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I'm pleased with our strong fourth quarter and fiscal year performance with net revenue increasing 7% year-over-year. Adjusted EBITDA grew 12% during the quarter and 18% for the full year. Backlog ended the fourth quarter up 12% year-over-year and up 7% on a pro forma basis. PA Consulting continued to post exceptional performance with 41% revenue growth. More importantly, PA delivered this growth while maintaining adjusted operating profit margins of 24%. For the full year, PA revenues surpassed $1 billion, far exceeding our deal investment model. As we look at overall Jacobs growth going forward, we now have certainty surrounding the unprecedented U.S. Infrastructure funding with the passage of the $1.2 trillion Infrastructure and Jobs Act last week. Looking beyond 2022, we expect our strong organic growth to result in approximately $10 per share of adjusted earnings per share in fiscal year 2025. We engaged in activities to accelerate solutions to ensure the world stays on track to meet the critical 1.5 degree celsius trajectory, while preparing to adapt to the changes already locked in from climate change. Annually, we generate approximately $5 billion of ESG-related revenue and expect to grow significantly over the next several years driven by strong capability and energy transition, decarbonization, climate adaptation and natural resource stewardship. Total CMS backlog increased 16% year-over-year, 7% on a pro forma basis to $10.6 billion driven by a strategic new wins in cyber and intel and nuclear and remediation. The funding for addressing these threats are partially reflected in the unclassified federal government spending on cyber in FY '22, which is expected to be over $20 billion, up 10% from prior year. During the quarter, we are awarded a $300 million, seven year contract with the National Geospatial-Intelligence Agency to modernize the NGA's ability to rapidly gain and share insights from cross domain inventory, including top secret data classification. And within the classified budget, we were awarded $170 million five year new contract to develop highly secure and hardened software application that are leveraging the latest advances in AI and machine learning. We also recently announced a strategic investment and distribution agreement with HawkEye 360, which will enhance our digital intelligence suite of technologies with their RF, spectrum analytics and collection automation offering. In addition, the new Bipartisan Infrastructure Bill includes $2.5 billion for 5G rollout at U.S. military bases, and the DoD is investing heavily in 5G technology in support of national priorities. The CMS sales pipeline remains robust with the next 18 month qualified new business opportunities remaining above $30 billion, which includes $10 billion in source selection with an increasing margin profile. We finished the year with strong financial performance with the year-over-year backlog growth of 7% and annual net revenue growth. As the first phase in a 20-year program across the entire city, Jacobs' plan will consolidate four aging wastewater facilities into a state of the art 1 billion gallon per day water resource recovery facility that includes the renewable energy hub. With ongoing impact to the supply chain, health systems and semiconductor chip shortage, Jacobs is gaining momentum with multi-year backlog across sectors with new wins in biopharma such as the next phase of a new $2 billion biotechnology facility. In highways, we were recently selected for transport for New South Wales along with consortium partners to undertake the $1.2 billion Warringah Freeway upgrade project to accommodate a third road crossing Sydney Harbour. And in air transportation, we were selected as the integrated program manager for the Solidarity Transport Hub in Poland, a greenfield airport in multimodal, including a high-speed rail network with an initial planned capacity of 45 million passengers. As we have previously communicated, our fiscal fourth quarter 2020 had 14 weeks compared to our normal 13-week quarters, which impacted our quarter year-over-year growth rate by 7% and our full year growth rate by 2%. Fourth quarter gross revenue increased 2% year-over-year and net revenue was up 7%. Including the pro forma impact from all acquisitions and adjusting for the year ago extra week, net revenue was up 6% for the quarter. Adjusted gross margin in the quarter as a percentage of net revenue was 27.2%, up 370 basis points year-over-year. Consistent with last year, the year-over-year increase in gross margin was driven by a favorable revenue mix in both People & Places, CMS as well as the benefit from PA Consulting, which has a strong accretive gross margin profile of nearly 50%. Adjusted G&A as a percentage of net revenue was up year-over-year to 17%. Within G&A, during the quarter, we incurred an approximate $20 million or $0.12 per share charge to a legal settlement cost, which burdened both GAAP and our adjusted results. GAAP operating profit was $252 million and was mainly impacted by $46 million of amortization from acquired intangibles. Adjusted operating profit was $303 million, up 17%. Our adjusted operating profit to net revenue was 10%, up 85 basis points year-over-year on a reported basis. GAAP earnings per share from continuing operations rounded to $0.34 per share and included $0.45 primarily related to the U.K. statutory tax rate changes and other tax-related items, $0.40 related to the final mark-to-market of the Worley stock and related FX impact, $0.23 of net impact related to amortization of acquired intangibles, $0.10 of transaction and other related costs and $0.06 from Focus 2023 and other restructuring costs. Excluding these items, fourth quarter adjusted earnings per share was $1.58, including the $0.12 burden from the previously discussed legal matter. During the quarter, PA's continued strong performance contributed $0.23 of accretion net of incremental interest. Q4 adjusted EBITDA was $310 million and was up 12% year-over-year, representing 10% of net revenue. During the quarter, our revenue book-to-bill ratio was 1.3 times for Q4, positioning us well for the developing growth momentum we expect over the course of fiscal year '22. Gross revenue increased 4% and net revenue was up 7%. Including the pro forma impact of all acquisitions and adjusting for the extra week in the year ago period, net revenue was up 3% for the full year. We continue to enhance our portfolio to higher value solutions, which is evident as gross margin as a percentage of net revenue was 26% for the year, up 235 basis points year-over-year. GAAP operating profit was $688 million and was mainly impacted by the $261 million of purchase price consideration for the PA Consulting investment and a $150 million of amortization of acquired intangibles. Adjusted operating profit was $1.188 billion, up 23% and represented 10% of net revenue. Adjusted EBITDA of $1.244 billion was up 18% year-over-year to 10.6% of net revenue and just above the midpoint of our increased fiscal 2021 outlook. GAAP earnings per share was $3.12 and was impacted by $1.96 from the PA Consulting purchase price consideration and valuation allocation, $0.77 of amortization of acquired intangibles, $0.57 related to the U.K. statutory rate change and other U.K. related tax items, $0.35 of net charges related to Focus 2023, deal costs and restructuring and all of this being partially offset by a net positive $0.48 from the final sale of Worley and C3. Excluding all of these items, adjusted earnings per share was $6.29, also above the midpoint of our previously increased outlook. Of the $6.29, PA Consulting contributed $0.48 to that figure. As a result, while we are still reviewing key components of the plan, we expect the potential non-cash impairment charge ranging from $60 million to $70 million in the first half of fiscal '22. Starting with CMS, Q4 2021 revenue was down 5% year-over-year, but when adjusting for the extra week in Q4 2020 was relatively flat on a pro forma basis. This represented $175 million year-over-year revenue impact during the quarter. In 2022 Q1, we expect to -- we continue to expect an approximate $210 million year-over-year impact from these two contract roll-offs, and this will phase out in Q2. Q4 CMS operating profit was $115 million, up 7%. Operating profit margin was strong, up 100 basis points year-over-year to 9.1%. For the full year, CMS operating profit was $447 million, up 20% with 8.8% operating profit margin. We expect operating profit margin to remain in the mid-8% range through fiscal 2022. When factoring in the impact from the extra week, P&PS grew net revenue approximately 8% year-over-year for Q4 and was up 2% for the fiscal year 2021. In Q4, total P&PS operating profit was down year-over-year driven by the $20 million legal settlement cost I described earlier. Adding back down legal settlement costs, operating profit growth would have been up 8% in Q4. For the fiscal year, operating profit was up 5% or 8% excluding the legal settlement. In terms of PA's performance, PA contributed $273 million in revenue and $66 million in operating profit for the quarter. Q4 revenue grew 41% and 32% year-over-year in sterling. Q4 adjusted operating profit margin was 24% in line with our expectations. On a full year basis, PA Consulting grew revenue 33%, 24% in sterling with adjusted operating profit margin up 23%. Our non-allocated corporate costs were $55 million for the quarter and $190 million for the full year. In fiscal 2022, we expect non-allocated corporate costs to be in the range of $200 million to $250 million given continued increases in medical costs and other investments. During the fourth quarter, we generated $176 million in reported free cash flow as DSO again showed strong improvement. The quarter's cash flow included $22 million of cash related to restructuring, and other items was $16 million related to a real estate lease termination as we take advantage of virtual working. For the year, free cash flow was $633 million, which was mainly impacted by the $261 million of PA purchase price consideration treated as post-closing compensation that we discussed last quarter. Regardless, our reported free cash flow represented 133% conversion against our reported net income. As a result of our strong cash flow, we ended the quarter with cash of $1 billion and a gross debt of $2.9 billion, resulting in $1.9 billion of net debt. Our pro forma net debt to adjusted expected 2022 EBITDA is approximately 1.3 times, a clear indication of the strength of our balance sheet. During the quarter, we monetized our Worley stock for $370 million and executed a $250 million accelerated share repurchase program. And finally, given our strong balance sheet and free cash flow, we remain committed to our quarterly dividend, which was increased 11% earlier this year to $0.21 per share. We are introducing our fiscal 2022 outlook for adjusted EBITDA to be in a range of $1.37 billion to $1.45 billion, which at the midpoint represents double-digit growth. Our adjusted earnings per share outlook for fiscal 2022 is in the range of $6.85 to $7.45. We anticipate approximately $10 of adjusted earnings per share through fiscal 2025.

GAAP earnings per share from continuing operations rounded to $0.34 per share and included $0.45 primarily related to the U.K. statutory tax rate changes and other tax-related items, $0.40 related to the final mark-to-market of the Worley stock and related FX impact, $0.23 of net impact related to amortization of acquired intangibles, $0.10 of transaction and other related costs and $0.06 from Focus 2023 and other restructuring costs. As a result of our strong cash flow, we ended the quarter with cash of $1 billion and a gross debt of $2.9 billion, resulting in $1.9 billion of net debt. We are introducing our fiscal 2022 outlook for adjusted EBITDA to be in a range of $1.37 billion to $1.45 billion, which at the midpoint represents double-digit growth. Our adjusted earnings per share outlook for fiscal 2022 is in the range of $6.85 to $7.45.

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First quarter net income totaled $91 million or $0.28 per share, resulting in an upper quartile return on tangible common equity of 15%. I'm so proud to state that the first quarter results are on par with pre-COVID-19 levels, an extraordinary accomplishment given the significant changes in interest rates and a less favorable economic environment during the last 12 months. Our company remains well capitalized, with increased risk-based capital ratios and an allowance for credit losses, excluding PPP loans, at 1.57%. We established a new record for noninterest income at $83 million, supported by strength in mortgage banking, record wealth management and insurance revenues and solid contributions from Capital Markets. During the quarter, we originated nearly $1 billion of PPP round 2 loan. On a linked-quarter basis, tangible book value per share increased $0.13 to $8.01, as we continue to -- our commitment to paying an attractive dividend by declaring our quarterly common dividend of $0.12 last week, while executing on $36 million of share buybacks during the quarter, at an average price of $11.91. In addition, our CET1 ratio increased to 10% as we continue to prioritize our options for capital deployment in the manner that produces the highest risk-adjusted returns for our shareholders. Diligent expense management remains a top priority, and we are on track to meet this year's $20 million cost savings target, completing our three-year $60 million expense reduction initiative. The efficiency ratio totaled 58.7%, improving 36 basis points compared to the first quarter of 2020, with both quarters reflecting seasonally elevated expenses. In what has been a challenging interest rate environment over the last 12 months, we have successfully leveraged these investments in our fee-based businesses to mitigate net interest margin headwind, specifically through significant growth in capital markets, mortgage banking, wealth management and insurance revenues. During the first quarter of 2021, we've continued to build on last year's success as those businesses have increased $16 million or 56% compared to the first quarter of 2020. Our mortgage banking business had a record-breaking year in 2020 with more than $3 billion in total production and $50 million in fee income. We've expanded our capabilities significantly through building our syndications, derivatives and international banking platforms organically, with those businesses now contributing revenues from just over $1 million to more than $30 million annually. The commercial team has originated more than $150 million in funded assets since inception, and the retail locations ranked among the upper quartile of branches relative to their key performance indicators during 2020. The level of delinquency improved over the prior quarter to end March at 80 basis points, representing a 22-basis point improvement linked-quarter, which was driven by positive macroeconomic trends and some seasonally lower past due levels in the consumer portfolio, as is typical in the first quarter. Excluding PPP loan volume, delinquency stands at 89 basis points. The level of NPLs in OREO ended March at 65 basis points, an improvement of 5 bps on a linked-quarter basis, while at non-GAAP level, excluding PPP loans, stands at 72 basis points. The improvement was largely driven by a reduction in nonaccrual loans of $12 million during the quarter, with nearly half of our NPLs continuing to pay on a contractually current basis. Net charge-offs for the first quarter came in at a very solid level of $7 million or 11 basis points annualized and 13 bps on a non-GAAP basis, with provision expense totaling $6 million, resulting in an ending March reserve position at 1.42%. Excluding the PPP portfolio, the non-GAAP ACL stands at 1.57%, up 1 basis point over the prior quarter. Inclusive of the remaining acquired unamortized discount, our total reserve coverage stands at 1.78%, with our NPL coverage position also remaining favorable at 230% following the previously noted improvement in NPL levels during the quarter. At the end of March, our deferrals are down to 1.2% of our core loan portfolio and the number of new requests from commercial borrowers have essentially ceased at this point. As noted on Slide 5, first quarter earnings per share was solid at $0.28, up significantly on a year-over-year basis, as the first quarter of 2020, a significant reserve built at the onset of the pandemic. Let's review the balance sheet on Page 8. Average balances for total loans increased 8.3% on a year-over-year basis and decreased 0.8% from the fourth quarter. On a spot basis for the first quarter of 2021, total loans were up 0.3% as PPP balances increased $330 million on a net basis, with $900 million of round 2 PPP loans funded during the quarter partially offset by $500 million of PPP forgiveness. Commercial line utilization rates remain at record lows in the low 30s, which translates into about $0.5 billion in funded balances at a normalized utilization rate. Average deposits grew 19.3% on a year-over-year basis and increased 5.7% annualized on a linked-quarter basis. On a spot basis, for the first quarter of 2021, total deposits increased $1.2 billion or 16.9% annualized, led by strong growth in noninterest-bearing and interest-bearing demand deposits, partially offset by a managed decrease in time deposits. This continued deposit growth bolsters our ample liquidity and strengthens our deposit mix, with a loan-to-deposit ratio at 84%, with 33% of our deposits being noninterest-bearing at the end of the quarter. Net interest income declined $11.5 million or 4.9% compared to the fourth quarter. The reported net interest margin narrowed 12 basis points to 2.75% as higher average cash balances were a 6-basis point negative impact on the margin compared to last quarter. Excluding these impacts, the underlying margin increased 5 basis points from the fourth quarter, with benefits from continuing to manage down interest-bearing deposit costs which improved 12 basis points to 31 basis points for the quarter. With the cost of these deposits ending the quarter at 27 basis points on a spot basis, 4 basis points lower than the average, we expect further reductions in our cost of funds moving forward. Let's now look at noninterest income and expense on Slides 10 and 11. Noninterest income totaled a record $83 million as mortgage banking income remained strong at $16 million, with expanded gain on sale margins and strong sold production volume that was up 69% on a year-over-year basis. Wealth management increased 14% from the fourth quarter to record levels due to the expanded footprint and positive market impacts on assets under management. Noninterest expense totaled $184.9 million, relatively flat with the prior quarter and year ago quarter. On an operating basis, compared to the fourth quarter of 2020, salaries and employee benefits increased $2.7 million or 2.5%, primarily related to $5.6 million of expense in the first quarter of 2021 due to the timing of normal seasonal long-term compensation recognition, similar to last year's first quarter. Occupancy and equipment on an operating basis increased $2.5 million or 8.1% due to investments in digital technology, expansion in key growth markets across the footprint and seasonal expenses related to adverse weather. Our CET1 ratio improved to an estimated 10%, up from 9.1% last March, even with $75 million of buyback over this period, reflecting FNB's strategy to optimize capital deployment. We expect continued strong contributions in mortgage banking, given the pipelines Vince mentioned, with total noninterest income expected in the high $70 million range for the second quarter. We are on-track to achieve our expense savings target of $20 million for 2021 and expect operating expenses for the second quarter to be down from seasonally higher expenses in the first quarter, based on our current forecasted level of mortgage commissions. Lastly, we expect the full year effective tax rate to be around 19%, assuming no change to the statutory corporate tax rate of 21%. As it relates to the quality of people and strength of our culture, FNB has received more than 65 Greenwich Excellence and Best Brand Awards, including specific recognition for excellence in client advisory services and for its commercial banking client experience during the past decade. FNB is one of only 75 banks in the United States to be recognized on the list, which includes a total of 500 banks from around the globe.

First quarter net income totaled $91 million or $0.28 per share, resulting in an upper quartile return on tangible common equity of 15%. As noted on Slide 5, first quarter earnings per share was solid at $0.28, up significantly on a year-over-year basis, as the first quarter of 2020, a significant reserve built at the onset of the pandemic.

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Our sales for the quarter were $296 million. Focusing on EV, last quarter, we reported that sales into EV applications were 16% of the consolidated sales. This quarter, EV sales were again 16% of consolidated sales. While our debt was down, we did have an increase in net debt as we utilized a portion of our available cash to execute a $35 million share buyback in the quarter. We have now executed half of $100 million stock buyback authorization since it was announced last March. Then in fiscal 2023, we expect the bulk of the remaining truck program sales to roll off in the range of $90 million to $100 million. The awards identified here represent some of the key business wins in the quarter and represent $25 million in annual sales at full production. Second quarter net sales were $295.5 million in fiscal year '22 compared to $300.8 million in fiscal year '21, a decrease of $5.3 million or 1.8%. The year-over-year quarterly comparisons included a favorable foreign currency impact on sales of $2.8 million in the current quarter. Sequentially, sales increased by $7.7 million or 2.7% from the first quarter of fiscal year '22. The sales decrease was partially offset by higher sales of electric hybrid vehicle products, which amounted to 16% of sales in the second quarter of fiscal 2022, which was in line with our previous communication at electric and hybrid vehicles sales would comprise a mid-teens percentage of our fiscal year '22 consolidated sales. Second quarter net income decreased $11.1 million to $27.5 million or $0.72 per diluted share from $38.6 million or $1.01 per diluted share in the same period last year. Fiscal year '22 second quarter margins were 23.4% as compared to 26.9% in the second quarter of fiscal year '21. The negative impact of supply chain disruption and higher logistics costs, including freight on the second quarter fiscal year '22 gross margin was approximately 250 basis points. Fiscal year '22 second quarter selling and administrative expenses, as a percentage of sales, increased to 10.6% compared to 10.2% in the fiscal year '21 second quarter. Other income net was down by $1.7 million, mainly due to lower international government assistance between the comparable quarters and increased foreign exchange losses from remeasurement. The effective tax rate in the second quarter of fiscal year '22 was 16.7% as compared to 16.5% in the second quarter of fiscal year '21. The fiscal year '22 full-year estimate, which does not include any discrete items, is estimated to be between 17% and 18%, tightening the high end of the range down from 19% to 18%. Shifting to EBITDA, a non-GAAP financial measure, fiscal year '22 second quarter EBITDA was $47.4 million versus $60.2 million in the same period last fiscal year. In the second quarter of fiscal year '22, we reduced gross debt by $12.3 million, and we ended the second quarter with $177.2 million in cash. During the first six months of fiscal year '22, net debt a non-GAAP financial measure, increased by $39 million, mainly due to the share repurchases of $42.4 million and unfavorable working capital changes, especially related to inventory, which increased by nearly $26 million due to the supply chain-related challenges. Regarding capital allocation on March 31, we announced a $100 million share repurchase program, which we executed nearly $35 million of purchases during the second quarter of fiscal year '22. Since the authorization's approval, we purchased nearly 50 million worth of shares at an average price of $44.04. For the fiscal year '22 second quarter, free cash flow was $21.6 million compared to $36.7 million in the second quarter of fiscal year '21. In the second quarter of fiscal year '22, we invested approximately $5.4 million in capex as compared to $3.6 million in the second quarter of fiscal year '21. We now estimate fiscal year '22 capex to be in the $45 million to $50 million range, which is lower than the prior estimates for the current fiscal year of $50 million to $55 million we provide earlier. The revenue range for full fiscal year '22 is between $1.14 billion and $1.16 billion, down from a range of $1.175 billion to $1.235 billion. Diluted earnings per share range is now between $3 per share and $3.20 per share, down from $3.35 to $3.75 per share.

Second quarter net sales were $295.5 million in fiscal year '22 compared to $300.8 million in fiscal year '21, a decrease of $5.3 million or 1.8%. Second quarter net income decreased $11.1 million to $27.5 million or $0.72 per diluted share from $38.6 million or $1.01 per diluted share in the same period last year. The revenue range for full fiscal year '22 is between $1.14 billion and $1.16 billion, down from a range of $1.175 billion to $1.235 billion. Diluted earnings per share range is now between $3 per share and $3.20 per share, down from $3.35 to $3.75 per share.

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Adjusted EBITDA was $1.1 billion, a 68% increase over the fourth quarter of 2020 and a 167% increase compared to the year ago quarter. This represents the highest quarterly adjusted EBITDA on record, surpassing the third quarter of 2020 by 48%. Nancy brings more than 20 years of leadership and financial and operating roles across a broad range of industries. First quarter housing starts averaged 1.6 million units on a seasonally adjusted basis, an improvement of 2% over the fourth quarter. Activity dipped briefly in February, driven by severe winter weather, but March activity rebounded sharply March housing starts totaled 1.7 million units on a seasonally adjusted basis, the highest level since 2006. Single family starts in March, reached the highest rate for any month since June of 2007 at nearly 104,000 units. Additionally, housing permits in the first quarter average nearly 8 million units on a seasonally adjusted basis, surpassing last quarter by 10%, and surging to its highest quarterly average since before the great recession. I'll begin the discussion with Timberlands on pages 6 through 8 of our earnings slides. Timberlands contributed $108 million to first quarter earnings. Adjusted EBITDA increased by $5 million, compared to the fourth quarter. And as of the end of the first quarter, we've harvested approximately 40% of our planned salvage volume. Southern Timberlands adjusted EBITDA increased $5 million compared with the fourth quarter. Northern Timberlands adjusted EBITDA increased $1 million compared to the fourth quarter due to improved sales realizations for hardwood logs. Turning to Real Estate Energy and Natural Resources, Pages 9 and 10. Real Estate ENR contributed $66 million to first quarter earnings and $96 million to adjusted EBITDA. First quarter adjusted EBITDA was $73 million higher than fourth quarter due to timing of transactions. Wood products, Pages 11 and 12. Wood Products contributed $840 million to first quarter earnings and $889 million to adjusted EBITDA. First quarter adjusted EBITDA was 68% higher than the fourth quarter and surpassed by 45% the previous quarterly record, which was established in the third quarter of 2020. Average lumber composite pricing increased 41% compared with the fourth quarter. EBITDA for lumber increased $259 million compared with the fourth quarter, a more than 100% improvement. Average sales realizations increased by 42%. Sales volumes decreased by 5% compared with the fourth quarter as customer takeaway and supply chains in the South were temporarily disrupted following the severe winter weather. Average OSB composite pricing increased 30% compared with the fourth quarter. OSB EBITDA increased $80 million compared to the fourth quarter, a 36% increase. Average sales realizations improved by 22%. Engineered Wood Products EBITDA increased $5 million compared to the fourth quarter. In distribution, EBITDA increased $15 million compared to the fourth quarter as strong demand drove sales volumes across all products and the business captured improved margins. After exceeding our 2020 operational excellence target, we remain focused on opex in 2021, targeting another $50 million to $75 million across our businesses. Today, we reported the closing of our previously announced acquisition of 69,000 acres of Alabama Timberlands. I'll begin with the first quarter results for our unallocated items as summarized on page 13. First quarter adjusted EBITDA for this segment improved by $7 million compared to fourth quarter 2020. Turning now to our key financial items, which are summarized on Page 14 cash from operations totaled nearly $700 million for the first quarter. This is our highest quarterly operating cash flow since fourth quarter 2006, and our highest first quarter cash flow on record. However, operating cash flow improved by over $250 million compared with the fourth quarter, as these factors were more than outweighed by higher pricing for lumber and oriented strand board. We reinvested a portion of this cash in our Timberlands and Wood Products businesses through capital expenditures, which totaled $53 million for the first quarter. Adjusted funds available for distribution or FAD, for first quarter 2021, totaled $645 million as highlighted on Page 15. In the first quarter, we returned $127 million to our shareholders through payment of our first-quarter base dividend of $0.17 per share. As a reminder, we plan to target a total annual return to shareholders of 75% to 80% of our annual adjusted FAD. We will deploy the remaining 20% to 25% of our annual FAD consistent with our stated priorities for opportunistic capital allocation. Turning to the balance sheet, we ended our first quarter with over $1 billion of cash, an undrawn line of credit, and just under $5.5 billion of outstanding long-term debt. As a reminder, we have cash earmarked to repay our $150 million 9% note, when it matures in the fourth quarter. Our strong balance sheet position, in addition to our record EBITDA performance, has resulted in a net debt to adjusted EBITDA leverage ratio of 1.5 times. Although our leverage ratio is significantly below our over the cycle target of 3.5 times net debt to EBITDA, we believe that's appropriate given the extremely strong commodity markets we're experiencing today. Looking forward, key outlook items for the second quarter are presented on page 16. Domestic average sales realizations are expected to be moderately lower compared with the first quarter. In the second quarter, we will report a cash outflow of approximately $149 million for the 69,000 acre Alabama Timberlands acquisition that we completed this week. We continue to expect full year 2021 adjusted EBITDA of approximately $255 million, although we now expect land basis as a percentage of real estate sales to be approximately 35% to 45% for the year due to the mix of properties sold. Excluding the effect of changes in average sales realizations for lumber and oriented strand board, we expect second quarter adjusted EBITDA will be significantly higher than the first quarter. Log costs are expected to be comparable to the first quarter. For lumber, our quarter-to-date average sales realizations are approximately $105 higher and current realizations are approximately $130 higher than the first quarter average. For OSB, our quarter-to-date average sales realizations are approximately $135 higher and our current sales realizations are approximately $185 higher than the first quarter average. As a reminder for lumber, every $10 change in realizations is approximately $11 million of EBITDA on a quarterly basis. For OSB, every $10 change in realizations is approximately $8 million of EBITDA on a quarterly basis. Additionally, in March 2021, we announced a third increase, which ranges from 10% to 25% and will be captured over the next several quarters. We continue to expect full year 2021 interest expense will be approximately $315 million. Additionally, we continue to anticipate 2021 capital expenditures to total $420 million, with most large projects executing in the second half of the year. Turning to taxes, we continue to expect our full-year 2021 effective tax rate will be between 18% and 22% before special items. As previously discussed, the $90 million tax refund, associated with our 2018 pension contribution, remains in process.

Domestic average sales realizations are expected to be moderately lower compared with the first quarter. Excluding the effect of changes in average sales realizations for lumber and oriented strand board, we expect second quarter adjusted EBITDA will be significantly higher than the first quarter. Log costs are expected to be comparable to the first quarter.

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Turning now to our expectations, with our sold and already started backlog up more than 50% and continuing strength in lead and traffic trends, our visibility and confidence in fiscal 2021 results is quite high. The headline is that we now expect full-year earnings per share to be above $3. First, our current backlog already contains nearly 700 homes scheduled to close in the first quarter of next year, that's more than half of our typical first quarter closings. And remember, these communities were tied up six to 12 months ago, before the recent run-up in home prices. Looking at the second quarter compared to the prior-year, new home orders increased approximately 12% to 1,854 as our sales pace was up more than 40% to 4.7 sales per community per month. Homebuilding revenue increased about 12% to $547 million on 9% higher closings. Our gross margin, excluding amortized interest, impairment and abandonment was 22.2% up approximately 140 basis points. SG&A was down 100 basis points as a percentage of total revenue to 11% as we benefited from improved overhead leverage. Adjusted EBITDA was $64.2 million up over 45%. Our EBITDA margin was 11.7%, the highest second quarter level in the past 10 years. Interest amortized as a percentage of homebuilding revenue was 4.4% down 20 basis points, and that led to net income from continuing operations of $24.6 million, yielding earnings per share of $0.81, more than double the same period last year. We now expect EBITDA to be up over 20% or more versus the prior-year, a significant increase from the previous guidance. This level of improvement implies EBITDA growth of more than 10% in the second half of this year, with greater year-over-year growth expected in the third quarter. Our full-year EBITDA guidance equates to earnings per share above $3 up from last quarter's guidance of at least $2.50. We now expect our return on average equity for the full-year to be approximately 14%. If you exclude our deferred tax asset, which doesn't generate profits, our ROE would be over 20%. Many of these restrictions remain in place and as such, we anticipate new homeowners to be down 10% to 20%. Our ASP should be above $400,000 for the first time ever, gross margin should be up over 100 basis points. SG&A as a percentage of total revenue should be down at least 20 basis points. Our interest amortized as a percentage of homebuilding revenue should be around 4% and our tax rate will be about 25%. We ended the second quarter with over $600 million of liquidity more than double this point last year, with unrestricted cash in excess of $350 million and no outstanding draws in our revolver. During the quarter, we retired approximately $10 million of our senior notes. And with two remaining terminal repayments, we're on a clear path to achieve our goal of bringing our total debt below $1 billion by the end of fiscal 2022. During the quarter, we spent almost $100 million on land acquisition and development. Based on land pipeline and approvals, we expect our land spend to accelerate in the remaining quarters of fiscal 2021, resulting in over $600 million of total land spend for the year. We also increased our option percentage in the second quarter and now control more than 45% of our active lots or options up from less than 30% in the same period last year. We still anticipate community count troughing around 120 later this year, but we expected to grow steadily from there in fiscal 2022 as we benefit from our increased land spending.

Interest amortized as a percentage of homebuilding revenue was 4.4% down 20 basis points, and that led to net income from continuing operations of $24.6 million, yielding earnings per share of $0.81, more than double the same period last year. Our interest amortized as a percentage of homebuilding revenue should be around 4% and our tax rate will be about 25%.

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In Q4, total reported sales declined by 9% versus the prior year. Organic sales were down about 12% versus prior year, but grew 10% sequentially. IS/CS sales reached approximately $400 million in fiscal '20 on an organic basis and were well in excess of that when including all of our recent inorganic investments. Together with PTC, we added over 200 new customer logos in fiscal 2020, and deal sizes in our Information Solutions software business continue to grow. Total sales include a 3 point positive contribution from inorganic investments, led by our Sensia joint venture, along with the Kalypso and ASEM acquisitions. Our Q4 Solutions and Services book-to-bill was 0.87, and full-year book-to-bill was over 1. Turning to profitability, strong segment operating margin performance of over 20% in the quarter was flat with last year on lower sales, underscoring our increasing business resilience. Our Discrete market segment declined approximately 10%, with Automotive performing better than we expected, driven by stronger MRO and projects sales. This segment declined a little less than 5% and outperformed the discrete and process industry segments. Process markets were down approximately 20%. North America organic sales declined by 12% versus the prior year. In EMEA, sales declined 12% largely, due to capex delays. Sales in the Asia Pacific region declined 9% largely, due to declines in end user business within Automotive and Mass Transit. And you can see those investments drive the performance of our software business, which reached over $500 million in revenue in fiscal '20 and was one of the best performing areas of our business in both orders and sales this year. We deployed over $500 million for inorganic investments that contributed almost 4 points to our top line growth; and we deployed over $700 million in cash toward dividends and repurchases enabled by our strong free cash flow. We expect reported sales to grow about 7.5% at the midpoint of the guidance range, including 5% of organic growth and over a point of growth from our fiscal '20 and fiscal '21 acquisitions to-date. ARR is expected to grow double digits in fiscal '21, after showing over 6% growth in fiscal 20. Adjusted earnings per share is expected to reach $8.65 at the midpoint, which is up 10% from last year's fiscal '20 results. We are targeting Free Cash Flow conversion of 100%. Organic sales improved as the quarter progressed and were up 10% sequentially versus Q3. Compared to last year, Q4 organic sales were down 12% and acquisitions contributed just over 3% to total growth. Currency translation was a smaller headwind than expected, and decreased sales by 0.3 points. Segment operating margin was 20.2%, the same as last year. Fourth quarter results included about $10 million of restructuring charges, which are expected to yield over $15 million in additional annualized structural cost savings. General Corporate -- net expense was $22 million, pretty much in line with what we expected. As I mentioned earlier, Adjusted earnings per share of $1.87 was better-than-expected, mainly as a result of better organic sales, productivity, and a slightly lower tax rate. The adjusted effective tax rate for the fourth quarter was 15%. We generated over $300 million of free cash flow in the quarter, well over 100% conversion on adjusted income. Note that this result includes a voluntary $50 million pre-tax contribution made to the US pension plan. Both segments were up about 10% on an organic basis, compared to Q3, though organic sales remained lower, compared to last year. Segment margin of both segments increased over 300 basis points, compared to Q3, mainly due to higher organic sales, but also as a result of cost control including a full quarter benefit of our cost reduction actions and generally improving operating efficiencies. Compared to last year, Architecture & Software margins were up 100 basis points, despite the impact of lower sales, mainly as a result of our cost actions, including lower incentive compensation. Segment margins for the Control Products & Solutions segment declined 60 basis points, compared to last year, with cost actions offsetting most of the impact of lower organic sales. The next Slide, 11, provides the adjusted earnings per share walk from Q4 fiscal '19 to Q4 fiscal '20. As you can see, core performance was down about $0.15 on a 12% organic sales decline. This implies core earnings conversion, that is, excluding the effects of acquisitions and currency, of a little below 20%, which is a bit better than the outlook I shared with you in July. Organic sales declined 8% for the fiscal year. R&D expense was about flat, compared to fiscal '19, and R&D as a percent of sales increased further to 5.9% of sales in fiscal 2020. Full-year segment margin remained at about 20%, compared to record 22% segment margins last year, and Adjusted earnings per share was down 11%. Free cash flow performance remained strong, and excluding the $50 million voluntary pension contribution in fiscal '20, was flat, compared to last year. Free cash flow conversion was over 110% of Adjusted Income. And finally, return on invested capital remained well above our target of over 20%. At September 30, our fiscal year end, cash on the balance sheet was over $700 million, and our total debt was about $2 billion. During the fourth quarter, we paid off the $400 million term loan that we executed earlier in the year, and our net debt to EBITDA ratio at September 30 was 1.0. As Blake mentioned, we are expecting sales of about $6.8 billion in fiscal 2021, up about 7.5% at the midpoint of the range. We expect organic sales growth to be in the range of 3.5% to 6.5% and about 5% at the mid-point of our range. We expect segment operating margin to be between 20% and 20.5% probably at the higher end of that range. At the midpoint, our guidance assumes full-year core earnings conversion, which excludes the impacts of currency and acquisitions of between 30% and 35%. As we mentioned last quarter, we expect to offset a $150 million year-over-year headwind related to fully funding our incentive compensation and reversing fiscal 2020 temporary cost reduction actions with additional productivity. We expect the full-year Adjusted Effective Tax Rate will be about 14%. This includes a 300 basis point benefit related to discrete items which we expect to realize late in the fiscal year. Our underlying adjusted effective tax rate is expected to be 17% to 18%. This has the effect of increasing adjusted earnings per share by approximately $0.20 on a full-year basis. Our adjusted earnings per share guidance range on the new basis is $8.45 to $8.85. This compares to fiscal 2020 adjusted earnings per share of $7.87 on the new basis. On an apples-to-apples basis, at the midpoint of the range, this represents 10% adjusted earnings per share growth on about 5% higher organic sales. We expect adjusted earnings per share to improve throughout the year and anticipate first quarter fiscal 2021 adjusted earnings per share to be lower than our fiscal 2020 fourth quarter performance, primarily as a result of a $0.30 sequential headwind related to increased incentive compensation expense and the reversal of our temporary cost actions as of the end of November. Finally, we expect full-year 2021 free cash flow conversion of about 100% of adjusted Income. This assumes $150 million of capital expenditures and a $50 million voluntary pre-tax US pension contribution. Corporate and Other expense, which we previously referred to as general corporate net expense, is expected to be around $105 million. Net interest expense for fiscal 2021 is expected to be between $90 million and $95 million, a little lower than fiscal 2020. Finally, we're assuming average diluted shares outstanding of about 117 million shares. The next Slide, 15, provides the adjusted earnings per share walk from fiscal 2020 to the fiscal 2021 guidance midpoint. Moving from left to right, fiscal 2020 adjusted earnings per share was $7.68 on the old definition. Next you see the $0.19 impact of the new definition of adjusted EPS. So, fiscal 2020 adjusted earnings per share on the new basis was $7.87. Core performance is expected to contribute about $1.90. Reinstatement of the bonus and reversal of the temporary cost actions, together, will be a headwind of about $1.15. Currency forecasts project a weaker US dollar, compared to fiscal 2020, which should contribute about $0.10 to EPS. The higher tax rate is expected to be about a $0.15 headwind. Acquisitions made during fiscal 2020, and so far this year, are expected to add about $0.10. As mentioned, at the midpoint of our guidance range, adjusted earnings per share is $8.65. Our capital deployment plans for fiscal 2021 include dividends of about $500 million. As a reminder, we announced a 5% dividend increase last week. Cost actions are expected to offset the significant headwind of reinstating incentive compensation and reversing temporary cost actions, and we expect about 10% adjusted earnings per share growth and continued strong free cash flow conversion.

ARR is expected to grow double digits in fiscal '21, after showing over 6% growth in fiscal 20. As I mentioned earlier, Adjusted earnings per share of $1.87 was better-than-expected, mainly as a result of better organic sales, productivity, and a slightly lower tax rate. During the fourth quarter, we paid off the $400 million term loan that we executed earlier in the year, and our net debt to EBITDA ratio at September 30 was 1.0. We expect organic sales growth to be in the range of 3.5% to 6.5% and about 5% at the mid-point of our range. Our adjusted earnings per share guidance range on the new basis is $8.45 to $8.85.

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Last December, we announced a milestone of 100,000 DaVita patients who have received transplant since the year 2000. New COVID infections among our patients continue to drop significantly through the last week of June down more than 90% from the peak in early January. As of last week on a rolling seven day average basis new infection, they're still down more than 90% from the peak. As a result, we delivered 6% year-over-year growth in adjusted operating income and 35% year-over-year growth in our adjusted earnings per share. We are preparing to partner with nephrologists and up to 12 markets beginning in January of next year to participate in CKCC voluntary program. With our special needs plan we have been able to lower mortality by 23% relative to other patients within the same-center and county. As of today, approximately 10% of our US dialysis patients are in value-based care arrangements in which Tervita is responsible for managing the total cost of care. This represents almost $2 billion of annual medical cost under management. We expect to incur a net operating loss of $120 million in 2021 in our US ancillary segment this outcome is consistent with the OII headwinds from ITC growth, we called out at the beginning of the year and is of course included in our full year guidance. The doubling of the business next year could result and an incremental operating loss in our ancillary segment of $50 million in 2022. Currently we serve approximately 200,000 dialysis patients across the country, we utilize over $12 billion in health services outside of the dialysis facility, including the cost of hospitalization, our patient procedures and physician services. For the quarter, operating income was $490 million and earnings per share were $2.64. Our Q2 results include a net COVID headwind of approximately $35 million similar to what we saw in Q1. In Q2 treatments per day increased by 0.4% compared to Q1. Excess mortality declined significantly in Q2 from approximately 3,000 in Q1 to fewer than 500 in Q2. Our US dialysis revenue per treatment grew sequentially by almost $6 this quarter, primarily due to normal seasonal improvements from patients meeting their co-insurance and deductible obligations. During the second quarter, we generated a gain of approximately $9 million on one of our DaVita Venture Group investments which hit the other income line on our P&L. The value of this investment at quarter end was $23 million going forward market-to-market every quarter. Adjusted earnings per share of $8.80 to $9.40. Adjusted operating income of $1.8 billion to $1.875 billion and free cash flow of $1 billion to $1.2 billion. Also we now expect our 2021 effective tax rate on income attributable to DaVita to be between 24% and 26% lower than the 26% to 28% range that we had communicated at the beginning of the year. I'll call out two notable potential headwind during the second half of the year. As a result, we are increasing the middle of the range of COVID impact for the full year to $170 million from $150 million. That implies a $30 million headwind from COVID in the second half of the year compared to the first half of the year. Second, we expect to experience losses in our US ancillary segment of approximately $70 million in the second half of the year compared to $50 million in the first half of the year.

For the quarter, operating income was $490 million and earnings per share were $2.64. Adjusted earnings per share of $8.80 to $9.40. I'll call out two notable potential headwind during the second half of the year.

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economy grow 5.7% in real terms in 2021, marking the best annual growth in nearly 40 years. Meanwhile, the labor market has seen a rapid recovery as employers added 6.4 million jobs last year and the unemployment rate fell to 3.9%. Stimulus measures fueled this rapid recovery, which has also spurred inflation to generational highs as seen in December when the consumer price index reached 7% year over year. Front-end rate markets are pricing roughly 25 basis point rate hikes this year beginning in March, up from just two -- one quarter ago. The Fed has also begun to discuss shrinking its balance sheet, and we expect the Fed will let assets run off at a pace faster than the prior taper of $50 billion per month. In anticipation of wider spreads, we managed the portfolio to decrease leverage and optimize our asset allocation with total assets decreasing by approximately $5 billion to $89 billion in the quarter. As a result, economic leverage declined slightly from 5.8 times to 5.7 times. Now, we were certainly not immune to the spread volatility as we experienced an economic return of negative 2.4% however, we generated earnings available for distribution of $0.28, unchanged from the prior quarter and exceeding our dividend by $0.06 per share. With respect to capital allocation, in line with recent quarters, we increased the allocation to our credit businesses by approximately 200 basis points to 32% in the fourth quarter as prospective returns continued to favor credit. Looking back on the full year, our credit allocation increased approximately 10 percentage points from December 2020, even with the successful sale of our commercial real estate business, which underscores the favorable fundamentals and strong execution from our resi credit and middle market lending businesses. First, our MSR business had a solid year with assets increasing over $500 million throughout 2021 to $645 million. And with over $200 million of MSR commitments already through the end of January, we're continuing to see progress toward fully scaling the platform and we expect to see increased market activity given diminished originator profitability. Our residential credit platform, which grew nearly 90% last year, remains diversified with the ability to deploy capital efficiently in either whole loans or securitized markets. We've also benefited from new bulk partnerships established outside of our correspondent channel and altogether, these efforts helped drive the group's record $4.5 billion in whole loan purchases last year, which exceeded the amount of originations in both the prior two years combined. Further, Onslow Bay remains a programmatic issuer of securitizations, pricing 13 whole loan transactions totaling $5.3 billion since the beginning of 2021 with OBX being the fourth largest nonbank issuer of prime jumbo and expanded prime MBS over the past two years. First, we have thoughtfully reduced our economic leverage to one and a half turns since the onset of COVID to 5.7 times, the lowest it's been since 2014. Our defensive leverage profile is further supported by our low capital structure leverage with 88% of our equity in common stock and minimal asset level structural leverage as highly liquid agency MBS make up the vast majority of our portfolio. Second, we have substantial liquidity with $9.3 billion of unencumbered assets up $500 million year over year. And finally, we are conservatively hedged to mitigate interest rate risk with a year-end hedge ratio of 95%, and we expect to remain close to fully hedged over the near term. I've worked with Ilker at three different institutions for the better part of the past 20 years, and I cannot think of an individual more knowledgeable about mortgages and prepayments or better suited to help us drive success for Annaly into the future. In fourth quarter, we reduced our agency holdings by roughly $5 billion, primarily through TBA sales, bringing the total 2021 portfolio reduction to $10 billion. In lower coupons, we continue to favor TBAs, which maximize our liquidity profile and despite the initiation of the taper, dollar roll financing remains special in the context of 30 to 40 basis points. In terms of our interest rate exposure, we adjusted hedges toward the front end of the yield curve by selling additional short-term treasury futures, which increased our hedge ratio to 95% of our liabilities. Consistent with these trends, our portfolio paid 21.4 CPR in Q4, 7% slower than in Q3, and we expect a further deterioration of approximately 15% in Q1 of 2022. With respect to our MSR platform, our fourth quarter purchases brought the portfolio to nearly $650 million in market value net of runoff. Additionally, as David mentioned, with over $200 million in bulk MSR commitments in January and the recent price appreciation due to the sell-off in rates, our current MSR portfolio has reached nearly $1 billion in market value. The economic value of residential credit portfolio grew by approximately $330 million quarter over quarter, primarily through the addition of $1.7 billion of whole loans, the retention of assets manufactured through our OBX securitization platform and the deployment of capital into short spread duration securities. The residential credit portfolio ended Q4 with $4.6 billion of assets representing $3.1 billion of the firm's capital. Lastly, our middle market lending portfolio had an active quarter closing nine deals totaling over $325 million in commitments, while five borrowers repaid. Middle market lending ended the fourth quarter with nearly $2 billion in assets, up 4% from the prior quarter. The portfolio's strong credit profile is demonstrated through a 10% increase in underlying borrowers' average EBITDA since closing and a nearly 30% reduction in system reserves throughout the year with no loans on non-accruals. Notwithstanding this more difficult economic return environment, we have again delivered solid earnings and ample coverage, approximately 125% of our dividend. Our book value per share was $7.97 for Q4, and we generated earnings available for distribution per share of $0.28. Book value decreased $0.42 for the quarter primarily due to lower other comprehensive income of $680 million or $0.47 per share on higher rates and spread widening and the related declining valuations on our agency positions, as well as the common and preferred dividend declarations of $349 million or $0.24 per share, partially offset by GAAP net income of $418 million or $0.29 per share. Our multifaceted hedging strategy continued to support the book value, albeit in a more muted fashion this quarter due to the aforementioned spread widening with swaps, futures and MSR valuations contributing $0.16 per share to the book value during the quarter. Combining our book value performance with our fourth quarter dividend of $0.22, our quarterly and tangible economic returns were negative 2.4%. Subsequent to quarter end, as Ilker and David both mentioned earlier, we continue to see significant spread widening impacting the valuation of our assets, which is partially offset by the benefit of our MSR investments and rate hedging strategy through January with our book value ending the month down 3% compared to December 31, 2021. Diving deeper into the GAAP results, we generated GAAP net income for Q4 of $418 million or $0.27 per common share, net of preferred dividends, down from GAAP net income of $522 million or $0.34 per common share in the prior quarter. The most significant drivers of lower GAAP income for the quarter is the unrealized losses on investments measured at fair value through earnings of $15 million in comparison to unrealized gains of $91 million in Q3 and realized losses on disposal of investments in the quarter of $25 million as compared to gains of $12 million in Q3 along with the previously referenced lower net gains on the swaps portfolio by $42 million. As I mentioned earlier, the portfolio continued to generate strong income with EAD per share of $0.28, consistent with Q3 earnings, and we continue to generate strong earnings while prudently managing lower leverage resulting in an EAD ROE per unit of leverage of 2.3%. Average yields remained flat at 2.63% compared to the prior quarter. However, dollar roll income contributed to EAD in Q4 reaching another record level at $118.5 million. The portfolio generated 203 basis points of NIM ex PAA, down one basis point from Q3 driven by the improved TBA dollar roll income, offset by higher swap expense on a lower average receive rate. As I noted in the prior quarter, we have benefited from our ample liquidity position and the robust financing market during 2021 with the previous quarter marking nine consecutive quarters of reduced economic cost of funds for the company and our year-to-date economic cost of funds being 79 basis points, down 55 basis points in comparison to the prior year. This upward trend along with higher swap rates impacted our overall cost of funds for the quarter rising by nine basis points to 75 basis points in Q4, and our average REPO rate for the quarter was 16 basis points compared to 15 basis points in the prior quarter. Efficiency ratios improved by seven basis points in the fourth quarter with opex to equity of 1.21%. And for the entire year, the opex to equity ratio was 1.35% compared to full year 2020 of 1.55% as we realize the benefits we projected from the reduction in compensation and other expenses following the disposition of our acreage business and the internalization of our management. As a result of our continued build-out of our MSR and residential credit businesses, which are more labor-intensive and additional vesting of stock compensation issued in prior years, we anticipate that the range of opex to equity for 2022 and long range will be 1.4% to 1.55%. And to wrap things up, Annaly maintained an abundant liquidity profile with $9.3 billion of unencumbered assets down modestly from the prior quarter at $9.8 billion, including cash and unencumbered Agency MBS of $5.2 billion.

Diving deeper into the GAAP results, we generated GAAP net income for Q4 of $418 million or $0.27 per common share, net of preferred dividends, down from GAAP net income of $522 million or $0.34 per common share in the prior quarter.

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Our continued focus on productivity and cost resulted in a companywide decremental of 19% in the quarter. The $45 million cost plan for 2020 that we communicated in May remains on track. With 13 new product launches in Q3, we remain on track to deliver on our commitment to launching 45 new products this year. Please turn to Page 4. We booked orders of $167 million, down 19% organically due to the impact of COVID-19 on our Industrial and Commercial Aerospace businesses. Sales came in as expected at $187 million flat to the prior quarter and down 15% organically. Adjusted operating income was slightly more than $17 million, representing a margin of 9.3%, up 80-basis-points from the prior quarter, and down 130-basis-points from last year driven by lower sales volume in industrial. The Companywide decremental was 19% in the quarter, which is significantly lower than our contribution margin driven by productivity, aggressive cost actions, and price. In Q3, Industrial segment orders were down 23% organically due to the impact of COVID-19 on most end markets. Excluding our Downstream business, orders an industrial were down 15% organically. As expected, the industrial segment had sales of $124 million flat to the prior quarter, and down 18% organically. The EOM margin was 7.9% down 210-basis-points sequentially, and a decline of 460-basis-points versus last year. In addition, one of our facilities in North America experienced a COVID-19 outbreak which forced us to idle the factory for most of August, and impacted our EOM by approximately $1.5 million in the quarter. Adjusted for the $1.5 million of COVID impact, the industrial margin would have been 9.1%, and the decremental would be approximately 30%. In Q3, in our Aerospace & Defense segment, we delivered orders of $59 million, down 9% organically. Sales for the Aerospace & Defense were $62 million flat to the prior quarter, and down 9% organically. The Aerospace & Defense operating margin was 23.7%, up 360-basis-points versus the prior year, and 260-basis-points sequentially. With $6 million lower revenue, the Aerospace & Defense team delivered $1 million of incremental operating income, driven by price, productivity, and other aggressive cost actions. For Q3, the effective tax rate was approximately 13% lower than the 14.8% in the prior quarter, due to a change in the statutory tax rate where CIRCOR operates. For Q4, the tax rate is projected to be approximately 15%. The Company took a non-cash charge of approximately $42 million to create a valuation allowance against its remaining U.S. deferred tax assets. Looking at special items and restructuring charges, we recorded a total pre-tax charge of $13 million in the quarter. The acquisition-related amortization and depreciation were a charge of $12 million with the remaining million dollars being associated with restructuring activities in the quarter. Interest expense for the quarter was $8 million, down $4 million, compared to last year. Corporate costs in the quarter were $7.2 million, in line with previous guidance provided. At the end of the third quarter, our net debt was at $468 million. This represents a year-over-year debt reduction of $120 million dollars. In Q3, we paid $52 million, and the revolver further reducing our debt balance and interest expense. Please turn to Page 9. For Q3, orders were down 7% on a sequential basis with both for market and aftermarket orders coming in slightly lower than Q2. For industrial revenue in Q4, we expect a moderate improvement sequentially with growth ranging from flat to up 10%. While year-over-year revenue is expected to be down between 5% and 15%. Defense revenue should see sequential growth of 20% to 25%, and year-over-year growth of 15% to 20%. Commercial revenue is expected to grow sequentially between 15% and 25%, but we'll be down year over year between 40% and 45%. The outlook for price remains strong with a net 4% increase for Defense and Commercial Aerospace, driven by improved price management. The $45 million cost plan for 2020 is on track. Our focus on productivity and cost resulted in a companywide decremental of 19% in the quarter, and the CIRCOR operating system is delivering improved operating performance across most metrics. We remain on track to deliver on our commitment to launching a record of 45 new products this year.

The $45 million cost plan for 2020 that we communicated in May remains on track. With 13 new product launches in Q3, we remain on track to deliver on our commitment to launching 45 new products this year. Sales came in as expected at $187 million flat to the prior quarter and down 15% organically. Commercial revenue is expected to grow sequentially between 15% and 25%, but we'll be down year over year between 40% and 45%. The $45 million cost plan for 2020 is on track. We remain on track to deliver on our commitment to launching a record of 45 new products this year.

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Though this is our second Analyst Day in less than 12 months, we feel that it is warranted as we are now well into our strategic transition and we want to use that forum to update our investors on our longer-term business plan, earnings capacity, financial metrics and the net zero emissions target that we will be sharing with you. We announced an updated five-year strategy that prioritizes investment in our regulated businesses and boosted our planned capital spending by about 25% to $16 billion. We instituted a 10% utility rate base CAGR, well above our peer group average of 8%. That rate base growth then supported an increased long-term utility earnings per share target growth rate of 6% to 8%, which is also above the consensus peer average of 6%. To efficiently fund our growth, while repairing our balance sheet, we announced the sale of our Arkansas and Oklahoma gas LDCs at a landmark earnings multiple of 2.5 times rate base. And we announced a commitment to a 1% to 2% annual reduction in O&M over the five years to keep our customer rate growth manageable. Today, we are raising our 2021 Utility earnings per share guidance range to $1.25 to $1.27. This 8% growth projection in '21 puts us at the high end of our 6% to 8% Utility earnings per share annual growth target. And as a reminder, this increase in guidance is after the dilution impact of the 18% increase in our share count that we experienced in 2020. And as you would expect, we are also reaffirming both our long-term 6% to 8% Utility earnings per share annual growth target and 10% rate base compound annual growth rate target. This 10% rate base growth also exceeds the average 8% rate base growth of our peer group. For the second quarter of 2021, we reported strong results, including $0.28 of Utility earnings per share compared to $0.18 for the second quarter of 2020. The bottom line for me is to focus on the reality that our Utility earnings per share is expected to grow 8% this year over last year, and then target 6% to 8% growth from there. We are already on track to save over $40 million in total O&M costs this year alone, while maintaining our focus on safety. This is almost 3% of our annual O&M cost. We are still absolutely committed to our continuous improvement cost management efforts in our target of 1% to 2% annual reductions in O&M. In fact, as a result of our excellent 2021 results to date, we were in the fortunate place to be able to already make a management decision and begin pulling recurring O&M work forward from 2022 into the last six months of this year and still be able to hit the 8% Utility earnings per share growth for this year. Overall, we saw about 2% customer growth for electric and 1% for natural gas for the first six months of the year when compared to the prior year. The growth is supported by the highest level of new home starts in Houston since 2005. We have invested approximately $1.5 billion for the first six months of this year and are still on track to invest approximately $3.4 billion for the full year 2021. More importantly, we now have better line of sight to additional capital investment opportunities beyond the five-year $16 billion investment plan we outlined on our Analyst Day. Based on initial analysis, these legislative changes provide support to increase our five-year capital investment plan by at least $500 million. Now this is on top of the $1 billion in reserve capital investment opportunities we previously identified during our last Analyst Day, but were not incorporated into that plan. Just as important, we will have the ability to efficiently fund $1.1 billion of these incremental opportunities. This is primarily due to the incremental proceeds expected from the sale of our gas LDCs and the execution of tax mitigation strategies, which Jason will discuss shortly as well as additional debt, assuming a roughly 50-50 cap structure. And finally, to reiterate what we said when we announced the news of these two transactions in our last quarterly call, completing these transactions will not change our industry-leading 6% to 8% Utility earnings per share growth target or 10% rate base compound annual growth rate target. With the approval from the Minnesota Public Utility Commission, a utility can invest up to 1.75% of our gross operating revenue in the state annually. This opportunity increases up to 4% of gross operating revenues by 2033. On a GAAP earnings per share basis, we reported $0.37 for the second quarter of 2021 compared to $0.11 for the second quarter of 2020. Looking at slide four, we reported $0.36 of non-GAAP earnings per share for the second quarter of 2021 compared to $0.21 for the second quarter of 2020. Our Utility earnings per share was $0.28 for the second quarter of 2021, while Midstream investments contributed another $0.08. This included favorable impacts for the second quarter of 2021, inclusive of $0.05 attributable to deferred state tax benefits. Of this $0.05 in total, $0.03 of the benefit was related to legislation in Louisiana that eliminated the NOL carryforward limitation period. The remaining $0.02 of benefit was due to Oklahoma's revision of the corporate tax rate, which is a favorable driver in our midstream segment. Our 2020 Utility earnings per share included a negative $0.06 impact due to COVID. Beyond those onetime items, other notable drivers for the second quarter of 2021 include customer growth and rate recovery, which contributed about $0.04 of favorable impacts as well as miscellaneous revenue contributing another $0.02 of favorable impacts. These were partially offset by a negative $0.02 impact from the share dilution resulting from the May 2020 issuance and a negative $0.03 for unfavorable O&M variance. The bottom line is we expect to grow our Utility earnings per share 8% this year and target 6% to 8% thereafter. The key takeaway is we are delivering on our planned efficiencies of over $40 million in cost reductions for the year, and are now beginning to accelerate O&M work from 2022. Our disciplined execution and tailwinds led us to raise our Utility earnings per share guidance range to $1.25 to $1.27 per share for the full year, which is at the high end of our 6% to 8% annual Utility earnings per share growth target. Beyond 2021, I want to reiterate, we are focused on growing Utility earnings per share at 6% to 8% each and every year. Based on our first look, we have confidence that new Texas legislation will support at least $500 million of incremental capital investment opportunities over just our current five-year plan. Regarding the previously identified incremental $1 billion, we may be able to deploy above our 2020 Analyst Day plan of $16 billion. As we reported last quarter, and Dave reinforced, we will receive an incremental $300 million of proceeds above our original plan once the gas LDC sale closes. While we are still refining this study, we have confidence that the benefit will generate at least $1 billion in incremental tax deductions, resulting in at least $250 million in additional cash to us and likely more. The combination of these improved sources of funding, coupled with debt, that will be authorized under our regulatory capital structure, supports incremental investments of at least $1.1 billion. We closed our $1.7 billion debt issuance in May, which was comprised of $700 million of three-year floating rate notes, $500 million of five-year fixed rate notes at 1.45% and $500 million of 10-year fixed rate notes at 2.65%. The proceeds was to refinance $1.2 billion of near-term maturities at the parent as well as to pay down commercial paper. Our current liquidity remains strong at $2.2 billion, including available borrowings under our short-term credit facilities and unrestricted cash. Our long-term FFO to debt objective is between 14% and 15%, aligning with the Moody's methodology and is consistent with the expectations of the rating agencies. With important capital investment to deliver needed improvements for our customers, our rate base growth target at 10% substantially outstrips the peer average at about 8%. Our resulting annual Utility earnings per share growth target of 6% to 8% is strong. Customer growth of 2% is just the level our peers would celebrate. Coupled with O&M reduction of 1% to 2% a year, this creates a lot of headroom for needed capital investment. Our five-year plan includes 1% to 2% cost reduction every year. Our plan for this year is for a fast start, down more than $40 million or 3%. The cost reductions, favorable tax changes, lower financing cost, economic recovery and more allow us to reinvest $20 million for our customers now and possibly more later.

We instituted a 10% utility rate base CAGR, well above our peer group average of 8%. Today, we are raising our 2021 Utility earnings per share guidance range to $1.25 to $1.27. On a GAAP earnings per share basis, we reported $0.37 for the second quarter of 2021 compared to $0.11 for the second quarter of 2020. Looking at slide four, we reported $0.36 of non-GAAP earnings per share for the second quarter of 2021 compared to $0.21 for the second quarter of 2020. Our disciplined execution and tailwinds led us to raise our Utility earnings per share guidance range to $1.25 to $1.27 per share for the full year, which is at the high end of our 6% to 8% annual Utility earnings per share growth target.

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Earnings per share were $0.37, including merger-related expenses of $2 million recorded during the quarter compared with $0.22 in Q2. Total assets at quarter end rose to $12.9 billion. The impact of COVID declined substantially during the quarter and related loan deferral levels to 3.2% of loans as of October 16, as we have seen a significant reduction in the number of consumers and businesses requesting part persistence. Now Tom will go over the loan payment deferrals in more detail, but suffice it to say, we have performed a deep dive analysis of full borrower requests for relief and are pleased that so many have recovered and resumed normal payments with approximately 2/3 of those remaining in deferral currently paying interest. As a result of our combination with SB One, the loan portfolio increased by $1.77 billion, further augmented by net organic growth for the quarter of $218 million on loan originations of $587 million. Regarding the $475 million of PPP loans we held at September 30, like many banks, we anticipated that forgiveness might have started by now. The yield on PPP loans is approximately 2.75%, and we have about $8 million remaining in related deferred fees. Deposits increased $2.46 billion, including $1.76 billion added from the SP One transaction. Included with the SB One deposits were $577 million in CDs, which were adjusted to market rates on acquisition, adding four basis points to our margin this quarter. Core deposits represent 88% of total deposits, and our total cost of deposits was 33 basis points, among the best in our market. Borrowings increased with $201 million coming from SB One, while the cost of borrowings declined during the quarter. And with PFS currently trading at 87% of book value, we see the repurchase of our stock as an effective use of capital and a great return for long-term stockholders. Additionally, our loan portfolio is approximately 57% adjustable rate and has repriced downward, putting further pressure on the margin. As Chris noted, our net income was $27.1 million or $0.37 per diluted share compared with $14.3 million or $0.22 per diluted share for the trailing quarter. Earnings for the current quarter reflect the $15.5 million acquisition date provision for credit losses on nonpurchased credit deteriorated loans acquired from SB One, partially offset by the favorable impact of an improved economic forecast. In addition, costs specific to our COVID response fell to $200,000 from $1 million in the trailing quarter. These improvements were partially offset by merger-related costs that increased to $2 million in the current quarter from $683,000 in the trailing quarter. Core pre-tax preprovision earnings, excluding provisions for credit losses on loans and commitments to extend credit, merger-related charges and COVID response costs were $44.4 million. This compares favorably with $35.9 million in the trailing quarter. Including noninterest-bearing deposits, our total cost of deposits fell to 33 basis points this quarter from 41 basis points in the trailing quarter. Noninterest-bearing deposits averaged $2.21 billion or 25% of total average deposits for the quarter, an increase from $1.85 billion in the trailing quarter, reflecting the SB One acquisition and organic growth. Noninterest-bearing deposits totaled $2.38 billion at September 30, and average borrowing levels increased $43 million and the average cost of borrowed funds decreased 12 basis points versus the trailing quarter to 1.19%. This rate reduction was partially offset by subordinated debentures acquired from SB One that had an average balance of $16.4 million at an average cost of 4.99% for the quarter. Quarter end loan totals increased $2 billion versus the trailing quarter, reflecting $1.8 billion from the SB One acquisition and organic growth in CRE, construction, multifamily and C&I loans, partially offset by net reductions in consumer and residential mortgage loans. Loan originations, excluding line of credit advances totaled $587 million for the quarter. The pipeline at September 30 increased $71 million from the trailing quarter to $1.4 billion. The pipeline rate increased 12 basis points since last quarter to 3.55% at September 30. Our provision for credit losses on loans was $6.4 million for the current quarter compared with $10.9 million in the trailing quarter. This reflects a day one provision of $15.5 million for the acquired non-PCD loans partially offset by the impact of improvements in the economic forecast. Nonperforming assets increased slightly to 42 basis points of total assets from 37 basis points at June 30. Excluding PPP loans, the allowance represented 1.16% of loans compared with 1.17% in the trailing quarter. The allowance for credit losses on loans included $13.6 million recorded as part of the amortized cost of PCD loans acquired from SB One. Loans that have been or expected to be granted COVID-19-related payment deferrals or modifications declined from their peak of $1.31 billion or 16.8% of loans to $311 million or 3.2% of loans. This $311 million of loans includes $48 million added through the SB One acquisition and consists of $27 million that are still in their initial deferral period, $85 million in the second 90-day deferral period and $199 million that have completed their initial deferral periods, but are expected to require ongoing assistance. Included in this total are $92 million of loans secured by hotels with a pre-COVID weighted average LTV of 56%; $44 million of loans secured by retail properties with a pre-COVID weighted average LTV of 56%; $31 million of loans secured by restaurants with a pre-COVID weighted average LTV of 49%; $15 million secured by suburban office space with a pre-COVID weighted average LTV of 66%; and $43 million secured by residential mortgages, with the balance comprised of diverse commercial loans. Noninterest income increased $6.3 million versus the trailing quarter to $21 million, as swap fee income increased $3.2 million. The addition of SB One Insurance Agency contributed $1.7 million for the quarter. And wealth management income increased $870,000 versus the trailing quarter. In addition, deposit ATM and debit card income increased $750,000 for the quarter with the addition of SB One's customer base and the easing of pandemic-related consumer restrictions, partially offset by a decrease in bank loan life insurance benefits. Excluding provisions for credit losses on commitments to extend credit, merger-related charges and COVID-related costs, noninterest expenses were an annualized 1.92% of average assets for the quarter compared with 1.86% in the trailing quarter. These core expenses increased $9.7 million versus the trailing quarter, primarily due to the addition of SB One personnel, operations and facilities. Our effective tax rate increased to 25.5% from 20.6% for the trailing quarter as a result of an improved forecasted taxable income in the current quarter. We are currently projecting an effective tax rate of approximately 24% for the balance of 2020.

Earnings per share were $0.37, including merger-related expenses of $2 million recorded during the quarter compared with $0.22 in Q2. As Chris noted, our net income was $27.1 million or $0.37 per diluted share compared with $14.3 million or $0.22 per diluted share for the trailing quarter.

