Prompt:
Human: Carter's is making good progress, recovering from the market disruption caused by the pandemic.
We achieved a record gross profit margin in the quarter with improved price realization and fewer and better promotions.
We reduced our spending and inventories below prior year levels.
We also strengthened cash flow and liquidity in the quarter and gained market share.
With respect to business trends, we got off to a good start in July with sales running more than 90% of prior year sales.
We had substantially all of our stores opened heading into the 4th of July weekend and retail sales over that holiday shopping period comped up 7%.
In August, we saw sales trend to about 87% of prior year sales as schools delayed reopening.
With children starting their school year learning virtually at home, there was less of a need to shop for back-to-school outfits.
September was the largest month so far this year in sales and earnings contribution.
September sales ramped up to 95% of prior year sales.
That's the best performance we've seen since the pandemic began to impact us in March.
Our Labor Day holiday sales were the strongest in the past three years, with comparable retail sales up 15% during that shopping period.
And in October, sales are trending over 90% of prior year sales.
With respect to product performance, we continue to see good demand for our baby apparel and sleepwear product offerings.
Our baby apparel and sleepwear contributed about 70% of our total apparel sales.
We own five times the share of our nearest competitors in each of these product markets.
Our playwear sales improved in July as families prepared for the beginning of a new school year.
Sales dipped in August when it became clear that schools would not reopen and then rebounded in September as consumers shopped for cooler weather outfitting.
We launched our Little Baby Basics product offering in late June to coincide with the store reopenings.
This is the core of our baby product offerings and the best-selling newborn apparel in the United States.
It's a high-margin replenishment program and one of our strongest performing launches in recent years.
Replenishment trends since the launch are much better than last year.
In the third quarter, our retail sales improved to 97% of third quarter sales last year.
That's the strongest recovery in sales relative to our Wholesale and International segments.
Understandably, the pandemic has accelerated the shift to online purchases.
With fewer store visits, we reduced our hours of store operations by over 20% in the quarter.
On a per hour basis, our store sales were better than last year.
Though store traffic was lower, we saw higher conversion rates and higher units purchased per transaction.
We believe those better metrics reflect the strength of our product offerings, our compelling value proposition and a high service level provided by our store associates.
Our stores that historically benefited from tourism, including international guests, saw the largest decline in traffic.
These stores only represent about 11% of our U.S. stores, but drove about 40% of the decline in comparable sales in the quarter.
Until tourism and cross-border travel resume to pre-pandemic levels, these stores will likely underperform our other stores.
Given the mix and level of eCommerce inventories, we were less promotional than last year.
And as a result, we significantly improved price realization and eCommerce profitability in the quarter.
Similar to our store experience, online demand from international customers continues to trend lower than last year.
The biggest declines in demand were from Brazil, Argentina and Europe.
Historically, these were three of our best sources of international demand on our U.S. websites.
These markets were particularly hard hit by the pandemic and stronger dollar.
We continue to benefit from significant investments made in recent years in our online shopping experience.
In the third quarter, our stores fulfilled 24% of our eCommerce orders.
We've invested in technology that helps us optimize the profitability and speed of delivering those purchases.
To improve the convenience of shopping with us, we now offer same-day pickup and curbside pickup services in over 600 of our stores in the United States.
These new omni-channel services are margin accretive relative to shipping from our distribution center to the consumer's home.
Our omni-channel customers, those who enjoy both the online and in-store experience, are our highest value customers with annual spending more than twice that of our single-channel customer.
Going forward, we expect our stores will play an important role supporting our eCommerce customers.
Currently, about 85% of our stores in the United States are located in open air centers, which we believe gives us an advantage relative to our mall-based competitors.
Open Air centers provide a better, more convenient experience for same-day pickup and curbside pickup of online purchases.
We plan to continue opening stores located in more densely populated areas and plan to close stores in more remote and declining centers.
We currently plan to open less than 100 co-branded stores over the next five years.
We also plan to close about 25% of our stores as leases expire.
Nearly 60% of those closures may occur by the end of next year.
80% of those closures are planned by the end of 2022.
These are generally older, lower margin stores in declining centers and less likely to support our focus on high-value omni-channel customers.
Carter's is an attractive tenant.
Our brands are viewed as traffic drivers and bring families with young children into the shopping centers.
As other retailers struggle and downsize, new and more attractive real estate opportunities become available to us.
It's a buyer's market, and we plan to pursue those better opportunities in better centers that provide convenience for our consumers and a high-return on investment for our shareholders.
Our Wholesale business also showed good progress recovering from store closures earlier this year.
Sales in the third quarter were about 86% of prior year sales.
The operating margin on those sales was better than last year.
In the third quarter, we had growth with three of our top-five wholesale customers.
We continue to see good growth with our exclusive brands with sales collectively up 10%.
E-commerce demand for our brands through our wholesale customers was up over 40% in the third quarter, including triple-digit growth rates with some of our exclusive brands.
The trend in online demand improved each month in the quarter.
Together with our wholesale customers, the online purchases of our brands is up over 50% year-to-date.
Within the next few weeks, we expect to achieve a new milestone for our company with annual online purchases of our brands exceeding $1 billion this year.
Our Carter's brand wholesale sales were down about 25% in the quarter, driven by retailers cautiously planning for second half sales and our decision earlier this year to curtail fall and holiday inventory commitments.
Generally speaking, most of our wholesale customers are lean on inventories, seeing better sell-throughs, higher margins and in a chase mode, given better-than-expected demand for our brands.
Given the pandemic-related uncertainty in consumer demand, we believe operating with leaner inventories is a better strategy through the balance of this year, even if it comes at the expense of fewer sales.
Our decision to run lean around inventories may impact second half wholesale sales by as much as $50 million or less than 3% of our total second half sales.
One benefit of running leaner on inventories this year is fewer low-margin sales to off-price retailers.
Our sales to off-price retailers were down 18% in the quarter and down over 50% year-to-date.
We use our stores and websites in the United States and Canada to sell through excess inventories which were caused by store closures and related wholesale order cancellations earlier this year.
As a result, we offer consumers a compelling value through our stores and websites and avoided losses that would have been incurred, selling the excess inventory to off-price retailers.
International sales in the quarter were about 90% of last year's sales and contributed over 13% of our total company sales, which is comparable to last year.
The strength of our International segment is in our direct-to-consumer business, which represented over two-thirds of our international sales in the quarter.
We saw high single-digit growth in our retail sales, driven by a nearly 70% increase in eCommerce sales in Canada and Mexico.
Many of our international wholesale relationships are with several smaller retailers, representing our brands throughout the world.
These retailers have historically been a good source of sales and profitability.
They've been particularly hard hit by the pandemic, stronger dollar and other local market challenges.
We currently expect that sales to these wholesale customers will be the slowest to recover from the global pandemic.
Just for context, these customers contributed less than 2% of our company's annual sales in 2019.
We expect a better recovery with our multinational retailers, including Walmart, Costco and Amazon.
Amazon is seeing good performance from its expansion of our Simple Joys brand in Europe this past year.
That should be a good source of growth for us in the years ahead.
With respect to our supply chain, our team did an excellent job working with our suppliers to reduce our exposure to excess inventories.
Inventories at the end of September were down over 10% compared to last year.
As we shared with you in July, we're seeing delays in the receipt of products from Asia.
We believe those delays were caused by reduced capacity by carriers earlier this year when demand slowed due to store closures.
The delays also reflect inadequate capacity to support the surge in demand when stores reopened this summer and the precautions being taken to keep manufacturing and transportation workers protected from the coronavirus.
They have been very supportive and recognize that the delays are a function of the market disruption.
As we head into the holidays, the flow of products has improved, and we do not expect shipping delays to have a material impact on fourth quarter sales.
We're also managing the exposure to freight surcharges imposed by inbound and outbound carriers due to the surge in eCommerce sales and constrained capacity.
Our best analysis suggests these surcharges may impact fourth quarter earnings by about $2 million.
With lower input costs and excess manufacturing capacity in Asia, our supply chain team has negotiated lower product costs for spring 2021.
Demand for that product offering is planned comparable to last year, and the related shipments began later this quarter.
In summary, we're making good progress recovering from the disruption caused by the pandemic.
We've endured a historically challenging market this past year with the unprecedented scope and duration of store closures, record unemployment and a highly contagious and deadly virus.
We expect the road ahead will be bumpy.
That said, we believe we have a strong product offering and good marketing plans as we head into the final weeks of the year.
No one knows how long the market disruption will last.
What we do know is that the fundamental strength of our brands and business model should help us continue to weather the storm.
We own the largest share of the young children's apparel markets in the United States and Canada with twice the share of our nearest competitors.
Children's apparel is a less discretionary purchase.
