Prompt:
Human: Yesterday, we reported results and posted all of the earnings-related materials on our website.
For the call today, our speakers are Chris Swift, Chairman and CEO of The Hartford; Beth Costello, Chief Financial Officer; and Doug Elliot, President.
Just a few final comments before Chris begins.
These statements are not guarantees of future performance, and actual results could be materially different.
A detailed description of those risks and uncertainties can be found in our SEC filings.
Our commentary today includes non-GAAP financial measures.
Explanations and reconciliations of these measures to the comparable GAAP measure are included in our SEC filings as well as in the news release and financial supplement.
Once again, our outstanding underwriting capabilities and consistent execution on strategic initiatives becomes increasingly evident with each quarterly earnings report and reinforces my confidence about the future for The Hartford.
In the third quarter, we reported core earnings of $442 million or $1.26 per diluted share; 8% growth in year-over-year diluted book value per share, excluding AOCI; and a trailing 12-month core earnings ROE of 12.5%.
We returned $634 million to shareholders in the quarter from share repurchases and common dividends and $1.6 billion for the nine months ended September 30.
The confidence we have in our business is also evidenced by the announcement that we have increased our share repurchase program by $500 million, bringing the total authorization to $3 billion through the end of 2022.
And we increased our quarterly dividend by 10%, payable in January of 2022.
With strong cash flow generation, we will continue to have a balanced capital deployment approach to support growth and investments in the businesses with capital return to shareholders.
Looking through to the underlying results.
The positive momentum continued with written premium growth, margin expansion, operating efficiencies and a significant return on alternative investments.
However, results were impacted by Hurricane Ida, higher pandemic-related excess mortality in Group Benefits and the Boy Scouts of America settlement.
Commercial Lines reported stellar margins with an industry-leading 87.2 underlying combined ratio and another double-digit top line growth, reflecting higher new business levels, continued strong retention and solid renewal price increases.
Our teams continue to execute exceptionally well.
In Personal Lines, we are in the midst of a transformation to provide a more contemporary experience in product.
Through a modernized platform, in partnership with AARP, one of the largest affinity groups in America, we see the opportunity to capitalize on the growth in the mature market segment as this demographic is expected to grow 3 times as fast as the rest of the U.S. population over the next decade.
I am pleased with the progress being made with the introduction of the new platform, and Doug will provide more commentary.
Additionally, in the quarter, we entered into a new agreement in principle with the Boy Scouts of America.
This agreement now includes not only the BSA, but local counsels and representatives of the majority of sexual abuse claimants who have now been asked to officially vote on the BSA bankruptcy plan.
The Hartford settlement becomes final upon the occurrence of certain conditions, which we expect to occur in early 2022.
Now turning to Group Benefits.
Core earnings for the quarter were $19 million, reflecting elevated life and short-term disability claims, partially offset by strong investment returns, improved long-term disability results and earned premium growth.
Throughout the year, we have been reporting earned premium growth over prior year, and this quarter's positive trends continues.
Fully insured ongoing premium is up 4%.
This reflects growth in our in-force book and continued strong sales in persistency.
Persistency was above 90% and increased approximately one point over prior year.
The group life industry has been impacted by excess mortality over the past six quarters.
During our July earnings call, we were optimistic that trends would lead to an improvement in COVID-related mortality.
Our optimism was short-lived as the number of U.S. deaths started increasing in August due to the Delta variant and continued through September.
As of this week, U.S. COVID deaths for the third quarter now exceed 112,000, and this number is likely to continue to increase in the weeks ahead due to reporting lags in the data.
The rapid increase in COVID deaths in the third quarter drove elevated mortality in our book of business and across the industry.
Additionally, the mortality experience from the Delta surge has a higher percentage impact on the under 65 population compared to prior periods.
Approximately 40% of U.S.-reported COVID deaths in August and September were of individuals under age 65 compared to approximately 20% of COVID deaths in December of 2020 and January of 2021.
Since younger age cohorts tend to carry higher face amounts, the combination of increased deaths and higher amounts of insured values resulted in a significant increase in total dollar levels of mortality claims.
In addition, we experienced higher levels of non-COVID excess mortality during the quarter, representing approximately 30% of reported excess mortality loss.
This is directionally consistent with the broader U.S. trends that saw elevated non-mortality in the third quarter.
As we look to the fourth quarter, forecasting excess mortality is a challenge.
What we do know is that vaccinations are saving lives, and higher levels of vaccination rates should help mitigate mortality claims.
Bottom line, the fundamentals across the Group Benefits business remains solid, and we are confident and optimistic about our performance in the future.
Turning to the economic backdrop.
While there are conflicting signals, I remain encouraged on the '22 macroeconomic outlook and believe the environment will be one in which The Hartford's businesses perform well.
Headline inflation remains elevated, but core inflation is on the decline.
I do not expect inflationary pressures to go away overnight.
The focus of global governments and the private sector on supply chain solutions as well as the normalization of hard-hit pandemic sectors causes me to believe inflationary pressure will begin to ease in the second half of 2022.
While employment gains stalled in the last couple of months as the U.S. was impacted by the Delta surge, vaccination rates, therapeutics and growing levels of natural immunity provide confidence that COVID will become less of a deterrent for individuals to seek employment and return to the workforce.
Unemployment is expected to continue a downward trend as borders increasingly reopen and pandemic-related benefits fully roll off.
This bodes well for The Hartford's business mix.
As I reflect on my tenure with The Hartford, I'm extremely proud of the progress we've made.
Over the years, we fixed core businesses, exited underperforming or noncore segments, successfully integrated the new operations we added, positioning the company to capture even more opportunities in the marketplace going forward.
This is a direct result of our performance-driven culture and the significant investments we have made to transform the organization into one with exceptional underwriting tools and expertise, expanded product depth and breadth and industry-leading digital capabilities, complemented by a talented and dedicated employee base.
However, the journey is not complete.
We will continue investing for the long term to become an even more differentiated competitor in the customer experience, all while producing superior financial results.
At our November 16 Investor Conference, I look forward to sharing how the business is positioned for continued outperformance and highlighting the talented senior leadership team.
With a high-quality franchise, growing revenues, strong margins, prudent capital management, I am very confident that The Hartford has never been better positioned to continue to deliver on our financial objectives and enhance value for all stakeholders.
Core earnings for the quarter of $442 million or $1.26 per diluted share reflects excellent investment results with a 40% annualized return on limited partnership investments and continued strong underlying results, offset by $300 million of catastrophe losses with $200 million from Hurricane Ida and excess mortality of $212 million in Group Benefits.
In P&C, the underlying combined ratio of 88.3 improved 2.3 points from the third quarter of 2020, highlighted by excellent performance in our Commercial Lines segment.
In Commercial Lines, we produced an underlying combined ratio of 87.2, a 6.5-point improvement from the third quarter of 2020, and 15% written premium growth for the second consecutive quarter.
In Personal Lines, an underlying combined ratio of 91.8 compares to 81.4 in the prior year quarter, which reflects higher auto claim frequency from increased miles driven and higher severity.
Doug will provide more detail on these results in Commercial and Personal Lines in a moment.
P&C prior accident year reserve development within core earnings was a net unfavorable $62 million, driven by the new settlement agreement with BSA, partially offset by reserve reductions of $75 million, including decreases in workers' compensation, personal auto liability, package business and bond.
In the quarter, we ceded an additional $28 million of Navigators reserves to the adverse development cover primarily related to wholesale construction.
Although these losses are economically ceded, the reserve development resulted in a deferred gain, representing a charge against net income in the quarter.
Group Benefits core earnings of $19 million decreased from $116 million in third quarter 2020, largely driven by higher excess mortality losses in group life, partially offset by increase in net investment income.
All-cause excess mortality in the quarter was $212 million before tax, which includes $233 million for third quarter deaths, offset by $21 million of net favorable development from prior periods, predominantly from the second quarter of 2021.
The percentage of excess mortality not specifically attributed to a COVID-19 cause of loss is more significant this quarter than it has been in the past and represents approximately 30% of the total.
Excluding losses from short-term disability related to COVID-19 and excess mortality, the core earnings margin was 12.6%.
