Prompt:
Human: Both of the documents are available at Old Republic's website, which is www.
Risks associated with these statements can be found in the Company's latest SEC filings.
Let us first reiterate our continued best wishes to all of you, your families, friends, co-workers as we all face the challenges related to the COVID-19 pandemic.
As we mentioned in the release, while some of our associates have begun returning to our office, the majority of Old Republic's more than 9,000 associates continue to work remotely, ensuring that our services are delivered uninterrupted to our customers, agents and brokers and all in our remote work efforts have gone extremely well.
Given the challenges emanating from COVID-19, we're pleased with the results we posted for this quarter, particularly the very strong Title Insurance results and the recovery in shareholders equity since the end of the first quarter.
As we noted could be the case in our first quarter release, the effect of COVID-19 and the associated governmental responses have indeed had a negative effect on the top line in the General Insurance Group in the second quarter.
However, our Title Insurance Group set yet another production record, again demonstrating that our strategic diversification between General Insurance and Title Insurance works very well.
So at this point, I'll turn the discussion over to Karl Mueller, to discuss our overall consolidated financial results and also our small RFIG run-off business.
And then he'll turn things back to me to discuss the General Insurance segment, followed by Carolyn Monroe, who will discuss the Title Insurance segment and after that I'll make a few closing comments before we open up the discussion to Q&A.
So with that, Karl, please take it away.
Earlier today, we announced second quarter net income excluding all investment gains and losses of $124 million or $0.42 per share and that's down approximately 7% from last year.
For the first six months of 2020, earnings per share was $0.89, up nearly 4%.
Consolidated net premiums and fees earned grew by 1.5 percentage points during the second quarter and 5.7% for the first half of this year.
Our Title Insurance Group as Craig said continues to set the pace with an increase of almost 10% for the quarter and 16% year-to-date.
General Insurance recorded relatively modest decline of 3.8% and 0.6% for the quarter and the first six months of the year, as the pandemic further impacted economic activity here in the US.
Net premiums earned in our mortgage run-off business continued to decrease as expected and really there are no longer a significant contributor to the consolidated total.
Net investment income dropped by 3.8% for the quarter and 1% year-to-date, and that's mostly caused by lower yields, which offset the generally higher invested asset balances.
Turning to underwriting results, this quarter's consolidated combined ratio ticked upward by less than 1 percentage point to 96% from 95.2% last year.
For this year's first six months, the combined ratio was 95.4% and that was largely unchanged from the same period a year ago.
Consistent with recent trends, the claim ratios moved lower and the expense ratio higher and that's due mainly to a shift in the mix of business toward the Title business, making up a greater percentage of total.
And as we've pointed out in the past, Title carries lower loss and higher expense ratio and that's influencing the consolidated total.
Claim reserves on a consolidated basis dropped or developed favorably for the current quarter and year-to-date periods, reducing the reported claim ratios by 0.4 percentage points and 0.6 percentage points.
Prior year development for the comparable 2019 period was again favorable by 0.2 percentage points and 0.9 percentage points.
At June 30th, the allocation of the investment portfolio remained relatively consistent, roughly 75% is invested in bonds and short-term investments, with the remaining 25% directed toward equity securities.
Our primary investment objective is to create a steady and growing stream of interest and dividend income and in that light, we do not anticipate any material changes to our investment strategy.
Turning to -- during this year's first quarter, disruption to the financial markets resulted in a 24% or $963 million decline in the value of our equity portfolio.
During the second quarter, the financial markets improved considerably resulting in a $354 million recovery in the valuation of our equities portfolio.
And I would also add that as of yesterday's close, the portfolio had rebounded by an additional $126 million on top of the $354 million.
Old Republic's book value per share increased from $17.29 at March 31st to $19.68 at the end of June, driven both by operating income and increases in the fair value of the investment portfolio.
Book value is now up slightly for the year after consideration of the regular cash dividends paid year-to-date, which now generate nearly a 5% yield.
In fact 2020 marks the 79th year of uninterrupted regular cash dividends and the 39th consecutive year of increasing dividends.
So now let me turn briefly and discuss our run-off mortgage insurance business.
As previously noted, we continue to monitor the impact of unemployment levels along with the effects of government loan, forbearance programs on reported delinquencies.
At the end of the first quarter, we cautioned that these factors along with the rate at which the US economy recovers could affect future claims experience and potentially slow the return of capital from the run-off business.
During the second quarter, we did actually experience an increase in reported delinquencies.
A significant portion of these still reported almost 41% of total delinquencies outstanding at June.
Our loans in forbearance and our experience with prior forbearance programs suggest that these loans will have significantly lower ultimate claim rates.
Therefore, they have been segregated and reserved for separately.
We have also pre-emptively increased the frequency factors on early stage delinquencies for normal loan defaults and what I mean by that loans that are not in forbearance and we've done so in consideration of the current economic environment.
So in combination, these additional reserves resulted in the $5 million pre-tax operating loss and escalated claim ratios that were reported.
So overall, we believe this was a very good quarter.
And there are number of positives to build upon for the future of Old Republic.
So as the release indicates, compared to the second quarter, General Insurance saw quarter-over-quarter operating revenue decreased by 3.6% and quarter-over-quarter pre-tax operating income decreased by 1.8%.
For the General Insurance Group, quarter-over-quarter combined ratio, we saw that it rose slightly to 98.4% from 98.1%, while the expense ratio remained very steady.
As shown in the financial supplement, net premiums earned in commercial auto decreased by 2.5% quarter-over-quarter, attributable to a decline in the exposure base resulting from the economic downturn, along with tighter risk selection criteria, offset by the positive effect of rate increases that have continued at a pace in the percentages in the lower teens.
Claims frequency has decreased significantly for commercial auto, again attributable to the economic downturn, but this was offset by severity that continued to increase.
We believe that comes from higher speeds as a result -- as a result of less congestion on the highways and also continued effect of social inflation on settlements.
Continuing with financial supplement, workers' compensation experienced a 14.3% decrease.
Net premiums earned quarter-over-quarter here too attributable to decline in exposure base resulting from the economic downturn.
And on this line, that's also further exacerbated by the effect of rate decreases that continued in the low single digits for workers' compensation.
Aside from COVID-19 related claims, claim frequency here too decreased, again attributable to government and businesses and their responses to the COVID-19 pandemic and of course the impact on the overall economy.
Turning to the line of coverage claim ratios in the financial supplement, our second quarter commercial auto claim ratio increased to 83.4% compared with 79.6% in the same period of 2019.
So our work on this line of coverage continues with necessary rate increases and stricter risk selection criteria to bring that claim ratio back in line with our target in the low 70s.
Turning to the workers' compensation claim ratio, the second quarter came in at 65.7%, compared to 69.3% in the second quarter of 2019.
As we discussed following the first quarter, it's important to remember that more than 90% of our COVID-19 workers' compensation claims emanate from loss-sensitive business such as large deductibles.
And furthermore, greater than 90% of the COVID-19 claims that we see in workers' compensation are mild in nature, with very low claim payments.
And ultimately less than 1% of those workers' comp claims are severe and less than 1% result in a fatality.
So, therefore based on our current analysis, we are confident in our current accident year, loss ratio selection for workers' compensation and we're confident that they're adequate, especially taking into consideration the loss sensitive nature of our business, the reduction in frequency we spoke about and the very high proportion of mild cases for COVID-19 claims.
For commercial auto workers' comp, general liability combined given that we usually provide these coverages together to our customers, we like to look at it that way as well and quarter-over-quarter that claim ratio came in at 74.6% compared to 75.3% last year.
Still looking at the financial supplement, the remainder of our other line of coverage claim ratios are generally within our targets and we feel very good about those.
So for General Insurance, the second half of 2020 will remain challenging from a top line perspective no doubt, but we will continue to seek the appropriate price for our products and continue with our long-term focus.
So on that note, I'll turn the discussion over to Carolyn for her comments on Title Insurance.
Carolyn along with her team continue to do a remarkable job, keeping our Title operations executing at an extremely high level.
So, Carolyn, please take it from here.
As the trials of COVID-19 continued in the second quarter, our Title employees continue to face the challenges head on effectively serving the needs of agents and customers.
We have transitioned a portion of our workforce back to their office.
So we are maintaining our nationwide work-from-home capabilities.
Our high standard of service commitment and execution remain regardless of the location of our employees.
In our first quarter earnings call, we reported that our owned digital closing provider, Pavaso had adjusted its platform to allow our agents and offices to be able to offer electronic signing products that were key to facilitating real estate transactions in the manner predicated in many of the emergency orders implemented by state government.
Prior to the COVID-19 pandemic, the real estate industry had not committed to adopting the digital closing models.
Based on need and then following regulations, there has been a dramatic increase in this activity.
From a national perspective, these electronic closings are relatively small number of the overall transactions.
However, as a result of the emerging interest to continue these methodologies, we have accelerated the development and roll out of our digital close tools.
We also continue to evaluate multiple products that will augment automation in the Title Production segment.
All-time second quarter and mid-year highs were set for both underwriting revenue and operation profit.
