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FinanceMTEB 8

I've already scheduled time with many of you after the call to fill in the gaps. A quick bit of housekeeping before we start. Cory and I will be participating in two investor conferences during the week of March 7. The first is the Raymond James annual institutional investors conference at the Grand Lakes Resort in Orlando. We'll travel to Boston to present the next day at the UBS annual global consumer and retail conference. With that, let's move on to today's call. Investors should familiarize themselves with the full range of risk factors that could impact our results. Those are filed in our Form 10-K, which is filed with the Securities and Exchange Commission. I want to remind everyone that today's call is being recorded, and an archived version of the call will be available on our website. The first quarter may comprise a small percentage of the year, but it doesn't mean things are slow around here. In fact, there are several important storylines coming out of Q1 that are worth exploring in more detail. Among them: a continued high level of consumer engagement that led to a second straight year of Q1 profitability in the U.S. Consumer segment, with strong momentum as we ended the calendar year; the announcement of a third pricing action in the consumer business that will take effect in the second half of the year; an increase in our full year sales guidance for the segment; some moderation, finally, in commodity prices; continued restrengthening of our supply chain and has us well positioned to meet the demands for the upcoming season; restructuring efforts in Hawthorne that will make the business even stronger; and plenty of activity, including two more Hawthorne acquisitions in what is the most robust M&A pipeline we've had in 25 years. Yes, there's a lot to cover. Before I jump into the details, I want to share a story that helps us put context around the strategy I outlined on our last call and its potential to drive value for our shareholders. As most of you know, my brothers and sisters and I own roughly 25% of the company. As part of our recent meeting with our advisors, we discussed the financial return on the family's investment since the merger of Scotts and Miracle-Gro in 1994. Just like other long-term shareholders, we've done well. The most important part of the discussion, however, was centered around the simple question, why? Why have we done so well? And that's the part of the story that matters to all shareholders. One of the benefits, I believe, from strong family ownership in a public company is that we take a long-term view, and we're not afraid to think like an activist and recognize the need to reimagine the company from time to time. This is one of those times. On our last call, I said we're pursuing five pillars of growth that could double the size of Scotts Miracle-Gro through both organic and acquired growth over the next five years. I also said we would explore the possibility of dividing the company into two pieces. Obviously, those things won't happen overnight. But the progress we've made already this fiscal year demonstrates just how seriously we're focused on this journey and how bold we're willing to be. So let's jump in. I usually leave the numbers to Cory, but I want to start by touching on the P&L. If you're only looking at the year-over-year comparisons, I'd say you're looking at things the wrong way. Look at it with a historical context. While it remains the smallest quarter of the year, Q1 has become increasingly important on a full year basis. We've moved more shipments into the quarter to better serve our retailers, a change that has improved the performance of the business significantly. You'll miss that fact if you just compare the year-over-year results. For example, Q1 volume is down from last year, but up 107% over fiscal '20 and significantly higher when compared to the average in the four years before COVID. This feels like a base we can grow from. The year-over-year gross margin rate is down 2%, but the segment's margin is up more than 1,300 basis points compared to the average of the four years prior to COVID. And that's true in the face of sharply higher commodities. The same story holds with segment income, which was a positive number for only the second time in our history. On average, the bottom line result was $50 million better than in each of the four years prior to COVID. And as we look ahead, there's good reason to believe that the first quarter of U.S. Consumer segment on an EBITDA basis could remain profitable going forward. If we look at consumer activity, it's another good story. In Q1, POS, as measured by consumer purchases at our largest retailers, was up 3% in units. It was up 9% in dollars. Both numbers were against a plus-40 comp a year ago. Normally, I caution against reading too much into our Q1 POS, and that caution still applies. What's different this time, however, is the December quarter marks a continuation of a trend dating back to spring of last year that shows a level of consumer engagement that consistently has outpaced our expectations. The COVID impact on POS continues to complicate the pure year-over-year comparison. But if you look at POS units over the past four quarters, we're up 22% compared to two years ago. More importantly, that two-year comparison has grown stronger with time, suggesting that the COVID benefit may be more permanent than we first expected, which would result in a much higher base from which to grow. I'm not going to predict whether POS for the March quarter will be positive because we continue to have difficult comps. But our most recent consumer sentiment data, which we received just last week, tells us consumers continue to see gardening as important to their lifestyles. It also tells us they plan for their spending levels to be consistent with last year, an important fact given the overall amount of inflation in the economy. And while we continue to expect a modest decline in overall participation levels, more than two-thirds of consumers who do plan to participate in gardening this year said they expect to buy more plants and have bigger gardens. Everything we're seeing and everything our retail partners are sharing with us is cementing our optimism as we move closer to the peak of the season. We've increased our sales guidance for the U.S. consumer business to a range of minus 2 to plus 2% on a full year basis, an increase of 200 basis points from our previous range. This increase does not require us to change our view of the balance of the year. We're able to increase the range for two reasons. First, the Q1 result was better than expected and should be a permanent benefit for the year. Also, we have communicated to our retail partners another price increase for the second half that will impact our full year results by 1%. The difficult decision to take a third price increase in a single year, while unprecedented for Scotts Miracle-Gro, was necessary in the face of continued cost increases that created a bigger headwind than we expected. The additional point of pricing, which takes effect in Q3, will get us back in line with our goal to offset commodity increases that have been a challenge for the past year. Fortunately, we've been seeing a few key commodity inputs peak over the past month, and it's beginning to feel like the worst may be behind us. Like others, we're still seeing higher distribution costs, but I'll leave it to Cory to discuss that in more detail. The additional round of pricing is not merely rooted in protecting our margins. It's about supporting our retailers and protecting our competitive advantages. Over the years, we've built a market-leading position and driven strong returns for our retail partners by investing strongly behind innovation as well as sales and marketing support. These competitive advantages drove both consumer engagement before and during the COVID crisis. We didn't outperform our competitors during COVID due to dumb luck. We won because consumers trusted our brands to deliver the results they are seeking. We won because our marketing team created relevant messages that resonated with those consumers and drove them to the stores. And we won because retailers knew they could count on our sales force to help manage their lawn and garden departments during the height of the crisis. Given the current challenges in the labor market, our in-store sales force is more important than ever in supporting our retailers, and we need to protect that investment. That's also true of our supply chain, which has been able to meet retailer demand when others could not. I said in the last call, we don't like this level of pricing, and I don't. But the actions we've taken allow us to protect those competitive advantages and strengthen our relationship with consumers and retails even further. Speaking of relationships, I want to provide an update on the performance of Bonnie Plants and our strategy for live goods. There is good news on both fronts. First, Bonnie POS is in line with our core legacy brands, and we're expecting another strong season in the edible gardening space. Over the past few months, there have been significant improvements to the Bonnie supply chain, both in the way of process improvement and a new influx of talent. We're also seeing continued integration of our sales and marketing efforts. This should result in better in-store experience for consumers and more cross-selling opportunities for our core brands, especially Miracle-Gro. As you know, we see live goods as an important gateway to the relationship with consumers. Our relationship with Bonnie has already improved the category, and we believe there's more we can do to enhance the range of choices available to consumers. Together with the Bonnie team as well as our partner, Alabama Farmers Coop, we have been actively exploring additional M&A opportunities that could significantly strengthen our live goods portfolio and bring a higher level of consumer-driven innovation and retailer support to the industry. While it's too early to share any details, we're excited by the prospects, and we'll be sharing more with you as these discussions play out. From nearly every angle, I'm extremely bullish about the potential in the core lawn and garden business right now. And I'm equally optimistic about the steps we're taking to further strengthen our franchise and transform what it means to be an industry leader. We knew before COVID hit, demographic trends were starting to work in our favor. We saw that millennials were becoming interested in this space and in our brands. But once their lives became centered around their homes, they turned to gardening in numbers we never expected. A decade ago, this group was barely evident in our results. Today, they're driving our results. Our job is to keep them engaged to have them see gardening as relevant to their lives and to see our brands as critical to their success. Throughout the entire business, we're taking the right steps and making the right investments to ensure this happens. So yes, I'm optimistic as we prepare for the season. That's true not just for fiscal '22 but in the years to come. And I know Mike Lukemire and his entire team see it the same way. Let's shift to Hawthorne. I'll start with the obvious. It's clear this year is going to be a challenge, and we'll see a decline in sales. I'll let Cory cover the numbers, but we already laid out much of what needs to be said in our announcement on January 4. While the current market reality is frustrating, we're not discouraged. We continue to believe in this space and its long-term potential. And over the past several months, there's been a lot of activity occurring that is designed to make the business even stronger when the market returns to growth. As many of you know, Hawthorne experienced a tough downturn in 2018. And it was on one of these calls that I publicly criticized the team for being paralyzed by the stress of the moment and said they needed to step up. You're not going to hear that this time. The learnings from 2018 have helped us tremendously, and the way the team is managing this situation couldn't be more different. First, the team saw the market decline coming as far back as June, and that allowed us to prepare. Second, they knew they couldn't change the reality of the situation, so there was not a panicked effort to chase sales that weren't there. Third and most importantly, they put on their activist hat and said, "How can we use this downturn to make our business better"? I have no doubt their answers to that question will, in fact, make Hawthorne better. So I'm going to pause for a few moments and ask Chris to give you an update. Let me start by taking a quick moment to update you on current industry trends. It's beginning to feel like we've seen the bottom of the market. We haven't bounced off the bottom yet, but daily sales trends have been consistent for about a month, and that makes it a bit easier to navigate. Also, we're beginning to see some slightly better results in consumable categories, like nutrients and growing media, which is also an encouraging sign. You guys know the nature of the industry's challenge right now, so I don't need to elaborate. As I said in our January 4 announcement, we expect to see growth again in the second half of the year, but I'm not going to speculate on exactly when that will happen or to what extent. What I can tell you is that our business will be significantly stronger once the downturn ends. We've made key acquisitions, have taken steps to restructure our manufacturing footprint and realigned the management team based on the future needs of the business. You probably saw our announcement last month about the acquisition of Luxx Lighting and True Liberty Bags, but let me give you some more context. There is no doubt that Gavita is the premier lighting brand in the indoor cultivation space. It has been a home run for Hawthorne and is critical to our long-term success. And Sun System, the private label brand we acquired from Sunlight Supply, is a solid opening price point fixture. Lighting is the most important category in our industry. It's a category where we made a commitment to innovation and to being a leader. For growers, lighting is where they spend the most money, and it's the category that has the biggest impact on their crop. The right lighting strategy creates a relationship with those growers that opens the door for us to sell a full portfolio of solutions. Over the last two years, our R&D and supply chain teams have helped drive our success in the critical area of LED lighting. We created the best products in the market, which has helped accelerate the industry's move to LEDs and strengthened our market share. Even though that's true, we still knew that we needed more than we had. We looked at all the available options in the market and decided that Luxx was the brand with the greatest potential. Luxx is unique because it was designed by cannabis growers and is widely used by commercial cultivators who know its history and trust its performance. The current market conditions made the economics of the Luxx acquisition extremely attractive, especially when you consider the synergies it allows us to capture. The Luxx deal makes this the perfect time to begin to consolidate our lighting manufacturing to a single location. We announced last week that we will move our current lighting production, mostly HPS lights, from Vancouver, Washington to Southern California. We'll move other LED assembly we've been doing it there too. This move will significantly reduce our inbound and outbound distribution costs, better leverage our labor force and take advantage of one of the best manufacturing plants in the SMG network. Those savings will allow us to take substantial costs out of each fixture and significantly improve our already market-leading position, especially in the critical LED market. As part of this restructuring effort, we're also closing the manufacturing facility for HydroLogic, which we acquired last year. We are moving that work to our Santa Rosa facility, which is the original home of General Hydroponics. And we're consolidating distribution on the East Coast to a facility we recently built in New Jersey to meet the expected demand from new markets in the years to come. The other acquisition we announced, True Liberty Bags, is a much smaller deal but speaks to our strategy of putting the grower at the center of everything we do. True Liberty's products are used in the post-harvest process to freeze, store, and transport large harvest quantities. The products are designed to prevent cross-contamination and preserve the quality of the plant. It is a niche category but a critical one. True Liberty is the clear leader in the space and a brand that commercial cultivators trust. The acquisitions in the last six months of Luxx, True Liberty, HydroLogic, and Rhizoflora don't just add the P&L. These brands make Hawthorne more critical to cultivators who continue to see us as far more than just a distributor. They see us as a trusted provider that understands the nuances of their business and one that continues to invest to bring them better product solutions and generate higher returns. The other changes that we've made is a realignment of the team to focus on the needs of the business once the market returns. The restructuring has resulted in the elimination of roughly 200 positions. While the business decision was easy, it's never a good day when you have to part with valued members of the team. We did everything we could to provide them a soft landing, and I sincerely wish them well moving forward. We also made some changes in Hawthorne management. Tom Crabtree joined the team a few months ago to lead our sales effort. Tom has a great background. He started off in the SMG supply chain and then moved to sales, including a stint in which he transformed the Home Depot sales team. And more than anything else, Tom is a great leader. He knows how to build teams, how to motivate them and how to design programs that drive results. As we look to the future, it was clear to me that Tom was the right person to be the chief operator of Hawthorne, and he was recently promoted into that role. As you can see, while sales have slowed for the time being, we haven't. Every one of these changes makes our business stronger and will help further distance Hawhorne from our competitors. I'll be around for Q&A. But for now, let me turn things back over to Jim. You'll remember that the fifth pillar of our growth strategy is to explore opportunities in the emerging areas of the cannabis industry that are more consumer-facing. While SMG can invest directly in that space right now, we can build optionality that we can capitalize on later. The creation of the Hawthorne Collective and the convertible loan we made to RIV Capital are part of that strategy. But recall that we do have three feet on their board, which is very active in setting the strategy and vision for what comes next. It is through that lens that I can tell you to expect some important developments over the next quarter. As a result, we may choose to infuse more cash into RIV over the balance of the year that would increase our ownership stake if we converted the loan to equity. But we would still maintain a noncontrolling and non-ownership interest, and the magnitude of any additional cash would not approach the initial investment we made last year. On the topic of Hawthorne and the Hawthorne Collective, I want to make one more comment. I know the discussion we had in the call last year regarding a possible split of the company got a lot of attention. Jim King has told me he had literally dozens of conversations about this issue with current or potential shareholders. I want to reiterate that we've made no firm decision about whether to proceed down this path, and it will take a while before we do. Since our last call, however, we've established an internal team to study this issue and help explore the right courses of action. There are arguments to be made for splitting and equally compelling arguments to be made to continue operating as one company. We don't feel any pressure to lean one direction or the other, but we'll rely on the facts and analysis to guide our decision-making. Before I wrap up and turn things over to Cory, I want to close with this thought, and it brings me back to the meeting with my family. Our business is sitting in a pretty good place right now, and it would be easy to sit back and just harvest the fruits of our labor over the next few years. But the opportunities in front of us are simply too obvious and to consequential to ignore. If we're successful in executing our strategy, this will be a much bigger and more profitable business that will drive meaningful value for our shareholders. I'm not going to tell you we won't have challenges along the way. The degree of difficulty associated with some of our efforts is high, but any path worth pursuing can be slippery at times. I'm confident those who choose to travel with us in the years ahead will be glad they did. We have a lot of exciting pieces coming together in the months and quarters ahead, and I look forward to tracking our progress with you along the way. For now, I'm going to turn things over to Cory to cover the first quarter financials. But there are a few key themes I want to cover, specifically about the adjustments we've made to our guidance, the current trends with cost of goods and how we're thinking about capital allocation as we look ahead. On the P&L, there were no real surprises on the top line. Total company sales were down 24%, against a 105% comp a year ago. U.S. consumer sales were down 16% on a 147% comparison. And Hawthorne was down 38%, against 71% growth a year ago. In U.S. consumer, we saw good POS, as Jim already mentioned. And retailers finished the quarter with inventory in line with where they were a year ago. That was the best-case scenario for us. They remain committed to the category through the fall season and kept appropriate levels of inventory in their stores as we approach the slowest weeks of the year. That leaves them well positioned as we pivot into our key selling season, and the shipments we saw through January leave us optimistic. The midpoint of our increase in our sales guidance for the segment assumes an eight-point decline in volume for the full year, offset entirely by pricing. The trends through four months suggest this might be a conservative estimate. But as Jim said, were less than 10% of the way through the year, and it's way too early to predict what will happen in the spring. The sales decline was due primarily to the slowness of the broader cannabis market. The supply chain challenges we've mentioned previously are difficult to precisely quantify, but we believe they caused around 5% of the downward pressure in the quarter. Those challenges, primarily in the LED lighting space, have been remedied and we are back in stock with the components we need to once again be manufacturing and shipping LED lights, which remain in strong demand. Let's move on to gross margins because this is an area that's important to understand. As you know, Q1 results often fall prey to the law of small numbers, and that's exactly what happened with gross margin. The adjusted rate was down 570 basis points in the quarter driven by the year-over-year decline in volume and its impact on manufacturing, distribution, and other fixed costs. Commodity prices were also a headwind in the quarter but offset by a 400 basis point improvement from pricing actions. Jim mentioned the importance of looking at the gross margin rate in historical context, and I totally agree. The result in the quarter was more than 600 basis points better than in fiscal '20 and more than 850 basis points better than fiscal '19. Over the past several years, we have effectively moved business into Q1 to ensure retailers are properly set for the season, which should keep us at a level of profitability that is higher going forward. As I look at the balance of the year, we are maintaining our gross margin rate guidance for a decline of 100 to 150 basis points. Right now, I'd expect us to be at the lower or worse end of that range. Margins for the balance of the year should be relatively flat but could vary a bit each quarter, positively or negatively, based primarily on timing and mix. In total, we are 70% locked on commodities for the year, which is slightly behind normal. We would normally have all of our costs locked right now on pallets, but we're only at 30% because vendors are not currently entering into long-term contracts due to the volatility of lumber prices. On everything else, we're actually in good shape, including urea, where we're nearly 80% locked for the year. The better news is that we're starting to see some relief. Resin has been retreating for a couple of months now. Urea has begun to do the same. No one has been accurately predicting input costs for the last year, so I want to be cautious. Still, I'm increasingly optimistic that the pricing moves we've taken should offset these commodity headwinds on a full year basis. SG&A was down 2% after a sharp increase last year. Recall that our guidance calls for SG&A to decline up to 6% for the year, and it's an area we're keeping an eye on as we move closer to the season. The only other issue on the P&L that merits your attention is the $7 million loss on the equity income line, which is related to our 50% ownership in Bonnie. Remember, we did not have that ownership stake a year ago, and Q1 is a seasonal loss quarter for Bonnie. As Jim said, the business has had a solid start for the year, and we're optimistic about the upcoming season. On the bottom line, our seasonal loss on a GAAP basis was $0.90 a share, compared with income of $0.43 last year. Adjusted earnings, which excludes restructuring, impairment, and nonrecurring charges, was a loss of $0.88, compared with earnings a year ago of $0.39. You might recall that fiscal '21 marked the first time in company history that we reported a first quarter profit. Chris mentioned in his remarks the realignment we've made at Hawthorne. We expect those actions to result in a restructuring charge of up to $5 million in the second quarter. That charge will be excluded from our full year guidance. Let me briefly touch on the balance sheet, specifically focusing on inventories, which are up about $590 million from last year. First, recall that inventory levels were lower than we had wanted a year ago as we were shipping product nearly as fast as we could build it in both major segments. Second, recall that we consciously built an inventory cushion last year to ensure we are able to keep our retailers at the appropriate levels throughout the season. And finally, about 25% of this increase is due to the higher input costs we've been experiencing over the past year. We remain comfortable with inventory at this level and continue to see it as a competitive advantage. We expect to see some competitors continue to struggle to meet demand this year, which we believe will work to our advantage. Finally, I want to focus on capital allocation. We are still planning for capex to be approximately $200 million for the year as we continue to improve our supply chain and invest in our e-commerce infrastructure. Remember, we had been investing based on the assumption that our U.S. consumer segment would grow at a point or two per year. Since fiscal 2019, it's up around 40%, and we've pushed our capacity to its limit. So these investments are necessary. Jim commented several times about the M&A opportunities in front of us. So let me provide some context. We are currently budgeting slightly more than $200 million for future transactions over the balance of the year. The opportunities that remain on the table, if executed, should be immediately accretive to earnings and go a long way in advancing our strategy. In terms of returning cash to shareholders, we repurchased $125 million of our shares in Q1 and have a 10b5-1 in place for another $50 million in our Q2. We currently do not have a 10b5-1 in place for the second half of the year and would expect that any share repurchase activity during that period would occur in the open market. Additionally, we have no current plans for a special dividend this year. Given our current outlook for the business and our expected outlay of capital, we could slightly exceed our leverage target of three and a half times by the end of the fiscal year. We were at 3.3 times at the end of Q1. If we exceed our three and a half times target, we expect to get back below that level within a quarter or two, and we will still be well within our current debt covenants. We know we have some near-term challenges in Hawthorne, but we are focusing on the demand that we can't control. What we're focusing on is what we can control, and that is what we look like when the growth does return. I'm convinced we'll be better positioned than ever with a better margin profile and competitive advantages that have been strengthened over the past several months. consumer, I share Jim's optimism. There's no need to make further adjustments in our guidance right now, but the trends are certainly tilting in our favor for the upcoming season and beyond. And finally, on a personal note, I've recently completed my first full year in this role. My engagement with all of you was a new experience for me, and it's given me a better appreciation of the issues on the minds of our shareholders. Through this new lens, I'm working closely with my colleagues to ensure we're acting as proper stewards of our capital and focusing on driving value for all of you. And while I've also grown to appreciate the importance of this quarterly discussion with all of you, it's also reinforced my view that we can't run the business on a quarter-to-quarter basis. Value is driven over the long term, and I'm convinced that the steps we're taking to strengthen the business will do exactly that.

