Prompt:
Human: I appreciate you all joining us today to discuss our second quarter fiscal 2021 results.
In particular, more than two-thirds of our people are essential workers, and they have continued to come to work every day, enabling us to continue to deliver for our customers.
I'm very proud of our entire team.
Regarding the business, as we indicated last quarter, overall, we have seen our commercial volumes stabilize and continued strong performance out of our government business.
While we remain in a difficult and uncertain environment, we are encouraged by the stabilization, as well as the positive developments regarding the vaccines, which not only will protect our people, but should also ultimately lead to more travel and a recovery in our commercial markets.
With that, turning to the quarter, our sales decreased 28% year-over-year from $561 million to $404 million, and our adjusted diluted earnings per share from continuing operations decreased 52% from $0.64 per share to $0.31 per share.
Our sales to commercial customers decreased 48%, and our sales to government and defense customers increased 13%.
For the quarter, sales to government and defense customers were 52% of our total sales.
Our Aviation Services segment grew 6% sequentially from our first quarter.
This was a result of increased volume in our MRO business, which is seasonally higher in Q1 over -- Q2 over Q1, as well as the continued strength of our government business.
Our commercial parts volumes overall were relatively stable throughout the quarter and remained above the lows we saw in April and May.
That said, I am particularly encouraged by our margin improvement progress.
Over the last several quarters, we have reduced our footprint across the enterprise, decreased our indirect and overhead spending, exited or restructured several underperforming contracts and divested a loss-making non-core business.
You are now starting to see the results of these actions in our adjusted operating margins, which improved meaningfully from 2.5% to 4% sequentially on stable revenue.
With respect to cash, we generated $28 million from operating activities from continuing operations and also reduced our accounts receivable financing program by nearly $7 million, further improving our already strong balance sheet position and putting our net leverage below 1 times EBITDA.
We also continue to add significant new business that positions us for growth going forward.
Our CFM56 partnership with Fortress solidifies a source of supply to meet growing demand for used serviceable material on the -5B and the -7B engine variants.
We expect demand for USM to increase across the board as we emerge from the pandemic and to be particularly strong for these engine platforms.
Also, our follow-on contract from the Navy to support the C-40 aircraft recognizes our performance over the last five years and provides for an expanded statement of work over the next five years.
It's worth noting that this was the first time that this contract was awarded to an incumbent, which speaks to the high-quality of our service.
Additionally, our 10-year agreement with Honeywell to be its sole authorized service center for 737 MAX Electronic Bleed Air System components positions us to support MAX operators worldwide when that aircraft to return to service.
These new contracts, along with others we have announced over the last several months, such as the Unison expansion and extension, represent nearly $1.7 billion in total contract value captured so far this fiscal year.
This demonstrates the unique value of our Aviation Services offerings, and these business wins will help accelerate our recovery coming out of the downturn.
Our sales in the quarter of $403.6 million were down 28% or $157.3 million year-over-year, driven by the impacts of the pandemic on commercial passenger flying activity.
Sequentially, Aviation Services sales were up 5.9% or $21.4 million, while sales in Expeditionary Services were down 50% or $18.6 million.
The sequential decline in Expeditionary Services was driven by two factors.
First, the exit of the composites business was completed at the end of Q1, and this business generated $7 million of revenue in Q1 and zero in the current quarter.
Second, as previously discussed, mobility had a particularly strong Q1 due to elevated shipments of pallets.
Within Aviation Services, our government and defense business was up 19% or $30 million year-over-year, reflecting strong performance on existing contracts.
In the quarter, as well as in Q1, our program to deliver two C-40 aircraft to the U.S. Marine Corps generated strong revenue due to elevated activity on the program.
Gross profit margin in the quarter increased to 17.2% from 15.3% in the prior year quarter, driven by the CARES Act payroll support.
On a sequential basis, gross profit margin was up 12 -- was up from 12.1% in our first quarter, reflecting the actions we have taken to reduce our indirect costs and to exit underperforming contracts and product lines.
SG&A expenses were $43.4 million for the quarter.
On an adjusted basis, SG&A was $38 million or 9.4% of sales, down $13 million from the prior year quarter, reflecting the reduction of our overhead cost structure.
Of this improvement, approximately $3.2 million was the result of temporary reductions in compensation and benefits, which we restored beginning on December 1.
As an update on our previous disclosure, we have been in settlement discussions with the Department of Justice regarding an investigation of airlift under the False Claims Act.
During the quarter, we recorded $6 million of additional accrual and discontinued operation, which brings our total reserve for this matter to $8 million based on our latest settlement offer.
We generated $27.6 million of cash in our operating activities from continuing operations for the quarter.
This is net of a use of cash of $6.8 million as we continue to reduce the size of our accounts receivable financing program.
Excluding the accounts receivable financing program, cash flow provided by operating activities from continuing operations was $34.4 million.
Inventory decreased $12.7 million during the quarter.
Our net debt at quarter end was $112.1 million, down $37 million from $149.3 million at the end of Q1.
Our balance sheet and liquidity remain strong with net leverage of 0.95 times adjusted EBITDA, unrestricted cash of $110 million and unused capacity under our revolver of approximately $390 million.
As such, we're well positioned to fund what we expect to be unique opportunities to grow our business over the coming quarters.
Overall, we are pleased with our results given the current environment and also pleased with the progress we have made in improving our operating efficiency.
As I mentioned, for many reasons, we are encouraged by the multiple vaccines coming to market and the plans for distribution.
As the vaccines are distributed and case numbers decline, we expect travel restrictions to be lifted and people to start flying again.
Until then, we expect to be in a relatively stable revenue environment, and we will continue to focus on driving cash flow, as well as continued margin improvement.
We will also remain focused on capturing new business, I am confident that our strong balance sheet, combined with the airlines' increasing desire for our lower-cost value-added services, will lead to even more growth opportunities.
 Assistant:

Chosen response:
second quarter sales of $404 million, down 28% from the prior year reflecting the impact of covid-19.
qtrly adjusted diluted earnings per share from continuing operations of $0.31, which excludes impact of cares act support, other items.
q2 adjusted earnings per share $0.31 from continuing operations excluding items.
q2 sales $404 million versus refinitiv ibes estimate of $409.4 million.


Prompt:
Human: I appreciate you joining us today to discuss our third quarter fiscal year 2021 results.
I would like to begin the call by once again recognizing our employees.
Their unwavering commitment, professionalism and flexibility have allowed us to continue to support our customers without interruption over the past year.
Turning to the quarter.
Our sales decreased 26% year-over-year from $553 million to $410 million and our adjusted diluted earnings per share from continuing operations decreased 45% from $0.57 per share to $0.37 per share.
Our sales to commercial customers decreased 42% and our sales to government and defense customers increased 4%.
For the quarter sales and government -- to government and defense customers were 49% of our total sales.
As we mentioned on the last earnings call, we expected relatively stable revenue which is what we saw in this quarter with sales up 2% sequentially.
In MRO we did see a sequential increase in hangar activity due to increased demand supporting anticipated leisure travel.
In our commercial parts activities revenue was relatively stable but we were encouraged to see orders across a broader range of customers during the quarter than what we saw in Q2.
Our government businesses, which have performed very well over the past year, continued their strong performance delivering another quarter of year-over-year growth.
Regarding profitability, our adjusted diluted earnings per share from continuing operations were up 19% sequentially reflecting our continued margin improvement progress.
On an adjusted basis, which excludes the benefit of the CARES Act, our gross margin improved sequentially from 13.9% to 16.1% and our operating margin improved from 4% to 5%.
We have now more than doubled our adjusted operating margin over the past two quarters while operating in a stable revenue environment.
We are also proud to have fully reinstated salaries and 401(k) benefits at the beginning of the third quarter which had been a priority for us as we look to attract and retain top talent.
Even with the compensation restoration, we were able to still deliver a full point of adjusted operating margin improvement.
That improvement reflects the operating leverage that we have created through cost reductions, efficiency gains and portfolio reshaping over the last year.
Turning to cash, once again, we were cash flow positive in the quarter even while making investments in new business wins.
We generated $18 million from operating activities from continuing operations and remain in a strong balance sheet position with 1.1 times net debt to adjusted EBITDA.
Speaking of new business, we also continued to secure and execute new wins during the quarter.
We expanded our distribution relationship with GE subsidiary Unison on a five-year program from the US Air Force to provide and repair and overhaul of F-16 accessories and extended our support of the Navy's H-60 Seahawk platform for an additional seven years.
We also began operations on our previously announced Honeywell 737 MAX EBAS contract.
Our sales in the quarter of $410.3 million were down 25.8% or $142.8 million year-over-year driven by the reduction in commercial passenger flying activity due to COVID-19.
Sequentially sales were up 1.7% with commercial sales up 7% driven by MRO volumes and government and defense sales down 3.3% driven by the scheduled reduction in activity and our program to deliver two C-40 aircraft to the US Marine Corps.
Gross profit margin in the quarter increased to 21% from 11.8% in the prior-year quarter driven primarily by the CARES Act payroll support.
On an adjusted basis, excluding the CARES Act support and other items, gross profit margin was 16.1% consistent with the 16% in the year-ago quarter despite the significant decline in sales.
Sequentially adjusted gross profit was up meaningfully from 13.9% to 16.1% reflecting the actions we have taken to reduce our indirect costs and drive efficiency.
Regarding Expeditionary Services specifically.
Gross profit margin increased to 17% from 0.4% in the prior-year quarter, driven by the divestiture of the composites business and improved performance at the mobility operation.
SG&A expenses were $44.9 million for the quarter.
On an adjusted basis, SG&A was $42.8 million or 10.4% of sales down $9 million from the prior-year quarter, reflecting the reduction of our overhead cost structure.
With respect to our accounting for the CARES Act payroll support, we have fully recognized our deferred credit in Q3 and we will no longer have income associated with the CARES Act support.
We have an $8.8 million promissory note associated with the CARES Act, which we expect to repay during the fourth quarter.
Also, we continue to have certain foreign subsidiaries that are eligible for stimulus provided by foreign governments.
Consistent with prior quarters, government subsidies, including the CARES Act are reflected in our GAAP income primarily as a reduction in our cost of sales.
However, we exclude these benefits from our adjusted results.
Other adjustments during the quarter included $4 million of loss provision and exit costs for commercial programs contracts, $1.5 million of which reduced sales.
In addition, there was a gain of $4.3 million related to a legal settlement, which we have excluded from our adjusted results.
Also during the quarter, we reached a tentative agreement with the Department of Justice to settle the investigation of airlift under the False Claims Act for approximately $11.5 million.
As such, we recognized a charge in the quarter of $4.2 million in discontinued operations.
As a reminder, we completed the exit of our airlift business in the fourth quarter of last year.
In the quarter, we generated $17.6 million of cash in our operating activities from continuing operations.
We reduced inventories by $21 million from our second quarter as we continued to focus on working capital management.
Our net debt at quarter-end was $108.4 million, down from $112.1 million at the end of Q2 and from $171.1 million at the end of Q3 of last year.
In addition, our accounts receivable financing program has decreased by $37.2 million over the last year from $85.6 million at the end of the year-ago quarter to $48.4 million.
Our overall leverage and liquidity remain strong with net debt of 1.1 times adjusted EBITDA, unrestricted cash of $99.2 million and unused capacity under our revolver of over $400 million.
Overall, we are encouraged by the widely reported recent increases in demand for domestic leisure travel and we remain optimistic about the broader commercial market recovery.
We expect modest sequential improvement in Q4 and continued improvement thereafter as the vaccine is distributed and current travel restrictions, which are impacting some of our larger international customers, are lifted.
As that occurs and our revenue recovers, we remain committed to leveraging our current cost structure to drive continued margin improvement.
In addition, our balance sheet puts us in a very strong position to be able to fund growth.
We expect to make investments in our USM and distribution activities as well as to continue to invest in our technology and digital initiatives.
These actions along with the continued strength of our government business and the early signs of a recovery in our commercial markets give us increasing confidence that we will emerge from the pandemic as an even stronger and more profitable company.
 Assistant:

