Prompt:
Human: Joining me on the call today are Arsen Kitch, President and Chief Executive Officer; and Mike Murphy, Chief Financial Officer.
Financial results for the fourth quarter of 2020 were released shortly after today's market close.
On a consolidated basis, the company reported net sales for the fourth quarter of $453 million and adjusted EBITDA of $72 million.
Which represents growth of approximately 4% and 38%, respectively, over the fourth quarter of last year.
A few business highlights to mention.
Our tissue business drove results with both higher sales and production volumes year-over-year to meet volatile demand, which exceeded our expectations.
Our production in the quarter was similar to our sales.
Our paperboard business delivered strong performance as well.
Our backlogs are robust, which contributed to our decision to announce a price increase of $50 per ton across our SBS portfolio, starting on February 2.
In the fourth quarter, we used the free cash flows generated to reduce net debt by an additional $58 million.
On slide four, as I noted over the previous quarters, we remain focused on our top priorities during COVID, the health and safety of our people and safely operating our assets to service our customers.
Our efforts and risk mitigation strategies are making a difference in helping to reduce the risk of COVID at our sites.
Our human resources and manufacturing leadership teams are doing an exceptional job of proactively monitoring the health of our workforce and ensuring that we have the proper staffing levels in place.
Our people's diligence to date has been key to our success and will continue to be so.
As a recognition of the work by our entire team during this challenging time, we paid out a onetime discretionary bonus of $1,000 in November to over 2,800 of our people.
We're also strongly encouraging all our people to get the COVID vaccine with a $200 incentive.
I would like to express my deepest gratitude to our entire team for their extraordinary efforts and perseverance through this challenging time.
As we start to see the benefits from a broader vaccine rollout, I want to encourage maintaining high levels of vigilance until COVID is under control and behind us.
I will now share what we saw for both the tissue and paperboard businesses in the fourth quarter.
Let's start with our Consumer Products division on slide five.
As we had previously noted, at home tissue demand was volatile during the quarter.
New waves of the pandemic caused significant spikes in demand mid-November through mid-December.
While we originally anticipated demand at or below levels that we saw in the fourth quarter of 2019, we were reminded of how unpredictable demand can be for essential products during this time.
Mike will expand further on demand patterns in the fourth quarter during his comments.
Our team and customers are doing a great job working through this volatility, and we benefited from higher-than-anticipated sales and production volumes in the fourth quarter.
Our industry view remains largely the same, which I'll summarize in a few key points to provide some context.
First, recall that the market for tissue in the U.S. is traditionally 2/3 at-home and 1/3 away-from-home, with limited manufacturing production capability to swing between the 2.
As consumers have been more homebound, there has been a shift toward at-home consumption.
Demand swings have and will continue to be driven by consumer behavior.
Our expectation is that as COVID vaccines are administered and infection rates decrease, that we will see a shift back to away-from-home consumption, which we expect will negatively impact us as we're primarily focused on the at-home market.
With that said, it is unclear if there will be a lasting impact on consumer behavior in a post COVID environment.
Second, while it is too early to discern private branded share trends, we continue to note that paper towel demand is tracking ahead of the overall tissue category, while facial demand is lagging.
Private brands have had a good track record of gaining share relative to branded products over the past decade, a trend that we would expect to continue.
We will continue to monitor these trends in the coming months and quarters due to the continued uncertainty in consumer demand associated with COVID.
Third, as we noted in previous quarters, SKU rationalization has occurred, aiding additional production.
We believe that lower SKU counts benefit both retailers and manufacturers like us.
While we have seen some customers desiring a recovery of SKUs, we do not anticipate SKU counts to go back to pre-COVID levels in the near to medium term.
Our tissue results in the fourth quarter were robust.
We shipped 13.9 million cases, which was up around 5.3% compared to the fourth quarter of 2019.
Sales were down 4.2% relative to the third quarter of 2020.
As we mentioned on our third quarter earnings call, we exited several customers to reduce complexity and improve our network, which impacted the fourth quarter results and is expected to impact first quarter 2021 results as well.
We are encouraged by our pipeline of sales for the remainder of 2021.
As you recall, we estimate that approximately 2/3 of paperboard demand is derived from products that are more recession-resilient and 1/3 is driven by economically -- by more economically sensitive or discretionary products.
Our folding carton customers, especially those with concentrations in food or healthcare packaging, continue to see strong demand and our food service customers, especially those with concentrations in quick service restaurants and away-from-home dining, continue to see weaker demand.
We are pleased with the market reception of our sustainability focused brands of Nuvo Cup and ReMagine folding carton.
Both are playing a meaningful role in our favorable market position.
We're encouraged by our solid performance in the quarter and continued strong demand for our products.
We made an announcement last week about the natural gas curtailment in Arkansas that caused us to temporarily suspend production in Cypress Bend.
Natural gas deliveries were curtailed to the point where we could no longer operate.
We estimate that the costs associated with the weather event across our paperboard system, including loss production, repairs and spikes in natural gas prices, could impact us in the first quarter by approximately $6 million to $8 million.
We continue to experience the same fundamental supply and demand dynamics that led us to announce a $50 per ton price increase in January.
Demand remains robust and our backlogs have grown since beginning of the year.
Price increase implementation has begun, and we expect that it will take several more months to fully implement the increase.
The consolidated company summary income statement shows fourth quarter as well as the full year 2020 and 2019.
In the fourth quarter, diluted net income per share was $1.34 per share and adjusted EBITDA was $71.6 million and full year diluted net income per share was $4.61 per share, and adjusted EBITDA was $283.2 million.
These represent significant increases over the prior periods, which were driven by tissue demand due in large part by consumer COVID-related behavior as well as the benefits from our Shelby investment, favorable raw material pricing and the lack of a major planned outage in our paperboard division.
The corresponding segment results are on slide eight.
Our paperboard business continued its strong adjusted EBITDA performance, while consumer products benefited from significant sales growth and fixed cost leverage associated with production growth and favorable input costs.
Before we speak in more detail about our divisional performance, I want to note changes in how we portray our financial bridges.
Previously, we have shown the impact of production volume changes and associated fixed cost leverage impact in our cost category.
We have modified that approach and are including production volume changes in our volume category.
We believe that this change will enable investors to better understand sales changes as we expect to produce similar quantities of product that we sell, which will all be in the volume category.
The cost category will better reflect the changes in raw material input pricing and inflation.
This sheeting is a service that distorts our sales price of our base paperboard products.
Additionally, we have decided to make some accounting changes that will impact our financials starting in 2021, but we want to note them for you today.
You can also review these changes and the pro forma impact in our 8-K filing.
Our bail pulp sales from our Lewiston mill to third parties have been recorded in our tissue business.
These sales will now be recorded in our paperboard business.
Bail pulp sales from Lewiston to our tissue operations will be transferred at market price going forward as opposed to cost.
We believe this change will better reflect the economics associated with the business.
We will still transfer pulp from the Lewiston pulp mill to the Lewiston tissue operations at cost given the located nature of these assets.
As a reminder, in the second quarter of 2019, we started our new Shelby, North Carolina paper machine and incurred, as anticipated, start-up costs related to lower production throughput, higher waste and other costs which persisted during the remainder of 2019.
We achieved the targeted production rate of our new paper machine in the second quarter of 2020 and we're continuing to capture the benefits associated with the project, including ramping our converting lines, realizing supply chain savings and achieving sales wins and mix improvements.
While we are not providing a specific dollar amount for these costs and benefits, the continued realization of the Shelby investment is an important factor in our performance improvement.
Our mix continues to improve as Shelby has come online, more than offsetting some year-over-year price impacts.
We're benefiting from the volume increases related to the production ramp, which helped to meet elevated demand.
Overall, lower input costs, improved mix and fixed cost leverage from increased production possibly impacted our tissue business in the fourth quarter of 2020 relative to the fourth quarter of 2019.
You can also review a comparison of our fourth quarter 2020 performance relative to third quarter 2020 on slide 17 of the appendix.
slide 10 contains some additional context on tissue related to the volatility of demand and its impact on our financial performance.
The IRI panel data, which is a snapshot of retail sales of tissue measured in dollars depicts what our customers and we have observed from consumer demand patterns, with the line showing changes on a year-over-year basis, while the data in the box shows a quarterly review versus last year.
As we exited the third quarter, we anticipated an elevated but stable demand pattern.
Based on that demand profile, ample inventory levels at our customers, and slowing demand from our customers in October, we expect to see softness in our fourth quarter sales.
But the consumer-driven demand spike in mid-November into December, that changed rapidly.
This period of volatility, both the October pullback, which we noted on our third quarter earnings call, and strong orders in November and December, are a good reminder that we may not return to a stable order pattern until after COVID-related volatility is behind us, impacting our ability to forecast the business.
We added an additional slide in the appendix of the supplemental materials that details the weekly volatility in IRI panel data that our customers and supply chain have experienced.
Our sales in the fourth quarter were 13.9 million cases, representing a unit decline of 4.2% versus the third quarter and unit growth of 5.3% versus prior year.
Our production in the quarter was $13.9 million cases or down 9% versus the third quarter and up 2.4% versus prior year.
Production levels have benefited from the Shelby ramp and SKU rationalization.
The cost leverage from the significant increase in production, along with improved costs in freight and logistics, led to continued strong results year-over-year.
Slide 11 is a year-over-year adjusted EBITDA comparison for our paperboard business.