We focus on essential core products bought in multiple quantities on a frequent basis in those early years of a child's life.
Our average price points are less than $10, providing a great value to consumers in a weaker economic environment.
We are the largest supplier of children's apparel to the largest retailers in the United States.
We are also the largest young children's apparel specialty retailer with one of the strongest and most profitable eCommerce platforms in children's apparel.
I'm grateful for their commitment to strengthen our brands and to serve the needs of families with young children.
Over the next few months, we will refresh our growth plans based on our experiences this year.
Based on our current estimates, we are planning good growth in sales and earnings next year.
I'll begin on Page 2 with our GAAP income statement for the third quarter.
As Mike noted, our third quarter results were meaningfully better than we had planned.
Net sales in the quarter were $865 million, down 8% from last year.
Reported operating income was $114 million, an increase of 35%.
And reported earnings per share was $1.85 compared to $1.34 a year ago, representing growth of 38%.
Our third quarter and year-to-date results for both 2020 and 2019 contained unusual items, which we've detailed on Page 3.
We've treated these items as non-GAAP adjustments to our reported results to enable greater comparability.
My remarks today will speak to our results on an adjusted basis, which excludes these unusual items.
Moving to Page 4 and our adjusted P&L for the third quarter.
Net sales declined 8% to $865 million, which is a meaningful improvement over the 30% decline we saw in the second quarter.
We continue to see strong demand online with our U.S. eCommerce business achieving a 17% comp and eCommerce comps in Canada up nearly 60%.
While gross profit dollars declined 5% due to lower sales, gross margin rate improved by 180 basis points versus last year to 44.4%.
This represented record quarterly gross margin and was driven by improved price realization and continued progress in reducing excess inventory.
Royalty income was roughly comparable to last year at $9 million.
Spending was very well managed during the quarter.
Adjusted SG&A declined to $24 million or 8% across a broad range of expense categories.
Adjusted operating income grew 4% to $120 million and adjusted operating margin expanded 160 basis points to 13.8%, driven by our strong gross margin performance and management of spending.
Below line, we had higher net interest expense than last year due to the $500 million in new senior notes which we issued earlier this year.
We had other income of approximately $3 million in the quarter, largely foreign currency gains.
And our effective tax rate was about 19% in the quarter, up from about 18% last year.
Average share count declined 2%, driven by share repurchases in 2019.
Recall that we suspended share repurchases earlier this year as part of our liquidity improvement initiatives.
So, on the bottom line, adjusted earnings per share grew 5% to $1.96, up from $1.87 last year.
Turning to Page 5 with some balance sheet and cash flow highlights.
Our balance sheet and liquidity remained very strong.
Total liquidity at the end of the third quarter was nearly $1.6 billion, with over $800 million of cash on hand and virtually all of the borrowing capacity under our $750 million credit facility available to us.
With all of the uncertainty of the current environment, we believe that having substantial liquidity, as we clearly do, is a strategic advantage for Carter's.
As Mike said, we ended the quarter with inventories 11% lower than the year ago.
We believe the quality of our inventory is high overall.
We've made good progress in reducing excess inventory, although we're still working through some excess spring product, particularly in our stores.
We're currently planning net inventories at the end of the year to be roughly comparable with a year ago.
Our Q3 accounts receivable balance declined 10% compared to last year, which reflects lower wholesale sales.
Accounts payable were $473 million at quarter-end compared to $206 million a year ago.
This increase reflects the successful extension of payment terms and rent deferrals.
We continue to receive strong support from our vendors and landlords as we collectively manage through the disruptions caused by the pandemic.
Long-term debt was $1 billion, up from $770 million in the third quarter of last year, which reflects our successful senior notes financing transaction in May and lower revolver borrowings.
In the third quarter, we repaid $244 million, which represented all of the outstanding borrowings under our credit facility.
When considering our meaningful cash position, net debt at the end of the third quarter was $158 million compared to over $600 million at the end of Q3 last years.
Based on our current outlook, we believe we will have ample liquidity for the foreseeable future as our business continues to recover from the pandemic.
Despite year-to-date net income, which is lower than last year, our operating cash flow was very strong at $320 million compared to $73 million last year.
This increase reflects improved working capital, including lower inventory and the successful extension of vendor payment terms, which I've described.
Turning to Page 7 with a summary of our business segment results for the third quarter.
While sales were down, profitability in each of our business segments improved in the third quarter, and our consolidated adjusted operating margin expanded by 160 basis points over last year.
Turning to Page 8, with third quarter results for our U.S. retail segment.
Total segment sales declined 3% compared to last year.
As Mike mentioned, we saw good demand over the Fourth of July and Labor Day holiday selling periods.
For the quarter, total retail comparable sales declined 3.5%, reflecting strong eCommerce growth of 17% and lower store sales.
September, which is the largest month of the year in our business, had particularly strong performance, with comparable store sales down only slightly versus last year.
Store traffic continued to be a challenge for us and the broader industry.
Consumers are understandably cautious, especially as we see virus counts rising again in many areas of the country.
Our store traffic in the third quarter exceeded the industry benchmark, which we follow.
While traffic was down, we saw improved conversion and higher transaction values in our stores in the third quarter.
The adjusted operating margin of our retail segment improved by 50 basis points to 11.4%, driven by improved price realization, especially online, and our improved inventory position and good control of spending.
Turning to Page 9.
Consumers continued to take advantage of our omni-channel capabilities in the third quarter.
We've worked to optimize our stores to make it convenient for customers to arrive and quickly pick up their online orders.
Many customers are also taking advantage of curbside pickup, which is a new capability for us.
Overall, the synergy and integration between our eCommerce business and our nationwide network of convenient and easy to shop stores continue to grow.
On Page 10, all of our recent marketing efforts continue to be highly integrated with our presence on social media.
In the third quarter, we built on our leadership position by adding more followers on Instagram and Facebook than our largest peers in children's apparel combined.
On Page 11, we had particularly high engagement in September with two specific promotional events.
With the pandemic, many families weren't able to take their usual end of summer vacation, around Labor Day.
Recognizing this, we held the promotion to give away staycation packages to families.
This promotion generated the highest ever social engagement for the Carter's brand.
We also held a special celebration of the 125th birthday of the OshKosh B'gosh brand, which included the release of Special Limited-edition vintage overalls, in sizes for the entire family.
This promotion proved very productive as we sold out of the kid sizes of these special overalls within a few weeks.
Turning to Page 12.
Another family tradition which has gone virtual, is the announcement that a new baby is on the way.
During our Baby Love event in September, we gave away 10,000 Carter's body suits with the message -- "2021, Looking Bright", to celebrate the happy news of a new baby set to arrive in 2021.
Moving to Page 13.
Since the pandemic began, we've been providing families with ideas for activities, while they spend more time at home.
We recently initiated a twice a week email series for parents with toddlers and babies, with new ideas and tips for fall.
These communications have continued to deepen our relationships with our customers and reinforce that no brand understands parenthood better than Carter's.
On the next page, it seems clear that we will all be living with the reality of social distancing for a while longer.
Like so many other things, the tradition of kids visiting Santa will be different this year, realizing that we've collaborated with the innovative and popular Cameo platform, in order to deliver personalized virtual messages from Santa to thousands of children for Christmas.
On the next several pages, we've included examples of some of our marketing for the holidays.
Maybe this year, more than most families are looking forward to being together and celebrating the holidays.
On Page 15, we've seen strong demand for our holiday products.
On Page 16, Carter's is known for our pajamas, especially Christmas PJs, with sizes for everyone in the family.
On Page 17, we also have extensive offerings for special outfitting, for dress applications for the holidays.
And this year, on Page 18, we have toys from Skip Hop and Carter's.
In the majority of our stores we will introduce special Santa's toy shops for the holiday season.
Moving to Page 19, with a recap of U.S. wholesale results for the third quarter.
While net sales were lower than last year, our sales were meaningfully better than we had expected.
The upside to our forecast was due to several factors.
We saw some earlier demand for fall product from several retailers, replenishment demand for Little Baby Basics was strong and the impact of the delay in the arrival of product, which we mentioned on our last call, was less severe than we had forecasted.
All of our wholesale customers are investing in and growing their online businesses, which has translated into strong demand for our brands.
Demand for our exclusive brands at Target, Walmart and Amazon was strong in the third quarter, with combined sales growing 10% over last year.
Our Skip Hop brand grew nicely in the wholesale channel this quarter.
With consumer spending more time at home, Skip Hop's Home Gear, Playtime and Bath Time products have proven very popular.
As Mike said, sales of the Carter's brand were down in the quarter, in part due to the fact that in the early days of the pandemic, we proactively canceled a good amount of fall and winter inventory commitments, and given that many customers have understandably chosen to run leaner on inventory in the current environment.
