Prompt:
Human: Earlier today, we reported strong first quarter results, building on last year's progress with solid execution across all financial metrics.
Organic revenue is up approximately 2% with mid-single-digit growth in our core government businesses, partially offset by COVID-related impacts of about three points from our commercial businesses, consistent with our expectations.
This should be the last quarter of tough compares due to the pandemic, which our team has managed incredibly well, and we anticipate more stability in the affected businesses ahead.
Margins expanded a robust 140 basis points to 18.9%, resulting in earnings per share of $3.18, up 14% and ahead of internal targets.
Free cash flow was $630 million supported shareholder returns in excess of $900 million, including repurchases of $700 million from our recently authorized $6 billion program, with a balance from dividends following our 20% increase in March.
Before handing over to Chris, with the transition occurring as planned on June 29, this quarter marks my 38th and final earnings call leading Harris and L3Harris as CEO.
It's been rewarding nearly 10 years with the hard work and dedication of our employees.
Harris grew from a small, niche, defense company to a leading mission solutions defense prime post the acquisition of Exelis and the merger with L3 with revenue today of over $18 billion.
I'm especially proud of the people at L3Harris who work hard every single day to support our customers' critical missions and deliver value to shareholders.
The performance culture and the work environment we created is really special, and we recently were recognized for it by Fortune as a 100 best company to work for in 2021 and earlier this year as a world's most admired company.
As you know, I'll continue as exec Chair of the Board for another year, working closely with Chris as he becomes CEO.
Last week, the independent directors of the Board unanimously endorsed the transition occurring as planned in the merger agreement, indicating their confidence and mind in Chris' ability to lead this company going forward.
The results today speak to the momentum we have in the company and the strong foundation we've built for the future.
And I'm excited and optimistic about what L3Harris can accomplish in its next phase under Chris' leadership.
As you heard at our investor briefing last month, we're excited about the potential for the company and the value creation opportunities in front of us.
The strategic priorities we develop together, as shown on Slide three, are the foundations on which we'll deliver sustainable top line growth, steady margin expansion and robust free cash flow with industry-leading capital returns.
All areas where we showed great progress in the first quarter.
In terms of the top line, our Q1 results, coupled with the Biden administration's announcement that the defense budget will continue to grow in FY '22, about 1.5 points versus FY '21, reinforces our optimism for growth.
We are encouraged by the continued focus on National Security and support for our military within the budget and believe L3Harris is well aligned with priorities that emphasize the return to peer competition and operations in increasingly contested environments.
This backdrop provides us opportunities to offer our advanced and affordable solutions across all domains.
We're watching closely for more details in the coming months and expect to consistently grow through our strong DoD portfolio, revenue synergies and international expansion, which stem from our R&D investment.
In the first quarter, we gained traction as we grew 4.8% in our core government businesses with international up double digits, driven by solid growth in aircraft ISR and Tactical radios.
Turning to revenue synergies.
We received eight new awards, maintaining our healthy win rate of about 70% with total awards to date of approximately $400 million.
We anticipate sustaining our momentum given notable prime level awards across all domains that represent multibillion-dollar opportunities.
On the space side, in addition to our recently highlighted HBTSS Responsive Satellite award with the Missile Defense Agency, our five decades of experience building space-based imaging systems has led to our down-select for the initial concept and design of next-generation weather imagers.
This award supports NOAAs future satellite system recapitalization.
The administration's focus on climate initiatives, supported by a nearly 30% FY '22 budget increase for NOAA, reinforces the opportunity set for L3Harris as we are a leader in weather payload and ground systems, creating an opportunity of $3 billion over the next decade.
On the air side, we had strong orders on both new platforms such as the F-35 and legacy platforms, including the F-18 and F-16.
In particular, we leveraged our experience with providing F-16 systems and our expertise in software-defined open systems architecture to secure a contract to develop the next-generation electronic warfare suite on international aircraft.
We can further expand our global footprint with opportunities in more than a dozen countries in the Middle East, Asia and Europe.
This adds to our recent success with the U.S. Navy's Next Generation Jammer Low-Band award, for the EA-18G Growler.
We're quickly establishing ourselves as a global leader in electronic warfare and aircraft survivability.
We also closed on the ISR aircraft contract with the NATO customer to missionize a series of G-550s that was still pending parliamentary approval last quarter, and we continue to work on similar opportunities for other customers, which when combined with the NATO award demonstrates our ability to expand our international footprint and represents over $3 billion in potential value over the next several years.
Moving over to the land side.
We continue to make progress supporting modernization efforts on both the domestic and international fronts, including a follow-on production order under SOCOM's $255 million multichannel manpack IDIQ contract.
We also received orders for our advanced radio and night vision products from Western Europe, the Middle East and Central Asia, further strengthening our international leadership.
And finally, in the sea and cyber domains, our maritime team was successful in winning two new prime level programs to provide imaging systems on submarines for international customers.
These strategic wins highlight our ability to expand our global maritime solutions to new customers with additional follow-on opportunities to come.
And while limited in what we can say due to its classified nature, our $1 billion intel and cyber business received a follow-on order to provide end-to-end mission solutions within its ground-based adjacency franchise as we continue to deliver against our customers most challenging cyber requirements.
These wins provide long-term visibility and support for our funded book-to-bill of 1.10 in the quarter.
Our total backlog remains above $21 billion, up 6% year-over-year when adjusted for divestitures.
In addition, with considerable recent bid and proposal activity, we're aggressively going after our three-year $125 billion pipeline to deliver sustainable top line growth.
Shifting over to margins.
This quarter, we saw the healthiest results since the merger at nearly 19%, which puts us in a strong position to meet the upper end of our full year guidance.
Cost synergies of $33 million, primarily attributable to supply chain and facilities consolidation, put us well on track to deliver up to $350 million of cumulative net benefits in 2021, a year ahead of schedule.
Our E3 program also gained traction through strong program performance, factory productivity and supply chain savings, and we continue to believe that there is considerable potential beyond this year to enable another phase of cost opportunities to sustain margin expansion for L3Harris.
Lastly, we're maximizing cash flow through continued working capital and capex discipline, driving shareholder-friendly capital deployment.
And while we're holding off on updating our $2.3 billion share repurchase target for the year based on our announced and potential divestitures, we still see considerable upside to the plan.
As an update on portfolio shaping, we've recently cleared the U.S. antitrust waiting period on both the previously announced military training and combat propulsion systems divestitures and are on track to close in the second half of the year.
We're progressing on other portfolio shaping opportunities, and we'll provide more details over the coming months.
And to reiterate, inclusive of divestitures, we remain on track to deliver on our $3 billion free cash flow commitment in 2022, along with double-digit cash growth on a per share basis, excluding potential tax policy impacts.
So we're pleased with the execution against our strategic priorities and progress we've made at the start of the year, which gives us confidence to raise the bottom end of our earnings per share guidance.
So with that, I'll hand it over to Jay.
First, let me begin with a brief recap of the quarter before I get into segment results.
Organic revenue was up about 2% as growth in IMS, SAS and CS was partially offset by the expected decline in AS due to the pandemic.
Overall, our core government businesses were up 4.8% reduced by about three points of COVID-related impacts in our commercial businesses.
Margins expanded 140 basis points to 18.9%, with expansion in all four segments, primarily from operational excellence, integration benefits and cost management.
We did better-than-expected in the quarter from stronger E3 and cost synergies of roughly 70 basis points as well as some timing benefits from lower R&D and program mix of approximately 50 basis points.
This, along with share repurchase activity led to earnings-per-share growth of 14% or $0.38 to $3.18, as shown on Slide six.
Of this growth, synergies and operations contributed $0.34, along with a lower share count, pension and interest totaling $0.23, which more than offset divested earnings and headwinds from pandemic-impacted end markets.
Free cash flow of $630 million was the result of solid net income drop-through as well as capex and working capital discipline, with days roughly steady at 55.
And shareholder returns of $909 million were comprised of $700 million in share repurchases and $209 million of dividends.
Integrated Mission Systems revenue was up 5.9%, with growth in all three businesses.
Double-digit growth in maritime from a ramp on manned platforms, including the Columbia class submarine in Constellation-class Frigate, was complemented by growth in ISR from the NATO award carryover from last year and an Electro Optical from deliveries of our WESCAM airborne turrets to the U.S. Army.
Operating income was up 19%, and margins expanded 180 basis points to 16.5% from cost management, integration benefits and operational excellence.
Funded book-to-bill was impressive at over 1.3 in the quarter.
In Space and Airborne Systems, organic revenue increased 4.1%.
From responsive programs, including SDA tracking in HBTSS, driving high single-digit growth in space, as well as growth from the F-35 platform in mission avionics and double-digit classified growth in Intel and cyber.
