets and non-performing loans declining to 5 basis points. Moving on to capital and liquidity. Our risk-base and leverage capital ratios came in at 18.9% from 11.7% respectively. The increase in the leverage ratio was driven by the strength of our retained earnings and was offset by loan growth in the quarter. During July, we also closed on a $300 million, 4.5% non-cumulative perpetual preferred stock offering and announced the redemption of our 6.25% percent Series A preferred. We continued our share repurchase program in the second quarter by buying back 440,000 shares at an average price of $65.85. We continue to feel good about our financial position as our liquidity remains strong. In addition to the $6 billion available on our sweep program, the bank has access to off-balance sheet funding of more than $4 billion. Within our primary broker dealer and holding company, we have access to nearly $2 billion of liquidity from cash, credit facilities that are committed and unsecured, as well as secured funding sources. I would also highlight that Fitch recently affirmed our credit rating and improved outlook to positive based on our strong operating results and overall financial position. On the next slide, we go through expenses. In the second quarter, our pre-tax margin improved 650 basis points year-on-year to a record 24%. The increase was a result of strong revenue growth, lower compensation accruals and our continued expense discipline. Our comp-to-revenue ratio of 59.5% was down 50 basis points from the prior year. The ratio came in at the midpoint of our previous full year guidance range. For the first six months of this year, our comp ratio was 60.2% and given our updated guidance, it is safe to assume that we expect the comp ratio in the second half of the year to be below the first. Non-comp operating expenses excluding the credit-loss provision and expenses related to investment banking transactions totaled approximately $185 million that represented approximately 16% of net revenue. This is also below our prior guidance primarily due to stronger-than-expected revenue. We expect the travel and entertainment-related expenses will pick up in the second half of the year, but will likely have a larger impact from the fourth quarter than the third. The effective tax rate during the quarter came in at 25%, which is at the lower end of the range and in-line with our commentary on last quarter's call. Absent any other discrete items, we'd expect to see an effective rate to be between 24% and 26% in the second half of the year. In terms of our share count, our average fully diluted share count was up 1% primarily as a result of normal stock-based compensation, offset by share repurchases. Absent any assumption for additional share repurchases and assuming a stable stock price we'd expect the third quarter, fully diluted share count to total 118.5 million shares. As you can see from our record first half results and the significant increase in our guidance 2021 is shaping up to be a far better year than we had originally forecast. Given our performance to date and our outlook for the second half of the year, we should again generate significant levels of excess capital. In addition to the excess capital we generate from operations as Jim noted, we raised an additional $300 million in preferred shares during July after redeeming our Series A preferred, we added an incremental $150 million in capital. I mentioned this to illustrate just how well positioned we are to take advantage of opportunities that come our way. I think it's pretty clear from our results and my comments about the benefits of our increased scale that reinvestment into our business is my preferred use of capital. As our updated guidance illustrates, we believe that we can grow our balance sheet by an additional $2 billion in the second half of the year. Many bolt-backed [Phonetic] firms and smaller regional banks have had muted loan growth rates given their sheer size or geographic limitations. By contrast, our loan portfolio is relatively small compared to the national footprint of our wealth management and institutional businesses. Security-based and mortgage loans have grown primarily through retail demand and new advisor recruiting and in recent years, we have expanded our capabilities and new commercial lending businesses. The combination of these growth channels has enabled us to generate and the average annual loan growth rate of 30% in the last seven years, while maintaining a strong credit profile. In terms of growth in our other business lines, we continue to focus on both hiring and acquisitions while we haven't done an acquisition in 18 months. We continue to believe that this is an attractive use of capital and a key element to our growth strategy. That said, we will always focus on deploying capital based on where we can generate the best risk adjusted returns and we'll continue to deploy capital through dividends and share repurchases. However, as a growth company, I believe that Stifel and our shareholders have and will continue to see the greatest upside from growth in our franchise.

qtrly non gaap diluted earnings per share $1.70.

If you do not yet have a copy, you can access them on our website. We are providing that information as a supplement to information prepared in accordance with generally accepted accounting principles. With us on the call today are John Arabia, President and Chief Executive Officer; Bryan Giglia, Chief Financial Officer; and Chris Ostapovicz, Chief Operating Officer. I'll start with a review of our second quarter operating results, which materially exceeded our expectations and pushed the company back into profitability sooner than expected. I will also provide an update on the current operating environment and forward booking trends, which continue to provide strong signal of continued growth in the third and fourth quarters despite the uncertainty surrounding COVID-19. Last, I'll provide an update on our most recent hotel investment, Montage Healdsburg, and the potential for additional acquisitions of long-term relevant real estate. Bryan will later provide more details on our liquidity, earnings and dividends as well as an update of our recent finance transactions, which have materially increased our near-term investment capacity. To begin, let's talk about our second quarter operating results. Building on the better-than-anticipated results of the first quarter, second quarter materially exceeded our expectations with comparable 17-hotel portfolio revenues of $104 million, and RevPAR of $96. RevPAR at all of our open hotels, including Montage Healdsburg, was $107, made up of an average daily rate of $235 and an occupancy of 45.6%. While the comparison to the second quarter of 2020 is of little value, the open hotel RevPAR of $107 in the second quarter was more than double the open hotel RevPAR of nearly $48 achieved in the first quarter of this year. Furthermore, our occupancy, ADR and RevPAR have each increased meaningfully on a sequential basis every month this year, and our June RevPAR of almost $130 was nearly 5 times that of the $27 comparable RevPAR achieved this past January. While we still have a ways to go, the trajectory of the recovery has been far steeper than expected. As a result of the better-than-expected second quarter results, hotel EBITDA was positive each month of the quarter, which is the first time we achieved this important milestone since the fourth quarter of 2019. This is a testament to the efficacy of zero basing expenses, the efficiencies in our operations, the diligence of our managers and the proactive investment and operating decisions made during the depths of the pandemic. When we last spoke on our first quarter earnings call, we shared that we expect to return to quarterly corporate profitability in the second half of the year. I'm happy to report we achieved this goal in the second quarter at least three months ahead of schedule. So let's dig into some of the details of our quarter. While occupancy in all segments grew quarter-over-quarter, transient demand continues to be the shining star and transient room nights more than doubled compared to the first quarter. Leisure demand continues to be incredibly strong, including in nontraditional leisure destinations, and commercial demand continues to demonstrate improvement as more people get back to business. While special corporate demand for the portfolio is still only around 20% of normal levels in the second quarter, several of our hotels, including Hilton San Diego Bayfront, Embassy Suites La Jolla, Hyatt Regency San Francisco and Hyatt Centric Chicago, witnessed a meaningful acceleration in special corporate room nights. Even more encouraging is the strength of transient pricing with our second quarter transient rate at $253. Even after adjusting for the acquisition of Montage Healdsburg, our second quarter transient rate still approach that of the same period in 2019. Despite several urban markets still lagging compared to pre pandemic levels, our resort hotels, specifically Wailea Beach resort and Oceans Edge, each achieved higher RevPAR than in the same time in 2019, up 4% and 79%, respectively. The performance of these hotels was driven by occupancy approaching pre-COVID levels with significantly higher room rates compared to '19, running 30% higher at Wailea Beach Resort and up a staggering 91% at Oceans Edge. The outsized rate growth at Oceans Edge is a direct result of our strategy to elevate the guest experience to match its superior physical offerings and then price the resort accordingly. Following our acquisition of the hotel in 2017 and the implementation of several asset management initiatives, the rate growth at Oceans Edge has been more than twice that of the Duval Street adjacent resorts. Additionally, our recent acquisition, Montage Healdsburg, has performed favorably to our initial estimates, running at an average rate of over $1,000 in the second quarter. We continue to believe that our outstanding hotel product in these sought after markets and a desire by travelers to spend time in special locations gives us a competitive advantage and further justifies our strategy of owning long-term relevant real estate. Now let's take a closer look at our quarterly group performance. Though presently a smaller percentage of occupancy than is normally the case, group business also experienced growth beyond our expectations. Group business contributed approximately 80,000 room nights in the second quarter, up from 51,000 room nights in the first quarter, and the outlook for the third and fourth quarters indicate significant sequential improvement. Not only has attendance in several recent group events across the portfolio exceeded projections, but short-term lead volumes and new group functions have increased significantly in recent months. For example, Hilton San Diego Bayfront, Boston Park Plaza and JW New Orleans each witnessed second quarter lead volumes approaching pre-pandemic levels. Similar to the last quarter, we saw corporate and association groups holding their meetings as planned and group pickup was better than anticipated. Several of our larger group of hotels, including Hyatt San Francisco, Boston Park Plaza and Renaissance Orlando, had several groups that picked up over 90% of the contracted blocks in the second quarter, which was substantially higher than we forecasted. With these dynamics in place, we expect to see a steady acceleration in group meetings, including citywide, corporate and association meetings for the remainder of the year holding out other variables constant. But rooms revenue was not alone and growing substantially on a sequential basis, Food and Beverage revenues increased by 2.5 times in the second quarter representing a 22% increase in food and beverage spend per occupied room and other revenues doubled as higher occupancy drove ancillary revenues such as parking. Catering revenue per group room night also increased by over 2.5 times as corporate group and associations returned. Not only are more guests staying in our hotels, but they are increasingly ready for the complete hotel experience and embracing our facilities and amenities as they reopen. As a result of these factors, our comparable total revenue per available room, or TREVPAR, increased from nearly $60 in the first quarter to over $138 in the second quarter. While we are pleased with our portfolio's financial improvement, we are equally pleased that our guest satisfaction scores remain very strong. For example, travelers on TripAdvisor recently ranked Oceans Edge as one of the top 10 hotels in Key West, up from 24 at the end of 2019, even with a massive increase in ADR. These factors give us confidence that the rate increase is sustainable, and additional growth is achievable. Again, we are seeing the benefits of the portfolio transformation completed in recent years as well as the operational investment decisions made during the depth of the pandemic. As we look forward, we are mindful that since early July, there has been a spike in COVID cases, particularly among the unvaccinated and areas such as Florida and Texas. The recent spike in cases may result in reinstituting travel restrictions, mask mandates and vaccine mandates in certain locations, which could postpone the eventual travel recovery. That said, we have not yet witnessed meaningful evidence that the spike in COVID cases has had a material impact on the trajectory of the lodging recovery. Rather booking trends for all segments continue to accelerate despite increased COVID cases in numerous parts of the country. This is evident in our continued sequential monthly RevPAR improvement in July. Through July 29, our 17 open hotels generated RevPAR of approximately $165, made up of a 62% occupancy and a $266 average daily rate. July's occupancy, ADR and RevPAR all increased meaningfully over the prior month, continuing the trend that started last year. Our July RevPAR represents a $35 increase from June and is $138 higher than that experienced this past January. As we evaluate expected group activity for the rest of the year, we anticipate increased demand for corporate and association meetings. The citywide calendar in many of our primary markets are very encouraging over the next several quarters and over 30% of our group room nights on the books for the fourth quarter are for citywide events. Citywide events are planned to resume in San Diego, Boston, New Orleans, DC and Orlando. That said, given the uncertainty around COVID, our operators have prudently assumed that the group room blocks will travel at significantly lower levels than historically been the case. This assumes that attendees continue to make attendance decisions in relatively short time frame and are influenced by evolving COVID data and trends. For example, in Orlando, a number of citywide groups relocated dates into the August to October time frame from prior periods, but the team is forecasting higher than normal slippage on these programs and is anticipating softer performance for the larger conventions in the fourth quarter. However, based on early trends, there may be upside potential in some markets from taking this conservative approach. As previously mentioned, several recent groups have picked up 90% to 100% of their room blocks, which was well in excess of our forecast. While this will not be the case for every group, it is a far cry from the muted group attendance we initially feared. These are just a few instances of the evolving citywide and group landscape that gives us confidence that the positive trends established in the second quarter are likely to continue this pent-up group demand gets back on the road. In-house group business has also witnessed positive trends. Increased vaccinations and the easing of travel and in-person meeting restrictions have given meeting planners a greater comfort level that their events will move forward. This has resulted in stronger group leads, more confirmed events and more participants planning to attend. In-house group demand has been broad-based and includes incentive trips from technology and pharmaceutical groups of Wailea; retail, medical and financial services groups at the Hilton Bayfront; state and regional associations at the Renaissance Orlando; and a medical company at the Hyatt San Francisco. With the number of vaccinated people growing every day, we are optimistic that group activity should continue on this trajectory. Based on these assumptions, we expect group to make up an increasingly larger part of our room mix and revenues in the second half of 2021 and specifically in the fourth quarter. On average, group rates on the books for the remainder of 2021 are higher than the rates on the books for the same period in 2019. Furthermore, given the anticipated increase in corporate and association group business, we also anticipate that banquet spend for occupied group room will increase substantially compared to the first half of the year when government and rooms-only group characterized most of the group room mix. Supplementing the return of corporate and association travel, local social business should be robust in the third and fourth quarters including a record numbers of weddings expected in the second half of the year. From corporate events, social gatherings, people are motivated to get together and celebrate. In addition to the more optimistic outlook for group business, transient trends have steadily improved. While our net transient reservations are still short of normal levels, bookings continue to accelerate. Our trailing six-week booking trends are now down only 10% to 15% compared to the same time in 2019, which marks a substantial improvement from the 80% to 90% declines we saw in the first of the year and the 40% to 50% declines we saw going into the second quarter. The booking window, though, still relatively short term, continues to expand. While leisure demand was the first to come out of the gates, business transient demand is expected to pick up in the third quarter and accelerate following Labor Day as companies continue to return to the office. Moving to our recent investment activity. We are excited to discuss the strong performance of Montage Healdsburg, which has exceeded our underwriting. While we are confident that this hotel would perform well, the ramp-up in rate and occupancy has surpassed our expectations in each month of ownership. During the quarter, the hotel ran an occupancy of 61% at an average rate over $1,000 and in July, the hotel ran at over 70% occupancy at a rate of nearly $1,250. We are seeing broad-based demand from the wine country and strong interest from transient and groups alike. In the second quarter, we experienced transient compression on weekends and stronger-than-anticipated group demand during the week. Profitability also outperformed with the hotel achieving positive EBITDA ahead of schedule in the second quarter. Looking forward, there's a lot to be excited about. The hotel has received extraordinary reviews, which has translated into strong group leads and is preparing for its second full property buyout since our acquisition. Layering in group with already strong transient will help drive additional success at this standout resort. Since our last earnings call, we executed upon a number of balance sheet enhancement transactions, including the issuance of two record-setting series of preferred equity and another favorable amendment to our unsecured debt agreements. Not only will these transactions provide us with an advantageous cost of capital that will result in greater FFO growth, but they unlock meaningful debt capacity that we can use to pursue additional acquisitions of long-term relevant real estate. We expect to be acquisitive and can do so without relying on the often fickle equity markets. This is a significant advantage that is not shared by many others, and one we plan to take advantage of to enhance the quality, scale and earnings power of our portfolio, while increasing NAV per share. To sum things up, performance in leisure and group segments in the second quarter set the stage for increased optimism in the second half of the year despite the ongoing threat of COVID-19. Based on forward booking information, we believe the portfolio is on track for continued improvement as the year goes on. Furthermore, we are in the enviable position to use our strong balance sheet and debt capacity to grow the company and to create value for our shareholders. As of the end of the quarter, we had approximately $210 million of total cash and cash equivalents, including $47 million of restricted cash. Adjusting for the issuance of our Series I preferred stock and the expected redemption of our Series F, our pro forma total cash balance at the end of the quarter would have been approximately $235 million. In addition to cash on hand, we also maintained full availability on our $500 million revolving credit facility. During the quarter, we executed another favorable amendment to our unsecured debt agreements, which removed the restrictions limiting the amount of unencumbered hotel acquisitions we could fund from existing liquidity during the covenant relief period. Even after deploying a portion of our excess liquidity in the second quarter, our balance sheet retains significant capacity, and this most recent amendment better positions us to use that capacity to grow the company through additional acquisition of long-term relevant real estate. We appreciate the continued partnership and support from our long-standing lender and noteholder relationships. As John mentioned, since our last earnings call, we also executed upon two additional balance sheet enhancing transactions through the issuance of both our 6.125% Series H preferred and our 5.7% Series I preferred. Proceeds from these two transactions, both of which were record-setting low coupons at the time of issuance, are being used to redeem higher cost existing preferred equity and will reduce our comparable preferred dividends by $1.5 million per year. Given the attractive pricing and strong demand for our most recent offering, we elected to upsize the Series I transaction to take incremental proceeds. Preferred equity is an increasingly important part of our long-term capital structure and as a result of the acquisition and financing activity in the quarter, we have increased our exposure, and we'll have three attractively priced series of preferred stock outstanding. Second quarter results reflect an improving operating environment driven by continued strong leisure demand and an increasing amount of commercial transient and group business. Second quarter adjusted EBITDAre was $15 million, and second quarter adjusted FFO per diluted share was a loss of $0.01. These results far surpassed our previous expectations and marks the return to positive corporate EBITDA, a full quarter sooner than we had previously projected. While total FFO was marginally negative in the second quarter, we expect it to also resume quarterly profitability going forward. Now turning to dividends. We have suspended our common dividend until we return to taxable income. Separately, our Board has approved the quarterly distributions for our Series H and I preferred securities. With that, we can now open the call to questions.

q2 adjusted ffo loss per share $0.01.

If you do not yet have a copy, you can access them on our website. We are providing that information as a supplement to information prepared in accordance with Generally Accepted Accounting Principles. With us on the call today, are John Arabia, President and Chief Executive Officer; Bryan Giglia, Chief Financial Officer; and Marc Hoffman, Chief Operating Officer. We appreciate you joining us here, for what I believe to be as last of the day. As you are aware, we are in unprecedented times and our third quarter results are a clear reminder of the devastation that the global pandemic has caused to the hotel industry. However I'm pleased to report that we are seeing several signs of the recovery that began in May and June, appears to be gaining steam and that we believe better days lie ahead. Several encouraging factors that give us confidence, including, first we have successfully resumed operations at the majority of our hotels. Second, those hotels that have been open in general, have achieved sequential monthly gains in occupancy. Third, transient room reservations have gradually improved over the past few months. And fourth, our group production, which remains well off normal levels, increased on a sequential basis. Today, I will provide more details on each of these topics. I'll then discuss our monthly cash burn rate, which has been further reduced, as well as our significant liquidity position. So let's talk about our recent operating results, starting with the pace at which our hotels resumed operations. Of our 19 hotels, six were in operations for all of the third quarter, including Oceans Edge, which opened in early June and Chicago Embassy Suites that opened July 1st. Six additional hotels resumed operation during the quarter, including our two hotels in New Orleans, the Marriott Boston Long Wharf, and the Hyatt Chicago in July, and then the Hilton San Diego Bayfront, and the Renaissance DC in mid to late August. Three additional hotels opened in October, including the Bidwell Portland, the Hyatt Regency San Francisco, and the Renaissance Orlando. Finally, we are excited to report that our Wailea Beach Resort opened earlier this week on November 1st. This leaves us today with 16 of our 19 hotels in operation, which comprised 88% of our rooms in our portfolio and generated nearly 96% of our 2019 hotel EBITDA. Despite having a larger subset of our hotels operating during the third quarter, it's important to note that a good portion of our larger and more economically important hotels, did not resume operations until the middle of the third quarter, until the fourth quarter. As a result, our third quarter results, while stronger than we had forecasted internally, underperformed portfolios with a higher percentage of rooms in operation. Holding all other variables constant, we expect our portfolio performance to improve in the fourth quarter and beyond, now that several of our larger hotels have resumed operations. In the quarter, comparable portfolio revenues were $24 million and RevPAR was $17.58 which represents a decline of 91% and 92% respectively, compared to the third quarter of last year. For the 12 hotels that were open at least some portion of the third quarter, RevPAR declined by a marginally better 86% and witnessed sequential monthly RevPAR improvement, as the quarter progressed. Similarly, the six hotels that were open for the entirety of the third quarter, RevPAR declined by a marginally better 80%, and also witnessed sequential monthly RevPAR improvement, as the quarter progressed. And finally, the four hotels that maintained operations throughout the year, witnessed an 81% decline in the third quarter, which equated to a RevPAR of $36, and a marked improvement from the $14 RevPAR witnessed in the second quarter. While we do not expect every hotel to follow this trend every month, the overall trend has been positive and gives us confidence that operating fundamentals are gradually improving. Despite an impressive two-thirds reduction in our property level expenses, the combination of only $24 million of comparable hotel revenue and approximately $62 million of total property level adjusted operating expenses, resulted in property level adjusted EBITDA loss of $37 million. As you would expect, this compares terribly to the results last year. But marks an improvement to the $42 million property level adjusted EBITDA loss witnessed in the second quarter, excluding the losses associated with the recently sold Renaissance Baltimore. Similar to our second quarter, the third quarter property level loss was several million dollars better than we had anticipated, as we continue to work with our operators to streamline operations, eliminate non-essential services, and reduce property level expenses from the prior year. Again, as more of our larger hotels have resumed operations and generally demonstrated sequential RevPAR growth, we would expect our property level losses to continue to decline, and eventually return to profitability. When we look at the current segmentation, we continue to see the majority of our demand come from leisure, government and contract business. Leisure demand has been the primary source of business for many of our hotels, and has generally remained steady, even after Labor Day, as people seek travel opportunities away from their homes, particularly on the weekends. Crew business, which has become an increasingly important source of demand in the current environment, increased in the third quarter relative to the second quarter, as more airline routes were restored. The limited group business that did materialize in the third quarter was primarily composed of government-related groups, such as armed forces and emergency management. We have also recently witnessed a very small but growing number of business transient rooms as the workforce has started to return to traditional offices and get back out on the road. As you can imagine, nearly all of our group business canceled in the third quarter. We would expect the same result in the fourth quarter other than a few rooms-only groups that are likely to travel. Furthermore, as the pandemic continues to linger, group cancellations in the first quarter of 2021 have increased. That said, our fundamental view is that group business will not return in scale until there is greater comfort in traveling and congregating. This means that group business is unlikely to return in a meaningful way until a vaccine or reliable therapeutics are developed. Nevertheless, we continue to see the value of keeping sales professionals on property and taking care of our customers. From July through October, we booked 106,000 new group rooms for all future months. In addition to new bookings, we have rebooked 197,000 group room nights that previously canceled or 23% of all cancelled group room nights since the start of the pandemic. Furthermore, an additional 56,000 group room nights that had been canceled have expressed their intent to rebook and are at various stages of reworking their group contract, which would increase our rebook percentage to 30% of total cancelled group room nights, should they be converted. Taken together, the recently booked groups and all definite and tentative rebook groups represent approximately $90 million to $95 million of group room revenue and roughly $130 million of total group revenue. We are confident we would not have captured all of this business if we did not keep sales professionals on property to work with and take care of our meeting planners and group customers. For 2021, while our group room night pace is down compared to pre-COVID levels, we currently have approximately 488,000 group rooms on the books, representing $120 million of group room revenue. These groups equate to approximately 13% of our 2021 occupancy on the books, which is below our three-year average of approximately 20% at this time of the year, yet represents a significant increase from the 2020 actualized levels. While the group outlook remains a bit of a wait-and-see scenario, the transient trends are more clearly showing signs of improvement. In mid-March, net transient bookings quickly turned negative, meaning reservation cancellations materially outpaced new reservations as travel came to a historic stand still. Weekly net transient reservations generally remained negative through the middle of July, and since then have gradually increased, as more of our hotels have opened and more people get back out on the road. In August, year-over-year net transient reservation declined by roughly 90%. Then in September and October, net transient weekly reservations were down roughly 75% and nearly 67% respectively, demonstrating sequential monthly growth. While it is obvious we still have a long way to go to get back to normal operating levels, the trend is clearly headed in the right direction, particularly now that several of our larger hotels have opened in the past couple of months. Now, let's talk a bit about our improving cash burn. On our last call, we provided an estimate of our monthly cash burn assuming approximately half of our portfolio had resumed operations, but would continue to run at very low occupancies and that we would reopen additional hotels if local restrictions allowed it and make it economically -- made economic sense to do so. Three months ago, we estimated that we would incur property-level cash losses of approximately $12 million to $15 million a month and when combined with our corporate expenses, debt service and preferred dividends represented a total monthly cash burn of $19 million to $23 million before capex and extraordinary items. I'm happy to report that as a result of more hotels resuming operation, the continued rightsizing of the operating model and strong expense reports, our estimate of future cash burn has been reduced by approximately $3 million a month, resulting in total monthly corporate cash burn rate before capital investment of approximately $16 million to $20 million a month or 14% decline from the previous range. Furthermore, as occupancy continues to increase, specifically for those hotels that recently resumed operations in October and November, our cash burn rate is expected to decline further. So, let's switch gears and talk a bit about our significant and enviable liquidity position. We ended the quarter with $504 million of total cash and cash equivalents and full availability on our $500 million credit facility. Our low leverage, meaningful cash balance gives us significant liquidity to weather the storm, even if it unexpectedly continues for a prolonged period. As our cash burn rate continues to decline, we gain confidence that a notable portion for existing unrestricted cash balance is available for investments that we believe are likely to become available in the next several quarters. That is, we are one of the few companies that is not dependent on credit facility draws or incremental borrowings to fund incremental investment. Now, let's talk about our ongoing capital projects. As you're likely to remember, we postponed approximately $35 million of capital projects this year, leaving approximately $40 million of our 2020 initial budgeted renovations. At the same time, taking a long-term view of our business, we accelerated $6 million to $8 million of very disruptive projects that were on hold, waiting a quiet time to be completed. Of the roughly $50 million of capital projects we expect to complete this year, we invested approximately $11 million into our portfolio in the third quarter and $44 million year-to-date. This leaves roughly $6 million of capital projects to completed in this final fourth quarter. Our largest project of the year is the repositioning of our rebranded Bidwell Portland, which we reopened to guests in October. The Bidwell was relaunched with a equal parts of nature and nurture, with one foot in the city and one in the natural beauty of the Pacific Northwest. The substantially completed reinvention includes a complete environmentally friendly reinvention of the rooms, restaurant, fitness center, meeting space and club lounge, as well as the addition of nine new guest rooms. For more details on many of the sustainable features of the Bidwell, I encourage you to review our 2020 Sustainability Report, which can be found on our Investor Relations portion of our website. Looking at our other key projects, they are substantially complete, our Renaissance Orlando resumed operations in October, with a refreshed atrium lobby, including an updated design to brighten up the overall feeling create a cohesive lobby experience. At our Wailea Beach Resort, we've added 32 beautiful lanai decks which significantly increased the appeal of these ocean front rooms. Also, in Wailea, we are on-track to complete -- in the first quarter of 2021 -- a solar project, which will eliminate approximately 650,000 kilowatt hours annually and reduce not only our carbon footprint, but also our energy build by roughly $160,000 per year. Finally, at our Renaissance DC, we have completed the refresh of product to share and the meeting space elevator modernization. To sum things up, we believe that the worst is behind us. 16 of our 19 hotels are operating, the hotels that remain open or have resumed operations have witnessed encouraging occupancy trends and are reducing our overall losses in cash burn. And finally, our significant cash on hand before drawing down on our credit facility not only provides us with incredible stability during these uncertain times, but will allow us to fund attractive investments earlier than others who may be forced focused on shoring up liquidity. As of the end of the quarter, we had approximately $504 million of total cash and cash equivalents, including $42 million of restricted cash and an undrawn $500 million revolving credit facility. During the quarter, we repaid $35 million of outstanding senior notes at par with a portion of the proceeds from the sale of the Baltimore Renaissance. Our balance sheet strength and significant liquidity have positioned us not only to survive the economic shock we are experiencing, but to also come out of it with more flexibility and greater ability to capitalize on opportunities than many others will have. We continue to focus on managing our costs and minimizing hotel expenses, while maintaining our properties in good condition and opportunistically investing in projects that would have resulted in material displacement. Working with our operators, we have reduced operating expenses by approximately 60% to 70% since the start of the pandemic. Based on our current projected cash burn rate of $16 million to $20 million per month before capital expenditures, which was reduced from our previous range of $19 million to $23 million per month, with an actual third quarter burn of approximately $19 million, we estimate that we have approximately two years of liquidity based on existing cash. Again, that is more than 24 months of liquidity before we would need to take on additional leverage from proceeds from our line or other capital sources, including asset sales, which could extend that liquidity for several more years if needed. This is a very important distinction. When we emerge from this pandemic, we will have significantly more capacity than others. Our balance sheet was already designed to handle major downturn. So, even if we emerge into a recessionary macro environment, which is possible, we will not need to access additional equity capital to shore up our balance sheet or rightsize our leverage. This may not likely be the case with everyone in our industry. Shifting to third quarter operations. While our third quarter performance was better than second quarter, operations continued to reflect the most dramatic decline in hotel demand the industry has ever seen. Third quarter adjusted EBITDA was a loss of $36 million, and third quarter adjusted FFO per diluted share was a loss of $0.26. As John indicated earlier on the call, three of our largest hotels, the Renaissance Orlando, Hyatt Regency San Francisco and Wailea Beach Resort did not resume operations until the fourth quarter. While these hotels did not help third quarter results, now that they have resumed operations, we expect these hotels to increase portfolio RevPAR and reduce cash burn in Q4 and into 2021. Now, turning to dividends. We have suspended our common dividend until we return to taxable income. At this time, we do not anticipate generating taxable income in 2020 or have the need for any additional distributions this year. Separately, our Board has approved the routine quarterly distributions for both outstanding series of our preferred securities.

compname posts q3 adjusted ffo loss per share $0.26. q3 adjusted ffo loss per share $0.26.

If you do not yet have a copy, you can access them on our website. We are providing that information as a supplement to information prepared in accordance with generally accepted accounting principles. With us on the call today are Doug Pasquale, Chairman and Interim Chief Executive Officer; Bryan Giglia, Chief Financial Officer; Robert Springer, Chief Investment Officer; and Chris Ostapovicz, Chief Operating Officer. On todays call, Doug will discuss our recent value-enhancing hotel transactions and provide his thoughts on the companys near-term priorities and objectives. Bryan will then discuss the current operating environment and recent trends in our business. And finally, Ill provide a summary of our current liquidity position and a recap of our prior quarter financial results. As many of you know, I have been affiliated with Sunstone for quite some time now, having joined the Board in 2011 and taking on the role of Chairman in 2015. During my tenure, I have facilitated the management teams efforts as they repaired the companys balance sheet and upgraded its portfolio following the global financial crisis, and most recently, as we navigated the unprecedented challenges brought on by the pandemic. Now as interim CEO, Ive had the opportunity to become increasingly involved in the day-to-day operations of the company. With that enhanced perspective, Im more confident than ever that Sunstone has the portfolio, the balance sheet and the management team to deliver incremental value to its shareholders and do so on a more accelerated basis. As a first step in this process, we announced a series of hotel transactions yesterday that reflect our renewed commitment to value creation through the sale of assets, which are no longer consistent with our strategy, the selected disposition of core assets when pricing is compelling and through the acquisition of long-term relevant real estate. Going forward, you should expect that Sunstone will do more of the same as we further position the company for growth by actively recycling capital and more effectively utilizing leverage in our tax attributes while still maintaining a solid balance sheet with capacity and flexibility. Overall, I am very pleased with the progress we have made in the first two months of my tenure, and I look forward to continuing to work with the management team to unlock further value for our shareholders. When I assume the interim CEO role, I made it clear that my tenure in this position would be for a year or less and that the Board was committed to identifying a permanent CEO, who would further advance our existing strategy. The search committee was established in tandem with my appointment and the search process is underway. While we intend to conduct an efficient search, we will be thoughtful and farsighted. We will not rush the process and we will do everything possible to ensure the right new leader is selected. We expect to have an update as part of our next quarterly call. And to share some encouraging recent trends we are seeing across our portfolio that give us reasons to be more optimistic as we head into the final months of the year and into 2022. Ill start with a review of the third quarter operating results. which, as Doug just mentioned, materially exceeded our expectations with EBITDA more than doubling the prior quarter and marking the return to positive quarterly FFO for the first time since 2019. I will provide an update on the current operating environment and forward booking trends, which point to continued growth in the fourth quarter and into 2022 despite the effects of the Delta variant. Last, I will provide some additional details on the exciting and value-enhancing hotel transactions that were announced yesterday. So lets begin with the third quarter operations, which came in stronger on both the top and bottom lines. Total revenue was $167 million, an increase of 43% from the second quarter, driven by a nearly 10-point sequential increase in occupancy at an average rate for the comparable portfolio that not only grew 13% from the second quarter of 2021, but was also just above the third quarter of 2019. These strong results were primarily the result of strong leisure demand over the summer vacation season that peaked in July and then moderated in August and September, partly as a result of typical seasonal patterns but also due to a short-term pause in travel demand due to the spread of the Delta variant. While occupancy increased to nearly 55% and benefited from growth in all segments, transient demand remained a standout, with room nights increasing 27% compared to the second quarter. Our total portfolio third quarter average daily rate was $30 higher than the second quarter and even when excluding Montage Healdsburg, which ran a very robust average daily rate of nearly $1,250, our comparable portfolio ADR of just over $248 in the third quarter came in higher than 2019 levels. A strong desire for leisure travel and a healthy U.S. consumer contributed to strong demand in certain markets and allowed our operators to push rates far beyond pre-pandemic levels. We achieved meaningful rate growth in Key West, Orlando, New Orleans and Wailea. In fact, Oceans Edge saw rates increase in astonishing 103% as compared to 2019 and Wailea Beach Resort vested their pre-pandemic rate by 40%. In addition to a stronger rate performance, out-of-room spend also increased with food and beverage revenues higher by 79% in the third quarter as compared to the second quarter, representing a 47% increase in food and beverage spend per occupied room. Other hotel revenues also increased as higher occupancy drove increased destination fees, spa and parking revenues. Banquet and catering contribution per occupied group room increased over the second quarter by $96 and achieved approximately 70% of 2019 levels. Combined with stronger ADR, the growth in nonrooms revenue generated a quarterly comparable TRevPAR of $207, a 41% increase from $146 achieved in the second quarter. We have been focused on working with our operators to deliver a safe and enjoyable guest experience while looking for ways to achieve efficiencies and permanent expense reductions. Year-to-date, we have eliminated nearly $11 million of costs from our hotels, which we believe will be lasting savings and can be sustained, even as business levels and occupancies increase. We recognize that there is a need to balance appropriate service levels and amenities with pricing and profitability, and there will not be a one-size-fits-all approach to margin enhancement at every hotel. And so we are continuing to work with our operators to identify creative ways to drive profitability across the portfolio. During the quarter, our comparable hotels generated hotel EBITDA margins of 24.3%. While this is below the low 30% range we maintained historically, delivering mid-20% margins at a portfoliowide occupancy of just below 55% is a significant accomplishment and gives us confidence that we will be able to achieve higher stabilized margins once demand returns to a more normalized level. The combination of higher rates, stronger nonroom revenue, permanent expense reductions and other cost controls contributed to third quarter EBITDA that exceeded expectations and represented a more than twofold increase over the prior quarter. While strong demand for leisure travel seems to be well established at this point, in fact, Saturday of Labor Day weekend was our portfolios highest demand night of the year, with occupancy of 84% at an average rate of nearly $275. We are also seeing positive trends in both group and business transient demand that we expect will accelerate as we move forward. Lets take a look at each of these segments in a bit more detail, starting with group. While total group room nights for the quarter increased only marginally from the second quarter to 82,000 nights. What is more important to note is that the group activity we saw in the third quarter was increasingly comprised of more traditional corporate and association events as opposed to the rooms-only and event-driven group business that composed much of the demand in the first two quarters of the year. Corporate group activity in the quarter grew nearly 30%, and the association business was more than five times higher than the previous quarter and generated 24,000 room nights. The Renaissance Orlando, Hilton San Diego and JW Marriott New Orleans, had a substantial increase in association and corporate group business and the Wailea Beach Resort experienced a meaningful return of incentive business, with 8,000 incentive room nights at a very attractive rate of nearly $600 compared to 6,700 room nights and a rate of $400 in the same quarter of 2019. The Delta variant impacted group business later in the quarter as our hotels experienced increased cancellations, a decrease in group lead volume and a decline in overall group production. The majority of the cancellations occurred in August and coincided with the peak in case counts witnessed in late summer from the spread of the Delta variant and were skewed toward corporate group as opposed to association business. Approximately 9% of our third quarter group room nights canceled, which were primarily for events in August and September, and approximately 16% of our fourth quarter group rooms canceled, which were primarily for events in October. We believe these headwinds from the Delta variant are largely behind us as group demand and lead volume began to reaccelerate post Labor Day and have continued into the fourth quarter. In fact, we expect the fourth quarter production to be the strongest of the year. For our five large group hotels, which make up 2/3 of our fourth quarter room nights, 77% of our forecasted group room nights have already been picked up. Moving on to transient, which accounted for roughly 75% of our total room nights in the third quarter. Total transient rate for the third quarter came in at $285 compared to $261 in the second quarter, an increase of more than 9%. Even more encouraging was the increased contribution of business travel to the overall transient demand. The number of special corporate rooms increased 103% from the second quarter with rates higher by 20%. Several of our hotels, including the Hyatt San Francisco, Boston Park Plaza and Hyatt Chicago witnessed a meaningful acceleration in special corporate room nights during the quarter. While our third quarter business transient volume was only 50% of pre-pandemic levels, future transient booking pace continues to grow every week and we expect this to accelerate into 2022 as companies increasingly return to the office and business transient travel becomes more widespread. As I mentioned earlier, our operators have been able to aggressively push rates in response to very healthy leisure demand. We saw strength in leisure rates at hotels across the portfolio, including Key West, Orlando, New Orleans, Napa, Sonoma and Wailea. The ability to achieve premium pricing has been most evident in our resort properties with Montage Healdsburg achieving a rate of approximately $1,250 for the quarter, and Oceans Edge in Wailea Beach Resort seeing rate increases of 103% and 40%, respectively, compared to the third quarter of 2019. This level of rate growth should also translate into profitability that exceeds our underwriting at Montage and that outpace pre-pandemic levels at Oceans Edge and in Wailea. Given the substantial pricing increase our operators have implemented, we are closely monitoring guest feedback to ensure our satisfaction scores remain competitive and that we are balancing near-term profitability with each hotels long-term positioning. Wailea continues to command a strong TripAdvisor rating despite a $185 higher rate than third quarter of 2019, an impressive achievement, especially given its luxury peers. As we move into the fourth quarter, were encouraged by what we are seeing for October. Our preliminary results for the month show a reacceleration of demand with RevPAR of approximately $150 made up of occupancy of 57% and a $264 average daily rate. October RevPAR is second only to our peak month of July and is above August and September by nearly 10% and 14%, respectively. Given the current trends, we expect a strong finish to the end of the year, with November and December benefiting from increased levels of business transient and group demand and continued ability to drive strong leisure rates during the holiday season. Shifting to our capital projects. We invested $25 million into our portfolio in the third quarter with a focus on enhancing the quality and future earnings potential of the portfolio. In July, we completed work on Boston Park Plazas newest meeting space, The Square, a 7,000 square foot indoor space that will give the hotel incremental capacity to host in-house group business and reduce its reliance on citywide events. At the Hilton San Diego Bay front, we completed a total redesign of the food and beverage options, including an addition of a market concept that will provide a better guest experience at a higher profit margin. Additionally, in San Diego, we converted unused space into 6,800 square feet of new, high-quality meeting space that looks out onto the San Diego Bay. During the quarter, we also continue to make progress on the transformation of the soon-to-be rebranded Westin Washington, D.C. The ballroom and meeting space renovations will be completed by the end of the year and work on the guest rooms and lobby will occur in 2022. Once the meeting space is completed, the hotel will be able to host group business next year while the rooms renovation is completed. We are pleased with the reception, the in-process conversion is receiving from meeting and event planners, and look forward to the incremental growth the hotel will generate as it captures higher rates and incremental share under the Westin brand. Moving on to transaction activity, as Doug noted, yesterday, we announced three transactions that enhance our portfolio quality, strengthen our balance sheet and provide additional capacity for future growth and acquisitions. First, we completed the sale of the 348-room Renaissance Westchester for gross proceeds of approximately $19 million. This hotel was a noncore asset in a challenged market that lacks sufficient demand to Marriott reopening after operations were suspended at the onset of the pandemic The net proceeds from the sale, after the payment of termination fees and severance costs, was approximately $11 million and the disposition removes an asset that was expected to be a drag on cash flow and growth going forward. Next, we are under contract to sell the 340-room Embassy Suites La Jolla for $226.7 million or approximately $667,000 per key. This is a tremendous outcome and is a perfect example of the embedded value that can be generated from the ownership of long-term relevant real estate. In addition to being a high-quality Embassy Suites and a productive cash generator, the hotel sits on phenomenal real estate. We were able to capitalize on its highly desirable location and sell the hotel to a buyer that will be able to better optimize the entire parcel. We expect the sale to close during the fourth quarter. Net proceeds after the mortgage loan are expected to be approximately $165 million. Finally, we are excited to announce the acquisition of the Four Seasons Resort Napa Valley. This one-of-a-kind asset located on the Famous Silverado Trail is a terrific example of long-term relevant real estate. We are acquiring the resort for a gross purchase price of $177.5 million, a meaningful discount to its development cost. In addition to the 85-room resort and its abundant event space and full suite of luxury amenities, the acquisition price also includes nearly 4.5 acres of vineyards and the Elusa Winery along with the inventory of prior wine vintages. The investment in the Four Seasons Napa Valley is the perfect complement to our previous Wine Country acquisition, Montage Healdsburg, which we acquired in April and is already surpassing our expectations. Between the Four Seasons and the Montage, we will have approximately 10% of our asset value in one of the most supply constrained sought after and highest-rated leisure destinations in the country. We will own the two premier assets and establish a market-leading position in Wine Country with ownership of approximately 24% of the luxury room inventory and 32% of the luxury event space. The purchase of the Four Seasons Resort in Napa Valley is consistent with our stated strategy of acquiring long-term relevant real estate, in the early phases of a cyclical recovery and its addition further elevates our overall quality and earnings potential of our portfolio. We expect Four Seasons to contribute meaningfully to our per share future earnings as we deploy more of our balance sheet capacity and benefit from the strong demand for leisure travel. To sum things up, third quarter results exceeded expectations as a result of continued strong leisure demand, steady improvement in business transient travel and an improving group mix. Although expectations for the fourth quarter have moderated due to group cancellations related to the Delta variant, we have seen demand reaccelerate in recent weeks. And based on forward-booking information, we are optimistic that these trends will continue in the fourth quarter and into 2022. Additionally, our investments both internally and externally will provide additional growth as travel demand moves closer to pre-pandemic levels. Furthermore, we are in the enviable position to use our strong balance sheet and debt capacity to grow the company and to create value for our shareholders. As of the end of the third quarter, we had approximately $222 million of total cash and cash equivalents, including $42 million of restricted cash. In addition to cash on hand, we also maintained full availability on our $500 million revolving credit facility, which equates to over $700 million of total existing liquidity. We are excited to close on the acquisition of Four Seasons Resort Napa Valley in the fourth quarter and expect to fund the transaction through a combination of cash on hand and from borrowings under our credit facility. As Bryan mentioned earlier, net cash proceeds from the sale of Embassy Suites La Jolla are expected to be approximately $165 million after the buyers assumption of the existing $57 million mortgage loan. We expect the sales to also be completed in the fourth quarter. The quarterly results reflect an improving operating environment driven by continued strong leisure demand, an increasing amount of commercial transient volume and improving mix of group business. Third quarter adjusted EBITDAre was $35 million and third quarter adjusted FFO was $0.10 per diluted share. These results surpassed our previous expectation and marked the return to positive quarterly FFO for the first time since the end of 2019. During the third quarter, we recognized $1.6 million of restoration expense and an impairment charge of $1 million as a result of damage incurred at our two hotels in New Orleans following Hurricane Ida. The Hilton New Orleans, St. Charles sustained the bulk of the damage, and we are working with our insurers to identify and settle a property damage claim, but we expect that future losses from the restoration work at this hotel will be mitigated by the propertys insurance deductible of approximately $3 million. Now turning to dividends. We have suspended our common dividend until we return to taxable income. Separately, our Board has approved the quarterly distributions for each of our Series G, H, N, and I preferred securities. And with that, we can now open the call to questions.

compname reports q3 adjusted ffo per share $0.10. q3 adjusted ffo per share $0.10.

Sherwin-Williams delivered terrific results in the first quarter. The momentum with which we exited the fourth quarter continued in the first quarter. We entered the quarter with strong expectations and we finished stronger. We capitalized on extremely robust demand across both architectural and industrial markets, leading to sales in two of our segments that exceeded the guidance we provided at the beginning of the quarter. We generated double-digit growth once again in residential repaint as well as in new residential in DIY. We also generated double-digit growth in our industrial business, with improvement in every region. Before getting into some of the specific numbers. I'll remind you that in February, our Board of Directors approved and declared a three-for-one stock split in the form of a stock dividend to make the stock more accessible to employees and a broader base of investors. Trading of our shares on a stock split-adjusted basis began on April 1, 2021. So starting with the top line, first quarter 2021 consolidated sales increased 12.3% to $4.66 billion. Consolidated gross margin decreased 20 basis points to 45.4% due to greater than anticipated raw material cost inflation. SG&A expense as a percent of sales decreased 300 basis points to 28.5%. Consolidated profit before tax increased $116.7 million or 29.8% to $509 million. The first quarter of 2021 included $75.6 million of acquisition related depreciation and amortization expense and one-time costs of $111.9 million related to the divestiture of the Wattyl Australian business. The first quarter of 2020 included $75.6 million of acquisition-related depreciation and amortization expense. Excluding these items, consolidated profit before tax increased 48.8% to $696.5 million with flow-through of 44.9%. Diluted net income per share in the quarter increased to $1.51 per share from $1.15 per share a year ago. The first quarter of 2021 included acquisition-related depreciation and amortization expense of $0.21 per share and one-time costs related to the Wattyl divestiture of $0.34 per share. The first quarter of 2020 included acquisition-related depreciation and amortization expense of $0.21 per share. Excluding these items first quarter adjusted diluted earnings per share increased 51.5% to $2.06 per share from $1.36 per share. Adjusted EBITDA grew to $848.7 million in the quarter or 18.2% of sales. Net operating cash grew to a $195.7 million in the quarter. All three of our operating segments delivered excellent top line growth, margin expansion and strong flow through in the quarter. Segment margin in the Americas Group improved 240 basis points to 19.2% of sales resulting primarily from operating leverage on the high single-digit top line growth. Adjusted segment margin in Consumer Brands Group improved 440 basis points to 21.4% of sales resulting primarily from operating leverage on the double-digit top line growth. Flow-through was 38.9% and adjusted segment margin in Performance Coatings Group improved 60 basis points to 14.3% of sales driven by operating leverage on the double-digit sales growth, which was partially offset by higher raw material costs. We're off to a tremendous start in 2021. Credit goes to all of 61,000 members of our team who are serving our customers at a high level, aggressively pursuing and capturing new business and managing through transitory disruptions in the supply chain. There is no better team in the industry. Demand was robust across both architectural and industrial businesses in the quarter, particularly in March, where sales were well above our forecast. We're seeing very positive trends as economies continue to reopen. As we've often said, volume is the strongest driver of our results and we leverage the strong growth to deliver improved profitability in every segment in the quarter. In The Americas Group, first quarter sales increased by 8.6% over the same period a year ago including about 1.7 percentage points of price. The impact of unfavorable currency translation was not material. Same-store sales in the U.S. and Canada were up 8.2% against a high single-digit comparison. In residential repaint, our largest segment, we delivered strong double-digit growth in the quarter against a double-digit comparison. We have grown this business by double-digits for five consecutive years. We expect this momentum to continue. Contractors are reporting solid backlogs and interior and exterior work were both very strong. Demand remained unprecedented in our DIY business where sales were up by a double-digit percentage for the fifth consecutive quarter. New residential also remained an area of strength for us with low double-digit growth in the quarter against a high single-digit comparison. New housing permits and starts have been trending very well since last summer and customers are reporting solid order rates. Momentum is gradually building in our commercial business where sales in the quarter were up low-single digits against a solid quarter a year ago. Projects continue to resume at varying paces and comparisons are favorable over the remainder of the year. Property maintenance was down slightly in the quarter though turnover in multifamily properties is improving. The month of March was positive and we expect to see meaningful improvement as the year progresses. Protective & Marine was down by a mid-single digit percentage in the quarter, but improved sequentially and delivered strong growth in the month of March. Growth in smaller customer segments such as flooring, bridge and highway and pharmaceutical was more than offset by softness in the oil and gas segment. We continue to aggressively pursue opportunities in all these end markets and we expect continued improvement as maintenance projects cannot be delayed indefinitely. From a product perspective, sales in both interior and exterior paint were up by double-digit percentages with interior being the larger part of the mix, as is normal for our first quarter. Additionally, this is the third consecutive quarter, spray equipment sales increased by double digits in the quarter. Contractors typically invest in this type of equipment in anticipation of solid demand. Our previously announced 3% to 4% price increase to U.S. and Canadian customers became effective February 1st prior to the supply chain disruption the industry began experiencing later in the quarter. We realized approximately 1.7% from price in the first quarter, and would expect 2% or better in the following quarters. We will continue to evaluate additional pricing actions as needed. We opened 11 new stores in the quarter in the U.S. and Canada. Along with these new stores, we continue to make investments in sales reps, management trainees, innovative new products, e-commerce and productivity enhancing services to drive additional growth. Moving onto our Consumer Brands Group, sales increased 25% in the quarter, including 2.7 percentage points of positive impact related to currency translation as DIY demand remained robust. Sales in all regions were above our mid-teen segment growth guidance led by Asia and followed by Europe, North America and Australia respectively. We exited the Australia business in this segment at the close of the quarter. As you know, our global supply chain organization is managed within this segment. We are working collaboratively across all businesses to keep our customers in paint and on the job. Last, let me comment on first quarter trends in Performance Coatings Group. The momentum we saw in the third and fourth quarters of last year continued and accelerated in our first quarter. Group sales increased by a double-digit percentage. Currency translation was a tailwind of 2% in the quarter. Price was positive in all regions and all divisions generated growth. Regionally, sales in Asia grew fastest in the quarter followed by Europe both of which were up by strong double-digit percentages. Latin America grew by a high single-digit percentage. North America, the largest region in the Performance Coatings Group continues to gain momentum where sales were up by a low single-digit percentage. From a divisional perspective, I'll start with the industrial wood division, which has the highest growth in the group. Sales were up by a strong double-digit percentage in the quarter and we're positive in every region. Strength in new residential construction continues to drive robust demand for our products in kitchen cabinetry, flooring and furniture applications. General Industrial, the largest division of the Group, sales were up by a high-teens percentage. We were positive in every region. Sales were strong within heavy equipment, building products, containers and general finishing. While there is likely an element of inventory restocking by our customers in these numbers, we believe growing end market demand is the larger driver given recent PMI and industrial production reports. Our packaging team also continues to deliver great results. Sales were up high single-digits against a nearly double-digit quarter a year ago, and were positive in every region. Demand for food and beverage cans remains robust and our non-BPA coatings continue to gain traction. This team has been remarkably consistent and has delivered solid growth in every quarter since Sherwin-Williams acquired the business as part of the Valspar acquisition in 2017. We and our customers continue to invest in this terrific business. Our Coil Coatings business has also been a remarkably consistent pro forma, sales grew by high single-digit percentage in the quarter against a double-digit comparison a year ago. This team continues to do an excellent job at winning new accounts in all regions. We're also seeing a gradual resumption of selected commercial construction projects. Last automotive refinish sales were up by a mid-single-digit percentage in the quarter. This level of growth is very encouraging given that miles driven inclusion shop volume remains below pre-pandemic levels, particularly in North America. We're also pleased with new installations of our products and systems in North America, which were very strong. This is a good indicator of future momentum in our business. Before moving on to our outlook, let me speak to capital allocation in the quarter. We returned approximately $930 million to our shareholders in the quarter in the form of dividends and share buybacks. We invested $735 million to purchase 3.3 million shares at an average price of $234.96. We distributed $151.8 million in dividends, an increase of 23.5%. We also invested $64.3 million in our business through capital expenditures. We ended the quarter with a debt-to-EBITDA ratio of 2.5 times. Turning to our outlook, we continue to see robust demand in North America residential repaint and new residential and continued recovery in commercial and property maintenance. Comparisons in DIY will be challenging over the remainder of the year. So we are excited by opportunities to work with our retail partners to grow sales in the pros who paint segment. We expect industrial demand will continue to improve as the year progresses. We'll continue to leverage our strengths in innovation, value-added services and differentiated distribution as we expect to grow at a rate that outpaces the market. On the cost side of the equation, we now expect raw material inflation for the year to be in the high single-digit to low double-digit range, a significant increase from the low to mid single-digit range, we communicated in January. In an already challenged supply chain due to COVID-19, the February natural disaster in Texas, further impacted the complex petrochemical network causing significant disruptions. These production disruptions coupled with surging architectural and industrial demand. That pressured supply and rapidly driven commodity prices upwards. Recovery has been significant in recent weeks and is improving, but it's still far from complete. At this time, we anticipate some moderation of costs in the back half of the year, though they will still be elevated year-over-year. As we previously described, there is a lag of about a quarter from the time we see inflation in commodities to the time we see the impact in our results. Given this timing, we expect to see significant raw material inflation in our second quarter, which will be the highest of the year. The pace at which capacity comes back online and supply becomes more robust remains uncertain. We have been highly proactive in managing the supply chain disruptions to minimize the impact on our customers. We expect to be in a similar mode throughout the summer months as reduced raw material availability resulted in lower than anticipated inventory build during our first quarter. Our close working relationships with customers and the strength of our global supply chain give us great confidence in managing through any challenges that may occur. We've also been highly proactive in our pricing actions to offset the raw material inflation we are seeing. We've issued price increases in both the consumer brands and Performance Coatings Group in addition to the previously announced price increase in The Americas Group. We likely will need to take further pricing actions if raw material costs remain at these elevated levels. While we are fully committed to combating rising raw material costs, we also recognize that the timing of price realization will likely result in some near term margin pressure. Against this backdrop, we anticipate second quarter 2021 consolidated net sales will increase by a mid- to high-teens percentage compared to the second quarter of 2020. We expect the Americas Group to be up by a mid- to high-teens percentage. We expect Consumer Brands to be down by a low double-digit to mid-teens percentage including a negative impact of approximately 4 percentage points related to the Wattyl divestiture and we expect Performance Coatings to be up by a high 20's percentage. We expect to have greater clarity of raw material availability and cost inflation trends at that time as well as further confirmation of the strong demand trends, we are currently seeing. Our current sales and adjusted earnings per share guidance remains unchanged at this time. We expect consolidated net sales to increase by a mid to high single-digit percentage. We expect the Americas Group to be up by a mid to high single-digit percentage, Consumer Brands Group to be up or down by a low single-digit percentage including a negative impact of approximately 5 percentage points related to the Wattyl divestiture and Performance Coatings Group to be up by a mid single-digit percentage. We expect diluted net income per share for 2021 to be in the range of $7.66 to $7.93 per share compared to $7.36 per share earned in 2020. Full year 2021 earnings per share guidance includes acquisition-related amortization expense of $0.80 per share and a loss on the Wattyl divestiture of $0.34 per share. On an adjusted basis, we expect full-year 2021 earnings per share of $8.80 to $9.07, an increase of 9% at the midpoint over the $8.19 we delivered in 2020. Let me close with some additional data points that may be helpful for your modeling purposes. We expect to see some contraction in full-year gross margin given the lag between price realization and the rapid and greater than expected increase in raw material costs. As we capture price and inflation abates, we expect to see gross margin recover and then expand over time just as it has in the previous cycles. We expect to see expansion of full year adjusted pre-tax margin as we leverage strong sales growth while controlling SG&A. We will continue making investments across the enterprise that will enhance our ability to provide differentiated solutions to our customers. We expect to return to our normal cadence with around 80 new store openings in the U.S. and Canada in 2021. We'll also be focused on sales reps, capacity and productivity improvements, systems and product innovation. We also plan additional incremental investments in our digital platform and the home center channel. These investments are embedded in our full year guidance. We expect foreign currency exchange will not have a material impact on sales for the full year. We expect our 2021 effective tax rate to be in the low 20% range. We expect full-year depreciation to be approximately $280 million and amortization to be approximately 300 million. The capex and interest expense guidance we provided last quarter remains unchanged. We have $25 million of long-term debt due in 2021. We expect to increase the dividend by 23.5% for the full year. We expect to continue making opportunistic share repurchases. We will also continue to evaluate acquisitions that fit our strategy. We're off to a great start in 2021 with our excellent first quarter performance. Our team is operating with momentum and energized by the many opportunities in front of us as the recovery gains strength. We see demand remaining strong over the remainder of the year and nobody is better equipped to provide differentiated customer solutions than Sherwin-Williams. We're confident in our ability to manage through transitory raw material availability and cost inflation issues and we expect to deliver another year of excellent results.

compname reports q1 earnings per share of $1.51. sees fy earnings per share $7.66 to $7.93. q1 adjusted earnings per share $2.06. q1 earnings per share $1.51. q1 sales rose 12.3 percent to $4.66 billion. sees fy 2021 adjusted net income per share $8.80 - $9.07.

On the call today are Signet's CEO, Gina Drosos; and chief financial and strategy officer, Joan Hilson. Any statements that are not historical facts are subject to a number of risks and uncertainties, and actual results may differ materially. During the call, we will discuss certain non-GAAP financial measures. For further discussion of those as well as reconciliations of them to GAAP measures, investors should review the news release we posted on our site at signetjewelers.com/investors. First, let me begin by sending our thoughts and prayers to our colleagues and partners who were in the wake of Ida. We hope you and your loved ones are all safe and sound. Now on the quarter. Our performance this quarter reflects continued momentum in our Inspiring Brilliance transformation to maximize jewelry category strength and capture market share over the last year. Specifically, we are advancing and better integrating our banner value propositions, product newness, always on marketing and connected commerce experiences. Our team continues to accelerate our transformation and delight new and loyal customers through their passion, dedication and expanding capabilities and talents. It's an honor to work alongside them. There are three key messages that I'd like to leave you with today. First, we outperformed expectations and are raising our fiscal '22 guidance. Data-driven insights and our bespoke research capabilities enabled our team to quickly identify and make the most of changing consumer trends. Second, our Inspiring Brilliance strategies are working in an integrated manner. Our continued refinement of our banner value propositions are serving distinct customers with differentiated product assortments and experiences. Our Connected Commerce strategy is increasingly enabling more consumers to shop with us whenever, however and wherever they want. And third, we are continuing to strengthen our culture of innovation and agility. And our team members are embracing new capabilities with excellence. By investing in our people and attracting the best talent across industries, our people and culture are becoming an even stronger competitive advantage. Now let me share some highlights from the second quarter. We delivered total sales of $1.8 billion this quarter. That's a same-store sales improvement of 97.4% compared to last year. We're pleased with this performance but are also mindful that we didn't meaningfully reopen our stores until about two-thirds of the way through the second quarter last year. A better indicator of our performance is the comparison to two years ago, when our fleet was fully operational. On that basis, this quarter represents same-store sales growth of 38.1%. Total revenue was nearly $425 million higher than two years ago despite having roughly 450 fewer stores, a 16% reduction in store count. This performance points to the importance of both Connected Commerce and our store footprint optimization. As we continue to transform our operating model, we delivered non-GAAP operating margin of 12.5% this quarter, representing an 860 basis point improvement compared to this time two years ago. As a result of this strong momentum, our view of the back half is more positive than it was a few months ago, particularly for the third quarter. We are seeing a delay in the anticipated shift of spending toward travel and experiences, which we believe is primarily related to the COVID Delta variant. While we continue to put the health and safety of both our employees and customers first, we don't anticipate significant store closures in the back half of the fiscal year. These factors are why we're raising our guidance today, reflecting second quarter outperformance and third quarter momentum while remaining cautious given potential macro headwinds. To explain our second-quarter performance, it's important to point out how our Inspiring Brilliance strategies are enabling our team to stay agile and create competitive opportunities. While category tailwinds existed in Q2, it was our differentiated assortments that resonated with customers, our Connected Commerce capabilities that increased conversion and our always on targeted marketing that all worked in combination to deliver strong growth this quarter. Recall that the Inspiring Brilliance phase of our transformation is built on four where-to-play strategies: winning in our biggest businesses, accelerating services, expanding accessible luxury and value and leading in digital commerce. As we aim to win in our big businesses, we focused on leaning into four consumer trends that our data identified early and our team worked to quickly execute against. The first of these trends is strong consumer confidence. While this index took a step back in August, it was heightened throughout our second quarter and remains similar to levels earlier this year. Confidence is highest among millennials and higher-income customers. Our recent research also shows that 80% of U.S. consumers believe they are the same or better off economically today than they were before the pandemic. We've responded by providing additions to our assortments that offer higher-quality pieces at higher price points. The second trend is gifting at higher price points as customers continue to celebrate those closest to them. We identified this trend early and leaned into it at Valentine's Day and again at Mother's Day. In the week leading up to Mother's Day, we drove brick-and-mortar same-store sales growth of more than 30% to two years ago, with average transaction value up 18%. Similarly, growth in eCommerce over the same time period was more than 90%, showing that our Connected Commerce experience is resonating, both in store and online. The third trend is higher self-purchasing among both women and men. Customers are seeking ways to express themselves by spending discretionary dollars on better quality pieces that both hold their value over time and reflect their personal style. open and now available at sales. This new 60-piece collection is a testament to Serena's self-love and strength and has been met with strong initial customer response. Another good example is our decision to expand the fashion assortment available through James Allen. While still a relatively small portion of its overall sales, James Allen's second quarter fashion sales were up more than threefold to this time two years ago. The fourth trend I'd like to highlight is the rising tide of engagements. Our research indicates 15% of committed couples or approximately 2.3 million couples plan to get engaged this calendar year, which is up high single digits to a typical prepandemic year. As a company, we have tremendous expertise in providing customers with education and counsel, both in store and online, which builds trust on such an important decision. Customers are responding as we saw total sales of our bridal category increased over $150 million or 25% this quarter to two years ago. While our strategies are working together to respond to these trends, I think the continued refinement of our banner differentiation shines brightest here. Recall that while our banners are well positioned to serve any customer journey, each of them is best positioned to serve a specific one. For example, our data analytics on Kay shows that new customers are 700 basis points more likely to be on a milestone gifting and holiday or holiday purchase journey, aligning with Kay's target of the generous sentimentalist. Meanwhile, Zales continues to refine their approach to attract the bold statement maker, and we can measure our progress. Zales' new customers in the first half of the year are 400 basis points more likely to be on a self-purchase journey than two years ago. One of the ways that we've driven this differentiation is through the continued refinement of our assortment. This includes engagement rings at Kay with the larger center stones and more fancy cuts, higher-quality diamonds and metals available through the Chosen line at Jared or our increasing assortment of diamond pieces at Pagoda. Alongside our efforts to provide a differentiated and consumer inspired assortment is our focus on a healthy inventory position. Through a series of integrated initiatives, we've driven a 40% improvement to our overall inventory turn since we began our transformation. First, we've improved the design and testing phase of our merchandise cycle so that we can lean into trends faster and at a scale that is unmatched in our category. Second, we are rationalizing our SKUs dynamically with data-driven precision to focus on assortments that resonate most, thereby reducing buildups of sell down or clearance merchandise. These efforts enable us to lower inventory levels while giving customers higher access to newness. A clear example here is Kay. New or high-turn inventory penetration at Kay is now 50% higher than it was two years ago. I'd also note that we've applied this playbook to our Memo inventory as well, a decision that has led to more effective purchasing and has bolstered our vendor relationships. Given potential macroeconomic headwinds, these improvements to our inventory and merchandise strategies are important to helping us remain agile. Services is our second where-to-play strategy, and we're making good progress here as well. We see an opportunity to grow services into $1 billion business. Not only do services carry higher margins, they are strategic as they drive trust and long-term relationships. Trust is key when a customer hands us a treasured piece of jewelry to repair or when they ask us to safely pierce a part of their body or when they act on the counsel of our jewelry consultants to choose and customize the perfect engagement ring. Every time we earn a customer's trust, we take a step toward building a relationship that will last a lifetime. And we're working to provide services at every relevant touch point in a customer's purchase journey. For example, in July, we took another step in the transformation of our financial services. We now have long-term agreements with strategic credit partners, which lower our costs and provide customers with a broader and more flexible range of payment options. Customization is also an increasingly important service. In a recent survey, 36% of retail consumers expressed interest in customizing their products and services and 20% indicated that they're willing to pay a premium. Over 80% of bridal customers express interest in some level of customization for their engagement and wedding rings. These insights are reflected in the performance of our Jared foundry experience. Stores with foundries delivered roughly 10% higher sales than Jared locations without them this quarter. This unique offering combines on-site jewelers with computer-assisted design software and 3D printing to provide an experience that customers cannot get at most other jewelry stores. With roughly 50 foundry locations today, we will continue investing in its rollout as we plan to have more than 70 Jareds with foundry experience this fiscal year. Our third where-to-play strategy is expanding the mid-market by growing accessible luxury and value through the continued differentiation of our banner portfolio. As an example, take Kay and Jared. Kay is our broadest reaching banner, positioned squarely in the mid-market. We've been pushing Jared toward the higher end of the mid-market or what we refer to as accessible luxury. The traction of this strategy is proving out in our results. In the second quarter, Jared's average transaction value was 86% higher than Kay's, up from roughly 31% differential this time two years ago. This differentiation allows our scaled banner portfolio to reach more customers with their ideal assortment and value. On the value end of the mid-market, we've continued the rollout of our rebranding test, Banter by Piercing Pagoda, that we began in 100 stores at the end of April. Based on promising results, we expanded to bring the total to 200 stores on August 2. At the same time, we launched banter.com. This new mobile-first site represents an exciting opportunity because the target customer is digitally savvy and most likely to shop from their mobile device. But our eCommerce penetration has historically been among the lowest of our banners. Results of this new site are still very early, but encouraging. Online traffic has doubled, and interaction times on the site have increased 25%. Importantly, we're seeing a lift from both new customers and existing Pagoda customers, unlocking new levels of customer acquisition and growth. Our fourth and final where-to-play strategy is leading digital commerce in the jewelry industry. I want to put particular emphasis on this because it is so fundamental to our strategy. If winning in our biggest businesses is our foundation, then leading in Connected Commerce is our accelerator. The two together, combined with services and mid-market expansion, are multipliers. Connected Commerce is not brick-and-mortar or eCommerce or digital. It's the integration of customer experiences, leveraging in store and online and mobile and ubiquitous delivery as both a mindset and a capability. It's data-driven and channel-agnostic, and it is seamless. It brings our people and our technology together in a more powerful way. In fact, our Connected Commerce capabilities are adding more opportunities to meet our customers through video calls, buy online, pick up in-store services and more. Customers are also growing more comfortable buying jewelry online. We recognize that the pandemic was a factor in this shift as 78% of consumers have said that the pandemic made them realize that shopping online is better and easier than their previous perception. We continue aiming to be at the forefront of this trend by working to provide an innovative digital shopping experience. Of engaged couples in 2021, roughly 30% said they bought their engagement ring online, which is more than double the amount in calendar 2019. Customers are also looking for convenience, capabilities like virtual consulting, buy online, pick up in-store and ship from store are changing the way that many customers shop with us. In Kay, more than 25% of online orders this quarter utilized at least one of these capabilities. And in Jared, it was over 30% of online orders. Last quarter, we implemented Google Business Messenger and Apple Business Chat as additional ways for customers to reach our virtual jewelry consultants. This is important because we know that when our virtual consultants establish a human connection through these conversations or help customers book an in-store appointment, we drive higher rates of conversion. For example, within Ernest Jones, 20% of our in-store business is now the result of appointments that were made online. Of those appointments, over 70% results in a sale that averages four times what a walk-in customer spends. We continue to believe that blending physical and virtual experiences will be a core customer expectation for fine jewelry and a Signet competitive advantage in the years to come. Now a few words on the potential headwinds ahead. Our research indicates that younger unvaccinated customers, those aged 18 to 49 and particularly those with young children, are more concerned about COVID variants than older customers. This growing concern may impact shopping behaviors among younger people. So we're preparing to meet them wherever and however they want to shop with us across our Connected Commerce ecosystem, including online, curbside pickup, same-day concierge delivery. That said, we also know that these customers are relatively more comfortable being in malls and shopping centers than on planes, in concert venues and at spas. So as travel and experiences take a backseat, we're advancing our flexible fulfillment options while also meeting customers' desires to celebrate those closest to them with gifts of significance and lasting value. Inflation is the other concern that we're seeing in our research. As prices for essentials increase and as stimulus programs wane, naturally, customers' discretionary income decreases. However, within jewelry, this trend still plays to our competitive strengths and to our optimized assortments. Customers, particularly higher-income and engagement customers, will continue to spend discretionary dollars focused on purchases with lasting value. With our scale and trusted network of vendors, we're able to offer product assortments that provide excellent value across a variety of price points, which also align with our margin goals. In summary, our ability to capitalize on category momentum with increasingly strong execution of our Inspiring Brilliance strategies as well as remain agile in a time of uncertainty is a reflection of our culture and our people. In a recent survey, 85% of our team members said they are proud to work at Signet, illustrating the dedication and commitment to performance within our company. We're unlocking incredible discretionary effort among our team, while also attracting top talent from within the retail industry and beyond. All of this creates a powerful cycle, capabilities that translate into positive customer experiences, continuing innovation, productive execution and talent advancements. And it's the strength of our organization and improving agility of our culture that drives my confidence in our near- and long-term performance more than any other factor. On that note, I'll turn this over to Joan, who will share her insights into what's working and what's ahead. The team delivered strong results this quarter, working to maximize the jewelry category strength with our new capabilities. As I talk to our performance, there are three key messages to highlight. First, we expanded operating margin by leveraging fixed costs, growing merchandise margin and achieving higher labor productivity and additional cost savings. Second, we are raising guidance to reflect our Q2 beat and a stronger Q3, given current business momentum and the delay of the anticipated shift to experience-related spending, which we believe is primarily due to the Delta variant. We are maintaining a conservative view of the fourth quarter due to macro uncertainty related to COVID-19 variants and the impact of government support policies on consumer spend. And third, aligned with our capital priorities, we've expanded our authorized repurchases to $225 million to reflect our confidence in our longer-term growth opportunities and the strength of our balance sheet and cash flow. Now turning to the quarter. Our total sales of $1.8 billion reflect growth of more than 100% over last year. We continue to overcome lower levels of retail industry foot traffic through higher conversion, higher average transaction values and Connected Commerce capabilities. I'd also note that this quarter reflects the return of brick-and-mortar business for our U.K. banners. Moving on to gross margin. We delivered approximately $780 million this quarter or 40% of sales. This is a 650 basis point improvement compared to the second quarter two years ago. Leveraging of fixed cost contributed more than 400 basis points of the improvement. The remaining factors were driven by sustained cost savings and merchandise margin expansion. A favorable merchandise mix, complemented by increasing levels of service revenue, enhanced discount controls and targeted promotions drove the expansion. This combination of drivers is an example of the strategy we detailed at our virtual investor event earlier this year. SG&A was approximately $503 million or 28% of sales. This rate reflects a 210 basis point improvement to two years ago. Our data-driven labor model continues to be one of the largest factors in our cost efficiency. It's worth noting that this model continues to make use of flexible store hours by removing unproductive store operating hours where possible. In other words, though overall traffic is down, we're increasing traffic per store hour. This model has delivered a sales per labor hour improvement of more than 70% to this time two years ago, while also contributing to our decrease in employee turnover compared to the same time period. Non-GAAP operating profit was $223 million compared to an operating loss of $41.7 million in the prior year. Second quarter non-GAAP diluted earnings per share was $3.57, including a discrete tax benefit of $0.80 per share. This is due to a release of a valuation allowance against deferred tax assets as our performance has significantly improved since it was recorded. This compares to prior year non-GAAP diluted loss per share of $1.13 and diluted earnings per share of $0.51 two years ago. Turning to the balance sheet. We made significant progress in strengthening our financial health this quarter, and I'd like to offer some additional perspective. Starting with inventory, we're improving the health of our inventory, both in productivity and margin capture as well as broadening the accessibility of our inventory to customers. This has resulted in both a 40% improvement to inventory turn and a reduction in overall inventory levels. To achieve this, we took three key strategic actions. We reduced the level of end-of-life and slow-turning product through strategic promotions. We are also leveraging flexible fulfillment capabilities such as ship from store and buy online, pick up in store, driving increased inventory access and visibility for our customers and team members. We've leaned into our consumer insights, improved design and test cycle to ensure that the new product that we bring in is better aligned with our banner value propositions, thereby reducing the amount of inventory that reaches the sell-down or clearance stage of product life cycle. Moving on to liquidity. We have financial flexibility to continue investing in our long-term growth, recently enhanced by the extension of our ABL facility. Alongside this, we removed customer credit risk from our balance sheet with the recently announced agreements with financial services partners. We're in a net cash position, including both our long-term debt and preferred share obligations, positioning us well to deliver on our capital priorities. Our first priority is to invest in the business. This primarily includes investment in digital capabilities, technology and banner value propositions. This also includes the evaluation of acquisition opportunities that align with our Inspiring Brilliance strategy, such as Rocksbox, which we announced earlier this year. Our second priority is to focus on our debt, with the goal of reducing our adjusted debt-to-EBITDA leverage ratio to below three times. And I'd note that the recent extension of our ABL facility through July 2026 provides us an additional option to address our 2024 senior note and preferred share obligations. Our third priority is returning capital to shareholders. Last quarter, we reinstated our common dividend. And as we announced today, we've expanded our current authorization of share repurchases to $225 million, which we'll evaluate on an opportunistic basis. Now I'd like to discuss our fiscal 2022 financial guidance. We are raising our full year guidance to reflect the Q2 beat and current business momentum. Factor into our view of Q3 is a delay in the anticipated shift to experiences-related spending primarily a result of the Delta variant. We are maintaining a conservative view of the fourth quarter due to macro uncertainty related to COVID-19 variants and the impact of government support policies on consumer spend. Building on last year, our back half strategy includes always on marketing, earlier receipt of holiday assortment and a promotional cadence designed to drive earlier holiday shopping into the third quarter to create less reliance on the fourth quarter. We expect third-quarter sales in the range of $1.26 billion to $1.31 billion, with same-store sales in the range of down 3% to up 1% and non-GAAP EBIT of $10 million to $25 million. Within Q3 guidance, we've embedded higher marketing and store staff expenses to last year as well as the favorable impact from our recently enhanced credit agreements. Implied in our guidance is fourth quarter negative same-store sales in the range of low to mid-single digits. For the fiscal year, we now expect total sales within range of $6.8 billion to $6.95 billion with same-store sales in the range of 30% to 33% and non-GAAP EBIT of $618 million to $673 million. Our guidance assumes no significant level of store closures resulting from COVID variants. And as we've already begun acting on our holiday strategy, we assume no meaningful impact to sourcing or fulfillment arising from inflation or pricing environment changes. As we continue to optimize our footprint, we remain on track to open up to 100 locations and close at least 100. We've opened 37 locations so far this year and closed 33, including 10 mall closures that were then reopened in off-mall locations. Recall over the past 18 months, we've evolved our real estate strategy from strict fleet rationalization to fleet optimization. This quarter has shown the benefits of this approach as our mall and off-mall locations drove similar performance levels. Lastly, recall that I mentioned expected capital expenditures in the range of $190 million to $200 million. This represents a narrowing of our previous range of $175 million to $200 million as we continue fueling Connected Commerce. Further, as we've identified incremental cost savings within gross margin and other indirect spend, we're raising our expected cost savings for the year from a range of $75 million to $95 million to a range of $85 million to $105 million. Our team continues to be a driving force for this company as their commitment to our strategies delivered strong performance this quarter. It is an exciting time for Signet as we continue through our transformation, and I'm proud to work alongside such a devoted team.

q2 non-gaap earnings per share $3.57. q2 sales $1.8 billion versus refinitiv ibes estimate of $1.64 billion. q2 same store sales up 97.4% to q2 of fy21 and up 38.1% to q2 of fy20. sees 2022 total revenue $6.80 billion to $6.95 billion. sees q3 total revenue $1.26 billion to $1.31 billion. expects to close over 100 stores in fy 2022 and open up to 100 locations, primarily in highly efficient piercing pagoda formats. sees q3 same store sales down 3% to up 1%; sees fy 2022 same store sales up 30% to 33%.

On the call are Signet's CEO, Gina Drosos; and chief financial and strategy officer, Joan Hilson. Any statements that are not historical facts are subject to a number of risks and uncertainties, and actual results may differ materially. During the call, we'll discuss certain non-GAAP financial measures. For further discussion on those non-GAAP measures as well as reconciliations of them to the most directly comparable GAAP measures, investors should review the news release we posted on our website at www. Our performance in Q3 reflects the continuing progress of our inspiring brilliance transformation and the innovation, agility, and passion of our entire organization. I continue to be inspired by our team quarter after quarter, and I am proud to work at their side every day. As we look back at this past quarter and our year to date, I want to leave you with one core message, our inspiring brilliance transformation is working, making Signet a much healthier and more agile company today than we were a few years ago. We believe our top and bottom line growth is sustainable, and we're growing share while also investing in important new capabilities and customer experiences at a rate that is currently unrivaled in our category. We still have important work to do to complete this phase of Signet's transformation, but we have the strategic clarity, structural advantages, operating discipline, and high-performing team to continue driving growth ahead of the jewelry sector. We saw this in Q3. Our team delivered the strongest, most profitable third quarter in Signet's history, a quarter that has often been challenging because there's no broad scale gift-giving occasion. We've been taking steps to mitigate our dependence on big holiday cycles and move to a more always-on approach. This is evidenced in our investments in consistent marketing and customer engagement throughout the year, our year-round bridal cycle, and our efforts to increasingly support early holiday shopping in October. This approach is paying off. We delivered a same-store sales increase of almost 19% to the third quarter last year, with notable growth acceleration in October. The overall jewelry category was strong this quarter, but we believe we're gaining market share. We're achieving this growth by leveraging five structural advantages that we've built throughout our transformation: No. 1, our distinctive portfolio of banners; two, our connected commerce presence; three, data analytics capability; four, financial flexibility; and five, scale. We've built these strategic advantages through a series of investments and innovation that we continue to build upon. For example, we've made significant progress differentiating our banner value propositions with distinctive marketing campaigns and unique product assortments, delivering 14% sales growth in bridal and over 30% growth in fashion. We've invested in connected commerce capabilities that now exist in virtually every part of our business. This is reflected in capabilities such as seamless virtual and in-store consulting, asynchronous chat, product visualization, buy online pick up in store, ship from store, curbside delivery, same-day delivery, and more. We've streamlined our fleet, enabling us to serve customers across channels, while also leveraging fixed costs as we drive the top line. We've eliminated consumer credit risk from our balance sheet, enabling us to focus entirely on jewelry retail leadership, while offering a broader array of payment options that continue to gain traction. By leveraging third-party expertise and focusing on what we do best, our financial services transformation is increasingly an enabler of customer acquisition and satisfaction. We've also eliminated costs the customer doesn't see or care about. Our expected cumulative four-year savings is now over $400 million through the end of fiscal '22. One example of how we're doing this is our data-driven labor model that enables us to dynamically plan staffing needs; store-by-store, hour-by-hour, delivering a 75% improvement in productivity compared to this time two years ago. And we've improved inventory turns 50% by defining our product assortment more precisely by banner and by providing a much broader range of fulfillment options. We are becoming the consumer-inspired data-driven jewelry leader and innovator that we aim to be. Given the very uncertain environment today, we are mindful of the challenges still ahead of us. That said, Joan and I would like to use our review of Q3 and our look ahead at Q4 to show how the advantages we've created are driving our performance and growth and positioning us for a strong holiday this year and beyond within all the factors we can control. Let's look first at how we're leaning into holiday earlier than ever. Our research indicates that roughly 25% of shoppers finished their holiday shopping before Black Friday this year, up from 17% a year ago. This trend is being driven by concerns about out of stocks, which we anticipated and planned for. We took action months ago to ensure that our holiday assortment would be stronger and available earlier than ever before. We pulled forward our premarket qualification of new merchandise, strengthened our core assortments, leaned into trends, identified in our research, and placed orders a month or more earlier than we typically do. We also prepared for continuing increases in digital sales and connected commerce this holiday. At this time last year, our jewelry consultants were providing new experiences like curbside pickup and virtual consultations to provide our customers a safe and convenient shopping experience. This year, we've improved the customer experience, allowing customers to select curbside service online during checkout and stay connected to the store throughout the process from purchase to receipt to pick up. And we've expanded curbside delivery to more than 800 stores. We're offering ship from store at 1,850 stores, five times more than last year. And we're offering buy online pick up in store at 2,100 locations. In addition, we've enhanced our distribution capabilities particularly by building in a layer of surge capacity to fulfill customer e-commerce orders on our busiest days. This is a good demonstration of the ongoing transformation at scale we're striving for. Last year, we increased our e-commerce supply chain capability fivefold. This year, we're building on that foundation, increasing the capacity of our distribution centers again, nearly 25% more than last year, and adding a nationwide fleet of local distribution centers with our ship-from-store capability. We're working to extend these distribution advantages even further in the coming year. We're building an AI-driven digital simulation of our entire supply chain. This digital twin will enhance our planning with scenarios that identify potential issues before they occur, giving us insights that enable us to provide faster delivery while driving cost efficiency. We're also improving our employee experience to maximize our advantages in talent and staffing. We increased our hourly wage this year, significantly expanded benefits to respond to the changing needs of our team members, and have continued to invest in training, development, and career growth. In addition, we continue to leverage the power of our purpose, inspiring love and our innovative agile culture to strengthen our team's pride, motivation, and performance. These and other efforts are making a difference. We've seen a 60% decrease in new employee turnover during their first two months at a time when turnover continues to top the headlines across retail. This is important because tenure matters in the jewelry category, where expertise and personal relationships lead to lifetime value. In fact, a jewelry consultant with at least one year of tenure achieves on average, 60% more sales than a new team member. All of these readiness efforts are driven by the structural advantages I mentioned a moment ago and will help us deliver a strong holiday. I'd now like to highlight the meaningful progress we made this quarter within each of our four where-to-play strategies: winning in our biggest businesses; expanding accessible luxury and value; accelerating services; and leading digital commerce. Winning in our big businesses is our foundational strategy. The story here is that the clearer our banner value propositions become the faster we grow. We've gained real traction with this strategy over three consecutive quarters now. For example, Kay and Zales are appealing to increasingly differentiated consumer segments. While both appeal to bridal customers, almost 30% of New Zales customers are on a self-purchase journey, up 400 basis points compared to two years ago, and 64% of new Kay customers are on a milestone or gifting journey to celebrate special moments in the lives of those they love, which is 700 points higher than two years ago. We plan our assortments with these journeys as our compass. We were able to introduce newness with much better success rates because our customers are more precisely defined and because our assortments are more relevant to the journey our customers are on. The success of the Monique Lhuillier launch at Kay is a clear example. Monique is an acclaimed fashion designer known for her captivating bridal gowns. Her brand is all about celebrating life's most special moments. She's partnering with Kay because she considers Kay to be an authority in both the bridal experience and the celebration of milestone moments. We just launched this line at the end of September, and it has already delivered more than $2 million in merchandise sales ahead of expectations. Our second strategy, expanding the accessible luxury and value tiers of the mid-market is also an important driver of growth because it's bringing new customers into our banners. Accessible luxury is appealing because it's a growing higher price point mezzanine segment that sits between luxury and the mid-market. We've built a portfolio that is attracting a diverse mix of highly valuable customers. Jared offers exclusive designer lines, concierge-level service, custom design studios, and a rich assortment of diamonds and fine jewelry for bridal, fashion, and gifting. James Allen is our digital bridal mega store, the company that continues to pioneer the way that customers shop for engagement rings online, setting new standards for custom design and selection with over 300,000 natural and lab-created diamonds. And Diamonds Direct, our newest banner, is our highly personalized bridal destination. They offer customers high-touch bridal experiences with a highly productive operating model, unlike any other in the jewelry category. This portfolio is designed not only to give accessible luxury customers a wide range of options but also to compete even more effectively with independent jewelers who make up more than 65% of the specialty jewelry category, and it's beginning to work as the integrated mix we've envisioned. Jared's average transaction value this quarter was up 35% versus the third quarter two years ago through increased custom design and higher quality merchandise that includes larger stones and precious metals like platinum. James Allen had 50% more customer transactions this quarter than two years ago, again, demonstrating our ability to attract and close highly discriminating bridal customers online. And Diamonds Direct offers customers a differentiated accessible luxury experience, which is currently generating a median annualized revenue of approximately $18.5 million per store over the last 12 months. We're confident we can learn from their model while also bringing Signet's best practices and our scale to their approach. We see similar opportunity on the value end of the mid-tier. Banter by Piercing Pagoda, is generating higher sales and resonating with customers we want to attract to our portfolio, young social media savvy and highly expressive Gen Z consumers and confident creative consumers of all ages. We're also growing banter.com, which has relatively low digital penetration with significant upside remaining. We're continuing to accelerate the expansion of the banter concept based on these early positive results. Accelerating services is our third growth strategy. Providing services is the glue that build lifetime relationships across every banner while also supporting our margin goals. We remain confident that our services strategy is a $1 billion opportunity on Signet's path to $9 billion in total revenue. Extended service agreements are a good example of the progress we're making with this strategy. One of the largest factors driving ESA growth is interaction with a salesperson. This happens naturally in store, but we are focused on enabling this kind of interaction for purchases made online. We've empowered our virtual consultants to sell ESAs and have launched a series of educational videos that engage customers and discuss the benefits of our programs. In addition, we've simplified our ESA offerings, which, along with these other improvements, has helped us nearly triple our attachment rate online compared to this time two years ago and has lifted our overall attachment rate across channels by 60 basis points. Another example is our launch of a new loyalty program. Our loyalty world is currently being piloted at a number of Jared stores. And after making refinements based on what we're learning, we expect to extend it across all our banners. This is a program that customers have expressed a desire for. It currently includes exclusive discounts, a Rocksbox trial membership and unlimited jewelry cleaning. These programs are a great way to reward customer loyalty, stay connected and provide additional data on how to better customize our assortment and services. Leading digital commerce is our fourth strategy. Digital is our accelerator, especially for our biggest businesses. The story in digital is data. This is becoming a real structural advantage for us, one of the biggest interventions we've made since we began our transformation. Our data analytics capabilities enable us to operate with increasing precision. For example, building on the insights of our initial real estate greenfield analysis, we are now taking a connected commerce approach to the next phase of this work. We didn't have capabilities like ship-from-store during our original analysis and no real way to capture each store's e-commerce halo. But now we do. We're analyzing customer needs down to an even more precise level to determine where connected commerce opportunity exists and how we can drive market share growth on a more localized basis. For example, we're now analyzing opportunities beyond just trade areas. We're micro-targeting customers using populations of 3,000 or fewer people. This focused level of data at scale is a significant advantage in the jewelry category and will serve us for years to come. We're also leveraging our analytics capability to optimize the way we introduce product assortments, a good example being our expansion of lab-created diamonds. Our merchandise teams have used our data to build and tier our LCD assortment in a way that doesn't compete with natural stones. For example, customers who come into our stores this holiday with a certain piece in mind, will in some cases, be able to choose a lab-created piece in a similar style that offers higher clarity or even higher carat weight. We're also offering an exclusive LCD cut through Zales called the Vera Wang true line, and we're offering an LCD option of Kay's Leo cut through the Leo legacy line. Our database approach is ensuring that LCD is additive. It is increasing selection, appealing to different customers and driving incremental sales. In these and so many other ways, we're building and leveraging a culture of agility and innovation that is driving growth in every part of our business. What I hope you can sense is that the momentum we've been building is intentional and disciplined and reinforces our conviction that Signet is a healthy and agile company. The strategic clarity and structural advantages we've created, combined with the disciplined execution that our team is providing quarter after quarter, is building momentum and driving top line growth, margin expansion, and liquidity that we believe is sustainable over the long term. We continue to work hard at our transformation efforts and we know there are many uncertainties in today's environment, but we're energized by the impact we're having in our customers' lives, and we're proud of what we're achieving and delivering together. We also take pride in what our company stands for, and I want to close on this point. Just as we're building momentum in our business, so are we building momentum in our leadership as a purpose-inspired company, and we're doing this from the inside out with our highly engaged team. A year ago, we announced on our Q3 earnings call that Signet was, for the first time, named a certified Great Place To Work company. Today, we're pleased to announce that not only was Signet recertified as a great place to work this year based on our strong employee trust index survey results but that all of our scores improved year over year. For us, our partnership with the Great Place to Work Institute gives us the ability to continuously advance our employee experience by listening to our team, taking action to improve and benchmarking ourselves against other great companies. Significantly, this year, 90% of our team share that they feel a sense of pride in what we are accomplishing and 82% believe wholeheartedly that Signet is a great place to work. We can confidently assure you that our Signet team is fully engaged and passionate about delivering for our customers this holiday. Additionally, this quarter, we paid close attention to the UN conference on climate change that concluded just a few weeks ago. As a member of the UN Global Compact, we are fully committed to enhancing our business practices to meet evolving expectations from our investors, employees and customers. We have established our own Signet Climate Action and Sustainability Committee, a cross-functional team tasked with preparing Signet for the future with our own net zero strategy as we articulated in our corporate sustainability goals released earlier this year. These quarterly milestones advancing Signet's commitment to corporate citizenship and sustainability matter because consumers are increasingly seeking out companies that share their values. On that note, I'll turn this over to Joan, who will provide deeper insight into what's driving our growth and where we're headed this fiscal year. There are three important messages that I'd like to leave you with today. First, we delivered cost leverage on top line growth again this quarter as a result of our strengthened operating structure. Second, we achieved a trailing 12-month leverage ratio of 2.1 times. We returned value to shareholders through dividends and share repurchases, and continue to invest in long-term growth. Third, we are raising fiscal 2022 guidance to reflect enhanced connected commerce capabilities and business momentum, which continued through Black Friday and Cyber Monday weekend. Also concluded in today's update is higher expected cost savings. In Q3, we achieved total sales of $1.5 billion, growth of approximately $237 million over last year. Compared to two years ago, sales are up $350 million with few -- with 423 fewer stores. While retail foot traffic remains down to pre-pandemic levels, our team effectively used enhanced connected commerce capabilities to drive increased conversion and higher average transaction value. So substantially, all merchandise categories and banners demonstrated growth supported by a roughly 50% increase in advertising to strategically drive earlier shopping and reduce reliance on traditional fourth quarter profitability. We delivered approximately $576 million this quarter in gross margin or 37.4% of sales. This is a 380 basis point improvement to last year, and a 630 basis point improvement to two years ago. Leveraging of fixed costs contributed roughly two-thirds of the improvement in both years, driven by fleet optimization efforts. Additionally, the remainder of gross margin improvement relates to merchandise margin and was driven by fundamental changes in our operating model. These significant changes include enhanced discount controls and reduced promotions as well as strategic inventory initiatives that I'll discuss in a moment. Moving on, SG&A was approximately $471 million or 30.6% of sales. This rate is 70 basis points higher versus a year ago from investments in both advertising and labor as we anniversary the reopening of stores after the COVID shutdown. Compared to two years ago, we leveraged 380 basis points. We leveraged 300 basis points, reflecting changes in our cost structure. These changes include cost savings from new credit agreements, a more efficient labor model and continued cost discipline across the organization. These improvements help to fund increased advertising as well as investments in our connected commerce capabilities. Non-GAAP operating profit was $105 million compared to $46.8 million last year and a loss of $29.3 million two years ago. Third quarter non-GAAP diluted earnings per share of $1.43 compares to the prior year of $0.11 and a non-GAAP loss per share of $0.76 two years ago. Looking deeper into our financial health, overall liquidity of $2.7 billion includes $1.5 billion of cash at quarter end. Working capital efficiency improved approximately 40% to last year, net of cash through strategic reduction of inventory, collaboration with vendors on payment terms, and the sale of our in-house receivables. We ended the quarter at $2.1 billion. Even with a 15% increase in holiday receipts compared to last year, inventory was down $26 million and sell-down and clearance inventory was lower by roughly 14 points. These improvements were driven by strategic inventory initiatives, including new flexible fulfillment capabilities, life cycle disciplines that includes SKU rationalization and data-driven allocation of product. The cumulative result of these actions was a 50% improvement in inventory turn to last year. Alongside the fundamental improvement in owned inventory, we've been partnering with our vendors to eliminate slower turning consignment inventory and strategically shift focus to just-in-time core products and data-driven testing of newer collections. As a result, consignment inventory was lower by $315 million, which has effectively doubled its productivity over the last two years. Moving on to capital. The $2.7 billion of liquidity at quarter end supports our capital priorities. Our first priority remains investing in growth opportunities, including our connected commerce and technology advancements, continued differentiation of our banners, as well as the recent acquisition of Diamonds Direct. We continue to expect capital expenditures in the range of $190 million to $200 million for fiscal '22. Our second priority is ensuring liquidity through a strong cash position to provide financial flexibility. Recall, we extended our ABL facility through calendar 2026, providing enhanced flexibility to address calendar 2024 maturities of senior notes and preferred share obligations. As mentioned earlier, the trailing 12-month adjusted leverage ratio of 2.1 times is nearly half that of pre-pandemic levels. Our third priority is returning capital to shareholders. We reinstated our common dividend earlier this year and this quarter, we repurchased for approximately $41 million. We have roughly $185 million remaining under the current share repurchase authorization. Now I'd like to discuss our fiscal '22 financial guidance. We are raising our full year guidance to reflect business momentum as well as the acquisition of Diamonds Direct. We expect fourth quarter total sales in the range of $2.4 billion to $2.48 billion and same-store sales in the range of 6% to 9%. While we've managed the factors within our control, our guidance also considers headwinds outside of our control as we move closer to peak holiday selling. These headwinds include disruptions emerging from COVID variants, government mandates and consumer behavior changes toward experience-related spending. That said, it remains difficult to predict the magnitude and timing of these expected changes in consumer behavior. We expect non-GAAP EBIT of $280 million to $317 million. Compared to Q4 of last year, guidance includes higher marketing, incremental store labor costs, which include additional holiday incentives, higher domestic transportation costs and provides for promotional flexibility. Lastly, we have raised cost savings expectations for fiscal '22 to $100 million to $115 million. Now turning to real estate. For fiscal '22, we expect approximately 75 closures across the fleet and 85 openings, primarily in highly productive Banter by piercing Pagoda format. This update to our guidance is a result of stronger than expected performance in select locations, favorable lease economics on short-term extensions and a shift in project timing. Looking deeper at our store footprint, we remain focused on optimizing our fleet through data-driven analytics. This includes the transition of traditional mall formats to highly productive off-mall locations. Over the past two years, we've increased the off-mall penetration within the Kay banner by four points. Now with nearly half of Kay locations and off-mall formats, we're seeing growth at these locations outpace traditional mall formats and carry more favorable economics. Additionally, this strategy to off-mall has reduced our exposure to declining malls by approximately eight points in our biggest banners. Now I'd like to address operating margin. We're often asked, given current jewelry category strength about the sustainability of our operating margin performance. We believe our margin performance is sustainable in a normal environment because of fundamental changes that have created a healthier and more agile operating model. I'd like to reiterate the following fundamental changes in our business. Data analytics inform critical decisions, and we will continue to mature and build on these competencies. Banner portfolio differentiation is driving growth and includes an increased focus on higher-margin services. Inventory management improved significantly through the implementation of capabilities such as flexible fulfillment, life cycle and price management, SKU rationalization, as well as strategic use of consignment inventory. Fleet optimization remains a critical part of our margin expansion and we will continue to refine our trade area analysis. Cost savings will continue to help fund long-term growth initiatives, including always on marketing and investments in digital capabilities, technology harmonization, and talent. Fully outsourced financial services, transitioned expertise to third-parties removed consumer credit risk from our balance sheet and provides customers with a broader and more modern range of payment options. Liquidity and working capital management improved our financial strength and flexibility to continue investing in strategic initiatives while also returning capital to shareholders. We still have important work to do to continue Signet's transformation. That said, we've made fundamental changes that have built structural advantages and created strong operating discipline, and we have a high-performing team to continue growth within the jewelry category. I'd like to wish everyone a safe and happy holiday season.

q3 sales $1.5 billion. qtrly adjusted earnings per share $1.43. sees 2022 same store sales up 41% to 43%. co now expects to close approximately 75 stores in fiscal 2022.

On the call today are Signet's CEO, Gina Drosos; and Chief Financial and Strategy Officer Joan Hilson. Any statements that are not historical facts are subject to a number of risks and uncertainties, and actual results may differ materially. During the call, will discuss certain non-GAAP financial measures. For further discussion of those non-GAAP measures as well as reconciliations to the most directly comparable GAAP measures, investors should review the news release we posted on our website at www. Before I get into the call, I want to take a moment to address the crisis in Ukraine. As a company whose purpose is inspiring love, we stand against this invasion and unprovoked war. As such, Signet has suspended all business interactions with Russian-owned entities since the beginning of the conflict. And through our Signet Love Inspire's Foundation, we have donated $1 million to the Red Cross to help provide food, medical attention, and supplies within Ukraine as well as shelter for the millions of refugees fleeing the country. Our foundation is also providing a two-to-one match for Red Cross donations made by our generous team members. We will continue to look for additional opportunities to support the people of Ukraine, and our thoughts and prayers are with them all. Now let me share Signet's results with you. We closed this year once again with strong performance. The Signet team delivered record sales and earnings growth, our sixth consecutive quarter of overall growth. I am always inspired by their achievements. There is one key message that I'd like you to take away from this quarter and year. We are demonstrating that Signet has the strategies strength and structural advantages to consistently outpace the market and gain share while also delivering sustainable double-digit operating margins. We can see this in three specific ways. market share to 9.3%, a 270 basis points gain over prior year. We grew share in every channel and every banner. This was true in well-established categories like bridal, where Signet is the clear U.S. retail leader with a roughly 30% share, and in lab-created diamonds, where we are widening the gap as the market leader in this new and fast-growing category. Second, we are continuing to increase margin as we grow. In fact, we have permanently reset our margins over the past four years by 200 basis points ahead of where we were before starting our Path to Brilliance journey. We'll use our time with you today to explain why we believe our double-digit operating margin is sustainable. And third, we are generating significant excess cash. Our leverage ratio is healthy at now less than two times EBITDAR. We are investing in organic growth and acquisitions. And with our stock's current valuation, we are aggressively focused on share repurchases to take advantage of the disconnect that exists between our confidence in the value Signet will continue to generate and what the current share price reflects from the market. In fact, we repurchased more than $270 million in shares since mid-January, and still have over $400 million in authorization remaining. Signet's results are being driven by the strengths we mentioned in our last call. Our diversified banner portfolio, connected commerce presence, data analytics capability, and scale, these strengths, and our financial health our ability to sustain industry-leading investments in our business have become important, sustainable sources of competitive advantage. In a moment, I'll talk through the progress we made this quarter in each of our where-to-play focus areas. But first, I'd like to share perspective on both the tailwinds and macro headwinds that we see ahead in the coming year, tailwinds we're confident Signet can leverage, and headwinds that we are well-positioned to manage through. The most important tailwinds are those that we are creating with our strategies. They are not transitory. To the contrary, they are accelerating. We plan to invest up to $250 million in capital during fiscal '23 to drive our strategies, further enhancing our stores, digital platform, and data analytics advantages. This is our largest planned capital investment in the past five years and it's guided by increasingly precise insights. The biggest external tailwind is also the happiest one. Couples are getting married at record-setting rates. We expect more weddings this year than we've seen in nearly 40 years. Bridal is an important part of our business, of course, but it's much more than engagement rings. The average couple buys their wedding bands two months ahead of the wedding. And wedding days give us the opportunity to provide jewelry for the bride and groom, bridesmaids, mother of the bride, and guests attending the wedding. In addition, these celebrations drive future growth because dating couples who attend a wedding together are among the most likely to get engaged shortly afterward. We continually look for new ways to innovate to make the entire bridal occasion more special. One example is the Rocksbox bridal subscription, which we're testing now. Rental pieces make it easy and affordable for every number of a bridal party to shine at showers, engagement dinners and at the magical I do moment. They also appeal to customers who want to participate in a circular economy. We also see macro headwinds in the months ahead and believe we are well-positioned to mitigate them. We continue to anticipate a shift in spending toward entertainment and travel. More than 75% of American consumers say they are ready to travel and a majority of those are already planning trips for June and July despite the inflated cost of these trips versus pre-pandemic levels. This reinforces that consumers are willing to pay more for both experiences and goods that they want and value. The biggest issue on people's minds, of course, is the war in Ukraine and, to a lesser extent, the inflationary pressures that may create in both the near and longer term on what we were -- on top of what we were already experiencing. Inflation puts pressure on discretionary purchases. That said, whether people have been waiting two years to travel or two years to get married, they are making the purchases that matter to them even at higher prices. At Signet, we are prepared to make the most of this dynamic with excellent value, fresh assortments, industry-leading marketing and services, expert advice from our jewelry consultants in store and online, and a connected commerce presence that provides superior and seamless customer experiences. Our financial fitness and our strong supply chain relationships enable us to deliver great value to customers despite inflationary pressures while still protecting and growing margin. As a result, we believe will be less impacted by inflation than jewelry industry competitors or the retail sector overall. To dig a little deeper, our supply chain is a significant source of competitive advantage. We are a sightholder with De Beers, which enables us to buy rough diamonds directly. We have a proprietary online diamond marketplace through James Allen. This gives us real-time pricing on more than 450,000 cut and polished stones valued at more than $2 billion. We now have seven manufacturing facilities in India subcontracted to work exclusively for Signet in addition to our own cut and polish manufacturing facility in Botswana. Altogether, we grew our production capacity by tenfold last year. This level of scaled vertical integration along with our strategic vendor partnerships gives us an enormous advantage in terms of both quality and volume of inventory. We are also an industry leader in responsible sourcing, which has become even more important to consumers today. We believe our sophisticated supply chain and AI-driven inventory management system is a clear competitive advantage in the highly fragmented jewelry industry, ensuring consumer access to the right inventory at the right time at the best price with an agility that's hard to match. We expect the overall jewelry industry to be down low single digits to roughly flat this year. While it's impossible to predict precisely how long it will take the industry to return to its historical average annual growth rate of 2%. What we can say with much greater confidence is that Signet has the right strategies, strength, and structural advantages to grow faster than the industry. We believe we are well-positioned to keep gaining market share and delivering sustainable double-digit operating margins. With that confidence in mind, let's take a closer look at our progress across each of our where-to-play strategies. Winning in our biggest businesses remains the largest pillar of our Inspiring Brilliance strategy. Every one of our banners is growing at or ahead of their growth targets. This reflects the steady progress we've made differentiating our banners with more clearly defined customer targets, optimize assortments, and always-on marketing that is highly efficient and effective. I'll touch on just two of these improvements. First, we are focused on our in-store experience as part of our seamless connected commerce presence. During the pandemic, we pivoted to digital and invested in the digital experiences customers needed. Now that customers are coming back to stores, marks the biggest investment in our store experiences that we've made in five years, all driven by our distinctive banner value propositions and database greenfield analysis. Second, we're investing in always-on marketing more aggressively and strategically than ever, at a level that no other company in the jewelry industry can. In fiscal '22, we increased our advertising budget by more than $180 million, and we expect to continue investing again this year. This enables us to increase customer acquisition, engaging customers with relevant messages in the right channels at the right times. And as a result, reducing our reliance on traditional fourth-quarter profitability. And here's where scale matters. We hold a 50% share of voice in targeted TV even as we've shifted significantly to a more targeted digital marketing plan. The two approaches work in concert, enabling us to expand quantity at the top of our customer acquisition funnel and reach more customers more efficiently. At the same time, our data-driven consumer insights help us improve the quality of customers we're attracting. Customers who are responding to our marketing have higher purchase intent and are looking to spend more. We see this most vividly in North America, where we drove average transaction values up more than 15% and in-store conversion, up nearly 20% versus two years ago. Further, Kay and Zales, two of our banners that historically overlapped each other, are now very distinct and delivering strong parallel growth. Not only did both outperform the industry but they also delivered double-digit improvements to their Net Promoter Scores compared to two years ago. Expanding accessible luxury and value is our second where-to-play priority and we're making meaningful progress at both ends of the mid-market. In the value tier, we have now completely rebranded Banter by Piercing Pagoda. With seven consecutive years of positive same-store sales, Banter continues to attract our youngest customer base. And the rebrand is building momentum. The launch of bantor.com, for example, has driven site traffic up more than 80% compared to last year. And our expansion into in-line locations is allowing us to enter high-traffic shopping environments where kiosks aren't feasible, and to provide private rooms for needle piercing services, one of the fastest-growing and highest-margin services we offer. We're also growing in the value tier by putting greater focus on our outlet formats with distinctive and exclusive merchandise designed for treasure-seeking customers. Outlets grew nearly 55% compared to last year. At the other end, in the accessible luxury tier, we grew considerably this year across three of our banners, Jared, James Allen, and Diamonds Direct. Jared has been diligently refining their assortment for the past few years to lean into higher price points. We are now offering larger stones, fancier cuts, and higher-quality metals while also moving away from lower-priced speeds. In fact, for the year, Jared's average transaction value increased more than 60% compared to the previous year. James Allen remains critical to our accessible luxury expansion with its digitally native model. This year, James Allen made significant progress by expanding its fashion assortment. The strategy here is that when customers are thrilled with their James Allen engagement ring and wedding bands. It's naturally one of the first places they look for meaningful gift ideas and fashion accessories. This too is working. James Allen increased its fashion category sales more than 95% this year with an average transaction value that is more than eight times our North America average. Diamonds Direct is another great story. We only have 22 locations today, and there is clear room for expansion. What Signet brings to this opportunity is our trade area analytics capability. This will enable us to expand Diamonds Direct stores with data-driven precision, ensuring we open new stores precisely where they will grow fastest and most profitably. And a bit down the road, we know we can leverage connected commerce to create a Diamonds Direct digital presence that will work seamlessly with our brick-and-mortar formats. Accelerating services is the third pillar of our strategy, and our goal is to grow it into a $1 billion business. In FY '22, we advanced toward this goal, delivering $620 million in revenue, up 65% versus prior year. I'll highlight three of our highest potential services, repair, extended service agreements, and rewards. What I love about these services is that they are all relationship builders. The better we do at each of them, the more lifetime relationships we build and the more lifetime value we capture. I'll start with repair. We offer repair services regardless of where a piece was purchased, not only because of the revenue it generates but also because it is a powerful opportunity to build advocacy. When someone hands us a treasured piece of jewelry to repair, and we beautifully refresh the quality, we create evangelists. It's a powerful and emotional moment of truth and also a driver of future growth. We are continually improving our repair capability. Our average turnaround time for repairs is now under a week compared to an industry average of two to three weeks. And we continue to see increasing customer satisfaction ratings in areas like feeling valued and time to assist. The second example I'd like to highlight is increased attachment of our extended service agreements, especially online. ESAs are the largest and among the highest margin of the services we provide. In the fourth quarter, after our relaunch, online attachment increased nearly 400 basis points, and the lifted total attachment 300 basis points versus prior year. That translated into more than 35% revenue growth in extended service agreements this quarter. Improvements like these are great for customers and are also important to our margin expansion goals. The last example I'll mention here is one I am personally very excited about. Our new Vault Rewards loyalty program. We began piloting this program at Jared last year, and by the end of fiscal '23, we'll expand it into other banners. Loyalty programs are important because they deepen relationships and drive repeat purchases. At Signet, a customer's second purchase is the most important indicator of lifetime value. 40% of customers who make a second purchase within nine months of their initial purchase will make a third purchase in the next six months, building a relationship that only grows stronger over time. In fiscal '22, for example, the average transaction value of a returning customer was 14% higher than a new customer. Lifetime relationships at scale are a powerful source of advantage. Our fourth strategy is leading digital commerce, which we see as an accelerator of growth. This is a strategy that I think many people may define too narrowly and as a result, underestimate the value Signet is creating. It includes e-commerce, of course, and we've doubled our e-commerce sales over the past two years. In fact, e-commerce sales have grown more than threefold since we began our Path to Brilliance transformation. With over $1.5 billion in e-commerce sales, we are now the largest online specialty jewelry retailer in the U.S., and we are widening the gap. Last year, when the overall retail average NPS in digital declined by 17 points versus prior year to less than 50, Signet's digital NPS improved by eight points to nearly 70. That's an almost 20-point gap. And given industry fragmentation, we believe our advantage over jewelry retail is even higher. But importantly, leading digital commerce at Signet is much bigger than e-commerce alone. We are digitizing every interaction we have with our customers. Our store associates are so connected now that they never have to leave a customer's side. They can search our entire inventory for a perfect piece that may not be in their store, enroll a customer in an ESA and complete the purchase, all on their tablet. Here's why I believe this is such an advantage. Digitally connected customers represent more value and Signet is uniquely positioned to serve them. Now 65% of all our customers visit our digital sites during their journey, much higher than pre-COVID. And fully 90% of our highest value customers, those who spend more than $500 with us, engage across our shopping channels, taking advantage of our connected commerce capabilities and services. The more customers who are comfortable and well served across formats with no friction, the faster our banners grow. Beyond our customer-facing capabilities, we are also using digital innovation and data analytics to improve efficiency and to inform decision-making. We know that targeted marketing and promotions are a better use of dollars. This year, we acquired 32% more new customers than we did in fiscal '21 as we continue to sharpen our targeting. And we regained 37% more customers who had not shopped with us in more than two years. This is why we're launching our new customer data platform this spring, which we will leverage to attract more customers at lower acquisition costs. There is real scale potential here with a companywide database of customer browsing and purchase histories harmonized across our banners. An additional point is that this data is by customer not by household, which allows us to advertise to a customer about their upcoming anniversary without tipping off their spouse or partner. Secondly, we're leveraging digital capabilities to accelerate the continued optimization of our fleet. As we've talked about, stores are an important part of our connected commerce presence. The key is to have them exactly where customers want them to be part of their shopping journey and where they will generate the greatest returns on investments. Over the past four years, we've trimmed over 20% of our fleet. Now we're drilling beyond trade areas to optimize our fleet at a hyper-local level with our new greenfield analysis. Fleet optimization is critically important because it enables the permanent reset of our margin structure. We delivered nearly 500 basis points more in gross margin in fiscal '22 than we delivered four years ago by driving higher sales on lower occupancy costs. A simple way to think about our strategy of leading digital commerce is that we are building a consumer-inspired moat around our business. The more we invest and the stronger our capabilities become and the more our customers come to value and expect our seamless connected commerce experience, the harder it becomes for competitors to catch up. This is strategic scale at its best. What I hope you can see is that we are outpacing the market in all four of our focus areas, and these strategic choices are widening the gap between us and the rest of the industry. We believe we can keep doing this and gaining market share year after year. Before I hand this over to Joan, I want to make one final point, culture matters. The strength of Signet's culture, talent, and employee engagement at every level of our organization is reflected in the company's strong business performance. One of the ways we assess the strength of our culture is the Great Place to Work survey. For the second year in a row, our employee survey scores qualified Signet as a Great Place to Work certified company, with ratings improving in literally every category the survey tracks. Importantly, in a year when so many companies were suffering from labor shortages as a result of the great resignation, Signet's turnover actually improved. One thing team Signet is highly motivated by is our purpose of inspiring love. This is part of every interaction we have with customers, and it's also part of our ethos as a good corporate citizen. Together, we want to make a long-term and meaningful positive impact on the world around us. This earns customer admiration and drives pride and belonging in our organization. One example, in addition to the humanitarian support for the people of Ukraine that I mentioned at outset, is the support we provide to St. Jude's Children's Research Hospital. This year, in the midst of an ongoing pandemic and continued uncertainty, our customers and team members rallied, eager to express love and to help celebrate the lives of every child St. Jude cares for. And our fiscal '22 annual campaign came to an end with an increased fundraising donation of over 85% versus prior year, a total of $7.6 million bringing our total to nearly $100 million in support over the past 25 years. Our ability to have an impact like this powered by our purpose and driven by performance and strong customer relationships builds tremendous pride and belonging in our organization. It's one of the factors driving 90% of our team members to say they are proud of what they achieved every day at Signet. Here are our key takeaways for today. We are demonstrating Signet has the strategies, strength, and structural advantages to consistently outpace the market and gain share while also delivering sustainable double-digit operating margins. Our strategic initiatives have improved our operating structure, and we are now positioned to consistently deliver an annual operating margin that is more than double that of two years ago. Simply stated, Signet is a transformed company poised to gain market share. Additionally, the combination of continuous market share gains and stronger margins means we will continue to generate excess cash, giving us the flexibility to continue investing in the business, consider acquisitions that align with our existing strategy, and given our current valuation, focus on share buybacks. Our performance this quarter and this fiscal year reflect the importance of our improved operating structure and the cost discipline that is now a core part of our culture and will help fuel growth in the years ahead. While we anticipate a challenging macro environment for the industry in the coming year, we believe we will deliver top-line growth that outpaces the industry. Now for the quarter, we delivered total sales of $2.8 billion, growth of nearly $625 million over last year. Growth continues to be broad-based across all banners and categories, reflective of our connected commerce efforts working across our platforms. Fourth-quarter non-GAAP operating income of $411 million is up from $293.8 million last year. This represents a 14.6% operating margin, up 120 basis points to last year. Reflected in this improvement is 150 basis points of gross margin expansion, led by the continued leverage on fixed costs from our real estate optimization efforts. This was slightly offset by 30 basis points in SG&A from deliberate investments in our holiday advertising strategy and staffing initiatives, both of which, we believe, led to an acceleration of top-line results. Turning to the balance sheet. I'd like to highlight a number of working capital milestones this year. This is an area of major progress, and net of cash, our working capital is better by the more than 40% to last year from the following improvements: We drove a 56% improvement in inventory turn versus last year, driven by continued progress of inventory life cycle management as well as the positive impact of fulfillment options like ship from store. Notably, Kay, our largest banner, had inventory turn of roughly two times, the fastest turn in its history. This is a great example of our progress that has enabled more targeted units for our customers. To highlight the health of our inventory, clearance and sell-down penetration declined 10 points to last year. It is the lowest it's been in five years. Additionally, we sold all of our remaining credit receivables in the first half of the year completing our transition away from historical exposure to consumer credit risk. And further, we drove a 30% increase in our days payable outstanding. I am really proud of the team and the muscles we have developed and continuously looking to optimize our efficiency and to achieve our results by doing more with less. Together, we are driving more sales with less working capital, less risk, and less stores, all while delivering more cash. And our balance sheet is strong. We ended the year with $1.4 billion in cash and overall liquidity of more than $2.6 billion to continue supporting our capital priorities as we look to the year ahead. As always, our first priority remains investing in our business with a focus on continued growth and market share gains. To that end, we utilized $193 million of cash in fiscal '22 for capital expenditures, fueling our digital and technology advancements as well as differentiating our banners. Also, we strategically invested in two new banners through the acquisitions of Diamonds Direct and Rocksbox. Looking at the year ahead, we see opportunities to further enhance our physical and digital footprint as these competitive advantages remain crucial to our connected commerce strategy. Looking forward, we expect capital expenditures up to $250 million for fiscal 2023. Our second priority is ensuring a strong cash position and liquidity to provide financial flexibility. We have achieved an adjusted debt-to-EBITDAR leverage ratio of 1.9 times this year, which is well within our stated goal of below three times leverage. Also recall, our ABL facility extends beyond the horizon of our current debt obligations. Lastly, with the strength in balance sheet and confidence in our team's execution, we are continuing to return excess cash to shareholders. As a reminder, we entered a $250 million accelerated share repurchase agreement during the fourth quarter, which was completed after the fiscal year end. Currently, $413 million remain under our authorization, and with our current valuation, we are focused on share repurchases. Additionally, we've increased our quarterly common dividend of $0.18 per share to $0.20 per share, a first step in becoming a consistent dividend growth retailer. Before I discuss our full-year guidance, I'd like to take a step back to detailed structural changes in our operating model since we began our transformation four years ago. These changes, expanding operating margins -- expanded operating margin by nearly 200 basis points and gives us the confidence to provide guidance that outpaces our expectation of industry growth and delivers a double-digit operating margin, all despite macro uncertainties. We've transformed our business model to do more with less through the following changes: First, we gained nearly 500 basis points resulting from our real estate optimization strategy. We've cut our fleet by over 20% and also shifted mall stores to more profitable off-mall formats. For example, Kay, our largest banner is now roughly 50% off-mall. Second, alongside a more efficient fleet is a more efficient labor model. Informed by our data analytics, we plan staffing store by store and hour by hour, contributing 300 basis points of margin expansion. Importantly, we're doing this while improving the team member experience as we continue to see high employee satisfaction scores and lower turnover. And thirdly, we've also invested over 500 basis points of margin to better align Signet with our long-term strategy. Notably, we shifted to a complete outsourcing of our store credit program. We also acquired James Allen, a critical step in both the acceleration of our digital innovation and the vertically integrated sourcing of both natural and lab-created diamonds. And finally, we made investments in always-on marketing, reducing our reliance on fourth-quarter profitability as well as increasing awareness of our differentiated banner portfolio. While there are other smaller puts and takes, I'd also highlight several capabilities that we see maturing in a margin-accretive fashion of time. These include our inventory life cycle optimization a practice that is helping us to better capture margin by taking early remarks during a product life cycle. We have also tripled our e-commerce sales while keeping our freight cost as a percent of sales flat, through our expanded fulfillment and freight management capabilities. We believe we can continue to leverage our digital and physical footprint to further optimize our shipping costs and the time of freight cost increases. In summary, these changes are sustainable and reflect the company that we are today. We are a data-driven and innovative connected commerce leader in the jewelry industry. As we look to the year ahead, we will continue to invest in both our physical and digital footprint as we manage the business in an even more integrated fashion. To this end, we're moving away from the practice of guiding same-store sales. We plan our business to drive top line, whenever, wherever and however our customers choose to shop with us. Today, the final point of sale is not indicative of our customers' shopping journey. Also, a portion of management's incentive compensation will now be tied to market share gains, incenting our team to drive top-line growth. That said, we appreciate that we and the industry are going up against difficult compares. So we will continue to report same-store sales in this unique environment. With that, let me turn to our fiscal '23 financial guidance. After a year of heightened growth in our industry, our guidance reflects an industrywide transition back to a more normalized environment. We expect sales for the overall drilling industry in a range of down low-single digits to roughly flat. Reflected in this view of the industry is an appreciation of the continued pressure on both consumer discretionary spend and commodity costs as well as the expectation of a more pronounced return of consumer travel. With this context, we expect to deliver total revenue in the range of $8.03 billion to $8.25 billion. This is a performance that we believe will outpace the industry trends through both our core business and Diamonds Direct. We expect operating income in the range of $921 million to $974 million. This range reflects the structural changes I detailed a moment ago, with flexibility for increased promotion and optionality based upon the evolving macro environment and shifting consumer discretionary spending. New with our guidance this year is that we will be providing annual earnings per share expectations. For FY '23, we expect earnings per share in the range of $12.28 to $13 per share. Turning to the first quarter. We expect revenue for the first quarter in the range of $1.78 billion to $1.82 billion, with operating income in the range of $177 million to $186 million. Our team brings our purpose to life every day, and I look forward to what we'll deliver together in the coming year.

qtrly total sales of $2.8 billion, up $624.8 million or 28.6% to last year, and up $658.0 million or 30.6% to fy20. sees q1 total revenue $1.78 billion - $1.82 billion. sees fy 2023 total revenue $8.03 billion to $8.25 billion. sees fy 2023 earnings per share $12.28 - $13.00.