Shipments to the off-price channel declined meaningfully in the third quarter, as we're more effectively using our own retail channels to clear excess inventory.
U.S. Wholesale adjusted segment income was $67 million in the third quarter compared to $73 million a year ago.
Adjusted segment margin improved by 140 basis points to 22.3%, reflecting lower inventory-related charges which were partially offset by higher bad debt expense.
On Page 20, we launched our core Little Baby Basics collection annually.
This year, we did so in late June, which is somewhat later than normal.
These products are the everyday essentials that every parent of a newborn needs.
We're seeing very strong performance of Little Baby Basics this year.
We sell these signature products in multiple channels, including at some of our largest wholesale accounts, such as Kohl's and Macy's.
Performance in our own stores on carters.com and in our International business has also been strong.
Beginning on Page 21, we've included a few slides that highlight our exclusive brands, which are available at Target, Walmart and Amazon.
The Just One You brand continues to enjoy good momentum.
Target has invested in several digital campaigns highlighting Just One You.
These campaigns have increased awareness of the brand among new and existing guests at Target.
Sleepwear for infant and toddlers has been a particularly productive category with plans for continued momentum in the fourth quarter with Christmas pajamas and a broad assortment of sibling dressing products.
On Page 22, on the Child of Mine brand at Walmart.
In the third quarter, eCommerce sales of Child of Mine more than doubled over last year.
Here too, investments in brand marketing have driven good productivity and momentum in Child of Mine, which we expect will continue into the holiday selling period.
Finally, on Page 23, our Simple Joys brand continues to resonate with consumers.
We have a strong partnership with Amazon and Simple Joys and Simple Joys has grown to be one of our largest brands.
We participated in another successful Prime Day recently, where we posted a significant increase in sales.
The Simple Joys assortment has expanded over the past few years and now includes Baby, Toddler and Pajamas up to size-eight as well as shoes and accessories.
Moving to Page 24 and third quarter results for our International segment.
International net sales declined 10% to $114 million.
This decrease was principally driven by lower wholesale shipments to markets outside of North America due in part to the stronger U.S. dollar as well as the disruptions caused by the global pandemic.
Canada delivered a very good quarter overall, with retail comparable sales growing 7%.
Online demand continued to be strong with eCommerce comps up 58%.
Store comps in Canada were down a bit, but the arrival of colder weather and good back-to-school demand helped boost sales.
Net sales in our Mexico business were down year-over-year, reflecting a weaker peso and lower wholesale sales.
We're making good progress in the retail portion of the business in Mexico.
Our new larger co-branded stores are performing well; and eCommerce, which we launched late last year, continues to post strong growth.
International adjusted operating margin expanded 270 basis points to 15.8%, driven by strong performance in Canada that was partially offset by a lower contribution from our partners business.
On Page 25, we've included a photo of one of our newest stores in Mexico.
The store is our sixth larger format co-branded store.
Initial consumer reaction has been very positive.
In Q3, this store has quickly become one of our best-performing locations in Mexico.
On Page 26, we've included pictures from the first three stand-alone Carter's stores in Brazil, two in Sao Paulo and one in Rio de Janeiro.
These stores are operated by Riachuelo, our exclusive partner in Brazil.
As many of you know, we've had a strong following by Brazilian consumers shopping with us in the United States over the years, so establishing a direct presence in this important market is a good step forward.
Early reaction from consumers to these new stores has been very positive.
Turning to Page 27 with our outlook for the balance of the year.
As with last quarter and given the ongoing market disruption caused by the pandemic, we're not providing sales and earnings guidance today.
We expect that COVID-19 will continue to have a significant impact on our operations in the fourth quarter.
We're assuming that store traffic will continue to be lower than last year, and we're mindful of the risk of the resurgence of COVID-19 in key markets in North America.
We expect that online demand will continue to be strong in the fourth quarter, and we're planning for continued gross margin expansion.
We're tracking several other risks over the balance of the fourth quarter, including the broader macroeconomic environment, including unemployment and consumer confidence, as well as developments related to possible additional economic stimulus, and the upcoming elections.
 Assistant:

Chosen response:
compname reports q3 earnings per share of $1.85.
q3 adjusted non-gaap earnings per share $1.96.
q3 earnings per share $1.85.
q3 sales $865 million versus refinitiv ibes estimate of $878.5 million.
qtrly u.s. retail comparable sales down 3.5%.
not providing fiscal 2020 sales and earnings guidance at this time.
$1.6 billion in liquidity at quarter end.
continues to believe has sufficient liquidity for foreseeable future.


Prompt:
Human: carlisle.com in the Investor Relations section.
Today's call will begin with Chris discussing business trends experienced during the fourth quarter of 2020, views of what's to come in 2021 and context around our continued confidence in achieving Vision 2025.
Bob will discuss Carlisle's fourth quarter performance and current financial position.
Those considering investing in Carlisle should read these statements carefully and review reports we file with the SEC before making an investment decision.
Entering what is now the second year of operating in this COVID-19 pandemic, I hope everyone is healthy and staying safe.
I'd like to open by saying how proud I am of the global Carlisle team for their perseverance and ability to execute in these uncertain times.
Our COVID statistics reflect the strong compliance to the CDC guidelines and safety measures all Carlisle employees have followed.
In 2020, we suffered 470 infections, 15 hospitalizations and sadly, three deaths.
We continue to do our part to combat the spread of the virus in combination with further progress on the vaccination rollout.
We anticipate that we will continue to show our safety measures are working because at Carisle maintaining health and safety is always our first priority.
Vision 2025 provided clear direction and consistency of mission during a tumultuous 2020 and will continue to guide our efforts as we accelerate into the recovery.
As we passed the mid-year mark and entered the third quarter, we continued to build on the momentum started in late Q2 when our employees, customers and supply chain partners increasingly were able to work safely and efficiently and began to get back to contributing to economic growth.
As the global community returned to work, strong underlying deferred demand became more evident, especially in our building products business.
While we expect this momentum to continue as vaccines help decrease risk, the construction industry is still contending with uneven regional disruptions due to COVID restrictions, severe weather in certain areas and tight labor dynamics, which is resulting in deferred demand continuing to build the backlog of work.
Turning to Slide 4.
2020 demonstrated yet again the exceptional and sustainable earnings power of the Carlisle business model.
Over the past several decades, Carlisle has been categorized as a diversified industrial company and rightly so as evidenced by our portfolio contact -- or content multiple acquisitions in a variety of segments ranging from fluid handling to medical technologies and our legacy strategic goals.
However, since CCM introduced the first single-ply EPDM roofing membranes to the market in the early 1960s.
Carlisle's growth and earnings have increasingly been powered by our construction materials business.
With over a half century of outstanding performance, CCM's influence on our overall performance has consistently expanded despite our diversification efforts peaking in 2020 when it accounted for over 70% of revenues and over 90% of earnings.
In the past three years, CCM has accelerated their world-class performance leveraging consistent organic growth focused on providing the ultimate customer service, the Carlisle Experience, and instituting greater price discipline, developing sophisticated sourcing and purchasing capabilities and maintaining a continuous improvement culture, all aiming to drive increased profitability and shareholder value.
In 2017, when we first contemplated Vision 2025, we turned a critical eye to our capital deployment efforts and started to pivot to a more disciplined ROI focus.
It was that critical assessment and objective view of value creation that drove our focus under Vision 2025 to apply a greater investment spotlight on the CCM.
A consistent 30% plus returns business, CCM's performance warranted and earn the right to share the majority of investment dollars that were allocated to portfolio diversification.
At that time, a key strategy of Carlisle's legacy approach of building out higher growth and presumably higher margin platforms as a path to sustainable value creation.
With the official rollout of Vision 2025 in February of 2018, our evolution was actualized evidenced by our recent extensive M&A and capital investments at CCM.
As shown on Slide 5, CCM has continued to evolve from its roots, the early 1960s of a simple, single-ply roofing membrane division to today where we deliver innovative easy to install and energy-efficient solutions throughout -- through the Carlisle Experience for customers who are creating the sustainable building for the future.
With our extensive line of building envelope products CCM offers complete set of solutions and systems to aid in the design of efficient building envelope efficient projects backed by industry leading warranties and a focus on green principles.
On Slide 6, you can see how this building envelope concept can deliver substantial energy savings for building owners.
CCM products provide a substantial offset to the estimated 40% of greenhouse gases globally generated from the construction and maintenance of buildings and our teams are focused on continuing to support the growing efforts in global energy efficiency.
It is because of this history of innovation, investment and continuous improvement that we have more conviction than ever that CCM's future success is secure.