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Like us, Tech Data has established a reputation for excellence and we are thrilled to partner with its 14,000 plus talented colleagues. We will have premier, best-in-class, end-to-end offerings through a broad diversified portfolio of more than 200,000 products and solutions. Together, SYNNEX and Tech Data will have a global footprint that serves more than 100 countries across the Americas, Europe and Asia Pacific. This transaction is valued at $7.2 billion, including net debt; and at close, SYNNEX will issue 44 million shares. Pro forma ownership will be 55% SYNNEX shareholders and 45% Tech Data shareholders. From a financial perspective, the combined company will be on very solid footing with pro forma revenue of $57 billion, healthy EPS, EBITDA and cash flow generation. We expect the transaction to be accretive to our non-GAAP diluted earnings per share by more than 25% in year one. From a cost perspective, we expect to realize $100 million of net synergies in year one, and $200 million in year two. It will consist of a $1.5 billion term loan A and $2.5 billion of unsecured bonds at varying maturities, bolstered by a $3.5 billion revolving credit facility, which we expect to be undrawn at close. The expected cash balance at close will be approximately $1 billion. The expected leverage ratio of approximately 2.7 times at transaction close is expected to decline to approximately 2 times within 12 months. With the combined entity generating LTM pro forma adjusted EBITDA of approximately $1.5 billion, this will provide us with ample ability to de-lever quickly while also remaining focused on optimizing the core and driving organic growth. Total revenue for Q1 was $4.9 billion, up 21% year-over-year. Gross profit totaled $305 million, up 19% or $49 million compared to the prior year; and gross margin was 6.2%, consistent with the prior year. Total adjusted SG&A expense was $149 million or 3% of revenue, up $9 million compared to the year-ago quarter and primarily due to COVID-19 related expenses. We continue to expect incremental quarterly costs at a minimum of $5 million in 2021, and we did a good job of scaling SG&A to the growth of the business. Non-GAAP operating income was $156 million, up $40 million or 35% versus the prior year; and non-GAAP operating margin was 3.2%, up 33 basis points over the prior year. Q1 interest expense and finance charges were approximately $23 million and the effective tax rate was 25%. Total non-GAAP income from continuing operations was $99 million, up $25 million or 34% over the prior year; and non-GAAP diluted earnings per share from continuing operations was $1.89, up from $1.42 in the prior year. Total debt of approximately $1.6 billion and net debt was less than $200 million. Accounts receivable totaled $2.4 billion and inventories totaled $2.6 billion as of the end of Q1. Our cash conversion cycle for the first quarter was 32 days, 25 days lower than the prior year and the decrease was driven by DSO improvements and better inventory turns. Cash generated from operations was approximately $25 million in the quarter; and including our cash and credit facilities, we had approximately $2.8 billion of available liquidity. We are pleased to report that our Board of Directors have approved a quarterly cash dividend of $0.20 per common share for the quarter. We expect revenue in the range of $4.7 billion to $5 billion. Non-GAAP net income is expected to be in the range of $94.9 million to $105 million and non-GAAP diluted earnings per share is expected to be in the range of a $1.80 to $2.00 per diluted share based on weighted average shares outstanding of approximately 51.8 million. Our non-GAAP net income and non-GAAP diluted earnings per share guidance excludes the after-tax cost of $7.3 million or $0.14 per share related to the amortization of intangibles and $4.8 million or $0.09 per share related to share-based compensation. We expect full year fiscal 2021 non-GAAP diluted earnings per share of approximately $8 per share.

Total non-GAAP income from continuing operations was $99 million, up $25 million or 34% over the prior year; and non-GAAP diluted earnings per share from continuing operations was $1.89, up from $1.42 in the prior year. We expect revenue in the range of $4.7 billion to $5 billion. Non-GAAP net income is expected to be in the range of $94.9 million to $105 million and non-GAAP diluted earnings per share is expected to be in the range of a $1.80 to $2.00 per diluted share based on weighted average shares outstanding of approximately 51.8 million.

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Q3 net sales were $202 million. Gross margin was 37.4%, earnings were $0.37 per share and adjusted earnings were $1.45 per share. The higher gross margin and effective management of expenditures and working capital resulted in strong free cash flow of $48 million. The long-term outlook for the EV/HEV market continues to be robust with industry experts projecting a compound annual growth rate of approximately 35% over the next five years. Over the next five years, this market is expected to grow at a CAGR of between 15% and 20%. Third-party estimates point to modest growth in the total smartphone market over the next five years with a CAGR of about 4%. However, the 5G portion of that market is expected to grow at a much faster 35% CAGR. The higher content ranges from 10% to 15% in mid-range devices up to 30% more content for certain premium products. Battery compression pads for plug-in HEVs and EVs are the largest opportunity in this market, where content can be greater than $30 per vehicle. As a reference point, the contact opportunity for our substrates ranges from $5 in a 48-volt mild hybrid to around $40 in a full electric vehicle. Some of the guiding principles of our system include establishing a proactive safety culture with 100% employee engagement, driving operational excellence through a lean manufacturing culture that embraces continuous improvement, and optimizing our global manufacturing footprint to maximize capital utilization while best serving our global customer base. We delivered GAAP earnings per share of $0.37 per fully diluted share which was above the midpoint of our guidance range. In the third quarter, we recorded restructuring and impairment charges of $9.4 million related to manufacturing footprint optimization plans involving certain Europe and Asia locations mentioned earlier. Additional restructuring charges of between $2.5 million and $4.5 million are expected in the fourth quarter. In addition, consistent with our communication last quarter, we incurred $11.7 million of expense in Q3 from the acceleration of our amortization of intangible assets from the DSP acquisition. Neither the restructuring charges nor the accelerated amortization were included in our adjusted fully diluted earnings per share for Q3 of $1.45. Our Q3 revenues of $201.9 million increased $10.7 million or 6% compared to the second quarter of 2020. EMS revenues increased 21% to $86.4 million. PES revenues increased 6% to $47.9 million while ACS revenues decreased 10% to $63.7 million sequentially. Currency exchange rates favorably impacted third quarter revenues by approximately 1% compared to the second quarter. The sequential EMS revenue increase resulted primarily from significantly higher portable electronic application revenues which grew 72% sequentially and accounted for over 35% of the segment revenues. In addition, revenues from EV, HEV battery pad applications grew 77% sequentially as the adoption of our materials into new design wins with battery makers for significant OEMs continue to demonstrate the application advantage of our PORON product. Revenues for general industrial applications, which comprise over 35% of the segment revenues, declined 2% sequentially. The increase in the PES revenues compared to Q2 was driven by a 20% increase in EV/HEV application revenues, which account for just under 30% of the segment revenues. In addition, traditional automotive revenues for x-by-wire applications grew 60% sequentially and-resulting from the automotive recovery that commenced in Q2. The industrial variable frequency drive business, which accounts for close to 25% of the segment revenues, declined 6% compared to Q2, an indication of the continued weakness in the general industrial market. ACS revenues decreased sequentially, primarily due to a 42% decline in our wireless infrastructure revenues-which comprise approximately 23% of the segment revenues. Aerospace and defense revenues, which now account for over 40% of the segment total, grew 11% sequentially from existing and new programs in the defense market. ADAS revenues grew 42% sequentially as the automotive market commenced the recovery in the second quarter and our customers worked through their inventories early in the third quarter. Our gross margin for the third quarter was $75.5 million or 37.4% of revenues, an increase of 80 basis points over the second quarter. The gross margin for Q3 2020 was 180 basis points higher than Q3 2019 gross margin of 35.6% on approximately $20 million less revenues. At the same revenue level and the same product profile as Q3 2019, our Q3 2020 gross margin would have approximated 39%. Also on slide 11, we detail the changes to adjusted net income for Q3 of $27.1 million compared to adjusted net income for Q2 of $21.1 million. The adjusted operating income for Q3 of $35 million and 17.3% of revenues was 190 basis points higher than Q2's adjusted operating income. Adjusted operating expenses for Q3 of $40.5 million or 20.1% of revenues were approximately flat compared to Q2's expenses demonstrating good spending discipline on increasing revenues. We terminated our interest rate swap agreement late in the third quarter, which resulted in recording additional interest expense of $2.4 million in Q3. Rogers effective tax rate for the third quarter decreased to 8.1% as a result of reducing evaluation allowance on R&D credits in the quarter. -We now expect our effective tax rate for 2020 will be approximately 23% to 24% with our long-term rate projected to be in the range of 20% to 22%. In the third quarter, the company generated strong free cash flow of $47.9 million and ended the quarter with a cash position of $186.1 million. In the quarter, we generated $58.7 million from operating activities, including a $22.2 million reduction in working capital and repaid $163 million on our credit facility. We ended the third quarter with an outstanding balance on our credit facility of $60 millionand a net cash position defined as cash and equivalents in excess of the amount owed under our credit facility of $126.1 million. In Q3, the company spent $10.8 million on capital expenditures. We spent $28.9 million year-to-date through September. And for 2020, expect to be at the low end of our communicated $40 million to $45 million range. As a result, Q4 revenues are estimated to be in the range of $195 million to $210 million. Therefore, we guide gross margin in the range of 37% to 38%. We guide GAAP Q4 earnings in the range of $0.50 to $0.70 per fully diluted share. On an adjusted basis, we guide fully diluted earnings in the range of $1.30 to $1.50 per share for the fourth quarter.

Gross margin was 37.4%, earnings were $0.37 per share and adjusted earnings were $1.45 per share. We delivered GAAP earnings per share of $0.37 per fully diluted share which was above the midpoint of our guidance range. Neither the restructuring charges nor the accelerated amortization were included in our adjusted fully diluted earnings per share for Q3 of $1.45. Our Q3 revenues of $201.9 million increased $10.7 million or 6% compared to the second quarter of 2020. As a result, Q4 revenues are estimated to be in the range of $195 million to $210 million. We guide GAAP Q4 earnings in the range of $0.50 to $0.70 per fully diluted share. On an adjusted basis, we guide fully diluted earnings in the range of $1.30 to $1.50 per share for the fourth quarter.

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In addition, Cousins gave back to our communities as we committed $900,000 from our nonprofit foundation to support organizations focused on COVID-19 relief and important social justice causes. On the operations front, the teams delivered $0.68 per share in FFO with second generation cash rents of 8.9%. We leased 387,000 square feet and collected 99% of total rent, including 99% from our office customers. In addition, we took advantage of economic uncertainty and made several investments in the South End of Charlotte, including our acquisition of the RailYard's for $201 million and two fabulous land sites, totaling 5.6 acres in aggregate. Second, we have a terrific development pipeline of $449 million, that is 77% pre-leased and attractive land sites where we can build an additional 5 million square feet. Our balance sheet is strong with net debt to EBITDA of 4.8 times and G&A as a percentage of total assets at 0.3%, both among the best in the entire office sector. In fact, 2020 with a record year for corporate relocations and expansions in Austin with 39 companies that announced plans to add nearly 9,900 jobs in the Greater Austin area. And in Atlanta just yesterday, Microsoft confirmed, it had purchased 90 acres in West Midtown with plans to build a major employment hub, which will include thousands of new office-using jobs. 2021 is a transition year for Cousins from an earnings perspective. Our financial results will reflect several known move-outs from recent value add acquisitions like 3350 Peachtree, 1200 Peachtree in Atlanta, as well as the Bank of America Plaza building in Charlotte, which is now known as One South at the Plaza. First, an update on customer utilization within our 20 million square foot operating portfolio. Utilization continues to track at an average of approximately 20% across the company, squarely in line with our reported levels last October. We collected 98.8% of rent from all customers and 99.2% of rent from office customers in the fourth quarter. In the fourth quarter, rent deferral agreements represented just 0.3% of annualized contractual rents. And we're only 1.5% of contractual rents for all 2020. Our total portfolio into the fourth quarter at 90.8% leased with our same property portfolio at a solid 92.7% leased. Total portfolio weighted average occupancy held steady this quarter at 90.4% and the same-property portfolio moved up to 92.4%. While only 8.5% of our annual contractual rents expire in 2021, our operating portfolio includes value-add investments with known 2021 pending vacancy, such as 1200 Peachtree and 3350 Peachtree in Atlanta and One South at the Plaza in Charlotte. The final 169,000 square feet of Bank of America space at One South expired at the end of 2020, representing about 90 basis points of portfolio occupancy. On top of that, we have only 8% or less of our annual contractual rents expiring in each year through 2024. In all, we executed over 387,000 square feet of leases during the fourth quarter and over 1.4 million square feet of leasing for the year. After quarter end, we also signed a new lease at our 100 Mill new development in Tempe. Our average lease term this quarter was a healthy 6.6 years, and it was seven years for the full year. Our average lease term was fairly consistent between new and renewal activity and was not meaningfully different than our three-year pre-COVID run rate of 7.5 years. Lease concessions defined as free rent and tenant improvements were $4.15 per square foot per year this quarter, below our rolling eight-quarter average. Rent growth within our portfolio has remained strong, especially for operating in pandemic, with second generation net rents increasing 8.9% on a cash basis for the quarter and 13.1% on a cash basis for the year. With solid rent growth and lower than normal concessions in this past quarter, our average net effective rents came in at $25.19 per square foot. For CoStar, Uptown Charlotte and Tempe still have notably low Class A vacancy rates of 7.7% and 6.9% respectively. For JLL, there are currently over 5.4 million square feet of tenant requirements in the market in Austin. 40% of these requirements are focused on the CBD and Northwest domain. Also for JLL, employees in Dallas have returned to the office faster than the rest of the country at almost 40% in December. This compares to only 10% to 15% in the coastal markets. According to a recent PwC study, 70% of executives expect their real estate footprint to stay the same or grow over the next three years due to the rising headcounts and social -- due to rising head counts and social distancing. FFO was $0.68 per share for the quarter and $2.78 per share for all of 2020. Same-property cash NOI growth remained positive during 2020 at 0.7%, and it was up a very solid 4.5%, when adjusting for COVID related rent deferrals and parking losses. Most impressive as all as Richard said earlier, was that we increased cash rents on expiring leases by over 13% during 2020. Focusing on our same-property performance, cash net operating income during the fourth quarter declined 3.3% compared to last year, driven by a 4% decline in revenues and a 5.2% decline in expenses. Adjusting for COVID related rent deferrals and parking losses, same-property cash NOI actually increased 1.7% during the fourth quarter. For all of 2020, same-property operating expenses were down 6%, compared to 2019, and excluding property taxes, expenses were down almost 10%. Turning to our development efforts, one asset Domain 12 in Austin was moved off our development pipeline schedule during the fourth quarter, as economic occupancy at that property exceeded 90%. The remaining development pipeline represents a total Cousins investment of $450 million, across 1.5 million square feet in five assets. Our remaining funding commitment for this pipeline is approximately $125 million, which is more than covered by our existing liquidity and future retained earnings. On the transaction front, we closed three acquisitions during the fourth quarter, the purchase of The RailYard in Charlotte for $201 million, as well as the purchase of two land parcels in Charlotte for $47 million. In addition, we sold our interest in two small non-core land parcels that the company acquired over 15 years ago, when the strategy was decidedly different than it is today, incurring a loss of approximately $750,000. This impairment reflects approximately a 6% decline in value for the asset, which is not surprising considering the disruption to energy markets, since we closed the TIER transaction 1.5 years ago. Looking forward, we're providing initial 2021 FFO guidance of between $2.76 and $2.86 per share. Please also note that our earnings guidance assumes physical occupancy will remain significantly below normalized levels until the second half of 2021.

On the operations front, the teams delivered $0.68 per share in FFO with second generation cash rents of 8.9%. 2021 is a transition year for Cousins from an earnings perspective. We collected 98.8% of rent from all customers and 99.2% of rent from office customers in the fourth quarter. FFO was $0.68 per share for the quarter and $2.78 per share for all of 2020. Looking forward, we're providing initial 2021 FFO guidance of between $2.76 and $2.86 per share. Please also note that our earnings guidance assumes physical occupancy will remain significantly below normalized levels until the second half of 2021.

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Fiscal 22 is off to a good start, driven by strong commercial performance, disciplined management of our production capacity and continued growth of our railcar and lease fleet. New railcars orders and actually were at 1.5 for this quarter. New railcar orders of 6,300 units were worth 685 million, were across a broad range of railcars. Our order intake for the first quarter alone represents 35% of new orders received during all of fiscal 2021. And I should mention in terms of backlog do we have booked another 200 million of rebody work which is sizable but not counted in our backlog. Meat production requirements we recently expanded our global workforce by about 10%. Asset utilization, a key performance metric for the leasing business is high at 97.1% for the portfolio that is well-diversified across car types and strong lessee credits as well as maturity ladders. Additionally, we exceeded the initial investment target for GBX leasing by $200 million to a portfolio of $400 million in only nine months of operations. For example, a portion of idle railcars in North America decreased to 32% in July to just below 20% by December. All this suggest that industry fleet utilization is nearing 80%. I became the CEO, when we were founded, when my partner and I cofounded a small asset leasing business in 1981. We entered manufacturing with the acquisition of Gunderson in 1985 and have continued to build on those two foundations. Today's manufacturing is our largest unit, comprising about 80% of our total annual revenues. I also would like to congratulate two directors who served throughout almost the last 18 years to 20 years on our Board, Duane McDougall and Donald Washburn. It is certainly an understatement to say that increasing headcount safely by several thousand employees, and increasing production rates by 40% to 50% is challenging. And the quarter just ended, we delivered 4,100 units, including 400 units in Brazil. Deliveries decreased by about 9% sequentially, which primarily reflects the timing of syndication activity, and line changeovers in North America. We've made a number of changes to our hiring and training practices, and we're seeing improved retention rate that maintenance cycle times can be 75 to 90 days. Between the portfolio assets and origination from Greenbrier, GBX leasing grew by approximately 200 million in the quarter. And as of quarter end, that fleet is valued at nearly 400 million, nearly doubling in value across the quarter. In addition to managing our lease fleet, our Management Services or GMS group continues to provide creative railcar assets solution for over 450,000 railcars in the North American freight industry. When other positive developments subsequent to quarter end, is that our leasing team successfully increased the size of our 300 million nonrecourse railcar warehouse facilities by 50 million to 350 million. In Greenbrier's first quarter, we had a book-to-bill 1.5 reflecting deliveries of 4,100 units and orders of 6,300 units. New railcar backlog of 28,000 units with a market value of three billion provides strong multiyear visibility. In addition to new railcar orders, we recently received orders to rebody 1,400 railcars, as part of Greenbrier railcar refurbishment program. As of November 30th, our modernization backlog included 3,500 units, valued at $200 million. Each gondolas unloaded weight is reduced by up to 15,000 pounds. Norfolk Southern will initially acquire 800 of these Greenbrier engineered gondolas. One item we are clarifying is the $800 gondolas will be part of the Q2 order activity. Greenbrier's leased fleet utilization ended the quarter at over 97%. North American industry delivery projections saw an increase in nearly 49,000 units in 2022 and over 60,000 units in 2023, given the strong reduction in railcars and storage that continue to congestion as the pores, which is impacting traffic and overall economic growth. Highlights for the first quarter include revenue of $550.7 million, deliveries of 4,100 units which include 400 units from our unconsolidated joint venture in Brazil. Aggregate gross margins of 8.6%, reflecting competitive new rail car pricing from orders taken earlier in the pandemic and labor shortages. Selling and administrative expense of $44.3 million is down 20% from Q4, primarily as a result of lower employee-related costs. Net gain on disposition of equipment was $8.5 million, like many leasing companies we periodically sell assets from our lease fleet as opportunities arise. We had an income tax benefit of 1.4 million in the quarter primarily reflect the net benefits from amending prior year tax returns. Non-controlling interest provides the benefit of 5.2 million, primarily resulting from the impacts of line changeovers and production ramping at our Mexico joint venture. Net earnings attributable to Greenbrier of 10.8 million or $0.32 per diluted share and EBITDA of 42.2 million or 7.7% of revenue. Liquidity of 610 million is comprised of cacheable reforms of the ten million and available borrowings of nearly 200 million. As mentioned last quarter, our cash receivable spends at 106 million as of November 30, and we expect to receive most of these refunds in the second quarter of fiscal 2022. Today, we announced the dividends are $0.27 per share, which is our thirty-first consecutive dividend. As of yesterday's closing price, our annual dividend represents a yield of approximately 2.3%. Since 2014, Greenbrier returns nearly 370 million of capital to shareholders through dividends and share repurchases. Additionally, you may have noticed an increase of approximately 70 million and Greenbrier's notes payable balance, when compared to the prior quarter. Increase deliveries by 1,500 units, now to a range of 17,500 to 19,500 units, which includes approximately 1,500 units from Greenbrier-Maxion in Brazil. Selling and administrative expenses are unchanged and expect to be approximately 200 million to 210 million for the year. Gross capital expenditures of approximately 275 million in leasing and management services, 55 million in manufacturing, and 10 million in maintenance services. We expect deliveries to continue to be back half waited with a 45%, 55% split. As reminders in fiscal 2022 approximately 1,400 units are expected to be built and capitalized into our lease fleet.

New railcar backlog of 28,000 units with a market value of three billion provides strong multiyear visibility. Net earnings attributable to Greenbrier of 10.8 million or $0.32 per diluted share and EBITDA of 42.2 million or 7.7% of revenue. Increase deliveries by 1,500 units, now to a range of 17,500 to 19,500 units, which includes approximately 1,500 units from Greenbrier-Maxion in Brazil.

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That dividend was made possible by the successful completion of the first stage of our return of capital strategy, accomplishing a series of successful exits, including Propeller and Transactis earlier in 2019 and the repayment of our $85 million in debt. In aggregate, to date, we have returned over $187 million to our balance sheet, including over $104 million in 2019 via exit transactions since we began our new strategic direction in 2018. The disciplined approach to managing our portfolio and realizing exit proceeds has not only resulted in Safeguard being debt free and initiating our return of value transactions, but also provided us with $25 million of cash today that is sufficient to fund our scaled down operations and expected deployments. Most importantly, Safeguard continues to hold a valuable portfolio of ownership interests, representing approximately $230 million of deployed capital in 15 tech-enabled companies and our other ownership interests. Six of our companies have run rates of between $5 million and $10 million of annual revenue. Another six have run rates of over $10 million. And the average growth rate of the non-digital media companies is 54%. Whenever we have cash and cash equivalents exceeding our minimum required capital, currently $25 million, we will evaluate a return of value to our shareholders in the most efficient manner in the form of either share repurchases and/or dividends. For the year ended December 31, 2019, Safeguard's net income was $54.6 million or $2.64 per share. That's compared with a net loss of $15.6 million or $0.76 per share for the same period in 2018. Our fourth quarter resulted in a net loss of $0.7 million or $0.03 per share as compared with a net loss of $16.6 million or $0.81 per share for the same quarter in 2018. Two large elements impacting the financial results and our financial position for the fourth quarter included the continued downward trajectory of our general and administrative costs as compared to prior periods and of course the $1 per share return of capital dividend. Safeguard's cash, cash equivalents, restricted cash and securities at December 31, 2019 totaled $25 million, and we have no debt obligations. As we've also previously discussed, the Board declared a $1 per share special dividend that was paid on December 30. Now I'll move back to our results of operations for the 2019 year, which includes the previously disclosed successes such as a $35.1 million gain from the exit of Propeller and a $50.7 million gain related to the exit from Transactis. In addition, we have recorded aggregate gains of $4.3 million for additional amounts received for holdbacks and escrows related to the other prior transactions, including $2.6 million of which occurred in the fourth quarter of 2019. Our 2019 results also included the impairment we disclosed in the second quarter of $3 million with respect to our interest in NovaSom. Our general and administrative expenses were $2.1 million and $10 million for the three months and year ended December 31, 2019 respectively. The decrease relative to the prior year is primarily due to a decrease in employee compensation from a lower overall level of staffing, the absence of $3.8 million in severance charges and lower professional fees. For the fourth quarter, corporate expenses, which represent general and administrative expenses, excluding depreciation, stock-based compensation, severance and retirement costs and other nonrecurring or other items, were $1.4 million compared with $1.9 million in the fourth quarter of 2018. For the ended December 31, 2019, those same expenses were $7.1 million as compared to $9.9 million in 2018. Our quarterly results also included $2.2 million of other income that was primarily the result of the removal of the estimates of our liabilities under the previous commitments to our former CEO, Mr. Musser who passed away in late 2019. Other income for the 2019 annual period also included previously disclosed non-cash gain from the credit derivative of $5.1 million and $4.5 million of observable price changes from a variety of our ownership interests. I should also note that our annual results included interest expense of $14 million related to the credit facility that was repaid in July of 2019. We also benefited during 2019 from the recognition of $2 million of interest income from our cash, marketable securities and convertible loans. With respect to our ownership interests at December 31, 2019, we have a carrying value of $77.1 million, which is a reduction from 2018 primarily from exits, impairments and the application of equity method accounting. During the fourth quarter, we limited deployments to $2.2 million to three existing companies, bringing 2019 follow-on funding to $16.7 million. We expect that we will make additional deployments in 2020 so that we can continue to support our ownership interests, but in the aggregate, we expect those deployments to be between $5 million and $10 million. Our share of the losses of our equity method ownership interest for the three months ended December 31, 2019, was $4.2 million as compared to $8.9 million for the comparable period in 2018. Similarly, for the annual 2019 period, we experienced a reduction of $20.6 million related to our losses from our share of the losses of our equity method companies. Aggregate annual revenue for 2019 of Safeguard's 15 remaining ownership interests, which we have previously referred to as partner companies, was $357 million. Aggregate revenue for the same companies was $330 million for 2018, representing a growth 8% for the group. Excluding those digital media companies, the aggregate year-over-year revenue of Safeguard's portfolio of partner companies grew at 41%.

Six of our companies have run rates of between $5 million and $10 million of annual revenue. Our fourth quarter resulted in a net loss of $0.7 million or $0.03 per share as compared with a net loss of $16.6 million or $0.81 per share for the same quarter in 2018. We expect that we will make additional deployments in 2020 so that we can continue to support our ownership interests, but in the aggregate, we expect those deployments to be between $5 million and $10 million.

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Our team delivered another outstanding results in our third quarter with over 20% core revenue growth, nearly 40% adjusted earnings-per-share growth and strong free cash flow generation. Our sales were $7.2 billion and we delivered 20.5% core revenue growth with portfoliowide strength led by Diagnostics and Life Sciences. Geographically, high growth markets grew approximately 25% and developed markets were up nearly 20%. In fact, revenue in each of our three largest markets, North America, Western Europe and China was up approximately 20% or more in the quarter. Our gross profit margin increased by 550 basis points to 60.3% primarily due to higher sales volume, the favorable impact of higher margin product mix, and the impact of prior-year purchase accounting adjustments related to the Cytiva acquisition that did not repeat in 2021. Now, adjusted diluted net earnings per common share were $2.39 and were up 39% compared to 2020 and we generated $1.7 billion of free cash flow in the quarter, bringing our year-to-date total to $5.2 billion, which is up 46.5% year-over-year. We continue to accelerate organic growth investments across the entire portfolio and increased our research and development spend by approximately 30% year-over-year. In fact, recently launched products like the SCIEX Zeno 7600 and the Triple Quad 7500 and Beckman Life Sciences' CytoFLEX SRT benchtop cell sorter are just a few great examples of how we're driving market share gains through proprietary innovation and enhancing our growth trajectory going forward. And we expect our total capital expenditures across Danaher to be approximately $1.5 billion in 2021 as we continue to invest in support of our customers' needs today and well into the future. Life Sciences reported revenue increased 24.5% with core revenue up 20%. Now these strong results were led by continued demand for our bioprocessing solutions as in Cytiva bioprocessing and Pall Biotech, both grew more than 30% in the quarter, including low double-digits non-COVID related core growth. COVID-related vaccine and therapeutic revenue contributed -- continued to be strong and now exceeds $1.5 billion year-to-date. Cytiva also added more than 1,500 new associates to the global team since joining Danaher to help ensure that we're supporting our customers today and continue meeting their needs well into the future. In Diagnostics, reported revenue was up 29.5% and core revenue grew 28.5% led by more than 60% growth at Cepheid. In respiratory testing at Cepheid, we further expanded manufacturing capacity, which enabled the team to produce and ship approximately 16 million cartridges during the quarter. COVID-only tests accounted for approximately 80% of those shipments and our 4-in-1 combination tests for COVID-19 Flu-A and B and RSV represented approximately 20%. And we believe the team's thoughtful placement of the GeneXpert and Infinity Systems over the last 18 months is setting up Cepheid very well for future growth opportunities. Reported revenue was up 7% with core revenue up 7.5%. We continue to expect about $2 billion of COVID-related vaccine and therapeutic revenue in 2021. And since we spoke at our Investor Day, we now expect to enter 2022 with approximately $2 billion in COVID-related backlog versus our previous expectation of $1.5 billion of backlog. As I mentioned earlier, we shipped approximately 16 million respiratory tests during the third quarter and we now expect to ship approximately 55 million tests in 2021 versus our prior expectation of 50 million. In preparation, their preference is for our 4-in-1 combination test, so we're seeing an uptick in demand for those cartridges, particularly given the recent outbreaks of RSV across the U.S. Cepheid's 4-in-1 test was also recently approved with a third gene target for SARS-CoV-2 detection, ensuring it can continue to accurately detect future COVID-19 viral mutations and reinforcing Cepheid's competitive advantage in the respiratory testing market. We expect to deliver fourth quarter core revenue growth in the low to mid teens range, with high single-digit core revenue growth in our base business and a mid to high single-digit core growth contribution from COVID-related revenue tailwind. Additionally, we expect to generate operating profit fall through of approximately 40% in the fourth quarter, a similar level to what we achieved in the third quarter. Now for the full year 2021, we now expect to deliver more than 20% core tailwind and our base business will each contribute more than 10% to our 2021 core revenue growth rate.

Our team delivered another outstanding results in our third quarter with over 20% core revenue growth, nearly 40% adjusted earnings-per-share growth and strong free cash flow generation. Geographically, high growth markets grew approximately 25% and developed markets were up nearly 20%. In fact, revenue in each of our three largest markets, North America, Western Europe and China was up approximately 20% or more in the quarter. Now, adjusted diluted net earnings per common share were $2.39 and were up 39% compared to 2020 and we generated $1.7 billion of free cash flow in the quarter, bringing our year-to-date total to $5.2 billion, which is up 46.5% year-over-year. Life Sciences reported revenue increased 24.5% with core revenue up 20%. COVID-only tests accounted for approximately 80% of those shipments and our 4-in-1 combination tests for COVID-19 Flu-A and B and RSV represented approximately 20%. Reported revenue was up 7% with core revenue up 7.5%. We expect to deliver fourth quarter core revenue growth in the low to mid teens range, with high single-digit core revenue growth in our base business and a mid to high single-digit core growth contribution from COVID-related revenue tailwind. Now for the full year 2021, we now expect to deliver more than 20% core tailwind and our base business will each contribute more than 10% to our 2021 core revenue growth rate.

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We generated 9% year-over-year revenue growth in the third quarter or 8% excluding the impact of acquisitions. This is a substantial improvement from the second quarter 6% year-over-year revenue decline. Orders increased 13% year-over-year and consistent with most new home construction and remodeling indicators, order growth remains strong throughout the quarter. We 're competing better than ever in this space and we continue to drive strong financial returns with third quarter operating margins expanding 270 basis points year-over-year to a third quarter record of 19.6%. In general, customers remain in a holding pattern and third quarter revenue was down 27% year-over-year. However, the segment still was able to generate a profit of nearly $17 million in the quarter. Orders in Workplace Furnishings excluding eCommerce declined 25% year-over-year in the third quarter. This was an improvement from the 35% order decline in the second quarter. Orders in our Workplace Furnishings eCommerce business increased 35% year-over-year in the third quarter. We reported a decremental margin of 19% in the third quarter. This is better than our previously communicated target of 25%. Also recall, we were up against a strong prior-year comp in the third quarter as our productivity efforts and cost management drove a 50% incremental margin in the third quarter of 2019. In the Workplace Furnishings segment, we expect fourth quarter year-over-year revenue declines to be in the mid-teens. And third, our fiscal calendar has an extra week this year, which we expect will add 4 percentage points to 7 percentage points of growth to the quarter. For the full year, we expect decrementals to be less than 20%. We continue to target decremental margins of 25% over time. As a result, our free cash flow through the first three quarters is tracking 70% ahead of prior prior year levels despite lower profitability. We ended the quarter with $109 million of cash in the balance sheet. We've reduced our net debt by 65% or nearly $123 million and our gross leverage ratio is 0.9, well below our debt covenant of 3.5. Our unique vertically integrated model with more than 20% of revenue coming from our owned [Phonetic] installing distributors along with our recent success in managing through the spike in demand surrounding the pandemic puts us in a strong position as we move into 2021. We have not cut our dividend in over 65 years of paying it.

In the Workplace Furnishings segment, we expect fourth quarter year-over-year revenue declines to be in the mid-teens.

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Including, close to 12% top line growth, margin expansion in excess of 200 basis points, and a total annualized return on average equity of 23.2%. In addition, we were encouraged earlier this month when the Florida Senate passed Bill 76, which would enable Floridians to have reliable access to property insurance. That being said, we continue to monitor closely the companion bill in the House, House Bill 305, which has differences from the Senate Bill 76. We ended the first quarter with total revenue up 11.7% to $262.8 million, driven by primary rate increases from 2020, earning through the book as policies renew and an improvement in the unrealized portion of the investment portfolio, partially offset by the impact of higher reinsurance costs when compared to the first quarter of 2020. Margins expanded by 210 basis points for the quarter, driven by the incremental fall-through profit from the top line as previously discussed, lower losses in LAE and lower operating expenses as a percentage of direct premiums earned. EPS for the quarter was $0.84 on a GAAP and non-GAAP adjusted basis. As to underwriting, direct premiums written were up 9.2% for the quarter, led by direct premium growth of 10.2% in Florida. On the expense side, the combined ratio improved one point for the quarter to 93.1%. The expense ratio improved on a direct earned basis by 45 basis points as a result of operating efficiencies but was more than offset by the impact of increased reinsurance costs on the net ratio resulting in a one-point increase in the net expense ratio for the quarter. On our investment portfolio, net investment income decreased by 56.3% to $3 million for the quarter, primarily due to significantly lower yields on the reinvested portfolio following the sale of a majority of securities in the portfolio that were in an unrealized gain position in the third and fourth quarters of 2020. Total invested assets increased 10.6% to $1 billion since year-end 2020. In regards to capital deployment, during the first quarter, the company repurchased approximately 15,000 shares at an aggregate cost of $245,000. On April 22, 2021, the Board of Directors declared a quarterly cash dividend of $0.16 per share of common stock, which is payable on May 21, 2021, to shareholders of record as of the close of business on May 14, 2021. As mentioned in our release yesterday, we are maintaining our guidance for 2021. We still expect GAAP and non-GAAP adjusted earnings per share range of between $2.75 and $3 and a return on average equity of between 17% and 19%.

We ended the first quarter with total revenue up 11.7% to $262.8 million, driven by primary rate increases from 2020, earning through the book as policies renew and an improvement in the unrealized portion of the investment portfolio, partially offset by the impact of higher reinsurance costs when compared to the first quarter of 2020. EPS for the quarter was $0.84 on a GAAP and non-GAAP adjusted basis. As mentioned in our release yesterday, we are maintaining our guidance for 2021.

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Growing the portfolio from 77% of ABR from grocery-anchored properties to 85% plus remains a strategic focus across the organization. During the fourth quarter, we executed 92 new leases, totaling 406,000 square feet, which exceeded the amount achieved in the fourth quarter of 2019. At that point, new leasing spreads remained positive, rising 6.8% during the fourth quarter. We are focused on the highest and best use of our real estate and believe the 80-20 rule applies to our assets and gives us tremendous flexibility and adaptability to create value in the future through our entitlement initiatives. Specifically, 80% of our real estate consists of parking lots, that are not generating any revenue; and 20%, the single-storey buildings. Target also stated that more than 95% of sales are fulfilled by the stores. The overall transaction volumes from March through year-end were down close to 85%, but there were several late 2020 deals that showcased the general theme we have seen occurring. Multiple grocery-anchored deals have transacted at sub 6% cap rates in Denver, South Florida, California, Washington DC, North Carolina and throughout the major primary and secondary markets in the U.S. While we are bullish on that asset side, which represents the core products within our portfolio, there is no shortage of capital chasing those deals. A $25 million mezzanine financing on a strong South Florida shopping center and a $10 million preferred equity investment on a densely located center in Queens, New York; both of which will generate an accretive return versus our cost of capital, with a chance to possibly acquire in the future. To that point, we completed a sale leaseback transaction in which we acquired two Rite Aid distribution centers in California for approximately $85 million. These distribution centers service all 540 plus stores for the pharmacy chain in the State of California. For the fourth quarter 2020, NAREIT FFO was $133 million or $0.31 per diluted share as compared to $151.9 million or $0.36 per diluted share for the fourth quarter 2019. The reduction was mainly due to rent abatements and increased credit loss of $21.2 million and lower net recovery from a $5.7 million. This reduction was offset by lower preferred dividends of $3.1 million and a $7.2 million charge for the redemption of preferred stock in the fourth quarter of 2019. Now, although not included in NAREIT FFO, during the fourth quarter 2020, we did record a $150.1 million unrealized gain on the mark-to-market of our marketable securities, which was primarily driven by the change in value of our $39.8 million shares of Albertsons stock. Our stake in Albertsons is valued in excess of $650 million today. For the full year 2020, NAREIT FFO was $503.7 million or $1.17 per diluted share as compared to $608.4 million or $1.44 per diluted share for the prior year. The change was primarily due to increases in rent abatements, credit loss and straight line reserves, aggregating $105.8 million and the NOI impact of disposition activity during 2019 and 2020 totaling $24.7 million. In addition, during 2020, we incurred a $7.5 million charge for the early extinguishment of debt. These reductions were offset by lower financing costs of $15.7 million and an $18.5 million charge for the redemption of $575 million of preferred stock during 2019. All our shopping centers remain open, and over 97% of our tenants are open and operating. We collected 92% of fourth quarter base rents, and this compares to third quarter collections of 90%. The furloughs granted during the fourth quarter were just under 2%, down from 5% during the third quarter. At year-end 2020, 8.2% of our annual base rents were from tenants on a cash basis of accounting. And 50% of that has been collected. As of year-end, our total uncollectible reserve was $80.1 million or 46% of our total pro rata share of outstanding accounts receivable. We finished the fourth quarter with consolidated net debt to EBITDA of 7.1 times. And on a look-through basis, including pro rata share of JV debt and preferred stock outstanding, the level was 7.9 times. This represents further progress from the 7.6 times and 8.5 times levels reported last quarter, with the improvement attributable to lower credit loss. On a pro forma basis, if our Albertsons investment was converted to cash, these metrics would improve by a full turn to 6.1 times and 7 times respectively. We ended 2020 with a strong liquidity position, comprised of over $290 million in cash and $2 billion available on our untapped revolving credit facility. We have only $140 million of consolidated mortgage debt maturing during 2021. Our consolidated weighted average debt maturity profile stood at 10.9 years, one of the longest in the REIT industry. By way of example, our 10-year green bond issued in July 2020 at 210 basis points over the 10-year treasury is currently trading in the area of 90 basis points over treasury. Regarding our common dividend, we paid a fourth quarter 2020 common dividend of $0.16 per share. Our initial NAREIT FFO per share guidance range is $1.18 to $1.24. Notwithstanding the expected optics of the first quarter results, our NAREIT FFO per share guidance range of $1.18 to $1.24 reflects growth over 2020 at both the low and high end of the range.

For the fourth quarter 2020, NAREIT FFO was $133 million or $0.31 per diluted share as compared to $151.9 million or $0.36 per diluted share for the fourth quarter 2019. Our initial NAREIT FFO per share guidance range is $1.18 to $1.24. Notwithstanding the expected optics of the first quarter results, our NAREIT FFO per share guidance range of $1.18 to $1.24 reflects growth over 2020 at both the low and high end of the range.

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For the fourth quarter, we estimate that the incremental mortality due to COVID was approximately 1,100, compared to approximately 1,600 during the third quarter. Transplant is a preferred treatment option for most of our patients and during 2021, despite the challenges posed by the COVID pandemic, we celebrated that nearly 8,000 DaVita patients received a transplant, exceeding our pre-pandemic level. I've been fortunate enough to be part of DaVita Village for over 20 years and in all that time across my many roles, I've never experienced the labor market as challenging as we face today. These programs added approximately 12,000 ESKD patients and an additional 12,000 CKD patients across 11 value-based programs in different markets. In light of our upfront cost of these programs and the lag of shared savings payment, as we discussed in November, we continue to expect that our operating loss in 2022 in our U.S. ancillary segment will increase by approximately $50 million, although this could increase or decrease depending on the number of new arrangements we enter into during the year. This resulted in a full-year adjusted operating income increase of approximately 3% over 2020. Adjusted earnings per share from continuing operations grew by approximately 26% year over year, and we generated more than $1.1 billion of free cash flow, which we largely deployed to return capital to our shareholders. For 2022, we expect adjusted operating income guidance of $1.525 billion to $1.675 billion. The midpoint of this guidance range is $35 million below our expectations from Capital Markets Day last November, which is primarily driven by our updated views on COVID and labor costs. We still believe we can deliver the long-term compounded annual growth of adjusted operating income of 3% to 7% that we discussed at Capital Markets Day. As Javier mentioned, our fourth-quarter results were slightly above the midpoint of our revised guidance. Q4 results included a net COVID headwind of approximately $80 million, an increase relative to the quarterly impact that we experienced in the first three quarters of the year primarily due to the impact of the incremental mortality from the delta surge in Q3 and some temporary labor cost increases. For the year, we experienced a net COVID headwind of approximately $200 million. As Javier said, the incremental mortality due to COVID in the fourth quarter was approximately 1,100, compared to approximately 1,600 in Q3. U.S. dialysis treatments per day were down 135 or 0.1% in Q4 compared to Q3. U.S. dialysis patient care cost per treatment were up approximately $6 quarter over quarter, primarily due to the increased wage rates and health benefit expenses. Our adjusted effective tax rate attributable to DaVita was 16% for the fourth quarter and approximately 22% for the full year. Finally, in 2021, we repurchased 13.9 million shares of our stock, reducing our shares outstanding by 11.5% during the year. We have repurchased to date an additional 1.4 million shares in 2022. Now looking ahead to 2022, our adjusted OI guidance is a range of $1.525 billion to $1.675 billion, and our adjusted earnings per share guidance is $7.50 to $8.50 per share. The midpoint of the OI guidance range is $37 million below the $1.635 billion that we discussed during our recent Capital Markets Day due to offsetting puts and takes. At the midpoint of our guidance range, we have incorporated the following assumptions related to COVID: excess patient mortality due to COVID of 6,000. This, along with our normal growth drivers, would result in a total treatment growth range of approximately 1.5% to 1%. Our guidance assumes an incremental increase of between $100 million and $125 million in labor costs above a typical year's increase, which is $50 million higher than what we communicated at Capital Markets Day. Third, we anticipate a year-over-year incremental operating loss in the range of $50 million as we continue to invest to grow our IKC business; and fourth, we will also begin to depreciate our new clinical IT platform, which we expect to be approximately $35 million in 2022 and will begin in Q2. We are forecasting our tax rate at 25% to 27% due to nondeductibility of valid expense. Looking past 2022, we continue to expect compounded annual OI growth relative to 2021 of 3% to 7% and compounded annual adjusted earnings per share growth relative to 2021 of 8% to 14%. Finally, we expect free cash flow of $850 million to $1.1 billion in 2022.

As Javier mentioned, our fourth-quarter results were slightly above the midpoint of our revised guidance. We have repurchased to date an additional 1.4 million shares in 2022. Now looking ahead to 2022, our adjusted OI guidance is a range of $1.525 billion to $1.675 billion, and our adjusted earnings per share guidance is $7.50 to $8.50 per share. Finally, we expect free cash flow of $850 million to $1.1 billion in 2022.

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In the first quarter of 2021, we made $19,000 per day our VLCC fleet, $15,000 per day on our Suezmax fleet, and $12,000 per day on our LR2/Aframax fleet. So far in Q1, we have booked 70% of our VLCC days at $18,100 per day, 63% of our Suezmax days have $13,600 per day, and 59% of LR2/Aframax days have $14,200 per day. Front Fusion and Front Future in March and April respectively, bringing our number of LR2s on the water to 20. As I said, we are happy to report numbers in black, and Frontline achieved total operating revenues and work expenses of $107 million in the first quarter. We also have an adjusted EBITDA of $59 million and net income of $28.9 nine million, or $0.15 per share. Further, we have an adjusted net income of $8.8 million or $0.04 cents per share. The adjustments consist of a $15.7 million gain on derivatives, a $3.1 million unrealized gain on marketable securities, a $1.2 million on amortization on acquired time charters, and $0.1 million results of associated companies. The adjusted net income in the first quarter has increased by $21 million compared with the previous quarter. The increase was driven by a decrease in ship operating expenses of $11 million, mainly as a result of $6.4 million lower dry-docking fund. We also had an increase of cash and cash equivalents of $6.4 million and that was due to the prior TCE rates, as well as we had a $11.2 million decrease in other costs. The total balance sheet numbers have increased by $10 million in the first quarter. As of March 31, 2021, Frontline had $318 million in cash and cash equivalents including undrawn amounts under our senior unsecured loan facility, marketable securities, and minimal cash requirements. We estimate that risk cash costs break-even rate will remain for 2021 of approximately $21,500 per day for VLCC, $17,700 for days for the Suezmax tankers, and $15,900 per day for LR2 tankers. This gave a fleet average of about $18,100 per day. These rates, they are all-in day rates. In the quarter, we recorded opex expenses of $7,300 per day for the VLCCs, $7,100 a day for the Suezmax tankers, and $7,200 for the LR2 tankers. Assuming $10,00, $20,000, $30,000, or $40,000 per day achieve rates in excess of all the cash breakeven rates. And then looking at the period of 365 days from April 1, 2021. So in this graph, as an example, with a fleet average cash possibly breakeven rates of $18,100 per day and assuming $30,000 on top of the average fleet earnings, then the TCE rate would be $48,100 one per day. A strong fund would then generate a cash flow per share of the debt service of $3.45. So total world oil consumption rose by 4.3 million barrels from January to March and reached to 96.5 million barrels per day. On the other hand, supply fell by 0.5 million barrels. This was mostly fueled by the actions from Saudi Arabia and their volunteer cuts to -- turn it up at 93.5 million barrels per day at the end of the quarter. Recycling prices are up 30% year to date and are now count being negotiated around %550 per long ton or $23 million for a VLCC. The overall tanker order book has shrunk year to date by approximately 4%. We've seen on the VLCC's 20 new -- 28 new orders placed, but as 25 vessels are delivered at the same time, the order book remains to be fairly flat. The VLCC order book stands at around 9% of the existing fleet, and the overall order book for tankers is up to around 7% of the existing fleet. We have, over the last six months, see more -- seen more than 170 new orders for containerships. The fundamentals of the tanker market suggest a tightening of capacity over the coming years. From where we are now, according to EIA, oil supply is expected to grow by 6 million barrels by year-end. The key to the demand bounces in 2021, you can find on the right-hand side. We know that gasoline demand fell by 3.3 million barrels per day in 2020. And it's now expected to grow by 1.8 million barrels per day in 2021. For jet, it's affected the crude oil balances by 3.2 million barrels per day and negative in 2020 and about 1.3 million barrels per day is expected to return this year. For diesel, we're actually adding more than we lost, 1.2 million barrels per day. Other kind of uses of oil is also linked to this at 0.7 million barrels per day. And global GDP is expected up 6% this year. I've just mentioned, global oil supply is expected to grow by 6 million barrels by the end of 2021.

In the first quarter of 2021, we made $19,000 per day our VLCC fleet, $15,000 per day on our Suezmax fleet, and $12,000 per day on our LR2/Aframax fleet. We also have an adjusted EBITDA of $59 million and net income of $28.9 nine million, or $0.15 per share. The increase was driven by a decrease in ship operating expenses of $11 million, mainly as a result of $6.4 million lower dry-docking fund. These rates, they are all-in day rates. The fundamentals of the tanker market suggest a tightening of capacity over the coming years. The key to the demand bounces in 2021, you can find on the right-hand side.

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I'm very pleased to report that we continued our strong start to the year, achieving record investment volume of more than $750 million during the first six months of 2021. Robust and high quality investment activity further increased our investment grade, concentration and raised our ground lease exposure to a record of nearly 13%. Our investment activities during the quarter were supported by more than $1 billion of strategic capital markets transactions that fortified our best-in-class balance sheet and positioned our company for continued growth in the quarters ahead. During the second quarter, we invested approximately $366 million in 59 high-quality retail net lease properties across our three external growth platforms. 54 of these properties were originated through our acquisition platform representing acquisition volume of more than $345 million. The 54 properties acquired during the second quarter are leased to 32 tenants operating in 18 distinct retail sectors including best-in-class operators in the off-price, home improvement, auto parts, general merchandise, dollar store, convenience store, craft and novelties, grocery and tire and auto service sectors. The acquired properties had a weighted average cap rate of 6.2% and a weighted average lease term of 11.8 years. Through the first six months of this year, we've invested a record $756 million into 146 retail net lease properties spanning 35 states in 24 retail sectors. Approximately $732 million of our investment activity originated from our acquisition platform. Roughly 75% of the annualized base rents acquired in the first half of the year comes from leading investment grade retailers, while almost one-third of annualized base rent is derived from ground leased assets. Given our record acquisition activity date and visibility into our pipeline, we are increasing our full-year 2021 acquisition guidance to $1.2 billion to $1.4 billion. Most significant with a five-store sale leaseback transaction with Kroger for approximately $68 million. The stores are located in Texas, Michigan, Ohio, and Mississippi and each location is subject to a new 15 year net lease. With this transaction Kroger moved into our top 10 tenants at 3.2% of annualized base rents. ShopRite is a tremendous operator in the real estate located at a strategic interchange of I-95 is yet another example of the diligent bottoms for analysis that we conduct on every asset that we acquired. The store located in Parsippany, New Jersey is over 100,000 square feet and was constructed at Wegmans expense. Through the first six months of the year we've acquired 45 ground leases for a total investment of over $240 million. The second quarter contribution to this total was 14 ground leases representing an investment volume of more than $113 million. A Walmart Supercenter and Lowe's and Hooks at New Hampshire, our first Cabela's in Albuquerque, New Mexico, as well as three additional Wawa assets increasing our Wawa portfolio to 25 properties including their flagship store in Downtown Philadelphia. As mentioned at quarter end, our overall ground lease exposure stood at a company record of 12.7% of annualized base rents and includes a very unique assets leased to the best retailers in the country. Inclusive of our second quarter acquisition activity, the ground lease portfolio now derives nearly 90% of rents from investment grade tenants and has a weighted average lease term of 12.5 years. The majority of the portfolio includes rent escalators that result in average annual growth of close to 1% while the average per square foot rent is only $9 and $0.65. As of June 30, our portfolio's total investment grade exposure was nearly 68%, representing a significant year-over-year increase of approximately 670 basis points. On a two-year stacked basis, our investment grade exposure has improved by more than 1,300 basis points. We had six development in PCS projects either completed or under construction during the first half of the year that represent total capital committed of more than $36 million. Gerber will be subjected to a new 15 year net lease upon completion and we anticipate rent will commence in the first quarter of 2022. We anticipate delivery will take place in the first quarter of next year at which time 7-Eleven will be subject to a new 15 year net lease. We continue to reducing Walgreens exposure and as well as franchise restaurants as we sold seven properties for gross proceeds of approximately $28 million with a weighted average cap rate of 6.7%. In total, we disposed of 10 properties through the first six months of the year for gross proceeds of more than $36 million with a weighted average cap rate of approximately 6.7%. Given our disposition activities during the first half of the year, we are raising the bottom end of our disposition guidance to $50 million for the year, while the high-end remains at approximately $75 million. Their efforts to reduce the remaining 2021 maturity to just three leases representing 20 basis points of annualized base rents. During the second quarter, we executed new leases, extensions or options on approximately 209,000 square feet of gross leasable area. Most notably, we are extremely pleased to have executed a new 15 year net lease with Gardner White to backfill our only former Loves Furniture store in Canton, Michigan. We delivered the space to Gardner White in June and rent commenced in July, allowing us to recover close to 100% of prior rents with just over one month of downtime. During the first six months of the year we executed new leases, extensions or options and approximately 275,000 square feet of gross leasable area and as of June 30, our expanding retail portfolio consisted of 1,262 properties across 46 states, including 134 ground leases and remains nearly 100% occupied at 99.5%. Starting with earnings core funds from operations for the second quarter was $0.89 per share, representing a record 17.3% year-over-year increase. Adjusted funds from operations per share for the quarter was $0.88, an increase of 15.9% year-over-year. Per FactSet, current analyst estimates for full year AFFO per share range from $3.40 per share to $3.53 per share, which implies year-over-year growth of 6% to 10%. Building upon our 6% of AFFO per share growth in 2020-this implies two year stack growth in the mid-teens. General and administrative expenses totaled $6.2 million in the second quarter. G&A expense was 7.6% of total revenue or 7.1% excluding the noncash amortization of above and below-market lease intangibles. Even as we continue to invest in people and systems to facilitate our growing business, we anticipate the G&A as a percentage of total revenue will be in the lower 7% area for full year 2021 excluding the impact of lease intangible amortization on total revenues. As mentioned last quarter, G&A expense for our acquisitions team fluctuates based on acquisition volume for the year and our current anticipation for G&A expense reflects acquisition volume within our new guidance range of $1.2 billion to $1.4 billion. Total income tax expense for the second quarter was approximately $485,000 for 2021. We continue to anticipate total income tax expense to be approximately $2.5 million. Moving onto our capital markets activities for the quarter, in May we completed a $650 million dual tranche public bond offering, comprised of $350 million of 2% senior unsecured notes due in 2028 and $300 million of 2.6% senior unsecured notes due in 2033. In connection with the offering, we terminated related swap agreements of $300 million that hedged for 2033 Notes receiving approximately $17 million upon termination. Considering the effect of the terminated swap agreements, the blended all-in rates for the 2028 Notes and 2033 Notes are 2.11% and 2.13% respectively. We used the portion of the net proceeds from the offering to repay all $240 million of our unsecured term loans, the termination costs related to early pay down of our unsecured term loans total approximately $15 million. The offering in combination with the prepayment of all of our unsecured term loans extended our weighted average debt maturity to approximately nine years and reduced our effective weighted average interest rate to approximately 3.2%. In June, we also completed a follow-on public offering of 4.6 million shares of common stock. Upon closing, we received net proceeds of approximately $327 million. During the second quarter, we entered into forward sale agreements in connection with our ATM program to sell an aggregate of roughly 1.2 million shares of common stock for anticipated net proceeds of approximately $81 million. In May, we settled roughly 164,000 shares and received net proceeds of approximately $10 million. At quarter-end we had approximately 3.9 million shares remaining to be settled under existing forward sale agreements which are anticipated to raise net proceeds of approximately $259 million upon settlement. Inclusive of the anticipated net proceeds from our outstanding forward offerings cash on hand and availability under our credit facility, we had nearly $950 million in available liquidity at quarter-end. As of June 30, our pro forma net debt to recurring EBITDA was approximately 3.6 times, including our outstanding forward equity offerings. Excluding the impact of unsettled forward equity, our net debt to recurring EBITDA was approximately 4.5 times. Total debt to enterprise value of quarter-end was approximately 25% while fixed charge coverage remained at a record five times. During the second quarter, we declared monthly cash dividends of $0.217 per share for April, May and June. The monthly dividend reflected an annualized dividend amount of $2.60 per share representing an 8.5% increase over the annualized dividend amount of $2.40 cents per share for the second quarter of last year. Our payout ratios for the second quarter were a conservative 73% of Core FFO per share and 74% of AFFO per share respectively. Subsequent to quarter-end, we declared a monthly cash dividend of $0.217 per share for July. The monthly dividend reflects an annualized dividend amount of $2.60 per share or an 8.5% increase over the annualized dividend amount of $2.40 per share from the third quarter of 2020.

Starting with earnings core funds from operations for the second quarter was $0.89 per share, representing a record 17.3% year-over-year increase. Adjusted funds from operations per share for the quarter was $0.88, an increase of 15.9% year-over-year.

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That is true every quarter, but it has been especially important in the past 18 months as the world have dealt with the unprecedented challenges brought on by the COVID-19 pandemic. As a result of the strong execution in both segments, second quarter 2021, operating margins, improved dramatically to 11.8% for the company, with both segments, delivering double-digit operating margins. This represents a 170 basis point adjusted operating margin improvement on revenues, 20% lower than the second quarter of 2019. Our intense focus on networking capital management and improved profitability drove $101 million of positive free cash flow in the quarter. And more than $140 million of free cash flow year-to-date. We expect our SG&A as a percentage of sales to be below our target of 12.5% for the full year 2021. Overall revenues of $1 billion were up 50% year-over-year with both of our operating segments revenues up significantly. For the quarter, we recorded an operating profit of $123 million compared to only $7 million in the second quarter of last year. We achieved an operating margin of approximately 12% from disciplined cost control and fulfilling as much customer demand as possible, given the realities of the global supply chain during the quarter. The second quarter operating profit does include $4 million of benefits from the release of a financing receivable reserve and the recording about that receivable related to prior years, offset by a $1 million charge for business impairment and restructuring. Interest and other expense was approximately $22 million higher than Q2 of last year driven by $26 million of costs in connection with the refinancing of a significant portion of our capital structure, offset by $4 million in interest savings. Our second quarter 2021 global effective tax rate was approximately 17% driven by a mix of discrete items in the quarter. Our tax rate estimate for the full year remains 19% consistent with our previous outlook. Finally, our reported earnings per share of $1.02 per share includes $23 million of interest charges and other callouts that I just discussed had amounted to $0.26 per share reduction in earnings per share in the quarter. AWP sales of $595 million were up 44% compared to last year, driven by a dramatic improvement in all our global markets. Second quarter bookings of $747 million were up dramatically compared to Q2 2020 while backlog at quarter end was $1.4 billion, close to 3 times the prior year. Sales of $441 million were up 67% compared to last year, driven by strong customer sentiment across all end markets and geographies. The MP team has been aggressively managing all elements of cost as end markets improve, resulting in an operating margin above 15%. Backlog of $868 million more than tripled from last year and was up 22% sequentially. MP saw its business has strengthened through the quarter with bookings up approximately 160% year-over-year. We continue to plan for total company incremental margins for the full year 2021, which meet or exceed our 25% target. As a result of positive first half callouts, corporate and other costs are expected to be slightly higher in the second half versus the first half of the year, including $0.26 per share of cost for refinancing of our capital structure and the other callouts in Q2. Our full year earnings per share outlook is increased to $2.85 to $3.05 per share based on sales of approximately $3.9 billion. For the full year 2021, we are estimating free cash flow of approximately $200 million, reflecting a strong year on positive cash generation. Full year free cash flow includes approximately $75 million from income and VAT tax refunds, which are not expected to reoccur. During the first half of 2021, we received approximately $35 million of these refunds. We continue to plan for capital expenditures, net of asset disposition of approximately $90 million. The strong, positive free cash flow of $101 million in the quarter demonstrates the focus and discipline our team members continue to demonstrate to tightly manage net working capital. We have over $1.1 billion available to us with no near-term debt maturities, so we can manage and grow the business. Our strong liquidity position and cash generation allowed us to prepay $83 million of term loans during Q2, which is in addition to the $196 million of term loans prepaid in early February.

Finally, our reported earnings per share of $1.02 per share includes $23 million of interest charges and other callouts that I just discussed had amounted to $0.26 per share reduction in earnings per share in the quarter. Our full year earnings per share outlook is increased to $2.85 to $3.05 per share based on sales of approximately $3.9 billion.

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As I did last quarter, I want to give a shout out to all 14,000-plus team members and our dedicated suppliers that have consistently stepped up during this difficult period to continue serving our customers. For the first quarter, we delivered sales of nearly $1.6 billion, and adjusted earnings per share of $1.13, both of which exceeded our expectations. With 0 hydraulics and 0 emissions, the DaVinci AE1932 scissor lift represents the next-generation of electrification and elevates our position in the access industry once again. DaVinci's innovative design reduces energy consumption by up to 70% compared to a traditional scissor lift, as JLG continues to push the innovation envelope. I'm proud of our team as they responded effectively to these issues to deliver solid results during the quarter, including a 10% increase in sales, and continued to be a reliable source of vehicles and aftermarket support for our U.S. government customer. During the quarter, we received another large JLTV order valued at more than $900 million that included units for several international customers. It's important to note that the budget action appropriated an additional $86 million in funding for FMTVs and $55 million for FHTVs that we supply for the U.S. armed forces. They worked hard to deliver strong results in the face of some significant challenges as they improved operating margins to 12.8% in the current year quarter. The segment finished the quarter with a robust backlog of $1.2 billion, up over 9% from the prior year. As I've mentioned in prior earnings calls, we're pleased with customer demand for our all-new S-Series 2.0 front discharge concrete mixer. Consolidated net sales for the quarter were $1.6 billion, down 7% from the prior year quarter. The decline was driven by decreases of 22% in Access Equipment sales and 13% in Commercial sales, partially offset by increased sales in both the Defense and Fire & Emergency segments. Consolidated adjusted operating income for the first quarter was $104.6 million or 6.6% of sales compared to $109.1 million or 6.4% of sales in the prior year quarter. Adjusted earnings per share for the quarter was $1.13 compared to earnings per share of $1.10 in the prior year. First quarter 2021 results benefited from a discrete tax benefit of $0.09 per share related to a favorable resolution of a tax audit. We're pleased with our solid start to the year, including strong consolidated adjusted decremental margins of 4% in the first quarter. During our last earnings call, we discussed an $85 million pre-tax cost headwind we expect to face in 2021, consisting of $120 million of temporary cost reductions in 2020, returning in 2021, offset by approximately $35 million of permanent cost reduction benefits. Looking at the second quarter, we will face year-over-year headwinds of about $25 million from a combination of last year's temporary cost reductions, offset by the benefit of permanent cost reductions we previously announced. Our balance sheet remains strong with further strengthened during the past quarter with solid working capital improvements yielding available liquidity at the end of the quarter of approximately $1.7 billion consisting of cash of approximately $900 million and availability under revolving line of credit of over $800 million. I'm even more proud of our people and the leadership team we have in place at Oshkosh, and I want them to know, it's been an honor to work with all of them in these past 16 years.

For the first quarter, we delivered sales of nearly $1.6 billion, and adjusted earnings per share of $1.13, both of which exceeded our expectations. Adjusted earnings per share for the quarter was $1.13 compared to earnings per share of $1.10 in the prior year.

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First quarter sales came in at $266 million compared to $282 million in fiscal 2019 and versus our guidance range of $220 million to $240 million. It is worth noting that $14 million of the $16 million sales decrease from the first quarter of fiscal 2019 is due to lower sales in Lanier Apparel, which, as you know, we are in the process of exiting. On an adjusted basis, earnings per share increased to a $1.89 compared to our earnings of a $1.30 in the first quarter of fiscal 2019. Very importantly, increased full-price selling and stronger initial IMUs, coupled with excellent expense control, helped contribute to a marked improvement in gross margin, operating margin and a 36% increase in operating income over first quarter of 2019. In total, first quarter '21 sales exceeded first quarter 2019 sales, and operating margin came in at an impressive 27% as compared to 21% in 2019. Our full-price e-commerce channel was 55% higher than in 2019, with significant growth over 2019 in all of our branded businesses. However, we are experiencing a much slower recovery in other parts of the country where sales levels in the Northeast, Mid-Atlantic and Midwest while improving versus Q4, were still over 30% lower than in 2019. Overall, our retail sales were 16% lower than in 2019. Our restaurants benefited from the addition of five Marlin Bars and the strong recovery in certain regions with a sales increase of 7% compared to 2019. We are particularly proud of the work we have done to improve our gross margin, which on an adjusted basis expanded 520 basis points over 2019 to 64%. In the first quarter of 2021, our direct business was 72% of revenue compared to 64% in the first quarter of 2019. Putting it altogether, in the first quarter, our consolidated adjusted operating margin expanded 410 basis points over 2019 to 15%, with operating margin expansion in all operating groups. On a FIFO basis, inventory decreased 29% compared to the end of the first quarter of 2020. Excluding Lanier Apparel, which we are exiting, FIFO inventory decreased 22% compared to the end of the first quarter of 2020. On a LIFO basis, inventory decreased 36% compared to the end of the first quarter of 2020. Our liquidity position is strong with $92 million of cash and no debt at the end of the first quarter. In the first quarter of 2021, cash provided by operating activities was $41 million compared to cash used in operating activities of $46 million in the first quarter of 2020. Sales in the second quarter expected to be in a range of $300 million to $310 million compared to $302 million in the second quarter of 2019. We estimate Lanier Apparel revenue to decline to approximately $5 million in the second quarter of fiscal 2021 compared to $20 million in the second quarter of fiscal 2019. On an adjusted basis, earnings per share for the second quarter of 2021 are expected to be in a range of $2.15 to $2.35 compared to $1.84 per share in the second quarter of 2019. As a result of lower planned revenue from clearance events in the third quarter and the impact of the Lanier Apparel exit, we are projecting an adjusted loss in the quarter in a range of $0.20 per share to $0.35 per share compared to adjusted earnings of $0.10 per share in the third quarter of 2019. We now expect sales in the range of $1.015 billion to $1.05 billion compared to net sales of $1.12 billion in 2019. For the full year, Lanier Apparel sales are expected to be approximately $20 million or $75 million lower than 2019, with no Lanier comparable sales planned in the fourth quarter. We now expect adjusted earnings in a range of $4.85 per share to $5.15 per share compared to $4.32 per share in 2019. In 2021, capital expenditures for the full year is expected to be approximately $35 million comparable to 2019 levels.

First quarter sales came in at $266 million compared to $282 million in fiscal 2019 and versus our guidance range of $220 million to $240 million. On an adjusted basis, earnings per share increased to a $1.89 compared to our earnings of a $1.30 in the first quarter of fiscal 2019. We now expect sales in the range of $1.015 billion to $1.05 billion compared to net sales of $1.12 billion in 2019. We now expect adjusted earnings in a range of $4.85 per share to $5.15 per share compared to $4.32 per share in 2019.

