Prompt:
Human: I am joined on the call today by Michael Happe, president and chief executive officer, and Bryan Hughes, senior vice president and chief financial officer.
These factors are identified in our SEC filings, which I encourage you to read.
We, as always, deeply appreciate your interest in Winnebago Industries and taking the time to discuss our fiscal fourth quarter and annual 2021 results.
Our fourth-quarter fiscal 2021 was a strong finish to a remarkable year, characterized by record revenue and record profitability, propelled by three key factors.
First, a sustained elevated excitement for the outdoor lifestyle remained a powerful tailwind driving demand for Winnebago Industries premium products.
Winnebago Industries grew fourth-quarter revenues 40.4% year over year, and 56.8% on an organic basis ex-Newmar, compared to our fiscal 2019 fourth quarter.
Second, Winnebago Industries trend of expanding market share accelerated in the fourth quarter, gaining a full 2.1 percentage points of share during the three-month period ending August.
Importantly, this is driven by both new and experienced consumers who recognize the differentiated quality and innovation in Winnebago Industries brand portfolio.
And the exceptional service we are known to provide in partnership with our dealers.
And third, our team's relentless demonstration of operational excellence, which enabled us to deliver for consumers and our dealer partners efficiently and profitably during a very challenging period as supply constraints and inflation have endured.
As a result, we expanded margins in both our motor home and towable segments during the fourth quarter.
Before I continue, I want to recognize the superb Winnebago Industries employee team.
Our employees now 6,800 plus drawn with the addition of Barletta, have worked tirelessly to provide the high-quality products and exceptional service our customers and dealer partners have come to expect.
While managing through record high backlogs to meet the tremendous demand for our products, their dedication throughout this year has been the key factor in our success.
The pandemic has undoubtedly catalyzed and accelerated powerful demand for outdoor experiences.
And we believe this secular shift already underway pre-COVID-19 will have a lasting impact as more and more new families experience the great outdoors.
Over 10 million households camp for the first time in 2020, and we are tracking toward another estimated 4.3 million households to have their first camping experience in 2021.
In addition to first timers, a new wave of engaged enthusiasts, especially millennials, younger generations are investing more of their time and income in the outdoor lifestyle.
To put a finer point on this, even as we saw the easing of pandemic restrictions over the summer, creating a possible return to a broader set of vacation and travel leisure options.
Our performance in the summer selling season was strong, setting revenue records in both our fiscal third quarter, and now, our fiscal fourth quarter.
Our record backlog of orders continues to grow, and we are seeing rapid sell-through of inventory we provide to dealers.
We are also confident that the diverse cohorts making memories in the outdoors will be the foundation of our growth in the decades ahead.
So, we're bullish on the broader recreation economy and investing to expand our reach beyond RVs, in line with our strategy to become a premier outdoor lifestyle company.
Early in the first quarter of our fiscal 2022 year, we completed our acquisition of Barletta Boat Company.
Building on our past marine investment in the Chris-Craft brand, Barletta's premium pontoon boats meaningfully expand and extend our marine platform into one of the fastest-growing boating segments in pontoons.
Looking ahead, we're excited to discuss the exciting opportunity in our new marine reporting segment in quarters to come.
Due to the strength of our overall offering, we have been very successful in harnessing the industrywide demand for the outdoor lifestyle and delivering net total growth.
Winnebago Industries is increasingly winning with customers, and we're proud that an outsized share of new outdoor adventures has chosen to become part of the Winnebago Industries' community.
As of August 2021, our RV fiscal year-to-date market share is now 12.5%, up 140 basis points from the same period last year.
Even better, we've been able to achieve these gains while maintaining record low levels of discounting.
Our performance and ability to capture share in the full value of our products in a competitive market underscores the unique appeal of our differentiated brand portfolio, which includes a broad range of options for new customers as they enter the market, as well as more premium products as customers upgrade and move up the value chain.
Continuing to invest in our products and brands unified by our golden threads of quality, innovation and service ensures we are positioned to meet consumer demands on technology and capabilities to drive share gains now and into the future.
Finally, our world-class team did a masterful job translating demand growth and market share gains into financial performance in the fourth quarter with an enterprisewide commitment to operational efficiency, despite the challenges posed by the ongoing pandemic, including supply chain disruptions and inflationary pressures.
These operational efforts can be clearly seen as we kept off the fiscal year with record consolidated annual gross margins of 17.9%.
One key element of our operational excellence is the success of our enterprisewide operations and sourcing teams, who quickly adapted to component shortages and supply disruptions that have become commonplace across the supply chain.
Our team has remained flexible using creative and strategic material sourcing strategies and solutions to keep our assembly lines moving.
We will continue to monitor supply chain issues and provide updates along with our results as long as they persist.
Our work to improve communication across our supply chain has allowed us to better anticipate and plan for disruptions in partner component availability.
And we are continuing to strengthen and deepen our relationships with our dedicated dealer network as we focus on replenishing their inventories as quickly as possible.
We are incredibly proud of our team and the performance in the fourth quarter and for our entire fiscal 2021 year.
Our results demonstrate that we are executing well on our proven value creation strategy.
The new heights we were able to achieve in revenues and profitability demonstrate the unique strength and appeal of our growing platform, as well as our world-class team.
I'll touch on fourth quarter and annual highlights, recent capital allocation announcements and several items impacting reporting going forward.
This information can be found on our investor relations website at investor.
As Mike mentioned earlier, our first fiscal fourth quarter was a strong finish to an already outstanding fiscal 2021.
Fourth-quarter revenues were a record $1 billion, an increase of 40% compared to the fiscal 2020 fourth quarter.
Fourth quarter consolidated gross profit margin of 18.1% was up 150 basis points compared to the same period last year due to leverage, pricing, including lower discounts and allowances and profitability initiatives.
Fourth-quarter record revenues and strong margins resulted in record levels of earnings per share.
Fourth-quarter earnings per diluted share was a record $2.45, an increase of 96% versus the same period last year.
Fourth-quarter adjusted earnings per diluted share was a record $2.57, up 77% versus the same period last year.
Now turning to the full-year fiscal 2021 results.
Consolidated fiscal 2021 record revenues of $3.6 billion increased approximately 54% from $2.4 billion in fiscal 2020, positively impacted by strong consumer demand for Winnebago Industries product, coupled with continued RV market share gains.
Revenues were also positively impacted by pricing taken throughout the year, which was implemented to offset inflationary cost input, as well as lower levels of discounts and allowances.
Annual gross profit margin improved 460 basis points to a record 17.9%, primarily due to robust fixed cost leverage, profitability initiatives, increased pricing, including lower discounts and allowances and favorable segment mix.
In line with the fourth quarter, strong annual revenues and healthy margins drove record levels of profitability.
Full-year earnings per diluted share were a record $8.28, an increase of 350% compared to fiscal 2020.
Annual adjusted earnings per diluted share also hit a record high of $8.55, an increase of 231% compared to adjusted earnings per diluted share of $2.58 in the same period last year.
Now, turning to the individual segments.
Towable segment revenues for the fourth quarter were $560 million, up approximately 35% from $414 million in fiscal 2020, primarily driven by strong-end consumer demand and pricing, which was implemented to offset inflationary cost input pressures.
Segment adjusted EBITDA for the fourth quarter was $83.4 million, up approximately 36% year over year, primarily driven by the higher revenues.
Fourth-quarter adjusted EBITDA margin of 14.9% increased 10 basis points, compared to the same period last year, primarily driven by operating leverage, which was offset by a shift in mix favoring travel trailers versus fifth wheel.
For the full-year fiscal 2021, revenues for the towable segment were a record $2 billion, up 64% from fiscal 2020, driven by high demand for our towable products and pricing, which was implemented to offset inflationary cost input pressures.
Segment adjusted EBITDA for the full year was $289 million, up 95% from fiscal 2020.
Segment adjusted EBITDA margin of 14.4% increased 230 basis points for the full year over fiscal 2020.
Now, let's turn to our motor home segment.
In the fourth quarter, revenues for the motor home segment were $448.9 million, up approximately 49% from the prior year, driven by strong end consumer demand, particularly in class B and class A and pricing, which was implemented to offset inflation.
Segment adjusted EBITDA was $50.4 million, up approximately 159% from the prior year.
And adjusted EBITDA margin was 11.2%, an increase of 480 basis points over the prior year and 150 basis points sequentially, driven by fixed cost leverage and profitability initiatives.
For the full-year fiscal 2021, revenues from motor home segment were $1.5 billion, up approximately 46% compared to fiscal 2020 due to increased unit sales and pricing.
Segment adjusted EBITDA for the full year was $169.2 million, up 414% from fiscal 2020.
Segment adjusted EBITDA margin for the full year was 11%, up 790 basis points over fiscal 2020.
Turning to the balance sheet.
As of the end of the 2021 fiscal year.
The company had outstanding debt of $528.6 million comprised of $600 million of gross debt, net of convertible note discount of $60.4 million and net of debt issuance costs of $11.1 million.
Working capital was $651.6 million.