We believe the extensive planning of Vision 2025 identified the strengths of CCM's core markets, demonstrated a consistent reroofing revenue stream and elevated the power of CCM's sustainable business model.
2020 only served to crystallize our confidence.
Turning to Slide 7.
I'd like to spend a few minutes talking in more detail about CCM's future and what drives our confidence in the CCM business model.
First, as you've heard us speak about it like CCM's core business is predominantly driven by replacement roofing demand.
Non-residential buildings built 10 to 20 years ago make up over 25% of current infrastructure and those roofs will need replacing in the next decade.
As a reminder, roof replacements are not discretionary.
Aided by the Carlisle experience and our market position, CCM should continue to capture placement of installed roofing systems and grow share with new energy-efficient, labor reducing and cost-effective product and solutions in the $6 billion and growing market.
While the majority of our core CCM business revenue comes from reroofing, past construction cycles evidenced residential construction as a strong leading indicator of new commercial construction, which augments core CCM growth.
Growing residential construction demand, which accelerated in 2020 coinciding with urban relocation due to COVID will require increased commercial infrastructure, including big-box retailers, hospitals, warehouses and educational buildings to support a growing population of suburban families and workers.
Second, as shown on Slide 8, the recent addition of our Polyurethane platform to CCM included spray foam insulation, which is a sustainable high single-digit growth market.
Our top performing formulations provide unmatched energy efficiency in both residential and non-residential applications.
Driven by our industry-first concept of the combined material and equipment solution, which we call IntelliSpray, it was developed and introduced with engineering support from Carlisle Fluid Technologies.
Carlisle's CCM is uniquely positioned to grow at above market levels in spray Polyurethane foam insulation.
This innovative new system will allow us to provide the contractor, builder and homeowner with greater application efficiency and control, savings from application efficiency improvements and ultimately a better foam insulation product.
Third, like Polyurethane, Architectural Metals is an exciting new platform for CCM, it's a $1 billion market growing at approximately 2 times GBP provides an attractive opportunity to diversify into the sloped roof market with a highly sustainable product.
Our metals platform is seeing healthy organic growth as it offers a lasting high ROI system solution to building owners, generating solid pull through sales of CCM insulation and other layman products.
To support our regional growth strategy, we are expanding our metals footprint in 2021 by opening three new locations in the U.S. Metal roofing systems also complement our drive to deliver solutions that support the construction of an efficient building envelope.
Metal roofs are 100% recyclable, increase energy efficiency of the building up to 20% versus traditional materials and reduce waste in the manufacturing process.
Fourth, we are committed to accelerating growth in Europe, a $10 billion -- or EUR10 billion addressable market.
To drive this growth, we recently changed leadership in the region and announced the investment of over $25 million to expand capacity in our German manufacturing facility.
Increasing demand and regulations for improved thermal performance along with integrated roofing systems are driving a shift to single-ply membranes in Europe.
CCM's leading environmental energy-efficient solutions lend themselves well to trends in the European market.
Recent industry dynamics reinforce our ability, the new ownership of the recently acquired competitor and it announced management addition at another competitor, shows the widespread belief of the strong prospects for the non-residential building product space.
The industry dynamics also support our strategy to accelerate growth in Europe.
And finally, as it was widely discussed after the recent acquisition, our increased focus on delivering the Carlisle Experience for the sustainable building of the future is in line with macro industry trends.
Before moving to our three other businesses, I want to reiterate how remarkable our CCM business and the team performed in 2020.
CCM was largely the story for Carlisle in 2020 and we expect that to continue into 2021 and beyond.
Regarding our other three businesses, on Slide 9, 2020 was obviously a difficult year due to the pandemic.
In the face of significant declines, the teams did a commendable job managing through the crisis, taking actions to reduce costs and position their businesses for the future, including leveraging COS, investing in new product development and rightsizing footprints.
While the results did not meet our expectations, these remain good -- very good businesses with solid management teams committed to weathering the current macroeconomic challenges.
We are optimistic that the actions taken in 2020 to improve CIT, CFT and CBF will position these businesses for a solid recovery, especially in 2021 for CFT and CBF where markets have signaled the bottom.
While we believe CIT will recover over a longer timeline, we are confident that there will be a recovery.
With higher inoculation rates from rapid vaccine rollouts, easing of COVID travel restrictions and an improved outlook for both aerospace and hospital capital spending, CIT will drive exceptional leverage with the resumption of growth.
Before Bob gives the financial details of the quarter, I'd like to touch on a few other notable achievements in 2020.
We've generated $2.5 billion of free cash flow over the last six years and recently accelerating significantly with almost half of that was generated in 2019 and 2020.
This track record of success supports our confidence and this team's ability to execute on our capital allocation strategy and to create value.
While 2020 was a subdued year for M&A, we are managing an active pipeline for accretive and synergistic acquisitions to rapidly scale our high returning businesses.
As always, our financial strength and cash flow generating capabilities afford us flexibility and we intend to remain opportunistic.
Notably, and as we've discussed in the past, when acquisition activity is subdued, we remain committed to returning capital to shareholders.
This is evidenced by our deployment of more of than $380 million of share repurchases in 2020, totaling approximately $1.5 billion in share repurchases since 2017.
And at our latest Board meeting, our Board approved an incremental $5 million share repurchase authorization for Carlisle.
We also returned over $112 million to shareholders in the form of dividends in 2020, raising our dividend in August for the 44th consecutive year.
An finally, we spent $96 million of capex in 2020 and that plans to significantly increase that in 2021.
On Slide 11, we touch on our continued and expanded actions around ESG where Carlisle remains steadfast in our commitment.
Supported by COS, we are continually examining ways to improve the design and manufacturing of our products, seeking to better engage our employees and communities and improve an already strong regulatory framework.
In 2020, we also made progress in diversity and inclusion exiting 2020 with 50% of our Board of Directors identifying as gender, racially or ethnically diverse and meeting our 2020 target for percent of females in senior leadership positions.
And as we've stated many times before, ESG is part of Carlisle's culture of continuous improvement and we look forward to sharing more progress with you in the future.
We also encourage you to read more about Carlisle's ESG efforts on the Sustainability pages of our website.
In 2020, COS delivered savings of 1.3% of sales, well within our Vision 2025 annual target of 1% to 2%, a remarkable feat considering 2020's challenging conditions and proving that Carlisle employees truly embody and live our continuous improvement culture every day.
Another major milestone in 2020 was the launch of the Path to Zero, which represents our commitment to creating the safest possible work environment and features the goal of zero accidents and zero injuries.
COS will continue to be a unifying cultural imperative for our businesses to rely on as they seek new opportunities to make our operations and business processes more efficient.
Bob will now provide operational and financial details about our fourth quarter and review our balance sheet and cash flow.
Revenue decreased 7% to $1.1 billion in the fourth quarter.
Organic revenue declined 9%.
Acquisitions contributed 1.4% of sales growth for the quarter and FX was a 60 basis point tailwind.
Turning to our margin bridge on Slide 14.
Q4 operating margin declined 180 basis points, pricing and volume headwinds combined for a 320 basis point decline and acquisitions were a 40 basis point tailwind.
Offsetting these declines, freight, labor, raw material, other operating costs netted to a 60 basis point improvement.
COS benefits added 120 basis points.
On Slide 15, we have provided an earnings per share bridge where you can see the fourth quarter diluted earnings per share from continuing operations was $1.57, which compares to $1.81 last year.
Volume, price and mix combined were a $0.74 year-over-year decrease.
Partially offsetting, interest and tax contributed $0.09 and raw material, freight and labor costs netted to a $0.16 benefit.
Share repurchases contributed $0.09, COS contributed $0.19, and finally, operating expenses were a $0.03 headwind.
While COVID-related volume declines clearly represented the most significant headwind during the quarter, our teams around the world did a commendable job managing costs, leveraging COS-improved efficiencies and taking actions to both position Carlisle for the recovery while mitigating the pandemic impact on earnings.
At CCM, the team again delivered outstanding results with revenues increasing 1% driven by volume and 30 basis points of foreign currency translation tailwind.
CCM continued to exhibit its resilience with solid U.S. commercial roofing performance despite the continued COVID-related restrictions in some areas restraining the recovery.
Our newer platforms of Architectural Metals and Polyurethanes were solid contributors to the quarter's revenue performance.
Operating margin at CCM was a record 20.4% for the fourth quarter, a 350 base improvement over the last year driven by CCM team's superb cost management and COS partially offset by wage inflation.
CCM executed well in delivering approximately $15 million of net price cost realization in the quarter.
CIT's revenue declined 35.4% in the fourth quarter.
As well publicized, this decline was driven by the crisis in commercial aerospace markets.