For the second quarter, total premium and fee revenue was up 9.9% and up 16.4% year-to-date.
Our pre-tax operating income of $65.4 million for the quarter, compared to $60.2 million in last year's second quarter was an increase of $5.2 million or 8.6%.
Year-to-date, pre-tax operating of $108.7 million compared to $80.8 million in the prior year-to-date period and the increase of $27.9 million or 34.6%.
Year-to-date 2020, our composite ratio of 93.1% compares favorably to the 94.3% reported for the comparable 2019 period.
Despite all the unknowns surrounding COVID-19, we remain cautiously optimistic going into the third quarter, with a robust order count in both purchase and refinance transactions, a strong real estate market, the 30-year mortgage rates remain historically low around 3% and expectations for these favorable rates to continue for this foreseeable future.
While we have adjusted to doing business during COVID-19, we are still mindful of the challenges ahead for our organization and our nation.
My appreciation goes out to all our employees and Title agents as they remain dedicated and positive, as we all deal with the daily challenges of the pandemic.
Our accomplishments are achieved through the commitment of our employees and the support of our agents.
As with past challenges, we rely on the same guiding principles of integrity, managing for the long-run, financial strength, protection of our policyholders and the well-being of our employees and customers that have served us well over the last 100 plus years.
So again, our second quarter operating results indicate that our businesses continue to perform and our strategic diversification between General Insurance and Title Insurance works well.
We will continue to focus on underwriting excellence and we will continue to ensure that our capital position remains very strong as we weather the current economic disruptions.
 Assistant:

Chosen response: old republic international - qtrly total operating revenues $1,623.9 million versus $1,607.7 million.


Prompt:
Human: Due to the material impact of COVID-19 on our business in fiscal 2020, we will also include comparisons to our fiscal 2019 results.
Before I begin reviewing third quarter results, I want to remind everyone of Oxford's core operating philosophies.
Our objective is always to deliver long-term shareholder value.
Our strategy for delivering this value is to own a portfolio of powerful lifestyle brands that can drive sustained profitable growth.
And our purpose as a company and in each of our brands is to make people happy.
With that, we're delighted to be reporting record sales and earnings for the third quarter of fiscal 2021.
These outstanding results are directly attributable to the power of our brand portfolio, the strength of our product offerings and our ability to connect with and serve customers across channels, combined with the great work our teams have done to fortify these foundational cornerstones during the pandemic.
As compared to the same quarter last year, our sales increased 41%.
And even more importantly, our sales also increased as compared to pre-COVID fiscal 2019 levels.
Excluding Lanier Apparel, where operations were effectively exited during the third quarter of fiscal 2021, net sales increased 15% over the same period of fiscal 2019.
The robust sales growth that we experienced during the third quarter was driven by 40% growth in our full price direct-to-consumer business, with growth in each of our brands compared to fiscal 2019, including a 13% increase in full-price retail and a 100% gain in full-price e-commerce.
Restaurant sales also contributed to our top-line improvement, growing 14% in the third quarter of fiscal 2021 as compared to the third quarter of fiscal 2019 fueled by strong increases at existing locations, as well as the addition of five new Marlin Bar locations.
At the same time, adjusted gross margin increased an impressive 710 basis points to 62% during the third quarter of fiscal 2021 as compared to fiscal 2019.
Scott will elaborate on all these excellent metrics in more detail momentarily.
But I will mention that they drove record third quarter earnings of $1.19 per share on an adjusted basis compared to an adjusted loss of $0.44 per share last year and adjusted earnings per share, up $0.10 during the third quarter of fiscal 2019.
While our third quarter results no doubt benefited from a very strong consumer market, we believe the primary driver of our outperformance was the excellent execution of our strategy and purpose.
The exit of Lanier Apparel during the third quarter mark an important milestone in our long-term strategy as Lanier was the last of our legacy private label businesses.
Our current portfolio consists of five excellent lifestyle brands: Tommy Bahama, Lilly Pulitzer, Southern Tide, The Beaufort Bonnet Company and Duck Head.
These brands are 100% focused on the consumer and making that consumer happy with powerful clear brand messages, exceptional differentiated product, superior customer experiences, including our e-commerce websites, our stores and restaurants and strategic wholesale accounts.
Over the last two years, across our brands, we have redoubled our commitment to delivering our positive upbeat brand messages through beautiful creative content in imagery.
Those brand messages are resonating with our consumers and are a big part of the excellent results that we are delivering.
The predominant mix of direct-to-consumer, which is expected to be over 80% of our business enhances our ability to deliver happiness to our customers.
The direct model gives us significant agility and flexibility in managing the flow of product to our customers.
This flexibility has proven especially useful this year, as industrywide supply chain challenges had required our merchants to be highly adaptable as to what product we are featuring on the floor and on our websites at any particular point in time.
The direct business also provides us with significant margin power and is responsible for a large portion of the gain in gross margin that we achieved during the quarter.
Finally, the direct-to-consumer model gives us the opportunity to deliver an unparalleled customer experience that is consistent with the aspirational positioning of our brands.
And our incredible people have continued to provide that elevated experience through all the challenges of the last two years.
One of our strategic priorities over the last couple of years has been to enhance our digital marketing capabilities by improving our ability to assimilate and analyze data, use that data to develop insights about existing in potential customers, create campaigns designed to reach those consumers and measure the effectiveness of those campaigns with the goals of increasing our customer account, retaining existing customers and driving higher spend across all customers.
I'm pleased to report that on a trailing 12-month basis, customer metrics at the end of the third quarter of fiscal 2021, including customer accounts, rate of new customer additions, retention rates and customer lifetime value were all strong relative to pre-pandemic numbers.
From a product perspective, we continued to see strength in the casual, easy and cozy styles, that are a hallmark of all our brands.
Great examples of this are continued strength in Tommy Bahama knits and shorts, women's lounge and sleepwear, and Lilly Pulitzer's Luxletic athleisure collection.
At the same time, we saw a nice rebound in some of the occasion-driven categories that were most challenged last year including men's pants and woven shirts and women's dresses, as people reengaged in more social events.
As we head into the final stretch of the year, I'm pleased to report that the holiday selling to-date has been robust and I firmly believe that we will deliver a strong finish to a fantastic year.
I'm incredibly grateful to our team, and share their pride in what we have delivered for our customers and our shareholders.
As Tom just mentioned, we had outstanding performances in each of our brands during the third quarter, which resulted in significant sales, gross margin, operating margin and earnings growth to levels exceeding pre-pandemic results.
On the top line, demand for our products remained high and revenue exceeded 2019 at our direct-to-consumer channels and in each of our brands.
Excluding Lanier Apparel where operations were effectively exited during the third quarter of fiscal 2021, consolidated sales increased 15% to $243 million.
We had improvements in all regions, with particular strength in Florida, the Southeast and Texas.
Hawaii has been positive overall with strength, except on the island of Oahu, which is more dependent on foreign tourists, than the other islands.
Our gross margin continued to track significantly higher than 2019.
On an adjusted basis, gross margin expanded 710 basis points over 2019 to 62% in the third quarter.
Driving this improvement was the higher proportion of full price sales, our overall shift in our sales mix to higher margin direct-to-consumer channels of distribution and improved IMUs.
Approximately 270 basis points of higher freight cost, including the use of air freight partially offset some of the margin improvement.
On an adjusted basis, we gained 260 basis points of SG&A leverage in the third quarter, improving from 56% of sales in 2019 to 53% of sales in 2021.
Adjusted SG&A dollars decreased modestly from 2019 levels but decreases in employment costs due to headcount reductions and lower occupancy cost, partially offset by increases in marketing expense.
As a result, our consolidated operating margin expanded 970 basis points from 1% in 2019, to 11%.
Tommy Bahama, Lilly Pulitzer and Southern Tide all experienced operating margin expansion.
Moving to the balance sheet, our liquidity position is strong.
We ended the third quarter with $188 million of cash and short-term investments and no borrowings outstanding under our revolving credit facility.
FIFO inventory decreased 17% compared to fiscal 2020 excluding Lanier Apparel due to higher-than-expected sales during the first nine months of 2021, ongoing enhancements to enterprise order management systems and prudent seasonal purchases.
We believe our inventory is well positioned to meet forecasted demand throughout the remainder of the holiday selling season.
Looking ahead, we are pleased with our holiday season results to-date and are confident we can deliver a solid fourth quarter.
Our outlook reflects our expectation of continued strength in full price direct-to-consumer business.
We expect full price direct-to-consumer sales growth and consolidated gross margin expansion over 2019.
While we raised our outlook for the year, year-over-year improvement in our full price direct business is expected to be partially offset by a handful of specific items in the fourth quarter of the fiscal year.
We expect sales from Lanier Apparel to be approximately $20 million lower than 2019's fourth quarter as we exited the business in Q3 of this year.
In addition, we expect our branded wholesale business to be approximately $15 million lower than 2019.
This is impacted by the shift to certain initial spring wholesale shipments.