Lower pricing, which RISI reported in February 2020, was partly offset by favorable mix.
The absence of a planned major outage at our Cypress Bend mill was also a driver of year-over-year improvement.
Overall, our team ran our operations well in the quarter and continued to deliver strong results.
You can review a comparison of our fourth quarter 2020 performance relative to third quarter 2020 performance on slide 18 in the appendix.
Slide 12 provides a perspective on our first quarter outlook and some other key drivers for full year 2021.
As previously discussed, tissue outlook is largely a function of sales demand.
Tissue shipments in January were 4.6 million cases, and our shipments in February are trending to below four million cases.
At this pace, we are expecting first quarter shipments to be below levels experienced in the first quarter of 2020, when COVID initially impacted consumer buying patterns, and down versus the fourth quarter of 2020.
As we mentioned previously, our paperboard business announced a price increase of $50 a ton across our SBS grades effective February 2.
Given the nature of our agreements and discussions with customers, we expect that the benefit of this will be reflected in the next couple of quarters with limited benefit expected in Q1.
The unexpected weather-related outage at our Arkansas mill, which caused loss production and repairs as well as natural gas price increases across our paperboard system, is expected to negatively impact the quarter by approximately $6 million to $8 million.
If our assumptions are correct, we would anticipate the first quarter adjusted EBITDA to be in the range of $51 million to $59 million.
This range also assumes that we continue to operate our assets without significant COVID-related disruptions.
While we are not prepared to provide specific annual guidance for 2021 and there are several drivers, assumptions and variables that we would like to address.
We are expecting a positive impact from the previously announced SBS price increases.
We are anticipating tissue volumes to drop high single to low double-digit percentages.
This assumes continued normalization of consumer buying patterns, but is highly dependent upon the course of the pandemic.
We are encouraged by our sales pipeline, which we anticipate will have a positive impact on the second part of the year.
Paperboard volumes are expected to be largely stable.
We are expecting higher input costs, including pulp, packaging, energy and freight.
While these variables are difficult to predict today, raw material inputs in total could be a $40 million to $50 million headwind this year, with more than half the total coming from pulp.
In our paperboard business, planned major maintenance outages are expected to reduce our earnings for 2021 compared to 2020 by $25 million to $30 million.
We have updated this guidance on slide 23, where we broke out the timing by quarter, which reflects our current plan.
In light of the Cypress Bend weather event, we're evaluating timing of our outage schedule and may update you in the coming quarters.
For the full year 2021, we're also anticipating the following: interest expense between $38 million and $40 million.
Depreciation is expected to be between $106 million and $110 million.
Capital expenditures are expected to be between $60 million and $65 million, which is closer to historical trends as we expect to execute against some projects that were delayed in 2020.
And our effective tax rate is expected to be 25% to 26%, and we expect to utilize some of our current tax attributes which amount to $60 million to reduce cash taxes.
Slide 13 outlines our capital structure.
We utilized approximately $50 million of free cash flow to reduce our net debt, including making voluntary prepayments on our term loan, and our liquidity was $250 million at the end of the year.
We continue to make strides in reducing our net debt and increasing our financial flexibility as we target a net debt to adjusted EBITDA ratio of 2.5 times, assuming adjusted EBITDA after COVID benefits and with a normal amount of outages.
Before wrapping up with our value proposition, I wanted to reflect on some of our key accomplishments in 2020 on slide 14.
Our team did an outstanding job managing through COVID.
We mitigated risks in our facilities with a focus on health and safety and continue to run our assets and serve our customers.
We rapidly adjusted to demand volatility to build stronger relationships with customers.
We ramped our new Shelby paper machine and are on track to fully ramp the overall site by the end of this year.
We delivered outstanding financial results, reduced net debt by $200 million, refinanced our near-term debt maturities and strengthen our balance sheet.
At the same time, we went through several leadership transitions, including my promotion to CEO, a hiring of a new CFO and a new leader of our CPD business.
It was certainly an interesting year to say the least, and I'm proud that we make this many changes and perform at the levels that we did.
We believe we're well positioned heading into 2021 to continue driving an improvement in our business and focusing on our near-term strategy of paying down debt while deleverage -- while developing options for long-term capital allocation.
I would like to reiterate our value proposition, which we discussed on our previous earnings call and mentioned to investors throughout the quarter.
We believe Clearwater Paper is very well positioned across two attractive and complementary businesses.
Our Consumer Products division is a leader within the growing private branded tissue market.
From our vantage point, we believe the key strengths of this business are the following: first, we have a national footprint with an ability to supply a wide range of product categories and quality tiers.
Which is an attractive sales proposition to our customers.
Our expertise in manufacturing, supply chain and transportation is a key differentiator, especially during challenging times like today.
Second, there are long-term trends away from branded products to private brands.
These have typically been amplified during recessions.
Private brand tissue share in the U.S. rose to over 30% in 2019, up from 18% in 2011.
While these trends are impressive, we're still a long way from where many European countries are where private brands represent over half of total tissue share.
Lastly, tissue is an economically resilient and a need-based product.
Historically, demand has not been negatively impacted by economic uncertainty.
Turning to our paperboard division.
We believe that the key strengths of this business are the following: first, we operated well invested assets with a geographic footprint, enabling us to efficiently service customers on both coasts.
We have a diverse customer base, which serves end markets that have largely stable demand.
Second, not being vertically integrated enables us to focus on independent customers with unparalleled service and quality commitments.
Third, we believe the business is well positioned to take advantage of trends toward more sustainable packaging and food service products.
Lastly, our paperboard business has demonstrated an ability to generate good margins and solid cash flows.
Overall, our large capital investments are behind us, and we're prioritizing cash flows to reduce debt.
As we demonstrated in the fourth quarter, with a net debt reduction of approximately $58 million, bringing our net reduction in 2020 to over $200 million.
We intend to continue to deleverage by delivering benefits from our Shelby investment, continuing operational improvements, aggressively managing working capital and prudently allocating capital.
While we expect to have lower tissue shipments in the first part of the year, we're making sound strategic moves to support our customers and their success and continue to position our business for success in the long term.
We believe that this strategy is the best way to create shareholder value.
With an adjusted EBITDA impacted by normal outages and reduced COVID benefits, we do not anticipate achieving our 2.5 leverage target this year.
We continually engage with our Board on future capital allocations.
Beyond deleveraging, we expect to explore a variety of means of creating shareholder value, including: first, internal investments in our operation that improve competitiveness.
Second, external investments that deliver synergies and improve our market position; and third, returning capital to our shareholders.
 Assistant:

Chosen response:
q4 earnings per share $1.34.
q4 sales $453 million versus refinitiv ibes estimate of $449.3 million.


Prompt:
Human: This is John Faucher, Chief Investor Relations Officer.
Actual results could differ materially from these statements.
I will provide commentary on our Q4 and full-year performance as well as our 2021 guidance before turning it over to Noel for his thoughts on how we are planning to sustain our growth momentum into 2021.
We will then open it up for Q&A.
As usual, we request that you limit yourself to one question so that as many people as possible get to ask a question.
We finished 2020 in very strong fashion with our highest level of quarterly organic sales growth in over 10 years and our highest annual organic sales growth since the depths of the financial crisis.
Importantly, we continue to deliver balanced growth, which we think is the key to sustainable strong performance.
For both the quarter and the year, we delivered both volume and pricing growth, organic growth in all four of our categories: oral care, personal care, home care, and pet nutrition, and organic sales growth in every division with both emerging markets and developed markets performing well.
Our strategy to deliver more impactful premium innovation is still in its early stages, but we believe the results are beginning to show.
Importantly, this growth is driving our income statement.
We delivered strong gross margin expansion for both the quarter and the year, which allowed us to deliver profitable growth despite significant investments for future growth and the headwinds from foreign exchange.
Our net sales grew 7.5% in the quarter.
Organic sales growth of 8.5% was driven by 5% organic volume growth and a 3.5% increase in prices.
The impact of acquisitions added an additional 100 basis points to volume growth, while foreign exchange was a 2% headwind.
In the fourth quarter, our gross profit margin was 61.1% on both a GAAP basis where we were up 100 basis points year over year and a base business basis where we were up 90 basis points.
For the fourth quarter, pricing was 130 basis points favorable to gross margin while raw materials were a 320 basis-point headwind driven by increases in the cost of raw materials like fats and oils and the transactional impact from foreign exchange.
Productivity was a 280 basis-point benefit.
On a GAAP basis, our SG&A was up 260 basis points as a percent of sales for the fourth quarter and 100 basis points for the full year.
On the base business basis, in the fourth quarter, our SG&A was up 310 basis points on a percent of sales basis.
This was primarily driven by a 210 basis-point increase in advertising to sales as we drove strong activation on brand building, innovation, and e-commerce.
Our SG&A ratio was also impacted by increased logistics costs, primarily in the U.S., and investments behind growth and innovation.
For the full year on a base business basis, our SG&A ratio was up 150 basis points driven primarily by a 100 basis-point increase in advertising to sales and increased logistics cost.
For the fourth quarter on a GAAP basis, our operating profit was up 4% year over year, while it was up 3% on a base business basis.
Our earnings per share was flat on a GAAP basis and up 5% on a base business basis.
For the full year, our earnings per share growth was 14% on a GAAP basis and 8% on a base business basis.
We delivered 18% growth in free cash flow for the full year.
