Prompt:
Human: Greg and Jason will review our results along with commentary, and Jack and Kelly will join for Q&A.
These materials include GAAP to non-GAAP reconciliations for your reference.
These statements are based on current expectations and assumptions that are subject to a variety of risks and uncertainties.
Information about factors that could cause such differences can be found in today's earnings news release, in the comments made during this conference call, in the Risk Factors section of our 2020 annual report on Form 10-K and in our other reports and filings with the SEC.
I'll start off by sharing a few thoughts about the overall business before Jason takes us through results and our outlook.
First, Q1 was an excellent quarter.
We achieved Q1 records for sales, operating earnings and cash flow.
We expanded operating margins by 220 basis points and ended the quarter with backlog of $11.3 billion, up 8% versus last year.
Additionally, demand remains strong, resulting in orders that were higher than any other first quarter in our history.
Second, our Software and Services segment had another outstanding quarter and continues to drive revenue growth and operating margin expansion.
Sales for the quarter were up 15%, driven by growth across our LMR, video security and command center software technologies.
And the segment also finished with operating margins up 310 basis points versus last year.
And finally, based on the increased demand we're seeing across our business and our strong backlog position, we're raising our full year guidance for both sales and earnings per share for the full year.
Our Q1 results included revenue of $1.8 billion, up 7%, including $48 million from acquisitions and $32 million from favorable currency.
GAAP operating earnings of $298 million and operating margins of 16.8% of sales compared to 15.6% in the year ago quarter.
Non-GAAP operating earnings of $411 million, up $64 million or 18%, and non-GAAP operating margins of 23.2% of sales, up from 21%, driven by higher sales and improved operating leverage in both segments.
GAAP earnings per share of $1.41 compared to $1.12 in the year ago quarter.
The increase was primarily due to higher sales volume, improved operating leverage and lower legal fees, partially offset by the gain from the sale of a manufacturing facility recognized in the prior year.
Non-GAAP earnings per share of $1.87 compared to $1.49 last year, primarily due to higher sales and improved operating leverage in both segments, higher pension income and a lower diluted share count, partially offset by a higher effective tax rate.
opex in Q1 was $455 million, up $4 million versus last year, primarily due to costs related to acquisitions, partially offset by lower discretionary spend.
Turning to cash flow.
Our Q1 operating cash flow was $370 million compared with $308 million in the prior year, and free cash flow was $318 million compared with $260 million in the prior year.
The increase in cash flow was primarily due to higher sales and improved working capital, partially offset by higher cash taxes.
Capital allocation for Q1 included $170 million of share repurchases at an average price of $175.53, $121 million in cash dividends and $52 million of capex.
During the quarter, we entered into a new five year $2.25 billion revolving credit facility, replacing our prior $2.2 billion facility.
And subsequent to quarter end, the Board of Directors approved a $2 billion increase to the share repurchase program.
Moving to our segment results.
Q1 Products and Systems Integration sales were $1 billion, up 2%, primarily driven by growth in video security and professional and commercial radio, partially offset by lower sales of public safety LMR, which were impacted by supply constraints.
Revenue from acquisitions in the quarter was $35 million.
Operating earnings were $131 million or 12.9% of sales, up from 12.4% in the year prior on higher sales and improved leverage.
Some notable Q1 wins and achievements in this segment include a $300 million frame agreement with the German MOD to meet their TETRA LMR requirements with an initial order of $154 million recorded in Q1.
$72 million of video sales with government customers, up 32% from last year.
A $37 million P25 upgrade for a government agency in Canada.
A $33 million TETRA upgrade for a large customer in Europe.
And a $12 million P25 order with a large U.S. federal customer.
Moving to the Software and Services segment.
Q1 revenue was $758 million, up 15% from last year, driven by growth in LMR services, video security and command center software.
Revenue from acquisitions in the quarter was $13 million.
Operating earnings were $280 million or 36.9% of sales, up 310 basis points from last year, driven by higher sales, higher gross margins and improved leverage.
Some notable Q1 wins in the segment include, over $40 million of orders for P25 services, upgrades and body-worn cameras with Nashville, Tennessee.
A $35 million push-to-talk over broadband multiyear contract with a large U.S. customer, a $22 million P25 and push-to-talk over broadband contract from a large middle eastern customer.
The $13 million of body-worn cameras with multiple U.K. customers and our largest cloud-based command center software win to date.
A $5 million contract with St. Lucie, Florida.
Additionally, we announced a new product integration between our V300 body-worn camera and our APX P25 radio platform.
Looking at our regional results.
North America Q1 revenue was $1.2 billion, up 6% on growth in LMR, video security and command center software.
International Q1 revenue of $588 million, was up 9%, with growth in EMEA, Asia Pac and Latin America.
The growth was driven by video security and LMR. Moving to backlog.
Ending backlog was a Q1 record of $11.3 billion, up $866 million compared to last year, driven by $639 million of growth in North America and $227 million of growth internationally.
Sequentially, backlog was down $130 million, driven by revenue recognition on the Airwave and ESN contracts, partially offset with international growth in LMR products.
Software and Services backlog was up $548 million compared to last year, driven by $491 million of growth in multiyear LMR services and command center software contracts in North America, and $58 million of international software growth.
The favorable impact of FX to backlog was offset by revenue recognition for Airwave and ESN.
Sequentially, backlog was down $269 million, also driven by revenue recognition for Airwave and ESN.
Products and SI backlog was $318 million compared -- up $318 million compared to last year.
Primarily driven by LMR growth in both regions.
Sequentially, backlog was up $139 million, driven by international LMR growth.
Turning to our outlook.
We expect Q2 sales to be up between 19% and 20%, with non-GAAP earnings per share between $1.90 and $1.95 per share.
This assumes FX at current spot rates, weighted average diluted share count of approximately 173 million shares and an effective tax rate of 23% to 24%.
And for the full year, we now expect sales to be up between 8% and 9%, an increase from our prior guide of 7.25% to 8%.
And we expect full year non-GAAP earnings per share between $8.70 and $8.80 per share, up from our prior guidance of $8.50 to $8.62 per share.
This increased outlook includes the ongoing supply chain constraints, primarily in LMR products and assumes FX at current spot rates.
A weighted average diluted share count of 173 million shares and an effective tax rate of 22.5% to 23%.
And now I'd like to end with a few thoughts on the business.
First, our results for the quarter were outstanding.
We achieved Q1 record sales, orders, operating earnings and cash flow.
Expanded both gross and operating margins, achieved double-digit growth in video security, command center software and LMR services and our PCR business returned to growth.
Additionally, we exited the quarter with a record Q1 backlog and continued strong demand that we expect will drive growth for the remainder of the year, inclusive of the supply challenges that we have.
We also announced today that the Board approved a $2 billion increase to our share repurchase program.
The second thing I would say is demand in our video security business is really strong.
And we now expect full year growth to be 20% plus, up from the high teens we referenced on our last call.
In fixed video, which makes up approximately 70% of the total video security revenue, our investments in AI analytics, cloud services, access control and NDAA-compliant manufacturing is differentiating us from our competitors and driving growth faster than the overall market.
And in mobile video, the call for more transparency is driving growth for our purpose-built body-worn and in-car camera solutions, and we're gaining share in a market that has predominantly been served by one vendor.
During the quarter, we had several large body-worn camera wins, both in the U.S. and internationally.
Additionally, during the quarter, we announced two new offerings, the integration of our V300 body-worn camera with our APX P25 radios, which allow us to leverage our market-leading LMR installed base and our $49 per month body-worn camera as a service offering, which offers every police agency in the U.S. with affordable access to a video solution that's fully integrated with our command central software suite.
And finally, I'm very pleased with our progress in leveraging our leading installed base in LMR to expand into command center software, video security and LMR services.
Today, almost half our revenue is generated from these higher growth areas, up from 20% five years ago, and our addressable market has tripled over that same period of time.
And while we've made significant progress, I absolutely believe we still have a long runway ahead as we continue to deploy capital both organically and inorganically in these areas to drive revenue, margin and cash flow for the company.
[Operator Instructions] Operator, would you please remind our callers on the line how to ask a question?