These have historically shipped in the fourth quarter, but are expected to ship in the first quarter of 2022, as we reduced our reliance on air freight for warmer weather product.
We also expect the Lilly Pulitzer fourth quarter flash clearance sale, to be lower compared to 2019, due to strong year-to-date full price sales resulting in less available inventory for the flash sale.
For the fourth quarter, we expect sales to be between $285 million and $295 million compared to sales of $298 million in the fourth quarter of fiscal 2019.
Again Lanier Apparel generated $20 million in net sales in the fourth quarter of 2019.
In the fourth quarter of fiscal 2021, we expect earnings of $1.20 to $1.35 per share on an adjusted basis, compared to earnings of $1.09 per share on an adjusted basis in the fourth quarter of 2019.
Our outlook includes strong quarter-to-date results with a solid start to the holiday selling season.
For the full year, we now expect sales in a range of $1.127 billion to $1.137 billion as compared to sales of $1.123 billion in 2019.
For the full year, sales from Lanier Apparel are expected to be $25 million in 2021, compared to $95 million in 2019.
Adjusted earnings per share is expected to be between $7.52 and $7.67.
This compared to earnings of $4.32 per share on an adjusted basis in 2019.
Our effective tax rate for the full fiscal year 2021 is expected to be approximately 22%.
We continue to support our business with investments for future growth.
Capital expenditures are expected to be between $35 million and $40 million in fiscal 2021, primarily reflecting investments in information technology initiatives, new Marlin Bars and retail stores.
We're excited to open our first company-owned Beaufort Bonnet Company store in Grand Boulevard at Sandestin later this quarter.
We continue to generate strong cash flow from operations, including a $157 million year-to-date.
Our capital allocation priorities include investing in our businesses, acquisitions and the return of capital to shareholders through dividends and share repurchases.
We remain in a strong position to return cash to shareholders and are proud of our long history of returning value through dividends, which we have paid every quarter since going public in 1960.
This quarter, our Board of Directors has declared a dividend of $0.42 per share.
Additionally, in assessing our capital allocation plan, our Board of Directors approved a new share repurchase authorization of $150 million.
 Assistant:

Chosen response:
compname reports q3 adjusted earnings per share $1.19.
oxford: strong consumer demand and excellent execution drove record third quarter results, raises full year guidance.
q3 adjusted earnings per share $1.19.
sees q4 sales $285 million to $295 million.
sees fy sales $1.127 billion to $1.137 billion.
sees fy adjusted earnings per share $7.52 to $7.67.


Prompt:
Human: The fourth quarter of 2021 was a fitting year -- a fitting way to end the year where Oxy's operational and financial performance advanced from strong to stronger.
Our focus on consistently delivering outstanding operational results, combined with our steadfast dedication and patience in improving our balance sheet, has positioned us to begin increasing the amount of capital returned to shareholders.
Our new shareholder return framework, which we will detail today, includes a dividend that is sustainable in a low price environment.
We are pleased to implement this new framework, beginning with an increase in the quarterly common dividend to $0.13 per share.
The position of strength that we are in today stems from our team's hard work and accomplishments last year.
Throughout 2021, we strived tirelessly to improve our already exceptional operational performance.
We capitalized on efficiency improvements by embedding innovative techniques across our operations.
Our focus on learning, implementing change, where needed, and maximizing opportunities for improvement enabled us to accelerate time to market for our products while generating notable capital saving.
We will continue to maximize operational efficiencies in 2022 by executing on the capital plan that invest in our highest-return assets to generate long-term sustainable free cash flow.
Rob and I will then discuss our shareholder return framework, and Rob will provide guidance for the first quarter and year ahead.
Before turning to Q&A at the end, I will provide a preview of the Low Carbon Ventures investor update that we have planned for next month.
Now to talk about delivering cash flow priorities.
Those who have followed us at Oxy's journey over the past several quarters know that our cash flow priorities have centered around derisking our balance sheet and reducing debt.
We diligently delivered on these cash flow priorities throughout 2021, including the repayment of approximately $6.7 billion of debt.
We now expect that our net debt will be below $25 billion by the end of the first quarter of 2022, which will mark a change in how excess cash flow will be allocated going forward.
Before I detail our updated cash flow priorities and shareholder return framework, I would like to first touch on a few of the many operational and financial successes that enabled us to reach this significant turning point.
2021 was a year of continuous operational improvements, which drove record free cash flow generation, rapid debt reduction and a return to profitability.
One of Oxy's core strengths is our ability to develop assets in a way that efficiently maximizes production and recovery while generating significant cash flow, and that is just what we did in 2021.
Multiple drilling and completion records were set across our domestic and international businesses as our production for the year averaged 1.167 million BOE per day.
That's 27,000 BOE per day higher than our initial guidance.
2021 was also a more conventional year in terms of commodity prices, operations and planning, all of which was helpful in providing a reserve update that reflects a more normalized price environment.
Our reserves for year-end 2021 increased to 3.5 billion BOE, representing a reserve replacement ratio of 241%.
Our reserves position means that we have a vast supply of low-breakeven projects and inventory available.
Over the last year, we significantly advanced our commitments toward a low-carbon future.
We are proud to be one of only a few oil and gas companies with net-zero goals that are aligned with the Paris Agreement's 1.5-degree Celsius pathway.
In December, Oxy became the first U.S. upstream oil and gas company to enter into a sustainability-linked revolving credit facility, which includes absolute reductions in our combined Scopes 1 and 2 CO2 equivalent emissions as the key performance indicator.
We set additional interim emission targets to further refine our net-zero pathway, including a short-term target to reduce our CO2 equivalent emissions to approximately 3.7 million metric tons per year below our 2021 level and to accomplish that by 2024.
We set a medium-term target to facilitate the geologic storage or use of 25 million metric tons per year of CO2 in Oxy's value chain by 2032.
We also endorsed the Methane Guiding Principles and Oil and Gas Methane Partnership 2.0, a climate and clean air coalition initiative led by the United Nations Environment program.
This is consistent with our commitment to enhance methane emissions reporting and reducing those emissions.
Our journey toward net zero is underway, and we look forward to discussing in greater detail at our Low Carbon Ventures investor day next month.
Now the fourth quarter highlights.
The strong operational and financial performance that we delivered throughout last year continued in the fourth quarter.
We set a fourth consecutive record for quarterly free cash flow generation before working capital, which contributed to generating our highest-ever annual level of free cash flow in 2021.
We continue to apply free cash flow toward reducing debt and strengthening our balance sheet, repaying an additional $2.2 billion of debt in the fourth quarter.
Operationally, all three business segments excelled in driving our robust financial performance.
OxyChem delivered record earnings for the second consecutive quarter as performance throughout the year culminated in 2021 being OxyChem's strongest in over 30 years.
The fourth quarter, which is typically lower due to seasonality, even exceeded the record third quarter.
And in our oil and gas segment, our Permian, Rockies and Oman teams set new operational records and efficiency benchmarks in the fourth quarter, further improving on their third quarter record.
Our midstream business outperformed by maximizing gas margins during the fourth quarter.
While short-term opportunities in the commodity markets are difficult to predict, our midstream team exceed at finding and taking full advantage of such opportunities when they arise.
Now I'm pleased to say that our fourth quarter results continued to demonstrate the commitment of all of our employees, no matter their position or location, to find ways to further create value by lowering costs, improving efficiencies and maximizing recoveries.
They truly are driving our strong financial results and providing a solid foundation for free cash flow generation.
Now on to 2021 oil and gas operational excellence.
On each of our last several calls, I've enjoyed highlighting the many operational achievements our teams continuously deliver.
The magnitude of these achievements is striking when viewed on a combined basis over the last year.
We established record drilling cycle times in the Gulf of Mexico, the Permian, Rockies and in Oman, and set new efficiency benchmarks across our portfolio in 2021.
We intend to maintain our focus on continuous improvement in the year ahead as we work to maximize the value our portfolio can generate for shareholders.
Now our 2022 capital plan.
Our 2022 capital plan invests in cash flow longevity while building on the capital intensity leadership we demonstrated in 2021.
We have sized our capital plan to sustain production in 2022 at 1.155 million BOE per day while investing in high-return projects that will provide cash flow stability throughout the cycle.
We have also incorporated an expectation for inflation and a capital range to reflect the potential for fluctuations in our third-party-operated assets and our low-carbon opportunities during the year.
Our sustaining capital, which we define as the capital required to sustain production in the $40 WTI environment over a multiyear period, remains industry-leading.
Our multiyear sustaining capital is expected to increase from our 2021 capital budget of $2.9 billion, the reduced inventory of drilling uncompleted wells and additional investment in our Gulf of Mexico and EOR assets, to optimize the long-term productivity of our reservoirs and facilities.
If the macro environment requires spending below our multiyear sustaining capital, we have the ability to reduce it further and hold production flat for shorter periods of time, as we've demonstrated.
We are also investing in attractive mid-cycle projects that will provide cash flow stability through the cycle in future years.
For example, these projects include the Al Hosn expansion, which began last year.