As we discussed at the beginning of 2020, we used some of the free cash flow to pay down debt primarily related to the Filorga transaction with the balance used for dividends and share repurchases.
A few comments on our divisional performance.
North America delivered 10% net sales and 8.5% organic sales growth in the quarter, driven by premium innovation and increased consumption in categories impacted by the COVID pandemic.
We also benefited from a rebound in performance by our skin health businesses in the quarter.
Our e-commerce business in North America finished the year strongly with sales in the fourth quarter more than double last year's sales.
North America saw significant increases in brand support behind the hum by Colgate Electric Brush, the Colgate Optic White Overnight Teeth Whitening pen, our toothpaste business, and Irish Spring.
Latin American net sales were down low single-digit as double-digit organic sales growth was more than offset by the negative impact of foreign exchange.
The strong organic sales growth performance was broad-based as we delivered organic sales growth in every hub for both the quarter and the year.
Oral care innovation has been a key growth driver with Colgate Tartar Control, Luminous White Charcoal, and our Natural Extracts line, all driving incremental growth.
Europe delivered double-digit net sales growth in the quarter.
Organic sales growth of 4.5% was driven by volume growth across all three segments; oral care, personal care, and home care, and in every hub.
Strong oral care volume growth on the Colgate and elmex brands was accompanied by significant brand-building investment in traditional media and digital.
We were also encouraged by a return to organic growth for Filorga where a strong China growth more than offset weakness in the travel retail channel.
We delivered 7% net sales and 5% organic sales growth in Asia Pacific led by volume growth across our biggest hubs; Greater China, India, the Philippines, and South Pacific.
In India and China, our growth strategies are driving improved toothpaste performance through Colgate Miracle Repair in China, Colgate Vedshakti in India, and our relaunched Colgate Anticavity business across the division.
Our personal care and home care businesses also benefited from COVID-related demand in the South Pacific region.
Africa/Eurasia net sales declined 1.5% due to significant foreign exchange headwinds as the division delivered organic sales growth across all three categories and in every hub.
Toothpaste organic sales growth was led by Colgate Herbal, Colgate Maxfresh, and Colgate Total.
Meridol also delivered strong growth as we look to gain share in the pharmacy channel.
Hill's finished the year with another quarter of strong net sales and organic sales growth despite continued difficult comparisons.
Organic sales growth was again led by the US with e-commerce up significantly.
But Europe also delivered double-digit growth.
Encouragingly, we are seeing a reacceleration in our Prescription Diet business as vet channel traffic continues to improve.
And now for guidance.
We expect organic sales growth to be within our 3% to 5% long-term target range.
Using current spot rates, we expect foreign exchange to be a low-single-digit benefit for the year, although we expect currencies to remain volatile.
We expect net sales to be up 4% to 7%.
We expect our gross profit margin to be up year over year in 2021 despite difficult comparisons given our performance in 2020, increases in raw materials, and the continuing uncertainty associated with COVID.
Advertising is also expected to be up on a percent of sales basis, although less so than in 2020.
Our tax rate is expected to be between 23.5% to 24.5% on both the GAAP and base business basis.
We point out that our guidance range does not account for any changes in the U.S. corporate tax rates given the recent change in administration.
On a GAAP basis, we expect earnings-per-share growth in the low-to-mid single digits.
On a base business basis, we expect earnings-per-share growth in the mid-to-high single digits.
Obviously, this is a wider range than what we normally provide, which we think is prudent given what we consider to be a heightened level of uncertainty as we plan out the year.
There are several factors that could impact where we fall within this wider range.
In the categories where consumption has risen during the pandemic, primarily liquid hand soap, dish soap, and cleaners, we are expecting lower rates of growth or even declines year over year in 2021 depending on the market.
However, we expect overall consumption in these categories to remain elevated versus 2019 levels.
Also, particularly in emerging markets, movements in foreign exchange could impact our ability to take pricing.
We are optimistic about our pricing plans for 2021 and believe they are appropriate given recent raw material trends, the competitive environment, and foreign exchange.
Raw materials, we have budgeted for increased raw material costs, but we do highlight that many raw material prices are accelerating faster than anticipated.
If this continues, it could put pressure on gross margin expansion depending on our ability to take pricing or drive additional productivity.
We've seen a further rise in logistics costs over the past few quarters, particularly in the U.S., but also related to shipping containers in Asia.
We expect these costs to remain elevated in the near term but to moderate later in the year.
Like me, I hope you and your families are safe and healthy and you share some sense of optimism that we can return to a more normal existence over the course of this year.
Stan joined us back in November, as we announced, and obviously, we're deeply excited to have him here.
He has hit the ground running already.
As I reflected on 2020, I'm so proud of the Colgate people around the world and what they've accomplished.
On our first quarter call I discussed three topics related to how we plan to manage through the crisis.
These three topics were: staying true to our values and purpose in helping us navigate a very difficult environment; adapting our strategies where necessary and executing with agility; and importantly, managing through the crisis with an eye toward the future.
On the first topic, we've implemented programs to keep our employees safe and healthy, while keeping our supply chain and our laboratories up and running and delivering record output from our facilities and our R&D organization.
Nothing is more important than the safety and health of Colgate people, and we will continue in 2021 to keep them as our first priority.
We worked with the World Health Organization this year and local hospitals to distribute free health and hygiene products to people all over the world to help stop the spread of COVID and enable people to live healthier lives, programs that Colgate people are deeply proud of.
In the second area, we continue to execute on our growth mindset strategy to drive sustainable, profitable growth through more impactful premium innovation, which you'll hear more about at CAGNY, increasing our brand building globally, and executing against our digital transformation.
And as John laid out, we did this all while delivering strong and balanced growth in organic net sales, net sales, operating profit, earnings per share, and free cash flow.
We were able to achieve those results despite many operating challenges we confronted and a sizable negative impact from foreign exchange.
But most importantly, while we've been delivering on 2020 results, we have been very focused on positioning ourselves for growth in 2021 and beyond by taking advantage of our momentum, ad that was the third topic, managing through this crisis with an eye toward the future.
So now I'll provide some thoughts on why I believe what we did last year leaves us well positioned to continue our growth journey in 2021 and beyond.
There are three reasons: the first is that as an organization, we have truly changed how we think about growth.
As a company with leading brands, we have to be focused on driving category growth, and we can drive this growth in many ways.
Of course, we can increase the number of people buying our products, we can increase the price that people are willing to pay for our products, and we can increase the frequency of how often people use our products.
So we have strengthened existing tools and, importantly, built new capabilities to drive this growth.
For example, on Hill's, we're reaching a much larger group of consumers through increased advertising to broaden our reach and improving our digital targeting so we can raise brand awareness and household penetration on what is truly a differentiated brand.
Think about this as finding the right person with the right message at the right time.
It's not just spending more, but spending smarter.
In Latin America, we have used revenue growth management tools to drive value with price/mix improvement in a very difficult operating environment.
For instance, our share of the premium segment in toothpaste in Brazil has expanded by three points in the last two years, all driven by tactful and strategic revenue growth management.
As I discussed at the Barclays Conference, we have disrupted our innovation processes to focus on breakthrough and transformational innovation, which will enable us to increase the frequency of how people use our products and purchase our products.
Superior performance, new forms, delivery systems, and innovation for new channels, all allow us to expand our availability to the consumer so they can choose our products more frequently.
And given that Colgate brand has the highest household penetration of any consumer brand in the world, we have a unique ability to leverage our presence into faster growth.
The second reason is that we're developing a balanced view of how we deliver profitable growth.
We know that in order to deliver a TSR that is in the top tier of our peer group, we can't just grow the top line.
We need to deliver profitable growth.
You can see this in our 2020 results where we delivered 8% earnings-per-share growth despite negative foreign exchange, while increasing brand building and investing in capabilities across the entire organization.
We're doing this by pulling on all the levers: premium innovation, revenue growth management, funding the growth, discipline on overheads, and laser focus on all cost elements throughout the income statement.
Looking forward, we have to do more than offset the expected increases in raw material costs and logistics and in other areas so that we can continue to invest in the transformation capabilities that we're deploying and that will rely on pairing growth and productivity more effectively.
The third reason is that we're making the necessary transformation to our culture to unleash the true potential of Colgate people.
As anyone who has come here from the outside can tell you, the desire of Colgate people to win is unmatched.
In 2020, we took several steps to accelerate the rate of change to build an organization for future growth.
To that end, we made real progress on e-commerce where we have brought in more external talent while upskilling existing talent across the enterprise, launched more online-specific innovation, like the Optic White pen, the Miracle Repair serum, and invested broadly behind enhanced digital capabilities.
And all this paid off in more than 50% online growth in the fourth quarter and we'll exit the year with e-commerce at a double-digit run rate as a percentage of total sales.
And lastly, it's building out the right team.
You need to provide the right tools to them, the right technology to digitally transform the organization.
We continue to invest in systems to enable this transformation.
Like our transition SAP S/4HANA that's giving us better system speed, far better reporting, streamlined processes, and simplified transactions.
We've developed our cloud capabilities, which is giving us far more agility, speed, and capability building our ability now to develop applications must faster and realize the value of those applications much faster; and with our partners, building support for our data and our analytics journey ahead.
We also recently rolled out a new global system with our Colgate Business Planning process.
You will remember that was called CBP that will significantly reduce the process time required by providing greater opportunity for our teams to do analytics, particularly in the commercial area and particularly around revenue growth management.