The strength was partially offset by program timing and electronic warfare.
Operating income was up 8.6%, and margins expanded 90 basis points to 19.4% from cost management including R&D timing, operational excellence and higher pension income.
Funded book-to-bill was a solid 1.15 for the quarter from strong bookings in our Space and Electronic Warfare businesses.
Next, Communication Systems organic revenue was up 2.9% with high single-digit growth in Tactical Communications, primarily from the continued ramp in U.S. DoD modernization.
That also drove integrated vision solutions and global communication solutions up double digits.
Conversely, volume was lower on legacy unmanned platforms within broadband due to the transition from permissive to contested operating environments.
And within public safety, due to anticipated COVID-related impacts, they are now showing signs of stabilization.
Operating income was up 12%, and margins expanded 240 basis points to 25.3% from operational excellence, cost of management and integration benefits.
Funded book-to-bill was 0.92 for the quarter.
Finally, in Aviation Systems, organic revenue decreased 8.3%, primarily driven by COVID-related impacts in our commercial aviation business, consistent with expectations and from program timing in military training.
High single-digit growth in mission networks from higher FAA volume paired with fusing and ordinates growth in defense aviation helped to offset these effects.
As we move past the first quarter, we're anticipating a return to growth in this segment as we lap COVID effects while our combined government businesses continue to grow.
Operating income was down 13%, primarily from the sale of our airport security and automation businesses.
Margins expanded 120 basis points to 15.7% is operational excellence, cost management, including R&D timing and integration benefits more than offset COVID-related headwinds.
Funded book-to-bill was 0.84 for the quarter.
Let's shift over to 2021 guidance.
We're off to a strong start with our first quarter results and performance, and we're confident in our integration and operating expectations, as well as our top line growth of 3% to 5%, supported by a solid 1.10 book-to-bill this quarter.
This puts us in a position to raise the bottom end of our full year earnings per share guidance by $0.10 inclusive of announced divestiture impacts.
We'll provide a more comprehensive update later in the year.
In the interim, I'll provide some color now on the moving pieces, specifically on margins, portfolio shaping and capital returns.
On margins, this strong start will likely push us toward the upper end of our range of 18% to 18.5%.
We do expect margins to normalize for the balance of the year due to increases in R&D, and stronger growth in new programs with lower initial margins.
Overall, the expected upside for the year from our prior midpoint is due to strong program execution and cost performance, and will be a key factor in our 2021 earnings strength.
On portfolio shaping, we now expect about $0.10 of dilution from announced divestitures net of buybacks from proceeds.
And there are a few remaining businesses that are in various stages of the divestiture process, which could have a modest incremental earnings per share impact for the year.
Lastly, as highlighted at our investor briefing.
We have another significant year planned for capital returns.
Embedded in our guidance is $2.3 billion of share repurchases from cash generation, which will be further augmented by over $1 billion in net divestiture proceeds.
So overall, for 2021, we're confident in delivering on our commitment of double-digit annual growth in earnings and free cash flow per share.
 Assistant:

Chosen response:
q1 revenue fell 1.3 percent to $4.6 billion.
qtrly adjusted earnings per share $3.18.
sees 2021 revenue $18.5 billion - $18.9 billion, excluding effect of divestitures, up organically 3.0% - 5.0%.
sees about $2.3 billion in share repurchases in 2021, excluding use of divestiture proceeds.


Prompt:
Human: Some of these factors are set forth in detail in our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q and in the company's other filings with the SEC.
At Labcorp, we continue to leverage innovation, science and technology to accelerate our strategy as we work to improve health and improve lives around the world.
We serve as a trusted source of health information that helps customers advance healthcare and guide medical decisions.
At the same time, we've remained focused on helping the world through the pandemic.
In the third quarter, we delivered strong results.
Revenue totaled $4.1 billion, adjusted earnings per share reached $6.82, and free cash flow was $650 million.
As a result of our strong performance and our improved outlook, we're raising full year guidance for revenue, adjusted earnings per share and free cash flow.
Glenn will cover those in more detail in a few minutes.
The Base Business for both Diagnostics and Drug Development performed well with 10% and 22% growth, respectively.
We saw consistent recovery across both businesses.
In Diagnostics, we experienced broad geographic recovery in our Base Business and across our testing portfolio.
Esoteric and routine testing demonstrated solid year-over-year growth for the quarter.
The trailing 12-month net book-to-bill for Drug Development remains strong at 1.34.
Drug Development continues to recover with nearly 85% of sites now open.
The business also saw decentralized trials increasing by more than 50% versus prior year.
Now I'd like to turn to our ongoing role in the pandemic response.
Labcorp continues to support the fight against the pandemic in every way possible through both our diagnostic and our drug development capabilities.
We experienced greater-than-anticipated COVID testing volumes in the quarter, although levels were below the same period last year.
Time to results for COVID test remains an average of one to two days, with results typically available within one day.
PCR testing volume averaged 85,000 per day in the quarter, up from 54,000 per day in the second quarter.
We averaged 114,000 tests per day in September, with volumes declining week-over-week since that time.
We will continue to break out COVID testing from Base Business revenue and volume as it remains difficult to forecast.
We will also continue to maintain high capacity levels to be prepared for potential future scenarios.
We also had another successful quarter of bringing new innovations to market.
Notably, we recently received Emergency Use Authorization for a combined COVID and flu-at-home collection kit.
With flu season upon us, the kit offers a convenient way to test for both viruses.
This new offering will be available for adults and children ages two and over and no upfront cost for those who meet clinical guidelines.
In addition, we collaborated with AstraZeneca on both a COVID prevention and treatment trial of its new long-acting antibody combination.
In the trial, the investigational antibody combination demonstrated statistically significant benefit in preventing symptomatic COVID and in reducing severe COVID or death in outpatients with mild to moderate COVID, promising milestones in the development of new treatments.
Also earlier this month, Merck filed for FDA Emergency Use Authorization for its investigational oral antiviral medicine for the treatment of mild to moderate COVID in at-risk adults, a treatment that we supported through Phase I, Phase II and Phase III clinical trials.
I'll now discuss progress on our strategy, and I'll start with oncology.
The OmniSeq integration is going as planned, and their leading pan-cancer diagnostic capabilities extend our portfolio of solutions in this area.
Additionally, we launched clonoSEQ, the first and only FDA-cleared test for monitoring residual blood cancer.
As part of our efforts to address healthy equity -- health equity issues, we recently partnered with the Community Clinical Oncology Research Network to assess social and economic impacts of cancer care disparities.
And we also recently began work with Pillar Biosciences to enhance our next-generation sequencing and plan to offer a specialty oncology assay.
During the quarter, we advanced our commitment to intensifying our customer focus and embedding technology and data throughout our business.
We acquired Ovia Health, a leading digital platform trusted by millions of women for family planning, pregnancy and parenting support.
Ovia Health extends our position as a go-to source for women's health insights through our deep expertise in diagnostic, genetic and specialty testing.
Additionally, we are working with several organizations to begin deploying Labcorp Diagnostic Assistant, which delivers comprehensive lab results and clinical insights directly to the point of care.
We're also using technology to improve health for low-income individuals and families.
We partnered with Medical Home Network to incorporate lab testing results into the records of Medicaid safety net patients.
And lastly, through a collaboration with Medidata, we are utilizing digital biomarkers with drug, vaccine and device trials to enhance our decentralized clinical trialing offers.
Pursuing opportunities with long-term, high-growth potential remains a focus.
Our recent acquisitions, including OmniSeq, Myriad's Vectra test for rheumatoid arthritis and Ovia Health advance our position in key growth markets.
Our M&A pipeline remains robust.
We expect continued activity on this front for the balance of fourth quarter and into the first quarter of 2022.
Importantly, Labcorp continues to be recognized for the significant work we do.
Just this month, we were named by Forbes as one of the world's best employers in 2021.
In addition, Informa Pharma Intelligence selected Labcorp as a finalist for Best Contract Research Organization of the Year.
Lastly, I'd like to provide a brief update on the Board and management team's ongoing assessment of the company's structure and capital allocation strategy.
We remain committed to ensuring Labcorp is best positioned to unlock shareholder value while offering patients and customers the support that they've come to expect.
Working closely with our advisors, we have made significant progress on assessing both our capital allocation and our structure.
And as previously shared, we expect to update you on our conclusions in this quarter.
To summarize, our Base Business in both Diagnostics and Drug Development had a strong third quarter and is well positioned for continued success.
We remain dedicated to the fight against COVID, all while delivering on our strategy and carrying out our mission.
I'm excited by the progress we've made and for what lies ahead.
With that, Glenn will take you through the details of our third quarter results.
