Prompt:
Human: In the third quarter Cullen/Frost earned $109.8 million or $1.73 per diluted common share compared with earnings of $115.8 million or $1.78 a share reported in the same quarter of last year.
Our return on average assets was 1.35% for the quarter compared to 1.49% in the third quarter last year.
Average deposits in the third quarter were up to $26.4 billion compared with $26.2 billion in the third quarter of last year.
Average loans in the third quarter were $14.5 billion up 5.8% from the third quarter of last year.
We continue to see growth in our C&I CRE and Consumer segments.
Our provision for loan losses was $8 million in the third quarter compared to $6.4 million in the second quarter of 2019 and $2.7 million in the third quarter of 2018.
Net charge-offs for the third quarter were $6.4 million compared with $15.3 million for the third quarter of last year.
Third quarter annualized net charge-offs were only 17 basis points of average loans.
Nonperforming assets were $105 million at the end of the third quarter compared to $76.4 million in the second quarter of 2019 and $86.4 million in the third quarter of last year.
The increase in the third quarter related to a single energy credit which have been included in problem energy loans since early 2016.
Overall delinquencies for accruing loans at the end of the third quarter were $100 million or 69 basis points of period end loans.
Those numbers remain well within our standards and comparable to what we have experienced in the past several years.
Our overall credit quality remains good.
Total problem loans which we define as risk grade 10 and higher of $487 million at the end of the third quarter compared to $457 million in the second quarter of this year and $504 million for the third quarter of last year.
Energy-related problem loans declined to $87.2 million at the end of the third quarter compared to $93.6 million at the end of the second quarter and $138.8 million in the third quarter of last year.
Energy loans in general represented 10.5% of our portfolio at the end of the third quarter well below our peak of more than 16% in 2015.
Our focus for commercial loans continues to be on consistent balanced growth including both the core component which we define as lending relationships under $10 million in size as well as larger relationships while maintaining our quality standards.
New relationships increased 5% versus the third quarter a year ago.
The dollar amount of new loan commitments booked during the third quarter dropped by 14% compared to the prior year with decreases in C&I public finance and energy but a slight increase in CRE amendments.
Similar to what we discussed last quarter we are looking at lots of deals but our booking ratio was down particularly in commercial real estate.
In the current quarter our booking ratio for CRE was 24% versus 32% in the prior year.
Overall in the third quarter we saw our percentage of deals lost to structure increase from 56% to 61% versus a year ago.
I was pleased to see our weighted current active loan pipeline in the third quarter was up by about 30% compared with the end of the second quarter due to higher levels of C&I opportunities.
So we are seeing good activity and I'm expecting some good growth in the fourth quarter.
In Consumer Banking our value proposition and award-winning service and technology continued to attract customers.
The fourth fifth and sixth of the 25 new financial centers planned over the next two years in Houston opened in the third quarter and we have already opened the seventh so far in the fourth quarter with more to come before the end of this year.
Overall net new consumer customer growth for the third quarter was up by 48% compared with a year ago.
So far this year same-store sales as measured by account openings increased by 14% compared to a year ago.
In the third quarter just under 30% of our account openings came from our online channel which includes our Frost Bank mobile app.
This channel continues to grow.
In fact online account openings were 56% higher during the quarter compared to the previous year.
The consumer loan portfolio averaged $1.7 billion in the third quarter increasing by 1.9% compared to the third quarter of last year.
I continue to be extremely proud of our banking insurance and wealth advisory staff executing our strategy of organic growth consistent with our strong culture.
The interest rate environment presents challenges to our industry but we continue to focus on the fundamentals and growing our lines of business in line with our quality standards.
To sum up Frost has received the highest ranking in customer satisfaction in Texas in J.D. Power's U.S. Retail Banking Satisfaction Study for 10 years in a row.
We have received more Greenwich excellence and best brand awards for small business and middle-market banking than any other bank nationwide for three consecutive years and we have once again been named the best Bank in Texas by money magazine.
You don't do that without great people dedicated to providing the kind of service that makes people's lives better.
I'll make a few comments about the Texas economy before providing some additional information about our financial performance for the quarter and I'll close with our guidance for full year 2019.
Regarding the economy Texas unemployment remained at the historically low level of 3.4% for the fifth month in a row in September.
Texas job growth continued at a healthy pace but decelerated during the third quarter coming in at 3% in July 1.8% in August and 0.9% in September compared to the 2.3% growth seen in the first six months of the year.
The Dallas Fed currently estimates Texas job growth at 2.1% for full year 2019.
In terms of employment growth by industry construction has been especially strong growing at 6% year-to-date followed by manufacturing job growth of 2.7%.
Energy industry job growth has weakened and now stands at 1.6% year-to-date however energy job growth was negative in the third quarter.
Looking at individual markets.
Houston economic growth was slightly ahead of historical trends in the third quarter.
The Fed's Houston business Cycle Index saw to a 3.9% growth rate in September but remains above its historical average of 3.5%.
Year-to-date Houston employment is up 2% with third quarter growth slightly better at 2.2%.
The construction sector saw 7.3% job growth in the nine months through September.
The strongest growth of any sector in the Houston economy.
Houston's unemployment rate fell slightly to 3.6% in September.
The Dallas business cycle index expanded at a 4.4% annual rate in the third quarter while the Fort Worth business cycle index expanded at a 3.5% annual rate.
In September the unemployment rate fell to 3.1% in Dallas and 3.2% in Fort Worth.
The Austin economy also remained healthy in August.
The Austin business cycle index grew at a 7.8% annualized rate.
Austin's unemployment rate stood at 2.7%.
The information sector saw by far the fastest job creation in Austin in the year-to-date period with job growth of 23% over the prior year period.
Growth in the San Antonio economy accelerated in September.
The San Antonio business cycle index expanded its fastest pace since 2016 growing at a 3.8% rate in September well above its long-term trend of 2.9%.
San Antonio's unemployment rate decreased slightly to 3% as of September.
The Permian Basin economy showed year-to-date job growth of 0.2% through September with unemployment of 2.3% remaining well below the state's overall 3.4%.
Looking at our net interest margin.
Our net interest margin percentage for the third quarter was 3.76% down nine basis points from the 385 -- 3.85% reported last quarter.
The decrease primarily resulted from lower yields on loans and balances at the Fed partially offset by lower funding costs.
The taxable equivalent loan yield for the third quarter was 5.16% down 18 basis points from the second quarter.
Looking at our investment portfolio the total investment portfolio averaged $13.4 billion during the third quarter up about $122 million from the second quarter average of $13.3 billion.
The taxable equivalent yield on the investment portfolio was 3.43% in the third quarter up one basis point from the second quarter.
Our municipal portfolio averaged about $8.2 billion during the third quarter flat with the second quarter.
During the third quarter we purchased about $100 million in agency mortgage-backed securities yielding 2.63% and about $260 million in municipal securities with a TE yield of 3.31%.
The municipal portfolio had a taxable equivalent yield for the third quarter of 4.08% up two basis points from the previous quarter.
At the end of the third quarter about 2/3 of the municipal portfolio was PSF insured.
The duration of the investment portfolio at the end of the quarter was 4.3 years flat with the previous quarter.
Looking at our funding sources.
The cost of total deposits for the third quarter was 39 basis points down two basis points from the second quarter.
The cost of combined Fed funds purchased and repurchase agreements which consists primarily of customer repos decreased 16 basis points to 1.53% for the third quarter from 1.69% in the previous quarter.
Those balances averaged about $1.29 billion during the third quarter up about $49 million from the previous quarter.
Moving to noninterest expenses.
Total noninterest expense for the quarter increased approximately $15.2 million or 7.8% compared to the third quarter last year.
Excluding the impact of the Houston expansion and the increased operating costs associated with our headquarter's move in downtown San Antonio noninterest expense growth with an approximately 4.3%.
Regarding the assets for full year 2019 reported earnings we currently believe that the mean of analyst estimates of $6.81 is reasonable.
Now I'll open up the call to questions.
 Assistant:

Chosen response:
q3 earnings per share $1.73.
increases quarterly cash dividend by 6 percent to $0.71per share.


Prompt:
Human: In the third quarter, Cullen/Frost earned $95.1 million or $1.50 per share compared with earnings of $109.8 million or $1.73 per share reported in the same quarter of last year and $93.1 million or $1.47 per share in the second quarter of this year.
Overall, average loans in the third quarter were $18.1 billion, up by 25% from $14.5 billion in the third quarter of last year, which included the impact from PPP loans.
However, even excluding this impact, loans managed a 3.3% increase from a year earlier.
Average deposits in the third quarter were $32.9 billion, also up by 25% from the $26.4 billion in the third quarter of last year and the highest quarterly average deposits in our history.
We understand that the banking industry has seen broad increases in deposit levels, as authorities implemented comprehensive fiscal and monetary responses to the pandemic.
However, it's also been our experience that Frost has historically been a safe place in times of uncertainty, and I believe this will always be a part of our growth in challenging times.
For the first time, our total assets have surpassed $40 billion, up 41% in the last five years, and all of that representing organic growth.
And speaking of organic growth, I'll discuss our Houston expansion in more detail later in the call.
But I'd like to point out that we were pleased to see our deposit market share in Houston has now moved up to #6, up from 10th place a year ago.
Even with the challenging environment, we and others in our industry have seen pressure on profitability.
Our return on assets in the third quarter was just below 1% at 0.96%, and we were pleased to announce yesterday the action of our Board to increase our dividend for the 26th consecutive year.
We saw a reduction in credit cost expense to $20.3 million in the third quarter, down from $32 million in the second quarter of 2020.
This compared with $8 million in the third quarter of last year.
