Prompt:
Human: Joining me on the call today are President and Chief Executive Officer, Lynn Bamford; and Vice President and Chief Financial Officer, Chris Farkas.
These statements are based on management's current expectations and are not guarantees of future performance.
As a reminder, the company's results include an adjusted non-GAAP view that excludes certain costs in order to provide greater transparency into Curtiss-Wright's ongoing operating and financial performance.
Also note that both our adjusted results and full year guidance exclude our build-to-print actuation product line that supported the 737 MAX program as well as our German valves business, which was classified as held for sale in the fourth quarter of 2020.
I'll begin with the key highlights of our third quarter performance and an overview of our full year 2021 outlook.
Starting with the third quarter highlights.
We experienced a strong 12% increase in overall sales, of which 4% was organic.
Our A&D markets improved 15%, reflecting solid growth in commercial aerospace, naval defense and yet another quarter of strong performance from our PacStar acquisition.
Having just completed its first year under Curtiss-Wright's ownership, I'm pleased to report that PacStar is executing very well, and its integration remains on track.
The business is well positioned for continued strong top line growth and is closely aligned with the Army's top modernization priorities.
Turning to our commercial markets.
We experienced strong year-over-year growth, which was led by both our industrial vehicle and process markets as these industries continue to sharply rebound.
Looking at our profitability, adjusted operating income improved 12% with adjusted operating margins strong at 17.5%, reflecting higher sales and operating income across all our segments as well as the benefits of our operational excellence initiatives.
It's important to note that this strong performance was achieved while we continue to invest strategically with a $4 million incremental investment in research and development as compared to the prior year.
As a result, we are on track to invest $12 million in incremental R&D this year to support our future organic growth initiatives.
Adjusted diluted earnings per share was $1.88 in the third quarter, which was slightly above our expectations due to the strong operational performance and the benefits of our consistent share repurchase activity.
Free cash flow was similarly strong, up 76% compared with the prior year, with strong free cash flow conversion that exceeded 125% and keeps us on track to achieve our long-term objectives.
Turning to our third quarter orders.
We achieved 13% growth, and book-to-bill exceeded onetime sales, driven by increases within each of our three segments.
Digging a little deeper, we experienced solid growth of 7% in our A&D market orders as well as a robust growth of 25% in our commercial market, providing continued support to our strong backlog.
Next, I wanted to address the global supply chain disruption on our business.
Overall, I am really proud of the team's strong execution in light of this challenging supply chain environment.
As we expected and as we indicated last quarter, our operations continued to be based with some supply chain disruptions caused by both delays in container shipments and shortages in electronic components, principally impacting sales within our A&I and Defense Electronics segment.
Thus far, these disruptions have been immaterial to our full year 2021 results, essentially limited to timing rather than lost revenues based upon the team's untiring efforts to mitigate these impacts to sales and to preserve our profitability.
We continue to aggressively manage the timing of product within our supply chain and remain encouraged by our strong backlog.
As we move forward, this remains a watch item for us.
And should we encounter further revenue pushout, we anticipate offsetting any delays through the strength of our combined portfolio.
We immediately and opportunistically began to repurchase $200 million of our stock in mid-September.
I'm pleased to report that we recently completed this program and bought back more than 1.5 million shares.
We are on track to complete at least $250 million of share repurchases in 2021, and we remain well positioned for the continued return of capital to our shareholders going forward with $350 million of remaining authorization.
Finally, turning to our full year 2021 adjusted guidance.
While we maintained our outlook for sales, operating income, margin and free cash flow, we tightened and raised the bottom end of our adjusted earnings per share guidance range.
We now expect to achieve between $7.20 and $7.35, essentially double-digit growth compared with the prior year based on our strong year-to-date performance and the benefit of our repurchase activity.
We remain very much on track to deliver strong results in 2021.
I'll begin with the key drivers of our third quarter results where we again delivered another strong financial performance with higher sales and operating income in all three segments.
Starting in the Aerospace & Industrial segment.
Sales increased 14% in the third quarter, led by strong increases in demand for our products and services in both commercial aerospace and general industrial markets.
Within the segment's commercial aerospace market, sales increased more than 20% year-over-year as we experienced improved OEM demand on Narrowbody aircraft as well as a solid increase in aftermarket sales.
We also experienced higher sales for our industrial vehicle products, including both on- and off-highway, which continue to benefit from improved demand and strong order activity.
Turning to the segment's profitability.
Adjusted operating income increased 34% while adjusted operating margin increased 240 basis points to 15.7%.
Our results reflect favorable absorption on strong sales and the savings generated by our prior year restructuring actions.
In the Defense Electronics segment, revenues increased 22% in the third quarter, principally reflecting the contribution from our PacStar acquisition.
Lower organic sales reflect the timing on various C5ISR programs in aerospace defense as we experienced a shift of about $10 million to $15 million in lower-margin system sales into the fourth quarter, which was mainly due to the global shortage and electronic components.
This segment's third quarter operating margin reflected favorable mix for our higher margin embedded computing revenues, which was more than offset by $4 million in incremental R&D investments and about $1 million in unfavorable FX.
And absent these two unfavorable impacts, this segment's third quarter 2021 operating margin would have been in line with the prior year's strong performance.
Next, in the Naval & Power segment, revenues increased 3% in the third quarter, led by higher sales of naval nuclear propulsion equipment and higher valve sales to process markets where we continue to experience strong demand.
This segment's adjusted operating income increased 4% while adjusted operating margin increased 20 basis points to 18.6%, reflecting favorable absorption on sales and approximately $2 million in restructuring savings.
It's also worth noting that we achieved higher profitability in this segment despite the wind down on the CAP1000 program in our commercial power market.
To sum up the third quarter results, overall, both sales and adjusted operating income increased 12%.
And across Curtiss-Wright, we drove 10 basis points of year-over-year margin expansion while adding $4 million in incremental R&D investments, which represents a 70 basis point headwind on our overall profitability.
Turning to our full year 2021 guidance.
I'll begin with our end market sales outlook, where we continue to expect total Curtiss-Wright sales growth of 7% to 9%, of which 2% to 4% is organic.
And while our sales guidance remains unchanged, I wanted to briefly highlight some specific dynamics within a few markets.
Starting with naval defense, our guidance remains unchanged at flat to up 2%, and we continue to see strong order activity for our nuclear propulsion equipment on critical naval platforms.
These awards not only support our outlook for overall aerospace and defense market sales growth in 2021, but also provide long-term visibility and stability for our naval defense market revenues.
Next, a few comments about our commercial markets where overall sales growth remains unchanged at 6% to 8%.
In the process market, we continue to see a solid rebound in MRO activity for our industrial valve businesses, principally to oil and gas customers.
In the general industrial market, based upon strong year-to-date growth in orders for industrial vehicle products, we are now on track to return to 2019 levels in this market by the end of 2021.
This is one year ahead of what we communicated at our May Investor Day where we previously expected to reach those levels in 2022.
Continuing with our full year outlook, we are reaffirming our sales, operating income and operating margin guidance.
We expect adjusted operating income growth of 9% to 12% and adjusted operating margin growth of 40 to 50 basis points to a range of 16.7% to 16.8%.
Diving deeper, I'd like to share a few specific reminders about our segment guidance.
I'll begin in the Aerospace & Industrial segment where we're expecting operating income to grow 17% to 21% while operating margin is projected to increase 180 to 200 basis points, keeping us on track to exceed 2019 profitability levels this year.
Next, in the Defense Electronics segment, we're maintaining our outlook for solid growth in sales and operating income despite the challenges that we've encountered in the supply chain.
As we noted earlier, we experienced a $10 million to $15 million shift in revenue from the third into the fourth quarter based upon the timing and receipt of electronic components.
We expect these delays to continue, and now expect to finish the year closer to the lower end of this segment's guidance range for sales.
It is, however, a very dynamic issue, and we're working aggressively to mitigate the impact on our business as we look to close out the year.