I'm going to start my comments with a review of our third quarter results, followed by a discussion of our performance in each segment and conclude with an update on our full year guidance.
Revenue for the quarter was $4.1 billion, an increase of 4.3% over last year due to organic growth of 3.4%, acquisitions of 0.4% and favorable foreign currency translation of 50 basis points.
The 3.4% increase in organic revenue is driven by a 10.2% increase in the company's organic Base business partially offset by a 6.8% decrease in COVID testing.
Operating income for the quarter was $767 million or 18.9% of revenue.
During the quarter, we had $92 million of amortization and $48 million of restructuring charges and special items.
Excluding these items, adjusted operating income in the quarter was $907 million or 22.3% of revenue compared to $1.2 billion or 29.7% last year.
The decrease in adjusted operating income and margin was due to a reduction in COVID testing as well as higher personnel costs resulting from increased Base Business demand and a tight labor market as the company continues to invest in its workforce.
Partially offsetting these headwinds were the benefit from organic Base Business growth and LaunchPad savings.
The tax rate for the quarter was 23.5%.
The adjusted tax rate, excluding restructuring charges, special items and amortization, was 24.4% compared to 25.7% last year.
The lower adjusted rate was primarily due to the geographic mix of earnings.
We continue to expect our full year adjusted tax rate to be approximately 25%.
Net earnings for the quarter were $587 million or $6.05 per diluted share.
Adjusted EPS, which exclude amortization, restructuring charges and special items, were $6.82 in the quarter, down from $8.41 last year.
Operating cash flow was $767 million in the quarter compared to $786 million a year ago.
The decrease in operating cash flow was due to lower cash earnings partially offset by favorable working capital.
Capital expenditures totaled $118 million or 2.9% of revenue compared to $77 million or 2% of revenue last year.
As a result, free cash flow was $650 million in the quarter compared to $709 million last year.
During the quarter, we used $300 million of our cash flow for our share repurchase program and invested $292 million on acquisitions.
Now I'll review our segment performance, beginning with Diagnostics.
Revenue for the quarter was $2.6 billion, a decrease of 3.2% compared to last year due to organic revenue being down 3.9%, partially offset by acquisitions of 0.4% and favorable foreign currency translation of 30 basis points.
The decrease in organic revenue was due to a 9.7% reduction from COVID testing partially offset by a 5.8% increase in the Base Business.
Relative to the third quarter of 2019, the compound annual growth rate for Base Business revenue was 4.7%, primarily due to organic growth.
Total volume increased 0.2% over last year as acquisition volume contributed 0.2% and organic volume decreased by 0.1%.
The decrease in organic volume was due to a 5.9% decrease in COVID testing partially offset by a 5.9% increase in the Base Business.
As a reminder, we do not include hospital lab management agreements in our volume, which would have added approximately 1.1% to our organic Base Business volume growth.
Price/mix decreased 3.4% versus last year due to lower COVID testing of 3.8% partially offset by currency of 0.3% and acquisitions of 0.2%.
Diagnostics organic Base Business revenue growth was 9% compared to its Base Business last year, with 7.7% coming from volume and 1.3% coming from price/mix, which was primarily due to an increase in test per session.
Diagnostics adjusted operating income for the quarter was $775 million or 29.6% of revenue compared to $1 billion or 37.1% last year.
The decrease in adjusted operating income and margin was primarily due to a reduction of COVID testing and higher personnel costs partially offset by organic Base Business growth and LaunchPad savings.
Relative to the third quarter of 2019, Base Business margins were down slightly due to the negative impact from PAMA.
Diagnostics three year LaunchPad initiative remains on track to deliver approximately $200 million of net savings by the end of this year.
Now I'll review the performance of Drug Development.
Revenue for the quarter was $1.5 billion, an increase of 17.5% compared to last year due to organic Base Business growth of 19.9%, acquisitions of 0.4% and favorable foreign currency translation of 100 basis points.
This was partially offset by lower COVID testing performed through its central lab business of 3.5% and divestitures of 0.3%.
Drug Development's Base Business benefited from broad-based growth across all businesses, including COVID vaccine and therapeutic work.
Relative to the third quarter of 2019, the compound annual growth rate for Base Business revenue was 11.4% primarily driven by organic growth.
Adjusted operating income for the segment was $226 million or 15.5% of revenue compared to $210 million or 16.9% last year.
The increase in adjusted operating income was primarily due to organic Base Business growth and LaunchPad savings partially offset by lower COVID testing and higher personnel costs.
The decline in adjusted operating margin was due to lower COVID testing.
Excluding the impact from COVID testing, operating margins would have been up compared to last year.
For comparability to peers, Drug Development earnings exclude $36 million of expense related to the enterprise component of its bonus, which is included in unallocated corporate expense.
We expect full year margins to be up over 2020, which were up over 2019.
For the trailing 12 months, net orders and net book-to-bill remained strong at $7.8 billion and 1.34, respectively.
During the quarter, orders were negatively impacted by approximately $150 million due to a significant scope change, which decreased the book-to-bill.
Backlog at the end of the quarter was $14.4 billion, an increase of 15.4% compared to last year.
We expect approximately $4.9 billion of this backlog to convert into revenue over the next 12 months.
Now I'll discuss our 2021 full year guidance, which assumes foreign exchange rates effective as of September 30, 2021, for the remainder of the year.
We are raising our full year guidance to reflect the company's strong third quarter performance and improved outlook for the remainder of the year.
We expect enterprise revenue to grow 13% to 14% from prior guidance of 6.5% to 9%.
This includes the benefit from foreign currency translation of 90 basis points.
This guidance range also includes the expectation that the Base Business will grow 18.5% to 19.5%, while COVID testing is expected to be down 11% to down 6%.
We are raising our expectations for revenue to grow in Diagnostics by 8% to 10% from prior guidance of minus 1% to plus 2%.
This guidance range includes the expectation that the Base Business will grow 16% to 17%, while COVID testing revenue is expected to be down 11% to down 6%.
We're also raising our growth expectations for revenue in Drug Development to 19.5% to 20.5% from prior guidance of 17% to 19%.
Our current guidance includes the benefit from foreign currency translation of 170 basis points.
This guidance range also includes the expectation that the Base Business will grow 21.5% to 22.5%.
Given the improved top line growth expectations, we are raising our adjusted earnings per share guidance to $26 to $28, up from prior guidance of $21.5 to $25.
Free cash flow is now expected to be between $2.45 billion to $2.6 billion, up from prior guidance of $1.95 billion to $2.15 billion.
For additional comparison purposes, we've also included in the supplemental deck on our Investor Relations website a view of 2021 third quarter results and full year guidance compared to 2019 results.
In summary, the company had another quarter of strong performance.
We remain focused on performing a critical role in response to the global pandemic while also growing our Base Business.
We expect to drive continued profitable growth in our Base Business, while COVID testing volumes are expected to decline through the remainder of the year.
We expect to continue to use our free cash flow generation for acquisitions that supplement our organic growth while also returning capital to shareholders through our share repurchase programs.
Operator, we will now take questions.
 Assistant:

Chosen response:
q3 earnings per share $6.05.
q3 adjusted earnings per share $6.82.
q3 revenue $4.1 billion.
revenue: q3 of $4.1 billion, versus $3.9 billion last year.
company raises full-year guidance.
qtrly diagnostics revenue for quarter was $2.62 billion, a decrease of (3.2%).
drug development revenue for quarter was $1.46 billion, an increase of 17.5% over $1.24 billion in q3 of 2020.
qtrly drug development revenue was $1.46 billion, an increase of 17.5%.
diluted eps: q3 of $6.05, versus $7.17 last year.


Prompt:
Human: Please read the forward looking statement disclosure on page two of the slides and note that it applies to all statements made during this teleconference.
Linde employees delivered another solid quarter, continuing Q2's record earnings per share performance, despite increasingly challenging market conditions.
Operating cash flow and return on capital reached record levels, and our project backlog nearly doubled, providing a strong foundation for high quality, long term growth.
We also stepped up our commitment to reducing our greenhouse gases emissions footprint, and Sanjiv will share that road map with you.
But frankly, this isn't something new.
It's what we committed to our shareholders since the merger and had been delivering on ever since, irrespective of the macro environment.
Most of you know this, but I think it bears repeating: our operating culture runs deep at Linde, our people take great pride in demonstrating continuous improvement across the key operating metrics in their business.
The best day of the month for our management team is when we review the operating performance of each of our regional business units.
This is what we do for fun in Danbury, among other things.
While I'm sure you've seen the announcement earlier this week where I will become the Chairman of the Board, and Sanjiv will become CEO effective March first.