Chosen response:
compname posts q3 adjusted earnings per share $0.37 from continuing operations.
q3 adjusted earnings per share $0.37 from continuing operations excluding items.
q3 sales $410 million versus refinitiv ibes estimate of $412.4 million.
compname says q3 sales down 26% from prior year reflecting continued impact of covid-19.


Prompt:
Human: Both of these documents are available in the Investor Relations section of applied.com.
In addition, the conference call will use non-GAAP financial measures, which are subject to the qualifications referenced in those documents.
On behalf of our entire team at Applied, we hope you and your families are healthy, safe and managing well.
I'll start today with a business update, including how we continue to respond to the pandemic as well as progress with various internal initiatives and color on the external environment.
Dave will follow with a summary of our financials and some specifics on our first quarter and outlook, and then I'll close with some final thoughts.
Into early fiscal 2021, we're seeing a modest recovery gain momentum and are executing well.
I'm encouraged by the start to the year and believe we are in a solid position to build off this positive momentum as we move forward.
Our operations are functioning productively.
Our supply chain and inventory levels are in a good position and we are responding effectively to customers' increasing requirements as an initial demand recovery appears to be under way.
Throughout the past several quarters, we have quickly adapted to the evolving environment, including implementing new processes and ways to support our customer needs.
A key part of our message to all our stakeholders during these evolving times is how Applied is stronger today than in prior cycles.
This includes benefits from our expanded offerings, greater technical focus and a more diversified end market mix.
We've also strengthened our marketing and sales efforts to showcase our comprehensive and leading technical offering and to further develop our cross-selling opportunity.
We are increasingly critical to our customers as maintenance, production and efficiency requirements begin to ramp across their core operational infrastructure.
These elements are providing near-term sales support and leave us increasingly constructive on our growth potential going forward.
In addition, investments in systems, talent, analytics and operational processes in recent years are yielding additional benefits in the current environment.
We quickly aligned our cost structure and once again are demonstrating our operational discipline and the resilience of our operating model.
This is highlighted by better-than-expected decremental margins in the quarter as well as ongoing strengthening of our balance sheet following strong cash generation performance and a nearly 30% reduction in net debt levels over the prior year.
Our capabilities and company-specific opportunities, combined with the improving outlook, positions us to be a growth leader with increasing earnings power entering the next phase of recovery in the industrial economy.
This is demonstrated by our recent tuck-in acquisition of Advanced Control Solutions earlier this month.
ACS represents the next step in expanding our automation offering, which is further differentiating our value proposition, diversifying our end market mix and enhancing our growth profile to include next-generation industrial solutions.
As it relates to the broader demand environment, underlying trends remain below prior year levels during our first quarter as business activity continued to adjust to the ongoing pandemic.
That said, customer order activity improved sequentially through the quarter, and we continue to gain traction with our internal growth initiatives.
As a result, the year-over-year organic sales decline of 13.4% in the quarter improved notably from the 18.4% decline last quarter.
Year-over-year organic sales declines improved each month and sequential trends in daily sales rates seasonally strong.
We're starting to see greater maintenance activity and break/fix requirements with customers increasing access to their facilities and expanding equipment utilization as production gradually ramps back up, including at smaller local accounts.
Feedback from our sales leaders suggest order sizes are increasing, customer inventory levels are being replenished and maintenance projects are getting authorized as businesses increase activity and new safety protocols support a productive path forward.
In addition, we saw several industry verticals return back to growth during the quarter with 10 of our top 30 verticals up year-over-year versus only two last quarter.
Areas such as Food & Beverage, Aggregates, Technology, Chemicals and Transportation were all showing positive momentum.
And while weakness remains greatest across heavy industries, such as Machinery, Metals and Oil & Gas.
Demand within these verticals appears to be stabilizing and improving slightly.
We view these dynamics as a positive sign for the industrial economy and demand for our critical products and solutions.
That said, the pace of end market improvement remains gradual and at times inconsistent.
Organic sales through our first 18 business days of October are down by mid-teens percent over the prior year.
We saw some easing in sales early in the month following a strong end to our fiscal first quarter.
Sales trends have improved each week in October, with order momentum increasing sequentially across both our segments month-to-date.
However, it's important to note that visibility remains limited ahead of the seasonally slower winter months as customers continue to manage through an uncertain macro and pandemic outlook near term.
Additionally, customer purchasing discipline can be more restrained around any given election cycle.
As we've shown in recent quarters, we know how to manage and execute in this still uncertain business environment and will remain prudent in our cost focus and capital deployment near-term while focusing on our self-help growth opportunities.
Overall, we're seeing signs that reinforce our view that the worst is behind us, and a recovery is starting to gain traction.
This bodes well for when we enter the seasonally stronger second half of our fiscal year as comparisons become easier and we continue to execute on our internal growth initiatives.
Before I begin, I will remind everyone that a supplemental investor deck recapping key financial performance and discussion points is available on our investor site for your additional reference.
To provide more detail on our first quarter, consolidated sales decreased 12.7% over the prior year quarter.
Acquisitions contributed 1.1% growth, partially offset by an unfavorable foreign currency impact of 0.4%.
Netting these factors, sales decreased 13.4% on an organic basis with a like number of selling days year-over-year.
Turning to sales performance by segment, as highlighted on slides six and seven.
Sales in our Service Center segment declined 14.9% year-over-year or 14.4% on organic basis.
The decline reflects the ongoing impact from COVID-19, including reduced industrial production activity and customer facility restrictions which continues to impact MRO demand across our service center network.
However, the 14% organic decline year-over-year represents an improvement from the 21% decline during last quarter.
In addition, average daily sales rates were up more than 4% sequentially and above the normal seasonal progression.
As Neil highlighted, we saw greater maintenance activity in break/fix demand.
More customers are providing access into their facilities and releasing working capital spending following a slow pace during the summer months.
Year-over-year declines remain greatest within Metals, Oil & Gas and Machinery end markets but were balanced by underlying improvement within Food & Beverage, Pulp & Paper, Aggregates, Forestry and Chemical Industries as well as ongoing growth in our Australian operations.
Within our Fluid Power & Flow Control segment, sales decreased 7.4% over the prior year quarter with our August 2019 acquisition of Olympus Controls, contributing 3.8 points of growth on roughly half a quarter of remaining inorganic contribution.
On an organic basis, segment sales declined 11.2%, reflecting lower demand across Industrial, Off-Highway Mobile and process-related end markets.
This was partially offset by sales growth within Technology, Life Sciences, Food & Beverage and Chemical end markets during the quarter as well as ongoing traction with our cross-selling initiatives and firm sales activity across our emerging automation platform.
Moving to margin performance.
As highlighted on Page eight of the deck, gross margin of 28.9% declined approximately 50 basis points year-over-year or 40 basis points when excluding noncash LIFO expense of $1.1 million in the quarter and $0.4 million in the prior year quarter.
Year-over-year declines primarily reflect unfavorable mix tied to sales declines across our local service center accounts, albeit more modest relative to last quarter as well as more subdued pricing opportunities given the softer demand environment.
That said, on a sequential basis, gross margins improved 13 basis points or 17 basis points when excluding LIFO expense, and we're slightly ahead of our expectations.
While we expect some of the volume-driven year-over-year headwinds to persist near term, we remain focused on driving annual gross margin expansion as demand levels normalize, reflecting benefits from our systems investments, the positive contribution of expansionary products, strategic growth driven by our technical service-oriented solutions and initiatives to expand business across our local customer base.
In addition, we are starting to see a slightly greater level of supplier price increase announcements, which, combined with firming demand, could provide some positive momentum for pricing contribution and margin expansion into the second half of our fiscal year.
Turning to our operating cost.
Selling, distribution and administrative expenses declined 13.4% year-over-year or approximately 15% when excluding incremental operating costs associated with our Olympus Controls acquisition.
Both of these figures exclude $1.5 million of nonroutine cost in the prior year quarter.
The year-over-year decline reflects the ongoing benefit from various actions we've taken in recent quarters to align expenses with lower demand.
This includes a mix of both structural and temporary cost actions as we continue to assess the environment.
And while we have begun to roll back some of the temporary actions, our team continues to demonstrate great discipline in controlling costs and identifying internal opportunities.
Combined with improving sales trends during the quarter, we reported a 9.5% decremental margin on operating income during our recent fiscal first quarter, which exceeded our expectations and highlights the adaptability and durability of our operating model.
Going forward, we will remain prudent and disciplined in maintaining our cost structure as we continue to gradually roll off temporary cost actions to align with our recent performance, a more constructive outlook and our growth initiatives.
EBITDA in the quarter was $67.6 million, down 13.6% compared to adjusted EBITDA of $78.2 million in the prior year quarter while EBITDA margin was 9%, down a modest 10 basis points over the prior year despite the double-digit sales decline.
We reported net income of $34.8 million or $0.89 per share, down from adjusted net income of $39.9 million or $1.02 per share in the prior year quarter.
Moving to our cash flow performance and liquidity.
During the first quarter, cash generated from operating activities was $81.8 million while free cash flow was $78.2 million or approximately 225% of net income.
This was up from $50 million and $45 million, respectively, as compared to the prior year quarter, and represents record first quarter cash generation.
The strong cash performance during the quarter reflects ongoing contribution from our working capital initiatives as well as the countercyclical cash profile of our business model.
Given the strong cash flow performance in the quarter, we ended September with over $271 million of cash on hand with approximately 75% of that unrestricted U.S. held cash.
Of note, this is after utilizing $62 million of cash during the quarter to pay down debt.
We have now paid down over $200 million of debt since early 2018, including over $80 million the past year.
Our net debt is down nearly 30% over the prior year, and net leverage stood at 2.1 times adjusted EBITDA at quarter end, below the prior year quarter level of 2.3 times and the prior year level of 2.6 times.
Additionally, our revolver remained undrawn with approximately $250 million of capacity and an additional $250 million Accordion option.
Combined with incremental capacity on our uncommitted private shelf facility, our liquidity is ample and our balance sheet is strong entering what appears to be an emerging recovery.
This provides flexibility to fund incremental working capital requirements in coming quarters as customer demand continues to improve as well as opportunistically pursue strategic M&A aligned with our growth initiatives.
Our M&A focus near-term remains on smaller bolt-on targets that align with our growth priorities, including additional automation and fluid power opportunities.
Transitioning now to our outlook.
Visibility remains limited on how customers will proceed with operations into the seasonally slower winter months.
That said, to provide some directional views near term based on month-to-day trends in October and assuming normal sequential patterns in daily sales rates for the balance of the quarter, we would expect fiscal second quarter 2021 sales to decline 13% to 14% organically on a year-over-year basis.
This includes an assumption of low-teen organic declines in both our Service Center segment and Fluid Power & Flow Control segment.
Again, this direction is meant to provide a starting framework on how second quarter sales could shape up if trends follow normal seasonality over the next two months.
If customers reduce underlying production activity, or extend these plant shutdowns, this could drive organic declines that are greater than the 13% to 14% assumption.
On the other hand, if we see ongoing improvement in underlying industrial activity and further traction with our internal growth initiatives, organic declines could be better than the 13% to 14% assumption.
In addition, we expect our recent acquisition of ACS to contribute approximately $6 million in sales during our fiscal second quarter.
Based on the 13% to 14% organic sales decline, we believe a low double-digit to low-teen decremental margin is an appropriate benchmark to use for our second quarter.
This assumes gross margin to be relatively stable sequentially to first quarter levels as well as the ongoing gradual rollback of temporary cost actions.
As indicated, we will continue to take a mindful and balanced approach to our operating costs going forward, including ongoing focus on internal opportunities and margin initiatives, which we expect to provide balance into our cost trajectory moving forward.
We are encouraged by our cost and margin execution year-to-date which are providing the flexibility to further roll back temporary cost actions as we take an offensive approach to an emerging recovery and our strategic growth targets.
We also note an effective tax rate of 23% to 25% is still an appropriate assumption near term.
Lastly, from a cash flow perspective, we would expect moderation from first quarter levels sequentially for the balance of the year, given potential greater working capital requirements as we look to support growth and the recovery as the year plays out.
We remain confident in our cash generation potential over the cycle and reiterate our normalized annual free cash target of at least 100% of net income.
Overall, I'm encouraged by how we started the year.
Our entire team has shown tremendous resiliency over the past several quarters which is driving improved performance into early fiscal 2021 and positions us to respond and capitalize on the recovery as it continues to unfold.
We have proven the durability of our business model, strengthened our balance sheet and optimized our cost structure.
We are leveraging our unique and differentiated industry position to be an industrial growth leader into the emerging recovery and in years to come.
All of this is reflected in our first quarter results and provides further evidence of the positive path we're on.
From our industry-leading technical MRO capabilities to our Engineered Solutions focus, multichannel cross-selling opportunity and expanding automation platform.
We have multiple catalysts to expand our market potential and accelerate share gains in coming years, all while driving additional margin expansion.
This is integrated into our long-term targets of $4.5 billion in sales and 11% EBITDA margins, which are well within our capability and provide the framework for accelerating earnings power and stakeholder returns long term.
 Assistant:

Chosen response:
compname reports q1 earnings per share $0.89.
q1 earnings per share $0.89.
applied industrial technologies - due to ongoing uncertainty from covid-19 pandemic, continues to refrain from providing financial guidance for fy2021.
compname says project q2 sales to decline 13% to 14% year over year on organic basis.


Prompt:
Human: I'd like to start by first congratulating Steve on being named ALLETE's CFO last week.
Steve is a familiar face to you all, and he is an integral member of ALLETE's executive leadership team.
With his breadth of experience and strategic and technical expertise always founded on strong integrity, Steve is the perfect person for this next era as ALLETE continues to advance the nation's clean energy transformation.
Steve succeeds Bob Adams as CFO.
As we announced earlier this year, Bob is retiring in June after more than 35 years at ALLETE.
We're all grateful Bob will be with us over the next several months.
These financial results were firmly within our 2021 earnings guidance range of $3 to $3.30 per share.
I couldn't be more proud of our entire team for these results and all of our accomplishments in 2021.
Our businesses had an incredibly strong fourth quarter, ending the year on a high note.
We delivered on many operational, positioning, and financial successes driven by ALLETE's amazing employees and strong culture, as together we advance sustainability in action.
These accomplishments are providing value to our customers and our shareholders today and will continue to do so for years to come.
In a few moments, Steve will provide details of the 2021 financial results and 2022 guidance, and Bob will provide his thoughts on our growth trajectory.
Before that, I would like to highlight just a few of the accomplishments we achieved during the year.
While we serve our customers with excellence and provide exciting opportunities for our employees, we take great pride in creating value for our shareholders, and ALLETE soundly executed in 2021, hitting our earnings target and paying an attractive dividend while strategically positioning all of our businesses for sustainable growth well into the future.
We're committed to ALLETE's long-term five-year objective of achieving consolidated average annual earnings per share growth within a range of 5% to 7%, and I'm confident in our ability to achieve this for our investors.
During 2021, a year we characterized early on as a transitional year for ALLETE.
We highlighted several initiatives we put in motion to improve returns on capital and to provide avenues for additional investments in clean energy infrastructure.
I'm pleased with our success on these key strategic initiatives.
First, regarding improving returns.
In late 2021, Minnesota Power received an interim rate order to begin charging new rates, which support the quality and reliability of electric services provided to our customers.
The interim rates were approved as filed and went into effect at the beginning of 2022.
Although there's more to play out during the year, we view this as a very constructive outcome that supports Minnesota Power's financial health and ability to continue our clean energy transformation while delivering safe, resilient, reliable, and affordable service to our customers.
Superior water, light, and power is also preparing to file a rate case later in 2022.
And this will support the company's ability to continue to upgrade infrastructure and maintain the resiliency, reliability, and high quality of services for its customers.
Onto new clean energy investments driven by our sustainability in action strategy.
We're making significant progress on Minnesota Power's vision to provide 100% carbon free energy to customers by 2050.
This bold vision reflects our commitment to the climate, our customers, and our communities through Minnesota Power's Energy Forward strategy.
Minnesota Power's clean energy transition, detailed in its Integrated Resource Plan, is moving forward in the process, including extensive engagement with a broad range of stakeholders, from customers to communities, to regulators, to employees, and many others, and we expect a decision in the second half of 2022.
Today, we're pleased to provide updated information regarding our capital expenditure plans to effectuate this transition, and Bob will share some additional comments on all of that in a moment.
And it has been great to see that Minnesota Power's taconite customers finished 2021 at full production of approximately 40 million tons.
We anticipate 2022 production to be closer to average at around 35 million tons as reflected in Minnesota Power's rate case.
But the ongoing investments by these customers in existing production and in product enhancements, including sustainability as well as the prospect of new customers, clearly support the long-term viability and attractiveness of the natural resource based economy of the region that Minnesota Power is privileged to serve.
ALLETE Clean Energy is also making significant progress in our sustainability in action strategy.
ALLETE's second largest business with operations that spanned from coast to coast is well positioned to drive additional clean energy sector growth.
With the recently completed 303 megawatt Caddo wind facility now in service, ALLETE Clean Energy's total wind capacity has increased to more than 1,300 megawatts.
We've also made significant progress in our work to expand ALLETE Clean Energy's focus beyond wind to provide additional growth engines in the clean energy space.
We've identified several promising opportunities for investment that would augment ALLETE's existing clean energy solutions and expand our capabilities into solar and storage.
We anticipate sharing more on this effort this year.
Along with creative solutions for our customers and great opportunities for our employees, ALLETE's mix of businesses offers differentiated value to investors with earnings growth, an attractive dividend, and strong positioning to thrive in the clean energy future.
Today ALLETE reported 2021 earnings of $3.23 per share or net income of $169.2 million.
Earnings for 2020 were $3.35 per share or net income of $174.2 million.
As Bethany mentioned, we finished the year well within our guidance range with both our regulated operations and ALLETE Clean Energy and corporate and other near the upper end of their respective original guidance range.
A few significant highlights impacting the full year ended 2021.
Earnings in 2021 reflected a $0.16 per share gain recorded in the fourth quarter for the sale of a portion of the Nemadji Trail Energy Center by South Shore Energy, ALLETE's non-rate regulated Wisconsin subsidiary.
Earnings in 2021 reflected a $0.07 per share charge resulting from the Minnesota Public Utilities Commission decision to order refunds in Minnesota Power's fuel adjustment clause filing, covering the periods of July 2018 through December 2019.
Net income in 2021 also included a $0.10 per share negative impact of ALLETE Clean Energy's Diamond Spring wind energy facility related to the extreme weather in the first quarter of 2021.
Turning to the fourth quarter of 2021.
Overall, ALLETE's consolidated results for the fourth quarter exceeded our expectations with earnings at $1.18 per share, compared to $0.90 per share for the same quarter in 2020.
At least regulated operations segment recorded net income of $29.7 million in the fourth quarter of 2021, as compared to $25.3 million in 2020.
Earnings reflected higher net income at Minnesota Power, primarily due to higher megawatt hour sales to retail and municipal customers, including a 10% increase from taconite customers and positive income tax expense timing differences.
The fourth quarter did include a reserve for the Minnesota Public Utilities Commission decision to order refunds in Minnesota Power's fuel adjustment clause filing related to prior years.
ALLETE Clean Energy recorded fourth quarter 2021 net income of $14.6 million, compared to $13.1 million in 2020.
And income in 2021 include a full quarter contribution from the Diamond Spring wind energy facility, which commenced operations in December of 2020, and earnings from the new Caddo wind energy facility, which was in service in December.
Offsetting these increases was an anticipated loss on the Northern Wind power project due to higher than expected total estimated cost to complete this project.
I will provide additional details on this in a moment.
Our corporate and other businesses recorded net income of $17.6 million in 2021, compared to net income of $8.7 million in 2020.
2021 included an $8.5 million after-tax gain from South Shore Energy sale of a portion of its interest in the Nemadji Trail Energy Center.
Also positively impacting 2021 results are higher earnings from our investment in the Nobles 2 energy facility, which commenced operations in December 2020, and higher net income from land sales at ALLETE properties.
I'll now turn to our 2022 earnings guidance.
Today, we initiated 2022 earnings guidance of $3.60 to $3.90 per share, a net income of $195 million to $210 million.
The midpoint of our guidance range represents a 16% increase over 2021 results and reflects our expectations of improving returns and positive momentum around our clean energy investments.
This guidance range is comprised of our regulated operations within a range of $2.60 to $2.80 per share in ALLETE Clean Energy and our Corp. and other businesses within a range of $1 to $1.10 per share.
Recall in February 2021, we shared at a high level that 2021 was expected to be a transition year with continued economic impacts from the ongoing COVID-19 pandemic and preparations for a much-needed Minnesota Power rate case.
To provide visibility into 2022, ALLETE provided a preliminary estimated earnings guidance range of $3.70 to $4 per share.
The reason for the approximately $0.10 difference between our preliminary guidance estimate and our 2022 guidance issued today relates primarily to ALLETE Clean Energy's expectation of lower megawatt hour generation from its legacy wind energy facilities.
At a high level, our actual megawatt hour generation at these facilities has been lower than our recent projections.
And to better reflect recent historical results and updated models, we have refined our estimates and expectations.