And OxyChem is in the process of completing a FEED study to modernize certain Gulf Coast chlor-alkali assets from diaphram to membrane technology.
Our capital plan also includes investments to advance our net zero pathway, including reducing emissions, improving energy efficiency and developing our carbon sequestration initiative.
We are allocating capital in the budget to 1PointFive to begin construction on the first direct air capture facility.
We continue to make progress on both the engineering and commercial needs for direct air capture development.
We are improving both of these aspects and believe Oxy's capital helps retain value for our shareholders.
As the construction phase and technology of this new project advance, we will continue to consider strategic capital partnerships and structures to address financing.
We'll provide more comprehensive update on 1PointFive and direct air capture at our March 23 LCV investor update.
We benefited greatly from commodity price rebound last year and appreciate how swiftly the price environment can change.
The optionality that our scale and asset base provide enables us to retain a high degree of flexibility in our capital and spending plans.
The majority of our capital program is comprised of short-cycle investments, meaning that we have the ability to quickly adapt to changes in the macro environment.
Within six months or less, if necessary, we can reduce capital spending to sustaining levels.
And if oil prices remain supportive this year, our intent is to follow our cash flow priorities and capital framework that we will share with you today.
We have no need and no intent to invest in production growth this year.
Having a flexible capital budget that includes investment and cash flow longevity provides us and puts us in a strong position to implement shareholder return framework that will benefit shareholders over the long term.
With respect to cash flow priorities, our priorities for 2022 remain largely unchanged, with a continuing emphasis on reducing debt while maintaining our asset base integrity and sustainability.
The objective of strengthening our financial position remains the same: Enable us to confidently increase the amount of capital that we may sustainably return to shareholders throughout the cycle.
As we expect net debt to fall below $25 billion by the end of the first quarter, our focus has expanded to returning capital to shareholders, beginning with the increase in our common dividend to $0.13 per share and the reactivation and expansion of our share repurchase program.
The increase in the dividend to $0.13 per share is consistent with our intention to initially increase the dividend to a level that approximates the yield of the S&P 500.
We believe establishing framework for returning capital to shareholders through a sustainable common dividend, combined with an active share repurchase program and continued debt reduction, creates an attractive value proposition for shareholders while also improving the company's long-term financial position.
For the first phase of our shareholder return framework initiated, we have the options in future years to invest in cash flow growth.
We have the ability to grow oil and gas cash flow through higher production, but also have multiple investment opportunities across our other businesses.
As evidenced by our guidance for 2022, we do not intend to grow production in 2022.
At the point where it is appropriate to invest in future cash flow growth, we will only do so if supported by long-term demand.
Any future production growth will be limited to an average annual rate of approximately 5%.
As Vicki mentioned, the first phase of our shareholder return framework consists of the debt reduction; an increase in the common dividend to $0.13 per share; and the reactivation, expansion of our share repurchase program.
With net debt expected to be below $25 billion by the end of the first quarter, we are ready to begin returning more capital to shareholders, but we'll continue to prioritize debt reduction to focus on our medium-term goal of regaining our investment-grade credit rating.
We place high importance on debt reduction for the reasons I highlighted last quarter, mainly that as debt is reduced, our company's enterprise value rebalances to the benefit of our shareholders.
We recognize that oil prices are uncertain and may remain volatile, particularly in the current environment.
We then prioritized retirement of an initial $5 billion of debt to drive our net debt toward our next milestone of $20 billion.
When this milestone is achieved, our balance sheet will improve significantly even from where we are today.
We intend to provide our shareholders with a competitive common dividend while maintaining a long-cycle cash flow breakeven at $40 WTI or less.
The long-term sustainability of our dividend will be enhanced by continued deleveraging and share repurchases, as well as our best-in-class capital efficiency and a deep low-cost portfolio of assets.
As debt is retired, our cash interest payments will decrease, freeing up cash that can be used to support future common dividend growth.
In addition to increasing the common dividend to $0.13 per share, we intend to purchase approximately $3 billion of outstanding shares of common stock.
Maintaining an active share repurchase program with the benefit of a healthy balance sheet will potentially enable us to grow the dividend on a per-share basis at a faster rate.
As evidenced by our progress reducing debt last year, debt retirement remains a higher cash flow priority than our share repurchase program.
We intend to make substantial progress toward retiring an additional $5 billion of debt before initiating share repurchases.
It is our goal to reward shareholders with the triple benefit of: A sustainable common benefit, an active share repurchase program and a continuously strengthening financial position.
I'll now turn to our fourth quarter results.
In the fourth quarter, we announced an adjusted profit of $1.48 and a reported profit of $1.37 per diluted share.
Our adjusted income improved significantly through 2021, with the fourth quarter being the strongest quarter of the year.
The increase in earnings was primarily driven by higher commodity prices and volumes, as well as OxyChem's excellent financial performance.
Our domestic oil and gas expenses experienced a sizable reduction on a BOE basis from the previous quarter and reflected a more normalized environment absent any significant weather disruptions.
The strong performance of our businesses, combined with the benefit of a healthy commodity price, enabled us to deliver another consecutive quarter of record free cash flow.
On our third quarter call, we announced the completion of our large-scale divestiture program, but reiterated our intention to continue seeking opportunities to optimize our portfolio to create shareholder value.
In November, we completed a bolt-on acquisition to increase our working interest in EOR assets that we'd operate.
And in January 2022, we divested a small package of Permian acreage that had yet no immediate plan to develop.
The purchase and sale prices of these transactions largely offset each other, while the EOR acquisition added approximately 5,000 BOE per day of low-decline production, as well as increasing our inventory of potential CCUS opportunity.
We exited the fourth quarter with approximately $2.8 billion of unrestricted cash on the balance sheet after repaying approximately $2.2 billion of debt in the quarter.
In total, last year, we paid approximately $6.7 billion of debt and retired $750 million of notional interest rate swaps.
Our debt reduction continues to drive a pronounced improvement in our credit profile.
Since our last call, both Fitch and S&P upgraded our credit ratings to BB plus, one notch below investment grade; while Moody's assigned us a positive outlook on our debt.
Reducing the amount of cash that is committed to interest payments today places us in a stronger position for a sustainable return of capital in the future.
We estimate that the balance sheet improvements executed in 2021 will reduce interest and financing costs by almost $250 million per year going forward, which will fund approximately half of the increase in our common dividend.
Our business incurred a negative working capital change in the fourth quarter.
It was primarily driven by higher accounts receivable balance due to higher commodity prices and, to a lesser extent, an increase in inventories, including a higher number of barrels on the water at year-end.
The oil and gas hedges we had in place rolled off at the end of the fourth quarter, and we are now positioned to take full advantage of the current commodity price environment.
We recognize the possibility of a swift change in commodity prices always exists.
The debt maturity profile we have today is far more manageable mantle than it was two years ago, and our liquidity profile remains robust.
In addition to cash on hand, we have $4.4 billion of committed unutilized bank facility.
We continue to believe that reducing debt and maintaining maximum flexibility in our capital plans is the most effective long-term solution to managing risk while providing shareholders the benefits of commodity price gain.
We expect our full year production to average 1.155 million BOE per day in 2022.
Production in the first quarter of 2022 is expected to be lower than the fourth quarter of 2021 due to the timing impact of wells that are brought online in 2021, severe winter weather in the Permian earlier this month and the impact of significant planned international turnaround activities this quarter.
Algeria, Al Hosn and Dolphin are all undergoing scheduled maintenance in the first quarter, which is reflected in our international production guidance.
The downtime associated with Al Hosn is notably larger than typical years as the plant is undergoing the first full shutdown since its inception to substantially complete the tie-ins associated with the expansion project and to enhance plant sustainability and reliability.
Additionally, a portion of our international production is subject to production-sharing contracts, where we typically receive fewer barrels in a higher-price environment, the impact of which is captured in our full year and first quarter guidance.
The Permian activity we added late in the fourth quarter is expected to replace the production benefit received in 2021 and completed our DJ -- our inventory of DJ Basin undrilled, uncompleted wells in the early part of last year.
Our 2022 Permian capital allocation is expected to provide benefits that will last into 2023.
We anticipate that our activity this year will provide us the flexibility to either hold Permian production flat at our 2022 exit rate for similar capital next year, or spend less capital in 2023 to hold production relatively flat to our 2022 average.
We also expect that our production in 2022 will increase throughout the year to achieve our full year guidance as our international operations will resume their normal production levels and our activity in the Permian brings new production online.
Additionally, the trajectory of operating production is anticipated to offset lower production in the Rockies this year as our activity in the DJ Basin is tapered, reflecting development planning timing to ensure efficient operations as new permits are obtained.
Partially offsetting lower Rockies production with higher Permian production, combined with an increase in EOR activity, will result in a slightly higher domestic operating expense as the DJ Basin has one of the lowest operating costs on a BOE basis in our portfolio.
The increase in Permian production is expected to result in domestic cash margins improving by -- in 2022 as the companywide oil cut increases approximately 54.5%.
The mid-cycle level of capital we intend to spin this year provides flexibility to sustain production in 2023 and beyond at our multiyear sustaining capital level of $3.2 billion in a $40 price environment.