scottsmiracle-gro increases full-year sales outlook for u.s. consumer segment. q1 sales fell 24 percent to $566 million. q1 non-gaap loss per share $0.88 excluding items. q1 gaap loss per share $0.90 from continuing operations. to consolidate u.s. lighting manufacturing for hawthorne into single location and to close another recently acquired assembly facility. compname says restructuring charge of up to $5 million expected to be recorded in q2, will be excluded from co's fy adjusted results.

In a moment, Mark Smucker, president, and CEO will give an overview of the quarter's results and an update on our strategic initiatives. Tucker Marshall, our CFO, will then provide a detailed analysis of the financial results and our fiscal 2022 outlook. These statements rely on assumptions and estimates, and actual results may differ materially due to risks and uncertainties. We also posted a slide deck summarizing the quarterly results, including additional information regarding net sales by segment and cost of products sold for fiscal 2021. Included in the slide deck are schedules summarizing net sales excluding divestitures for fiscal years 2019 through 2021. If you have additional questions after today's call, please contact me. Fiscal 2021 was a year like no other. In the face of unprecedented challenges, we delivered outstanding results. Moreover, we believe the business is at an inflection point, and we are delivering against our strategic and executional plans. We are emerging from the pandemic along with recent strategic actions a much stronger company. From the outset of the pandemic, we prioritize the well-being of our employees, funded relief activities for our communities, and produced a record amount of products for consumers and their pets. Our people are resilient and moved with speed and agility to adapt our business, all while executing our consumer-centric growth strategy and making progress toward our four execution priorities. These are driving commercial excellence, streamlining our costs infrastructure, reshaping our portfolio, and unleashing our organization to win. These priorities are essential to position our company for sustainable long-term growth. I'll first share some examples of the progress we are making toward our priorities before turning to a few highlights from the fourth quarter and our fiscal year 2022 outlook. Our first execution priority is driving commercial excellence. Throughout the past year, significant changes in our industry demanded a rethink of CPG commercial models. We adapted our approach to deliver what customers and consumers need and want more efficiently These changes included standing up a new sales model with two distinct teams, one focused on pets and the other on our consumer foods and coffee businesses. The benefits from improved in-store execution and leveraging insights, combined with additional advertising and improved reach through new digital media models have been a driving factor for our market share gains. These investments in our commercial capabilities provide a competitive advantage as we partner with retailers. They also enable seamless and highly targeted consumer experiences from awareness to purchase and strong repeat purchasing. Consumers remained loyal to our brands as we maintained the 1 million net new households gained in the prior year, while dollars per buyer increased 10%. Over the past year, we increased our marketing investment by nearly $40 million or 8%. Most importantly, we significantly improved our market share performance, where today, 55% of the brands in our portfolio are growing market share versus 26% 18 months ago. This is the sixth quarter of sequential share performance improvement for our portfolio. We also made significant progress on our second priority to increase focus on profitability and cost discipline. We restructured our corporate support functions leading to a more lean and agile organization while continuing to optimize our supply chain and maximize network production efficiencies. Full implementation of these initiatives will deliver $50 million of incremental cost savings in each of the next three fiscal years. One example where we are driving efficiency in our supply chain is with our high-growth Dunkin' coffee. The pandemic-driven surge in demand required us to increase agility and decrease production downtime and change over. This led to operational efficiencies and incremental capacity for our coffee production, which supported 21% sales growth for the brand this year. Our third execution priority to reshape our portfolio supports our strategy of leading in the best categories. baking mix and condensed milk businesses. In the pet business, we divested the special teaching and all exclusive Natural Balance brand. These decisions show our commitment to divesting brands and businesses that are no longer consistent with our long-term strategic focus. In turn, this allows us to optimize assortment to maximize productivity, reduce complexity, and shift resources to our fastest-growing opportunities. We continue to evaluate opportunities to increase our portfolios' focus in the pet food, coffee, and snacking categories. Further, acquisitions will remain a part of our strategic growth and we will be prudent when considering them, ensuring we focus on appropriate multiples paid and financial returns in their evaluation. Our fourth execution priority, unleashing our organization to win, powers the first three priorities. The strength of the Smucker culture has always been a unique differentiator in achieving growth and is a critical component of our future. With the impact of my new leadership team and through the additional organization changes implemented this past year, we are more lean, agile, and focused on delivering with excellence and winning in the marketplace. We're also increasing our focus on becoming a more inclusive and diverse company at every level of the organization. These four priorities are critical to ensuring we maintain our momentum and we're critical to our record fiscal 2021 results with full-year net sales increasing 3%. Net sales grew 5% when excluding the prior-year sales for divested businesses and foreign currency exchange. Fiscal '21 adjusted earnings per share was $9.12, an increase of 4%, exceeding our most recent guidance range of $8.70 to $8.90. Free cash flow was $1.26 billion, above our most recent expectations of $1.1 billion. Our strong financial performance accelerated elements of our capital deployment strategy to support increased shareholder value. We returned $1.1 billion of capital to shareholders this year in the form of dividends and share repurchases. We increased our dividend for the 19th consecutive year and through share repurchases, reduced our shares outstanding by approximately 5% on a full-year basis. And we repaid over $860 million of debt during the fiscal year, strengthening our balance sheet to provide flexibility for a balanced approach to reinvesting in the business and returning cash to shareholders. Turning to the fourth quarter, we delivered results ahead of our expectations while accelerating investments for future growth. Net sales declined 8% versus the prior year. Excluding the non-comparable net sales from divestitures and foreign exchange, net sales decreased 3% due to lapping the initial stock upsurge related to the COVID-19 pandemic. As we are lapping the COVID-19-related demand in the prior year, we believe evaluating results over the prior two-year period is more meaningful. Adjusting for divestitures, net sales grew at a two-year CAGR of 4%, demonstrating growth across all three of our U.S. retail segments. Fourth-quarter adjusted earnings per share declined 26%, primarily driven by the decreased sales, $40 million of incremental marketing investments, and higher costs, partially offset by higher pricing. Turning to our segment results. In pet food, we anticipated sales to be down due to lapping stock up purchasing in the prior year. Net sales, excluding sales for the divested Natural Balance business, decreased 6% and demonstrated growth on a two-year basis. While pet food consumption was not materially impacted by at-home versus away-from-home eating trends as in other categories, the pandemic did impact how consumers shop for their pets such as accelerated growth in e-commerce channels. Also, the total U.S. pet population grew by an estimated high-single-digit percentage this past year with new pet parents showing a willingness to spend more for their pets compared to historical trends. We expect top-line growth on a comparable basis for the pet business in fiscal '22, supported by higher pricing, category growth, continued marketing support, and innovation for our leading treats portfolio, and premium food offerings. Turning to our coffee business, net sales were comparable to the prior year despite lapping the COVID-19 stock up purchasing and demonstrated growth on a two-year basis. Consumer adoption of K-Cups continues to grow with 3 million incremental households purchasing a Keurig machine last year. In the last 52 weeks, retail sales of our brands grew 17%. This was over twice the category rate and we gained over a point of share. Our share gains further accelerated in more recent periods as all our brands continue to grow, including Folgers. Cafe Bustelo and Dunkin' are the two fastest-growing brands in the coffee category. Over the last 52 weeks, Cafe Bustelo retail sales grew 21% and Dunkin' grew 16%. The Dunkin' brand, representing $1 billion in all-channel retail sales dollars was a top share gainer in the coffee category growing nearly triple the total at-home coffee category rate in measured channels over the last 52 weeks. The Folgers brand gained 3 million new households at the height of the pandemic and has the highest repeat rate of any brand for new households gained during the pandemic. We will continue to build up this momentum with initiatives to reinvigorate the iconic brand rolling out in the second half of fiscal year '22. As new coffee habits formed during the pandemic, we anticipate retaining a substantial portion of these new consumers for the long term. In our consumer foods business, net sales decreased due to the Crisco divestiture and increased 1% on a comparable basis and reflected strong growth on a two-year basis. Smucker's Uncrustables frozen sandwiches continue to deliver exceptional growth with net sales and household penetration each increasing 16% in the quarter. For our combined U.S. retail and away-from-home segments, the Uncrustables brand delivered nearly $130 million of net sales this quarter, recording its 28th consecutive quarter of growth. The brand delivered over $400 million of net sales this year and is on track to exceed our $500 million target in fiscal year 2023. Across our retail businesses, we delivered strong financial results this year, while significantly increasing investments in our brands, strengthening our balance sheet, and returning cash to shareholders, all of which are key building blocks for supporting long-term growth and increasing shareholder value. I'll briefly touch on the current supply chain and cost environments. Our operations have run efficiently, and we have had no material disruptions to date. We continue to monitor global supply chain challenges specifically as it relates to the availability of transportation, labor, and certain materials. Broad-based inflation is impacting many of the commodities, packaging materials, and transportation channels that are important to our business. We are mitigating the impact through a combination of higher pricing inclusive of list price increases, reduced trade, and net revenue optimization strategies, as well as continued cost management. We have recently implemented net price increases across all business segments with most becoming effective during the month of July. Let me now provide additional details on our outlook for fiscal 2022. As the U.S. emerges from the pandemic, we believe elevated at-home consumption for our brands will continue into fiscal 2022. Our confidence is supported by the increased pet population, elevated work-from-home benefiting breakfast and lunch occasions, and consumers' investments in at-home brewing equipment. Lapping sales from divested businesses will have a material impact on year-over-year net sales growth in fiscal 2022. When excluding the non-comparable net sales, we anticipate top-line growth supported by higher net pricing, the continued momentum of our brands, and a significant recovery in our away-from-home business. Year-over-year earnings per share is expected to decline. The growth in comparable sales and benefits from cost savings programs are anticipated to be more than offset by the impact of higher costs and the timing of pricing actions, as well as the loss of earnings from divestitures. On a two-year basis, we expect growth for both comparable net sales, as well as adjusted earnings per share as we continue to demonstrate underlying growth for the business. Finally, as we emerged from the pandemic with a heightened focus on health and wellness, we remain dedicated to having a positive impact on our employees, our communities, and our planet. This includes supporting the quality of life for people and pets strengthening the communities we serve both locally and globally and ensuring a positive impact on our planet with a focus on sustainable and ethical sourcing. We look forward to sharing more details including the achievement of our 2020 environmental targets and information regarding our new ESG goals when we release our Corporate Impact Report this summer. In summary, I would like to reinforce three key points. First, we continue to deliver strong financial results, and our actions to deliver our priorities are leading to improvement in key metrics, including market share that position us well for the future. Second, we are reshaping our portfolio to increase our focus on faster growth opportunities within pet food, coffee, and snacking. And finally, we are sharpening our focus on cost management and becoming a more efficient and agile organization. We are exiting this pandemic a stronger company, and our actions taken over the previous year support consistent delivery of long-term growth and shareholder value. I'll begin by giving an overview of fourth-quarter results, which finished above our expectations, then I'll provide additional details on our financial outlook for fiscal 2022. Net sales decreased 8%. Excluding the impact of divestitures and foreign exchange, net sales decreased 3%. This was primarily driven by unfavorable volume mix due to lapping the prior-year stock-up during the beginning of the pandemic, most notably for pet food and our Canadian baking business. Higher net price realization was a 1 percentage point benefit, primarily driven by peanut butter and our pet business. Adjusted gross profit decreased $79 million or 10% from the prior year. This was mostly driven by unfavorable volume mix, with noncomparable impact to the domestic businesses and higher costs, partially offset by the higher net pricing. Adjusted operating income decreased $120 million, or 28%, reflecting the decreased gross profit and higher SG&A expenses. The increase in SG&A expense was primarily driven by increased marketing investments and incentive compensation, partially offset by reduced selling and distribution costs. Below operating income, interest expense decreased $3 million, and the adjusted effective income tax rate was 23.3% compared to 23.4% in the prior year. Factoring all this in, along with share repurchases that resulted in a weighted average shares outstanding of 108.9 million, fourth-quarter adjusted earnings per share was $1.89. I'll now turn to fourth-quarter segment results, beginning with U.S. retail pet foods. Net sales decreased 12% versus the prior year. Excluding the noncomparable net sales for the divested Natural Balance business, net sales decreased 6% versus the prior year. Net sales grew at a 2% CAGR on a two-year basis excluding the divestiture. Dog snacks continue to perform well, decreasing just 1% in the fourth quarter after growth of 12% in the prior year. Cat food decreased 4%, following an 18% growth in the prior year. Dog food net sales decreased 15%, reflecting anticipated declines versus the prior year. Pet food segment profit declined 32%, primarily reflecting lower volume mix, increased marketing investments, and increased freight and transportation costs, partially offset by higher net pricing. Turning to the coffee segment. Net sales were comparable to the prior year and increased 5% on a two-year CAGR basis. The Dunkin' and Cafe Bustelo brands grew 10% and 18%, respectively, offset by a 7% decline for the Folgers brand, which benefited the most from consumers stocking up on coffee in the prior year. For our K-Cup portfolio, net sales increased 14% and accounted for over 30% of the segment's net sales with growth across each brand in the portfolio. Coffee segment profit decreased 9%, primarily driven by increased marketing expense. In consumer foods, net sales decreased 13%. Excluding the prior-year noncomparable net sales for the divested Crisco business, net sales increased 1%. On a two-year CAGR basis, net sales, excluding the divestiture, grew at a 9% rate. The fourth-quarter comparable net sales increase relative to the prior year was driven by higher net pricing of 4%, primarily due to a list price increase for peanut butter in the second quarter, partially offset by unfavorable volume mix of 3%. Growth was led by the Smucker's Uncrustables frozen sandwiches, which grew 16%. Consumer foods segment profit decreased 29%, primarily reflecting the noncomparable profit from the divested Crisco business, higher costs, and increased marketing expense, partially offset by the higher net pricing. Lastly, in international and away-from-home, net sales declined 7%. Excluding the prior-year noncomparable net sales for the divested Crisco business. , net sales declined 5%. The away-from-home business increased 7% on a comparable net sales basis, primarily driven by increases in portion control products. International declines of 15% on a comparable net sales basis were primarily driven by declines in baking, partially offset by pet food and snacks. On a comparable two-year CGAR basis, net sales for the combined businesses declined at a rate of 2%. Overall, international and away-from-home segment profit decreased 30%, primarily driven by lower volume mix, partially offset by a net benefit of price and costs and favorable foreign currency exchange. Fourth-quarter free cash flow was $183 million, an increase in cash provided by operating activities was more than offset by a $31.6 million increase in capital expenditures. Capital expenditures for the fourth quarter were $108 million, with the increase over the prior year, primarily related to the capacity expansion for Uncrustables frozen sandwiches. On a full-year basis, free cash flow was $1.26 billion, with capital expenditures of $307 million, representing 3.8% of net sales. In the fourth quarter, repurchases of 1.5 million common shares settled for $174 million. Over the course of the fiscal year, we repurchased 5.8 million shares for $678 million, reducing our outstanding share count by approximately 5%. We finished the year with cash and cash equivalent balances of $334 million, compared to the prior year-end of $391 million. We paid down $84 million of debt during the quarter and $866 million for the full year, ending the year with a gross debt balance of $4.8 billion. Based on a trailing 12-month EBITDA of approximately $1.8 billion, our leverage ratio stands at 2.6 times. We anticipate maintaining a strong balance sheet and leverage ratio, enabling a balanced capital deployment model, which includes strategic reinvestment in the business through capital expenditures and acquisitions while returning cash to shareholders through increasing dividends and evaluating share repurchases over time. Let me now provide additional color on our outlook for fiscal 2022. The pandemic and related implications, along with cost inflation and volatility in supply chains, continue to cause uncertainty for the fiscal year 2022 outlook. Any manufacturing or supply chain disruption, as well as changes in consumer mobility and purchasing behavior, retailer inventory levels, and macroeconomic conditions could materially impact actual results. We continue to focus on managing the elements we can control, including taking the necessary steps to minimize the impact of cost inflation and any business disruption. As always, we will continue to plan for unforeseen volatility while ensuring we have contingency plans in place. This guidance reflects performance expectations based on the company's current understanding of the overall environment. Net sales are expected to decrease 2% to 3% compared to the prior year, including lapping of sales from the divested Crisco and Natural Balance businesses. On a comparable basis, net sales are expected to increase approximately 2% at the midpoint of the sales guidance range. This reflects benefits from higher pricing actions across multiple categories, primarily to recover increased commodity and input costs, along with continued double-digit sales growth for the Smucker's, Uncrustables brand, and the recovery in away-from-home channels, partially offset by a deceleration in at-home consumption trends. We anticipate full-year gross profit margin of 37% to 37.5%, which reflects an 85-basis-point decline at the midpoint versus the prior year. This factors in higher net pricing effective in the month of July, along with cost and productivity savings and a mixed benefit associated with the divestitures. This will be more than offset by higher costs experienced throughout the full year. These cost increases are driven by a high single-digit increase from commodities, ingredients, and packaging. SG&A expenses are projected to be favorable by approximately 4%, reflecting savings generated by cost management, and organizational restructuring programs, a reset of incentive compensation, and total marketing spend of 6% to 6.5% of net sales, which reflects a stepdown from fiscal year 2021, partially driven by programs that were pulled forward into the fourth quarter. We anticipate net interest expense of approximately $170 million and an adjusted effective income tax rate of approximately 24%, along with a full-year weighted average share count of 108.3 million. Taking all these factors into consideration, we anticipate full-year adjusted earnings per share to be in the range of $8.70 to $9.10. At the midpoint of our guidance range, year-over-year adjusted earnings per share is anticipated to decline 2%, mostly attributable to around a $0.20 net impact of divested earnings and the timing of benefits from shares repurchased. Approximately one-third of the share repurchase benefit was recognized in fiscal 2021. The adjusted earnings per share guidance further reflects benefits from the increase in comparable net sales, primarily due to pricing actions along with the company's cost management and organizational restructuring programs, which are expected to fully offset higher commodity ingredient, and packaging costs, and the timing of input cost recovery. Given the timing of cost increases and recovery through higher net pricing, as well as a shift in timing of marketing expenses, earnings are anticipated to decline in the first half of the fiscal year, most notably in the first quarter with an anticipated decrease of over 20%. We project free cash flow of approximately $900 million, with capital expenditures of $380 million for the year. The increase for capital expenditures primarily relates to capacity expansion for Smucker's Uncrustables. Other key assumptions affecting cash flow include depreciation expense of $230 million, amortization expense of $220 million, share-based compensation expense of $35 million, and restructuring costs of $25 million, which includes $15 million of noncash charges. On a two-year basis, our full-year guidance reflects net sales, excluding divestitures to grow at a 3% to 4% CAGR, and modest adjusted earnings-per-share growth at the midpoint of the guidance range. The two-year growth reflects the recovery of earnings related to the divested businesses through both organic growth and shares repurchased and accounts for the lapping of the unprecedented stock-up purchasing during the onset of the COVID-19 pandemic. In closing, I am incredibly proud of our employees who continue to deliver exceptional financial results. Because of their dedication, our business has strong momentum and we've positioned ourselves better than ever to serve the needs of consumers and their pets. With continued financial discipline, we are committed to delivering sustainable and consistent, long-term value for our shareholders. Operator, please queue up the first question.

