Prompt:
Human: On the call today are Donnie King, President and Chief Executive Officer; and Stewart Glendinning, EVP and Chief Financial Officer.
As many of you know, I've been a Tyson team member for close to four decades.
And in that time, I've led every business segment.
We've always believed in our mission and the vision of John W. Tyson, who founded this Company nearly a century ago because he wanted to find a better way to feed a growing country.
Today, on my first earnings call as CEO, I am incredibly proud to stand alongside our team members to continue that legacy.
It's an interesting time to be in this industry and we have a leadership team that together can capitalize on the strengths of this Company and the opportunities ahead.
Let's begin with the view of our overall performance this quarter.
First, our retail performance.
12 consecutive quarters of retail share gains in our core business lines is driven by strength of our brands, along with solid execution from our team.
We are in a market that has demonstrated strong demand for protein and people are reaching most for brands they trust.
Our $1 billion brands Tyson, Jimmy Dean and Hillshire Farms have driven strong share growth with consumers buying more than ever before.
Second, we saw in the third quarter growing volume in foodservice channel, as reopening and recovery continue.
We saw an uptick from outlets nationwide reflected in our sales, which we were up $1.3 billion for the quarter.
Our broad production and distribution network is well positioned to meet this growing demand.
Third, the diversity of our portfolio demonstrated its value during the quarter, led by Beef, we delivered an exceptional result as the strong US and export demand, coupled with ample cattle supply, supported elevated margins in that business.
Fourth, we continue to build financial strength.
This quarter, we used higher operating cash flow to reduce debt.
The steps we've taken positioned us with a very strong balance sheet and high levels of liquidity.
And finally, we are investing in future growth across our portfolio.
We're in the process of bringing 12 new plants online globally to address capacity constraints and growing demand.
In all, Tyson delivered a strong quarter.
As we look to the future, we want to build on these strengths.
Let's look at how we plan to do that.
First, we have built a solid footing to drive consistent results.
Our strength include a diverse portfolio, well-known trusted brand, scale in meaningful markets and an exceptionally strong balance sheet.
Second, labor is our number one challenge.
So, we have continued our focus on improving our team member experience, without compromising their health and safety.
We are accelerating efforts to make Tyson the most sought-after place to work because we know how important team members are to our business.
One of the way that we're doing this is to accelerate our investments in automation and technology.
This not only helps us to eliminate more difficult, hard-to-fill task, but also reskill our labor profile to enable their contribution to more value-added activities.
Third, we are actively working to recover volume from pandemic lows.
And in doing so, improve the reliability we offer our customers.
Dynamic and evolving channel demand continues to create operational complexities.
We took steps earlier this year to make our organization more responsive to demand signals and to accelerate our speed to market by getting our sales teams closer to their customers.
There is more to do, however, and so our work here continues.
Fourth, our focus on operational excellence and disciplined cost management is especially important during periods of continued market volatility and increasing inflationary pressures.
As you will hear today, we continue to be laser focused in making progress in restoring the competitiveness of our Chicken segment.
We are also accelerating actions across our enterprise to become more operationally excellent.
Finally, we will continue to optimize our balance sheet, which will give us optionality as we prioritize the delivery of shareholder value.
Turning to Slide 5.
We improved our sales and earnings performance this quarter.
The results demonstrate the benefit of our multi-protein, multi-channel portfolio.
Sales improved 25% in third quarter and 8% year-to-date, reflecting improved volumes, which were up 10% for the quarter and flat year-to-date.
It also reflects effective pricing strategies in all of our segments during this inflationary environment.
We delivered strong operating earnings performance, resulting in approximately $1.4 billion in operating income for the quarter.
This represents an 81% increase compared to prior year and translates to $2.70 in earnings per share.
Our earnings reflect our three key priorities: one, to be the go-to supplier for customers and consumers; two, to be the most sought-after place to work; and three, to be operationally excellent.
We want to be the most sought-after place to work.
This starts with an unrelenting focus on safety, every minute, every shift, every day.
Health and safety have been and will continue to be our top priority.
We have a history of using all the tools at our disposal to protect our team members and the vaccine is no different.
As many of you will have seen, last week we announced that Tyson will require COVID-19 vaccinations for our entire US workforce by November 1.
We do this now because the Delta variant is more contagious and getting vaccinated is the single most effective thing people can do to protect themselves, their families and their communities.
We have raised wages in many markets to ensure we're competitive and are exploring other ways to make Tyson the most sought-after a place to work in the communities where we operate.
For example, we are piloting child care facilities at some of our plants and we have opened medical clinics to make healthcare more accessible to team members and their families.
Finally, we are accelerating investments in automation and advanced technologies to make team members' jobs easier.
We look forward to providing more detail on automation and technology roadmap at our upcoming Investor Day.
We're taking aggressive actions to add new capacity to meet demand, adjust our product mix by plant, and match our portfolio more closely with customer and consumer needs.
We're listening to our customers and are committed to improving reliability of supply.
In the third quarter, we improved volume levels across all segments.
In Prepared Foods, we continue to optimize our product portfolio, remove processing and supply chain complexity and prioritize products with the highest demand resulting in lower cost and better service to our customers.
In Beef, ample cattle supply, heavier animal weights, and strong demand have driven volumes higher year-to-date.
In Pork, our volumes are up year-to-date versus pandemic lows.
We are pleased to have additional capacity coming online at Eagle Mountain in Utah and Columbia, South Carolina, both facilities are expected to grow our pre-packaged Beef and Pork products.
In Chicken, volume declined year-to-date despite improved foodservice demand led by QSRs.
We also saw sustained retail demand, including the frozen value-added poultry category, limited capacity and persistent labor challenges have impacted customer fill rates in this segment.
However, our new plant in Humboldt, Tennessee continues to ramp-up production, including harvest capacity.
This ramp-up is helping us improve customer fill rates.
Chicken remains a top priority for me and for our Company.
We continue to execute against our roadmap to bring operating income margin to at least the 5% to 7% range by mid-fiscal 2022.
Our goal has not changed and we remain committed to restoring top-tier performance.
We are making progress.
The first imperative is to be the most sought-after a place to work.
I've outlined the investments we're making to enhance our team member experience in my earlier comments.
The second imperative is to improve operational performance.
Last quarter, we highlighted the impact of lower hatch rates on our Chicken operations.
We have begun to deploy new male parent stock, where this stock has been deployed, hatch rates are improving.
We expect a full rollout of this breeder stock to be complete this fall with harvest capacity improvements occurring by mid-fiscal 2022.
Our rate of outside meat purchases has declined 25% versus last quarter and will continue to decline as hatch rates and utilization improve.
We have identified opportunities to reduce mix complexity across our Chicken footprint, which will help us operate more efficiently.
The final imperative is to service our customers on time and in full.
We're pleased by the continued share performance of our value-added products like Tyson Chicken Nuggets, Crispy Strips and Air Fried.
We gained share during the third quarter and the last 52 weeks.
Looking ahead, we expect further growth and as a result, we're investing in line upgrades and increased capacity drive branded product growth.
We have increased prices to help offset significant raw material and supply chain cost inflation.
Pricings improved nearly 16% in the quarter versus the comparable period last year.
We will staff our plants, service our customers, grow our business and be the best Chicken Company, period.
Part of being customer-centric means being as efficient as possible and taking cost out where you can, without compromising our ability to execute against our strategic and operational priorities.
We have ongoing efforts across the business to reduce costs.
But we must also find new innovative ways to be better and stronger.
This means investing in advances like automation and artificial intelligence to deliver productivity gains and competitive advantage.
We have already delivered strong productivity gains in fiscal year 2021.
Across our business, we are looking to build upon the strength of those actions in the months and years to come, which we will detail at the Investor Day later this year.
These improvements come at a time when we are investing heavily in capacity expansions across segments to better partner with our customers and meet long-term demand.
Let me turn first to summary of our total Company financial results.
Sales were up approximately 25% in the third quarter.
Volumes were up 9.7%, primarily due to strength in retail and the ongoing foodservice recovery.
Average sales price was also up about 17%, largely due to strong results in our Beef segment, the mix benefit from retail volume and the partial recovery of raw material inflation in net sales price.
Operating income was up 81% in the third quarter due to continued strong performance in our Beef business.
Chicken and Prepared Foods also improved their respective segment earnings, while Pork earnings were down versus the comparable period a year ago.
Year-to-date, operating income for the total Company improved by 49%.
Earnings per share grew 93% in the third quarter due largely to strength in operating income, specifically within our Beef segment.
EPS was up 61% on a year-to-date basis.
We performed well despite a challenging operating environment that span tough labor availability, significant inflationary pressures on raw material costs, global supply chain challenges and an evolving demand backdrop.
Slide 11 bridges our total Company sales on a year-to-date basis.
We delivered growth in the retail channel along all reporting segments, which in aggregate accounted for more than $1 billion in sales improvement over the year-to-date period and more than $300 million in the third quarter versus the respective comparable periods.