Regarding the segment's profitability, it's important to note that we are maintaining our outlook for operating income despite the revenue timing issues and our $8 million year-over-year increase in strategic investments in R&D.
Lastly, in the Naval & Power segment, our guidance remains unchanged, and we continue to expect 20 to 30 basis points of margin expansion on solid sales growth despite the wind down of the CAP1000 program.
Continuing with our financial outlook, where we increased the bottom end of our full year 2021 adjusted diluted earnings per share guidance to a new range of $7.20 to $7.35, which reflects growth of 9% to 12%, in line with our growth in operating income.
Our updated guidance reflects both the lower share count stemming from our ongoing share repurchase activity as well as a slightly lower interest expense where we continue to maintain sufficient capacity under our revolver for continued share repurchase, acquisitions and operational investments.
And lastly, based on strong year-to-date free cash flow generation of $128 million, we remain on track to achieve our full year free cash flow guidance of $330 million to $360 million.
I'd like to recap some of the key takeaways of our 2021 guidance where despite some caution as it pertains to the ongoing supply chain issues, we are well positioned to drive strong results for this year.
Led by high single-digit revenue growth, including the contribution from last year's PacStar acquisition, we expect to generate 9% to 12% growth in both operating income and diluted earnings per share this year.
Our 2021 operating margin guidance of 16.7% to 16.8% reflects our solid execution and ongoing focus on operational excellence.
We expect to achieve those results while investing an additional $12 million or 40 basis points in strategic R&D to facilitate future organic growth.
In addition, our adjusted free cash flow remains strong, and we are on track to achieve our ninth consecutive year of greater than 100% free cash flow conversion.
We also continue to maintain a strong and healthy balance sheet and remain committed to deploying disciplined and balanced capital allocation to support our pivot to growth.
We are focused on investing our capital for the best possible return to drive long-term shareholder value.
And in the case of our recent share repurchase announcement, we took advantage of opportunities to ramp up our activities in this area.
Meanwhile, acquisitions have been and will continue to remain the highest priority for Curtiss-Wright.
With a full pipeline of opportunities, I remain ever confident that we will effectively deploy our capital to strategically and profitably grow our business for the long term.
In summary, Curtiss-Wright is performing well, and we remain on track to deliver strong profitable growth in 2021, driven by our diversification and the strength of our combined portfolio.
Our defense backlog remains strong, particularly in naval defense.
And our commercial orders have been very resilient, reflecting book-to-bill of 1.1 times sales year-to-date.
We continue to demonstrate the highest levels of agility in response to the dynamic changes taking place in our end markets.
Altogether, this affords us the opportunity to remain on track to achieve our long-term guidance communicated at our May Investor Day.
 Assistant:

Chosen response:
q3 adjusted earnings per share $1.88.
qtrly adjusted sales of $614 million, up 12%.
qtrly new orders of $617 million, up 13%.
raised bottom end of full-year 2021 adjusted diluted earnings per share guidance to new range of $7.20 to $7.35 (previously $7.15 to $7.35).
maintained full-year 2021 sales growth of 7% to 9%.


Prompt:
Human: For the benefit of our participants, we have posted slides, which accompany our discussion.
And these slides are available on the Investor Relations page of dieboldnixdorf.com.
In the supplemental schedules of our slides, we have reconciled each non-GAAP metric to its most directly comparable GAAP metric.
Additional information on these factors can be found in the company's SEC filings.
And now I will pass the microphone to Gerrard.
We were very pleased with our results this quarter, and Jeff will get into details.
From our perspective, we are executing in line with our strategy.
We delivered stronger-than-expected orders, especially in Eurasia Banking and retail.
While revenue was in line with our pre-COVID expectations, and we continue to deliver strong year-over-year improvements in profitability.
Starting on Slide 3, I'll describe our near-term priorities.
From the earlier stages of the crisis in January, our first priority has been on protecting the health and well-being of our employees.
Our second priority is on our mission to deliver essential services as designated by the U.S. government and many other governments around the world.
Almost 100% of our banking revenue and around 65% of our retail revenue is generated from customers that are essential businesses.
I'm extremely pleased that we have consistently delivered strong service levels: banks, grocery stores, pharmacies and fuel and convenience locations, which facilitate critical day-to-day commerce.
Thirdly, we are committed to strengthening Diebold Nixdorf during this crisis.
This means leveraging the operational rigor we have forged over the past two years to drive efficiencies in our business.
It also means we are taking further steps to maintain adequate liquidity and ensure financial flexibility.
Our response to pandemic is guided by our company values, shown on the right side of the slide, which have been in place and have underpinned our progress over the past two years.
Our employees are using technology to collaborate on an unprecedented scale to meet customer needs and address business challenges.
This is taking place despite the social distancing protocols we operate under.
We're acting with a great sense of urgency and decisiveness as we seek to enhance the way we do business, for the betterment of customers and shareholders.
And more than ever, our team is stepping up to hold one another accountable.
On Slide 4, I'd like to add more color to our comprehensive response plans.
Starting with our customers and solutions.
We are delivering strong service levels, which reinforce our value proposition, even in the hardest-hit areas of the world.
In turn, our customers have affirmed our value and the criticality of the ATM and retail checkout channels.
Two recent customer quotes on this slide, one from a European grocer and the other from a large financial institution in the U.S., up to the essence of our value proposition.
And we continue to enhance our differentiation by bringing to market our DN Series next-generation banking solutions, self-checkout solutions, dynamic software and our IoT-enabled AllConnect Data Engine.
Turning to our employees.
We've gone to great lengths since early January to proactively care for their health and well-being.
We have equipped our service technicians with the appropriate protective gear and trained them on relevant hygiene and social distancing rules.
For employees and our manufacturing facilities, we have segmented our workers, intensified our cleaning rituals and are taking temperatures on a daily basis.
And for our support functions, we have provided the proper tools, resources and guidance for more than 10,000 employees to safely and productively work from home.
I'm pleased to report that our efforts are making a difference, and we are operating well in all areas of our business with no disruptions despite these circumstances.
We're also looking out for the financial health of employees as well during this tumultuous time, by establishing an employee crisis reserve fund, which is available for employees who need support, especially in markets with limited government programs.
In recognition of the tremendous efforts of our frontline service employees during this challenging time, we have provided an extra week of pay.
Additionally, our company has increased the frequency and depth of its internal communications.
In return, we're seeing strong employee engagement and resourcefulness during this crisis.
In addition, I'm pleased to see Diebold Nixdorf actively supporting our communities.
In Ohio, we've been producing face shields and shipping them to medical facilities in need.
In Germany, we started manufacturing ventilated carriages.
Our manufacturing facilities are all online and performing well.
With respect to our global supply chains, members of our response team have been vigorously engaged since January to avoid major disruptions by maintaining frequent contact with our key suppliers, monitoring safety stocks and developing contingency plans.
While COVID-19 is likely to remain as a watch item for supply chains over the coming quarters, we are currently pleased with our ability to limit the impact.
Our comprehensive response is leveraging the operating rigor, which we've created during the past two years.
We continue to efficiently manage inventory, receivables and payables, as well as indirect spend.
And we are keenly focused on maintaining adequate liquidity and financial flexibility.
After an abundance of caution, we drew the remaining amount on our revolving credit facility in March.
On Slide 5, we provided a framework for thinking about the impact of COVID-19 on Diebold Nixdorf over the medium term.
Firstly, our business model is resilient.
Underpinned by many customers, reaffirming that the ATM and self-checkout channels are vital to their business, and that our company plays a critical role in their ability to serve the needs of their customers.
Starting with our services business, which generated about 51% of total revenue in 2019, we expect a mild impact as the vast majority of our services revenues are recurring.
It comes from sticky contracts for maintaining critical ATMs and retail devices.
In the near term, we're likely to see a slowdown for installation service revenue.
Certain hardware-related projects are pushed out.
For our products business, which accounted for about 39% of revenue in 2019, we expect to see a moderate impact of certain customers postpone installation dates or defer new hardware purchases.
