Prompt:
Human: I'm Mark Kowlzan, Chairman and CEO of PCA and with me on the call today is Tom Hassfurther, the Executive Vice President, who runs the Packaging business and Bob Mundy, our Chief Financial Officer.
After that, I'll then wrap things up and then would be glad to take questions.
Yesterday, we reported third quarter net income of $251 million or $2.63 per share, excluding the special items, third quarter 2021 net income was $257 million or $2.69 per share compared to third quarter 2020 net income of $149 million or $1.57 per share.
Third quarter net sales were $2 billion in 2021 and $1.7 billion in 2020.
Total company EBITDA for the third quarter excluding the special items was $464 million in 2021 and $323 million in 2020.
Third quarter net income included special items expenses of $0.06 per share primarily for certain costs at the Jackson Alabama mill for paper to containerboard conversion related activities while last year's third quarter net income included special items expenses of $0.11 per share that were related primarily to the impact of Hurricane Laura on the DeRidder, Louisiana mill.
Excluding the special items, the $1.12 per share increase in third quarter 2021 earnings compared to the third quarter of 2020 was driven primarily by higher prices in mix of $1.58 and volume $0.62 in our Packaging segment.
Higher production volume of $0.06 in prices in mix of $0.05 in our Paper segment and lower non-operating pension expense $0.03 and lower interest expense $0.01.
The items were partially offset by operating costs, which were $0.84 per share higher, primarily due to inflation-related increases, particularly in the areas of labor and benefits expenses, recycled fiber costs, energy, repairs, materials and supplies, as well as several other indirect and fixed cost areas.
We also had inflation-related increases in our converting costs, which were $0.10 per share higher.
For the last several quarters, freight and logistics costs have risen, and were $0.23 per share higher compared to last year, driven by significant increases in fuel costs, tight truck supply, driver shortages, and the higher mix of spot pricing to keep up with box demand.
And finally, scheduled outage expenses were $0.04 per share higher than last year.
And sales volume in our Paper segment was lower by $0.02 per share.
Looking at the packaging business.
EBITDA excluding special items in the third quarter of 2021 of $467 million with sales of $1.8 billion, resulted in a margin of 26% versus last year's EBITDA of $324 million with sales of $1.5 billion and a 22% margin.
Packaging segment demand remained strong and the teams did a tremendous job of implementing their previously announced containerboard and corrugated products price increases.
The containerboard mills set an all-time quarterly sales volume record and our box plants set new third quarter record for total corrugated product shipments, as well as shipments per day.
By utilizing the capability of both machines at our Jackson Alabama mill to produce containerboard, we were able to reach our desired inventory levels to better serve our customer demand, help minimize the transportation challenges we continue to experience, and build some inventory ahead of the DeRidder mills fourth quarter outage.
We manage very effectively, the execution of numerous initiatives and capital projects to reduce cost through efficiency, productivity, and optimization improvements across our manufacturing locations.
We continue to put tremendous effort into managing certain material, equipment, and labor availability issues to keep our customers supplied and their needs and their capital projects on track.
With no relief from the supply chain obstacles that we, our customers, and our suppliers continue to face along with unprecedented inflation-related challenges, the combination of all of these efforts are critical to our success going forward.
The improvements in execution our employees deliver constantly across many fronts is what allows us to continuously improve margins.
After successfully completing the planned maintenance outage at the Jackson mill during the third quarter, the mill restarted with the number 1 machine making corrugated medium rather uncoated freesheet grades, utilizing a mix of Virgin Kraft and DLK fiber based on the needs of our customers.
This was required to help meet continued strong demand from our box plant customers, meet our targeted inventory levels prior to year-end, and help supply the needs of our box plant acquisition that we anticipate acquiring later this quarter.
Similar to the number 3 machine at Jackson, the smaller number 1 machine is highly efficient.
It's a versatile machine and with minimal capital required to repurpose a deinking plant to handle DLK.
The machine was very quickly able to produce high-quality medium for the box plants.
Although still capable of producing uncoated freesheet products, we plan to continue producing medium on the machine over the next several months as our internal and external packaging demands warrants.
This gives us the opportunity to further evaluate the machine's capabilities and to process -- and process changes that might be required to potentially produce medium permanently in a cost-effective manner.
We'll also use the period to further refine our estimates and assumptions to fully understand the potential of the entire mill to produce containerboard on both machines at their optimal cost and quality.
This will also allow us to evaluate our strategic containerboard supply capabilities for providing the necessary runway to grow our Integrated Downstream box demand.
We are committed to being fully integrated and we have a track record of ramping up our internal capacity according to our customers' demand requirements.
The previously announced conversion of the J3 machine to linerboard remains on track with no changes to the schedule we discussed on last quarter's call.
We will continue to serve our paper customers with both machines at our International Falls mill, which is capable of producing all of Jackson's paper grades as well as available inventory produced on the number 1 machine at Jackson.
We continue to get excellent realization from the implementation of our previously announced price increases across all product lines.
Domestic containerboard and corrugated products prices and mix together were $1.40 per share above the third quarter of 2020 and up $0.55 per share compared to the second quarter of 2021.
Export containerboard prices were up $0.18 per share compared to the third quarter of 2020 and up $0.06 per share compared to the second quarter of 2021.
As Mark mentioned, we achieved a new all-time record for containerboard shipments with continued strong demand in our box plants as well as our domestic and export containerboard markets.
We had record third quarter corrugated products shipments, which were up 2.3% in total and per workday over last year's very strong third quarter.
Through the first three quarters of 2021, our box shipment volume is up 6.7% on a per day basis versus the industry being up 4.5%.
In addition to supplying the record internal needs of our box plants, our outside sales volume of containerboard was 73,000 tons above last year's third quarter and 37,000 tons higher than the second quarter of 2021.
Regarding our third quarter demand and our outlook, I'd like to reemphasize some points I made on previous earning calls and what Mark alluded to earlier, the same issues that impact our ability to get more volume out of our box plants like labor shortages, truck availability, driver shortages, raw material availability issues, and supply chain bottlenecks also persist with our customers.
They are telling us they have higher demand and could ship more if not for these issues.
There is no doubt we view demand is strong and we expect this to continue even with the economic obstacles most companies are facing.
And keep in mind the fourth quarter will have three less shipping days in the third and fourth quarter comparisons will be against last year's all-time quarterly record for the industry.
Regarding the box plant acquisition, Mark mentioned, last week we entered into a definitive agreement to acquire substantially all of the assets of Advanced Packaging Corporation, an independent corrugated products producer in a cash-free transaction.
Under the terms of the agreement, PCA will acquire a modern full line 500,000 square foot corrugated products facility located in Grand Rapids, Michigan.
The transaction is structured as a purchase of assets, resulting in a full step-up of the assets to fair market value.
This acquisition is consistent with one of the key strategic focus areas we have discussed many times regarding increasing our vertical integration of containerboard through organic box volume growth and strategic box plant acquisitions.
After completion of the acquisition, our containerboard integration is expected to increase by almost 80,000 tons.
This also will allow for further optimization and enhancement of our mill capacity and box plant operations, as well as other benefits and synergies that we expect to begin realizing soon after closing.
Although we won't get into financial details at this point, we expect the acquisition to be accretive to earnings immediately with a bottom line purchase price multiple similar to the average of our last four acquisitions.
Closing subject to certain customary conditions and regulatory approval is expected later this quarter and we will finance the transaction with available cash on hand.
Advanced Packaging is a well-capitalized full service provider of corrugated packaging products, including high-end graphics, retail displays, sustainable shipping containers, and protective packaging.
They utilized started state-of-the-art technology, structural and graphic design, and engineering capabilities, and an ISTA certified test laboratory to provide customers a solution for nearly any packaging need.
With the commitment to continuous improvement, innovation and safety in their operations, Advanced Packaging is a great strategic fit for PCA and our culture with an excellent management team, highly skilled and dedicated employees, and an outstanding reputation in the marketplace.
Looking at the Paper segment.
EBITDA excluding special items in the third quarter was $18 million with sales of $150 million or 12% margin compared to third quarter 2020 EBITDA of $17 million and sales of $178 million or 9% margin.
Prices and mix were up 4% from last year's third quarter and also moved 4% higher from the second and into the third quarter of 2021 as we continue to implement our previously announced price increases.
As we mentioned last quarter, we finished goods inventory now at optimal levels for the paper business, sales volume, which was 19% below last year's level, is fairly reflective of our production capability.
As I said earlier, while the Jackson number 1 machine is running medium, we will continue to service our paper customers' needs from both of the International Falls machines, which are capable of producing all of the Jackson paper grades.
While we've maintained our capability to produce uncoated freesheet on both machines at Jackson, we'll will continue to monitor market conditions and run our paper system accordingly.
Cash provided by operations during the quarter totaled $284 million with free cash flow of $134 million.