The underlying trends in disability remain positive with lower long-term disability claim incidents and stronger recoveries related to prior year reserves.
The disability loss ratio in this year's quarter was 3.1 points higher as the prior year loss ratio benefited from favorable short-term disability claim frequency due to fewer elective medical procedures during the early stages of the pandemic.
As Chris commented, the incidence in excess mortality claims going forward is hard to predict as it is dependent on a number of factors, including the vaccination rate, the potential spread of new COVID variants, the percentage of those infected who are in the workforce and the strain on the healthcare system impacting the treatment of non-COVID-related chronic illnesses.
Improving operating efficiencies and a lower expense ratio from Hartford Next have contributed to margin expansion.
The program delivered $306 million in pre-tax expense savings in the nine months ended September 30, 2021, compared to the same period in 2019.
We continue to expect full year pre-tax savings of approximately $540 million in 2022 and $625 million in 2023.
Turning to Hartford Funds.
Core earnings for the quarter were $58 million compared with $40 million for the prior year period, reflecting the impact of daily average AUM increasing 27%.
Total AUM at September 30 was $152 billion.
Mutual fund net inflows were approximately $300 million compared with net outflows of $1.3 billion in third quarter 2020.
Hartford Funds continues to produce excellent returns, with growth in assets under management driven by net inflows and market appreciation.
As a low-capital business, its return on equity has been outstanding, consistently over 45% since 2018.
The Corporate core loss was lower at $47 million compared to a loss of $57 million in the prior year quarter, primarily due to a $21 million before tax loss in third quarter 2020 from the equity interest in Talcott Resolution, which was sold earlier in 2021.
Our investment portfolio delivered another outstanding quarter of results.
Net investment income was $650 million, up 32% from the prior year quarter, benefiting from very strong annualized limited partnership returns of 40%, driven by higher valuations and cash distributions within private equity funds and sales of underlying investments in real estate.
Limited partnership returns continue to exceed expectations.
We continue to manage the investment portfolio with a focus on high-quality public investments while leveraging our capabilities to take advantage of attractive private market opportunities.
The total annualized portfolio yield, excluding limited partnerships, was 3% before tax compared to 3.3% in the third quarter of 2020, reflecting the lower interest rate environment.
We expect pressure on the portfolio yield to continue in the fourth quarter.
The portfolio credit quality remains strong with no credit losses on fixed maturities in the quarter.
Net unrealized gains on fixed maturities before tax were $2.5 billion at September 30, down from $2.8 billion at June 30 due to higher interest rates and wider credit spreads.
Book value per diluted share, excluding AOCI, rose 8% since September 30, 2020, to $49.64, and our trailing 12-month core earnings ROE was 12.5%.
During the quarter, The Hartford returned $634 million to shareholders, including $511 million of share repurchases and $123 million in common dividends paid.
Yesterday, the Board approved a 10% increase in the common dividend and increased our share repurchase authorization by $500 million.
With this increase and the $1.2 billion of repurchases completed through September 30, there remains $1.8 billion of share repurchase authorization in effect through 2022.
From October one through October 27, we repurchased approximately 1.5 million common shares for $108 million.
Cash and investments at the holding company were $2.1 billion as of September 30, which includes the proceeds from the September issuance of $600 million of 2.9% senior notes.
These proceeds will be used to repay our $600 million 7.875% junior subordinated debentures, which are redeemable at par on or after April 15, 2022.
During the third quarter, we received $443 million in dividends from subsidiaries and expect approximately $445 million in the fourth quarter.
With top line growth, improving underlying margins, operating efficiencies, strong cash flow and ongoing capital management, we are positioned to consistently generate market-leading returns and enhance value creation for shareholders.
Across Property & Casualty, I continue to be extremely pleased with our execution and performance.
In the quarter, the underlying combined ratio was an outstanding 88.3.
Commercial Lines achieved double-digit written premium growth for the second consecutive quarter.
Written pricing remained strong, largely consistent with second quarter, and our new Personal Lines product launch is accelerating with five new states rolled out in October.
As Beth mentioned, Commercial Lines produced a terrific underlying combined ratio of 87.2, with over five points of improvement coming from the loss ratio and another point from expenses.
I've been doing these calls for a long time, and this is one of the stronger underlying quarters I have presented.
Before providing more color on commercial pricing and loss trends, let me spend a few minutes detailing another quarter of exceptional top line performance.
Small Commercial written premium of just over $1 billion was a third quarter record, increasing 14% over prior year.
Policy count retention was strong at 84%, and in-force policies grew 6% versus prior year.
As anticipated, we continue to benefit from an improved economy, with increases in payroll and wages contributing to the quarter's top line result.
Small Commercial new business of $165 million was up 28%, the fourth consecutive quarter of double-digit growth.
Our workers' compensation and market-leading BOP product, Spectrum, contributed equally to the result.
I'm particularly pleased with the growth we're achieving across each of our Small Commercial distribution channels.
New business from agents, payroll programs, alliances and direct all delivered double-digit growth and will meaningfully contribute to continued top line performance.
The breadth and depth of this distribution balance is unmatched by competitors.
In Middle & Large Commercial, we produced a second consecutive excellent quarter with written premium growth of 18%.
Middle Market new business of $139 million was up 6% in the quarter driven in large part by our industry verticals.
Policy retention increased 8% -- or eight points to 87%, one of the strongest retention quarters in quite some time.
We continue to balance the rate and retention trade-off while maintaining disciplined risk underwriting and leveraging our segmentation tools to drive profitable growth.
Global Specialty produced another strong quarter with written premium growth of 14%.
New business growth of 26% was equally impressive, and retention remains strong in the mid-80s.
In the quarter, the breadth of our written premium growth was led by 14% in wholesale and 19% in U.S. financial lines.
Global Reinsurance also had an excellent quarter with written premium growth of 39%.
Execution to fully leverage our expanded product portfolio these past two years has been excellent.
Across our franchise, we continue to further develop our operating routines with broader risk solutions to meet customer needs.
As a proof point, third quarter cross-sell new business premium between Global Specialty and Middle & Large Commercial was $15 million.
With this result, we have now exceeded our initial transaction goal of $200 million, more than a year early.
After years of development, our product portfolio has become a competitive strength, and our execution will only get stronger.
Let's move to pricing metrics.
U.S. Standard Commercial Lines pricing, excluding workers' compensation, was 6.5%, consistent with the second quarter.
Middle Market ex workers' compensation price change of 8.1% was essentially flat to quarter two and continues to exceed loss cost trend.
In Standard Commercial workers' compensation, renewal written pricing was in line with quarter two at 1.2%.
Global Specialty renewal written price remained strong in the U.S. at 10% and international at 17%.
Turning to commercial loss trends.
Our casualty current accident year loss ratios are in line with expectations.
It was a pretty quiet non-CAT weather quarter in Small Commercial property.
In addition, we continue to monitor the adverse impacts of supply chain disruptions on loss costs and expect property severity trends to be elevated for the rest of the year and into 2022.
Earned pricing is still exceeding loss trends within most lines, and we remain confident in our full year 2021 loss ratio expectations.
Before I move to Personal Lines, let me comment on the commercial pricing environment over the past two to three years.
There's no question we've experienced a healthy pricing environment and in several lines, one of the hardest markets I've experienced.
The combination of these rate actions and disciplined underwriting decisions are central drivers of our strong performance.
Continued pressure from weather, supply chain and inflation lead me to believe that the current pricing environment will remain healthy well into 2022.
Moving to Personal Lines.
The third quarter underlying combined ratio rose 10.4 points to 91.8.
Auto frequency is up with increasing vehicle trips and miles traveled but still modestly below prepandemic levels.
Auto severity is elevated, driven in part by the rising cost of used cars, parts and labor.
These inflationary factors will continue to be an industry headwind as we expect them to persist into 2022.
In home, we continue to experience favorable frequency versus our initial expectations, more than offsetting higher claim severity from elevated building material and labor costs.
Turning to the top line.
Written premium declined 2%.
Policy retention was relatively stable at 84%, and new business premium was up 6% in the quarter.
This new business uptick occurred despite J.D. Power's survey results concluding that auto insurance shopping rates among the 50-plus age segment remains 6% below a year ago.