In addition, on the call, we will discuss non-GAAP financial measures. Investors can find both a detailed discussion of business risks and reconciliations of non-GAAP financial measures to GAAP financial measures in the company's Annual Report, Quarterly Report and other forms filed or furnished with the SEC. He is a seasoned public company CFO with exceptional strategic, analytical and change management skills. He's an experienced developer of team capability and an outstanding addition to the Six Flag's team. He played a vital role as interim CFO during a very challenging time. He will continue to report to me in a large operational role that will compliment his individual development and skills and position him to contribute significantly to our long term success. This quarter tested everyone at the company and I am proud of how the entire team rose to meet the challenges that the world is facing. Seeing how the team responded over the last several months gives me even more conviction that Six Flags is a truly special company. In the early part of the quarter, we were in a crisis management mode. It was an all hands on deck effort to keep our people safe, reduce our cash burn and bolster our liquidity position. However, as a situation has evolved over the last summer months, we have switched from defense to offense. Our number one priority is always safety, but we have broadened our focus. We learned how to operate profitably with reduced capacity today and how we can be an even stronger company on the other side of the pandemic. In this very dynamic environment, I am proud of how the team has reached a level of nimbleness and agility. We have been able to respond very quickly and effectively as the situation continues to evolve. And the trends we are seeing in the business. Then Sandeep will discuss our financial performance and liquidity position. Before opening up for QA, I will highlight our transformation initiative to drive earnings growth, and improve the guest experience, so that we emerge stronger and more profitable after the crisis. On March, 13, we suspended our operations in response to the COVID 19 pandemic and local government mandates. Our immediate focus was on liquidity and cash flow. We shored up our liquidity and implemented aggressive cost saving measures that partially offset the resulting revenue decline. We also proactively communicated with our guests to preserve our act past base during this period of uncertainty. These efforts have been very successful as we limited our net cash outflow in the second quarter to approximately $25 million per month, a significant improvement compared to the average $30 million to $35 million per month that we projected on our last earnings call. Over the last few months we work closely with local health authorities, disease experts and others in the theme park industry. We also solicited extensive feedback from our guests to understand their expectations and they socially distance world. This work has enabled us to implement best-in-class safety protocols, including health screenings of team members, temperature checks of both team members and guests, mandatory facemask requirements for anyone in our parks, pervasive social distancing markers, that abundance of hand sanitizing and hand washing stations added throughout our parks in frequent sanitization of rides and other high touch points. We also established clean teams to uphold the highest standards of cleanliness. The crisis has allowed us to accelerate the introduction of technology into our parks that will have ongoing benefits even after the crisis subsides. We have used technology to remove some of the pain points common theme parks. These include advanced reservations online, which spread out the entry times for guests to avoid wait times at the gate, contactless temperature and security screening to ease entry into the park, mobile food ordering to reduce the time it takes to fulfill an order and encourage guests to add on to their order through easier menu access and testing of reverse ATM machines to reduce cash transactions. In addition, we we'll be testing our newly developed virtual queuing system in one of our parks. Waiting in long lines is consistently ranked as the number one pain point and our guests experience in virtual queuing technology will allow customers to push a button on their smartphone to secure a seat on one of our major coasters without physically standing in line. If a testing is successful, we will begin rolling the technology out to other parks. With our new operating protocols and technology in place, we have resumed limited operations at 14 of our parks. In addition, we opened our Safari as a stand-alone attraction at Six Flags Great Adventure and animal experience at Six Flags Discovery Kingdom, our hotel waterpark at The Great Escape in our campground at Darien Lake. We've used a cautious and phased approach with limited attendance in accordance with local conditions and government guidelines. Our park reopenings initially experienced solid demand as our customer saw opportunities to have fun in the safe and outdoor environment that our parks provide. In addition, guest feedback on our enhanced safety protocols has been very positive. However, a recent spike in coronavirus cases in many of the states in which we operate has had a negative impact on demand to this our parks. It is very difficult to forecast future demand trends in this rapidly changing environment. Based on capacity limitations designed to ensure a safe environment for guests as well as current demand trends. We expect daily attendance to be approximately 25% to 30% of prior year levels for the foreseeable future. This has resulted in our reducing some Park schedules to maximize attendance on the days we are open. There's no question that this is unprecedented environment has created challenges for our business. However, our parks have a number of advantages top rate during the pandemic compared to other out of home entertainment attractions. First, our parks our outdoor venues and spread over anywhere from a dozen to 100s of acres, allowing for social distancing. Second, our parks are open many hours throughout the day reducing the need for people to arrive or leave at the same time. Third, our parks are regionally diverse and we operate in the largest markets in the U.S., making us not overly reliant on one geographic region. Fourth, almost 90% of our gas come within driving distance. So we are not dependent on air travel or other public transportation. Finally, our parks generate cash flow in excess of their variable costs and significantly less than 25% of their maximum capacity. Although this crisis has affected our business profoundly in the short term, it has given us the opportunity to make necessary changes in the business that will benefit us in the long term. I'm very excited to be at Six Flags. I'm a huge fan of the brand and I've long admired the consumer experience that delivers. My first month on the job has only confirmed my view that the opportunities ahead are substantial. And the company is well positioned for its next round of profitable growth. I will begin by telling you a little bit about myself. I'll then discuss our second quarter financial results and liquidity position, and end by outlining our team priorities. I have 25 years of financial strategy experience, primarily in consumer facing businesses. Most recently, I was the CFO of Guest Incorporated, a publicly traded global multi channel lifestyle brand in the fashion industry and prior to that I worked in financials for Mattel Incorporated, one of the leading toy companies in the world. As CFO of Six Flags, I believe my primary role in partnership with Mike and the leadership team is to identify and drive a value creation agenda for the company. I've done this in the past, and believe that with the incredible branded company like Six Flags, we can generate significant value for all stakeholders. Turning to Six Flags financial performance, results for the second quarter was not comparable to prior, because we suspended the operations of our parks for almost the entire quarter during the pandemic. As Mike mentioned, we were able to limit our net cash outflow for the second quarter to $76 million. This was excluding the costs associated with our financing initiatives are approximately $25 million per month. This represented an improvement compared to the previously projected net cash outflow of $30 million to $35 million per month during the last nine months of 2020. The improvement was driven by discipline cost management, higher active pass base retention due to the lower than anticipated membership cancellations and Season Pass refund requests, as well as positive cash flow from our parks that have reopened. Total attendance for the quarter was 433,000, half of which came from our drive thru Safari and our Park in New Jersey, which was our first attraction to open. As a result, revenue declined by $458 million or 96% to $19 million. The reduction in revenue included $29 million of membership revenue from our members that have completed that initial 12 month commitment period that we diverted to future periods. But nearly when our members entered a 13 month membership, we recognize the revenue on a monthly basis, according to their cash payments. However, as part of our retention efforts, we offer an additional monster our members for every month they could not use their home park. As a result, for those members who have completed their initial 12 month commitment period, we will recognize revenue at the end of their membership term, whenever those members utilize their additional months. The decrease in revenue was also partially attributable, to a $29 million reduction in sponsorship, international agreements and accommodations revenue. This reduction was driven by three things, determination of the company's international contracts in China and Dubai, resulting in no revenues from those contracts in 2020. Before most sponsorship revenues, while the parks were not operating, the suspension of almost all accommodations operations. We recognized little revenue from corporate sponsorships in the second quarter, but are working with our corporate partners on a case-by-case basis to defer other planned programs until our parks are open. We also continue to recognize revenue from our parks being developed in Saudi Arabia. Guest spending per capita in the quarter decreased 15% to $35.77. Admissions per capita increased 5%, primarily due to a higher mixer single day pay tickets. In parks spending per capita decreased 43%, primarily due to the large proportion of attendance from our drive thru Supply Park, where there is no opportunity for in park spending. On the cost side, cash operating an SGA expenses, increased by $141 million or 60%, primarily due to proceedings measures we took, after we suspended operations. These savings were partially offset by costs incurred to open and operate our park toward the end of the quarter, including increased costs related to enhanced standardization and additional prevalent preventative measures to help minimize the spread of COVID-19. In addition we increased our legal reserves by $8 in the quarter. These expenses associated with several unrelated legal claims. Adjusted EBITDA for the quarter was a loss of $96 million, compared to income of $180 million in the prior period. We now have 14 of 26 parks open. These parks generated more than 50% of our 2019 attendance on a full year basis. Month to-date in July, we are averaging approximately 30% of Prior attendance at the parks that are open. We are holding steadily in certain states, but are doing much better and improving in states and I experienced of COVID-19 trends. This gives us confidence that we will see a rebound once the virus has abated. In the near-term it is unclear if we will be able to open any of the remaining parks this year, or whether we will close any of the open parks, earlier than prior years. At this time we are evaluating a modified version of our popular Fright Fest and holiday in the park events. Turing to our active pass base, which represents the total number of guests enrolled in the company's membership program all that have Season pass. As anticipated, we lost a significant season -- we lost significant season pass and membership sales while our parks were not operating. Our Active Pass Base as of the end of the second quarter was down 38% and compared to the prior year quarter. This includes 2.1 million members compared to 2.6 million at the end of calendar year 2019 and 2.4 million at the end of the first quarter 2020. Customers typically purchase new season passes or memberships when they are planning to visit a park. For that reason, the temporary closure of our park had a temporary but large impact on our ability to sell new season passes and memberships. However, we were pleased with the retention of our existing members as we retained 81% of our members since the start of the year through the second quarter. Since we opened our parks, we have begun to sell new memberships and season passes. We are proactively working to retain our existing members and season pass holders in several ways. First, we offer day-to-day extensions for our season pass holders for each operating day their home park is closed and extended our members by one month for each month that their home park is closed. Second, we offer to automatically upgrade memberships to the next tier level for the rest of the 2020 season for members who continue to make payments until the parks reopen. And third, we offer the pause payments for any member requesting to do so. We are taking members on pause as we open our parks, and we anticipate that most of our pause members will return to active paying members once we reopen our remaining parks. In addition, we are actively recruiting our cancelled members back to our programs now that park operations are beginning to resume. We have received very few refund requests of season passes to date. While we have no contractual obligation to make a refund, and almost all of our existing pass holders have used their pass at least once, the satisfaction of our guests is very important to us. We are actively engaged in conversations with them to ensure a continued loyalty. In response to our curtailed operations, we continued to take actions to reduce operating expenses and to defer or eliminate at least $50 million to $60 million of capital expenditures. We now expect to spend $80 million to $90 million on capital expenditures in 2020, $10 million lower than our previous projections. We have kept our full-time team members on the payroll and maintain their benefits at the same cost. We believe this has left us in the best position to open our parks quickly. However, we will continue to evaluate all options in the future, given the fluidity of the virus and any associated impacts on park operating calendars. Based on all the cost savings measures we have implemented, the retention of most of our membership base and positive cash flow from the parks that are currently open, we estimate that our net cash outflows will average between $25 million to $30 million per month through the end of 2020. This includes all operating expenditures and capital expenditures relating to our parks along with contractual rent, interest and partnership park distributions. Note that partnership park distributions occur only in the back half of the year and represent an average run rate of $7 million per month for the last six months of the year. We believe we have adequate liquidity to the end of 2021 even if we need to close our parks. However, if operations remain curtailed, we will likely need a further amendment to our senior secured leverage ratio covenant. We also incurred approximately $6 million of costs on the strategic work related to the transformation initiative that Mike will discuss. Costs in future periods are included in our net cash outflow estimates. However, we will not finalize the cost of associated savings until we complete the work. We anticipate that a portion of the work will be completed by the fourth quarter of 2020, and the remaining portion will be completed when the parts are again operating at more normal capacity. Deferred revenue of $182 million was down $53 million or 22% to prior year, driven by fewer membership and season pass sales, while our parks have been closed. These lower sales were partially offset by the deferral of revenue out of the quarter from our members who have completed their initial 12-month commitment period and extension of visitation privileges into the 2021 season for our season pass holders and members in the initial 12-month commitment period. Our liquidity position as of June 30 was $756 million. This included $460 million of available revolver capacity, net of $21 million of letters of credit and $296 million of cash. This compares to a pro forma liquidity position of $832 million as of March 31, 2020, a reduction of $76 million or approximately $25 million per month. We do not expect to draw on our revolver until Q1, 2021. I now would like to turn to our immediate priorities for the company. First, reopen with caution and prioritize the health of our employees and guests. Second, focus on liquidity and minimizing cash expenditure while we go through this period of uncertainty. Third, be conservative with capex, ensuring we only invest in projects with a good return of investment. And finally, continue building business and team capability. We have withdrawn guidance due to the uncertain trajectory of the virus. However, like Mike, I am committed to providing additional disclosures when feasible and being as transparent as possible. Our capital allocation strategy will be focused on growing the base business and paying down debt to return our net leverage ratio to between three and four times adjusted EBITDA. We have suspended our dividend and share repurchases for the foreseeable future, and we believe targeting the low end of the range is appropriate given the new environment. In summary, despite the challenges our entire industry is facing, we have adapted our operations in response to the crisis, and we remain a healthy company with a bright future. We will not let these difficulties slow down our efforts to build new business capabilities and prepare the company for its next phase of profitable growth. Now, I will pass the call back over to Mike. Our focus is on building a stronger base business and reducing our net leverage ratio. We will be disciplined in this focus post the pandemic. We are developing a holistic transformation program that will allow us to accelerate growth and unlock significant new efficiencies as we emerge from the pandemic and ramp up to full-scale operations. We will focus on revenue generation and cost efficiency programs in our base business as we become a more agile, commercially driven and technology savvy organization. Our transformation will improve the guest end-to-end experience while reducing our operating costs. To this end, we have initiated a detailed review of our business. As we complete different work streams, we will provide our expectations for annual earnings improvements. Our transformation initiative is composed of three elements. The first element is top line growth. This element is about improving the end-to-end guest experience, starting with price and simplicity, website redesign and a compelling value proposition for food and beverage. One focus area that we previously highlighted was the recapture of lost single day guests. We already saw progress in this area through our focus and targeted offers prior to the COVID-19 crisis and it will continue to be a major focus going forward. The second element is organizational design. The purpose of this element is to enhance the guest and team member experience while creating cost efficiencies. We will reexamine what work belongs in the parks versus headquarters and eliminate any redundancy while being careful to protect the guest and team member experience. This organizational design will be constructed in a way that fosters an entrepreneurial culture and our park leadership teams. The third element is non-headcount cost reductions. We will leverage the scale of Six Flags and examine each area of our cash operating expenses to determine what is essential. We will capture savings by implementing consistent systems, standards and processes. In addition, we are beginning to revamp our environmental, social and governance program, which has a special emphasis on diversity and inclusion. This is a personal priority for me. I know the importance of this firsthand for my decades of experiences working with diverse teams and customer bases, including in multiple countries and cultures around the globe. I believe diversity and inclusion provide the necessary foundation for a sustainable and healthy business, more importantly, they are simply the values we should all uphold. We will integrate diversity and inclusion into our existing business agenda, and we will hold ourselves accountable by measuring our results to ensure that we make sustainable progress. Our plans will focus on five key areas. We are creating a diversity and inclusion council made up of members of our team to provide me as CEO, direct feedback on how we are doing and what we can do to improve. We are conducting robust training on diversity and inclusion for all of our team members, including dedicated sessions with our top 200 leaders on understanding the business rationale, identifying unconscious biases, and learning how to lead open and honest conversations with our team members. Three, address unconscious biases. We have updated our grooming, social media and hiring policies. We are also reviewing and correcting all branded names, park attractions and infrastructure that might be offensive in any way to our guests and team members. We expect our social media partners to model the same values. Four, build a diverse team. We will establish a leadership team that represents the diversity of our marketplace. We're reviewing and updating our recruiting and talent management programs to foster more objective processes for all team members. Five, partner with communities. We will proactively work with minority suppliers to develop long-term alliances. We will pledge up to $5 million cumulatively in investments and ticket value by the end of 2022 toward programs dedicated to equality and the socioeconomic advancement of people of color. Our transformation initiative is an ambitious and important program. And I am confident it will reshape our business for future profitable growth and sustained value creation coming out of the COVID-19 crisis. We look forward to updating you on our progress during the third quarter earnings call. Operator, at this point, could you please open the call for any questions.

q2 revenue fell 96 percent to $19 million. improves cash flow outlook from company's prior guidance. targeting significant improvement to its financial performance and to guest experience. six flags - will not make final determination of costs or associated savings until it completes work related to 'transformation initiative'. anticipates that a portion of work related to 'transformation initiative' will be completed by q4. resumed partial operations at many of its parks on a staggered basis near end of q2. total guest spending per capita for q2 of 2020 was $35.77, a decrease of $6.50. six flags - working with members, season pass holders to extend usage privileges to compensate for any lost days due to temporary park closures. offered members option to pause payments on their current membership. active pass base decreased 38 percent as of end of q2 of 2020. as of june 30, had cash on hand of $296 million, $460 million available under revolving credit facility. six flags - anticipates it has sufficient liquidity to meet cash obligations through end of 2021 even if currently open parks are forced to close. six flags - if operations continue to be significantly reduced in 2021, co would likely require additional covenant relief during 2021.

And the company undertakes no obligation to update or revise these statements. In addition, on the call, we will discuss non-GAAP financial measures. Investors can find both a detailed discussion of business risks and reconciliations of non-GAAP financial measures to GAAP financial measures in the company's annual reports, quarterly reports and other forms filed or furnished with the SEC. We have divided our call into three parts. First, I will provide an overview of our operating performance and the strong demand trends we are seeing. Second, Sandeep will go into more detail about our financial results and our capital allocation strategy. Finally, I will return to provide some comments about the initial progress we have made on our three key strategic priorities. I am pleased to report that the strong start we experienced in the first quarter continued through the second quarter into the heart of our summer season. Our results this quarter are due to the dedication of our team members who really stepped up and pulled together to safely reopen our parks. In fact, the second quarter marks the first time since 2019 that all of our parks were open. And as of today, there are no constraints on park capacity or ride seating in any of our U.S. parks. I am proud to see our employees working hard to deliver a great guest experience in this difficult operating environment. I am also proud of our efforts to give back to our communities. Over the past few months, we have hosted numerous vaccination sites at our parks, and we have donated more than 140,000 tickets as an incentive for residents in areas around our parks in Texas, Illinois and California to get vaccinated. Turning to our operating trends. We continue to experience strong consumer demand at all of our parks. Through July 25, year-to-date attendance and open parks was 82% of 2019 levels. A significant portion of our attendance shortfall relative to 2019 is a result of lower prebooked group ticket sales, which have historically accounted for a significant portion of our early season attendance and which have been slower to recover. Excluding prebooked groups, year-to-date attendance at our parks during the periods they were open in 2021 was 89% compared to the same period in 2019. We are also seeing strong guest spending per capita. For the second quarter, our guest spending per capita was up more than 20% versus the second quarter of 2019 due to progress on several of our transformation initiatives as well as a strong consumer spending backdrop. In addition, our season pass sales trends have accelerated. As of July four, 2021, our Active Pass Base was essentially flat with the same day in 2019. As a result of our strong revenue trends and season pass sales, we generated $190 million of cash flow during the quarter. While we are encouraged by our results and the early progress we are making on our transformation, operating conditions continue to be quite challenging. We continue to operate with COVID-related constraints at our park in Montreal and our two parks in Mexico. And like many other businesses, we also continue to face a tight labor market and supply chain constraints. While labor challenges persist, our team has worked aggressively and creatively to alleviate some of the pressures. We selectively raised hourly rates for seasonal team members, offered a bonus for any team member who were employed as of July one and who stayed through the end of the summer season. And we recently offered an additional bonus for those who stayed through the end of October. In addition, we have expanded our outreach and recruiting efforts through traditional channels as well as social media. These measures have helped us manage through the labor challenges the entire industry is facing. Our results this quarter are encouraging. We were still in the early stages of transforming our operating model. Our goal is to delight both our guests and our shareholders by providing classic Six Flags thrills enhanced with modern technology while keeping a careful eye on costs. I would like to start by reminding everyone that results for the second quarter and year-to-date trends are not comparable to prior year because we closed all of our parks in mid-March last year, and many of our parks remained closed or had curtailed operations during the second quarter 2020. For that reason, I will provide comparisons to 2019. Total attendance for the quarter was 8.5 million guests, a 19% decline from second quarter 2019, reflecting fewer operating days at several of our parks due to the pandemic capacity restrictions at some of the parks that were open and the loss of most of our prebooked group sales. These headwinds were partially offset by a favorable calendar shift from our fiscal year change. Because of our fiscal year change, our second fiscal quarter 2021 ended on July four instead of June 30 as we did in 2019. As a result, second quarter 2021 includes four calendar days in July or most of the July four holiday weekend. This was partially offset by four days in April, including the Easter holiday in 2021 that shifted out of the second quarter and into the first quarter this year. The net benefit of these shifts into the second quarter of 2021 was 614,000 of attendance and $32 million of revenue. In the spring and early summer, we historically derived a significant amount of attendance from group sales, which includes school groups and company buyouts. Because most schools and offices have yet to resume group events and these outings are typically booked in advance, we have experienced a significant decline in group sales during the spring and early summer months. Through July 25, year-to-date attendance at open parks was 82% of 2019 levels and has accelerated since the end of the quarter. A significant portion of our attendance shortfall relative to 2019 is a result of lower pre-booked group ticket sales. Excluding prebooked groups, year-to-date attendance at our parks that have been open all year was 89% of 2019 levels. Attendance from our single-day guests in the second quarter represented 36% of total attendance versus 39% for the second quarter of 2019, reflecting the impact of lower prebook sales, which are counted toward single-day attendance. Excluding prebook sales, the attendance mix from our single-day guests increased by eight percentage points versus 2019. Looking ahead, we expect group sales to have less of an impact since groups typically represent a smaller portion of our attendance during the second half of the year. However, our new fiscal calendar will continue to create attendance shifts between quarters for the balance of this fiscal year. Our third quarter will include an extra weekend during Fright Fest compared to 2019. We expect this calendar shift -- the calendar change to shift approximately 500,000 of attendance out of the fourth quarter and into the third quarter. When netted against the shift of the July four weekend out of the third quarter, we expect the changes in our fiscal calendar to negatively impact the third quarter's attendance compared to 2019 by approximately 400,000 guests. Total guest spending per capita increased 23% in the quarter versus 2019. Applying the pro forma allocation mentioned on last quarter's earnings call to 2019, admission spending per capita increased 24%. And in-park spending per capita increased 22% compared to the second quarter of 2019. The increase in admission spending per capita compared to 2019 was driven primarily by our new approach to revenue management. That approach includes pricing our tickets based on the demand curve as well as a new pricing architecture that allows us to optimize relative pricing among our various ticket types and to reduce promotions. In addition, as much of our season pass sales are occurring later in the season than usual, we are recognizing season pass revenue over a shorter time frame, which boosted our ticket per capita in the second quarter. Looking ahead to the second half of 2021 and 2022, we expect the ticket per capita growth rate to moderate as our attendance and promotional cadence begins to normalize. The increase in in-park spending per capita compared to 2019 was primarily due to early progress on several of our transformation initiatives, including an acceleration in the uptake of mobile dining, which carries a higher average order value; our new F&B strategy, including a new food pricing architecture and the introduction of more premium offerings; our new cash to card kiosk, making it easier for consumers to spend money on games and merchandise in our parks; our QR code-enabled FLASH Pass program; and a higher mix of non-group single-day guests, who typically spend more in our parks per visit. In addition, the overall consumer spending environment was very strong in the second quarter, and we believe that we benefited from an unusually high level of consumer discretionary spending. Looking ahead to the second half of 2021, we expect our in-park spending per capita to increase relative to 2019, but we expect the growth rate to moderate. Revenue in the quarter was $460 million, down $17 million or 4%. Excluding the impact of reduced sponsorship, international agreements and accommodations revenue, revenue was down less than $1 million. The decrease was also a result of lower attendance net of the fiscal calendar change mostly offset by higher guest spending per capita. On the cost side, cash, operating and SG&A expenses versus 2019 decreased by $4 million or 2%. The reduction in expenses reflected cost savings measures during the quarter driven by our transformation plan, lower advertising costs and a benefit from a portion of the proceeds received in connection with one of our terminated international development agreements in China partially offset by higher incentive costs to attract and retain team members. Due to the labor conditions we currently face, we are incurring higher wage rates for seasonal employees. During the second quarter, these additional costs were offset by a reduction of hours worked due to the tight labor market. Adjusted EBITDA for the second quarter was $170 million, down $9 million or 5% versus second quarter 2019. This included a net benefit of the fiscal quarter change, which shifted attendance into the quarter. Second quarter 2021 also included $11 million of proceeds received in connection with one of our terminated international development agreements in China. As a reminder, second quarter 2019 included a $7.5 million settlement related to the termination of our international development agreement in Dubai. We are pleased with the retention of our Active Pass Base. At the end of the second quarter, we had 6.3 million pass holders, which included 2.1 million members and 4.2 million traditional season pass holders. Due to our fiscal calendar reporting change, the second quarter of 2021 benefited from additional sales over the July fourth weekend. Adjusting for the reporting calendar change, the Active Pass Base as of June 30, 2021, was essentially flat compared to June 30, 2019, with an increase in traditional season pass holders offset by a commensurate decrease in members. We are focused on increasing our membership base, and we expect our total members to grow over time. Our Active Pass Base retention is a testament to our unique offering and loyal following. Deferred revenue as of July four, 2021, was $310 million, up $75 million or 32% compared to second quarter 2019. The increase was primarily due to strong season pass sales in the second quarter of 2021 and to the deferral of revenue from members and season pass holders whose benefits were extended through 2021. We expect to recognize most of this deferred revenue in 2021. Year-to-date capital expenditures were $42 million. For the full year, we previously expected to spend less than $98 million spent in 2020. However, because of our strong operating results and cash flow and our confidence that our operating performance will continue to improve, we now have capital expenditures of $130 million to $140 million in 2021. We expect to believe 9% to 10% of revenue is an appropriate level of annual capital expenditures in a normalized environment. Our balance sheet is very healthy with no borrowings under our revolver and no debt maturities before 2024. Our liquidity position as of July four was $714 million. This included $461 million of available revolver capacity net of $20 million of letters of credit and $253 million of cash. Net cash flow for the quarter was $190 million. Given the significant operating losses we incurred in 2020 as well as our pre-existing NOLs, we expect to pay minimum federal taxes this year and next. And we do not expect to become a full cash taxpayer until 2024 at the earliest. I would now like to give you a quick update on our transformation plan. We continue to make progress with our revenue and cost initiatives, as shown by the positive impact on our attendance, per capita spending and cost savings. In 2021, we expect to achieve $30 million to $35 million from our fixed cost reductions, and we have already realized more than $16 million through the first half of this year. We continue to be on track to deliver $80 million to $110 million in incremental annual run rate EBITDA once our transformation plan has been fully implemented and attendance returns to 2019 levels. This includes an incremental investment of approximately $20 million in seasonal wage rate increases annually on a go-forward basis in addition to the $20 million we called out in our previous baseline for a net increase of $40 million compared to 2019. The full impact of the wage rate increases will likely materialize in 2022, but we expect them to be offset by an increase in the expected value of our revenue initiatives. As part of our transformation plan, we expect to incur $70 million in charges. We have incurred $46 million in cost so far through second quarter 2021, including the noncash write-offs of $10 million that occurred in 2020. We expect to incur the remaining $24 million in 2021 and 2022, the majority of which is related to investments in technology, including a new CRM system. Finally, I'd like to touch on our capital allocation strategy, which is particularly important given our large cash balance and our expectations that we will generate significant cash in the back half of this year. Our first priority will always be to invest back in our base business when we see opportunities to generate attractive returns. As I just mentioned, we expect to increase our capital expenditures this year, which will allow us to invest in high-priority and high-return park infrastructure and technology projects. Priority #2 is to pay down debt until we reach our targeted leverage range of three times to four times net debt to adjusted EBITDA. Longer term, once we are within our targeted leverage range, we will consider strategic acquisition opportunities. And if there are none, then we will return excess capital to our shareholders via dividends or share repurchases. To conclude, we are encouraged by the initial progress on our transformation plan and are well positioned to achieve our adjusted EBITDA baseline range of $530 million to $560 million when attendance levels return to 2019 levels including the impact from labor inflation. This new baseline is not the endpoint but rather the beginning. And once it is achieved, we expect to grow EBITDA by mid- to high single digits annually thereafter. Now I will pass the call back over to Mike. I'd like to take a few minutes to review our strategic priorities. We believe that improving the guest experience will be the most important driver of our long-term sustainable earnings growth. We are evolving our culture to center on our guests. Everything we do will focus on how to delight our visitors with a fun and memorable experience. Our second strategic priority is to continuously improve operational efficiency, which essentially means that we will be laser-focused on managing costs as we grow our revenue. And finally, our third priority is driving financial excellence, which means that we will make sure that our operating improvements flow through to bottom line profits and that we achieve strong returns on any investments we make. Despite the challenging operating environment, we have already made progress on some of these strategic priorities, and I'd like to highlight a few of these areas before opening up the call for Q&A. On our first strategic priority, modernizing the guest experience through technology, I'd like to call out four initiatives that are already starting to have an impact. First, customer relationship management. We recently launched our new CRM platform that will allow us to understand and predict our guest preferences from the moment they visit our website to the moment they leave the park. Based on our new consumer database, we have already begun tailoring our communications based on our guest preferences. And over time, we will be able to customize their experiences, so they get exactly what they want, when they want it. Second, Mobile FLASH Pass, which now includes QR code capabilities. We recently have begun transitioning our traditional FLASH Pass to a mobile environment at certain parks. This has been very well received by our guests as they no longer have to wait in line to retrieve and return a physical FLASH Pass, and they can easily show a QR code on their phones for faster entry to rides. This has helped generate a double-digit increase in our FLASH Pass sales. Third, cash to card kiosks. This provides several benefits. First, it makes it easier for our guests to spend money on games and merchandise because they don't have to worry about carrying around cash, and it speeds up transactions. Second, it reduces shrinkage in our parks and minimizes cash handling costs. Finally, it improves hygiene. We have already seen a benefit to our in-park per caps from this initiative. Our guests will no longer have to wait in long lines to order food. Instead, they can choose to order on their smartphones and pick up their food when it is ready. We are still testing and iterating the implementation of mobile dining, but even in this early stage, our guest utilization of mobile dining continues to accelerate. Mobile dining has already led to higher average transaction spend and improved guest satisfaction with our food ordering and pickup process. We are pleased that our two key performance indicators for this strategic priority, attendance and revenue, are both accelerating. And we look forward to implementing more of our initiatives to improve the guest experience over time. We've also made progress on our other strategic priorities, continuously improving operational efficiency and driving financial excellence. On operational efficiency, we have moved quickly to streamline our organization and reduce other fixed costs. And we expect to realize $30 million to $35 million of fixed cost savings in 2021. Finally, our financial excellence, we are pleased to report that our adjusted EBITDA is improving, although we are still a long way from where we would like to be. As the operating environment returns to 2019 levels, and we implement more of our transformation program, we expect to achieve our adjusted EBITDA baseline range of $530 million to $560 million. And most importantly, we expect that level to serve as a jumping off point from which we can sustainably grow mid- to high-single digits over time. In conclusion, we are pleased with our high customer retention and loyalty, demonstrated by our Active Pass Base, which continues to grow. Our transformation efforts are proving their value as we see cost savings from our changes in the operating model and increased per capita spending from our revenue initiatives. Our team members are working very hard to create fun and thrills for our guests. With a clear focus on improving the guest experience in a talented and dedicated team to execute our strategy, we are well positioned to accelerate growth in the back half of 2021 into 2022. Catherine, at this point, could you please open the call for any questions?

six flags entertainment q2 revenue $460 million. q2 revenue $460 million. reported attendance of 8.5 million and revenue of $460 million for q2 2021.

In addition, on the call, we will discuss non-GAAP financial measures. Investors can find both a detailed discussion of business risks and reconciliations of non-GAAP financial measures to GAAP financial measures in the company's Annual Reports, quarterly reports and other forms filed or furnished with the SEC. A few weeks ago, my wife and I spent a day at Six Flags Over Texas. I wanted to get some firsthand feedback by chatting with employees and guests. What really struck me on that visit though, was what I saw all around me. It was something simple, but meaningful. I saw people getting out in the fresh air, riding roller coasters, eating funnel cakes, and our other great food items, and having fun, while spending quality time together. COVID has been a worldwide crisis. But to many of us, it has also revealed what really matters. And while COVID has obviously had a severe impact on our business, it has demonstrated just how important the work of Six Flags really is, having fun together is vital to our happiness and well-being. You've helped families and friends connect. You have lifted morale. You have given someone a brighter day during a difficult time. I've never been more proud of what we do or how we do it. As usual, we will provide our quarterly results. But in addition, we will also describe the outlines of our transformation plan, which is already well under way. First, I will focus on the transformation plan. Then Sandeep will discuss our quarterly financial results, including our cash outflow and liquidity. He will also provide details on the financial implications of our transformation plan. Finally, I will conclude with a few comments and why I'm so confident that Six Flags' future is bright. Even though Six Flags offers a truly unique combination of thrills and fun for guests of all ages, our base attendance growth have slowed for several years prior to the pandemic, because we did not evolve at the same pace as our guest expectations. Specifically, our guests expect a seamless and personalized experience that blends the heritage of our theme parks with the conveniences of modern technology. People still want roller coasters and indulgent foods like our great funnel cakes, cakes. They just want it to be an easier and faster experience. In order to provide our guests with the value for their time and money that they have come to expect, we launched a transformation plan earlier this year to modernize our operations, and to improve the guest experience. While the transformation work is ongoing, we have already developed a strategic framework, and are focusing on specific high value areas, that we believe will lead to significant revenue and earnings growth. We engaged outside consultants to assist with facilitation and provide agility, capacity, and a fresh outside introspective. However, it is our Six Flags team that is leading and completing the work. We are also creating an internal office to take on this work, beginning in the second quarter of 2021. Functionally, we have broken our transformation plan into two distinct components; cost efficiencies and revenue enhancements. On the cost side, we need to make sure that we are operating efficiently at both the corporate and park level, and then we are eliminating any unnecessary costs within our operations. On the revenue side, we need to ensure that we improve the guest experience from the moment our guests log-on to our website, to the moment they exit our park, in order to maximize our attendance and per capita spending. Starting with the cost side, our three productivity initiatives are to, first, optimize our corporate overhead structure. Second, reduced non-headcount operating costs; and third, optimize our park level labor expense. On the corporate overhead piece, we have updated our organizational design to reduce the layers in our organization, so that we are leaner and more agile. Lowering our total costs and improving our speed of decisionmaking. I've installed a new senior leadership team, that is about 30% more affordable than 2019, but includes a dedicated guest experience team and a transformation team to focus on the guest experience, and ensure we operate more efficiently and effectively. We will also be consolidating certain positions out of the parks into a new park support shared services center. These positions are primarily back office functions such as finance, human resources and IT. Moving some workflows in the functional shared service centers, allows us to become more efficient. As previously announced, we reduced our full time headcount by 240 employees or about 10% of the workforce. These have been very difficult decisions, as they affect many dedicated and talented team members, but we do believe this will improve our efficiency as an organization. Despite these changes, one key element of our corporate overhead structure will remain the same, local leaders will continue to lead local markets. Park leaders know their parks, communities, employees and markets best. We want to enable them to provide the best guest experience for the unique demands of each local market. Our second productivity initiative is to reduce non-headcount operating costs. This essentially means that we are reviewing each operating cost with a fine toothcomb to eliminate excess. For example, we are eliminating two of our satellite offices and modifying our T&E policies to lower our corporate expenditures. A large portion of our non-headcount operating cost reductions will involve leveraging the scale of Six Flags as a whole, to centralize procurement, consolidate vendors and renegotiate contracts. As we go through this process, we are leaving no stone unturned, examining light items, as small as our lettuce expense, which serves as an interesting example. If we standardize that one order and by just one kind of lettuce, we will save $40,000 per year. We have hundreds of goods, where this concept would apply, from napkins to paint, to chlorine, to uniforms. In addition, optimizing our rides will save us enough capex to fund a new ride every single year. Our park Presidents, engineers and maintenance teams have studied the performance of each and every ride, calculating the cost against the ride's throughput productivity. We now know which rides to redeploy across parks, which rides need to be refurbished, and which can be removed entirely. We are eliminating 15 underperforming rides this year, reducing maintenance costs, and freeing up significant capex resources. Our third and final productivity initiative, is to optimize park level labor. We have developed a system that enables us to model more narrow attendance bands by park, by time of day, and by guest location, in order to better forecast our labor needs, better data analysis will allow us to align labor with guest demand by season, by day, and by hour. Better staffing will also increase guest transaction opportunities and decrease wait times. So we expect a revenue benefit from this initiative as well. Moving to the revenue side, our five revenue initiatives are to optimize the following areas; first overall guest experience in our parks. Second, website and search engine optimization. Third, pricing and promotions. And fifth, our culinary and retail offerings. Let's start with the most important initiative, modernizing the overall guest experience. We have already begun to implement systems like advanced reservation systems, prepaid parking, mobile ordering, contactless security and cash to debit card kiosks, to provide a contactless experience on purchase transactions. All these improvements allow guests to spend more time having fun, and less time waiting. We also started testing virtual queuing, in order to learn how we can enable our guests to better plan, when they can ride their favorite roller coasters and reduce waiting in line. Our second revenue initiative, redesigning the website and improving search engine optimization, can be a significant revenue driver, and we have already witnessed it's powerful impact through higher conversion rates. We launched our new website at one of our parks in August, and realized improved conversion of website traffic to sales by a double digit percentage. More than half of our revenue was derived from our website, so this is a very encouraging sign. We launched the new website across all of our parks in mid-October. We've also seen how our third initiative, optimizing pricing and promotions can drive attendance and revenue growth. Before the pandemic, we began to change our pricing and outreach to target more single-day guests. In the first quarter, prior to shutting the seven parks that were open during that timeframe. We sold 38% more paid single-day tickets compared to the previous year, with total attendance up 19%. The fourth revenue initiative is to optimize media spending. Our marketing team and media partners began using a new customized artificial intelligence tool, to analyze the return on our media spending by park and by media channel. We've tested this new tool and found that a highly targeted media spend has a clear and demonstrable impact on our attendance growth. So in addition to improving the efficacy of our media spend by using our new analytical tool, we intend to increase our marketing spend to 4% to 5% of revenue versus the historical 3% to 4%, based on observed returns of increased investments to drive incremental EBITDA dollars. Our fifth revenue initiative, is to optimize our culinary and retail offerings. Food and beverage consistently rates as our lowest score in terms of guest satisfaction. We know that our guests expect more from us, and we intend to focus on providing a greater breadth of higher quality options, including healthy, indulgent and premium food and beverage choices. We have tested several enhanced food and beverage concepts, and are pleased with the initial uptick in our sales. This is a very big opportunity for us, since more than a third of our revenue comes from in-park spending and the majority of that is food and beverage. While we will take time to fully implement all of our initiatives, we are already starting to see the impact on our results and look forward to updating you on our continued progress in the months ahead. My first 90 days on the job have only reinforced my belief, that this is a great business. Six Flags has an exceptional brand and the largest portfolio of thrill rides, that have been providing lasting memories to our guests for generations. I'm thrilled to help drive the transformation efforts that are already under way. Results for the third quarter were not comparable to prior year, because we suspended the operations at nine of our 26 parks for almost the entire quarter, and had attendance limitations at our other parks, that were open. The parks that were open, represented slightly more than 50% of our 2019 attendance, and invested approximately 35% of prior levels in the quarter. We have been pleased with the sequential improvement in our attendance trends, since we began reopening our parks. Upon our initial reopening in the second quarter, attendance at our open parks averaged 20% to 25% of prior levels. That grew through the third quarter from 27% in July to 43% in September. In October, so far, we are indexing more than 30% [Phonetic] of prior year, with the number of parks beating prior attendance on several operating days. Our guests, government officials, and health authorities, have given us high marks for our safety standards and procedures, and we expect that we will continue to see improvement in our attendance trends. Currently, we are operating a modified Halloween event called HALLOWFEST at seven of our theme parks, and we plan to keep these parks open for Holiday in the Park in November and December. In addition, we reopened our water park in Mexico on September 12th; our theme park in Mexico City on October 23; and we plan to open a holiday walkthrough experience at our Great America Park, outside of Chicago in late November through December. We are pleased to reopen our parks in Mexico, as they are able to operate year round, given the favorable climate conditions. Total attendance for the quarter was 2.6 million guests. 371,000 of which came from our Drive-Through Safari at our park in New Jersey. As a result of the 81% decline in attendance, revenue in the quarter was down $495 million or 80% to $126 million. Sponsorship, international and accommodations revenue declined by $22 million, due to the following three things. Number one; the termination of the company's international contracts in China, resulting in no revenue from those contracts in 2020. Number two, the deferral of most sponsorship revenue, while many of our parks were not operating. And number three, the suspension of a majority of our accommodations operations. Guest spending per capita in the quarter increased 10%, driven by an 11% increase in admissions per capita, and a 9% increase in in-park spending per capita. The increase in admissions per capita spend, was primarily driven by recurring monthly membership revenue from members who retained their memberships, after their initial 12-month commitment period ended. Excluding the impact of membership revenue, admissions per capita spending was approximately flat. The increase in in-park spending per capita, was primarily driven by higher mix of single day guest, who tend to spend more on a per-visit basis. In addition, recurring monthly all season membership products such as all-season dining pass, contributed to the increase. On the cost side, cash operating and SG&A expenses decreased by $94 million or 39%, primarily due to the following; first, cost-saving measures, primarily related to salaries and wages, especially at the parks, that were not operating. Second, lower advertising costs. And third, savings and utilities and other costs related to many of our parks not operating. While we have taken measures to reduce our variable costs, we have decided to retain the balance of our full-time members and maintain their benefits, in order to position ourselves to reopen safely and quickly, as soon as we receive authorization from government authorities. Employees at closed parks are on a 25% salary reduction, as are our senior leadership team and other corporate executives. We will continue to evaluate all options in the future, given the fluidity of the situation. Adjusted EBITDA for the quarter was a loss of $54 million, compared to income of $307 million in the prior year period. Deferred revenue of $199 million was up $1 million or less than 1% to prior year, driven by suspension of operations at our parks and extension of the 2020 season passes to the 2021 operating season. This was mostly offset by fewer membership and season pass sales. We are making significant efforts to ensure the continued loyalty of our active pass base. We recently extended the use privileges for all 2020 season passes through the end of 2021. For our members, we added an additional month to the membership for every month they paid, when their home park was closed. All members have the option to pause their membership payments at any time until the spring of next year, but we have offered a menu of benefits, including upgrades to higher membership tiers, if they elect to continue on their normal payment schedule. We also are rolling out a gift card program that members can choose to use in our parks, in lieu of adding the initial months to their membership. We are very pleased with the loyalty and retention of our very large active pass base of 3.7 million, which included 1.9 million members and 1.9 million season pass holders at the end of the third quarter. In fact, our active pass base is close to flat versus the end of the second quarter of this year, when we had 2.1 million members and 1.7 million season pass holders. Although the active pass base at the end of the third quarter is down 49% compared to the same time last year, this is primarily due to substantially lower sales of new season passes and memberships, due to the short-term impact on demand from the pandemic. To-date, 14% of current members have chosen to pause their membership and we anticipate that most of these paused members will return to active paying members, once we reopen our remaining parks. In the first nine months of 2020, we spent $90 million on capital expenditures, net of property insurance recoveries, but expect to spend minimal capital in the fourth quarter. Our liquidity position as a September 30th, was $673 million. This included $459 million of available revolver capacity, net of $22 million of letters of credit, and $214 million of cash. This compares to a pro forma liquidity position of $756 million as of June 30, 2020, a reduction of $83 million, representing approximately $27 million per month of net cash outflows, in line with our prior estimates. We estimate that our net cash outflows will continue to average $25 million to $30 million per month through the end of 2020, including partnership park distributions that represents an average run rate of $7 million per month for the last three months of the year. The operating environment is quite fluid, and changes almost daily. So it is difficult to project more than three months into the future. However, the first quarter has historically consumed more cash than the rest of the year, when we have been in a normal operating environment. We expect this to be the case next year as well, but will have better visibility into the operating environment, by the time we report our fourth quarter results next year. Now, let me take a minute to talk about breakeven levels for the company, on an annual basis. There are three levels of breakeven that we calculate. First, park breakeven levels. All parks that are operating are generating positive cash flow on a variable basis. We wouldn't operate them otherwise. Second, breakeven EBITDA levels for the company. This level is definitely mix driven, but we estimate breakeven EBITDA levels in an attendance range of 45% to 55% of 2019. Third, free cash flow breakeven levels for the company. This level is also mix driven, but would cover our cash interest and partnership park distributions. We estimate breakeven free cash flows at an attendance range of 65% to 75% of 2019. We believe we have adequate liquidity through the end of 2021, even if we need to close our parks. In August, we further amended our credit facility to extend the covenant waiver period by one year, from the fourth quarter of 2020, to the fourth quarter of 2021, and the covenant modification period by one year, to the end of 2022. Between our current liquidity and our recent covenant modifications, we have given ourselves significant runway to navigate through this challenging period. I would now like to turn to the financial impact of our transformation plan. Executing the transformation will require one-time cost of approximately $69 million through 2021. $60 million of which is expected to be cash and $9 million of non-cash write-offs. So far, $29 million has been incurred through the end of the third quarter of 2020, $6 million of which was incurred in the second quarter and $23 million of which was incurred in the third quarter. We anticipate that we will incur approximately $5 million in charges in the fourth quarter of 2020, including the $3 million in employee termination costs related to our full time headcount reduction, previously discussed. The remainder of the $69 million in costs are expected to be incurred by the end of 2021, approximately two-thirds of which will be technology investments. Financially, we expect the transformation to unlock $80 million to $110 million in incremental annual run rate EBITDA, once fully executed. Taking the midpoint of our pre-pandemic 2020 adjusted EBITDA guidance of $450 million, this implies a new earnings baseline of at least $530 million to $560 million, once the transformation plan is completed, and we are operating in a normal business environment. Of the $80 million to $110 million in transformation value, roughly half the value is expected to be realized through a reduction of fixed costs, that is independent of attendance levels and is fully in our control. The other half is expected to be realized from incremental revenue initiatives and lower variable costs from better labor optimization. These estimates are based on historical data, tested at operating parks before and during COVID-19 and through the validation of our teams. From our revenue initiatives, we expect to deliver $30 million to $40 million of EBITDA. For our three cost productivity initiatives, we expect to deliver $50 million to $70 million in EBITDA. Of this, $40 million to $55 million will be realized through a reduction of fixed costs that is independent of attendance levels. We expect to deliver $30 million to $35 million in EBITDA in 2021, from the reduction of the fixed costs. We expect to deliver the full $40 million to $55 million in EBITDA by 2022, independent of attendance levels, with incremental benefits to be realized from revenue, and variable labor initiatives, depending on overall attendance in both 2021 and 2022. Our capital allocation strategy will be focused on growing the base business and paying down debt to return our net leverage ratio, to between three and four times adjusted EBITDA over time. We have suspended our dividend and share repurchases for the foreseeable future, to allow us to focus on these two objectives. In summary, despite the challenges our entire industry is facing, we have adapted our operations in response to the crisis, and have not let these difficulties slow down our efforts to transform our business. We are very excited about the value creation opportunity for the company, that comes from implementing our transformation plan. Now, I will pass the call back over to Mike. Despite a challenging operating environment, I am very optimistic about Six Flags' future, for the following reasons. First, we have an incredible portfolio of regional theme parks, serving all of the top 10 DMAs in the U.S., as well as major metropolitan areas in Mexico and Canada. Our parks provide a unique live experience for families and teens, that cannot be replicated by other forms of entertainment. They are outdoors and spread over hundreds of acres, making them naturally conducive to social distancing, and our guests continue to visit our parks and engage with our brand, despite the sub-optimal operating environment. Second, our recent surveys of several thousand consumers reveal that 93% of them would visit a theme park, if they were guaranteed a COVID free environment by rapid testing. In addition, 87% of consumers say they would visit a theme park after vaccine becomes available. So while the current environment is tough, we are confident that our guests will return, once the pandemic subsides. Third, our transformational agenda will provide what our customers want and it is readily achievable from a business perspective. I have overseen three distinct transformational agendas over my career, and I am confident that we can execute on our goals. Finally, we have an exceptional team of dedicated people working at our company. They love Six Flags and are excited to up our game and deliver an outstanding guest experience. We're also fortunate to be aided by two new exceptional board members. Esi Eggleston Bracey and Enrique Ramirez Mena, are highly accomplished business leaders who bring complementary, diverse skills and experiences to our organization. Skills that are specially critical, as we focus on getting closer to our customers and on operating more effectively and efficiently. In the coming months, we will remain focused on modernizing the guest experience, making it easier for our guests to enjoy Six Flags, as the thrill rides destination of the world. We want to provide our guests a memorable experience, and an excellent value for both their time and their money. We remain intently focused on executing our transformational plan, to achieve our earnings baseline of at least $530 million to $560 million, once we are operating in a normal business environment. I look forward to updating you on our continued progress in the months ahead. Operator, at this point, could you please open the call for any questions?

q3 revenue $126 million versus refinitiv ibes estimate of $142.7 million. six flags entertainment - believes it has sufficient liquidity to meet its cash obligations through end of 2021 even if open parks are forced to close.

And the company undertakes no obligation to update or revise these statements. In addition, on the call we will discuss non-GAAP financial measures. Investors can find both a detailed discussion of business risks and reconciliations of non-GAAP financial measures to GAAP financial measures in the company's annual reports, quarterly reports, and other forms filed or furnished with the SEC. Over the past few weeks, I have been energized by visiting our parks and spending time with so many of our team members. It has been great to witness firsthand our team's resilience and their dedication to serving our guests. We have divided our call today into three parts. First, I will provide an overview of our operating performance and the strong demand trends we are seeing. Second, Sandeep will go into more detail about our financial results. Finally, I will return to provide some comments about the progress we've made on our three long-term strategic focus areas. Despite the challenging environment in the third quarter, we continue to experience strong consumer demand at all of our parks. We benefited from delivering exactly what consumers are looking for thrilling and affordable entertainment for the whole family that is outdoors, and only a short drive from home. Attendance during the quarter indexed 92% of 2019 levels excluding pre-booked group sales our parks index 95% in the third quarter compared to the same period in 2019. Fourth quarter to-date trends through this past weekend, ending October 24 have accelerated versus the 92% index. We also continue to make steady progress with our revenue management initiatives. During the third quarter, guest spending per capita was up 23% versus 2019. In addition, season pass sales trends have accelerated. As of October 3, 2021, our Active Pass Base was up 3% compared to the third quarter 2019. While demand trends are encouraging, we continue to face a tight labor market, and we continue to incur additional costs while operating in this unprecedented environment. Looking back on the past two quarters, the speed and magnitude of the resurgence of demand was even stronger than we expected which exasperated the stress on our costs and operations. We are working on several initiatives to alleviate some of these cost pressures. Sandeep will discuss this in more detail. Overall, we are encouraged by our continued progress yet, we are still in the early stages of transforming our operating model. We are confident that our efforts to improve all aspects of the guest experience will fundamentally reshape the future earnings power of our business. I would like to start by reminding you that results for the third quarter and year-to-date trends are not comparable to prior year because we closed all of our parks in mid-March last year and several of our parks remained closed or had curtailed operations through third quarter 2020. For that reason, I will provide comparisons to 2019. Total attendance for the third quarter was 12 million guests, a 14% decline from 2019. Reflecting capacity restrictions at some of the parks that were open, the loss of a significant portion of our pre-booked group sales and an unfavorable calendar shift due to our fiscal year change which benefited the second quarter at the expense of the third quarter. Group sales, which includes school groups and company buyouts continued to experience downward pressure. As Mike stated attendance at open parks in the third quarter index at 92% of 2019. Excluding pre-booked group sales, our parks indexed 95%. During the months of the quarter, our attendance indexed 97% in July, 89% in August and 86% in September. Concerns about the delta variants increased over the summer, and we experienced a decline in group sales in the second half of August through September. However as Mike stated, fourth quarter to-date trends have accelerated versus the 92% index we achieved in the third quarter. Looking ahead, we don't plan to share monthly attendance trends. However, because of the extraordinary environment, we thought it would be helpful to share this detail. Attendance from our single day guests in the third quarter represented 39% of the attendance mix, the same as in the third quarter of 2019 despite the negative impact of lower pre-book sales on single day attendance. Excluding pre-booked group sales, our mix of single day guests increased by three percentage points. Because of our reporting calendar change, our third quarter fiscal quarter 2021 ended on October 3, instead of September 30 as it did in 2019. As a result, third quarter 2021 includes three calendar days in October. This was more than offset by four days in July, which shifted out of the third quarter and into the second quarter of this year including most of the July 4th weekend. The net reduction due to these calendar shifts in third quarter 2021 was 437,000 of attendance and approximately $24 million of revenue. We expect group sales to have less of an impact in the fourth quarter, when groups typically represent a smaller portion of our attendance than in the second and third quarters. However, our new fiscal calendar will continue to create attendance shifts in the fourth quarter, which will include an extra weekend in January compared to 2019. We expect this reporting calendar change to shift approximately 200,000 of attendance out of first quarter 2022 into fourth quarter 2021. When netted against the shift of the October weekend out of the fourth quarter into the third quarter, we expect the changes in our fiscal operating calendar to negatively impact the fourth quarter's attendance compared to 2019 by approximately 270,000 guests. Total guest spending per capita increased 23% in the third quarter versus 2019. Admissions spending per capita increased 20% and in-park spending per capita increased 26%. The increase in admissions spending per capita compared to 2019 was primarily driven by our new approach to revenue management as we saw double-digit growth in admissions per capita for both our Active Pass Base and single day tickets. Our new approach includes pricing our tickets based on a demand curve. It also includes a new pricing architecture that allows us to optimize relative pricing among our various ticket types and to significantly reduce the debt of discounted promotions. In addition, as much of our season pass sales are occurring later in the season than the historical pattern, we recognize season pass revenue over fewer visits which boosted our admissions per capita in the third quarter. As expected, admissions per capita growth versus 2019 moderated in the third quarter. We expect to continue growing our admissions per capita over time, but we expect the growth rate to continue to moderate. The increase in in-park spending per capita compared to 2019 was due to early progress on several of our transformation initiatives, as well as a stronger overall consumer spending environment. Highlights from our in-park initiatives include our new food and beverage strategy featuring a new food pricing architecture and the introduction of more premium offerings, our QR code-enabled FLASH Pass program, which has increased FLASH Pass adoption, our improved merchandise mix resulting in higher retail sales, and a higher mix of single day ticket visitors whose tickets, do not include parking. The acceleration of our in-park per capita spending during our highest attendance quarter gives us confidence that our transformation initiatives are providing a sustainable lift. Revenue in the quarter were $638 million, up $17 million or 3% compared to 2019. Excluding the impact of the fiscal calendar change and the impact of reduced sponsorship international agreements and accommodations revenue, our base business revenue increased by $55 million or 9% compared to the third quarter 2019. On the cost side, cash operating and SG&A expenses increased by $45 million or 19% in the third quarter compared to 2019. The increase was driven by several factors. First higher wage rates and incentive costs to attract and retain teams members. Second, an increase in litigation reserves primarily related to an increased estimate of the probable outcome of the settlement of legacy class action lawsuit. Third, increase security in our parks, and finally, a shift in the timing of our repair and maintenance costs based on our parks leader opening dates. As we sit here today, the operating environment remains challenging with the tight labor market and ongoing supply chain constraints. We believe that approximately half of the additional costs we are incurring are transitory and will normalize over time. However some of these costs, particularly wage inflation may prove to be more permanent. In terms of labor if current wage rates were to persist, we would incur additional labor expenses of $40 million annually compared to 2019 inclusive of the $20 million we called out in the EBITDA baseline we gave during our fourth quarter 2019 earnings call. This $40 million is consistent with what we called out in our previous earnings call. Our team is working on potential opportunities to alleviate many of these cost pressures in case they persist over time. Adjusted EBITDA for the third quarter was $279 million, down $28 million or 9% versus third quarter 2019. This included the negative impact of the fiscal quarter change which shifted attendance out of the quarter, the reduction of international sponsorship and accommodations revenue, and roughly half of the $45 million cost increase in the quarter that we believe to be transitory. We are pleased with the growth of our Active Pass Base. At the end of the third quarter we had 7.6 million passholders up 3% from the end of the third quarter 2019. This is especially encouraging because we elected to not hold a highly promotional FLASH sale that we conducted around Labor Day, the last several years before the pandemic. We expect to continue to increase our Active Pass Base through the spring while achieving higher ticket yields. Our very large Active Pass Base sets us up for a solid fourth quarter and positions us well as we head into the 2022 season. Deferred revenue as of October 3, 2021 was $224 million, up $26 million or 13% compared to third quarter 2019. The increase was primarily due to the deferral of revenue for members whose benefits were extended. Year-to-date capital expenditures were $62 million. We expect capital expenditures of $120 million to $130 million in 2021 as we make investments to improve the guest experience and to increase capacity on our rights. Our capex this year is heavily weighted in the fourth quarter due to our cautious approach toward capital spending in the early part of 2021. We continue to believe 9% to 10% of revenue is an appropriate level of annual capital expenditures in a normalized environment. As the recovery continues, we are focused on maximizing cash flow. Year-to-date net cash flow through the third quarter was $232 million, an increase of $26 million compared to the first three quarters of 2019. Our balance sheet is very healthy, with no borrowings under our revolver and no debt maturities before 2024. Our liquidity position as of October 3 was $851 million. This included $461 million of available revolver capacity, net of $20 million of letters of credit and $390 million of cash. Our capital allocation priorities remain the same, first, to invest in our base business. Second, to pay down debt until we reach our target leverage range of three to four times net debt to adjusted EBITDA. Third, to consider strategic acquisition opportunities. Finally, to return excess cash to shareholders by our dividends or share repurchases. Moving to our transformation plan as previously discussed, we expect the plan to generate an incremental $80 million to $110 million in annual run-rate adjusted EBITDA. In 2021, we expect to achieve $30 million to $35 million from our fixed cost reductions. We have already realized over $23 million through the first nine months of this year. Based on year-to-date trends, we now expect to reach the high end of $80 million to $110 million range once the plan is fully implemented and attendance returns to 2019 levels. Thus far, our revenue management initiatives have overdelivered on our original plan. However, our cost initiatives have been negatively impacted by labor and supply chain inflationary pressures. For that reason, we expect our revenue initiatives to provide a greater proportion of the $110 million. Relative to the midpoint of the company's pre-pandemic guidance range of $450 million, we are well positioned to achieve our adjusted EBITDA baseline of $560 million once our transformation plan is fully implemented, and attendance returns to 2019 levels. This EBITDA level assumes the current wage rate environment persists. We are laying the groundwork for sustainable earnings growth and once the base line is achieved, we expect to grow revenue by low to mid-single-digits and EBITDA by mid-to-high single-digits annually thereafter. Now, I will pass the call back to Mike. I'd like to take a few minutes to review some of the progress we have made on our three strategic focus areas to drive long-term, sustainable earnings growth. Our first strategic focus area is modernizing the guest experience through technology. We want to create more personalized and customized experiences for our guests, putting them in control of their time and activities. This will result in our guests spending less time wait in line, and more time having fun and enjoying activities during each visit. We believe that improving the guest experience will be the most important driver of our earnings growth. On past calls, I've discussed a number of the exciting long-term initiatives that are underway including our new CRM platform, cash to card kiosks, ride reservations and an improved mobile app to name a few. Today, I would like to provide some detail on three additional initiatives that are already starting to have an impact. First, digital fright passes. Instead of guests having to wait in long lines to pick up hundred attraction wrist bands, this Fright Fest season they able to go right to the honored attractions using their season pass card, membership card for e-tickets. Guests are able to purchase digital fright passes on their phone from anywhere in the park by scanning QR codes. This has increased our fright pass sales while eliminating wait times for our guests. Second, expanding our mobile dining locations across our parks and enhancing our food and beverage offerings. We continue to see the adoption of mobile dining leading to higher average transactions and improved guest satisfaction. Third, culinary partnerships, to elevate the guest dining experience we have launched two we probably serve Starbucks locations that serve a variety of the premium Starbucks drinks beloved by our guests. Early findings reveal that selective partnerships with third-party brands, improves guest satisfaction, and increases in-park spend. Our partnership with Starbucks is only the first of several initiatives centered on enhancing our guest dining experience through strategic partnerships. Our second focus area is to continuously improve operational efficiency. We continue to make progress in this area in particular on our centralized back office and procurement efforts. Our cost progress is currently being obscured by the labor cost and supply chain headwinds, but over time, we expect our cost savings to show up in our financial results as we scale our business, get closer to full attendance capacity and pursue additional cost opportunities. Finally, our third focus area is driving financial excellence. While we are keeping a close eye on the delta and other variants, we are optimistic that the global recovery will continue. Timelines are hard to predict and progress will continue to vary by region, but we believe we are fast on our way to stronger guest attendance beyond the levels of 2019. As we implement more of our transformation program and as our attendance recovers at 2019 levels, we expect to deliver $560 million in adjusted EBITDA. Even more important, once we achieve that new EBITDA baseline, we expect to sustainably grow adjusted EBITDA from our base business mid to high single-digits over time. In conclusion, these have been challenging times, but we are looking forward to a bright future. With a clear focus on improving the guest experience through technology and a talented and dedicated team to execute our strategy, we are well positioned to accelerate growth in 2022. Catherine, at this point, could you please open the call for any questions.

compname reports q3 revenue of $638 mln. q3 revenue $638 million. qtrly total revenue was $638 million, an increase of $17 million compared to q3 2019. six flags entertainment - expects transformation plan announced in march 2020 to generate incremental $80 million to $110 million annual run-rate adjusted ebitda. qtrly increase in operating costs was driven by higher wage rates & incentive costs to attract and retain team members.

In addition, on the call, we will discuss non-GAAP financial measures. Investors can find, both a detailed discussion of business risks and reconciliations of non-GAAP financial measures to GAAP financial measures in the company's annual reports, quarterly reports and other forms filed or furnished with the SEC. This past year has been exceptionally challenging as the world contends with a pandemic that has upended all of our lives. We are grateful for the first responders who keep us safe and for those who provide the services we all count on every day. I am proud that Six Flags has been able to make a difference in the communities we serve by hosting vaccination sites and testing locations and by donating food banks for those in need. They have continued to amaze me with their dedication, perseverance and resilience as we found innovative ways to safely entertain nearly 7 million guests as a preferred entertainment choice. We established the highest standards of cleanliness and safety protocol as validated by local health officials and our guest feedback. We strengthened our liquidity position, significantly reduced our operating and capital expenditures and continue to innovate to safely and successfully reopen our parks. I've never been more proud of our company or more confident in our future. In the fourth quarter, we continued to make significant progress on our transformation plan, which focuses on strengthening our core business. This plan is in full action and will fuel our new strategy to drive long-term profitable growth. Our new strategy is evolutionary, not revolutionary. We are going to do many of the same things we did in the past. We are going to do them better. Specifically, we will modernize all aspects of the guest experience and we will operate more efficiently as an organization. As I stressed on our last call, our guests still love our roller coasters and funnel cakes. They just want a more seamless experience and we can provide them that through technology. We have divided our call into three parts. First, I will provide an overview of our recent operating performance and the strong demand trends we are seeing. Second, Sandeep will go into more detail about our financial results and give an update on the progress of our transformation plan. Finally, I will return to discuss our new strategy in more detail and review our three strategic focus areas. We are pleased that our attendance has consistently improved since we first reopened our parks last year in the second quarter. I'd like to highlight a few reasons why we're so optimistic about the upcoming season despite the challenging operating environment. First, on a comparable period basis, attendance trends in open parks have increased from 20% to 25% of 2019 levels in the second quarter to 35% in the third quarter to 51% in the fourth quarter. We have continued to see strong signs so far this year with attendance in open parks trending at consistent levels as the fourth quarter despite extreme weather conditions in Texas over the past couple of weeks. Our guest surveys indicate that there is extraordinary pent-up demand for outdoor entertainment options close to home. And we believe that this widespread desire will drive attendance in the coming quarters. Second, we are encouraged by the resiliency of our Active Pass Base which was approximately flat between the third quarter and fourth quarter of 2020. Even more encouraging, the number of members who retained their memberships after their initial 12-month commitment period, our most valuable guests, is actually up versus this time last year. We see the strong retention of our members even in the midst of a pandemic as a testament to our unique offering and our loyal following. Once our parks are back up and running at full capacity, we expect that our Active Pass Base will quickly ramp back up to previous levels and beyond. Third, the pandemic encourage us to think creatively about how to maximize use of our parks. Both the creative solutions we found and the underlying dynamism of our team will continue to drive growth well past COVID. Demand was so high that we will operate the drive-through safari again starting in March 2021 creating the longest season in the Animal Parks history. In the fourth quarter, we also offered drive-through or walk-through holiday experiences with our rides at four of our theme parks giving our guests the opportunity to celebrate the season with lights, beloved characters and festivities. These events proved so popular that we extended them into January. Going forward, we expect to continue many of these events, which will allow us to extend our operating season and give guests even more reasons to visit our parks throughout the year. So while the environment remains fluid, we are encouraged by recent trends and are optimistic about both the short and long-term prospects of our business. Results for the fourth quarter and full-year are not comparable to prior year because of temporary park closures, modified operations and attendance limitations. Total attendance for the quarter was 2.2 million guests, 338,000 of which came from the four parks that offered modified Holiday in the Park lights without rides and our drive-through safari in New Jersey. Revenue in the quarter was down $152 million or 58% to $109 million as a result of a 65% decline in attendance. Sponsorship, international and accommodations revenue in the fourth quarter declined by $8 million due to the deferral of most sponsorship revenue and the suspension of the majority of our accommodations operations. Guest spending per capita in the quarter increased 17% driven by a 16% increase in admissions spending per capita and a 19% increase in in-park spending per capita. The increase in admissions spending per capita was driven primarily by recurring monthly membership revenue from members who retained their memberships after their initial 12-month commitment period, as well as an increase in the mix of single-day guests. The increase in in-park spending per capita was primarily driven by a higher mix of single-day guests who tend to spend more per visit. In addition, revenue from recurring monthly all-season membership products such as the all-season dining pass contributed to the increase. Attendance from our Active Pass Base in the fourth quarter represented 55% of total attendance versus 71% for the fourth quarter of 2019 demonstrating our success in attracting visitation of single-day guests. On the cost side, cash, operating and SG&A expenses decreased by $30 million or 18%, primarily due to the following: first, cost saving measures, primarily related to reduced salaries and wages and lower Fright Fest and Holiday in the Park related costs due to the restricted operating environment and our organization redesign completed in October; second, lower advertising costs; third, savings in utilities and other costs related to the fact that several of our parks were not operating or were operating with a reduced product offering. These cost savings were offset by a charge of $19 million due to an increase in legal reserves. The total amount recorded reflects managements estimate of the probable outcome of a legacy class action lawsuit. Excluding the litigation charge, cash costs decreased by $49 million or 29%. While we have taken measures to reduce our variable costs, we retained 90% of our full-time members and maintained their benefits in order to position ourselves to reopen parks as safely and as soon as possible. We reduced salaries of all employees by 25% during 2020 in order to preserve cash and our Directors also deferred their compensation for the last three quarters of 2020. Several of them, including our retiring and new Chairman, opted to take that compensation in the form of stock. Due to the improving outlook, we have restored all our employees to full salaries, with the exception of our CEO who opted to be restored in March. Although these actions offset our cost reduction efforts somewhat, we believe they were the right decisions for both the short and long-term. By keeping our parks in a state of readiness, we were able to maximize the number of days we could operate. We also were able to keep our guests engaged, our employees motivated and our parks prepared for 2021. Adjusted EBITDA for the quarter was a loss of $39 million which included a $19 million increase in legal reserves compared to income of $72 million in the prior year period. Moving to full year performance. Attendance of 6.8 million guests was down 79% from prior year. Total revenue of $357 million was down 76% driven by lower attendance due to park closures, limited operations. Total guest spending per capita increased more than $6 or 14% due to a higher percentage of single-day guests and the positive revenue impact from members who have remained past their initial 12-month commitment period. Attendance from our Active Pass Base for the full year represented 56% of total attendance versus 63% for full year 2019. Cash, operating and SG&A expenses were down 35% for the year due to cost savings measures taken immediately after we suspended operations. This cost reduction offset a portion of the revenue decline resulting in an adjusted EBITDA loss of $231 million. Fully diluted GAAP loss per share was $4.99, a decline of $7.10 primarily due to the lower attendance in our parks. We are making significant efforts to ensure the continued loyalty of our Active Pass Base. We extended the use of all 2020 season passes through the end of 2021. For our members, we added an additional month to their membership for every month they paid when their home park was closed. We are also rolling out a gift card option in the second quarter that members can choose to use in our parks in lieu of adding additional months to their membership. Finally, all members have the option to pause their membership payments at any time through spring 2021. However, we have offered a menu of benefits including upgrades to higher membership tiers if they elect to continue on their normal payment schedule. As of today, only about 20% of current members have chosen to pause their membership. We anticipate that most of these paused members will return to active paying members once we reopen our remaining parks. We are pleased with the retention of our very large Active Pass Base, which included 1.7 million members and 2.1 million season pass holders at the end of 2020. Our Active Pass Base was approximately flat compared to the end of the third quarter 2020 when we had 1.9 million members and 1.9 million season pass holders. Our Active Pass Base at the end of 2020 is down 51% compared to the end of 2019. While this is a significant decline, it is important to assess this in proper context. This decline is almost entirely due to lower sales of new season passes and memberships during 2020 as they were difficult to sell with so much uncertainty during the pandemic. We also did not hold our usual pass sales events including our flash sale in September, which contribute significantly to our year-end Active Pass Base. That being said, because we extended our 2020 season passes through the end of 2021, our Active Pass Base, as of today, is down less than 10% versus the same day last year, which preceded the pandemic's impact. We believe this represents a more meaningful comparison for our Active Pass Base heading into the 2021 operating season as we believe the season pass holders and members who were extended will visit our parks in 2021. Looking ahead, we expect the Active Pass Base trends to continue to improve as we start selling more new passes and memberships. Deferred revenue as of December 31, 2020 was $205 million, up $61 million or 42% to prior year as we expect to recognize most of this deferred revenue in 2021. The increase was primarily due to the deferral of revenue from members and season pass holders whose benefits were extended through 2021, partially offset by lower new season pass and membership sales. Total capital expenditures for the year were $98 million, a reduction of 30% from 2019. We expect our 2021 capital spend to be slightly lower than 2020 due to the carryover of new rides that were delivered and paid for, but not commissioned in 2020. Our liquidity position, as of December 31, was $618 million. This included $460 million of available revolver capacity, net of $21 million of letters of credit and $158 billion of cash. This compares to a liquidity position of $673 million as of September 30, 2020. Net cash outflow for the quarter was $56 million, representing an average of $19 million per month. As a reminder, our net cash outflow in the fourth quarter included partnership park distributions that represented an average of $7 million per month. Our fourth quarter cash flow benefited by $8 million from the sale of some excess land in New Jersey, which was not in our prior estimates. Without the landfill, our net cash outflow was $21 million per month, an improvement from our prior estimates of $25 million to $30 million. We historically experienced significant cash outflow in the first quarter of the year as the majority of our parks are closed, yet, we incurred an elevated operating and capital expenditures to prepare for our parks opening in the spring. We estimate that our net cash outflow in the first quarter of 2021 will be higher than normal or approximately $53 million to $58 million per month. This is primarily due to three things. First, the normal seasonality of our business. Second, the timing of interest payments on our newly issued $725 million of senior secured debt. And, third, the pandemic-related limitations on our parks, including our California and Mexico parks that typically have year round operations. We are striving to be cash flow positive for the balance of the year but this is largely dependent upon all our parks opening and attendance levels continuing to normalize. I would now like to give you an update on the progress of our transformation plan. The headline is this. We are on track with our plan and we are highly confident in our ability to achieve our objectives. Executing the transformation plan will require one-time cost of approximately $70 million through 2021, including $60 million of cash and $10 million of non-cash write-offs. So far, $35 million has been incurred through the end of 2020, including the non-cash write-offs of $10 million. We expect to incur the remaining $35 million by the end of 2021. Approximately two-thirds of the spending in 2021 is related to investments in technology, beginning with the implementation of a state-of-the art CRM system. We expect the transformation plan to unlock $80 million to $110 million in incremental annual run rate EBITDA once fully implemented and the company is now operating in a normal business environment. In 2021, we expect to achieve $30 million to $35 million from our organization redesign and other fixed cost reductions. In January alone, we realized more than $2 million of fixed cost value due to transformation, so we are well on track to achieve our estimated savings for 2021. We expect to ramp up to the full amount of benefits as attendance grows to 2019 levels. We have already completed significant portions of the work that will benefit us in 2021 starting with our three cost initiatives. First, as we announced last fall, we reduced our full time headcount costs by approximately 10%. We are piloting new approaches to recruiting and training and moving to centralize some of our back office operations, such as finance, human resources and IT. Second, from a non-headcount cost perspective, we closed offices in New York City and West Hollywood and are in the midst of driving savings through centralized negotiations with a number of our vendors. Initial results are validating the projected value opportunities of these initiatives. Third, from a variable labor perspective, we are piloting our park level labor model, which will allow us to dynamically match stuffing with attendance levels throughout the day. We are conducting this pilot in our Texas parks and plan to roll it out to our remaining parks once we validate that the model is working effectively. We will realize the benefits of the model as attendance levels rise and we will keep you updated as our parks continue to open. We are also making excellent progress on our revenue initiatives. Specifically, we are testing our new and improved menu assortment, pricing and merchandising strategy in Over Texas and Fiesta Texas. We expect to expand these initiatives to all other parks once they reopen. Our marketing team and media agency have incorporated the use of our media ROI tool and we plan to measure our ROI by park in the future. We continue to improve our website, which we rolled out last fall. We will soon make it available for our parks in Mexico and Canada. Finally, we continue to make progress with our initiative to bring back single-day visitors, particularly those living far away enough from our parks where a season pass is not an attractive option. While we always prefer to sell a season pass or a membership because of the highest full season revenue, we believe there is a significant opportunity to capture additional attendance by targeting single-day visitors. We are already seeing a positive impact on our attendance and per caps as a result of this initiative. As we announced last December, we are changing our method of determining our fiscal quarters and fiscal years, such that each fiscal quarter shall consist of 13 consecutive weeks ending on a Sunday. Each fiscal year shall consist of 52 weeks or 53 weeks and shall end on the Sunday closest to December 31. During the years when there are 53 weeks, the fourth quarter shall consist of 14 weeks. Because of this change, our first fiscal quarter of 2021 will end on April 4 instead of March 31 and the current fiscal year will end on January 2, 2022. The purpose of this change is to align our reporting calendar with how we operate our business and to improve comparability across periods. Looking ahead, the operating environment remains unpredictable. So it's difficult to project beyond the next three months. For that reason, we are not providing annual guidance at this time. We have announced opening dates for all our parks that are not already open with start dates beginning in March. That being said, we will remain flexible and we'll be cautious to commit our capital, media and labor dollars only when we believe there will be a strong ROI. We are extremely encouraged by the improvements in our attendance trends in the face of the pandemic, and we are very excited about the value creation that will come from implementing our transformation plan. We have more work to do, but I'm pleased by our progress so far. The whole company is intently focused on executing the transformation plan over the coming quarters. Now, I will pass the call back over to Mike who will tell you more about our strategy. Our strategy is to drive profit from our core business because this will create sustainable value over time. We can grow our business from its core because we operate in a healthy industry that is benefiting from long-term secular trends as consumers increasingly choose to spend on experiences over objects. Even within out-of-home entertainment, regional theme parks are a compelling sector because they enjoy high recurring cash flow that has proven to be extremely resilient during downturns. These attributes have enabled our industry and our company to deliver strong revenue and earnings growth over time. However, over the past few years, we did not evolve at the same pace as our guest expectations. As a result, we underperformed the industry from both a top-line and bottom-line perspective. To reinvigorate profitable growth, our team has reassessed every aspect of our business. We have developed an updated strategy to ensure that we constantly evolve so we not only meet but exceed our guests' expectations, both now and for many years to come. So here it is. Our strategy is to create thrilling memorable experiences at our regional parks delivered by a diverse and empowered team through industry-leading innovation and technology. Our vision is to be the preferred regional destination for entertainment and our mission is to create fun and thrilling memories for all. Our core values prioritize safety and the guest experience and drive accountability throughout the organization. Our values will result in a guest-centric culture; a commitment to prioritize the guest at every decision point. Looking to the future, three key long-term focus areas will drive our strategy. First, modernizing the guest experience through technology; second, continuously improving operational efficiency; and third, driving financial excellence. For each of these focus areas, we will measure our progress based on certain key performance indicators. For our first focus area, modernizing the guest experience through technology, our goal is to create a seamless and improved in-park experience with new applications of technology. First, we will provide opportunities for our guests to tailor the in-park experience to each of their individual preferences. Second, we will decrease wait times wherever possible, especially for our roller coasters where we are testing several virtual queuing and reservation systems. Third, we will facilitate our guests' ability and desire to share their experience on social media. Finally, we will improve food and beverage quality and the overall appearance of our parks. In everything we do, we will prioritize the guest experience. Here are a few highlights of our progress on this focus area thus far. Website redesign; our new simplified website has made it easier than ever for guests to find information about our offerings and to purchase tickets. This has led to higher sales conversion rates and higher per caps. Customer relationship management; we are in the midst of developing a new CRM platform that will allow us to understand and predict our guests' preferences from the moment they visit our website to the moment they leave the park. Based on this consumer data, we will begin tailoring our offerings to their preferences and customize their experiences so they get exactly what they want when they want it. Contactless security; our guests no longer have to wait in long lines or have their bags searched to enter our parks. They now walk seamlessly through our contactless security systems which scans them for anything unsafe and also measures their temperature to ensure safe environment. Cash card kiosks; our domestic parks that opened for normal operations in the fourth quarter have offered any guests who only have cash the ability to obtain cash cards from kiosks throughout the parks in order to facilitate electronic transactions. This improves hygiene within our parks, while also speeding up transactions and eliminating cash handling costs. Mobile dining; our guests no longer have to wait in long lines to order food. Instead they can choose to order on their smartphones and pick up their food when it is ready. Mobile dining has also led to higher average checks. For this first focus area of modernizing the guest experience through technology, the key performance indicators will be attendance and revenue. Moving on to our second focus area; continuously improving operational efficiency, we will deliver products and services in a more cost-efficient manner, including effectively deploying park-level labor, leveraging our scale of increased purchasing power and optimizing our ride portfolio. We are also focused on increased guest throughput on our rides, as well as our food and beverage locations. As Sandeep mentioned, we have moved quickly to streamline our organization and reduced other fixed costs and we expect to realize $30 million to $35 million of fixed cost savings in 2021. For the second focus area; continuously improving operational efficiency, the key performance indicator will be operating expense ratio, which is the ratio of our operating expenses relative to our revenue. We will begin to measure this ratio once we return to a more normal business environment. Finally, our third focus area is driving financial excellence. We expect our transformation initiatives to create a new adjusted EBITDA baseline of $530 million to $560 million once our plan is implemented and we are operating in a more normal business environment. After we achieve this baseline, we believe our strategy will allow us to grow revenue at low-to-mid single-digits, in line with the overall out-of-home entertainment industry. Combined with our annual productivity initiatives, we will continue to invest back in our parks and improve margins to accelerate annual adjusted EBITDA growth to a range of mid-to-high single-digits. In addition, we will be disciplined in the way we allocate capital to ensure we deliver sustainable earnings growth. We have developed the following capital allocation priorities to guide our path toward financial excellence. First, invest in our base business to facilitate profitable and sustainable growth. this includes investments in our park infrastructure, in technology for our parks, and in systems that help us oversee our park operations. This also includes investments in new rides and attractions, as well as other in-park offerings such as food and beverage. We expect to maintain our annual capital expenditures at 9% to 10% of revenue. Second, use free cash flow to pay down debt and return our net leverage ratio to between 3 and 4 times. Third, once we are within our targeted leverage range, consider strategic acquisition opportunities to further build our regional network of parks. Finally, if there are no acquisition opportunities that meet our strategic and financial return thresholds, we will return excess cash flow to shareholders via dividends or share repurchases. For this third focus area of driving financial excellence, the key performance indicator will be adjusted EBITDA. We have a resilient team and a resilient business. Our team's focus for 2021 is to safely open all of our parks and ensure that we successfully execute our transformation plan. I look forward to updating you on our continued progress in the months ahead. Catherine, at this point, can you please open the call for any questions?

q4 revenue $109 million. provides update on transformation plan. confident that we will see significant benefits beginning in 2021. six flags entertainment - estimates that net cash outflow in q1 of 2021 will be, on average, $53 to $58 million per month. striving to become cash flow positive for last nine months of 2021. six flags entertainment - believes has sufficient liquidity to meet cash obligations through end of 2021 even if all its parks are unable to open.

In a moment, Mark Smucker, president, and CEO will give an overview of the quarter's results and an update on our strategic initiatives. Tucker Marshall, our CFO, will then provide a detailed analysis of the financial results and our fiscal 2022 outlook. These statements rely on assumptions and estimates, and actual results may differ materially due to risks and uncertainties. We also posted a slide deck summarizing the quarterly results, including additional information regarding net sales by segment and cost of products sold for fiscal 2021. Included in the slide deck are schedules summarizing net sales excluding divestitures for fiscal years 2019 through 2021. If you have additional questions after today's call, please contact me. Fiscal 2021 was a year like no other. In the face of unprecedented challenges, we delivered outstanding results. Moreover, we believe the business is at an inflection point, and we are delivering against our strategic and executional plans. We are emerging from the pandemic along with recent strategic actions a much stronger company. From the outset of the pandemic, we prioritize the well-being of our employees, funded relief activities for our communities, and produced a record amount of products for consumers and their pets. Our people are resilient and moved with speed and agility to adapt our business, all while executing our consumer-centric growth strategy and making progress toward our four execution priorities. These are driving commercial excellence, streamlining our costs infrastructure, reshaping our portfolio, and unleashing our organization to win. These priorities are essential to position our company for sustainable long-term growth. I'll first share some examples of the progress we are making toward our priorities before turning to a few highlights from the fourth quarter and our fiscal year 2022 outlook. Our first execution priority is driving commercial excellence. Throughout the past year, significant changes in our industry demanded a rethink of CPG commercial models. We adapted our approach to deliver what customers and consumers need and want more efficiently These changes included standing up a new sales model with two distinct teams, one focused on pets and the other on our consumer foods and coffee businesses. The benefits from improved in-store execution and leveraging insights, combined with additional advertising and improved reach through new digital media models have been a driving factor for our market share gains. These investments in our commercial capabilities provide a competitive advantage as we partner with retailers. They also enable seamless and highly targeted consumer experiences from awareness to purchase and strong repeat purchasing. Consumers remained loyal to our brands as we maintained the 1 million net new households gained in the prior year, while dollars per buyer increased 10%. Over the past year, we increased our marketing investment by nearly $40 million or 8%. Most importantly, we significantly improved our market share performance, where today, 55% of the brands in our portfolio are growing market share versus 26% 18 months ago. This is the sixth quarter of sequential share performance improvement for our portfolio. We also made significant progress on our second priority to increase focus on profitability and cost discipline. We restructured our corporate support functions leading to a more lean and agile organization while continuing to optimize our supply chain and maximize network production efficiencies. Full implementation of these initiatives will deliver $50 million of incremental cost savings in each of the next three fiscal years. One example where we are driving efficiency in our supply chain is with our high-growth Dunkin' coffee. The pandemic-driven surge in demand required us to increase agility and decrease production downtime and change over. This led to operational efficiencies and incremental capacity for our coffee production, which supported 21% sales growth for the brand this year. Our third execution priority to reshape our portfolio supports our strategy of leading in the best categories. baking mix and condensed milk businesses. In the pet business, we divested the special teaching and all exclusive Natural Balance brand. These decisions show our commitment to divesting brands and businesses that are no longer consistent with our long-term strategic focus. In turn, this allows us to optimize assortment to maximize productivity, reduce complexity, and shift resources to our fastest-growing opportunities. We continue to evaluate opportunities to increase our portfolios' focus in the pet food, coffee, and snacking categories. Further, acquisitions will remain a part of our strategic growth and we will be prudent when considering them, ensuring we focus on appropriate multiples paid and financial returns in their evaluation. Our fourth execution priority, unleashing our organization to win, powers the first three priorities. The strength of the Smucker culture has always been a unique differentiator in achieving growth and is a critical component of our future. With the impact of my new leadership team and through the additional organization changes implemented this past year, we are more lean, agile, and focused on delivering with excellence and winning in the marketplace. We're also increasing our focus on becoming a more inclusive and diverse company at every level of the organization. These four priorities are critical to ensuring we maintain our momentum and we're critical to our record fiscal 2021 results with full-year net sales increasing 3%. Net sales grew 5% when excluding the prior-year sales for divested businesses and foreign currency exchange. Fiscal '21 adjusted earnings per share was $9.12, an increase of 4%, exceeding our most recent guidance range of $8.70 to $8.90. Free cash flow was $1.26 billion, above our most recent expectations of $1.1 billion. Our strong financial performance accelerated elements of our capital deployment strategy to support increased shareholder value. We returned $1.1 billion of capital to shareholders this year in the form of dividends and share repurchases. We increased our dividend for the 19th consecutive year and through share repurchases, reduced our shares outstanding by approximately 5% on a full-year basis. And we repaid over $860 million of debt during the fiscal year, strengthening our balance sheet to provide flexibility for a balanced approach to reinvesting in the business and returning cash to shareholders. Turning to the fourth quarter, we delivered results ahead of our expectations while accelerating investments for future growth. Net sales declined 8% versus the prior year. Excluding the non-comparable net sales from divestitures and foreign exchange, net sales decreased 3% due to lapping the initial stock upsurge related to the COVID-19 pandemic. As we are lapping the COVID-19-related demand in the prior year, we believe evaluating results over the prior two-year period is more meaningful. Adjusting for divestitures, net sales grew at a two-year CAGR of 4%, demonstrating growth across all three of our U.S. retail segments. Fourth-quarter adjusted earnings per share declined 26%, primarily driven by the decreased sales, $40 million of incremental marketing investments, and higher costs, partially offset by higher pricing. Turning to our segment results. In pet food, we anticipated sales to be down due to lapping stock up purchasing in the prior year. Net sales, excluding sales for the divested Natural Balance business, decreased 6% and demonstrated growth on a two-year basis. While pet food consumption was not materially impacted by at-home versus away-from-home eating trends as in other categories, the pandemic did impact how consumers shop for their pets such as accelerated growth in e-commerce channels. Also, the total U.S. pet population grew by an estimated high-single-digit percentage this past year with new pet parents showing a willingness to spend more for their pets compared to historical trends. We expect top-line growth on a comparable basis for the pet business in fiscal '22, supported by higher pricing, category growth, continued marketing support, and innovation for our leading treats portfolio, and premium food offerings. Turning to our coffee business, net sales were comparable to the prior year despite lapping the COVID-19 stock up purchasing and demonstrated growth on a two-year basis. Consumer adoption of K-Cups continues to grow with 3 million incremental households purchasing a Keurig machine last year. In the last 52 weeks, retail sales of our brands grew 17%. This was over twice the category rate and we gained over a point of share. Our share gains further accelerated in more recent periods as all our brands continue to grow, including Folgers. Cafe Bustelo and Dunkin' are the two fastest-growing brands in the coffee category. Over the last 52 weeks, Cafe Bustelo retail sales grew 21% and Dunkin' grew 16%. The Dunkin' brand, representing $1 billion in all-channel retail sales dollars was a top share gainer in the coffee category growing nearly triple the total at-home coffee category rate in measured channels over the last 52 weeks. The Folgers brand gained 3 million new households at the height of the pandemic and has the highest repeat rate of any brand for new households gained during the pandemic. We will continue to build up this momentum with initiatives to reinvigorate the iconic brand rolling out in the second half of fiscal year '22. As new coffee habits formed during the pandemic, we anticipate retaining a substantial portion of these new consumers for the long term. In our consumer foods business, net sales decreased due to the Crisco divestiture and increased 1% on a comparable basis and reflected strong growth on a two-year basis. Smucker's Uncrustables frozen sandwiches continue to deliver exceptional growth with net sales and household penetration each increasing 16% in the quarter. For our combined U.S. retail and away-from-home segments, the Uncrustables brand delivered nearly $130 million of net sales this quarter, recording its 28th consecutive quarter of growth. The brand delivered over $400 million of net sales this year and is on track to exceed our $500 million target in fiscal year 2023. Across our retail businesses, we delivered strong financial results this year, while significantly increasing investments in our brands, strengthening our balance sheet, and returning cash to shareholders, all of which are key building blocks for supporting long-term growth and increasing shareholder value. I'll briefly touch on the current supply chain and cost environments. Our operations have run efficiently, and we have had no material disruptions to date. We continue to monitor global supply chain challenges specifically as it relates to the availability of transportation, labor, and certain materials. Broad-based inflation is impacting many of the commodities, packaging materials, and transportation channels that are important to our business. We are mitigating the impact through a combination of higher pricing inclusive of list price increases, reduced trade, and net revenue optimization strategies, as well as continued cost management. We have recently implemented net price increases across all business segments with most becoming effective during the month of July. Let me now provide additional details on our outlook for fiscal 2022. As the U.S. emerges from the pandemic, we believe elevated at-home consumption for our brands will continue into fiscal 2022. Our confidence is supported by the increased pet population, elevated work-from-home benefiting breakfast and lunch occasions, and consumers' investments in at-home brewing equipment. Lapping sales from divested businesses will have a material impact on year-over-year net sales growth in fiscal 2022. When excluding the non-comparable net sales, we anticipate top-line growth supported by higher net pricing, the continued momentum of our brands, and a significant recovery in our away-from-home business. Year-over-year earnings per share is expected to decline. The growth in comparable sales and benefits from cost savings programs are anticipated to be more than offset by the impact of higher costs and the timing of pricing actions, as well as the loss of earnings from divestitures. On a two-year basis, we expect growth for both comparable net sales, as well as adjusted earnings per share as we continue to demonstrate underlying growth for the business. Finally, as we emerged from the pandemic with a heightened focus on health and wellness, we remain dedicated to having a positive impact on our employees, our communities, and our planet. This includes supporting the quality of life for people and pets strengthening the communities we serve both locally and globally and ensuring a positive impact on our planet with a focus on sustainable and ethical sourcing. We look forward to sharing more details including the achievement of our 2020 environmental targets and information regarding our new ESG goals when we release our Corporate Impact Report this summer. In summary, I would like to reinforce three key points. First, we continue to deliver strong financial results, and our actions to deliver our priorities are leading to improvement in key metrics, including market share that position us well for the future. Second, we are reshaping our portfolio to increase our focus on faster growth opportunities within pet food, coffee, and snacking. And finally, we are sharpening our focus on cost management and becoming a more efficient and agile organization. We are exiting this pandemic a stronger company, and our actions taken over the previous year support consistent delivery of long-term growth and shareholder value. I'll begin by giving an overview of fourth-quarter results, which finished above our expectations, then I'll provide additional details on our financial outlook for fiscal 2022. Net sales decreased 8%. Excluding the impact of divestitures and foreign exchange, net sales decreased 3%. This was primarily driven by unfavorable volume mix due to lapping the prior-year stock-up during the beginning of the pandemic, most notably for pet food and our Canadian baking business. Higher net price realization was a 1 percentage point benefit, primarily driven by peanut butter and our pet business. Adjusted gross profit decreased $79 million or 10% from the prior year. This was mostly driven by unfavorable volume mix, with noncomparable impact to the domestic businesses and higher costs, partially offset by the higher net pricing. Adjusted operating income decreased $120 million, or 28%, reflecting the decreased gross profit and higher SG&A expenses. The increase in SG&A expense was primarily driven by increased marketing investments and incentive compensation, partially offset by reduced selling and distribution costs. Below operating income, interest expense decreased $3 million, and the adjusted effective income tax rate was 23.3% compared to 23.4% in the prior year. Factoring all this in, along with share repurchases that resulted in a weighted average shares outstanding of 108.9 million, fourth-quarter adjusted earnings per share was $1.89. I'll now turn to fourth-quarter segment results, beginning with U.S. retail pet foods. Net sales decreased 12% versus the prior year. Excluding the noncomparable net sales for the divested Natural Balance business, net sales decreased 6% versus the prior year. Net sales grew at a 2% CAGR on a two-year basis excluding the divestiture. Dog snacks continue to perform well, decreasing just 1% in the fourth quarter after growth of 12% in the prior year. Cat food decreased 4%, following an 18% growth in the prior year. Dog food net sales decreased 15%, reflecting anticipated declines versus the prior year. Pet food segment profit declined 32%, primarily reflecting lower volume mix, increased marketing investments, and increased freight and transportation costs, partially offset by higher net pricing. Turning to the coffee segment. Net sales were comparable to the prior year and increased 5% on a two-year CAGR basis. The Dunkin' and Cafe Bustelo brands grew 10% and 18%, respectively, offset by a 7% decline for the Folgers brand, which benefited the most from consumers stocking up on coffee in the prior year. For our K-Cup portfolio, net sales increased 14% and accounted for over 30% of the segment's net sales with growth across each brand in the portfolio. Coffee segment profit decreased 9%, primarily driven by increased marketing expense. In consumer foods, net sales decreased 13%. Excluding the prior-year noncomparable net sales for the divested Crisco business, net sales increased 1%. On a two-year CAGR basis, net sales, excluding the divestiture, grew at a 9% rate. The fourth-quarter comparable net sales increase relative to the prior year was driven by higher net pricing of 4%, primarily due to a list price increase for peanut butter in the second quarter, partially offset by unfavorable volume mix of 3%. Growth was led by the Smucker's Uncrustables frozen sandwiches, which grew 16%. Consumer foods segment profit decreased 29%, primarily reflecting the noncomparable profit from the divested Crisco business, higher costs, and increased marketing expense, partially offset by the higher net pricing. Lastly, in international and away-from-home, net sales declined 7%. Excluding the prior-year noncomparable net sales for the divested Crisco business. , net sales declined 5%. The away-from-home business increased 7% on a comparable net sales basis, primarily driven by increases in portion control products. International declines of 15% on a comparable net sales basis were primarily driven by declines in baking, partially offset by pet food and snacks. On a comparable two-year CGAR basis, net sales for the combined businesses declined at a rate of 2%. Overall, international and away-from-home segment profit decreased 30%, primarily driven by lower volume mix, partially offset by a net benefit of price and costs and favorable foreign currency exchange. Fourth-quarter free cash flow was $183 million, an increase in cash provided by operating activities was more than offset by a $31.6 million increase in capital expenditures. Capital expenditures for the fourth quarter were $108 million, with the increase over the prior year, primarily related to the capacity expansion for Uncrustables frozen sandwiches. On a full-year basis, free cash flow was $1.26 billion, with capital expenditures of $307 million, representing 3.8% of net sales. In the fourth quarter, repurchases of 1.5 million common shares settled for $174 million. Over the course of the fiscal year, we repurchased 5.8 million shares for $678 million, reducing our outstanding share count by approximately 5%. We finished the year with cash and cash equivalent balances of $334 million, compared to the prior year-end of $391 million. We paid down $84 million of debt during the quarter and $866 million for the full year, ending the year with a gross debt balance of $4.8 billion. Based on a trailing 12-month EBITDA of approximately $1.8 billion, our leverage ratio stands at 2.6 times. We anticipate maintaining a strong balance sheet and leverage ratio, enabling a balanced capital deployment model, which includes strategic reinvestment in the business through capital expenditures and acquisitions while returning cash to shareholders through increasing dividends and evaluating share repurchases over time. Let me now provide additional color on our outlook for fiscal 2022. The pandemic and related implications, along with cost inflation and volatility in supply chains, continue to cause uncertainty for the fiscal year 2022 outlook. Any manufacturing or supply chain disruption, as well as changes in consumer mobility and purchasing behavior, retailer inventory levels, and macroeconomic conditions could materially impact actual results. We continue to focus on managing the elements we can control, including taking the necessary steps to minimize the impact of cost inflation and any business disruption. As always, we will continue to plan for unforeseen volatility while ensuring we have contingency plans in place. This guidance reflects performance expectations based on the company's current understanding of the overall environment. Net sales are expected to decrease 2% to 3% compared to the prior year, including lapping of sales from the divested Crisco and Natural Balance businesses. On a comparable basis, net sales are expected to increase approximately 2% at the midpoint of the sales guidance range. This reflects benefits from higher pricing actions across multiple categories, primarily to recover increased commodity and input costs, along with continued double-digit sales growth for the Smucker's, Uncrustables brand, and the recovery in away-from-home channels, partially offset by a deceleration in at-home consumption trends. We anticipate full-year gross profit margin of 37% to 37.5%, which reflects an 85-basis-point decline at the midpoint versus the prior year. This factors in higher net pricing effective in the month of July, along with cost and productivity savings and a mixed benefit associated with the divestitures. This will be more than offset by higher costs experienced throughout the full year. These cost increases are driven by a high single-digit increase from commodities, ingredients, and packaging. SG&A expenses are projected to be favorable by approximately 4%, reflecting savings generated by cost management, and organizational restructuring programs, a reset of incentive compensation, and total marketing spend of 6% to 6.5% of net sales, which reflects a stepdown from fiscal year 2021, partially driven by programs that were pulled forward into the fourth quarter. We anticipate net interest expense of approximately $170 million and an adjusted effective income tax rate of approximately 24%, along with a full-year weighted average share count of 108.3 million. Taking all these factors into consideration, we anticipate full-year adjusted earnings per share to be in the range of $8.70 to $9.10. At the midpoint of our guidance range, year-over-year adjusted earnings per share is anticipated to decline 2%, mostly attributable to around a $0.20 net impact of divested earnings and the timing of benefits from shares repurchased. Approximately one-third of the share repurchase benefit was recognized in fiscal 2021. The adjusted earnings per share guidance further reflects benefits from the increase in comparable net sales, primarily due to pricing actions along with the company's cost management and organizational restructuring programs, which are expected to fully offset higher commodity ingredient, and packaging costs, and the timing of input cost recovery. Given the timing of cost increases and recovery through higher net pricing, as well as a shift in timing of marketing expenses, earnings are anticipated to decline in the first half of the fiscal year, most notably in the first quarter with an anticipated decrease of over 20%. We project free cash flow of approximately $900 million, with capital expenditures of $380 million for the year. The increase for capital expenditures primarily relates to capacity expansion for Smucker's Uncrustables. Other key assumptions affecting cash flow include depreciation expense of $230 million, amortization expense of $220 million, share-based compensation expense of $35 million, and restructuring costs of $25 million, which includes $15 million of noncash charges. On a two-year basis, our full-year guidance reflects net sales, excluding divestitures to grow at a 3% to 4% CAGR, and modest adjusted earnings-per-share growth at the midpoint of the guidance range. The two-year growth reflects the recovery of earnings related to the divested businesses through both organic growth and shares repurchased and accounts for the lapping of the unprecedented stock-up purchasing during the onset of the COVID-19 pandemic. In closing, I am incredibly proud of our employees who continue to deliver exceptional financial results. Because of their dedication, our business has strong momentum and we've positioned ourselves better than ever to serve the needs of consumers and their pets. With continued financial discipline, we are committed to delivering sustainable and consistent, long-term value for our shareholders. Operator, please queue up the first question.

compname announces quarterly adj earnings per share of $1.89. qtrly net sales decreased $171.8 million, or 8 percent. qtrly adjusted earnings per share was $1.89. expected net sales decrease of 2 to 3 percent in 2022. sees fy 2022 net sales change versus prior year down 3% - 2%. sees adjusted earnings per share $8.70 to $9.10 in 2022. sees fy 2022 adjusted earnings per share $8.70 - $9.10. sees free cash flow $900 million in 2022. qtrly u.s. retail consumer foods sales decreased $60.7 million, or 13 percent. qtrly u.s. retail pet foods sales decreased $93.2 million, or 12 percent.

I will be presenting today with Eric Thornburg, Chairman of the Board, President and Chief Executive Officer. For those who would like to follow along, slides accompanying our remarks are available on our website at www. These statements are based on estimates and assumptions made by the company in light of its experience, historical trends, current conditions and expected future developments, as well as other factors that the company believes are appropriate under the circumstances. I'm Eric Thornburg and it is my honor to serve as Chairman, President and CEO of SJW Group. Coast to coast, we are seeing extreme weather play out across our service area this summer, underscoring the importance of our environment and water resources. In California, we're seeing one of the driest summers in recent memory. State and regional water supply agencies are responding with urgent calls for conservation. It's an entirely different story across the country in Connecticut. After initial concerns of drought in Connecticut just a few months ago, we have since seen nearly four times the normal amount of precipitation just this month, more than 19 inches of rain has fallen in one of our communities. People there have experienced flash floods, water log basements and unusually cool temperatures. Christmas Day 2020 was warmer than July 3, 2021 and all of this on top of the severe deep freeze event we experienced earlier this year in our Texas operation. Rate case cycles and regulatory environments are important to our business, but there is nothing more fundamental than the water cycle and the natural environment. Water utilities have long understood the importance of protecting water resources and the environment. At SJW Group, our vision calls for us to view our business initiatives through a lens that includes the impact of people, communities and the environment. Our commitment to be a leader across the environmental, social and governance, ESG landscape, is built on our long-standing sense of purpose and our determination to be a force for good in the communities we serve and beyond. We have employee teams working together across our organization driving this vision forward. They're working with outside experts to create a comprehensive greenhouse gas inventory for our company, so we can establish clear and measurable metrics and quantify our success going forward. Enterprise environmental, health and safety programs and metrics are also being evaluated with the intent of setting national goals and adopting common compliance and reporting strategies. As we further our efforts to meet supplier diversity goals, we're also adopting ESG vendor compliance strategies to promote aligned with our company's ESG policies. We are also forming innovative partnerships with community organizations in San Jose. We belong to a collaborative that created a plan to protect nearly 1,000 acres of forests in the Santa Cruz Mountains. The collaborative was awarded a $7.5 million CAL FIRE Grant to fund a plan, which is designed to protect water sources, establish fire resilient ecosystems and promote the long-term sequestration of carbon. In Connecticut, we're in discussions with six communities about the preservation of more than 100 acres of land as protected open space. Additionally, we're also evaluating and identifying opportunities to partner with local communities and land conservation organizations to establish passive recreation programs on company-owned land. Our commitment to the environment and communities has never been stronger. Water resources in California continue to be impacted by the lack of precipitation. On June 9, Valley Water, our wholesale water supplier declared a water shortage emergency and asked its retailers including San Jose Water to reduce consumption by 15% compared to 2019 usage. On June 18, we asked the California Public Utilities Commission or CPUC to activate Stage 3 of our water shortage contingency plan, which calls for 15% mandatory conservation. The approval for this filing is pending the completion of customer noticing. Our current conservation program is focused on outdoor water use, which typically accounts for half of our residential customers consumption. In a related filing, we also requested the authorization to reestablish memorandum accounts to provide regulatory treatment to respond to the drought emergency. Last week, the CPUC approved our request to establish the Water Conservation Memorandum Account, WCMA to track the revenue impact of authorized versus actual water consumption while we have requested customers to conserve. A Water Conservation Expense Memorandum Account or WCEMA was also authorized to track the incremental expenses required to implement our mandatory water conservation plan. Importantly, both memorandum accounts allow for potential future recovery of the revenue and expense impacts. San Jose Water has actively promoted water conservation for decades and continues to encourage our customers to conserve and use water wisely at all times. From complementary customer water efficiency visits, water wise gardening information, conservation tips, as well as rebates and incentives, we offer a comprehensive program to assist customers with their efforts. We're also strongly committed to doing what we can to reduce water loss on our side through timely leak repairs and the deployment of innovative technology such as acoustic sensors and our zero waste discharge flushing truck. While we hope for improving water supply conditions in 2022, we are evaluating ways to further encourage mandatory water conservation, which could include surcharges should the water shortage emergency persist. In Connecticut, we are pleased that the Public Utilities Regulatory Authority or PURA approved our request for conservation rate design. Connecticut Water will now be able to encourage conservation by charging a higher tariffs for water when residential customers use more than an average of 200 gallons per day. Consumption above that amount is typically related to outdoor use. PURA also approved our request for a water rate assistance program or REP for income eligible customers. It still provides for a 15% reduction on the water bill for qualifying customers. We believe that this -- we believe this to be the first program of its kind in Connecticut and is a great addition to the financial assistance tools already available to our customers. We are working locally and within the industry to engage with administering agencies on the low income household water assistance program. More than $1.1 billion federal will be available to states to pay water and wastewater bills on behalf of low-income residents. We are closely monitoring these efforts and are working to make sure that our customers in all four states can benefit from the program. After Jim's remarks, I will address other regulatory and business matters. Our quarterly operating results benefited from increases in customer usage in California and Texas and authorized rate increases in each of our four operating utilities. These increases were partially offset by a decrease in the availability of surface water supplies in our California service area due to the continued dry weather conditions, Eric mentioned. In the second quarter, we also recognized a purchase price holdback from the 2017 sale of our Texas Water Alliance or TWA subsidiary to the Guadalupe Blanco River Authority or GBRA. Second quarter revenue was $152 million, a $5 million or 3.4% increase over reported second quarter 2020 revenue of $147.2 million. Net income for the second quarter was $20.8 million or $0.69 per diluted share. This compares with $19.7 million or $0.69 per diluted share for the second quarter of 2020. Diluted earnings per share for the quarter is primarily driven by cumulative rate increases of $0.14 per share, $0.11 per share due to release of the $3 million TWA purchase price holdback and increased usage of $0.05 per share. These increases were partially offset by an increase in administrative and general expenses of $0.15 per share, a decrease in California surface water production of $0.07 per share and increased production costs of $0.07 per share due to higher customer usage. Turning to our comparative analysis for the quarter, the $5 million increase in revenue was primarily due to $3.6 million in cumulative rate increases, 1.3 million in increased customer usage and $0.7 million from new customers. Water production expense increased $2.8 million compared to the second quarter of 2020. The expense increase includes $1.9 million for the purchase of additional water supply necessary to replace the low volume of California surface water and $1.8 million due to higher customer usage. These increases were partially offset by a $700,000 decrease in lower average unit water production costs. As stated in our first quarter earnings call, in 2021, we anticipated producing 2.5 billion gallons of surface water from our California Watershed, which is representative of our 10-year average surface water production and consistent with the volume authorized in our 2019 California general rate case. For the first half of 2021, we experienced minimal rainfall and produced less than 260 million gallons of surface water. Absent additional rainfall, we don't anticipate any additional surface water production in 2021. The incremental cost to supplement this shortfall was approximately $4.6 million per billion gallons. This replacement cost estimate includes the 9.1% July 1 rate increase implemented by Valley Water. Other operating expenses increased $5.6 million during the second quarter, primarily due to a $3.6 million increase in general and administrative expenses, a $1.3 million increase in higher maintenance expenses and depreciation expense of $800,000. The increase in administrative and general expenses was primarily due to one-time expenses related to our general rate case and cost of capital, regulatory proceedings, compensation and accounts receivable activity offset by lower accounting fees. Other income includes the $3 million purchase price holdback received from CBRE in the 2021 second quarter upon satisfaction of remaining conditions on the Company's 2017 sale of TWA. No similar transaction occurred in 2020. The effective income tax rate for the second quarter was 14% compared to 18% for the second quarter of 2020. The effective tax rate decrease was primarily due to flow through tax benefits. Turning to the first six months of 2021, revenue was $267 million, a 2% increase over the same period last year. Net income for the first six months of 2021 was $23.4 million or $0.79 per diluted share, compared to $22.1 million or $0.07 per diluted share during the same period a year ago. Diluted earnings per share for the year was primarily due to rate increases that contributed $0.23 per share, the TWA purchase price holdback that contributed $0.11 per share, non-regulated income of $0.06 per share and tax benefits that contributed $0.05 per share. These increases were partially offset by an increase in general and administrative expenses of $0.11 per share, a decrease in California surface water production of $0.10 per share, an increased depreciation expense of $0.10 per share and a decreased production cost of $0.06 per share due to lower customer usage. Our 2021 year-to-date increase in revenue was primarily due to $6.4 million in cumulative rate increases and $1.1 million from new customers. This increase was partially offset by a decrease in customer usage of $1.5 million, winter storm customer credits in our Texas service area of $800,000 and a decrease in the recognition of certain regulatory mechanisms in Connecticut and Maine of $800,000. Water production expenses increased $2.6 million in the first half of 2021. The increase was primarily due to $2.7 million from decreased surface water in California and $1.7 million in higher customer usage. These increases were partially offset by a $1.5 million decrease in lower average per unit water supply costs. Other operating expenses increased $7.2 million in the first half of 2021, primarily due to a $2.8 million increase in depreciation expense, $2.8 million in higher general and administrative expenses and $1.4 million in higher maintenance expenses. First half 2021 other income and expense included the TWA holdback, which I previously discussed. Turning to our capital expenditure program, we added $53.4 million in company-funded utility plant in the second quarter of 2021, bringing total funded additions for the first half of the year to a $100.1 million. We are on track to add approximately $239 million to utility plant in 2021, consistent with our 2021 construction budget. Our first half 2021 cash flows from operation increased approximately $34.8 million over the same period in 2020. The increase was primarily due to an increase in collections from accounts receivable and accrued unbilled utility revenue of $15.3 million, payments of amounts previously invoiced and accrued of $7.3 million and an increase due to net changes in balancing and memorandum accounts of $5.7 million. In addition, we made an upfront payment of $5 million in the prior year in connection with our city of Cupertino service concession agreement that did not recur in the current year and general working capital and net income adjusted for non-cash items increased $1.5 million. At the end of the quarter, we had $121.5 million available on our bank lines of credit for short-term financing of utility plant additions and operating activities. The average borrowing rate on the line of credit advances during the first six months of 2021 was approximately 1.39%. SJW Group continues to execute on our core growth strategy of investing in high-quality water systems to provide safe and reliable water service to customers and communities, and earning a fair return on those investments. As Jim just mentioned, we've already invested approximately 42% of our planned 2021 capital spending through the end of the second quarter. Our cost of capital application was filed in California in May as required. We're seeking a modest revenue increase of $6.4 million. The application also includes an increase in the return on equity from our currently authorized 8.9% to 10.3%, an increase in the equity portion of our capital structure and the proposed decrease in our cost of debt. The CPUC see continues to process our 2022 to 2024 general rate case application that requests a $435 million capital program and $88 million increase in revenues over three years. A final decision is now expected in the second quarter of 2022. We plan to file for interim rates that would be in place on January 1, 2022 until the final decision on the GRC is issued. In June, San Jose Water and the Public Advocate's Office filed a joint settlement agreement with the CPUC on our application to deploy advanced metering infrastructure. If approved by the CPUC, we anticipate a capital program of approximately $100 million spread over the next four years. A decision is expected in the fourth quarter. The California Commission also authorized a revenue increase of $17.3 million effective on July 1, 2021 to recover our wholesaler's water rate increase of 9.1%. About 48 hours ago, the Connecticut PURA approved an increase of $5.2 million in annual revenues, which is an increase of about 5.1%. Based on the tone and tenor of the proceedings and the recommendations of the Office of Consumer Counsel, we had anticipated a decision more in line with the typical regulatory outcomes in Connecticut. We're still reviewing and evaluating the decision. As part of that review, we are assessing options for further consideration of a few tax-related items in the case. In addition, we will pursue a regulatory strategy for timely recovery of additional Water Infrastructure and Conservation Adjustment or WICA eligible plant that was not recovered in this case. The $40 million in capital investments that were removed from this case were done so on the basis of timing, not prudence. Over half of the capital projects not included in rates, as part of this decision, are WICA eligible projects scheduled to be completed before year-end 2021. The resetting of the WICA surcharge to zero will allow us to recover these investments in upcoming filings. Our next WICA filing is planned now for October 2021 and is expected to include approximately $18 million of completed projects. Based on that timing, we would expect the approved surcharge to be effective in January 2022. The statute allows for filings every six months, up to a 5% increase in the annual surcharge with a 10% cap between general rate cases. Through the Water Revenue Adjustment Mechanism in Connecticut or WRAM, we are confident that we will realize the full revenues authorized in this case and subsequent WICA surcharges. There are other aspects of the decision that were favorable and significant such as the authorization of the capital structure, consisting of 53% equity. In addition, over a decade of capital investments were approved, including a number of important environmental projects such as a significant solar installation and the deployment of acoustic leak detection sensors across select distribution systems. The commission also approved our conservation rates, affirmed some of the benefits of the merger, commended us for proposing our Water Rate Assistance Program and was complementary of our operations and service. Taking into account the current decision, our forecasted earnings remain within our guidance of $1.85 to $2.05 per share, but are trending toward the lower half of the range. There has been significant progress on both the construction and the regulatory treatment for Maine Water's $60 million water treatment project. The new facility along the Saco River will replace its 1884 vintage drinking water treatment plant. On June 23, Maine Water received approval from the Maine Public Utilities Commission for its innovative rate smoothing mechanism for the Biddeford & Saco Division that was effective on July 1. The RSM provides for a graduated transition to higher rates, helping to mitigate customer rate shock for this significant generational investment. Customers will pay a surcharge in year one with those payments funding a regulatory liability account, which will later be used to provide credits to customer bills to mitigate the impacts and the full rate increase when the plant is completed and in service in 2022. Consistent with the original filing in March 2021, the team is now updating its general rate case filing to recover in base rates all investment and costs associated with the new facility with new rates expected to start in July 2022. We continue to see robust growth at SJWTX, our Texas Water and Wastewater Utility. On June 28, an application was filed with the Texas Public Utilities Commission to acquire the Kendall West and Bandera East utilities, which are under common ownership. The utilities provide water service to approximately 4,000 people through 1600 service connections in Bandera and Medina counties. If approved by the Texas Commission, this would be the 14th acquisition for SJWTX since 2006. Through organic growth and acquisitions, we have more than tripled the number of our service connections to over 21,000. With the addition of Kendall West and Bandera East, SJWTX would serve three of the five fastest growing counties in the United States, Comal, Hays and Kendall counties. Earlier this year, SJWTX completed the Clearwater Estates acquisition, which was the first fair market value acquisition in Texas. With a diverse portfolio of water supplies and continued additions to customer base through organic growth and acquisitions, we remain optimistic about the prospects for SJWTX and it's steadily increasing contributions to consolidated earnings. Our people are resilient and we have confidence that their commitment to serve will overcome current and future challenges. Debra joined the SJW Group Board in 2016 and recently announced her retirement from Board's service. I will miss her counsel and contribution to the important work of delivering life-sustaining water service to our customers and communities.

compname says q2 earnings per share $0.69. reaffirms fy earnings per share view $1.85 to $2.05. diluted earnings per share were $0.69 for quarters ended june 30, 2021.