Net charge-offs for the third quarter were $10.2 million, down sharply from the $41 million in the second quarter and included no energy charge-offs.
Annualized net charge-offs for the third quarter were 22 basis points of average loans.
Nonperforming assets were $96.4 million at the end of the third quarter compared to $85.2 million at the end of the second quarter and $105 million at the end of the third quarter last year.
The third quarter increase resulted primarily from the addition of an energy service company.
Overall delinquencies for accruing loans at the end of the third quarter were $133 million or 73 basis points of period-end loans.
Those numbers remain within our standards and comparable to what we've experienced in the past several years.
In total, we granted 90-day deferrals to more than 2,500 borrowers for loans totaling $2.2 billion.
At the end of the third quarter, there were around 300 loans totaling $157 million in deferment or about 1%.
Total problem loans, which we define as risk grade 10 and higher, were $803 million at the end of the third quarter compared to $674 million at the end of the second quarter.
Energy-related problem loans were $203.5 million at the end of the third quarter compared to $176.8 million for the previous quarter and $87.2 million for the third quarter last year.
To put that in perspective, the year-end 2016 total problem energy loans totaled nearly $600 million.
Energy loans continued to decline as a percentage of our portfolio, falling to 9.1% of our non-PPP portfolio at the end of the third quarter.
As a reminder, the peak was 16% back in 2015.
Oil prices have stabilized from volatile levels that we saw earlier in the year, and we continue to moderate our company's exposure to the energy segment.
Through the first nine months of this year, the pandemic's economic impacts on our portfolio have been negative but manageable.
During our last two conference calls, we discussed the nonenergy portfolio segments that have had an increased impact from the economic dislocations brought on by the pandemic, namely restaurants, hotels, entertainment and sports and retail.
The total of these portfolio segments, excluding PPP loans, represented $1.54 billion at the end of the third quarter, and our loan loss reserve for these segments was 3.37%.
New relationships are up by 38% compared with this time last year, largely because of our strong efforts and reputation for success in helping small businesses get PPP loans.
The dollar amount of new loan commitments booked through September is up by about 2% compared to the prior year.
Regarding new loan commitments booked, the balance between these relationships has stayed steady at 53% large and 47% core so far in 2020.
The market remains competitive and, in fact, seems to be getting more so.
For instance, the percentage of deals lost to structure increased from 61% this time last year to 70% this year.
It was good to see that in this environment, our weighted current active loan pipeline in the third quarter was up 11% compared with the second quarter of this year.
Consumer banking continues to see growth, although it slowed somewhat by the effect of the pandemic.
Overall, net new customer growth for the third quarter was down 13% compared with the third quarter of 2019 for consumers.
Same-store sales, as measured by account openings, were down about 15.5% through the end of the third quarter when compared with the third quarter of 2019.
In the third quarter, 52% of our account openings came from our online channel, which includes our Frost Bank mobile app, and online account openings were 73% higher compared to the third quarter of 2019.
Our investments in enhancing our mobile and online experience proved timely during the quarantine.
The consumer loan portfolio was $1.8 billion at the end of the third quarter, up by 6.7% compared to the third quarter of last year.
Our growth is being driven primarily by consumer real estate loans.
Our Houston expansion continues on pace, with five new financial centers opened in the third quarter for a total of 20 of the 25 planned new financial centers.
We expect to open two more in this quarter, with the remaining three opening in early 2021.
The fact that we've been able to continue our expansion plans through the pandemic and see very promising results is due to the dedication and skill of Frost bankers.
When they've done the miraculous, what merely seems extraordinary tends to be taken for granted.
Of course, we realize the pressures impacting the banking industry in light of the current and projected economic and interest rate environment and the importance of operating as efficiently as possible while providing the level of world-class customer service Frost is known for.
I'm proud of our efforts over time and, in particular, what we've accomplished this year, which Jerry Salinas has been reporting on as we've moved through 2020.
Next year will be no different, and we're committed to improving our operating efficiency further.
In that regard, I'll note that our executive team has committed to reduce our own salaries by 10% effective January one as well as reducing my team's bonus targets by 5% and mine by 10% for the coming year.
We're taking these actions despite the recognized success Frost has had managing through the pandemic and supporting our customers and communities.
They represent management's desire to contribute to the current and future long-term well-being of the company and reflect our commitment to our unique culture.
All of us at Frost in all our lines of business will face these challenges together, and our company, as always, will emerge stronger than ever.
Looking first at our net interest margin.
Our net interest margin percentage for the third quarter was 2.95%, down 18 basis points from the 3.13% reported last quarter.
The decrease primarily resulted from lower yields on loans, which had a negative impact of approximately 11 basis points on the net interest margin and a lower yield on securities, which had a three basis point negative impact, combined with an increase in the proportion of balances at the Fed as a percentage of earning assets, which had about a seven basis point negative impact on the NIM compared to the previous quarter.
Lower interest costs in the quarter reduced these negatives by about two basis points.
The taxable equivalent loan yield for the third quarter was 3.73%, down 22 basis points from the previous quarter.
The decrease in yield was impacted by decreases in LIBOR during the quarter, as about 2/3 of our loan portfolio, excluding PPP, is made up of floating rate loans, and about 60% of our floating rate loans are tied to LIBOR.
The PPP loan portfolio also had a negative effect on our loan yield as compared to the second quarter.
During the third quarter, we extended the expected term of the PPP portfolio somewhat, which resulted in a yield on the PPP portfolio of 3.65% during the third quarter as compared to 4.13% in the second quarter.
This had a nine basis point negative impact on the comparison between the second and third quarter reported total loan yields.
Looking at our investment portfolio.
The total investment portfolio averaged $12.7 billion during the third quarter, up about $180 million from the second quarter average of $12.5 billion.
The taxable equivalent yield on the investment portfolio was 3.44% in the third quarter, down nine basis points from the second quarter.
The decrease in the portfolio yield was driven by a decrease in the yield on our taxable portfolio.
The yield on that portfolio, which averaged $4.2 billion during the quarter, was down 19 basis points from the second quarter to 2.21%, as a result of higher premium amortization associated with our agency MBS securities, given faster prepayment speeds and lower yields associated with recent purchases.
Our municipal portfolio averaged about $8.5 billion during the third quarter, flat with the second quarter, with a taxable equivalent yield of 4.08%, up one basis point from the prior quarter.
At the end of the third quarter, 78% of the municipal portfolio was pre-refunded or PSF insured.
The duration of the investment portfolio at the end of the third quarter was 4.5 years, up slightly from 4.4 years last quarter.
For the third quarter, I'll point out that the salaries line item includes about $4.5 million in reductions in salary expense associated with truing up our incentive plans based on current expectations of projected payouts for the year.
As Phil mentioned, in this environment, we continue to focus on managing our discretionary spending and looking for ways to operate more efficiently.
Looking at the full year 2020, our previous guidance on expenses was that adding back the deferred expenses related to PPP loans, we expected an annual expense growth of something around 6%.
Our current expectations would reduce that to something around the 3% range.
 Assistant:

Chosen response: q3 earnings per share $1.50.


Prompt:
Human: In the fourth quarter, Cullen/Frost earned $88.3 million or $1.38 a share, compared with earnings of $101.7 million or $1.60 a share reported in the same quarter last year, and $95.1 million or $1.50 a share in the third quarter of 2020.
For the full year of 2020 Cullen/Frost earned $323.6 million or $5.10 a share, compared with earnings of $435.5 million or $6.84 a share reported for 2019.
Our team continues to manage expenses, while at the same time pursuing the expansion of market share and investing for long-term growth.
Overall, average loans in the fourth quarter were $17.9 billion, an increase of 22% compared with $14.7 billion in the fourth quarter of last year, but excluding PPP loans, fourth quarter average loans of $15 billion represented a 2.3% increase compared to the fourth quarter of 2019.
Average deposits in the fourth quarter were $34 billion, an increase of 25% compared with the $27 billion in the fourth quarter of last year.
For the second consecutive quarter, we've seen the highest quarterly average deposits in our history.
This growth reflects it for us has always been a safe haven for customers in times of uncertainty, and also our success in building new relationships.
Our return on average assets and average common equity in the fourth quarter was 86 basis points and 8.55% respectively.
We saw a reduction in our credit loss expense to $13.8 million in the fourth quarter, down from $20.3 million in the third quarter of 2020.
And this compared to $8.4 million in the fourth quarter of last year.
Net charge-offs for the fourth quarter were $13.6 million compared with $10.2 million in the third quarter.
Annualized net charge-offs for the fourth quarter were 30 basis points of average loans.
Nonperforming assets were only $62.3 million at year-end, down 35% from the $96.4 million at the end of the third quarter.
A year ago, non-performer stood at $109.5 million.
Overall, delinquencies for accruing loans at the end of the fourth quarter were $103 million or 59 basis points of period end loans.
Those numbers remain within our standards and comparable to what we've experienced in the last several years.
In total, we have granted 90-day deferrals to more than 2500 customers for loans totaling $2.2 billion, and at the end of the fourth quarter, only about $46 million remained in deferment.
Total problem loans, which we define as risk grade 10 and higher were $812 million at the end of the fourth quarter, in line with the $803 million at the end of the third.
Energy related problem loans were $133.5 million at the end of the fourth quarter, compared to $203.7 million for the previous quarter, and $132.4 million for the fourth quarter of last year.
To put that in perspective, total problem energy loans peaked at nearly $600 million early in 2016.
Energy loans continue to decline as a percentage of our portfolio, falling to 8.2% of our non-PPP portfolio at the end of the fourth quarter.