We expect that OxyChem's 2022 earnings will exceed even 2021.
OxyChem continues to benefit from continued demand improvement for caustic soda, while PVC pricing remains strong.
Additionally, as I mentioned on our last call, we expect chlorine markets to remain tight as chlor-alkali producers seek the highest value for their products.
OxyChem's integration toward multiple chlorine derivatives enables us to optimize our production mix to supply the products the market requires, whether this is for chlorine for water treatment, vinyls or PVC, for example.
This year, we will make an incremental capital investment as we complete a FEED study for the modernization of certain Gulf Coast chlor-alkali assets from diaphram to membrane technology.
Modernizing these assets would result in a material energy efficiency improvement, but will also lower the carbon intensity per ton of the product produced and delivered.
The project would also provide the opportunity for a significant expansion of our existing capacity to meet growing demand for our key products.
We expect to reach final investment decision later this year, at which time, we will be prepared to share additional details.
To assist investors to reconcile our guidance with our segment earnings, we have made a change in how we guide midstream going forward.
Our midstream guidance now includes income from WES, which is a change to how we've guided midstream previously.
Quarterly guidance now includes Oxy's portion of WES income using the average of the previous four publicly available quarters.
Our annual guidance now includes Oxy's portion of WES income using the sum of the previous four publicly available quarters.
As we look to the year ahead, we will work to continue to improve on the numerous operational and financial success of 2021, including making additional inroads on reducing debt, implementing our shareholder return framework and advancing our low-carbon aspirations.
When we established Low Carbon Ventures in 2018, we knew we were ahead of the curve in recognizing the opportunity and necessity of building a carbon management business, both to help reduce global emissions and to enhance our business.
At that time, we were focused on key technologies and projects that would reduce Oxy's emissions and provide a more sustainable future business.
Today, we have advanced that vision and fully appreciate the vast scope of the carbon management opportunity, as well as the cross-industry support and partnership in front of us.
On past earnings calls, we had discussed several of the initiatives Low Carbon Ventures is developing and Oxy's ambition to achieve net zero before 2050.
We've been working on key technology developments and important commercial needs to advance LCV's projects that are now in a position to move more fully -- and more fully detail our low carbon business and how it positions us to realize our net-zero ambition and improve our long-term business.
On March 23, we will host a Low Carbon Ventures investor update, where we will provide a detailed update on our low-carbon strategy, with a focus on the technology and commercial development of carbon-capture projects, specifically direct air capture.
The event, which we expect may last up to two and a half hours, will be accessible through our website.
As I've said before, we are excited about our unique position and capabilities as a company.
We value our broader low-carbon and business partnerships that are growing, and our workforce is energized to advance this immense opportunity before us.
 Assistant:

Chosen response:
occidental increases dividend.
occidental petroleum corp - board of directors has declared a regular quarterly dividend of $0.13 per share on common stock.


Prompt:
Human: I'm Charlotte Rasche, Executive Vice President and General Counsel of Prosperity Bancshares.
David Zalman will lead off with a review of the highlights for the recent quarter.
He will be followed by Asylbek Osmonov, who will review some of our recent financial statistics and Tim Timanus, who will discuss our lending activities including asset quality.
During the call, interested parties may participate live by following the instructions that will be provided by our call moderator, Tom.
Before we begin, let me make the usual disclaimers.
Prosperity reported some of the best results in our history.
Much of the success is attributed to the dedicated associates of Prosperity and LegacyTexas who helped make our combination with LegacyTexas so successful.
Our annualized return on average assets, average common equity and average tangible common equity for the three months ending December 31, 2020 were: we made 1.63% on average assets; we made 8.98% return on average common equity, and we made a 19.5% return on average tangible common equity.
Respectively, Prosperity's efficiency ratio, net gains -- excluding the net gains and losses on the sale or writedown of assets and taxes was 40.7% for the three months ended December 30, 2020.
Our net income was $137 million for the three months ended December 31, 2020, compared with $86 million for the same period in 2019.
However, the net income for the fourth quarter of 2019 included a $46.4 million of merger-related expenses.
Our earnings per diluted common share were $1.48 for the three months ended December 31, 2020, compared with $1.01 for the same period in 2019 and were impacted by the merger-related expenses of $46.4 million or $0.43 per diluted common share in the fourth quarter of 2019.
Our loans at December 31, 2020 were $20.2 billion, an increase of $1.4 billion or 7.4% compared with $18.8 billion at December 31, 2019.
Our linked quarter loans decreased $548 million or 2.6% from $20.7 billion at September 30, 2020, primarily due to a $430 million decrease in PPP loans.
In addition, we continue reduce loans identified at LegacyTexas that we determined to exit.
At December 31, 2020, the company had $963 million of PPP loans outstanding.
Our deposits at December 31, 2020 were $27.3 billion, an increase of $3.1 billion or 13% compared with $24.2 billion at December 31, 2019.
Linked-quarter deposits increased $901 million or 3.4% from $26.4 billion at September 30, 2020.
We continue to see increased deposit balances.
Some of the money is from stimulus payments and some from increased savings given the unknowns in the economy.
This may begin to change as vaccinations increase and we return to a more normalized daily life.
Our asset quality, the non-performing assets decreased $2 million or 14.3% from the quarter ended September 30, 2020.
Our non-performing assets totaled $59 million or 20 basis points of quarterly average interest earning assets at December 31, 2020 compared with $62 million or 25 basis points of quarterly average interest earning assets at December 31, 2019, and as mentioned, $69 million or 24 basis points of quarterly average interest earning assets as of September 30, 2020.
With regard to acquisitions, as mentioned in prior conference calls, we believe that the M&A activity will increase.
And we saw PNC's acquisition of BBVA announced last quarter as well as two other large transactions.
Bank stock prices have risen, which results in sellers being more active.
Further, most banks are facing lower net interest margins and higher operating costs due to technology and other operational investments.
We believe that these factors, combined with the unknown regulatory burden going forward, may cause more bankers to explore the strategic alternatives including a sale.
We are open to exploring acquisition transaction if it makes sense for our shareholders and is appropriately accretive to earnings.
With regard to the economy, Texas and Oklahoma continue to benefit from a pro-business attitude.
Companies continue to move to Texas with HP and Oracle announcing their headquarters move and other companies such as Tesla announcing a major expansion into Texas.
Also, Samsung recently mentioned a $10 billion plant expansion in the Austin area.
The Federal Reserve Bank of Dallas has projected achieving a nationwide 5% GDP growth by year-end 2021 and an unemployment rate of 4.5% noting the first half of the year will be slower with an expected increase in the second half of the year.
We believe Texas will have a higher growth rate and outperform other states over the next several years.
We expect that we will face several challenges over the next few years such as higher tax rates that will affect income and continued lower interest rates that will affect our net interest margin.
However, a steeper yield curve could help to mitigate both issues.
Let me turn over our discussion to Asylbek Osmonov, our Chief Financial Officer to discuss some of the specific financial results we achieved.
Net interest income before provision for credit losses for the three months ended December 31, 2020 was $257.6 million compared to $232 million for the same period in 2019, an increase of $25.6 million or 11%.
The increase was primarily due to three months of combined bank earnings for the fourth quarter 2020, resulting from the Legacy merger on November 1, 2019 and reduced cost of funds partially offset by the decrease in loan discount accretion of $7.7 million.
The net interest margin on a tax equivalent basis was 3.49% for the three months ended December 31, 2020 compared to 3.66% for the same period in 2019 and 3.57% for the quarter ended, September 30, 2020.
Excluding purchase accounting adjustments, the core net interest margin for the quarter ended December 31, 2020 was 3.26% compared to 3.26% for the same period in 2019 and 3.25% for the quarter ended September 30, 2020.
Noninterest income was $36.5 million for the three months ended December 31, 2020 compared to $35.5 million for the same period in 2019 and $34.9 million for the quarter ended September 30, 2020.
Non-interest expense for the three months ended December 31, 2020 was $120.2 million compared to $156.5 million for the same period in 2019, which included $46.4 million in the merger-related expenses.
On a linked quarter basis, non-interest expense increased $2.3 million primarily due to salaries and benefits.
For the first quarter 2021, we expect non-interest expense of $118 million to $120 million, which includes elevated employment-related taxes for vested restricted stock.
The efficiency ratio was 40.8% for the three months ended December 31, 2020 compared to 58.1% for the same period in 2019, which included $46.4 million in merger-related expenses and 48.2% for the three months ended September 30, 2020.
We estimate fair value loan income for the first quarter 2021 to be around $7 million to $10 million based on the current fair value discount for each loan amortized over its remaining loan life.
This does not account for additional discount accretion income that may occur due to early loan pay downs or payoffs, which cannot be accurately estimated.
In the fourth quarter of 2020, we recognized $10 million from the fair value loan amortization and additional $6 million from early payoffs for a total of $16.1 million in fair value loan income.
The bond portfolio metrics at 12/31/2020 showed a weighted average life of 2.8 years and projected annual cash flows of approximately $2.4 billion.