A few comments on a regulated operations outlook for 2022.
Our guidance reflects interim rates for the Minnesota Power retail rate case of approximately $87 million.
Interim rates are subject to refund.
Our guidance assumes we will achieve reasonable outcomes in regulatory proceedings.
Minnesota Power's investor sales are expected to range between 6 million to 6.5 million megawatt hours, which reflects anticipated production from our taconite customers of approximately 35 million tons.
Our taconite customers started the year with full production.
However, recent customer announcements signaled some curtailments during the year, which would result in production in line with our estimates.
As you might recall, Minnesota Power has asked for a large power sales true-up mechanism in its recently filed rate case to fairly balance this type of variation in sales between customers and investors.
A few highlights from ALLETE Clean Energy outlook for 2022.
ALLETE Clean Energy expects total wind generation of approximately 4 million megawatt hours this year, compared to 3 million megawatt hours last year with the expectation of normal wind resources.
The increase in megawatt hours is primarily related to the Caddo wind energy facility in service for the full year.
Our guidance reflects the downward adjusted megawatt hour generation from ALLETE Clean Energy's legacy wind energy facilities, which is more in line with 2021 actual megawatt hour generation.
For our Corp. and other businesses, we expect slightly higher earnings from our investment in the Nobles 2 wind energy facility and earnings from a new Minnesota solar project expected to be completed later this year.
Earnings per share reflects $50 million of additional equity issuances to fund the Caddo project and other growth initiatives.
A further update on ALLETE Clean Energy projects, which is detailed on Slide 9.
As previously disclosed, we plan to repower and sell the now 100 megawatt Northern Wind project, which consists of the existing Chanarambie and Viking facilities to a subsidiary of Xcel Energy.
This transaction remains on track for completion in late 2022 and will provide a significant cash contribution for redeployment.
ALLETE Clean energy has experienced inflationary increases and significant cost pressures related to this project, and as a result, now anticipates a slight loss on the eventual sale of this project, which resulted in an approximately $2 million after-tax charge in the fourth quarter of 2021.
We will be working to maximize the value of this project and minimize costs as we further navigate supply chain options and work with vendors to make this project profitable.
The 20 megawatt Rock Aetna portion of this project is positioned to move forward in tandem with the Northern wind power as a shovel-ready project with attractive future profit potential.
We are finalizing development plans to begin and complete construction of the 92 megawatt Red Barn build-on transfer project, the closing expected in early 2023.
This project will utilize some of our safe harbor turbines while expanding our customer base and presence in another geographic region of the country.
The extension of this project, and a testament to our strong relationships with optionality to serve C&I customers or regional utilities, the 68 megawatt whitetail development project is also advancing with its advanced transmission Q position and landowner relationships for either a long-term PPA or build-on transfer project.
Leveraging ALLETE Clean Energy safe harbor turbines, we continue to advance the 200 megawatt Ruso wind project in North Dakota and are working with various regulators on permitting and citing for this facility.
First of all, I too would like to begin by congratulating Steve on his promotion to senior VP and CFO of ALLETE.
I have worked with Steve for over 20 years, and I found him to be an individual of very high integrity and rock solid in terms of his financial expertise, leadership qualities, and strategic mindset.
He has worked closely with me in recent years on numerous major initiatives aimed at improving our overall returns, growth profile and competitiveness on behalf of our investors and customers alike.
Steve is supported by one of the strongest teams in the industry, and I have no doubt that Bethany, Steve, and the rest of the management team will continue to succeed as the company prosecutes its clean energy vision and strategy.
As Steve just shared with you, 2021 was a highly successful year, evident not just by the strong financial results, but the advancement of many key sustainability-in-action initiatives on both the regulated and non-regulated parts of our business that will pay dividends in future years.
These results came even despite ongoing challenges from the pandemic, as well as significant volatility in weather and lower-than-expected wind production levels at ALLETE Clean Energy.
We begin 2022 with a strong balance sheet, conservative capital structure at approximately 40% total debt, and an excess of $260 million in operating cash flow.
A notable achievement on the financing side was our ability to secure approximately $240 million in tax equity financing of the $450 million project under very competitive terms.
Of the $200 million in total equity investment, $50 million will be raised through our ATM program, as Steve noted earlier in his 2022 guidance overview.
As Bethany stated, we are committed and confident in our ability to achieve ALLETE's longer-term average annual growth objective within a range of 5% to 7%.
As a reminder, this is comprised of 4% to 5% from the regulated utility businesses and at least 15% for the non-regulated businesses.
The favorable growth outlook is being fueled by historic clean energy transformation that we are leading regionally at our utility business, as well as our growing non-regulated clean energy platform, which is expanding both its geographic footprint and product service offerings.
As promised in recent quarters, we have updated our five year capital expenditure table in the 10-K, as well as provided -- the supporting schedules to provide added granularity to assist you with your financial modeling.
As promised, Slide 10 represents our traditional capex table, and Slide 12 is the financing and support of this $1.8 billion capex plan, highlighting significant clean energy investments in the next five years.
In conjunction with Minnesota Power's outstanding IRP process currently under consideration by the MPUC, our projected spend in this updated capex table is approximately $1.8 billion over the next five years and is predominantly for regulated or utility-like clean energy infrastructure, representing a 19% compounded annual growth rate over 2021 levels, and translate into rate base growth of over 5%.
As you can see, the primary driver of investment growth is further transformation to clean energy, particularly in the transmission area, to address large transmission constraints currently limiting Mysore region power movement on the grid.
As renewable generation continues to expand, our planned expansion of our 550 megawatt DC transmission line by 65% to -- or 900 megawatts is a key component in the solution to address this issue.
On Slide 11, you can see we have additional clean energy project opportunities also in the pipeline, and we expect that more will materialize into actionable projects as the IRP process plays out.
Minnesota Power's mission to deliver 100% carpentry energy by 2050 will require significant investment in renewable generation and in transmission and distribution over the next decade or so.
We will continue to navigate this clean energy transition that we have, as we have in the past with customer rates and overall competitiveness in mind.
Our non-regulated business segment, which is comprised primarily of ALLETE Clean Energy, is expected to continue to exceed our 15% growth objective in the foreseeable future.
And we are confident that this highly successful platform will soon advance us into new, complementary, and higher returning segments of the clean energy market, such as solar and storage.
As I begin my transition into retirement, I want to pause and express my sincere gratitude to ALLETE, my team, and the investor community more broadly, for your support and confidence in me, especially over the past five-plus years as the CFO of the organization.
I will surely miss our many conversations and proactive input as we navigated the challenges and opportunities facing the industry and our company.
Stepping back, I feel extremely proud in what the ALLETE team has accomplished thus far in terms of positioning the company for future success and have every confidence the company will continue to do well as it continues to be a leader in the exciting and historic clean energy transition.
I will now hand it back to Bethany.
We're obviously very pleased with all that our team has accomplished in 2021, and we're already making significant strides here in the early weeks of 2022.
This is truly an exciting time for ALLETE, and we look forward to sharing more with you in the near future, and of course, delivering another year of value to our shareholders.
Demands for cleaner energy are increasing, providing new and diverse opportunities for investment for ALLETE.
We believe ALLETE's reputation as a leader in this environment will continue to attract capital and we're committed to deliver value to our investors.
On Slide 13 is a list of ESG-related information you can find on our website at allete.com.
I'm particularly proud of our internal team, who put together our Corporate Sustainability Report, which is well aligned with SASB and TCFD reporting requirements.
We'll evolve, expand, and improve on our CSR as we continue to execute our sustainability-in-action strategy.
The very foundation of ALLETE's growth strategy is sustainability in all of its forms, people, planet, and prosperity.
And as always, we are committed to doing all of this in the absolutely right way.
We've taken significant steps already and will continue not only to mitigate climate change risks, but to build a clean energy future through just, equitable, and meaningful change, making a difference and doing our part to make the world a better place for everyone.
ALLETE's family of businesses is well positioned for an even brighter future.
 Assistant:

Chosen response:
compname reports 2021 earnings of $3.23 per share.
compname reports 2021 earnings of $3.23 per share; initiates 2022 earnings guidance range of $3.60 to 3.90 per share.
allete inc - qtrly earnings per share $1.18.


Prompt:
Human: Please ensure that your lines are muted until the operator announces your turn to ask a question.
Leading our call today will be Mike Jackson, our Chief Executive Officer; and Joe Lower, our Chief Financial Officer.
I will be available by phone following the call to address any additional questions that you may have.
Today, we reported all-time record quarter results with adjusted earnings per share from continuing operations of $2.79, an increase of 207% compared to last year.
These outstanding results were driven by strong performance in new, used and customer financial services and disciplined expense management.
Demand continues to exceed supply for new vehicles, and we expect this to continue through 2021 in part due to the production disruption.
More importantly, low interest rates and consumer preference for vehicle ownership versus ridesharing and public transportation are supporting demand.
We expect our shipments from the manufacturers to double in the second quarter compared to the prior year.
AutoNation same-store new vehicle units were up 22% year-over-year and up 12% compared to 2019.
We remain focused on our pre-owned vehicle procurement strategy, nearly 90% of our pre-owned vehicles retailed in the first quarter were self- sourced, meaning, we acquired through trade-in, switch returns.
We'll Buy Your Car or service loaners and avoided auctions.
Acquiring vehicles at the right price, speed to the front line, a fair one price environment and leading digital capabilities are winning formula for our customers, which shows in our results.
AutoNation same-store pre-owned units were up 28% year-over-year and 20% compared to 2019.
We continue to leverage our digital capabilities to drive cost reductions and increase efficiency.
Tools like Customer 360, which has over 10 million active customer records, enable us to provide a truly comprehensive and personal experience for our customers, which leads to higher close rates and increased vehicle sales.
These efforts allowed us to deliver adjusted SG&A as a percent of gross profit, a 62.7% in the first quarter of 2021 which represents a 1,120 basis point improvement compared to the first quarter of 2020.
Our target is to operate at or below 65% SG&A as a percent of gross profit for '21.
We are committed to our business growth strategy through investment in our existing franchise business.
Expansion of AutoNation USA and future acquisitions.
We are on track to open five new AutoNation USA stores in 2021 and 12 additional new stores in 2022.
Our target is to have over 130 AutoNation USA stores in operation from coast to coast by the end of 2026.
Today, we announced that we signed an agreement to acquire 11 stores and one collision center for Peacock Automotive Group in Hilton Head and Columbia, South Carolina and Savannah, Georgia, representing approximately $380 million in annual revenue.
The brands acquired are Porsche, Jag [Phonetic], Land Rover, Audi, Subaru, Chrysler, Dodge, Jeep, Ram, Volkswagen and Hyundai.
This acquisition will increase AutoNation's footprint from coast to coast to over 325 locations and it's set to close in the summer.
We have set the target to sell 1 million combined new and pre-owned vehicles annually.
AutoNation remains committed to delivering value to our shareholders, which includes opportunistic share repurchase.
During the quarter we bought back 3.8 million shares or 5% of our shares outstanding.
Today we reported adjusted net income from continuing operations of $234 million or $2.79 per share versus $82 million or $0.91 per share during the first quarter of 2020.
This represents an all-time high quarterly earnings per share and a 207% increase year-over-year.
During the quarter, we sold our remaining stake in Vroom for a gain of approximately $6 million after tax or $0.07 per share, which was excluded from our adjusted results.
Our first quarter same-store revenue increased $1.3 billion or 27% compared to the prior year due to strong growth in new, used and customer financial services.
While prior-year comparisons are impacted by the onset of the COVID-19 pandemic, we continue to see strong consumer demand exceed supply for new vehicles.
Given this backdrop, we remain focused on optimizing our business in the current environment.
For the quarter, same-store total variable gross profit increased 52% year-over-year, driven by an increase in total combined units of 25% and an increase in total variable PVR of $767 or 21%.
Our customer care business continues to gradually improve with same-store customer care gross profit increasing 1% year-over-year.
Taking together, our same-store total gross profit increased 27% compared to the prior year.
First quarter SG&A as a percentage of gross profit was 62.7%, as Mike stated a 1,120 basis point improvement compared to the year-ago period.
This strong performance was driven by a combination of strict cost discipline, leverage of our digital capabilities and healthy vehicle margins.
As measured against gross profit, overhead decreased 590 basis points, compensation decreased 320 basis points and advertising decreased 210 basis points.
Based on current business conditions, we project SG&A as a percentage of gross profit to be at or below 65% for the full year 2021.
Floorplan interest expense decreased to $9 million in the first quarter of 2021 due to lower interest rates and lower average floorplan balances.
This, combined with lower non-vehicle interest expense, a lower effective tax rate and fewer shares outstanding generated record adjusted EPS.
Regarding our balance sheet and liquidity, we have ample capacity to continue investing in our business, including our AutoNation USA expansion as well as opportunistic share repurchases and acquisitions.
Our cash balance at quarter end was $350 million which combined with our additional borrowing capacity resulted in total liquidity of approximately $2.1 billion.
Our covenant leverage ratio of debt to EBITDA declined to 1.3 times at the end of the first quarter, down from 1.8 times at the end of the fourth quarter.
Including cash and used floorplan availability, our net leverage ratio was 1.1 times at the end of March.
Our AutoNation USA expansion continues to provide a very attractive growth opportunity.
During the first quarter, our five existing AutoNation US stores generated over $3 million in pre-tax profit.
As Mike referenced earlier, we plan to open five new stores by the end of this year and 12 new stores in 2022 and targeting over 130 total locations by the end of 2026.
And we will continue to look for attractive acquisitions that complement our portfolio and we – and meet our return thresholds.
During the first quarter, repurchased 3.8 million shares of common stock for an aggregate price of $306 million.
We have approximately $892 million of remaining Board authorization for share repurchases and approximately 80 million shares outstanding.
Looking ahead, we will continue our disciplined capital allocation strategy, utilizing our strong balance sheet, robust cash flow generation and ample liquidity to invest in our business and drive long-term shareholder value.
We had another impressive and record-breaking quarter.
We remain focused on delivering a peerless customer experience with industry leading digital capabilities and outstanding associate interactions.
Our commitment to the customer experience is why we're number 1 for the J.D. Power Dealer of Excellence Recognition Program for the third year in a row.
Less than 2% of all US franchise dealers achieved this honor.
78 AutoNation stores representing over 20% of our dealerships were recognized.
Our associates did not let the pandemic interfere with their ability to provide a great experience.
We're in the stores and in the offices to meet the needs of our customers.
With that, I'm delighted to take any questions.
 Assistant:

Chosen response:
qtrly adjusted earnings per share from continuing operations $2.79.
qtrly revenue $5.90 billion, up 27%.
qtrly same-store used vehicle unit sales increased 28%.
to acquire 11 stores and 1 collision center.
targets selling 1 million combined new and pre-owned vehicles annually.
qtrly same-store new vehicle unit sales increased 22%.
targeting to have over 130 autonation usa stores in operation by end of 2026.