The primary payments of cash during the quarter included capital expenditures of $150 million, common stock dividends totaled $95 million, $68 million for federal and state income tax payments.
Pension and other post-employment benefit contributions of $51 million, and net interest payments of $7 million.
During the third quarter, we issued $700 million of 30-year, 3.05% notes and used the proceeds from these notes to redeem our 4.5%, $700 million, 2023 notes in early October.
This transaction will lower our average annual cash interest rate from 3.8% to 3.4%, lower our annual interest expense by $11 million per year, and extend our average debt maturity from 8.5 years to 16.3 years.
Based on the timing of closing the new bonds in September and the redemption of the old bonds occurring in October, our quarter-end cash on hand balance included the new bond proceeds.
Excluding this transaction, our quarter-end cash on hand balance was just over $1 billion or $1.2 billion, including marketable securities with liquidity at September 30th of $1.5 billion.
Our planned annual maintenance expense for the quarter is still expected to be about $0.41 per share or about $0.06 per share primarily due to the DeRidder mill outage.
This will result of negative impact of $0.25 per share moving from the third quarter to the fourth quarter and $0.18 per share higher than last year's fourth quarter.
Finally, as Mark mentioned previously, we continue to put tremendous effort into managing certain material equipment and labor availability issues to keep our capital projects on track.
While we are managing to keep the key milestones of our more significant projects on schedule, our capital spending across the entire company is now expected to come in below the range we provided previously.
We currently expect to end the year with total capital spending around $550 million.
Looking ahead, as we move from the third into the fourth quarter, we will continue to implement our previously announced price increases for domestic containerboard, corrugated packaging, and paper and will also expect average export containerboard prices to move higher.
Packaging segment volume will be lower due to three less shipping days, as well as the scheduled outage at our DeRidder mill and Paper segment volume will be lower as the Jackson mill is not expected to produce any paper grades.
With higher energy prices and anticipated colder weather, energy costs will increase.
Wood costs, especially in our Southern mill system, will be higher due to the previous wet weather.
Low-inventory and high-demand will also impact wood.
We also expect inflation to continue with most of the other operating and converting costs along with higher freight and logistics expenses.
And lastly, as Bob mentioned, we expect scheduled outage cost to be approximately $0.25 per share higher than the third quarter.
Considering these items, we expect fourth quarter earnings of $2.04 per share.
With that, we'd be happy to entertain any questions.
The statements were based on current estimates, expectations and projections of the company, and involve inherent risks and uncertainties, including the direction of the economy and those identified as risk factors in our Annual Report on Form 10-K and in subsequent quarterly reports on Form 10-Q filed with the SEC.
And with that, Josh.
 Assistant:

Chosen response:
packaging corp of america sees q4 earnings per share of $2.04.
sees q4 earnings per share $2.04.
q3 earnings per share $2.69 excluding items.
expect inflation to continue with most of other operating & converting costs,alongwith higher freight and logistics expenses.
expect average export containerboard prices to move higher.
with higher gas prices and anticipated colder weather, energy costs will increase.
wood costs, especially in co's southern mills, will be higher due to previous wet weather, low inventory and high demand.


Prompt:
Human: I'm Mark Kowlzan, Chairman and CEO of Packaging Corporation of America.
And with me on the call today is Tom Hassfurther, Chief -- Executive Vice President, who runs the Packaging business; and Bob Mundy, our Chief Financial Officer.
I'll then wrap things up and we'd be glad to take questions.
Yesterday, we reported fourth quarter 2020 net income of $124 million or $1.30 per share.
Excluding the special items, fourth quarter 2020 net income was $127 million or $1.33 per share compared to the fourth quarter of 2019's net income of $163 million or $1.71 per share.
Fourth quarter net sales were $1.7 billion in both 2020 and 2019.
Total company EBITDA for the fourth quarter, excluding special items, was $293 million in 2020 and $335 million in 2019.
Fourth quarter net income included special items of $3 million primarily for facilities closure and restructuring costs.
In addition, we also reported full year 2020 earnings excluding special items of $550 million or $5.78 per share compared to 2019's earnings excluding special items of $726 million or $7.65 per share.
Net sales were $6.7 billion in 2020 and $7 billion in 2019.
Excluding the special items, total company EBITDA in 2020 was $1.23 billion compared to $1.45 billion in 2019.
Excluding special items, the $0.38 per share decrease in fourth quarter 2020 earnings compared to the fourth quarter of 2019 was driven primarily by lower prices and mix in our Packaging segment of $0.30; the Paper segment, $0.05; lower volumes in our Paper segment of $0.27 and higher scheduled maintenance outage costs of $0.08.
High demand for trucks due to low inventories along with driver shortages and rail rate increases drove higher freight expenses of $0.07 and our tax rate was $0.05 per share higher primarily due to some of the benefits we had in 2019 that were not repeated in 2020.
These items were partially offset by higher volumes in our Packaging segment of $0.40 per share and excellent management of costs during the quarter, which resulted in lower operating costs of $0.01 and lower other costs of $0.03 per share.
Looking at the Packaging business.
EBITDA excluding special items in the fourth quarter of 2020 of $303 million with sales of $1.54 billion resulted in a margin of 20% versus last year's EBITDA of $303 million and sales of $1.46 billion or a 21% margin.
For the full year 2020, Packaging segment EBITDA excluding special items was $1.2 billion with sales of $5.9 billion or 21% margin compared to full year 2019 EBITDA of $1.3 billion with sales of $5.9 billion or 22% margin.
Demand in our Packaging segment remained very strong as sales volumes in both the containerboard mills and the corrugated products plants set all-time records.
Although we were able to replenish some inventory during the quarter by postponing a large discretionary outage at the DeRidder mill and utilizing the Jackson mill for additional containerboard production, we again ended the period with inventory levels lower than planned and at a new low from a weeks of supply standpoint due to much stronger-than-expected demand.
As we mentioned on the last quarter's call, during the fourth quarter, we did begin producing high-performance virgin linerboard on the number three machine at Jackson, Alabama to help meet the continued strong demand from our box plant customers and also to build some much-needed inventory prior to the year-end.
The machine's capabilities met our expectations for the quarter, producing excellent quality, lightweight, high-performance grades for the months of November and December.
Although as we said previously, these tons are currently at a very high cost, we were able to refine our previous studies and assumptions in order to more accurately estimate the future capital investment and process changes required in a phased approach to fully utilize the potential of the mill to produce containerboard at an optimal cost and quality.
In order for us to address our strategic integrated containerboard supply needs capable of providing the necessary runway to grow our downstream box plant demand, this analysis along with other options we've been evaluating will be reviewed by the Board of Directors in our February meeting.
We'll then be able to discuss this further with you.
As Mark mentioned, our corrugated products plants established new all-time quarterly records for total box shipments up 9.9% compared to last year's fourth quarter as well as shipments per day up 11.7% compared to last year.
Said another way, although there were three less shipping days this quarter compared to the third quarter, our total fourth quarter shipments exceeded the third quarter by 2.2%.
For the full year, annual corrugated shipment records were set as well, both in total and per day, up 5.8% and 5.4%, respectively, with one more shipping day compared to 2019.
Outside sales volume of containerboard was 16,000 tons below last year's fourth quarter as we ran our containerboard system to supply the record needs of our box plants.
Domestic containerboard and corrugated products prices and mix together were $0.31 per share lower than the fourth quarter of 2019 and down $0.11 per share versus the third quarter of 2020 primarily due to a less rich mix as the graphics and point-of-purchase display business as well as the produce business in the Pacific Northwest tails off during this period.
Export containerboard prices were $0.01 per share above both the fourth quarter of 2019 as well as the third quarter of 2020.
As expected, late in the quarter, we began to see the initial benefit of our recently announced Packaging segment price increases.
While we don't comment on forward pricing specifics, we would expect to realize the vast majority of the increases during the first quarter of 2021.
Looking at the Paper segment, EBITDA excluding special items in the fourth quarter was $10 million with sales of $156 million or 6% margin compared to fourth quarter 2019 EBITDA of $53 million and sales of $244 million or a 22% margin.
For the full year 2020, Paper segment EBITDA excluding special items was $73 million with sales of $675 million or an 11% margin compared to the full year 2019 EBITDA of $213 million with sales of $964 million or a 22% margin.
Market conditions in the Paper segment continued to be challenged due to the nationwide responses to help control the spread of the pandemic.
As expected, sales volume was below seasonally stronger third quarter levels and over 30% below the fourth quarter of 2019.
As mentioned previously, with the scheduled outage at our International Falls mill, the Jackson mill was restarted on white paper in October and produced both paper and containerboard during the fourth quarter.
We'll continue to assess our outlook for paper demand and optimal inventory levels and will run our paper system accordingly.
Average paper prices and mix were 1% below the third quarter of 2020 and approximately 3% below the fourth quarter of 2019.