Moving to foodservice, sales improved by approximately $1.3 billion in the third quarter, leading to a year-to-date improvement for the channel of nearly $1 billion compared to the same period last year.
Exports were up over 18% versus the comparable period, led by Beef, where sales improved by more than $350 million on a year-to-date basis.
Asia has been a key driver of Beef export strength.
We've also seen some strength in industrial, particularly in Beef and Pork.
And finally, year-to-date sales grew $79 million or approximately 6% in our international business.
This business is a growth priority for Tyson and we continue to invest to develop further capacities and capabilities in new markets to meet growing global consumer demand for protein products.
Current capacity expansions across seven international locations are expected to dramatically increase our fully cooked production capabilities.
These investments are fully aligned to our strategic growth priorities and when complete, will enhance our international processing capacity by close to 30% versus fiscal 2020.
Overall, we're pleased with the Company's top line growth year-to-date.
We are carefully managing the current inflationary pressures through pricing actions, as well as commercial and operational excellence, with emphasis on productivity and cost.
We know that our price recovery efforts relative to inflation must be matched by equal aggressiveness on productivity.
Slide 12 bridges year-to-date operating income.
Production inefficiencies and low labor availability resulted in total Company volumes roughly flat to the comparable period a year ago.
However, we are encouraged by the volume improvement we are seeing across our segments in the third quarter.
Price mix benefited substantially in the year-to-date period from price recovery of raw material cost inflation, improved mix, strong Beef segment performance and continued retail strength across segments.
Operating income was partially offset by $2.2 billion and increased cost of goods sold for the period, reflecting meaningful inflation in raw material and supply chain costs.
Feed ingredients, labor, packaging and freight are all key components of this COGS increase, which we're working to mitigate.
On a comparative basis, SG&A benefited from the $56 million loss in the year-to-date fiscal 2020 period as compared to a $55 million gain in the first quarter of fiscal 2021 associated with the cattle supplier incident.
This was in addition to certain reductions in trade spend and travel costs.
Moving into the Chicken segments' results.
Sales were $3.5 billion for the third quarter, up 12%.
Volumes were also up in the quarter due to continued strength in retail, improving demand through foodservice and segmentwide operational improvements.
These were partially offset by COVID-related production inefficiencies.
Average sales price was up 15% in the quarter due to favorable mix, sustained retail volume and strong supply and demand fundamentals.
Our reported price improvement also reflects actions we took to cover the inflationary pressure seen from higher grain, labor and freight costs.
Our conversations with customers on widespread inflationary pressures have been productive.
And we'll continue to partner with customers to ensure we receive a fair return on our products while working to deliver service levels and fill rates that meet or exceed their expectations.
Operating income was $27 million in the third quarter and $137 million on a fiscal year-to-date basis, both stronger than comparable periods a year ago.
This represents an operating margin of 1.3% year-to-date.
Fiscal year-to-date operating income was negatively impacted by $410 million of higher feed ingredient costs, as well as $210 million of increased grow-out expenses and outside meat purchases.
For the third quarter, feed ingredients were $270 million higher, while grow-out expenses and outside meat purchases were $110 million higher.
Segment performance also reflects net derivative gains during the third quarter of $125 million and $235 million on a year-to-date basis, both versus the respective comparable periods.
These results are associated with realized gains, as well as open positions.
Moving now to Prepared Foods.
Sales were $2.3 billion for the quarter, up 14% relative to the same period last year.
Total volume was up 4.5% in the quarter with strength in the retail channel and continued recovery in foodservice.
Sales growth outpaced volume growth, driven by the pass-through of raw material costs, lower commercial spending and better sales mix.
Segment operating income was $150 million for the quarter, up over 3% versus the prior year.
Year-to-date operating income was $633 million, up 23% versus the prior year period.
Operating margins for the segment was 6.5% for the third quarter, a decline of 60 basis points versus the comparable year-ago period.
The slowdown in segment operating margins versus the same quarter last year were driven by significant increases in raw material input costs.
However, on a year-to-date basis, our operating margin of 9.6% was up 170 basis points versus last year, driven by favorable pricing and lower commercial spend.
Demand for the balance of the year is expected to remain elevated at retail, with volumes continuing to exceed pre-COVID levels and foodservice continuing to recover.
During the third quarter, core business lines experienced volume share growth of 90 basis points, while dollar share grew 70 basis points.
We continue to believe that the ongoing inflationary environment will create a meaningful headwind for Prepared Foods in the upcoming quarter.
Raw material cost, logistics, ingredients, packaging and labor are all challenging our cost of production.
To offset inflationary pressure, we're focused on pricing, revenue management, and commercial spend optimization, while ensuring the continued build of brand equity through marketing and trade support.
Moving to the Beef segment.
Segment sales were over $4.9 billion for the quarter, up 36% versus the same period last year.
Key sales drivers included strong domestic and export demand for Beef products with average sales price up 12% for the quarter.
We had ample livestock available in the quarter, driven by strong front-end supplies.
Mounting drought conditions in the Western United States cattle growing region, as well as elevated cost for grain also drove some cattle supply liquidation.
We have good visibility into cattle availability through fiscal 2022 and currently believe it will also be sufficient to support our customer needs.
Sales volume for the quarter was up year-over-year due to continued strong demand in contrast to a soft comparable period a year ago, driven by lower production volumes.
We delivered segment operating income of $1.1 billion for the quarter.
This improvement was driven by strong global demand for beef products and a higher cut-out, which were partially offset by higher operating costs.
Operating margins for the segment improved 520 basis points to 22.6% for the third quarter.
While our Beef segment experienced tremendous results on a year-to-date basis, we're still not at optimal levels of capacity throughput within our beef plants due to labor challenges.
Meanwhile, drought conditions and elevated grain prices are creating incremental costs and risks for cattle producers.
Until these conditions stabilize and within the constraints I had mentioned, we will work to maximize our beef processing capacity to provide a reliable outlook for our livestock farmers and adequate product supply for customers and consumers.
Now, let's move on to the Pork segment on Slide 16.
Third quarter results reflect higher hog costs and operating expenses that weren't fully offset through Pork cut-out.
Segment sales were $1.7 billion for the quarter, up 54% versus the same period last year.
Key sales drivers for the segment included higher average sales price due to strong demand, partially offset by a challenging labor environment.
Average sales price increased more than 39% while volumes were also up relative to the same period last year.
Segment operating income was $67 million for the quarter, down 37% versus the comparable period.
Overall, operating margins for the segment declined by 570 basis points to 3.9% for the quarter.
The operating income decline was driven by higher hog costs and increased labor and freight costs.
At the end of this calendar year, lower projected 2021 Pork production and strong consumer demand are expected to support hog prices well above 2020 levels.
Slide 17 captures our financial outlook for fiscal 2021.
Given the continued strength in our Beef segment and ongoing inflationary pressures that are partially being recovered through price, we are raising our sales guidance for the full-year.
We now expect to deliver annual revenues in the range of $46 billion to $47 billion.
At the segment level, we expect our directional annual guidance to hold.
Key risks to this guidance include freight rates, labor cost and availability, grain costs in the Chicken segment, raw material costs for each of our businesses and continued export market strength along with price volatility in commodity meats.
We're slightly revising our outlook on effective tax rate to approximately 22.5%.
We'll continue to monitor the potential implications of new legislation, but we do not currently expect to see impacts to our adjusted rate this fiscal year.
While our expectations related to liquidity are also unchanged, liquidity during the third quarter improved substantially to $3.4 billion and has since benefited from $1.2 billion of pre-tax proceeds from the divestiture of our Pet Treats business in early July.
Finally, we expect our COVID-related costs, which totaled $55 million in the quarter to be approximately $325 million for the year.
As a reminder, some of the costs that were previously described as COVID-related, have evolved to become structural.
Turning to Slide 18, in pursuit of our priority to build financial strength and flexibility, we have substantially delevered our business over the past 12 months, reducing leverage to 1.7 times net debt to adjusted EBITDA.
Investing organically in our business will continue to be an important priority and will help Tyson increase production capacity and market capabilities.
Each of these levers individually and in aggregate will support strong return generation for our shareholders.
We will also continue to explore costs to optimize our portfolio through M&A through the lens of value creation and shareholder return.
Finally, we are committed to return cash to shareholders through both dividends and share buybacks.
In short, we view the cash generation capabilities of this business as both strong and diverse, and we expect our capital allocation framework to deliver solid returns for our shareholders in the future.
To close, our priorities are clear, being the most sought-after place to work, being our customers' go-to supplier and doing so while driving operational and functional excellence across all areas of our business.
There is a lot to be excited about.
We look forward to discussing where we're headed during our upcoming Investor Day and hope you can join us.
Operator, please provide the Q&A instructions.