Our current net debt to adjusted EBITDA ratio is 0.4 times, below our targeted range of 0.9 to 1.5 times providing financial flexibility and balance sheet strength to enable continued investment in our strategic imperatives and health returns for our shareholders.
We continue to maintain a very healthy liquidity position.
Our cash balance increased to $434.6 million at the end of fiscal 2021, and we have not drawn on our $192.5 million ABL.
This liquidity of approximately $627 million provided the necessary funding for the Barletta acquisition, which closed in early fiscal 2022.
We also bought back approximately $45 million worth of shares throughout the year with approximately $35 million occurring in the fourth quarter.
Combining share repurchases with dividends paid, Winnebago Industries returned a total of $62 million to shareholders in fiscal 2021, while also growing the business significantly.
The effective income tax rate for the full year was 23.3% compared to 20.5% for fiscal 2020 due to relatively consistent year-over-year tax credits on higher pre-tax income in fiscal 2021.
Looking ahead to fiscal 2022, we expect our tax rate to be in the range of 23.5% to 24.5%, not considering unforeseen discrete items or any change in the tax law.
Our balance sheet and financial health have never been so strong.
With that in mind and looking ahead, I want to comment on our capital allocation priorities.
First, we will continue to invest in our business and advance our strategic priorities focused on growth and to meet the robust demand we continue to expect.
We are planning investments to add capacity, including new facilities, executing production flow, redesign and optimizing our operational capabilities.
These improvements will support continued production output, as well as product innovation, and they signal our confidence in the future of Winnebago Industries and the vitality of our end markets.
We continually look for areas of improvement across our Winnebago, Grand Design, Newmar, Chris-Craft, and now, Barletta, manufacturing and assembly footprint and will add meaningful square footage in the coming year.
Our acquisition of Barletta completed in early fiscal 2022 was primarily funded out of cash but also included newly issued shares.
This effective deal structure keeps our liquidity position strong and our leverage ratio low, so we can continue to pursue M&A opportunities as they arise.
Issuing shares also serves to align all parties on driving a successful integration and our collective future success.
On August 18, 2021, the company's board of directors approved a quarterly cash dividend of $0.18 per share, payable on September 29, 2021, to common stockholders of record at the close of business on September 15, 2021.
This quarter's dividend declaration represents a 50% or $0.06 per share increase from the previous quarter and further demonstrates our confidence in future business performance while also delivering financial returns to our shareholders.
As mentioned previously, we returned approximately $45 million to shareholders through share repurchases during the year.
with approximately $35 million occurring in the fourth quarter.
To enable further repurchase activity in the future, our board approved a new share buyback program on October 13 that authorizes us to repurchase up to $200 million of our shares in the future.
This should be interpreted as a signal that we have confidence in our future, and we will continue to utilize our share repurchase program as another mechanism to return cash to our shareholders.
Before I conclude my remarks, I want to raise three items that will change our reporting beginning with the first quarter of our fiscal year 2022.
The first is that, as previously announced, our acquisition of Barletta Boat Company materially increases the scale of our marine platform.
Beginning next quarter, Q1 of fiscal 2022, Winnebago Industries' public reporting will include a new reporting segment, the Marine segment, comprised of Barletta and Chris-Craft.
Comparisons will be made to fiscal 2021, which will only include Chris-Craft results, and we will report the same key data points for the Marine segment as we do with our RV segments, specifically revenues, units, adjusted EBITDA, backlog and field inventories.
Second, going forward, we will be adjusting for 100% of intangible amortization within our adjusted earnings per diluted share metric.
We are taking this step to ensure that our adjusted earnings per share best reflects the core operations of our business.
Third, the tax rate for adjusting items that impact reported earnings per share to arrive at adjusted earnings per share will be 24.2%.
We have historically utilized the federal statutory 21% rate.
This change will be effective going forward, and we will not restate prior years.
To conclude, our Q4 and annual fiscal 2021 results reflect very strong position in the industries we compete in and also reflects the great contributions to the Winnebago Industries portfolio of businesses and the people that comprise these businesses.
We are extremely proud of these results, and we have strong expectations for our future.
That concludes my review of our quarterly and full-year financials with that.
As we reflect on 2021, as Bryan said, we're proud of the financial, strategic and cultural strides we have made together with our talented team.
In addition to delivering strong financial results and market share growth, Winnebago Industries also continued our deep commitment to our corporate responsibility to our communities and shareholders.
As part of our commitment to our Winnebago Industries family and all of our stakeholders, we have made several important strides toward enhancing our ESG efforts across the organization.
Jill is responsible in partnership with the rest of company leadership for advancing DEI programs and initiatives and leading the execution of our overall DEI strategy and road map.
As an example of lifting others up, we launched a year-round Go Together fund to aid employees facing natural and personal disasters.
Following our work mobilizing resources recently to support earthquake relief and recovery in Haiti as an example, which is closely connected with many of our valued Chris-Craft teammates.
At Winnebago Industries, we are committed to the pursuit of outdoor adventures and in doing so, seek to be vigorous protectors of the environment.
It is essential to our mission that our employees and customers are able to experience the beautiful natural spaces our planet has to offer.
In the spirit of reducing our footprint for the next generation of outdoor enthusiasts, we recently strengthened our commitment to sustainability by joining the business ambition for 1.5 degrees Celsius, a United Nations-backed global coalition of business leaders.
As part of this program, we are committing to help limit the impact of climate change by setting a goal to achieve net zero greenhouse gas emissions by 2050.
We also announced additional goals on water, waste and product sustainability.
We look forward to working with the science-based target initiative and external validators to develop an active plan for achieving this net zero goal, which represents an important focus of our corporate responsibility strategy.
As we move into the coming year, you can expect us to continue to prioritize corporate responsibility in our investments and partnerships.
Turning to the future.
The unprecedented interest in our products and bullish industry outlook has provided us with a very bright outlook for fiscal 2022.
In addition to leveraging the strength of our RV and Chris-Craft brands, we are excited to add Barletta, the fastest-growing brand and the fastest-growing segment of the marine category in pontoons.
Barletta's quality brand and high-quality dealer partners adds to our existing portfolio of premium brands, bringing more families access to the long-term value of Winnebago Industries' quality products provide.
Collectively, our brands exemplify quality, service and innovation to our dealers and end consumers.
The golden threads that will drive market share gains for us in the RV and marine industries during fiscal '22 and the years ahead.
Consumer interest in the outdoors remains strong.
Campground reservations are just one metric that remained robust due to more households camping and camping more frequently.
Website traffic is as strong as ever on our websites, and dealers continue to see steady interest in the outdoor lifestyles of RV and boating.
As I mentioned earlier, over 14 million households will have experienced camping for the first time during the 2021 and 2021 period.
And those experiences have resulted in many of those families buying their first RV.
As these new households experience the outdoors and further identify what they want from their experiences, our dealers are already seeing the upgrade cycle take place.
Yes, some new customers from 2020 are trading out of the lifestyle, which is not at all historically unusual.
But our broad dealer conversations across all RV brands indicate dealers are also seen at a higher accelerated pace of users trade up, a trend that favors our premium brands as we tend to outperform the broader market when consumers upgrade.
Long term, we believe the number of new customers who came into the outdoor lifestyle in 2021 and 2020 will bode well for the industry.
And we're particularly excited about the number of kids who experienced RV and boating as those experiences have been proven to translate into a love of the outdoors throughout their future lifetimes.
From a supply perspective, we continue to see material and component cost increases from suppliers, and we continue to manage out of stock or late deliveries on a weekly basis.
There is limited visibility right now to when those trends will dissipate meaningfully.
Despite those challenges, though, we continue to deliver record-level revenues and margin accretion as our teams continue to work very hard in deploying effective sourcing and production strategies.
Given the levels of cost input inflation that we have witnessed over the past year, we are thoughtfully working to mitigate these cost increases with our internal cost savings initiatives.
However, it has also been necessary for us to pass price increases that serve to offset the inflationary pressures we are seeing while also ensuring our products are viewed as having exceptional value in the marketplace.
The level of price increases year-over-year across our portfolio of our respective brands varies from mid-single digits to 20% plus.
There is no one price increase number for our business.
Each of our outdoor brands are blending a price to market and price to cost approach that protects profitable market share growth.
Accordingly, consumers are seeing the price of boats and RVs go up as pricing to the consumer is a combination of OEM pricing and improved dealer margins due to high levels of demand.
Retail pricing is not a result of OEM pricing strategy alone.
Despite higher prices, we are still sustaining a higher double-digit percentage retail pace currently than two years ago.
Before we open the call to questions, I want to touch quickly on expectations for the RV industry for the upcoming year.
We are aligned with RVIA's recent -- recently released RVIA forecast for calendar year 2022, which calls for 600,000 wholesale shipments or a growth of 4% versus the calendar year 2021 forecast of 577,000 units.
On a fiscal year 2022 basis for Winnebago Industries, the RVIA forecast translates to 605,000 wholesale industry shipments or 6% growth compared to the fiscal 2021 number of 569,000 units.
RV retail sales for the industry in our fiscal year 2021 were approximately 585,000 units, a record number and will likely be adjusted upwards as SSI adjustments take place in the coming months.