 Assistant:

Chosen response:
sees q2 non-gaap earnings per share $1.90 to $1.95.
sees fy revenue up 8 to 9 percent.
sees q2 revenue up 19 to 20 percent.
q1 sales rose 7 percent to $1.8 billion.
q1 non-gaap earnings per share $1.87.
q1 gaap earnings per share $1.41.
backlog of $11.3 billion at quarter end.
sees fy non-gaap earnings per share $8.70 to $8.80.


Prompt:
Human: These statements speak only as of the date made, and M&T undertakes no obligation to update them.
Revenue in our fee generating businesses was particularly strong including mortgage banking, trust and brokerage and payments.
Credit trends are stable to improving, illustrated by net charge-offs, about half our long-term average, a modest reserve release and little change in the level of nonaccrual loans.
In alignment with the strong revenue trends and the improved profitability over the last year, incentive compensation is rising as well.
We'll offer some details on that in a moment.
Lastly, our capital levels continue to rise.
The CET1 ratio is near a record high as we await the closing of the People's United merger.
Now let's review our results for the quarter.
Diluted GAAP earnings per common share were $3.69 for the third quarter of 2021, improved from $3.41 in the second quarter of 2021 and $2.75 in the third quarter of 2020.
Net income for the quarter was $495 million, compared with $458 million in the linked quarter and $372 million in the year-ago quarter.
On a GAAP basis, M&T's third-quarter results produced an annualized rate of return on average assets of 1.28% and an annualized return on average common equity of 12.16%.
This compares with rates of 1.22% and 11.5%, respectively, in the previous quarter.
Included in GAAP results in the recent quarter were after-tax expenses from the amortization of intangible assets amounting to $2 million or $0.02 per common share, little change from the prior quarter.
Also included in the quarter's results were merger-related charges of $9 million related to M&T's proposed acquisition of People's United Financial.
This amounted to $7 million after tax or $0.05 per common share.
Results for this year's second quarter included $4 million of such charges amounting to $3 million after-tax effect or $0.02 per common share.
Consistent with our long-term practice, M&T provides supplemental reporting of its results on a net operating or tangible basis from which we have only ever excluded the after-tax effect of amortization of intangible assets, as well as any gains or expenses associated with mergers and acquisitions.
M&T's net operating income for the third quarter, which excludes intangible amortization and the merger-related expenses, was $504 million.
Compare that with $463 million in the linked quarter and $375 million in last year's third quarter.
Diluted net operating earnings per common share were $3.76 for the recent quarter, improved from $3.45 in 2021 second quarter and up from $2.77 in the third quarter of 2020.
Net operating income yielded annualized rates of return on average tangible assets and average tangible common shareholders' equity of 1.34% and 17.54% for the recent quarter.
The comparable returns were 1.27% and 16.68% in the second quarter of 2021.
Let's take a look at some of the details that drove our results.
Taxable equivalent net interest income was $971 million in the third quarter of 2021, compared with $946 million in the linked quarter.
Higher income from PPP loans accounted for the majority of the $25 million quarter-over-quarter increase in net interest income and the second round of PPP loans began to receive forgiveness from the Small Business Administration.
The net interest margin for the past quarter was $2 dollars -- excuse me, 2.74%, down just three basis points from 2.77% in the linked quarter.
We estimate that the higher balance of cash on deposit at Federal Reserve contributed about 13 basis points of pressure to the margin.
Largely offsetting that was the higher income from PPP loans both scheduled amortization and accelerated recognition of fees from forgiven loans, which added an estimated 10 basis points to the margin.
All other factors including lower income from hedges, a slightly lower cost of deposits and an additional accrual day netted to zero impact.
Compared with the second quarter of 2021, average interest earning assets increased by 3%, reflecting a 22% increase in money market placements, primarily cash on deposit with the Fed and a 3% decline in investment securities.
Average loans outstanding declined about 3% compared with the previous quarter.
Looking at the loans by category, on an average basis compared with the linked quarter.
Overall, commercial and industrial loans declined by $3.3 billion or 12%.
The primary driver was a $2.4 billion decline in PPP loans.
Dealer floor plan loans declined by $803 million, reflecting the ongoing impact from vehicle production and inventory issues seen across the industry.
All other C&I loans were essentially a little changed from the prior quarter.
Commercial real estate loans were also little changed from the second quarter.
Residential real estate loans declined by just under 4%.
There are a few moving parts underlying that figure that are worth highlighting.
Balance decreases due to normal prepayments and principal amortization, including the Hudson City portfolio, drove some of the decrease, as well as repooling of loans previously purchased from Ginnie Mae servicing pools, offset -- those were offset by retention of new loan production, which will be a bigger factor in the fourth quarter.
Consumer loans were up 3%, consistent with the recent quarters and continuing to be led by growth in indirect auto and recreational finance loans.
On an end-of-period basis, total loans were down 4%, reflecting most of the same factors I just mentioned.
The 11% decline in C&I loans include a decline of PPP loans outstanding to $2.2 billion at September 30.
Average core customer deposits, which exclude CDs over $250,000, increased 2% or $2.8 billion compared with the second quarter.
That figure includes $3.8 billion of noninterest-bearing deposits partially offset by lower interest checking deposits.
Turning to noninterest income.
Noninterest income totaled $569 million in the third quarter, compared with $514 million in the linked quarter.
The recent quarter included an insignificant valuation gain on equity securities, largely on our remaining holdings of GSE preferred stock, while the prior quarter included $11 million of valuation losses.
Mortgage banking revenues were $160 million in the recent quarter, compared with $133 million in the linked quarter.
Revenues for our residential mortgage business, including both origination and servicing activities, were $110 million in the third quarter, compared with $98 million in the prior quarter.
Residential mortgage loans originated for sale were down about 7% to $1.1 billion when compared with the second quarter.
However, the lower volume was more than offset by higher gain on sale margins.
Commercial mortgage banking revenues were $50 million in the third quarter, compared with $35 million in the linked quarter.
Those results reflect a strong originations quarter combined with prepayment fees on loans previously securitized.
Trust income was $157 million in the recent quarter, compared with $163 million in the previous quarter.
Recall that the second quarter's results included $4 million of seasonal fees arising from tax preparation work we undertake for clients, which did not recur in the third quarter.
Also, in conjunction with the transfer of M&T's retail brokerage and advisory business to the platform of LPL Financial in mid-June of this year, about $10 million in revenues associated with managed investment accounts, previously classified as trust income, are now included in brokerage services income.
Service charges on deposit accounts were $105 million, compared with $99 million in the second quarter.
The primary driver of the increase was customer payments related activity.
Operating expenses for the third quarter, which exclude the amortization of intangible assets and merger-related expenses previously mentioned, were $888 million.
The comparable figure was $859 million in the linked quarter.
Salaries and benefits were $510 million for the quarter, compared with $479 million in the prior quarter.
As was the case in previous quarters this year, the higher salaries and benefits reflect revenue generation in certain business lines and incentive compensation associated with that revenue, notably commercial mortgage banking and trust.
Also, at the enterprise level, we are accruing the corporate incentive at a higher rate in 2021, reflecting our expectation that M&T's full-year earnings and profits will be higher than they were in 2020.
Other cost of operations in the recent quarter, including $5 million from the accelerated amortization of capitalized mortgage servicing rights as a result of the prepayments of previously securitized commercial mortgage loans that we referenced earlier.
Lastly, year-over-year growth in trust income and assets under management in our retirement business has carried with us an increase in the share of those fees paid to subadvisors, which are included in other cost of operations.
Also recall that the other cost of operations for the second quarter included an $8 million addition to the valuation allowance for our capitalized residential mortgage servicing rights.
There were no adjustments to the valuation allowance in the third quarter.
The efficiency ratio, which excludes intangible amortization and merger-related costs from the numerator and securities gains or losses from the denominator was 57.7% in the recent quarter, compared with 58.4% in 2021's second quarter.
Next, let's turn to credit.
Credit trends continue to stabilize, but as has been the case for the past little while, some industries are improving more rapidly than others, reflecting challenges such as the supply chain, pressure on materials costs, and the cost and availability of labor.