As a reminder that figure was 9.1% at the end of the third quarter and the peak was 16% back in 2015.
We continue to work hard to rationalize our Company's exposure to the energy segment to appropriate levels.
Throughout 2020, the pandemic's economic impacts on our portfolio were negative but manageable, and our overall outlook for credit quality is stable to improving.
In the second half of 2020, we discussed the non-energy portfolio segments that have had an increased impact in the economic dislocations brought on by the pandemic: restaurants, hotels, entertainment and sports and retail.
The total of these portfolio segments excluding PPP loans represented just under $1.6 billion at the end of the fourth quarter and our loan loss reserve for these segments was 4.55%.
We saw the largest reserve increases in hotels and restaurants where our allocated allowances as a percentage of outstanding balances are now 9.1% and 7.4% respectively.
We continue to monitor credit in these areas closely and we will have a good and we have a good handle on our risk, and as a reminder, hotels and lodging represent approximately 1.9% of our total loans and restaurants represent approximately 1.8% of our total loans.
To me a really bright spot is the growth in our commercial relationships in 2020.
They were up by 31% compared to a year ago.
We're great at building relationships.
It's what we do.
It's in our mission statement.
But clearly cross national recognition for its success and going above and beyond to obtain PPP loans for its customers at a positive impact in the market.
In addition, our Houston expansion is also contributing to our success here.
New commercial relationships in Houston, grew 49% in 2020 and represented 39% of the new commercial relationships companywide during the year.
For the year, our loan commitments booked were down 6% compared to the prior year and reflected the impact of the pandemic.
Regarding new loan commitments booked, the balance between these relationships have stayed steady at 53% larger and 47% core at the end of 2020 -- 2020.
The market remains very competitive.
The percentage of deals lost to structure increased from 61% this time last year, to 67% this year.
Our weighted current active loan pipeline in the fourth quarter dropped by about 2% compared with the end of the third quarter, reflecting the continued impact of the pandemic on business activity.
Consumer banking continues to see good growth.
Overall, our net new customer growth for the fourth quarter was up 57% compared to the pre-COVID fourth quarter of 2019.
Same-store sales as measured by account openings for branches opened less than a year were up by 2.2% through the end of the fourth quarter when compared to the fourth quarter of 2019, and up 8.2% compared to the prior quarter.
Here again our Houston expansion is helping this growth.
For example, despite currently representing only about 16% of our total consumer households, Houston contributed 34% of fourth quarter total company consumer household growth.
In the fourth quarter, 41% of our account openings came from our online channel, including our cross-mobile app.
Online account openings were 39.5% higher compared to the fourth quarter of 2019.
The consumer loan portfolio was up $1.8 billion at the end of the fourth quarter, up by 7.2% compared to the fourth quarter last year.
Our Houston expansion is nearing completion with two new financial centers opened in the fourth quarter for a total of 22 of 25 planned new financial centers.
COVID has had an impact on our rollout, but we expect to open the remaining three in the first half of this year.
Overall, the new financial centers are exceeding our expectations and the new locations were well placed and well-timed to leverage our success in obtaining PPP loans for the market.
The fourth quarter also saw the opening of our new financial center in College Station with the second financial center to open in nearby Bryan later this quarter.
So far in January, our newest location in Dallas, the Red Bird Financial Center location also opened for business.
We remain committed to consistent, sustainable, above average organic growth.
We also remain committed to managing costs and operating as efficiently as possible.
This month, we took the difficult step of eliminating 68 positions across the company where business needs have changed, where technology can be better utilized and where responsibilities could be consolidated.
This along with broadly successful efforts to improve efficiency, which Jerry will discuss positioned us well as we move into 2021.
I talk often about the dedication skill of Frost Bankers and about their commitment, Frost philosophy and culture.
Throughout a difficult 2020 and now into a new year that promises to be challenging in its own way, the people of Frost have been and will be ready to provide the level of world-class customer service Frost is known for.
I'm proud of what we've accomplished and I'm optimistic about the long-term well-being of the company and the communities we serve.
Looking first at our net interest margin, our net interest margin percentage for the fourth quarter was 2.82%, down 13 basis points from the 2.95% reported last quarter.
The decrease was almost all a result of a higher proportion of earning assets being invested in lower yielding balances at the Fed, in the fourth quarter as compared to the third quarter.
Interest-bearing deposits at the Fed earning 10 basis points averaged $7.7 billion or 20% of our earning assets in the fourth quarter, up from $5.9 billion or 16% of earning assets in the third quarter.
The taxable equivalent loan yield for the fourth quarter was 3.74%, up 1 basis point from the previous quarter.
Average loan volumes in the fourth quarter of %17.9 billion were down $205 million from the third quarter average of $18.1 billion.
The decrease was driven by a decrease of $296 million in average PPP loans as a result of those balances being forgiven.
Excluding PPP loans, average loans in the fourth quarter were up about $92 million or 2.4% on an annualized basis from last quarter.
Looking at our investment portfolio.
The total investment portfolio averaged $12.6 billion during the fourth quarter, down about $98 million from the third quarter average of $12.7 billion.
The taxable equivalent yield on the investment portfolio was 3.41% in the fourth quarter, down 3 basis points from the third quarter.
The lower portfolio yield was driven by a decrease in the yield in our taxable portfolio.
The yield on that portfolio which average $4.2 billion during the quarter was down 9 basis points from the third quarter to 2.12% as a result of higher premium amortization associated with our agency MBS securities given faster prepayments speeds and lower yields associated with recent purchases.
Our municipal portfolio averaged about $8.4 billion during the fourth quarter, down $95 million from the third quarter, with the taxable equivalent yield of 4.09%, up 1 basis point from the prior quarter.
At the end of the fourth quarter, 78% of the municipal portfolio was pre-refunded or PSF insured.
The duration of the investment portfolio at the end of the fourth quarter was 4.4 years compared to 4.5 years last quarter.
During the fourth quarter, our investment purchases were less than $100 million and consisted primarily of MBS securities.
As we look out into 2021, we currently are not expecting to make a significant amount of investment purchases in this market.
We are currently only expecting to make purchases in the neighborhood of about $1 billion, which will help to offset a portion of our maturities and expected prepayments in calls.
For the fourth quarter, I'll point out that non-interest expense includes about $7.1 million in one-time restructuring costs with $5.2 million of that related to severance impacted by the eliminated positions Phil noted.
As we mentioned last quarter and as Phil mentioned in his comments, in this environment, we continue to focus on managing our discretionary spending and looking for ways to operate more efficiently.
We have worked and continue to work in a collaborative manner across our organization to look for ways to operate more efficiently without affecting our customer experience.
We challenged ourselves to eliminate open positions where possible and reorganized operating areas, including using technology where it makes sense to further automate processes.
We used a thoughtful process to reorganize positions where the business needs have changed, where technology could be better utilized and where responsibilities could be consolidated.
We asked our teammates to question discretionary spending and visited with vendor relationships to reduce costs where we could.
All this was done without losing sight of our core values of integrity, caring and excellence.
We believe that we have always been prudent in managing expenses but in this zero rate environment, our approach has become even more focused.
We began this process in the second quarter of last year as we began to deal with the challenges of the pandemic in a zero interest rate environment.
Our initial guidance for expense growth for 2020 was around 10.5% and we actually ended up with a growth rate of under 2% on reported non-interest expenses, 2020 over 2019.
Obviously the changes resulting from the operating environment and lower incentives affected the decrease somewhat, but overall, it shows our team's commitment to managing expenses in this environment.
Now looking forward into 2021, we expect an annual expense growth of something around the 4% to 4.5% range growth off of our 2020 total reported non-interest expenses.
Regarding income taxes, we currently expect our effective tax rate for 2021 to be a little higher than our 2020 effective tax rate of 5.7%.
Just as a reminder, 2020 income tax expense included a discrete onetime credit of $2.6 million.
Regarding the estimates for full year 2021 earnings, we currently believe that the current mean of analysts' estimates of $4.72 is a little low.
This assumes a steady operating environment with no unexpected credit event.
 Assistant:

Chosen response:
compname reports q4 earnings per share of $1.38.
q4 earnings per share $1.38.
qtrly average loans increased $3.2 billion, or 22.0 percent, to $17.9 billion.


Prompt:
Human: I'm going to begin with the safe harbor statement.
I recommend that you read it at your leisure.
We have our entire management team on the call today available for Q&A after the formal pitch.
We have a lot of slides and several presenters but I'm going to give you the short story upfront.
2020 was a turbulent year.
We emerged from 2020 much stronger as a company.
We like to say that we do our best work and we're going to jam.
That's true for 2020.
We protected our people, we found a way to run the plants and warehouses safely, we set production and shipping records, we figured out how to make hand sanitizer in our U.K. plant, we operated the company with 2,000 remote employees, we pivoted our marketing messages to support a 60% increase in e-commerce sales, we installed the new packaging lines with the assistance of off-site engineers using Google classes, we added overflow warehouses, and we validated new suppliers and co-manufacturers.
In our communities, we delivered masks and hand sanitizers to hospitals where we live and donated to food banks, and recently our Mason City, Iowa plant loaned an ultra-cold freezer to a local hospital to store the COVID-19 vaccine.
Consumer demand drove huge sales growth, which enabled us to overcome significant incremental COVID costs and incremental U.S. government tariffs.
But it also gave us the opportunity to invest in our future, which we did in the second half.
Looking ahead to '21, we're optimistic that the vaccine will help the global business environment.
We operate in many categories and we do expect pluses and minuses, depending on the category.
All in, we expect to deliver 3% organic sales growth and 6% to 8% earnings per share growth in 2021.