His appointment is the culmination of a diligent three year succession planning process, in which Sanjiv clearly demonstrated he was the right choice to lead this company going forward.
I will continue to provide guidance, both from the perspective of a Director and a significant shareholder.
But my primary responsibility shifts to chairing the Board of Directors, while Sanjiv takes over day to day management of the company.
Supporting Sanjiv is a highly capable and experienced leadership team.
I have been CEO for 15 years, and I have never felt better about how the company is positioned.
Obviously, our strategy is working well and the team is executing at a high level.
Some say we are a well oiled machine.
We are a company for all seasons, and I'm confident Linde's best days lie ahead.
I'll now hand the call over to Sanjiv.
I'm honored to be given the opportunity to lead this outstanding company into the future.
I appreciate your confidence and support over the years.
Before I jump into the slides, I wanted to build on Steve's comment of a seamless leadership transition.
Here at Linde, we are proud of our industry leading performance, which starts with living our core values while maintaining a disciplined execution culture.
As CEO, I fully intend to build upon our foundation.
My focus will be on areas that are aligned with the interest of our shareholders: profitable growth, optimize the business, cash generation and, of course, the truth serum for our industry, ROC.
Linde will remain focused on the things that create value for Linde owners such as strong pricing and productivity culture, an active commitment to sustainability, a disciplined investment philosophy, a shareholder friendly capital policy, and of course, pursuing high quality and sustainable growth initiatives with emphasis on ROC.
Ultimately, it's about being the best performing industrial gases and engineering company in the world.
Stated differently, you can expect a seamless transition with minimal change.
Now with that said, let's move on to slide three for an update on our growth initiatives.
Last quarter, I mentioned some key growth drivers, including the secured project backlog, accretive base capex investments and the strength of our growth in low capital intensity areas such as healthcare, food and beverage, engineering and our packaged gas business.
Today, I'm happy to report that our project backlog has increased from $7.5 billion to $13.4 billion or up 81% sequentially from the last quarter.
You will recall, this backlog only includes contractually secured incremental growth with fixed payments to ensure targeted returns.
We're also beginning to see a return of the capital cycle, especially in upstream operations, such as natural gas production that bodes well for our overall pipeline of opportunities.
On top of that, the electronics sector continues to be very active.
We recently announced a $600 million investment, sale of gas investment indeed to supply a world class fab in Phoenix, Arizona.
This will supply only the first phase of this project, and we expect to see further opportunities as that area builds out.
Overall, I'm pleased to see how the entire Linde team has come together and is leveraging our combined strengths to secure high quality growth opportunities through our leading high density industrial gas network combined with the world class engineering capabilities.
This backlog, combined with our supply network density, enables profitable and secured growth for years to come.
Now before moving to the quarterly results, I want to update you on Linde's new and more ambitious greenhouse gas emission goals.
A good way to stop this is to first explain the role our products play in people's lives and the overall economy.
You'll find this on slide four.
We make products that are critical for society, products such as medical oxygen for hospitals, ultra high purity nitrogen for semiconductors, liquid nitrogen for food freezing, krypton to insulate windows and hydrogen to produce cleaner fuels to give you just a few examples.
In order to make these products, we expect to have a total of 39 million metric tons of Scope one and Scope two emissions this year.
As you know, the production of gases require significant amounts of electricity.
When such electricity is generated using hydrocarbons, we're penalized for those indirect emissions called Scope two emissions.
We also have Scope one emissions, which are significantly lower than our Scope two emissions, but are significant nonetheless.
Now these emissions are largely as a result of using natural gas to make hydrogen, which is used by refiners to produce cleaner fuels.
Our gases play a critical role in the economy.
In addition to saving lives, improving energy efficiency, increasing shelf life, our products also help our customers eliminate or reduce greenhouse gas emissions.
In 2020, we generated a total of 37 million metric tons of emissions to make products that helped our customers avoid more than twice our emissions or 85 million metric tons of CO2 equivalent.
In other words, without Linde's products, there would be significantly higher net carbon emissions in our world.
At Linde, we have been doing our part to support our planet for many decades, but we know we need to do more.
In 2019, we set a goal to reduce the carbon intensity of Linde 35% by 2028.
We are well ahead of that goal and expect to exceed it, which is, of course, good news.
But an intensity goal doesn't fully address the absolute Scope one and Scope two emissions.
So we are determined to continue on our mission of making our world more productive, enabling our customers to decarbonize and commit to reducing our own carbon footprint.
With that in mind, I'd like to announce Linde's new medium and long term emission goals, which you will find on slide five.
The first goal is to achieve a 35% reduction in our Scope one and Scope two emissions by the year 2035 or simply 35 by 35.
To achieve this goal, we must materially reduce our Scope one emissions, which are driven by hydrogen production.
We will do this by focusing our efforts on carbon capture and sequestration, developing blue and green hydrogen production and progressively transitioning to a zero emission fleet.
Our Scope two emissions are related to electricity consumption.
Today, we consume approximately 45 terawatt hours of power, a 1/3 of which is from renewable and low carbon sources.
In order to achieve the 35 by 35 goal, we will triple, triple our renewable and low carbon power sourcing by 2035 through new PPAs and by supporting renewable energy projects with offtake agreements and even co-investment.
To put this goal in perspective, the amount of renewable energy we were planned to purchase is equivalent of all the power consumed annually in New York City.
That's a big number.
Of course, in addition to that, we will continue improving the energy efficiency of our plants as well.
These goals are being embedded across the entire global organization, being reviewed as part of our operating rhythm and will be incorporated into our annual variable compensation.
This is what gives me the confidence in our ability to deliver these goals, which is no different than how we would approach anything of importance in our company.
Now in addition to the 35 by 35 goal, we are also committed to pursuing our goal of becoming climate-neutral by 2050.
We will do our part to achieve this goal, but we also need strong policy support and regulatory support.
Let me summarize this journey on slide six.
We have defined a road map to reach climate neutrality.
The road map is underpinned by numerous initiatives and milestones, which will be embedded into our operating system, providing us the greatest opportunity for success.
Going forward, we will continue to share our progress, ensuring accountability and transparency for our stakeholders.
Sales of $7.7 billion increased 12% over last year, and 1% from the second quarter.
Cost pass through, which represents the contractual billing of energy cost variances, primarily in the on site business, rose 3% over last year and 2% sequentially.
Recall that cost pass-through has no effect on profit dollars, but will impact profit margins as we gross up or down sales and variable costs.
Foreign exchange was a 2% tailwind versus prior year, but a 1% headwind sequentially, as most currencies have recently devalued against the U.S. dollar.
Excluding these items, underlying sales grew 11% over prior year and 1% sequentially.
The 8% volume increase over last year was broad based across all geographies and end markets, as we continue to see recovery from the pandemic.
Sequentially, volumes are flat as contribution from project start-ups were mostly offset by lower volumes in China.
Pricing levels are up 3% from last year and 1% from the second quarter, as we continue to adjust merchant and packaged gas product pricing in line with local inflation.
Note that some of these contracts have lagging recovery mechanisms, which may not take effect for two to six months, depending upon the terms and conditions.
Operating margin of 23.6% is 150 basis points above 2020, but 60 basis points below the high mark set in the second quarter.
Excluding the impact of cost pass-through, operating margin would have increased 220 basis points above last year and had a negligible decline sequentially.
As mentioned, merchant and package cost recovery can lag one to two quarters.
So going forward, I expect continued pricing momentum.
EPS of $2.73 is up 27% over last year from higher volumes and price over a relatively stable cost base.
As both Steve and Sanjiv mentioned, Linde has a strong productivity culture, which enables consistent profit growth, irrespective of the economic climate.
This is also evident in the 16.7% return on capital, which represents another record as profit continues to grow double digit percent over a flat capital base.
The reason we've been able to maintain such a steady capital base is due to a combination of disciplined capital management and healthy cash generation, which I'll cover on slide eight.
You can see to the left, our operating cash progression resulting in a record level of $2.6 billion in the third quarter.
The three main drivers are stronger earnings, timing benefits from last quarter and engineering contract prepayments.
In light of the record sale of plant backlog, I anticipate further project repayments into the next few quarters.
As far as how we allocated year to date cash, the pie chart to the right shows $2.3 billion invested into the business and $4.8 billion distributed back to shareholders through dividends and stock repurchases.
Note that investments exclude sale of plant since we are paid in advance for engineering projects, which means that we are committing much larger amounts toward contractually secured growth than what's shown on this chart.
In addition to generating significant surplus cash we have access to very attractive capital through the debt markets.
In September, we issued almost EUR two billion at five, 12 and 30 year maturities, with all-in coupons of 0%, 0.38% and 1%, respectively.
