Prompt:
Human: Today's discussion is being broadcast on our website.
Participating in today's call are Bob Wetherbee, Board Chair, President and CEO; and Don Newman, Senior Vice President and CFO.
Bob and Don will focus on our second quarter highlights and key messages, but may refer to certain slides within their remarks.
These slides are available on our website.
They provide additional color and details on our results and outlook.
Here we are over a year since the world went into lockdown as a result of the COVID-19 pandemic.
So much has changed in the last four quarters, and it's easy to focus on the more challenging aspects of this period.
At the same time, it's important to remember that we also changed some things, those within our control for the better.
Like many, we quickly innovated within our digital technology infrastructure to thrive on remote collaboration.
Technology allowed us to streamline our processes and work more efficiently overall.
We'll continue to drive these improvements utilizing new skills and tools to provide more flexibility to our employees and create better connections with our customers, and we'll capture the associated structural cost savings.
I'm pleased to see millions of people returning to the skies for the summer travel season.
Every day seems to bring another sign of recovery in airframe and jet engine demand.
The current economic reawakening and everything from travel to consumer goods to energy is real.
Despite lingering pandemic-related uncertainties, I'm confident the desire to travel is significant and growing worldwide.
Ultimately, that drives the sustained lengthy backlog for any airliner programs.
At ATI, we're ready to produce what our customers need.
With that as a backdrop, we generated second quarter financial results that showcase the improving trends in our end markets.
At the same time, they reflect the negative impact of the recently concluded strike by the United Steelworkers at our Specialty Rolled Products or SRP business.
Excluding the $40 million cost attributed to the strike and a small improvement in our restructuring reserves, we lost $0.12 per share in the second quarter.
Despite the earnings loss, the aerospace recovery is readily apparent beneath the headline numbers.
Our jet engine product revenues were up over 20% compared to the first quarter 2021.
The High Performance Materials & Components segment, or HPMC, saw its margins improve by more than 200 basis points sequentially and nearly 300 basis points year-over-year.
Very good news that Don will cover in more depth in a few minutes.
As we discussed on the first quarter earnings call in April, we were incredibly disappointed that the union leadership chose to call a strike at our major SRP operating locations.
Our robust continuity plans allowed us to maintain operations during the strike.
The new 4-year labor agreement was ratified on July 13.
Many represented employees returned to their positions within a week of ratification.
We're safely and efficiently ramping up operations to their prior production levels.
We're on track and expect to be back to full production capabilities in September.
I've been asked many times by many people inside and outside of ATI, some form of the question, was the strike worth it?
Clearly, we would have preferred to continue negotiating to reach an agreement without a work stoppage.
A competitive cost structure for this business is imperative.
Left unresolved, we'd be facing rapidly escalating healthcare costs that were on a trajectory to double every seven years.
Product pricing can increase fast enough to offset that level of healthcare inflation.
The SRP business would have fallen behind its competition.
We were compelled to act now to find a solution.
Under this contract, annual healthcare cost inflation will be capped at 3.5%.
The represented employees are responsible to take any necessary actions required to cover annual overage amounts.
The SRP business is now appropriately focused on getting back to full speed, providing our customers with the materials and components they need.
To close out my comments related to the SRP business, I have two pieces of good news to share.
First, the transformation initiative to exit standard stainless sheet products is on track and will be completed by year-end 2021 as planned.
We're making excellent progress on consolidating our footprint.
Second, we recently signed a long-term agreement with JSW Steel USA to toll convert a significant percentage of their Ohio-produced carbon steel slabs through our hot rolling and processing facility in Pennsylvania.
This multiyear agreement provides a meaningful opportunity to increase our asset utilization and cash flow.
We're happy to partner with JSW to bring the exceptional quality and gauge control of our world-class HRPF to their customers.
We're currently ramping up production.
Congratulations to the operating team for setting a production record for carbon steel toll conversion volume in the month of June, even in the midst of the strike at this facility.
So what are we seeing in our key end markets?
Well, for the first time in several quarters, the news is encouraging across most of our portfolio.
This removes the strike impact from the comparison.
I believe this provides the most realistic view of our underlying performance and the true market demand.
Using that context, sales increased sequentially in each of our major end markets with the exception of electronics, which is being compared to record results in Q1.
On a year-to-year basis, we grew sales in most of our key end markets, most notably Energy, up 60%; and Defense, up 22%.
We continue to gain momentum in our largest key market, commercial jet engines.
This is principally driven by the recovery of narrowbody platforms, particularly engine programs used on the A320 and A321 aircraft families.
As we said on the last few calls, the demand recovery began in our Forgings business where lead times are six to nine months ahead of engine production.
Due to the market recovery and our recent share gains, our Forgings revenue exceeded both the prior year and the prior quarter levels.
We expect this positive growth trend to continue and expand as increased production rates on the 737 MAX become a larger part of our order book.
The return to growth in Jet Engine Specialty Materials has lagged Forgings, largely due to pockets of stranded inventory throughout the supply chain.
As expected, this inventory is depleting, albeit at an uneven pace, according to customer and product form.
In the second quarter, sales of our Specialty Materials like Rene 65 for LEAP engines grew significantly compared to the first quarter, but were still below prior year.
We anticipate demand for materials to continue to increase for narrowbody engines, but lag for widebody engines.
This uneven pull, coupled with any remaining channel inventory will make for a somewhat choppy growth trajectory quarter-to-quarter for the balance of the year.
Rounding out commercial aerospace, the airframe market continues to be soft.
This is largely due to the much discussed sluggish demand for widebody aircraft due to subdued international travel and stranded supply chain inventory.
We expect this trend to continue throughout 2021 and possibly into early 2022 as the industry awaits the catalyst for increased widebody production rates.
Our newly won European OEM Airframe business begins production in the second half of 2021, initially at low levels.
This will partially offset the anticipated destocking pressure at our primary domestic airframe customer.
As I mentioned earlier, Defense continues to be a growth market for ATI.
Our broad materials portfolio serves customers with a wide range of demanding applications, ensuring we can be successful under almost any defense budget or economic backdrop.
Our second quarter growth was driven by naval nuclear applications and rotorcraft products to support increased demand for U.S. navy ships and heavy-lift helicopters.
We expect our Defense business to continue to grow and are seeing titanium armor plate demand return in the second half of 2021, in support of a new U.K. armored vehicle program.
Turning to the Energy markets.
We experienced significant growth, largely in our specialty energy portfolio.
These increases primarily supported land-based gas turbine production in Asia where energy demand is increasing.
Sales to civilian nuclear customers added to this growth.
Looking ahead, we see continued improvements in Energy markets as the world slowly reopens from pandemic lockdowns and economic growth drives increasing energy needs.
Wrapping up the market's discussions, results were mixed in our two smaller differentiated markets.
We saw the expected return to growth in medical applications as hospitals perform more elective surgeries and diagnostic testing procedures.
Both our MRI and Implant Materials sales increased sequentially.
We expect demand to improve modestly over the coming quarters, led by MRI.
In the Electronics market, sales decreased from record levels in the first quarter of 2021, but grew year-over-year.
Sales of ATI's specialty alloy powders increased versus both prior periods.
We expect demand to remain strong for these products for the balance of 2021.
I'd like to cover several areas, including our Q2 financial performance, our balance sheet and our outlook.
On a reported basis, ATI lost $0.39 per share in the second quarter.
Excluding $40 million of costs associated with the strike and a small favorable true-up to our restructuring reserves, the company lost $0.12 per share in the second quarter.
To get a true sense of our performance, you have to go beyond the headlines.
As we told you on the last two earnings calls, the commercial aerospace recovery, particularly in jet engines, is gaining momentum and becoming more broad-based within our business.
This is readily apparent in our HPMC segment results where jet engines account for more than 40% of overall segment revenues.
As Bob shared, jet engine revenues increased by more than 20% sequentially for ATI as a whole and for HPMC.
Volumes in our Forgings business continue to expand, building on growth in the prior two quarters.
Underlying demand for our Specialty Materials accelerated meaningfully for the first time since the pandemic began.