q4 revenue $109 million. provides update on transformation plan. confident that we will see significant benefits beginning in 2021. six flags entertainment - estimates that net cash outflow in q1 of 2021 will be, on average, $53 to $58 million per month. striving to become cash flow positive for last nine months of 2021. six flags entertainment - believes has sufficient liquidity to meet cash obligations through end of 2021 even if all its parks are unable to open.

And joining me on the call today are Dale Gibbons, our -- and our Chief Credit Officer, Tim Bruckner. I'll begin by laying out Western Alliance's approach to the COVID, an economic crisis. First and most importantly, I hope that everyone on the line is doing well, and that your families and loved ones are safe and healthy. These wishes are especially extended to all the care and safety workers actively putting themselves in harm's way to protect our communities. At Western Alliance Bank, our people remain healthy and engaged, and despite the vast majority working-from-home for the last month, continue to go above and beyond the call of duty to serve our customers and the communities we operate to navigate this challenging time. Our business continuity plans have been working as anticipated, and I am proud of the entrepreneurial spirit our people continue to demonstrate to get the job done and develop unique solutions for our clients. First, I'd like to lay out the business actions Western Alliance has taken in light of the evolving environment. Although we did not anticipate the widespread severity and likely duration of the virus, we did start assessing potential risks and mitigants as early as mid-January. And as the breadth of the pandemic became apparent, we accelerated implementing plans in mid-February to prioritize asset quality, capital and liquidity management. We have since divided the business into appropriate risk segments led by senior managers with deep credit and workout experience to monitor and force the early engagement with our borrowers and begin the necessary credit triage process. For example, Robert Sarver is leading the hotel franchise group, while I am leading the warehouse lending and gaming groups, Dale has corporate finance; and Tim Bruckner coordinates overseas and directs' all credit activities. Our overall risk management approach is focused on establishing individual borrower level strategies in which we are proactively engaging in customer conversations to evaluate and agree upon financial plans focused on liquidity management to conserve resources in anticipation of an elongated economic downturn. Today, we have had direct dialogue with all borrowers with over $3 million in exposure or 86% of our portfolio, and substantial dialogue below this level. We assume that all borrowers will have some level of COVID-19 impact and are focused on evaluating our borrowers' remediation efforts, access to capital and contingency plans. We're also very pleased that Congress and the entire federal government came together to expeditiously pass the CARES Act and stimulus measures a few weeks ago. Additionally, we applaud the Fed's actions to reduce interest rates to support liquidity in the financial markets to quantitative easing for a wide variety of asset classes and provide support for small and medium-sized businesses through its innovative new lending programs. We recognize that the SBA has a large task in front of them, and I'm extremely proud to say that our people work tirelessly with them so that we could successfully process the PPP program loans on the first day. We have dedicated over a quarter of our workforce to avail our clients of this important program and have successfully approved over 2,600 applications totaling $1.5 billion today. We anticipate funding approximately $150 million per day. As part of our broader risk management strategy, we have prioritized implementing the PPP program as the most expedient method to quickly get incremental liquidity to our clients. Furthermore, we believe that the newly initiated mainstream lending program when implemented provides incremental liquidity for our large clients as well as PPP participants. Our approach to loan modifications and deferment request is to look for resourceful ways to partner with our clients along with assessing their willingness and capacity to support their business interests. We are asking our clients to work hand-in-hand with us for a long-term solutions to hopefully short-term challenging environment, whereby our clients contribute liquidity, capital or equity as an integral component to loan modifications. Our longer term solutions-based approach distinguishes us from industry standardized 90-day deferral programs. Our approach collectively uses the resources of the borrower, government and the banks' balance sheets to develop solutions that extend beyond six-month window provided for in the CARES Act. This negotiation process has likely slowed our modification pipeline as approximately $400 million has been processed today. We learned during the last downturn when both the borrower and the bank use their resources to bridge the gap, it generates a mutually favorable outcome. With all of this as the backdrop, I'd like to walk through our financial performance for the quarter. Despite a uniquely challenging operating and rate environment, I am proud to report that in the first quarter, Western Alliance generated $163.4 million of operating pre-provision net revenue, up 10% year-over-year and 3% quarter-to-quarter. We continued with the adoption of CECL accounting changes this quarter, which resulted in a provision for credit losses of $51.2 million for the quarter, 47% of which was driven by our robust balance sheet growth. Dale will go into more detail in a bit on how the unique features of CECL drove our provisions, but our ACL to funded loan ratio now stands at 1.14%. WAL generated net income of $84 million or $0.83 per share and tangible book value per share was $26.73. This quarter, we produced a NIM of a 4.22% and had net recoveries of $3.2 million and continue to improve our operating leverage. Even with our increased vigilance, organic balance sheet continue to be healthy in Q1 for both loans and deposits. Deposits grew $2 billion to $24.8 billion as we gained market share in several of our key business lines as well as traction in one of our recently launched deposit initiatives, which added over $400 million. This highlights the continued strength of our diversified funding channel and overall deposit franchise to generate stable low-cost liquidity irrespective of the macroeconomic environment. Continuing on our strong momentum from 2019, total loans increased $2 billion to $23.1 billion. Approximately $1.5 billion of this was through organic loan growth from new client projects and another $500 million was credit line drawdowns, of which approximately half was redeposited into the bank. Let me take a moment now to make a few high level comments on Western Alliance's loan portfolio. We believe that our well-diversified business model and purposeful decisions made over the past decade regarding conservative underwriting criteria and sector allocations positioned the portfolio to withstand the current economic environment. At quarter end, asset quality was stable with a decline in totally adverse graded loans and OREO to assets of 1.2% from 1.27% in Q4. Western Alliance has no direct energy or large retail mall exposure. We stopped making loans to the quick service restaurants sector several years ago with current exposure of only $150 million. Our construction and land and development portfolio is now under 9% of our loan book. In our institutional lot banking business, which makes up 30% of the CLD portfolio, we have not received any deferral request at this time. Single family residential construction, which composes another 27%, were still experiencing positive absorption trends through March. However, April's traffic has fallen off. Our portfolio is extremely well positioned coming into the pandemic and right now is performing as expected. We are especially focused on monitoring and engaging with our clients in our hotel franchise finance and technology and innovation segments, which will be reviewed in more detail later in the call. During the quarter, we repurchased 1.8 million shares at an average price of $35.30. Additionally, consistent with our 10b5 plan, we repurchased 270,000 shares thus far in Q2. However, given the rapidly changing environment, we have now paused our share repurchase activity. Finally, Western Alliance arrives at this crisis in a position of strength uniquely prepared to address what's ahead. We remain well capitalized and highly liquid with the CET1 ratio of 9.7% and ample liquidity -- total liquidity resources of over $10 billion. Dale will now take you through our financial performance. For the first quarter, Western Alliance generated net income of $84 million or $0.83 earnings per share. Net income was reduced by a $51.2 million provision for credit losses driven by the adoption of CECL, balance sheet growth as well as the change in the economic outlook due to pandemic. Strong ongoing balance sheet momentum, coupled with diligent expense management, drove operating pre-provision net revenue to $163.4 million, up 10% from a year ago, which we believe is the most relevant metric to evaluate the ongoing earnings power of the company. Net interest income and fee income remain relatively stable producing net operating revenue of $285.3 million, primarily a result of lower yields on loans, which was partially offset by lower rates on deposits and borrowings. Non-interest income declined $10.9 million to $5.1 million from the prior quarter due to mark-to-market of preferred stock holdings of primarily large money center banks of $11.3 million, partially offset by $3.8 million equity investment gain. To-date, of the $11.3 million mark, $3.5 million has been recovered. As credit spreads widened during the last quarter, the yield on preferred stocks followed impacting valuations. We do not believe this represents a premanently reduced valuation and that preferred stock values will continue to recover over time. Finally, non-interest expense declined $9.3 million as compensation and other operating expenses declined by $7 million. Regarding implementing CECL in our allowance for credit losses, in our 10-K, we disclosed the adoption impact of $37 million, $19 million of which was attributable to funded loans, $15 million for unfunded commitments and $2.6 million for held-to-maturity securities. This resulted in a combined January 1st allowance of $214 million. During Q1, loan growth drove an additional $24 million of required reserves and another $30 million was driven by changes in the economic outlook as a result of the pandemic. In total, reserve availed during the first quarter was $91 million, an increase of 50% from the year-end reserve. The quarter end ACL of $268 million was 1.14% of funded loans, up 30 basis points. Provision expense for the quarter was $51.2 million, which is over 10 times the average quarterly provision during 2019. As of March 31st, the reserve bill reflects our best estimate of the future economic environment, including the impact of government stimulus programs. We utilized an assimilation of various Moody's macroeconomic outlook scenarios to capture the most likely economic outcomes in a more severe scenario for potential tail risks. As the economy continues to change, we will adjust our ACL modeling accordingly. Turning now to net interest drivers. Net interest income for the quarter declined a modest $3 million from the prior quarter to $269 million as there was one less day during the quarter compared to Q4 and margin compression was offset by loan to deposit growth. Investment yield showed a modest improvement of 2 basis points from the prior quarter to 2.98%. However, on a linked quarter basis, loan yields increased 31 basis points due to the lower rate environment. The average yield of our portfolio at quarter end or the spot rate was 5.02%. Interest bearing deposit cost increased 18 basis points in Q1 to 90 basis points as a result of immediate steps taken to reduce our deposit costs after the FOMC cut rates twice in March. The spot rate of total deposits at quarter end was 29 basis points. Total funding costs decreased 11 when all of the company's funding sources are considered, including non-interest bearing and borrowings. Through the transition to a substantially lower rate environment during the quarter, net interest income was $269 million, a decline of 1.1% from Q4. Continued strong balance sheet growth and immediate steps taken to reduce the cost of interest bearing deposits counteracted the decline in Prime and LIBOR. Net interest margin declined 17 basis points to 4.22% during the quarter as their earning asset yield fell 28 basis points, partially offset by 19 basis points funding cost decrease. With regards to our asset sensitivity, our rate risk profile has declined notably as the majority of our variable rate loan portfolio has flipped to fixed rate as floors have been triggered in the declining rate environment. Presently, 82% or $8.1 billion of variable rate loans with floors are at the floors. With the addition of our mix shift primarily to fixed rate residential loans, $16.2 million or 70% of loans are now behaving as a fixed rate portfolio. This has reduced our interest rate risk on a 100 basis point parallel shock lower scenario to 3% at March 31st from 6.5% one year ago and assumes that rates are held flat at zero across the term structure. Turning now to operating efficiency. On a linked quarter basis, our efficiency ratio decreased 200 basis points to 41.8%. As mentioned earlier, the improvement was attributed to decreases in compensation and other operating expenses while our revenues increased modestly. As a core component of our strategy, we continue disciplined expense management to sustain industry-leading operating leverage and profitability. Our core underlying earnings power remains strong as pre-provision net revenue ROA was 2.38%, flat from the prior quarter, while return on assets was down 70 basis points to 1.22% directly related to our provision expense in excessive charge-offs of $54.4 million. As Kim mentioned earlier, our strong balance sheet momentum from 2019 continued into Q1. During the quarter, loans increased $2 billion to $23.2 billion and deposits also grew $2 billion to $24.8 billion. Loan to deposit ratio increased to 93.2% from 92.7% in the fourth quarter. Our strong liquidity position continues to provide us with balance sheet capacity to meet funding needs. Shareholders equity declined by $17 million as dividends and share repurchases were matched by net income. Tangible book value per share increased $0.19 over the prior quarter to $26.73 per share as our share count declined. We continue to believe our ability to profitably grow deposits is both a key differentiator and a core value driver to our platform's long-term value creation. Q1 is a seasonally strong deposit quarter, and coupled with the roll out of our deposit initiatives, deposits grew $2 billion. The increase was driven by growth of $1.3 billion in non-interest bearing DDA primarily from market share gains in our mortgage warehouse operations. Additionally, HOA continues to perform well and contributed $330 million of low cost deposits. During the quarter, the relative proportion of non-interest bearing DDA grew to nearly 40% of deposits from 37.5% on a linked quarter basis. Turning to loan growth. In line with the industry, the vast majority of growth was driven by increases in C&I loans totaling $1.8 billion, followed by $107 million in construction and land development, and $92 million in residential. Residential homes now comprise 9.7% of our portfolio, while construction loans decreased as a relative proportion of the portfolio to 8.9% from 9.2% in the fourth. At the segment level, Tech & Innovation loans grew $626 million, with $124 million from capital call and subscription lines and $176 million from existing technology loan draws, in turn bolstering technology-related deposits by $383 million. Corporate finance loans grew $408 million, which was primarily due to line draws, two-thirds of which were from investment grade borrowers bringing utilization rates to 38% from 13% during the prior quarter. Mortgage warehouse also contributed to loan growth of $550 million, approximately 50% of which was due to line draws. Across the bank, one quarter or about $500 million of our net new loan growth was driven by drawdowns on existing loan commitments from the beginning of the quarter. In all, total loan growth of $2.2 million for the quarter was fully funded by deposit growth for the same amount. Overall, asset quality was stable during the quarter with total adversely graded assets increasing $10 million during the quarter to $351 million, while non-performing assets comprised of loans on non-accrual and repossessed real estate increased $27 million to $97 million or 0.33% of total assets, and is now held-for-sale. Within these categories, we had migration from special mention to substandard and some of the normal investor funding was delayed in tech and innovation. As a precaution, when remaining liquidity declines below six months, repaying those loans into either special mention or sub for enhanced monitoring and engagement. This quarter, we also -- we saw the cumulative impact of our efforts of managing certain special mention and substandard loans as several resolved in our favor with no losses, a $100 million of adversely graded loans resolved during the past quarter, 37 loans or $50 million paid-off in full, while the other $50 million were upgraded to pass. As Ken mentioned in his introduction, we're well positioned entering this economic cycle. We only incurred $100,000 of gross credit losses during the quarter, which was more than offset by $3.3 million in recoveries, resulting in net recoveries of $3.2 million. We typically have one or two one-off credit charges every quarter. However, highlighting the strength of our loan book, we didn't experience any of these in Q1. We believe early indication in identification and conservative management helps mitigate losses on these assets. In all, the ACL-to-funded loans increased 30 basis points to 1.14% in Q1 as a result of CECL adoption and the result in provision expense related to Q1 loan growth and changes in the economic outlook. We continue to generate capital and maintain strong regulatory capital ratios with tangible common equity, the total assets of 9.4% and a CET1 ratio of 9.7%. In Q1, a reduction of TCE-to-total assets was mainly driven by $2.3 billion increase in tangible assets due to our significant loan growth, while the tangible common equity was affected by $15.4 million of provisions in excess of charge-offs due to CECL adoption. In spite of reduced quarterly earnings and the payment of quarterly cash dividends of $0.25 per share, our tangible book value per share rose $0.19 in the quarter to $26.73 and is up 15.2% in the past year. Our diversified deposit generation platform and access to significant liquidity resources is critical in times of economic stress. Overall, we have access to over $10 billion in liquidity, primarily through our $4.7 billion investment portfolio, of which $2.7 billion are investment grade readily marketable and not pledged on any borrowing base. Additionally, we have $7 billion in unused borrowing capacity with the Fed, Federal Home Loan Bank and Correspondent. Our strong capital base, access to liquidity and diversified business model will allow us to address any credit demands in the future. I'll now hand back the call to Ken to conclude with comments on a few of our specific portfolios. Regarding our Hotel Franchise Finance business, we believe our focus on the Select Service subsegment, conservative loan to cost underwriting discipline and strong operating partners sets us up for a maximum financial flexibility to weather the duration of the crisis. Like most hotels in the country, our clients have seen a dramatic reduction in occupancy rates over the last month, and senior management is involved in active dialogue with each borrower to evaluate remediation efforts and contingency plans. Going into the pandemic, 75% of the portfolio had an LTV under 65% and more than 73% had a debt service coverage ratio of 1.3 times. Additionally, we only partner with experienced hotel operators with significant invested equity and resources to support ongoing operations. Fully 66% of the portfolio is with large sponsors who operate more than 25 hotels and 90% operate 10 or more properties with top franchises or flags. Based on our ongoing constructive dialogue, we believe that sponsors view this as a temporary event and want to continue to maintain and support these properties over the long-term, given their significant equity investments. We are actively working with them to appropriately utilize the PPP program and the Main Street lending programs, along with their own liquidity as a helpful financial bridge to arrive at a longer-term solution. Based on the mutually developed financial action plans, we will selectively implement loan modifications along the lines we previously discussed. This is a prime example where both parties contribute to a comprehensive solution. Now, regarding our Tech & Innovation business, we primarily financed established growth technology firms with a strong risk profile, mainly companies classified as Stage 2 with an established business model, validated product, multiple rounds of investment, and a path to profitability. This provides greater operating and financial flexibility in times of stress. 99% of the borrowers have revenues greater than $5 million and have strong institutional backing with 86% backed by one or more DC or PE firms. During the quarter the portfolio grew $495 million to $2 billion or 8.8% of the total portfolio, which was attributed to $175 million of existing line drawdowns in the technology division and an additional $124 million from capital call lines, a product that historically has had zero losses. Tech & Innovation commitments grew $284 million in Q1 and utilization rates increased to 60% from 49% in Q4 2019. The portfolio is fairly granular with average loan size of $6 million and these borrowers are generally liquid with more than 2:1 deposit coverage ratio. Additionally, since 2007, warrant income has covered cumulative net charge-offs 2 times over. Currently 14% of technology loans or $164 million has less than six months remaining liquidity, which is in line with historical trends. Although some fund raising has been delayed, we were pleased to see several investment rounds closed over the last several weeks and days with strong continued sponsored support. In conclusion, we see increased cash generation driven by our balance sheet momentum going into the quarter-end as well as continued loan growth from the PPP distributions. We expect pre-provision net revenue to continue to grow to Q2 with the ability to absorb any necessary future provisions. Given uncertainty surrounding the likely duration of the virus and evolving economic environment, we will continue to reassess our outlook as health and economic facts warrant. Regarding asset quality, our proactive risk management approach is institutionalized throughout the Company. We are actively working with our borrowers to develop mutually agreed upon financial plans assuming an elongated economic downturn that leads to long-term solutions. Our strong collateral positions and little unsecured or consumer lending should serve us well in mitigating potential risk of loss as we navigate these uncertain times. We stand ready to implement the likely next phase of PPP and the Main Street Lending Program to assist our clients and communities. Finally, Western Alliance has assembled a seasoned management team that has weathered several economic downturns and is applying the lessons learned from the Great Recession to face these uncertain economic times. And with that we'll open up the line, operator, and we'll take everyone's questions.