Overall, the combination of excess cash generation and low cost incremental debt gives us a high degree of confidence to maintain shareholder friendly allocation policies over the long term.
I'll wrap things up with guidance on slide nine.
The fourth quarter earnings per share guidance range of $2.60 to $2.70 is 13% to 17% above last year and 38% to 43% above 2019.
Consistent with prior quarters, we believe it's important to distinguish true multiyear growth from mere recovery of 2020 recessionary conditions.
Versus the third quarter, this range represents a sequential decrease due to normal seasonal declines plus an estimated 1% foreign currency headwind.
Underlying volumes are assumed to be roughly in line with the third quarter, but if current conditions hold, I'd expect to be at the upper end of this range.
This quarterly update results in a new full year guidance of $10.52 to $10.62, which represents a growth rate of 28% to 29% over 2020 and 43% to 45% over 2019.
In summary, another solid quarter despite some challenging conditions.
And regardless of the macro, we remain confident in Linde's ability to continue delivering industry-leading performance.
 Assistant:

Chosen response:
increased full-year 2021 adjusted earnings per share guidance to $10.52 - $10.62, representing 28% to 29% growth.
q3 operating profit margin 16.8%; adjusted operating profit margin 23.6%, up 150 basis points.
q3 sales $7.7 billion, up 12% versus prior-year quarter.
q3 operating cash flow $2.6 billion, up 36%.
outlook 2021: has updated its adjusted diluted earnings per share guidance to be in range of $10.52 to $10.62, up 43% to 45% versus 2019 and 28% to 29% versus prior year.
outlook 2021: guidance assumes 3% currency tailwind versus 2020.


Prompt:
Human: Anatol Feygin, Executive Vice President and Chief Commercial Officer; and Zach Davis, Senior Vice President and CFO.
And actual results could differ materially from what is described in these statements.
In addition, we may include references to certain non-GAAP financial measures, such as consolidated adjusted EBITDA and distributable cash flow.
As part of our discussion of Cheniere's results, today's call may also include selected financial information and results for Cheniere Energy Partners LP, or CQP.
We do not intend to cover CQP's results separately from those of Cheniere Energy, Inc. the call agenda is shown on slide three.
Jack will begin with operating and financial highlights, Anatol will then provide an update on the LNG market, and Zach will review our financial results and guidance.
Before covering our results and outlook, I want to spend a minute addressing winter storm Uri and its impact on Cheniere.
As we described back in February, we were impacted by the widespread power outages in Texas, which resulted in our Corpus Christi facility being down for a few days.
I'm extremely proud of our operating personnel at both Sabine Pass and Corpus Christi for rising to yet another weather challenge and working so diligently to manage our operations smoothly throughout the freeze event.
From hurricanes to fog to now historic freezes, the Cheniere platform has withstood whatever mother nature throws our way and our focus on safe and reliable operations continues to benefit our customers, shareholders and other stakeholders.
As a result of the winter storm, there was no material impact on our assets or operations, and we were able to fill some cargoes at Sabine Pass and restore Corpus Christi to normal operating levels quickly to mitigate impacts on our delivery obligations.
We did recognize a financial benefit as a result of some optimization activity in the period leading up to the storm.
But the magnitude of that benefit is not material, which to our expected full year 2021 financial results.
More importantly, the global LNG market has recovered significantly for 2021 and beyond as demand has outstripped supply, resulting in higher prices even during the shoulder and summer months.
I continue to believe in the long-term viability and sustainability of LNG as an essential fuel source in the low-carbon future.
After delivering on our 2020 guidance, despite a myriad of challenges, we continued our momentum into the first quarter and are off to a fast start.
Now full year 2021 is looking even better for us than it did on our last call in February.
For the first quarter, we generated approximately $1.5 billion of consolidated adjusted EBITDA, approximately $750 million of distributable cash flow and almost $400 million in net income on revenue of approximately $3.1 billion.
We've often described 2021 as Cheniere's cash flow inflection point, and you can see progress on that early in the year in our first quarter financial results.
Zach will cover these numbers in more detail in a few minutes.
During the first quarter, we exported a quarterly record of 133 cargoes of LNG from our two facilities, with production incentivized by strong global LNG margins during the quarter, and we had the benefit of Corpus Christi Train three commissioning volumes.
This record production is also despite Corpus being down a few days as a result of the winter storm in February.
A sustained stronger LNG margin environment, together with our results for the first quarter, contribute to our ability to raise our full year 2021 financial guidance for the second consecutive quarter.
Our outlook for the balance of the year has improved since our last call in February, with a slightly higher production forecast, augmenting the impact of the improved LNG margins we see throughout the balance of the year.
We now forecast consolidated adjusted EBITDA of $4.30 to $4.6 billion, and distributable cash flow of $1.60 to $1.9 billion for the full year 2021.
Near the end of the quarter, Train three at Corpus Christi achieved substantial completion within budget and in line with the accelerated time line we've previously communicated, with the completion of train three, the Cheniere and Bechtel relationship has now delivered eight LNG trains ahead of schedule and within project budgets, which is truly world class execution.
And that execution excellence continues with our ninth Train.
As construction on Train six at Sabine Pass continues to progress against accelerated schedules.
The estimated substantial completion timeline has accelerated once again.
Substantial completion is now projected to be achieved in the first half of next year.
The carbon offsets covered full life cycle emissions.
From the wellhead through consumption, with Cheniere delivering the cargo to Shell FOB at Sabine Pass and Shell delivering the cargo to a our European regasification facility.
This first carbon neutral cargo is another step in Cheniere's environmental efforts I've discussed over the past several months.
Our efforts emphasize enhanced transparency as a critical step toward improving environmental performance, and maximizing the benefits of our LNG for Cheniere, our customers and our value chain partners.
Today's carbon neutral cargo announcement follows our February announcement of cargo Emissions Tags development.
The response to our CE tax from current and prospective customers has been extremely positive and has spurred further engagement.
Our focus is to ensure the long-term benefits of natural gas as an affordable, reliable and clean energy source for the world.
Turn now to slide six.
Where I'll discuss what I'm seeing in the market today and why I'm so optimistic about Cheniere's future prospects.
In the short term market, we're beginning to see the impact of the structural shift to natural gas as a primary energy source for the world, as evidenced by the global LNG demand growth we saw in 2020 despite the pandemic.
There was constructive LNG demand tension between Europe and Asia earlier this year that left some countries short of natural gas.
In addition, South America is entering its winter demand month and is contributing to the tightness in the global LNG market.
With natural gas storage below normal levels in Europe and precious little new supply entering the market this year, we also have a constructive backdrop in the LNG market for the balance of this year and into next year in 2023.
With Corpus Christi Train three completed very early and the completion time line for Sabine Pass Train six recently accelerated again to the first half of next year.
We are ideally positioned to benefit from these near-term market dynamics.
In the longer term, the supply and demand fundamentals in the global LNG market are even stronger and reinforce our confidence in the value of our existing platform and in our ability to commercialize our Corpus Christi Stage III expansion project.
In the four year period from 2017 to 2020 and the global LNG market added almost 120 million tons of capacity, an average of almost 30 million tons per year.
In the subsequent four year period, that average is expected to drop to approximately 11 million tons a year, a significant slowdown in supply growth, which will be amplified by output declines from older legacy projects.
On the demand side, the structural shift to gas on a global basis is evidenced by the near-term doubling of LNG importing nations in the last 10 years, and hundreds of billions of dollars of natural gas oriented infrastructure being built around the world today.
LNG consumers recognize and value LNG's flexibility, reliability, affordability and the critical role natural gas plays in improving environmental performance and achieving decarbonization goals.
We forecast that global LNG trade will approximately double, expanding by approximately 350 million tons per annum to over 700 million tonnes per annum by 2040, which would support additional, approximately 225 million tons per annum of incremental global supply.
Our constructive long-term view on the LNG market was recently reinforced for the results of a comprehensive climate scenario analysis we conducted with a leading global management consulting firm.
We published this analysis last month, and it's available on our website.
This study analyzed Cheniere's business over the long-term under various energy transition scenarios and concluded that even under the most aggressive energy transition scenario analyzed.
Demand for LNG and natural gas is expected to grow for decades to come.
In that not only are Cheniere's existing assets well positioned to take advantage of that, but new LNG capacity will be needed to meet that demand.
With regard to Cheniere specifically, our accomplishments and progress over the past five years of LNG operations have been nothing short of transformative and position the company to take full advantage of the constructive market we see in front of us.
We have established ourselves as a premier LNG operator, demonstrating LNG buyers worldwide the reliability and certainty associated with a long-term supply agreement with Cheniere.
In addition, our continuous improvement efforts have yielded efficiency gains and debottlenecking has unlocked a significant amount of extremely cost-effective volume across our projects, which further improves our competitive position and increases financial returns.