And this is on top of almost 10% organic growth and 15% earnings per share growth in 2020, which exceeded our 2020 outlook when we last spoke in October.
Our Evergreen model is intact.
Before we start the formal part of the program, here is a brief video that is a look back on 2020.
Okay, here's today's agenda.
I'm going to begin by describing who we are as a company, I'm going to be followed by Britta Bomhard, who is our Chief Marketing Officer.
Britta's going to talk about the categories, how they performed in 2020 and how we expect them to perform in '21.
Steve Cugine's going to come up and tell us about our new products in '21.
Steve Cugine, by the way, will be retiring in the middle of '21.
Steve has had a spectacular career with Church & Dwight, spanning over 20 years.
For the past seven years, he has been running our international business, which has been a stellar performer.
And Steve is going to introduce Barry Bruno, who has been with the company for a number of years and he has been Steve's right-hand man in growing the international business.
I'm going to come back and talk about the animal productivity story as well as how we run the company and also talk about our M&A platform.
We're going to wrap up with Rick Dierker, our CFO, to run us through the financials.
And now, who we are.
Whether you've been a short term one year shareholder of Church & Dwight, three, five, 10 or 15 years, you're very pleased with our performance.
We have been a stellar performer in the CPG space for many, many years, we're known for our consistency.
And one of the reasons for our consistency is our Evergreen model.
Every year, we expect to grow our top line organically 3% and our bottom line 8%.
That's true in '21, it will be true in '22, '23, '24, '25.
You might ask, how's that been working out for you?
Well, if you take a look back over the last 10 years, you'll see that we've exceeded the 3% target every year except 2013 and 2017.
With respect to 8% EPS, you can see over many, many years, we're consistent.
So Church & Dwight is a consistent performer.
We have an Evergreen model that is very familiar to all of our existing shareholders, 3% top line, 8% bottom line.
Now, where does the 3% organic growth come from?
Well, 2% from the U.S., 6% from international and 5% from the specialty products.
This is our evergreen target, but it also happens to be the targets for 2021.
We expect to deliver these three numbers for each of those divisions in '21.
We focus on power brands, we have 13 power brands in our company that are displayed here on this chart.
And those 13 power brands, deliver 80% of our revenues and profits.
And we're very balanced as a company.
About half of our consumer business is in household and half is in personal care and we have a small specialty products business, which is a combination of bulk sodium bicarbonate and animal productivity products.
We have a nice split between premium and value, 58% premium and 42% value.
What this means is, we operate and perform well in virtually any economic environment.
With respect to our geographic split.
We have a lot of room to grow internationally.
We're largely a U.S. company, only 17% of our consumer business is international, so lots and lots of runway.
That's going to generate a lot of growth for us in future years.
One of our big advantages is that we're nimble, we're small, we only have 5,000 employees.
We have the highest sales per employee of any CPG company, and it helps us three ways.
Quick decision-making, ease of communication and ability to adapt.
And the ability to adapt was highlighted in 2020 when you saw how we reacted to the pandemic.
We have a long history of growth through acquisitions.
If you went back to the year 2000, the only brand we owned was ARM & HAMMER.
We were up only $800 million in sales in the year 2000.
In '21, we're going to cross $5 billion.
And of those 13 power brands, 12 of them were acquired since 2001.
If you go back just a few years in 2015, we were a laggard when it came to online sales, less than 1% of our sales were online.
At the end of 2019, it was 8%, at the end of '20, largely due to COVID, it's over 13%.
So we regard us as a leader now, with respect to e-commerce.
We have a low exposure to private label, only 12%, and if you look at the categories, there's only five of our 17 categories where we have significant private label share and those shares have been pretty stable over the last five years.
Now, I'm going to bring up Britta Bomhard, our Chief Marketing Officer, to take us through the categories in the U.S. business.
As you have heard from Matt, we plan to deliver another year of growth in 2021 on top of an outstanding performance in 2020, and in line with our Evergreen model.
There are five distinctive drivers for our growth in 2021.
Number one, tailwinds on vitamin gummy category growth accelerated by strong brand, Vitafusion.
Second, Waterpik, despite dental offices and many retailers being closed for part of the year, we sold slightly more power flosses in 2020 than in 2019.
Removing these roadblocks, growth will be even stronger.
Three, Flawless sales will benefit from new products, a great influencer boost and a rebound of footfall.
Four, some brands will rebound where social distancing really impacted sales.
With vaccines coming, consumers will socialize more.
And five, last but most importantly, we strengthened our brands and improved our media spend effectiveness.
We create brands consumers love.
2020 was a year of dramatic changes, how consumers use media, which allowed us many test-and-learn experiments feeding our predictive data model and giving us confidence that our media dollars will be again more effective in 2021.
But, let's start with tailwinds.
We are in the right categories.
We saw growth in 12 of our 17 categories, average 9.8% overall.
We saw an over 50% growth in vitamin, double-digit growth in baking soda and single-digit in many other categories.
The only category with double-digit decline is Power Flosses, and that is in the Nielsen universe.
This is important as Nielsen only measures about one quarter of Power Floss's sales.
And I will show you numbers from the whole universe later.
We have high expectations for category growth in 2021 and I will speak to them in more detail.
Four categories will stay on elevated levels, five categories will come down from COVID peaks but some to higher levels, five categories will bounce back from COVID impact, three categories will be steady.
The underlying brand for category growth is household penetration.
As you can see in this chart, 11 of our 17 categories increased household penetration.
This means more consumers are buying this category.
It wasn't only consumers buying these categories, they bought our brands in unprecedented numbers.
We added 8.6 million households to ARM & HAMMER, More Power to You, 2.4 million to OxiClean Stain Fighter and in the second half alone, Vitafusion added 3 million more households.
We know that we have category-leading repeat rate.
This means once these households experience our brands, they enjoy them and come back to them, laying the foundation for strong growth in 2021.
Let's look at some of the category behaviors one by one.
Vitamins grew an amazing 58% in consumption.
You can see the original stock up peak in March, but also that increased levels continued for the rest of the year.
It takes 66 days to form a new habit, and consumers clearly formed new habits, regarding taking vitamins.
20% of consumer started taking vitamins, 57%, that means more than half, are now taking vitamins daily.
So it's not only more consumers taking vitamins, they also take them more frequently, and another one-third of consumers plan to add more types of vitamins to their baskets, planning to add immune-strengthening, for example.
Last but not least, when taking vitamins, consumers preferred gummies over other forms.
You can see that the share of gummies on total increased by nearly one-third, that is, it is now 23% and who would be better placed to profit from that growth than the number 1 vitamin gummy, Vitafusion.
Let's look at the category of Power Flosses.
Nielsen only captures about one quarter of category sales, that is why I show you unit sales across all classes of trade and you can see that after the decline at the beginning of the year with the lockdown, there was a strong rebound.
In total, for 2020, we achieved slightly more unit sales than in 2019, despite dentists and certain retailers being closed for significant periods of time, which also means that we came out strong by the end of the year and this momentum will continue and only accelerate with more dentist office opened up and resuming higher traffic, there is only upside.
Women's grooming saw two opposing trends.
On one hand, retailer stores closed over reduced foot traffic reducing sales, on the other hand, spa closures in COVID concerns driving do at home movement and increasing sales.
Our Flawless team quickly spotted the trend and turned it around with spa at home products, which have just launched.
We now offer solutions for women who do not want to go to a beautician and get a face massage or do not want to visit to the nail salon.
And as nail salons and spas have closed down due COVID, we believe that women will continue to prefer at-home treatment.
So here are two of our exciting new products.
A facial massage cleanser and a salon nail tool kit.
Steve will talk more about them later.
Moreover, we have secured an icon to speak for the brand, Halle Berry, who will be even more popular, if that's even possible, in 2021 due to the launch of her new film, Moonfall.
In addition, we have Ashley Graham, Amelia Hamlin and Dove Cameron as enthusiasts promoting Flawless.
It will be an exciting year for Flawless.
Flawless means being perfect to you.
Be you, be flawless.
Now to our biggest category, laundry.
As you can see, laundry grew 5.5% in 2020 but was a lot of swings due to consumers' stockpiling and changing habits.
Being more concerned about germs and being home, allowing for more time to do laundry that will continue as tailwinds for 2021.
Cat Litter will also benefit from changed habits that continue.
It is hard to get good statistics on cat ownership but we do know that 6% more households bought Cat Litter in 2020, leading me to believe that this is the minimum of additional cat owners.
What this number won't capture is the households who got additional cats and as consumers want to spend more time with their cat instead of going to stores, we have seen a significant increase in online sales, which are not captured in these Nielsen sales.
Then, there are categories, which are impacted by social distancing.
We call these the social interaction categories.
One of them is dry shampoo, where we had seen category decline due to store closures and like browsing in store.
Here, the advance of vaccination and the associated expected increase of socializing will bounce back the category.
And even more eagerly awaited bounce back of sales is in the condom category, as condoms mean pleasure.
18 to 24 year olds can't wait to get their social lives back and with college campuses reopening, 2021 looks promising.
Now that we've gone through the different categories, let me summarize changed consumer behaviors due to COVID that we think will stay and help our business.
Number one, self-care at home for our hair care and removal hair businesses like Nair and Flawless, cat ownership for Cat Litter, higher consciousness of germs and cleanliness benefiting ARM & HAMMER, OxiClean, XTRA but also Kaboom, and four, awareness trend with a regular daily intake of supplements, Vitafusion, L'il Critters and Viviscal will benefit, and Waterpik for gum health.
It is not only category growth that will drive our business, it will also be the strengths of our brands and the ability to win market share, which we have proven year-over-year.
We have brands consumers love.