Our new business growth was driven by higher marketing spend and improved conversion rates.
I'm pleased with this quarter's momentum.
We're also encouraged by the early results from the launch of our new contemporary Personal Lines auto and home product, Prevail.
Through the third quarter, written premium responses and issue counts are exceeding expectations.
Both products are now available in seven states.
With our latest launch in early October, we also enhanced our auto and home bundling and telematics capabilities.
On the latter, we're excited to be partnering with the industry leader, Cambridge Mobile Telematics.
This is an important change as we continue to augment our models based on driving behavior.
The Prevail product will be in two more states over the next 90 days.
Before turning the call back to Susan for Q&A, let me conclude with a few final thoughts.
Property & Casualty had an incredible quarter.
Our commercial top line produced a second consecutive quarter of superior performance.
Strong pricing is earning into the book, driving lower current accident year loss ratios.
Global Specialty is delivering strong execution and underwriting performance, and we continue to be excited about the launch of Prevail in Personal Lines.
We're clearly seeing the positive results of our multiyear road map with deeper and broader products, improved risk selection and outstanding execution.
This quarter is another demonstration of those capabilities.
Our technology invest agenda has been significant, and the results are clear and sustainable.
I'm thrilled with our continued progress and look forward to sharing more details with our business heads in November at Investor Day.
We'll now take questions.
 Assistant:

Chosen response: qtrly core earnings per diluted share of $1.26.


Prompt:
Human: Actual results may differ.
Also in the remarks today, Mike, Chris and Tom will refer to certain non-GAAP measures.
I trust that everyone is staying healthy and safe.
Sales of $2.3 billion for the quarter were slightly higher than 2020.
Diluted earnings per share was $3.68 for the quarter and pension adjusted earnings per share was $3.56, up from $2.43 in 2020.
New contract awards during the quarter were approximately $5.3 billion, resulting in a record backlog of approximately $49 billion, of which approximately $25 billion is funded.
Chris will provide some color on a few of the key awards for the quarter during his remarks.
Shifting to activities in Washington.
We were pleased that the recently released summary of the fiscal year 2022 President's budget request affirm that maintaining U.S. naval power is critical to reassuring allies and signaling U.S. resolved to potential adversaries.
Of note, the budget summary cited continued recapitalization of the nation's strategic ballistic missile submarine fleet, investment in remotely operated and autonomous systems and funding for the next-generation attack submarine program.
And we look forward to understanding budget details for these and other national security priorities when that information becomes available as well as funding levels requested for the Department of Energy and the Department of Homeland Security.
We also look forward to working closely with the Congress as the FY '22 President's budget request is considered during the current legislative cycle.
Regarding portfolio shaping actions during the quarter, we completed the previously announced sale of our oil and gas business and also completed the contribution of the San Diego Shipyard to Titan Acquisition Holdings in exchange for a noncontrolling interest in this leading provider of ship repair and fleet sustainment services.
Completion of these transactions sharpens the focus of our Technical Solutions business into areas where we believe our unique capabilities and close customer relationships will drive strong organic revenue growth and margin expansion.
And as I prepare to close, I'm very pleased with the operating rhythm the team is achieving, which led to the third consecutive quarter of solid program execution and financial results.
And I am very confident that our strength, agility and positive momentum resulting from enduring the impacts of COVID-19 will serve as key catalyst to help us leverage our historic backlog, to generate strong free cash flow and create long-term sustainable value for our shareholders, customers and employees.
After serving as President of Ingalls since 2014 and with more than 40 years of service, Brian Cuccias retired on April 1.
Brian's career at Ingalls has been remarkable, and HII has truly benefited from his leadership.
Effective April 1, Kari Wilkinson succeeded Brian as the new President of Ingalls and will report to Chris.
Kari has proven herself to be a strategic and visionary leader that is focused on operational excellence, and I am extremely confident that Ingalls is in very capable hands.
Operationally, we had a solid quarter, making consistent progress across our shipbuilding and Technical Solutions programs.
With that, let me share a few key contract awards and programmatic highlights from the business segments for the quarter.
At Ingalls, the team was awarded a life-cycle engineering and support services contract for the LPD program with a cumulative value of approximately $214 million.
The scope of work includes engineering change management, supply chain management, training for new shipboard systems and the execution of post-delivery availabilities.
Regarding program status, LHA eight Bougainville achieved a 25% complete milestone during the quarter, and the team remains focused on maintaining strong cost and schedule performance in support of their planned production milestones.
On the DDG program, the team remains focused on preparations for launch of DDG 125 Jack H. Lucas and sea trials for DDG 121 Frank E. Peterson, Jr., both planned for the second half of this year.
And on the LPD program, LPD 28 Fort Lauderdale remains on track to complete sea trials later this year.
And LPD 29, Richard M. McCool, Jr., remains on schedule for launch early next year.
The team at Ingalls is also working closely with the Navy to put LPD 32 and 33, along with LHA nine under contract.
This bundle acquisition approach is the most affordable method to buy these ships.
And when complete, affords predictable savings for the Navy.
At Newport News, the team was awarded a $3 billion contract for the refueling and complex overhaul of CVN 74 USS John C. Stennis, and also received a contract modification for construction of the 10th Virginia-class Block V submarine.
These key awards are additional building blocks for a record backlog, which now stands at nearly $49 billion.
Shifting to program status, CVN 79 Kennedy is approximately 81% complete.
The team is finalizing plans to support the single phase delivery requirements while continuing to focus on compartment completion and key initial test milestones.
CVN 73 USS George Washington is approximately 87% complete and continues to make progress with the crew recently beginning to move back aboard the ship.
This is another key milestone is supported redelivery to the Navy planned for next year.
On the VCS program, SSN 794 Montana continues test program activities in preparation for delivery to the Navy planned for later this year.
In addition, SSN 796 New Jersey remains on track to achieve the float off milestone as planned in the second half of this year.
At Technical Solutions, the team booked several key awards during the quarter.
This included a $175 million fleet to statement recompete and a position on a Naval Information Warfare Center Pacific, ISR and cybersecurity IDIQ contract.
Additionally, production of the first Orca XLUUV modules is now under way at our unmanned systems center of excellence.
Approximately 75% of all structural components have been fabricated, and assembly has commenced with final unit delivery to Boeing plan later this year.
And finally, our Nuclear and Environmental Services business continues to perform very well with strong performance across our Department of Energy contracts at Los Alamos, Nevada and Savannah River.
Today, I will briefly review our first quarter results.
This was primarily due to growth at Newport News and Ingalls that was largely offset by a decline of Technical Solutions due to divestitures associated with the portfolio-shaping actions we have taken.
Segment operating income for the quarter of $191 million increased $35 million from the first quarter of 2020 and segment operating margin, 8.4%, increased 149 basis points.
The improvement was driven by higher risk retirement at Ingalls and improved performance to Technical Solutions.
Operating income for the quarter of $147 million decreased by $68 million from the first quarter of 2020 and operating margin of 6.5% decreased 35 basis points.
These decreases were primarily driven by a less favorable operating FAS/CAS adjustment, partially offset by the stronger segment operating results compared to the prior year.
The tax rate in the quarter was approximately 15% compared to approximately 20% in the first quarter of 2020.
The decline in tax rate was primarily due to the divestiture of our oil and gas business as well as the recognition of R&D tax credits for the current year and prior periods.
Net earnings in the quarter were $148 million compared to $172 million in the first quarter of 2020.
Diluted earnings per share in the quarter were $3.68 compared to $4.23 in the first quarter of 2020.
Excluding the impact of pension, diluted earnings per share in the quarter were $3.56 compared to $2.43 in the first quarter of 2020.
Cash from operations was $43 million in the quarter and net capital expenditures were $59 million or 2.6% of revenues, resulting in free cash flow of negative $16 million.
This compares to cash from operations of $68 million and net capital expenditures of $66 million and free cash flow of $2 million in the first quarter of 2020.
Cash contributions to our pension and other postretirement benefit plan were $72 million in the quarter, of which $60 million were discretionary contributions to our qualified pension plans.
