Prompt:
Human: If you did not receive a copy of the release, you can find it on our website at hormelfoods.com under the Investors section.
On our call today is Jim Snee, Chairman of the Board, President and Chief Executive Officer; and Jim Sheehan, Executive Vice President and Chief Financial Officer.
Jim Snee will provide a review of the Company's current and future operating conditions, commentary regarding each segment's performance for the quarter and update on the impact to the company of the COVID-19 pandemic and a perspective on the balance of fiscal 2021.
Jim Sheehan will provide detailed financial results and commentary regarding the Company's current and future financial condition.
As a courtesy to the other analysts, please limit yourself to one question with one follow-up.
It will also be posted on our website and archived for one year.
Before we get started, I need to reference the Safe Harbor statement.
It can be accessed on our website.
As we approach the one-year mark of the pandemic, I want to express my gratitude to our plant professionals for their continued dedication, energy and focus.
They continue to be the true heroes of our company during this time.
On our last earnings call in November, we were witnessing an increase of COVID-19 cases in the United States.
Our number one priority has been to keep our team members safe, and we have been very focused on our best-in-class preventative measures and on educating our employees through our awareness campaign keep COVID out.
As the pandemic evolves and the vaccine becomes more widely available to our team members, we'll continue to keep the health and safety of our team members as the top priority.
We were among the first to offer a COVID pay program to allow those who are ill or had symptoms to stay home from work and still be paid.
Additionally, we paid $11 million in fiscal 2020 and unconditional bonuses to our team members to provide further financial security.
Our program has resulted in minimizing the spread of COVID in our workplaces and our communities.
Recently, we have been encouraged to see cases decline and the number of team members on our COVID pay program drastically decrease.
This gives us increased optimism as we head into the second quarter.
We were pleased to announce the entry into a definitive agreement to acquire the Planters business last Thursday.
We have many leading brands that Hormel and the acquisition of the Planters snack nut business will be an excellent addition to our Company.
Over the past 10-years, we have made numerous acquisition, all of which are meeting our strategic objectives.
The performances of MegaMex, Wholly, SKIPPY, Applegate, Justin's, Ceratti, Fontanini, Columbus and Sadlers give us a high level of confidence in our ability to successfully integrate, operate and grow the Planters business.
The acquisition of Planters is the perfect strategic fit.
The addition of this iconic brand in high-margin business continues our evolution as a global branded food company, moving us further away from a commodity-oriented meat-centric company.
As one of our biggest brands, we will give it a high level of focus and attention.
Our core competency and brand stewardship will be key to our success and unlocking the power of the Planters brands.
We know how to manage brands and Planters is right in our sweet spot as we know Planters is more than simply peanuts in the jar.
Planters also perfectly complements, enhances and expands our existing snacking business.
Joining brands like Hormel Gatherings, Columbus, Wholly and Herdez.
There are numerous opportunities to leverage the consumer insights from both portfolios to drive further innovation and improve growth for our entire snacking business.
The Planters business gives us another iconic brand to grow and increases our scale in key areas such as center store and convenience stores.
Integration into our direct sales force is a high priority and we know there are immediate opportunities to improve distribution and drive sales growth.
Another priority for us is to integrate the business into our One Supply Chain and Project Orion platforms.
We expect synergies from this integration for the Planters business and for our existing business.
There is a lot to love about this acquisition and I'm excited for the transaction to close, so we can begin to give the Planters business the attention and focus it needs to grow.
Now turning to our first quarter.
Our team generated strong top line growth with sales increasing 3% to a record $2.5 billion all four segments delivered sales growth and achievement that hasn't been accomplished since 2016.
Incremental supply chain costs related to COVID-19 of $15 million were the primary reason for a $13 million decline in pre-tax earnings.
Net earnings and diluted earnings per share declined 9%, due primarily to incremental supply chain costs and higher tax expense.
As in prior quarters, we continue to strike a balance between the consumer demand we are seeing and our supply chains ability to meet that demand.
We increased production levels this quarter through a combination of improving efficiencies; bringing on new capacity and further leveraging our strategic supply chain partners.
We expect this steady improvement to continue throughout the year, we have been successful in a number of critical categories and we will continue to make progress across the portfolio.
Our retail business continued to perform extremely well with sales increasing 13% for the quarter.
Brands such as SPAM, SKIPPY, Hormel chili, Hormel Black Label, Applegate, Hormel pepperoni, Lloyd Hormel fully cooked entrees and Justin's all delivered very strong growth.
Most encouraging was the sales growth we saw from the Jennie-O brand every major retail category, including Jennie-O lean ground, turkey burgers, Oven Ready items, Bacon and marinated meats grew.
The Jennie-O brand continues to resonate with consumers and the efforts we have made on gaining back customer distribution are paying off.
Our e-commerce business continues to be a bright spot as it almost doubled in the last 12-weeks according to IRI.
We grew share in several key categories and have a high level of momentum in online grocery pickup, delivery and direct-to-consumer.
Our deli channel sales increased 7% this quarter; Columbus branded products led the way with exceptional growth from grab-and-go items.
The opening of our new plant in Omaha this quarter, which produces Columbus charcuterie products will provide much needed capacity for this business.
While the Columbus brand was the clear leader for us this quarter in the deli, our team generated growth in every deli segment they compete in, including grab-and-go, prepared foods, behind-the-glass and fresh sliced deli meats.
Our party tray business also grew volume in sales over the holiday season, despite fewer group gatherings, a testament to our team's ability to keep this brand relevance.
We saw a positive signs of recovery in foodservice this quarter even as the business declined 17%, compared to last year, due to the continued impacts of the pandemic on the industry.
We continue to see strength in our business with an important segments such as Pizzeria, QSRs and convenience stores.
Our direct sales force also made excellent progress pivoting to high growth areas, such as commissary's and ghost kitchens as they secured new distribution with both distributors and operators.
Turning to the segments.
Grocery Products delivered very impressive results this quarter.
We saw top line strength across many of our brands, including SPAM, SKIPPY, Hormel Compleats and Herdez, which led to volume increases of 4% and the sales increases of 7%.
We implemented a price increase for our SKIPPY business this quarter, once again demonstrating our ability to price in our categories.
We are also encouraged with the performance of our recent innovative new items, including SKIPPY Squeeze, SKIPPY No Sugar and SKIPPY with added protein spreads.
Our MegaMex joint venture had a strong performance this quarter as well, but equity and earnings increasing by 31%.
This growth was led by our retail brands, such as Wholly, Herdez, CHI-CHI'S and La Victoria.
In addition to the MegaMex results, the 35% increase in segment profit was driven by higher sales and a favorable mix.
Refrigerated Foods volume declined 2% and sales increased 1%.
Our retail and deli teams overcame steep year-over-year declines in our foodservice business to deliver growth for our value-added business.
Applegate had a particularly strong quarter with growth fueled by both category momentum and share gains across core categories such as Frozen Branded Chicken, Breakfast Sausage, Bacon and Hot Dogs.
I continue to be optimistic about the momentum we are building in the Applegate business.
We also delivered excellent results in our Hormel pepperoni business both in foodservice and retail.
Our teams continue to optimize the brand by focusing on our core products in the category and simultaneously leaning into our new Cup N' Crisp innovation.
We plan to maintain our advertising efforts for Hormel pepperoni to ensure we retain the households we gained during the initial pandemic buying.
Refrigerated food segment profit declined by 16%, due to lower foodservice sales, a significant decline in commodity, profitability and increased supply chain expenses due to COVID-19, profitability was also impacted by one-time start-up expenses related to our new plant in Omaha.
Jennie-O volume decreased 2% and the sales increased 1%.
We saw exceptionally strong retail and whole bird sales, which overcame significant declines in the foodservice and commodity.
Our retail business grew double-digits this quarter with growth coming from almost every category in which we compete.
We have taken price increases across our portfolio and expect those to be effective late in the second quarter.
Whole bird volumes increased by strong double-digits, due to a very positive holiday season.
Our foodservice business was impacted by lower K through 12 and college and university business in addition to continued weakness in the foodservice industry.
Jennie-O Turkey Store segment profit declined 30%, lower foodservice sales increased supply chain costs related to the COVID-19 pandemic and higher freight expenses were key drivers to the lower profitability.
Grain prices increased significantly during the quarter, but only had a modest effect on earnings.
We expect the primary impact of higher grain prices to affect the coming quarters.
In addition the pricing action, we have taken additional actions to manage higher corn and soybean meal costs.
International volume decreased 5%, sales increased 13% and segment profit increased 61%.
Once again the strong sales and earnings performance was led by our retail and foodservice business in China.
SPAM, SKIPPY and beef jerky were all key drivers to growth in China, we remain very positive about the short and long-term prospects of our China business.
We also saw a strong branded exports for brands like SKIPPY and SPAM.
Similar to prior quarters, our affiliated businesses in the Philippines, South Korea and Europe continue to show high levels of growth.
Looking to the balance of the year, I'm increasingly optimistic about delivering sales and earnings growth.
As such we are establishing fiscal 2021 guidance for the full-year at $1.70 to $1.82 per share.
As a reminder this guidance range does not include the impact of the acquisition of Planters.
Similar to prior quarters, we believe there are three key drivers to our near-term and long-term performance.
Retail dynamics, the recovery in the foodservice industry and the performance of our supply chain.
Our retail deli and International teams need to maintain their momentum and outperform their respective categories.
Our brands continue to gain new households and our repeat rates remain very strong.
The depth of repeat, those consumers purchasing our brands multiple times is incredibly positive, but almost all new buyers for our brands making two or more repeat purchases during the first quarter.
As a whole, our brands continue to make household penetration gains with brands like Herdez, La Victoria and Columbus increasing household penetration by over 20%.
For the foodservice channel, we are optimistic about our foodservice recovery and confident in our ability to gain share during the recovery.