In the first quarter, we experienced early signs within our European retail and Eurasia Banking segments, which corresponds to the geographic spread of the virus.
And while we did not see an acceleration of these trends in April, it is reasonable to expect that product revenue declines will be more pronounced in the second quarter.
We've taken multiple steps within our manufacturing operations to create a variable cost structure to help us mitigate the impact of lower volume on our profitability.
Moving to our software business.
We generate recurring revenue from the sale of licenses and maintenance, which we expect will be very resilient.
Our project-based business, or professional services, could be affected by customers deferring initiatives, although we have experienced very limited impact to date.
The vast majority of our customers are continuing this important work.
Additionally, our software teams have done a great job of supporting customers remotely.
For these reasons, we expect a mild impact to our software revenue, which accounted for about 11% of total company revenue in 2019.
From an industry perspective, we expect our banking business, which generated approximately 74% of the company's revenue during 2019, will show greater resiliency in our retail business, due to the higher mix of services and software revenues.
So while we are confident in the resilience of our business model, we've not been standing still during this time.
We continue to take further decisive actions to strengthen Diebold Nixdorf.
On Slide 6, you will see that we continue to execute on our multiyear DN Now cost program.
We remain encouraged with our achievements, including substantial gains in profit margins during the first quarter.
We are seeing good progress from our services modernization plans and our G&A cost reduction actions, especially our finance transformation efforts.
And while COVID-19 pandemic has mildly influenced select work streams, we are continuing to pursue our gross savings target of $130 million for the year.
Additionally, the company launched incremental actions during the quarter, which cumulatively add up to another $80 million to $100 million of savings.
We have suspended capital investments on internal major projects, mostly related to the upgrading of systems.
During the quarter, we also reduced our annual bonus expense by a substantial amount.
We have deferred merit pay increases and have implemented a hiring freeze.
In several European markets, we have transitioned certain functions to shorter work weeks.
We continue to reduce indirect spend.
And based on our successful transition to remote work environment, we have reassessed our global real estate footprint and are taking decisive actions to further reduce our footprint over the coming months.
While some of these cost reductions will be temporary, others will generate long-term structural savings for our company.
Beginning on Slide 7.
First-quarter revenue of $911 million was in line with our pre COVID 19 expectation and reflects the actions we are taking to drive higher quality revenue.
In order to make useful comparisons to the prior year, we have provided a table to explain five different factors.
Our work stream for divesting noncore businesses accounted for approximately $13 million of revenue variance versus the first quarter of 2019.
Next, you can see a $17 million variance from our efforts to reduce our exposure to low-margin business with most of the impact relating to our actions to call our portfolio of lower value services contracts.
On the borrowing line, you will see a $31 million variance, which includes nonrecurring volume from the prior year period, partially offset by incremental activity in the current quarter.
These items were fully known and planned for as part of our 2020 operating plan.
We have previously communicated our expectation for year-over-year revenue declines in the first half followed by gains in the second half of the year.
With respect to foreign currency, we experienced headwinds of $23 million in the quarter as the U.S. dollar strengthened primarily against the euro and Brazilian real.
COVID-19 is the last factor on this table.
Approximately $33 million of revenue, which we expected to recognize in the first quarter of 2020, will be recognized in future periods.
This effect was predominantly in our retail and Eurasia Banking segments.
Transitioning to the right of this slide, you will see the combined efforts of higher-quality revenue and our DN Now initiatives, as non-GAAP gross profit increased $7 million year over year.
We achieved this positive result despite the effects of COVID-19 and a foreign currency headwind of approximately $7 million in the quarter.
From a gross margin perspective, we are pleased to deliver a 380-basis-point increase year over year to 27.9%.
On $911 million of revenue, this increase translates to approximately $35 million of incremental gross profit.
We are delivering significant margin increase across all three business lines, with services rising by 230 basis points, products expanding 280 basis points, and our software and gross margin increased by 1,280 basis points due to an easier comp, as well as better delivery and management of our labor costs.
Over to Slide 8.
As previously mentioned, the company is harvesting operating efficiencies and from functional G&A cost as part of our DN Now transformation.
We made good progress on our finance transformation, which includes regionalizing and centralizing activities, and introducing automation within our core finance functions.
Through the end of March, we have streamlined our organization by approximately 470 employees.
Our procurement initiative is also bearing results as we are utilizing spend analytics to reduce indirect spend.
With respect to real estate expenses, we are looking closely at our needs post COVID.
We have demonstrated a highly resilient ability to work remotely.
And accordingly, we are aggressively moving to reduce our real estate footprint.
In the past several weeks, we have decided to close greater than 50 smaller sites permanently.
When compared with the prior year, we reduced our non-GAAP operating expenses by $29 million, a decline of 13%.
Given this success, we expect to continue to deliver G&A efficiencies going forward.
As displayed on Slide 9, stronger gross margin, coupled with reductions to operating expense, boosted our operating profit by $36 million or 133% year over year to $63 million.
The operating margin expanded by 430 basis points in the quarter to 6.9%.
Our first-quarter results include a reduction to our annual bonus expense of approximately $7 million, which is just one of our incremental actions we have executed to strengthen the company during the COVID-19 period.
Adjusted EBITDA of $89 million improved by $24 million or 37% over the prior-year period.
The company's adjusted EBITDA margin expanded by 350 basis points in the quarter to 9.8%.
The next three slides provide segment-level financial information.
In order to make the year-on-year comparisons more meaningful, we introduced adjusted revenue and gross profit for the first quarter of 2019, which removes the effects of foreign currency and divestitures.
We are showing gross profit on these slides to more closely reflect how we are running the business.
However, we will continue to disclose segment operating profit in the MD&A section of our Form 10-Q.
As Gerrard mentioned earlier, Eurasia Banking delivered very strong orders in the first quarter and built up a nice backlog.
These wins included a new ATM-as-a-Service contract with Bank99 in Austria, valued at more than $20 million in a branch transformation win, valued at more than $13 million with a large Saudi Arabian financial institution.
Moving to Slide 10.
First-quarter revenue of $311 million was in line with our pre-COVID expectations.
Approximately $13 million of the revenue decline was due to our divestiture activity, while $8 million was due to our delivered actions taken in 2019 to reduce low-margin business.
Additionally, certain large hardware installations benefited 2019 revenue, which did not continue in 2020.
Delays from the COVID-19 pandemic pushed approximately $14 million of revenue into future periods.
Non-GAAP gross profit of $90 million in the quarter and a gross margin of 28.9% reflects the resiliency of this segment as we benefit from our DN Now services modernization and software excellence initiatives, as well as our intentional actions to reduce low-margin business.
First-quarter gross profit includes a foreign currency headwind of approximately $4 million versus the prior-year period.
On Slide 11, Americas Banking revenue of $345 million reflects a 3% decline, primarily due to our constant decision to exit lower margin service contracts.
Within our products revenue, we are seeing good growth from U.S. regional financial institutions, although nonrecurring projects at large banks in North America eased year over year as we had expected.
During the quarter, we were especially pleased to generate software revenue growth of 13% in constant currency.
Gross profit of $104 million for the quarter increased 30% versus the prior year due to the execution of our DN Now initiatives and a favorable customer mix.
We were pleased to expand gross margins from 22.7% to 30.3%, with meaningful contributions from all three business lines.
Key to our success was services gross margin of 32.1% for this segment, reflecting very good performance from our services modernization initiative.
Slide 12 contains financial highlights for our retail segment.
From an orders perspective, retail performed as we expected and was in line with the prior-year period.
Revenue of $256 million primarily reflects lower POS installation activity in Europe, partially offset by growth in self-checkout hardware and higher software activity.
Both results came in as expected.
The impact of the pandemic was more acute in this segment, pushing approximately $19 million of revenue out of the quarter.
Gross profit increased to $60 million, up 11% in the quarter, and gross margin improved significantly to 23.4% due to a favorable revenue mix from services software and self-checkout solutions, as well as solid progress with our services modernization and software excellence program.