During the first quarter, we paid dividends of $1.14 per share or $46 million.
As noted on our fourth quarter earnings call, we did reinitiate share repurchases earlier this year and continue to view the return of excess free cash flow via share repurchases as an integral part of our capital allocation strategy over the long term.
During the quarter, we repurchased approximately 292,000 shares at a cost of approximately $50 million.
Moving on to pension.
With the passage of the American Rescue Plan Act, we have reviewed the five-year pension outlook that we provided on our last earnings call and continue to believe that remains the most appropriate view.
Due to the limited nature of our projected contributions and the impact of lower cash sensitivity with safe harbor implementation, the passage of the legislation does not have a meaningful impact on our outlook.
We plan to provide an update to near-term pension expectations on our Q3 call, consistent with our prior cadence.
Ingalls revenues of $649 million in the quarter increased $20 million or 3.2% from the same period last year, driven primarily by higher revenues on the DDG program.
Ingalls operating income of $91 million and margin of 14% in the quarter were up from the first quarter of 2020, mainly due to higher risk retirement on LHA, which was related to the 25% completion milestone that Chris mentioned earlier.
Newport News revenues of $1.4 billion in the quarter increased to $66 million or 4.9% from the same period last year due to higher revenues in both aircraft carrier and submarine construction as well as fleet support services.
Newport News operating income of $93 million and margin 6.6% in the quarter were down slightly year-over-year, primarily due to lower risk retirement on CVN 73 RCOH, partially offset by higher risk retirement on VCS Block IV boats.
Technical Solutions revenues of $259 million in the quarter decreased 18.3% from the same period last year, mainly due to the divestitures of both our oil and gas business in the San Diego shipyard on February one of this year, partially offset by a full quarter of results from Hydroid, which was acquired at the end of the first quarter of 2020.
Technical Solutions operating income of $7 million in the quarter compares to a loss in the first quarter of 2020.
This was driven primarily by improved performance in Defense and Federal Solutions and Nuclear Environmental Services as well as a gain related to the sale of our oil and gas business.
Turning to Slide nine.
We continue to expect we will finish the year with strict building operating margin in the 7% to 8% range with the significant remaining risk retirement events weighted toward the end of the year.
In addition, we expect shipbuilding margin for the first half of 2021 to be around the midpoint of our annual guidance range.
We continue to view the remainder of our 2021 guidance as appropriate with the exception of the effective tax rate, which we now expect to be approximately 18%.
 Assistant:

Chosen response:
compname reports q1 earnings per share $3.68.
q1 adjusted earnings per share $3.56.
q1 earnings per share $3.68.
q1 revenue $2.3 billion.


Prompt:
Human: This is Brendan Maiorana.
The release and supplemental include a reconciliation of these non-GAAP measures to the most directly comparable GAAP financial measures.
We are pleased with our solid financial and operational results in the third quarter.
Given the emergence of the delta variant, utilization across our portfolio did not increase as much in the third quarter as we anticipated, leveling off around 40%.
We now do not expect usage to meaningfully increase until the new year.
While the progression of the pandemic and the resulting impact on office utilization remain difficult to predict, customers and prospects fortunately continue to sign leases and our parking revenues continue to recover nicely.
As I mentioned on our last call, leasing activity has been healthy, particularly for new deals.
We signed 672,000 square feet of second gen leases, including 245,000 square feet of new deals.
In total, we signed 96 leases during the quarter, including 46 new deals, consistent with our long-term average.
So far this year we've signed 140 new deals, which puts us on pace to eclipse our annual high watermark.
Plus, we signed 83,000 square feet of first gen leases on the development pipeline.
In addition to healthy volume, rents on signed leases increased 19.3% on a GAAP basis and 4.3% on a cash basis.
The weighted average term was also solid at 6.3 years reflecting growing confidence in the long-term value of the office for our customers.
Leasing Capex increased, but this was offset by higher face rents and longer terms.
We're often asked about the effect of the pandemic on net effective rents.
We don't track apples-to-apples net effective rent spreads.
However, if we look solely at the change in second gen net effective rents on signed deals from 2019 to 2021 year-to-date, the decline is roughly at the midpoint of the 5% to 10% average decline across our markets we've mentioned previously, which in our experience is also consistent with the typical recessionary patterns.
As we noted last quarter, we continue to believe net effective rents have stabilized.
As you may have seen from local media reports, two customers in our top 20 announced this quarter plans to move out upon exploration and relocate to new developments.
In both cases, we have at least three years of lease term remaining, in-place rents are substantially below market and these buildings are among the best in their BBDs.
As the war for talent accelerates, we are strong believers that well-located office space in highly amenitized Best Business Districts, will become a competitive recruiting advantage for employers.
This flight to higher quality buildings in the best locations and with well capitalized owners, plays to our strengths.
Our markets and our portfolio continue to generate activity and growth, further demonstrating the resilience and quality.
Turning to our results, we delivered strong FFO of $0.96 per share in the third quarter.
Our same property cash NOI growth was also strong at 6.4%, including the repayment of temporary rent deferrals agreed to during the first months of the pandemic.
Excluding these repayments, same-property cash NOI growth would still have been a healthy 5.2%, consistent with last quarter.
In last night's release, we updated our 2021 FFO outlook to $3.73 to $3.76 per share, up $0.07 at the midpoint from our prior outlook and up $0.165 from our initial 2021 FFO outlook provided in February.
We also raised our same property cash NOI growth outlook to 6% to 7%, up more than 150 basis points at the midpoint from our prior outlook.
Moving to investments, as we previously disclosed, we acquired the office portfolio from PAC in late July for a total investment of $683 million, including planned near-term building improvements.
We've already signed leases ahead of schedule at healthy rents and are seeing strong interest across the portfolio in Charlotte and Raleigh as well as to the development parcel in the Cumberland/Galleria BBD of Atlanta, around the corner from where the Braves are hosting the World Series at Truist Park.
As you know, we plan to bring our balance sheet back to pre-acquisition levels by accelerating the sale of $500 million to $600 million of noncore assets by mid-2022.
We closed two dispositions for $120 million in the third quarter, bringing our total to $163 million since we first announced the acquisition.
We are confident we'll end the year toward the high end of our outlook of $250 million to $300 million.
Turning to development, we delivered our $285 million build-to-suit for Asurion in Nashville, the largest development project in Highwoods history.
Completing this project ahead of schedule and on budget in the midst of a pandemic, is a true testament to the strength of our development team in our partners of Brasfield & Gorrie and Hastings Architecture.
We delivered the keys on this incredible workplace to our new customer three months early.
Following the delivery of the Asurion build-to-suit, our $109 million development pipeline consists of Virginia Springs II in the Brentwood BBD of Nashville and Midtown West in the Westshore BBD of Tampa.
We signed 83,000 square feet of leases on these developments during the quarter, bringing leasing to 59% for both buildings.
We have a pipeline of strong prospects to bring these properties to stabilization by the second half of next year.
We increased the low end of our development announcement outlook from 0 to $100 million, demonstrating the growing confidence we have in potential announcements before year-end.
The high end remains $250 million.
We continue to see strong interest from prospective build-to-suit and anchor customers.
We believe companies planning significant investments in physical workplaces is yet another sign of a return to healthy fundamentals across our markets.
Our well-located land bank, which can support more than $2 billion of future development, is a true differentiator for Highwoods and will drive value creation over the long term.
We are thrilled to have acquired the remaining 77 acres of development land at Ovation in the Cool Springs district of Franklin, Tennessee, one of Nashville's BBDs, for a total purchase price of $57.8 million.
We will partner with the City of Franklin to reimagine Ovation as one of the premier mixed-use addresses in the country and anticipate working with high-quality retail, multi-family and hotel developers to realize the tremendous potential of this live-work-play property, while retaining full control of the development -- office development sites.
We delivered the $285 million Asurion project on budget and ahead of schedule; we acquired a $683 million portfolio of office properties with attractive long-term returns; since announcing the acquisition, we have sold $163 million of noncore properties at attractive valuations; we raised our quarterly dividend over 4%; we increased the midpoint of our FFO outlook $0.165 per share since the beginning of the year; and we did all this while maintaining a strong and flexible balance sheet with a debt-to-EBITDAre ratio of 5.6 times.