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Our golf equipment segment continued to experience unprecedented demand, which combined with a strong performance by our supply chain team, delivered 29% revenue growth versus 2020, and 16% growth versus 2019. Let's now turn to Page 6 and jump into our Q1 results by segment. retail sales of golf equipment hard goods were up 49% compared to Q1 2019 and 72% compared to 2020, thus setting another record for Q1 just as the last two quarters delivered records for their respective time periods. 1 club brand in overall brand rating as well as the leader in innovation and technology. Driving this performance, e-com was up 145% year over year in Q1, and company-owned stores comped up nearly 10% despite some code restrictions early in the quarter. These investments enable our apparel business e-com to deliver 96% year-over-year growth in Q1. And although the pandemic delayed our efforts, we still believe we'll be able to deliver $15 million of synergies in this segment over the coming years. We now believe we will be either at the high end or modestly above our previous full year same venue sales expectations, which was 80 to 85%. Globally, we have 66 company-owned venues in operation. We successfully installed 1,533 bays in Q1, a new record despite the COVID challenges globally. We now have just over 10,000 bays globally, which is significantly more than our largest competitor. We remain on track for 8,000 bays this year. We now expect that revenue and adjusted EBITDA for the full 12 months of 2021 will meet or beat 2019 results. We are very pleased with our first-quarter results, with consolidated revenue increasing 47% and adjusted EBITDA increasing 113% compared to the same period in 2020. Our consolidated revenue and adjusted EBITDA for the first quarter of 2021 increased by 26% and 38%, respectively compared to the first quarter of 2019. As of March 31, 2021, our available liquidity, which is comprised of cash on-hand and availability under our credit facilities, was $713 million compared to $260 million at March 31, 2020. Third, we recognized in the first quarter of 2021 a $253 million non-cash gain related to the write-off of our premerger Topgolf investment. With those factors in mind, I will now provide some specific financial results for the first quarter of 2021 compared to the first quarter of 2020. Today, we are reporting record consolidated first-quarter 2021 net revenues of $652 million, compared to $442 million for the same period in 2020, an increase of 210 million or 47%. This increase was led by a 26% increase in the legacy Callaway business, as well as an incremental $93 million from the four weeks of the Topgolf business. Changes in foreign currency rates had a $17 million favorable impact on first-quarter 2021 net sales. We are also reporting for the first quarter of 2021 operating income of $76 million, an increase of $35 million or 85%, compared to $41 million for the same period in 2020. On a non-GAAP basis, operating income for the first quarter of 2021 was $97 million, a 54 million or 126% increase compared to 43 million for the same period in 2020. The increase in non-GAAP operating income was led by a $50 million increase in segment operating income from the legacy Callaway business as well as an incremental $4 million from the four weeks of the Topgolf business. Other income was $244 million in the first quarter of 2021 compared to other expense of $3 million in the same period of the prior year. This includes the $253 million non-cash gain related to the Topgolf merger. On a non-GAAP basis, which includes Topgolf gain, other expense was $5 million in the first quarter of 2021 compared to other expense of $3 million for the comparable period in 2020. The $2 million increase in other expense was primarily related to higher interest expense related to incremental interest from the convertible bonds issued in May 2020, plus four weeks of Topgolf interest, partially offset by a decrease in foreign currency-related losses. Pretax income was $320 million in the first quarter of 2021 compared to $38 million for the same period in 2020. Non-GAAP pre-tax income was $91 million in the first quarter of 2021 compared to non-GAAP pre-tax income of $41 million in the same period of 2020. Earnings per share was $2.19 or approximately 125 million shares in the first quarter of 2021 compared to earnings of $0.30 or approximately 96 million shares in the first quarter of 2020. Non-GAAP earnings per share was $0.62 in the first quarter of 2021 compared to earnings per share of $0.32 for the first quarter of 2020. Fully diluted shares were 125 million in the first quarter of 2021 compared to 96 million shares for the same period in 2020. The net 29 million share increase is primarily related to the issuance of additional shares in connection with the Topgolf merger. Full year estimated diluted shares is approximately 176 million shares, which represents the weighted average shares issued in connection with the merger over approximately a 10-month period. As of March 31, 2021, we had approximately 185 million shares that were issued and outstanding. Adjusted EBITDA was $128 million in the first quarter of 2021 compared to $60 million in the first quarter of 2020 and $93 million in the first quarter of 2019. Topgolf contributed adjusted EBITDA of $15 million for the four-week period. To provide some additional perspective, The Topgolf first quarter 2021 EBITDA, the full three months was $17 million. The golf equipment segment's net revenue increased $85 million or 29% to, $377 million in the first quarter of 2021, compared to $292 million in the first quarter of 2020. Both golf club and golf ball sales increased by 26% and 50%, respectively. The golf equipment segment operating income was $85 million or 22.5% of net revenues in the first quarter of 2021 compared to $59 million or 20.2% of net revenues in the first quarter of 2020, an increase of $26 million or 230 basis points. The apparel, gear and other segment's net revenue increased $31 million or 21% to $182 million in the first quarter of 2021 compared to $151 million in the first quarter of 2020. The increase was driven by a 23% increase in apparel sales as well as an 18% increase in gear and accessories and other. The apparel, gear and other segment's operating income increased $24 million to $20 million compared to a loss of $4 million for the same period in the prior year. In 2021, this equated to 11% of segment revenue, a 1,360-basis-point improvement over the first quarter of 2020. The Topgolf segment net revenue was $93 million in the first quarter of 2021, which includes four weeks of the Topgolf business. The Topgolf segment's operating income was $4 million for the four-week stub period. To provide investors additional perspective, Topgolf's full first quarter net revenues were $236 million and full first quarter GAAP operating loss was $30 million and on a non-GAAP basis, Topgolf's operating loss was 15 million. As of March 31, 2021, available liquidity was $713 million compared to $260 million at the end of the first quarter. At March 31, 2020, we had total net debt of $1,160 million, including 640 million of Topgolf related net debt. The Topgolf debt includes landlord financing of $222 million related to financing the venues business. Our consolidated net accounts receivable was $329 million, an increase of 27% compared to $260 million at the end of the first quarter of 2020. Days sales outstanding decreased slightly to 61 days on March 31, 2021, compared to 62 days as of March 31, 2020. The increase in net accounts receivable primarily is attributable to the increase in first quarter revenue, but also includes an incremental $9 million of accounts receivable. Also, this on Slide 13, our inventory balance decreased by 19% to $336 million at the end of the first quarter of 2021 compared to 413 million at the end of the first quarter of the prior year. The $77 million decrease was due to the high demand we are experiencing in the golf equipment business, recovery of our soft goods businesses, as well as inventory reduction efforts in the soft goods business. Capital expenditures for the first quarter of 2021 were $29 million. This includes $16 million related to Topgolf. From a full-year 2021 forecast perspective, the legacy Callaway forecast is increasing to approximately $65 million versus the previous forecast of 50 million due to capacity investments in our plants and warehouses, as well as increasing the number of play in TravisMathew retail stores. The full year and 12-month forecast for Callaway and Topgolf is approximately $265 million, driven primarily by the new venue openings. If you include Topgolf for only 10 months, that would be approximately $235 million. Depreciation and amortization expense was $20 million in the first quarter of 2021. Non-GAAP depreciation and amortization expense was $17 million in the first quarter of 2021 compared to $8 million in 2020. This includes $9 million of non-GAAP depreciation and amortization related to Topgolf. To help give investors additional perspective, the Topgolf full Q1 non-GAAP depreciation and amortization was $27 million. For the full year of 2021, we expect non-GAAP depreciation and amortization expense to be approximately $155 million, which includes 115 million for the Topgolf business. We are not providing specific revenue and earnings guidance ranges for 2021 at this time due to the continued uncertainty surrounding the duration and impact of COVID-19. This negatively impacted gross margins for the golf equipment business in the first quarter of 2021 by approximately 85 basis points and will continue to affect comparisons with prior periods for the balance of the year as prior periods were not changed. We previously estimated that the freight container shortage was expected to have a negative impact of $13 million on freight costs in 2021, with a substantial majority affecting the first half. At this point, the impact of COVID-19 in our overall freight cost is expected to be greater than the 13 million, with more costs hitting the balance of the year than originally expected. We also previously estimated that operating expenses for the legacy Callaway business would be approximately $78 million higher than in 2019 due to the negative impact of foreign currency inflationary pressures and continued investment in the company's business, which included investment needed to assume the apparel business, investment in the other soft goods businesses and investment in Pro Tour. Given the faster-than-expected recovery of both businesses, and with all three of our operating segments performing above plan in the first quarter, we now project that revenue and adjusted EBITDA from our legacy businesses will exceed 2019 levels, and then our Topgolf business for the full 12 months of 2021 will meet or exceed 2019 levels, which is a year faster than expected. As a reminder, in 2019, the Calllaway legacy business reported revenue of $1.7 billion and adjusted EBITDA of $211 million. For full year 2019, that's 12 months. The Topgolf business reported revenue of $1.06 billion and adjusted EBITDA of $59 million in 2019. Please note that Callaway's actual reported full year financial results will only include 10 months of Topgolf results in 2021, and therefore, will not include January and February results which were in the aggregate, $143 million in revenue and $2.3 million in adjusted EBITDA.

With those factors in mind, I will now provide some specific financial results for the first quarter of 2021 compared to the first quarter of 2020. Earnings per share was $2.19 or approximately 125 million shares in the first quarter of 2021 compared to earnings of $0.30 or approximately 96 million shares in the first quarter of 2020. Non-GAAP earnings per share was $0.62 in the first quarter of 2021 compared to earnings per share of $0.32 for the first quarter of 2020. We are not providing specific revenue and earnings guidance ranges for 2021 at this time due to the continued uncertainty surrounding the duration and impact of COVID-19.

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Since we spoke in April, commodity inflation has spiked higher and our supply chain has been challenged. We're also navigating historic levels of demand volatility in Consumer Tissue. We've taken decisive action to offset the impact of raw material inflation. Excluding North American Consumer Tissue, our organic sales were up 4%. Personal Care organic sales were up 6% globally, driven by a 4% volume increase. In D&E markets, personal care organic sales were up 8% with very strong market share performance, including in China, Brazil throughout Eastern Europe, India, Peru and South Africa.

Since we spoke in April, commodity inflation has spiked higher and our supply chain has been challenged. We're also navigating historic levels of demand volatility in Consumer Tissue. We've taken decisive action to offset the impact of raw material inflation. Excluding North American Consumer Tissue, our organic sales were up 4%.

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But I would be remiss if I didn't mention that RLI overcame many challenges during the last 12 months and delivered strong results. Our gross premiums were up 7%. GAAP equity grew to $1.1 billion after returning more than $87 million to shareholders during the year. And we achieved a 92 combined ratio. That 92 combined marks the 25th consecutive year of underwriting profit for RLI. Last night, we reported fourth quarter operating earnings of $0.75 per share. We achieved 10% top line growth and posted an 88 combined ratio. Overall, strong net and comprehensive earnings drove book value per share up 22% for the year, inclusive of dividends, to end the year at $25.16. Pricing momentum continued in a number of our products and the pandemic's influence was muted in the quarter, with casualty posting 9% top line growth, while property and surety were up 15% and 2%, respectively. From an underwriting perspective, we posted a fourth quarter combined ratio of 88.0 compared to 92.4 a year ago. Our loss ratio declined 3.5 points to 45.8 as reserve benefits offset 6.5 points of hurricane losses posted in the quarter. This resulted in recording another $3.5 million in COVID-19-related pre-tax losses, $2.5 million in casualty and $1 million in surety. Year-to-date, reserves established for COVID-19 totaled $18 million. By segment, amounts recorded totaled $2 million for property, $3 million for surety and $13 million for casualty. To date, we have paid less than $10,000 in actual indemnity losses on what we deem as COVID-related. Over 90% of claims received have been closed without payment, but we continue to investigate and review all claims submitted. Offsetting reserve additions in the quarter were approximately $25 million in net benefits from prior year's reserve releases, largely within the casualty segment, where the majority of products posted favorable experience. Our quarterly expense ratio remained below last year, down 0.9 points to 42.2. I would note, however, on a year-to-date basis, our expense ratio was 40.8, down 1.8 points compared to last year. Public equities were responsible for most of the quarter's 3.2% return. We ended the year with $1.1 billion in shareholders' equity, our combined ratio was 92.0 for 2020, which, as Jon mentioned, represents our 25th consecutive year of reporting an underwriting profit. Once again, operating income and solid investment performance resulted in capital generation in excess of current needs, which was returned to shareholders in the form of $1 special dividend in December. With special dividends, we have returned over $1.1 billion in dividends to our shareholders over the last decade. We reported our 25th consecutive year of underwriting profit and grew top line by 7%. A great quarter overall, with an 88 combined ratio on 10% top line growth. In our casualty segment, we saw 9% top line growth for the quarter and ended the year up 6%. We were able to achieve a very good underwriting result for the quarter and the year with an 85 and 92 combined ratio, respectively. And as a result, we realized a 25% revenue decline for the quarter and 40% for the year. Overall, in the casualty segment, rates were up 11% for the quarter and 10% year-to-date, which is outpacing our expectations for loss cost inflation. In property, we grew 15% in the quarter and 11% year-to-date. Obviously, a tough year with a dozen name storms making landfall in the U.S. Property business is where the market is hardening most broadly, with rates up 11% across the segment for the quarter and the year. Our catastrophe-focused wind and quake businesses led the way and year-to-date rates were up 35% and 18%, respectively. Our Marine business continues to find opportunities from disruption at Lloyd's, with rates up 9% for the quarter and year-to-date. We were able to grow the top line 2% this quarter but did end up the year down 1%. The combined ratio continues to outperform at an 85 for the quarter and 75 year-to-date. During her first 25 years on earth, she grew up with the Spanish flu, the first World War, the spread of polio and The Great Depression. Like my grandmother who lived to the age of 92, we have also been resilient and will persevere. Our company has overcome many extraordinary challenges over the last 25 years of its existence but still delivered underwriting profit every year.

Last night, we reported fourth quarter operating earnings of $0.75 per share.

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Q4 total revenue increased 7% year-over-year, with non-GAAP earnings per share up over 8%. We finished fiscal 2021 with $11.8 billion in total revenue and non-GAAP earnings per share of $7.20 a share. We also continue to see momentum with key communication service providers, such as NTT DOCOMO and Telia increasing their focus on VMware solutions, as well as new and expanded contracts with additional Tier 1 communication service providers globally. The group will bring together approximately 2,000 professionals across a variety of industries with expertise in hybrid cloud and cloud migrations, cloud-native and application modernization, as well as security. In FY '21, VMware was recognized by top industry analyst firms as a leader in 13 key reports across cloud management, networking, hyperconverged infrastructure and end-user computing. From a broader corporate perspective, I'm personally pleased to highlight that we recently unveiled our 2030 agenda, which encapsulates how we will drive ESG goals into every aspect of our business. Our 2030 agenda is integrated into the business and is focused on three business outcomes; trust, equity, and sustainability. In Q4, the combination of subscription, SaaS, and license revenue grew 8% year-over-year to $1.721 billion. We saw large enterprise demand strength throughout the quarter, which allowed us to close a record 35 deals over $10 million. Subscription and SaaS revenue increased 27% year-over-year for the quarter, with strong growth in our VMware Cloud Provider Program, end-user computing, Carbon Black, and VMware Cloud on AWS offerings. As of the end of Q4, ARR for subscription and SaaS was $2.9 billion, an increase of 27% year-over-year. License revenue for the quarter declined 2% year-over-year to $1.014 billion. Non-GAAP operating income increased 8% year-over-year in Q4 to $1.133 billion, primarily driven by better-than-expected revenue growth. Non-GAAP operating margin for the quarter was 34.4%, with non-GAAP earnings per share of $2.21 on a share count of 423 million diluted shares. We ended the quarter with $10.3 billion in unearned revenue and $4.7 billion in cash, cash equivalents, and short-term investments. Cash flow from operations for fiscal 2021 was $4.4 billion, which was well ahead of our expectations. Q4 cash flow from operations was $1.324 billion and free cash flow was $1.242 billion. For Q4, RPO was $11.3 billion, up 10% on a year-over-year basis and current RPO was $6.2 billion, up 12% year-over-year. Total backlog was $93 million, substantially all of which consist of orders received on the last day of the quarter that were not shipped that day and orders held due to our export control process. License backlog at quarter-end was $23 million. Core SDDC product bookings increased 12% year-over-year in Q4, highlighted by strength in our vRealize management offerings, which are now available both on a perpetual and SaaS basis. EUC's ACV SaaS growth rate was 30% year-over-year in Q4, driven primarily by Horizon and our initiatives related to anywhere workspace. Our Tanzu portfolio exceeded expectations and had a strong attach rate in eight of the top 10 VMware deals in Q4. In Q4, we repurchased 2.7 million shares in the open market at an average price of $140 per share. At the end of Q4, we've utilized over $1.4 billion from our current repurchase authorization of $2.5 billion. We expect total revenue of approximately $12.700 billion or a growth rate of 8%, which is consistent with the early outlook provided on our last call. We expect to generate approximately $6.300 billion from the combination of subscription of SaaS and license revenue or an increase of 12% with approximately 55% of this amount from subscription in SaaS. We expect non-GAAP operating margin of 28% with non-GAAP earnings per share of $6.68 under diluted share count of 422 million shares. As I mentioned earlier, we had very strong cash flow from operations in Q4 due to a number of initiatives that resulted in exceeding our cash flow guidance by over $650 million. Taking that into account for FY 2022, we currently expect cash flow from operations of $3.8 billion and free cash flow of $3.42 billion. For Q1, we expect total revenue of approximately $2.910 billion or a growth rate of 6%. We expect approximately $1.320 billion from combined subscription and SaaS and license revenue in Q1, an increase of 7% year-over-year, with over 55% of this amount from subscription and SaaS. We expect non-GAAP operating margin of 27.5% for Q1, with non-GAAP earnings per share of $1.49 on a diluted share count of 422 million shares.

In Q4, the combination of subscription, SaaS, and license revenue grew 8% year-over-year to $1.721 billion. Non-GAAP operating margin for the quarter was 34.4%, with non-GAAP earnings per share of $2.21 on a share count of 423 million diluted shares.

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Over the trailing 12 months, Darling's Ingredients business has generated in excess of $4 billion in sales and now more than $1 billion of combined adjusted EBITDA. Darling opportunistically repurchased approximately $76 million of common stock during the second quarter because we believe that our Diverse Green Global business will continue to appreciate in value in the near future. In total, our Global Ingredients business generated approximately $222 million of EBITDA and DGD produced $132 million, which is our half, making our combined adjusted EBITDA just shy of $354 million for the second quarter. We are very excited about the anticipated start-up of the new 400 million gallon renewable diesel expansion in Norco. We are approximately 60 days from the largest project of its kind to begin producing, one of the greenest hydrocarbons on the planet. Also, we are pleased that the start-up of the 470 million gallon renewable diesel plant located in Port Arthur, Texas has now moved through the first half of 2023 for start-up. Once Port Arthur is online, the DGD platform will have 1.2 billion gallons of renewable diesel production capacity and 50 million gallons of Green gasoline capability. Net income for the second quarter of 2021 total a $196.6 million or $1.17 per diluted share compared to net income of $65.4 million or $0.39 per diluted share for the 2020 second quarter. Net sales increased 41.2% to $1.2 billion for the second quarter of 2021 as compared to $848.7 million for the second quarter of 2020. Operating income increased 152.4% to $268.3 million for the second quarter of 2021 compared to $106.3 million for the second quarter of 2020. The increase in operating income was primarily due to the $104.3 million increase in gross margin, which was a 48.2% increase in gross margin over the same quarter in 2020. Adding to our operating income improvement was our 50% share of Diamond Green Diesel's net income, which was $125.8 million as compared to $63.5 million for the second quarter of 2020. For the first six months of this year, our gross margin percentage was 26.5% compared to 24.8% for the same period a year ago, which comes out to a 6.8% improvement year-over-year. Depreciation and amortization declined $4.1 million in the second quarter of 2021 compared to the second quarter of 2020. SG&A increased $8.9 million in the quarter as compared to the prior year. Interest expense declined $2.7 million for the second quarter 2021 as compared to the 2020 second quarter. Now turning to income taxes, the Company recorded income tax expense of $55 million for the three months ended July 3, 2021. The effective tax rate is 21.7% which differs from the federal statutory rate of 21% due primarily to biofuel tax incentives, the relative mix of earnings among jurisdictions with different tax rates, and certain taxable income inclusion items in the U.S. base on foreign tax -- foreign earnings. For the six months ended July 3 2021, the Company recorded income tax expense of $83.7 million and an effective tax rate of 19.2%. The Company has also paid $25.3 million of income taxes as of the end of the second quarter. For 2021, we are projecting an effective tax rate of 22% and cash taxes of approximately $20 million for the remainder of this year. Our balance sheet remains strong with our total debt outstanding as of July 3 at approximately $1.44 billion and the bank covenant leverage ratio ended the second quarter at 1.71 times. Capital expenditures were $65.3 million for Q2 2021 and totaled $126.1 million for the first six months of 2021, which is in line with our planned spend of approximately $312 million on capital expenditures for fiscal 2021. Through the first half of 2021, we have produced $638.5 million of combined adjusted EBITDA and we believe based on what we see in our markets at the present time, the second half performance of 2021 will be as strong as the first. DGD has sold 162 million gallons of renewable diesel in the first half of 2021 and with DGD II starting up in Q4, we should see over 200 million gallons sold in the back half of 2021. I do want to point out that we would expect the EBITDA margin per gallon for DGD to normalize back into the original guidance range that we gave you of $2.25 to $2.40 per gallon over the next six months. Earning $2.97 EBITDA per gallon in the first half was well above our expectations. And with margins normalizing in the second half, DGD can still put up EBITDA per gallon north of $2.50 per gallon during all of 2021. With our current Global Ingredients business approaching $800 million of EBITDA for 2021, we believe that our base business could grow in the range of 5% to 10% for 2022. We anticipate that DGD will earn $2.25 per gallon in 2022 and at a 700 million gallon sold rate that puts Darling's half of DGD EBITDA at approximately $800 million. Adding it all up, Darling Ingredients combined adjusted EBITDA for 2022 should be in the range of approximately $1.6 billion to $1.7 billion. For a quick comparison, last year we reported $841.5 million of combined adjusted EBITDA. And I am very confident that they will, because for the last half-year and -- year-and-a-half, our 10,000 employees have delivered stellar results in what has been one of the most challenging environments a business or a community or our people and people around the world have ever faced with the ongoing pandemic.

Net income for the second quarter of 2021 total a $196.6 million or $1.17 per diluted share compared to net income of $65.4 million or $0.39 per diluted share for the 2020 second quarter. Net sales increased 41.2% to $1.2 billion for the second quarter of 2021 as compared to $848.7 million for the second quarter of 2020.

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Local currency sales increased 7% in the quarter, our growth was relatively broad-based throughout the world. Sales were $938 million in the quarter, an increase of 7% in local currency. On the U.S. dollar basis, sales increased 11% as currency benefited sales by 4% in the quarter. On Slide number 4, we show sales growth by region. Local currency sales increased 8% in the Americas, 7% in Europe, and 8% in Asia, rest of the world. Local currency sales increased 12% in China in the quarter. Local currency sales increased 2% in the Americas, 1% in Europe and 3% in Asia/rest of the world. China local currency sales grew 7% in 2020. On Slide number 6, we outlined local currency sales growth by product area. For the fourth quarter laboratory sales increased 12%, industrial increased 1%, with core industrial up 5%, and product Inspection down 5%. Food Retail increased 7% in the quarter. We estimate that we benefited 1% to 2% from COVID tailwinds in the quarter related to our pipette business for covered testing. Laboratory sales increased 5%, industrial declined 1% with core industrial up 2%, and Product Inspection down 7%. Food Retail declined 4% in 2020. Gross margin in the quarter was 59.6%, a 60 basis point increase over the prior-year level of 59%. R&D amounted to $39.9 million, which represents a 6% increase in local currency. SG&A, amounted to $226.4 million, a 5% increase in local currency over the previous year. Adjusted operating profit amounted to $292.8 million in the quarter, which is a 14% increase over the prior year amount of $256.3 million. Operating margins increased 80 basis points in the quarter to 31.2%. Currency benefited operating profit growth by approximately 2%, but actually hurt operating margin expansion by about 50 basis points. Amortization amounted to $14.7 million in the quarter. Interest expense was $9.5 million in the quarter and other income amounted to $3.7 million. We reduced our effective tax rate for the full year from 20.5% to 19.5%. Moving to fully diluted shares, which amounted to $24 million in the quarter and is a 3% decline from the prior year. Adjusted earnings per share for the quarter was $9.26, a 19% increase over the prior year amount of $7.78. Currency benefited adjusted earnings per share by approximately 2% in the quarter. On a reported basis in the quarter, earnings per share was $9.03 as compared to $7.84 in the prior year. Reported earnings per share in the quarter includes $0.12 of purchased intangible amortization and $0.11 of restructuring. We also had 2 offsetting items for income taxes. We had a $0.20 increase due to the difference between our quarterly and annual tax rate due to the timing of stock option exercises. This was offset by a $0.20 benefit from adjusting our tax rate to 19.5% for the first three quarters. Local currency sales increased 2% in 2020 while adjusted operating income increased 8% and adjusted operating margins were up 130 basis points. Adjusted earnings per share amounted to $25.72, an increase of 13% over the prior year amount of $22.77. In the quarter, adjusted free cash flow amounted to $218 million, which is an increase of 20% on a per share basis, as compared to the prior year. DSO declined approximately 3.5 days in the quarter to 36.5 days as compared to the prior year. ITO came in at 4.3 times. For the full year 2020, adjusted free cash flow was $648 million as compared to the prior year amount of $531 million. On a per share basis, this is a 26% increase in earnings flow-through of more than 100%. For the full year 2021, we now expect local currency sales growth will be in the range of 5% to 7% as compared to 2020. We expect full year adjusted earnings per share will be in the range of $29.20 to $29.80, which is a growth rate of 14% to 16%. This compares to previous adjusted earnings per share guidance in the range of $27.50 to $28.30. With respect to the first quarter, we would expect local currency sales growth to be in the range of 11% to 13% and expected adjusted earnings per share to be in the range of $5.55 to $5.70, a growth rate of 39% to 43%. We expect interest expense to be approximately $40 million in 2021 and total amortization to be approximately $55 million. Other income, which is below operating profit, will be approximately $9 million in 2021. As I mentioned earlier, we would expect our effective tax rate in 2021 to also remain at 19.5%. In terms of free cash flow for the year, we expect it to be approximately $690 million. We will continue to repurchase shares and expect to end 2021 in a targeted range of approximately 1.5 times leverage ratio. With respect to the impact of currency on sales growth, we expect currency to increase sales growth by approximately 3.5% in 2021 and 5% in the first quarter. In terms of adjusted EPS, currency will benefit growth by approximately 3% in 2021. In terms of Industrial business, Core Industrial did well in the quarter with a 5% increase driven by double-digit growth in China. Product Inspection came in weaker than we had anticipated with a 5% decline in the quarter. Food retailing came in better than we expected with 7% growth overall and growth in all regions. Sales in Europe increased 7% in the quarter with excellent growth in Lab and good growth in core industrial and food retail. Americas increased 8% in the quarter with excellent growth in Lab offset by flat results in both product inspection and core industrial. Finally, Asia/Rest of the World grew 8% in the quarter with both Lab and Core Industrial doing very well. As mentioned, China have 12% growth in the quarter with excellent growth across product lines. One final comment on the business, Service and Consumables were up 13% in the quarter and 8% for the full year. Our almost 3,000 service technicians are an important competitive advantage for us. Emerging markets, an important growth driver are 35% of sales today compared with 25% in 2007. Similarly, our faster growing Laboratory business is now 54% of sales, up from 44%. Finally, Service and Consumable is now 33% of sales as compared to 28%.

On the U.S. dollar basis, sales increased 11% as currency benefited sales by 4% in the quarter. Laboratory sales increased 5%, industrial declined 1% with core industrial up 2%, and Product Inspection down 7%. Adjusted earnings per share for the quarter was $9.26, a 19% increase over the prior year amount of $7.78. On a reported basis in the quarter, earnings per share was $9.03 as compared to $7.84 in the prior year. For the full year 2021, we now expect local currency sales growth will be in the range of 5% to 7% as compared to 2020. We expect full year adjusted earnings per share will be in the range of $29.20 to $29.80, which is a growth rate of 14% to 16%.

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1 operating challenge for the quarter was supply chain and logistics disruptions. Our teams continue to drive margin improvement through 80/20 simplification, lean effort and through sound capex deployment. We deployed just over $575 million in the first half of the year with our acquisitions of ABEL Pumps, Airtech and a small investment in a digitalization technology start-up within the fire and rescue space. While we've stepped up our M&A game, we're also investing in our existing businesses with a 45% increase in capital spending through the first half of the year. As I mentioned, order strength continued in the second quarter both compared to prior year and sequentially, resulting in a backlog build of $65 million in the quarter. And with its backlog burn last year and significant pullback in customers' capital investments, it impacted FMT's organic sales by 11%. In other words, FMT's organic sales for the quarter would have been 19% instead of 8%. Q2 orders of $751 million were up 44% overall and 39% organically as we built $65 million of backlog in the quarter. Second-quarter sales of $686 million were up 22% overall and 17% organically. Excluding FMD, organic sales would have been up 22%. Q2 gross margin expanded by 280 basis points to 44.6%. Excluding the impact of $1.8 million pre-tax fair value inventory step-up charge related to the ABEL acquisition, adjusted gross margin was 44.9% and was approximately flat sequentially. Second-quarter operating margin was 23.1%, up 340 basis points compared to prior year. Adjusted operating margin was 24.4%, up 330 basis points compared to prior year, largely driven by gross margin expansion and fixed cost leverage, offset by a rebound in discretionary spending and investment. Our Q2 effective tax rate was 21.3%, which was lower than the prior-year ETR of 22.7% due to benefits from foreign sourced income in the second quarter of 2021. Q2 adjusted net income was $123 million, resulting in adjusted earnings per share of $1.61, up $0.51 or 46% over prior-year adjusted EPS. Finally, free cash flow for the quarter was $120 million, down 25% compared to prior year and was 98% of adjusted net income. Adjusted operating income increased $49 million for the quarter compared to prior year. Our 17% organic growth contributed approximately $41 million flowing through at our prior-year gross margin rate. As we return to a spend level, in line with our growth and continued strategic investments, we see year-over-year pressure of about $11 million, in line with the guidance we gave at the beginning of the year. Even with the incremental spend, supply chain and operational issues that tempered our performance, we still achieved a robust 45% organic flow-through. Flow-through is then negatively impacted by the dilutive impact of acquisitions and FX, getting us to our reported flow-through of 39%. For the third quarter, we are projecting earnings per share to range from $1.57 to $1.61. We expect organic revenue growth of 14% to 16% and operating margins of approximately 24 and a half percent. The third quarter effective tax rate is expected to be 23% and we expect a 1% top-line benefit from the impact of FX. And corporate costs in the third quarter are expected to be around $21 million. Turning to the full year. We are increasing our full-year earnings per share guidance from our previous range of $6.05 to $6.20, up to $6.26 to $6.36. This range includes Airtech, which will contribute $0.06 in the second half of 2021, roughly $0.03 a quarter. We are also increasing our full-year organic revenue growth from 9% to 10% up to 11% to 12%. We expect operating margins of approximately 24 and a half percent. We expect FX to provide a 2% benefit to top-line results. The full-year effective tax rate is expected to be around 23%. Capital expenditures are anticipated to be around $65 million, an increase of around $10 million versus our last call as we increase our investments in growth opportunities. Free cash flow is expected to be 110% to 115% of net income, lower versus our last guide, primarily due to the additional capital spending and higher working capital to support our increased volume. And corporate costs are expected to be approximately $77 million for the year. Once completed next month, this collection of solar panels will be about one-third the size of the European soccer field and provide 30% of the electricity needs for the facility. Not only will it help reduce our carbon footprint there, we estimate it will save the business more than EUR 67,000 in just the first year alone. The IDEX Foundation also paid $100,000 to the German Red Cross, which has thousands of people in the region assisting those impact.

Q2 adjusted net income was $123 million, resulting in adjusted earnings per share of $1.61, up $0.51 or 46% over prior-year adjusted EPS. For the third quarter, we are projecting earnings per share to range from $1.57 to $1.61. We expect organic revenue growth of 14% to 16% and operating margins of approximately 24 and a half percent. Turning to the full year. We are increasing our full-year earnings per share guidance from our previous range of $6.05 to $6.20, up to $6.26 to $6.36. We are also increasing our full-year organic revenue growth from 9% to 10% up to 11% to 12%.

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On a consolidated basis, we posted record third quarter revenues of $3.1 billion, up 21% and record third quarter gross profit of $472 million, up 25%, driven by strong performance across the board and new used fixed operations in F&I. Going beyond our top line growth, our third quarter results continue to validate our permanent expense reductions, achieving record third quarter SG&A expense as a percentage of gross profit of just 68.1%. On a Franchised Dealerships segment basis, though, SG&A as a percentage of gross profit was just 60.1%, a 760-basis point decrease year-over-year and down from 76.9% in the third quarter of 2019. Turning to earnings, we reported record third quarter pre-tax income from continuing operations of $112 million, up 39% year-over-year and earnings from continuing operations of $85 million or $1.96 per diluted share. Diving deeper into our core Franchised Dealerships segment, third quarter 2021 revenues were $2.4 billion compared to $2.2 billion in the prior year, which reflects the ongoing recovery in consumer demand we've seen since the high since pandemic. On a same-store basis, Franchised Dealerships third quarter revenues were up 11% year-over-year, while gross profit improved by 27%, driven by a record new and used vehicle gross per unit, a 21% increase in customer pay fixed operations gross profit and all-time record Franchised segment F&I gross profit per retail unit, up $2,303, up 27% from the third quarter of 2020. Our Franchised Dealerships new vehicle inventory was approximately 2,400 units or just a 10-day supply down from nearly 13,000 new vehicles at this same time last year. Comparatively, used vehicles inventory was in line with our target level of 27 days supplying or 8,200 units. We reported all-time record quarterly revenues of $663 million, up 72% from the prior year and representing our fifth consecutive quarter of record EchoPark revenues. We achieved record third quarter EchoPark retail sales volume of 21,255 units, up 41% year-over-year. During the third quarter of 2021, EchoPark market share increased 110 basis points to approximately 4% of the one to four year-old vehicle segment in our current markets. At the end of the quarter, EchoPark used vehicle inventory was approximately 9,800 units for a 41-day supply. For the third quarter, we reported an EchoPark pre-tax loss of $32.9 million and adjusted EBITDA loss of $28.5 million. This includes new market-related losses of $18 million and $16.8 million, respectively. With our progress today, we remain confident in attaining our goals of 25% population coverage by the end of 2021 and 90% population coverage by 2025. We recently announced several strategic acquisitions to further accelerate our growth plans In September, we signed a definitive agreement to acquire RFJ Auto Partners, a top 15 U.S. dealer group by total revenues. With 33 locations in seven states and a portfolio of 16 automotive brands, the transaction will add six incremental states to Sonic's geographic coverage and five additional brands to our portfolio, including the highest volume, Chrysler Dodge Jeep RAM dealer in the world and Dave Smith Motors. This acquisition, which is expected to close in December of this year, is projected to add $3.2 billion in annual revenues to the company, which are an incremental to Sonic's previous stated target of $25 billion in total revenues by 2025. We ended the third quarter with $618 million in available liquidity, including approximately $320 million in cash and 425 was on hand. More recently in connection with our pending acquisition of RFJ Auto, we announced a significant upside to our credit facilities, increasing total capacity to $2.95 billion and completed an oversubscribed senior note offering with an aggregate principal amount of $1.15 billion, capitalizing on the favorable market conditions and an upgraded corporate credit rating to refinance our existing debt maturities at attractive terms with lower borrowing costs. Lastly, given our strong balance sheet, I'm pleased to report that our Board of Directors approved a quarterly cash dividend of $0.12 per share, payable on January 14, 2022, to all stockholders of record as of December 15, 2021.

On a consolidated basis, we posted record third quarter revenues of $3.1 billion, up 21% and record third quarter gross profit of $472 million, up 25%, driven by strong performance across the board and new used fixed operations in F&I. Turning to earnings, we reported record third quarter pre-tax income from continuing operations of $112 million, up 39% year-over-year and earnings from continuing operations of $85 million or $1.96 per diluted share.

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I could not have asked for a better partner than Andy who has served Loews with complete dedication for the last 50 years. The company's underlying combined ratio decreased by 1.5 points, driven by the expense ratio, which was 30.7% compared to 31.8% in the prior year quarter. The underlying loss ratio was also lower at 60.2% compared to 60.5% in the prior year. CNA's P&C gross written premiums increased by 10% and net written premiums increased by 5%. CNA had pre-tax investment income of $513 million, pretty much flat with the prior year's quarter. When it opens in early 2024, the hotel will have 888 rooms and over 250,000 square feet of meeting and event space. The two Arlington Hotels combined will offer nearly 1,200 guestrooms and more than 300,000 square feet of meeting and event space and these properties offer unique local experiences and are equally attractive to leisure and good customers. For the third quarter, the occupancy rate for owned and joint venture hotels was almost 72% as opposed to about 35% in the first quarter of this year. Our resort hotels continue to do considerably better than our properties in urban settings, and about 60% of Loews Hotels' rooms are in resort destinations. The company currently has $9 billion of revenue backlog with a weighted average contract life of seven years. From July 1 through last Friday, we repurchased 6.2 million shares of Loews common stock for just over $337 million. Year-to-date, we've bought back 15.7 million shares for $830 million, which is 5.85% of the shares outstanding at the beginning of the year. For the third quarter, Loews reported net income of $220 million or $0.85 per share compared to net income of $139 million or $0.50 per share in last year's third quarter. CNA contributed net income of $229 million, up from $192 million in Q3 2020. The combination of a 6% increase in net earned premium and a 1.5 point improvement in the underlying combined ratio led to a 27% increase in CNA's underlying underwriting gain, which excludes cat losses and prior year development. Net cat losses in the quarter were $178 million pre-tax, including $114 million for Hurricane Ida. Last year's Q3 cat losses were modestly lower at $160 million pre-tax driven by three Southeast hurricanes and the Midwest derecho. CNA's expense ratio, which just a few years ago hovered in the mid-30s, came in below 31%, down from 31.8% in Q3 2020 and 31.6% last quarter. This is the lowest expense ratio posted by CNA in about 13 years. Last year, the company booked a net reserve charge of $83 million pre-tax for its long-term care and structured settlement books of business. This year, the comparable number was a net reserve release of $38 million pre-tax as CNA had no change in its long-term care active life reserve, a $40 million pre-tax release from its long-term care claims reserve, and a de minimis charge related to structured settlements. CNA ended the quarter with total assets of $66.5 billion, shareholders' equity of $12.7 billion and consolidated statutory surplus of approximately $11.1 billion. Boardwalk contributed net income of $38 million, up from $20 million in Q3 2020. Boardwalk's EBITDA, which is shown and defined in our quarterly earnings supplement, was $186 million in the quarter and $635 million year-to-date. Through nine months, natural gas transportation throughput increased by more than 11% year-over-year across the system. Loews Hotels contributed net income of $13 million; a dramatic improvement from the $47 million net loss posted in Q3 2020. Adjusted EBITDA, which is defined in our earnings supplement and excludes non-recurring items, rebounded from a $38 million loss last year to a positive $59 million in Q3 2021; close to $100 million swing. The year-over-year improvement was driven by a dramatic revenue increase as all properties, including all 9,000 rooms at the Universal Orlando Resort, were open for the full quarter. This was the first time all 9,000 rooms in Orlando were open for a full quarter. On Page 11 of our quarterly earnings supplement, there is a good snapshot of Loews Hotels year-over-year and sequential operational improvement, which highlights the drivers of the company's revenue increases during this COVID period. We have invested $32 million in Loews Hotels year-to-date, all in the first quarter. The parent company's investment portfolio generated a pre-tax net investment loss of $30 million as compared to income of $23 million last year. The parent company portfolio of cash and investments stood at $3.6 billion at quarter end with about 80% in cash and equivalents. During the quarter, as Jim mentioned, we repurchased 6.2 million shares of our common stock for $333 million and we received about $92 million in dividends from CNA. After quarter end, we spent less than $5 million repurchasing our stock. As of last Friday, there were under 254 million shares of Loews common stock outstanding, down about 6% since the beginning of the year and about 25% over the past five years.

For the third quarter, Loews reported net income of $220 million or $0.85 per share compared to net income of $139 million or $0.50 per share in last year's third quarter.

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During the third quarter, we delivered 8.5% global retail sales growth, excluding foreign currency impact, driven by a combination of store growth and same store sales. That 8.5% result was lapping a 14.8% from the third quarter of 2020. The third quarter extended our unmatched streak of international same store sales growth to 111 consecutive quarters. While our 41 quarter streak of positive same store sales in the U.S. ended during the quarter, I'm pleased that we still grew our U.S. retail sales during the quarter, while rolling over 21.3% retail sales growth in Q3 2020. During the quarter, we also accelerated our pace of global store growth on a trailing four-quarter basis, we have opened 1124 net new stores, that's an increase of 500 relative to where we were in Q4 2020. Overall, Domino's team members and franchisees around the world continue to generate healthy operating results, leading to a diluted earnings per share of $3.24 for Q3. Global retail sales excluding the positive impact of foreign currency grew 8.5% in Q3 as compared to Q3 2020. Breaking down total global retail sales growth, U.S. retail sales grew 1.1% rolling over a prior year increase of 21.3%. International retail sales excluding the positive impact of foreign currency grew 16.5% rolling over a prior year increase of 8.5%. During Q3, we continued our streak of 111 consecutive quarters of positive international comps. Same store sales for our international business grew 8.8% rolling over a prior year increase of 6.2%. The U.S. comp was negative in Q3 following 41 straight quarters of positive same store sales growth. Same store sales in the U.S. declined 1.9% in the quarter rolling over a 17.5% increase in same store sales in Q3 of 2020, the highest quarterly U.S. comp we have ever achieved since becoming a publicly traded company in 2004. Breaking down the U.S. comp, our franchise business was down 1.5% in the quarter, while our company-owned stores were down 8.9%. Shifting to unit count, we and our franchisees added 45 net stores in the U.S. during the third quarter, consisting of 46 store openings and only one closure. Our international business added 278 net stores comprised of 287 store openings and 9 closures. Total revenues for the third quarter were up approximately $30.3 million or 3.1% over the prior year quarter. Changes in foreign currency exchange rates positively impacted our international royalty revenues by $1.3 million in Q3. Our consolidated operating margin as a percentage of revenues increased to 38.6% in Q3 2021 from 37.4% in the prior year, due primarily to higher revenues from our global franchise businesses. Company-owned store margin as a percentage of revenues was flat year-over-year at 19.8%. Supply chain operating margin as a percentage of revenues increased to 10.7% from 10.2% in the prior year quarter. While the market basket increased 2.1% year-over-year, higher product and supplies expenses related to certain COVID related safety and sanitizing equipment negatively affected the supply chain operating margin in Q3 2020, which did not recur in the current quarter. G&A expenses increased approximately $4.7 million in Q3 as compared to Q3 2020 resulting from higher travel and labor costs, including higher non-cash compensation expense, partially offset by lower professional fees. Net interest expense increased approximately $7.1 million in the quarter, driven by a higher average debt balance due to our recent recapitalization transaction completed in Q2. Our weighted average borrowing rate for Q3 decreased to 3.8% from 3.9% in Q3 2020 due to lower interest rates on our outstanding debt as a result of this recapitalization transaction. Our effective tax rate was 10.7% for the quarter as compared to 19.9% in Q3 2020. The effective tax rate in Q3 2021 included a 10.4 percentage point positive impact from tax benefits on equity-based compensation. This compares to a 2.8 percentage point positive impact in Q3 2020. Combining all of these elements, our third quarter net income was up $21.3 million or 21.5% versus Q3 2020. Our diluted earnings per share in Q3 was $3.24 versus $2.49 in the prior year quarter. Breaking down that $0.75 increase in our diluted EPS, most notably, our improved operating results benefited us by $0.36. Our lower effective tax rate, primarily due to higher tax benefits on equity based compensation positively impacted us by $0.34. A lower diluted share count driven by share repurchases over the trailing 12 months benefited us by $0.19 and higher net interest expense negatively impacted us by $0.14. During Q3, we generated net cash provided by operating activities of approximately $189 million. After deducting for capex, we generated free cash flow of approximately $172 million. Regarding our capital expenditures, we spent approximately $17 million on capex in Q3, primarily on our technology initiatives, including our next-generation point-of-sale system and our new supply chain center. As we discussed on the Q2 earnings call, we completed our $1 billion accelerated share repurchase transaction during Q3. Subsequent to the settlement of the ASR, during Q3, we repurchased and retired approximately 153,000 shares for $80 million or an average price of $521 per share. As of the end of Q3, we had approximately $920 million remaining under our current Board authorization for share repurchases. We have continued to repurchase and retire shares subsequent to the end of the quarter and through October 12, we had repurchased and retired an additional 205,000 shares for approximately $100 million or an average price of $488 per share. We also returned $35 million to our shareholders during Q3 in the form of a $0.94 per share quarterly dividend. We previously provided guidance that our store food basket pricing in our U.S. system would increase approximately 2.5% to 3.5% over 2020 levels. We previously provided guidance that foreign currency could have a $4 million to $8 million positive impact on royalty revenues as compared to 2020. We previously provided guidance of $415 million to $425 million for G&A expense. We continue to expect that our full year capex investments will be approximately $100 million. Recall that the 53rd week last year contributed an incremental $0.39 to our earnings per share in Q4 2020 due to the additional week of revenues and the costs attributable to the 53rd week. Retail sales grew 1.1% in the third quarter, lapping a 21.3% increase from Q3 2020. Our 1.9% same store sales declined during the quarter, was offset by the positive impact of 232 net new stores that we have opened over the trailing four quarters. Our 45 net new stores in Q3 was a sequential improvement over Q2, but still came in softer than we would like to see. At 15.6% for Q3, we saw a sequential decline of the two-year stack when compared to the second quarter, bringing us back more in line with the two-year stack we saw in Q1 of this year. In fact, we have many stores across the country that are consistently below 1 minute. Just this past Monday, we went on air to launch three great new products to support our signature $7.99 carryout offer. During this campaign, one out of every 14 digital delivery orders receives a free item. Over the course of the campaign, Domino's and our franchisees will give away $50 million worth of surprise frees to delivery customers. Our 16.5% international retail sales growth, excluding foreign currency impact, was supported by a very strong 8.8% comp. When you look at it on a trailing four-quarter basis, excluding the impact of foreign currency and the 53rd week of 2020, Domino's International retail sales grew by 16.2%. Q3 represented a 15% two-year stack, which was very consistent with the second quarter. Our international master franchisees opened 278 net new stores during the quarter, which increased the trailing four-quarter pace to 892 stores for the international business. This acceleration and international store growth combined with our U.S. store growth has driven the global pace of store growth back into our two to three-year outlook range of 6% to 8% global net unit growth. I was also very pleased to see that we had only nine closures in international and only 10 closures on a global basis during the quarter. At the end of the quarter, we estimate Domino's had fewer than 175 temporary store closures, with many of those located in India and New Zealand. We successfully converted 52 stores in Poland as Dominion pizza rebranded to become part of the Domino's family. This provides important scale for us in Poland, fast-forwarding us to 119 total stores in the market at the end of the third quarter. We now have 24 international markets with 100 or more Domino's stores. India resumed an impressive pace of store growth, while becoming the first Domino's market outside the U.S. to reach 1400 stores.

Overall, Domino's team members and franchisees around the world continue to generate healthy operating results, leading to a diluted earnings per share of $3.24 for Q3. Same store sales for our international business grew 8.8% rolling over a prior year increase of 6.2%. Same store sales in the U.S. declined 1.9% in the quarter rolling over a 17.5% increase in same store sales in Q3 of 2020, the highest quarterly U.S. comp we have ever achieved since becoming a publicly traded company in 2004. Our diluted earnings per share in Q3 was $3.24 versus $2.49 in the prior year quarter. Our 1.9% same store sales declined during the quarter, was offset by the positive impact of 232 net new stores that we have opened over the trailing four quarters. Our 16.5% international retail sales growth, excluding foreign currency impact, was supported by a very strong 8.8% comp.

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Focusing on the fourth quarter of 2021, our FFO per share was $0.51, in line with market consensus. Portfolio operating metrics were solid with same-store NOI on a cash basis increasing 5.8%. We leased approximately 400,000 square feet, generated a 3% increase in second-generation cash rents and executed an average lease term of six and a half years, illustrating the longer-term view taken by most of our customers. Overall, leasing activity remained robust and well dispersed across the portfolio with over 40 leases and amendments executed during the fourth quarter. Today, our leasing pipeline stands at over 500,000 square feet of negotiations. And we're trading LOIs on an additional 1 million square feet, which positions Piedmont for space absorption in 2022 and with only about 1 million square feet of existing leases expiring or about 6% of the portfolio. For example, during the past year in our Burlington submarket, three competitive Class A buildings comprising over 400,000 square feet have been repurposed to labs, helping to push net effective rents for office space to pre-pandemic levels. As an example, during the fourth quarter, we signed a 55,000 square foot lease at our Connection Drive property in Dallas to serve as the new corporate headquarters of an undisclosed Fortune 500 company. And in that same market during the second quarter, we signed a 44,000 square foot lease to serve as the corporate headquarters for a large national beverage distributor. However, net effective rents are approximately 2% to 5% lower. For example, JLL Research noted that 84% of Atlanta leasing activity in the fourth quarter was in Class A or trophy product. In Orlando, net effective rents are still trailing pre-pandemic levels by about 5% as a result of increased concessions. I would add, we are fortunate to have limited vacancy and near-term lease expirations at our 60 Broad Street property in Lower Manhattan and virtually no expirations at our Washington, D.C. properties for more than two years. Piedmont leased almost 2.3 million square feet, which was in line with our average pre-COVID annual leasing levels. In addition, the increase in second-generation cash rents was seven and a half percent, which helped increase same-store cash NOI for the year by almost 7%. And finally, our tenant retention ratio was in line with prior years at approximately 70%. Looking ahead, approximately 750,000 square feet of tenant leasing has yet to commence as of this year-end or is in some form of abatement. This backlog creates organic growth opportunities going into 2022 associated with approximately $26 million in future annualized cash rents. In addition, approximately 60% of the portfolio's vacancy and 85% of 2022's lease expirations resided in our Sunbelt properties, where we are experiencing the greatest level of leasing velocity. We are currently in discussions on a pipeline of over $1 billion of high-quality assets primarily for properties in our Sunbelt markets. In addition, new construction costs have escalated by 15% to 20% versus pre-pandemic pricing driven by an increase in both raw materials and labor. In 2021, we completed over $50 million of incremental investment in our properties, upgrading assets to remain best-in-class within their respective submarkets. During the quarter, we expanded our Atlanta market footprint with the acquisition of 999 Peachtree Street. As you all know, the 999 acquisition marks our entry into Midtown Atlanta submarket. The iconic Class A LEED-Platinum 28-story building, a 622,000 square feet with 77% leased at acquisition. We purchased it for $360 a square foot, which we estimate is over 40% below replacement cost. We're working with Gensler, a tenant at the building to complete the redesign of 999s arrival experience in public spaces, including a modernized and expanded lobby, energized outdoor space and other enhanced amenities, which will complete over the next 12 to 18 months, and we'll revitalize this asset in a fraction of the time and cost of new construction. With a 10-foot glass window line across 70% of the facade this asset will effectively compete against new construction at a fraction of the cost with an expected all-in basis in the low $400 per square foot versus new product costing in excess of $650 per square foot, creating substantial pricing leverage for our building when compared to that new development. The $224 million acquisition of 999 is being funded through multiple dispositions. Immediately after quarter end, the disposition of 225 and 235 presidential Way in Boston closed in a reverse 1031 exchange for $129 million or a mid-5s cap rate. The acquisition of 999 Peachtree Street during the fourth quarter as well as the completion of two non-core dispositions just after the quarter end, now makes Atlanta our largest market based on annualized lease revenue. Adjusting our lease percentage for the disposition transactions our pro forma lease percentage as of December 31 would have been 87%. Additionally, approximately 63% of our annualized lease revenue is now generated from our Sunbelt properties and our goal is to have 70% to 75% of our ARR generated by our Sunbelt markets before the end of 2023. Looking back on 2021, core FFO for the year was $1.97 per diluted share, a 4% increase over 2020 and in excess of the upper end of our original guidance range for the year. This growth in core FFO overcame an approximately 1% reduction in our overall lease percentage on a year-over-year basis. The decrease in occupancy was driven by several factors: Reduced leasing activity during 2020 in the first half of 2021 as a result of the pandemic, a number of sizable lease expirations at recently acquired properties in Atlanta and Dallas that were underwritten as part of their respective acquisitions and the purchase of the 77% leased 999 Peachtree Street property. After incorporating the just completed disposition activity in January of 2022, our pro forma lease percentage as of December 31 would have been 87%. We reported $0.51 per diluted share of core FFO for the quarter. That's an 11% increase over the fourth quarter of 2020. Our core FFO achievement during the fourth quarter also reflects the repurchase of approximately 1 million shares of our common stock at an average price of $17.76 per share during the quarter, leaving approximately $150 million in board authorized capacity under our share repurchase program. As is often the case, gap typically just dictates early recognition of potential losses and the decision to shorten the hold period for this asset did result in the recognition of a $41 million impairment charge that is included in our fourth quarter results of operations. On the flip side, the sale of 225, 235 presidential Way will result in the recognition of an estimated $50 million gain during the first quarter of 2022 when the sell closed. AFFO generated during the fourth quarter was approximately $39 million, which is well above our current $26 million quarterly dividend level. Our board has indicated that given our cash NOI growth over the last few years, the fact that we're approaching the conclusion of the large construction restacking project for the State of New York at 60 Broad, and the time since our last dividend increase, they will be reviewing our dividend payout amount during 2022. Our annual debt -- net debt to core EBITDA ratio as of the end of the fourth quarter of 2021 was 5.7 times and we reported $210 million of unused capacity on our line of credit. Taking into consideration the completed disposition activity occurring right after year-end, with the net sales proceeds received in January, our current available capacity on our $500 million line of credit is approximately $320 million, with an approximate $120 million more expected later this quarter from the payoff of a note receivable. Adjusting for the application of proceeds from the two closed January sales, our pro forma debt to gross asset ratio at year-end would have been approximately 35%. Finally, we're introducing 2022 annual financial guidance for core FFO in the range of $1.97 to $2.07 per diluted share. It also assumes a neutral amount of asset recycling during the year with about $350 million to $450 million each of acquisitions and additional dispositions. This net neutral activity excludes the recently completed sales of the presidential Way assets and Two Pierce Place property that were used to fund the 999 Peachtree Street acquisition. The guidance assumes general and administrative expenses in the range of $29 million to $31 million for the year. Our same-store cash NOI growth is expected to be flat for the year with a number of abatements occurring during 2022 due to the lease renewals and newly commencing leases such as 160,000 square foot renewal at 1155 Perimeter Center West in Atlanta, and a 56,000 square foot lease at 400 Virginia in Washington, D.C. As well as downtimes between leases associated with new tenant build-outs, such as a 67,000 square-foot lease at 5 and 15 Wayside in Boston and a 44,000 square foot lease at One Lincoln in Dallas. Accrual-based store NOI is expected to grow from 1% to 3% during the year. Likewise, our lease percentage is expected to grow to approximately 88%. But again, this estimate is subject to the lease percentages of the properties involved was $350 million to $450 million of potential recycling transactions completed during the year.

Focusing on the fourth quarter of 2021, our FFO per share was $0.51, in line with market consensus. We reported $0.51 per diluted share of core FFO for the quarter. Finally, we're introducing 2022 annual financial guidance for core FFO in the range of $1.97 to $2.07 per diluted share.

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Total revenue was $167 million, an increase of 43% from the second quarter, driven by a nearly 10-point sequential increase in occupancy at an average rate for the comparable portfolio that not only grew 13% from the second quarter of 2021, but was also just above the third quarter of 2019. While occupancy increased to nearly 55% and benefited from growth in all segments, transient demand remained a standout, with room nights increasing 27% compared to the second quarter. Our total portfolio third quarter average daily rate was $30 higher than the second quarter and even when excluding Montage Healdsburg, which ran a very robust average daily rate of nearly $1,250, our comparable portfolio ADR of just over $248 in the third quarter came in higher than 2019 levels. In fact, Oceans Edge saw rates increase in astonishing 103% as compared to 2019 and Wailea Beach Resort vested their pre-pandemic rate by 40%. In addition to a stronger rate performance, out-of-room spend also increased with food and beverage revenues higher by 79% in the third quarter as compared to the second quarter, representing a 47% increase in food and beverage spend per occupied room. Banquet and catering contribution per occupied group room increased over the second quarter by $96 and achieved approximately 70% of 2019 levels. Combined with stronger ADR, the growth in nonrooms revenue generated a quarterly comparable TRevPAR of $207, a 41% increase from $146 achieved in the second quarter. Year-to-date, we have eliminated nearly $11 million of costs from our hotels, which we believe will be lasting savings and can be sustained, even as business levels and occupancies increase. During the quarter, our comparable hotels generated hotel EBITDA margins of 24.3%. While this is below the low 30% range we maintained historically, delivering mid-20% margins at a portfoliowide occupancy of just below 55% is a significant accomplishment and gives us confidence that we will be able to achieve higher stabilized margins once demand returns to a more normalized level. While strong demand for leisure travel seems to be well established at this point, in fact, Saturday of Labor Day weekend was our portfolios highest demand night of the year, with occupancy of 84% at an average rate of nearly $275. While total group room nights for the quarter increased only marginally from the second quarter to 82,000 nights. Corporate group activity in the quarter grew nearly 30%, and the association business was more than five times higher than the previous quarter and generated 24,000 room nights. The Renaissance Orlando, Hilton San Diego and JW Marriott New Orleans, had a substantial increase in association and corporate group business and the Wailea Beach Resort experienced a meaningful return of incentive business, with 8,000 incentive room nights at a very attractive rate of nearly $600 compared to 6,700 room nights and a rate of $400 in the same quarter of 2019. Approximately 9% of our third quarter group room nights canceled, which were primarily for events in August and September, and approximately 16% of our fourth quarter group rooms canceled, which were primarily for events in October. For our five large group hotels, which make up 2/3 of our fourth quarter room nights, 77% of our forecasted group room nights have already been picked up. Moving on to transient, which accounted for roughly 75% of our total room nights in the third quarter. Total transient rate for the third quarter came in at $285 compared to $261 in the second quarter, an increase of more than 9%. The number of special corporate rooms increased 103% from the second quarter with rates higher by 20%. While our third quarter business transient volume was only 50% of pre-pandemic levels, future transient booking pace continues to grow every week and we expect this to accelerate into 2022 as companies increasingly return to the office and business transient travel becomes more widespread. The ability to achieve premium pricing has been most evident in our resort properties with Montage Healdsburg achieving a rate of approximately $1,250 for the quarter, and Oceans Edge in Wailea Beach Resort seeing rate increases of 103% and 40%, respectively, compared to the third quarter of 2019. Wailea continues to command a strong TripAdvisor rating despite a $185 higher rate than third quarter of 2019, an impressive achievement, especially given its luxury peers. Our preliminary results for the month show a reacceleration of demand with RevPAR of approximately $150 made up of occupancy of 57% and a $264 average daily rate. October RevPAR is second only to our peak month of July and is above August and September by nearly 10% and 14%, respectively. We invested $25 million into our portfolio in the third quarter with a focus on enhancing the quality and future earnings potential of the portfolio. In July, we completed work on Boston Park Plazas newest meeting space, The Square, a 7,000 square foot indoor space that will give the hotel incremental capacity to host in-house group business and reduce its reliance on citywide events. Additionally, in San Diego, we converted unused space into 6,800 square feet of new, high-quality meeting space that looks out onto the San Diego Bay. First, we completed the sale of the 348-room Renaissance Westchester for gross proceeds of approximately $19 million. This hotel was a noncore asset in a challenged market that lacks sufficient demand to Marriott reopening after operations were suspended at the onset of the pandemic The net proceeds from the sale, after the payment of termination fees and severance costs, was approximately $11 million and the disposition removes an asset that was expected to be a drag on cash flow and growth going forward. Next, we are under contract to sell the 340-room Embassy Suites La Jolla for $226.7 million or approximately $667,000 per key. Net proceeds after the mortgage loan are expected to be approximately $165 million. We are acquiring the resort for a gross purchase price of $177.5 million, a meaningful discount to its development cost. In addition to the 85-room resort and its abundant event space and full suite of luxury amenities, the acquisition price also includes nearly 4.5 acres of vineyards and the Elusa Winery along with the inventory of prior wine vintages. Between the Four Seasons and the Montage, we will have approximately 10% of our asset value in one of the most supply constrained sought after and highest-rated leisure destinations in the country. We will own the two premier assets and establish a market-leading position in Wine Country with ownership of approximately 24% of the luxury room inventory and 32% of the luxury event space. As of the end of the third quarter, we had approximately $222 million of total cash and cash equivalents, including $42 million of restricted cash. In addition to cash on hand, we also maintained full availability on our $500 million revolving credit facility, which equates to over $700 million of total existing liquidity. As Bryan mentioned earlier, net cash proceeds from the sale of Embassy Suites La Jolla are expected to be approximately $165 million after the buyers assumption of the existing $57 million mortgage loan. Third quarter adjusted EBITDAre was $35 million and third quarter adjusted FFO was $0.10 per diluted share. During the third quarter, we recognized $1.6 million of restoration expense and an impairment charge of $1 million as a result of damage incurred at our two hotels in New Orleans following Hurricane Ida. The Hilton New Orleans, St. Charles sustained the bulk of the damage, and we are working with our insurers to identify and settle a property damage claim, but we expect that future losses from the restoration work at this hotel will be mitigated by the propertys insurance deductible of approximately $3 million.

Third quarter adjusted EBITDAre was $35 million and third quarter adjusted FFO was $0.10 per diluted share.

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The company reported record quarterly net income of $312 million or $1.67 per share. This improvement was evidenced in our current accident year combined ratio ex-cats of 88.8% and strong investment income and net investment gains, which contributed to an annualized quarterly return on equity of 20.6%. Growth in our gross premiums written accelerated through the year, with fourth quarter representing growth of 9.3%. Similarly, net premiums written grew by 8.2% to approximately $1.8 billion in the quarter. All lines of business grew in the insurance segment, with the exception of workers' compensation, increasing net premiums written by 7.2% to approximately $1.6 billion. Professional liability led this growth with 29.6%, followed by commercial auto of 20.6%, other liability of 10.6% and short-tail lines of 2%. Growth in the reinsurance and Monoline Excess segment was 16.8%, bringing net premiums written to $205 million. Casualty reinsurance led this growth with 21.2%, followed by 9.3% in property reinsurance and 6% in Monoline Excess. Rate improvement, along with lower claims frequency and non-cap property losses contributed to our improvement in underwriting income of 44.2% to $165 million. We recognized $42 million of total catastrophe losses in the quarter or 2.3 loss ratio points, of which, 1.5 loss ratio points relates to COVID-19. The current quarter's natural cat losses compare favorably with the prior year quarter of $20 million, or 1.2 loss ratio points. The reported loss ratio was 61.3% in the current quarter, compared with 62.4% in 2019. Prior year loss reserves developed favorably by $4 million or 0.2 loss ratio points in the current quarter. Accordingly, our current accident year loss ratio, excluding catastrophes, was 59.2% compared with 61.4% a year ago. Rounding out the combined ratio, we benefited from an improving expense ratio of 1.3 points to 29.6%. We continue to benefit from growth in net premiums earned at 5.6%, which outpaced an increase in underwriting expenses of 1.2%. This contributes a benefit of more than 50 basis points to the expense ratio. Net investment income for the quarter increased 32% to approximately $181 million. The increase was driven by investment fund income of $53 million due to market value adjustments and arbitrage trading income of $26 million, in large part coming from investments in special purpose acquisition companies. In addition, we continue to maintain a cash and cash equivalent position of approximately $2.4 billion, enabling us to maintain a relatively short duration of 2.4 years and significant liquidity. Pre-tax net investment gains in the quarter of $163 million is primarily attributable to realized gains of $127 million and changes in unrealized gains on equity securities of $36 million. As previously announced, the realized gain was largely driven by the sale of a real estate investment in New York City, which resulted in a gain of $105 million. In the quarter, our unrealized currency translation loss improved by $66 million, resulting in a net equity pick up of approximately $47 million. As a reminder, expenses included a non-recurring cost of $8.4 million relating to the redemption of our $350 million subordinated debentures in the quarter. Stockholders equity increased 5.3% in the quarter and book value per share before share repurchases and dividends increased 6.1%. We ended the year with more than $6.3 billion in stockholders equity, after share repurchases of approximately 6.4 million shares for $346 million at an average price per share of $54.43 and ordinary dividends totaling $84 million. That brings total return to shareholders of $430 million in the year. Finally, the company had strong cash flow from operations in the quarter of $480 million and more than $1.6 billion for the full year, an increase of more than 41%. When we look at the marketplace, is it what we saw at least at this stage in ‘86. And whether it will prove to be similar to what we saw in sort of late 2001 and 2002 and 2003, we’ll only see with the time, but the reality is no cycle looks like any other cycle. As you may have picked up in the release ex-comp, we got 15.5-ish points of rate. In the quarter, if you go back a year earlier to Q4 2019, we were getting just shy of 9 points of rate, Q4 2018, 4 points of rate, Q4 2017, 2.3, Q4 2016, we got a point of rate. Turning to our quarter, as Rich referenced, pretty healthy growth on the top-line, the growth was up about 9%, the net was up about 8%. So you're getting 15 points a rate in this quarter or so. One, the 15 basis points benefit, if you will, that the expense ratio is getting as a result of a reduction of activity on our end with travel and entertainment, and so on. Penciling in on average, give or take 25 million a quarter is what we've suggested to people in the past. As we have suggested to people there are going to be moments when the funds do great, there are going to be moments where the funds are lagging a little bit but on average, we suggested that people pencil in high teens, call it 20 million a quarter. Rich mentioned and I know we've talked about this last quarter how the duration is sitting there at about 2.4 years. But the simple fact is that if you move rates up, call it our modeling 100 basis points or so, the impact on a quarterly basis, we will pick up after-tax give or take maybe $5 million. But if you move rates up 100 basis points, the impact on book value will be approximately $160 million.

The company reported record quarterly net income of $312 million or $1.67 per share. Growth in our gross premiums written accelerated through the year, with fourth quarter representing growth of 9.3%.

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We've achieved a 130 basis point sequential increase in occupancy and a meaningful rebound in same-center NOI. Same-center NOI in the second quarter was up 88% compared to the second quarter of 2020 and represents 93% of the same period in 2019. Average tenant sales productivity grew to $424 per square foot for the trailing 12 months of 7.3% from $395 per square foot with the comparable 2019 period. On a same-center basis, average tenant sales increased 5.5%. Consolidated portfolio occupancy at quarter end was 93%, a 130 basis point increase from the end of the first quarter. We have recaptured 80,000 square feet of space due to bankruptcies and retailer restructurings through the end of the second quarter and shortly after we captured an additional 55,000 square feet, which was expected and represents negotiated early terminations for our legacy outlet brands where we collected lease termination fees. Leasing activity continues to accelerate with over 300 new leases and renewals totaling 1.6 million square feet of leasing that commenced during the last 12 months. As of the ended the quarter, renewals executed or in process represented 54% of the space scheduled to expire during the year. This revenue is captured in the other revenues line, which year-to-date is up 88% from last year and 26% over 2019. Second quarter core FFO available to common shareholders was $0.43 per share compared to $0.10 per share in the second quarter of 2020. Core FFO for the second quarter of 2021 includes $0.02 per share dilution from the shares issued to date and excludes a charge of $14 million or $0.13 per share for the early extinguishment of debt since we redeemed $150 million of our 2023 bonds. Same-center NOI for the consolidated portfolio increased 87.6% for the quarter as the prior year reflects reductions in rental revenues due to the pandemic along with higher variable rents driven by better than expected tenant sales performance this year. We have collected approximately 98% of contractual fixed rents build in the first half of 2021. Through July 30, 2021, we had collected 98% of the 2020 deferred rents due to be repaid in the first half of 2021. We issued 3.1 million common shares that generated $58 million in net proceeds at a weighted average price of $18.85 per share. Year-to-date, we sold 10 million shares and raised $187 million of equity at an average price of $18.97 per share. As previously announced, on April 30, we completed the partial early redemption of $150 million aggregate principal amount of our 3.87% senior notes due December 2023 for $163 million in cash. Subsequent to the redemption, $100 million remains outstanding. We also paid down our unsecured term loan by an additional $25 million in June, bringing the outstanding balance to $300 million. Additionally, in July, we amended and extended our unsecured lines of credit, pushing the maturity date to July 2026 including extension options and providing borrowing capacity of $520 million within an accordion feature to increase capacity to $1.2 billion. For the full year 2021, we expect core FFO to be in the range of $1.52 and $1.59 per share, up from our prior expectations of $1.47 to $1.57. This guidance reflects continued sequential improvement in our business, offset by the additional dilution of approximately $0.02 per share related to the common shares sold in the second quarter, which is an addition to the $0.4 of dilution from the first quarter issuances included in our prior guidance. Our guidance includes the 135,000 square feet of space we have recaptured-to-date through the end of July, along with potential for an additional 65,000 square feet related to bankruptcies and brandwide restructuring for the remainder of the year.