During the pandemic operators have been looking for products to simplify their food preparation, save time and minimize labor, all while preserving the flexibility to add their own unique touch to a menu item.
Our direct sales force continues to meet their needs with products like Hormel Fire Braised meats, Sadler's authentic smoke barbecue and Hormel, Bacon 1.
The recent trends we are seeing in our foodservice businesses are positive.
We have been able to react quickly to increase demand as cities and states have these dining restrictions, allowing patrons to return to their favorite restaurants.
We also anticipate our non-commercial business such as K through 12 schools, colleges and universities and healthcare to recover as the pandemic subsides.
The most encouraging signs we are seeing are in our supply chain.
We made excellent progress on increasing capacity to meet the high levels of demand from our customers.
Steady week-over-week improvements, lower levels of absenteeism, new capacity and a continued vaccine rollout are all reasons we have a positive outlook.
Our supply chain team hit two major milestones this quarter, with the opening of our new dry sausage production facility in Omaha, Nebraska and the opening of our pizza toppings expansion at Burke.
Both projects were on time and on budget, which is truly amazing considering both projects were constructed primarily during the pandemic.
Our plant teams have made progress on labor availability and in almost every location, our labor situation has improved.
We expect that trend to continue into the second quarter and beyond, as the vaccine becomes widely available for our team members.
We now have a higher level of visibility into the coming quarters and remain confident in our team's ability to deliver our sales and earnings guidance this year.
Record sales for the first quarter were $2.5 billion, an increase of 3%.
COVID-related direct expenses of $15 million were the primary driver to pre-tax earnings declining $13 million or 5%.
Absent the COVID expenses pre-tax earnings would have increased; total COVID expenses have started to decline from the prior quarterly run rate of $20 million.
This was driven by higher volumes through our production facilities and improved efficiencies in our logistics network.
Earnings per share for the first quarter was $0.41, compared to $0.45 last year.
On an after-tax basis, first quarter results reflected approximately $0.04 per share in incremental COVID-related costs and higher tax expense.
SG&A, excluding advertising was 6.6% of sales, down slightly, compared to the prior year.
Advertising spend for the quarter was $34 million, compared to $35 million last year.
We continue to invest in our leading brands including SPAM, SKIPPY, Hormel pepperoni, Black Label and Jennie-O.
Operating margins for the quarter were 10.9%, compared to 11.8% last year.
The decline was driven by COVID-related expenses and a continued to impact from lower foodservice earnings.
Unallocated expenses included deferred compensation expenses related to tax settlement and deal fees.
Our effective tax rate for the quarter was 19.7% last year's rate of 16.3% was affected by the large volume of stock options exercised in the quarter.
Excluding the impact from the Planters acquisition, we expect the full-year tax rate to be between 20% and 21.5%.
Cash from operations was $206 million during the quarter, a 9% increase.
Even with record sales inventory levels continue to gradually improve throughout the quarter, due to improvements in operations, labor availability, internal capacity expansions and increased use of strategic manufacturing partners.
We expect inventories to continue to build throughout the second quarter.
There is a risk for inflationary pressure on freight expense, both domestically and internationally.
However, we expect improved efficiency factors to offset some of the higher freight costs.
We paid our 370th consecutive quarterly dividend effective February 16th at an annual rate of $0.98, a 5% increase over the prior year.
During the quarter, the company repurchased 200,000 shares for $9 million.
Capital expenditures were $40 million in the quarter, we opened the pizza topping expansion of Burke and the new dry sausage facility in Omaha.
Work is also under way to expand our pepperoni capacity.
The Company's target for the capital expenditures in 2021 is $260 million.
Last Thursday, we announced the definitive agreement to acquire the Planters snack nut portfolio for an effective purchase price of $2.79 billion.
The transaction was structured as an asset purchase and included a $560 million tax benefit.
The adjusted 2020 EBITDA multiple on the effective purchase price of $2.79 billion was 12.5 times.
This acquisition is financially attractive, our disciplined approach to valuation allowed us to secure our leading brand at a multiple below the industry average, take advantage of historically low rates, increase our company sales by 10%, improve the profitability of the portfolio with accretive margins and responsibly leverage our balance sheet.
We expect to finance the transaction with cash on hand and a combination of long-term and short-term debt.
We will be able to borrow the funds at approximately 1.5%, and expect to be able to significantly deleverage the debt in 18 to 24 months.
We are targeting a 1.5 times leverage by 2023, and are very focused on retaining a strong investment-grade rating.
The cash flows from our existing business along with Planters allows us to maintain our long-term capital allocation strategy.
We will continue to prioritize returning cash to shareholders in the form of annual dividend growth.
Industry operating efficiencies, labor availability and production levels continue to improve during the first quarter, driving less volatility in the hog market, compared to the back half of 2020.
Hog weights are currently at historically high levels, which has led to balanced market conditions.
In 2021, the USDA is projecting pork production to increase 1%.
With an expected recovery in the foodservice industry and higher grain prices for the balance of the year, we anticipate hog cost to increase.
Our balanced mix of hog and pork supply contracts will help us manage the risk of higher prices.
The USDA composite cut out was in line with last year during the first quarter.
Recently, we have seen strength in the cutout supported by strong demand for pork domestically and internationally.
We continue to monitor export demand and ASF in China, Southeast Asia and Europe.
ASF continues to be a risk in the pork industry.
We have seen the disease could be successfully managed in areas with modern agricultural practices.
We expect higher prices for pork with less volatility than last year.
The strength of our brands and balanced approach to procurement, continue to be a competitive advantage.
Pork trim markets are expected to remain higher during the second quarter of 2021 and declined in the back half, as labor availability and processing plants improves.
Beef trim prices are expected to be lower in 2021.
We anticipate belly prices to be volatile in the near-term, driven by strong demand and foodservice industry growth.
Strong Chinese demand and drought conditions in South America continue to generate higher grain prices, which is expected to negatively impact Jennie-O Turkey Store.
Like the pork industry, we are closely watching the fundamentals for grain.
The primary factor, we are watching our global demand, planting intentions for the coming season and weather conditions in South America.
We managed grain costs through a combination of spot buying, derivatives and adjusting feed formulas.
Additionally, we have announced pricing action across all Jennie-O products to protect our profitability.
We are prepared to take additional actions as conditions change.
Fundamentals in the Turkey industry remain mixed, excess poult placements and cold storage are below year ago levels, while prices or commodity breast and thigh meat remain depressed, poult placements have been declining recently, which will likely lead to lower levels of supply.
Because the foodservice industry is a key outlook for breast meat as the foodservice industry recovers breast meat pricing is expected to improve.
We are finalizing the implementation plans for the Planters business.
We will have the HR and Payroll functions integrated by the closing date.
The finance and supply chain will be fully implemented within one year of closing.
 Assistant:

Chosen response:
qtrly net sales of $2.5 billion, up 3%.
qtrly diluted earnings per share of $0.41.
sees fy earnings per share $1.70 to $1.82.
qtrly grocery products volume up 4%.
qtrly grocery products net sales up 7%.
qtrly jennie-o turkey store volume down 2%.
qtrly jennie-o turkey store net sales up 1%.
hormel foods - international segment is poised to have a record year led by continued strength in china business, branded exports, global partnerships.
expect continued improvement throughout supply chain as labor availability improves and pandemic-related expenses begin to subside.
expect a recovery in foodservice business, given acceleration in shipments during recent weeks.
qtrly international & other volume down 5%.
qtrly international & other net sales up 13%.
continued escalation in grain prices will require additional actions.
qtrly international & other volume down 5% and net sales up 13%.


Prompt:
Human: If you did not receive a copy of the release, you can find it on our website at hormelfoods.com under the Investors section.
On our call today is Jim Snee, Chairman of the Board, President and Chief Executive Officer; and Jim Sheehan, Executive Vice President and Chief Financial Officer.
Jim Snee will provide a review of the Company's current and future operating conditions, commentary regarding each segment's performance for the quarter and a perspective on the balance of fiscal 2021.
Jim Sheehan will provide detailed financial results and commentary regarding the Company's current and future financial condition.
As a courtesy to the other analysts, please limit yourself to one question with one follow-up.
It will also be posted on our website and archived for one year.
Before we get started, I need to reference the Safe Harbor statement.
It can be accessed on our website.
Once again this quarter, I want to recognize the heroic work of our production team members.
This team deserves much of the credit for our record sales results this quarter as they continued working to produce safe high-quality food for millions of consumers and customers.
Our number one priority has been to keep our team members safe and our cross-functional COVID-19 leadership team is ensuring we are on the leading edge of the country's vaccination efforts.
To date, we have fully vaccinated over 51% of our domestic workforce, which is well ahead of the country's vaccination rate.
We are encouraged by the rapid decline in cases in our communities.
From a top-line perspective, our balanced business model has again proven to be a winning formula as our team delivered record sales for the second quarter and first half.
In total, sales for the quarter increased 8% compared to last year, and the sales increased over 5% for the first half of the year.
A key driver of our sales performance is the rebound in our foodservice business.
As expected our foodservice team experienced a strong recovery and took numerous actions to properly position our organization to capitalize on the industry recovery.
For the quarter, foodservice sales increased 28%.
This reflects an increase of 1% over 2019 pre-pandemic levels.
This is a significant accomplishment, especially knowing where the industry was just a few short months ago.
Since the beginning of the pandemic, our foodservice teams have been doing their part to support the industry.
Within days of the crisis, we worked closely with our distributor and operator partners to assist their businesses in many different ways; whether it was a rebate program to offset food costs, extending payment leniency, helping adjust to the new takeout delivery and pickup environment or simply being available to personally check in with the restaurant tour to see how they're doing.
Our confidence in the industry recovery never wavered.
We know these actions benefited our distributor and operator partners and are playing a part in our outperformance of the broader industry trends.