While the economy bore the brunt of the delta variant's impact in the third quarter, we believe our positive results for the period are a product of the clear and consistent BBD strategy Highwoods has been focused on for a long time.
Developing, operating and owning BBD-located and talent-centric workplaces has proved our portfolio's resiliency in the face of unprecedented times, provides a strong foundation for future growth.
Customers are returning to the office, some sooner than others.
But the common course we hear is that place matters and that while many see a more flexible workplace and perhaps more accurately, work week ahead, most of us have told us that they are the very best when they are together versus being remote.
This sentiment is inherent in the healthy quarterly leasing volume and metrics our team posted.
This is also consistent with our markets being highlighted in the most recent addition of ULI and PwC's emerging trends in real estate and where we have a significant best-in-class workplace options across 11.8 million square feet in the BBDs of Nashville and Raleigh, which ranked number 1 and number 2, respectively, and where 44% of our third quarter NOI was generated.
The great migration continues to accelerate as talented companies and individuals migrate to the SunBelt where cities and states are open for business, housing is affordable and commute times and modes, more manageable.
At 90.4%, occupancy increased 90 basis points from last quarter and we foresee occupancy holding steady for the balance of the year.
Tour and RFP activity is getting back to pre-pandemic levels as many organizations that delayed decision-making of any scope or scale since the spring of 2020 are now ready to discuss their long-term office plans.
With 140 new customers signing on to join the portfolio so far this year, led by engineering and healthcare/life science customers, we're enthusiastic about where their plans may take them with many new to the market and with plans for growth.
Now, to our markets, which are increasingly being discovered by individuals, organizations and investors based on the prevalence of out-of-state license plates at the grocery store and the unending stream of housing sales above listings, sometimes sight unseen.
There continue to be more data points supporting our markets' open-for-business and let's-get-back-to-work mentality, such as JLL noting Atlanta, Charlotte and Nashville pushed above 2019 leasing levels and the Atlanta market posting a positive net absorption of 478,000 square feet for the quarter.
In Raleigh, we signed 135,000 square feet of leases for the quarter and activity there is off to a quick start in the fourth quarter.
Market vacancy decreased slightly year-over-year and market rents are up nearly 4%.
We expect Raleigh to be at or near the top of many lists for years to come with several additional new job announcements this quarter, including three new headquarter relocations, adding to the strong list of relocations from the first half of 2021.
In Nashville, we signed 76,000 square feet of second generation leases and achieved quarter-end occupancy of 95.3%.
Our development team completed the new 553,000 square foot Asurion headquarters anchoring our Gulch Central mixed-use development that stretches the better part of three city blocks and is adjacent to Nashville's Amazon HQ2.
In addition, we had a strong leasing quarter in our development pipeline.
We signed 83,000 square feet of first generation leases at Virginia Springs II and Midtown West bringing the leased rate up from 59% from 24% last quarter.
We continue to see strong interest in both projects and are tracking well toward their projected stabilizations in the latter half of 2022.
As Ted mentioned, we have a sizable land bank that can support over $2 billion of future development.
Having completed nearly $1 billion of successful development since 2016, we're confident development will continue to drive future growth and value creation.
To this end, we're extremely excited about our purchase of the remaining acreage at Ovation in Nashville's suburban Williamson County, listed by Kiplinger as the tenth most affluent in the nation.
These 145 acres, already home to Mars PetCare's U.S. headquarters that we developed in 2019, represent one of the premier mixed-use opportunities in the nation and is where we can build an additional 1.2 million square feet of Class A office amid significant densities of complementary residential, retail and hotel uses.
In conclusion, we're fortunate to be weathering the storm well.
With our high-quality portfolio and our unmatched all-under-one-roof-team to develop, lease, operate and maintain it, we are supporting our customers' ability to achieve together what they cannot apart.
Because of this, our customers are growing more than they're not.
They're investing in new space and they see their workplaces as competitive currency to retain and recruit the very best talent available.
Our development team has delivered the very best examples of our work-placemaking and is busy reloading the pipeline for the next generation of commute-worthy buildings.
Our exceptional people and portfolio have produced results we're proud of this quarter and throughout the pandemic.
It truly is a team effort and each and every member of the Highwoods family plays a meaningful role in our success.
In the third quarter, we delivered net income of $72.1 million or $0.69 per share, and FFO of $102.8 million or $0.96 per share, an increase from $0.93 in the second quarter.
As Ted mentioned, we closed on the acquisition from PAC in late July, delivered the $285 million Asurion development in September and sold $120 million of noncore assets at the end of the quarter.
While there were a lot of moving parts from investment activity in the quarter, there weren't a lot of unusual operational items that impacted our financial results.
Turning to the balance sheet, our leverage obviously ticked up temporarily due to this quarter's acquisition.
However, we are very pleased that our debt-to-EBITDAre was 5.6 times in the third quarter, less than half-a-turn increase at 5.2 times in the prior quarter.
We are making solid progress on our noncore disposition plan, having sold $163 million of the planned $500 million to $600 million, and are on track to return our balance sheet to pre-acquisition metrics by mid-2022.
Further, we have ample liquidity with $615 million currently available on our revolving credit facility, limited debt maturities until late 2022 and expected disposition proceeds over the next several quarters.
During the quarter, we issued a modest amount of shares on the ATM at an average price of $45.81 per share for net proceeds of $6.8 million, consistent with the ATM activity in the second quarter.
ATM issuances remain one of the many arrows in our quiver and we continue to believe are an efficient and measured way to fund incremental investments, particularly our development pipeline on a leverage-neutral basis.
As Ted mentioned, we increased the low end of our development announcement outlook to $100 million, signifying our growing confidence in future development starts.
The modest ATM issuance so far in 2021 gives us a head start on funding these future investments.
Regarding our expectations for the rest of the year, we've updated our 2021 FFO outlook to $3.73 to $3.76 per share, with the mid-point up $0.07 since July and up $0.165 from our original 2021 outlook provided in February.
Rolling forward from our prior outlook in July, the rationale for the increase was: $0.01 higher per share impact from the combination of the acquisition and corresponding noncore dispositions; $0.01 to $0.02 higher per share impact due to earlier-than-expected delivery of the Asurion build-to-suit; and $0.04 to $0.05 higher per share impact from core operations due to our robust third quarter results and the outlook for the remainder of the year.
Compared to our original FFO outlook provided in February, here are the major moving parts: $0.05 to $0.07 higher per share impact from acquisition and disposition activity on a net basis; $0.03 to $0.05 from the early delivery of Asurion and faster-than-expected lease-up of the remainder of the development pipeline; approximately $0.02 from rising parking revenues, particularly transient parking; and $0.04 to $0.05 from better-than-expected core operations.
In addition to our improved 2021 FFO outlook, we also increased our same-property cash NOI growth outlook to a range of 6% to 7%, up more than 150 basis points at the midpoint from our July outlook.
Since the onset of the pandemic, we've regularly commented on parking revenues and operating expenses given the reduced utilization rates.
We're still tracking below normal on both Opex and parking revenues, but recently we've seen a notable increase in transient parking revenue.
The trajectory of Opex and parking revenues continues to be challenging to forecast.
But with that said, we do expect an increase in both line items in the fourth quarter compared to our quarterly averages so far in 2021.
In addition to our solid FFO, our cash flows continue to strengthen.
Since 2016, we've sold nearly $1.8 billion of noncore properties, we've acquired $1.3 billion of high-quality assets in the BBDs of our Sun Belt markets and delivered $940 million of development.
We are very proud to have consistently grown our FFO per share while simultaneously making meaningful improvements to the quality of our portfolio.
The strengthening of our cash flows since 2016 is evidenced by a 22% increase in average in-place cash rents, an 18% increase in our dividend, and a steadily declining payout ratio over that same time frame.
Our strengthening cash flows and continuous portfolio improvement combined with a land bank that can support $2 billion of future development and our proven track record as a developer makes us confident about our long-term outlook.
Finally, this is my 28th and last quarterly earnings call at Highwoods.
I really appreciate all your interest in Highwoods and the great questions over the years.