Second quarter core FFO available to common shareholders was $0.43 per share compared to $0.10 per share in the second quarter of 2020. For the full year 2021, we expect core FFO to be in the range of $1.52 and $1.59 per share, up from our prior expectations of $1.47 to $1.57.

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I'm happy to report that we have brought a significant number of these mountaineers back to work to serve our customers, and we now have over 90% of our employees working regularly. Second, utilizing our global scale as well as 70 years of customer trust to deliver a differentiated data center offering. Their old process was too manual and it could no longer support the volume of work, much less scale to meet the credit Union's 30% year-over-year growth projection. With these changes, the credit union can now process post-close mortgage loans much faster, more than doubling their capacity while reducing their costs by 25%. Total organic storage rental revenue growth accelerated modestly from last quarter, up 2.5%. Total global organic volume increased 2 million cubic feet sequentially. Contributing to this was 3 million cubic foot increase in consumer and other and fine art storage, partly offset by a decrease in records management volume. Looking more specifically at records management organic volume, this was down 1.1 million cubic feet compared to the second quarter. While still a decline, this is a significant improvement from the 3.9 million cubic foot decline last quarter, again, reflecting the early signs of recovery. We continue to expect the full-year organic volume to be down 1 to 1.5% and up 2.5% in terms of organic revenue based on current visibility. In Q3, we leased 12.3 megawatts, bringing the year-to-date total to just over 51 megawatts. The strong leasing this year, particularly among smaller deployments, has resulted in increase in our utilization by more than seven points to nearly 92%. Given the need for additional capacity, we have increased our development pipeline to approximately 50 megawatts, consisting of both greenfield development and further build out of existing facilities. Moreover, in excess of 50% of our development is pre-leased, resulting in a strong backlog. Our transformation program is progressing well, and we are on track to realize our permanent structural cost savings of $375 million per year exiting next year. I am proud to say we achieved a perfect score of 100 on the Human Rights Campaign Foundation's 2020 Corporate Equality Index. Revenue of $1.04 billion declined 2.4% on a reported basis year on year, which includes a 30 basis point impact from foreign exchange. Total organic revenue declined 3.4%. Organic service revenue declined 13.5%, reflecting the continued COVID impact on our activity levels. Despite the macro headwinds, total organic storage rental revenue grew 2.5%, driven by three points of revenue management and data center growth partially offset by a 30-basis-point decline in global organic volume on a trailing 12-month basis. Adjusted EBITDA was $370 million. Adjusted EBITDA margin expanded 30 basis points year on year to 35.7%. Adjusted earnings per share was $0.31, down $0.01 from last year. AFFO declined 5.4% to $213 million. This was partially offset by storage volume growth in our faster-growing markets and revenue management, which led to a total organic revenue decline of 3.9%. Back, together with better than planned project Summit benefits resulted in adjusted EBITDA margin expansion of 110 basis points. In the service business, we experienced year-on-year declines of approximately 31% for new boxes inbounded and 39% for retrievals and refiles. We also continue to see a slowdown on the outgoing side as permanent withdrawals declined to 28% and destructions were down 22%. In our thread business, activity declined approximately 17%. For the third quarter, our average realized paper price was 20% higher than the prior year, which was more than offset by a decline in paper tonnage, leading to a net $3 million reduction in adjusted EBITDA. The business delivered organic revenue growth of 12.1%, driven by prior period leasing and strong service revenue growth. This was partially offset by a moderate churn of 160 basis points, in line with our target of 1 to 2% per quarter. In the quarter, we booked a nonrecurring revenue adjustment of $1.8 million. Adjusted EBITDA margin of 45.8% was consistent with our first half trend. As Bill noted, our data center team continued to deliver strong bookings momentum, signing over 12 megawatts of new and expansion leases, bringing year-to-date bookings of 51 megawatts. For the full year, we expect to deliver more than 55 megawatts of new and expansion leasing, representing bookings growth of 45%. And excluding that, we would expect bookings growth of about 23%. This compares to our original guidance of 15 to 20 megawatts or mid-teens bookings growth. We believe we can lease in excess of 20 megawatts next year, which would result in mid-teens annual bookings growth. In October, we announced the formation of our joint venture with AGC Equity partners, a greater than EUR 300 million partnership for our fully pre-leased data center in Frankfurt. In the third quarter, we recognized $48 million of restructuring charges as well as an adjusted EBITDA benefit of $48 million. Through the first nine months, we have delivered $113 million of benefit. As Bill referred to, we now expect the program to deliver adjusted EBITDA benefits of $165 million in 2020, approximately $150 million more in 2021 with the full program generating $375 million exiting 2021. In terms of costs related to Project Summit, we now expect to spend closer to $200 million in 2020. We continue to expect the cost to implement the full program to be approximately $450 million. In August, the team executed another successful bond refinancing, issuing $1.1 billion to redeem our most restrictive outstanding debt and pay down a portion of the outstanding balance under our revolving credit facility. Taken together with our bond offerings in CIN, we issued $3.5 billion of new debt on a leverage-neutral basis, increased our weighted average maturity by over two years to nearly eight years, while only modestly increasing our weighted average cost of debt. At quarter end, we had $1.7 billion of liquidity. We paid off the notes in early July, leaving us with a cash balance at September 30 $152 million. We ended the quarter with net lease-adjusted leverage of 5.3 times, which takes into account adjustments as described in our credit facility. Looking ahead, we expect to end the year with leverage of approximately 5.3 times, which would represent an improvement year on year as we made progress toward our long-term leverage range. With our strong financial position, our board of directors declared our quarterly dividend of $0.62 per share to be paid in early January Turning to capital expenditures. Our full-year expectation is now approximately $450 million, or a decrease of $75 million, reflecting development capital for our FIFO data center that will now be a part of our venture with AGC. With that, in the third quarter, our team accessed the market and monetized two facilities for proceeds of approximately $110 million. This brings our year-to-date proceeds to nearly $120 million, ahead of our full-year target of $100 million. This outlook includes a full-year headwind from foreign exchange rates approaching $60 million for revenue and $20 million for adjusted EBITDA. Our full-year expectations for tax rate and shares outstanding remain unchanged from our prior commentary.

Our transformation program is progressing well, and we are on track to realize our permanent structural cost savings of $375 million per year exiting next year. Revenue of $1.04 billion declined 2.4% on a reported basis year on year, which includes a 30 basis point impact from foreign exchange. Adjusted earnings per share was $0.31, down $0.01 from last year. As Bill referred to, we now expect the program to deliver adjusted EBITDA benefits of $165 million in 2020, approximately $150 million more in 2021 with the full program generating $375 million exiting 2021. Our full-year expectations for tax rate and shares outstanding remain unchanged from our prior commentary.

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Nick has led many of Oliver Wyman's major practices in his 23 years with the business and I look forward to seeing Oliver Wyman continue to grow and thrive under his leadership. Our adjusted earnings per share increased by an impressive 33%, and we generated margin expansion despite challenging expense comparisons. The Marsh Global Insurance Market Index showed price increases of 13% year-over-year versus 18% in the first quarter. Global property insurance was up 12% and global financial and professional lines were up 34%, driven in part by steep cyber increases, while global casualty rates are up 6% on average and U.S. workers' compensation rates declined modestly in the quarter. Guy Carpenter's global property catastrophe rate online index increased 6% at midyear. We generated adjusted earnings per share of $1.75, which is up 33% versus a year ago, driven by strong top line growth and continued low levels of T&E. Total revenue increased 20% versus a year ago and rose 13% on an underlying basis, the highest quarterly growth in two decades. Underlying revenue grew 13% in RIS and 12% in consulting. Marsh grew 14% in the quarter on an underlying basis, the highest quarterly underlying growth in nearly two decades and benefited from stronger business and renewal growth. Guy Carpenter grew 12% on an underlying basis in the quarter, continuing its string of excellent results. Mercer underlying revenue grew 6% in the quarter, the highest in almost a decade. Oliver Wyman posted record reported underlying revenue growth of 28%. Overall, the second quarter saw adjusted operating income growth of 24%, and our adjusted operating margin expanded 90 basis points year-over-year. With 9% underlying revenue growth year-to-date, our full year growth will be strong. Highlights from our second quarter performance included the strongest underlying growth at Marsh since the first quarter of 2003; the strongest at Guy Carpenter in 15 years; solid rebound at 6% at Mercer; and record reported underlying growth at Oliver Wyman. Consolidated revenue increased 20% in the second quarter to $5 billion, reflecting underlying growth of 13%. Operating income in the quarter was $1.2 billion, an increase of 39% over the prior year. Adjusted operating income increased 24% to $1.2 billion, and our adjusted operating margin increased 90 basis points to 26.4%. GAAP earnings per share was $1.50 in the quarter and adjusted earnings per share increased 33% to $1.75. For the first six months of 2021, underlying revenue growth was 9%, and adjusted operating income grew 22% to $2.6 billion. Our adjusted operating margin increased 170 basis points. Our adjusted earnings per share increased 26% to $3.74. Second quarter revenue was $3.1 billion, up 21% compared with a year ago or 13% on an underlying basis. Operating income increased 37% to $950 million. Adjusted operating income increased 22% to $927 million, and our adjusted operating margin expanded 30 basis points to 32.4%. For the first six months of the year, revenue was $6.4 billion, with underlying growth of 10%. Adjusted operating income for the first half of the year increased 19% to $2 billion with a margin of 34.5%, up 110 basis points from the same period a year ago. At Marsh, revenue in the quarter was $2.7 billion, up 23% compared with a year ago, 14% on an underlying basis. Even excluding the impact of the revenue adjustment we reported a year ago, underlying revenue at Marsh was up 12%. The U.S. and Canada region delivered another exceptional quarter with underlying revenue growth of 15%, the highest result since we began reporting this segment. In international, underlying growth was 13%, EMEA was up 16%, Asia Pacific was up 10% and Latin America grew 2%. For the first six months of the year, Marsh's revenue was $5 billion, with underlying growth of 11%. U.S. and Canada underlying growth was 12% and international was up 9%. Guy Carpenter's second quarter revenue was $488 million, up 13% compared with a year ago or 12% on an underlying basis. Guy Partner has now achieved 7% or higher underlying growth in six of the last eight quarters. For the first six months of the year, Guy Carpenter generated $1.4 billion of revenue and 8% underlying growth. In the Consulting segment, revenue in the quarter was $1.9 billion, up 17% from a year ago or 12% on an underlying basis. Operating income increased 35% to $344 million. Adjusted operating income increased 34% to $356 million, and the adjusted operating margin expanded by 220 basis points to 19.5%. Consulting generated revenue of $3.8 billion for the first six months of 2021, representing underlying growth of 8%. Adjusted operating income for the first half of the year increased 31% to $726 million. Mercer's revenue was $1.3 billion in the quarter, up 6% on an underlying basis, representing a meaningful acceleration from the first quarter. Career grew 15% on an underlying basis, reflecting the rebound in the economy and business confidence. Wealth increased 4% on an underlying basis, reflecting strong growth in investment management offset by a modest decline in defined benefit. Our assets under delegated management grew to $393 billion at the end of the second quarter, up 28% year-over-year and 3% sequentially, benefiting from net new inflows and market gains. Health underlying revenue growth was 4% in the quarter, driven by strength internationally. Oliver Wyman's revenue in the quarter was $618 million, an increase of 28% on an underlying basis. For the first six months of the year, revenue at Oliver Widen was $1.2 billion, an increase of 19% on an underlying basis. Adjusted corporate expense was $62 million in the second quarter. However, the net benefit credit was $71 million in the quarter. Investment income was $19 million in the second quarter on a GAAP basis and $18 million on an adjusted basis and mainly reflects gains on our private equity portfolio. Interest expense in the second quarter was $110 million compared to $132 million in the second quarter of 2020, reflecting lower debt levels in the period. Based on our current forecast, we expect approximately $110 million of interest expense in the third quarter. Our adjusted effective tax rate in the second quarter was 24.4% compared with 25% in the second quarter last year. Excluding discrete items, our effective adjusted tax rate was approximately 25.5%. Our GAAP tax rate was 31.6% in the second quarter, up from 26.2% in the second quarter of 2020. The increase reflects a $100 million impact from the revaluation of deferred tax liabilities due to an increase in the U.K. statutory tax rate that goes into effect in 2023. Through the first half of the year, our adjusted effective tax rate was 24.4% compared with 24% last year. Based on the current environment, we continue to expect an adjusted effective tax rate between 25% and 26% for 2021, excluding discrete items. We ended the quarter with $10.8 billion of total debt. This reflects repayment of $500 million of senior notes in April, which completed our JLT-related deleveraging. Our next scheduled debt maturity is in January of 2022 when $500 million of senior notes mature. We continue to expect to deploy approximately $3.5 billion and possibly more capital in 2021, of which at least $3 billion will be deployed across dividends, acquisitions and share repurchases. Last week, we raised our dividend 15%, which is the largest increase since the third quarter of 1998. We also repurchased 2.4 million shares of our stock for $322 million in the second quarter. Our cash position at the end of the second quarter was $888 million. Uses of cash in the quarter totaled $993 million and included $241 million for dividends, $322 million for share repurchases and $430 million for acquisitions. For the first six months, uses of cash totaled $1.4 billion and included $478 million for dividend, $434 million for share repurchases and $473 million for acquisitions.

We generated adjusted earnings per share of $1.75, which is up 33% versus a year ago, driven by strong top line growth and continued low levels of T&E. GAAP earnings per share was $1.50 in the quarter and adjusted earnings per share increased 33% to $1.75.

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Altogether, the team delivered core earnings per share of $1.68 and revenue of $7.6 billion, resulting in a core operating margin of 4.6%, a 40 basis point increase year on year. You'll see management's outlook for the year. We've increased core earnings per share to $7.25, an increase of nearly 30% year on year. As for revenue, FY '22 now looks to be in the range of $32.6 billion, up more than 10% year on year. In addition, we remain committed to delivering a minimum of $700 million in free cash flow for the year, while increasing core operating margin to 4.6%, a 40 basis point improvement year on year. Given the higher revenue, I'm particularly pleased with our ability to drive an extra 30 basis points of margin improvement compared to our expectations in December mainly through broad-based strength in several key end markets benefiting from long-term secular trends as well as outstanding execution by our business, operations, and supply chain teams. For the quarter, revenue was approximately $7.6 billion, up 10.6% over the prior-year quarter and ahead of the midpoint of our guidance from December. Our GAAP operating income during the quarter was $313 million, and our GAAP diluted earnings per share was $1.51. Core operating income during the quarter was $344 million, an increase of 21% year over year, representing a core operating margin of 4.6%, up 40 basis points over the prior year. Core diluted earnings per share was $1.68, a 32% improvement over the prior-year quarter. Revenue for our DMS segment was $3.8 billion, an increase of 4% on a year-over-year basis. Core margin for the segment came in at 5.1%. Revenue for our EMS segment came in at $3.8 billion, an increase of 19% on a year-over-year basis. Core margin for the segment was 4%, up 90 basis points over the prior year, reflecting improved mix and solid execution by the team. In Q2, inventory days came in at 86 days. Net of these inventory deposits, inventory days was 71 in Q2. In spite of these two factors impacting inventory, our second quarter cash flows from operations were very robust, coming in at $246 million, and net capital expenditures totaled $201 million. From a total debt to core EBITDA level, we exited the quarter at approximately 1.3 times and with cash balances of $1.1 billion. During Q2, we repurchased approximately 2.3 million shares for $145 million. And for the year, we've repurchased 4.4 million shares for $272 million, as we remain committed to returning capital to shareholders. DMS segment revenue is expected to increase 17% on a year-over-year basis to approximately $4.2 billion, while the EMS segment revenue is expected to increase 11% on a year-over-year basis to approximately $4 billion. We expect total company revenue in the third quarter of fiscal '22 to be in the range of $7.9 billion to $8.5 billion. Core operating income is estimated to be in the range of $300 million to $360 million, representing a core margin range of 3.8% to 4.2%. At the midpoint, this is an improvement of 20 basis points over the prior year and down sequentially, reflecting planned investments in our Q3 quarter. In Q3, GAAP operating income is expected to be in the range of $276 million to $336 million. Core diluted earnings per share is estimated to be in the range of $1.40 to $1.80. GAAP diluted earnings per share is expected to be in the range of $1.24 to $1.64. The core tax rate in the third quarter is estimated to be approximately 21%. We've seen this rapid acceleration manifest in top-line revenue growth in excess of 50% this year alone in our automotive end market. We're now anticipating core earnings per share will be in the neighborhood of $7.25 per share on revenue of approximately $32.6 billion. Notably, this incremental revenue will improve mix and drive operating leverage, thereby giving us the confidence to raise our core margin by 10 basis points to 4.6% for FY '22, as we continue to drive the organization to 5% and beyond. Importantly, for the year, we also remain committed to generating in excess of $700 million in free cash flow, in spite of the higher revenue and associated working capital.

Altogether, the team delivered core earnings per share of $1.68 and revenue of $7.6 billion, resulting in a core operating margin of 4.6%, a 40 basis point increase year on year. You'll see management's outlook for the year. For the quarter, revenue was approximately $7.6 billion, up 10.6% over the prior-year quarter and ahead of the midpoint of our guidance from December. Our GAAP operating income during the quarter was $313 million, and our GAAP diluted earnings per share was $1.51. Core diluted earnings per share was $1.68, a 32% improvement over the prior-year quarter. We expect total company revenue in the third quarter of fiscal '22 to be in the range of $7.9 billion to $8.5 billion. Core diluted earnings per share is estimated to be in the range of $1.40 to $1.80. GAAP diluted earnings per share is expected to be in the range of $1.24 to $1.64. We're now anticipating core earnings per share will be in the neighborhood of $7.25 per share on revenue of approximately $32.6 billion.

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On our top line versus the year-ago period, we grew fourth quarter sales 11%. Our fourth quarter adjusted operating income and adjusted earnings per share both increased 6%, driven by growth from higher sales and CCI-led cost savings, partially offset by cost inflation. Consumer segment sales grew 10%, including incremental sales from our Cholula acquisition. Our Americas sales growth was 13% in the fourth quarter, with incremental sales from our Cholula acquisition contributing 3% growth. Our total McCormick U.S. branded portfolio consumption, as indicated in our IRI consumption data and combined with unmeasured channels, grew 1%, following a 17% consumption increase in the fourth quarter of 2020, which results in a 19% increase on a two-year basis. Focusing further on our U.S. branded portfolio, our 19% consumption growth versus the fourth quarter of 2019 was the seventh consecutive quarter that our U.S. branded portfolio consumption grew double digits versus the two-year ago period. Our Flavor Solutions segment grew 14%, reflecting higher base volume growth in new products as well as pricing actions to partially offset cost inflation and contributions for our FONA and Cholula acquisitions. Notably, for the full year, on a two-year basis, we have driven 19% constant currency growth across the portfolio. We drove record sales growth in 2021, growing sales 13% to $6.3 billion with strong organic sales growth and a 4% contribution from our Cholula and FONA acquisitions. Notably, on a two-year basis, we grew sales 18%, reflecting a robust and sustained growth momentum in both of our segments. Our Consumer segment sales growth of 9% was driven by consumer sustained preference for cooking more at home fueled by our brand marketing, strong digital engagement and new products, as well as growth from Cholula. Versus 2019, we grew sales 20%, which reflects the continuation of consumers cooking and using flavor more at home and the strength of our brands. Our Flavor Solutions segment growth of 19% reflected the strong continued momentum with the at-home products in our portfolio, including a record year of new product growth and a robust recovery from last year's lower demand for away-from-home products as well as contributions from FONA and Cholula. On a two-year basis, we grew sales 15%, driven by the at-home part of our portfolio with demand for the away-from-home portion recovering to pre-pandemic levels. We have consistently driven industry-leading sales growth resulting in McCormick being named to the latest Fortune 500. At year end, our board of directors announced a 9% increase in our quarterly dividend, marking our 36th consecutive year of dividend increases. We have paid dividends every year since 1925 and are proud to be a dividend aristocrat. And just last week, Corporate Knights ranked McCormick in their 2022 Global 100 Sustainability Index as the world's 14th most sustainable corporation, and for the sixth consecutive year, No. 1 in the food products sector. During 2021, we gained significant momentum on top of lapping elevated growth in 2020, adding over one million new households and growing Cholula's consumption 13% in 2021 versus last year. Combined with 19% total distribution point growth in the fourth quarter of 2021, it is clear our plans are driving accelerated growth. 2 hot sauce brand in the U.S., joining Frank's RedHot, the No. 1 ranked brand, at the top of the category. Beverages, with particular strength in the fast-growing performance nutrition category, continued to drive significant growth for FONA up 15% compared to last year. For Cholula, we have achieved the targeted $10 million to be fully realized by 2022. For FONA, we are on track to achieve our targeted $7 million by the end of 2023. Early in 2021, we took the opportunity in a low interest rate environment to optimize our long-term financing following the acquisitions, raising $1 billion through the issuance of five-year 0.9% notes and 10-year 1.85% notes, and therefore, realized lower interest expense than we originally projected. During the fourth quarter, we grew constant currency sales 10%, with higher volume and product mix. Our organic sales growth was 6%, driven by strong growth in both the Consumer and Flavor Solutions segments. And incremental sales from our Cholula and FONA acquisitions contributed 4% across both segments. Versus the fourth quarter of 2019, we grew sales 15% in constant currency with both our Consumer and Flavor Solutions segments growing double digits. During the fourth quarter, our Consumer segment sales grew 9% in constant currency, driven by higher volume and product mix, pricing actions and a 2% increase from our Cholula acquisition. Compared to the fourth quarter of 2019, sales grew 14% in constant currency, led by the Americas. On Slide 21, Consumer segment sales in the Americas increased 13% in constant currency, driven primarily by higher volume and product mix as the sustained shift to at-home consumption continues to drive increased demand as well as lapping last year's capacity constraints. Pricing actions and a 3% increase from the Cholula acquisition also contributed to sales growth. Compared to the fourth quarter of 2019, sales increased 19% in constant currency, driven by broad-based growth across branded products as well as an increase from the Cholula acquisition. In EMEA, constant currency consumer sales declined 5% from a year ago due to lapping the high demand across the region last year. On a two-year basis, sales increased 5% in constant currency driven by growth in spices and seasonings, hot sauce and mustard. Consumer sales in the Asia/Pacific region increased 11% in constant currency due to the recovery of branded foodservice sales in China or away-from-home products and higher sales of cooking at-home products across the region. We grew fourth quarter constant currency sales 12%, including a 7% increase from our FONA and Cholula acquisitions. Compared to the fourth quarter of 2019, Flavor Solutions segment sales grew 16% in constant currency. In the Americas, Flavor Solutions constant currency sales grew 13% year over year, with FONA and Cholula contributing 11%. On a two-year basis, sales increased 15% in constant currency versus 2019, driven by higher sales from acquisitions and packaged food and beverage companies, partially offset by the exit of some lower-margin business in other parts of the portfolio. In EMEA, constant currency sales grew 16% compared to last year due to increased sales to QSRs and branded foodservice customers, as well as continued growth momentum with packaged food and beverage companies. Constant currency sales increased 26% versus the fourth quarter of 2019, driven by strong sales growth with packaged food and beverage companies and QSR customers. In the Asia/Pacific region, Flavor Solutions sales rose 1% in constant currency versus last year and increased 8% in constant currency versus the fourth quarter of 2019, both driven by QSR growth and partially impacted by the timing of our customers' limited time offers and promotional activities. As seen on Slide 28, adjusted operating income, which excludes transaction and integration costs related to the Cholula and FONA acquisitions as well as special charges, increased 6% in the fourth quarter versus the year-ago period with minimal impact from currency. Adjusted operating income in the Consumer segment increased 14%, or in constant currency, 13%. Brand marketing investments, as planned, were 10% lower in the quarter, following an 18% Consumer segment increase in the fourth quarter of last year. For the full year, we increased our brand marketing investments 3%. In the Flavor Solutions segment, adjusted operating income declined 16% or 15% in constant currency. As seen on Slide 29, adjusted gross profit margin declined 150 basis points, driven primarily by the net impact of cost pressures we are experiencing and the phase-in of our pricing actions. Our selling, general, and administrative expense as a percentage of sales declined 70 basis points, driven by leverage from sales growth and the reduction in brand marketing I just mentioned. These impacts netted to an adjusted operating margin decline of 80 basis points, as we had expected. For the fiscal year, adjusted gross profit margin declined 140 basis points, primarily driven by the cost pressures we experienced in the second half of the year and the lag in pricing. Adjusted operating income grew 6% in constant currency with the Consumer segment's adjusted operating income increasing 1% and the Flavor Solutions segment 23%. Adjusted operating margin declined 80 basis points for the fiscal year, driven by the adjusted gross profit margin decline. Our fourth quarter adjusted effective tax rate was 21.3%, compared to 22.9% in the year-ago period. For the full year, our adjusted tax rate was 20.1%, comparable to 19.9% in 2020. Adjusted income from unconsolidated operations declined 40% versus the fourth quarter of 2020 and 5% for the full year. At the bottom line, as shown on Slide 32, fourth quarter 2021 adjusted earnings per share increased to $0.84 from $0.79 in the year-ago period. And for the year, adjusted earnings per share increased 8% to $3.05 for fiscal year 2021. Our cash flow from operations for the year was $828 million. We've returned $363 million of this cash to our shareholders through dividends and used $278 million for capital expenditures in 2021. On the top line, we expect to grow constant currency sales 4% to 6%. Our 2022 adjusted gross margin is projected to range between comparable to 2021 to 50 basis points lower than 2021. We expect to grow our adjusted operating income 8% to 10% in constant currency, which reflects our robust operating momentum, a reduction in COVID-19-related costs and our continuing investment in ERP business transformation. This projection includes inflationary pressure in the mid-teens, a low single-digit increase in brand marketing investments and our CCI-led cost savings target of approximately $85 million. Our 2022 adjusted effective income tax rate is projected to be 22% to 23% based upon our estimated mix of earnings by geography as well as factoring in a level of discrete impacts. This outlook versus our 2021 adjusted effective tax rate is expected to be a headwind to our 2022 adjusted earnings-per-share growth of approximately 3%. Our 2022 adjusted earnings per share expectations reflect strong operating profit growth of 8% to 10% in constant currency, partially offset by the tax headwind I just mentioned. This results in an increase of 4% to 6% or 5% to 7% in constant currency. Our guidance range for adjusted earnings per share in 2022 is $3.17 to $3.22 compared to $3.05 of adjusted earnings per share in 2021.

On our top line versus the year-ago period, we grew fourth quarter sales 11%. We drove record sales growth in 2021, growing sales 13% to $6.3 billion with strong organic sales growth and a 4% contribution from our Cholula and FONA acquisitions. Consumer sales in the Asia/Pacific region increased 11% in constant currency due to the recovery of branded foodservice sales in China or away-from-home products and higher sales of cooking at-home products across the region. In the Americas, Flavor Solutions constant currency sales grew 13% year over year, with FONA and Cholula contributing 11%. For the full year, we increased our brand marketing investments 3%. At the bottom line, as shown on Slide 32, fourth quarter 2021 adjusted earnings per share increased to $0.84 from $0.79 in the year-ago period. Our guidance range for adjusted earnings per share in 2022 is $3.17 to $3.22 compared to $3.05 of adjusted earnings per share in 2021.

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Vicki has been an important driver of TDS Telecom's success over the past 10 years, and she will bring a wealth of experience to her new job. And with fiber available to only 30% of households in the U.S., this represents a great opportunity for us. TDS was founded 50 years ago on a mission of bringing connectivity to unserved and underserved markets, so the introduction of the infrastructure bill brings opportunities for both of our businesses. Since the beginning of 2020, we have raised three and a half billion in new capital, both debt and preferred equity at 4.8% while at the same time redeeming $1.8 billion in debt. That carried a weighted average cost of 6.9%, reducing our average cost from 6.7% to 5%, and resulting in $37 million in annual coupon savings. So far, nearly 30% of our smart phone subscribers have 5G-capable devices. And with the spectrum we acquired in the C-Band and DOD auctions, we will have mid-band spectrum and substantial majority of our operating footprint, covering 80% of our subscribers with 100 megahertz of mid-band. As a reminder, we have previously acquired millimeter wave spectrum with an agreeable spectrum depth of 530 megahertz across our footprint. In total, including required incentive and relocation payments, we have invested slightly over $2 billion in mid-band spectrum and have done so at efficient prices as our average price per megahertz pop that we paid in both auctions, 107 and 110, was lower than the overall auction averages. We turn to Page 9. Put some context around it, you got $46 billion allocated to broadband. The specific allocations are still being worked out but you can think of about $20 billion likely flowing to the states that we operate in and at least $8 billion flowing to the areas where we operate network. We've commercially launched our millimeter wave product at 300 gigs. We're number 141 in the country. That's up from number 413 last year, and we're ranked as the best employer in telecom. That's ahead of Cox at 180, ahead of Verizon at 244, ahead of T-Mobile at 336, and ahead of a lot of others that weren't even ranked. We estimate there are over 3 million businesses in our operating footprint. Posted handset gross additions increased by 6,000 year over year, largely due to higher switching activity in combination with a strong promotional activity. We saw our connected device gross additions to climb 12,000 year over year, driven by lower hotspot sales compared to the prior year, when we experienced an increase in demand due to the pandemic. Postpaid handset churn was 1.10%, up from 1.01% a year ago. Total postpaid churn combined in handsets and connected devices was 1.35% for the fourth quarter of 2021, higher than a year ago due to the higher handset churn and certain business and government customers disconnecting connected devices that were activated during the peak periods of the pandemic in 2020. We saw prepaid gross additions increased by 7,000 year over year and saw an overall increase of 14,000 to our prepaid base compared to prior year end. Total operating revenues for the fourth quarter were $1.068 billion, essentially flat year over year. Retail service revenues increased by 2% to $696 million, primarily due to a higher average revenue per user, which I will discuss in a moment. Inbound roaming revenue was $24 million, decrease in 27% year over year due to lower data volume and rates. Other service providers were $62 million, up 3% year over year. Finally, equipment sales revenues decreased by 4% year over year, in large part as a result of an increase in promotional activity. And as a result of the combined impact of these factors, loss on equipment increased $24 million year over year. Average revenue per user or connection was 48.62 for the fourth quarter, up 2% year over year. On per comp basis, average revenue per -- average revenue also grew 2% year over year. Fourth quarter tower rental revenues increased by 9%. As shown in the slide, adjusted operating income was $181 million, an increase of 1% year over year. As I commented earlier, total operating revenues were $1.068 billion, essentially flat. Total cash expenses were $887 million, a decrease of 1% year over year. Total system operations expense decreased 3%, largely driven by lower roaming expense resulting from lower data rates and lower voice usage, combined with lower cell site maintenance. Cost of equipment sold increased 4% due to an increase in units sold in a higher average cost per unit sold, driven by a higher mix of smartphone sales. Selling, general, and administrative expenses decreased 4%, driven primarily by decreases in advertising and legal expenses. Suggested EBITDA, which incorporates the earnings from our equity method investments along with interest and dividend income, was $225 million, an increase of 1% year over year. Total operating revenues are $4.1 billion, a 2% increase year over year. Total cash expenses were $3.3 billion, an increase of 3%. Excluding costs of equipment sold, cash expenses decreased 1%. Adjusted operating income and adjusted EBITDA declined 1% due primarily to an increase in loss on equipment, which increased $70 million from $41 million to $111 million, which is a result of the highly competitive and promotional environment that we experienced throughout 2021. We expect ranges of approximate $3.1 billion to $3.2 billion in service revenues, $750 million to $900 million in adjusted operating income, and $925 million to $1.075 billion in adjusted EBITDA. For capital expenditures, the estimate is in a range of $700 million to $800 million. We will also continue our targeted millimeter wave buildout in 2022 and begin making investments to deploy the mid-band spectrum we acquired in auctions 107 and 110. In fact, we surpassed $1 billion in operating revenues and we exceeded 500,000 broadband connections for the first time in TDS Telecom's history. In 2021, we turned up 86,000 new fiber marketable service addresses, bringing total fiber addresses to nearly 400,000. As we execute our strategy over the next five years, we plan to reach approximately 2.2 million service addresses, with about 60% of those addresses being fiber and 80% capable of gig or faster speeds. We plan to triple our total fiber service addresses over the next five years to 1.2 million with aspirations of increasing that target as we identify new opportunities. For the markets we have selected, we expect to achieve broadband penetration rates between 40% and 50% in a steady state, making us the leader in our markets. I am very proud to have served as TDS Telecom's CFO for the past 10 years, and I look forward to continued success in my new role at TDS. Moving to Slide 25, we grew our total service addresses 7% year over year, and are now offering one gig broadband speeds to 58% of our total footprint. Total residential connections increased 2% due to broadband growth in new and existing markets, partially offset by a decrease in voice and video connection. Looking at the chart on the right, overall, higher value product mix and price increases drove a 4% increase in average residential revenue per connection. Total telecom broadband residential connections grew 7% in the quarter as we continue to fortify our networks with fiber and expand into new markets. Our focus on fast, reliable service has generated a 12% increase in total residential broadband revenue. In areas where we offer one gig service, we are now seeing 20% of our new customers taking this superior product. On Slide 27, total revenues increased 2% year over year, driven by strong broadband growth. Residential revenues increased 6% across all markets. Commercial revenue decreased 7% in the quarter on lower [Inaudible] connections, partially offset by a 5% increase in broadband connection. Wholesale revenue decreased 2%. Total revenues increased 2% in the quarter and 3% for the year. Cash expenses increased 2% in the quarter and 5% for the year due to both supporting our current growth, as well as spending related to future expansion into new markets, which is not yet reflected in our revenue. Adjusted EBITDA increased 2% for the quarter to $75 million, but decreased 2% for the full year due to planned investment spending on new market. Capital expenditures increased 2% for the quarter and 12% for the year due to increased investment in fiber deployment. On Slide 29, we've provided guidance for 2022. We are forecasting total telecom revenues of $1.01 billion to $1.04 billion. Our plans include address delivery of approximately 160,000 fiber service services. Adjusted EBITDA is expected to be between $260 million $290 million in 2022, compared to $310 million in 2021. Capital expenditures are expected to be between $500 and $515 million in 2022, compared to $411 million in 2021. Nearly 90% of our capital spending is allocated to broadband growth, with more than 60% going directly into cyber investment.

Total operating revenues for the fourth quarter were $1.068 billion, essentially flat year over year. As I commented earlier, total operating revenues were $1.068 billion, essentially flat. On Slide 29, we've provided guidance for 2022.

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We did incur direct costs of about $7.5 million related to these actions to protect our employees from COVID. We finished the year strong with a combined EBITDA, adjusted EBITDA of $214.5 million in fourth quarter. All of our segments in the Global Ingredients platform put up solid results as the $146.3 million of EBITDA in the base business was the best quarterly performance of 2020 and reflected the growing momentum of an improved pricing cycle. The Feed segment ended the year with a solid performance of $90.2 million of EBITDA, driven by the higher raw material volumes and better prices in both proteins and fats for the quarter. Our collagen peptide sales drove better results posting approximately $50 million of EBITDA for the fourth quarter. Now, as we had indicated on our third quarter call, Diamond Green Diesel had its turnaround in early fourth quarter, which led to DGD selling approximately 57 million gallons of renewable diesel at $2.40 per gallon or contributing $68.2 million of EBITDA to Darling during the fourth quarter. For the year, DGD certainly met our expectations, selling 288 million gallons of renewable diesel at an average of $2.34 per gallon. Darling's share of EBITDA from DGD for 2020 was $337.3 million. The previously mentioned pre-tax restructuring and asset impairment charge of $38.2 million related to the shutdown of the two biodiesel facilities included a goodwill impairment charge of $31.6 million, other long-lived asset charges of $6.2 million and $0.4 million of restructuring charges. Now, for a few of the highlights; net income for the fourth quarter of 2020 totaled $44.7 million or $0.27 per diluted share compared to a net income of $242.6 million or $1.44 per diluted share for the 2019 fourth quarter. Net income for fiscal 2020 was $296.8 million or $1.78 per diluted share compared to $312.6 million or $1.86 per diluted share for fiscal 2019. In the fourth quarter of 2020, we recorded a 30.6 million after-tax restructuring and asset impairment charge related to the shutdown of our Canada and U.S. biodiesel facilities. Excluding this charge, adjusted net income was $75.3 million or $0.45 per diluted share. Excluding these credits for periods prior to the fourth quarter of 2019 resulted in an adjusted net income for the fourth quarter of 2019 of $50.1 million or $0.30 per diluted share. Excluding the restructuring and asset impairment charge related to the shutdown of the two biodiesel facilities adjusted net income for fiscal 2020 was $327.4 million or $1.96 per diluted share. Excluding the retroactive blenders tax credits related to 2018 adjusted net income for fiscal 2019 was $226 million or $1.34 per diluted share. Now, turning to our operating income, we recorded $74.4 million of operating income for the fourth quarter of 2020 compared to $293.3 million for the fourth quarter of 2019. Excluding the pre-tax $38.2 million restructuring and asset impairment charge adjusted operating income for the fourth quarter of 2020 was $112.5 million. Excluding the retroactively reinstated blenders tax credits recorded in the fourth quarter of 2019 for prior periods, the adjusted operating income for the fourth quarter of 2019 was $100 million. Therefore, on a comparative basis the fourth quarter of 2020 adjusted operating income improved $12.5 million over the fourth quarter of 2019. The fourth quarter 2020 gross margin increased $29.8 million over the prior year amount, which partially offset the $38.2 million impairment charge and a $10 million increase in depreciation and amortization, which was partially attributable to the Belgium Group and Marengo acquisition assets added in the fourth quarter of 2020. Operating income for fiscal 2020 was $430.9 million as compared to $475.8 million for fiscal 2019. Excluding the $38.2 million restructuring and impairment charge, the adjusted operating income for fiscal 2020 was $469.1 million. Operating income for fiscal 2019 was $475.8 million. Excluding the retroactive blenders tax credits related to 2018 adjusted operating income for fiscal 2019 was $389.2 million. The $79.9 million increase in adjusted operating income for fiscal 2020 as compared to fiscal 2019 was primarily due to a gross margin increase of $108.3 million and a larger contribution and equity earnings from our renewable diesel joint venture Diamond Green Diesel. These improvements more than offset a $20 million increase in SG&A, asset sales gains of $20.6 million in fiscal 2019 and a $24.7 million increase in depreciation and amortization. SG&A increased $20 million in fiscal 2020 as compared to fiscal 2019, primarily due to increases in insurance premiums, labor cost, COVID-related costs and foreign currency effect, which were partially offset by lower travel cost. Interest expense declined $1.7 million for the fourth quarter 2020 as compared to the 2019 fourth quarter amount and declined $6 million for fiscal 2020 as compared to fiscal 2019. Turning to income taxes, the company's 2020 effective tax rate of 15.1% is lower than the federal statutory rate of 21% primarily due to the biofuel tax incentives. Tax expense and cash tax payments for 2020 were $53.3 million and $36.8 million respectively. For 2021 we are projecting the effective tax rate to be 20% and cash taxes of approximately $40 million. Looking at the balance sheet at year-end January 2, 2021 debt was reduced $141.4 million during the year with a net paydown of $189.8 million. The bank covenant leverage ratio ended the year at 1.90. Capital expenditures totaled $280.1 million for 2020 as we plan to spend approximately $312 million on capital expenditures in fiscal 2021. The company received $205.2 million in cash distributions in 2020 from our Diamond Green Diesel joint venture. Lastly, we repurchased approximately 2.2 million shares of common stock totaling $55 million during fiscal 2020 and paid approximately $29.8 million in cash in the fourth quarter of 2020 for the Belgium Group and Marengo acquisitions. Now diving into 2021, with the commodity price improvement and continued strong raw material volumes, we believe that our Food, Feed and Fuel segments prior to adding Diamond Green Diesel should generate between $565 million and $600 million of EBITDA. That's a conservative 12% to 20% improvement over 2020. DGD, we believe will be able to earn at least $2.25 a gallon EBITDA in 2021 and should produce between 300 million gallons and 310 million gallons this year, which would generate between $335 million and $350 million of EBITDA for Darling share. This range does not include any additional upside for renewable diesel gallons that could be produced in 2021 as the 400 million gallon expansion is on track to commission in early Q4. This 470 million gallon renewable diesel facility should be operational by the back half of 2023 securing Diamond Green Diesel's leadership position as the largest low-cost producer of renewable diesel in North America. Darling believes there's adequate low carbon feedstocks to supply the 1.2 billion gallon renewable diesel platform of DGD.

Now, for a few of the highlights; net income for the fourth quarter of 2020 totaled $44.7 million or $0.27 per diluted share compared to a net income of $242.6 million or $1.44 per diluted share for the 2019 fourth quarter. Excluding this charge, adjusted net income was $75.3 million or $0.45 per diluted share.

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Methode's second quarter sales increased 17% to nearly $301 million. Our net income increased 62%, and our diluted earnings per share increased 60%. The $301 million in net sales, as well as our $45 million in income from operations, were both records for Methode. The resulting operating income margin was 15%. The Automotive segment sales for the quarter were also a record at $216 million. Sales for EV applications were over 9% of our total consolidated sales. We also saw continued strength for EV bookings during the quarter with the annual expected sales from those awards totaling over $28 million. The awards identified here represent a cross-section of the business wins in the quarter and represent over $40 million in the annual business. In vehicle electrification, we won awards for ambient and functional lighting, overhead console and busbar programs totaling over $28 million annually. Of note, in the first half of the fiscal year, Methode booked awards approximately $100 million in annual sales. Additional content in an EV could range from 20% to over 100% above our current content on internal combustion vehicle. The more recent plan resulted in over 7% annual EBITDA growth, and our new plan targets just under 8% annual growth. While we always have to contend with programs going end of life, and we may exit businesses for strategic reasons, we are confident that we have a path via organic growth, operational improvements and acquisitions to achieve the target of $300 million in EBITDA in fiscal year 2025. Second quarter sales increased 17% or $43.6 to $300.8 million in fiscal '21 from $257.2 million in fiscal '20. The year-over-year quarterly comparisons benefited from the $32 million impact of the UAW strike on General Motors in the second quarter of fiscal '20. In addition, the favorable impact of foreign currency on sales was $6.5 million in the current quarter. Second quarter net income increased $14.8 million to $38.6 million, or $1.01 per diluted share, from $23.8 million or $0.63 per diluted share in the same period last year. In addition to the flow-through from higher sales and leveraging of SG&A expenses, second quarter net income also benefited from other income from foreign governmental COVID-19 assistance of $3.3 million, partially offset by $4.2 million of restructuring costs. Fiscal '21 second quarter margins were 26.9% as compared to 26.7% in the second quarter of fiscal '20. From a sales growth perspective, segment growth mix was unfavorable as a 4% increase in sales in the highest margin industrial segment was partially muted by the 19.8% and 37.8% increases in the automotive and interface segments, respectively. The fiscal '21 second quarter gross margins included $2.7 million of restructuring expense and the second quarter of fiscal '20 gross margins included $200,000 of restructuring costs. Second quarter selling and administrative expenses as a percentage of sales decreased 270 basis points year-over-year or 10.2% compared to 12.9% in the fiscal '20 second quarter. The fiscal '21 second quarter figure was attributable to leverage gained from increased sales, lower stock-based compensation expense, lower wages and associated benefits due to the COVID-related salary reduction and shorter work weeks, and much lower travel expense, partially offset by restructuring expense of $1.5 million. There was $300,000 of restructuring expense in the second quarter of fiscal '20. The company currently expects an additional restructuring expense of $700,000 in fiscal '21 resulting from the second quarter actions. Net income was $38.6 million in the second quarter of fiscal '21 as opposed to $23.8 million in the second quarter of fiscal '20. The main drivers between the fiscal periods were higher sales, receipt of $3.3 million of foreign government assistance due to COVID, lower selling and administrative expenses, partially offset by higher restructuring costs. Fiscal '21 second quarter EBITDA was $60.2 million versus $43.6 million in the same period last year. In the second quarter of fiscal '21, we invested approximately $3.6 million in capex as compared to $13.6 million in the second quarter of fiscal '20. The fiscal '21 year-to-date second quarter investment represents an approximately $30 million run rate for the current fiscal year. Income tax expense in the second quarter of fiscal '21 was $7.6 million as compared to a tax expense of $5.2 million in the second quarter of fiscal '20. The fiscal '21 second quarter tax rate was 16.5% as compared to 17.9% in the same period last fiscal year. We deleveraged gross debt by $2.2 million in the second quarter. Since our acquisition of Grakon in September of 2018, when adjusting for the $100 million precautionary credit facility draw in March of 2020, we have reduced gross debt by $110 million. Net debt decreased by $29.5 million in the second quarter of fiscal '21 as compared to the fiscal '20 year-end from $134.8 million, to $105.3 million. We ended the second quarter with $242.3 million in cash, which includes the $100 million precautionary draw on the credit facility in March. In November, we repaid $50 million of the March precautionary draw, and we'll continue to evaluate the landscape in the third quarter and may pay down the precautionary draw even further. Our debt to trailing 12 months EBITDA ratio, which is used for our bank covenants, is approximately 1.7. This figure includes the impact of the precautionary $100 million draw we initiated in March. Without the draw, the ratio would have been approximately 1.2. Our net debt to trailing 12 months EBITDA ratio was a strong 0.5. For the fiscal '21 second quarter, free cash flow was $36.7 million as compared to $35.1 million in the second quarter of fiscal '20. Please note that the third quarter of fiscal '21 contains 13 work weeks, whereas the third quarter of fiscal '20 had 14 work weeks. The revenue range for the third quarter is between $265 million and $285 million. Diluted earnings per share range is between $0.69 and $0.85 per share.

Second quarter sales increased 17% or $43.6 to $300.8 million in fiscal '21 from $257.2 million in fiscal '20. Second quarter net income increased $14.8 million to $38.6 million, or $1.01 per diluted share, from $23.8 million or $0.63 per diluted share in the same period last year. The revenue range for the third quarter is between $265 million and $285 million. Diluted earnings per share range is between $0.69 and $0.85 per share.

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Q3 total revenue decreased 17% to $591 million. Segment operating income decreased 22% to $84 million. Regarding EPS, we took our net asbestos liability to a full-horizon estimate, resulting in a noncash expense equivalent to $1.20, the main driver of the $0.55 earnings per share loss. Free cash flow increased 77% to $271 million. We delivered record ITT operating income margin of 15.4%. We grew 92% sequentially in Friction OE sales. We delivered 19% segment decremental margin and 40% segment incremental margins sequential to Q2. Lastly, we generated record free cash flow of $271 million. Year-to-date, we reduced the number of incidents by 30%. Our injury frequency rate is 0.8%, and 50% of our sites have been incident-free for more than a year. We delivered solid earnings per share of $0.82, up 44% sequentially, strong segment operating income margin of 16.2%, up 360 basis points sequentially; record operating income margin of 15.4%; and record free cash flow of $271 million, representing a growth of 77% or $118 million versus prior year. I also experienced the progress made firsthand, progress that helped us to deliver 14.1% operating margin at IP. This is the highest Industrial Process Q3 margin ever, and we continue to confidently progress toward our long-term 15% plus margin target. This 14.1% margin performance represented 120 basis point expansion versus prior year, and 40 basis points higher than Q2 this year. Motion Technologies delivered a strong operating margin at 18.5%, up 630 basis points versus Q2 and only 30 basis points below prior year. These operational excellence, combined with our speed and execution, enabled us to accelerate working capital reduction and post a year-over-year 180 basis points improvement. Our Friction OE sales grew 92% sequentially, and the momentum in shared gains continued with each one of our main regions outperforming global production year-to-date, including over 1,000 basis points of outperformance in North America and China. IP grew organic short-cycle pump orders by 14% sequentially on the back of strong part, which improved gradually during the quarter and showed year-over-year growth in September. IP delivered a book-to-bill of 1. And as a result, our backlog at the end of Q3 was up 6%, excluding foreign exchange compared to the beginning of 2020. We've been talking a lot about Seneca Falls' 95% plus baseline pumps delivery performance for the last 12 months. As a result, we are raising our free cash flow margin target to a range of 13% to 15% for the full year. Today, we have $1.5 billion of available liquidity, and we have ample capital to fund all of our operational needs and investment, and position us to take advantage of other strategic opportunities. We produced 16.2% segment operating income margin. We delivered these margins through productivity and aggressive cost actions that produced segment incremental margin of 19%. We continued to drive down corporate costs and delivered an approximately 20% structural run rate reduction versus prior year. EPS of $0.82 per share declined 15% and was ahead of our expectations. And on cash, we generated $271 million of free cash flow year-to-date, up 77% versus prior year. Our trailing 12-month free cash flow margin now stands at a record 15.4%, a sequential improvement of 80 basis points. Our segment operating income jumped 48%, an impressive growth compared to an organic revenue increase of 12%. Our revenue growth was driven by a 92% increase in friction sales OE, mainly coming from outperformance in China and North America. Similarly, earnings per share grew 44% sequentially despite a onetime environmental benefit realized last quarter. Organic revenue declined 13% on lower order production rates and slower activity in the rail segment due to reduced passenger traffic. This is a strong showing with China and North America growing 11% and 14%, respectively, which was offset by Europe, where we experienced destocking with some Tier one customers. Sequentially, Friction OE sales skyrocketed 92%, gradually accelerating during the quarter to show mid-single-digit year-over-year growth in September. Segment operating income declined 12% to $50 million. MT successfully improved decremental margins to 21%. And sequentially, operating income increased 107% with 36% incremental margin performance. Motion Technologies delivered outstanding Q3 margins of 18.5%, 30 basis points lower than the prior year, but increased 630 basis points sequentially. And lastly, from an award perspective, both Friction and Wolverine continued to gain share with Conquer wins and new platform wins like the 15 new electric vehicle platform awards in the quarter. With 14.1% operating margin, IP expanded 120 basis points compared to the prior year despite an organic revenue decline of 19%. Sequentially, the growth was 40 basis points on flat revenue. Organic orders for the quarter declined 17% coming from 33% lower project bookings and 12% short-cycle decline versus prior year. IP's book-to-bill of one in Q3 and year-to-date backlog growth of 6%, excluding foreign exchange, provides solid revenue visibility into next quarter. Operating income declined only 12% to $27 million despite significant revenue declines. Our proactive cost actions, shop floor and sourcing productivity resulted in best-in-class decremental margin of 8%. Industrial Process segment operating margin of 14.1% was driven by productivity and cost control, sourcing and restructuring actions amid a decline in revenue. This design has generated so much interest from our customers that we booked 43% higher orders year-to-date than for the entire 2019. Finally, IP improved working capital by 800 basis points as we reduced AR past dues by more than 20% and inventory by 14%. IP finished the quarter with 19% working capital as a percent of sales. IP's outstanding performance reflects the multiyear strategy that we outlined back in 2017 and that we are faithfully executing as we advance toward our long-term margin target of 15% plus. CCT organic revenue declined 26% on weakness across our major end markets. We are also impacted by the specific challenges related to the 737 MAX requalification process. Our CCT industrial business experienced only a 2% decline as our distribution partners reduced excess inventory and adjust to lower levels of activity. However, we were able to gain share in that region on the back of better quality and delivery performance, and our year-to-date orders are up 30% year-over-year. Operating income declined 40% on the volume drop, and margin of 14% showed an improvement of 300 basis points over Q2. CCT decremental margins of 28% improved sequentially from Q2 and reflect the aggressive restructuring actions executed by the business. As you know, last quarter, we raised our cost action target to $160 million. We are hard at work on the remaining $125 million of cost reduction, a large portion of which is structural. To date, we have completed more than 90% of the full year headcount reduction plan. Overall, we expect these actions will generate more than $90 million savings of benefits -- $90 million of benefits in 2020 and additional carryover benefits in 2021, partially offset by temporary compensation actions that have been rolled back in Q1 -- in Q4. As a result, we are improving our decremental margin target, and we now expect total segment decremental margin for 2020 to range from 21% to 24%. These events, coupled with stability in our underlying claim data, enabled us to extend the period for which we provide an estimate through 2052 from our previous rolling 10-year estimate. Since then, excluding the full horizon transition, our net liability declined 44%, and when accounting for these quarters, noncash $136 million full horizon impact, the net liability dropped 25%. Importantly, we now expect that our projected annual average net after-tax defense and indemnity outflows for the next 10 years will decrease to $20 million to $30 million, a reduction of 24% from the midpoint. We expect auto production rates to improve sequentially, reflecting a market decline of approximately 20% for the full year. From a segment margin standpoint, we expect to produce strong Q4 margins, well over the 15.4% generated last year driven by benefits from productivity and cost actions. We expect corporate expenses for the full year to be down approximately 40%. We also expect Q4 earnings per share to show low double-digit sequential improvement, and we are now targeting segment decremental margins of 21% to 24% for the full year. On free cash flow, we are raising our margin target to 13% to 15% for the full year as we rebuild some working capital to support our business and customers.

Q3 total revenue decreased 17% to $591 million. Regarding EPS, we took our net asbestos liability to a full-horizon estimate, resulting in a noncash expense equivalent to $1.20, the main driver of the $0.55 earnings per share loss. We delivered solid earnings per share of $0.82, up 44% sequentially, strong segment operating income margin of 16.2%, up 360 basis points sequentially; record operating income margin of 15.4%; and record free cash flow of $271 million, representing a growth of 77% or $118 million versus prior year. We've been talking a lot about Seneca Falls' 95% plus baseline pumps delivery performance for the last 12 months. EPS of $0.82 per share declined 15% and was ahead of our expectations. Our segment operating income jumped 48%, an impressive growth compared to an organic revenue increase of 12%. This is a strong showing with China and North America growing 11% and 14%, respectively, which was offset by Europe, where we experienced destocking with some Tier one customers. Segment operating income declined 12% to $50 million. Organic orders for the quarter declined 17% coming from 33% lower project bookings and 12% short-cycle decline versus prior year. Operating income declined only 12% to $27 million despite significant revenue declines.

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Our Flavors & Extract group had another outstanding quarter reporting 9% adjusted local currency revenue growth and 13% adjusted local currency operating profit growth. Our Personal Care business rebounded substantially contributing to the Color Groups 7% adjusted local currency revenue growth and 5% adjusted local currency profit growth. Asia Pacific had another strong quarter, delivering 11% adjusted local currency revenue growth and over 22% adjusted local currency operating profit growth. On a consolidated basis, we reported 9% consolidated adjusted local currency revenue growth and mid-single-digit adjusted EBITDA growth in the quarter. Flavors & Extracts Group had another outstanding quarter with 9% adjusted local currency revenue growth and 13% adjusted local currency profit growth. The group's adjusted operating profit margin increased 50 basis points in the quarter compared to last year's second quarter. We are well on track to achieve 50 basis points to 100 basis point improvement to operating profit margin this year. The Color Group had an exceptional rebound this quarter, delivering 7% adjusted local currency revenue growth and 5% adjusted local currency profit growth. The Asia Pacific Group delivered 11% adjusted local currency revenue growth and 22% adjusted local currency profit growth. Over the long term, I continue to expect Flavors & Extracts to deliver mid-single-digit revenue growth and 50 basis points to 100 basis points annual improvement to operating profit margin over the foreseeable future. I also expect the Color Group to deliver mid-single-digit revenue growth, along with an operating profit margin at or above 20%. Our second quarter GAAP diluted earnings per share was $0.61. Included in these results are $7 million or approximately $0.16 per share of costs related to the divestitures and the cost of the operational improvement plan. In addition, our GAAP earnings per share this quarter include approximately $2.2 million of revenue or $0.01 of costs related to the results of the divested operations. The combination of these items were included within the divestiture and other related costs, which increased last year's second quarter net earnings by $1 million or approximately $0.02 per share. In addition, our GAAP earnings per share in the second quarter of 2020 include approximately $28.2 million of revenue and an immaterial amount of net earnings related to the divested product lines. Excluding these items, consolidated adjusted revenue was $333.6 million, an increase of 9.1% in local currency compared to the second quarter of 2020. Our adjusted local currency EBITDA was up approximately 6% for the quarter, and our adjusted local currency earnings per share was up 8.6% for the quarter. In terms of capital expenditures, we continue to expect our spend to be around $65 million for the year. During the second quarter, we bought back approximately $11 million of company's stock. Our leverage ratios are 2 times debt-to-adjusted EBITDA, down from 2.7 a year ago, leaving our balance sheet in a solid position to support potential acquisitions, share repurchases as well as our dividend payout. Our GAAP earnings per share guidance calls for mid-to-high single-digit growth compared to our 2020 reported GAAP earnings per share of $2.59. Our full-year guidance for 2021 includes approximately $0.25 of divestiture-related costs, operational improvement plan costs and the impact of the divested businesses. On an adjusted basis, our earnings per share guidance for the year calls for mid-single-digit local currency growth compared to our 2020 adjusted earnings per share of $2.79. Based on current corporate tax law, we expect our adjusted tax rate to be approximately 22% for the last six months of 2021. We now expect our 2021 adjusted local currency revenue to grow at a mid-single-digit rate. This is up from our previous guidance of a low-to-mid single-digit growth rate for 2021. And based on current exchange rates, we expect our earnings to benefit by approximately $0.10 due to currency for the year.

Our second quarter GAAP diluted earnings per share was $0.61. Our GAAP earnings per share guidance calls for mid-to-high single-digit growth compared to our 2020 reported GAAP earnings per share of $2.59. We now expect our 2021 adjusted local currency revenue to grow at a mid-single-digit rate. This is up from our previous guidance of a low-to-mid single-digit growth rate for 2021.

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Don, it's hard to believe that it's the end of an era, 17 years at M&T and 40 years in the industry. Against that backdrop, GAAP-based diluted earnings per common share were $13.80 compared with $9.94 in 2020, up 39%. Net income was $1.86 billion compared with $1.35 billion in the prior year, improved by 37%. Those results produced returns on average assets and average common equity of 1.22% and 11.54%, respectively. Net operating income, which excludes the after-tax impact from the amortization of intangible assets, as well as merger-related expenses, was $1.9 billion, up 39% compared with $1.36 billion in the prior year. Net operating income per diluted common share was $14.11, compared with $10.02 in 2020, up 41%. Net operating income for 2021 expressed as a rate of return on average tangible assets and average tangible common shareholders' equity, was 1.28% and 16.8%, respectively. We increased the common stock dividend for the fifth consecutive year to an annual rate of $4.80 per share per year. Tangible book value per share grew to $89.80 at the end of 2021, up 11.5% from the end of 2020. And as we build capital in anticipation of the merger with People's United Financial, our CET1 ratio increased to an estimated 11.4% at the end of 2021 from 10% at the end of 2020. Diluted GAAP earnings per common share were $3.37 for the fourth quarter of 2021 compared with $3.69 in the third quarter of 2021, and $3.52 in the fourth quarter of 2020. Net income for the quarter was $458 million compared with $495 million in the linked quarter and $471 million in the year-ago quarter. On a GAAP basis, M&T's fourth quarter results produced an annualized rate of return on average assets of 1.15% and an annualized return on average common equity of 10.91%. This compares with rates of 1.28% and 12.16%, respectively, in the previous quarter. Included in GAAP results in the recent quarter were after-tax expenses from the amortization of intangible assets amounting to $1 million or $0.01 per common share, little change from the prior quarter. Also included in the quarter's results were merger-related expenses of $21 million, related to M&T's proposed acquisition of People's United Financial. This amounted to $16 million after tax or $0.12 per common share. Results for 2021's third quarter included $9 million of such charges amounting to $7 million after tax or $0.05 per common share. M&T's net operating income for the fourth quarter, which excludes intangible amortization and merger-related expenses was $475 million. That compares with $504 million in the linked quarter and $473 million in last year's fourth quarter. Diluted net operating earnings per common share were $3.50 for the recent quarter compared with $3.76 in 2021's third quarter and $3.54 in the fourth quarter of 2020. Net operating income yielded annualized rates of return on average tangible assets and average tangible common shareholders' equity of 1.23% and 15.98% for the recent quarter. The comparable returns were 1.34% and 17.54% in the third quarter of 2021. Included in the recent quarter's GAAP and net operating results, was a $30 million distribution from Bayview Lending Group. This amounted to $22 million after-tax effect and $0.17 per common share. Taxable equivalent net interest income was $937 million in the fourth quarter of 2021, marking a decrease of $34 million or 3% from the linked quarter. The primary driver of that decrease was a $30 million decline in interest income and fees from PPP loans as that portfolio continues to decline following forgiveness of those loans by the Small Business Administration. The net interest margin decreased by 16 basis points to 2.58%, that compares with 2.74% in the linked quarter. We estimate that the higher balance of low-yielding cash on deposit at the Federal Reserve diluted the margin by about 9 basis points in the quarter. The lower income from PPP loans, including declines in the scheduled amortization and accelerated recognition of fees from forgiven loans, contributed about 5 basis points of the margin pressure. All other factors, including lower benefit from hedges accounted for an estimated 2 basis points of the decline. Average earning assets increased by $4 billion compared with the third quarter. This includes a $5.3 billion increase in cash on deposit with the Federal Reserve and a $785 million increase in investment securities. On average, total loans decreased by $2.1 billion or about 2% compared with the previous quarter. Commercial and industrial loans declined by $1.4 billion or about 6%. That reflects a $1.6 billion decline in PPP loans, primarily reflecting loan forgiveness. Auto floor plan loans to vehicle dealers declined by $58 million on an average basis but grew by $554 million on an end-of-period basis. All other C&I loans grew about 1% compared with the prior quarter. Commercial real estate loans declined $830 million or about 2% compared with the third quarter. Residential real estate loans declined by $89 million or less than 1%, as a result of principal repayments, as well as the ongoing repooling of loans previously purchased from Ginnie Mae servicing pools. Consumer loans were up over 1%, reflecting growth in indirect auto loans and positive but seasonally slower growth in recreation finance loans, partially offset by lower home equity lines of credit. Average core customer deposits, which excludes CDs over $250,000, grew by $3.6 billion or 3% compared with the third quarter, primarily reflecting noninterest-bearing products. Noninterest income totaled $579 million in the fourth quarter compared with $569 million in the prior quarter. The increase reflects the $30 million distribution from Bayview Lending Group that I previously mentioned. Mortgage banking revenues were $139 million in the recent quarter compared with $160 million in the linked quarter. As we noted on the October call, we have begun to retain a significant majority, around 85% of residential mortgage originations, to hold for investment on the balance sheet, which utilizes a portion of the excess liquidity we currently have. This includes the roughly 20% normally held for investment. As a result of increasing mortgage rates and the holiday slowdown, residential mortgage loan applications during the most recent quarter amounted to $1.7 billion compared with $2.2 billion in the third quarter. Of those, we recorded gains on sale on the $191 million that were locked for sale in the fourth quarter versus gain on sale on the $1.1 billion that were locked in the third quarter. Total residential mortgage banking revenues, including origination and servicing activities, were $91 million in the fourth quarter compared with $110 million in the prior quarter. Commercial mortgage banking revenues totaled $48 million, encompassing both originations and servicing compared with $50 million in the third quarter. Recall that in the third quarter's commercial servicing results, they included an $11 million fee for yield maintenance as a result of prepayment of previously securitized commercial mortgage loans. Trust income was $169 million in the recent quarter, improved from $157 million in the previous quarter. Service charges on deposits were $105 million in the recent quarter, unchanged from the third quarter. Operating expenses for the fourth quarter, which exclude the amortization of intangible assets and the merger-related expenses were $904 million compared with $888 million in the third quarter. Salaries and benefits increased by $5 million from the prior quarter. Data processing and software increased by $6 million from the third quarter tied in part to higher business volumes, as well as the costs from software licensing agreements. The $6 million linked quarter increase in advertising and marketing reflects the beginning of the winter marketing campaign combined with incentives paid on new customer accounts. The efficiency ratio, which excludes intangible amortization, and merger-related expenses from the numerator and securities gains or losses from the denominator was 59.7% in the linked quarter, compared with 57.7% in the third quarter. The allowance for credit losses declined by $46 million to $1.47 billion at the end of the fourth quarter. That reflects a $15 million recapture of previous provisions for credit losses, combined with $31 million of net charge-offs in the quarter. At December 31, the allowance for credit losses as a percentage of loans outstanding was 1.58% compared with 1.62% at September 30. Annualized net charge-offs as a percentage of total loans were 13 basis points for the fourth quarter, down slightly from 17 basis points in the third quarter. Non-accrual loans as of December 31 declined to $2.1 billion, a decrease of $182 million from the end of September. Non-accrual loans, as a percentage of loans outstanding, were 2.22% compared with 2.4% at the end of the prior quarter. Loans 90 days past due, on which we continue to accrue interest, were $963 million at the end of the recent quarter. Of those loans, $928 million or 96% were guaranteed by government-related entities. M&T's common equity Tier 1 ratio was an estimated 11.4% as of December 31 compared with 11.1% at the end of the third quarter. As previously noted, we increased the quarterly common stock dividend by 9% this quarter to $1.20 per share per quarter, raising the annual dividend rate to $4.80 per share. We don't expect the $42 billion of cash on the balance sheet at the end of 2021 to endure through 2022. We expect to do this by replacing maturities and principal amortization and to increase investment securities by an incremental $1 billion by the end of the year. On the commercial side, PPP loans on our balance sheet amounted to $1.2 billion at year-end. As noted earlier, we're retaining a large majority of the mortgage loans we originate, which we expect will grow balances by approximately $2.5 billion in 2022, depending on the level of refinance activity. Offsetting that growth, are $2.8 billion of mortgage loans purchased from Ginnie Mae servicing pools on our balance sheet at the end of 2021, more than half of which we believe will qualify for repooling over the course of 2022. That should result in a net interest margin, little change from full-year 2021 in the area of 2.75%. We would need to see short-term interest rates rise by 50 to 75 basis points before we can fully recover the money fund fees we are currently waiving. Those amount to an annual run rate of approximately $50 million. Noninterest operating expenses in 2021 grew at an uncharacteristically high rate, rising 5.6% over prior years. That amount last year was approximately $69 million. Since that pause, our CET1 ratio has increased by 140 basis points to 11.4%, leaving us positioned well in excess of what we believe we need to run the combined company.

Tangible book value per share grew to $89.80 at the end of 2021, up 11.5% from the end of 2020. Diluted GAAP earnings per common share were $3.37 for the fourth quarter of 2021 compared with $3.69 in the third quarter of 2021, and $3.52 in the fourth quarter of 2020. Diluted net operating earnings per common share were $3.50 for the recent quarter compared with $3.76 in 2021's third quarter and $3.54 in the fourth quarter of 2020. Taxable equivalent net interest income was $937 million in the fourth quarter of 2021, marking a decrease of $34 million or 3% from the linked quarter. That reflects a $15 million recapture of previous provisions for credit losses, combined with $31 million of net charge-offs in the quarter.