Our cash flow update is on Slide 13.
As we discussed previously, the company has been consistent and are disciplined in managing our net working capital over the past several quarters.
Net working capital as a percentage of trailing 12-month revenue declined steadily over the last seven quarters, down to 13.3% in the first quarter of 2020, down from 19.1% a year ago, due primarily to more efficient management of inventory and accounts payable.
From a cash flow perspective, net working capital drove a $15 million benefit year over year.
Because of our focus, we believe the company is well prepared to manage net working capital during the current challenging economic conditions.
As communicated previously, the company typically uses cash during the first half of the year and our free cash use of $65 million in the quarter was slightly better than our expectations and slightly improved versus one year ago.
First-quarter results include an incremental $35 million of compensation-related cash payments tied to our strong 2019 performance.
Adjusting for this item, you can clearly see that we are delivering high-quality earnings in addition to our net working capital efficiencies.
Towards the bottom of the slide, we bridge our cash balances from the end of 2019 through the end of March.
We used approximately $71 million to pay down debt.
This includes our amortization payments, as well as our contractual requirement to reduce debt with at least half of our free cash flow from the prior year.
Since I have already discussed our free cash flow, the next item is cash inflow from our revolving credit facility.
We drew the entire available amount from our facility in March out of an abundance of caution in light of the evolving COVID-19 pandemic and related macroeconomic implications.
This action has almost no impact on our expected cash interest payments of approximately $170 million because the incremental interest on the revolver will largely be offset by lower LIBOR rates for other debt instruments.
An additional $89 million reduction of cash is attributed to foreign currency headwinds experienced in the quarter, plus the effect of selling our 68% stake in the German IT outsourcing business called, Portavis and one other pending transaction.
With a cash balance of $549 million at the end of March, we believe we have adequate liquidity to fund the seasonal cash flows of our business and our DN Now transformation program.
On Slide 14, we highlight our debt maturities and leverage ratio.
Our contractual debt maturities of $98 million for 2020 and $26 million for 2021 are manageable under our current liquidity model.
We continue to monitor the debt markets relative to our strategy to address our 2022 debt maturities.
At the appropriate time, we will take steps to optimize our capital structure by reducing our weighted average cost of capital, lowering interest rates and extending maturities.
To the right of the slide, we have provided our net debt to trailing 12 months adjusted EBITDA ratio for the past five quarters.
As you can see, we have steadily improved this metric and we are pleased to maintain the 4.4 times ratio in the first quarter as our adjusted EBITDA gains offset the changes to net debt.
This compares favorably to our bank covenant maximum of 7 times.
Our net debt on 31st March was approximately $1.9 billion.
Moving to Slide 15.
I will build upon Gerrard's comments about the financial resiliency of our business model and provide a few guideposts for understanding how we expect to perform under challenging macroeconomic conditions.
For your convenience, we have provided selected financial results from 2019, including revenue and gross margin for services, products and software.
We expect our services business to be resilient during this time, with a mild impact to revenue.
As previously disclosed, we expect to complete two divestitures in 2020, which generated about $110 million of services revenue for the company in 2019.
One of these transactions closed in Q1, with the other expected to close in Q2, subject to customary closing conditions.
Additionally, the software we deliver for our customers is critical to their performance, and therefore, we expect a mild impact for COVID-19 to this business line.
With respect to product revenue, we expect a moderate impact based on what we have seen thus far, as well as the company's experience from prior recessions.
Given the timing of the crisis, it is reasonable to expect a more significant impact of product revenue in the second quarter as certain product installations are expected to be delayed during country lockdowns while other hardware orders are postponed.
Our current cost structure and incremental action plans provide us with the confidence to improve gross margins during this challenging time.
We are targeting improvements to service margins due to our actions to improve the quality of revenue and execution of the services modernization plan.
For products, we expect to deliver broadly stable gross margin due to our variable cost structure and our solid performance in the first quarter, inclusive of some level of higher freight costs.
At the same time, we expect to improve our software margins versus the prior year due to better project execution and more efficient utilization of labor.
Moving to operating profit.
We expect to benefit from our DN Now initiatives and our plans for realizing approximately $130 million of savings for 2020.
And while COVID-19 is having a mild influence on select DN Now work streams, we have also launched incremental actions to generate $80 million to $100 million of savings, as Gerrard described.
These actions include: accelerating our finance transformation, streamlining indirect spend, significantly lower bonus expense and other labor savings, reduced travel and marketing expenditures and savings from our real estate and information technology initiatives.
Together with our net working capital efficiencies and cash management actions, we are targeting breakeven free cash flow for 2020.
By minimizing the uses of cash, we will maintain adequate liquidity and covenant compliance through 2020.
In summary, this leadership team has taken significant and appropriate action to strengthen the company during these challenging times.
Our accomplishment, near-term plans and company values provide us with the confidence to persevere.
We are hard at work executing these plans, and we are developing additional levers to be used as needed.
And now I will hand the call back to Gerrard for closing comments.
I'd like to conclude on Slide 16 with a few reminders about why we believe Diebold Nixdorf is well-positioned to persevere through this crisis and emerge as a stronger company.
I'll also provide a few color comments regarding April.
First, we've been designated as an essential service provider to financial institutions and retailers.
Our customers are counting on us to keep their businesses running.
And during this crisis, the criticality of the ATM channel, point-of-sale and self-checkout channels have been reaffirmed strongly.
Next, our position as a trusted technology partner produces strong recurring revenue streams, which underpins a resilient business model.
Furthermore, our leadership team has demonstrated resiliency and an ability to execute complex transformation initiatives over the past two years.
Considering DN's operational rigor and our incremental cost actions in place, we are confident in our ability to navigate the current environment and emerge as a strong company.
Before we turn over to Q&A, let me offer a few thoughts on what we saw in April.
From an order entry perspective, we are seeing a moderate slowing in hardware decisions from customers in Eurasia Banking and retail, where projects are being delayed and not canceled.
Within Eurasia banking, these delays tend to be mostly evident within smaller Tier 2 banks.
Within Americas Banking, order activity has remained largely in line with our pre-COVID expectations.
Regarding installations, we have seen some hardware installations push out, typically by several weeks as customers focus on other priorities.
In April, our factories shipped more volume than in the same period of 2019, reflecting the backlog as we entered Q2, even though we may see some implementations pushed out of Q2.
From a services perspective, we continue to be fully engaged with customers in delivering strong service levels.
And from a software perspective, we've not seen any delays in professional services projects from larger customers, but the only delays observed among Tier 2 and Tier 3 customers.
Overall, employee morale remains strong as we rally around our customers' needs and implement incremental actions to strengthen Diebold Nixdorf.
In closing, while the current operating environment is dynamic, we remain confident in our people, our mission and in the resiliency of our business.
We stand ready to support our customers as the global economic economy recovers.
Our confidence is based on the DN Now foundation we've built over the last two years, the robust plans we're executing and the tremendous response we're seeing from Diebold Nixdorf employees who are living out at company values.
 Assistant:

Chosen response:
diebold nixdorf targeting break-even free cash flow for the full year.
diebold nixdorf inc - targeting break-even free cash flow for the full year.


Prompt:
Human: We have prepared slides to supplement our comments during this conference call.
Joining me on the call today are Ed Breen, chief executive officer; Lori Koch, our chief financial officer; and Jon Kemp, president of our electronics and industrial segment.
Our 2020 Form 10-K, as updated by our current and periodic reports, includes detailed discussion of principal risk and uncertainties which may cause such differences.
Unless otherwise specified, all historical financial measures presented today exclude significant items.
We will also refer to other non-GAAP measures.
I will provide comments on another overall strong quarter, including continued advancement of our strategic priorities as a premier multi-industrial company aimed at growth and creating value for our shareholders.
As a result of the principles and protocols that we adopted over the last year, we continue to operate safely and productively on site and remotely.
We have encouraged all employees to get vaccinated, and where possible, we are working with local governments to facilitate access, including on-site vaccinations at some locations.