During this difficult labor environment, our experienced and tenured direct sales force is helping operators meet their accelerating demand with products that simplify their food preparation, save time and minimize labor, all while preserving the flexibility to add their own unique touch to a menu item.
Products like Hormel Fire Braised meats, Sadler's authentic smoke barbecue, Fontanini authentic Italian meat, Hormel Bacon 1 fully cooked bacon, Wholly Guacamole and Jennie-O Turkey are uniquely positioned to meet this need.
The brightest spot in our foodservice portfolio has been our pizza toppings business.
Prior to the pandemic, we capitalized on the continued growth in this category, especially for premium products and invested heavily in capacity to meet future demand.
We've also been investing in plant-based offerings and are seeing growth from our plant-based pepperoni and crumbles products.
We are excited to leverage our expertise in the pizza toppings category to drive growth in plant-based toppings.
With our new capacity expansion effort and with additional pepperoni capacity set to open at the beginning of fiscal 2022, we are set up nicely to meet the consistent growth we have seen in this space.
With the foodservice industry recovery well under way, we will continue to strengthen our relationships with our valued partners, invest in our direct sales team and support the industry's return to growth with innovative, convenience and flavorful product solutions.
In addition to foodservice growth, our retail and deli businesses also remained healthy with demand elevated compared to pre-pandemic levels.
Total retail sales this quarter were flat to last year as we lapped the months when consumers were stocking their pantries in anticipation of the pandemic.
Sales finished up 16% compared to the second quarter of 2019.
And we continued to see strength from our leading brands such as SPAM, Applegate, Jennie-O, Black Label, Herdez and Wholly.
As a reminder, we experienced an immediate and sustained demand surge for our shelf-stable products in the Grocery Products segment at the onset of the pandemic.
The second wave of demand that impacted our perishable and refrigerated items happened weeks later in the third fiscal quarter.
Sales in the deli channel increased 4% this quarter and are up 9% over pre-pandemic levels.
Hormel Gatherings party trays delivered strong growth as consumers started to spend more time with family and friends, and consequently, are purchasing more products to entertain their guests.
The Columbus brand remains a cornerstone for our deli business, and it is now benefiting from the opening of our new plant in Omaha, which is providing much needed capacity.
Columbus is a leader in charcuterie, and we now have the capacity to continue expanding distribution.
Across the retail and deli space, our consumer takeaway metrics continue to be positive according to IRI.
Many of our brands have made large gains in household penetration, overall buy rates are improving and we are seeing an expansion in cross purchasing across our brands.
E-commerce sales grew double-digits in the last 12 weeks, according to IRI, and we are gaining share in important categories.
We will continue to increase our investment in this important channel.
Throughout the quarter, our supply chain continued to improve as we were able to increase production levels through a combination of gaining efficiencies, increasing capacities and leveraging our strategic supply chain partners.
Another area we have made great strides is in our distribution network.
Over the last year, we have opened a new Grocery Products distribution center, and, in recent weeks, have opened a Refrigerated distribution center serving the West Coast.
These strategic investments will reduce overall freight miles and costs, improve our customer service levels, support growth for our value-added businesses and reduce greenhouse emissions.
From a bottom-line perspective, operating income showed a slight decline.
We saw raw material and feed prices rapidly increase throughout the quarter.
We have taken pricing actions in many categories, but did not see the full benefit of these actions during the quarter.
As we have previously discussed, in volatile market conditions, pricing will lag the markets, which will shift profits to subsequent quarters.
Net earnings and diluted earnings per share were flat to last year.
A higher tax rate negatively impacted earnings by $0.01 per share compared to last year.
Turning to the segments.
Refrigerated Foods volume increased 3% and sales increased 17%, with growth coming from almost every division.
Value added sales increased 18%, driven by a significant recovery in the foodservice businesses.
As anticipated, we saw a rapid increase in foodservice demand as the quarter progressed.
Almost all categories within the foodservice grew sales, led by our pizza toppings portfolio and brands such as Fontanini and Bacon 1.
In fact, pepperoni, pizza toppings, Bacon 1 and Fontanini authentic Italian meats all showed growth compared to the second quarter of 2019.
We also experienced a recovery in the premium breakfast portfolio, with growth from our Old Smokehouse brand.
Additionally, we saw excellent growth from our premium prepared proteins, which include brands such as Austin Blues, Fire Braised, Cafe H and Sadler's.
These items are key to our pre-strategy, items that are pre-marinated, pre-cooked, pre-sliced and fully prepared.
As the industry recovery accelerates into the summer and labor remains the predominant challenge for most operators, our line of products offer convenient, safe, versatile and flavorful solutions.
Our retail and deli teams delivered a strong quarter on the top line, with growth coming from products such as Black Label bacon, Hormel Gatherings, Applegate, Lloyd's Barbeque, Hormel Pepperoni and Columbus prepared foods items.
Refrigerated Foods segment profit increased 32% due to higher foodservice sales, higher retail fresh pork profitability and decreased operational expenses due to abating COVID-19 cost pressures.
International delivered its fifth consecutive quarter of record earnings growth, with sales increasing 17% and segment profit increasing 6%.
The performance of the team in China remains impressive.
Foodservice volumes have recovered to pre-pandemic levels, driven by growth from SKIPPY, pizza toppings, and bacon items.
Retail demand for the SPAM and SKIPPY brands has also been outstanding.
The Company's innovative offerings including beef jerky, SKIPPY snacking items and two new SPAM varieties are providing additional avenues for growth, and we remain confident in the long-term prospects for our China business.
Branded exports also grew with growth coming from the SKIPPY and SPAM brands, higher foodservice sales and improved margins on the fresh pork items.
In addition, our partners in the Philippines, South Korea and Europe continued to experience elevated demand for shelf-stable products.
Grocery Products results were strong given the difficult comparison to last year due to the extremely high levels of demand experienced at the onset of the pandemic.
Even though volume declined 14%, sales declined 8% and segment profit declined 23%, we are encouraged by the segment's performance as we have seen sustained consumer demand for many of our brands compared to pre-pandemic levels.
Sales for center store brands such as SPAM, Hormel Chili, Compleats and Mary Kitchen hash were all over 20% higher compared to our second quarter of 2019.
We will continue to support our leading brands including SKIPPY, SPAM, Compleats, Herdez, Wholly, Justin's and Hormel Chili, and we're resuming promotional activity as inventory levels normalize.
Our MegaMex joint venture performed well, as equity and earnings increased 26%.
Both Herdez and Wholly brands grew as consumers looked for authentic and convenient Mexican products to enhance their at-home eating occasions.
The Herdez brand continues to outperform the salsa category.
This brand has grown households by 3 million since the start of the pandemic and has introduced industry leading innovation to the marketplace in recent years.
Following the highly successful performance of Herdez's Guacamole Salsa, we continue to expand distribution and grow share with two new product lines: Herdez Taqueria Street Sauces and Herdez Salsa Cremosas.
Recently, Herdez also entered the hot sauce market with the introduction of Herdez Avocado Hot Sauce, another versatile offering that can enhance any meal.
The Wholly brand had a strong quarter as well, as it continues to target consumers looking for convenient solutions to enjoy avocado offerings.
Our recent innovations, including Wholly Smashed and Wholly Diced Avocado products solve for that consumer need.
And as we saw across many of our refrigerated foodservice businesses, demand for avocado products in the channel started to return during the quarter.
Jennie-O volume decreased 3% and sales increased 2%, a recovery in the foodservice business and higher whole bird sales drove the sales increase.
Foodservice volumes were up double digits compared to last year.
Demand for Jennie-O retail products such as Lean Ground Turkey remained above pre-pandemic levels.
Jennie-O Turkey Store segment profit declined 54% due to the impact from higher feed costs.
Grain prices continued to increase significantly during the quarter, while pricing action had yet to be fully reflected in the marketplace.
Jim Sheehan will provide further commentary on the actions we have taken to manage higher corn and soybean meal costs.
Looking to the balance of the year, we are increasing our full year sales guidance range to $10.2 billion to $10.8 billion, and reaffirming our earnings per share guidance range of $1.70 to $1.82 per share.
As a reminder, this guidance range does not include the estimated impact of the pending acquisition of the Planters snacks nuts business.
Our diversified and balanced business model gives us confidence we can perform well in many different economic scenarios and market conditions.
We have a very positive outlook on the foodservice business as we head into the second half of the year.
We are well positioned from an inventory and capacity standpoint to meet the demand from our distributor partners and operators, and are confident in our ability to gain share throughout the recovery.
Additionally, we are increasingly confident that K-12 schools and colleges and universities will open and operate in a more traditional manner this fall.
This should benefit both Refrigerated Foods and Jennie-O Turkey Store.
We continue to see elevated demand in the retail, deli and international channels.
We expect to further benefit from pricing actions, increased capacities on key product lines and continued improvements in our supply chain.
This year, we have seen rapid increases in key input costs across our businesses, and we expect to operate in a high-cost environment for the remainder of the year.
Our experienced management team has a proven ability to navigate and grow our business in volatile and inflationary market conditions.
And once again, we will be leveraging our direct sales force to partner with our customers to mutually grow our businesses.
As a reminder, our operations were heavily impacted by plant shutdowns, supply shortages and lower production throughput caused by the effects of the pandemic in the back half of fiscal 2020.
This ultimately led to lower levels of inventory, which negatively affected the third and fourth quarters.
Through the strategic actions we have taken to improve all facets of our operations and based on our record first half performance, we expect to benefit from more normalized operations in the back half of fiscal 2021.
I am confident in our ability to continue growing and I'm looking forward to closing the acquisition of Planters next month.
Record sales for the second quarter were $2.6 billion, an increase of 8%.
First half sales increased 5% to $5.1 billion, also a record.
Pre-tax earnings increased 2% for the quarter compared to last year.