In addition to jet engines, revenues in each of HPMC's key end markets grew versus the first quarter, led by specialty energy, including materials for land-based gas turbines produced in Asia.
As a result of our profitable jet engine growth and increased asset utilization, HPMC EBITDA margins increased by 220 basis points compared to the first quarter and nearly 300 basis points versus the second quarter of 2020.
We anticipate third quarter growth across HPMC's key end markets, most notably jet engine and specialty energy and further utilization benefits from increasing production rates across our network.
We expect robust incremental margins over the coming quarters as profitable jet engine revenues increased and structural cost improvements executed throughout 2020 are maintained.
Q2 financial results were clearly impacted by the 105-day strike in the SRP business.
It should be noted that while we removed strike-related costs from segment earnings, segment revenues also declined nearly $140 million versus the first quarter due to plant outages and resulting production declines.
No adjustments were made for these revenue headwinds.
Despite the short-term impacts to 2021 performance, we achieved the needed long-term cost structure changes that will help SRP compete more effectively in the specialty materials marketplace.
Sticking with the AA&S segment, our Precision Rolled Strip business in Asia continues to operate at robust levels with revenues in line with its record-setting first quarter, well above prior year.
Earnings from this business were below first quarter levels due to unfavorable mix.
Earnings from our SA&C business were below the first quarter and prior year, largely due to unfavorable mix and the elevated production costs.
Looking ahead in the AA&S segment, we expect the SRP business to begin to recover in August.
As a result of the strike continuing throughout most of July and the inefficiencies associated with the production reramp, we anticipate approximately $25 million of additional third quarter costs.
We expect the Asian Precision Rolled Strip business to produce solid results in what is generally its strongest seasonal quarter as device manufacturers prepare for the year-end holiday season.
Our SA&C business will likely have marginally lower sequential earnings due to its traditional third quarter preventive maintenance outages.
It's worth noting that second quarter corporate costs and closed company expenses were elevated compared to prior year and prior quarter.
Corporate costs were above prior year largely due to incentive compensation accruals and higher than the prior quarter, mainly due to foreign exchange losses.
Closed company expenses were above first quarter and prior year, primarily due to nonrepeating benefits in both prior periods.
As we've discussed over the past several quarters, our decisive 2020 cost actions continue to benefit the business.
They serve to limit decremental margins while year-over-year revenues declined.
We fully expect them to benefit the bottom line when revenues return to year-over-year growth.
The HPMC segment's second quarter results offer a preview of what is expected in future quarters.
While HPMC revenues were flat versus prior year, earnings grew 30%.
We achieved this earnings growth largely as a result of increasing production rates at many segment facilities coupled with streamlined cost structures.
However, we still have room to improve.
Some facilities such as our nickel powder operations at Bakers, North Carolina, continue to operate on limited schedules due to low demand levels.
While others still produce large quantities of lower-margin transactional products as commercial aerospace markets recover.
Now let's move to the balance sheet and liquidity.
As has been the case throughout the pandemic, we've taken actions to improve our debt profile and have prioritized our balance sheet to ensure an ample cushion to weather any storm.
Despite the recent strike, we ended the quarter with roughly $830 million of total liquidity, including at least $475 million of cash.
Our second quarter managed working capital levels increased, partially from elevated inventories in our SRP business due to strike-related inefficiencies.
Accounts receivable and accounts payable balances also contributed to the second quarter's higher working capital levels.
We continue to focus on inventory velocity as we ramp production.
We expect working capital levels as a percent of sales to improve significantly in the second half of the year.
Looking ahead, we anticipate contributing up to $50 million to our U.S. defined benefit pension plan in the third quarter to improve our funding status and long-term leverage profile.
The deposit is above and beyond minimum contribution requirements, but it is consistent with our intent to reduce our pension exposure.
Additionally, we'll continue to actively manage our debt maturity profile in the coming quarters.
As I said earlier, we expect our Jet Engine business to continue to improve, led by growth in Specialty Materials and our ongoing cost structure benefits.
In the AA&S segment, we anticipate higher sequential SRP volumes.
We'll also see increased maintenance and production costs due to a temporary production outage related to our transformation efforts.
Our SA&C business will be negatively impacted sequentially by its traditional summer maintenance outages, creating lower revenues and higher expenses versus the second quarter.
We expect earnings from our Asian Precision Rolled Strip business to increase sequentially due to higher electronics volumes.
As a result of the new USW labor agreement, we reduced our contractual funding requirements for post-retirement medical benefits.
This will result in a onetime noncash pre-tax gain of approximately $65 million in our third quarter results.
This benefit and associated $15 million tax charge will be excluded from our adjusted earnings.
In aggregate, we expect third quarter adjusted earnings to be between breakeven and a loss of $0.08 per share, excluding strike-related costs and the $65 million post-retirement medical accounting gain.
HPMC segment gains will likely be partially offset by AA&S segment maintenance outages and production expense headwinds.
While we are not able to accurately predict fourth quarter results due to lingering uncertainties in the aerospace production ramp, we expect adjusted earnings to return to profitability in Q4 and continue to improve in 2022.
Finally, due to the negative strike-related earnings impact, we now anticipate full year free cash flow to be at breakeven to slightly positive levels.
We'll work diligently to offset the strike cash impact, continuing to be disciplined on capital spending and aggressively seeking working capital improvements throughout the back half of the year.
I'm confident we'll meet our goal of generating positive free cash flow in 2021.
We're excited to accelerate along this path of end market recovery and fully expect a leaner ATI to showcase its capabilities, expanding market shares and margins along the way.
Our second quarter financial results showed solid sequential improvement.
We're seeing commercial aerospace recovery and our forward order load.
We feel momentum building at ATI, particularly within our HPMC segment.
Improving aerospace market conditions will create an outsized benefit for ATI as we streamlined our cost structures and have higher shares of critical, high-growth customer programs.
I'm confident that when these volumes return to pre-pandemic levels, we'll be an even stronger and more profitable company.
The AA&S segment will be well served by growth in defense, energy, medical and electronics.
Transformation is on track in our Specialty Rolled Products business.
We've made significant and structural changes to rationalize our product portfolio, consolidate and upgrade our footprint and align our cost structure for future success.
We're building a leaner and more profitable SRP business that out earns its cost of capital, has substantial profitable growth opportunities and compete successfully for investment within the company.
I'll close with three important points.
ATI is a growth-focused company with the cost structure we need for success.
We're well positioned in key markets to achieve higher than GDP growth over the long term.
And transformation of our product portfolio is on track and will deliver significant benefits.
With a clear strategy and innovative team, we're accelerating our future.
 Assistant:

Chosen response:
q2 loss per share $0.39.
qtrly adjusted net loss attributable to ati was $0.12 per share.
anticipate continued recovery in our jet engine market in q3 driven by increasing narrow body aircraft production rates.
allegheny technologies - while we expect lingering effects on srp business, production will ramp back toward pre-strike levels across balance of q3.


Prompt:
Human: A few orders of business before we proceed.
We are providing to the SEC our 10-Q report today.
There has been some delays on the part of the SEC.
But we will get that done today.
They deal with the quarter and they deal with our strategic growth initiatives.
So if you're all online, you will see them scrolling across your screen.
If you are on audio, telephone only, you can see such slides by going to our website.
There is an icon on the very front page that allows you to see those slides.
Our usual cautionary reminder, which we will do before beginning.
Such factors include weather conditions, changes in regulatory policies, competitive pressures and other risks that are identified in the Company's SEC reports and filings.
Such information will not necessarily be updated by the Company.
In today's call, we will first be starting with our Chief Financial Officer.
David Johnson, who will review the quarter and the nine months followed by Mr. Eric Wintemute, Chairman and CEO of the Company who will talk about our strategic growth initiatives.
We also have Mr. Bob Trogele present to answer any questions you may have.
Going forward, we intend to keep you apprised on how we are doing against these targets, just as I do with respect to matters that are key to investors, understanding our business performance such as inventory and borrowing capacity.
With regard to our public filing, as Bill mentioned, our 10-Q document for the three and nine months ended September 30th, 2020 is presently in queue to be filed today.