In 2020, a year with difficult supply situations, the majority of our brands, which means seven out of our 13 power brands have grown share.
We are set to continue our market share winning streak.
Let me get back to what I outlined at the beginning, as growth drivers, brand equity and media effectiveness.
2020 was a year where consumers radically changed consumption but also media behavior.
This is a marketeer's dream, because it allows for a lot of test and learn and very distinctive data set.
As you are familiar with data analytics, we now have great input to our media effectiveness model and are confident to drive even better ROIs in 2021.
Let me just share one area.
It is not only consumers who love our brands, it is influencers as well.
We have more than 500 influencers globally enjoying and recommending our brand.
We have reached more than 200 million consumers via those recommendations and this number will definitely grow in 2021.
What will the influencers write about?
About some of our exciting new products.
I hand over to Steve Cugine to share what we are launching.
Church & Dwight has delivered consistent new product innovation, year-in and year-out, in support of our global growth objectives.
2021 is no different, we have a super lineup of brand-building innovation, so much so, we do not have the time to take you through the full list.
So we have curated a few of our favorites.
Every new product is born from a consumer insight.
79% of our consumers want germs removed from their laundry, introducing OxiClean Laundry and Home Sanitizer.
This product kills 99.9% of bacteria and viruses, it also removes germs, odors and stains.
Check out this video.
[video playing] Consumers have been hyperfocused on cleaning household surfaces.
Introducing OxiClean multi-purpose disinfecting spray.
This product kills COVID, it is powerful, cleaning and disinfecting without chlorine bleach.
Two-thirds of consumers find flossing difficult and only 16% floss daily.
Introducing Waterpik Sonic-Fusion 2.0, the most successful new product launch in power flosser history just got better.
It has two times of bristle speed, greater flossing power, multiple head sizes and two brush speeds.
Here's another consumer insight.
Consumers with smaller bathrooms struggle with counter space and outlets.
Introducing Waterpik ION, the same amazing clean, unplugged.
This product is 30% smaller than traditional plug-in models, has 90 seconds of water capacity and with a lithium-ion battery that lasts up to four weeks with a single charge.
Check out this video.
Here's another consumer insight.
Men seek condoms that fit and feel the best.
Introducing Trojan All The Feels, it is a selection of our best condoms with personalized fit and feel and better feel equals more usage.
Here is a video featuring our Ecstasy condom.
One more consumer insight is that consumers are becoming more confident in doing beauty routines at home and they are aware of the cost savings.
Introducing Finishing Touch Flawless facial cleanse and salon nails.
And one last consumer insight.
33% of consumers plan to purchase more immune-support supplements.
Introducing Vitafusion Super Immune Support.
It is the only gummy to deliver over 100% daily value of the top three immune ingredients, Vitamin C, zinc and elderberry, it also includes a new ingredient, Manuka honey.
This is the first Vitafusion item in the cough and cold aisle.
Vitafusion has been increasing the amount of new items it has been launching, 2021 will be no different.
We have an exciting lift of new items coming.
I'm also excited to share with you the details of another fabulous quarter and year for the international division.
2020 was like no other year as we track the coronavirus as it surged across the globe starting in Asia in Q1.
We planned for its impact and pivoted to areas of growth as our international mix is heavily weighted toward personal care versus household products and therefore, more susceptible to global store closures, particularly in Europe.
We finished 2020 posting organic growth of 8.6%, well above our 6% Evergreen goal.
This is remarkable given the fact that during Q2 at the height of the pandemic, we delivered less than 1% organic growth for the division.
Q4 finished up a remarkable 14.9% behind growth in both our domestic subsidiary markets as well as our GMG business, where a resurgent Asia was a key driver of performance.
We have now built an international business that's over $800 million and approaching scale in key markets and we feel that there is not a market that we cannot reach.
We've also tripled the historic CAGR of the division from 3% to 9%.
Wait a minute, I didn't label this slide The Cugine Effect, it must come from my friend, Barry Bruno.
Well this seems like a good transition point from looking at the past performance to Barry Bruno and his focus on the future.
I will be retiring from Church & Dwight in June of this year.
Barry Bruno has been promoted to Executive Vice President of the International Consumer Products division.
Barry was one of my first hires when I moved into this position almost eight years ago.
He has been the co-architect of the existing international strategy.
Barry has led the design and execution of the Global Markets Group and the divisionwide global international marketing team.
His fingerprints are all over the success of this business in conjunction with the other members of the division leadership team.
Barry came to Church & Dwight from Johnson & Johnson, where he worked for 14 years across consumer, pharmaceutical and medical device businesses, where he developed a depth of experience in both U.S. domestic and global markets during his time there.
He turned that experience into a great start here at Church & Dwight and I have confidence in his ability to continue what we've started here in International.
Congratulations, Barry, and good luck.
In closing, it has been my sincere pleasure to work for this great company for the past 20 years.
The culture at Church & Dwight is a place where performance matters, straight talk is encouraged and teamwork is a differentiator.
I stayed at Church & Dwight because I felt that I could bring my unique self to work every day, cable big ideas that challenge the status quo, and when the decision was made, I know I had the support of my peers to make it happen.
This is as true today as when I joined in 1999.
I am confident in the future as the company and the international team is stronger today than ever before.
It's been an honor to work alongside you these last seven plus years here in International and I can assure you that the Cugine Effect is felt far beyond just us here in International.
And your work over 20 plus years has impacted the entire Church & Dwight organization.
You will be missed by so many Steve, but I think most of all by me.
As you saw under Steve's leadership, we've built International into an $820 million business that's growing faster than ever.
And as a reminder to this audience, we think about our International business in two buckets, our subsidiaries, where we have fully staffed Church & Dwight teams on the ground in Canada, Mexico, U.K., France, Germany and Australia, and our Global Markets Group, which covers 130 other markets via distributors who represent our brands.
I'm going to get into both shortly.
However, this chart shows the relative size of each in net sales.
As you've seen, GMG has been on a tear and now represents 34% of all international sales, followed by Canada and our European subsidiaries and then, our Australia and Mexican subsidiaries.
From a growth standpoint, our subsidiaries grew plus 4.8% in 2020 and GMG continued its stellar run with explosive growth of plus 19%.
What's noteworthy here is that our international business is much more heavily weighted toward personal care products than our U.S. business, which makes these results even more impressive in an environment where COVID slowed down many personal care categories.
For some additional context, our subsidiaries have been delivering outsized growth, more than double historical CPG category averages and some of our key subs are now for the first time approaching scale, which we'll talk about as the margin improvement enabler a bit later.
As I mentioned earlier, GMG is now our largest entity with outstanding growth of plus 19%.
Emerging markets in Asia, the Middle East and Latin America have been and will continue to be growth drivers going forward.
Last but not least, you know how acquisitive we are, and I'm happy to share that we've delivered double-digit growth on Waterpik and Flawless in 2020 and they remain far underrepresented in international household penetration than in the U.S. lead market.
If we look a level deeper in key drivers, in our subsidiaries, we continue to make great headway in turning our U.S. domestic power brands into international power brands.
ARM & HAMMER, OxiClean and Trojan are all examples of U.S. power brands, which still have long international runway in our subsidiaries.
Likewise, Waterpik and Flawless' household penetration in our subs trailed the U.S. significantly and we're lifting and applying best practices from the U.S. to drive subsidiary success on these brands.
Finally, we're approaching pricing with greater rigor and discipline and hiring dedicated resources in international to help us understand where pricing opportunities exist.
From a GMG standpoint, emerging markets have been a big area of focus and we are significantly under-indexed in these key markets versus our competitors.
For context, our top CPG competitors derive over 25% of international sales from emerging markets in which we both compete, while C&D only realizes only 7% of our international revenue from them.
Today, we're spending more in these markets and we'll continue to prioritize them going forward.
From an acquisition standpoint, our distributor coverage in 130 plus markets gives us a great footprint for expansion and we've been making excellent headway on new acquisitions like Waterpik and Flawless, but we're also still making excellent progress on some of our older acquisitions like Batiste and our VMS brands.
Last but not least, we are working with our supply chain partners to evolve from our export origins, where we ship products from the U.S. and the U.K. where they're made today to more local manufacturing, particularly in Asia.
Speaking of Asia, I don't think it will come as a surprise to you that the region contains some of the largest economies in the world.
However, what you might find interesting is the visualization here showing if there are more consumers living in Asia than in the rest of the world combined, including 4.5 billion middle income consumers who represent our target audience for Church & Dwight brands.
In recognition of this and the terrific future growth opportunity that exists in Asia, we now have C&D representative offices in Shanghai, Singapore, and just last month opened our first India office in Mumbai, to help drive growth in that new market for us.
From an acquisition standpoint, Waterpik and Flawless are our primary areas of focus and our key subs we've delayered by removing distributors and are now leveraging our own sales force to sell direct.
In terms of GMG, we continue to expand into new markets via distributors with two very recent examples being our launch of Waterpik in Japan and of Flawless in India, in just the past few months.
Finally, we're bringing C&D's marketing, e-commerce and pricing expertise to bear on these brands to make sure we're leveraging our capabilities, which are often broader than those of the companies from whom we acquire brands, so that we can drive efficient profitable growth all around the globe.
We know this is a winning formula as we doubled the business already.
However, what's even more exciting is the runway ahead of us that exists due to very low household penetration in comparison to the lead U.S. market.
In terms of Flawless, it's a brand we love that's still in its very early days internationally.
However, you heard Britta talk about the powerhouse influencers that we're leveraging in the U.S. and I'm happy to share that we're using them abroad as well, with plants in 10 of our largest global markets that are sure to drive awareness and trial of this great new addition to our portfolio.