Our Wilmington- based office locations have fully reopened, and I have to say it is great to be back in the office with our teams.
Starting on Slide 2.
Lori will take you through the specifics but in summary, broad-based organic growth was driven by continued strength in our key end markets, including ongoing recovery in those most impacted by the pandemic.
Despite a challenging production environment with escalating raw material costs and continuous supply chain and logistics constraints, strong operating discipline and quick pricing actions resulted in about 460 basis points of margin expansion versus the year-ago period.
With strong order trends continuing and confidence in our teams' ability to continue to navigate through raw material and supply chain challenges, we are raising our full-year guidance for net sales, operating EBITDA and adjusted EPS.
I will provide more details on our updated guidance shortly.
In addition to our financial results, we continue to execute on our balanced approach to capital allocation during the quarter.
In May, we further delevered our balance sheet by redeeming $2 billion of bonds, thereby reducing our gross financial debt to $10.6 billion at the end of the quarter.
Since the end of last year, we have paid down a total of $5 billion of debt and do not have another debt maturity until the fourth quarter of 2023, which further solidifies our sound liquidity position.
We also returned approximately $800 million of capital to shareholders during the second quarter through share repurchases and dividends.
During the second quarter, we purchased a total of $640 million in shares, which includes completion of our previous share repurchase program and the start of repurchases under our new authorization announced last quarter, which expires on June 30, 2022.
Through the first 6 months of the year, we repurchased approximately $1.1 billion in shares and plan to be opportunistic with our remaining authorization as we move throughout the year.
And in July, we repurchased an additional $125 million of shares.
With respect to dividends, we returned about $160 million of cash to shareholders during the quarter.
As we previously mentioned, we intend to work with the board to increase our dividend annually as we grow earnings.
Before I close, I'm pleased to note that in late June, we closed on the previously announced divestiture of our Solamet business for approximately $190 million.
And on July 1, we completed the acquisition of Laird performance materials utilizing cash on hand.
The Laird acquisition advances DuPont's strategy of growing as a global innovation leader and strengthens our leadership position in advanced electronic materials.
Joining us today is the president of our global E&I segment, Jon Kemp.
It's an exciting transaction for DuPont that significantly advances our position in the electronics industry and accelerates the transformation of our interconnect solutions business into a total solutions provider.
We've been following Laird for several years and have admired their capabilities as a leading provider of electromagnetic shielding and thermal management solutions and are excited to have added their capabilities and history of growth to our portfolio.
As a reminder, Laird delivered $465 million of revenue with approximately 30% EBITDA margin in 2020.
E&I and Laird are both recognized for innovation, quality and reliability and have strong relationships across the electronics industry.
This combination brings together DuPont's premier applied material science expertise with Laird's industry-leading application engineering capabilities.
It also adds more content on many of the devices that we're already in.
We have already begun the process of integrating Laird into our existing interconnect solutions business, providing opportunities to further optimize business structure, functional support and our global site network.
We expect $60 million in run rate cost synergies by the end of year 3 with approximately 60% realized in the first 18 months.
We expect to achieve cost synergies through a mix of G&A, procurement and site consolidation initiatives.
On the next slide, I'll share some of the key benefits of this transaction and describe how the combination enhances DuPont's position as a leading electronic materials provider.
The second way it enhances our position is through innovation.
This acquisition strategically aligns us to critical needs across thermal management, signal integrity, power management, miniaturization and high reliability.
And it enables us to have early engagement with OEMs in both system design and material specification, creating both greater product differentiation and higher margins.
The next benefit of the acquisition is that it broadens our portfolio of solutions.
With Laird's unique multifunctional capabilities, we will leverage an expanded customer base, broad product portfolio, global scale and deep technical expertise to increase speed to market, create new efficiencies in the development of integrated and multifunctional solutions and provide high-value next-generation products that will deliver additional growth in the next several years.
We believe customers will see immediate benefits as the combined E&I organization engages across value chains to address the increasingly complex challenges in the industry.
Our combined organization will advance our leadership to help customers accelerate solutions necessary for the adoption of high-performance computing, artificial intelligence, 5G communications, smart and autonomous vehicles and the Internet of Things.
We will be well positioned to capture growth in these key secular growth areas.
I'll cover our second-quarter financial performance, beginning on Slide 5.
Our results for the quarter reflect the diversity and strength of our portfolio and our teams' continued ability to execute in the face of escalating raw material costs and global supply chain and logistics headwinds.
Net sales of $4.1 billion were up 26% versus second quarter of 2020, up 23% on an organic basis.
The organic sales growth resulted from a 20% increase in volume and a 3% increase in price.
Currency provided a 4% tailwind in the quarter, which was slightly offset by a 1% headwind as a result of non-core business divestitures in the prior year.
Overall sales growth was broad-based with double-digit growth on an organic basis in all 3 reporting segments and across all regions.
The most notable increase versus the year-ago period was in our M&M segment, reflecting the sizable change in the global automotive market versus the prior year and disciplined pricing actions.
I will provide additional color on our segment top-line results on the next slide.
From an earnings perspective, we delivered operating EBITDA of $1.06 billion and adjusted earnings per share of $1.06 per share, up 53% and about 240%, respectively, versus the year-ago period.
The earnings improvement resulted from volume gains most notably reflecting ongoing recovery in key end markets adversely impacted by the pandemic and the absence of approximately $150 million in charges associated with temporary idling certain facilities, partially offset by the absence of a $64 million gain associated with a joint venture that has since been divested.
Strong operating EBITDA leverage drove operating EBITDA margin expansion of 460 basis points.
Incremental margins for the quarter were about 43%.
Given the unique nature of 2020 and the discrete items that impacted our operating results in the prior year, it's important to evaluate our year-over-year operating performance for our core results on an underlying basis.
Specifically, operating EBITDA for our core results during the quarter was up about 40% versus last year after excluding the impact of the $150 million in idle mills incurred in the prior year, with about 240 basis points of margin expansion and operating leverage of one and a half times.
Similarly, I continue to track our growth versus 2019 given the significant impact that the pandemic had in key end markets last year.
In comparing our current second-quarter results to a more normalized performance before the pandemic, all reported sales in the quarter were up 6% versus the second quarter of 2019 and up 10% versus that same period for our core sales.
Operating EBITDA for our core results during the quarter was up 15% versus second quarter of 2019 or one and a half times leverage.
From a segment perspective, E&I delivered operating EBITDA margin of 32%, with 190 basis points of expansion driven by broad-based volume gains.
M&M delivered significant operating EBITDA improvement, driven by an overall recovery in automotive markets and the absence of approximately $130 million in charges associated with temporarily idling polymer capacity in the year-ago period.
Operating EBITDA margin for the quarter was 23%, reflecting volume growth and net pricing gains resulting from actions taken ahead of escalating raw material costs.
In W&P, operating EBITDA increased 4% versus the year-ago period.
Operating EBITDA margin and leverage were adversely impacted primarily by 2 key drivers.
First, given contractual commitments with customers, local selling price increases lagged the headwind from raw materials and supply chain cost escalation.
We expect this to resolve in the second half as price increases start to kick in.
Second, production volumes for Tyvek protective garments were at peak levels in the year-ago period given the company's response to the pandemic.
This enabled us to minimize manufacturing changeovers to other Tyvek grades, resulting in an overall increase to production rates.
As Tyvek output shifted from protective garments to multiple other applications, the resulting increase in expected changeovers in the current quarter decreased production rates, leading to lower volumes.
For the quarter, cash flow from operating activities and free cash flow were $440 million and $224 million, respectively.
While these amounts have improved since the first quarter, cash flow and conversion are not where we need them to be.
The headwinds we faced are related to increased working capital levels and capital spending in excess of D&A as we advance critical capacity expansion projects.
With respect to working capital, we saw an increase in inventories due to our efforts to create a more stable supply chain for our customers given the strong demand environment and numerous raw material and logistics constraints.
In the second half of the year, we expect higher cash flow and conversion rate as the global supply chain and logistic environment stabilizes.
