Market Newsdesk

April 29, 2021 6:34 am

CBIZ Reports First-Quarter 2021 Results; Raises Full-Year 2021 Guidance

FIRST-QUARTER HIGHLIGHTS:

– TOTAL REVENUE +8.4%

– SAME-UNIT REVENUE +3.6%

– EPS FROM CONTINUING OPERATIONS +39.4%

– FULL-YEAR 2021 GUIDANCE RAISED TO 8% TO 10% GROWTH IN REVENUE AND 12% TO 15% GROWTH IN EPS

PR Newswire

CLEVELAND, April 29, 2021 /PRNewswire/ — CBIZ, Inc. (NYSE: CBZ) (the “Company”) a leading provider of financial, insurance and advisory services, today announced results for the first quarter ended March 31, 2021.

For the 2021 first quarter, CBIZ recorded revenue of $300.7 million, an increase of $23.2 million, or 8.4%, over the $277.5 million reported in the same period in 2020. Newly acquired operations, net of divestitures, contributed $13.3 million, or 4.8%, to first quarter 2021 revenue growth. Same-unit revenue increased by $10.0 million, or 3.6%, for the quarter, compared with the same period a year ago. Income from continuing operations was $50.2 million, or $0.92 per diluted share in the 2021 first quarter, compared with $36.9 million, or $0.66 per diluted share for the same period a year ago. Adjusted EBITDA for the first quarter was $73.3 million, compared with $57.0 million for the same period in 2020.

During the first quarter of 2021, the Company repurchased a total of 1.1 million shares of its common stock. Between March 31, 2021, and April 27, 2021, the Company repurchased an additional 270,000 shares. The balance outstanding on the Company’s unsecured credit facility on March 31, 2021, was $162.0 million with $228.7 million of unused borrowing capacity.

Jerry Grisko, CBIZ President and Chief Executive Officer, said, “Our business experienced strong performance through the first quarter of 2021, and we are pleased to announce ongoing growth in total revenue, same-unit revenue, earnings per share, and adjusted EBITDA over the same period last year.”

Grisko continued, “In addition to the momentum resulting from our first quarter performance, I am also pleased to announce the acquisition of the non-attest assets and business of Berntson Porter, a leading provider of accounting and related professional services located in Bellevue, Washington, with annual revenue of approximately $26 million. We’ve been searching for a platform acquisition in the Pacific Northwest for a number of years and are excited to have found the ideal firm with Berntson Porter. Berntson Porter’s outstanding reputation for exceptional client service, commitment to the growth and development of their team members, and service to the communities where they work and live align with CBIZ’s core values and beliefs. We welcome founders Robert Berntson and Greg Porter and President Mary Actor, in addition to the entire Berntson Porter team to CBIZ.”

“As a result of our strong performance in the first quarter of this year and the acquisition of Berntson Porter effective May 1, 2021, we are revising upward our previously announced guidance. Our revised guidance is to grow revenue between 8% to 10% and earnings per share between 12% to 15% for the full year 2021 compared to the full year 2020,” concluded Grisko.

2021 Outlook

The Company expects total revenue growth within a range of 8% to 10% over the prior year.
Although a number of factors may impact the tax rate, the Company expects an effective tax rate of approximately 25%.
The Company expects a weighted average fully diluted share count within a range of 54.0 million to 54.5 million shares.
The Company expects to grow fully diluted earnings per share within a range of 12% to 15% over the prior year.

Conference Call
CBIZ will host a conference call at 11:00 a.m. (ET) today to discuss its results. The call will be webcast live for the media and the public, and can be accessed at www.cbiz.com. Shareholders and analysts who would like to participate in the call can register at https://dpregister.com/sreg/10155213/e7145d9127 to receive the dial-in number and unique personal identification number. Participants may register at any time, including up to and after the call start time.

A replay of the webcast will be made available approximately two hours following the call on the Company’s website at www.cbiz.com. For those without internet access, a replay of the call will also be available starting at approximately 1:00 p.m. (ET), April 29, through 5:00 p.m. (ET), May 6, 2021. The toll-free dial-in number for the replay is 1-877-344-7529. If you are listening from outside the United States, dial 1-412-317-0088. The access code for the replay is 10155213.

About CBIZ
CBIZ is a leading provider of financial, insurance and advisory services to businesses throughout the United States. Financial services include accounting, tax, government health care consulting, transaction advisory, risk advisory, and valuation services. Insurance services include employee benefits consulting, retirement plan consulting, property and casualty insurance, payroll, and human capital consulting. With more than 100 offices in 31 states, CBIZ is one of the largest accounting and insurance brokerage providers in the U.S. For more information, visit www.cbiz.com.

Forward-Looking Statements
Forward-looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include, but are not limited to, the impact of COVID-19 on the Company’s business and operations and those of our clients; the Company’s ability to adequately manage and sustain its growth; the Company’s dependence on the current trend of outsourcing business services; the Company’s dependence on the services of its CEO and other key employees; competitive pricing pressures; general business and economic conditions; and changes in governmental regulation and tax laws affecting the Company’s insurance business or its business services operations. A more detailed description of such risks and uncertainties may be found in the Company’s filings with the Securities and Exchange Commission at www.sec.gov.

CBIZ, INC. FINANCIAL HIGHLIGHTS (UNAUDITED) THREE MONTHS ENDED MARCH 31, 2021 AND 2020 *(In thousands, except percentages and per share data)*

	Three Months Ended March 31,
	2021	%	2020	%
Revenue	$ 300,730	100.0 %	$ 277,455	100.0 %
Operating expenses ⁽¹⁾	223,971	74.5	199,827	72.0
Gross margin	76,759	25.5	77,628	28.0
Corporate general and administrative expenses ⁽¹⁾	14,483	4.8	10,489	3.8
Operating income	62,276	20.7	67,139	24.2
Other income (expense):
Interest expense	(877)	(0.3)	(1,119)	(0.4)
Gain on sale of operations, net	—	—	95	—
Other income (expense), net ⁽¹⁾⁽²⁾	4,789	1.6	(15,800)	(5.7)
Total other income (expense), net	3,912	1.3	(16,824)	(6.1)
Income from continuing operations before income tax expense	66,188	22.0	50,315	18.1
Income tax expense	15,972		13,453
Income from continuing operations	50,216	16.7	36,862	13.3
Loss from operations of discontinued businesses, net of tax	(7)		(14)
Net Income	$ 50,209	16.7 %	$ 36,848	13.3 %

Diluted income per share:
Continuing operations	$ 0.92	$ 0.66
Discontinued operations	—	—
Net income	$ 0.92	$ 0.66

Diluted weighted average common shares outstanding	54,436	55,945
Other data from continuing operations:
Adjusted EBITDA ⁽³⁾	$ 73,317	$ 57,043

(1)

CBIZ sponsors a deferred compensation plan, under which a CBIZ employee’s compensation deferral is held in a rabbi trust and invested accordingly as directed by the employee. Income and expenses related to the deferred compensation plan are included in “Operating expenses” and “Corporate general and administrative expenses,” and are directly offset by deferred compensation gains or losses in “Other income (expense), net.” The deferred compensation plan has no impact on “Income from continuing operations before income tax expense.”

Income and expenses related to the deferred compensation plan for the three months ended March 31, 2021, and 2020 are:

	Three Months Ended March 31,
	2021	% of Revenue	2020	% of Revenue
Operating expenses	$ 4,616	1.5 %	$ (14,800)	(5.3)%
Corporate general and administrative expenses	$ 496	0.2 %	$ (1,804)	(0.7)%
Other income (expense), net	$ 5,112	1.7 %	$ (16,604)	(6.0)%

Excluding the impact of the above-mentioned income and expenses related to the deferred compensation plan, the operating results for the three months ended March 31, 2021, and 2020 are:

	Three Months Ended March 31,
	2021				2020
	As	Deferred Compensation		% of	As	Deferred Compensation		% of
	Reported	Plan	Adjusted	Revenue	Reported	Plan	Adjusted	Revenue
Gross margin	$ 76,759	$ 4,616	$ 81,375	27.1 %	$ 77,628	$ (14,800)	$ 62,828	22.6 %
Operating income	$ 62,276	$ 5,112	$ 67,388	22.4 %	$ 67,139	$ (16,604)	$ 50,535	18.2 %
Other income (expense), net	$ 4,789	$ (5,112)	$ (323)	(0.1)%	$ (15,800)	$ 16,604	$ 804	0.3 %
Income from continuing operations before income tax expense	$ 66,188	$ —	$ 66,188	22.0 %	$ 50,315	$ —	$ 50,315	18.1 %


(2)	Included in “Other income (expense), net” for the three months ended March 31, 2021, and 2020, is expense of $0.7 million and income of $0.7 million, respectively, related to net changes in the fair value of contingent consideration related to CBIZ’s prior acquisitions.
(3)	Refer to the financial highlights tables for a reconciliation of Non-GAAP financial measures to the nearest generally accepted accounting principles (“GAAP”) financial measure, and for additional information as to the usefulness of the Non-GAAP financial measures to shareholders and investors.

CBIZ, INC. FINANCIAL HIGHLIGHTS (UNAUDITED) *(In thousands)*

SELECT SEGMENT DATA

	Three Months Ended March 31,
	2021	2020
Revenue
Financial Services	$ 204,149	$ 188,777
Benefits and Insurance Services	87,239	79,612
National Practices	9,342	9,066
Total	$ 300,730	$ 277,455

Gross Margin
Financial Services	$ 62,403	$ 50,179
Benefits and Insurance Services	20,306	14,389
National Practices	801	783
Operating expenses – unallocated (1):	–	–
Other expense	(2,135)	(2,523)
Deferred compensation	(4,616)	14,800
Total	$ 76,759	$ 77,628

(1)

Represents operating expenses not directly allocated to individual businesses, including stock-based compensation, consolidation and integration charges, and certain advertising expenses. “Operating expenses – unallocated” also includes gains or losses attributable to the assets held in a rabbi trust associated with the Company’s deferred compensation plan. These gains or losses do not impact “Income from continuing operations before income tax expense” as they are directly offset by the same adjustment to “Other income (expense), net” in the Consolidated Statements of Comprehensive Income. Net gains/losses recognized from adjustments to the fair value of the assets held in the rabbi trust are recorded as compensation expense in “Operating expenses” and “Corporate, general and administrative expenses,” and offset in “Other income (expense), net.”

CBIZ, INC. SELECT CASH FLOW DATA *(In thousands)*
	Three Months Ended March 31,
	2021	2020
Net income	$ 50,209	$ 36,848
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization expense	6,252	5,704
Bad debt expense, net of recoveries	58	2,289
Adjustments to contingent earnout liability, net	660	(684)
Stock-based compensation expense	2,855	2,023
Other noncash adjustments	1,265	(311)
Net income, after adjustments to reconcile net income to net cash used in operating activities	61,299	45,869
Changes in assets and liabilities, net of acquisitions and divestitures	(76,120)	(64,500)
Operating cash flows used in continuing operations	(14,821)	(18,631)
Operating cash used in discontinued operations	(6)	(16)
Net cash used in operating activities	(14,827)	(18,647)
Net cash provided by investing activities	229	4,355
Net cash (used in) provided by financing activities	(2,960)	207,772
Net (decrease) increase in cash, cash equivalents and restricted cash	(17,558)	193,480
Cash, cash equivalents and restricted cash at beginning of year	$ 170,335	$ 146,505
Cash, cash equivalents and restricted cash at end of period	$ 152,777	$ 339,985

Reconciliation of cash, cash equivalents and restricted cash to the
consolidated balance sheet:
Cash and cash equivalents	$ 6,778	$ 216,942
Restricted cash	27,618	28,927
Cash equivalents included in funds held for clients	118,381	94,116
Total cash, cash equivalents and restricted cash	$ 152,777	$ 339,985




CBIZ, INC. SELECT FINANCIAL DATA AND RATIOS (In thousands)

	March 31, 2021	December 31, 2020
Cash and cash equivalents	6,778	4,652
Restricted cash	27,618	23,951
Accounts receivable, net	270,610	216,175
Current assets before funds held for clients	330,701	268,991
Funds held for clients	140,774	167,440
Goodwill and other intangible assets, net	756,684	756,750

Total assets	1,551,843	1,513,754

Current liabilities before client fund obligations	193,184	211,285
Client fund obligations	140,490	166,989
Total long-term debt	161,282	107,192

Total liabilities	824,060	811,134

Treasury stock	(629,439)	(595,297)

Total stockholders’ equity	727,783	702,620

Debt to equity	22.2 %	15.3 %
Days sales outstanding (DSO) – continuing operations ⁽¹⁾	91	72

Shares outstanding	53,416	54,099
Basic weighted average common shares outstanding	53,366	54,288
Diluted weighted average common shares outstanding	54,436	55,359

(1)

DSO is provided for continuing operations and represents accounts receivable, net, at the end of the period, divided by trailing twelve month daily revenue. The Company has included DSO data because such data is commonly used as a performance measure by analysts and investors and as a measure of the Company’s ability to collect on receivables in a timely manner. DSO should not be regarded as an alternative or replacement to any measurement of performance under GAAP. DSO on March 31, 2020, was 94.

CBIZ, INC. GAAP RECONCILIATION Income from Continuing Operations to Non-GAAP Financial Measures ⁽¹⁾ (In thousands)

	Three Months Ended March 31,
	2021		2020
Income from continuing operations	$	50,216	$	36,862
Interest expense		877		1,119
Income tax expense		15,972		13,453
Gain on sale of operations, net		—		(95)
Depreciation		2,553		2,283
Amortization		3,699		3,421
Adjusted EBITDA	$	73,317	$	57,043

(1)

CBIZ reports its financial results in accordance with GAAP. This table reconciles Non-GAAP financial measures to the most directly comparable GAAP financial measure, “Income from continuing operations.” Adjusted EBITDA is not defined by GAAP and should not be regarded as an alternative or replacement to any measurement of performance under GAAP. Adjusted EBITDA is commonly used by the Company, its shareholders and debt holders as a performance measurement to evaluate, assess and benchmark the Company’s operational results.

View original content:http://www.prnewswire.com/news-releases/cbiz-reports-first-quarter-2021-results-raises-full-year-2021-guidance-301279663.html

SOURCE CBIZ, Inc.

April 29, 2021 6:34 am

Itronics Reports Presence of Potentially Recoverable Iron, Copper, Silver, Cobalt, Other Strategic and Battery Metals, and Nutrient Materials, in Mine Tailings

PR Newswire

RENO, Nev., April 29, 2021 /PRNewswire/ — Itronics Inc. (OTC:ITRO) an emerging “Cleantech Materials” growth Company that manufactures GOLD’n GRO Multi-Nutrient Fertilizers and produces silver, zinc, and critical and battery minerals recovered from industrial and mining waste, today reported it has received a complete set of polymetallic assays on two tailings samples that were chosen to provide quantitative metal content information for two locations in the tailings pile on the mining claims at the Auric Fulstone project site in the Yerington Copper District near Yerington, Nevada.

The samples were chosen to provide quantitative measurements of the metal and mineral content of the material at the two locations in order to determine whether there would be enough potentially economic metal and mineral content to qualify the material for use in Rock Kleen process testing. The results are very positive and show the presence of a high percentage of iron and smaller amounts of silver, copper, cobalt, and manganese (battery minerals) and magnesium and potassium (critical minerals). The samples also contain gold and trace amounts of rare earth elements, lithium, and other rare metals.

“These tailings samples provide the opportunity to measure the recoverability of each of the contained metals and minerals by performing detailed recoverability studies at the Itronics Metallurgical R & D facility at its manufacturing plant located in Reno, Nevada“, said Dr. John Whitney, Itronics President. “This will be our first opportunity to evaluate the recoverability of such a wide range of metals from one set of samples and will give us a much better understanding of the potential scope of capabilities of the Rock Kleen Technology. If, as we believe, some of the contained metals and minerals can be recovered, that will justify launching a larger scale program to do detailed sampling and volume measurements of the tailings pile at the Auric Fulstone site to provide standardized feed material for the pilot plant and demonstration plant that is being planned.”

An important purpose of this work is to establish a tailings supply to support an operational testing and production facility to demonstrate the technology. Successful results from testing the tailings on the Auric claims will mean that the Itronics Rock Kleen demonstration plant can proceed with zero dependance on another mining company for feed to the plant.

Ultimately a portion of the facility would be configured to provide testing capabilities where potential customers for the technology would have the opportunity to have their tailings materials tested using the Rock Kleen Technology. The scale would be large enough to test Rock Kleen suitability for use at potential customer tailings locations.

The Auric Fulstone tailings materials contain a significant amount of the iron in magnetite, which is a high-grade iron ore, but which also has a variety of other commercial uses. Based on preliminary laboratory evaluation, the company believes that the magnetite will be relatively straight forward to recover and to classify into commercial products for sale. A portion of the iron may be chemically recoverable for use in the company’s GOLD’n GRO chelated liquid fertilizers. Based on prior testing of other mine tailings, the company believes that a portion of the calcium, magnesium, manganese, potassium, and sulfur in the tailings may be recoverable for use in the GOLD’n GRO fertilizers. The company anticipates that a portion of the copper and cobalt may be recoverable for separate sale. Rare earth elements, and other rare metals, including lithium, may be partially recoverable. “The proposed testing will be our first opportunity to evaluate the recoverability of all of these elements in the Rock Kleen chemical system,” said Dr. Whitney.

The Company does not yet have a budget for measuring the mineralogy of the samples, so that work will be performed as part of the ongoing testing later in the year. However, there will be a market for at least some of the mineral material. Itronics Metallurgical, Inc. will require fill material and construction materials for the construction at the Itronics Cleantech Materials Campus which would otherwise have to be purchased from outside parties. The Company believes that it will be less expensive to purchase some of these materials, after processing, from Auric Gold & Minerals, thereby providing a market for them at or near the processing site.

“The Rock Kleen Technology can play a role in economically and efficiently cleaning up mine tailings, some of which is in unsightly piles in the states that have a mining history. Under the Rock Kleen processing concept, all the rock is processed to recover its components for commercial use, maximizing sustainability and eliminating the waste from the environment,” said Dr. John Whitney. “The proposed Yerington Rock Kleen Demonstration plant will provide the first opportunity for us to show potential customers how this will work.”

Itronics, through its subsidiary Auric Gold & Minerals controls the Auric Fulstone Project which is adjacent to the former operating Minnesota Mine, which started as a copper mine but was commercially operated as an iron mine from the late 1940’s through the early 1960’s. Some of the tailings and some of the mining waste generated by the iron mining operation are located on the Auric Fulstone Project mining claims and are now under the control of Auric Gold & Minerals.

Itronics Technical and Administrative Services subsidiary, Whitney & Whitney, Inc. will be leading the project development effort beginning with sampling and measurement of the tailings, to be followed by planning and engineering, construction, and early-stage operation. Itronics Metallurgical will be performing the test work that is required to advance the process development. The Company plans to use independent laboratories to perform the required analyses. This is a procedure the Company has always followed. In addition, any cyanide testing that may be required will also be performed by independent qualified laboratories.

About Itronics

Headquartered in Reno, Nevada, Itronics Inc. is a “Zero Waste Energy Saving Technology” Company which produces GOLD’n GRO specialty liquid fertilizers, silver bullion, and silver-bearing glass. The Company is an emerging “critical minerals” producer. The Company’s goal is to achieve profitable cleantech materials technology driven organic growth in specialty GOLD’n GRO fertilizers, silver, zinc, and critical minerals. The Company’s technologies maximize the recovery and uses of metals and minerals and by doing this maximize sustainability.

The Company’s growth forecast centers upon its 10-year business plan designed to integrate its Zero Waste Energy Saving Technologies and to grow annual sales from $2 million in 2019, to $100 million in 2025.

The Company’s environmentally friendly award winning GOLD’n GRO liquid fertilizers, which are extensively used in agriculture, can be used for lawns and houseplants, and are available at the Company’s “e-store” on Amazon.Com at http://www.amazon.com/s/ref=bl_sr_lawn-garden?ie+UTF8&field-brandtextbin=GOLD%27n+GRO&node+2972638011. Due to expanded retail customer interest, GOLD’n GRO fertilizer may now be purchased in Reno, Nevada at “Buy Nevada First Gift Shop”, 4001 S. Virginia St.

Follow Itronics on Facebook: https://www.facebook.com/itronicsinc

Follow Itronics on Twitter: https://twitter.com/itronicsinc

* * * * * * * * * *

VISIT OUR WEB SITE: http://www.itronics.com

(“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: This press release contains or may contain forward-looking statements such as statements regarding the Company’s growth and profitability, growth strategy, liquidity and access to public markets, operating expense reduction, and trends in the industry in which the Company operates. The forward-looking statements contained in this press release are also subject to other risks and uncertainties, including those more fully described in the Company’s filings with the Securities and Exchange Commission. The Company assumes no obligation to update these forward-looking statements to reflect actual results, changes in risks, uncertainties or assumptions underlying or affecting such statements, or for prospective events that may have a retroactive effect.)

Contact:
Paul Knopick
888.795.6336

View original content:http://www.prnewswire.com/news-releases/itronics-reports-presence-of-potentially-recoverable-iron-copper-silver-cobalt-other-strategic-and-battery-metals-and-nutrient-materials-in-mine-tailings-301279654.html

SOURCE Itronics Inc.

April 29, 2021 6:34 am

Caterpillar Reports First-Quarter 2021 Results

PR Newswire

DEERFIELD, Ill., April 29, 2021 /PRNewswire/ —

Sales and revenues increased 12%
First-quarter 2021 profit per share of $2.77; adjusted profit per share of $2.87
Strong balance sheet with $11.3 billion of enterprise cash on hand

	First Quarter
($ in billions except profit per share)	2021	2020
Sales and Revenues	$11.9	$10.6
Profit Per Share	$2.77	$1.98
Adjusted Profit Per Share	$2.87	$1.65

Caterpillar Inc. (NYSE: CAT) today announced first-quarter 2021 sales and revenues of $11.9 billion, a 12% increase compared with $10.6 billion in the first quarter of 2020. The increase was due to higher sales volume driven by higher end-user demand and the impact from changes in dealer inventories. Dealers increased their inventories more during the first quarter of 2021 than during the first quarter of 2020.

Operating profit margin was 15.3% for the first quarter of 2021, compared with 13.2% for the first quarter of 2020. First-quarter 2021 profit per share was $2.77, compared with $1.98 profit per share in the first quarter of 2020. Adjusted profit per share in the first quarter of 2021 was $2.87, compared with first-quarter 2020 adjusted profit per share of $1.65. Adjusted profit per share for both quarters excluded restructuring costs, while the first quarter of 2020 also excluded a remeasurement gain of $0.38 per share resulting from the settlement of a non-U.S. pension obligation. Please see a reconciliation of GAAP to non-GAAP financial measures in the appendix on page 12.

For the three months ended March 31, 2021, enterprise operating cash flow was $1.9 billion. Caterpillar ended the first quarter with $11.3 billion of enterprise cash.

“I’m proud of our global team’s strong performance as they continue to serve our customers,” said Caterpillar Chairman and CEO Jim Umpleby. “We’re encouraged by improving conditions in our end markets and are proactively managing supply chain risks. Our dedicated team continues to execute our strategy for long-term profitable growth.”

CONSOLIDATED RESULTS

Consolidated Sales and Revenues

Consolidated Sales and Revenues Comparison

First Quarter 2021 vs. First Quarter 2020

To access this chart, go to

https://investors.caterpillar.com/financials/quarterly-results/default.aspx

for the downloadable version of Caterpillar first-quarter 2021 earnings.

The chart above graphically illustrates reasons for the change in consolidated sales and revenues between the first quarter of 2020 (at left) and the first quarter of 2021 (at right). Caterpillar management utilizes these charts internally to visually communicate with the company’s Board of Directors and employees.

Total sales and revenues for the first quarter of 2021 were $11.887 billion, an increase of $1.252 billion, or 12%, compared with $10.635 billion in the first quarter of 2020. The increase was primarily due to higher sales volume and favorable currency impacts related to the euro and the Australian dollar. The increase in sales volume was driven by higher end-user demand and the impact from changes in dealer inventories. Dealers increased inventories by $700 million during the first quarter of 2021 compared to $100 million during the first quarter of 2020.

Sales were higher across the three primary segments. Sales increased in Asia/Pacific, Latin America and EAME while sales in North America were about flat.