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We delivered record adjusted earnings per share of $5.02 and total segment EBIT of $550 million. And our focus on cash, resulted in a record discretionary free cash flow of $353 million. Adjusted earnings per share has grown at a compound annual growth rate of 11% since the inception of our strategy, ahead of our 7% to 10% target. Our total recordable incident rates of 0.34 keeps us firmly in the upper echelon of chemical and industrial companies. In August, we announced a new $1 billion revolving credit facility that has pricing that is based on the company's credit ratings, as well as our performance against annual intensity reduction targets for sulfur dioxide and nitrogen oxide emissions. I am pleased to report solid fourth quarter results with adjusted earnings per share of $1.11. This performance was 63% above the same quarter last year despite the effects of the semiconductor chip shortage and ongoing global supply chain disruptions, as well as a higher level of maintenance spending due to the timing of turnarounds. We also continue the momentum of battery materials and ended the year with EBITDA in our previously communicated range of $15 million to $20 million. Cash flow from operations was strong at $100 million in the quarter despite the impact of higher raw material prices. During the fourth quarter and full year of fiscal 2021, EBIT for Reinforcement Materials increased by $8 million and $167 million respectively, as compared to the same periods in the prior year. Higher margins were driven by higher spot pricing, particularly in Asia. Globally, volumes were up 6% in the fourth quarter as compared to the same period of the prior year due to 6% growth in the Americas, 5% increase in Europe and up 7% in Asia. EBIT increased by $20 million in the fourth quarter and $93 million for the full year as compared to the same periods in fiscal 2020, primarily due to improved product mix, stronger volumes and higher customer pricing. Year-over-year volumes in the fourth fiscal quarter increased by 2% in performance additives and decreased by 8% in formulated solutions. This segment experienced increased maintenance costs in the fourth fiscal quarter as expected, but these higher costs were offset by $7 million of insurance proceeds related to a claim from earlier in fiscal 2021. EBIT in the fourth quarter of 2021 increased by $4 million compared to the fourth quarter of fiscal 2020 and full year EBIT increased $7 million. We ended the quarter with a cash balance of $168 million and our liquidity position remains strong at approximately $1.3 billion. During the fourth quarter of fiscal 2021, cash flows from operating activities were $100 million, which included a working capital decrease of $4 million. Capital expenditures for the fourth quarter of fiscal 2021 were $80 million and additional uses of cash during the fourth quarter were $20 million for dividends. During fiscal 2021, we generated $257 million of cash flow from operations, including an increase in net working capital of $222 million. Capital expenditures for fiscal year 2021 were $195 million dollars, which included both our targeted growth investments and the spend related to U.S. EPA compliance projects. We expect capital expenditures in fiscal 2022 to be between $225 million and $250 million. In addition, we are executing on a new specialty compounds unit in Indonesia and have planned growth capital related to capacity expansions in battery materials and inkjet. Additional uses of cash during the fiscal year included $80 million for dividends. The operating tax rate for fiscal year 2021 was 27% and we anticipate our operating tax rate for fiscal 2022 to be in the range of 27% to 29%. Additionally, the aforementioned specialty carbons conversion of our Suzhou plant will provide 50,000 metric tons of growth capacity across specialty carbons and will free up our network to support growth of battery materials. Based on this, we expect adjusted earnings per share for the fiscal year 2020 to be in the range of $5.20 to $5.60. Our end markets remain robust and we continue to execute at a high level.

I am pleased to report solid fourth quarter results with adjusted earnings per share of $1.11. Higher margins were driven by higher spot pricing, particularly in Asia. In addition, we are executing on a new specialty compounds unit in Indonesia and have planned growth capital related to capacity expansions in battery materials and inkjet. Based on this, we expect adjusted earnings per share for the fiscal year 2020 to be in the range of $5.20 to $5.60. Our end markets remain robust and we continue to execute at a high level.

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Moving to third-quarter results and reporting all percentages on a constant currency basis, Consolidated revenues were $763 million, with CooperVision at $558 million, up 20%, and CooperSurgical at $206 million, up 58%. Non-GAAP earnings per share were $3.41. For CooperVision, our daily silicone hydrogel portfolio led the way with all 3 regions posting strong growth. Within the regions, the Americas grew 16%, led by MyDay and clariti and continued improvement in patient flow. EMEA grew a healthy 24% as consumer activity returned in the region, and we took share. 1 in EMEA, and we're seeing the benefits of increasing patient flow, So, we'll continue investing to support the reopening activity happening in many of the European markets. Asia Pac grew 18%, led by a slow but steady improvement in consumer activity. Silicone hydrogel dailies grew 31% and with MyDay and clariti both performing well. Recent data shows that over 90% of contact lens wearers over the age of 40 expect to continue wearing lenses with the biggest challenge being finding a good multifocal. Our portfolio grew a robust 90% this quarter to $18 million, with MiSight up 187% to $5 million and ortho-k products up 68%. We continue targeting $65 million in myopia management sales this year, including MiSight reaching $20 million. As an example, it's estimated that over 80% of high school kids are myopic, So, treating children at a younger age is of high importance in the country. We now have over 40,000 children wearing MiSight worldwide, and that number is growing quickly. Additionally, the average age of a new MiSight wearer remains 11, So, this treatment is bringing children into contact lenses at a much younger age. On a longer-term basis, the macro growth trends remained solid, with roughly 33% of the world being myopic today, and that number is expected to increase to 50% by 2050. This was an outstanding quarter with record revenues of $206 million. Fertility, in particular, continued to perform exceptionally well, growing 72% year over year to $83 million. And with an addressable market opportunity of well over $1 billion and mid- to upper-single-digit growth, this is a great market for us. And that more than 100 million individuals worldwide suffer from infertility. Within our office and surgical unit, we grew 50% with PARAGARD up 51% and office and surgical medical devices up 49%. For PARAGARD, we implemented a roughly 6% price increase toward the end of the quarter, which resulted in a buy-in of roughly $4 million. To wrap up on CooperSurgical, this was another excellent quarter, and it was great to exceed $200 million in sales for the first time ever. Third-quarter consolidated revenues increased 32% year over year or 28% in constant currency to $763 million. Consolidated gross margin increased year over year to 68.3%, up from 66.3% with CooperVision posting higher margins driven by product mix and currency, and CooperSurgical posting higher margins from product mix tied to the significant year-over-year growth in fertility and PARAGARD. Opex grew 28% as sales increased with a rebound in revenues, along with higher sales and marketing expenses associated with investments in areas such as myopia management. Consolidated operating margins were strong at 26.6%, up from 23.2% last year. Interest expense was $5.6 million and the effective tax rate was 13.5%. Non-GAAP earnings per share was $3.41 with roughly 49.8 million average shares outstanding. Free cash flow was very strong at $180 million, comprised of $224 million of operating cash flow, offset by $44 million of capex. Net debt decreased to $1.5 billion and our adjusted leverage ratio improved to one and a half times. Specific to Q4, consolidated revenues are expected to range from $730 million to $760 million, up 7% to 11% in constant currency, with CooperVision revenues between $540 million and $560 million up 6% to 10% in constant currency, and CooperSurgical revenues between $190 million and $200 million, up 8.5% to 14% in constant currency. Non-GAAP earnings per share is expected to range from $3.24 to $3.44. To provide color on this guidance, currency moves since last quarter have reduced the benefit of the full-year FX tailwind from 3% to 2.5% for revenues, and 7% to 5% for EPS. With respect to Q4, this equates to reducing revenues by $10 million in CooperVision and $2 million at CooperSurgical, and reducing earnings per share by $0.14. CooperVision is offsetting some of the impact with expected strength in daily silicone and myopia management sales, while CooperSurgical is expecting continued strength, although incorporating the Q3 PARAGARD buy-in of $4 million and hopefully some conservatism regarding COVID's impact on elective procedures. Consolidated gross margins for the fiscal year are expected to be around 68%, with fiscal Q4 gross margins expected to be around 67.5%, driven primarily by currency. Our Q4 tax rate is expected to be around 11%. And lastly, our free cash flow continues to improve, and we're now expecting roughly $550 million for the full year.

Non-GAAP earnings per share were $3.41. Our portfolio grew a robust 90% this quarter to $18 million, with MiSight up 187% to $5 million and ortho-k products up 68%. Non-GAAP earnings per share was $3.41 with roughly 49.8 million average shares outstanding. Specific to Q4, consolidated revenues are expected to range from $730 million to $760 million, up 7% to 11% in constant currency, with CooperVision revenues between $540 million and $560 million up 6% to 10% in constant currency, and CooperSurgical revenues between $190 million and $200 million, up 8.5% to 14% in constant currency. Non-GAAP earnings per share is expected to range from $3.24 to $3.44.

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For the quarter, revenue increased 6%, operating profit increased 41%, earnings per share increased 58%, and we generated $65 million of operating cash flow. First, our apparel business outperformed; second, the organization quickly pivoted to create a new PPE business; third, we generated positive cash flow; and fourth, we ended the quarter with $1.8 billion of liquidity. Moving from down 29% in April to up 8% in May and up 11% in June. We experienced strong momentum in our Basics business with mid-teens point-of-sale growth, yielding more than 300 basis points of market share gains in the quarter. Within our Intimates business, point-of-sale returned to essentially flat in June and improved to up 3% in July, regaining its pre-COVID momentum as the mid-tier and department store channels reopened. In the quarter, Champion point-of-sale accelerated from down 14% in April to up nearly 40% in May and up more than 70% in June as consumers continued to actively seek out the brand, particularly within the online channel. Strength in our Online business continued globally in the second quarter, with sales up more than 70% over prior year. We experienced strong growth across our key regions in the quarter, with triple-digit online growth at some of our largest customers and nearly 200% growth on our newly enhanced champion.com website. Within our Apparel business, which excludes PPE, online represented over 30% of total sales in the quarter. Our newly created PPE business generated over $750 million of revenue. We expect to generate more than $150 million of additional PPE revenue in the second half of the year. The third highlight of the quarter was cash flow, as we generated $65 million of cash flow from operations. Year-to-date, operating cash flow was $40 million better than last year. We ended the quarter with $1.8 billion of liquidity, which we believe provides us ample capital to maximize our operating flexibility and positions us to grow the business going forward. These are things that could only be achieved by the determined efforts of 60,000 team members around the world pulling together. Sales for the quarter were $1.74 billion, which includes $752 million of PPE revenue. As compared to last year, sales increased 6% on a reported basis and 7% on a constant currency basis. Excluding PPE, Apparel revenue declined approximately 40% over prior year. Adjusted gross margin of 37.9% decreased approximately 180 basis points over the last year. Approximately 50 basis points of the decline was the result of deleverage from minimum royalty payments in our sports license business. Adjusted operating margin for the quarter increased approximately 430 basis points over prior year to 17.5%. Interest and other expense declined $8 million over prior year to approximately $47 million due primarily to lower average rates in the quarter. Restructuring and other related charges were approximately $63 million in the quarter. Our planned supply chain restructuring actions and program exit costs, which remain unchanged, accounted for $11 million of these costs. The remaining approximately $52 million are nonrecurring COVID related costs in the quarter, which are noncash. These include a $20 million intangible asset write down, $11 million of bad debt expense and approximately $21 million of inventory adjustments primarily related to canceled orders from retailers for seasonal product we already made. The tax rate of 17.8% was higher than our expectation as better-than-expected performance in U.S. Innerwear and PPE resulted in a higher mix of U.S. profit in the quarter. And adjusted and GAAP earnings per share increased 58% and 12% over prior year to $0.60 and $0.46, respectively. For the quarter, U.S. Innerwear sales increased approximately 67% over the prior year, while the operating margin expanded nearly 550 basis points to 27.8%. Adjusting for sales from our PPE business, core U.S. Innerwear performed significantly better than our base case scenario. Core revenue declined approximately 27% over prior year, with Basics down 18% and Intimates down 52%. Revenue declined 52% over prior year, which was better than our base case scenario. As compared to last year, revenue declined approximately 20% on a reported basis and 17% on a constant currency basis. Adjusting for PPE sales, core International revenue declined 44% as compared to the prior year. The International segment's operating margin of 17.3% increased 310 basis points over prior year, driven by lower SG&A costs as we benefited from various temporary cost savings initiatives. Excluding C9, revenue declined 46% over prior year with declines in both our domestic and international businesses. We delivered a strong cash flow performance in the quarter, generating $65 million of cash flow from operations. Year-to-date, operating cash flow was approximately $40 million above last year. With respect to our balance sheet, inventory declined approximately $265 million or 12% compared to last year. Leverage was 3.4 times on a net debt to adjusted EBITDA basis, down from 3.5 times last year. And we ended the quarter with approximately $1.8 billion of liquidity, which we believe provides us with significant cash capital cushion in this uncertain environment. Due to the uncertainty and unpredictability of the COVID-19 pandemic as well as the current lack of visibility in our business environment, we are not providing third quarter or full year 2020 guidance at this time. Looking at our Apparel business, which excludes PPE, revenue declined approximately 40% over prior year in the second quarter. With respect to our PPE business, we currently expect more than a $150 million of PPE revenue in the second half, the vast majority of which is expected in the third quarter. Combined with a lower overall unit and sales volume, we believe it is reasonable to assume year-over-year pressure on margins in both this third and fourth quarters. Now with respect to our tax rate, we currently expect a rate of approximately 17.5% for the second half. And in terms of cash flow, we continue to expect to generate positive cash flow in the second half of the year.

First, our apparel business outperformed; second, the organization quickly pivoted to create a new PPE business; third, we generated positive cash flow; and fourth, we ended the quarter with $1.8 billion of liquidity. We expect to generate more than $150 million of additional PPE revenue in the second half of the year. We ended the quarter with $1.8 billion of liquidity, which we believe provides us ample capital to maximize our operating flexibility and positions us to grow the business going forward. Sales for the quarter were $1.74 billion, which includes $752 million of PPE revenue. Restructuring and other related charges were approximately $63 million in the quarter. And adjusted and GAAP earnings per share increased 58% and 12% over prior year to $0.60 and $0.46, respectively. Adjusting for sales from our PPE business, core U.S. Innerwear performed significantly better than our base case scenario. And we ended the quarter with approximately $1.8 billion of liquidity, which we believe provides us with significant cash capital cushion in this uncertain environment. Due to the uncertainty and unpredictability of the COVID-19 pandemic as well as the current lack of visibility in our business environment, we are not providing third quarter or full year 2020 guidance at this time. With respect to our PPE business, we currently expect more than a $150 million of PPE revenue in the second half, the vast majority of which is expected in the third quarter. Combined with a lower overall unit and sales volume, we believe it is reasonable to assume year-over-year pressure on margins in both this third and fourth quarters. And in terms of cash flow, we continue to expect to generate positive cash flow in the second half of the year.

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Earnings per share were $0.63 for the quarter as compared to $0.23 for the same period in 2020. Annualized return on average assets was 1.51%, and annualized return on average tangible equity was 16.8%. And our core deposits are now 91% of total deposits. Operating expenses were $61.9 million increase from the prior year, largely due to the addition of compensation and occupancy expenses from SB One. Non-interest expense to average assets was 1.95% versus 2.13% for 2020. Our efficiency ratio was 56.19%. Deferrals are down to $132 million, of which $123.5 million are commercial loans. And of that number, approximately 96% are paying interest. In addition to further expanding our successful wealth management and insurance groups we, will evaluate other sources of revenue with a long-term goal of having non-spread income comprised in excess of 25% of our net income. This quarter we originated or funded $526 million of new loans excluding line of credit advances and net PPP loan activity. At quarter end, our pipeline remains strong at approximately $1.3 billion, and we are seeing a marginal improvement in the average rate in the pipeline. As noted earlier, our net income was $48.6 million or $0.63 per diluted share compared with $40.6 million or $0.53 per diluted share for the trailing quarter. Earnings for the current quarter were favorably impacted by $15.9 million of negative provisions for credit losses on loans and off balance sheet credit exposures while the trailing quarter reflected negative provisions of $6.2 million. Core pre-tax pre-provision earnings, excluding provisions for credit losses on loans and commitments to extend credit were $48.9 million for a pre-tax pre-provision ROA of 1.52%. This is consistent with $50.1 million or 1.54% in the trailing quarter which also included -- excluded merger related charges and COVID response costs. Our net interest margin expanded six basis points versus the trailing quarter to 3.10% as benefits from PPP loan forgiveness reduced funding costs and a steeper yield curve were partially offset by lower yielding excess liquidity. We expect to maintain a core margin of approximately 3% as we continue to deploy excess liquidity into loans and securities, while we're pricing funding downward and continuing to emphasize non-interest bearing deposit growth. Including non-interest bearing deposits, our total cost of deposits fell to 30 basis points this quarter from 31 basis points in the trailing quarter. Average non-interest bearing deposits were stable at $2.4 billion or 24% of total average deposits for the quarter. Average borrowing levels decreased $196 million and the average cost of borrowed funds decreased four basis points versus the trailing quarter to 1.12%. Average loans increased slightly for the quarter, although quarter end loan totals decreased $19 million versus the trailing quarter. Loan originations excluding line of credit advances were strong at $539 million for the quarter, including $190 million of PPP2 loans. Payoffs were elevated however, including $177 million of PPP one loan forgiveness. The loan pipeline at March 31st increased $73 million from the trailing quarter to $1.3 billion. In addition, the pipeline rate increased eight basis points since last quarter to 3.65% at March 31st. Our provision for credit losses on loans was a benefit of $15 million for the current quarter compared with a benefit of $2.3 million in the trailing quarter. Non-performing assets decreased to 65 basis points of total assets from 72 basis points at December 31st. Excluding PPP loans, the allowance represented 0.92% of loans compared with 1.09% in the trailing quarter. Loans that have been granted short-term COVID 19 related payment deferrals further declined from their peak of $1.3 billion or 16.8% of loans to $132 million or 1.3% of loans. This compares with $207 million or 2.1% of loans at December 31st. This $132 million of loans consist of $300,000 that are still in their initial deferral period, $47 million in a second 90-day deferral period, and $85 million that have received a third deferral. Included in this total are $41 million of loans secured by hotels, $33 million secured by multifamily properties, including $20 million that are student housing related, $9 million of loans secured by retail properties, $7 million secured by restaurants, and $9 million secured by residential mortgages, with the balance comprised of diverse commercial loans. Of the $123 million of commercial loans in deferral, 96% are paying interest. Non-interest income increased $1.2 million versus the trailing quarter to $22 million as growth in insurance agency income, loan and deposit fees, wealth management income, and bank-owned life insurance income was partially offset by reductions in net profits on loan level swaps and gains on loan sales. Excluding provisions for credit losses on commitments to extend credit and in the trailing quarter merger-related charges and COVID related costs, non-interest expenses were an annualized 1.95% of average assets for the current quarter compared to 1.82% in the trailing quarter. Our effective tax rate increased to 25.1% from 23.3% for the trailing quarter as a result of an increase in the proportion of income derived from taxable sources. We are currently projecting an effective tax rate of approximately 25% for the remainder of 2021.

Earnings per share were $0.63 for the quarter as compared to $0.23 for the same period in 2020. As noted earlier, our net income was $48.6 million or $0.63 per diluted share compared with $40.6 million or $0.53 per diluted share for the trailing quarter.

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Under the leadership of our newly expanded management team, which had been in place just 75 days before the pandemic took hold, we made significant progress on our historic transformation executing on our strategy, and operating in four new segments. We also ended 2020 with a lowest net debt in 2.5 years and paid our regular quarterly dividend demonstrating our disciplined stewardship and financial strength. We reported revenue of $1.79 billion for the full year 2020, a decline of 11% compared to 2019. You will note, at our Q1 earnings call we had forecasted 20% adjusted EBITDA margins for the full year 2020; fast-forward nine months later, I'm very pleased to report that we achieved this goal delivering adjusted EBITDA margin of 20.4% for the full year, despite the macroeconomic impact from COVID. Now, I would like to take a moment to review the 4 core pillars of our strategy. In 2020 we signed more than 3,900 deals. In fact, since we began One Deluxe, we sold 6 of the Top 10 deals of the last decade, including the largest sale in the company's history. In our telesales centers, we delivered record average order value growing 7.5% over last year, and our sales team find more than 200 cross sell deals totaling $35 million in total contract value. We saw $31 million of personal protective equipment in 2020, a business we had not been in previously, where we had no source of supply, no way to book an order, and no sales training at the beginning of the pandemic; it's a great example of innovative thinking, and speed this organization can now deliver. We closed an additional 24 sites during the year, reducing our location count by 60% in the last two years. As Barry mentioned, DLX delivered in 2020; we delivered EBITDA margin in line with our plan and guidance. The result, we delivered EBITDA margin in line with our commitments, reduced net debt to it's lowest level in 2.5 years, and we continue to invest for growth. Our total revenue in the quarter was $454.5 million, a decline of 12.9% as compared to the same period last year; however, an increase of 3% from the third quarter. For the full year, total revenue declined 10.8% to $1.791 billion. We reported GAAP net income of $24.7 million in the quarter, and $8.8 million for the full year. Our adjusted EBITDA for the quarter was $94.9 million resulting in $364.5 million for the full year. Adjusted EBITDA margins for the quarter was 20.9% bringing full year performance 20.4%. As previously committed, our cost containment initiatives improved our adjusted EBITDA margin performance from the first quarter low by more than 300 basis points, this brought both Q4 and full year adjusted EBITDA margin into the low end of our pre-pandemic long-term adjusted EBITDA margin guidance range. Promotional expanded revenue went to 15%, sequentially versus Q3 and Check maintained a strong EBITDA margin despite significant COVID-related headwinds to the business. Consistent with our expectations and as we had shared at the third quarter call, payments grew Q4 revenue 3% to $78 million as compared to prior year, achieving 12% growth for the year and ending at $301.9 million. Adjusted EBITDA decreased in the quarter and for the full year by $4.5 million and $6.3 million respectively. For the year, adjusted EBITDA margin was 22.6%, well within the range of our pre-pandemic guide on slightly lower revenue performance. We continue to invest to drive growth and as such we're assuming adjusted EBITDA margins in the low 20% area through the year. Cloud solutions revenue declined 27.1% to $59.2 million in the quarter and ended the year at $252.8 million, resulting in a decline of 20.6% compared to 2019. In Q4, cloud achieved a 160 basis point improvement in adjusted EBITDA margin versus prior year, and expanded 20 basis points to 24.4% for the full year reflecting solid performance against pre-pandemic guide on significantly less revenue. We expect the loss of revenue associated with Q4 2020 product exits will continue to impact the business into 2021, but we anticipate cloud margins to remain healthy in the low-to-mid 20% range. Promotional Solutions fourth quarter 2020 sequential revenue grew by 15.3% from Q3 to $144 million, the year-over-year rate of decline moderated to down 16.6%, reflecting the continued impact of market conditions. Adjusted EBITDA margin for the fourth quarter was 14%, down from the prior quarter peak. Full year revenue declined 17.4% to $529.6 million with an adjusted EBITDA margin of 12.6%, and was greatly impacted by macroeconomic conditions in 2020. Checks fourth quarter revenue declined 10% from last year to $173.3 million due to the secular trend combined with the impact of the pandemic. Q4 adjusted EBITDA margin levels of 48.1% held largely steady versus Q3 declining only 10 basis points sequentially despite lower revenue levels, but remained lower than 2019 levels as a result of increased selling costs, new wins, and technology investments in support of our One Deluxe strategy. Full year Check revenue declined 9.4% to $706.5 million as compared to last year, and adjusted EBITDA margin decreased to 48.4%. Free cash flow defined as cash provided by operating activities less capital expenditures was $155 million for 2020, a decline of $65.1 million as compared to last year. We ended the quarter with strong liquidity of $425 million, including $123 million in cash. During the quarter we reduced the amount drawn under the credit facility by $200 million, ending the year with $840 million drawn, a reduction of $44 million in the year resulting net debt continue to decrease through the year ending at $717 million, the lowest level in 2.5 years. Our Board approved a regular quarterly dividend of $0.30 per share on all outstanding shares. The dividend will be payable on March 1, 2021 to all shareholders of record on February 16, 2021. We are poised for recovery to begin in the second quarter enabling us to exit the year a sales-driven mid-single-digit revenue growth company. All of this means, we expect to achieve full-year 2021 revenue growth of 0% to 2% with full year 2021 adjusted EBITDA margin of 20% to 21%. We expect to invest approximately $90 million in CapEx to continue with important transformation work, innovation investments in building future scale across all our product categories.

As Barry mentioned, DLX delivered in 2020; we delivered EBITDA margin in line with our plan and guidance. Our total revenue in the quarter was $454.5 million, a decline of 12.9% as compared to the same period last year; however, an increase of 3% from the third quarter. We are poised for recovery to begin in the second quarter enabling us to exit the year a sales-driven mid-single-digit revenue growth company. All of this means, we expect to achieve full-year 2021 revenue growth of 0% to 2% with full year 2021 adjusted EBITDA margin of 20% to 21%.

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Last week, the U.S. Department of Interior announced a temporary suspension of delegated authority for 60 days. We've also seen, in the past two weeks, over 20 approvals given for work in the Gulf of Mexico to not only us, but our peers. Slide 4, Murphy produced an average of 149,000 barrels of oil equivalent to-date -- per day in the fourth quarter. These volumes include impacts totaling nearly 4,000 barrels equivalent from two subsea equipment issues with production expected to restart in the first quarter 2021. Our cash capex totaled $111 million for the quarter, inclusive of $1 million in NCI spending. On an accrued basis, capex totaled $130 million net to Murphy, excluding King's Quay. Prices continued to improve in the fourth quarter with oil realizations at an average of $42, the highest, of course, seen since quarter 1, and natural gas at $2.36 per 1,000 cubic feet, also far ahead of prior quarters. On Slide 5, our full year 2020 production averaged 164,000 barrels of oil per day. Overall, for the year, we averaged nearly $38 per barrel for realized oil prices with $1.85 per 1,000 cubic feet for natural gas. Cash capex for the year totaled $760 million, which included $23 million of NCI capex. On an accrued basis, capex totaled $712 million, excluding King's Quay and NCI spending as per our guidance. Our proved reserve base remains sizable at year-end 2020, with 697 millions of oil -- barrels of oil equivalent, comprised of 41% liquids and 51% proved developed. Approved reserve life is maintained at more than 11 years. Overall, our total approved reserves were 13% lower from the year-end 2019 due to two primary events. The change in capital allocation of the current five-year plan reduced PUDs by over 100 million barrels equivalent. Separately, the sanction of the Tupper Montney development in the fourth quarter resulted in the conversion of probable reserves and contingent resources to proven undeveloped, totaling nearly 100 million barrels equivalent. On Page 7, while total proved reserves were lower year over year, our North American onshore proved plus probable resource remained near 2.5 billion barrels of oil equivalent. Overall, Murphy continues to hold more than 3,400 undrilled locations across onshore North America. Slide 8, Murphy recorded a net loss of $172 million or a $1.11 net loss per diluted share for the fourth quarter of 2020. After-tax adjustments, including, but not limited to, a noncash mark-to-market loss on crude oil derivative contracts and contingent consideration, totaling $159 million resulted in an adjusted net loss of $14 million or a $0.09 adjusted net loss per diluted share. Overall, our net cash provided by continuing operations rose to $225 million in the fourth quarter, including a $13 million cash outflow from our working capital increase. When combined with property additions and dry hole costs of $135 million, including $38 million for King's Quay, we had positive free cash flow of $90 million in the quarter. For full year 2020, our net cash from continuing operations of $803 million included a $39 million outflow from working capital. Property additions and dry hole costs of $859 million, including King's Quay spending of $113 million, resulted in a negative free cash flow of $56 million for the year. If we exclude the King's Quay expenditures for the year, we would have some positive free cash flow of more than $55 million. We continue to maintain a high level of liquidity with $1.7 billion at year-end, including $311 million of cash and equivalents at December 31st. With our focus on cost reduction measures throughout 2020, we've achieved significantly lower G&A, with an approximately 40% reduction in full year costs from 2019. Liquidity remains a key focus for Murphy, and our balance sheet remains strong with $1.4 billion available under our $1.6 billion senior unsecured credit facility as well as $311 million of cash and equivalents as of December 31. Murphy achieved another year of low metrics, including 46% reduction year over year in total recordable incidents. A key highlight is our goal of reducing greenhouse gas emissions intensity of about 15% to 20% by 2030 from 2019. On Slide 15, on the Eagle Ford Shale business, we produced 31,000 barrels equivalents per day in the fourth quarter, now comprised of 71% oil. For the full year, production averaged 36,000 barrels equivalent per day, with $197 million of capex, which includes near $50 million for field development as well. We brought online 25 operated and 10 nonoperated wells earlier in that year. Murphy is seeing an average base decline rate of 24% for all wells drilled prior to '21, which, in our view, is very well positioned. On Slide 16, on the Kaybob Duvernay project, the company produced 10,000 barrels equivalent oil per day in the fourth quarter, comprised of 75% liquids, and averaged 11,000 barrels equivalent per day for the full year. Overall, Murphy spent $94 million in capex during the year, including Placid Montney, breaking online 16 operated wells in Kaybob and 10 nonoperated wells in Placid. Most notable in the second quarter in the Kaybob East 15-19 Pad, which is achieving significant results as our best well in Kaybob Duvernay so far, ranking in the top 2% of all Murphy unconventional wells. In the Tupper Montney, we produced 234 million per day in the fourth quarter and averaged 238 million cubic feet per day full year 2020. Approximately, $14 million of capex was spent during the year to drill four wells with completions planned this year and ongoing. In the Gulf of Mexico, our assets there produced 63,000 barrels equivalent of oil per day in the fourth quarter, comprised of 78% oil. Production volumes were impacted by nearly 4,000 barrels of oil equivalent per day on unplanned downtime due to two subsea equipment issues, in addition to previously guided hurricane downtime in the fourth quarter. Our full-year 2020 production averaged 70,000 barrels equivalent per day. We remain on schedule with King's Quay construction at 90% complete and drilling beginning in the second quarter for Khaleesi, Mormont and Samurai development. In exploration, we participated in the latest OCS Gulf of Mexico lease sale during the fourth quarter, and we were awarded and fully awarded 8 blocks with 5 prospects at a net cost of approximately $5.3 million. As a result, our Gulf of Mexico interest today totals 126 blocks, spanning to more than 725,000 acres with 54 exploration blocks and 15 key prospects at this time. For 2021, Murphy plans to spend $675 million to $725 million and achieve production of 155, 000 to 165, 000 barrels equivalent per day. For the first quarter, we forecast production of 149, 000 to 157, 000 barrels of oil equivalent per day. Approximately 47% of our 2021 capex is allocated to offshore Gulf of Mexico, with nearly all dedicated to the major long-term projects that achieve first oil in 2022. Our North American onshore capital budget is $265 million in 2021 and is also focused on maintaining flat production in the Eagle Ford Shale, with $170 million dedicated to bringing on 19 operated wells and 53 nonoperating wells as well as field development, which is 30% of the total spend. Approximately $85 million is earmarked for newly sanctioned Tupper Montney development program to bring 14 wells online during the year. The remaining $10 million of capex supports field development and maintenance in the Kaybob Duvernay and nonoperated Placid. Of note, our oil-weighted shale assets maintain a long runway of drilling with more than 1,400 locations in the Eagle Ford Shale and more than 600 in the Kaybob Duvernay. The asset generated free cash flow of approximately $50 million in 2020, which is more than sufficient to cover the cash flow requirements in the next 2 years as the development is initiated. And overall, the current sanction plan requires an average annual capex of $68 million and will generate cumulative free cash flow of approximately $215 million through 2025. In the fourth quarter, we farmed into an attractive play opening trend for a 10% nonoperated working interest with Chevron as operator. The first well plan is a Silverback prospect, and we will provide access to -- and we will also be provided access to about 12 blocks through our participation. Our Tupper Montney development leads to an approximately 8% CAGR from '21 through '24, while oil growth remains at 3%. As we began with our announcement in 2020 for a lower capital program, the average annual capex through 2024 is approximately $600 million, with 2022 being the peak year due to finalizing the major Gulf projects along with increased Tupper Montney development.

Slide 8, Murphy recorded a net loss of $172 million or a $1.11 net loss per diluted share for the fourth quarter of 2020. After-tax adjustments, including, but not limited to, a noncash mark-to-market loss on crude oil derivative contracts and contingent consideration, totaling $159 million resulted in an adjusted net loss of $14 million or a $0.09 adjusted net loss per diluted share. For 2021, Murphy plans to spend $675 million to $725 million and achieve production of 155, 000 to 165, 000 barrels equivalent per day. For the first quarter, we forecast production of 149, 000 to 157, 000 barrels of oil equivalent per day.

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In the first quarter, systemwide RevPAR decreased 38% year-over-year and 53% versus 2019. As we lapped the start of the U.S. lockdowns, RevPAR turned positive up more than 23% year-over-year. Systemwide occupancy reached 55% by the end of the month driven by strong leisure demand. In the U.S., more than 50% of adults have received at least one dose of a COVID-19 vaccine. As a result, we're seeing a significant lift in forward bookings and occupancy, which is now around 60% as well as lengthening booking windows. In fact, we are on pace to see record leisure demand in the U.S. over the summer months with April bookings for the summer exceeding 2019 peak levels by nearly 10%. In the first quarter, business transient revenue was roughly 75% of 2019 levels in states that were further along in their reopening process. Additionally, recent forecast for nonresidential fixed investment are up more than three percentage points from prior projections to 7.8%, indicating even greater optimism around business spending. Near-term group bookings continue to be driven largely by social events and smaller group meetings, but we are seeing a slow shift back to a more normal mix of business with corporate group leads up more than 70% for future periods. As we look out to next year, our group position is roughly 85% of peak 2019 levels with rate increases versus 2019. In fact, last week, I was in Mexico to chair the World Travel and Tourism Council's Global Summit where more than 800 participants from all over the world attended in person and thousands more attended virtually. During the quarter, we added 105 hotels totaling more than 16,500 rooms to our system and achieved net unit growth of 5.8%. Overall conversions accounted for approximately 24% of additions in the quarter. We also continued to enhance our resort footprint during the quarter with the openings of the 1,500-room Virgin Hotel Las Vegas, the Hilton Abu Dhabi Yas Island, the all-inclusive Yucatan Resort Playa del Carmen and six spectacular properties along the California Coast. In the quarter, we signed nearly 22,000 rooms modestly ahead of our expectations. Additionally, through our strategic partnership with Country Garden to introduce the Home2 Suites brand to China, we added more than 5,000 rooms to our pipeline. Home2 recently celebrated its tenth anniversary, marking the milestone with nearly 1,000 rooms, hotels open and in the pipeline. On Entrepreneur Magazine's Annual Franchise 500 List, which featured 11 of our 18 brands, Home2 was the number two hotel brand ranking only behind Hampton. Overall, we are very happy with our development progress and excited for additional growth opportunities with more than half of our 399,000-room pipeline under construction, We're confident in our ability to grow net units in the mid-single-digit range for the next several years and continue to expect growth in the 4.5% to 5% range in 2021. We ended the first quarter with more than 115 million Honors members, up roughly 8% year-over-year with membership increasing across every major region despite lower demand due to the pandemic. During the quarter, systemwide RevPAR declined 38.4% versus the prior year on a comparable and currency-neutral basis as rising COVID cases and reinstated travel restrictions and lockdowns disrupted the demand environment, especially across Europe and Asia Pacific. However, occupancy improved sequentially throughout the quarter, increasing more than 20 points. Adjusted EBITDA was $198 million in the first quarter, down 45% year-over-year. Management and franchise fees decreased 34%, less than RevPAR decrease as franchise fee declines were somewhat mitigated by better-than-expected license fees and development fees. For the quarter, diluted earnings per share adjusted for special items was $0.02. First quarter comparable U.S. RevPAR declined nearly 37% year-over-year and 50% versus 2019. Demand improved sequentially throughout the quarter with March occupancy 62% higher than January and ending at 55%, the highest level since the pandemic began. In the Americas outside the U.S., first quarter RevPAR declined 55% year-over-year and 63% versus 2019. In Europe, RevPAR fell 76% year-over-year and 82% versus 2019. In the Middle East and Africa region, RevPAR was down 32% year-over-year and 46% versus 2019. In the Asia Pacific region, first quarter RevPAR fell 7% year-over-year and 49% versus 2019 as rising infections, lockdowns and border closures weighed on performance early in the quarter. RevPAR in China increased 64% year-over-year with occupancy levels increasing from roughly 35% to roughly 65% during the quarter. As Chris mentioned, in the first quarter, we grew net units 5.8% driven primarily by the Americas and Asia Pacific. For the full year, we continue to expect net unit growth of 4.5% to 5%. We repaid $500 million of the outstanding balance under our $1.75 billion revolving credit facility and opportunistically executed a favorable debt refinancing transaction to extend our maturities at lower rates.

During the quarter, systemwide RevPAR declined 38.4% versus the prior year on a comparable and currency-neutral basis as rising COVID cases and reinstated travel restrictions and lockdowns disrupted the demand environment, especially across Europe and Asia Pacific. For the quarter, diluted earnings per share adjusted for special items was $0.02.

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Delivering $0.73 of normalized FFO per share, which is in the upper half of our guidance range. Demonstrating powerful demand, our U.S. same-store SHOP portfolio has increased occupancy 750 basis points since mid March 2021, lifting the entire same-store SHOP portfolio nearly 600 basis points during the same period. Turning to capital allocation, we have been highly active with $3.7 billion of investments announced or closed year-to-date. We've completed $2.5 billion in independent living investments, including our accretive acquisition of New Senior's hundred plus independent living communities at an attractive valuation well below replacement costs and a six community Canadian Senior Living portfolio with one of the New Senior operators, Hawthorne. In medical office we've completed or announced $300 million of investments. Second, by acquiring our partner PMB's interest in this Sutter Van Ness Trophy MOB in downtown San Francisco, we now own a 100% of this asset at a 6% yield. With 92% of the MOB already leased, we intend to capture additional NOI growth and value. Finally, we intend to expand our relationship with Ardent Healthcare by acquiring 18 of their 100% leased medical office buildings for $200 million by year-end. On our third capital allocation priority, we are delighted to announce that we have commenced development of a 1 million square foot life science project anchored by Premier Research University, UC Davis with our exclusive partner Wexford. Purpose-built for clinical research, this project will be 60% pre-leased to UC Davis, and total project cost are expected to be $0.5 billion. In fact, we've now reviewed more deal volume this year than we saw in all of 2019, over $40 billion and we continue to pursue those that meet our multi-factor investment framework. These strong capital flows are also supporting our intention to recycle $1 billion of capital this year to enhance both our balance sheet and our portfolio. Moving on to third quarter performance; in SHOP, leading indicators continue to trend favorably during the quarter as leads and move-ins each surpassed a 100% of 2019 levels while move-outs remain steady. In the third quarter, average occupancy grew by 230 basis points over the second quarter, led by the U.S. with growth of 290 basis points and a 110 basis points in Canada, which is over 93% occupied. Turning to SHOP operating results, same-store revenue in the third quarter increased sequentially by $13.6 million or 3.1% driven by strong occupancy growth and slight rate growth. Regarding rate growth, our operators have proposed rent increases to the residents of 8% in the U.S. and 4% in Canada, which on a blended basis is approximately 200 basis points higher than the historical levels. Operating expenses increased sequentially by $16.7 million or 5.4% of which approximately half is due to overtime and agency costs. For the sequential same-store pool SHOP generated $106.7 million of NOI in the third quarter, which represents a sequential decrease of $3.7 million or 3.4%. The portfolio consists of 103 independent living communities located in attractive markets with favorable demand characteristics. Its third quarter spot occupancy grew 110 basis points sequentially. The same-store pool, which excludes the 33 communities that transitioned to new operators this year, grew 180 basis points in the third quarter and then another 10 basis points in October, marking occupancy growth in six out of the past seven months. These acquisitions expand our independent living exposure to 59% of NOI on a stabilized basis. This is in combination with our existing portfolio positions us well to capture demographic demand with the 80-plus population expected to grow over 17% over the next five years, while facing less new supply versus historical levels. I'd also like to note our previously announced transition of 90 assisted living and Memory Care communities is off to a solid start as 65 communities have already transitioned and the rest are planned by year-end. Ventas has 37 operator relationships including seven of the top 10 largest operators in the sector and 8 new relationships added this year. These businesses taken together increased same-store NOI by 4.2% year-over-year and increased 1.2% sequentially on an adjusted basis. MOB NOI grew 3.2% year-over-year and R&I increased 7.1%. MOB occupancy is up 130 basis points year-to-date. Same-store MOB occupancy of 91.3% is at its highest point since the first quarter of 2018. MOB tenant retention was 91% in the third quarter and MOB new leasing increased 43% versus prior year. R&I occupancy remains outstanding at 94.4% and improved 50 basis points sequentially due to exciting demand for lab space. MOB expenses increased less than 1% year-on-year as a result of completed energy conservation projects and sourcing initiatives. At the enterprise level, we delivered $0.73 of FFO per share in the third quarter. This result is at the higher end of our $0.70 to $0.74 guidance range and benefited from the stable performance of our diversified portfolio as well as a $0.04 Ardent bond prepayment fee that was included in our guidance. Consistent with our prior $1 billion disposition guidance, we now have $875 million of disposition proceeds in the bank with $170 million of senior housing and MOB portfolios under contract and expected to close in the fourth quarter. These dispositions have enhanced and reshaped our portfolio and we view these proceeds to reduce $1.1 billion of near-term debt so far this year. We also issued $1.4 billion of equity in the third quarter including $800 million for New Senior and $600 million in ATM issuance at $58 a share. As a result, our net-debt-to-EBITDA ratio, excluding New Senior improved sequentially to 6.9 times, while including New Senior Q3 leverage was better than forecast at 7.2 times. Turning to Q4 guidance, we expect fourth quarter net income will range from a $0.01 to $0.05 per fully diluted share. Q4 normalized FFO is expected to range from $0.67 to $0.71 per share. Starting with our SHOP same-store expectations, SHOP Q4 average occupancy is forecast to increase between 80 basis points and 120 basis points versus the Q3 average growing ahead of pre-pandemic levels while following seasonal trends. At the guidance midpoint spot occupancy, September 30 to December the 31 is expected to be approximately flat. No HHS grants are assumed to be received in the fourth quarter though our license assisted living communities have applied for qualified grants under Phase 4 of the Provider Relief Fund for COVID losses incurred at the communities. We expect to receive an M&A fee in Q4 of $0.03 for the announced Kindred sale, which Kindred communicated is expected to be completed in the fourth quarter subject to customary closing conditions. We continue to expect a $1 billion in asset sales and loan repayments for the full year 2021 at a blended yield in the high fives. And our fully diluted share count is now 403 million shares reflecting the equity raised today.

Delivering $0.73 of normalized FFO per share, which is in the upper half of our guidance range. At the enterprise level, we delivered $0.73 of FFO per share in the third quarter. Q4 normalized FFO is expected to range from $0.67 to $0.71 per share.

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For the full year 2021, we generated adjusted EBITDA of $13 billion, which was a significant increase over 2020 and in line with our expectations. DCF attributable to the partners of Energy Transfer, as adjusted, was $8.2 billion, which resulted in excess cash flow after distributions of approximately $6.4 billion. On an incurred basis, we had excess DCF of approximately $5 billion after distributions of $1.8 billion and growth capital of approximately $1.4 billion. On January 25, we announced a quarterly cash distribution of $0.175 per common unit or $0.70 on an annualized basis, which represents a 15% increase over the previous quarter and represents the first step in our plan to return additional value to unitholders. At our Nederland terminal, we completed expansions in early 2021 that brought our companywide total NGL export capacity to more than 1.1 million barrels per day which we believe is the largest in the world. We continue to expect the combined company to generate more than $100 million of annual run rate cost savings synergies, of which we expect to achieve 75 million in 2022. Construction of the final phase of the Mariner East pipeline is complete and commissioning is in progress which will bring our total NGL capacity on the Mariner East pipeline system to 350,000 to 375,000 barrels per day, including ethane. For full year 2021, NGL volumes through the Mariner East pipeline system and Marcus Hook terminal are up nearly 10% over 2020. For the full year 2021, we loaded nearly 26 million barrels of ethane out of the facility. For 2022, we expect to load a minimum of 40 million barrels of ethane and project this to increase to up to 60 million barrels for 2023. And in total, our percentage of worldwide NGL exports has doubled over the last two years, capturing nearly 20% of the world market, which was more than any other company or country exported during the fourth quarter of 2021. At Mont Belvieu, we recently brought online a 3 million-barrel high-rate storage well, which increases our total wells to 24 and our NGL storage capabilities at Mont Belvieu to 53 million barrels. In early June, we commenced service on the 65,000 barrels per day crude oil pipeline, providing transportation service from our Cushing terminal to our Nederland terminal, which also provides access for Powder River and DJ Basin barrels to our Nederland terminal via an upstream connection with our White Cliffs pipeline. And as we mentioned on our last call, we are moving forward with phase 2, which will nearly double the pipeline's capacity to 120,000 barrels per day. Phase 2 is expected to be in service by the end of the first quarter of 2022 and is underpinned by third-party commitments. This project allows us to move approximately 115,000 Mcf per day of rich gas out of the Midland Basin and to utilize available processing capacity more efficiently, while also providing access to additional takeaway options. In addition, an expansion is underway, which will bring the top line's total capacity to over 200,000 Mcf per day in the first quarter of 2022. And due to significantly increased producer demand, we now plan to build a new 200 MMcf per day cryogenic processing plant in the Delaware Basin. Turning to the Gulf Run Pipeline, which will be a 42-inch interstate natural gas pipeline with 1.65 Bcf per day of capacity. Consolidated adjusted EBITDA was $2.8 billion, compared to $2.6 billion for the fourth quarter of 2020. DCF attributable to the partners, as adjusted, was $1.6 billion for the fourth quarter, compared to $1.4 billion for the fourth quarter of 2020. For the fourth quarter, we saw higher transportation volumes across all of our segments, including record volumes in the NGL and refined products segment as well as a $60 million adjusted EBITDA contribution from the acquisition of Enable for the month of December. On January 25th, we announced a quarterly cash distribution of $0.175 per common unit or $0.70 on an annualized basis. This distribution represents a 15% increase over the previous quarter and represents the first step in our plan to return additional value to unitholders while maintaining our leverage ratio target of four to four and a half times debt to EBITDA. Future increases to the distribution level will be evaluated quarterly with the ultimate goal of returning distributions to the previous level of $0.305 per quarter or $1.22 on an annualized basis while balancing our leverage target, growth opportunities and unit buybacks. Adjusted EBITDA was $739 million, compared to $703 million for the same period last year. NGL transportation volumes on our wholly owned and joint venture pipelines increased to a record 1.9 million barrels per day, compared to 1.4 million barrels per day for the same period last year. With average fractionated volumes of 895,000 barrels per day compared to 825,000 barrels per day for the fourth quarter of 2020. For our crude oil segment, adjusted EBITDA was $533 million, compared to $517 million for the same period last year. For midstream, adjusted EBITDA was $547 million, compared to $390 million for the fourth quarter of 2020. This was primarily due to a $147 million increase related to favorable NGL and natural gas prices. Gathered gas volumes were 14.8 million MMBtus per day, compared to 12.6 million MMBtus per day for the same period last year due to higher volumes in the Permian, South Texas, and Northeast regions as well as addition of the Enable assets in December of 2021. In our interstate segment, adjusted EBITDA was $397 million, compared to $448 million in the fourth quarter of 2020. We have seen steady growth recently in the interstate segment with the fourth quarter up more than 10% over the third quarter of 2021 even without the impact of Enable. For our Intrastate segment, adjusted EBITDA was $274 million, compared to $233 million in the fourth quarter of last year. With expectations for continued strong performance from our existing business as well as the addition of the Enable assets, we expect our full year 2022 adjusted EBITDA to be $11.8 billion to $12.2 billion. We expect growth capital expenditures, including expenditures related to the recently acquired Enable assets to be between 1.6 billion and $1.9 billion, balanced primarily across the midstream NGL refined products and interstate segments. This number includes approximately $200 million of 2021 planned capital that has been deferred into 2022 as well as growth capital related to the recently acquired Enable assets, in particular, Gulf Run pipeline. As of December 31, 2021, total available liquidity under our revolving credit facility was slightly over $2 billion, and our leverage ratio was 3.07% for the credit facility. During the fourth quarter, we utilized cash from operations to reduce our outstanding debt for approximately $400 million. And for full year 2021, we reduced our long-term debt by approximately $6.3 billion. In addition, we have increased our growth capital spend, as I mentioned earlier on the call, with this capital focused on strong returning projects that will be in service in less than 12 months.

With expectations for continued strong performance from our existing business as well as the addition of the Enable assets, we expect our full year 2022 adjusted EBITDA to be $11.8 billion to $12.2 billion.

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Our first quarter was strong with an NOI growth rate of 5.2%. We saw strong demand on the MH side of the business, with a 4.9% increase in rental revenue. We wrapped up our snowbird season and have a total RV revenue growth rate of 4.8%. The drivers in that revenue were a 7.4% growth rate in annual revenue, a 7% growth rate in seasonal revenue and a 7.6% decline in transient revenue. We have an occupancy rate of 95% in our core portfolio. Our overall occupancy consists of less than 6% renters. In 2019, 33% of all home sales were the result of a renter conversion. In April, we saw continued strength in MH platform, with 96% of our residents paying us timely. 80% of our RV revenue is longer term in nature and 20% come from our Transient customers. For the first quarter, the annual revenue grew by 7.4%, comprised of 5.8% rate and 1.6% occupancy. This year the opening of 46 of our RV resorts has been delayed until at least the end of April. Our seasonal revenue stream comes from customers who have a reservation of 30 days or more. Our seasonal revenue primarily comes from our sunbelt locations with 70% of the revenue generated between November and March. The first quarter, which represents half of the full year anticipated seasonal revenue grew by 7%. The second quarter seasonal revenue is generally our slowest quarter with approximately 15% of the overall seasonal revenue in 2019, occurring in the second quarter. Our transient business represents under 6% of our total revenue. Towards the end of March, we stopped accepting transient reservations for the remainder of March and all of April. For the first quarter we reported $0.59 normalized FFO per share. Core MH rent growth of 4.9% includes 4.4% rate growth and approximately 50 basis points related to occupancy gains. Our transient revenues, which were pacing ahead of guidance through February ended the quarter down 7.6% compared to last year. Dues revenues increased 6.1% as a result of rate increases and an increase in our paid member count of 4.3%. During the quarter we sold approximately 3,200 Thousand Trails camping passes. We upgraded 727 members during the quarter, 15% more than the first quarter last year. In summary, first quarter core property operating revenues were up 5.4% and core NOI before property management increased 5.2%. Property operating income from the non-core portfolio, which includes our Marina portfolio, as well as assets acquired during 2019 was $2.8 million in the quarter. Other income and expenses generated the net contribution of $1.4 million for the quarter. Interest and related amortization was $26.1 million and includes the impact of the refinancing we completed during the quarter. In our MH properties, we've collected 96% of April rent. The collection rate is net of approximately $180,000 of rent deferral requests we've approved. Our largest population within the MH portfolio age qualified properties have the highest collection rate at 97% collected. Our renter population, while a very small portion of our portfolio, has the lowest rate of collection with approximately 91% collected. As detailed in the update, 46 of these properties have delayed openings, which has affected typical payment patterns. To-date, we have collected approximately 61% of the April and May annual RV renewals as compared to 71% collected at this time last year. However, we also saw customers extend their stays and are currently showing a revenue decline of 12% in April. While terms and conditions are substantially similar to the expiring policies, adverse market conditions resulted in a higher than expected premium increase of 27%. The resulting insurance expense for the remainder of the year is approximately $1.1 million higher than our expectation. During the quarter, we closed a $275.4 million secured facility with Fannie Mae. The loan is a fixed interest rate of 2.69%. With the proceeds, we've repaid our secured debt maturing in 2020, which carried a weighted average interest rate of 5.2% and the outstanding balance in our line of credit. That said, current secured financing terms available for MH and RV assets range from 55% to 75% LTV, with rates from 3% to 3.75% for 10-year money. As noted on our COVID-19 update page, we have a current available cash balance of $126 million with no debt maturing in 2020. Our debt to EBITDA and our interest coverage are both around 4.9 times. The weighted average maturity of our outstanding secured debt is almost 13 years.

Towards the end of March, we stopped accepting transient reservations for the remainder of March and all of April. For the first quarter we reported $0.59 normalized FFO per share.

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Our portfolio occupancy has returned to pre-pandemic levels, despite having recaptured over 1 million square feet due to bankruptcies and brandwide restructurings since the beginning of 2020. This includes 55,000 square feet recaptured in the third quarter as anticipated. As of September 30, occupancy was 94.3%, up 140 basis points year-over-year and up 130 basis points since the end of the second quarter. With regard to rent spreads, we continue to see positive momentum for leases that commenced in the 12 months ended September 30. Blended average rates improved by 240 basis points on a cash basis compared to the 12 months ended June 30. We also benefited from significant percentage rental growth this quarter, which was more than 2.5 times the comparable 2019 period. Renewals executed or in process represented 68% of the space scheduled to expire during the year compared to 72% at this time last year. Traffic for the quarter was approximately 99% of the same period in 2019. Tenant sales accelerated in the quarter, reaching an all-time high of $448 per square foot for the consolidated portfolio for the 12 months ended September 30, representing an increase of more than 13% over the comparable 2019 period. This revenue is captured in the other revenues line, which for the third quarter has doubled the contribution from 2020 and increased 38% over 2019. Third quarter core FFO available to common shareholders was $0.47 per share compared to $0.44 per share in the third quarter of 2020. Core FFO for the third quarter of 2021 excludes a charge of $34 million or $0.31 per share for the early extinguishment of debt related to the redemption of our 2023 and 2024 bonds. Same-center NOI for the consolidated portfolio increased 11.5% for the quarter to $73.8 million, driven by better than expected rebound in variable rents and other revenues. We remain on track with rent collections and, through October 29, had collected approximately 98% of 2020 deferred rents due by the end of the third quarter. Year-to-date, we have sold 10 million shares generating proceeds of approximately $187 million and $60 million remains available under our current authorization. The lines have a borrowing capacity of $520 million with an accordion feature to increase borrowing capacity to $1.2 billion. Additionally, in August, we completed a public offering of $400 million of senior notes at a rate of 2.75%, the lowest coupon in Tanger history. We used the proceeds from the sale to redeem the $100 million that was outstanding on our 3.875% notes due in 2023 and the $250 million that was outstanding on our 3.75% notes due in 2024. We also incurred a $31.9 million make-whole premium in September related to these redemptions. As of September 30, our net debt to adjusted EBITDA improved to 5.3 times for the trailing 12 months compared to 7.2 times for the comparable 12-month period of the prior year. We are increasing our core FFO to a range of $1.67 to $1.71 per share from the prior range of $1.52 and $1.59, an increase of 9% at the midpoint. Our guidance also includes up to 50,000 [Phonetic] square feet related to the potential additional bankruptcies and brandwide restructurings that could occur for the remainder of the year.

Third quarter core FFO available to common shareholders was $0.47 per share compared to $0.44 per share in the third quarter of 2020. We are increasing our core FFO to a range of $1.67 to $1.71 per share from the prior range of $1.52 and $1.59, an increase of 9% at the midpoint.

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In the fourth quarter, we delivered 16% organic growth despite auto production declines caused by our auto customer supply chain. Both our sales and adjusted earnings per share in fiscal 2021 were up double digits versus 2019, and we expanded adjusted operating margins by over 100 basis points by continuing the margin journey that we're on. We generated sales of $3.8 billion with 16% organic growth and adjusted earnings per share ahead of guidance at $1.69, which was up 46% year-over-year. Adjusted operating margins were 18.5% as a result of the increases across all three segments, and I'll share more details about segment results a little bit later. When you look at the full year, year-over-year sales were up 23%, adjusted operating margins expanded approximately 400 basis points and adjusted earnings per share was up over 50% to $6.51. Our free cash flow was above $2 billion with approximately 100% conversion to adjusted net income for the year, demonstrating our strong cash generation model. We also continue to remain balanced in our capital deployment with about 3/4 of our free cash flow return to owners this past year and the remainder used for M&A including the earning acquisition in the industrial segment that we mentioned last quarter. When you look at our orders in the fourth quarter, they remained strong at $4.1 billion, with strength in each segment, and our book-to-bill was 1.08. With these orders and where we position TE, we do expect a strong performance of our portfolio to continue into the first quarter with approximately $3.7 billion in sales, which will be up mid-single digits organically year-over-year despite a roughly 20% expected decline in year-over-year auto production. Adjusted earnings per share is expected to be approximately $1.60 in the first quarter, and this will be up 9% year-over-year. Now let me talk about the market, and frame it to where we were just 90 days ago when we last spoke. Global auto production came in lower than we expected just 90 days ago as our customers reduced production to enable the supply chain to catch up. And we're expecting auto production to be in the 18 million unit range in our first quarter. This first quarter production will be well below the nearly 23 million units made in the first quarter of 2021. Now versus 90 days ago in our industrial segment, the key is that we continue to see an improving backdrop, which is benefiting our industrial equipment and energy businesses, and our medical business is growing year-over-year as interventional procedures increase. In communications versus 90 days ago, we continue to see favorable end market trends with global growth in cloud capital expenditures and strength in residential demand benefiting our appliances business. Now while that's a view of what we've seen versus 90 days ago from a market perspective, I also believe in this environment, so it's important to tell you what we're seeing in our supply chain. While challenges remain in the broader supply chain, we have seen some improvement in our availability of certain raw materials in our own supply chain versus 90 days ago. 90 days ago, we thought we were impacted by about $100 million of revenue due to us not having availability of supply. This quarter end, we're only -- that's down to about $50 million. Some of the key highlights I want to mention is that on the environmental side, we set up a new goal to decrease Scope one and Scope two greenhouse gas emissions by over 40% on an absolute basis by 2030. And this new goal is above and beyond the 35% reduction we've already made in absolute greenhouse gas emission reductions over the past decade. And today, I'm happy to say over 20% of TE's production currently uses carbon-free electricity. If you look at social initiatives, we set a goal to increase women in leadership position by over 26% by 2025. For the fourth quarter, our orders were over $4 billion, with year-over-year order growth in all regions. We continue to see growth in Asia, where China orders were up 17%, and growth across all three segments. In Europe, orders were up 21% and North America orders were up 26%. But the one key difference is we did see growth in our transportation segment orders in China sequentially where our auto orders were up 9%. Segment sales were up 16% organically year-over-year with growth in each of our businesses. Our auto business grew 12% organically despite the declines in auto production that I mentioned. Hybrid and electric vehicle production grew 50% year-over-year increasing from roughly six million units produced in 2020 to roughly nine million units produced globally in 2021. We saw 38% organic growth with increases across all submarket verticals. In our sensors business in the segment, we saw 15% organic growth driven by transportation applications with the new program ramps that we've talked to you about in the past few years. And for this segment, adjusted operating margins expanded nearly 500 basis points to 18% driven by higher volume and strong operational performance by our team. Our sales increased 6% organically year-over-year. Industrial equipment was up 32% organically with double-digit growth in all regions driven by momentum in factory automation applications where we continue to see the benefit from accelerated capital expenditures in areas like semiconductor manufacturing as well as in the automotive space. Our AD&M business declined 18% organically year-over-year driven by the continued market weakness I talked about earlier. And in our energy business, we saw 8% organic growth driven by increases in renewables, especially global solar applications. And it was nice that our medical business grew 5% year-over-year, and it's growing in line with the recovery that we're seeing in the interventional procedures. At a margin level, the segment expanded margin year-over-year by 200 basis points to 15.9% driven by strong operational performance. Sales grew 36% organically year-over-year for the segment, and in both businesses. It's clear that our communications team continues to deliver an outstanding performance with record adjusted operating margins of 24.7%, and this is up 300 basis points versus a strong quarter in the prior year. Sales of $3.8 billion were up 17% on a reported basis and 16% on an organic basis year-over-year. Currency exchange rates positively impacted sales by $51 million versus the prior year. Adjusted operating income was $706 million with an adjusted operating margin of 18.4 -- I'm sorry, 18.5%, with strong year-over-year fall-throughs. GAAP operating income was $660 million and included $38 million of restructuring and other charges and $8 million of acquisition-related charges. For the full year, restructuring charges were $208 million, in line with expectations, and I expect restructuring charges to decline in fiscal 2022 to approximately $150 million. Adjusted earnings per share was $1.69 and GAAP earnings per share was $2.40 for the quarter and included a tax-related benefit of $0.92, primarily related to decreases and our valuation allowances associated with tax planning. We also had a charge of $0.07 related to the annuitization of the proportion of our U.S. pension liabilities. Additionally, we have restructuring, acquisition and other charges of $0.14. Free cash flow was approximately $535 million for the quarter. And during the quarter, we utilized approximately $300 million for acquisitions, including earnings in our industrial segment, which Terrence mentioned earlier. The adjusted effective tax rate in Q4 was 20% and approximately 19% for the full year. For 2022, we expect an adjusted effective tax rate of around 19% but continue to expect our cash tax rate to be in the mid-teens. We are back above the 2019 pre-COVID levels on every financial metric, with sales up 11%, adjusted operating margins expanding over 100 basis points, adjusted earnings per share increasing by 17% and free cash flow up 29%. To provide some segment-level examples, our transportation sales are up approximately 15% versus fiscal 2019, despite auto production declining over 11% during that same time frame. Similarly, in our communications segment, sales are up approximately 25% over this time period, significantly outperforming our end markets. Fiscal 2021 sales of $14.9 billion were up 23% on a reported basis and 18% organically year-over-year. Currency exchange rates positively impacted sales by $444 million versus the prior year. Adjusted operating margins of 18.1% and expanded by nearly 400 basis points year-over-year with expansion in every segment. Our adjusted earnings per share expanded 53% year-over-year to $6.51. We generated approximately 100% conversion to adjusted net income with record free cash flow of approximately $2.1 billion for the year. During the year, we returned over $1.5 billion to shareholders and utilized over $400 million for acquisitions. Going forward, we remain committed to our balanced capital deployment strategy and expect to return 2/3 of our free cash flow to shareholders while supporting our inorganic growth initiatives through bolt-on acquisitions.

We generated sales of $3.8 billion with 16% organic growth and adjusted earnings per share ahead of guidance at $1.69, which was up 46% year-over-year. With these orders and where we position TE, we do expect a strong performance of our portfolio to continue into the first quarter with approximately $3.7 billion in sales, which will be up mid-single digits organically year-over-year despite a roughly 20% expected decline in year-over-year auto production. Sales of $3.8 billion were up 17% on a reported basis and 16% on an organic basis year-over-year. Adjusted earnings per share was $1.69 and GAAP earnings per share was $2.40 for the quarter and included a tax-related benefit of $0.92, primarily related to decreases and our valuation allowances associated with tax planning.

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Jerome Pedretti, who has been with Pentair for nearly 15 years, will lead our Industrial & Flow Technologies segment. While we formally withdrew our quarter and annual guidance at the end of March due to a lack of visibility, we are planning for significantly reduced demand throughout the remainder of 2020. Consumer Solutions is a $1.6 billion segment comprised of our pool and our water solutions businesses. As you can see on this slide, Consumer Solutions is approximately 75% residential, and approximately 75% of the revenue serves the installed aftermarket base. There are approximately 5.5 million pools installed in the ground. And we expect the aftermarket business, which represents roughly 80% of our pool business, to see some short term softness, but not to the extent that we might expect will occur in the new pool construction and remodeling parts of the business. Industrial & Flow Technologies, or IFT, is a $1.3 billion segment comprised of our residential and irrigation flow, commercial and infrastructure flow and industrial filtration businesses. IFT does, however, generate approximately 65% of sales from the installed aftermarket base. It is hard to leave after 12 years with Pentair, but I believe the company is well positioned and will emerge from this current situation stronger as a leading water treatment company. Materials is our biggest cost at approximately 40% of sales and is the one piece of our structure that is truly variable. We ended the quarter with $169 million in cash and $326 million available under our revolver. We ended the first quarter with a leverage ratio of 2.1 times, which is well below our 3.7 times covenant. Given the dramatically changing environment, we have lowered our capital expenditures forecast by over 10% for the year. During the first quarter, we repurchased $115 million of our shares, but we suspended the buyback during the quarter and are currently choosing to remain on the sidelines as we focus on our strong liquidity. While we covered our liquidity position on the previous slide, we would point out that we have a healthy mix between fixed and variable debt. Our average borrowing rate for the quarter was a very respectable 2.6%, and we ended the quarter with 14.4% ROIC. For the first quarter, overall sales grew 3%, and core sales also increased 3%. Segment income grew 13%, return on sales expanded 140 basis points, and adjusted earnings per share increased 21%. Below the line, we saw an adjusted tax rate of 16%, net interest other expense of $7.5 million, and our average shares in the quarter were $168.7 million. Consumer Solutions saw sales increased 9% with core sales growing 7%. The segment had strong segment income performance growing 13% year-over-year, and ROS expanded 80 basis points to 21.8%. IFT reported a 3% decline in sales with core growth down 2%. Segment income was a positive story with a 9% year-over-year increase, and ROS improved 150 basis points to 13.9%.

While we formally withdrew our quarter and annual guidance at the end of March due to a lack of visibility, we are planning for significantly reduced demand throughout the remainder of 2020. We ended the quarter with $169 million in cash and $326 million available under our revolver. While we covered our liquidity position on the previous slide, we would point out that we have a healthy mix between fixed and variable debt.

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For the second quarter, our net sales were a record and nearly $4.4 billion and our adjusted earnings per diluted share from continuing operations were $1.94. Our adjusted earnings per share were significantly higher than the second quarter of 2020, partially due to last year's second quarter, including various pandemic related impacts. Our adjusted earnings per share was similar to the second quarter of 2019, despite sales volumes being 6% lower than that period and we are dealing with historical high levels of raw material inflation in the current period [Phonetic]. Coming in the quarter, we expected these disruptions would have an estimated impact of $70 million to $90 million. However, the actual impact was much more severe and closer to $200 million. Our automotive OEM business was impacted most significantly from supply disruptions as we estimate that more than 2 million less cars were built than initially expected during the quarter. This impacted our sales by about $100 million or higher than $40 million more than we expected in April. Finally, as we expected the supply disruptions led to shortages of certain raw materials with anticipated impact of $30 million to $50 million, but the actual impact was closer to $100 million. This helped us achieve solid price increases year-to-date and our pace of price realization is well ahead of the most recent raw material inflation cycle in 2017 and 2018. We're also continuing our strong cost management evidenced by our SG&A as a percentage of sales being 130 basis points lower than the second quarter of 2019. This is being supported by our ongoing execution on our structural cost savings programs, realized an incremental $40 million of savings in the second quarter. We have increased our targeted full-year 2021 savings by about 10% to $135 million. We had yet another strong operating cash performance during the quarter and ended the quarter with about $1.3 billion of cash and cash equivalents, given us continued flexibility to do additional accretive cash deployment in the upcoming quarters. Our current best estimate is our sales are expected to be unfavorably impacted by about $150 million in the third quarter, due to these issues. We also expect raw material costs to remain at elevated levels in the third quarter, our current best estimate is that they will be inflated by [Indecipherable] 20%, compared to the third quarter of 2020 with businesses and our industrial coatings segment experiencing the largest increases, due to the raw material mix of those types of coatings. In the third quarter these acquisitions will add about $500 million of incremental sales to our company. Including our acquisitions, we expect overall sales growth to be over 20%, compared to the third quarter of 2020. In addition, full-year 2021 adjusted earnings, excluding amortization expense and other non-recurring items is expected to be $7.40 to $7.60, which at the midpoint would be about 13% higher than the adjusted earnings per share we realized in 2019, despite the significant raw material inflationary pressures we are dealing with this year. Finally, I'm very pleased that our Board recently approved a dividend increase of about 10%. Our September payment coupled with the anticipated payment of a similar quarterly dividend in December, will mark 50 consecutive years of annual per share increases in the Company's dividend. In closing, I could not be more proud of our now 50,000 employees around the world, who is [Phonetic] share of our customers, our communities and our many stakeholders.