I mentioned earlier that we love all of our acquisitions here in international, even those that are a bit older and an example of how we're still greenhousing some of these older brands can be seen first with Batiste where we've grown at a 20% CAGR over the last five years and are still under-indexed in household penetration versus our lead market in the U.K.
We continue to launch in new markets and drive household penetration in existing markets and again have lots more room to run with household penetration less than 2% in most global markets.
Finally, we can't forget about VMS. We've owned it a little bit longer, but the trends that we see in the U.S. are the same abroad and I'm happy to share that VMS is booming for us internationally as well.
One example of a market where we're investing significant time and resources on VMS is in China, where sales were up more than 30% in 2020.
So again, long runways even on acquisition we've owned for a while now.
Okay, so how are we doing it?
Well, we're making strategic investments in areas that have the biggest impact.
For example, to support our booming e-commerce business in China, we are ramping up hiring of our own e-commerce staff to help augment and better direct the efforts of our multiple partners in China.
India is a vast and complicated market and we knew we needed boots on the ground, so we've hired our first staff there just a few weeks ago.
Another complicated area is global pricing where we are now building strategies to take advantage of pricing power in order to understand where we can take price and we now, for the first time, have dedicated international expertise there as well.
From a manufacturing standpoint, we're evolving from our historical export routes where we manufactured product in developed western markets and shifted around the world to local manufacturing, especially in Asia where our business is now big enough to justify bringing co-packers online to deliver better costs and faster supply to customers.
Finally, we are investing for the first time in global marketing campaigns like ARM & HAMMER's More Power to You campaign where we leverage proven insights, while localizing the talent and messaging to make sure we're relevant in the markets in which they are launched.
Individually, none of these might seem all that impactful to you, however, cumulatively, I assure you they represent a significant investment in resources and capability building that we're confident will keep international growing long into the future.
Last but not least, we remain committed to doing all of the above, while continuing to use our increasing scale, pricing power in key markets and our personal care weighted mix to keep increasing operating margin by 50 basis points per year.
We did even better than that in 2020 where we grew 120 basis points and we remain committed to further continuous improvements here.
So in closing, we remain very excited about International and remain committed to our 6% organic growth target, which is also consistent with our outlook for 2021, and as a reminder, this is on top of almost 9% organic growth we experienced in 2020.
We've got a long runway on U.S. power brands going global, a number of acquisitions with very low household penetration versus their lead markets, and enormous opportunity in emerging markets where we've just started opening new offices to help us reach these consumers and a number of strategic investments in resources and capabilities like e-commerce and pricing to help make sure our great international team is working as efficiently and effectively as possible to drive profitable growth long into the future.
Now, back to you, Matt.
I'm going to run you through the animal productivity story right now.
You heard me speak earlier about what our Evergreen model is, it's 3% annual organic growth, 2% from the U.S., 6% from International and 5% from the Specialty Products.
Our specialty products business is a $300 million business, two-thirds is animal productivity and one-third is specialty chemicals.
If you look at the animal productivity piece, you'll see it's split between animal dairy and animal non-dairy.
Historically, dairy has been the biggest part of the business.
Three types of products we produce our prebiotics, probiotics and nutritional supplements.
Now why is that important?
It's because the consumer is moving away from wanting to consume food that is produced with antibiotics.
The dairy business has been cyclical.
As I said before, it's been the biggest part of the business.
If you look at this chart in 2011, 2014, 2017, those were up years.
So typically it's a three-year cycle.
The expectation was that 2020 was going to be a big up year.
It didn't happen, why?
Because of the pandemic.
So we expect a strong year from the dairy business in '21.
Now, if you look at dairy versus non-dairy, we were monolithic back in 2015.
Less than 1% of our sales were from non-dairy.
In '21, we expect it to cross 30%.
So just wrapping up here.
We have a trusted brand, all of those products I described are ARM & HAMMER products, and we're aligned with the consumer trend to move away from antibiotics to prebiotics and probiotics.
We've moved from dairy to other species, cattle, swine and poultry and we have a lot of runway internationally.
Now I'm going to talk about how we run the company.
It's pretty simple, we have five operating principles.
One, leverage brands, two, friend of the environment, three, leverage people, four, leverage assets and finally, leverage acquisitions.
Number one, brands consumers love.
As we say -- we opened the program today, pointing out that we have 13 brands that we call our power brands.
These are brands that consumers love.
Number two, we are a friend of the environment and that friend of the environment started back in the 19th century.
If you run your eyes across this page, you can see back in 1888, we -- the company introduced pro-environmental wall charts and trading cards that we put in our packages as a promotion for the environment.
In the '70s, we were the first corporate sponsor of Earth Day.
If you went 20 years later to 1990, we were still the only corporate sponsor of Earth Day.
More recently, in 2016, 50% of our global electricity demand was supplied by renewable energy sources.
In 2018, we crossed 100%.
Over the last five years, we've been planting trees in the Mississippi River Valley.
Now why is that important?
It's because trees take CO2 out of the atmosphere and this is consistent with our goal of being carbon-neutral by 2025.
Here are our three environmental goals.
Reduce water and our wastewater by 25% by 2022.
For solid waste, to increase our solid waste recycling rate to 75% by the end of 2021.
We want to achieve 100% carbon-neutral status for all of our global operations by 2025 and of all those three, that's the one I'm most excited about.
Now we've been getting a lot of recognition externally as you can see on this slide.
From JUST Capital, FTSE4Good, the EPA, etc.
Not because we've been applying for these things and running our business so we can take a bow.
No, we've been recognized because we've been doing the right thing.
Number three, we leverage people.
We have the highest sales per employee of any company in the CPG space.
This is an underappreciated statistic.
Look at these numbers.
We're almost $1 million of sales per employee, you'd normally expect that off a start-up.
We have a very simple compensation structure.
We focus on four things, revenue, gross margin, cash from operations and EPS.
And gross margin is actually an unusual element of our incentive compensation package.
The reason why we have gross margin in there is because it creates financial literacy.
Gross margin expansion is very important to our operating model and when people think, hey, gross margin is part of my incentive comp, they ask the question, what's gross margin, and how can I get it?
Number four, we consider ourselves asset-light.
Capex as a percentage of sales has been about 2% for as long as I've been with the company.
The other thing that may not be appreciated is that about 25% of our global sales are manufactured by third parties.
So I just ran through the first four operating principles.
Let's go into number five, leveraging acquisitions.
If you did the first four principles well, you're going to have good shareholder returns.
If you can add to that leveraging acquisitions, you get great shareholder returns, which we do.
We have a long history of growth through acquisitions as I mentioned earlier.
And the reason why we do so well with acquisitions is because we're disciplined.
So here's the five criteria.
Number one, we only buy brands that are number 1 or number 2 in their categories.
Number two, we only buy brands that can grow 3% or better and have gross margins that are equal to or better than our corporate gross margins.
Number three, need to be asset-light.
Number four, we're always looking for cost synergies.
So we're trying to leverage a Church & Dwight supply chain footprint.
And finally, these brands need to have a sustainable competitive advantage for many years to come.
Our most recent acquisition is Zicam, that's a number 1 Zinc supplement in the United States in the adult cold shortening category.
As many of you have been watching, the cough and cold categories have been -- are expected to be down in '21.
Because people are wearing masks and using hand sanitizers, etc.
We expect that as well but we think this is going to be a wonderful acquisition for us for years to come.
Just to wrap up the M&A section, we have 13 brands today, we're shooting for 20 tomorrow.
Why is this important?
Well, acquisitions have been a great driver of total shareholder return historically and will be again in the future.
And next up is Rick to take us through the financials.
I'm going to go through four items today.
First off is the Evergreen model like we always do, number two is 2020 results, both for the quarter and the full year, the third thing will be the 2021 outlook and then, the fourth will be the capital allocation discussion.
So first off is the Evergreen model and our shareholders know that we've been talking about this for a very long time, 3% top line, 8% bottom line.
And we have a detailed model to go through as well.
So 3% for net sales growth, 25 basis points for gross margin expansion, flat marketing as a percentage of sales, which is typically higher dollars as we grow the top line.
And then we leverage SG&A by 25 basis point.
That gets us to 50 basis points of operating margin expansion and about 8% earnings per share growth.
Now moving to 2020.
So we ended the year in a fantastic way.
Q4 2020 was 10.8% organic sales growth, 11% domestic organic sales growth, 14.9% for international and minus 1.2% for SPD.
Gross margin was down 280 basis points, but in line with what our expectations were.
Remember our outlook was down 250 basis points for the quarter.
Now that 280 included a 40 basis point drag because we recognized some of our supply chain workers as the pandemic spiked the again.
And then, marketing change was up 140 basis points in the quarter as we invested behind our brands to enter 2021 with momentum.
SG&A was leveraged by 70 basis points.
Despite higher amortization and investments, the top line helps us leverage SG&A in a big way.
And then, earnings per share was $0.53, our outlook was $0.50 to $0.52.
So we beat the midpoint of the range by $0.02.
Moving to the full year 2020.
Organic was 9.5%, domestic was 10.7%, international 8.6% and SPD was 0.4%.
So just really a strong year to have a 10% organic full-year number.
Gross margin was 45.2% or down 30 basis points, really driven because of COVID and incremental tariffs, but we'll get into the detail in a minute.
Marketing was 12.1% or higher by 30 basis points.
That's very significant, it was a huge investment behind our brands.
You'll hear in the outlook that we're going to return to pre-pandemic levels for marketing support.
Adjusted SG&A is 14.1% or down 10 basis points, so we did leverage SG&A.