Sales and Revenues by Segment
(Millions of dollars)	First Quarter 2020		Sales Volume		Price Realization		Currency		Inter- Segment / Other		First Quarter 2021		$ Change		% Change

Construction Industries	$	4,306	$	1,006	$	(23)	$	146	$	24	$	5,459	$	1,153	27%
Resource Industries	2,084		132		(47)		33		14		2,216		132		6%
Energy & Transportation	4,349		(41)		7		74		118		4,507		158		4%
All Other Segment	109		9		—		1		11		130		21		19%
Corporate Items and Eliminations	(934)		(19)		(1)		—		(167)		(1,121)		(187)
Machinery, Energy & Transportation	9,914		1,087		(64)		254		—		11,191		1,277		13%

Financial Products Segment	814		—		—		—		(53)		761		(53)		(7%)
Corporate Items and Eliminations	(93)		—		—		—		28		(65)		28
Financial Products Revenues	721		—		—		—		(25)		696		(25)		(3%)

Consolidated Sales and Revenues	$	10,635	$	1,087	$	(64)	$	254	$	(25)	$	11,887	$	1,252	12%

Sales and Revenues by Geographic Region
	North America			Latin America			EAME			Asia/Pacific			External Sales and Revenues			Inter-Segment			Total Sales and Revenues
(Millions of dollars)	$		% Chg	$		% Chg	$		% Chg	$		% Chg	$		% Chg	$		% Chg	$		% Chg
First Quarter 2021
Construction Industries	$	2,126	2%	$	392	48%	$	1,081	22%	$	1,842	72%	$	5,441	26%	$	18	400%	$	5,459	27%
Resource Industries	657		(6%)	405		27%	474		20%	561		(1%)	2,097		6%	119		13%	2,216		6%
Energy & Transportation	1,782		3%	256		3%	1,093		4%	527		(9%)	3,658		1%	849		16%	4,507		4%
All Other Segment	13		160%	—		(100%)	3		(73%)	22		120%	38		36%	92		14%	130		19%
Corporate Items and Eliminations	(39)			—			—			(4)			(43)			(1,078)			(1,121)
Machinery, Energy & Transportation	4,539		1%	1,053		26%	2,651		13%	2,948		32%	11,191		13%	—		—%	11,191		13%

Financial Products Segment	476		(9%)	62		(11%)	100		(2%)	123		5%	761		(7%)	—		—%	761		(7%)
Corporate Items and Eliminations	(24)			(11)			(8)			(22)			(65)			—			(65)
Financial Products Revenues	452		(4%)	51		(12%)	92		(1%)	101		2%	696		(3%)	—		—%	696		(3%)

Consolidated Sales and Revenues	$	4,991	—%	$	1,104	24%	$	2,743	13%	$	3,049	31%	$	11,887	12%	$	—	—%	$	11,887	12%

First Quarter 2020
Construction Industries	$	2,085		$	265		$	889		$	1,073		$	4,312		$	(6)		$	4,306
Resource Industries	696			320			395			568			1,979			105			2,084
Energy & Transportation	1,738			249			1,053			578			3,618			731			4,349
All Other Segment	5			2			11			10			28			81			109
Corporate Items and Eliminations	(15)			(2)			(4)			(2)			(23)			(911)			(934)
Machinery, Energy & Transportation	4,509			834			2,344			2,227			9,914			—			9,914

Financial Products Segment	525			70			102			117			814			—			814
Corporate Items and Eliminations	(54)			(12)			(9)			(18)			(93)			—			(93)
Financial Products Revenues	471			58			93			99			721			—			721

Consolidated Sales and Revenues	$	4,980		$	892		$	2,437		$	2,326		$	10,635		$	—		$	10,635

Consolidated Operating Profit

Consolidated Operating Profit Comparison

First Quarter 2021 vs. First Quarter 2020

To access this chart, go to

https://investors.caterpillar.com/financials/quarterly-results/default.aspx

for the downloadable version of Caterpillar first-quarter 2021 earnings.

The chart above graphically illustrates reasons for the change in consolidated operating profit between the first quarter of 2020 (at left) and the first quarter of 2021 (at right). Caterpillar management utilizes these charts internally to visually communicate with the company’s Board of Directors and employees. The bar titled Other includes consolidating adjustments and Machinery, Energy & Transportation’s other operating (income) expenses.

Operating profit for the first quarter of 2021 was $1.814 billion, an increase of $410 million, or 29%, compared with $1.404 billion in the first quarter of 2020. The increase was primarily due to higher sales volume and higher profit from Financial Products, partially offset by higher selling, general and administrative (SG&A) and research and development (R&D) expenses, unfavorable price realization and higher manufacturing costs.

The increase in SG&A/R&D expenses was driven by higher short-term incentive compensation expense, which was reinstated in 2021. Unfavorable manufacturing costs were driven by higher short-term incentive compensation expense, partially offset by favorable material costs and lower warranty expense.

Profit (Loss) by Segment
(Millions of dollars)	First Quarter 2021		First Quarter 2020		$ Change		% Change
Construction Industries	$	1,035	$	640	$	395	62%
Resource Industries	328		304		24		8%
Energy & Transportation	666		602		64		11%
All Other Segment	3		7		(4)		(57%)
Corporate Items and Eliminations	(368)		(212)		(156)
Machinery, Energy & Transportation	1,664		1,341		323		24%

Financial Products Segment	244		105		139		132%
Corporate Items and Eliminations	(19)		47		(66)
Financial Products	225		152		73		48%

Consolidating Adjustments	(75)		(89)		14

Consolidated Operating Profit	$	1,814	$	1,404	$	410	29%

Other Profit/Loss and Tax Items

Other income (expense) in the first quarter of 2021 was income of $325 million, compared with income of $222 million in the first quarter of 2020. The change was due to the absence of a remeasurement gain resulting from the settlement of a non-U.S. pension obligation that occurred in the first quarter of 2020, which was more than offset by the favorable impacts from foreign currency exchange gains (losses), unrealized gains (losses) on marketable securities at Insurance Services, gains (losses) on commodity hedges and favorable pension and other postemployment benefit (OPEB) plan costs.
The company experienced foreign currency exchange net gains in the first quarter of 2021 across several currencies, compared with net losses in the first quarter of 2020. The favorable impact of unrealized gains (losses) on marketable securities was due to unrealized losses in the first quarter of 2020, compared with unrealized gains in the first quarter of 2021. The company experienced net losses in commodity hedges in the first quarter of 2020, compared with net gains in the first quarter of 2021.
The provision for income taxes for the first quarter of 2021 reflected a lower estimated annual tax rate of 26%, compared with 31% for the first quarter of 2020, excluding the discrete items discussed below. The comparative tax rate for full year 2020 was approximately 28%. The decrease in the estimated annual tax rate from full-year 2020 is primarily related to changes in the expected geographic mix of profits from a tax perspective for 2021.
In addition, a discrete tax benefit of $43 million was recorded in the first quarter of 2021, compared with an $8 million benefit in the first quarter of 2020, for the settlement of stock-based compensation awards with associated tax deductions in excess of cumulative U.S. GAAP compensation expense. A $43 million tax charge was also recorded in the first quarter of 2020 related to the $254 million remeasurement gain resulting from the settlement of a non-U.S. pension obligation.

CONSTRUCTION INDUSTRIES
(Millions of dollars)
Segment Sales
	First Quarter 2020		Sales Volume		Price Realization		Currency		Inter- Segment		First Quarter 2021		$ Change		% Change
Total Sales	$	4,306	$	1,006	$	(23)	$	146	$	24	$	5,459	$	1,153	27%

Sales by Geographic Region
	First Quarter 2021		First Quarter 2020		$ Change		% Change
North America	$	2,126	$	2,085	$	41	2%
Latin America	392		265		127		48%
EAME	1,081		889		192		22%
Asia/Pacific	1,842		1,073		769		72%
External Sales	5,441		4,312		1,129		26%
Inter-segment	18		(6)		24		400%
Total Sales	$	5,459	$	4,306	$	1,153	27%

Segment Profit
	First Quarter 2021		First Quarter 2020		Change		% Change
Segment Profit	$	1,035	$	640	$	395	62%
Segment Profit Margin	19.0%		14.9%		4.1 pts

Construction Industries’ total sales were $5.459 billion in the first quarter of 2021, an increase of $1.153 billion, or 27%, compared with $4.306 billion in the first quarter of 2020. The increase was due to higher sales volume driven by higher end-user demand and the impact from changes in dealer inventories. Overall, dealers increased inventories more during the first quarter of 2021 than during the first quarter of 2020.

In North America, sales increased slightly due to higher end-user demand partially offset by the impact from changes in dealer inventories and unfavorable price realization. The higher end-user demand was driven primarily by residential construction. Dealers increased inventories more during the first quarter of 2020 than during the first quarter of 2021.
Sales increased in Latin America mostly due to higher sales volume driven by higher end-user demand across the region and the impact of changes in dealer inventories, partially offset by unfavorable currency impacts from a weaker Brazilian real. Dealers decreased inventories during the first quarter of 2020, compared with an increase during the first quarter of 2021.
In EAME, sales increased due to higher sales volume and favorable currency impacts from a stronger euro. Higher sales volume was driven by higher end-user demand and the impact from changes in dealer inventories. Dealers increased inventories more during the first quarter of 2021 than during the first quarter of 2020.
Sales increased in Asia/Pacific primarily due to higher sales volume and favorable currency impacts from a stronger Chinese yuan. The increase in sales was primarily due to higher end-user demand across the region driven mainly by China, reflecting the impact of the pandemic in the first quarter of 2020, and the impact from changes in dealer inventories. Dealers increased inventories during the first quarter of 2021, compared with a decrease during the first quarter of 2020 due to the timing of Chinese New Year.

Construction Industries’ profit was $1.035 billion in the first quarter of 2021, an increase of $395 million, or 62%, compared with $640 million in the first quarter of 2020. The increase was mainly due to higher sales volume.

RESOURCE INDUSTRIES
(Millions of dollars)
Segment Sales
	First Quarter 2020		Sales Volume		Price Realization		Currency		Inter- Segment		First Quarter 2021		$ Change		% Change
Total Sales	$	2,084	$	132	$	(47)	$	33	$	14	$	2,216	$	132	6%

Sales by Geographic Region
	First Quarter 2021		First Quarter 2020		$ Change		% Change
North America	$	657	$	696	$	(39)	(6%)
Latin America	405		320		85		27%
EAME	474		395		79		20%
Asia/Pacific	561		568		(7)		(1%)
External Sales	2,097		1,979		118		6%
Inter-segment	119		105		14		13%
Total Sales	$	2,216	$	2,084	$	132	6%

Segment Profit
	First Quarter 2021		First Quarter 2020		Change		% Change
Segment Profit	$	328	$	304	$	24	8%
Segment Profit Margin	14.8%		14.6%		0.2 pts

Resource Industries’ total sales were $2.216 billion in the first quarter of 2021, an increase of $132 million, or 6%, compared with $2.084 billion in the first quarter of 2020. The increase was due to higher sales volume driven by the impacts of changes in dealer inventories, higher end-user demand for equipment and aftermarket parts and favorable currency impact from the Australian dollar, partially offset by unfavorable price realization. Dealers decreased inventories during the first quarter of 2020, compared to remaining about flat during the first quarter of 2021. End-user demand was higher in mining, offset by lower end-user demand in heavy construction and quarry and aggregates.

Resource Industries’ profit was $328 million in the first quarter of 2021, an increase of $24 million, or 8%, compared with $304 million in the first quarter of 2020. The increase was mainly due to favorable manufacturing costs and higher sales volume, partially offset by unfavorable price realization and higher SG&A/R&D expenses. Favorable manufacturing costs reflected favorable cost absorption, lower warranty expense and favorable variable labor and burden. Cost absorption was favorable as company inventory increased more in the first quarter of 2021 than in the first quarter of 2020. The increase in SG&A/R&D expenses was driven by higher short-term incentive compensation expense, partially offset by other cost-reduction actions.

ENERGY & TRANSPORTATION
(Millions of dollars)
Segment Sales
	First Quarter 2020		Sales Volume		Price Realization		Currency		Inter- Segment		First Quarter 2021		$ Change		% Change
Total Sales	$	4,349	$	(41)	$	7	$	74	$	118	$	4,507	$	158	4%

Sales by Application
	First Quarter 2021		First Quarter 2020		$ Change		% Change
Oil and Gas	$	915	$	861	$	54	6%
Power Generation	963		854		109		13%
Industrial	813		801		12		1%
Transportation	967		1,102		(135)		(12%)
External Sales	3,658		3,618		40		1%
Inter-segment	849		731		118		16%
Total Sales	$	4,507	$	4,349	$	158	4%

Segment Profit
	First Quarter 2021		First Quarter 2020		Change		% Change
Segment Profit	$	666	$	602	$	64	11%
Segment Profit Margin	14.8%		13.8%		1.0 pts

Energy & Transportation’s total sales were $4.507 billion in the first quarter of 2021, an increase of $158 million, or 4%, compared with $4.349 billion in the first quarter of 2020. Sales growth was driven by Power Generation and Oil and Gas, partially offset by a decrease in Transportation. Inter-segment sales also increased.

Oil and Gas – Sales increased mainly due to higher sales of reciprocating engine aftermarket parts primarily driven by North America and EAME.
Power Generation – Sales increased due to turbines, turbine-related services and large reciprocating engine applications, including data centers.
Industrial – Sales were about flat.
Transportation – Sales declined in rail due to lower deliveries of locomotives and related services, primarily in North America, and in marine.

Energy & Transportation’s profit was $666 million in the first quarter of 2021, an increase of $64 million, or 11%, compared with $602 million in the first quarter of 2020. The increase was due to higher sales volume including inter-segment sales and favorable variable manufacturing costs, partially offset by higher SG&A/R&D expenses. Favorable variable manufacturing costs reflected lower material costs and variable labor and burden. The increase in SG&A/R&D expenses was driven by higher short-term compensation expense, partially offset by other cost reduction actions.

FINANCIAL PRODUCTS SEGMENT
(Millions of dollars)
Revenues by Geographic Region
	First Quarter 2021		First Quarter 2020		$ Change		% Change
North America	$	476	$	525	$	(49)	(9%)
Latin America	62		70		(8)		(11%)
EAME	100		102		(2)		(2%)
Asia/Pacific	123		117		6		5%
Total Revenues	$	761	$	814	$	(53)	(7%)

Segment Profit
	First Quarter 2021		First Quarter 2020		Change		% Change
Segment Profit	$	244	$	105	$	139	132%

Financial Products’ segment revenues were $761 million in the first quarter of 2021, a decrease of $53 million, or 7%, from the first quarter of 2020. The decrease was primarily because of lower average financing rates and lower average earning assets in North America.

Financial Products’ segment profit was $244 million in the first quarter of 2021, compared with $105 million in the first quarter of 2020. The increase was primarily due to a favorable impact from equity securities in Insurance Services and lower provision for credit losses at Cat Financial, partially offset by an increase in SG&A expenses primarily due to higher incentive compensation. The impact of lower average financing rates was offset by lower interest expense.

At the end of the first quarter of 2021, past dues at Cat Financial were 2.90%, compared with 4.13% at the end of the first quarter of 2020. Past dues decreased across all portfolio segments as global markets generally improved. Write-offs, net of recoveries, were $24 million for the first quarter of 2021, compared with $30 million for the first quarter of 2020. As of March 31, 2021, Cat Financial’s allowance for credit losses totaled $441 million, or 1.64% of finance receivables, compared with $479 million, or 1.77% of finance receivables at December 31, 2020.

Corporate Items and Eliminations

Expense for corporate items and eliminations was $387 million in the first quarter of 2021, an increase of $222 million from the first quarter of 2020, primarily due to an unfavorable change in fair value adjustments related to deferred compensation plans and segment reporting methodology differences.

Notes

i.
Glossary of terms is included on the Caterpillar website at https://investors.caterpillar.com/overview/default.aspx.

ii.
End-user demand is demonstrated by the company’s Rolling 3 Month Retail Sales Statistics filed in a Form 8-K on Thursday, April 29, 2021.

iii.
Information on non-GAAP financial measures is included in the appendix on page 12.

iv.
Some amounts within this report are rounded to the millions or billions and may not add.

v.
Caterpillar will conduct a teleconference and live webcast, with a slide presentation, beginning at 7:30 a.m. Central Time on Thursday, April 29, 2021, to discuss its 2021 first-quarter results. The accompanying slides will be available before the webcast on the Caterpillar website at https://investors.caterpillar.com/events-presentations/default.aspx.

About Caterpillar

With 2020 sales and revenues of $41.7 billion, Caterpillar Inc. is the world’s leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives. Since 1925, we’ve been driving sustainable progress and helping customers build a better world through innovative products and services. Throughout the product life cycle, we offer services built on cutting-edge technology and decades of product expertise. These products and services, backed by our global dealer network, provide exceptional value to help our customers succeed. We do business on every continent, principally operating through three primary segments – Construction Industries, Resource Industries, and Energy & Transportation – and providing financing and related services through our Financial Products segment. Visit us at caterpillar.com or join the conversation on our social media channels at caterpillar.com/social-media.

Caterpillar’s latest financial results are also available online:

https://investors.caterpillar.com/overview/default.aspx

https://investors.caterpillar.com/financials/quarterly-results/default.aspx
(live broadcast/replays of quarterly conference call)

Forward-Looking Statements

Certain statements in this press release relate to future events and expectations and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “believe,” “estimate,” “will be,” “will,” “would,” “expect,” “anticipate,” “plan,” “forecast,” “target,” “guide,” “project,” “intend,” “could,” “should” or other similar words or expressions often identify forward-looking statements. All statements other than statements of historical fact are forward-looking statements, including, without limitation, statements regarding our outlook, projections, forecasts or trend descriptions. These statements do not guarantee future performance and speak only as of the date they are made, and we do not undertake to update our forward-looking statements.

Caterpillar’s actual results may differ materially from those described or implied in our forward-looking statements based on a number of factors, including, but not limited to: (i) global and regional economic conditions and economic conditions in the industries we serve; (ii) commodity price changes, material price increases, fluctuations in demand for our products or significant shortages of material; (iii) government monetary or fiscal policies; (iv) political and economic risks, commercial instability and events beyond our control in the countries in which we operate; (v) international trade policies and their impact on demand for our products and our competitive position, including the imposition of new tariffs or changes in existing tariff rates; (vi) our ability to develop, produce and market quality products that meet our customers’ needs; (vii) the impact of the highly competitive environment in which we operate on our sales and pricing; (viii) information technology security threats and computer crime; (ix) inventory management decisions and sourcing practices of our dealers and our OEM customers; (x) a failure to realize, or a delay in realizing, all of the anticipated benefits of our acquisitions, joint ventures or divestitures; (xi) union disputes or other employee relations issues; (xii) adverse effects of unexpected events; (xiii) disruptions or volatility in global financial markets limiting our sources of liquidity or the liquidity of our customers, dealers and suppliers; (xiv) failure to maintain our credit ratings and potential resulting increases to our cost of borrowing and adverse effects on our cost of funds, liquidity, competitive position and access to capital markets; (xv) our Financial Products segment’s risks associated with the financial services industry; (xvi) changes in interest rates or market liquidity conditions; (xvii) an increase in delinquencies, repossessions or net losses of Cat Financial’s customers; (xviii) currency fluctuations; (xix) our or Cat Financial’s compliance with financial and other restrictive covenants in debt agreements; (xx) increased pension plan funding obligations; (xxi) alleged or actual violations of trade or anti-corruption laws and regulations; (xxii) additional tax expense or exposure, including the impact of U.S. tax reform; (xxiii) significant legal proceedings, claims, lawsuits or government investigations; (xxiv) new regulations or changes in financial services regulations; (xxv) compliance with environmental laws and regulations; (xxvi) the duration and geographic spread of, business disruptions caused by, and the overall global economic impact of, the COVID-19 pandemic; and (xxvii) other factors described in more detail in Caterpillar’s Forms 10-Q, 10-K and other filings with the Securities and Exchange Commission.

APPENDIX

NON-GAAP FINANCIAL MEASURES

The following definitions are provided for the non-GAAP financial measures. These non-GAAP financial measures have no standardized meaning prescribed by U.S. GAAP and therefore are unlikely to be comparable to the calculation of similar measures for other companies. Management does not intend these items to be considered in isolation or as a substitute for the related GAAP measures.

The company believes it is important to separately quantify the profit impact of two significant items in order for the company’s results to be meaningful to readers. These items consist of (i) a remeasurement gain resulting from the settlement of a non-U.S. pension obligation in the first quarter of 2020 and (ii) restructuring costs, which were incurred to generate longer-term benefits. The company does not consider these items indicative of earnings from ongoing business activities and believes the non-GAAP measure provides investors with useful perspective on underlying business results and trends and aids with assessing the company’s period-over-period results. The company intends to discuss adjusted profit per share for the fourth quarter and full-year 2021, excluding mark-to-market gains or losses for remeasurement of pension and other postemployment benefit plans along with any other discrete items.

Reconciliations of adjusted results to the most directly comparable GAAP measure are as follows:

(Dollars in millions except per share data)	Operating Profit		Operating Profit Margin	Profit Before Taxes		Provision (Benefit) for Income Taxes		Effective Tax Rate	Profit		Profit per Share

Three Months Ended March 31, 2021 – US GAAP	$	1,814	15.3%	$	1,997	$	475	23.8%	$	1,530	$	2.77
Restructuring costs	64		0.5%	64		10		15.0%	54		$	0.10
Three Months Ended March 31, 2021 – Adjusted	$	1,878	15.8%	$	2,061	$	485	23.5%	$	1,584	$	2.87

Three Months Ended March 31, 2020 – US GAAP	$	1,404	13.2%	$	1,513	$	425	28.1%	$	1,092	$	1.98
Remeasurement gain of a non-U.S. pension obligation	—		—%	(254)		(43)		17.0%	(211)		$	(0.38)
Restructuring costs	37		0.3%	37		7		19.0%	30		$	0.05
Three Months Ended March 31, 2020 – Adjusted	$	1,441	13.5%	$	1,296	$	389	30.0%	$	911	$	1.65

Supplemental Consolidating Data

The company is providing supplemental consolidating data for the purpose of additional analysis. The data has been grouped as follows:

Consolidated – Caterpillar Inc. and its subsidiaries.

Machinery, Energy & Transportation (ME&T) – The company defines ME&T as it is presented in the supplemental data as Caterpillar Inc. and its subsidiaries, excluding Financial Products. ME&T’s information relates to the design, manufacturing and marketing of its products.

Financial Products – The company defines Financial Products as it is presented in the supplemental data as its finance and insurance subsidiaries, primarily Caterpillar Financial Services Corporation (Cat Financial) and Caterpillar Insurance Holdings Inc. (Insurance Services). Financial Products’ information relates to the financing to customers and dealers for the purchase and lease of Caterpillar and other equipment.

Consolidating Adjustments – Eliminations of transactions between ME&T and Financial Products.

The nature of the ME&T and Financial Products businesses is different, especially with regard to the financial position and cash flow items. Caterpillar management utilizes this presentation internally to highlight these differences. The company believes this presentation will assist readers in understanding its business.

Pages 14 to 22 reconcile ME&T and Financial Products to Caterpillar Inc. consolidated financial information.

Caterpillar Inc.
Condensed Consolidated Statement of Results of Operations
(Unaudited)
(Dollars in millions except per share data)

	Three Months Ended March 31,
	2021		2020
Sales and revenues:
Sales of Machinery, Energy & Transportation	$	11,191	$	9,914
Revenues of Financial Products	696		721
Total sales and revenues	11,887		10,635

Operating costs:
Cost of goods sold	8,012		7,266
Selling, general and administrative expenses	1,239		1,121
Research and development expenses	374		356
Interest expense of Financial Products	125		175
Other operating (income) expenses	323		313
Total operating costs	10,073		9,231

Operating profit	1,814		1,404

Interest expense excluding Financial Products	142		113
Other income (expense)	325		222

Consolidated profit before taxes	1,997		1,513

Provision (benefit) for income taxes	475		425
Profit of consolidated companies	1,522		1,088

Equity in profit (loss) of unconsolidated affiliated companies	9		5

Profit of consolidated and affiliated companies	1,531		1,093

Less: Profit (loss) attributable to noncontrolling interests	1		1

Profit ¹	$	1,530	$	1,092


Profit per common share	$	2.80	$	2.00
Profit per common share — diluted ²	$	2.77	$	1.98

Weighted-average common shares outstanding (millions)
– Basic	546.4		546.8
– Diluted ²	551.4		551.1


1	Profit attributable to common shareholders.
2	Diluted by assumed exercise of stock-based compensation awards using the treasury stock method.

Caterpillar Inc.
Condensed Consolidated Statement of Financial Position
(Unaudited)
(Millions of dollars)

	March 31, 2021		December 31, 2020
Assets
Current assets:
Cash and short-term investments	$	11,342	$	9,352
Receivables – trade and other	7,955		7,317
Receivables – finance	9,333		9,463
Prepaid expenses and other current assets	1,802		1,930
Inventories	12,149		11,402
Total current assets	42,581		39,464

Property, plant and equipment – net	12,132		12,401
Long-term receivables – trade and other	1,115		1,185
Long-term receivables – finance	11,966		12,222
Noncurrent deferred and refundable income taxes	1,391		1,523
Intangible assets	1,246		1,308
Goodwill	6,343		6,394
Other assets	3,955		3,827
Total assets	$	80,729	$	78,324

Liabilities
Current liabilities:
Short-term borrowings:
— Machinery, Energy & Transportation	$	—	$	10
— Financial Products	3,625		2,005
Accounts payable	6,694		6,128
Accrued expenses	3,574		3,642
Accrued wages, salaries and employee benefits	1,283		1,096
Customer advances	1,168		1,108
Dividends payable	—		562
Other current liabilities	2,035		2,017
Long-term debt due within one year:
— Machinery, Energy & Transportation	1,301		1,420
— Financial Products	6,898		7,729
Total current liabilities	26,578		25,717

Long-term debt due after one year:
— Machinery, Energy & Transportation	9,751		9,749
— Financial Products	16,605		16,250
Liability for postemployment benefits	6,698		6,872
Other liabilities	4,480		4,358
Total liabilities	64,112		62,946

Shareholders’ equity
Common stock	6,215		6,230
Treasury stock	(25,049)		(25,178)
Profit employed in the business	36,697		35,167
Accumulated other comprehensive income (loss)	(1,290)		(888)
Noncontrolling interests	44		47
Total shareholders’ equity	16,617		15,378
Total liabilities and shareholders’ equity	$	80,729	$	78,324

Caterpillar Inc.
Condensed Consolidated Statement of Cash Flow
(Unaudited)
(Millions of dollars)

	Three Months Ended March 31,
	2021		2020
Cash flow from operating activities:
Profit of consolidated and affiliated companies	$	1,531	$	1,093
Adjustments for non-cash items:
Depreciation and amortization	586		614
Gain on remeasurement of a non-U.S. pension obligation	—		(254)
Provision (benefit) for deferred income taxes	109		20
Other	(104)		534
Changes in assets and liabilities, net of acquisitions and divestitures:
Receivables – trade and other	(543)		500
Inventories	(657)		(541)
Accounts payable	733		90
Accrued expenses	84		(97)
Accrued wages, salaries and employee benefits	191		(722)
Customer advances	58		116
Other assets – net	56		(50)
Other liabilities – net	(116)		(173)
Net cash provided by (used for) operating activities	1,928		1,130
Cash flow from investing activities:
Capital expenditures – excluding equipment leased to others	(252)		(305)
Expenditures for equipment leased to others	(252)		(243)
Proceeds from disposals of leased assets and property, plant and equipment	309		216
Additions to finance receivables	(2,629)		(2,953)
Collections of finance receivables	2,770		3,153
Proceeds from sale of finance receivables	5		31
Investments and acquisitions (net of cash acquired)	(386)		(35)
Proceeds from sale of businesses and investments (net of cash sold)	28		—
Proceeds from sale of securities	126		68
Investments in securities	(148)		(180)
Other – net	(48)		35
Net cash provided by (used for) investing activities	(477)		(213)
Cash flow from financing activities:
Dividends paid	(562)		(567)
Common stock issued, including treasury shares reissued	65		(23)
Common shares repurchased	—		(1,043)
Proceeds from debt issued (original maturities greater than three months)	2,273		2,141
Payments on debt (original maturities greater than three months)	(2,887)		(2,466)
Short-term borrowings – net (original maturities three months or less)	1,659		(40)
Other – net	(2)		(1)
Net cash provided by (used for) financing activities	546		(1,999)
Effect of exchange rate changes on cash	(12)		(80)
Increase (decrease) in cash and short-term investments and restricted cash	1,985		(1,162)
Cash and short-term investments and restricted cash at beginning of period	9,366		8,292
Cash and short-term investments and restricted cash at end of period	$	11,351	$	7,130

All short-term investments, which consist primarily of highly liquid investments with original maturities of three months or less, are considered to be cash equivalents.