Prompt:
Human: Leading our call today will be Mike Jackson, our Chairman and Chief Executive Officer; and Joe Lower, our Chief Financial Officer.
I will be available by phone following the call to address any additional questions that you may have.
AutoNation's third quarter results were the best ever in the Company's history.
We reported an all-time record quarter adjusted earnings per share from continuing operations of $2.38, an increase of 102% compared to last year.
In the third quarter, we saw solid demand and a strong pricing environment due to low interest rates and increased interest in vehicle ownership from consumers.
With the higher demand and tight inventory, we adjusted pricing and we were able to improve our margins.
New vehicle inventory remains tight, and we expect it will remain tight into '21.
For the quarter, same store total variable gross profit per vehicle retailed increased $966 or 28% compared to the prior year.
Same-store new vehicle gross profit per vehicle retailed increased $914 or 56%, and same-store used vehicle gross profit per vehicle retail increased $602 or 43% compared to prior year.
With our continue focused on our We will Buy Your Car initiative, we more than doubled the number of vehicles we source compared to last quarter.
Approximately 75% of the pre-owned units retailed are acquired from customers.
For the third quarter, we acquired over 12,000 units, with We'll Buy Your Car, and we're currently sourcing over 4,000 units a month to both supplement our inventory as well as reduce our average used vehicle acquisition cost.
During the third quarter, we continued to leverage our digital capabilities to drive cost reductions and increase efficiency for the business's long-term success.
These efforts, combined with our strong gross profit growth, drove significant SG&A leverage in the quarter.
Adjusted SG&A as a percentage of gross profit was 64.4% in the third quarter of 2020, representing a 800 basis point improvement compared to the third quarter of 2019.
We are committed to operating below 68% SG&A as percent of gross profit on a long-term basis.
Our AutoNation USA stores delivered another profitable quarter.
The continued growth and strong execution at these stores solidified our decision to move forward with the AutoNation USA expansion announced in the second quarter.
We plan to build over 100 AutoNation USA pre-owned stores, with over 50 completed by the end of 2025.
Our plan includes five new AutoNation US stores to be opened by the end of '21.
The AutoNation USA expansion will include extending AutoNation's coast to coast footprint into new markets, with our first new stores to open in Austin and San Antonio in '21.
These stores will continue to leverage the AutoNation brand and its proven processes for competitive advantage.
With this expansion, we have set the long-term goal of selling over 1 million combined new and used retail units per year.
As Mike just highlighted, today we reported adjusted net income from continuing operations of $212 million or $2.38 per share versus $106 million or $1.18 per share during the third quarter of 2019.
This represents a 102% increase on a per share basis.
Third quarter 2020 adjusted results exclude charges of $28 million after-tax or $0.31 per share associated with the previously announced exit of our aftermarket collision parts business and an unrealized loss of $2 million after-tax or $0.02 per share associated with our equity investment in Vroom.
During the third quarter, same-store revenue was in line with the prior year as increases in used vehicle and customer financial services revenue were offset by declines in sales of new vehicles and customer care.
High supply of new vehicles continued to limit sales volumes, and lower miles driven has limited the pace of customer care recovery.
That said, we continued to execute in an extremely high level during the quarter, with adjusted same store gross profit increasing 13% year-over-year.
Recovering demand, coupled with limited new vehicle supply, drove strong margins, with same store total PVRs up $966 or 28% compared to the prior year.
We were also able to grow our same-store used unit sales, which were up 3% year-over-year as we successfully met strong demand with trade-in volume and inventory sourced through our We'll Buy Your Car program.
Looking ahead, we expect the rebalancing of volume and vehicle margins as inventories recover next year.
Our customer care business also continues to gradually improve.
Adjusted same store customer care gross profit declined 2% in the quarter compared to the prior year.
And, as Mike highlighted, adjusted SG&A as a percentage of gross profit was 64.4% for the third quarter, which represents an 800 basis point improvement compared to the year-ago period.
This impressive performance was driven by the combination of strong cost discipline, leverage of our digital capabilities and healthy vehicle margins.
Looking ahead, we remain committed to maintaining expense discipline, and we continue to target operating below 68% SG&A as a percentage of gross profit.
A decline in floor plan interest expense also benefited our results.
Floor plan interest expense decreased to $11 million compared to $33 million in the third quarter of 2019 due to both lower interest rates and lower average floor plan balances.
This, combined with lower non-vehicle interest expense, a slightly lower effective tax rate and fewer shares outstanding, generated adjusted earnings per share from continuing operations of $2.38, up 102%.
Moving to the balance sheet and liquidity.
Our cash balance at quarter-end was $351 million, which, combined with our additional borrowing capacity, resulted in total liquidity of $2.4 billion at the end of September.
Our covenant leverage ratio of debt to EBITDA declined to 2.0 times at the end of the third quarter, down from 2.3 times at the end of the second quarter.
Including cash and used floor plan availability, our net leverage ratio was 1.4 times at quarter-end.
Looking ahead, we will continue our disciplined capital allocation strategy, utilizing our strong balance sheet, robust cash flow generation and ample liquidity to invest in our business and drive long-term shareholder value.
To this end, today we are providing additional details regarding the expansion of our AutoNation USA footprint, leveraging our established brand and proven success to further penetrate the attractive used vehicle market.
Our AutoNation USA stores require upfront capital investment of about $10 million to $11 million per store, and we expect to build at least 50 additional stores by the end of 2025.
Our AutoNation USA expansion is an exciting growth driver, with each store expected to earn a pre-tax profit of almost $2.5 million annually, once running at initial run rate.
In addition, today we announced that our Board of Directors has increased our share repurchase authorization to $500 million.
Throughout this pandemic, AutoNation has remained committed to our associates and communities we live and work in.
2020 marks the fifth anniversary of our DRIVE PINK initiative.
Our associates, our customers and our partners have helped AutoNation reach a tremendous milestone of raising and contributing over $25 million in the fight against cancer.
I'm excited by the opportunities there are in front us.
We have built an industry-leading brand, and we're the largest and most recognized automotive retailer.
We will capitalize on our strategic advantages.
 Assistant:

Chosen response:
qtrly earnings per share from continuing operations $2.05; qtrly adjusted earnings per share from continuing operations $2.38.
qtrly revenue $5.40 billion, down 1%.
qtrly same-store new vehicle gross profit per vehicle retailed was $2,535, up 56%.
qtrly same-store used vehicle gross profit per vehicle retailed was $1,994, up 43%.
qtrly same-store customer financial services gross profit per vehicle retailed was $2,154, up 11%.
increased share repurchase authorization to $500 million.
plans to build over 100 autonation usa pre-owned vehicle stores, with over 50 completed by end of 2025.
qtrly same-store total variable gross profit per vehicle retailed was up $966.
qtrly adjusted sg&a as a percentage of gross profit was 64.4%, up 800 basis points.