Looking ahead, we expect that fiscal 2022 RV industry retail sales will be strong.
While they will still likely fall short of the record fiscal 2021 retail results, we fully expect that we will see industry retail sales for our fiscal 2022 period, notch the second highest level of industry retail sales on record in that period.
Given that outlook, it is highly unlikely that industry field RV inventories will be adequately replenished by the end of our fiscal year 2022, suggesting that the restocking phase will continue into our fiscal 2023.
As we approach inventory normalization sometime in the future, we've mentioned in the past that we could see that some dealers, not all, but some work on lower levels of inventory and higher turns.
In line with history as markets normalize, dealers will rationalize the quantity of OEM brands on their lots, and we believe we are competitively advantaged in that scenario with our brands.
We would also expect that dealers will return to more normal or historic levels of profitability, implying pricing to end customers may ease as that occurs and as general inflation dissipates in the future.
 Assistant:

Chosen response:
compname reports q4 earnings of $2.45 per share.
q4 adjusted earnings per share $2.57.
q4 earnings per share $2.45.
compname posts q4 adjusted earnings per share $2.57.


Prompt:
Human: On the call today, we have Brian Casey, our President and Chief Executive Officer; and Terry Forbes, our Chief Financial Officer.
We hope you're keeping safe in what's a difficult circumstances for all of us.
As always, I'll discuss our quarterly earnings and we'll cover the impact of the COVID-19 crisis on our company.
Looking back, the past quarter was one for the record books.
The global COVID-19 pandemic swept across the globe, sending liquidity and returns sharply lower with much of the pain felt in March.
The S&P 500 suffered the worst first quarter performance since 1928 while global equity and fixed income markets were equally battered.
Investors remain focused on when the number of new cases of the virus may peak for clues about the future, though the path to economic recovery is anything but clear.
In our U.S. Value Equity products, the unprecedented sell-off in equities was large in absolute terms, but higher quality companies up and down the market cap spectrum were the best relative performers.
Every single one of our U.S. Value strategies outperformed its passive benchmark, as the benefits of active management were clearly evident.
Our flagship LargeCap Value strategy showed resilience during the sell-off, capturing only about 85% of the downside and posting nearly 400 basis points of outperformance relative to the Russell 1000 Value Index.
LargeCap Value is ahead of the benchmark over multiple time periods, and its ranking among institutional LargeCap Value peers remains strong.
Through the first quarter, our LargeCap Value strategy was in the top-decile for the trailing three-year period and in the top-quartile for the trailing one-, five- and seven-year periods.
Our LargeCap Select strategy also finished the quarter ahead of the Russell 1000 Value benchmark and it now possesses a ranking in the top-decile among institutional peers in the eVestment large-cap value manager universe for the trailing three-year time period.
Our SMidCap strategy also beat the Russell 2500 Value Index by over 400 basis points and now has returns above the benchmark in most trailing year periods.
Rankings among institutional peers were also strong.
The strategy now ranks in the top half ranking for the trailing five and seven years and the top-quartile for the trailing one- and three-year time periods.
Our portfolio managers have worked hard to improve the track record and we are seeing growing interest in the strategy from the institutional channel.
SmallCap was the hardest hit sector of our U.S. Value strategies, but our portfolio managers continue to focus on finding companies with strong fundamental qualities and finished the quarter ahead of the Russell 2000 Value benchmark by approximately 260 basis points.
Our institutional strategy also maintained attractive peer rankings with a top one-third placement for the quarter and trailing one-year time period.
SmallCap's longer-term tracker record places it in the top-decile over the trailing seven-, 10- and since inception time periods.
As we work through the economic situation created by the COVID-19, market volatility will create an attractive investment opportunity for high-conviction, actively managed portfolios centered around quality and value.
While the value style, which emphasizes companies priced at low valuation levels has historically performed best coming out of a recession, today, many companies have higher debt levels than in past cycles and may find themselves with limited options.
Financial distress is particularly acute in the energy sector and we're already seeing several companies filing for bankruptcy protection.
As the market pays more attention at balance sheets, the cream will rise to the top and the debt-laden companies of the past cycle will falter.
Our investment process has always incorporated a fundamental understanding of a candidate's balance sheet and that has historically served our clients well in times of stress.
Many index funds hold more than one-third of their portfolio in companies with zero profits and high debt levels.
Increasing losses and debt will kill a lot of these companies and we believe this to be an opportune time for investors to sell index funds and lean in on active managers, who can thoughtfully navigate through the minefield of winners and losers.
Turning now to our Multi-Asset group, our product line-up in Multi-Asset holds an array of strategies aligned across the risk and return spectrum that are tailored for a client specific risk profile and investment objective.
Income opportunity, our largest strategy in the group, showed attractive characteristics relative to the equity markets.
However, investors rush to assets perceived as safe, pushing treasury returns up and holding back our relative performance.
Asset classes such as preferreds, convertible bonds and mortgage-backed securities experienced large declines during the quarter.
The drop in convertible securities has provided opportunities not seen since the global financial crisis.
And it's created an opportune time for investors to look at strategies such as our Global Convertible and Alternative Income strategies that have historically delivered solid risk-adjusted results.
Our Global Convertible and Alternative Income strategies performed as expected and acted as diversifiers in an asset allocation mix during a very difficult and volatile time.
Correlations across capital markets went to one and volatility shot up to levels last seen during the global financial crisis.
Among institutional peers, our Alternative Income strategy ranked in the Top 20% for the trailing one-year and top-decile in the trailing five-, seven- and 10-year time periods.
In Emerging Markets, the valuation case remains positive, particularly relative to developed markets following the asset class' under-performance of recent years.
In our strategies, performance fell behind primarily due to our underweights in China and Hong Kong.
Globally, Emerging Markets had unprecedented volatility and the reaction to COVID-19 was swift and indiscriminate.
Investors reached for any kind of liquidity and these markets were particularly impacted by this flight to liquidity and safety.
This reaction also caused currencies in several emerging market countries in which we invest, including Brazil, Indonesia, Mexico, and Chile to see larger sell-offs.
We do not believe this volatility is over yet.
The duration and depth of the shockwaves are still to be determined and will vary across geographies.
Outside China, some of the largest emerging markets are in the middle of lockdowns and government economic reactions are evolving.
As in our other strategies, dislocations in these markets have created opportunities to invest in companies with strong management teams, strong cash flow and solid balance sheets.
Our emphasis on quality companies has enabled us to manage through past crises and gives us conviction that our holdings will be well positioned for the long run.
Shifting to Wealth Management, our teams in Dallas and Houston have been actively contacting clients to assist them through the market's uncertainty.
Many of our larger high net worth clients are choosing to add to their accounts during this time to take advantage of the sell-off and position themselves for an eventual recovery.
We have broadened service offerings at Westwood Private Bank for our high net worth clients, improving our ability to retain clients in the Westwood branded ecosystem.
The combination of banking services, integrated with Westwood's existing financial planning, trust and investment services is resonating well with our clients.
As we move forward, Westwood Trust will begin rolling out our new digital portal to allow us to better engage with clients.
The Select Equity strategy, managed out of Westwood Trust Houston office, saw its risk management metrics work as expected this quarter, posting outperformance against its benchmark.
Select Equity and its tax-efficient counterpart is designed to provide a high-quality, low-turnover portfolio with risk controls for downside protection.
At the market's lows this quarter, both held up well due to the emphasis on risk control and investments in companies with high-quality balance sheets.
Both versions of our strategy recently completed their three-year track record and are ahead of their global benchmark.
Additionally, we tax loss harvest throughout the year instead of waiting until year-end, which helps lower our clients' tax bills and has provided over 200 basis points of additional annualized alpha over the last three years.
In our institutional and intermediary sales group, we had inflows of nearly $400 million and $950 million in outflows for total net outflows of $560 million.
Most of the outflows were in our sub-advisor relationships in LargeCap Value, Global Converts, Alternative Income and Emerging Markets.
SmallCap was again our most successful strategy with net inflows in the quarter as existing clients added funds to their accounts and new clients were earned into our mutual fund.
With the strong relative performance in our U.S. strategies, we feel that we're well positioned to capture sales in the current environment.
The investments we've made in distribution infrastructure and alignment of investment teams, vehicles, pricing, product definitions, risk guidelines and messaging have allowed us to create a cohesive message that positions our sales teams for success.
Our intermediary and institutional investment teams continue to work on adding consultant approvals; and overall, our pipeline remains healthy and spread across several different strategies.
New opportunities were added in SmallCap and Income Opportunity during the quarter and a large portion of our pipeline is in the mid- to late-stage and we are hopeful of decisions throughout the year.
We have made it well within the red zone on approvals for our SmallCap fund at several of the largest wirehouses.
Although COVID-19 has created market disruptions and slowed the sales cycle with prospects, our distribution teams continue to execute on our plan to build a broader, more sustainable distribution business and our client services teams continue to provide strong service to our clients.
While we're not able to conduct face-to-face meetings, our teams are functioning quite normally.
We did an online campaign to 25,000 advisors a few weeks ago and we were thrilled to see over 10,000 views.