I do understand that the agency that assists us with our filing has a large number of documents in the queue at this time.
Everything I am covering here is included in more detail in that document.
As we have noted in previous calls, the Company is fortunate to participate in industries that are considered part of critical infrastructure in all countries in which we operate.
As a result, our customers and our suppliers have all operated more or less without disruption during the pandemic.
This has continued through the third quarter.
Having said that, the pandemic has impacted us in a few ways, including our ability to present new sales and marketing ideas such as new products face to face with customers in the field.
We have also seen customer buying patterns that appear to have been moderated in the face of pandemic-related uncertainties.
On the other hand, the same restrictions have caused us to spend less on operating expenses.
These marketplace changes have been challenging to manage.
However, we have succeeded in maintaining a profitable performance throughout this difficult period.
With regard to our financial performance for the three months ended September 30th, 2020, the Company's net sales decreased by 6% to $117 million as compared to sales of $125 million this time last year.
Within that overall decline, our US sales were down about $7.5 million and our international sales were flat.
International sales accounted for 43% of net -- of total net sales as compared to 41% of net sales this time last year.
The main factors driving our third quarter sales performance are as follows.
In our US crop market, sales were affected by reduced cotton acres, which according to USDA statistics, are down about 11% or 1.5 million acres in 2020.
Acres were impacted by cotton commodity prices that are down, driving growers to plant alternative crops.
Our market performance has also been impacted by extreme drought conditions in West Texas and frequent hurricanes in the Southeast USA, both affecting grower ability to apply our products.
On a plus note, we saw a stronger than expected demand for our fumigant products, which are sold into the potato markets.
The better than expected performance is attributed to cautious reopening on schools and restaurants across the United States.
In our domestic non-crop market, there were small quarter-over-quarter changes with some decline on our pest strip products which are used in bars and restaurants that were impacted by pandemic restrictions.
With regard to international sales, which were overall flat, there were really three factors.
First, we had a very strong performance in Mexico, Central America and Australia.
By contrast, our Brazilian sales were down in real terms as a result of reduced insect pressure and challenges getting in front of customers because of pandemic restrictions.
In addition sales translated from local currency to US dollars were further negatively impacted by a decline in local currency exchange rates quarter-over-quarter.
Finally, whereas we saw Mocap and Nemacur sales lower in Europe, both products recorded significant sales increases in other parts of the world.
As you can see from the table, the US crop market was where we recorded reduced sales.
This is pretty much in line with other market participants that have reported Q3 results.
Our international business increased as a percentage of consolidated net sales and our comparatively low exposure to foreign currency rate movements was a strength for the quarter.
With regard to the nine-month performance, the various market dynamics described for the quarter are broadly the same.
Our US crop business was impacted by reduced cotton acres and by growers making cautious decisions with regard to input as the pandemic gradually revealed its impacts.
As an offset, we have done a bit better than expected with fumigants as schools and restaurants reopened.
And in addition, we've had the benefit of sales of products acquired in the fall of 2019.
Our non-crop business in mosquito control has been a little lower than we hoped given the storm intensity impacting our main markets, mainly due to vector control districts using existing inventory.
Finally, our international sales have performed well, given the challenges with currency devaluation in some of our key markets.
Moving now to cover our gross profit performance.
For both the quarter and the year-to-date, the trends are fairly similar.
In our US crop business the drop in gross profit was driven by our lower sales of cotton products and partially offset by strong fumigant sales.
In non-crop, the impact of reduced sales of Dibrom and pest strips were negative for the quarter and was somewhat offset by strong sales in our horticultural business which has slightly lower margins.
During the quarter, we also recorded higher royalty income on our Envance technology business.
For the international business, the decline in foreign exchange rates was offset entirely in the three-month period and to a lesser degree in the nine-month period by strong performances in Central America, Australia and Mexico.
As a result of these various dynamics, gross margin performance in the quarter reduced from 38% to 37% and for the nine-month period from 39% to 38%.
For the quarter, our manufacturing performance was strong with factory operating cost well controlled and activity improved as compared to 2019.
Generally speaking, over the long term our net factory costs amount to about 2.5% of net sales, reflecting some latent capacity in our plants should the need arise.
This kind of available capacity is necessary to help manage our production planning effectively.
In the third quarter our factories cost approximately 2.4% of sales as compared to 2% this time last year.
The third quarter is typically a strong manufacturing period for the Company.
For the first nine months, the net factory costs amounted to 1.6% as compared to 2.4% of net sales for the same period of 2019.
For the three months ended September 30th, 2020, our operating expenses decreased as compared to the same period of the prior year.
The underlying performance is greater than its parent from the published statements because in 2019 we benefited from an adjustment to earn out liabilities on past acquisition.
That benefit did not recur this year.
On the other hand, we did record a benefit of approximately $1 million during the third quarter because we completed an update to our environmental risk assessment related to the Brazilian business we acquired at the start of 2019 which led to a decrease in our liability in this regard.
As we have reported for prior periods this year, our operating expenses were reduced because travel and entertainment costs were lower as a result of pandemic restrictions in all jurisdictions in which we operate.
Our costs were also reduced because of the translation effect caused by devaluation of currencies that are important for the Company, including the Mexican, Brazilian and Australian currencies.
With regard to the nine-month period ended September 30th, 2020 compared to the same period of 2019, our overall expenses have reduced.
The reported reduction actually understates the real improvement because in 2019 we benefited from adjustments to earn out liabilities related to past acquisitions in the amount of $3.5 million that did not recur this year.
As a result, our underlying costs are down approximately $5.5 million or 5% for the nine months.
The drivers of the reduced costs are similar to the quarter.
We have spent less on travel and entertainment because of pandemic restrictions.
Both short and long-term incentive compensation is tied to financial performance and has reduced in 2020 compared to 2019.
Finally, operating expenses incurred in currencies other than the US dollar are reduced as a result of the devaluation of those currencies I have already mentioned.
I've mentioned adverse exchange rate movements in three key currencies for the from the Company's perspective.
I want to put some color on that comment.
If we had used the 2019 exchange rates for both the three and nine-month periods of 2020, our reported net sales would have increased for the three months by $3 million and for the nine months by $7 million.
When looking at gross margin, we would have recorded additional gross margin of $700,000 in the three-month period and $1.7 million year-to-date.
Notwithstanding these impacts we have been effective at putting in place some natural hedges.
That is that the majority of our operating expenses for the businesses in territory are also in local currency.
That mitigates the impact on sales and gross margin leaving relatively immaterial differences at the bottom line resulting from translation exposure.
The Company experienced some significant transactional related exposures during the first quarter of the year.
This has reduced as exchange rates have settled at new levels during the second and third quarters.
During the third quarter, we recorded lower interest expense than this time last year.
Our average debt was lower than the prior year and we got a benefit from reduced borrowing rates in the US.
In the nine-month period, our average debt was a little higher than the prior year, but we gained the benefit for the lower federal base rate resulting in significantly lower interest expense.
Finally, our effective tax rate continues to decline in comparison to the prior year as we are having a stronger international performance in jurisdictions with lower rates this year as compared to last year.
In the three-month period, we earned $0.10 per share as compared to $0.11 per share in the same period of the prior year.
For the nine-month period, we earned $0.25 per diluted share as compared to $0.34 per share last year.
From my perspective, the operating and financial focus of the Company remains as follows.
We continue to follow a disciplined approach in planning our factory activities balancing overhead recovery with demand forecasts and inventory levels.
At the end of September 2020, our inventories were at $176 million as compared to $186 million this time last year.
During the intervening periods we have made acquisitions and added inventory as a result.
The underlying period-over-period improvement in our base inventory before the impact of recent acquisitions amounted to approximately $14 million or 7.5%.
We are highly focused on our balance sheet as we navigate through this pandemic period and having lower inventories at this point of the year is pleasing to report.
As we look at the final quarter of the year and our target for December 31st, 2020 inventory, Eric will comment in a moment about acquisitions that we closed in the first and second week of the final quarter of this year.