 Assistant:

Chosen response:
tyson foods - q3 adjusted earnings per share $2.70.
q3 adjusted earnings per share $2.70.
tyson foods - beef sales volume increased during q3 due to strong global demand and reduced production inefficiencies associated with covid-19.
on an adjusted basis, we anticipate prepared foods results in fiscal 2021 to be similar to fiscal 2020.
at current grain prices, we believe chicken results will likely be lower in fiscal 2021 as compared to fiscal 2020.
expect sales to approximate $46 billion to $47 billion in fiscal 2021.
expect capital expenditures of approximately $1.3 billion for fiscal 2021.
tyson foods - chicken sales volume increased in q3 due to increased demand in foodservice channel, reduced inefficiencies associated with covid-19.
for fiscal 2021, estimate that we will incur about $325 million of direct incremental expenses associated with impact of covid-19.
prepared foods sales volume increased in q3 primarily due to increased demand in foodservice channel and sustained retail demand.
prepared foods sales volume increased in q3 also due to reduced production throughput disruptions associated with covid-19.
pork sales volume increased during q3 due to strong global demand, reduced production inefficiencies associated with covid-19.


Prompt:
Human: Please go to slide two.
Please see our SEC filings for a description of some of the factors that may cause our actual results to differ materially from anticipated results.
While the pandemic continues to present significant challenges around the world, our strategy as a global climate innovator remains steadfast.
We are innovating rapidly to address complex and pressing sustainability challenges for our customers and for our planet.
This is even more critical, as the clock is ticking on climate change and the battle intensifies.
Our aggressive goals and bold actions can dramatically reduce carbon emissions and accelerate the world's progress.
We are committed to making a difference consistently, relentlessly and over the long term, our unwavering focus on innovation has been fundamental to our ability to drive market outgrowth and share gains in recent year and it continues to be a path forward for long term value creation.
At Trane Technologies, weve never built strategies around episodic investments which may increase for a year or two to driver growth and then slow in favor of margin or cash or any changing new priority.
Our approach is markedly different.
We remain confident in our ability to lead precisely because our investments are continuous and ongoing.
They are focused on our clear purpose-driven strategy, a consistent operating system, and goals and expectations focused always on top quartile results for our stakeholders.
This relentless approach drives market outgrowth, which in turn helps us deliver strong margins and powerful free cash flow to deploy through our balanced capital allocation strategy.
The end result is more value across the board for our team, for our customers, for our shareholders and for the planet.
Moving to slide four.
Our global teams drove exceptional performance in the first quarter, which positions us well, as we look toward the balance of the year.
We delivered broad-based market outgrowth and share gains in each of our segments and business units, with total enterprise organic revenues up 11%, while at the same time delivering more than 400 basis points of margin expansion in every segment and for the enterprise as a whole.
We delivered double-digit bookings growth in all segments, growing our backlog over 30% sequentially versus December 2020 and up more than 30% versus our already strong backlog at the end of 2019 heading into 2020.
Adjusted earnings growth was also exceptional, up 135%.
Although it's still early in the year and overall visibility remains limited, our strong quarter 1 performance, growing backlog, improving markets and asterism for improved vaccination rates gives us confidence to raise our full year 2021 guidance for both revenue and adjusted earnings per share above the high end of the prior ranges.
We also continue to make excellent progress toward our transformation savings goal of $300 million by 2023 and expect to realize approximately $190 million in total savings in 2021.
That's up from $100 million in 2020.
These transformation savings help fund superior innovation, market outgrowth and share gains with sustainable strong leverage.
We expect a strong growth in leverage in 2021 to once again deliver powerful free cash flow which further strengthens our balance sheet and fuels our balanced capital allocation strategy.
We've raised our capital deployment expectations for 2021 by $500 million from approximately $2 billion to $2.5 billion to continue our commitment of deploying 100% effective cash overtime.
We're actually, our core strategy remains focused on backward sustainability mega trends of energy efficiency and sustainability which are becoming more press everyday.
We're one of just a handful of companies to achieve validation for our second set of science based targets, and our path to net zero carbon emissions.
For those of you know as well, you know sustainability has been at our core for a very long time.
Our first set of science-based targets were approved in 2014 and we achieved those in 2018.
We also have revised our annual incentive compensation plan for approximately 2,300 leaders beginning this year to link directly to ESG metrics, including both carbon emission reduction, and advancing diversity and inclusion.
In addition, all salaried employees must now include at least 1 sustainability-related goal in their annual performance plans.
Our commitment couldn't be stronger.
With our purpose to challenge what's possible for a sustainable world, we are uniquely positioned to solve pressing challenges for our customers.
This passion powers us forward to deliver top-tier financial performance and differentiated returns for our shareholders.
We delivered robust organic bookings growth of 31% in the first quarter.
The growth across all segment and business unit.
We also delivered strong revenue growth in each segment.
Our Americas segment delivered growth in both bookings and revenue, up 36% and 9%, respectively.
Our Americas Commercial HVAC business has remained resilient since the start of the pandemic, delivering strong Q1 bookings growth of low single digits in the quarter.
We're especially pleased with this performance relative to the mid-teens growth comp in the first quarter of 2020, making the two year growth stack for America's Commercial HVAC high teens.
Revenues were flat in the quarter, which also represents strong performance relative to the growth in the first quarter of 2020, making the two year stack up mid single digits.
Services were up low single digits.
The residential HVAC markets remain robust and our residential HVAC team delivered strong revenue growth, well in excess of 30% in the quarter as they once again grew market share.
We entered the quarter with a strong backlog, and exited the quarter with an even stronger backlog, putting us in a strong position entering Q2.
Our Americas transport refrigeration business outperformed the North America truck and trailer markets in the quarter, delivering strong revenue growth, up mid-teens and exceptional bookings growth in the quarter.
Turning to EMEA, our team's delivered 18% bookings growth in the quarter, with strong growth in both commercial HVAC and transport refrigeration.
Revenues were also strong, up 12%.
EMEA Commercial HVAC bookings were up high single digits and revenues were up mid-teens once again outperforming the market.
We continue to see strong demand for our products and services that help reduce the energy intensity and greenhouse gas emissions of buildings.
EMEA transport bookings were up over 20% in the quarter and revenues are up high single digits, outperforming the broader transport markets.
Our Asia Pacific team delivered bookings growth of 14% and revenue growth of 34% in the quarter, laughing a soft Q1 2020 that was heavily impacted by the COVID-19 pandemic.
China continues to outperform the rest of Asia, where a number of economies are still struggling with the impacts of the pandemic and low vaccination rates.
Dave provided a good overview of our revenues on the prior slide, so I'll focus my comments on margins.
Adjusted EBITDA margins were strong up 460 basis points, driving adjusted earnings per share growth of 135%.
We delivered strong operating leverage in all regions, supported by superior innovation for our customers, strong productivity and cost containment actions.
Price cost tailwinds were particularly strong in the first quarter, driven by realization of premium pricing on leading innovation and pricing actions taken to remediate increasing material cost inflation in 2021.
In addition, we maintain high levels of business reinvestment in innovation, technology, and productivity.
In the Americas region, market outgrowth, cost containment, productivity and price drove solid EBITDA margin expansion of 400 basis points.
Likewise, the EMEA and Asia Pacific regions delivered strong market outgrowth, productivity and cost containment to improve EBITDA margins by 540 basis points, and 1,160 basis points, respectively versus 2020.
Our market outgrowth in each region is supported by relentless investments in superior innovation to help our customers solve their most challenging and complex problems, fueling new product and service offerings.
We delivered strong productivity from both our robust pipeline of projects and structural transformation initiatives that we outlined at our December 2020 Investor Event.
Commercial HVAC in Americas has significantly outperformed the broader markets since the beginning of the pandemic through strong focused, agility, and execution combined with relentless innovation across products and services to our customers.
Demand remains high for comprehensive indoor air quality solutions and we continue to see indoor air quality as a long-term tailwind for our business.
End markets are mixed with continued strong data center and warehouse demand.
The pipeline for our education end market is also strong.
To-date we've engaged with many of our K-12 customers to perform indoor air quality assessments in anticipation of the time when Federal stimulus funds will be made available.
At this point, the full impact and timing of the stimulus remains to be determined, but it's clearly a multi-year tailwind for our business, given our strong presence in the education markets, and our direct sales force with deep relationships in this vertical.
End market indicators are improving with ABI over 50 and both February and March, both positives for the road ahead.
In summary, though our visibility into some end market verticals remain somewhat limited due to continued uncertainty related to the pandemic, we continue to see solid prospects for continued underlying market improvements in the second half of 2021, given positive progress and trends related to increased vaccination rates.
Turning to residential, we saw record first quarter bookings and revenue, which puts us in a strong backlog position entering the second quarter.
Overall, we expect a strong first half and a challenging second half with tough comps in the back half of the year given record bookings and revenue in the second half of 2020.
Turning to Americas transport, we're expecting continued strong growth for the balance of 2021 as markets continue to improve.
Orders were very strong in the quarter with many customers placing orders for the year.
All-in, we expect 26% weighted average market growth for the year, reiterating our prior outlook.
Turning to EMEA, the recovery continues to be country-dependent with some countries and additional rounds of lockdowns.
It's early to call the recovery broadly in Europe, but we expect continued improvement in 2021 with increased vaccination rates in the region.
Transport markets, in particular, are expecting approximately 8% market growth, given the current rates of economic improvement, reiterating our prior outlook.