Conference calls, portfolio updates, RFPs and questionnaires continue as usual.
We are cognizant of the fact that clients and consultants need timely and relevant communication.
They need communication on how the pandemic is affecting portfolios and our portfolio investment decisions and they're interested to know how our business continuity plan is functioning and changing.
Our success working remotely is also a key point of inquiry as clients work to understand how we've protected the integrity of our business in this environment.
Prior to COVID-19, the asset management industry was already experiencing disruption on several fronts, including fee compression, margin erosion and rising data, technology and other costs.
As I've noted in the past, Westwood made major investments in technology to reduce costs, gain operational efficiencies, prepare our business for disruptions and increase our agility.
Given recent events, these have proven to be a wise investment as we have not only increased efficiency, but we're able to move to a fully operational, remote working environment with little to no disruption.
We will continue to evaluate our business and take meaningful steps to reduce our cost structure.
To-date, we've identified over 750,000 of cost reductions that are being implemented or in process over the balance of the year.
We've been researching the outsourcing of trading for the past six months and recently made the decision to move forward with this project.
We will move to an outsourced trading model later this summer and expect to save over $1 million per year beginning in 2021.
We will continue to utilize technology to define our future state to be more efficient wherever possible.
We will close or eliminate commercially unviable funds and put only our best products and people on the field.
Although, financial performance over the last year has been disappointing, we continue to execute on numerous initiatives to strengthen our foundation for the future.
Our partnership with InvestCloud continues to reap operational benefits.
The U.S. Value and Multi-Asset strategies are delivering alpha and we have commitments from private wealth clients for a new credit opportunities fund that we launched a few weeks ago.
We expect industrywide disruption to continue and the steps we've taken to reinvent ourselves have placed us in a position to survive and grow.
Finally, I want to emphasize that the health and safety of our employees and their families is our first priority.
All our employees are well, working remotely and completing their work in an efficient manner.
We understand that we have a business to run and we're working hard to balance the company's needs with the employees' personal needs.
And I'm really proud of everyone at Westwood and how well everyone is working together, yet apart, during this difficult time.
Our customers still have goals and priorities and we will continue to service them to the best of our ability.
Today, we reported total revenues of $16.7 million for the first quarter of 2020 compared to $18.6 million in the fourth quarter of 2019 and $23.9 million in the prior year's first quarter.
The decrease from the fourth quarter and the prior year's first quarter was primarily due to lower average assets under management.
First quarter net income was $1.1 million or $0.13 per share compared to $2.5 million or $0.30 per share in the fourth quarter of 2019.
The decrease primarily related to lower total revenues and unrealized losses on private investments, partially offset by lower operating expenses and income taxes.
Economic earnings, a non-GAAP metric, were $4.2 million or $0.50 per share in the current quarter versus $5.4 million or $0.64 per share in the fourth quarter of 2019.
First quarter net income of $1.1 million or $0.13 per share compared to $0.4 million or $0.05 per share in the prior year's first quarter.
The increase primarily related to lower operating expenses, particularly employee compensation and benefits, foreign currency transaction gains and income taxes, partially offset by lower revenues and unrealized losses on private investments.
Economic earnings for the quarter were $4.2 million or $0.50 per share compared to $4.1 million or $0.49 per share in the first quarter of 2019.
Firmwide assets under management totaled $11.6 billion at quarter end and consisted of institutional assets of $6.3 billion or 55% of the total, wealth management assets of $3.8 billion or 33% of the total and mutual fund assets of $1.5 billion or 12% of the total.
Over the quarter, we experienced market depreciation of $3 billion and net outflows of $0.6 billion.
Our financial position continues to be very solid with cash and short-term investments at quarter end totaling $82.4 million and a debt free balance sheet.
In the first quarter, we repurchased approximately 272,000 shares of our common stock for an aggregate purchase price of $4.9 million.
In April, we repurchased an additional 407,000 shares for an aggregate purchase price of approximately $8.1 million.
This completed the amount authorized under our share repurchase program.
That brings our prepared comments to a close.
 Assistant:

Chosen response:
q1 earnings per share $0.13.
q1 revenue $16.7 million versus $23.9 million.
q1 non-gaap earnings per share $0.50.


Prompt:
Human: This is Brandon Day, Whiting's investor relations Manager.
Also available to answer questions during the Q&A session will be our CFO, Jimmy Henderson; COO, Chip Rimer; and VP Commercial, Jo Ann Stockton.
Those include risks relating to commodity prices, competition, technology, environmental and regulatory compliance, midstream availability and others described in our filings with the Securities and Exchange Commission, which are incorporated by reference.
I believe you have all thoroughly read and enjoyed our 10-Q we filed last evening as well as our news release and reconciliations to non-GAAP measures and you can refer to them for detailed information.
Over the past year, the macroenvironment has changed dramatically.
However, we have remained disciplined in our approach and continue to execute on our plan.
We find ourselves in an enviable financial position, whereby we expect to have no debt and be cash positive before the end of 2021.
We're working through the 2022 capital plans now and I'll give some high-level thoughts after briefly discussing some of the quarterly financial numbers.
Starting with our financial results for the third quarter of 2021, we had net income, on a GAAP basis, of $198 million or $5 per diluted share during the quarter as compared to a loss of $61 million or $1.57 per share for the previous quarter.
Adjusting for certain items, primarily the mark-to-market of hedging instruments and the gain on sale properties in the previously announced divestiture, we had adjusted net income of $142 million or $3.57 per diluted share as compared to $118 million or $3.01 per share for the previous quarter.
Adjusted EBITDAX was $201 million compared to $176 million in the previous quarter, primarily due to better commodity prices.
Our company's production on a barrels of oil equivalent remained relatively flat quarter over quarter, averaging 92,100 boe compared to second quarter production of 92,600 boe.
Oil production for the third quarter averaged 51,800 barrels of oil, which was down from the second quarter of 53.4 million barrels of oil -- 53,400 barrels of oil.
Most of the wells turned in line during the quarter were in our Sanish field, which typically come on with lower initial production rates, but experienced a shallow overall decline, particularly in the first year.
Additionally, some of our third-party midstream providers have continued to increase ethane recoveries as illustrated by our NGL yield for the quarter.
Oil differentials have continued to narrow given an overall basin production level that remains significantly behind total takeaway capacity of which increased during the quarter as expansion capacity was placed into service.
On an activity basis, our oil differential was similar to what we realized in the second quarter.
However, revisions primarily from third-party providers recognized in the third quarter resulted in a wider differential reflected in our financials.
We expect our full year oil differentials to land within the low end of our stated guidance.
Additionally, with the majority of our G&P agreements structured on a fixed fee, we've seen a more pronounced benefit to our net realized price from the increase in both residue gas and purity product benchmark prices.
The company invested capex of $67 million during the third quarter to bring 17 gross 9.1 net wells on to production and we drilled 10 gross 5.6 net operated wells.
We ended the quarter with 25 gross 14.3 net drilled uncompleted wells.
The company currently has a rig running in the Sanish Field and a second rig in our Cassandra area, that commenced drilling operations at the end of September.
We have just released a completion crew this week and we expect them to return in mid-December.
Lease operating expenses were $57 million or $6.68 per boe for the third quarter of 2021.
LOE benefited from less operating expense workovers during the quarter.
General and administrative expenses of $12 million or $1.41 per boe was similar quarter over quarter.
In September, we completed the previously announced acquisition of assets in North Dakota and divested our Redtail assets located in Colorado.
The assets in the Williston Basin overlap our Sanish field and expand our inventory by over 60 gross locations.
The acquisition also included five drilled uncompleted wells.
The acquired assets will allow us to maximize lateral length across several DSUs, allow us to develop stranded resources and eliminate costs for frac protect as acreage is developed.
We plan to issue our 2020 sustainability report later this quarter.
I'm pleased with the progress the company has made and how we continue to improve on the goals we've set for the safety of our employees, the environmental controls for our operations and the ongoing governance improvements.
Gas capture remains to be an area of focus for the company and we continue to make improvements in that area.
I would now like to spend a little time thinking about 2022.
We expect the company's reinvestment rate in 2022 to be similar to what we saw here in 2021 where we will have invested roughly 35% of our EBITDA.
Let me highlight a few items that we think will impact our 2022 outlook.
First, we are budgeting for some additional activity in '22, both from an operating standpoint, as shown from our second drilling rig that we brought in during September, but also non-operated properties and we've seen our peers increase activity during the year.
2021 has been somewhat of an anomaly for us and that the company shut down operations during its restructuring in '20 and therefore, '21 has been a rebuilding year.
Our corporate decline rate increased during '21 as we brought on new wells and therefore, we will need some additional activity level to replace that production.
Second, we do believe we will be dealing with some inflationary costs and we are estimating this to be in a range of high single-digit to low double-digit percentages.
To address price inflation, the team has been aggressively securing contracts and lining up equipment through the first half of '22.
We are hoping to see some relief with supply chain issues and perhaps some rollover with steel prices in the back half of '22.
And finally, we have some infrastructure to build out next year, particularly in the Sanish field for new well connections and to alleviate flaring and/or curtailment of production.