As a consequence, our inventory forecast will now be amended to incorporate these new businesses.
In previous conference calls, we expected to end in the region of $145 million.
Given our latest operations planning assessment, we are expecting that our underlying inventory will increase a little from our prior forecast.
In addition, the new acquisitions that Eric will mention in a moment are expected to add approximately $15 million at December 31st, 2020.
Accordingly, our latest forecast is to end the year at approximately $160 million to $165 million, effectively flat with 2019, but including the addition of inventory from recent acquisitions.
Our business has a distinct annual cycle and we continue to experience expansion -- and we routinely experience expansion in working capital in the first part of the year and a reversal in the second part.
During 2020 we, like most businesses, have been highly focused on working capital and its impact on debt levels.
During the period of the year when we typically expand working capital, we have contained the increase to only $5 million as compared to adding $49 million in the same period of 2019.
This careful management of working capital is driving the improved cash generated from our operating activities.
In the first nine months of 2020 we have generated $19 million from operations as compared to using $21 million in the first nine months of 2019.
Comparatively that amounts to a positive change of $40 million period-over-period.
At September 30th, 2020 net indebtedness ended at $149 million as compared to $165 million this time last year.
During the last year, in addition to paying down $16 million in debt, we have funded more than $27 million in investments, including fixed assets, product acquisitions and technology investments from the cash generated from operations.
These investments are focused on developing our consolidated business for the future.
With regard to liquidity at the end of the third quarter, availability under our credit line was $45 million, which compares to $30 million at the same point in 2019.
In summary, for the third quarter and for the nine-month period though our sales were down, selling prices and gross margins in each territory remained good.
We are seeing a stronger international performance than this year and the mix of US sales, generally higher gross margin, and international sales, generally lower gross margin, is tending to bring the average down slightly.
Our factory performance improved compared to 2019 and our expenses for operating costs, interest and tax are all lower in 2020 than in the comparable periods of the prior year.
From a balance sheet and cash perspective, we are doing very well, managing working capital and our debt is lower than this time last year, notwithstanding our investments in long-term growth of our business.
Finally, availability under our credit line has improved.
With that I will hand over to Eric.
Many of our investors have expressed an interest in our strategic direction and longer-term prospects, particularly in light of our increased emphasis on technology innovation.
In that spirit then, rather than getting into the weeds on market conditions over the past reporting periods, I would like to look forward to where we hope to be in the next three to five years.
We have three primary growth platforms within our business, our core business, our green product lines, and our precision application technology led by SIMPAS.
There are synergies between these platforms.
For example, SIMPAS is a market access tool for both core products and green solutions such as Agrinos biologicals.
Also there is some overlap between these platforms.
But for directional purposes, it is useful to take each platform in order.
Our core business consists largely of our synthetic chemistries.
Using 2019 numbers as a reference, let's build a model using a baseline of annual sales of $468 million.
We have grown our core business in three ways; first, organically, that is through additional market penetration; second through our new product pipeline, that is making new formulations or getting new users for what we already have; and third, through acquisitions.
If we were to grow at a rate of only 2% per year, we should be at $507 million by year three and $527 million by year five in organic growth.
Let's add to that our new product pipeline.
We regularly introduce several new products per year.
For example, in 2020 alone, we launched five new formulations.
As these new products get traction and we continue adding new introductions, we expect that we will add another $37 million by year three and $109 million by year five.
The core business plus new pipeline products puts us at $544 million by year three and $636 million by year five.
But now let's add acquisitions.
It's hard to predict the acquisition market, but I can say that it is extremely active today.
As you may have read, we just completed two acquisitions; Agrinos, a biologicals company that I will talk about further in a moment and AgNova, an Australian company that gives us greater critical mass and market access in Australia and the surrounding region.
If out of conservatism, we cut that number in half to $20 million per year and extrapolate it forward, we find that our incremental acquisition growth that put us at $60 million by year three and $100 million by year five.
The core business plus new product pipeline acquisitions puts us at a three-year top line target of $604 million and a five-year target of $736 million.
Now let's turn to our green solutions platform.
Before we get back to the model, I would like to bring you current on a recent acquisition.
In early October, we acquired the shares of Agrinos, Inc. and its sister companies at a very favorable price as they were being sold in an auction by the Norwegian parent in a liquidation process.
Agrinos makes and markets unique blends of biological products into many markets and operates three factories.
The first located in Oregon ferments [Phonetic] a 22-species consortium of bacteria into an end-use product that enhances soil health and plant growth by, for example, increasing nitrogen update.
The second located in Mexico produces a microbially enhanced tightened base product that tightens a calciferous substance comes from shells of shrimps that are locally grown that has similar applications.
The third located in India producers biologicals for that region, including sales to the Government of India.
With this investment, we have created a biologicals team to manage these green product offering globally.
That effort will also include our management of the advanced TyraTech business.
So, let's get back to the model.
Now, admittedly some of the green solution businesses are already included in our core business.
For purposes of this discussion, we will focus on the incremental addition.
Through the end of the third quarter of 2020, we had already been on track to sell approximately $22 million in green products this year, including biologicals, bio-nutritional products through both our domestic and international businesses and essential oil products through Envance which are the active ingredients in Procter & Gamble's Zevo line of consumer products.
Let's use that number as a baseline for our green products platform.
And as mentioned, we are already in the consumer pest control space through the P&G's Zevo product line and we are expanding our essential oil product line into other areas, including lawn and garden, crop and public and animal health.
We expect that with the addition of Agrinos, the growth of our other biologicals and the expansion of Envance/TyraTech we should see incremental revenues in year three of $48 million and in year five of $118 million.
Let's take our prior graph of core, including product pipeline and acquisitions and now add green products.
That would take us to about $70 million in year three and $140 million in year five.
Now for the third platform, namely precision application.
We have been reporting regularly about our SIMPAS technology which we believe is at leading edge of prescriptive application systems.
We know of no other system that enables a grower to take an agronomist's prescription for multiple crop inputs based upon field conditions and prior-yield results and apply those products variably in multiple rose automatically in one path.
Further with our Ultimus technology, we can trance product from factory to field and as important, we can measure precisely what was used in any given application.
And now, we are enhancing this technology to permit seed treatment at time of plant.
After seeing positive results from field trials by growers in many states, a number of our peers are performing their own tests with the goal of making their products available in smart cartridges through SIMPAS.
That said, some investors are asking that we give them a better idea of where SIMPAS could be in three to five years.
In order to answer the question, we will consider the following elements; first, revenues from our existing portfolio of products, and I'm talking about increased users which would be dramatically enhanced by applied prescriptively; second, revenues from the sale of active ingredients, licensed from other basic producers to be sold under RNA; third, royalties from third parties for marketing their products through our smart cartridges under their name; and fourth, a share in the growers' incremental yield benefit.
Using conservative estimates of market penetration and domestic markets only, we are targeting top line contribution on the order of $35 million in year three and $131 million in year five.
In addition, we are confident that SIMPAS will be well received outside the US and are already planning to host SIMPAS field trials in Brazil in 2021.
Also, these figures do not include the potential for additional revenues from our seed treatment innovation.
In other words, these are conservative, domestic, in-furrow SIMPAS targets only.
Let's put all of the platforms together.
If we add Core plus Green plus SIMPAS we are in the neighborhood of $687 million in year three and $985 million in year five at the top line which is roughly double where we are today.
There are many moving parts of the equation.
We will continue to control the things that are within our control.
For example, exercising strict discipline on managing working capital and operating expenses.
Further, we are committed to maximizing our consolidated profit margin.
While our expansion into distribution within international markets has tended to lower our gross margin percentage, we expect that the introduction of newer technologies across these markets will create an updraft on profitability.
In future calls,I will be updating you on how we are progressing against those targets.
Finally, let me pull our focus to the present and the near term.
2020 has been an unprecedented year for this industry.
In spite of the pandemic, weather effects and farm economy as David mentioned, we have kept pace with Q3 of 2019 in terms of profitability, even with modestly lower sales.