For the second quarter, our net sales were a record and nearly $4.4 billion and our adjusted earnings per diluted share from continuing operations were $1.94. Our adjusted earnings per share were significantly higher than the second quarter of 2020, partially due to last year's second quarter, including various pandemic related impacts. This helped us achieve solid price increases year-to-date and our pace of price realization is well ahead of the most recent raw material inflation cycle in 2017 and 2018. In addition, full-year 2021 adjusted earnings, excluding amortization expense and other non-recurring items is expected to be $7.40 to $7.60, which at the midpoint would be about 13% higher than the adjusted earnings per share we realized in 2019, despite the significant raw material inflationary pressures we are dealing with this year.

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In the second quarter, organic sales were up 31% with sizable gains in both our operating segments. Similarly, orders were very good as we generated a book-to-bill of 1.3 times, with Aerospace driving that result. Our total backlog stands at $984 million at quarter-end, reflecting a 12% increase from the end of the first quarter. Adjusted operating income and margins were up 41% and 40 bps respectively. Adjusted earnings per share were $0.45, up 67% from last year. For the segment, orders were up 37% organically with a book-to-bill of approximately 1 times. Industrial sales grew 42% with organic sales growth of 35%. Now with expanding the ongoing semiconductor issue that's dampening automotive bills, IHS predicts -- still predicts 2021 global production to be up 10% over the last year and up an additional 11% in 2022. Within our Molding Solutions business, we saw a good orders quarter up 17% organically. Organic sales were up 22% year-over-year, while sequential sales were up 13%. To maximize up time in an operation that runs 24 hours a day, seven days a week, the configuration of the mold allows for required maintenance of worn parts to occur right on the machine to replaceable modular units or clusters allowing for minimum disruption and production to come quickly back online. At Force and Motion control organic orders were up over 50% with organic sales up double digits. On a sequential basis, sales increased 6%. As a result of this issue, we saw our second quarter revenue impact of approximately $5 million, very much aligned with the exposure we disclosed in April. We expect the third quarter semiconductor revenue impact of $3 million and another $1 million in the fourth quarter. We now expect 2021 to deliver organic growth of approximately 20%, better than our April expectation of mid-teens growth. At Industrial, we see 2021 organic growth in the mid-teens with operating margins of 12% to 13%. Aerospace sales improved 23% over last year and 6% sequentially from the first quarter. A highlight of the quarter was our strong OEM orders which generated a book-to-bill of 2.5 times. Segment operating margin is anticipated to be 13% to 14%, slightly higher than our April outlook. Second quarter sales were $321 million, up 36% from the prior year period, with organic sales increasing 31% and foreign exchange generating a positive impact of 5%. Operating income was $38.5 million versus $10.1 million a year ago. On an adjusted basis, which excludes restructuring charges of $700,000 this year and $17.7 million last year, operating income of $39.2 million was up 41% and adjusted operating margin of 12.2% was up 40 basis points from a year ago. Interest expense was $4.5 million, an increase of $600,000 as a result of a higher average interest rate, offset in part by lower average borrowings. For the quarter, our effective tax rate was 25.3%, compared with 89% in the second quarter of 2020, and 37.6% for full year 2020. Net income was $24.5 million or $0.48 per diluted share compared to $600,000 or $0.01 per diluted share a year ago. On an adjusted basis, net income per share of $0.45 was up 67% from $0.27 a year ago. Adjusted net income per share in the current quarter excludes $0.01 of restructuring charges and a net foreign tax benefit of $0.04, while the prior-year period excludes $0.26 of restructuring charges. Second quarter Industrial sales were $235 million, up 42% from a year ago, while organic sales increased 35%. Favorable foreign exchange increased sales by $12.4 million or 7%. As has been the case since June of last year, we have delivered another sequential quarter of sales improvement with second quarter sales up 7% from the first quarter of 2021. Industrial's operating profit was $27.3 million versus an operating loss of $300,000 last year. Excluding restructuring costs of $200,000 this year and $15.8 million last year, adjusted operating profit was $27.5 million versus $15.5 million a year ago. Adjusted operating margin was 11.7%, up 230 basis points from a year ago. In the second quarter, we experienced approximately $1.5 million of combined freight and material inflation in the Industrial segment. For the second half of 2021, our Industrial outlook includes $2 million of inflation impacts. Sales were $86 million, up 23% from a year ago, driven by a 37% increase in our OEM business. Our aftermarket business which continues to be impacted by lingering effects of the global pandemic, experienced a 2% sales decrease, with MRO down 8% and spare parts up 14%. On a sequential basis, total Aerospace sales increased 6% from the first quarter of 2021. Operating profit was $11.3 million, an increase of 8%. Excluding $400,000 of restructuring cost this year and $1.9 million last year, adjusted operating profit was $11.7 million, down 5%, driven by higher incentive compensation and unfavorable mix. Adjusted operating margin was 13.5%, down 400 basis points from a year ago. Aerospace OEM backlog ended June at $694 million, up 16% from March 2021, and we expect to ship approximately 40% of this backlog over the next year. Year-to-date cash provided by operating activities was $86 million versus $123 million last year, with free cash flow of $68 million, down from $103 million last year. Capital expenditures were $18 million, down $2 million from a year ago. Year-to-date operating cash flow in 2020 saw a $48 million benefit from working capital, as cash management with a significant focus during the pandemic. Regarding the balance sheet, our debt-to-EBITDA ratio as defined by our credit agreement was 2.9 times at quarter end, down from 3.1 times at the end of last quarter. Our second quarter average diluted shares outstanding were $51.1 million. During the second quarter under a pre-existing 10b5-1 plan, we repurchased 100,000 shares at an average price of $52.29, leaving approximately 3.6 million shares remaining available for repurchase under the Board's 2019 stock repurchase authorization. We now expect organic sales to be up 11% to 12% for the year, an increase from our prior view of up 10% to 12%, driven by strong Industrial growth. FX is expected to have about a 2% favorable impact on sales, while divested Seeger revenues will have a small negative impact. Adjusting op-- Adjusted operating margin is forecasted to be approximately 13%, consistent with our prior year. Adjusted earnings per share is expected to be in the range of $1.83 to $1.98 per share, up 12% to 21% from 2020's adjusted earnings of $1.64 per share. Our current expectation reflects an increase at the lower end of our previous range of $1.78 to $1.98 and we expect second-half earnings per share to be weighted to the fourth quarter. Our interest expense forecast remains $16 million, while our other expense is forecast at $6.5 million, slightly less than our April outlook. Estimated capex of $50 million, average diluted shares of $51 million and a full year tax rate of 30% are all consistent with our prior outlook. Cash conversion is now anticipated to be greater than 110%, an increase over our prior expectation of 100%.

Adjusted earnings per share were $0.45, up 67% from last year. Second quarter sales were $321 million, up 36% from the prior year period, with organic sales increasing 31% and foreign exchange generating a positive impact of 5%. Net income was $24.5 million or $0.48 per diluted share compared to $600,000 or $0.01 per diluted share a year ago. On an adjusted basis, net income per share of $0.45 was up 67% from $0.27 a year ago. We now expect organic sales to be up 11% to 12% for the year, an increase from our prior view of up 10% to 12%, driven by strong Industrial growth.

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Our third quarter results exceeded our expectations as net sales rose 9% over the prior year to approximately $2.8 billion. Our adjusted earnings per share was $3.95 per share. Due to supply shortages, government regulations and political issues, natural gas costs in Europe are presently about 4 times as high than they were earlier in the year. Our results have improved significantly during 2021 and we generated over $1.9 billion of EBITDA for the trailing 12 months. Given this in our current valuations, our Board increased our stock purchase program by an additional $500 million. Since the end of the second quarter, we bought approximately $250 million of our stock at an average price of $193 per share. Sales for the quarter exceeded $2.8 billion and 9.4% increase as reported and 8.7% on a constant basis. Gross margin, as reported, was 29.7% or 29.8% excluding charges, increasing from 28.3% last year. SG&A as reported was 16.9% and flat versus prior year, excluding charges. Operating margin as reported was 12.8%. Restructuring charges were approximately $1 million, and we have reached our original savings goal exceeding $100 million in annual savings. Operating margins, excluding charges, were also 12.8%, improving from 11.5% in the prior year or 130 basis points. Interest expense was $15 million in the quarter, flat versus prior year. Our non-GAAP tax rate was 21.4% versus 16.9% in the prior year, and we still expect the full year rate to be between 21.5% and 22.5%. Earnings per share as reported were $3.93, and excluding charges were 3.95% -- $3.95, excuse me, increasing by 21% versus prior year. Global ceramic sales came in just under $1 billion, a 9.6% increase as reported or approximately 9.1% on a constant basis, led by strengthening price and mix across our geographic regions. Operating margin excluding charges was 11.9%, up 160 basis points versus prior year due to the favorable price/mix offsetting increasing inflation, which improved -- with improved productivity and limited year-over-year shutdowns strengthening our results, partially offset by increased costs in new product development. Flooring North America sales just exceeded $1 billion, a 6.9% increase as reported. Operating margin excluding charges was 11.4%. That's an increase of 320 basis points versus prior year. In Flooring Rest of the World, sales exceeded $760 million, a 12.7% as reported increase or 10.5% on a constant basis, driven again by price and mix actions while volumes here were constrained by material disruptions, especially in LVT, a return to a normal summer seasonality and COVID restrictions, which caused lockdowns in Australia, New Zealand and Malaysia. Operating margin, excluding charges, was 17.4%. Corporate and eliminations were $11 million, and I would expect that to be $45 million for the full year. Cash for the quarter exceeded $1.1 billion with free cash flow of $351 million in the quarter and over $720 million in third quarter year-to-date. Receivables were just shy of $1.9 billion with a DSO of just under 57 days. Inventories were just over $2.2 billion, an increase of approximately $374 million or 20% from the prior year. That's an increase of about 16% if you compare to the year-end balance. Inventory days just under 107 days compared to our low point last year at just under 100 days and 103 days at the year-end. Property, plant and equipment exceeded $4.4 billion with capex for the quarter at $148 million, in line with our D&A. Full year capex is currently projected to be $650 million, with D&A projected at $586 million. One note on October 19, the company redeemed at par their January 2022 EUR500 million 2% senior notes plus unpaid interest, utilizing cash on hand. The balance sheet overall and cash flow remained very strong with gross debt as of the end of Q3 of $2.3 billion and leverage at 0.6 times to adjusted EBITDA. For the period, our Flooring Rest of World segment sales increased 12.7% as reported and 10.5% on a constant basis. Operating margins were 17.4% as a result of pricing and mix improvements, offset by inflation and a return to more normal seasonality in the period. Our wood plant in Malaysia resumed full operations in September after 12 weeks of government lockdowns due to COVID. In the third quarter period, our Flooring North America segment sales increased 6.9% and operating margins were 11.3% as reported as a result of productivity, pricing and mix improvements, partially offset by inflation. To support future growth, we are expanding our LVT operations adding approximately $160 million of production, with the initial phase beginning at the end of this year. In the quarter, our Global Ceramic segment sales increased 9.6% as reported and 9.1% on a constant basis. Operating margins were 11.9% as a result of higher volume, productivity, pricing and mix improvements, partially offset by inflation. In Ceramic Europe, record gas prices are increasing the net cost by approximately $25 million in the fourth quarter, and it will take some time for the industry to adjust to the higher cost. In addition, our fourth quarter calendar has 6% fewer days than the prior year. Given these factors, we anticipate our fourth quarter adjusted earnings per share to be $2.80 to $2.90, excluding any restructuring charges.

Our adjusted earnings per share was $3.95 per share. Sales for the quarter exceeded $2.8 billion and 9.4% increase as reported and 8.7% on a constant basis. Earnings per share as reported were $3.93, and excluding charges were 3.95% -- $3.95, excuse me, increasing by 21% versus prior year. Given these factors, we anticipate our fourth quarter adjusted earnings per share to be $2.80 to $2.90, excluding any restructuring charges.

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Core income for the quarter was $879 million or $3.45 per diluted share, generating a core return on equity of 13.7%. In terms of underwriting results, higher underlying underwriting income and net favorable prior year reserve development, as well as a lower level of catastrophe losses, all contributed to higher core income. Underlying underwriting income was 8% higher than in the prior year quarter, driven by record net earned premiums of $7.6 billion and an excellent underlying combined ratio of 91.4%. In Business Insurance, net earned premiums were higher and the underlying combined ratio improved by 3.7 points. Our high-quality investment portfolio generated net investment income of $682 million after tax, reflecting very strong returns in our non-fixed income portfolio. These excellent results, together with our strong balance sheet, enabled us to grow adjusted book value per share by 13% over the past year after making important investments for the future and returning significant excess capital to our shareholders. During the quarter, we returned $625 million of excess capital to shareholders, including $401 million of share repurchases. During the quarter, we grew net written premiums to $8.1 billion, an increase of 11% or 8% after adjusting for the auto premium refunds in the prior year quarter. In Business Insurance, net written premiums grew by 5%, driven by retention, which ticked up almost 1 point; renewal premium change at a near record high of 9.5%; and 9% growth in new business. Inside renewal premium change, pure renewal rate change was a strong 7.1%. In Bond & Specialty Insurance, net written premiums increased by 16%, driven by record renewal premium change of 12.7% in our management liability business, while retention remained strong. Net written premiums increased 8% after adjusting for the auto premium refunds in the prior year quarter. We've accelerated our domestic auto policies in force growth from 1% to 4% over the last six quarters, bringing PIF count to a record high. Core income for the second quarter was $879 million compared to a core loss of $50 million in the prior year quarter. Our second quarter results include $475 million of pre-tax cat losses compared to $854 million in last year's second quarter. On a year-to-date basis, we have accumulated about $1.5 billion of qualifying losses toward the aggregate retention of $1.9 billion on our property aggregate catastrophe XOL Treaty. The Treaty provides $350 million of coverage on the first $500 million of losses above the aggregate retention amount. Underlying underwriting income increased 8% to $617 million pre-tax, reflecting a higher level of earned premium in each of our segments and a strong underlying combined ratio of 91.4%, consistent with the prior year. The underlying loss ratio came in at 61.7%, up 1.3 points from last year's second quarter as the beneficial impact of earned pricing in excess of loss trend was more than offset by the comparison to a very low pandemic-related personal auto loss ratio in the year ago quarter. Expense ratio of 29.7% is 1.3 points lower than the prior year quarter as last year's result was elevated primarily due to the premium refunds we provided to our personal auto customers. In Personal Insurance, both auto and property losses came in better than expected for recent accident years, resulting in $65 million pre-tax net favorable PYD. In Bond & Specialty Insurance, $44 million of pre-tax, net favorable PYD was driven by favorable loss experience in surety and fidelity related to recent accident years. In Business Insurance, net favorable prior year reserve development of $73 million was driven by better-than-expected loss experience in workers' comp across multiple accident years, partially offset by reserve strengthening in our run-off book. Net investment income improved to $682 million after tax this quarter. Our non-fixed income portfolio turned in particularly strong results this quarter, reflecting performance in the equity markets, contributing $265 million after tax. For the remainder of 2021, we expect fixed income NII, including earnings from short-term securities, of between $425 million and $435 million after tax per quarter. Operating cash flows for the quarter of $1.8 billion were again very strong. All our capital ratios were at or better than target levels and we ended the quarter with holding company liquidity of approximately $2.4 billion. During the second quarter, we took advantage of favorable market conditions and raised $750 million to help fund the future growth with a 30-year debt issuance at 3.05%, representing our second lowest 30-year coupon ever and achieving one of the tightest spreads ever for a 30-year note issued by an insurance company. And accordingly, our after tax net unrealized investment gain increased from $2.8 billion as of March 31 to $3.2 billion at June 30. Adjusted book value per share, which excludes net unrealized investment gains and losses, was $103.88 at quarter end, up 4% since year-end and up 13% year-over-year. We returned $625 million of capital to our shareholders during the second quarter with $224 million of dividends and $401 million in share repurchases. In the annual reset for the 2021 hurricane season, the attachment point was adjusted from $1.87 billion to $1.98 billion while the total cost of the program was flat year-over-year. Segment income was $643 million for the quarter compared to a loss of $58 million in the prior year quarter. We're particularly pleased with the underlying combined ratio of 93.3%, which improved by 3.7 points from the second quarter of 2020, primarily attributable to three things. First, about 2 points of the improvement resulted from earned pricing exceeding loss cost trends. Another 0.5 point or so resulted from lower non-cat weather. In terms of non-cat weather, while the year-over-year improvement was about a 0.5 point favorable, as I just mentioned, this quarter's result was about 1.5 point better than what we assumed for the quarter. Net written premiums were up 5%, benefiting from strong renewal premium change, including both strong renewal rate and exposure levels that are trending back to pre-pandemic levels and higher year-over-year new business volumes. As for domestic production, renewal premium change was 9.5%, a historically high result and up almost 4 points from the second quarter of last year. Underlying the RPC, we achieved strong renewal rate change of 7.1% and healthy exposure growth that reflects improving trends in our customers' outlook for their businesses. New business was up more than 9% with both select and middle-market contributing. While this quarter's renewal rate change of 7.1% remains well in excess of loss trends, it was a little lower sequentially. As illustrated on Slide 12, in our middle market and national property businesses, we achieved rate increases in 84% of the accounts that renewed in the second quarter, up from 81% in last year's second quarter. As for the individual businesses, in Select, renewal rate change was 4.3%, more than 2 points higher than the second quarter of 2020, while retention was 80%. Exposure growth was up over 4% for the quarter, which is an encouraging sign as the economy reopens. Lastly, new business was up 6% over the prior year quarter, driven by the continued success of our new BOP 2.0 product, which is now live in 31 states. In middle market, renewal premium change of over 9% and retention of 87% were both historically high. Renewal rate change at 7.4% remained strong and well in excess of loss trends. Finally, new business was up 16% over the prior year quarter, driven by the success with larger accounts, as well as some improvement in the quality of the flow in the market. Segment income was $187 million, considerably more than double the prior year quarter, driven by favorable prior year reserve development, a significantly improved underlying underwriting margin and higher business volumes. The underlying combined ratio of 83.4% improved by over 4.5 points from the prior year quarter as pricing that exceeded loss cost trends drove a lower underlying loss ratio. Net written premiums grew an exceptional 16% in the quarter with solid contributions from all our businesses. In management liability renewal premium change was a record 12.7%, driven by near record rate. Retention remained strong at 86%. New business increased 6% from the second quarter of last year; our first quarterly increase since the beginning of the pandemic with strong new business pricing. Segment income of $121 million was up $111 million from the prior year quarter, benefiting from lower catastrophes, higher net investment income and higher net favorable prior year reserve development. Our second quarter combined ratio improved from the prior year quarter by about 1.5 points to 99.7%. Net written premiums grew 16%. Recall that in the prior year quarter, we provided $216 million of premium refunds to automobile customers in response to the impact of the pandemic. Adjusting for these premium refunds, net written premiums grew a very strong 8% with Domestic Homeowners up 12% and Domestic Automobile up 4%. Automobile delivered another excellent quarter with a combined ratio of 91.6%. The underlying combined ratio was an impressive 92%, although up 6 points from the prior year quarter, which reflected lower loss activity during the initial months of the pandemic. In Homeowners and Other, the second quarter combined ratio of 108.3% was 6 points lower than the prior year quarter, driven by a 13.5 point reduction in catastrophe losses. Partially offsetting the catastrophe favorability was an 8 point increase in the underlying combined ratio. Domestic Automobile retention was up slightly to a strong 85%. New business increased by 19% and policies in force grew 4%. Domestic Homeowners and Other delivered another excellent quarter with retention remaining strong at 85%, renewal premium change increasing to 8.2%, and new business growth of 28%, reflective of increased quote activity and increase in average premium, along with the ongoing successful rollout of Quantum Home 2.0. Policies in force grew 7%. When we launched Quantum Auto 2.0, we designed it with a modular product structure to give customers what they need and to deliver long-term performance. Regarding telematics, we've seen take-up rates for IntelliDrive increase by 30% since the launch of our second-generation offering, which features a fully redesigned mobile experience, monitors distracted driving and improves our ability to match price to driving behavior. The Quantum Home 2.0 product is now available in over 40 states, generating consistent growth in policies in force. With advancements in our MyTravelers mobile app, we continue to digitize the customer journey with over 600,000 customers already downloading the app since its launch earlier this year. Jeff has been at Travelers for more than 20 years.

Core income for the quarter was $879 million or $3.45 per diluted share, generating a core return on equity of 13.7%. In terms of underwriting results, higher underlying underwriting income and net favorable prior year reserve development, as well as a lower level of catastrophe losses, all contributed to higher core income. During the quarter, we grew net written premiums to $8.1 billion, an increase of 11% or 8% after adjusting for the auto premium refunds in the prior year quarter. Our second quarter results include $475 million of pre-tax cat losses compared to $854 million in last year's second quarter.

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As a result of our second quarter performance our confidence in the second half of the fiscal year and McKesson's continue to role in the COVID-19 response efforts, we are raising our guidance range for fiscal 2022 adjusted earnings per diluted share from $19.80 to $20.40 to a new range of $21.95 to $22.55. We're so grateful for all the contributions from the team over the last 19 months. The virtual experience helped 2,000 independent pharmacies, prioritize education and networking, which we believe will shape the future of community, pharmacy and strengthen the independent business for the better. We're a leader in medical distribution to alternate site markets and our footprint in the US healthcare is underpinned by our strong sourcing and supply chain capabilities, we deliver medical and surgical supplies and services to over 250,000 customers. McKesson's oncology ecosystem supports over 14,000 specialty physicians through distribution and GPO services, and we are the leading distributor in the community oncology space. We have over 1,400 physicians in the US Oncology Network spread over approximately 600 sites of care in the US. Dr. Carmona has a strong focus on improving public healthcare and extensive experience in clinical sciences, healthcare management and emergency preparedness, which led to his nomination and unanimous senate confirmation as the 17th Surgeon General of the United States from 2002 until 2006. The US Pharmaceutical segment saw a 12% adjusted operating profit growth, which was underpinned by the distribution of specialty products to providers and health systems and the contribution from our successful COVID-19 vaccine distribution operations. Through October 28th, our US Pharmaceutical business has successfully distributed over 311 million Moderna and Johnson & Johnson COVID-19 vaccines to administration sites across the United States and to support the US government's international donation mission. The segment had excellent momentum and delivered a 38% increase to adjusted operating profit growth during the second quarter. Distribute and administer COVID-19 vaccines and through September, we've distributed over 58 million vaccines to administration sites in select markets across our international geographies. The assets involved in this transaction contributed approximately $7.8 billion in revenue and $64 million in adjusted operating profit in fiscal 2021. We will remeasure the net assets to the lower of carrying amount or fair value, less cost to sell, and we estimate that this will result in a GAAP only charge of between $700 million to $900 million in our third quarter of fiscal 2022. First, we recorded a GAAP only after tax charge of $472 million related to our agreement to sell certain European businesses to the Phoenix Group to account for the remeasurement of the net assets to lower of carrying amount or fair value, less cost to sell. Also during the quarter we recorded an after-tax loss of $141 million on debt extinguishment related to the successful completion of a bond tender offer. Second quarter adjusted earnings per diluted share was $6.15, an increase of 28%, compared to the prior year. Second quarter adjusted earnings per diluted share, also includes net pre-tax gains of approximately $97 million or $0.46 per diluted share associated with McKesson Ventures equity investments, as compared to $49 million in the second quarter of fiscal 2021. Consolidated revenues of $66.6 billion increased 9% above the prior year. Adjusted gross profit was $3.3 billion for the quarter, up 12% compared to the prior year. Comparable adjusted gross margins for the quarter was up 10 basis points versus the prior year. Adjusted operating expenses in the quarter increased 4% year-over-year. and adjusted operating profit of $1.3 billion for the quarter was an increase of 34%, compared to the prior year and reflected double-digit growth in each segment. Interest expense was $45 million in the quarter, a decline of 10%, compared to the prior year driven by the net reduction of debt in the quarter. Our adjusted tax rate was 18.8% for the quarter, which was in line with our expectations. In wrapping up our consolidated results second quarter diluted weighted average shares were 155.8 million, a decrease of 5% year-over-year. Moving now to our second quarter segment results, which can be found on Slides eight through 13, and I'll start with US Pharmaceutical. Revenues were $53.4 billion, an increase of 11% year-over-year as increased pharmaceutical volumes, including growth in specialty products and our largest retail national account customers were partially offset by branded to generic conversions. Adjusted operating profit increased 12% to $735 million, driven by growth in the distribution of specialty products to providers and health systems and the contribution from COVID-19 vaccine distribution. The contribution from our contract with the US government-related to the distribution of COVID-19 provided a benefit of approximately $0.28 per share in the quarter, which is above our original expectations. In the Prescription Technology Solutions segment revenues were $932 million, an increase of 40% driven by higher biopharma service offerings, including third-party logistics services and increased technology service revenue, partially resulting from the growth of prescription volumes. Adjusted operating profit increased 38% to $144 million, driven by organic growth from access and adherence solutions. Moving now to Medical-Surgical Solutions, revenues were $3.1 billion, an increase of 23%, driven by increased sales of COVID-19 tests and growth in the primary care business. Adjusted operating profit increased 52% to $319 million, driven by growth in the primary care business, increased sales of COVID-19 tests, and the contribution from kitting, storage and distribution of ancillary supplies for the US governments COVID-19 vaccine program. The contribution from our contract with US government-related to the kitting, distribution and storage of ancillary supplies for COVID-19 vaccines provided a benefit of approximately $0.14 per share in the quarter, which was above our original expectations. Revenues in the quarter were $9.1 billion, a decrease of 5%, primarily driven by the contribution of McKesson's German wholesale business to a joint venture with Walgreens Boots Alliance, partially offset by volume increases in the pharmaceutical distribution and retail businesses. Segment revenue increased 13% year-over-year and was up 9% on an FX adjusted basis. Adjusted operating profit increased 41% year-over-year to $163 million. On an FX adjusted basis adjusted operating profit increased 34% to $155 million, driven by the discontinuation of depreciation and amortization on certain European assets classified as held for sale beginning in the second quarter of fiscal 2022. The held for sale accounting in our international business contributed $0.13 to adjusted earnings in our second quarter of fiscal 2022. Adjusted corporate expenses were $83 million, a decrease of 39% year-over-year, driven by gains of approximately $97 million or $0.46 from equity investments within our McKesson Ventures portfolio. This quarter we had fair value adjustments related to multiple portfolio companies within McKesson Ventures, compared to fiscal 2021 gains from McKesson Ventures contributed $0.24 year-over-year. We also reported opioid related litigation expenses of $36 million for the second quarter and anticipate that fiscal 2022 opioid-related litigation expenses will be approximately $155 million. Consistent with the proposed settlement announced in July, we also made the first annual payment into escrow of approximately $354 million during the quarter. We ended the quarter with a cash balance of $2.2 billion for the first six months of the fiscal year, we had negative free cash flow of $109 million. In August, we completed a cash funded upsize tender offer, which resulted in the redemption of $922 million principal outstanding debt. And finally, we completed a public offering of a note in the principal amount of $500 million at 1.3%. Year-to-date, we made $279 million of capital expenditures, which included investments to support our strategic pillars of oncology and biopharma services. For the first six months of the fiscal year, we returned $1.4 billion in cash to our shareholders through $1.3 billion of share repurchases and the payment of $134 million in dividends. We have $1.5 billion remaining on our share repurchase authorization and continue to expect diluted weighted average shares outstanding to range from 154 million to 156 million for fiscal 2022. As a result of our strong first half performance and our outlook for the remainder of the year, we are raising our previous adjusted earnings per share guidance range for fiscal 2022 to $21.95 to $22.55, which is up from our previous range of $19.80 to $20.40. Our updated outlook for adjusted earnings per diluted share reflects 27.5% to 31% growth from the prior year. Additionally, fiscal 2022 adjusted earnings per diluted share guidance includes $2.30 to $3.05 of impacts attributable to the following items: $0.50 to $0.70 related to the US governments COVID-19 vaccine distribution, which is an increase from the previous range of $0.45 to $0.55; $0.80 to $1.10 related to the kitting storage and distribution of ancillary supplies, an increase from the previous range of $0.50 to $0.70 as discussed at recent conference; $0.50 to $0.75 related to COVID-19 tests impairments for PPE related products; and approximately $0.49 from gains or losses associated with McKesson Ventures equity investments within our corporate segment year-to-date. Excluding the impact of these items from both fiscal 2022 guidance and fiscal 2021 results this indicates 20% to 29% forecasted growth. In US Pharmaceutical segment, we now expect revenue to increase 8% to 11% and adjusted operating profit to deliver 4.5% to 7.5% growth over the prior year. When excluding COVID-19 vaccine distribution in the segment, we expect approximately 3% to 6% adjusted operating profit growth. In addition, our investments in our leading and differentiated position in oncology will continue to represent an approximate $0.20 headwind in fiscal 2022. In our Prescription Technology Solutions segment, we see revenue growth of 31% to 37%, and adjusted operating profit growth of 23% to 29%, this growth reflects the strong service and transaction momentum in the business. Now transitioning to Medical-Surgical our revenue outlook assumes a 8% to 14% growth and adjusted operating profit to deliver 35% to 45% growth over the prior year. As mentioned previously, our outlook includes $0.80 to $1.10 related to the contribution from the US government's distribution of ancillary supply kits and storage programs, and $0.50 to $0.75 related to COVID-19 tests and PPE impairments related products. Excluding the impacts from these items from both fiscal 2022 guidance and fiscal 2021 results, this indicates 13% to 19% forecasted growth. Therefore, the guidance that we're providing today includes approximately $0.10 to $0.20 of adjusted operating expense impact for labor investments in our US distribution businesses in the second half of the year. Finally in the international segment, our revenue guidance is 1% decline to 4% growth as compared to the prior year. For adjusted operating profit our guidance reflects growth in the segment of 39% to 43%, which includes approximately $0.38 of expected adjusted earnings accretion in fiscal 2022, as a result of the held for sale accounting related to our agreement to sell certain European assets to the Phoenix Group. Our increased guidance assumes a 8% to 11% revenue growth and 18% to 22% adjusted operating profit growth, compared to fiscal 2021. Our full-year adjusted effective tax rate guidance of 18% to 19% remains unchanged. And we anticipate corporate expenses in the range of $610 million, $660 million. And based on this progress we now expect earlier benefits from these actions, resulting in the realization of annual operating expense savings of approximately $15 million to $25 million in the second half of fiscal 2022, with annual savings of $50 million to $70 million, when fully implemented.

As a result of our second quarter performance our confidence in the second half of the fiscal year and McKesson's continue to role in the COVID-19 response efforts, we are raising our guidance range for fiscal 2022 adjusted earnings per diluted share from $19.80 to $20.40 to a new range of $21.95 to $22.55. Second quarter adjusted earnings per diluted share was $6.15, an increase of 28%, compared to the prior year. Consolidated revenues of $66.6 billion increased 9% above the prior year. As a result of our strong first half performance and our outlook for the remainder of the year, we are raising our previous adjusted earnings per share guidance range for fiscal 2022 to $21.95 to $22.55, which is up from our previous range of $19.80 to $20.40. Additionally, fiscal 2022 adjusted earnings per diluted share guidance includes $2.30 to $3.05 of impacts attributable to the following items: $0.50 to $0.70 related to the US governments COVID-19 vaccine distribution, which is an increase from the previous range of $0.45 to $0.55; $0.80 to $1.10 related to the kitting storage and distribution of ancillary supplies, an increase from the previous range of $0.50 to $0.70 as discussed at recent conference; $0.50 to $0.75 related to COVID-19 tests impairments for PPE related products; and approximately $0.49 from gains or losses associated with McKesson Ventures equity investments within our corporate segment year-to-date.

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In the first nine months of 2021, IFF achieved $8.6 billion in sales, representing 10% growth or 7% on a currency-neutral basis, a strong reflection of the strength of our market-leading platform and the compelling position we have established with our customers as a combined company. We delivered a 22% adjusted operating EBITDA margin and a combined EBITDA growth of 5%. We have maintained our robust cost discipline efforts and are entering the fourth quarter with continued financial strength, having achieved $884 million free cash flow or approximately 10% of our trailing nine months sales, driven by strong cash generation. In North America, we achieved 7% growth across all four of IFF's business divisions, led by high single-digit growth in Nourish and Scent. In Asia, we experienced a 7% increase in sales led by continued double-digit growth in India as well as a low single-digit growth in China, even amid particularly strong recent market complexities in the region. Latin America continues to be our strongest performing region and sales growth leader, having achieved 12% growth, largely fueled by double-digit growth in our Nourish and Scent divisions and continued local currency strength. Perhaps, most impressive is a 7% sales growth that our EMEA region achieved to date, which includes a robust double-digit increase in the third quarter, impressive performance on our Scent and Nourish divisions growth, this encouraging rebound with Scent delivering double-digit growth led by our Fine Fragrance business and Nourish delivering high single-digit growth led by our Food Service business. Our largest division, Nourish, has been a strong performer throughout the year, achieving currency-neutral sales growth of 9% with broad-based strength from our Flavors, Ingredients and Food Design businesses. Scent has had a similar strong year delivering 8% in currency-neutral growth to date, led by impressive double-digit growth in Fine Fragrance as well as strong growth in Consumer Fragrance and Ingredients. While we have seen some margin impact of about 20 basis points in the year, we are proud of how our execution has mitigated much of the negative headwinds, while delivering meaningful growth. Notably, Fine Fragrances alone has realized 36% growth year-to-date with double-digit growth in Cosmetic Active and continued solid performance in Consumer Fragrances. At the time, sales profitability expansion of 110 basis points has been led by higher volume, favorable mix and higher productivity. If you look at the total business, you will see that on a comparable 9-month pro forma basis, the new IFF has realized 9% sales growth over 2019 results. Nourish is a business that was particularly hard hit through the pandemic, is now strongly growing with sales growth of 9% compared to pro forma 2019 9-month period. In the first nine months of 2021, we've achieved approximately $40 million in cost synergies, representing nearly 90% of our 2021 cost synergy target with one quarter to go. I'm confident that we will more than exceed our $45 million year one synergy target. And I'm encouraged by the continued progress we are making toward achieving our 3-year run rate of cost synergy target of $300 million. In Q3, IFF generated approximately $3.1 billion in sales, representing a 12% year-over-year increase, primarily driven by the continued double-digit growth in our Nourish division and strong increases in both Scent and Health & Biosciences. Though our gross margin continued to be challenged by inflationary pressures, it was somewhat offset by our strong cost management focus, which resulted in adjusted operating EBITDA growth of 4%. And while we had solid year-over-year EBITDA growth, our gross margin was down by 210 basis points as our pricing actions recovered only about 65% of our raw material increases or approximately 50% in the third quarter when we include raw material, logistics and energy increases. Let me finish on this slide by saying that we achieved strong earnings per share, excluding amortization of $1.47. In Q3, Nourish achieved 17% year-over-year sales growth or 15% on a currency-neutral basis, driven by robust double-digit growth in Flavors for the second consecutive quarter. As a result of strong volume growth, price increases and our focus on cost management, Nourish achieved an adjusted operating EBITDA increase of 19% and margin expansion of 30 basis points. On Slide 14, you'll see that our Health & Biosciences division saw year-over-year sales growth of 7% or 5% on a currency-neutral basis, led by double-digit growth in Home & Personal Care and high single-digit growth in Cultures & Food Enzymes. As Andreas mentioned earlier, inflationary pressures and higher logistics and energy costs to keep up with the robust customer demand has challenged our margins across our business, with H&B particularly impacted, which drove an operating EBITDA decrease of 12%. Unpacking this a bit deeper, the bulk or 70% of our year-over-year EBITDA decline came from higher air freight volumes, where we have increased intercompany shipments to manage available capacity. Our Scent division continues to perform extremely well and experienced strong growth, achieving 10% year-over-year growth or 9% growth on a currency-neutral basis. This performance was driven by Fine Fragrances' continued rebound, which grew approximately 36%, led by new customer wins and improved volumes. On a 2-year average basis, Consumer Fragrance remained strong at 9% in the third quarter. Scent also experienced adjusted operating EBITDA growth of 10%, driven by strong volume growth and favorable mix. Lastly, in our Pharma Solutions business, we saw a currency-neutral sales decrease of 2% due to continued supply chain challenges related to raw material availability and logistics disruptions, which have made it challenging to meet persistent and growing customer demand. So far this year, IFF has generated $884 million in free cash flow, with cash flow from operations totaling approximately $1.1 billion. Year-to-date, we have spent $242 million or approximately 2.8% of sales on capex and expect a significant ramp-up in fourth quarter as our annual spend is traditionally more back half weighted. From a leverage perspective, we are continuing to make substantial progress toward achieving our deleveraging target, with our cash and cash equivalents finishing at $794 million, including $122 million restricted cash, with gross debt reduced by $446 million versus the second quarter to $11.5 billion due to our debt maturity schedule as part of our deleverage plan. Our trailing 12-month credit-adjusted EBITDA totaled approximately $2.7 billion, with a 4.1 times net debt to credit-adjusted EBITDA. With our continued strong cash flow generation, including proceeds from divested noncore businesses, we remain confident that IFF is on track to achieve our deleveraging target of less than three times net debt to EBITDA within 20 to 36 months, post-transaction close. Just as examples, vegetable oil prices hit a record high after rising by almost 10% in October. The price of wheat is up almost 40% in the last 12 months through October. Brent crude prices have more than doubled over the past 12 months to the highest level since October 2018. In the U.S., natural gas prices are up 100% from a year ago and in the U.K. grew up about 500%. For example, in the first half of 2021, gross margin was down about 150 basis points, while in the third quarter, we were down about 210 basis points. For the full year 2021, we are targeting $11.55 billion in total revenue or approximately 8.5% growth, up from the forecast of $11.4 billion or 7% growth that we disclosed in the second quarter. And as a result, we have further revised our adjusted EBITDA margin to be modestly below 21%, down from approximately 21.5% that was forecasted in September.

Let me finish on this slide by saying that we achieved strong earnings per share, excluding amortization of $1.47. For the full year 2021, we are targeting $11.55 billion in total revenue or approximately 8.5% growth, up from the forecast of $11.4 billion or 7% growth that we disclosed in the second quarter.

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As a result, we reported adjustments of $11 million related to inventory write-offs, sales claims and other costs associated with the product recall. For the full-year 2019, adjusted earnings per diluted share were $1.12, compared with adjusted earnings per diluted share of $0.40 in 2018. Net sales were in line with the prior year at $4.5 billion, with unfavorable exchange rates negatively impacting net sales by $43 million. Adjusted gross profit increased to $312 million, compared with $280 million in 2018. Adjusted operating income for the year was $113 million, compared with $82 million in the prior year. And adjusted net income increased to $55 million, from $20 million in 2018. For the full-year 2019, net sales in our fresh and value-added business segment increased by $50 million to $3 billion compared to the prior year, primarily as a result of higher net sales in our fresh-cut, avocado and vegetable product lines. Our gross profit increased $5 million to $195 million and gross profit was negatively impacted by the Mann Packing voluntary product recall. For the full-year 2019, net sales in our banana business segment decreased $47 million, due to lower net sales in North America, Asia and Europe, while gross profit increased $30 million as a result of higher selling prices in Europe and Asia. For the fourth quarter of 2019, adjusted loss per diluted share was in line with the fourth quarter of 2018 at $0.45, net sales were in line with the prior-year period at $1 billion, with unfavorable exchange rates negatively impacting net sales by $4 million. Adjusted gross profit was $47 million,compared with adjusted gross profit of $42 million in the fourth quarter of 2018. Adjusted operating loss for the quarter was $6 million, compared with an adjusted operating loss of $8 million in the prior year. And adjusted net loss for the quarter was $21 million, compared with an adjusted net loss of $22 million in the fourth quarter of 2018. In our fresh and value-added business segment for the fourth quarter of 2019, net sales were $597 million, compared with $618 million in the prior-year period, and gross profit decreased to $21 million, compared with $45 million in the fourth quarter of 2018. In our pineapple category, net sales were $115 million, compared to $116 million in the prior-year period, primarily due to lower sales volume and the selling prices in Europe, and lower selling prices in Asia. Overall volume was 2% lower, unit price was 2% higher, and unit costs were 6% higher than the prior-year period. In our fresh-cut fruit category, net sales were $116 million compared with the $113 million in the prior-year period, primarily due to increased demand in North America, Europe and Asia. Overall volume was 2% higher, unit pricing was in line with the prior year, and unit cost was 1% higher than the fourth quarter of 2018. In our fresh-cut vegetable category, net sales were $96 million compared with $120 million in the fourth quarter of 2018. Volume was 21% lower, unit pricing was 1% higher, and unit cost was 19% higher than the prior-year period. In our avocado category, net sales increased to $65 million, compared with $65 million in the fourth quarter of 2018, supported by higher sales volume as a result of increased customer demand. Volume increased 8%, pricing was 2% lower, and unit cost was 8% higher than the prior-year period. In our vegetables category, net sales decreased to $47 million compared with the $49 million in the fourth quarter of 2018, primarily due to lower sales volume and selling prices as a result of Mann Packing voluntary product recall. Volume decreased 4%, unit pricing decreased 2%, and unit cost was 1% higher. In our non-tropical category, which includes our grape, berry, apple, citrus, pear, peach, plum, nectarine, cherry, kiwi product lines, net sales increased to $33 million compared with $29 million in the fourth quarter of 2018. Volume increased 1%, unit price increased 11%, and unit cost was 2% higher. In our prepared foods category, which includes our traditional canned products, and meals and snacks product lines, net sales for the fourth quarter decreased 1% compared with the fourth quarter of 2018. In our banana business segment, net sales were $399 million compared with $395 million in the fourth quarter of 2018, primarily due to higher sales volume in the Middle East and higher selling prices in Europe, partially offset by lower sales volume in North America and Asia. Overall volume was 1% lower than last year's fourth quarter, worldwide pricing increased 2% over the prior-year period. Total worldwide banana unit cost was 2% lower and gross profit increased to $13 million compared with a loss of $2 million in the fourth quarter of 2018, reflecting 3.7 percentage point increase in gross profit margin. On selling, general and administrative expenses during the quarter, they represented $49 million compared with $47 million in the fourth quarter of 2018. The foreign currency impact at the gross profit level for the full year was unfavorable by $15 million and the foreign currency impacts at the gross profit level for the fourth quarter was unfavorable by $5 million. Interest expense net for the fourth quarter was $5 million compared with $7 million in the fourth quarter of 2018, due to lower debt levels as well as lower interest rates. Income tax expense was $1 million during the quarter compared with income tax expense of $3 million in the prior year. Regarding cash from operating activities at the end of the quarter, our net cash provided was once $169 million compared with net cash provided by operating activities of $247 million in the same period of 2018. Our total debt decreased from $662 million at the end of 2018, to $587 million at the end of 2019. As it relates to capital spending, we invested $122 million in 2019, compared with $151 million in the same period in 2018. Net sales increased to $69 million compared with $65 million in the fourth quarter of 2018.

For the fourth quarter of 2019, adjusted loss per diluted share was in line with the fourth quarter of 2018 at $0.45, net sales were in line with the prior-year period at $1 billion, with unfavorable exchange rates negatively impacting net sales by $4 million.

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With all 10 wholesale sub-lines of business posting growth for the year. 2021 funded commercial loan production increased 50% versus 2020 and was up 40% versus 2019. As a result, core transaction balances have increased 57% in the past two years. At year-end, 77% of total deposits were core transaction deposits versus 70% at year-end 2020. Ex-security gains non-interest revenues grew 5%, led by increases in core banking fees and income from various wealth businesses. Drivers of this growth include a strong equity market, as well as net new assets under management from client growth, including the onboarding of 12 new family office clients during the year. As of year-end, we have achieved $110 million in pre-tax run-rate benefit ahead of our original projections. This year, we will transition our Synovus forward efforts into our overall strategic plan but remain committed and on pace to achieve the $175 million Synovus forward target. We grew our treasury and payments team, which had another record-breaking year, growing sales by almost 40% and adding to specialty banking our middle market talent, and our high growth central and west Florida regions. Despite the challenges associated with the pandemic, our recent voice of the team member survey indicated that 84% of our team members were actively engaged, which is top quartile relative to the financial services benchmark, and we have designated a great place to work by the Great Place to Work Institute. Let's start on Slide 4 with loan growth, which increased $1.4 billion or an annualized 14% excluding P3. The growth this quarter resulted from our second consecutive quarter of record-funded commercial loan production at $3.2 billion. This represented a 30% increase from the third quarter. The quality of growth as measured by risk ratings and underwriting metrics is consistent with the existing portfolio, which continues to perform well and is supported by the reversal of credit losses of $55 million this quarter. It's a similar story on the other side of the balance sheet, with core transaction deposit growth of $1.3 billion or 4% versus the third quarter. Approximately 30% of this quarter's increase came from non-interest-bearing deposits. Net interest income growth was also strong this quarter, as we delivered $1.7 billion in earning asset growth. Net interest income increased by $16 million from the third quarter or 4%, excluding the reduction in P.3 fees. From a fee income perspective, we continue to be pleased with overall performance as the fourth quarter totaled $117 million. Diluted earnings per share were $1.31 or $1.35 on an adjusted basis and increased from $0.96 or $1.08 adjusted per share from the same period in 2020. During the fourth quarter, we successfully completed our capital plan with $33 million of share repurchases. For the full year, we balanced core client loan growth, a common dividend, and $200 million in share repurchases to achieve our target CET1 ratio of 9.5% at year-end, which represents the middle of our operating range target for the upcoming year. We ended the year with total assets of $57.3 billion and loans of $39.3 billion. In the fourth quarter, total loans, excluding PPP balances, were up $1.4 billion, or 4% from the prior quarter, bolstered by strong commercial loan growth. In Q4 was also supported by reduced pay-offs and increased C&I line utilization, which increased approximately 340 basis points to 43%. We also saw continued growth in commitments up 4.4% or $512 million, which positions us well for economic expansion, particularly in the southeast, where growth is expected to exceed national averages. A continued normalization of C&I line utilization on today's balance sheet would result in over $350 million in funding balances, which should occur over time as liquidity subsides. In aggregate, core consumer balances declined by $20 million in the quarter. Additionally, our securities portfolio ended the quarter at $11 billion, up $400 million from the prior quarter, though that growth generally dragged out of the overall balance sheet and remained at 19% of total assets. As you can see, it was another very strong year for growth led by core transaction account balances, which were up $1.3 billion or 4% in the fourth quarter and up $5.1 billion or 16% for the full year. For Q4, our total cost of deposits continued to decline to 12 basis points, which was down one basis point from the third quarter. In the first quarter, we expect broker deposits to decline by approximately $1 billion to $1.5 billion as we efficiently manage our significant liquidity position. Slide 7 shows a total net interest income of $392 million in the fourth quarter or $380 million, excluding the impact of the Paycheck Protection Program. The net interest margin for the fourth quarter ended at 2.96%, a decline of five basis points from the prior quarter. The portion of our portfolio that is floating rate now stands at 58%, which helps to support our NII sensitivity estimated at an increase of 6.5% for a 1% immediate increase in rates. Adjusted noninterest revenue of $116 million is highlighted on Slide 8, up $2 million from the prior quarter. This includes a one-time, $8 million increase of BOLI income that offsets a $4 million reduction in mortgage income. On a full-year basis, NIR excluding security gains increased 5%. Drivers of this growth included wealth management and core banking fees, which increased 24% and 20% year over year, respectively. Within core banking fees, commercial cash management revenue increased $10 million, or 34% year over year. Slide 9 highlights a total adjusted non-interest expense of $286 million, up $19 million from the prior quarter. Recurring expense increases totaled $9 million and were driven by several factors, including growth initiatives related to Synovus forward, investments in tech and risk infrastructure, additional FDIC expenses, and expenses related to normalized travel and entertainment spending. Other notable expense increases total $10 million and consisted of $4 million of incremental performance-based management bonuses, a $4 million seed gift into a newly established donor-advised fund, and a $2 million increase in health insurance expense driven by seasonal and pandemic related factors. The net charge-off ratio fell 11 basis points to 0.11% while criticizing classified loans declined 16%. The NPA ratio declined five basis points to 0.4% and the NPL ratio declined eight basis points to 0.33%. Past dues dropped one basis point to 0.14% excluding the increase from Paycheck Protection Program loans. There was a reversal of provision for credit losses, a $55 million in the fourth quarter, as further improvement in the economic outlook was partially offset by significant loan growth. The ACL ratio, excluding PPP loans, declined 21 basis points to 1.21%. In the fourth quarter, we executed the remaining $33 million of our 2021 authorization. And in doing so, we ended the quarter with our CET1 ratio at 9.5%. For the year, we retired 4.4 million shares or approximately 3% of the common shares outstanding from the end of the prior year. That includes an increase in the quarterly common shareholder dividend by $0.1 to $0.34, which would first be payable in April. While our two 2022 plan also includes an authorization for up to $300 million in share repurchases are capital priorities, our focus is on supporting core client growth, and managing our CET1 ratio around the target level of 9.5%. Excluding the impact of $400 million in remaining P3 balances, we expect loan growth of 4% to 7% in 2022. The adjusted revenue outlook of 4% to 7% largely aligns with the current rate expectations, assuming three FOMC rate hikes and excludes the impact of P3-related revenue. Our adjusted expense outlook of 2% to 5% incorporates increases in compensation, a return to pre-pandemic travel and business development levels, and includes our strategic investments in talent and technology. One significant efficiency initiative that is underway is the closing of an additional 15% of our branch locations, with an estimated run-rate savings of approximately $12 million by year-end. Moving to capital, as Jamie shared earlier, we extended the upper range of our targeted CET1 ratio by 25 basis points, providing a new range of 9.25% to 9.75%.

Diluted earnings per share were $1.31 or $1.35 on an adjusted basis and increased from $0.96 or $1.08 adjusted per share from the same period in 2020.

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And so with revenue, we were at 25% through the first half through three quarters were exactly still 25%. With our gross profit margin, we were tracking right on 39% through three quarters last year we had slipped a little to 38%, we're still holding at 39% at this point. Our operating expenses, you know, we said we would maintain hope to move down slightly if we could as a percent of sales in the first half we had dropped from 35% to 34% and year-to-date, we are now at 33% versus 34%. Our interest expense is down now at 20%, so we're attracting certainly below 2020 and believe we'll outperform our initial forecast. On our tax rate, we were 31% versus 23% at -- through the first half, we're now at 27% versus 20% at this point last year. We do expect that rate to drop in the fourth quarter and certainly to meet or exceed our mid-20% range. On our debt to EBITDA, you can see we've dropped from 2.5 times to 2.1 times and as we look at it now, we expect to drop further and probably below the 2 times target that we had drawn out. And as far as net income is concerned, pretty much the same we were at 86% for the three quarters we're at 87% increase. Definitely a faster rate than our 25% revenue growth and our EBITDA is moving up, as we're now 39% increase from where we were at this time last year. This is with macro trends as of September 27th of '20 and then comparing that to September 27th of '21, a pretty dramatic increase, it's about 59% increase. So, soybeans have -- we're at $10.21 a bushel, have increased to $12.85 over that year period, 26% increase. I think currently or last week we were around 7%, 8%, but -- so it's looking positive for us in that sector. And then, corn moving from $3.79 a bushel up to $5.42. So our increase overall in the ag sector was up 38% for US crop. And he was saying that there are currently 540,000 containers and you're looking at boats here that have about 500 containers on them and 540,000 that are sitting at the port today that have not been -- that are backed up waiting to be unloaded. So that's about 100 vessels and if you go down there, you can see them anchored all up and down the Southern Coast there. And the current ability to unload at that port is about 18,000 containers a day. So if you looked at it and said, well, I guess in 30 days, we would be able to unload those 540,000 containers, which is true, but the problem is that 29,000 new containers are arriving each day. And just a word, we've got products that we were -- we've been trying to ship to Australia and we can't get a truck to take us -- to take it from the 20 miles from our plant down to Long Beach Harbor. So, it's created quite a miss and of course, we're dealing with somewhere in that 60,000 to 80,000 truckers short, which makes even once those containers do get offloaded, it gets difficult to actually move them out of the harbor. The second is on logistics, which we talked a little bit about, but those containers that you saw that come over -- last year, we were running about $2,500 to $3,000 per container. This year they've picked up to $26,000 per container and that's just bringing them into the US. I mentioned with China about 8% of our portfolio is dependent on materials from China. Few years ago, we've started the process of second sourcing, if we could, outside of China, due to the tariffs, which were pushing up to 31%. Second, we manufacture 46% of our portfolio within our six North American factories. With regard to our public filing, I understand from my controller that we are in the file and the queue to file and so I expect that we will file within the half hour or 45 minutes. Overall, our sales were up about $30 million to a $147 million, that's a 25% increase over the prior year. Our US sales were up about 33% or $22 million and our international sales were up about 16% or $8 million. And because of the very strong US performance, despite the strong international performance, our international sales reduced to about 40% of total sales, whereas this time last year there were at about 43%. And that has an impact on our gross margin performance and when I look at the crop business, our gross margin performance improved by about 50%, including the impact of the recovery of [Indecipherable] in the factory. And you can see that in the third quarter of 2021, on the far right of the graph, our factories cost is about 1.2% of net sales on the recovery and that compares, if you look back a couple of quarters to the third quarter of 2020, you will see that the cost amounted to 2.5% and that's just a reflection of the kind of activity that we managed to record in the factory in this third quarter. Operating expenses increased by about 24% and that amounted to $9 million. Our newly acquired businesses accounted for about 14% of the increase and freight accounted for 17%, and then the balance was incentive compensation linked to financial performance, some legal expenses, and increased marketing costs. And overall our opex as a percentage of sales remained steady at 33%. Our operating income in the third quarter was up 112% versus last year. As Eric mentioned, our interest expense continues to track about 24% below the prior year. And finally, our bottom line is about $5.5 million, which is up 88% in comparison to the prior year. For the first nine months of 2021, our sales were up 25%. Gross margin in absolute terms are up 27%. Overall, operating costs were up 22%, as compared to the net sales increase I mentioned a moment ago of 25%, and operating costs, compared to sales improved 33% in 2021, as compared to 34% last year. Interest expenses reduced by 23% as a result of cash generated over the last 12 months, and overall, our net income has increased by 87%. As you can see from this slide, during the third quarter, we increased cash generated from operations by 56%, as compared to the same quarter of the prior year. Overall, net cash from operations increased by 34%. At the end of September 2021, our inventories were about $167 million, as compared to $176 million this time last year. If for a moment, we exclude the impact of products and entities acquired since December 2019, which accounted for $10 million of inventory at the end of Q3, our base inventory decreased by 11% from this time last year. Our current inventory target for the end of the financial year remains at $155 million that compares with $164 million at the end of 2020. Our consolidated EBITDA for the trailing four quarters to September 30th, 2021, was $66 million, as compared to $49 million for the four quarters to September 30th, 2020. This taken in conjunction with outstanding indebtedness translates to borrowing availability amounting to $95 million at the end of September 30th, 2021, as compared to $45 million at the same time last year. Overall, in summary then, the second -- the third quarter of 2021, we have increased sales by 25%, improved overall margins, we have managed operating expenses, which increased in absolute terms, but declined when expressed as a percentage of sales, our net income increased by 88%. We have a similar story for the first nine months of 2021, we increased sales by 25%, gross margins by 24%, operating costs have reduced when compared to net sales, our interest expense is down and net income has improved by 87%. So we mentioned last time that we have, kind of, grown our technology on the green solutions and we've now -- see that we've got 100 different products in our expanding portfolio. For Q3, we increased about $10 million, which is 26% increase from Q2. Year-to-date, our revenue is at just $27 million and for the full-year, we're up in our forecast from the $32 million to $35 million range. We're now sticking somewhere in that $35 million to $37 million range. And of that, about $10 million is coming from. And part of that's a result of the 1,500 spot trials we mentioned last time that we were doing in '21, which are basically looking to benefit in the '22 period. There's over 1 million acres of almonds in California, and we think we've got a nice fit for a biotreatment for canker, a particular disease that hits almonds. We expect that, that number to double over the next few months and we've identified I think there is 26 here mostly in the Midwest, but also we've got five retailers in the South.

Overall, our sales were up about $30 million to a $147 million, that's a 25% increase over the prior year. Overall, in summary then, the second -- the third quarter of 2021, we have increased sales by 25%, improved overall margins, we have managed operating expenses, which increased in absolute terms, but declined when expressed as a percentage of sales, our net income increased by 88%.

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As we reported in last night's release, National Fuels fourth quarter operating results were $0.40 per share. Consistent with earlier quarters, lower commodity prices were the main driver, contributing to the $0.14 per share drop in operating results, contributing to non-cash ceiling test impairment charge. As a reminder, this project is fully contracted, with the bulk of the commitments extending for 15 years. The project is expected to add about $27 million in annual revenues. It looks like the final capital cost will come in around $129 million, which is more than 10% below our initial cost estimate. And again as a reminder, FM100 will add approximately $50 million in annual revenues between the $35 million expansion component and the additional $15 million modernization rate step-up agreed to in our February rate case settlement. Nevertheless, in spite of the incremental $60 million in capital associated with this rig, we still expect to generate in excess of $100 million of free cash flow from our upstream and gathering businesses. In spite of the pandemic, we had a very successful construction season, replacing over 150 miles of older pipe on the system. As a result of the improved outlook for natural gas prices, we are revising our earnings guidance up to $3.70 at the midpoint, an increase of more than 25% over our fiscal 2020 results. Despite the backwardation in the natural gas curve, as we look to fiscal 22, the increased activity at Seneca, combined with the expected in-service date of the FM100 project and a continued modest growth in our utility segment are all expected to drive further earnings growth. For example, relative to 1990 levels, our utilities EPA Subpart W emissions are down by over 60%. We produced 67.3 Bcfe, an increase of around 14% compared to last year's fourth quarter. Despite low-end basin and natural gas prices, which led us to voluntarily curtail about 6 Bcf, we achieved our largest quarterly production ever. For the year, we curtailed 17 Bcf and annual net production came in just over 241 Bcfe. For the year, capital expenditures, excluding the acquisition, ended up at around $384 million, a reduction of approximately $108 million or 22% from the prior-year. Expenses on a per unit basis were down 8% from last year, and we're all within our fiscal 2020 guidance ranges. PUD reserves increased by 359 Bcfe or 12% to just under 3.5 Tcfe, with the increase largely driven by our acquisition during the fourth quarter. PUD developed reserves now make up approximately 84% of total reserves. As a result of our recent acquisition, we now have substantial inventory of both Utica and Marcellus drill locations in Tioga, and our inventory has expanded to approximately 300 locations in the EDA. In the Rich Valley Beechwood area, we have around 100 Utica drill locations, and we'll be able to utilize our existing gathering trump line [Phonetic]. In California, we produced around 555,000 barrels of oil during the fourth quarter, a decrease of around 9% from last year's fourth quarter. Year-over-year, oil production was largely flat, with a slight increase of 26,000 barrels. As we are currently planning to differ much of our fiscal 2021 development program in California, we have budgeted only $10 million in capex, but again as prices rebound, our intention is to increase our activity in California to return to our development programs in Midway Sunset and Coalinga. As part of our recent acquisition, we secured 100 million [Phonetic] a day on Dominion, with access to Transco Leidy line and the Leidy South project, providing us with optionality to utilize this capacity from Tioga, in addition to Lycoming and the WDA. First production from the additional rig is expected in early fiscal 2022 to align with the expected Leidy South in-service date, allowing Seneca to utilize this 330 million [Phonetic] a day of incremental pipeline capacity to reach premium markets during the winter heating season. As a result of adding the second rig for approximately nine months of the fiscal year, we are increasing our fiscal 2021 capex by around $60 million from our previous guidance to a total of $370 million at the midpoint. Even with a second rig, we are forecasting a decrease in capital expenditures of around $15 million year-over-year. Most of our production growth in fiscal 2021, forecasted to be up over 30% of the mid-point, should occurred during the first half of the year with a moderate decline during the back half, as we defer completion and flowback activity until the winter season when our new capacity is targeted to be in service. Moving forward, we have 234 Bcf around 77% of our fiscal 2021 East Division gas production locked in physically and financially. We have another 41 Bcf of firm sales providing basis protection. So 90% -- around 90% of our forecasted gas production is already sold. We currently estimate that we'll have around 30 Bcf of gas exposed to the spot market. And finally in California, around 50% of our oil production is hedged at an average price of just over $58 per barrel. As Dave stated at the beginning of the call, National Fuels operating results for the quarter came in at $0.40 per share, adjusting for items impacting comparability, which was in line with our expectations. One item of note during the fourth quarter was our effective tax rate, which at approximately 15% was much lower than expectations and the prior year. Looking to fiscal 2021, we revised our earnings guidance higher to a range of $3.55 to $3.85 per share or $3.70 at the midpoint. First, we've increased our NYMEX assumption to $3 per MMBtu and correspondingly increased our in-basin pricing forecast to $2.50 in the winter months and $2.10 in the summer and shoulder months. Second, as a result of the ceiling test impairment charge recorded during the quarter, we now expect DD&A at Seneca to be in the range of $0.60 to $0.65 per Mcfe. Going in the other direction, reflecting recent changes in forward crude oil prices, we've reduced our WTI assumption to $37.50 per barrel and made a slight adjustment to our California basis differential, moving it down from 95% to 94% as a result of recent trends we are experiencing in the region. There is a tipping point into a higher tier as we hit the $3 per MMBtu mark. So our updated forecast reflects this increased fee, which is approximately $3 million higher for the fiscal year. One of the key inputs in our steam generation is natural gas, and with the increase in pricing, we expect modestly higher LOE in the region, which is reflected in the slight widening of our guidance range now forecast between $0.83 and $0.86 per Mcfe. Further on production, as John mentioned, we continued to actively hedge as the forward curve moves up, and now have price protection on 77% of our natural gas volumes. We also have 50% of our crude oil production hedged at $58 per barrel. As a reminder, we are forecasting a return to normal weather at the utility, which will drive a $5 million increase in margin year-over-year. Combining this with $3 million of incremental revenue related to our New York system modernization tracker, we expect to see margin growth of approximately 2% for the year. Going in the opposite direction, we now project O&M to increase approximately 3% to 4%, which is modestly higher than our previous guidance. We still expect revenues to be in the range of $330 million to $340 million, and O&M expense to increase approximately 4% for the year. Looking to this year, as Dave and John both mentioned, we expect Seneca's capital to increase by approximately $60 million, as a result of the increased Appalachian activity level. So at the midpoint of our range, we expect spending to be $775 million. Tying everything together, we now forecast our funds from operations to exceed capital spending by $50 million to $75 million on a consolidated basis.

Looking to fiscal 2021, we revised our earnings guidance higher to a range of $3.55 to $3.85 per share or $3.70 at the midpoint.

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First, we are delighted to announce that Truist Financial Corporation has selected Global Payments to be its provider of issuer processing services for its combined businesses. Truist is the sixth largest commercial bank in the United States serving approximately 12 million consumer households and a full range of business clients with leading market share in many of the most attractive high-growth markets in the country. Contactless is a great example, and we have seen near 30% year-on-year growth in recent periods. Synovus is a leading regional commercial bank with 299 branches in the southeast region of the United States. Our partner software business, which we recently rebranded as Global Payments Integrated, launched 30 new partners in the first few months of 2020. We have also begun testing this solution for a potential placement throughout the restaurant brands international family of more than 26,000 global restaurants. In fact, for the first quarter, the number of omni mobile and online orders processed for Xenial customers increased over 50% sequentially as QSRs shifted toward online fulfillment. During April, we processed over 0.5 million deposits accounting for over $1.2 billion in stimulus payments to American consumers dispersed by the IRS. We made significant strides on our integration this quarter, and we continue to anticipate delivering at least $125 million in annual run rate revenue synergies and at least $350 million in annual run rate expense synergies within three years of the merger close. We expect these actions to deliver at least an incremental $400 million in annualized savings over the next 12 months. As Jeff mentioned, even with the vast majority of our nearly 24,000 team members worldwide working from home since mid-March, our business has continued to operate seamlessly. In addition to the Xenial highlights that Jeff already provided, our higher education business had its strongest ever bookings performance in March, and AdvancedMD saw bookings increased 35% year on year for the first quarter largely due to our ability to deliver cloud-based technology solutions, including telemedicine capabilities to physician practices throughout the U.S. In our Heartland business, we delivered outstanding growth of over 30% in online payments during the first quarter as we continued to see strong customer demand for our omnichannel solutions. Merchant migration and lead referrals from all branches commenced at the beginning of March, and we received nearly 1,500 referrals before the current disruption. We also converted over 300,000 accounts during the period and have a robust pipeline with implementation stage throughout the year and into 2021. In fact, in North America alone, we have added over 1,800 new restaurants to our online ordering platform since mid-March. For healthcare customers at AdvancedMD, we've enabled nearly 1,500 practices with telemedicine capabilities, delivering the technology for more than 80,000 virtual visits in the last two weeks of March alone. Further, we are waiving setup fees in the first 90 days of subscription fees for our virtual card add-on solution to brick-and-mortar gift card customers and have extended free trial period of our analytics and customer engagement platform that we are deploying in our Heartland business. For the first quarter, total company adjusted net revenue was $1.73 billion, reflecting growth of 108% over 2019 and ahead of our preliminary expectations on April 6. Adjusted operating margins expanded an impressive 300 basis points to 39% for the quarter and well above the 250 basis point annual expansion target we mentioned on our last call. As a result, we were able to deliver strong adjusted earnings-per-share growth of 18% to $1.58, which also includes a roughly 100-basis-point impact from adverse foreign currency exchange rate movements. First, adjusted net revenue in merchant solutions increased 2% on a combined basis to $1.1 billion for the first quarter, which includes nearly a 100-basis-point headwind from currency while adjusted operating margin improved 180 basis points to 45.4%. Before the spread of COVID-19, we were experiencing low double-digit adjusted net revenue growth in this segment, excluding the impact of COVID-19 in Asia Pacific, which negatively impacted results consistent with the $15 million drag we had previously disclosed. As Cameron noted, we delivered strong growth in online sales at Heartland during the quarter while in Europe, we saw high single-digit growth in the U.K. and roughly 20% growth in Spain as more spending moved online. Moving to issuer solutions, we delivered a record $442 million in adjusted net revenue for the first quarter, representing growth of 150 basis points on a constant-currency basis. As I mentioned previously, this business was tracking in line with our expectations through early March for roughly 3% growth with underlying trends to that point remaining consistent with our long-term outlook for mid-single-digit growth. Adjusted segment operating margin expanded a very strong 430 basis points to 39.5% as we continue to drive efficiencies and make the pivot toward the cloud in this business. We also added over 13 million accounts on file this quarter, producing yet another record. Finally, our business and consumer solutions segment delivered adjusted net revenue of $204 million, down nearly 7% from the prior year, primarily due to headwinds from the CFPB prepaid rule and seasonal tax impacts. Adjusted operating margin for the quarter for this segment was 25.7% and was again better than our expectation. We continue to be pleased by the performance of our DDA products with account growth of over 30% from the prior-year period. As it relates to cost actions, as Jeff highlighted, we have already implemented expense initiatives that will translate to roughly $100 million per quarter in incremental cost benefits for the balance of 2020. From a cash flow standpoint for the quarter, we generated adjusted free cash flow of approximately $400 million, which was in line with our expectation. We also exited Q1 with roughly $1.3 billion of available cash, including $640 million in excess of our operating cash needs. This excess cash increased approximately $300 million from year-end. We have adjusted our capital spending outlook for the year from the high $500 million to low $600 million range we talked about on our last call and now expect to be in the $400 million to $500 million range or roughly $100 million less for the year. We invested $105 million of cash in the first quarter that was focused on new products and technologies to ensure we continue to build upon our leading portfolio of pure-play payment solutions, which is consistent with our newly revised estimate. Earlier in the quarter, we finished the buyback activity started in the fourth quarter, purchasing 2.1 million of our shares for approximately $400 million. We ended the quarter with a leverage position of roughly 2.45 times on a net-debt basis or roughly 2.75 times on a gross basis consistent with year-end. With $2.9 billion of liquidity, including our available cash and undrawn revolver and no significant required debt repayments until our maturity in April 2021, we are truly in a position of financial strength. This includes both our issuer and business consumer segments, which combined account for roughly 35% of our adjusted net revenue.