Caterpillar Inc.
Supplemental Data for Results of Operations
For the Three Months Ended March 31, 2021
(Unaudited)
(Millions of dollars)

			Supplemental Consolidating Data
	Consolidated		Machinery, Energy & Transportation		Financial Products		Consolidating Adjustments
Sales and revenues:
Sales of Machinery, Energy & Transportation	$	11,191	$	11,191	$	—	$	—
Revenues of Financial Products	696		—		788		(92)		¹
Total sales and revenues	11,887		11,191		788		(92)

Operating costs:
Cost of goods sold	8,012		8,013		—		(1)		²
Selling, general and administrative expenses	1,239		1,114		124		1		²
Research and development expenses	374		374		—		—
Interest expense of Financial Products	125		—		125		—
Other operating (income) expenses	323		26		314		(17)		²
Total operating costs	10,073		9,527		563		(17)

Operating profit	1,814		1,664		225		(75)

Interest expense excluding Financial Products	142		142		—		—
Other income (expense)	325		231		19		75		³

Consolidated profit before taxes	1,997		1,753		244		—

Provision (benefit) for income taxes	475		412		63		—
Profit of consolidated companies	1,522		1,341		181		—

Equity in profit (loss) of unconsolidated affiliated companies	9		12		—		(3)		⁴

Profit of consolidated and affiliated companies	1,531		1,353		181		(3)

Less: Profit (loss) attributable to noncontrolling interests	1		1		3		(3)		⁵

Profit ⁶	$	1,530	$	1,352	$	178	$	—

1	Elimination of Financial Products’ revenues earned from ME&T.
2	Elimination of net expenses recorded by ME&T paid to Financial Products.
3	Elimination of discount recorded by ME&T on receivables sold to Financial Products and of interest earned between ME&T and Financial Products as well as dividends paid by Financial Products to ME&T.
4	Elimination of equity profit (loss) earned from Financial Products’ subsidiaries partially owned by ME&T subsidiaries.
5	Elimination of noncontrolling interest profit (loss) recorded by Financial Products for subsidiaries partially owned by ME&T subsidiaries.
6	Profit attributable to common shareholders.

Caterpillar Inc.
Supplemental Data for Results of Operations
For the Three Months Ended March 31, 2020
(Unaudited)
(Millions of dollars)

			Supplemental Consolidating Data
	Consolidated		Machinery, Energy & Transportation		Financial Products		Consolidating Adjustments
Sales and revenues:
Sales of Machinery, Energy & Transportation	$	9,914	$	9,914	$	—	$	—
Revenues of Financial Products	721		—		830		(109)		¹
Total sales and revenues	10,635		9,914		830		(109)

Operating costs:
Cost of goods sold	7,266		7,267		—		(1)		²
Selling, general and administrative expenses	1,121		940		182		(1)		²
Research and development expenses	356		356		—		—
Interest expense of Financial Products	175		—		176		(1)		³
Other operating (income) expenses	313		10		320		(17)		²
Total operating costs	9,231		8,573		678		(20)

Operating profit	1,404		1,341		152		(89)

Interest expense excluding Financial Products	113		112		—		1		³
Other income (expense)	222		179		(47)		90		⁴

Consolidated profit before taxes	1,513		1,408		105		—

Provision (benefit) for income taxes	425		397		28		—
Profit of consolidated companies	1,088		1,011		77		—

Equity in profit (loss) of unconsolidated affiliated companies	5		9		—		(4)		⁵

Profit of consolidated and affiliated companies	1,093		1,020		77		(4)

Less: Profit (loss) attributable to noncontrolling interests	1		1		4		(4)		⁶

Profit ⁷	$	1,092	$	1,019	$	73	$	—

1	Elimination of Financial Products’ revenues earned from ME&T.
2	Elimination of net expenses recorded by ME&T paid to Financial Products.
3	Elimination of interest expense recorded between Financial Products and ME&T.
4	Elimination of discount recorded by ME&T on receivables sold to Financial Products and of interest earned between ME&T and Financial Products as well as dividends paid by Financial Products to ME&T.
5	Elimination of equity profit (loss) earned from Financial Products’ subsidiaries partially owned by ME&T subsidiaries.
6	Elimination of noncontrolling interest profit (loss) recorded by Financial Products for subsidiaries partially owned by ME&T subsidiaries.
7	Profit attributable to common shareholders.

Caterpillar Inc.
Supplemental Data for Financial Position
At March 31, 2021
(Unaudited)
(Millions of dollars)

			Supplemental Consolidating Data
	Consolidated		Machinery, Energy & Transportation		Financial Products		Consolidating Adjustments
Assets
Current assets:
Cash and short-term investments	$	11,342	$	10,492	$	850	$	—
Receivables – trade and other	7,955		3,020		501		4,434		^1,2
Receivables – finance	9,333		—		13,896		(4,563)		²
Prepaid expenses and other current assets	1,802		1,399		544		(141)		³
Inventories	12,149		12,149		—		—
Total current assets	42,581		27,060		15,791		(270)

Property, plant and equipment – net	12,132		8,185		3,947		—
Long-term receivables – trade and other	1,115		333		169		613		^1,2
Long-term receivables – finance	11,966		—		12,604		(638)		²
Noncurrent deferred and refundable income taxes	1,391		1,933		103		(645)		⁴
Intangible assets	1,246		1,246		—		—
Goodwill	6,343		6,343		—		—
Other assets	3,955		3,260		1,899		(1,204)		⁵
Total assets	$	80,729	$	48,360	$	34,513	$	(2,144)

Liabilities
Current liabilities:
Short-term borrowings	$	3,625	$	—	$	3,625	$	—
Short-term borrowings with consolidated companies	—		—		—		—
Accounts payable	6,694		6,597		226		(129)		⁶
Accrued expenses	3,574		3,174		400		—
Accrued wages, salaries and employee benefits	1,283		1,256		27		—
Customer advances	1,168		1,168		—		—
Dividends payable	—		—		—		—
Other current liabilities	2,035		1,558		640		(163)		^4,7
Long-term debt due within one year	8,199		1,301		6,898		—
Total current liabilities	26,578		15,054		11,816		(292)

Long-term debt due after one year	26,356		9,776		16,605		(25)		⁸
Liability for postemployment benefits	6,698		6,697		1		—
Other liabilities	4,480		3,804		1,394		(718)		⁴
Total liabilities	64,112		35,331		29,816		(1,035)

Shareholders’ equity
Common stock	6,215		6,215		919		(919)		⁹
Treasury stock	(25,049)		(25,049)		—		—
Profit employed in the business	36,697		32,443		4,243		11		⁹
Accumulated other comprehensive income (loss)	(1,290)		(627)		(663)		—
Noncontrolling interests	44		47		198		(201)		⁹
Total shareholders’ equity	16,617		13,029		4,697		(1,109)
Total liabilities and shareholders’ equity	$	80,729	$	48,360	$	34,513	$	(2,144)

1	Elimination of receivables between ME&T and Financial Products.
2	Reclassification of ME&T’s trade receivables purchased by Financial Products and Financial Products’ wholesale inventory receivables.
3	Elimination of ME&T’s insurance premiums that are prepaid to Financial Products.
4	Reclassification reflecting required netting of deferred tax assets/liabilities by taxing jurisdiction.
5	Elimination of other intercompany assets between ME&T and Financial Products.
6	Elimination of payables between ME&T and Financial Products.
7	Elimination of prepaid insurance in Financial Products’ other liabilities.
8	Elimination of debt between ME&T and Financial Products.
9	Eliminations associated with ME&T’s investments in Financial Products’ subsidiaries.

Caterpillar Inc.
Supplemental Data for Financial Position
At December 31, 2020
(Unaudited)
(Millions of dollars)

			Supplemental Consolidating Data
	Consolidated		Machinery, Energy & Transportation		Financial Products		Consolidating Adjustments
Assets
Current assets:
Cash and short-term investments	$	9,352	$	8,822	$	530	$	—
Receivables – trade and other	7,317		3,846		397		3,074		^1,2
Receivables – finance	9,463		—		13,681		(4,218)		²
Prepaid expenses and other current assets	1,930		1,376		624		(70)		³
Inventories	11,402		11,402		—		—
Total current assets	39,464		25,446		15,232		(1,214)

Property, plant and equipment – net	12,401		8,309		4,092		—
Long-term receivables – trade and other	1,185		363		164		658		^1,2
Long-term receivables – finance	12,222		—		12,895		(673)		²
Noncurrent deferred and refundable income taxes	1,523		2,058		110		(645)		⁴
Intangible assets	1,308		1,308		—		—
Goodwill	6,394		6,394		—		—
Other assets	3,827		3,158		1,871		(1,202)		⁵
Total assets	$	78,324	$	47,036	$	34,364	$	(3,076)

Liabilities
Current liabilities:
Short-term borrowings	$	2,015	$	10	$	2,005	$	—
Short-term borrowings with consolidated companies	—		—		1,000		(1,000)		⁶
Accounts payable	6,128		6,060		212		(144)		⁷
Accrued expenses	3,642		3,099		543		—
Accrued wages, salaries and employee benefits	1,096		1,081		15		—
Customer advances	1,108		1,108		—		—
Dividends payable	562		562		—		—
Other current liabilities	2,017		1,530		580		(93)		^4,8
Long-term debt due within one year	9,149		1,420		7,729		—
Total current liabilities	25,717		14,870		12,084		(1,237)

Long-term debt due after one year	25,999		9,764		16,250		(15)		⁶
Liability for postemployment benefits	6,872		6,872		—		—
Other liabilities	4,358		3,691		1,385		(718)		⁴
Total liabilities	62,946		35,197		29,719		(1,970)

Shareholders’ equity
Common stock	6,230		6,230		919		(919)		⁹
Treasury stock	(25,178)		(25,178)		—		—
Profit employed in the business	35,167		31,091		4,065		11		⁹
Accumulated other comprehensive income (loss)	(888)		(352)		(536)		—
Noncontrolling interests	47		48		197		(198)		⁹
Total shareholders’ equity	15,378		11,839		4,645		(1,106)
Total liabilities and shareholders’ equity	$	78,324	$	47,036	$	34,364	$	(3,076)

1	Elimination of receivables between ME&T and Financial Products.
2	Reclassification of ME&T’s trade receivables purchased by Financial Products and Financial Products’ wholesale inventory receivables.
3	Elimination of ME&T’s insurance premiums that are prepaid to Financial Products.
4	Reclassification reflecting required netting of deferred tax assets/liabilities by taxing jurisdiction.
5	Elimination of other intercompany assets between ME&T and Financial Products.
6	Elimination of debt between ME&T and Financial Products.
7	Elimination of payables between ME&T and Financial Products.
8	Elimination of prepaid insurance in Financial Products’ other liabilities.
9	Eliminations associated with ME&T’s investments in Financial Products’ subsidiaries.

Caterpillar Inc.
Supplemental Data for Cash Flow
For the Three Months Ended March 31, 2021
(Unaudited)
(Millions of dollars)

			Supplemental Consolidating Data
	Consolidated		Machinery, Energy & Transportation		Financial Products		Consolidating Adjustments
Cash flow from operating activities:
Profit of consolidated and affiliated companies	$	1,531	$	1,353	$	181	$	(3)	¹
Adjustments for non-cash items:
Depreciation and amortization	586		383		203		—
Provision (benefit) for deferred income taxes	109		127		(18)		—
Other	(104)		(52)		(83)		31		²
Changes in assets and liabilities, net of acquisitions and divestitures:
Receivables – trade and other	(543)		(104)		(32)		(407)		^{2, 3}
Inventories	(657)		(657)		—		—
Accounts payable	733		706		13		14		²
Accrued expenses	84		58		26		—
Accrued wages, salaries and employee benefits	191		179		12		—
Customer advances	58		58		—		—
Other assets – net	56		(4)		(12)		72		²
Other liabilities – net	(116)		(131)		79		(64)		²
Net cash provided by (used for) operating activities	1,928		1,916		369		(357)
Cash flow from investing activities:
Capital expenditures – excluding equipment leased to others	(252)		(251)		(4)		3		²
Expenditures for equipment leased to others	(252)		(4)		(249)		1		²
Proceeds from disposals of leased assets and property, plant and equipment	309		27		286		(4)		²
Additions to finance receivables	(2,629)		—		(2,867)		238		³
Collections of finance receivables	2,770		—		3,062		(292)		³
Net intercompany purchased receivables	—		—		(411)		411		³
Proceeds from sale of finance receivables	5		—		5		—
Net intercompany borrowings	—		1,000		—		(1,000)		⁴
Investments and acquisitions (net of cash acquired)	(386)		(386)		—		—
Proceeds from sale of businesses and investments (net of cash sold)	28		28		—		—
Proceeds from sale of securities	126		11		115		—
Investments in securities	(148)		—		(148)		—
Other – net	(48)		2		(50)		—
Net cash provided by (used for) investing activities	(477)		427		(261)		(643)
Cash flow from financing activities:
Dividends paid	(562)		(562)		—		—
Common stock issued, including treasury shares reissued	65		65		—		—
Net intercompany borrowings	—		—		(1,000)		1,000		⁴
Proceeds from debt issued > 90 days	2,273		494		1,779		—
Payments on debt > 90 days	(2,887)		(644)		(2,243)		—
Short-term borrowings – net < 90 days	1,659		(10)		1,669		—
Other – net	(2)		(2)		—		—
Net cash provided by (used for) financing activities	546		(659)		205		1,000
Effect of exchange rate changes on cash	(12)		(14)		2		—
Increase (decrease) in cash and short-term investments and restricted cash	1,985		1,670		315		—
Cash and short-term investments and restricted cash at beginning of period	9,366		8,822		544		—
Cash and short-term investments and restricted cash at end of period	$	11,351	$	10,492	$	859	$	—

1	Elimination of equity profit earned from Financial Products’ subsidiaries partially owned by ME&T subsidiaries.
2	Elimination of non-cash adjustments and changes in assets and liabilities related to consolidated reporting.
3	Reclassification of Financial Products’ cash flow activity from investing to operating for receivables that arose from the sale of inventory.
4	Elimination of net proceeds and payments to/from ME&T and Financial Products.

Caterpillar Inc.
Supplemental Data for Cash Flow
For the Three Months Ended March 31, 2020
(Unaudited)
(Millions of dollars)

			Supplemental Consolidating Data
	Consolidated		Machinery, Energy & Transportation		Financial Products		Consolidating Adjustments
Cash flow from operating activities:
Profit of consolidated and affiliated companies	$	1,093	$	1,020	$	77	$	(4)	¹
Adjustments for non-cash items:
Depreciation and amortization	614		402		212		—
Gain on remeasurement of a non-U.S. pension obligation	(254)		(254)		—		—
Provision (benefit) for deferred income taxes	20		75		(55)		—
Other	534		245		170		119		²
Changes in assets and liabilities, net of acquisitions and divestitures:
Receivables – trade and other	500		328		(56)		228		^{2, 3}
Inventories	(541)		(538)		—		(3)		²
Accounts payable	90		2		51		37		²
Accrued expenses	(97)		(105)		8		—
Accrued wages, salaries and employee benefits	(722)		(689)		(33)		—
Customer advances	116		116		—		—
Other assets – net	(50)		15		(16)		(49)		²
Other liabilities – net	(173)		(299)		73		53		²
Net cash provided by (used for) operating activities	1,130		318		431		381
Cash flow from investing activities:
Capital expenditures – excluding equipment leased to others	(305)		(304)		(1)		—
Expenditures for equipment leased to others	(243)		2		(249)		4		²
Proceeds from disposals of leased assets and property, plant and equipment	216		61		156		(1)		²
Additions to finance receivables	(2,953)		—		(3,213)		260		³
Collections of finance receivables	3,153		—		3,421		(268)		³
Net intercompany purchased receivables	—		—		376		(376)		³
Proceeds from sale of finance receivables	31		—		31		—
Net intercompany borrowings	—		599		1		(600)		⁴
Investments and acquisitions (net of cash acquired)	(35)		(35)		—		—
Proceeds from sale of securities	68		6		62		—
Investments in securities	(180)		(5)		(175)		—
Other – net	35		—		35		—
Net cash provided by (used for) investing activities	(213)		324		444		(981)
Cash flow from financing activities:
Dividends paid	(567)		(567)		—		—
Common stock issued, including treasury shares reissued	(23)		(23)		—		—
Common shares repurchased	(1,043)		(1,043)		—		—
Net intercompany borrowings	—		(1)		(599)		600		⁴
Proceeds from debt issued > 90 days	2,141		15		2,126		—
Payments on debt > 90 days	(2,466)		(6)		(2,460)		—
Short-term borrowings – net < 90 days	(40)		(5)		(35)		—
Other – net	(1)		(1)		—		—
Net cash provided by (used for) financing activities	(1,999)		(1,631)		(968)		600
Effect of exchange rate changes on cash	(80)		(59)		(21)		—
Increase (decrease) in cash and short-term investments and restricted cash	(1,162)		(1,048)		(114)		—
Cash and short-term investments and restricted cash at beginning of period	8,292		7,302		990		—
Cash and short-term investments and restricted cash at end of period	$	7,130	$	6,254	$	876	$	—

1	Elimination of equity profit earned from Financial Products’ subsidiaries partially owned by ME&T subsidiaries.
2	Elimination of non-cash adjustments and changes in assets and liabilities related to consolidated reporting.
3	Reclassification of Financial Products’ cash flow activity from investing to operating for receivables that arose from the sale of inventory.
4	Elimination of net proceeds and payments to/from ME&T and Financial Products.

View original content:http://www.prnewswire.com/news-releases/caterpillar-reports-first-quarter-2021-results-301279971.html

SOURCE Caterpillar Inc.

April 29, 2021 6:34 am

Carrier Reports First Quarter 2021 Results

Raises Full-Year Outlook for Sales, Adjusted EPS and Free Cash Flow

– Sales of $4.7 billion, up 21% compared to 2020 including 17% organic growth

– GAAP EPS of $0.43 and adjusted EPS of $0.48

– Net cash flow from operating activities of $184 million and free cash flow of $131 million

– Increases full-year 2021 sales growth outlook to 7% to 10%, 5% to 8% organic*

– Increases full-year 2021 adjusted EPS range to $1.95 to $2.05, and free cash flow of about $1.7 billion*

PR Newswire

PALM BEACH GARDENS, Fla., April 29, 2021 /PRNewswire/ — Carrier Global Corporation (NYSE: CARR) today reported financial results for the first quarter of 2021 and updated its full year outlook. Carrier is the leading global provider of healthy, safe and sustainable building and cold chain solutions.

“Carrier delivered strong first quarter results as all three segments contributed to our 21% year-over-year sales growth. We exceeded our expectations through continued strength in North American residential HVAC and improving order trends across the rest of the portfolio. I’m also pleased with the strong margin expansion and free cash flow performance in the quarter. We remain focused on executing our strategic growth initiatives and advancing on our Carrier 700 cost containment actions,” said Carrier Chairman & CEO Dave Gitlin. “We continue to lead the industry through innovation. I am especially excited about the launch of Abound, a cloud-native platform designed to give people confidence in the health and safety of their indoor spaces. We also look forward to closing on our acquisition of Guangdong Giwee Group and its subsidiaries, which will expand Carrier’s offerings in the attractive and growing variable refrigerant flow (VRF) and light commercial markets. Overall, we are encouraged by our strong start to the year, order trends and market outlooks, and the momentum across our Healthy Building and Cold Chain offerings, which provide us with confidence to update our full-year expectations.”

First Quarter 2021 Results
Carrier’s first quarter sales of $4.7 billion were up 21% compared to the prior year and organic sales were up 17% over the same period. The sales performance was largely driven by continued strong demand in North American residential HVAC, which was up 48% compared to the prior year, growth in transport refrigeration and commercial HVAC, and sequential improvement across the portfolio. GAAP operating profit in the quarter of $571 million was up 82% from last year and adjusted operating profit of $608 million was up 39%. These results benefitted from higher volume and productivity.

Net income of $384 million included the impact of restructuring, separation costs and charges resulting from the prepayment of $500 million of debt. Adjusted net income was $427 million. GAAP EPS was $0.43 while adjusted EPS was $0.48. Net cash flows provided by operating activities were $184 million and capital expenditures were $53 million, resulting in free cash flow of $131 million.

Updated Full-Year 2021 Outlook*
Carrier is announcing the following updated outlook for 2021:

Sales growth of 7% to 10%, up from 6% to 8%

Organic sales growth of 5% to 8%, up from 4% to 6%
Currency translation to add approximately 2%

Adjusted operating margin of about 13.5%
Adjusted EPS of $1.95 to $2.05, up from $1.85 to $1.95
Free cash flow of about $1.7 billion, up from about $1.6 billion

*Note: When the company provides expectations for organic sales, adjusted operating profit, adjusted operating margin, incremental margins / earnings conversion, adjusted EPS and free cash flow on a forward-looking basis, a reconciliation of the differences between the non-GAAP expectations and the corresponding GAAP measures generally is not available without unreasonable effort. See “Use and Definitions of Non-GAAP Financial Measures” below for additional information.

Conference Call
Carrier will host a webcast of its earnings conference call today, Thursday, April 29, 2021, at 9:00 a.m. ET. To access the webcast, visit the Events & Presentations section of the Carrier Investor Relations site at ir.carrier.com/news-and-events/events-and-presentations or to listen to the earnings call by phone, dial (877) 742-9091.

About Carrier

As the leading global provider of healthy, safe and sustainable building and cold chain solutions, Carrier Global Corporation is committed to making the world safer, sustainable and more comfortable for generations to come. From the beginning, we’ve led in inventing new technologies and entirely new industries. Today, we continue to lead because we have a world-class, diverse workforce that puts the customer at the center of everything we do. For more information, visit www.corporate.carrier.com or follow Carrier on social media at @Carrier.

CARR-IR

Use and Definitions of Non-GAAP Financial Measures

Carrier Global Corporation (“Carrier”) reports its financial results in accordance with accounting principles generally accepted in the United States (“GAAP”).

We supplement the reporting of our financial information determined under GAAP with certain non-GAAP financial information. The non-GAAP information presented provides investors with additional useful information, but should not be considered in isolation or as substitutes for the related GAAP measures. Moreover, other companies may define non-GAAP measures differently, which limits the usefulness of these measures for comparisons with such other companies. We encourage investors to review our financial statements and publicly filed reports in their entirety and not to rely on any single financial measure. A reconciliation of the non-GAAP measures to the corresponding amounts prepared in accordance with GAAP appears in the tables attached to this release. The tables provide additional information as to the items and amounts that have been excluded from the adjusted measures.

Organic sales, adjusted operating profit, adjusted operating margin, incremental margins / earnings conversion, earnings before interest, taxes and depreciation and amortization (“EBITDA”), adjusted EBITDA, adjusted net income, adjusted earnings per share (“EPS”), the adjusted effective tax rate, and net debt are non-GAAP financial measures. Organic sales represents consolidated net sales (a GAAP measure), excluding the impact of foreign currency translation, acquisitions and divestitures completed in the preceding twelve months and other significant items of a nonoperational nature (hereinafter referred to as “other significant items”).

Adjusted operating profit represents operating profit (a GAAP measure), excluding restructuring costs and other significant items. Adjusted operating margin represents adjusted operating profit as a percentage of net sales (a GAAP measure). Incremental margins / earnings conversion represents the year-over-year change in adjusted operating profit divided by the year-over-year change in net sales. EBITDA represents net income attributable to common shareholders (a GAAP measure), adjusted for interest income and expense, income tax expense, and depreciation and amortization. Adjusted EBITDA represents EBITDA, as calculated above, excluding non-service pension benefit, non-controlling interest in subsidiaries’ earnings from operations, restructuring costs and other significant items. Adjusted net income represents net income attributable to common shareowners (a GAAP measure), excluding restructuring costs and other significant items. Adjusted EPS represents diluted earnings per share (a GAAP measure), excluding restructuring costs and other significant items. The adjusted effective tax rate represents the effective tax rate (a GAAP measure), excluding restructuring costs and other significant items. Net debt represents long-term debt (a GAAP measure) less cash and cash equivalents. For the business segments, when applicable, adjustments of operating profit and operating margins represent operating profit, excluding restructuring and other significant items.