Our non-performing assets at quarter end December 31, 2020 totaled $59,570,000, a 29 basis points of loans and other real estate compared to $69,542,000 or 33 basis points at September 30, 2020.
This represents approximately a 14% decline.
The December 31, 2020 non-performing asset total was made up of $48,884,000 in loans, $93,000 in repossessed assets and $10,593,000 in other real estate.
Of the $59,570,000 in non-performing assets, $10,682,000 or 18% are energy credits, $10,147,000 of which are service company credits and $535,000 are production credits.
Since December 31, 2020, $2,715,000 in non-performing assets have been put under contract for sale.
This represents approximately 5% of the non-performing assets.
Net charge-offs for the three months ended December 31, 2020 were $7,567,000 compared to $10,570,000 for the quarter ended September 30, 2020.
No dollars were added to the allowance for credit losses during the quarter ended December 31, 2020.
The average monthly new loan production for the quarter ended December 31, 2020 was $439 million.
Loans outstanding at December 31, 2020 were $20.2 billion, which includes $963.2 million in PPP loans.
The December 31, 2020 loan total is made up of 38% fixed rate loans, 38% floating rate loans, and 24% resetting at specific intervals.
Tom, can you please assist us with questions?
 Assistant:

Chosen response:
q4 earnings per share $1.48.
net interest income before provision for credit losses for three months ended december 31, 2020 was $257.6 million.


Prompt:
Human: Mike Speetzen, our interim chief executive officer; and Bob Mack, our interim chief financial officer, have remarks summarizing the quarter and our revised expectations for the full year.
Then we'll take some questions.
You can refer to our 2020 10-K for additional details regarding these risks and uncertainties.
Once again, the Polaris team delivered an impressive quarter despite substantial supply chain challenges.
Our team has remained focused on meeting the needs of our dealers and customers, which allowed us to again beat expectations this quarter.
Consumer interest in powersports continued at record levels throughout the quarter, with strong growth coming from both existing customers and new customers.
I'm pleased to report that our ORV market share gains continued, which we expect to be an ongoing trend for the year.
I'm also pleased to report that motorcycles, snowmobiles and boats also had strong retail demand and gained share in Q1.
The strong growth we are experiencing is not only in our North American whole good retail.
Our PG&A business grew nearly 50% during the quarter, with all segments and categories up significantly year over year.
And our international business was also strong, with sales increasing 59% as countries impacted by the pandemic slowly began to reopen.
Q1 results reflect an all-out effort by the Polaris team to overcome numerous challenges.
We continue to operate our plants at maximum supply chain-constraint capacity and utilize every available tactic at our disposal to produce the products our customers were demanding.
While our dealer inventory remains below optimal levels, we largely met demand and expertly navigated supply chain constraints.
To do so, logistics, commodities and rework costs have increased substantially.
We are managing the cost as best we can and, where it makes strategic sense, have raised prices to compensate for this inflation.
And yet, despite these headwinds, given the overall strong and better-than-expected performance seen in Q1 and continuing into April, we are raising our full-year guidance.
Bob will give you more details shortly.
First-quarter North American retail sales were up a robust 70%, continuing the unprecedented levels of growth.
The comparables were easier in the last two weeks of March when the pandemic drove an abrupt shutdown of commerce in 2020.
Even after adjusting for that impact, our retail was up an impressive 50-plus percent for the quarter.
We continue to see an expanding customer base, with new customers growing 70% in Q1.
We are especially proud to see success in our strategy to further diversify our customer base.
While many of these new customers have been in powersports for only a short time, our early data indicates a strong intent of these new customers to stay with the sport and a stronger intent to purchase another vehicle versus what we have historically seen, which is a promising indicator to support ongoing strong retail.
And the continued growth in sales to our existing owners, which increased an impressive 40% year over year, reinforces our confidence that these customers will return.
As I indicated earlier, our ORV business gained over 4 percentage points of market share in the first quarter.
Both Indian and Slingshot's first-quarter retail was strong as well, collectively finishing up over 70% and market share increased about 3 percentage points.
boats retail was also strong, tracking ahead of the industry based on preliminary data.
Snowmobile sales were strong as well, with retail up low 20% range for the first quarter.
Let me spend a minute talking about the strong performance of our Snowmobile business.
While our Snowmobile business is one of our smaller product lines today, it is where we started over 66 years ago in Northern Minnesota.
The North American snowmobile industry concluded its strongest season in over a decade, with industry retail up approximately 16%.
Polaris retail eclipsed the market, growing in the mid-20% range, resulting in market share gains of over two points for the season, the best share position in 16 years.
We are seeing tremendous new customer growth in Snowmobiles.
During the 2020, 2021 selling season, new customers represented over 60% of the sales growth, nearly double the rate from the prior season ending March 2020.
During the quarter, we held our annual spring dealer meeting and, while virtual, it was one of the best attended meetings in over a decade.
Attendance was up almost 80% compared to 2020.
During the meeting, we introduced 22 new snowmobiles on the revolutionary Rider-First Matryx Platform, which delivers industry-leading ride and handling, both on and off trail.
Additionally, we introduced the company's first turbo-charged two-stroke engine, the Patriot Boost.
This new engine uses proprietary SmartBoost technology for unrivaled combustion stability, enabling 10% more power at sea level and 50% more power at 10,000 feet than our current 850 Patriot engine.
The strong model year lineup, along with continued demand from new customers entering the sport, has generated demand we haven't seen in years.
In fact, our SnowCheck orders, which concluded a couple of weeks ago, will make up over half of our Snowmobile build this year, eliminating much of the uncertainty around in-season sales required later in the year.
As you well know, strong retail demand in all of our businesses has continued to pressure our ability to fill the dealer channel.
Inventory levels declined further on a sequential basis and were down 71% year over year, with ORV realizing the most significant decline.
Supplier constraints and logistics delays remain the ongoing bottlenecks, and we are working all available options to ease the supply chain strain as quickly as possible.
I'll talk more about our efforts to manage the situation shortly.
As we've discussed in the past, presold vehicles continue to be a lever that our dealers can utilize to ensure they capture the sale.
This is enabled by our advanced manufacturing capability which provides visibility into and flexibility of our production plan.
This is just one of many examples of how the team is navigating this challenging environment to ensure dealers and consumers get the vehicles they want.
Given the current environment and our expectations that the supply chain constraints may not improve significantly until late in 2021, we anticipate it will likely take until sometime in 2022 to return dealer inventory to targeted levels.
That said, our ability to continue to expertly manage the supply chain through 2021 positions us well to meet consumer demand.
The number of suppliers impacted by COVID-related constraints has been somewhat of a moving target.
The Polaris team has been doing a tremendous job of keeping product flowing to fulfill demand by expediting shipping, working directly with suppliers on their staffing and supply base, rebalancing in-sourced and outsourced manufacturing, using alternative logistics lanes to shorten lead times, staging Polaris employees at ports to expedite customs clearance and optimizing the flow and location of inventory to fill backlog as quick as possible.
Additionally, we're adding capacity at select locations, including Monterrey, Mexico for RZR and GENERAL; Elkhart and Syracuse, Indiana for Bennington and Hurricane; Rigby, Idaho for climb apparel and Wilmington, Ohio for PG&A distribution.
We will be evaluating additional expansion needs with our board as the year progresses based on the trajectory of current demand.
These capacity additions, along with the anticipated supply chain improvements later in the year, will allow us to further ramp production in the coming quarters.
However, as I said before, we do not see dealer inventory returning to targeted levels until sometime in 2021.
Despite these distractions, I'm happy to report that we are still on track with our supply chain transformation and that the savings are being realized slightly ahead of plan.
This is an incredibly important strategic initiative for us with the goal of identifying suppliers that can provide the best quality, delivery, service, technology and value.
We have now made all sourcing decisions for two of the four waves, and we kicked off the third wave in February through a virtual supplier conference and are optimistic about the continued success of the program.
By the end of the year, we expect to be almost halfway to our goal of approximately $200 million of gross savings.
Currently, these savings are partially offsetting increased costs from logistics, commodities, rework and tariffs.
The good news here is when these costs abate, our sourcing savings will continue.
Our sports electrification is a very real opportunity, appealing to current as well as new consumers.
As we look into the future, EV technology will continue to mature and grow, both in terms of performance capabilities and consumer awareness and interest.
Our efforts today will set the stage and enable us to be well positioned for the future.
Our revved up strategy aims to position Polaris as the industry leader in electrification, both through the introduction of new vehicles and expansion of current offerings.
Our goal is to offer consumers an electric vehicle option within each of our core product segments over the next five years.
Last fall, we partnered with Zero Motorcycles, a global leader in electric motorcycle powertrains and technology, to bring to market an all-new 2022 electric RANGER by December 2021.
This all new electric powertrain will elevate the RANGER platform to a whole new level of capability, durability and performance.
We're also making investments to grow our current EV offerings with the co-development of a fully autonomous low-speed shuttle using our GEM vehicles, coupled with Optimus Ride's full stack of sensors and software to enable fully autonomous shuttles.