Slide 6 provides more detail on the year-over-year changes in net sales for the quarter.
Organic sales were up 17% on 17% volume growth with double-digit volume growth increases in all regions.
Volume gains were led by mid-20s percent growth in Industrial Solutions, reflecting broad-based demand strength across most product lines but most notably for OLED displays for new phones and television launches, medical silicones in healthcare and Kalrez seals within electronics.
Interconnect solutions also delivered organic growth over 20% with high-teens volume growth.
The volume growth was driven by higher material content in premium next-generation smartphones, partially resulting from timing shifts as select OEM demand shifted from the second half this year, along with some share gains for printed circuit board.
Semiconductor technologies continues to benefit from strong electronics demand and advancements in key growth areas such as 5G, high-performance computing and electric vehicles.
During the quarter, new technology ramps in advanced nodes within logic and foundry and higher demand for memory in servers and data centers drove double-digit volume growth.
Continued recovery of key end markets within W&P drove organic growth of 11%, driven by volume increases.
Sales gains were led by recovery in construction with Shelter Solutions reporting organic sales growth of more than 30%, which reflects continued strength in North American residential construction for products like Styrofoam and Tyvek house wrap and in retail channels for do-it-yourself applications.
Commercial construction recorded higher sales in the quarter for Corian surfaces as global demand continues to improve.
Within safety solutions, organic sales were up high single digits, reflecting strong volume improvement for aramid fibers in industrial, oil and gas and automotive end markets.
As previously noted, lower production volumes for Tyvek reduced overall safety volume.
In water solutions, broad-based demand for water technologies remained strong.
However, logistics challenges primarily in our Ultrafiltration business impacted our ability to supply, resulting in a low single-digit volume decline versus the year-ago period.
We expect organic sales growth for the year for water solutions to be in the mid to high single digits.
The most notable increase in top-line improvement was in our M&M segment, which had organic sales growth of over 50%.
The improvement was driven by the continuing recovery of the global automotive market, which represents about 60% of the segment from an end market perspective and helped deliver strong volume growth across all 3 lines of business.
Local pricing gains of 13% also contributed to organic sales growth, reflecting our actions taken to offset raw material costs and higher metals pricing in the advanced solutions business.
Excluding metals pricing, local price was up about 8%.
Within engineering polymers, global supply constraints of key raw materials continues to improve but are expected to remain tight through the end of the year.
We continue to expect to recover lost volume related to these disruptions as the raw material constraints are alleviated.
Turning to Slide 7.
I mentioned earlier that adjusted earnings per share of $1.06 per share was up over 240% from $0.31 per share in the year-ago period.
Higher segment earnings resulted in a net benefit totaling over $0.40.
This net benefit resulted mainly from higher volumes and the absence of idle mills recorded in the prior year, offset slightly by portfolio changes, which includes the absence of the gain recorded in the prior year in corporate.
Also providing a significant benefit to adjusted earnings per share versus last year was an approximate $0.30 per share benefit due to a lower share count.
Benefit from lower interest expense in the current quarter as a result of our recent delevering actions was mostly offset by a higher base tax rate compared to last year.
Our base tax rate for the quarter of 19.8% was higher than the year-ago period due to the absence of certain discrete gains benefiting the prior year rate.
For full-year 2021, we currently expect our base tax rate to be closer to the lower end of our expected range of 21% to 22%.
Let me discuss our financial outlook on Slide 8, which includes our view of the third quarter and full-year 2021.
We are raising our full-year guidance range for net sales, operating EBITDA and adjusted EPS.
Along with the underlying improvement that we are expecting compared to our previous estimates, our revised guide also reflects the acquisition of Laird and the divestiture of the Solamet business.
At the midpoint of the range provided, we now expect net sales for the year to be about $16.5 billion and operating EBITDA to be about $4.235 billion.
Also, we now expect adjusted earnings per share to be $4.27 per share at the midpoint of the range provided, which reflects about $0.23 underlying raise to our original estimate, a $0.10 benefit from the portfolio changes and about $0.27 full-year benefit related to the amortization reporting change.
For the third-quarter 2021, we expect net sales to be about $4.2 billion, operating EBITDA to be about $1.07 billion and adjusted earnings per share to be about $1.12 per share, all at the midpoints of the ranges provided.
Before opening up for Q&A, I'd like to provide some highlights on our commitment to ESG and what we are doing to sustainably grow and operate our businesses for the long term.
In June, we published our 2021 sustainability report, which reflects our first full-year progress against the 2030 goals that we set in 2019.
Our report highlights more than 50 examples of how our teams are addressing the environmental and social needs of our customers and communities.
Some of the highlights from this report are reflected on Slide 9.
ESG is fundamental to our core long-term strategy, which is why the board of directors and I made the decision to incorporate the progress on our sustainability goals into our incentive compensation program beginning this year.
As an innovation leader, we believe our biggest lever to affect economic, environmental and social progress is through working directly with our customers.
Today, our R&D investment is focused on the intersection of key market trends and the needs of sustainable development.
One example of how we are doing this is in the area of addressing the global need for clean water.
Our water solutions business recently launched its B-Free technology.
This pretreatment solution enables a significant improvement in the reliability of reverse osmosis desalination plants.
Another example is within advanced mobility.
The broad adoption of electric vehicles is fundamental in addressing climate change.
Through leveraging our broad portfolio of expertise in battery assembly and thermal management for electric vehicles, our DuPont M&M collaborated team with General Motors to develop an advanced adhesive solution for use in electric vehicles.
In June, as a result of our close collaboration, GM recognized the DuPont team with the GM Supplier of the Year award.
The power of customer partnerships to drive sustainability is a key element to our long-term growth strategy, and I am confident that we will continue to deliver these types of wins in the future.
With that, let me turn it to Leland to open the Q&A.
We will allow for one question and one follow up question per person.
Operator, please provide the Q&A instructions.
 Assistant:

Chosen response:
compname posts q2 adjusted earnings per share $1.06.
q2 adjusted earnings per share $1.06.
q2 sales $4.1 billion versus refinitiv ibes estimate of $4 billion.
dupont - 2q21 gaap earnings per share from continuing operations of $1.04.
dupont - raises full year 2021 guidance for net sales, operating ebitda and adjusted eps.
compname announces change to treatment of intangible amortization expense for non-gaap reporting effective 3q21.
dupont - fy adjusted earnings per share outlook includes fy benefit estimated at $0.27/share related to amortization reporting change.


Prompt:
Human: We have prepared slides to supplement our comments during this conference call.
Joining me on the call today are Ed Breen, chief executive officer; and Lori Koch, chief financial officer.
Our 2020 Form 10-K, as updated by our current and periodic reports, includes detailed discussion of principal risks and uncertainties which may cause such differences.
Unless otherwise specified, all historical financial measures presented today exclude significant items.
We will also refer to other non-GAAP measures.
Our fourth quarter results are highlighted by 6% volume gains, including a 9% increase in the E&I segment and a 12% increase in W&P.
M&M delivered top-line results ahead of expectations, including volumes well ahead of global auto builds in the quarter.
Customer demand was broad-based across the portfolio, led by greater than 20% volume growth in semiconductor technologies and high teens volume growth in Water.
Our top-line performance also reflects significant pricing actions we took to offset $250 million of raw material inflation in the quarter.
We are seeing increases in all businesses with about three-fourths of the impact in M&M.
Our teams have done an outstanding job monitoring our input costs and quickly translating that into price increases to remain price cost neutral for the year.
We are taking additional actions as we work to offset logistics costs, which, during the fourth quarter, were a $50 million headwind, mostly in W&P.
Their unwavering commitment in the face of a relentless pandemic, ongoing supply chain disruptions, and logistic challenges deserves our gratitude.
Turning to Slide 3, I will provide an update on our portfolio transformation and will review how our focus on those strategic actions, balanced capital allocation, and innovation-led growth position us extremely well heading into 2022 to continue unlocking value for our shareholders, innovating for our customers, and creating opportunity for our employees.