I will be presenting today with Eric Thornburg, Chairman of the Board, President and Chief Executive Officer. For those who would like to follow along, slides accompanying our remarks are available on our website at www. These statements are based on estimates and assumptions made by the Company in light of its experience, historical trends, current conditions and expected future developments as well as other factors that the Company believes are appropriate under the circumstances. As we reflect on 2020, I'd like to begin by recognizing our nation's essential workers who are bravely serving us on the front lines during this extraordinary time. From the public safety employees consisting of police, fire, emergency response, and healthcare professionals to our grocery store and other critical supply chain workers, they all deserve our recognition and appreciation for their dedicated service. Our appreciation and recognition also extends to our 700 plus employees and their utility industry peers across the nation, who we consider to be essential as they continue to deliver safe and reliable service. Our dedicated and passionate water professionals met the challenges of 2020 head on to provide a reliable supply of safe drinking water to more than 1.6 million people in our local service communities in California, Connecticut, Texas and Maine. In my 38 years in this profession, it never mattered more. So while COVID-19 dominated 2020, it did not dominate our people. I'm especially proud of our teams and their commitment to protect the health of their customers, communities and coworkers. They knew that delivering safe, clean drinking water to their customers and communities was essential to public health. They developed protocols and procedures that protected their coworkers, so they can safely carry out their essential work. And they did it by collaborating across our expanded national footprint to support each other and build on our strengths for the good of the entire organization. And it also reminded us that human life is precious and fragile and that there is no higher calling than to serve others. We also responded to the needs of customers and communities who were financially impacted by COVID-19. Since the beginning of the pandemic, we've worked with customers throughout -- through our assistance programs to help them keep their accounts current and suspended shut offs for non-payment, consistent with each state's requirements. And we increased our donations to local service organizations in 2020 to help them meet the basic needs of people in the community. It is clear that our transformative combination with Connecticut Water Service, Incorporated in 2019 made for a stronger SJW Group in 2020, which benefited shareholders, customers and employees. Our 2020 corporate sustainability report, coast to coast, documents our commitment to environmental, social and governance matters. As that report was telling our story, the Company was recognized with prime status by ISS ESG. Prime status is awarded to companies with an ESG performance above the sector-specific prime threshold where we were tied for the top ranking among US utilities. We saw significant improvements in our environmental and social scores and ranked second among our utility industry peers for our combined environmental and social quality scores. Our governance quality score was already at the highest level and placed us among the top within our industry. We're especially proud of the human rights policy adopted by our Board in the fourth quarter. The policy affirms our conviction, the human rights are fundamental rights, freedoms and standards of treatment to which all people are entitled. It also reflects our values and commitment to diversity, equity and inclusion. A team of employees with the full support of senior leaders and the Board serve on our national diversity, equity and inclusion council, DEI, to support and advocate for DEI initiatives. We're also determined to be a force for good in the communities where we live, work and serve. For example, in 2020, San Jose Water was responsible for $28.8 million of diverse supplier spend, representing 30.1% of our addressable spend there. And following Connecticut Water's adoption of a supplier diversity plan in early 2020, both Texas and Maine approved formal plans later in the year that are being implemented in 2021. We are fully committed to our diverse supplier program, and we'll continue to share our progress in the years to come. Other highlights of 2020 include investing more than $199 million in our water and wastewater systems across our multistate footprint, achieving world-class customer satisfaction on a composite basis across the Company and another successful year of meeting drinking water and environmental regulations, delivering on our commitment to public health and environmental stewardship. After Jim's remarks, I will address regulatory, water supply and other business matters. Our 2020 operating results reflect our first full year of combined activity with CTWS. One key attribute of our merger was the diversification we achieved by expanding our geographic footprint into New England. The strength and importance of our diversification strategy were tested almost immediately by the drier than normal winter we experienced in our Northern California service area, severe weather events in our Texas and New England service areas and COVID-19 and its impact on our customers, operations and construction activities across the United States. In each case, the impacts of these events on SJW Group's combined operating results were diminished due to our geographic diversification in the case of weather events and diversification of our regulatory and operating platforms in the case of COVID-19. Diversification, coupled with our strong local operations, supported by our national framework enabled us to safely deliver water service to our customers and communities, protect our employees and deliver solid results for our shareholders. Fourth quarter revenue was $135.7 million, a $9.9 million increase over reported fourth quarter 2019 revenue. Net income for the quarter was $13.3 million or $0.46 per diluted share. This compares with a net loss of $5.5 million or $0.19 per diluted share for the fourth quarter of 2019. Diluted earnings per share for the quarter reflects lower CTWS merger expenses of $0.36 per share, higher customer usage of $0.22 per share and lower administrative and general expenses of $0.19 per share due to lower integration costs. These increases were partially offset by an increase in production costs due to higher usage of $0.10 per share and a decrease of $0.05 per share due to lower local surface water availability in Northern California. Turning to our comparative analysis for the quarter, our $9.9 million revenue increase was primarily due to increased customer usage of $6 million and $1.4 million in cumulative rate increases. In addition, we recorded $2.8 million in customer rate credits in the fourth quarter of 2019 as a result of regulatory commitments we made in connection with the merger. No such rate credits reoccurred in 2020. Water production expenses increased $3.6 million compared to the fourth quarter of 2019. The increase included $2.6 million in higher customer usage and $1.5 million for the purchase of additional water supply necessary to supplement California surface water. Other operating expenses decreased $12 million during the quarter, primarily due to lower merger-related expenses of $9.7 million and lower general and administrative expenses of $5.1 million due to lower merger-related integration costs. These decreases were partially offset by $2.5 million in higher depreciation expense. The effective income tax rate for the fourth quarter was a negative 7% compared to 6% for the fourth quarter of 2019. The effective tax rate decrease was primarily due to the capitalization of non-deductible merger expenses, which resulted in a decrease of tax benefits in 2019. No similar tax benefit reduction occurred in 2020. Turning to our annual results, 2020 revenue was $564.5 million, a 34% increase over the same period last year. Net income in 2020 was $61.5 million or $2.14 per diluted share compared to $23.4 million or $0.82 per diluted share during the same period in 2019. The change in diluted earnings per share for the year was due to many of the same factors noted for the quarter. CTWS customer usage contributed $2.83 per share and customer usage from our other operations increased $0.59 per share. Due to the timing of when the merger transaction closed in 2019, we only recorded $0.01 per share of earnings from CTWS in 2019. As such, essentially all of CTWS 2020 customer usage is reflected as an increase as compared to the prior year. In addition, 2019 non-recurring merger costs contributed $0.48 per share and the WCMA write-off in 2019 contributed $0.29 per share. These increases were partially offset by increased production costs of $1.04 per share due to higher usage, a net increase in interest on long-term debt of $0.86 per share due primarily to merger-related debt, and 2020 note issuances and a decrease in local surface water availability in Northern California of $0.58 per share. Our 2020 increase in revenue was primarily due to $111.2 million in increased customer usage, $12.2 million in cumulative rate increases and $2.7 million from new customers. These increases were primarily the result of the addition of CTWS and higher usage due primarily to drier weather in our service areas. Water production expenses increased $50 million in 2020. The increase was primarily due to $33.9 million in higher customer water usage from the addition of CTWS and drier weather, and a $19 million increase due to lower surface water supplies. This increase was partially offset by $3.4 million of increase in California cost recovery balancing and memorandum accountants. Other operating expenses increased $33.9 million in 2020, primarily due to a $23.7 million increase in depreciation expense, $13.4 million in higher general and administrative expenses and $10.8 million in higher property and other non-income taxes. The increases were primarily a result of the inclusion of CTWS operating activities. In addition, in 2019, we incurred $15.8 million in merger expenses related to the merger transaction. No similar expenses were incurred in 2020. Other income and expense for the year included $13 million of new interest on SJW Group's $510 million senior notes, which were issued in October of 2019 and a $50 million senior note issued by SJW Group in August of 2020, as well as $8 million of interest expense on CTWS financings. Other expense and income in 2019 included $6.5 million of interest income earned on the proceeds of the Company's December 2018 equity offering. No similar income was earned in 2020. Turning to our capital expenditure program, we added approximately $65 million in Company-funded utility plant in the fourth quarter of 2020, bringing total Company-funded additions to $199.3 million. Our 2020 cash flows from operations decreased approximately $25.9 million over the same period in 2019. The decrease was primarily due to the authorized collection of $45.3 million of balancing and memorandum accounts in 2019, a decrease in collections of previously billed and accrued receivables of $15 million, a decrease in other non-current assets and liabilities of $12.4 million and a $50 million upfront payment we made to the city of Cupertino in connection with our service concession agreement. These decreases were partially offset by a $51.8 million increase in net income adjusted for non-cash items. We continue to monitor customer payment activity at each of our four operating utilities. And specifically, the impact COVID-19 is having on our customers' ability to remain current with their accounts. In our Northern California service area, where we have seen the largest increase in past due accounts, the California Public Utilities Commission has authorized water utilities to activate their catastrophic emergency memorandum account or their SEMA. The account track savings and costs from COVID-19 related activities as well as uncollectible account balances beyond the authorized bad debt in our most recent general rate case. SJWC has determined that future recovery of the account is probable and recognized a regulatory asset of $2.3 million in the SEMA-related to COVID-19 for the year ended December 31, 2020. At the end of 2020, we had $84.9 million available on our bank lines of credit for short-term financing of utility plant additions and operating activities. The average borrowing rate on line of credit advances during 2020 was approximately 1.78%. SJW Group continues to deliver on our core growth strategy of investing in high-quality water systems to provide safe and reliable water service to customers and communities and earning a fair return on those investments. In the last decade alone, more than $1 billion has been invested in the local water systems of the communities that we serve. It's well documented that our nation's water and wastewater systems are in need of significant investments. Utility regulators have historically recognized this need and have enabled regulated water utilities to make such investments. In 2021, SJW Group's subsidiaries plan to invest $239 million in infrastructure improvements to serve our customers in California, Connecticut, Maine and Texas. Over $1 billion is planned across the organization over the next five years. Accordingly, in January, both San Jose Water and Connecticut Water filed general rate cases. San Jose Water's GRC application proposes a $435 million capital program for the years 2021 through 2023, supported by our award-winning enterprise asset management plan. The process is expected to take about 12 months, and new rates are anticipated in January 2022. California employs a future test year, and thus, the level of capital spend is authorized during each general rate case cycle. Connecticut and Maine employ a historical test year, where capital investments and expenses are recovered after they have been incurred and subsequent general rate case filings. Connecticut Water's GRC is the first it has filed since 2010. A primary driver of the case is the $266 million in infrastructure investments that have been completed and are providing a benefit to customers but are not yet covered in rates. The Connecticut Public Utilities Regulatory Authority, PURA is expected to issue a decision in Q3. Earlier this year, PURA approved a 1.1% increase in infrastructure surcharges through the water infrastructure and conservation adjustment program, or WICA, this request covers $8.7 million in qualified infrastructure investments with incremental annual revenue of about $1 million. It will become effective on April 1, 2021. Maine Water received approval in December 2020 for infrastructure surcharge increases in five divisions for eligible projects through the water infrastructure surcharge program, or WISC. The increases were effective on January 1, recognizing $3.5 million in critical infrastructure investments and increasing revenues by about $300,000. These various filings include proposed capital investments that, over the long term, benefit customers, communities and shareholders as they enhance SJW's ability to deliver safe, high quality, and reliable water service while increasing rate base, the earnings engine for the Company. In January 2021, San Jose Water, along with the three other Class A water utilities, requested a one-year deferment on their cost of capital filings, which would otherwise be due on May 1 of this year. Postponing the filing for one more year would alleviate administrative processing costs on the utilities as well as the commission staff and provide relief for both commission and utility resources, already strained by numerous other proceedings and COVID-19. We will let you know if the commission approves this request. Turning to water supplies in California, we are seeing less precipitation than normal, both locally as well as in the Sierra Nevada Snowpack, California's largest reservoir. The rainy season typically ends in late March, and we will have a complete picture of our supply status when we report Q1 earnings. At that time, we also plan to issue 2021 guidance. Difficult situation in Texas. The combination of what has been described as a once in a century cold spell, coupled with an ice storm, a snowstorm, and rolling blackouts across the state has resulted in a real crisis affecting millions of people. Our operation located in the fast-growing region in between Austin and San Antonio, serves 20,000 customer connections. Like our utility peers, we've suffered significant operating challenges during the crisis, owing to energy disruptions, broken water mains and roads that have remained nearly impossible since Sunday. We are focused on restoring normal service to our customers as rapidly as possible while protecting the safety of our employees. If we're able to do that before other water utilities in the region, we will do our best to come to their aid as well. Looking ahead, I remain optimistic about SJW Group's future success. COVID-19 and our shared commitment to serving customers, communities and each other has brought our four companies together in a way that we would never have imagined a year ago. Our geographic workforce and regulatory diversity has strengthened our Company and positioned us well for 2021 and beyond. To achieve our goals, we are working diligently to support the growth of our Texas Water Utility, which has more than tripled in size through organic growth and acquisitions since 2006, increased our capital investments to deliver safe and reliable service to our local communities and grow the rate base for all of our operating entities and continue to seek acquisition opportunities that create value for our stakeholders. The prudent management of our business and financial resources continues to be fundamental to our growth and ability to return capital to shareholders, demonstrating the Company's strong commitment to our shareholders in January 2021, the Board authorized a 6.3% increase in SJW Group's 2021 dividend to $1.36 per share as compared to the total dividends paid in 2020. We're proud to have continuously paid a dividend for over 77 years and to have increased that annual dividend in each of the last 53 years, delivering value to our shareholders. We look forward to working with commissioner Houck and her colleagues and their staff to address the many water-related issues facing California's regulated utilities.

compname announces q4 earnings per share $0.46. q4 earnings per share $0.46. q4 revenue $135.7 million versus $125.8 million.

These results demonstrate the successful execution of our strategic initiatives and progress in continuing to evolve Tanger to drive improved profitability and shareholder value. We have seen traffic and sales return to pre-pandemic levels as our open-air centers offer an excellent value proposition for both retailers and the shoppers. Sandeep is currently the CEO at WeWork and previously was CEO of Brookfield Properties retail group and of GGP. We are privileged to benefit from his experience and wisdom and look forward to his ongoing counsel and guidance. Our second quarter results demonstrate continued progress in the leasing, operating and marketing of our open-air retail centers. Tenant sales and domestic traffic are now outpacing pre-pandemic levels. We've achieved a 130 basis point sequential increase in occupancy and a meaningful rebound in same-center NOI. We are curating a compelling mix of brands and uses, creating a sense of place for experiential outings, connecting with shoppers in more personalized ways and monetizing the non-store elements of our centers. Same-center NOI in the second quarter was up 88% compared to the second quarter of 2020 and represents 93% of the same period in 2019. For the second quarter, traffic to our domestic centers was above the same period of 2019. This sustained rebound in traffic levels clearly reflects the attraction of our open-air shopping centers, their dominant market location and the value proposition that we offer to both our retailer partners and shoppers. And in sales, have followed a similar trajectory. Average tenant sales productivity grew to $424 per square foot for the trailing 12 months of 7.3% from $395 per square foot with the comparable 2019 period. On a same-center basis, average tenant sales increased 5.5%. Categories that are performing particularly well include athleisure, youth-oriented brands, jewelry, accessories, beauty and home. Consolidated portfolio occupancy at quarter end was 93%, a 130 basis point increase from the end of the first quarter. We have recaptured 80,000 square feet of space due to bankruptcies and retailer restructurings through the end of the second quarter and shortly after we captured an additional 55,000 square feet, which was expected and represents negotiated early terminations for our legacy outlet brands where we collected lease termination fees. When we were unable to achieve desired rents, our strategic approach to leasing included shortening term to enable us to reprice or repopulate our real estate sooner and preserving variable rent upside by reducing breakpoints and increasing variable rent pay rates. Some deals that were completed during the height of COVID uncertainty ultimately produced total rents that exceeded the prior contractual fixed rents. In these cases, our rent spreads don't fully capture variable rent contributions as spreads measure the change in base rent and common area charges only. Leasing activity continues to accelerate with over 300 new leases and renewals totaling 1.6 million square feet of leasing that commenced during the last 12 months. As of the ended the quarter, renewals executed or in process represented 54% of the space scheduled to expire during the year. This pace reflects our strategy to hold on some of our renewal leasing activity, while the market continues to rebound and rental rates improve. This has proven sound as our sales and traffic, continue to build. We continue to gain ground on our lease spreads, which represents sequential improvement from those reported as of the end of the first quarter. Permanent leasing activity is continuing to build and we continue to pursue top-up leases as a near-term strategy. These transactions contribute to occupancy, higher cash flow, help maintain the variety and vibrancy of our centers and provide us an opportunity to increase the value of our real estate as market conditions continue to improve. The core tenancy of our portfolio remains apparel and footwear. However, we are continuing to realize the tremendous appeal our centers offer to new categories and uses. The addition of new food concepts such as sit-down restaurants, iconic cookie and cupcake brands, local micro breweries and upscale gourmet grocers have added to our place making, experiential activation and entertaining uses which have helped achieve our goal of driving shopper visits, frequency, dwell time and ultimately bigger baskets. Welcoming these new uses to Tanger's provided the opportunity for our retailer partners to introduce their brands and concepts to a whole new shopper base. Additionally, as part of our ESG strategy, this year we launched our small business initiative, aimed at supporting up and coming retailers in our local communities. Through this program, we discovered compelling new retailers and brands, which have enhanced our tenant mix and provide us access to new shoppers. We are focused on growing our non-store revenue streams, which are delivering promising results. These initiatives include creating onsite paid sponsorship and media opportunities where brands can promote their business on center, but outside the four walls of their store. This includes marketing opportunities on bright walls, digital directories and common area activation. In addition to providing more on-center branding, these programs and activations create fun ways to engage our shoppers during their visits. This revenue is captured in the other revenues line, which year-to-date is up 88% from last year and 26% over 2019. As we continue to monetize our real estate and create additional revenue streams, we've stood up a peripheral land team to take advantage of our existing portfolio about parcels and ancillary land. We presently have peripheral land inventory at over two-thirds of our centers and we'll opportunistically acquire additional parcels and leasing demand for these property types increase. As an example, we have recently acquired an adjacent parcel to our Glendale, Arizona shopping center to expand our footprint at that center and provide more F&B and entertainment uses, as well as additional PayPort [Phonetic] event parking. We continue to enhance and expand our digital initiatives as we execute our strategy to meet our customer where they are. To further develop seamless customer experiences that connect our digital and physical space, we are expanding our online pre-shop capabilities where customers can search and feed products that are available in store in our centers. Through our virtual shopper program, customers can shop remotely and either pick up in-store or have merchandise shipped directly to them. We also continue to grow our Tanger flash pop-up sales and live [Phonetic] sales through our website, app and social channels, which we hosted participating retailers as we innovate discovered ways to reach customers. Through all of our digital channels, we are providing more personalized and relevant content and this quarter we have introduced our Tanger Fashion Director who shops our brands and retailers, curates looks and post them on our social media channels. This initiative is aimed at our loyal Tanger insiders and Tanger Club members who shop our centers with greater frequency and is designed to reach new and emerging shoppers to the brand. By providing more enriched in visual content for the center, our goal is to drive higher frequency of shopper visits and more engagement with our virtual shops. These digital touchpoints complement our on-center experience and help to attract new customers, particularly in younger demographics. In summary, we continue to execute our strategic plan and focus on our core business. We are delivering new leasing and actively pursuing new uses, new brands and new categories with a goal of increasing center occupancy. We continue to grow and build our new revenue streams such as paid media, sponsorship and peripheral land and we are innovating new ways to reach our customer to drive center visits. We are seeing our traffic, leasing and business development results improving rapidly and we are positioned to use this momentum to increase the value of our real estate, drive cash flow and deliver long-term growth. We delivered strong second quarter results showing continued positive momentum. Second quarter core FFO available to common shareholders was $0.43 per share compared to $0.10 per share in the second quarter of 2020. Core FFO for the second quarter of 2021 includes $0.02 per share dilution from the shares issued to date and excludes a charge of $14 million or $0.13 per share for the early extinguishment of debt since we redeemed $150 million of our 2023 bonds. Same-center NOI for the consolidated portfolio increased 87.6% for the quarter as the prior year reflects reductions in rental revenues due to the pandemic along with higher variable rents driven by better than expected tenant sales performance this year. As we discussed last quarter, we have maintained high rent collections. We have collected approximately 98% of contractual fixed rents build in the first half of 2021. We have also continued to collect rents build for prior periods including amounts related to 2020 that we allowed our tenants to defer to 2021. Through July 30, 2021, we had collected 98% of the 2020 deferred rents due to be repaid in the first half of 2021. During the second quarter, we opportunistically raised capital using our ATM program to further reduce debt and strengthening our balance sheet. We issued 3.1 million common shares that generated $58 million in net proceeds at a weighted average price of $18.85 per share. Year-to-date, we sold 10 million shares and raised $187 million of equity at an average price of $18.97 per share. As previously announced, on April 30, we completed the partial early redemption of $150 million aggregate principal amount of our 3.87% senior notes due December 2023 for $163 million in cash. This reduction in debt improves our leverage ratio and enhances our balance sheet flexibility. Subsequent to the redemption, $100 million remains outstanding. We also paid down our unsecured term loan by an additional $25 million in June, bringing the outstanding balance to $300 million. Additionally, in July, we amended and extended our unsecured lines of credit, pushing the maturity date to July 2026 including extension options and providing borrowing capacity of $520 million within an accordion feature to increase capacity to $1.2 billion. The facility includes a sustainability metrics, tying potential interest savings to LEED and ENERGY STAR Certifications. This further demonstrates our commitment and accountability regarding environmental initiatives. We have no significant debt maturities until December 2023. We have always prioritized maintaining a strong financial position. We will continue our disciplined and prudent approach to capital allocation. Our Board will continue to evaluate dividend distributions alongside earnings growth and our priority uses of capital include investing in our portfolio to grow NOI, reducing leverage to pre-COVID levels over time, extending debt maturities and evaluating selective growth opportunities. Our guidance assumes current macro conditions continue through the remainder of the year and that there are no further government mandated retail shutdowns. For the full year 2021, we expect core FFO to be in the range of $1.52 and $1.59 per share, up from our prior expectations of $1.47 to $1.57. This guidance reflects continued sequential improvement in our business, offset by the additional dilution of approximately $0.02 per share related to the common shares sold in the second quarter, which is an addition to the $0.4 of dilution from the first quarter issuances included in our prior guidance. Our guidance also reflects year-over-year comparisons, which get more difficult in the back half of 2021 due to higher occupancy and lower operating expenses last year, as well as lease termination fees and reserve reversals that we recognized in the second half of 2020. Our guidance includes the 135,000 square feet of space we have recaptured-to-date through the end of July, along with potential for an additional 65,000 square feet related to bankruptcies and brandwide restructuring for the remainder of the year. For additional details on our key assumptions, please see our release issued last night. Operator, can we take our first question.

sees 2021 estimated diluted core ffo per share $1.52 - $1.59. q2 core ffo per share $0.43.

This information is available on our Investor Relations website, investors. We direct you to our filings with the Securities and Exchange Commission for a detailed discussion of these risks and uncertainties. During the call, we will also discuss non-GAAP financial measures as defined by SEC Regulation G, including funds from operations or FFO, core FFO, same-center net operating income, adjusted EBITDA and net debt. As such, it is important to note that management's comments include time-sensitive information that may only be accurate as of today's date, November 2, 2021. At this time, all participants are in listen-only mode. We request that everyone ask only one question and one follow-up to allow as many of you as possible to ask questions. If time permits, we are happy for you to requeue for additional questions. On the call today will be Steven Tanger, our Executive Chair; Stephen Yalof, Chief Executive Officer; and Jim Williams, Executive Vice President and Chief Financial Officer. We had a great quarter as a result of improvements in occupancy, rent spreads and sales. These all contributed to earnings, which exceeded our expectations, and an increase in our guidance for the remainder of the year. Our proactive capital market success has also positioned us well with low leverage, ample liquidity and exciting potential growth opportunities. I'm proud of the tireless efforts of the entire Tanger team who are successfully delivering our strategic objectives. We delivered strong performance in the third quarter and the continued momentum we are demonstrating across our portfolio supports our decision to increase our guidance for the year. The successful execution of our strategic plan is evident across all of our key metrics, including occupancy, rent spreads, tenant sales and our focus on driving non-rental revenues, all of which continue to contribute to core FFO growth. Our portfolio occupancy has returned to pre-pandemic levels, despite having recaptured over 1 million square feet due to bankruptcies and brandwide restructurings since the beginning of 2020. This includes 55,000 square feet recaptured in the third quarter as anticipated. As of September 30, occupancy was 94.3%, up 140 basis points year-over-year and up 130 basis points since the end of the second quarter. With regard to rent spreads, we continue to see positive momentum for leases that commenced in the 12 months ended September 30. Blended average rates improved by 240 basis points on a cash basis compared to the 12 months ended June 30. Spreads have improved each quarter this year and we believe that the continued improvement we are seeing in traffic and sales will help sustain this trend. We also benefited from significant percentage rental growth this quarter, which was more than 2.5 times the comparable 2019 period. During the height of the pandemic, we renegotiated select leases with an aim to trade value for value, in some cases, trading base rent for a larger variable rent component. In many cases, reducing break points and increasing variable rent pay rates are now producing total rents that exceed the prior contractual fixed rents. Our rent spreads don't capture percentage rent contributions as spreads measure the change in base rent and common area charges only, but the strong variable rent component has contributed to our core FFO growth. Additionally, as we continue to negotiate renewals on these leases, we are focused on converting some of the variable upside into base rents, which provide longer term certainty. In light of the improving trends, we are being strategic in our renewal and permanent leasing activity. Renewals executed or in process represented 68% of the space scheduled to expire during the year compared to 72% at this time last year. Traffic for the quarter was approximately 99% of the same period in 2019. We saw a slight downturn in August, in part, due to concerns over the Delta variant and the timing of Labor Day, but September traffic returned to pre-pandemic levels. Tenant sales accelerated in the quarter, reaching an all-time high of $448 per square foot for the consolidated portfolio for the 12 months ended September 30, representing an increase of more than 13% over the comparable 2019 period. The key objective underlying our leasing strategy is to maximize NOI. While shorter-term leasing will continue to be a strategy, our goal is to convert this space to permanent deals over time as conditions improve, retaining the current tenant with higher rent or repopulating the space. We also continue to focus on growing our non-apparel and footwear tenant base and have added multiple new brands and categories to our portfolio this quarter. Key categories include furniture and home goods and wellness and beauty. We have also focused on growing our food offerings, adding numerous sit-down, quick serve and grab-and-go concepts across our portfolio and we are growing the presence of entertainment stores, kiosks and amenities aimed to driving shopper visits, frequency, dwell time and ultimately larger spend. These new uses are presenting both on-center and in our outparcel and peripheral real estate. We are seeing traction with non-rental revenues. This is an area with growth opportunity as it is still in the early stages as a focus for Tanger. Marketing partnerships in the form of sponsored onsite events, activations and advertising provide an opportunity for retailers to interact and communicate with the tens of millions of customers that shop at our centers annually. And our Labor Day Block Party activations, for example, was sponsored by international brands such as Unilever, Tesla and Heineken, and we are planning similar events in the fourth quarter around holiday themes and tree lightings. Events like these not only improve traffic and dwell time, but also generate revenue. This revenue is captured in the other revenues line, which for the third quarter has doubled the contribution from 2020 and increased 38% over 2019. This has proven to be a profitable initiative with plenty of additional opportunity and we plan to grow this program across our portfolio. Our digital channels, including our website app and social channels, complement our on-center experience and help to attract new customers, particularly in young demographics. Activations and shopper amenities such as Virtual Shopper and our web-hosted flash sales continue to engage and draw a younger consumer, while providing an omnichannel experience for our core shopper base and important Tanger Club members. Our Tanger Fashion Director is leading these programs and will continue to do so for us through the holiday season. As we look ahead to holiday shopping, we are encouraged. In partnership with our retailers, we are starting early. Holidays began at Tanger on November 1 and we are underway running campaigns, programs and events to encourage early shopping. Many retailers across the country are facing potential logistics and staffing issues but are proactively navigating the situation. Although the impact of labor and supply chain is unknown, we are optimistic with regard to our ability to deliver an exciting and fulfilling holiday experience to our customers and guests. In summary, we continue to execute on our strategic plan, focus on our core business, and create value by unlocking new revenue opportunities across our portfolio. We are enthusiastic with our positive leasing momentum and are encouraged by the new brands and categories we are adding to our centers. We are innovating and reaching our shoppers where they want to be, offering additional ways to engage and interact with new products and to shop. We continue to see traffic, sales, leasing and business development results improve. We're on a clear path to sustained same-center NOI growth and, along with our new long-term growth initiatives and operational efficiencies, we believe we have a compelling opportunity to create value over time. We delivered strong third quarter results showing continued positive momentum. Third quarter core FFO available to common shareholders was $0.47 per share compared to $0.44 per share in the third quarter of 2020. Core FFO for the third quarter of 2021 excludes a charge of $34 million or $0.31 per share for the early extinguishment of debt related to the redemption of our 2023 and 2024 bonds. Same-center NOI for the consolidated portfolio increased 11.5% for the quarter to $73.8 million, driven by better than expected rebound in variable rents and other revenues. We remain on track with rent collections and, through October 29, had collected approximately 98% of 2020 deferred rents due by the end of the third quarter. The strategy we employed during the pandemic of deferring rent has proven to be effective. With regard to our ATM program, we did not sell any additional equity during the third quarter. Year-to-date, we have sold 10 million shares generating proceeds of approximately $187 million and $60 million remains available under our current authorization. As previously announced, in July, we amended our unsecured lines of credit and extended the maturity date to July 2026, including extension options. The lines have a borrowing capacity of $520 million with an accordion feature to increase borrowing capacity to $1.2 billion. Additionally, in August, we completed a public offering of $400 million of senior notes at a rate of 2.75%, the lowest coupon in Tanger history. We used the proceeds from the sale to redeem the $100 million that was outstanding on our 3.875% notes due in 2023 and the $250 million that was outstanding on our 3.75% notes due in 2024. We also incurred a $31.9 million make-whole premium in September related to these redemptions. As of quarter end, we had no significant debt maturities until April 2024. Our leverage position has continued to improve in conjunction with our capital markets activity and earnings growth. As of September 30, our net debt to adjusted EBITDA improved to 5.3 times for the trailing 12 months compared to 7.2 times for the comparable 12-month period of the prior year. We have always prioritized maintaining a strong financial position and a disciplined and prudent approach to capital allocation. Our Board will continue to evaluate dividend distributions alongside earnings growth and taxable income distribution requirements. Our priority uses of capital are investing in our portfolio to grow in a way and evaluating selective external growth opportunities. Turning to guidance for the remainder of the year. We are increasing our core FFO to a range of $1.67 to $1.71 per share from the prior range of $1.52 and $1.59, an increase of 9% at the midpoint. This guidance reflects continued sequential improvement in our business, particularly higher variable rents achieved in the third quarter. Our guidance also includes up to 50,000 [Phonetic] square feet related to the potential additional bankruptcies and brandwide restructurings that could occur for the remainder of the year. For additional details on our key assumptions, please see our release issued last night. Operator, can we take our first question?

qtrly core ffo per share $0.47. sees fy 2021 diluted core ffo per share to be $1.67 to $1.71.

This information is available on our Investor Relations website, investors. We direct you to our filings with the Securities and Exchange Commission for a detailed discussion of these risks and uncertainties. During the call, we will also discuss non-GAAP financial measures as defined by SEC Regulation G, including funds from operations or FFO, core FFO, and Same-Center net operating income. As such, it is important to note that management's comments include time-sensitive information that may only be accurate as of today's date, February 18, 2021. At this time, all participants are in listen-only mode. We request that everyone ask only one question and one follow-up to allow as many of you as possible to ask questions. If time permits, we are happy for you to requeue for additional questions. On the call today will be Steven Tanger, our Executive Chair; Stephen Yalof, Chief Executive Officer; and Jim Williams, Executive Vice President and Chief Financial Officer. Clearly, 2020 was a year like no other. And I want to express my deep appreciation for the entire Tanger team who have worked so diligently to navigate the challenges brought on by the global pandemic. Virtually, all of our tenants have been facing mandates, directing them to close their stores, operate at reduced capacity and comply with additional health and safety measures. In 2020, there were several retail bankruptcies and restructurings, resulting in space recapture and higher vacancy than historic levels. But also providing us with opportunities to further diversify and upgrade our tenant mix. This past year also highlighted the positive characteristics of the Tanger Outlet platform. As evidenced, by the resilience, our portfolio has demonstrated since governmental mandates were lifted starting in the second quarter of 2020. Our open-air centers provide an excellent value proposition for both retailers and shoppers that cannot be duplicated by e-commerce or other brick-and-mortar formats. These desirable characteristics are demonstrated in our recent results, including the rapid pace that stores reopened after mandates were lifted and the positive trends in our traffic and rent collection metrics. Our balance sheet further differentiates Tanger. Our financial strategy has always been conservative, with a great emphasis on maintaining sufficient liquidity to provide optimal flexibility. In January, given the meaningful improvement of our cash flows since the onset of the pandemic, we reinstated out dividend, which is an important part of our total return for shareholders. As previously announced on January 1, I assumed the role of Executive Chair after 12 years as CEO. And the more than 35 years that I've been with the company, I am extremely proud of what we have accomplished as the leader in the outlet industry. We created a brand synonymous with quality Outlet Centers, became the go-to-channel for countless world-class brands and retailers, created thousands of jobs and prioritized our role as a community leader, contributor, and partner. I have complete confidence in Steve's ability to lead the company during this transformative time and look forward to advising Steve through this transition. We are encouraged by the opportunities we have identified to position the company to return to sustained growth over time. Finally, I want to extend our best wishes to those who are in the path of the current winter storms and are being so impacted by the extreme weather and power outages. I'm grateful and excited for the opportunity to lead Tanger through this important transition, in partnership with Steve, our Board of Directors, and the entire Tanger team. While the last 11 months' have been challenging for our company, the positive traffic, rent collections and liquidity trends that Steve mentioned are all indicators that our business is stabilizing and our shoppers are quickly returning to our open-air outlet shopping centers. During 2020, while navigating the pandemic, we accomplished many things and established the groundwork for positioning our company for growth. Our team turned challenges into opportunities and focused on enhancing the key components of our core business, leasing, operations and marketing. Our year end consolidated portfolio occupancy was 91.9% despite having recaptured almost 8% of the square footage in our portfolio during the year due to bankruptcies and brandwide retailer restructurings. Leasing has taken on an increased intensity and a broader focus across the entire company. Our leasing and business development professionals are focused on growing our existing tenant base through store expansions and new deals across our portfolio, identifying new retailers and users in order to diversify our center offerings and augment our merchandising with best-in-market food, entertainment and experiential retailers, aimed at driving new shopper visits, increasing their frequency, extending their stay and driving sales growth. This strategy has already begun to pay off as we have added best-in-class brands such as Tory Burch, Lululemon, Victoria's Secret and Hugo Boss to several new locations. And in early 2021, we'll add new categories. For example, in the F&B category, the iconic Gourmet grocer Nantucket Meat and Fish took space in Hilton Head, South Carolina. In the sporting goods category, Dick's will open their first outlet warehouse concept with us later this month. And in shipping and distribution, through our partnership with PELAGIC [Phonetic], the last mile distribution and logistics platform, we are opening our first on-center facility in Deer Park, which we anticipate will be a model for other locations going forward. Leasing momentum had started to build in Q4 across our portfolio and continues to do so now. We are well staffed to take advantage of this increased activity. In addition to our team of leasing professionals, we've entered into strategic partnerships in key markets with top retail brokers to tap their local market expertise and drive best-in-class local and iconic businesses in these select markets. Lastly, as I discussed last quarter, we brought on an EVP of Property Operations to help create a field-led strategy. Through this initiative, we've reorganized our field management teams and have empowered them to take a proactive role in supporting our local leasing initiatives. Given the level of vacancy going into 2021, it's going to take time to rebuild our occupancy, and we anticipate that. In certain cases, rent spreads will continue to be pressured. However, we are encouraged by an increase in deal activity as we see more retailers strategizing growth. While our strong brand, stabilized traffic and an attractive value proposition, Tanger Outlet's offers retail brands a compelling solution to manage their product, placement and pricing that is unique to any other retail distribution channel. We also believe there is an opportunity to drive NOI by monetizing additional elements of our center, such as media and amenity sponsorships. At the onset of the pandemic, we proactively offered all of our retail partners the opportunity to defer April and May rents until January and February of this year, in order to provide them the flexibility to reopen quickly when the mandates were lifted. This strategy proved effective. The percentage of occupied stores that are open rapidly accelerated post mandate and currently stands at 99%. Our strong rent collections at 95% of fourth quarter build rents and better than expected deferred rent collections to date demonstrate that the strategy was successful, where we permitted concessions, we negotiated landlord-friendly amendments that resulted in a value for value exchange that strengthened our portfolio. We also took a closer look at expenses and we're able to quickly devise a plan that resulted in almost $18 million in cost reductions over the last nine months of 2020. I'm pleased to note the meaningful rebound in traffic to our centers. In the fourth quarter, shopper traffic rebounded to approximately 90% of prior year levels, rising to more than 95% during the month of January. Excluding our Canadian centers, where stores were closed under government mandate, January traffic rebounded to prior year levels. This performance reflects our favorable characteristics, open-air, outdoor centers that offer an inviting way for shoppers to find their favorite brands and everyday value pricing. During 2020, we started the journey of our digital transformation. During the second quarter, we rolled out our Tanger 3-Ways To Shop, in-store, curbside pickup and our proprietary Tanger virtual shopper service, each allowing the customer to shop the way they feel most comfortable. Tanger virtual shopper is a service that meets our customer where they are and allows them to virtually shop any brand in the Tanger portfolio regardless of geography using FaceTime to chat with the Tanger stylist. Orders can be picked up your curbside or shipped to home. To date, our Tanger virtual shopper engagements continue to build. Throughout the pandemic, our centers have been hubs for civic engagement, including blood drives, food drives, and voter registration sites. During 2020, Tanger team members created and organized a D, E and I leadership council with the mission of championing diversity, equity and inclusion across the organization, empowering us to reach our full potential, fueling innovation and connection with our employees, customers and the communities we serve. My confidence in our business is steadfast and I'm energized by our opportunity. While there is still headwinds as we enter 2021, I'm confident in our team, our strategy and our ability to execute to our initiatives. We remain focused on our core business, accelerating leasing, reshaping operations and advancing our marketing strategy to meet shoppers where they want to shop. Each of these initiatives are establishing the necessary infrastructure to return to sustained growth and profitability over time, which is our top priority. Fourth quarter results showed continued improvement from our second and third quarter performance, but reflect the ongoing impact of the pandemic, recent bankruptcies and brandwide restructurings. Fourth quarter Core FFO available to common shareholders was $0.54 per share compared to $0.59 per share in the fourth quarter of 2019. Same-Center NOI for the consolidated portfolio decreased $7.8 million for the quarter, primarily reflecting the rent modifications and store closings from the recent bankruptcies and brandwide restructurings, including an additional 317,000 square feet recaptured during the quarter. Included in Same-Center NOI for the quarter or write-offs of approximately $3.1 million related to the fourth quarter build rents. The write-offs were offset by the reversal of approximately $3.5 million in reserves related to rents previously deferred or under negotiation as a result of better-than-expected collections, leaving a net benefit of approximately $400,000. In addition, we recognized a $1.1 million charge to core FFO related to the write-off of straight-line rents, which are not included in Same-Center NOI. Through the end of January, we had collected 95% of fourth quarter rents build. We also continue to collect rents build for prior periods, including amounts related to 2020, we allowed our tenants to defer to 2021. As of January 31, our second quarter improved to 63% of build rents from 43%. Third quarter improved to 91% from 89% and 57% of deferred rents had been collected, nearly half of which represented prepayments. We collected 90% of the deferred rents that were due in January. As of January 31, 2021, collections of January rents build were similar to collection rates for the fourth quarter. Core FFO for the quarter was positively impacted by the recognition of lease termination fees totaling $4.1 million, which was significantly elevated over the prior year amount of approximately $100,000. As previously discussed, we have always prioritized maintaining a strong financial position and particularly through the pandemic, this discipline has proven to be critical. With the improvements in rent collections, the ongoing focus on cost controls and a prudent approach to capital allocation, we had over $680 million of available liquidity, including over $80 million of cash and $600 million of unused capacity on our lines of credit as of the end of January. We have no significant debt maturities until December 2023. Given the improved rent collections and our ample liquidity position, our Board declared a dividend of $0.1775 per share, which was paid last week to holders of record on January 29. We will continue our disciplined and conservative approach to capital allocation. In addition to dividend distributions sufficient to maintain REIT status, our priority uses of capital include investing in our portfolio to grow NOI, reducing leverage to pre-COVID levels over time, and evaluating selective growth opportunities over the longer term. While we are encouraged by the pace of leasing and progress of the initiatives that Steve Yalof discussed, we anticipate that there will be variability in our performance. As the ongoing impact of the pandemic remains uncertain, we continue to anticipate pressure from current vacancies, additional potential store closures and rent modifications. In light of this backdrop, we expect core FFO per share for 2021 to be between $1.47 and $1.57 per share. This guidance assumes there are no further government mandated shutdowns and assumes lease termination fees decrease by $9 million to $10 million or $0.09 to $0.10 per share, from the elevated level we recognized in 2020. Currently, we expect to recapture approximately 200,000 square feet due to bankruptcies and brandwide restructurings during 2021, most of which we expect will occur during the first half of the year. We are not providing any further detailed operational performance assumptions at this time. However, we do anticipate there will be some variability in quarterly operational performance on a year-over-year comparison basis. In 2020, we did not see any meaningful impact from COVID it in the first quarter. And in the first quarter of 2021, there have been widespread winter storms across much of our portfolio. We expect a combined annual recurring capital expenditures and second generation tenant allowances of approximately $40 million to $45 million for 2021. Finally, we believe our balance sheet is well positioned from a liquidity perspective. We are continuing to take the appropriate steps to navigate the current environment and maximize our financial flexibility. Operator, can we take our first question.

q4 ffo per share $0.54. liquidity exceeded $680 million at end of january. collected 95% of q4 rents. qtrly core funds from operations available to common shareholders was $0.54 per share.

I hope you, your colleagues and loved ones are staying safe and healthy. As the COVID-19 pandemic continues to be a global challenge, we remain dedicated to the safety of everyone in the entire Skechers organization and appreciate their ongoing efforts and resiliency during this difficult period. While many countries' restrictions are easing, our thoughts are with those regions facing another coronavirus wave. As is the case with most businesses, the pandemic continued to impact Skechers but the high demand for our comfort technology product resulted in a strong beginning to 2021 and it feels reminiscent of 2019. In the first quarter, we achieved revenue growth of 15% over the same period last year, which resulted in our first quarterly sales of more than $1.4 billion. This was done while parts of the world remained closed due to the pandemic. The $1.43 billion first quarter sales were also an 11.9% increase over first quarter 2019, which was then a record for the period. Driving the record sales was 20.2% increase in our international business and an 8.5% increase in our domestic business. This double-digit growth drove international sales to 57.8% of total sales in the first quarter. Throughout the quarter, we focused on delivering our footwear and apparel to meet the needs of both our consumers and customers. Our sell-throughs across customer types and categories exceeded expectations in many markets and we were able to deliver double-digit growth. Skechers' mission of delivering comfort, style and quality and innovation at a value resonated with consumers prior to the onset of the COVID-19 pandemic and the same is true now. Consumers are returning to a new normalcy, one that involves more walking, more comfort on the job and a casual lifestyle mindset. We are a natural choice for any demographic worldwide with comfort technology at our core. The record sales are a testament to the fact that consumers appreciate our product offerings, which we're seeing by the success across many divisions. Our International Wholesale business grew 23.8% for the first quarter last year and 13% from 2019. The quarterly sales growth was driven by an increase of 174% in China, which was severely impacted by the pandemic in the prior year. However, even as compared to 2019, China grew 45.5%. The International Wholesale growth was partially offset by decreases in our subsidiary and distributor businesses. Subsidiary sales decreased 4.8% from 2020 but improved 4.2% from 2019. The first quarter 2021 decrease was due to temporary closures and reduced operating hours in Spain and Italy, and especially in the United Kingdom, where businesses were closed for the entire quarter. Where markets were open, sales were strong, including in Germany, India and Canada. Our distributor business was down 6.5% from last year, yet several markets experienced growth in the quarter, specifically Russia, Taiwan, Turkey and Ukraine. We believe we will continue to see improvements in our distributor business in the second quarter and the remainder of the year. Sales in our Domestic Wholesale business decreased less than 1% in the first quarter compared to the same period in 2020 but improved 8.1% compared to the first quarter of 2019. We believe sales in our Domestic Wholesale business were negatively impacted by logistical challenges, which caused slower replenishment and product shipments to some accounts. Key sales drivers came from multiple categories with the largest gains in our Women's Sport, Kids, Work and Men's Performance. Additionally, the average selling price per pair increased 2.7%, reflecting the strength and appeal of new comfort products and technologies. Skechers direct-to-consumer business increased 18.1% over 2020 and 13.1% over 2019, despite the fact that domestic operating hours were reduced by approximately 15% during January and February, and 7% in March. In our international company-owned stores, we lost 37% of the days available to sell during the quarter. Our domestic direct-to-consumer sales increased 28.4% compared to the first quarter of 2020 and 18% compared to 2019. This improvement came from our domestic e-commerce channel, which grew by 143% and our brick and mortar stores, which grew by 13.6%. Our domestic direct-to-consumer average selling price per unit rose 10.9%, which speaks to the strength of our current product offering. While we expected our e-commerce business to continue to perform exceptionally well, we were pleased with the increased traffic and sales in our domestic retail stores, especially in March, which we believe improved as more people became comfortable shopping and we ramped up our marketing efforts. We have now completed the update of our point-of-sale system, which further optimizes our domestic direct-to-consumer channels and will continue to improve our omnichannel capabilities. We are now focused on rolling out this same platform worldwide. Our e-commerce channel remains a meaningful growth opportunity as sales increase significantly across the globe. We plan to expand our e-commerce reach across Europe, beginning with a new site in Ireland and the revamp of our U.K. site this summer. Our international direct-to-consumer business increased 1.9% over the first quarter of 2020 and 4.4% over 2019. The growth was largely attributable to our company-owned e-commerce sites and the strength of our sales in Korea, India and Thailand, partially offset by ongoing temporary store closures due to stay at home guidelines across many markets, most notably in the United Kingdom. While we are seeing some markets reopening this month, including England last week, other countries have extended or reinstated their lockdowns given the unpredictability of the coronavirus and its impact on many markets, we remain cautious about a return to normal traffic and sales in many international stores. In the first quarter, we opened 12 company-owned Skechers stores, six of which are in international location, including our largest store in India. We have opened seven stores to-date in the second quarter, including our first in Antwerp. We closed 20 locations in the first quarter as we opted not to renew expiring leases, and we expect to close one additional store at the end of this month. An additional net 106 third-party Skechers stores opened in the first quarter, bringing our total store count at quarter end to 3,989. The stores that opened were across 16 countries with most located in China and India. To support the open regions during the first quarter, we ramped up our marketing efforts to drive home our comfort message. This included former professional quarterback and lead NFL commentator, Tony Romo in our Max Cushioning commercial during the Super Bowl and NFL coach, Jon Gruden and sports analyst, Howie Long in new commercials for Skechers Arch Fit, as well as Brooke Burke featured in Arch Fit and Skechers apparel commercials during the quarter. Our new campaign went on television as well as digital platforms to support key initiatives for men, women and kids. In the first quarter, we were awarded Company of the Year by leading industry publication, Footwear Plus, for the ninth time in 15 years. This was due to our efforts during the challenging 2020 year and our ability to deliver to consumers the comfort they wanted. We are pleased with our performance in the first quarter, I think this was a solid beginning, especially given the ongoing pandemic-related difficulties most recently impacting our international business, which now represents 58% of our total sales. While many markets continue to face challenges, we are seeing strong signs of recovery and remain focused on delivering our comfort technology and managing the flow of our inventory to fulfill demand where we are open and drive sales where possible. The Skechers brand performed exceptionally well this quarter, despite ongoing challenges posed by the pandemic, including continuing store closures and operating restrictions in many markets across the world. The quarter began as expected with the pandemic continuing to influence tepid consumer trends worldwide, especially as many markets reinstituted lockdowns. However, mid-quarter, we began seeing signs of consumer engagement and optimism domestically that we have not seen in over a year, that led to results in March that even exceeded our own internal expectations, reflecting high demand for the Skechers brand. Although we remain cautious given the nature of government responses to COVID-19 globally, we are optimistic that our first quarter results are indicative of the power of our brand as the world begins to recover from the pandemic. Now, let's turn to our first quarter results, where you will note that due to the unusual nature of last year, we will occasionally compare to both 2020 and 2019, where we feel the added measure is beneficial to evaluating the performance of our business. Sales in the quarter achieved a new record, totaling $1.43 billion, an increase of $186.1 million or 15% from the prior year and an impressive 11.9% increase over the first quarter of 2019. On a constant currency basis, sales increased $145.9 million or 11.7%. International Wholesale sales increased 23.8% in the quarter compared with the first quarter of 2020 and 13.4% compared with the first quarter of 2019. Our joint ventures grew an impressive 120% in the quarter led by China, which grew 174% against prior year results, which contained the most severe impacts of the COVID-19 outbreak. As compared to the first quarter of 2019, China grew 45.5% driven by strong e-commerce performance. Subsidiary sales declined slightly in the quarter by 4.8%, primarily as a result of continuing closures in Europe and Latin America. However, as compared to 2019, our subsidiary sales grew an impressive 4.2% despite the current year operational restrictions. As expected, our distributor business continued to face pandemic headwinds in the first quarter, decreasing 6.5% but saw a marked improvement as compared to the second half of 2020. Although we continue to expect this portion of our business to recover more slowly than the overall International Wholesale segment, we remain optimistic that we will ultimately see a full recovery of sales in this important channel. Domestic Wholesale sales decreased slightly in the quarter by less than 1%, primarily due to the unfavorable timing of shipments to customers, which we now expect to occur in the second quarter. Compared to the first quarter of 2019, sales increased 8.1%, which we believe is more reflective of the positive underlying trends we are seeing with the majority of our domestic wholesale partners, particularly based on sell-through we observed in the back half of the quarter. Direct-to-consumer sales returned to growth in the quarter increasing 18.1%, the result of a 28.4% increase domestically and a 1.9% increase internationally. The results reflect a slight benefit from the pandemic store closures in the prior year but more importantly, also reflect a notable 143% increase in our domestic e-commerce business and a significant increase in store traffic and sales in March, a trend that has continued. Gross profit was $679.6 million, up 24.1% or $131.9 million compared to the prior year. Gross margin was 47.6%, an increase of 350 basis points versus the prior year, primarily driven by increases in our average selling price across all segments as well as a favorable mix of online sales. Total operating expenses increased by $19.9 million or 3.9% to $528 million in the quarter. Selling expenses increased by $11.2 million or 15.2% to $85.3 million, which was flat as a percentage of sales versus last year. The dollar increase was primarily due to higher domestic digital demand creation spending as well as the reopening of certain markets internationally. General and administrative expenses increased slightly by $8.6 million or 2% to $442.7 million, which was primarily the result of volume-driven expenses in warehouse and distribution for both our international and domestic e-commerce businesses. This was partially offset by lower retail labor costs. Earnings from operations was $157.7 million versus prior year earnings of $44.8 million. This represents an increase of 252% or $112.9 million. Operating margin was 11% compared with 3.6% a year ago and 13% in 2019, reflecting strong combination of top line performance and operating expense leverage despite ongoing pandemic-related challenges. Net earnings were $98.6 million or $0.63 per diluted share on 155.9 million diluted shares outstanding. This compares to prior-year net income of $49.1 million or $0.32 per diluted share on 154.7 million diluted shares outstanding. Our effective income tax rate for the quarter was 20.2% versus 15.3% in the same period last year. The increase was predominantly due to an unfavorable mix of earnings from higher tax jurisdictions. And now turning to our balance sheet. We ended the quarter with $1.51 billion in cash, cash equivalents and investments, which was an increase of $148.2 million or 10.8% from March 31, 2020. Trade accounts receivable at quarter end were $798.8 million, an increase of $2.6 million from March 31, 2020. Total inventory was $1.07 billion, an increase of 8.3% or $81.8 million from March 31, 2020. The increase is largely attributable to higher inventories to support growth in China and government closures in Europe. Total debt, including both current and long-term portions, was $779.7 million at March 31, 2021 compared to $699.8 million at March 31, 2020. Capital expenditures for the first quarter were $84.2 million, of which $42.9 million related to the expansion of our joint venture-owned domestic distribution center, $13.8 million related to investment in our new corporate offices in Southern California, $12.4 million related to investments in our direct-to-consumer technology and retail stores and $3.6 million related to our new distribution center in China. Our capital investments remained focused on supporting our strategic growth priorities, growing our direct-to-consumer relationships and business as well as expanding the presence of our brand internationally. For the remainder of 2021, we expect total capital expenditures to be between $200 million and $250 million. Now turning to guidance. First, let me preface by saying that we remain in a dynamic situation, where conditions can change materially at any point in time. As a result, assessing the ongoing impact of the pandemic to our business is difficult. Incorporated into the following guidance is our best estimate of the influence of these factors on our expected results for 2021. However, if the situation deteriorates and closures continue longer than anticipated, our expected results may differ materially from this guidance. That being said, we are providing a perspective today for our second quarter and full year 2021 results, based upon current trends, backlogs and other indicators. We expect second quarter 2021 sales to be in the range of between $1.45 billion and $1.5 billion and net earnings per diluted share to be in the range of between $0.40 and $0.50. For fiscal year 2021, we expect sales to be in the range of between $5.8 billion and $5.9 billion and net earnings per diluted share to be in the range of between $1.80 and $2. We also anticipate that gross margins for the full year will be flat or up slightly compared to 2020 and that our effective tax rate for the year will be approximately 20%. We achieved a new quarterly sales record over $1.4 billion due to the strong demand for our comfort technology footwear and markets where we are open. International, which is approximately 58% of our total sales was the biggest driver, but we saw strong improvements in our domestic business with increasing traffic in March and now in April. The achievement came despite ongoing pandemic-related issues. We drove sales through strong marketing campaigns across multiple platforms, continue to rollout our BOPIS and BOPAC initiative in the United States and plan for additional e-commerce sites in 2021. To further support our business in the coming years, we are in the process of enhancing our infrastructure with new distribution centers in Peru, the U.K. and Japan. In addition, our new 1.5 million square foot China distribution center remains on track for full implementation by mid-year. Given today is Earth Day, I'd like to note that we are continuing to work on the expansion of our LEED Gold certified North American distribution center, which will bring our facility in Southern California to 2.6 million square feet in 2022. We are also completing construction on Phase 1 of our new LEED Gold certified office buildings and we are increasing efficiencies in our existing corporate office buildings, including the addition of solar panels. Although we remain cautious given the ongoing temporary closures in many countries, we are seeing the improved traffic that we experienced in March continue in April, where markets are open. The demand for our product is strong as consumers want familiarity, comfort, quality and value, all of which the Skechers brands delivers together with innovation and style.

compname reports q1 earnings per share $0.63. q1 earnings per share $0.63. q1 sales $1.43 billion. sees q2 earnings per share $0.40 to $0.50. sees fy earnings per share $1.80 to $2.00. sees q2 sales $1.45 billion to $1.5 billion. sees fy sales $5.8 billion to $5.9 billion.

Once again we are nearly alone in our normally busy corporate offices in Manhattan Beach. In early June we added additional safety features and began allowing a limited number of personnel back with staggered work schedule, while most of our talented team continued to successfully work from home. As always, our top priority is the health and well-being of our employees and partners around the world. The pandemic remains a deep concern driving our everyday decisions. We continue to actively review inventory balances and production commitments across the globe, managing both to bring them in line with forecasted demand. With the closure of most markets, it should be clear that the pandemic significantly impacted our business during the second quarter. However, China led the path to recovery, first by stabilizing and then moving to growth by the end of the quarter. As a result of the pandemic, our second quarter sales decreased 42% to $729.5 million, which consisted of a 37.8% decrease in our international businesses and a 47.3% decrease in our domestic businesses. Despite the decreases, we believe the sales we achieved during the quarter are due to the strength of our product and the determination of our teams to drive sales where possible. The primary drivers in the quarter were Asia, led by China with a 11.5% growth and our company-owned e-commerce business with sales growth of more than 400%. With nearly all stores open in China during the second quarter, we gained insight into how to safely and efficiently reopen during the pandemic. Additionally, we experienced pent-up demand for our product and saw our brand resonate with a wider and younger audience in our e-commerce channels in North America, Chile and Europe. While our international wholesale business decreased 29.9%, China offered a model of recovery, stabilization and then growth in the quarter. Every country's progress has been at a different pace. But we began to see similar recoveries and stabilization trends in other markets. These include Australia, France, Germany, Indonesia, Spain, South Korea, Taiwan, among others. Each market has reopened at different times and under distinctive guidelines, but we are seeing positive signs within each of these regions. At this time, more than 90% of the third-party SKECHERS stores around the world have reopened. Feedback from many of our global partners has been that SKECHERS remains a go-to footwear brand in the markets as consumers seek casual, comfort and value during this challenging time. Our domestic wholesale business decreased 57.2% reflecting the majority of retail store closures during much of the quarter. Many of our partners have now reopened. The demand remains high and we are shipping at an active rate. We believe, based on early indicators from our partners and consumer sentiment, that SKECHERS will remain a key resource for these leading accounts. With nearly all company-owned SKECHERS stores closed for most of the quarter, our direct-to-consumer business decreased 47.1%, which includes a 428.2% increase in our e-commerce business. Comparable same-store sales in our direct-to-consumer business decreased 45.6%, including a decrease of 35.9% in the United States and 66.9% internationally. We saw our direct to consumer comps improve month over month with total comp store sales down low double digits and domestic comps down single digits in June. As of today, more than 90% of our global company-owned stores have reopened under heightened safety protocols. Traffic and sales have been strongest within our big box and outlet locations, as well as our non-tourist stores. Our company-owned stores that remain closed are primarily in South America. As far as new store openings, we opened seven stores in the quarter; one in Germanyand three each in the United States and Japan, all locations that were under development prior to COVID-19. Further 102 new third-party SKECHERS stores opened across 28 countries, bringing our total store count to 3,615 worldwide at quarter-end. The key sales driver within our direct-to-consumer channel has been e-commerce which grew by triple digits in each of our platforms in North America, South America and Europe. This week, we launched our new online shopping platform in the United States, which we believe will provide a better customer experience. We plan to roll out the same platform to multiple countries later this year with even more countries planned for 2021 and beyond. Additionally, South Korea has launched an e-commerce platform this month and several of our distributors are developing SKECHERS e-commerce websites. Also after a successful pilot program during the second quarter, we will continue the rollout of our new retail POS system, providing a more efficient checkout experience in addition to BOPIS and BOPAC capabilities. We believe consumers are gravitating toward comfortable and casual footwear. At SKECHERS we design and deliver comfort, innovation, style and quality at a reasonable price in every one of our collections, from our athletic lifestyle footwear and a variety of fits under our SKECHERS Sport and SKECHERS Active lines, casual slip-on styles for men and women, work footwear for men and women, including styles designed for first responders, walking and running footwear and, of course, our kids footwear, which meets the needs of growing children. Our natural product development cycles helped us navigate these unique times as we are more flexible, can easily pivot design and production and offer a flow of fresh product to meet the needs of the buy now, wear now consumer. The progress we have made through the second quarter from a product and sales perspective couldn't have been achieved without our faster, flexible and focused business approach. This has included actively reviewing inventory balances and production commitments across the globe, bringing both in line based on our forecast for demand and managing our expenses, while still supporting the businesses that are performing well, including a shift toward digital advertising to support our online sales. Several integral factors are proving beneficial during this time and are helping ensure both the stability and success of the SKECHERS brand, our comfortable casual product at a reasonable price, the diversity of our distribution channels and broad-based customer demographics, the solid relationships with our factories and wholesale partners and our exceptionally strong balance sheet and ample liquidity. Although the near term remains uncertain as some markets are still closed and the fluidity of the pandemic continues to be a substantial concern, we believe that the SKECHERS brand will continue to have a worldwide appeal. And now to John. First, I hope you're all staying safe and healthy. Despite the challenges of the second quarter, demand for our product remains strong, as evidenced by the explosive growth of our online business, a return to growth in China and the steady month-over-month improvement we saw in the quarter across most of our businesses. Today the majority of our stores are now fully operational and SKECHERS' value proposition continues to resonate with consumers, as our core casual athletic styles are decidedly on trend in a predominantly work-at-home environment. We also continue to make investments, notably in our digital capabilities, which included an aggressive pivot toward digital advertising this quarter and the relaunch of our web site completed just this week, which will be followed by a new mobile app and a new loyalty program over the next few quarters. We are also modernizing our in-store point-of-sale system to better integrate engagement with our customers both online and in store. Overall, we remain extremely confident in our ability to manage through this crisis and optimistic about the long-term future of the SKECHERS brand. Now turning to our second quarter results. Similar to last quarter, I will not be detailing each and every impact of the pandemic. But it should be clear that the closure of our stores and the stores of our wholesale customers for much of the quarter, negatively impacted our results nearly everywhere. Sales in the quarter totaled $729.5 million, a decrease of $529.1 million or 42% from the prior year quarter. On a constant currency basis, sales decreased $516.2 million or 41%. Domestic wholesale sales declined 57.2% or $174.6 million as operations at many of our wholesale customers were closed, particularly in the first half of the second quarter. International wholesale sales decreased 29.9% in the quarter. Our wholly owned subsidiaries were down 43.7% and our distributor business decreased 58.1%. However, our joint ventures were down only 6.4% as China sales grew 11.5% for the quarter led by e-commerce, which was especially strong over the 6-18 selling period. Direct-to-consumer sales decreased 47.1%, the result of a 35.4% decrease domestically and a 66.6% decrease internationally, reflecting the impact of temporary store closures globally, partially offset by a 428.2% increase in our e-commerce business. Gross profit was $368.6 million, down $241.2 million compared to the prior year on lower sales volumes while gross margin increased by approximately 210 basis points to 50.5%. The higher gross margins were attributable to a favorable mix of online and international sales. Total operating expenses decreased by $73 million or 14.5% to $432.1 million in the quarter, reflecting the swift actions we took during the quarter to reduce all non-essential discretionary spending. Selling expenses decreased by $53.3 million or 46.9% to $60.2 million, primarily due to lower advertising expenses globally, partially offset by an increase in digital advertising spend. General and administrative expenses decreased by $19.7 million or 5% to $371.9 million reflecting reductions in discretionary spending and compensation related costs and despite the inclusion of an incremental $10.2 million in bad debt expense due to the expected impact of the pandemic on wholesale customers across the globe. Loss from operations was $61 million versus the prior year earnings from operations of $111.1 million. Net loss was $68.1 million or $0.44 per diluted share on 154.1 million diluted shares outstanding compared to net income of $75.2 million or $0.49 per diluted share on 153.9 million diluted shares outstanding in the prior year. Our effective income tax rate for the quarter decreased to 7.2% from 18.4% in the prior year and resulted in a net tax benefit of $4.3 million. And now turning to our balance sheet. At June 30th, 2020, we had over $1.56 billion in cash, cash equivalents and investments, which was an increase of $524.5 million or 50.9% from December 31st, 2019 reflecting the drawdown of our senior unsecured credit facility last quarter. Importantly, this represents an increase in net cash balances over last quarter of $189.3 million, reflecting our prudent inventory, working capital and operating expense management and including $75.9 million of capital expenditures. Trade accounts receivable at quarter-end were $478 million, a decrease of 25.9% or $167.3 million from December 31st, 2019 and a decrease of 25.5% or $163.4 million from June 30th, 2019. The decrease in accounts receivable was primarily due to successful collection activities during the quarter, coupled with lower global wholesale sales. Total inventory was $1.03 billion, a decrease of 3.9% or $42.1 million from December 31st, 2019, but an increase of 20.1% or $172.1 million from June 30th, 2019. The increase in year-over-year inventory levels is attributable to Asia where sales have largely recovered from the most serious effects of the pandemic. We continue to aggressively manage product supply in light of anticipated demand, aiming to prudently balance our inventory to position us constructively for the back half of the year and 2021. Total debt, including both current and long-term portions, was $763.3 million compared to $121.2 million at December 31st, 2019. The increase primarily reflects the drawdown of our senior unsecured credit facility in the first quarter. Capital expenditures for the second quarter were $75.9 million, of which $20.5 million related to our new China corporate office space, $13.8 million related to several new store openings worldwide, $12.4 million was associated with our new distribution center in China and $10.9 million related to the expansion of our domestic distribution center. As we discussed on our last call, we prioritized our capital expenditures this quarter to focus only on business critical and highly strategic projects, like the launch of our new digital platform and completion of our new distribution center in China. As mentioned previously, our new web site launched this week and several supporting digital initiatives will follow. In China, our distribution center progress has been slowed by the impacts of the pandemic which has particularly hampered the installation and testing of our automation. We now expect the distribution center to begin limited operations in the third quarter and to become fully operational over the first half of 2021. As our businesses continue to recover, we expect to restart investments that have been paused like the rollout of a new global point-of-sale system and significant additional capacity at our US distribution center. However, given the ongoing dislocation in the retail environment, we expect to continue tightly regulating our new store opening plans. We now expect total capital expenditures over the remainder of the year to be between $100 million and $150 million. We have also commenced the expansion of our US distribution center, which is owned and financed through a joint venture that we consolidate for accounting purposes. We expect incremental capital expenditures related to that expansion to total between $90 million and $110 million this quarter -- this year, sorry, of which approximately $10 million has already been recorded. As David said, while the near term remains uncertain, we are confident that we have taken the necessary actions to ensure that SKECHERS will successfully navigate this crisis. We will not be providing revenue or earnings guidance at this time as the current environment remains too dynamic from which to plan results with a reasonable degree of certainty. However, given the strength of our brands, our compelling value proposition and our healthy balance sheet, we believe SKECHERS is well positioned to continue growing once the situation normalizes. We are more than halfway through what has proven to be an unprecedented year. We have successfully embraced the new way of conducting business both at our corporate offices with safer at-home work guidelines and in our retail stores with extensive safety measures put in place for our employees and customers. We experienced exceptionally strong demand for our brand in Europe, North America and South America with our e-commerce platforms growing more than 400%. Similarly, we saw demand in Asia primarily within [Phonetic] China with a 11.5% growth, including e-commerce growth of 43%. Many of our global partners have indicated that SKECHERS remains a go-to brand in their stores and we ramped up shipments to these businesses. Nearly all the SKECHERS retail stores around the world are now open following safety protocols. In our company-owned stores we are seeing improved month-over-month comp store sales. As a few countries remain closed, others are reopening and consumer shopping habits are changing. We believe the pandemic will not only continue to be a concern, but it's also changing the retail and competitive landscape. We believe that SKECHERS is well positioned to accelerate out of the Global Health Conference when it stabilizes and that we will remain a global footwear leader. We are optimistic with the reception of our vast product offering and a reasonable price and the loyalty of our consumers, the positive sentiment toward the safety measures we have taken in our SKECHERS retail stores and the flexibility and determination of our teams around the world.

q2 loss per share $0.44. q2 sales $729.5 million versus refinitiv ibes estimate of $659.7 million. qtrly company-owned e-commerce sales grew 428.2 percent. company is not providing further financial guidance at this time. impact of covid-19 to skechers' business was significant in q2. china sales grew 11.5 percent in q2. optimistic about early-stage recovery we are seeing in much of our business, including a return to growth in china. more than 90 percent of our skechers stores re-opened.

I hope you, your colleagues and loved ones are healthy as the COVID pandemic continues to be a global challenge. We appreciate the resiliency of the Skechers organization over the past 18 months and hope that those facing the ongoing COVID-related challenges are staying safe. Skechers second quarter financial results exceeded expectations as we achieved record quarterly sales of $1.66 billion, a 127% increase over 2020 and a 32% increase over 2019. This marks the first time our quarterly sales have exceeded $1.6 billion and together with our first quarter yields a new six-month record of over $3 billion. We also achieved a record gross margin of 51.2%, record quarterly diluted earnings per share of $0.88, an exceptionally strong operating margins of 12.1%. Our record revenues were the result of increases of 147% in our domestic business and 114% in our international business and both businesses increased over 30% compared to 2019. International sales comprised 56% of our total sales in the quarter. This growth, a result of increases across all reportable segments, is reflective of higher average selling prices on significantly more units sold, less promotional activity during the period and consumers embracing our comfort technology in our seasonal, athletic and casual footwear lines, in addition to our apparel offering. It is important to note that these exceptional second quarter results came despite the ongoing global pandemic. COVID continue to clearly impact some countries in the second quarter, most notably India, but also remains a challenge for many other markets with lockdown restrictions, temporary closures and reduced store operating hours. The pandemic and other factors also continue to challenge our global supply chain. We appreciate the dedication and focus of the Skechers teams around the world. Without them, we wouldn't have achieved the results we had. Our international wholesale business grew 95% from the second quarter last year and 37% from 2019. The quarterly sales growth was primarily driven by China with an increase of 51% over the same period in 2020 and a 68% increase from 2019, as well as Europe, which had an increase of 150% over 2020 and 85% over 2019. Our joint venture businesses increased 56% for the quarter compared to 2020 and 46% as compared to 2019. In addition to China, Mexico and Israel also improved over both periods. Subsidiary sales increased 163% from 2020 and 48% from 2019 despite temporary closures and reduced operating hours in many regions, including India, Canada, Japan and parts of Europe and South America. The UK, Germany, Canada, France, Spain and Italy all achieved notable growth of about 2020 and 2019's comparable periods. Our distributor business improved 122% over last year, though it was down 7% from 2019. Several markets achieved growth not only compared to 2020 but also 2019. These include Australia, Russia, Taiwan, Algeria, South Africa, Scandinavia and Ukraine, among others. Our largest distributor, the UAE, which handles much of our business across the Middle East and parts of Africa and Eastern Europe, saw significant improvements over 2020 and we believe it is continuing to improve. Skechers direct-to-consumer business increased 138% over 2020 and 26% over 2019 despite temporary store closures, primarily in India, Canada, Japan and Chile and reduced hours in many of our international company-owned stores due to local health guidelines. Worldwide comp store sales were up 109% compared to 2020, including 96% domestically and 165% internationally. As compared to 2019, worldwide comp store sales increased 13%, including an increase of 22% domestically and a 9% decrease internationally, reflecting the ongoing store closures. Our direct-to-consumer average selling price per unit rose 17% compared to 2020, indicative of our less promotional stance and the success of our comfort technology products. Given the unpredictability of the coronavirus and its continued impact on many markets, we remain cautious about our return to normal traffic and sales in many international stores but believe that we will see improvements where we are fully open and restrictions will ease. Our domestic direct-to-consumer sales increased 101% compared to the second quarter of 2020 and nearly 30% compared to 2019. Driving this growth was a 232% increase in our retail store sales or 11% over 2019. The domestic retail store improvement was partially offset by a decrease in our domestic e-commerce channel of 25%, which faced difficult comparisons to the prior year. However, it is important to note that domestic e-commerce sales were up 337% over 2019. Our international direct-to-consumer business increased 259% over the second quarter of 2020 and 20% over 2019. The growth as compared to 2019 was the result of a larger international company-owned retail store base and increases in our e-commerce business. A number of markets achieved growth over both 2020 and 2019, including the UK, Spain, Germany, Mexico and others. Our e-commerce channel remains a meaningful growth opportunity and continues to grow this business. We recently launched our new loyalty program in the United States, which we will be capitalizing on in the coming weeks. We're also looking forward to the planned expansion of our worldwide e-commerce presence this year and into 2022. In the second quarter, we opened 13 company-owned Skechers stores, including key locations in Antwerp, Barcelona Berlin and Lima. We closed eight locations in the second quarter as leases expired. We have opened three stores to-date in the third quarter and have another three planned through the end of the month, with another 20 to 25 expected to open by year's end. An additional net 63 third-party Skechers stores opened in the second quarter across 26 countries, including our first in the Dominican Republic. In total, at quarter end, there were 4,057 Skechers stores around the world. Another 145 to 155 third-party stores are expected to open by year-end. Sales in our domestic wholesale business improved significantly. 206% in the second quarter compared to the same period in 2020 and 31% compared to the same period in 2019. Nearly every product category we achieved growth in the quarter with the highest gains coming from sports, kids, casual and our seasonal sandal footwear. Additionally, the average selling price per pair increased, reflecting the appeal of our new comfort product and technologies. Innovations in developing footwear technology has been a significant part of our DNA for much of our history. Going back to our made to last occupational footwear to the lightweight cushioning and performance material for our first generation Skechers GO RUN and GO WALK lines, the features that deliver comfort in every pair. Our core product philosophy of comfort, style, innovation and quality at the right price is resonating with consumers, especially during these difficult times as we believe people are embracing a more relaxed lifestyle and want to incorporate comfort into their work and week end wear. Throughout the quarter, we were strategic in our approach to marketing, communicating the comfort and innovations of Skechers vast collection of products for men, women and kids. In the second quarter, our multiplatform approach included television, outdoor, print and online in many global markets. This created awareness, helped drive sales and resulted in our record revenues. To further support our business in the coming year, we are enhancing our infrastructure with new distribution centers in Peru, the UK and Japan and are looking for a location in India. We have completed our new 1.5 million square foot China distribution center, which as of this month is fully operational. We are continuing to work on the expansion of our LEED Gold-certified North American distribution center, which will bring our facility in Southern California to 2.6 million square feet in 2022. Given our global growth, we are confident that Skechers innovative collection of comfort footwear and apparel resonated with consumers as they began returning to work, dining out, shopping and traveling. Where markets were open and restrictions eased, sales exceeded our expectations. And in the markets that were largely closed due to local health guidelines, we still performed well given the circumstances. We believe our exceptional results in the second quarter are signs of the power of the brand globally. Skechers second quarter results were remarkable and even exceeded our internal targets for the period. They clearly illustrate the strength of our comfort technology product portfolio, resident brand and the focused execution of our global growth strategy. And we delivered these results despite lingering obstacles posed by the pandemic, including supply chain challenges, continued store closures and operating restrictions primarily in some international markets. Now let's turn to our second quarter results where we will provide comparisons to both prior year and 2019. Since the prior year is heavily influenced by the impact of the pandemic and numerous lockdowns, I will largely focus my commentary on the comparisons to 2019 because we believe it is a more meaningful period against which to assess our performance. Sales in the quarter achieved a new record totaling $1.66 billion, an increase of $928.3 million or 127% from the prior year and a 32% increase over the second quarter of 2019 with both our domestic and international businesses growing over 30%. On a constant currency basis, sales increased $857 million or 118% from the prior year. International wholesale sales increased 95% year-over-year and grew 37% compared to the second quarter of 2019. Our joint ventures grew 56% year-over-year, led by China which grew 51% on the strength of robust e-commerce demand, partially offset by weakness in several adjacent markets, which are still being impacted by the pandemic. As compared to the second quarter of 2019, China grew by 68%. Subsidiary sales increased an impressive 163% year-over-year and as compared to the second quarter of 2019 grew 48%. The improvement versus 2019 was primarily the result of volume increases, particularly in Europe. Our distributor business grew 122% year-over-year, declined by 7% as compared with the second quarter of 2019. We are pleased by the year-over-year growth in this business, which as expected continues to recover more slowly from the pandemic. However, we remain optimistic that this business retains its attractive long-term growth characteristics. Direct-to-consumer sales increased 138% year-over-year, supported by growth in both domestic and in international markets, albeit at a lower rate due to store closures in the period. As compared with the second quarter of 2019, direct-to-consumer sales increased 26%, the result of a 30% increase domestically and a nearly 20% increase internationally. Domestic wholesale sales grew 206% year-over-year and as compared to the second quarter of 2019 increased 31%. As indicated on last quarter's earnings call, we continue to see very positive underlying trends with the majority of our domestic wholesale partners, including healthy sell-through rates and strong average selling prices. Gross profit was $849.5 million, up 130% or $480.9 million compared to the prior year. Gross margin for the quarter was 51.2%, an increase of over 70 basis points versus the prior year and 270 basis points as compared to 2019. In both instances, gross margins improved as a result of higher average selling prices across all segments. Compared to 2020, the increase in gross margin was partially offset by channel mix, including a lower proportion of e-commerce sales and a higher proportion of domestic wholesale sales. Total operating expenses increased by $220.3 million or 51% to $652.44 million in the quarter versus the prior year period. Selling expenses in the quarter increased year-over-year by $72.2 million or 120% to $132.4 million. However, as a percentage of sales, this represented a year-over-year decrease of 30 basis points and as compared to 2019, a 100 basis point reduction. The dollar increase year-over-year was primarily due to higher demand creation spending as markets reopened globally. General and administrative expenses in the quarter increased year-over-year by $148 million or 40% to $519.9 million but decreased as a percentage of sales by almost 20 percentage points. The dollar increase year-over-year was primarily reflective of increased labor and incentive costs as well as volume-driven expenses and warehouse and distribution for all our businesses globally. Earnings from operations were $201.2 million versus a prior year loss of $61 million, an increase of $262.2 million. Compared to the second quarter of 2019, earnings from operations increased 81%, operating margin was 12.1% as compared with 8.8% in the second quarter of 2019, an increase of 330 basis points. Net earnings were $137.4 million or $0.88 per diluted share on 156.7 million diluted shares outstanding. This compares to prior-year net loss of $68.1 million or $0.44 per diluted share on 154.1 million diluted shares outstanding. As compared to the second quarter of 2019, net earnings improved 83% from $75.2 million or $0.49 per diluted share. Our effective income tax rate for the quarter was 20.4% versus an income tax benefit of $4.3 million in the prior year and an 18.4% effective tax rate in the second quarter of 2019. And now, turning to our balance sheet. Our cash and liquidity position remain extremely healthy. During the second quarter, we fully repaid our revolving credit facility, of which $452.5 million was outstanding and still ended the quarter with $13.2 billion in cash, cash equivalents and investments. This reflects a decrease of 234.5 million or 15.1% from June 30, 2020. Trade accounts receivable at quarter-end were $778.2 million, an increase of $300.2 million from June 30, 2020, predominantly a result of higher wholesale sales. Total inventory was $1.06 billion, an increase of 2.9% or $29.5 million from June 30, 2020. The increase is primarily attributable to higher inventories to support growth in Asia. Total debt, including both current and long-term portions, was $312 million at June 30, 2021 compared to $763.3 million at June 30, 2020, reflecting the repayment of our revolving credit facility during the quarter. Capital expenditures for the second quarter were $62 million, of which $23.1 million related to the expansion of our joint venture on domestic distribution center in the United States, $14.7 million related to investments in our direct-to-consumer technologies and retail stores, $8 million related to our new now fully operational distribution center in China and $7.8 million related to investments in our new corporate offices in Southern California. Our capital investments remain focused on supporting our strategic growth priorities, growing our direct-to-consumer business as well as expanding the presence of our brand internationally. For the remainder of 2021, we expect total capital expenditures to be between $150 million and $200 million. Now, I will turn to guidance. Given our outstanding performance this quarter as well as cautious optimism that the recently resurgent virus impacts will be limited. We expect third quarter and full year results above our previous guidance range in both sales and earnings per share. We expect third quarter 2021 sales to be in the range of $1.6 billion and $1.65 billion and net earnings per diluted share to be in the range of $0.70 and $0.75. For fiscal 2021, we now expect sales to be in the range of $6.15 billion and $6.25 billion. And net earnings per diluted share to be in the range of $2.55 and $2.65. We anticipate that gross margins over the back half of the year will be up as compared to the back half of 2019. And then, our effective tax rate for the year will be approximately 20% as compared to a rate of 5.5% in 2020 and 70% in 2019. Our second quarter performance exceeded expectations with three new records, quarterly revenues of more than $1.6 billion, gross margins of 51.2% and diluted earnings per share of $0.08. Our innovative comfort product resonated with consumers around the world, conversions and foot traffic improved in many of our retail stores opened during the period and our e-commerce business continued to perform well. Although we remain in a fluid situation with various government responses to COVID globally, given our performance in the first half of the year, the strength of our brand in our product, we believe, our momentum will continue in the back half of the year and into next year. We remain focused on driving sales by managing our inventory flow, developing and delivering fresh new innovative product and communicating our message to consumers that Skechers is the comfort technology company.

compname announces record second quarter 2021 sales of $1.66 billion and diluted earnings per share of $0.88. q2 earnings per share $0.88. q2 sales $1.66 billion versus refinitiv ibes estimate of $1.49 billion. sees fy earnings per share $2.55 to $2.65. sees q3 earnings per share $0.70 to $0.75. sees q3 sales $1.6 billion to $1.65 billion. sees fy sales $6.15 billion to $6.25 billion.

I hope you, your colleagues, and loved ones are healthy and staying safe. The pandemic continues to impact business throughout the world, but Skechers has seen meaningful improvements from the second quarter including a return to growth in many markets. Third quarter sales were $1.3 billion, which was a 3.9% decrease from the prior year but a 78.3% increase over the second quarter, a significant accomplishment and an encouraging sign of the health of our brand. Growth came from each of our segments as the retail environment steadily improved with our wholesale channel stabilizing and in several instances growing. We believe our third quarter results speak to the relevance of our product, resilience of our company's distribution model and our plan to emerge from the pandemic even stronger than before. In these uncertain times when people are predominantly working from home and more focused on their well-being, consumers desire comfort and we have the product they want and need. Athletic and casual footwear and apparel with a focus on comfort is precisely in our wheelhouse. In our domestic wholesale business, growth came primarily from our adult athletic, casual and sandal footwear, along with single-digit improvements in our men's and women's collections. We experienced double-digit improvement in our kids' footwear, which is particularly notable given the absence of a traditional back-to-school selling season and many children still learning remotely. Our domestic wholesale business returned to growth in the quarter, rising 6.3% a result of pent-up demand and the relevance of our product. We saw similar sales trends for our comfortable footwear and our other business channels with a return to growth in many markets and quarterly improvements in our own direct-to-consumer business. The more than 3,770 Skechers stores e-commerce sites and availability in many of the leading retailers worldwide gave us the opportunity to fulfill demand and satisfy customers as the markets reopen. The pace of recovery has differed across geographies but where markets are stable and open, Skechers experienced solid growth in sales. Our joint venture business was up 14% led by an increase of 23.9% in China where our e-commerce business was particularly strong. Our European subsidiaries were up 18.1% overall led by fantastic growth in Germany as well as in France and Central Eastern Europe. Our distributor business was down double digits due to ongoing store closures in several markets including our largest distributor, which covers the Middle East. However several markets recorded positive sales including Australia New Zealand and Scandinavia among others. By the end of the third quarter all but a few Skechers retail locations were open although many were operating with limited hours. In the quarter we also opened 24 pre-COVID planned stores including flagship locations on Rue de Rivoli, the premier shopping street in France Oxford Circus in London and Shinjuku in Tokyo. And two stores in Colombia and another 19 domestic and international locations. One store closed in the quarter. We plan to open several key locations in the fourth quarter including our first in Munich and Berlin. In the third quarter, our direct-to-consumer business decreased 16.9%, as consumer traffic remained challenged mostly in tourist and destination concept stores as well as continued store closures in some markets. However, our domestic e-commerce business continued to grow significantly, even as our retail locations reopened increasing 172.1% in the quarter. That said we showed sequential improvement in our brick-and-mortar stores particularly in our big box locations throughout the third quarter and from the fourth -- from the second quarter. We continue to invest in our direct-to-consumer experience. During the quarter we began a full-scale update to our point-of-sale system. And are now connected with our e-commerce channel, allowing consumers to shop our product online and pick up in one of our more than 500 U.S. locations, either in-store or curbside. We believe these investments to fully integrate our physical and digital ecosystems, into one omnichannel experience will drive sales as shopping online has become a preference and a growing necessity for many consumers. In addition to the 24 company-owned stores, 189 new third-party Skechers stores opened around the world and 48 closed bringing our total company-owned third-party store count to 3,770 worldwide, at quarter end. To support the reopening of our business in markets around the world, we strategically heightened our advertising efforts, continuing with the digital focus, while adding in-store, outdoor and new television campaigns for our comfort footwear, including one with baseball great and World Series Champion Clayton Kershaw, who played this week in custom Skechers cleats. We believe the steps we have taken to protect and improve our business, to reopen stronger than ever, is evident in the growth we have achieved in many markets, including most notably our domestic wholesale channel. As we strive to continue this positive trend worldwide, we are further enhancing our infrastructure as well as our digital business. Our new 1.5 million square foot China distribution center remains on track. And we are working diligently on the expansion of our North American distribution center, which we expect to be completed in the second half of 2021 bringing our facility to 2.6 million square feet. We also completed the expansion of our European distribution center, bringing it to 2.1 million square feet and expect to open our first U.K.-based distribution center by the end of this year. Also we have opened new distribution centers in Panama and Colombia, all to pave the way for growth as well as increased e-commerce business. We are on track to upgrade our e-commerce platforms in Canada, Europe, South America, Japan and India. Further, as we continue to build our logistics centers for growth. And as we experience the pent-up demand for our product, we are ramping up our supply chain with increased factory production capacity, to be in line with our future product needs. Their unwavering dedication has positioned Skechers for the recovery we are beginning to see in our business. This quarter was a stark improvement over last quarter, as sales improved in each of our segments and total sales grew 78.3%. Where conditions returned to a degree of normalcy, our business responded, with growth reminiscent of prior years. Where pandemic restrictions persisted our businesses weathered the situation and improved steadily. Our sales were down only 3.9% year-over-year, which we view as a major accomplishment. As conditions normalize further worldwide, we are confident that Skechers will return to growth because our distinctive value proposition continues to resonate with consumers. And our core, casual, athletic, styles are on trend. Despite the current environment, we continue to invest for growth, with a focus on our direct-to-consumer capabilities and global distribution infrastructure. We are confident these investments will continue to propel our brand, by allowing us to scale quicker and meet growing worldwide demand. Now let's turn to our third quarter results. Sales in the quarter totaled $1.3 billion, a decrease of $53.1 million or 3.9% from the prior year quarter. On a constant currency basis, sales decreased $65.6 million or 4.8%. Domestic wholesale sales increased 6.3% or $18.8 million, fueled by consumer demand for multiple categories, across men's, women's and kids. International wholesale sales decreased 0.5% in the quarter. Our distributor business decreased 43.7% in the quarter, reflecting continuing challenges, in distributor-led markets. But our subsidiaries were up 1.5%. And our joint ventures grew 14%. China sales grew 23.9% for the quarter, as demand rebounded, especially in e-commerce channels. Direct-to-consumer sales decreased 16.9%, the result of a 15.3% decrease domestically and a 19.6% decrease internationally, reflecting both challenged consumer traffic trends and the impact of temporary store closures. However, these results were partially offset by another robust increase in our domestic e-commerce business of 172.1%. Gross profit was $625.1 million, down $28 million compared to the prior year on lower sales volumes. Gross margin was relatively flat compared with the prior year, as increased promotional activity in our joint ventures was nearly offset by a favorable mix shift in our online and international sales. Total operating expenses increased by $24.3 million or 4.7%, to $536.2 million in the quarter. Selling expenses decreased by $11.6 million, or 11.9%, to $85.9 million, primarily due to lower global advertising and trade show expenditures. General and administrative expenses increased by $35.9 million, or 8.7%, to $450.3 million, which was primarily the result of an $18.2 million one-time non-cash compensation charge related to the cancellation of restricted share grants associated with the recent legal settlement, as well as volume-driven increases in warehouse and distribution expenses for both our international and domestic businesses. Earnings from operations was $92.1 million versus prior year earnings of $147.4 million. Net income was $64.3 million, or $0.41 per diluted share, on 155 million diluted shares outstanding. However, adjusting for the one-time non-cash compensation charge previously mentioned, net income was $82.6 million, or $0.53 per diluted share. These compare to prior year net income of $103.1 million, or $0.67 per diluted share, on 154 million diluted shares outstanding. Our effective income tax rate for the quarter decreased to 15.4% from 15.8% in the prior year. And now turning to our balance sheet. We ended the quarter with $1.5 billion in cash, cash equivalents and investments, which was an increase of $468.2 million or 45.4% from December 31, 2019, primarily reflecting the drawdown of our senior unsecured credit facility in the first quarter. Trade accounts receivable at quarter end were $709 million, an increase of 9.9%, or $63.6 million from December 31, 2019, and an increase of 7% or $46.6 million from December 30, 2019. The increase in accounts receivable was primarily due to higher wholesale sales, both domestically and in international markets. Total inventory was $1.05 billion, a decrease of 1.5% or $16.5 million from December 31, 2019, but an increase of 18.3% or $163 million from the September, 30, 2019. The increase in year-over-year inventory levels is largely attributable to increases in our international markets, especially in preparation for Singles' Day in China. Domestic inventory levels declined year-over-year. Overall, we feel confident in our inventory levels and continue to actively manage supply and demand, aiming to position the business constructively for next year. Total debt, including both current and long-term portions, was $812 million compared to $121.2 million at December 31, 2019. The increase primarily reflects the drawdown of our senior unsecured credit facility in the first quarter. Capital expenditures for the third quarter were $63.6 million, of which $24.6 million related to the expansion of our domestic distribution center, $19.2 million related to new store openings and remodels worldwide, as well as a new point-of-sale system and $11.4 million related to our new corporate offices in the United States. Our capital investments remain focused on our strategic priorities, enhancing our direct-to-consumer relationships and augmenting our global distribution infrastructure. This quarter we launched several digital solutions, including our new website and two mobile applications, BOPIS and BOPAC capabilities in the majority of our domestic stores and a refresh of our in-store point-of-sale systems. We also continued to make progress, despite the pandemic, on our new distribution center in China and expansions to our North American, South American and European facilities. We have also begun the process of opening a new logistics center in the United Kingdom in anticipation of a post-Brexit environment. We now expect total capital expenditures for the remainder of the year to be between $100 million and $125 million, inclusive of the aforementioned projects. Overall, we are pleased with our third quarter performance and remain confident that Skechers will continue to successfully navigate this dynamic environment. However, we will not be providing revenue and earnings guidance this quarter, as the environment remains too unpredictable to forecast reliably. We experienced meaningful improvements from the second quarter in all channels of our business, especially in our domestic wholesale, which grew mid-single digits. Additionally, our wholesale business in many other markets was up single and double digits. Our direct-to-consumer sales improved since the second quarter and backlogs are up in many key countries including the United States. We remain very aware of the global health crisis, yet we remain confident in our actions and the strength of our brand and business as countries reopen and consumer confidence grows. The diversity of our distribution channels broad-based consumer demographics and our exceptionally strong balance sheet and ample liquidity have been especially beneficial to our success during this challenging year. We believe consumers will continue to gravitate toward comfort in their lives and our athletic casual product at a reasonable price will continue to have worldwide appeal. We see many opportunities for near and long-term growth and believe, we will be in an even stronger position in the future.

compname reports q3 adj. earnings of $0.53 per share. q3 sales $1.3 billion versus refinitiv ibes estimate of $1.22 billion. quarterly diluted earnings per share were $0.41. q3 adjusted earnings per share $0.53. quarterly china sales grew 23.9 percent year-over-year. not providing further financial guidance at this time.

I hope you, your colleagues, and loved ones are staying safe and healthy. We couldn't have weathered the storm in such good shape without all your hard work. Many countries faced another surge of the pandemic in the fourth quarter, which negatively impacted businesses around the world, resulting in temporary store closures and reduced traffic. Even with the ongoing health crisis and challenges, Skechers experienced growth in several of our segments and meaningful improvements in key countries. Our fourth quarter sales were $1.32 billion, a half of 1% decrease from the prior year which was a fourth quarter record and notably a sequential improvement from the third quarter of nearly 2%, illustrating the continuing recovery of our business. Our strong year-over-year sales in the fourth quarter was the result of a 1.2% increase in our domestic wholesale business and a 1.1% increase in our international business, which was led by nearly 30% sales increase in China, as well as growth in Europe and Latin America. Throughout the quarter and year, we strategically directed the flow of inventory to markets that were open, delivered fresh product to consumers and continued to fulfill demand resulting in growth in many key distribution channels. In 2020 consumers searched and desired comfort and value. With comfort as the cornerstone of the Skechers design initiatives, along with style and value inherent to our product development, we are a natural choice for all, including essential workers and those working from home. In our domestic wholesale business, our fourth quarter sales growth of 1.2% came primarily from our athletic casuals, walking and work footwear, as well as high single-digit improvement in our men's business. The domestic business decreased 2.8% due to a 7.6% decline in our direct-to-consumer sales, which was negatively impacted by reduced traffic in our brick-and-mortar stores, a result of the stay at home guidelines, and an overall decline in foot traffic and tourism. We believe our domestic brick-and-mortar stores will continue to be impacted by the pandemic at least through the first half of the year, though we expect to see improvement as more people receive vaccinations and government restrictions ease. The decrease in our domestic direct-to-consumer business was partially offset by a 142.7% increase in our domestic e-commerce channel, which continues to perform extremely well. With a focus on improving our direct-to-consumer experience over the holiday season, customers were able to shop online and pickup in store at many of Skechers locations across the United States. We are now completing the update to our point-of-sales system to better connect within our e-commerce channel and we are finalizing enhancements to our loyalty program, both of which we believe will further improve our omnichannel offering. We continue to view our e-commerce channel as an opportunity for meaningful growth, as sales increased significantly on both our domestic and international sites that we currently operate, and this coming year, we plan to launch new sites across Europe and South America, which will provide both a better brand experience for consumers as well as new sales channel for Skechers in many regions. Our international direct-to-consumer business decreased 4.4% which was due to a decline in traffic with stay at home guidelines, reduced hours and temporary closures primarily in Europe, Canada and Latin America. In total, Skechers direct-to-consumer segment decreased 6.4% as the pandemic spread again in numerous markets temporary store closures and reduced hours continued. In the United States, consumer traffic at our stores was approximately 35% lower and operating hours were reduced by approximately 20%. For our international company-owned stores we effectively lost 17% of the days available to days available to sell during the quarter. At quarter end nearly 10% of our company-owned stores were closed due to health guidelines. Today, due to government restrictions, a number of our international locations remain closed or have reduced hours. All Skechers stores in the United States are open and some domestic regions are trending positive, while others are still impacted by reduced hours and traffic due to local guidelines. To note, while our direct-to-consumer business decreased in the fourth quarter, we did experience sequential quarterly sales improvement of 9.5%. In the fourth quarter, we opened 19 company-owned Skechers stores, 12 of which were international locations, including a flagship store in Munich. We closed 6 locations in the fourth quarter and another 18 have closed to date in the first quarter. By the end of the first quarter, another 5 to 7 company owned stores are expected to close. An addition of 108 third party Skechers stores opened in the fourth quarter, bringing our total store count at quarter end to 3891. The stores that opened were across 22 countries with China opening the most locations including our first dedicated golf store at the same Mission Hills Golf Resort in Shenzhen. Our international sales improved 1.1% over the same period last year and sequentially 4.5% higher than the third quarter. Our international wholesale business improved 2.5% from the fourth quarter last year. This was the result of increases in our joint venture business with 19.4% led by an increase of 29.7% in China and an increase in our subsidiaries of 12.7%. The subsidiary growth was across Europe and Latin America with exceptional improvements in the United Kingdom and Germany, as well as in Chile and Spain. As expected, our distributor business was down 57.9% due to ongoing store closures in several markets, including our largest distributor, which covers the Middle East. To support the open markets during the holiday selling period, our marketing efforts were focused on comfort with commercials and digital advertising to support key initiatives for men's, women and kids. This included a new campaign with former quarterback and lead NFL commentator Tony Romo for max cushioning, who you will see in a Skechers Super Bowl commercial this Sunday. To support our business during 2020 and for the coming years, we took steps to not only enhance our POS systems and e-commerce platforms, including the addition of BOPIS and BOPAC in the United States, but also enhanced our distribution centers and supply chain production capabilities. Along with opening a new logistic center in Columbia, we have a distribution center in the United Kingdom to serve the region in a post Brexit environment. The automation of our new 1.5 million square foot China distribution center remains on track for full implementation by midyear and we continue working on the expansion of our North American distribution center which will bring our facility to 2.6 million square feet in 2022. We anticipate many markets will remain challenged in the first half of the year due to the pandemic, but believe some countries are showing signs of recovery. During this time, we will continue to manage the flow of our inventory to fulfill demand where we are open, spend prudently in markets still impacted and drive sales where possible. 2020 was an extremely challenging year and the fourth quarter was no exception. Multiple markets continue to experience significant operating restrictions, including store closures and reduced operating hours. Despite this, the Skechers brand performed exceptionally well with encouraging sell-through and strong gross margins. In addition, the Skechers organization continued to effectively navigate the uncertainty of this environment, while making investments for the future. While we expect similar challenges to continue for at least the first half of 2021, we are confident that the strength and resilience of the Skechers brand and the execution of our growth strategy focused on expanding our international footprint and increasing our direct-to-consumer relationships will deliver shareholder value. Now, let's turn to the fourth quarter results. Sales in the quarter totaled $1.32 billion, a decrease of $6 million or half of a 0.05% below the prior year. We believe that this is a notable accomplishment when considering both the current operating environment and last year represented a fourth quarter sales record for the company. On a constant currency basis, sales decreased $33.5 million or 2.5%. Domestic wholesale sales increased 1.2% or 3.5 million, fueled by broad strength across customer types and encouraging consumer sell-through in multiple categories. International wholesale sales increased 2.5% in the quarter. Our subsidiaries were up 12.7%, led by Latin America and Europe, which grew 29.9%, and 22.9% respectively. Our joint ventures were up 19.4% in the quarter. China sales grew 29.7%, driven by strong e-commerce channel performance, particularly around Singles' Day and December's 12/12 event. These increases were offset by our distributor business, which as expected, decreased 57.9% or $72.6 million in the quarter, reflecting acute challenges in several distributor managed markets. Direct-to-consumer sales decreased 6.4%, the result of a 7.6% decrease domestically and a 4.4% decrease internationally, reflecting both challenged consumer traffic trend and the impact of temporary store closures in operating our restrictions. However, these results were partially offset by another strong increase in our domestic e-commerce business of 142.7%. Gross profit was $648.4 million up $10.7 million compared to prior year. Gross Margin increased over 100 basis points versus the prior year, primarily driven by a favorable mix of international and online sales and an increase in domestic wholesale average selling price, where higher full price sell through of several of our innovative platforms like Arch Fit and Max Cushioning drove average selling prices higher. Total operating expenses increased by $47.4 million or 8.6% to $595.7 million in the quarter. Selling expenses increased by $9.2 million or 10.4% to $97.9 million, primarily due to an increase in domestic demand creation through digital advertising channels. General and Administrative expenses increased by $38.1 million or 8.3% to $497.8 million, which was primarily the result of volume driven expenses in warehouse and distribution for both our international and domestic e-commerce businesses. Earnings from operations was $57.7 million versus prior earnings of $94.1 million. Net earnings were $53.3 million or $0.34 per diluted share on 155.4 million diluted shares outstanding. Net income included a one-time, discrete tax benefit of $15.9 million. Excluding the effects of this one-time tax benefit adjusted diluted earnings per share were $0.24. These compared to prior year net income of $59.5 million or $0.39 per diluted share on 154.6 million diluted shares outstanding. Our effective income tax rate for the quarter was a negative 14%. And now turning to our balance sheet. We ended the quarter with $1.37 billion in cash and cash equivalents, which was an increase of $545.9 million or 66.2% from December 31, 2019. The inventories, primarily reflects the company's outstanding borrowings of $452.5 million on a senior unsecured credit facility. However, even net of those borrowings and nearly $310 million in capital expenditures, cash and cash equivalents grew by over $90 million. Trade accounts receivable at quarter end were $619.8 million, a decrease of 4% or $25.5 million from the prior year end. The decrease in accounts receivable was primarily due to lower distributor sales. Total inventory was $1.02 billion, a decrease of 5% or $53.1 million from December 31, 2019. The decrease in year-over-year inventory levels is largely attributable to lower domestic and European inventories, partially offset by higher inventories in China to support sales growth. China inventories declined versus the third quarter. Overall, we feel confident about our inventory position and continue to actively manage our supply to meet customer demand positioning the business constructively for the balance of this year. Total debt including both current and long-term portions were $735 million at December 31, 2020 compared to $121 million at December 31, 2019. The increase primarily reflects the drawdown of our senior unsecured credit facility in the first quarter of 2020. Capital expenditures for the fourth quarter were $96.7 million, of which $48.9 million related to the expansion of our joint venture owned domestic distribution center, $13.9 million related to investments in retail technologies and stores, $11.4 million related to our new distribution center in China, and $7 million related to our new corporate offices in California. Our ongoing capital investments remains focused on our strategic priorities, enhancing our direct-to-consumer capabilities and augmenting our global distribution infrastructure. In 2021, we expect total capital expenditures to be between $275 and $325 million. The fourth quarter, like all of 2020 was a challenge. However, we saw many encouraging trends our performance. Our brand strength, distinctive and compelling value proposition, and healthy balance sheet gives us continued competence that Skechers is poised for a return to growth in 2021 and beyond. However, due to the continued uncertainty in the retail marketplace, we will not be providing guidance this quarter, as the environment remains too unpredictable to forecast reliably. A year ago, Skechers achieved a new fourth quarter sales record, while the brand and business trends across all segments were exceptionally strong. Now as we continue to face challenges due to the ongoing health crisis, our fourth quarter sales increased only a 0.5% to 1% from the prior year record. This important accomplishment was the result of the continued demand for Skechers product, the diversity of our distribution model, and our efforts to drive value by maximizing revenue and efficiently managing inventory. Skechers brand strength was most notable in our online business with strong triple digit growth, as well as meaningful growth in our domestic wholesale business, and in many of our biggest international markets, including China, Germany and the United Kingdom. We continue to see our products resonating with consumers with comfort, value and style at the forefront of our product design. We are a key footwear brand during these difficult times. We have an exceptionally strong balance sheet and ample liquidity both important to our success in the quarter and to position ourselves for future growth. Our backlogs have improved across many distribution channels, a positive sign for many countries. We believe our business will continue to be impacted by the global pandemic in the first half of 2021. Though we are cautious through the global health crisis, we remain confident in our strategic initiatives, the relevance of our brands and our efforts to develop new product innovations and the many opportunities for growth in both the near and long-term.

compname reports q4 earnings per share of $0.34. q4 earnings per share $0.34. q4 sales $1.32 billion versus refinitiv ibes estimate of $1.31 billion. qtrly china sales grew 29.7% year-over-year. qtrly domestic wholesale sales grew 1.2% year-over-year. not providing further financial guidance at this time.

I will now read the safe harbor statement. Specifically, the COVID-19 pandemic has and is currently having a significant impact on the company's business, financial conditions, cash flow and results of operations. At this time, there is significant uncertainty about the duration and extent of impact of the COVID-19 pandemic. I hope you, your colleagues and loved ones are doing well. As we mark our 30th year in business, we remain focused on the wellbeing of our teams worldwide and are extremely proud and grateful that the entire organization continues to operate with flexibility, resiliency, efficiency, and above all, safely. Skechers achieved a new fourth quarter sales record of $1.65 billion, the second highest quarterly sales in the company's history, and gross margins of 48.6%. This is a remarkable achievement, given the challenges we faced as the global pandemic continued to impact our business. For the full year, Skechers achieved record sales of $6.29 billion with strong gross margins of 49.3%. These exceptional results bring us closer to our goal of $10 billion in five, or $10 billion by 2026. While the disruptions and costs remained a challenge in the global supply chain for the fourth quarter, our logistics team worked diligently to navigate around them. We saw improvements in December with more goods moving through our distribution centers than in the previous months. The improvement continued through January as port congestions eased, and more containers reached our distribution center. However, we believe these challenges will remain through the first half of 2022. But we are optimistic they will ebb in the latter half of the year. We continually monitor the developments within the supply chain to deliver our products as efficiently as possible. The fourth quarter sales gain of 24% was the result of a 10% increase in our domestic sales and a 34% increase in our international sales. International represented 65% of our total sales for the fourth quarter. All our reportable segments achieved growth for the quarter and full year, with international wholesale registering the highest gains for both periods. We attribute this exceptional global growth to the ongoing broad-based demand for the Skechers brand and products. Consumers continue to embrace the outdoors for exercise, dining and many other activities and sought out Skechers for our comfort, innovation, style and quality, all at a reasonable price. Our international wholesale business grew 30% year over year in the fourth quarter, with increases coming from all our channels, reflecting the global strength of our brand. Our distributor business was the largest growth driver with a 124% increase, led by the Middle East and followed by Russia, Scandinavia, Indonesia, and Turkey. Subsidiary sales increased 47% with double-digit growth coming from nearly every country. Several even achieved triple-digit growth. The strongest gains came from the United Kingdom and India, two of our largest markets. We believe this impressive sales growth is due to both strong demand for our product and our ability to deliver goods as some of the port pressure eased. Our joint venture business increased 10% for the quarter on strong sales in China and Mexico, as well as the addition of the Philippines, which transitioned from a distributor model to being directly managed by Skechers. China's high single-digit growth in the quarter is particularly notable, given temporary store closures in select provinces due to COVID-19 and the supply chain restrictions, which resulted in a delay of some 11.11 inventory. E-commerce still achieved double-digit growth for the quarter. The improvements in our joint venture business were partially offset by declines in several markets in Asia due to COVID-19, inventory challenges and a decline in tourism. An additional net 128 third-party Skechers stores opened in the fourth quarter across 30 countries, including our first in Bhutan, a notable number of franchise locations in China and India, as well as through our distributors in Australia, New Zealand, Turkey, among others. In total, at quarter-end, there were 2,946 third-party Skechers stores around the world. Skechers' direct-to-consumer business achieved quarterly sales gains of 30%, driven by a 52% increase in international and a 17% increase domestically. Worldwide comparable same-store sales increased 21%, including 15% domestically and 36% internationally. Further, our direct-to-consumer average selling price per unit increased 25%. This was reflective of our less promotional stance, higher-priced products and the continued strong demand for the innovative features in our comfort technology footwear. The increase of 17% in our domestic direct-to-consumer business was the result of a 24% gain in our brick-and-mortar stores, partially offset by a decrease of 12% in domestic e-commerce, which was challenged by low inventory availability during periods in the quarter. As compared to the same period in 2019, our domestic e-commerce business increased 115%. The increase in our international direct-to-consumer business was primarily driven by strong retail sales across Europe and Latin America. This was despite the temporary closure of several stores in Austria and the Netherlands due to local health restrictions. We continue to invest in our direct-to-consumer capabilities in the quarter by upgrading our POS systems in North America and the U.K. And we are currently in the process of completing updates in Japan, with Europe to follow. The rollout of new e-commerce sites continued in the fourth quarter with the launch of new platforms in the United Kingdom, India, Germany and Austria. More markets are planned for 2022, including several in Europe slated for this quarter. These investments further our progress as an omnichannel retailer, capable of addressing consumer demand whenever, wherever and however the shopper wants. In the fourth quarter, we opened 16 company owned Skechers stores, including eight in India, two in Colombia and one each in France, Italy, Peru, and Chile. We closed three locations in the quarter. This brings the global company owned and third-party Skechers store count to 4,306 at year-end. To date, in the first quarter, we've opened six stores in the United States and one in Italy, and we plan to open an additional 120 to 150 company-owned locations by year-end. We closed 11 stores in the United States at the end of January, and by the end of the year, expect to close another five to 10 locations, the majority of which are mall-based concept stores. Sales in our domestic wholesale business improved 5% in the fourth quarter. The growth came primarily from our women's and kids categories, though our men's running and walking categories also performed well. We believe our domestic wholesale growth is particularly positive, given the supply chain challenges that continue to impact consumers in the United States. We are able to improve our deliveries in December from earlier in the quarter and are continuing to maintain a current flow of goods through our North American distribution center with the pace of shipments to our wholesale partners picking up, allowing us to better meet the demand for Skechers in our largest market. One of our main priorities is to meet consumers' needs with comfortable footwear at a reasonable price, and we're doing just that. We have seen consumers react positively to our product globally with the consistent and universal demand for Skechers comfort technology. The expansion of our offering with more comfort fits, fresh collaborations and styles that incorporate recycled materials allow Skechers to appeal to an everwidening consumer base and for shoppers to meet more of their footwear needs with the brand they trust. As always, we drove awareness to our various product offerings through multichannel marketing efforts that united the Skechers message across all touch points, online and in-store, as well as through television, radio, magazines, outdoor, and social media. While 2021 was a record year, we expect the momentum to continue into 2022. We are strategically investing in both our distribution and corporate infrastructure. In India, we purchased our corporate headquarters in January and finalized the location for a new DC to be opened in 2023. We relocated our Japan distribution center, more than doubling our space. And we also recently relocated to a slightly larger distribution space in Panama with the intent to build an additional center, allowing us to grow from 270,000 square feet to approximately 800,000 square feet in 2023. The expansion continues on our LEED certified Gold North American distribution center, which will bring our facility in Southern California to 2.6 million square feet later this year. 2021 proved to be yet another challenging year with more COVID-related operating restrictions, closures and supply chain disruptions, many of which continued in the fourth quarter. Despite these challenges, Skechers delivered another exceptional quarter and year. Strong product and brand momentum yielded higher average selling prices in our direct-to-consumer business, as well as among many of our wholesale partners. This translated into record sales and a recovery in our operating margins above what we expected at the beginning of the year. We also continued to make investments throughout the year in our core strategies, growing our business internationally and increasing the depth of our relationships with consumers in our direct-to-consumer business. Before getting into specifics about this quarter's performance, let me spend a moment to provide an update on the supply chain disruptions we spoke about last quarter. First, we note that many of those disruptions, manufacturing delays, extended transit times, port congestion and elevated freight rates persisted throughout the quarter, and we worked diligently to mitigate the impact of these obstacles. Alongside our factories, distribution partners and wholesale accounts, we worked to get product on to shelves as quickly as possible. The effect of these challenges was most evident in our inventory balances, which include an incremental $325.1 million in in-transit inventory, a year-over-year increase of over 130%. This inventory supports orders to our wholesale accounts and our own direct-to-consumer business, which could not be sold in the quarter. As David mentioned, we recently started to see an improvement in the delivery rate of containers and are optimistic this will continue. We are monitoring events daily but expect some level of these challenges to persist well into 2022. Nonetheless, we remain confident in the strength of our brand and trajectory of our business and have fully embraced the goal of achieving $10 billion in sales by 2026. This confidence in the long-term health of the business encouraged our board to authorize a new three-year share repurchase program of up to $500 million, which we expect to fund through free cash flow. Now, let me turn to details of our fourth quarter financial results, where we will provide comparisons to both the prior year and where appropriate to 2019. Sales in the quarter achieved a new fourth quarter record totaling $1.65 billion, an increase of $323.2 million or 24% from the prior year and a 24% increase over the fourth quarter of 2019. Direct-to-consumer sales increased 30% year over year, supported by growth in domestic and international markets of 17% and 52%, respectively. Both markets delivered meaningful improvements in gross margins and strong year-over-year average selling price growth. As compared with the fourth quarter of 2019, direct-to-consumer sales increased 22%, the result of an 8% increase domestically and a 45% increase internationally. International wholesale sales increased 30% year over year and grew 33% compared to the fourth quarter of 2019. Our distributor business grew 124% year over year but remains slightly below pre-pandemic levels. This channel continues to make good strides toward recovery, particularly in critical markets like the Middle East and Russia. Subsidiary sales increased 47% year over year, and as compared to the fourth quarter of 2019, grew 66%. The improvement was primarily the result of a strong recovery in many markets heavily impacted by the pandemic last year, including the United Kingdom, Spain, and India. Our joint ventures grew 10% year over year, led by a 9% growth in China. As compared to the fourth quarter of 2019, this reflects a 32% increase. The growth in China was driven by strong e-commerce demands, somewhat tempered by slower traffic patterns in retail stores, as well as temporary pandemic-related store closures. Continuing weakness in several adjacent markets also weighed on joint venture growth in Asia. Domestic wholesale sales grew 5% year over year, and we continue to see very positive underlying trends among our domestic wholesale partners, including strong sell-through rates and higher average selling prices. Gross margin for the quarter was 48.6%, a decrease of 30 basis points year over year due to higher freight expense and the mix impact of higher sales in our distributor business, which is an inherently lower gross margin business with very attractive operating margins. These were partially offset by higher average selling prices. Total operating expenses increased by $119.4 million or 20% to $715.1 million in the quarter versus the prior year but improved 160 basis points as a percentage of sales from 45% to 43.4%. Selling expenses in the quarter increased year over year by $24.2 million or 25% to $122.1 million, reflecting additional demand creation spending globally. General and administrative expenses in the quarter increased year over year by $95.2 million or 19% to $593 million. However, as a percentage of sales, this represented an improvement of 160 basis points. The dollar increase was due to a combination of factors, including higher retail store labor, incentive compensation, settlements of multiple legal matters and distribution-related costs. Earnings from operations were $93.1 million versus prior year earnings of $57.7 million, an increase of $35.4 million or 61%. Operating margin improved 120 basis points to 5.6% as compared with 4.4% in the prior year. Net earnings were $402.4 million or $2.56 per diluted share on 157.3 million diluted shares outstanding. We recorded an income tax benefit of $346.8 million in the quarter, resulting from an intra-entity transfer of certain intellectual property, which will be amortized in the future. Excluding the effects of this nonrecurring tax benefit and the settlement of multiple legal matters, adjusted diluted earnings per share were $0.43. This compares to prior year net earnings of $53.3 million or $0.34 per diluted share on 155.4 million diluted shares outstanding. Our effective tax rate for the fourth quarter was a negative 399%, which reflects the benefit of the intellectual property transfer. The company's effective income tax rate was a negative 43.2% for the full year, which includes a 60.9% impact from the intellectual property transfer in the fourth quarter. Excluding this benefit, our effective tax rate would have been 17.7% for the full year. And now turning to our balance sheet. Our cash and liquidity position remained extremely healthy. We ended the quarter with $1.04 billion in cash, cash equivalents and investments. This reflects a decrease of $539.6 million or 34% from December 31, 2020. As a reminder, we fully repaid our revolving credit facility in the second quarter of 2021, of which $452.5 million was outstanding last year. Also, in December, we expanded our senior unsecured credit facility to $750 million, which retains a $250 million accordion feature that provides for total liquidity of up to $1 billion. Trade accounts receivable at quarter-end were $732.8 million, an increase of $113 million from December 31, 2020, predominantly the result of higher wholesale sales. Total inventory was $1.47 billion, an increase of 45% or $454.2 million from December 31, 2020. However, as previously noted, this balance reflects an increase of $325.1 million in in-transit inventory, attributable mainly to supply chain disruptions. Total debt, including both current and long-term portions, was $341.6 million at December 31, 2021, compared to $735 million at December 31, 2020. Capital expenditures for the fourth quarter were $74 million, of which $28.7 million related to the expansion of our joint venture-owned domestic distribution center, $16 related to investments in our new corporate offices, $14.2 million related to investments in our direct-to-consumer technologies and retail stores and $5.9 million related to our distribution centers in China, the United Kingdom, and Japan. Our capital investments remain focused on supporting our strategic priorities, growing our direct-to-consumer business, as well as expanding the presence of our brand internationally. For 2022, we expect total capital expenditures to be between $250 million and $300 million, reflecting continuing investments, both in the U.S. and internationally in our distribution infrastructure, omnichannel retail capabilities and corporate offices. Now, I will turn to guidance. For fiscal 2022, our projections are predicated upon the expectation that the pandemic and its aftereffects such as supply chain disruptions will continue but will begin to ease in severity over the course of the year. We expect sales to be in the range of $7 billion to $7.2 billion and net earnings per diluted share to be in the range of $2.70 to $2.90. For the first quarter, we expect sales to be in the range of $1.675 billion to $1.725 billion and net earnings per diluted share in the range of $0.70 to $0.75. We anticipate that gross margins will be down slightly compared to last year as freight costs will offset improved pricing. Our effective tax rate for the year is expected to be between 19% and 20%. Achieving record sales for the fourth quarter of $1.65 billion and for the year at $6.29 billion is a tremendous accomplishment, especially given the supply chain constraints and ongoing COVID-related challenges. The comfort, innovation, style and quality of Skechers resonating with consumers around the world and drove an increase in sales of 24% for the fourth quarter and 37% for the full year, with gross margins of 48.6% and 49.3%, respectively. Towards the close of 2021, we saw improvements in the moving of goods through our North American distribution center and are hopeful that the current COVID variant has reached its peak here, as well as in many countries and the world can begin to normalize again. Our logistics teams are working tirelessly to address the supply chain challenges, monitoring the situation globally, with the goal of delivering Skechers comfort footwear to our customers and consumers as quickly as possible. We do expect the supply chain disruptions to continue through at least the first half of this year. 2022 marks our 30th anniversary in business, and we're looking forward to the continued growth and implementing the many strategic plans underway. We'll be introducing more innovative and comfort technology product, developing multi-platform marketing campaigns with our growing roster of ambassadors, including recently announced television personality, Amanda Kloots, and rolling out more Skechers e-commerce sites around the world, including Spain, Portugal and Italy shortly. We are finalizing plans to enter the metaverse, creating an entirely new opportunity for the Skechers brand and are further driving home the message that Skechers is the comfort technology company. Innovation, comfort and creativity will be at the forefront of our product and marketing efforts, supported by efficiency and determination in our operations to deliver product. Our focus is on ensuring the health and safety of the Skechers team as we look to the future. And together, as determined and driven organization, we will make 2022 another record year and continue on the road to $10 billion in sales.

compname reports q4 adjusted earnings per share of $0.43. q4 adjusted earnings per share $0.43. q4 earnings per share $2.56. q4 sales rose 24.4 percent to $1.65 billion. sees q1 earnings per share $0.70 to $0.75. sees fy earnings per share $2.70 to $2.90. sees q1 sales $1.675 billion to $1.725 billion. sees fy sales $7.0 billion to $7.2 billion.