Diluted earnings per share for the quarter was $0.42 per share, flat to last year.
Second quarter results reflected approximately $0.01 per share in incremental COVID-related costs and $0.01 in higher tax expense.
SG&A, excluding advertising, was 6.5% of sales, down slightly to last year.
Advertising spend for the quarter was $31 million.
Operating margins for the quarter were 11.1% compared to 12.1% last year.
Higher raw material and feed costs negatively impacted margins, as pricing lagged input cost increases.
We have taken numerous pricing actions across the portfolio to protect profitability.
The actions will take place early in the third quarter with additional pricing actions likely.
COVID-related expenses were $6 million.
The impact of COVID expenses continued to decline.
Net unallocated expenses decreased due to higher investment income.
The effective tax rate for the quarter was 22.1% compared to 20.6% last year.
Excluding the impact from the Planters acquisition, we estimate the full year tax rate to be between 20% and 21.5%.
We built inventory during the quarter in preparation for higher demand and to support continued growth for the remainder of the year.
Our strategic action to build inventory was the primary driver of lower operating cash flow during the quarter.
We paid our 371st consecutive quarterly dividend, effective May 17th, at an annual rate of $0.98, a 5% increase over the prior year.
Share repurchases were minimal during the quarter.
Capital expenditures were $45 million in the quarter.
The Company's target for capital expenditures in 2021 is $260 million.
During the second quarter, we saw dramatic increases in pork and hog prices.
USDA composite cutout prices since January have increased more than $30, with all primals contributing to the increase.
Key inputs such as bellies and trim increased 57% and 76%, respectively, during the quarter.
Pork exports also set an all-time record in March due to African swine fever outbreaks in China, Southeast Asia and Europe.
We anticipate strength in pork markets due to continued export demand and a foodservice recovery domestically.
The USDA is now projecting pork production for the year to be slightly lower than 2020.
Industry operating efficiencies are expected to improve as COVID pressures abate; however, labor availability, tighter hog supplies and reductions in the sow herd [Phonetic] support higher markets.
Our balanced approach to hog import procurement mitigated cost volatility during the quarter.
In high-cost and volatile environment, the strength of our leading brands and balanced approach to procurement continues to be a competitive advantage.
The guidance range assumes elevated and volatile market conditions for the balance of the year, with some moderation heading into the fall.
We expect hog price in the USDA composite cutout to remain well above year-ago levels due to strong domestic and export demand, along with tighter hog supplies.
We anticipate prices to peak during the summer and gradually decline in the fall, consistent with the seasonal increase in harvest.
Deli prices are projected to remain higher than last year in historical averages.
We anticipate markets to stabilize near the current levels, but volatility due to lower cold storage levels and strong demand in the foodservice channel could cause inflationary pressure.
Pork trim prices are expected to moderate from the current levels, but labor shortages across the industry remains a key risk to trim prices as limited boning capacity directly impacts trim supply and pricing.
Due to the higher beef harvest levels in the summer months, beef prices are anticipated to be lower in the back half of 2020.
In response to global supply and demand imbalances in corn and soybean meal, we have taken strategic hedges to fully cover grain costs for the remainder of the year.
The positions also provide a benefit if markets decline.
These hedges, coupled with the previously announced pricing actions, are expected to protect Jennie-O's profitability.
Turkey poult placements and egg sets have declined.
Inventory levels are lower compared to last year.
The tightening of supply has led to higher whole turkey and thigh meat markets.
We have also recently seen an increase in breast meat prices.
A recovery in the foodservice industry remains the key driver for higher prices for this important market.
We anticipate inflationary pressure on freight in the back half of the year.
The tactical action to optimize our distribution network with two new DCs combined with improvements in load efficiencies will help mitigate a portion of the increase.
We have obtained the required regulatory approvals for the acquisition of the Planters snack nut business.
The scheduled close date is in June.
 Assistant:

Chosen response:
hormel foods reaffirming fy earnings per share outlook range of $1.70 to $1.82 per share.
reaffirming our fy earnings per share guidance range of $1.70 to $1.82 per share.
qtrly net sales of $2.6 billion, up 8%.
qtrly diluted earnings per share of $0.42.
q2 refrigerated foods volume up 3%.
q2 refrigerated foods net sales up 17%.
qtrly volume of 1.2 billion lbs. , down 3%.


Prompt:
Human: If you did not receive a copy of the release, you can find it on our website at hormelfoods.com under the Investors section.
On our call today is Jim Snee, Chairman of the Board, President and Chief Executive Officer; and Jim Sheehan, Executive Vice President and Chief Financial Officer.
Jim Snee will provide a review of the company's current and future operating conditions, commentary and each segment's performance for the quarter, and a perspective on the balance of fiscal 2021.
Jim Sheehan will provide detailed financial results and commentary regarding the company's current and future financial condition.
As a courtesy to the other analysts, please limit yourself to one question with one follow-up.
It will be posted on our website and archived for one year.
Before we get started, I need to reference the Safe Harbor statement.
It can be accessed on our website.
In the third quarter, our team delivered the highest quarterly sales in the company's 130-year history, while operating in an environment, which included inflationary pressures and industrywide supply chain challenges.
Our ability to deliver this performance demonstrates the strength of our balanced business model and strong consumer demand, as we grew sales in all four segments and all four sales channels on an organic basis.
Also in the third quarter, we completed the acquisition of the Planters snacks nut business.
This brand fits perfectly into our vision for Hormel Foods and is another step in our strategic evolution.
The integration has been smooth, which has allowed us to effectively operate the business with no disruptions.
These accomplishments were achieved by our team members who never lost sight of our long-term growth strategy in the face of unprecedented industrywide challenges.
Now more than ever, our investments across all areas of our business are paying off and have allowed us to reach even more consumers when and where they are eating.
Whether it is cooking a meal at home, snacking at work, eating at a local restaurant, hosting a gathering with family and friends or ordering food online, a Hormel Foods branded product will likely be an option.
The proof is in our performance this quarter.
Sales increased 20% on a volume increase of 1%.
Compared to the third quarter of 2019, sales increased 25%.
This all-time record performance was led by an acceleration in our Foodservice business, sustained demand for our retail and deli products, continued growth from our international business and pricing actions taken across the portfolio.
Excluding a partial quarter of the Planters business, organic sales increased 14% and volume declined 2%.
For the quarter, we saw an acceleration in our Foodservice business as sales grew 45% compared to last year.
What is even more impressive is sales increased 17% compared to 2019 pre-pandemic levels.
Our Enterprise Foodservice portfolio remains perfectly positioned to meet the most pressing need of today's foodservice operators, which is labor.
Our products minimize labor, simplify food preparation and save time, all while preserving the flexibility to add their own unique touch to their menus.
Hormel Bacon 1 fully cooked bacon, Wholly Guacamole, Fontanini authentic Italian sausages and Hormel Fire Braised meats are all excellent examples of products that are succeeding in today's environment.
Our retail business also showed 9% growth compared to 2020.
Compared to pre-pandemic levels in 2019, this business delivered outstanding growth of 31%.
Brands such as SPAM, Hormel Black Label, Applegate, Jennie-O and Herdez continue to resonate with consumers.
Sales in the deli channel increased 12% this quarter and are up 16% compared to pre-pandemic levels.
Hormel Gatherings, Party Trays and Columbus charcuterie items showed another quarter of growth as consumers return to entertaining and spending time with family and friends.
An important component of our growth in retail and deli is our e-commerce performance.
We continue to invest in the digital space, and we are seeing strong results compared to pre-pandemic levels.
Our International channel delivered impressive growth of 36% compared to 2020 and is 33% above 2019 levels.
Improvement was led by branded exports and strength from the Multinational businesses in China and Brazil.
Again, I cannot stress enough, how proud I am of our entire team, for delivering these impressive results, in the midst of an incredibly difficult operating environment, marked by significant inflation, labor challenges and supply chain disruptions.
This not only demonstrates the team's ability to execute our long-term growth strategy, but also reinforces the power of our brands.
On a consolidated basis, diluted earnings per share were $0.32, a 14% decline, compared to 2020.
The decrease was due to one-time transaction costs, and accounting adjustments, related to the acquisition of the Planters business.
Adjusted earnings per share were $0.39, a 5% increase.
Our team did an excellent job actively managing through inflationary pressures and supply chain challenges.
During the quarter, we continue to see inflation in labor rates, freight, supplies, raw materials and many other inputs, with an acceleration compared to the second quarter.
Of note, we saw a very high level of inflation in pork input costs.
To mitigate this inflationary pressure, we have taken pricing on almost every brand and product across our company.
This is a testament to our successful pricing strategy, the power of our brands and the hard work of our entire team, especially our direct salesforce.
As a reminder, there is a difference in how quickly pricing flows through by channel, and this can shift profits to later quarters.
We have a track record of improving profitability through a market cycle and we expect margins to improve in the coming quarters.
We also saw a drastic step-up in industrywide operational challenges, caused by labor shortages.
This has impacted both our facilities and the operations of supplier and logistics partners.
This has created a very complex operating environment, which led to an inability to fully meet customer demand.
To address labor availability in our facilities, we are taking swift actions to hire and retain team members, implement automation across manufacturing facilities and simplify the portfolio.
Our entire team, from operations to our direct salesforce, has done an excellent job adjusting, prioritizing and managing through this dynamic environment.
Turning to the segments, Refrigerated Foods volume decreased 2%, sales increased 19% and segment profit was flat.
Organic volume decreased 3% and organic sales increased 18%.
Volume was lower, due to lower harvest levels and commodity sales, compared to last year.
Our Foodservice business accelerated compared to the second quarter, with elevated levels of demand for all our branded products.
Nearly every category grew volume and sales compared to last year, with standout performances from products like Hormel Bacon 1, pizza toppings and sliced meats.