In November, we announced our planned acquisition of Rogers Corporation, as well as our intent to divest a significant portion of our M&M segment.
These portfolio actions will position DuPont among the top of the multi-industrial peer set with top-quartile revenue growth, EBITDA margins, and low cyclicality, all hallmarks of top-performing companies.
Going forward, our business will be centered around the secular, high-growth pillars of electronics, water, industrial technologies, protection, and next-generation automotive.
Our team sees strong customer demand across these pillars, driven by megatrends such as the transition to hybrid and electric vehicles, clean water, sustainability, and the move to 5G.
The preparation for the Rogers acquisition is well underway and on track for end of second quarter closing.
Several significant milestones in the path to closing have already been achieved.
In mid-December, the waiting period under the HSR expire here in the U.S., and regulatory processes in other parts of the world are underway.
Just two weeks ago, on January 25th, Roger shareholders voted to approve the transaction.
Excitement is building for combining this business with our portfolio of electronics offerings, which includes our recent acquisition of Laird Performance Materials.
Our teams are anxious to get to the point where we can start working with the application engineers, R&D, and sales teams at Rogers to map out the revenue synergy opportunities in the areas of next-generation auto, 5G infrastructure, defense electronics, and clean energy.
Combined with Laird, these acquisitions increase the total addressable market of our E&I business by approximately 50% and will deepen our penetration into markets such as electric vehicles, consumer electronics, and industrial technologies.
A lot of work has been done to plan for the cost synergies associated with the Rogers acquisition, which we expect to be approximately 150 million.
We also have line of sight to about 63 million of cost synergies from the Laird acquisition from last summer, which is ahead of our target.
We are looking across both of the acquisitions, as well as our existing E&I business to maximize our synergies through G&A and footprint optimization, along with procurement savings.
We also announced that we have initiated a process to divest the majority of the M&M segment.
Our work here is also on track and progressing well.
As I had expected, there is a significant level of interest in this market-leading asset, and I am pleased with how the process is progressing.
Our target is to have a signed agreement by the end of the first quarter with the closing in the fourth quarter of this year.
In addition to positioning the company as a top-performing multi-industrial, these transactions enable us to transform the portfolio while maintaining a strong balance sheet and continuing with a balanced financial policy.
Today, we announced that our board has approved a 10% per share increase to our dividend, which is consistent with our commitment for a dividend payout in the range of 35% to 45% and to grow the dividend annually in line with earnings.
In addition, our board has also authorized a new 1 billion share repurchase program, which enables us to continue returning value to our shareholders as we expect to complete the remaining 375 million under our existing authorization in the first quarter, ahead of the planned expiration.
After paying down the financing associated with the Rogers acquisition, we expect to deploy a significant portion of the remaining M&M proceeds to do further M&A to build on our core areas of strength, as well as additional share repurchases.
We will also generate strong cash flow this year in addition to the 240 million gross proceeds from the biomaterials divestiture, which is the last of our non core divestitures.
Our strong balance sheet positions us well to deliver for all stakeholders through investment in our business, dividends, share repurchases, and additional M&A.
Finally, we will deliver shareholder value through staying focused on innovation, which is at the core of DuPont.
The 6% volume growth we delivered in the quarter and 10% volume growth for the year benchmarks well against our top peers.
For the quarter, our volume gains, excluding M&M segment, were up 10%.
These results are proof point that the work of our R&D teams and application engineers who spent countless hours working alongside our customers solving their most complex challenges is an advantage in the marketplace.
Our focus on innovation is also at the core of our ESG strategy through both innovation and our own processes to reduce greenhouse gas emissions at our factories, as well as new product innovations that support and advance our customer sustainability goals in areas such as clean water, clean energy, electric vehicles, and connectivity.
The levers of portfolio transformation, balanced capital allocation, and innovation-led growth is a powerful combination to create long-term shareholder value at DuPont.
As Ed mentioned, customer demand in our key end markets remain strong in the fourth quarter.
We continue to face unprecedented global supply chain challenges and rising inflation.
However, the swift pricing actions that we continue to implement are benefiting top-line performance and maintaining earnings on a dollars basis.
These factors, along with our intense focus on execution, contributed to net sales, operating EBITDA, and adjusted earnings per share results above our guidance.
In addition, we have solid cash flow generation and returned over 650 million in capital to shareholders during the quarter through 500 million in share repurchases and over 150 million in dividends.
For the year, we returned more than 2.7 billion in cash flow to shareholders, 32.1 billion in share repurchases, and 600 million in dividends.
Turning to Slide 4.
Net sales of 4.3 billion were up 14% versus the fourth quarter of 2020, up 13% on an organic basis.
Organic sales growth consists of 7% price gains, reflecting the continued actions we are taking to address inflationary pressure and 6% volume growth.
A 2% portfolio tailwind reflects the net impact of strong top-line results related to our acquisition of Laird and headwind from non core divestitures.
Currency was a 1% headwind in the quarter.
Overall sales growth was broad-based and reflects double-digit organic growth in all four regions and high-single-digit to double-digit organic growth in all three reporting segments.
From an earnings perspective, we reported fourth quarter operating EBITDA of 973 million and adjusted earnings per share of $1.08 per share, up 5% and 54%, respectively, from the year-ago period.
Our incremental market in the quarter was pressured by price costs and logistics.
Net of these impacts, our incremental margin was about 33% in 4Q.
Ed mentioned earlier the pricing actions that we took throughout the year, resulting in us offsetting about 250 million of raw material inflation in the quarter.
And we also ended the year price cost neutral.
The raw material inflation, coupled with about 50 million of higher logistics costs in the quarter, were headwinds to our margins.
I will provide more detail of the margin compression we saw in the quarter in a few minutes.
From a segment perspective, E&I delivered 10% operating EBITDA growth on volume gains and earnings uplift from Laird, which more than offset raw material and logistics segments, as well as start-up costs associated with our Kapton capacity expansion.
In W&P, operating EBITDA increased 7% as pricing gains and volume growth more than offset higher raw material and logistics costs.
We will remain disciplined in our pricing approach as we move into 2022 to address continued inflation.
M&M operating EBITDA declined 3% as net pricing gains were more than offset by lower equity earnings due to higher natural gas costs in Europe.
In the quarter, cash flow from operating activities was 621 million and capex was 184 million, resulting in free cash flow of 437 million.
Free cash flow conversion was 100%.
In addition, we received gross proceeds of about 500 million during the quarter from our Clean Technologies divestiture, which was closed at the end of December.
Before we go to the next slide, I would also like to make a few comments on our full year performance.
Full year net sales of 16.7 billion grew 16% and were up 14% on an organic basis.
The organic growth consists of a 10% increase in volume and a 4% increase in price.
Organic sales growth reflects double-digit growth in all four regions and in all three reporting segments.
Further, all nine of our business lines had organic growth in 2021, and seven of the nine business lines grew double digits.
The 10% increase in volume for the year consists of gains in all three reporting segments and within all nine business lines, reflecting robust global customer demand in secular growth areas, such as electronics and water, along with recovery in end markets negatively impacted by the pandemic in prior year, such as automotive, commercial construction, and select industrial markets.
Full year operating EBITDA of 4.2 billion increased 21%, reflecting 1.3 times operating leverage, operating EBITDA margin expansion of about 100 basis points, an incremental margin of 32%.
Operating EBITDA increased for all three reporting segments during the year.
Full year adjusted earnings per share of $4.30 per share was up about 95% from prior year on higher segment earnings, a lower share count, and lower interest expense.
Slide 5 shows the impact that price cost inflation had on our operating EBITDA margin in the fourth quarter.
As costs continued to rise throughout 2021, our fourth quarter results reflect the largest headwind to quarterly margins for the year.
In total, pricing actions fully offset about 250 million of raw material inflation, which was higher than our expectations for input costs coming into the quarter and mainly in the M&M segment.
While our pricing actions have enabled us to maintain earnings, the price cost inflation resulted in a significant headwind of about 150 basis points to operating EBITDA margins versus the year-ago period.