Today's call is being hosted from the Schlumberger-Doll Research Center in Boston, following the Schlumberger Limited Board meeting held earlier this week. Joining us on the call are Olivier Le Peuch, Chief Executive Officer; and Stephane Biguet, Chief Financial Officer. These matters involve risks and uncertainties that could cause our results to differ materially from those projected in these statements. I therefore refer you to our latest 10-K filing and our other SEC filings. Our comments today may also include non-GAAP financial measures. I will then share some insights on the Middle East and offshore markets, and finally, a first view of the 2022 growth outlook. The third quarter results further emphasize our returns focus, consistent execution, and the advantaged mix of our portfolio. Growth momentum was sustained, and we delivered a fifth consecutive quarter of margin expansion, achieving the highest pre-tax operating margin since 2015 and cash flow from operations in excess of $1 billion. Let me share with you some performance highlights from the quarter, across our core, digital, and new energy. In our core: First, margin expansion was led by Well Construction and Reservoir Performance where we fully seized the sequential growth opportunity, driving operating margins in both these divisions above mid-teens, the highest levels in the last three years. Revenue quality improved, boosted by favorable activity mix and higher new technology uptake that delivered strong margin expansion. Second, internationally, we recorded growth in all three areas, with revenue up 11% year-on-year, consistent with our ambition of double-digit revenue growth compared to the second half of 2020. International margins further expanded, exceeding pre-pandemic levels and are the highest since 2018. In North America, revenue growth was sustained, albeit impacted by transitory supply and logistics disruptions. Margins also continued to expand, with operating margins firmly at double digits. Finally, we are pleased with the very sizable activity pipeline secured during the quarter, through competitive tenders, direct awards and contract extensions, some of which include net pricing improvement, building on our differentiated performance, integration capabilities, and technology. These wins enhance our market position, creating a long tail of activity and a platform to further our new technology adoption and digital deployment, strengthening our leadership as we enter an exceptional growth cycle. We are delivering on the promise of our performance strategy, which is increasingly impacting our top- and bottom-line results, both in North America and internationally. As the cycle accelerates, we'll leverage our advantaged platform to capture the exciting growth and outperform the market in our core going forward. Moving to Digital: We continued to progress our platform strategy this quarter, expanding our offering through the acquisition of Independent Data Services and a strategic investment in DeepIQ to further advance our digital technology offerings and the adoption of AI solutions in our industry. In digital production operations, we announced a partnership with AVEVA to expand powerful edge and IoT solutions to the field, complementing our Agora platform and Sensia solutions. This achievement is a significant step for our industry, particularly offshore, and signals a momentous opportunity to apply digital technology to create a step change in well construction safety, performance and carbon footprint. As shared recently, we are seeing the adoption of digital solutions accelerate in our industry. And while we are in the early innings, we are excited about the prospect of transitioning the majority of our software customer base, of over 1,700 companies, to our digital platform during the next few years. This growing adoption will generate an expanding set of digital revenue streams over a long horizon, as we transition every customer to new digital solutions for their data, workflows and operations. Moving to New Energy: We advanced our portfolio by taking a position in stationary energy storage through our strategic investment in EnerVenue, a company with differentiated metal-hydrogen battery technology. This represents a new opportunity set and an expansion of total addressable market in a sector with significant growth opportunities. In geoenergy, following the success of the pilot in our technology facility in France, Celsius Energy has secured five commercial contracts in Europe. This is a significant achievement in the commercialization roadmap for Celsius as a low-carbon solution for heating and cooling buildings, contributing to global efforts in reducing emissions. Now, I would like to turn to the near-term macro and the growth opportunity ahead of us. The market fundamentals have improved steadily throughout 2021, especially over the last few weeks, with oil and gas prices attaining recent highs, inventories at their lowest levels in recent history, a rebound in demand and encouraging trends in the pandemic containment efforts. These strengthening industry fundamentals, combined with the actions of OPEC plus and continued capital discipline in North America, have firmly established a prospect of an exceptional multi-year growth cycle ahead. In the international markets, all regions are set to benefit from this highly favorable environment, something not seen internationally since the last super cycle. This expansion will occur at different paces, across different basins, operating environments and customer groups, resulting in a sustained, multipronged growth cycle. Our broad exposure across these different dimensions puts us in an advantaged position to fully seize this growth opportunity. For example, this growth inflection is already visibly underway in Latin America, sparked by the resumption of exploration and the initiation of long-cycle development campaigns. Activity has strengthened throughout 2021, and revenue in this market is already at 2019 pre-pandemic levels. Year-to-date revenue growth in Latin America is at 30%, with broad activity growth across multiple countries, including Argentina, Brazil, Ecuador and Guyana. This growth is expected to strengthen further in the coming years due to ongoing long-cycle development campaigns. By contrast, in the Middle East, where activity has been more subdued in 2021, the market conditions are set for a material uptick of activity in the coming quarters. The combination of short-cycle activity to meet supply commitments, strategic oil capacity expansion and the acceleration of gas development projects will result in a significant increase in investment throughout 2022 and beyond. In the offshore markets, we are also set for a strong resurgence this cycle. Rig activity grew for the third sequential quarter internationally and is expected to build on the notable increase in development FIDs in the coming years. Advances in new technology, digital and integration are driving performance impact offshore, from discovery to well construction, production and recovery, and are creating the conditions for offshore operators to reinvest with confidence in this cycle. In North America, the imminent resumption of lease sales in the Gulf of Mexico, where we have significant market presence, will drive additional offshore growth, as operators capitalize on the advantages of this prolific basin and its existing takeaway infrastructure and extract more value from their core upstream positions through exploration and tiebacks. Taking these factors together, a broad offshore resurgence will result from IOCs building on their advantaged hubs, independents fast-tracking development of their recently acquired assets and NOCs unlocking their gas and oil reserve recovery potential. Our technology, digital enablement and integration capabilities are critical advantages in this market environment and are resulting in significant new contract awards, both internationally and in North America. Finally, we are extremely pleased with customer reception of our Transition Technologies portfolio, and the accelerated adoption of these technologies that reduce the carbon impact of oil and gas operations. This portfolio is focused on fugitive emissions, flaring and electrification, and is already helping customers decarbonize operations, advancing our net-zero ambition and strengthening our sustainability leadership in the industry. Some examples of this impact are cited in our highlights. Directionally, we anticipate another quarter of growth, with an ambition for growth across all divisions. Growth will be led by Production Systems and Digital & Integration, benefiting from a year-end sales uplift, tempered by typical seasonality in Reservoir Performance and Well Construction. This should result in an overall sequential growth rate similar to the prior quarter. With this fourth quarter outlook, we expect to reach our double-digit international growth ambition for the second half of 2021, when compared to the second half of 2020. It will also translate into full year revenue growth, both internationally and in North America, after adjusting for the effect of divestitures. Building on third quarter operating margins at recent highs, our ambition is to sustain this level of margin performance in the fourth quarter. Consequently, on a full year basis, we remain confident in attaining the high end of our guidance of 250 bps to 300 bps EBITDA margin expansion, an excellent foundation for expansion in the year ahead. Against the backdrop of the constructive environment I described earlier, our confidence in the onset of an exceptional growth cycle is reinforced. At this early point in the planning cycle, and absent of setback in economic and pandemic recoveries, we anticipate very strong global upstream capital spending growth. This growth will impact all basins, every operating environment, short- and long-cycle activity and all customer groups. In North America, we anticipate capital spending growth to increase around 20%, impacting both the onshore and offshore markets. Internationally, growth momentum will strengthen, and early indications point to strong capital spending growth in the low- to mid-teens, driven by both short-cycle activity and the onset of multiyear capacity expansion plans. Through our performance strategy, we have strengthened our position across multiple dimensions. In North America, we have enhanced our market positioning and are now biased to accretive growth onshore and will benefit from strong growth offshore in the Gulf of Mexico. And in the international markets, we have built a multiyear pipeline of strong activity in the most prolific basins that will lead the supply response, both in oil and gas. More importantly, we have enhanced our earnings growth potential significantly, as demonstrated by multiple quarters of margin expansion. In North America, our operating margins are primed to exit the year at the highest levels since 2015, which, combined with the favorable market position I've just described, is an excellent platform for margin expansion. Internationally, we are also set for peer-leading margin expansion, as we exit 2021 with margins above pre-pandemic levels. The combination of strong activity growth and operating leverage will support durable margin expansion. Additionally, through our Fit-for-Basin and Transition Technologies, and capacity tightening, we see favorable conditions for broader net pricing net gains in the coming year, in both North America and the international markets. Finally, as a result of our digital platform strategy and growing customer adoption, we anticipate an acceleration of our digital journey, resulting in accretive revenue and earnings growth. Consequently, we expect margins to expand further in 2022, supporting material earnings growth potential and are increasingly confident in achieving our mid-cycle adjusted EBITDA margin ambition of 25% or higher and sustaining a double-digit free cash flow margin throughout the cycle. I will now pass the call to Stephane. Third quarter earnings per share, excluding charges and credits, was $0.36. This represents an increase of $0.06 compared to the second quarter of this year and an increase of $0.20 when compared to the same period of last year. In addition, we recorded in the third quarter a $0.03 gain relating to a start-up company we had previously invested in. This company was acquired during the quarter and, as a result, our ownership interest was converted into shares of a publicly traded company. Overall, our third quarter revenue of $5.8 billion dollars increased 4% sequentially. Pretax operating margins improved 120 basis points to 15.5% and have now increased five quarters in a row. Margins expanded sequentially in three of our four divisions, with very strong incremental margin in both Reservoir Performance and Well Construction. This performance was due to a favorable geographic mix, driven by continued international revenue growth, as well as a favorable technology mix, with increased exploration and appraisal activity and new technology adoption. Companywide adjusted EBITDA margin of 22.2% in the quarter increased 90 basis points sequentially. It is worth noting that this margin expansion was achieved despite the well documented disruptions in global supply chain systems and inflation in select commodities and materials, as well as in logistics. Through our global supply chain organization, we are successfully engaging with our suppliers and customers to jointly navigate inflationary trends. We are collaborating with our customers to optimize planning and, where applicable, make the necessary adjustments through existing contractual clauses or negotiation. As a result, so far, we have largely been able to shield ourselves from the inflation effects. As the growth cycle accelerates, we will continue to be proactive, dynamically adjusting sourcing strategies, and leveraging our diverse global manufacturing footprint and supply network. Let me now go through the third quarter results for each divisions. Third quarter Digital & Integration revenue of $812 million was essentially flat sequentially as lower sales of digital solutions were offset by higher APS revenue. Pretax operating margins increased 154 basis points to 35%, largely as a result of improved commodity pricing in our Canada APS project. Reservoir Performance revenue of $1.2 billion increased 7% sequentially. This revenue growth was entirely driven by higher international activity. Margins expanded 202 basis points to 16%, largely due to higher offshore and exploration activity, as well as accelerated new technology adoption. Well Construction revenue of $2.3 billion increased 8% sequentially due to higher land and offshore drilling, both internationally and in North America. Margins increased 230 basis points to 15.2% due to the higher drilling activity and a favorable geographical mix. Finally, Production Systems revenue of $1.7 billion was essentially flat sequentially while margins decreased 27 basis points to 9.9%. Cash flow from operations was once again strong as we generated $1.1 billion of cash flow from operations and free cash flow of $671 million during the quarter. This represented a significant sequential increase when adjusting for last quarter's exceptional tax refund of $477 million. We paid $42 million of severance during the quarter. Excluding these payments, the working capital impact on our cash flow was neutral despite the revenue increase. This was driven by a very strong DSO performance. We expect the fourth quarter to show another quarter of strong free cash flow generation, which positions us favorably to achieve our ambition of delivering full year double-digit free cash flow margins. As a result of this strong cash flow performance, net debt decreased sequentially by $588 million to $12.5 billion. During the quarter, we made capital investments of $399 million. This amount includes capex, investments in APS projects and multiclient. For the full year 2021, we are now expecting to spend approximately $1.6 billion on capital investments. In total, during the first nine months of the year, we have generated over $2.7 billion of cash flow from operations and $1.7 billion of free cash flow. As a result, we have been able to progress significantly on our commitment to deleverage the balance sheet. This is evidenced by the fact that gross debt has decreased by almost $1.5 billion since the beginning of the year. Net debt has reduced by $1.4 billion during this same period. Overall, I am very pleased with our cash flow performance and the progress we are making toward strengthening the balance sheet. This will provide us with greater flexibility in our capital allocation. I will now turn the conference call back to Olivier. So, I think we are ready for the Q&A session at this point.

qtrly gaap eps, including charges and credits, was $0.39 and increased 30% sequentially. qtrly eps, excluding charges and credits, was $0.36. qtrly global revenue of $5.85 billion increased 4% sequentially and 11% year-on-year. qtrly north america revenue of $1.13 billion increased 4% sequentially. qtrly pretax segment operating margin 15.5% versus 10.9%. qtrly revenue growth was led by well construction and reservoir performance. international revenue is on track to meet double-digit revenue growth ambition for second half of 2021 compared to same period last year. capital investment for full-year 2021 is now expected to be approximately $1.6 billion. looking ahead, we anticipate another quarter of growth, and expect to close 2021 with strong momentum. schlumberger - industry fundamentals have strengthened this year, particularly in recent weeks-with demand recovery, commodity prices at recent highs. higher drilling revenue in north america offshore was partially offset by hurricane-related disruption in quarter.

Today's call is being hosted from Houston, following the Schlumberger Limited board meeting held earlier this week. Joining us on the call are Olivier Le Peuch, chief executive officer; and Stephane Biguet, chief financial officer. These matters involve risks and uncertainties that could cause our results to differ materially from those projected in these statements. I therefore, refer you to our latest 10-K filing and our other SEC filings. Our comments today may also include non-GAAP financial measures. Thereafter, I will follow with our view of the 2022 outlook and some insights into our near-term financial ambitions. The fourth quarter was characterized by broad-based activity growth. With continued momentum in North America, activity acceleration in the international markets and an accretive offshore market contribution, upon which we delivered strong sequential revenue growth, our sixth consecutive quarter of margin expansion and outstanding double-digit free cash flow generation. These financial results conclude an exceptional year of financial performance for Schlumberger, at a pivotal time for the company and in our industry at large. Underlying these results are the following highlights from the quarter. Geographically, sequential growth in North America exceeded rig activity, growing in excess of 20% offshore and international revenue growth accelerated, closing the second half of 2021, up 12% versus the prior year. All international areas posted growth, driven by gains in more than 75% of our international business units. By division, revenue in all four divisions grew sequentially and when compared to the same period last year. Digital Integration led growth, posting double-digit sequential growth and record-high margins. well construction and reservoir performance, our predominantly service-oriented Divisions, outperformed expectations with strong sequential growth and approximately 30% growth year over year on a pro forma basis. production systems recorded year-end sales, which drove mid-single-digit growth, though partially impacted by logistics challenge. Operating margins expanded in spite of seasonality effects, improving further beyond prepandemic levels. And finally, we generated outstanding cash flow from operation exceeding $1.9 billion in the quarter. All in all, I am very pleased with our operational execution, our safety performance and our financial results through the fourth quarter. Now, let me briefly reflect on what we achieved in 2021. In our core, we fully operationalized our returns-focused strategy, leveraging our new division and basin organization to seize the start of the upcycle. In North America, this resulted in full year topline revenue growth, excluding the effects of divestures and significantly expanded margins achieving double digits, one of the financial targets we laid out in 2019. Internationally, we also grew the topline and expanded margins significantly, as international activity strengthened in the second half of the year. This also resulted in full year international margins that exceeded 2019 levels. Taken together, these margins resulted in the highest global operating margins of the last six years, setting an excellent foundation for further expansion, as activity accelerates and market conditions further support pricing improvement. In Digital, our second engine of growth, I am very proud of the momentum we established during the year. We advanced on our goals to expand market access and accelerate adoption of our platform, AI capabilities and powerful digital tools to reduce cycle time, improve performance and lower carbon intensity. We built partnerships to achieve comprehensive cloud access globally, collaborated with AI innovators to deploy machine-learning and AI solutions and enabled digital operations through the automation of key workflows in well construction and production operations. At the end of 2021, we have more than 240 commercial DELFI customers, recorded more than 160% DELFI user growth year over year and saw a more than tenfold increase in compute-cycle intensity on our DELFI cloud platform. We also made significant progress in our data business streams and digital operations advancing our OSDU commercial offerings, autonomous drilling and the adoption of Agora Edge Ai and IoT solutions with great success. The Q4 results, including significant uptake in digital sales and sizable incremental margins, are a clear testament of this success. In Schlumberger New Energy, we continue to advance the development of clean energy technologies and low-carbon projects. In 2021, we took a position in stationary energy storage, expanding our total addressable market. And advanced all of our venture in hydrogen, lithium, geoenergy and a suite of CCUS opportunities, including our bioenergy CCS project. Some notable milestones achieved include the signature of pilot agreements by Genvia, our hydrogen venture, with ArcelorMittal, Ugitech, Vicat and Hynamics leading companies in steel and cement. And in Celsius, our geoenergy venture, we secured five commercial contracts in Europe and one in North America for a prestigious university campus. This was also a pivotal year for us in terms of our commitment to sustainability. We announced our comprehensive 2050 net-zero commitment, inclusive of Scope 3 emissions and launched the Transition Technologies portfolio to focus on the decarbonization of oil and gas operations with much success. In addition, Schlumberger earned an AA Rating by MSCI and won an ESG Top Performer Award by Hart Energy, recognizing our sustainability efforts, our enhanced disclosures and our commitment to apply our technologies and capabilities toward helping the world meet future energy demand. In summary, 2021 was a great year for Schlumberger. Beyond these operational and financial results and our ESG accomplishments, we made excellent progress in our core, digital and new energy, the three engines of growth that support our success now and well into the future. Above all, I am most proud of our people. Their unique ability to execute, remobilizing operations across the world through numerous pandemic constraints, adapting the logistics and supply chain dynamics and setting new performance benchmarks, all of which earned the recognition of our customers. They surpassed all of our targets this year and created excellent momentum as we enter 2022, for which I would like now to share our outlook. Looking ahead, we have increased confidence in our view of robust multiyear market growth. Tight oil supply and demand growth beyond the prepandemic peak, are projected to result in a substantial step up in capital spending amid shrinking spare capacity, declining inventory balance and supportive oil prices. In addition, we expect more pervasive service pricing improvements in response to market conditions as technology adoption increases while service capacity tightens. In essence, 2022 will be a period of stronger short-cycle activity resurgence driven by improved visibility in the demand recovery and greater confidence in the oil price environment. And as oil demand exceeds prepandemic levels in 2023 and beyond, long cycle development will augment capital spending growth in response to the current supply. This demand led capital spending growth sets the foundation for a strong multiyear upcycle. Indeed, this scenario is already being established, as the number of FIDs increases, service pricing has begun to improve and multiyear long cycle capacity expansion plans have started particularly internationally and offshore as seen during the last quarter. Turning to 2022, more specifically, we expect an increase in capital spending of at least 20% in North America, impacting both the onshore and offshore markets, while internationally, capital spending is projected to increase in the low-to-mid teens, building momentum from a very strong exit in the second half of 2021. All areas and operating environments short and long cycle, including deepwater are expected to post strong growth, with upside potential as omicron disruptions dissipate as the year advances. In this scenario, increased activity and pricing will drive simultaneous double-digit growth both internationally and in North America that will lead our overall 2022 revenue growth to reach mid-teens. Our ambition is to, once again, expand operating and EBITDA margins on a full year basis, exiting the year with EBITDA margins at least 200 bps higher than the fourth quarter of 2021. In this context, let me share how we see the year unfolding. Directionally, while we are still experiencing COVID-related disruptions, we anticipate typical seasonality in the first quarter, with revenue and margin progression similar to historical sequential trends, which will be seen most prominently in digital and integration. This will be followed by a strong seasonal uptick in the second quarter across all divisions with growth further strengthening through the second half of the year supporting our full-year, mid-teens revenue growth ambition and EBITDA margin expansion. This growth and margin expansion trajectory gives us further confidence that we will reach or exceed our mid-cycle ambition of 25% adjusted EBITDA margin before the end of 2023, leading to adjusted EBITDA that should visibly exceed 2019 levels in dollar terms. Fourth quarter earnings per share excluding charges and credits was $0.41. This represents an increase of $0.05 compared to the third quarter of this year and $0.19 when compared to the same period of last year. In addition, we recorded a net credit of $0.01 bringing GAAP earnings per share to $0.42. This consisted of a $0.02 gain relating to the sale of a portion of our shares in Liberty Oilfield Services, offset by a $0.01 loss relating to the early repayment of $1 billion of notes. Overall, our fourth quarter revenue of $6.2 billion increased 6% sequentially. All divisions posted sequential growth, led by digital and integration. From a geographical perspective, International revenue grew 5%, while North America grew 13%. Pretax operating margins improved 31 basis points sequentially to 15.8% and have increased for six quarters in a row. This sequential margin improvement was driven by very strong digital sales, which helped sustain overall margins, despite seasonality effects in the Northern Hemisphere. Companywide adjusted EBITDA margin remained strong at 22.2%, which was essentially flat sequentially. Let me now go through the fourth quarter results for each division. Fourth quarter digital and integration revenue of $889 million increased 10% sequentially with margins growing by 268 basis points to 37.7%. These increases were driven by significantly higher digital and exploration data licensing sales which were partly offset by the effects of a pipeline disruption in Ecuador that impacted our APS projects. Reservoir performance growth further accelerated in the fourth quarter with revenue increasing 8% sequentially to $1.3 billion. This growth was primarily due to higher intervention and stimulation activity in the international offshore markets. Margins were essentially flat at 15.5% as a result of seasonality effects and technology mix, largely driven by the end of summer exploration campaigns in the Northern Hemisphere. Well construction revenue of $2.4 billion increased 5% sequentially due to higher land and offshore drilling, both in North America and internationally. Margins of 15.4% were essentially flat sequentially as the favorable combination of increased activity and pricing gains was offset by seasonal effects. Finally, production systems revenue of $1.8 billion was up 5% sequentially, largely from new offshore projects and year-end sales. However, margins decreased 85 basis points to 9%, largely as a result of the impact of delayed deliveries due to global supply and logistic constraints. Now, turning to our liquidity. Our cash flow generation during the fourth quarter was outstanding. We delivered $1.9 billion of cash flow from operations and free cash flow of $1.3 billion during the quarter. This was the result of a very strong working capital performance driven by exceptional cash collections and customer advances. Cash flows were further enhanced by the sale of a portion of our shares in Liberty, generating net proceeds of $109 million during the quarter. Following this transaction, we hold a 31% interest in Liberty. On a full year basis, we generated $4.7 billion of cash flow from operations and $3 billion of free cash flow. We generated more free cash in 2021 than in 2019, despite our revenue being 30% lower. This is largely attributable to our efforts of the last two years relating to the implementation of our capital stewardship program and the high grading of our portfolio. As a result of all of this, we ended the year with net debt of $11.1 billion. This represents an improvement of $2.8 billion compared to the end of 2020. We are proud to say that net debt is now at its lowest level of the last five years. During the year, we also continued to reduce gross debt by repaying $1 billion dollars of notes that were coming due in May of this year. In total, our gross debt reduced by $2.7 billion in the last twelve months thereby significantly increasing our financial flexibility. Now, looking ahead to 2022. We expect total capital investments, consisting of capex and investments in APS and exploration data, to be approximately $1.9 to $2 billion dollars, as compared to just under $1.7 billion in 2021. This increase will allow us to fully seize the multiyear growth opportunity ahead of us, while still achieving our double-digit free cash flow margin objective. We are entering this growth cycle with a business that is much less capital-intensive as compared to previous cycles. As a reminder, during the last growth cycle of 2009 to 2014 our total capital investment as a percentage of revenue was approximately 12%. We are, therefore, well positioned to fully reap the benefits of this growth cycle with the potential for enhanced free cash flow margins and return on capital employed. With this backdrop, I would like to emphasize that based on the industry fundamentals and positioning of the Company that Olivier highlighted earlier, our financial outlook for 2022 is very strong. We have high expectations and in 2022, we expect a triple double consisting of double-digit return on capital employed, double-digit return on sales and double-digit free cash flow margin. It is worth noting that we have not experienced this combination in a single year since 2015. Finally, I am pleased to announce that we will hold a Capital Markets Day in the second half of the year. This event will allow us the opportunity to provide you with additional details relating to Schlumberger's strategy and financial objectives. Further information regarding this event will be forthcoming shortly. I will now turn the conference call back to Olivier.

fourth-quarter revenue of $6.22 billion increased 6% sequentially and 13% year-on-year. fourth-quarter gaap earnings per share of $0.42 increased 8% sequentially and 56% year-on-year. fourth-quarter eps, excluding charges and credits, of $0.41 increased 14% sequentially and 86% year-on-year. qtrly pretax segment operating margin of 15.8% versus 11.8% reported last year. sequential q4 revenue growth was broad based across all geographies and divisions, led by digital & integration. qtrly north america revenue of $1.28 billion increased 13% sequentially. looking ahead into 2022, industry macro fundamentals are favorable, due to steady demand recovery, increasingly tight supply market. schlumberger - capital investment (comprised of capex, multiclient, aps investments) for full-year 2022 expected to be between $1.9 billion and $2.0 billion. schlumberger- absent any further covid-related disruption, oil demand expected to exceed prepandemic levels before end of year, further strengthen in 2023. sees double-digit growth in international and north american markets for year ahead.

We have just come from the historic opening of what I consider New York's most thrilling and unique destination, Summit One Vanderbilt, opened to the public earlier today. At 11 a.m., we cut the ribbon in the transcendence room, high above One Vanderbilt with the most incredible and amplified views of New York City. The room is aptly named because everything we've done with this building has been about transcending limits and pushing boundaries. We're doing it again today, but this time, we're taking it to a much higher level literally. At the ribbon-cutting ceremony, I spoke about how One Vanderbilt is representative of what the true 21st century office tower can be. It redefines what it means to integrate excellence in design, efficiency, sustainability, amenity, health, wellness and commutability. By putting it all together, we've established a new category of building, a new icon on the skyline and a new model for the workplace. As a result, we are now more than 90% leased despite COVID, and despite every dire prediction of the city's demise. Several months after we opened this building, we introduced Daniel Boulud's Le Pavillon to the Midtown restaurant scene, and that too was an important milestone for New York, marking the reopening of indoor dining. Every available table has been booked every single night since its opening in May, and there were a lot of questions when we opened that restaurant about whether the New York had enough of a population here in Midtown to support this restaurant. And the restaurant has hundreds and hundreds on waiting list every evening. This time, we've done more than push the boundary, we've completely shattered it. We spent years in design, taking the best elements of observation decks, cultural institutions, experiential art and immersive technology, and combined it all into Summit. The result is an experience that has the potential to not only become one of the most sought-after destinations in New York City, but a true global phenomenon. The energy in New York has been palpable this past month. New York is back. On certain days of the week, we are reaching nearly 40% physical occupancy in our portfolio, a substantial increase that's been building up over the past few weeks. As a sense of normalcy returns to the city, ambitious projects, like One Vanderbilt, ensure that New York remains a top global destination. People from around the world come here to shop, to be entertained, to enjoy great food, to see great architecture and visit world-class museums. Summit now becomes an important addition to that lineup. The primary drivers of this market, finance, technology, business services, media and healthcare, are all doing unbelievably well, and beginning to make space commitments that evidence net demand in our market that will stabilize the occupancy rate and hopefully turn into meaningful positive absorption toward the end of this year and 2022. With over 450,000 square feet leased in the third quarter in our portfolio and nearly 1.4 million square feet leased in SL Green portfolio to date, we are tracking well ahead of our leasing goals for the year. And we're doing that at rental levels that are ahead of expectations and almost flat with expiring escalated rents. We carry this momentum into the fourth quarter with the announcement of the seismic Chelsea Piers lease. It's a 56,000 square foot lease to one of the best operators of fitness, wellness and health in New York City. It's only their second Manhattan location. We've been negotiating with Chelsea for quite a while, and they've selected one Madison to be their East side home where they'll be making substantial investment to make a fitness destination that I think is going to be second to none. It's going to be awesome. And that really bodes well for one Madison, which otherwise is already about six to seven weeks ahead of schedule on construction and significantly under budget, even beyond the numbers that we discussed back in December of last year, the buyouts, which now stand at close to 92% of the total project, have resulted in over $12 million of additional contingency savings. And that's above and beyond the savings we had already factored in to that deal through smart bidding, smart project management, and just given the overall state of the construction market right now, we're experiencing savings while the city and I think the nation at large is experiencing cost increase as a result of supply chain issues that are driving up price. So we're managing that to the best we can, staying well within our budget, and one Madison with that new lease now done and more conversations underway, we feel very, very good about that development. During the quarter, we also completed a couple of dispositions previously announced, but we closed them. Most significantly, the consummation of the sale of about a 50% interest to institutional -- overseas institutional investor in the News Building. And we have more transactions teed up that we think we'll be able to complete in the fourth quarter. So we continue to have great success in monetizing our assets, our gains, and we see that continuing to Q4. That, of course, enabled us to repurchase about an additional $80 million of stock in the fourth quarter, which brings us close, but not completely rounded out -- I'm sorry, in the third quarter, my mistake. $80 million of stock in the third quarter. And that brings us close, but not completely rounded out to our repurchase objectives for the year. So as we sit here, end of October with a rigorous two month sprint to the finish line to get done, all we need to do to close out this year and then embark on what we feel is going to be a solid 2022 for this company, and more importantly, this city. I think it's great to have the call on this day. That is really a historic event for the company to open this wonderful experience. It's truly -- it's fun, it's exhilarating, it's thrilling, and it's everything we set out for it to be. With that, I think we'll open up to questions.

revising its earnings guidance ranges.

I've already scheduled time with many of you after the call to fill in the gaps. A quick bit of housekeeping before we start. Cory and I will be participating in two investor conferences during the week of March 7. The first is the Raymond James annual institutional investors conference at the Grand Lakes Resort in Orlando. We'll travel to Boston to present the next day at the UBS annual global consumer and retail conference. With that, let's move on to today's call. Investors should familiarize themselves with the full range of risk factors that could impact our results. Those are filed in our Form 10-K, which is filed with the Securities and Exchange Commission. I want to remind everyone that today's call is being recorded, and an archived version of the call will be available on our website. The first quarter may comprise a small percentage of the year, but it doesn't mean things are slow around here. In fact, there are several important storylines coming out of Q1 that are worth exploring in more detail. Among them: a continued high level of consumer engagement that led to a second straight year of Q1 profitability in the U.S. Consumer segment, with strong momentum as we ended the calendar year; the announcement of a third pricing action in the consumer business that will take effect in the second half of the year; an increase in our full year sales guidance for the segment; some moderation, finally, in commodity prices; continued restrengthening of our supply chain and has us well positioned to meet the demands for the upcoming season; restructuring efforts in Hawthorne that will make the business even stronger; and plenty of activity, including two more Hawthorne acquisitions in what is the most robust M&A pipeline we've had in 25 years. Yes, there's a lot to cover. Before I jump into the details, I want to share a story that helps us put context around the strategy I outlined on our last call and its potential to drive value for our shareholders. As most of you know, my brothers and sisters and I own roughly 25% of the company. As part of our recent meeting with our advisors, we discussed the financial return on the family's investment since the merger of Scotts and Miracle-Gro in 1994. Just like other long-term shareholders, we've done well. The most important part of the discussion, however, was centered around the simple question, why? Why have we done so well? And that's the part of the story that matters to all shareholders. One of the benefits, I believe, from strong family ownership in a public company is that we take a long-term view, and we're not afraid to think like an activist and recognize the need to reimagine the company from time to time. This is one of those times. On our last call, I said we're pursuing five pillars of growth that could double the size of Scotts Miracle-Gro through both organic and acquired growth over the next five years. I also said we would explore the possibility of dividing the company into two pieces. Obviously, those things won't happen overnight. But the progress we've made already this fiscal year demonstrates just how seriously we're focused on this journey and how bold we're willing to be. So let's jump in. I usually leave the numbers to Cory, but I want to start by touching on the P&L. If you're only looking at the year-over-year comparisons, I'd say you're looking at things the wrong way. Look at it with a historical context. While it remains the smallest quarter of the year, Q1 has become increasingly important on a full year basis. We've moved more shipments into the quarter to better serve our retailers, a change that has improved the performance of the business significantly. You'll miss that fact if you just compare the year-over-year results. For example, Q1 volume is down from last year, but up 107% over fiscal '20 and significantly higher when compared to the average in the four years before COVID. This feels like a base we can grow from. The year-over-year gross margin rate is down 2%, but the segment's margin is up more than 1,300 basis points compared to the average of the four years prior to COVID. And that's true in the face of sharply higher commodities. The same story holds with segment income, which was a positive number for only the second time in our history. On average, the bottom line result was $50 million better than in each of the four years prior to COVID. And as we look ahead, there's good reason to believe that the first quarter of U.S. Consumer segment on an EBITDA basis could remain profitable going forward. If we look at consumer activity, it's another good story. In Q1, POS, as measured by consumer purchases at our largest retailers, was up 3% in units. It was up 9% in dollars. Both numbers were against a plus-40 comp a year ago. Normally, I caution against reading too much into our Q1 POS, and that caution still applies. What's different this time, however, is the December quarter marks a continuation of a trend dating back to spring of last year that shows a level of consumer engagement that consistently has outpaced our expectations. The COVID impact on POS continues to complicate the pure year-over-year comparison. But if you look at POS units over the past four quarters, we're up 22% compared to two years ago. More importantly, that two-year comparison has grown stronger with time, suggesting that the COVID benefit may be more permanent than we first expected, which would result in a much higher base from which to grow. I'm not going to predict whether POS for the March quarter will be positive because we continue to have difficult comps. But our most recent consumer sentiment data, which we received just last week, tells us consumers continue to see gardening as important to their lifestyles. It also tells us they plan for their spending levels to be consistent with last year, an important fact given the overall amount of inflation in the economy. And while we continue to expect a modest decline in overall participation levels, more than two-thirds of consumers who do plan to participate in gardening this year said they expect to buy more plants and have bigger gardens. Everything we're seeing and everything our retail partners are sharing with us is cementing our optimism as we move closer to the peak of the season. We've increased our sales guidance for the U.S. consumer business to a range of minus 2 to plus 2% on a full year basis, an increase of 200 basis points from our previous range. This increase does not require us to change our view of the balance of the year. We're able to increase the range for two reasons. First, the Q1 result was better than expected and should be a permanent benefit for the year. Also, we have communicated to our retail partners another price increase for the second half that will impact our full year results by 1%. The difficult decision to take a third price increase in a single year, while unprecedented for Scotts Miracle-Gro, was necessary in the face of continued cost increases that created a bigger headwind than we expected. The additional point of pricing, which takes effect in Q3, will get us back in line with our goal to offset commodity increases that have been a challenge for the past year. Fortunately, we've been seeing a few key commodity inputs peak over the past month, and it's beginning to feel like the worst may be behind us. Like others, we're still seeing higher distribution costs, but I'll leave it to Cory to discuss that in more detail. The additional round of pricing is not merely rooted in protecting our margins. It's about supporting our retailers and protecting our competitive advantages. Over the years, we've built a market-leading position and driven strong returns for our retail partners by investing strongly behind innovation as well as sales and marketing support. These competitive advantages drove both consumer engagement before and during the COVID crisis. We didn't outperform our competitors during COVID due to dumb luck. We won because consumers trusted our brands to deliver the results they are seeking. We won because our marketing team created relevant messages that resonated with those consumers and drove them to the stores. And we won because retailers knew they could count on our sales force to help manage their lawn and garden departments during the height of the crisis. Given the current challenges in the labor market, our in-store sales force is more important than ever in supporting our retailers, and we need to protect that investment. That's also true of our supply chain, which has been able to meet retailer demand when others could not. I said in the last call, we don't like this level of pricing, and I don't. But the actions we've taken allow us to protect those competitive advantages and strengthen our relationship with consumers and retails even further. Speaking of relationships, I want to provide an update on the performance of Bonnie Plants and our strategy for live goods. There is good news on both fronts. First, Bonnie POS is in line with our core legacy brands, and we're expecting another strong season in the edible gardening space. Over the past few months, there have been significant improvements to the Bonnie supply chain, both in the way of process improvement and a new influx of talent. We're also seeing continued integration of our sales and marketing efforts. This should result in better in-store experience for consumers and more cross-selling opportunities for our core brands, especially Miracle-Gro. As you know, we see live goods as an important gateway to the relationship with consumers. Our relationship with Bonnie has already improved the category, and we believe there's more we can do to enhance the range of choices available to consumers. Together with the Bonnie team as well as our partner, Alabama Farmers Coop, we have been actively exploring additional M&A opportunities that could significantly strengthen our live goods portfolio and bring a higher level of consumer-driven innovation and retailer support to the industry. While it's too early to share any details, we're excited by the prospects, and we'll be sharing more with you as these discussions play out. From nearly every angle, I'm extremely bullish about the potential in the core lawn and garden business right now. And I'm equally optimistic about the steps we're taking to further strengthen our franchise and transform what it means to be an industry leader. We knew before COVID hit, demographic trends were starting to work in our favor. We saw that millennials were becoming interested in this space and in our brands. But once their lives became centered around their homes, they turned to gardening in numbers we never expected. A decade ago, this group was barely evident in our results. Today, they're driving our results. Our job is to keep them engaged to have them see gardening as relevant to their lives and to see our brands as critical to their success. Throughout the entire business, we're taking the right steps and making the right investments to ensure this happens. So yes, I'm optimistic as we prepare for the season. That's true not just for fiscal '22 but in the years to come. And I know Mike Lukemire and his entire team see it the same way. Let's shift to Hawthorne. I'll start with the obvious. It's clear this year is going to be a challenge, and we'll see a decline in sales. I'll let Cory cover the numbers, but we already laid out much of what needs to be said in our announcement on January 4. While the current market reality is frustrating, we're not discouraged. We continue to believe in this space and its long-term potential. And over the past several months, there's been a lot of activity occurring that is designed to make the business even stronger when the market returns to growth. As many of you know, Hawthorne experienced a tough downturn in 2018. And it was on one of these calls that I publicly criticized the team for being paralyzed by the stress of the moment and said they needed to step up. You're not going to hear that this time. The learnings from 2018 have helped us tremendously, and the way the team is managing this situation couldn't be more different. First, the team saw the market decline coming as far back as June, and that allowed us to prepare. Second, they knew they couldn't change the reality of the situation, so there was not a panicked effort to chase sales that weren't there. Third and most importantly, they put on their activist hat and said, "How can we use this downturn to make our business better"? I have no doubt their answers to that question will, in fact, make Hawthorne better. So I'm going to pause for a few moments and ask Chris to give you an update. Let me start by taking a quick moment to update you on current industry trends. It's beginning to feel like we've seen the bottom of the market. We haven't bounced off the bottom yet, but daily sales trends have been consistent for about a month, and that makes it a bit easier to navigate. Also, we're beginning to see some slightly better results in consumable categories, like nutrients and growing media, which is also an encouraging sign. You guys know the nature of the industry's challenge right now, so I don't need to elaborate. As I said in our January 4 announcement, we expect to see growth again in the second half of the year, but I'm not going to speculate on exactly when that will happen or to what extent. What I can tell you is that our business will be significantly stronger once the downturn ends. We've made key acquisitions, have taken steps to restructure our manufacturing footprint and realigned the management team based on the future needs of the business. You probably saw our announcement last month about the acquisition of Luxx Lighting and True Liberty Bags, but let me give you some more context. There is no doubt that Gavita is the premier lighting brand in the indoor cultivation space. It has been a home run for Hawthorne and is critical to our long-term success. And Sun System, the private label brand we acquired from Sunlight Supply, is a solid opening price point fixture. Lighting is the most important category in our industry. It's a category where we made a commitment to innovation and to being a leader. For growers, lighting is where they spend the most money, and it's the category that has the biggest impact on their crop. The right lighting strategy creates a relationship with those growers that opens the door for us to sell a full portfolio of solutions. Over the last two years, our R&D and supply chain teams have helped drive our success in the critical area of LED lighting. We created the best products in the market, which has helped accelerate the industry's move to LEDs and strengthened our market share. Even though that's true, we still knew that we needed more than we had. We looked at all the available options in the market and decided that Luxx was the brand with the greatest potential. Luxx is unique because it was designed by cannabis growers and is widely used by commercial cultivators who know its history and trust its performance. The current market conditions made the economics of the Luxx acquisition extremely attractive, especially when you consider the synergies it allows us to capture. The Luxx deal makes this the perfect time to begin to consolidate our lighting manufacturing to a single location. We announced last week that we will move our current lighting production, mostly HPS lights, from Vancouver, Washington to Southern California. We'll move other LED assembly we've been doing it there too. This move will significantly reduce our inbound and outbound distribution costs, better leverage our labor force and take advantage of one of the best manufacturing plants in the SMG network. Those savings will allow us to take substantial costs out of each fixture and significantly improve our already market-leading position, especially in the critical LED market. As part of this restructuring effort, we're also closing the manufacturing facility for HydroLogic, which we acquired last year. We are moving that work to our Santa Rosa facility, which is the original home of General Hydroponics. And we're consolidating distribution on the East Coast to a facility we recently built in New Jersey to meet the expected demand from new markets in the years to come. The other acquisition we announced, True Liberty Bags, is a much smaller deal but speaks to our strategy of putting the grower at the center of everything we do. True Liberty's products are used in the post-harvest process to freeze, store, and transport large harvest quantities. The products are designed to prevent cross-contamination and preserve the quality of the plant. It is a niche category but a critical one. True Liberty is the clear leader in the space and a brand that commercial cultivators trust. The acquisitions in the last six months of Luxx, True Liberty, HydroLogic, and Rhizoflora don't just add the P&L. These brands make Hawthorne more critical to cultivators who continue to see us as far more than just a distributor. They see us as a trusted provider that understands the nuances of their business and one that continues to invest to bring them better product solutions and generate higher returns. The other changes that we've made is a realignment of the team to focus on the needs of the business once the market returns. The restructuring has resulted in the elimination of roughly 200 positions. While the business decision was easy, it's never a good day when you have to part with valued members of the team. We did everything we could to provide them a soft landing, and I sincerely wish them well moving forward. We also made some changes in Hawthorne management. Tom Crabtree joined the team a few months ago to lead our sales effort. Tom has a great background. He started off in the SMG supply chain and then moved to sales, including a stint in which he transformed the Home Depot sales team. And more than anything else, Tom is a great leader. He knows how to build teams, how to motivate them and how to design programs that drive results. As we look to the future, it was clear to me that Tom was the right person to be the chief operator of Hawthorne, and he was recently promoted into that role. As you can see, while sales have slowed for the time being, we haven't. Every one of these changes makes our business stronger and will help further distance Hawhorne from our competitors. I'll be around for Q&A. But for now, let me turn things back over to Jim. You'll remember that the fifth pillar of our growth strategy is to explore opportunities in the emerging areas of the cannabis industry that are more consumer-facing. While SMG can invest directly in that space right now, we can build optionality that we can capitalize on later. The creation of the Hawthorne Collective and the convertible loan we made to RIV Capital are part of that strategy. But recall that we do have three feet on their board, which is very active in setting the strategy and vision for what comes next. It is through that lens that I can tell you to expect some important developments over the next quarter. As a result, we may choose to infuse more cash into RIV over the balance of the year that would increase our ownership stake if we converted the loan to equity. But we would still maintain a noncontrolling and non-ownership interest, and the magnitude of any additional cash would not approach the initial investment we made last year. On the topic of Hawthorne and the Hawthorne Collective, I want to make one more comment. I know the discussion we had in the call last year regarding a possible split of the company got a lot of attention. Jim King has told me he had literally dozens of conversations about this issue with current or potential shareholders. I want to reiterate that we've made no firm decision about whether to proceed down this path, and it will take a while before we do. Since our last call, however, we've established an internal team to study this issue and help explore the right courses of action. There are arguments to be made for splitting and equally compelling arguments to be made to continue operating as one company. We don't feel any pressure to lean one direction or the other, but we'll rely on the facts and analysis to guide our decision-making. Before I wrap up and turn things over to Cory, I want to close with this thought, and it brings me back to the meeting with my family. Our business is sitting in a pretty good place right now, and it would be easy to sit back and just harvest the fruits of our labor over the next few years. But the opportunities in front of us are simply too obvious and to consequential to ignore. If we're successful in executing our strategy, this will be a much bigger and more profitable business that will drive meaningful value for our shareholders. I'm not going to tell you we won't have challenges along the way. The degree of difficulty associated with some of our efforts is high, but any path worth pursuing can be slippery at times. I'm confident those who choose to travel with us in the years ahead will be glad they did. We have a lot of exciting pieces coming together in the months and quarters ahead, and I look forward to tracking our progress with you along the way. For now, I'm going to turn things over to Cory to cover the first quarter financials. But there are a few key themes I want to cover, specifically about the adjustments we've made to our guidance, the current trends with cost of goods and how we're thinking about capital allocation as we look ahead. On the P&L, there were no real surprises on the top line. Total company sales were down 24%, against a 105% comp a year ago. U.S. consumer sales were down 16% on a 147% comparison. And Hawthorne was down 38%, against 71% growth a year ago. In U.S. consumer, we saw good POS, as Jim already mentioned. And retailers finished the quarter with inventory in line with where they were a year ago. That was the best-case scenario for us. They remain committed to the category through the fall season and kept appropriate levels of inventory in their stores as we approach the slowest weeks of the year. That leaves them well positioned as we pivot into our key selling season, and the shipments we saw through January leave us optimistic. The midpoint of our increase in our sales guidance for the segment assumes an eight-point decline in volume for the full year, offset entirely by pricing. The trends through four months suggest this might be a conservative estimate. But as Jim said, were less than 10% of the way through the year, and it's way too early to predict what will happen in the spring. The sales decline was due primarily to the slowness of the broader cannabis market. The supply chain challenges we've mentioned previously are difficult to precisely quantify, but we believe they caused around 5% of the downward pressure in the quarter. Those challenges, primarily in the LED lighting space, have been remedied and we are back in stock with the components we need to once again be manufacturing and shipping LED lights, which remain in strong demand. Let's move on to gross margins because this is an area that's important to understand. As you know, Q1 results often fall prey to the law of small numbers, and that's exactly what happened with gross margin. The adjusted rate was down 570 basis points in the quarter driven by the year-over-year decline in volume and its impact on manufacturing, distribution, and other fixed costs. Commodity prices were also a headwind in the quarter but offset by a 400 basis point improvement from pricing actions. Jim mentioned the importance of looking at the gross margin rate in historical context, and I totally agree. The result in the quarter was more than 600 basis points better than in fiscal '20 and more than 850 basis points better than fiscal '19. Over the past several years, we have effectively moved business into Q1 to ensure retailers are properly set for the season, which should keep us at a level of profitability that is higher going forward. As I look at the balance of the year, we are maintaining our gross margin rate guidance for a decline of 100 to 150 basis points. Right now, I'd expect us to be at the lower or worse end of that range. Margins for the balance of the year should be relatively flat but could vary a bit each quarter, positively or negatively, based primarily on timing and mix. In total, we are 70% locked on commodities for the year, which is slightly behind normal. We would normally have all of our costs locked right now on pallets, but we're only at 30% because vendors are not currently entering into long-term contracts due to the volatility of lumber prices. On everything else, we're actually in good shape, including urea, where we're nearly 80% locked for the year. The better news is that we're starting to see some relief. Resin has been retreating for a couple of months now. Urea has begun to do the same. No one has been accurately predicting input costs for the last year, so I want to be cautious. Still, I'm increasingly optimistic that the pricing moves we've taken should offset these commodity headwinds on a full year basis. SG&A was down 2% after a sharp increase last year. Recall that our guidance calls for SG&A to decline up to 6% for the year, and it's an area we're keeping an eye on as we move closer to the season. The only other issue on the P&L that merits your attention is the $7 million loss on the equity income line, which is related to our 50% ownership in Bonnie. Remember, we did not have that ownership stake a year ago, and Q1 is a seasonal loss quarter for Bonnie. As Jim said, the business has had a solid start for the year, and we're optimistic about the upcoming season. On the bottom line, our seasonal loss on a GAAP basis was $0.90 a share, compared with income of $0.43 last year. Adjusted earnings, which excludes restructuring, impairment, and nonrecurring charges, was a loss of $0.88, compared with earnings a year ago of $0.39. You might recall that fiscal '21 marked the first time in company history that we reported a first quarter profit. Chris mentioned in his remarks the realignment we've made at Hawthorne. We expect those actions to result in a restructuring charge of up to $5 million in the second quarter. That charge will be excluded from our full year guidance. Let me briefly touch on the balance sheet, specifically focusing on inventories, which are up about $590 million from last year. First, recall that inventory levels were lower than we had wanted a year ago as we were shipping product nearly as fast as we could build it in both major segments. Second, recall that we consciously built an inventory cushion last year to ensure we are able to keep our retailers at the appropriate levels throughout the season. And finally, about 25% of this increase is due to the higher input costs we've been experiencing over the past year. We remain comfortable with inventory at this level and continue to see it as a competitive advantage. We expect to see some competitors continue to struggle to meet demand this year, which we believe will work to our advantage. Finally, I want to focus on capital allocation. We are still planning for capex to be approximately $200 million for the year as we continue to improve our supply chain and invest in our e-commerce infrastructure. Remember, we had been investing based on the assumption that our U.S. consumer segment would grow at a point or two per year. Since fiscal 2019, it's up around 40%, and we've pushed our capacity to its limit. So these investments are necessary. Jim commented several times about the M&A opportunities in front of us. So let me provide some context. We are currently budgeting slightly more than $200 million for future transactions over the balance of the year. The opportunities that remain on the table, if executed, should be immediately accretive to earnings and go a long way in advancing our strategy. In terms of returning cash to shareholders, we repurchased $125 million of our shares in Q1 and have a 10b5-1 in place for another $50 million in our Q2. We currently do not have a 10b5-1 in place for the second half of the year and would expect that any share repurchase activity during that period would occur in the open market. Additionally, we have no current plans for a special dividend this year. Given our current outlook for the business and our expected outlay of capital, we could slightly exceed our leverage target of three and a half times by the end of the fiscal year. We were at 3.3 times at the end of Q1. If we exceed our three and a half times target, we expect to get back below that level within a quarter or two, and we will still be well within our current debt covenants. We know we have some near-term challenges in Hawthorne, but we are focusing on the demand that we can't control. What we're focusing on is what we can control, and that is what we look like when the growth does return. I'm convinced we'll be better positioned than ever with a better margin profile and competitive advantages that have been strengthened over the past several months. consumer, I share Jim's optimism. There's no need to make further adjustments in our guidance right now, but the trends are certainly tilting in our favor for the upcoming season and beyond. And finally, on a personal note, I've recently completed my first full year in this role. My engagement with all of you was a new experience for me, and it's given me a better appreciation of the issues on the minds of our shareholders. Through this new lens, I'm working closely with my colleagues to ensure we're acting as proper stewards of our capital and focusing on driving value for all of you. And while I've also grown to appreciate the importance of this quarterly discussion with all of you, it's also reinforced my view that we can't run the business on a quarter-to-quarter basis. Value is driven over the long term, and I'm convinced that the steps we're taking to strengthen the business will do exactly that.

scottsmiracle-gro increases full-year sales outlook for u.s. consumer segment. q1 sales fell 24 percent to $566 million. q1 non-gaap loss per share $0.88 excluding items. q1 gaap loss per share $0.90 from continuing operations. to consolidate u.s. lighting manufacturing for hawthorne into single location and to close another recently acquired assembly facility. compname says restructuring charge of up to $5 million expected to be recorded in q2, will be excluded from co's fy adjusted results.

And for the Q&A session, we'll be joined by president and COO, Mike Lukemire. I'd refer you to our Form 10-K, which is filed with the Securities and Exchange Commission, so that you might familiarize yourself with the full range of risk factors that could impact our results. For the last month, I've been thinking about the key themes I wanted to cover today, and I also spent a lot of time thinking about who exactly I wanted to target with my remarks. I won't spend a lot of time focusing on the quarter or the past year but it is worth pointing out that we've just finished our third straight record year, and remain extremely optimistic. consumer was against a 24% comp, and a 39% growth in Hawthorne was against a comp of 64%. I know there are obvious questions to address. Our stance on pricing, the commodity outlook, excess inventory in the cannabis market, and our thoughts about capital allocation. We'll cover all of these topics, as well as share our thoughts about fiscal '22. But I've been a public company CEO for 20 years now. And too often, I've seen the markets focus with short-term issues overwhelmed the bigger picture. So I want to spend most of my time focused on more than our current results. Frankly, there are a lot of great things happening at the company right now. Some of them I can't share with you, but they're very exciting. Our business is in important inflection point, one that could transform what we look like five years from now. We have the opportunity to make this company stronger to make the moat around our business wider and deeper, and to empower a new generation of leaders to shape it through their eyes, not just mine or my executive team. We also see the current volatility in the market as an opportunity. If you're willing to lean in during times like this, there is potential to capture opportunities that others can't and an opportunity to further strengthen your competitive advantages, and leveraging those advantages, it's what drives long-term shareholder value. So I want the real takeaway from today to be a better understanding of the journey we're on. And I'll be honest, my target audience is pretty narrow. To our sell-side friends, I appreciate the need to get your models refined and to share that information with your clients. We're committed to giving you what you need, but my comments are not aimed at you. My comments are also not aimed at short-term investors. I'm not going to get pulled into a rabbit hole about our quarterly splits to spot market price of commodities, or a bridge to year-over-year SG&A. I do, however, want to speak to those investors who see the long-term opportunity in SMG shares. I want you to know where we're headed, and why we're confident that our efforts will create shareholder value. I won't ignore the key questions about fiscal '22, but weave them into a broader context of how we're operating the business rather than the confines of how it impacts the P&L. In order to look ahead, I need to look backwards for just a moment. For the five-year period, we've completed on September 30. Our strategic plan assumed a relatively mature core business, and enterprise growth of roughly 4% to 6%, driven by the higher growth at Hawthorne. We sought to achieve a consistent shareholder return of 10% to 12% by leveraging the P&L, repurchasing shares, maintaining a roughly 2% dividend yield. We also set a five-year target of cumulative free cash flow of $1.5 billion. We exceeded each of those goals. While we are proud of the achievement, we know that the strategy has run its course because the opportunities are different now. And we're different, too. And so the next step in our evolution will reflect these realities. We have defined five distinct pillars of growth for the next five years. Three of the five pillars, related to the U.S. consumer business; the other two are related to Hawthorne. First, we see a higher level of sustainable growth with our existing brands in our core business based largely on our ability to reach a new generation of consumers. Second, further growth of our direct-to-consumer efforts is there for the taking, if we invest in people, brands, partnerships and infrastructure. Third, live goods remains a meaningful growth vehicle and a gateway for a more direct relationship with gardeners. Our goal remains the same for consumers to see us as a gardening company, not a gardening supply company. Fourth, to support Hawthorne's future growth, we must continue to put the commercial grower at the center of everything we do. This means further strengthening our model, driven by innovation and technical solutions. And fifth, there is no doubt the cannabis industry will continue to evolve and grow. And there's little doubt that those companies, creative and courageous enough, to wait until that pool early, have the potential for a first mover advantage. We've shown our willingness to do this when we created Hawthorne. And as I'll describe later, we intend to do it again. As we pursue these pillars, we are strengthening our team. Focusing on succession planning, and ensuring our ESG efforts, are embedded into our operations, and also better understood by our key stakeholders. We debated as a team and with our board whether to pursue all of these opportunities at once. We all agreed we had to, but we recognize that succeeding against all these pillars requires us to reorganize and empower a new generation of leaders. While there are no plans for me or any member of the current team to step away, nearly every member of my team has made changes to their organizations. The level of oversight needed to succeed against these efforts requires Mike Lukemire to spend more of his time on the strategy and implementation of the fastest-growing areas of the business. He has reshaped this organization so that each of these pillars reports directly to him. consumer segment to Josh Peoples and Dave Swihart, who will effectively serve as co-leads of that business. On the corporate side, Cory has fortified his leadership team with an infusion of outside talent. And Denise Stump and Jim King have realigned their teams to better meet the needs of the business. In addition, most of the M&A opportunities we're pursuing includes a management team that can further strengthen our own. If every opportunity we see manifest itself, we could double the size of Scotts Miracle-Gro within five years. That's not the goal necessarily. We want smart growth, not growth simply for the sake of it, but the magnitude of the opportunity could be game changing. Let me briefly tell you how we expect to execute against these pillars, or I can, I'll talk about them in the context of our expectations for next year. Between the first two pillars, we believe the U.S. consumer segment can achieve sustainable long-term growth of 2% to 4% annually. Our previous strategic plan assumed growth of 0% to 2%. If we can sustain growth at this higher level, those added two points carry significant P&L leverage and improved cash flow. It's worth noting that the guidance we set for next year assumes flat to slightly declining growth in the U.S. consumer segment. This is based on an assumed reset of the business in a post-COVID world. Specifically, we're planning for a decline in unit volume offset by pricing. You'll remember from our Q3 call that we took roughly five points of pricing, effective in August. In recent weeks, we've communicated to our retail partners a second price increase effective in January. This more targeted increase will range from mid-single to low double-digits depending on the product line. In total, we now expect pricing in '22 to be on the high single-digit side with the goal of covering commodity prices. While we believe our sales assumption for '22 is a prudent way to plan, the trends suggest a better outcome. Consumer POS, in units in fiscal '21 was six points higher than in 2020. More importantly, it was 21 points better than fiscal '19 and actually got stronger later in the year. Consumer volume during the fourth quarter of fiscal '21, while down seven points from last year's record performance was 35 points higher than the same period in fiscal 2019. Consumers are showing us that lawn and garden is an essential part of their lives. Every cut of the data tells us they have stayed with the category and our brands throughout this past season. Those trends have continued in October. While it's a relatively small month, it's an important conclusion to the season, especially in the Midwest and Northeast. POS and units were up 4% in October, compared to last year's record result and up 42% compared to fiscal 2019. As we enter the off-season, the POS numbers won't tell us much until February. And obviously, we won't know until next summer, how much of the COVID bump we've retained. But I'm confident we'll have a significantly higher base to grow from. We continue to invest with that in mind. Millennial homeowners clearly have become a demographic tailwind, and are more than offsetting baby boomers who are leaving the category. This group of consumers care more about gardening than their parents, and see the categories more rewarding and purpose-driven as well. A 30-year-old couple buying a home today and entering our category for the first time has the potential to stay with us for 20 years or longer. We must operate with that time frame in mind. We don't want our marketers to worry about hitting a target for Wall Street. Their job is to drive consumer engagement, brand loyalty, and market share. And we're going to give Josh Peoples and his team the tools to get that done. The same holds true for our direct-to-consumer pillar. This area is approaching 10% of our U.S. consumer sales and will only grow higher. When we think about direct-to-consumer, it goes well beyond selling items on our website. It also means collaborating closely with our retail partners to support their online efforts. It also means finding new partners who can help us boost the appeal of gardening and have their own digital platforms that we leverage. Patti Ziegler is one of our brightest and most creative leaders, and directs our direct-to-consumer effort. In addition to the efforts I've already mentioned, she and her team have launched native online brands like green digs, knock-knock, and instead. But one of their greatest successes has been with AeroGrow. Patti has been a champion for the potential of our direct-to-consumer platform since day one, and continues to reimagine the future of this business. Succeeding in our direct-to-consumer effort also requires improving our IT and supply chain infrastructure. Dave Swihart, whose role has recently been expanded to lead both supply chain and R&D, is driving toward that goal. We need to improve our ability to ship directly to consumers, especially in categories like live goods, which has significant online potential. Until recently, our direct-to-consumer efforts didn't want your attention, but that's changed. While it remains too early to gauge the ultimate potential of this pillar, it will be a significant contributor to growth as we go forward. I'm equally convinced our third pillar, live goods will be even more important. Live goods are the gateway to lawn and garden category, but historically have been highly regional, poorly marketed, and highly commoditized. We believe, we can do better. We've got a great start with Bonnie and its leader, Mike Sutterer, and we're working with Bonnie's other owner, Alabama Farmers Coop or AFC, to pursue other growth opportunities that holds significant potential. Like us, AFC has a vision to create a national branded business across several categories of live goods. Together, we believe we can better meet the needs of gardeners and our retail partners through innovation, marketing, and supply chain. We've already made tremendous progress improving the Bonnie business. And even there, we've only scratched the surface. The other two pillars are related to Hawthorne. Chris will spend more time discussing the current environment, but I want you to know I'm not obsessing about the sales in Q4 or what we think about Q1. I believe Chris and his team have a good handle on the current environment. More importantly, I believe they're navigating the choppiness in the market, while keeping their eye on the long-term opportunity. If the market is challenged for a couple of quarters, expect them to take advantage of it. We won't chase sales but we will take an aggressive stance to further solidify Hawthorne and strengthen its market position. So expect us, for example, to further enhance our innovation efforts. I finally visited our new R&D facility in British Columbia last week. I've recently visited field stations in Oregon, Florida and, of course, Ohio. What's been the takeaway, that the work we're doing on hemp and cannabis research, is changing the industry. From lighting to nutrients, to growing media, our research is not just focused on continuing to improve our product offerings but more importantly, to help growers get a better and more cost-effective outcome. Our unique understanding of plant science and the nuances of indoor cultivation is unmatched. Not only is no one in the industry doing, what Hawthorne is doing, our competitors can't even try to replicate that model. I think, you should keep that in mind. We also are likely to use this period as an opportunity to step up our M&A efforts. We continue to be disciplined in our M&A efforts but the economics of some of our deals have become more attractive recently. The final pillar of our strategy is embedded into the recent creation of a new subsidiary called the Hawthorne Collective. I've been alluding for months about the opportunities to invest in emerging areas of the cannabis industry, but this is my first opportunity to discuss the effort in detail. It starts with our recent investment in RIV Capital, a Canadian-based publicly traded company, that owns or invest in a series of cannabis-related businesses. We share a common vision with the other major investors at RIV, to create a fully integrated business, based on the acquisition of licenses for cultivation and distribution. From there, Roof can partner with some of the most well-managed brands in the cannabis industry. There's a lot of speculation regarding the potential for new brands to prosper, as the market expands in the categories like beverages. However, too few people are focused on existing brands in traditional categories. This is already a multibillion-dollar market, with brands operating in the silos of individual states. We're convinced there is tremendous potential for some of those brands to flourish more broadly as the market expands, and our investment in RIV reflects that belief. We believe that our unique level of expertise in the cannabis industry, gives us the right to win in areas beyond our existing portfolio. However, today, we cannot make direct investments in those areas. In fact, we can't even have a direct ownership stake in a company that does, but we can create an ownership option, which is what our convertible loan to RIV Capital reflects. In the near term, we do not expect to see an impact from the investment in RIV on our P&L, and the amount of capital we've employed $150 million does not impact our ability to invest in other areas, or return cash to shareholders. In the intermediate term, it is possible RIV may seek further capital infusions. We could be interested depending on the opportunities I'm not going to speculate on how much we might invest. The honest answer is it depends. But just as we did when we purchased General Hydroponics, Botanicare, Gavita and Can-Filters, we're willing to make investments others might avoid, until there is more clarity about the future. If you're a short-term investor, you may not like it. But the long-term potential is real and is significant. Ultimately, if we convert our financial interest in RIV into equity, which is definitely the goal, it may prompt us to reassess our current capital structure. Many of you have asked if we break Hawthorne off as a separate company. I've said we'd only consider doing that for strategic reasons, and not to chase valuation, and that's still true. Over the past year, we've worked to understand what a potential separation would require, and I believe we're capable of pulling trigger on such a move if we decided, it made sense. Let me be clear. We have no near-term plans to do this. But could it become a viable option? I think, the possibility is growing. As I transition to Cory, I want to emphasize that I'm just as confident about our near-term plans as I am about our long-term strategy. The U.S. consumer business is performing well, and our consumers continue to demonstrate how important they see this category in their lives. At Hawthorne, while we continue to expect top-line pressure through Q1. I'm confident in our team's ability to power through it, and we still expect sales growth on a full year basis. Are there more challenges out there right now than a year ago? Am I thrilled with the equity price right now? But we're on a path to build a better, and stronger business, and we won't be distracted by the noise around us. I mentioned earlier that we exceeded all the financial targets that we set with our previous strategic plan. And the goal is to remain on a path that allows shareholders to continue benefiting from the opportunities, I outlined in our new plan, and the pillars that I've discussed. The confidence we all have is part of our decision to increase our share repurchase efforts. I told you last quarter, we had allocated $250 million for that purpose. We now expect to add another $100 million to that total, and we hope to acquire as many of those shares as possible in the next two quarters. Cory, why don't you pick it up from here? I'm going to spend a few minutes on the big themes from our Q4 results, especially around sales and gross margin. And in between, I'll turn things over to Chris to provide some color on Hawthorne. U.S. consumer sales did better than we expected, finishing up 11%, compared to the 7% to 9% growth we expected. At $3.2 billion, sales grew by nearly $900 million in the last two years. The supply chain team deserves a lot of credit for their ability to deliver this growth. The targeted investments we have made and will continue making in this area will prove to be key. Consumer engagement remained extremely strong through the fourth quarter, and that kept our retailers equally engaged. consumer segment, sales declined 28% in Q4, we were up against a plus-92% comp. Also, remember that Q4 had six fewer days this year than last year. Adjusting for that, sales in the quarter would have declined 23%. At Hawthorne, the calendar shift cost us sevent points for the quarter. While year-over-year sales declined 2%, the segment would have been up 5% on an apples-to-apples basis when adjusting for the calendar. And the U.S. Hawthorne business, grew by over 10% last year in Q4 given the same comparison. Finally, recall that Hawthorne was up against a plus-64% comp in the same period a year ago. On a full year basis, Hawthorne grew 39% to $1.4 billion. I'll remind you that number was $640 million in fiscal 2019. We have more than doubled the sales of that business in two years and all of that growth was organic. On the segment profit line, Hawthorne earned $164 million in fiscal '21, for an operating margin of 11.5%. The profit was up 46% from last year and more than 200% from 2019. We've said repeatedly that we're trying to strike a balance between growth and improved profitability. I think, the results speak for themselves. As many of you know, I served as a finance lead at Hawthorne, almost since the inception of that business, before joining the corporate team as CFO. As you look at the Hawthorne results, I encourage investors to look deeper than the numbers. While the growth and profit improvements have been impressive. The improvements we've made to how the business operates tell an even better story from the integration of seven separate businesses to the implementation of SAP, the revamping of our sales force, and the creation of the world's only cannabis-focused R&D program, the efforts of this team have been outstanding. I know all of you want to know more about the current state of the business. I'll leave the details around the numbers to Cory, but I know you guys are wondering about the current state of the industry, and how we're navigating it. So let me address that for a few minutes. We're, obviously, seeing some disruption in the market right now, but we expect it to be temporary. Our field sales team, began seeing the signs of potential slowdown in late June. We got smarter about the issues in July, and that allowed us to share some of those insights on our third quarter conference call in August. That's when we caution that the growth will be significantly slower in Q4 than we've seen for the rest of the year. Since then, many of you have been asking whether this will be a replay of 2018. We don't see it that way at all, and we're not alone. Some of you were in Las Vegas a couple of weeks ago for the MJBiz conference. It's the largest cannabis trade show in the world. And if you were there, you saw firsthand, that this is not an industry that's spreading about the future. Consumer demand for cannabis products continues to grow, and the market continues to expand. As it relates to the current environment, what was clear to me in Vegas, was the industry is becoming increasingly adept at navigating the choppiness that's inevitable in a market like this. What's happening right now is actually pretty straightforward. In California, there were simply too much cannabis harvested in the past few months, especially from outdoor growers in the northern part of the state. On top of a strong harvest from the first turn of crops earlier in the year, many growers harvested their second crop of cannabis earlier this season due to concerns about wildfires drought, and in the case of the legacy market, fear of increased enforcement efforts. The combination of too much product and relatively poor quality has put downward pressure on wholesale cannabis prices. However, that issue should solve itself once the current supply makes its way through the marketplace, because the legacy market remains a big part of what's happening in California, the available data isn't great. So that makes it hard to give you a precise answer on how long it will take for the current oversupply to work itself through the market. That's why we're currently forecasting Hawthorne sales to decline in the first quarter. That said, the single most important fact is the end market for cannabis continues to expand, and we expect to start seeing growth again in the new calendar year. And virtually no one is expecting that fact to change for the foreseeable future. In fact, many high-end growers have told us that current market issues are not impacting them at all, and they continue to flourish. Another important fact to remember is that unlike in 2018, there are no regulatory issues getting in the way right now. Three years ago, California badly boxed the rollout of the recreational marketplace. That overwhelmingly was the issue that impacted the market back then. It was nearly impossible to get a license to operate legally, regardless of whether you were a cultivator or a dispensary. While the current marketplace in California remains more expensive and bureaucratic than other states, it is vastly improved from what we've seen in the past and the legal market there continues to grow. Some of you are also wondering whether the current situation will result in some consolidation. The answer is pretty simple. Yes, of course, it will. But those kinds of ebbs and flows are exactly what we expect to happen. It's what happened in Colorado back in 2015, it happened in Oregon when it went legal, and it's likely to happen in California to some degree. In fact, that's also what we're seeing right now in Oklahoma. Like many new markets, Oklahoma, had explosive growth out of the gates and probably got a bit overbuilt. So we expect to pause there before growth resumes. We have told you repeatedly over the years that this industry is likely to be choppy from time to time. This is not the first time the industry has seen an oversupply of cannabis and just to be clear, it will not be the last. What's important for Hawthorne as we keep running our play. The growth will be there in the long term. I'm not worried about that. Instead, I want to make sure that we're doing everything we need to distance ourselves from the competition. Jim has already told you that we won't slow down on our innovation efforts, which, by the way, go much further than just new product development, which brings me full circle to the MJBiz conference a couple of weeks ago in Vegas. Like most major trade shows, MJBiz, was canceled last year due to COVID. So we haven't seen the industry all-in-one place for over two years. What was clear to us and frankly, nearly everyone we interacted with is how far Hawthorne has come in those two years and how much we've distanced ourselves from the competition. We have fundamentally changed our approach to selling, and that transformation is continuing. We've brought new products to the market that have improved the results for growers, by both increasing the yields and lowering their operating costs. And we've used the innovation to help us in more qualitative ways, like the establishment of the Hawthorne Social Justice Fund, within our corporate foundation. While I understand the questions you all need to ask about the step down in our growth rate, I would urge you not to lose sight of the bigger picture. There is no doubt that we're the clear leader in the industry. There is no doubt that our competitive advantages are unique, and there's also no doubt that the cannabis industry still has miles of runway ahead of it. So looking ahead at fiscal '22, I'm not worried about a few speed bumps. Rather, I'm excited to see how much further we can push this business, and continue to lead the way in an industry, that remains poised for years of growth. Let's move down the P&L now to the gross margin line. Like nearly all other CPG companies, we've continue to see pressure from higher commodities and distribution costs. However, the year-over-year change in the margin rate during Q4 require some additional context. In Q4 of fiscal '21, the adjusted gross margin rate was 17.4% compared with 24.3% in 2020. Companywide sales in Q4 of last year were up nearly 80%. So the fixed cost leverage in a relatively small quarter drove a massive improvement in the margin rate. If you compare the Q4 gross margin rate in '21 versus '19, you'll see the difference is only 100 basis points, and that difference is a combination of segment mix and higher commodity costs. On a full year basis, the gross margin rate declined 270 basis points to 30.3%. The year-over-year increase in commodity costs of about $85 million nearly all of which was on plan, was the primary reason for the decline, followed by higher distribution costs. As you know, we did not adjust our prices this year until August in the U.S. consumer business. So we had limited ability to offset the commodity inflation during the first three quarters of the year. That story will change significantly in fiscal '22, which I'll explain further when I cover our guidance for next year. Higher volume was able to drive improved fixed cost leverage, and conversion, to help offset the commodity cost increases. SG&A came in 2 percentage points lower in fiscal '21 at $743 million. It declined 21% in the quarter to $161 million. Lower variable compensation was the main driver. Also, in Q4 of 2020, and we used some of our strong earnings upside, to significantly increase our annual contribution to The Scotts Miracle-Gro Foundation, which we did not repeat in fiscal '21. Interest expense was $5 million higher in Q4 compared with a year ago. but essentially flat on a full year basis. Remember, we issued $900 million of bonds in the second half of the year, which drove an increase in the quarter. On the bottom line, adjusted net income, which excludes restructuring, impairment, and onetime items, was up 28% to $528 million or $9.23 a share. That's just $0.01 shy of a $2 per share increase in a single year and more than twice the $4.47 a share we earned in 2019. The earnings per share number is on the high end of the revised range we've set in early June, and is a major accomplishment given the difficult comps, and some of the cost hurdles we've had to clear in the second half of the year. But instead of spending more time on those details, I want to switch gears and share our thoughts about goal '22. This assumes the U.S. consumer segment is flat to minus 4%, and that Hawthorne grows 8% to 12%. None of those ranges assume the potential impact from acquisitions. consumer, we are going into the year with the assumption that unit volume will decline high single digits. Roughly half of that decline is expected from lower shipments in the first half of the year. Remember that last year's Q1 was up nearly 150%, as retailers worked hard to remedy depleted inventory levels. Since current retail inventory levels remain higher than a year ago, we likely won't see a repeat of that kind of initial load-in. We're also for planning purposes, assuming modest declines in consumer takeaway in fiscal '22, mostly driven by the difficult comps we've faced in the first half. As Jim already indicated, consumer POS has been stronger than we expected in recent months, and has actually been positive for the fall season. It's easy for us to lean in to meet the higher consumer demand if it comes, but the prudent play is to assume a slight decline. Most and perhaps, all of the planned unit volume decline, should be offset by pricing. You should see some benefit from pricing in Q1 from the August price increases, and the balance will begin during our Q2. As it relates to Hawthorne, we're planning for 8% to 12% growth on a full year basis. As we expect to see continued pressure in Q1. As Chris said, it's hard to be precise regarding the current inventory supply issues in the industry, but we're hoping to see a return to growth sometime in Q2. Let's move on to gross margin. We expect to see gross margin rate decline by 100 to 150 basis points on a full year basis. We are cautiously optimistic that our pricing moves will offset expected commodity pressure. That said, we expect about 65% to 70% of our costs to be locked in by the end of the calendar year. So we'll still have some exposure if costs move higher than the planned increases we are assuming. The two biggest pressures on the rate next year, will come from lower fixed cost leverage and segment mix. We would expect some leverage out of SG&A, meaning this line can range from a 6% decline year over year to a slight increase, maybe 2%. There are no major moving pieces in SG&A, and we remain committed to investments, we believe will drive the business, not just in fiscal '22, but the years to follow. Below the operating line, interest expense should be roughly $25 million higher, based on the full year impact of our recent bond offering. Our guidance also assumes no offsetting earnings impact from acquisitions, which is a pretty conservative starting point. All of this rolls up to a guidance range for adjusted earnings per share of $8.50 to $8.90. I also want to talk about cash flow for a moment. For the year we just completed, free cash flow, that's operating cash flow minus capex, came in at $165 million. While that is low from historical standards. There are three main reasons behind the year-over-year decline. First was variable compensation that was earned in fiscal '20, but paid out in fiscal '21. That was about a $60 million impact. Second, we increased capex by about $45 million. Third, inventory levels were up $500 million from fiscal '20. While most of this increase was paid during the year, we did lean on our vendor partners more than in the past to achieve extended payment terms. As we look to fiscal '22, we're aiming for free cash flow of up to $300 million. We expect capex to increase again, and we also expect inventory levels, while flat on a unit basis to be higher overall because of the increased cost. These investments are necessary to continue meeting the required service levels to our customers, which is the higher priority. But as it relates to inventory, we find ourselves in a very good place right now. In both U.S. consumer and Hawthorne, we believe some competitors will have a hard time meeting demand. And in the consumer business, we expect the market to see shortages of grass, seed and sphagnum peat moss. The key ingredient used in growing media. We do not expect to be impacted by those issues, and we do not expect to have any problems getting our customers at the appropriate inventory levels either. I agree with Jim's assessment. We've got a lot of moving pieces right now and several active initiatives that could require us to update our outlook as we move through the year. But even in the unlikely event that none of those efforts come to pass, I believe the business is in a great spot. The challenges we're seeing on the cost of goods line are pretty consistent with what you've been hearing from other companies over the past two weeks. And just as we said we would, we've taken aggressive action to stay ahead of all those challenges, and protect the profitability of the business. When I think about how far this business has come in such a short period of time, it's hard not to feel good about where we sit right now.

compname announces intent for share repurchases of $300 million in fiscal 2022. expect to continue pursuing acquisition opportunities throughout year. in addition to $113 million of share repurchases in fiscal '21, plan to repurchase as much as another $300 million in 2022. established guidance for fiscal 2022 based on expected company-wide sales growth of 0 to 3 percent. sees 2022 non-gaap adjusted earnings per share anticipated to be in a range of $8.50 to $8.90. scotts miracle-gro - at hawthorne, sees current over-supply of cannabis to put negative pressure on growth rate through calendar year and into q2.

My name is Larry Sills. I'm Chairman of the Board. Today, our agenda will be Eric will go over some of the first quarter highlights, and Jim will discuss operations and finally, Nathan will go into more detail on the numbers. Then we'll open it to Q&A. They are based on information currently available to us and certain assumptions made by us, and we cannot assure you that they will prove correct. The last year has been a roller coaster and while the challenges were undoubtedly significant, I believe we've navigated it quite well, and there is no doubt in my mind that we would not have managed it as successful if it were not for the dedication and skills of all of our people around the world. I couldn't be more proud of how they guided us through. The first quarter had many high notes. Our sales were very strong, up almost 9% as we saw the ongoing market strength continue from the second half of last year. Furthermore, we posted the highest earnings we've ever had in the first quarter, more than doubling last year's profitability due to a combination of sales leverage and cost control. It's important to note that the first quarter of 2020 was only modestly impacted by COVID for us with a minor downturn in the last two weeks of March. So while comparisons going forward will be muddy, the first quarter is a bit cleaner. Sales in our Engine Management division were up more than 5%. As previously discussed, we lost a large account and had a sizable reduction in sales to them in the quarter as they transitioned the business, but this loss was more than made up for by strong demand from our other customers. Off in the first quarter is March with some large pipeline orders, but that was not the case this year. Rather, we believe that our customer's strong purchases from us were the direct result of surging sell-through rather than inventory building. Their POS was extremely strong with many accounts showing gains well into the double digits. Obviously, March POS comparisons are not relevant due to last year's March COVID shutdowns, but our customers are also up double digits against their more normalized 2019 March POS. And we are pleased to see that this trend is continuing into the second quarter with no apparent sign of abating. Temperature Control also posted strong sales but as stated every year, the first quarter is largely related to preseason orders, which can vary in size year-to-year depending on various factors, and the full year will depend on demand in the summer months. We are encouraged, however, by very strong POS in the quarter, which suggests that some of the purchases intended this pre-season are actually being sold through already and similar to Engine Management, these trends have continued into the second quarter. Looking forward, we are quite bullish on the market in general. Overall, industry trends are very favorable. Cars are getting back on the road. Miles driven are increasing and the repair base are getting busy again. In all likelihood, this will continue as more Americans are vaccinated and more restrictions are lifted. We believe that this will favor the ongoing recovery of the DIFM market, which is where our product categories excel. Key economic indicators are also favorable. Unemployment is dropping, and consumer spending is soaring and we expect SMP to enjoy those tailwinds. As for our own initiatives, we are seeing very strong success in programs we have developed with our customers to pursue market share gains at the street level and while there are always some gains and losses, we are happy to report that we have been able to secure some new business, which annualized, will replace roughly a quarter to a third of the business that we lost. This new business will begin to phase in over the next few quarters. We're also very excited about our strategy to expand our original equipment business with a focus on heavy-duty commercial and off-road vehicles targeting sectors such as heavy truck, construction, agricultural, industrial, and power sports. Over the past many years, we have been quietly building up this part of our business, both organically and through acquisition. As previously announced, during the first quarter, we acquired the particulate matter sensor product line from Stoneridge. This sophisticated technology, often referred to as SIP sensors is utilized in heavy-duty trucks to reduce tailpipe emissions. We inherited $12 to $14 million business with blue chip customers but almost more importantly, we acquired the intellectual property and complex manufacturing capabilities to court more business in this fast-growing product category, and new opportunities are already presenting themselves. Overall, the OE channel accounted for over $150 million in sales last year and is the fastest-growing part of our business. We believe that we are now at a point of critical mass where we have the internal resources and competencies to support it as well as credibility with the customers to be an important supplier to them. We also strongly believe that this focus is complementary to our aftermarket business for several reasons. First off, it tends to be in similar product categories and technologies, which can be leveraged in the aftermarket. Secondly, all this holds us to extremely high-quality standards, which get universally adopted throughout all of our operations and finally, we believe that in time, it will help us shift away from an over-reliance on conventional powertrains. It does this in two ways. It gets us into products for alternative energy vehicles as with our successful compressed natural gas injection program or our joint venture in AC compressors for electric vehicles or moves us further into product categories that are not powertrain-related such as many of the product types that came with the Pollak acquisition. So overall, we are very pleased with the state of the market and of our position within it. Most trends are favorable and while the COVID crisis is not completely over, we are confident that the worst is behind us and that we have emerged from it stronger than we went in both operationally and from a financial standpoint. Our core business is doing very well. We have initiatives in place to take advantage of the momentum and we are very excited about our prospects in this adjacent commercial vehicle space. And as such, we look forward to the future. So, with that, I will hand it over to Jim to talk about our operations. I'll provide some color around our operations. To begin, as you have seen in our release, our first-quarter gross margins in both segments reflected some of our best results in the last 10 years. At a very high level, this is primarily the benefit of increased production to meet our strong customer demand and the associated efficiency gains generated in our factories. I'm very pleased with how our manufacturing and supply chain teams adapted to meet this higher demand. Our supply chain team also addressed headwinds. First material source of supply, we faced semiconductor chip and resin supply delays. Our teams worked with our suppliers, increasing lead times and working around allocation limitations. Fortunately, we were able to mitigate much of these supply issues with existing safety stocks and where necessary, alternate vendors. On the material inflation front, we experienced price increases on semiconductor chips, resins, and other general commodities such as copper and aluminum, but no single commodity has a significant impact on our overall cost structure. Lastly, Asia-sourced product face the same global inflation pressures, but also the compounded effect from higher container cost and vessel fees. Fortunately, our global manufacturing footprint has been of benefit as compared to our peers sourcing 100% from Asia, recall our low-cost manufacturing facilities are in Mexico and Poland with other highly skilled and less labor-intensive operations in the US and Canada. We believe our NAFTA footprint provides advantages for lower cost, improve supply chain logistics, and cost avoidance. To offset these inflationary pressures, we looked internally at our margin enhancement efforts. First, to expand in-house manufacturing versus buy initiatives. In this effort, we are targeting the tool products earlier in the product life cycle to better control our costs, quality, and supply. Next is our new vendor sourcing initiative. This effort is driven by our overseas sourcing office working with our engineering teams to validate new vendors capturing significant cost reductions. Another internal effort is referred to as value engineering where we evaluate existing processes for automation and other cost improvements. Externally recognized and we are in a competitive marketplace, we look for pricing to offset inflationary costs incurred. Overall, our intent is to alleviate any cost increases and strive for incremental margin improvements. Looking forward, we will continue to enjoy increased production levels to meet our strong customer demand as we go into Q2. Our goal is to be the number one full-line supplier for premium parts in our product categories. On this point, many of our customers recognize the SMP with their 2020 Vendor of the Year Award. Now turning to the numbers, I'll walk through the operating results for the first quarter and also cover some key balance sheet and cash flow metrics. Looking first at the P&L, consolidated net sales in the first quarter were $276.6 million, up $22.3 million or 8.7% versus Q1 last year with increases coming from both of our segments. Looking at it by segment,, Engine Management net sales in Q1, excluding wire and cable sales were $173.7 million, up $9.1 million versus the same quarter last year. This 5.6% increase is partly reflective of the softness we experienced in Q1 last year but also reflects continued growth in sales with the ongoing customers that they are noted for. Wire and cable net sales in Q1 were $38.4 million, up $1.8 million or 4.7%. Sales continued to be positively impacted by strong DIY sales as consumers work on their own vehicles, but we're helped too by strong sales to OE customers as business ramped up in that channel as well. While the sales in the wire and cable business continued to be steady, the product category remains in secular decline, and we believe sales will ultimately resume a trend line of declines in the range of 6% to 8% on an annual basis. Temperature Control net sales in Q1 2021 were $62.5 million, up 21.4% versus the first quarter last year and increased primarily as a result of stronger pre-season ordering by our customers. As we always point the first quarter is not indicative of how the year will turn out for the segment, as the year ultimately depends on summer weather. Turning to gross margins, our consolidated gross margin in the first quarter was 30.3% versus 27.7% last year, up 2.6 points with both of our segments reporting increases for the quarter. Looking at the segments, first-quarter gross margins for Engine Management was 30.7%, up 2.5 points from Q1 last year and for Temperature Control was 25.6%, an increase of 2.1 points from 23.5% last year. The higher margins in both segments remain with the result of three things. First, the higher sales volumes we experienced versus last year. Second, favorable plant absorption from inventory production in the quarter and third, the carryover impact of favorable manufacturing variances from the record sales and production levels last year. Looking ahead, the gross margin expectations for the year in Engine Management, we are seeing strong customer POS sales and new business wins, which should help offset the loss of the customer from a sales perspective. However, we're also facing headwinds from inflationary cost and labor, raw materials, and transportation as Jim touched on earlier. While we expect the impact of higher sales and higher costs will have somewhat offsetting effects, gross margins will vary across quarters, and we continue to forecast full-year 2021 gross margin of 29% plus for this segment. For our Temp Control segment, we continue to target a gross margin of 26% plus for the full year in 2021. Moving now to SG&A expenses, our consolidated SG&A expenses in Q1 declined by $1.4 million to $54.5 million ending at 19.7% of sales versus 22% last year. Expenses declined despite some higher distribution costs, mainly due to continued cost control around discretionary spending. And the improvement as a percentage of sales mainly reflects the improved expense leverage due to higher sales volumes. Looking at our SG&A cost for the full year in 2021, we expect expenses to be about $54 million to $58 million each quarter, a slightly higher range that noted on our last call as we'll see some higher expenses as a result of higher sales. Consolidated operating income before restructuring and integration expenses and other income net in Q1 2021 was $29.3 million or 10.6% of net sales up 4.9 points from Q1 2020. As we note on our GAAP to non-GAAP reconciliation of operating income, our performance resulted in first-quarter 2021 diluted earnings per share of $0.97 versus $0.43 last year. The increase in our operating profit for the quarter was mainly due to higher sales volumes, higher gross margin percent, and slightly lower SG&A expenses. Turning now to the balance sheet, accounts receivable at the end of the quarter were $174.1 million, up $21.9 million from March 2020, but down $23.9 million from December 2020. The increase over March last year was due to the increase in sales during the quarter, while the decrease from December mainly reflects the timing of collections and management of our supply chain factoring arrangements. Our inventory levels finished the quarter at $390.9 million, up $20 million from March 2020 reflecting the need to carry higher balances to support higher sales levels. As compared to December 2020, our inventory was up $45.4 million, mainly due to our effort to restock our shelves to normal levels. As a reminder, our inventories were depleted during 2020 due to strong sales in the last half of the year, and we expected to build back our inventories in the quarter. Looking at cash flows, our cash flow statement reflects cash used in operations in the first quarter of $11.4 million as compared to cash used of $32.8 million last year. The $21.4 million improvement was driven by an increase in our operating income as noted earlier and by changes in working capital. The changes in working capital in the first quarter of 2021 were mainly again a result of timing and were to be expected if sales returned to normal levels. Inventory balances finished higher as we replenished our shelves, the cash used for inventory was partly offset by an increase in accounts payable. Additionally, we generated cash from accounts receivable, again due to the timing of collections and management of our factoring programs while we used cash for customer rebates that were earned and accrued last year. Turning to investments, we used $5 million of cash for capital expenditures during the quarter, which was slightly more than the $4.4 million we used last year. We also used $2.1 million to purchase the SIP Sensor business from Stoneridge that was discussed earlier. Financing activities included $5.6 million of dividends paid and $11.1 million paid for repurchases of our common stock. Financing activities also included $31 million of borrowings on our revolving credit facilities, which were used to fund operations, investments in capital, and returns to shareholders through dividends and share buybacks. We finished the quarter with total outstanding borrowings of $42.5 million and available capacity under our revolving credit facility $206 million.

compname announces q1 earnings per share of $0.97. q1 earnings per share $0.97 from continuing operations. q1 sales $276.6 million versus $254.3 million.

My name is Larry Sills, Chairman of the Board. Jim will talk a little more about operations. Nathan will take a deeper dive into the numbers, and then we'll open it to questions. Overall, we're very pleased with our performance in the quarter. We set records for sales and profits. We were able to consummate a major acquisition with terrific strategic value, and we were able to accomplish this while continuing to navigate the complexities of the ongoing pandemic, including the related supply chain challenges. We would not have been able to have done this without the tireless efforts of our skilled and dedicated employees who we are just so proud of. We achieved sales of over $340 million in the quarter, up 38% from the prior year with both divisions having all-time highs. Comparisons to 2020 are not particularly relevant. As you are well aware, that was the trough of the downturn for us. However, when comparing to a more normalized 2019, we are favorable by 12%. I believe that this has been somewhat aided by a shift back toward the DIFM business, a trend we expect will continue. Coming out of the pandemic, DIY sorted as people had a certain amount of disposable money to spend and chose to upgrade their vehicles. We felt that this was not necessarily a durable long-term trend, what was required was for vehicles to get back on the road. We're now seeing that. Vehicle miles traveled are nearing normal levels and deferred repairs are occurring. And while this is good for the whole industry, we believe it is especially so for us as our product categories are more technical in nature and therefore, lend themselves to professional installation. Let me now go into a review of our two product segments, beginning with Engine Management. Our top line sales remained quite strong, up 35% versus last year, but also up 7% over 2019. As discussed on previous calls, we entered 2021 with the loss of a major account. Therefore, we are pleased to have been able to post positive numbers despite this. As noted in the release, there were several contributors. First, we implemented programs with all of our customers to pursue market share gains at the street level. Early indications are that these were very successful. Second, we have been aggressively pursuing new business wins with our existing customers, and we are very pleased with our results as our new business awards recover over 1/3 of the lost business on an annualized basis. Some of this rolled in during the second quarter, while much of it is yet to begin. Third, we've been busy on the M&A front, and I'll speak more on this in a minute. And lastly, the general market conditions have been favorable. Customer POS is well into the double digits over both 2020 and 2019 and was consistently strong month-over-month. Turning to Temperature Control. I think it is helpful to remind people that this is a highly seasonal and weather-dependent business. The first quarter is always light, it's almost entirely preseason and can swing year-to-year depending on the timing of these orders. The second quarter tends to have two parts. April and May tend to be a continuation of preseason. And then in June, the summer heat begins and the channel starts selling through and reordering. This year, things shifted forward a bit. We began seeing very strong POS early on in the year, which suggested that the purchases intended to load shelves were selling through, and this trend has continued. We saw early heat in many parts of the country. And when combined with the return of miles driven and the associated vehicle maintenance, we enjoyed a record-setting quarter for sales, up nearly 50% from last year and up over 25% compared to 2019. Customer sell-through has remained very high with elevated summer heat in much of the country, we believe we are in for a good third quarter. However, similar to Engine Management, here too, we are facing difficult third quarter comparisons to 2020, which was up 25% from '19 and was far and away the biggest third quarter we had ever had in Temperature Control. Overall, gross margins dipped slightly from the first quarter. Jim will go into more depth on the drivers when he discusses our operations, but at a high level, margins were aided by strong absorption in our plants due to elevated production levels as we sought to rebuild our inventory. However, offsetting this, we are also experiencing inflationary headwinds across many of our cost inputs. Our operating expenses were elevated due to a combination of distribution expenses related to higher sales as well as the cost increases in freight and labor. However, we were able to achieve very good leverage on our costs due to our strong sales performance, and Nathan will dig a little deeper on this later on the call. All of these elements combined for record profits as we posted earnings per share of $1.26, which is more than 140% greater than 2020 and nearly 40% greater than 2019. However, looking forward, it is important to point out that the cadence of the last 18 months was very unusual, making the future difficult to predict. From a top line perspective, although we entered the third quarter with indications of strong customer sell-through, it's hard to predict how long that can last. The past 12 months have seen outsized market expansion, which likely includes a certain amount of pent-up demand, and at some point, it will not be a sustainable rate of growth. From a gross margin standpoint, we anticipate certain pressures as the nonrecurring benefits of favorable absorption fade and elevated supply chain costs persist, though we do believe that the market is amenable to a pass-through of inflation. Additionally, we will begin to see a slight mix shift to our OE business, which I'll discuss in a bit, and that segment has a different margin profile from the aftermarket. Lower gross margins, but also lower operating expenses, so it ends up comparable at the bottom line. When you put all these together and acknowledging the difficulties in forecasting these unusual times, we believe 2019 may provide a better benchmark for second half performance. I would like to now spend a couple of minutes discussing our progress toward expanding our original equipment business. For the last several years, we have been growing our penetration in the OE space. And while we do have a certain amount of passenger car OE, our efforts have been more in niche areas, specifically heavy-duty and commercial vehicles, where product life cycles tend to be longer, technology tends to be more stable and price pressures tend to be less. This year, we have made two acquisitions in this arena, both previously announced. On our first quarter call, we discussed the acquisition of a high-tech emission sensor product line from Stoneridge Inc., which we are in the process of integrating into existing SMP locations. Then at the end of May, we made a larger acquisition. We acquired Trombetta, a worldwide leader in mechanical and electronic power switching and power management devices, generating about $60 million in annual sales. Trombetta is headquartered in Milwaukee, Wisconsin, is run by a strong and seasoned management team and employs approximately 350 associates globally in four locations. They sell to a broad group of blue chip OE customers across multiple commercial vehicle channels, including construction, agricultural, medium and heavy truck, lawn and garden and power sports. From a product standpoint, they offer an expansive portfolio of both well-established electromechanical parts as well as a growing assortment of sophisticated electronics devices. The majority of their offering is considered powertrain neutral, meaning that their parts either service other systems on the vehicle where are equally suited to conventional or electric powertrains. And we believe this is extremely beneficial as they are well positioned to capitalize on the eventual shift to electric vehicles, and we believe we will be able to leverage this in our aftermarket business. From an operations standpoint, Trombetta brings a highly complementary manufacturing footprint to SMP. There are two plants in Wisconsin, including a high-tech electronics facility. There is a low-cost plant in Tijuana, Mexico, and there is majority ownership in a joint venture in Wuxi, China, geared toward pursuing the fast-growing industrial market there. While oftentimes, the synergies of an acquisition come from the cost savings of closing plants and eliminating duplicate costs, that is not the strategy here. With Trombetta, the synergies come from the combination of their strengths and ours, cross-selling opportunities through combined product portfolios and customer lists and collaboration between our engineering groups and advanced technologies. We're in the early stages, but we are delighted with the potential. We believe that this acquisition takes us to the next level in this OE space. When combined with previous activities, including organic business wins such as our compressed natural gas injection program and other acquisitions, such as the Pollak deal in 2019, we have grown this business to an annual run rate of around $250 million. We now have the critical mass to be a significant supplier and are excited to see where we can take it. And to reiterate, we believe that this channel is highly complementary to our core aftermarket business from the product and technology standpoint as well as from an engineering and production. At this point, I'll hand it over to Jim to review our operations. I would also like to reiterate what Eric stated that we are very pleased with our year-to-date performance, considering the challenges facing manufacturers. Supply chain difficulties have been significant, and our supply chain and manufacturing teams continue to battle a host of challenges such as material source supply, including semiconductor chips, resins, which continue on allocation limitations, extended lead times, which add to challenges of forecasting demand and managing inventory levels and transportation of goods only adds to the difficulties once your vendors can provide the components. Container and vessel management has become a critical path to managing the manufacturing process. Fortunately, we believe our global footprint and being a basic manufacturer has helped us with these challenges. Our low-cost operation in Mexico and domestic manufacturing facilities in North America ease the challenges of sourcing strictly from Asia. Our low-cost operation in Poland is also easier to schedule containers and vessels as compared to China. And in addition, this reduces any negative tariff impacts out of China. Availability of labor has also been a struggle at times but not to the same magnitude of material supply. With the significant increases in customer demand, the primary challenge has been to secure distribution personnel to get the product out. We have managed this labor shortage with the help of our dedicated distribution teams working six or seven days per week and daily over time. We also have adjusted wages for existing and new hires as we compete for a limited labor pool. Despite these challenges, our internal teams are focused on meeting our customer demand for availability and timely deliveries. We have received many accolades from our customers for higher fill rates than other vendors in the industry. On the inflation front, the low supply and demand tends to set pricing. We are not immune to these pressures and are incurring increases in materials for chips, resins and commodities across the board. Transportation for international impact on containers and vessels as well as domestic transportation cost increases and labor supply for wage adjustments and over time. We do our best to offset some of these increases with make-first-buy efforts and low-cost vendor sourcing. However, we are also passing on price increases to our customers. Availability of product and better fill rates than other vendors help support the need and acceptance for these price increases. Now turning to the numbers. I'll walk through the numbers for the second quarter and first six months, also cover some key balance sheet and cash flow metrics. Looking first at the P&L. Consolidated net sales in Q2 '21 were $342.1 million, up 94.8% versus last year, and our consolidated net sales for the first six months of 2021 were $618.6 million, up $116.4 million or 23.2%. Looking at it by segment. Engine Management net sales in Q2 were $233.2 million, up $60.1 million versus the same quarter last year. And for the first six months, were up $71 million to $445.2 million. These large increases of 34.7% and 19% for the quarter and first six months, respectively, largely reflect the softness we experienced in Q2 last year in the midst of the pandemic. Given the volatile results in 2020, it's better to compare our results through 2019, where Engine is up 7% for the quarter and up 3.2% for the first six months despite the loss of a large customer. These increases are a result of the successful customer initiatives, new business wins and generally robust demand highlighted before. Additionally, the acquired Trombetta and soot sensor businesses provided approximately $9 million of revenue in the second quarter of 2021. Temperature Control net sales in Q2 '21 were $106.5 million, up 47.1% versus the second quarter last year and were up 36.4% to $168.9 million for the first six months. And like we said for the Engine segment, it's better to compare our 2021 results to 2019. And on that basis, Temp Control sales were up 10.2% for the first six months, with the increases mainly reflecting an earlier-than-usual start to the summer selling season, as Eric alluded to before. Our consolidated gross margin in Q2 '21 was 29% versus 26% last year, up three points. And for the first six months, it was 29.6% versus 26.8% last year, up 2.8 points with increases for both the quarter and year-to-date periods coming from both of our segments. Looking at the segments. Second quarter gross margin for Engine Management was 28.9%, up 2.2 points from Q2 last year. And for Temperature Control, was 26.9%, an increase of 4.1 points from 22.8% last year. The higher margins in both segments were mainly the result of the higher sales volumes we experienced and favorable plant absorption from building our inventory back to sufficient levels. And were partly offset by higher costs and labor raw materials and exportation as was expected, given the inflation occurring across the spending categories. For the first six months, Engine Management gross margin was up 2.3 points to 29.8%, while Temp Control was up 3.3 points to 26.4%. The increases in our first half margins were also due to higher sales and higher fixed cost absorption given elevated production levels and were again partly offset by inflationary cost pressures. Moving now to SG&A expenses. Our consolidated SG&A expenses in Q2 increased by $14 million to $62.3 million, ending at 18.2% of sales versus 19.5% in Q2 last year. For the first six months, SG&A spending was $116.8 million, up $12.6 million, but ending lower at 18.9% of net sales versus 20.7% last year. Expenses increased for both the quarter and first half, mainly due to higher selling and distribution costs due to both higher sales levels and inflation and costs. The improvement as a percentage of sales mainly reflects improved expense leverage due to our higher sales volumes and continued focus on cost control around discretionary spending. Our consolidated operating income before restructuring, integration and acquisition expenses and other income net in Q2 was $37.7 million or 11% of net sales, up 4.5 points from Q2 last year. And for the first six months was 10.8% of net sales, up 4.7 points from the first six months last year. As we note on our GAAP to non-GAAP reconciliation of operating income, our performance resulted in second quarter 2021 diluted earnings per share of $1.26 versus $0.52 last year. And for the first six months, diluted earnings per share of $2.23 versus $0.95 last year. The increase in our operating profit for both the quarter and first half was mainly due to higher sales volumes, higher gross margin percent and improved SG&A expense leverage. Turning now to the balance sheet. Accounts receivable at the end of the quarter were $211.8 million, up $48.8 million from June 2020 and up $13.7 million from December 2020. The increase over June last year was due to the increase in sales during the quarter, while the smaller increase from December reflects both higher sales and management of our supply chain factoring arrangements. Inventory levels finished the quarter at $404.9 million, up $51.6 million from June last year and up $59.4 million from December 2020. The increased inventory levels reflect higher sales levels and the need to carry higher balances to support our customers. And as a reminder, our inventories were depleted during 2020 due to strong sales in the last half of the year, and we expected to build our inventories back this year. Looking now at cash flows. Our cash flow statement reflects cash generated from operations in the first six months of 2021, $23.2 million as compared to cash used of $0.9 million last year. The $24.1 million improvement was mainly driven by an increase in our operating income. And while we saw some large swings in working capital balances, the changes were largely offsetting. The changes in working capital in the first six months were mainly driven by sales performance during the period. Inventory balances finished higher as we replenished ourselves and made sure we had sufficient inventory to serve our customers, but cash used for inventory was partly offset by an increase in accounts payable. Additionally, we use significantly less cash and funding accounts receivable versus last year due to both timing of collections and management of our factoring programs, but this was partly offset by cash used to pay customer rebates that were earned and accrued last year. We used $11.7 million of cash for capital expenditures during the first six months, up from $9 million last year. We also used $109.3 million to fund our acquisitions of the aforementioned Trombetta and soot sensor businesses. Financing activities included $11.1 million of dividends paid and another $11.1 million paid for repurchases of our common stock. Financing activities also included $127.3 million of borrowings on our revolving credit facilities, which were used mainly to fund our acquisitions, but also for investments in capital and returns to shareholders through dividends and share buybacks. And while after making significant acquisitions in the first six months, we still finished the quarter with total debt of less than 1 times EBITDA given our strong operating performance and ended Q2 with total outstanding borrowings of $137 million and had more than sufficient remaining available capacity under our revolving credit facility of $112 million. In summary, we are very pleased with our operating results for the first half of the year. These results led to strong cash flow generation, which supported two great acquisitions in the Trombetta and soot sensor businesses as well as continued returns to shareholders and helped us finish the second quarter with low levels of debt and a substantial amount of liquidity. Our financial performance has been strong both in sales and profits. We've been active in M&A, closing two very strategic deals and have done so while navigating the complexities of the ongoing pandemic, keeping our people safe, managing through supply chain challenges. And I absolutely feel we are a stronger organization for it. We're pleased with the overall state of the industry and of our standing within it, and we are very excited about the future.

q2 sales $342.1 million versus $247.9 million.