Turning to Asia, we expect continued growth in China in 2021, however, the rest of Asia has been slowed due to virus and vaccination rates remain low.
Overall, we see a mixed picture for Asia in 2021.
Based on our strong first quarter performance, our growing backlog and the expectation for improving pace of global vaccinations, we have raised our full year guidance for both revenues and adjusted earnings per share for 2021.
As Mike indicated earlier, we expect to deliver a strong organic financial performance with organic revenue growth of approximately 9%, up from our previous guidance of between 5% in 7%.
We expect to deliver strong organic leverage over 35% for the full year, with organic leverage of approximately 30% for the balance of the year.
We continue to see about 1.5 points of revenue growth from the channel acquisitions, we announced last quarter, which will carry about five points of operating margin and deliver earnings per share accretion of about $0.05.
All-in, total revenue growth is expected to be approximately 10.5%, and adjusted earnings per share is expected to be approximately $6, which translates to approximately 35% earnings growth versus 2020.
Our updated guidance reflects both our strong performance in Q1, and an improved outlook for the remainder of the year.
We also raised our free cash flow guidance with our increased earnings per share growth.
We expect free cash flow to remain strong and equal to or greater than 100% of adjusted net income.
If you project current FX rates out to the end of the year, FX would likely be a tailwind, albeit too early to call given market volatility.
Our FX exposure is largely translational and each point of revenue were translated approximately translational OI rates.
Net each point from FX would translate into about $0.05 of EPS.
Please go to slide number 10.
As we outlined during our investor event in December, by transforming Trane Technologies, we initially identified $100 million of fixed cost reductions by 2021.
We've exceeded our initial cost reduction expectations, delivering $100 million of savings in 2020, a full year early.
And we expect to deliver a $90 million of incremental savings for a total of $190 million in savings in 2021.
We are now targeting and are on track to deliver $300 million of run rate savings by 2023.
As we outlined in December, we will continue to invest these cost savings to further strengthen our high performance flywheel, which has a reinforcing and compounding effect over time.
First, we invest a significant portion of the savings into unrelenting business reinvestments in innovation and leading technology.
This fuels the second element, sustained growth above our end markets.
Third, we invest another significant portion of the savings into an improved cost structure, which drives the fourth element, improved and sustainable incremental margins at or above 25% over the mid to long term.
When combined, this creates a compounding effect of high quality earnings growth and free cash flow year-after-year.
Please go to slide number 11.
We remain committed to our balanced capital allocation strategy is focused on consistently deploying excess cash to opportunities with the highest returns for shareholders.
We continue to strengthen our core business with high levels of business reinvestment and high ROI technology, innovation, and operational excellence projects, which are vital to our continued growth product leadership, and margin expansion.
We remain committed to maintaining a strong balance sheet that provides us with continued optionality as our markets evolve.
We have a long standing commitment to a reliable, strong and growing dividends that increases at or above the rate of earnings growth over time.
We continue to pursue strategic M&A that further improves long term shareholder returns.
And we continue to see value in share repurchases as the stock trades below our calculated intrinsic value.
All in, we expect to consistently deploy a 100% of excess cash over time.
And I'll discuss how we plan to deploy excess cash in 2021.
Looking at full year 2021, after fully reinvesting in the business, we plan to continue executing our balance capital allocation strategy.
And have increased our capital deployment target to approximately $2.5 billion, a $500 million increase to our prior guidance.
We anticipate deploying the additional $500 million between value accretive M&A and share repurchases, taking the total target for M&A and share repurchases to approximately $1.5 billion for the year.
In the first quarter, we raised our dividend by 11%, deployed $174 million to M&A and share repurchases and paid down $300 million of debt.
We plan to retire an additional $125 million in debt as it reaches maturity in the third quarter of 2021, taking the total debt retirement to $425 million for the year.
This guidance increase reflects our strong balance sheet and liquidity position, our commitment to deploying 100% of excess cash over time and our continued confidence in our ability to deliver powerful free cash flow to execute our balanced capital allocation strategy.
Please go to slide number 14.
The objective of this slide is to lay out how to think about organic growth and leverage and the impact of the acquisitions.
It also provides some helpful modeling guidance elements outlined on the bottom of the slide.
The key takeaways are that we're expecting strong organic growth, leverage and earnings per share and the M&A adds additional revenues and modest earnings per share accretion in 2021.
Please go to slide number 15.
We want to provide an update on transport markets, as we know this is a topic of interest for investors and analysts.
The net takeaway is that our outlook for 2021 is largely unchanged from our prior outlook, where we highlighted that we expect to see approximately 26% weighted average market growth for transport Americas, and approximately 8% weighted average market growth for transport EMEA.
While ACT has raised their outlook slightly on North America trailers, about 1% from 39% growth to 40% growth, they modestly lowered their outlook for truck, which nets out to be a wash on total growth.
EMEA is in a similar boat with IHS lowering their 2021 forecast slightly, but not enough to shift our view.
In total, we've seen very strong demand through the first quarter in both transport markets, and we think that ACT and IHS have called the market about right for 2021, which means transport globally should have a very strong year for us.
This is consistent with our prior 2021 view, but I'd say, we have greater confidence after our first quarter performance and our growing backlog.
The other element I wanted to highlight for transport North America is that, ACT has increased their trailer forecast for fiscal year 2022 to 51,100 units, which represents an increase of about 13% over their 2021 forecast.
While on the subject, we are occasionally asked about the historical cyclicality in the North America trailer market.
Data would suggest the patterns have changed.
The North America trailer market took a step-up in 2015 and has been above 40,000 units ever since with only one exception, 2020.
2020 saw market declines intensified by the pandemic.
So I'm not sure how informative it is about the future.
The driver logs, driver shortage and added economic activity appears to have fundamentally shifted the market to new levels above 40,000 units, excluding economic disruption.
ACT's forecast for 2023 is also at the mid-40,000 unit level.
If they are correct in their forecast for 2021 through 2023, it will be eight of nine years where the North America trailer market has been in the mid-40,000 unit range, plus or minus 10%.
Net, 2022 and 2023 are shaping up to be strong years as well.
Please go to Slide 16.
Energy efficiency and sustainability megatrends are only growing stronger, and we are uniquely positioned to deliver leading innovation that intersects with these trends and accelerates the world's progress.
And we're not only focused on investments in innovation and growth, but also on investments in our business transformation.
We are on track to deliver $300 million in savings that will continue to improve the cost structure of the company and enable additional reinvestment to expand margins and further strengthen our ability to outgrow our end markets.
When combined with the long-term sustainability megatrends underpinning our end markets, our exceptional ability to generate free cash flow and balanced capital deployment of 100% of excess cash over time, we are well positioned to continue to drive differentiated shareholder returns.
I've said that train technologies has the essence of a start-up with the credibility of a market leader.
That unique profile fosters a culture of inclusion, ingenuity and performance that delivers results as we demonstrated in the first quarter.
It's this type of passion and purpose that sets Trane Technologies apart and is how it will change the industry and ultimately change the world.
 Assistant:

Chosen response:
trane technologies q1 revenue up 14% at usd 3 bln.
q1 revenue rose 14 percent to 3.0 billion usd.


Prompt:
Human: Please go to slide two.
Please see our SEC filings for a description of some of the factors that may cause our actual results to differ materially from anticipated results.
As we do each quarter, I'd like to spend a few minutes upfront on our focused sustainability strategy, the engine that enables us to deliver differentiated shareholder returns over time.
Long-term sustainability megatrends continue to intensify, and our innovation leadership is transforming the climate industry as the world decarbonizes.
Our aggressive goals and bold actions can dramatically reduce carbon emissions and accelerate the world's progress.
This is more critical every day as the clock is ticking on climate change.
That's why we are calling for businesses and governments to take stronger action at COP26 and why we continue to set aggressive science-based emission reduction targets to push our innovation further and faster.
That innovation also extends to emerging trends as we see heightened focus on indoor air quality and strong momentum in aging infrastructure in our schools.
We continue to make a difference consistently, relentlessly and over the long term.
This unyielding approach drives market outgrowth over the long term, which in turn helps us drive strong margins and powerful free cash flow to deploy through our balanced capital allocation strategy.
The end result is more value across the board for our customers, for our team, for our shareholders and for the planet.
Moving to slide number four.
Our global team delivered solid execution in the third quarter, and we continue to target top quartile earnings per share growth for 2021.
Bookings were once again exceptional in Q3, building on strong growth in both Q1 and Q2 and bringing our year-to-date organic bookings growth to over 25% for the enterprise.
Underlying demand for our innovative products and services have never been stronger, and our Q3 ending backlog reflects this strength.
In fact, Q3 ending backlog for the enterprise is up more than 70% or approximately $2 billion from year-end 2020 with all three of our business segments at record levels.
Americas and EMEA have backlog that are up over 90% and 65%, respectively, from year-end 2020.
We're well positioned to close out 2021 on a strong note and to enter 2022 with unprecedented levels of backlog as well.