The allowance for credit losses declined by $60 million to stand at $1.5 billion at the end of the third quarter.
This reflects a $20 million recapture of previous provisions for credit losses, combined with $40 million of net charge-offs in the quarter.
At September 30, the allowance for credit losses as a percentage of loans outstanding was unchanged from June 30 at 1.62%.
Annualized net charge-offs as a percentage of total loans were 17 basis points for the third quarter, 19 basis points in the second quarter.
The allowance for credit losses at the end of the quarter reflects our assessment of credit losses in the portfolio under the CECL loss measurement methodology which includes our macroeconomic forecasts.
As we've previously indicated, our macroeconomic forecast uses a number of economic variables with the largest drivers being the unemployment rate and GDP.
Our forecast assumes the national unemployment rate continues to be elevated compared to prepandemic levels, averaging 5.5% over 2021, followed by a gradual improvement, reaching 3.5% by mid-2023.
The forecast also assumes that GDP grows at a 6.8% annual rate over 2021 and 2.7% annual rate during 2022.
Nonaccrual loans were essentially flat at $2.2 billion compared with June 30, but increased as a percentage of loans to 2.4%, compared with 2.31% of loans at the end of June.
We also expect to disclose that our level of criticized loans is a little changed from the second quarter when we file our third-quarter 10-Q in a few weeks.
Loans past due, on which we continue to accrue interest, were $1 billion at the end of the recent quarter.
M&T's Common Equity Tier 1 ratio was an estimated 11.1% at quarter end, compared with 10.7% at the end of the second quarter.
This reflects continued strong organic capital generation combined with lower risk-weighted assets.
As previously noted, while the People's merger is pending, we don't plan to engage in any stock repurchase activity.
Now let's turn to the outlook.
As we enter the final quarter of the year, we see a little need to change our outlook for the remainder of 2021.
We expect year-over-year loan growth to be flat to up slightly on a reported basis and flat to down slightly, excluding the impact from PPP loans, which reflects the decline in dealer floor plan loans.
We continue to expect net interest income to be down a low single-digit percentage from full-year 2020.
We noted on the July conference call that we expected net interest income in the third and fourth quarters to, on average, be in line with the $946 million in the second quarter.
We still expect that to be true, but the faster than expected forgiveness of PPP loans did pull some of that income forward into the third quarter from the fourth quarter.
We've slightly exceeded our outlook for low single-digit growth in noninterest income.
As we begin to retain the majority of residential mortgage loans we originate on the balance sheet, residential gains on sale will be primarily driven by Ginnie Mae repooling gains.
Momentum in the trust and payments-related businesses remain strong.
Expenses have grown faster than we forecast in January, but with most of that growth directly connected to better-than-expected revenue and better-than-expected net income trend.
The credit environment continues to improve along with the overall economy, but some segments are recovering more slowly than others.
We believe criticized assets are at or near their peak, but there still remains some risk of downgrades within criticized loans from accruing to nonaccruing.
Our preparations for completion of the merger with People's United continue while we wait for regulatory approval.
Our projections as to the financial impact remain largely in line with what we offered at the time of announcement this past February.
Following our usual practice, we'll offer our thoughts for 2022 on the January conference call.
Of course, as you are all aware, our projections are subject to a number of uncertainties and various assumptions regarding national and regional economic growth, changes in interest rates, political events and other macroeconomic factors, which may differ materially from what actually unfolds in the future.
Now let's open up the call to questions, before which Emma will briefly review the instructions.
 Assistant:

Chosen response:
compname reports q3 gaap earnings of $3.69 per share.
q3 operating earnings per share $3.76.
quarterly net interest income expressed on a taxable-equivalent basis totaled $971 million , up from $947 million in q3 2020.
q3 gaap earnings per share $3.69.
quarterly net loan charge-offs were $40 million versus $30 million.
allowance for credit losses totaled $1.52 billion or 1.62% of loans outstanding at september 30, 2021.
compname posts q3 gaap share $3.69.
qtrly net interest income expressed on a taxable-equivalent basis totaled $971 million , up from $947 million in q3 of 2020.
q3 gaap share $3.69.
qtrly net loan charge-offs were $40 million versus $30 million.


Prompt:
Human: I'm joined today by Patrick Kaltenbach, our Chief Executive Officer; and Shawn Vadala, our Chief Financial Officer.
Let me cover just a couple of administrative matters.
For a discussion of these risks and uncertainties, please see our recent Form 10-K and other reports filed with the SEC.
Just one other item.
More detailed information with respect to the use of and differences between non-GAAP financial measures and most directly comparable GAAP measures is provided in our Form 8-K.
I am pleased to report another quarter of very strong results.
Customer demand was robust and our growth initiatives continue to be very effective.
Our teams throughout the world are executing very well.
I want to give a special acknowledgment to our global supply chain team, which is navigating a myriad of challenges with respect to raw materials, components and transportation.
Our ability to continue to meet heightened customer demand while overcoming the dynamic challenges in the supply chain is proving to be a competitive advantage in this environment.
Now let me turn to our financial results.
Local currency sales was 16%, and we had broad-based growth in all regions.
Our Laboratory business had excellent growth and our industrial product lines also performed very well.
Food retail was a headwind, drove overall sales growth as we had significant decline in the quarter.
With our strong sales growth and good execution, we achieved a 19% growth in adjusted operating income and a 24% increase in adjusted EPS.
Cash flow generation was very strong in the quarter.
Our end markets remain favorable, and our strategic initiatives are very effective at capturing growth.
Our Spinnaker sales and marketing approach provides the framework to identify and pursue the most attractive market segments while also increasing our sales force exposure to the most strategic customers.
We also continue to invest in the strength and breadth of our product portfolio, further extending our technology lead and reinforcing customer trust through our global service offering, which supports customers' productivity.
We have several -- we have successfully navigated the challenges of the global supply chain to date, but are cautious as demand dynamics remain challenging and conditions can change rapidly.
Although pockets of uncertainty exists in the global economy, we believe we are ideally positioned to gain market share.
With proven strategies, good demand in our end markets and continued focused execution on our growth and margin initiatives, we believe we are in an excellent position to deliver strong results in 2021 and 2022.
Let me now turn it to Shawn to cover the financial and guidance details, and then I will come back with some additional commentary on the business, and our outlook for next year.
Sales were $952 million in the quarter, an increase of 16% in local currency.
On a U.S. dollar basis, sales increased 18% as currency benefited sales growth by 2% in the quarter.
The PendoTECH acquisition contributed approximately 1% to local currency sales growth in the quarter, while we estimate that COVID testing was a headwind of approximately 1% to sales growth.
Last year, the benefit in our pipette business from COVID testing labs was particularly strong.
On Slide four, we show sales growth by region.
Local currency sales increased 20% in the Americas, 10% in Europe and 16% in Asia/Rest of the World.
Local currency sales increased 19% in China in the quarter.
The next slide shows sales growth by region year-to-date.
Local currency sales grew 20% for the nine months with a 21% increase in the Americas, 15% in Europe, and 23% growth in Asia/Rest of World.
On Slide six, we summarize local currency sales growth by product area.
For the third quarter, Laboratory sales increased 23%, Industrial increased 12%, with core Industrial up 11% and product inspection up 13%.
Food Retail came in worse than we expected with a decline of 19% in the quarter.
The next slide shows local currency sales growth by product area year-to-date.
Laboratory sales increased 26%, Industrial increased 16%, with core Industrial up 21% and product inspection up 9%.
Food Retail declined 1% for the nine-month period.
Let me now move to the rest of the P and L, which is summarized on Slide eight.
Gross margin in the quarter was 58.4%, a 20 basis point increase over the prior year level of 58.2%.
We benefited from volume and pricing which was offset in part by the challenges in the global supply chain, namely higher transportation, logistics and material costs as well as the impact of temporary cost actions we undertook in 2020.
R and D amounted to $42.3 million in the quarter, which is a 19% increase in local currency over the prior period.
The impact of temporary cost savings undertaken last year and greater project activity contributed to this increase.
SG and A amounted to $240.7 million, a 16% increase in local currency over the prior year.