Here is the agenda for today, Eric will begin by reviewing the highlights of the quarter, then Jim will give a brief review of operations. Nathan will go into a more detailed review of the numbers, and then I will have a short wrap up before we open it to questions. As part of an essential industry, we had to jump through many hoops to stay operational so that people could come to work safely and I'm just so appreciative of everyone whose dedication, intelligence and skills lead us through this unprecedented experience. These folks are the true heroes. Okay, so on to business. As mentioned on our last call, we came out of the second quarter experiencing strong demand and I'm pleased to say that the trend continued throughout the third quarter. Let me discuss each of the divisions separately, starting with Engine Management. Engine Management sales were up 6.7% for the quarter, clawing back about a third of our sales shortfall in the first half. Consumer demand has been robust, which we believe reflects the deferred maintenance from the early days of the pandemic when costs were idled in driveways, but we're also experiencing a general surge in the aftermarket, the result of people staying at home and working on their vehicles. And we believe this has especially impacted the DIY segment. Good evidence of this is a strong performance of our wire and cable business. It fits older vehicles and is relatively easy to install which are two hallmarks of DIY business, and while this line has recently been trending down 7% or so per year due to varied [Indecipherable] in lifecycle, it spiked up 10% in the quarter, which we have to assume is a temporary phenomenon. Customer orders for all of Engine Management have been consistently solid and this has continued into October. That said, our forecast remains low single-digit growth over the long term. Our Temperature Control Division was up 25% in the quarter driven by two dynamics. The first was related to timing. If you recall, pre-season orders from our last, from our customers were very light this year. In fact, our first half was down almost 20%. And then it got hard out creating a surge in demand across the country. These two factors combined for a very strong quarter, though year-to-date we are slightly behind last year. This is why we always suggest looking at Temperature Control on a full year basis. There are often quarterly anomalies but they typically balance themselves out. We are pleased to report that the quarter set an all-time record for SMP. Jim and Nathan will provide some detail on the drivers, so I just want to take a moment to speak to COVID-related savings. As we have mentioned in the past, we put in place short-term cost reduction measures ratcheting back various discretionary expenses as well as cutting Executive and Board compensation. We do plan to assess what we've learned and identify areas where we believe the savings can be sustained, however, we do recognize that many of these reductions will in fact be temporary. We had also taken steps to conserve cash including suspensions of both our quarterly dividends and our share repurchase plan and we are pleased to reinstate both of these programs as they are core aspects of how we return value to our shareholders. So in summary, needless to say, it's been a roller coaster of a year. After a mediocre first quarter and a truly difficult second quarter, we were able to make up much of the lost grounds with a very strong third quarter. We always experienced a certain amount of volatility period to period, and while this year, it has been substantially more exaggerated, it does show that our business tends to balance over time, and we do expect that to continue going forward. Before I hand this off, I would just like to make a few comments about the future. First, we were delighted, but not surprised to see our industry once again show its resilience. The basic fundamentals are solid and there are many favorable trends taking us forward. And while the crisis is certainly not over, we are confident that we are smarter now than we were before, our team were stronger as a result of managing our way through it and we are well equipped to tackle whatever is thrown at us. With that, I'll hand it over to Jim who will talk about our operations. I will provide an overview of our business from an operational perspective. I plan to touch on the basics from supply chain manufacturing through distribution. As we have all experienced, the past six months to seven months has been challenging and demanding. Our baseline was a 40% decrease in volume in April. This was followed by a relatively quick rebound in customer POS numbers in May and June that turned into increased orders to us in June and July. This momentum increased as we progressed through Q3 and remained steady. From a supply chain view, this meant working feverishly with our vendors to be able to meet our materials demand. Overall, with a few exceptions, our vendors and supply team have been able to keep supply flowing to our factories. Turning to our manufacturing base, we face surging demand with a significant mix shift toward older technology SKUs, driven by our customer sales in the DIY channel. Early in the third quarter, we were hampered with a shortage of available labor, a combination of higher demand and the COVID impact with high risk employees out and disruptions from contact tracing. I'm happy to report that we have been able to secure additional manpower along with the return of our high-risk employees. What is the result of the surge in demand? Production levels are significantly up in all our manufacturing facilities, generating favorable overhead absorption, which can be seen in our very strong Q3 gross margins. Engine Management was 31.5% and Temperature Control was 29.2%. These higher margins were generated from the surge in production volume, which we expect to level off. While this favorable momentum should carry into Q4, we expect sales and production to return to normal in 2021. Our longer-term gross margin targets would be Engine Management, 30% plus and Temperature Control 26% plus. We are fortunate to have a substantial manufacturing footprint in North America, including three low cost operations in Mexico, reducing our China exposure. I will also note on occasion, we have transferred production back to the U.S., the benefit of automating previous manual assembly processes. Quickly looking around the globe, our Poland operations, which is our coil manufacturing center of excellence, along with other switches and sensors has steadily grown in size and value. Over the past year, we have approved the added capacity for Poland to meet our increasing ignition coil demand. Our three China joint ventures, all in the Temperature Control product categories recovered very early from the pandemic at the start of the year. All three JVs provide us a steady source of supply, whereby we can control costs, quality and lead times. Finally, our North American distribution centers are our last touch point with our products. Our Q3 surge in demand present the challenges for our DC shipping performance. Similar to our manufacturing operations, we experienced the shortage of available labor to meet demand. The impact from this was slower turnaround time in our DCs to ship orders. During this period, our DCs were working six and seven days per week to keep up. Tremendous efforts were put forward by our DC employees to satisfy our customer needs. We have made great strides securing additional head count and I'm happy to report that we are covering [Phonetic] again and meeting our shipping turnaround goals. In summary, we are very fortunate to be a resilient industry that bounced back so quickly. Unfortunately, this is not the same for many other industries that have suffered dearly. I commend our frontline heroes that were on the job, six and seven days per week to satisfy the customer. Customer satisfaction is ingrained in our SMP culture and we just do it. Looking now at the results in the P&L, our consolidated net sales in Q3 2020 were $343.6 million, up $35.9 million or 11.7% versus Q3 last year. Our net sales for the first nine months of the year were $845.9 million, down $50.8 million or 5.7%. By segment, our Engine Management net sales in Q3 excluding wire and cable sales were $190.9 million, up $10.1 million or 5.6%. But for the first nine months of the year were down $40.5 million or 5.7%, finishing at $498.2 million. The increase in sales during the quarter we believe was due to pent-up demand from earlier in the year and strong customer POS. But looking in total at the first nine months, the quarter increase only partially offset the declines we saw earlier in the year related to the economic slowdown caused by the pandemic. Wire and cable net sales in Q3 were $38.7 million, up $3.5 million or 10% and for the first nine months were $105.6 million down $2.9 million or 2.6%. While the wire and cable business continues to be in secular decline and we still believe it will decline 6% to 8% on an annual basis, sales this year have been positively impacted by an increase in DIY sales as consumer stayed at home during the pandemic. Our Temperature Control net sales in Q3 2020 were $110.4 million, up $22.1 million or 25%. However, for the first nine months, sales were down $7.4 million or 3.1% versus last year, ending at $234.2 million. As Eric noted, Temp Control net sales in the quarter were driven by a very hot summer across most of the U.S. aided by very light pre-season ordering earlier in the year. Net sales on a year-to-date basis in this segment are more in step with last year, down slightly from the first nine months of 2019. Our consolidated gross margin in Q3 2020 was 31.4% versus 29.9% last year, up 1.5 points, for the first [Technical Issues] 28.7% [Phonetic] [Indecipherable] versus 28.9% last year, down 0.2 points. Looking at the segments, Engine Management gross margin in the third quarter was 31.5%, up 0.8 points from Q3 last year, while for the first nine months of 2020, it was down 0.3 points to 29%. Temperature Control gross margin in Q3 2020 was 29.2% up 3.2 points from 26% last year and for the first nine months, it was up 0.5 points to 26%. Margins for the quarter reflect the strong sales volumes we experienced in both segments and the positive impact of high fixed cost absorption, resulting from the compression of production into just a few short months as Jim alluded to earlier. On a year-to-date basis, gross margin in both segments, more closely aligned with long-term trends as Engine Management margins are really flat with last year and Temp Control margins ended just slightly ahead of the prior year. Consolidated SG&A expenses in Q3 were $59.5 million, down $0.4 million in Q3 '19 and came in at 17.3% of sales versus 19.5% last year. For the first nine months, SG&A spending was $163.7 million, down $16.8 million at 19.4% of net sales versus 20.1% last year. While our SG&A expenses in the quarter were roughly flat with last year, the improvement as a percentage of sales is reflective of the higher sales volumes we experienced this year. Lower SG&A expenses in the first nine months were helped by cost reduction plans put in place as a response to the impact of the pandemic and overall better leverage of expenses as a percentage of sales. Our consolidated operating income before restructuring and integration expenses and other income net in Q3 of '20 was $48.3 million or 14% of net sales, up 3.6 points from Q3 '19 and for the first nine months was 9.3% of net sales, up 0.5 points from last year. As we note on our GAAP to non-GAAP reconciliation of operating income, our performance resulted in third quarter 2020 diluted earnings per share of $1.59 versus $1.02 last year and for the first nine months, diluted earnings per share of $2.53 versus $2.51 in 2019. The increase in our operating profit for the quarter was mainly due to higher sales volumes, while the increase for the first nine months, primarily reflects lower SG&A expenses across the Company which slightly more than offset the impact of lower sales volumes. Turning now to the balance sheet, accounts receivable at the end of the quarter were $238 million up $102.5 million from December 2019 and up $69 million from September 2019. The increase over year-end reflects seasonal patterns in our business while the increase over last year reflects the strong sales we experienced in the third quarter as well as the timing of this in the quarter as compared to last year. Inventory levels finished the quarter at $311.4 million, down $56.8 million from December 2019 and down $28.8 million from September 2019. The decrease from both year-end and September last year mainly reflects the sharp recovery in sales we experienced in the third quarter, after having lower production levels earlier in the year in response to general expectations of slowdown in sales. Looking at the cash flow statement, it reflects [Phonetic] the cash generated from operations in the first nine months of 2020 of $78.6 million as compared to a generation of $43.1 million last year. The increased cash generation during the first nine months of this year was driven mainly by timing, both of movements in inventory and accrued customer returns and offset by an increase in accounts receivables stemming from strong sales during the quarter. We expect this timing around cash flows to normalize as sales and production levels stabilize. During the first nine months, we continue to invest in our business and use $13.2 million of cash for capital expenditures, which was higher than the $12.3 million used in the first nine months of 2019. Financing activities included $5.6 million of dividends paid and $8.7 million of repurchases of our common stock, both of which occurred during the first quarter. Financing activities also included $44.9 million of payments on a revolving credit facility. We finished the third quarter with total outstanding borrowings of $12 million and available capacity under our revolving credit facility of $238 million. Larry, you're on mute. As you saw in the release, come January 1st, I'm going to be moving from Executive Chairman to Chairman of the Board and this reflects the fact that I'll be stepping back a bit from day to day activities, but I'll still remain closely connected to the Company as Chairman of the Board. I believe this is an appropriate and a proper move after 53 glorious years, where I had the privilege of being part of the Company's growth from roughly $20 million in our core business when I began to well over a $1 billion today. And we still have many plans for future growth. I'm confident it's going to be a very seamless transition as all our major moves have been. We have in place, what I believe is the strongest and deepest management team I can remember who proved themselves on how well we performed during this very difficult year. So I am very confident about the future.

standard motor productsa nnounces third quarter 2020 results and reinstates quarterly dividend. q3 earnings per share $1.59 from continuing operations excluding items. q3 earnings per share $1.59 from continuing operations. q3 sales $343.6 million versus refinitiv ibes estimate of $327.3 million. approved reinstatement of quarterly dividend of 25 cents per share.

My name is Larry Sills, Chairman of the Board. Our agenda for today is we'll start with Eric who'll review the highlights of the fourth quarter and the year. Jim will then review some operations and Nathan will then give a more detailed review of the numbers. When that's complete we will switch over to -- we will start our Q&A session, so a lot to cover. I truly believe we would not have been nearly as successful in navigating these uncharted waters without their dedication and skills. I truly could not be more proud of how they guided us through it. Okay, on to business, we are extremely pleased with our fourth quarter results as we set records for both sales and profits. Our sales were up $41 million or 17% with both divisions contributing record numbers. Engine Management was up 15% and was far and away our largest fourth quarter on record. Some of this was due to entering the period with an order backlog. As you recall, the third quarter was also quite strong and due to some manpower shortages in our distribution centers we did not fully catch-up until early in the fourth quarter. But beyond that, incoming volume from our customers continued to be robust throughout the period as well. I would note that our customer's sell-through in the fourth quarter was in the mid single-digits and we are pleased to see that the positive trend is continued into 2021. Temperature Controls also had a record, up 30% though the fourth quarter is the lowest sales period of this highly seasonal category. We enjoyed a very warm summer and similar to Engine Management we ended the quarter with a bit of a backlog. In addition to this backlog, the warmth continued into the fourth quarter prolonging the selling season. Customer POS was robust throughout but again this is a light period for the Air Conditioning business. Reflecting back this was a -- this year was a tale of two halves. At mid-year we were down nearly 15% due to the sales drop off and the pandemic. And with the third and fourth quarters strengthening sequentially on a full year basis we were nearly flat with 2019 with Engine Management slightly behind and Temperature Control slightly ahead. From a profitability standpoint the trend was similar. After the first half our earnings from continuing operations were down almost 37% and with the record third and fourth quarters, we ended the year up 16%. Nathan will provide much more detail later in the call. But overall, we are quite pleased with our year and proud of our performance. Although we enter 2021 with many positives as previously announced, we were recently informed of a loss of a major account within our Engine Management segment. At the time of the announcement we knew that the annualized impact was an approximate loss of $140 million that we had yet to finalize any details including timing. We now know that this business is phasing out over the course of the first quarter of this year during which we expect approximately $20 million in revenue and it will then be totally absent beginning in the second quarter and thereafter. This account has chosen to pursue a private label strategy as they have with other product categories before and it is our understanding that they have split the business between several suppliers both domestic and overseas. We now turn our attention to rightsizing our cost structure accordingly meanwhile we seek to replace the volume. First off we have many exciting opportunities with various customers that are actively in discussion. And secondly installers all have many sources for their parts needs. Many of whom we believe to be loyal to our brands. And we plan to work aggressively in the field helping them find our products. While this account decided to pursue a different approach, we strongly believe that our full-line, full-service strategy continues to resonate with our other customers as well as with the installers and end consumers. As evidence of this and of the strength of our partnerships, we are honored to have recently received O'Reilly Auto Parts top honors as their 2020 Supplier of the Year. I'd next like to speak for a moment about some of our other areas of business that complement our North American aftermarket focus. First is original equipment; while we do enjoy some OE business for the passenger car market our larger emphasis has been more toward the heavy duty industrial and agricultural arenas. We believe these are a better fit for us. The product lifecycle tends to be a bit longer and frankly tend to be a bit more profitable than OE for passenger cars. In general, the OE market was slower to recover from the pandemic than the aftermarket as new vehicle production and sales were more adversely impacted. But I'm pleased to report that it has now rebounded quite nicely and we are seeing good run rates entering 2021. Included in this is our recent Pollak acquisition of which 75% is OE and largely commercial vehicle. Not only are we seeing a rebound of the acquired product lines, this acquisition has opened new doors for us which we're actively pursuing. Another original equipment area that has been a real highlight for us has been our compressed natural gas injectors, which are utilized in heavy duty commercial vehicles largely in Asia. As that region focuses on alternative energy vehicles we have seen strong growth as they build out systems that operate cleaner than conventional power trains. We sold over a million natural gas injectors last year and the order book remains very strong. Next, regarding the heavy duty aftermarket portion of the acquired Pollak business we saw the same rapid recovery that we saw in our legacy aftermarket. But as you'll recall, our intent with this is to focus on reinvigorating what has been a somewhat neglected business from its former owner. We have added hundreds of SKUs, are refreshing all marketing materials and are building out an organization to aggressively pursue the heavy-duty aftermarket for both Engine Management and Temperature Control. We see this as a very complementary channel for us. There are many similar products to what we offer elsewhere and we have acquired a well-known and highly regarded brand on which to build. Lastly, I'd like to address our Chinese operations. To remind you, we have three joint ventures all within Temperature Control. While they provide us with access to high quality, low cost products for our North American aftermarket business there are other purposes to pursue Chinese original equipment business, which is the largest new vehicle market in the world. As of now about 30% of what we sell out of these JVs is for in-country OE. Now while these businesses are still quite small the growth potential is substantial. One that we are really excited about is called CYJ, which manufactures electric compressors for electric vehicles both passenger car and heavy duty truck and bus. Similar to the natural gas injector discussion a few moments ago, we see real potential in being a basic manufacturer of products for alternative energy vehicles and are excited to be in at the ground floor. So in summary, 2020 was a rollercoaster of a year. After a difficult first half, the second half showed the resilience of our industry and we were able to make up essentially all of the lost ground. And while the ongoing pandemic will continue to cause uncertainty, looking forward to 2021 we see many positives. Industry trends are all favorable. Among them average age of vehicles has hit a record 12 years. Gas prices remain relatively low. And as mile driven recovers, we expect DIFM, which is our core business will strengthen as well. Our strong customer sell-through from the second half of 2020 has continued into the first quarter of '21 and while we will feel the near-term impact of the lost business, our relationships in the marketplace have never been stronger. And with that, I will hand it over to Jim to talk about our operations. That is Jim Burke and I'd like to touch on two topics from operations today. First is our supply chain. 2020 was like no other year and I'm very proud of all our team members enduring everything that was thrown at us. We are deemed an essential business to the transportation industry and we remained open to meet our customer demands. This entailed retrofitting all of our facilities for safety precautions and social distancing. We endured wild demand swings dropping 30% to 40% followed by positive swings up 10% to 20%. At the same time, we were faced with a labor shortage. Many customers were very complimentary recognizing our employee efforts. A more recent topic around supply chain has been the disruption in the auto sector from lack in availability of semiconductor chips. Fortunately, we believe we have an adequate inventory supply and deem this to be a minor risk. Another supply chain challenge has been the logistics of moving product primarily from the Far East to the U.S. Fortunately we have a very large manufacturing footprint in North America and Poland and are less exposed than others who source a 100% from Asia. The logistic challenge reflects a combination of container shortages, availability of shipping vessels and ultimately congestion at local domestic ports. We have been managing through this process by forward booking containers and vessels to meet our needs. While definitely a challenge, we were able to alleviate more of this risk than others with our North American and Poland manufacturing locations. Closer to home I would be remiss without addressing the recent storms across the U.S. and in particular Texas. The polar blast with snow and ice instilled significant hardship and devastation across the midsection of the U.S. affecting many of our plants. However, Texas was hit hardest where we have our Temperature Control headquarters and distribution center. We are assessing employee needs to recover and our facility reopened after being shut for four days. Fortunately, this time of the year we are focused on pre-season orders and will be able to make up the lost days with overtime and weekends. Our global teams have met all these supply chain challenges head on with pride and are driven to meet our customer needs. Turning to my final topic, I would like to highlight our SMP inaugural Social Responsibility and Sustainability Report. For over 100 years SMP has nurtured a culture focused on all our stakeholders including our employees, customers and our communities. With solely internal resources, our team members produced this outstanding ES&G report which can be found on our website. With a focus on environmental and social responsibility our report highlights the products we produce that reduce auto emissions, efforts to reduce our carbon footprint in our operations, increasing diversification and inclusion throughout our organization addressing the health and safety of our employees and being engaged in the communities where we are located. Many of these efforts have been captured under our SMP Cares banner focusing on all stakeholders and striving for continuous improvement. And I will pass the call over to Nathan for our financial wrap-up. Now turning to the numbers; I'll walk through the operating results for the fourth quarter and the full year, cover some key balance sheet and cash flow metrics and then also talk a little about our expectations for the year of 2021. Looking first at the P&L, consolidated net sales in Q4 2020 were $282.7 million, up $41.5 million or 17.2% versus Q4 last year. Our consolidated net sales for the full year were $1.13 billion finishing down just 0.8% after recovering in the last half of the year as Eric noted earlier. Looking at it by segment, Engine Management net sales in Q4 excluding Wire and Cable sales were $193.5 million, up $26.2 million versus the same quarter of last year. This 15.7% increase was driven mainly by catching up on a large order backlog we've carried into the fourth quarter that stemmed from the sharp rebound in business activity after COVID lockdowns were lifted. For the full year, Engine Management's net sales were down 2% to $691.7 million, a strong second half volume helped offset the pandemic induced declines we saw earlier in the year and brought the segment's full year sales to a level just slightly below 2019. Wire and Cable net sales in Q4 were $38.3 million, up $3.7 million or 10.6% but for the full year were relatively flat finishing up 0.6% at a $144 million. Sales during the quarter and for all of 2020 were positively impacted by an increase in DIY sales as consumers stayed at home during the pandemic. While the Wire and Cable business performed very well in 2020, the business remains in secular decline and we believe sales will be lower by 6% to 8% on an annual basis. Our Temperature Control net sales in Q4 2020 were $47.7 million, up 30% versus the fourth quarter last year driven by an extended selling season as weather stayed warm well into the fourth quarter across most of the U.S. Like Engine Management, Temp Controls full year sales were more in line with last year ending the year up 1.3% at $282 million as the strong seasonal sales helped the segment finish slightly ahead of 2019. Looking now at gross margins, our consolidated gross margin in Q4 2020 was 33.3% versus 30.2% last year, up 3.1 points and for the full year it was 29.8% versus 29.2% last year, up 0.6 points. Looking at the segments, fourth quarter gross margin for Engine Management was 33%, up 2.4 points from Q4 last year. And for Temperature Control was 30%, an increase of 7.3 points from 22.7% from last year. The very strong margins in both segments reflect the higher sales volumes we experienced as well as the positive impacts of high fixed cost absorption resulting from increased production. For the full year gross margins in both segments more closely aligned with long-term trends. Engine Management gross margin was up 0.5 points to 30.1% while Temp Control was up 1.5 points to 26.7%. These full year margins reflect strong second half sales and fixed cost absorption and also incremental improvements achieved from our continuous savings programs. Moving now to SG&A expenses, our consolidated SG&A expenses in Q4 were $61 million ending at 21.6% of sales versus 22.5% last year. For the full year, SG&A spending was $224.7 million, down $10 million at 19.9% of net sales versus 20.6% last year. The improvement as a percentage of sales in the quarter mainly reflected improved expense leverage as sales volumes increased. Lower overall SG&A expenses for the year were helped by cost reduction plans put in place earlier in the year and lower interest rates on accounts receivable factoring programs and to a lesser extent COVID-related government incentives. Consolidated operating income before restructuring and integration expenses and other income net in Q4 2020 was $33.2 million or 11.7% of net sales, up 4 full points from Q4 2019 and for the full year it was 9.9% of sales, up 1.4 points from last year. As we note on our GAAP to non-GAAP reconciliation of operating income, our performance result in fourth quarter 2020 diluted earnings per share of $1.08 versus $0.59 last year and for the full year diluted earnings per share of $3.61 versus $3.10 last year. The increase in our operating profit for the quarter was mainly due to higher sales volumes while the increase for the year mainly reflects higher gross margins and lower SG&A expenses across the company, which overcame the impact of slightly lower sales volumes. Turning now to the balance sheet, accounts receivable at the end of the quarter were $198 million, up $62.5 million from December 2019 with the increase over last year due both to higher sales in the fourth quarter and management of our supply chain factoring arrangements. Inventory levels finished the quarter at $345.5 million, down $22.7 million from December 2019 with the decrease from last year mainly reflecting the sharp recovery in sales we experienced in the second half of the year after having lower production levels earlier in the year. Our cash flow statement reflects cash generated from operations for the year of $97.9 million as compared to a generation of $76.9 million last year. The $21 million improvement was driven by an increase in our operating income as noted earlier but also by changes in working capital. The changes in working capital in 2020 were mainly a result of strong second hand half sales and related timing. Inventory balances finished lower, but accounts payable were higher as we tried to replenish our shelves. Further, accrued customer returns and rebates were also higher due to timing of sales in the back half of the year. These favorable movements were partly offset by an increase in accounts receivable as highlighted before. As we said last quarter we expect this timing around cash flows to normalize as sales and production levels stabilize. During the year we continued to invest in our business and used $17.8 million of cash for capital expenditures which was more than the $16.2 million used in 2019. Financing activities included $11.2 million of dividends paid and $13.5 million paid for repurchases of our common stock. Financing activities also included $46.7 million of payments on our revolving credit facilities. We finished the year with total outstanding borrowings of $10 million and available capacity under our revolving credit facility of $237 million. To that end our Board of Directors has approved the quarterly dividend of $0.25 per share on common stock outstanding, which is payable on March 1. Further, our Board has also authorized an additional $20 million common stock repurchase plan. This new authorization is on top of the $6.5 million remaining under our existing plan and when added together will allow us to repurchase up to 26.5 million of additional shares. Lastly, let me talk about our expectations for 2021. As I said earlier, sales in the last half of 2020 and in the fourth quarter in particular were very strong leading to very favorable gross margin performance. But as you've heard we -- as we head into the first quarter of 2021 facing the loss of a customer who will be working through cost reductions for the balance of the year while we seek to replace the volume. While gross margins will vary across the quarters we expect full year 2021 gross margins for Engine to be 29%-plus. For our Temp Control segment we continue to target gross margins of 26%-plus for the full year in 2021. Looking at our SG&A cost in 2021, we expect expenses to be in the range of $52 million to $56 million each quarter. And finally, with regard to working capital we expect balances to normalize as noted earlier. As a result, we expect cash flows to be driven by using cash to build our inventory back to appropriate levels and to pay customer rebates earned during 2020 and offset by cash generated from the collection of accounts receivable. Brittany, are you there?

q4 earnings per share $1.08 from continuing operations excluding items. q4 sales $282.7 million versus refinitiv ibes estimate of $254.3 million.

We are very pleased to report exceptional second-quarter financial and operational results. The quarter exceeded expectations on several measures and puts us ahead of schedule in meeting our key priorities. Turning to Slide 3. I will reiterate our long-term objectives and progress in meeting them. First, maximize cash flow over the next five years sustaining a reinvestment rate of less than 75%. During the second quarter, we accelerated certain capital activity to effectively make up for lost time as a result of the Texas weather event in the first quarter. Production came in ahead of expectations and capital came in lower, delivering free cash flow neutrality. Our outlook from here for free cash flow and free cash flow yield is highly competitive for our sector and favorable compared to other market sectors. Our second long-term objective is to improve the balance sheet by applying free cash flow to absolute debt reduction, targeting less than two times leverage by year-end 2022 and generating sufficient cash flow to exceed bond maturities due through 2024. Our outlook on leverage is more favorable on two fronts. Given the strength and price outlook for all three commodities since we constructed our plan in February, the target of less than two times leverage by the end of 2022 is now looking like less than one and a half times levered at the end of 2022. Secondly, our second-quarter bond tender and new issuance reduced near-term maturities by nearly $400 million. We now believe that free cash flow generation through 2024 will be sufficient to cover bond maturity through 2026. I'll let Wade expand upon that great outcome. Our third long-term objective is to maintain top-tier high-return inventory. Our success here may be the most exciting of all. Despite a particularly challenging 2020 and weather-related bumps during the first quarter, our team has continued to delineate and develop the Austin Chalk. This is real value creation, as I will elaborate on later. And the fourth long-term objective is to report differential ESG stewardship. Today, we've posted our responses to the 2020 CDP questionnaire as well as posted the data in the format of the task force on climate-related financial disclosures or TCFD. We will be posting additional ESG disclosures in the coming days including the Sustainability Accounting Standards Board, or SASB, framework updated for 2020 data. Among reported ESG metrics, most notable are our reported 37% decline in greenhouse gas emissions intensity in 2020 versus 2019 and a 20% decline in methane intensity. Turning briefly to Slide 4. This chart depicts our highly competitive free cash flow yield as projected for 2022. I'll start on Slide 5. I think you'll find most of the information straightforward, so I'll just add some context to a few items. Starting with production, we beat the top end of guidance with production at 12.4 million BOE or 136,500 BOE per day. And this was due mainly to performance from the Austin Chalk, where both base production and new wells were stronger than we had modeled. For the quarter, oil production percentage was a healthy 54%. Capex of $214 million came in under our guidance range of $230 million to $240 million. This related to timing as our capital expenditure estimate for the full year remains unchanged. Drilling and completion activity is on schedule. We drilled 22 and completed 45 net wells in the quarter. For the first half of 2021, capital expenditures totaled $399 million, and we drilled 40 net wells and completed 62 net wells. So we're roughly 60% through our capital program for the year. In general, line item costs are tracking guidance, but I would expect LOE per BOE to tick up to the high end of the range in the third quarter as we have more workover scheduled during the quarter. Turning to the balance sheet on Slide 7. Here, we see the substantial reduction in near-term maturities due through 2024 which at second quarter end stood at $223 million including the revolver. I'll also note that since quarter end, we redeemed the converts. So for modeling purposes, assume that went on the revolver. We termed out approximately $400 million in debt with the issuance of new six and a half percent notes due 2028. The tender offer and issuance transactions went extremely well, was actually oversubscribed by 10 times. It served the purpose of strengthening the balance sheet by removing any perceived risk associated with near-term maturities and positions us to reduce the highest cost debt sooner. Updating our hedge positions on Slide 8, we have 75% to 80% of oil production and about 85% of natural gas production hedged the second half of 2021, details by quarter in the appendix. As we previously stated, our methodology for hedging is aligned with our outlook for leverage, so you can expect a directionally lower percentage of production to be hedged in 2022. To say it again, we now see debt-to-EBITDAX trending below one and a half times by the end of next year, and that is based on current strip and estimated cost. So now turning to guidance on Slide 9. Guidance for the year remains unchanged. We did narrow the range around production to 47.5 million to 49.5 million BOE, and that range really relates to ultimate timing of wells coming on. Third-quarter production is expected to range between 13 million to 13.2 million BOE or 141,000 to 143,000 BOE per day 53% to 54% oil. This implies fourth-quarter production to be relatively flat with the third quarter. In terms of cadence, the remaining capital activity will be heavier weighted to the third quarter, with the third-quarter capital guidance range forecasted to be between $170 million to $190 million. I think we will lean toward the high end of full-yea capital guidance, accounting for some inflation that may kick in. We're now expecting full-yea activity to include about 85 net wells drilled and 100 to 110 net wells completed. This sets us up to low single-digit production growth in 2022 and of course substantial growth in free cash flow. I'd just like to highlight a few operational accomplishments, skipping to Slide 11. In the Midland Basin, I have to boast about the longest lateral ever in the state of Texas. While we have previously confirmed drilling the 20,900 foot almost 4-mile long lateral which we drilled in 20 days, we now have the well on production. And I can tell you and anyone with field experience would know, drilling out the plugs and cleaning out a well with a lateral this long is no easy feat. The project went smoothly and the well has been on production since June 25. Keep an eye out for the performance of the Clarice Starling Sundown D 4542WA well in Howard County, an aptly long name for a really long lateral. Also in Midland, we just finished our first two simul frac operations on two pads located in Sweetie Peck and North Martin. These operations went smoothly, and we were able to complete an average of 16 stages per day about twice the pace of a typical zipper frac, and we're able to complete as many as 24 stages in a day. I think many of you already recognize that we are always in pursuit of commercially astute technical advancements. I will also draw your attention to Slide 12, showing that SM is already recognized for drilling the longest laterals on average in the Midland Basin. Our ability to do this is a result of our contiguous land positions and really good work by our land department in blocking up positions. Longer laterals present a tangible benefit in terms of capital efficiency. Wrapping these concepts together, longer laterals and simul frac operations in areas where the development design is amenable, we clearly have the potential to offer additional capital efficiencies. We are often asked if we expect to keep improving our already efficient operations which we continue to run at around $520 per lateral foot. It's hard to imagine material improvements, but this is a great example. We will be working with the longer lateral and time effect concepts as successfully tested as we put together our 2022 operations plan. Turning to Slide 14. In South Texas, we have updated the Austin Chalk cumulative production plot which continue very favorably. And on Slide 15, I will reiterate the great Austin Chalk 30-day peak rates we announced in June. Three new wells averaged 3,300 BOE per day. And the wells have an estimated breakeven oil price of just $24 per barrel. We should have additional Austin Chalk results in the third quarter, and we look forward to sharing more with you. Also, I will remind you that our transportation costs for natural gas in South Texas dropped by about $0.25 per mcf starting this month, another factor contributing to better economics in the South Texas program. In summary, second-quarter results were outstanding, and we are on track to return to free cash flow generation starting in the third quarter and on track to deliver highly competitive free cash flow as measured by yield to market capitalization going forward. Operationally, we have been able to keep costs flat and through our successful testing of longer laterals and simul-frac completions, we will seek to drive increased capital efficiencies through technology. Keep watching for updates on our Austin Chalk results as we continue to successfully build grassroots inventory and asset value. Again, we have posted CDP and TCFD responses which you can access on our website and expect more ESG-related disclosures in the coming days.

qtrly production was 12.4 mmboe (136.5 mboe/d) and was 54% oil. qtrly production volumes exceeded expectations due to outperformance from new wells and base production in austin chalk. full year 2021 production guidance range is narrowed to 47.5-49.5 mmboe, or 130.1-135.6 mboe/d. except production, all other 2021 guidance metrics are unchanged.

As customary with year-end reporting, we have a lot to cover here today. As we review the results and plan, I hope you'll see why we believe that we are a premier operator of top-tier assets. I'll start with Slide 3 and the highlights of 2020. Our focus on free cash flow involved a companywide effort to reduce costs and increase efficiencies. Generating $240 million in free cash flow exceeded probably all estimates and is a testament to the SM team, achieving that during a very challenging 2020. Debt reduction of nearly $500 million was also a significant achievement. Not only did we apply free cash flow funds to debt reduction, but the total reflects the outcome of the exchange offer launched in April, as well as market purchases of our bonds throughout the year, buying them back at a discount. Turning to Slide 4. Exceptional results in 2020 were supported by a number of factors. Capital efficiency tops the list with faster drill times, faster completions, rebidding and deflation across nearly all service lines and generally a focused effort to improve in all areas within our control. Well performance was particularly strong with Midland Basin wells outperforming early year expectations and Austin Chalk delineation wells exceeding expectations. Compared with the original February 2020 plan, we reduced capital by nearly 30%, while delivering production in 2020 within the original guidance range. Year-end inventory and reserves, which I will speak to later, reflect the exceptional quality of our assets and the success of our delineation work in the Austin Chalk. With respect to ESG, we notably increased our disclosure, publishing both SASB and CDP/TCFD to our website, but more importantly, establish the oversight of a board ESG committee, a management ESG committee and put processes in place to collaborate and engage relevant functional areas to ensure ESG priorities are actionable throughout the organization. Our safety metrics continue to improve and are outstanding, top quartile among our peers and notably not a single recordable incident in South Texas in 2020, and that includes employees and contractors. Midland Basin flaring was reduced 75% compared with the prior year, which is in part attributable to the construction of interconnections that enable gas production to be redirected in the event an individual third-party processor cannot receive it. Now turning to Slide 5. A better balance sheet is another successful outcome of 2020. We both reduced debt and manage the maturity schedule. On top of the nearly $500 million overall debt reduction, we reduced near-term maturities through 2024 by more than $600 million and ended the year with nearly $1 billion in liquidity and reduced our leverage, net debt to adjusted EBITDAX from 2.8 to 2.3 times. I'm going to start on Slide 7. So despite the macro challenges, 2020 was an exciting time for the company as our multiyear portfolio transition to top-tier assets turns from high oil growth to free cash flow positive, setting the foundation for sustainable free cash flow going forward. As we put together our five-year plan, the core objectives were to set activity levels appropriate to optimize free cash flow over the plan period, which should enable us to reduce leverage significantly and move the company into a very sustainable reinvestment rate going forward. This optimal plan involves a returning activity in 2021 after the severely contracted level in 2020. In addition to these financial objectives, we believe inventory depth and ESG stewardship are key components of our sustainable long-term plan. So now moving to Slide 8. Here we graphically present the five-year plan and the financial priorities, which are: first, to maximize free cash flow over this five-year period; second, continue strengthening the balance sheet by applying free cash flow to debt reduction, which targets less than two times leverage by the end of next year 2022 and close to one time leverage by the end of the five-year period; and third, achieve a consistent, sustainable reinvestment rate south of 75% in the years 2022 through 2025. These priorities also deliver free cash flows that exceed all debt maturities due through 2024. Now on Slide 9. Specifics of the 2021 plan include delivering positive free cash flow, which we estimate will approach $100 million at current strip, capital expenditures of $650 million to $675 million consistent with preliminary discussion last fall. Again, this is a return to what we view as the optimal activity level for achieving those five-year plan objectives, mainly maximizing free cash flow generation and leverage reduction. Total production of approximately 47 million to 50 million BOE or 129,000 to 137,000 BOE per day, with oil volumes at 52% to 53% of total production. I believe the other line items are self-explanatory and includes slightly higher LOE with increased oil in the production mix and decreased transportation due to the favorable change in terms for South Texas gas that go into effect in the second half of 2021, as well as lower South Texas gas production volumes. So regarding the current quarter, we are estimating capital of about $180 million. Therefore, it's premature to provide first-quarter production guidance until we can assist and quantify the extent of the impact over the next few days. Slide 10 includes a little more detail on 2021 capital allocation, which we expect to be 90% DC&E and allocated roughly 70% to the Midland Basin. We've increased the allocation to South Texas Austin Chalk given the excellent results we're seeing to date. The plan includes drilling net 55 wells in Midland and 39 in South Texas and completing net 72 wells in Midland and 21 wells in South Texas. So comparing that with preliminary guidance, our drill pace is now about 17% faster, which results in more wells drilled as we optimize efficiency under our drilling contracts, also compared with preliminary guidance, fewer completions are largely the result of timing differences. A few Midland Basin wells were accelerating in 2020. We entered into the South Texas JV and modified the timing of several 2021 completions to turn in line in early 2022. Looking beyond 2021, the chart to the right indicates a flattening in total capital going forward corresponding to a low growth, sustainable reinvestment rate. Now turning to Slide 11 and hedging. Our hedge strategy is to protect downside risk and is correlated to our leverage. We go into 2021 with about 75% to 80% of oil hedged and about 85% of gas. Looking ahead to 2022, as leverage metrics have improved, assuming no significant macro change, in general, you could anticipate a lower targeted hedge level as we approach next year, especially considering the risk that continued upward price movements could ultimately result in rising costs. It was a great way to end a very challenging 2020. The details in the release and slide deck, generally self-explanatory. We had a nice production beat versus guidance, the higher production, higher oil production was due to better performance from our base production in the Midland Basin. We simply have not brought our models up to fully reflect improved base well performance there. At the same time, capital expenditures were well below expectations. Capital expenditures reflected further capital efficiencies in Midland, where DC&E costs averaged less than $500 a foot for the quarter. As noted last quarter, while we were seeing improved D&C costs, the fourth-quarter plan included testing significantly larger completions at certain Midland wells. The larger proppant loadings were included in the less than $500 per lateral foot average for the quarter as we realized further cost efficiencies on completions. In addition, we deferred the completions of five Austin Chalk wells in South Texas due to casing problems identified in the vertical sections of certain wells. We're currently working to better understand and rectify the issues. Those wells were planned to turn in line in 2021, the plan now assumes those wells will turn in line in 2022. I'm now on Slide 13. The majority of our activity in 2021 is directed at the Midland Basin, where the drilling program has very robust economics with an average 10% IRR breakeven flat price of $16 to $31 per barrel. Costs are now expected to average $520 per lateral foot, and we expect to drill an average lateral length of around 11,300 feet. We've increased our completion intensity this year, and that cost is reflected in this estimate. Turning to Slide 14, which shows our drilling and completion efficiencies. This is just such a great slide. Each year, I think it will be hard to beat our past performance, and yet we do it again and again. Speaking of that, we have an outstanding drilling team, and they just set a new record. Just in the past month, they drilled and cased the longest lateral in Texas at about 20,900 feet or almost four miles, and did it in 20 days. That is almost 3,000 feet longer than the previous record also in Howard County. As you all know well by now, longer lateral lengths translate to improved capital efficiency and returns. It shouldn't surprise you then that we have drilled 25 of the 50 longest laterals in the Midland Basin. Not mentioned in the slide, but in 2020, we also implemented dual fuel on some of our rigs partly for cost efficiency gains but also for emissions reduction. And we are now pumping an average of about 10 stages a day per frack spread in the Midland Basin with our primary pumping service provider. Moving to Slide 15 in South Texas. Approximately 30% of our capital is allocated to South Texas in 2021, and it will primarily target the Austin Chalk. Projected well costs are down to $520 per lateral foot, with an average lateral length of around 12,000 feet. From our delineation program over the past couple of years, we believe that our Austin Chalk wells have competitive returns with co-development in the Midland Basin. In 2021, we have designed a program that is partly delineation and partly development. The plan includes 21 South Texas net completions, of which 18 are Austin Chalk. Also in South Texas, we have been testing an electric frack fleet and during the second quarter, plan to increase the number of stage pumped fully electric. Slide 16 provides an update on the performance of our Austin Chalk wells to date. Our newer wells target a better landing zone than some of our earlier wells. We have some older DUCs that landed in the original landing zone that will be completed this year, along with several new wells that are in the new landing zone. It is worth emphasizing that the economics of Austin Chalk wells are superior compared to legacy Eagle Ford wells. The Austin Chalk has substantially higher revenue per BOE due to the liquids content. They also have a favorable cost structure, about 35% to 40% lower per BOE produced. We have added a slide in the appendix that compares new Austin shot cost per BOE with our historical Eagle Ford averages so that you can see the breakdown there. Slide 17 puts SM's Austin Chalk well performance into context versus the historical Austin chalk wells some of you may remember. Just for perspective, we also showed a comparison to the historical average Delaware Basin horizontal well performance. On Slide 19, let's turn to year-end reserves. The waterfall here is generally self-explanatory but let me point out a few important takeaways. As you know, this year, SEC reserves were run at very low commodity prices, sub $40 oil and sub $2 gas. Because of the robust economics of our wells, the negative proved reserves impact of price revisions totaled only 33 million barrels equivalent, and this was predominantly from Eagle Ford gas wells. Reserve revisions due to the SEC five-year rule are a result of scaling back activity in our five-year plan, corresponding to the lower reinvestment rate that Wade just talked about. These are absolutely economic wells but are now moved away from the proved category in our development plan. The wells underpinning these reserves that were moved are robust with an estimated average IRR of nearly 70% at $50 per barrel oil and $2.50 per Mcf gas. Scaled back activity over the five-year plan period provides for a longer duration inventory of high-quality wells. You may wonder by how much we scaled back activity, for the planned period 2021 to 2025, we reduced the number of turn-in-lines by 29% compared to last year's plan. The reserve additions and performance revisions originate from the Midland Basin, the Austin Chalk and Eagle Ford. Turning now to Slide 20, regarding inventory. We have over 13 years of total company inventory and nine years in the Midland Basin. It's important to highlight this inventory has an average IRR of more than 50% when run at a price deck of $50 per barrel and $2.50 per Mcf gas and current costs. This is very high-quality inventory and is not necessarily comparable to other companies' inventory reports, which may use higher price decks, lower return thresholds, shorter lateral lengths or include all contingent resources. We do have additional potential inventory on our existing acreage in the contingent resources category from potential additional intervals and/or spacing changes at various price points. And these are not reflected in the years of inventory I just talked about. The chart on this slide reflects Enverus data published last week indicating about eight years of inventory at sub $40 and $2.25 gas, underscoring the quality of our inventory base. We include this to simply make the point about quality, meaning robust inventory even at that very low price deck, $40 and $2.25 gas. We put forth a few years ago that our objective was to be a premier operator of top-tier assets and I believe others can concur that we have solidly achieved that as we show in Slide 21. Before closing, I will reiterate the strategic priorities of our five-year plan, which are to: optimize free cash flow; reduce absolute debt and improve leverage metrics; achieve a sustainable reinvestment rate 2022 and beyond; and demonstrate measurable top-tier ESG stewardship. With that, we look forward to our live Q&A call on Thursday.

guidance full year 2021: production: approximately 47-50 mmboe or 129-137 mboe/d at 52-53% oil. guidance q1 2021: capital expenditures: about $180 million.

We have on the call today, Nick Pinchuk, Snap-on's chief executive officer; and Aldo Pagliari, Snap-on's chief financial officer. Aldo will then provide a more detailed review of our financial results. As usual, we have provided slides to supplement our discussion. These slides will be archived on our website along with a transcript of today's call. As usual, I'll start the call by covering the highlights of our third quarter and along the way I'll give you my perspective on our results. On our market, they are positive and more than resilient, and I'll speak about our progress. It's been considerable, each period demonstrating increasing strength even when in the midst of silencing headwind. And we'll also speak about what it all means for our future. And then Aldo will move into a more detailed review of the financials. Our reported sales in the quarter were $1,037.7 million. They were up 10.2%, including $9.6 million of favorable foreign currency and $19.5 million of acquisition-related sales. Organic sales growth was up 7%, with 7% gains in every group. It was our fifth straight quarter of above pre-pandemic performance and Snap-on value creation processes, safety, quality, customer connection, innovation and rapid continuous improvement, or RCI, as we call it, all combined to drive that progress and progress it was. opco operating income of $201.3 million was up $15.6 million from last year. The OI margin was 19.4%, down 30 basis points, impacted negatively by acquisitions, but still very strong at a strong level. For financial services, operating income of $70.6 million increased 7.6% and the delinquencies were down even below the 2019 pre-pandemic levels, a continued testimony to our unique business model and its ability to navigate the most threatening of environments. First quarter earnings per share was $3.57, up $0.29 or 8.8% from last year. And as I said before, we believe Snap-on is stronger now than when we entered this great withering and our third-quarter results testifies to just that. Compared with 2019, before we ever heard of the virus, our sales grew $135.9 million or 15.1%, which includes $21 million from acquisition-related sales, $13.6 million of favorable foreign currency and a $101.3 million or 11.1% organic gain. And that 2021 opco operating margin of 19.4% was up 80 basis points from the pre-pandemic levels, even while absorbing the impact from acquisitions and while meeting what we can call a considerable disruption of these days. Now let's talk about the markets. Water repair remains quite resilient. The technicians are prospering. They know they weather the depths of the COVID shock, learn to accommodate the virus environment and are well along the psychological recovery. They've been at their post for the last 18 months undoing it, and they won't be shots again, and they are optimistic about the future of their profession, about the outlook of individual transportation, and about the greater need for their skills as the vehicle park changes with new technology. Vehicle repair is a strong and resilient market. You can hear it in the franchisees voice and you can see it written clearly across our numbers every quarter. Also on auto repair, there are our shop owners and managers different from the tech. That's where our repairs information group, RS&I's trade. Demand for new and used cars is high despite limited supply in dealership prepared maintenance and warranty is rebounding, and dealers are starting to invest again. And we've been able to take advantage with groundbreaking products like our award-winning Tru-Point Advanced Driver Assistance calibration system. Our new diagnostic, our new diagnostic TRITON-D10, intelligent diagnostic and our claimed Mitchell 1 ProDemand repair estimating guide, all representing new technologies and data deployed to make work easier in the shop. Vehicle repair looks more promising than ever and Snap-on is poised to capitalize. Now let's talk about critical industries where Snap-on rolls out of the garage, solving tasks of consequence. These are commercial industrial or C&I operates. The virus had a much longer impact on these customers. They were slower to accommodate, but they are recovering. And in the quarter, our results showed that trend, gains in North America, Europe and in Asia, all over the globe. So overall, I describe our C&I markets as improving. And coupled with the strength of the auto repair sectors, our markets are beyond resilient, and we're ready and well positioned to make progress along those run rate to recover. At the same time, it's clear that we have ongoing potential on our runways for improvement. The Snap-on value creation processes. They never been more important, helping to counter the turbulence of the day, especially important with customer connection, understanding the work of professional technicians and innovation, matching that insight with technology, driving new products. And just this quarter, Snap-on was prominently represented with nine Professional Tool & Equipment News, we call it P10 People's Choice Awards where the actual users, the technicians make the selection. We're also recognized with two P10 innovation awards, and we're honored with two motor magazine Top Tool awards. An essential driver of Snap-on growth is innovative product that makes work easier and the awards, [Inaudible], our testimony that great Snap-on products just keep coming, matching the growing complexity of the task, becoming more essential to technicians and driving our forward progress. That's the environment, pretty positive. Now we'll move to the operating groups. In C&I, volume in the quarter rose 13.9% or $42 million versus 2020 on significant growth across all divisions, reflected a $32.9 million or 10.6% organic uplift and $7.5 million from our AutoCrib acquisition. And double-digit growth in our European hand tool businesses and a high single-digit rise in critical industries led the way. C&I operating income of $53.6 million was up $10.5 million or 24.4%, and the operating margin was 15.3%. That's an increase of 130 basis points versus last year. I'd say that's an intention getting rise against the wind. Now compared to the pre-pandemic 2019 results, sales were up 4.8%, including a 0.9% organic gain. And that OI margin of 15.3% was up 90 basis points against the 70-point impact of acquisitions and unfavorable currency. Once again, SNA Europe delivered double-digit growth beyond pre -- double-digit growth beyond pre-virus levels against the complex and varied marketing environment propelled by the customization power of their [Inaudible] to management system. And our Industrial division roles in critical industries, recording nice gains in general industry, heavy-duty education and U.S. aviation, a number of positive sectors overcoming weakness and continuing weakness in the military and natural resources. P&I is rising, and we're enthusiastic about the possibilities. We'll keep strengthening our position to capture those opportunities and enabling that intent is our expanding lineup of innovative new products. In the third quarter did see some great new offerings. Like our 14.4-volt 3h-inch drive brushless reaction, the CTR at 61. And it's no wonder. It's a powerful combination of strength and speed, high torque, 60-foot [Inaudible], the bus loose, very suborn bolts and rapid operations, 275 RPM for getting those fashions off in quick time. made our -- made in our Murphy, North Carolina plant, and it features a full frame brushless motor for longer run time and durability. It includes a safety switch that shuts in an [Inaudible] safety switch that shuts down the tool after two minutes of continuous use that's eliminating the chance of overheating. It also has a super bright aluminum front-facing light that stays illuminated after the trigger is released, allowing easy and immediate inspection of the work. This ratchet also features a built-in break that stops the tool from throwing or fasteners, which is -- it seems like not much, but it's an important safety feature for technicians. And it also offers a great cushion group that makes for more comfortable tool control even during extended use. The CGR861, power, speed and comfort, It's in a very compact package. It's a mighty mic for accomplishing critical tasks and the professionals love it. Well, that's C&I, continuing upward, exceeding pre-pandemic volumes, strong profitability and positions for more. Now onto the Tools Group. Sale of $471.4 million, up $21.8 million, including $4.9 million of favorable currency and a $16.9 million or 3.7% organic gain. Growth in the U.S. -- both in the U.S. and the international operations. And the operating margin was 20.8%, one of our highest effort and up 140 basis points from last year. Compared with the pre-virus 2019 level, the organic gain was $80.4 million or 20.6%. And the 20.8% operating margin was up 700 basis points compared with the pre-pandemic level, 700 basis points in the midst of operating turbulence. Tools Group is responding to the challenges of the day, increasing its product advantage, fortifying its brands and further enabling its franchisees, giving them more selling capacity, it's all working. Five strong quarters of above pre-pandemic performance says it's so. Now the third quarter is when we hold our -- most of you know this, the third quarter is when we hold our annual Snap-on Franchisee Conference, our SFC. This year, we're back again in person at the Gaylord in Orlando, Florida. Over 9,000 attendees, a record. We have training seminars in sales growth and intelligent diagnostics. They're well attended and well received. And we had several football fields of products. So our franchisees could get up close and personal with our latest innovations. For the franchisees, the SFC is an opportunity for learning, for touching and ordering new products and for recharging their Snap-on batteries and believe me, they are charged. For the company, the SFC is an opportunity to gauge the franchisees' outlook on the business. One quantitative way is orders. Well, they were up, strong double digits over last year's virtual live from the Forge event, and from the 2019 SFC live in Washington, D.C. And when I say up, I mean all of our product categories showed substantial gains over both of those events. And so that's the quantitative look at it qualitatively, I spoke with many of our franchisees. And I can attest that they were beaming, showing a lot of confidence in our business and declaring considerable optimism on their future days and decades ahead with Snap-on. We do believe our franchisees are continuing to grow stronger each quarter, and we continue to invest in our future. And if you were with us in Orlando, you would have seen it unmistakably, and we are investing, building franchisees' ability to use the direct interface with technicians, enabling them to better communicate their unique capability and the unique capability and growing technology of Snap-on product lines. We have great confidence in the power of our products and there are real reasons for the confidence. You heard about the product awards. Well, beyond that, there's a continuous stream of terrific new offerings. During the SFC, the Tools Group unveiled its new KHP415, portable 40-inch substation power card. It's targeted at entry-level technicians. The ones working on a narrow scope of repairs. It's built in our Algona, Iowa factory, and the new part enables young mechanics to invest a step on storage at a value price, while at the same time getting some very attractive professional features, a lockable comp compartment, fourfold distort and adjustable power tool rack that holds up the 10 tools and a power strip with five outlets and two USB ports for battery and device charging. New cart, it was well received. And it's quickly reaching what we call hit-product status. Over $1 million of sales, it's rising upward on a steep trajectory. Beyond products, we spent time working to expand franchisee selling capacity, harnessing social media, improving product training and RCI and the van operations, and it's working. Selling capacity is up, and you can see it clearly in the five straight gangbuster quarters for our van network. The Tools Group is on a very positive trend, ascending and leaving pre-pandemic levels way behind. Now on to RS&I. Sales were up 14.8% or $46.9 million, including a $31.7 million or 9.9% organic uplift. Growth was weighted toward undercar equipment. But our diagnostics and information businesses also chipped in with double-digit increases versus 2020. RCI operating earnings were $83.3 million, representing a rise of $3.2 million. Comparing with 2019, sales grew $41.7 million or 12.9%, including $24.2 million or 7.4% organic gain, nice growth. The RS&I OI margin was down versus the last two years, attenuated by business mix, acquisitions and currency, but it was still a strong 22.9%. So we clearly see the potential of our runway with RS&I, expanding Snap-on's presence in the garage with coherent acquisitions and a growing line of powerful products. That's a nice turnaround, and it was led by innovative products like our 15K [Inaudible] post alignment lift. It's really taking a hold in the repair shops as they've resumed investing. This new 15K provides professional grade alignment lifting for a variety of vehicle sizes. With open front columns, best-in-class ultrawide 26-inch runways and integrated 100-inch show long-wear plates. It's suited to accommodate vehicles from compact passenger cars, compact passenger cars to big pickup trucks. And it's low easy on approach angle makes it great, even for low-profile sports cars that are often a challenge for other lifts. Made in our Louisville, Kentucky plant on an Assembly line is made or Louisville that took a plan on assembly line, I'm very familiar with. I participated in an RCI event for that process. Our new 15K has helped drive the recovery for undercar equipment, and it's driven the rise in RS&I volumes. We're quite positive about RSI's possibilities to repair shop owners and managers as the vehicle industry evolves, it's got a great future. So that's the highlights of our quarter. Our fifth straight period exceeding pre-pandemic levels, C&I on track with strong sales and increasing profitability. RS&I, undercar coming back, the Tools Group, strong, pumped and moving vertically the credit company solid in a storm and profitable. The overall corporation, organic sales rising 7%. opco operating margin, 19.4% and earnings per share of $3.57 a considerable rise and most important, more testimony that Snap-on has emerged from the turbulence much stronger than we entered. It was an encouraging quarter. The third quarter of 2021 exhibited another period of solid financial performance. The results also compared favorably with the third quarter of 2019, which being a pre-COVID-19 time period, in some cases may serve to be the more meaningful baseline. Net sales of $1,037.7 million in the quarter increased 10.2% from 2020 levels, reflecting a 7% organic sales gain, $19.5 million of acquisition-related sales and $9.6 million of favorable foreign currency translation. Additionally, net sales in the period increased 15.1% from $901.8 million in the third quarter of 2019, including an 11.1% organic gain, $21.0 million of acquisition-related sales and $13.6 million of favorable foreign currency translation. Consolidated gross margin of 50.2% improved 30 basis points from 49.9% last year. The gross margin contributions from the higher sales volumes, 60 basis points of favorable foreign currency effects and benefits from the company's RCI initiatives more than offset higher material and other costs. Operating expenses as a percentage of net sales of 30.8% increased 60 basis points from 30.2% last year, primarily due to 60 basis points of unfavorable acquisition effects. Benefits from the higher sales volumes were offset by increased brand building, travel and other costs, including the restoration of our annual in-person Snap-on Franchisee Conference. Operating earnings before financial services of $201.3 million compared to $185.7 million in 2020 and $167.7 million in 2019, reflecting an 8.4% and a 20% improvement, respectively. As a percentage of net sales, operating margin before financial services of 19.4% compared to 19.7% last year and 18.6% in 2019. Financial services revenue of $87.3 million in the third quarter of 2021 compared to $85.8 million last year, while operating earnings of $70.6 million increased $5 million from 2020 levels, reflecting the higher revenue as well as lower provisions for credit losses. Consolidated operating earnings of $271.9 million increased 8.2% from $251.3 million last year and 18.9% from $228.7 million in 2019. As a percentage of revenues, the operating earnings margin of 24.2% compared to 24.5% in 2020 and 23.2% in 2019. Our third-quarter effective income tax rate of 23.7% compared to 23.4% last year. Net earnings of $196.2 million or $3.57 per diluted share increased $16.5 million or $0.29 per share from last year's levels, representing an 8.8% increase in diluted earnings per share. As compared to the third quarter of 2019, net earnings increased to $31.6 million or $0.61 per share, representing a 20.6% increase in diluted earnings per share. Now let's turn to our segment results. Starting with the C&I group on Slide 11. Sales of $351.4 million increased 13.9% from $308.4 million last year, reflecting a 10.6% organic sales gain, $7.5 million of acquisition-related sales, and $2.6 million of favorable foreign currency translation. The organic gain reflects higher activity in all of the segment's operations and includes high single-digit increases in sales to customers in critical industries. Within the critical industries, year-over-year sales gains were achieved in general industry, heavy-duty and technical education, but were partially offset by declines in sales to the military and international aviation, both of which had particularly robust sales in the prior year period. As a further comparison, net sales in the period increased 4.8% from 2019 levels, reflecting a $3 million organic sales gain, $7.5 million of acquisition-related sales and $5.6 million of favorable foreign currency translation. As compared to 2019, sales in our European-based hand tools business were up mid-teens. With respect to critical industry sales activity in that period, our lower sales to the military international aerospace and Natural Resources segments offset gains in our sales to technical education, heavy-duty, and general industry customers. Gross margin of 38.2% improved 90 basis points from 37.3% in the third quarter of 2020. Contributions from the higher sales volumes and benefits from RCI initiatives were partially offset by higher material and other costs. Operating expenses as a percentage of sales of 22.9% improved 40 basis points as compared to last year, primarily due to the improved volumes, which were partially offset by higher travel and other costs. Operating earnings for the C&I segment of $53.6 million compared to $43.1 million last year. The operating margin of 15.3% compared to 14% a year ago. Turning now to Slide 8. Sales of Snap-on Tools Group of $471.4 million increased 4.8% from $449.8 million in 2020, reflecting a 3.7% organic sales gain and $4.9 million of favorable foreign currency translation. The organic sales increase reflects a mid-single-digit gain in our U.S. business and a low single-digit gain in our international operations. Net sales in the period increased 22.4% from $385.2 million in the third quarter of 2019, reflecting a 20.6% organic sales gain and $5.8 million of favorable foreign currency translation. Gross margin of 45.8% in the quarter improved 30 basis points from last year, primarily due to the higher sales volumes and 130 basis points from favorable foreign currency effects, which offset higher material and other costs. Operating expenses as a percentage of sales of 25% improved from 26.1% last year, primarily reflecting the higher sales. Operating earnings for the Snap-on Tools Group of $98.2 million compared to $87.1 million last year. The operating margin of 20.8% compared to 19.4% a year ago, an improvement of 140 basis points. Turning to the RS&I Group shown on Slide 9. Sales of $364.4 million compared to $317.5 million a year ago, reflecting a 9.9% organic sales gain, $12 million of acquisition-related sales and $3.2 million of favorable foreign currency translation. The organic increase reflects double-digit increases in sales of undercar equipment and in sales of diagnostic and repair information products to independent shop owners and managers. While activity focused on OEM dealerships was essentially flat. As compared to 2019 levels, net sales increased $41.7 million from $322.7 million, reflecting a 7.4% organic sales gain, $13.5 million of acquisition-related sales and $4 million of favorable foreign currency translation. Gross margin of 46.8% declined from 47.3% last year, primarily due to the impact of higher sales and lower gross margin businesses, increased material and other costs and 10 basis points of unfavorable foreign currency effects. These declines were partially offset by savings from RCI initiatives and 60 basis points of benefits from acquisitions. As a reminder, undercar equipment, which had healthy sales increases in the quarter, typically has a gross margin rate that is below the RS&I segment's average. Operating expenses as a percentage of sales of 23.9% increased 180 basis points from 22.1% last year, primarily due to 170 basis points of unfavorable acquisition effects. Operating earnings for the RS&I Group of $83.3 million compared to $80.1 million last year. The operating margin of 22.9% compared to 25.2% a year ago. Now turning to Slide 10. Revenue from financial services of $87.3 million compared to $85.8 million last year. Financial services operating earnings of $70.6 million compared to $65.6 million in 2020. As a percentage of the average portfolio, financial services expenses were 0.8% and 0.9% in the third quarter of 2021 and 2020, respectively. In the third quarters of both 2021 and 2020, the average yield on finance receivables was 17.8%. The respective average yield on contract receivables were 8.5% and 8.4%, respectively. Total loan originations of $269.3 million in the third quarter increased $16.5 million or 6.5% from 2020 levels, reflecting a 5.7% increase in originations of finance receivables and a 9.5% increase in originations of contract receivables. Moving to Slide 11. Our worldwide gross financial services portfolio increased $7.5 million in the third quarter. The 60-day plus delinquency rate of 1.4% for U.S. extended credit compared to 1.5% in the third quarter of 2020 and 1.7% in the third quarter of 2019. On a sequential basis, the rate is up 20 basis points, reflecting the typical seasonal increase of 20 to 30 basis points we experienced between the second and third quarters. As it relates to extended credit or finance receivables, trailing 12-month net losses of $42.7 million represented 2.48% of outstanding at quarter end, down 22 basis points as compared to the same period last year. Now turning to Slide 12. Cash provided by operating activities of $186.4 million in the quarter reflects 92.5% of net earnings. While this represents a decrease of $37.6 million from 2020 levels, this cash conversion rate compares favorably with 77.5% of net earnings in both the third quarters of 2019 and 2018. The decrease from the third quarter of 2020, primarily reflects the higher net earnings being more than offset by net changes in operating assets and liabilities, including a $61.9 million increase in working capital. This change in working capital is largely driven by the more typical seasonal inventory build in the third quarter of 2021 as compared to the reduction of inventory experienced in the period last year. Inventory additions also reflect some increases in buffer stocks and higher levels of in-transit inventories associated with the supply chain dynamics being seen in the macro environment. Net cash used by investing activities of $29.7 million included net additions of finance receivables of $7.6 million and $16.2 million of capital expenditures. Net cash used by financing activities of $385.8 million included $250 million in senior note repayments, cash dividends of $66.3 million and the repurchase of 300,000 shares of common stock for $66.5 million under our existing share repurchase programs. As of quarter end, we had remaining availability to repurchase up to an additional $197 million of common stock under existing authorizations. Turning to Slide 13. Trade and other accounts receivable increased $12.5 million from 2020 year end. Days sales outstanding of 56 days compared to 64 days of 2020 year-end. Inventories increased $43.1 million from 2020 year-end. On a trailing 12-month basis, inventory turns of 2.7 compared to 2.4 at year-end 2020. Our quarter end cash position of $735.5 million compared to $923.4 million at year-end 2020. Our net debt to capital ratio of 10.3% compared to 12.1% at year-end 2020. In addition to cash and expected cash flow from operations, we have more than $800 million in available credit facilities. As of quarter end, there were no amounts outstanding under the credit facility, and there were no commercial paper borrowings outstanding. That concludes my remarks on our third-quarter performance. I'll now briefly review a few outlook items for the balance of 2021. We now forecast that capital expenditures will approximate $90 million. tax legislation that our full year 2021 effective income tax rate will be in the range of 23% to 24%. The Snap-on third quarter can be summarized in one word, momentum. Our markets are showing extraordinary possibilities, almost across the board with order repair the most advanced going beyond resilience. We sold the COVID-19 playing out with our customers in three phases: shock, interruption in the face of virus uncertainty. A combination of gradual learning to pursue essential work while staying safe and psychological recovery, our confidence in the future and return to normal buying. But now, we're seeing a fourth phase, exhilaration of certainty that we're moving sharply to higher levels, ignited by the conviction that we have met and manage the virus and they want -- and that we won't get shocked again. It's a bright outlook. And Snap-on with continuing investment in product and brand and people is well positioned to serve that trend. Of course, the COVID is still lingering, and its side effects, inflation and supply disruption around the loose, but Snap-on is strongly arrayed to engage those challenges. A direct selling model and strong brand position enables agile pricing. Our vertical integration and shorter supply chains make us less vulnerable to sourcing viscosities. Our broad product line, more than 80,000 SKUs supports flexible marketing to guide around shortages, and our RCI culture drives cost offsets. We found opportunities on our runway for growth and improvement even amid these challenging times, and you can see it in the numbers, encouraging. C&I sales up both from last year and 2019, OI margin, 15.3% strong and rising 130 basis points and 90 basis points versus 2020 and 2019, respectively. RS&I, up organically, 9.9% versus last year and 7.4% beyond the pre-pandemic levels. OI margins of 22.9%. And the Tools Group, organic volume rising 3.7% versus last year's record level and up 20.6% versus the day before the virus. OI margin, it was 20.8%, up 140 basis points from last year and up 700 basis points from 2019. It all led to our corporation being organically up 7% compared with last year and a strong 11.1% versus pre-pandemic numbers. Overall, OI margin was 19.4%, solid in the face of turbulence in our credit company, navigating then certainly without disruptions. And EPS, $3.57, rising emphatically versus all comparisons. We have emerged from the virus stronger than when we entered, and the numbers confirm it. We've now recorded 5, 5 straight quarters of above pre-pandemic performances, and we believe that with our markets reaching beyond resilience to exhilaration, with the capabilities of our model to overcome the challenges of the environment, and with a considerable advantage nurtured by our continuing investment in product, brand and people will continue to rise, maintaining our upward trajectory through the end of this year and well beyond. I always know you're listening. This is a period of great momentum for Snap-on. You are the fuel that is ignited and fan that drive forward and upward. For your success in creating this encouraging performance, you have my congratulations. For the capabilities you bring to bear in achieving our progress every day, you have my admiration.

compname posts q3 earnings per share $3.57. q3 earnings per share $3.57. now anticipates that capital expenditures in 2021 will approximate $90 million.

We have on the call today, Nick Pinchuk, Snap-on's chief executive officer; and Aldo Pagliari, Snap-on's chief financial officer. Aldo will then provide a more detailed review of our financial results. As usual, we have provided slides to supplement our discussion. These slides will be archived on our website along with the transcript of today's call. Both can be found on our website. Today, I'll start with the highlights of our fourth quarter. I'll give you my perspective on how the virus is playing out on the trends we see today and going forward, and I'll speak about our physical and financial progress. Then Aldo will give you a more detailed review of the financials. I'll just say, we are encouraged by the quarter. It was strong, but we believe we can reach even higher. This year with some -- a lot of unusual events. But when you look through it all, Snap-on saw headwinds, but we met those challenges, absorbed the shock, developed accommodations to the environment, moved forward on a clear recovery, and we believe we exited the year stronger than ever. We did have disparities from group to group and within each group, but our overall sales and profitability improved both sequentially and year over year for the second straight quarter, achieving new heights despite the virus. Through the year, the Snap-on team continue to make progress, accommodating to the threat, pursuing our essential commercial opportunities safely. And moving along upward trajectory is consistent with our general projections on how the days of the virus would unfold. Geographically, the impact of the COVID continues to be varied for us. Asia-Pacific remains virus challenged. Southeast Asia and India are still in deep turbulence. And while the U.S. and Europe actually seem to be further ahead in accommodation and are moving onto, what we call, psychological recovery. For the business segments, we saw the essential nature of our markets rising through the turbulence along our runways for growth, demand for vehicle repair technicians to our franchisee network, directly selling off the vans. Again, this quarter, it was robust. Volume of repair shop owners and managers continued to gain and activity in critical industries advanced despite certain sectors like education, oil and gas, U.S. aviation, not returning to growth yet. But you would kind of expect that. Going forward, we are convinced that we're well positioned on a strong base. But we know we have much more work to do. The environment throughout the world is still impacted by the virus, and many of our businesses have not yet fully recovered against the great withering. But having recognized these headwinds, however, we're also convinced that there will be abundant opportunities as the sky is clear and society pivots toward suburban locations and to more individual transportation. This is great news for the vehicle repair industry. I got to tell you. And because of that, we're keeping focus on Snap-on value creation, safety, important use -- safety, quality, customer connection, innovation and rapid continuous improvement or RCI. We've been unrelenting in advancing our advantage in products that solve the most critical of tasks, in brands that serve as the outward sign -- our brands that serve as the outward sign of the pride and dignity, working men and women taking their profession and in our people who're deeply committed and very capable. Snap-on team is a great asset, and we've maintained it through these days of the virus. We've advanced each of these strengths in the turbulence, and it's enabled Snap-on to achieve new heights, and the numbers show it. So that's the overview. Fourth quarter as reported sales of 1.0744 billion were up 12.5% from 2019, including 9.6 million of favorable foreign currency translations and $7.5 million of acquisition-related sales. Organic sales rose 10.6% volume gains in the van channel, in OEM dealerships and diagnostics and repair information, in our European hand tools business, all demonstrating the abundant opportunities on our runway and our increased ability to take advantage of those opportunities. From an earnings perspective, operating income, opco OI from the quarter of $216.2 million, including 2.8 million of direct costs associated with the virus, 1 million of restructuring charges for actions outside the United States and 1.5 million hit from unfavorable currency was up 26.1%. And the opco operating margin, it was 20.1%, up 220 basis points, overcoming 30 basis points of unfavorable currency, 30 basis points, 30 points of COVID cost impact and 10 basis points of restructuring. For financial services, operating income of 68.5 million increased 10.1% from 2019, all while keeping 60-day delinquencies flat to last year in the midst of the pandemic stress test and that result combined with opco for consolidated operating margin of 24.4%, 190 basis points improvement. The overall quarterly earnings per share was $3.82, including a $0.02 charge for restructuring and that result compared to $3.08 last year, an increase of 24%, I did say new heights. Now, for the full-year, sales were 3.593 billion, a 3.8% organic decline, principally on the first and second-quarter shock of the virus before the sequential gains of accommodation took hold. Opco OI 631.9 million, including $12.5 million of restructuring charges, 11.9 million of direct costs associated with COVID-19 and 13.1 million of unfavorable currency compared to 716.4 million in 2019, which benefited from 11.6 million legal settlement in a patent-related litigation matter. Opco OI margin, including a 30-basis-point impact associated with restructuring, 30 points of direct pandemic expenses, 30 points of unfavorable currency was 17.6% and compared with 19.2% in 2019, which incorporated 30 basis points of the nonrecurring benefit for the legal settlement. That's a mouthful right? But what it says is that despite the great disruption, our full-year OI margin was down only 40 basis points, apples to apples, demonstrating the special Snap-on's resilience that has enabled us to pay dividends every quarter since 1939 without a single deduction. For the year, financial services registered OI of 248.6 million versus the 245.9 million in 2019. Overall, earnings per share for the period of $11.44 was down 7.8% from the $12.41 reported last year -- 2019. Adjusting for the restructuring in the current year and the onetime legal benefit in the prior year, 2020 earnings per share as adjusted reached $11.63, down 5.1%. So now, let's go on to the individual operating groups. In C&I, volume in the fourth quarter of $364.4 million, including 7.5 million from acquisitions and 6.5 million of favorable foreign currency, was up 3.3% as reported. The activity was essentially flat organically, but represented a continuing sequential C&I rise all the way back to the early shock. Notably, in these numbers, the C&I year-over-year sales were marked by a strong double-digit rise and our European-based hand tool business growing broadly across Western Europe against the twin challenges of COVID and the Brexit disruption. There are also offsetting decreases in sales to our customers in critical industries in Asia Pacific. But both these operations joined the overall group and registering substantial quarter to quarter sequential improvement. They're still down, but they're clearly recovering. From an earnings perspective, C&I operating income of 56.2 million increased 11.2 million, including 1.3 million of unfavorable foreign currency effects and 1 million of COVID-related costs with sales up 3.3% as reported, flat organically. OI grew 24.9%, a nice operating improvement. And the OI margin for the group was 15.4%, up 260 basis points from last year, overcoming 70 basis points of unfavorable currency and 30 points of direct COVID costs. The benefits of RCI and margin gains in the critical industries made all the difference. Speaking of the critical industries, we did see selective gains, international aviation and heavy-duty registered double-digit improvements. But as you might expect and I referenced before, education, oil and gas and U.S. aviation continue to be down. And in the quarter, our military sales were also impacted by the wind down of one of our major kitting programs. But we do remain confident in and committed to expanding in the critical industries, and we see growing opportunities moving forward. And a principal path to that possibility is customer connection and innovation, creating powerful new products. You heard about our European hand tool business. It showed significant resiliency in the quarter, and it was aided by a good dose of innovation, products like our recent expansion of our pop-up custom kitting system, extending our direct-to-user possibilities. Our new fit and go product line allows buyers to quickly develop semi bespoke kits in foam tool control, consists of more than 200 preconfigured different tool sets designed around 26-inch wide Rock N' Roll Cab available in three standard foam configurations, one-third drawer, two-thirds drawer and a full drawer. Customers can choose the particular box, drawer configuration and the tool array needed right from our bahco.com website, reaching end users without distributor interaction and with wider range of specialization, and sometimes it is, specialization is required, our sales reps can help develop just the right unit using the full breadth of the Bahco system. We've had great success with our new fit and go. It's an important extension of our hand tool presence in Europe. And in the quarter, it helped boost SNA Europe to achieve the double-digit growth in a very challenging environment. I think everybody would agree. C&I demonstrating further accommodation with continued sequential gains, serving the essential. Each of the business is generating a positive trajectory and exiting the quarter stronger than when they entered and product authored a big piece of that progress. Now, onto the tools group. As reported, sales of 20.2% to 494.9 million, including 2.2 million of favorable foreign currency and an 81 million or 19.6% organic increase, the second straight quarter of strong gain with the U.S. and International businesses both growing at double digits. In the tools group operating earnings, 93.6 million, including 1.2 million of virus-related costs, that 93 points, including -- in fact, 93.6 million included 1.2 million of virus-related costs. And that 93.6 million compared to last year's 54.3 million, an over 70% improvement. Actually, the tools group recovered to positive territory for the full year, sales were up 2% organically, with OI rising almost 9% and OI margins up 110 basis points. The continued operating gains of the tools group are further affirmation of our view of the COVID trajectory on the resilience of the vehicle repair business and on the strength of our direct face-to-face van model. It turns out that deep and direct connection with the customers is a differentiator even in a pandemic. And in the quarter and throughout the year, the tools group confirm the market-leading position of our van network. We believe the franchisees are growing stronger. That's clear in the franchisee health metrics we monitor each period. One was the franchise business review, where we were again recognized in the magazine's latest rankings for franchisee satisfaction as a top 50 franchise, marking the 14th consecutive year that Snap-on received that award. Now this type of recognition reflects the fundamental strength of our franchisees and our van business in general. And it would not have been achieved without a continuous stream of innovative new product developed through our strong customer connections. Throughout the storm, we've added every day to our already considerable insight and experience in the changing vehicle environment. And because of that, we're able to bring forward innovation after innovation, great products, like our newly released eight-inch Talon Grip FlankJaw pliers, we call it the HJ47ACF with a unique design for significant versatility in both removing and tightening fastness. First, our unique FlankJaw, formed as a specially designed, smooth and serrated mating area allows the user to grip a hex shape only on the flat service positioning the load away from the corners. That's similar to our Flank Drive systems on socket, 30% more torque applied to the fastener while still minimizing damages, eliminating rounded edges. Second, when the fasteners have already been heavily rounded and are tough to grip, our Talon grip, diamond-serrated jaws, joined at -- located at the pliers tip, generate unparallel clamping forces up 57% -- up to a 57% increase in turning power. With the Snap-on Talon, technicians can remove even the most damaged and rounded hex fasteners. And for the icing on the versatility cake, the new pliers also feature a patented three position slip joint design for easy changes to the grip position, the HJ47ACF manufactured right here in Milwaukee plant in the U.S., and it's been very well received, putting on a clear path to becoming another one of our hit products, million-dollar selling products just in one quarter. We also worked hard during the COVID to maintain and further strengthen our brands celebrating our 100th year, continuing our presence in racing. And most importantly, I think, servicing our customers every day, reinforcing that what they do really is essential and that the display of the Snap-on brand confirms that it's sold. Some time, the tools group has also been working to expand franchisee selling capacity. And that effect continued with focus through the pandemic, in the days of the early shock, access to the shops and to the technicians very widely. And the tools group worked to engage social media and bridging the gap. This turned into a powerful tool for pre briefing customers on products and promotions reserving the actual face-to-face interaction for closing the deal, providing a significant franchisee opportunity for selling more products and reaching new customers. Why do you think we're up? Well, that's the tools group. Moving through a V-shaped recovery, recording two straight quarters of double-digit expansion, continuing to stream in new products, building the brand, raising selling capacity and strengthening for the future. Now, let's speak of RS&I. The RS&I Group, continuing the accommodation and extending its positive trend. Sales of 361.1 million in the fourth quarter, up 7.8%, 7% organically, excluding a 2.4 million of favorable foreign currency, a steep recovery from the depths of the pandemic. The rise was due to double-digit gains in OEM dealerships, as auto manufacturers began to release new models and launch more essential programs. A high single-digit gain in the sales of our powerful diagnostics and repair information products, independent repair shop owners and managers and then offsetting low single-digit decline in sales of under car equipment where garage owners haven't developed sufficient confidence to invest -- to get it invest broadly in upgrading or expanding their facilities. RS&I operating earnings of 90 million improved 2.8 million as the mix of lower-margin OEM project sales diluted the volume improvement and as the group recorded $1 million in charges for a small European-focused restructuring. Our diagnostics and information-based operations have recorded continuous growth for some time, the sales to independent repair shop owners and managers. They've had continuous growth for some time, and innovative new products are the key to that success. And the fourth quarter was no exception. We just began shipping our new 20.4 software update for our diagnostics platforms in North America, full coverage for the 2020 vehicles, additional reprogramming facility, increased functional test capabilities and an expansion of our unique advanced driver assistance or ADAS content, so critical these days for engaging vehicle automation. This software represents another move forward in our already powerful, already market-leading intelligent diagnostics and repair information product lines. And it's being well received. and Canada will be upgrading to this very capable new addition before the next update is released in May. And then, we'll start again. RS&I is building a powerful position in the vehicle repairs -- in vehicle repair software that meets the changing mobility environment. And the 20.4 is another step in that direction. We're confident in the strength of RS&I, and we keep driving to expand its position with repair shop owners and managers, making work easier with great new products even in the days of the virus. And that's our fourth quarter; absorbing a shock, driving accommodation, moving onto psychological recovery, keeping our people safe while we serve the essential, all of that is working, building Snap-on's advantage and the results show us sequential gains from the third quarter and significant growth from last year, sales up 12.5%, 10.6% organically, OI margin, 20.1%, 220 basis points higher. Financial service is continuing to deliver, navigating the virus with strength and without disruption, an earnings per share of $3.82, up 24%, all achieved while maintaining and expanding our advantages in products, brands and people, ending the year stronger, ready for more opportunities to come. It was an encouraging quarter. Our consolidated operating results are summarized on Slide 6. Fourth quarter of 2020 was strong with respect to Snap-on's financial performance. Sales development was robust, both year-over-year and sequentially. Gross profit and operating earnings margins expanded, and cash flow generation was again healthy. Net sales of $1.0744 billion in the quarter compared to $955.2 million last year, reflecting a 10.6% organic sales gain, $9.6 million of favorable foreign currency translation and $7.5 million of acquisition-related sales. The organic increase principally reflected double-digit growth across Snap-on tools segment and high single-digit gains with repair shop owners and managers in the repair systems and information segment. We've again identified direct costs associated with COVID-19, which totaled $2.8 million this quarter. These costs include direct labor and under-absorption associated with temporary factory closures, wages for quarantined associates and event cancellation fees, as well as other costs to accommodate the current enhanced health and safety environment. Also, in the quarter, we recorded $1 million of restructuring cost actions for Europe. Consolidated gross margin of 48% compared to 47.2% last year. The 80-basis-point improvement primarily reflects the higher sales volume and benefits from the company's RCI initiatives, partially offset by 30 basis points of unfavorable foreign currency effects and 10 basis points of direct cost associated with COVID-19. Operating expenses as a percentage of net sales of 27.9%, improved 140 basis points from 29.3% last year, primarily reflecting the impact of the higher sales, which more than offset the 30 basis points related to restructuring and direct costs associated with COVID-19. Operating earnings before financial services of $216.2 million, including $2.8 million of direct costs associated with COVID-19, $1 million of restructuring costs and $1.5 million of unfavorable foreign currency effects compared to $171.4 million in 2019, reflecting a 26.1% year-over-year improvement. As a percentage of net sales, operating margin before financial services of 20.1%, including 30 basis points of direct costs associated to the COVID-19 pandemic and 30 basis points of unfavorable foreign currency effects, improved 220 basis points from 17.9% last year. As you may know, Snap-on operates on a fiscal calendar, which results in an additional week to our fiscal full-year and fourth quarter every six years. As a result, our 2020 fiscal year contained 53 weeks of operating results with the extra week relative to the prior year occurring in the fourth quarter. While the impact of this additional week was not material to Snap-on's consolidated fourth-quarter total revenues or net earnings, our financial services segment did earn an additional week of interest income on its financing portfolio. At the consolidated level, the net earnings benefit from the additional week of financial services interest income was largely offset by a corresponding additional week of fixed expenses, primarily personnel-related costs and interest expense. With that said, financial services revenue of $93.4 million in the quarter of 2020 compared to $83.9 million last year, primarily reflecting the extra week of interest income and the growth in the financial services portfolio. Financial services operating earnings of $68.5 million, increased $6.3 million from 2019 levels, principally due to the higher revenue but partially offset by increased variable compensation and other costs; consolidated operating earnings of 284.7 million, including $2.8 million of direct COVID-related costs, $1 million of restructuring costs and $1.3 million of unfavorable foreign currency effects compared to $233.6 million last year. As a percentage of revenues, the operating earnings margin of 24.4% compared to 22.5% in 2019. Our fourth-quarter effective income tax rate of 21.8% compared to 22.3% last year. Finally, net earnings of $208.9 million or $3.82 per diluted share, including a $0.02 charge for restructuring increased $38.3 million or $0.74 per share from 2019 levels, representing a 24% increase in diluted earnings per share. Now, let's turn to our segment results. Starting with the C&I Group on Slide 7. Sales of $364.4 million increased 3.3% from $352.9 million last year, reflecting $7.5 million of acquisition-related sales and $6.5 million of favorable foreign currency translation, partially offset by 0.7% organic sales decline. While organic sales were essentially flat as compared to last year, they did improve sequentially in a more meaningful manner than what we see in our typical seasonal patterns with organic sales up 14.6% from the third quarter of 2020. As compared to last year, the organic sales decline primarily reflects a mid- single-digit decrease in our Asia Pacific operations and a low single-digit decline in sales to customers in critical industries, offset by double-digit gains in the segment's European-based hand tools business. Within Asia, similar to last quarter, sales to customers in India and Southeast Asia continue to be impacted by the effects of the pandemic. Across critical industries, while year-over-year sales declined in natural resources, including oil and gas, U.S. aviation and technical education, sales into these markets have improved from third-quarter comparisons. This quarter's year-over-year gains were reflected across international aviation, heavy-duty and non-military government-related activity. Sales to the U.S. military were lower as compared to the prior year, as the fourth quarter of 2019 included sales for a major project that is winding down. Sales increases in our European-based hand tool business were evident across the region, particularly in France and the United Kingdom, as well as in our Scandinavian and export markets. Gross margin of 37.8% improved 230 basis points year-over-year, primarily due to increased sales and higher gross margin businesses and declines in lower gross margin sales to the military, as well as from benefits of RCI initiatives. These increases were partially offset by 60 basis points of unfavorable foreign currency effects and 20 basis points of direct COVID-19 cost. Operating expenses as a percentage of sales, 22.4% improved 30 basis points as compared to last year. Operating earnings for the C&I segment of $56.2 million, including $1.3 million of unfavorable foreign currency effects and $1 million of direct COVID-19 cost compared to $45 million last year. The operating margin of 15.4% compared to 12.8% a year ago. Turning now to Slide 8. Sales in the Snap-on tools group of $494.9 million increased 20.2% from $411.7 million in 2019, reflecting a 19.6% organic sales gain and $2.2 million of favorable foreign currency translation. This reflects a 9.5% organic sequential gain over a strong third-quarter 2020 sales performance. Gross margin of 42.9% in the quarter improved 270 basis points, primarily due to the higher sales volumes and benefits from RCI initiatives. Operating expenses as a percentage of sales of 24% improved from 27% last year, primarily due to the impact of higher sales volumes and savings from cost containment actions, which more than offset $1 million or 30 basis points of COVID-19-related costs. Operating earnings for the Snap-on tools group of $93.6 million compared to $54.3 million last year. The operating margin of 18.9% compared to 13.2% a year ago, an increase of 570 basis points. Turning to the RS&I Group, shown on Slide 9. Sales of $361.1 million compared to $335 million a year ago, reflecting a 7% organic sales gain and $2.4 million of favorable foreign currency translation. The organic increase includes a double-digit gain in sales to OEM dealerships, particularly in sales related to OEM facilitation programs and a high single-digit increase in the sales of diagnostics and repair information products to independent repair shop owners and managers. These increases were partially offset by a low single-digit decline in sales of under car equipment. Sequentially, RS&I organic sales improved by 13.2%. Gross margin of 46.1%, including 10 basis points of unfavorable foreign currency effects, declined 160 basis points from last year, primarily due to the impact of higher sales of lower gross margin businesses, including facilitation program related sales to OEM dealerships. Operating expenses as a percentage of sales of 21.2%, including 30 basis points of cost from restructuring, improved 50 basis points from 21.7% last year, largely reflecting the mix of business activity in the quarter. Operating earnings for the RS&I group of $90 million compared to $87.2 million last year. The operating margin of 24.9%, including the effects of 20 basis points of unfavorable foreign currency effects and 10 basis points of direct costs associated with COVID-19 compared to 26% a year ago. Now, turning to Slide 10. Revenue from financial services of $93.4 million compared to $83.9 million last year. This includes the additional days of accrued interest associated with the 53rd week in our 2020 fiscal calendar. Financial services operating earnings of $68.5 million compared to $62.2 million in 2019. Financial services expenses of $24.9 million increased $3.2 million from last year's levels, primarily due to higher variable compensation and other costs, partially offset by a year-over-year decrease in provisions for credit losses. Compared to the fourth quarter last year, provisions for credit losses were lower by $700,000, while net charge-offs of bad debts were lower by $1.3 million. As a percentage of the average portfolio, financial services expenses were 1.1% and 1% in the fourth quarters of 2020 and 2019, respectively. In the fourth quarter, the average yield on finance receivables of 17.7% in 2020 compared to 17.5% in 2019. The respective average yield on contract receivables was 8.5% and 9.2%. The lower yield on contract receivables in 2020 includes the impact of lower interest business operation support loans for our franchisees. These loans were offered during the second quarter to help accommodate franchisee operations in dealing with the COVID-19 environment. As of the end of the quarter, approximately $13 million of these business operating support loans remain outstanding. Total loan originations of $272.4 million in the quarter increased $10 million or 3.8% from 2019 levels, reflecting a 4.5% increase in originations of finance receivables, while originations of contract receivables were essentially flat. Moving to Slide 11. Our year-end balance sheet includes approximately $2.2 billion of gross financing receivables, including $1.9 billion from our U.S. operation. In the fourth quarter, our worldwide gross financial services portfolio increased $20.8 million. The 60-day plus delinquency rate of 1.8% for the United States extended credit is unchanged from last year and reflects the seasonal increase we typically experience in the fourth quarter. As it relates to extended credit or finance receivables, trailing 12-month net losses of $45.6 million represented 2.62% of outstandings at quarter end, down 8 basis points sequentially and down 29 basis points as compared to the same period last year. Now, turning to Slide 12. Cash provided by operating activities of $317.6 million in the quarter increased $120.9 million from comparable 2019 levels, primarily reflecting the higher net earnings and net changes in operating assets and liabilities, including a $53.5 million decrease in working investment, primarily driven by inventory reductions in the period. Net cash used by investing activities of $73.6 million included $35.4 million for the acquisition of AutoCrib, capital expenditures of $26.5 million and net additions to finance receivables of $15.9 million. Free cash flow during the quarter of $275.2 million was 129% in relation to net earnings. Net cash used by financing activities of $111.6 million included cash dividends of $66.8 million and the repurchase of 460,000 shares of common stock for $78.7 million under our existing share repurchase program. Full-year 2020 share repurchases totaled 110,900 shares for $174.3 million. As of year-end, we had remaining availability to repurchase up to an additional $275.7 million of common stock under existing authorizations. Turning to Slide 13. Trade and other accounts receivable decreased $53.9 million from 2019 year-end, days sales outstanding of 64 days compared to 67 days of 2019 year-end, inventories decreased $13.9 million from 2019 year-end, including a $40.1 million inventory reduction, partially offset by increases from $23.2 million of currency translation and $3 million from acquisitions, on a trailing 12-month basis, inventory turns of 2.4 compared to 2.6 at year-end 2019 and 2.4 at the end of the third-quarter 2020, our year-end cash position of $923.4 million compared to $184.5 million at year-end 2019, our net debt-to-capital ratio of 12.1% compared to 22.1% at year-end 2019. In addition to cash and expected cash flow from operations, we have more than $800 million in available credit facilities. As of year-end, there were no amounts outstanding under the credit facility, and there were no commercial paper borrowings outstanding. That concludes my remarks on our fourth-quarter performance. I'll now briefly review a few outlook items for 2021. We anticipate that capital expenditures will be in the range of 90 to $100 million. We currently anticipate absent of any changes to U.S. tax legislation that our full-year 2021 effective income tax rate will be in a range of 23 to 24%. Snap-on fourth quarter, we are encouraged by where we've been and by where we're going. You see, we believe that we exit 2020 stronger, more capable and more advantaged than when we entered the year. The virus came, we absorbed the shock, we accommodated to the turbulence, and we forged the V-shaped recovery, as we anticipated in the depths of the difficulty. We believe the year is vivid testimony to Snap-on's resilience into our ability in turning change and challenge to our advantage, and the fourth-quarter performance says it so. Sales up 12.5% as reported, 10.6% organically. OI margin, 20.1%, up 220 basis points against 30 basis points of unfavorable currency, 10 basis points of restructuring charges and 30 basis points of direct COVID cost, strong improvement. C&I sales, clear sequential gains. OI margin of 15.4%, rising 260 points. Organic sales up 7% organically, OI of 24.9% down, but still in heavy territory. Financial services revenue and profits all up, portfolio solid in the storm. And finally, the tools group. Sales up 19.6% organically, profits up 72.4%, OI margin of 18.9%, rising 570 basis points, good numbers. But more importantly, underscoring our belief that the franchisee selling capacity has expanded and is positioned for more gains. And all of that, it all came together to author an earnings per share in the quarter of $3.82, up 24% from 2019; new heights in the great turbulence of 2020. And these heights were achieved while still nurturing our product, our brand and our people, preserving and amplifying our natural advantages. We do believe we leave the year at full and expanded strength and ready to reach higher and farther, amid the abundant opportunities of 2021 and the years beyond. We celebrate your contributions as you perform your essential task, and we're confident your effort in preserving our society will be remembered for years to come. For your success in authoring the encouraging results of our fourth quarter, you have my congratulations.

q4 earnings per share $3.82. projected that capital expenditures in 2021 will be in a range of $90 million to $100 million. currently anticipates that its full year 2021 effective income tax rate will be in range of 23% to 24%. qtrly organic sales up 10.6%.

Today, I'll start with a view of our fourth quarter, give you an update on the environment and the trends we see. And I'll take you through some of the turbulence we've overcome and the advancements we've made. And Aldo will then, as usual, give you a more detailed review of the financials. The fourth quarter was encouraging. It affirmed the characteristics that make Snap-on the company, we know it to be, the resilience of our markets, the power of our strategic position, and the consistent and capable execution of our teams. It all ended up to momentum, cutting through the challenges and the numbers testified to just that. Reported sales in a quarter of $1,108.3 million were up 3.2%, including $12.2 million from acquisitions being offset by $3 million of unfavorable foreign currency exchange. Organically, our sales grew by 2.3%. Importantly, if you compare to the pre-pandemic levels of 2019 before the period, the period variability of last year, you see a clear and unmistakable upward drive versus 2019. Sales in this past quarter were up 16% as reported and 13% organically continuing an ongoing trend of accelerating expansion, increasing higher and higher over pre-COVID levels. What also bears the marks of the Snap-on value creation processes safety, quality, customer connection, innovation, and rapid continuous improvement, or RCI, as we call it. All combined to offer significant progress. The progress there was. Opco, operating income of $232.2 million was up $16.6 million from last year and the 0I margin was 21%. An all-time high, up 90 basis points from last year and 310 basis points from 2019 all achieved by overcoming the challenges of this day. For financial services, operating income of $67.2 million was down from the $68.5 million of last year, but delinquencies in the quarter were below both 2020 and those of 2019. An ongoing testament to our unique business model and its ability to navigate through the most threatening of environments. And the combination of the results from opco and financial services offered an overall consolidated operating margin of 25.1%, up from the 24.4% of last year, and the 22.5% recorded in 2019. Our quarterly earnings per share was $4.10 well over the $3.82 of a year ago, which included a $0.2 charge for restructuring, and that's $4.10 was up 33.1% over 2019. Considerable gains in my book. Well, those are the numbers. Now let's speak about the markets, we do believe the auto repair environment continues to be favorable in the area, serving vehicle OEMs and dealerships. We do see some turbulence. New car sales around the world remain mixed, with China generally progressing. But both North America and Europe had a tough fourth quarter. Overall volume remained below the 2019 levels. And some new model releases and features were delayed by supply chain constraints, and that impacted the associated essential tool programs that we are involved in. OEM projects aside, however, dealership repair, maintenance, and warranty are all healthy. Techs are seeing good times, and the dealers are looking to support their expansion in their shop. In effect, the OEM market is mixed but technicians are quite positive. There's a growing appetite for repair shop equipment, but essential tool programs are attenuated. Now in the independent repair shop, it's a horse of a different color. Confidence is uniformly sky high based on what we hear from our franchisees, shop owners, and technicians' optimism and independent repair shops continue to be strong, and our sales in that sector may reflect that confidence. So we believe, on balance, vehicle repair is a great place to operate for our Tools Group and for our Repair System & Information or RS&I Group. In the critical industries where our Commercial & Industrial group plays or C&I plays, we are seeing areas of progress, but the lingering effects of the virus have created headwinds. And the results in the quarter showed that trend with variations from country to country. A recovery in Asia and emerging markets, but Europe is quite mixed. There are also differences from sector to sector education, natural resources in general industries showing improvement while the military spending continues to experience, what I'd say are substantial challenges. Overall, however, I would describe our C&I markets as holding their own against the turbulence, but with a variation. We do believe we're well-positioned, and I think the numbers say this to confront the challenges of this time advancing along with ways for growth. We're also confident that we have continuing potential on a runway for improvement to Snap-on value creation processes. There is constant fuel for our progress, especially customer connection. Understanding the work of professional technicians in innovation, matching that insight to technology. We believe our product lineup just keeps getting stronger every day and we keep investing to make it so. Vehicles are rising in complexity, technicians need assistance, and so products are becoming more sophisticated to match the changing requirements and Snap-on is keeping pace. In 2021, we had more hit $1 million projects than ever before. We've endeavored through the virus here to maintain our product, our brand, I've spoken of this before and the virus area to maintain our product, our brand, and our people, and we believe that continuing commitment has served us well. Authoring positive results and creating substantial momentum for the days ahead. And that momentum is apparent in our full-year results. Sales of $4,252 million, up 18.4%, including an organic increase of 15.1% compared to last year and a 14.14% organic gain over 2019, strong numbers. The as-reported opco OI margin for the year was 20%, a new high, up from the 17.6% of 2020, exceeding the 19.2% of pre-pandemic 2019. As-reported earnings per share for the year were $14.92, up 30.4%, or 28.3% as adjusted for the nonrecurring restructuring and the restructuring in 2020, and up 21.7% as adjusted from 2019. All clear signs of ongoing momentum. Now for the operating groups. Let's start with C&I, fourth quarter sales at $358.7 million for the group were down $5.7 million, including $4.1 million of unfavorable currency versus 2019 sales group $5.8 million, reflecting primarily acquisition volume and currency impact. The period saw a recovery in Asia with Indonesia. In the quarter we saw -- we did see recovery in Asia with Indonesia, India, Japan, South Korea, and China rising. Europe and North America were more impacted by the environment, we're down slightly in the quarter. Looking at the sectors, nice progress with our precision -- was achieved in our precision torque line. And that progress was -- but that progress was more than offset by lower critical industry activity attenuated in those critical industries, primarily by lower US military spending and by supply chain-driven constraints and in the custom kitting area. C&I operating income was $50.1 million, down $6.1 million, including $1.2 million of unfavorable currency. The gains in Asia and the torque were more than offset by the reduced military activity in the industrial kitting constraints. As I mentioned, however, specialty torque -- the specialty torque operation did register continuing progress driven by innovative product development, customer connection, and observational work. Great offerings like our recently released QB4R [Inaudible] of three quarter inch drive break-over torque wrenches, capable of -- this wrench is capable of accurately fastening from 450 to 750-pound feet. It's designed specifically for heavy-duty applications, tough jobs such as torquing lug nuts on big trucks. The new unit combines our Norbar, our regionally acquired Norbar industrial torque technology with a robust ratchet design produced on -- Tennessee factory. Those original light vehicle ratcheting mechanisms of a Tennessee plant were reengineered for four higher retention heavy requirements and were directly matched to our unique Norbar break-over device, which provides a clear indication that the torque target has been reached, ensuring reliable accuracy every time. The ratchet design with our patented seal head is rugged, capable of withstanding very high stresses, and has an easy-to-read adjustment mechanism that reduces the possibility of error and is virtually maintenance-free. The new wrench also has a quick-release feature for easy disassembly, compact storage, and great portability. The Snap-on QB4R, we like to say strength, accuracy, and convenience. And as you might expect, sales have been strong as the need for precision increases, torque products are becoming more prominent, and Snap-on is playing an active role in that rise. C&I, mixed results, but significant areas of progress boding well for its future. Now, let's go on to the tools group. Sales of $504.8 million, up $9.9 million, including favorable currency and a $7.9 million organic rise from continued expansion in the US, a positive that was somewhat attenuated this quarter by a low single-digit decline in international networks. But versus 2019, a more comparable base, the Tools Group rose 21.5% and has been up now from prepandemic levels for 6 straight quarters. And the operating margin was 21.9%, easily one of the highest ever, up 300 basis points from last year, all despite the ongoing challenges of this day. We have continued to invest in products, brands, and people. And the Tools Group has used that focus to its advantage. The expanding and considerable gains from the time before the virus makes that clear. In the quarter and throughout the year, the Tools Group results continue to confirm the leadership position of our brand network. We believe the franchisees are growing stronger, and that's evidenced in the franchisee health metrics we monitor each period. They're on an unmistakably favorable trend. This quarter, we were once again ranked among the top franchise organization, both in the US and abroad recognized by the franchise business view, which in its latest ranking for franchisee satisfaction, was a Snap-on the top as a top 50 franchise for the 15th consecutive year. We're also featured at number three among all franchises in Entrepreneur Magazine's 2020 list of top franchises for veterans and abroad. Snap-on was ranked No. 2 in Elite Franchise Magazine's top UK franchises. The judges in that ranking state that the durability and innovation showed in the face of unimaginable circumstances are what is decided in this year's top 10, and the panel was right on. Durability and innovation are what makes the Tools Group -- what marks the Tools Group in the storm is clear. That this type of recognition is a point of pride for us, but it reflects the fundamental strength of our franchisees and of our brand business in general. But it would not have been achieved without a continuous stream of innovative new products developed through our strong customer connections learning to lead to multiple new problem-solving innovations and the result of our insight and experience in the changing universe of vehicle repair. Customer connection gives us a great window into that changing universe, and we put it to good use. Our sales enhance our sales of hand tools, we're up nicely in the quarter and of course, new products led the way there. Our innovative 30, LS, DM, core half-inch drive impact suckets were a significant contributor. Born out of customer connection, observing the work in automotive shops, the special sockets, they range from 17 to 22 millimeters, come with an extra deep hex, up to three-quarter inch deeper, accommodating the lug nuts with a decorative cap that are becoming so common on the latest models. The new sockets provide the clearance needed to fit right over those nut covers without damage, grab the lug and enable quick removal without having to remove the caps. It saves techs significant time over a day of repair activity that is made right here in our Milwaukee plant. They released just this past quarter, and initial sales have been gangbusters, I'm telling you. And making those sales have made that new socket line a hit product just in the volume in the fourth quarter. Well, that's the Tools Group expanding the success in the US, balancing the international operations, continuing to innovate, building on our underlying advantages, stronger than ever performance all achieved against the wind. Volume for the fourth quarter was $392.5 million, up 8.7%, including acquisitions and 5.5% of organic growth with gains in sales of modern car equipment, increased volume of handheld diagnostics, and the rise of information and data subscriptions being partially offset by a decrease in our business focused on vehicle OEMs and dealerships. RS&I operating margins of $97.2 million rose $7.2 million or 8% versus 2020. And that number in 2020 included $1 million of restructuring costs. Compared with the pre-pandemic levels of 2019, sales grew $57.5 million, 17.2%, including a $43.7 million or 13% organic gain. And the RS&I gross OI margin of 24.8% compared with a 24.9% and a 26% registered in 2020 and 2010, respectively. With the impact of acquisitions attenuating a generally positive balance for the operations. Again, software products and subscriptions for RS&I were a significant plus. Along those lines, our Mitchell 1 division, providing software to independent shops, continues to succeed, pursuing customer connection and innovation, launching great new products to improve shop efficiency. RS&I just added more powerful and exclusive features to its award-winning Mitchell 1 pro demand auto repair information software. You see, as auto electronics have expanded, wiring diagrams have become of rising importance in-vehicle diagnosis and repair, and the new pro demand significantly advances what is already a clear lead for Mitchell 1 in diagram navigation, offering new features that provide interactive dropdowns, display, and connection data allow easy movement to the next diagram on the diagnostic trail and enable the seamless recall of previously, viewed circuits should a look-back be needed in the repair process. And as you might expect, the initial reactions to the new updates have been quite enthusiastic from both the shops and from the technicians. It's all music to our ears. We keep driving to expand RS&I's position with repair shop owners and managers, offering them more and more solutions for their day-to-day challenges, developed by our value creation processes or added by our strategic coherent acquisitions. And we're confident it's a winning formula. So those are the highlights of the quarter. Doing what we expect to do. Achieve ongoing process again, achieve ongoing progress against the storm. A continuing rise versus the pre-pandemic levels up more each quarter now for several straight periods gauged forged through our Snap-on value creation processes, strengthening our business and driving to a 21% optimal operating margin up 90 basis points, a new record. EPS $4.10 a considerable rise to new heights. Overcoming all headwinds and demonstrating continued confirmation that Snap-on has emerged from the pandemic much stronger than when we entered with the momentum that we're confident will propel us to even higher heights as we move forward. Our consolidated operating results are summarized on Slide 6. During the fourth quarter of 2021, the resilience and continued strength of our business model enabled Snap-on to close the year with another period of robust financial performance. The quarter also compared favorably with the fourth quarter of 2019, which was a pre-COVID-19 time period. In some cases may serve to be the more meaningful baseline. Net sales of $1,108.3 million in the quarter increased 3.2% from 2020 levels, reflecting a 2.3% organic sales gain and $12.2 million of acquisition-related sales, partially offset by $3 million of unfavorable foreign currency translation. Additionally, net sales in the period increased 16% from $955.2 million in the fourth quarter of 2019, including a 13% organic gain, $20.9 million of acquisition-related sales, and $7.1 million of favorable foreign currency translation. In both comparisons, the organic gains more than offset lower sales to the military. Consolidated gross margin of 48.1% improved 10 basis points from 48% last year, the gross margin contributions from the higher sales volumes. Pricing actions 30 basis points of favorable foreign currency effects and benefits from the company's RCI initiatives offset higher material and other costs. For the quarter, the corporation continue to navigate effectively the supply chain dynamics associated with the global pandemic. Operating expenses as a percentage of net sales of 27.1% improved 80 basis points from 27.9% last year, which included 10 basis points of cost from restructuring actions. The improvement is primarily due to higher sales volumes, partially offset by 40 basis points of unfavorable acquisition effect. Operating earnings before financial services of $232.2 million, compared to $216.2 million in 2020 and $171.4 million in 2019, reflecting an improvement of 7.4% and 35.5%, respectively. As a percentage of net sales, operating margin before financial services of 21% improved 90 basis points from last year and 310 basis points from 2019. The operating company margin of 21% represents the highest quarterly level of profitability and Snap-on's modern-day history. Financial services revenue of $86.9 million in the fourth quarter of 2021, compared to $93.4 million last year, which included an extra week of interest income associated with the 53rd week 2020 fiscal calendar. Operating earnings of $67.2 million decreased $1.3 million from 2020 levels, reflecting the lower revenue partially offset by lower provisions for credit losses. Consolidated operating earnings of $299.4 million increased 5.2% from $284.7 million last year and 28.2% from $233.6 million in 2019. As a percentage of revenues, the operating earnings margin of 25.1% compared to 24.4% in 2020 and 22.5% in 2019. Our fourth quarter effective income tax rate of 22.3% compared to 21.8% last year, which includes a 10 basis point increase related to the restructuring actions. Net earnings of $223.7 million or $4.10 per diluted share increased $14.8 million, or $0.28 per share from last year's levels, representing a 7.3% increase in diluted earnings per share. As compared to the fourth quarter of 2019, net earnings increased by $53.1 million, or $1.02 per share, representing a 33.1% increase and diluted earnings per share. Now let's turn to our segment results. Starting with the C&I Group on Slide 7. Sales of $358.7 million decreased from $364.4 million last year, reflecting a $1.6 million organic sales decline and $4.1 million of unfavorable foreign currency translation. The organic decrease primarily reflects a low single-digit decline in sales to customers in critical industries within critical industries. Lower sales for the military were partially offset by gains in general industry and technical education, as well as by improved sales into oil and gas applications. As a further comparison net sales in the period increased 1.6% from 2016 levels, reflecting $8.7 million of acquisition-related sales and $3.8 million of favorable foreign currency translation, partially offset by a $6.7 billion organic sales decline. As compared to 2019, sales in our European-based hand tools business were up mid-teens. Those gains were more than offset by lower activity with the military. As you may recall, the fourth quarter of 2019 included sales for a major project that is substantially complete. Gross margin of 36.5% declined 130 basis points from 37.8% in the fourth quarter of 2020, primarily due to the higher material and other costs, partially offset by benefits from RCI industries. While pricing actions have been taken in this segment to help offset the increasing costs, the longer-term nature of certain customer agreements affects the timing of price realization. Operating expenses as a percentage of sales of 22.5% in the quarter, compared to 22.4% last year. Operating earnings for the CNI segment of $50.1 million, compared to $56.2 million last year. The operating margin of 14%, compared to 15.4% a year ago. Turning now to Slide 8. Sales in the Snap-on Tools Group of $504.8 million increased 2% from $494.9 million in 2020, reflecting a 1.6% organic sales gain and $2 million of favorable foreign currency translation. The organic sales increase reflects a low single-digit gain in our US business, partially offset by a low single-digit decline in our international operations. Net sales in the period increased 22.6% from $411.7 million in the fourth quarter of 2019, reflecting a 21.5% organic sales gain and $3.9 million of favorable foreign currency translation. Sales gains in the quarter were led by our hand tools category, with strong performance sequentially, as well as versus both the fourth quarters of 2020 and 2019. Gross margin of 43.9% in the quarter improved 100 basis points from last year, primarily due to the higher sales volumes. Pricing actions and 60 basis points from favorable foreign currency effects, which offset higher material and other costs. Operating expenses as a percentage of sales of 22% improved from 24% last year, primarily reflecting the higher sales and benefits from ongoing RCI and cost containment efforts. Operating earnings for the Snap-on tools group of $110.5 million, compared to $93.6 million last year. The operating margin of 21.9% improved 300 basis points from 18.9% last year. Turning to the RS&I Group shown on Slide 9. Sales of $392.5 million compared to $361.1 million a year ago, reflecting a 5.5% organic sales gain and $12.2 million of acquisition-related sales, partially offset by $500,000 of unfavorable foreign currency translation. The organic gain is comprised of a double-digit increase in sales of under-car equipment and a mid-single-digit gain in sales of diagnostic and repair information products to independent shop owners and managers, partially offset by a low single-digit decrease in sales to OEM dealerships. Also during the quarter, the RS&I Group continue to benefit from the increasing number of monthly software subscribers for its aftermarket and dealership repair shops. As compared to 2019 levels, net sales increased $57.5 million from $335 million, reflecting a 13% organic sales gain, $12.2 of acquisition-related sales, and $1.6 million of favorable foreign currency translation. Gross margin of 46.1% was unchanged from last year as benefits from pricing actions and 60 basis points from acquisitions were offset by higher material and other costs. Operating expenses as a percentage of sales with 21.3% compared to 21.2% last year, primarily due to150 basis points of unfavorable acquisition effects, partially offset by the impact of higher sales and 30 basis points from lower expenses related to $1 million of restructuring costs that were recorded in the fourth quarter of 2020. Operating earnings for the RS&I Group of $97.2 million compared to $90 million last year. The operating margin of 24.8% compared to 24.9% a year ago. Now turning to Slide 10. Revenue from financial services of $86.9 million decreased by $6.5 million from $93.4 million last year, primarily as a result of an additional week of interest income occurring in the 53rd 2020 fiscal year. Financial services operating earnings of $67.2 million compared to $68.5 million in 2020. As a percentage of the average portfolio, financial services expenses were nine-tenths of 1% and 1.1% in the fourth quarter of 2021 and 2020, respectively. In the fourth quarter of 2021, in 2020, the average yield on finance receivables was 17.7% and the average yield on contract receivables was 8.5%. Total loan originations of $256.3 million in the fourth quarter decreased $16.1, or 5.9% from 2020 levels, reflecting a 3.6% decrease in originations of finance receivables and a 16.6% decrease in originations of contract receivables. Last year's extra week in the quarter contributed approximately $10 million of finance receivable originations. As a reminder, revenues in the quarter are generally dependent on the average size of the financing portfolio, rather than originations in any one period. Moving to Slide 11. Our quarter-end balance sheet includes approximately $2.2 billion of gross financing receivables, including $1.9 billion from our US operation. The 60-day plus delinquency rate of 1.6% for the US extended credit compared to 1.8% in the fourth quarter of 2020. On a sequential basis, the rate is up 20 basis points, reflecting the typical seasonal increase we experienced between the third and fourth quarters. As relates to extending credit or finance receivables, trailing 12-month net losses of $41.1 million represented 2.38% of outstanding at quarter-end, down 24 basis points as compared to the same period last year. Now turning to Slide 12, cash provided by operating activities of $222.7 million in the quarter reflects 97.2% of net earnings and compared to $317.6 million last year. The decrease from the fourth quarter of 2020 primarily reflects higher cash payments for income and other taxes and an $85 million increase in working investment, partially offset by higher net earnings. The change in working investment is largely driven by increased receivables and higher levels of inventory this year versus a reduction of inventory in 2020. The increase in inventory primarily reflects higher demand, as well as incremental buffer stocks and expanded levels of in-transit inventories associated with the supply chain dynamics in the current macro environment. Net cash used by investing activities of $23.8 billion included net additions to finance receivables of $9.7 million and $16.3 million of capital expenditures. Net cash used by financing activities, $154.1 million included cash dividends of 76.1 million and the repurchase of 355,000 shares of common stock for $75.5 million under our existing share repurchase programs, as of year-end, we have to remain available to repurchase up to an additional $454.9 million of common stock under existing authorizations. The 2021 full-year free cash flow generation of $872.6 million represented about 104% of net earnings. Turning to Slide 13, trade and other accounts receivable increased $41.6 million from the 2020 year-end. Days sales outstanding of 58 days compared to 64 days at 2020 year-end. Inventories increased $57.3 million from 2020 year-end and trailings 12-month basis inventory turns of 2.8 times, compared to 2.4 times at year-end 2020. Our year-end cash position of $780 million, compared to $923.4 million at year-end 2020. Our net debt to capital ratio of 9.1% compared to 12.1% at year-end 2020. In addition to cash, and expected cash flow from operations, we have more than $800 million available under our credit facilities. As of year-end, there were no amounts outstanding under the credit facility and there were no commercial paper borrowings outstanding. That concludes my remarks on our fourth quarter performance, and I'll briefly review a few outlook items for 2022. We anticipate the capital expenditures will be in a range of $90 million to $100 million. In addition, we currently anticipate absenting any changes to US tax legislation that our full-year 2022 effective income tax rate will be in the range of 23%, 24%. Well, that's our fourth quarter. Positive performance, overcoming challenges as we expect to do. In these times of turbulence, we continued to rise based on the resilience of our markets, vehicle repair expanding the shop level, tax pumped and garage is optimistic, overcoming the postponement of essential OEM programs. The critical industry is mixed, but with promising areas, gains in general industry, natural resources, and education, and progress in emerging markets. Difficulties are in the air but we're able to prosper nonetheless on the power of our strategic position, controlling the customer interface with our wide product line and unique brand. And perhaps most importantly, we rose on the consistent and capable execution by our team, employing agile marketing, considered active pricing, new and higher-value products, quick redesigns to match available materials, aggressive spot buying, and as always, our ongoing RCI. It's a combination authored another positive performance, and it's all spelled out clearly in our numbers. Sales rising organically over pre-pandemic levels by 13%, with the last four periods up organically 8%, 9%, 11%, and 13% expanding the gain over 2019, demonstrating a positive second derivative in the rising sales quarter by quarter. Opco OI margins of 21%, a record high in the midst of multiple challenges, up 90 basis points from last year and up substantially more from 2019. And it all came together for an earnings per share of $4.10, up 7.2% from last year and 33% from the pre-pandemic period, leading to a full-year earnings per share of $14.92, new heights despite the storm. It was an encouraging quarter and the year. The period clearly had challenges, but we were able to overcome maintaining our progress, extending our upward trend. And we believe that Snap-on exits 2021 with a substantial momentum that will carry us forward. And as we mined the abundant opportunities of our resilient markets, we held the advantages of our unique strategic position and engage the considerable capabilities of our challenged-tested team. We'll continue to track progress throughout 2022 and well beyond. My friends, you are the face of the success we've registered this quarter in this year for the extraordinary progress you achieved. You have my congratulations.

q4 earnings per share $4.10. q4 sales rose 3.2 percent to $1.108 billion. qtrly organic sales up 2.3%. projected that capital expenditures in 2022 will be in a range of $90 million to $100 million. currently anticipates that its full year 2022 effective income tax rate will be in the range of 23% to 24%.