First, we are delighted to announce that Truist Financial Corporation has selected Global Payments to be its provider of issuer processing services for its combined businesses. We made significant strides on our integration this quarter, and we continue to anticipate delivering at least $125 million in annual run rate revenue synergies and at least $350 million in annual run rate expense synergies within three years of the merger close. We expect these actions to deliver at least an incremental $400 million in annualized savings over the next 12 months. As a result, we were able to deliver strong adjusted earnings-per-share growth of 18% to $1.58, which also includes a roughly 100-basis-point impact from adverse foreign currency exchange rate movements.

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We witnessed the incredible health, societal and economic consequences of the worst global pandemic in more than 100 years. I strongly believe that the prevailing theme of fiscal 2020 was that despite all of the chaos we experienced, our 5,500-plus strong Winnebago Industries employees were steadfast in their commitment to safely achieving our strategic goals and also delivering on our golden threads of quality, innovation and service in all that we do. In fiscal 2020, Winnebago Industries returned $15 million to shareholders through our increase in sustained dividends. Consolidated revenues for Winnebago Industries were the $737.8 million for the fourth quarter of fiscal 2020, an increase of approximately 39% year over year and a robust 15.3% organic increase, excluding the impact of Newmar. Behind the strength of our Winnebago Grand Design and Newmar brands, and we saw our RV market share gains continue, achieving 11.3% market share on a trailing 12-month basis, which is a full 1.3 percentage points above last year, of which 0.8 percentage points or almost 2/3 is organic. Remember, this company had less than 3% total market share at the end of 2015. Full-year operating cash flow was $270.4 million, an increase of approximately 102%, reflecting disciplined working capital management and our strong sales momentum throughout the year, despite the acute COVID impact in our fiscal third quarter. Our cash balance rose to $293 million at quarter end. I am also very pleased that Winnebago Industries' overall quarterly adjusted EBITDA margin expanded over 70 basis points in the fourth quarter compared to the same period last year as we continued our focus on excellence in operations and delivered our profitable growth safely. In the Towables segment, fourth-quarter revenues of $414 million were up approximately 35% from the prior year period, primarily driven by strong demand for safe outdoor lifestyle experiences and the strength of our premium Towable portfolio. Our adjusted EBITDA margin was 14.8% in the quarter for the Towable segment, up 110 basis points compared to the same period last year as a result of fixed cost leverage and profitability initiatives. Backlog increased to a record $747.9 million, an increase of approximately 219% over the prior year period as dealers at the end of August had largely depleted much of their inventories to meet high levels of the consumer demand in the fourth quarter. Fourth-quarter Motorhome segment revenues are $301.8 million were up approximately 50% from the prior year period, driven by those same strong demand trends for safe outdoor family experiences. Excluding Newmar, organic revenues were $175.5 million, down 12.6% from the same period last year. Adjusted EBITDA margin for the Motorhome segment increased to 6.4% in the quarter, 100 basis points over the fourth quarter in 2019 because of lower input costs. Our Motorhome backlog increased to some record $1.1 billion at the end of this August, an increase of approximately 536% from the prior year due to depleted dealer inventory, strong consumer demand and the influx of Newmar orders inorganically. Our fourth-quarter backlog included approximately 7,000 units of Winnebago-branded Motorhome units alone as dealers see increasing promise in the improving lineup of Motorhome products within that brand. Fourth-quarter consolidated revenues were $737.8 million. Revenues, excluding Newmar, were $611.5 million, reflecting an increase of 15.3% compared to the fiscal 2019 fourth quarter, driven by the strong rebound in consumer demand in the Towable segment and Class B Motorized products. Gross profit was $122.5 million in the fourth quarter, an increase of approximately 47% year over year, reflecting strong growth in the Towable segment and the contribution from Newmar. Gross profit margin of 16.6% was up 90 basis points compared to the same period of last year due to lower Motorhome segment input costs and Towable segment fixed cost leverage, partially offset by segment mix as a result of the acquisition of Newmar. Operating income was $68.4 million for the quarter, an increase of approximately 53% compared to the fourth quarter last year. Fiscal 2020 fourth-quarter net income was $42.5 million, an increase of approximately 33%, compared to $31.9 million in the fourth quarter of last year, driven by the growth in operating income, partially offset by increased interest expense. Our earnings per diluted share was $1.25. Adjusted earnings per diluted share was $1.45, representing an increase of 45%, compared to adjusted earnings per diluted share of $1 even in the same period last year. Consolidated adjusted EBITDA was $76.5 million for the quarter, compared to $50.8 million last year, an increase of approximately 51%. Consolidated fiscal 2020 revenues of $2.4 billion increased approximately 19% from $2 billion in fiscal 2019, positively impacted by the acquisition of Newmar, which closed in Q1 of fiscal 2020, but negatively impacted by the COVID-19 pandemic and related suspension of manufacturing operations. Gross profit margin decreased 220 basis points, primarily due to the mix impact of adding Newmar as well as the related purchase accounting impacts and further impacted by COVID-19 and associated deleverage during fiscal third quarter. Operating income for the year was $113.8 million, compared to $155.3 million in fiscal 2019, and net income was $61.4 million. Full-year earnings per diluted share were $1.84, a decrease of approximately 48% compared to fiscal 2019. Adjusted earnings per diluted share was $2.58 for fiscal 2020, compared to adjusted earnings per diluted share of $3.45 in the same period last year. Fiscal 2020 consolidated adjusted earnings per diluted share excludes costs totaling $25 million or $0.74 of per diluted share after tax related to the noncash portion of interest expense on the convertible bond, Newmar acquisition-related costs, debt issuance cost write-off due to termination of the Term loan B and restructuring costs. Recall also that reported and adjusted earnings per diluted share was also impacted by the 2 million shares issued as consideration in the Newmar acquisition. Fiscal 2020 consolidated adjusted EBITDA was $168.1 million, a decrease of 6.4% from $179.7 million in fiscal 2019. Now, before turning to the individual segments, I wanted to mention that amortization of intangibles for the fourth quarter was $3.6 million. We currently expect amortization of approximately $3.6 million in each quarter of our fiscal 2021. Towable segment revenues for the fourth quarter were $414 million, up approximately 35% from $307 million in fiscal 2019, primarily driven by strong consumer demand for outdoor experiences. As of just August, Grand Design's market share was 8.7% of the Towables market on a trailing 12-month basis, representing an increase of 1.5 percentage points over the prior year. Segment adjusted EBITDA for the fourth quarter was $61.3 million, up approximately 46% year over year and adjusted EBITDA margin of 14.8% increased 110 basis points, primarily due to fixed cost leverage and profitability initiative. For the full-year fiscal 2020, revenues for the Towable segment were $1.2 billion, up 2.5% from fiscal 2019, reflecting strong results for three quarters of our fiscal year, partially offset by the severe impact of the suspension of manufacturing and consumer disruption due to the COVID-19 pandemic in the third quarter. Segment adjusted EBITDA for the full year was $148.3 million, down approximately 9% from fiscal 2019. Adjusted EBITDA margin of 12.1% decreased 160 basis points for the full year, driven again by the COVID-related impacts during our fiscal third quarter. In the fourth quarter, revenues for the Motorhome segment were $301.8 million, up approximately 50% from the prior year, driven by the addition of Newmar. Excluding Newmar, segment revenues decreased 12.6% compared to the prior year as a result of strong Class B sales, offset by a decline in Class A and Class C sales due to a slower ramp-up of this business following the COVID-19 pandemic. Segment adjusted EBITDA was $19.5 million, up approximately 81% over the prior year due to improved profitability in the Winnebago-branded business and the addition of Newmar, partially offset by class mix. Adjusted EBITDA margin was 6.4%, an increase of 100 basis points over the prior year, primarily due to lower input costs, driven by an improvement in our LIFO reserve of $5 million that was recognized in the quarter. For the full-year fiscal 2020, revenues for the Motorhome segment were $1.1 billion, up approximately 50% compared to fiscal 2019. Revenues, excluding Newmar, were $668.4 million, down 5.4% from fiscal 2019 as a result of manufacturing and distribution disruption due to this COVID-19 pandemic. Segment adjusted EBITDA for the full year was $32.9 million, up 20% over fiscal 2019, driven by the addition of Newmar. Adjusted EBITDA margin of 3.1% was down 80 basis points for the full year due to the impact of COVID-19 during our fiscal 2020 third quarter, partially offset by the addition of Newmar. As of the end of the fiscal year, the company had outstanding debt of $512.6 million, comprised of $600 million of gross debt, net of convertible note discount of $74.3 million and our net of debt issuance costs of $13.1 million. Working capital was $413.2 million. Our current net debt to adjusted EBITDA ratio was 1.7 times. Annual fiscal year 2020 cash flow from operations was $270.4 million, an increase of $136.7 million from the same period of fiscal 2019. As Mike mentioned earlier, our cash balance increased to approximately $293 million at the end of the fiscal year, and we currently have nothing drawn on our $193 million ABL. The effective income tax rate for the full year was 20.5%, compared to 19.5% for fiscal 2019. On August 19, 2020, the company's board of directors approved a quarterly cash dividend of $0.12 per share payable on September 30, 2020, to common stockholders of record at the close of the business on September 16, 2020. This represents a 9% increase from the prior dividend of $0.11 per share. As Mike mentioned earlier, Winnebago Industries returned a total of $15 million to shareholders during the fiscal year 2020. The acquisition of Newmar in November introduced $300 million of convertible debt. In late June, during our fiscal Q4, we refinanced our Term loan B and issued some senior secured notes, also valued at $300 million. Second, the convertible note will have a dilutive accounting impact on outstanding shares once the average share price during a reporting period exceeds the conversion price of $63.73. Since we structured the convertible instrument with our call spread overlay, economic dilution to our shareholders does not materialize until the share price exceeds $96.20. As such, if our reported earnings per share for a reporting period reflects the dilution required by the accounting rules, our adjusted earnings per share will remove this dilution up until the average share price exceeds $96.20. And finally, as it relates to our capital allocation priorities, and we continue to prioritize reaching our target leverage ratio of 0.9 to 1.5. The 424,000 unit forecast for calendar 2020 or roughly 4.5% overall growth is reasonable in our minds for the 2020 period. Further, the record number of 507,000 units forecasted for wholesale shipments in calendar 2021 also appears reasonable in our view even considering well-documented and real ongoing supply chain challenges.

Fourth-quarter consolidated revenues were $737.8 million. Our earnings per diluted share was $1.25. Adjusted earnings per diluted share was $1.45, representing an increase of 45%, compared to adjusted earnings per diluted share of $1 even in the same period last year.

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Our domestic same-store sales were an impressive 13.6% this quarter on top of last year's very strong 12.3%. Our growth rates for retail and commercial were both strong with domestic commercial growth impressively north of 29%. Commercial set a first quarter record with $900 million in sales. And now we've delivered $900 million in sales in one quarter, an incredible accomplishment. On a trailing four quarter basis, we had over $3.5 billion in annual commercial sales versus $2.8 billion a year ago, up 27%. We also set a record in average weekly sales per store for any quarter, reaching over $14,400 versus $11,500 just last year. On a two year basis, our sales accelerated from last quarter, exceeding 40%. We ran a 9% comp this quarter on top of last year's 12.7%. While our DIY two year stack comp decelerated slightly from our fourth quarter, it's remarkable to reflect on a more than 20% two year comp in this sector of our business. From the data we have available to us, we continue to not only retain the enormous 10% share gains we built during the initial stages of the pandemic, but modestly build on those gains. Given the dynamics of the past 20 months, we like others who benefited from the pandemic, believe it is more instructive to look at two year stacked comps. For Q1, our two year comp was 25.8% and the four week periods of the quarter increased by 26.3%, 26% and 25.3% respectively. Regarding this quarter's traffic versus ticket growth in retail, our traffic was up 1%, while our ticket was up 7.5%. While last quarter we saw roughly 400 basis point gap in comp performance between the Northeast and Midwestern markets versus the remainder of the country, we did not see that gap this quarter. Our same-store sales were up 13.6% versus last year's first quarter. Our net income was $555 million. And our earnings per share was $25.69 a share, increasing an impressive 38.1%. This quarter, we saw our sales impacted positively by about 4% year-over-year from inflation, while our cost of goods was up about 2% on a like-for-like basis. For the quarter, total auto part sales, which includes our domestic, Mexico and Brazil stores, were $3.6 billion, up 16.2%. Starting with our commercial business, for the first quarter, our domestic DIFM sales increased 29.4% to $900 million and were up 41% on a two year stack basis. Sales to our DIFM customers represented 25% of our total sales. And our weekly sales per program were $14,400, up 25% as we averaged $75 million in total weekly commercial sales. Once again, our growth was broad-based as national and local accounts both grew over 25% in the quarter. We now have our commercial program in approximately 86% of our domestic stores, and we're focused on building our business with national, regional and local accounts. This quarter, we opened 32 net new programs, finishing with 5,211 total programs. We now have 62 mega hub locations and we expect to open approximately 16 more over the remainder of the fiscal year. As a reminder, our mega hubs typically carry roughly 100,000 SKUs and drive tremendous sales lift inside the store box as well as serve as a fulfillment source for other stores. These assets continue to outperform our expectation, and we would expect to open significantly more than 110 locations we have previously targeted. On the retail side of our business, our domestic retail business was up 9% and up 21.4% on a two year stack. During the quarter, we opened two new stores in Mexico to finish with 666 stores and one new store in Brazil to finish with 53. With approximately 10% of our store base now outside the U.S. and our commitment to continue expansion in a disciplined way, international growth will be an attractive and meaningful contributor to AutoZone's future growth. For the quarter, our gross margin was down 65 basis points, driven primarily by the accelerated growth in our commercial business where the shift in mix coupled with the investments in our initiatives drove margin pressure, but increased our gross profit dollars by 14.9%. I mentioned on last quarter's call that we expected to have our gross margin down in a similar range this quarter as we saw in the fourth quarter of last fiscal year where we were down 82 basis points. Our expenses were up 10.4% versus last year's Q1 as SG&A as a percentage of sales leverage of 171 basis points. EBIT for the quarter was $754 million, up 22.6% versus the prior year's quarter, driven by strong top-line growth. Interest expense for the quarter was $43.3 million, down 6.3% from Q1 a year ago as our debt outstanding at the end of the quarter was just under $5.3 billion versus just over $5.5 billion last year. We're planning interest in the $45 million range for the second quarter of fiscal 2022 versus $46 million in last year's second quarter. For the quarter, our tax rate was 21.9% versus 22.2% in last year's first quarter. This quarter's rate benefited 159 basis points from stock options exercised, while last year it benefited 134 basis points. For the second quarter of fiscal 2022, we suggest investors model us at approximately 23.6% before any assumption on credits due to stock option exercises. Net income for the quarter was $555 million, up 25.5% versus last year's first quarter. Our diluted share count of 21.6 million was lower by 9.1% from last year's first quarter. The combination of higher earnings and lower share count drove earnings per share for the quarter to $25.69, up 38.1% over the prior year's first quarter. For the first quarter, we generated approximately $800 million of operating cash flow. Regarding our balance sheet, we now have nearly $1 billion in cash on the balance sheet and our liquidity position remains strong. We're also managing our inventory well, as our inventory per store was up 10% versus Q1 last year. Total inventory increased 3% over the same period last year, driven by new stores. Net inventory, defined as merchandise inventories less accounts payable on a per store basis, was a negative $207,000 versus negative $99,000 last year and negative $203,000 last quarter. As a result, accounts payable as a percent of gross inventory finished the quarter at 129.4% versus last year's Q1 of 114.1%. We repurchased $900 million of AutoZone's stock in the quarter. As of the end of the fiscal quarter, we had approximately 20.7 million shares outstanding. At quarter end, we had just over $1 billion remaining under our share buyback authorization and just under $700 million of excess cash. The powerful free cash we've generated this quarter allowed us to buy back approximately 2.5% of the shares outstanding at the beginning of the quarter. We bought back over 90% of the shares outstanding of our stock since our buy back inception in 1998, while investing in our existing assets and growing our business. We expect to maintain our long-term leverage target in the 2.5 times area and generate powerful free cash flows that will enable us to invest in the business and return meaningful amounts of cash to shareholders. To wrap up, we had another very strong quarter, highlighted by strong comp sales, which drove a 25.5% increase in net income and a 38.1% increase in EPS. From July 4, 1979 when our first store opened in Forest City, Arkansas, customer service has been paramount to our success. We are also targeting to open 16 more new domestic mega hubs in the U.S. that will enhance our availability and support growth in our retail and commercial businesses. For the fiscal year, we will open more than 200 new stores throughout the Americas with notable acceleration in our Brazil business. Our company, our customers, our leadership team, and in particular, our AutoZoners have greatly benefited from Mark's 19 years of remarkable service.

Our domestic same-store sales were an impressive 13.6% this quarter on top of last year's very strong 12.3%. Our same-store sales were up 13.6% versus last year's first quarter. And our earnings per share was $25.69 a share, increasing an impressive 38.1%. The combination of higher earnings and lower share count drove earnings per share for the quarter to $25.69, up 38.1% over the prior year's first quarter.

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For the fourth quarter, we reported non-GAAP operating income of $3.3 million or $0.06 per share. For the full year, we reported a non-GAAP operating loss of $27.7 million, attributable to the pre-tax net underwriting loss of $45.7 million, associated with the tail policy issued to a large national healthcare account and a pre-tax $10 million IBNR reserve related to the pandemic, both of which were recorded in the second quarter. For the fourth quarter, our consolidated net loss ratio was 74.9%, a significant quarter over quarter decrease primarily due to the effects of the large national healthcare account in the year ago quarter. But most importantly, also reflected our reunderwriting and rate strengthening efforts over the last 12 months. For the year, the net loss ratio was 83.4%, a 5.6 percentage point decrease primarily due to favorable reserve development and a reduction to the current accident year net loss ratio, driven by improvements made in our Specialty P&C segment. Our consolidated underwriting expense ratios for the quarter and for the year of 30.9% and 30% respectively were relatively unaffected by our contracting topline revenue from our reunderwriting efforts, which demonstrates that the strategic initiatives to improve our underlying expense structure have taken hold. From an investment perspective, our consolidated net investment result increased quarter-over-quarter to $26.3 million, driven by $10.1 million of income from our unconsolidated subsidiaries. We invest in various LPs and LLCs and the results of those investments are typically reported to us on a 1/4 lag, accordingly, the earnings from unconsolidated subsidiaries in the current quarter represent the recovery in value of our LPs and LLCs in the third quarter. Consolidated net investment income was $16.1 million in the quarter, down from the year ago period primarily due to a decrease in our allocation to equities and lower yields from our short-term investments and corporate debt securities, given the actions taken by the Federal Reserve to reduce interest rates in response to COVID-19. In addition, gross premiums written in the quarter reflected renewal timing differences of $4.6 million dollars in our Specialty business, and the non-renewal of a $2.8 million dollar policy in our Standard Physicians business. Retention for the full year was 79% and reflects the reunderwriting in specialty and rate strengthening efforts and standard positions over the past 12 months. In addition to higher premium retention in the quarter, we achieved renewal price increases of 8% in the segment, driven by price increases in both our Standard Physician and Specialty business of 10%. For the full year, we achieved renewal price increases of 9% attributable to increases in the Specialty and Standard Physicians business of 15% and 11% respectively. New business writings were $5.3 million in the quarter compared to 4.6 million in the fourth quarter of 2019, driven by our Medical Technology Liability business. Year-end new business writings were $23 million, compared to $43 million in 2019 which reflects careful risk selection, disciplined underwriting evaluation, and the impact of slower submission activity due to market disruptions from the pandemic. The current accident year net loss ratio decreased 6.3 percentage points year-over-year, exclusive of the impact of the large national healthcare account in 2019 and 2020 and posting of the COVID IBNR reserve in the second quarter. We established a pre-tax $10 million IBNR reserve in the second quarter related to reported incidents. Despite the challenges of the current loss environment, we recognized net favorable development of $6.8 million and $27.5 million in the fourth quarter and full year respectively. The Specialty Property & Casualty segment reported expense ratios of 23.8% and 23% in the fourth quarter and full year respectively. Incremental improvements of 1.4 and 1.1 percentage points as compared to the same periods of 2019. This result was achieved despite lower net earned premiums and $4 million of one-time charges during the year related to restructuring. As a result of organizational structure enhancements, office consolidations and reductions in staff, we achieved expense savings of approximately $12 million in 2020. The current reinsurance market continues to firm as a result of social inflation and severity claim trends, via successful October renewal of our reinsurance treaty and mitigated potential significant cost increases by increasing our retention from $1 million to $2 million for -- [Technical Issues] liability and Medical Technology Liability businesses. The Workers' Compensation Insurance segment produced income of $6 million and a combined ratio of 97.8% for 2020, including income of $2.1 million and a combined ratio of 96.3% for the fourth quarter. During the quarter and full year, the segment booked $47 million and $247 million of gross premiums written respectively, representing decreases of 13.6% and 11.4% compared to the same periods in 2019. Renewal pricing in 2020 decreased 4% for both the quarter and full-year, reflecting the continued competitive pressures in our underwriting territories despite COVID-19 and the associated economic conditions. Premium renewal retention was 82% for the 2020 quarter and 84% for the year, both improvements compared to 76% and 83% for the same periods in 2019. New business writings decreased quarter over quarter to point $4.4 million dollars in 2020, compared to $5.5 million in 2019. And for the full year were $27.4 million in 2020 compared to $30.8 million in 2019. Audit premium for the fourth quarter of 2020 resulted in additional premium to the company of approximately $700,000 compared to $2.2 million for 2019, and for the year, was additional premium of $700,000 compared to $5.7 million in 2019. The 2020 accident year loss ratio was 69% for the year, compared to 68.4% in 2019. Net favorable loss reserve development for the quarter was $2 million in 2020 compared to $4.4 million dollars in 2019, and for the full year was $7 million versus $7.8 million in 2019. Reported claim frequency for non-COVID claims decreased 35% during the pandemic, with only $2.2 million of gross undeveloped incurred losses at the end of 2020 from the currently reported 1,375 COVID claims. Further, through the end of January 2021, we closed 87% of the 2020 reported COVID claims received to date, indicative of the shorter tailed nature of workers' compensation insurance compared to healthcare professional liability. Our claims professionals' continue to function effectively while working remotely, closing 61% of 2019 and prior claims during 2020, consistent with historical claim closing rates. Turning to expenses, the underwriting expense ratio in the quarter was 32.7% compared to 29.8% in 2019 reflecting the decrease in net premiums earned. The underwriting expense ratio decreased 2.5 percentage points from the third quarter of 2020 due to our restructuring efforts discussed on our November earnings call, and to a lesser extent, the associated one-time expense of $900,000 included in the third quarter. For the 2020 year, the expense ratio was 32.9% compared to 30.4% in 2019. Turning now to the Segregated Portfolio Cell Reinsurance segment, we reported income of $1.6 million for the quarter and$4.4 million dollars for all of 2020. The SPC resegment recorded favorable development of $9 million in the fourth quarter of 2020 compared to $2.3 million in 2019, and for the full year was $16.6 million dollars versus $10.1 million in 2019. As of December 31, 2020, we had 1,090 reported COVID claims for this segment with $1 million of gross undeveloped incurred losses. Our participation in the results of Syndicate 1729 and 6131 let us to record a loss of just under $1 million in the quarter. The fourth quarter loss, combined with our reduce participation in Syndicate 1729 for the 2020 underwriting year, contributed to overall lower income of approximately $2.1 million for the year. Losses on these storms and other natural catastrophes in the last three months of 2020 lead us to expect the segment loss in our first quarter of approximately $2.5 million. For the 2021 underwriting year, we have further reduced our participation in Syndicate 1729 from 29% to 5%. Additionally, we reduced our participation in Syndicate 6131 from 100% to 50% for the 2021 underwriting year. Before we open the call to questions, I'll note that the meaningful improvements we've made in the past 12 months go a long way toward our goals of operational excellence and sustainable profitability.

For the fourth quarter, we reported non-GAAP operating income of $3.3 million or $0.06 per share.

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Our second quarter financial results outpaced expectations with revenue growing 6.8% year-over-year on a same-store basis, and adjusted EBITDA growing 48% as compared to the prior year second quarter. Adjusted EBITDA of $116 million in the second quarter brings our LTM adjusted EBITDA to $453 million. Within the quarter, the company repaid approximately $46 million in debt under our 5-year Term Loan B. This was done with asset sales and with excess cash flow. This brings our total principal balance under our term Loan B below $1 billion. We also finished the quarter with $159 million of cash on hand. As a result, our digital revenue is now 32.2% or about 1/3 of total revenue. And importantly, the digital category is growing strongly, up 33% in Q2 over prior year. We ended the second quarter with approximately 1.4 million digital-only subscribers, adding 160,000 new net subscribers in the quarter. This subscriber growth for the company outpaced our previous high, which we set during the first quarter of this year, with 120,000 net new adds. With the 174 million unique visitors per month in the quarter, as measured by Comscore, Gannett has the sixth largest digital reach across all domestic peers. With a subscriber model at USA TODAY, a new subscription product, a portfolio of new content subscription products in the pipeline and data, driving our decisions based on what our consumers and customers are engaging with, is leading to steady progress toward our goal of 10 million digital-only subscribers by 2025. Just to remind you, the USA TODAY NETWORK includes over 250 local media markets as well as our USA TODAY publication. In addition, the Louisville Courier Journal was named a finalist for two politer price categories, breaking news and public service for its coverage and relentless investigation into the fatal shooting of Breonna Taylor and the ensuing 180 days of unrest. We have historically retained 96% to 97% of customer revenue month-to-month, akin to a SaaS or subscription product. There are over 30 million small businesses in the U.S., and those businesses are increasingly dependent on a digital strategy to grow their businesses and more importantly, to generate and manage leads. Our platform for our Digital Marketing Solutions segment generated revenue of $110 million in the second quarter, and that represented double-digit growth up 21.5% compared to the prior year on a same-store basis, and importantly, up 7.6% sequentially to Q1. Our core platform business, which we view as customers using our proprietary digital marketing services platform, grew 33% over the prior year, accompanied by significant improvement in ARPU, which we also saw, we saw a 12% sequential growth in terms of revenue over the first quarter, and that was in line with customer growth sequentially of 13% from the first quarter. Our margins were 11.4% in the second quarter. That's up from 9% in the first quarter and represents our strongest quarterly performance to date for this segment. Within the second quarter, we've added content to Sunday newspapers in 19 markets and will further expand that to more markets in the third quarter. With this announcement, Typical became the exclusive sports betting and iGaming provider for Gannett in the U.S. The 5-year agreement includes $90 million in media spend by Typical with Gannett, along with incremental incentives payable to Gannett for customer referrals and the ability for Gannett to acquire up to a 4.99% stake -- equity stake in Typical U.S. With a highly engaged audience of more than 46 million sports fans, over 500 dedicated sports journalists and more than 200 sports sites in our portfolio, Gannett is uniquely positioned to reach sports and gaming enthusiasts. We held 81 events in the second quarter, with approximately 20% of them held in person. Our 81 events is up from 13 events in Q1 of this year and up from 75 events in Q2 of 2020. The slight increase in the number of events from Q2 2020 to this quarter resulted in 4.4% revenue growth versus the prior year in our events category. For Q2, total operating revenues were $804.3 million, which was an increase of 4.9% as compared to the prior year quarter. On a same-store basis, operating revenues increased 6.8% as compared to the prior year quarter, which was the quarter most significantly impacted by the COVID-19 pandemic. Adjusted EBITDA totaled $115.8 million in the quarter, which was up $37.8 million or 48.4% year-over-year. The adjusted EBITDA margin was 14.4%, up from 10.2% in the prior year quarter and 12.9% in Q1. These are strong results, particularly considering that the prior year benefited from approximately $150 million of largely temporary cost reductions put in place in response to the pandemic. On the bottom line, we achieved $15.1 million of net income and $30.1 million of adjusted net income attributable to Gannett in the second quarter. The Publishing segment revenue in the second quarter was $724.5 million, up 4.2% as compared to the prior year quarter and up 5.6% year-over-year on a same-store basis. Current advertising revenue increased 10.7% compared to the prior year on a same-store basis as a result of the pandemic's impact in the prior year. Digital advertising and marketing services revenues increased 35.9% on a same-store basis, reflecting strong operational execution from our national and local sales teams. Despite a slightly smaller audience base compared to last year's peak new cycle, which was driven by the pandemic and the political environment, digital media revenue increased 46.9% versus the prior year. National sales of digital advertising grew 77% as compared to the prior year and over 49% on a 2-year basis. Digital classified revenues declined 19% on a same-store basis. While this is a significant improvement as compared to the Q1 results of down 31.3%, digital classified was negatively impacted in the period as a result of lower automotive business, which is reflective of supply constraints impacting the automotive industry. Digital marketing services revenue in the Publishing segment grew 41% year-over-year and 17.2% quarter-over-quarter. Moving now to circulation, where revenues decreased 9.2% compared to the prior year on a same-store basis, which compares favorably with Q1 same-store trend of down 12.9%. Also with regard to single copy, it is still significantly impacted by the ongoing pressure of the pandemic as a result of lower business travel, but it continued to show improvement year-over-year and was down 5.1% on a same-store basis as compared to down 31.5% in Q1. Record digital-only subscriber growth yielded 40% growth in digital-only revenue. Digital-only subscribers grew 41% year-over-year to approximately 1.4 million subscriptions. Adjusted EBITDA for the Publishing segment totaled $114.2 million, representing a margin of 15.8% in the second quarter. That represents an expansion of 120 basis points over Q1 and the prior year. For the Digital Marketing Solutions segment, total revenue in the first quarter was $110 million, an increase of 21.5% on a same-store basis and a substantial improvement in year-over-year trends. As compared to Q1 2021, revenue grew $7.8 million or 7.6% on growing client counts -- or client accounts. Those that utilize our proprietary digital marketing services platform increased from 13,600 clients in Q1 to 15,300 clients in Q2, a 12.7% sequential increase. Comparing to the prior year quarter, the core business, which accounts for 95% of the revenue in the Digital Marketing Solutions segment, increased 32.9% year-over-year. While the average client count declined year-over-year from 16,100 in Q2 of 2020 to 15,300 in 2021, that decline is attributable to the alignment of the product suite and platforms that took place in late Q3 2020, bringing together the legacy ThriveHive and ReachLocal systems onto a single platform. Several low dollar and low-margin products were eliminated from the portfolio, which had the impact of reducing overall client count by approximately 2,500 customers. The more focused combined products will help fuel the year-over-year growth and the increase in ARPU from $1,600 per month in Q2 of 2020 to $2,300 per month in Q2 of 2021. Adjusted EBITDA for the Digital Marketing Solutions segment totaled $12.5 million, representing a strong margin of 11.4% in the second quarter, above our Q4 2020 and Q1 2021 levels and the strongest margin to date within the segment. Our Q2 net income attributable to Gannett was $15.1 million and includes $48.2 million of depreciation and amortization. In Q2, our interest expense was approximately $35 million, which is down 39% from the prior year. Our cash balance was $158.6 million at the end of Q2, resulting in net debt of approximately $1.3 billion. Our ending Q2 cash balance was impacted by an optional $35 million debt repayment we made during the quarter. Capital expenditures totaled approximately $8.2 million during Q2, reflecting investments related to digital product development, technology and operating infrastructure. Free cash flow in the second quarter was $23.1 million, which reflects interest payments of approximately $36.4 million. Free cash flow in the quarter was burdened from a working capital perspective by approximately $42 million as a result of the timing of our employee payroll and seasonality associated with accounts receivable. We ended the quarter with approximately $1.5 billion of total debt, comprised primarily of $991 million of 5-year term loan and $497 million of the 2027 convertible notes. During the quarter, we repaid $450 million of debt funded through $11.2 million of real estate sales and excess cash flow. We continue to optimize our real estate and asset portfolio, and we completed 28 real estate transactions for approximately $11 million in proceeds during the quarter. Additionally, we expect to generate $80 million to $100 million of incremental asset sales during the second half of this year, of which approximately $20 million has already been completed in July. We remain confident in our ability to achieve our first lien net leverage goal of below 1 times adjusted EBITDA by the end of 2022.

Our second quarter financial results outpaced expectations with revenue growing 6.8% year-over-year on a same-store basis, and adjusted EBITDA growing 48% as compared to the prior year second quarter. And importantly, the digital category is growing strongly, up 33% in Q2 over prior year. Our core platform business, which we view as customers using our proprietary digital marketing services platform, grew 33% over the prior year, accompanied by significant improvement in ARPU, which we also saw, we saw a 12% sequential growth in terms of revenue over the first quarter, and that was in line with customer growth sequentially of 13% from the first quarter. For Q2, total operating revenues were $804.3 million, which was an increase of 4.9% as compared to the prior year quarter. On a same-store basis, operating revenues increased 6.8% as compared to the prior year quarter, which was the quarter most significantly impacted by the COVID-19 pandemic.

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And lastly, I'll provide an AIG 200 update. We made meaningful progress on the separation of life retirement from AIG and we significantly advance AIG 200 with the transformation remaining on track to deliver $1 billion in savings by the end of 2022 against the cost to achieve $1.3 billion. We ended the first quarter with parent liquidity of $7.9 billion and we repurchased $92 million of common stock in connection with warrant exercises and an additional $207 million against the $500 million buyback plan we mentioned on our last call. We expect to complete the additional $230 million of that buyback plan by the end of the second quarter. Turning to general insurance, net premiums written increase approximately $600 million year over year, or approximately 6% on an FX constant basis, driven by nearly $1 billion, or a 22% year-over-year increase in our global commercial businesses. This 22% increase in global commercial was driven by higher retentions; excellent new business production, particularly in international; strong performance in first-quarter portfolio repositioning; and continued rate momentum. North America commercial net premiums written grew by approximately 29%, an outstanding result due to a variety of factors including increased 1/1 writings on the balance sheet, continue strong submission flow in Lexington, rate improvement, strong retention and higher new business and segments we have been targeting for growth. The international commercial had an exceptionally strong first quarter with the year-over-year growth in net premiums written of approximately 13% on an FX constant basis. Looking ahead, we expect overall growth in net premiums written for the remainder of 2021 to be higher than the 6% we saw in the first quarter of this year with more balance in growth across our global commercial and personal portfolios. With respect to rate, momentum continued with overall global commercial rate increases of 15%. North America's commercial rate increases were also 15%, driven by improvements in Lexington casualty with 36% rate increases, excess casualty with 31% rate increases, and financial lines with rate increases over 24%. International commercial rate increases maintain strong momentum at 14%in the first quarter of 2021, which is typically the largest quarter of the year for our European business. These increases were driven by energy with 26% rate increases, commercial property with 19% rate increases, and financial lines with 20% rate increases. Turning to global personal insurance, net premiums written in the first quarter declined 23% on an FX constant basis due to our travel business continuing to be impacted by the pandemic as well as reinsurance sessions to Syndicate 2019. Adjusted for these impacts, global personal insurance, net premiums written were down only 1.6% on an FX constant basis. In the first quarter of this year, the adjusted accident year combined ratio was 92.4%, a 310-basis-point improvement year over year, driven by a 440-basis-point improvement in our adjusted commercial accident year combined ratio. The adjusted accident year loss ratio improved 160 basis points, to 59.2%, driven by a 330-basis-point improvement in global commercial. The expense ratio improved 150 basis points reflecting the impact of AIG 200 savings and continued expense discipline. We expect to continue to improve the expense ratio throughout 2021, particularly as we deliver on our AIG 200 programs. To provide further color on combined ratio improvements, in North America, the adjusted accident year combined ratio improved to 95.6%, 210-basis-point improvement year over year. This reflects a 370-basis-point improvement in the North American commercial lines adjusted accident year combined ratio, which came in at 93.9%. In international, the adjusted accident year combined ratio improved to 90.2%, a 340-basis-point improvement year over year. This reflects a 490-basis-point improvement in the international commercial lines adjusted accident year combined ratio, which came in at 86.8%, 150-basis-point improvement in the international personal lines adjusted accident year combined ratio which was 94%. Net cap losses in general insurance are $422 million primarily driven by the Texas storms and do not include any new COVID-related estimated losses for the first quarter. As I noted, Validus Re saw strong 1/1 renewals across most lines with attractive levels of risk-adjusted rate improvement. With respect to April 1 renewals, within the international property, rate adjustments varied from mid-single-digits to upwards of 30% and loss impacted accounts and our Japanese renewals were very successful with 100% client retention, net limits largely similar year over year, and risk-adjusted rate increases, which were in the high single-digits. Growth limits and global commercial will reduce by over $650 billion. North America excess casualty removed over $10 billion in mid-limits and increased writings in mid-excess layers in order to achieve a more balanced portfolio. The portfolio is now more balanced and the submission flow has increased over 100% over the last couple of years. Adjusted pre-tax income in the first quarter was $941 million, an adjusted return on common equity was 14.2% reflecting our diversified businesses and high-quality investment portfolio. We continue to actively manage impacts from the low-interest rate and tighter credit spreads environment and the range we previously provided for expected annual spread compression of 8 to 16 basis points has not changed. With respect to the separation of life retirement from AIG, we continue to work diligently and with a sense of urgency toward an IPO of about 19.9% of the business. Turning to AIG 200, all 10 operational programs are deep into execution mode. Recent progress on IT modernization has enabled us to reach the halfway point or $500 million of our run-rate savings target. $250 million in cumulative run-rate savings has been realized in APTI through the first quarter of this year with $75 million of incremental savings achieved within the first-quarter income statement. Key highlights on our progress include the successful transition of our shared services operations and over 6,000 colleagues to Accenture at year-end 2020. And with a new highly experienced leader in Japan, we made significant progress during the first quarter on our AIG 200 strategy in Japan and are on track to finalize target outcomes as we modernize this business by developing digital capabilities with agile product innovation. Since Peter has already provided a good overview of the quarter, I'll just add that we've posted a 7.4% annualized adjusted return on common equity at the AIG level, an 8.2% adjusted return on tangible common equity at the AIG level, an 8.5% adjusted return on segment common equity for general insurance, and a 14.2% adjusted return on segment common equity for life and retirement. Now moving to general insurance, first-quarter adjusted pre-tax income was $845 million, up $344 million year over year, primarily reflecting increased underwriting income in international, as well as increased global net investment income driven by alternatives. Catastrophe losses totaled $422 million pre-tax or 7.3 loss ratio points this quarter, compared to 6.9 loss ratio points in the prior-year quarter. The CAT losses were mostly comprised of $390 million related to the winter storms, primarily impacting commercial lines including AIG rate. Overall, prior-year development was $56 million favorable this quarter, which included $58 million of net favorable development in North America, driven by $52 million of favorable development from the ADC amortization, and $2 million of net unfavorable development in international. It's worthwhile to note that general insurance still has $6.6 billion remaining of the 80% quota share ADC cover. There was also, embedded within these figures, $33 million of unfavorable development related to COVID-19 claims that relate back to 2020 loss occurrences or a movement of less than 3%, emanating primarily from Validus Re and Talbot or Lloyd's syndicate. As Peter, noted on a global-commercial-lines basis, the accident year combined ratio, excluding CAT was 90.4%, which represents a 440-basis-point improvement over the prior year's quarter with 75% of that improvement attributable to a lower loss ratio and 25% of the improvement attributable to a lower expense ratio. Although North American personal lines had a 74% drop in net premiums written as Peter highlighted, it's also important to understand that the other units within the segment which represented nearly 50% of the quarter's net written premium is comprised mostly of warranty and personal A&H business had their net premium only fall marginally. The increase achieved in the first quarter of 2020 and compounded in the first quarter of 2021 alone, ignoring prior to 2020 rate increases, exceeded 150% for Bermuda-based capacity business, which makes sense given recent years' price deficiency on these capacity excess layers, and approximately 115% for the other mentioned units. financial lines on the same compound basis has seen in excess of 80% increases for the staples of D&O and EPLI. Internationally, the 14% first-quarter overall rate increase saw continued rate expansion in key markets, such as the U.K. at plus 23%, global specialty at plus 15%, Europe and the Middle East at 14%, Latin America at 13%, and Asia Pacific also at 13% when excluding the tempering influence of predominantly Japan at 3%. Lastly cyber achieved our highest rate increase yet at 41% for the quarter. So, first, our achieved North America commercial rate change for the quarter on a net basis is now estimated to be at least 150 basis points stronger than the corresponding growth rate change, largely due to our increased net positions across selected product lines. Now, even with superior risk selection rate and term condition changes that have been achieved, renewal retentions have improved to the mid-80% in the aggregate across all commercial lines in both North America and across internationally. As a result, I would like to reconfirm our outlook for a sub-90% accident year combined ratio excluding CAT by the end of 2022. Global commercial lines are very nearly at the sub-90% level now and global personal lines is running at 96% for the first quarter. We are highly confident that we will achieve our sub-90% target and have several pass to help us get there. North America commercial is expecting to see growth of approximately 10% for the second quarter of 2021 relative to the prior-year quarter, driven mostly from Lexington across a host of product lines and admitted casualty both primary and excess. You will recall, North American personal had a negative $150 million net written premium in the second quarter of 2020 due to many syndicate 2019 treaties becoming effective, including an unearned premium cover for the PCG high-net-worth book. So, overall, for North America, both personal and commercial combined, we anticipate net written premium growth between 35% to 40% for the second quarter over the second quarter of the prior year. International commercial in the second quarter of 2021 is expected to be roughly plus 7% net written premium growth, driven by global specialty, financial lines, and Talbot, and international purpose -- personal is expected to be approximately flat relative to the prior-year quarter. Now, turning to life and retirement, adjusted pre-tax income increased by 57% or $340 million compared to the first quarter of 2020 with favorable equity markets driving higher private equity returns, lower deferred acquisition and cost amortization, a rebound in most areas of sales, and higher-fee income. This increase was partially offset by adverse mortality as U.S. COVID-related population death of approximately 205,000 in the first quarter were higher than or earlier anticipated which was also reflected in our own experience. Individual retirement premium and deposits grew 8% from the prior-year quarter, which we consider a pre-COVID quarter as the sales pipeline carried through March of last year with index and variable annuities, both exceeding prior-year levels. In group retirement, group acquisition deposits increased significantly from prior year, although both periodic and nonperiodic deposits declined, leading to a marginal reduction in overall gross group premiums and deposits of 2%. In life insurance, premiums and deposits grew 6% overall with year-over-year growth in both the U.S. and international. Individual retirement net flows improved by approximately $1 billion over the first quarter of 2020 driven by variable annuities and retail mutual fund. And yet when excluding retail mutual funds, net flows were positive, led by index annuities rebounding to be plus 1 billion for the quarter, which is virtually identical to one year ago, but with steady progress from a low of 439 million in the second quarter of 2020 to the plus 1 billion this quarter. Adjusted pre-tax loss was 530 million, which was inclusive of 176 million of losses from the consolidation and eliminations line, which principally reflects adjustments, offsetting investment returns in the subsidiaries by being eliminated in other operations. Before consolidation and eliminations, adjusted pre-tax loss was $354 million, which was $481 million better than the first quarter of 2020, which included a $317 million adjusted pre-tax loss related to Fortitude and a $30 million one-time cash grant given to employees to help with unanticipated costs when the global pandemic began last March. Net investment income on an APTI basis was 3.2 billion or 492 million higher than the first quarter of 2020. Adjusting first-quarter 2020 for Fortitude's investment income to make the comparison apples to apples, this quarter's net investment income on an APTI basis was actually 611 million higher than the prior year, or plus 23%, reflecting strong private equity and real estate returns, as well as bond tender and call premiums, which more than offset the lower income on the AFS fixed income portfolio. At March 31, book value per common share was $72.37, down 5.3% from year-end, reflecting net unrealized mark-to-market losses on the investment portfolio. Adjusted book value per share was $58.69, up nearly 3% from December 31. At quarter-end, AIG parent, as Peter noted, had cash and short-term liquidity assets of $7.9 billion, and we repaid our March debt maturity of $1.5 billion and repurchased the $362 million of shares, as Peter outlined. Our GAAP debt leverage at March 31 was 28.4%, flat to year-end given downward fixed income market movements negatively impacting AOCI despite the repaid debt maturity mentioned earlier. For general insurance, we estimate the U.S. pool fleet risk-based capital ratio for the first quarter to be between 465% and 475%, and life and retirement fleet is estimated to be between 435% and 445%, both well above our target ranges.

At March 31, book value per common share was $72.37, down 5.3% from year-end, reflecting net unrealized mark-to-market losses on the investment portfolio.

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We believe at least $23 billion of CARES Act funding under the Provider Relief Fund remains unallocated. Our adjusted FFO of $0.81 per share and our funds available for distribution of $0.77 per share allow us to maintain our quarterly dividend of $0.67 per share. The payout ratio is 83% of adjusted FFO and 87% of funds available for distribution. As of January 31, based on 92% of our facilities reporting in, 95% of facilities have conducted or are scheduled within the next week for first-dose clinics. The vaccination rate for residents is approximately 69%, and the vaccination rate for staff is approximately 36%. For most facilities, the second-dose clinic, which occurs 21 days after the first dose, will also incorporate a new day of first doses for those residents or staff who are not available or who are not prepared for the vaccination during the first round clinic. Our NAREIT FFO on a diluted basis was $173 million or $0.73 per share for the quarter as compared to $176 million or $0.77 per diluted share for the fourth quarter of 2019. Revenue for the fourth quarter was approximately $264 million before adjusting for the nonrecurring writedown of straight-line receivables as well as other nonrecurring favorable revenue items. Revenue for the quarter included approximately $12 million of noncash revenue. We collected over 99% of our contractual rent, mortgage and interest payments for the fourth quarter and for January as well, excluding, of course, rental payments due from Daybreak, which is under a forbearance agreement and has not been making payments. Our G&A expense was $10.4 million for the fourth quarter of 2020, in line with our estimated quarterly G&A expense of between $9.5 million and $10.5 million. Interest expense for the quarter was $56 million, with a $4 million increase over the third quarter of 2020, primarily resulting from our October issuance of $700 million of 3.375% senior notes due February 2031. As a result of the repayments, we terminated $225 million of LIBOR-based swaps and recorded approximately $12 million in early extinguishment of debt. Our October bond issuance repaid $683 million of short-term LIBOR-based borrowings. borrowings outstanding under our $1.25 billion credit facility and had approximately $163 million in cash and cash equivalents. In March 2020, we entered into $400 million of 10-year interest rate swaps at an average swap rate of approximately 0.87%. In the fourth quarter, we issued 4.2 million shares of common stock through our ATM program, generating $151 million in net cash proceeds. At December 31, approximately 95% of our $5.2 billion in debt was fixed and our funded debt to adjusted annualized EBITDA was five times. Our fixed charge coverage ratio was 4.3 times. When adjusting to include a full quarter of contractual revenue for new investments completed during the quarter as well as eliminating revenue related to assets sold in the quarter, our pro forma leverage would be roughly 4.99 times. As of December 31, 2020, Omega had an operating asset portfolio of 949 facilities with over 95,000 operating beds. These facilities were spread across 69 third-party operators and located within 39 states and the United Kingdom. Trailing 12-month operator EBITDARM and EBITDAR coverage for our core portfolio increased during the third quarter of 2020 to 1.87 times and 1.51 times, respectively, versus 1.84 times and 1.48 times, respectively, for the trailing 12-month period ended June 30, 2020. During the third quarter, our operators cumulatively recorded approximately $102 million in federal stimulus funds as compared to approximately $175 million recorded during the second quarter. Trailing 12-month operator EBITDARM and EBITDAR coverage would have decreased during the third quarter of 2020 to 1.53 times and 1.18 times, respectively, as compared to 1.61 times and 1.26 times, respectively, for the second quarter when excluding the benefit of any federal stimulus funds. EBITDAR coverage for the stand-alone quarter ended September 30, 2020 for our core portfolio was 1.44 times, including federal stimulus funds, and 0.97 times excluding the $102 million of federal stimulus funds versus 1.87 times and 1.05 times with and without the $175 million in federal stimulus funds, respectively, for the second quarter. Cumulative occupancy percentage for our core portfolio were at a pre-COVID rate of 84% in January of 2020, flattened out to around 75% throughout the fall months and subsequently dropped to 72.9% in December of 2020. Based upon what Omega has received in terms of occupancy reporting for January to date, occupancy has continued to decline slightly, averaging approximately 72.1%. Per patient day operating expenses for our core portfolio increased approximately $40 from pre-COVID levels in January 2020 to November 2020; the latest stats available. On November 1, 2020, Omega completed a $78 million purchase lease transaction for 7 skilled nursing facilities in Virginia. The facilities were added to an existing operator's master lease for an initial cash yield of 9.5% with 2% annual escalators. New investments for the year ended December 31, 2020 totaled approximately $260 million including $113 million in capital expenditures. As mentioned by Taylor, on January 20, 2021, Omega closed on the purchase of 24 senior housing facilities from Healthpeak for $510 million. The portfolio primarily consists of assisted living, independent living and memory care facilities with a total of 2,552 units located across 11 states. The facilities will generate approximately $43.5 million in contractual 2021 cash rent with annual escalators of 2.4%. During the fourth quarter of 2020, Omega divested 16 facilities for total proceeds of $64 million. For the year ended December 31, 2020, Omega strategically divested a total of 35 facilities for $181 million. Since our last earnings call, the $175 billion Provider Relief Fund was increased by $3 billion as a result of the $900 billion stimulus package signed in December 2020. Of that fund, approximately $23 billion remains unallocated. In terms of previously allocated funds still in the process of being paid out, as previously mentioned, on July 22, a Medicare-certified nursing home targeted infection control fund of $5 billion was announced. $2.5 billion was paid out in August and an additional $2 billion was set up as a quality incentive payment program with payments based on a facility's ability to maintain a rate of infection below the county infection rate and a death rate below a national performance threshold for nursing home residents. The September payout was made in October at $330 million, with the October payout being made in December at $530 million and the November payout just starting to go out last week. With respect to the Phase 2 general distribution announced in September, due to the fact that HHS hadn't previously tracked assisted living facilities, a lengthy tax identification process delayed the payout for many assisted living providers to December and early January. This allocation was an application process for up to 2% of 2019 patient revenues from Medicaid, children's health insurance program and assisted living providers. The $20 billion Phase 3 general distribution announced in October was increased to $24.5 billion once all applications were received and reviewed. $10 billion was paid out in December with the remainder expected to be paid out within the coming weeks. Payouts were based on the change in net operating income related to patient care for the first half of 2020 as compared to the first half of 2019, with a stated payout of 88%. The final project cost is expected to be approximately $310 million. By example, our Maplewood portfolio, which is concentrated in the early affected Metro New York and Boston markets, saw meaningful census erosion early in the pandemic, with second quarter census hitting a low point of 80.4% in early June. That said, their portfolio occupancy had returned to 84.5% at the end of August and increased further to 85.6% in the month of November. Including the land and CIP at the end of the fourth quarter, Omega's senior housing portfolio totaled $1.6 billion of investment on our balance sheet. and U.K. As expected, this portfolio on a stand-alone basis had its trailing 12-month EBITDAR lease coverage fall four basis points to 1.12 times in the third quarter of 2020. We invested $19.4 million in the fourth quarter in new construction and strategic reinvestment. $12.8 million of this investment is predominantly related to our active construction projects. The remaining $6.6 million of this investment was related to our ongoing portfolio capex reinvestment program.

Our adjusted FFO of $0.81 per share and our funds available for distribution of $0.77 per share allow us to maintain our quarterly dividend of $0.67 per share. Our NAREIT FFO on a diluted basis was $173 million or $0.73 per share for the quarter as compared to $176 million or $0.77 per diluted share for the fourth quarter of 2019.

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Our stated target was to reach at least 400 basis points of growth above the IP index by the end of our fiscal 2023. Our first base camp would be this past quarter, our fiscal '21 fourth quarter, where we expect it to be at least 200 basis points above IP. And we would achieve this by leveraging growth, by executing on gross margin initiatives, and by delivering structural cost takeout of 90 to $100 million, helping to reduce opex as a percentage of sales by at least 200 basis points over that time period. Our Q4 performance was strong, with ADS growth of roughly 500 basis points above IP. After adjusting out nonrecurring costs, adjusted ROIC was 15.4% at the end of Q4, an improvement of approximately 60 basis points over the past year. We achieved $40 million of cost savings in fiscal '21, exceeding our original target of 25 million. We're approaching pre-COVID levels on our vending machine signings and our implant program is gaining traction, finishing fiscal '21 at just over 7% of company sales, as compared to 5% a year ago. With respect to revenue growth, we're aiming for at least 300 basis points of growth above IP, on our way to 400 basis points or more for fiscal 2023. On the structural cost front, we expect to deliver roughly $25 million in incremental savings on top of the 40 million in fiscal 2021. As Kristen will describe in just a bit, we expect this to yield incremental margins of 20% in the likely scenarios for the year. We are well positioned to navigate this environment, particularly when compared to the local and regional distributors who make up 70% of our market. Sales were up 11.1%, or 12.9% on an average daily sales basis. Our non-safety and non-janitorial product lines grew 20%, while sales of safety and janitorial products declined roughly 14%. Government sales declined nearly 30% due to difficult janitorial and safety comps. September continued the trend of a low double-digit growth rate with ADS growth of 11.1%. Our non-safety and non-janitorial growth was roughly 15% [Inaudible] 11%. Supplier pricing moves led us to take another increase in August, and solid realization of our June increase allowed us to post the gross margin of 42% for the quarter, down just 30 basis points from our fiscal third quarter, which is less than our typical seasonal drop. Our fourth-quarter sales were 831 million, up 11.1% versus the same quarter last year. So on an average daily sales basis, net sales increased 12.9%. Erik gave some details on our sales growth, but I'll just reiterate that the non-safety and non-janitorial ADS sales grew 20% in the quarter, while our safety and janitorial sales declined 14%. Our gross margin for fiscal Q4 was 42%. And as Erik mentioned, was down 30 basis points from our third quarter and up 40 basis points from last year. Operating expenses in the fourth quarter were 253.3 million or 30.5% of sales, versus 227 million or 30.4% of sales in the prior year. It's worth noting that our fourth quarter operating expenses include nearly 8 million of expense add-back from prior year COVID cost containment measures. Excluding approximately $1 million of acquisition-related costs, adjusted opex was 252.1 million or 30.3 as a percent of sales. We also incurred approximately 4.4 million of restructuring and other related charges in the quarter. Our operating margin was 11%, compared to 9.8% in the same period last year. Excluding the acquisition-related costs, as well as the restructuring and other related costs, our adjusted operating margin was 11.7%, versus an adjusted 11.2% in the prior year. Adjusted incremental margin for our fiscal fourth quarter was 15.3%. GAAP earnings per share were $1.18, as compared to $0.94 in the same prior-year period. Adjusted for the acquisition-related costs, as well as restructuring and other charges, adjusted earnings per share were $1.26 as compared to adjusted earnings per share of $1.09 in the prior-year period, an increase of 15.6%. Our free cash flow was 69 million in the fourth quarter, as compared to 171 million in the prior year. I would also note that we repurchased 20 million of stock during the quarter or about 231,000 shares at an average price of 89.08 per share. As of the end of the fiscal fourth quarter, we were carrying 624 million of inventory, up 26 million from last quarter. Our capital expenditures were 16 million in the fourth quarter and for the full year, were 54 million, within our expected range of 50 to 60 million. In addition, our fiscal year 2021 annual cash flow conversion or operating cash flow divided by net income was strong at 103%. Our total debt at the end of the fiscal fourth quarter was 786 million, reflecting a 27 million increase from our third quarter. As for the composition of our debt, 234 million was on our revolving credit facility, about 200 million was under our uncommitted facilities, and approximately 350 million was long-term fixed rate borrowings. Cash and cash equivalents were 40 million, resulting in net debt of 746 million at the end of the quarter. As of the end of September, our net debt was down to 728 million. Our original program goal was to deliver 90 to 100 million of cost takeout through fiscal 2023, and that is versus fiscal 2019. As you can see on Slide 10, our cumulative savings for fiscal year 2021 were 40 million against our original goal of 25 million and our revised goal of 40 million. We also invested roughly 23 million in fiscal 2021, which compares to our revised full-year target of 25 million. We expect additional gross savings in fiscal '22 of 25 million and additional investments of 15 million. That will result in additional net savings for Mission Critical initiatives of roughly 10 million. As a result of our strong progress on Mission Critical savings, we are increasing our total savings target to a minimum of 100 million through the end of fiscal '23, as compared to our fiscal '19 baseline. We would expect adjusted operating margin to be in the range of 12.3%, plus or minus 30 basis points. And if sales are up mid-single digits, we would expect adjusted operating margin to be in the range of 12%, also plus or minus 30 basis points. This means we expect to achieve 20% adjusted incremental margins at our likely revenue growth range of mid to high single-digit growth. With regard to sales levels, we are assuming an IP index somewhere between low to mid-single-digit growth, and we are targeting market outgrowth of roughly 300 basis points. It's worth noting that in addition to volume-related expenses, we will face several challenging headwinds, such as labor and freight inflation of nearly 25 million, as well as COVID cost add-backs and additional COVID-related costs of more than 13 million. I would point out that 3 million of those costs are for an incentive and marketing campaign to help us achieve compliance with the federal contractor vaccination mandate. Looking to fiscal '22, we're set up for a strong year, including 20% incremental margins in our likely growth range.

Our fourth-quarter sales were 831 million, up 11.1% versus the same quarter last year. GAAP earnings per share were $1.18, as compared to $0.94 in the same prior-year period. Adjusted for the acquisition-related costs, as well as restructuring and other charges, adjusted earnings per share were $1.26 as compared to adjusted earnings per share of $1.09 in the prior-year period, an increase of 15.6%.

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After realizing more than $10 million of synergies last year, we anticipate at least another $20 million this year. The Rail segment recorded its highest quarterly profit in two years, and we expect EBITDA growth to exceed 60% for the full year. Last year, Harsco recycled or repurposed over 75% of the material that we processed and we continue to see increases in our ESG ratings. Harsco's revenues totaled $570 million and adjusted EBITDA reached $78 million in the second quarter outperforming the prior year and sequential quarters. Harsco consolidated revenues increased 27% compared with the second quarter of 2020 and 8% compared with the first quarter of 2021. Harsco's adjusted earnings per share from continuing operations for the second quarter was $0.28, and this figure compares favorably to adjusted earnings per share of $0.13 in the prior year quarter and is above the guidance range of $0.21 to $0.27 we provided in May. Lastly, our free cash flow for the quarter of $6 million was consistent with our expectations. Revenues totaled $273 million and adjusted EBITDA was $58 million. These results compare favorably to the prior year quarter when EBITDA totaled $40 million. Our quarterly margin improved to just over 21%. Liquid steel tonnage, or LST, increased roughly 25% versus the prior year, and we expect to benefit from increased production as the global economy continues to improve. Our customers operated at less than 80% of capacity in Q2, which leaves room for further improvement in service levels in the future. For the quarter, revenues were $196 million, and adjusted EBITDA totaled $18 million. Compared to the second quarter of 2020, revenues increased 21% with both our contaminated and hazardous materials businesses contributing higher revenues. Integration benefits totaled roughly $5 million in the quarter versus the prior year period. And overall, our integration efforts are progressing well with us on track to realize $20 million of benefits this year. Lastly, on Clean Earth, I'd highlight that our year-to-date free cash flow now totals $24 million. This total represents more than 70% of its EBITDA and reflects the positive results and financial characteristics of this business. Rail revenues totaled $101 million, up 24% from the prior year quarter and the segment's adjusted EBITDA totaled $10 million in the second quarter. Adjusted EBITDA is expected to be within a range of $295 million to $310 million. Adjusted earnings per share is expected to be within a range of $0.82 and $0.96 and we expect free cash flow of $35 million to $55 million for the year. Q3 adjusted EBITDA is expected to range from $75 million to $81 million.

Harsco's revenues totaled $570 million and adjusted EBITDA reached $78 million in the second quarter outperforming the prior year and sequential quarters. Harsco's adjusted earnings per share from continuing operations for the second quarter was $0.28, and this figure compares favorably to adjusted earnings per share of $0.13 in the prior year quarter and is above the guidance range of $0.21 to $0.27 we provided in May. Adjusted earnings per share is expected to be within a range of $0.82 and $0.96 and we expect free cash flow of $35 million to $55 million for the year.

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We've revised our organic revenue growth expectations to approximately 2% primarily due to delays for these components weighing on the CS segment. Absent such delays, we would have comfortably been within our prior 3% to 5% range. And with our broad and diversified portfolio, along with continued execution elsewhere, especially on the margin front, we've increased our range on earnings per share to $12.85 to $13 per share and still expect to deliver free cash flow per share of around $14, up double-digit on both accounts. Shifting over to the third quarter, following organic revenue growth of 6% in the second quarter, we saw a decline of 1% due to timing associated with supply chain delays at CS and in ISR aircraft award with IMS. While I'm disappointed by the soft top-line results, I'll note that the order momentum remained strong with a book-to-bill of 1.07 and we delivered record-high margins at 19.6%. EPS was $3.21, up 13% versus the prior year with solid free cash flow of $673 million, that contributed to shareholder returns of $1.5 billion in the quarter. In the third quarter, the impact was nearly $100 million or approximately 2 points of revenue. And in the fourth quarter, our expectation is for the backlog of unfilled orders to grow and all told, we foresee a roughly $250 million to $300 million revenue impact for the year, implying another step down in the fourth quarter. Having said that, we do not anticipate any impact to our bookings nor our win rate and expect the segment to end the year with a book-to-bill well over 1 time. Second, in IMS we had a follow-on ISR aircraft order with a NATO customer that booked late in the quarter, causing revenues to slip to Q4 representing roughly a 2.5 point shift between quarters. Within the space domain, on the classified side, we continued to advance our responsive and exquisite satellite business with several earlier stage awards, both with the Intel community and DoD which have follow-on opportunities of nearly $2 billion. And on the unclassified side following the Imager award in Q2, NOAA is progressing on the recapitalization of its GOES weather satellite system and awarded us a study contract for a sounder payload as part of a $3 billion opportunity over the next decade. On the B-52, we received a 10-year $1 billion IDIQ that has the potential to expand our scope on the program to include EW hardware upgrades, such as radar warning receivers, building on our existing software sustainment work. In addition, on the international front, we were awarded an initial $100 million contract to provide capabilities on 12 multi-mission aircraft to the UAE, with the potential to double these amounts, further demonstrating the breadth of our RSR capabilities that range from turboprops to business jets to larger aircraft. Under the Army HMS program, we received over $200 million in awards for the Manpack and Leader radios taking a majority share on both products. These were the first full-rate production award out of a multi-billion dollar IDIQ and represents less than 15% of the acquisition objective pointing to considerable runway ahead. We also won a majority share on the second program of record for the ENVG-B program with $100 million order setting us up to ramp production on the army's next-generation field-ready Goggle. Operationally, the team delivered power conversion's fleet hardware as part of the Virginia-class Block 5 upgrade and completed qualifications for a portion of the power distribution system on the Columbia class, advancing the US Navy's top priority. This program is over $300 million opportunity and strengthens L3Harris's long-standing relationship with Australia. Finally, we received a strategic award on the revenue synergy front as we signed a $130 million contract with the Mid-East customer to provide modernized software-defined radios through a localized joint venture. And this customer channel synergy award opens the door to a long-term opportunity for up to 50,000 radios. When combined with other orders in the quarter, revenue synergy awards to date totaled roughly $900 million on the win rate that remains at 70%. With a pipeline of over $7 billion, these synergies will be a notable contributor to our top line growth. These wins supported another strong quarter for a book-to-bill of 1.07 and 1.06 times year-to-date, increasing our organic backlog to $21 billion or up 9% from last year and 4% year-to-date. All in all, as we consider the trajectory of our top line, we remain confident in our ability to deliver sustainable growth through our domestic positioning, revenue synergies and international expansion that stem from a pipeline of opportunities, well in excess of $100 billion. Pivoting to margin performance, our team delivered a stellar quarter at 19.6%, the best post merger results and an indication of the company's potential over the next couple of years as we further build a culture of operational excellence. Our performance was the result of delivering another $15 million of incremental cost synergies and we're well on track to hit our $350 million targets. We continue to manage our overhead costs and drive our E3 program to more than offsetting supply chain headwinds, due primarily to our year-to-date results, we now see margins for 2021, exceeding our prior expectation of 18.5% by 25 basis points. We're in augmented reality assembly aid that electronically displays and validates our processes, helps reduce cycle time by 25% and higher first-pass yields by several points. The other half of our opportunity comes from the engineering excellence and supply chain on the former through the deployment of our digital ecosystem, front-loading our program activities, and enhancing training for our roughly 20,000 engineers and 1500 program managers, we're able to increase commonality and better manage cost and schedule across the company. On supply chain, the global disruption we've highlighted have been largely contained to about 15% of the company and are temporary in nature. The focus we've had be it on reducing the number of suppliers or leveraging our roughly $7.5 billion spend as an enterprise remain in place with further opportunities in the years ahead. Moving over to the portfolio, we put a bow on the post-merger shaping activities in the quarter and closed on the Electron Devices divestiture for $185 million while announcing the sale of two small businesses within AS for a combined $130 million, bringing total gross proceeds since the merger to $2.8 billion. Our expectation now is for buybacks to be roughly $3.6 billion this year versus our prior $3.4 billion. When combined with dividends, capital returns will be about $4.5 billion in 2021. In the quarter organic revenue was down 1% lower than our internal expectations by about 4.5 points from the supply chain delays and ISR aircraft award timing. IMS and CS were down 3% and 5% respectively, and absent these impacts would have been up closer to the mid-single-digit range for both. The SAS segment was up 3% and led by strong growth in our responsive Space business, while AS was up 1% including the benefit from recovery in commercial aerospace. Margins expanded 170 basis points to 19.6% with the most notable drivers being from E3 performance and cost management, which more than offset volume-related supply chain headwinds. We exceeded our internal expectations by more than 100 basis points from favorable mix related to award timing and strong E3 performance. These drivers along with our share repurchase activity drove earnings per share up 13% or $0.37 to $3.21 as shown on Slide 5. Of this growth synergies and operations contributed $0.39, lower share count contributed another $0.20 and pension and tax accounted for the remaining $0.08 then more than offset a $0.14 headwind from divested earnings and a $0.16 headwind from supply chain delays. Free cash flow was $673 million and we ended the quarter steady with working capital days at 56. This supported robust shareholder returns of $1.5 billion, comprised of $1.3 billion in share repurchases and $202 million in dividends. Integrated Mission Systems revenue was down 3% driven by follow on ISR aircraft award timing from the NATO customer that would have contributed 8 points of growth for which revenue has now been booked in October. Operating income was up 4% and margins expanded 110 basis points to 16.6% from operational excellence, integration benefits and pension. Funded book-to-bill was 1.04 in the quarter and 1.05 year-to-date with strength across the segment. In Space and Airborne Systems, revenue increased 3% driven by double-digit growth in space, primarily from our ramping missile defense and other responsive programs. The space growth was more than offset -- from the production transition -- I'm sorry the Space program more than offset headwinds from the production transition of the F-35 Tech Refresh 3 program within Mission Avionics, as well as program timing and electronic warfare, and Intel & Cyber. Operating income was up 5% and margins expanded 30 basis points to 18.8% as E3 performance, increased pension income and integration benefits more than offset higher R&D investments and mix impacts from growth programs such as in space. And funded book to bill was about 1 for the quarter and 1.05 year-to-date, driven by responsive and other space awards. Next, Communication Systems organic revenue was down 5% due primarily to product delivery delays within tactical communications that stemmed from the global electronic component shortages, creating an approximately 8.0 headwind year-over-year and versus expectations, as well as lower volume for our legacy unmanned platforms in broadband due to the transition from permissive to contested operating environments. Operating income decreased to 1% and margins expanded 130 basis points to 26.3%. And funded book-to-bill was above 1.1 for both the quarter and year-to-date from strong product bookings within tactical communications and in Integrated Vision for modernization alongside key state-level awards within public safety. Finally, in Aviation Systems, organic revenue increased 1%, by our commercial aerospace business that was up over 40% from recovering training and air transport OEM product sales. Operating income decreased 13% primarily due to divestitures while margins expanded 140 basis points to 14.4% and expense management, the commercial aerospace recovery and integration benefits more than offset divestiture related headwinds. And funded book-to-bill was 1.1 for the quarter and about 0.9 year-to-date. Organic revenue is now anticipated to be up about 2% with the different versus our prior guide largely attributable to supply chain delays. At a segment level, we maintained our sales guides but foresee us, where we now anticipate revenue to be down 2.5% to 4.5% versus our prior range of up 2.5% to 4.5%. This is largely due to the global supply chain disruptions mainly within tactical communications, that will now be down about 10% versus our prior view of up in the low to mid-single digits. This implies fourth quarter sales growth will be in the 1% to 2% range for the company, which includes CS down in the mid-teens, and our other segments up in the mid to high single-digits on average. Turning to margins, we've raised our outlook to 18.75% from 18.5%, due to performance to date E3 progress and favorable mix from award timing. On earnings per share we are raising the lower end of the prior guide by $0.05 to $12.85 to $13 per share, reflecting 11% growth from 2020 at the midpoint. As shown on Slide 11, the midpoint is now at $12.93 and $0.55 from improvement in operations and other items, including the release of contingencies, offset additional divested earnings about $0.03 and $0.49 from supply chain delays. As mentioned previously, we continue to expect about $0.15 of net dilution from divestitures. Moving to free cash flow, our guide of 2.8% to 2.9% remains intact. However, due to prior divestiture headwinds and now supply chain delays of over $150 million in the aggregate, we'll likely be toward the lower end. On working capital, we expect to end the year in the low '50s in terms of days, reflecting a three to five-day sequential improvement in the fourth quarter, and capex is now expected to be around $350 million, about $15 million lower versus the prior expectation primarily from completed divestitures. Lastly, our guidance now reflects approximately $3.6 billion in share repurchases, an increase of $200 million from our prior guide to account for net proceeds from recently closed divestitures.