Bacon 1, Fire Braised, Fontanini, Applegate and pizza toppings were just some of the items that also grew volume and sales compared to 2019.
Similar to prior quarters, we saw excellent growth from premium prepared proteins, which are the cornerstone of our pre-strategy, offering versatile and flavorful items that come pre-marinated, pre-sliced or pre-cooked.
These items sold for the most pressing issues facing operators today, labor shortages.
Brands like Bacon 1, Austin Blues, Fire Braised and Cafe H are designed to solve for this challenge and have never been as important or in higher demand than they are today.
We saw momentum continue for our retail and deli brands in Refrigerated Foods as well.
Products showing exceptional sales growth include Hormel Gatherings party trays, Hormel Black Label bacon, Hormel Fully Cooked entrees and Lloyd's Barbecue.
The Columbus brand has shown no signs of slowing down, as consumers look for premium, authentic charcuterie.
I'm pleased with the performance of our new charcuterie plant in Omaha, as the team is quickly filling up the new production lines.
We are excited about the upcoming holiday season and expect a high level of demand for our innovative and premium Columbus product lines.
International delivered its sixth consecutive quarter of record earnings growth, with volume up 2%, sales up 26% and segment profit up 18%.
Organic volume increased 1%, and organic sales increased 24%.
Total branded and fresh pork exports grew during the quarter.
We continue to see strong growth from SPAM, Skippy and many foodservice brands around the world.
Our business in China continues to perform well led by foodservice and from retail brands such as SPAM and Skippy.
Our new item launches of Beef Jerky and Skippy Snacking items have also been very successful.
Grocery Products volume increased 4%.
Sales increased 20% and segment profit increased 1%.
Brands, including SPAM, Hormel Complete and Wholly showed excellent growth in the quarter.
We continue to see strong growth relative to 2019 pre-pandemic levels for brands such as SPAM, Hormel Complete, Dinty Moore, Mary Kitchen and Herdez.
Organic volume decreased 6%, and organic sales were flat.
Organic volumes faced difficult comparisons due to the extremely high levels of demand during the early parts of the pandemic.
Additionally, we have rationalized capacity on numerous contract manufacturing items to support growth of our branded business.
Our MegaMex joint venture delivered excellent results as equity in earnings increased 30%.
The growth from the Herdez and Wholly brands are being driven by the tremendous level of innovation from MegaMex, with products such as Herdez Cremosa, Herdez Guacamole Salsa and Wholly Smashed Avocado.
We are also extremely encouraged by our entry into the hot sauce space with Herdez Avocado Hot Sauce.
Jennie-O volume increased 9% and sales increased 22%, a combination of a foodservice recovery and higher whole bird and commodity volumes drove the volume increase.
Increase sales is due to higher volumes and pricing actions across the portfolio.
Jennie-O Turkey Store segment profit declined 17%, driven by the impact from significantly higher fee and freight costs.
While spot grain markets remained elevated during the quarter, the hedging actions we took stabilize the cost increases.
Looking to the balance of the year, we issued our full year net sales and earnings guidance to reflect the Planters acquisition.
We expect net sales to be between $11 billion to $11.2 billion and for diluted earnings per share to be between $1.65 to $1.69.
This guidance reflects the addition of the Planters business and includes the associated one-time transaction costs and accounting adjustments in addition to the impact from inflationary pressures on our business.
We expect a strong finish to the year as pricing actions continue to take effect, the foodservice industry continues to recover and from the addition of Planters.
Looking beyond the fourth quarter, I feel very optimistic about the future.
Our balanced portfolio with diversification across raw materials, channels and categories will allow us to perform well in many economic environments.
Further, we never wavered on our commitment to employee safety and on making disciplined and strategic investments to ensure we are positioned to deliver long-term sustainable growth.
Since the onset of the pandemic, we have made the following strategic investments.
We opened a new Columbus charcuterie plant in Omaha, and we immediately invested in Phase 2, representing a major expansion of our pepperoni capacity.
We completed the Pizza Toppings expansion at our Burke plant in Iowa, which significantly increased our capacity for Pizza Toppings.
We have invested in R&D for plant-based products and launched our plant-based pepperoni and sausage crumble items at the Pizza Expo in mid-August.
Additionally, we bolstered our innovation efforts by investing in new R&D centers, both domestically and in China.
We expanded our distribution network for both the Shelf-Stable and Refrigerated businesses.
We made further progress on building out our one supply chain by investing in systems, people and processes.
We acquired Sadler's Smokehouse, which added capacity to support growth during the recovery in the foodservice industry.
We completed the HR and finance portions of Project Orion and continue to work toward the multi-phase implementation of our supply chain.
We continue to make investments in advertising for our leading brands.
And finally, we made the company's largest investment ever, the acquisition of Planters.
We are already seeing the benefits that a large iconic and well-known brand can have on our business.
These are just some of the many investments we have made to further enhance our business and set us up for growth into the future.
Third quarter sales were $2.9 billion, an all-time record for the company.
Net sales and organic net sales increased 20% and 14%, respectively, compared to last year.
Segment profit increased 2% for the quarter, driven by strong results in the International segment, Foodservice growth and the addition of Planters.
Earnings per share were $0.32.
Adjusted earnings per share, excluding one-time costs and accounting adjustments related to the acquisition of Planters was $0.39, a 5% increase.
COVID-related expenses during the quarter were immaterial.
Adjusted SG&A was 6.9% of sales compared to 7.6% last year.
Advertising for the quarter was $31 million, an increase of 25%.
Adjusted operating margins for the quarter were 8.7%, a decrease from 10.5% last year.
We expect margins to show sequential improvement in the fourth quarter as the impact of pricing actions continue to take effect.
Net unallocated expenses increased as a result of the one-time acquisition-related costs for Planters and net interest expense.
The effective tax rate for the quarter was 13.3%.
The primary driver of the decline was a large volume of stock options exercised during the quarter and a one-time foreign tax benefit.
The revised guidance range assumes a full year tax rate between 19% and 20.5%.
Operating cash flow declined compared to last year, impacted by working capital from the Planters acquisition and higher levels of inventory.
Inventory levels were unseasonably low last year during the third quarter.
We paid our 372nd consecutive quarterly dividend, effective August 16 at an annual rate of $0.98 per share, a 5% increase over 2020.
This completes the 93rd consecutive year of uninterrupted dividend payments.
Capital expenditures were $54 million in the quarter.
The company's target for the capital expenditures in 2021 is $260 million.
The Planters acquisition represents a change to the company's capital structure.
In June, we issued $2.3 billion of notes in three, seven and 30-year tranches.
This debt was incremental to the $1 billion of 10-year notes we issued in 2020.
Including the treasury locks, the weighted average cost of debt is 1.6% and the weighted average maturity is 10.4 years.
This attractive debt profile is an ideal balance for our business.
We will continue to use a disciplined waterfall approach to capital allocation, which includes three areas: required, strategic and opportunistic uses of cash.
I expect no changes to dividend growth or our capex strategy.
We are committed to an investment-grade rating and plan to deleverage to 1.5 to 2 times debt-to-EBITDA over the next two to three years.
The business experienced significant inflationary pressures on pork input costs during the quarter.
The dramatic increase in pork and hog prices continued in the third quarter.
Hog prices were up 250% compared to 20-year lows last year.
Additionally, the prices of pork remained elevated caused by the recovery in the foodservice and the strong worldwide demand.
The USDA composite cutout was up 50% compared to last year and 20% compared to the second quarter.
Trim and belly prices also experienced inflationary pressure with significant volatility.
Compared to the prior year, belly prices were 62% higher and trim prices were 27% higher.
The business benefited from the balanced approach to hog and pork procurement as we purchased hogs in aggregate at prices lower than the market.
However, the rate of the drastic rise in the total pork input costs negatively impacted profitability.
The latest estimates from the USDA indicate pork production for the year to decrease 2% compared to 2020.
Lower harvest levels, lighter carcass weights and labor shortages across the industry support higher markets near-term.
We're closely monitoring the discovery of African swine fever in the Caribbean and labor availability across the industry.
Both factors could impact input costs going forward.
Fundamentals in the turkey industry improved during the third quarter.
Higher prices for commodity items, including breast meat, size and whole turkeys were a benefit to the quarter.
Additionally, egg sets and poult placements declined.
Cold storage remains significantly below historical averages.
Higher operating costs offset the market benefits.
Inflationary pressure on corn and soybean meal have resulted in substantially higher feed costs.
The strategic hedges on corn and soybean meal have stabilized feed costs.
We also absorbed higher costs for freight, packaging, supplies and labor.
We are actively managing our logistics network and supplier partnerships to minimize cost increases.
Across the portfolio, pricing actions were effective, but from a timing standpoint, trailed inflation during the quarter.
We expect to recover lost profitability due to inflation in the coming quarters as conditions normalize and pricing actions expand.
The strong demand for our key products during the price increases is a testament to the strength of our leading brands.
The guidance issued for the remainder of the year includes the impact of Planters and the expectations of continued inflationary pressure and volatile market conditions.
Although the third quarter had its challenges, it also included significant financial milestones.
We closed the largest acquisition in the company's history.
We financed the transaction by leveraging the balance sheet through an attractive debt structure in both interest rates and tenure, all while maintaining our investment-grade rating.
We move into the future with a more efficient capital structure, stronger brands and continued financial strength to invest in our business.
 Assistant:

Chosen response:
q3 earnings per share $0.32.
q3 sales rose 20 percent to $2.9 billion.
, up 1%; organic volume down 2%.
qtrly refrigerated foods volume down 2%; organic volume down 3%.
qtrly refrigerated foods net sales up 19%; organic net sales up 18%.
sees 2021 net sales guidance $11.0 - $11.2 billion.
sees 2021 diluted earnings per share guidance $1.65 - $1.69.
hormel foods qtrly refrigerated foods volume, net sales, segment profit were negatively impacted by production constraints due to labor shortages.