So to sum it up, when I look back at 2020 as a year where our company battled through uncertainty to deliver really strong results, I will also look back at a year where we elevated our performance and capabilities and positioned ourselves to deliver sustainable, profitable growth into the future.
 Assistant:

Chosen response:
providing financial guidance for full year 2021.
expects fy net sales to be up 4% to 7% including a low-single-digit benefit from foreign exchange.
expects 2021 organic sales to be up within its long-term targeted range of 3% to 5%.
as we enter 2021, expect volatility in raw material and logistics costs and foreign exchange.


Prompt:
Human: I will begin the call with brief remarks regarding our third-quarter performance before offering some perspective on the current market environment.
I will also provide an update on CMC's key strategic growth initiatives.
I'm pleased to report that CMC's third-quarter fiscal 2021 financial results were the best in our company's 106-year history.
Earnings from continuing operations were $130.4 million or $1.07 per diluted share on net sales of $1.8 billion.
Excluding the impact of a gain on the sale of a small rail reclamation business, adjusted earnings from continuing operations were $127.1 million or $1.04 per diluted share.
CMC reported a core EBITDA of $230.5 million, generating an annualized return on invested capital of 18%.
This level of performance underscores CMC's enhanced earnings capability following our multi-year strategic repositioning.
Third-quarter volumes were exceptionally strong in North America and Europe, and the ability of our commercial operational logistics and support teams to respond to the rise in customer demand generated our strong financial performance.
and Poland set monthly shipment production records during the quarter, enabling us to capitalize on market conditions.
During the quarter, we also continued to execute on our previously discussed in-flight strategic initiatives and growth projects.
We are expanding our capability to serve the merchant bar market.
Customers appreciate CMC's expanded product range and service capabilities, and we're seeing our recent investments in handling and storage capacity pay off in increased volumes.
We expect more growth in the future, especially once our state-of-the-art Arizona 2 micro mill starts up in early 2023.
We continue to execute on our network optimization efforts.
And with recent actions firmly entrenched in our financial performance, CMC is roughly halfway to our longer-term goal of $50 million in annual cost efficiencies.
You can see the benefit of these efforts in our controllable cost performance on a per-ton basis.
Despite well-publicized inflationary pressures across the global economy, we were able to reduce this metric modestly on a year-over-year basis.
In April, we received the required air permit for Arizona 2, CMC's planned state-of-the-art micro mill at our Mesa, Arizona site.
This was an important milestone, enabling us to begin construction and we continue to anticipate an early 2023 start-up.
As a reminder, this plant will be the first micro mill in the world capable of producing merchant bar as well as rebar.
It will also be the first in North America with the capability to connect directly to an onsite renewable energy source.
These capabilities, combined with a micro mill's inherent low-cost and low-carbon footprint will define a new level of operational and environmental excellence in long products steelmaking.
In May, our team in Europe began hot commissioning their plant's third rolling line.
The start-up process is going very well, and we expect to begin commercial production late in the fourth quarter.
This project was delivered on time and under budget, a testament to our Polish team's ability to execute.
We will be ramping operations within a very strong market environment, which will help shorten the time to achieve our targeted annual run rate incremental EBITDA of $20 million.
I'd now like to provide an update on market conditions.
The encouraging trends we discussed during our second-quarter call continued and strengthened in the third quarter.
As I will detail, project owners have grown more confident as the economy has recovered and states have reopened, and they are now more willing to contract new work.
This view is supported by the strong level of new awards booked in the quarter.
The strength and new project opportunities is occurring in both the private and public sectors.
On the private side, CMC is seeing work related to the hardening of supply chains, as well as the trend toward investments in e-commerce infrastructure.
The ongoing global semiconductor shortage has spurred several very large investments within CMC's core geographical markets.
At the same time, public demand is solid, and we are experiencing good activity for highways, bridges, and other infrastructure-related applications.
Activity in residential markets also continues to be strong.
CMC is growing our participation in this area and our mills have capitalized on the increased demand.
The benefit to CMC of new housing investment and community formation is twofold.
The first phase is under way, and we are currently benefiting from direct demand from the residential sector.
We believe the next phase will include local infrastructure and commercial centers that support new communities.
Historically, the lag between new residential activity and the inflow of supporting non-residential investment has been 9 to 24 months.
Finally, domestic demand for merchant product continues to benefit from the ongoing recovery of industrial production, as well as a lean service center supply chain.
Looking further ahead at our markets, we see several positive long-term developments.
Over the last year, the population migration to the Southern States has accelerated with metro areas in our core Sunbelt geographies being the primary beneficiaries.
Various discussions regarding a potential long-term infrastructure package are also encouraging.
Several proposals are under consideration, any of which would provide a meaningful increase to annual federal infrastructure funding relative to current levels.
Based on our analysis, we believe the annual percentage increase to funding ranges from 30% to 60% across the various proposals.
Turning to Europe, demand for CMC's long products remained robust during the third quarter.
Like the U.S., construction activity in Poland is healthy and supporting strong volumes of rebar.
The residential market is an important driver of demand in the Polish market.
And new housing permits and units under construction are growing by double digits on a year-over-year basis.
Industrial activity continues to recover in Central Europe, driving consumption of CMC's merchant bar and wire rod products.
Germany's manufacturing PMI in May was among the strongest globally, while Poland's reading reached a new all-time high.
We will soon publish our latest corporate sustainability report, featuring greatly enhanced disclosures around three key pillars of environmental, social, and governance.
You will see that as CMC has improved its operational and financial performance, we have also improved our already industry-leading environmental performance.
That's what we mean when we say that good business and good environmental stewardship go hand in hand.
We will also be setting ambitious environmental goals in line with science-based targets.
I hope that once you read our upcoming report, you'll have a better understanding of the value we place and steps we've taken to serve our people, customers, communities, and environment.
The dividend will be paid on July 14, 2021.
This represents CMC's 227th consecutive quarterly dividend.
And with that as an overview, I will now turn the discussion over to Paul Lawrence, vice president and chief financial officer, to provide some more comments on the results for the quarter.
I am pleased to review with you the outstanding third-quarter results.
As Barbara noted, we reported record earnings from continuing operations of $130.4 million, or $1.07 per diluted share, roughly double the prior-year levels of $64.2 million and $0.53 per diluted share.
Results this quarter include a net after-tax benefit of $3.3 million related to the sale of a small rail reclamation business.
Excluding the impact of this, adjusted earnings from continuing operations were $127.1 million or $1.04 per diluted share.
Core EBITDA from continuing operations was $230.5 million for the third quarter of 2021, up 49% from the year-ago period and 35% on a sequential basis.
Both our North America and Europe segments contributed significantly to year-over-year earnings growth, while core EBITDA per ton of finished steel reached a record level of $144 per ton.
The third quarter marked the ninth consecutive quarter in which CMC generated an annualized return on invested capital at or above 10%, which is well above our cost of capital.
This translates into meaningful value created for our shareholders.
Now, I will review the results of our third quarter of fiscal 2021.
The North America segment recorded adjusted EBITDA of $207.3 million for the quarter, an all-time high, compared to adjusted EBITDA of $159.4 million in the same period last year.
The largest drivers of this 30% improvement were a significant increase in margins on steel products, strong volume growth, and expanded margins on sales of raw materials.
And continued management of controllable costs also allowed us to fully capitalize on the robust market conditions during the quarter.
These factors more than offset the impact of lower margin over scrap on downstream products.
Selling prices for steel products from our mills increased by $170 per ton on a year-over-year basis and $99 per ton sequentially.
Since bottoming in August 2020, our average monthly selling price has rebounded roughly $220 per ton.
Margin over scrap on steel products increased $40 per ton from a year ago and $74 per ton sequentially.
The average selling price of downstream products of $963 per ton shipped was essentially flat compared to the prior-year third quarter.
A flat selling price, coupled with higher underlying scrap costs, resulted in lower margins on downstream products.
In a period of elevated ferrous and nonferrous price -- scrap pricing, we realized higher margins on sales of raw materials, which as a result of our vertically integrated network of operations helped provide earnings stability to our consolidated results.
Shipments of finished product in the third quarter increased 9% from a year ago.
Both rebar and merchant bar volumes out of our mills reached record levels, increasing 8% and 28% respectively compared to the third quarter of fiscal 2020.
As Barbara noted, we experienced good activity in both public and private construction.
CMC also continued growing its president -- presence in residential construction, which added meaningfully to the year-over-year increase in rebar shipments.
Downstream product shipments were impacted by a reduced backlog and weather challenges in certain geographies, resulting in a 4% reduction in year-over-year volume decline.
The recent trend in North American margins, volumes, and cost performance can be seen on Slide 8.
Our continued focus on operational performance allowed us to achieve record North American financial results.
Our team was able to generate a modest reduction in controllable costs per ton of finished steel shipped compared to a year ago despite inflationary pressures in freight and certain other costs.
A quick glance at recent producer price index or manufacturing ISM reports should underscore the strength of this accomplishment.
The most significant benefit came from volume-driven efficiencies at our steel mills and recycling yards, as well as the impact of closing the former Steel California rolling operations.
Turning to Slide 9.
Our Europe segment generated adjusted EBITDA of $50 million in -- for the third quarter of 2021, compared to adjusted EBITDA of $14.3 million in the same period of the prior year.
The improvement was driven by expanded margins over scrap and strong volumes across all ranges of products.
Margins over scrap increased $90 per ton on a year-over-year basis and were up $84 per ton from the prior quarter.