Looking forward into the fourth quarter, we are already seeing greater optimism in the domestic agricultural sector, hurt in part by rising crop commodity prices for corn and soybeans and cotton which would tend to contribute to improved grower profitability.
In the Midwest with less crop rotation and more continuous corn over corn planting, we are beginning to see a resurgence of soil insect pressure.
In addition, demand for our soil fumigant products continues to rise.
Based upon these trends and current sales activity, we are encouraged by our prospects for the balance of this year and into the 2021 season.
We'll now take any questions you may have.
 Assistant:

Chosen response:
compname reports qtrly earnings per diluted share of $0.10.
american vanguard corp qtrly net sales of $117 million, compared with $125 million.
american vanguard corp qtrly earnings per diluted share of $0.10.


Prompt:
Human: These beliefs are subject to known and unknown risks and uncertainties, many of which may be beyond our control, including those detailed in our periodic SEC filings.
Please note that the Company's actual results may differ materially from those anticipated and we undertake no obligation to update these statements.
There will be an opportunity for Q&A at the end of the call.
For those participating, please limit your remarks to one question and one follow-up if necessary.
I'm pleased with our company's performance in the second quarter of fiscal 2021.
We have delivered solid results while continuing to make progress on our strategy.
We've improved the way in which we serve our customers, expanded margins, and allocated capital effectively.
As you know, the pandemic has created real challenges over the past several quarters and we have yet to return to a steady state.
The slowdown last year had a global impact on supply chains and logistics and we continue to feel the impact of this in the economy and in our operations.
Yet, we have continued to have consistent and strong performance during this time.
As we look forward, we are facing some new and existing challenges.
As demand begins to rebound, global logistics, for example, continues to encounter issues.
New challenges include the global chip shortages and the rising cost of some components.
To be clear, these are good problems to have.
We are managing these challenges aggressively and our entire team will work tirelessly to deliver the best possible outcomes for our customers and continued high quality results.
So moving on to the second quarter highlights, our team delivered great results this quarter.
Sales were down 5.8%.
However, we saw gross profit margin of 43.4% expand 170 basis points and reported operating profit margin expand 180 basis points against the prior year.
The expansion was largely a result of product and productivity improvements throughout the business and we are very happy with the results.
Karen will speak in more detail about this later in the call.
Finally, in a message to our associates earlier this month, we announced that we were carbon neutral in our operations.
I will talk more around this later in the call, but I'm delighted that we were able to announce this milestone as quickly as we did.
I'd now like to update you on our ongoing transformation.
I have been at Acuity Brands for a little over 12 months and what I continue to see every day is a team that is striving for success, that is not shy about changing and that believes in Acuity and where we are going.
It is no secret that I came to Acuity because I saw the opportunity for our company to be more than a lighting business.
Our core lighting and lighting controls business was and is way more durable than the market gives it credit for, as evidenced by our performance over the past several quarters.
And we will continue to transform our business and the broader industry.
We have the best go-to-market network in the industry and the broadest product lines that serve a wide variety of end markets.
We continue to improve the effectiveness of our products and the efficiency of our supply chain through the implementation of new technologies.
We have a valuable and growing business in Distech and in Atrius we have the potential to build a very valuable technology business.
Finally, we have the ability to grow through acquisitions both in our current businesses as well as in new ones.
In our Lighting and Lighting Controls business we announced an exciting evolution in the leadership of that business.
Trevor Palmer has taken over as President.
Most recently, Trevor was leading our Controls business.
He joined the Company through the Distech acquisition nearly five years ago and he exemplified the talent that already exist within our organization.
Trevor brings 27 years of industry experience to the role.
I'm excited for what Trevor and his team will do with this business going forward.
During the quarter, we continued to invest in product development.
We have introduced new lighting and controls products and improved and evolved parts of our product and solutions portfolio.
In our Contractor Select portfolio, we saw significant demand for the Compact Pro High Bay, a versatile high bay that has been in demand as a result of the increase in warehouse renovations, driven by the shift to online retail and the expansion of logistics networks across North America.
The CPHB is a breakthrough product that was designed to deliver improved performance in a smaller size to ensure ease in installation.
The product uses fewer inputs, is more efficient to transport, and is both globally sourced and manufactured in our facilities to ensure supply chain flexibility.
Within our GUV category, we introduced EvolAIR with UV technology -- with UV Angel technology, excuse me.
This product uses onboard 254-nanometer technology and circulation above the fixture to locally disinfect air in occupied and unoccupied spaces.
We have installed this product in multiple Acuity locations and have specifications being developed with this product in education, office, and healthcare applications.
It is worth pointing out that our controls capabilities are a key differentiator for successful GUV lighting solutions.
Our Holophane product continued to win bids in infrastructure projects.
We were awarded the order for the relighting of the Big Dig project in Massachusetts that will begin in the second half of our fiscal year.
Part of the scope of this mandate was to replace existing low cost fixtures that had been installed several years ago and were not performing as expected.
Holophane is known for its quality, and durability and I am pleased we are the partner of choice to make the necessary improvements.
Throughout the pandemic, we have continued to invest in product vitality.
We have maintained the pace and quality of product rollouts this year, which positions us well for the market recovery.
I continue to be impressed by the agility of our team.
Transitioning to go-to-market, we are committed to our independent sales network.
This quarter we announced the realignment in the Northeast that will benefit our customers in the region and nationwide.
We are creating a new agency through the consolidation of what were formerly the Acuity-owned agency in New York, the New Jersey territory and the independent agency in Philadelphia.
This transaction demonstrates our commitment to the independent sales network, which we believe to be the strongest in the industry.
By creating this new agency, we are better positioned to participate in designs and specifications that start in New York and travel around the country.
We are also better positioned to serve contractors who work in New York, New Jersey and Philadelphia.
We continue to make progress with Distech and Atrius.
Distech is uniquely positioned in the building management space, built on open protocols and distributed through a network of independent systems integrators.
It has continued to grow throughout the COVID-19 pandemic.
We're also making progress around the product roadmap for Atrius.
We are recruiting best-in-class talent to drive the capabilities in that business.
In early January, Sandeep Modhvadia joined the business as Vice President of Product Development.
Sandeep comes to us from Google Cloud where he was responsible for the product development team building vertical solutions for the manufacturing, industrial, automotive, power and transportation industries.
We will continue to add talent to Atrius and make progress building unique and valuable technology solutions.
Now, I would like to take a few minutes to highlight our progress on the ESG front.
ESG is directly aligned with our values and our business strategy.
We care about the environment, our people and our communities.
Our company has been built on products, technologies and services that deliver sustainability and energy efficiency.
Over the last year, we have focused on our own operations.
Our recent accomplishment of achieving carbon neutrality across Scope 1 and 2 emissions in our operations is the result of this work and demonstrates our commitment to continually improving our communities.
We achieved carbon neutrality as a result of reducing environmental impacts in our facilities and through investing in carbon offsite projects.
Some of the energy efficient improvements made in our facilities can be highlighted by our Crawfordsville, Indiana facility where we optimized air compressors, installed more efficient belts and added switches to reduce energy consumption and by our Conyers, Georgia and Des Plaines, Illinois facilities where we installed our new I-BEAM IBG and Holophane Phuzion high bay lights and used our Atrius building OS technology to conserve energy and improve the quality of light and space.
And in our facility in New York, Ohio, in which we rebuilt the glass furnace to improve overall efficiency and which has now completely converted to renewable electricity, a win for the environment and the cost savings.
Our priority is the reduction of energy usage in our facilities and for our customers.
Until we're able to realize the full impact of our energy efficiency improvements, we are supplementing with an offset program that is focused on helping the communities where we operate.
We are investing in a series of carbon offset projects in Mexico, Indiana and California, all communities where we have a presence.
These projects support energy efficiency and renewable energy options at colleges and universities, landfills and agricultural sites.
These programs allow us to remove carbon from the atmosphere and balance our carbon footprint from operations.
While the focus of our recent accomplishments has been environmental, we are giving equal prominence to the S and the G parts of EFG.
Simply stated, we want to be the place where the best people come to do their best work.