Additionally, higher logistics cost of about 50 million in the quarter resulted in a margin headwind of about 120 basis points.
Offsetting the headwinds from raws and logistics was a 70 basis-point improvement in operating EBITDA margin, which includes volume growth in E&I and W&P and the benefit associated with the Laird acquisition.
If you exclude the price cost and logistics headwinds in the quarter, on an ex-M&M segment basis, our operating EBITDA margin was above 26.5% in the fourth quarter, further illustrating our strong performance and putting an emphasis on our planned portfolio actions.
Turning to Slide 6, which provides more detail on the year-over-year changes in the net sales for the quarter.
As I mentioned earlier, organic sales growth of 13% during the quarter consists of 7% pricing gains and 6% volume growth.
In E&I, volume gains delivered 9% organic sales growth for the segment, led by higher volumes in semiconductor technologies of more than 20%.
Semiconductor technologies demand was driven by the ongoing transition to more advanced node technologies resulting from growth in electronics megatrends.
Semi Tech was up mid-teens for the full year.
And we expect to continue to outpace MSI growth as we head into 2022.
We are seeing more investments in semiconductor capacity, which we expect to be a positive for us in the long term.
Industrial Solutions was up mid-teens during the quarter on volume growth, which was driven by ongoing strength for Kalrez and Vespel within electronics and industrial end markets, along with strong demand for medical silicones and biopharma and healthcare applications.
Organic growth for Industrial Solutions was up mid-teens for the full year as well.
As expected, organic sales growth for Interconnect Solutions was down in the quarter, reflecting the anticipated impact of the shift in demand related to premium next-generation smartphones to the first half of 2021, along with softness in automotive end markets related to the semi chip shortage.
For the full year, organic sales growth for our Interconnect Solutions was up mid single-digits.
And we expect to return to a more traditional seasonality in 2022.
In addition, we recently completed our Kapton expansion project here in the U.S., which expands our production of polyamide film and flexible circuit board materials.
We will begin qualifying materials in the first half of this year for high-value applications, which will start to accelerate in the second half of 2022.
For W&P, 17% organic sales growth during the quarter consisted of a 12% increase in volume, including volume gains in all three businesses, and 5% pricing gains.
Sales gains were led by high-teens organic growth in Safety Solutions as continued recovery in industrial end markets resulted in significant volume improvement for Nomex and Kevlar air and mid fibers.
Within Water Solutions, high-teens organic sales growth reflects strong global demand for water technologies, primarily in industrial and desalination markets.
Shelter Solutions sales increased on mid-teens organic growth, driven by continued strength in North American residential construction and continued recovery in commercial construction led by higher demand for quarry and services.
Year-over-year pricing gains of 5% during the quarter relate primarily to actions taken in safety and shelter in response to raw material inflation and also reflect sequential price improvement from all three business lines within W&P versus the third quarter.
For the full year, W&P delivered 10% organic sales growth on 8% volume improvement and 2% pricing gains.
Safety and Shelter Solutions were up low double digits organically, and Water Solutions was up mid single digits for the year.
The global demand for clean water technologies remained strong, and expanding our capacity remains a priority for us.
For M&M, 13% organic sales growth during the quarter was driven by a 16% increase in price, offset slightly by a 3% decline in volumes.
M&M within the segment within our portfolio most significantly impacted by raw material inflation.
The 60% local price increase during the quarter reflects continued actions taken to offset higher raw material and logistics costs.
Volume declines reflect softness in global auto production due to supply constraints, primarily the semiconductor chip shortage.
For the year, M&M organic sales growth was 24% on 12% higher volume and 12% pricing gains.
All three business lines within M&M delivered organic sales growth of greater than 20% for the full year.
Turning to Slide 7.
Adjusted earnings per share of $1.08 per share was up 54% from $0.70 per share in the year-ago period.
Higher volumes and strong results from Laird more than offset higher logistics costs and other operating items, such as Kapton start-up costs.
Below-the-line items continue to benefit our earnings per share results compared to the year-ago period, primarily our lower share count.
Lower interest expense was mainly offset by a higher tax rate.
For full year 2022, we expect our base tax rate to be in the range of 21% to 23%.
Let me close with a few comments on our financial outlook on Slide 8.
We expect continued top-line strength across the portfolio in 2022, led by ongoing strength in semiconductors, as the industry continues to operate near capacity to meet demand and consistent demand in areas such as industrial technologies, smartphone sales, housing starts, and water filtration.
Our plan assumes these market dynamics will lead to solid volume growth in 2022.
In 2022, we are planning that raw material and logistics costs will remain at elevated levels with approximately 600 million of year-over-year headwinds versus 2021, primarily in the first half.
Once again, the raw material inflation will be predominantly in our M&M segment.
In response, we are implementing more price increases in all businesses, which will enable us to offset raw material and logistics costs on a full year basis, but we will lag in the first quarter.
We expect our operating EBITDA margins to improve throughout 2022, driven by volume growth, productivity, acquisition synergies, and full implementation of pricing actions.
In the first quarter, we expect net sales between 4.2 billion and 4.3 billion and operating EBITDA between 940 million and 980 million.
At the midpoint of our guidance range, we are anticipating first quarter operating EBITDA margins to be about flat sequentially with the fourth quarter of 2021.
We expect sequential improvement in E&I and M&M to be offset by W&P as manufacturing cost increases stemming from the omicron variant and ongoing logistics cost headwinds lead to sequential margin decline.
For the full year, net sales of 17.4 billion to 17.8 billion and operating EBITDA of approximately 4.4 billion at the midpoint reflects volume growth and acceleration of additional pricing gains throughout the year to offset the impact of both raw material and logistics cost increases.
We expect operating EBITDA margin in the back half of 2022 to return to more normalized levels as impacts from the omicron variant subsides, as well as gains from volume improvement, productivity actions, acquisition synergies, and full implementation of price increases.
Once we sign a deal, the in-scope M&M businesses will move to discontinued operations.
And we will reset the guidance [Inaudible] DuPont.
Let me close by summarizing why I am excited about 2022 at DuPont.
Our results demonstrate that our businesses deliver the solutions our customers demand and a tight supply chain and challenging logistics environment.
We delivered 6% volume growth well ahead of our expectations coming into the quarter.
Our teams continue to work closely with our customers to understand their complex material challenges and to win business by delivering innovative and sustainable solutions.
You can also see our teams are managing every lever within our control.
This is evident through our delivery of pricing gains to offset every dollar of raw material inflation in 2021.
And these actions continue into 2022.
In addition to having our fundamentals in place, we are on track to complete a few substantial steps in the transformation of DuPont in 2022 with the planned Rogers acquisition and the M&M divestiture.
These transactions, as well as the potential for additional M&A in strategic areas, position DuPont as a premier multi-industrial company, focused in the areas of electronics, water, industrial technologies, protection, and next-generation auto.
And finally, because of our ability to complete this transformation while maintaining a strong balance sheet, we will be in a position to generate value for all stakeholders through organic and inorganic investment in our businesses and by staying committed to our dividend and share repurchases as we announced today.
I look forward to providing you updates on each of these areas as we progress through 2022.
With that, let me turn it to Pat to open the Q&A.
We will allow for one question and one follow-up question per person.
Operator, please provide the Q&A instructions.
 Assistant:

Chosen response:
q4 adjusted earnings per share $1.08.
q4 sales rose 14 percent to $4.3 billion.
sees q1 sales $4.2 billion to $4.3 billion.
compname announces 10 percent increase to q1 regular dividend and board approval of $1.0 billion share buyback program.
dupont - for 2022, expect net sales between $17.4 and $17.8 billion.
dupont - water & protection reported q4 net sales of $1.4 billion, up 16 percent from year-ago period.
dupont - mobility & materials reported q4 net sales of $1.3 billion, up 12 percent from year-ago period.
dupont - consumer demand remains strong however raw material and logistics cost inflation is expected to continue to impact margins in q1.