And so, earnings per share was up 15% or $2.83 and then cash was up to $990 million, a $400 million above our $890 million estimate a year ago.
And then, finally that translates into 125% free cash flow conversion, we do a great job converting net income into cash flow.
And now, turning to the detail on gross margin.
So for Q4, we had positive price volume mix, similar to the way we've had it all year long plus 130 basis points.
Then, inflation was a drag of 310 basis points, but that included a few items, commodities, distribution with a tight trucking market, labor increases and then investments.
COVID costs were 150 basis point drag, which included a 40 basis point drag for the supplemental bonus that we discussed earlier.
Incremental tariffs for Waterpik was a 90 basis point drag for the quarter, and then productivity programs were plus 160, so there's a lot of great work behind our good to great program.
Acquisition, that's really Zicam, for the month of December, a positive margin mix, and then Flawless accounting was down 30 basis points.
Remember back in 2019, it was a good guy and so, it didn't exist in 2020, so it's a drag year-over-year.
And that's how we get to down 280 basis points for the quarter.
And then, all that translates into the full year to be down 30 basis points.
And so, we feel like we have a great springboard to have margin expansion in 2021 and we'll talk about that in a minute.
Turning to this slide, this is four reasons why we can expand gross margin in the future and we believe these things.
First off is our good to great program and I just got finished telling you how well we did in 2020.
Number two is supply chain optimization, that's really our footprint, our network.
Number three is acquisition synergies, you heard us a few months ago talking about Zicam, and we signed up for $5 million of synergies for Zicam, as an example.
And then, fourth is new products, we want to launch accretive new products.
So those four reasons help us have confidence in expanding margin over the long term.
Okay, moving to the 2021 outlook.
So at a high level, our outlook consists of reported sales growth of 4.5%, that's really the organic number of 3% plus the impact of Zicam.
Organic is 3%, operating profit margin expansion of 100 basis points, which is almost double our 50 basis point expansion for our Evergreen model.
And then, adjusted earnings per share growth of 6% to 8%.
So here's a detailed outlook for 2021.
First, the 4.5% reported and then we get into the 3% organic sales growth.
And it's very consistent with what you just heard from Matt and Barry and Britta, 2% for domestic, 6% for international and 5% for SPD.
Now, the 3% organic growth, it does have a couple of strategic choices that we've made previously in there.
Remember, last year we communicated that we were de-emphasizing OxiClean laundry and we were getting out of the private label vitamin business.
Both of those things, this is the second and complete year of those actions and now that would have added a full point of organic growth as an example.
So we would have been at 4%, I just want to give you context there.
Gross margin is up 50 basis points.
We'll go through that detail in a minute and marketing is down 30 basis as we get back to kind of the average for pre-pandemic levels is around 11.8 and that's what we plan on doing in 2021.
SG&A, we leveraged by 20 basis points and then were up 100 basis points for operating margin.
Now you might ask if you're leveraging the operating margin by 100 basis points, why aren't you higher on the earnings per share growth outlook?
It's just 8%, your Evergreen model is 50 basis points and your 8% earnings per share growth.
Well, it's because of tax.
Our tax rate in 2020 was 19% and we're going back to the consistent average of around 21%, 22%.
In 2019, we had two things that helped us on tax.
One was a discrete international planned settlement and then the second one was just a higher number of stock option exercises.
And so, those two things aren't going to recur to the same extent.
And so, as a result, we're up 100 basis points on operating margin, just really strong base business plan, up 6% to 8% on EPS, and then up to approximately $1 billion of cash flow generation, cash from operations.
Okay, here's a track record of our organic sales over the last 10 years.
We've typically averaged around 4%, this year we're calling 3% for 2021 and as I said before, if you add in some of those strategic decisions we made, we are closer to the 4% on an apples to apples basis.
We focus on gross margin in a big way.
Gross margins are great surrogate for -- and driver for EBITDA margin, and then that flows all the way down to cash flow and cash generation, and we believe cash drives value.
So plus 50 basis points in 2021.
The detail of the 50 basis points of expansion in '21 really leads off with price and volume mix continuing to expand.
We have higher volumes, we have improved price mix throughout the year.
Inflation and the COVID costs are drag of around 130 basis points.
COVID costs do reduce year-over-year, but there is -- they still exist.
And then productivity programs are a tailwind of 100 basis points.
Tariffs and acquisition, that's again the Zicam acquisition in the favorable gross margin impact to mix.
Those two pretty much offset and we're at plus 50 basis points for the year.
So really happy with that type of expansion.
Now, we're talking about the seasonality of gross margin.
The first half, second half dynamic.
So first half gross margin is down 50 basis points.
And why is that?
While we're going back to normal promotional levels, remember in 2020 March, April, May, June, promotional levels pulled back in a big way as the pandemic was spiking and couponing as well.
We have higher Waterpik tariffs in the first half, right.
It's not in the comp year ago, first half.
And we have COVID costs compared to a year ago, when they were none, and plus there is higher commodity costs.
Moving to marketing, we have a long track record of spending between 11% and 12% on marketing.
It just drives the brand's growth over time and drives our Evergreen model.
In years past, about -- the average is around 11.
8% and we're saying in 2021, we're going to get back to the pre-pandemic average of around 11.8%.
Moving to SG&A leverage.
We have a long track record of leverage in SG&A, this is on a reported basis.
In 2021, we're going to be down 20 basis point, is our expectation, but if you look at this on a cash basis on the next slide, you can see how much we're actually leveraging cash SG&A.
We're going to be down 60 basis points in 2021.
And then, finally on EPS, we have a long track record of great earnings per share growth, low double-digit, high single-digit earnings per share growth for a long period of time.
And in 2021, it is no different.
6% to 8% earnings per share growth of $3 to $3.06 is the outlook.
And that's on top of 15% growth in 2020.
Same discussion we just had in gross margin.
We have a timing dynamic for earnings per share growth as well.
For many of the same reason, earnings per share growth is expected to be down 5% in the first half, as we get back to normal promotional levels.
We have higher Waterpik tariffs and we have higher COVID costs as well as higher commodity costs.
In the second half, we expect to be up around 20% and that's because of a return to historical marketing level, improved promotional efficiency, lower COVID costs, tariff remediation in those actions that we're taking and 2020 investments that aren't going to repeat in the back half of the year.
Okay, moving to free cash flow.
This is my favorite slide.
We have a long track record of free cash flow conversion, 122% over the time period.
We had 125% in 2020.
How do we do that?
Well, we have great working capital management, we've moved from 52 days down to 16 days is the outlook for 2021.
And if you strip out the Chinese supply chains that we have for Waterpik and Flawless, those numbers are actually closer to five days as we approach 0 working capital.
We have a very strong balance sheet, we have a lot of financial capacity.
We expect to end the year at 1.3 times debt-to-EBITDA at the end of 2021.
And so, we have a lot of dry powder, what do we do?
We have the ability to do up to $4.2 billion deal and still maintain our credit rating.
So just a lot of excess cash and debt capacity.
Now moving to capital allocation.
We're very clear on the top five reasons for capital allocation.
Number one, far away is TSR-accretive M&A and we're very picky on what deals we do deal.
Number two, we moved this up previously this summer, on capex for organic growth and you're going to hear me talk about capacity additions for laundry, litter and vitamins in a few minutes.
So number two is capacity investments for growth.
Launching an accretive MPD has been a just a stalwart of this company and it helps drive our top line as well.
Number four is debt reduction.
And as you saw, we're going to end the year at 1.3 times debt-to-EBITDA in 2021, is our expectation.
And then, return cash to shareholders through dividends and buyback.
We're not a capital-intensive company.
If you looked back at our history, we usually bump around 2% of sales or below.
In years past, we've had capacity additions and that's what happened in 2009, we had our York laundry plant and that's when we bumped up to about about 5.5%.
In 2011, we bumped up to 2.8% when we had our Victorville laundry plant and so 2021, 2022 are no different.
We think we're going to spike up to around 3.5% as we add these capacity investments.
And so those capacity investments are around laundry, litter, vitamins, baking soda, technology and our distribution network around the country.
And then, finally, we have a great history of paying the dividends.
For over 120 years we've been paying dividends and in 2021, our outlook is a 5.2% dividend increase on top of increases of 5.5%, 4.5% and 14.5% these past few years.
In addition, we did a $300 million ASR that started in December and we expect to complete by the end of Q1.
 Assistant:

Chosen response:
q4 adjusted earnings per share $0.53 excluding items.
sees fy sales up about 4.5 percent.
expect 2021 to be another strong year with adjusted earnings per share of $3.00 to $3.06.
in 2021, we expect several categories to remain at elevated consumption levels.
expect modest growth from laundry category in 2021.
expect growth in water flossers in 2021 due to wellness trend and as higher traffic returns to dental offices.
expect full year reported gross margin to be up 50 basis points.
for q1, expect reported sales growth of approximately 3.0%, organic sales growth of approximately 2.0%.


Prompt:
Human: Before we begin, let me remind you that the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 apply to this conference call.
In addition, management may also discuss non-GAAP operating performance results during today's call, including earnings before interest, taxes, depreciation and amortization or EBITDA and adjusted EBITDA.
Kevin McNamara, President and Chief Executive Officer of Chemed Corporation; Dave Williams, Executive Vice President and Chief Financial Officer of Chemed; and Nick Westfall, President and Chief Executive Officer of Chemed's VITAS Healthcare Corporation subsidiary.
I will begin with highlights for the quarter, and Dave and Nick will follow-up with additional operating detail.
When we reported our second quarter 2020 operating results, I noted that the pandemic and related economic lockdown severely impacted our April 2020 operating results.