While the recovery in aerospace could be prolonged, we are confident that there will be a resumption of growth with the continued rollout of the COVID vaccines and airlines returning to profitability.
In other positive recent news, the 737 MAX 8 has been cleared for returned flights in the U.S., Europe and South America, while TSA, the early checkpoint data continues to improve.
In our medical platform, sales continued to be impacted by COVID-related delays in the hospital capex and postponed elective surgeries.
However, our project pipeline is robust and the long term trends remain attractive, including increasing preference to minimally invasive surgeries and OEM strategies, consolidated by surgery partners.
CIT's operating margin declined significantly year-over-year to a negative 8.6% driven by commercial aerospace volume declines and accelerated restructuring actions.
These declines were partially offset by savings from CLS, lower SG&A and price increases.
While the actions taken by CIT in 2020 to rightsize our footprint and reduce our workforce were difficult, we are positioned to deliver improved operating income performance when the volumes return.
Turning now to Slide 18.
CFT sales declined 8.3% year-over-year.
Organic revenue declined 16.1% and additionally, acquisitions added 5% in the quarter.
FX contributed 280 basis points.
Stabilization in key end markets driven by an improved industrial capital spending outlook in 2021, coupled with recent management additions, new product introductions, pricing resolve and CFT's efforts to upgrade the customer experience and positioned CFT well as we enter 2021.
Operating income of 4.5% was an 820 basis point decline year-on-year.
This decline was driven by lower volumes, restructuring and raw material costs, partially offset by price and efficiencies from core CLS and lower SG&A.
Turning to CBF on Slide 19.
CBF's fourth quarter organic revenue grew 2.8% and FX had a positive 2.6% impact driving CBF growth of 5.4% in the quarter.
Demand for agriculture and construction equipment were the primary drivers, while orders in all regions improved throughout the second half of 2020.
Operating income was $8 million or 1.1% operating margin.
Flat for the fourth quarter of 2019, driven primarily by unfavorable mix in aerospace markets, wage inflation, offset by COS efficiencies, increased volumes and tight cost controls.
On slides 20 and 21, we show selected balance sheet metrics.
Our balance sheet remains strong.
We ended the quarter with $902 million of cash on hand and $1 billion of availability under our revolving credit line.
We continue to approach capital deployment in a balanced and disciplined manner.
Investing organic growth in capex and opportunistically repurchasing shares while also actively seeking strategic and synergistic acquisitions.
Free cash flow for 2020 was an exceptional $601 million consistent with '19 results on the lower sales volumes.
Turning to Slide 21, you can see the outlook for 2021 on items affecting comparability in corporate items.
Corporate expense is expected to be approximately $105 million for the year.
We expect depreciation and amortization expense to be approximately $225 million.
For the full year, we will continue to invest in our businesses and now expect capital expenditures of $100 million to $175 million.
Net interest expense is approximately -- expected to be approximately $75 million for the year and we expect our tax rate to be approximately 25%.
Without you, we could not have weathered and overcome the significant challenges of 2020.
Entering 2021, we are cautiously optimistic about the outlook for Carlisle.
We will continue to benefit from the strength in the Carlisle business model and enhance our strong earnings power by investing in our high returning businesses.
We'll continue to deploy capital into strategic acquisitions, share repurchases and dividends, all the while maintaining our commitment to delivering returns on invested capital in excess of 15% and ultimately driving the $15 of earnings per share.
While there are clearly many uncertainties around the pandemic, including the effectiveness of the rollout of the vaccines, we want to keep investors informed on our views of our businesses and markets.
As such, we offer 2021 guidance based upon where we are today, while fully acknowledging that we are in uncertain and turbulent times.
For full year 2021, we anticipate the following.
At CCM, supported by reroofing project deferrals that occurred in 2020, positive momentum in our newer businesses of Architectural Metals, Polyurethanes, expansion of our European businesses and a decrease in complexity to complete jobs as COVID restrictions ease, we anticipate revenue growth of high-single digits in 2021.
At CIT, we believe that rapid COVID inoculation will drive an improvement in business and leisure travel exiting 2021.
Aircraft manufacturers are indicating production rates will rise toward the end of 2021.
These trends are coupled with an improved order book for medical products and solutions as hospital capital investments and elective surgeries resume.
That said, we anticipate pressures remain near term and given a different -- very difficult year-over-year comparison in the first quarter, we expect CIT revenue will decline in the mid-to-high single digit range in full year 2021.
With the order book strengthening for both CFT and CBF and end markets stabilizing, we anticipate low double-digit growth for both businesses.
 Assistant:

Chosen response:
compname reports fourth quarter earnings per share of $1.57.
compname reports fourth quarter diluted earnings per share of $1.57.
q4 earnings per share $1.57.
q4 revenue $1.1 billion versus refinitiv ibes estimate of $1.07 billion.


Prompt:
Human: I'll begin by sharing a few thoughts on our business performance and our operations.
As mentioned on our last earnings call, we expected sales to improve in the third quarter.
Sales were $113.8 million in the quarter, down 2% in the third quarter of 2019 and up 35% sequentially.
Third quarter gross margin was 32.4% compared to 32% in the same period in 2019, up 40 basis points and up 80 basis points sequentially from the second quarter of this year.
Third quarter adjusted earnings per share was $0.34, up 17% from $0.29 in the third quarter of last year and up from $0.18 in the second quarter of 2020.
We delivered an EBITDA -- an adjusted EBITDA margin of 19%, up 230 basis points from 16.7% in the second quarter of 2020.
New business wins were $127 million in the third quarter, and we added seven new customers.
We ended the quarter with $132 million in cash and $106 million in debt.
Operationally, all our plants are running.
We continue to experience challenges at our Mexico locations.
Since last quarter, those facilities have improved from approximately 60% capacity to more in the range of 90%.
We are monitoring local changes to COVID-19 restrictions at one of those facilities and at our Ostrava facility in Czech Republic.
Ashish Agrawal is with me for today's call and will take us through the safe harbor statement.
To the extent that today's discussion refers to any non-GAAP measures under Regulation G, the required explanations and reconciliations are available in the Investors section of the CTS website.
I will now turn the discussion back over to our CEO, Kieran O'Sullivan.
As we navigate to COVID-19, our employees are supporting and helping the less fortunate in our local communities, something we're very proud of.
Our employees also continue to demonstrate flexibility and responsiveness throughout our operations to support all customers.
Our first focus continues to be the safety of our employees and compliance with state and local regulations.
We are adapting our business and processes to focus on our priorities, driving profitable growth, strengthening our go-to-market, enhancing our operational capabilities and advancing our leadership talent and culture.
The restructuring plan we announced on the last earnings call is progressing to plan and is expected to deliver an annualized earnings per share improvement of $0.22 to $0.26 by the second half of 2022.
More importantly, we are focused on returning to growth, targeting 10%, in line with our strategic plan, 5% organic and 5% through strategic acquisitions.
We remain focused on our strategic growth investments as part of our planning for 2025.
Growing our business and expanding our range of products that sense, connect and move is the priority.
New business awards were $127 million for the quarter, the best quarterly performance this year.
We added seven new customers in the quarter, four in industrial and one each in defense, medical and telecom.
In transportation, we were awarded a large passive safety sensor award for an electric vehicle application in the China market.
We also secured multiple OEM accelerated awards with customers in Asia, Europe and a global platform win with a North American OEM.
These recent wins are leveraging our inductive technology, which is a key enabler for growth to meet mid- and high-end product requirements.
We secured an additional ride height sensing award with the same customer.
Cumulative, EV and hybrid wins this year are approximately $75 million, and we expect further gains.
Last quarter, we reported our first win with current sensing.
We aim to expand this application in other regions.
In defense, we were awarded contracts with several Tier one customers for sonar applications.
More recently, we developed and secured a new sample order for an ordinance application.
In Europe, we seek to gain share by building relationships with new customers.
We are leveraging our footprint and capabilities in Denmark and the Czech Republic, where we recently received sample orders with two new defense Tier one customers.
With temperature sensing, we secured a small initial order for an application in electric vehicles.
The sensor is part of the charging circuit for the battery management system.
In the precision frequency product line, we were selected for a design win in a 5G small cell application for systems in multiple countries, and also secured the distribution order.
We secured a multiyear design award for a low-power crystal product in a defense application.
We continue to advance product innovations.
Our focus in the transportation market, as we have stated previously, is to develop sensor solutions that are agnostic to the underlying propulsion technology, strengthening our growth in the next decade as hybrid and electric vehicle penetration grows.
EVs are expected to be less expensive than internal combustion engines in the 2025 time frame as battery costs decline.
15 countries and two U.S. states have announced phase outs of internal combustion engines in the 2030 to 2040 time period, with Norway aiming for 2025.