For the fourth quarter, we generated cash from operations of $271 million and free cash flow of $103 million.
The primary uses of cash during the quarter included capital expenditures of $168 million.
Common stock dividends totaled $75 million, $51 million for federal and state income tax payments and net interest payments of $40 million.
We ended the year with $975 million of cash on hand or just over $1.1 billion, including marketable securities.
Our liquidity at December 31 was just under $1.5 billion.
For the full year 2020, cash from operations was $1.03 billion.
We had capital spending of $421 million.
Free cash flow was $612 million.
Our final recurring effective tax rate for 2020 was 25% and our final reported cash tax rate was 18%.
Regarding full year estimates of certain key items for the upcoming year, we expect total capital expenditures to be between $500 million to $525 million, which excludes any potential capital spending related to the Jackson conversion since that is still being evaluated, as Mark indicated earlier.
DD&A is expected to be approximately $407 million.
Pension and post-retirement benefit expense of approximately $2 million, which is net of a nonoperating pension benefit of almost $20 million primarily due to our pension asset performance in 2020.
We also expect to make cash pension and post-retirement benefit plan contributions of $52 million.
Based on the recent 27% increase to our dividend, we expect dividend payments for the year of $380 million.
Our full year interest expense in 2021 is expected to be approximately $95 million and net cash interest payments should be about $93 million.
The estimate for our 2021 combined federal and state cash tax rate is about 20.5% and for our book effective tax rate, approximately 25%.
Currently, planned annual maintenance outages at our mills in 2021 will result in approximately 81,000 less tons of containerboard production compared to 2020.
The annual earnings impact of these outages, including lost volume, direct costs and amortized repair costs, is expected to be $0.90 per share compared to the $0.65 per share we had in 2020.
The current estimated impact by quarter in 2021 is $0.10 per share in the first quarter, $0.25 in the second, $0.13 in the third quarter and $0.42 per share in the fourth.
As they've done through this pandemic, our employees demonstrated tremendous resiliency to overcome adversity in both their personal and work lives to deliver significant accomplishments throughout the company, not the least of which was running our manufacturing and office locations safely during these times of constant change and distraction.
Without question, we experienced difficulties and unique challenges during the year.
However, our employees never lost their resolve to succeed.
Our manufacturing and sales organizations continued to successfully adapt to the needs of our customers during this period of unprecedented demand in our packaging business and also effectively manage the market challenges in our paper business brought on by the pandemic as well as working through the impact of multiple hurricanes.
Our engineering and technology organization has stayed on track with the key capital projects and process improvements for our box plants and mills and our corporate staff groups found innovative solutions for remote working conditions to ensure we continue to manage the company effectively as well as perform all of the necessary administrative activities that are necessary for our employees or are required as a public company.
I'm very proud of our accomplishments and the strong partnerships we've built with our customers and suppliers over the many years.
Looking ahead, as we move from the fourth into the first quarter, our Packaging segment demand should remain strong with shipments exceeding those of last year's record first quarter.
This will require us to continue producing containerboard at our Jackson mill in addition to an appropriate amount of white paper to maintain optimal inventory levels for servicing the paper customers.
As Tom mentioned, we expect to realize the majority of our recently announced Packaging segment price increases during the first quarter and we expect average export prices to move higher as well.
However, higher freight costs are expected to continue and labor costs will be higher with annual wage inflation and timing related increases to fringes and benefits as we start the new year.
Seasonally colder weather will increase energy and wood costs.
And we also expect higher prices for recycled fiber.
Finally, scheduled outage expenses should be lower although inflation-related increases with our operating supplies and repair costs are expected to offset much of that benefit.
Shelter-in-place and lockdown conditions are constantly changing across the country.
And with the new federal administration in place, we expect that guidelines and requirements will continue to evolve.
There continues to be numerous events and actions that could significantly impact our expectations and assumptions for the upcoming quarter in both our Packaging and Paper segments.
This is true not only for the operation of our facilities but also for the needs of our customers and the availability of services and products we rely on for our -- from our suppliers.
As a result, we are not able to appropriately quantify our guidance for the first quarter.
With that, we'd be happy to entertain any questions.
These statements were based on current estimates, expectations and projections of the company and involve inherent risks and uncertainties, including the direction of the economy and those identified as risk factors in our annual report on Form 10-K on file with the SEC.
And with that, Holly, I'd like to open up the call to questions, please.
 Assistant:

Chosen response:
compname reports q4 earnings per share $1.30.
q4 earnings per share $1.33 excluding items.
q4 earnings per share $1.30.
q4 sales $1.7 billion versus refinitiv ibes estimate of $1.73 billion.


Prompt:
Human: I'm standing in for Tracy today.
The supplemental document is available on our website at prologis.com under investor relations.
These statements are based on current expectations, estimates and projections about the market and the industry in which Prologis operates as well as management's beliefs and assumptions.
And in accordance with Reg G, we have provided a reconciliation to those measures.
Tom, will you please begin?
The fourth quarter closed out a year of record-setting activity across our business.
Core FFO was $1.12 per share, with net promote earnings of $0.05.
For the full year, core FFO was $4.15 per share, with net promote earnings of $0.06.
Excluding promotes, core FFO grew 14% year over year.
Net effective rent change on rollover accelerated to 33%, up 510 basis points sequentially and was led by the U.S. at over 37%.
Average occupancy was 97.4%, up 80 basis points sequentially.
Cash same-store NOI growth remained strong at 7.5% for the quarter and 6.1% for the full year.
I want to point out that we're modifying our in-place to market rent disclosure to standardize this metric among logistics REITs.
This collaboration is an extension of the work we've done to harmonize other property operating metrics.
We have collectively defined net effective lease mark-to-market of our operating portfolio as the growth rate from in-place rents to market rents.
This now aligns with how rent change on rollover is expressed.
Using this new definition consistently applied, our net effective lease mark-to-market at year-end jumped almost 800 basis points sequentially to 36%.
This current rent spread represents embedded organic NOI of more than $1.2 billion or $1.55 per share that we will capture without any further market rent growth.
Turning to strategic capital.
This business continues to drive tremendous growth in value.
In Q4, we completed the early wind up of our highly successful UKLV venture.
UKLV's $1.7 billion of operating assets were contributed to our PELF and PELP Ventures, we earned net promote income of $0.05 in connection with the closeout of this venture and our percentage of infinite life vehicles has consequently grown to 95% of our $66 billion of third-party assets under management.
For the year, our team raised $4.4 billion of third-party equity.
After drawing down $1.9 billion in our open-ended funds for acquisitions during the year, equity Qs stood at a record $4 billion at yearend.
On the deployment front, we had a very productive and profitable year.
Development starts totaled $3.6 billion with margins of 32%.
We continue to maintain a long development runway with a land portfolio able to support $26 billion of future starts.
Stabilizations totaled $2.5 billion with estimated value creation of $1.3 billion and average margin of 53%, both all-time highs.
Realized development gains were $817 million for the year, also an all-time high.
These results are the product of our highly disciplined team and an incredibly strong operating environment.
For our customers, the importance of the health of their supply chain and the real estate that underpins it has never been so critical.
We believe the current global supply chain challenges will continue well beyond this year.
Fortunately, the scale of our 1 billion square foot portfolio puts us in a unique position to help our customers address these current supply chain challenges.
This includes shortening construction delivery times by navigating raw material shortages and leveraging our Essentials platform to procure warehouse equipment and services, so our customers can focus on their core operations.
We're also investing in technology and talent to support our industry-leading sustainability objectives, including our efforts around renewable energy.
Market dynamics today are highly favorable and demand has never been stronger.
During the quarter, we signed 62 million square feet of leases and issued proposals on 90 million square feet.
Demand is diverse across a range of industry end customers.
E-commerce made up 19% of our new leasing this quarter, with further broadening of customer diversity.
We signed 357 new leases, with 265 unique e-commerce customers in 2021, both of which are high watermarks.
Demand is fueled by three forces.
First, overall consumption and demographic growth require our customers to expand.
Second, customer supply chains are still repositioning to address the massive shift to e-commerce as well as preparing for higher growth and service expectations.
And third, the need to create more resiliency in supply chains.
Inventory to sales ratios are more than 10% below pre-pandemic levels.
Our customers not only need to restock at this 10% shortfall but build additional safety stock of 10% or greater.
This combination has the potential to produce 800 million square feet or more of future demand in the U.S. alone.
Collectively, these forces have placed a premium on speed to market and flexibility, driving demand for years to come.
is approximately 70% pre-leased, which is well above the historical average.
We believe demand will balance out with supply in 2022, and vacancy rates will remain at record lows in both our U.S. and international markets.
Competition for limited availabilities produced yet another quarter of record rent and value growth.