Since April, both VITAS and Roto-Rooter have reengineered their operating procedures to safely care for our patients and customers during the pandemic.
These operational changes have allowed Chemed to generate sequential operational improvement starting in May 2020, and this improvement has continued and has, in fact, accelerated throughout the third quarter and continued into October.
David will provide updated earning guidance later in the call.
Our hospice segment operations continued to be impacted by the pandemic.
Fortunately, the federal government, specifically HHS and CMS have been exceptionally supportive in terms of relaxing regulations, allowing the use of telehealth where appropriate and providing pragmatic flexibility in caring for our 19,000 patient census.
The severe initial disruption within our patient referral and admission patterns we noted in the second quarter has noticeably dissipated throughout the third quarter.
This improvement is reflected in our third quarter admissions.
Our July 2020 admissions increased 4.3%, August increased 5.9% and September admissions expanded 4%.
Overall, our third quarter 2020 admissions increased 4.7%.
Our average daily census did decline two-tenths of 1 percentage point in the quarter.
The slight decline in census is a result of soft admissions from the second quarter as well as supressed referrals from nursing homes and assisted-living facilities.
We anticipate admissions to normalize when these types of facilities return to their pre-COVID occupancy levels.
As I discussed last quarter, we made the strategic decision for Roto-Rooter to maintain full staffing and operating capacity early in the pandemic.
This strategic decision to maintain full capacity was designed to capitalize on any snapback in commercial and residential demand, both to protect existing market share as well as to maximize on opportunities to grow market share.
I believe this has proven to be the correct strategic course.
Roto-Rooter services demand began to show weekly improvement beginning in the later part of April and has strengthened unabated throughout the second and third quarters of 2020.
This is reflected in our monthly performance.
Roto-Rooter unit-for-unit commercial revenue declining 38.6% in April, improving to a 31.8% decline in May and a decline of 19.7% in June.
Third quarter 2020 unit-for-unit commercial demand did decline 11.6% when compared to the prior year quarter.
This third quarter commercial demand is a significant improvement when compared to the 29.1% decline in the second quarter 2020 commercial revenue.
On a sequential basis, third quarter 2020 unit-for-unit commercial revenue totaled $39.5 million, an increase of 26.8% when compared to the second quarter of 2020.
Our residential services have proven to be exceptionally resilient with our unit-for-unit residential revenue declining a modest 1.6% in April, increasing 11.7% in May and 18.7% in June.
The third quarter residential demand set all-time records with July 2020 unit-for-unit residential revenue expanding 22.8%, August revenue increased 24.1%, and September 2020 residential unit-for-unit revenue increased 26.6%.
This translated into Roto-Rooter on a unit-for-unit basis having third quarter 2020 commercial revenue declining 11.6% and residential revenue increasing 24.6%.
Total Roto-Rooter third quarter unit-for-unit revenue increased 12.9% when compared to the prior year.
Including acquisitions, Roto-Rooter generated consolidated third quarter 2020 revenue growth of 20.4%.
I anticipate continued strong operational and financial results for both VITAS and Roto-Rooter, as we operate during the pandemic.
With that, I would like to turn this teleconference over to David.
VITAS' net revenue was $337 million in the third quarter of 2020, which is an increase of 4.8% when compared to the prior year period.
This revenue increase is comprised primarily of a geographically weighted average Medicare reimbursement rate increase of approximately 5.7%, a 0.2% decline in days-of-care and acuity mix shift, which then reduced the blended average Medicare rate increase 242 basis points.
In addition, a favorable reduction in our Medicare Cap liability increased our third quarter 2020 revenue growth 162 basis points.
Our average revenue per patient per day in the third quarter of 2020 was $194.10, which, including acuity mix shift, is 3.2% above the prior year period.
Reimbursement for routine home care and high acuity care averaged $166.51 and $971.71, respectively.
During the quarter, high acuity days-of-care were 3.4% of our total days-of-care, 57 basis points less than the prior year quarter.
This 57 basis points mix shift in high acuity days-of-care reduced the increase in average revenue per patient per day from 5.7% to 3.2% in the quarter.
In the third quarter of 2020, VITAS reversed $4.1 million in Medicare Cap billing limitations recorded in earlier quarters.
This compares to the prior year third quarter Medicare Cap billing limitation of $1.3 million.
At September 30, 2020, VITAS had 30 Medicare provider numbers, 4 of which have an estimated fiscal 2020 Medicare Cap billing limitation liability that totaled $8.7 million.
This compares favorably to the full year fiscal 2019 Medicare Cap billing limitation liability of approximately $11.4 million.
VITAS' third quarter 2020 adjusted EBITDA, excluding Medicare Cap, totaled $68.2 million, which is an increase of 25.6%.
Adjusted EBITDA margin, excluding Medicare Cap, was 20.5% in the quarter, which is a 367 basis point improvement when compared to the prior year period.
Now let's take a look at Roto-Rooter.
Roto-Rooter generated quarterly revenue of $191 million in the third quarter of 2020, which is an increase of $32.3 million or 20.4% over the prior year.
On a unit-for-unit basis, which excludes the Oakland and HSW acquisitions completed in July of 2019 and September of 2019, respectively, Roto-Rooter generated quarterly revenue of $173 million, which is an increase of 11.4% over the prior year quarter.
Total commercial revenue, excluding acquisitions, did decline 11.6% in the quarter.
This aggregate unit-for-unit commercial revenue decline consisted of drain cleaning declining 13%, commercial plumbing and excavation declining 11.2% and commercial water restoration declining 1.6%.
This was more than offset by the residential activity.
Total residential revenue, excluding acquisitions, increased 24.6%.
This aggregate residential revenue growth consisted of residential drain cleaning increasing 22%, plumbing and excavation expanding 31.2% and residential water restoration increasing 16.1%.
Now let's talk about our 2020 guidance.
Over the past 7 months, our operating units have been able to successfully navigate within a rapidly changing environment and produce operating results that we believe provides us with the ability to issue guidance for the remainder of the calendar year.
However, this guidance should be taken with the recognition that pandemic will continue to materially disrupt all aspects of our healthcare system and general economy to such an extent that future rules, regulations and government mandates could have an immediate and material impact upon our ability to achieve this guidance.
Within this context, revenue growth for VITAS in 2020 prior to Medicare Cap is estimated to be 4%.
Our average daily census in 2020 is estimated to expand approximately 1.3%.
And VITAS' full year 2020 adjusted EBITDA margin prior to Medicare Cap is estimated to be 21%.
We are currently estimating $8.6 million for Medicare Cap billing limitations for calendar year 2020.
Roto-Rooter is forecasted to achieve full year 2020 revenue growth of 12.5% to 13%.
This full year revenue growth assumes 2.7% of seasonal sequential revenue growth from the third quarter to the fourth quarter of 2020.
Over the past 5 years, excluding water restoration and the impact from acquisitions, this Q3 to Q4 seasonal sequential revenue growth has averaged between 4% to 11%.
Based upon the above, Chemed's full year 2020 adjusted earnings per diluted share, excluding non-cash expense for stock options, tax benefits for stock options, costs related to litigation and other discrete items, is estimated to be in the range of $18 to $18.15.
This compares to our previous guidance of $16.20 to $16.40.
This 2020 guidance assumes an effective corporate tax rate of 25.8%.
And for comparison purposes, Chemed's 2019 reported adjusted earnings per diluted share was $13.95.
In the third quarter, our average daily census was 19,045 patients, a slight decline of 0.2% over the prior year.
This decline in average daily census is a direct result of the disruptions across the entire healthcare system, which started in March that impacted traditional admission patterns into hospice.
While certain healthcare sectors have shown improvement in admission patterns in the third quarter, the long-term care market, specifically nursing homes and assisted-living facilities continue to be impacted as they work to safely navigate serving their residents during the pandemic.
ADC growth is expected to normalize over the coming quarters as we return to pre-pandemic referral patterns across all sectors of the healthcare industry.
In the third quarter of 2020, total admissions were 17,943.
This is a 4.7% increase when compared to the third quarter of 2019.
In the third quarter, our admissions increased 18.3% for our home-based pre-admit patients.
Hospital directed admissions expanded a positive 6.2%, nursing home admits declined 22.6% and assisted-living facility admissions declined 13.5% when compared to the prior year quarter.
Our average length of stay in the quarter was 97.1 days.
This compares to 92.6 days in the third quarter of 2019 and 90.9 days in the second quarter of 2020.
Our median length of stay was 14 days in the quarter, which is 3 days less than the 17 day median in the third quarter of 2019 and equal to the second quarter of 2020.
Median length of stay continues to be a key indicator of our penetration into the high acuity sector of the market.
As we sit here today, we're confident in our ability to support all of our team members and their ability to deliver care by prioritizing their safety with sufficient PPE inventory, education and clinical protocols.
Additionally, we'll continue to utilize the resources and testing supplies we've acquired to comply with federal, state and local requirements to safely access the health facilities in our markets.
Lastly, our entire team will continue to be out in the communities we serve, collaborating safely with our local healthcare partners to successfully identify and navigate patients and their families onto the hospice benefit during this unprecedented time.
As we've internally discussed throughout the pandemic, we'll get through this by continuing to support one another and the patients and families we serve, all while focused on continuing to deliver the results we have thus far throughout the pandemic.
I will now open this teleconference to questions.
 Assistant:

Chosen response:
sees fy 2020 adjusted earnings per share $18.00 to $18.15 excluding items.
roto-rooter is forecasted to achieve full-year 2020 revenue growth of 12.5% to 13.0%.
qtrly vitas net patient revenue of $337 million, an increase of 4.8%.
qtrly roto-rooter revenue of $191 million, an increase of 20.4%.