As construction ramps down, the long-awaited financial results of our multiyear capital programs are bearing fruit as evidenced by today's results.
This year, we expect to generate well over $1 billion of free cash flow, and we are quickly approaching our expected run rate metrics.
Our run rate forecast of $11 per share and distributable cash flow not only has a high degree of visibility but also empowers us to execute on an all of the above strategy for capital allocation, which includes achieving investment-grade credit metrics, funding a significant portion of Corpus Christi Stage three with cash flow after that project is commercialized and returning significant capital to shareholders via buybacks and dividend.
Zach and his team and I are working diligently with the Board and the rest of management on our detailed capital allocation plans, which we will communicate to you later this year.
I'm excited about what we are seeing in the LNG market, how Cheniere is positioned to capitalize with our portfolio volumes, a shovel-ready brownfield expansion project commercial offerings tailored to customers' needs and an improving credit and cash flow profile.
The global LNG market exited 2020 on a positive note as cold weather across Asia and continued economic expansion in China helped contribute to an increase in Asian LNG imports in Q4.
As non-U.S. supply was slow to respond, markets tightened as Asia pulled cargoes from Europe, a trend which continued in Q1 of 2021.
The in the first quarter, global LNG supply showed positive year-on-year growth for the first time since the first quarter of 2020, but net growth was modest as a healthy 17% growth in U.S. exports was largely offset by declines at several LNG facilities around the globe, which were either shut down or underperforming, including facilities in Norway, Nigeria, Australia, Trindad, Tobago and Russia.
Extreme cold weather in Asia and then Europe during the first quarter, combined with the supply constraints and a tight shipping market, caused unprecedented price spikes in JKM in the early part of the quarter to all-time highs of over $30 in January.
Since then, extreme temperature conditions have passed and JKM prices have moderated.
However, price levels are still well above where they were a year ago with March JKM settling at $8.26 and June trading above $9 currently.
Well above prices around the $2 in MMBtu level a year ago, indicating an underlying structural tightening of the market, supported by strengthening demand fundamentals.
As I just mentioned, in Asia, LNG imports were very strong in Q1, up over seven million tons or 11% year-on-year.
China added nearly five million tons of LNG demand despite robust domestic gas production and increased Russian pipeline gas imports.
Early reports of total gas demand in China show an increase of approximately 15% year-on-year in Q1.
Weather, continued coal-to-gas switching and a remarkable over 18% increase in Q1 GDP drove the demand increase.
In the Japan, Korea, Taiwan area, LNG imports increased 8% or three million tons year-on-year due partly to scheduled nuclear and coal outages.
From a structural demand level, 10 years after the Fukushima earthquake, most Japanese nuclear plants remain offline with only nine units, totaling 9.1 gigawatts resuming operation as of Q1 '21 compared with 42 gigawatts in 2010, solidifying LNG as a critical fuel for the stability of the energy system in Japan and in the region as a whole.
In Europe, gas demand in major markets rose by 9% year-on-year during Q1 and stronger heating and gas-fired power demand.
Significant drawdowns from storage through winter and into April has left European storage approximately 34 bcm or around 50% lower than the prior year by the end of April and approximately 11 bcm or approximately 375 Bcf below the five year average.
To attract LNG volumes away from Asia to help replenish storage, TTF prices remain elevated.
April TTF settled higher than JKM at $6.46 an MMBtu that was 13% higher on the month and up almost 200% year-on-year.
Current prop margins are in the $3 range, inclusive of a dramatic upward shift in charter rates from the $30,000 a day range well above the $80,000 a day range today.
Based on these demand fundamentals, although specific conditions during the first quarter led to some dramatic LNG price volatility, we believe we have also seen indications that the structural tightening that we've been predicting for some time is now under way.
As such, we have continued to transact incremental volumes aligned with our midterm strategy.
The team has secured an additional approximately 1.7 million tons, locking in over $200 million in fixed fees across 2022 and '23.
We see strong appetite for midterm agreements as both intermediaries and end users add diversity, security and flexibility to their portfolios.
Turning now to slide nine, where I will discuss some longer-term aspects of the market.
We've discussed over the last few years that we viewed 2021 as a transition year to a tight market.
And as we just described, that has played out so much faster than we expected.
Forward margins today during the Northern Hemisphere Spring shoulder season, are higher than they have been at any point for this season since we began operating just over five years ago.
A number of market conditions that have been headwinds to entering into long-term commitments have more recently become tailwinds.
And such as oil price, prompt margins and forward supply growth, just to name a few.
We remain quite sanguine on the long-term contracting market for our products over the coming quarters and years as the demand for LNG will continue to increase over time with many current markets expanding and new markets continuing to be added.
Specific to Asia, along with China and India, markets in South and Southeast Asia have shown keen interest in expanding their natural gas infrastructure.
From pipelines to power plants to support their rapidly growing economies.
In power generation, forecast suggests that gas is expected to be the second highest growth segment after renewables in terms of capacity additions.
The need to expand access to reliable energy across the region means that natural gas is expected to play a crucial role in ensuring sustainable economic growth while reducing emissions intensity.
Of the roughly 3,000 gigawatts of forecast incremental power generation capacity in Asia by 2040, over 300 gigawatts is expected to be gas fired.
Just for reference, a gigawatt of combined cycle natural gas generation operated as baseload, requires approximately one million tons of LNG per annum.
A significant portion of that sum will be in China, but almost half of it is expected to satisfy growth in South and Southeast Asian countries, such as India, Indonesia, Bangladesh, Vietnam and the Philippines.
Some of these countries are already well-established gas users with indigenous resources, which are mature and declining.
Data from Wood Mackenzie suggest that the region could lose more than 20 Bcf a day of domestic output by 2040, and while current upstream developments are considered unlikely to offset more than just a small fraction of that decline.
In addition, gas demand in the region is currently expected to grow by at least 18 Bcf a day during the period to 2040, creating a gap of more than 35 Bcf a day of gas, which we expect to be satisfied in large part by LNG.
Again, for reference, 35 Bcf a day is equivalent to approximately 250 million tons per annum of LNG.
LNG demand growth across the various markets of South and Southeast Asia is in aggregate very significant.
LNG demand growth in South and Southeast Asia is expected to accelerate and potentially grow fivefold by 2040, adding between 160 million and 200 million tons to global trade.
We believe that over the next two decades, over 20% of the growth in Asian demand will come from China, and approximately 70% will come from South and Southeast Asia as these countries prioritize gas over coal to secure economic growth and meet their climate goals.
This region consumed over 17% of global coal and was responsible for more than 1/3 of global greenhouse gas emissions in 2019.
While most net zero pledges came from outside the region, we believe that nations in South and Southeast Asia have been increasingly determined to improve environmental performance and find ways to fuel growth in a more environmentally sustainable manner.
We see Cheniere's LNG as a secure, reliable and cost-effective fuel for the region and which, along with renewables, will displace more polluting fuels.
Jack already touched on our leadership and initiatives in ESG and I'll just add that we are seeing increasing interest and engagement from both existing and potential customers on the environmental opportunities we are developing.
Cheniere stands ready to work with customers in the region and all over the world to create practical solutions that fit their commercial needs and satisfy global environmental imperatives.
We believe our low emitting LNG standards will play a role in supporting the region's environmental goals and its energy priorities.
I'm pleased to be here today to review our first quarter financial results and key financial updates as well as our increased 2021 guidance.
Turning to slide 12.
For the first quarter, we generated net income of $393 million, consolidated adjusted EBITDA of approximately $1.5 billion and distributable cash flow of approximately $750 million.
Our financial results for the first quarter were positively impacted by increased global LNG prices and margins, particularly margins realized on spot and short-term cargoes sold through our marketing affiliate and a higher-than-normal contribution from LNG and natural gas portfolio optimization activities due to significant volatility in LNG and natural gas markets during the quarter.
As we have discussed in prior quarters, our IPM agreements, certain gas supply agreements and certain forward sales of LNG qualify as derivatives and require mark-to-market accounting meaning that from period to period, we will experience noncash gains and losses as movements occur in the underlying forward commodity curves.
The impact of shifts in these curves on the fair value of our commodity and FX derivatives, during first quarter 2021 was a net loss of approximately $120 million, which was substantially all noncash.
For the first quarter, we recognized an income 456 TBtu of physical LNG, including 442 TBtu from our projects and 14 TBtu from third parties.
84% of these LNG volumes recognized in income were sold under long-term SPA or IPM agreements.
During and after this winter storm, we were able to work with our long-term customers on cargo schedules as well as shift some volumes from Corpus to Sabine, leading to no material impact to our production for the quarter.