The impact of the temporary cost savings that we undertook last year, higher variable compensation, and increased investments in sales and marketing were the principal factors driving the increase.
Adjusted operating profit amounted to $272.8 million in the quarter, a 19% increase over the prior year amount of $230 million.
We are pleased with this increase, which reflects very strong sales growth combined with good execution.
Adjusted operating margins reached 28.7%, a 20 basis point increase over the prior year level of 28.5%.
On a teo-year combined basis, our margins were up 270 basis points as the prior year margin benefited from the cost actions we implemented due to the pandemic.
A couple of final comments on the P and L. Amortization amounted to $16 million in the quarter, interest expense was $11.8 million in the quarter, other income in the quarter amounted to $3.3 million primarily reflecting nonservice-related pension income.
Our effective tax rate before discrete items and adjusted for the timing of stock option deductions was 19.5%.
Fully diluted shares amounted to $23.4 million in the quarter, which is a 3% decline from the prior year.
Adjusted earnings per share for the quarter was $8.72, a 24% increase over the prior year amount of $7.02.
On a reported basis in the quarter, earnings per share was $8.71 as compared to $6.68 in the prior year.
Reported earnings per share in the quarter includes $0.18 of purchased intangible amortization, $0.02 of restructuring offset by $0.19 due to the difference between our quarterly and annual tax rate due to the timing of stock option exercises.
The next slide shows our P and L year-to-date.
Local currency sales grew 20%, adjusted operating income increased 35%, with margins up 210 basis points.
Adjusted earnings per share grew 43% on a year-to-date basis.
That covers the P and L, and let me now comment on cash flow.
In the quarter, adjusted free cash flow amounted to $243.1 million, which is an increase of 19% and on a per share basis as compared to the prior year.
We are very happy with our cash flow generation.
DSO was 35 days, which is two days less than the prior year.
ITO came in at 4.5 times, which is slightly better than last year.
On a year-to-date basis, adjusted free cash flow amounted to $615.3 million, an increase of 48% on a per share basis as compared to the prior year.
Let me now turn to guidance.
While our end markets remain favorable, forecasting continues to be challenging.
There are pockets of uncertainty in the global economy, most notably in China.
Furthermore, the widespread challenges within the supply chain and in transportation and logistics and the corresponding inflationary impact also creates uncertainty.
Finally, we have seen over the last several months how COVID variance and lockdowns can occur quickly.
We recognize the importance of remaining agile and adapting to unexpected changes in the environment.
We are very pleased with our ability to navigate the unprecedented challenges of the last two years, which we believe reflects the strength of our organization.
While we remain cautious about factors outside of our control, we feel very good about our growth initiatives and our ability to continue to gain market share and drive margin improvement via our pricing and Stern Drive initiatives.
Now let me cover the specifics.
For the full year 2021, we now expect local currency sales growth in 2021 and to be approximately 17%.
This compares to previous guidance of 15%.
We expect full year adjusted earnings per share to be in the range of $33.35 to $33.40, which is a growth rate of 30%.
This compares to previous guidance of adjusted earnings per share in the range of $32.60 to $32.90.
With respect to the fourth quarter, we would expect local currency sales growth to be approximately 8% and expect adjusted earnings per share to be in the range of $10 to $10.05, a growth rate of 8% to 9%.
For the full year 2022, based on our assessment of market conditions today, we would expect local currency sales growth to be approximately 6% and adjusted earnings per share to be in the range of $37.25 to $37.65.
Using the midpoint of 2021 guidance, this reflects a growth rate of 12% to 13%.
Some further comments on 2022 guidance.
We expect a slight headwind to sales growth from the impact of COVID testing on our pipette business.
We expect interest expense to be approximately $50 million in 2022 in total amortization, including purchase intangible amortization to be $65 million.
Purchase intangible amortization is excluded from adjusted earnings per share and is estimated at $24 million on a pre-tax basis or $0.79 per share in 2022.
In 2022, other income, which is below operating profit, will amount to approximately $13.5 million.
This is higher than the $10.7 million expected in 2021 due to an expected increase in pension income.
Finally, we assume our effective tax rate before discrete items will be 19.5% in both 2021 and 2022.
In terms of free cash flow for 2021, we now estimate it will reach $810 million, which reflects a 29% growth on a per share basis.
For 2022, we would estimate free cash flow in the range of $845 million.
Cash flow in 2022 is impacted by higher variable compensation payments related to the very strong performance in 2021.
Once we get beyond 2022, we expect free cash flow per share will grow in line with earnings per share and net income conversion will be in the 100% range.
We expect to repurchase approximately $1 billion in shares in both 2021 and 2022, which should allow us to maintain a net debt-to-EBITDA ratio of approximately 1.5 times.
Some final details on guidance.
With respect to the impact of currency on sales growth, we expect currency to increase sales growth by approximately 3% in 2021 and be relatively neutral to sales growth in Q4.
In 2022, we would expect currency to decrease sales growth by approximately 1%.
In terms of adjusted EPS, currency will benefit growth by approximately 4% in 2021 and be a slight headwind to adjusted earnings per share growth in 2022.
We do not expect currency to impact adjusted earnings per share in the fourth quarter.
Let me start with some comments on our operating results.
Our Lab business had outstanding growth in the third quarter despite having more challenging comparisons than it faced in the first half of the year.
Almost all product lines and regions had very strong growth.
We expect good growth in the fourth quarter, but it won't be the same level we have seen year-to-date.
As we look at 2022, we expect the strong biopharma trends to continue to be favorable and expect other end markets to do well, but we won't benefit from catch-up demand segments like chemical that we benefited from this year.
We also expect a bit of headwind in our pipette business from lower COVID testing activity.
Overall, we believe we are well positioned to continue to capture growth and gain market share in our Laboratory business.
An additional nice development within our Lab business is that we obtained a $36 million grant from the U.S. Department of Defense to expand our pipette tip production in California.
We estimate that by the end of 2023, we will expand our global tip production by approximately 15% and the grant will also allow us to enhance manufacturing, automation and warehouse and logistics surrounding tips.
We are happy with this grant, which allows us to cost effectively increase tip capacity while at the same time, improving productivity.
Turning to our Industrial business.
Core Industrial did well in the third quarter as we are benefiting from some catch-up in demand and have been well positioned to benefit from increasing trends in automation and digitalization.
Core Industrial should have a solid fourth quarter.
We will face tougher comparisons in core Industrial in 2022, but expect to continue to drive market share gains overall.
Product Inspection grew 13% in the quarter.
Growth was especially strong in the Americas.
We expect good growth in the fourth quarter and we are cautiously optimistic about solid growth in 2022 as we should benefit from some pent-up investments from large packaged food customers and our strong product portfolio.
Finally, Food Retail declined 19% with pronounced declines in Americas and Asia and Rest of the World.
Our production was impacted by shortages of electronic components as these products use more standardized components that are also used in consumer electronic products.
We were also impacted by the timing of project activity.
We would expect Food Retail to also decline in the fourth quarter.
We are not forecasting much growth in 2022 as we continue to manage this business for profitability.
Now let me make some additional comments by geography.
Sales in Europe increased 10% in the quarter with very strong growth in Lab.
We would expect solid growth in Europe in 2022 against very good growth in 2021.
Americas increased 20% in the quarter with excellent growth in Lab, core Industrial and Product Inspection.
As mentioned earlier, Food Retail was down significantly in the Americas.
While we will face challenging comparisons in the Americas in 2022, we expect overall good growth.
Finally, Asia and the Rest of the World grew 16% in the quarter with outstanding growth in Laboratory and good growth in Product Inspection.
Core Industrial also did well.
China had good growth, particularly given the strong growth in the prior year.
We expect good growth in China in Q4 and in 2022, although it won't be at the same level we have seen year-to-date.
We are very strongly positioned in China, and the team is executing well.
One final comment on the business.
Service and Consumables performed well and were up 12% in the quarter.
We continue to be very pleased with the growth of -- in this important and profitable part of the business.
That concludes my comments on the business.
And now let me provide some context on our 2022 guidance.
We believe we are emerging from this pandemic as a stronger company and are further distancing ourselves from competition in several ways.