compname reports q3 adjusted earnings per share $1.14. q3 adjusted earnings per share $1.14. q3 gaap earnings per share $0.69. q3 sales rose 2.2 percent to $1.91 billion. compname says tightened its 2021 sales guidance to a range of $7.90 billion to $8.05 billion. sees fy 2021 adjusted earnings per share $4.20 to $4.30.

Please visit our website at transdigm.com to obtain a supplemental slide deck and call replay information. The company would also like to advise you that during the course of the call, we will be referring to EBITDA, specifically EBITDA as defined, adjusted net income and adjusted earnings per share, all of which are non-GAAP financial measures. As usual, I'll start with a quick overview of our consistent strategy, a few comments about the quarter, and then Kevin and Mike will expand and give more color. To reiterate, we are unique in the industry in both the consistency of our strategy in good and bad times as well as our steady focus on intrinsic shareholder value creation through all phases of the cycle. To summarize, here are some of the reasons why we believe this: About 90% of our net sales are generated by proprietary products, and around three quarters of our net sales come from products for which we believe we are the sole source provider. Most of our EBITDA comes from aftermarket revenues, which generally have significant higher margins, and over any extended period of time, have typically provided relative stability through the downturns. We follow a consistent long-term strategy. Specifically, we own and operate proprietary aerospace businesses with significant aftermarket content. Second, we utilize a simple, well-proven, value-based operating methodology. Third, we have a decentralized organization structure and unique compensation system closely aligned with shareholders. Fourth, we acquire businesses that fit this strategy and where we see a clear path to a PE-like return. And lastly, our capital structure and allocations are a key part of our value-creation methodology. Our long-standing goal is to give our shareholders private equity-like returns with the liquidity of a public market. To do this, we stay focused on both the details of value creation as well as careful allocation of our capital. The commercial aftermarket revenue, typically the largest and most profitable portion of our business, dropped sharply in the second half of fiscal-year 2020, as we expected, following the steep decline in air travel due to COVID. Sharp drops have happened during other severe shocks though not to this magnitude and likely duration. At this point, there are some indications that Q3 of our fiscal-year 2020 was the bottom. To the positive, we saw significant sequential increases in commercial aftermarket bookings in our fiscal-year Q1, but the stalling of the air travel recovery concerns us with regards to timing. Our commercial aftermarket simply will recover as more people worldwide fly again, though not necessarily in lockstep. This is starting to happen slowly and somewhat erratically, but the timing of the recovery is still not clear. In addition to safety, the two most important items we continue to focus on are the things we can, to some degree, control. One, we are tightly managing our costs. Our revenues were down significantly in fiscal-year 2021, Q1 versus the prior year Q1, but our costs are down about the same. The mixed impact of low commercial aftermarket revenues continues to impact our margins, but we have been able to mitigate part of this impact. We raised an additional $1.5 billion at the beginning of our third quarter of fiscal-year '20. The money raised was an insurance policy for these uncertain times. It now seems unlikely that we will need it. We continued to generate cash in Q1 of 2021. We generated about $275 million of positive cash flow from operations and closed the quarter with almost $5 billion of cash. This is prior to the acquisition that we made in January. Absent some large additional dislocation or shutdown, we should come out of this with substantial firepower. We continue to look at possible M&A opportunities, and are always attentive to our capital allocation. But the M&A and capital markets are always difficult to predict, but especially so in these uncertain times. In general, on capital allocation, we still tend to lean toward caution, but we feel better now than we did six months ago for sure. M&A activity in this last quarter was more active. As I'm sure you saw, we made a good-sized acquisition after the quarter end. We bought the Cobham Aero Connectivity business, which is an antenna and radio business, for a purchase price of $965 million. I must admit, it does feel good to play some offense again. This is a good proprietary sole-source business with high aftermarket content. We also like the customer diversity. As usual, we expect to get a PE-like return on this transaction. Though we are not giving overall guidance for TransDigm, for the little less than nine months that we will own the Cobham business in fiscal '21, we expect it to contribute roughly $160 million in revenue with EBITDA as defined margins running in the 25% to 35% range. The revenue is impacted somewhat by the historical calendar year versus fiscal-year shipment timing. We paid for the Cobham business with cash on hand, so -- but for the tax impacts, much of this will drop right through the earnings. We also sold two small nonproprietary former Esterline businesses that did not fit our model for about $30 million so far in 2021. The total revenues for these businesses in fiscal-year '20 were roughly $35 million, and EBITDA was in the 10% revenue range. We continue to investigate the sale of a few other less proprietary defense businesses that don't fit as well with our consistent long-term strategy. At this point, it's too soon to know when or if we will sell these businesses. We still don't have sufficient clarity to give 2021 guidance. When the smoke clears enough for us to feel more confidence, we'll reinstate the guidance. In general, we are planning to keep tight control on expenses and hold our organization roughly flat until we see more clear signs of a pickup. We believe we are about as well positioned as we can be for right now. We'll watch the market develop and react accordingly. Now let me hand it over to Kevin to review our recent performance and to give more information on Q1 and other thoughts. Today, I'll first provide my regular review of results by key market and profitability of the business for the quarter. I'll also comment on fiscal 2021 outlook and some COVID-19-related topics. Our Q1 fiscal 2021 was another challenging quarter, considering the continued slowdown across the commercial aerospace industry in a difficult global economy. In Q1, we continued to see a significant unfavorable impact on the business from the pandemic as demand for travel has remained depressed. Despite these headwinds, I am pleased that we were able to achieve a Q1 EBITDA as defined margin approaching 43%, which was a sequential improvement from our Q4 EBITDA as defined margin. Now we will review our revenues by market category. For the remainder of the call, I will provide color commentary on a pro forma basis compared to the prior year period in 2020. That is assuming we own the same mix of businesses in both periods. In the commercial market, which typically makes up close to 65% of our revenue, we split our discussion into OEM and aftermarket. Our total commercial OEM market revenue declined approximately 40% in Q1 when compared with Q1 of the prior year period. The pandemic has caused a significant negative impact on the commercial OEM market. We are under the assumption that demand for our commercial OEM products will continue to be reduced throughout fiscal 2021 due to reductions in OEM production rates and airlines deferring or canceling new aircraft orders. Longer term, the impact of COVID-19 is fluid and continues to evolve, but we anticipate negative impacts on our commercial OEM end market for some certain -- uncertain period of time. On a positive note, Q1 demonstrated significant sequential bookings improvement compared to Q4, which is likely an indicator of OEM destocking slowing. Additionally, it is encouraging that the MAX has been recertified in multiple countries and added back to route schedules, although the near-term impact to our business will likely be minimal given the low build rates. Now moving on to our commercial aftermarket business discussion. Total commercial aftermarket revenues declined by approximately 49% in Q1 when compared with Q1 of the prior year period. In the quarter, the decline in the commercial transport aftermarket was primarily driven by decreased demand in the passenger and interior submarkets. There was also a decline in the commercial transport freight market but at a less impactful rate. On a positive note, the total commercial aftermarket revenues increased sequentially by approximately 5% when comparing the current quarter to Q4 fiscal 2020. This increase was driven by the commercial transport aftermarket. Our quarterly commercial aftermarket bookings were down in line with observed flight traffic declines resulting from decrease in air travel demand and uncertainty surrounding COVID. However, Q1 also demonstrated significant sequential bookings improvement compared to Q4, and the bookings in Q1 modestly outpaced sales. This is likely the result of destocking slowing at the airlines. To touch on a few key points of consideration. Global revenue passenger miles are still at unprecedented lows, though off the bottom as a result of the pandemic. IATA's most recent forecast expects the final reported revenue passenger miles for calendar year 2020 to be 66% below 2019 and that calendar year 2021 average traffic levels will be about 50% of pre-COVID crisis levels. Cargo demand was weaker prior to COVID-19 crisis as FTKs have declined from an all-time high in 2017. However, a loss of passenger belly cargo due to flight restrictions and reduced passenger demand has helped cargo operations to be impacted to a lesser extent by COVID-19 than commercial travel. Business jet utilization data was -- point to stagnant growth before the current disruption. Now during the pandemic and in the aftermath, the outlook for business jets remains unpredictable as business jet flights were rebounding but due to personal and leisure travel as opposed to business travel. However, now we face the typical slower winter season, and the sustainability of this trend is especially difficult to foresee. Although the longer-term impacts of the pandemic are hard to predict, we continue to believe the commercial aftermarket will recover as long as air traffic continues to improve. The recent approval and rollout of several vaccines will greatly aid in this recovery. We believe there is a global pent-up demand for travel. And in due time, passengers across the globe will return, and flight activity will increase. Historically, personal travel has accounted for the largest percentage of revenue passenger miles, and forecasts still seem to indicate a pickup in personal travel in the back half of this calendar year, followed later by business travel. We are hopeful this will be the case. For now, the timing of the recovery is uncertain. And in the meantime, we will continue to make the necessary business decisions and remain focused on our value drivers. Now let me speak about our defense market, which traditionally are at or below 35% of our total revenue. The defense market, which includes both OEM and aftermarket revenues, grew by approximately 1% in Q1 when compared with the prior year period. Defense bookings declined slightly in the quarter driven primarily by a modest decline in defense aftermarket bookings. As we have said many times, defense sales and bookings can be lumpy. We continue to expect our defense business to expand throughout the year due to the strength of our current order book. I'm going to talk primarily about our operating performance, or EBITDA as defined. EBITDA as defined of about $474 million for Q1 was down 30% versus prior Q1. EBITDA as defined margin in the quarter was just under 43%. I am pleased that amid a disrupted commercial aerospace industry and in spite of the mix impact of low commercial aftermarket sales, we were able to expand our EBITDA as defined margin by approximately 40 basis points sequentially. This result was made possible by our cost-mitigation efforts and a consistent focus on our operating strategy. Now moving to our outlook for 2021. As Nick previously mentioned, we are not in a position to issue formal fiscal 2021 sales, EBITDA as defined and net income guidance at this time. We will look to reinstitute guidance when there is less uncertainty and we have a clearer picture of the future. We, like most aero suppliers, remain hopeful that we will realize a more meaningful return of activity toward the second half of the calendar year. This will be driven by increased vaccination availability and an initial recovery in personal and vacation travel. For now, we are encouraged by the recovery in commercial OEM and aftermarket bookings in the first quarter. As for the defense market, and as we said on the Q4 earnings call, we expect defense revenue growth in the low single-digit to mid-single-digit percent range for fiscal 2021 versus prior year. Additionally, given the continued uncertainty in the commercial market channels and consistent with our commentary on the Q4 earnings call, we are not providing an expected dollar range for EBITDA as defined for the 2021 fiscal year. We assume a steady increase in commercial aftermarket revenue going forward and expect full year fiscal 2021 EBITDA margin roughly in the area of 44%, which could be higher or lower based on the rate of commercial aftermarket recovery. This includes Cobham Aero Connectivity, which should have limited dilutive effects to our EBITDA margin. Barring any other substantial disruptions of the commercial aerospace industry recovery, we anticipate EBITDA margins will continue to move up throughout the year, with this fiscal Q1 being the lowest. Mike will provide details on other fiscal 2021 financial assumptions and updates. Additionally, I would like to touch on our environmental, social and governance initiatives or ESG initiative. 2020 was a year of progress for our ESG program, though we are still in the beginning of our ESG journey. Ongoing conversations with our stakeholders have been an integral part of building and evolving our ESG efforts. As a leader in the aerospace industry, we recognize we need to extend our industry leadership to ESG initiatives as well. These initiatives are a priority, and we are dedicated to continuous improvement as we move forward on our ESG journey. More information regarding our ESG initiatives can be found within our recently published 2020 Stakeholder Report that is posted on the TransDigm homepage. Let me conclude by stating that although Q1 of fiscal 2021 continued to be significantly impacted by the pandemic's disruption of the commercial aerospace industry, I am pleased with the company's performance in this challenging time and with our commitment to drive value for our stakeholders. There is still much uncertainty about the commercial aerospace market, but we have a strong tenured management team that is always ready to act quickly and as necessary. The team is focused on controlling what we can control while also monitoring the ongoing developments in the commercial aerospace industry and ensuring that we are ready to respond to demand as it comes back. I am confident that as a result of our swift cost-mitigation efforts and focus on our operating strategy, the company will emerge more strongly from the ongoing weakness in our primary commercial end markets. We look forward to the remainder of 2021 and expect that our consistent strategy will continue to provide the value you have come to expect from us. I'm going to quickly hit on a few additional financial matters. So I'm not going to rehash that in detail. For the quarter, organic growth was negative 24% driven by the commercial end market declines that Kevin mentioned. A quick note on taxes. The lower than expected GAAP tax rate for the quarter was driven by significant tax benefits arising from equity compensation deductions. This is just timing. Barring some deviations in the rates in this first quarter, our tax rate expectation for the full year is unchanged. That is, we still anticipate our GAAP cash and adjusted tax rates to all be in the 18% to 22% range. Moving to cash and liquidity. We had a nice quarter on free cash flow. Free cash flow, which we traditionally define at TransDigm as EBITDA as defined less cash interest payments, capex and cash taxes, was roughly $200 million. We then saw an additional $70 million-plus come out of our net working capital driven by accounts receivable collections. We ended the quarter with $4.9 billion of cash, up from $4.7 billion of cash at the end of last quarter. Note that this was prior to the acquisition of the Cobham Aero Connectivity business, the majority of which closed on January 5. There's one remaining piece of that acquisition, a Finland facility, representing 2% of the purchase price that's going through regulatory approvals now and should close soon. Pro forma for the closing of this acquisition, our Q1 net debt-to-EBITDA ratio was a shade higher than 7.5 times Assuming air travel remains depressed, this ratio will continue ticking up through the end of Q2 of our fiscal 2021 when the last remaining pre-COVID quarter rolls out of the LTM EBITDA computation. Beyond Q2 of fiscal '21, the ratio should stabilize with a potential for improvement should our commercial end markets start to rebound. From an overall cash liquidity and balance sheet standpoint, we think we remain in good position and well prepared to withstand the currently depressed commercial environment for quite some time.