The vehicles are expected to roll out in the second half of 2023.
As we move through the year, watch for additional details on our revved up strategy in the upcoming RANGER product launch.
As you just heard, our first quarter far exceeded our expectations given the ongoing strong retail demand across the portfolio.
The Polaris team has met the challenges of supply chain shortages, logistics delays by working tirelessly with our suppliers, executing significant rework and coordinating with our logistics providers to deliver on our dealer and customers' expectations.
First-quarter sales were up 39% on a GAAP and adjusted basis versus the prior year.
Sales were up significantly for all segments of our business, driven by the ongoing strength in powersports, the boating industry and in our adjacent markets and Aftermarket segments.
First-quarter earnings per share on a GAAP basis was $2.11.
Adjusted earnings per share was $2.30, which was up significantly over last year's first quarter.
The results were driven by increased volume across the portfolio, lower promotional costs and operating expense leverage during the quarter.
Adjusted gross margins were up 352 basis points year over year primarily due to the lower promotional costs driven by the strong retail demand and lower floor-plan financing costs as a result of the low dealer inventory levels.
Supply chain constraints were an ongoing pressure point to gross margins as logistics and rework remained high.
And as we previously indicated, tariff costs were higher during the quarter as the onetime exemptions and refunds we saw in 2020 largely ended.
Operating expenses as a percentage of sales were down 584 basis points as we realized leverage from the strong sales growth and the timing of some R&D expenses and stock-based compensation costs being delayed into the coming quarters.
Income from financial services declined 18% during the quarter as income from the Polaris Acceptance joint venture, which dealers use to finance their inventory, continue to be down due to the lower level of inventory in the channel.
Foreign exchange also had a positive impact on our quarterly results, primarily driven by the Canadian dollar and the euro.
From a segment reporting perspective, all segments reported increased sales for the quarter.
ORV & Snowmobiles increased 50%.
global adjacent markets was up 27%.
And boats increased 29% for the quarter.
Our segments benefited from lower promotional costs, which has decreased considerably across the powersports industry, given the high demand and the lack of product in the channel.
And aside from boats, all powersports segments also experienced a negative product mix during the quarter as supply chain constraints caused a shift in the types of products we were able to produce.
Two additional highlights I want to point out are International and parts, garments and accessories businesses.
International sales were up 59% during the quarter.
All segments and regions experienced increased sales during the quarter, mostly driven by strong ORV, snow, motorcycle and PG&A sales.
About 10 points of the growth came from improved currency rates.
And our parts, garments and accessories sales increased 49% during the quarter.
All segments and product categories grew significantly during the quarter, driven by strong retail and installed base demand.
Moving on to our revised guidance for 2021.
Given the stronger-than-anticipated performance in the first quarter, we have increased our total company sales growth guidance and now expect sales to increase in the 18% to 21% range for the year, up from the 13% to 16% we guided in January.
We are also increasing our full-year adjusted earnings per share guidance for 2021 and now expect earnings to be in the range of $9 to $9.25 per diluted share.
The increase is driven by higher volume, increased pricing through growth, MSRP changes and continued lower promotional spending and floor-plan financing costs in addition to improved foreign exchange rates and operating expense leverage.
These positives are, however, being partially offset by continued manufacturing inefficiencies and higher logistics costs in addition to commodity and component pricing pressures driven by supply chain constraints.
While we are pleased with the strong demand we are experiencing, it continues to stress our supply chain as our supply partners attempt to match our demand trends.
This is putting additional pressure on gross profit margins for the remainder of the year.
We now anticipate that gross profit margins will be down 60 to 90 basis points, primarily driven by ongoing negative product mix we saw in the first quarter, along with increased logistics and manufacturing inefficiencies due to the high level of rework in our factories.
Additionally, we are seeing increases in commodity prices that we expect to hit our P&L beginning in the second quarter.
As a result, we are implementing price increases to help offset these pressures.
However, we expect it will take several quarters for the two to converge.
And as Mike indicated, our supply chain initiative now in its third year will help offset some of the additional supply chain costs.
While our gross profit margins are expected to be down for the year, as I stated on our last earnings call, if you exclude the impact of tariffs and supply chain disruptions, our gross profit margin rate would be up over 200 basis points compared to last year.
Adjusted operating expenses are now expected to improve 80 to 100 basis points as a percentage of sales as sales growth outpaces operating expense growth.
Our guidance for operating expenses in dollars for the full year hasn't changed.
The improvement in operating expenses as a percent of sales is entirely driven by the escalating sales growth anticipated this year.
Income from financial services is now expected to be down in the high single digits percent, driven entirely by the expectation that dealer inventory levels will remain low.
Retail financing availability remains at acceptable levels.
Guidance for the remainder of the P&L items remains materially unchanged from our previously issued guidance.
Given our strong performance in Q1, our expectation for sales and earnings per share are relatively consistent across each of the next three quarters.
Seasonality of products will have some impact but, in general, we will produce -- be producing the maximum number of vehicles our supply chain will allow.
As I mentioned earlier, we expect supplier constraints to continue to negatively impact our sales mix.
Additionally, higher commodity costs will begin to materialize in Q2 and are expected to remain for the balance of the year.
Both of these factors will result in lower gross profit margins as compared to the first quarter.
We expect operating expenses in each of the remaining three quarters to be approximately 10% to 15% above Q1 given the timing of spending.
Moving on to sales expectations by segment.
The increase in total company sales is driven by the sales increases in all of our businesses, given the strong first-quarter demand and significant order backlog.
As we have stated, the gating factor in meeting the current demand and beginning to fill the dealer channel is the ability of our supply chain and the logistics network to be able to deliver materials to the factories.
Our operations and sourcing teams continue to work diligently to maximize production levels.
First-quarter operating cash flow finished at $56 million compared to a negative $71 million in the first quarter of last year.
While our first quarter is typically a heavy cash use quarter given the working capital timing, our strong cash from earnings was able to overcome the cash needs and provide positive cash from operations.
Our cash flow performance expectations for the full year remain unchanged as we work to rebuild dealer and factory inventory to more acceptable levels.
Our bank leverage ratio improved sequentially to approximately 1.3 times as our debt levels continue to decline as anticipated.
Our expectations for use of cash for 2021, outside investing in the business, remains a combination of debt reduction and share repurchases.
During the first quarter, we spent almost $300 million on share repurchases.
Of the $300 million spent, $130 million was generated from the exercise of options.
This helps minimize the dilution of our shares.
We anticipate continuing to buy back shares throughout the remainder of the year, subject to market conditions and available authorizations.
Our expectations for capital expenditures of approximately $250 million remain unchanged.
And on January 28, the board of directors approved a 2% increase in the regular quarterly cash dividend, which is the 26th consecutive year of Polaris increasing its dividend.
During the quarter, we experienced broad-based retail strength across all of our businesses.
New customers continue to drive significant growth during the quarter, supplementing strong demand from our dedicated installed base.
Our supply chain's ability to keep pace with demand trends will remain an ongoing challenge for longer than originally anticipated.
But our size, agility and seasoned Polaris team gives me confidence in our ability to match supply with demand better than anyone in our industry.
The company is in the best financial position in years, with a strong cash position, debt below our targeted leverage ratios and all segments expected to grow sales, improve profitability and gain market share in 2021.
 Assistant:

Chosen response:
compname says q1 earnings per share $2.11.
polaris first quarter 2021 earnings results.
q1 earnings per share $2.11.
q1 reported and adjusted sales increased 39% to $1,951 million.
adjusted net income for q1 was $2.30 per share.
north american retail sales increased 70% for quarter compared to last year driven by broad-based strength across biz.
full year 2021 adjusted sales is now expected to be up 18% to 21% over prior year.
now expects full year earnings to be in range of $9.00 to $9.25 per diluted share.


Prompt:
Human: Again, I'm Mark Kowlzan, Chairman and CEO of PCA.
And with me on the call today is Tom Hassfurther, Executive Vice President, who runs the Packaging business; and Bob Mundy, our Chief Financial Officer.
Without a doubt, these may be the most unpredictable and unprecedented times that hopefully we will ever encounter.
There is no reference manual for managing through a public health crisis with severe economic ramifications, such as what has occurred with the COVID-19 pandemic.
Our routines, habits, personal preferences, work and social activity and many other aspects of our lives are sure to change forever as a result of this.
PCA's operations qualify as an essential or critical element under the various state and local shelter-in-place orders.
Our leadership team is in constant communication discussing safety, the state of our operations, business continuity and other critical management topics.
It is our responsibility at PCA to ensure that, first and foremost, we help provide for the well-being of our more than 15,000 employees and their families.
We must do everything in our power to assist our customers and suppliers as well.
We have implemented various procedures and safeguards at all our manufacturing, converting and office locations across the country to help keep our employees safe and healthy as we provide the goods and services considered essential for assisting with our country's response to the pandemic.
We have also put measures in place to assist them with the economic ramifications that have resulted from these response measures.
To date, we have not experienced any significant interruptions at our operations or in our supply chain due to the virus.