During the last two years, we have accelerated our digital transformation in sales and marketing.
We had already started on this path, but the disruption from COVID-19 allowed us to significantly accelerate our digital approach.
Our use of eDemos, our vast and expanded digital library of selling materials, further development of selling guides and greater utilization of telesales and telemarketing resources are clear differentiators for remote selling.
And while we expect our face-to-face customer interactions to continue to increase in 2022, these digital tools allow us to expand our customer reach in a cost-effective manner.
In addition to the digital gains in sales and marketing, we have also made great strides in sharpening our focus on the most attractive market segments, allowing us to accelerate market share gains.
Increasing sophistication in data analytics is fundamental to our ability to guide our sales force to the best growth opportunities.
We continue to provide what we refer to internally as Top K alerts.
These alerts provide tailored actionable information about potential sales opportunities, which our market organizations qualify and integrate into the territory planning and target setting.
We see the trend for greater use and sophistication of data analytics continuing in 2022 and beyond.
Our global service network and our ability to continue to service our customers during this period has led to steady increases in customer satisfaction.
Service keeps us close to customers, builds trust and the customer is much more likely to purchase additional products if they utilize our service offering.
We continue to develop service tailored specific to customer needs.
For example, we quickly developed a service tool for customers who utilize analytical balances and quality control to meet new requirements from the European pharmacopeia that goes into effect in January.
In addition, as software is becoming an integral part of our solutions, harmonized services for software are becoming increasingly important.
A new service offering supports our instrument control software LabX to enable customers to achieve consistent performance and meet regulatory compliance.
These are just two examples.
We have many more within our portfolio.
We believe service will continue to provide a good opportunity for growth and differentiation from our competitors, and we use the same data analytics approach to leverage service opportunities within our installed base.
New product development also continues to be core to our growth potential.
I am excited about the many launches that will take place over the coming year.
Our product pipeline continues to be very strong and product launches reinforce our technology leadership.
While most product and software development will continue to be done in-house, we will also complement this with small acquisitions like the one we completed in October.
We acquired a software company Scale Up Systems, which is the leading provider of scale-up and reaction modeling software for pharma and chemical customers.
It is a great addition to our AutoChem offering.
And we now have a comprehensive offering for process development and scale-up for the pharma and chemical industries.
Turning now to supply chain and margin initiatives.
As already mentioned, our supply chain team has shown tremendous agility in adapting to very dynamic market conditions and continuing to support customers.
There are risks and increasing inflationary pressures in the supply chain and transportation and logistics markets.
We have mitigation strategies in place to help offset and believe we can continue to manage effectively, but are cautious as conditions can change quickly.
Our pricing program and Stern Drive productivity initiatives have good traction and will help us to offset inflationary pressures that we will likely continue to face in the coming months.
I trust this provides some context to our guidance and shows the confidence we have in our ability to continue to capture growth, gain market share, and deliver solid earnings growth in 2021 and in 2022 and beyond.
 Assistant:

Chosen response:
compname posts q3 earnings per share of $8.71.
q3 adjusted non-gaap earnings per share $8.72.
q3 earnings per share $8.71.
compared with prior year, total reported gaap sales increased 18% to $952.0 million.
anticipates local currency sales growth for q4 of 2021 will be about 8%.
sees q4 adjusted earnings per share to be $10.00 to $10.05, a growth rate of 8% to 9%.
anticipates local currency sales growth in 2022 will be about 6%.
2022 sales growth of about 6% is expected to result in adjusted earnings per share in range of $37.25 to $37.65.


Prompt:
Human: Those and any other projections represent the current opinions of management, which are subject to change at any time, and we assume no obligation to update them.
Home buying activity remained solid during the third quarter.
We continued to experience elevated demand and despite the return of some seasonality in the quarter, monthly demand has improved sequentially from August to September and October.
The macro drivers for market demand continued to be what we've experienced all of '21: limited housing supply, still extremely low interest rates and higher home buying activity from millennials and baby boomers who are experiencing life events associated with changes in housing needs.
New and existing resale housing supply remained tight, especially for affordable entry-level homes.
Mortgage interest rates are still very attractive as entry-level buyers are typically focused on monthly payment.
The low interest rates continued to offset higher ASPS and we are seeing elevated demand persist.
And lastly, we continued to see household formation for millennials and downsizing for baby boomers, both of which create demand for the type of housing that we build.
We believe these underlying demographic factors will not fundamentally change in the near future, and although they may be bumpy if interest rates move materially within a short period of time.
This quarter, we leaned on our deep vendor relations to navigate ongoing industrywide supply chain challenges.
These strategic supply side partnerships and our operating model focus on spec homes and limited SKUs, allowed us to deliver 3,112 homes, which set the company record for the highest third quarter of home closings.
We also set two additional quarterly company records: we generated the highest quarterly home closing gross margin of 29.7% in company history as a result of pricing power, more than offsetting the elevated lumber and other commodity costs; and our quarterly diluted earnings per share of $5.25 was the highest in our company's history.
We grew community count sequentially again this quarter as well as year-over-year, overcoming municipal delays and supply shortages and land development as well.
As of September 30, 2021, we had 236 ending communities and remain confident in our ability to achieve our goal of 300 communities by mid-2022.
On slide four, I want to touch on the latest milestones we achieved this quarter.
The EPA recognized Meritage as a recipient of the 2021 Indoor airPLUS Leader Award.
Our advanced air filtration, ventilation and HVAC as well as spray foam insulation helped minimize the indoor exposure to airborne pollutants and contaminants.
So it's great to be recognized for these accomplishments nationally.
In terms of innovation, we launched self-guided tours in select locations to address customers' changing preferences when it comes to the home buying process.
Self-guided tours allow buyers to sign up for a no contact tour of our model homes on our website and then tour the home after-hours at their convenience.
We expect to have this program rolled out throughout the country in the coming months.
Additionally, we expanded our offering of digital financial services, so Meritage customers can now receive guaranteed on-demand homeowners' insurance quotes on their selected home on our website.
From an ESG perspective, we memorialized our human rights policy, which can now be found on our Investor Relations website, and stay tuned as we will have more to share on ESG -- on the ESG front before year-end.
Overall, it was another successful quarter, where our teams and supplier relationships helped Meritage deliver 3,112 homes.
Affordability was one of the cornerstones of our strategic shift in 2016, and we continue to be focused on today.
From land acquisition to operations, we look to maintain our entry-level products as an affordable home offering in the new home marketplace.
That being said, the sustained favorable pricing environment stemming from the elevated demand for our products over the past few quarters and the tight housing supply conditions led to ASP increase on orders, backlog and closings that are masking our ongoing product mix shift toward entry level.
Although order ASP grew 12% year-over-year, we experienced a deceleration in ASP growth sequentially this quarter, and the new product we'll be bringing on in 2022 and 2023 will allow us to continue repositioning our future communities down the ASP band.
During the third quarter, we continued metering our orders pace to align with the current production environment and supply chain challenges.
Even still, our average absorption pace remained elevated at 5.0 per month.
We were still typically able to sell inventory shortly after releasing it, but we are only releasing homes once we have visibility into our cost structure and confidence about closing times, which is a bit late in the process today due to supply constraints.
It is unclear when the current supply challenges will work themselves out.
We currently have no insight to suggest that it's on the near term, and therefore, we are continuing to model elongated cycle times for the foreseeable future.
Now turning to slide five.
Our third quarter closings totaled 3,112 homes.
They were up 4% over the prior year.
Entry-level comprised 78% of closings, up from 63% in the prior year.
For us, Q3 of last year was the quarterly peak of the surging housing demand since the start of COVID-19, resulting in our all-time highest third quarter absorption pace of 5.8 sales per month.
In 2021, we have been metering orders due to the well-documented supply chain issues.
As a result, the total orders of 3,441 for the quarter of 2021 reflected a decrease of 11% year-over-year, driven by a 15% decline in average absorption pace that was partially offset by a 5% increase in average communities.
Despite metering, our third quarter 2021 absorption pace currently remained elevated at five sales per month.
Entry-level comprised over 80% of quarterly orders, up from nearly 70% in the third quarter of last year.