Tight market conditions provided the backdrop to achieve the segment's higher -- highest average selling price in nine years, reaching $664 per ton during the third quarter.
This level represented an increase of $227 per ton compared to a year ago and $132 per ton sequentially.
Europe volumes increased 8% compared to the prior year and reached their highest third-quarter total in a decade.
The strength was driven primarily from the market for rebar.
Volumes of merchant and other products also grew on a year-over-year basis, supported by goods demand from industrial customers in Central Europe, as well as some opportunistic billet sales.
As Barbara mentioned, the demand environment during the quarter was robust, with indications that conditions should remain favorable in the near term.
Turning to our balance sheet and liquidity.
As of May 31, 2021, cash and cash equivalents totaled $443 million.
In addition, we had approximately $639 million of availability under our credit and accounts receivable programs.
In March, we upsized our revolving credit facility to $400 million from $350 million and extended the maturity till 2026.
During the quarter, we generated $94 million of cash from operating activities despite a $79 million increase in working capital.
The rise in working capital was driven by the significant increase in both scrap input costs and average selling prices.
We expect working capital balances to increase modestly heading into the end of the fiscal year.
Our leverage metrics remain attractive, and we have improved significantly over the last two fiscal years.
As can be seen on Slide 12, our net debt-to-EBITDA ratio now sits at 1.0 times, while our net debt to capitalization is just 20%.
We believe our robust balance sheet and overall financial strength provides us the flexibility to fund our strategic growth projects, navigate economic uncertainties, and pursue an opportunistic M&A.
CMC's effective tax rate for the quarter was 22.6%, which was both below our full-year effective rate forecast to be around 25%.
Lastly, I would like to provide that our current outlook for capital expenditures in fiscal 2021 remains between 200 million and 225 million of which roughly 100 million will be used for the new micro mill.
For comparison purposes, we have previously stated that our typical capital spend averages around 150 million annually.
We expect a strong finish to fiscal 2021.
The summer construction season is under way, and demand is robust across each of our major product lines in both North America and Europe.
We anticipate margins over scrap on steel products in both segments to be consistent or up modestly compared to the third quarter.
Our internal indicators such as bidding activity and backlog level support continued strength.
The recent recovery of leading national construction indicators such as the Architectural Billing Index dodged momentum index and the Portland Cement Association forecast each mirror our view.
These external measures also point to good conditions in the calendar year 2022.
And at this time, we will now open the call to questions.
 Assistant:

Chosen response:
q3 adjusted earnings per share $1.04 from continuing operations excluding items.
q3 earnings per share $1.07 from continuing operations.
q3 sales $1.8 billion versus refinitiv ibes estimate of $1.7 billion.


Prompt:
Human: Joining me are our chief executive officer, Bob Steers; our president, Joe Harvey; and our chief financial officer, Matt Stadler.
Further, none of our statements constitute an offer to sell or the solicitation of an offer to buy the securities of any fund.
These non-GAAP financial measures should be read in conjunction with our GAAP results.
My remarks will focus on our as-adjusted results.
Yesterday, we reported record earnings of $1.24 per share compared with $0.76 in the prior year's quarter and $1.06 sequentially.
The fourth quarter of 2021 included cumulative adjustments to compensation and benefits and income taxes that lowered our compensation-to-revenue ratio and effective tax rate, respectively.
Revenue was a record $159.7 million for the quarter compared with $116.6 million in the prior year's quarter and $154.3 million sequentially.
The increase in revenue from the third quarter was primarily attributable to higher average assets under management and open-end funds and higher performance fees from certain institutional accounts when compared with the third quarter.
Our implied effective fee rate was 58.1 basis points in the fourth quarter compared with 57.5 basis points in the third quarter.
Excluding performance fees, our fourth quarter implied effective fee rate would have been 57 basis points, and our third quarter implied effective fee rate would have been 57.3 basis points.
Operating income was a record $82.6 million in the quarter compared with $49.4 million in the prior year's quarter and $70.4 million sequentially.
Our operating margin increased to a record 51.7% from 45.6% last quarter, primarily due to the cumulative adjustment mentioned a moment ago, which reduced compensation and benefits to reflect actual amounts to be paid.
Expenses decreased 8.1% when compared with the third quarter as lower compensation and benefits was partially offset by higher G&A.
The compensation-to-revenue ratio, which included the cumulative adjustment was 26.16% for the quarter.
For the year, the compensation-to-revenue ratio was 32.22%.
The increase in G&A was primarily due to higher travel and entertainment, increased hosted and sponsored conferences, and higher recruitment fees.
And the increase in distribution and service fee expense was primarily due to higher average assets under management in U.S. open-end funds.
Our effective tax rate, which was 25.36% for the quarter, included a cumulative adjustment to bring the rate to 26.15% for the year.
The reduction in the effective tax rate was primarily due to a decrease in a nondeductible portion of executive compensation on a higher than previously forecasted pre-tax base.
Our firm liquidity totaled $248.2 million at quarter-end, compared with $241 million last quarter.
Firm liquidity as of December 31 reflected the payment of a special cash dividend in December of $60.3 million or $1.25 per share.
Over the past 12 years, we have paid a total of $15.25 per share in special dividends, and we continue to be debt-free.
Assets under management totaled a record $106.6 billion at December 31, an increase of $9.4 billion or 10% from September 30.
The increase was due to net inflows of $1.8 billion and market appreciation of $9.1 billion, partially offset by distributions of $1.6 billion.
This marks the 10th consecutive quarter that we have recorded net inflows.
Bob Steers will be providing an update on our flows and institutional pipeline of awarded unfunded mandates.
And now, I'd like to briefly discuss a few items as we begin the new year.
First, regarding our expected compensation-to-revenue ratio.
We intend to balance anticipated revenue growth from year-end assets under management that exceeded our full-year assets under management by about 13%.
With a disciplined approach toward adding human capital, in addition to the full-year impact from the new hires we made last year, we plan on making controlled investments in order to broaden our product offerings, expand our public and private distribution efforts, and most importantly, to maintain our industry-leading investment performance.
As a result, we expect that our compensation-to-revenue ratio will increase to 33.75% and from the 32.22% recorded in 2021.
Continuing with the theme of investing in our business, we expect G&A to increase 10% to 15% from the $47.2 million we recorded in 2021.
We intend to make incremental investments this year in technology, including the implementation of new systems that will add efficiencies and expand our capabilities, cloud migration, and upgrades to our infrastructure and security.
We will also make investments in global marketing, focused on hosting virtual and in-person conferences, as well as expanding our digital footprint.
And we expect that travel and entertainment costs will increase as global conditions begin to return to normal.
We expect that our effective tax rate will remain at 26.15% in 2022.
And finally, you will recall that a year ago, we noted that we were anticipating the redemption of $1 billion global real estate institutional account in 2021.
I am pleased to inform you that not only do we continue to manage this account, but the client has also added assets to it, and therefore, we no longer consider this account to be at risk.
Today, I will review our investment performance, and discuss the macro environment and its impacts on our asset classes.
Four weeks into January, the fourth quarter of last year seems far away, but it was very strong for equities.
2021 closed with momentum and expectations for post-pandemic economic recovery, earnings growth, stimulus, and appetite for risk-taking.
Our largest asset class, U.S. REITs, was the best performing sector in the S&P, returning over 16% in the quarter.
For the full year, our asset classes performed well, with U.S. REITs up 41%, global real estate up 26%, listed infrastructure up 15%, resource equities up 24%, and preferred is up nearly 3%.
With the new year, however, the market has finally focused on rising inflation, which, as we shared our views with you last year, will likely persist.
With the last reading at 7%, CPI is currently at the largest gap to the federal funds rate in our professional lifetimes.
Reversion of that gap will come by way of both monetary tightening, as well as from inflation normalizing at a lower rate.
We believe inflation could stabilize in the high 2% ZIP code or 100 basis points higher than the pre-pandemic trend line.
The interest rate and adjustment process will reshuffle the deck of winning and losing asset classes and sectors while exposing vulnerabilities from risk-seeking borrowers.
We believe that the U.S. economy will continue to enjoy above-trend growth, supported by a prolonged and oscillating recovery as the pandemic ebbs and flows.
Earnings sensitivity to inflation should be a key differentiator in performance to counteract the impending interest rate adjustment.
Looking at our performance scorecard.
In the fourth quarter, eight of nine core strategies outperformed or equaled their benchmarks.
For the last 12 months, nine of nine core strategies outperformed.
Measured by AUM, 99% of our portfolios are outperforming benchmarks on a one-year basis compared with 79% last quarter.
The improvement was attributable primarily to global real estate, which improved from 25% outperforming in the third quarter to 95% outperforming as of year-end.
For both three and five years, 100% of AUM are outperforming.
Credit goes to our investment leaders, John Cheigh, our CIO; and Chris Parliman, chief administrative officer, in guiding our teams to these outstanding results.
In light of the inflation situation, I'll kick off our asset class review by highlighting our multi-strategy real assets portfolio, the benchmark for which returned 21% in 2021.
This portfolio is designed to provide equity-like returns, inflation sensitivity, and diversification.
We outperformed the benchmark by 340 basis points for the year, which included outperformance in all five asset class sleeves, as well as asset allocation alpha by our portfolio manager, Vince Childers.
This portfolio is designed to perform best in environments of rising or unexpected inflation.