We expect EV penetration to reach 9% by 2025 and 22% by 2030.
Our innovations are in the areas of electronic braking, new accelerator interfaces and high-performance temperature applications.
We continue to research new material formulations as we target growth in defense, industrial and medical markets.
In defense, our primary focus is on the solar market for forward and towed arrays.
In industrial, we target in-jet printing, flow and position as well as nondestructive testing.
In medical, the primary focus is medical ultrasound, intravascular medical ultrasound, ultrasonic therapy and scalpel applications.
We continue to advance our traditional position sensing for industrial applications and new encoder product for medical equipment.
The developments for ultra-low life high frequency TCXOs and OCXOs for millimeter wave and sub-6 gigahertz systems are progressing as we continue to gain design awards through a major telecom OEM.
While the M&A environment has become a little more challenging due to COVID and associated travel restrictions, we are adapting and continue to strengthen our pipeline of opportunities.
We seek to expand our range of technologies, products, customers and geographic reach.
We continue to make progress on our foundry operations and expect to have completed the improvements this year.
The team is making steady progress on process controls into subsequent efficiencies.
The Focus 2025 initiative has an important emphasis on building stronger customer relationships.
As part of this initiative, we are improving our go-to-market capabilities, skills and sales incentive plans to place a stronger focus on profitable growth.
We are working to improve the quality of the sales funnel, optimize our end market approach, target new accounts and align our functional areas to be more responsive and solution-oriented in line with our core values.
As part of our realignment on profitable growth, we are evaluating the product portfolio for longer-term growth and margin expansion.
We have moved from a period of sharp decline in the second quarter to a time of uncertainty as the inventory levels are rebalanced and the market responds to high unemployment and other economic challenges.
In the U.S., the seasonally adjusted growth rate for 2020 is closer to 13 million units, down 21% for last year.
We expect next year to be in the 14 million unit range.
On-hand days of supply are now at 55 days, down from 65 days of supply in the third quarter of 2019.
European sales are forecasted to decline 24% from last year, and we expect 18.7 million unit levels in 2021.
The China market continues to be more robust, with volumes predicted to be down 9%, in the 21 million to 22 million range for this year and up to 24 million units next year.
There are signs, the commercial vehicle market may be on an improving trend as freight fundamentals continue to improve.
It's a little early to say how sustainable this improvement will be.
We continue to see stronger growth in industrial and defense markets.
We remain cautious on market conditions in the next several quarters.
We expect to resume annual guidance for fiscal year 2021 in February.
Our liquidity remains solid.
We view this challenging time period as an opportunity to strengthen our capabilities.
Now Ashish will walk us through our financial performance in more detail.
Third quarter sales were $113.8 million, down 2% compared to last year.
Sequentially, sales rebounded strongly, up 35% from the second quarter.
Sales to transportation customers decreased by 9% year-over-year.
However, sequentially, we grew by 71%.
Sales to other end markets increased by 10% versus Q3 of 2019 and 5%, sequentially.
Our temperature sensing acquisition had solid growth and added $6.6 million.
Organic sales to non-transportation customers were up 4% versus last year.
We experienced double-digit growth in sales to both the defense and industrial end markets.
As expected, the medical end market was soft.
Our gross margin was 32.4% for the third quarter, up 80 basis points compared to last quarter and up 40 basis points compared to last year.
Conditions remain uncertain due to the impact of COVID.
And we are maintaining a focus on cost efficiency and capability to ramp production up or down.
As a result of improved revenue and careful cost management, adjusted operating earnings were 13%, up 170 basis points from last year and up 450 basis points sequentially.
As Kieran mentioned, we are making progress on the restructuring plan we initiated a few months ago.
We will update you on the improvements as we complete various parts of the plan in the coming quarters.
Our year-to-date tax rate was approximately 24%, and we expect the full year rate to be in the range of 23% to 25%, excluding discrete items.
Third quarter 2020 earnings were $0.34 per diluted share.
Adjusted earnings per diluted share were also $0.34 compared to $0.16 last quarter and $0.29 in the third quarter of 2019.
Focusing on the balance sheet.
Our working capital -- our controllable working capital as a percentage of sales was 15.6% at the end of the third quarter.
This represents a significant improvement from 21.2% last quarter, and the team recognizes that we still have much work ahead of us to further improve our working capital performance.
We generated $25.6 million in operating cash flow in the third quarter.
Year-to-date, we have generated $49 million in operating cash flow, up 21% compared to 2019.
The strong cash performance in the third quarter enabled us to reduce debt by $35 million.
capex was $3.2 million.
For the full year, we are expecting capital expenditures to be below 4% of sales.
On liquidity, our net cash position was $25 million, an improvement of approximately $20 million from the second quarter.
We have access to an additional $192 million through our revolving credit facility.
And at this time, we expect to remain well within our debt covenants.
We are continuing to implement SAP.
As we communicated earlier, more than 80% of our revenues come from sites that are running on SAP.
We are expecting to complete the implementation around the middle of 2021.
However, COVID-related travel limitations could cause some delays.
This concludes our prepared comments.
 Assistant:

Chosen response:
compname reports q3 earnings per share $0.34.
q3 adjusted earnings per share $0.34.
q3 earnings per share $0.34.
q3 sales $113.8 million versus refinitiv ibes estimate of $104.1 million.
management is not providing revenue or earnings guidance.


Prompt:
Human: I'm Susie Lisa, senior vice president of investor relations for CVS Health.
Today's call is being broadcast on our website where it will be archived for one year.
CVS Health has delivered another strong quarter and exceeded expectations.
For the third quarter in a row, we are raising adjusted earnings per share guidance.
Throughout 2021, we have made progress executing our strategy to deliver an integrated healthcare experience centered around the consumer.
We sustained strong revenue growth in each of our core businesses helped improve health outcomes and reduce costs by broadening access to quality care.
We help fight the pandemic and reach millions of consumers with convenient, accessible care in communities across America.
During the third quarter, we delivered revenue growth of 10%.
This double-digit growth was led by membership gains in both healthcare benefits and pharmacy services, as well as higher volume in retail.
We grew adjusted operating income by 12.5%.
We generated adjusted earnings per share of $1.97 and strong cash flow from operations of $5.5 billion.
Given these results and our outlook, we are raising our adjusted earnings per share guidance to $7.90 to $8.
This higher guidance reflects the quarter's outperformance and continued positive momentum, which Shawn will discuss shortly.
Third quarter results again demonstrate that our customers value how we bring together our unique portfolio of assets our deep healthcare expertise and vast consumer touchpoints to meet health needs.
There is strong demand for our integrated solutions across the healthcare continuum, including health management programs for chronic conditions, mental health support, pharmacy services, and health and wellness products.
We added over 1.3 million new integrated pharmacy and medical members through the 2021 and 2022 selling season.
More customers are seeking complementary health services that work together, such as virtual care.
Earlier this year, CVS Health launched the first national Virtual Primary Care program.
This market-leading solution offers a national network of physicians virtually and access to convenient face-to-face care in our MinuteClinic locations when needed, often with 0 co-pay.
Our program has grown to 30 customer accounts with over 750,000 eligible members as of January 1, 2022.
This is an indication of our ability to scale nationally and bring innovative products to the marketplace.
Our customers recognize the importance of CVS Health Care Solutions and the ease of access we now provide in the community, the home, and virtually.
Our high customer retention rates and new business wins are a testament to the strength of our business model.
Healthcare benefits revenue increased 9.5% year over year.
Strength in government services helped drive an adjusted operating income increase of 2.4% versus prior year despite higher costs related to COVID-19, net of deferred care primarily within our commercial book.
We generated sequential membership growth across all three product lines in the quarter: commercial, Medicare, and Medicaid.
Our medical benefit ratio of 85.8% was above our expectations, driven by COVID-related costs, primarily driven by commercial.
Underlying non-COVID costs emerged in line with our expectations.
We believe aggregate medical costs will slightly exceed baseline levels for the full year.
We produced strong results in our Medicare business and grew membership both sequentially and year over year across all Medicare products.
This reflects our strong product portfolio, Stars performance, and reputation for service excellence.
Year to date, Medicare Advantage membership has grown 9.2%.
In 2022, we anticipate we will achieve double-digit growth in individual Medicare and generate strong momentum in dual eligibles.
Our strong performance in Stars continues, as you saw for 2022, with 87% of our members in Star plans rated four and higher, up from 83% in 2021.
In our commercial business, we expect moderate growth in 2022 for national accounts, driven by both increased sales, which are up approximately 50% year over year, and a 95% client retention rate.
As we mentioned earlier this year, we are reentering the individual exchanges in eight states as of January 2022.