Some of these costs were deferred in '21 due to the lower commodity price environment at the beginning of the year.
Most importantly, the company is in a desirable financial position as we exit 2021 and move into 2022.
Many of the derivatives that were linked to much lower prices rolled off during 2021 and we now have a much more attractive hedge portfolio and commodity prices continue to benefit the bottom line, increasing our free cash flow.
With the free cash flow we expect to generate from operations, we will continue to pursue acquisitions which enhance Whiting's competitive position in the Williston Basin including bolt-on opportunities that create synergies with Whiting's existing asset base.
While we continue to believe that we will have attractive opportunities to create value through investments in our operations, Management and the board also understands important to returning capital to shareholders.
Now that we have the company in a solid financial position, we expect to initiate a return of capital to shareholders in some form commencing in the first quarter of 2022 at a level that is competitive with our peers.
 Assistant:

Chosen response:
q3 adjusted non-gaap earnings per share $3.57.
expects to continue to fund its operations fully within operating cash flow.
forecasts to be in a positive net cash position with no outstanding balance on its credit facility by end of 2021.


Prompt:
Human: On our call today, we have Andy Rose, Worthington's President and Chief Executive Officer and Joe Hayek, Worthington's Chief Financial Officer.
Today's call is being recorded and a replay will be made available later on our worthingtonindustries.com website.
Today we'll be sharing our results consistent with our new reporting segments for the first time.
We believe the new structure will provide greater insights into the underlying performance of our businesses.
We had a strong start to our fiscal year, reporting earnings of $2.55 a share in Q1 versus $11.22 in the prior-year quarter.
Excluding restructuring and one-time items, we generated a record $2.46 per share in earnings in Q1 compared to $0.64 in the prior-year quarter.
During the quarter, we recognized a net after-tax restructuring gain of $5 million or $0.09 a share primarily related to the sale of a shuttered facility owned by our WSP joint venture.
That compares to restructuring and impairment charges of $0.16 a share a year ago.
In addition, the prior-year results included a net benefit of $10.74 per share related to our investment in Nikola Corporation.
Consolidated net sales in the quarter of $1.1 billion were up significantly compared to $703 million in Q1 of last year.
The improvement was primarily due to higher steel prices combined with increased volumes across most of our segments.
Gross profit for the quarter increased to $219 million from $113 million a year ago and our gross margin increased to 19.7% from 16.1%.
Adjusted EBITDA in Q1 was a record $196 million, up from $75 million in Q1 of last year and our trailing 12-month adjusted EBITDA is now $604 million.
In Steel Processing net sales of $823 million nearly doubled from $431 million in Q1 of last year due to higher average selling prices and increased volumes.
Total shipped tons were up 14% from last year's first quarter when demand was just beginning to recover from COVID-related shutdowns, particularly at our automotive customers.
Direct tons in Q1 were 49% of mix, which was consistent with the prior-year quarter.
We continue to see solid demand across nearly all of our major end markets, including automotive, construction, heavy truck and agriculture.
Despite the solid demand and year-over-year growth, automotive shipments could have been better, if not for the continuing semiconductor-related slowdowns.
Everything we see suggest that while consumer and fleet demand for new cars remain strong, chip shortages will persist for the next several quarters and our automotive demand will be subject to some uncertainty as a result.
The demand is clearly there.
It would likely just take some time for the semiconductor shortage to resolve itself.
Our teams continue to do a terrific job navigating unprecedented market conditions while remaining laser-focused on the needs of our customers.
In the current quarter, steel generated adjusted EBIT of $108 million and adjusted EBIT margin of 13% compared to $14 million and 3% in Q1 of last year.
The large year-over-year increase was primarily driven by increased demand, higher spreads and arbitrage gains.
In the quarter, we had pre-tax inventory holding gains estimated to be $47 million or $0.68 per share compared to holding losses of $7 million or $0.09 a share in Q1 of last year.
Based on current steel prices, we expect inventory holding gains again in Q2, but we will also continue to see the impact of the widening scrap gap.
In Consumer Products, net sales in Q1 were $148 million, up 10.6% from the prior-year quarter.
Legacy consumer products revenues were up slightly and the inclusion of sales from GTI, which was acquired in January, drove the balance of the growth.
EBIT for the consumer business was $21 million and EBIT margin was 14%, down from $24 million and 18% in the prior-year quarter.
The decrease in EBIT was due to higher labor and input costs.
Our consumer business has some longer fixed-price contracts with customers, which can create a short-term drag on margins when input rises -- when input prices rise as rapidly as they have.
These dynamics are typically short term and we do expect margins to improve moving forward.
Building Products generated net sales of $115 million in Q1, which was up 30% from $88 million in the prior-year quarter.
Increase was due primarily to higher volumes as the prior-year quarter was impacted by COVID-related disruptions.
Building Products EBIT was $49 million and EBIT margin was 42%, up significantly from $23.4 million and 27% in Q1 of last year.
We saw significant growth year-over-year in our wholly owned Building Products businesses but the majority of the upside was driven by strong results at WAVE and ClarkDietrich that contributed $26 million and $17 million respectively in equity earnings.
WAVE and ClarkDietrich both had better demand environments than in Q1 of last year and all of our teams in Building Products are doing an excellent job managing dynamic supply chains and continuing to execute in challenging conditions.
In Sustainable Energy Solutions net sales in Q1 were $25 million, down from $28 million in the prior-year quarter.
Largest end market for this business is transportation and the semiconductor chip shortage created a headwind for them with respect to demand.
In addition, the economy in Europe is recovering, but very slowly.
The business reported a negative EBIT of $3 million in the current period as volumes were too low to absorb fixed costs.
We remain very excited about this business and its prospects over the long term as its innovative products and solutions are poised to grow quickly serving hydrogen ecosystem and adjacent sustainable energies like compressed natural gas.
With respect to cash flows in our balance sheet, operations used cash of $50 million in the quarter, which was driven by $149 million increase in working capital, primarily associated with higher steel prices along with annual accrued compensation being paid out during the quarter.
Absent further increases in steel prices, we would expect the significant working capital increases to subside in the next quarter or two.
During the quarter, we received $20 million in dividends from our unconsolidated JVs, received $27 million in proceeds from asset sales, completed one acquisition for $105 million, invested $24 million in capital projects, paid $15 million in dividends and spent $61 million to repurchase 1 million shares of our common stock.
Following the Q1 purchases, we have 8.3 million shares remaining under our share repurchase authorization.
Looking at our balance sheet and our liquidity position.
Funded debt at quarter end of $706 million was relatively flat sequentially and interest expense of $8 million was in line with the prior-year quarter.
Ended Q1 with $399 million in cash and we continue to take a balanced approach to capital allocation focused on growth and on returning capital to shareholders.
Earlier today, the Board declared a $0.28 per share dividend for the quarter, which is payable in December 2021.
It's great to start fiscal '22 with another record performance.
However, the operating environment remains quite challenging with the continued rise in steel prices, supply chain issues in steel and other components and the continuing labor shortage.
Our people continue to showcase their commitment by going the extra mile to ensure that we are working safe and doing their best to meet our customers' needs.
Demand levels are good across almost all of our end markets and backlogs remain at elevated levels.
We continue to raise prices in many of our product lines to offset rising input costs, particularly steel.
Higher working capital needs had a meaningful impact on free cash flow this quarter, but this will reverse if steel prices begin to decline as we expect in coming quarters.
This is the first quarter reporting our three new operating segments, Consumer Products, Building Products, and Sustainable Energy Solutions.
Hopefully you will find, as we believe, that each of these segments is an attractive business with unique advantages and compelling strategies to grow for years to come.
We will continue to leverage our transformation playbook, new product development and innovation and M&A to drive above-market growth and higher returns on capital.
While our innovation and M&A growth initiatives continue across the portfolio, the M&A environment is proving challenging with elevated purchase multiples and difficult earnings analysis due to the unpredictability of the COVID environment.
To the extent we do find compelling targets, our balance sheet remains strong with significant cash and borrowing capacity.
Finally, we just published our second corporate citizenship and sustainability report.
Since our inception, we have worked hard to be a good corporate citizen for all of our constituencies and in our communities, as well as to minimize our environmental footprint.
While we are a relatively clean manufacturing operation overall, in 2012 we started our successful GreenStar initiative that aims to recognize our manufacturing facilities for environmental conservation and stewardship.
In fiscal '21, 64% of our facilities achieved a four or five star performance rating.
We are working toward an even more robust approach to reducing our environmental footprint and expect to have more details in the future regarding our goals.
It is often difficult to follow a record year but we were off to a fast start and our teams remain focused on continuing to deliver for our customers and creating value for our shareholders.
We'll now take any questions.
 Assistant:

Chosen response:
q1 sales rose 58 percent to $1.1 billion.
worthington industries - qtrly earnings per share $2.55.
qtrly adjusted earnings per share $2.46.


Prompt:
Human: Along with me co-hosting, we have our Executive Chairman, Bill Berkeley; as well as Rich Baio, Group CFO.