Prompt:
Human: Joining me on the call today are Todd Meredith, Bethany Mancini, Rob Hull and Kris Douglas.
These risks are more specifically discussed in a Form 10-K filed with the SEC for the year ended December 31, 2020.
Today, I'll discuss current healthcare utilization trends, our second-quarter results and our external growth momentum.
And I'll describe how our strategy delivers steady growth quarter after quarter.
And I'll close by touching on a few of our internal initiatives.
First, we're pleased to see that most providers are back to normal in terms of utilization.
Healthcare providers have proven their ability to operate throughout the pandemic.
Patients have returned to their doctors and we're hearing from our tenants that outpatient procedures are back to or above pre-pandemic levels.
Even more encouraging, physicians and health systems are telling us their businesses are growing and they need more space to meet demand.
This underscores our view that healthcare utilization is poised to continue growing on a consistent annual basis propelled by aging demographics.
Turning to our results; we reported same-store NOI growth of 2.9% for the second-quarter, which puts us back in line with our historical average of about 3%.
Looking ahead, we're well-positioned to sustain these steady levels of internal growth.
We continue to see the benefits of operating in dense markets with high barriers to entry.
This insulates us from new supply and facilitates steady rent growth.
As rents rise, we're well-positioned to benefit from shorter lease terms which gives us the ability to increase rents more often.
With respect to external growth, we're truly firing on all cylinders.
Year-to-date, we've acquired 21 properties for over $400 million.
We're well on our way to meet or exceed our 2020 acquisition volume, which was our best year ever.
And we're confident in our ability to continue this momentum.
Today we're seeing aggregators sell portfolios comprised of lower quality, often isolated assets at premium cap rates.
This is driving relative cap rate compression, especially on portfolios.
What makes us different is that we're sourcing individual quality assets at attractive prices in better markets and building on our strategic clusters.
Our ability to smoothly integrate properties into our existing operations reflects the value of our platform.
Another source of value creation is our development pipeline, which includes over $1 billion of embedded growth opportunities.
As an example, here in Nashville, we're starting an on-campus redevelopment project involving a property we've owned for over 15 years.
Sites of the existing building, we're constructing a larger lead-certified medical office building at the center of the Ascension St. Thomas Midtown campus.
This strengthens our relationship with St. Thomas and builds on our cluster of nearly 1 million square feet in Nashville.
Our strategy is straightforward; we focus on markets with strong demographic trends and partner with leading health systems.
In today's competitive environment, our local market knowledge and industry relationships help us source new investments and attract new tenants.
Our cluster strategy amplifies these benefits, and we gained scale and efficiency as we lease and manage more and more properties in close proximity.
In terms of location, we target properties on and adjacent to campus complemented with nearby off-campus facilities where we can drive incremental returns.
We're able to further enhance our yields by engaging in targeted development projects in utilizing our joint venture partnership which widens our opportunity set.
The strategy has paid off in contrast to many other REITs whose results were hard hit during the volatility of the last 18 months, we've delivered growth in FFO per share each quarter.
Over the long term, our strategy creates value for shareholders through the steady compounding of cash flows.
Before I hand the call over to Bethany, let me take a few moments to highlight some recent initiatives.
We believe the depth and breadth of our team as well as the long tenure of our leadership is the driver of our success.
I'm pleased to announce that we recently promoted Julie Wilson to Executive Vice President of Operations.
Julie has been with us for over 20 years and this promotion highlights her leadership and the growth of our platform in that time period.
Julie now has oversight of our portfolio operations, as well as marketing, technology and ESG groups.
And with respect to ESG, we continue to dedicate resources to this important effort.
Our ESG program will now be led full-time by Carla Baca.
This year, we completed our second gross survey [Phonetic] and later this year, we'll release our third Corporate Responsibility Report.
Health systems are reporting strong momentum in elective care and patient utilization across the Board.
Performance was better than expected in the second quarter for the public hospital companies.
One of the main drivers for their recovery and growth outlook is outpatient volume.
Physicians have been able to ramp up patient visits in surgeries more quickly than hospitals in most markets.
MG&A reported positive average growth in physician compensation for 2020, a sign of strength amid the shutdown of routine care and elective surgeries.
Ambulatory outpatient settings have also experienced strong employment growth throughout the recovery.
In 2021 physician offices continue to be a bright spot for job gains in the healthcare sector, which bodes well for medical office space demand.
Physicians are expanding into larger practice groups to lower administrative costs, increase market share and utilize external capital to fund growth.
Healthcare providers are also benefiting from a public health policy environment that continues to support positive reimbursements and expanded health insurance coverage.
More than 2 million people gain insurance through ACA exchange marketplaces during a special enrollment period after Congress increased the availability of subsidies last year.
Congress is focused now on extending the two-year expansion of ACA subsidies and exchange eligibility in the upcoming budget and infrastructure bill.
The legislative agenda should provide a stable backdrop for providers as they meet greater patient demand and pursue growth initiatives.
On the regulatory side, CMS is pursuing several avenues to lower healthcare costs.
President Biden issued an executive order in July mandating the FTC to increase scrutiny of hospital consolidation and anti-competitive practices among providers.
CMS also continues to implement regulations on price transparency, requiring a list of hospitals' prices to be published of their most common services.
It remains to be seen if consumer-friendly disclosures will change patient behavior when choosing their care.
But these efforts to lower cost growth and ensure competition should accelerate incentives for healthcare delivery in outpatient settings.
The correlation of health policy, hospital regulation and outpatient trends is continuing to advance the nation's demand for medical office facilities.
The opportunities that lie ahead position HR's portfolio and external growth prospects well within the rising tide of healthcare services.
Investor demand for MOBs has accelerated, highlighted by the resilience of the asset class over the last 18 months.
As a result, cap rates have continued to trend lower.
We have also seen an uptick in the number of portfolios in the market as MOB aggregators seek to capitalize on this demand in attractive pricing.
In our view, most of these portfolios of disparate assets are richly priced at 50 to 100 basis points over similar quality individual properties.
In contrast, our strategy is to curate a high-quality portfolio clustered in dense, growing markets by targeting the properties we won.
We have been busy on the acquisition front.
We closed on 14 buildings for $336 million since the end of March.
These acquisitions had a blended initial cap rate of 5.2% with another 30 basis points of embedded upside through lease-up.
Three-quarters of these acquisitions are located directly on campus and all are located in existing markets.
The average 10-mile population density around these assets is over 900,000 and the projected growth of 5.4% is nearly double the US average.
These assets also illustrate our cluster strategy and the depth of our existing health system relationships.
As an example, we acquired five buildings associated with Centura Health, a leading system in Colorado, that we have worked with for over a decade.
We now have over 1 million square feet with Centura and expect to add more over time.
Year-to-date; we have completed $412 million of acquisitions, adding 1.1 million square feet to our portfolio.
Given the strength of our activity year-to-date and a robust pipeline, we are raising our acquisitions guidance.
The increased range is now $500 million to $600 million.
In this competitive environment, we are also taking advantage of the strong pricing to recycle capital into investments with better long-term growth prospects.
We have closed on approximately $115 million of sales year-to-date.
We are raising our disposition guidance to $115 million to $175 million for the year.
In our development pipeline, we see increased momentum as hospitals expand their outpatient programs.
In Nashville, we kicked off a development that is highly integrated with Ascension St. Thomas Midtown Hospital.
We're building a 106,000 square foot LEED-certified MOB with a subterranean parking garage.
And it will also include a new shared front entrance with a women's services tower of this leading hospital.
Our budget is $44 million and construction will take approximately two years.
At completion, we will have almost 450,000 square feet on this campus and nearly 1 million in the dense healthcare corridor of Nashville.
What's important is developments like these strengthen our provider relationships and our attractive avenue to create value.
We target development yields of 100 to 200 basis points above comparable stabilized assets.
In closing, our focus on relationships in clusters means that the investments we are making today will lead to more investments tomorrow.
With our increased acquisitions guidance, we are on pace to deliver robust accretive net investment activity for the year.
Our second quarter results reflect the steady growth of our MOB-focused business.
Normalized FFO per share was $0.43, up $0.01 from a year ago.
This is driven from the contribution of the $500 billion [Phonetic] and net acquisitions completed over the past 12 months along with meaningful same-store growth.
Second quarter same-store NOI increased 2.9%, which is in line with our long-term outlook.
Trailing 12 months same-store NOI growth was 2.3%, up from 2% in the first quarter.
The year-over-year second quarter NOI growth benefited from a few key items.
First, the 4.9% increase in expenses appears to be above normal.
However, keep in mind, we're coming off of quarantine-impacted lows from last year.
On a compound annual growth rate basis from second quarter 2019, expenses grew just under 1%.
This is below our long-term expectation of 2% to 2.5%.
Second, parking income is essentially back to pre-pandemic levels.
The rebound generated year-over-year growth of 45% in parking income for the quarter.
Finally, the $700,000 reserve for COVID rent deferrals booked in second quarter last year is boosting year-over-year -- the year-over-year comparison.
As a reminder, we reversed the majority of the reserves in the third and fourth quarter of 2020, as the deferrals were repaid.
When you're updating your models, please keep in mind that this reversal together with normalizing expenses will dampen year-over-year growth in the next two quarters.
But the real takeaway is the consistent embedded growth in our portfolio.
The portfolio average in-place contractual rent increase is approaching 2.9%.
For our second quarter lease renewals, the average cash leasing spread was 2.8%.
Year-to-date, cash leasing spreads have averaged 3.8%, which is at the high end of our 3% to 4% target range.
Releases commencing in the second quarter, our average future contractual increase is 3.1%, 20 basis points higher than our in-place average.
This reflects our pricing power derived from our quality portfolio and attractive markets.