To do this, we are continuing to focus on improving the lives of our associates by strengthening our culture and removing the barriers to success.
Acuity is proud to be an inclusive company where we all succeed together.
Finally, we have addressed several issues of governance over the last year by, among other things, diversifying and restructuring our Board of Directors and overhauling our total rewards program including improving our long-term incentive plans.
Moving on to capital allocation.
As I previously mentioned, we have now repurchased nearly 10% of our outstanding shares since May 2020.
Effectively allocating capital is an important part of how we will create value for our company.
To reiterate, our capital allocation priorities are clear: first, to grow our current businesses; second, to grow our company through acquisitions; third, to maintain our dividend; and fourth to create value through share repurchases.
We were able to capitalize on the dislocation in our share price and have been very effective repurchasing shares over the last year.
As we look forward and barring another significant market dislocation, we do not anticipate maintaining this rate of share repurchases.
We will return to our priority of using capital to grow the business.
As we look ahead, we see improvements in the end markets we serve and we are cautiously optimistic about the outlook for the remainder of fiscal year '21.
We intend to use the breadth of our product portfolio and the strength of our go-to-market teams to deliver a solid top line performance.
While there will be global challenges ramping back up, we are aggressively addressing them.
We will continue to invest in our business with the intention of becoming a larger, more dynamic company.
I want to start by echoing Neil's initial comments regarding this quarter's performance.
Our associates pulled together to deliver a solid performance and the fourth consecutive quarter of gross profit margin over 42%.
I am proud of the changes and progress we continue to make.
Moving to our second quarter results, net sales were $777 million, a decrease of 5.8% compared to the prior year, which we believe was a very good performance in this market.
Notably, within our sales performance, our independent sales network and direct sales network were approximately flat with the prior year as we continued to see strength in medium to large projects, offsetting some of the pressure in the commercial office space, which continues to be impacted by the COVID-19 pandemic.
Retail channel sales declined approximately 24% as compared to the prior year as a result of strong year-over-year pre-pandemic comparison.
This was exacerbated by one of our large customers carrying out an inventory rebalancing, which we believe to be a one-off impact.
We expect to see sequential growth in this channel in our fiscal third quarter of 2021.
Finally, sales in corporate accounts declined just over 50% as compared to the prior year.
We continue to see large retailers differ renovation spend as a result of safety concerns resulted from the COVID-19 pandemic.
In the last few weeks, there have been indications that these concerns are slowly lifting and we expect to see continued sequential recovery through the balance of the year.
Moving on to the rest of the income statement.
Gross profit margin was 43.4% for the second quarter of fiscal 2021, an increase of 170 basis points over the prior year.
This was an outstanding achievement.
This outperformance was the result of product and productivity improvements that yielded returns and we believe that this will position us well for any unforeseen challenges.
Given this gross profit margin improvement, we believe attaining a gross profit margin above 42% is reasonable on an annualized basis.
Reported operating profit margin was 11.7% of net sales for the second quarter of fiscal 2021, an increase of 180 basis points over the prior year.
Adjusted operating profit margin was 14% of net sales for the second quarter of fiscal 2021, an increase of 170 basis points over the prior year.
The majority of this improvement was driven by the higher gross profit margin and continued cost containment efforts, particularly around travel expenses and sales and marketing costs resulting from less in-person activity due to the pandemic.
As we continue to demonstrate our ability to drive margins, we will begin to reassess our reinvestment strategy, prioritizing systems and software development as we focus on executing our digital transformation.
As the economy continues to open up, we expect to see travel and other marketing expenses increase throughout the balance of the year.
We are working with our associates to ensure that only essential travel and marketing expenses are being incurred and do not expect to return to pre-pandemic expense levels in fiscal 2021.
As previously discussed, this quarter, we were able to share with our associates that we achieved 100% carbon neutrality within our operations by prioritizing efficiency improvements in operations and some offsetting measures.
This is not just an initiative for the management team.
Both Neil and I believe this is the core to the ongoing success of the Company.
As part of the offsetting measures, we expect to see a modest SDA investment, but this will not be material.
The effective tax rate for the second quarter of fiscal 2021 was 23.5% compared with 23.4% in the prior year quarter.
We currently estimate that our blended effective income tax rate will be around 24% for the full year fiscal 2021.
Finally, we saw significant improvement in diluted earnings per share for the second quarter of fiscal 2021.
Diluted earnings per share of $1.74 increased $0.30 or 20.8% over the prior year and adjusted diluted earnings per share of $2.12 increased $0.28 or 15.2% over the prior year.
Moving on to cash flow.
Net cash from operating activities for the first half of fiscal 2021 was relatively flat at approximately $213 million compared to the prior year.
We invested $21 million or 1.4% of net sales in capital expenditures during the first half of fiscal 2021 and currently expect to invest approximately 1.5% of net sales in capital expenditures in the full year of fiscal 2021.
On February 28, 2021, we had cash and cash equivalent balance of $499 million.
I am pleased with the continued solid cash generation.
Over the last 12 months, we have been extremely judicious around our capital allocation decisions.
We continue to prioritize long-term growth and believe that reinvestment into the future of the Company is core to our success.
We have further committed to maintaining our dividend and being opportunistic around allocating capital to buybacks.
As a result, we have repurchased 3.2 million shares of common stock during the first half of fiscal 2021 for a total of $338.3 million, at an average price of $104 per share, with 4.4 million shares still remaining under our current Board authorization.
Going forward, I will spend a few minutes reviewing some of the most important conversations around our company and industry and offer insight into how we are thinking about them.
There are three discussions that have been top of mind.
How are we seeing the price increases play out?
What is the potential impact of commodity price increases throughout the balance of the year?
And what is our plan to deal with the electrical component shortage?
Price increases did not affect our fiscal second quarter earnings.
We had previously announced that price increases would go into effect March 15, 2021 across the portfolio which is the beginning of our third quarter with any potential effects not being felt until April.
To date, we do not anticipate any drop-off in demand as a result of the price increases.
Similarly, our fiscal second quarter was not impacted by escalating input pricing.
On our first quarter 2021 earnings call and throughout the second quarter, we have been deliberate about changing the conversation around the impact of price and cost.
As we highlighted last quarter, our prior discussion ignored that we as a company control several levers within our cost of goods sold structure.
Our associates understand that it is our obligation to be in control of the relationship between our price and costs, separate from whether raw material prices go up or go down.
The continuous improvement in our gross profit margin demonstrates that the move away from the price/mix conversation as appropriate and that the discussion around operating the Company toward a gross profit margin target is the correct lens in which to view our margin performance.
The ongoing improvements have been a result of product and productivity improvements.
Essentially, we are reengineering our products to meet the needs of our customers, while also meeting our margin obligations.
Whether commodity prices increase or decline, we believe we can hold gross profit margin above 42% by controlling what we can control and through the ongoing improvements throughout our business.
Finally, the electrical component shortage is starting to make its way through the supply chain, which will create challenges for the entire industry.
We have seen indications that some of our products may experience procurement issues and we are working diligently to service our customers.
To wrap up, we have seen encouraging signs of improvement in our end markets, although some challenges still remain and I continue to be proud of our dedicated team.
We are committed to instilling discipline across the organization to ensure the long-term stability and predictability of the Company and we are to-date satisfied with the progress we are making.
 Assistant:

Chosen response:
compname posts q2 adjusted earnings per share $2.12.
q2 adjusted earnings per share $2.12.
q2 earnings per share $1.74.


Prompt:
Human: My name is Kevin Maczka, I'm Belden's vice president of investor relations and treasurer.
Roel will provide a strategic overview of our business and then Henk will provide a detailed review of our financial and operating results, followed by Q&A.
Additionally, during today's call, management will reference adjusted or non-GAAP financial information.
As a reminder, I'll be referring to adjusted results today.
Demand trends improved in the fourth quarter, and I'm pleased to report that revenues, earnings and cash flow exceeded our initial expectations.
Fourth quarter revenues increased 5% sequentially to $498.5 million compared to our initial guidance range of $460 million to $485 million, and our revised guidance range of $494 million to $499 million.