As we highlighted on our second quarter earnings call and in subsequent forums, global supply chains, logistics systems and labor markets remain tight, and inflation is persistent.
Our global teams are focused on meeting the unique needs of our wide-ranging customer base and helping them solve complex challenges on a daily basis as we navigate a challenging yet positive demand and supply environment.
Temporary supply chain delays on key materials impacted portions of our product portfolio, shifting the timing of approximately $150 million or 4% of our revenue out of the third quarter and into future periods.
Working closely with our key suppliers and with our customers, we anticipate that between $50 million and $75 million or roughly 2% of the Q3 impact will shift into the fourth quarter, leaving our 2021 revenue guidance unchanged.
We expect the remaining balance to shift into 2022.
We also highlighted on our second quarter earnings call that persistent inflation would require us to execute an incremental $150 million in pricing actions in the second half of the year in order to neutralize the impact.
Strong execution of our business operating system has enabled us to keep pace with the inflationary curve.
In the third quarter, we realized approximately $150 million or 4.3% incremental price, offsetting approximately $150 million of inflation.
Leverage was negligible as you would expect on flat volume.
While adjusted operating income was modestly higher in the quarter, primarily reflecting nominal pull-through on M&A and FX growth, consistent with our expectations and our guidance.
We continue to execute the business transformation projects we discussed in detail at our Investor Day in December and are on track to deliver approximately $90 million of incremental savings in 2021.
These savings support leading innovation across our end markets through relentless high levels of business reinvestment.
They also enable us to stay on track to deliver incremental margins of approximately 30% organic for fiscal 2021 despite persistent inflation, tight logistics systems and supply chain challenges.
We're also on track to deliver powerful free cash flow of equal to or greater than 100% of net earnings.
This provides us with strong optionality to deploy significant cash to opportunities now and in the future, including M&A and share repurchases.
Lastly, we never lose sight of our long-term, purpose-driven strategy and the tremendous leadership role we can play in bending the curve on climate change.
By changing the industry, we can change the world.
Executing our purpose-driven strategy is how we will continue to deliver top-tier financial performance for our shareholders.
While we're still in the midst of our planning process for 2022 and anticipate providing guidance in conjunction with our fourth quarter earnings call, we thought it might be constructive to spend a few minutes discussing our initial thoughts on 2022 and some of the key dynamics we believe will be in play.
While this is not a comprehensive list, it will highlight some of the key reasons why we're so excited about what the future holds for Trane Technologies as well as some of the key challenges we see on the road ahead.
First, we expect to have strong fundamentals entering the year.
Exiting Q3, backlog in our Americas and EMEA segments are both at unprecedented levels, up over 90% and up over 65% versus December of 2020, respectively.
Asia also has record backlog, up nearly 20%.
If we very conservatively plot out bookings through the balance of 2021, we anticipate entering 2022 with at least 70% more backlog in the Americas and EMEA than we entered 2020.
I've been in this business a long time, and I've never entered any year with a stronger backlog position, which bodes well for us in 2022.
Another fundamental strength entering 2022 is the foundation of our business operating system.
Strong execution of our business operating system has enabled us to stay ahead of the persistent inflation through 2021 and position us well to manage additional inflationary pressures and deliver strong price realization again in 2022.
And we'll continue to drive transformation savings in 2022 that will support high levels of business reinvestment and continued innovation.
These savings will also support healthy incremental margins in what we expect to be another year of tight conditions for supply chain, labor markets and logistics systems.
Looking out to 2022, we also expect to see continued acceleration of the strong secular sustainability megatrends that are so tightly aligned with our purpose-driven business strategy.
Decarbonization of the built environment is accelerating.
U.S. education stimulus dollars are being put to good use, upgrading our aging infrastructure.
And momentum around indoor air quality upgrades, retrofits and new projects continues.
Additionally, the global economy is expected to continue to recover in 2022 with solid underlying GDP and other economic indicators driving broader expansion in the nonresidential markets.
Lastly, we're excited about the future of transport refrigeration markets where ACT and IHS are plotting a steady growth path forward in both 2022 and 2023.
All in, we're exceptionally well positioned for strong performance in 2022 and beyond.
Customer demand for our innovative climate control products and services continues to grow.
We delivered another quarter of robust organic bookings growth, up 20% with growth across all segments and business units.
Customer demand has been high all year, with organic bookings up over 25% year-to-date, driving record backlog in each segment.
Organic revenues were also up 4%, driven by continued strong price execution.
Our Americas commercial HVAC business delivered robust bookings growth in the quarter with orders up over 30%.
Strength was broad-based with applied and unitary bookings both up more than 50% and service bookings up high teens.
Demand for system-focused indoor air quality solutions remain strong and contributed to our mid-single-digit revenue growth in commercial HVAC Americas.
The residential HVAC markets continue to be strong, and our residential team delivered low single-digit bookings growth, building on nearly 40% growth in the third quarter of 2020.
Revenues were flat in the quarter as demand outpaced supply.
And we entered the fourth quarter with record backlog, up more than 150% year-over-year and up from prior record backlog at the end of the second quarter.
With year-to-date organic bookings up over 80% and year-to-date organic revenue up over 30%, our Americas transport refrigeration business is significantly outperforming the North America transport markets.
During the third quarter, with most of 2021 orders already in the backlog, we opened up our 2022 order book solely for the first quarter of 2022, which drove bookings growth of more than 20%.
We are methodically managing our 2022 order book in order to mitigate inflationary risks.
Organic revenues were also strong, up low to mid-teens.
We continue to see strong demand for our innovative products and services that help reduce energy intensity and greenhouse gas emissions for our customers.
Our EMEA teams delivered 25% organic bookings growth in the quarter with strong growth in both commercial HVAC and transport refrigeration.
Revenues were also strong, up 8%, led by high-teens organic revenue growth in transport refrigeration.
Our Asia Pacific team delivered bookings growth of 11%.
Revenue grew 1% in the quarter.
Though we saw growth in China during the quarter, the impacts of the COVID-19 pandemic continue to be challenging in the region with low vaccination rates in some countries.
Organic revenue growth in the quarter was driven by continued strong price execution, yielding 4.3% incremental price in the quarter.
Price over material inflation was positive in the quarter and combined with mix offset the net impact of productivity over other inflation and increased investment spending to support leading innovation.
Organic volume and, therefore, pull-through leverage was largely flat for the enterprise in the quarter.
At a high level, positive leverage was primarily the result of mix and a modest flow-through of M&A and FX, consistent with our guidance.
Net adjusted EBITDA and operating margins declined by 70 and 60 basis points, respectively.
Adjusted earnings per share grew 5%, driven primarily by higher adjusted operating income.
We discussed the key revenue and margin dynamics for the enterprise on the prior page.
The dynamics impacting revenue and margins were similar across each of our business segments, as we've highlighted here, with strong price realization, productivity inflation and higher investments in innovation as consistent drivers.
In EMEA, solid price realization was accompanied by strong volume growth, delivering good leverage and margin expansion in the quarter.
Both the Americas and Asia Pacific segments delivered higher revenues on modest volume declines impacting leverage.
Asia Pacific also experienced price versus cost headwinds in the quarter, further impacting margins.
We continue to expect Asia Pacific to deliver solid margin expansion for the full year and are pleased with our overall performance in the region.
Commercial HVAC Americas has significantly outperformed the broader markets over a number of years through strong focus, agility and execution combined with relentless innovation for our customers.
These defining characteristics compounded by the strength in the underlying market conditions power the business forward today, yielding bookings growth of over 30% in the quarter, an exceptional backlog entering Q4.
Bookings strength was universal across nearly every vertical market and major product category.
End markets continue to improve.
Vaccination rates are improving.
And end market indicators are generally strong, with ABI over 50 since February and a healthy GDP.
Data centers and warehouse demand remain strong.
Education and healthcare end market demand is also growing.
We're benefiting from increased demand across our K-12 customers with federal stimulus funds supporting both current and more importantly, future growth.
We see this as a multiyear tailwind for our business given our strong position in the education market and our direct sales force with deep relationships in this vertical.
Our residential end markets remain strong.
As I mentioned previously, we delivered low single-digit bookings growth in the quarter, compounding on nearly 40% growth in the prior year.
And we are entering the fourth quarter with unprecedented backlog.
I'm proud of our residential team that has continued to meet customer demand while ramping capacity after our February weather event in our Texas facility.
The team delivered historically high revenues in Q3 and is on track for capacity expansion in advance of next year's cooling season.
Turning to Americas transport.
We're significantly outgrowing strong end markets in 2021.
ACT market forecasts are projecting strong growth in 2022 and 2023 as well.
I'll talk more about the transport outlook in our topics of interest section.
Economic conditions are improving across the region.
We expect continued improvement for the remainder of the year with increased vaccination rates supporting the opening of an increased number and variety of venues.
Transport markets have been strengthening throughout the year, and we're on track to outperform end markets in 2021 as evidenced by our year-to-date performance.
We expect growth in China in 2021, supported by increased vaccination rates and strength in data centers, electronics, pharmaceutical and healthcare.