Kessel Stelling, chairman and chief executive officer, will begin the call. He will be followed by Jamie Gregory, chief financial officer; and Kevin Blair, president and chief operating officer. During the call, we will reference non-GAAP financial measures related to the company's performance. And now here's Kessel Stelling. This is the 45th quarterly earnings call I participated in with this great company. My 44th as CEO, and I can tell you with great certainty that despite the lingering challenges for our company and the industry, these calls are ending for me on a much more positive note than when they started. My very first call was in April of 2010, 11 years ago to the day as chief operating officer. We were weeks away from completing the consolidation of 30 bank charters into one, and still very much in the early stages of recovering from the financial crisis. Our team looks forward to these calls every quarter, in part because of the relationships we built with you. While we don't always agree, we appreciate your commitment to and usually your delivery of fair assessments of our opportunities and our strengths. Many of whom are listening in today. This team has a passion, a drive, an incredible depth of talent, they simply won't take no for an answer. They're time-tested and battle worn. They dig deep and always find new ways to win. I truly believe I work alongside the best team in the industry, and I'm regularly in awe of their dedication to each other, our customers, communities, and shareholders. On Thursday, I'll confidently pass the CEO baton to Kevin Blair, who I strongly believe is more than capable and ready to take the helm. I'm so proud of all we've done and beyond excited about what's still ahead, and that's where I'd like to focus the remainder of my comments. The first is being positioned for success, which includes capturing the growth in our southeastern footprint, and capitalizing on our strong reputation with customers and communities. Second is providing an exceptional customer experience, in which we continue to invest aggressively through efficiencies generated by Synovus Forward. And third is delivering core organic growth, which remains our top priority for capital deployment with expectations for core customer loan growth this year consistent with our guidance of 2% to 4%, excluding P3 loans. Our results in the first quarter demonstrated our ability to deliver in these areas. Adjusted diluted earnings per share were $1.21 compared to $1.08 last quarter and $0.21 a year ago. Total adjusted revenue of $488 million, adjusted expenses of $267 million, and a $19 million reversal of provision for credit losses led to strong earnings that further increased capital levels. Core transaction deposits grew $2 billion, helping reduce the total cost of deposits by six basis points to 0.22%. Commercial loans, excluding those under the Paycheck Protection Program, increased $212 million or 1% from the end of the year. Through mid-April, we processed 10,000 new Phase 2 applications for $1.1 billion and have funded approximately $950 million for our customers. Net charge-offs remained low at 21 basis points. NPA, NPL and past due ratios all remain near historical lows, and we remain confident in the credit performance of our portfolio. We continue to be pleased with the progress in our Synovus Forward initiatives. By the end of the quarter, we've achieved a pre-tax run rate benefit of approximately $50 million of the $175 million expected by the end of 2022. Kevin will also provide more detail later on the call. Again, our team did an outstanding job delivering strong results for the quarter, and I look forward to continued progress throughout the year. Total loans increased $552 million in the first quarter, highlighted by $894 million in fundings from the second phase of P3 as well as the $476 million in direct auto portfolio purchase in March. With back-end loaded growth, period-end loan balances were $593 million higher-than-average balances. Loan growth of approximately $212 million in commercial loans, excluding P3, was led by our specialty verticals while we saw declines in balances associated with our smaller commercial customers. Total C&I loans, excluding P3 balances, increased to $4 million in the first quarter. Despite total commitment growth of $93 million, line utilization declined $43 million and the ratio remained stable at 40%. With the recent $2.9 trillion stimulus plan, we expect C&I line utilization to remain at or near these historically low levels for longer as customers prioritize use of their own excess liquidity before making meaningful draws. And returning to a more normalized average of 46% would add approximately $650 million in funded balances. Total CRE loans increased $208 million as the recovery of commercial real estate markets continues. Total consumer loans, excluding lending partnerships, declined $333 million. The reductions are a continuation of the post-COVID trends witnessed across the industry as the consumers use the government stimulus to reduce revolving credit balances and deleverage. This trend was particularly apparent within our consumer mortgage and HELOC portfolios, which declined $214 million and $105 million, respectively. We continue to deliver on the P3 program for our customers. We have processed $1.1 billion of P3 loans and funded approximately $950 million to date as part of the second phase of the program. We also continue to work through the forgiveness process on Phase 1 loans. In the first quarter, we had $711 million of loans complete the forgiveness process. Total P3 loans ended the quarter at $2.4 billion. More details related to some of these loans are available in the appendix. Total lending partnership loans held for investment increased $503 million, led by the purchase of prime auto loans. We will continue to use lending partnerships as a strategy to manage the balance sheet, which I'll discuss further in the capital and our liquidity sections. As shown on Slide 5, we had total deposit growth of $677 million. The main drivers of the change include the deposits associated with Phase 2 of P3, declines in public funds and continued remixing of our deposit base. Deposit growth was led by an increase in core noninterest-bearing deposits of $1.4 billion, allowing the continued strategic runoff of higher cost deposits. The more favorable mix supports further declines in the total cost of deposits, which declined another six basis points in the quarter to 0.22%. At the end of the quarter, total noninterest-bearing deposits accounted for 31% of total deposits, which improves our cost of deposits and NII sensitivity. The cost of money market deposits fell by three basis points, and we will continue to manage these costs down in the low rate environment. In the first quarter, we were able to reduce the cost of time deposits by 24 basis points to 0.89%. The reduction then included a 19% decline in brokered CDs, which included $309 million at an average rate of approximately 1.85%. Further reductions in our deposit costs will come from time deposit maturities as well as further price reductions in nonmaturity deposits. Slide 6 shows net interest income of $374 million or $349 million, excluding P3 fee accretion. Those figures represent a $12 million decrease from the fourth quarter, largely due to lower day count and a continuation of some low pressure. This includes a greater-than-expected increase in refinance activity and higher premium amortization within the securities portfolio. These headwinds were partially offset by lower deposit costs and the continued deployment of excess liquidity. In addition to the increase in lending partnerships of about $503 million I referenced earlier, we increased the size of the securities book by $1 billion. In the first quarter, we realized $25 million in P3 fees. At quarter end, the net unrealized fees were $25 million for Phase 1 and $36 million for Phase 2. We expect most of the remaining Phase 1 fee accretion will occur in the second quarter and Phase 2 fee accretion will pick up in the second half of the year. As such, a reminder, most Phase 1 loans have a two-year term. It's a five-year term for Phase 2 loans. Securities accounted for approximately 16% of total assets at the end of the quarter, and we continue to expect further growth within that portfolio for the foreseeable future to deploy excess liquidity. Based on current market conditions and our loan growth expectations, we reiterate our expectation that our core NII should trough in the first quarter, exclusive of accelerated P3 fee accretion. And as we progress through the year, we expect to see increases in NII driven by loan growth, deployment of liquidity, a deceleration of prepayments and further deposit cost reductions. The net interest margin was 3.04%, down eight basis points from the previous quarter. We will continuously monitor our forecasted liquidity position that we consider the appropriate size and composition of our securities and lending partnership portfolios. Slide 7 shows noninterest revenue of $111 million. After adjusting for security losses, adjusted noninterest revenue was $113 million, up $1 million from the prior quarter and $14 million from the prior year. Core banking revenues increased $1 million as a $2 million increase in account analysis fees following the first wave of some of our pricing for this value initiative, offset declines in NSF fees of $1 million. Increased customer derivative activity and interest rate movement contributed to a capital markets improvement of $3 million. We saw continued growth in assets under management, which were up 2% quarter-over-quarter and 35% year-over-year. Net mortgage revenue of $22 million remains strong, although we're seeing some normalization in activity from the extended low rate environment. And so while first-quarter mortgage production levels remained elevated, the recent increase in interest rates is likely to reduce production levels going forward. Moving on to noninterest expense on Slide 8. Total and adjusted noninterest expenses were $267 million. Adjusted NIE was down $9 million from the prior quarter and $5 million from the prior year. The employment expense increase of $8 million from the prior quarter include seasonal first-quarter increases in employment taxes and other related employment expenses that were partially offset by this benefit of Synovus Forward initiatives, including a full quarter benefit of the voluntary early retirement program last quarter. Professional fees declined $8 million from the prior quarter, primarily from lower expenses associated with Synovus Forward-, P3- and CARES Act-related initiatives. Kevin will share an update on the Synovus Forward progress shortly. We remain committed to prudent expense management, enabling us to continue investing in areas that position us for greater success, deliver a superior customer experience and promote profitable growth. We remain confident in the credit performance of our loan portfolio. As you can see on Slide 9, key credit metrics remain stable with NPA, NPL, and past dues all remaining near historical lows. I'd further note that our allowance estimates show reduced life of loan losses versus the prior quarter. Net charge-offs declined $2 million to $20 million or 21 basis points. Given elevated levels of liquidity and continued economic recovery, and particularly in Southeast, we are not expecting a significant change in net charge-offs in the near term. The $19 million reversal of provision for these credit losses resulted from the improved economic outlook and stable loan portfolio metrics that were partially offset by an increased size of the loan portfolio. As expected, we saw an increase in criticized and classified loans that reflects the timing from our grading process, which uses trailing quarterly financial statements and reflects the lower levels of revenue experienced during the pandemic. Approximately 60% of the $263 million increase is hospitality-related, including hotels and full-service restaurants. The most recent cash inflow data, which is located in the appendix, shows positive momentum in year-over-year activity. We also expect to see a significant reduction in criticized and classified levels as the real-time improvements we're seeing in cash inflows, which serve as a proxy for revenues, translates into improved quarterly financial statements for borrowers. This more positive outlook is reflected in ending ACL ratio of about 1.69%, excluding P3 loans. It is the first quarterly decline since implementing CECL over a year ago. The decrease aligns with the more positive economic outlook and reduced uncertainty. The allowance at the end of the quarter incorporates an outlook with moderate economic expansion and benefits from the recently approved stimulus. There is more detail included in the appendix. As noted on Slide 10, the CET1 ratio increased eight basis points to 9.74% from strong core earnings despite a risk-weighted asset increase of $1.2 billion. The RWA increase is now primarily from balance sheet management efforts I referenced earlier as well as a $234 million increase in loans held for sale. The CET1 ratio grew more than 100 basis points over the past year, and we remain above the top end of our 9% to 9.5% operating range for CET1. We are well positioned to really complete our key strategic objectives, including a commitment to profitable growth. Our top priority is to deploy our balance sheet to core multi solution relationships. We also believe it's important to return a portion of current earnings through dividends, targeting a long-term payout ratio of 30% to 40%. When we are comfortable that our capital is sufficient to cover these primary objectives, we consider secondary priorities like share repurchases and noncore growth. Before handing over -- it over to Kevin, I'd like to highlight the active balance sheet management efforts we've taken, shown on Slide 11. Because that goes hand-in-hand with our ability to deploy excess liquidity as well as capital above the top end of our operating range. And the first graph is a historical view of our cash position to give a sense for where normalized operating levels were pre-COVID. We've talked about the impact on NIM, but there's also the opportunity cost of not deploying that liquidity. Our current interest-bearing funds with the Federal Reserve of $2.7 billion are about three and a half times higher than normalized levels, and we've actively managed our balance sheet the past few quarters to monetize that excess liquidity. One way we were able to accomplish this was in our lending partnership portfolio, which a year ago had approximately $2 billion and held for investment loans. With our actions and restructuring the GreenSky relationship and active management of these other lending partnership portfolios, our total lending partnership exposure at quarter end was $1.9 billion with approximately $1.2 billion and held for investment loans and approximately $700 million and that are held for sale loans. We will continue to manage this portfolio as we navigate the current capital and liquidity environment. In the first quarter, we purchased auto loans because we believe that the risk return profile and the two-year average life and the auto loan market liquidity was a good fit under current market conditions. As you can see in the third graph, we also increased our securities as a percentage of total assets. The yield on first-quarter purchases was about 1.4%. The last graph is just a historical view of the loan-to-deposit ratio, which currently stands at 82%. This provides significant longer-term opportunities highlighted by the ability to be more selective and efficient with our funding, of which you've seen us actively manage over the past year. This includes deposits and other liabilities. With excess liquidity and capital above this high end of our targeted operating range, we can increase assets, including securities and loans, which results in much higher yields than the overnight rates with the Federal Reserve. We can also accomplish this without sacrificing core organic loan growth, our highest priority for capital and liquidity deployment. The entire Synovus leadership team and I also sincerely appreciate the unwavering support, and then especially skillful and influential leadership Kessel has provided as CEO. And we're grateful he will remain in the mix in his role as the executive chairman of the board. Kessel and I have worked very closely together since I joined the company in 2016. He's taught me too that our entire team has a lot as we've watched and listened to him steer us through challenges no one ever dreamed we'd face. It's certainly an honor to take the helm of this incredible company as we continue to build on the strong foundation that is part of his legacy. As Kessel stated during his introduction, and we've been working intently not only to perform in the present, but also building upon our core foundations and further transforming the company to be in a position to deliver sustainable top quartile growth. Slide 12 provides a basis for which we believe creates a compelling formula for our ability to achieve and sustain our top quartile objectives. It begins with this -- being positioned for success, which is a combination of the longevity and resulting value of a strong core franchise as well as the more recent transformation of the company. In the appendix, we've included a timeline with a series of highlights under Kessel's tenure as CEO. We certainly don't have time today to discuss all of these accomplishments and transformation over the last 11 years, spanning the four phases of stabilize, rebuild, invest and accelerate. However, I want to highlight a couple of imperatives that have been instrumental in better positioning Synovus for scalable growth and winning in the marketplace. And during this time frame, we moved to a more centralized banking model without impacting our agility and customer connectivity that has long been a staple of Synovus. We built out robust and comprehensive risk management procedures and practices while strengthening and diversifying the balance sheet to better withstand periods of stress. And lastly, we have enhanced our products and solutions as well as expanded our coverage through this addition of many talents and through Global One and Florida Community Bank acquisitions. As we evaluate our performance over the prior 12 months, these initiatives and efforts have been essential in helping to weather and overcome the challenges of the economic downturn while continuing to strengthen the bank for the future. Synovus is well positioned competitively to be in our industry. We are large enough and aligned with the right fintechs and partners to deliver the capabilities and functionality of our largest bank competitors. We have also doubled down on remaining local and focusing on delivering a personalized rightt approach to banking, which competes well with the smaller institutions. Lastly, we have solid coverage across our markets, customer segments and industries, but we continue to have opportunities to expand our asset classes, products and solutions and talent base. We also believe that we're in the best footprint in banking. This belief is strongly supported by the demographic and economic data as we evaluate relative comparisons of metrics such as GDP, employment rates, home prices, and many others. Our five-state footprint is performing at levels far better than the national averages. And we believe this trend will now continue and will likely become more pronounced with population and business flows into our markets. In addition, our capital levels have increased significantly throughout 2020 and into 2021, and we have demonstrated prudence given the unprecedented changes in this underlying economic environment. And we are now in a position to fully utilize our capital to support the organic growth as our current capital levels are in excess of our stated target levels. So, in addition to being well positioned, we fully understand the importance of and are committed to delivering a superior customer experience. The industry also attempts to make more complex than it really is. It is all about making it easier to do business with us. And through our actions over time, building a strong level of trust with our customers. We accomplished this by putting their interest first and partnering with them as advisors. We have a long and our successful track record with high levels of customer loyalty, as evidenced by our Net Promoter Scores, but we know there's an opportunity to continue to improve. We are also redesigning our customer processes and leveraging technology to further strengthen relationships with a model of high-tech meeting high-touch with our highly engaged and experienced team members serving as a key point of differentiation. It is not about addition by subtraction, but rather building synergies from the combination of both aspects. The line between service and sales is also becoming blurred. Customers want advice and guidance, and they expect their financial partners to provide it in a proactive manner in order to support their financial objectives. We are prioritizing investment in data and analytics as well as the channels that support customer interactions in order to be more proactive and timely in providing his insights and advice. Not only is it leading to creating longer-term sticky relationships, but it is also generating new sources of revenue, which brings me to our third area of focus, profitable growth. Jamie summarized our capital priorities well as we will continue to prioritize this core organic growth as our primary objective. Given the strength of the economic activity in our footprint and our calling activities, we are starting to see pipelines and production levels return to pre-pandemic levels. We will continue to expect the second half of 2021 to be the strongest in terms of growth. We have also had a concerted strategy to accelerate the growth in our fee income generation businesses, including our wealth management, treasury, and payment solutions and capital markets. The first-quarter results continue to show good momentum in these areas with increases in wealth management revenues, up $2 million or 5% from the fourth quarter, as well as our AUM continuing to grow, as we referenced earlier. Treasury and payment solutions, overall production and onboarding efforts continue to hit record levels, combined with the repricing efforts, produced a $2 million or 23% increase in service charges versus the fourth quarter despite increases in customer liquidity. And lastly, the addition of key talents that will serve as a catalyst for growth. Synovus continues to be a model that is attracting top talent. We continue to double down on businesses where we have the right to win and present the opportunity for profitable growth. We have increased the producing team members in our wholesale and specialty banking units, treasury and payment solutions as well as wealth management. Our ongoing disruption in the industry as well as a targeted approach for expansion will allow us to opportunistically add top talent in areas where we continue to see this relatively short payback periods and sources of long-term growth. Moving to Slide 13. This outlines our Synovus Forward initiatives, which we've shared previously. We are confident these initiatives will help us achieve our stated objectives and align with our three tenets that Kessel outlined earlier. As a reminder, we expect to achieve the pre-tax run rate benefit of around $175 million by the end of 2022. We have prioritized efficiency initiatives as we kicked off the program in late 2019 in order to fund our journey forward. These initiatives will result in approximately half of the $175 million anticipated pre-tax benefit. At the end of the first quarter, we have now achieved a pre-tax run rate benefit of approximately $50 million with about $40 million in cost reductions and $10 million in incremental revenues. We are in the process of realizing the additional Phase 1 efficiency initiatives, and announced in January that we expect to generate an additional $25 million in Phase 2. We have also initiated our Phase 2 program in over the next two quarters, we will begin to make decisions that will lead to the incremental savings with the goal to have all of the efficiency programs executed by the fourth quarter of 2022. As we continue executing the Synovus Forward plan, the mix of benefits will shift toward revenues. As such, we are really pleased with the progress we've made in both our commercial analytics and pricing for value revenue initiatives. We are currently in the pilot phase of our commercial analytics enhancements, which include the smart tool that I detailed on our previous earnings call. Our team is now receiving and closing these actionable leads from this tool, and you'll begin to see the benefits in both net interest and noninterest revenue lines going forward. The smart tool will be fully adopted and in production by the third quarter of this year. We remain confident in our ability to generate a pre-tax run rate benefit of over $20 million by the end of the year. We are also in the initial phases of developing a very similar tool to be leveraged by our retail and wealth management bankers and expect to have a program in place by year-end. Our pricing per value initiative in treasury and payment solutions began in the fourth quarter and will continue through our second quarter of 2021. Results, to date, have exceeded our expectations with fees increasing $2 million quarter-over-quarter and we expect to maintain and even increase profitability in these products as we continue to increase our value proposition and treasury and payment solutions, including the new Synovus Gateway platform, priority service and enhanced solutions. Delving deeper into our focus on expanding our products and solutions, sales in our new merchant solution continue to outpace our expectations, and we are also tuning our attention to rolling out additional functionality and capabilities in 2021, including international export financing, integrated payables and receivables and a one card digital wallet solution. To achieve sustainable top quartile growth, we understand that continued investments in technology and talent are paramount. And as we evaluate the need to balance short-term headwinds from interest rates or economic activity, we have emphasized not making short-term decisions that impact our long-term valuation or growth opportunities. As such, it requires more rigorous prioritization and focusing more intently on businesses where we have the right and proven track record of winning. Synovus Forward is now predicated to be the support in our aspirations as a growth bank and not simply cutting our way to prosperity. Since our announcement in December, we've been asked a lot about how the strategies will be changing under new leadership. While there will be some changes over time, like Kessel, I will continue to execute the Synovus Forward plan. We have been aligned with the company's direction and areas of emphasis outlined in Synovus Forward and our other strategic initiatives. We are both clear on our strengths as well as our opportunities for improvement. Also, we both have a lot of confidence in the Synovus team and our ability to win versus our largest and smallest competitors. And lastly, we are both committed to lead our company forward to deliver on our -- both the short- and long-term objectives while not losing sight of what makes Synovus a great company: its team members, its customers, and the communities we serve.

q1 adjusted earnings per share $1.21.

Kessel Stelling, chairman and chief executive officer, will begin the call. He will be followed by Jamie Gregory, chief financial officer; and Kevin Blair, president and chief operating officer. During the call, we will reference non-GAAP financial measures related to the company's performance. And now here's Kessel Stelling. Before I move to the financials, I just wanted to share a few comments and reflections on our industry and our company. The defining characteristic of our industry has changed and I have certainly seen my share of change in my four and a half decades in this business, including this unprecedented pandemic and period of social unrest. And although things are relentless, I've never been more convinced of the ability and responsibility of our industry to be a trusted resource for our customers and for the communities we serve. Synovus, in particular, is built for times like these embedded in our markets, close to our customers, and able to quickly assess and anticipate needs. And that continues to ring true as challenges linger even as we see glimpses of a slow and steady recovery. The story we'll tell today is largely shaped by our model that has allowed us to respond to, plan for, and do our best to control the things we can control. Adjusted diluted earnings per share was $0.23, compared to $0.21 last quarter and $1 a year ago. Loan balances increased $1.7 billion or 4.3%, compared to the prior quarter. Growth in Paycheck Protection Program loans of $2.7 billion was offset by a reduction in C&I line utilization of $775 million. In the consumer book, loans were down approximately $700 million as reductions in lending partnership balances were partially offset by mortgage balance increases of $200 million. Total deposits grew $4.4 billion or 11% from the prior quarter. Growth was largely split between DDA and interest-bearing core deposits, which grew $2.9 billion and $1.2 billion, respectively. We continued the strategy of allowing higher-priced CDs to run off, which led to a decline of $655 million in time deposits. Net interest income was up $3 million for the quarter. This included a full quarter of the 150-basis point reduction in short-term rates from March along with offsets, including over $9 million in fee recognition associated with P3 loans. The net interest margin declined 24 basis points to 3.13%. Adjusted non-interest revenue of $95 million was greater than expected largely due to outperformance in mortgage. Net mortgage revenue was $24 million, up $11 million from the prior quarter led by secondary mortgage production of $635 million, up $380 million from the prior quarter. Adjusted non-interest expense totaled $276 million, up $5 million from the previous quarter. This included $7 million of COVID-related expenses and $7 million in fees associated with the implementation of certain Synovus forward initiatives. Commission expense was $7 million higher than the prior quarter, largely resulting from record mortgage production. These increases were offset by reductions in other areas, including seasonal employment fees and travel. Provision for credit losses was $142 million and resulted in an allowance for credit losses ratio of 1.74%, excluding the P3 balances. That's an increase of 35 basis points from the previous quarter and incorporates a more stressed economic outlook. Credit quality metrics remain stable with the nonperforming loan ratio and net charge-off ratio of 37 basis points and 24 basis points, respectively. Our CET1 ratio increased 20 basis points to 8.90% and our total risk-based capital ratio increased 41 basis points to end at 12.70%, a two-year high. The 90-day deferral program we outlined on the last call has done exactly what it was intended to do by providing much needed support and assistance for our customers. While it's too early to know exactly how deferrals will play out in the second half of 2020, reviews of customer cash flows, client surveys, and conversations and interactions with customers to date lead us to believe that somewhere between 3% to 5% of total loans will have a round two deferral granted for a 90-day deferment of principal and interest. Jamie will now share more detail about the quarter. As Kessel noted, this was a very eventful quarter for our company with considerable progress on a number of fronts despite headwinds. The resulting impact on our balance sheet has been significant starting with loans on Slide 4. As we shared in May, we funded $2.9 billion in P3 loans for approximately 19,000 customers, quite an undertaking, which required a coordinated effort across our bank. The average P3 loan was approximately $150,000 and the customers that received those loans employ over 335,000 employees. An offset to the C&I growth from P3 loans, which ended the quarter with a balance of $2.7 billion was a decrease in loan balances from C&I line utilization. We ended the second quarter at a record low of 41% that resulted in balance sheet declines of $775 million. We expect C&I line utilization to normalize in the mid- to upper 40% range as the economy improves. Highlights in the consumer portfolio include mortgage loan balance increases of over $200 million on a production of a record $800 million. As was disclosed during the quarter, we restructured our GreenSky relationship in a way that is mutually beneficial. Our total exposure limit remains $1 billion for the relationship, but you'll see a shift of loan balances from held for investment to held for sale. In the second quarter, we moved $266 million in loans to held for sale under this new arrangement. Going forward, you'll see a shift in geography on the income statement from our GreenSky loans as we realize more non-interest revenue from transactions and servicing fees, as well as, a reduction in net interest income and non-interest expense. The other meaningful item to highlight within partnership lending is a disposition of approximately $535 million in student loans. In June, we moved those loans to held for sale, which contributed to the decline in consumer balances and resulted in an allowance release of approximately $12 million. We have closed that transaction since quarter end realizing a modest gain which will be recorded in the third quarter. We believe that the strength of the market for these loans is a testament to the quality of these loan portfolios and we remain committed to those relationships while also acknowledging their core customer base takes priority as we focus on managing our balance sheet in these uncertain times. We continue to expect loans to be flat for the remainder of the year, excluding the impact of P3 forgiveness. On Slide 5, you can see that we had unprecedented growth in deposits with DDA balances, up $2.9 billion and total deposits, up $4.4 billion in the second quarter. Much of this growth occurred in conjunction with our P3 lending effort. However, we also saw broad-based growth across interest-bearing transaction balances with money market and NOW up 11% quarter-over-quarter while savings balances increased by 14% quarter-over-quarter. While lower cost transactional deposit growth has accelerated since late in the first quarter, we have continued to experience strategic declines within our core time deposit portfolio. As you are aware, much of these declines have been intentional over the last several quarters as we've reduced exposure to higher cost CDs and public funds in certain markets. One of the benefits of having a sizable time deposit portfolio is the ability to reprice as rates decline and that portfolio turns over. With our transactional interest-bearing accounts approaching the lowest rates experienced since the great financial crisis, we expect further declines in rate paid on deposits to be led by strategic turnover within our core and brokered time deposit portfolios. As a simple means of comparison to the prior cycle, Synovus achieved its lowest deposit cost in the third quarter of 2014. At that time, total interest-bearing deposit costs were roughly 35 basis points. While our deposit mix has evolved from that time, we believe a return to comparable levels is achievable in the coming quarters with continued pricing and balance sheet discipline. We expect deposits to decline in the second half of 2020 as excess liquidity is deployed. Slide 6 shows net interest income of $377 million, an increase of $3 million from the previous quarter. This benefited from $9 million in fee accretion from our P3 loan portfolio. In the coming quarters, P3 forgiveness may have a meaningful impact on our net interest income as unearned fees associated with that program are recognized into interest income. P3 processing fees totaled $95 million. In terms of net interest margin, we ended the quarter at 3.13%, down 24 basis points from the first quarter. Beyond the anticipated impact associated with the lower rate environment, the significant inflow of deposits throughout the quarter resulted in an excess cash position, which while not impactful to net interest income, diluted the margin by approximately 8 basis points, as compared to the prior quarter. Although we expect to maintain an elevated level of liquidity within the current economic environment, we also anticipate some reversal in that elevated position in the second half of the year, which should support the margin. Balance sheet management activities in the second quarter, including securities portfolio sales, the student loan sale, and the GreenSky strategy change, will serve as a headwind to net interest income beginning in the third quarter and will put some additional downward pressure on the margin. The impact of these recent transactions is approximately 9 basis points to the margin. After adjusting for these impacts and excluding the impact of P3 loans, we expect the margin to remain relatively stable in the second half of 2020. We were pleased with non-interest revenue of $173 million or $95 million adjusted, shown on Slide 7. The transaction activities, including capital markets activities, mortgage originations, and credit card transactions exceeded our expectations. And we had one of our strongest quarters in fee revenue. We realized investment gains of $78 million which includes $70 million from repositioning the securities portfolio. While these transactions were primarily focused on agency mortgage-backed securities, part of the repositioning included the disposition of our remaining $150 million in collateralized loan obligations in the investment portfolio. Total net mortgage revenue was $24 million which was $11 million more than the previous quarter. This is the result of an all-time high of $635 million in secondary mortgage production and an elevated gain on sale. Looking forward to the third quarter, we do not expect net mortgage revenue to stay at the record level of the second quarter. Led by normalization of mortgage revenue, we believe a reduction of adjusted non-interest revenue in the third quarter is likely before we see a return to consistent growth in fee revenue. Noninterest expense of $284 million or $276 million adjusted is shown on Slide 8. As expected, we had approximately $7 million in COVID-related expenses in the second quarter. These included bonuses to certain frontline team members, as well as, efforts to improve the safety of our team members and customers. Adjustments for the quarter of $8 million included expenses of $3 million related to branch closures and restructuring of corporate real estate, as well as, $5 million in expenses related to the Global One earnout liability. Adjusted expenses included the $7 million in COVID-related expenses, as well as, an increase in commission expense of $7 million higher than the prior quarter due to elevated mortgage production. The second quarter also had $7 million in upfront expenses related to efforts we've made to implement and execute certain Synovus forward initiatives. These efforts will help us achieve sustainable top quartile performance that Kevin will provide an update for shortly. Consistent with prior guidance, we expect expenses to decline in the second half of the year. Current credit ratios shown at the top of Slide 9, which include NPAs, NPLs, and past dues remain stable. We generally expect some pressure on these credit metrics over the next few quarters which are aligned with the reserve builds in the first half of the year under the procyclical nature of CECL. Although loan deferrals have an impact on these metrics, it's important to note that we are not seeing any widespread deterioration in the portfolio and these ratios remain at or near lows for this credit cycle. The net charge-off ratio was 24 basis points, up 4 basis points from the prior quarter. Net charge-offs of $24 million largely resulted from a single credit that was moved to nonaccrual last quarter. Provision for credit losses of $142 million resulted in an allowance build of nearly $120 million from the current expectation for longer-term economic headwinds. After adjusting for P3 loans, the ACL ratio increased 35 basis points to 1.74%. The economic assumptions for the current quarter include the estimated impact of stimulus and an unemployment rate declining to around 10% by the end of the year, and remaining elevated throughout 2021. We anticipate moderate economic expansion following the dramatic spikes in real GDP expected in the second and third quarter of the year. Economic uncertainty remains great due in part to the direct impact of COVID. The ACL ratio could remain elevated due to this economic uncertainty and credit migration which could result in today's allowance for credit losses not fully funding future charge-offs. Slide 10 includes a review of our capital position as we ended the second quarter. Our focus remains on diligently managing our balance sheet and capital in alignment with our risk appetite and capital adequacy process. And you can see the result of that effort in our capital ratios. CET1 improved 20 basis points to 8.9% and total risk-based capital rose 41 basis points to 12.7%, the highest level in two years. Actions included student loan sales and the settlement of security trades in July will further reduce risk-weighted assets and will benefit CET1 by approximately 20 basis points in the third quarter. As it relates specifically to common shareholder dividends, we continue to be guided by two considerations: capital adequacy and long-term earnings. We remain confident in our current capital levels which is supported by stress testing and sensitivity analysis. We believe it's important for shareholders to receive current income on their investment and also for us to retain enough capital for our strategic growth objectives. To achieve those objectives, a total long-term payout ratio of 70% to 80% is appropriate, with approximately half of that coming from common shareholder dividends. Before handing off to Kevin, I'd like to summarize our thoughts on the balance sheet. We remain confident in our capital position and the second quarter has shown we have the means to further support capital when needed. From December 31st to June 30th, we increased our allowance by approximately $400 million while maintaining a stable CET1 ratio. Given the elevated uncertainty, we are not planning to repurchase shares in 2020 and we'll use future earnings to build capital and grow our businesses. We expect our primary means of capital return to be through dividends and accretion of our tangible book value. I'll begin on Slide 11 with an update to the segments we highlighted on the last call that we defined as particularly sensitive to COVID-19. Balances totaled $4.7 billion in these industries which is stable with the prior quarter. When we implemented a 90-day deferral program in late March, we utilized a review process, particularly on our larger customers, to assess the impact of the economic conditions that warranted a deferment to help address short-term changes in cash flow. As these deferrals end, we have once again taken a proactive approach and conducted thorough cash burn analyses on our customers to determine who will continue to see reduced levels of cash flows over the next 90 and 180 days. What we found is that a large percentage of the companies experiencing a longer-term impact to cash flows are encompassed in five of the segments identified on this slide. Let me touch on each industry briefly. I'll start with the hotel industry which continues to see a 40% to 60% decrease in occupancy and revenue per available room. Given the reopenings in the southeast and the increase in occupancy in various drivable vacation destinations, we expect cash flows to increase somewhat in the coming months, and as a result, the overall deferral rate of the hotel portfolio to range between 30% and 40% in the next 90 days. As we shared last quarter, this portfolio maintains a strong loan value, slightly over 50%, and it entered the downturn with almost 2 times debt service coverage. For non-grocery-anchored shopping centers, we expect to see deferments in the range of 20% to 30% as certain types of retail are performing well such as home improvement and electronics, while other retail reopens and resumes their sources of revenue. Moving to restaurants, this industry benefited greatly from the P3 program and we are seeing more significant improvements in the quick-serve and fast casual businesses which will lead to a reduction in second round deferrals. However, we continue to see a lag in revenue recapture in full-service and drinking establishments. Similar to shopping centers, the impact on the retail trade industry is largely a function of the type of goods sold, but we are seeing an improvement here as well with overall cash flows increasing in June versus the previous year with solid growth in beer and wine, furniture, and grocery-related trade. And therefore, we expect 10% to 20% of the portfolio to pursue a second round of principal and interest deferments. Fitness, recreation, and entertainment centers are among the industry's hardest hit by the shutdown, but golf courses and country clubs are faring better. Despite the softness in some of the entertainment industries, we do expect this industry to have low percentage of second-round deferments. Our oil-related segment, totaling approximately $300 million in outstandings was initially of greater concern due to the negative oil futures and the impact of less travel. Despite those concerns, we saw a lower percentage of first-round deferments and expect this portfolio to continue to perform well with minimal second-round deferments. In aggregate, while deferral trends are positive to this point, we are keenly aware that any additional mandated closings from the COVID surges in our markets would have the potential of impacting cash flows, and therefore, increasing the need for additional deferments. At this point, I would like to draw your attention to Slide 25 in the appendix. Another notable segment that is often discussed as a COVID-impacted industry that is not on this list is our senior housing portfolio, which is over $2 billion in outstandings. We have not included senior housing on this slide based on the solid performance of this portfolio and our outlook on future performance. The reason for exclusion is supported by the fact that we have only seen 4% of the outstanding balances deferred in round one, which was comprised of five loans, and the expectation at this time is that we will have no further deferments in the portfolio during round two. In addition, we continue to work closely with our customers and the industry associations, as well as, actively monitor cash flows which have trended down only modestly to date. Our senior housing portfolio primarily includes private pay facilities that have better access to resources, including staffing and equipment. This portfolio is led by a very seasoned team with a stellar track record dealing with longtime operators. The portfolio carries strong LTVs and debt service coverage metrics, and is strategically aligned with sponsors who have access to liquidity and have demonstrated commitment to the space over several decades. In terms of overall portfolio deferments, a significant percentage of our first 90-day deferrals have expired. And at this point, we are seeing a relatively low level of additional requests which is partially due to the timing of payment due dates. As of July 14th, 2.3% of the total loan portfolio was in a 90-day deferral status. We will continue to gain additional insights in the coming weeks. But based upon current conditions, activity to date and ongoing discussions with our customers, as Kessel mentioned earlier, we believe this percentage could increase into the range of 3% to 5% this quarter. The process for granting a second deferral takes into consideration the borrower's current financial condition and liquidity, the impact of the borrower's industry from COVID-19, and the performance history of the borrower pre-COVID. The strength of our portfolio coming into the crisis combined with the assistance from deferrals and government stimulus programs, should help many customers weather the storm and help to minimize defaults. Combining these actions with strong loan-to-values and good sponsorship should help to mitigate and limit future losses. Moving to Slide 12. This is an example of the analyses we've conducted to identify and assess the financial strength of our borrowers. This work is supported by our commercial portfolio transaction data where we have the primary operating accounts. Approximately two-thirds of our commercial loan exposures have an operating account open with us. And we have been comparing their cash inflows which can serve as a proxy for revenues on a year-over-year basis to assess and predict their ability to repay debt during this crisis. Using this data, we have validated the impact to cash inflows between our customers who received a deferral and those who have not, as well as, the pace of improvement. Our customers overall have experienced improved cash flows since the trough in April, with the month of June exhibiting only a 6% reduction in cash inflows relative to the same month last year. This analysis is constructive in evaluating current conditions, but more importantly, it enables a more real-time analysis versus traditional underwriting criteria and provides a prediction of cash flows throughout the current economic cycle. Predictive analytics allows us to determine which customers require intervention and whether, for example, a deferral or bridge facility could provide the support needed to supplement short-term cash flow disruption. It also provides early identification of customers where the outlook is less optimistic, thereby, allowing us to take earlier action to reduce and mitigate losses. As we turn from credit to Slide 13, before I talk about the future, let me briefly touch on the present. Despite the challenging environment, our businesses continue to perform well. You have heard from Kessel and Jamie on the financial results this quarter, and those results reflect the ongoing success we have across our geography and our business units. I want to highlight several areas that continue to perform at a high level in this difficult economy. Yes, the low-rate environment helped drive volume, but it's important to also note that mortgage loan originators recruited since January 2018 have produced 42% of the year-to-date volume. Successful recruiting in the past two years has also proven to be a key factor in our mortgage growth. Second, we continue to bolster our balance sheet and P&L through productivity gains. With mortgage and wholesale banking leading the way, second-quarter funded loan production was up 43% versus the same quarter last year and deposit production with increases in all of our lines of business, was up 37% versus second-quarter 2019. The deposit growth is a great example of how our relationship-based model continues to deliver results. This quarter's results reflect the growth in both balances and accounts. It is a function of new customers being gained through the P3 process, new talent that we've added, as well as, thorough, consistent prospecting efforts while continuing to see existing customers augment their balances. Next, as we've also shared in the past, we have been aggressively adding talent and new services in our treasury and payment solutions area. As a result, production revenue of $2.9 million in the quarter, was up 210% versus the second quarter of 2019. Lastly, our Global One premium finance business unit continues to generate strong growth while improving returns and the overall efficiency of operations. As a result of this continued success and the successful integration within Synovus, we have expanded the responsibility of the executive leadership to now lead our specialty finance division which includes structured lending and asset-based lending. Underlying all of these results, we have seen more significant year-to-date growth in markets where we have made substantial investments in talent, in marketing, and in distribution channels. Markets such as Atlanta, Tampa, Miami, Birmingham, and Greenville, South Carolina drive a large portion of our overall growth. And speaking of talent, we have continued to selectively attract top talent in growth markets throughout this quarter across all of our businesses. We have achieved these results while our customer satisfaction scores and our branches and our contact centers remain quite high, and they've actually increased versus historical levels. All of these areas, as well as others I have not mentioned, give me great confidence in our ability to win. And when we return to a state of normalcy, we will be even better positioned to do so. As I close, let me transition to our Synovus Forward initiative which we've highlighted on Slide 13. We remain focused on the execution of this program to drive incremental efficiencies and sources of new revenue in 2020 and beyond. Our financial objective of an incremental $100 million in pre-tax income remains intact with the efficiency benefits being realized early in 2021 while the revenue benefits will continue to build throughout next year. Our work on one of our largest expense initiatives, our third-party spend concluded last week. This work stream was accelerated and has proven to be quite fruitful with the identified savings from the renegotiation and demand management efforts yielding savings of around $25 million. These benefits will be fully realized in our run rate expenses in 2021. We have also completed Phase 1 of our branch consolidation and corporate real estate optimization efforts and are diligently working on subsequent opportunities that will result in additional savings in 2021. We remain confident in our ability to generate $45 million to $65 million in expense savings through this program. While we have focused more intently on the efficiency initiatives out of the gate, we have also turned our attention to the revenue opportunities that were identified during the diagnostic phase with the total potential pre-tax income of between $35 million and $55 million. Analytics enhancement is at the center of many of these opportunities. As I mentioned previously during the second quarter, we utilized the resources on this work stream to build out our credit analytics and predict the modeling capabilities to create early warning mechanisms that will allow us to take actions to mitigate and reduce credit losses. We will benefit from this work in the coming quarters, but this work will also serve as the baseline analytic framework to generate advancements in our sales and our service activities, as well as, improvements in our overall relationship profitability. Moreover, as we enter 2021, we will be in a better position to optimize the pricing of our depository and treasury products and solutions through the deployment of new tools and processes. We will maintain a dedicated team to continue to lead this work and we'll also remain flexible to adjustments and additions to the overall program. This work serves as our North Star as we prioritize future investments and determine needs to continue to differentiate Synovus in what is becoming an increasingly competitive landscape. We also recognize the uncertainty in the environment and the subsequent impact of financial results which may lead to a change in the scope and the sizing of the program. And the management team is fully committed to execution and the delivery of the results. I had the privilege last week of participating in our mortgage company townhall meeting where they were celebrating a quarter of not only record production, but significant increases in customer satisfaction surveys. And I said to them, what I'll say to our entire team today, I've never been more proud to be associated with the Synovus team and I continue to be inspired by, not only what they do, but how they do it, putting our customers first in all that they do each and every day. And in spite of all the challenges and uncertainty facing our industry, we continue to attract and retain the very best talent in the industry.

q2 adjusted earnings per share $0.23. qtrly period-end loan growth of $1.66 billion or 4.3% sequentially. total loans ended quarter at $39.91 billion, up $1.66 billion or 4.3% sequentially.

Kevin Blair, president and chief executive officer, will begin the call. We ask that you limit yourself to one question and one follow-up. During the call, we will reference non-GAAP financial measures related to the company's performance. And now Kevin Blair will provide an overview of the quarter. Our team delivered another solid quarter with growth in revenue and earning assets while maintaining an expense discipline that resulted in year over year quarterly expenses declining 5%. Additionally, we continue to see an improving credit outlook that produced a release in allowance. Finally, we continue to successfully deliver on our Synovus Forward initiatives and investments with the $75 million in pre-tax run rate benefit achieved through the second quarter and an additional $100 million in pre-tax run rate benefits to come by year-end 2022. Before I proceed, let me take a second to remind you of our performance to date as it compared to our expectations at the beginning of the year. We shared with you that we would deliver loan growth, excluding PPP and ramp it up in the second half of the year. We also said we would improve the deposit mix and lower our cost of funds to stabilize the margin. Also, we would drive efficiency initiatives that will assist in returning to positive operating leverage while continuing to manage effectively through the uncertain credit environment and produce the planned benefits from Synovus Forward. I'm pleased to share with you today that we are delivering on those objectives, and we concluded the first half of 2021 with considerable momentum and are optimistic about the prospects for growth and expansion moving forward. Our commercial loan pipelines are back to pre-pandemic levels with continued growth in C&I outstandings and commitments and line utilization actually increased slightly during the quarter. Client liquidity remains strong, which has allowed us to further optimize our deposit mix and reduce our cost of funds again this quarter. We expect this trend to continue in this low rate environment. Our Wealth and Treasury and Payment Solutions businesses are performing at a high level. Continued growth and operating margin expansion in these fee income-generating business units will help to offset the industrywide reduction in mortgage activity. Criticized and classified loans declined for the quarter, another proof point that the elevated credit concerns raised by the pandemic continue to abate and signal the opportunity to continue to move the allowance over time back down toward day one CECL levels. And during the first half of the year, we continued to invest in the future of Synovus. Key priorities to enhance the customer experience and deliver new sources of growth. A couple of examples of this include: our Treasury and Payment Solutions business launched a new suite of integrated receivable solutions called Synovus Accelerate AR. This solution has been well received, and the sales pipeline has already begun to fill which will create a new source of revenue while significantly benefiting our customers by saving them time and money. We also have migrated approximately 25,000 business clients to Synovus Gateway, our new digital platform for business and commercial banking. With expanded functionality and capabilities, we are making it easier for our customers to do business and promoting higher levels of business retention. Lastly, our smart analytics tool, which we've shared previously, has been further rolled out across our bankers and our markets, and is beginning to have an impact on increasing pipelines and opportunities to expand the share of wallet from our customers. We are also reminded during the second quarter that our focus on delivering a personalized and value-added customer experience matters and will continue to provide a foundation for future growth. Industrywide consumer satisfaction surveys, again show that our clients are more satisfied and loyal than those of our competitors. And we also received two awards of excellence for our family office during the quarter. These scores and accolades are not success in and of themselves, but rather affirmation that our efforts and our approaches are having meaningful impacts for our customers. For all of these reasons, as well as the vibrant economic expansion that we expect to continue in the Southeast, we remain confident in our path forward. Moving to Slide 3, which includes our financial highlights for the quarter. Total adjusted revenue of $489 million, adjusted expenses of $268 million and a $25 million reversal of provision for credit losses resulted in adjusted net income of $179 million or $1.20 diluted earnings per share. Without adjustments, net income was $178 million or $1.19 diluted earnings per share. Pretax run rate benefits from Synovus Forward of $75 million have increased by $25 million from the first-quarter results. Our work on completed and future initiatives continues to give us confidence in our ability to achieve an aggregate pre-tax run rate benefit of $100 million by year-end 2021 and $175 million by the end of '22. Total loans, excluding P3 loans, were up $194 million in the second quarter. Growth in the quarter was delivered in our core C&I portfolio, as well as third-party consumer lending, given the continued high liquidity environment. Despite solid production levels, elevated prepayment activity remains a headwind in our commercial and consumer real estate portfolios. Core transaction deposits increased $702 million or 2%, led by core noninterest-bearing deposits growth of $601 million or 4%. With the current loan-to-deposit ratio, we continue to remix the deposit base strategically reducing higher cost categories, including CDs and broker deposits. Key credit metrics were stable with the NPA ratio declining by 4 basis points to 46 basis points, and the ACL coverage remains strong. A more favorable economic outlook and a 14% reduction in criticized and classified loans supported further allowance releases. The ACL ratio, excluding P3 loans, declined 15 basis points to 1.54%. We remain well capitalized with the CET1 ratio increasing to 9.8%, while completing nearly half of our $200 million share authorization in the quarter. We also executed on additional earning asset growth activities to monetize excess liquidity while keeping capital above our operating target. As shown on Slide 4, we ended the quarter with earning assets of $51 billion. Total loans declined $569 million, led by P3 balance declines of $763 million. While gross production levels continue to improve, the liquidity environment continues to result in downward pressure on loan demand. While our customers are utilizing less of their line commitments, we are continuing to grow overall commitments to new client relationships and deeper existing relationships. The annualized growth rate and total commitments over the past two years is more than 3% compared to an annualized increase in funded loan balances of approximately 1%. A material portion of that growth will translate into funded balances once C&I line utilization begins to normalize closer to the long-term average of 46 to 47%. Based on market intelligence and conversations with our clients, we believe increases in line utilization will occur later in the cycle as client liquidity subsides. Our base assumption included in our loan growth guidance is that line utilization will remain near current levels through year-end. While commitment growth will support longer-term loan growth, our confidence in the forecast for the near term is based on continued strong production, growth in the commercial loan pipeline and our expectation that the elevated level of payoffs and paydowns will abate. Another factor that gives us confidence in loan growth is more recent monthly data. In June, total loans, excluding changes in P3 balances grew by approximately $200 million. In the second quarter, further declines in consumer mortgage and HELOC portfolios of $98 million and $74 million, respectively, continued to be impacted by accelerated prepayment activity and excess liquidity. CRE loan declines of $173 million this quarter largely resulted from accelerated payoffs as many owners are selling with the expectation that capital gains taxes will increase in 2022. C&I balances, excluding changes in P3, increased $220 million with $469 million in commitment growth while C&I line utilization remained near historic lows. As a reminder, a normalization in C&I line utilization would result in more than $700 million in funded balances. We had approximately $150 million in fundings of round two P3 loans, net of unearned fees, which partially offset forgiveness of $927 million. Total P3 balances ended the quarter at $1.6 billion. There's more detail related to P3 loan activity in the appendix. Lastly, as a function of this liquidity environment, we increased the securities portfolio about $616 million and third-party consumer portfolio about $273 million. The risk profile of asset acquisitions was largely consistent with those completed in the first quarter with emphasis in mortgage-backed securities and secured third-party consumer loans. Investment securities accounted for 17% of total assets at the end of the quarter and could increase further as we look for opportunistic deployments of liquidity in the second half of 2021. As shown on Slide 5, we continue to grow core transaction deposits, which increased $702 million, or 2% from the prior quarter. This was led by core noninterest-bearing deposit growth of $601 million or 4%, which offset strategic declines in higher cost deposits. We continue to have success reducing our total deposit costs in the second quarter with a reduction of 6 basis points from 22 basis points to 16 basis points. This was driven by a combination of deposit mix optimization with a continued focus on strategic reductions in high-cost time deposits, as well as a reduction in the expense associated with interest-bearing deposits. While the pace of CD maturities will slow significantly, there are opportunities to further improve the deposit mix and reduce rates paid on other interest-bearing deposits as we progress through the second half of 2021. For the month of June, total deposit costs were 15 basis points, and we expect further reductions in total deposit costs this year. Slide 6 shows net interest income of $382 million, an increase of $8 million from the prior quarter. NII increased as benefits from asset growth, reduced deposit costs and day count more than offset the reduction in P3 fee income. The net interest margin of 3.02%, a decline of 2 basis points was primarily impacted by P3 forgiveness as P3 fee accretion decreased $5 million from the prior quarter. Other dynamics are similar to recent quarters as the headwind from asset repricing is being offset by further reductions in liability costs. As expected, slower prepayment activity in the latter part of the quarter helped to improve the yield on the securities portfolio, supporting both margin and NII. Based on current mortgage trends, we'd expect modest further improvement in that yield in the third quarter as the impact of a full quarter of more normalized prepay activity is realized. Deceleration of prepayment activity resulted in a $3 million reduction of premium amortization in the second quarter, down from $20 million in the first quarter. In terms of asset sensitivity, we remain positively exposed to potential increases in interest rates. That dynamic continues to be supported by the aforementioned shifts in our balance sheet, including funding mix, with the estimated exposure being split between both short-term and long-term rates. As of June 30th, our loan portfolio is 54% variable and approximately 30% of those variable rate loans have floors at or above short-term index rates of 25 basis points. Based on current market conditions and our expectations for loan growth, we reiterate our expectation that quarterly net interest income, excluding P3 fee accretion, should increase in the second half of the year driven by loan growth, deployment of liquidity, a deceleration of prepayments and further deposit cost reductions. Using the quarter-end forward curve and absent rate hikes, we expect a NIM of approximately 3%, excluding the impact of P3, with headwinds from the lapse of P3 fee accretion being offset by the continued deployment of excess liquidity and with notable upside coming from increases in either short-term or long-term interest rates. As we've shared previously, we estimate NIM dilution of approximately 6 basis points per $1 billion of excess cash on deposit at the Federal Reserve. Slide 7 shows a total adjusted noninterest revenue of $106 million, down $6 million from the previous quarter. Embedded in the continued strength in fee revenue is diversified growth across our fee revenue sources, partially offsetting the continued normalization of the mortgage business from all-time high levels of production. Core banking fees were $41 million, up $3 million. Increases were broad-based, led by $1 million increases in account analysis fees that benefit from our treasury and payment solutions team and our recently in-sourced merchant business. NSF, or overdraft fees, which have received a lot of attention throughout the industry, were flat at $6 million, accounting for less than 6% of noninterest revenue and 1.3% of total revenues. Net mortgage revenue declined $8 million in the second quarter to $14 million due to reductions in secondary production and gain on sale. This remains above pre-pandemic levels, and we expect continued normalization in the second half of 2021. Increases in fiduciary revenues of $3 million helped offset decreases in other areas, including capital markets income. Assets under management grew 3% in the quarter and 28% from the previous year. The build-out of wealth management and other fiduciary services, particularly in South Florida, will continue to provide meaningful growth opportunities. Total noninterest expense of $271 million is highlighted on Slide 8. Adjusted noninterest expense was $268 million up $2 million from the prior quarter and down $6 million from the prior year. Adjusted items include the impact of an earn-out liability, nonqualified deferred compensation and restructuring fees primarily related to branch closures. Employment expense of $159 million was down $1 million from the prior quarter as seasonal decreases in payroll taxes was partially offset by an increase in pay days, as well as commissions and other variable compensation. Expenses of $42 million associated with occupancy, equipment and software increased $1 million from the previous quarter, largely due to an increase in the repairs and maintenance. As Kevin will touch on later, we continue to evaluate and optimize our branch and non-branch real estate for additional efficiency opportunities. Other expenses of $67 million were up $3 million primarily due to the $4 million increase in third-party processing fees associated with the expenses from additional P3 forgiveness and third-party consumer loans. Our commitment to prudent expense management and profitable growth allows us to continue to invest in strategically compelling high-return growth vectors. We have reduced our head count 6% year over year, approximately 85% of which was on the support side. This reduction in headcount is a key priority in our expense management efforts, However, there are some offsetting costs as we promote team members who are taking on more responsibility and continue to hire customer-facing team members. Our expectations for expenses and benefits from Synovus Forward remain unchanged. Slide 9 highlights stable credit metrics, which remain near historical lows. We continue to see improvement in the overall economic outlook, which is reflected in the reversal of provision for credit losses of $25 million and a 14% reduction in criticized and classified loans. Support for the ratings improvements comes from client conversations and cash inflows. As shown in the appendix, cash inflows from March to May are each up more than 10% compared to the same period from 2019, which we use as a pre-pandemic baseline. The annualized net charge-off ratio for the quarter was 0.28%. We expect net charge-offs to remain relatively stable in the second half of the 2021, assuming no material change in the economic outlook. During the second quarter, the NPA ratio declined 4 basis points to 46 basis points. Criticized and classified loans fell 14%, and we expect further reductions as we progress through the rest of the year. The ACL ratio of 1.54%, excluding P3 loans, was down 15 basis points from the prior quarter and 27 basis points from the end of the year. We continue to use a multi-scenario framework in our CECL modeling and a sign of 40% weighting to adverse scenarios, 55% weighting to the base scenario and 5% weighting to an upside scenario. As noted on Slide 10, the CET1 ratio increased 1 basis point to 9.75% as a result of strong performance. The building capital was deployed via risk-weighted asset growth, share repurchases and our common equity dividend. In the second quarter, we repurchased $92 million of the $200 million share repurchase authorization in place for 2021, which resulted in a 1.3% reduction of average diluted outstanding shares. We have completed approximately $15 million of additional repurchase activity in July. Based on current conditions and economic outlook, we expect to complete the full authorization in the second half of the year. We will continue to opportunistically deploy capital on our balance sheet and to our shareholders as we remain above our 9.5% operating target for CET1. We remain well positioned to complete our key strategic objectives including profitable growth with the highest priority being multi-solution relationships. At the beginning of 2020, we laid out our Synovus Forward plan to deliver significant upside in earnings power through a set of strategic actions to enhance our efficiency and accelerate top line growth. The Synovus Forward initiatives are aligned with our strategy of building a high-growth, low-risk, nimble bank that can continue to take market share in our attractive southeastern markets. As I highlighted earlier, throughout the second quarter, we have continued to add to our Synovus Forward pre-tax run rate benefits, now totaling approximately $75 million. As you can see on Slide 11, we have delivered these results through a combination of expense and revenue initiatives. Based upon our progress to date, as well as the ongoing plan and execution, we remain confident in achieving the 2021 and 2022 milestones of $100 million and $175 million, respectively. Success to date on the expense front has largely come from three primary areas: a reduction in third-party spend, a decrease in head count, as well as branch and corporate real estate consolidation. Approximately $50 million of the $75 million pre-tax run rate benefit we have achieved by the end of the quarter relates to these specific efficiency initiatives. We have plans to increase the savings in each of these categories, but also are adding new initiatives and areas of focus to achieve an incremental 30 to $40 million in pre-tax benefits by the end of 2022. Additional third-party savings, workforce optimization, a reduction in branch and non-branch square footage, process automation and additional tax strategies will all contribute to drive future efficiencies. We have also had success to date on the revenue side of Synovus Forward with $25 million in pre-tax run rate benefits. The Treasury and Payment Solutions pricing-for-value initiative has resulted in annualized pre-tax run rate benefits of approximately $12 million in the second quarter. The realization of a broad-based increase in pricing has been supported by the competitive landscape, enhancements to our products and services and a commitment to providing proactive needs-based advice. In addition, with the deployment of a new pricing tool and the continued low rate environment, we have also been able to reduce our cost of funds to levels lower than was originally expected, and we now have a more robust capability and tool to better manage customer rate elasticity as we move into a higher rate environment in the future. Additional areas where we have seen incremental revenue include the in-sourcing of our merchant business, and expansion of our merchant sponsorship business and expanded solutions such as trade finance and international payment and currency capabilities. As we turn to future plans and initiatives, the 60 to $70 million in expected pre-tax revenue benefits will largely be accomplished through analytics, new products and solutions, balance sheet management strategies, as well as ongoing talent and specialty team expansion. As it relates to analytics, we continue to make progress on our aforementioned commercial analytics pilot, which we refer to as the SMART tool. The feedback and utilization thus far are encouraging as our bankers are working to actionable leads and insights that are now translating into new sales and overall expansion of the share of wallet of our existing clients. We will continue to pilot in the third quarter with a companywide rollout in the fourth. In addition, we have begun to develop our retail analytics program, which will also have a meaningful impact in our ability to deepen the share of wallet of our consumer and wealth customers while reducing the overall levels of attrition. We are expanding our premium finance and specialty lending businesses, adding strong new teams and highly attractive specialized verticals, as well as launching targeted, innovative products and capabilities to serve as new sources of revenue growth. As I have noted in the past, Synovus Forward is a constant improvement mindset, not just a collection of initiatives. I am pleased with our team members focused on the art of possible as we continue to innovate and find new ways to become more efficient and drive new sources of revenue. And I would be remiss if I didn't end this slide with an update on technology in general. We clearly feel that our competitive advantage will come from our high-touch approach, complementing our high-tech investments and partnerships. We continue to make progress in enhancing both the consumer and the commercial client digital experience. We are partnering with the right fintechs to build and deliver new products and solutions, and we have a road map to move to a modern core over time in a segmented and controlled fashion. We will continue to focus on ways to increase online origination capabilities and evaluate new technological opportunities, especially in the payment and banking as a service areas. Moving to Slide 12. This includes our 2021 outlook, which have a few key changes. With the first half of the year behind us and greater certainty in the economic outlook, we'd like to provide some updates and additional clarity. I'll begin with loan growth. We still expect to be within our 2 to 4% loan growth guidance excluding P3 loans, and third-party consumer loans. However, we think it's likely that we're at the low end of this range due primarily to the elevated prepayment activity that we have seen to date that was not anticipated at the beginning of the year. This assumes line utilization remains at current low levels and prepayment activity returns to a more normalized level. As a reminder, we do not include third-party consumer loans in this guidance. This asset class represents $1.5 billion in period-end balances, up $776 million in 2021. Pre-pandemic, this portfolio was approximately $2 billion in held for investment outstandings. Over the past five-plus years, we have had a successful track record with originating and managing these credits providing incremental revenue and solid returns. We will continue to employ this strategy as long as the excess liquidity environment persists, as well as the relative returns of future purchases are constructive. We're raising our expectation for total adjusted revenue and total adjusted expense. As a reminder, it's appropriate to consider these together because areas that are providing additional revenue, including mortgage production and higher third-party consumer balances have associated expenses related to them, and these examples commission and servicing expense. And while we remain committed to taking advantage of growth opportunities in the Southeast. We also remain committed to achieving positive operating leverage, and that is one of our top priorities for 2021. We are not incorporating any significant change in interest rates as part of the updated guidance. Although it's important to note the increased asset sensitivity Jamie referenced earlier, as any increase in rate will provide a meaningful tailwind to NII. Our capital management target now includes a CET1 ratio greater or equal to 9.5% target. A continuation of strong operating performance and a stable economic outlook is likely to result in a CET1 ratio above 9.5%, even after completing the entire $200 million share repurchase authorization for the current year. Additional focus and execution related to various tax strategies are expected to result in an effective tax rate of 22 to 24%. Year-to-date, the ETR is 22% or 23% before discrete items. The actions we've mentioned throughout today's call further position us for success in the second half of the year but also long-term success. It's important to note that the efforts and continued investment in Synovus strengthens our currency and provides opportunities for strategic growth, both organic and inorganic. We're looking forward to the second half of 2021, and I feel an increased level of excitement from our entire team as we roll out our future of work operating environment this quarter. Our balance sheet is well positioned for growth with strong capital and liquidity. Our team members are delivering, and they're very passionate about winning. And our pipeline show that clients are poised to grow their business with Synovus as their partner.

q2 adjusted earnings per share $1.20. q2 earnings per share $1.19.

Kevin Blair, president and chief executive officer, will begin the call. During the call, we will reference non-GAAP financial measures related to the company's performance. And now, Kevin Blair will provide an overview of the quarter. All four were killed in a plane crash on October 8, shortly after takeoff from a private airport in Atlanta. Many of you have likely heard us mentioned Jonathan's name or may have even met him, and you've certainly heard us talk about the extensive impact he has made on our company since we acquired his life insurance premium finance company, Entaire and Global One, in 2016. In addition to exceeding expectations in growing his premium finance division, he also oversaw our asset-based lending team and built out a world-class structured lending business. But as successful as he was in his work, he was even more passionate about his family and helping others, especially evident through his Rosen Family Foundation that promotes financial empowerment across the socioeconomic spectrum. His assistant, Lauren, was equally dedicated to her work and to impacting others. As you can imagine, our entire work family is dealing with tremendous shock and sadness over this unimaginable loss, but Jonathan built an amazingly talented team that is doing a remarkable job of carrying on under difficult circumstances. I am not sure I agree, but I am confident in the team he has built to carry his vision forward. Please join us in keeping the families, friends, and colleagues have all lost in your thoughts and prayers. Now let's shift to our third-quarter results. We are delivering on our growth objectives, as evidenced by the period-end loans, core operating deposits, and broad-based fee income growth. At the same time, we have maintained good expense discipline, while continuing to invest in longer-term initiatives and have managed through the challenging interest rate environment by strategically investing excess liquidity, while continuing to lower the overall cost of deposits. Loan growth was extremely strong for the quarter as funded commercial loan production increased almost 70% versus the previous quarter, which more than offset the ongoing elevated levels of payoffs and pay downs. Fee income was up $8 million or 8% versus the second quarter, with wealth and capital markets income posting strong growth, as well as core banking fees returning to more normalized levels post COVID. Our treasury and payments team set a new high bar in terms of new production at $10.6 million year to date, surpassing its full-year 2020 totals during the month of September. We also continued to deliver on our Synovus Forward initiatives, which reached a pre-tax run-rate benefit of approximately $100 million by quarter-end. And we're making great progress in planning for the additional $75 million worth of benefits to be delivered by the end of 2022. Synovus Forward represents our ongoing innovation and profitable growth mindset, but it will also drive our efficiency efforts in order to ensure we deliver on our sustainable top quartile financial performance objectives. On the efficiency front. Additional branch consolidation is underway with four additional branches scheduled for closure by year-end, and we will continue to rationalize the branch network as we reinvent the retail delivery model. The efficiency efforts will enhance returns but also allow us to further our investment and specialized talent to build out new businesses and product lines. Through strategic hires this quarter, we have expanded our specialty lending coverage to restaurant services, strengthened our middle-market Florida presence, and announced our expansion into the corporate and investment banking segment. We continue to make progress on our efforts to digitize our business. Through the third quarter, we have migrated 90% of our clients on to Synovus Gateway, our commercial portal, and usage of My Synovus, our consumer platform, indicates that digital usage continues to expand with an additional 10% increase in enrollment in active users. Moreover, a concerted effort has led to a 43% increase in paperless enrollment in 2021. We recognized that many of these advancements are table stakes in our industry and, therefore, we are focusing additional resources on more transformational opportunities. Efforts are underway to expand our digital engagement through insights. We are also expanding the solutions we offer our ISO and ISV clients and are working on the next generation of fully integrated treasury solutions. These and other initiatives are all focused on delivering new sources of revenue in the coming quarters and years ahead. Our strategic plan forward balances our investments in both core and transformational initiatives in order to generate both short- and long-term returns, while building on our core differentiation principles. Now, let's take a look at the financials for the quarter. On Slide 3, we've included some key financial highlights for the quarter. I'd like to begin with loan growth, which increased $923 million, excluding changes in P3 balances. As mentioned previously, record levels of funded commercial production drove the growth for the quarter. We expect this momentum to carry into the fourth quarter as commercial pipelines remain robust. Quality deposit growth continued in the third quarter, including an increase in core transaction deposits of $1 billion. We continue to take advantage of this liquidity environment to focus on remixing our deposit base and along with strategic repricing, this has helped lower the overall cost of deposits by an additional 3 basis points to 0.13%. We continue to experience balanced augmentation, but a core focus on operating accounts has led to DDA and now production to increase 34% versus the prior quarter. Jamie will provide additional details regarding the balance sheet, but our goal remains consistent in this environment, attracting, and deepening core relationships. Total adjusted revenue of $500 million increased 2% from the prior quarter while adjusted expenses declined $1 million to $267 million. This resulted in a 6% increase in adjusted preprovision net revenue quarter on quarter. An $8 million reversal of provision for credit losses resulted from the provision expense associated with strong loan growth being more than offset by a reduction in life of loan loss estimates. Adjusted net income was $178 million or $1.20 diluted earnings per share. As we have returned to a position of growth, we have done so with strong credit, liquidity, and capital metrics. The net charge-off ratio declined 6 basis points this quarter to 0.22%, while the NPL and NPA ratios each fell 1 basis point. The ACL ratio was down 12 basis points, excluding P3 loans, ending the quarter at 1.42%. And the CET1 ratio declined 12 basis points to 9.63% and remained slightly above our stated range. Starting with Slide 4. We ended the quarter with total assets of $55.5 billion and loans of $38.3 billion. Total loans, excluding P3 balances, grew $923 million, up 3% from the prior quarter, led by growth in C&I and third-party consumer loans. P3 balances declined $818 million. In the third quarter, we had record commercial loan production. However, transaction activity remained elevated, which led to a $500 million increase in payoffs, primarily in the CRE portfolio. Regional economic data, as well as client conversations, continue to give us a cautiously optimistic outlook on the pace of economic recovery in our footprint. We continue to see growth in commitments and are well-positioned to increase funded loan balances as market uncertainty and liquidity subsides. C&I line utilization declined approximately 70 basis points to 39%. A return to normalized levels of C&I line utilization would result in over $750 million in funded balances. The liquidity environment continues to be a headwind to consumer loan demand and resulted in declines in our HELOC portfolio of $50 million. Our third-party lending strategy is one means of responding to this liquidity and capital environment, providing attractive risk-adjusted returns, while diversifying the loan portfolio. We continue to leverage third-party consumer lending to offset consumer loan declines as evidenced by the $267 million increase in third-party consumer loans for the third quarter. In order to offset continued increase in liquidity, we grew the securities portfolio by $1 billion to 19% of total assets at the end of the quarter. As evidenced in the appendix, a significant portion of the growth was in short-dated securities, which mature in less than one year. We intend to continue rebuilding the third-party consumer loan portfolio to prepandemic levels as long as we secure more assets with attractive risk-adjusted returns. At the end of the third quarter, third-party held for investment balances were $1.7 billion or 3% of total assets. Growth in this portfolio is predicated on overall balance sheet dynamics, including capital, liquidity, and client loan growth. As you can see on Slide 5, core transaction deposits increased $1 billion or 3% from the prior quarter. Core noninterest-bearing deposit growth of $490 million or 3% was offset by strategic declines in time and brokered deposit portfolios. Total deposit costs continued to decline with a reduction of 3 basis points to 13 basis points. This was primarily driven by deposit mix optimization and strategic reductions in high-cost transactional deposits. Time deposits declined 35% from the prior year, accounting for 5% of total deposits, compared to 9% a year ago. This was led by the reduction in higher-cost CDs. While we believe there are additional opportunities for improvement through ongoing product repricing and the continued disciplined balance sheet management, it is likely that deposit costs remain relatively stable over the next two quarters. As shown on Slide 6, net interest income was $385 million, an increase of $3 million from the prior quarter. The net interest margin was stable with a decline of 1 basis point to 3.01%. We are focused on profitable growth over the long term, which includes further optimization of the balance sheet through strategies I just outlined on the previous slides. Our top priority remains multisolution client growth. However, we believe there are further opportunities to balance credit, duration, and liquidity risks. We believe this longer-term view, in conjunction with strong commercial loan production in our high-growth Southeast footprint, can provide outsized NII increases. We reiterate our previous guidance that NII, excluding P3, will increase in the second half of the year. Loan growth and the deployment of excess liquidity are expected to offset headwinds from continued fixed-rate repricing and a slight reduction in LIBOR. We expect P3 revenue to decline between $8 million and $12 million in the fourth quarter. The net interest margin continues to be pressured by the liquidity environment. While liquidity is generally accretive to NII, the impact of cash on the balance sheet and securities portfolio growth are likely to continue to be a NIM headwind for the foreseeable future. Slide 7 shows total adjusted noninterest revenue of $114 million, up $8 million from the previous quarter. The increase was led by growth of $5 million in capital markets, which resulted from swap income and $2 million in loan syndication fees. The growth in syndication fees is evidence of why we believe we have opportunities to go upmarket and compete. Kevin will speak more to this shortly. Broad-based growth across other NIR categories was evidenced by our performance in our treasury group and core banking fees and highlighted by our wealth areas that are up more than 25% year over year. In the third quarter, we had approximately $4 million in revenue associated with SBA loan sales and low-income housing transactions. In the fourth quarter, we expect adjusted NIR to decline as broad-based growth is more than offset by the continued normalization of mortgage revenues, seasonality of our brokerage business, and third-quarter gains that are not expected to repeat. Slide 8 highlights total adjusted noninterest expense of $267 million, down $1 million from the prior quarter. A $5 million reduction in third-party processing fees was offset by a $4 million increase in production incentives and additional project spend of $2 million. We expect a similar level of adjusted noninterest expense in the fourth quarter, with some increases in areas related to increased branch staffing expense, as well as revenue and customer-facing projects as we invest for future top-line growth. Key credit metrics on Slide 9 remain stable, near historical lows. The net charge-off ratio fell 6 basis points to 0.22%, while criticized and classified loans declined 22%. The NPA and NPL ratios were each down 1 basis point. Past dues were flat at 0.13%, excluding the increase from P3 loans. We expect net charge-offs in the fourth quarter to remain relatively stable. And assuming a similar trend in economic improvement, a further reduction in the ACL ratio, which ended the quarter down 12 basis points excluding P3 loans, to 1.42%. This quarter, the baseline economic outlook improved. However, due to economic uncertainty, our multi-scenario framework included a 45% bias to downside scenarios. As noted on Slide 10, the CET1 ratio declined 12 basis points to 9.63% due primarily to capital deployment for growth in our loan and securities portfolios as we continue to actively manage excess liquidity. Strong financial performance allowed us to return capital to shareholders through share repurchases and common shareholder notes. Through the end of the third quarter, we have completed approximately $167 million of the $200 million share repurchase authorization for the year. And we expect to repurchase the remaining $33 million in the fourth quarter. We will continue deploying capital to support client growth and facilitate opportunistic inorganic opportunities like third-party consumer purchases while returning capital to our shareholders. Our capital position remains strong, and we are well-positioned to complete key strategic objectives focused on profitable growth, prioritizing mutisolution client relationships. On March 3, 2020, the Federal Reserve announced an emergency rate cut of 50 basis points. That same day, we unveiled details of Synovus Forward, a plan we created in 2019, that would deliver an incremental pre-tax run-rate benefit of $100 million by the end of 2021. We're excited today to share that our efforts to date have yielded approximately $100 million in pre-tax benefits. Half of the benefit to date comes from expenses, which were front-loaded in the plan to better fund the journey forward. As a reminder, the most significant items to date have come from organizational efficiencies and headcount reductions, a reduction in third-party spend, as well as branch and nonbranch real estate consolidation. As a result of these actions, as well as demand management, our adjusted expenses are down $15 million year to date or 2%. Although expense reductions will become a lower percentage of the Synovus Forward benefits in 2022, we will continue to manage with discipline as we expect inflationary pressures, especially around wages, will impact our overall expense base over the near term. One of our ongoing initiatives is branch rationalization. We are scheduled to close an additional four branches in the fourth quarter, bringing our total consolidation to 20 locations since January 2020. We have additional closures planned in 2022, as we continue to see the opportunity to optimize the network and do so without having outsized attrition. While we rank favorably in key metrics, such as deposits per branch and branch proximity, we believe our digital efforts, as well as the shifting behaviors of our clients, provide an opportunity to further streamline our delivery through our bricks-and-mortar channel. And these changes are not limited to branches. Last month, we announced the strategy to optimize our real estate here at our headquarters by selling our own real estate and consolidating our nine corporate and retail locations in Uptown Columbus into three and allows us to evolve our workplace for the future of work, while reducing our overall square footage by over 60%, leading to a lower run rate expense and greater flexibility for potential future optimization opportunities. As we move forward, a key focus on expenses will be on optimizing how and where we invest. By delivering ongoing efficiencies in this quickly changing landscape, we have and will continue to reallocate resources from infrastructure to innovation and support functions to revenue-producing talent. Our investments will be governed and prioritized by the objective of maintaining long-term positive operating leverage, which leads to our discussion regarding revenue enhancement within Synovus Forward. Much of the future benefits are predicated on the use of analytics to drive a deeper share of wallet. Enhanced analytics are now firmly in place for our commercial line of business, and we have begun development for our consumer LOB to comment the high-touch approach that our team members deliver today. These more timely and actionable insights promote our ability to offer more meaningful advisory capabilities and solutions and better meet the needs of our clients. A significant portion of the incremental revenue benefit in the third quarter relates to our profitability enhancements, as well as our balance sheet management efforts. Similar to our pricing for value initiative within treasury management, beginning in the fourth quarter of 2020, we began utilizing various analytical tools and capabilities to actively drive deposit costs lower. Of the 26-basis-point decline in deposit pricing that occurred over that time frame, our Synovus Forward initiatives drove additional product and customer level repricing, which represented 3 basis points of that decline, contributing $15 million in incremental pre-tax run-rate benefit by the end of the quarter. Additional balance sheet management efforts have largely been centered around increasing the risk-adjusted yield of the loan portfolio. Targeted remixing of a subset of consumer loans throughout 2021 has translated into relative higher yields, resulting in an incremental pre-tax run-rate benefit of $16 million. We remain committed and on track to achieve the cumulative pre-tax run-rate benefit of $175 million by the end of 2022 and are confident about the opportunities ahead to achieve those benefits. Consistent with our reporting today, we will provide more detail on each initiative as they are sized and realized. Some of the future initiatives are a function of our renewed focus on innovation. I'm excited to provide more details regarding new products and solutions later in the year as we work toward their respective rollout. Our 2021 outlook on Slide 12 remains unchanged from the prior quarter. However, I'd like to share some additional updates on how we expect to end the year. In July, we mentioned that we expected 2021 loan growth, excluding balance change from P3 and third-party consumer loans, to be at the low end of the 2% to 4% guidance. While payoff activity remains a significant headwind, recent productions, client conversations, and our loan pipeline leads us to expect loan growth to be in the lower half of our guidance. Although excluded from the guidance, it's important to note that we've increased third-party consumer loans more than $1 billion year to date, and our total loans at the end of the third quarter were up 4%, excluding changes in P3 balances. Total adjusted revenues are expected at the higher end of the negative 1% to 1% guidance, as the balance sheet management efforts we've taken throughout the year to monetize excess liquidity and reduce the cost of funds are being complemented by broad-based fee revenue growth outside of the normalization of mortgage revenues. Similarly, total adjusted expenses are expected to end the year within the existing guidance of negative 1% to negative 2%, thus providing the opportunity to achieve positive operating leverage. We expect to achieve this reduction while making longer-term investments in talent and technology that support accelerated top-line growth. We also reiterate our capital and tax guidance. The capital guidance assumes we complete the full $200 million share repurchase authorization this year and achieve our loan growth targets. We're also trending toward the lower half of the effective tax rate guidance of 22% to 24%. I also want to reiterate my excitement for our new team members we have onboarded this past quarter and for those that are scheduled to join us in the fourth quarter. As I announced in the beginning of the call, we will be building out a corporate and investment banking team, which will allow us to move upmarket a bit into a segment that I believe we have the capabilities and talent to win in. The team will be built around specific industry specialties to allow for customized and expert advice in providing credit and depository products, as well as traditional capital market solutions. We'll share more about the progress in this area, as well as other build-outs, including our restaurant services division and our expanded Florida commercial strategy over the coming quarters. Lastly, I'm pleased to share that we will be hosting an Investor Day in early February 2022, our first in many years. During this event, we'll provide clearer, long-term guidance with supporting information from our various business units to show where we're focused on in driving profitable growth. You'll hear from more of our leadership team, and I believe you'll share the confidence that I have that we will be successfully delivering on our key strategic and financial objectives.

compname reports q3 adjusted earnings per share of $1.20. q3 adjusted earnings per share $1.20. on track to achieve aggregate $175 million pre-tax run rate benefit by end of 2022. compname posts q3 adjusted earnings per share $1.20.

Kessel Stelling, Chairman and Chief Executive Officer, will begin the call; followed by Jamie Gregory, Chief Financial Officer who'll be providing more detailed comments on the fourth quarter; and then, President, Chief Operating Officer, Kevin Blair, who will talk about our 2020 outlook and long-term goals. Due to the number of callers, we ask that you limit yourself to two questions. During the call, we will reference non-GAAP financial measures related to the company's performance. And now, here is Kessel Stelling. Before I'll offer a few additional comments on the year and the quarter, I want to take a moment to congratulate Kevin Blair, who was recently named President of Synovus, adding to his responsibilities as COO that he took on just a year ago. In that regard, we have recently partnered with a third-party to assist us in identifying new revenue and efficiency opportunities designed to improve ongoing performance as well as the customer experience. 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. Let's begin on Slide 4 with loans. We had another strong quarter of loan growth with a net increase of nearly $750 million on production of $3.6 billion. The growth was broad-based with CRE growing in seven of ten asset class. Direct C&I lending increasing across the footprint and the consumer book experiencing growth in all product types. The credit profile of this growth was consistent with prior quarters and we remain confident in the quality of our loan book. We have a robust loan pipeline across industries and the footprint -- and we're starting to benefit more directly from changes in the competitive marketplace following recent M&A activity and industry consolidation. On Slide 5, deposit highlights include a continued increase in core transaction deposits. This is a direct reflection of our team member's performance growing quality relationships across our footprint. In the fourth quarter, we continued our efforts to remix the deposit book by allowing higher cost deposits to run off. We offset that run off with growth in non-interest bearing deposits, money markets and the seasonal inflows for more reasonable priced public fund deposits. 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. Strong balance sheet pipelines and the timing of loan growth, which was weighted toward the end of the quarter, provide tailwinds going into 2020. 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. Non-interest income as a percentage of average assets continues to improve as we successfully execute on this key strategic objective. 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. Expenses also increased with opportunistic revenue producing hires and additional non-interest income. 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. As we execute strategies from our new operating model, we continue to recalibrate our expense base to emphasize the importance of customer-facing talent and technology. These investments have short-term paybacks that will serve the company well by improving efficiency and profitability long-term. 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. Provision expense remains elevated compared to net charge-offs due to the impact of purchase accounting. Under our acquired loan accounting selection, the credit mark flows through NII rather than provision as loans pay off or renew. As we think about the overall allowance, our coverage ratios remained favorable as credit quality continues to look healthy. 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. Ongoing analysis continues to provide support for operating at our current capital and liquidity ratios. And now, Kevin will discuss our outlook. Before I talk about what we expect in 2020, let me take a minute to reflect on 2019. I am very pleased with our progress and success achieved during the year. As we rolled out a new operating model in the beginning of the year our objectives were to better align our organization to further enhance the customer experience as well as expand and diversify our sources of growth. 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. Various business units contributed to our growth, including mortgage, brokerage, trust, private wealth management, wholesale banking and Treasury & Payment Solutions. The attraction of this talent helped move the needle in 2019 and will have an even bigger impact on 2020. 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. As we previously discussed, we completed the integration of the Florida Community Bank during the year and we're pleased with the contributions of our newest team members. 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. Credit in the acquired FCB book also performed as we expected during the year with credit metrics and internal reviews supporting the overall quality of the portfolio. 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. We also invested a new technology and new business units to generate growth. We released MySynovus, our consumer digital portal in 2019 and are preparing for the release of our commercial digital platform in 2020. 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 also spent the year building out and piloting a much stronger value proposition for the mass affluent customer segment and we'll release this program and the associated solutions across our franchise this quarter. So as we enter 2020, our roadmap will follow a similar course. It calls for opportunistic expansion and growth, simplification and process enhancements that will make us even easier to do business with and additional efficiency efforts that will fund new investments while helping to mitigate the headwinds from the margin. In building the strategic roadmap, we engaged a third-party back in September of 2019. The work over the last four months has informed our 2020 guidance, but more importantly, our long-term goals. We have reviewed over 20 initiatives that provide opportunities for incremental growth from the revenue side as well as additional efficiencies. We are in the final stages of prioritizing the eight to ten initiatives that will be delivered during 2020. But generally the revenue opportunities have a longer-term horizon while efficiency opportunities will begin to be realized in 2020. Our efficiency opportunities will center around the categories that have been constructive for us in the past; third-party spend, real estate and staffing rationalization. As we move forward with this engagement, we will continue to provide updates and greater transparency around the opportunities as well as the progress. Now, moving to our 2020 guidance and long-term targets, these are based on a lower for longer rate environment and modest economic growth. We believe that the economic tailwinds that have resulted in above-average economic growth in the Southeast will continue. Our clients maintain a favorable outlook on the business environment and we are focused on supporting their growth. 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. Funded loan production increased throughout 2019 and ended the year with a robust pipeline funded by a remix deposit base. For 2020, we expect loan growth to exceed market economic growth as we further deepen existing relationships, grow new relationships, and continue hiring of frontline bankers. We expect this to result in broad-based loan growth across markets and industries. We will fund this growth with a continued focus on growing core transaction deposits. Our efforts to reduce high cost deposits will continue in 2020 as we selectively reduce higher cost, single service deposits. 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. We do expect the net interest margin to be down slightly, assuming flat interest rates and similar balance sheet mix. Adjusted non-interest income is expected to increase 3% to 6% with broad-based growth. The continued growth in fee income is a function of hiring efforts and higher opportunity markets, product areas such as Treasury & Payment Solutions, as well as an expansion of the share of wallet with existing relationships. Adjusted non-interest expense is expected to increase 3% to 5%. The primary drivers include continued investments in people, processes and technology that will have relative short-term paybacks. These investments will be partially offset by savings realized during the execution of our strategic efficiency initiatives. 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. Elimination of these aforementioned expenses as well as additional strategic tax initiatives and the realignment of certain subsidiaries will reduce the future effective tax rate substantially. We expect the net charge off ratio of 15 basis points to 25 basis points as the credit cycle matures and recovery subside. There are no indications of any widespread credit deterioration; however, net charge-offs will be impacted by changes resulting from purchase accounting of the acquired portfolio as the credit mark is unwound at CECL adoption. As we look forward to 2020, the largest change to financial statements involve CCEL implementation. Provision expense will be elevated going forward as we provide for life of loan losses and will be highly dependent on the projected economic environment, the credit profile and tenure of loans, the impact of unfunded reserves as well as expectations about net loan growth and a continuation of the current elevated levels of payoffs. 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. Our estimated day one CECL impact, which remains unchanged from the previous quarter, can be found in the appendix. This incremental forecasted provision expense is not related to any changes in the underlying credit fundamentals of our loan book. 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%. Moreover, we will monitor capital consumption through organic loan growth and tailor our share repurchases accordingly, as we continuously manage our capital and liquidity positions. Our long-term goals reflect the successful execution of our strategic roadmap. We are committed to aggressively identify and implement new avenues for growth and efficiencies throughout our organization. I am confident in our path forward, in the passion and the commitment of our entire team and in the clarity of our vision to be the bank we've always been, but better. And before we move to Q&A. Our results reflect continued momentum across our footprint with greater organic growth and an improving ability to execute well as a fully unified team. I'm always so proud of the way our team supports each other, serves our customers and gives back to our communities.

compname reports q4 adjusted earnings per share of $0.94. compname announces earnings for the fourth quarter 2019 and a 10% increase in common stock dividend. q4 adjusted earnings per share $0.94. q4 earnings per share $0.97. qtrly net interest margin of 3.65%, a decline of 4 basis points from previous quarter. synovus financial - board approved a 10% increase in co's quarterly common stock dividend from $0.30 to $0.33 per share.

Kessel Stelling, chairman and chief executive officer, will begin the call. He will be followed by Jamie Gregory, chief financial officer; and Kevin Blair, president and chief operating officer. During the call, we will reference non-GAAP financial measures related to the company's performance. And now here's Kessel Stelling. This past year was one that none of us will ever forget and certainly challenging for the industry and for our company. From the pandemic to social and political unrest, the year presented more intensive challenges in a more concentrated period than any single time in my 40-plus-year banking career, including the financial crisis just over a decade ago. Slide 3 includes some notable achievements from 2020, starting with the Paycheck Protection Program, through which we extended approximately 19,000 loans totaling $2.9 billion to customers across the Southeast. P3 represented a truly herculean effort by our team to quickly deliver critical aid to customers and communities in need. We're also off to a very strong start with the newest round of P3 with approximately 5,000 loan applications submitted totaling $700 million in new requests. We operate in one of the best geographic footprints in banking. And last year, we continued to improve our competitive positioning for 2021 and beyond. This past January, we announced our transformational Synovus Forward initiative. And we made significant progress throughout the year, executing on our Phase 1 revenue and efficiency efforts. As previously stated, we expect to achieve $100 million in pre-tax run rate benefits by the end of this year. And Kevin will provide more detail later on plans for an additional $75 million in benefits by the end of 2022. We made additional investments in talent and solutions to support growth and to enhance technology that further improves the customer experience. Last year, we made upgrades to our mobile and online banking portal, online account origination capabilities and other digital touch points. And we continued to invest in and grow our existing businesses while also building out new offerings. During the year, we onboarded new affordable housing and agribusiness expertise, significantly expanded our merchant services business and further matured our structured lending and treasury and payment solutions capabilities. Also during the year, given the dramatic change in the underlying economic environment, we moved quickly to further strengthen our balance sheet and capital position. Our CET1 ratio increased over 70 basis points, ending the year at 9.7%. In addition, our ACL ratio increased 75 basis points from day one CECL implementation. And our total risk-based capital ended the year at 13.4%, the highest level since 2014. As a result, we enter this year very well positioned to facilitate additional growth while also effectively managing balance sheet risk. I'm also proud of our work last year in important areas that are not directly disclosed in financial statements but are important sources of value, such as ESG reporting, financial literacy outreach and financial support of nonprofits and community agencies, including the establishment of a substantial scholarship endowment for African American students through the UNCF in honor of our former colleague and longtime Georgia State representative, Calvin Smyre. Finally, we announced last month that I'll be transitioning from chairman and CEO to executive chairman of our board in April following our Annual Shareholders Meeting. I'll serve in that role until January 1st, 2023. To be clear, this is not my final earnings call so no farewells or goodbyes just yet. I'll participate in our first-quarter call in April and then will hand the reins over to Kevin and team to take it from there. With that, I'll turn to Jamie to share fourth-quarter financial highlights beginning on Slide 4. We ended the year strong with diluted earnings per share of $0.96 per share compared to $0.56 last quarter and $0.97 a year ago. Adjusted diluted earnings per share was up $1.08 per share compared to $0.89 last quarter and $0.94 a year ago. Total adjusted revenues of $499 million were up $5 million from last quarter, led by broad-based increases in fee revenue, continued reductions in deposit costs and accelerated P3 loan forgiveness income. Adjusted noninterest expense of $275 million was up $6 million from last quarter, which was impacted by a $5 million increase in Synovus Forward, P3 and COVID-related expenses. Moving to Slide 5. Total loans declined $1.3 billion in the fourth quarter, including accelerated P3 loan forgiveness that resulted in balance declines of $516 million. Total lending partnership loans held for investment declined $81 million, while loans held for sale from this category increased $81 million. Excluding reductions in P3 and lending partnership balances, total loans declined $700 million or 2% from the third quarter. Total C&I loans declined $640 million in the fourth quarter, including the $516 million coming from accelerated P3 forgiveness. Line utilization continued to decline in the quarter, down an additional $57 million. C&I line utilization of 40% was 6% lower than it was the same quarter last year and remain near historic lows. Total CRE loans declined $395 million as payoff and paydown activity increased significantly in the fourth quarter as transactions that were delayed during the height of the pandemic were completed. Total consumer loans declined $282 million. This included lending partnership reductions, as well as paydowns within our mortgage and HELOC portfolios. As shown on Slide 6, we had total deposit growth of $2 billion. Fourth-quarter increases were led by core transaction deposit growth of $1.8 billion and $1 billion in seasonal public funds. Offsetting this growth were expected declines in time and brokered deposits. The cost of deposits fell by 11 basis points from the previous quarter to 28 basis points due to a combination of rates paid and deposit remixing. In the fourth quarter, we were able to reduce the cost of time deposits by 28 basis points and the cost of money market deposits by 9 basis points. In this lower-for-longer rate environment, we believe there are additional opportunities to reduce deposit costs through CD turnover, ongoing repricing, as well as the ability to continue to remix the deposit composition. Slide 7 shows net interest income of $386 million in the fourth quarter, an increase of $9 million from the third quarter that was primarily due to the impact of increased P3 forgiveness. Net interest income was further supported by deposit cost efforts previously mentioned and was offset by modest headwinds from lower loan balances and continued pressure from fixed rate asset repricing. Exclusive of P3 fee accretion, NII in the fourth quarter was $361 million as compared to $365 million the prior quarter. We are pleased with continued progress on deposit repricing and positive remixing trends on the liability side of the balance sheet. The current environment is enabling us to grow our core relationships and further improve our overall liability profile, which is serving to offset a portion of the headwind we are experiencing from repricing within our fixed rate asset portfolios. The net interest margin was 3.12%, up 2 basis points from the previous quarter. The additional P3 fee accretion of $13 million to a total of $25 million was a meaningful contributor to that increase. Conversely, considerable deposit inflows, coupled with the timing of our subordinated debt transaction, led to an elevated level of one balance sheet liquidity within the fourth quarter with average excess cash balances increasing $1.4 billion. This dynamic can have a notable impact on the margin with every $1 billion of extra cash on balance sheet diluting the margin by approximately 6 basis points. In the coming quarters, we expect the elevated cash position to decline as we experience seasonal deposit outflows and as we manage our balance sheet and overall liquidity position. This will include further growth within our securities portfolio, as well as declines in noncore funding sources, such as brokered deposits. As of year-end, there were $49 million of Phase 1 P3 processing fees remaining with approximately $20 million associated with loans that had initiated the forgiveness process. Excluding the impact from P3, we expect modest downward pressure in NII and NIM in the first quarter from the rate environment as asset growth and further reductions in cost of funds partially offset continued fixed rate asset repricing. Slide 8 shows noninterest revenue, which was $115 million, flat to the prior quarter. After adjusting for security gains, adjusted noninterest revenue was $112 million, down $3 million from the prior quarter. The fourth quarter included notable increases in service charges, fiduciary and asset management, card fees and brokerage income. Core banking revenue improved by $3 million to $37 million primarily due to increased activity as we continue the gradual return to pre-COVID levels. Service charges on deposits, SBA gains and card fees each increased about $1 million from the previous quarter. $2 million in revenue growth from fiduciary and asset management, brokerage and insurance helped offset the $1 million decline in capital markets revenue resulting from lower loan activity. Net mortgage revenue of $24 million, down $7 million from the prior quarter, remained elevated. Secondary mortgage production increased 4%, which directly impacted commissions. Despite a quarter-over-quarter increase in secondary production, fee income declined due to lower margin and pipeline. Total noninterest expenses were $302 million, down $14 million. On an adjusted basis, NIE was $275 million, up $6 million from the prior quarter. Adjustments include $14 million related to the voluntary early retirement program we announced in October, $8 million in loss on early extinguishment of debt and $4 million in branch optimization real estate writedowns. Payback on all of these strategic initiatives are 2.5 years or less. The quarter-over-quarter increase in adjusted NIE includes $5 million related to Synovus Forward, P3 and COVID. The Synovus Forward expenses are upfront third-party expenses associated with the design and build of these strategic initiatives. This quarter's expenses are largely tied to the pricing for value in commercial analytics programs. Most of the $3 million increase in P3 and COVID-related expenses are upfront consulting and technology fees to streamline the forgiveness process. We are encouraged by the forward impact of efforts we've taken and investments we've made throughout the year, including the fourth quarter. During the quarter, we realized an additional $2.5 million in savings from Synovus Forward that offset investments in digital and technology. These include the first phase rollout of our new commercial digital platform Synovus Gateway, continued migration of systems to a cloud environment and enhancements to our BSA/AML technology. These investments will provide future revenue, scale, risk and expenses benefits in 2021 and beyond. In the fourth quarter, headcount declined by 100, most of which occurred in December as part of the voluntary early retirement plan. Savings from this initiative largely began January 1. So these salary reductions will help offset the seasonal first-quarter increases in employment taxes. Kevin will speak to our full-year guidance shortly. Before providing some comments related to key credit metrics on Slide 10, I'd like to provide a brief update on our COVID-related deferral program, which provided for up to 180 days of deferred payments of principal and interest. Loans in this program with a full P&I deferral declined to 34 basis points at the end of the fourth quarter. Performance for borrowers that completed a deferral period has been strong, with approximately 99% paying as agreed. As we've shared in the past, we've conducted enhanced monitoring on industries that were likely to experience the most pressure from the pandemic. Elevated risks remain and are largely concentrated in hospitality-related segments, including hotels and full-service restaurants. More information on those portfolios is available in the appendix. As evidenced by key credit metrics, we're not seeing widespread credit deterioration. Credit measures of NPLs, NPAs, criticized and classified assets all remained relatively stable for the quarter. Past dues and net charge-offs declined modestly. Cash inflow updates, which are also in the appendix, generally showed continued improvement through November, although we do expect some pressure to these inflows from recent surges in COVID cases. This pressure will likely be more impactful in the same hospitality segments I mentioned and were the main driver of increase in criticized and classified loans in the third quarter. Provision for credit losses of $11 million include net charge-offs of $22 million or 23 basis points. Provision for credit losses other than net charge-offs reflect lower loan balances and a more favorable economic outlook. The allowance for credit losses ended the fourth quarter at $654 million. And the ACL ratio increased 1 basis point to 1.81%, excluding P3 loans. The year-end allowance includes a multi-scenario framework with a base economic outlook which incorporates the most recent stimulus with modest economic growth and declines in unemployment rate throughout '21 and '22. We returned to a two-year reasonable and supportable period this quarter as economic uncertainty is moderated. Another noteworthy change included use of a third-party provider's economic projections as a starting point for our economic outlook rather than a benchmark or challenger as it was used earlier in the year. Changing to a third-party provider did not have a material impact on the economic inputs or resulting allowance. There is more detail included in the appendix. Preliminary capital ratios on Slide 11 show continued improvement as CET1 increased 37 basis points to 9.7% this quarter. We ended the year above the higher end of our operating range of 9 to 9.5%, which positions us well as we move into the new year. The total risk-based capital ratio of 13.4% was up 25 basis points. It includes subordinated debt optimization efforts completed in the fourth quarter that aligns with our ongoing efforts to diligently manage our capital position and weighted average cost of capital. Our 2021 capital plan maintains the current common shareholder dividend of $0.33 per quarter and includes authorization for share repurchases of up to $200 million. We will be opportunistic with repurchase activity throughout the year as we prioritize organic growth first and balanced capital deployment with factors such as uncertainty in the economic outlook. Based on the current outlook, we will continue to target a CET1 ratio at the higher end of the 9 to 9.5% range with more opportunity to deploy capital as we gain greater clarity around effectiveness of the vaccine, as well as confidence in the broader economic recovery. Let me take a few minutes to provide a brief update on our Synovus Forward progress. Having initiated the program back in the second half of 2019, 2020 was a year of execution and expansion. As we have shared, the initial focus was on funding our journey through various efficiency initiatives. I am pleased with our progress in the delivery surrounding these first-round programs. The third-party spend program will fully deliver $25 million run rate savings in 2021. We also consolidated 13 branch locations this past year, which will result in approximately $5 million in run rate savings on a go-forward basis. And as we close out 2020, we completed two components of organizational efficiency work stream with a voluntary early retirement program and a back-office staffing optimization, which will produce $13 million in run rate benefit in 2021. As 2020 progressed, we expanded our efforts within Synovus Forward by embarking on several revenue-based initiatives. Starting with our pricing for value program, we have begun the market-based repricing of our treasury and payment solutions offerings and are pleased with the progress to date with an anticipated run rate benefit of approximately $9 million in the first half of 2021. As Jamie has also noted, we've been able to more aggressively reprice our deposit throughout 2020 with the month of December coming in below our previous cycle lows. We also kicked off our commercial analytics program. Utilizing transaction-level data, we have built a tool known as smart that will allow our commercial bankers to better identify opportunities to expand relationships, reduce attrition, as well as better manage changes in underlying risk profiles. As we begin to pilot the smart tool, we are convinced we will see incremental revenue benefits from its full deployment. We have also prioritized resources, capital expenditures and business activities to ensure that we have continued to invest prudently during the year. As Kessel referenced during the 2020 highlights, we made significant improvements in our consumer and business digital capabilities during the year. Enhancements made improved the customer experience, expanded new account origination availability and built a more scalable platform for future functionality deployment. As a result of our progress and the plans for additional Phase 1 initiatives, we remain committed to deliver the $100 million run rate pre-tax benefits by the end of 2021. We have also increased our objective by an additional $75 million run rate benefit to be achieved by the year-end 2022. The additional benefits will come from both revenue and expense initiatives with a heavier weight toward revenues. Much of the additional benefit will come from expanding the breadth and depth of the programs already launched, as well as leveraging new processes, technology, products and solutions and talent to generate the incremental benefits. We will provide more detail throughout the year as we set more specific execution plans for the next phase of Synovus Forward. Turning to Slide 13. This slide provides an overview of our 2021 outlook, which incorporates Synovus Forward initiatives and other strategic objectives and is predicated on our current view of the economic stability and growth in our footprint for the year. Before I share more details around the individual categories, let me first touch on a few things that gives me confidence as we enter 2021. First, the talent we have added in recent years continues to provide outsized opportunities for growth as they continue to build their portfolios to more seasoned levels. Secondly, investments we are making in products and capabilities continue to pay dividends. For example, treasury and payment solutions' new revenue in 2020 was up 160% over 2019 and 450% over two years ago. And lastly, our teams are better prepared for the operating environment in 2021. And we'll be able to avoid many of the distractions and challenges that we encountered in 2020. With our enhanced online account origination capabilities and remote sales approaches, our sales effectiveness for the year will improve. So let's start with the asset side of the balance sheet. We expect an additional 65 to 70% of the P3 loans funded in 2020 to be forgiven by mid-2021, leaving around $500 million on the books for an extended period. As Kessel mentioned earlier, we are participating in the second round of the P3 program. And since opening our portal on January 19, we have received strong application volumes and are working diligently to efficiently process the request to support our eligible customers and prospects' needs. Based upon our results to date, as well as our preliminary analysis of eligibility, we believe the number of applicants will range from 5,000 to 7,500, which compares to just over 19,000 last year. We expect the average loan size to be less than the round one average of approximately $150,000, which would result in a higher percentage of fee revenue. Excluding all P3 balance changes, we expect loan growth of approximately 2 to 4% in 2021. Given the current environment, we do forecast this growth to accelerate in the back half of the year and will be well diversified across business units, asset classes and geography. Despite continued uncertainty in the markets, we have reasons to be optimistic about our expectations for loan growth. Our expectations are that we will see a steady increase in production throughout 2021 in our commercial book as economic activity improves. From our discussions with our customers, we also know there is a pent-up demand for capital that has been delayed due to the overarching uncertainties. Synovus is well positioned for growth given our marketplace and business model. Entering 2020, our teams were achieving record levels of production and we expect to return to similar levels post pandemic. We love our footprint and the outsized growth expectations for the Southeast. The demographics of our market continue to be very constructive for growth. In addition, our model is very attractive to both prospective customers and banking talent and we've seen this over the recent years. As such, we expect to continue to see organic growth arising from the execution of our go-to-market strategy, as well as any fallout that may occur as industry consolidation continues. We've also added and expanded to our new specialty verticals in 2020, including structured lending, affordable housing and agribusiness. These teams will provide accelerated growth in 2021 and beyond as we continue to evaluate the expansion into new industry and asset class specialty areas that will expand our offerings and provide new sources of growth in the future. A return to a more normalized C&I line utilization would increase funded loan balances by $650 million as compared to year-end balances. Although there's obviously some uncertainty related to how quickly this will take place especially with the possibility of additional stimulus and elevated liquidity, we do expect the normalization to occur over time. Lastly, we have the capacity to increase our lending partnership portfolios, which can serve as an effective and profitable use of excess liquidity and capital. As Jamie mentioned earlier, given the current liquidity environment and the recent increase in interest rates, we are likely to increase the size of the securities portfolio in the near term. Now let's move to revenue. Net interest income will remain under pressure from fixed rate asset repricing. We will actively work to reduce the impact of rates through balance sheet management, loan growth, future reductions and cost of deposits, as well as the potential deployment of excess liquidity in the investment portfolio or higher returning asset classes such as third-party lending. There's a similar story with fee revenue, which faces the headwind of normalized secondary mortgage revenue. The expected decline in mortgage activity will be largely offset by increases in most other categories, including core banking fees, as well as fiduciary and asset management fees. Our investment in treasury and payment solutions, the recently launched merchant program and various wealth management businesses will provide added momentum throughout 2021. One business that we are especially excited about is the Synovus Family Office. Despite a challenging year, the Family Office grew assets under management by 23% and new business revenue booked for the year increased 66%. This unique value and service provided by businesses like Synovus Family Office will provide continuous growth opportunities. In aggregate, we expect total adjusted revenues to decline 1 to 4% in 2021. Some opportunities to perform at the higher end of the range include more favorable deposit pricing, further steepening in the yield curve, higher-than-expected economic activity, increased participation in Phase 2 of the P3 program and acceleration of the benefits from enhanced analytics and other revenue-centric Synovus Forward initiatives. In the fourth quarter, we continued to make progress on our efficiency initiatives with branch and headcount reductions. As we assess the current environment and the resulting pressures on revenue, we are proactively adjusting our expense base to promote a return to positive operating leverage. Despite our overall actions to reduce expenses, it is not inhibiting our ability to continue to invest in areas of focus with approximately $20 million in strategic investments in technology and digital planned for 2021. In aggregate, we expect adjusted expenses to decline between 2 and 5% for the year. We continue to assess, challenge and target all expense categories as we look to further improve our efficiency and effectiveness and remain committed to positive operating leverage over the long term. A large portion of the annual decrease will be realized in the second half of 2021 as seasonal increases in employment tax and the previously mentioned investments in digital and technology will be more front loaded. Our CET1 ratio of 9.7% is above our stated operating range of 9 to 9.5%. Existing capital levels, as well as the inflow from 2021 core earnings will support our anticipated balance sheet growth and strategic objectives. Jamie mentioned some components of the 2021 capital plan. So I'll simply reiterate that we are a growth company and that's our first priority for deploying capital. Other priorities include maintaining a competitive dividend, capital optimization and other deployment opportunities, including share repurchases. The CET1 target of 9.5% in the 2021 outlook is at the higher end of our 9 to 9.5% operating range, which we believe is prudent while greater levels of uncertainty exist. Given our current CET1 ratio and our economic outlook, it is likely we will remain above our targeted range in the near term. As clarity around the economic outlook increases, we will look to further deploy capital through balance sheet growth and/or share repurchases. Lastly, assuming no significant change in the current tax environment, we expect an effective tax rate of 23 to 25%. We've increased our focus and execution around various tax strategies, some of which were executed in 2020 and others that will be established over time that will provide opportunities to further reduce the effective tax rate from current levels. For sensitivity purposes, a federal tax rate change from 21 to 28% would result in an increase of our long-term effective tax rate of 6.5%. That would follow a one-time adjustment to the DTA that would mitigate a portion of the impact in the first year. Now before we move to Q&A, let me close with a couple of comments. I am humbled and honored to be presented with the opportunity to transition into the CEO role in April. Kessel has led this company with such a steady hand over the last 10 years and has returned the company to a position of strength. With this handoff, working with Kessel in his role as executive chairman of the board, we will continue our unwavering path forward. And on the second point, as we evaluate our path forward, I am convinced our purpose-driven, advice-based relationship approach, complemented with innovative digital capabilities and functionality will provide a compelling, differentiated value proposition in the crowded and competitive landscape we operate within. We will continue to use Synovus Forward to set our vision and agenda for the transformational imperatives that are required to ensure we execute and deliver on our short- and long-term business and financial objectives. 2021, despite the uncertainties, will serve as our next step forward in achieving these goals.

q4 adjusted earnings per share $1.08. q4 earnings per share $0.96. qtrly net interest income of $385.9 million increased $8.9 million or 2% sequentially.

Kevin Blair, president, and chief executive officer will begin the call. Except as may be required by law. During the call, we will reference non-GAAP financial measures related to the company's performance. And now, Kevin Blair will provide an overview of the quarter. I want to take a moment to officially recognize Cal Evans and his new role as investor relations and market intelligence senior director. Cal expanded role in our company became official shortly after last quarter's call when Kevin Brown, who led IR for the past two years, shifted to our corporate treasury team. Kevin has done a great job interfacing with our analysts and investor community, but his latest move will help with his development and career aspirations. Cal has hit the ground running and brings a lot to the table given his credit and market intelligence background. The transition is going well, and I know you will enjoy working with and getting to know Cal. Now let's shift into the overview of 2021. With the fourth quarter placing an exclamation point on the year. 2021 was again wrought with challenges and uncertainties. But our teams were able to navigate the difficult environment to support our clients, contribute to our communities, and deliver for our shareholders. As you'll hear today, we accomplished a lot, even as the pandemic continued to impact the operations of our clients and of our company. Our team is capable and understands the assignment when it comes to meeting the challenge from the unexpected and anticipating opportunities with and for our clients. Our strong fourth quarter and year-end report is an absolute testament to your talents and passions for the inspired and purpose-driven work we do that enables people to achieve their full potential. What you'll see today is a story of execution and follow-through of doing what we said we could and would do, and in many areas doing even more. As we began 2021, we focused on five core business objectives. Number one, to regain growth momentum. Two, to enhance the client experience by making it even easier to do business with Synovus. Number three, to provide seamless delivery of our solutions across all of our lines of business, leading to a deeper wallet share and client relationships. Four, to better leverage analytics in order to provide more informed and proactive advice. And five, the development and attraction of talent to support our growth initiatives. We have made significant progress in all five core areas, and our success in 2021 was largely driven by our execution of these business objectives. Moving to Slide 3, let's review the year. Our lines of business succeeded in delivering core performance via a solid loan, deposit, and fee income growth, while client loan demand was muted in the first half of 2021, in the second half, we saw double-digit, broad-based commercial loan growth, driven primarily by our wholesale bank. With all 10 wholesale sub-lines of business posting growth for the year. 2021 funded commercial loan production increased 50% versus 2020 and was up 40% versus 2019. With significant productivity gains across our community and wholesale teams. We expect this momentum to continue into 2022 given the pipelines and activities of our bankers, as well as the incremental growth that will be provided by our key 2021 investments and talent in the middle market, restaurant services, and corporate and investment banking teams. Deposit growth was driven by continued balance augmentation, as well as an ongoing sales focus on core operating accounts. As a result, core transaction balances have increased 57% in the past two years. We have strategically allowed higher-cost, lower-value deposits to attrite with an overarching goal of remixing our funding profile to optimize lower-cost deposit composition, during this period of excess liquidity. At year-end, 77% of total deposits were core transaction deposits versus 70% at year-end 2020. Ex-security gains non-interest revenues grew 5%, led by increases in core banking fees and income from various wealth businesses. This was the seventh consecutive quarter of increases in wealth fees. Drivers of this growth include a strong equity market, as well as net new assets under management from client growth, including the onboarding of 12 new family office clients during the year. In 2021, we continue to make significant progress with Synovus forward initiatives. As of year-end, we have achieved $110 million in pre-tax run-rate benefit ahead of our original projections. Evidence of success includes reducing real estate expenses, lowering headcount, and a reduction of third-party spending, all of which resulted in adjusted 2021 expenses being flat versus 2020. The Synovus forward savings allowed us to make strategic and impactful investments in every area while managing overall expenses. This year, we will transition our Synovus forward efforts into our overall strategic plan but remain committed and on pace to achieve the $175 million Synovus forward target. As part of our focus on innovation, we launched several new digital solutions and services, including enhanced deposit, online account origination, accelerate AR, our integrated receivables suite, and gateway, our commercial banking digital platform. These investments have enhanced capabilities and functionality and are leading to a better overall client experience. We also implemented the smart commercial analytics tool that is giving our bankers better insights into solutions, our client's needs, early warning on client attrition, and proactive risk monitoring. In 2021, we also invested in people. In particular, those who have experience and expertise to expand our advisory services and to build strong relationship value. We grew our treasury and payments team, which had another record-breaking year, growing sales by almost 40% and adding to specialty banking our middle market talent, and our high growth central and west Florida regions. We also continued to emphasize the development of our existing team members through the launch of two new leadership development tracks for emerging and senior leaders. Despite the challenges associated with the pandemic, our recent voice of the team member survey indicated that 84% of our team members were actively engaged, which is top quartile relative to the financial services benchmark, and we have designated a great place to work by the Great Place to Work Institute. We also have made measured progress in our diversity, equity, and inclusion efforts by meeting our short-term ethnicity and gender-based goals, and the leadership ranks in 2021. So overall, a productive and rewarding year and one that carries a tremendous amount of momentum into 2022. Now let me shift the highlights from the fourth quarter. Let's start on Slide 4 with loan growth, which increased $1.4 billion or an annualized 14% excluding P3. The growth this quarter resulted from our second consecutive quarter of record-funded commercial loan production at $3.2 billion. This represented a 30% increase from the third quarter. The quality of growth as measured by risk ratings and underwriting metrics is consistent with the existing portfolio, which continues to perform well and is supported by the reversal of credit losses of $55 million this quarter. It's a similar story on the other side of the balance sheet, with core transaction deposit growth of $1.3 billion or 4% versus the third quarter. Approximately 30% of this quarter's increase came from non-interest-bearing deposits. The combination of balance augmentation and new account origination continues to be the drivers of growth. Net interest income growth was also strong this quarter, as we delivered $1.7 billion in earning asset growth. Net interest income increased by $16 million from the third quarter or 4%, excluding the reduction in P.3 fees. The net interest margin declined five basis points in the quarter, largely due to lower P3 income. But the NIM before PPP fees actually increased one basis point as earning asset yields were fairly stable and we continue to lower deposit rates during the quarter. From a fee income perspective, we continue to be pleased with overall performance as the fourth quarter totaled $117 million. Core banking fees have returned and exceeded pre-pandemic levels in the fourth quarter, as card and cash management income have more than offset reductions and NSF income. And our core strategic segments such as wealth management, continue to generate growth through AUM expansion. Diluted earnings per share were $1.31 or $1.35 on an adjusted basis and increased from $0.96 or $1.08 adjusted per share from the same period in 2020. During the fourth quarter, we successfully completed our capital plan with $33 million of share repurchases. For the full year, we balanced core client loan growth, a common dividend, and $200 million in share repurchases to achieve our target CET1 ratio of 9.5% at year-end, which represents the middle of our operating range target for the upcoming year. Jamie will now share greater detail on the key initiatives and financial results for the quarter. I'll begin on Slide 5. We ended the year with total assets of $57.3 billion and loans of $39.3 billion. In the fourth quarter, total loans, excluding PPP balances, were up $1.4 billion, or 4% from the prior quarter, bolstered by strong commercial loan growth. The commercial growth was broad-based across businesses, asset classes, and markets, and included robust production in several of our key business lines, such as structured finance, senior housing, national accounts, and commercial banking. The positive momentum was also evident in CRE, driven by healthy industry fundamentals in our footprint. We achieved this growth while adhering to our prudent underwriting standards and disciplined approach to portfolio management. Benefits from strategic growth initiatives are being realized, and we're excited about the potential of the corporate and investment banking team being led by Tom Deardorf, an industry veteran who joined the team in November growth momentum. In Q4 was also supported by reduced pay-offs and increased C&I line utilization, which increased approximately 340 basis points to 43%. This is the first quarter where we have seen clear evidence of inflection toward increased utilization. We also saw continued growth in commitments up 4.4% or $512 million, which positions us well for economic expansion, particularly in the southeast, where growth is expected to exceed national averages. A continued normalization of C&I line utilization on today's balance sheet would result in over $350 million in funding balances, which should occur over time as liquidity subsides. Within our core consumer portfolio, the trend remains somewhat mixed with growth in card and other consumer products is more than offset by continued declines in the mortgage. In aggregate, core consumer balances declined by $20 million in the quarter. Looking outside of our core lending activities, we did see a modest decline in our third-party portfolio in Q4, as purchases were more than offset by elevated pay-down activity. Additionally, our securities portfolio ended the quarter at $11 billion, up $400 million from the prior quarter, though that growth generally dragged out of the overall balance sheet and remained at 19% of total assets. These portfolios will remain central to our overall balance sheet management efforts, and we'll continue to leverage both as a means to manage our capital and our liquidity positions. Slide 6 highlights the deposit trends for the fourth quarter, as well as for the full year 2021. As you can see, it was another very strong year for growth led by core transaction account balances, which were up $1.3 billion or 4% in the fourth quarter and up $5.1 billion or 16% for the full year. Notably, the majority of the growth for the year was in non-interest-bearing deposits, while we've seen continued strategic declines in time deposits. For Q4, our total cost of deposits continued to decline to 12 basis points, which was down one basis point from the third quarter. The fourth quarter also experienced seasonal inflows related to public funds, while broker deposits were relatively stable. Both of these portfolios experienced declines versus one year ago, and we expect further declines in the first quarter as seasonal balances normalize and as we further reduce broker balances. In the first quarter, we expect broker deposits to decline by approximately $1 billion to $1.5 billion as we efficiently manage our significant liquidity position. Slide 7 shows a total net interest income of $392 million in the fourth quarter or $380 million, excluding the impact of the Paycheck Protection Program. NII growth largely resulted from strong earning asset growth, which began late in the third quarter and continued through the fourth quarter. The net interest margin for the fourth quarter ended at 2.96%, a decline of five basis points from the prior quarter. As expected, the wind-down of the Paycheck Protection Program is serving as a notable NII headwind. Excluding the impact of PPP, the margin was stable in the quarter. Our portfolio remains asset-sensitive and stands to benefit from increases in rates across the yield curve. To that end, I would note that much of the loan production we saw in the second half of 2021 was variable rates. The portion of our portfolio that is floating rate now stands at 58%, which helps to support our NII sensitivity estimated at an increase of 6.5% for a 1% immediate increase in rates. Adjusted noninterest revenue of $116 million is highlighted on Slide 8, up $2 million from the prior quarter. This includes a one-time, $8 million increase of BOLI income that offsets a $4 million reduction in mortgage income. Wealth management continues to see an increase in fee revenue and assets under management, recording its seventh consecutive quarter of growth. This growth is driven by continued strong client acquisition and asset inflows. From a capital markets perspective, we recorded another strong quarter despite overcoming headwinds from a large one-time arranger fee. In the third quarter, that was not expected to repeat. As our commercial segments continue their robust growth, we should expect to see continued strength from arranger fees and swap income that will drive this line item. On a full-year basis, NIR excluding security gains increased 5%. Despite headwinds driven by the normalization of mortgage revenues. Drivers of this growth included wealth management and core banking fees, which increased 24% and 20% year over year, respectively. Within core banking fees, commercial cash management revenue increased $10 million, or 34% year over year. This growth represents the momentum within our commercial segment, including the deep depository relationships we have with our core customers. Slide 9 highlights a total adjusted non-interest expense of $286 million, up $19 million from the prior quarter. This change included both recurring expense increases and other notable expenses that we do not believe will repeat in future quarters. Recurring expense increases totaled $9 million and were driven by several factors, including growth initiatives related to Synovus forward, investments in tech and risk infrastructure, additional FDIC expenses, and expenses related to normalized travel and entertainment spending. Other notable expense increases total $10 million and consisted of $4 million of incremental performance-based management bonuses, a $4 million seed gift into a newly established donor-advised fund, and a $2 million increase in health insurance expense driven by seasonal and pandemic related factors. In spite of an elevated quarter of expenses, we were able to manage the flat year-over-year adjusted expenses, resulting in positive operating leverage in 2021. Benefits from the successful implementation of other foreign initiatives can be seen in comparison to key areas from 2020 to 2021, particularly in base salaries, third-party spending, and real estate spending. These reductions have helped lay the groundwork for future strategic growth initiatives. The credit metrics on Slide 10 show continuing improvement in all key categories. The net charge-off ratio fell 11 basis points to 0.11% while criticizing classified loans declined 16%. The NPA ratio declined five basis points to 0.4% and the NPL ratio declined eight basis points to 0.33%. Past dues dropped one basis point to 0.14% excluding the increase from Paycheck Protection Program loans. There was a reversal of provision for credit losses, a $55 million in the fourth quarter, as further improvement in the economic outlook was partially offset by significant loan growth. The ACL ratio, excluding PPP loans, declined 21 basis points to 1.21%. On Slide 11 is a recap of our capital management efforts through 2021. In the fourth quarter, we executed the remaining $33 million of our 2021 authorization. And in doing so, we ended the quarter with our CET1 ratio at 9.5%. For the year, we retired 4.4 million shares or approximately 3% of the common shares outstanding from the end of the prior year. Our ongoing capital management efforts have helped maintain strong and stable capital ratios, which along with core PPNR, positions us well for continued balance sheet growth in 2022. For 2022, our capital plan continues the prioritization of capital for client growth while returning an appropriate amount to our shareholders in the form of a dividend. That includes an increase in the quarterly common shareholder dividend by $0.1 to $0.34, which would first be payable in April. While our two 2022 plan also includes an authorization for up to $300 million in share repurchases are capital priorities, our focus is on supporting core client growth, and managing our CET1 ratio around the target level of 9.5%. As we look ahead, we believe this focus on maintaining a strong capital position and prioritizing core growth is not only in the best interest of our shareholders, but also our clients, our communities, and our broader set of stakeholders. Excluding the impact of $400 million in remaining P3 balances, we expect loan growth of 4% to 7% in 2022. This growth assumes continued strong production in commercial lending, some curtailment of prepayment activity, particularly in the CRE portfolio, and relatively stable line utilization. The adjusted revenue outlook of 4% to 7% largely aligns with the current rate expectations, assuming three FOMC rate hikes and excludes the impact of P3-related revenue. Overall fee income growth will be muted due to the industrywide reduction in secondary mortgage revenue. However, we expect continued growth in strategic fee categories, including core banking fees and wealth management. Our adjusted expense outlook of 2% to 5% incorporates increases in compensation, a return to pre-pandemic travel and business development levels, and includes our strategic investments in talent and technology. XP3, we expect to continue to generate positive operating leverage in 2022 while building out the bank of the future. Benefits from Synovus forward initiatives will continue to offset increased inflationary pressures and will remain disciplined and agile in terms of managing expense growth throughout the year. One significant efficiency initiative that is underway is the closing of an additional 15% of our branch locations, with an estimated run-rate savings of approximately $12 million by year-end. Moving to capital, as Jamie shared earlier, we extended the upper range of our targeted CET1 ratio by 25 basis points, providing a new range of 9.25% to 9.75%. This range will continue to support our strategic growth objectives while maintaining more than adequate protection against significant adverse conditions if they were to arise. And in the terms of capital, core relationship growth remains our top priority for capital deployment, while whole bank M&A is not a priority. We believe these expectations for 2022 support our continued progress toward becoming a sustained top quartile performer. We have a tremendous amount of momentum in our core businesses, and the team is performing at a very high level. Given the heightened levels of inflation, it appears the interest rate environment will serve as a tailwind in 2022 as we continue to position the balance sheet for asset sensitivity. We also believe that our strategic investments will begin to drive top-line growth during the year. We are making good progress on the build-out of our Banking as a Service product called Mast and are seeing strong talent pipelines for the corporate and investment banking build-out. For all of these reasons, my confidence in delivering on our 2022 business and financial objectives is very high, and I know our team is poised and ready to win. Operator, we're now ready to begin Q&A.

q4 adjusted earnings per share $1.35. q4 earnings per share $1.31.