Free cash flow is a non-GAAP financial measure that represents net cash flows provided by operating activities (a GAAP measure) less capital expenditures. Management believes free cash flow is a useful measure of liquidity and an additional basis for assessing Carrier’s ability to fund its activities, including the financing of acquisitions, debt service, repurchases of Carrier’s common stock and distribution of earnings to shareowners.

When we provide our expectations for organic sales, adjusted operating profit, adjusted operating margin, incremental margins / earnings conversion, adjusted EPS, and free cash flow on a forward-looking basis, a reconciliation of the differences between the non-GAAP expectations and the corresponding GAAP measures (expected net sales, operating profit, operating margin, incremental operating margin, diluted EPS and net cash flows provided by operating activities) generally is not available without unreasonable effort due to potentially high variability, complexity and low visibility as to the items that would be excluded from the GAAP measure in the relevant future period, such as unusual gains and losses, the ultimate outcome of pending litigation, fluctuations in foreign currency exchange rates, the impact and timing of potential acquisitions and divestitures, future restructuring costs, and other structural changes or their probable significance. The variability of the excluded items may have a significant, and potentially unpredictable, impact on our future GAAP results.

Cautionary Statement

This communication contains statements which, to the extent they are not statements of historical or present fact, constitute “forward-looking statements” under the securities laws. From time to time, oral or written forward-looking statements may also be included in other information released to the public. These forward-looking statements are intended to provide management’s current expectations or plans for our future operating and financial performance, based on assumptions currently believed to be valid. Forward-looking statements can be identified by the use of words such as “believe,” “expect,” “expectations,” “plans,” “strategy,” “prospects,” “estimate,” “project,” “target,” “anticipate,” “will,” “should,” “see,” “guidance,” “outlook,” “confident,” “scenario” and other words of similar meaning in connection with a discussion of future operating or financial performance or the separation and distribution from United Technologies Corporation (the “Separation” and the “Distribution”), since renamed Raytheon Technologies Corporation. Forward-looking statements may include, among other things, statements relating to future sales, earnings, cash flow, results of operations, uses of cash, share repurchases, tax rates and other measures of financial performance or potential future plans, strategies or transactions of Carrier, the estimated costs associated with the Separation, Carrier’s plans with respect to our indebtedness and other statements that are not historical facts. All forward-looking statements involve risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the U.S. Private Securities Litigation Reform Act of 1995. Such risks, uncertainties and other factors include, without limitation: (1) the effect of economic conditions in the industries and markets in which Carrier and our businesses operate in the U.S. and globally and any changes therein, including financial market conditions, fluctuations in commodity prices, interest rates and foreign currency exchange rates, levels of end market demand in construction, the impact of weather conditions, pandemic health issues (including COVID-19 and its effects, among other things, on production and on global supply, demand and distribution as the outbreak continues and results in a prolonged period of travel, commercial and other restrictions and limitations), natural disasters and the financial condition of our customers and suppliers; (2) challenges in the development, production, delivery, support, performance and realization of the anticipated benefits of advanced technologies and new products and services; (3) future levels of indebtedness, capital spending and research and development spending; (4) future availability of credit and factors that may affect such availability, including credit market conditions and Carrier’s capital structure and credit ratings; (5) the timing and scope of future repurchases of Carrier’s common stock, including market conditions and the level of other investing activities and uses of cash; (6) delays and disruption in the delivery of materials and services from suppliers; (7) cost reduction efforts and restructuring costs and savings and other consequences thereof; (8) new business and investment opportunities; (9) risks resulting from being a smaller, less diversified company than prior to the Separation; (10) the outcome of legal proceedings, investigations and other contingencies; (11) the impact of pension plan assumptions on future cash contributions and earnings; (12) the impact of the negotiation of collective bargaining agreements and labor disputes; (13) the effect of changes in political conditions in the U.S. (including in connection with the new administration in Washington, D.C.) and other countries in which Carrier and our businesses operate, including the effect of changes in U.S. trade policies or the United Kingdom’s withdrawal from the European Union, on general market conditions, global trade policies and currency exchange rates in the near term and beyond; (14) the effect of changes (including potentially as a result of the new administration in Washington, D.C.) in tax, environmental, regulatory (including among other things import/export) and other laws and regulations in the U.S. and other countries in which we and our businesses operate; (15) the ability of Carrier to retain and hire key personnel; (16) the scope, nature, impact or timing of acquisition and divestiture activity, including among other things integration of acquired businesses into existing businesses and realization of synergies and opportunities for growth and innovation and incurrence of related costs; (17) the expected benefits of the Separation; (18) a determination by the U.S. Internal Revenue Service and other tax authorities that the Distribution or certain related transactions should be treated as taxable transactions; (19) risks associated with indebtedness, including that incurred as a result of financing transactions undertaken in connection with the Separation, as well as our ability to reduce indebtedness and the timing thereof; (20) the risk that dis-synergy costs, costs of restructuring transactions and other costs incurred in connection with the separation will exceed Carrier’s estimates; and (21) the impact of the Separation on Carrier’s business and Carrier’s resources, systems, procedures and controls, diversion of management’s attention and the impact on relationships with customers, suppliers, employees and other business counterparties.

The above list of factors is not exhaustive or necessarily in order of importance. For additional information on identifying factors that may cause actual results to vary materially from those stated in forward-looking statements, see Carrier’s reports on Forms 10-K, 10-Q and 8-K filed with or furnished to the SEC from time to time. Any forward-looking statement speaks only as of the date on which it is made, and Carrier assumes no obligation to update or revise such statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

Contact:	Media Inquiries
	Danielle Canzanella
	561-365-1101
	[email protected]

	Investor Relations
	Sam Pearlstein
	561-365-2251
	[email protected]

Carrier Global Corporation
Condensed Consolidated Statement of Operations

	(Unaudited)
	For the Three Months Ended March 31,
*(dollars in millions, except per share amounts; shares in millions)*	2021		2020
Net sales:
Product sales	$	3,864	$	3,147
Service sales	835		741
Total Net sales	4,699		3,888
Costs and expenses
Cost of products sold	(2,724)		(2,237)
Cost of services sold	(581)		(529)
Research and development	(121)		(98)
Selling, general and administrative	(743)		(692)
	(4,169)		(3,556)
Equity method investment net earnings	38		29
Other income (expense), net	3		(46)
Operating profit	571		315
Non-service pension (expense) benefit	18		17
Interest (expense) income, net	(93)		(37)
Income from operations before income taxes	496		295
Income tax (expense) benefit	(104)		(193)
Net income from operations	392		102
Less: Non-controlling interest in subsidiaries’ earnings from operations	8		6
Net income attributable to common shareowners	$	384	$	96

Earnings per share ^{(1), (2)}
Basic	$	0.44	$	0.11
Diluted	$	0.43	$	0.11
Weighted average number of shares outstanding⁽²⁾
Basic	869.3		866.2
Diluted	889.8		866.2

⁽¹⁾ On April 3, 2020, United Technologies Corporation, since renamed Raytheon Technologies Corporation (“UTC”), completed the spin-off of Carrier into a separate publicly traded company (the “Separation”). The Separation was completed through a pro-rata distribution (the “Distribution”) of all of the outstanding common stock of the Company to UTC shareowners who held shares of UTC common stock as of the close of business on March 19, 2020.

⁽²⁾ Basic and diluted earnings per share for the three months ended March 31, 2020 are calculated using the weighted-average number of common shares outstanding for the period beginning after the Distribution date. Diluted earnings per share is computed by giving effect to all potentially dilutive stock awards that are outstanding. For periods prior to the Separation it was assumed that there were no dilutive equity instruments as there were no equity awards in Carrier common stock outstanding prior to the Separation.

Carrier Global Corporation
Condensed Consolidated Balance Sheet

	(Unaudited)
	As of
*(dollars in millions)*	March 31, 2021		December 31, 2020
Assets
Cash and cash equivalents	$	2,599	$	3,115
Accounts receivable, net	2,831		2,781
Contract assets, current	694		656
Inventories, net	1,854		1,629
Other assets, current	350		343
Total current assets	8,328		8,524

Future income tax benefits	461		449
Fixed assets, net	1,777		1,810
Operating lease right-of-use assets	770		788
Intangible assets, net	1,002		1,037
Goodwill	10,077		10,139
Pension and post-retirement assets	607		554
Equity method investments	1,530		1,513
Other assets	316		279
Total Assets	$	24,868	$	25,093

Liabilities and Equity
Accounts payable	$	2,175	$	1,936
Accrued liabilities	2,265		2,471
Contract liabilities, current	545		512
Current portion of long-term debt	153		191
Total current liabilities	5,138		5,110
Long-term debt	9,577		10,036
Future pension and post-retirement obligations	507		524
Future income tax obligations	477		479
Operating lease liabilities	621		642
Other long-term liabilities	1,730		1,724
Total Liabilities	18,050		18,515

Equity
Common stock	9		9
Treasury stock	(38)		—
Additional paid-in capital	5,350		5,345
Retained earnings	2,027		1,643
Accumulated other comprehensive loss	(859)		(745)
Non-controlling interest	329		326
Total Equity	6,818		6,578
Total Liabilities and Equity	$	24,868	$	25,093

Carrier Global Corporation
Condensed Consolidated Statement of Cash Flows

	(Unaudited)
		For the Three Months Ended March 31,
*(dollars in millions)*		2021		2020
Operating Activities
Net income from operations		$	392	$	102
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization		83		81
Deferred income tax provision		(2)		135
Stock-based compensation costs		19		13
Equity method investment net earnings		(38)		(29)
Distributions from equity method investments		12		10
Impairment charge on minority-owned joint venture investments		—		71
Changes in operating assets and liabilities
Accounts receivable, net		(83)		(19)
Contract assets, current		(44)		(39)
Inventories, net		(248)		(264)
Other assets, current		(23)		(10)
Accounts payable and accrued liabilities		151		(24)
Contract liabilities, current		39		51
Defined benefit plan contributions		(24)		(25)
Other operating activities, net		(50)		(6)
Net cash flows provided by (used in) operating activities		184		47
Investing Activities
Capital expenditures		(53)		(48)
Investments in businesses, net of cash acquired		(6)		—
Settlement of derivative contracts, net		8		(95)
Other investing activities, net		2		15
Net cash flows provided by (used in) investing activities		(49)		(128)
Financing Activities
Increase (decrease) in short-term borrowings, net		28		(44)
Issuance of long-term debt		51		10,961
Repayment of long-term debt		(570)		(34)
Repurchases of common stock		(36)		—
Dividends paid on common stock		(104)		—
Dividends paid to non-controlling interest		(5)		(8)
Net transfers to UTC		—		(10,948)
Other financing activities, net		(7)		(3)
Net cash flows provided by (used in) financing activities		(643)		(76)
Effect of foreign exchange rate changes on cash and cash equivalents		(9)		(28)
Net increase (decrease) in cash and cash equivalents and restricted cash		(517)		(185)
Cash, cash equivalents and restricted cash, beginning of period		3,120		957
Cash, cash equivalents and restricted cash, end of period		2,603		772
Less: restricted cash		4		4
Cash and cash equivalents, end of period		$	2,599	$	768

Carrier Global Corporation
Segment Net Sales and Operating Profit Reported (GAAP) to Adjusted (Non-GAAP)

	(Unaudited)
	For the Three Months Ended March 31,
	2021				2020
*(In millions)*	Reported		Adjusted		Reported		Adjusted
Net sales
HVAC	$	2,486	$	2,486	$	1,959	$	1,959
Refrigeration	1,005		1,005		808		808
Fire & Security	1,304		1,304		1,206		1,206
Segment sales	4,795		4,795		3,973		3,973
Eliminations and other	(96)		(96)		(85)		(85)
Net sales	$	4,699	$	4,699	$	3,888	$	3,888

Operating profit
HVAC	$	365	$	369	$	167	$	242
Refrigeration	127		129		99		99
Fire & Security	150		164		120		126
Segment operating profit	642		662		386		467
Eliminations and other	(40)		(25)		(35)		5
General corporate expenses	(31)		(29)		(36)		(36)
Operating profit	$	571	$	608	$	315	$	436

Operating margin
HVAC	14.7%		14.8%		8.5%		12.4%
Refrigeration	12.6%		12.8%		12.3%		12.3%
Fire & Security	11.5%		12.6%		10.0%		10.4%
Total Carrier	12.2%		12.9%		8.1%		11.2%

Carrier Global Corporation
Reconciliation of Reported (GAAP) to Adjusted (Non-GAAP)

Operating Profit

		(Unaudited)
		For the Three Months Ended
		March 31,
*(dollars in millions – Income (Expense))*		2021		2020
HVAC
	Net sales	$	2,486	$	1,959

	Operating profit	$	365	$	167
	Restructuring	(4)		(2)
	Gain on sales of joint venture	—		—
	Impairment of joint venture investment	—		(71)
	Separation costs	—		(2)
	Adjusted operating profit	$	369	$	242

Refrigeration
	Net sales	$	1,005	$	808

	Operating profit	$	127	$	99
	Restructuring	(2)		—
	Adjusted operating profit	$	129	$	99

Fire & Security
	Net sales	$	1,304	$	1,206

	Operating profit	$	150	$	120
	Restructuring	(11)		(3)
	Separation costs	—		(3)
	Other	(3)		—
	Adjusted operating profit	$	164	$	126

General Corporate Expenses and Eliminations and Other
	Net sales	$	(96)	$	(85)

	Operating profit	$	(71)	$	(71)
	Restructuring	(1)		—
	Separation costs	(16)		(40)
	Adjusted operating profit	$	(54)	$	(31)

Carrier
	Net sales	$	4,699	$	3,888

	Operating profit	$	571	$	315
	Total restructuring costs	(18)		(5)
	Total non-recurring and non-operational items	(19)		(116)
	Adjusted operating profit	$	608	$	436

Carrier Global Corporation
Reconciliation of Reported (GAAP) to Adjusted (Non-GAAP) Results

Net Income, Earnings Per Share, and Effective Tax Rate

	(Unaudited)
	For the Three Months Ended March 31, 2021
*(In millions)*	Reported		Adjustments			Adjusted
Net sales	$	4,699	$	—		$	4,699

Operating profit	571		37		a	608
Operating margin	12.2%					12.9%

Income from operations before income taxes	496		56		a,b	552
Income tax expense	(104)		(13)		c	(117)
Income tax rate	21.0%					21.1%

Net income attributable to common shareowners	$	384	$	43		$	427

Summary of Adjustments:
Restructuring costs			$	18	a
Separation costs			16		a
Debt prepayment costs			19		b
Other			3		a
Total adjustments			$	56


Tax effect on adjustments above			$	(13)
Total tax adjustments			$	(13)	c

Shares outstanding – Diluted	889.8					889.8

Earnings per share – Diluted	$	0.43				$	0.48

Carrier Global Corporation
Reconciliation of Reported (GAAP) to Adjusted (Non-GAAP) Results

Net Income, Earnings Per Share, and Effective Tax Rate

	(Unaudited)
	For the Three Months Ended March 31, 2020
*(In millions)*	Reported		Adjustments			Adjusted
Net sales	$	3,888	$	—		$	3,888

Operating profit	315		121		a	436
Operating margin	8.1%					11.2%

Income from operations before income taxes	295		126		a,b	421
Income tax expense	(193)		84		c	(109)
Income tax rate	65.4%					25.9%

Net income attributable to common shareowners	$	96	$	210		$	306

Summary of Adjustments:
Restructuring costs			$	5	a
Impairment of equity method investment			71		a
Separation costs			45		a
Debt issuance costs			5		b
Total adjustments			$	126


Tax effect on adjustments above			$	(13)
Tax specific adjustments			97
Total tax adjustments			$	84	c

Shares outstanding – Diluted	866.2					866.2

Earnings per share – Diluted	$	0.11				$	0.35

Carrier Global Corporation
Reconciliation of Reported (GAAP) to Adjusted (Non-GAAP) Results

Components of Changes in Net Sales

Three Months Ended March 31, 2021 Compared with Three Months Ended March 31, 2020
	(Unaudited)
	Factors Contributing to Total % change in Net Sales
	Organic	FX Translation	Acquisitions / Divestitures, net	Other	Total
HVAC	25%	2%	—%	—%	27%
Refrigeration	19%	5%	—%	—%	24%
Fire & Security	3%	5%	—%	—%	8%
Consolidated	17%	4%	—%	—%	21%

Free Cash Flow Reconciliation

	(Unaudited)
	Q1		Q2		Q3		Q4		FY		Q1
*(dollars in millions)*	2020		2020		2020		2020		2020		2021
Net cash flows provided by operating activities	$	47	$	509	$	937	199		$	1,692	$	184
Less: Capital expenditures	48		46		57		161		312		53
Free cash flow	$	(1)	$	463	$	880	$	38	$	1,380	$	131

Net Debt Reconciliation

	(Unaudited)
	As of
*(dollars in millions)*	March 31, 2021		December 31, 2020
Long-term debt	$	9,577	$	10,036
Current portion of long-term debt	153		191
Less: Cash and cash equivalents	2,599		3,115
Net debt	$	7,131	$	7,112

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SOURCE Carrier Global Corporation

April 29, 2021 6:34 am

Uranium Royalty Corp. Takes Delivery of Initial Tranche Under its 10-Year Supply Agreement to Acquire US$10 Million of Physical Uranium

PR Newswire

Highlights

Uranium Royalty Corp (URC) previously announced on March 30, 2021 the initial exercise of its option to purchase US$10 million of physical uranium, secured under its strategic and foundational investment in the 2018 IPO of Yellow Cake plc (YCA);
URC has now taken delivery of 348,068 pounds of U₃O₈; and
Together with our recently announced proposed acquisitions of royalty interests in the McArthur River and Cigar Lake mines, URC is ideally positioned to benefit from improving uranium prices.

VANCOUVER, BC, April 29, 2021 /PRNewswire/ – Uranium Royalty Corp. (NASDAQ: UROY) (TSXV: URC) (“URC” or the “Company”) is pleased to confirm the completion of its previously announced acquisition of 348,068 pounds of U₃O₈pursuant to its existing strategic arrangements with Yellow Cake plc (“Yellow Cake”) at a price of US$28.73 per pound. The purchased physical uranium is being held in URC’s account at the Fuel Services facilities of Cameco Corporation in Ontario, Canada.

Scott Melbye, Chief Executive Officer of URC, commented: “We are pleased to confirm the acquisition and delivery of uranium into our holding account. This purchase is in line with our goal of gaining exposure to uranium prices through sector-focused investments and we believe that it clearly demonstrates the value of our strategic Yellow Cake investment.”

Mr. Melbye continued: “The addition of this direct physical uranium interest further diversifies our unique uranium-focused portfolio and adds a valuable asset to our balance sheet. Together with our recently announced proposed acquisitions of royalty interests in the McArthur River and Cigar Lake mines, we believe we are uniquely positioned to benefit from improving uranium prices.”

The acquisition was completed pursuant to the option granted to the Company in connection with its 2018 IPO investment in Yellow Cake. Pursuant to the option, the Company may acquire between US$2.5 million and US$10 million of U₃O₈per year from Yellow Cake under its supply agreement that will expire on January 1, 2028, up to a maximum aggregate amount of US$31.25 million worth of U₃O₈. Yellow Cake is a listed uranium holding company that purchases U₃O₈through the spot market and a long-term supply agreement with National Atomic Company Kazatomprom JSC.

About Uranium Royalty Corp.

Uranium Royalty Corp. (URC) is a pure-play uranium royalty company focused on gaining exposure to uranium prices by making strategic investments in uranium interests, including royalties, streams, debt and equity investments in uranium companies, as well as through holdings of physical uranium. The Company recognizes the inherent cyclicality of valuations based on uranium prices, including the impact of such cyclicality on the availability of capital within the uranium sector and the current historically low uranium pricing environment. URC intends to execute on its strategy by leveraging the deep industry knowledge and expertise of its management team and the Board to identify and evaluate investment opportunities in the uranium industry. The Company’s management and the Board include individuals with decades of combined experience in the uranium and nuclear energy sectors, including specific expertise in mine finance, project identification and evaluation, mine development and uranium sales and trading.

Forward Looking Statements

Certain statements in this news release may constitute “forward-looking statements”, including those regarding uranium markets, proposed royalty acquisitions and the Company’s acquisition strategy. Forward-looking statements are statements that address or discuss activities, events or developments that the Company expects or anticipates may occur in the future. When used in this news release, words such as “estimates”, “expects”, “plans”, “anticipates”, “will”, “believes”, “intends” “should”, “could”, “may” and other similar terminology are intended to identify such forward-looking statements. Forward-looking statements reflect the current expectations and beliefs of the Company’s management. These statements involve significant uncertainties, known and unknown risks, uncertainties and other factors and, therefore, actual results, performance or achievements of the Company and its industry may be materially different from those implied by such forward-looking statements. They should not be read as a guarantee of future performance or results, and will not necessarily be an accurate indication of whether or not such results will be achieved. A number of factors could cause actual results to differ materially from such forward-looking statements, including, without limitation, any inability to satisfy conditions to completion of the Company’s recently announced royalty acquisitions or to complete any of the transactions as contemplated or at all, any ability for the Company to obtain necessary financing on acceptable terms or at all, risks inherent to royalty companies, uranium price volatility, risks related to the operators of the projects underlying the Company’s existing and proposed interests and those other risks described in the Annual Information Form and other filings with Canadian securities regulators and the U.S. Securities and Exchange Commission, which could cause actual results and events to vary significantly. Accordingly, readers should exercise caution in relying upon forward-looking statements and the Company undertakes no obligation to publicly revise them to reflect subsequent events or circumstances, except as required by law.

Neither the TSX-V nor its Regulation Services Provider (as that term is defined in policies of the TSX-V) accepts responsibility for the adequacy or accuracy of this release.

View original content:http://www.prnewswire.com/news-releases/uranium-royalty-corp-takes-delivery-of-initial-tranche-under-its-10-year-supply-agreement-to-acquire-us10-million-of-physical-uranium-301279701.html

SOURCE Uranium Royalty Corp.

April 29, 2021 6:34 am

Keurig Dr Pepper Reports Strong Start to 2021

Delivers Double-Digit Net Sales and Earnings Growth

Raises Full-Year Net Sales Guidance and Reaffirms EPS Guidance

PR Newswire

BURLINGTON, Mass. and FRISCO, Texas, April 29, 2021 /PRNewswire/ — Keurig Dr Pepper Inc. (NASDAQ: KDP) today reported financial results for the first quarter ended March 31, 2021 and increased its outlook for 2021 net sales growth to 4% to 6%, from the Company’s prior net sales guidance of 3% to 4%. KDP also reaffirmed its guidance for full-year Adjusted diluted EPS growth of 13% to 15%.

Net sales in the first quarter of 2021 advanced approximately 11% on both a GAAP and constant currency basis, with each of the Company’s business segments reporting strong growth. GAAP diluted earnings per share more than doubled to $0.23 and Adjusted¹ diluted EPS grew to $0.33, a double-digit increase versus year-ago.

Commenting on the announcement, Chairman and CEO Bob Gamgort stated, “We delivered an exceptional first quarter, driving double-digit net sales and earnings growth, behind outstanding in-market execution. Looking forward, we see an improving, but volatile, macro environment marked by increasing consumer mobility and rising inflationary headwinds. We remain focused on delivering our business plan, with increased net sales growth expectations and growing confidence in achieving our Adjusted diluted EPS growth target of 13% to 15% for the year, and we plan to reinvest any earnings upside in the business to drive future growth.”

First Quarter Consolidated Results

Net sales for the first quarter of 2021 increased 11.1% to $2.90 billion, compared to $2.61 billion in the year-ago period, driven by strong growth in each business segment, particularly Coffee Systems. On a constant currency basis, net sales advanced 10.8%, reflecting higher volume/mix of 10.3% and favorable net price realization of 0.5%.

KDP in-market performance in the quarter remained strong, with retail dollar consumption²advancing 9.4% across the Company’s cold beverage retail base, with particular strength in CSDs³, premium unflavored water, teas, juice drinks, apple juice, vegetable juice, mixers, and coconut water. This performance reflected the strength of Dr Pepper, Canada Dry, A&W, 7UP, and Sunkist CSDs, CORE hydration, Snapple teas and fruit drinks, Clamato vegetable juice, Motts apple juice, and Vita Coco. On a two-year stacked basis, consumption of KDP’s cold beverage portfolio increased 17%.

In coffee, retail consumption of single-serve pods manufactured by KDP in IRi tracked channels increased 3.9% in the quarter and dollar market share advanced to 83%. In untracked channels, accelerated e-commerce growth of K-Cup pods continued in the quarter, more than offsetting declines in the away-from-home office and hospitality businesses. On a two-year stacked basis, retail consumption of single-serve pods manufactured by KDP increased 11% in IRi tracked channels.

GAAP operating income increased 37% to $640 million in the first quarter of 2021, compared to $466 million in the year-ago period, reflecting the growth in net sales, productivity and merger synergies, lower marketing spending in relation to pre-COVID investment levels in the year-ago period and the favorable year-over-year impact of items affecting comparability. These drivers were partially offset by higher operating expenses associated with increased consumer demand and inflation in logistics and input costs, as well as the unfavorable comparison to a $42 million gain recorded in the year-ago period on the sale-leaseback of four facilities.

Adjusted operating income in the first quarter of 2021 totaled $741 million, an increase of 8.3%, compared to $684 million in the year-ago period, which included the benefit of the aforementioned sale-leaseback gain – this gain negatively impacted the year-over-year Adjusted operating income growth rate by more than seven percentage points. On a percent of net sales basis, Adjusted operating income was 25.5% in the first quarter of 2021, compared to Adjusted operating margin of 26.2% in the year-ago period, a decline of 70 basis points including the headwind from the year-ago gain on the sale-leaseback transaction.