Prompt:
Human: This is Craig Lampo, Amphenol's CFO, and I'm here together with Adam Norwitt, our CEO.
The Company closed the third quarter with record sales of $2,323 million and record GAAP and adjusted diluted earnings per share of $1.12 and $1.09 respectively.
Sales were up 11% in US dollars and up 10% in local currencies compared to the third quarter of 2019.
Sales in the third quarter increased by 9% organically.
And sequentially, sales were up 17% in US dollars and 15% in local currencies and organically.
Breaking down sales into our two segments, the interconnect business, which comprised 96% of our sales was up 11% in US dollars and 10% in local currencies compared to the third quarter of last year.
Our cable business, which comprised 4% of our sales, was up 2% in US dollars and 5% in local currencies compared to the third quarter of last year.
Adam will comment further on trends by market in a few minutes.
Operating income was $476 million in the third quarter of 2020.
Operating margins were 20.5%, which was up a very strong 250 basis points sequentially and up 80 basis points compared to the third quarter of 2019.
The strong sequential improvement in margins reflected a healthy conversion on the higher sales levels, as well as an expected significant reduction in the impact of COVID-related costs.
The year-over-year improvement in operating margin reflected a strong conversion on the higher sales levels.
From a segment standpoint, in the interconnect segment, margins were 22.4% in the third quarter of 2020, which increased from 21.7% in the third quarter of 2019 and 20% in the third quarter -- sorry, in the second quarter of 2020.
In the cable segment, margins were 10.7%, which increased from 10.2% in the third quarter of 2019 and 9.4% in the second quarter of 2020.
Given the unprecedented challenges related to the COVID-19 pandemic, we are extremely proud of this quarter's performance.
Our team's ability to manage through all of the impacts of this crisis is a direct result of the strength and commitment of the Company's entrepreneurial management team, which continues to foster a high performance action-oriented culture and which has enabled us to capitalize on opportunities and maximize profitability in an uncertain market environment.
Interest expense for the quarter was $28 million, which was down from $30 million in the third quarter of last year.
The Company's GAAP effective tax rate for the third quarter of 2020, including excess tax benefit of $11 million associated with stock option exercises during the quarter, was 22.1% compared to 24.5% in the third quarter of 2019.
Excluding the excess tax benefit just mentioned, the Company's adjusted effective tax rate was 24.5% for both the third quarter of 2020 and 2019.
Adjusted net income of $336 million was 14% of sales in the third quarter of 2020, another confirmation of the strength of the Company's financial performance.
On a GAAP basis, diluted earnings per share increased by 22% to $1.12 in the third quarter of 2020 compared to $0.92 in the third quarter of 2019.
Adjusted diluted earnings per share increased by 15% to $1.09 in the third quarter of 2020 from $0.95 in the third quarter of 2019.
Orders for the quarter were $2,275 million, which was up 9% compared to the third quarter of 2019 and up 15% sequentially, resulting in a book-to-bill of 0.98 to 1.
The Company continues to be an excellent generator of cash.
Cash flow from operations was a strong $398 million in the third quarter or 119% of adjusted net income.
Our free cash flow was $330 million or 98% of adjusted net income.
From a working capital standpoint, inventory and accounts receivable and accounts payable were $1.4 billion, $1.9 billion and $1.1 billion respectively at the end of September.
And inventory days, days sales outstanding and payable days were 79, 72 and 61 days respectively.
All improved from the second quarter levels and all within our normal range.
During the third quarter, our cash flow from operations of $398 million, along with the proceeds from the exercise of stock options of $104 million, were used primarily to repurchase 1.9 million shares of the Company's stock for $202 million or an average price of $108, fund dividend payments of $75 million, fund net capital expenditures of $68 million, fund acquisitions of $50 million and fund net purchases of short-term investments of $9 million.
This increase is effective for payments beginning in January of 2021.
At September 30, cash and short-term investments were $1.5 billion, a majority of which is held outside of the US.
Total debt at September 30 was $3.8 billion with no maturities before the third quarter of 2021.
And net debt at September 30 was $2.4 billion.
Total cash on hand plus the remaining availability under our credit facilities was $4 billion at the end of the quarter.
And third quarter EBITDA was $568 million and our pro forma net leverage ratio was 1.2 times.
And first and foremost, I hope that all of you on the call here today, together with your family, your friends and your colleagues, are staying safe and healthy throughout the pandemic.
As Craig mentioned, I'm going to highlight some of our achievements in the third quarter, and most importantly, discuss the trends and progress across our served markets.
I'll then make a few comments on our outlook for the fourth quarter as well as for the full year of 2020.
With respect to the third quarter, amid what has been clearly an unprecedented and volatile year, I'm truly proud that we at Amphenol achieved record sales and adjusted earnings per share in the third quarter, realizing levels significantly above our guidance that we issued just 90 days ago.
Sales reached $2,323 million, an increase from prior year of 11% in US dollars, 10% in local currencies and 9% organically.
This strong growth was driven by increases in mobile devices, IT-datacom, industrial, military, broadband and the automotive markets, and was offset partially by declines in the commercial air and mobile networks markets.
We are particularly proud to have achieved a very robust 17% sequential growth from the second quarter, which was significantly higher than our original expectations.
As Craig mentioned, the Company booked $2,275 million in orders, and that represented a book-to-bill of 0.98 to 1.
Now, despite experiencing some continued operational challenges related to the pandemic, we generated excellent operating margins of 20.5% in the third quarter, and this was a full 250 basis point increase from our second quarter levels.
Just want to say that the Company's financial position remains extremely strong with our operating cash flow of $398 million, and that was particularly notable given the stronger-than-expected sequential growth from the second quarter.
And we continue to leverage that financial strength to return capital to our shareholders, both through our repurchase last quarter of 1.9 million shares of the Company's stock as well as the Board of Directors' approval of a 16% increase in our quarterly dividend that we are announcing today.
I'm extremely proud of the Amphenol team.
No question in my mind that the record results this quarter clearly demonstrate the true value of the agility, the discipline and the drive of our entrepreneurial organization.
Now, turning to the trends across our served markets, I would just comment that as we've seen this year so far, Amphenol's balanced and broad end market diversification is a uniquely valuable asset, especially in times of heightened economic uncertainty.
As many of our markets began to recover in the third quarter, we were able to quickly capitalize on the growth opportunities in those markets, while still retaining our broad exposure to new opportunities and new technology developments across all areas of the electronics industry.
The military market represented 12% of our sales in the third quarter.
Sales in this market increased by 6% from prior year, driven in particular by growth in military vehicles, naval, space, communications and airframe applications.
Sequentially, our sales increased by a strong 30% as we recovered from the impact of production restrictions that hit certain of our facilities related to government measures implemented in the second quarter to control the COVID-19 pandemic.
Looking into the fourth quarter, we expect sales to increase slightly from these levels.
And for the full year 2020, we expect a low-single digit increase in sales from prior year.
This full year performance reflects our leading market position and strong execution, offset in part by the impact of the pandemic-related production restrictions we experienced in the first half of 2020.
I'm very proud of our team working in the military market around the world.
They have maintained a singular focus on ensuring that our defense industry customers have uninterrupted access to our leading high technology interconnect products, which are critical to our customers' equipment.
We are encouraged both by the accelerating adoption of electronics in these systems, together with the overall favorable defense spending environment.
The investments that we've made over the last several years in both new technologies and the capabilities to produce them at volume have positioned us very strongly to be able to capitalize on these trends for many years to come.
The commercial aerospace market represented 2% of our sales in the third quarter.
Sales were down by 40%, a very significant level, as the commercial aircraft market once again experienced unprecedented declines in demand for new aircraft due to the pandemic-related disruptions to the global travel industry.
Sequentially, our sales were a bit better than expected, rising 4% from the second quarter.
As we look ahead, though, we expect the commercial air market to continue to be negatively impacted by the significant reduction in demand for air travel, which is occurring around the world.
Accordingly, we expect an approximately 20% sequential reduction in our sales to this market in the fourth quarter.
And for the full year 2020, we expect a roughly 35% decline from prior year due to the unprecedented demand disruptions that our customers are experiencing.
It's no question that these are difficult times for the entire travel industry and that that's having a serious impact on the market for commercial airplanes in the near term.
Nevertheless, our team remains committed to leveraging the Company's strong technology position across a wide array of aircraft platforms and next-generation systems integrated into those airplanes.
And we remain well positioned when this market eventually does return to growth.
The industrial market represented 22% of our sales in the quarter.
And our sales to the industrial market exceeded our expectations, increasing by 21% in US dollars and 18% organically, a very strong performance.
This robust growth was driven especially by the instrumentation, medical, industrial battery, heavy equipment, alternative energy and rail mass transit segments, really a broad base of growth that we saw in the industrial market.
Although we had expected sales to be modestly lower than the second quarter, we actually realized 11% sequential growth here in the third quarter, a very strong performance.
Looking into the fourth quarter, we expect a modest decline from these third quarter sales levels.
Nevertheless, for the full year 2020, we expect a low-double digit increase in sales from 2019 levels, an outstanding performance given the overall market environment.
I'm truly proud of our team working in the industrial market.
Whether enabling the growth in volumes of a wide array of medical equipment, managing through significant increases in demand for semiconductor capital equipment or executing on unprecedented demand for next-generation batteries, our global organization has reacted quickly to ensure that our customers around the world are fully supported, regardless of the many operational challenges that have arisen throughout the COVID-19 pandemic.
As we look toward the long term, I'm confident that our performance through this crisis has positioned us very strongly for the future.
And importantly, we continue to drive our leading development of next-generation interconnect, sensor and antenna products in support of our customers in the industrial market, who in turn are accelerating their adoption of next-generation technologies.
The automotive market represented 17% of our sales in the third quarter.
After a truly challenging second quarter during which the global automotive industry was deeply impacted by the COVID-19 pandemic, we were very pleased to have seen a very strong recovery here in the third quarter with results much better than we had originally anticipated coming into the quarter.
Our team's outstanding execution led to an increase in sales from prior year by 4% in US dollars and 1% organically, well ahead of our expectations.
Sequentially, our sales increased by truly significant 78% from the second quarter as our team was able to execute quickly on a recovery in demand from automotive customers in all regions.
Looking now into the fourth quarter, we expect automotive sales to further increase in the mid-single digits from these levels.
For the full year 2020, we expect a low-double digit reduction in sales, which does reflect the severe and sudden pandemic-related downturn in demand from automotive OEMs that we saw in the first half.
I'm extremely proud of our team working in the automotive market, who has clearly demonstrated both agility and resiliency in realizing these strong sequential growth levels.
In fact, our performance through this crisis makes me even more confident in our long-term prospects in the automotive market.
We've continued to expand our range of interconnect, sensor and antenna products, both organically and through acquisitions, all with the goal of enabling a wide array of onboard electronics across a diversified range of vehicles made by auto manufacturers around the world.
This consistent strategy will no doubt continue to benefit us as the automotive market recovers.
The mobile devices market represented 16% of our sales in the quarter.
And our sales to mobile device customers increased by a stronger-than-expected 25% from prior year, driven in particular by increased sales of products incorporated into laptops, tablets and wearables, and this was offset in part by slightly lower year-over-year sales to smartphones.
Sequentially, our sales increased by a much stronger-than-expected 37%.
And this was driven by higher sales across all the products that we serve.
Looking to the fourth quarter, we expect a slight increase from these already strong third quarter levels.
And for the full year, we anticipate sales to grow in the low-double digits from 2019.
And I would just note that this is well above our original expectations as we came into the year before we were hit with the pandemic.
While mobile devices will always remain one of our most volatile markets, our outstanding agile team is poised as always to capture any opportunities for incremental sales that may arise here in the fourth quarter or beyond.
Our leading array of antennas, interconnect products and mechanisms continues to enable a broad range of next-generation mobile devices, and this positions us well for the long term.
The mobile networks market represented 6% of our sales in the quarter.
And sales decreased as we had expected from prior year by 19% in US dollars and 21% organically, driven by lower sales to wireless operators, as well as some continued impact from the US government restrictions on certain Chinese entities that we have previously discussed.
Looking into the fourth quarter, we expect a further seasonal sales reduction of approximately 25% related to both OEMs and service providers.
And for the full year, we expect a high-teens reduction in sales, which reflects the impact of the US government restrictions as well as the COVID-19 pandemic.
Regardless of the near-term challenges in the mobile networks market, we're confident in the Company's long-term position in this important and exciting industry.
Our team continues to work aggressively to expand our opportunity with next-generation equipment and networks.
As customers ramp up investment of these advanced systems, we look forward to benefiting from the increased potential that comes from our unique position with both equipment manufacturers and mobile service providers around the world.
The information technology and data communications market represented 21% of our sales in the quarter.
Sales in the third quarter were once again much better than we had anticipated, rising from prior year by a very strong 24% in US dollars and 21% organically.
And this growth was really driven from increased demand for data traffic that continued to prompt both our OEM and service provider customers to increase their demand across virtually all segments of the IT-datacom market.
Sequentially, sales were down by less-than-expected 10% from our extremely strong second quarter.
As we look toward the fourth quarter, we expect a mid-teens sequential decline from these very strong third quarter levels.
And for the full year 2020, we expect sales to increase in the low-teens, reflecting the significant upside in demand we experienced in both the second and third quarters, offset in part by the pandemic-related disruptions we saw in the first quarter.
Our team working in support of the IT-datacom market has clearly distinguished themselves this year, reacting quickly to capitalize on unprecedented demand for our industry-leading high-speed and power products.
At the same time, we've not slowed down our efforts to further develop our broad range of industry-leading interconnect products in support of data communications networks around the world.
Indeed, we remain very encouraged by the Company's strong technology position in the global IT-datacom market.
Our customers continue to drive their equipment to ever-higher levels of performance in order to manage the dramatic increases in demand for bandwidth and processor power.
In turn, our team remains singularly focused on enabling this continuing revolution in IT-datacom.
The broadband market represented 4% of our sales in the quarter.
Sales increased by 5% from prior year, driven by stronger demand for home installation-related equipment from broadband operators.
On a sequential basis, sales increased by a stronger-than-expected 13% as our customers continued to upgrade their networks in support of the increased demand for high-speed data.
We expect sales in the fourth quarter to moderate from these levels on typical end-of-the-year seasonality.
And for the full year 2020, we expect sales to be roughly flat with prior year.
And this reflects the pandemic-related disruptions we experienced in certain geographies, offset by increased investments by our customers in support of higher bandwidth demand.
Now, turning to our outlook for the future, while our performance in the third quarter was very strong, there still remain significant uncertainties in the global market related to the COVID-19 pandemic, which does appear to be worsening in some regions of the world.
Assuming no new material disruptions from the pandemic, as well as constant exchange rates, for the 4th quarter, we expect sales in the range of $2,160 million to $2,200 million and adjusted diluted earnings per share in the range of $0.98 to $1.00.
This represents both sales and adjusted diluted earnings per share growth versus prior year of flat to up 2%.
Our fourth quarter guidance also represents an expectation for full-year sales of $8,333 million to $8,373 million and full year adjusted diluted earnings per share of $3.59 to $3.61.
This outlook represents sales growth versus prior year of 1% to 2% and an adjusted diluted earnings per share decline of 3% to 4%.
The expected decline in our earnings relates directly to the significant cost and disruptions associated with the COVID-19 pandemic that the Company faced particularly during the first half of 2020.
Now, let me just say that I'm extremely pleased by Amphenol's performance in the third quarter, especially our team's achievement of these new quarterly records in both sales and earnings.
Most importantly, I remain very confident in the ability of our outstanding management team to adapt to the continued challenges in the marketplace and to capitalize on the many future opportunities to grow our market position and expand our profitability.
I just want to assure you that our entire organization remains committed to fighting hard to secure the Company's financial performance, all while dedicating ourselves wholeheartedly to protecting the safety and health of each of our employees around the world.
And with that, operator, we'd be very happy to take any questions.
 Assistant:

Chosen response:
amphenol corp q3 adjusted earnings per share $1.09.
third quarter 2020 record results and dividend increase reported by amphenol corporation.
q3 adjusted earnings per share $1.09 excluding items.
q3 gaap earnings per share $1.12.
for q4 2020 expect adjusted diluted earnings per share in range of $0.98 to $1.00.
for full year 2020 expect adjusted diluted earnings per share to be in range of $3.59 to $3.61.
on oct 20, board approved 16% increase in co's quarterly dividend, from $0.25 to $0.29 per share to be first paid on jan 6, 2021.


Prompt:
Human: armourreit.com, along with our Form 10-K and most recent company update.
Also our discussion today may include reference to certain non-GAAP measures.
An online replay of this conference call will be available on ARMOUR's website shortly and will continue for one year.
U.S. financial markets continued to stabilize and improve during the fourth quarter, and ARMOUR continues to concentrate its portfolio activity in Agency MBS, which we will do for the foreseeable future.
Quarter-end book value was $12.32 per common share, up $0.58 from Q3 2020.
As of the close of business last Friday, February 12, we estimate book value to be approximately $12.90 per common share ex dividend.
ARMOUR's Q4 comprehensive income was $60.2 million or $0.89 per common share.
We paid dividends of $0.10 per common share for each month in the fourth quarter for a total of $19.6 million.
We've also declared February and March common dividends at the rate of $0.10 per share and Series C preferred stock dividends for Q1 at the rate of $0.14583 per share.
The fourth quarter of 2020 provided favorable conditions for mortgage investors and ARMOUR REIT.
A one-two punch of fiscal action from Washington and all-out commitment from the Fed to the U.S. Treasury and mortgage-backed securities markets created a wave of liquidity that drove asset spreads significantly tighter in the fourth quarter.
The trends have continued into the first quarter of 2021 as markets anticipate a new wave of fiscal stimulus from Congress in the near future.
The demand for yield from private investors, combined with the official QE purchases, delivered a strong MBS performance during a period when longer-term treasury yields rose significantly off their 2020 lows.
Echoing the positive market sentiment, repo financing also improved over the quarter, dropping from 20 to 25 basis points in the third quarter for 30-day tenors, down to 15 to 20 basis points currently.
The flip side of all the good news is that historically low mortgage rates helped create the largest wave of home for loan refinancing since 2003.
Faster prepayments at higher prices tampered down new yield opportunities in the market.
The TBA dollar roll market remains the most attractive proposition as the Fed's growing footprint in the sector generates significantly higher returns versus those on agency CMBS or specified MBS pools.
And we expect the Fed's presence to persist at least for the first half of 2021, if not longer.
While we do allocate approximately 36% of our portfolio to dollar rolls in 30-year and 15-year TBAs, 94% of the remaining portfolio are assets with favorable prepayment protection characteristics, including prepayment penalties, lower loan balances and seasoning.
Such pools held up very well as expected.
The average CPR in our portfolio was 17.3% as of the fourth quarter versus 16% in the third quarter, which were both significantly below the aggregate speeds on more generic MBS.
Year-to-date, the portfolio is averaging 17.9% CPR.
Our response to the tighter spread, higher prepayment mortgage environment has been to exercise caution.
This is reflected in our implied leverage ratio of 7.7 at the end of the fourth quarter and 6.9 implied leverage ratio currently.
These numbers are considerably lower than our historical leverage levels and provide two or more terms of that additional dry powder to take advantage of market opportunities.
ARMOUR's duration as of year-end was 0.62 and is currently 0.76.
As a result of our early investment in specified pools, the portfolio's convexity profile remains significantly more favorable than that of newly issued MBS.
ARMOUR continuously monitors its hedge book and manages the net duration gap within a tight range dictated by the team's outlook on the rates barker.
It should be noted that a significant portion of the portfolio's duration is in the key rate buckets of inside three years, where we expect yields to be pegged close to 0 for the foreseeable future.
Our exposure to the long end of the curve is considerably less than our overall duration.
While we accept the apparent market consensus that the Fed's presence and support for the market is here to stay for a prolonged period, we also have a keen appreciation for the unexpected.
We will continue to shape our portfolio to protect book value and will not reach for yield at the expense of much higher risk.
This means that metrics like core earnings may trend a bit lower, but should work to optimize total economic return.
As we've noted before, we set our dividend policy based on the medium-term outlook on our business.
We continue to see our dividend level as appropriate.
We'd be delighted to take any questions.
 Assistant:

Chosen response:
compname reports q4 earnings per share of $0.89.
q4 earnings per share $0.89.