We received no cargo cancellation notices and had no revenue related to cargo cancellations in the first quarter.
However, we previously recognized $38 million of revenues during fourth quarter 2020 and related to canceled cargoes that would have been lifted in the first quarter.
Commission activities for Corpus Train three went well, as Jack discussed, and we received $191 million related to sales of commissioning cargoes in the first quarter, corresponding to 25 TBtu of LNG.
As a reminder, amounts received from the sale of commissioning cargoes are offset against LNG terminal, construction and process, net of the costs associated with production and delivery of those cargoes.
six TBtu of LNG-related to commissioning activities was on the water at the end of the first quarter and will be recorded as an offset to construction in process upon delivery.
Turning to the balance sheet.
We prioritized debt reduction since raising the Cheniere loan to refinance convertible notes last year and have committed to pay down at least another $500 million of outstanding debt in 2021.
The we made good progress toward that goal during the first quarter when we paid down $148 million in outstanding borrowings under the Cheniere term loan.
I'll provide some additional color in a few moments.
But we are in an excellent position to reach, and likely surpass, our minimum debt reduction target this year.
In February, we locked in an approximately $150 million private placement of long-term amortizing fixed rate notes at SBL that are committed to fund in late 2021.
And at a rate of 2.95%, the lowest yielding bond ever secured across the Cheniere complex.
In March, CQP opportunistically issued $1.5 billion of 4% senior notes through 2031, the proceeds of which, together with cash on hand, were used to extend the maturity and accretively refinance all of CQP's 5.25% senior notes due 2025.
Our efforts on execution, performance and prudently managing the balance sheet throughout the Cheniere structure continue to be recognized by the credit rating agencies.
As we mentioned on our last call, in February, Fitch revised the outlook of SPL's senior secured notes rating to positive from stable while reaffirming its existing BBB minus investment-grade rating.
In April, S&P revised the outlook of both Cheniere Engineered Partners BB ratings to positive from negative, a signal that ratings upgrades may be coming.
In addition, S&P's commentary indicated a leverage level of 4.5 to five times on a debt-to-EBITDA basis in the next couple of years could be consistent with an investment-grade rating.
Commentary, which is in line with, and supportive of, our deleveraging plan and goal of investment-grade credit metrics throughout the structure.
Turning now to slide 13.
As Jack mentioned, today, we are again increasing our guidance ranges for full year 2021 consolidated adjusted EBITDA and distributable cash flow by $200 million, bringing total increases to $400 million above the original ranges we provided in November of last year.
Our revised guidance ranges are $4.30 to $4.6 billion in consolidated adjusted EBITDA and $1.6 to $1.9 billion in distributable cash flow.
Today's increase in guidance is largely driven by our strong results in the first quarter.
The continued improvement in global LNG market pricing and our ability to execute additional higher-margin forward sales into the stronger pricing.
Since the last call, we have continued to lock in additional volumes for the remainder of the year.
Though those sales have been offset by an upwardly revised production forecast driven by maintenance optimization, some favorable weather and a much faster than expected ramp-up to steady Train three volumes.
We currently forecast that a $1 change in market margin would impact EBITDA by approximately for full year 2021.
As we have now sold almost all of our production for the remainder of the year and have completed and placed Corpus Spring III into service, in line with our previously forecasted timing.
Our remaining exposure this year is not material, and we only plan to provide another update if that were to change.
We are confident in our ability to deliver results within these upwardly revised guidance ranges for the full year.
With Train three now in operation, we've also now passed the free cash flow inflection point we have long discussed with our stakeholders.
We expect to generate meaningful free cash flow this year for the first time in Cheniere's history of well over $1 billion.
We originally committed to $500 million in debt reduction this year, but we now think $500 million is conservative due to our strong performance and cash flow generation year-to-date and the forward sales of LNG we have executed in a strong LNG market.
We are continuing to work on our long-term capital allocation strategy with our Board, and we anticipate communicating this multiyear plan to you in the second half of the year.
Including more comprehensive plans for the remainder of free cash flow this year after meeting our initial 2021 debt reduction goal of $500 million.
 Assistant:

Chosen response:
cheniere increases full year adjusted ebitda guidance.
cheniere energy - increasing 2021 consolidated adjusted ebitda guidance to $4.3 - $4.6 billion and 2021 distributable cash flow guidance to $1.6 - $1.9 billion.


Prompt:
Human: Total revenues for the third quarter of fiscal 2021 of $161.9 million increased $38.8 million or 32% compared to $123.1 million in the same quarter last year.
Net earnings for the quarter were $17.8 million or $1.61 per diluted share compared to net earnings of $10.1 million or $0.93 per diluted share in the prior year.
Irrigation segment revenues for the third quarter of $140.2 million increased $44.7 million or 47% compared to the same quarter last year.
North America irrigation revenues of $87.4 million increased $24.5 million or 39% compared to the same quarter last year.
The increase resulted from a combination of higher irrigation equipment sales volume and higher average selling prices.
This increase was partially offset by lower engineering services revenue of approximately $4.5 million related to a project in the prior year that did not repeat.
In the international irrigation markets, revenues of $52.8 million increased $20.2 million or 62% compared to the same quarter last year.
The increase resulted primarily from higher irrigation equipment sales volumes in most international markets.
There was also a favorable foreign currency translation impact of $2.3 million compared to the prior year.
Total Irrigation segment operating income for the third quarter was $23.9 million, an increase of $8.5 million or 55% compared to the same quarter last year.
And operating margin improved to 17.1% of sales compared to 16.1% of sales in the prior year.
Improved margins were supported by higher irrigation equipment sales volume and was partially offset by the continuing impact of higher raw material and other costs.
In North America, margin headwinds are diminishing as multiple price increases implemented over the past several months are being realized.
However, as Randy mentioned, we have also experienced significant cost increases in Brazil that have compressed margins and will continue to do so as we work through a large backlog of orders.
We expect this margin pressure to continue through the first quarter of fiscal 2022 until price increases are fully realized.
Infrastructure segment revenues for the third quarter of $21.8 million decreased $5.8 million or 21% compared to the same quarter last year.
The decrease resulted from lower Road Zipper system sales, which were partially offset by higher Road Zipper lease revenue and increased sales of road safety products.
The current quarter did not have any significant Road Zipper sales, while the prior year included over $9 million in revenue related to the Highways England project and Japan order.
Infrastructure segment operating income for the third quarter was $3.8 million compared to $8.2 million in the same quarter last year.
And operating margin for the quarter was 17.3% of sales compared to 29.5% of sales in the prior year.
Current year results reflect lower revenues, coupled with a less favorable margin mix compared to the prior year.
 Assistant:

Chosen response:
q3 earnings per share $1.61.
q3 revenue $161.9 million versus refinitiv ibes estimate of $146.4 million.
expect raw material inflation and supply chain challenges to persist through balance of our fiscal year.
remain optimistic about outlook for co's infrastructure business.


Prompt:
Human: My name is Aaron Howald, and I'm LP's Director of Investor Relations.
All these materials are available on LP's Investor Relations website, www.
Rather than reading those statements, I will refer to you to those supplemental materials.
Robust customer demand for all of LP's products has continued, driven by ongoing strength in homebuilding and remodeling, resulting in an outstanding quarter for LP.
SmartSide net sales grew by nearly 50% versus Q1 of last year to $283 million and EBITDA more than doubled to $90 million.
Smooth and ExpertFinish volumes more than doubled, with those innovative products reaching 8% of total SmartSide volume.
OSB prices continued to climb throughout Q1, with the result that LP's OSB segment generated extraordinary cash flow.
LP's South American segment also had a very strong quarter, with 50% more sales and 3 times more EBITDA than the first quarter of last year.
As a result, LP exceeded $1 billion in sales, generated $461 million in EBITDA and $314 million in operating cash flow and earned $3.01 per share, all of which are quarterly records.
Last quarter, we announced a phased integrated capacity expansion plan that included converting our mill in Houlton, Maine from LSL and OSB to SmartSide, the restart of our Peace Valley OSB mill in Fort St. John, British Columbia, and plans to convert our OSB mill in Sagola, Michigan Society.
Let me briefly update you on those projects.
Houlton conversion is under way and on schedule despite some expected difficulties with travel and contractor access presented by COVID.
We expect to begin SmartSide production at Houlton less than a year from now in late Q1 of next year.
We are excited about the capacity expansion of these investments in Houlton represent, and we are gratified by the enthusiastic responses from local and regional suppliers and community stakeholders.
Given the strength of SmartSide demand, we are exploring options to accelerate the conversion of Sagola.
We're also evaluating and prioritizing subsequent projects to add capacity by conversion and/or expansion of existing facilities as well as growing prefinishing capacity.