Commodities and resource equities provided the most inflation sensitivity while real estate is driven more by economic growth and infrastructure tends to be an all-weather performer.
Valuations of these listed real assets are as cheap as they've been to equities in 20 years.
Meantime, the beta to equities is just 0.6 times.
We recently published a white paper on this strategy and its constituent asset classes and is available on our website.
Our three core real estate strategies: U.S., global and international outperformed in both the quarter and year.
As mentioned, global real estate returned 26% with significant dispersion by region.
The U.S. returned 41%, Europe returned 9% and Asia returned 4%.
To address the inflation and interest rate question on prospective performance, earnings sensitivity and replacement cost dynamics should help listed real estate.
Globally, these companies' cash flows should accelerate to an average of 12% over the next few years compared with their long-term growth rate of 5%.
U.S. REIT returns have averaged 10.8% during periods of rising bond yields accompanied by rising growth, while in periods of rising yields with declining growth, returns have been flat.
Comparatively, private real estate unleveraged returns have averaged 10.7% in high-inflation environments versus 6.5% in low-inflation environments.
The asset class returned 15% in 2021, compared with 22% for global equities lagging for the second year.
We outperformed our benchmark for the quarter and year.
Sector dispersion was wide with over 40 percentage points best to worst.
While certain pandemic-challenged sectors, namely passenger rails, toll roads, and airports, restrained performance, the ongoing economic recovery should provide tailwinds for these sectors going forward.
Reflecting the income and stable cash flow growth profile of infrastructure, I'd characterize infrastructure generally as steady Eddie.
That is -- it provides solid returns in most market regimes, while not at the top of the charts nor at the bottom.
In part due to President Biden's now passed infrastructure spending legislation, we are seeing broadening allocations in institutional portfolios and increased flows in wealth.
Preferred securities portfolios had modest negative returns in the fourth quarter but performed well versus fixed income for the full year.
For the quarter and the year, we outperformed benchmarks in both our core and low-duration strategies.
This year, likely we'll test fixed-income performance generally based on our review for rising bond yields.
Our portfolios are positioned defensively against increases in interest rates with duration of 2.4 years in our low-duration strategy and 4.0 years in our core preferred strategy.
After high yield, preferreds offer the second-highest yields in fixed income and offer meaningful tax advantages for the taxable investor due to the high percentage of qualified dividend income that they produce.
In terms of our private real estate initiative, we have commenced our investment process and have closed on several property acquisitions for both our income strategy and our opportunistic or capital appreciation strategy.
This year, we will look to add a real estate investment strategist as part of our expansion of multi-strategy capabilities to help our teams and clients allocate between listed and private real estate and execute thematic and strategic research.
We look forward to sharing our progress on this initiative in the future.
In closing, we are very positive about the allocation trends we are seeing for our asset classes.
In the institutional channel, we see a greater need to allocate to real assets.
By example, in the private market, dry powder and private equity funds is at $390 billion for real estate and $300 billion for infrastructure.
Investors are becoming more comfortable with listed allocations to complement private, despite greater measured volatility.
Some investors want real assets with liquidity, particularly in the endowment and foundation and Healthcare segments where some plans liquidity has been challenged.
In our early stage pipeline, we have some sovereign wealth opportunities where the plan sponsors are making initial allocations to listed real estate and infrastructure.
We would expect those initial small allocations to grow meaningfully to make it worthwhile for those plan sponsors to research the asset classes and oversee additional managers.
In the wealth channel, we are seeing earlier-stage adoption of private real asset allocations.
As we've seen in other markets, this will help drive listed allocations over time.
We believe the inflation environment will help provide additional support for these trends.
Finally, manager consolidation and conversions from passive to active are trends also in our favor as our performance continues to be excellent.
2021 was a record-breaking year in myriad ways for Cohen & Steers.
It marked our 35th anniversary and 17 years as a public company.
For the quarter and year, we achieved a record number of records, driven by improving fundamentals, a rebounding economy, accompanied by the return of meaningful inflation.
And for the first time in over a decade, the prospect of sustained Fed tightening.
As Matt discussed, assets under management increased to a record $106 billion at year-end, driven by our 10th consecutive quarter of firmwide net inflows.
Both open-end fund and advisory channels ended the quarter with record assets under management.
For the full year, we also achieved record gross and net inflows.
Open-end fund and advisory gross sales increased 11% and 13% to $19.5 billion and $4.9 billion, respectively.
Most notably, open-end fund net inflows rose 62% year over year to a record $8.8 billion, while the advisory channel also registered a record $1.9 billion of net inflows.
Firmwide organic growth was 12% for the year.
The seemingly sudden rise of inflation and the expectation from multiple rounds of Fed tightening have put into stark relief the importance and value of portfolio allocations to actively managed real asset strategies across client portfolios to enhance returns and provide diversification.
The wealth channel was by far our strongest business segment and achieved multiple milestones in the quarter.
Net inflows in that channel were a record $2.5 billion for a 22% organic growth rate and represented our 12th consecutive quarter of positive net flows.
Importantly, net flows in the quarter were not just strong but also diverse, with meaningful contributions from each of the wirehouse, regional brokerage, and RIA segments.
In addition, DCIO open-end fund net inflows were a record $476 million and marked the 14th consecutive quarter of net inflows.
DCIO assets in our open-end funds ended the year at a record $6 billion.
Our non-U.S. open-end funds registered net inflows of $45 million in the quarter and a record $202 million for the full year.
We will continue to invest to support growth in this important channel, and we expect that flows will continue on an upward trajectory.
For the year, the powerful combination of strong absolute and relative performance derived from our unique and diversifying asset classes resulted in 25% organic growth in wealth and industry-leading market share as well.
Our U.S. global real estate and preferred securities funds achieved market share records of 33%, 12%, and 46%, respectively, against other comparable actively managed funds.
2021 was a record year for the institutional advisory channel as well with $1.9 billion of net inflows.
However, 2021 was also a year in which we reorganized our sales leadership and converted to a regional approach to our institutional sales coverage.
We enter 2022 fully staffed and prepared to go higher and deeper into the global institutional marketplace.
In the quarter, the advisory channel had net outflows of $456 million.
These outflows were driven by a single and unexpected client termination of $400 million.
However, not included in the headline advisory flow results was $564 million of net new mandates from institutional clients, which were invested into our open-end funds.
Other full-year achievements for the advisory channel include positive net flows from each of the U.S., EMEA, and Asian markets.
Additionally, all of our core strategies, U.S. real estate, global real estate, global listed infrastructure, and preferred securities registered net inflows.
The pipeline of awarded but unfunded mandates has increased dramatically $900 million in September to $2.1 billion, another new record.
New awards in the quarter totaled $1.3 billion and included our first relationship in Africa, a $300 million global listed infrastructure mandate.
Sub-advisory flows in the quarter were subdued.
Net outflows in Japan were $242 million and distributions totaled $276 million.
Sub-advisory net outflows ex Japan in the quarter were a modest $56 million.
At the risk of sounding overly optimistic, we believe our current momentum and growth prospects have never been brighter, driven as always, by our industry-leading investment results.
It bears repeating that virtually 100% of our AUMs are outperforming their benchmarks for the one-, three-, five- and 10-year time periods, a truly remarkable accomplishment.
Looking ahead, the combination of industry-leading investment performance, rising demand for real asset strategies and our plans for new product introductions designed to meet this demand has us poised for continued organic growth.
In addition to our open-end fund organic growth, next month, we plan to market the first new listed real estate securities closed-end fund in over nine years, supported by an exceptionally strong and deep syndicate.
And as I've discussed, the institutional advisory channel entered this year with a record pipeline, fully staffed, and the reorganization behind them.
Also under new leadership, our EMEA wholesale business is also poised to deliver meaningful organic growth.
To capitalize on all of this momentum, this year, we plan to launch multiple new initiatives which will seek to position Cohen & Steers at the intersection of public and private real estate markets through the introduction of vehicles tailored to the unique requirements of both the institutional and wealth marketplaces.
These initiatives are designed to take us higher and deeper into real assets and position us for continued future growth.
 Assistant:

Chosen response:
cohen & steers inc - qtrly adjusted earnings per share $1.24.
cohen & steers inc- • ending aum of $106.6 billion for q4.


Prompt:
Human: To access the call on the Internet, please log on to Capital One's website at capitalone.com and follow the links from there.
In the first quarter, Capital One earned $3.3 billion or $7.03 per diluted common share.
Pre-provision earnings increased 1% in the quarter to $3.4 billion, and we recorded a provision benefit of $823 million.
After recognizing $535 million of gains during 2021 on our Snowflake investment, we had a loss on our position in the first quarter of $75 million or $0.12 per share.
We've now fully exited our position with a cumulative gain of $460 million.
Turning to Slide 4, I will cover the quarterly allowance moves in more detail.
In the first quarter, we released $1.6 billion of allowance.
The release was driven by strong credit performance across all of our businesses and a more favorable economic outlook that includes the $1.9 trillion stimulus package passed in March.
Our allowance continues to assume that the relationship between economic metrics and credit performance reverts to historical patterns.
And despite the strong credit performance and more favorable economic outlook, we continue to hold significant qualitative factors to account for a number of remaining uncertainties.
Turning to Slide 5, I'll provide some detail on the allowance coverage by segment.
After the impact of the $1.6 billion allowance release, our coverage levels declined modestly across all segments from the prior quarter and remain well above pre-pandemic levels.