Our network of mills, converting facilities and distribution operations strategically located throughout the United States gives PCA asset flexibility to manufacture and ship products to multiple locations.
We will continue to closely monitor developments, take proactive measures to protect our employees, and provide our customers with the products and services they require.
I could not be more proud of the effort, responsiveness and sacrifices displayed by all PCA employees as well as our customers and suppliers.
It has truly been an inspiring observation.
I'll then wrap things up, and we'll be glad to take some questions.
Yesterday, we reported first quarter net income of $142 million or $1.49 per share.
First quarter net income included special items expenses of $0.01 per share, related primarily to costs and expenses associated with the COVID-19 pandemic.
Excluding special items, first quarter 2020 net income was $143 million or $1.50 per share compared to the first quarter of 2019 net income of $187 million or $1.98 per share.
First quarter net sales were $1.7 billion in both 2020 and 2019.
Total company EBITDA for the first quarter, excluding special items, was $311 million in 2020 and $371 million in 2019.
Excluding special items, the $0.48 per share decrease in first quarter 2020 earnings compared to the first quarter of 2019 was driven primarily by lower prices and mix in our Packaging segment of $0.64 and Paper segment of $0.05; lower volumes in our Paper segment of $0.03; higher annual outage expenses, $0.04; higher depreciation expense, $0.04; other expenses, $0.01; and higher tax rate, $0.01.
The items were partially offset by higher volumes in our Packaging segment of $0.14; lower operating costs of $0.09; lower converting costs, $0.04; lower freight and logistics costs, $0.01; and lower interest expense, $0.04; and nonoperating pension expense, $0.02.
The results were $0.30 above the first quarter guidance of $1.20 per share, primarily due to higher volumes in our Packaging segment of $0.03 and our Paper segment of $0.01, higher prices and mix in the Packaging segment of $0.02 and lower operating costs of $0.15, resulting from the excellent fiber and energy usage and lower input prices in our mills.
Freight and logistics costs were lower than expected by $0.03, as were converting costs, annual outage costs and other expenses, each lower than expectations by $0.02 per share.
Looking at our Packaging business.
EBITDA, excluding special items in the first quarter of 2020 of $290 million with sales of $1.5 billion resulted in a margin of 20% versus last year's EBITDA of $334 million and sales of $1.5 billion or a 23% margin.
Our containerboard mills established a new first quarter volume record, even while performing scheduled annual maintenance outage work at four of the mills.
Our containerboard production allowed us to maintain our industry-leading integration rate of approximately 95% by supplying the necessary containerboard to our box plants, who achieved an all-time record for total box shipments as well as a new first quarter shipments per day record.
We were able to meet this greater-than-anticipated demand through proactive management, changing the sequencing of our scheduled maintenance outages as well as outstanding execution of the work performed during these outages.
Our enhanced capabilities to optimize the mix, freight and logistics costs, inventory levels and internal and external customer needs of the customer of the containerboard system provided to us by our machine conversion at Wallula Mill were a key component as well.
We ended the quarter with containerboard inventories at their lowest levels since the acquisition of Boise's packaging business in 2013.
Corrugated products and containerboard demand were very strong during the quarter.
As Mark indicated, our corrugated products plants achieved a new all-time record for total box shipments, which were up 5.6% over last year as well as a new first quarter record in shipments per day, which were up 3.9% compared to last year's first quarter.
Outside sales volume of containerboard was 13% above last year's first quarter, primarily attributable to increased domestic demand with export demand slightly higher as well.
Domestic containerboard and corrugated products prices and mix together were $0.54 per share below the first quarter of 2019 and down $0.06 per share compared to the fourth quarter of 2019.
Export containerboard prices were down about $0.10 per share versus last year's first quarter and flat compared to the fourth quarter of 2019.
Looking at our Paper segment.
EBITDA, excluding special items in the first quarter of $42 million with sales of $217 million or 19% margin compared to the first quarter of 2019 EBITDA of $55 million and sales of $240 million or 23% margin.
First quarter paper prices and mix were below last year as expected, however, they were flat compared to the fourth quarter of 2019.
Our Paper volume was also lower as expected, primarily due to the scheduled maintenance outage at our Jackson, Alabama mill; however, it was about 3% higher than we had assumed.
Although we ended the quarter with our inventory slightly lower than planned, on April 1, we announced downtime at our Jackson, Alabama mill for the months of May and June to ensure we manage the supply according to our demand outlook for the second quarter.
Throughout the quarter, the mills did an outstanding job, managing fiber and chemical usage and maintained tight control over indirect and fixed expenses.
We had record first quarter cash generation with cash provided by operations of $237 million and record first quarter free cash flow of $166 million.
The primary uses of cash during the quarter included capital expenditures of $71 million and common stock dividends of $75 million.
We ended the quarter with $764 million of cash on hand or $913 million, including the cash we recently moved to marketable securities.
Our liquidity at March 31 of over $1.2 billion is the highest ever for our company.
And with the refinancing we completed in the fourth quarter of 2019, we have no debt maturities for the next 3.5 years.
Regarding our announcement of taking our paper mill in Jackson, Alabama down for the months of May and June, our estimated second quarter financial impact of this decision is approximately $30 million or $0.24 per share.
I want to update you on our full year guidance for certain items that we provided on last quarter's call.
As Mark alluded to earlier, we managed through a very strong first quarter demand in our Packaging business, partly by altering the sequencing of the scheduled maintenance outages at our containerboard mills as well as the containerboard machines impacted versus what we discussed during last quarter's call.
There are no changes to the scheduled outages at our white paper mills.
The actual impact in the first quarter was $0.22 per share, and the estimated impact by quarter for the remainder of the year is now $0.09 per share in the second quarter, $0.16 in the third and $0.34 per share in the fourth quarter.
The full year estimate remains at $0.81 per share, as we mentioned previously.
Also, our full year interest expense is now expected to be $88 million versus $81 million.
And our net cash interest is now estimated to be $92 million versus $84 million, primarily due to lower expected interest income.
Our cash tax rate estimate is now slightly lower than our earlier estimate of 19%, partially due to the downtime we announced at our Jackson mill, and our effective tax rate remains at approximately 25%.
After a thorough review of our capital spending plans, we are not changing the range of spending we provided previously, which was between $400 million to $425 million, nor are we changing our full year outlook for pension contributions or depreciation.
As I mentioned earlier, these may be the most unpredictable and unprecedented times that hopefully we will ever encounter.
Not a day passes that we realize something new being impacted in a way we had never thought of or imagined of before.
Our consistent approach toward prudent capital allocation and sound financial governance has served us well for many, many years and is certainly helpful in times like this.
PCA entered this uncertain period of time brought on by the COVID-19 crisis from a position of financial and balance sheet strength.
Our focus has been and will remain on preserving that strength through the actions and decisions we make as a management team.
As Bob mentioned, our company's liquidity position has never been higher nor has our confidence in the future success of PCA.
We are well positioned to manage through whatever lies ahead, while ensuring we take care of the needs and expectations of our employees, customers, suppliers and shareholders.
However, the confidence does not translate to the same degree short-term predictability or guidance specifics that we normally provide at this time.
However, due to the uncertain scope and duration of the pandemic and the timing of the global recovery and economic normalization, we're not able to properly quantify our guidance for the second quarter.
We've already announced the actions being taken in our Paper business, and we believe these actions will position us properly for what we anticipate right now for the second half of 2020.
However, nothing is certain, especially now, and it may require further action to be taken.
We know that we experienced a demand surge in our Packaging business in the first quarter, and the second quarter has also begun quite strong as well.
Our containerboard inventory is at the lowest levels, both in total and in weeks of supply since our acquisition of the Packaging business from Boise.
And while recycled fiber prices began moving significantly higher during the first quarter, our position as a primarily virgin fiber producer minimizes its impact compared to other producers.
However, it only makes logical sense that demand in certain end markets will return to more normal growth trends at some point, although we've been successful at securing new business in end markets with a stronger demand outlook versus markets whose demand may be impacted more negatively.
Also, it is impossible to predict what additional health-related measures will be or must be taken or dictated to us by the various state and local governments where we operate.
Such events and actions could adversely impact the operation of not only our facilities, but also the availability of services and products we rely upon from our suppliers.
That being said, it is also a fact that the products our company provides are essential to the response efforts, the recovery and the well-being of our country.
The needs for our cost-effective, sustainable and renewable products will continue.
While no one knows the severity or longevity of the virus' impact on global economy, it is my belief that this need will be even more in demand as the world recovers from this crisis.
The statements were based on current estimates, expectations and projections of the company, and involve inherent risks and uncertainties, including the direction of the economy and those identified as risk factors in our annual report on Form 10-K on file with the SEC.
 Assistant:

Chosen response:
q1 earnings per share $1.50 excluding items.
q1 earnings per share $1.49.
q1 sales $1.7 billion versus refinitiv ibes estimate of $1.66 billion.
strong demand in our packaging segment drove q1 results.
due to uncertain scope and duration of pandemic , we are not able to properly quantify our guidance for q2.