Outside of China, the picture is mixed, with vaccination and economic recovery rates still low in some countries.
Given all the puts and takes we've discussed today, our guidance for 2021 is unchanged.
Importantly, we continue to see our 2021 adjusted earnings per share growth guidance of more than 30% as top quartile among peers in the broader industrials.
We've discussed the shift in revenues from Q3 into Q4 and 2022 throughout the call.
Our fourth quarter revenues are supported by record backlog, and that backlog is firm.
Supply chain, labor and logistics systems will continue to be challenging and are the limiting factor to potential upside, not demand or backlog.
We also continue to expect free cash flow to remain strong and equal to or greater than 100% of adjusted net income.
Please go to slide number 11.
As we outlined during our investor event in December, we're on track to deliver $300 million of run rate savings by 2023, including $90 million in 2021.
Importantly, we continue to invest these cost savings to further fuel innovation and other investments across the portfolio.
This consistent investment strengthens our high-performance flywheel, which has a reinforcing and compounding effect over time.
Please go to slide number 12.
We remain committed to our balanced capital allocation strategy that is focused on consistently deploying excess cash to opportunities with the highest returns for shareholders.
First, we continue to strengthen our core business through relentless business reinvestment.
Second, we're committed to maintaining a strong balance sheet that provides us with continued optionality as our markets evolve.
Third, we expect to consistently deploy 100% of excess cash over time, using a balanced approach that includes strategic M&A that further improves long-term shareholder returns and share repurchases as the stock trades below our calculated intrinsic value.
Year-to-date, we have deployed $1.8 billion in cash, with approximately $1 billion to M&A and share repurchases, including $250 million for the Farrar Scientific life sciences acquisition we closed in October.
We have paid $422 million in dividends and $425 million to pay down debt.
Our strong free cash flow, liquidity and balance sheet continue to give us excellent capital allocation optionality and dry powder moving forward.
We are on track to deploy at least $2.5 billion in excess cash in 2021.
Please go to slide number 15.
I wanted to spend a couple of minutes providing an update on the transport refrigeration markets for 2021 as we've seen the forecast shift a fair amount since our second quarter earnings call.
I think the primary takeaway this quarter is that ACT is projecting an extended and more gradual upturn in the North America transport refrigeration markets than initially projected.
North America trailers is probably the clearest example and one of the most watched by investors and analysts as a proxy for the overall transport refrigeration health.
ACT started out the year projecting an almost immediate snapback in the North America trailer production in 2021, up 39%, off the lows of the pandemic in 2020.
As trailer OEMs have had a challenging year producing enough trailers to meet the forecast, ACT has gradually pulled the forecast down and is now projecting a strong but more gradual improvement in 2021, up 18%, and continued improvement in production rates in both 2022 and 2023, up another 18% and 14%, respectively.
If you look at the all-in weighted average market forecast for North America transport refrigeration, 2021 is now expected to be up about 14% versus 24% projected in July.
Year-to-date, our Thermo King Americas transport refrigeration business is up more than 30%, clearly outperforming the markets, and we expect to outperform the markets for the full year as well.
Looking at IHS and other key indicators for EMEA markets, the outlook has improved about three points with the weighted average market growth now expected to be about 12% for 2021.
Year-to-date, our Thermo King EMEA business is up more than 20%, clearly outperforming the markets, and we expect outperformance for the full year 2021 as well.
Please go to slide number 16.
One of the things we've talked about over the past several quarters is the North America trailer market has not been particularly volatile over the past several years, and it's not projected to be particularly volatile over the ACT forecast horizon either.
On the left side of the page, you can see the visual depiction of what we've been describing.
We chart ACT's reported actual trailer units built going back to 2015 and ACT's forecast for trailer builds through their forecast horizon of 2023.
The 9-year average is in the mid-40,000 unit range with the pandemic in 2020 being the only significant outlier.
We also see that good growth is projected in both 2022 and 2023.
It's important to note that our global transport refrigeration business is highly diversified.
Trailer is an important part of the global mix at about 25% of the total.
However, we're focused on strong execution across the transport refrigeration portfolio, which we believe will further help reduce variability of this business over time.
Please go to slide number 17.
2021 is shaping up to be a strong year for us overall despite a number of macro challenges that we expect to continue over the near term.
We're seeing unprecedented levels of demand for our products and services across the board, and our backlog has never been stronger.
We're executing our business operating system well and staying ahead of persistent inflation with strong price realization.
And we expect to deliver top quartile earnings per share growth for the full year.
Energy efficiency and sustainability megatrends are only growing stronger.
We are uniquely positioned to deliver leading innovation that addresses these trends and accelerates the world's progress, supported by a business transformation and our engaging uplifting culture.
We are proud to have been recognized by Forbes as one of the best employers for diversity and best employers for women and by Fortune as one of the best workplaces in manufacturing.
It's our people that power our innovation and bring our purpose to life every day.
We have many reasons to be excited about our prospects for strong performance as we look to 2022 and beyond.
When combined with our exceptional ability to generate free cash flow and our balanced capital deployment, we are well positioned to continue to drive differentiated shareholder returns over the long term.
 Assistant:

Chosen response:
qtrly reported bookings of $4.3 billion, up 22 percent.
qtrly organic bookings up 20 percent.
expects to deploy at least $2.5 billion as part of its balanced 2021 capital allocation strategy.
reaffirms 2021 guidance.


Prompt:
Human: It is great to be here with you today to share our fourth quarter and full year 2021 results.
As we ended 2021, we passed the midway point of our three-year turnaround plan.
In 2020, our priority was to stabilize the company.
In 2021, our priority was to build a foundation for omnichannel growth.
And in 2022, we will expand our efforts and increase our investments to make our products available to consumers wherever they choose to shop.
And while we focus on building a strong foundation in 2021, we reported both top and bottom-line growth in 2020 and in 2021.
Most important to me and to our board at this point are accomplishments, what we've learned and what we see ahead of us in the second half of our turnaround plan.
First, what has been accomplished.
We had to rightsize our cost structure to survive in 2020, carry that fiscal rigor into 2021, and successfully stabilize the company.
We reorganized and upgraded talent to help us fix and stabilize our direct selling business.
We have brought into the company new talent with retail and CPG experience to help us build an omnichannel business.
We restructured our debt twice, first, to provide a bridge loan in late 2020, and again in late 2021, to provide critical funding for growth, increasing our financial flexibility and reduce our cost of capital.
We divested non-core assets and reclassified the company's beauty business as discontinued operations in our financials as we work to complete remaining sales transactions in 2022.
We implemented proven methods of operations, utilizing data and techniques to revamp our core direct selling business.
We started building new capabilities to open up our iconic brand to new channels of distribution, with the goal of dramatically increased consumer access to our products.
And we have been working with retailers around the world to take limited amount of products into new channels, and we closed the year ahead of our objective of $50 million in B2B revenue, which is product sales sold through retails in their loyalty programs.
We accomplished top and bottom-line growth in 2021, while continuing to execute on our turnaround plan.
Additionally, we made important changes and investments while navigating unprecedented operating conditions, such as COVID lockdowns throughout the world.
And our gross profit was dramatically impacted both by higher resin prices and logistic costs.
Yet despite these outside distractions, we delivered growth in three of our four regions, with APAC being the outlier, as it was the hardest hit by the most recent COVID variant.
2021 performance was a tale of two halves.
Through the first half of 2021, we were ahead of our internal expectations and really seeing the initial benefits of using direct selling methods that we know are successful.
and Canada, and high resin and transportation cost as well as other inflationary pressures.
That said, we managed controllable expenses as we are exercising more discipline in our spending.
We ended the year up 1% of revenue and more than 50% on adjusted income.
Given the unknowns of COVID and all that we have accomplished to develop a stronger and scalable foundation, we are pleased with the progress our teams are making to prepare for an omnichannel future.
Additionally, as you know, we're up against very difficult comps in the second half of the year.
I'd also like to mention a few noteworthy recent achievements.
We continue to focus on introducing new more sustainable materials to our product lines, new products design to solve consumer needs identified by data and insights, and refined product strategy tied to our renewed purpose to help consumers reduce food waste and eliminate the use of single plastic products and packaging.
In 2021, the ECO+ Coffee To-Go Cup received the Fast Company's 2021 Innovation by Design Award and the Green Good Design Award.
The Handy Spiral also received high honors by the 2022 German Designer Award.
We introduced a freezable reusable bottle that, when frozen, offers up to eight hours of fresh, cool water for consumers on the go.
We also launched our Universal Cookware set, a product line developed for small kitchens and spaces.
In 2022, we will expand the glass bakeware and storage category given the current needs of today's consumers.
With our purpose to nurture a better future, in 2021, we brought to life a collaboration with TerraCycle circular reuse platform called Loop, producing a one-of-a-kind reusable packaging container option for Tim Hortons and Burger King.
Lastly, we continue to make progress in our ESG efforts.
We published our 10th annual sustainability report in the fourth quarter, which highlights the degree to which sustainability is moving into our cultural nevus.