In the fourth quarter, rents in our portfolio grew 5.7% globally and 6.5% in the U.S., bringing full year growth to records 18% and 20%, respectively, far exceeding our initial forecast.
This growth, paired with continued compression in cap rates, is translating to record valuation increases.
Our portfolio posted its highest quarterly value increase, rising more than 12.5% globally, bringing the full year increase to a remarkable 39%.
Now moving to guidance for 2022, here are the components on an our share basis.
We expect cash same-store NOI growth to range between 6% and 7% and average occupancy to range between 96.5% to 97.5%.
We are forecasting rent growth in our markets to be 11% in the U.S. and 10% globally.
For strategic capital, we expect revenue, excluding promotes, to range between $540 million and $560 million.
We expect net promote income of $0.55 per share for the year, almost all of which will occur in the third quarter and is driven by our PELF venture.
While a record, given the significant increase in rents and valuations, we would expect to see similar or higher promote levels in 2023.
In response to continued strong demand, we are forecasting development starts of $4.5 billion to $5 billion, with approximately 35% build-to-suits.
Dispositions will range between $1.5 billion and $1.8 billion, two-thirds of which we expect to close this quarter.
We're forecasting net deployment uses of $2.3 billion at the midpoint, which we plan to fund with $1.6 billion of free cash flow after dividends and a modest increase in leverage.
We project core FFO, including the $0.55 of net promote income, to range between $5 and $5.10 per share, representing 22% year-over-year growth at the midpoint.
Core FFO, excluding promotes, will range between $4.45 and $4.55 per share or year-over-year growth of 10% at the midpoint.
Since our Investor Forum in 2019, our three-year earnings CAGR has been 13%, excluding promotes, well ahead of the 8% to 9% CAGR forecast we originally provided.
Before closing out, I want to spend a minute on the quality of our earnings drivers and differentiators, which set Prologis apart from other real estate companies.
We continue to drive strong organic growth and aren't reliant upon external growth to achieve sector-leading results.
In fact, approximately 75% of the increase to our core FFO for 2022, excluding promotes, is derived from organic growth, principally same-store NOI and strategic capital fee-related earnings.
It's important to point out that in 2022, our strategic capital revenue, including promotes, will be over $1 billion, a new milestone.
This high-margin business generates very durable fee streams with asset management fees marked to fair values each quarter, all while requiring minimal capital.
In addition, we see growing earnings from our Essentials business, which allows us to expand our services and solutions beyond rent.
When we introduced this business back in 2018, we set a target of $300 million from procurement savings and Essentials revenue.
We will hit that target this year with more than $225 million from procurement and $75 million from Essentials.
In light of our success with procurement and the fact that we have embedded this initiative into our platform, we will not provide specific procurement reporting going forward, instead focusing on Essentials.
We also have a long development runway of $26 billion, much of which comes from our international opportunity set, positioning us for continued strong value creation well into the future.
Lastly, these differentiators are all underpinned by the lowest cost of capital among REITs and unmatched scale that minimizes operating costs.
In closing, while 2021 was a year of many records, the bulk of the benefit from the current environment will be realized in the future, providing a clear tangible runway for sector-leading growth for many years to come.
We are confident our best years are still ahead of us.
 Assistant:

Chosen response:
core funds from operations (core ffo)* per diluted share was $1.12 for quarter.
sees 2022 net earnings per diluted share $4.40 to $4.55.
sees 2022 core ffo per diluted share $5.00 to $5.10.
sees 2022 core ffo, excluding net promote income $4.45 to $4.55.


Prompt:
Human: For the fourth quarter 2021, PMT reported a net loss attributable to common shareholders of $27.3 million or $0.28 per common share, driven primarily by fair value declines in its interest rate sensitive strategies.
These impacts were partially offset by strong returns in our credit sensitive strategies, which consist of investments in GSE credit risk transfers and investments in non-agency subordinate bonds.
During the quarter, we repurchased 2.2 million common shares of PMT common stock for $39 million.
PMT paid a common dividend of $0.47 per share.
Book value per share decreased to $19.05 from $19.79 at the end of the prior quarter.
Our high quality loan production continues to organically generate assets for PMT and this quarter, $17.2 billion in UPB of conventional correspondent production led to the creation of $239 million in new, low-coupon mortgage servicing rights.
We continue to create new credit investments in the form of subordinate bonds from non-agency investor loan securitizations, also sourced from PMT's production volumes.
This quarter, PMT successfully completed two securitizations with an aggregate UPB of $713 million.
In total, the fair value of PMT's investments in investor loan securitizations, net of associated asset-backed financing was approximately $87 million at the end of the year.
The origination market is projected to decline substantially in 2022.
Inside mortgage finance estimates the 2021 origination market was $4.8 trillion and current forecasts for 2022 total $3.1 trillion, a reduction of 35% year over year.
However, purchase originations are expected to remain strong at $2 trillion in 2022.
The smaller origination market, combined with significant levels of competition for conventional loans in the correspondent channel, including from the GSEs, is expected to result in headwinds for PMT's correspondent production business in the near-term.
Despite these headwinds, however, we believe PMT's scale and purchase market orientation positions it well over the long-term for continued organic asset creation.
PMT went public in July of 2009 and in our more than 12-year history we have delivered shareholder returns that have exceeded comparable REIT indices.
Additionally, our book value over the same period has remained relatively stable, with an average of $20 per share.
This performance can be attributed to PMT's organic business model led by the deep and talented management at PFSI, with years of experience successfully navigating changing mortgage markets and the associated risks.
Organic asset creation remains a competitive advantage for PMT relative to other mortgage REITs.
Combined with the platform and management team provided by PFSI, we believe PMT is uniquely positioned to capitalize on opportunities as they arise and evolve.
An example of this is our recent success aggregating and securitizing investor loans while investing in the subordinate tranches of the resulting bonds.
In fact, over the last several months we have invested in subordinate tranches of investor loan securitizations with a total UPB of over $1.5 billion.
Importantly, the most recent transactions we completed in the quarter were securitized by PMT, and we expect to be a programmatic issuer of investor and second home securitizations throughout 2022.
As we look ahead, we see additional opportunities for private label securitizations and subsequent investments for PMT, bolstered by recent GSE fee increases on certain loans as mandated by the FHFA.
Loan level price adjustments for second homes and certain high balance loans have provided incentives for originators to sell these loans through the correspondent channel for securitization, particularly to scaled aggregators like PMT, rather than directly to Fannie Mae or Freddie Mac.
Turning to CRT, PMT is a leader in lender risk share transactions with nearly $120 billion in UPB of loans sold to Fannie Mae from 2015 to 2020.
While we are not currently delivering loans into CRT transactions, we are actively engaged in discussions with the GSEs regarding the potential resumption of lender risk share investments.
We believe we are well-positioned to lead broadly on this effort given our history, platform, and expertise.
Because of the greater capital relief CRT provides the GSEs under the amended Enterprise Regulatory Capital Framework, and the additional private capital CRT provides to the housing ecosystem, we remain optimistic for the future of lender risk share.
Most importantly, the alignment of interest as acquirer and servicer of the loans should be compelling for the GSEs, given we can work directly with our borrowers in times of hardship.
On Slide 8, we illustrate the run-rate potential from PMT's investment strategies, which represents the average annualized return and quarterly earnings potential that PMT expects over the next four quarters.
In total, we expect the quarterly run-rate for PMT's strategies to average $0.37 per share or 7.7% annualized return on equity.
This run-rate potential reflects performance expectations in the highly competitive, transitioning mortgage market.
In our credit sensitive strategies, CRT returns reflect credit spreads that have tightened over time.
In addition, we expect to increase investments in non-agency subordinate MBS at attractive returns through private label securitizations.
In the interest rate sensitive strategies, we expect more consistent returns as prepayment speeds stabilize.
In correspondent production, the expected returns reflect our view that significant levels of competition to acquire conventional loans will result in lower volumes and margins than we have experienced in recent quarters.
This analysis excludes potential contributions from opportunities under exploration, such as new investments in CRT or the introduction of new products other than investor loans.
It is also important to note important our forecast for PMT's taxable income and liquidity continues to support the common dividend at its current level of $0.47 per share over this period.
Let's begin with highlights in our correspondent production segment.
Total correspondent acquisition volume in the quarter was $32.8 billion, down 25% from the prior quarter, and down 42% from the fourth quarter of 2020.
52% of PMT's acquisition volumes were conventional loans, down from 65% in the prior quarter.
We maintained our leadership position in the channel as a result of our consistency, competitive pricing, and the operational excellence we continue to provide to our nearly 770 correspondent sellers.
Conventional lock volume in the quarter was $14.7 billion, down 50% from the prior quarter, and down 63% year over year as we maintained our pricing discipline despite significant competition for conventional loans in a smaller origination market, including the GSE cash window.