We're going to follow a similar agenda to what we've done in the past, so we're in a moment or two going to hand it over to Rich to walk us through the quarter and focus our attention on a few highlights.
And once he is through, I'm going to offer a few soundbites, and then we will be opening it up for Q&A.
Rich, so if you would please.
The positive momentum continues to build in our business as evident by our growth in premium and expansion in underwriting profits as rate improvements and additional premium associated with increase in exposure through the income statement.
We reported a consecutive quarterly record underwriting profit in the second quarter of 2021 along with strong net investment income, resulting in an annualized return on beginning of year equity of 15%.
The company reported net income of $237 million, or $1.27 per share.
The components include operating income of $219 million, or $1.17 per share and after-tax net investment gains of $18 million or $0.10 per share.
Drilling down into our quarterly underwriting performance, you will note that gross premiums written grew by $529 million, or 24.8%, almost $2.7 billion.
Net premiums written grew $472 million, or 27.2% to more than $2.2 billion, recognizing an increase in both segments.
Our overall cession rate decreased in the quarter due to changes in certain underlying outward reinsurance arrangements, lower reinstatement premium and business mix.
Moving into segment production of net premiums written, the insurance segment grew 29.2% to almost $2 billion, with an increase in all lines of business.
Professional liability led this growth with 64.8%, followed by commercial auto with 31%, other liability of 28.7%, short tail lines of 21.2% and workers' compensation of 15.6%.
The reinsurance and Monoline Excess segment grew about 11% to $218 million, with an increase in Monoline Excess of 20.9% and casualty reinsurance of 17.5%, partially offset by a decrease in property reinsurance of 13.8%.
Underwriting income benefited from the compounding rate improvement above loss cost trends along with growth in exposure and lower claims frequency in certain lines of business.
We did experience an above average level of non-weather related property losses in the quarter that partially offset these benefits.
In addition, our current accident year, catastrophe losses decreased significantly quarter-over-quarter from $146 million, or 8.7 loss ratio points in the prior year to $44 million or 2.2 loss ratio points in the current quarter.
As a result, quarterly underwriting income increased almost 800% to a record $202 million.
The reported loss ratio was 61% in the current quarter, compared with 67.7% in 2020.
Prior-year loss reserves developed favorably by about $0.5 million in the current quarter.
Accordingly, our current accident year loss ratio, excluding catastrophes was 58.8% compared with 59.2% for the prior year's quarter.
The continued growth in net premiums earned has benefited the expense ratio, which was 28.7% in the current quarter compared with 31% a year ago.
Net premiums earned outpaced underwriting expenses by a margin of more than 8.5%.
We also continue to benefit from reduced cost associated with travel and entertainment, but do anticipate some of this will be given back as the economy more fully reopens.
Wrapping up the full picture.
On the underwriting side, our current accident year combined ratio, excluding catastrophes, was 87.5% for the quarter compared with 90.2% for the prior year quarter.
On the investment front, net investment income increased 96.9% to $168 million, driven by strong results in investment funds.
The fixed maturity portfolio reflected a decline quarter-over-quarter due to the lower interest rate environment.
Although the quarterly gap is closing.
We also continue to maintain an above average level of cash and cash equivalents as of June 30, 2021, which has been decreasing over the past few quarters where we see opportunities to invest at attractive risk-adjusted returns.
Our duration remains flat at 2.4 years, while maintaining a high credit quality of AA minus.
Pre-tax net investment gains in the quarter of $24 million is primarily comprised of realized gains on investments of $39 million, a reduction in unrealized gains on equity securities of $18 million, and a decrease in the allowance for expected credit losses of $3 million.
The realized gain was largely driven by the sale of two real estate properties, which also resulted in the reduction in our debt that was supporting one of the real estate properties of approximately $102 million.
Corporate expenses increased approximately $13 million due to debt extinguishment costs of $8 million relating to the redemption of hybrid securities on June 1st, and higher incentive compensation costs as well.
In addition, we announced the formation of a new operating unit in the second quarter, which you may recall that such expenses are reflected in corporate until the operation begins writing business and is then moved into the underwriting expense.
Stockholders' equity increased by $164 million to approximately $6.6 billion in the quarter after regular and special dividends of $112 million.
Book value per share increased 2.5% in the quarter and book value per share before dividends increased 4.3%.
And finally, cash flow from operations continue to be strong with approximately $700 million on a year-to-date basis.
And with that, I'll pass it back to Rob.
So let me just offer a couple of quick observations and then we'll get to your Q&A and take the dialog anywhere participants would like to.
I think by virtually any measure, it was a great quarter for the company.
And from my perspective, it's been in the making for some period of time.
In addition to that, I think there is a growing amount of evidence that would support the idea that there is more to come and it's just again quite encouraging.
And as far as drilling down into the market a little bit more, when we look at the major product lines with the exception of workers' compensation, all of them continue to get rate increases that outpace our view of loss trend, and that is even as we have been factoring in a bit more for financial inflation.
Regarding workers' compensation, there are again growing but early signs that the level of erosion there is slowing.
That having been said, we also are paying close attention to wage inflation and what that may mean for the comp economic model.
Rich walked you through the top line, obviously, the 27% growth plus is pretty healthy.
A couple of observations there, though, one, please keep in mind, if you go back and you look at 2020, we were not an organization, where in Q2 of '20, our top line fell off a cliff.
We will give or take flat.
So this was not just a bounce back to a normal run rate.
This was a meaningful growth.
In addition to that Richard commented around the Excess and reinsurance segment, you would have noted possibly in the release and also again in Rich's comments, that it was the reinsurance segment where particularly our domestic treaty business where we backed away from a couple of deals where we just felt as though the rates were good, they weren't good enough for us to participate.
If you unpack the 27% growth overall, give or take about a third of it is coming from rate, the balance of it is coming from exposure as you would have gathered from the rate increase coming in ex-comp at just shy of 10%.
I think it's important that people not read too deeply into as I suspect some might as to the rate increase.
And what does this mean relative to what the rate increase was last quarter or the same time in the prior year?
The simple fact is that when we think about our economic model, it is multi-dimensional.
We look at the margins that are available in the business and as we become pleased with available margins, we start to think about possibly how we reprioritize exposure growth versus pushing further on rate.
And again, as we have seen the margins in a meaningful part of our portfolio become particularly attractive.
We are still pushing for rate.
We are still getting rate by and large ex-comp that outpaces trend, but again growing exposure becomes even more of an opportunity that we are capitalizing on.
Couple of other comments just as it relates to the top line, I think it's a helpful data point, particularly our specialty businesses are getting flooded with submissions.
It's a clump and in particular, it's our E&S businesses.
Two things, and opening economy which clearly we are benefiting from across the board.
And of course, a standard market that continues to revisit its appetite.
As far as the opening economy just bouncing back to workers' compensation.
As we have expressed in the past, we are concerned with that product line and where rates have gone.
But you would have seen that product line growing in our release [Phonetic], and that is really driven by payroll growth.
And again, I think it just speaks to the health and well-being of the US economy, as it continues to recover.
Maybe pivoting over to the combined ratio, Rich got through a lot of this.
Just a couple of observations from my perspective.
On the expense front, coming in at a 28.7% from our perspective is a pretty good place with opportunity to improve from here.
As Rich suggested, as our travel and entertainment picks back up.
Certainly some if not all of the approximately 50 basis point benefit that we've been getting as far as expenses due to COVID, that is likely to erode and disappear.
That having been said, if you look at the power of the earned premium coming through and how it is likely to build from here, and you can see that given the written leads the earned, there is likely more benefit to be had over time.
Loss ratio pretty good at a 61%.
The ex-cat accident year, as Rich mentioned, was a 58.8% [Phonetic].
He talked about non-cat property loss activity of that added relative to where it was running last year, about a little over two points.
So this was, quite frankly, we had a rash of fires.
Some would suggest it's bad luck, we tend to believe that oftentimes you make your own luck.
So we're digging into that to make sure that this is not a new normal, and it was more of a one-time unfortunate series of events.
Another data point on the loss ratio front, the paid loss ratio came in at a very attractive 44.3 [Phonetic].
A couple of comments on the investment portfolio.
Again, Rich, commented on the duration of the 2.4 years, the book yield is running coincidentally at about 2.4 as well.
We continue to be very focused on inflation.
From our perspective, inflation is very much here.
There are some people that talked about it being this transient, that may be true.
I'm not quite sure when people talk about transient will -- well, how long is transient, regardless the cost of things are up today.
But even if you saw inflation return to 2.5% or 3% level, we continue to believe that a 10-year at 130 [Phonetic] or less doesn't make a whole lot of sense for the long run.
One other comment just related to the balance sheet and the capital structure and we can get into this during the Q&A, if people are interested.
We've done a fair amount of work and restructuring certain things per one of Rich's comments around the prepayment or the calling of certain securities and the cost associated with that.
But as you think about, again, the earnings power of the business later this year, but even more so for '22 and '23, there is a very meaningful benefit that will be coming through, again, savings around capital costs.
So long story short, very good quarter.
And I think what's more encouraging than even just the results is, if you look at how the table is set for what is likely not just to be the next couple of quarters, but quite frankly the next couple of years.