Our domestic card coverage is now 10.5%, down from 10.8% last quarter.
Our branded card coverage is 12.1%.
Recall that the difference between branded and domestic coverage is driven by the law-sharing agreement in our partnership portfolio.
Coverage in our consumer business declined 38 basis points to 3.6%.
And coverage in our commercial banking business fell 23 basis points to 2%.
Moving to Slide 6, I'll discuss liquidity.
You can see our preliminary average liquidity coverage ratio during the first quarter was 139%, well above the 100% regulatory requirement.
Our liquidity reserves from cash, securities, and federal home loan bank capacity ended the quarter at approximately $151 billion.
The $7 billion increase in total liquidity is largely attributable to strong inflows of consumer and commercial deposits in the last few weeks of the quarter.
Turning to Slide 7, I'll discuss our net interest margin.
NIM declined six basis points in the linked quarter due to a 14-basis-point headwind from having two less days in the quarter, as well as a higher mix of cash.
These factors were partially offset by the full quarter effect of deposit pricing actions we took in the fourth quarter and a modest increase in loan yields.
Lastly, turning to Slide 8, I will cover our capital position.
Our common equity Tier 1 capital ratio was 14.6% at the end of the first quarter, up 90 basis points from the fourth quarter and 260 basis points higher than a year ago.
We continue to estimate that our CET1 capital need is around 11%.
Recall that in January, our board of directors authorized a repurchase plan of up to $7.5 billion of the company's common stock.
In the first quarter, we repurchased $400 million of -- $490 million of common stock at an average price of approximately $114 per share.
Based on the Fed's extension of the trailing four-quarter average earnings rule, our share repurchase capacity will be limited to approximately $1.7 billion in the second quarter.
The timing and amount of all future stock repurchase activity will be a function of any regulatory restrictions, stock trading volumes, and our holistic view of our capital position.
I'll begin on Slide 10 with our credit card business.
Year over year, credit card loan balances and revenue declined in the first quarter driven by the continuing impacts of the pandemic.
Purchase volume rebounded compared to the first quarter of 2020.
And the biggest driver of quarterly results was the provision for credit losses, which improved significantly.
Credit card segment results are largely a function of our domestic card results and trends, which we show on Slide 11.
For the third consecutive quarter, the story of our domestic card business continues to be two sides of the same coin.
Historically, high payment rates amplified by the effects of government stimulus continue to put pressure on loan balances.
And on the flip side, the same factors are driving exceptional credit performance.
Looking first at growth.
We continued to see purchase volume rebound from the sharp declines early in the pandemic.
Domestic card purchase volume for the first quarter was up 8.4% year over year, with growth accelerating in March.
Compared to the first quarter of 2019, purchase volume is up 17%.
Most spend categories are now exceeding the pre-pandemic levels we saw in 2019.
T&E spend is still lagging pre-pandemic levels, but it's catching up.
T&E purchase volume is growing faster than overall purchase volume.
The payment rate, which has risen to a historically high level, continues to put pressure on loan balances, even with the pickup in consumer spending.
At the end of the first quarter, domestic card ending loan balances were down $18.5 billion or about 17% year over year.
Excluding the impact of a partnership portfolio moved to held-for-sale last year, first-quarter ending loans declined about 15% year over year.
The year-over-year percentage change in ending loan balances this quarter was approximately the same as it was last quarter.
Strikingly strong credit was the biggest driver of domestic card financial results in the quarter, just as it has been for the prior two quarters.
The domestic card charge-off rate for the quarter was 2.54%, a 214-basis-point improvement year over year.
The 30-plus delinquency rate at quarter end was 2.24%, 145 basis points better than the prior year.
First-quarter provision for credit losses improved by nearly $4 billion year over year.
We had a large allowance release in the first quarter of this year versus a large allowance build in the first quarter last year.
Strong credit and purchase volume growth were also key drivers of domestic card revenue margin, which was up 229 basis points year over year to 17.2%.
Total company marketing was up modestly compared to the first quarter of 2020.
Our choices in card marketing are the biggest driver of total company marketing trends.
In the midst of the pandemic, we're finding opportunities to continue to build the business, and we continue to lean into marketing.
Pulling up, our domestic card business is delivering significant value and building momentum.
Slide 12 summarizes first-quarter results for our consumer banking business.
Auto growth continued strength in retail deposits and exceptional auto credit are the main themes in the first-quarter consumer banking results.
Driven by auto, first-quarter ending loans increased 10% year over year in the consumer banking business.
Average loans grew 9%.
Auto originations were up 16% year over year, and up 20% from the linked quarter.
We've seen competitive intensity increase through the second half of 2020 and in the first quarter of 2021.
And with most competitors holding excess deposits, we expect that competitive intensity will continue to increase going forward.
First-quarter ending deposits in the consumer banking were up $36.4 billion, or 17% year over year.
Average deposits were up 16%.
On a linked-quarter basis, ending deposits were up 2% and average deposits were flat.
Elevated consumer savings rates, fueled by continuing government stimulus, are driving year-over-year deposit growth.
First-quarter consumer banking revenue increased 22% from the prior-year quarter, driven by growth in auto loans and retail deposits.
First-quarter provision for credit losses improved by $986 million year over year, driven by an allowance release and lower charge-offs in our auto business.
Credit results in our auto business are strikingly strong and continue to benefit from historically high auction values and government stimulus.
Year over year, the first-quarter charge-off rate improved 104 basis points to 0.47%, and the delinquency rate improved 217 basis points to 3.12%.
A sharp uptick in used car values, coupled with a stimulus-driven surge in customer payments, resulted in a negative net charge-off rate in March.
We expect the auto charge-off rate to increase from its unusually low level as auction prices normalize and stimulus impact play out.
The consumer banking business continues to deliver resilient growth in auto loans and retail deposits.
Moving to Slide 13.
I'll discuss our commercial banking business.
First-quarter ending loan balances were down 9% year over year.
Average loans were down 3%.
In C&I, we've seen a reduction in commercial line utilization, which peaked early in the pandemic as customers facing elevated uncertainty drew down their lines.
That behavior has since diminished.
In our commercial real estate business, originations were down, and pay downs increased compared to the first quarter of 2020.
Quarterly average deposits increased 24% from the first quarter of 2020 and 4% from the linked quarter as middle market and government customers continued to hold elevated levels of liquidity.
First-quarter revenue was up 4% from the prior-year quarter.
Higher loan and deposit spreads and growth in average deposits were partially offset by lower average loan balances.
Provision for credit losses improved significantly compared to the first quarter of 2020, driven by a swing from an allowance build to an allowance release and lower net charge-offs.
For the first quarter, the commercial banking annualized charge-off rate was nine basis points.
The criticized performing loan rate was 9.2%, and the criticized nonperforming loan rate was 0.9%.
Our commercial banking business is delivering solid performance as we continue to navigate the pandemic and build our commercial capabilities.
I'll close tonight with some thoughts on our results and our strategic positioning.
Three key themes are evident in our first-quarter results.
High payment rates continue to put near-term pressure on loan balances and revenue growth, particularly in our domestic card business.
On the flip side, strikingly strong credit drove a third consecutive quarter of record earnings per share.
And our investments to transform our technology and transform how we work are paying off.
Our modern technology is powering our response to the pandemic and putting us in a strong position for opportunities that emerge as sweeping digital change transforms banking.
Pulling way up, we continue to focus on the things that create enduring value when delivered and sustained over the long term, continuing to transform our technology from the ground up, capitalizing on our transformation to drive innovation and growth, generating positive operating leverage, and improving efficiency over time, and managing capital efficiently and effectively, including significant planned capital distribution.
We'll now start the Q&A session.
As a courtesy to other investors and analysts who may wish to ask a question, please limit yourself to one question plus a single follow-up.
And if you have follow-up questions after the Q&A session, the investor relations team will be available after the call.
Keith, please start the Q&A.
 Assistant:

Chosen response:
compname reports q1 2021 net income of $3.3 bln, or $7.03 per share.
compname reports first quarter 2021 net income of $3.3 billion, or $7.03 per share.
q1 revenue fell 3 percent to $7.1 billion.
qtrly earnings per share $7.03.
common equity tier 1 capital ratio under basel iii standardized approach of 14.6 percent at march 31, 2021.
qtrly benefit for credit losses $823 million versus provision for credit losses of $5,423 million.
qtrly net interest income $5,822 million, down 3%.
capital one financial qtrly earnings per share $7.03.
q1 revenue fell 3% to $7.1 billion versus q4 2020 .


Prompt:
Human: To access the call on the internet, please log on to Capital One's website at capitalone.com and follow the links from there.
In the third quarter, Capital One earned $3.1 billion or $6.78 per diluted common share.
Included in our results for the quarter was a $45 million legal reserve build.
Net of this adjusting item, earnings per share in the quarter were $6.86.
On a GAAP basis, pre-provision earnings were $3.6 billion, an increase of 7 percent relative to a quarter ago.
Period and loans held for investment grew $11.8 billion or 5 percent as we had strong loan growth across all of our businesses.
Recall that we moved $4.1 billion of loans to held-for-sale late in the second quarter, so average loans in the third quarter grew more modestly at 3 percent.
Revenue increased 6 percent in the linked quarter, largely driven by the loan growth I just described, coupled with margin expansion in our card business.
Operating expenses grew 3 percent in the quarter with total non-interest expense increasing 6 percent.