GAAP net income in the first quarter of 2021 more than doubled to $325 million, or $0.23 per diluted share, compared to $156 million, or $0.11 per diluted share, in the year-ago period. This performance was driven by the growth in operating income, a lower effective tax rate, and lower interest expense, despite lapping a $15 million after-tax gain on interest rate swaps in the year-ago quarter. Also driving net income growth for the quarter was the favorable year-over-year impact of items affecting comparability.

Adjusted net income in the first quarter of 2021 totaled $471 million, an increase of 15%, compared to $408 million in the year-ago period, which included the after-tax benefit of the sale-leaseback gain in the year-ago period, which negatively impacted the year-over-year Adjusted net income growth rate by nearly 10 percentage points. Adjusted diluted EPS in the first quarter advanced 14% to $0.33, compared to $0.29 in the year-ago period, which included the year-ago sale-leaseback gain.

KDP generated free cash flow of $458 million in the first quarter of 2021, reflecting the growth in earnings and ongoing effective working capital management. The strong free cash flow performance enabled KDP to reduce total financial obligations by $125 million and end the first quarter of 2021 with $335 million of unrestricted cash on hand. In addition, the Company’s management leverage ratio declined 0.7x to 3.5x at the end of the first quarter of 2021, compared to 4.2x in the year-ago period. Since the close of the merger in July 2018, management leverage ratio has declined by 2.5x.

¹Adjusted financial metrics used in this release are non-GAAP. See reconciliations of GAAP results to Adjusted results in the accompanying tables.
² Retail consumption data based on Keurig Dr Pepper’s custom IRi category definitions for the 13-week period ending 3/28/2021.
³ CSDs refer to “Carbonated Soft Drinks”.

First Quarter Segment Results

Coffee Systems

Net sales for the first quarter of 2021 advanced 17.4% to $1.14 billion, compared to $0.97 billion in the year-ago period. On a constant currency basis, net sales advanced 16.9%, reflecting higher volume/mix of 19.5%, partially offset by lower net price realization of 2.6%.

The volume/mix increase of 19.5% in the quarter reflected pod volume growth of 13.7% and brewer volume growth of 61%. The pod volume growth was driven by strong at-home consumption, partially offset by continued softness in the away-from-home business, as return to offices and hospitality has been slow. The brewer volume growth largely reflected strong retail consumption, primarily driven by the Company’s successful brewer innovation program, as well as a benefit from shipment timing.

GAAP operating income increased 23.5% in the first quarter of 2021 to $336 million, compared to $272 million in the year-ago period, reflecting the strong growth in net sales, continued productivity and merger synergies and the favorable year-over-year impact of items affecting comparability. Partially offsetting these positive drivers was the unfavorable comparison to the sale-leaseback gain in the year-ago period that impacted the segment by $16 million, as well as inflation in logistics and input costs and slightly higher marketing spending.

Adjusted operating income in the first quarter of 2021 totaled $389 million, an increase of 12.1%, compared to $347 million in the year-ago period, which included the benefit of sale-leaseback gain – this gain negatively impacted the year-over-year Adjusted operating income growth rate by more than five percentage points. On a percent of net sales basis, Adjusted operating margin was 34.1% in the first quarter of 2021, compared to Adjusted operating margin of 35.7% in the year-ago period, a decline of 160 basis points, including negative margin mix related to the exceptionally strong brewer sales and the 170 basis point headwind from a year-ago sale-leaseback gain.

Packaged Beverages

Net sales for the first quarter of 2021 increased 7.4% to $1.31 billion, compared to $1.22 billion in the year-ago period. On a constant currency basis, net sales increased 7.2%, reflecting favorable volume/mix of 6.8% and higher net price realization of 0.4%. Leading the net sales performance were Dr Pepper, A&W, Canada Dry, Sunkist, 7UP, and Squirt CSDs, as well as growth of Snapple and Clamato, partially offset by a decline in Bai.

GAAP operating income decreased 7.4% in the first quarter of 2021 to $175 million, compared to $189 million in the year-ago period, largely reflecting the unfavorable comparison to the sale-leaseback gain in the year-ago period that impacted the segment by $26 million, as well as inflation in logistics and input costs, higher operating costs to meet continued strong consumer demand and the unfavorable year-over-year impact of items affecting comparability. Partially offsetting these drivers were the benefits of the strong growth in net sales, continued productivity and merger synergies.

Adjusted operating income in the first quarter of 2021 totaled $197 million, a decrease of 3.0%, compared to $203 million in the year-ago period, which included the benefit of the sale-leaseback gain – this gain negatively impacted the year-over-year Adjusted operating income growth rate by more than 14 percentage points. On a percent of net sales basis, Adjusted operating margin was 15.1% in the first quarter of 2021, compared to Adjusted operating margin of 16.7% the year-ago period, a decline of 160 basis points including the 220 basis point headwind from the year-ago sale-leaseback gain.

Beverage Concentrates

Net sales for the first quarter of 2021 increased 7.2% to $328 million, compared to $306 million in the year-ago period. On a constant currency basis, net sales advanced 6.5%, reflecting favorable net price realization of 7.2%, partially offset by lower volume/mix of 0.7%. This volume/mix performance continued to be primarily impacted by the fountain foodservice business with lower levels of consumer mobility in the restaurant and hospitality channels compared to last year, albeit improving since the beginning of the year.

Total shipment volume versus year-ago increased 1.0% in the quarter, as increases in Dr Pepper and A&W were partially offset by lower shipment volume in Canada Dry and Sunkist. Bottler case sales volume decreased 3.1% in the quarter compared to the year-ago period.

GAAP operating income in the first quarter of 2021 increased 20.8% to $238 million, compared to $197 million in the year-ago period, reflecting the impact of the higher net sales and lower marketing spending, partially offset by the unfavorable year-over-year impact of items affecting comparability.

Adjusted operating income increased 21.3% to $239 million, compared to $197 million in the year-ago period, and Adjusted operating margin advanced 850 basis points to 72.9%, primarily reflecting favorable net price realization.

Latin America Beverages

Net sales for the first quarter of 2021 increased 6.8% to $125 million, compared to $117 million in the year-ago period. On a constant currency basis, net sales increased 7.7%, driven by strong net price realization of 10.3%, partially offset by unfavorable volume/mix of 2.6%.

GAAP operating income in the first quarter of 2021 decreased 18.5% to $22 million, compared to $27 million in the year-ago period, reflecting the unfavorable impact of foreign currency transaction expense, inflation in logistics and the unfavorable year-over-year impact of items affecting comparability. This performance was partially offset by the growth in net sales and productivity.

Adjusted operating income decreased 15% to $23 million, compared to $27 million in the year-ago period, and, on a constant currency basis, Adjusted operating income decreased 14.8%. Adjusted operating margin in the quarter decreased 470 basis points to 18.4%, primarily reflecting the unfavorable impact of foreign currency transaction expense.

Outlook for 2021

The Company reaffirmed its guidance for Adjusted diluted EPS growth in the range of 13% to 15%, reflecting its increased guidance for constant currency net sales growth in the range of 4% to 6%, which is expected to offset growing inflationary pressures in the balance of the year. The Company continues to expect its management leverage ratio to be at or below 3.0x at year-end.

Investor Contacts:

Tyson Seely

Keurig Dr Pepper
T: 781-418-3352 / [email protected]

Steve Alexander

Keurig Dr Pepper
T: 972-673-6769 / [email protected]

Media Contact:

Katie Gilroy

Keurig Dr Pepper
T: 781-418-3345 / [email protected]

About Keurig Dr Pepper
Keurig Dr Pepper (KDP) is a leading beverage company in North America, with annual revenue in excess of $11 billion and nearly 27,000 employees. KDP holds leadership positions in soft drinks, specialty coffee and tea, water, juice and juice drinks and mixers, and markets the #1 single serve coffee brewing system in the U.S. and Canada. The Company’s portfolio of more than 125 owned, licensed and partner brands is designed to satisfy virtually any consumer need, any time, and includes Keurig®, Dr Pepper®, Green Mountain Coffee Roasters®, Canada Dry®, Snapple®, Bai®, Mott’s®, CORE® and The Original Donut Shop®. Through its powerful sales and distribution network, KDP can deliver its portfolio of hot and cold beverages to nearly every point of purchase for consumers. The Company is committed to sourcing, producing and distributing its beverages responsibly through its Drink Well. Do Good. corporate responsibility platform, including efforts around circular packaging, efficient natural resource use and supply chain sustainability. For more information, visit, www.keurigdrpepper.com.

FORWARD LOOKING STATEMENTS
Certain statements contained herein are “forward-looking statements” within the meaning of applicable securities laws and regulations. These forward-looking statements can generally be identified by the use of words such as “outlook,” “guidance,” “anticipate,” “expect,” “believe,” “could,” “estimate,” “feel,” “forecast,” “intend,” “may,” “plan,” “potential,” “project,” “should,” “target,” “will,” “would,” and similar words, phrases or expressions and variations or negatives of these words, although not all forward-looking statements contain these identifying words. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements regarding the estimated or anticipated future results of the combined company following the combination of Keurig Green Mountain, Inc. (“KGM”) and Dr Pepper Snapple Group, Inc. (“DPS” and such combination, the “transaction”), the anticipated benefits of the transaction, including estimated synergies and cost savings, the long-term merger targets, and other statements that are not historical facts. These statements are based on the current expectations of our management and are not predictions of actual performance.

These forward-looking statements are subject to a number of risks and uncertainties regarding the company’s business and the transaction and actual results may differ materially. These risks and uncertainties include, but are not limited to: (i) the impact the significant additional debt incurred in connection with the transaction may have on our ability to operate our business, (ii) risks relating to the integration of the KGM and DPS operations, products and employees into the combined company and assumption of certain potential liabilities of KGM and the possibility that the anticipated synergies and other benefits of the transaction, including cost savings, will not be realized or will not be realized within the expected timeframe, (iii) the impact of the global COVID-19 pandemic, and (iv) risks relating to the businesses and the industries in which our combined company operates. These risks and uncertainties, as well as other risks and uncertainties, are more fully discussed in the Company’s filings with the SEC, including our Annual Report on Form 10-K and subsequent filings. While the lists of risk factors presented here and in our public filings are considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Any forward-looking statement made herein speaks only as of the date of this document. We are under no obligation to, and expressly disclaim any obligation to, update or alter any forward-looking statements, whether as a result of new information, subsequent events or otherwise, except as required by applicable laws or regulations.

NON-GAAP FINANCIAL MEASURES
This release includes certain non-GAAP financial measures including Adjusted operating income, Adjusted net income, Adjusted diluted EPS and Free Cash Flow, which differ from results using U.S. Generally Accepted Accounting Principles (GAAP). These non-GAAP financial measures should be considered as supplements to the GAAP reported measures, should not be considered replacements for, or superior to, the GAAP measures and may not be comparable to similarly named measures used by other companies. Non-GAAP financial measures typically exclude certain charges, including one-time costs related to the transaction and integration activities, which are not expected to occur routinely in future periods. The Company uses non-GAAP financial measures internally to focus management on performance excluding these special charges to gauge our business operating performance. Management believes this information is helpful to investors because it increases transparency and assists investors in understanding the underlying performance of the Company and in the analysis of ongoing operating trends. Additionally, management believes that non-GAAP financial measures are frequently used by analysts and investors in their evaluation of companies, and continued inclusion provides consistency in financial reporting and enables analysts and investors to perform meaningful comparisons of past, present and future operating results. The most directly comparable GAAP financial measures and reconciliations to non-GAAP financial measures are set forth in the appendix to this release and included in the Company’s filings with the SEC.

To the extent that the Company provides guidance, it does so only on a non-GAAP basis and does not provide reconciliations of such forward-looking non-GAAP measures to GAAP due to the inability to predict the amount and timing of impacts outside of the Company’s control on certain items, such as non-cash gains or losses resulting from mark-to-market adjustments of derivative instruments, among others.

KEURIG DR PEPPER INC. *CONDENSED CONSOLIDATED STATEMENTS OF INCOME* *For the First Quarter of 2021 and 2020* (Unaudited, in millions, except per share data)

	First Quarter
*(in millions, except per share data)*	2021		2020
Net sales	$	2,902	$	2,613
Cost of sales	1,302		1,161
Gross profit	1,600		1,452
Selling, general and administrative expenses	961		1,028
Other operating income, net	(1)		(42)
Income from operations	640		466
Interest expense	140		153
Loss on early extinguishment of debt	105		2
Impairment of investments and note receivable	—		86
Other (income) expense, net	(3)		20
Income before provision for income taxes	398		205
Provision for income taxes	73		49
Net income	$	325	$	156
Less: Net income attributable to non-controlling interest	—		—
Net income attributable to KDP	$	325	$	156

Earnings per common share:
Basic	$	0.23	$	0.11
Diluted	0.23		0.11
Weighted average common shares outstanding:
Basic	1,409.2		1,407.0
Diluted	1,425.6		1,420.1

KEURIG DR PEPPER INC. *CONDENSED CONSOLIDATED BALANCE SHEETS* *As of* *March 31, 2021 and December 31, 2020* (Unaudited, in millions, except shares and per share data)

	March 31,		December 31,
*(in millions, except share and per share data)*	2021		2020
Assets
Current assets:
Cash and cash equivalents	$	335	$	240
Restricted cash and restricted cash equivalents	14		15
Trade accounts receivable, net	1,065		1,048
Inventories	841		762
Prepaid expenses and other current assets	410		323
Total current assets	2,665		2,388
Property, plant and equipment, net	2,261		2,212
Investments in unconsolidated affiliates	88		88
Goodwill	20,209		20,184
Other intangible assets, net	23,949		23,968
Other non-current assets	1,187		894
Deferred tax assets	44		45
Total assets	$	50,403	$	49,779
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	3,871	$	3,740
Accrued expenses	989		1,040
Structured payables	148		153
Short-term borrowings and current portion of long-term obligations	1,750		2,345
Other current liabilities	467		416
Total current liabilities	7,225		7,694
Long-term obligations	11,715		11,143
Deferred tax liabilities	6,025		5,993
Other non-current liabilities	1,367		1,119
Total liabilities	26,332		25,949
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value, 15,000,000 shares authorized, no shares issued	—		—
Common stock, $0.01 par value, 2,000,000,000 shares authorized, 1,417,325,379 and 1,407,260,676 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively	14		14
Additional paid-in capital	21,718		21,677
Retained earnings	2,174		2,061
Accumulated other comprehensive (income) loss	164		77
Total stockholders’ equity	24,070		23,829
Non-controlling interest	1		1
Total equity	24,071		23,828
Total liabilities and stockholders’ equity	$	50,403	$	49,777

KEURIG DR PEPPER INC. *CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS* *For The* *First Quarter of 2021 and 2020* (Unaudited, in millions)

	First Quarter
*(in millions)*	2021		2020
Operating activities:
Net income	$	325	$	156
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense	102		98
Amortization of intangibles	33		33
Other amortization expense	40		32
Provision for sales returns	19		7
Deferred income taxes	11		(5)
Employee stock-based compensation expense	25		19
Loss on early extinguishment of debt	105		2
Gain on disposal of property, plant and equipment	(1)		(43)
Unrealized (gain) loss on foreign currency	(10)		22
Unrealized (gain) loss on derivatives	(41)		43
Equity in loss of unconsolidated affiliates	—		15
Impairment on investments and note receivable of unconsolidated affiliate	—		86
Other, net	15		22
Changes in assets and liabilities:
Trade accounts receivable	(37)		42
Inventories	(77)		(38)
Income taxes receivable and payables, net	25		(29)
Other current and non-current assets	(295)		(179)
Accounts payable and accrued expenses	121		150
Other current and non-current liabilities	186		(19)
Net change in operating assets and liabilities	(77)		(73)
Net cash provided by operating activities	546		414
Investing activities:
Purchases of property, plant and equipment	(95)		(151)
Proceeds from sales of property, plant and equipment	7		201
Purchases of intangibles	(12)		(15)
Issuance of related party note receivable	—		(6)
Other, net	1		5
Net cash (used in) provided by investing activities	(99)		34
Financing activities:
Proceeds from issuance of common stock	140		—
Proceeds from unsecured credit facility	—		1,000
Proceeds from senior unsecured notes	2,150		—
Net payment of commercial paper	—		(387)
Proceeds from structured payables	35		44
Payments on structured payables	(41)		(107)
Payments on Notes	(1,845)		(250)
Payments on term loan	(425)		(405)
Payments on finance leases	(15)		(13)
Cash dividends paid	(192)		(212)
Tax witholdings related to net share settlements	(125)		—
Other, net	(37)		2
Net cash used in financing activities	(355)		(328)
Cash, cash equivalents, restricted cash, and restricted cash equivalents:
Net change from operating, investing and financing activities	92		120
Effect of exchange rate changes	2		(8)
Beginning balance	255		111
Ending balance	$	349	$	223

KEURIG DR PEPPER INC. RECONCILIATION OF SEGMENT INFORMATION (Unaudited)

	First Quarter
*(in millions)*	2021		2020
Net Sales
Coffee Systems	$	1,142	$	973
Packaged Beverages	1,307		1,217
Beverage Concentrates	328		306
Latin America Beverages	125		117
Total net sales	$	2,902	$	2,613

Income from Operations
Coffee Systems	$	336	$	272
Packaged Beverages	175		189
Beverage Concentrates	238		197
Latin America Beverages	22		27
Unallocated corporate costs	(131)		(219)
Total income from operations	$	640	$	466

KEURIG DR PEPPER INC.

RECONCILIATION OF CERTAIN NON-GAAP INFORMATION

(Unaudited)

The company reports its financial results in accordance with U.S. GAAP. However, management believes that certain non-GAAP financial measures that reflect the way management evaluates the business may provide investors with additional information regarding the company’s results, trends and ongoing performance on a comparable basis.

For the first quarter of 2021 and 2020, we define our Adjusted non-GAAP financial measures as certain financial statement captions and metrics adjusted for certain items affecting comparability. The items affecting comparability are defined below.

Specifically, investors should consider the following with respect to our financial results:

Adjusted: Defined as certain financial statement captions and metrics adjusted for certain items affecting comparability.

Items affecting comparability: Defined as certain items that are excluded for comparison to prior year periods, adjusted for the tax impact as applicable. Tax impact is determined based upon an approximate rate for each item. For each period, management adjusts for (i) the unrealized mark-to-market impact of derivative instruments not designated as hedges in accordance with U.S. GAAP and do not have an offsetting risk reflected within the financial results; (ii) the amortization associated with definite-lived intangible assets; (iii) the amortization of the deferred financing costs associated with the DPS Merger; (iv) the amortization of the fair value adjustment of the senior unsecured notes obtained as a result of the DPS Merger; (v) stock compensation expense and the associated windfall tax benefit attributable to the matching awards made to employees who made an initial investment in KDP; and (vi) other certain items that are excluded for comparison purposes to prior year periods.

For the first quarter of 2021, the other certain items excluded for comparison purposes include (i) restructuring and integration expenses related to significant business combinations; (ii) productivity expenses; (iii) costs related to significant non-routine legal matters; (iv) the loss on early extinguishment of debt related to the redemption of debt; (v) incremental costs to our operations related to risks associated with the COVID-19 pandemic; and (vi) gains from insurance recoveries related to the February 2019 organized malware attack on our business operation networks in the Coffee Systems segment.

For the first quarter of 2020, the other certain items excluded for comparison purposes include (i) restructuring and integration expenses related to significant business combinations; (ii) productivity expenses; (iii) transaction costs for significant business combinations (completed or abandoned) excluding the DPS Merger; (iv) costs related to significant non-routine legal matters; (v) the loss on early extinguishment of debt related to the redemption of debt, (vi) incremental costs to our operations related to risks associated with the COVID-19 pandemic and (vii) impairment recognized on equity method investment with Bedford.

Incremental costs to our operations related to risks associated with the COVID-19 pandemic include incremental expenses incurred to either maintain the health and safety of our front-line employees or temporarily increase compensation to such employees to ensure essential operations continue during the pandemic. We believe removing these costs reflects how management views our business results on a consistent basis. See Impact of COVID-19 on our Financial Statements for further information.

For the first quarter of 2021 and 2020, the supplemental financial data set forth below includes reconciliations of Adjusted income from operations, Adjusted net income and Adjusted diluted EPS to the applicable financial measure presented in the unaudited condensed consolidated financial statement for the same period.

Reconciliations for these items are provided in the tables below.

KEURIG DR PEPPER INC. RECONCILIATION OF CERTAIN REPORTED ITEMS TO CERTAIN NON-GAAP ADJUSTED ITEMS For the First Quarter of 2021 (Unaudited, in millions, except per share data)

	Cost of sales		Gross profit		Gross margin		Selling, general and administrative expenses		Income from operations		Operating margin
Reported	$	1,302	$	1,600	55.1	%	$	961	$	640	22.1	%
Items Affecting Comparability:
Mark to market	9		(9)				29		(38)
Amortization of intangibles	—		—				(33)		33
Stock compensation	—		—				(6)		6
Restructuring and integration costs	—		—				(43)		43
Productivity	(8)		8				(25)		33
Nonroutine legal matters	—		—				(10)		10
COVID-19	(12)		12				(4)		16
Malware incident	—		—				2		(2)
Adjusted	$	1,291	$	1,611	55.5	%	$	871	$	741	25.5	%

	Interest expense		Loss on early extinguishment of debt		Income before provision for income taxes		Provision for income taxes		Effective tax rate		Net income attributable to KDP		Diluted earnings per share
Reported	$	140	$	105	$	398	$	73	18.3	%	$	325	$	0.23
Items Affecting Comparability:
Mark to market	8		—		(46)		(11)				(35)		(0.02)
Amortization of intangibles	—		—		33		8				25		0.02
Amortization of deferred financing costs	(3)		—		3		—				3		—
Amortization of fair value debt adjustment	(6)		—		6		2				4		—
Stock compensation	—		—		6		12				(6)		—
Restructuring and integration costs	—		—		43		11				32		0.02
Productivity	—		—		33		8				25		0.02
Loss on early extinguishment of debt	—		(105)		105		25				80		0.06
Nonroutine legal matters	—		—		10		2				8		0.01
COVID-19	—		—		16		4				12		0.01
Malware incident	—		—		(2)		—				(2)		—
Adjusted	$	139	$	—	$	605	$	134	22.1	%	$	471	$	0.33

Diluted earnings per common share may not foot due to rounding.

KEURIG DR PEPPER INC. RECONCILIATION OF CERTAIN REPORTED ITEMS TO CERTAIN NON-GAAP ADJUSTED ITEMS For the First Quarter of 2020 (Unaudited, in millions, except per share data)

	Cost of sales		Gross profit		Gross margin		Selling, general and administrative expenses		Income from operations		Operating margin
Reported	$	1,161	$	1,452	55.6	%	$	1,028	$	466	17.8	%
Items Affecting Comparability:
Mark to market	(15)		15				(43)		58
Amortization of intangibles	—		—				(33)		33
Stock compensation	—		—				(7)		7
Restructuring and integration costs	—		—				(52)		52
Productivity	(16)		16				(38)		54
Nonroutine legal matters	—		—				(9)		9
COVID-19	(1)		1				(4)		5
Adjusted	$	1,129	$	1,484	56.8	%	$	842	$	684	26.2	%

	Interest expense		Loss on early extinguishment of debt		Impairment of investment and note receivable		Income before provision for income taxes		Provision for income taxes		Effective tax rate		Net income		Diluted earnings per share
Reported	$	153	$	2	$	86	$	205	$	49	23.9	%	$	156	$	0.11
Items Affecting Comparability:
Mark to market	(24)		—		—		82		21				61		0.04
Amortization of intangibles	—		—		—		33		9				24		0.02
Amortization of deferred financing costs	(3)		—		—		3		1				2		—
Amortization of fair value debt adjustment	(6)		—		—		6		2				4		—
Stock compensation	—		—		—		7		1				6		—
Restructuring and integration costs			—		—		52		14				38		0.03
Productivity	—		—		—		54		15				39		0.03
Loss on early extinguishment of debt	—		(2)		—		2		—				2		—
Impairment of investment and note receivable	—		—		(86)		86		21				65		0.05
Nonroutine legal matters	—		—		—		9		2				7		—
COVID-19	—		—		—		5		1				4		—
Adjusted	$	120	$	—	$	—	$	544	$	136	25.0	%	$	408	$	0.29

Diluted earnings per common share may not foot due to rounding.