fiscal 2021 financial guidance will not be issued at this time. commercial air travel demand recovery is expected to continue to be slow and uneven.

Before turning the call over to Hugh, there are a few housekeeping items I'd like to address. These non-GAAP financial measures are provided to facilitate meaningful year-over-year comparisons but should not be considered superior to or the substitute for our GAAP financial measures and should be read in conjunction with GAAP financial measures for the period. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in yesterday's release, which is available on our website at www. Our guiding principle at Regis is to generate long-term value for our shareholders and key stakeholders. In that regard, I was honored to be asked to chair our company's Board of Directors, in addition to my continuing role as President and Chief Executive Officer. I believe that assuming the Chairman's role will help ensure continuity of leadership in our multiphase transformational strategy, during a period of ongoing change. The second quarter does represent an important milestone where we gained greater clarity into the end date of our portfolio transformation. Based on our year-to-date results and a robust pipeline of potential transactions, we now believe that our transition to a fully franchised business will be substantially complete by the end of this calendar year. This improved visibility into the cadence of our portfolio transfer transition enabled us to begin meaningful reductions in our cost structure and to initiate other plans we have for the business including reengineering our capital structure, so that so that it will be appropriate for a fully franchised capital like growth platform. We are pleased to report this quarter that we continue to make meaningful progress in our ongoing strategic transformation to capital light high growth franchise company in August 2019 we estimated that it would take us 18 to 24 months to complete our conversion to a fully franchise portfolio. However, due to the success we've had in the first half of fiscal year 2020 are, we expect that we will substantially complete this conversion at a somewhat earlier date than we originally anticipated. In the first half of fiscal 2020, we have converted 988 salons to franchise owners, with line of sight to the sale of approximately 900 additional salons. This means that net of closing roughly 350 to 500 underperforming salons, which typically occurs at lease expiration. We have approximately 50% of the remaining company-owned salon portfolio in the pipeline at various stages of transition. As of December 31, nearly 70% of our portfolio is now franchised. And you may recall that when I began my tenure as CEO in April of 2017, our salon portfolio was roughly 28% franchised and 72% company-owned. So by any measure, very significant progress in our portfolio transformation. As I mentioned, our transition to a fully franchised model has been occurring at a rapid pace. And as a result, we have been thoughtful and intentional in our plans to begin more aggressive expense reductions. In January, we announced actions that will reduce G&A by approximately $19 million on an annualized basis. As we consider the magnitude of these planned G&A reductions, we decided to schedule our actions at the beginning of the third quarter, as we recognized by scheduling the execution of these G&A reductions in January would dilute our second quarter results, given the increased pace of our venditions. However, we wanted to ensure that our actions to reduce expense did not create an unacceptable level of risk to the stability of our company-owned salons and corporate operations. We expect to consider further G&A reductions as we draw closer to the end date of our transition and gain additional visibility into our path to sustainable growth. Further, we believe it is the right time to redesign our capital structure so that our debt facility is better suited for a company that is now 70% franchised. We recently engaged Guggenheim Securities to help us design the optimal capital structure for what is now a franchise business. Guggenheim has an outstanding track record of success in working with large franchisors and assuming continued favorable market conditions, we anticipate that this process will be successful and that we will complete our replacement financing no later than the fourth quarter. Once we have completed our financing, we anticipate that we will continue to make investments to prepare the company for the growth phase of our multi-phase transformation. This could include additional investments in the following franchisor capabilities: frictionless customer-facing technology; the company's new internally developed back office salon management system, which is now in beta; disruptive marketing and advertising; print driven merchandise, including investments we have made in a new private label brand, we've named Blossom, and the relaunch of our historically successful DESIGNLINE brand. Ongoing investments in stylists' recruiting and education and then stylists and franchise partner education will also be considered. We may also utilize our cash in the next 18 months to complete any remaining elements of our multiyear restructuring, including closing nonperforming company-owned salons, when it's justified by the economics, although our operational bias is typically to manage these salons to lease expiration; paying down some debt, we determined that it's wise to do so; supporting our ongoing G&A reductions through severance programs and if needed, capital investments in salon refurbishments and remodels as we consolidated our various brands into what we have called the Fab 5. And as you all know, we have utilized cash to repurchase our shares in circumstances where we believe that would be in the best interest of our shareholders. We decided to push the pause button on share repurchases during the second quarter in order to reduce our debt levels and continue investments in other growth initiatives. Upon completion of our refinancing, management and the board will continue to assess our capital allocation strategies on a periodic basis as we have done historically. Despite the inherent variability and near-term risks associated with our transformational strategy, we remain convinced that a fully franchised business has the potential to generate a higher return on its capital and will prove to be in the best long-term interest of our shareholders and franchise constituents. We do have a significant amount of work ahead of us in order to substantially complete the portfolio transformational phase of our strategy by calendar year-end. However, we are determined to bring this phase to a conclusion so that we can continue to shift our time and energy in our talent toward the organic growth phase of our strategy. Although conditions could change, we have growing confidence in our plan and our ability to successfully execute our multiphase transformation. Our restructuring and portfolio transformational phases are each moving rapidly toward their end dates. And we intend for Regis to be well positioned for its growth phase, a period we expect to generate sustainable revenue and earnings in the years ahead. With that, I'll ask Kersten Zupfer, our Chief Financial Officer, to take us through the numbers. As you mentioned, we are pleased to share significant progress in our transition to a fully franchised model. Yesterday, we reported on a consolidated basis, second quarter revenues of $208.8 million, which represented a decrease of $65.9 million or 24% versus the prior year. The year-over-year revenue decline was driven primarily by the conversion of a net 1,447 company-owned salons to the company's franchise portfolio over the past 12 months and the closure of 172 salons, of which the majority were cash-flow negative and not essential to our future plans. When targeting salons for closure, our bias is to exit the location at lease expiration, unless the economics justify a course of action to buy out of the lease early. The headwinds in the quarter were partially offset by a $5.8 million increase in franchise revenues and $33.6 million of rent revenue recorded in connection with the new lease accounting guidance adopted in the first quarter of fiscal 2020. Second quarter consolidated adjusted EBITDA of $17 million was $3.6 million or 17.5% unfavorable to the same period last year, and was driven primarily by the elimination of the EBITDA that had been generated in the prior period from the net 1447 company on salon that have been sold and converted to the franchise portfolio over the past 12 months. Second quarter adjusted Eva dial was also impacted by lower comp, minimum wage increases and strategic investments in technology. The decline in adjusted EBITDA was partially offset by a $5.6 million increase in the gain associated with the sale of company-owned salons. Excluding discrete items and the income from discontinued operations the company reported decreased second quarter 2020 adjusted net income of $4.6 million or $0.13 earnings per diluted share as compared to adjusted net income of $8 million or $0.18 earnings per diluted share for the same period last year. The year-over-year decrease in adjusted net income was driven primarily by the elimination of adjusted net income that had been generated in the prior year from salons that were sold and converted to the company's asset-light franchise portfolio over the past 12 months. On a year-to-date basis, consolidated adjusted EBITDA of $46.8 million was $1.1 million or 2.3% favorable versus the same period last year. The year-over-year favorability was driven primarily by a $24.7 million increase in the gain, excluding noncash goodwill derecognition related to the year-to-date sale and conversion of 988 company-owned salons to the franchise portfolio. Excluding the impact of the gains second quarter year-to-date adjusted EBITDA totaled $5.6 million, which was $23.7 million unfavorable year-over-year and like the second quarter results, this unfavorable variance is also driven largely by the elimination of EBITDA related to the sold and transferred salons over the past 12 months. As you noted, we disclosed at the close of fiscal year 2019 that our transition to a capital-light franchise model would initially have a dilutive impact on the company's adjusted EBITDA. So this decline in our reported adjusted EBITDA was not unexpected. Nevertheless, please note that as we continue our transition, we are certainly paying attention to cash from operations. As you know, we do not provide guidance. However, assuming no unexpected changes in market conditions and after adjusting for unusual and transition-related items. Our objective is for our run rate trajectory to be cash flow positive in the fourth quarter as we accelerate into the end state of our transition. Looking at the segment-specific performance and starting with our franchise segment second quarter franchise royalties and fees of $29.3 million increased $6.7 million or 29.8% versus the same quarter last year, driven primarily by increased franchise salon counts. Product sales to franchisees decreased to $1 million year-over-year, to $16.9 million, driven primarily by a $6.5 million decrease in products sold to TBG, partially offset by increased franchise salon counts. As a reminder, franchise same-store sales are calculated in a manner that is consistent with how we calculate our same-store sales in our company-owned salon portfolio and represents the total change in sales for salons that have been a franchise location for more than 12 months. As we are in this transition phase, salons are leading company-owned comps but not entering franchise comps for 12 months, which adds temporary noise to same-store sales comparisons. Second quarter franchise adjusted EBITDA of $13.1 million grew approximately $4.6 million year-over-year, driven by growth in the franchise salon portfolio and better leverage of our cost structure, partially offset by lower margins on franchise product sales. We believe that the franchise portfolio may have been temporarily challenged by the operational complexity of onboarding new owners and transitioning salons to a more -- to our more experienced owners, among other factors. With the revenue recognition and the lease accounting guidance we have adopted over the last two years as well as sales of merchandise to TBG at cost, our EBITDA margin percentage is not comparable year-over-year. After adjusting for the noncontributory revenue associated with ad fund revenue, franchisee rent revenue and TBG product sales EBITDA margin was approximately 37.5%, which is approximately 4.2% favorable year-over-year and is in line with where we would expect it to be. Year-to-date, franchise adjusted EBITDA of $24.9 million grew approximately $6.6 million or 36% year-over-year. Now looking at the company-owned salon segment, second quarter revenue decreased $105.3 million or 45% versus the prior year to $128.9 million. This year-over-year decline is driven and consistent with the decrease of approximately 1,598 company-owned salons over the past 12 months, which can be bucketed into two main categories. First, the conversion of 1,498 company-owned salons to our asset-light franchise platform over the course of the past 12 months. These net company-owned salon reductions were partially offset by 51 salons that were brought -- bought back from franchisees over the last year and 21 new company-owned organic salon openings during the last 12 months, which we expect to transition to our portfolio in the month's end. Second quarter company-owned salon segment adjusted EBITDA decreased $17 million year-over-year to $4.2 million. Consistent with the total company consolidated results, the year-over-year variance was driven primarily by the elimination of the adjusted EBITDA that had been generated in the prior year period from the company-owned salons that were sold and converted into the franchise platform over the past 12 months. The quarter was also impacted year-over-year by increases in stylist minimum wage and styles commissions and a decline in same-store sales in our company-owned salon. As you might expect, we are carefully monitoring our company-owned salons as we continue through our transition. Our objective is to maintain focus and stability in those salons until they are venditioned. On a year-to-date basis, company-owned salon consolidated adjusted EBITDA of $15.7 million was $33.2 million unfavorable versus the same period last year. The unfavorable year-over-year variance is driven by the elimination of the adjusted EBITDA related to the sold and transferred salons over the past 12 months, partially offset by management initiatives to rightsize the source structure in the field. Of course, it's important to note that our company-owned salon performance will continue to become less critical to the future trajectory of our business as we accelerate our conversion to franchise. Turning now to corporate overhead. Second quarter adjusted EBITDA of $0.3 million increased $8.8 million and is driven primarily by the $15 million of net gains excluding noncash goodwill derecognition from the sale and conversion of company owned salons, the net impact of management initiatives to eliminate noncore, nonessential G&A expense and lower year-over-year incentive and equity compensation. In January, based on the improved visibility into the speed of our transition, we began meaningful reductions in our expenses. By eliminating approximately 290 positions, including 15 contractors across the U.S. and Canada, which is expected to result in approximately $19 million of annualized G&A savings as the company accelerates into its multiyear transformation. We expect the removal of these G&A costs will also positively impact the company's cash from operations in the back half of fiscal 2020 and in future periods. Lastly, I wanted to point out that vendition cash proceeds during the second quarter were approximately $71,000 per salon compared to approximately $69,000 per salon in the first quarter of our fiscal 2020, which is consistent quarter-over-quarter. However, as we vendition more Signature Style salons this fiscal year, we may have lower net proceeds per salon due to the cost of converting some of these salons as part of our brand consolidation efforts, along with more SmartStyle venditions. Looking now at the balance sheet. At the end of the quarter, we made a decision to pay $30 million toward our outstanding debt, which decreased our cash balance to $49.8 million as of December 31, 2019. We paid down the debt to remain in compliance with the net leverage covenants that are part of our existing credit facility. Given our successful vendition process, we have known for some time that our existing credit facility would not be appropriate for our end state franchise business and that we would need to reengineer our credit facility to meet the opportunities inherent in our new business model. We believe we now have the visibility and facts that we need to move forward with our refinancing efforts. After careful consideration, we retained Guggenheim because they have a strong track record of establishing capital structures for growth-oriented franchise companies. We expect a successful outcome in our refinancing efforts and to complete the process, no later than the fourth quarter of this fiscal year. Turning now to cash flow. I thought it might be helpful to provide a high-level reconciliation of how we see adjusted EBITDA flow-through to cash from operations and our free cash flow. When looking at the cash flow statement, the single largest use of cash is approximately $17 million use of working capital. As we noted in the prior quarter, this net use of cash is significantly impacted by cash outlays associated with the wind down of company-owned salons as we convert to a fully franchised platform, including transaction-related payments and severance payments related to restructuring our field teams to better align with our future state. As you noted, we also invested in our new Blossom brand of our private label merchandise, which was received in December and will be in the salons in the spring. We have also invested in the repackaging and reformulation of our historically successful DESIGNLINE private label brands. In addition to change in working capital, when reconciling the adjusted EBITDA to operating capital, you will need to take into account the fact that the $41.2 million net gain from the conversion of our company-owned salons to the franchise platform are included in our net income and adjusted EBITDA but not included in cash from operations as the proceeds are reported as inflows in the investing section of the cash flow statement. I also wanted to provide a brief update on TBG. At the end of December, TBG transferred back to Regis 207 of its North American mall-based salons, a roughly 10% of the company's portfolio. When TBG approached Regis about their financial situation in late 2019, we just determined that acquiring the salons, where we just had continuing obligations under real estate leases, would provide greater control over the outcome and maximum optionality for these locations. This was always a previously considered strategy for these salons. The remaining lease liability associated with the TBG salons is approximately $30 million and Regis will operate the salons until lease end date or until a new franchise owner is identified. Essentially, we are now managing these salons in the normal course and will treat the former TBG salons as we would any other location in our company-owned salons portfolio. We continue to believe the overall transaction, which was always intended to mitigate the company's lease obligation on these salons, was a financial and strategic success. As a reminder, when we executed the original transaction with TBG back in October of 2017, the lease liability for the mall-based portfolio was approximately $140 million, and as noted, is less than $30 million today.

estimates it lost approximately $44 million in revenue due to reduced traffic and store closures associated with covid-19 pandemic.