This is an organization that is going to benefit greatly from the broader macro conditions.
 Assistant:

Chosen response:
compname reports qtrly earnings per share $1.27.
qtrly earnings per share $1.27.


Prompt:
Human: We refer to certain of these risks in our SEC filings.
Participating in today's call with me will be Paul McDermott, President and Chief Executive Officer; Steve Riffee, Executive Vice President and Chief Financial Officer; Drew Hammond, Vice President, Chief Accounting Officer and Treasurer; and Grant Montgomery, Vice President and Head of Research.
I'd like to start off with an update on the progress of our Southeastern market expansion, following our commercial asset sales.
I will also discuss the efforts that are underway to transform our operating model and current market conditions in the DC Metro and Atlanta, where we are actively growing our footprint.
Steve will then update you on our portfolio performance and trends and we'll discuss our third quarter results and outlook as we execute our transformation.
Starting with our geographic expansion.
We are pleased to report that in just over four months since our transformation announcement, we have already deployed or tied up over 55% of our $450 million target.
We have deployed or under binding contract to deploy approximately $154 million and we have been awarded another $97 million that is moving toward a binding contract.
We also have other opportunities that we are pursuing, all of which in line with our strategies and offer very strong NOI growth prospects.
We have a very active pipeline and remain confident that we will meet our target over the balance of this year and perhaps into early next year.
During the quarter, we closed the sales of our office and retail portfolios as planned.
We closed our first Southeastern multifamily acquisition, The Oxford, on August 10th for $48 million.
We have three additional acquisitions in process, including two communities that are under binding contracts of $106 million and the $97 million property that is moving toward the binding contract.
We expect all three to close during the fourth quarter.
We have and will remain disciplined and we are only underwriting assets that fit our strategy and provide stronger NOI growth.
Three of our initial properties aligned with our B Class portfolio strategy, with price points that target the deepest demand segments in their respective sub-markets and the other property aligns with our Class B value-add strategy and offers a near-term value-add renovation pipeline.
Our first acquisition, The Oxford, is a 240 unit garden-style community in the city of Conyers, Georgia.
The area is primarily comprised of family households who want the benefits of living in the suburbs, combined with connectivity with downtown, midtown and the South Atlanta business districts, along with the proximity to local employment nodes, including the Interstate 20 corridor, which is experiencing significant investment as employers expand into the area.
The Oxford was built in 1999 and over the past five years same-store rent growth for the submarkets 1999 product has outperformed the average for all 90s vintage apartments in the Atlanta market and significantly outperformed the overall Atlanta market rent growth for all apartments.
Over the past three years, the submarket has widened its outperformance versus the region's 90s vintage rent growth by over 3%.
The Oxford has performed very well during the first two-and-a- half months we've operated it, with very strong new lease rate growth of 25% during September and increasing to 26% in October.
Occupancy is tracking above our expectations, driven by very high retention rates and new leasing activity.
We acquired The Oxford at a cap rate of 4.7% and we expect an NOI growth rate that will be very high for the next three years.
Two of the properties that we currently expect to close in the fourth quarter are located in Henry County in the southern suburbs of Atlanta, where rent growth has outperformed the overall Atlanta market on a trailing five and three-year basis and is projected to continue to outperform over the next several years.
These properties are a strategic fit, aligning with our Class B portfolio strategy.
We will provide more details after we close.
In terms of our plans for our remaining capital and growth beyond, we are underwriting opportunities to acquire Southeastern communities, with low double-digit NOI growth prospects, which is stronger than our initial expectations when we decided to enter these markets.
While the Southeastern markets are competitive, we have several advantages that appeal to sellers and are helping us to succeed.
We have a 55-year track record of owning and operating multifamily properties and a strong track record of execution, which allows for a smooth and efficient due diligence process.
We have well-established relationships in the multifamily industry that transcend into our new Southeastern growth markets that we are profiting from.
Additionally, we are an all cash buyer with no financing contingencies, which sets us apart and adds a greater level of certainty of execution to the seller.
While cap rates have tightened further since June, we are keying in on opportunities that will yield outsized rent and NOI growth and align with our strategic goals.
Investment discipline is critical for us and we spend a lot of time and effort, researching and selecting our target markets and strategies for each market.
Our research tells us that the industrial mix of an economy can determine what rent growth will look like over the long-term.
Our current target markets of Atlanta, Raleigh-Durham and Charlotte have outsized exposure to industry that drive productivity growth, which creates a virtual feedback loop of job and income growth in migration and increasing education levels.
Year-over-year effect of rents for Atlanta, Raleigh/Durham and Charlotte grew by 19.8%, 19% and 17.6% respectively in September as reported by RealPage.
New lease trade outs were even stronger, averaging 22.7% across the three markets and a 580 basis point inflection between June and September.
Annual demand also serves across these markets as in migration and household formation drove record-setting absorption.
Reported first quarter annual demand had already exceeded the five-year average in each target market, yet it climbed over 23% higher from the first and the third quarters.
Raleigh/Durham posted a second quarter annual demand at 142% of its five-year average, while Charlotte and Atlanta second quarter annual demand topped 162% and 161% of their five-year averages respectively.
In order to maintain a disciplined approach and invest in these economies without competing with new supply, we're evaluating acquisition opportunities at the submarket level and targeting vintages with price points located at the deepest section of the demand curve.
We are targeting renters that are benefiting from economic and wage growth, but remain underserved by new supply, which provides us the opportunity to create a quality living experience, while also growing rents without competing with new supply.
We remain in active negotiations, pursuing additional opportunities and would like to tie up another $200 million in multifamily assets that we expect can now be completed by early 2022.
Again, we remain disciplined and are committed to allocating capital according to our strategy.
We have passed on opportunities that did not meet our criteria or would not generate accretive growth.
While we believe diversifying and expanding our footprint makes sense, we will also continue to explore acquisition opportunities in Northern Virginia, should they create greater value.
The Washington apartment market is exhibiting some of the same positive trends that we are seeing in our Southeastern target markets.
Year-over-year effective rents climbed 640 basis points from June to September.
Suburban Virginia's performance followed a similar pattern, but with even stronger growth with year-over-year effective rent growth accelerating to 9.7% in September.
Our DC portfolio is positioned well with 80% of our portfolio in Northern Virginia where the rapidly expanding consumer technology sector continues to drive job and income growth.
Furthermore, our value-oriented price points offer favorable supply and demand fundamentals over the long-term as the regional housing shortage worsens and cost of ownership and new apartment supply remains unaffordable for mid-market renters.
As many of you know we have been planning this transformation for several years and our transformation plan includes bringing property level management in-house while building a new operating platform for the future.
Over the past year, we have worked with a consultant to map out a plan to optimize our operational design as we scale our multifamily portfolio.
We are now in phase one of this project, which includes three phases in total.
We're making steady progress against the road map that we laid out and we anticipate that by the time of our year-end call, we will have selected all technology, establish the elements required to support our operations including a comprehensive human capital program and established a new brand that best defines our approach for investors, residents and employees.
At that time, we expect to be able to give guidance on G&A and transformation costs as we will be actively building out the platform.
We hope to execute phase two, which includes core platform implementation in 2022 and phase three, which incorporates the onboarding of our property management functions to our internal systems starting in late 2022 into mid-2023.
While we control our revenue strategy and do all capital planning internally, day-to-day marketing, maintenance and property management staffing have been outsourced.
Following the complete internalization of property management and enhancements to our operational platform, we expect to realize significant operational benefits from streamlining our business processes through the use of technology to establishing a closer connection with our residents to operational design efficiencies as we scale the business and optimize G&A expenses.
At the property level, we believe that there are operating efficiencies ahead of us from internalizing property management because we are designing an operating platform aligned with our strategies for resident experience and employee satisfaction and growth.
By utilizing corporate functions in a centralized model, we can be highly scalable, which will allow us to grow NOI at a much higher rate than G&A expenses.
By designing and implementing our operating platform from scratch, we are not limited by existing infrastructure and will offer value and opportunity to all our stakeholders.
The lease rate momentum that we experienced during the summer months has continued into the fall and we are positioned well heading into the winter months with low double-digit lease rate growth on our most recent new lease executions.
New lease rate growth was 9% for leases signed in September and 11% for leases signed thus far in October on an effective basis.
On the renewal side there has been very strong demand and the renewal lease rate growth was over 6% for September renewals and over 7% for October renewals on an effective basis.
Concessions declined dramatically from June through September and are nearing pre-COVID levels.
Total concessions for September move-ins declined over 95% compared to June move-ins driven by both a decline in the number of new leases with concessions and a decline in the average concession amount per lease.
The percentage of new leases with concessions declined from an average level of 60% during the first half of the year to only 9% of new leases for September move-ins.
The average concession value for new leases where concessions were granted, declined by 60% from $1300 for June move-ins to approximately $560 per home for September move-ins.
Occupancy remains strong, with a forward trend that will allow us to continue to increase rents.
Same-store average occupancy grew 40 basis points in October, compared to the third quarter.