KEURIG DR PEPPER INC. RECONCILIATION OF SEGMENT ITEMS TO CERTAIN NON-GAAP ADJUSTED SEGMENT ITEMS (Unaudited)

*(in millions)*	Reported		Items Affecting Comparability		Adjusted GAAP
For the first quarter of 2021:
Income from Operations
Coffee Systems	$	336	$	53	$	389
Packaged Beverages	175		22		197
Beverage Concentrates	238		1		239
Latin America Beverages	22		1		23
Unallocated corporate costs	(131)		24		(107)
Total income from operations	$	640	$	101	$	741

For the first quarter of 2020:
Income from Operations
Coffee Systems	$	272	$	75	$	347
Packaged Beverages	189		14		203
Beverage Concentrates	197		—		197
Latin America Beverages	27		—		27
Unallocated corporate costs	(219)		129		(90)
Total income from operations	$	466	$	218	$	684

KEURIG DR PEPPER INC. RECONCILIATION OF ADJUSTED EBITDA AND MANAGEMENT LEVERAGE RATIO (Unaudited)

*(in millions, except for ratio)*
ADJUSTED EBITDA RECONCILIATION – LAST TWELVE MONTHS
Net income	$	1,494
Interest expense	591
Provision for income taxes	452
Loss on early extinguishment of debt	107
Impairment of investments and not receivable	16
Impairment of intangible assets	67
Other (income) expense, net	(6)
Depreciation expense	366
Other amortization	166
Amortization of intangibles	133
EBITDA	$	3,386
Items affecting comparability:
Restructuring and integration expenses	$	190
Productivity	92
Nonroutine legal matters	58
Stock compensation	26
COVID-19	139
Malware incident	(2)
Mark to market	(124)
Adjusted EBITDA	$	3,765

	March 31,
	2021
Principal amounts of:
Commercial paper notes	$	—
Term loan	—
KDP Revolver	—
Senior unsecured notes	13,625
Total principal amounts	13,625
Less: Cash and cash equivalents	335
Total principal amounts less cash and cash equivalents	$	13,290

March 31, 2021 Management Leverage Ratio	3.5

KEURIG DR PEPPER INC. RECONCILIATION OF ADJUSTED EBITDA – LAST TWELVE MONTHS (Unaudited)

*(in millions)*	SECOND QUARTER OF 2020		THIRD QUARTER OF 2020		FOURTH QUARTER OF 2020		FIRST QUARTER OF 2021		LAST TWELVE MONTHS
Net income	$	298	$	443	$	428	$	325	$	1,494
Interest expense	157		148		146		140		591
Provision for income taxes	108		141		130		73		452
Loss on early extinguishment of debt	2		—		—		105		107
Impairment on investments and note receivable	—		16		—		—		16
Impairment of intangible assets	—		—		67		—		67
Other (income) expense, net	(4)		5		(4)		(3)		(6)
Depreciation expense	85		89		90		102		366
Other amortization	44		42		40		40		166
Amortization of intangibles	33		34		33		33		133
EBITDA	$	723	$	918	$	930	$	815	$	3,386
Items affecting comparability:
Restructuring and integration expenses	$	52	$	39	$	56	$	43	$	190
Productivity	18		26		22		26		92
Nonroutine legal matters	26		8		14		10		58
Stock compensation	8		6		6		6		26
COVID-19	63		49		11		16		139
Malware incident	—		—		—		(2)		(2)
Mark to market	13		(45)		(54)		(38)		(124)
Adjusted EBITDA	$	903	$	1,001	$	985	$	876	$	3,765

KEURIG DR PEPPER INC. RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW (Unaudited)

Free cash flow is defined as net cash provided by operating activities adjusted for purchases of property, plant and equipment, proceeds from sales of property, plant and equipment, and certain items excluded for comparison to prior year periods. For the first quarter of 2021 and 2020, there were no certain items excluded for comparison to prior year periods.

	First Quarter
*(in millions)*	2021		2020
Net cash provided by operating activities	$	546	$	414
Purchases of property, plant and equipment	(95)		(151)
Proceeds from sales of property, plant and equipment	7		201
Free Cash Flow	$	458	$	464

RECONCILIATION OF CERTAIN CURRENCY NEUTRAL ADJUSTED FINANCIAL RESULTS (Unaudited)

Net sales, adjusted income from operations and adjusted earnings per share, as adjusted to currency neutral: These adjusted financial results are calculated on a currency neutral basis by converting our current-period local currency financial results using the prior-period foreign currency exchange rates.

	For the First Quarter of 2021
Percent change	Coffee Systems		Packaged Beverages		Beverage Concentrates		Latin America Beverages			Total
Net sales	17.4	%	7.4	%	7.2	%	6.8	%		11.1	%
Impact of foreign currency	(0.5)	%	(0.2)	%	(0.7)	%	0.9	%		(0.3)	%
Net sales, as adjusted to currency neutral	16.9	%	7.2	%	6.5	%	7.7	%		10.8	%


	For the First Quarter of 2021
Percent change	Coffee Systems		Packaged Beverages		Beverage Concentrates		Latin America Beverages			Total
Adjusted income from operations	12.1	%	(3.0)	%	21.3	%	(14.8)	%		8.3	%
Impact of foreign currency	(0.3)	%	(0.4)	%	(0.5)	%	—	%		(0.4)	%
Adjusted income from operations, as adjusted to currency neutral	11.8	%	(3.4)	%	20.8	%	(14.8)	%		7.9	%

								For the First Quarter of 2021
Adjusted diluted earnings per share								$	0.33
Impact of foreign currency								—
Adjusted diluted earnings per share, as adjusted to currency neutral								$	0.33

The following table sets forth our reconciliation of significant COVID-19-related expenses. However, employee compensation expense and employee protection costs, which impact our SG&A expenses and cost of sales, are included as the COVID-19 item affecting comparability and is excluded in our Adjusted financial measures. In addition, reported amounts under U.S. GAAP also include additional costs, not included as the COVID-19 item affecting comparability, as presented in tables below.



	Items Affecting Comparability⁽¹⁾
*(in millions)*	Employee Compensation Expense⁽²⁾		Employee Protection Costs⁽³⁾		Allowances for Expected Credit Losses⁽⁴⁾		Total
For the first quarter of 2021:
Coffee Systems	$	1	$	9	$	—	$	10
Packaged Beverages	3		2		—		5
Beverage Concentrates	—		—		—		—
Latin America Beverages	—		1		—		1
Total	$	4	$	12	$	—	$	16

For the first quarter of 2020:
Coffee Systems	$	—	$	—	$	2	$	2
Packaged Beverages	3		2		8		13
Beverage Concentrates	—		—		—		—
Latin America Beverages	—		—		—		—
Total	$	3	$	2	$	10	$	15


(1)	Employee compensation expense and employee protection costs are both included as the COVID-19 items affecting comparability in the reconciliation of our Adjusted Non-GAAP financial measures.
(2)	In 2021, reflected pay for temporary employees, including the associated taxes, as well as incremental benefits provided to frontline workers such as extended sick leave, in order to maintain essential operations during the COVID-19 pandemic. In 2020, primarily reflected temporary incremental frontline incentive pay and benefits, as well as pay for temporary employees, including the associated taxes. Impacts both cost of sales and SG&A expenses.
(3)	Included costs associated with personal protective equipment, temperature scans, cleaning and other sanitization services. Impacts both cost of sales and SG&A expenses.
(4)	Allowances reflect the expected impact of the economic uncertainty caused by COVID-19, leveraging estimates of credit worthiness, default and recovery rates for certain of our customers. Impacts SG&A expenses.

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SOURCE Keurig Dr Pepper

April 29, 2021 6:34 am

Privia Health Announces Pricing of Initial Public Offering

Privia Health Announces Pricing of Initial Public Offering

ARLINGTON, Va.–(BUSINESS WIRE)–
Privia Health Group, Inc. (“Privia Health”), a technology- driven, national physician enablement company that collaborates with medical groups, health plans and health systems, announced the pricing of its initial public offering of 19,500,000 shares of its common stock at a public offering price of $23.00 per share. The offering consists of 2,800,000 shares of common stock offered by Privia Health and 16,700,000 shares of common stock sold by Privia Health’s majority stockholder.

The gross proceeds of the offering to Privia Health, before deducting underwriting discounts and commissions and other expenses payable by Privia Health, are expected to be approximately $64.4 million. Privia Health will not receive any proceeds from the sale of the shares by its majority stockholder. Privia Health has granted the underwriters a 30-day option to purchase up to an additional 2,925,000 shares of its common stock at the initial public offering price, less underwriting discounts and commissions. Privia Health shares are expected to begin trading on the Nasdaq Global Select Market on April 29, 2021, under the ticker symbol “PRVA”. The offering is expected to close on May 3, 2021, subject to customary closing conditions.

Privia Health intends to use the net proceeds from the offering primarily for general corporate purposes, including working capital, research and development, business development, sales and marketing activities and capital expenditures. Privia Health may also use a portion of the net proceeds to acquire or invest in complementary businesses, technologies or other assets, although Privia Health currently has no agreements or understandings with respect to any such acquisitions or investments.

Goldman Sachs & Co. LLC and J.P. Morgan are acting as joint lead book-running managers for the proposed offering and as representatives of the underwriters for the proposed offering. Credit Suisse, Piper Sandler and William Blair are also acting as active book-running managers. Canaccord Genuity and Truist Securities are also acting as book-running managers for the proposed offering, and R. Seelaus & Co., LLC and Siebert Williams Shank are acting as co-managers for the proposed offering.

A registration statement relating to these securities was declared effective by the U.S. Securities and Exchange Commission (“SEC”) on April 28, 2021. The offering is being made only by means of a prospectus. Copies of the preliminary prospectus, when available, may be obtained from: (i) Goldman Sachs & Co. LLC, Attention: Prospectus Department, 200 West Street, New York, New York 10282, via telephone: 1-866-471-2526, or via email: [email protected]; or (ii) J.P. Morgan Securities LLC, c/o Broadridge Financial Solutions, Attention: Prospectus Department, 1155 Long Island Avenue, Edgewood, NY 11717, via telephone: 1-866-803-9204, or via email: [email protected].

This press release shall not constitute an offer to sell or the solicitation of an offer to buy these securities, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

About Privia Health

Privia Health™ is a technology-driven, national physician enablement company that collaborates with medical groups, health plans, and health systems to optimize physician practices, improve patient experiences, and reward doctors for delivering high-value care in both in-person and virtual settings. Our platform is led by top industry talent and exceptional physician leadership, and consists of scalable operations and end-to-end, cloud-based technology that reduces unnecessary healthcare costs, achieves better outcomes, and improves the health of patients and the well-being of providers.

Cautionary Note Regarding Forward-Looking Statements

This press release contains statements that constitute “forward-looking statements,” including with respect to the proposed initial public offering. No assurance can be given that the offering discussed above will be completed on the terms described, or at all. Forward-looking statements are subject to numerous conditions, many of which are beyond the control of Privia Health, including those set forth in the Risk Factors section of the registration statement and the preliminary prospectus included therein. Copies are available on the SEC’s website at www.sec.gov. Privia Health undertakes no obligation to update these statements for revisions or changes after the date of this press release, except as required by law.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210429005408/en/

Investors

Robert Borchert
[email protected]

817.783.4841

Media

Jen Porter
[email protected]

571.733.9347

KEYWORDS: Virginia United States North America

INDUSTRY KEYWORDS: Software Practice Management Managed Care Finance Health Data Management Professional Services Technology

MEDIA:

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Posted on April 29, 2021 6:34 am
Energous Corporation Announces Conference Call for First Quarter 2021 Financial Results

Energous Corporation Announces Conference Call for First Quarter 2021 Financial Results

SAN JOSE, Calif.–(BUSINESS WIRE)–Energous Corporation (NASDAQ: WATT), the developer of WattUp®, a revolutionary wireless charging 2.0 technology, today announced that it will hold a conference call on Wednesday, May 12 at 1:30 p.m. PT (4:30 p.m. ET) to discuss its financial results for the first quarter ended March 31, 2021.

Interested parties can access the call by dialing 888-317-6003 within the United States or 412-317-6061 from international locations and providing the code 2181664 to be connected to the Energous Corporation conference call. The call also will be broadcast on the Energous website at www.energous.com, where it will be archived for at least one year.

For those unable to attend the live call, a replay will be available through May 19, 2021 by dialing 877-344-7529 within the United States or 412-317-0088 from international locations, using conference ID 10155746.

About Energous Corporation

Energous Corporation (Nasdaq: WATT) is the global leader of Wireless Charging 2.0 technology. Its award-winning WattUp^® solution is the only technology that supports both contact and distance charging through a fully compatible ecosystem. Built atop fast, efficient and highly scalable RF-based charging technology, WattUp is positioned to offer improvements over older, first generation coil-based charging technologies in power, efficiency, foreign device detection, freedom of movement and overall cost for consumer electronics, medical devices, retail, military, industrial/commercial IoT, automotive, military, retail and industrial applications. Energous develops silicon-based wireless power transfer (WPT) technologies and customizable reference designs, and provides worldwide regulatory assistance, a reliable supply chain, quality assurance, and sales and technical support to global customers. The company received the world’s first FCC Part 18 certification for at-a-distance wireless charging and has been awarded 236 patents for its WattUp wireless charging technology to-date. For more information, please visit Energous.com.

Safe Harbor Statement

This press release contains “forward-looking statements” within the meaning of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this press release are forward-looking statements. Forward-looking statements may describe our future plans and expectations are based on the current beliefs, expectations and assumptions of Energous. These statements generally use terms such as “believe,” “expect,” “may,” “will,” “should,” “could,” “seek,” “intend,” “plan,” “estimate,” “anticipate” or similar terms. Examples of our forward-looking statements in this release include but are not limited to our statements about our financial results and the future of the wireless charging industry and our technology. Factors that could cause actual results to differ from what we expect include: uncertain timing of necessary regulatory approvals; timing of customer product development and market success of customer products; our dependence on distribution partners; and intense industry competition. We urge you to consider those factors, and the other risks and uncertainties described in our most recent annual report on Form 10-K as filed with the Securities and Exchange Commission (SEC) any subsequent quarterly reports on Form 10-Q as well as in other documents that may be subsequently filed by Energous from time to time with the SEC, in evaluating our forward-looking statements. In addition, any forward-looking statements represent Energous’s views only as of the date of this release and should not be relied upon as representing its views as of any subsequent date. Energous does not assume any obligation to update any forward-looking statements unless required by law.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210429005399/en/

Energous Investor Relations:

Bishop IR

Mike Bishop

(415) 894-9633

[email protected]

Energous Public Relations:

[email protected]

(408) 963-0200

KEYWORDS: California United States North America

INDUSTRY KEYWORDS: Technology Mobile/Wireless Hardware Semiconductor

MEDIA:

Posted on April 29, 2021 6:33 am
Merck Announces First-Quarter 2021 Financial Results

Merck Announces First-Quarter 2021 Financial Results

First-Quarter 2021 Sales Were $12.1 Billion, In-Line with First-Quarter 2020; Excluding the Impact from Foreign Exchange, Sales Declined 1%

First-Quarter 2021 Sales Reflect Strong Underlying Performance of KEYTRUDA, Lynparza, BRIDION and Animal Health, Which Was Offset by COVID-19 Pandemic Impacts to Patient Access, Particularly for Vaccines

First-Quarter 2021 GAAP EPS Was $1.25; First-Quarter Non-GAAP EPS Was $1.40

Entered into HIV Collaboration with Gilead Sciences, Inc. and Completed Acquisition of Pandion Therapeutics, Inc.

Merck Will Host an Investor Event Featuring Organon on May 3; Organon Spinoff is Expected to be Completed on June 2, with First Day of Trading Scheduled for June 3

2021 Financial Outlook

Continues to Expect Sales Growth of 8% to 12%; Full-Year 2021 Sales Estimated to be Between $51.8 Billion and $53.8 Billion, Including a Positive Impact from Foreign Exchange of Less Than 2%, Assuming Organon is Part of Merck for the Full Year

Expects Full-Year 2021 GAAP EPS to be Between $5.05 and $5.25; Continues to Expect Non-GAAP EPS to be Between $6.48 and $6.68, Including a Positive Impact from Foreign Exchange of Less Than 3%, Assuming Organon is Part of Merck for the Full Year

Assuming the Completion of the Organon Spinoff, Expects Full-Year 2021 Sales from Continuing Operations to be Between $45.8 Billion and $47.8 Billion

KENILWORTH, N.J.–(BUSINESS WIRE)–
Merck (NYSE: MRK), known as MSD outside the United States and Canada, today announced financial results for the first quarter of 2021.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20210429005381/en/

“While our results this quarter were impacted by the pandemic, the underlying demand for our innovative products remains strong and we remain confident in our future growth prospects,” said Kenneth C. Frazier, chairman and CEO, Merck. “We are also taking the right steps to evolve Merck’s operating model to continue to create value for patients, shareholders and society.”

“As I transition into the CEO role, one of my immediate priorities is to ensure that our experienced leadership team continues to build on our solid foundation,” said Robert M. Davis, president, Merck. “Our company is well positioned for strong long-term performance, with scientific innovation remaining the source of our company’s energy and value creation.”

Financial Summary

$ in millions, except EPS amounts

First Quarter

2021

2020

Change

Change

Ex-

Exchange

Sales

$12,080

$12,057

0%

-1%

GAAP net income¹

3,179

3,219

-1%

-3%

Non-GAAP net income that excludes certain items^1,2*

3,556

3,851

-8%

-9%

GAAP EPS

1.25

1.26

-1%

-3%

Non-GAAP EPS that excludes certain items²*

1.40

1.51

-7%

-9%

*Refer to table on page 11.

GAAP (generally accepted accounting principles) earnings per share assuming dilution (EPS) was $1.25 for the first quarter of 2021. Non-GAAP EPS of $1.40 for the first quarter of 2021 excludes acquisition- and divestiture-related costs, restructuring costs, income and losses from investments in equity securities and certain other items.

Oncology Pipeline Highlights

Merck continued to advance the development programs for KEYTRUDA (pembrolizumab), the company’s anti-PD-1 therapy; Lynparza (olaparib), a PARP inhibitor being co-developed and co-commercialized with AstraZeneca; and Lenvima (lenvatinib mesylate), an orally available tyrosine kinase inhibitor being co-developed and co-commercialized with Eisai Co., Ltd. (Eisai), in addition to other notable developments as follows:

Merck announced the following regulatory actions for KEYTRUDA:

Approval by the U.S. Food and Drug Administration (FDA) in combination with platinum- and fluropyrimidine-based chemotherapy for the first-line treatment of patients with locally advanced or metastatic esophageal or gastroesophageal junction (GEJ) (tumors with epicenter 1 to 5 centimeters above the GEJ) carcinoma that is not amenable to surgical resection or definitive chemoradiation, based on results from the Phase 3 KEYNOTE-590 trial.

Approval by the European Commission (EC) for the treatment of adult and pediatric patients aged 3 years and older with relapsed or refractory classical Hodgkin lymphoma (cHL) who have failed autologous stem cell transplant (ASCT) or following at least two prior therapies when ASCT is not a treatment option, based on results from the Phase 3 KEYNOTE-204 trial.

Approval by the EC for the first-line treatment of adult patients with metastatic microsatellite instability-high (MSI-H) or mismatch repair deficient colorectal cancer based on results from the Phase 3 KEYNOTE-177 trial.

A Complete Response Letter was received from the FDA regarding Merck’s supplemental Biologics License Application for the treatment of patients with high-risk early-stage triple-negative breast cancer (TNBC), in combination with chemotherapy as neoadjuvant (pre-operative) treatment, then continuing as a single agent as adjuvant (post-operative) treatment after surgery.

A voluntary withdrawal in the United States for the treatment of patients with metastatic small cell lung cancer with disease progression on or after platinum-based chemotherapy and at least one other prior line of therapy. This withdrawal does not affect other indications for KEYTRUDA.

Merck announced that an interim analysis from the pivotal Phase 3 KEYNOTE-564 trial evaluating KEYTRUDA met its primary endpoint of disease-free survival for the potential adjuvant treatment of patients with renal cell carcinoma (RCC) following nephrectomy or following nephrectomy and resection of metastatic lesions. Data will be presented at the 2021 American Society for Clinical Oncology (ASCO) Annual Meeting.

Merck announced that the FDA has accepted and granted priority review for a New Drug Application (NDA) for the hypoxia-inducible factor-2 alpha (HIF-2α) inhibitor, belzutifan, a novel investigational candidate in Merck’s oncology pipeline, for the potential treatment of certain patients with von Hippel-Lindau (VHL) disease-associated RCC, not requiring immediate surgery. The FDA has set a PDUFA date of Sept. 15, 2021.

Merck and Eisai announced the first presentation of new investigational data from the pivotal Phase 3 CLEAR study (KEYNOTE-581/Study 307) at the 2021 Genitourinary Cancers Symposium (ASCO GU) and simultaneously published in the New England Journal of Medicine. The combination of KEYTRUDA plus Lenvima significantly improved the primary endpoint of progression-free survival (PFS) and key secondary endpoint of overall survival (OS) versus sunitinib in first-line treatment of patients with advanced RCC.

Merck and Eisai announced the first presentation of investigational data from the pivotal Phase 3 KEYNOTE-775/Study 309 trial at the Society of Gynecologic Oncology (SGO) 2021 Annual Meeting. The combination of KEYTRUDA plus Lenvima significantly improved the dual primary endpoints of PFS and OS versus chemotherapy for the treatment of patients with advanced endometrial cancer following one prior platinum-based regimen in any setting.

Merck and AstraZeneca announced that the Phase 3 OlympiA trial for Lynparza will move to early primary analysis and reporting following a recommendation from the Independent Data Monitoring Committee (IDMC). Based on the planned interim analysis, the IDMC concluded that the trial crossed the superiority boundary for its primary endpoint of invasive disease-free survival versus placebo in the adjuvant treatment of germline BRCA-mutated (gBRCAm), high-risk human epidermal growth factor receptor 2 (HER2)-negative early-stage breast cancer following definitive local treatment and neoadjuvant or adjuvant chemotherapy. The trial will continue to evaluate the key secondary endpoints of OS and distant disease-free survival. Data will be presented at the 2021 ASCO Annual Meeting.

Merck began enrollment for the Phase 3 study evaluating vibostolimab, its investigational anti-TIGIT antibody, in combination with KEYTRUDA in non-small cell lung cancer patients whose tumors express PD-L1.

Business Development and Other Pipeline Highlights

Merck and Gilead Sciences, Inc. (Gilead) announced that they have entered into an agreement to co-develop and co-commercialize long-acting treatments in HIV that combine Gilead’s investigational capsid inhibitor, lenacapavir, and Merck’s investigational nucleoside reverse transcriptase translocation inhibitor (NRTTI), islatravir, into a two-drug regimen in oral and injectable formulations with the potential to provide new, meaningful treatment options for people living with HIV.

Merck acquired Pandion Therapeutics, Inc. (Pandion), a clinical-stage biotechnology company developing novel therapeutics designed to address the unmet needs of patients living with autoimmune diseases, on April 1, 2021.

Merck announced that a Phase 2/3 trial of molnupiravir (EIDD-2801/MK-4482), an investigational oral antiviral agent being developed in collaboration with Ridgeback Biotherapeutics, for the treatment of outpatients diagnosed with COVID-19, will proceed to Phase 3. Interim results from Phase 2/3 studies evaluating molnupiravir in both outpatients and inpatients will be shared with the scientific community at an upcoming medical meeting.

Merck announced results from a Phase 1 study evaluating the safety, tolerability and pharmacokinetics (PK) of the company’s investigational subdermal drug-eluting implant with potential for extended administration of islatravir, an investigational NRTTI, for pre-exposure prophylaxis (PrEP) of HIV-1 infection. Study results demonstrated that the implant achieved active drug concentrations above the pre-specified PK threshold at 12 weeks across the three doses of islatravir studied (48 mg, 52 mg and 56 mg), and is projected to provide drug concentrations likely above threshold for one year at the 56 mg dose. Based on these findings, Merck plans to initiate a Phase 2 trial to further explore the potential of a subdermal implant containing islatravir as a long-acting option for PrEP for up to 12 months.

Merck announced that the FDA has accepted for review the company’s NDA for gefapixant, an investigational, orally administered, selective P2X3 receptor antagonist, for the treatment of refractory chronic cough or unexplained chronic cough in adults based on results from the COUGH-1 and COUGH-2 studies. This application for gefapixant will be discussed at an upcoming advisory committee meeting. The FDA has set a PDUFA date of Dec. 21, 2021.

Merck announced that supply for VAXELIS (Diphtheria and Tetanus Toxoids and Acellular Pertussis, Inactivated Poliovirus, Haemophilus b Conjugate and Hepatitis B Vaccine) in the United States will be available in June 2021. Developed as part of a joint-partnership between Sanofi and Merck, VAXELIS is the first and only hexavalent combination vaccine approved in the United States to help protect infants and children 6 weeks through 4 years of age against diseases caused by six infectious agents: diphtheria, tetanus, pertussis (whooping cough), poliomyelitis, hepatitis B and invasive disease due to Haemophilus influenzae type b.

Organon Highlights

Merck filed a Form 10 registration statement with the United States Securities and Exchange Commission (SEC) in connection with the intended spinoff of its women’s health, biosimilars and established brands businesses into a standalone, publicly-traded company, Organon & Co. (Organon).

In April 2021, Organon Finance 1 LLC issued senior secured notes of €1.25 billion aggregate principal amount of 2.875% senior secured notes due 2028, $2.1 billion aggregate principal amount of 4.125% senior secured notes due 2028 and $2.0 billon aggregate principal amount of 5.125% senior unsecured notes due 2031, in connection with the intended spinoff of Organon from Merck.

Merck announced a definitive agreement pursuant to which, after the intended spinoff of Organon, Organon will acquire Alydia Health. Alydia Health is a commercial-stage medical device company focused on preventing maternal morbidity and mortality caused by postpartum hemorrhage or abnormal postpartum uterine bleeding.

Merck will host an investor event featuring Organon on May 3. The Organon spinoff is expected to be completed on June 2, with first day of trading scheduled for June 3.

Corporate Developments

Merck announced goals to achieve carbon neutrality in its operations (Scopes 1 & 2 emissions) by 2025 through ongoing innovation to increase efficiency and reduce carbon emissions, applying sustainable building standards and continuing to transition away from fossil fuel use. Remaining Scope 1 emissions will be offset each year with a portfolio of high-quality carbon credits, including carbon removals. Merck has also set a goal of achieving a 30% reduction in its value chain emissions by 2030 (Scope 3 emissions).

First-Quarter Revenue Performance

The following table reflects sales of the company’s top pharmaceutical products, as well as sales of animal health products.

$ in millions

First Quarter

2021

2020

Change

Change Ex-Exchange

Total Sales

$12,080

$12,057

0%

-1%

Pharmaceutical

10,675

10,655

0%

-3%

KEYTRUDA

3,899

3,284

19%

16%

JANUVIA / JANUMET

1,295

1,277

1%

-2%

GARDASIL / GARDASIL 9

917

1,097

-16%

-20%

PROQUAD, M-M-R II and

VARIVAX

449

435

3%

2%

BRIDION

340

299

14%

11%

Lynparza*

SIMPONI

228

214

145

215

57%

0%

51%

-8%

ISENTRESS / ISENTRESS HD

209

245

-15%

-15%

PNEUMOVAX 23

ROTATEQ

171

158

256

222

-33%

-29%

-36%

-29%

Animal Health

1,418

1,214

17%

15%

Livestock

819

739

11%

9%

Companion Animals

599

475

26%

24%

Other Revenues**

(13)

188

-107%

-21%

*Alliance revenue for this product represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs.