With respect to occupancy, we are still catching up from last summer.
And like most in the real estate sector, we are working through the impact of delays and permitting and construction.
On average, we have seen build-out timelines increased by approximately 30%.
In some high-growth markets like Dallas, permitting timelines have more than doubled.
As a result, our same-store average occupancy was down 50 basis points year-over-year.
While these delays may persist in the short run, we are optimistic about our ability to drive improvements in occupancy moving into next year.
Tours and interests are strong across our portfolio as physicians seek space for their expansions.
And over the long term, the projected growth in outpatient care will drive the need for more medical office real estate.
Regarding our balance sheet and liquidity, net debt to EBITDA was 5.1 times, down from 5.3 times in the first quarter.
During the second quarter, we funded $223 million of investments with $66 million of dispositions, $38 million from our joint venture partner as well as the settlement of $160 million of forward equity contracts.
As we look ahead, we have ample liquidity to fund our growing pipeline of acquisitions.
We have $150 million of forward equity contracts remaining to be settled in addition to cash and other liquidity sources.
The year-to-date FAD payout ratio is 85% with moderate maintenance capex in the first half of the year.
We expect maintenance capex to increase as we move to the back half, but the payout ratio to remain below 90% for the year.
The events of the past 18 months more than proved the resilience of our portfolio.
We believe the strong underlying demand drivers for outpatient care will help drive internal and external growth.
These tailwinds when combined with low leverage and access to multiple sources of capital will continue to drive compounding per share growth.
 Assistant:

Chosen response:
q2 adjusted ffo per share $0.43.
qtrly normalized ffo per share totaled $0.43.


Prompt:
Human: Please note, that the information presented is preliminary and based upon data available at this time.
Except to the extent required by law, we expressly disclaim any obligations to update earlier statements as a result of new information.
For the fourth quarter 2020, Hilltop reported net income of $116 million or $1.35 per diluted share, representing an increase from the fourth quarter 2019 of $67 million or $0.81 per diluted share.
This included a final settlement from the sale of National Lloyds of $3.7 million or $0.05 per diluted share.
Return on average assets for the period was 2.8% and return on average equity was 21%.
Full-year 2020 net income equated to $448 million or $5 per diluted share.
This was an increase from $225 million or $2.44 per diluted share in 2019.
Full-year results reflect a discontinued operations from National Lloyds of $38 million.
The fourth quarter capped off remarkable year of growth for the organization.
We continued to capitalize on a tremendous mortgage market, as originations for the quarter totaled $6.8 billion, an increase over prior year of $2.4 billion.
Driven by PPP loan balances, the Bank's average loans for the fourth quarter increased 8% from prior year, and average deposits grew by $2.3 billion or 26% from prior year as well.
Net revenues at the broker-dealer increased for the same period by $37 million or 33%, primarily due to robust volumes in Structured Finance, Public Finance and Fixed Income businesses.
Our strong capital position in 2020 enabled us to distribute $241 million in both dividends and share repurchases.
This includes the Dutch auction tender that was executed in the fourth quarter, were Hilltop paid $193 million to repurchase approximately 8 million shares of common stock.
Yesterday, our Board of Directors declared a quarterly cash dividend of $0.12 per common share, an increase of 33% from the prior quarter.
This dividend is payable on February 26th, 2021.
During the period, we continued to support our impacted banking clients through the approval of COVID-related loan modifications.
The balance of total active deferrals as of December 31 was $241 million -- excuse me, $240 million, down from $968 million at the end of the second quarter.
Our allowance for credit losses as of December 31 totaled $149 million or 2% of the Bank's loan portfolio.
This reflects a reduction in the reserve balance of $6.2 million from the third quarter, which was driven by fourth quarter payoff, lower-than-expected charge-offs and a shift in the economic outlook.
2020 was a challenging year for all of us, where I believe made us a stronger and better company.
I'm very proud of our teammates companywide and how they responded to take care of each other, as well as our clients and the communities we serve.
At the onset of the pandemic, our treasury and capital markets teams immediately pulled together to manage the volatility which occurred and to ensure our businesses had ample liquidity to serve the needs of our clients.
As well, the coordinated efforts of our technology, property management and human resources groups, enabled us to effectively transition 90% of our employees to a work-from-home model, in less than 30-days.
Although the pandemic caused Hilltop to change the way we work, it did not deter our company from making progress on large and complex initiatives.
Also notable, our team at PlainsCapital Bank originated 2,800 PPP loans and deferred loan payments in a few short months, for their commercial and consumer clients that were most impacted by the pandemic.
Their efforts in partnering and supporting our banking clients, highlight the culture of PlainsCapital and the quality of our bankers.
2020 was also a record-breaking year for the company.
As prime lending funded a record $23 billion in mortgage loan, Hilltop Securities generated record net revenues of $530 million and Hilltop produced record earnings.
Importantly, we do not expect these favorable market conditions to continue indefinitely.
As we embark upon 2021, we believe that Hilltop is well positioned with established businesses, synchronized leadership and substantial capital.
Moving to Slide 4.
PlainsCapital Bank had a solid quarter, with pre-tax income of $59 million, as a negative provision of $3.6 million was recorded.
Net interest income increased $11 million from Q4 2019, driven by fees and interest income from PPP loans.
Net interest margin was 3.37% during the period, a linked quarter increase of 35 basis points, as the Bank utilized cash proceeds from PPP loan pay-offs to reduce sweep deposits from Hilltop Securities.
PrimeLending had an outstanding fourth quarter and generated pre-tax income of $84 million, an increase of $76 million from Q4 2019.
That was driven by a 54% increase in origination volumes and a gain on sale margin of 448 basis points, a strong finish to an incredible year for the PrimeLending team.
HilltopSecurities, also had an outstanding quarter with pre-tax income of $34 million, an increase of $10 million or 42% from the fourth quarter of 2019.
Structured Finance grew net revenue by 92% from Q4 2019, driven by a 57% increase in TBA lock volume.
Public Finance Services grew net revenue by 32% and Fixed Income Services grew net revenue by 45%, both driven by robust volumes, improved capabilities and key talent addition.
Moving to Slide 5.
In late 2017, we announced a broad set of initiatives to enhance our platform and streamline operations with the goal of lowering operating costs, and building a foundation for future growth.
Our goal was to deliver $84 million and run-rate PPNR benefit by the end of 2021.
Through the end of 2020, we have completed projects that have resulted in $90 million in revenue and cost benefits.
This program was centered around three main areas.
Enhanced Business Operations, Strategic Sourcing and Shared Services.
In the first area of Enhanced Business Operations, we streamlined front-end operations through the replacement of legacy core systems with the Blue Sage loan origination system at PrimeLending and with the FIS platform in HilltopSecurities.
Also, we improved the alignment of leadership and management through affecting succession plan and making certain large organizational changes, such as the PrimeLending staff reorganization in 2018 and the restructuring of Hilltop's [Indecipherable] organization in 2019.
Additionally, we established a agency MBS group at HilltopSecurities, which is a securitized product platform that complements our mortgage origination businesses.
In the second area of Strategic Sourcing, the focus was to take advantage of the size of our organization, in order to improve our pricing and discounts with all vendors.
In order to do this, we implemented an enterprise contract and procurement platform to better enable the organization to work effectively with contracts and across vendors.
A single travel and entertainment platform to aggregate data and leverage our scale for better rates and discounts and a consolidation of supplier sourcing, which includes IT hardware and software, it's in janitorial services, and office supply.
Notably, Strategic Sourcing has been a huge effort and is showing very positive results, that we will continue to leverage as we negotiate contracts.
The focus of the third and last area was to build a Shared Services organization to support the entire enterprise.
We had redundancy across the organization in most functional departments.
And through the centralization of certain responsibility, we now have better controls, communication and run rate costs.
Most importantly, our Shared Services organization has positioned us for enhanced scalability to support both organic and acquisitive growth.
I'll start on Page 6.
As Jeremy discussed, for the fourth quarter of 2020, Hilltop reported consolidated income attributable to common stockholders of $116 million, equating to a $1.35 per diluted share.
Hilltop produced income from continuing operations of $113 million or $1.30 per diluted share during the fourth quarter.
For the full-year of 2020, Hilltop reported consolidated income attributable to common stockholders of $448 million or $5.01 per diluted share.
Income from continuing operations available to common stockholders equated to $409 million or $4.59 per diluted share.
Earnings per share from continuing operations effectively doubled from $2.30 reported in 2019.
During the fourth quarter, revenue related to purchase accounting was $5.7 million and expenses were $1.4 million, resulting in a net purchase accounting pre-tax impact of $4.3 million for the quarter.
In the current period, the purchase accounting expenses largely represent amortization of deposit and other intangible assets related to prior acquisitions.
During the fourth quarter, the provision for loan losses reflected a net recovery of $3.5 million and included $2.7 million of net charge-offs.
The impacts of the improvements in the macroeconomic assumptions, as well as client pay-downs and pay-offs, yielded a net reduction in the allowance for loan losses during the quarter.
As a result of the earnings performance and capital actions taken in 2020, Hilltop's year-end capital ratios remain strong with common equity Tier 1 of 18.97% and a Tier 1 leverage ratio of 12.64%.
Moving to Page 7.
As shown here on Page 7, Hilltop's allowance for credit losses declined by $6 million versus the third quarter of 2020, as modest improvements in the macroeconomic outlook versus the prior quarter and lower specific reserves resulting from payoffs, whereby clients were able to refinance their debt with other institutions, lowered our at-risk assets.
Year-end allowance for credit losses of $149 million, yielded ACL to bank loans HFI ratio of 2.05% as of the year-end 2020.
Of note, we continue to believe that the allowance for credit losses could be volatile and the changes in the allowance will be driven by net loan growth in the portfolio, credit migration and changes to the macroeconomic outlook over time.