Entry-level also represented 77% of our average active communities compared to 60% a year ago.
Moving to the regional level trends on slide six.
Our central region, which is comprised of Texas, led in terms of average absorption pace with 5.4 sales per month this quarter, which was 14% lower than prior year.
This decline was partially offset by a 5% greater average active communities, which together contributed to a 10% decline in order volume.
Third quarter order ASP increased 20% year-over-year given solid market conditions in Texas.
Our east region with the highest entry-level product mix with -- representing 80% of the average community was the only region to generate year-over-year growth in order volume of 3% despite metering as a result of an 8% increase in average active communities in the third quarter, which offset a 4% decrease in average absorption pace.
South Carolina opened several new communities later in the third quarter, which resulted in a 3.7 average absorption pace in the third quarter.
This was our lowest absorption pace in the company's quarter, despite South Carolina's orders increasing 11% over prior year.
Given healthy demand in the state, we anticipate the order pace will increase in the near future.
The west region's third quarter 2021 order volume had our largest decline at 24% year-over-year, mainly due to 25% lower average absorption pace to 4.9 per month.
Specifically, Arizona reduced its absorption pace from 6.5 per month in Q3 of 2020 to 4.8 per month this quarter as a result of supply chain challenges.
Colorado remained the lowest percentage of entry-level mix at 48% of its average active communities this quarter.
During the third quarter, California had the highest average absorption pace of all our states at 5.6 per month.
Given 100% of the average active communities are entry-level there, we continue to focus on affordability, particularly as it's our most expensive geography.
The third quarter order ASP increased 15% year-over-year in the west region.
Arizona and Colorado had the largest increase in order ASP in all our states at 26%.
So we are monitoring these markets to ensure we wire ASP to local market condition and continue to introduce products that is more affordable.
Overall, demand remained healthy in all of our markets.
Turning to slide seven.
Of our home closings this quarter, 74% came from previously started spec inventory, which increased from 71% a year ago.
We ended the quarter with nearly 2,100 spec homes in inventory or an average of 11.7 homes per community as we push to get homes in the ground.
This was an important improvement from approximately 2,300 specs or an average of 11.2 in the third quarter of 2020.
At September 30, 2021, less than 5% of the total specs were completed versus our typical run rate of 1/3.
Having available spec is crucial to our business model, but even as we started over 3,400 homes this quarter, maintaining our goal of a four to six-month supply of entry-level spec has been challenging.
As we have been ramping up our new communities, we are working very hard to get enough spec started in all of them.
We didn't accomplish all that we wanted in Q3, but we expect to accelerate our pace in Q4.
We ended the quarter with a backlog of over 1,500 units as our conversion rate declined from 68% last year to 57% this year due to supply delays.
Although we believe our spec strategy and entry-level focus will drive the conversion up in the long-term when the supply chain normalizes, we expect current supply issues and the resulting slower backlog conversions to persist at least for the next couple of quarters.
During the third quarter, bottlenecks abound in various areas along supply chain, some on the front-end and others on the back-end, leading to an additional two weeks or so of construction cycle times sequentially from Q2 to Q3 this year.
In particular, windows and truss delays impacted our operations throughout the country.
As Steve mentioned, our operating structure and strong vendor partnerships have afforded us some advantage as we navigate these disruptions.
We reengineered our product a few years ago which limit our SKU count and planned libraries, allowing us to order material in bulk in advance.
We have also heavily invested in relationships with our vendors, which we have strengthened during the last couple of quarters.
We are maintaining constant communication and remain flexible to substitute or upgrade our SKUs or find alternative supplies as necessary.
We have been benefiting from our 100% spec building strategy for entry-level homes.
Pre-starting homes enable us to maintain a steady cadence of homebuilding construction and makes us a preferred partner to our trades This transparency and scheduling visibility as well as no structural changes makes our products simpler to build.
At times like these, we appreciate that we can leverage our spec building strategy and our operating model to continue to deliver our backlogs and get more homes started.
The 10% year-over-year home closing revenue growth to $1.3 billion in the third quarter of 2021 was the result of the 4% increase in home closings and 7% higher closing ASP despite the mix shift to more entry-level products.
The 820 bp improvement in third quarter 2021 home closing gross margin to 29.7% from 21.5% a year ago was driven by the price increases over the past several quarters as well as the leveraging of our fixed costs on greater home closing revenue.
The pricing power more than offset the increased cost of lumber and other commodities.
Today's more normal lumber cost will start to be reflected in our gross margin in early 2022, but will be partially offset by other increased commodity costs as well as the additional overhead burden in gross margin from our community count ramp up.
Once we're fully selling and closing from all 300 communities in 2022, we will be able to leverage the higher fixed overhead costs across the corresponding higher revenue.
We are also continuing to monitor the recent increases in lumber and the impact they may have on our 2022 gross margin.
Our SG&A leverage of 9.3% remained better than our 10% expectation and continued to benefit from both greater closing volumes and higher ASPs.
The 80 bps year-over-year improvement and SG&A leverage from 10.1% in the third quarter of 2020 also included lower brokerage commissions in 2021 and cost savings from technology innovations that particularly benefited our sales and marketing efforts.
We will continue to find ways to incorporate technology into our operations and expect to be able to better leverage our total SG&A on higher closing volumes in 2022 as well.
The third quarter 2021's effective income tax rate was 23.3% compared to 19.5% in the prior year.
Both years reflect reduced rates primarily from eligible tax credit on qualifying energy-efficient homes closed under the 2019 Taxpayer Certainty and Disaster Tax Relief Act.
Increased profit in states with higher tax rates and reduced benefit of the energy tax credit due to greater overall profitability for the company both contributed to the higher tax rate in 2021.
Higher closing volume, pricing power, expanded gross margin and the improved overhead leverage that we achieved this quarter all led to the 85% year-over-year increase in third quarter diluted earnings per share of $5.25.
To highlight a few year-to-date results through September 30, 2021, on a year-over-year basis, we generated an 85% increase in net earnings, orders decreased 1%, closing were up 15%, we had a 640 bp expansion of our home closing gross margin to 27.4%, and SG&A as a percentage of home closing revenue improved 90 bps to 9.4%.
As seen on slide nine, our balance sheet reflects ample liquidity and flexibility for further growth.
At September 30, 2021, our cash balance was $562 million compared to $746 million at December 30, 2020.
It was down just $184 million despite an $815 million increase in real estate assets over the same time.
Our net debt-to-cap ratio of 17.5% at September 30, 2021, remained low.
We still target a maximum ceiling of net debt-to-cap in the high 20s, which is in line with the quick asset turn we expect from our entry-level and first move-up offerings.
Our capital usage priority is still focused on growth.
The bulk of our cash will be spent on land acquisition and development and to get specs in the ground in our new communities.
We routinely repurchase shares to offset new grants and keep our dilution neutral.
As demonstrated in the third quarter, we will also continue to opportunistically repurchase incremental shares.
We repurchased over 95,000 shares during the quarter for $9.5 million.
Since the end of the quarter, we repurchased an additional nearly 244,000 shares for another $24 million.
Today, over $153 million remains in our share repurchase authorization program.
We expect cash generation to accrete once our 300 communities are operating and delivering homes in the back half of 2022.
On to slide 10.
Our land book increased 46% from September 30, 2020.
With nearly 70,000 lots under control at the end of this quarter, we had 5.4 years supply of lots based on trailing 12-month closings, which was higher than our target range of four to five-year supply of lots under control.
However, looking forward to the closing volume that we would generate once our 300 communities are actively selling in the middle of next year, the ratio drops back to our four to five year objective.
We secured about 9,800 net new lots this quarter compared to approximately 9,000 in the same quarter of 2020.
These new lots will translate to an estimated 45 net new communities, of which 87% are entry-level with an average community size of 196 lots.
Despite the additional demand for land from all builders today, we were able to meet our internal land acquisition goal while making sure our projects meet our underwriting hurdles, modeling a normalized absorption pace and a higher incentive environment.
Our understanding of who we are has sharpened as has our confidence level in the type of projects we bid on.