**Other revenues are comprised primarily of third-party manufacturing sales and miscellaneous corporate revenues, including revenue hedging activities. The revenue hedging activities resulted in negative revenue in the first quarter of 2021.

Pharmaceutical Revenue

First-quarter pharmaceutical sales of $10.7 billion were in-line with the first quarter of 2020. Excluding the favorable effect of foreign exchange, sales declined by 3%. Sales performance reflects underlying strength in the business, offset by negative impacts of the COVID-19 pandemic, and the ongoing impacts of the loss of market exclusivity for several products. With respect to the COVID-19 pandemic, the estimated negative impact to Merck’s first quarter pharmaceutical revenue was approximately $600 million. Continued reduced access to health care providers, combined with the prioritization of COVID-19 vaccines has negatively impacted the sales of certain products, notably vaccines in the United States.

Pharmaceutical revenue reflects growth in oncology, largely driven by higher sales of KEYTRUDA, which rose 19% to $3.9 billion in the quarter, although the COVID-19 pandemic had a dampening effect on growing demand due to a decline in the number of new patients starting treatment. Global sales growth of KEYTRUDA reflects continued strong momentum from the non-small-cell lung cancer indications as well as continued uptake in other indications, including adjuvant melanoma, RCC, bladder, head and neck squamous cell carcinoma (HNSCC) and MSI-H cancers, as well as uptake following the recent launch of the 400mg every 6 weeks adult dosing regimen in the United States, partially offset by pricing pressure in Europe and Japan. Also contributing to growth in oncology was 57% growth in Lynparza alliance revenue, reflecting continued uptake in approved indications in the United States, Europe and China.

The decline in vaccine sales was primarily driven by GARDASIL (Human Papillomavirus Quadrivalent [Types 6,11,16 and 18] Vaccine, Recombinant)/GARDASIL 9 (Human Papillomavirus 9-valent Vaccine, Recombinant), vaccines to prevent certain cancers and other diseases caused by HPV, primarily attributable to buying patterns in the United States and the timing of shipments in China, which in total negatively affected the year over year GARDASIL/GARDASIL 9 sales comparison by approximately $230 million. The COVID-19 pandemic also negatively affected sales for GARDASIL/GARDASIL 9, particularly in the United States and Europe.

Also contributing to the decline in vaccine sales were lower sales of PNEUMOVAX 23 (pneumococcal vaccine polyvalent), a vaccine to help prevent pneumococcal disease, primarily reflecting the impact of the COVID-19 pandemic on demand in the United States, partially offset by higher volumes in international markets.

Vaccines sales were also negatively affected by lower sales of ROTATEQ (Rotavirus Vaccine, Live Oral, Pentavalent), a vaccine to help protect against rotavirus gastroenteritis in infants and children, largely due to the timing of shipments in China and lower demand in the United States.

Pharmaceutical sales in the quarter were negatively affected by the ongoing impacts from the loss of market exclusivity, including for ZETIA (ezetimibe) and NOXAFIL (posaconazole), as well as certain products in diversified brands.

Performance in hospital acute care primarily reflects the decline in sales of ZERBAXA (ceftolozane and tazobactam) for injection, a combination cephalosporin antibacterial and beta-lactamase inhibitor for the treatment of adults with certain bacterial infections due to the temporary suspension of sales and product recall in the fourth quarter of 2020. Hospital acute care performance also reflects higher demand globally for BRIDION (sugammadex) Injection 100 mg/mL, a medicine for the reversal of neuromuscular blockade induced by rocuronium bromide or vecuronium bromide in adults undergoing surgery; and the continued uptake of PREVYMIS (letermovir), a medicine for prophylaxis (prevention) of cytomegalovirus (CMV) infection and disease in adult CMV-seropositive recipients of an allogeneic hematopoietic stem cell transplant.

Animal Health Revenue

Animal Health sales totaled $1.4 billion for the first quarter of 2021, an increase of 17% compared with the first quarter of 2020; excluding the favorable effect from foreign exchange, Animal Health sales grew 15%. Sales growth reflects higher demand globally for companion animal products, including parasiticide lines of products, primarily BRAVECTO (fluralaner), as well as higher sales of companion animal vaccines. Sales growth in livestock products reflects higher demand in international markets for ruminant, poultry and swine products, as well as higher demand globally for Animal Intelligence products.

First-Quarter Expense, EPS and Related Information

The tables below present selected expense information.

$ in millions

First-Quarter 2021

GAAP

Acquisition-

and

Divestiture-

Related

Costs³

Restructuring

Costs

(Income)

Loss from

Investments

in Equity

Securities

Certain

Other

Items

Non-

GAAP²

Cost of sales

$3,670

$517

$27

$−

$188

$2,938

Selling, general and administrative

2,633

218

3

−

−

2,412

Research and development

2,465

18

7

−

−

2,440

Restructuring costs

298

−

298

−

−

−

Other (income) expense, net

(448)

(28)

−

(561)

−

141

First-Quarter 2020

Cost of sales

$3,312

$407

$68

$−

$−

$2,837

Selling, general and administrative

2,555

278

11

−

−

2,266

Research and development

2,209

40

17

−

−

2,152

Restructuring costs

72

−

72

−

−

−

Other (income) expense, net

71

(11)

–

(87)

−

169

GAAP Expense, EPS and Related Information

Gross margin was 69.6% for the first quarter of 2021 compared to 72.5% for the first quarter of 2020. The decrease reflects higher costs associated with COVID-19 development programs, including a charge related to the discontinuation of certain COVID-19 development programs, as well as higher acquisition- and divestiture-related costs, and pricing pressure, partially offset by favorable product mix.

Selling, general and administrative expenses were $2.6 billion in the first quarter of 2021, an increase of 3% compared to the first quarter of 2020. The increase primarily reflects higher promotion and administrative costs, the unfavorable effects of foreign exchange and higher costs related to the company’s planned spinoff of Organon, partially offset by lower selling costs due in part to the COVID-19 pandemic.

Research and development expenses were $2.5 billion in the first quarter of 2021, an increase of 12% compared with the first quarter of 2020. The increase was primarily driven by higher expenses related to clinical development, including investment in COVID-19 development programs, as well as increased investment in discovery research and early drug development, partially offset by lower licensing costs.

Other (income) expense, net, was $448 million of income in the first quarter of 2021 compared to $71 million of expense in the first quarter of 2020, primarily reflecting higher income from investments in equity securities in 2021 compared with 2020.

The effective income tax rate of 8.0% for the first quarter of 2021 reflects a net tax benefit of $237 million related to the settlement of certain federal income tax matters.

GAAP EPS was $1.25 for the first quarter of 2021 compared with $1.26 for the first quarter of 2020.

Non-GAAP Expense, EPS and Related Information

Non-GAAP gross margin was 75.7% for the first quarter of 2021 compared to 76.5% for the first quarter of 2020. The decrease in non-GAAP gross margin reflects higher costs associated with COVID-19 development programs, as well as pricing pressure, partially offset by favorable product mix.

Non-GAAP selling, general and administrative expenses were $2.4 billion in the first quarter of 2021, an increase of 6% compared to the first quarter of 2020. The increase primarily reflects higher promotion and administrative costs and the unfavorable effects of foreign exchange, partially offset by lower selling costs due in part to the COVID-19 pandemic.

Non-GAAP R&D expenses were $2.4 billion in the first quarter of 2021, a 13% increase compared to the first quarter of 2020. The increase primarily reflects higher expenses related to clinical development, including investment in COVID-19 development programs, as well as increased investment in discovery research and early drug development, partially offset by lower licensing costs.

Non-GAAP other (income) expense, net, was $141 million of expense in the first quarter of 2021 compared to $169 million of expense in the first quarter of 2020.

The non-GAAP effective income tax rate was 14.1% for the first quarter of 2021.

Non-GAAP EPS was $1.40 for the first quarter of 2021 compared with $1.51 for the first quarter of 2020.

A reconciliation of GAAP to non-GAAP net income and EPS is provided in the table that follows.

$ in millions, except EPS amounts

First Quarter

2021

2020

EPS

GAAP EPS

$1.25

$1.26

Difference

0.15

0.25

Non-GAAP EPS that excludes items listed below²

$1.40

$1.51

Net Income

GAAP net income¹

$3,179

$3,219

Difference

377

632

Non-GAAP net income that excludes items listed below^1,2

$3,556

$3,851

Decrease (Increase) in Net Income Due to Excluded Items:

Acquisition- and divestiture-related costs³

$725

$714

Restructuring costs

335

168

(Income) loss from investments in equity securities

(561)

(87)

Charge for the discontinuation of COVID-19 development programs

188

–

Net decrease (increase) in income before taxes

687

795

Income tax (benefit) expense⁴

(310)

(163)

Decrease (increase) in net income

$377

$632

Financial Outlook

The guidance provided below is based on the assumption that the Organon business will be part of Merck for all of 2021; however, the Company expects that the Organon spinoff will occur on June 2, 2021. If the spinoff occurs, these financial estimates will be updated. Initial information related to revenue from continuing operations is provided below.

Merck continues to experience strong global underlying demand across its business. Consequently, at mid-April 2021 exchange rates, Merck continues to expect sales growth of 8% to 12% in 2021 with full-year 2021 revenue estimated to be between $51.8 billion and $53.8 billion, including a positive impact from foreign exchange of less than 2%. Merck now estimates that the pandemic will have a net unfavorable impact to 2021 revenues of approximately 3%, all of which relates to the pharmaceutical segment.

Merck continues to believe that global health systems and patients have largely adapted to the impacts of COVID-19 disease, but that negative impacts will persist, particularly during the first half of 2021 and most notably with respect to vaccine sales in the United States, which is expected to be partially offset by the re-allocation of GARDASIL 9 doses to markets outside of the United States to address continued strong demand.

Merck now expects full-year 2021 GAAP EPS to be between $5.05 and $5.25.

Merck continues to expect full-year 2021 non-GAAP EPS to be between $6.48 and $6.68, including a positive impact from foreign exchange of less than 3%. The non-GAAP range excludes acquisition- and divestiture-related costs, costs related to restructuring programs, income and losses from investments in equity securities and certain other items.

For full-year 2021, Merck expects the pandemic to have a negligible impact on operating expenses, as spending on the development of its COVID-19 antiviral programs is expected to largely offset the favorable impact of lower spending in other areas due to the COVID-19 pandemic.

Neither the sales nor the EPS guidance ranges provided above include the impact of the potential launch of Merck’s COVID-19 antiviral drug candidate.

The following table summarizes the company’s full-year 2021 financial guidance.

GAAP

Non-GAAP²

Revenue

$51.8 to $53.8 billion

$51.8 to $53.8 billion*

Operating expenses

Lower than 2020 by a mid-single digit rate

Higher than 2020 by a mid- to high-single digit rate

Effective tax rate

15% to 16%

15% to 16%

EPS**

$5.05 to $5.25

$6.48 to $6.68

*The company does not have any non-GAAP adjustments to revenue.

**EPS guidance for 2021 assumes a share count (assuming dilution) of approximately 2.53 billion shares.

A reconciliation of anticipated 2021 GAAP EPS to non-GAAP EPS and the items excluded from non-GAAP EPS are provided in the table below.

$ in millions, except EPS amounts

Full-Year 2021

GAAP EPS

$5.05 to $5.25

Difference

$1.43

Non-GAAP EPS that excludes items listed below²

$6.48 to $6.68

Acquisition- and divestiture-related costs

$2,500

Restructuring costs

700

(Income) loss from investments in equity securities

(1,000)

Charge for the discontinuation of COVID-19 development programs

188

Charge for the acquisition of Pandion

1,800

Net decrease (increase) in income before taxes

4,188

Income tax (benefit) expense⁴

(565)

Decrease (increase) in net income

$3,623

Impact of Planned Spinoff of Organon

Merck expects the spinoff of Organon to be completed on June 2, 2021. Merck continues to expect the transaction to create two companies with enhanced strategic and operational focus, improved agility, simplified operating models, optimized capital structures and improved financial profiles. Merck believes the transaction will deliver significant benefits for both Merck and Organon and create value for Merck shareholders.

On a pro forma basis, assuming it operated as an independent company for the full year, Organon is expected to generate $6.1 billion to $6.4 billion in revenue in 2021. Organon is expected to have $9.5 billion in initial debt and is expected to pay a special tax-free dividend to Merck of approximately $9.0 billion.

For Merck, the spinoff of Organon will allow it to increase its focus on key growth pillars, achieve higher revenue and EPS growth rates and enable incremental operating efficiencies of approximately $1.5 billion, which are expected to be achieved ratably over three years, with approximately $500 million realized during 2021. Merck will continue to incur overhead costs previously allocated to the Organon products, which are estimated to be approximately $400 million on a full-year basis. These costs are expected to be reduced over time and are netted into the overall efficiency target. Merck expects to use the special tax-free dividend from Organon for business development and/or share repurchases.

As a result of the stronger growth Organon is expected to achieve as a standalone company and the benefit of operating efficiencies at Merck enabled by the spinoff, Merck expects combined non-GAAP EPS of the two companies to be higher within 12-24 months post-spinoff versus what would have been achieved assuming no transaction. Due to the higher relative profitability of Organon’s products, Merck’s operating margin from continuing operations is expected to initially be slightly lower in 2021 versus what it was prior to the spinoff. With the incremental operating efficiencies enabled by the spinoff, Merck’s operating margins are expected to be higher within 12-24 months versus where they would have been in the absence of the spinoff and to be greater than 42% in 2024.

Finally, assuming the completion of the Organon spinoff, Merck anticipates full-year 2021 revenue from continuing operations to be between $45.8 billion and $47.8 billion. Continuing operations for Merck exclude Organon results for the full year. Further details, including post-spinoff GAAP and non-GAAP EPS guidance, will be announced in conjunction with Merck’s second-quarter 2021 earnings release.

Earnings Conference Call

Investors, journalists and the general public may access a live audio webcast of the call today at 8:00 a.m. EDT on Merck’s website at https://investors.merck.com/events-and-presentations/default.aspx. Institutional investors and analysts can participate in the call by dialing (833) 353-0277 or (469) 886-1947 and using ID code number 7279283. Members of the media are invited to monitor the call by dialing (833) 353-0277 or (469) 886-1947 and using ID code number 7279283. Journalists who wish to ask questions are requested to contact a member of Merck’s Media Relations team at the conclusion of the call.

About Merck

For 130 years, Merck, known as MSD outside of the United States and Canada, has been inventing for life, bringing forward medicines and vaccines for many of the world’s most challenging diseases in pursuit of our mission to save and improve lives. We demonstrate our commitment to patients and population health by increasing access to health care through far-reaching policies, programs and partnerships. Today, Merck continues to be at the forefront of research to prevent and treat diseases that threaten people and animals – including cancer, infectious diseases such as HIV and Ebola, and emerging animal diseases – as we aspire to be the premier research-intensive biopharmaceutical company in the world. For more information, visit www.merck.com and connect with us on Twitter, Facebook, Instagram, YouTube and LinkedIn.

Forward-Looking Statement of Merck & Co., Inc., Kenilworth, N.J., USA

This news release of Merck & Co., Inc., Kenilworth, N.J., USA (the “company”) includes “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based upon the current beliefs and expectations of the company’s management and are subject to significant risks and uncertainties. There can be no guarantees with respect to pipeline products that the products will receive the necessary regulatory approvals or that they will prove to be commercially successful. If underlying assumptions prove inaccurate or risks or uncertainties materialize, actual results may differ materially from those set forth in the forward-looking statements.

Risks and uncertainties include but are not limited to, general industry conditions and competition; uncertainties as to the timing of the proposed spinoff; general economic factors, including interest rate and currency exchange rate fluctuations; the impact of the global outbreak of novel coronavirus disease (COVID-19); the impact of pharmaceutical industry regulation and health care legislation in the United States and internationally; global trends toward health care cost containment; technological advances, new products and patents attained by competitors; challenges inherent in new product development, including obtaining regulatory approval; the company’s ability to accurately predict future market conditions; manufacturing difficulties or delays; financial instability of international economies and sovereign risk; dependence on the effectiveness of the company’s patents and other protections for innovative products; and the exposure to litigation, including patent litigation, and/or regulatory actions.

The company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in the company’s 2020 Annual Report on Form 10-K and the company’s other filings with the Securities and Exchange Commission (SEC) available at the SEC’s Internet site (www.sec.gov).

¹
Net income attributable to Merck & Co., Inc.

²
Merck is providing certain 2021 and 2020 non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s results and permits investors to understand how management assesses performance. Management uses these measures internally for planning and forecasting purposes and to measure the performance of the company along with other metrics. In addition, senior management’s annual compensation is derived in part using non-GAAP pretax income. This information should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP. As previously disclosed, beginning in 2021, Merck changed the treatment of certain items for purposes of its non-GAAP reporting. Prior periods have been recast to conform to the current presentation. For a description of the non-GAAP adjustments, see Table 2a attached to this release.

³
Includes expenses for the amortization of intangible assets and purchase accounting adjustments to inventories recognized as a result of acquisitions, intangible asset impairment charges, and expense or income related to changes in the estimated fair value measurement of liabilities for contingent consideration. Also includes integration, transaction and certain other costs related to acquisitions and divestitures.

⁴
Includes the estimated tax impact on the reconciling items. In addition, the amount for 2021 includes a $237 million net tax benefit related to the settlement of certain federal income tax matters.

MERCK & CO., INC.

CONSOLIDATED STATEMENT OF INCOME – GAAP

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 1

GAAP

% Change

1Q21 1Q20

Sales
$

12,080
$
12,057

0%

Costs, Expenses and Other

Cost of sales

3,670

3,312

11%

Selling, general and administrative

2,633

2,555

3%

Research and development

2,465

2,209

12%

Restructuring costs ⁽¹⁾

298

72

*

Other (income) expense, net

(448)

71

*

Income Before Taxes

3,462

3,838

-10%

Taxes on Income

276

619

Net Income

3,186

3,219

-1%

Less: Net Income Attributable to Noncontrolling Interests

7

–

Net Income Attributable to Merck & Co., Inc.
$

3,179
$
3,219

-1%

Earnings per Common Share Assuming Dilution
$

1.25
$
1.26

-1%

Average Shares Outstanding Assuming Dilution

2,541

2,547

Tax Rate ⁽²⁾

8.0%

16.1%

* 100% or greater

⁽¹⁾Represents separation and other related costs associated with restructuring activities under the company’s formal restructuring programs.

⁽²⁾ The effective income tax rate for the first quarter of 2021 reflects a net tax benefit of $237 million related to the settlement of certain federal income tax matters.

MERCK & CO., INC.

GAAP TO NON-GAAP RECONCILIATION

FIRST QUARTER 2021

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 2a

GAAP Acquisition and Divestiture Related Costs ⁽¹⁾ Restructuring Costs ⁽²⁾ (Income) Loss from Investments in Equity Securities Certain Other Items Adjustment Subtotal Non-GAAP

Cost of sales
$

3,670

517

27

188

⁽³⁾

732

$

2,938

Selling, general and administrative

2,633

218

3

221

2,412

Research and development

2,465

18

7

25

2,440

Restructuring costs

298

298

298

–

Other (income) expense, net

(448

)

(28

)

(561

)

(589

)

141

Income Before Taxes

3,462

(725

)

(335

)

561

(188

)

(687

)

4,149

Income Tax Provision (Benefit)

276

(114

)

⁽⁴⁾

(41

)

⁽⁴⁾

123

⁽⁴⁾

(278

)

⁽⁴⁾

(310

)

586

Net Income

3,186

(611

)

(294

)

438

90

(377

)

3,563

Net Income Attributable to Merck & Co., Inc.

3,179

(611

)

(294

)

438

90

(377

)

3,556

Earnings per Common Share Assuming Dilution
$

1.25

(0.24

)

(0.12

)

0.17

0.04

(0.15

)

$

1.40

Tax Rate

8.0

%

14.1

%

Only the line items that are affected by non-GAAP adjustments are shown.

Merck is providing certain non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s results as it permits investors to understand how management assesses performance. Management uses these measures internally for planning and forecasting purposes and to measure the performance of the company along with other metrics. In addition, senior management’s annual compensation is derived in part using non-GAAP pretax income. This information should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP.

⁽¹⁾Amount included in cost of sales primarily reflects expenses for the amortization of intangible assets. Amount included in selling, general and administrative expenses reflects approximately $208 million of expenses related to the company’s planned spin-off of Organon & Co. and other acquisition and divestiture-related costs. Amount included in other (income) expense, net, primarily reflects royalty income, partially offset by an increase in the estimated fair value measurement of liabilities for contingent consideration related to the termination of the Sanofi-Pasteur MSD joint venture.

⁽²⁾Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related to activities under the company’s formal restructuring programs.

⁽³⁾ Represents a charge for the discontinuation of COVID-19 development programs.

⁽⁴⁾ Represents the estimated tax impact on the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments. Certain other items also include a $237 million net tax benefit related to the settlement of certain federal income tax matters.

MERCK & CO., INC.

FRANCHISE / KEY PRODUCT SALES

(AMOUNTS IN MILLIONS)

(UNAUDITED)

Table 3

2021

2020

1Q

1Q

1Q

2Q

3Q

4Q

Full Year

Nom %

Ex-Exch %

TOTAL SALES ⁽¹⁾
$

12,080

$

12,057

$

10,872

$

12,551

$

12,514

$

47,994

–

-1

PHARMACEUTICAL

10,675

10,655

9,679

11,320

11,367

43,021

–

-3

Oncology

Keytruda

3,899

3,284

3,388

3,715

3,993

14,380

19

16

Alliance Revenue – Lynparza⁽²⁾

228

145

178

196

206

725

57

51

Alliance Revenue – Lenvima⁽²⁾

130

128

151

142

158

580

1

-1

Vaccines ⁽³⁾

Gardasil / Gardasil 9

917

1,097

656

1,187

998

3,938

-16

-20

ProQuad / M-M-R II / Varivax

449

435

378

576

488

1,878

3

2

Pneumovax 23

171

256

117

375

339

1,087

-33

-36

RotaTeq

158

222

168

210

196

797

-29

-29

Vaqta

34

60

28

51

31

170

-43

-44

Hospital Acute Care

Bridion

340

299

224

320

355

1,198

14

11

Prevymis

82

60

63

77

80

281

37

31

Noxafil

67

94

73

79

82

329

-29

-32

Primaxin

65

51

64

74

62

251

26

17

Cancidas

57

55

43

50

65

213

4

1

Invanz

57

64

43

51

53

211

-12

-11

Zerbaxa

(8

)

37

32

43

19

130

-121

-120

Immunology

Simponi

214

215

191

209

223

838

–

-8

Remicade

85

88

73

82

88

330

-3

-9

Neuroscience

Belsomra

79

79

84

81

83

327

–

-4

Virology

Isentress / Isentress HD

209

245

196

205

211

857

-15

-15

Cardiovascular

Zetia

92

145

137

103

98

482

-37

-41

Vytorin

41

53

39

47

43

182

-23

-27

Atozet

112

122

115

111

105

453

-9

-16

Alliance Revenue – Adempas⁽⁴⁾

74

53

79

83

65

281

38

38

Adempas ⁽⁵⁾

55

56

57

55

53

220

-2

-10

Diabetes ⁽⁶⁾

Januvia

809

774

854

821

857

3,306

5

2

Janumet

486

503

490

506

472

1,971

-3

-6

Women’s Health

Implanon / Nexplanon

183

195

132

189

165

680

-6

-7

NuvaRing

45

63

63

58

53

236

-28

-30

Diversified Brands

Singulair

107

155

100

82

124

462

-31

-35

Cozaar / Hyzaar

90

102

98

91

94

386

-12

-16

Arcoxia

56

70

65

68

54

258

-20

-22

Follistim AQ

52

41

44

50

57

193

25

21

Nasonex

43

71

49

41

57

218

-39

-40

Other Pharmaceutical ⁽⁷⁾

1,197

1,338

1,207

1,292

1,340

5,173

-11

-13

ANIMAL HEALTH

1,418

1,214

1,101

1,220

1,168

4,703

17

15

Livestock

819

739

648

758

794

2,939

11

9

Companion Animals

599

475

453

462

374

1,764

26

24

Other Revenues ⁽⁸⁾

(13

)

188

92

11

(21

)

270

-107

-21

Sum of quarterly amounts may not equal year-to-date amounts due to rounding.

⁽¹⁾ Only select products are shown.

⁽²⁾ Alliance Revenue represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs.

⁽³⁾ Total Vaccines sales were $1,809 million in the first quarter of 2021 and $2,155 million, $1,418 million, $2,521 million and $2,163 million in the first, second, third and fourth quarters of 2020, respectively.

⁽⁴⁾ Alliance Revenue represents Merck’s share of profits from sales in Bayer’s marketing territories, which are product sales net of cost of sales and commercialization costs.

⁽⁵⁾ Net product sales in Merck’s marketing territories.

⁽⁶⁾ Total Diabetes sales were $1,363 million in the first quarter of 2021 and $1,353 million, $1,418 million, $1,405 million and $1,412 million in the first, second, third and fourth quarters of 2020, respectively.

⁽⁷⁾ Includes Pharmaceutical products not individually shown above.