For the first time ever, we conducted a materiality assessment intended to guide our efforts toward the ESG targets, the most important to many of our stakeholders.
The new report includes first-time social and governance goals, a new established 2025 and 2030 environmental target, including 90% absolute reduction of greenhouse gas emissions by 2030.
As a testament to our sustainability reports, we're recently recognized by Newsweek as one of America's most responsible companies in 2021 for our commitment to our people, planet, and environmentally responsible products.
And last month, we renewed our partnership with the National Park Foundation, providing $2 million multi-use donation to create meaningful impact across the National Park system.
As we head into 2022, and the second half of our turnaround plan, we believe our strategy is the right one: to make the company as big as our famous brand.
We will continue to fix our core business, continue to enter into product categories, and continue to open and expand into new channels, all of which we believe will transform this iconic brand.
In our core direct selling business, we're using a more data-driven approach to making better and smarter decisions.
This includes segmentation of how we look at our sales force and our customers to personalize their experience with Tupperware and, in some cases, introducing preferred customer loyalty programs in our biggest markets.
We're also turning around unprofitable markets through changing our sales models and supplementing with business expansion strategies.
When we started the turnaround plan, we had 18 markets that we're losing money.
By converting these markets to a more omnichannel approach, this 18 formerly struggling markets now represent over $180 million in revenue and are contributing over 14% operating profit return on sales.
As I talked about in prior earnings calls, using importers is one of those models we're using more broadly to both expand sales and improve margins.
At the end of 2021, revenue from importers was almost $70 million, up 12% from last year.
Our retail studio market, excluding China, grew 19% in 2021, while our B2B loyalty programs achieved $56 million revenue, over 50% higher than last year.
In 2021, we continue to create the foundation for transforming a business that has been a pure direct selling business for more than 75 years.
We continue to learn as we go and readjust and make investments to accomplish the goal that we set from the very beginning of the turnaround plan.
We're doing something no company has done before in taking a proved direct selling organization and going omnichannel.
This transformation will take time to execute organically, but we've made progress in 2021 through the expansion of importer, studios, and B2B loyalty programs.
We believe we are laying the foundation for further retail expansion as we enter into the next half of the turnaround.
We know the real price is opening up consumer access to our products in a major way, and that means meeting consumers wherever they shop.
Therefore, in 2021, we invested in retail talent to develop and grow retail partnerships, expand with third-party distribution partners across the globe to improve service levels, implement detailed tools to support the retail business and enhance packaging and labeling.
We also onboarded a new product team and established a new sourcing and supply chain center of excellence in Singapore and developed a sub-brand specifically for this channel.
In summary, significant progress has been made in 2021 to build a foundation that accounts for both a direct selling business and the omnichannel business.
and the U.K., just to name a few.
Our focus in 2022 is globalizing direct selling best practices, accelerating new product development, increasing consumer access through omnichannel efforts, including expanded product access in the U.S. and Canada, stabilizing in China.
The entire Tupperware team, our sales force, our associates, our board, and our executive team is excited about the future.
We've made meaningful progress in 2021, despite some challenging headwinds in the second half of the year, while continuing to execute on our turnaround plan and lay the groundwork for future expansion and sustainable growth.
In 2021, we invested in the business to fix the core and set the foundation for expanding into more channels.
We refinanced the debt for more flexibility with more favorable terms, continued our efforts to divest of non-core assets, significantly improved our tax rate and remediated the material weakness within our Mexico operations.
Now to our financial results.
As a reminder, we made an accounting change last quarter to classify our sold and held-for-sale beauty and personal care businesses as discontinued operations, which is consistent with our strategy to focus on the performance of our core business and expansion efforts.
For the full year 2021, we posted revenue of $1.6 billion, which represents an increase of 1% compared to 2020.
As Miguel mentioned, we were outpacing our plan during the first half of the year.
Then in the second half, we had to manage through the impact of restricted COVID lockdowns, especially in Asia and Europe.
We also were challenged in the second half in the U.S. and Canada business with the implementation of a new sales force tool, but still managed to achieve an all-time high for revenue in this market in 2021.
We also grew in three of our four regions for the full year, with Europe up 2%; North America, up 6%; South America, up 20%; and APAC was down 11%, mainly due to China.
Business expansion, which includes B2B loyalty programs, importers, studios, and retail, is now approximately 20% of our revenue.
We're pleased to report that the B2B loyalty revenue was $56 million for the year, exceeding our stated goal of $50 million for 2021 and $37 million in 2020.
Miguel also mentioned the significant progress we've made in importers and studios outside of China.
For the year, three of our big four markets posted growth with the U.S. and Canada up 2%; Brazil up 9%; and Mexico higher than last year by 13%.
China was the only big four market that did not grow and was down by 21%, heavily impacted by fewer studio openings, impacts of lockdowns due to COVID and leadership changes throughout the year.
For the year, gross profit was $1.1 billion, flat compared with last year.
However, gross margin was 66.7%, as compared to 67.5% last year.
The decrease of 80 basis points was driven primarily by higher resin cost of 200 basis points, partially offset by manufacturing efficiencies in the first half of the year.
Adjusted EBITDA was $290 million or 18.1% of sales, relatively flat on a reported basis.
Excluding the foreign exchange impact, EBITDA would have been lower due to the gross profit impacts I just spoke about.
We continue to improve SG&A, despite higher distribution and freight and incremental investments.
Adjusted earnings per share was $3.25, as compared to $2.15 last year as reported.
In 2021, we had two favorable one-time items for the year: $0.15 related to a favorable ruling from the court in regard to a Brazil non-income tax matter; and $0.05 for a China grant, which are being partially offset by a deferred tax asset adjustment of $0.10 that we'll talk about in a minute.
Adjusted for these one-time items and for tax items in both periods, adjusted earnings per share was $3.15 for 2021, compared to $3.33 for 2020.
The decrease was primarily driven by higher resin cost of $0.47; investments, $0.24; partially offset by $0.53 of favorable manufacturing efficiencies, tighter cost controls, and lower interest.
The operating tax rate was 21.9% versus 45.5% in 2020.
As we noted in prior calls, we made significant investments in 2021 to accelerate our tax strategies in an effort to achieve our goal of sub-30%, aligned with our peers and our global operating structure.
Next, turning to performance for the quarter.
Overall, the fourth quarter was heavily impacted by COVID lockdowns, especially in Asia and Europe.
It also had the highest resin cost for the year and a one-time tax adjustment that I'll discuss in more detail in a few minutes.
For the fourth quarter, net sales were $395 million, representing a decrease of 10% compared to last year.
The impact of omicron variant of the COVID-19 was significant in the quarter, with partial or countrywide lockdowns in various markets affecting our operations, particularly in Asia Pacific and Europe.
Excluding the COVID impact, net sales would have decreased 2% in the quarter.
Also coming off a strong second half of 2020, we were facing tougher comps in Q4, particularly in the U.S., due to over $25 million of backlog from previous quarters being shipped in the fourth quarter of the prior year.
On a two-year stack, fourth-quarter revenue increased by 6%.
Q4 was the strongest quarter for B2B loyalty program revenue, with $20 million of the full year $56 million and representing an increase of $15 million compared to the same quarter last year.
Turning now to sales performance by region, including specific performance in our largest markets.
First, in Asia Pacific, sales decreased by 10%.
The slowdown in China, which was down 14% in the quarter, was driven by COVID lockdowns related to resurgence challenges as well as studio closings and a slower pace of new openings, partially offset by the successful entry into small kitchen appliances in this market.
We also made an important leadership change and believe that we have the right person now in place.
China remains an important market for the Tupperware brand and holds significant potential for future growth.
We will continue to prioritize the revitalization of this important market, including through new product innovation, upgrading the look and feel of our physical studio locations and investments in digital and e-commerce platforms.
Excluding China, the remainder of the Asia Pacific region was down 9% in the quarter, as we saw continued impact from lockdowns driven by the pandemic in Malaysia, Indonesia, and the Philippines, which significantly impacted sales efforts, particularly as digital adoption is low in many of these markets.
We think there is significant opportunity to improve performance within the region as we focus on increasing digital adoption.
Excluding the impact of COVID, sales in the Asia Pacific region would have decreased by 2%.
In Europe, sales decreased by 7%.
While sales were lower overall, $13 million of the $20 million B2B in the quarter was in this market at significantly higher profit margins.
European emerging markets were severely impacted by the lockdowns due to the omicron variant of COVID-19, as this market relies heavily on physical gatherings, resulting in lower recruitment and productivity.
Excluding the impact of COVID, sales in Europe would have decreased by 3%.
In North America, sales decreased by 12% in the quarter, with the U.S. and Canada decreasing by 29%.
The decrease in the U.S. and Canada was driven by tougher comparables due to a large backlog shift in the fourth quarter of 2020 that did not reoccur in 2021.
Adjusting for this, sales in the U.S. and Canada would have increased by 11%.