As you know, Brendan is well qualified for the CFO role and will do a great job helping to continue Highwoods' strong track record of success.
 Assistant:

Chosen response:
highwoods properties inc - qtrly ffo per share $0.96.
qtrly ffo per share $0.96.
updates 2021 ffo outlook to $3.73 to $3.76 per share from $3.62 to $3.73 per share.


Prompt:
Human: We undertake no obligation to publicly update or revise these statements.
We certainly appreciate you all joining us today, and I hope everybody is staying well.
I want to start with something difficult.
I want to start by extending my most heartfelt condolences to the Sorenson family and the thousands of Marriott associates around the world following the heartbreaking news of Arne's passing.
To say I'm deeply saddened by that loss, it would be an understatement.
As many of you know, had the opportunity to work with Arne in a number of capacities throughout my career, including earlier on at Host.
I think it's very fair to say he was an exceptional leader, but also an incredible person and a great friend.
Our industry is better because of him, and I am a better professional and a better person because of him.
On behalf of everyone at Hilton family, the entire Marriott family are in our thoughts.
As we all know, this past year has presented unique challenges, including a pandemic that devastated lives, communities, and businesses across the world, widespread economic declines and acts of social injustice.
Due to the extraordinary levels of disruption, our industry experienced demand declines we've never seen before in our 101-year history.
Guided by our founding purpose, to make the world a better place through the light and warmth of hospitality, we acted quickly to ensure the safety and well-being of our people.
We also took steps to protect our business by rightsizing our cost structure and enhancing our liquidity position while continuing to drive net unit growth and increase our network effect.
As a result of these moves, we expect to recover from the pandemic as a stronger, higher-margin business that is even better positioned to deliver performance for our owners and strong free cash flow for our shareholders.
While it's certainly been a very difficult year, we're proud of everything we've accomplished, but we certainly could not have done it without the support of all of our stakeholders.
Because of our amazing people, we've been able to lean on our award-winning culture, which earned the number one Best Place to Work in the United States for the second consecutive year and the number three World's Best Workplace to help get us through these trying times.
For the full year, systemwide RevPAR declined 57% with adjusted EBITDA down only modestly, more illustrating the resiliency of our fee-based model.
We also demonstrated the strength of our brands and power of our customer-centric strategy by achieving market share gains across every region, even in a distressed business environment.
For the quarter, systemwide RevPAR declined 59%, relatively in line with our expectations.
The positive momentum in demand that we saw through the summer and early fall was disrupted in November, December by rising COVID cases, tightening travel restrictions and further hotel suspensions, particularly in Europe.
Similar to the third quarter, drive to leisure travel drove an outsized portion of demand.
Business transient and group trends showed modest sequential improvement versus the prior quarter, but overall demand remained quite muted.
As we look to the year ahead, we remain optimistic that accelerating vaccine distribution will lead to easing government restrictions and unlock pent-up travel demand.
For the first quarter, overall trends so far appear to be similar to the fourth quarter with modest increases in demand in the U.S., offsetting stalled recoveries in Europe and Asia Pacific.
We expect improving fundamentals heading into spring with essentially all systemwide rooms reopened by the end of the second quarter.
We expect a more pronounced recovery in the back half of the year driven by increased leisure demand and meaningful rebounds in corporate transient and group business.
Over the last year, the personal savings rate in the United States has nearly doubled, increasing by more than $1.6 trillion to $2.9 trillion, with the potential to go even higher given additional stimulus.
We expect this to drive greater leisure demand as travel restrictions ease and markets reopened the tourism.
Additionally, conversations with our large corporate customers along with sequential upticks in business transient booking pace year-to-date indicate that there is pent-up demand for business travel that should drive a recovery in corporate transient trends as the year progresses.
On the group side, we saw a meaningful step-up in new group demand in January with our back half group position showing significant sequential improvement versus the first half of the year.
With roughly 70% of bookings made within a week of travel, overall visibility remains limited.
However, we continue to see signs of optimism.
In fact, the vast majority of our large corporate accounts agreed to extend 2020 negotiated rates into this year.
Despite the challenges in 2020, we opened more than 400 hotels, totaling nearly 56,000 rooms and achieved net unit growth of 5.1%, slightly ahead of guidance.
Fourth quarter openings were up nearly 30% year-over-year, largely driven by new development in China, where our focused-service brands continue to command a disproportionate share of industry growth.
We also celebrated our 1,000,000th room milestone and the openings of our 300th hotel in China, our 600th DoubleTree hotel and our 900th Hilton Garden Inn.
We ended up the year with 397,000 rooms in our development pipeline, up 3% year-over-year.
While market disruption weighed on new development signings, conversion signings increased more than 30% versus the prior year.
As owners look to benefit from the strength of our network, we anticipate continued positive momentum and conversion activity, particularly through DoubleTree and our collection brands.
During the quarter, we signed agreements to expand our Curio Collection in Mexico and bring our Tapestry Collection to Portugal.
This marks one of several new Tapestry hotels scheduled to open across Europe this year.
We also announced plans to debut LXR in the Seychelles with Mango House Seychelles.
The property will deliver a truly unique hospitality experience with spaces, guest rooms and suites and five world-class food and beverage venues.
Scheduled to open in the coming months, the hotel underscores our commitment to further expanding our resort portfolio.
Building on that momentum, we kicked off 2021 with an agreement to bring LXR to Bali.
Additionally, we celebrated the openings of Oceana Santa Monica, which marked LXR's U.S. debut as well as the Waldorf Astoria, Monarch Beach Resort and the Hilton Vancouver Downtown, which was converted from a competitor brand.
With these notable openings and many exciting development opportunities in front of us, we are confident in our ability to continue delivering solid growth over the next several years.
The pandemic rapidly changed guest behaviors, priorities and concerns.
We listen to our customers and move quickly to launch modifications to our Honors loyalty program, deliver industry-leading standards of cleanliness and hygiene with Hilton CleanStay and provide flexible, distraction-free environments for remote work with WorkSpaces by Hilton.
Additionally, with an even stronger focus on recovery, last month, we implemented Hilton EventReady Hybrid Solutions, an expanded set of resources to help event planners address the dramatic shift toward hybrid meetings as group business rebounds.
Our flexibility and innovation drove continued growth in our Honors network, ending the year with more than 112 million members who accounted for approximately 60% of systemwide occupancy.
Throughout 2020, we also remained focused on our corporate responsibility and our commitment to our ESG initiatives.
We're proud to contribute to our communities, and we're honored to be named the global industry leader in the Dow Jones Sustainability Index for the second year in a row.
And earmarked by challenge and change, we effectively executed our crisis response strategy, carefully managed key stakeholder relationships and continued to press forward on strategic opportunities.
I'm confident that there are brighter days ahead and that we are in a stronger, more resilient, and we are better positioned than ever before.
Before I begin, I'd like to echo Chris' sentiments about Arne.
During the quarter, systemwide RevPAR declined 59.2% versus the prior year on a comparable and currency-neutral basis as the pandemic continued to disrupt the demand environment.
Relative to the third quarter, occupancy was modestly lower, partially due to seasonality and further tempered by rising COVID cases and associated travel restrictions.
Adjusted EBITDA was $204 million in the fourth quarter, down 65% year-over-year.
Results reflected the continued impact of the pandemic on global travel demand, including temporary suspensions at some of our hotels during the quarter.
Management and franchise fees decreased 50%, less than RevPAR decreased as franchise fee declines were somewhat mitigated by better-than-expected Honors license fees and development fees.
Overall, revenue declines were mitigated by continued cost control at both the corporate and property levels.
For the full year, our corporate G&A expenses were down nearly 30% year-over-year at the high end of our expectations.
Our ownership portfolio posted a loss for the quarter due to the challenging demand environment, temporary closures in Europe and fixed operating costs, including fixed rent payments at some of our leased properties.
Continued cost control measures, coupled with onetime items mitigated segment losses.
For the fourth -- for the quarter, diluted loss per share adjusted for special items was $0.10.
Turning to our balance sheet.
We continue to enhance our liquidity position and preserve our financial flexibility.
Over the last few months, we opportunistically refinanced $3.4 billion of senior notes to extend our maturities at lower rates.