By knowing the cost of the home and increasing our land development expertise, we feel comfortable bidding on land parcels that others might not, from acquisition of larger lot sizes to those in secondary submarkets that best align with our entry-level products and projects with complexity in land development.
In fact, our year-to-date finished lot cost for newly controlled lots is right around $75,000 a lot.
During the third quarter of 2021, we continued to make excellent progress in our land development despite municipal delays and supply chain constraints, and we opened 40 new communities.
We grew our community count by 10 net communities from 226 at the start of the quarter to 236 actively selling communities at the end of the quarter.
On a year-over-year basis, we were also up 16% or 32 net communities from 204 at September 30, 2020.
We spent $526 million on land acquisition and development this quarter, which was 76% higher than last year's Q3 spending of nearly $300 million.
We continue to expect our annual land acquisition and development to be about $2 billion in 2021 and thereafter.
To preserve liquidity, we use options for staggered purchasing terms where financially feasible.
About 64% of our total lot inventory at September 30, 2021, was owned and 36% was optioned compared to 58% owned and 42% option at September 30, 2020.
Finally, I'll direct you to slide 11.
With limited visibility into when the supply chain will loosen, we continue to forecast supply chain delays and longer cycle times for the rest of 2021 and into 2022.
With more than 5,800 units in backlog and another almost 2,800 specs in the ground today, we are projecting 12,600 to 12,900 home closings for the full year of 2021, which we anticipate will generate $5.05 billion to $5.15 billion in home closing revenue.
We are lifting our full year 2021 guidance on home closing gross margin, which we now anticipate will be between 27.5% to 27.75%.
With an increase to the projected effective tax rate to 23%, we expect diluted earnings per share to be in the range of $18.75 to $19.40 for 2021, a year-over-year increase of over 70%.
For year-end 2021, we also anticipate around 250 active communities.
We are reiterating our commitment to 300 communities by June 2022, with around $2 billion of land acquisition and development spend projected for next year as well.
For 2022, we anticipate double-digit growth in unit and home closing revenue.
As I previously noted, we expect gross margins in '22 to remain elevated, although supply chain issues, commodity costs and recent lumber cost increases may all cap further upside.
With the higher volume of communities operating next year, we anticipate full year 2022 SG&A rate will drop below our current SG&A rate of the low 9s.
To summarize on slide 12.
We have capitalized on the ongoing favorable market conditions by having available supply of entry-level and first move-up homes that are attractive to both millennials and baby boomers, the largest home buying demographic today.
The continued significant investment in land acquisition and development as well as the meaningful growth in community count over the past two quarters to 236 communities as of September 30 demonstrates our ability to attain our strategic goal of 300 communities by mid-2022.
Our operating model, strong execution, growing community count and focus on the entry-level and first move-up markets have all led to the company hitting our closings, achieving an absorption pace of five per month while metering the order pace, growing community count again and obtaining industry-leading gross margins this quarter.
Additionally, these attributes position us well to continue expanding our market share, leveraging our operating costs and driving profitability over the next several years.
 Assistant:

Chosen response:
compname reports third quarter 2021 results, including record gross margin of 29.7% and diluted earnings per share of $5.25.
q3 earnings per share $5.25.
projecting 12,600 to 12,900 home closings for full year 2021.
expect diluted earnings per share to be in range of $18.75-19.40 for 2021.
in quarter delivered 3,112 homes and produced a 10% year-over-year increase in home closing revenue to $1.3 billion.


Prompt:
Human: I'm pleased to be with you today on my first earnings call as chief executive officer.
Today's remarks also include certain non-GAAP financial measures.
With that said, let's turn to our fiscal 2022 first quarter results.
We are pleased with our results for the quarter, which exceeded our expectations.
Performance at our Australian resorts during the first quarter was negatively impacted by COVID-19-related limitations and restrictions, including stay-at-home orders and periodic resort closures throughout the quarter.
We were able to reopen Australian resorts for the last few weeks of the ski season, resulting in favorability relative to our expectations.
Our Tahoe resorts were negatively impacted by the Caldor fire, which resulted in the early closure of our summer operations in the region.
Aside from these unique challenges, we continued to see strong demand throughout the quarter, which we believe highlights our guests continued desire for outdoor experiences.
Turning now to our 2021-2022 North American season pass sales and early season indicators.
Pass product sales for the North American ski season increased approximately 47% in units and approximately 21% in sales dollars through December 5, 2021 as compared to the period in the prior year through December 6, 2020, without deducting for the value of any redeemed credits provided to certain North American pass holders in the prior period.
Pass product sales through December 5, 2021 for the 2021-2022 North American ski season increased approximately 76% in units and approximately 45% in sales dollars as compared to the sales for the 2019-2020 North American ski season through December 8, 2019, with pass product sales adjusted to include peak resorts pass sales in both periods.
Pass product sales are adjusted to eliminate the impact of foreign currency by applying an exchange rate of $0.78 between the Canadian dollar and the U.S. dollar in all periods for Whistler Blackcomb pass sales.
We are very pleased with the results of our season pass sales, which continue to demonstrate the strength of our data analytics capabilities and the compelling value proposition of our pass products.
Driven in part by the 20% price reduction in passes for the 2021-2022 season, we expect that the total number of guests on all advanced commitment products this year will exceed 2.1 million, including all pass products for our North American and Australian resorts, representing an increase of approximately 700,000 pass holders from last year and an increase of approximately 900,000 pass holders from two years ago.
For the full pass sales season, we saw a strong unit growth from renewing pass holders and significantly stronger unit growth from new pass holders, which includes guests in our database who previously purchased lift tickets or passes but did not buy a pass in the previous season, as well as guests who are completely new to our database.
Our most significant unit growth was from our destination markets, particularly in the Northeast.
And we also had very strong growth across all of our local markets.
We have focused on growing our destination pass holder base as we have expanded our network.
And over the course of the last two years, we have nearly doubled the number of advanced commitment guests from those markets.
Our absolute unit growth was led by our core Epic Pass and Epic Local Pass products.
And we also saw very strong growth from our Epic Day Pass products, including strength in our new Epic Day Pass limited products, which offer a lower price point for guests not planning to ski at select resorts as we continue to refine our product offering to help move more guests into advanced commitment products.
Compared to the period ended December 6, 2020, effective pass price decreased 17% despite the 20% price decrease we implemented this year and the significant growth of our lower-priced Epic Day Pass products, which continue to represent an increasing portion of our total advance commitment product sales.
We significantly outperformed our original expectations for pass sales relative to the estimates we provided when we announced the 20% price decrease in our passes, which was driven by the significant increase in new pass holders and guests trading up to higher-value passes.
We are encouraged by the indicators of demand heading into the 2021-2022 North American ski season with strong leisure travel demand indicators.
Our strong pass sales provide visibility into the robust demand for guests to visit our resorts in the year ahead.
resorts for the upcoming season are trending ahead of pre-COVID-19 levels for the 2019-2020 season, while lodging bookings at Whistler Blackcomb are lagging 2019-2020 bookings, which we anticipated due to the impact of travel restrictions on international visitors to the resort.
Based on historical averages, around half of the bookings for the winter season have been made by this time.
So, it is important to note that our lodging bookings represent a small portion of the overall lodging inventory around our resorts.
Our early season conditions have been challenging across the network, resulting in delayed openings and limited opening to open terrain.
Many of our resorts are very recently experiencing snowfall and colder temperatures that have been more conducive to snowmaking, which we expect will allow us to expand our open terrain soon.
Despite the challenging early season condition, the success of our advanced commitment strategy allows us to secure a significant amount of our demand and revenue ahead of the season, which creates significant stability for our business.
We remain dedicated to continuing to improve the guest experience, reduce wait times, and communicate transparently with guests, especially given the excitement and demand for travel this coming season.
As announced on November 16, we have taken additional steps to prioritize the on-mountain experience of pass holders this season, including lift ticket sales during the three most popular holiday periods; deploying a new operating plan, which includes significantly improving how efficiently we load lifts and gondolas; launching a new daily forecast of lift line wait times in the EpicMix app; and investing in new lifts and expanded terrain to reduce wait times in order to ensure skiers and riders have an experience of a lifetime at our resorts this season.