PMT's correspondent production segment pre-tax income as a percentage of interest rate lock commitments was three basis points, down from nine basis points in the prior quarter.
Acquisition volumes in January were $7.6 billion in UPB, and locks were $7.5 billion in UPB.
PMT's interest rate sensitive strategies consist of our investments in MSRs sourced from our correspondent production, and investments in agency MBS, non-agency senior MBS, and interest rate derivatives with offsetting interest rate exposure.
The fair value of PMT's MSR investments at the end of the fourth quarter was $2.9 billion, up slightly from $2.8 billion at the end of the prior quarter.
The increase reflects newly originated MSRs resulting from conventional production volumes that more than offset fair value declines and prepayments.
Similarly, the UPB of loans underlying PMT's MSR investments totaled $216 billion, up from $212 billion.
Now I would like to discuss PMT's credit sensitive strategies, which primarily consist of investments in CRT.
The total UPB of loans underlying our CRT investments as of December 31st was $30.8 billion, down 13% quarter over quarter.
Fair value of our CRT investments at the end of the quarter was $1.7 billion, down from $1.9 billion at September 30th due to declines in asset value that resulted from prepayments.
The 60-plus day delinquency rate underlying our CRT investments continued to improve and declined to 3.06% from 3.79% at September 30th.
And the outlook for our current investments in CRT remains favorable, with the current weighted average loan-to-value ratio of approximately 64% at year end, benefiting from the home price appreciation experienced in recent years.
PFSI's position as the manager and servicer of loans underlying PMT's CRT investments gives PMT a strategic advantage, since we can work directly with borrowers who have loans underlying PMT's investments that have experienced hardships.
PFSI uses a variety of loss mitigation strategies to assist delinquent borrowers, and because the scheduled loss transactions, notably PMTT1 through 3 and L Street Securities 2017 PM1, trigger a loss if a borrower becomes 180 days or more delinquent, we have deployed additional loss mitigation resources and continue to assist those borrowers at risk.
With respect to PMTT1 through 3, which comprises 6% of the fair value of PMT's overall CRT investment, if all presently delinquent loans proceeded unmitigated to 180 days or more delinquent, additional losses would be approximately $11 million.
Through the end of the quarter, losses to-date totaled $13 million.
Moving on to L Street Securities 2017-PM1, which comprises 19% of the total fair value of PMT's CRT investment, such losses will become reversed credit events if the payment status is reported as current after a forbearance period due to COVID-19.
PMT recorded $17 million in net losses reversed in the fourth quarter, as $19 million of losses reversed more than offset the $2 million in additional realized losses.
We estimate that an additional $18 million of these losses were eligible for reversal as of 31st subject to review by Fannie Mae and we expect this amount to continue to increase as additional borrowers exit forbearance and reperform.
We estimate that only $17 million of $48 million in losses to-date had no potential for reversal.
This market expectation of significant future loss reversals resulted in the fair value of L Street Securities 2017-PM1 exceeding its face amount by $12 million at the end of the quarter.
As David mentioned earlier, we continued to invest in securitizations collateralized by investor loans.
During the quarter, we added $42 million in fair value of new investor loan securitization investments and ended the year with $87 million of such investments.
In total, this year we have successfully deployed the runoff from elevated prepayments on CRT investments and on Slide 7 you can see $1.1 billion of net new investments in long-term mortgage assets offset by $1.1 billion in runoff from prepayments on CRT assets.
Additionally, we opportunistically deployed $56.
9 million to repurchase 3.1 million of PMT's common shares in 2021.
Under our current program, capital remains available for repurchases at attractive price levels.
PMT reports results through four segments: credit sensitive strategies, which contributed $33.2 million in pre-tax income; interest rate sensitive strategies, which contributed $43.2 million in pre-tax loss; correspondent production, which contributed $4.6 million in pre-tax income; and the corporate segment, which had a pre-tax loss of $14 million.
The contribution from PMT's CRT investments totaled $31.3 million.
This amount included $1.6 million in market-driven value gains, reflecting the impact of slight credit spread tightening and elevated prepayment speeds.
As a reminder, faster prepayment speeds benefit PMT's CRT investments as payoffs of the associated loans reduce potential for realized losses.
Net gain on CRT investments also included $26.9 million in realized gains and carry, $14.5 million in net losses reversed, primarily related to L Street Securities 2017-PM1 which Vandy discussed earlier, $100,000 in interest income on cash deposits, $11.7 million of financing expenses, and $200,000 of expenses to assist certain borrowers in mitigating loan delinquencies they incurred as a result of dislocations arising from the COVID-19 pandemic.
PMT's interest rate sensitive strategies contributed a loss of $43.2 million in the quarter.
MSR fair value decreased a total of $84 million during the quarter and included $49 million in fair value declines due to changes in interest rates, primarily due to a significant flattening of the yield curve, and $35 million of valuation decreases due to increases to short-term prepayment projections.
The fair value on agency MBS and interest rate hedges also declined by $7 million largely due to elevated hedge costs during the quarter.
PMT's correspondent production segment contributed $4.6 million to pre-tax income for the quarter.
PMT's corporate segment includes interest income from cash and short-term investments, management fees and corporate expenses.
The segment's contribution for the quarter was a pre-tax loss of $14 million.
Finally, we recognized a tax benefit of $2.6 million in the fourth quarter driven by fair value declines in MSRs held in PMT's taxable subsidiary.
And with that, I'll turn the discussion back over to David for some closing remarks.
As the market transitions to a higher rate environment, we believe the return volatility of our investments will stabilize and the competitive climate will improve as correspondent aggregators adjust capacity to the new market.
Until that takes place, we expect headwinds for the return potential of PMT's strategies.
However, there are significant investment opportunities we are pursuing in the form of private-label securitization and the potential to resume new CRT investments and we are encouraged by our continued active discussions with the GSEs and FHFA on that front.
As a public company in our 13th year of operations with a very seasoned management team, we have been disciplined through numerous mortgage cycles and have a strong track record of performance throughout our history.
We encourage investors with any questions to reach out to our investor relations team by email or phone.
 Assistant:

Chosen response:
q4 loss per share $0.28.
book value per common share decreased to $19.05 at december 31, 2021 from $19.79 at september 30, 2021.


Prompt:
Human: Jim Hatfield, Chief Administrative Officer; Daniel Froetscher, APS' President and COO; Barbara Lockwood, Senior Vice President, Public Policy; and Jacob Tetlow, Senior Vice President, Operations, are also here with us.
First, I need to cover a few details with you.
It will also be available by telephone through May 12, 2021.
2021 has started off in line with our financial expectations.
And so, before Ted discusses the details of our first quarter results, I'll provide a few updates on our recent operational and regulatory developments.
And I'll also touch on our progress toward achieving our 2021 goals.
Spring is an important time of year for our summer preparedness work.
And while we've always had a robust summer preparedness program, resource adequacy has recently become a more visible topic, given the events in neighboring states over the past year.
To serve our customers with top-tier reliability, each year we perform preventative maintenance, emergency operation center drills, acquire critical spare equipment, conduct fire mitigation line patrols and execute a comprehensive plan to support public safety and first responders.
We're also procuring an additional 450 megawatts of seasonal peaking capacity, including hydro power, and we expanded our contract up to 60 megawatts for demand response from our commercial and industrial customers to help ensure that we've got adequate resources through the 2021 summer season.
Our procurement process is another important way that we help ensure long-term resource adequacy.
Last year, we announced the addition of 141 megawatts of battery storage to be located on six of our APS-owned solar sites.
Development has begun and this project is on track to meet the expected 2022 in-service date.
We also announced two RFPs last year, including an all-source RFP and a battery RFP.
The response to these solicitations was robust and we're in the process of reviewing the proposals.
We expect to narrow the potential projects under review to a smaller pool soon.
On the regulatory front, the Commission continues to evaluate the clean energy rules preliminarily approved last year.
In fact, the Commission is scheduled to discuss the clean energy rules at their open meeting today.
The Commission may hold their final vote today or they may choose to continue the discussion.
For our rate case, the hearing concluded in March and initial briefs were filed on April 6 and reply briefs were filed on April 30.
The ACC is scheduled to discuss at their open meeting today whether to reopen the evidentiary record in our pending case to include additional evidence, including evidence regarding adjusted cost recovery mechanisms.
We believe the rate case record is sufficient and that adjustors provide substantial benefit to customers by supporting both critical programs and reflecting changes in utility cost that can be properly passed on to customers.
Pending this decision, the next steps in this rate case are that the administrative law judge will issue a recommended opinion and order and the Commission will schedule the case for an open meeting to vote.
We currently expect a decision on the rate case will be issued during the third quarter of 2021.
Turning to our 2021 goals.
On the fourth quarter 2020 earnings call, we highlighted improving our customer communication and engagement, enhancing our regulatory relationship and continuing to execute our clean energy commitment as three key priorities.