Sales in Mexico increased by 22% in the quarter, 5% from B2B, while the direct selling growth was driven by higher engagement and productivity due largely to the implementation of our proven direct selling methods, segmenting our sales force and sharing best practices as well as returning to in-person events during November and December as lockdowns were lifted in this market.
We believe the success in Mexico reflects our efforts, methods, and tools that we are also implementing in markets around the world to stabilize our direct selling business.
In South America, sales decreased by 10%.
Sales in Brazil were down by 21% driven by challenging economic conditions, including household debt levels and the expiration of the government stimulus in October, all of which contributed to lower levels of recruitment and productivity.
Due to macro environment conditions and the upcoming October 2022 presidential and general election, we do expect this market to remain challenging for the next few quarters.
Moving now to profit for the quarter.
Gross profit in the fourth quarter was $241 million or 61% of net sales, a decrease of approximately 740 basis points compared to last year, largely driven by inflationary pressures.
Of the total, approximately 250 basis points was due to higher resin costs, with the balance being a mix of downtime and manufacturing inefficiencies due to lower volume and higher inventories, higher inventory reserves and market and product mix.
In the first half of the year, we were offsetting the resin impact through manufacturing efficiencies.
However, as volumes began to decrease in the second half, we were no longer able to offset the impact and could not respond fast enough on pricing due to the nature of our catalog-based business.
We believe that inflationary pressures will persist throughout 2022, and we will look to raise prices to offset the dollar impact, being mindful of relative market dynamics.
We will also continue to look for opportunities to reduce cost and increase efficiencies where possible.
From an inventory standpoint, we ended the year at a higher level than we had anticipated due to the softness in sales, and we will work to reduce that balance as we move through the first half of 2022.
I should note that our ability to manufacture locally continues to be an advantage in the current supply chain environment, avoiding costly and time-consuming shipping delays.
Our SG&A as a percentage of sales in the fourth quarter was 52.3% versus last year of 52.1%.
In the quarter, we made approximately $6 million of strategic investments, including information technology, new talent for products, sourcing, and business expansion to support future growth and the tax investments to achieve a sub-30s tax rate.
Adjusted EBITDA for the fourth quarter was $47 million or 12% of sales, reflecting the higher resin cost and investments just discussed.
Our fourth-quarter operating tax rate was 40% versus over 80% in the same quarter in 2020.
During the fourth quarter of 2021, as part of a tax control design reassessment, we identified a deferred tax asset balance for stock compensation that included amounts associated with expired or forfeited awards and other amounts or awards with no expected tax deduction.
These were out of period and related to prior years that are recorded in the fourth quarter of 2021.
We also recorded a reserve related to transfer pricing in the quarter, which is also part of our comprehensive tax planning strategy.
As a reminder, the 2020 Q4 tax rate was impacted by the sale of the Orlando property and early retirement of debt.
As I stated earlier, on a full-year basis, our operating tax rate was 21.9%, so as you can see, we've made great progress toward our goal of sustainably lowering our tax rate and achieving our goal of sub-30s.
It's clear that our tax planning strategies are working.
Now the earnings per share.
Adjusted earnings per share was $0.38 in the quarter, compared to $0.22 last year.
Adjusting both years for the tax impacts, adjusted earnings per share would have been $0.49 per share versus $0.89 per share in 2020.
In 2021, higher cost related to resin, manufacturing inefficiencies and higher inventory reserves resulted in a negative impact of $0.27, while lower profit on reduced sales was $0.12.
Turning now to other notable financial matters for the year.
On a reported basis, for the full year, operating cash flow net of investing was $130 million, compared to $198 million last year.
As we previously discussed, cash flow benefited last year by aggressive cost savings actions, including pandemic-specific actions such as furloughs and significantly lower spending on inventory and higher payables in order to preserve cash.
For 2021, cash flow was impacted by investments we made in the inventory in an effort to improve service levels, given current global supply chain issues, while also reverting to a more normalized level of capital spending.
Moving to the balance sheet.
We ended the quarter with a healthy cash balance of $267 million, which compares to $134 million last year, and we ended the quarter with a total debt balance of $712 million.
At year end, our consolidated net leverage ratio was 2.1 times, well below both historical levels and our required covenant of 3.75 times.
We mentioned on our last call that we would look to favorable market conditions to present opportunities to further improve our capital structure, and I'm pleased to report that we were able to do just that in the fourth quarter by refinancing our credit facility, reducing our cost of debt, improving liquidity and extending our maturities.
Our new $880 million credit facility consists of a five-year $480 million revolving credit facility, a five-year U.S. dollar term loan of $200 million and a euro term loan of EUR 176 million.
The entire facility extends maturity out by two and a half years to 2026, increases liquidity by approximately $100 million through a higher level of revolver capacity and reduces the interest rate on our term loan by more than six percentage points.
In addition, the new facility resets our financial covenants to enhance operating flexibility, including capital allocation flexibility and leverage ratio calculation on a net basis, allowing for up to $100 million of cash to be applied toward debt balances.
We are also pleased to have the support of a new lead bank and banking syndicate, which is comprised of 10 banks and led by Wells Fargo.
We are also pleased and have made significant progress over the past 18 months in strengthening our balance sheet, refinancing our debt, investing in our business and selling our non-core assets.
In June of 2021, our board authorized a $250 million share repurchase program.
And in the third quarter of 2021, we returned $25 million to our shareholders under this program through stock buybacks.
This $25 million was the maximum amount of share repurchase allowable under our prior credit facility covenants.
Under our new credit facility, we are no longer subject to the same restricted covenants as long as we remain below certain leverage thresholds.
Therefore, as we continue to generate strong cash flow and given our confidence in our future growth trajectory, given the enhanced flexibility we now have to utilize this facility, we may opt to more aggressively support the stock at current levels, always being mindful to deploy capital as effectively and efficiently as possible.
While we remain in a challenging operating environment and are only at the halfway point of our three-year turnaround, we feel we have sufficient visibility to provide a more tangible view into the coming year.
Given the uncertainty that COVID, inflationary pressures, volumes in response to pricing actions and a host of other variables, we will only be providing our view on profitability and cash flow for 2022 at this time.
We previously shared that at a quarterly run rate of $470 million of revenue and a tax rate of 28%, we believe we could sustainably deliver quarterly adjusted earnings per share of approximately $1 to $1.20.
That range was provided prior to the reclassification of our beauty businesses to discontinued operations.
If we adjust that range to reflect continuing operations only, we believe a reasonable quarterly range to be approximately $0.85 to $1, which assumes a tax rate in the mid- to upper 20s.
As we move into the expansion stage of our turnaround plan, which will require further investments and given the persisting uncertainty of the pandemic, we believe that for 2022, adjusted earnings per share will be approximately $0.65 to $0.80 per quarter, reflecting $0.05 to $0.20 per share per quarter lower than the normalized estimate.
We also believe that 2022 will be another tale of two halves, the trending opposite of 2021, with tougher comps in the first half exasperated by COVID and persistent cost pressures, followed by relatively easier comps in the second half.
We also expect our pricing actions to catch up with cost increases by the second half and for results to benefit from business expansion efforts that began to take root in the latter part of the year.
Therefore, we expect the second half to be our stronger half for 2022.
Our cash flow expectations follow a similar storyline.
We had originally shared that normalized annual free cash, which we define as operating cash flow net of investing cash flow, to be approximately $200 million.
Adjusting for discontinued operations, that normalized number now moves to a range of roughly $140 million to $160 million on a continuing operations basis.
For 2022, we anticipate a similar range of between $125 million and $150 million given anticipated investments into the business for our turnaround plan.
Lastly, and as we alluded to last quarter, we look forward to conducting an in-person Investor Day this year.
And given the current COVID trends, we've decided to push it to the second half of 2022, hoping to meet face to face and share many of exciting initiatives that are underway and designed to leverage our brand, expand our distribution and reach more consumers than ever before.
We'll also provide a more comprehensive view into the business, strategy, and tangible proof points of progress as well as a longer-term framework and outlook.
Look for more details in the coming months.
Looking back, throughout 2021, we continue to fortify our financial foundation, which enables us to strengthen our core business, while also increasing consumer access to our products by entering new sales channels and product categories.
Despite a year of challenging and rapidly changing operating conditions, we held firm to our plan and executed on a number of important strategic initiatives that further strengthen our capital structure and position us well for future growth.
We refinanced our debt at very favorable terms, sold additional non-core assets, and announced the opening of a new global sourcing and supply chain center in Singapore.
We are entering the new year on solid footing, and we believe that our consistent execution will result in a stronger, more resilient, and durable business capable of delivering long-term sustainable growth and value.
 Assistant:

Chosen response:
q4 adjusted non-gaap earnings per share $0.38 from continuing operations including items.
as a result of its remediation efforts, material weaknesses were remediated as of december 25, 2021.
impact of the omicron variant of covid-19 on the company's financial results in the quarter was significant.
as of december 25, 2021, co was in compliance with its financial covenants.
currently exploring the sale of its nutrimetics and nuvo businesses.
sees 2022 operating cash flow net of investing cash flow to be between $120 million and $160 million.