With us on the call from National Fuel Gas Company are Dave Bauer, President and Chief Executive Officer; Karen Camiolo, Treasurer and Principal Financial Officer; and Justin Loweth, President of Seneca Resources. We may refer to these materials during today's call. While National Fuel's expectations, beliefs and projections are made in good faith and are believed to have a reasonable basis. Actual results may differ materially. National Fuel had a great fourth quarter with operating results of $0.95 per share, up 138% over last year. The value of our integrated model and the underlying strength of our business were both clearly evident with each of our reporting segments contributing to the increase. The improvement in commodity prices, the ongoing benefits of our Appalachian acquisition and the continued investment in the expansion of our interstate pipeline system drove the increase and will remain as tailwinds into fiscal '22. The fourth quarter capped an outstanding year for the Company, one in which the underlying fundamentals of our business continued to strengthen. Against the backdrop of capital discipline by producers and strong domestic and global demand for natural gas, the long-term outlook for pricing has improved substantially to levels where we expect to generate increasing amounts of free cash flow from our upstream and gathering businesses. On the pipeline side of the business, our recent Empire North and FM100 projects are two of the largest interstate pipeline expansions in the Company's history. Combined, these projects represent incremental pipeline revenues of more than $75 million and provide much needed capacity out of the basin. And lastly at the utility, we continue to see customer and demand growth which supports the need for further investment in our distribution system. To that end, in August, the New York Commission approved an extension of our system modernization tracker, which will allow us to add the cost of new replacement projects to that mechanism through March 2023. This is a great program that enhances the safety and reliability of our system and reduces emissions. Construction of the FM100 expansion and modernization project is nearly complete. Earlier this week, we made a filing with FERC, which would allow us to place this project fully in service on December 1. This is an important project for us. In addition to growing our regulated pipeline earnings and cash flows, FM100 when combined with Transco's Leidy South expansion project create the path to attractive markets in the Mid-Atlantic for production from each of Seneca's major development areas. This path gives Seneca considerable flexibility in its development plans and supports growth in both Seneca's production and our gathering systems throughput. Without a doubt, this project is a perfect example of the inherent benefits of our integrated approach to development. The project team has done a terrific job leading an aggressive in-service timeline amid the global pandemic and supply chain disruptions. Total project costs are expected to come in nearly 15% under budget. Those of you who have followed us for a while know that safety is a top priority at National Fuel. We strive to have a strong safety culture where everyone in the organization, from me at the top, to our newest employee sees the value of a safe work environment. I'm happy to say that in fiscal '21, our systemwide dark injury rate was the lowest it's been since we've been keeping track. This is a great accomplishment and I'd like to congratulate the team on our continued improvement. As we look to the future, it's clear that Natural Gas will play an important role in meeting the world's energy needs. As is evident from recent events in Europe and Asia, global demand for Natural Gas is growing and we see continued growth here in Western New York and Northwest Pennsylvania where Natural Gas' resilience reliability and affordability compared with other alternatives make it the energy of choice for both space heating needs and commercial and industrial processes. But as the world decarbonizes we too much lower the carbon footprint of both our customers and our own operations. By doing so will require us to embrace low carbon fuels like renewable natural gas and hydrogen and new solutions like hybrid heating. At the same time through our Conservation Incentive Programs, we have to encourage our customers to use less. And lastly, we have to improve the emissions profile of our own operations. To that end, in December, coincident with the publication of our 2020 corporate responsibility report. We announced aggressive emissions reduction targets. In particular, we committed to reduce methane intensity at our major operating segments by 30% to 50% from 2020 levels by 2030. In addition, we pledged to reduce absolute greenhouse gas emissions by 25% again by 2030. Importantly, unlike the aspirational goals that have become commonplace, these targets while challenging are based on tangible projects that use today's technology. This is an important step for the Company, one that demonstrates our commitment to sustainably operating our assets for the long term. Before closing, I want to spend a minute on our expectations for free cash flow. As you can see from page 7 of our current IR deck, at $4.50 natural gas prices, we project free cash flow of approximately $320 million in fiscal '22. Looking beyond 2022, I expect that to trend even higher as capital moderates and FFO continues to grow across the system. Our first priority for that free cash flow will be our dividend, which we paid for the last 119 years and grown for the last 51. After paying the dividend, we'll still have considerable free cash. And I see three options for redeploying that capital. First is reducing leverage on the balance sheet with the goal of gaining an upgrade from the rating agencies. While our credit metrics will likely improve with the recent rise in pricing, we need to be able to sustain those metrics through the cycles. And to do so, we'll probably require a reduction in our absolute debt levels. We see the ability to start that deleveraging over the next few quarters. Ideally we'd also use that capital to fund growth projects. We continue to pursue expansions of our pipeline system and while projects of the size of FM100 aren't likely in the near future. I do see the opportunity for us to build more modestly sized projects. In addition should Seneca secure additional firm transportation or long-term firm sales. It certainly has the acreage to continue to grow production. M&A is also a possibility. If the right assets come on the market, we'd certainly take a look at them. And lastly should those growth opportunities not materialize, we'd look to return capital to shareholders. In closing, National Fuel had a great quarter and a great fiscal year. Our integrated model continues to deliver considerable benefits that are clearly evident in our financial and operating results. Looking forward, we expect to transition to a period of substantial free cash flow which will give us significant financial flexibility and our focus on ongoing emissions reductions will improve the sustainability of our operations and position us well for the future. The fourth quarter concluded a great year for Seneca Resources. Production came in at 79.6 Bcfe nearly a 20% increase from the prior year's fourth quarter. This increase was driven by strong operational performance from our two rig development program as well as an additional month of production from our Appalachian acquisition that closed in July 2020. For the full year, production increased 36%, which along with significant realized synergies from our acquisition helped to drive a 7% reduction in cash operating unit costs. We've also updated our reserve estimates with proved reserves increasing nearly 400 Bcfe to 3.9 Tcfe up 11% from last year. We remain conservative in our approach to reserve bookings with 84% of our reserves being proved developed. Before diving into some operational and marketing updates, I wanted to hit on the growing benefits of last year's Appalachian acquisition. The growth in production and related drop in unit costs help to expand operating margins and deliver significant accretion to Seneca's earnings and cash flows. Additionally, as we talked about in the past, given the depressed natural gas price environment at the time of the acquisition, we ascribe no value in our [Technical Issues] long-term upside. Since closing the acquisition last July, our team has continue to evaluate the undeveloped potential. From a geologic operational and Midstream synergy perspective, this highly economic inventory has been more fully incorporated into our development plans both this year and into the future, resulting in a shift of more drilling activity to Tioga County. In fiscal '22, we expect to bring online thee pads in Tioga with two targeting the Utica and the other in the Marcellus, incorporating more of this inventory into our program enhances capital efficiency further improving consolidated upstream and gathering returns. Our ability to ship activity across our three major operating areas is supported by our diverse marketing portfolio including the incremental 330,000 per day of new Leidy South capacity expected to come online in December. As we've discussed previously, Leidy South will provide an outlook to valuable Mid-Atlantic markets for each of our three major operating areas, giving us additional flexibility to optimize our development activity and maximize returns. As Dave mentioned, the project is on track and we should be able to start using this capacity next month. With more clarity on the Leidy South in service date, we've been very active on the marketing front. Since last quarter, we've converted a significant portion of our existing Leidy South firm sales from a Transco Zone 6 index sale to a NYMEX based sale, providing basis certainty on those volumes. Overall, at this point we have hedges and fixed price firm sales in place for about three-quarters of our expected fiscal '22 natural gas production. We have another 17% with basis protection that is not hedged, which leaves less than 10% of expected production exposed to in basin pricing. This is a great spot to be in and allows us to be opportunistic in our marketing and hedging activities over the remainder of the year. Shifting gears, our operating and spending plans for the year remain largely unchanged. As we talked about previously, our plan to ramp up production over the course of the year to fill our new Leidy South capacity is right on track. I expect Q1 production to be sequentially flat, and we are timing several pads to come online during the quarter in conjunction with the new Leidy South capacity. From there production should ramp up in Q2 and Q3, then level out around 1 Bcf a day net toward the end of the fiscal year. Capital is the opposite, with the extensive completion activity driving capital higher in Q1 and Q2 then decreasing over the second half of the year. Also on capital, there has been a lot of industry discussion around cost inflation and service availability. On the latter point, we think we're well positioned to avoid meaningful impacts. We've been in regular communication with our key vendors and do not expect service availability will pose any issues. However, we do see some modest headwinds on the cost front as is the case with most industries, labor challenges, supply chain issues and increased fuel costs are impacting our service providers. Cost of certain materials such as tubulars are up as well. All that being said, we expect these increases to be largely offset by continued operational efficiencies. In aggregate drill and complete drill and complete costs are likely going to rise a few percent, but this is all accounted for in our capital guidance range, which remains unchanged from last quarter. In California, our team has done a great job managing through the last 18 months and we are forecasting relatively flat oil production from fiscal '22 to fiscal '20, excuse me, for fiscal '21 to fiscal '22. This is a result of long-term planning for permits for our drilling program and a more active workover program in the second half of fiscal '21 that will carry into fiscal '22 while we are facing some modest cost headwinds largely from increasing steam fuel costs, those are more than offset by rising oil prices and we expect to generate significant free cash flow this year. Also, our new solar facility at South Midway is substantially complete and should go in service very soon and we are moving full speed ahead with our next solar facility at South Lost Hills, which is expected to go in service late next year. [Technical Issues] honestly, I want to provide an update on Seneca's sustainability efforts. As I mentioned last quarter, we are undertaking a comprehensive study of emissions generated by various types of completion equipment. We have completed all testing and are working with our completion service providers as well as air hygiene and West Virginia University to evaluate the data and develop a comprehensive report. This is a landmark study that will provide truly comparative data across a wide array of completions equipment including e-frac technology. Most importantly, with this data, we will be able to make more informed decisions and selecting completions equipment that aligns with our sustainability values as well as our cost and performance requirements. We also announced our plans to seek a responsible natural gas certification for 100% of our Appalachian production through Ekahau [Phonetic] origin. This ISO based framework evaluates our operations under a rigorous set of ESG performance criteria with independent verification. The third party verification is ongoing and we expect to conclude the process in the next couple of months. Additionally, we are working with project canary toward the responsibly sourced gas designation for approximately 300 million a day of our production utilizing their trust well process. As part of our relationship with project canary, we are also installing continuous emissions monitoring devices on three of our well pads. We expect -- we expect these installations to be completed by the end of the year. In addition, since June of this year, we have committed to the use of compressed air or electric power pneumatics on every new Seneca development pad. And we are retrofitting existing natural gas pneumatics [Phonetic] on return trip pads to also run on compressed air. This will continue to reduce our already low methane emissions intensity as we strive to meet our long term emissions reduction goals. All of these initiatives are key steps that demonstrate our commitment to sustainability and we will remain focused on furthering and building upon these efforts throughout the coming years. In closing Seneca's business is fundamentally sound with a great outlook. The added scale and synergies from our 2020 acquisition and recent growth have reduced operating costs and strengthened our margins. Our larger scale and increased inventory has given us the opportunity to further optimize our development program leading to improved capital efficiency and driving earnings and cash flows higher. We also operate in one of the lowest emissions intensity basins in the world and work hard to be on the leading edge of the industry sustainability initiatives. This dual focus on enhancing free cash flow, while reducing our environmental footprint positions us well for ongoing success. National Fuel closed out its fiscal year on a strong note with earnings coming in at $0.95 per share. For the full year after adjusting for several items impacting comparability, operating results were $4.29 per share. This is well above the high end of our guidance range and was driven by several factors. First, the significant improvement in natural gas and crude oil prices during the quarter drove higher after hedging price realizations. Second, operating cost came in below expectations as we continue to find ways to optimize our cost structure across all of our businesses. Lastly, we completed some tax planning around intangible drilling costs. This resulted in an adjustment to a state tax valuation allowance reducing our effective tax rate. Turning to fiscal '22, we now expect earnings to be in the range of $5.05 to $5.45 per share, an increase of $0.65 per share or 14% at the midpoint from our preliminary guidance. A few items are driving this change. First, we've increased our commodity price assumptions. We're now forecasting NYMEX natural gas prices of $5.50 per MMBtu for the first half of our fiscal year and $3.75 from April through September. We've also increased our NYMEX crude oil price assumption to $75 per barrel. While we're well hedged for the year approximately 25% of forecasted production remains unhedged. For reference, a $0.25 change in our natural gas price assumption is now expected to impact earnings by $0.12 per share. Given the cadence of our production profile, roughly two-thirds of this price impact would occur in the second half of the year. On the oil side, our sensitivities remain unchanged with a $5 change oil impacting earnings by $0.03 per share. The second major driver is a modest increase in Seneca's LOE. We've increased our range of $0.01 [Phonetic] now projecting $0.83 to $0.86 per Mcfe for the year. This is entirely driven by streaming operations in California. The higher price of natural gas will lead to higher steam fuel costs. However, this increase will be more than offset by the forecasted increase in oil revenues. The last major driver is the impact of the system modernization tracker extension in our New York utility. We expect us to increase margin at the utility by approximately $4 million for the year. One other major item of note related to a recent preceding in our Pennsylvania Utility jurisdiction. While this doesn't impact earnings or cash flow, it will have an impact on the utility's EBITDA, it's a bit complex, so I'll hit the high point. Due to the over-funded status of our Pennsylvania jurisdictions post-employment benefit plans, we made a regulatory filing to stop recovering these costs from our customers each year, using money previously set aside in the trust we also agreed to pass back a regulatory liability through one-time and ongoing bill credits. [Technical Issues] material impact to our ongoing earnings or cash flows. The point of note here is that the annual collection of OPEB funding costs is reflected as margin in the utility's financial statements. While the vast majority of the OPEB expense is related to non-service costs which sit below operating income. By reducing our OPEB collections from approximately $10 million to zero, we expect to see an equivalent reduction in utility EBITDA. This doesn't fundamentally change the business in any way, but we wanted to point out the negative impact to EBITDA despite no change to our expected earnings or cash flows. Switching over to capital. Fiscal '21 came in at $770 million for the year, which was toward the lower end of our guidance range. This was primarily driven by costs coming in below expectations in our Midstream businesses including the FM100 project Dave mentioned earlier. For fiscal '22, our guidance was $640 million to $760 million remains unchanged. Bringing this altogether, our balance sheet is in a great position and our free cash flow outlook is strong. In fiscal '21, funds from operations exceeded cash capital expenditures by approximately $120 million for the year. Adding to that, the proceeds from the sale of our timber assets which closed in December, we generated free cash flow in excess of our $165 million dividend payment for the year. As we look to fiscal '22, we would expect our funds from operations to exceed capital spending by $300 million to $350 million. At this level, our free cash flow, we are projecting more than $150 million of excess cash after funding our dividend for the year. This provides additional cash flow that can be directed toward the debt-reduction efforts Dave referenced to earlier. While our free cash flow is in line with previous expectations, I did want to spend a minute talking about one item on the balance sheet. Given the recent run up in prices, we recorded $600 million mark to market liability associated with our hedge portfolio. Well, this is a rather large liability, our investment grade balance sheet minimize collateral requirements such that we were limited to approximately $90 million posted with counterparties at the end of September. Today, the collateral amount has been further reduced now sitting closer to $25 million. As we progressed through the winter, most of those hedges driving the current liability will settle and as a result, we expect to have minimal, if any collateral requirements. In conclusion and echoing, Dave's earlier comments, we're in a great spot, the outlook for the business is strong and our ability to generate significant and sustainable free cash flow, positions us well to deliver shareholder value well into the future.

q4 gaap earnings per share $0.95. qtrly adjusted operating results of $87.3 million, or $0.95 per share. co is now projecting 2022 earnings to be within range of $5.05 to $5.45 per share.