We've made progress toward these objectives during the first quarter, but we recognized there is more work to do.
Customer enrollment in our Cool Rewards program surpassed 36,000 connected smart thermostats.
We're also working on a customer bill redesign project to simplify customer bills.
And a lot of the work that we're doing in the customer communication and education space is the result of collaboration with an input from our customer advisory and our stakeholder advisory boards.
I can say, we truly appreciate the individuals and organizations that participate in these forums and they provide us with tremendous feedback.
In the regulatory space, we appreciate the Commission's balanced decision to implement our annual power supply adjusted rate change, 50% in April and 50% in November, instead of our typical February 1 implementation date.
This decision recognizes and balances the ongoing COVID impacts on customers providing rate gradualism and helping to ensure that the company remains financially secure.
I already covered some of the progress we've made on procuring additional clean energy.
I'm also proud to share that the US Environmental Protection Agency selected APS as a 2021 Energy Star Partner of the Year in recognition of our demand-side management programs.
These programs contributed to our overall 2020 energy efficiency savings of nearly 586,000 megawatt hours and they will contribute to reducing lifetime carbon emissions by an estimated 2.1 billion pounds.
In addition, we continue to explore partnerships with our customers to expand our microgrid offerings.
I'll close my comments by sharing that Daniel Froetscher, President and Chief Operating Officer, will retire this August after serving nearly 41 years with the company.
Daniel has been instrumental in the success of this company over the past four decades.
In particular, he served as a respected and admired leader both within the companies and in the communities that we serve and as a mentor to many.
I can't express in words my gratitude and appreciation for Daniel's contribution.
I join my colleagues in congratulating Daniel on his retirement.
As Stephanie mentioned, Jacob Tetlow, Senior Vice President of Operations, is here today and he'll be joining our earnings calls going forward.
Jacob has a wealth of experience in both transmission and distribution operations and fossil generation here at APS.
And Jacob's extensive experience as well as the company's robust succession planning position us well to continue operating with top-tier reliability.
With Jeff having covered our operational and regulatory updates, I'll cover our first quarter 2021 financial results.
I'll also provide additional details around our customer and sales growth.
2021 started strong, earning $0.32 per share compared to $0.27 per share in the first quarter of 2020.
Higher pension and other post-retirement non-service credits, higher transmission revenue and weather, all contributed to the increase in earnings, partially offset by a higher operations and maintenance expense due to higher planned outage expense compared to the prior year period.
We also experienced 2.1% customer growth and positive weather-normalized sales growth, both within our expected guidance for the first quarter compared to the same period in 2020.
Economic development continues to support our customer and sales growth as headlines regarding new companies moving to our state are becoming even more frequent.
Chris Camacho, the Greater Phoenix Economic Council President and CEO, said the organization is working with 291 companies that are considering relocating or expanding in the Phoenix area.
To support the expansion of businesses, Phoenix is projected to add 18.4 million square feet of new industrial space in 2021, placing the valley second nationwide after Dallas according to a study by CommercialSearch.
This represents a 76% increase over last year for industrial construction.
The influx from business for relocation also adds to the residential population growth we have experienced.
Turning to our financial health.
We are following the status of President Biden's infrastructure and tax plan, including the potential for new tax incentives and we'll integrate any necessary changes to our resource procurement plans and capital if the proposal passes.
With regard to the potential for a corporate tax rate increase, we are well positioned to address future changes through our existing TEAM adjustor mechanism.
As an update on our customer delinquent account balances, the cumulative total dollar amount of all residential accounts in arrears has decreased 30% since December 31, 2020.
We see this trend continuing as customers are paying down past due balances.
We expect the Commission's preliminary vote at the April open meeting to implement a permanent summer disconnect moratorium will result in this continuing trend of increasing delinquent balances through the summer and decreasing balances after the expiration of the annual moratorium.
For 2021, we expect the increased bad debt expense associated with the summer disconnect moratorium and COVID-19 disconnect moratorium will result in a negative impact to our 2021 operating results of approximately $20 million to $30 million pre-tax compared to prior years that did not have a disconnect moratorium.
This is consistent with the results we experienced in 2020.
Including the impacts from COVID and the summer disconnect moratorium, we continue to maintain a strong balance sheet, solid investment grade credit ratings, a well-funded pension and sufficient liquidity.
In addition, our focus and progress on cost saving initiatives continues to result in improvements.
As a recent example, our supply chain team installed a new inventory optimization software.
The software uses scenario-based service level-driven methodologies to establish optimal inventory policies.
Since implementation in August of last year, this software has reduced our inventory by nearly $9 million, which mitigates potential inventory write-off risk in the future.
Our Lean efforts continue for managing costs, combined with the key initiatives Jeff highlighted for 2021.
They all support our commitment to provide long-term value to both shareholders and customers.
 Assistant:

Chosen response:
compname reports q1 earnings per share of $0.32.
qtrly earnings per share $0.32.


Prompt:
Human: First, I need to cover a few details with you.
Note that the slides contain reconciliations of certain non-GAAP financial information.
They will also be available by telephone through November 6, 2020.
We continue to navigate through the extraordinary events of 2020 and so, as part of my operations update, I'll share with you our success in managing the hottest July and August on record in the Valley.
I'll also provide an update on our regulatory dockets and our focus as we prepare for 2021.
Ted will explain our earnings expectations for the year are higher due to the significantly above average temperatures.
And so, first, I want to recognize our field team for doing an exceptional job in maintaining reliable service for our customers this summer.
The extreme heat this year contributed to a challenging energy market across the entire desert, Southwest.
The lack of available capacity and the resulting declarations of energy emergencies by other utilities across the west, served as a reminder of the importance of long-term resource portfolio planning, vigilance over day-to-day energy supply and responsible energy policy.
Our ability to avoid an energy emergency this summer was the result of careful long-term planning, resource adequacy, flexibility and innovative customer programs.
We relied heavily on our base load and fast ramping assets including Four Corners, Ocotillo and Palo Verde, and those assets were ready when we needed them.
Our fossil fleets equivalent availability factor which is the percentage of time that a fossil generation unit is available and ready to perform when called upon was 95.3% from June through September.
And Palo Verde Generating Station capacity factor for the same timeframe was 100.2%.
Not only were our generation plants there when we needed them, our customers were as well.
Out of an abundance of caution and to better prepare for potential unforeseen events, on August 18th and the 19th, we asked our customers to voluntarily conserve energy during peak hours.
It came as no surprise to me that our customers were an amazing partner.
Their response reduced peak demand on August 18th by approximately 240MW, creating a meaningful reduction on a day when the entire western grid was challenged.
In addition to successfully navigating the capacity shortfalls that were created by the heat, we also used our careful planning in close coordination with the Forest Service and first responders to mitigate the potential impact from wildfires this season.
To reduce fire risk, our teams performed vegetation management activities, we held wildfire prevention training and we continue to expand our clearance around poles program, and it was an incredibly active wildfire season with over 900,000 acres burned to-date compared to an average over the last five years of 250,000 acres.
Despite the above average wildfire activity, we actually experienced minimal impact to our assets, and I think that was due in part to our effective planning and risk management program.
Despite a worldwide pandemic, a record hot summer, regional capacity shortage and wildfires, our team continues to focus on how to make lasting impacts that benefit our customers, our shareholders and the company.
Palo Verde consistently provides examples of this type of continuous improvement and forward thinking, as a recent example, Steve is a Palo Verde procurement engineer challenged our traditional procurement process and conducted a cost analysis in engineering evaluation for a micro switch replacement.
The technical evaluation allowed Palo Verde to purchase commercial grade switches at approximately 7 times lower than the alternative.
Over the next three years alone, this change is expected to save the company $2.5 million.
His leadership and innovation earned him a nomination for an EPRI Technology Transfer Award, and I can't emphasize enough that it's our team who drives the success for this company, and I'm proud to recognize Steve for his innovation.
Shifting gears to regulatory.
Staff and Intervenors filed testimony in our current rate case on October 2.
Staff's initial testimony recommended a 9.4% return on equity, and that compares to our current authorized 10% return on equity.
Staff also recommended approval of our actual capital structure at the end of the test year, that's consistent with our request and that would result in a 54.7% equity layer.
The total revenue increased recommended by staff is $89.7 million compared to our request for a $184 million increase.
We'll file our Rebuttal testimony on November 6 and Staff and Intervenors will file Surrebuttal testimony on November 20.
The hearing is scheduled to begin on December 14 and I expect it to continue into 2021.
While testimony is certainly an important part of the process and it does provide visibility in each party's priorities, we're still very early in the case and we expect that many of the issues will certainly be discussed further as the case progresses.
I do want to note that yesterday the commission voted on several amendments to a proposed energy rules package.
The amendments include new carbon reduction standard of 100% by 2050 with interim targets of 50% by 2032 and 75% by 2040.