SmartSide has a long runway for growth ahead as we innovate, capture share, expand addressable markets and execute an aggressive capacity expansion strategy.
Process to resume OSB reduction in Peace Valley is also going quite well.
I want to complement the small containment has maintained the mill since we idled it in the summer of 2019.
They have kept the equipment in excellent condition, and we anticipate minimal impediments to an efficient restart.
Last quarter, I spoke about the challenges presented by shortages of MDI, the resident use and manufacture of SmartSide and OSB.
MDI availability has improved significantly, and we are essentially back to normal levels of supply with OSB mills once again using planned levels of MDI.
This episode has highlighted the strategic value of having Siding and OSB integrated in LP's portfolio.
SmartSide uses MDI exclusively, but OSB can use alternate rests.
When supply has become constrained, we were able to allocate scarce MDI from OSB to Siding.
Without which Siding, we have struggled to achieve another outstanding quarter of growth.
While the MDI supply has improved, global shortage of vital asset tape-based adhesives has forced decreased production of TechShield, LP's Radiant Barrier sheeting product in the second quarter.
The vinyl acetate supply situation is improving, and we expect to be back to normal levels of textile production by the end of the quarter.
However, as COVID subsides in North America and the broader county rebounds a tremendous supply chain disruptions and type logistics availability are likely to present challenges going forward.
We recognize the difficulties this creates for LP's customers, particularly in an environment with such strong demand.
We're doing everything we can to mitigate the impact of these issues through strategic sourcing and network optimization, and we are adding SmartSide and OSB capacity as safely, efficiently and quickly as possible.
Finally, I'm happy to announce that LP is in the initial phases of returning to our national headquarters after more than a year of working from home.
And while COVID-19 vaccines are now widely available in the U.S. and Chile, vaccination rates continue to lag in Canada and Brazil.
The situation is improving, but we are not out of the woods yet.
Ongoing diligence in care exercised by LP's pandemic response team and mill employees are helping minimize operational impacts from COVID, enabling LP to supply our customers the products they need to build and renovate homes.
I encourage all of them and all of you on the call to continue to exercise appropriate precautions and get vaccinated as soon as possible.
LP had a remarkable first quarter.
And while challenges remain, very strong housing in RNR markets resulting in intense demand for SmartSide and OSB, keeping our near-term outlook exceptionally positive.
Slide six shows summarized results for the quarter, which, much like the fourth quarter, are clean and straightforward with ongoing SmartSide growth and higher OSB prices as the most significant drivers.
Compared to the first quarter of last year, net sales increased by 74% to just over $1 billion, driven by 49% growth in SmartSide and over $330 million of significantly higher OSB prices.
The resulting EBITDA of $461 million is more than 5 times last year's result.
We generated $314 million of operating cash flow, including increased capital investments and heavy spending on logs, common practice for LP in the first quarter.
The $3.01 per share of adjusted earnings is 10 times that in the first quarter last year.
In terms of capital allocation, we paid $17 million in dividends in the first quarter and spent $122 million to repurchase 2.4 million shares.
We've continued buying back shares through the second quarter and as of the close of business yesterday, had just $32 million remaining of our existing $300 million buyback authorization.
All else equal, that remaining authorization will be exhausted by the end of this week.
I'm therefore, delighted to report that LP's Board of Directors has authorized a further $1 billion of share repurchases, which we plan to launch immediately.
LP's Board also declared a dividend of $0.16 per share payable on June 1.
Slide seven highlights the cleanliness of the quarter from a reporting perspective.
Continued SmartSide growth and OSB price appreciation resulted in $93 million and $333 million, respectively, of incremental revenue for the quarter, compared to which everything else is really just a rounding error.
All $333 million of the incremental OSB pricing and 55% of the incremental SmartSide revenue translated into EBITDA, with everything else aggregating to a net negative of $6 million.
Slide eight provides an update on our transformation.
On a trailing 12-month basis, SmartSide revenue grew at twice the rate of single-family housing starts.
Consequently, and as the table on the right shows, SmartSide growth dominates the first quarter, accounting for $53 million or $65 million transformation in the quarter.
The resident substitution, which Brad referenced earlier, accounts for the negative $4 million in efficiency.
Given that SmartSide growth contributes the lion's share of our transformation dollars in the quarter, Slide nine looks a little deep into that growth.
The bar chart on the left is not repeat of Slide 8.
This chart shows SmartSide revenue growth for just the quarter relative to single family starts.
The pie chart on the right provides more resolution of the also SmartSide growth.
While total volume grew by 39%, the volume of the more innovative smooth prefinished and shrink products grew to 140%.
As such, their share of the total volume increased under 5% to just over 8%.
The substantially higher average selling prices of these new products also contributed one point to overall price growth in the fourth quarter.
The waterfalls on Slides 10 and 11 show year-over-year revenue and EBITDA growth in the Siding and OSB segments for the quarter.
Slide 10 covers Siding.
The 49% revenue growth for SmartSide is the result of 39% volume growth compounded by 7% price growth and at $93 million in sales and $51 million in EBITDA, for an incremental EBITDA margin of 55%.
OEE and sales and marketing efficiencies offset increased costs for freight and the dwindling nonrecurrence of fiber sales reduced revenue by $20 million and EBITDA by $2 million.
The resulting Siding segment EBITDA of $19 million on $285 million of revenue, yields an EBITDA margin of 32%.
Slide 11 shows the quarter in more detail for OSB and is dominated by ongoing record high OSB prices.
We estimate the impact of MDI scarcity and alternate resin substitution at roughly 80 million square feet or 7% of volume due to reduced operating efficiency for OEE.
And as Brad said, the supply chain for that resin seems to have stabilized.
We will, of course, continue to monitor that situation and other potential supply chain interruptions closely.
LP's ability to substitute alternate resins for OSB production and therefore, to be able to strategically allocate all available MDI to the Siding was a unanticipated benefit of having these segments under the LP umbrella.
OSB prices will continue to grab headlines for sure, but OMP's results this quarter are no small measure of testament to the agility of the Siding and OSB operations team and LP's strategic sourcing team as they collaboratively navigated the MDl shortage.
And this is almost entirely the result of OSB prices raising accounts receivable balances and the normal seasonal accumulation of logs I mentioned earlier.
The bridge from the $314 million of operating cash flow to the net change in cash is similarly uneventful.
With buybacks, capex, dividends and payments associated with refinancing, our long-term debt as the only material items.
Reconciliations of net income to both adjusted EBITDA and adjusted income are also straightforward with depreciation and a rather large but appropriately proportional provision for taxes as the only items I've not already mentioned.
Slide 12 provides updated guidance for capital expenditures for the year.
As Brad said, we are exploring opportunities to accelerate our siding capacity expansion.
The Houlton conversion, restarting Peace Valley, other growth capital and the basis of sustaining maintenance, altogether, bring our capital expenditures for the full year in the range of $230 million to $250 million.
In other words, we're raising our tax guidance by about $10 million.
And with extremely robust housing and repair and remodel markets, fueling intense demand for SmartSide and OSB, our order files give us some visibility into the remainder of the second quarter.
For the OSB segment, prices continue to climb, with the result that we believe OSB revenue will be at least 30% sequentially higher in the second quarter than in the first.
We also expect another strong quarter of SmartSide growth with revenue for the second quarter, at least 30% higher than last year, which would mark the fourth consecutive quarter of growth above 20%.
Assuming the Siding and OSB scenarios I just detailed and given all the usual caveats about certain demand shocks or other unforeseeable events, we expect EBITDA for the second quarter to be at least $580 million, another quarter of record results and outstanding cash flow generation.
Before handing the call over for Q&A, I do want to discuss our expectations for full year revenue growth for SmartSide.
Demand continues to be very strong, and we expect to continue running our mills at or near capacity at for the remainder of the year.
Also, ExpertFinish, Smooth and Shakes, should continue to grow as a percentage of total Smartside volume and revenue.
However, given the acceleration of growth in the second half of last year, we simply cannot increase year-over-year revenue by much more than 10% in the second half of 2021.
So all said, this would bring full year SmartSide growth to roughly twice our previous long-term guidance of 10% to 12% per year.
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Chosen response:
compname announces an additional $1 billion share repurchase authorization.
compname reports first quarter 2021 results, provides second quarter outlook, and announces an additional $1 billion share repurchase authorization.
q1 sales rose 74 percent to $1.0 billion.
q1 adjusted non-gaap earnings per share $3.01.
sees adjusted ebitda for q2 2021 to be greater than $580 million.
sees q2 smartside sales to be more than 30% higher than last year.
osb sales in q2 2021 to be sequentially higher than q1 2021 by more than 30%.