In Colorado, we completed a 250-acre lift-served terrain expansion in the signature McCoy Park area of Beaver Creek, further differentiating the resort's high-end family focused experience.
We also added a new four-person high-speed lift at Breckenridge to serve the popular Peak 7, replaced the Peru lift at Keystone with a six-person high-speed chairlift, and replaced the Peachtree lift at Crested Butte with a new three-person fixed-grip lift.
At Okemo, we completed a transformational investment, including upgrading the Quantum lift to replace the Green Ridge three-person fixed-script chairlift.
In addition to these investments that will greatly improve uplift capacity, we have invested in companywide technology enhancements, including a number of upgrades to bring a best-in-class approach to how we service our guests through our customer service channels.
As Kirsten mentioned, we are pleased with our first fiscal quarter performance.
Net loss attributable to Vail Resorts was $139.3 million for the first quarter of fiscal 2022, compared to a net loss attributable to Vail Resorts of $153.8 million in the same period in the prior year.
Resort reported EBITDA was a loss of $108.4 million in the first fiscal quarter, which compares to resort reported EBITDA loss of $94.8 million in the same period in the prior year.
Both periods continued to be negatively impacted by COVID-19 and related limitations and restrictions.
Additionally, the prior-year period included the recognition of $15.4 million of lift revenue associated with the expiration of the credit offers that were made to 2019-2020 pass product holders in connection with COVID-19-related closures.
We remain focused on our disciplined approach to capital allocation.
Our liquidity position remains strong, and we are confident in the free cash flow generation and stability of our business model.
Our total cash and revolver availability as of October 31, 2021 was approximately $2.1 billion with $1.5 billion of cash on hand, $417 million of revolver availability under the Vail Holdings Credit Agreement, and $220 million of revolver availability under the Whistler Blackcomb Credit Agreement.
As of October 31, 2021, our net debt was 2.6 times trailing 12 months total reported EBITDA, and we exited the temporary waiver period under the Vail Holdings Credit Agreement, effective October 31, 2021.
I'm also pleased to announce that our board of directors has declared a cash dividend on Vail Resorts common stock.
The dividend will be $0.88 per share of common stock and will be payable on January 11, 2022 to shareholders of record on December 28, 2021.
This dividend payment equates to 50% of pre-pandemic levels, consistent with our prior quarter cash dividend, and reflects our continued confidence in the strong free cash flow generation and stability of our business model despite the ongoing risks associated with COVID-19.
Our board of directors will continue to closely monitor the economic and public health outlook on a quarterly basis to assess the level of our quarterly dividend going forward.
Moving now to our fiscal 2022 outlook.
Our guidance includes an estimated $2 million of acquisition-related expenses specific to Seven Springs but does not include any estimate for the closing costs, operating results, or integration expense associated with the Seven Springs acquisition, which is expected to close later this winter.
We are encouraged by our very strong pass sales heading into the season, our favorable first quarter results, and the strong demand we are seeing across leisure travel and in our U.S. booking trends.
It's important to note that our growth in pass sales is expected to be partially offset by reduced lift ticket sales as we continue to successfully convert guests from lift tickets to pass products.
Additionally, we anticipate modest offsets from limiting lift ticket sales during the three most popular holiday periods across our North American resorts to prioritize access for pass holders.
Early season conditions have been challenging, resulting in delayed openings and limited terrain across many of our resorts, and we anticipate that these conditions will have a negative impact on our results leading up to the holidays.
But the North American ski season has just begun with our primary earnings period still in front of us.
There continues to be uncertainty regarding the ultimate impact of COVID-19 on our business results in fiscal year 2022, including any response to changing COVID-19 guidance and regulations by the various governmental bodies that regulate our operations and resort communities, as well as changes in travel and consumer behavior resulting from COVID-19.
Our guidance for fiscal year 2022 assumes normal weather conditions -- excuse me, assumes normal weather and conditions from the holiday period onward, and no impact from incremental travel or operating restrictions associated with COVID-19 that could negatively impact our results.
The company revised its segment reporting to move certain dining and golf operations from the lodging segment to the mountain segment, consistent with how those operations are managed.
This shift has no impact on expected net income attributable to Vail Resorts or resort reported EBITDA.
We were thrilled to share our announcement yesterday that we entered into an agreement to acquire Seven Springs Mountain Resort, Hidden Valley Ski Resort, and Laurel Mountain ski area in the Pittsburgh, Pennsylvania area.
Seven Springs is a leading regional destination in western Pennsylvania, serving guests in Pittsburgh, Cleveland, Washington, D.C., and Baltimore.
These resorts create yet another opportunity for us to bring skiers and riders into the Vail Resorts network, providing guests with the opportunity to ski close to home and at world-class destination resorts on the same pass product.
We will be acquiring Seven Springs for a purchase price of approximately $125 million, subject to certain adjustments.
We estimate that Seven Springs will generate incremental annual EBITDA in excess of $15 million in the company's fiscal year ending July 31, 2023, which includes approximately $5 million for the 418-room Slopeside Hotel and its associated conference facilities and lodging operations.
The ongoing capital expenditures associated with the Seven Springs operations are expected to be approximately $3 million per year.
We plan to add access to the three resorts to our Epic Pass products for the 2022-2023 North American ski season.
The transaction is expected to close this winter.
As announced in September, we are excited to be proceeding with our ambitious capital investment plan for calendar year 2022 of approximately $318 million to $328 million across our resorts to significantly increase lift capacity and enhance the guest experience as we drive increased loyalty from our guests and continuously improve the value proposition of our advanced commitment products.
The plan includes the installation of 21 new or replacement lifts across 14 of our resorts and a transformational lift-served terrain expansion at Keystone.
The updated lift upgrade plan includes two incremental replacement lifts at Jack Frost and Big Boulder in Pennsylvania to provide increased capacity and improved guest experience at the resorts.
All of the projects in the plan are subject to regulatory approvals.
In addition to these lift upgrade and terrain expansion projects, we are excited to announce additional details on our investment plans not previously highlighted in our September announcement.
We continue to remain highly focused on developing and leveraging our data-driven approach to marketing and operating the business.
Our planned investments include networkwide scalable technology that will enhance our analytics, e-commerce, and guest engagement tools to improve our ability to target our guest outreach, personalized messages, and improve conversion.
We will also be investing in broader self-service capabilities to improve guest online experience and engagement.
In addition, we are excited to announce a $3.6 million capital investment plan in Vail Resorts' Commitment to Zero initiative, including targeted investments in high-efficiency snowmaking, heating and cooling infrastructure, and lighting to further improve our energy efficiency and make meaningful progress toward our 2030 goal.
We expect our capital plan for calendar 2022 to be approximately $315 million to $325 million, excluding approximately $3 million of one-time items associated with real-estate-related capital, and excluding any capital expenditures associated with the Seven Springs acquisition, which remains subject to closing.
This is approximately $150 million above our typical annual capital plan based on inflation and previous additions for acquisitions and includes approximately $20 million of incremental spending to complete the one-time capital plans associated with the Peak Resorts and Triple Peaks acquisitions.
Including one-time real-estate-related capital, our total capital plan is expected to be approximately $318 million to $328 million.
We will be providing further detail on our calendar year 2022 capital plan in March 2022.
I am honored and excited to lead this company and culture that I love so much.
I am especially grateful to the more than 55,000 employees who make Vail Resorts so special.
Our attention to service and our commitment to delivering an outstanding guest experience across our network continues to be the focus of our company.
I am also incredibly proud of our company's commitment to inclusivity, environmental sustainability, and supporting our resort communities, all of which are highlighted in our most recent EpicPromise progress report that is available on our website.
We are excited to have you join the Vail Resorts family, and we look forward to welcoming you to our network of resorts later this winter when the transaction closes.
We hope that you all enjoy a fun and safe season ahead.
At this time, Michael and I will be happy to answer questions.
Operator, we are ready to take questions.
 Assistant:

Chosen response: vail resorts - resort reported ebitda loss $108.4 million for q1 2022 versus resort reported ebitda loss of $94.8 million for q1 2021.