The reductions are based on a 2016 to 2018 carbon emissions level benchmark.
The amendments also require electric utilities to install energy storage systems with the capacity equal to 5% of each utilities 2020 peak demand by 2035.
And 40% of the required energy storage must be customer owned or customer leased distributed storage.
Another approved amendment modifies the resource planning process including requirements for the ACC to approve utilities load forecast and resource plan and for utility to perform an all sorts requests for information to guide its resource planning.
Earlier this month, the commission also voted on another amendment to establish a new energy efficiency standard.
The standard requires electric utilities to implement demand side management resources equivalent to 35% of their 2020 peak load by 2030.
Eligible demand side management resources include energy efficiency, demand response and load shifting, and just importantly the commission must vote and I expect they will vote soon to approve a final energy rules package before any of these amendments can take effect.
As we look to wrap up 2020, we will continue to work with the commission on implementing a clean energy transition for the benefit of their constituents and for our customers.
Recall that we've spent an aspirational goal of 100% carbon free by 2050 and 65% clean by 2030.
To do so we'll require a strong regulatory partnership support for an organized transition away from coal and fossil fuels and regulatory and financial support for the expansion of renewables, batteries and energy efficiency within our portfolio.
I think yesterday was a strong indication of alignment with both the commission and other stakeholders to achieve a cleaner energy vision and energy future for Arizona.
Near term, our focus and priorities remain on improving our customer communications, rebuilding our regulatory relationships by reestablishing trust, moving toward a reasonable resolution of our rate case and continuing to engage with stakeholders to build alignment on priorities to support our goal of providing clean reliable and affordable service to our customers.
As Jeff mentioned, I will cover our third quarter results and the impact from weather.
I'll also provide additional details around our customer and sales growth, economic development and financing activities.
Lastly, I'll cover our expectations for the remainder of 2020.
Turning now to the third quarter.
The significant tailwind from hotter than normal weather supported earnings of $3.07 per share compared to $2.77 per share in the third quarter of '19.
July set a new record for the hottest month recorded in Phoenix until August.
August then surpassed July setting another new record for the hottest month.
The above average temperatures this quarter added $0.26 to earnings year-over-year.
For the nine months ended September 30, 2020, weather added $91 million of pre-tax gross margin or $0.61 per share year-over-year.
We also experienced 2.3% customer growth and 1.3% weather normalized sales growth in the third quarter 2020 compared to the same period in 2019.
From May 13, when business started reopening after the COVID closure period through September 30, weather normalized sales increased 1% compared to the same period last year.
We continue to see a reduction in weather normalized commercial and industrial sales of 5%, offset by an increase in weather normalized residential sales of 6% during this period.
The strength and speed of our return for positive growth numbers reflects the continued expansion of our local economy, following the full COVID closure period earlier this year.
Further evidence of our recovery can be seen in the increased number of single-family building permits and commercial construction activity.
In 2020, we expect a total of 32,000 housing permits, an increase of about 1,200 compared to last year and the highest number since 2006.
The labor market in Arizona has also started to gradually recover from the pandemic impacts as well.
For 2020 through the end of August the employment in Metro Phoenix decreased 1.7% compared to 5.6% across the entire US.
And while manufacturing employment Metro Phoenix decreased 1.2%, construction employment increased by 0.9%.
The ongoing growth of new businesses and residential properties and the 18 construction cranes that are currently visible here in Downtown Phoenix are evidence of our continued growth.
To serve our growing customer base and support investments in clean energy, in September, we issued $400 million of 30 year 2.65% green bonds at APS.
The 2.65% coupon represents the lowest 30-year rate in the APS bond portfolio.
Turning to our full-year 2020 guidance, as a result of the above average weather, we are increasing our 2020 consolidated earnings range from $4.75 to $4.95 per share to $4.95 to $5.15 per share.
The weather benefit has more than offset the additional costs and the reduction in sales due to COVID-19.
We are also increasing our 2020 weather normalized year-over-year sales growth expectations to be between zero and 1%.
In light of the weather benefit, we have accelerated the timing of near term O&M initiatives.
For example, we're pulling forward some spend in 2020 that was previously anticipated for future years, particularly around project work and customer experience initiatives as well as one time opportunities, like our $10 million contribution to the APS Foundation, which supports our community non-profits.
Our revised 2020 O&M guidance range of $870 million to $890 million reflects these items.
While we believe this increase in O&M demonstrates prudent, planning and flexibility through this challenging year, we do remain focused on our lean initiatives and continue to see our core O&M trend down.
We are executing our plan to reduce 2020 O&M expense by $20 million, including $10 million through improved procurement and contract management activities, and another $10 million in several small operating efficiencies across the enterprise.
We also continue to partner with Arizona State University to train our workforce on lean skills and are excited about the long-term potential in continuing to streamline our business.
While we don't enter a year counting on whether it would be a driver, we do enter the year prepared to take advantage of above normal weather when it makes sense to do so.
This can help us mitigate the impacts of mild weather in future years, while also enabling our investment in certain key initiatives that improve customer experience, a focus area for our company.
Our resource planning and capital expenditure forecast have also been revised.
The delay in our clean energy procurement impacted by the McMicken investigation, slightly reduced our 2020 capital expenditure forecast by $68 million.
However, we do remain committed to our clean energy commitments that have made progress with our resource acquisition activities.
In September, we executed a 200 megawatt wind PPA with a 20-year term.
This is a repower of an existing wind facility and is expected to be fully upgraded with additional capacity in 2021.
We also plan to issue two new RFPs.
One outsourced RFP and an additional utility owned energy storage RFP at our existing solar facilities.
While it was an exceptionally hot summer, we are grateful the weather tailwind allowed us to further increase financial assistance to customers struggling to pay their bills as a result of COVID-19, and to accelerate investments that will enhance the quality of our service and maintain our record for providing top tier reliability.
As Jeff mentioned, we will continue to focus on our regulatory outcomes in the near term, while executing our long-term plan to deliver value for our customers, shareholders and community stakeholders.
 Assistant:

Chosen response:
compname says co increased 2020 consolidated earnings guidance to $4.95 to $5.15 per diluted share.
q3 earnings per share $3.07.
sees fy 2020 earnings per share $4.95 to $5.15.
increased 2020 consolidated earnings guidance to $4.95 to $5.15 per diluted share.


Prompt:
Human: Ted Geisler, CFO; Daniel Froetscher, APS' President and COO; and Barbara Lockwood, Senior Vice President, Public Policy are also here with us.
First, I need to cover a few details with you.
Note that the slides contain reconciliations of certain non-GAAP financial information.
It will also be available by telephone through February 28.
Before I review our 2019 achievements and provide operating and regulatory updates, I want to look forward to the future and share more information about our focus areas and priorities.
Our strategy is anchored by four concepts that align with industry trends and shape the way we do business.
Those concepts can most simply be stated as clean, affordable, reliable and customer-focused.
Let me talk briefly about each one.
Clean is about decarbonizing our generation mix with our new goal to deliver 100% clean carbon-free energy by 2050.
Affordable is planning and operating our business to maintain reasonable electricity prices for the people, businesses and communities we serve.
Reliable means serving our customers with dependable power safely and efficiently.
And customer-focused is about developing new solutions, products and services to meet the changing needs and expectations of our customers.
With these in mind, we created a long-term plan and targets to track our progress along the way.
First, we recently announced our goal to deliver 100% clean carbon-free electricity to customers by 2050.
This goal includes a near-term target of 65% clean energy with 45% coming from renewables by 2030 and a commitment to exit coal by 2031.
Importantly, our plan includes flexibility to ensure that we're able to execute in a way that maintains affordability for customers.
As Jim will discuss, we expect this plan will require considerable capital investment.
We believe a carbon-free future as possible while keeping customer rates over time at or below the rate of inflation with timely recovery of clean energy investments.
To support the affordability of our transition to a carbon-free resource mix, we will have a sharp focus on economic development in Arizona.
Growing our customer base, allocates these costs across more customers, which helps keep rates affordable and increase the shareholder value by growing our Company.
Supporting an internal culture focused on reducing costs and maintaining a financially strong company to access low cost capital are also key in delivering a 100% clean energy future affordably.
In the area of reliability, we believe putting the responsibility on the utility to maintain high-performing well-run resources is important.
In pursuit of our clean energy plan, we will acquire resources that appropriately balance reliability, cost and flexibility for our customers.
This includes both owning new resources and considering supplemental generation from purchase power as appropriate.
Our fourth concept reinforces that customers are at the core of what we do every day.
We're committed to providing options that make it easier to do business with us.
We plan to continue developing innovative programs that connect customers with advanced technologies to help manage their bill.
In addition, we'll be convening an advisory panel of customers to gain a deeper understanding of the customer experience through individual perspective, so a little design basis thinking.