In addition, on the call, we will discuss non-GAAP financial measures. Investors can find both a detailed discussion of business risks and reconciliations of non-GAAP financial measures to GAAP financial measures in the company's Annual Report, Quarterly Report and other forms filed or furnished with the SEC. He is a seasoned public company CFO with exceptional strategic, analytical and change management skills. He's an experienced developer of team capability and an outstanding addition to the Six Flag's team. He played a vital role as interim CFO during a very challenging time. He will continue to report to me in a large operational role that will compliment his individual development and skills and position him to contribute significantly to our long term success. This quarter tested everyone at the company and I am proud of how the entire team rose to meet the challenges that the world is facing. Seeing how the team responded over the last several months gives me even more conviction that Six Flags is a truly special company. In the early part of the quarter, we were in a crisis management mode. It was an all hands on deck effort to keep our people safe, reduce our cash burn and bolster our liquidity position. However, as a situation has evolved over the last summer months, we have switched from defense to offense. Our number one priority is always safety, but we have broadened our focus. We learned how to operate profitably with reduced capacity today and how we can be an even stronger company on the other side of the pandemic. In this very dynamic environment, I am proud of how the team has reached a level of nimbleness and agility. We have been able to respond very quickly and effectively as the situation continues to evolve. And the trends we are seeing in the business. Then Sandeep will discuss our financial performance and liquidity position. Before opening up for QA, I will highlight our transformation initiative to drive earnings growth, and improve the guest experience, so that we emerge stronger and more profitable after the crisis. On March, 13, we suspended our operations in response to the COVID 19 pandemic and local government mandates. Our immediate focus was on liquidity and cash flow. We shored up our liquidity and implemented aggressive cost saving measures that partially offset the resulting revenue decline. We also proactively communicated with our guests to preserve our act past base during this period of uncertainty. These efforts have been very successful as we limited our net cash outflow in the second quarter to approximately $25 million per month, a significant improvement compared to the average $30 million to $35 million per month that we projected on our last earnings call. Over the last few months we work closely with local health authorities, disease experts and others in the theme park industry. We also solicited extensive feedback from our guests to understand their expectations and they socially distance world. This work has enabled us to implement best-in-class safety protocols, including health screenings of team members, temperature checks of both team members and guests, mandatory facemask requirements for anyone in our parks, pervasive social distancing markers, that abundance of hand sanitizing and hand washing stations added throughout our parks in frequent sanitization of rides and other high touch points. We also established clean teams to uphold the highest standards of cleanliness. The crisis has allowed us to accelerate the introduction of technology into our parks that will have ongoing benefits even after the crisis subsides. We have used technology to remove some of the pain points common theme parks. These include advanced reservations online, which spread out the entry times for guests to avoid wait times at the gate, contactless temperature and security screening to ease entry into the park, mobile food ordering to reduce the time it takes to fulfill an order and encourage guests to add on to their order through easier menu access and testing of reverse ATM machines to reduce cash transactions. In addition, we we'll be testing our newly developed virtual queuing system in one of our parks. Waiting in long lines is consistently ranked as the number one pain point and our guests experience in virtual queuing technology will allow customers to push a button on their smartphone to secure a seat on one of our major coasters without physically standing in line. If a testing is successful, we will begin rolling the technology out to other parks. With our new operating protocols and technology in place, we have resumed limited operations at 14 of our parks. In addition, we opened our Safari as a stand-alone attraction at Six Flags Great Adventure and animal experience at Six Flags Discovery Kingdom, our hotel waterpark at The Great Escape in our campground at Darien Lake. We've used a cautious and phased approach with limited attendance in accordance with local conditions and government guidelines. Our park reopenings initially experienced solid demand as our customer saw opportunities to have fun in the safe and outdoor environment that our parks provide. In addition, guest feedback on our enhanced safety protocols has been very positive. However, a recent spike in coronavirus cases in many of the states in which we operate has had a negative impact on demand to this our parks. It is very difficult to forecast future demand trends in this rapidly changing environment. Based on capacity limitations designed to ensure a safe environment for guests as well as current demand trends. We expect daily attendance to be approximately 25% to 30% of prior year levels for the foreseeable future. This has resulted in our reducing some Park schedules to maximize attendance on the days we are open. There's no question that this is unprecedented environment has created challenges for our business. However, our parks have a number of advantages top rate during the pandemic compared to other out of home entertainment attractions. First, our parks our outdoor venues and spread over anywhere from a dozen to 100s of acres, allowing for social distancing. Second, our parks are open many hours throughout the day reducing the need for people to arrive or leave at the same time. Third, our parks are regionally diverse and we operate in the largest markets in the U.S., making us not overly reliant on one geographic region. Fourth, almost 90% of our gas come within driving distance. So we are not dependent on air travel or other public transportation. Finally, our parks generate cash flow in excess of their variable costs and significantly less than 25% of their maximum capacity. Although this crisis has affected our business profoundly in the short term, it has given us the opportunity to make necessary changes in the business that will benefit us in the long term. I'm very excited to be at Six Flags. I'm a huge fan of the brand and I've long admired the consumer experience that delivers. My first month on the job has only confirmed my view that the opportunities ahead are substantial. And the company is well positioned for its next round of profitable growth. I will begin by telling you a little bit about myself. I'll then discuss our second quarter financial results and liquidity position, and end by outlining our team priorities. I have 25 years of financial strategy experience, primarily in consumer facing businesses. Most recently, I was the CFO of Guest Incorporated, a publicly traded global multi channel lifestyle brand in the fashion industry and prior to that I worked in financials for Mattel Incorporated, one of the leading toy companies in the world. As CFO of Six Flags, I believe my primary role in partnership with Mike and the leadership team is to identify and drive a value creation agenda for the company. I've done this in the past, and believe that with the incredible branded company like Six Flags, we can generate significant value for all stakeholders. Turning to Six Flags financial performance, results for the second quarter was not comparable to prior, because we suspended the operations of our parks for almost the entire quarter during the pandemic. As Mike mentioned, we were able to limit our net cash outflow for the second quarter to $76 million. This was excluding the costs associated with our financing initiatives are approximately $25 million per month. This represented an improvement compared to the previously projected net cash outflow of $30 million to $35 million per month during the last nine months of 2020. The improvement was driven by discipline cost management, higher active pass base retention due to the lower than anticipated membership cancellations and Season Pass refund requests, as well as positive cash flow from our parks that have reopened. Total attendance for the quarter was 433,000, half of which came from our drive thru Safari and our Park in New Jersey, which was our first attraction to open. As a result, revenue declined by $458 million or 96% to $19 million. The reduction in revenue included $29 million of membership revenue from our members that have completed that initial 12 month commitment period that we diverted to future periods. But nearly when our members entered a 13 month membership, we recognize the revenue on a monthly basis, according to their cash payments. However, as part of our retention efforts, we offer an additional monster our members for every month they could not use their home park. As a result, for those members who have completed their initial 12 month commitment period, we will recognize revenue at the end of their membership term, whenever those members utilize their additional months. The decrease in revenue was also partially attributable, to a $29 million reduction in sponsorship, international agreements and accommodations revenue. This reduction was driven by three things, determination of the company's international contracts in China and Dubai, resulting in no revenues from those contracts in 2020. Before most sponsorship revenues, while the parks were not operating, the suspension of almost all accommodations operations. We recognized little revenue from corporate sponsorships in the second quarter, but are working with our corporate partners on a case-by-case basis to defer other planned programs until our parks are open. We also continue to recognize revenue from our parks being developed in Saudi Arabia. Guest spending per capita in the quarter decreased 15% to $35.77. Admissions per capita increased 5%, primarily due to a higher mixer single day pay tickets. In parks spending per capita decreased 43%, primarily due to the large proportion of attendance from our drive thru Supply Park, where there is no opportunity for in park spending. On the cost side, cash operating an SGA expenses, increased by $141 million or 60%, primarily due to proceedings measures we took, after we suspended operations. These savings were partially offset by costs incurred to open and operate our park toward the end of the quarter, including increased costs related to enhanced standardization and additional prevalent preventative measures to help minimize the spread of COVID-19. In addition we increased our legal reserves by $8 in the quarter. These expenses associated with several unrelated legal claims. Adjusted EBITDA for the quarter was a loss of $96 million, compared to income of $180 million in the prior period. We now have 14 of 26 parks open. These parks generated more than 50% of our 2019 attendance on a full year basis. Month to-date in July, we are averaging approximately 30% of Prior attendance at the parks that are open. We are holding steadily in certain states, but are doing much better and improving in states and I experienced of COVID-19 trends. This gives us confidence that we will see a rebound once the virus has abated. In the near-term it is unclear if we will be able to open any of the remaining parks this year, or whether we will close any of the open parks, earlier than prior years. At this time we are evaluating a modified version of our popular Fright Fest and holiday in the park events. Turing to our active pass base, which represents the total number of guests enrolled in the company's membership program all that have Season pass. As anticipated, we lost a significant season -- we lost significant season pass and membership sales while our parks were not operating. Our Active Pass Base as of the end of the second quarter was down 38% and compared to the prior year quarter. This includes 2.1 million members compared to 2.6 million at the end of calendar year 2019 and 2.4 million at the end of the first quarter 2020. Customers typically purchase new season passes or memberships when they are planning to visit a park. For that reason, the temporary closure of our park had a temporary but large impact on our ability to sell new season passes and memberships. However, we were pleased with the retention of our existing members as we retained 81% of our members since the start of the year through the second quarter. Since we opened our parks, we have begun to sell new memberships and season passes. We are proactively working to retain our existing members and season pass holders in several ways. First, we offer day-to-day extensions for our season pass holders for each operating day their home park is closed and extended our members by one month for each month that their home park is closed. Second, we offer to automatically upgrade memberships to the next tier level for the rest of the 2020 season for members who continue to make payments until the parks reopen. And third, we offer the pause payments for any member requesting to do so. We are taking members on pause as we open our parks, and we anticipate that most of our pause members will return to active paying members once we reopen our remaining parks. In addition, we are actively recruiting our cancelled members back to our programs now that park operations are beginning to resume. We have received very few refund requests of season passes to date. While we have no contractual obligation to make a refund, and almost all of our existing pass holders have used their pass at least once, the satisfaction of our guests is very important to us. We are actively engaged in conversations with them to ensure a continued loyalty. In response to our curtailed operations, we continued to take actions to reduce operating expenses and to defer or eliminate at least $50 million to $60 million of capital expenditures. We now expect to spend $80 million to $90 million on capital expenditures in 2020, $10 million lower than our previous projections. We have kept our full-time team members on the payroll and maintain their benefits at the same cost. We believe this has left us in the best position to open our parks quickly. However, we will continue to evaluate all options in the future, given the fluidity of the virus and any associated impacts on park operating calendars. Based on all the cost savings measures we have implemented, the retention of most of our membership base and positive cash flow from the parks that are currently open, we estimate that our net cash outflows will average between $25 million to $30 million per month through the end of 2020. This includes all operating expenditures and capital expenditures relating to our parks along with contractual rent, interest and partnership park distributions. Note that partnership park distributions occur only in the back half of the year and represent an average run rate of $7 million per month for the last six months of the year. We believe we have adequate liquidity to the end of 2021 even if we need to close our parks. However, if operations remain curtailed, we will likely need a further amendment to our senior secured leverage ratio covenant. We also incurred approximately $6 million of costs on the strategic work related to the transformation initiative that Mike will discuss. Costs in future periods are included in our net cash outflow estimates. However, we will not finalize the cost of associated savings until we complete the work. We anticipate that a portion of the work will be completed by the fourth quarter of 2020, and the remaining portion will be completed when the parts are again operating at more normal capacity. Deferred revenue of $182 million was down $53 million or 22% to prior year, driven by fewer membership and season pass sales, while our parks have been closed. These lower sales were partially offset by the deferral of revenue out of the quarter from our members who have completed their initial 12-month commitment period and extension of visitation privileges into the 2021 season for our season pass holders and members in the initial 12-month commitment period. Our liquidity position as of June 30 was $756 million. This included $460 million of available revolver capacity, net of $21 million of letters of credit and $296 million of cash. This compares to a pro forma liquidity position of $832 million as of March 31, 2020, a reduction of $76 million or approximately $25 million per month. We do not expect to draw on our revolver until Q1, 2021. I now would like to turn to our immediate priorities for the company. First, reopen with caution and prioritize the health of our employees and guests. Second, focus on liquidity and minimizing cash expenditure while we go through this period of uncertainty. Third, be conservative with capex, ensuring we only invest in projects with a good return of investment. And finally, continue building business and team capability. We have withdrawn guidance due to the uncertain trajectory of the virus. However, like Mike, I am committed to providing additional disclosures when feasible and being as transparent as possible. Our capital allocation strategy will be focused on growing the base business and paying down debt to return our net leverage ratio to between three and four times adjusted EBITDA. We have suspended our dividend and share repurchases for the foreseeable future, and we believe targeting the low end of the range is appropriate given the new environment. In summary, despite the challenges our entire industry is facing, we have adapted our operations in response to the crisis, and we remain a healthy company with a bright future. We will not let these difficulties slow down our efforts to build new business capabilities and prepare the company for its next phase of profitable growth. Now, I will pass the call back over to Mike. Our focus is on building a stronger base business and reducing our net leverage ratio. We will be disciplined in this focus post the pandemic. We are developing a holistic transformation program that will allow us to accelerate growth and unlock significant new efficiencies as we emerge from the pandemic and ramp up to full-scale operations. We will focus on revenue generation and cost efficiency programs in our base business as we become a more agile, commercially driven and technology savvy organization. Our transformation will improve the guest end-to-end experience while reducing our operating costs. To this end, we have initiated a detailed review of our business. As we complete different work streams, we will provide our expectations for annual earnings improvements. Our transformation initiative is composed of three elements. The first element is top line growth. This element is about improving the end-to-end guest experience, starting with price and simplicity, website redesign and a compelling value proposition for food and beverage. One focus area that we previously highlighted was the recapture of lost single day guests. We already saw progress in this area through our focus and targeted offers prior to the COVID-19 crisis and it will continue to be a major focus going forward. The second element is organizational design. The purpose of this element is to enhance the guest and team member experience while creating cost efficiencies. We will reexamine what work belongs in the parks versus headquarters and eliminate any redundancy while being careful to protect the guest and team member experience. This organizational design will be constructed in a way that fosters an entrepreneurial culture and our park leadership teams. The third element is non-headcount cost reductions. We will leverage the scale of Six Flags and examine each area of our cash operating expenses to determine what is essential. We will capture savings by implementing consistent systems, standards and processes. In addition, we are beginning to revamp our environmental, social and governance program, which has a special emphasis on diversity and inclusion. This is a personal priority for me. I know the importance of this firsthand for my decades of experiences working with diverse teams and customer bases, including in multiple countries and cultures around the globe. I believe diversity and inclusion provide the necessary foundation for a sustainable and healthy business, more importantly, they are simply the values we should all uphold. We will integrate diversity and inclusion into our existing business agenda, and we will hold ourselves accountable by measuring our results to ensure that we make sustainable progress. Our plans will focus on five key areas. We are creating a diversity and inclusion council made up of members of our team to provide me as CEO, direct feedback on how we are doing and what we can do to improve. We are conducting robust training on diversity and inclusion for all of our team members, including dedicated sessions with our top 200 leaders on understanding the business rationale, identifying unconscious biases, and learning how to lead open and honest conversations with our team members. Three, address unconscious biases. We have updated our grooming, social media and hiring policies. We are also reviewing and correcting all branded names, park attractions and infrastructure that might be offensive in any way to our guests and team members. We expect our social media partners to model the same values. Four, build a diverse team. We will establish a leadership team that represents the diversity of our marketplace. We're reviewing and updating our recruiting and talent management programs to foster more objective processes for all team members. Five, partner with communities. We will proactively work with minority suppliers to develop long-term alliances. We will pledge up to $5 million cumulatively in investments and ticket value by the end of 2022 toward programs dedicated to equality and the socioeconomic advancement of people of color. Our transformation initiative is an ambitious and important program. And I am confident it will reshape our business for future profitable growth and sustained value creation coming out of the COVID-19 crisis. We look forward to updating you on our progress during the third quarter earnings call. Operator, at this point, could you please open the call for any questions.

q2 revenue fell 96 percent to $19 million. improves cash flow outlook from company's prior guidance. targeting significant improvement to its financial performance and to guest experience. six flags - will not make final determination of costs or associated savings until it completes work related to 'transformation initiative'. anticipates that a portion of work related to 'transformation initiative' will be completed by q4. resumed partial operations at many of its parks on a staggered basis near end of q2. total guest spending per capita for q2 of 2020 was $35.77, a decrease of $6.50. six flags - working with members, season pass holders to extend usage privileges to compensate for any lost days due to temporary park closures. offered members option to pause payments on their current membership. active pass base decreased 38 percent as of end of q2 of 2020. as of june 30, had cash on hand of $296 million, $460 million available under revolving credit facility. six flags - anticipates it has sufficient liquidity to meet cash obligations through end of 2021 even if currently open parks are forced to close. six flags - if operations continue to be significantly reduced in 2021, co would likely require additional covenant relief during 2021.