Today is important and transformative day for the technology distribution industry as SYNNEX and Tech Data come together. For over four decades we have each worked to help our customers and partners grow and achieve their strategic priorities. We have both been leaders in the space and I and the entire SYNNEX management team have the utmost respect for the team at Tech Data and what they have created. Like us, Tech Data has established a reputation for excellence and we are thrilled to partner with its 14,000 plus talented colleagues. For SYNNEX, this combination is beneficial as it accelerates our strategic growth initiatives by multiple years versus what we could have done by acquiring several smaller, geographically diverse companies. Thus, the combined company will be able to bring additional services and capabilities to our respective partners. Even with a well planned and executed strategy, I'm not sure we could have achieved -- over time -- all that is accomplished with this merger. For our investors, we have the opportunity to create value by accelerated revenue growth, scaled efficiencies, increased cash flow and greater earnings power. I am pleased to be able to partner with Rich Hume and the go-forward combined entity. Rich is a talented leader with significant industry expertise and we're fortunate to have him as the CEO of the business going forward. [Technical Issues] the transformative transaction we are about [Technical Issues] I along with our shareholder Apollo, believe combining our business with SYNNEX accelerates the momentum that was already under way to create growth opportunity that neither company could achieve independently. The combined company will deliver superior value for shareholders, offer our customers and vendors exceptional reach, efficiency and expertise across the entire technology ecosystem and be an employer of choice in the IT industry. Importantly, together, we have the portfolio, the financial strength and the talent to enable us to achieve these objectives. We will have premier, best-in-class, end-to-end offerings through a broad diversified portfolio of more than 200,000 products and solutions. The combined company will be positioned to transform value creation from the linear model to the multi-point model, enabling collaboration among all of the ecosystem participants. This will enable us to drive effective go-to-market strategies that our vendors can capitalize on and help to deliver optimal business-oriented solutions for their customers. Our ability to orchestrate the access, interaction, delivery and services required to solve business challenges at scale is the foundation of how we will continue to grow. As you know, change is constant in our business and this is a pivotal time in our industry. Technologies such as cloud, analytics, IoT and security are changing our customers and their end user customers' buy, sell, consume and finance technology solutions causing the IT ecosystem to evolve faster than ever before. This evolution has accelerated further due to the work-from-home and return to office trends which are contributing to explosive growth in these areas in which we are ideally positioned to serve. The combined company will have a solid financial foundation, including an investment grade profile and strong free cash flows to support investments in our core growth platforms as well as investments in these next generation technologies. The breadth and diversification of the combined company extends well beyond our products and solutions. Together, SYNNEX and Tech Data will have a global footprint that serves more than 100 countries across the Americas, Europe and Asia Pacific. This combination brings new market opportunities for both companies. For example, SYNNEX has a well-established presence in Japan, where Tech Data does not. Similarly, Tech Data is a well-established business across Europe, where SYNNEX has a more limited access. This meaningful reach across products, services, geographies will also provide increased value and purchasing efficiencies to the combined companies' customers and vendors. Both SYNNEX and Tech Data have excelled at driving top and bottom-line growth and has successfully acquired and integrated companies in the past. I have full confidence that our combined team will deliver on the exciting growth underpinning this transformational merger, especially given the complementary values of our organization. Very well said, and I'm looking forward to working with you to achieve all these benefits and also to continue to drive and support the great cultures each of the company's bring to this transaction. Over to you, Marshall. This transaction is valued at $7.2 billion, including net debt; and at close, SYNNEX will issue 44 million shares. Pro forma ownership will be 55% SYNNEX shareholders and 45% Tech Data shareholders. We expect the transaction to close in the second half of 2021, subject to customary closing conditions, including approval by SYNNEX shareholders and regulatory approvals. From a financial perspective, the combined company will be on very solid footing with pro forma revenue of $57 billion, healthy EPS, EBITDA and cash flow generation. We expect the transaction to be accretive to our non-GAAP diluted earnings per share by more than 25% in year one. Given the complementary customer set and geographic footprints, we see the opportunity to generate revenue synergies as a combined company. There is little overlap among our top customers and partners, and we believe SYNNEX's deep and narrow strategy combined with Tech Data's broad customer base minimizes risk regarding diversification. From a cost perspective, we expect to realize $100 million of net synergies in year one, and $200 million in year two. This transaction will be facilitated by a new capital structure that we will use to refinance debt at both Tech Data and SYNNEX. It will consist of a $1.5 billion term loan A and $2.5 billion of unsecured bonds at varying maturities, bolstered by a $3.5 billion revolving credit facility, which we expect to be undrawn at close. The expected cash balance at close will be approximately $1 billion. We're also actively seeking to obtain our first investment grade credit rating and feel confident regarding the outcome. As many of you are familiar with, SYNNEX has a long track record of diligently deleveraging post acquisitions. We expect the same results with this transaction. The expected leverage ratio of approximately 2.7 times at transaction close is expected to decline to approximately 2 times within 12 months. With the combined entity generating LTM pro forma adjusted EBITDA of approximately $1.5 billion, this will provide us with ample ability to de-lever quickly while also remaining focused on optimizing the core and driving organic growth. Now moving to Q1 fiscal results. Our team delivered strong results ahead of internal expectations to start off the fiscal year, driven by continued robust broad-based demand. Total revenue for Q1 was $4.9 billion, up 21% year-over-year. Gross profit totaled $305 million, up 19% or $49 million compared to the prior year; and gross margin was 6.2%, consistent with the prior year. Total adjusted SG&A expense was $149 million or 3% of revenue, up $9 million compared to the year-ago quarter and primarily due to COVID-19 related expenses. We continue to expect incremental quarterly costs at a minimum of $5 million in 2021, and we did a good job of scaling SG&A to the growth of the business. Non-GAAP operating income was $156 million, up $40 million or 35% versus the prior year; and non-GAAP operating margin was 3.2%, up 33 basis points over the prior year. Q1 interest expense and finance charges were approximately $23 million and the effective tax rate was 25%. Total non-GAAP income from continuing operations was $99 million, up $25 million or 34% over the prior year; and non-GAAP diluted earnings per share from continuing operations was $1.89, up from $1.42 in the prior year. Now turning to the balance sheet. Total debt of approximately $1.6 billion and net debt was less than $200 million. Accounts receivable totaled $2.4 billion and inventories totaled $2.6 billion as of the end of Q1. Our cash conversion cycle for the first quarter was 32 days, 25 days lower than the prior year and the decrease was driven by DSO improvements and better inventory turns. Cash generated from operations was approximately $25 million in the quarter; and including our cash and credit facilities, we had approximately $2.8 billion of available liquidity. We are pleased to report that our Board of Directors have approved a quarterly cash dividend of $0.20 per common share for the quarter. The dividend is expected to be paid on April 30, 2021 to stockholders of record as of the close of business on April 16, 2021. Now moving to our outlook for fiscal Q2. We expect revenue in the range of $4.7 billion to $5 billion. Non-GAAP net income is expected to be in the range of $94.9 million to $105 million and non-GAAP diluted earnings per share is expected to be in the range of a $1.80 to $2.00 per diluted share based on weighted average shares outstanding of approximately 51.8 million. Our non-GAAP net income and non-GAAP diluted earnings per share guidance excludes the after-tax cost of $7.3 million or $0.14 per share related to the amortization of intangibles and $4.8 million or $0.09 per share related to share-based compensation. For the full fiscal year, we continue to expect a healthy IT spending environment, driven by gradually increasing investments in technology enablement. We expect full year fiscal 2021 non-GAAP diluted earnings per share of approximately $8 per share. I'm very proud of our associates and the excellent first quarter results that we have delivered. In Q1, we continued to navigate an unpredictable environment; but through it all, the team again showed flexibility, creativity and dedication to find innovative ways to support our customers and partners with exceptional service. Our results above our internal expectations were driven by healthy broad-based demand across all our businesses as remote capability and digital transformation investments continued. Similar to the past few quarters, we saw strong demand for client devices like notebooks and Chromebooks, as well as continued demand for security, cloud, collaboration solutions and related services. We also saw improvements in areas like enterprise solutions, including server and networking. Our performance came from across all our customer segments with really no exception in the contribution to the growth in the quarter. From a geographical perspective, all regions performed well, with Canada and Japan exceeding expectations by the most. Turning to our Q2 outlook. Our priority remains on the health and safety of our associates. Overall, we are encouraged about the IT and spending environment so far in 2021. As we move closer to a sense of normalcy, it appears investment, especially in IT, is following. For our Q2, with ongoing execution, we anticipate our business will continue to grow better than the market as our guidance implied a mid to upper single digit year-over-year growth rate. Perhaps we're being a bit cautious with our expectations for the second quarter given the demand environment is fairly strong currently, evident by our ongoing high backlog and that on-premise purchasing activity is picking up each quarter. However, given how much we over performed in Q1 and how early we are in Q2, we will start with the current range we have provided. Overall, we are pleased with the trajectory of our business, evident by Marshall calling out our earnings per share expectations for the year. As I wrap up, and touching again on the Tech Data merger announcement, those who have followed our space for many years know that M&A has been an important part of this industry. We and Tech Data have both participated in many transactions over the years and have built up a wealth of knowledge and experience on how to have a successful outcome ensuring that value creation is delivered. I believe we are very well situated given the strong cultural fit, knowledge of the industry, customers and partners and a strong and talented combined workforce. We are developing a robust integration plan, and we'll share more with you as we get closer to the transaction close. We are very excited by the possibilities that this deal creates for our combined company and look forward to realizing the significant value that should produce for our customers, partners, associates and shareholders. In closing, we remain very focused on our core business.

sees q2 non-gaap earnings per share $1.80 to $2.00. sees q2 revenue $4.7 billion to $5.0 billion. qtrly non-gaap diluted earnings per share from continuing operations $1.89.

Before getting into the details of the quarter's performance, I would like to remind everyone that the year-ago quarter was the first full quarter impacted by the COVID-19 pandemic. Given the significant negative impact that this had on our fiscal Q2 2020 results, the year-over-year comparisons that we discuss today are greater than normal in magnitude. Our fiscal Q2 results came in well ahead of our expectations, fueled by continued strong demand environment. Total revenue for Q2 was up 31% year-over-year to $5.9 billion. Gross profit increased 20% or $55 million compared to the prior year to $329 million. Gross margin was 5.6%, down from 6.1% in the prior year, primarily due to product mix. Total adjusted SG&A expense was $159 million or 2.7% of revenue, down $14 million compared to the year-ago quarter, primarily due to COVID-related expenses in the prior year. Non-GAAP operating income was $170 million, improved by $68 million or 67% versus the prior year and non-GAAP operating margin was 2.9%, up 62 basis points year-over-year. Q2 interest expense and finance charges were approximately $23 million and the effective tax rate was 25%, both in line with our expectation. Total non-GAAP income from continuing operations was $109 million, up $44 million and improved by 68% over the prior year. And non-GAAP diluted earnings per share from continuing operations was $2.09, up from $1.26 in the prior year. Now turning to the balance sheet. We ended the quarter with cash and cash equivalents of $1.7 billion and debt of $1.6 billion. Accounts receivable totaled $2.5 billion, down 12% year-over-year and inventories totaled $2.7 billion, flat from the prior year. Our cash conversion cycle for the second quarter was 26 days, 17 days improved from last year. The decrease was driven by DSO improvements and better inventory turns. Cash generated from operations was approximately $280 million in the quarter. And including our cash and credit facilities, we had approximately $3.1 billion of available liquidity. We are pleased to report that our Board of Directors have approved a quarterly cash dividend of $0.20 per common share for the current quarter. The dividend is expected to be paid on July 30, 2021 to stockholders of record as of the close of business on July 16, 2021. Before moving to our Q3 outlook, let me provide a brief update regarding our proposed merger with Tech Data. Since our announcement in March, we have established the capital structure for the planned merger through a new $5 billion credit facility and are on track with the debt financing for the merger. Now moving to our outlook for fiscal Q3. Revenue is expected to be in the range of $4.95 billion to $5.45 billion. This estimate does not contemplate any impact related to the customer consignment change that we have previously spoken about. At this time, we no longer expect the change to occur within our fiscal 2021. Non-GAAP net income is expected to be in the range of $99.9 million to $110.4 million. And non-GAAP diluted earnings per share is expected to be in the range of $1.90 to $2.10 per diluted share based on weighted average shares outstanding of approximately 51.9 million. Our Q3 non-GAAP net income and non-GAAP diluted earnings per share guidance exclude the after-tax cost of $7 million or $0.13 per share related to the amortization of intangibles and $5.3 million or $0.10 per share related to share-based compensation. With our quarter starting off with the Tech Data merger announcement, there was a potential of this news being a distraction to our daily efforts. As expected though, our team executed very well, provided exceptional service to our customers and continued to expertly manage through the ongoing dynamics of our industry and the pandemic. For Q2, our results came in above our internal expectations due to continued demand for remote capability, digital transformation, the ongoing recovery of office and data center IT purchasing and overall above-market growth. Essentially, every product category we participate in saw strength in the quarter, most notably notebooks, Chromebooks, cloud, security, services, networking and collaboration. Our manufacturing business also performed very well with results above the high end of our internal forecast. The demand came from across most all our customer segments with SMB and public sector leading the way. From a geographical perspective, all regions were at expectations or better. Regarding our proposed merger with Tech Data, everything is going well. As Marshall mentioned, we are set up for an effective financing of the transaction. Our proxy has been filed and our shareholder meeting will be held next week. And from a regulatory standpoint, we have received clearance from a number of governmental authorities and expect the rest to process through normal course. As would be expected, the COVID pandemic has led to review delays in some countries. We still believe our transaction will close in the second half of 2021, reflective of the typical six to eight months announced to close time frame for a deal of this size and complexity. Since the announcement of the transaction, we have continued to receive internal and external support for the merger. The integration work we have performed since the announcement, albeit limited due to regulatory rules, further supports the strategic benefits of this deal that we discussed in March. We look forward to sharing more when the transaction closes later this year. Moving to our outlook. Our priority remains on the health and safety of our associates. Overall, we are optimistic about the IT spending environment, given the current strong demand, the expectation of more geographies reopening and the resumption of on-premise enterprise IT projects. We believe these factors represent potential tailwinds for our business. Specific to our Q3 guidance. We are planning for continued growth in our distribution business but have added a bit of conservatism in the forecast this quarter given the widely reported supply chain component challenges. Considering our current backlog, still very strong, we know the business is there. It just remains to be seen when it will transact. For our manufacturing business, we use the low end of our internal range for forecasting purposes. This low end for manufacturing will reflect the decline over Q3 last year. This is a result of the very strong prior-year quarter, the over-forecast achievement in Q2 of this year and the overall unpredictable nature of this business. Taking all these factors into account, we believe our Q3 view reflects a balanced outlook, which incorporates all the various puts and takes of the current environment. Hopefully a conservative view, and as always, we'll strive to do better. I am confident with ongoing execution we will continue to progress on our stated strategy of improving our core business, driving organic growth, increasing our value-added services and products and successfully closing our proposed merger with Tech Data.

synnex corporation sees q3 non-gaap earnings per share $1.90 to $2.10. sees q3 non-gaap earnings per share $1.90 to $2.10. sees q3 revenue $4.95 billion to $5.45 billion. qtrly non-gaap diluted earnings per share from continuing operations $2.09. q2 revenue rose 31 percent to $5.9 billion.

The consolidated Q4 and fiscal 2020 results I will present today include Concentrix as the spin-off was completed on December 1st which is the first day of our fiscal 2021. All go-forward financial discussion applies to SYNNEX on a stand-alone basis. The COVID-19 pandemic altered the way that we all worked, lived and learned this year. Despite this, we successfully saw Concentrix create an increased value for our shareholders and are well positioned heading into 2021. The remote work, learn and consume trends continued in the fourth quarter which led to increases in demand for products and services provided by SYNNEX and Concentrix and this dynamic led to record financial results for our fourth quarter. On a consolidated basis, total revenue was $7.4 billion, up 13% year-over-year. Consolidated gross profit totaled $823 million, up 4% or $29 million compared to the prior year. And gross margin was 11.1% compared to 12.1% the prior year. Total adjusted SG&A expense was $503 million or 6.8% of revenue, down $23 million compared to the year-ago quarter, primarily due to continued Concentrix synergies related to the Convergys acquisition and lower Concentrix variable operating expenses. Consolidated non-GAAP operating income was $388 million, up $50 million or 15% versus the prior year. Non-GAAP operating margin was 5.2%, up 10 basis points compared to the prior-year period. Total non-GAAP net income was $271 million, up $51 million or 23% over the prior year and non-GAAP diluted earnings per share was $5.21, up 22% year-over-year. Now shifting gears to Technology Solutions' Q4 operating performance. Technology Solutions revenue was $6.1 billion, up 14% or $745 million over the prior-year quarter. Technology Solutions gross margin of 6% was 30 basis points lower than the prior-year quarter, primarily due to product mix. Operating income of $200 million was up $34 million from the year-ago period and non-GAAP operating income was $216 million, up 22% or $38 million year-over-year. Non-GAAP operating margin was 3.5%, 22 basis points higher than a year ago. Technology Solutions COVID-19 related incremental expense decreased in Q4 as expected, driven by a reduction in the amount related to doubtful accounts. The costs associated with staffing and remote work increased quarter-over-quarter. We expect incremental quarterly costs at a minimum of $5 million in 2021 with the goal of creating other efficiencies to offset the majority of these impacts. Interest expense and effective tax rate for Q4 reflects SYNNEX and Concentrix consolidated results and were consistent with expectations. Technology Solutions Q1 interest expense and finance charges are expected to be approximately $22 million to $23 million and effective tax rate is expected to be 26% for the quarter and also for fiscal 2021. Given our spin, for comparison to prior year we believe it's best to compare Technology Solutions with the non-GAAP operating income operating margin level provided in prior releases and filings. This is due to the fact that below the operating line Technology Solutions and Concentrix were under a consolidated capital and tax structure. This along with stranded corporate costs of approximately $5 million, which we expect to lower over time, make the comparisons difficult. For those who would like to produce a pro forma comparison analysis to the prior fiscal year, we suggest that along with the stranded cost to use an assumed debt of $1.5 billion at approximate 4.5% plus other financing costs of approximately $7 million per quarter and a tax rate of approximately 25%. Please note that the Q1 2020 pro forma tax rate is approximately 15% due to stock-based comp tax benefits and FIN 48 reversals. Please note that these are only suggested amounts for pro forma analysis and in no way should be construed as GAAP or equivalent numbers. Now turning to the balance sheet. Post spin Technology Solutions' debt is approximately $1.6 billion and net debt is just about $200 million. Accounts receivable totaled $2.8 billion and inventories totaled $2.7 billion as of the end of Q4. Technology Solutions cash conversion cycle for the fourth quarter was 25 days, 16 days lower than the prior year and eight days lower than the prior quarter. The decrease was driven by DSO improvements across Technology Solutions and better inventory turns. Cash generated from operations was approximately $297 million in the quarter with approximately $205 million attributable to Technology Solutions excluding inter-company settlements. For the full year we generated $1.84 billion in operating cash flow with $1.36 billion attributable to Technology Solutions. At the end of the fourth quarter including our cash and credit facilities, Technology Solutions had approximately $2.8 billion of available liquidity. As a result of our improved financial performance and liquidity, our Board of Directors has approved the reinstatement of a quarterly cash dividend of $0.20 per common share. The dividend is expected to be paid on January 29, 2021 to stockholders of record as of the close of business on January 22, 2021. Going forward, we intend to utilize 30% to 35% of our free cash flow for capital return programs either via dividends and/or share buybacks. We believe this level allows us to adequately invest in our business while maintaining our commitment to driving long-term shareholder returns. Now moving to outlook for fiscal Q1. We expect revenue to be in the range of $4.5 billion to $4.8 billion. Non-GAAP net income is expected to be in the range of $81 million to $91.5 million and non-GAAP diluted earnings per share is expected to be in the range of $1.55 to $1.75 per diluted share on weighted average shares outstanding of approximately 51.8 million. As previously announced, beginning in fiscal Q1 we've made the decision to exclude share-based compensation from our non-GAAP results. Excluding share-based compensation it's consistent with the practices of many of our partners, competitors and customers and we believe this more accurately reflects our operating performance. Our Q1 non-GAAP net income and non-GAAP diluted earnings per share guidance exclude after-tax cost of $7.3 million or $0.14 per share related to the amortization of intangibles and $3.4 million or $0.07 per share related to the shareholder based compensation. Lastly, we previously shared that one of our customers would be moving to a consignment service model in 2021. We now have more clarity regarding the timing of this change and expect the transition to occur in our fiscal Q3 2021. As previously indicated, we expect this change to reduce revenue by approximately $600 million per quarter although it may take some time to fully ramp up to that level. Moving into 2022 we expect further consignment with this customer will take place, increasing the quarterly run rate to something greater than $600 million per quarter. On a go-forward basis margins related to this customer will be based on product and service mix. I'm very proud of the accomplishments of the SYNNEX team in 2020, especially so against the backdrop of a very challenging environment. A big congratulation to Chris and the Concentrix team and we look forward to continuing to work with them as a customer of Concentrix. Now to our Q4 results. Despite the pandemic and other challenges, Concentrix accelerated into the spin and we look forward to watching their execution and growth going forward. For the SYNNEX TS business, our record top line performance in the fourth quarter was driven by broad-based demand across all our platform as the remote work, learn and consume trends continued. Our revenue growth along with seasonally high Q4 leverage benefits drove solid profit and returns as well. Consistent with Q2 and Q3, demand remained strong in products such as notebooks, Chromebooks, cloud, collaboration and security. This was evident in both our commercial and retail distribution businesses. As expected COVID-19 continued to impact enterprise office demand in Q4 with office desktop, print and other products experiencing lower volumes. We did, however, see the signs of a continuation of the return of on-premise projects in Q4 that we started to experience in Q3. From a geographical perspective, US, Canada, and Japan all performed well and better than internal expectations. Latin America was essentially flat compared to the prior year but overall positive given the obvious challenges in the geo. In our Hive business Q4 was stronger than anticipated with continued demand from our largest customer to support its data center needs. Part of our overall margin strength during the quarter was also from Hive. Leverage and improved efficiencies due to spike in business and recoveries from investments made throughout fiscal '20 were the drivers. Our Q4 guidance anticipated Hive revenues to be at the lower end of our range of expectations. This was due to the strong Q3 performance and visibility at the time of our Q4 outlook. In the end revenue was above the high end of our internal range as we performed very well in servicing a significant increase in demand in the quarter. As we have consistently noted regarding this business, it is lumpy and continue to be challenging to predict quarter-to-quarter. Turning to our outlook. Our priority remains on the health and safety of our associates. Overall, we are optimistic about fiscal '21 given the start of vaccine rollouts and we are hopeful our world returns to a closer sense of normalcy over the next year. With this occurring, we expect that business investment will increase, especially in IT. At the same time we are cognizant of the fact that while economies around the world should begin to normalize much is still uncertain about the pace in solving all the challenges of the pandemic and the timing of consistent economic recovery. This is evident by additional lockdown actions taken recently in most major countries we operate in. For our Q1 with continued execution, we anticipate our business will grow slightly better than the market for the quarter. Continued demand for our products and services related to remote work, learn and consume combined with the remaining backlog we have provides us a base level of confidence in our forecasts. Like the last few quarters, we have estimated our Hive business at the lower end of our internal projection. For fiscal '21 using our Q1 forecast as a base, we expect the rest of fiscal '21 to progress in line to the seasonal patterns of 2018 and 2019. This assumes market conditions and demand improves throughout the year and there is no significant change in our current mix of business among other traditional assumptions. Lastly, I am pleased that we are able to restart our capital return program with our dividend announcement today and Marshall's comments about our share repurchase program. In closing, our strategy of optimizing our core business, investing in organic opportunities and targeting strategic M&A to enhance our portfolio will continue to provide us with opportunities to grow moving forward. This strategy, along with the drive, determination of the SYNNEX team coupled with the excellent partnerships with our customers, vendors and the communities we operate in support my confidence about the future for SYNNEX.

synnex sees q1 2021 earnings per share $1.34 to $1.55. sees q1 2021 non-gaap earnings per share $1.55 to $1.75. sees q1 2021 earnings per share $1.34 to $1.55. sees q1 2021 revenue $4.5 billion to $4.8 billion. qtrly non-gaap diluted earnings per share $5.21.

Today's results represent only our very first 90 days together, and I'm delighted with what the team has already been able to accomplish in just that short amount of time. Let me share a bit more about what we've accomplished relative to our strategy and integration, having made excellent progress in both areas. First, we define our go-forward strategy with the overarching goal of keeping our customers and vendors at the center of everything we do. We are making significant investments, which will solidify our position for the future and continue to accelerate our participation in the high-growth, next-generation technology areas like cloud, security, analytics, IoT, and everything as a service. And we are committed to continuing our journey to digitally transform the company, allowing us to create an enhanced engagement with our customers and vendor partners with improved efficiency. To provide further details on these topics, we will be having our first Investor Day as TD SYNNEX to be held virtually after we report our first quarter results. At that event, we'll share with you our multiyear strategy, growth opportunities, and financial performance. From an integration perspective, we are on track, and the team is executing very well on our plans. We rolled out our complete organizational structure, ensuring that all coworkers are clear on their roles and responsibilities. We have also been spending a lot of time with our customers and vendor partners, who continue to be very supportive of our company and the plans that we've outlined. Another critical area that we've been focused on is our IT systems infrastructure. We completed our assessment of our current ERP systems. And after a deep and thorough analysis, made the decision to consolidate our Americas business on to CIS, the ERP system custom-built for the IT distribution business. CIS has a great track record, is highly responsive and flexible and provides us with the ability to move quickly with an attractive cost basis. All other geographic regions will remain on their existing ERP systems. Lastly, we are on track with our cost optimization and synergy attainment goals. And though there is much work ahead, we are well on schedule relative to our ambitious integration plans. Moving forward to our fiscal fourth quarter, we had a good performance despite the anticipated challenging supply chain environment, the change attained with our merger and the new fiscal year-end for much of the company. Overall, our core distribution business performed in line with what we communicated last quarter and the supply that we received was consistent with our expectations. Strong operational execution by the teams allowed us to optimize our results to the higher end of our guided revenue range. Our advanced solutions products and service business saw a continued improvement in the quarter and grew year over year, assuming the merger had occurred in the prior year. Endpoint solutions, though slightly down year over year, performed well and in line with our expectations despite the challenging industry supply conditions and a tough prior year comparison. All three geographic regions performed well. In the Americas, demand was solid. And the enterprise space did well as corporations prioritize infrastructure and security projects. In the government segment, there was a bit of a slowdown in spending, which is not unusual in the first year of a new administration. And the education segment was flat year over year. In Europe, demand for next-generation solutions was healthy, and we outgrew the market. In the Asia Pacific region, we had a very strong end to the year and made positive traction across multiple countries and product segments, both from the core legacy Tech Data business as well as from the Innovix business, which was acquired more than a year ago. Additionally, for many of our vendors, combining Japan and Asia Pacific provides the opportunity for expansion and incremental value creation. From an integration perspective, we continue to do well in identifying and capturing cost optimization opportunities and are tracking ahead of expectations. As Marshall will discuss in a moment, we are now tracking to a 30% non-GAAP earnings per share accretion, which is above the 25% that we previously targeted. As we begin 2022, I'm encouraged by the solid demand drivers across the technology landscape and the opportunities in front of us as we bring our expanded set of products and services to the market. Our enhanced breadth and scale provide us with an even greater ability to bring value and choice to our customers. As an example, post merger, we have more than doubled the number of vendor partners in the security space available to legacy Tech Data customers. Similarly, we have also significantly broadened the data center offerings available to legacy SYNNEX customers. Customers and vendors continue to increase their levels of investment in digital transformation, enabling any prepping users everywhere to connect, collaborate, and work more effectively and securely. Specific to the PC ecosystem, we remain cautiously optimistic given the opportunities in the commercial space with the Windows 11 refresh cycles and upgrade for advanced security features, offset by some moderation in the consumer segment. Taken together, we believe this results in an opportunity to grow our top line in fiscal 2022. This view considers current industry supply constraints that we expect to continue through fiscal year. Before I hand it over to Marshall, let me pause to express my gratitude to all TD SYNNEX coworkers for their hard work and contributions during fiscal 2021. I couldn't be more excited to see all that we'll accomplish in 2022. I'll now pass it over to Marshall, who will provide additional details on our financial performance. We performed well in our first quarter together, with results at or better than our expectations across the board and despite a continued difficult supply chain environment. I am proud of our teams who collaborated well, executed flawlessly, and adjusted to many changes in our first 90 days together. In particular, I'd like to express my gratitude to the global finance organization for their dedication and hard work in reporting combined company results for the first time. Now turning to our results for the fiscal fourth quarter. Total worldwide revenue came in at 15.6 billion, down 2% from the prior year. This comparison assumes the merger with Tech Data occurred on September 1, 2020. We are pleased with this result, given the tough comparison to prior year, supply chain constraints, and newness of operating as one company as well as an approximate 1% FX headwind due to the euro weakening against the dollar. Gross profit was 943 million, and gross margin was 6%, reflecting solid execution by the team and a continued favorable mix of products and services. Total adjusted SG&A expense was 559 million, representing 3.6% of revenue and in line with our expectations. Non-GAAP operating income was 408 million and non-GAAP operating margin was 2.6%. Non-GAAP interest expense and finance charges were 42 million and the non-GAAP effective tax rate was 24%. Total non-GAAP income from continuing operations was 276 million and non-GAAP diluted earnings per share from continuing operations was $2.86. Now turning to the balance sheet. We ended the quarter with cash and cash equivalents of 994 million and debt of 4.1 billion. Our gross leverage ratio was 2.6 times and net leverage was two times. This ratio assumes the merger with Tech Data occurred on September 1, 2020. Accounts receivable totaled 8.3 billion and inventories totaled 6.6 billion. Our net working capital at the end of the fourth quarter was 2.7 billion, and our cash conversion cycle for the fourth quarter was 14 days, which was in line with our expectations. Cash provided from operations was approximately 561 million in the quarter. As we begin fiscal 2022, I'd like to share some thoughts on capital allocation. Given the numerous positive drivers for the company, we remain on course of delivering approximately 1 billion of free cash flow by the end of fiscal 2023. Our long-term capital allocation strategy over the next two to three years is to distribute approximately 50% of our free cash flow to our shareholders in the form of dividends and share repurchases. Remaining investment grade, optimizing our cost of capital and balancing organic investments with M&A opportunities are some of the key priorities we are focusing on as we enter fiscal '22 and beyond. For the current quarter, our board of directors has approved a quarterly cash dividend of $0.30 per common share. The dividend is expected to be paid on January 28, 2022, to stockholders of record as of the close of business on January 21, 2022. Let me now provide you with some modeling thoughts about fiscal 2022 and Q1. As Rich had mentioned, we remain confident about the variety of growth drivers for IT spending this year, driven by both traditional and next-generation technologies. Like most others in the industry, we also believe that we will remain in a supply constrained environment through fiscal 2022. Against that backdrop, we expect to grow revenue in the mid-single digits in fiscal 2022. Negatively impacting these gross expectations are FX, which is expected to impact us by approximately 1.1 billion; and gross versus net revenue adjustment of 1.2 billion, which is the result of aligning policies between the two companies. Net of these headwinds, revenue is expected to grow low single digits. We made very good progress in fiscal Q4 on productivity initiatives as well as deal-related synergies. Given this progress and the view regarding fiscal 2022, we now expect to realize a 30% accretion to non-GAAP earnings per share in fiscal 2022 compared to fiscal '21 legacy SYNNEX stand-alone results. This represents an improvement from our initial target of 25% accretion. For fiscal '22, we expect non-GAAP earnings per share to be between $10.80 and $11.20 per diluted share. This also assumes a negative 22 million headwind to non-GAAP net income or $0.18 per share, primarily associated with the weakening of the euro since the date we first performed our merger accretion assessment. Now let me share some thoughts for fiscal Q1. We expect total revenue to be in the range of 14.75 billion to 15.75 billion, which, when adjusted for FX of approximately 450 million and gross versus net adjustments of approximately 300 million, represents an expected year-over-year growth rate in the mid-single digits. This comparison assumes the merger with Tech Data occurred on September 1, 2020. Our backlog level continues to be elevated, and we estimate the impact of fiscal Q1 revenue to be approximately 5%. Non-GAAP net income is expected to be in the range of 245 million to 275 million and non-GAAP diluted earnings per share is expected to be in the range of $2.55 to $2.85 per diluted share based on weighted average shares outstanding of approximately 96 million. Interest expense is expected to be approximately 38 million, and we expect non-GAAP tax rate to be approximately 24%.

sees q1 non-gaap earnings per share $2.55 to $2.85. sees fy non-gaap earnings per share $10.80 to $11.20. sees q1 revenue $14.75 billion to $15.75 billion.

A news release reporting our financial results was issued before the market opened today and is available in the Investor Relations website at sonoco.com. These statements are not guarantees of future performance and are subject to certain risks and uncertainties. Therefore, actual results may differ materially. Further information about the company's use of non-GAAP financial measures including definitions as well as reconciliations of those measures to the most closely related GAAP measure is also available in the Investor Relations section of our website. At a high level, we experienced strong volume growth in many of our businesses, but our third quarter operational results continue to be impacted by significant cost inflation and supply chain challenges. In terms of the $0.21 difference between base and GAAP earnings per share the largest item was the $0.30 per share benefit from the use of additional foreign tax credits on our recently amended 2017 U.S. income tax return. Next, we recognized $0.03 per share in GAAP earnings related to net restructuring and asset impairment expenses. And finally, there was a $0.06 impact from a variety of adjustments including approximately $11 million in discrete income tax expense items, partially offset by $5 million of after-tax net gain running through operating profit. Now moving to our base income statement on Slide 4, and starting with the topline, you see that sales were $1.415 billion, up $130 million or almost 8% from the prior year period. I'll review more details about our key sales drivers on the sales bridge in just a moment. Gross profit was $258 million, a $1 million increase over the prior year's quarter. This resulted in gross profit as a percent of sales of 18.2% compared to 19.6% last year. SG&A expenses, net of other income were $135 million, an increase of $9 million year-over-year. This increase was expected and key drivers were higher expenses for normalized management incentives, group medical activity as well as strategic IT projects. So all of that resulting in third quarter 2021 operating profit of $122 million, and I'll discuss the key drivers on the operating profit bridge in a few minutes. Net interest expense of $14 million was $5 million below last year due to reduced debt balances and a more favorable mix of fixed and floating rate debt. Income tax expense of $20 million was $7 million below last year due to our lower effective tax rate of 18.1% compared to last year's 24.1%. Much of this lower tax rate was anticipated, but we did recognize an increased benefit from project work related to R&D tax credit. Moving down to net income, our third quarter 2021 base earnings were $91 million, an increase of almost 5% compared to the $87 million that we generated last year. Now looking at the sales bridge on slide 5, you see that volume was higher by $43 million or almost 4% for the company after removing the display and packaging sales divested from 2020. Overall, all segments experienced demand recovery or continued strong pandemic-driven volumes, although there was a diverse mix of volume trends within our various markets. Consumer packaging volume mix was up $6 million or 1.1% as very strong growth in Flexibles was mostly offset by lower demand in both global rigid paper containers and plastic foods. In our industrial Paper Packaging segment volume mix was up $25 million or just over 5% with a continued surge in post COVID economic recovery across most of these operations. Our global tubes, cores and cones franchise volume rose by approximately 12%, and our global paper business increased by almost 3%. Finally, our all other group volume mix growth of $12 million are almost 8% when excluding the impact of Display and Packaging from 2020 sales. This was primarily driven by a very strong rebound in Industrial plastics at almost 45% and solid demand at ThermoSafe, which grew by 6%. Moving to price, you see that. Selling prices were higher year-over-year by $161 million as we continue to increase prices to battle inflation globally. This was mostly driven by our industrial segment as we work to recover escalating OCC, freight, labor and energy costs. In both our Consumer segment and all other group we have also been acting on price increases to recover the significant inflation in resins and other operating costs. Moving to acquisitions and divestitures, you see a topline negative impact of $111 million, which is driven by the divestitures of our Display and Packaging Europe and the U.S. operations, partially offset by the can packaging acquisition completed in August of last year. And finally, the sales impact from foreign exchange and other was positive by $9 million. The primary driver is approximately $30 million of foreign exchange gain associated with a weaker U.S. dollar year-over-year. Moving to the operating profit bridge on Slide 6 and starting with volume mix, our higher sales volume of $43 million combined with the impact of mix had a positive impact on operating profit of $13 million. Shifting to price cost, I will remind you that this category includes the earnings benefit from higher selling prices as well as the impact of total inflation. In the third quarter, we had a $14 million unfavorable price cost impact with most of this falling in our Consumer Packaging segment. In our Industrial segment we faced continuing increases in OCC costs during the third quarter. As usual, there is a slide in the appendix that shows recent OCC price trends and you'll see that Southeast OCC official board market pricing was $125 per ton in June and increased to $195 per ton in September, resulting in an average of $175 per ton in the third quarter. This represents a $105 increase relative to the third quarter of last year and a $68 per ton sequential increase just over this year's second quarter. Next is the impact of total productivity, which includes all results from our productivity actions, including manufacturing, procurement and fixed cost. You see that our total productivity contributed $15 million year-over-year with the favorable impact being predominantly driven in our consumer segment. Moving to acquisitions and divestitures, the $10 million decrease in operating profit is the net impact from the divestiture of our global Display and Packaging businesses and our Can Packaging acquisition. And finally, the operating profit change and FX and other was unfavorable by $12 million with various moving pieces, but mostly within SG&A expenses. Moving to the segment analysis on slide 7, you see that Consumer Packaging sales were up by 9.7% driven by higher selling prices, which were mostly implemented to offset cost inflation. Consumer segment operating profits fell by 5,4% driven by unfavorable price cost, but with a positive impact from their strong productivity results. Our Consumer segment margin declined to 10.2% versus the third quarter of last year when the margin was 11.8%. Our Industrial segment sales grew by almost 30% due to year-over-year price increases as well as recovering demand from pandemic lows last year. Our Industrial segment's operating profit surged by 30% driven by the global turnaround in demand as well as procurement productivity. Our Industrial segment's margin profile was unchanged compared to last year at 8.4%. All other sales declined by just over 34% driven by the sale of the Display and Packaging businesses, but this was partially offset by volume mix growth as well as price increases. Operating profit in all other decreased by almost 68% due to the Display and Packaging divestiture and price cost headwinds. Margins declined to 4.5% from the prior year's 9.1%. So for the total company sales were up almost 8% and operating profit declined by 6% resulting in a companywide operating margin of 8.6%. Moving to cash flow, in the middle of slide 8, you see that our year-to-date third quarter operating cash flow was $220 million compared with $490 million last year. But back to the top of this slide, I'll note that we had a year-to-date GAAP net loss of $150 million compared to a profit of $290 million in the prior year period. Most of this decrease relates to the $404 million after tax and non-cash settlement charge related to our pension termination process that was substantially completed in the second quarter. This leaves us with several primary drivers to our lower operating cash flow. One is the $133 million pension contribution related to the pension termination process. Next is the $59 million increased use of cash by working capital driven both by inflation and by a greater increase in business activity year-over-year. And finally, we had a $35 million negative impact related to last year's COVID-related FICA deferrals that were partially paid in this year's third quarter. Moving down to our year-to-date capex spend, our net spend was $146 million this year compared to $108 million for the same period last year. This $38 million increase is mostly due to the spending on Project Horizon. This takes us to free cash flow of $74 million compared with $381 million for the same period last year. This $307 million decrease again is mostly driven by the pension termination process, increased working capital and higher capex spend. I'll note that we paid cash dividends of $35 million year-to-date this year compared to $129 million for the same period of 2020. On slide 9, you see that our balance sheet and our liquidity position remains very strong and reflects several strategic actions implemented through the first 9 months of this year. Our third quarter ending 2021 consolidated cash balance was $160 million, a $405 million decrease from year-end 2020. This decrease was driven by significant deployments of cash this year which have included the accelerated share repurchase of $150 million, almost $500 million of long-term debt repayments and the already mentioned $133 million of pension contributions. These cash uses uses were somewhat offset by the Display and Packaging U.S. divestiture gross proceeds of around $80 million, operating cash flow generation, as well as commercial paper borrowings. Our consolidated debt was approximately $1.5 billion at the end of the third quarter, a decrease of $231 million from year-end and reflecting the debt portfolio actions that I just mentioned. So finally, on slide 10 for your reference, we've included our quarterly earnings history for 2020 and for this year. I'll note that the now divested Display and Packaging businesses contributed $0.29 of earnings per share in full-year 2020 with $0.21 coming in the first 9 months of last year. This compares with this year when we earned $0.03 of earnings per share in the first quarter before the divestiture of these U.S. operations. But focusing on this year and our fourth quarter guidance, you see that our range for Q4 base earnings per share is $0.84 to $0.90 per share. This guidance includes several key assumptions. Starting with volumes we expect that demand will remain solid, but this is more than offset by 6 fewer days than in last year's fourth quarter. For price cost, our outlook is to have a positive overall result in the fourth quarter as various inflation driven price increases continue to be implemented. Also, while the Display and Packaging divestiture is an $0.08 headwind, this is more than offset by lower SG&A expenses, lower interest expense and reduced shares outstanding. I'll add that our expected effective tax rate in this year's fourth quarter is approximately 25%, slightly higher than last year's 23, 5%. So, based on our year-to-date actual base earnings plus our updated fourth quarter outlook we are updating our full-year guidance to be $3.49 to $3.55 per share. Related to our cash flow guidance on a full year basis, we are not changing our full year free cash flow guidance of $270 million to $300 million, but we are reducing our outlook for operating cash flow by $50 million to be between #520 million and $550 million. This reduction is driven by our updated expectations for slightly higher year-end 2021 net working capital balances due to a combination of inflation as well as increased fourth quarter business activity in addition to our updated forecast for the timing and amount of certain tax payments. These operating cash flow headwinds are offset by our expectation for lower capital spending, which is now approximately $250 million instead of our original $300 million target. And as a reminder, our cash flow guidance excludes the $133 million of one-time pension contributions that we made in the second quarter. This concludes my review of our third quarter results and our outlook for the 4th quarter and full year 2021 yeah. Let me share thoughts on our third quarter performance. I would also like to provide a brief update on some important capital projects and what we see as we finish out the year. Firstly, we were very pleased with the improved top and bottom line results delivered in the quarter as our team navigated through supply chain disruptions, raw material shortages and frankly unrelenting inflation to meet the needs of our customers. Sales reached a record level driven by an almost 4% improvement in volume mix despite the impact of the divestiture of the Display and Packaging business. We experienced solid demand in each of our business segments while facing numerous supply chain challenges. For example, we had a sizable consumer customer shut down for more than a week due to logistic problems. All other customers were impacted by labor and material shortages. Our team did a remarkable job in keeping our plants running despite similar challenges. Base earnings per diluted share improved 6% and above the midpoint of our guidance. Operating profits in our Consumer Packaging segment declined 5% in the quarter, a strong productivity improvements were more than offset by a negative price cost relationship as we continue to chase inflation of critical raw materials and other inputs. Our Industrial segment experienced a 30% improvement in operating profit due to strong demand and the associated leverage through our operations. Finally, we were disappointed in results from our all other segment, which consist of our Industrial Plastics, Protective Health Care and Retail Security Packaging units. While the 58% decline in operating profit primarily reflects the divestiture of Display and Packaging, several of the business has struggled due to price costs as well as a high degree of COVID related volume impacts such as chip shortages. A key element of our strategy is investing to drive growth and margin improvement. So let me provide you a brief update on some of our large capital projects starting with Project Horizon. We've made a tremendous amount of progress over the summer. We've completed much of the work on the new stock prep system, which will allow us to use a larger percentage of lower cost mixed paper. This should be operational by the end of this year and we expect the machine to be fully converted around the end of the third quarter. We will experience downtime during the conversion, but expect this will have only a minor impact on profitability in 2022 while providing of course significant savings going forward. Also in our industrial businesses, we are completing work on a new 100,000 square foot plant in Tulsa, Oklahoma, where we will be combining our current tube and core operation with two new fiber Sonoco's lines to serve growing appliance and HVAC customers in the Southwest. In the fall we are opening a new Sonoco's operation in Poland and are working on growth opportunities in Turkey as well as Mexico. Our fiber protective business is attracting a lot of new orders as the market is looking for a more sustainable and durable protective alternatives. And our can business we recently approved approximately $15 million of new capital to develop additional capabilities to produce cans with new options including paper bottoms and paper overcast. As I mentioned previously we continue to receive interest particularly in Europe to convert products into a more sustainable type of can option. These new capital products, projects will go into our existing facilities in Belgium, Poland and the U.K. In addition we're making investments in renewable energy projects to help meet our target of reducing greenhouse gas emissions by 25% by 2030. Here in Hartsville we plan to spend $2.5 million to convert waste methane generated from our mill affluent system into to a fuel quality biogas, which will be traded compressed and injected in the pipeline to be used in industrial applications. We're also investing $1.5 million have to install solar panels on an East Coast can plan and expect to add further solar power projects in the near future. Combined, these projects will reduce approximately 5,300 metric tons of carbon dioxide annually while generating returns greater than our cost of capital. Entering the final three months of 2021 we do remain upbeat as demand for our products globally remains strong despite those supply chain challenges we are facing. That said inflation continues to be a concern. We expect certain raw materials, energy and freight packaging and other pressures will continue well into 2022. We now project inflation excluding labor will rise an additional 1.2% of our previous estimate from last quarter. This means our costs globally this year will have an increase by more than $250 million or about 9%. As a result we will continue executing price actions and we will remain focused on controlling costs as we work to see successfully through this continued difficult operating environment. As for volume we expect our Consumer Packaging segment to continue to benefit from elevated at-home eating trends driven by remote working and consumers particularly younger consumers adopting new cooking habits. In most markets demand for our global Industrial products has recovered to pre-pandemic levels and several of our businesses in the all other segment, which have been negatively impacted by supply chain interruptions are starting to see external conditions improve, and we've taken actions to improve the overall performance of several of these businesses. Finally, we're pleased that our ThermoSafe cold chain packaging business has picked up significant new orders to provide temperature assured shippers for transporting COVID-19 vaccines. Sonoco is coming out of the pandemic well positioned, we have a strong balance sheet, we have strong businesses and we have a solid cash flow. We'll will continue investing in the long-term potential of our core consumer and industrial businesses while remaining committed to returning value to our shareholders through dividends and share repurchases, and as always acquisitions that fit our portfolio and expand our capabilities. Let me close by inviting you to participate in our live virtual investor beginning at 8:00 AM Eastern on Friday, December 10th. While we will miss meeting with you face to face, we will do our best to facilitate an open discussion in this virtual manner. You can expect us to talk in more detail about our value creation strategy and we'll provide you a first look at our earnings expectations for 2022. So, please consider joining us again on December 10th. Now with that, operator, would you please review the question and answer procedures.

sonoco products- expects q4 base earnings per diluted share to be in a range of $0.84 to $0.90. expects full-year base earnings per diluted share to be in a range of $3.49 to $3.55.

The economies in our service territories are starting to recover from the COVID-19 pandemic and the customer demand remains mildly lower than pre-pandemic levels during the first quarter, it exceeded our expectation. Importantly, many of the programs we implemented to keep customers connected during the pandemic have proven to be very effective. We have reliably provided energy to our customers and facilitated alternative payment arrangements for those in need. I continue to be proud of our employees and the ways we have partnered with our communities throughout this pandemic. This past February parts of our nation were contending with the effects of devastating winter weather that crippled generating units and power grids in Texas and beyond. At Southern Company, each of our businesses, including those with operations in Texas and the Southwest region performed well during this event. Our regulated electric and gas utilities did not experience any operational issues or related service disruptions. Southern Power was minimally impacted due to its highly contracted business model. Our wholesale gas services subsidiary Sequent Energy effectively served customers in need utilizing in large part, natural gas held in storage. And micro grids provided by power secure had a 98 runtime reliability producing over 2,260 megawatt hours of reliable energy for customers during the storm. The winter seasons atypical temperatures have also caused utilities across the country to evaluate their own system resilience under similar conditions. For Southern Company are vertically integrated structure and integrated resource planning process as we utilize across our Southeast electric utilities have beneficial for years in allowing us along with our regulators to carefully consider, plan for, and invest in infrastructure needed to address a range of extreme circumstances and improve resilience. We will continue to leverage the rigorous analysis and stakeholder input provided by these proceedings as we evaluate the potential for additional system enhancements across our footprint. Let's turn now to an update on Plant Vogtle Units 3 and 4. Unit 3 Hot Functional Testing started on April 25 marking the last milestone in a series of major tests. Hot Functional Testing is conducted to verify the successful operation of reactor components and systems together and to confirm that the reactor is ready for fuel load. As part of the testing, the site team will run Unit 3 plant systems without nuclear fuel and advanced through the testing process to reach normal operating pressure and temperature. Starting Hot Functional Testing represents a significant step toward the operation of Unit 3 and ultimately providing customers with a reliable carbon-free energy source for the next 60 years to 80 years. The site work plan now targets fuel load in the third quarter and late December, 2021 in-service date for Unit 3, of course, any delays could result in a first quarter 2022 Unit 3 in-service date. Now, as we have stated in prior calls and important step in the system turnover process is to assure that the as built state of the plant aligns with the design basis and to resolve any differences. Before we close systems, declare them ready for testing and submit ITAAC. We are committed to the notion of getting it right. In recent months, Southern Nuclear identified certain construction remediation work, primarily electrical in nature that was necessary to ensure the quality and design standards were met prior to the start of Hot Functional Testing. We reviewed the project construction quality programs prior to Hot Functional Testing, we implemented improvement plans and we believe Southern Nuclear's construction quality program is effective. Furthermore, the improvement plans we are implementing are designed to help drive successful completion of Unit 3 and improve performance for Unit 4. As the operator of these units, we are committed to getting it right, striving to ensure our safety and quality standards are met prior to significant testing and operations activities. We will not sacrifice that commitment to meet schedule or milestone dates. With Unit 3 direct construction nearing completion, and Hot Functional Testing in progress, our primary system focus include going forward one, successful completion of Hot Functional Testing, two, completion of the remaining construction system turnovers and testing leading to fuel load, and three, an orderly transition from fuel load to an efficient start-up of the unit. The ITAAC submittal and review process is expected to accelerate as we move into and beyond the hot functional test sequence. To date 188 ITAAC had been submitted to the NRC. We will submit the remaining 211 during Hot Functional Testing as we approach fuel load. Turning the Unit 4, direct construction is now approximately 80% complete. And the current site work plan targets completion in the third quarter of 2022, which would provide margin to the regulatory approve November 22 in service date. Earlier this week, the site came placed the water tank on top of the Unit 4 containment vessel and shield building roof representing the last major crane lift at the project site. Integrated flush is in progress and initial energization is expected in the coming weeks. The site is focused on increasing craft, labor resources and electrical productivity. We will continue adding incremental resources while also shifting resources from Unit 3 to Unit 4, which is expected to increase our current pace of construction completion. Construction completion has averaged 1.5% per month since the start of the year. In order to achieve November 22 regulatory and approved and service date, we estimate we would need to average construction completion of approximately 2% per month through the end of this year. And as a reference point, Unit 3 averaged approximately 2% during the second half of 2019 and through the first half of 2020, which did include periods heavily impacted by COVID-19. Looking now at cost during the first quarter Georgia Power allocated $84 million of contingency into the base capital forecast related to extending the schedule for Unit 3, performing construction remediation work and increasing support resources across both units. As a result, Georgia Power replenished its contingency by $48 million reporting an after-tax charge of $36 million at the end of the first quarter. While there was contingency remaining prior to this increase, we believe providing this additional amount of contingency is appropriate when considering the extended time necessary to reach the start of Unit 3 Hot Functional Testing and the potential cost risk remaining as we complete both units. The major risks that remain to our cost estimate are similar to those for schedule namely, one, our ability to increase earned hours and improve productivity or CPI at Unit 4, successful completion of the Unit 3 Hot Functional Testing, and three, completion of the system turnovers and subsequent testing lead it to the Unit 3 fuel load. Notably at this time last year, the onset of COVID-19 led to many uncertainties at the project site. The site team has responded in exemplary fashion, maintaining safety and progress toward completion of both units during what has been an unprecedented year. With effective COVID protocols in place and now the broader availability of vaccines, the impact on the site has decreased in recent months as active cases and isolation rates are trending significantly lower. We are very pleased that Unit 3 Hot Functional Testing is under way. We've consistently said that both the commencement and successful completion of this testing sequence will reduce risk for the project. I hope you're all safe and well. As Tom mentioned, we had a very strong start to the year. Our adjusted earnings per share for the first quarter of 2021 was $0.98, $0.20 higher than last year and $0.14 above our estimate. The primary drivers compared to last year was strong performance at our state-regulated utilities, despite a comparative quarter that had very limited COVID-19 impacts. The lessons we learned during COVID-19 allowed us to maintain a relatively static cost structure as we saw a withdrawal of COVID-19 impacts from their peak. We saw year-over-year benefit of $0.06 from weather due to the extremely mild first quarter we experienced in 2020. Further, retail electric revenues increased in aggregate due to strong customer growth in the Southeast and constructive state regulatory actions. When looking at an adjusted earnings per share as compared to our estimate for the quarter, the main drivers of the positive variance were continued expense discipline, retail sales impacts from COVID-19 that were nearly 60% better than our forecast across all customer classes and significantly lower than their peak and residential customer growth that has continued to exceed our expectation by almost 50%, we added nearly 60,000 customers last year. A detailed reconciliation of our report and adjusted quarterly results as compared to 2020 is included in today's release and the earnings package. Looking more closely at sales in the first quarter, weather-normal retail sales were only approximately 1.5% lower than last year's largely unaffected quarter. This decrease was driven by the continued trends of higher residential sales offset by lower commercial and industrial sales compared to normal times. While residential sales remained elevated, commercial and industrial sales continue to be depressed by about 3%. As you would expect, the commercial sub-sectors most impacted by the pandemic continue to be office, restaurant and education. These are meaningful declines and we expect recovery to be very gradual, even with improving economic conditions. For industrial sales during the quarter, supply chain constraints appear to be affecting the automotive sector with primary metals and chemicals also down, but construction and lumber in particular are demonstrating early strength. In general, all industrial segments have moved stronger since the COVID-19 peak. The economies in our service territory are showing strong signs of recovery with retail sales exceeding our expectations in the first quarter by roughly 3 percentage points. A recent analysis produced by IHS Markit estimates that most Southeastern states, including Georgia, Alabama, and Mississippi are predicted to return to their pre-pandemic peak employment levels by 2022, while other states may not return to these levels until 2025 and beyond. We have certainly learned that the COVID-19 pandemic and its impacts are unpredictable, but the potential for more near-term recovery is encouraging. We mentioned on our last call that economic development trends are strong in our region, particularly in Georgia. And in fact, in the first quarter of 2021 alone, economic development announcements in Southern Company's retail electric service territory, included the addition of over 3,600 new jobs and investments of more than $2.2 billion. We saw strong activity in both non-manufacturing and manufacturing segments with new project announcements across a variety of industries, including warehousing, distribution, scientific and transportation equipment among others. For the second quarter of 2021, our estimated EPS-our adjusted earnings per share estimate is $0.78. I would also like to call your attention to our recent dividend increase. At its last meeting, the Southern Company board of directors approved an $0.08 per share increase in our common dividend, raising our annualized rate to $2.64 per share. This action marks our 20th consecutive annual increase and for 73 years, dating back to 1948, Southern Company has paid a dividend that was equal to or greater than that of the previous year. The Board's decision to increase the dividend reinforces the strength and sustainability of Southern Company's business. This dedication to continuing our dividend increases combined with our projected long-term earnings per share growth rate of 5% to 7%, supports our objective of providing superior risk adjusted total shareholder return to investors over the long-term. On our ESG efforts, recall in January, Southern Company became the first major U.S. utility to publish a sustainable financing framework. Our first issuance was a green bond related to Southern Power's renewable investments, further solidifying Southern Power is one of the largest green bond issuers in the United States. In February, we issued our inaugural sustainable bond at Georgia Power with net proceeds to be used for sustainable projects, such as our spending with diverse and small business suppliers and our investment in renewable energy projects. The Georgia Power issuance aligns with our ongoing commitments to the community and the continued growth of Georgia Power solar portfolio. We look forward to leveraging our sustainable financing framework for future financings by all of our issuers as appropriate. Also I'd mentioned that Southern Power has been very active over the last few years, establishing itself as one of the nation's largest renewable generation owners with a total renewable portfolio of nearly 5,000 megawatts in operation are under construction. Within the last month, Southern Power announced the acquisition of the 300-megawatt Deuel Harvest wind facility located in South Dakota and the 118-megawatt Glass Sands wind facility located in Oklahoma. With these acquisitions, Southern Power now owns 15 wind projects and approximately 2,500 megawatts of solar across the U.S. along with approximately 160 megawatts of battery storage. The existing generation fleet comprised of both renewables and natural gas is over 90% contracted for the next 10 years. Finally, over the past three years, we have strategically simplified our business in order to focus our time and investments in our core operations. As another example of that commitment, yesterday, we entered into an agreement to sell our wholesale gas trading and services business comprised of Sequent Energy Management and Sequent Energy Canada and we expect to complete the transaction in the third quarter of 2021. We do not expect a material gain or loss on the sale of the business, there we'll provide a return of the associated working capital and the elimination of certain credit supports of approximately $1 billion. As a reminder, we have always excluded Sequent's earnings from our adjusted results due to its quarterly variability. So the sale of this business both reduces risk and has no impact on our adjusted earnings per share expectations for the remainder of the year. I can tell you that it's been my pleasure working with all of those individuals at Sequent for more than 20 years. And I really look forward to their continued success. As I noted last quarter, we achieved a 50% reduction in GHG emissions in 2020, beating our 2030 goal by a decade. Earlier this month, we filed an integrated resource plan in Mississippi that includes the retirement of Mississippi's last coal unit in 2027. Both Alabama Power and Georgia Power will work with their respective regulators over the next year and responding to the effluent limitation guideline rules, which they will reflect in their next integrated resource plan. We will also continue to work with all stakeholders in developing these strategies. Another note, we have historically worked in partnership with municipalities and co-ops in our region. We work hard on mutual respect and constructive collaboration. As an example of the wisdom of this approach, Alabama Power recently signed a long-term agreement with Power South of valued customer in Alabama, which is expected to create energy savings and enhance system reliability from coordinated planning and operations. As a part of this agreement, Alabama Power has the right to participate in a portion of power SaaS future incremental load growth. In closing, our strong first quarter positions us well to deliver on the financial objectives for the year, with the summer months and storm season ahead, our operating companies are well prepared to support the needs of our customers. And of course, all eyes remain on progress at Vogtle and we look forward to providing continued updates as we approach fuel load and in service for Unit 3. Operator, we're now ready to take questions.

southern co quarterly basic earnings per share, excluding items $0.98.

I'm Kevin Kim, Divisional VP of Investor Relations and moderator for today's call. This document will remain there following our call. Our call will be led by David Maura, Chairman and Chief Executive Officer; Jeremy Smeltser, Chief Financial Officer; and Randy Lewis, Chief Operating Officer. Turning to slides three and four. Actual results may differ materially. Before I get started, I want to take a moment and speak directly to our employees and our partners around the world. While our work is far from complete, our financial results reflect another quarter of strong top and bottom line growth and further confirm that we are structuring for growth and efficiency to serve our consumers, customers and stakeholders. I'm also very proud of the progress we've made these past three years. Our teams have embraced both our new global operating model and the spirit of our servant leadership culture. They've also persevered through a global pandemic to deliver excellent and consistent financial performance for our stakeholders. Because of you, our employees, the new Spectrum Brands has emerged a more efficient, focused, productive and consistent operating company. We will continue to be driven by our values of trust, accountability and collaboration to serve our mission as we make living better at home. Our latest financial results for the second quarter reflect another excellent quarter of top line growth and operating leverage. Our investments in marketing and advertising for our trusted brands were higher in each of our business units, and this continued to drive strong demand this quarter. Our second quarter revenue grew 22.6% as we achieved double-digit growth across all of our business units. And our e-commerce sales grew nearly 43%. Turning to the bottom line. Second quarter adjusted EBITDA increased 28.8% driven by higher volumes and improved efficiencies from our Global Productivity Improvement Program. Our operating leverage also improved despite higher inflation and incremental investments that we're making in marketing and advertising. As we outlined during our prior earnings calls, our reinvestments continue to reignite the flywheel of new product launches, improving our top line growth, expanding our margins and driving greater profitability and cash flow generation. If I could have everyone turn now to slide seven. As has been well-documented, transportation and commodity-related inflation continue to negatively impact our industry. Consistent with our highlights last quarter, we expect these headwinds to more heavily impact the second half of the year. But despite these headwinds, our stellar first half performance and our continued organic growth give us confidence in again raising our earnings framework to reflect mid-teens net sales and adjusted EBITDA growth, adjusted free cash flow of $260 million to $280 million. We are well positioned going into the third quarter. And while we recognize tough comparisons as we lap last year's fourth quarter performance, we will continue to focus on disciplined execution of our winning playbook, leveraging our stable manufacturing and distribution footprint and investing behind our strong brands. We remain laser-focused on capturing gross GPIP savings. And in fact, our teams are targeting incremental savings for 2022. Randy will highlight that in more detail later on. Our new operating model and deliberate investments behind our business units over the last few years have built a stronger and much more resilient company, and we continue to expect long-term growth. Now moving to slide eight. Our balance sheet this quarter improved sequentially, ending the quarter with net leverage of 3.2 times and over -- and maintaining over $860 million in total liquidity. Our actions earlier this quarter to refinance our debt are expected to reduce our annual interest expense by $18 million a year. As a reminder, we issued $900 million of total debt with a mix of Term Loan B and a new 10-year three 7/8 senior notes, which will lower our cost of capital. As announced in April, we are very excited to add the recent acquisition of Rejuvenate to our portfolio. Rejuvenate is a leading developer and marketer of household cleaning products, maintenance and restoration products with an incredible loyal following. We expect the transaction to close in the third quarter. And this fits perfectly with our company's strategy to make living better at home, and it adds a fourth category to our Home & Garden business unit. I'm confident in our ability to create tremendous value together. Turning to slide nine. Going forward, our capital allocation priorities continue to focus on: One, allocating capital internally to our highest-return opportunities, and this includes strengthening our brands through consumer insights, research and development, innovation and advertising and marketing to drive vitality and profitable organic growth; two, we plan to return cash to our shareholders via dividends and opportunistic share repurchases; third, disciplined M&A with tuck-in strategic acquisitions that are synergistic and help drive value creation. We will continue to target a net leverage ratio in the three to 4 times range. Now you'll hear more from Jeremy on the financials, and Randy will give you an update and additional business insights. Over to you, Jeremy. Turning to slide 11 and a review of Q2 results from continuing operations. I'll begin with net sales. Net sales increased 22.6%. Excluding the impact of $18 million of favorable foreign exchange and acquisition sales of $26.8 million, organic net sales increased 18% with double-digit growth across all four business units. Gross profit increased $75.1 million, and gross margin of 35.1% was in line with the year ago driven by higher volumes in all business units, improved efficiencies from our Global Productivity Improvement Program and favorable mix, offset by higher freight and input cost inflation and last year's retrospective tariff excluding benefits. SG&A expense of $262.2 million increased 13.1% at 22.8% of net sales, with the dollar increase driven by improved volumes, higher advertising and marketing investments and incentive and distribution costs. Operating income of $116.8 million was driven by improved volumes, improved productivity and lower restructuring costs partially offset by input cost inflation, marketing and advertising investments and incentive costs. Net income and diluted earnings per share were primarily driven by the operating income growth and favorability from Energizer investments, offset by higher debt refinance costs. Adjusted diluted earnings per share improved to $1.76 driven by operating income growth along with lower shares outstanding. Adjusted EBITDA increased 28.8% from the prior year primarily driven by growth across all business units. Turning to slide 12. Q2 interest expense from continuing operations of $65.5 million increased $30 million due to the debt refinancing costs. Cash taxes during the quarter of $11.9 million were $4.4 million lower than last year. Depreciation and amortization from continuing operations of $38.7 million was $2.3 million higher than the prior year. Separately, share- and incentive-based compensation decreased from $14.6 million last year to $8.5 million this year driven by the change to incentive compensation payout methodology we talked about last year. Cash payments for transactions were $3.1 million, down from $6 million last year. And restructuring and related payments were $7.6 million versus $12.8 million last year. Moving to the balance sheet. The company had a cash balance of $290 million and approximately $577 million available on its $600 million cash flow revolver. At the end of the quarter, total debt outstanding was approximately $2.6 billion, consisting of approximately $2.1 billion of senior unsecured notes, $400 million of term loans and approximately $159 million of finance leases and other obligations. Additionally, net leverage improved sequentially and was approximately 3.2 times. During the quarter, we sold off our remaining Energizer shares for proceeds of $12.6 million. Capital expenditures were $16.2 million in Q2 versus $13 million last year. Turning to slide 13 and our updated earnings framework for 2021. We now expect mid-teens reported net sales growth in 2021, with foreign exchange expected to have a positive impact based on current rates. Adjusted EBITDA is also expected to grow mid-teens. This includes benefits from higher volumes; our GPIP program; approximately 11 months of results from the recent Armitage transaction in Global Pet Care, offset by net tariff headwind of about $30 million to $35 million driven by the expiration of previously disclosed retrospective tariff exclusions in 2020. In addition, as David mentioned, we have also now factored in $120 million to $130 million of input cost inflation compared to a year ago. Fiscal 2021 adjusted free cash flow for continuing operations is now expected to be between $260 million and $280 million, up from the previous range of $250 million to $270 million. This includes plans for incremental investments and inventory levels as well as the expected input cost inflation. Depreciation and amortization is expected to be between $180 million and $190 million, including stock-based compensation of approximately $30 million to $35 million. Full year interest expense is now expected to be between $130 million and $135 million. This meaningful step-down compared to our prior range of last year is driven by our successful $900 million refinancing in February of our senior notes due 2024 and partial refinancing of our senior notes due 2025. On a full run rate basis, as David mentioned, we expect annualized savings of approximately $18 million. Restructuring and transaction-related cash spending is now expected to be between $70 million and $80 million. Capital expenditures are expected to be between $85 million and $95 million. And cash taxes are expected to be between $35 million and $40 million, and we do not anticipate being a significant U.S. federal cash taxpayer during fiscal 2021 as we continue to use net operating loss carryforwards. We ended fiscal 2020 with approximately $800 million of usable federal NOLs. For adjusted EPS, we use a tax rate of 25%, including state taxes. Regarding our capital allocation strategy, we continue to target a net leverage range of 3 times to 4 times adjusted EBITDA. As it relates to our 2021 earnings framework, please keep in mind just a few factors. First, we continue to plan for incremental advertising investments of over $20 million in fiscal 2021 as we continue to raise awareness, consideration and purchase intent with consumers. Second, recall the Q4 results this fiscal year will have six fewer selling days compared to the prior year. It's important to recognize this modeling nuance. Third, we continue to manage through inflationary pressures, which are currently expected to be $120 million to $130 million higher than the prior year. And fourth, adjusted EBITDA is also expected to be negatively impacted by the absence of Energizer dividend income. Now to Randy for a more detailed look at our operations. My comments today will focus on reviewing each business unit to provide detail on the underlying performance drivers of our operating results. And I will also update you on the current overall cost environment, progress on our GPIP program and results from our commercial operations team in e-commerce and marketing. Overall, we continue to see significant benefits from our operating model transformation as well as the addition of new talent in many key strategic roles. Q2 reflected another quarter of exceptional financial results with strong improvements across all four businesses. With the backdrop of elevated demands, this quarter reflected generally improved supply chain performance and consistent service levels despite continued industry challenges. These efforts, in addition to our continued commercial investments, helped drive another quarter of double-digit sales and adjusted EBITDA growth. Now let's dive into the specifics of each business. Starting with Hardware & Home Improvement on slide 15. Second quarter reported net sales increased 18.4%, and organic net sales increased 17.4%. Adjusted EBITDA increased 5.6% primarily driven by positive volumes and productivity improvements that were materially offset by last year's significant benefit from retrospective tariff exclusions as well as higher freight and input cost inflation, distribution costs, COVID-19-related costs and higher marketing investments. Excluding last year's tariff exclusions, adjusted EBITDA improved 20.1%. This represents another quarter of strong double-digit growth within HHI. While inventory levels are improved and have normalized over the last few quarters, demand continues to outpace supply with continued strong consumer demand for our products. This bodes well for our third quarter, especially as we are lapping last year's government-mandated shutdowns in three of our manufacturing facilities throughout Mexico and the Philippines. We expect continued demand increases throughout the balance of 2021 driven by our new product introductions and incremental advertising investments. Fundamentals across both the repair and remodel segment as well as the new build channels continue to be strong. In our Kwikset business, we are focused on driving demand for Microban, which incorporates antimicrobial technology on the surface of our hardware; also SmartKey technology, which allows users to rekey their own locks to any Kwikset key in about 15 seconds; and finally, our exciting Halo Touch Smart Lock product, which includes biometric- and WiFi-enabled technology along with voice-assist capability through Alexa and Google Assistant. As an example, the Kwikset team recently partnered with long-standing customer, Shea Homes, to begin installing Halo Touch locks on every new build as a standard home feature. This and other similar wins with Halo platform are encouraging as we believe home automation trends will continue to drive sales for our electronics and smart connected locks. Additionally, our Baldwin brand, which is a leader in luxury security products, launched a new quick-ship program this quarter with a wide array of SKUs shipping within five business days, dramatically improved the customer experience. Finally, I'm also pleased to announce that Tim Goff accepted the role of President of HHI in March. Tim is one of our top strategic leaders and most recently served as the Head of our Commercial Operations Group. He captained the transformational benefits that, that team has had on the new SPB operating model and business results. Tim knows the HHI business very well, having previously served as the Chief Marketing Officer and holding other supply chain, operational and sales leadership roles over the years. We look forward to sharing more details over the coming quarters as Tim and the HHI team work to build on our leading market positions in Spectrum Brands' largest business unit. Now to Home & Personal Care, which is slide 16. Reported and organic net sales increased 28% and 24.3%, respectively. Adjusted EBITDA more than doubled to $25.4 million. Net sales were driven by continued strength in small kitchen appliances and personal care categories as well as growth across all regions. e-commerce sales both in pure-play and retailer dotcom channels continued to grow at a high rate. EBITDA was driven by higher volumes and productivity improvements partially offset by increased freight and input cost inflation and continued marketing investments. Q2 represented the seventh consecutive quarter of year-over-year top line growth as momentum for our home appliances and personal care products continued well past the successful holiday season. We've seen incremental demand in the U.S. for recent stimulus spending, and our fill rates continue to improve. This bodes well for our plans to continue to grow sharing and shelf space with our key retailers. However, when modeling this business, please keep in mind the inflationary headwinds within Home & Personal Care. We expect our pricing and supplier partner initiatives will only partially offset the second half headwind. As a result of these factors, we currently expect margin pressure in the second half, and we'll continue working to mitigate the inflation throughout the year and into fiscal 2022. Our focus on 2021 and beyond will remain on consumer-led, insights-driven new products. We will continue to drive those investments in our brands across more markets than ever before. Moving to Global Pet Care, which is slide 17. Q2 represented another strong quarter of financial performance with reported net and organic sales growth of 23.9% and 10%, respectively. Adjusted EBITDA grew 39%. Top line growth was driven by both our aquatics and companion animal categories with broad-based demand across subcategories and channel partners. Higher EBITDA was driven by volume growth and productivity improvements partially offset by higher inflation and distribution expenses as well as advertising and marketing investments. Q2 was also the tenth consecutive quarter of year-over-year top line growth and eighth consecutive quarter of bottom line growth as our existing legacy brands and recently acquired brands all performed well in their categories. Our global pet team continues to build its worldwide market leadership position in the core categories of Aquatics, Dog Chews, Pet Grooming and Pet Stain & Odor. You'll recall that we added Omega Sea as an acquisition last year to advance our premium aquatics offerings, and our addition of the Armitage Pet Care came earlier this year. This is an excellent platform for international expansion, not only our dog chews business but also cat chews, treats and toys. As we've said before, our Global Pet Care team remains confident that 2021 and beyond will benefit from the continued execution of our global strategies coupled with the very strong category growth fundamentals. In particular, we anticipate sustained demand for our high-margin consumables given all of the new pet parents in companion animal and all the new hobbyists who have recently entered the aquatics and reptile categories. These are long-term commitments and bode well for the future demand of our products. And finally, Home & Garden, which is slide 18. Second quarter reported net sales increased 21.4%, and adjusted EBITDA increased 22.7%. The top line again grew across controls, household insecticides and repellants with strong early season orders across all channels. EBITDA increase was driven by volume growth, favorable mix, productivity improvements partially offset by advertisement and marketing investments and higher distribution expenses. We believe both Spectrum Brands and our key retailers are very well positioned as we enter Q3, which is historically our largest quarter for sales and profitability. Q2 reflected another quarter of improved production capabilities to meet continued high levels of demand, which results in heavier inventory positions at retail compared to prior year. Spring is just starting in much of the U.S., which kicks off our selling season for controls and repellants. We are seeing good early quarter POS performance. The weather, and thus the resulting POS performance in our peak season, remains an unknown variable. We are very well positioned to maximize our results this year despite ongoing challenges from input and freight markets. We're also very excited about the anticipated acquisition of Rejuvenate, a leading household cleaning, maintenance and restoration product company. Rejuvenate has a loyal customer following and has generated impressive top and bottom line growth. Product categories centered around floor care as well as disinfectants and kitchen and bath. Last year's net sales were over $60 million with growing sales and margins over the past three years. We are confident in our ability to capture operational and revenue synergies with a business that has strong EBITDA margins and customer alignment with our existing channels. The transaction is planned to close during the third quarter, but we look forward to applying our strengths in manufacturing, marketing and sales to further strengthen the Rejuvenate brand, particularly within underpenetrated retailers. Our continued A&P investments this quarter are consistent with our strategy to invest more resources to tell our story around brands such as Spectracide, Cutter, Hot Shot and EcoLogic, along with incremental research dollars to deliver even more new and innovative products. We believe these actions will further enhance our mission to be a recognized market leader in providing consumers the best solutions to conquer nature's challenges and enjoy life. This is possible with our distinctive combination of brands, formulations, registrations, supported by efficient manufacturing and strong customer relationships. The fundamentals in this business remain very strong. With solid profitability and high barriers to entry, we're confident that our strong brand equities and increased investments in product development and marketing will accelerate long-term growth rates. Now let's turn to our internal growth and efficiency efforts with our Global Productivity Improvement Program, which is on slide 19. As David mentioned, we remain laser-focused on the execution of our key initiatives in this program as Q2 delivered productivity enhancements across all business units. We remain resolute on using the savings to reinvest back into the business to deliver long-term sustainable organic growth. This program continues to be our most important strategic initiative as we transform to our new global operating model. Our F '21 savings are running ahead of previous projections, and we are now raising our total gross savings target of $150 million to at least $200 million by the end of fiscal 2022. Our confidence in raising this target is driven by strong performance from our teams and expanded scope of our existing program initiatives. As Dave and Jeremy noted earlier, inflationary headwinds, while second-half-weighted, did begin to impact our business in this quarter. During our call last quarter, we indicated these headwinds were $70 million to $80 million higher than we had originally planned for the year or in other words, $100 million to $110 million higher than fiscal 2020 levels. Based on current rates as well as our improved expectations for top line growth for the year, these inflationary headwinds are now expected to be $120 million to $130 million higher in fiscal 2020 levels. During the quarter, we actively addressed these headwinds with a coordinated and consistent strategy utilizing many of the tools developed through our GPIP program. We are working in concert with our supplier partners to offset this inflation and have additional mitigation actions in many areas such as ocean freight and supplier management. The agreed-upon price increases with our retail partners are going into effect now during Q3 and are expected to continue to step up during Q4. And additionally, we anticipate further pricing discussions being necessary in the back half of the calendar year. We believe at this point that some of these inflationary pressures are likely temporary in nature and may begin to moderate in fiscal 2022. As Jeremy alluded to earlier, these headwinds are currently included in our earnings framework for the year, and we will remain vigilant with our operating discipline to maximize the long-term performance of our brands as a result of this. And finally, our commercial operations team continues to drive impressive results. This quarter, e-commerce grew by nearly 43% and represented more than 16% of our total net sales. Additionally, our digital teams continue to leverage data for the early identification of consumer trends to seed new product and sales opportunities and create promotional content that appeals to those consumers. Now back to David. Earlier this year at CAGNY, at the investor conference, we shared our Spectrum Brands mission, which is we make living better at home. And as I shared earlier, we are a more efficient, focused, productive and consistent operating company. Given that we've covered a lot on the call, let's conclude with a few takeaways on slide 21. First of all, our second quarter financials reflect another excellent quarter of top line growth. Investments in marketing and advertising for our trusted brands were higher in each division, which helped drive double-digit top line growth across all of our business units. Second, our second quarter financials reflect another quarter of operating leverage, with adjusted EBITDA increasing 28.8% from the prior year with growth across all businesses. Thirdly, our balance sheet improved sequentially, ending the quarter with net leverage of 3.2 times with over $860 million in total liquidity. Additionally, our successful debt refinancing actions this quarter are expected to drive a material step-down in our interest expense. I'm extremely grateful for all the sacrifices you have made to navigate our company successfully through these challenging times. Francis, let's just dive right into Q&A.

compname reports q2 adj earnings per share of $1.76. q2 adjusted earnings per share $1.76. qtrly net sales $1.15 billion, up 22.6%. now expects mid-teens reported net sales growth in fiscal 2021. adjusted ebitda is also expected to increase mid-teens in fiscal 2021. adjusted free cash flow is now expected to be between $260 million and $280 million in fiscal 2021.

This document will remain there following our call. Our call will be led by David Maura, Chairman and Chief Executive Officer; Jeremy Smeltser, Chief Financial Officer; and Randy Lewis, Chief Operating Officer. Turning to slides three and four. Actual results may differ materially. You have all overcome a lot over these past 18 months, and I'm very proud of you. The management team and I appreciate each and every one of you. We should all be proud of our progress, which is further confirmation of the durability of our business and our winning playbook. Our teams have embraced both our global operating model and the spirit of our servant leadership culture. We persevered through a global pandemic to deliver excellent and consistent financial performance for our stakeholders. And our fourth quarter financial results reflect another quarter of top and bottom line growth. And it reinforces that we are truly structured for growth and efficiency to serve our consumers, customers and our stakeholders. On a year-to-date basis, our businesses have delivered 19% organic net sales growth and 36% EBITDA growth. The new Spectrum Brands is, in fact, a more efficient, focused, productive and consistent operating company, and we are confident in our ability to manage through the near-term volatility, including the current inflationary headwinds and supply chain disruptions. We have and will manage through these challenges with the same discipline and collaboration that allowed Spectrum Brands to navigate the tariff headwinds in 2019 and the pandemic restrictions of 2020. We will emerge a more durable company with a more resilient supply chain, and we will continue to be driven by our values of trust, accountability, and collaboration to serve our mission, which is, we make living better at home. We again delivered top and bottom line growth in the quarter, and we continued to plant seeds for future growth with our investments in innovation, marketing and advertising across each of our businesses. Our third quarter net sales grew 18.1%, driven by growth across all business units, with standout performance from HHI. This double-digit top line performance also reflects 14% total company growth against our 2019 levels and reflects our actions over the last few years to reignite the flywheel of growth for our trusted brands. Now turning to the bottom line. Third quarter net income from continuing operations was $34.9 million, and adjusted EBITDA was $167.4 million, mainly driven by HHI's organic growth. What I'm actually most proud of this quarter is the discipline exhibited by all four business units, as our EBITDA this quarter included an additional $19 million in innovation, marketing and advertising spend versus the period a year ago. The fact that our operators of our businesses continue to lean in and invest for long-term future growth despite the current macro challenges is evidence to me that our culture -- the culture of this company has changed and we are truly focused on sustainable growth. Adjusted earnings per share grew 15.4% despite headwinds from inflation and incremental investments in marketing and advertising, as our teams continue to focus on driving efficiencies from our Global Productivity Improvement Program and implementing pricing actions. We were also opportunistic this quarter with a share repurchase program, buying back over $10 million worth of Spectrum Brands shares. Turning to slide seven. Headwinds from inflationary pressures stepped up in the quarter, as expected, driven by transportation and commodity costs. But despite these continued headwinds, we remain committed to delivering on our earnings framework with mid-teens net sales and adjusted EBITDA growth and adjusted free cash flow of $260 million to $280 million. We will continue to focus on the disciplined execution of our winning playbook by investing in our people, continuing to drive a culture of servant leadership, empowering and resourcing our teams to win in the marketplace with news and excitement from new product introductions. Our balance sheet this quarter remained strong with net leverage of 3.6 times, and we have over $600 million in total liquidity. We also successfully closed on the Rejuvenate acquisition during the quarter for approximately $300 million, adding a fourth category to our ever-expanding Home & Garden business. Turning to slide nine. Going forward, our capital allocation priorities will continue to focus on: one, allocating capital internally to our highest return opportunities, and this includes strengthening our brands through consumer insights, innovation and advertising and promotion and marketing to drive the vitality of our business and drive profitable organic growth; two, we plan to return cash to shareholders via dividends and opportunistic share repurchases; and third, we will continue with disciplined M&A, with tuck-in strategic acquisitions that are synergistic and help drive value creation. I'm very pleased to report to all of our stakeholders that all of our recent acquisitions, including Omega Sea, Armitage and Rejuvenate are performing at or above our original deal expectations. We continue to target net leverage in the 3 times to 4 times range. Now you'll hear more from Jeremy on the financials, and Randy will update you with additional business unit insights. Turning to slide 11, and review Q3 results from continuing operations, beginning with net sales. Net sales increased 18.1%. Excluding the impact of $25.9 million of favorable foreign exchange and acquisition sales of $34.3 million, organic net sales increased 12%. Net sales grew across all four business units. Gross profit increased $58.5 million and gross margins of 35%, declined just 40 basis points from a year ago due to higher freight and input costs, partially offset by higher volumes, improved efficiencies from our GPIP initiative and favorable mix. SG&A expense of $275.4 million, increased 22.5% at 23.7% of net sales, with the dollar increase driven by higher volumes, higher advertising and marketing investments, higher distribution and incentive costs, higher transaction-related costs and SG&A from our recent acquisitions. Operating income of $98 million was driven by higher volumes, improved productivity and lower restructuring costs, partially offset by higher freight and input costs and marketing and advertising investments. Declines in GAAP net income and diluted earnings per share were primarily driven by prior year gains from the company's prior Energizer common stock investments and gains from the extinguishment of Salus CLO debt. Adjusted diluted earnings per share improved to $1.57, driven by favorable volumes and improved productivity. Adjusted EBITDA increased 1.8% from the prior year, primarily driven by HHI. Turning to slide 12. Q3 interest expense from continuing operations of $31.4 million, decreased $4.7 million due to our lower cost of debt. Cash taxes during the quarter of $8.6 million were $4.8 million higher than last year. Depreciation and amortization from continuing operations of $38.6 million was $3.6 million higher than the prior year. Separately, share and incentive-based compensation decreased from $14.2 million last year to $7.5 million this year, driven by the change to incentive compensation payout methodology. Cash payments for transactions were $16 million, up from $7.2 million last year. And restructuring and related payments were $5.1 million versus $25.2 million last year. Moving to the balance sheet. The company had a quarter-end cash balance of $130 million and $478 million available on its $600 million Cash Flow Revolver. Total debt outstanding was approximately $2.7 billion, consisting of $2.1 billion of senior unsecured notes, $497 million of term loans and revolver draws and $156 million of finance leases and other obligations. Additionally, net leverage is 3.6 times. And during the quarter, the company repurchased 115,000 shares for $10.2 million. Capex was $15.2 million in Q3 versus $12.9 million last year. Turning to slide 13 and our earnings framework for 2021. We are reiterating our earnings framework for the year as we continue to expect mid-teens reported net sales growth in 2021, with foreign exchange expected to have a positive impact based on current rates. Adjusted EBITDA is also expected to grow mid-teens. This includes benefits from higher volumes, our GPIP efficiencies, approximately 11 months of results from the recent Armitage transaction in Global Pet Care and now includes approximately 4 months of Rejuvenate for Home & Garden, offset by net tariff headwinds of about $30 million to $35 million driven by the expiration of previously disclosed retrospective tariff exclusions in 2020. In addition, as David mentioned, we have factored in $120 million to $130 million of input cost inflation compared to a year ago primarily in the second half of the fiscal year. Fiscal 2021 adjusted free cash flow from continuing operations is expected to be between $260 million and $280 million. This includes plans for incremental investments in inventory levels as well as the expected input cost inflation. Depreciation and amortization is expected to be between $180 million and $190 million, including stock-based compensation of approximately $30 million to $35 million. Full year interest expense is expected to be between $130 million and $135 million. Both restructuring and transaction-related cash spending as well as capital expenditures are expected to be between $70 million and $80 million. Cash taxes are expected to be between $35 million and $40 million, and we do not anticipate being a significant US federal cash taxpayer during fiscal 2021 as we continue to use net operating loss carryforwards. We ended the prior year with approximately $800 million of usable federal NOLs. For adjusted EPS, we use a tax rate of 25%, which includes state taxes. Regarding our capital allocation strategy, we continue to target a net leverage range of 3 times to 4 times adjusted EBITDA. As it relates to the 2021 earnings framework, please keep in mind a few factors. First, we continue to plan for incremental brand support investments of approximately $45 million for the year as we continue to raise awareness, consideration and purchase intent. Second, recall the Q4 results this fiscal year will have 60 reselling days compared to the prior year. It's an important to recognize this modeling nuance. Third, we continue to manage through inflationary pressures, which are still expected to be $120 million to $130 million higher than last year. Fourth, Q4 results this fiscal year will include the change to our incentive compensation program that was enacted in Q4 last year, positively impacting comparability by about $12.7 million compared to the prior year in Q4. And lastly, adjusted EBITDA is also expected to be negatively impacted by the absence of Energizer dividend income. Now over to Randy for a more detailed look at our operations. My comments today will focus on within each business unit to provide detail on the underlying performance drivers of our operating results. I will also update you on the current overall cost environment and our global productivity improvement program. Overall, we continue to see significant benefits from our operating model transformation. As David outlined earlier, our business is demonstrating its durability and our operating strategy is proving effective in helping us actively manage through today's headwinds. While the impacts of COVID-19 over the past year are creating extreme volatility in the year-over-year and quarter-to-quarter comparisons of our businesses. Overall, we continue to believe that consumer demand remains positive in our categories and the strong performance of our brands continues to drive long-term growth. Q3 reflected another quarter of organic sales growth for the total company. And despite industry supply chain challenges, we continue to work to improve our delivery performance and provide more consistent service levels to our customers, which is earning us positive feedback from those partners. These efforts, in addition to our continued commitment to long-term commercial strategies, operational investments help drive another quarter of top and bottom line growth. Now let's dive into the specifics for each business. Starting with Hardware & Home Improvement on slide 15. Third quarter reported net sales increased 48.8% and organic net sales increased 46.7%. Top line performance was primarily driven by security sales growth over the prior year. Last year, you will recall, we experienced COVID-19-related disruptions at our Hardware & Home Improvement manufacturing locations in Mexico and the Philippines due to temporary, government-ordered shutdowns. It's important to highlight that we had double-digit growth across all HHI categories, even in comparison to strong results from the prior year in plumbing and builders hardware. EBITDA increased 56%, primarily driven by volume growth and productivity improvements and partially offset by higher freight and input costs and higher advertising investments. This represents our fourth consecutive quarter of strong double-digit sales growth for HHI, as well as 18% growth compared to 2019 levels. We continue to expect demand to be driven by our new product introductions and increased advertising investments. Additionally, fundamentals across both the repair and remodel and the new build channels continue to be strong. As we turn to expectations for the next two quarters, we should look at last year's history. If you recall, Q4 of last year started the strong rebound in sales as production of our security products recovered dramatically from the COVID-19 government shutdowns. Our HHI teams across security, plumbing and builder's hardware continue to be focused on driving growth and taking share. We will continue to invest in innovation, marketing and advertising and are seeing positive results in retail POS and benefits from recent commercial wins with Clayton Homes, Shea Homes and another -- and a number of other top 100 US builders. Additionally, our Baldwin brand, the leader in luxury security products, recently launched its Quick Ship Program with a wide array of customized SKUs, shipping within five business days, to dramatically improve the customer experience in that category. In Kwikset, we remain focused on driving demand with our exciting Halo and Halo Touch Smart Lock product lines, which includes biometric and WiFi-enabled technology, along with voice control capability through Alexa and Google Assistant. Also contains SmartKey technology, which allows users to rekey their own locks to any Kwikset key in about 15 seconds. And Microban, which incorporates antimicrobial technology on the surfaces of our hardware. Now to Home & Personal Care, which is slide 16. Reported inorganic net sales increased 9.5% and 4.2%, respectively. Adjusted EBITDA decreased to $11.8 million. Net sales were driven by continued strength in small kitchen appliances and personal care categories with notable growth from haircare and garment care segments. The US continued to grow along with strong growth in Latin America as retail channels began reopening after shutdowns from COVID-19. Lower EBITDA was driven by increased freight expense, substantial investments in marketing and advertising and input cost inflation. This was partially offset by pricing actions, higher volumes and productivity improvements. Q3 represented the eighth consecutive quarter of year-over-year top line growth for our appliance business. Performance was driven by double-digit growth in haircare and garment care products as well as moderate continued growth in small kitchen appliances compared to the outstanding sales from last year. Our consistent commercial wins over the last two years and continued investments give us confidence in our plans to continue growing share and taking shelf space with our key retailers. As we outlined on our last call, inflationary headwinds as well as continued marketing investments in HPC in Q3 and Q4 only be partially offset by our pricing and supplier partnership initiatives. This will put pressure on margins. However, we continue to work to mitigate the inflation impact as we enter fiscal 2022. Our focus in 2021 and beyond will remain in consumer-led, insights-driven new products with incremental sales opportunities as retailers continue to reopen. And there is excitement for back-to-school, which was limited last year, as well as for the upcoming holiday season. Moving to Global Pet Care, which is slide 17. Q3 represented another quarter of top line growth. Reported net sales grew 6.5%, while organic sales declined 7.2%. Adjusted EBITDA declined 2.8%. Higher net sales was attributable to acquisition sales, which drove companion animal category growth. Top line results this quarter were impacted by lower-than-desired fulfillment levels during a June transition of 3PL providers at one of our major US distribution centers. The fulfillment challenge was a transitional issue and customer shipment volume returned to pre-transition levels by the end of the quarter. Lower EBITDA was driven by the distribution center transition, resulting in lower customer shipment volumes and increased operating costs. Profits were also pressured by higher freight and input cost inflation and advertising investments, partially offset by productivity improvements and pricing actions. The transition of service providers at the distribution center in the US was a planned strategic move. Our Global Pet Care business has been a very strong performer for several years, with 11 consecutive quarters of sales growth. We are very excited about the continued momentum of the business given the positive macro trends of the category and the strong performance of our brands. Thus, to better serve our customers currently and to support our strategic growth plan, we partnered with a new 3PL provider and committed to significant increases in space and automation. Our new partner is a Fortune 500 world-class service provider with extensive experience working with some of the largest companies in the consumer product space. They have the experience, scale, systems and automation processes to take our Global Pet Care business to the next level of customer order fulfillment and supply chain efficiency. The facility transition is now stable, and we expect the benefits of the new capabilities to start showing up this quarter. As we said before, our Global Pet Care team remains confident that 2021 and beyond will benefit from the continued execution of our global strategies, coupled with the strong category growth fundamentals. In particular, we anticipate sustained demand for our consumable products, given all the new pet parents in companion animal and all the new hobbies who have entered the acquired [Indecipherable] categories. These are long-term commitments and bode very well for the future demand of our products. In addition to operating a very strong business, our Global Pet Care unit is leading in another equally important area, giving back to society. Through a long-standing relationship with our GloFish brand, we partner with an outstanding organization named Well Aware. Well Aware is a non-profit organization headquartered in Austin, Texas that provides innovative and sustainable solutions to water scarcity in East Africa. While our partnership goes back almost 10 years, this quarter, we completed one of our most successful fundraising campaigns ever through Well Aware's Shower Strike Program. These fundraising actions, along with matching funds from Spectrum Brands, will directly contribute to providing a lifetime of clean, healthy water for thousands of people living in two communities in Southern Kenya. And finally, Home & Garden, which is slide 18. Third quarter reported net sales increased just less than 1%. Organic sales declined 3% and adjusted EBITDA decreased 3.8%. The net sales increase was driven by repellent category growth from distribution gains as well as contributions from the recently acquired Rejuvenate cleaning business. Sales of herbicides and insecticides were negatively impacted by unfavorable weather through much of the first two months of the quarter. The EBITDA decrease was driven by lower volumes and increased marketing investments and partially offset by pricing actions and productivity improvements. Despite the challenging weather in Q3, our business continues to outperform the category, and POS performance thus far in Q4 has been positive, with more favorable weather patterns and continued strong retailer support despite ongoing challenges from raw materials and freight markets. Given these ongoing challenges, the Home & Garden team has announced another round of planned price increases at the end of last month. With the successful close of the Rejuvenate acquisition, our teams are also focused on capturing operational and revenue synergies with a business that has strong EBITDA margins and good customer alignment with our existing channels. Recall that net sales for the business last year were over $60 million. And just recently, Rejuvenate was named HGTV's best multipurpose hardwood floor cleaner. We look forward to applying our strengths in supplier partnerships, manufacturing and marketing to further strengthen the Rejuvenate brand, particularly within underpenetrated channels and retailers. Our continued A&P investments in Home & Garden this quarter are consistent with our strategy to invest more resources to tell our story around the brand, such as Spectracide, Cutter, Hot Shock, EcoLogic and now Rejuvenate. We believe these actions will further enhance our mission to be the recognized market leader in providing consumers the best solutions to counter nature's challenges and enjoy life. Now let's turn to our internal growth and efficiency efforts for Global Productivity Improvement Program on slide 19. As David mentioned, we've remained laser-focused on execution of these key initiatives. As Q3 delivered productivity improvements across all business units. We remain resolute on using these savings to invest back into the business to drive long-term, sustainable, organic growth, especially during these challenging times. This program continues to be our most important strategic initiative as we transform our global operating model, and we remain on track to deliver our total gross savings target of at least $200 million by the end of fiscal 2022. Widespread inflationary headwinds stepped up this quarter and more meaningfully impacted our Q3 results. As we said during our last quarter, we continue to expect these gross headwinds to be approximately $120 million to $130 million higher than fiscal 2020 levels. While many of these headwinds are industrywide and often outside of our control, our results this quarter reflect our actions to address these impacts. We are expecting -- we are executing and coordinating a consistent strategy across the enterprise using the tools developed through our GPIP program and leveraging our operating model. We are partnering with suppliers to offset inflation, implementing mitigation actions and driving productivity improvements throughout all businesses, regions and functions. As Jeremy alluded to earlier, these headwinds are currently included in our earnings framework for this year. We implemented price increases with many of our retail partners in Q3, and we are taking additional pricing in Q4. And if the current cost environment holds, we expect to be taking further pricing actions in fiscal 2022. While we believe that some of these inflationary pressures are temporary in nature and may begin to moderate in fiscal 2022, we are preparing for higher levels of gross headwinds next year. As a reminder, the inflation we are experiencing in fiscal 2021 is hitting us almost entirely in the second half of the year. As we look forward to fiscal 2022, these inflationary headwinds are expected to be first half-weighted. Now back to David. Look, at this point, we've covered quite a bit on the call. I want to conclude now with the key takeaways here on slide 21. First, our third quarter financial results reflect another excellent quarter of top line growth driven by growth across every one of our business units. This top line performance, however, you analyze it, reflects our actions over the last few years to reignite the flywheel of growth for our trusted brands. Second, our third quarter financial results reflect adjusted EBITDA growth, despite inflationary headwinds, which stepped up in the quarter and continued challenges with our supply chain, but most importantly, it covered an incremental $19 million investment in innovation, marketing and advertising. Third, our teams remain focused on managing with discipline and collaboration. Our winning playbook gives us confidence in reiterating our 2021 earnings framework, and our GPIP program and efficiency targets are helping us finish the year strong. As I stated, we expect a strong finish to fiscal 2021, and we have great momentum heading into fiscal 2022. We remain encouraged by consumers' demands for our products and our retail partners' enthusiasm for our categories, brands and our new product launches. As I sit here today, I'm excited and optimistic about the future of our businesses and our company as a whole. As I mentioned earlier, the company's culture has shifted. We are no longer focused on running our business for short-term results. We are a more efficient company today and we are reinvesting much of the savings from our global productivity improvement program back into driving the growth of our four business units. Additionally, the backdrop of low interest rates, the US consumer with approximately $2.5 trillion in liquid assets, combined with a strong housing market and a permanent demand shift higher for our Pet and Home & Garden product offerings paints the picture of a very strong macro demand environment for our company. In summary, all of this adds up to a very favorable view of our prospects as we enter our fiscal 2022 on October 1st. The new energy of our teams and the investments we've made in innovation, marketing and advertising leaves me enthusiastic about our new product development pipeline and our expected new product launches in fiscal 2022 and 2023. I expect our current challenges on the supply chain to be mostly transitory, and I expect that we can overcome a lot of the headwinds that we're currently seeing on the inflation side. The future of Spectrum Brands is genuinely bright. I am extremely grateful for all the sacrifices of our Spectrum Brands employee partners that you've made to navigate our company successfully through these challenging times. Dawn, let's just dive right into Q&A.

compname posts q3 adjusted earnings per share $1.57. q3 adjusted earnings per share $1.57. spectrum brands holdings continues to expect mid-teens reported net sales growth for fiscal 2021. continues to expect adjusted ebitda to increase mid-teens for fiscal 2021.

I am Jeremy Smeltser, Chief Financial Officer of Spectrum Brands. As many of you know, Kevin Kim left Spectrum for another opportunity at the end of Q4, so I will moderate today's call. This document will remain there following our call. Actual results may differ materially. Appreciate everybody joining us today. On behalf of all of those at Spectrum Brands, I'm particularly pleased to report that full year fiscal '21 total Company sales were $4.614 billion, an increase of $650 million over the period a year ago. Adjusted EBITDA was $689.2 million, increasing $109 million over the period a year ago and our adjusted diluted earnings per share was $6.53. We have faced significant tariff costs, we've worked through a global pandemic, we have experienced unprecedented global supply chain challenges and inflation and yet we still succeeded in executing on our strategic playbook and delivering on all our financial goals. Looking back at fiscal '21, we've a lot to be proud of as we have continued to leverage our developing centers of excellence to allow our business units to focus their efforts on truly knowing our consumers. The focus is on efficiently using data to understand the needs of our end users in each category, meeting those needs through increased investment in new product innovation and telling that story to our consumers through enhanced brand messaging and product promotions. Our fiscal '21 and fourth quarter financial results reflect our continuing trend of delivering on commitments quarter-after-quarter, while navigating the challenging supply chain environment we all face. We are confident in our ability to face these inflationary pressures and supply chain disruption headwinds with the same focus and discipline as we look forward to another successful year in fiscal 2022. Fiscal '21 has also been a transformative year for our Company, as we have completed a number of strategic transactions. In addition to the tuck-in acquisitions in our Global Pet Care unit and our Home & Garden business, as we previously disclosed, we have entered into an agreement to sell our HHI business for $4.3 billion in cash to ASSA ABLOY. The transaction is subject to the customary regulatory approvals in the US and abroad, all of which are advancing nicely. Also, from a capital allocation perspective, we did repurchase 1.6 million shares of our common stock for approximately $125.8 million. Turning to slide 6. Here, we have an overview of the pro forma results of total Spectrum Brands, including HHI on a comparable basis to last year consistent with our earnings framework. Total pro forma Spectrum Brands results were in line with our earnings framework of mid-teen top line growth with revenue actually accelerating 16.4%, and we delivered adjusted EBITDA growth in the high teens at 18.8% growth. We also delivered adjusted free cash flow of $273 million as compared to our earnings framework of $260 million to $280 million. We are extremely pleased to report that we grew revenue by $650 million this fiscal year, and we grew our adjusted EBITDA by $109 million, delivering on the earnings framework we communicated to our shareholders in a very challenging operating environment. And we're extremely proud of the global team for making this happen. We've maintained our strategy of investing in insights, innovation and advertising at an elevated level across each of our businesses despite significant inflation headwinds within the quarter. We experienced accelerated inflation levels, in line with our expectations, and we currently foresee these headwinds continuing throughout our fiscal 2022. The team has done an exceptional job of managing our profitability, while continuing to invest in our future growth despite the challenges faced during the quarter. We remain committed to maintaining our focus on long-term sustainable growth, and we will continue to invest in the business. Moving on to slide 7. We again delivered top and bottom-line growth this quarter, including the impact of acquisitions. Organic sales, excluding the impact of FX and acquisitions, actually decreased 3.4% in the quarter as we compare the results of the fourth quarter of fiscal 2020, which was an exceptionally high sales quarter due to recovery from COVID-driven supply disruptions in the third quarter of fiscal 2020. As a reminder, we did have six fewer shipping days in the fourth quarter versus the same period a year ago. The decrease in shipping days, as well as the ongoing pandemic-related global supply chain disruptions, adversely impacted our sales this quarter. However, compared to the more normal operating environment of our fourth quarter of fiscal of 2019, these results actually represent double-digit organic sales growth. Turning now to the bottom line. Fourth quarter net income from continuing operations was $6.1 million compared to a loss of $9.6 million during the fourth quarter of last year. Adjusted EBITDA for the quarter was $79 million, resulting from volume growth, pricing actions, our Global Productivity Improvement Program savings and favorable comparisons to last year's variable compensation change from stock to cash payouts. This was partially offset by pressure from inflation and incremental investments. We remain committed to maintaining our focus on long-term sustainable growth, and we will continue to invest in our businesses going forward. Our balance sheet remains strong, and we ended the year with net leverage of about 3.5 times, and we have over $760 million in total liquidity. We were also able to fund $490 million worth of acquisitions during the past year without substantially increasing our leverage ratio. Also, from a capital allocation perspective, we did repurchased 1.6 million shares of our common stock for approximately $125.8 million. As we discussed on our HHI transaction announcement call in September, we expect to deleverage our balance sheet to approximately 2.5 times gross leverage upon the closure of the HHI sale. We have subsequently adjusted our long-term net leverage range to a more conservative 2 to 2.5 times net leverage. Our capital allocation priorities continue to focus first on allocating capital internally to our highest return opportunities. This includes strengthening our brands through consumer insights, innovation, advertising and marketing to drive vitality and profitable organic growth. Secondly, we plan to return cash to shareholders via dividends and opportunistic share repurchases. Third, we will continue with disciplined strategic M&A transactions that are synergistic and help drive long-term value creation. We believe this strategy will further enhance Spectrum's position as a home essentials company, focused on meeting consumer demand through our greatest brands and innovative product offerings. Moving now to slide 9. And our high-level fiscal 2022 earnings framework. We will continue to focus on executing our winning playbook, and we expect to grow the top line in the mid-to-high single digits. Adjusted EBITDA, we plan to grow in the low-single digits. This is after absorbing an expected additional level of inflation of around $230 million to $250 million. We expect the current step-up in inflationary pressures to continue throughout fiscal 2022 and the year-over-year impact will be more acute in our first half reporting of the year. We've implemented price increases in fiscal '21, and we've put in place further price actions in the first half of this year to counter these headwinds. Our goal is to achieve approximately 70% to 80% price coverage for inflation by the end of fiscal 2022, but we do expect our first half margins to be pressured due to the timing of these price increases. One of our key focus areas during fiscal '22 will be improving product availability to meet the continued elevated demand across our business units as we expect the global supply chain constraints to remain in place. Now you'll hear more from Jeremy on the financials and then Randy will come and provide you an update on additional business unit insights. Net sales increased 2.8%. Excluding the impact of $5.1 million of favorable foreign exchange and acquisition sales of $41.2 million, organic net sales decreased 3.4% as fourth quarter fiscal '20 was an exceptionally high sales quarter for both Global Pet Care and Home & Garden due to recovery after COVID-driven supply disruptions in Q3 fiscal 2020. HPC registered another quarter of growth. Results were also negatively impacted by the six fewer shipping days in the current quarter versus fourth quarter last year, as David mentioned. Gross profit increased $4 million and gross margins of 34.1% decreased 40 basis points, driven by commodity and freight inflation, partially offset by favorable pricing, mix and improved productivity from the Company's Global Productivity Improvement Program. Overall, given the inflationary pressures, we are pleased with the gross margin performance in the quarter. SG&A expense of $218.2 million increased 8.8% at 28.8% of net sales, with the dollar increase driven by acquisitions, higher marketing investments and inflation. Operating income declined from $30.5 million to a loss of $4 million, driven by higher restructuring and transaction-related expenses. Net income and diluted earnings per share increased due to a tax benefit, driven primarily by the release of certain valuation allowances. Adjusted diluted earnings per share decreased 2.6% due to the decline in operating income from higher SG&A. Adjusted EBITDA increased 8.5% primarily driven by volume growth from acquisitions, as well as productivity improvements and positive pricing, partially offsetting margin pressure from commodity and freight inflation. Recall that we had a change in our incentive compensation payout methodology during Q4 of last year that resulted in a reduction of stock-based compensation expense and consolidated adjusted EBITDA of $12.7 million during the fourth quarter of fiscal 2020. Turning to slide 12. Q4 interest expense from continuing operations of $20.1 million decreased $4.2 million. Cash taxes during the quarter of $6.3 million were $1.1 million lower than last year. Depreciation and amortization from continuing operations of $29.6 million was $2.9 million higher than the prior year. Separately, share and incentive-based compensation increased by $8.2 million from last year to $7.5 million driven by a change to incentive compensation payout methodology in last year's fourth quarter, which resulted in a reduction of stock-based comp expense for Q4 and the full year in fiscal 2020. Cash payments for transactions were $6 million, down from $6.2 million last year. Restructuring and related payments in the fourth quarter were $13.6 million versus $10.3 million last year. Moving to the balance sheet. The Company had a cash balance of $188 million and approximately $575 million available on its $600 million cash flow revolver. Debt outstanding was approximately $2.5 billion, consisting of approximately $2 billion of senior unsecured notes, nearly $400 million in term loans and just over $100 million of finance, leases and other obligations. Additionally, net leverage was 3.5 times at the end of the fiscal 2021. Capital expenditures were $23.2 million in the quarter versus $16.5 million last year. Let's turn now to slide 13. Here, we have an overview of full year continuing operations results. Net sales increased 14.3%. Excluding the impact of $49.5 million of favorable foreign exchange and acquisition sales of $122.7 million, organic net sales increased 7.8%, as we experienced growth across all businesses with double-digit organic growth in our Home & Personal Care business. The sales performance was driven by strong consumer demand in the first half of fiscal '21 and favorable comparisons to COVID-related closures across most regions in fiscal 2020. Gross profit increased $157 million and gross margins of 34.5% increased 100 basis points, driven by favorable pricing, mix and improved productivity from the Company's GPIP program partially offset by commodity and freight inflation. We are very pleased with the gross margin performance despite the inflationary headwinds. Adjusted EBITDA increased 21% primarily driven by volume growth, including acquisitions, as well as productivity improvements and positive pricing, partially offset by margin pressure from commodity and freight inflation. Turning now to slide 14 and our expectations for fiscal 2022. We currently expect mid-to-high single digit reported net sales growth in 2022, with foreign exchange expected to have a slightly positive impact based upon current rates. Adjusted EBITDA is expected to grow low-single digits. This includes continued benefits from our GPIP program and approximately eight months of results from the recent Rejuvenate transaction, which, last fiscal year, generated about $66 million of full year revenue. EBITDA is expected to grow despite incremental inflation headwinds of $230 million to $250 million, which are mostly offset by annualization of current pricing actions and planned further price increases, as well as additional productivity actions. From a phasing perspective, we expect first half and specifically the first quarter to be most negatively impacted by inflation pressures on a net basis. Depreciation and amortization is expected to be between $120 million and $130 million, including stock-based comp of approximately $25 million to $30 million. Full year interest expense is expected to be between $80 million and $90 million, including approximately $5 million of non-cash items. Restructuring and transaction-related cash spending is expected to be between $55 million and $60 million. Capital expenditures are expected to be between $95 million and $105 million. We ended fiscal '21 with approximately $725 million of usable federal NOLs and expect to use substantially all of them to offset the gain on the sale of HHI. We are projecting to be a US taxpayer in fiscal 2022. Cash taxes are expected to be between $20 million and $30 million. For adjusted EPS, we use a tax rate of 25% including state taxes. Regarding our capital allocation strategy, after the closure of the HHI sale, we're targeting a near-term gross leverage target with approximately 2.5 times. After full deployment of the HHI proceeds, we are targeting 2 to 2.5 times net leverage for our long-term target. So lastly, we plan to continue to invest behind our brands at the higher rates to support the execution of our strategy. Moving to slide 15. First, GAAP accounting for discontinued operations will allow us to allocate about $40 million to $45 million of interest to discontinued operations for the full year fiscal 2022. Our actual expected interest expense reduction is about $20 million higher than that on an annual basis after planned debt reductions. Continuing operations will carry about $20 million higher interest expense than we would expect in fiscal 2023, all else being equal. Second, as compared to our historical allocation approach to HHI, technical GAAP accounting will not allow us to allocate approximately $20 million of center-led cost to discontinued operations in our GAAP financials. After the sale closes, we would expect to be reimbursed for these costs under TSAs and our contractual agreements with the buyer for periods ranging from 6 to 24 months depending on the enabling function and region of the world. Post those TSAs, we will address any remaining stranded costs, consistent with our approach in our past material asset sales. Next, our year-over-year results are expected to be stronger in the second half of fiscal '22 as compared to the first half, essentially opposite of our quarterly results in fiscal '21 due to the timing of the impact of inflation hitting our cost lines and the continued increasing pricing actions taking effect as the year progresses. And finally, from a cash flow and working capital perspective, a few notable items to point out. First, HHI's free cash flow will not be presented in continuing operations for any period reported. Second, continuing operations free cash flow will be reduced by the $20 million of interest that I mentioned earlier. Third, we expect heavier than normal investments and capital expenditures, primarily due to our investments in our new S/4 Hana SAP upgrade program of about $30 million to $40 million, as well as heavier cash spend in restructuring and acquisition and integration costs due to the sale of HHI, the S/4 Hana program, as well as the completion of the Global Pet Care DC transition in the US. And finally, inventory levels are very difficult to predict this early in the year, given the global supply chain challenges and consumer demand. We will maintain a bias toward fill rates as needed to support our retail customers, and thus the timing of potential inventory reductions after last year's investments in inventory is uncertain. Now, I'll turn it to Randy for a more detailed look at our operations. My comments today will focus on a review of each business unit to provide details on the underlying performance drivers of our operating results, and I will also update you on the current overall supply chain and cost environment, as well as the progress on our Global Productivity Improvement Program. Overall, we continue to utilize our operating model to navigate the headwinds in the current business environment. While our results remain volatile from quarter to quarter due to the impact of COVID-19, we believe the fundamentals of our product categories remain very strong. Consumer demand in our categories continues to be positive and our brands continue to perform very well in their spaces. Now let's dive into the specifics of each business. Starting with Home & Personal Care which is slide 17. Reported and organic net sales increased 2.3% and 1.1%, respectively. Adjusted EBITDA decreased 36.1% to $14.5 million. Net sales were driven by continued recovery in the hair and garment care offsetting a slight decline in kitchen appliances, primarily due to global supply chain delays, as well as an expected slowing of consumer demand in that category. The US markets were most acutely impacted by transportation delays, but this was offset by strong growth in EMEA and Latin America. Lower EBITDA was driven by increased freight expense, continued investments in marketing and advertising, as well as input cost inflation. This was partially offset by pricing actions, higher volumes and productivity improvements. Q4 represented the ninth consecutive quarter of year-on-year top line growth for this business. Performance was driven by double-digit growth in garment care products and moderate growth in hair appliances, despite the significant transportation delays. Our consistent commercial wins over the last two years and continued investments give us confidence in our plans to continue growing share and shelf space with our key retailers. As we outlined in our previous calls, inflationary headwinds, as well as continued marketing investments in HPC in Q4 is only partially offset by our pricing and supplier partner initiatives. This will put pressure on margins, however, we continue to work to mitigate the inflation impact as we enter fiscal 2022. The timing of additional pricing action to address these increasing inflation pressures and supply challenges will further pressure margins in Q1. Although our long-term focus in 2022 will remain on a consumer-led insights driven new product platform with incremental sales opportunities in the upcoming holiday season, our immediate focus is on improving supply availability, as we continue to face capacity and transportation challenges. Moving to Global Pet Care, which is slide 18. Reported net sales grew 9.1%, while organic net sales declined just under 1% due to six fewer shipping days in Q4 of fiscal '21 versus fiscal '20, as well as impacts from supply chain constraints. Adjusted EBITDA grew 7.4% driven primarily by the impacts of acquisitions. Profits were pressured by higher freight and input cost inflation, partially offset by productivity improvements and pricing actions. We were able to overcome the third quarter fulfillment challenges from transitioning new 3PL provider at one of our US distribution centers that do see output level steadily improved throughout the quarter and finished above last year and at target rates by the end of the quarter. Q4 represented a record 12th consecutive quarter of revenue growth for this business. All top categories grew and sales to all top channels grew as well. With the continued resurgence in the pet specialty brick and mortar channel, as consumers have returned to in-store shopping. This is a great sign for the pet industry in general, as it's indicative of the strong consumer engagement that exists in the outlook for the category. EBITDA was driven by the top line growth, including the impact of acquisitions. Profits were pressured by higher freight and input cost inflation, partially offset by productivity improvements and pricing actions. We remain confident that 2022 and beyond will benefit from the continued execution of our strategy, which is centered around introducing unique innovation in order to drive demand for our portfolio of leading brands. The team is particularly excited to see the continued strong demand for the consumables products in this portfolio. As we've discussed before, we've seen an influx of new pet parents into companion animal categories, a new hobbyist into the aquatics and reptile categories. This bodes well for all the repeatedly purchased items in our portfolio, like dog and cat chews and treats, grooming tools and aids, bird and small animal foods, pet stain and odor removers and aquatic food filtration and water care products. These products typically carry strong margins and represent a significant portion of our overall portfolio. This is just another reason why we remain bullish about the continuing growth of this business. And finally, Home & Garden, which is slide 19. Fourth-quarter reported net sales decreased 7.3% and adjusted EBITDA decreased 19.4%. However, the full year reported net sales increased over 10% and the adjusted EBITDA increased 10.6%, closing a very successful year for this business. Fourth quarter net sales showed a decline across controls, household insecticides and repellents as last year's quarterly revenue was historically high, driven by the recovery of COVID-related supply disruptions in Q3 of fiscal 2020. The impact was compounded by six fewer shipping days in Q4 of fiscal 2021. The sales were also lower due to strategic exits of low-margin contract manufacturing business and non-strategic low-velocity SKUs. Fourth-quarter sales were 28% ahead of a more normal Q4 fiscal '19, driven by organic growth from strong consumer demand and continued market share gains. Our market data indicates that during Q4, we had double digit POS growth and in the 2021 season, we increased our overall leading market share position by an estimated 50 basis points. We are also very excited about our new Rejuvenate cleaning business, which continues to perform in line with expectations, as we fully integrated into our operations. The EBITDA decrease was driven by lower volumes and higher manufacturing and distribution costs, partially offset by pricing and productivity improvements. The business continues to see higher product costs from raw materials and freight. The business has announced another round of price increases that go into effect in this quarter to offset that cost pressure. We are also targeting further pricing action in the first half to offset additional expected inflation. We remain committed to our strategy to invest more resources to deliver truly innovative consumer solutions and tell our story around the brands of Spectracide, Cutter, Hot Shot, EcoLogic and now Rejuvenate. We believe our continued strategic investments will further enhance our mission to be the recognized market leader in providing consumers the best solutions for conquering nature's challenges and enjoying life. Now let's turn to our internal growth and efficiency efforts with our Global Productivity Improvement Program on slide 20. We remain focused on continued success, execution of this program as we complete our global operating model transformation. We are committed to our strategy of reinvesting these savings back into the business to drive long-term sustainable organic growth. We are reaffirming our gross savings target of $200 million of savings by the end of fiscal 2022. Our teams have already captured over $175 million of gross savings, since the program inception and this has helped us offset some of the adverse impacts of tariffs and inflation. These amounts include the HHI business. And adjusting for continuing operations only, the savings are about $150 million in total with approximately $135 million achieved through the end of fiscal 2021. As we had anticipated, inflationary pressure further accelerated in this quarter and impacted our results in a meaningful way. Although these inflationary trends are broad based with an industrywide impact, our quarterly results reflect the various actions we have undertaken to offset these cost pressures. We are leveraging the many advantages of our new global operating model and utilizing the enhanced tools developed through our GPIP program to launch a coordinated response to these market forces. The GPIP program is driving further productivity improvements in our processes and helping us partner with our suppliers to offset some of the inflation. With the current constrained global supply chain environment, we expect these inflationary pressures to accelerate further in the current quarter. We've also implemented further pricing increases with our retail partners in Q4 and are actively engaged in taking additional price in the first half of FY '22 to offset further incremental inflation. While we will continue to make incremental investments to growth initiatives such as consumer insights, R&D and marketing across each of the businesses, we believe supply chain improvement and resiliency must continue to be an area of focus for us in fiscal '22 as we work to improve product availability, while simultaneously finding ways to mitigate the cost pressures coming through the global supply chain. Now back to David. I'd like to take just a few minutes here to recap the key takeaways here on slide 22. First, our fourth quarter financial results conclude a very successful fiscal '21 for us, where we saw a 14% growth in sales and a 21% growth in adjusted EBITDA from continuing operations. The progress from our Spectrum family to improve our business is nothing short of remarkable. We've once again delivered strong results in the face of globally constrained supply chains and an accelerating inflation backdrop by continuing to invest in our long-term growth and find ways to offset the inflationary pressures through both price and productivity. We've demonstrated great discipline on our capital allocation process, as well as business operations. Our Global Productivity Improvement Program is delivering the savings we committed to, and we continue to reinvest those savings into long-term growth of the Company. Secondly, we are driving a strategic shift for Spectrum Brands with the sale of our HHI business for $4.3 billion. As mentioned earlier, the process is progressing well and it's going through the customary regulatory review. We expect to deleverage the balance sheet to approximately 2.5 times gross leverage upon the closure of the HHI sale, and we have adjusted our long-term average leverage target range to a more conservative 2 to 2.5 times net leverage. In addition, we expect to have approximately $2 billion of capital to deploy and to maintain this target leverage range. Third, the momentum in our operating businesses remains positive, despite inflationary pressures and global supply constraints. We expect inflation to accelerate in fiscal 2022. We've already launched a coordinated response to this through pricing actions and productivity programs. I'm personally very optimistic about the future of our businesses, and I'm proud of the way the team has come together to face the many challenges during fiscal 2021. As I mentioned earlier, the Company's culture has shifted to focus more than ever on the long-term growth and profitability of our businesses. And though we continue to face a challenged global supply chain, this management team has demonstrated the discipline to operate efficiently and maintain profitability, while continuing to invest in the future. On the demand side of the equation, we have experienced a sustained demand shift to a higher level of consumption in our Global Pet Care and Home & Garden businesses. We expect to continue this strong growth momentum in fiscal 2022. The macroeconomic environment remains favorable, as we enter the peak holiday season, which bodes well for our Home & Personal Care businesses. Overall, we are a more efficient Company today, and we are reinvesting much of the savings from our Global Productivity Improvement Program back into driving the growth of our three businesses. In summary, we maintain a favorable outlook for fiscal '22 and beyond, despite the various challenges over the next couple of quarters. The continued energy of our teams and the investments we're making in insights, innovation and advertising leave me enthusiastic about our new product development pipeline and our expected new launches in fiscal '22 and fiscal 2023. The future of Spectrum Brands is genuinely bright, as we continue to make living better at home. I'm extremely grateful for all the sacrifices our Spectrum Brands employees have made to navigate our Company successfully through these challenging times. Hey Josh, can you kick off the Q&A for us, please?

sees mid to high single-digit reported net sales growth in fiscal 2022.