Our suburban lease rates continue to outperform our urban lease rates, although the gap has narrowed due to the strong rebound we're experiencing in our urban portfolio.
Blended lease rate growth was 7% for leases signed in September and over 8% for leases signed in October on an effective basis which represents a significant increase in the third quarter average.
For move-ins that took place during the third quarter, blended lease rate growth was 3.5% on average on an effective basis, representing a 620 basis point increase from the second quarter.
Lease rate growth for September and October move-ins and lease executions with November and December move-in dates, indicates steady and consistent improvement through year-end.
We expect strong lease rate growth through the winter months and into the spring and summer leasing seasons in 2022.
Rents have shown a swift recovery.
The inflection as indicated by the rapid weekly improvement in lease rate growth, began toward the end of June and rental rates improved rapidly through the summer.
In August, we started signing new leases that were above pre-COVID levels for the majority of our portfolio.
Specifically, the average effective rent for new leases in the third quarter was above the same month in 2019 for 17 of our 21 same-store properties.
In fact, new leases for our suburban portfolio were 10% above the 2019 level on average in the third quarter, highlighting how well our suburban properties performed during the pandemic.
We expect to see steady growth in average portfoliowide rent levels, as the market recovery works its way in our rent roll, over the next year.
Our ability to capture this embedded growth will be slower during the winter months, as less than 25% of our leases expire between November and December.
During this time, we will be focused on balancing rent growth with retention as maintaining a balance and fundamentals heading into 2022 will set us up, for anticipated exceptionally strong spring and summer leasing season.
As we enter the spring and summer, we will be positioned to capture both the impact of the recovery and market rent growth beyond the COVID-related recovery.
Trove lease-up momentum continues and it is now over 85% occupied.
We expect Trove to be a key growth driver adding approximately $7 million of NOI in 2022 and $7.6 million of NOI in 2023.
We also continued to monitor demand levels at Riverside, where we have a shovel-ready opportunity to add 767 units which we put on hold when COVID hit.
While lease executions of Riverside are on a positive trend, we're currently monitoring projected lease rate growth, to support this development.
Our renovation programs are actively ramping up, after they were temporarily paused during the pandemic.
We have a pipeline of approximately 2,700 units in our same-store portfolio.
As expected, the pace of renovations picked up through the summer months, while unit turnover is seasonally high.
In many cases we preserve the renovation opportunity for the next turn, as we're achieving strong effective rent growth without currently having to make a capital investment.
Year-to-date we have fully renovated over 130 units and have invested capital in upgrading 110 additional units.
We are securing low to mid double-digit cash on cash returns year-to-date.
We expect to spend $3 million in our renovation program this year ramping up to approximately $7.50 million to $8 million next year for the current same-store portfolio.
In the spirit of our transformation into a multifamily REIT, we have made changes to our earnings materials and non-GAAP financial metrics to be more in line with and comparable to other multifamily REITs.
First, we provided a more detailed expense breakdown of both controllable and non-controllable expenses including property operating, taxes and insurance and property management.
Second, we've included detail of our same-store operating results by geographic region as we continue executing our strategic plan to diversify in the multiple geographic regions.
Third, we modified our calculation of NOI to exclude property management expense which is more consistent, with the multifamily industry standard and better presents the impact of our trends in occupancy rates, rental rates and operating costs and our operating performance.
We retrospectively adjusted our previously reported multifamily NOI for comparability.
And overall this adjustment has increased our NOI margin by 300 to 400 basis points.
Fourth, we updated our definition of NOI for residential communities to exclude NOI from ground level retail tenants.
Fifth we changed the name of the non-GAAP measure funds available for distribution or FAD to AFFO because we believe that AFFO is the more common term in the multifamily sector.
We do not make any change to the calculation and there is no difference in the definition of AFFO and FAD as previously labeled.
Sixth, we expanded our disclosure of same-store metrics adding operating margin and effective lease rate growth.
All of these adjustments are described in detail on page 14 of the third quarter earnings package.
Now turning to financial performance.
Net income for the third quarter of 2021 was approximately $31 million or $0.37 per diluted share compared to a net loss of $1 million or $0.01 per diluted share in the prior year.
Core FFO was $0.20 per diluted share reflecting a year-over-year decline of $0.16 due to the impact of our commercial asset sales.
Multifamily same-store NOI declined 40 basis points compared to the prior year driven by the impact of leases signed during the pandemic.
As expected, the rapid rebound in core multifamily operating trends that began toward the end of the second quarter is and will continue to have a more gradual impact on our financial performance.
While new lease executions began to improve rapidly starting in June and into July those movements started to impact our results in late August and we expect the inflection in lease rates to have a greater impact on our fourth quarter results.
Furthermore, the impact of the concession amortization peaked during the third quarter driven by the timing of the peak in concessions which occurred toward the very end of 2020 and into the first quarter of 2021.
The impact of concessions and amortization or in monthly NOI peaked in August and began to decline on a monthly basis in September.
Excluding the impact of amortization related to concessions granted in prior periods same-store multifamily NOI increased 2% on a year-over-year basis during the third quarter.
Our resident credit continues to be excellent.
For the small amount, of delinquent rents that we have local rent assistance programs have helped us on the margin today.
We collected 99% of multifamily rents during the third quarter and received $400,000 of local government rent assistance from residents.
Year-to-date residents have received over $1.4 million of rental assistance.
Other NOI which represents Watergate 600 declined 4.9% in the third quarter compared to the prior year primarily due to higher taxes and payroll expenses and a favorable bad debt recovery in the prior year period.
Leasing activity at Watergate 600 has been steady, despite the challenging environment of the DC office market.
We signed an 8200 square foot new lease with a credit tenant during the quarter and two renewals and one expansion post quarter end.
Our percentage leased has increased to 92% and we have activity to allow us to create further value in the asset.
This one remaining office asset is an iconic building with Riverfront and monument views, high-quality institutional tenants and a weighted average lease term of eight years and we continue to see opportunity to create value by owning and leasing Watergate 600.
Now touching on our outlook for the balance of the year.
We are reinstating full year 2021 guidance with a core FFO range of $1.05 per share to $1.08 per share.
We estimate that our same-store multifamily portfolio will contribute between 90 and $90.5 million of NOI for the year.
At the midpoint this implies an approximate 4.5% multifamily growth rate for the fourth quarter compared to the prior year period.
We expect healthy same-store NOI growth in the fourth quarter and further growth in 2022.
Trove and The Oxford are expected to contribute between $3.75 million and $4.25 million of 2021 NOI.
Watergate 600 is expected to contribute approximately $12.75 million of NOI.
We completed the sale of the office portfolio on July 26th for gross proceeds of $766 million and completed the sale of retail portfolio on September 22nd for gross proceeds of $168.3 million.
We acquired The Oxford on August 10th, which as Paul highlighted has performed very well thus far and is tracking ahead of underwriting based on rents.
As we've discussed, we entered into binding agreements to acquire two communities in the Atlanta market for $106 million and are moving toward an additional binding agreement for another property $97 million.
All three of these transactions are expected to close during the fourth quarter.
We redeemed all $300 million of senior unsecured notes that previously were scheduled to mature in 2022 on August 26 and repaid $150 million of amounts outstanding under the term loan maturing in 2023 on September 27.
We ended the quarter with a very low net debt to EBITDA ratio of 1.4 times.
While we may be in the mid to high five times net debt to adjusted EBITDA range in the first year after executing these transactions, as we progress through the second and third years of multifamily NOI growth, we would aspire to operate in the lower half of the five times to six times range.
We have very little debt maturing in the near term none earlier than 2023.
And our equity versus debt ratio is expected to get close to 80% to 20% which will be very strong.
We have no secured debt in our capital structure, which provides us with flexibility to take on some agency debt or other secured debt as we acquire apartments.
Moreover, we believe we will continue to have most of our line available.
So strong liquidity will be maintained.
We currently have approximately $1 billion of liquidity including the full availability of our $700 million line of credit, which we further extended another four years this quarter.
With this report, we are proud to be among the first multifamily REITs to commit to achieving net-zero carbon operations.
We detail a number of exciting ESG projects underway including pursuit of green building certifications for multifamily Class B assets growing our pipeline on on-site solar projects and the integration of climate risk into the company's overall enterprise risk management framework including evaluating climate risk and asset resilience as part of our underwriting process.
Overall, we are off to a very good start progressing on our geographic expansion and have executed most of our transformation to a multifamily company.
We have completed the sale of our commercial segments and we have closed on one asset have two others under contract and as we said have been awarded one more asset in Atlanta.
We have an active pipeline of opportunities that align with our strategies and we remain confident, we can allocate this capital appropriately over the balance of this year and into early next year.
For the balance of 2021, we remain focused on investing our remaining capital and firming up our plan to transform and expand our operating model.
We expect to achieve operating efficiencies as we scale the business and execute our plan to bring property-level operations back in-house.
We look forward to keeping you updated on our progress as we expand our geographic footprint and transform our operating platform.
 Assistant:

Chosen response:
q3 core ffo per share $0.20.
core ffo for 2021 is expected to be $1.05 to $1.08 per share.