⁽⁸⁾ Other Revenues are comprised primarily of third-party manufacturing sales and miscellaneous corporate revenues, including revenue hedging activities.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210429005381/en/

Media Contact:

Patrick Ryan

(973) 275-7075

Investor Contacts:

Peter Dannenbaum

(908) 740-1037

Raychel Kruper

(908) 740-2107

KEYWORDS: United States North America New Jersey

INDUSTRY KEYWORDS: Oncology Health Infectious Diseases Clinical Trials Pharmaceutical Biotechnology

MEDIA:

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Posted on April 29, 2021 6:33 am
Strategic Education, Inc. Reports First Quarter 2021 Results

Strategic Education, Inc. Reports First Quarter 2021 Results

HERNDON, Va.–(BUSINESS WIRE)–Strategic Education, Inc. (Strategic Education) (NASDAQ: STRA) today announced financial results for the period ended March 31, 2021.

“We are pleased with the organization’s ongoing commitment to the success of our students and to our mission to enable economic mobility,” said Karl McDonnell, Chief Executive Officer of Strategic Education. “As we continue to navigate through the challenges presented by the COVID-19 pandemic, we are encouraged by continued strength in our Australia/New Zealand and Alternative Learning segments.”

STRATEGIC EDUCATION CONSOLIDATED RESULTS

[Note: Strategic Education’s financial results for any periods ended prior to November 3, 2020 do not include the financial results of the Australia/New Zealand acquisition and are therefore not directly comparable.]

Three Months Ended March 31

Revenue increased 9.4% to $290.3 million compared to $265.3 million for the same period in 2020. Revenue in 2021 includes the impact of a purchase accounting adjustment of $2.2 million to record acquired contract liabilities at fair value as a result of the acquisition of Torrens University and associated assets in Australia and New Zealand, and foreign currency exchange impact. Adjusted revenue, which is a non-GAAP financial measure and excludes the aforementioned adjustments, increased 9.5% to $290.5 million compared to $265.3 million for the same period in 2020. For more details on non-GAAP financial measures, refer to the information in the Non-GAAP Financial Measures section of this press release.

Income from operations was $12.0 million or 4.1% of revenue, compared to $44.0 million or 16.6% of revenue for the same period in 2020. Income from operations in 2021 includes the impact of the aforementioned contract liabilities adjustment, $19.4 million of amortization expense related to assets acquired in the merger with Capella Education Company and the acquisition of Torrens University and associated assets in Australia and New Zealand, $1.0 million in expenses associated with the merger with Capella Education Company and the acquisition of Torrens University and associated assets in Australia and New Zealand, $18.3 million of restructuring charges for severance costs and right-of-use lease asset impairment charges, and foreign currency exchange impact. Income from operations in 2020 included $15.4 million of amortization expense related to assets acquired in the merger with Capella Education Company and $3.8 million in expenses associated with the merger with Capella Education Company. Adjusted income from operations was $52.9 million in 2021 compared to $63.1 million for the same period in 2020. The adjusted operating income margin was 18.2% compared to 23.8% for the same period in 2020.

Net income, which includes the items described above, and also includes income from partnership interests and other investments, certain discrete tax adjustments, and foreign currency exchange impact, was $9.6 million in 2021 compared to $35.2 million for the same period in 2020. Adjusted net income was $37.0 million compared to $46.5 million for the same period in 2020.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) was $46.6 million in 2021 compared to $69.7 million in 2020. Adjusted EBITDA, which excludes the items described above, as well as amortization expense associated with deferred implementation costs incurred in cloud computing arrangements, and stock-based compensation expense, was $70.6 million compared to $76.5 million for the same period in 2020.

Diluted earnings per share was $0.40 compared to $1.60 for the same period in 2020. Adjusted diluted earnings per share decreased to $1.53 from $2.11 for the same period in 2020. Diluted weighted average shares outstanding increased to 24,153,000 from 22,071,000 for the same period in 2020, due primarily to new shares issued to facilitate the acquisition of Torrens University and associated assets in Australia and New Zealand.

U.S. Higher Education Segment Highlights

The U.S. Higher Education segment (USHE) is comprised of Strayer University, including the Jack Welch Management Institute and DevMountain, Capella University, and Hackbright Academy.

For the first quarter, student enrollment within USHE decreased 7.3% to 89,482 compared to 96,537 for the same period in 2020.

For the first quarter, FlexPath enrollment was 17% of USHE enrollment compared to 12% for the same period in 2020.

Revenue decreased 11.3% to $226.5 million in the first quarter of 2021 compared to $255.5 million for the same period in 2020, driven by lower first quarter enrollment and lower revenue-per-student.

Income from operations decreased to $47.8 million in the first quarter of 2021 from $56.7 million for the same period in 2020. The operating income margin was 21.1%, compared to 22.2% for the same period in 2020.

Alternative Learning Segment Highlights

The Alternative Learning segment includes Employer Solutions, Workforce Edge, Sophia Learning, and Digital Enablement Partnerships.

For the first quarter, employer affiliated enrollment was 20.7% of USHE enrollment compared to 17.0% for the same period in 2020.

Revenue increased 27.9% to $12.5 million in the first quarter of 2021 compared to $9.8 million for the same period in 2020, driven by growth in Sophia Learning subscriptions and employer affiliated enrollment.

Income from operations decreased to $5.9 million in the first quarter of 2021 from $6.4 million for the same period in 2020, as we continue to invest in the Alternative Learning group. The operating income margin was 47.0%, compared to 65.3% for the same period in 2020.

Australia/New Zealand Segment Highlights

The Australia/New Zealand segment (ANZ) includes Torrens University, Think Education, and Media Design School.

For the first quarter, student enrollment within ANZ was 21,469, an increase of 11.9% compared to pro forma enrollment of 19,192 for the same period in 2020.

Revenue was $51.3 million in the first quarter of 2021, and adjusted revenue was $51.5 million excluding the impact of a purchase accounting adjustment of $2.2 million to record acquired contract liabilities at fair value as a result of the acquisition of Torrens University and associated assets in Australia and New Zealand, and foreign currency exchange impact. On a pro forma basis, revenue was $50.2 million in the first quarter of 2020.

Loss from operations was $2.9 million in the first quarter of 2021, and the adjusted loss from operations was $0.7 million excluding the impact of a purchase accounting adjustment to record acquired contract liabilities at fair value as a result of the acquisition of Torrens University and associated assets in Australia and New Zealand, and foreign currency exchange impact. On a pro forma basis, income from operations was $2.7 million in the first quarter of 2020.

BALANCE SHEET AND CASH FLOW

At March 31, 2021, Strategic Education had cash, cash equivalents, and marketable securities of $274.0 million, and $141.8 million outstanding under its revolving credit facility. For the first three months of 2021, cash provided by operations was $78.8 million compared to $68.7 million for the same period in 2020. Capital expenditures for the first three months of 2021 were $12.7 million compared to $14.3 million for the same period in 2020. Capital expenditures for 2021 are expected to be $50 million to $55 million.

For the first quarter of 2021, consolidated bad debt expense as a percentage of revenue and adjusted revenue was 3.7%, compared to 4.2% of revenue for the same period in 2020. Net tuition receivable as of March 31, 2021 includes additional reserves to account for projected deterioration in collections performance due to the pandemic.

COMMON STOCK CASH DIVIDEND

Strategic Education announced today that it declared a regular, quarterly cash dividend of $0.60 per share of common stock. This dividend will be paid on June 7, 2021 to shareholders of record as of May 28, 2021.

CONFERENCE CALL WITH MANAGEMENT

Strategic Education will host a conference call to discuss its first quarter 2021 results at 10:00 a.m. (ET) today. To participate in the live call, investors should dial (877) 303-9047 ten minutes prior to the start time. In addition, the call will be available via webcast. To access the live webcast of the conference call, please go to www.strategiceducation.com in the Investor Relations section 15 minutes prior to the start time of the call to register. An earnings release presentation will also be posted to www.strategiceducation.com in the Investor Relations section prior to the start time of the call. Following the call, the webcast will be archived and available at www.strategiceducation.com in the Investor Relations section.

About Strategic Education, Inc.

Strategic Education, Inc. (NASDAQ: STRA) (www.strategiceducation.com) is dedicated to helping advance economic mobility through higher education. We serve working adult students globally through our core focus areas: 1) U.S. Higher Education, including Strayer University and Capella University, each institutionally accredited, and collectively offer flexible and affordable associate, bachelor’s, master’s, and doctoral programs including the Jack Welch Management Institute at Strayer University, and non-degree web and mobile application development courses through Hackbright Academy and Strayer University’s DevMountain; 2) Alternative Learning, encompassing Employer Solutions, developing and maintaining relationships with large employers; Workforce Edge, a full service, online employee education management platform; Sophia Learning, self-paced general education courses that are ACE-recommended for college credit; and Digital Enablement Partnerships, helping advance capabilities in course development, online delivery, and student support; and 3) Australia/New Zealand, comprised of Torrens University, Think Education, and Media Design School that collectively offer certificate and degree programs in Australia and New Zealand. This portfolio of high quality, innovative, relevant, and affordable programs and institutions helps our students prepare for success in today’s workforce and find a path to bettering their lives.

Forward-Looking Statements

This communication contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may be identified by the use of words such as “expect,” “estimate,” “assume,” “believe,” “anticipate,” “may,” “will,” “forecast,” “outlook,” “plan,” “project,” “potential” and other similar words, and include all statements that are not historical facts, including with respect to, among other things, the future financial performance and growth opportunities of Strategic Education; Strategic Education’s plans, strategies and prospects; the impact of the current COVID-19 pandemic on Strategic Education’s business and results; and future events and expectations. The statements are based on Strategic Education’s current expectations and are subject to a number of assumptions, uncertainties and risks, including but not limited to:

the pace of student enrollment;

Strategic Education’s continued compliance with Title IV of the Higher Education Act, and the regulations thereunder, as well as other federal laws and regulations, institutional accreditation standards and state regulatory requirements;

rulemaking by the Department of Education and increased focus by the U.S. Congress on for-profit education institutions;

competitive factors;

risks associated with the further spread of COVID-19, including the ultimate impact of COVID-19 on people and economies;

the impact of regulatory measures or voluntary actions that may be put in place to limit the spread of COVID-19, including restrictions on business operations or social distancing requirements;

risks associated with the opening of new campuses;

risks associated with the offering of new educational programs and adapting to other changes;

risks associated with the acquisition of existing educational institutions, including in the case of Strategic Education’s acquisition of Torrens University and associated assets in Australia and New Zealand, the risk that the benefits of the acquisition may not be fully realized or may take longer to realize than expected, and the risk that the acquisition may not advance Strategic Education’s business strategy and growth strategy;

risks relating to the timing of regulatory approvals;

Strategic Education’s ability to implement its growth strategy;

the risk that the combined company may experience difficulty integrating employees or operations;

risks associated with the ability of Strategic Education’s students to finance their education in a timely manner;

general economic and market conditions; and

additional factors described in Strategic Education’s most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

Many of these risks, uncertainties and assumptions are beyond Strategic Education’s ability to control or predict. Because of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements. Furthermore, these forward-looking statements speak only as of the information currently available to Strategic Education on the date they are made, and Strategic Education undertakes no obligation to update or revise forward-looking statements, except as required by law. Actual results may differ materially from those projected in the forward-looking statements.

STRATEGIC EDUCATION, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

For the three months ended

March 31,

2020

2021

Revenues

$

265,302

$

290,336

Costs and expenses:

Instructional and support costs

132,936

152,805

General and administration

69,226

86,845

Amortization of intangible assets

15,417

19,407

Merger and integration costs

3,764

1,012

Restructuring costs

—

18,267

Total costs and expenses

221,343

278,336

Income from operations

43,959

12,000

Other income

2,123

2,167

Income before income taxes

46,082

14,167

Provision for income taxes

10,843

4,590

Net income

$

35,239

$

9,577

Earnings per share:

Basic

$

1.62

$

0.40

Diluted

$

1.60

$

0.40

Weighted average shares outstanding:

Basic

21,810

23,974

Diluted

22,071

24,153

STRATEGIC EDUCATION, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

December 31,

2020

March 31,

2021

ASSETS

Current assets:

Cash and cash equivalents

$

187,509

$

238,290

Marketable securities

7,557

6,455

Tuition receivable, net

50,169

63,469

Income taxes receivable

1,429

—

Other current assets

39,458

44,714

Total current assets

286,122

352,928

Property and equipment, net

158,854

164,277

Right-of-use lease assets

120,687

142,998

Marketable securities, non-current

30,270

29,280

Intangible assets, net

326,420

308,190

Goodwill

1,318,526

1,311,487

Other assets

54,928

60,282

Total assets

$

2,295,807

$

2,369,442

LIABILITIES & STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable and accrued expenses

$

104,742

$

97,448

Income taxes payable

—

11,350

Contract liabilities

60,501

108,073

Lease liabilities

34,809

32,886

Total current liabilities

200,052

249,757

Long-term debt

141,823

141,798

Deferred income tax liabilities

53,407

44,264

Lease liabilities, non-current

106,151

152,981

Other long-term liabilities

46,055

44,717

Total liabilities

547,488

633,517

Commitments and contingencies

Stockholders’ equity:

Common stock, par value $0.01; 32,000,000 shares authorized; 24,418,939 and 24,651,205 shares issued and outstanding at December 31, 2020 and March 31, 2021, respectively

244

247

Additional paid-in capital

1,519,549

1,521,145

Accumulated other comprehensive income

48,880

40,064

Retained earnings

179,646

174,469

Total stockholders’ equity

1,748,319

1,735,925

Total liabilities and stockholders’ equity

$

2,295,807

$

2,369,442

STRATEGIC EDUCATION, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

For the three months ended

March 31,

2020

2021

Cash flows from operating activities:

Net income

$

35,239

$
9,577

Adjustments to reconcile net income to net cash provided by operating activities:

Amortization of deferred financing costs

83

138

Amortization of investment discount/premium

65

24

Depreciation and amortization

25,733

34,571

Deferred income taxes

(2,108)

(8,898)

Stock-based compensation

3,025

3,900

Impairment of right-of-use lease assets

453

14,388

Changes in assets and liabilities:

Tuition receivable, net

3,553

(13,417)

Other assets

(3,090)

(9,897)

Accounts payable and accrued expenses

(7,028)

(10,276)

Income taxes payable and income taxes receivable

12,314

12,777

Contract liabilities

1,901

46,872

Other long-term liabilities

(1,445)

(978)

Net cash provided by operating activities

68,695

78,781

Cash flows from investing activities:

Purchases of property and equipment

(14,258)

(12,650)

Purchases of marketable securities

(1,863)

—

Proceeds from marketable securities

9,905

1,930

Other investments

(118)

(72)

Net cash used in investing activities

(6,334)

(10,792)

Cash flows from financing activities:

Common dividends paid

(13,327)

(14,778)

Net payments for stock awards

(25,089)

(2,326)

Repurchase of common stock

(247)

—

Net cash used in financing activities

(38,663)

(17,104)

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

—

(866)

Net increase in cash, cash equivalents, and restricted cash

23,698

50,019

Cash, cash equivalents, and restricted cash — beginning of period

420,497

202,020

Cash, cash equivalents, and restricted cash — end of period

$

444,195

$
252,039

STRATEGIC EDUCATION, INC.

UNAUDITED SEGMENT REPORTING

(in thousands)

For the three months ended

March 31,

2020

2021

Revenues:

U.S. Higher Education

$

255,513

$
226,547

Australia/New Zealand

—

51,265

Alternative Learning

9,789

12,524

Consolidated revenues

$

265,302

$
290,336

Income (loss) from operations:

U.S. Higher Education

$

56,743

$
47,754

Australia/New Zealand

—

(2,949)

Alternative Learning

6,397

5,881

Amortization of intangible assets

(15,417)

(19,407)

Merger and integration costs

(3,764)

(1,012)

Restructuring costs

—

(18,267)

Consolidated income from operations

$

43,959

$
12,000

Non-GAAP Financial Measures

In our press release and schedules, we report certain financial measures that are not required by, or presented in accordance with, accounting principles generally accepted in the United States of America (“GAAP”). We discuss management’s reasons for reporting these non-GAAP measures below, and the press release schedules that follow reconcile the most directly comparable GAAP measure to each non-GAAP measure that we reference. Although management evaluates and presents these non-GAAP measures for the reasons described below, please be aware that these non-GAAP measures have limitations and should not be considered in isolation or as a substitute for revenue, total costs and expenses, income from operations, operating margin, income before income taxes, net income, earnings per share or any other comparable financial measure prescribed by GAAP. In addition, we may calculate and/or present these non-GAAP financial measures differently than measures with the same or similar names that other companies report, and as a result, the non-GAAP measures we report may not be comparable to those reported by others.

Management uses certain non-GAAP measures to evaluate financial performance because those non-GAAP measures allow for period-over-period comparisons of the Company’s ongoing operations before the impact of certain items described below. Management believes this information is useful to investors to compare the Company’s results of operation period-over-period. These measures are Adjusted Revenue, Adjusted Total Costs and Expenses, Adjusted Income from Operations, Adjusted Operating Margin, Adjusted Income Before Income Taxes, Adjusted Net Income, Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), Adjusted EBITDA and Adjusted Diluted Earnings Per Share (EPS). We define Adjusted Revenue, Adjusted Total Costs and Expenses, Adjusted Income from Operations, Adjusted Operating Margin, Adjusted Income Before Income Taxes, Adjusted Net Income, and Adjusted Diluted EPS to exclude (1) a purchase accounting adjustment to record acquired contract liabilities at fair value as a result of the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand, and amortization and depreciation expense related to intangible assets and software assets associated with the Company’s merger with Capella Education Company and the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand, (2) transaction and integration expenses associated with the Company’s merger with Capella Education Company and the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand, (3) severance costs and right-of-use lease asset impairment charges associated with the Company’s restructuring, (4) income recognized from the Company’s investments in partnership interests and other investments, (5) discrete tax adjustments utilizing adjusted effective income tax rates of 28.5% and 29.2% for the three months ended March 31, 2020 and 2021, respectively, and (6) foreign currency exchange impact related to translating foreign currency results at a constant exchange rate of 0.743 Australian Dollars to U.S. Dollars, which is the 2021 budget rate. We define EBITDA as net income before other income, the provision for income taxes, depreciation and amortization, and from this amount in arriving at Adjusted EBITDA we also exclude stock-based compensation expense, amortization expense associated with deferred implementation costs incurred in cloud computing arrangements, a purchase accounting adjustment to record acquired contract liabilities at fair value, and the amounts in (2), (3) and (6) above. These non-GAAP measures are reconciled to the most directly comparable GAAP measures in the sections that follow. Non-GAAP measures should not be viewed as substitutes for GAAP measures.

STRATEGIC EDUCATION, INC.

UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

ADJUSTED REVENUE, ADJUSTED TOTAL COSTS AND EXPENSES, ADJUSTED INCOME FROM

OPERATIONS, ADJUSTED INCOME BEFORE INCOME TAXES, ADJUSTED NET INCOME, AND ADJUSTED

EPS

(in thousands, except per share data)

For the three months ended March 31, 2020

Non-GAAP Adjustments

As

Reported

(GAAP)

Purchase

accounting

adjustments⁽¹⁾

Merger and

integration

costs⁽²⁾

Restructuring

costs⁽³⁾

Income from

other

investments⁽⁴⁾

Tax

adjustments⁽⁵⁾

Foreign

currency

adjustments⁽⁶⁾

As Adjusted

(Non-GAAP)

Revenues

$

265,302

$

—

$

—

$

—

$

—

$

—

$

—

$

265,302

Total costs and expenses

$

221,343

$

(15,417)

$

(3,764)

$

—

$

—

$

—

$

—

$

202,162

Income from operations

$

43,959

$

15,417

$

3,764

$

—

$

—

$

—

$

—

$

63,140

Operating margin

16.6%

23.8%

Income before income taxes

$

46,082

$

15,417

$

3,764

$

—

$

(254)

$

—

$

—

$

65,009

Net income

$

35,239

$

15,417

$

3,764

$

—

$

(254)

$

(7,685)

$

—

$

46,481

Earnings per share:

Diluted

$

1.60

$

2.11

Weighted average shares outstanding:

Diluted

22,071

22,071

For the three months ended March 31, 2021

Non-GAAP Adjustments

As

Reported

(GAAP)

Purchase

accounting

adjustments⁽¹⁾

Merger and

integration

costs⁽²⁾

Restructuring

costs⁽³⁾

Income from

other

investments⁽⁴⁾

Tax

adjustments⁽⁵⁾

Foreign

currency

adjustments⁽⁶⁾

As Adjusted

(Non-GAAP)

Revenues

$

290,336

$

2,223

$

—

$

—

$

—

$

—

$

(2,019)

$

290,540

Total costs and expenses

$

278,336

$

(19,407)

$

(1,012)

$

(18,267)

$

—

$

—

$

(2,041)

$

237,609

Income from operations

$

12,000

$

21,630

$

1,012

$

18,267

$

—

$

—

$

22

$

52,931

Operating margin

4.1%

18.2%

Income before income taxes

$

14,167

$

21,630

$

1,012

$

18,267

$

(2,783)

$

—

$

22

$

52,315

Net income

$

9,577

$

21,630

$

1,012

$

18,267

$

(2,783)

$

(10,688)

$

22

$

37,037

Earnings per share:

Diluted

$

0.40

$

1.53

Weighted average shares outstanding:

Diluted

24,153

24,153

⁽¹⁾
Reflects a purchase accounting adjustment to record acquired contract liabilities at fair value as a result of the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand, and amortization and depreciation expense of intangible assets and software assets acquired through the Company’s merger with Capella Education Company and the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand.

⁽²⁾
Reflects transaction and integration expenses associated with the Company’s merger with Capella Education Company and the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand.

⁽³⁾
Reflects severance costs and right-of-use lease asset impairment charges associated with the Company’s restructuring.

⁽⁴⁾
Reflects income recognized from the Company’s investments in partnership interests and other investments.

⁽⁵⁾
Reflects tax impacts of the adjustments described above and discrete tax adjustments related to stock-based compensation and other adjustments, utilizing adjusted effective income tax rates of 28.5% and 29.2% for the three months ended March 31, 2020 and 2021, respectively.

⁽⁶⁾
Reflects foreign currency exchange impact related to translating foreign currency results at a constant exchange rate of 0.743 Australian Dollars to U.S. Dollars, which is the 2021 budget rate.

STRATEGIC EDUCATION, INC.

UNAUDITED NON-GAAP SEGMENT REPORTING

(in thousands)

For the three months ended

March 31,

2020

2021

Revenues:

U.S. Higher Education

$

255,513

$

226,547

Australia/New Zealand

—

51,265

Alternative Learning

9,789

12,524

Consolidated revenues

265,302

290,336

Adjustments to consolidated revenues:

U.S. Higher Education

—

—

Australia/New Zealand¹

—

204

Alternative Learning

—

—

Total adjustments to consolidated revenues

—

204

Adjusted revenues by segment:

U.S. Higher Education

255,513

226,547

Australia/New Zealand

—

51,469

Alternative Learning

9,789

12,524

Adjusted consolidated revenues

$

265,302

$

290,540

Income (loss) from operations:

U.S. Higher Education

$

56,743

$

47,754

Australia/New Zealand

—

(2,949)

Alternative Learning

6,397

5,881

Amortization of intangible assets

(15,417)

(19,407)

Merger and integration costs

(3,764)

(1,012)

Restructuring costs

—

(18,267)

Consolidated income from operations

43,959

12,000

Adjustments to consolidated income from operations:

Australia/New Zealand¹

—

2,245

Amortization of intangible assets

15,417

19,407

Merger and integration costs

3,764

1,012

Restructuring costs

—

18,267

Total adjustments to consolidated income from operations

19,181

40,931

Adjusted income (loss) from operations by segment:

U.S. Higher Education

56,743

47,754

Australia/New Zealand

—

(704)

Alternative Learning

6,397

5,881

Total adjusted income from operations

$

63,140

$

52,931

____________________

¹Adjustments to the Australia/New Zealand segment revenue and loss from operations include a purchase accounting adjustment of $2.2 million to record acquired contract liabilities at fair value as a result of the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand, and foreign currency exchange impact of ($2.0) million related to translating foreign currency results at a constant exchange rate of 0.743 Australian Dollars to U.S. Dollars, which is the 2021 budget rate.

STRATEGIC EDUCATION, INC.

UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

ADJUSTED EBITDA

(in thousands)

For the three months ended

March 31,

2020

2021

Net income

$

35,239

$

9,577

Provision for income taxes

10,843

4,590

Other income

(2,123)

(2,167)

Depreciation and amortization

25,733

34,571

EBITDA ⁽¹⁾

69,692

46,571

Stock-based compensation

3,025

3,900

Merger and integration costs ⁽²⁾

3,764

1,012

Restructuring costs ⁽³⁾

—

16,231

Cloud computing amortization ⁽⁴⁾

—

641

Contract liability adjustment ⁽⁵⁾

—

2,223

Foreign currency exchange impact ⁽⁶⁾

—

22

Adjusted EBITDA ⁽¹⁾

$

76,481

$

70,600

⁽¹⁾
Denotes non-GAAP financial measures. Please see the information in the Non-GAAP Financial Measures section of this press release for more detail regarding these adjustments and management’s reasons for providing this information.

⁽²⁾
Reflects transaction and integration charges associated with the Company’s merger with Capella Education Company and the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand.

⁽³⁾
Reflects severance costs and right-of-use lease asset impairment charges associated with the Company’s restructuring. Excludes $2.0 million of depreciation and amortization expense for the three months ended March 31, 2021.

⁽⁴⁾
Reflects amortization expense associated with deferred implementation costs incurred in cloud computing arrangements.

⁽⁵⁾
Reflects a purchase accounting adjustment to record acquired contract liabilities at fair value as a result of the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand.

⁽⁶⁾
Reflects foreign currency exchange impact related to translating foreign currency results at a constant exchange rate of 0.743 Australian Dollars to U.S. Dollars, which is the 2021 budget rate.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210429005295/en/

Terese Wilke

Manager, Investor Relations

Strategic Education, Inc.

(612) 977-6331

[email protected]

KEYWORDS: United States North America Virginia

INDUSTRY KEYWORDS: Education Training Continuing University

MEDIA:

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