In January, we also repaid $250 million of the outstanding balance under our $1.75 billion revolving credit facility.
On a pro forma basis, taking these transactions into effect as of year-end 2020, we've lowered our weighted average cost of debt to 3.6% and extended our weighted average maturity to 7.2 years.
We have no major debt maturities until 2024 and maintain a well-staggered maturity ladder thereafter.
We would now like to open the line for any questions you may have.
[Operator Instructions] Chad, can we have our first question, please?
 Assistant:

Chosen response:
q4 adjusted loss per share $0.10.
hilton worldwide - system-wide comparable revpar decreased 59.2 percent and 56.7 percent on a currency neutral basis for q4 and fy, respectively.
hilton worldwide - in q4, there was both occupancy and revpar improvement in americas (excluding u.s.), middle east and africa and asia pacific regions.


Prompt:
Human: I'm Anvita Patil, Hecla's assistant treasurer.
With that, I will pass the call to Phil.
We're going to start with Slide 4, where you'll see there's four key messages that we're trying to communicate.
First, silver as fundamental to the transition to the lower carbon energy, with solar power being a key renewable to make it happen.
Silver demand for the use -- to be used for it, energy, has increased and is continuing to increase.
The United States Energy Information Agency projects that silver demand for solar will be half a billion ounces annually.
Realize the current silver market is only a little more than a billion ounces, so that's a huge increase in the demand for silver for energy use.
Second message, for the transition to solar power to happen, you really have to have a reliable supply chain.
And so to do that, you need silver mined in reliable countries.
And most silver is mined in China, Peru, and Mexico.
Hecla has the United States largest reserve of any mining company and produces more than 40% of all the silver mined here.
We are the most reliable silver producer.
Our third message is that on the ESG front, Hecla stands out with the safety record of our employees that is 40% below the national average, and we are also net neutral on greenhouse gas emissions for Scope 1 and 2 because we have among the smallest emissions in our industry.
And that small amount allows us to use offset credits set at very, very low cost to get net neutral.
And then the final message, and really what we'll spend the bulk of this conference call on is what a great year Hecla had operationally as well as financially.
Aside from our safety and environmental performance, our most significant achievement, though, was the implementation of the new underhand closed bench or the UCB mining method at the Lucky Friday.
Now we mined 86% of our tons last year with the UCB method, but we we didn't speak about this until almost the end of the year because we wanted to make sure we understood how the cycle worked, confirmed how it would improve our seismicity management, determine how we manage dilution, and consider the impacts on the workforce.
We wanted to put ourselves in a place where we are now, which is where we're focusing on optimizing the method, not whether the method works or not.
And it clearly works with the UCB method contributing to the 75% increase in the lucky Friday silver production over 2020.
And 2022's silver production is expected to be 20% increase over 2021, and we'll have even more growth in '23 as the mine becomes a consistent 5 million ounce producer.
Now, the Lucky Friday has been around for 80 years, but this new mining method fundamentally changes this long standing mine.
Well, if you look at the history of the mine, Lucky Friday has never had sustained production about 2.5 million ounces.
So with the higher grade that we get as we go deeper and this new mining method, that production doubles and the costs stay relatively flat.
And so what happens is the lucky Friday generates two or three times or more free cash flow than what we've done in the past.
And so it's because of the innovation of this new mining method and our determination to make the mines safer to mine it better, that the lucky Friday provides this growth exposure to silver without the risk of large capital investment.
And in this inflationary time, having growth with low capital is very unusual and you have so much less risk to get that growth.
Now, Lauren is going to talk about the method more in detail, and I also encourage you to consider our technical report that was filed as an exhibit to the 10-K that describes the method and gives a lot of visibility into the Lucky Friday's strong economics.
Now adding a strong Lucky Friday in 2021 led to a record financial year with revenues of $807 million and adjusted EBITDA of $279 million.
Cash flow from operations was $221 million and free cash flow was $111 million, and those were the second highest in our history.
This and last year's performance has allowed Hecla to generate in excess of $200 million in free cash flow over the past two years and further enhance our common stock dividend policy by lowering the realized silver price threshold to $20 per ounce.
So as a result of this, about 20% of our free cash flow went to shareholders last year.
We spent a little less than $50 million as drilling -- we were able to resume our drilling and our operations in sites after the slowdown that we had in 2020 due to COVID-19.
So as a result of that, our silver reserves increased 6% over last year, and they're now the second highest in our history at 200 million ounces, with Greens Creek's reserves at 125 million ounces.
And it's -- that's its highest since 2002, and it's an increase of about 12% over 2020.
The chart on the left shows not only that we replaced mining depletion, but also converted 26 million ounces of resource to reserves.
Now, our gold reserves at the end of 2021 were 2.7 million ounces.
The second highest in our history, and that's shown in the graph on the right.
Our companywide measured and indicated resources declined largely due to reserve conversions.
However, we did increase our silver inferred resources by 8% to 490 million ounces, with increases at Greens Creek, Lucky Friday, and San Sebastian.
And we expect to continue to see increases in reserves and resources that should allow us to maintain our reserve lives of the 14-plus years that we have.
I mentioned the technical report on the Lucky Friday.
We also filed reports for Greens Creek and Casa Berardi to give support for the reserves.
And in those reports, there's an economic analysis that's in Section 19 that shows very strong economics of the reserves.
And what it does is it assumes that the inferred resources that we mine, which is about 5% to 15% of what we typically mine at those two mines, that that was waste.
And so what we've also done is we've included in Section 21 the summarized information, the supplemental information that gives our long-term plans that includes this inferred materials at their expected grade.
Liven our long history of the two mines, we have a pretty good idea of what the mine will look like when you include the inferred material so that gives you a sense of what that looks like.
And so I'd encourage you to look at Section 21 as Section 19.
With that, I'd like to pass coal over to Russell.
Turning to Slide 7, as Phil noted earlier, we generated record revenue of more than $800 million, of which silver contributed 34% while gold contributed 42%.
Each of our operations contributed significantly to our revenue, led by Greens Creek at about 50%, Casa Berardi at 30%, and Lucky Friday at 16%.
With the projected production growth at Lucky Friday, we anticipate its contribution to grow.
Record revenues, coupled with high margins, generated record adjusted EBITDA for the year of $279 million, resulting in our leverage ratio being 1.1 times, which is significantly below our target of two times.
Our cash flow from operations at $221 million and free cash flow of $111 million were the second highest.
As a result of our consistent and strong operational performance, our balance sheet has continued to strengthen as we entered the year with $210 million in cash and excess of $440 million of liquidity.
Turning to Slide 8, there's been a lot of discussion in the industry regarding inflationary pressures, both in the operating costs of companies as well as capital costs.
At Hecla, we are facing inflationary pressures, too.
However, we anticipate those factors to be muted relative to the rest of the industry for a few reasons.
First, for the most part, we operate high grade, high value but low tonnage underground mines.
And since we don't move a lot of rock, our production comes from processing less tons than others within the industry.
Therefore, making our mines less susceptible to some cost pressures.
Second, we are less exposed to increasing costs of energy as the majority of the power at our sites come from local utilities based on renewable energy sources.
And third, we don't have any large capital expenditures to speak of.
As you look on Slide 8, we don't have any planned large capital expenditures as our capital ranges from a low of $91 million in 2020 to what we anticipate spending in 2022 of $135 million.
In 2021, our total capital and production costs were approximately $480 million, split approximately $370 million as production cost and $109 million for capital.
Our 2022 total expected spend on production costs is about 6% higher than 2021.
And while our guided capital spend for 2022 is slightly higher than 2021, it is primarily due to our investment at the Lucky Friday.
A 5% inflation factor would add less than $7 million to the total capital spend.
Turning to Slide 9, what record revenue generation, strong margins, and consistent capital spend add up to as a strong free cash flow at all our operating mines.
You can see all our minds generate positive free cash flow, and companywide, we generated more than 110 million in free cash flow during 2021, which was the second highest in the company's history.
With this strong and consistent free cash flow generation, we've seen an increase to our cash balance of 60% over 2020 and more than three times that of 2019.