I'm turning to Page 8.
Net interest income in the fourth quarter equated to $107 million, including $6.3 million of PPP origination fees and the previously referenced purchase accounting accretion.
Versus the prior year -- quarter, net interest income decreased by $3.4 million or 3%.
Net interest margin, which declined versus the prior year period, increased versus the third quarter of 2020 by 15 basis points, driven by the recognition of deferred PPP origination fees and a decline in our cash balances of approximately $500 million.
Loan yields remain pressured and deposit cost remain somewhat elevated as a result of higher brokered deposit and CE balance.
During the quarter, loan originations including credit renewals, maintained an average book to yield of 3.97%, which is lower than the third quarter of 2020 originations by approximately 7 basis points.
Although interest bearing deposit costs declined by 5 basis points in the quarter, as we continue to lower customer deposit rates and return broker deposits where appropriate.
We expect that net interest income and net interest margin will remain pressured as overall market rates remain low, putting pressure on loan, held-for-sale yields and new production yields across the commercial portfolio and the competition could remain aggressive over the coming quarters.
I'm moving to Page 9.
Total non-interest income for the fourth quarter of 2020 equated to $448 million.
Fourth quarter mortgage-related income and fees increased by $140 million versus the fourth quarter of 2019.
During the fourth quarter of 2020, the environment in mortgage banking remained strong and our business outperformed our expectations in terms of origination volumes, principally driven by lower mortgage rates, which drove improved demand for both refinance and purchase mortgages.
Versus the prior year quarter, purchase mortgages increased by $725 million or 25% and refinance volumes improved substantially, increasing by $1.7 billion or 116%.
While volumes during the quarter were very strong, gain on sale margins also improved by 8 basis points to 448 basis points versus the third quarter of 2020.
While we're expecting wholesale margins could be somewhat volatile during 2021, we expect full-year average margins to move within a range of 360 basis points to 385 basis points, contingent on market conditions.
Other income increased by $31.5 million, driven primarily by improvements in sales and trading activities in both Capital Markets and Structured Finance businesses at Hilltop Securities.
Favorable market conditions resulted in a 57% increase in TBA lock volumes versus the prior year period.
These businesses continue to realize the benefits of the investments we have been making to improve our securitized products, structuring, sales and distribution capabilities since the third quarter of 2018 and while we believe these investments will continue to provide ongoing benefits, it is important to recognize that these businesses can be volatile from period-to-period, as they are impacted by interest rates, overall market liquidity and production trends.
Turning to Page 10.
Non-interest expenses increased from the same period of the prior year by $94 million to $402 million.
The growth in expenses versus the prior-year were driven by an increase in variable compensation of approximately $79 million at HilltopSecurities and PrimeLending.
This increase in variable compensation was linked to strong fee revenue growth in the quarter, compared to prior year period.
Looking forward, we expect that in 2021, our revenues will decline from the record levels of 2020, which will put pressure on our efficiency ratio.
That said, we remain focused on continuous improvement, leveraging the investments we've made over the last few years to aggressively manage fixed cost, while we continue to further streamline our businesses and accelerate our digital transformation.
Turning to Page 11.
Total average HFI loans grew by 7% versus the fourth quarter of 2019.
Growth versus the same period in the prior year, was driven by growth in PPP loans, principally during the second quarter.
End of period banking loans remained stable versus the prior year period, as commercial loan demand has remained tepid throughout the pandemic.
As we noted on our prior earnings call, we are planning to retain between $30 million and $50 million per month of consumer mortgage loans originated at PrimeLending, that have offset demand from our commercial clients, subject to market conditions.
During the fourth quarter of 2020, PrimeLending locked approximately $145 million of loans to be delivered to PlainsCapital over the coming months.
These loans had an average yield of 2.79% and average FICO and LTV of 780% and 62% respectively.
Moving to Page 12.
This page highlights the ongoing work our banking and credit teams have been doing to support our clients throughout this pandemic.
As noted, as of 12/31/2020, Hilltop had approximately $240 million of loans on an active deferral program.
This represents a decline of 75% from the active deferrals of $630 million.
In total, this portfolio of loans carries an allowance for credit losses of 17.3% and is concentrated in our Hotel and Restaurant portfolios.
It is important to note, that we are managing this portfolio of clients and exposure, consistent with our existing credit policies and as a result, during the third and fourth quarters of 2020, the credit rating of these clients were reviewed and in many cases were adjusted to reflect the current financial situation for each of these borrowers.
As a result, of the $240 million of loans on active deferrals, $202 million are currently rated as criticized loans.
We remain focused on supporting our clients through the challenging times, while continuing to protect the Bank's capital.
Turning to Page 13.
During the quarter, net charge-offs equated to $2.7 million or 15 basis points of total HFI loan.
As is shown on the graph at the bottom right of the page, the allowance for credit loss coverage at the bank ended 2020 at 2.05%, including both mortgage warehouse lending, as well as PPP loans.
We continue to believe that both mortgage warehouse lending, as well as our PPP loans, will maintain lower loss content over time.
Excluding mortgage warehouse and PPP loans, the Banks' allowance for credit loss to loans HFI ratio equates to 2.48%.
Turning to Page 14.
Fourth quarter average total deposits were approximately $11.2 billion and have increased by $2.3 billion or 26% versus the fourth quarter of 2019.
Throughout the pandemic, we've continued to experience abnormally strong deposit flows from our customers, driven by government stimulus efforts and shifting client behaviors, as customers remain cautious during these challenging times.
During the fourth quarter, customer deposits grew by approximately $392 million from 9/30/2020.
Offsetting this growth in the fourth quarter, was the return of an additional $200 million in HilltopSecurities sweep deposits and the maturity of $272 million of broker deposits, which we have and will continue to allow them to enroll over the coming quarters.
At 12/31, Hilltop maintained $731 million of broker deposits and maintain a blended yield of 44 basis points.
Of these broker deposits, $469 million will mature by 6/30 of 2021.
These maturity broker deposit maintain an average yield of 40 basis points.
While deposit levels continue to remain elevated, it should be noted that we remain focused on growing our client base and deepening wallet share through our treasury products and services.
These efforts have been successful in 2020 and we expect that they will continue to accelerate in 2021.
I'm moving to Page 15.
During the fourth quarter of 2020, PlainsCapital Bank generated solid profitability producing $59 million of pre-tax income during the quarter.
The Bank benefited from the previously mentioned provision for credit losses recapture of $3.5 million and the recognition of $6.3 million of PPP dues.
Non-interest expenses in the quarter reflect a writedowns on certain OREO assets of $3.8 million, which did cause the efficiency ratio to drift higher this period.
This year has presented a number of challenges for PlainsCapital, we were very pleased with the resiliency of our client and teammates across the business.
As Jeremy mentioned, the team delivered for our clients by providing approximately 2,800 PPP loans in 2020 and deferring payments for those customers that have been most impacted by the pandemic.
The work this year demonstrates a solid balance of customer support, while protecting the principle of the Bank and Hilltop.
In 2021, the team remains focused on providing great service to our client and delivering profitable growth, while maintaining a moderate risk profile.
I'm moving to Page 16.
PrimeLending generated pre-tax profit of $84 million for the fourth quarter of 2020, driven by strong origination volumes that increased from the prior year by $2.4 billion or 54%.
As noted earlier, gain on sale margins expanded during the fourth quarter.
In previous calls, we discussed the retention of MSRs during the second and third quarters.
This continued during the fourth quarter and the MSR asset ended the year with a value of $144 million.
Throughout the second half of 2020, we reduced our retention percentage of servicing rights on sold loans for 57%.
We expect to continue to retaining servicing assets at these levels during the first half of 2021, subject to market conditions and we will be looking to potentially execute bulk sales throughout the year, if market participation is robust.
2020 reflects a record year for PrimeLending by almost all measures.
We are grateful for the teamwork and effort put forth across Hilltop and PrimeLending to deliver these outstanding results for our customers and our company.
In 2021, PrimeLending will remain focused on generating profitable mortgage volume and continue to execute on delivering operational efficiencies across the business.
Moving to Page 17.
HilltopSecurities delivered a pre-tax profit of $34 million in the fourth quarter of 2020, driven by solid execution in Structured Finance, Capital Markets and Public Finance businesses, which have benefited from our ongoing investments in talent and infrastructure over the last few years and a constructive market backdrop.
While activity was strong in the quarter, we continued to execute on our growth plan, investing in bankers and sales professionals across the business, to support additional product delivery, enhance our product offerings and deliver our differentiated solutions set to municipalities across the country.
This is highlighted in the fourth quarter in Public Finance Services, which was able to deliver net revenue growth of $8 million for 32% versus same period in the prior year, even as overall market issuance volumes declined.
The team at HilltopSecurities is focused on delivering profitable revenue growth, optimizing operating expenses, while managing market and liquidity risk within a moderate risk profile.
Turning to Page 17.
As a result of the teams' work over the past few years, we were well positioned to take advantage of the opportunities the market presented, by leveraging our franchise and our enhanced infrastructure to serve customers, while keeping our teams and clients as safe as possible during some very challenging times and circumstances in 2020.
In 2021, we remain focused on remaining nimble, as the pandemic evolves, to ensure the safety of our teammates and our clients.
Further, our financial priorities for 2021 remains centered on delivering great customer service to our clients, attracting new customers to our franchise, supporting the communities where we serve, maintaining a moderate risk profile and delivering long-term shareholder value.
Given the current uncertainties in the marketplace, we are not providing specific financial guidance, but we are continuing to provide commentary as to our most current outlook for 2021, with the understanding of the business environment, including the impact of the pandemic, could remain volatile throughout the year.
That said, we will continue to provide further updates during our future quarterly calls.
 Assistant:

Chosen response: hilltop holdings inc qtrly earnings per share from continuing operations $1.30.