Also on the call are Brian McDade, chief financial officer; and Adam Reuille, chief accounting officer. Please note, our 8-K filing is still in process with the SEC. However, it has not yet been accepted to it. Now, for those of you who would like to participate in the question-and-answer session, we ask that you please respect our request to limit yourself to one question and one follow-up question so we might allow everyone with interest the opportunity to participate. I'm pleased to report our business is solid and improving. Demand for our space and our well-located properties is increasing. I'll turn to some highlights. Our profitability and cash flow have significantly increased. Second-quarter funds from operations were $1.22 billion or $3.24 per share. Our domestic operations had an excellent quarter. Our international operations continue to be affected by governmental closure orders and capacity restrictions, which cost us roughly $0.06 per share for this quarter compared to our expectations due to the equivalent of a two-and-a-half month of closures. We generated over $1 billion in cash from operations in the quarter, which was $125 million more than the first quarter. And additionally, compared to the second quarter of last year, our cash flow from operations was breakeven due to the lockdown. Domestic-international property NOI combined increased 16.6% year over year for the quarter and 2.8% for the first half of the year. Remember, the first quarter of 2020 was relatively unaffected by the COVID-19 pandemic. These growth rates do not include any contribution from the Taubman portfolio or lease settlement income. Malls and outlets occupancy at the end of the second quarter was 91.8%, an increase of 100 basis points compared to the first quarter. We continue to see demand for space across our portfolio from healthy local, regional and national tenants, entrepreneurs, restaurateurs and mixed-use demand ever so increasing day by day. Our team is active in signing leases with new and exciting tenants. Average base minimum rent was $50.03. Our average base rent was impacted by the initial lower base rents we agreed to in addressing certain tenant COVID negotiations in exchange for lower sales breakpoints. The variable rents that were recognized in the first half of the year were included. It would add approximately $5 per foot to our average base minimum rent. Leasing spreads declined again due to mix of deals that are now included, as well as the activity that had fallen out of the spread given its rolling 12-month nature and metric. New leasing activity that has affected the spread include large footprint entertainment, fitness and large-scale retailers, big boxes. Big box deals reduced our opening rate as they're all included in our spread metric. As a reminder, the opening rate included in our spread calculation does not include any estimates for percentage rent-based income based on sales, as I mentioned just recently. Leasing activity accelerated in the quarter. We signed nearly 1,400 leases for approximately 5.2 million square feet and had a significant number of leases in our pipeline. Through the first six months, we signed 2,500 leases for over 900 -- I'm sorry, 9.5 million square feet. Our team executed leases for 3 million more square feet or over approximately 800 more deals compared to the first six months this year, as well as -- I'm sorry, compared to the first six months of 2019. We have completed nearly 90% of our expiring leases for 2021. We recently had deal committee, and what I'm told by my leasing folks is that that was the most active deal committee that they've had in several years. Now, retail sales continued to increase. Total sales for the month of June were equal to June 2019 and up 80% compared to last year and were approximately 5% higher than May sales. If you exclude two well-known tenants, our mall sales were up 8% more than compared to June of 2019. Multiple regions in the US recorded higher sales volume in June and for the second quarter, compared to our 2019 levels. We're active in redevelopment and new development. We opened West Midlands Designer Outlet, and we started construction in the Western Paris suburb for a third outlet in France. The end of the quarter, new development/redevelopment was underway across all our platforms for our share of $850 million. Our retail investments posted exceptional results. All of our global brands within SPARC Group outperformed their budget in the quarter on sales, gross margin and EBITDA, led by Forever 21 and Aeropostale. SPARC's newest brand, Eddie Bauer, also outperformed our initial expectations. We're also very pleased with JCPenney results. They continue to outperform their plan. Their liquidity position is growing, now $1.4 billion, and they do not have any outstanding balance on their line of credit. Penny will launch several private national brands later this year, as well as their new beauty initiative. Taubman Realty Group is operating their 2021 budget at a level above that and above our underwriting. And their portfolio, our portfolio shows resilience as sales are quickly returning to pre-pandemic levels. Year to date through June, retail sales are 13% higher than the first half of 2019. As you would expect, we've been very active in the capital markets. We refinanced 13 mortgages in the first half of the year for a total of $2.2 billion in total, our share of which is $1.3 billion at an average interest rate of 2.9%. Our liquidity is more than $8.8 billion, consisting of $6.9 billion available on our credit facility and $1.9 billion of cash, including our share of JV cash. And again, our liquidity is net of $500 million of US commercial paper that's outstanding at quarter-end. We paid $1.40 per share of dividend in cash on July 23 for the second quarter. That was a 7.7% increase sequentially and year over year. Today, we announced our third-quarter dividend of $1.50 per share in cash, which is an increase of 7.1% sequentially and 15.4%, 15.4% year over year. The dividend is payable September 30. You will know that going forward, we are returning to our historical cadence of declaring dividends as we announce our quarterly earnings. Given our results for the first half of the year, as well as our view for the remainder of 2021, we are increasing our full-year 2021 FFO guidance range from $9.70 to $9.80 per share to $10.70 to $10.80 per share. This is an increase of $1 per share at the midpoint, and the range represents approximately 17% to 19% growth compared to 2020 results. Before we open it up to Q&A, I wanted to provide some additional perspective. First, we expect to generate approximately $4 billion in FFO this year. That will be approximately 25% increase compared to last year and just 5% below our 2019 number. To be just 5% below 2019, given all that we've endured over the last 15, 16 months, including significant restrictive governmental orders that forced us to shut down unlike many other establishments is a testament to our portfolio and a real testament to the Simon team and people. Second, we expect to distribute more than $2 billion in dividends this year. Keep in mind, we did not suspend our dividend at any point during the pandemic. And in fact, we have now increased our dividend twice already this year. Now, just a point on valuation. And I tend to never really talk about it, but I thought it was appropriate today. Our valuation continues to be well below our historical averages when it comes to multiple -- FFO multiples compared to other retail REITs, retailers and the S&P 500. And our dividend yield is higher than the S&P 500 by more than 250 basis points, treasuries by 325 basis points and the REIT industry by 150 basis points. And as I mentioned to you, our dividend is growing. Our company has a diverse product offering that possesses many, many multiple drivers of earnings growth, accretive capital investment opportunities and the balance sheet to support our growth. We are increasing our performance, profitability, cash flow and return to our shareholders.

simon property group raises quarterly dividend. sees fy ffo per share $10.70 to $10.80. q2 ffo per share $3.24. u.s. malls and premium outlets occupancy was 91.8% at june 30, 2021. declared a quarterly common stock cash dividend of $1.50 for q3 a 7.1% increase compared to q2 dividend.

Our conference call this evening will be limited to one hour. For those who would like to participate in the question-and-answer session, we ask to please respect the request to limit you to one question. I'm pleased to introduce David Simon. Our cash flow increased to nearly $3 billion year to date, consistent with pre-pandemic levels. We recorded increased leasing volumes, occupancy gains, shopper traffic, and retail sales. Demand for our space from a broad spectrum of tenants is strong and growing and our various platform investments continue to outperform. Third quarter highlights from funds from operation starts with $1.18 billion or $3.13 per share. Included in the third quarter results were a noncash after-tax gain of $0.30 per share from the contribution of our interest in the Forever 21 and Brooks Brothers licensing ventures for additional equity ownership in Authentic Brands Group. We now own approximately 11% of ABG and a loss on extinguishment of debt of $0.08 per share from the redemption of the $1.65 billion of senior notes. Our domestic operations had another excellent quarter. Our international operations have improved. However, the quarter was below our budget by roughly $0.03 per share, primarily due to various COVID restrictions. Domestic property NOI increased 24.5% year over year for the quarter and 8.8% year to date. These growth rates do not include any contribution from the TRG portfolio or lease settlement income. And if you did include TRG and international properties, our portfolio NOI increased 34.3% for the quarter and 18.7% year to date. Occupancy was 92.8%, which was an increase of 100 basis points compared to the second quarter. Average base rent was $53.91. However, that excludes percentage rent. For the first nine months, we signed 3,500 leases for 12.8 million square feet, which was nearly 3 million square feet or approximately 800 more deals compared to the first nine months of 2019. Mall sales for the third quarter were up 11% compared to third quarter 2019, up 43% year over year. Our sales are over 2019 peak levels. These results are impressive, in particular, given the lack of international tourism, which we believe will start to increase after the restrictions on international travel are lifted beginning next week. Our company's focus, as you know, is cash flow growth, which will allow us to fund our growth opportunities and increase our dividend. We would encourage the analytic community to focus on our cash flow and its growth because there are many levers that contribute to it beyond what is contained in one or two operating metrics. A simple case-in-point, our mathematical open and close spread has declined yet our cash flow has significantly increased. Leasing spreads are calculated at a poignant time. We have studied the leasing spread metric across the various retail real estate companies and highlight the following: Spreads are significantly impacted by tenant mix. Our leasing spreads include all openings and closings, and it's not the same space measure. However, we believe many other companies use only the subset for their calculation. We do not include variable lease income in our spread calculation, others do. And there's no consistency in approach. We intend to spend the next several months working to achieve uniformity on this metric, much like we did for sales reporting, although the shopping center sector still does not disclose any sales productivity for its retailers. Let's keep in mind that all of these metrics we need to put in perspective, and we encourage you to take this opportunity to refocus on the importance of cash flow. We opened our fifth premium outlet in Korea and our 10th in Japan is under construction. Our redevelopment activity is accelerating. Northgate Station opened, Seattle Kraken Community Iceplex, and we have many developments ongoing at Fifths, King of Prussia, Southdale, and many others. Our share of net cost of development projects is now approaching $1 billion. Our retail investment platforms are performing very well, including SPARC, Penney, and ABG. SPARC outperformed their budgets on sales, gross margins, and EBITDA and we're very pleased with the JCPenney results. The Penney's team has stabilized the business, improved financial results, and we've added private and exclusive national brands to it. Our liquidity position is at $1.5 billion, and there's no outstanding balance on their line of credit. And we're very excited to announce -- and in fact, his first day is today, Marc Rosen. He's joined the company as the CEO. He's got a terrific background; great leader and we look very forward to working with him as he builds on the momentum Penney has established this year. Penney's success is an excellent example of how to better understand our company. We appointed Stanley Shashoua as the interim CEO for nearly a year ago and look at the results. Much like the variety of our investments, no other company in our industry has the capability to put an executive in an interim role and produce these results. This is a testament not only to Stanley but to the Simon culture. TRG is operating above our underwriting, posted also impressive results for cash flow growth, occupancy gains in retail sales, which were 16% higher. As you know, we amended and extended our $3.5 billion revolving credit facility. We refinanced a number of mortgages, and our liquidity stands at $8 billion including $6.9 billion available on our credit facility, the rest in our share of cash. We paid a dividend of $1.50 in September. That was a 7.1% increase sequentially and 15.4% year over year. Today, we announced our fourth quarter dividend of $1.65 per share in cash, which is an increase of 10% sequentially and 27% year over year. Dividend will be paid December 31. Now we raised our guidance from $10.70 to $10.80 last quarter to $11.55 to $11.65 per share. This is 85% increase on the midpoint. That's 27% to 28% growth compared to 2020 results and basically $2 higher than our initial budget this year. And let me just conclude by saying the following. Even though our stock has posted impressive year-to-date returns, we strongly believe it is still undervalued. Our current multiple of 13 times is approximately three turns lower than our historical average and screens very cheap compared to the REIT sector at 24 times and in many cases, even close to 30. We have unequivocally proven with our results year to date that we've overcome the arbitrary shutdown of our business due to the pandemic and our cash flow has bounced back dramatically, which many have doubted. We have growth levers beyond our real estate assets that are unique attributes of our company. We have proven to be astute investors. We have unique business models and diversity of income streams. Our balance sheet is industry-leading and as strong as it's ever been. Our dividend yield is 4.7% and growing, well covered, higher than the S&P yield of 1.9% and the REIT average of 2.9%, and we have the potential to perform very well in an inflationary cycle.

sees fy ffo per share $11.55 to $11.65. once again increasing full-year 2021 guidance and raising our quarterly dividend. qtrly ffo was $1.176 billion, or $3.13 per diluted share, versus $723.2 million, or $2.05 per diluted share, in prior year period.

Also on the call are Brian McDade, chief financial officer; and Adam Reuille, chief accounting officer. As all of us know, 2020 was a difficult year for all of those affected by COVID-19, including our company. Even with the unprecedented operating environment, we accomplished a great deal. We earned $9.11 per diluted share and funds from operation for the full year, which includes a $0.06 per share dilution from our recent equity offering in November. We generated over $2.3 billion in operating cash flow. We acquired an 80% interest in the Taubman Realty Group, made strategic investments in several widely recognized retail brands at attractive valuations and have already made significant progress in repositioning each brand and increasing their operating cash flow. We raised over $13 billion in debt and equity markets; opened two new international shopping destinations, expanded two others, completed three domestic redevelopments; abated rent for thousands of small and local businesses, regional entrepreneurs and restaurateurs who, frankly, needed our help to survive; paid $700 million in real estate taxes which, unbelievably, was an increase from 2019 despite losing approximately 13,500 shopping days in our domestic portfolio during the year due to the restrictive governmental orders placed upon us, and that's roughly 20% of the whole year to put in perspective; and we returned $2 billion in cash to our shareholders in dividends. These results and, frankly, these accomplishments are a testament to the entire team, Simon team, for the resilience, relentless focus on operations and cost structure and the safety of the communities we serve and, obviously, focused on giving back to the communities in terms of what we did from an abatement and real estate tax point of view. Now let's go to the fourth quarter, and then we're going to turn the page. Fourth-quarter FFO was $787 million. That's $2.17 per share. Obviously, that was affected by the dilution of our equity offering that I mentioned. I'm pleased that -- to report that with the solid profitability and the $900 million in operating cash flow we generated within the fourth quarter, our domestic international operations in the quarter were negatively impacted by approximately a net $0.95 per diluted share, primarily due to the reduced lease income, including sales-based rents and other property revenues caused by COVID-19 disruption and $0.06 also from the international operations due to various restrictions placed upon those properties. Collection from our U.S. retail portfolio continued to improve. As of last week, we have collected 90% of our net billed rents for the second, third and fourth quarters combined. We made significant progress in the fourth quarter in addressing previously unresolved amounts with certain large tenants. We still, even to this day, have a handful of large tenants, unfortunately, who have yet to resolve their receivables. And we are hopeful that -- and we anticipate resolving those, certainly, in the next few weeks. Again, to remind you, these are on a gross basis and not a company share. Last year, our NOI was $1.6 billion in the fourth quarter. This year, it's $1.2 billion. That's a decrease of 23.9% or approximately $380 million. And here are the components of the decline: $220 million in aggregate from domestic rent abatements and higher uncollectible rents, primarily associated with retail bankruptcies. And this is an important reminder, we do not amortize any of the abatements. Even though through FASB, you could, we chose to write those off in the period that they were granted. And hence, they affect our lease income in the period that we decided to go ahead and grant the abatement. Approximately $205 million from lower minimum rents reimbursement, short-term leasing, ancillary property revenues and terminations associated with bankruptcy tenants and lower sales volume due to COVID-19 disruption, obviously, lots of government restrictions on restaurants and amount of people we could have in the properties and, just as a reminder to you, we have a great deal of seasonality in the fourth quarter, so obviously, the card kiosk overage rent was impacted by, again, the immense restrictions that we had in terms of operating our portfolio by government mandates. And then, we offset some of that decline by our diligent cost reduction initiatives. Operating metrics at the fourth quarter was basically flat compared to the third-quarter 2020, and we were down year over year. Average base minimum rent was $55.80, up 2.2% for the year. Leasing spreads declined primarily as a function of mix. We had some boxes last year that rolled out and are no longer in the 12-month reporting period. Good news is leasing momentum is continuing. We signed over 1,400 leases, representing 6 million square feet and have a number of -- significant number of leases in our pipeline. And that's a testament to our quality of our real estate. And I do think we're starting to see our retailers get back to what they do best, and that is operate stores. We opened two new outlets, frankly, in Spain and Bangkok, which we're proud of. We have an outlet under construction in England, which will open this spring. Redevelopments, as I mentioned to you, we completed a number of properties. We also added, which is essentially the Woodbury of Asia, the Gotemba outlet expansion, another 178,000 square feet and another property in Japan, adding another 110,000 square feet. So look for those to add to our cash flow in future years. We continue to densify our centers with the opening of a multifamily residential complex and hotel. We also have three hotels under construction. We completed the redevelopment and -- of another Northshore Mall, and we started construction on an expansion in Naples. So we're back to focused on continuing to add improvements across our portfolio worldwide. We also have a pipeline, as you know, of redevelopment, new development that is under consideration. Now let me just turn to our retail investments, and I think and I hope this puts all of this in proper perspective. Obviously, we have an unbelievable track record in capital allocation, making significant returns on investment. During the year, we capitalized on buying four recognized retail brands in bankruptcy. So we bought them at attractive valuations. They include Forever 21, Lucky Brand, Brooks Brothers and Penney. Each of these brands, we believe, presents a very interesting repositioning opportunity, and each investment has completed at attractive valuations, and we've made significant progress improving the positioning and operating results of the company. And let me just give Forever 21 as an example. And as you know, we bought it in February, pre-COVID, well before we knew COVID would have the impact it did on 2020. And despite all of that -- despite all of that, Forever 21, both in -- in the company generated a positive EBITDA pre-royalties of approximately $75 million in 2020. And we basically paid $67 million for that. So our share of that is $30 million. And you can divide it by $67 million to give you our return on investment in COVID 2020. Now you could probably conclude that that's a pretty good return on investment. Now if you put all of our retail brand investments in context, we have approximately $330 million of remaining invested capital, net of cash distributions and the value of appreciation of our ABG investment, which has just had a recent trade. And so in marking that to market, our net investment in all of these activities is $330 million. And all of these brands will generate for us in 2021, our share, $260 million of EBITDA. So you can take $260 million, divide it by $330 million to get a sense of our return on investment. Now I want to remind everyone that we do not add back the depreciation associated with these retailer investments to our FFO because it's not real property. So the contribution of that from an earnings point of view will, obviously, be much less. But the EBITDA is the EBITDA. So the other point to make in these retail investments is all of these brands generate $3.5 billion in digital sales. $3.5 billion in digital sales. And all we have to do is look at how e-commerce brands are being valued today, and I think you could all conclude, we hope you do, that we've been making some wise investments here. Now with respect to Taubman, I'm very pleased to have completed the transaction for 80% TRG and their premier retail portfolio, asset portfolio. Our teams have worked -- started working together. And we are off to a very productive, good spirited start. I really do look forward to the partnership and growth inherent in the portfolio, and I think we'll all work very well together. As many of you know, we recently filed an S-1 with the SEC to raise $300 million in a Simon-sponsored special purpose acquisition corporation, i.e., SPAC. We are currently in a quiet period for the filing and are unable to speak to it, about the proposed offering, at this time. We've been very active in the debt and equity capital markets, raising $13 billion in the last 12 or so months and, just some highlights, amended and extended our credit facility with a $6 billion facility that included a $2 billion term loan, which was used to fund the Taubman transaction; issued $3.5 billion of senior notes including the recent $1.5 billion offering in January, addressing all of our 21 unsecured maturities and, obviously, before the treasury really moved up; we completed 15 secured loan financings -- refinancings for $2 billion; and again, in November, we completed a common stock issuance of 22 million shares for $1.56 billion. The term loan funded the Taubman deal, and our net debt was flat compared to last year, exclusive of the properties that we added with the Taubman transaction and the term loan drawdown. Fourth quarter, we ended our liquidity with $8.2 billion, consisting of about $1.5 billion of cash, including our share of joint venture and $6.7 billion of available credit facility. This is net of $623 million of commercial paper outstanding at quarter end. Dividend, we paid our fourth-quarter dividend of $1.30 per share, which is $6 in total for the year. We paid more than $2 billion in 2020. We're up to over $34 billion in dividends of our history as a public company. And we're really proud that we paid the cash dividend when many of our other companies are either suspended or completely eliminated or dramatically reduced their dividend. Now, finally, let's move on to 2021 because I do, frankly, want to turn the page on 2020 as I'm sure we all -- as you all do. We feel confident we've turned the corner. We expect growth in cash flow and earnings. In 2021, our guidance is $9.50 to $9.75 per share. This range, it includes approximately $0.15 to $0.20 per share from our retailer investments. Again, keep in mind that we can't add back -- or we don't add back depreciation for those investments. That's a growth range of 4.3% to 7%, compared to our full year of $9.11. And just no more -- our diluted share count will be 376. No significant acquisition or disposition activity and no further government mandate shutdown of our domestic retail properties is in that guidance. As you know, we are dealing with certain shutdowns in Europe as we speak. So let me just conclude, one heck of a year. Let's not repeat it in any stretch of our imagination. Let's turn the corner. In a very tough environment, we've dealt with just basically about everything. And everyone out there, be well. And we're ready for any and all questions, though I'm sure people want to go home and warm up because it's cold.

simon property group sees fy 2021 ffo per share $9.50 to $9.75. sees fy 2021 ffo per share $9.50 to $9.75. q4 ffo per share $2.17. ffo will be within a range of $9.50 to $9.75 per diluted share for 2021. expect growth in earnings and cash flow in 2021. simon property group - as of feb 5,, has collected from its u.s. retail portfolio, 90% of net billed rents for second, third, fourth qtrs, combined.

Also on the call are Brian McDade, chief financial officer; and Adam Reuille, chief accounting officer. Our conference call this evening will be limited to one hour. For those who would like to participate in the question-and-answer session, we ask that you please respect our request to limit yourself to one question. I'm pleased to introduce David Simon. We had a very busy and productive quarter to end a very successful year. We recorded occupancy gains, record retail sales, and demand for our space from a broad spectrum of tenants is robust, and our other platform investments had strong results. We generated nearly $4.5 billion in funds from operation in '21 or $11.94 per share. The $4.5 billion is a record amount for our company for the -- for a year. And coming off a difficult year of 2020, these results are a testament to our relentless focus on operations, cost structure, active portfolio management, smart investments, coupled with coherent strategy. Fourth-quarter funds from operations were 1.160 billion -- I'm sorry, $1.16 billion or $3.09 per share. Included in the fourth quarter results was a net loss of $0.10 per share from a loss on extinguishment of debt and a write-off of predevelopment cost, partially offset by an after-tax gain on the sale of equity interest. Our domestic operations had another excellent quarter to conclude the year. Our international operations improved in the quarter. Domestic property NOI increased 22.4% year over year -- I'm sorry, for the quarter and 12% for the year, including our share of NOI from TRG and our international properties, portfolio NOI increased 33.6% for the quarter and 22.3% for the year. Mall and outlet occupancy at the end of the fourth quarter was 93.4%, an increase sequentially of 60 basis points and 260 basis points year over year. Average base minimum rent was $53.91, add $8 to that if you included variable rent. For the year, we signed more than 4,100 leases for a total of more than 15 million square feet. This was the highest amount of leasing activity we have done over the last six years. Retail sales, reported retail sales continued in the fourth quarter. Mall sales for the fourth quarter were up 8% compared to the fourth quarter of 2019 and up 34% year over year. Reported retail sales per square foot reached a record level for 2021 at $713 per foot for our Mall and Outlet Business and $645 for the Mills. These results obviously are impressive, particularly given the lack of international tourism for '21. Occupancy costs at the end of 2021 are the lowest they've been in five years at 12.6% year-end. and a premium outlet in South Korea. Construction continues on our tenth outlet in Japan, opening this fall and Normandie France opening the spring of '23. We completed five significant redevelopments. We added densification components with the opening of two hotels and the completion of an NHL headquarters and practice facility. Progress continues on the densification of Phipps Plaza which will open this fall. We have a significant pipeline of redevelopment projects, which will be funded from our internally generated cash flow. Let me turn to our other platform investments, they produced terrific results in 2021, namely JCPenney, SPARC, ABG, and RGG, which is Rue Gilt Groupe. JCPenney's results were impressive. Their liquidity position is growing, now $1.6 billion. The company de-levered their balance sheet, has no borrowings on their line of credit. CEO, Marc Rosen strengthened his management team with a new CIO and Chief Digital Officer. RGG, including our Shop Premium Outlet, marketplace growth continues, and we expect continued investment in 2022 to drive customer acquisition and sales growth. SPARC Group will be the operating partner for Reebok in the U.S. There's a tremendous opportunity for SPARC to develop sportswear and footwear expertise. The Reebok integration will require additional investment by SPARC as it expands its capability and reach. TRG, Taubman Realty Group, which we own 80% posted great operating metrics and results, which also beat our underwriting. Reported retail sales was $942 per square foot, a 31% increase year over year. Occupancy also increased 210 basis points for the year. Now, turning to the balance sheet. We've been active in the debt markets. We amended and extended our $3.5 billion revolving credit facility with a lower pricing grid for five years. We issued $2.75 billion of senior notes 750 million-euro notes, completed the refinancing of 25 property mortgages for a total of $3.3 billion at an average interest rate of 3.14%. We paid more than $4 billion in debt and de-levered by $1.5 billion. And with the recent January notes offering, our liquidity stands at $8 billion. Now, just to turn to dividend. We paid out $2.7 billion in cash common stock dividends last year. Today, we announced a dividend of $1.65 per share for the quarter, a year-over-year increase of 27%. This dividend is payable on March 31. Now, just to go through guidance for 2022. Our FFO guidance is $11.50 to $11.70 per share. When looking at our '22 FFO guidance, it is important to note the following items as compared to '21 actual results. Approximately $0.32 per share gain related to the reversal of a deferred tax liability at Klepierre, approximately $0.32 per share in gains related to our investment in authentic brands. These gains were partially offset by approximately $0.14 per share in debt extinguishment charges resulting in an adjusted FFO of $11.44 per share for '21. '21 also included significant increase in overage and percentage rent compared to prior years and lease settlement income of approximately $0.10 higher than historical average. Our guidance reflects the following assumptions: Domestic property NOI growth of up to 2%, approximately $0.15 to $0.20 drag on FFO from additional investments in RGG, and SPO, JCPenney, and the Reebok integration cost at SPARC all to fund future growth, the impact of a continued strong U.S. dollar versus the euro and yen compared to '21 levels and continued muted international tourism, no significant acquisition or disposition activity. And for bouncing back in '21 after a very difficult 2020. Make no mistake about it, '21 was a great year. And I think -- Tom knows, but I think our FFO guidance was -- which was consistent with basically the analytic community around $9.60 per share, and we reported $11.94 per share. So, that's a heck of a year. I'm very excited about our plans for '22 and the future growth prospects of our company, and we're ready for any questions.

simon property sees fy ffo per share $11.50 to $11.70. sees fy ffo per share $11.50 to $11.70. q4 ffo per share $3.09. sees 2022 net income to be within a range of $5.90 to $6.10 per share and ffo within a range of $11.50 to $11.70 per share. u.s. malls and premium outlets occupancy was 93.4% at december 31, 2021.

The factors that could cause our actual results to differ materially are discussed in the Company's most recent 10-K and 10-Q filed with the SEC. Lastly, because the offer period for our IEnova exchange offer is open, we're limited in what we can say about the exchange offer and we will be unable to respond to questions about this transaction. I'm pleased with our first quarter results, and I think it sets us up well for the balance of 2021. You'll recall, we shifted our market focus back to North America several years ago and have been consistently investing new capital in our utility platforms in California and Texas. This strategic focus, together with strong operational execution, are continuing to drive improvements in our financial performance. A second part of our strategy is focused on consolidating our unregulated investments under Sempra Infrastructure and we're making great progress there as well. Just last month, we announced our agreement to sell a 20% equity interest in that business to KKR and it's an important step for two reasons: first, bringing in a new strategic partner allows Sempra Infrastructure to strengthen its own balance sheet while also position the business to self-fund its future growth; and second, this transaction sends a clear market signal about the value and expected growth of our Infrastructure platform. Turning now to the Company's financial results. We're also affirming our 2021 adjusted earnings per share guidance range. We've had several positive developments at our operating companies this past quarter. At our California Utilities, we received a proposed decision for 2022 and 2023 attrition rates, which if approved, will provide greater support for safety and reliability initiatives, as well as improved visibility into future earnings. In 2020, Oncor experienced its highest organic premise growth ever and we're excited to see the growth continue this year. In the first quarter alone Oncor connected approximately 19,000 new premises, greater than the connections in the first quarter of 2020, again validating the underlying strength of economic and demographic growth in the region. Now, shifting to our Infrastructure business. At Sempra LNG, we have begun engineering, construction of ECA Phase 1 and continue to progress our LNG development projects. At Cameron Phase 2, we continue to work with our Cameron partners on the technical design of the project and to advance commercial discussions. At Port Arthur LNG, we continue to work with partners and customers to focus on options to reduce the projects' greenhouse gas profile and continue improving its competitive position in the global energy transition. At this time, given this work and the continued impacts of the pandemic on the global energy markets, it is more likely that final investment decision at Port Arthur will move to next year. We will keep you updated as things progress. Moving to our Mexican business. We continue to advance our pipeline of development projects, focused on diversifying its energy supplies and improving the country's energy security. In March, we expanded the renewable energy platform by finalizing the acquisition of the remaining 50% equity interest in ESJ and placing the Border Solar project into operation. Also, as Jeff mentioned earlier, we're making great progress on Sempra Infrastructure and the associated series of transactions. Just last week, we received the necessary regulatory approvals to launch the IEnova exchange offer. As that process moves forward, it's important to note that it does not have a minimum requirement to close. With that, please turn to the next slide for a short update on additional details of the pending sale announcement in Sempra Infrastructure. With the announced sale of a 20% equity interest in Sempra Infrastructure to KKR, we've gained a strategic partner to help fund future growth. The $3.37 billion in proceeds is expected to be used to fund growth at our US utilities and to strengthen our balance sheet, and also establishes an implied enterprise value of approximately $25.2 billion. Equally important, we're pleased to be partnering with an investment firm that has a shared vision for growth in North America. Lastly, we expect to close the transaction in the middle of this year, subject to customary closing conditions and certain approvals from third parties and regulatory agencies. Please turn to the next slide, where I will review the financial results. This compares to first quarter 2020 GAAP earnings of $760 million, or $2.53 per share. On an adjusted basis, first quarter 2021 earnings were $900 million, or $2.95 per share. This compares to our first quarter 2020 adjusted earnings of $741 million, or $2.47 per share. Please turn to the next slide. The variance in the first quarter 2021 adjusted earnings compared to the same period last year was affected by the following key items: $73 million of lower losses at parent and other, primarily due to net investment gains, lower net interest expense, lower retained operating costs and lower preferred dividends; $62 million of higher equity earnings from Cameron LNG JV, primarily due to Phase 1 commencing full commercial operations in August of 2020; $35 million of higher CPUC base operating margin at SoCalGas, net of operating expenses; and $30 million of higher equity earnings at Sempra Texas Utilities, primarily due to increased revenues from rate updates to reflect invested capital and customer growth and higher consumption due to weather. This was partially offset by $56 million of lower earnings due to the sales of our Peruvian and Chilean businesses in April and June of 2020, respectively. Please turn to the next slide. We're pleased to report a successful quarter, both operationally and financially, and we are affirming our full-year 2021 adjusted earnings per share guidance range.

compname reports q1 adjusted earnings per share $2.95. q1 adjusted earnings per share $2.95.

The factors that could cause our actual results to differ materially are discussed in the company's most recent 10-K and 10-Q filed with the SEC. As we discussed at our Investor Day, we've simplified our business model, narrowed our investment strategy to attractive markets and improved capital discipline, all with the goal of offering a competitive value proposition, including: consistent and attractive returns, strong earnings visibility and earnings per share growth and a sustainable and growing dividend. Additionally, at the Investor Day, Allen and I highlighted the robust growth that Oncor continues to see all across its service territory. Shifting now to the quarter. I'm pleased with our financial results, and I think it's a testament to the affirmative steps we've taken to simplify our business model and focus our capital investments on top-tier infrastructure growth platforms. We're reporting strong earnings and affirming both our increased 2021 adjusted earnings per share guidance range and our 2022 earnings per share guidance range. I'm excited about the progress we've made so far this year, and I'm proud of the broad support we're seeing all across our operating businesses. To begin, we have had several positive developments at our operating companies this past quarter. At SDG&E, in July, we received CPUC approval for our 2021 wildfire mitigation plan update, building on the utility's long-standing commitment to advance fire hardening and public safety. SoCalGas began flowing renewable natural gas at two additional biomethane projects in support of their goal to provide 20% RNG to core customers by 2030 to help the state reach its decarbonization goals. In Texas, Oncor has provided visibility to their 2022 to 2026 projected capital plan, which has increased to approximately $14 billion over the five-year period. Additionally, Oncor did receive PUCT approval to extend its rate case filing deadline to June 1, 2022. At Sempra Infrastructure, we completed the exchange offer for IEnova's shares, resulting in a 96.4% ownership interest, and we plan to launch a cash tender offer for the remaining 3.6% interest. We're also advancing the sale of the noncontrolling interest in Sempra Infrastructure Partners to KKR. And while I may have been a bit optimistic at Investor Day, we now expect to close the transaction around the end of the third quarter, subject to the Mexican Competition Commission completing its economic and market analysis and issuing the regulatory approval. With that, please turn to the next slide for more details around Oncor's capital plan update. Oncor continues to operate in one of the fastest-growing states with strong macro fundamentals. As a result, Oncor is announcing its 2022 to 2026 projected capital plan of approximately $14 billion, nearly a $2 billion increase over the 2021 to 2025 capital plan. Furthermore, Oncor is increasing its 2021 to 2022 capital plan by approximately $425 million, consistent with what Allen outlined at the Investor Day and is largely incorporated in the new $14 billion five-year capital plan. Oncor's robust capital plan supports the economic development seen throughout its service territory, increases in generation interconnection requests, strong premise growth and investments in grid resiliency. A good example of this robust growth can be seen in new relocations, expansions and electric service to Oncor's system, which are on pace to exceed 2020 values by 70% and to exceed 2019 values by 170%. Please turn to the next slide where I will review the financial results. This compares to second quarter 2020 GAAP earnings of $2,239,000,000 or $7.61 per share. On an adjusted basis, second quarter 2021 earnings were $504 million or $1.63 per share. This compares to our second quarter 2020 adjusted earnings of $501 million or $1.71 per share. On a year-to-date basis, 2021 GAAP earnings were $1,298,000,000 or $4.24 per share. This compares to year-to-date 2020 GAAP earnings of $2,999,000,000 or $9.91 per share. Adjusted year-to-date 2021 earnings were $1,404,000,000 or $4.58 per share. This compares to our year-to-date 2020 adjusted earnings of $1,242,000,000 or $4.20 per share. Please turn to the next slide. The variance in the second quarter 2021 adjusted earnings compared to the same period last year was affected by the following key items: $126 million from a CPUC decision that resulted in the release of a regulatory liability at the California utilities in 2020 related to prior year's forecasting differences that are not subject to tracking in the income tax expense memorandum account; and $22 million of lower earnings due to the sale of our Peruvian and Chilean businesses in April and June of 2020, respectively. This was more than offset by: $38 million higher equity earnings from the Cameron LNG JV, primarily due to Phase one achieving full commercial operations in August of 2020; $35 million of lower losses at Parent and Other, primarily due to lower preferred dividends and lower net interest expense; $34 million of higher income tax benefits from forecasted flow-through items at SDG&E and SoCalGas; and $22 million income tax benefit in 2021 from the remeasurement of certain deferred income taxes at Sempra LNG. Please turn to the next slide. We're pleased with our strong operational and financial performance this quarter and are focused on continuing to execute throughout the remainder of the year.

sempra energy second quarter earnings. q2 adjusted earnings per share $1.63. announcing higher projected five-year capital plan at oncor of $14 billion.

The factors that could cause our actual results to differ materially are discussed in the company's most recent 10-K and 10-Q filed with the SEC. We also encourage you to review our quarterly report on Form 10-Q for the quarter ended September 30th, 2021. Several years ago we revised our business strategy to narrow the focus of the company to invest in an energy infrastructure in markets where we expect high growth. Today, there is a growing recognition about why these types of investments are increasingly important, whether it's the current dislocation in European energy markets or high prices for LNG in Asia or even challenging weather events here at home that call for greater resiliency, new investments in energy infrastructure are certainly needed. Bipartisan support in Washington for the pending infrastructure bill provides further validation of this trend. In addition to help meet the needs of the market, at Sempra, we certainly believe energy infrastructure right here in North America is a key driver of job creation, economic growth, and competitiveness across the economy. Moreover, maintaining a modern, flexible, and secure network of electric transmission and distribution lines, natural gas pipelines, and storage facilities is essential to delivering affordable and increasingly clean energy to U.S. businesses and consumers while promoting growth across all sectors of our economy. Against that backdrop, we'll provide a business update today on the key activities in our California and Texas utilities. Also Justin Bird, our new CEO of Sempra Infrastructure will provide an update on how he's organized that business to capture exciting new growth opportunities. This will be followed by a summary of our financial performance. As an overview for the quarter, our strategic focus on investing in energy infrastructure across each of our three growth platforms together with a commitment to operational excellence continue to drive strong financial performance. As you know, we have a long track record of continuing to raise our guidance and then working hard to meet or exceed that guidance. This is a result of our high-performing culture and continuous focus on improving the quality of our operations. As a result of these efforts, we expect to be at the upper-end of our full-year 2021 adjusted earnings per share guidance range and we're reaffirming our full-year 2022 earnings per share guidance range. Now please turn to the next slide where Justin and I will provide business updates. Let me start with our California utilities. In August, SDG&E filed an off-cycle application with the CPUC to update its cost of capital effective January 1, 2022. This application would increase SDG&E's equity ratio from 52% to 54%, ROE from 10.20% to 10.55% while also lowering cost of debt from from 4.59% to 3.84%. The application, if accepted by the CPUC, would supersede the automatic cost of capital adjustment mechanism. In terms of timing, SDG&E has requested a decision in the first half of 2022. Also at SoCalGas, we recently announced agreements expected to resolve substantially all material civil litigation against SoCalGas and Sempra related to the 2015 Aliso Canyon natural gas storage facility leak with net after-tax cash flows for SoCalGas expected to ultimately be up to $895 million after taking into consideration collection of existing insurance receivables and other adjustments. These agreements are important milestones that will help the community and our company work toward putting this difficult chapter behind us. In addition, last month, SoCalGas issued an important technical analysis, underscoring the essential role of clean fuel networks that leverage existing gas infrastructure to help California achieve its net zero goals and more importantly, to do so more affordably and more efficiently than other alternatives. Moving now to Texas, Oncor announced its updated 2022 to 2026 capital plan of approximately $15 billion. It's important to note that this plan is a $2.8 billion increase over its 2021 to 2025 capital plan that was presented at the 2021 Investor Day in June. At Sempra Infrastructure, we recently finalized a series of transactions including the sale of a non-controlling interest to KKR, completing the exchange offer and subsequent cash tender offer to purchase the publicly owned IEnova shares, and delisting IEnova shares from the Mexican Stock Exchange. Additionally, I'd like to note related to the formation of Sempra Infrastructure, we've updated our GAAP guidance range for 2021 to include items expected to be reflected in our fourth quarter results. You can find a GAAP reconciliation in the appendix to the slide decks. Please turn to the next slide. Before I hand the call over to Justin, I want to make one follow-on point about Oncor. We've talked a lot in the past about being in the most attractive energy markets in North America and Texas is certainly an example. Oncor today operates in one of the fastest growing markets in the country with some forecasts estimating that the Texas population will nearly double by 2050. With strong macro fundamentals across its service territory, Oncor just announced a record-high five-year capital plan of $15 billion. This capital plan is primarily earmarked to meet load growth with two-thirds of the plan dedicated to expansions of the company's transmission and distribution network. Oncor's robust projected capital plan and rate base figures are expected to support economic development across its service territory, increases in generation interconnection, strong premise growth, and critical new investments in grid modernization and resiliency. And finally, Oncor now expects to grow its rate base to nearly $28 billion by 2026, which reflects a compound annual growth rate of about 8% over the five-year period. The growth the company is experiencing is just remarkable. Please turn to the next slide where I'll pass the call over to Justin to review the latest updates at Sempra Infrastructure. I'm excited to present the newly formed Sempra Infrastructure platform. We expect the formation of Sempra Infrastructure along with the financial strength of KKR to give us added scale to execute on a wide range of energy infrastructure opportunities across Sempra Infrastructure's three business lines. Since closing this transaction a month ago, we're already seeing the benefits of combining the two organizations through financial synergies and commercial optimization. For example, we've been able to restack our capital structure to create meaningful cost savings. To capture new development opportunities, we've organized into three business lines: LNG and Net Zero Solutions, Energy Networks, and Clean Power. We expect this structure will enhance growth and quality execution. This also strategically positions us to benefit from North America's continued trend toward the clean energy transition by optimizing the natural partnership between natural gas and renewables to help meet decarbonization goals here in North America and abroad. Energy infrastructure as Jeff described at the top of today's call is the focus of our development program. Now please turn to the next slide, where I'll briefly discuss how we're advancing growth in each of our business lines. First at LNG and Net Zero Solutions, the LNG market has recovered quite dramatically as evidenced by the spot market with record high prices being seen in Europe and Asia and a recent uptick in long-term contracting activity around the world. With that constructive backdrop, our LNG development portfolio is expected to benefit from the strategic advantage of being situated on both the Pacific and Gulf Coast with direct access to both Asian and European markets. As a reminder, ECA LNG Phase 1 was the only LNG export project in the world to take a final investment decision last year, which reinforces the competitive advantage of brownfield sites that can dispatch into the Atlantic and Pacific basins. Now looking forward, we remain focused on the construction of ECA LNG Phase 1, working with our partners to optimize Cameron LNG's current operations as well as the development of the Cameron LNG expansion, and finally, working on an exciting new Pacific opportunity in Topolobampo, Mexico called Vista Pacifico LNG. At ECA LNG Phase 1 engineering, equipment, fabrication, and site preparation are well underway. The project is on time and on budget and we continue to expect first LNG production by the end of 2024. At Cameron LNG, the current facility is running well and hit record production levels during the month of October. Together with our partners, we are developing a projected 7 million tonnes per annum expansion project benefiting from 1 million tonnes per annum of debottlenecking Trains 1-3. With innovations in train design coupled with the high performance of trains one through three, we expect this to be a very competitive, capital efficient expansion. In terms of next steps, we plan to move to feed early next year to file an amendment with FERC to build Train 4 with electric drives in order to reduce Scope 1 emissions and to work closely with our partners as we advance toward FID. Lastly, Vista Pacifico LNG is a new development project located adjacent to Topolobampo refined products terminal. This new project is expected to be a mid-scale facility connected to two existing pipelines, one of them being the high pressure pipeline system we own in Sonora. The project would source lower cost natural gas from the Permian Basin for export to high demand Asian markets. At our Energy Networks and Clean Power businesses, I'd like to highlight two important projects: the expansion of the GRO pipeline and the expansion of our ESJ wind farm. The GRO expansion is a pipeline project in development that is expected to increase gas delivery capacity to the Baja peninsula and play a critical role in supplying gas to the ECA LNG Phase 1 project. We continue to advance a series of our cross-border renewable projects that are expected to dispatch directly into California. Specifically, the ESJ expansion leverages the existing power transmission capacity that we own on the U.S. and Mexico border. We're the only company that owns cross-border transmission lines that can connect into the California electric grid and that allow us to have a competitive advantage in helping the state meet its growing need for new renewable energy resources. I'm excited about the team we've put together and about the business we're building. It's a unique opportunity. We're well situated to compete and we certainly expect to play a crucial role in investing in energy infrastructure right here in North America that supports the global energy transition. Please turn to the next slide where I'll pass the call to Trevor to review our financial results. This compares to third quarter 2020 GAAP earnings of $351 million or $1.21 per share. On an adjusted basis, third quarter 2021 earnings were $545 million or $1.70 per share. This compares to our third quarter 2020 adjusted earnings of $432 million or $1.49 per share. Please turn to the next slide. The variance in the third quarter 2021 adjusted earnings compared to the same period last year was affected by the following key items: $35 million of higher earnings at Sempra Mexico due to higher ownership of IEnova; $35 million of higher CPUC base operating margin, net of operating expenses at SDG&E and SoCalGas; $29 million of lower losses at parent and other primarily due to lower preferred dividends; and $29 million related to the energy efficiency program refund in the third quarter of 2020 at SDG&E. Please turn to the next slide. We are pleased with our operational and financial performance this quarter and are focused on continuing to execute through the remainder of the year. We also think our strong year-to-date performance sets us up well to have a great year in 2022.

sempra energy - qtrly adjusted earnings per share $1.70.

The factors that could cause our actual results to differ materially are discussed in the company's most recent 10-K filed with the SEC. We also encourage you to review our annual report on Form 10-K for the year ended December 31, 2021. In 2021, we delivered another year of strong performance. We'll discuss some of the operating highlights in a moment. But on the financial side, we invested over $7 billion in critical energy infrastructure, a record amount for our company, and we delivered full year 2021 adjusted earnings per share of $8.43 well above our increased adjusted earnings per share guidance range of $7.75 to $8.35 per share. The strength of that performance, together with a portfolio of investment opportunities across all three of our growth platforms gives us a lot of confidence in the future. Today, we're announcing approval by our board of directors of an increased annualized dividend of $4.58 per share, consistent with our long-standing commitment to return value to our shareholders, record five-year capital plan of $36 billion with nearly 94% dedicated to our utilities, continued confidence in our full year 2022 earnings per share guidance range and the issuance of our full year 2023 earnings per share guidance range. And finally, we're announcing a projected long-term earnings per share growth rate for the company of 6% to 8%. Please turn to the next slide. Next, I'd like to highlight a few of our accomplishments. From a strategic standpoint, we've made great progress over the last four years in updating our portfolio with three goals in mind: first, prioritizing markets with strong fundamentals and constructive regulation; second, simplifying our business model to improve execution; and third, building scale, financial strength and a high-performing culture to deliver improved financial results. 2021 was another key milestone in that journey. We've completed a series of transactions to form Sempra Infrastructure, a simplified growth platform with scale and portfolio synergies, all while generating over $3 billion by selling a noncontrolling interest to support growth and the return of capital to our owners. Furthermore, these transactions highlight the underlying market value of this business and demonstrate Sempra's continued ability to source lower cost of capital and recycle it into organic growth at our utilities. Moving on, we continue to advance our capital plan in 2021, deploying over $7 billion with a continued focus on supporting the strong growth at our utilities. From a safety standpoint, we had record employee safety results at Sempra California and Sempra Infrastructure also had a great year, advancing construction at ECA LNG Phase 1 on time and on budget with over 1 million hours worked without a lost time injury. Taken together, these accomplishments and the quality of execution we're seeing across our businesses, gives us confidence in our ability to capitalize on future growth opportunities. Please turn to the next slide. Sempra's growth platforms are strategically positioned in highly attractive and contiguous markets in North America where we serve one of the largest utility consumer bases in the United States. Each of these growth platforms have both scale and a leadership position in our core markets, and that is central to our strategic execution. Please turn to the next slide. Our growth platforms benefit from three main competitive advantages. Size and scale in attractive markets, lower risk and strong recurring cash flows associated with T&D investments and positive growth trends centered on the expansion of energy networks to support cleaner forms of energy, improve safety and reliability and the continued integration of North American energy markets. Our three platforms combined for nearly 300,000 miles of transmission and distribution lines, all in key markets in North America, while serving nearly 40 million consumers. These integrated growth platforms generated approximately $2.6 billion in 2021 full year adjusted earnings and position us to grow earnings well into the future. But at a high level, our projected growth of 6% to 8% is supported by strong continued investment at Sempra California to support safety, reliability and the state's ambitious energy transition goals; investment in our Texas utilities to support strong economic growth and a significant interconnection queue loaded with renewables; and, disciplined investments at Sempra Infrastructure for fully contracted assets currently under construction; and, potential upside to projected growth from projects we currently have in development. Finally, I think it's worth noting that the vast majority of our assets have some form of inflation protections built into them, either through regulatory constructs such as upcoming rate cases or pass-through mechanisms on our Infrastructure projects. Additionally, given our strategic focus on T&D Infrastructure, the lower risk section of the energy value chain, we believe we've reduced our exposure to many of the traditional risks in the energy space whether it's commodity exposure, extreme weather, retail credit or stranded generation investments. Please turn to the next slide. For two decades, Sempra has been on a sustained path to decarbonize our business operations and the markets we serve. Innovation and new technologies are central to a clean energy future, enabled by investments in three key capabilities: decarbonization, diversification and digitalization. This past year, we summarized our aspirations in each of these areas as part of Sempra's Energy Transition action plan, and I'm pleased to update you that we're making great progress. Here are a few examples. In California, SDG&E completed its inaugural issuance of $750 million in green bonds and secured regulatory approval for three new energy storage projects expected to total 161 megawatts. Additionally, SoCalGas achieved over 4% renewable natural gas deliveries to core customers in 2021. Oncor is doing an excellent job connecting customers to cleaner renewable sources of energy by expanding and modernizing Texas' vast transmission and distribution network. In 2021, Oncor connected nearly 2,200 megawatts of wind and solar generation, bringing the total renewables connected to Oncor system to approximately 15,500 megawatts. In addition to progress on its operations, Oncor has also entered into a new $2 billion revolving credit facility with sustainability-linked performance metrics. And lastly, at Sempra Infrastructure, the newly consolidated platform is advancing opportunities in renewables, hydrogen, ammonia, LNG and carbon capture infrastructure. The company recently filed an amendment with FERC to incorporate electric drives at our proposed Cameron LNG Phase 2 project, which could help reduce facility emissions by up to 40% while continuing to help decarbonize global markets. Earlier this year, the company also announced an MOU with Entergy to develop options intended to accelerate deployment of renewable energy to power primarily LNG facilities. Across our industry, companies are adjusting their business models to meet customer demands for increasingly cleaner sources of energy. At Sempra, we think these trends play to the strength of our company and effectively create a tailwind for new and cleaner investments across our platforms. Please turn to the next slide, where I'll hand the call over to Trevor to provide business and financial updates. To begin, we've had several positive developments at our operating companies. In the third quarter, SDG&E filed an application with the CPUC to assess its cost of capital for 2022 as a result of the extraordinary event of the COVID-19 pandemic. In December, the CPUC issued a scoping memo with a final decision expected later this year. Also, the CPUC authorized a memorandum account effective January 1, 2022, to track any differences in revenue requirements resulting from the interim cost of capital decision expected later this year. Additionally, the CPUC is working through the implementation of a renewable natural gas procurement standard. We're excited about this development and view it as a significant step forward in advancing the future of cleaner fuels here in California. Lastly, SoCalGas recently announced a bold new vision to develop a proposed green hydrogen infrastructure system to serve the Los Angeles Basin called Angeles Link. As contemplated, this project would be the nation's largest green hydrogen infrastructure system and will deliver green hydrogen to the country's largest manufacturing hub to help decarbonize electric generation, industrial processes, heavy-duty trucking and other sectors that are challenging to fully electrify. Oncor set a company record for the number of new and active requests received for transmission interconnections in 2021 demonstrating the rapid growth in Texas and continuing opportunities for Oncor to grow its system. Oncor service territory continued to grow as well, with Oncor connecting approximately 70,000 additional premises in 2021. At Sempra Infrastructure, we signed two MOUs to advance our unique capability of delivering LNG into both the Atlantic and Pacific basins. The first with Entergy that Lisa discussed earlier and the second, an MOU with CFE to jointly develop Vista Pacifico LNG, as well as a new regasification project in La Paz, Baja California Sur. Additionally, Sempra Infrastructure established a new credit facility in the fourth quarter and issued its inaugural investment-grade bonds last month, all with the intention of efficiently financing its growth along with internally generated cash flows. Please turn to the next slide where I'd like to go into additional detail on an update relating to Sempra Infrastructure. Here, the key takeaway is that we're making progress on our announced sale of an additional 10% interest in the business to ADIA. This transaction, which is subject to customary closing conditions and third-party and regulatory approvals, valued Sempra Infrastructure at an enterprise value of approximately $26.5 billion, which was $1 billion higher than the KKR transaction. We expect to use the proceeds to fund utility capital, execute share repurchases and continue supporting improvements in the balance sheet. Please turn to the next slide where I'll review the financial results. This compares to fourth quarter 2020 GAAP earnings of $414 million or $1.43 per share. On an adjusted basis, fourth quarter 2021 earnings were $688 million or $2.16 per share. This compares to our fourth quarter 2020 earnings of $668 million or $2.28 per share. Full year 2021 GAAP earnings were $1.254 billion or $4.01 per share. This compares to 2020 GAAP earnings of $3.764 billion or $12.88 per share. On an adjusted basis, full year 2021 earnings were $2.637 million or $8.43 per share. This compares favorably to our previous full year 2020 adjusted earnings of $2.342 billion or $8 per share. Please turn to the next slide. The variance in full year 2021 adjusted earnings compared to the prior year was affected by the following key items: $78 million of lower earnings due to the sales of our Peruvian and Chilean utilities in April and June of 2020, respectively. $126 million of lower earnings from a CPUC decision in 2020 that resulted in the release of regulatory liabilities at Sempra California related to prior year's forecasting differences that are not subject to tracking in the income tax expense memorandum account. This was offset by $216 million due to higher earnings from Cameron LNG JV primarily due to Phase 1 achieving full commercial operations in August of 2020, and asset and supply optimization primarily driven by changes in natural gas prices and higher volumes. $139 million of lower losses at Parent and Other, primarily due to the lower preferred dividends from the mandatory conversion of preferred stock and lower net interest expense. $52 million of higher CPUC base operating margin, net of operating expenses at SDG&E and SoCalGas, $44 million charge in 2020 for amounts to be refunded to customers related to the energy efficiency program at SDG&E, $37 million of higher earnings at Sempra Texas Utilities, primarily due to increased revenues from rate updates to reflect increases in invested capital and customer growth. Please turn to the next slide. We continue to see robust opportunities to invest in our Utilities and Infrastructure businesses, resulting in a $36 billion five-year capital plan, the largest in our history. And notably, a $4 billion increase over the prior plan we announced last year. This plan is anchored by $33 billion of Utility investments, representing nearly 94% of the total capital plan. For SDG&E and SoCalGas, safety and reliability continue to be at the forefront of our planned expenditures. Our investments in California centered around the state's regulatory priorities including wildfire safety and the integrity and safety of our gas infrastructure along with technology investments. Additionally, at Oncor, the capital plan addresses the strong organic growth. For example, the population of Texas increased more than any other state in 2021, continuing the need for further investments to support this growing demand. Please turn to the next slide. These capital investments in top-tier markets in North America are driving tremendous growth in our projected rate base. In 2017, we had $14 billion of rate base at the California utilities. And through adding our interest in Oncor, as well as organic growth at both our California and Texas utilities, we grew our rate base to $41 billion in 2021 and expect to grow it even further to $62 billion by 2026. Just as importantly, we expect to support this strong projected growth without issuing common equity. Notably, over the next five years, our rate base mix is not expected to change materially with approximately 70% of total rate base dedicated to electric infrastructure, which reflects how well-positioned we are to continue supporting strong trends in electrification in our core utility markets. Please turn to the next slide where I'll provide additional details on the opportunities we have to efficiently fund our growing rate base. As we think about our financing strategy, we have multiple opportunities to efficiently fund the expansive growth that we're experiencing at our utilities. Over the past few years, you've seen us rotate capital to fund utility growth while also strengthening the balance sheet, finishing 2021 in a strong position with 47% total debt to capitalization and 18% FFO to debt. Looking forward, our financial plan is underpinned by a portfolio of strong operating cash flows that are backed by regulated returns or long-term contracts. Our robust utility capital plan is further supported by cash generated from Sempra Infrastructure where projected cash distributions to Sempra, combined with the proceeds from the sales to KKR and ADIA are expected to provide over $7 billion from 2021 through 2026. Turning to the dividend. We continue to target a payout ratio of approximately 50% to 60%, which allows us to aggressively invest in utility growth while supporting the dividend. In addition to the dividend, we see opportunistic share repurchases as a way to efficiently return capital to shareholders from time to time. We remain focused on delivering shareholder value. And through this efficient financing strategy, we expect to deliver strong earnings per share and dividend growth without issuing external common equity. Please turn to the next slide where I'll discuss our near-term earnings per share guidance ranges and projected long-term earnings per share growth rate. We're reaffirming our 2022 earnings per share guidance range of $8.10 to $8.70 per share, and we're introducing our 2023 earnings per share guidance range of $8.60 to $9.20 per share. The aforementioned guidance includes plans to continue returning capital to our owners in the form of $1 billion of share repurchases. This would be an addition to the $500 million of share repurchases we recently completed. Now let me talk about our longer-term growth. Our historical execution, combined with the growth opportunities in front of us, give us confidence in providing a long-term earnings per share growth rate of an annual average of 6% to 8% starting at the midpoint of 2022 earnings per share guidance through 2026. This 6% to 8% growth is driven by our five-year capital plan and continued operational excellence across our businesses. It is anchored by an 8.5% projected rate base growth at our utilities and only includes projects currently in construction at Sempra Infrastructure. Importantly, we see opportunities to outperform this projected growth rate through incremental investments across our three platforms. A few examples would include additional spending on energy storage, wildfire mitigation, electric vehicle infrastructure and related make-ready work and pipeline safety and reliability in California, further economic growth driving transmission and distribution expansion in Texas and lastly, executing on incremental LNG and other development projects at Sempra Infrastructure that are currently outside the plan. Please turn to the next slide where I'll highlight our historical execution. This slide is a good depiction of how we've historically met or exceeded our published earnings per share guidance ranges and done so consistently, reflecting our long track record of disciplined capital allocation, thoughtful execution and a commitment to deliver on our financial projections. Please turn to the next slide. Let me summarize our investment proposition. We've invested time and energy in building a high-performing infrastructure company that is well-positioned in some of the fastest-growing markets in North America, overlaid with a commitment to capital discipline, we have a track record of operational excellence, disciplined financial execution and dedication to consistently returning value to our shareholders in the form of dividends and opportunistic share repurchases. Bottom line, we're excited about the future of Sempra and the critical role that our infrastructure will play in supporting future economic growth in the energy transition. Please turn to the last slide. Over the last four years, we've continued to update our portfolio with a view toward prioritizing markets with strong fundamentals and constructive regulation and simplifying our business model to improve execution and building scale, financial strength and a high-performing culture to deliver improved financial results. With the benefit of those strategic efforts, it allowed us to end 2021 in a strong position and looking forward we have three integrated platforms with improved visibility to future growth.

reaffirms fy earnings per share view $8.60 to $9.20. q4 adjusted earnings per share $2.16. reaffirms 2022 and issues 2023 earnings per share guidance range. announcing its full-year 2023 earnings per share guidance range of $8.60 to $9.20. starting from midpoint of 2022 earnings per share guidance, sees to grow long-term earnings per share at compound annual growth rate of about 6% to 8% through 2026.

Such statements are based on certain estimates and expectations and are subject to a number of risks and uncertainties. We encourage you to read the risks described in the Company's public filings and reports, which are available on SEC or the Company's corporate website. Now I would like to turn the conference over to Karen Colonias, Simpson's President and Chief Executive Officer. I'll begin with a summary of our key first quarter performance drivers and initiatives. Brian will then walk you through our financials and updated full-year 2021 business outlook in greater detail. Our first quarter consolidated net sales were strong, growing 22.6% year-over-year to $347.6 million on significantly higher sales volumes. Our gross margin expanded to 46.7% from 45.7% in the prior year quarter, primarily due to lower labor, factory, warehouse and shipping costs, which were partially offset by higher material costs. Our solid gross margin, combined with our diligent expense management and reduced costs due to COVID-19, drove a significant year-over-year increase of 38.6% in our income from operations to $68.4 million and an increase of 39.8% in our earnings per diluted share to $1.16. The increase in sales volume we experienced in the first quarter was primarily a result of the continued momentum in the home center distribution channel, where sales increased over 60% compared to the prior year period. As a reminder, the home center distribution channel includes both our home center and co-op customers and is where we see much of our repair and remodel business. We are continuing to see increased activity in the repair and remodel space likely as a result of the ongoing pandemic as consumers continue home renovations. Lowe's contributed significantly to the channel growth compared to the first quarter last year, due to their return as a home center customer in the second quarter of 2020. Our sales further benefited from solid trends in U.S. housing starts. As we generally experience a multiple month lag in demand from the time of the start, in the first quarter, we benefited from strong fourth quarter 2020 housing starts, which grew over 10% year-over-year. In addition, housing starts in the markets where we sell the most content continued to surpass the broader U.S. housing starts, especially in single-family space and in the western and southern regions of the U.S. While adverse weather conditions in the month of February resulted in certain supply chain interruptions, most notably in Texas, we have since addressed any back order demand and did not record a material impact to our first quarter performance. Now let's turn to Europe. Our first quarter sales improved over the prior year on local currency basis, given strong demand trends and our ability to continue meeting our customers' needs due to our solid inventory management practices amid broader supply chain shortages. As a reminder, net sales in the first quarter of 2020 were negatively affected by weaker conditions in Europe due to COVID-19 when two of our larger European operations in the United Kingdom and France were ordered to cease operations in late March. As of today, all of our major production and distribution facilities remain open and operational in Europe, so we continue to promote remote work from home where possible, such as in our corporate offices to help prevent the spread of COVID-19. Lastly, I'd like to take a moment to discuss some recent pricing dynamics in the marketplace. As previously announced in early February, we implemented price increases ranging from 5% to 12% depending on the product mix for certain of our wood connectors, fasteners and concrete products in the U.S. in an effort to offset rising material costs. These price increases went into effect on April 5, following a 60-day notice period to our customers. The notification also included a clause that prohibited significant pre-buying ahead of the increases in order for us to properly manage our inventory levels. As a result, we do not believe we experienced meaningful pre-buying activity related to these increases. More recently, we announced the second price increase ranging from 6% to 12% primarily for our wood connector products in the U.S. in an effort to further offset rising material costs. Our customers were notified of this increase on April 16, which will go into effect on June 15. We expect the impact of these price increases will help support our ability to maintain strong gross profit margins through the end of the year. I'd now like to turn to a high-level discussion on our key growth initiatives. As many of you are aware, we held a Virtual Analyst and Investor Day event on March 23 in which we unveiled several growth initiatives that we believe will help us continue our track record of above-market growth through a combination of organic and inorganic opportunities. Our organic opportunities are focused on expansion into new markets within our core competencies of wood and concrete products. Our inorganic opportunities will be focused on licensing, purchasing IP and traditional M&A. As a reminder, our growth initiatives focused on the following markets, which I'll list in no particular order of priority: OEM, original equipment manufacturers; repair remodel, the do-it-yourself market; mass timber, concrete and structural steel. In order to appropriately grow in the first three markets that being OEM, retail -- R&R as well as the DIY and mass timber, we aspire to be a leader in engineered load-rated construction fastener solutions, given that each of these markets have a broader product opportunity within the fastener solutions. In addition, we're striving to be a stronger leader in customer-facing technology, which has been a focus of ours for a number of years. Here I'm referring to software that helps our customers better run their business by providing them with the proper tools to design, select and specify the right Simpson solutions for the job. We expect technological advancements will drive enhanced growth in all of our key growth initiatives as well as across all of Simpson Manufacturing in general. We believe our business model will support our ability to be successful throughout each of these areas, given our engineering expertise, our deep-rooted relationship with top builders, engineers, contractors, code officials and distributors, along with our ongoing commitment to testing, research and innovation. Importantly, we currently have existing products, test results, distribution and manufacturing capabilities for all five of our growth initiatives. This is also important to note that these initiatives are currently in different stages of development. Our successful growth in these areas will ultimately be a function of expanding our sales and marketing functions to promote our products to different end-users and distribution channels, expanding our customer base, and potentially introducing new products in the future. We will keep you appraised of significant updates regarding our key growth initiatives as they arise. I'd also like to highlight our five-year Company ambitions that we unveiled at our Analyst Investor Day. First, we want to strengthen our values-based culture. Barclay Simpson founded our Company on the nine principles of doing business, which continue to guide our organization today. Our Simpson Strong-Tie employees are our most important asset. So we spend a significant amount of time communicating with them to ensure a relentless customer focus, involving them in leadership programs and instilling a safety-first culture. Second, we want to be the partner of choice. This ambition takes on many meanings. It means we want to be your solution provider, your trusted brand to provide you a solution and quickly get that product out to your job site and we want to make it easy to do business with us. We aspire to be the partner of choice in all aspects of our business. Third, we strive to be an innovative leader in product categories. If we can accomplish this, we have no doubt we will be able to accomplish ambition Number 4, which is to continue our above-market growth relative to U.S. housing starts. This we will continue to expand our operating income margin to remain within the top quartile of our proxy peers. And finally, we will continue expanding our return on invested capital to remain in the top quartile of those peers. After building our strong foundation through the 2020 plan, we look forward to an even stronger future ahead. Before I close today, I'd like to briefly touch on our capital allocation strategy. As our business continues to generate strong cash flows, we remain focused on appropriately balancing our growth and stockholder return priorities. We will prioritize investing in our growth initiatives in areas such as engineering, talented marketing and sales personnel and testing capabilities. M&A also remains a key focus in order to expand our product line and develop complete solutions for the markets in which we operate to strengthen our business and improve our market share. As previously stated, we are leveraging venture capital expertise to help identify potential strategic acquisitions or investments, including innovative technologies of interest in the building space. In summary, we are thrilled with our strong first quarter performance, despite global macroeconomic turbulence stemming from ongoing pandemic. We expect the second quarter of 2021 will reflect ongoing sales momentum with strong Q1 housing starts in the areas we primarily serve, which positions us well to continue to benefit from this unique environment. Our employees have been thoughtfully engaged with our leadership team as it pertains to our Company ambitions and growth initiatives to ensure a collaborative environment and to assist in the execution of our strategy. We look forward to capitalizing on our growth opportunities in adjacent markets by leveraging our business model, built on engineering, testing and innovation. I'm pleased to discuss our first quarter financial results with you today. Now turning to our results. As Karen highlighted, our consolidated net sales were strong, increasing 22.6% to $347.6 million. Within the North America segment, our net sales increased 20.7% to $300.6 million, primarily due to higher sales volumes in our home center distribution channel, which includes our home center and co-op customers. Sales volumes were supported by the return of Lowe's, along with increased repair and remodel activity. We also continue to benefit from solid demand trends in other distribution channels, which are experiencing increased demand from new housing starts and repair and remodel activity. In Europe, net sales increased 35.3% to $44.3 million, primarily due to higher sales volumes in local currency. Europe's sales also benefited by approximately $3.6 million of positive foreign currency translations resulting from some Europe currencies strengthening against the United States dollar. Wood construction products represented 87% of total sales, compared to 86% and concrete construction products represented 13% of total sales compared to 14%. Consolidated gross profit increased by 25.2% to $162.3 million, which resulted in a stronger Q1 gross margin of 46.7% compared to last year. Gross margin increased by 100 basis points, primarily due to lower labor, factory, warehouse and shipping costs, which were partially offset by higher material costs. On a segment basis, our gross margin in North America increased to 48.5% compared to 47.7%, while in Europe, our gross margin increased to 34.4% compared to 32.7%. From a product perspective, our first quarter gross profit margin on wood products was 46.6% compared to 45.4% in the prior year quarter and was 42.5% for concrete products, the same as the prior year quarter. Now turning to our first quarter costs and operating expenses. Research and development and engineering expenses increased 9% to $14.6 million, primarily due to increases in personnel costs, professional fees and patent costs. Selling expenses increased 8% to $30.8 million due to increases in stock-based compensation, personnel costs and professional fees, offset by a decrease in travel-related costs. On a segment basis, selling expenses in North America were up 9.1% and in Europe, they were up 2.8%. General and administrative expenses increased 26.2% to $48.6 million, primarily due to increases in stock-based compensation, personnel costs and professional fees and amortization and depreciation expense, offset by a decrease in travel-related costs. Total operating expenses were $94.0 million, an increase of $13.6 million or approximately 16.9%. As a percentage of net sales, total operating expenses were 27%, an improvement of 130 basis points compared to 28.3%. Our solid topline performance combined with our stronger Q1 gross margin and diligent expense management helped drive a 38.6% increase in consolidated income from operations to $68.4 million compared to $49.4 million. In North America, income from operations increased 29.5% to $69.4 million, primarily due to increased gross profit, partly offset by higher operating expenses. In Europe, income from operations increased 35.3% to $2.3 million, primarily due to increased gross profit. On a consolidated basis, our operating income margin of 19.7% increased by approximately 230 basis points. Our effective tax rate increased to 24.3% from 21.3% due to a lower windfall tax credit on the vesting of restricted stock units. Accordingly, net income totaled $50.4 million, or $1.16 per fully diluted share compared to $36.8 million or $0.83 per fully diluted share. Now turning to our balance sheet and cash flow. Our balance sheet remained healthy with ample liquidity to operate our day-to-day operations. At March 31, cash and cash equivalents totaled $257.4 million, a decrease of $44.3 million compared to March 31, 2020. As of March 31, 2021, the full $300 million on our primary line of credit was available for borrowing and we remain debt-free with a small portion of capital leases, mostly unchanged from year-end. Our inventory position of $296.8 million at March 31 increased by $13 million from our balance at December 31, as we continue to see higher levels of construction activity and raw material prices along with the unprecedented demand we've experienced throughout the pandemic. We continue to carefully manage raw material inventory purchases in this environment of rising costs and limited supplies, all while striving to maintain our high levels of customer service and on-time delivery standards. As a result of our improved profitability and effective working capital management, we generated strong cash flow from operations of $18.5 million for the first quarter of 2021, an increase of $5.8 million or 45.5%. We used approximately $10.5 million for capital expenditures during the quarter. In regard to stockholder returns, we paid $10 million in dividends during the first quarter. As of March 31, 2021, we had the full amount of our $100 million share repurchase authorization available, which will remain in effect through the end of 2021. Given our confidence in our business and our expectation that our strategic initiatives will continue to drive improved operational performance and a higher return on invested capital, we expect we'll remain both active and opportunistic as it relates to share purchase activity. Our next Board meeting is scheduled to take place in early May, where we will review our capital allocation priorities in greater detail. Based on business trends and conditions as of today, April 26, we are updating certain elements of our guidance for the full year ending December 31, 2021 as follows. We're updating our operating margin outlook to now be in the range of 19.5% to 22%, compared to our original estimate of 16.5% to 18.5%. We're increasing the range to reflect the impact of our recent price increase announcements, as well as the stronger-than-anticipated demand trends we've been experiencing in 2021. While we are very pleased to increase our outlook for operating margins in fiscal 2021, it's important to note that based on our current expectations, we are anticipating raw material costing pressure in late 2021 and into fiscal 2022. Our gross margins in the first half of 2021 will reflect an average cost of steel sourced prior to or early into the surging steel market together with steel purchased more recently at substantially higher prices. As we work through our on-hand inventory and continue to buy raw material at these higher prices, our anticipated cost of goods sold are expected to increase significantly in the latter part of 2021 and 2022 even if prices for raw materials begin to decline, adversely impacting our margins, as the impact from averaging raw material costs typically lags our price increases. However, as announced during our recent Analyst and Investor Day, the key focus of our five-year Company ambitions will be to expand our operating income margin to remain within the top quartile of our proxy peers, which we plan to achieve through successful execution on our growth initiatives and careful expense management. In addition, we expect our effective tax rate to be in the range of 25% to 26%, including both federal and state income tax rates. And finally, we are reiterating our capital expenditure outlook to be in the range of $50 million to $55 million, including approximately $10 million to $15 million, which will be used for safety and maintenance capex. It's important to note, our elevated capital expenditure spend relative to fiscal 2020 includes carryover projects that we have previously paused due to the pandemic, investments in factory equipment to improve service levels, as well as for safety and maintenance updates. At this time, only a small amount of our capex spend is related to pursuing our growth initiatives outlined during our Investor and Analyst Day. In summary, we were very pleased with our strong first quarter financial results and operating performance. We believe our significant scale, geographic reach and diverse product offerings combined with our strong balance sheet gives us confidence in our ability to maintain operational excellence and support current and future demand trends moving forward.

compname reports q1 earnings per share of $1.16. q1 earnings per share $1.16. q1 sales rose 22.6 percent to $347.6 million. sees fy 2021 operating margin to be in range of 19.5% to 22.0%.

Such statements are based on certain estimates and expectations and are subject to a number of risks and uncertainties. We encourage you to read the risks described in the Company's public filings and reports, which are available on the SEC's or the Company's corporate website. Now I would like to turn the conference over to Karen Colonias, Simpson's President and Chief Executive Officer. I'm pleased to discuss our results with you today. I'll begin with a high-level summary of our second quarter financial results and will then turn to a more detailed discussion on our key performance drivers along with the actions we've been taking in response to the COVID-19 pandemic. We executed a strong second quarter with sales of $326.1 million, improving 7% year-over-year and 15% quarter-over-quarter on higher volume despite the significant level of macroeconomic challenges resulting from COVID-19. We maintained a strong gross profit margin of 45.9% due to a combination of sales mix and lower material costs on improved overhead absorption. This, when coupled with our effective expense management, resulted in a 35% year-over-year increase in our income from operations to $72.2 million and strong earnings of $1.22 per diluted share. Our sales volume improved primarily due to the return of the home center customer during the quarter which resulted in significantly higher demand associated with the initial product rollout into those stores. I'll give more details on this new customer relationship momentarily. In addition, we saw improved sales in the repair and remodel market which were stronger than anticipated as a result of a shift in consumer behavior toward home renovation which we believe stems from the COVID-19 pandemic and associated shelter-in-place orders. Partially offsetting this strength were volume declines specific to Europe following government shutdowns in the United Kingdom and France in late March affecting our operations there. These facilities are now back up and running at near full capacity. We've been extremely diligent in our efforts to ensure Simpson remains a safe place to work. We've been enacting rigorous safety protocol in all of our facilities, including improved sanitation measures, mandatory social distancing, temperature screening, staggered shift schedule and remote working when possible. These actions, in addition to being deemed an essential business, have enabled us to continue operating our business with minimal disruptions during the pandemic. Importantly, we have not experienced any supply chain disruptions related to COVID-19 and have been able to continue meeting our customer needs. I'd now like to discuss the key driver of our performance during the second quarter. As some of you may recall, we had a prior relationship with Lowe's back in 2011 and we are delighted to have the opportunity to once again supply their customers with our industry-leading mechanical anchor, connector and fastener product solutions. During the second quarter, we shipped our connector product into Lowe's and expect to ship selections of both our mechanical anchor and fastener product in the current quarter. Please note that the sell-through into the Lowe's stores required for initial inventory stocking in Q2 and Q3 will not be indicative of volume trends moving forward. In addition, we anticipate some of our mechanical anchor and fastener products will be phased out of the Home Depot throughout the remainder of the year. These products were in some, but not all, Home Depot locations. Next, I'll turn to an update on our SAP implementation, which has continued to progress on track despite travel interruptions related to COVID-19. We have transitioned our rollout and training efforts to a virtual format for the time being which has been working out quite well. As of the end of the first quarter of 2020, all of our US based sales organizations have been transitioned over to SAP. And as of today, we still anticipate a companywide completion goal near the end of 2021. However, we will continue to monitor and update our timeline should COVID-19 continue to impact international travel for an extended period of time. As many of you are aware, we withdrew our financial targets associated with our 2020 plan back in April given the uncertainties surrounding the impact of COVID-19 on our operations, customers and suppliers. That said, we've made significant progress from when the plan was first publicly announced through the implementation of strategic changes to our business to ensure the long-term sustainability and profitability of our operation. By investing in adjacent products and markets, we've achieved enhanced diversification in our product and service offerings, leading our business to be far less reliant on US housing starts than it has been historically. We also took significant steps to rationalize our cost structure in addition to reducing discretionary expense in the current environment in order to operate more efficiently. The outcome of these efforts is directly evidenced by our 280 basis point improvement in our total operating expenses as a percent of sales for the second quarter of 2020 compared to the second quarter of 2019. In summary, we are very pleased with our second quarter financial performance despite the highly volatile and unpredictable environment that has continued into the third quarter. So far in the first few weeks of July, our net sales have increased approximately 10% compared to July of 2019. Looking ahead, we believe the solid demand trends we experienced in the second quarter of 2020 from the addition of Lowe's and improved repair and remodel market will continue, offsetting expected weakness in housing construction. Brian will provide additional detail regarding our reinstated financial outlook for the full year of 2020 shortly. We look forward to continuing to execute our model with an emphasis on enhancing our operational efficiencies and cost savings which will serve us well through this pandemic and in the long term. I continue to believe our business is very well positioned, given our strong brand reputation and loyal customer base which has been built over 64 years, our deep-rooted industry relationships, our many, many talented employees and our superior customer service standards, industry-leading high quality trusted products, a high level financial flexibility and a healthy balance sheet and solid liquidity position. I'm pleased to discuss our second quarter financial results with you today. Now turning to our results. As Karen highlighted, our consolidated sales were strong, increasing 7% to $326.1 million. Within the North America segment, sales increased 10.7% to $286.8 million due primarily to the return of Lowe's and the corresponding higher sales volume necessary to support the rollout of our products into their stores. In Europe, sales decreased 14.4% to $37.4 million mainly due to government-mandated COVID-19 related closures which resulted in lower sales volume. Europe sales were further negatively impacted by $1.2 million from foreign currency translation resulting from Europe currencies weakening against the United States dollar. In local currency, Europe net sales still declined on the whole. Wood Construction products represented 86% of total sales, compared to 84% and Concrete Construction products represented 14% of total sales compared to 16%. Gross profit increased by 11.6% to $149.8 million resulting in a gross margin of 45.9%. Gross margin increased by 190 basis points, primarily due to improved material costs which were partially offset by higher warehouse and shipping costs. On a segment basis, our gross margin in North America improved to 47.4% compared to 45.1% while in Europe our gross margin decreased to 35.1% compared to 37%. From a product perspective, our second quarter gross margin on wood products was 46.2% compared to 43.4% in the prior-year quarter and was 40.7% for concrete products compared to 44% in the prior-year quarter. Now turning to our second quarter costs and operating expenses. Research and development and engineering expenses increased 10.3% to $12.2 million primarily due to increases in cash profit sharing expense and personnel costs. Selling expenses decreased 6.5% to $26.8 million due to declines in travel, fuel and entertainment expenses, professional fees and promotional expenses, which were partly offset by increases in cash profit sharing, stock based compensation and personnel costs. On a segment basis, selling expenses in North America were down 4.3% and in Europe they decreased 13.3%. General and administrative expenses decreased 8.1% to $38.6 million, primarily due to declines in professional and consulting fees and travel and entertainment expenses, which were partly offset by increases in cash profit sharing, stock based compensation, computer hardware and software expenses and depreciation and amortization. On a segment level general and administrative expenses in North America decreased 7.9%. In Europe, G&A decreased by 13.6%. Total operating expenses were $77.7 million, a decrease of $3.4 million or approximately 4.2%. As a percentage of sales, total operating expenses were 23.8%, an improvement of 280 basis points compared to 26.6%. Stock-based compensation expense included adjustments to performance-based shares of 5.2 million in the second quarter of 2020. Our strong gross margin and diligent management of costs and operating expenses helped drive a 34.6% increase in consolidated income from operations to $72.2 million compared to $53.7 million. In North America, income from operations increased 41% to $72.2 million due to the strength of our gross profit margin coupled with reduced operating expenses. In Europe, income from operations was $2.7 million compared to $4.7 million due to a combination of lower sales and slightly higher operating expense. On a consolidated basis, our operating income margin of 22.1% increased by approximately 450 basis points. The effective tax rate decreased to 25.8% from 26.4%, primarily due to a reduction in foreign losses subject to valuation allowances. Accordingly, net income totaled $53.5 million or $1.22 per fully diluted share compared to $39.6 million or $0.88 per fully diluted share. Now turning to our balance sheet and cash flow. Our balance sheet remained healthy with ample liquidity to operate our day-to-day operations. At June 30th cash and cash equivalents totaled $315.4 million, an increase of $13.7 million compared to the balance at March 31st. Our inventory position of $265.4 million at June 30th increased $9.6 million from our balance at March 31st, in line with the seasonal increase in inventory we typically experienced in the summer and fall months due to increased construction activity. We continue to be highly selective in regard to inventory purchases in line with our goal to improve our inventory balance through careful management and purchasing practices. We generated strong cash flow from operations of $29.3 million for the second quarter of 2020, a decrease of $14.6 million or 33.2%. During the second quarter, we used approximately $7.3 million for capital expenditures which included a minimal amount for our ongoing SAP implementation project. In regard to stockholder returns, we paid $10.2 million in dividend to our stockholders during the second quarter. On July 13th, our Board of Directors declared a quarterly cash dividend of $0.23 per share which will be payable on October 22nd to stockholders of record as of October 1st. As such, based on business trends and conditions as of today, July 27th, we estimate our outlook for the full fiscal year ending December 31, 2020 to be as follows. Net sales are estimated to increase in the range of 1.5% to 4% compared to the full year ended December 31, 2019. Gross margin is estimated to be in the range of approximately 43% to 45%. Operating expenses as a percentage of net sales are estimated to be in the range of approximately 27% to 29% and the effective tax rate is estimated to be in the range of 24% to 26%, including both federal and state income taxes. Notwithstanding the improved visibility, it is important to note that the potential economic impact related to COVID-19 on our operations, raw material costs, consumers, suppliers and vendors, which we are unable to predict at this time, may have a material adverse impact on our 2020 financial outlook. In summary, despite broader COVID-19 related challenges in the marketplace, we were very pleased with our second quarter financial results and operating performance. We remain focused on executing our strategy to drive improved performance moving forward. Our industry leadership position, geographic reach and diverse product offering, combined with our strong balance sheet and liquidity position gives us confidence in our ability to maintain our operations and support current and future demand trend. We look forward to updating you on our progress in the coming quarters. For the second quarter of 2020 we generated strong cash flow from operations of $30 million for the second quarter of 2020, a decrease of $14 million or 31.2%.

compname reports q2 earnings per share $1.22. q2 earnings per share $1.22. q2 sales rose 7 percent to $326.1 million. providing full year 2020 financial guidance on improved demand outlook. sees fy net sales to increase in range of 1.5% to 4.0% compared to full year ended december 31, 2019. sees fy 2020 sales up 1.5 to 4 percent.

Such statements are based on certain estimates and expectations and are subject to a number of risks and uncertainties. We encourage you to read the risks described in the company's public filings and reports, which are available on SEC or the company's corporate website. Now, I would like to turn the conference over to Karen Colonias, Simpson's President and Chief Executive Officer. I'm pleased to discuss our results with you today. I'll begin with a high level summary of our third quarter results and we'll then turn to a more detailed discussion on our key performance drivers and initiatives. Brian will then walk you through our financials and updated business outlook in greater detail. We delivered strong third quarter results with our sales increasing 17.5% year-over-year to $364.3 million on significantly higher volume. Compared to the second quarter of 2020, our sales increased 11.7%. Further, we achieved a considerable improvement in our gross profit margin to 47.6% from 44.4% in the prior year quarter, primarily related to lower material and labor costs. The strength in our gross profit margin combined with our efforts in expense management and reduced cost from travel and other restrictions, as a result of the COVID-19 helped drive a 49.8% year-over-year increase in our income from operations to $91.3 million and strong earnings of $1.54 per diluted share. At Simpson, we value our employees' health, safety and well-being as our top priority and strive for continuous improvement to ensure our company remains a safe and rewarding place to work. Our diligence including strict adherence to protocol to help minimize the spread of COVID-19 has enabled us to continue operating our business with minimal disruptions from the pandemic. We are prepared to play a key role in the rebuilding efforts with our mission of helping people build safer, stronger structures. Getting back to our results. The substantial increase in sales volume we experienced in the third quarter was primarily related to ongoing momentum in the repair and remodel space, which includes both our home center and co-op customers. We continued to benefit from a shift in consumer behavior toward home renovations as people are spending more and more time in their homes and outdoor living spaces, as a result of the COVID-19 pandemic. We estimate sales from the home center channel, where we see much of our repair and remodel business, improved 125% over the prior year period. As disclosed in our previous call, we are extremely happy to have Lowe's return as a home center customer in the second quarter, during which time we began shipping our products into their locations. We continued to make progress on our product rollout during the third quarter. As of the end of September, all Lowe's stores had been set with our industry-leading connectors, as the exclusive supplier. In addition, both our mechanical anchor and fastener product solutions were set in 987 stores among other competing manufacturers. By the end of October, we expect our product set to be nearly completed in all 1,737 Lowe's stores. In addition, while the Home Depot continues to carry our connector line, most of our mechanical anchor and fastener products are being phased out of the Home Depot locations throughout the remainder of this year. As a reminder, our mechanical anchor and fastener products were in some, but not all Home Depot locations. Our sales were further supported by strong US housing starts in 2020. In the third quarter of 2020, housing starts grew 11.4% versus the comparable period last year and grew 29.9% versus the second quarter of 2020. Notably, in the West and South, where we provide a meaningful amount of content into homes, third quarter starts grew 7.6% and 14.1% respectively year-over-year. Turning now to Europe. We saw our sales recover nicely with our facilities now operating at full capacity following government shutdowns in the United Kingdom and France due to the COVID-19 in late March. While much of the improvement in Europe was related to the benefit of foreign currency translations, sales still improved both year-over-year and quarter-over-quarter on slightly higher volume. As part of our strategy to continue to grow our market share in Europe, subsequent to quarter end we acquired a small connector manufacturer based in the United Kingdom with a complementary product line. The acquisition closed early in October and the acquired company's operations will be absorbed into our existing business. Overall, we expect this acquisition to benefit our market position in the region moving forward. I'd now like to shift our focus to our software strategy. As previously discussed, we believe that the investments we made over the years in software have enhanced our technological capabilities to remain competitive in the wood construction space by providing our customers with complete end-to-end product and software solutions. We estimate over 40% of our core wood connector sales are to customers with software needs and believe this figure will increase over time. To further our expertise in this area, we completed the purchase of a small software application for builders during the third quarter of 2020. Similar to our acquisition of LotSpec in 2018, which was a suite of software applications designed to optimize efficiency and productivity for homebuilders, this application expands our software choices for builders to help minimize costs and best align with their business needs. By expanding our technology offering to provide our customers with more tailored and innovative software solutions, we believe we will strengthen our value proposition. Next, I'll return to an update on our SAP implementation, which continued to progress despite travel limitations related to the COVID-19. Some of the benefits we've enjoyed so far include better forecasting tool to aid with working capital management and particular inventory management. Earlier this year, we successfully transitioned all of our US based sales organization over to SAP. Immediately following the third quarter, we also completed two more locations, including our UK branch, which is now live. That said, given the duration and severity of the pandemic remains highly fluid and uncertainty, we are unable to accurately predict how COVID-19 will continue to impact international travel, on-site meeting, and training requirements to complete the rollout in our remaining location. As such, we currently anticipate a companywide completion goal in 2022 versus near the end of 2021, though we will continue to monitor and update our time line should circumstances change. Now I'd like to briefly touch on our capital allocation strategy. As business continues to generate strong cash flow, we remain focused on appropriately balancing our growth and stockholder return priorities while also paying down debt. While our focus for the majority of the year has been on cash preservation to ensure our working capital needs during the pandemic could be met in the near term. Over the past seven months, we have been very grateful to be able to operate as a supplier to other essential businesses with only minimal disruptions to the COVID-19. As such, we are continuing to support our growth strategy in identifying M&A opportunities that would complement our existing product offering, manufacturing footprint or strengthen our software capabilities. We were also very pleased to declare our quarterly dividend as we have done consistently since 2004. As previously announced, Mike will be joining Simpson at the end of November after spending over 22 years in numerous leadership positions at Henkel, a global chemical and consumer goods company. We are excited to have Mike on board and he will be instrumental in helping us uncover new ways to remain innovative and seek opportunities for future growth. Mike replaces our former COO, Ricardo Arevalo, who retired in February of 2020 after 20 years of service to Simpson Strong-Tie. While the search to find the right candidate took longer than anticipated, I could not be more pleased with our choice. In summary, we executed an excellent third quarter with strong financial performance across the board, despite broader macroeconomic challenges that continue to plague our economy. The durability of our business model has continued to support us through this challenging time as a result of key elements, including our strong brand recognition and trusted reputation in the industry, our industry-leading high quality and tested product solution, our superior customer service standards, our disciplined capital allocation strategy, a strong balance sheet and liquidity position, which enables financial flexibility and most importantly our passionate and dedicated employees. Looking ahead, we believe the solid demand trends we experienced in third quarter of 2020 will continue through the duration of the year, aside from the seasonality we typically experienced during the fourth quarter, due to holiday-related closures and winter conditions. I'm pleased to discuss our third quarter financial results with you today. Now turning to our results. As Karen highlighted, our consolidated sales were strong, increasing 17.5% to $364.3 million. Within the North America segment, sales increased 19% to $316.9 million, primarily due to the return of a home center customer and increased repair and remodel activity, as well as from other sales distributor channels, which experienced increased new housing starts and repair and remodel activity. In Europe, sales increased 6% to $44.8 million, primarily due to higher sales volumes. Europe sales benefited by approximately $2.1 million of positive foreign currency translations resulting from some Europe currencies strengthening against the United States dollar. In local currencies, Europe net sales still increased. Wood Construction products represented 85% of total sales compared to 84% and concrete construction products represented 15% of total sales compared to 16%. Gross profit increased by 25.9% to $173.2 million, which resulted in a strong gross margin of 47.6%. Gross margin increased by 320 basis points, primarily due to lower material and to a lesser extent reduced labor costs, which were partially offset by higher warehouse and shipping costs. As we continue to purchase steel to support heightened demand levels, we would expect our consolidated gross margin to normalize back down to a more appropriate run rate, which I will discuss in greater detail in our outlook shortly. On a segment basis, our gross margin in North America improved to 48.9% compared to 45.6%, while in Europe our gross margin decreased to 37.9% compared to 38.4%. From a product perspective, our third quarter gross margin on wood products was 48% compared to 44.4% in the prior year quarter and was 42.1% for concrete products compared to 41.6% in the prior year quarter. Now turning to our third quarter costs and operating expenses. Our strong third quarter performance and improved expectations for the full-year 2020 resulted in higher performance based compensation within our total operating expenses. Research and development and engineering expenses increased 2.6% to $12.3 million, primarily due to cash profit sharing and personnel costs, partly offset by lower capitalized software development costs. Selling expenses increased 6.2% to $29.4 million, due to increases in cash profit sharing, sales commissions, personnel costs, and stock-based compensation, which were partially offset by lower travel, fuel and entertainment expenses and advertising expense. On a segment basis, selling expenses in North America were up 7.3% and in Europe they increased 1%. General and administrative expenses increased 8.7% to $40.3 million primarily due to increases in cash profit sharing, stock-based compensation, depreciation and amortization and insurance, partly offset by lower travel associated expenses. On a segment level, general and administrative expenses in North America increased 5.6%, in Europe G&A, slightly decreased. Total operating expenses were $82 million, an increase of $5.3 million or approximately 6.9%. As a percentage of sales, total operating expenses were 22.5%, an improvement of 220 basis points compared to 24.7%. Our solid topline performance combined with our strong gross margin and diligent management of costs and operating expenses, helped drive a 49.8% increase in consolidated income from operations to $91.3 million compared to $61 million. In North America, income from operations increased 53.7% to $87.4 million, due to our strong sales and the strength of our gross profit margin. In Europe, income from operations increased 12.8% to $6.1 million primarily due to increased gross profit. On a consolidated basis, our operating income margin of 25.1% increased by approximately 540 basis points. Our effective tax rate remained flat at 26.2%. Accordingly, net income totaled $67.1 million or $1.54 per fully diluted share compared to $43.7 million or $0.97 per fully diluted share. Now turning to our balance sheet and cash flow. Our balance sheet remained healthy with ample liquidity to operate our day-to-day operations. At September 30, cash and cash equivalents totaled $311.5 million, a slight decrease of $4 million compared to the balance at June 30, after paying down $75 million on our revolving credit facility during the quarter. As a reminder, we drew down $150 million on a revolving line of credit during the first quarter of 2020 as a precautionary measure in order to preserve financial flexibility given the uncertainty of the length and impact of the COVID-19 pandemic. As of September 30, approximately $225 million remained available for borrowing. Our inventory position of $260.1 million at September 30, slightly decreased by $5.3 million from our balance at June 30, as we strived to maintain inventory levels to service the increased construction activity we typically see in the summer and fall months, along with the unprecedented demand we've experienced through the pandemic. We continue to be focused on improving our inventory balance through diligent management, and purchasing practices, to ensure maximum efficiency, while maintaining our high levels of customer service and on-time delivery standards. We generated strong cash flow from operations of $86.8 million for the third quarter of 2020, a decrease of $8.9 million or 9.3%. During the third quarter, we used approximately $6.8 million for capital expenditures, which included a minimal amount for our ongoing SAP implementation project. In regards to stockholder returns, we paid $10 million in dividends during the third quarter. And on October 23, our Board of Directors declared a quarterly cash dividend of $0.23 per share, which will be payable on January 28, 2021 to stockholders of record as of January 7, 2021. As a reminder on our second quarter earnings call in late July we reinstated our fiscal 2020 outlook based on improved visibility on the progression of pandemic related restrictions and the impact of those restrictions on our operations. Today we are updating our outlook to reflect an additional quarter of strong financial results as well as the latest business trends and conditions as of today October 26. As such, our current outlook for the full fiscal year ending December 31, 2020 is as follows. Net sales are estimated to increase in the range of 9% to 10% compared to the full-year ended December 31, 2019. Gross margin is estimated to be in the range of approximately 45% to 46%. Operating expenses as a percentage of net sales are estimated to be in the range of 25% to 26.5% and the effective tax rate is estimated to be in the range of 24.5% to 26%, including both federal and state income taxes. I would like to note that there continues to be a high level of macroeconomic uncertainty resulting from the COVID-19 pandemic. The potential economic impact related to COVID-19 on our operations, raw material costs, consumers suppliers and vendors, may have a material adverse impact on our 2020 financial outlook should conditions materially change from the current environment. I would expect gross margins and operating margins to pull back as we exit 2020, as we anticipate costs directly related to customer engagement and investments in growth to increase. In closing, despite the ongoing macroeconomic challenges in the marketplace stemming from the pandemic, we were thrilled with our third quarter financial results and operating performance. We believe our industry-leading position geographic reach and diverse product offerings combined with our strong balance sheet and liquidity position, give us confidence in our ability to continue executing against our strategic, operational, and financial initiatives.

compname says q3 sales $364.3 million. q3 earnings per share $1.54. q3 sales $364.3 million versus refinitiv ibes estimate of $316.4 million. updating full year 2020 financial guidance on improved demand outlook.

Such statements are based on certain estimates and expectations and are subject to a number of risks and uncertainties. We encourage you to read the risks described in the Company's public filings and reports, which are available on the SEC's or the Company's corporate website. Now I would like to turn the conference over to Karen Colonias, Simpson's President and Chief Executive Officer. I'd like to provide a high-level overview of our third quarter financial results and the associated performance drivers. I'll then wrap up by summarizing our key growth initiatives. Brian will then walk you through our financials and full-year 2021 business outlook in greater detail. Our third quarter net sales of $396.7 million were once again very strong and increased 8.9% over the prior-year period. Sales growth was primarily driven by product price increases to offset rising raw material costs. While the macroeconomic landscape remained challenged throughout the third quarter due to ongoing global supply chain constraints, limited steel availability and a tight labor market, we continued to deliver on the key elements of our business model to ensure our customers' needs were met. This includes but is not limited to ensuring availability of our trusted product solutions typically within 48 hours or less. To date, we have implemented four price increases in 2021; in early April, mid-June, mid-August, and our fourth price increase in mid-October. These price increases ranged from mid-single digits to mid-teens depending on the product mix for certain of our wood connector, fasteners and concrete products in the United States. Looking at our sales results in greater detail, although third quarter net sales benefited primarily from a full quarter of the first two price increases, our top line moderately declined by 3.3% compared to the second quarter of 2021, predominantly due to decreases in sales volumes from our home center channel, which I'll discuss in more detail shortly. These price increases were primary contributors to another quarter of strong gross margins, which increased to 49.9% from 47.9% in the prior quarter and 47.6% in the year-ago period. As a result, our income from operations improved to $100.6 million and led to strong earnings per diluted share of $1.70. As we highlighted on our last call, we currently anticipate significant gross margin compression beginning in fiscal 2022 as we continue to acquire higher priced raw materials, thereby raising our average cost of steel on hand. Brian will discuss this impact in more detail during his remarks. Turning back to our sales performance. We experienced decline in sales volume during the third quarter throughout the various forms of distribution channels we serve, including our home center channel and other distribution channels to contractors and lumberyards. As a reminder, the home center channel includes both our home center and co-op customers, and is where we see much of our repair and remodel and DIY business. We experienced a slowdown in this channel during the third quarter as we believe there may be a releveling of inventory for our customers. Additionally, our sales reflected an as expected decline year-over-year related to the return of Lowe's as a home center customer. As you may recall, we experienced elevated volume in both Q2 and Q3 of 2020 as we've loaded in our products at the Lowe's locations, resulting in a difficult comp in both quarter two and quarter three of this year. We expect volume levels in the home center channel to become normalizing in the fourth quarter as demand increases and we pass the elevated volumes from last year's product rolling into Lowe's. Similar to the home center channel, we experienced modest volume decline in our other distribution channels to contractors and lumberyards during the quarter. We are confident this decline in volume is not due to a loss of customer or market share and attribute this primarily to customers adopting a more cautious stance in regard to their inventory levels given tightening labor and supply chain conditions and the potential impact on the building industry. With that said, U.S. housing starts continue to show promise, improving by 19.5% during the first nine months of 2021 versus comparable period last year. And finally in Europe, our third quarter sales improved over the prior year on a local currency basis, primarily from strengthening demand compared to the prior year where we experienced government-mandated COVID-19-related closures and to a lesser extent from price increases. Sales in Europe also improved from our ability to continue meeting our customers' needs due to our solid inventory management practices amid broader supply chain shortage. I'll now turn to a high-level discussion on our key growth initiatives, which we first unveiled in late March of this year. We are focused on growing in the OEM, repair/remodel, DIY and mass timber markets, where we are striving to be a leader in engineered low-graded construction fastening solutions, given that each of these markets have a broader product opportunity within the fastening solutions. We are also focused on building our presence in concrete construction as well as structural steel, which is a new market for Simpson. While we are looking to grow our presence in each of these key growth areas, it's important to realize that we already have existing products, testing results, distribution and manufacturing capacities in place for all five of these initiatives. To bolster our growth, we remain focused on organic opportunities through expansion into new markets within our core competencies of wood and concrete products, as well as inorganic opportunities through licensing, purchasing IP and traditional M&A. While we are pleased that we are continuing to build out these product lines and inherit new customer wins to improve our market share, we recognize this will be a multi-year endeavor to ensure we have the proper testing, the validation of our product lines, and to ensure we provide our customers with the highest-quality solution sets to build safer, stronger structures. Currently, each of our key growth initiatives remains in different phases of implementation. However, we believe that these are the right areas to pursue to position Simpson for above-market growth based on our ability to execute given the core tenants of our business model. That includes our strong long-standing relationship with top builders, engineers, contractors, code officials and distributors, as well as our significant engineering expertise and our ongoing commitment to testing, research and innovation. Finally, we are working to become a leader in building technology space, which hits upon all of our key growth initiatives. As we continue to develop innovative new tools and solutions for our customers to help with design and options management, we'll also be able to easily specify the right Simpson solution for the job, helping to drive enhanced growth across our business. Our strong earnings and effective working capital management have enabled us to continue generating strong cash flow to fuel our growth and stockholder return priorities. In regard to growth, we are dual focused on both organic growth and M&A opportunities, facilitate growth organically, we are investing in areas such as engineering, marketing and sales personnel, as well as testing capabilities across all areas of our business, including the aforementioned five adjacencies where we are looking to expand. We may also invest in facility expansions to support our growth. In regards to M&A, we are more broadly focused on product line expansions in order to develop complete solutions for the markets in which we operate. This may also include opportunities in areas that support our key growth initiatives. In summary, despite broader market challenges, we are very pleased with our continued strong results, both financially and operational for the third quarter. I'm pleased to discuss our third quarter financial results with you today. Now turning to our results. As Karen highlighted, our consolidated net sales increased 8.9% to $396.7 million. Within the North America segment, net sales increased 6.8% to $338.6 million, primarily due to product price increases that took effect through the third quarter of 2021 in an effort to address rising material costs and were partially offset by a decline in sales volumes, primarily in our home center channel. In Europe, net sales increased 22.5% to $54.8 million, primarily due to higher sales volumes compared to last year's COVID-19-related slowdown. Europe sales also benefited by approximately $900,000 of positive foreign currency translations, resulting from some Europe currencies strengthening against the United States dollar. Wood construction products remained consistent at 85% of total sales and concrete construction products also remained consistent at 15% of total sales. Consolidated gross profit increased by 14.3% to $198 million, which resulted in another strong gross margin quarter at 49.9%. Gross margin increased by 230 basis points, primarily due to the aforementioned price increases, which were partially offset by higher material costs. On a segment basis, our gross margin in North America increased to 52.1% compared to 48.9%, while in Europe our gross margin declined slightly to 37.7% compared to 37.9%. From a product perspective, our third quarter gross margin on wood products was 50.2% compared to 48% in the prior-year quarter, and was 44.6% for concrete products compared to 42.1% in the prior-year quarter. Now turning to our third quarter costs and operating expenses. As a reminder, last year, we implemented various cost-saving and other measures in light of the uncertainty surrounding the impact of the COVID-19 pandemic. As a result, total operating expenses were $97.4 million, an increase of $15.4 million or approximately 18.8%. As a percentage of net sales, total operating expenses were 24.6% compared to 22.5. Research and development and engineering expenses increased 18.5% to $14.6 million, primarily due to increased salaries and expenses on patents. Selling expenses increased 19.3% to $35.1 million due to increased salaries, commissions and travel expenses. On a segment basis, selling expenses in North America were up 18.9% and in Europe they were up 22.4%. General and administrative expenses increased 18.6% to $47.8 million, primarily due to increased salaries, a variable compensation and travel expenses. Our solid top-line performance, combined with our stronger Q3 gross margin, helped drive a 10.2% increase in consolidated income from operations to $100.6 million compared to $91.3 million. In North America, income from operations increased 11% to $97 million, primarily due to the increase in gross profit, partly offset by higher operating expenses. In Europe, income from operations increased 23.8% to $7.5 million, primarily due to the increase in sales volumes and gross profit. On a consolidated basis, our operating income margin of 25.4% increased by approximately 30 basis points from 25.1%. Our effective tax rate decreased slightly to 26.1% from 26.2%. Accordingly, net income totaled $73.8 million or $1.70 per fully diluted share, compared to $67.1 million or $1.54 per fully diluted share. Now turning to our balance sheet and cash flow. Our balance sheet remained healthy with ample liquidity to operate our day-to-day operations. At September 30th, cash and cash equivalents totaled $294.2 million, a decrease of $17.3 million compared to September 30, 2020. And as of September 30, 2021, the full $300 million on our primary credit line was available for borrowing and we remained debt free. Our inventory position of $385.5 million at September 30th increased by $75.3 million from our balance at June 30th, primarily due to the increases we saw in steel prices over the first nine months of the year. We continue to be highly selective in regard to inventory purchases through careful management and purchasing practices, while at the same time ensuring we maintain ample product availability in order to provide our customers continued high levels of customer service and on-time delivery standards, which are key cornerstones to our value proposition. As a result of our improved profitability and effective working capital management, we generated strong cash flow from operations of $40.5 million for the third quarter of 2021. Turning to capital allocation. We remain dedicated to supporting the growth of our business as well as providing strong capital returns to our stockholders through both dividends and share repurchases. Our strong cash generation enabled us to invest $12 million for capital expenditures during the quarter as well as pay $10.9 million in dividends and repurchase 222,060 shares of our common stock at an average price of $108.64 per share for a total of $24.1 million. On October 19, 2021, our Board of Directors declared a quarterly cash dividend of $0.25 per share. The dividend will be payable on January 27, 2022 to stockholders of record as of January 6, 2022. And as of September 30, 2021, we had $75.9 million of our share repurchase authorization available, which remains in effect through the end of 2021. Given our confidence in our business and our expectation that our strategic initiatives will continue to drive improved operational performance and a higher return on invested capital, we expect we will remain both active and opportunistic as it relates to share repurchase activity. Finally, I'd like to discuss our 2021 financial outlook. Based on business trends and conditions as of today, October 25th, we are updating certain elements of our guidance for the full year ending December 31, 2021 as follows. We are updating our operating margin outlook to be in the range of 20% to 22% from our previous estimate of 19.5% to 21%. Our current outlook reflects three quarters of actual results as well as our latest expectations regarding demand trends, raw material input costs, and operating expenses. We are reiterating the remaining elements of our outlook for fiscal 2021 as follows. We continue to expect our effective tax rate to be in the range of 25% to 26%, including both federal and state income tax rates. And our capital expenditures outlook remains in the range of $55 million to $60 million, including approximately $15 million to $20 million that will be used for safety and maintenance capex. At this time, only a small amount of our capex spend is related to implementing our key growth initiatives. Further, I'd like to provide some additional color on our margin expectations for fiscal 2022. Based on our current expectations, we are anticipating continued raw material cost pressure for the remainder of 2021 and into fiscal 2022. Our gross margins thus far in 2021 reflect an average cost of steel sourced prior to and during the increasing steel price market. As we work through our on-hand inventory and continue to buy raw material at these much higher prices, our anticipated cost of goods sold are expected to increase significantly in late 2021 and into 2022, even if prices for raw material begin to decline, which will adversely affect our margins as the impacts from averaging raw material costs typically lags our price increases. As a result and based on our updated fiscal 2021 operating margin outlook, we currently expect our operating margin for the full year of 2022 will decline by approximately 400 basis points to 500 basis points year-over-year. However, despite near-term macroeconomic pressures, we continue to believe we can maintain an industry-leading operating margin in the high-teens range annually in the long term, a key goal of our five-year Company ambitions. In summary, we were pleased with our strong third quarter financial results and remain focused on executing against our strategic, operational and financial initiatives. We believe our industry-leading position, geographic reach and diverse product offerings, combined with our strong balance sheet and liquidity position, gives us confidence in our ability to maintain operational excellence to support current and future demand trends. We look forward to updating you on our progress in the coming quarters. Again, we are very pleased with our third quarter financial and operational results that we've achieved despite ongoing macroeconomic challenges. While we cannot control elements of the economy, we are dedicated to managing the key areas of our business that we can control, and we remain confident in our ability to execute on our five-year Company ambitions. These include strengthening our values-based culture, being the partner of choice in all aspects of our business, being an innovative leader in our product categories, to continue our above-market growth relative to U.S. housing starts, and maintaining an operating income margin and return on invested capital target within the top quartile of our proxy peers.

compname reports q3 earnings per share of $1.70. q3 earnings per share $1.70. q3 sales rose 8.9 percent to $396.7 million. fy capital expenditures are estimated to be in the range of $55 million to $60 million.