With that, I'll pass the call to Lauren to go through operations.
I will start on Slide 11.
Greens Creek had another strong year as the mine produced 9.2 million ounces at an all-in sustaining costs of $3.19 per ounce, which was below our lower end of guidance at $3.25 per silver ounce.
The cost beat was due to higher byproduct credits and more favorable treatment charges than originally estimated.
The 2021 realized silver margin at the mine was approximately $22 per ounce, an increase of 75% over 2020.
These high silver margins drive the solid free cash flow generation at the mine.
In 2021, Greens Creek generated $185 million in free cash flow and over the past three years has generated more than $445 million in free cash flow.
In addition to the strong operational and financial performance, we increase reserves by 12%, and at 125 million ounces, the reserves are the second highest since 2002.
This high grade, high margin mine is among the best in the world.
Silver production guidance for 2022 is 8.6 million to 8.9 million ounces as we will be mining lower grades for the production sequence.
Silver cash costs are expected to be in the range of seventy $0.75 to $2.50 per ounce while the silver all-in sustaining cost guidance is $6.50 to $8.50 per ounce.
Moving to Slide 12.
Introduction of the UCB mining method and anticipated higher grades depth have positioned the Lucky Friday for a strong decade ahead.
We are very excited about the UCB mining method, which is showing significant improvements in managing seismicity and improving productivity.
Lucky Friday has 75 million ounces in silver reserves, which translates to a reserve mine life plan of 17 years.
The Lucky Friday mine produced 3.6 million ounces of silver in 2021 with almost one million ounces produced in the fourth quarter.
In 2021, production was a 75% increase over 2020.
All-in sustaining costs for the year were $14.34 per ounce in line with our guidance.
The mine generated $32.7 million in free cash flow for the year with 86% of the tons mined using the UCB method.
The mine is expected to produce 4.3 million to 4.6 million ounces of silver in 2022 and cash costs of $0.75 to $2 per ounce, and all-in sustaining costs of $7.25 to $9.25 per ounce.
Production in 2022 is planned to be almost 20% greater than 2021 while the all in sustaining cost per ounce is expected to decline by more than 30% due to higher production and byproduct credits.
Turning to Slides 13 and 14, the UCB mining method is a new productive mining method developed by Hecla in an effort to proactively control fault slip seismicity in deep, high stress narrow-vein mining.
The method uses bench drilling and blasting methods to fragment significant vertical and lateral extensive vein beneath a top cut, taking a long strike of the vein and under engineered backfill.
The method is accomplished without the use of drop raises or lower mucking drives, which may result in local stress concentrations and increased exposure to seismic events.
Large blasts using up to 3,500 pounds of a pumped emulsion and programable electronic detonators fragment up to 350 feet of strike length to a depth of approximately 30 feet.
These large blast proactively induce fault slip seismicity at the mine at the time of the blast and shortly after it.
This blasted corridor is then mined underhand for two cuts.
As these cuts are mined, little to no blasting is done to advance them.
Dilution is controlled by supporting the hanging wall and foot wall as the mining progresses through the blasted ore.
The entire cycle repeats and stoping advances down dip, under fill, and in the de-stress zone.
The method allows for greater control of fault slip seismic events, significantly improving safety.
In conjunction, a notable productivity increase has been achieved by reducing seismic delays and utilizing bulk mining techniques.
Moving to Slide 15, the Casa Berardi mine achieved record throughput as the mill achieved 4,187 tons per day in 2021.
Our investments in mill optimization continued to deliver results in 2021 with mill recoveries increasing four percentage points in conjunction with the increase in throughput.
For the year, the mine produced 134.5 thousand ounces of gold at cash costs of $1,125 per ounce and all-in sustaining costs of $1,399 per ounce while generating free cash flow of $13.7 million.
From 2019 to 2021, the mine has generated more than $100 million in free cash flow.
While our investments in optimizing production have yielded results, we are seeing increased costs is due to the greater volumes mined and processed, contractor costs and higher underground maintenance costs.
For 2022, our production guidance for the mine is 125,000 to 132,000 ounces at cash costs of $1,175 to $1,325 per ounce and all-in sustaining costs of $1,450 to $1,600 per ounce.
Of note is a 16% increase in reserves at the mine to 1.8 million ounces, mainly attributable to additions at the 160 pit.
With these reserves, Casa Berardi has a reserve mine plan of 14 years.
Slide 17 shows our consolidated production guidance, so it takes all of the production guidance that Lauren's given you on a mine by mine basis and aggregates it.
And then we also give you guidance with -- for '23 and '24.
And as we look at our business for the next few years, we anticipate seeing growth in the production of silver due to the high grade material we'll be mining at the Lucky Friday coupled with the productivity gains due to the UCB method.
With these improvements, we anticipate seeing margins and free cash flow generation at Lucky Friday continue to expand, and we expect that the mine will move to be in the best third of the cost curve of primary silver mines.
Casa Berardi will hold its position as a top tier silver asset, continuing to deliver the significant margins and free cash flow.
Just a comment on the guidance relative to the guidance that we gave a year ago, realize that with higher zinc prices, we're able to mine -- and remember, Hecla is the third largest zinc producer in the United States.
So as a result, we're able to mine lower grade silver and actually generate the same or maybe even better cash flow.
So that's why you see a little bit of a reduction in the production from a year ago to this year.
On the gold side, we anticipate production of -- over the next few years to grow slightly with our gold production coming from Casa and Greens Creek.
So we're going to remain a very low cost silver producer with our all-in sustaining cost guidance being $9.75 to $11.75.
On gold, we're guiding to a sic of $14.50 to $1,600 per ounce and we're going to continue to work to improve the operations at Casa and deal with the inflationary pressure that we see in the Abitibi.
Looking to capital, we anticipate spending approximately $135 million, as Russell mentioned, which is slightly higher than previous years.
Remember that this change is driven mainly from new equipment increasing the number of stokes at the Lucky Friday.
And so just a slight increase as a result of that.
Cost and capital assumptions include costs associated with managing COVID and assume 5% inflation.
We also anticipate spending 45 million for exploration and pre-development of that.
A quarter of that will be spent at Greens Creek and Casa.
In addition to extending reserves and resources, both properties have programs identifying testing new targets.
The Nevada program, which is about a third of the program, is going to focus on the two miles of the East Graben Corridor at Midas, where we've had some very high grade intersections.
And we're going to complete the pre-development drift and exploration drilling at Hollister's Hatter Graben.
At San Sebastian, we're testing for deeper mineralization near the mine infrastructure to try to expand the huge zone type mineralization, as well as mining more for just silver and gold in an area called La Roca.
Our programs for Republic and the [Inaudible] districts that have been on hold for a number of years will also have some drilling this year.
I want to take a moment to speak about the reset that we are taking in our Montana assets.
We withdrew the previous owner's plan of operations on both properties since it was based on their view of what the mines would be, but they really didn't have the data to formulate what we need to do for a modern, innovative mine plan.
So we're submitting a new plan of operation limited to geologic and environmental activities for just the Montanore site so we can develop our own plans.
At this point, Rock Creek will only have care and maintenance activities with our mineral and property rights intact.
that host more than 300 million ounces of silver and 3 billion pounds of copper.
Given the growing importance of these two metals, we believe that this sort of one step back to allow two-step forwards approach will allow production to begin as early as next year and next decade.
So that has not changed our view that early in the next decade, we should be able to be in production there.
Before I open the line to questions, I want to take just a moment to remember my friend and predecessor, CEO R. Brown, who passed away recently.
Artworks for Hecla for almost 40 years, and he was the CEO for Hecla for almost half of that.
The UCB method is only the most recent example of Hecla's culture of innovation.
Our art had Hecla on the cutting edge of a number of new technologies.
Many that are standard in many operations around the world like pace backfill and the circular shaft that we had at the Lucky Friday.
His legacy is continuing innovation not only at the Lucky Friday, but the automation advances that we've had at Greens Creek and Casa Berardi.
Hecla would not be the company that we are today without him.
And so please keep his family in your in your thoughts.
With that operator, I would like to open the call to questions.
 Assistant:

Chosen response: sees 2022 capital expenditures of $135 million.