As we work to execute in all these strategic areas, we'll focus on strengthening our relationships with stakeholders.
Going forward, we plan to continue working collaboratively with those who have vested interest in Arizona's future and our Company's role as the state's largest electricity provider.
For our regulators, we are committed to maintaining an open dialog, listening and ensuring transparency.
We have a lot of important work ahead of us, and we'll be sharing information about our progress as we advance through the year.
And while I'm excited about our future opportunities, I also want to recognize our team and the hard work completed last year.
We finished 2019 with our best-ever reliability performance, if you exclude outages from voluntary proactive fire mitigation efforts, and Palo Verde once again achieved a capacity factor above 90%.
Our goal to reach 100% clean carbon-free energy by 2050 is new, but our efforts to move toward a cleaner energy mix are not.
In 2019, we maintained our environmental, social and governance A rating from MSCI, and we were ranked in the electric utility sectors top quartile by Sustainalytics.
Notably, APS was one of 10 American companies and the only U.S. utility to make CDP's A List for both climate change and water security in 2019.
And we accomplished all this while reducing the average residential bill by 7.8% or $11.68 on average since January of 2018 due primarily to savings from federal tax reform and operating cost savings that have been passed on to customers.
2019 was also a busy year for our state regulatory team.
Some of the work that we began in 2019 will continue this year.
Key dockets for 2020 include our rate case, retail choice, disconnection rules and modifications to the commission's energy rules.
A number of workshops have already been scheduled to discuss these topics, and you can find a list of key dates in the appendix to our slides.
The next milestone in our rate case proceeding is May 20, the date the commission staff and other interveners file testimony.
However, I would note that commission staff has indicated that they may need an extension to watch that proceeding.
Outside of our regulated operations, our Bright Canyon subsidiary acquired minority equity stakes in two wind farms being developed by Tenaska.
The 242 megawatt Clear Creek wind farm in Missouri and the 250 megawatt Nobles 2 wind farm in Minnesota.
We expect these wind farms to be operational in Q1 and Q4 of this year, respectively.
Our objective with these investments is to gain experience in the construction, ownership and operation of wind assets, and to partner with a proven developer in Tenaska.
Our overall strategy with Bright Canyon is to develop, own, operate and acquire infrastructure within the electric energy industry.
Investments in renewables, electric transmission and microgrids represent some of the opportunities that Bright Canyon has been evaluating, and I want to emphasize that these are close adjacencies.
We will continue to pursue attractive growth opportunities consistent with our core strength.
We have ambitious goals and a talented team to achieve them.
At the officer level, I recently made changes to our organizational structure that better aligns our experience and talent to our strategic focus areas and to strengthen our succession pipeline.
I'm excited about our future, all the possibilities and the team I have the privilege of working with.
First, to the team at Palo Verde for their work on a short notice outage at Unit 3 in getting the necessary work done safely and the unit back online ahead of schedule.
And second, to our T&D Engineering and Construction team for their outstanding work on the new substations associated with the Microsoft datacenter build out.
And third, to the Arizona State Sun Devils for their win last night over 14 Oregon.
So Jim, go ahead and take it away.
Before I review the details of our 2019 results, let me briefly touch on some of the key factors from the quarter, which can be found on Slide 3.
For the fourth quarter of 2019, we earned $0.57 per share compared to $0.23 per share in the fourth quarter of 2018.
Our results were largely impacted by a one-time tax refund to customers related to the TEAM III refund and lower adjusted O&M expenses.
We also experienced another quarter of mild weather.
For the full-year 2019, we earned $4.77 per share compared to $4.54 per share in 2018.
2019 earnings reflect our growing infrastructure to support the strong Phoenix economy and 2% customer growth.
Other key items for 2019 was negative weather, which decreased gross margin by $37 million or $0.25 per share.
The negative impact was more than offset by lower O&M.
Year-over-year lower adjusted O&M expense increased earnings $0.52 per share, primarily driven by lower planned outage expenses and lower public outreach costs at the parent level.
As I mentioned last quarter, we are committed to enhancing our customer and shareholder value through cost management.
The implementation of Lean Sigma will be the mechanism that allows us to improve the customer and employee experience while eliminating waste.
As a result of our cost management efforts, we made great strides in reducing O&M in 2019, allowing us to reach the low end of our original guidance range, despite the mildest Metro Phoenix cooling season on 10 years.
We expect to continue our cost savings efforts by reducing O&M approximately $20 million in 2020.
As Jeff mentioned in his comments, we are on a path to deliver 100% clean carbon-free electricity.
Part of that plan includes ending our use of coal-fired generation seven years earlier than previously projected.
As a result, the reduction in fuel costs as we use less fossil fuels and more renewables will be a source of cost savings to our customers in the future.
Our journey to a carbon-free future will require intelligent investments in renewable resources and developing technologies.
As you can see on Slide 14, we rolled forward our capex forecast for one year.
Our 2022 capex forecast reflects nearly $800 million of investment related to new clean generation resources and reflects our conservative mix of owned resources.
While we don't know the exact mix of ownership versus purchase power at this point, we will need an appropriate mix to ensure long-term value and reliability for customers.
That said, we believe there is potential upside to our capital investments, especially as we get past 2022.
As Jeff alluded to, customer affordability will be top of mind.
We would expect customer rates to increase no more than the rate of inflation over time.
In terms of financing our clean energy future, we would expect that we will issue equity sometime after 2020.
While the exact amount has not yet been determined, we would expect the amount to be in the $300 million to $400 million range.
The timing of the offering around the next rate case minimizes dilution and is ultimately accretive for our shareholders.
Our financial health, including a solid equity layer, will continue to provide our customers the benefits of low-cost access to capital and competitive returns to our shareholders.
In 2020, we expect to issue up to $1 billion of term debt at APS and $450 million that Pinnacle West.
Overall liquidity remain strong.
In the fourth quarter, APS issued $300 million of new 30-year unsecured debt at 3.5%.
We used the proceeds to repay commercial paper and to fund a $100 million of our $250 million par value 2.2% notes which matured in mid-January.
At the end of the fourth quarter, Pinnacle West had a $115 million of short-term debt outstanding and APS had no short-term debt outstanding.
Due to the tax benefits associated with both the TEAM Phase II and Phase III and optimized use of income tax incentives, our effective tax rate for 2019 was a negative 2.9%.
We anticipate an effective tax rate in 2020 of 14%.
Continued use of income tax incentives, including tax credits associated with clean generation investments, will reduce cash taxes in the year projects -- our projects are placed in service.
A quick note on pension.
The funded status of our pension remains healthy at 97% as of year-end 2019.
This is due to strong portfolio returns during 2019, continued contributions and the continued success of our liability-driven investment strategy, which has helped mitigate risk to our benefit plan funded status.
2019 was a great year for economic development in our service territory.
We saw high-profile data centers and manufacturing plants break ground in the West Valley.
We successfully connected two new data centers to our power grid included in the Microsoft data center and begin prep work to add an additional six data center feeds in 2020.
In addition to growth from the commercial sector, Arizona is benefiting from residential population growth.
According to a December 2019 report from the U.S. Census Bureau, Arizona ranked third in population growth behind Texas and Florida.
Arizona's population grew by approximately 120,000 people between July 2018 and July 2019.
Reflecting the steady improvement in economic conditions, APS' retail customer base grew 2.2% in the fourth quarter of 2019.
We expect that this growth rate will continue in response to the economic trends in our service territory.
The Metro Phoenix area continues to show strong job growth and has consistently been above the national average.
In 2019, employment in Metro Phoenix increased 2.9% compared to 1.6% for the entire U.S. Construction employment in Metro Phoenix increased by 9.6% and manufacturing employment increased by 5.2%.
According to the U.S. Bureau of Labor Statistics, Arizona's job growth ranked second in the nation in 2019.
The Metro Phoenix residential real estate market has also continued its upward trend.
In 2020, we expect a total of 31,100 housing permits, driven by both single-family and multifamily permits.
We continue to expect Pinnacle West's consolidated earnings for 2020 to be in the range of $4.75 to $4.95 per share.
A complete list of key factors and assumptions underlying our 2020 guidance can be found on Slide 6 and 7.
In closing, our long-term rate base growth outlook remains intact at 6% to 7% and we expect to achieve a weather-normalized annual consolidated earned return on average common equity of more than 9.5% in 2020.
The new year is off to a great start with the announcement of our bold clean energy plan, coupled with organic growth in our service territory.
We are excited to embark on a path that will help create a healthy and prosperous Arizona that benefits our customers, communities and shareholders.
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Chosen response:
compname reports qtrly earnings per share of $0.57.
pinnacle west capital corp - qtrly earnings per share $0.57.
pinnacle west capital corp - reaffirms 2020 estimated consolidated earnings will be within a range of $4.75 to $4.95 per diluted share.