Enrollment began on Monday, and we anticipate our co-branded CVS Aetna offering and benefit design focused on consumer choice will result in gains of at least 100,000 new members in 2022.
Turning to pharmacy services.
We delivered third quarter revenue growth of 9.3% and adjusted operating income growth of 9.5% year over year.
For the 2022 selling season, we achieved a 98% retention rate.
We drove $10.4 billion of growth new business, resulting in $8.9 billion of net new business wins, providing evidence of our market-leading trend management, transparency customer service, and integrated offerings.
We continue to be a leader in specialty pharmacy with programs that drive value in the marketplace provide substantive savings to customers and differentiate us as we pay our programs with digital assets.
We maintained a strong momentum this quarter with specialty revenue up 8.7% versus prior year.
Our service excellence and top-tier execution are key areas of differentiation.
Our retail segment continues to play a critical role as a local health destination for millions of Americans.
Retail outperformed both expectations and the industry in the third quarter.
We delivered 10% revenue growth and 22% adjusted operating income growth year over year.
Pharmacy sales and prescriptions filled both increased 8% year over year, largely driven by COVID-19 vaccine administration and core pharmacy services.
Our patient satisfaction scores remain high with approximately 90% satisfied with their experience in our CVS Health locations.
We continue to support millions of Americans for COVID-19 testing and vaccine administration.
We administered 11.6 million COVID-19 vaccines and 8.5 million COVID-19 tests in the quarter.
Since our program began, we have administered 43 million vaccines and approximately 38 million tests.
We also expanded our digital capabilities to provide universal access to CVS Health vaccination records to the millions of adults we have vaccinated.
This new capability has driven over 1 million visits per month to vaccination records on cvs.com.
This provides another opportunity for us to build deeper engagement with our customers while simplifying and connecting their health experience.
Front store sales momentum also continued with revenue growth of 13% versus prior year.
Front store sales were led by consumer demand for COVID-19 home testing kits, as well as cough and cold products, with year-over-year volume increases across most front store categories.
Our CVS Health retail presence consistently serves as a strong channel for capturing new lives.
In fact, this year, 12.5% of new COVID-19 testing customers chose to fill new prescriptions or receive a COVID-19 vaccination with CVS Health.
Finally, we anticipate a benefit from administering boosters and pediatric doses to eligible consumers will occur largely in the fourth quarter of this year.
We continue to make measurable progress with our strategy to deliver a superior customer experience and address the total cost of care.
We have focused on several important areas.
First, with our unique portfolio of businesses, we continue to expand our role in care delivery designed around the customer.
We are taking a proactive approach to meeting the emerging needs of customers, clients, and communities.
We are improving access, lowering costs, and combining local points of care to simplify the consumer health experience.
We have one of the country's largest network of physician extenders and are able to deliver care locally with our national footprint.
We will continue to drive higher engagement with customers as we evolve the format of select CVS locations, creating community health destinations, and shifting into three distinct models: sites dedicated to offering primary care services, an enhanced version of health hubs with products and services designed for everyday health and wellness needs.
Our traditional CVS Pharmacy store model that provides prescription services and health and wellness and other convenient retail offerings.
Our unique combination of businesses and our presence in communities nationwide enable us to meet consumers where they are to enhance their well-being and to be a bigger part of their wellness.
Next, we are further strengthening the consumer experience through the expansion of digital services and platforms that connect to health services and in-person channels for our more than 35 million unique digital customers.
For example, more than 70% of CVS Pharmacy customers are enrolled in our text messaging programs today.
Within that group this quarter, adherence outreach drove 10% growth in prescriptions filled.
Greater adherence leads to improved health outcomes and lower costs.
In today's hyper-connected digital consumer-driven world, the demand for omnichannel pharmacy is greater than ever.
We continue to modernize our operating systems and enhance the integration of pharmacy model simplifying consumer interactions and driving further engagement with our customers.
Finally, we continue to invest in our employees as part of our workforce strategy.
Last quarter, we announced the phased increase in the minimum wage to $15 an hour by July 2022.
We invested in modernizing our training programs and technology for our frontline and clinical colleagues.
Despite the tight labor market and anticipation of the higher demand for health services, we strengthened our workforce in every business.
We hired a record number of people in the third quarter to advance open enrollment and customer service, as well as enhance technology and clinical capabilities.
Nearly 20,000 pharmacists, pharmacy technicians, and nurses recently joined the CVS Health team supporting flu season, as well as COVID-19 vaccinations and testing.
Our pharmacists and pharmacy technicians are an integral part of our overall workforce strategy.
We are committed to investing in our pharmacists, awarding immunization bonuses in the second half of this year.
We look forward to sharing more about our strategy to improve access, quality, and customer engagement in investor day on December 9.
Our commitment to shareholders, customers, and communities remain steadfast.
Health equity is critical as the pandemic continues to disproportionately impact certain communities.
In addition to targeted vaccine and booster education efforts, we provided 31 million meals this year to people suffering from food insecurity and invested in 2,800 affordable housing units in 30 cities.
By helping address the social determinants of health, permanent housing can reduce healthcare costs by 59%.
Joneigh Khaldun, to build upon our efforts to advance health equity and better support underserved communities, and our increased wages and bonuses support our employees, their families, and their communities.
For the third quarter in a row, we executed on and exceeded our plan and raised adjusted earnings per share guidance.
We continue to enhance our diverse portfolio of assets to serve the customer.
We are guiding to a strong year end, all possible due to the leadership and commitment of our over 300,000 CVS Health colleagues that bring their heart to every moment of our customers' health.
Our third quarter results reflect a continuation of the strong performance observed in the first half of 2021 and as we exceeded our expectations from both a revenue, cash flow, and adjusted earnings per share basis.
These results ensue from our differentiated portfolio of capabilities and keen focus on operational execution.
This momentum in our performance enables us once again to raise our outlook for 2021.
Starting with the enterprise as a whole.
Total revenues of $73.8 billion increased 10% year over year with robust growth in all three segments.
We reported adjusted operating income of $4.1 billion, a 12.5% increase versus the prior year.
This growth in adjusted operating income was also reflected in the strong cash flow generation in the third quarter.
with year-to-date cash flow from operations now exceeding $14 billion.
Adjusted earnings per share of $1.97 represent a nearly 19% year-over-year increase, generated by our adjusted operating income growth and lower interest expense resulting from our ongoing deleveraging efforts.
Moving to the segments.
Healthcare benefits revenue increased by 9.5% year over year, driven by sustained growth in our Government Services business, slightly offset by the repeal of the health insurance fee.
In the third quarter, we saw Medicaid membership grow sequentially by 67,000 members across multiple geographies.
Medicare Advantage membership also continued to grow in the quarter, increasing by 42,000 members sequentially and representing year-over-year growth of 9.8%.
Our Medicare Advantage franchise continues to be a powerful growth engine with Medicare Advantage membership more than doubling since the third quarter of 2015, representing a 15% compound annual growth rate.
Our attention has now turned to ensuring a successful 2022 annual enrollment period for Medicare, which began on October 1.
While still quite early in that process, we are pleased with what we have seen to date.
Healthcare benefits adjusted operating income grew modestly year over year but fell below our expectations for the quarter due to higher-than-expected COVID-related medical costs in our commercial business.
With the surge in nationwide COVID cases emanating from the Delta variant, we experienced higher-than-expected COVID-related medical costs in August and September.
Three key factors drove this difference versus our expectations.
First, commercial COVID inpatient admissions in August and September.
Were in line with the peak levels experienced in January 2021 and were nearly three times the average of the second quarter of 2021.
Second, COVID testing costs, which we had expected to moderate during the third quarter, also approached January 2021 levels and were more than 1.5 times the average we experienced in the second quarter.
It is critical to recognize the outsized impact of COVID testing on overall claim costs as testing costs represented approximately 35% of gross COVID costs in the quarter.
And finally, while non-COVID deferred care was better than we had forecast, it was not enough to entirely offset these higher COVID costs in commercial.
The resultant medical benefit ratio for the quarter of 85.8% was above our forecast and driven almost entirely by the higher-than-expected commercial COVID testing and treatment costs.
There are two important aspects of HCB's third quarter performance to note.
One, absent these COVID dynamics, underlying performance in our commercial book of business continues to be in line with our expectations.
Two, in our government services business, we also saw an increase in COVID treatment and testing costs, but far less pronounced than in commercial.
This lower level of increase was fully offset by better-than-expected deferred care.
As a result, the overall performance of our Government Services business was in line with expectations.
Wrapping up HCB -- We experienced favorable prior period development in the quarter on both commercial and government products.
Days claims payable of 51 at the end of the third quarter is three days higher sequentially and two days above prior year.