The upside relative to our expectations was broad based, with contributions from both the Industrial Solutions and Enterprise Solutions segments.
During the fourth quarter, our channel partners further reduced the inventory levels by approximately $22 million as expected, resulting in a reduction of approximately $70 million for the full year 2020.
Importantly, this is not expected to recur in 2021.
Incoming order rates were solid during the quarter, increasing 13% sequentially.
This resulted in a book-to-bill ratio of 1.10 times, including a robust 1.16 times in the Industrial Solutions segment.
EPS increased 25% sequentially to $0.90, compared to our initial guidance range of $0.63 to $0.78, and our revised guidance range of $0.85 to $0.90.
Free cash flow generation was $101 million in the quarter, which exceeded our expectations by approximately $11 million.
As a result, we exited the fourth quarter with cash on hand of $502 million, which provides ample flexibility as we pursue our strategic initiatives.
2020 was a truly unprecedented year, with each of us facing significant challenges related to the global pandemic both personally and professionally.
I'm extremely proud of the way our global workforce responded to these challenges and maintained a sharp focus on supporting our customers, then executing our strategic plans, while maintaining the safest possible working conditions.
For the full year 2020, we delivered revenues of $1.863 billion and earnings per share of $2.75.
Free cash flow generation was $86 million compared to our expectation of approximately $75 million.
Beyond the initial response to the pandemic, the year was highlighted by the bold steps we took to position the company for substantially improved organic growth and margins.
This includes streamlining our cost structure, funding our compelling growth initiatives, and significantly improving our portfolio of businesses.
On the cost side, we delivered on our commitments by successfully reducing SG&A costs by $40 million for the full year 2020.
We exited the year with a quarterly run rate savings of $15 million in the fourth quarter, so we are prepared to deliver the full $60 million in savings in 2021 as planned.
This represents approximately 300 basis points of incremental EBITDA margin expansion on an annual basis.
These are permanent cost reductions that will not return as conditions normalize.
As we executed these cost reduction plans, we continue to make strategic investments to accelerate growth and capitalize on the opportunities in our key markets.
To that end, R&D spending increased 14% to $107 million in 2020, with approximately 65% of this investment dedicated to software development.
This includes stand-alone software and embedded software within various hardware products.
We are making targeted investments to support growth and innovation in Industrial Automation and enhance our best-in-class cybersecurity cloud platform.
These innovations are important to our customers and our shareholders, as they will further strengthen our product offering and enhance our competitive advantage.
We also maintained capex spending of approximately $70 million for the year, to ensure that we have the capabilities and capacity to fully participate in the anticipated growth in our key markets.
We made significant portfolio moves during the year, including the sale of Grass Valley in July.
Divesting this business simplified and improved our portfolio.
It also removed considerable drag on consolidated organic growth and declines in Grass Valley's business in prior years represented a substantial headwind.
In addition, we initiated a process to divest approximately $200 million in revenues associated with certain undifferentiated copper cable product lines.
These are primarily stand-alone product lines that are low growth and low margin, and we do not believe that they can meet our growth or margin goals in the future.
Much like Grass Valley, we believe that exiting these product lines will improve our end-market exposure.
In this case, we are exiting the oil and gas markets and reducing our exposure to certain smart buildings markets.
We expect to complete multiple transactions associated with these product line exits.
We are encouraged by the overall progress to date, and we remain on track to complete these divestitures in the first half of 2021 as previously communicated.
Finally, subsequent to the end of the fourth quarter, we announced the Bolton acquisition of OTN Systems for $71 million.
The transaction closed on January 29.
This is our first Industrial Automation acquisition in years, and we are very excited to add this talented team and its innovative networking products and technologies to our portfolio.
OTN Systems is a leading provider of easy-to-use and highly reliable network solutions tailored for specific applications in harsh, mission critical environments.
It's value-added technology allows customers to easily build, maintain, and monitor complex networks in growing industrial markets such as power transmission, mass transit and process.
Belden and OTN systems have a commercial partnership dating back to 2017.
So we have a thorough understanding of the business and the value it will add to our product offering and our customers.
The company's primary brand and product line known as XTran consists of proven switching devices and network management software that is complementary to Belden's leading industrial network offering.
We expect the acquisition to contribute incremental revenue and earnings per share of approximately $36.11 million respectively during the 11 months of ownership in 2021.
Consistent with our M&A strategy, this acquisition supports one of Belden's key strategic priorities related to the growing demand for Industrial Automation by adding proprietary technology and mission critical hardware and software products for more complete end-to-end solutions.
It also accelerates Belden's initiatives related to Customer Innovation Centers or CICs, with advanced solution selling and customer consulting capabilities.
This will allow us to bid on a wider array of projects.
It offers meaningful business synergies in the product, technology and commercial areas, and we see significant opportunities to leverage our global customer base to accelerate growth and further improve profitability.
We remain an acquisitive company.
And we continue to pursue other strategic inorganic opportunities in Industrial Automation and fiber connectivity that would further enhance our product offering and growth potential.
However, we are prioritizing de-levering in the near-term.
And as a result, we expect our M&A activity to be modest in 2021.
I will now ask Henk to provide additional insight into our fourth quarter financial performance.
After 20 years with Belden, the last nine as our CFO, Henk has announced his departure next month following a transition of duties to Jeremy parks.
Henk, your contributions to Belden are difficult to put into words.
I'm proud of my role and leaving Belden through a substantial transformation on a regional cable company in the early 2000s, to the global network solutions company it is today, I'll leave the company with a strong balance sheet and capital structure and much improved portfolio, and I'm confident that Belden remains well positioned for future success.
I will start my comments with results for the quarter followed by a review of our segment results and a discussion of the balance sheet and cash flow performance.
As a reminder, I will be referencing adjusted results today.
Revenues were up $498.5 million in the quarter compared to $549.7 million in the fourth quarter of 2019.
Revenues decreased 9.3% on a year-over-year basis and increased 4.8% sequentially.
After adjusting for a $5.5 million favorable impact from acquisitions and a $14 million favorable impact on currency translation and higher copper prices, revenues declined 12.8% organically on a year-over-year basis.
After further adjusting for changes in channel inventory levels, revenues decreased 6.1% organically from the prior year.
On a sequential basis, revenues increased 2.9% organically after adjusting for a $9.1 million favorable impact from currency translation and higher copper prices.
After further adjusting for changes in channel inventory, revenues increased 9.6% organically on a sequential basis.
Incoming orders were solid during the quarter, increasing 13% sequentially.
This resulted in a book-to-bill ratio of 1.10 times [Phonetic] including robust 1.16 in the Industrial Solutions segment, and a 1.04 in the Enterprise Solutions segment.
Gross profit margins in the quarter were 35.4% consistent with the third quarter.
EBITDA was $74 million compared to $65.3 million in the prior quarter and $92.9 million in the prior year period.
EBITDA margins were 14.8% compared to 13.7% in the prior quarter and 16.9% in the prior year period.
As Roel mentioned, we successfully executed our SG&A cost reduction program by delivering savings of $15 million in the fourth quarter and $40 million for the full year.
We expect to deliver the full $60 million in savings in 2021.
As we streamlined the cost structure, we are committed to our important initiatives.
We increased R&D investments by approximately 15% in the fourth quarter and the full year 2020.
We expect further increases in 2021 as we make additional targeted investments to drive innovation and growth in Industrial Automation and Cybersecurity.
Net interest expense was approximately flat sequentially in the quarter.
At current foreign exchange rates, we expect interest expense to be approximately $61 million in 2021.
Our effective tax rate was 13.5% in the fourth quarter and 16.4% for the full year, as we benefited from incremental discrete tax planning initiatives.
For financial planning and modeling purposes, we recommend using an effective tax rate of 20% throughout 2021.
Net income in the quarter was $40.5 million compared to $32.2 million in the prior quarter and $54.9 million in the prior year period.
Earnings per share was $0.90 in the fourth quarter compared to $1.20 in the year-ago period.
Earnings per share increased 25% sequentially from $0.72 in the third quarter.
I will begin with our Industrial Solutions segment.