During the call, you'll be hearing from Steve Moster, our president and CEO; David Barry, our president of Pursuit; and Ellen Ingersoll, our chief financial officer. During the call, we'll be referring to certain non-GAAP measures, including loss before other items, adjusted segment EBITDA, and adjusted segment operating income or loss. I hope you all are staying safe and healthy. Following my opening comments, I'll hand the call over to David Barry to discuss our Pursuit business, and then I'll come back on to cover the GES business. Before turning to the business, I, first and foremost, want to commend our team members at Viad for their resiliency, positivity, and dedication during these challenging times. Like many businesses, we've had to make tough decisions by way of employee furloughs and wage reductions in order to protect our financial position in this unprecedented operating environment. Nevertheless, our team members have not missed a beat in acting quickly to help maintain the health and safety of our clients, guests, and the communities we operate in as our No. Now moving into our business. The first two months of the quarter were largely in line with our expectations. In March, we began to experience some operational impacts as the spread of COVID-19 began to reach all corners of the world, including some event postponement and cancellations. There were some signs of reprieve as CONEXPO-CON/AGG took place in early March with less than 3% of the floor space affected by exhibitor cancellations and attendee registrations of more than 100,000. However, by the end of March, travel and live event activity had essentially halted and with continued travel restrictions and social distancing guidelines in place, we are anticipating a very weak second quarter for 2020. In response, we took swift and effective steps to bolster our company's liquidity and financial position. We drew on our revolving line of credit to increase our cash position, and we've obtained a waiver of our financial covenants for the second quarter. We implemented aggressive cost-reduction actions, including furloughs, mandatory unpaid time off, and salary reductions for all employees across the company. Our executive management team voluntarily reduced its base salaries by 20% to 50%, and each of our nonemployee members of our Board of Directors has agreed to reduce his or her cash retainer by 50% for payments typically made to them in second quarter of 2020. We have limited all nonessential capital expenditures and discretionary spending. We have suspended future dividend payments and share repurchases. And finally, we've made changes to our executive management team to reduce costs and prioritize client-facing team members. In addition to some other terminations, Jay Altizer, president of GES, will be leaving the company, and I will be taking over the leadership of GES. As many of you know, this is a position I know well, having led GES before bringing Jay on board about two years ago. During the last two years, GES has undergone significant streamlining to improve the cost structure and create a more nimble organization, putting us in a much better position today to navigate the current environment. While these are extremely difficult steps to take, these actions are necessary to ensure that Viad and GES can outlast the challenging road ahead. I firmly believe the management team that's in place today is the right one to steer the company through these challenging times. We have successfully navigated past periods of disruption with a strict focus on cash flow and liquidity, a proven playbook that we are once again turning to. And as with other prior macro shocks, we believe this one presents us with an opportunity, if not a mandate, to rethink and reimagine how we run our business so that we can emerge in a stronger, more flexible position. So Pursuit came into the year with lots of momentum, and we saw a very strong start to 2020. At the end of February, revenue and EBITDA were well ahead of plan, with revenue up significantly from the prior year. And that's largely due to our acquisition of a controlling stake in the Mountain Park Lodges and outstanding results at FlyOver Iceland. By the middle of March, though, the effects of the global health crisis and pandemic were becoming more clear. So working with regional health authorities in three countries, we moved quickly to both facilities and organized teams into two workstreams, one being shutdown mode and the other being post-crisis recovery. More than anything, this decision to organize our teams along multiple workflows has given us the bandwidth to move quickly in a crisis and make good decisions. In the past 61 days, we've supported our communities through the donation of PP&E to regional health authorities, and we fed literally thousands of team and community members through a volunteer-driven meal program. Like all of you, we stand strongly behind emergency responders, doctors and especially nurses who are working bravely to help those who are sick, and we offer our sympathies to those who have lost loved ones. And It's obvious to point out that most of our second quarter bookings were impacted by governmental stay-at-home orders and the overall reduction in domestic and international travel, resulting in large numbers of cancellations. We're not isolated from the global impact on travel and hospitality, we find ourselves among many fine brands and companies that are facing these same challenges. Safety first is and always has been our No. It was never a question of if we would be reopening, but more importantly, how? Last week, we launched Pursuit Safety Promise, which was constructed using material from the CDC and regional health authorities. As guests return to our iconic locations and our team members are present to host them, we've taken steps to ensure that we can do that safely. And you can see all about that on the specifics on the Pursuit website. So fast forward 60 days, looking to our iconic locations and FlyOver experiences, we're seeing the world begin to open back up. FlyOver Iceland reopened last week in Reykjavik, and we expect to benefit from the over 30,000 units of presold product already in the hands of our Icelandic guests in that market. And for our first weekend of operation, we handily surpassed our visit projection while maintaining a safe environment for visitors. We appreciate the support of the Icelandic government as they've moved quickly to support both workers and businesses in this unprecedented global pandemic. As travel restarts, we believe Iceland's thoughtful management of this public health crisis and renowned reputation as a safe destination, will position the country and our FlyOver Iceland experience well. So let's travel to Canada, Western Canada, and we expect to begin safely opening facilities in Banff National Park and Jasper National Park at the beginning of June. We expect visitation to be below 2019 levels with less international visitors. However, we do anticipate more Canadians traveling within the country than usual. To date, we have bookings in late June, and well into the third and fourth quarters of 2020. We continue to take more every day. For the week ending May 10, we were net positive for bookings, meaning we took more new reservations than cancellations at both the Mount Royal Hotel and the Glacier View Lodge. Canadian government has been very industry-focused, has enacted several programs that have been super helpful, including wage subsidies of up to 75% for team members, and that's called the CEWS program. And this has been extended to August, as well as everything from rent abatements within National Parks. We head north to the great state of Alaska, we expect the National Parks in Denali and Kenai Fjords will open for summer 2020. When they do, we'll be there to safely host guests and staff. Our properties and attractions will open in Alaska on a staggered basis beginning mid-June, because we expect business levels to be impacted by the partial cancellation of many cruise departures from the lower 48. We'll be prepared to adapt our properties and attractions accordingly. So that means we'll shrink and expand the operating capacity of our experiences based on demand. Down the West Coast of Vancouver, talk about Vancouver for a second. Vancouver obviously expects that international visitation will be down from historical levels, but we do expect more Canadians will visit Vancouver and enjoy the culture and beauty of that amazing city, including FlyOver Canada. And next, south of Montana, we expect to begin opening our facilities around Glacier National Park in June. Over 90% of guests to this area are self-driving Americans, and so with record low gas prices and the overall safety allure of a family road trip, we anticipate attendance in Glacier will be less impacted than other locations. In terms of future projects, we've made great progress on Sky Lagoon in Iceland and are on track for a late spring 2021 opening. The team has been working hard on FlyOver Las Vegas. And we've made great strides on the development of the creative product that will be shown in 2021. But finally, we believe that the power of iconic locations will not be dimmed. And looking back throughout history and now looking ahead into 2021, Pursuit is well-positioned to benefit from the pent-up perennial demand for iconic, unforgettable and inspiring experiences. So back over to Steve to talk about GES. Through February, GES performed well with overall results tracking slightly ahead of forecast. We were looking forward to a tremendous year with strong momentum on the corporate side and an incremental $100 million of revenue from three nonannual events all set to take place this year. Fortunately, the first of the major nonannual events, CONEXPO-CON/AGG took place as scheduled in early March before wide-sweeping stay-at-home orders and other restrictions went into place as a result of COVID-19. As event activity essentially halted, we drew upon our logistical capabilities to help our communities in the battle against COVID. We partnered with facilities, other contractors and members of the trade to convert four large exhibition centers in Chicago, London, New York City and Edmonton, Canada into temporary hospitals or shelters. This was around the clockwork completed in a very short time, and we're proud of our employees for their drive and commitment to this important work. Where we sit today, event activity has largely been canceled or postponed through July. Exactly when large-scale events will resume remains unclear and will ultimately be determined by the lifting of restrictions by local authorities and at the discretion of the event organizers. Just yesterday, MINExpo, one of our three major nonannual events that was scheduled to take place in Las Vegas in September, officially announced that it was postponing until September 2021. And based on a reopening plan recently announced in Illinois, it appears unlikely that IMTS will be able to take place as previously scheduled for this September in Chicago. That said, we do still have events on the books for the third and fourth quarter, including the International Woodworking Fair, a biannual event that is set to take place in Atlanta this August. And we continue to receive and win RFPs for client work in late 2020 and 2021. So there are definite signs that the live event industry is ready for a comeback as circumstances permit. We are closely monitoring commentary and decisions made by local governments to understand how they intend to handle the reintroduction of exhibitions and conventions in their economic reopening plans. While we wait for those decisions, we have effectively hibernated GES by leveraging its high variable cost model to minimize operating costs, while retaining the ability to reactivate parts of the company as business returns. We expect certain sectors will return faster than others, including pharma and technology, which are two of our strongest verticals on the corporate side of our business. We are taking this opportunity to design and build a better business, one that's more profitable, less asset-intensive, and more focused on our clients' future needs. Our focus continues to be on transforming our exhibition business, which is the largest part of our revenue today and driving share gains in our corporate business, while smaller competitors struggle to stay alive during this challenging time. When we begin to restart GES, we will do so with the future in mind and expect to emerge leaner, more nimble and more client-focused. As a service business, we have a highly variable, largely labor-based cost structure, which allowed us to act very quickly when the COVID-19 restrictions began occurring. Both business segments were able to flex down very quickly as conditions weakened. At Pursuit, we immediately reduced more than half of our costs and still have additional cost levers to pull if conditions do not begin to improve in the coming months. We can expand and contract the operating capacity of our experiences based on fluctuating business levels, which is a core competency for us, given the normal seasonal demand patterns of this business. At GES, more than two-thirds of our costs are entirely variable with an even larger percentage able to be quickly adjusted based on business demand. We essentially entered a hibernation mode until events return, reducing our semi-variable cost by approximately 70%, and we stand ready to quickly turn the faucet back on as events return. In addition to reducing our costs, we took a variety of other steps to preserve cash. We significantly reduced or eliminated planned capital expenditures, including both nonessential maintenance and small growth capital projects, and we slowed the pace of the two Pursuit FlyOver projects in development. We amplified our focus on working capital management, we engaged in productive dialogues with landlords and local tax jurisdictions to eliminate or defer spending where possible and we received some benefits from various government relief programs, including wage subsidies offered in Canada, the U.K. and the Netherlands, as well as U.S. payroll tax deferrals available under the CARES Act. We believe we have an adequate cash position and balance sheet to weather the near-term impacts of COVID-19. At March 31, our cash balance was $130.5 million, and in early April, we drew the remaining $33 million down on our revolver, bringing our total cash at the beginning of the second quarter to approximately $163 million. Given the swift and deep cost savings actions we've taken, we have significantly reduced our operating costs and expect our cash outflow during the second quarter will approximate $40 million. This assumes continued collection of outstanding receivables, minimal new revenue, and no postponed events coming back in the quarter. As it relates to our revolving credit facility, we were in compliance with all financial covenants at the end of the first quarter, and we have already received a waiver of financial covenants for the second quarter. This waiver, combined with our cash position, gives us important breathing room to negotiate longer-term covenant relief and line up additional sources of capital as we prepare for COVID impacts to persist into the third quarter and perhaps beyond. We are working closely with our lender group and outside advisors to ensure that Viad is sufficiently capitalized to withstand the downturn and emerge in a position of strength, with Pursuit poised to continue its pre-COVID growth trajectory. As David mentioned, we believe experiential trips will rebound more quickly than large events, and this economic downturn may ultimately bring interesting investment opportunities we hope to be able to pursue. Now switching over to our preliminary first-quarter results, which were in line with our pre-announcement in mid-March. First, let me comment on the preliminary nature of these results. The impact of COVID-19 has necessitated additional asset impairment testing, which we are currently working through. We do not expect the noncash impairment charges to impact cash flow, debt covenants or ongoing operations. However, we do expect the impairment charges to have a material impact on the final GAAP financial results presented in our Form 10-Q, which we expect to file no later than June 15, 2020. Preliminary revenue was $306 million, up 7.1% from the 2019 first quarter primarily due to positive share rotation of approximately $57 million at GES, partially offset by show postponements and cancellations due to the COVID-19 pandemic. January and February were in line with our original expectations, while March was impacted by postponements and cancellations resulting from virus concerns, causing us to reduce our original guidance for the first quarter and withdraw our full-year guidance. GES revenue was $292.5 million, up $17.6 million or 6.4%. This growth was largely due to the occurrence of a nonannual CONEXPO-CON/AGG trade show in early March before the COVID effects were fully felt. Pursuit revenue was $13.5 million, up $2.9 million or 26.8%. This is a seasonally slow quarter for Pursuit and although we began to feel the effects of COVID-19 during late March, Pursuit finished the quarter with higher revenue than 2019, largely due to strong pre-COVID results from our acquisition of Mountain Park Lodges and our new FlyOver Iceland attraction. Preliminary net loss attributable to Viad was $10.6 million versus $17.8 million in the 2019 first quarter. And preliminary net loss before other items was $8.5 million versus a loss of $10.2 million in the 2019 first quarter. This non-GAAP measure excludes impairment and restructuring charges, acquisition, integration and transaction-related costs, and attraction start-up costs, as well as a legal settlement recorded in the 2019 first quarter. Preliminary adjusted segment operating loss was $8.4 million versus a loss of $11 million in the 2019 first quarter, and adjusted segment EBITDA was $6.9 million, up $4.7 million from the 2019 first quarter. The increase in adjusted segment EBITDA was primarily due to higher revenue at GES and the elimination of performance-based incentives partially offset by increased seasonal operating losses at Pursuit driven by the June 2019 acquisition of Mountain Park Lodges and the opening of FlyOver Iceland. GES adjusted segment EBITDA was $19.1 million, up from $10.9 million in the 2019 first quarter. And Pursuit adjusted segment EBITDA was negative $12.2 million versus negative $8.8 million in the 2019 first quarter. The second quarter will be extremely difficult, but our quick move to reduce variable expenses into increased liquidity will help protect our financial position. We've essentially been in hibernation mode since early in second quarter, maintaining the lowest level of expenses we prudently can, while we wait for the slow resumption of travel and events. At Pursuit, as you know, the seasonally strongest period is June through September. And as David said, we believe the business will be the first to recover and are beginning to see signs of this. GES is expected to take longer, although we are hopeful that as certain locations begin to lift restrictions, events will start to take place again during the third quarter. We've controlled the factors we can control. We've reduced expenses, prudently managed our balance sheet and maintained very close contact with our lending partners. We are in a good financial footing to manage through a brutal second quarter and hope to emerge in the third quarter with growing visitation and bookings at Pursuit and the cessation of cancellations for future events at GES. And now I'll hand the call back to you, Steve, for your concluding remarks. In closing, the spread of COVID-19 affected our overall results for first quarter and we anticipate continued impact in the near term as planned events further unfold, air travel remains at a bare minimum for the time being, and the state-by-state regulations continue to shift. We expect GES will experience a patient Rebound, whereas Pursuit will see more benefit in the short term as stay-at-home orders are lifted and domestic regional travel resumes. As Ellen shared previously, we have taken swift steps to bolster our near term liquidity, and we are prepared to take other prudent steps to ensure we weather the storm. We have an experienced management team that has navigated through previous downturns and are more than capable of leading this company through this uncertain time. We see the current environment as an opportunity to reimagine the demand side of our two business segments and map out where we believe to be the most profitable pockets of opportunity and growth as we exit this downturn. We anticipate making some strategic changes to the business in order to better facilitate the evolving needs of our clients, better serve our guests and provide significant value for our stakeholders as we improve our competitive position in a post-COVID-19 universe. And we believe in the longevity and resiliency of our business, exhibitions, conferences and corporate events are a vital part of the economic engine, facilitating sales, networking and education and a relatively low-cost and high-impact way. The replacement of live events by virtual events has been tested in the past and will likely be tested again. But even in the most productive of virtual worlds, we do not believe that face-to-face meetings will go away. They may change and our industry will change along with it. In our GES business, we will focus on shrinking our footprint and choosing which markets we want to be in and which ones we don't. On the Pursuit side, iconic location and experiences cannot be replaced, and people will not choose to stay at home indefinitely. We will once again venture out to explore the world in its amazing places perhaps with pent-up demand. More than ever, we believe that experiences will be more valuable than things.

sees q1 adjusted normalized ffo $0.66-$0.71 per share. qtrly attributable net income per share $0.29. qtrly normalized ffo per share $0.83.

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