While influenced by many factors with the anticipated abatement and COVID-related claims in the fourth quarter, we would expect DCP to return to a more typical results in Q4.
Overall, we remain comfortable with the adequacy of our reserves.
Turning to pharmacy services.
Our ability to deliver sustainable, profitable growth remains clear.
2021 is expected to be the second year of adjusted operating income growth in excess of 10%.
This sustained growth has been driven by our track record of delivering industry-leading drug trend on behalf of our clients, our proven industry-leading capabilities, particularly in the specialty pharmacy arena our outstanding customer service, as reflected by our over 98% renewal rate for 2022.
During the third quarter, pharmacy revenues increased by 9.3% year over year, driven by increased pharmacy claims volume, growth in specialty pharmacy, and brand inflation.
Total pharmacy membership increased by 1.6 million lives sequentially, primarily reflecting growth in government programs.
Total pharmacy claims processed grew nearly 7% above the prior year.
Nearly half of this growth was attributable to net new 2021 business with COVID vaccine administration and new therapy prescriptions also contributing to the year-over-year growth.
Note that new therapy prescriptions were adversely impacted in the third quarter 2020 due to the pandemic.
Pharmacy adjusted operating income exceeded expectations in the quarter, up more than $150 million or 9.5% year over year.
The three major drivers of this increase remain consistent with the second quarter.
Improved purchasing economics reflecting the products and services of our group purchasing organization launched in the second quarter of 2020; continued strength in our specialty pharmacy business driven by 340B administration and increased pharmacy claims volumes, both of which were partially tempered by ongoing but stable client pricing pressure.
Our retail business delivered strong results this quarter, again exceeding expectations.
Total revenue of just under $25 billion increased by $2.3 billion or 10% year over year.
There are two main components to this increase.
Approximately half or $1.2 billion is attributable to the contributions from the more than 11 million COVID vaccines and over 8 million COVID tests we administered combined with strong front store sales driven by demand for over-the-counter COVID test kits and related treatment categories.
With this quarter's results, we are now on pace to deliver about 44 million to 49 million COVID vaccines and 28 million to 33 million COVID tests for full year 2021.
The remaining half or 1.1 billion was driven by a combination of sustained pharmacy growth and broad strength in front store trends across a range of categories, partially offset by continued pharmacy reimbursement pressure.
This strong revenue growth, combined with a 70-basis-point improvement in adjusted operating margin, produced adjusted operating income that exceeded our forecast and drove a year-over-year increase of $300 million.
This adjusted operating income growth driven by COVID testing vaccines and front store sales was partially tempered by continued pharmacy reimbursement pressure, business investments, including the minimum wage increase and other performance incentives, and increased staffing to provide expanded levels of service.
Turning to cash flows and the balance sheet.
Our liquidity and capital position remained excellent at the end of the third quarter with cash from operations of $5.5 billion for the quarter and $14.3 billion year to date.
Through our proactive liability management transaction in August, we paid down $1.1 billion in net long-term debt in the quarter.
As of the end of the third quarter 2021, we have repaid a net total of $18.7 billion in long-term debt since the close of the Aetna transaction.
In addition, we returned over $650 million to shareholders through our quarterly dividend.
Let me now discuss our updated 2021 guidance.
This increase reflects the strong performance in pharmacy services and retail, partially offset by expected COVID pressure in our healthcare benefits business, specifically in the commercial block.
We are raising our total revenue outlook to $286.5 billion to $290.3 billion and adjusted operating income outlook to $16.4 billion to $16.6 billion.
We are also increasing expected full year cash flow from operations to a range of $13 billion to $13.5 billion.
Note that this increased cash flow forecast is actually lower than our September year-to-date figure, reflecting expected payments in the fourth quarter that were accrued in 2020, including FICA taxes and increased minimum loss ratio rebates, as well as the timing of receipts and payments between the third and fourth quarters.
I'll now highlight some key items related to the segments and full year guidance.
For the healthcare benefits segment, we are lowering our full year adjusted operating income guidance from $5.25 billion to $5.35 billion to $4.9 billion to $5 billion.
We expect the full year medical benefit ratio to be in a range of 84.4% to 85.6% or an increase of 30 basis points from our prior range.
This reflects the higher-than-expected commercial COVID medical costs observed in the third quarter and our expectation that these will continue, although at a lower level into the fourth quarter.
Emerging October operational data indicate that COVID inpatient admissions are tracking at approximately half the levels of September.
Again, it is important to remember the degree to which testing costs are driving expenses.
So while we expect Q4 testing expenses to be lower than Q3, we do not anticipate they will decline as much as inpatient expense.
Finally, recall the normal seasonality of the healthcare benefits segment with fourth quarter operating income typically the lowest of the year driven by deductible satisfaction producing the highest quarterly medical costs.
For pharmacy services, given the continued strength in the quarter and our visibility to the remainder of the year, we are increasing full year 2021 adjusted operating income guidance to $6.85 billion to $6.94 billion, representing year-over-year growth of 20.5% to 22%.
We anticipate that the strength in third quarter pharmacy services results will largely continue into the fourth quarter.
In the retail/long-term care segment, we are also increasing our full year 2021 adjusted operating income guidance to $6.98 billion to $7.07 billion.
As you consider the fourth quarter, I would note that we currently expect vaccinations to continue, although at a lower rate than the third quarter.
We have also contemplated the impact of the CDC's COVID booster recommendations, as well as a modest impact from pediatric vaccinations.
We expect testing to decline modestly in comparison with the levels experienced during the third quarter.
Given retail's Q3 outperformance and Q4 outlook, we now expect the full year 2021 COVID impact to be neutral.
This compares to our prior guidance in August for an overall modest negative net impact.
As we closed the third quarter, we are very pleased with the performance of our businesses, which provides us with a strong foundation as we now look ahead to 2022.
While we plan to share more details with you at our upcoming investor day in early December in New York, I want to update you on our thoughts regarding the 2022 outlook.
While there are still many factors to play out, we believe that current analyst estimates for 2022 adjusted earnings per share of approximately $8.20 are within our anticipated initial guidance range.
As we discussed last quarter, there are some significant moving pieces to keep in mind in determining an appropriate baseline for 2021.
Second, in 2022, we will incur a full year of expense related to our minimum wage increase announced last quarter.
We estimate these factors combined represent approximately $0.40 per share.
Using the midpoint of our updated 2021 adjusted earnings per share guidance range, which is $7.95, these adjustments create a 2021 baseline of $7.55.
The other significant factor in considering 2022 performance is the effect that COVID will have on our retail and healthcare benefits businesses.
For retail, we expect that COVID-19 vaccine and testing volume, which is expected to generate over $3 billion of revenue in 2021, will decline significantly in 2022 to 30% to 40% of the volume we administered in 2021.
In addition, we expect COVID-driven front store sales to decline in 2022.
For HCB, we expect to see a significant improvement in results in 2022, as treatment and testing costs decline with COVID cost estimates and improved risk-adjusted revenue reflected in our pricing.
Overall, we estimate the COVID-driven impact in HCB will largely be offset by the expected decline in COVID-related retail performance.
It is important to note that forecasts of future COVID impacts to our business remain extremely difficult and are subject to change as circumstances dictate.
Beyond these considerations, Other factors affecting our growth for 2022 remain consistent with the commentary we provided last quarter regarding headwinds and tailwinds.
With all of this in mind, the current consensus of analyst estimates of approximately $8.20 for adjusted earnings per share would represent about an 8% increase over the 2021 baseline.
To conclude, the strong performance of CVS Health in the first half of 2021 continued in the third quarter, producing strong revenue, adjusted operating income, and cash flow results, and we are pleased to again raise our full year 2021 adjusted earnings per share guidance.
During the pandemic, we have solidified our opportunity to become a national leader in healthcare delivery, which at its core, starts and ends with lowering the cost of care, improving access and convenience, ultimately enabling people to live healthier and more fulfilling lives.
During our investor day in a few weeks, we look forward to sharing with you more about our path over the coming years to deliver on this ambition and to position CVS Health to generate sustainable, low double-digit adjusted earnings per share growth.
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compname posts q3 adjusted earnings per share $1.97.
q3 adjusted earnings per share $1.97 .
sees fy adjusted earnings per share $7.90 to $8.00.
qtrly total revenues increased to $73.8 billion, up 10.0% compared to prior year.
raised 2021 cash flow from operations guidance range to $13.0 billion to $13.5 billion from $12.5 billion to $13.0 billion.
qtrly adjusted operating income increased 12.5% primarily due to administration of covid-19 vaccinations and diagnostic testing.
administered more than 8 million covid-19 tests and more than 11 million covid-19 vaccines nationwide in q3.