In addition to strong pre-provision earnings, the P and L was aided by a provision benefit in the quarter as record-low charge-offs were more than offset by an allowance release.
Turning to Slide 4, I will cover the changes in our allowance in greater detail.
We released $770 million of allowance in the third quarter as the effects of continued actual strong credit performance and a reduction in qualitative factors drove a decline in allowance balance, which was partially offset by loan growth in the quarter.
Turning to Slide 5, you can see our allowance coverage ratios continue to decline across all of our segments, driven by the factors I just described.
Turning to Page 6, I'll now discuss liquidity.
You can see our preliminary average liquidity coverage ratio during the third quarter was 143 percent.
The LCR remains stable and continues to be well above the 100 percent regulatory requirement.
Our liquidity reserves from cash, securities, and Federal Home Loan Bank capacity ended the quarter at approximately $124 billion, down $13 billion from the prior quarter as we continue to run off excess liquidity built during the pandemic.
The nine percent decline in total liquidity was driven by a modest reduction in the size of our investment portfolio and $8 billion in lower-ending cash balances, which were used to fund loan growth and share repurchases.
The decline in cash balances had an impact on our NIM, which I will discuss in more detail on Page 7.
You can see that our third-quarter net interest margin was 6.35 percent, 46 basis points higher than Q2 and 67 basis points higher than the year-ago quarter.
The linked-quarter increase in NIM was largely driven by four factors.
First, the decline in average cash balances I just described.
Second, margin expansion in our domestic card business.
Third, loan growth in our domestic card business.
And lastly, the benefit of one additional day in the quarter.
Turning to Slide 8, I will end by covering our capital position.
Our common equity Tier 1 capital ratio was 13.8 percent at the end of the third quarter, down 70 basis points from the prior quarter.
Net income in the quarter was more than offset by an increase in risk-weighted assets and share repurchases.
We repurchased $2.7 billion of common stock in the third quarter and have approximately $2.6 billion remaining of our current board authorization of $7.5 billion.
At the beginning of the third quarter, we began operating under the Federal Reserve's stress capital buffer framework, resulting in a minimum CET1 capital requirement of seven percent as of October 1st.
However, based on our internal modeling, we continue to estimate that our CET1 capital need is around 11 percent.
On October 18th, we announced our intention to redeem our outstanding preferred stock Series G and Series H in early December.
As a result of the full quarter of recent issuances and a partial quarter of the planned redemptions, we expect fourth-quarter preferred dividends to remain elevated at around $74 million.
Looking ahead to Q1, we expect the run rate for preferred dividends to decline to approximately $57 million per quarter, barring additional activity.
I'll begin on Slide 10 with our credit card business.
Strong year-over-year purchase volume growth and strong revenue margin drove an increase in revenue compared to the third quarter of 2020 and provision for credit losses improved significantly.
Credit card segment results are largely a function of our domestic card results and trends, which are shown on Slide 11.
As you can see on Slide 11, third-quarter domestic card revenue grew 14 percent year over year.
Purchase volume for the third quarter was up 28 percent year over year and up 27 percent compared to the third quarter of 2019.
And the rebound in loan growth continued with ending loan balances, up $3.7 billion or about four percent year over year.
Ending loans also grew four percent from the sequential quarter, ahead of typical seasonal growth of around one percent.
Ending loan growth was the result of strong growth in purchase volume, as well as the traction we're getting with new account originations and line increases, partially offset by continued high payment rates.
Payment rates leveled off in the third quarter but remain near historic highs.
The flip side of high payment rates is strong credit and credit results remain strikingly strong.
The domestic card charge-off rate for the quarter was 1.36 percent, a 228-basis-point improvement year over year.
The 30-plus delinquency rate at quarter-end was 1.93 percent, a 28-basis-point improvement over the prior year.
The pace of year-over-year improvement is slowing particularly for the delinquency rate.
Domestic card revenue margin was up 218 basis points year over year to 18.4 percent.
Two factors drove most of the increase.
Revenue margin benefited from spend velocity, which is purchase volume growth and net interchange outpacing loan growth.
And favorable current credit performance enabled us to recognize a higher proportion of finance charges and fees in third-quarter revenue as well.
This credit-driven revenue impact generally tracks domestic card credit trends.
Total company marketing expense was $751 million in the quarter, including marketing in card, auto, and retail banking.
Our choices in card marketing are the biggest driver of total company marketing trends.
We continue to see attractive opportunities to grow our domestic card business.
Our loan -- our -- well, our growth opportunities are enhanced by our technology transformation.
Turning opportunities into actual growth requires investment.
And once again, we're leaning further into marketing to drive growth and to build our franchise.
At the same time, we're keeping a watchful eye on the competitive environment, which is intensifying.
Looking ahead, we expect a sequential increase in total company marketing in the fourth quarter that's consistent with typical historical patterns.
Pulling up, our domestic card business continues to deliver significant value as we invest to build our franchise.
Slide 12 summarizes third-quarter results for our consumer banking business.
Consistent auto growth and strong auto credit are the main themes in the third-quarter consumer banking results.
Our digital capabilities and deep dealer relationship strategy continue to drive strong growth in our auto business.
Driven by auto, third-quarter ending loans increased 12 percent year over year in the consumer banking business.
Average loans also grew 12 percent.
Auto originations were up 29 percent year over year.
On a linked quarter basis, auto originations were down 11 percent from the exceptionally high level in the second quarter.
As we discussed last quarter, pent-up demand and high auto prices have driven a second-quarter surge in originations across the auto marketplace.
Third-quarter ending deposits in the consumer bank were up $2.7 billion or one percent year over year.
Average deposits were also up one percent year over year.
Consumer banking revenue increased 14 percent from the prior-year quarter, driven by growth in auto loans.
Third-quarter provision for credit losses improved by $48 million year over year, driven by an allowance release in our auto business.
Credit results in our auto business remain strong.
Year over year, the third-quarter charge-off rate improved five basis points to 0.18 percent and the delinquency rate improved 11 basis points to 3.65 percent.
Looking at sequential-quarter trends, the charge-off rate increased from the unprecedented negative charge-off rate in the second quarter and the 30-plus delinquency rate was up 39 basis points from the second quarter, consistent with historical seasonal patterns.
Moving to Slide 13, I'll discuss our commercial banking business.
Third-quarter ending loan balances were up four percent year over year, driven by growth in selected industry specialties.
Average loans were down two percent.
Ending deposits grew 18 percent from the third quarter of 2020 as middle market and government customers continued to hold elevated levels of liquidity.
Quarterly average deposits also increased 18 percent year over year.
Third-quarter revenue was up 17 percent from the prior-year quarter and 23 percent from the linked quarter.
Recall that revenue in the second quarter was unusually low due to the impact of moving $1.5 billion in commercial real estate loans to held-for-sale.
Commercial credit performance remains strong.
In the third quarter, the commercial banking annualized charge-off rate was five basis points.
The criticized performing loan rate was 6.9 percent and the criticized non-performing loan rate was 0.8 percent.
Our commercial banking business is delivering solid performance as we continue to build our commercial capabilities.
I'll close tonight with some thoughts on our results and our strategic positioning.
In the third quarter, we drove strong growth in domestic card revenue, purchase volume, and new accounts.
And loan growth is picking up.
Credit remains strikingly strong across our businesses and we continue to return capital to our shareholders.
In the marketplace, the pandemic has clearly accelerated digital adoption.
The game is changing from new and permanent shifts in virtual and hybrid work to more digital products and exceptional customer experiences to new fintech innovation and business models.
The common thread throughout all of this is technology and the stakes are rising faster than ever before.
Competitors are embracing the realization that technology capabilities may be an existential issue.
The investment flowing into fintechs is breathtaking and it's growing.
We can see investors voting with their feet in stunning fintech valuations and the war for tech talent continues to escalate, which will drive up tech labor costs even before any headcount increases.
All these developments underscore the size of the opportunity for players who lead the way in transforming how banking works, and Capital One is very well-positioned to do just that.
We are in the ninth year of our technology transformation from the bottom of the tech stack up.
We were an original fintech and we have built modern technology capabilities at scale.
But what is also clear in the marketplace is that the time frames for investment and innovation are compressing.
The imperative to invest is now.
We have been on a long journey to drive down operating efficiency ratio, powered by revenue growth and digital productivity gains.
Our journey will need to incorporate the investment imperative of the rapidly changing marketplace and it is likely to pressure operating efficiency ratio along the way.
Pulling way up, we're living through an extraordinary time of accelerating digital change.
Our modern technology stack is powering our performance and our opportunity.
It's setting us up to capitalize on the accelerating digital revolution in banking and it's the engine that drives enduring value creation over the long term.
We'll now start the Q and A session.
As a courtesy to other investors and analysts who may want to ask a question, please limit yourself to one question plus a single follow-up question.
And if you have any follow-up questions after the Q and A session, the Investor Relations team will be available after the call.
 Assistant:

Chosen response:
compname reports third quarter adj earnings per share $6.86.
compname reports third quarter 2021 net income of $3.1 billion, or $6.78 per share.
q3 revenue rose 6 percent to $7.8 billion.
q3 adjusted earnings per share $6.86 excluding items.
common equity tier 1 capital ratio under basel iii standardized approach of 13.8 percent at september 30, 2021.
qtrly total net revenue increased 6 percent to $7.8 billion versus q2 2021.
qtrly net interest margin of 6.35 percent, an increase of 46 basis points versus q2 2021.