As a reminder, our Industrial Solutions allow customers to transmit and secure audio, video, and data in harsh industrial environments.
Our key markets include discrete manufacturing, process facilities, energy and mass-transit.
The Industrial Solutions segment generated revenues of $217.8 million in the quarter.
Currency translation and copper prices had a stable impact of $9.2 million year-over-year and $5.8 million sequentially.
After adjusting for these factors, revenues decreased 14% organically on a year-over-year basis and increased 7% sequentially.
After further adjusting for changes in channel inventory levels, revenues declined 8% year-over-year and increased 10% sequentially on an organic basis.
Within this segment, Industrial Automation revenues declined 8% year-over-year and increased 9% sequentially on an organic basis after adjusting for changes in channel inventory levels.
Not surprisingly, the trends were relatively consistent across our market verticals in the quarter.
Cybersecurity revenues declined 14% in the fourth quarter on a year-over-year basis and increased 16% sequentially.
We continue to secure large strategic orders with new customers and significantly expand our engagements with existing customers.
As a result, nonrenewal bookings in the fourth quarter matched the highest quarterly level in five years.
Notable bookings in the quarter included a Fortune 500 insurance company migrating from on-premise to-cloud based solutions, and a multinational financial services corporation expanding its coverage in preparation for expected future growth from acquisitions.
We remain very bullish on Industrial cybersecurity.
Nonrenewal bookings in this vertical increased 13% sequentially in the quarter and 31% for the full year.
Further, we continue to gain significant traction with our software as a service offerings.
SaaS offerings represented approximately 25% of nonrenewal bookings in the quarter compared to 10% a year-ago.
Industrial Solutions segment EBITDA margins were 17.5% in the quarter compared to 15.6% in the prior quarter and 20.1% in the year-ago period.
The year-over-year decline primarily reflects lower volumes and increased R&D investments in Industrial Automation and Cybersecurity.
Turning now to our Enterprise segment.
As a reminder, our Enterprise Solutions allow customers to transmit and secure audio, video and data across complex enterprise networks.
Our key markets include Broadband, 5G, and Smart Buildings.
Our Enterprise Solutions segment generated revenues of $227.7 million during the quarter.
After adjusting for $5.5 million favorable impact from acquisitions and a $4.8 million favorable impact from currency translation and higher copper prices, revenues declined 12% organically on a year-over-year basis.
Revenues declined 2% sequentially after adjusting for a $3.3 million favorable impact from currency translation and higher copper prices.
After further adjusting for changes in channel and customer inventory levels, revenues declined 3% year-over-year and increased 9% sequentially on an organic basis.
Revenues in Broadband and 5G increased 8% year-over-year and 5% sequentially after adjusting for changes in customer inventory levels.
We are encouraged by the solid share capture during the quarter.
The ever increasing demand for more bandwidth and faster speeds is driving increased investments in network infrastructure by our customers.
This supports continued robust growth in our fiber optics products, which increased 28% organically in 2020.
Revenues in Smart Buildings market declined 12% year-over-year and increased 13% sequentially on an organic basis after adjusting for changes in channel inventory.
Enterprise Solutions EBITDA margins were 11.5% in the quarter consistent with the prior quarter and compared to 13.7% in the prior year period.
The year-over-year decline primarily reflects lower volumes.
Our cash and cash equivalents balance at the end of the fourth quarter was $502 million compared to $391 million in the prior quarter and $426 million in the prior year period.
We're very comfortable with our current liquidity position.
Working capital turns was 10.3 turns compared to 6.6 turns in the prior quarter and 8.9 turns in the prior year period.
We are extremely pleased with the DSO performance in the quarter.
Days sales outstanding declined 8 days sequentially from 58 days in the prior quarter to 50 days.
Inventory turns was 5.2 turns compared to 5.0 turns in the prior quarter and 6.0 turns in the prior year.
Our total debt principal at the end of the fourth quarter was $1.59 billion compared to $1.52 billion in the third quarter.
The sequential increase reflects current foreign exchange rates.
Net leverage was 4.0 times net debt to EBITDA at the end of the quarter.
This is temporarily above our targeted range of 2 to 3 times and we expect to turn back to the targeted range as conditions normalize.
Turning now to Slide 9, I will discuss our debt maturities and governance.
As a reminder, our debt is entirely fixed at an attractive average interest rate of 3.5%, with no maturities until 2025 to 2028.
We have no maintenance covenants on these debts, so are not a risk of a default in the unlikely event of significantly worsening economic conditions.
As I mentioned previously, we're comfortable with our liquidity position and the quality of our balance sheet.
Cash flow from operations in the fourth quarter was $134.7 million compared to $187.4 million in the prior year period.
Net capital expenditures were $33.3 million for the quarter compared to $35.9 million in the prior period.
For the full year 2020, we generated cash flow from operations of $173.4 million compared to $276.9 million in 2019.
The decline primarily reflects lower EBITDA during the year that resulted from the global pandemic.
The full year net capital expenditures were $87.1 million compared to $110 million in 2019.
The difference is primarily related to the timing of the Grass Valley divestiture, which we completed in July of 2020.
As a result, we generated free cash flow of $86.3 million in 2020 compared to $166.9 million in 2019.
2021 will be a year of recovery in most of our key markets.
During the year, we expect to complete our transformative portfolio actions and turn the focus to accelerating organic growth.
Our recent order rates are encouraging and I'm confident in our ability to achieve our financial goals and drive superior returns for our shareholders.
We anticipate first quarter 2021 revenues to be between $490 million and $505 million, and earnings per share of $0.60 to $0.70.
For the full year 2021, we expect revenues to be between $1.99 billion and $2.050 billion, and earnings per share of $2.90 to $3.30.
For financial modeling purposes, we recommend using interest expense of approximately $61 million for 2021, and then effective tax rate of 20% for each quarter and the full year.
This guidance includes the expected accretion from the OTN Systems acquisition.
It continues to include the contribution of our copper cable product lines that we are in the process of divesting, which contributed approximately $200 million in revenue and $0.20 in 0PS in 2020.
We will update our guidance accordingly as we complete these divestitures.
We expect current copper prices and foreign exchange rates to have a favorable impact on revenues of approximately $80 million in 2021, but a negligible impact on earnings.
We expect consolidated organic growth in the range of 1% to 4% or up to $70 million, with solid growth in our Industrial Solutions segment, partially offset by declines in the Smart Buildings markets within our Enterprise Solutions segment.
We anticipate an incremental $36 million in revenue and $0.11 in earnings per share from the OTN Systems acquisition.
Consistent with our commitment, we expect to realize the incremental $20 million in savings under our SG&A cost reduction program.
These savings represent $0.36 in EPS.
R&D investments are an important strategic initiative designed to drive growth in future periods.
But these investments will temporary pressure margins and earnings per share in 2021.
Finally, a normalized effective tax rate of 20% along with modestly higher interest expense and share count represent an earnings per share headwind of approximately $0.20 for the year.
For the full year 2021, the high-end of our guidance implies total revenue and earnings per share growth of 10% and 20% respectively.
Before we conclude, I would like to reiterate our investment thesis.
We view Belden as a very compelling investment opportunity, as we are taking bold steps to drive substantially improved business performance.
We are significantly improving our portfolio and aligning them on favorable secular trends in our key strategic markets, including Industrial Automation, Cybersecurity, Broadband and 5G, and Smart Buildings.
We continue to invest in our business to position the company for accelerating organic growth and robust margin expansion.
As we successfully execute our strategic plans and deliver on our goals, we would expect this to drive superior returns for our shareholders.
 Assistant:

Chosen response:
q4 adjusted earnings per share $0.90.
q4 revenue $498.5 million versus refinitiv ibes estimate of $483.9 million.
sees fy 2021 adjusted earnings per share $2.90 to $3.30.
sees q1 adjusted earnings per share $0.60 to $0.70.
sees q1 revenue $490 million to $505 million.
sees fy 2021 revenue $1.99 billion to $2.05 billion.
cfo henk derksen, will be leaving belden in march.
derksen's successor will be jeremy parks.