EPS was $3.21, up 13% versus the prior year with solid free cash flow of $673 million, that contributed to shareholder returns of $1.5 billion in the quarter. When combined with dividends, capital returns will be about $4.5 billion in 2021. In the quarter organic revenue was down 1% lower than our internal expectations by about 4.5 points from the supply chain delays and ISR aircraft award timing. These drivers along with our share repurchase activity drove earnings per share up 13% or $0.37 to $3.21 as shown on Slide 5. Next, Communication Systems organic revenue was down 5% due primarily to product delivery delays within tactical communications that stemmed from the global electronic component shortages, creating an approximately 8.0 headwind year-over-year and versus expectations, as well as lower volume for our legacy unmanned platforms in broadband due to the transition from permissive to contested operating environments. At a segment level, we maintained our sales guides but foresee us, where we now anticipate revenue to be down 2.5% to 4.5% versus our prior range of up 2.5% to 4.5%. On earnings per share we are raising the lower end of the prior guide by $0.05 to $12.85 to $13 per share, reflecting 11% growth from 2020 at the midpoint.

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First, we have derisked the company through market product and geographical diversification with retail energy operations across 16 U.S. jurisdictions, The U.K. and Scandinavia and the rapidly growing solar energy business in the U.S. Second, we differentiate ourselves from the competition through our strong balance sheet with minimal to no debt, an asset-light business model, which not only reduces our relative cost of capital that allows us to self-fund and invest in growth opportunities, such as expanding our international retail energy and domestic solar businesses. It currently operates in 15 states and Washington, D.C. under a variety of names reselling electricity from both carbon-based and green sources as well as natural gas. Our current U.S. strategy revolves around opportunistically taking incremental share in our existing 16 markets. Between The U.K. and Scandinavia, there are roughly 60 million energy meters installed with about 80% of them in The U.K. We did have some moving parts in the financials due to the sale of our Japanese business and in Texas as the Governor signed review legislation into law, which is expected to provide a minimum of $1.5 million of relief. Consolidated revenue increased 28% to $98 million, the highest level for any second quarter in our history. The top line increase was generated predominantly by Genie Retail Energy International, where revenue increased to $28 million from $5 million in the year ago quarter. In the year ago quarter, Orbit generated $15 million in revenue. Setting aside the impact of consolidating Orbit revenue in the current period, the international business increased revenue by $8 million year-over-year, driven by the robust growth of our business in The U.K. and Scandinavia. Revenue at Genie Retail Energy, our domestic retail business, increased 1% to $67 million. Revenue for our Renewables business was $2.3 million, a decrease from $4.6 million in the year ago quarter, when we delivered the remainder of a large solar panel manufacturing order at a very low margin. Consolidated gross profit increased 22% to $24 million, a very strong second quarter results with increased contributions from all three of our reporting segments. Consolidated SG&A increased to $22.4 million from $16 million. Our consolidated income from operations totaled $1.4 million compared to $2.7 million in the year ago quarter. Adjusted EBITDA was $3.1 million compared to $3.5 million in the year ago quarter. Genie Energy's income per diluted share was $0.19 compared to $0.06 in the year ago quarter. Our bottom line benefited from a $4.2 million gain on the sale of Genie Japan and an unrealized gain of $2.9 million on marketable equity investments, predominantly our investment in holdings that are mark-to-market. At quarter end, cash, restricted cash and marketable equity securities totaled $50.9 million at June 30, a strong increase from $41.7 million three months earlier and our highest levels in recent years.

Genie Energy's income per diluted share was $0.19 compared to $0.06 in the year ago quarter.

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Loan growth was extremely strong for the quarter as funded commercial loan production increased almost 70% versus the previous quarter, which more than offset the ongoing elevated levels of payoffs and pay downs. Fee income was up $8 million or 8% versus the second quarter, with wealth and capital markets income posting strong growth, as well as core banking fees returning to more normalized levels post COVID. Our treasury and payments team set a new high bar in terms of new production at $10.6 million year to date, surpassing its full-year 2020 totals during the month of September. We also continued to deliver on our Synovus Forward initiatives, which reached a pre-tax run-rate benefit of approximately $100 million by quarter-end. And we're making great progress in planning for the additional $75 million worth of benefits to be delivered by the end of 2022. Through the third quarter, we have migrated 90% of our clients on to Synovus Gateway, our commercial portal, and usage of My Synovus, our consumer platform, indicates that digital usage continues to expand with an additional 10% increase in enrollment in active users. Moreover, a concerted effort has led to a 43% increase in paperless enrollment in 2021. I'd like to begin with loan growth, which increased $923 million, excluding changes in P3 balances. Quality deposit growth continued in the third quarter, including an increase in core transaction deposits of $1 billion. We continue to take advantage of this liquidity environment to focus on remixing our deposit base and along with strategic repricing, this has helped lower the overall cost of deposits by an additional 3 basis points to 0.13%. We continue to experience balanced augmentation, but a core focus on operating accounts has led to DDA and now production to increase 34% versus the prior quarter. Total adjusted revenue of $500 million increased 2% from the prior quarter while adjusted expenses declined $1 million to $267 million. This resulted in a 6% increase in adjusted preprovision net revenue quarter on quarter. An $8 million reversal of provision for credit losses resulted from the provision expense associated with strong loan growth being more than offset by a reduction in life of loan loss estimates. Adjusted net income was $178 million or $1.20 diluted earnings per share. The net charge-off ratio declined 6 basis points this quarter to 0.22%, while the NPL and NPA ratios each fell 1 basis point. The ACL ratio was down 12 basis points, excluding P3 loans, ending the quarter at 1.42%. And the CET1 ratio declined 12 basis points to 9.63% and remained slightly above our stated range. We ended the quarter with total assets of $55.5 billion and loans of $38.3 billion. Total loans, excluding P3 balances, grew $923 million, up 3% from the prior quarter, led by growth in C&I and third-party consumer loans. P3 balances declined $818 million. However, transaction activity remained elevated, which led to a $500 million increase in payoffs, primarily in the CRE portfolio. C&I line utilization declined approximately 70 basis points to 39%. A return to normalized levels of C&I line utilization would result in over $750 million in funded balances. The liquidity environment continues to be a headwind to consumer loan demand and resulted in declines in our HELOC portfolio of $50 million. We continue to leverage third-party consumer lending to offset consumer loan declines as evidenced by the $267 million increase in third-party consumer loans for the third quarter. In order to offset continued increase in liquidity, we grew the securities portfolio by $1 billion to 19% of total assets at the end of the quarter. At the end of the third quarter, third-party held for investment balances were $1.7 billion or 3% of total assets. As you can see on Slide 5, core transaction deposits increased $1 billion or 3% from the prior quarter. Core noninterest-bearing deposit growth of $490 million or 3% was offset by strategic declines in time and brokered deposit portfolios. Total deposit costs continued to decline with a reduction of 3 basis points to 13 basis points. Time deposits declined 35% from the prior year, accounting for 5% of total deposits, compared to 9% a year ago. As shown on Slide 6, net interest income was $385 million, an increase of $3 million from the prior quarter. The net interest margin was stable with a decline of 1 basis point to 3.01%. We expect P3 revenue to decline between $8 million and $12 million in the fourth quarter. Slide 7 shows total adjusted noninterest revenue of $114 million, up $8 million from the previous quarter. The increase was led by growth of $5 million in capital markets, which resulted from swap income and $2 million in loan syndication fees. Broad-based growth across other NIR categories was evidenced by our performance in our treasury group and core banking fees and highlighted by our wealth areas that are up more than 25% year over year. In the third quarter, we had approximately $4 million in revenue associated with SBA loan sales and low-income housing transactions. Slide 8 highlights total adjusted noninterest expense of $267 million, down $1 million from the prior quarter. A $5 million reduction in third-party processing fees was offset by a $4 million increase in production incentives and additional project spend of $2 million. The net charge-off ratio fell 6 basis points to 0.22%, while criticized and classified loans declined 22%. The NPA and NPL ratios were each down 1 basis point. Past dues were flat at 0.13%, excluding the increase from P3 loans. And assuming a similar trend in economic improvement, a further reduction in the ACL ratio, which ended the quarter down 12 basis points excluding P3 loans, to 1.42%. However, due to economic uncertainty, our multi-scenario framework included a 45% bias to downside scenarios. As noted on Slide 10, the CET1 ratio declined 12 basis points to 9.63% due primarily to capital deployment for growth in our loan and securities portfolios as we continue to actively manage excess liquidity. Through the end of the third quarter, we have completed approximately $167 million of the $200 million share repurchase authorization for the year. And we expect to repurchase the remaining $33 million in the fourth quarter. On March 3, 2020, the Federal Reserve announced an emergency rate cut of 50 basis points. That same day, we unveiled details of Synovus Forward, a plan we created in 2019, that would deliver an incremental pre-tax run-rate benefit of $100 million by the end of 2021. We're excited today to share that our efforts to date have yielded approximately $100 million in pre-tax benefits. As a result of these actions, as well as demand management, our adjusted expenses are down $15 million year to date or 2%. We are scheduled to close an additional four branches in the fourth quarter, bringing our total consolidation to 20 locations since January 2020. Last month, we announced the strategy to optimize our real estate here at our headquarters by selling our own real estate and consolidating our nine corporate and retail locations in Uptown Columbus into three and allows us to evolve our workplace for the future of work, while reducing our overall square footage by over 60%, leading to a lower run rate expense and greater flexibility for potential future optimization opportunities. Of the 26-basis-point decline in deposit pricing that occurred over that time frame, our Synovus Forward initiatives drove additional product and customer level repricing, which represented 3 basis points of that decline, contributing $15 million in incremental pre-tax run-rate benefit by the end of the quarter. Targeted remixing of a subset of consumer loans throughout 2021 has translated into relative higher yields, resulting in an incremental pre-tax run-rate benefit of $16 million. We remain committed and on track to achieve the cumulative pre-tax run-rate benefit of $175 million by the end of 2022 and are confident about the opportunities ahead to achieve those benefits. In July, we mentioned that we expected 2021 loan growth, excluding balance change from P3 and third-party consumer loans, to be at the low end of the 2% to 4% guidance. Although excluded from the guidance, it's important to note that we've increased third-party consumer loans more than $1 billion year to date, and our total loans at the end of the third quarter were up 4%, excluding changes in P3 balances. Total adjusted revenues are expected at the higher end of the negative 1% to 1% guidance, as the balance sheet management efforts we've taken throughout the year to monetize excess liquidity and reduce the cost of funds are being complemented by broad-based fee revenue growth outside of the normalization of mortgage revenues. Similarly, total adjusted expenses are expected to end the year within the existing guidance of negative 1% to negative 2%, thus providing the opportunity to achieve positive operating leverage. The capital guidance assumes we complete the full $200 million share repurchase authorization this year and achieve our loan growth targets. We're also trending toward the lower half of the effective tax rate guidance of 22% to 24%.

Adjusted net income was $178 million or $1.20 diluted earnings per share. We remain committed and on track to achieve the cumulative pre-tax run-rate benefit of $175 million by the end of 2022 and are confident about the opportunities ahead to achieve those benefits.

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Our process discipline enabled Wabash National to observe a notable reduction in volume, while minimizing the impact to operating income as shown through 14% decremental margins for the full year of 2020. We generated $104 million of free cash flow during 2020, which enabled us to maintain our dividend through the cycle, a feat never remotely accomplished during a significantly challenging environment in the history of Wabash National. While traditionally constructed refrigerated cargo vans are insulated using spray foam, which can be subject to off-gassing and mold intrusion, Gruau inserts are engineered to fit specific manned models and provide a superior finish with 30% to 50% thermal efficiency than standard refrigerated body construction, thus improving total cost of ownership, reducing spoilage and improving food safety. Overall, backlog ended the fourth quarter at approximately $1.5 billion, up sequentially by approximately $500 million from the end of Q3. While I believe this to remain true based on our own experience and feedback from suppliers, customers and peers, I do want to call out that we were able to successfully hire approximately 600 new employees across our business during the fourth quarter. This hiring activity equated to adding to our workforce by about 15%. We fully expect to add another 900 employees during the first half of 2021 based on our progress to date. We are initiating our full year revenue outlook at just under $2 billion. In this environment, we are seeing earnings per share of approximately $0.75 at the midpoint. On a consolidated basis, fourth quarter revenue was $404 million. Consolidated new trailer shipments were approximately 10,600 units during the quarter. In terms of operating results, consolidated gross profit for the quarter was $45.5 million or 11.3% of sales. The company generated operating income of $10 million and operating margin of 2.5% during the fourth quarter. Consolidated decremental margins were 12% during the fourth quarter, which is a performance we're very proud to have achieved. Compared to Q4 of last year, SG&A expense was lower by about $5.6 million or 16%. Operating EBITDA for the fourth quarter was $25.2 million or 6.2% of sales. Finally, for the quarter, GAAP net income was $5.5 million or $0.10 per diluted share. From a segment perspective, Commercial Trailer Products performed very well with revenue of $283 million and non-GAAP adjusted operating income of $23.3 million. Average selling price for new trailers within CTP was about $27,000 in the fourth quarter, which is roughly flat with the same quarter of last year. Diversified Products Group generated $75 million of revenue in the quarter with non-GAAP adjusted operating income of $3.3 million. This business is responsible for approximately $20 million during 2020, which is revenue that will not be part of DPG's results going forward. FMP generated $52 million of revenue during the quarter with an operating loss of $4.5 million. Due to the burden of depreciation and increasing amortization in the business, it's important to point out that FMPs fourth quarter EBITDA was a loss of only $600,000. With operating cash flow of approximately $124 million, roughly $20 million was reinvested to be a capital expenditure, leaving $104 million of free cash flow. We are extremely pleased with the work the team did to register $104 million of free cash flow during a pandemic. With regard to capital allocation during the fourth quarter, we utilized $11.2 million to pay down debt, $8.7 million to repurchase shares and invested $6.4 million in capital projects and paid our quarterly dividend of $4.2 million. We expect revenue of approximately $1.9 billion to $2 billion. SG&A as a percent of revenue is expected to be approximately 6.5% for the full year and we remain positioned to sustain the reduction in our cost structure by $20 million from 2019 with around $15 million of that cost-out residing within SG&A. Operating margins are expected to be 4% at the midpoint. While we've talked about both incremental and decremental margins for the company being in the 20% range on a normalized basis, the base on which we're calculating incremental margins for 2021 have considerable furlough savings included, which does temporarily serve to depress incremental margins. We had approximately $25 million to $30 million of one-time reductions in areas such as furloughs and incentive compensation in 2020 that will return in 2021. But we would expect 20% incrementals from 2021 to calendar year 2022. Lastly, I'd like to make on the full year calendar -- consolidated P&L is that amortization of the tangibles does step up again in 2021 by about $2 million. On a segment basis, the step-up in amortization will be seen entirely within FMP, bringing this segment's full-year amortization to $12.4 million. In total, we estimate 2021 capital spending of between $35 million and $40 million. Combining those seasonal trends with the massive capacity ramp we are undertaking to keep up with the demand, that has us adding roughly 1,500 hourly employees from September 30 to March 31, and we would expect Q1 to be pressured. Our expectation is for first quarter revenue to come in between $390 million and $420 million with new trailer shipments of 9,500 to 10,500 and to be approximately breakeven from an earnings per share perspective. We continue to look for opportunities to drive structural improvements to working capital, though, in the short term and we do expect in 2021 to consume upwards of $50 million of cash, most of which will occur in the first half of the year. We had outlined targets that centered around achieving a consolidated operating margin of 8%. While the world has obviously changed immensely since we initially released these targets, I do want to reiterate that the team still see the 8% operating margin as a reasonable goal in the medium term. Given our longer-term planning, I believe the 8% operating margin is achievable over the next two to three years.

Overall, backlog ended the fourth quarter at approximately $1.5 billion, up sequentially by approximately $500 million from the end of Q3. In this environment, we are seeing earnings per share of approximately $0.75 at the midpoint. Finally, for the quarter, GAAP net income was $5.5 million or $0.10 per diluted share. We expect revenue of approximately $1.9 billion to $2 billion.

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As we look specifically at the results for the quarter, we maintained top line momentum with organic sales of 12.7% with strong sales across categories and markets around the globe. Our adjusted earnings per share were $0.77, more than double the prior-year, driven by strong organic sales growth, synergy realization, favorable currencies and lower interest expense. Net sales growth to 5% to 7% adjusted earnings per share to a new range of $3.30 to $3.50 and adjusted EBITDA to a new range of $620 million to $640 million. During the three months ending February, our brands grew faster than the category and we gained 2.1 share points globally as we benefited from the previously discussed distribution gains. We anticipated these year-over-year declines, including a 13.9% decline in the U.S. during that four-week timeframe. In the U.S., for example, the category was up 14.1% for that four-week period when you compare 2019 to 2021. Looking at the U.S. AutoCare category, in the 13 weeks through February, we saw a healthy category growth of 7.4% as the category experienced both an increase in household penetration and existing consumer spending more on cleaning and maintaining their cars. Finally, while we don't have e-commerce category data this quarter, our net sales have increased 70% across our combined portfolio, a reflection of our investments and ongoing focus which are paying off and positioning us to lead well into the future. Specifically, we are on track to deliver over $120 million in synergies by the end of fiscal 2021, a portion of which is being reinvested in the business through innovation and brand building activities. We have built an impressive innovation pipeline for our AutoCare business and have advanced our international growth plans with International AutoCare organic growth for the second quarter at 24%. Our organic revenue growth of 12.7% combined with synergy realization, cost controls, lower interest expense and favorable currency headwinds resulted in strong adjusted earnings per share of $0.77, up more than double the prior-year second quarter and adjusted EBITDA of $148 million, up 20% compared to the prior year. Both of our segments showed organic growth with the Americas up nearly 16% and International up 6%, and our Battery and Auto Care businesses grew benefiting from elevated demand and distribution gains that began last summer. Adjusted gross margin decreased 110 basis points versus the prior year to 40.5% in line with our adjusted gross margin reported in the first quarter. Additionally, our gross margin was negatively impacted by the lower margin profile associated with recent distribution gains and acquisitions, synergies of $14.2 million and favorable impacts from currency exchange rates partially offset these negative impacts. A&P as a percent of sales was 4% relatively flat compared with the prior year's second quarter. Consistent with our priorities, we invested on an absolute dollar basis in A&P to support our brands and innovation with total A&P spending of $4 million or 19% over the prior year. Excluding acquisition and integration costs, SG&A as a percent of net sales was 16.7% versus 18.4% in the prior year, primarily the result of elevated sales experienced in the current year. On an absolute dollar basis, adjusted SG&A increased $6 million in part because of the higher overheads associated with our top line sales growth and foreign exchange rate impacts. We realized nearly $20 million in synergies this quarter, bringing the total for that first half of 2021 to $40 million. Since our Battery and Auto Care acquisitions were completed, we have recognized approximately $109 million of synergies, exceeding our initial targets and we expect to realize an additional $10 million to $15 million over the balance of the year. As I mentioned last quarter, we've taken advantage of favorable debt markets and refinanced a significant portion of our debt over the last 12 months. We expect these refinancings to contribute to a $30 million reduction in our 2021 interest expense, of which $8 million was realized in the second quarter. At the end of the quarter, our total debt was approximately $3.5 billion or 4.8 times net debt to credit defined EBITDA, with nearly 80% at fixed interest rates and an all-in cost of debt of 4.2%. Net sales growth is now expected to be between 5% to 7%, owing in large part to a prolonged elevated battery demand in North America and favorable currency impacts. Adjusted earnings per share is now expected to be in the range of $3.30 to $3.50. Adjusted EBITDA is expected to be in the range of $620 million to $640 million. And finally, adjusted free cash flow is expected to be at the low end of our previously provided range of $325 million to $350 million due to working capital requirements, mostly related to inventory as we look to rebuild safety stocks. We will also benefit over the rest of the year as our gross margin in the third and fourth quarter of 2020 was burdened with one-time COVID-related costs of $9 million and $19 million, respectively.

Our adjusted earnings per share were $0.77, more than double the prior-year, driven by strong organic sales growth, synergy realization, favorable currencies and lower interest expense. Net sales growth to 5% to 7% adjusted earnings per share to a new range of $3.30 to $3.50 and adjusted EBITDA to a new range of $620 million to $640 million. Our organic revenue growth of 12.7% combined with synergy realization, cost controls, lower interest expense and favorable currency headwinds resulted in strong adjusted earnings per share of $0.77, up more than double the prior-year second quarter and adjusted EBITDA of $148 million, up 20% compared to the prior year. Net sales growth is now expected to be between 5% to 7%, owing in large part to a prolonged elevated battery demand in North America and favorable currency impacts. Adjusted earnings per share is now expected to be in the range of $3.30 to $3.50.

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As I mentioned earlier, this year, we celebrate 70 years of Iron Mountain. Since that day on 24 August 1951, we have built, evolved and expanded our trusted relationship with our customers to include not just the leading storage platform of physical assets but now includes a rapidly increasing range of business services. And today, with this broadened portfolio of services and storage capabilities, we have become an innovative and global leader in our field with more than 225,000 customers, including more than 95% of the Fortune 1000, a global footprint of more than 1,450 facilities with a presence in 58 countries and 24,000 dedicated Mountaineers across the globe. And doing all this with -- in an energy sustainable way with 100% of our data centers powered by renewable energy. Many of the things about us have changed in 70 years. Over the last two quarters, we shared with you that we now have an expanded total addressable market, or TAM, of more than $80 billion. In this quarter versus a year ago, these business lines have grown over 37%, resulting in $25 million of incremental growth. We won a $750,000 annual recurring revenue digital mailroom contract over their current service provider. We won a deal with one of the world's largest banks to recycle corporate laptops, monitors, and outdated IT equipment across over 400 corporate offices, 4,000 conference rooms and 5,000 retail offices, which we expect to generate annual run-rate revenues greater than $5 million. We want to share not only our continued growth in top and bottom line, but some recent exciting developments in the last month which has led us to increase our guidance for expected 2021 leasing from 25 to 30 megawatts to over 30 megawatts, not including additional leasing expected from the recent acquisitions in Frankfurt and India. Today, we announced not only the 3.6 megawatts of new leases we signed in the second quarter, but also a six-megawatt lease with a new logo to our platform that was signed post Q2 in Northern Virginia. Taken together, along with our strong results in Q1, we have recorded a total of 19 megawatts of new and expansion leases in the first seven months of the year. Turning back to Q2, it should be noted, of the 3.6 megawatts we leased in the quarter, the majority was in the retail and enterprise segments. This resulted in attractive pricing for the quarter which increased 14% sequentially. We have a new 27-megawatt greenfield build in London, adjacent to our existing London-1 facility, as well as the pending acquisition of a multi-tenant colocation data center in Frankfurt. Taken together, this will increase our total potential capacity in Europe to more than 88 megawatts and will provide access to important interconnection markets for new and existing customers looking for a reliable, flexible and secure data center location. And as part of our commitments, we will power our new buildings in London and Frankfurt with 100% renewable energy. Since its inception, the Clean Start product has generated over $19 million in revenue and has uncovered 1.1 million net new cube over a three-year period. Specifically, in the first half of 2021, Clean Start has delivered $5 million of new revenue or some 25% of the total revenue from this program since its inception three years ago. A specific customer example in this quarter includes a $1.8 million deal with a leading global hotel chain over the next five years. This prompted their decision to deploy our services across 103 hotels, plus an additional 15 one-off sites as required. Just in the last year, we've had 10 healthcare vertical wins for Smart Sort with our most recent win with Johns Hopkins Medical Center. The agreement is a five-year term which includes a $1.2 million Smart Sort move project, bringing an additional 160,000 cubic feet of inventory, representing over 4 million individual patient records. Reflecting some of these successes, total global volume grew to a record 733 million cubic feet this quarter. In spite of organic volume being down 10 basis points in the second quarter versus the first quarter, total global organic volume was up 1.6 million cubic feet in the first half of the year, and we continue to expect organic volume to be flat to slightly up for the full year. On a reported basis, revenue of $1.1 billion grew 14%. Total organic revenue increased 10%. Organic service revenue increased $81 million or 26%, and was ahead of our expectations. Total organic storage rental revenue grew 2.5% with continued benefit from pricing, together with positive trends in volume. Adjusted EBITDA was $406 million. AFFO was $246 million or $0.85 on a per-share basis. If you recall, last year's AFFO benefited from a $23 million tax refund. Adjusting for this, AFFO would have increased 8% year over year. In the second quarter, our Global RIM business delivered revenue of $993 million, an increase of $116 million from last year. On an organic basis, revenue increased 9.1%. The team performed well with constant-currency storage rental revenue growth of 1.9% or 1.6% on an organic basis. We added about 4.5 million cubic feet from our acquisition in Indonesia, which closed during the quarter. Our traditional services business continued to recover from the pandemic with revenue growing 24% year over year and 4% from the first quarter. Our Global Digital Solutions business continued to display strong momentum, growing 24% year over year. Global RIM adjusted EBITDA was $430 million, an increase of $47 million year on year. Adjusted EBITDA margin declined 50 basis points year over year as a result of mix given the strong service revenue growth. Sequentially, EBITDA margin increased 110 basis points due to Project Summit benefits and the contribution from pricing. We booked 3.6 megawatts in the quarter, and through the first half, we have booked 12.6 megawatts. Based on the year-to-date performance and the strength of our pipeline, we increased our full-year leasing target to more than 30 megawatts, which would represent a 23% increase in bookings. In terms of revenue, as we projected, growth accelerated sharply to 15% year over year. Adjusted EBITDA margin of 43.4% increased 60 basis points from the first quarter and was ahead of our expectations. Turning to Project Summit, this quarter, the team delivered $42 million of incremental year-on-year adjusted EBITDA benefit. With the strength of the team's performance year to date, we now expect year-on-year benefits from Summit to approach $160 million, with another $50 million of year-on-year benefit in 2022. Total capital expenditures were $136 million, of which $100 million was growth and $36 million was recurring. With that backdrop, in the second quarter, we upsized our recycling program and generated approximately $203 million of proceeds. Year to date, we have generated $215 million in proceeds, compared to our previous guidance of $125 million. With our strong data center development pipeline, we are now expecting to generate full-year proceeds of approximately $250 million. At quarter end, we had approximately $2.1 billion of liquidity. We ended the quarter with net lease-adjusted leverage of 5.3 times, slightly better than our projection and down from both last year and last quarter. With our strong financial position, our board of directors declared our quarterly dividend of $0.62 per share to be paid in early October. And third, we have acquired a small records management business in Morocco that will add about $5 million in revenue. Compared to our prior guidance, this represents a reduction of approximately $20 million of revenue and $15 million of EBITDA. dollar is more of a headwind by nearly $20 million for revenue and $7 million for EBITDA. For the full-year 2021, we now expect revenue of $4.415 billion to $4.515 billion. We now expect adjusted EBITDA to be in a range of $1.6 billion to $1.635 billion. At the midpoint, this guidance represents growth of 8% and EBITDA growth of 10%. We now expect AFFO to be in the range of $970 million to $1.005 billion. And AFFO per share of $3.33 to $3.45. At the midpoint, this represents 11% and 10% growth, respectively. For the third quarter, we expect revenue and EBITDA to both increase approximately $10 million sequentially from the second-quarter levels. We expect AFFO to be slightly in excess of $250 million in the third quarter.

On a reported basis, revenue of $1.1 billion grew 14%.

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In 2020, we earned more than 20% of our revenue in Texas, where we have multiple strong mechanical capabilities in many markets, and Texas is also the home to our largest electrical team. We finished the year with strong fourth quarter earnings per share of $1.17, and for the full year, we earned $4.09. Revenue for full year 2020 was also a record at $2.9 billion. Our 2020 free cash flow was an unprecedented $265 million. At the end of 2020, we acquired a Tennessee Electric Company headquartered in Kingsport, Tennessee, and we expect they will contribute $90 million to $100 million of revenues in 2021. Trent has been with Comfort Systems USA for 16 years, and I believe he will be a valuable leader, as we continue to grow and improve our operations. So fourth quarter revenue was $699 million, a decrease of $21 million compared to the same quarter last year. Our same-store revenue declined by a larger $68 million. However, our recent acquisitions of TAS and Starr offset that decline somewhat as they added $48 million in revenue this quarter. Revenue for the full year was $2.9 billion, an increase of $241 million or 9% compared to 2019. Full year same-store revenue in 2020 was 2% lower than in 2019 due to the factors I just mentioned. Gross profit was $137 million for the fourth quarter of 2020, an increase of $4 million. And gross profit as a percentage of revenue rose to 19.6% in the fourth quarter of 2020 compared to 18.4% for the fourth quarter of 2019. For the full year, gross profit increased $45 million, and our gross profit margin was approximately flat at 19.1%. SG&A expense was $89 million or 12.7% of revenue for the fourth quarter of 2020 compared to $87 million or 12% of revenue for the fourth quarter of 2019. The prior year fourth quarter benefited from insurance proceeds associated with the cyber incident of approximately $1.6 million, and that reduced SG&A last year. For the full year, SG&A as a percentage of revenue was 12.5% for 2020 compared to 13% for 2019. On a same-store basis, for the full year, SG&A declined $6 million, and that decrease was primarily due to austerity relating to COVID, such as reductions in travel-related expenses. During the fourth quarter of 2020, we revalued estimates relating to our earn-out liabilities, and as a result, we reported an overall gain of $7 million or $0.18 per share. For the full year, the gain associated with acquisition earn-out valuation changes was $0.20 per share. Our 2020 tax rate was 21.6% compared to 24.7% in 2019. On a go-forward basis, we now expect our normalized effective tax rate will be between 25% and 30%. Specifically, net income for the fourth quarter of 2020 was $43 million or $1.17 per share as compared to $34 million or $0.92 per share in 2019. Earnings per share for the current quarter included that $0.18 gain associated with earn-out revaluations. Our full year earnings per share was $4.09 per share compared to $3.08 per share in the prior year. The current year also included a tax benefit of $0.17 that we reported in the third quarter of 2020 from a discrete tax item. The gains associated with earn-out revaluations, which for the full year was $0.20. For the fourth quarter, EBITDA was $63 million, which is 6% higher than the fourth quarter of last year. Our annual 2020 EBITDA was a milestone achievement for us, as our full year EBITDA was $250 million. Our full year free cash flow was $255 million compared to $112 million in 2019. Our 2020 cash flow includes roughly $32 million of benefit, that's a direct result of the Federal Stimulus Bill, which allowed us to defer payroll tax payments in the last nine months of 2020. 2020 was our largest year for share repurchases in quite some time, as we reduced our overall shares outstanding by repurchasing 685,000 of our shares at an average price of $43.99. Since we began our repurchase program in 2007, we have bought back over 9.3 million shares at an average price under $20. Our backlog level at the end of the fourth quarter of 2020 was $1.51 billion. Sequentially, our same-store backlog increased by $10 million, with particular strength in our modular backlog. Same-store backlog compared to one year ago has decreased by $375 million, of which approximately, 1/3 related to an expected decline in our electrical segment. Our industrial revenue has grown to 39% of total revenue in 2020 compared to 34% a year ago. Institutional markets, which includes education, healthcare and government, were 36% of our revenue, and that is roughly consistent with what we saw in 2019. The commercial sector was 25% of our revenue. For 2020, construction was 79% of our revenue with 47% from construction projects for new buildings and 32% from construction projects in existing buildings. Service was 21% of our 2020 revenue with service projects providing 8% of revenue and pure service, including hourly work, providing 13% of revenue.

We finished the year with strong fourth quarter earnings per share of $1.17, and for the full year, we earned $4.09. So fourth quarter revenue was $699 million, a decrease of $21 million compared to the same quarter last year. Specifically, net income for the fourth quarter of 2020 was $43 million or $1.17 per share as compared to $34 million or $0.92 per share in 2019. Our backlog level at the end of the fourth quarter of 2020 was $1.51 billion.

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Relative to the global office leasing market, JLL Research reported that activity in the fourth quarter was down 43% from a year earlier. The United States saw a much sharper decline compared to the other regions with activity down 53%. EMEA and Asia Pacific recorded decreases in activity of 39% and 25% respectively relative to last year. Vacancy rates increased across all regions in the fourth quarter with a global vacancy rate now at 12.9%, the highest level since 2014. Consolidated revenue fell 8% to $16.6 billion and fee revenue declined 14% to $6.1 billion in local currency. We recorded adjusted EBITDA of $860 million, a decline of 24% from the prior year and adjusted diluted earnings per share of $9.46, which represented a decline of 34% from the prior year. It is worth noting that despite the challenges of 2020, we were able to achieve a full year 14% adjusted EBITDA margin, which is within our long-term target range of 14% to 16%. We also generated a record $1.1 billion in operating cash flow, testament to the strength of our business model and ability to navigate a downturn. Consolidated revenue fell 12% to $4.8 billion and fee revenue declined 19% to $2 billion in local currency. Adjusted EBITDA of $417 million represented a decline of 18% from the prior year, although adjusted EBITDA margin increased 50 basis point to 21.3% as reported, driven by cost mitigation initiatives and some government COVID programs. Adjusted net income totaled $276 million for the quarter and adjusted diluted earnings per share totaled $5.29. Our current approach is to operate within a reported net leverage range of 0.5 to 1.25 times, recognizing that there may be periods outside of this range due to seasonality and other short-term factors. Any opportunity must meet our already rigorous standards specifically, they must be value-accretive acquisitions that are appropriately priced, have a strong cultural and strategic fit and generate a return on invested capital of at least 12%. Over the long-term, we are committed to returning approximately 20% our free cash flow to shareholders. We repurchased 100 million worth of shares at an average price of $111. We have 100 million remaining on our existing repurchase authorization and the Board of Directors recently authorized an incremental 500 million share repurchase program for a total of $600 million. Once again, it yielded strong cash generation in the quarter, which we use to fully pay down our revolving credit facility and return an additional $50 million of cash to shareholders via repurchases. Fourth quarter Capital Markets fee revenue declined 15% from 2019, a market improvement from the 43% decline in the third quarter. It is also worth noting that we decreased our loan loss credit reserves in the Americas by $9 million, partly offsetting the $31 million charge we took in the first quarter. The sale and financing of the iconic Transamerica Pyramid Center in San Francisco for $650 million and $390 million respectively during the fourth quarter. Looking at the global capital markets environment, investment sales dropped 21% in the quarter and 28% for the year according to JLL Research. Consolidated leasing fee revenue declined 28% compared with the prior year quarter, a slight improvement from the 30% decline in the third quarter as clients continue to delay significant decisions regarding future real estate strategies. Global office leasing volumes declined 43% in the fourth quarter compared with the 46% decline in the third quarter. Our U.S. gross leasing pipeline has improved from mid-year lows and is up 5% year-over-year, though we emphasize closing rates and timing remain highly uncertain. Our Corporate Solutions business fee revenue declined 7% in the quarter, a strong growth in Americas Facility Management was more than offset by ongoing headwinds in our project and development services and U.K. mobile engineering businesses. Coming off a record $8 billion of capital raised in 2019, LaSalle raised $6.1 billion in 2020 demonstrating that capital continues to flow to investment managers with proven track records. LaSalle's assets under management grew about $3 billion from the prior quarter to $69 billion. For 2021, we anticipate around $25 million of incentive fees with very little in the first quarter. Consistent with my statements on the third quarter call, we expect $135 million of annualized fixed cost savings from actions taken in 2020. For the full year 2020, non-permanent cost savings totaled about $330 million, including about $85 million in the fourth quarter. Major items that benefited our full-year profitability included approximately $250 million of cost mitigation savings in T&E, marketing and other expense areas and $80 million of government COVID relief programs. Just under half of the $330 million of savings will not be repeated in 2021, as they represent finite actions, including government programs and temporary reductions to compensation and benefits. Considering our cost saving initiatives, business mix and growth initiatives, we expect to operate within our 14% to 16% long-term adjusted EBITDA margin target range in 2021 and the years ahead. The sequential improvement in earnings, our enhanced focus on improving asset efficiency and modest capex and investment spending allowed us to reduce net debt by $560 million in the quarter, which ended the year at $192 million. At the end of December, reported leverage was 0.2 times, down from 0.8 times at the end of September and we had $3.3 billion of liquidity, including full availability of our $2.7 billion revolving credit facility. As Christian mentioned, we are targeting reported net leverage ratio of 0.5 to 1.25 times over the long term, though there may be variances due to operational seasonality as well as timing of business reinvestment, M&A and share repurchases. With the distribution of vaccines, the general sentiment supports a meaningful recovery in 2021, with some analysts forecasting global economic growth in excess of 5%, much of it coming in the second half of the year.

Consolidated revenue fell 12% to $4.8 billion and fee revenue declined 19% to $2 billion in local currency. Adjusted net income totaled $276 million for the quarter and adjusted diluted earnings per share totaled $5.29. Our Corporate Solutions business fee revenue declined 7% in the quarter, a strong growth in Americas Facility Management was more than offset by ongoing headwinds in our project and development services and U.K. mobile engineering businesses. Just under half of the $330 million of savings will not be repeated in 2021, as they represent finite actions, including government programs and temporary reductions to compensation and benefits.

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We generated net sales of $270.4 million during the second quarter of 2021, which represents an increase of 44.2%, compared to $187.5 million during the second quarter of 2020. More specifically, we posted net sales growth of four -- of 34.6% in our North American fenestration segment, 25.5% in our North American cabinet components segment, and 92.1% in our European fenestration segment, excluding the foreign exchange impact. In an effort to provide a more realistic comp, on a consolidated basis, we posted revenue growth of 20.6% in the first half of 2021 compared to the first half of 2019 prior to COVID. We reported net income of $14.6 million, or $0.43 per diluted share, for the three months ended April 30, 2021, compared to $5.5 million, or $0.17 per diluted share, for the three months ended April 30, 2020. However, this improvement was somewhat offset by a $13 million increase in SG&A during the quarter, $9.7 million of which was related to the valuation of our stock-based comp awards, and $3.1 million of which was due to higher and more normalized medical claims. On an adjusted basis, EBITDA for the quarter increased by 47.7% to $32.2 million, compared to $21.8 million during the same period of last year. From a margin standpoint, this increase represents adjusted EBITDA margin expansion of approximately 30 basis points on a consolidated basis. Cash provided by operating activities was $32.4 million for the three months ended April 30, 2021, compared to $6.1 million for the three months ended April 30, 2020. Free cash flow came in at $27.8 million for the quarter, compared to essentially zero free cash flow in Q2 of last year. Year to date, as of April 30, 2021, cash provided by operating activities was $29 million, compared to $2.5 million for the same period of last year. And free cash flow year to date as of April 30, 2021, was $19.2 million, compared to a negative $12.8 million during the same period of 2020. Our strong free cash flow generation during the quarter enabled us to repay $25 million in bank debt and repurchased approximately 2 million of our stock. Our liquidity position continues to improve, and our leverage ratio of net debt to last 12 months adjusted EBITDA improved to 0.3 times as of April 30, 2021. Based on our strong first-half results and ongoing conversations with our customers, we are raising our expectations for the year again and now expect approximately 20% sales growth in our North American fenestration segment, approximately 15% sales growth in our North American cabinet components segment, and approximately 40% sales growth in our European fenestration segment. Net sales of $1.04 billion to $1.06 billion. Adjusted EBITDA of $125 million to $130 million. Depreciation of approximately $33 million. Amortization of approximately $14 million. SG&A of approximately $115 million. Interest expense of $2.5 million to $3 million. Tax rate of approximately 27%. Capex of $30 million to $35 million. And free cash flow of $60 million to $65 million. If you adjust for the expected increase in SG&A, the implied incremental adjusted EBITDA margin is in the low 20% range. From a cadence perspective for Q3 and on a consolidated basis, we expect net sales to be up by 28% to 30% year over year. We do expect net sales growth of approximately 10% year over year during the quarter on a consolidated basis. To summarize, on a consolidated basis for the full year, we now expect to generate net sales growth of approximately 23% year over year to the midpoint of guidance while maintaining adjusted EBITDA margin in the low 12% range. But there is often a contractual lag that can generally be anywhere from 30 to 90 days. Our North American fenestration segment generated revenue of $146.1 million in Q2, which was approximately 35% higher than prior-year Q2 and compares favorably to Ducker windows shipment growth of 10.8% for the calendar quarter ending March 31, 2021. Adjusted EBITDA of $20.6 million in the segment was approximately 54.1% higher than prior-year Q2. For the first six months, this segment had revenue of $274.3 million and adjusted EBITDA of $36.9 million, which represents growth of 25.2% and 67.9%, respectively. This also represents adjusted EBITDA margin expansion of approximately 340 basis points. Our European fenestration segment generated revenue of $61.7 million in the second quarter, which is $32.5 million or approximately 111% higher than the prior year. Excluding foreign exchange impact, this would equate to an increase of approximately 92%. Adjusted EBITDA of $12.9 million for the quarter was $10 million better than the prior year, but it is important to remember that our U.K. plants were shut down for part of the prior-year comp period. On a year-to-date basis, revenue of $110.7 million and an adjusted EBITDA of $23.6 million resulted in margin expansion of approximately 840 basis points as compared to the first half of last year. Our North American cabinet components segment reported net sales of $63.6 million in Q2, which was $12.9 million or approximately 26% better than prior year. Note that this growth rate was slightly higher when compared to the latest KCMA data for the semi-custom segment which came in at 24.2% growth over the same period. Adjusted EBITDA was $3 million in this segment, which was 21.6% higher than prior year. In fact, the rapid increase in hardwood prices has impacted adjusted EBITDA by $1.7 million year to date. And if we adjust for this inflation, we would have realized approximately 180 basis points of margin expansion in this segment. On a year-to-date basis, operational improvements and volume-related leverage gains have helped offset the timing-related material impacts and resulted in margin expansion of approximately 150 basis points. Unallocated corporate and other costs were $4.3 million for the quarter, which is $7.2 million higher than the prior year. Despite inflationary headwinds, we continue to make progress in these areas and this work has strengthened our balance sheet by enabling us to further pay down debt during the quarter, while still repurchasing approximately $2 million in treasury stock. With these points in mind, on a consolidated basis, we're confident in our ability to deliver revenue growth in the low-20% range this year, while maintaining adjusted EBITDA margin in the low-12% range despite the increasing inflationary pressures.

We generated net sales of $270.4 million during the second quarter of 2021, which represents an increase of 44.2%, compared to $187.5 million during the second quarter of 2020. We reported net income of $14.6 million, or $0.43 per diluted share, for the three months ended April 30, 2021, compared to $5.5 million, or $0.17 per diluted share, for the three months ended April 30, 2020. Net sales of $1.04 billion to $1.06 billion. Adjusted EBITDA of $125 million to $130 million.

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With just over $4 billion in sales, our first quarter revenue increased over 18% organically. This compares to a market being up less than 13%. So our outgrowth was about 570 basis points for the quarter, which was ahead of our expectation and our guidance for the year. Our incremental margin performance was in line with our expectations, with an even strong free cash flow of $147 million for the quarter, a good strategy toward our full year guidance. Flexible battery technology across multiple cell architectures, proven technology and products with established manufacturing facilities already in serial production today, strong order backlog of about $2.4 billion, primarily from leading OEMs and a focus on bus, CV and off-highway applications. It operates at 400 volts and has exceptional peak power of 135 kilowatts. With successful execution of this strategy, we expect to deliver over 25% of our revenue from electric vehicles by 2025 and approximately 45% by 2030. As we look at our year-over-year revenue walk for Q1, we begin with pro forma 2020 revenue of $3.2 billion, which includes $945 million of revenue from Delphi Technologies. Then our organic growth year-over-year was over 18% compared to a less than 13% increase in weighted average market production. That translates to 570 basis points of outgrowth in the quarter, which breaks down as follows: in Europe, we outperformed by mid- to high single digits, driven by growth in small gasoline turbochargers and strong performance in multiple former Delphi Technologies businesses, most notably fuel injection. In North America, we outperformed the market by high single digits as we saw a nice benefit from the ramp-up of the new Ford F-150 and other new business launches. The sum of all this was just over $4 billion of revenue in Q1, which was a new quarterly record for the company. Our first quarter adjusted operating income was $444 million, compared to the pro forma $274 million in the first quarter of 2020. This yielded an adjusted operating margin of 11.1%, which was up compared to the 10.3% margin for BorgWarner only in the first quarter of 2020. On a comparable basis, excluding the impact of foreign exchange, adjusted operating income increased $145 million on $591 million of higher sales. That translates to an incremental margin of roughly 25%. We're proud of the fact that we generated $147 million of positive free cash flow during the first quarter, which was roughly flat year-over-year despite increased investment in working capital. As you can see, we expect our global weighted light vehicle and commercial vehicle markets to increase in the range of nine percent to 12%, which is down from our previous assumption of an 11% to 14% increase. Looking at this by region, we're planning for North America to be up 17% to 20%. We see the largest incremental impact of the semiconductor shortage in North America with our market expectations down approximately 500 basis points from our initial assumptions. In Europe, we expect a blended market increase of nine percent to 12%, with that range being down approximately 200 basis points from our earlier planning assumption. Starting with our pro forma 2020 sales, which includes $2.6 billion of revenue from the first three quarters of Delphi Technologies in 2020. You can see that our end market assumptions from the prior slide are expected to drive an increase in revenue of roughly $0.9 billion to $1.3 billion. Next, we expect to drive market outgrowth for the full year of approximately 300 to 500 basis points, which is a meaningful step up from our previous guidance of 100 to 300 basis points. Based on these assumptions, we expect our 2021 organic revenue to increase about 12% to 17% relative to 2020 pro forma revenue. Then adding a $400 million benefit from stronger foreign currencies, we're projecting total 2021 revenue to be in the range of $14.8 billion to $15.4 billion. That's up from our prior guidance by about $100 million at both ends of the revenue range. From a margin perspective, we expect our full year adjusted operating margin to be in the range of 10.1% to 10.5% compared to a pro forma 2020 adjusted operating margin of 8.3%. This contemplates the business delivering full year incrementals in the low 20% range before the impact of Delphi related cost synergies and purchase price accounting. From a cost synergy perspective, our margin guidance includes $70 million to $80 million of incremental benefit in 2021. That puts us right on track to achieve 50% of our total expected cost synergies in 2021. Based on this revenue and margin outlook, we're expecting full year adjusted earnings per share of $4 to $4.35 per diluted share, which is an increase from our prior guidance of $3.85 to $4.25 per diluted share. I would point out that this guidance now assumes a 31% tax rate versus our prior guidance of 32% as a result of the successful execution of certain international tax planning initiatives. And finally, we continue to expect that we'll deliver free cash flow in the $800 million to $900 million range for the full year. AKASOL represents an important part of Project CHARGING FORWARD as it represents approximately 20% to 25% of the estimated 2025 revenue from acquisitions underlying our plan and it significantly increases our exposure to the ECV space. As it relates to portfolio optimization, we continue to target combustion-related dispositions with annual revenue of approximately $1 billion to be executed over the next 12 to 18 months. We delivered 570 basis points of market outgrowth, an 11.1% adjusted operating margin and $147 million of free cash flow.

As you can see, we expect our global weighted light vehicle and commercial vehicle markets to increase in the range of nine percent to 12%, which is down from our previous assumption of an 11% to 14% increase. Then adding a $400 million benefit from stronger foreign currencies, we're projecting total 2021 revenue to be in the range of $14.8 billion to $15.4 billion. And finally, we continue to expect that we'll deliver free cash flow in the $800 million to $900 million range for the full year.

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In fact, I continue to hold weekly 2-hour state of the company calls with over 40 of my key managers during which I solicit input on operational challenges, sales opportunities and regional developments to ensure that we are all moving in the same direction. Specifically, even while quarterly net sales declined by 8%, net income increased by 25% over the period. At the same time, and I hate to steal David's thunder here, as of June 30, we have strengthened our balance sheet by reducing inventory even with expanded product offerings, reducing debt and improving cash from operations by $38 million so far this year. With regard to our financial performance for the three months ended June 30, 2020, the company's net sales decreased by 8% to $105 million as compared to sales of $113 million this time last year. Within that overall decline, our U.S. sales were down about $6 million and our international sales were down about $2 million. International sales accounted for 44% of net sales as compared to 43% of net sales this time last year. Without the adverse currency translation effect on our Brazilian and Mexican sales, our second quarter consolidated sales would have been $3 million higher. As a result of these various dynamics, we improved our gross margin performance when expressed as a percentage of sales to 39% of sales in the second quarter of 2020 as compared to 37% in the same period of 2019. For the three months ended June 30, 2020, our operating expenses decreased by $1.9 million or 5% as compared to the expenses incurred in the same period of the prior year. In the prior year, however, we had a benefit of approximately $1.8 million, primarily associated with adjustments to deferred liabilities on a past acquisition. Making adjustments for that item, our underlying reduction in recurring operating expenses is greater and amounted to approximately $3.7 million or about 10%. In summary, for the second quarter, though our sales were down, selling prices and overall mix of sales remain good, factory performance was improved compared to 2019 and gross margins as a percentage of sales increased from 37% to 39%. And as a result, net income increased by 25% in comparison to 2019. Sales were down about $12 million or 6% as compared to the prior year. Within that performance, net sales of both our domestic and international businesses were down about $6 million each. The devaluation in key currencies resulted in about $4 million lower sales when sales originally recorded in the Brazilian real and the Mexican peso were translated to dollars for inclusion in our consolidated financial statements. Our factory performance for the six-month period was excellent, with costs up only 0.006% and factory output up about 13%. Overall, gross margin when expressed as a percentage of net sales was flat period-over-period at 39% of sales. In the prior year, however, we had a benefit of approximately $3.3 million, primarily associated with adjustments to deferred liabilities on a past acquisition. Making adjustments for that item, our underlying reduction in recurring operating expenses amount to about $3.3 million or about 5%. Our net income for the first six months of 2020 ended at $4.4 million or $0.15. This compared with $7 million or $0.24 in the same period of 2019. At the end of June 2020, our inventories were at $180 million. This includes about $5 million of inventory related to acquisitions completed since June 30, 2019. An adjusted or underlying inventory of $175 million represents an $18 million reduction as compared to $193 million this time last year. The estimate of $145 million that we previously indicated remains a good estimate, excluding any acquisitions. Year-to-date, in 2020, working capital has increased by only $8 million as compared to $45 million in the same period of 2019. In the first six months of 2020, we have generated $6 million from operations as compared to using $32 million in the first half of 2019. Comparatively, that amounts to a positive change of $38 million period-over-period. With regard to liquidity, at the end of the second quarter, availability under our credit line was $49 million, which compares to $31 million at the same point in 2019. Indebtedness ended at $159 million at June 30, 2020, as compared to $165 million this time last year. During the last year, in addition to paying down $6 million in debt, we have funded more than $35 million in investments, including fixed assets, product acquisitions and technology investments from the cash generated from operations. We expect that these core growth products will generate over $100 million in high-margin revenues per annum within the next five years. For over 20 years, our current SmartBox users have recognized the benefit of using our granular insecticide products, primarily to address corn rootworm pressures which tends to be greatest in the I-70, I-80 corridor, where most farmers also grow soybeans.

With regard to our financial performance for the three months ended June 30, 2020, the company's net sales decreased by 8% to $105 million as compared to sales of $113 million this time last year.

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Per CBRE EA, net absorption was a healthy 120 million square feet in the third quarter, while completions came in at 79 million square feet. Through the first three quarters of this year, net absorption was 292 million square feet, significantly outpacing new supply of 193 million. In our portfolio, we grew occupancy 50 basis points to finish the third quarter at 97.1%. Cash, same-store NOI increased 6.9% and cash rental rates for new and renewal leases were up 22.8%. As of today, we have signed roughly 98% of the 2021 expirations and including new leasing, our overall cash rental rate increase is 15.3%, which puts us on pace to top our previous company record of 13.9% in 2019. With respect to 2022 expirations, we're off to a great start with 29% of renewals signed and a cash rental rate increase of 19%. Due to continued robust fundamentals in the industrial market, the strength of our balance sheet and growth in our portfolio and the significant opportunities we have to create shareholder value through new investments, we've increased our speculative leasing cap by $175 million, bringing the total to $800 million. During the third quarter, we closed on three development sites, totaling 122 acres for $59 million. In total, these sites can accommodate up to 2.1 million square feet of new development. And one of the new Inland Empire East sites, we are starting our First Pioneer Logistics Center, a 461,000 square foot cross-dock facility. Our total projected investment is $73 million, with a targeted cash yield of 6.8%. Market vacancy in the Inland Empire is sub-2%, and market rents have grown more than 80% since we went under contract on this site in early 2020. We look forward to adding this prime asset to our Southern California portfolio, which represents approximately 23% of our rental income, as of the end of the third quarter. We are starting another development in South Florida to serve the strong tenant demand, we have experienced there, with our recent leasing successes at First Park Miami and First 95 Distribution Center. FirstGate Commerce Center will be a 132,000 square foot, Class A distribution facility in the infill Coral Springs submarket. Market rents in Broward County have grown 15% to 20% since the end of 2019. Our total estimated investment is $24 million, and our targeted cash yield is 5.5%. In the fourth quarter, we acquired a site in Bordentown, New Jersey, just off of Exit 7, on the Jersey Turnpike, for $8 million. We immediately started construction, a First Bordentown Logistics Center, a 208,000 square foot facility. The Central New Jersey market has been exceptionally strong, with asking rents up 34% versus last year, according to a recent market report from CBRE. Our total projected investment is $33 million, with an estimated cash yield of 5.8%. In summary, these three planned fourth quarter starts total approximately 800,000 square feet, with an estimated investment of $130 million and a cash yield of 6.3%. Including these planned starts, our developments in process totaled 6.4 million square feet, with a total investment of approximately $725 million. At a cash yield of 6%, our expected overall development margin on these projects is approximately 65%. In the fourth quarter to date, in addition to the New Jersey site, I just discussed, we also acquired a total of 10 acres in the Inland Empire and Northern California for a total of $10 million. As of today, adjusted for our planned fourth quarter starts and the aforementioned land acquisitions, our balance sheet land can support approximately 12.5 million square feet of new development. Our share of the Phoenix Camelback joint venture is an additional 3.8 million square feet. In total, that's north of 16 million square feet and represents approximately $1.7 billion of potential new investment activity. We just leased the entire 548,000 square footer at First Park @ PV303, in Phoenix, at completion, to a leading omnichannel retailer. As part of this lease, we are also expanding the building, another 254,000 square feet, for a total of 802,000 square feet. The total estimated investment for the project, including the expansion is $72 million, and the estimated cash yield is 6%. We also leased 100% of our 303,000 square foot First Wilson Logistics Center in the Inland Empire that will be completed in the first quarter of 2022. With a cash yield of 8.7%, we substantially outperformed our underwritten yield. We are pleased that we have land sites in this high-growth market that can support another 2.8 million square feet of development. Our first year yield is 7.5% on our $21 million investment, which represents a margin of around 150%. During the quarter, we sold six properties and four units for $14 million. And in the fourth quarter, we have sold four additional buildings in Detroit, totaling $7 million, bringing our year-to-date total to $126 million. Given current visibility on our disposition pipeline, we now expect sales for the year to total $175 million to $225 million, a $75 million increase from the prior midpoint of $125 million. NAREIT funds from operations were $0.51 per fully diluted share, compared to $0.49 per share in 3Q 2020. Excluding approximately $0.04 per share of income related to the final settlement of an insurance claim, 3Q 2020 FFO was $0.45 per share. Our cash basis same-store NOI growth for the quarter, excluding termination fees, was 6.9%, primarily due to higher average occupancy, an increase in rental rates on new and renewal leasing, rental rate bumps and lower bad-debt expense, slightly offset by an increase in free rent. We commenced approximately 2.4 million square feet of leases. Of these, 500,000 were new, 1.4 million were renewals and and 500,000 were for developments and acquisitions with lease-up. Tenant retention by square footage was 85%. Cash rental rates for the quarter were up 22.8% overall, with renewals up 21% and new leasing up 27.5%. And on a straight-line basis, overall rental rates were up 36.2%, with renewals increasing 34.9% and new leasing up 39.5%. First, we expanded our line of credit to $750 million and improved our pricing to LIBOR plus 77.5 basis points, a reduction of 32.5 basis points, compared to our prior facility. We also refinanced our $200 million term loan. The new term loan matures in July 2026 and has an interest rate of LIBOR plus 85 basis points, a reduction of 65 basis points in the spread, compared to our prior facility. With our interest rate swaps in place, the new fixed interest rate on the term loan is 1.84%. On the equity side, through our ATM, we issued 1.1 million common shares, at a weighted average price of $55.35 per share, for total net proceeds of $59 million to help fund the new investments, Peter spoke about. Our guidance range for NAREIT FFO is now $1.93 to $1.97 per share, which is a $0.02 per share increase at the midpoint, reflecting our third quarter performance and an increase in capitalized interest due to our announced development starts. Key assumptions for guidance are as follows: in-service occupancy at year-end of 96.75% to 97.75%. This implies a full year quarter-end average in-service occupancy of 96.5% to 96.8%, an increase of 15 basis points at the midpoint. Fourth quarter same-store NOI growth, on a cash basis, before termination fees of 6% to 7.5%. This implies a quarterly, average same-store NOI growth for the full year 2021 of 4.3% to 4.7%, an increase of 25 basis points at the midpoint due to our third quarter performance. Please note that our full year same-store NOI guidance excludes the impact of approximately $1 million from the gain from an insurance settlement. Our G&A expense guidance is now $34 million to $35 million, an increase of $1 million at the midpoint, and guidance includes the anticipated 2021 costs related to our completed and under-construction developments at September 30, plus the expected fourth quarter starts of First Pioneer Logistics Center, First Gate Commerce Center, and First Bordentown Logistics Center. In total, for the full year 2021, we expect to capitalize about $0.08 per share of interest. We're excited about our growth prospects, as we continue to put into production our landholdings that can currently support more than 16 million square feet of value-creating developments.

NAREIT funds from operations were $0.51 per fully diluted share, compared to $0.49 per share in 3Q 2020. Our guidance range for NAREIT FFO is now $1.93 to $1.97 per share, which is a $0.02 per share increase at the midpoint, reflecting our third quarter performance and an increase in capitalized interest due to our announced development starts.

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And for 65 years, we've created iconic experiences for billions of people around the world. For the past 18 months, our digital customer engagement, global marketing, data analytics and restaurant solutions teams have worked to standardize our infrastructure and align the system against some common frameworks. He's been an important part of the McDonald's system for more than 20 years at every level. McSpicy launched in China over 20 years ago, and customers can now enjoy this great-tasting sandwich in multiple markets around the world. And earlier this month, we were proud to launch our new loyalty program, MyMcDonald's Rewards, in the U.S. The loyalty of every McDonald's fans has been unmatched for 65 years. We already have over 22 million active MyMcDonald's users in the U.S., with over 12 million enrolled in our new loyalty program, MyMcDonald's Rewards. Our digital systemwide sales across our top six markets were nearly $8 billion in the first half of 2021, a 70% increase versus last year. Over 80% of our restaurants across 100 markets globally now offer delivery. Today, about 70% of our dining rooms in the U.S. are open. By Labor Day, barring resurgences, it will be nearly 100%. I'm pleased to share that global comp sales were up 40% in the second quarter or 7% on a two-year basis. In the U.S. our momentum continued with Q2 comp sales up 26% or 15% on a two-year basis, our strongest quarterly two-year growth in over 15 years. Our performance in the U.S. is the result of an accumulation of decisions that we've made over the last 18 months. This includes an advertising rehit of our Crispy Chicken Sandwich, which continues to perform at an elevated level and the success of our BTS meal. Comp sales were up 75% in the quarter or nearly 3% on a two-year basis as we lapped the peak in 2020 restaurant closures. The market benefited from continued growth in delivery and successful marketing and core menu news, including the BTS Famous Orders and 50th Birthday Big Mac promotion. Comp sales in the International Developmental Licensed segment were up 32% for the quarter or relatively flat on a two-year basis. Japan maintained momentum in Q2 with comps up nearly 10%, achieving an impressive 23 consecutive quarters of comp sales growth. In addition, China surpassed the 4,000-restaurant mark in June and is now on pace to open over 500 new restaurants this year. This quarter, the BTS Famous Order took that ambition global, connecting our marketing, core menu and digital strategies in 50 markets. Adjusted earnings per share in Q2 was $2.37, which excludes a gain on the further sale of some of our ownership in McDonald's Japan and a onetime income tax benefit in the U.K. In year-to-date, adjusted operating margin was 43%, reflecting improved sales performance across all segments and higher other operating income compared to last year. Total restaurant margin dollars grew $1.3 billion in constant currencies with improvement in both franchised and company-operated restaurant margins, mostly driven by higher comp sales as a result of COVID-19 impact last year. G&A decreased 1% in constant currencies for the quarter, primarily due to lapping our $160 million incremental marketing investment last year, offset by higher incentive-based compensation and increased spend in restaurant technology. Our adjusted effective tax rate was 21.7% for the quarter. And we're projecting the tax rate for the back half of 2021 in the range of 21% to 23%. And finally, foreign currency translation benefited Q2 results by $0.13 per share. Based on current exchange rates, we expect FX to benefit earnings per share by about $0.03 to $0.05 for Q3, with an estimated full year tailwind of $0.20 to $0.22. I'm proud of all that we've accomplished during the past 18 months. For 65 years, the one unassailable truth about McDonald's is that we get better together. That's why in May, we announced a 10% increase in the average hourly wage at our company-owned restaurants in the U.S., with the goal to get to a $15 an hour wage by 2024. Today, 23% of our U.S.-based suppliers come from diverse backgrounds, more than double the industry average. We have set a goal to increase purchases of goods and services from diverse-owned suppliers by 10% over the next four years. That will put us in a position where 1/4 of our U.S. spend is with diverse-owned suppliers by 2025. I'm amazed with everything that our system has accomplished over the past 18 months, and we can't wait to write the next great chapter of the McDonald's story together.

This includes an advertising rehit of our Crispy Chicken Sandwich, which continues to perform at an elevated level and the success of our BTS meal. The market benefited from continued growth in delivery and successful marketing and core menu news, including the BTS Famous Orders and 50th Birthday Big Mac promotion. Adjusted earnings per share in Q2 was $2.37, which excludes a gain on the further sale of some of our ownership in McDonald's Japan and a onetime income tax benefit in the U.K. In year-to-date, adjusted operating margin was 43%, reflecting improved sales performance across all segments and higher other operating income compared to last year. And finally, foreign currency translation benefited Q2 results by $0.13 per share.

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In that regard, I was honored to be asked to chair our company's Board of Directors, in addition to my continuing role as President and Chief Executive Officer. We are pleased to report this quarter that we continue to make meaningful progress in our ongoing strategic transformation to capital light high growth franchise company in August 2019 we estimated that it would take us 18 to 24 months to complete our conversion to a fully franchise portfolio. In the first half of fiscal 2020, we have converted 988 salons to franchise owners, with line of sight to the sale of approximately 900 additional salons. This means that net of closing roughly 350 to 500 underperforming salons, which typically occurs at lease expiration. We have approximately 50% of the remaining company-owned salon portfolio in the pipeline at various stages of transition. As of December 31, nearly 70% of our portfolio is now franchised. And you may recall that when I began my tenure as CEO in April of 2017, our salon portfolio was roughly 28% franchised and 72% company-owned. In January, we announced actions that will reduce G&A by approximately $19 million on an annualized basis. Further, we believe it is the right time to redesign our capital structure so that our debt facility is better suited for a company that is now 70% franchised. We may also utilize our cash in the next 18 months to complete any remaining elements of our multiyear restructuring, including closing nonperforming company-owned salons, when it's justified by the economics, although our operational bias is typically to manage these salons to lease expiration; paying down some debt, we determined that it's wise to do so; supporting our ongoing G&A reductions through severance programs and if needed, capital investments in salon refurbishments and remodels as we consolidated our various brands into what we have called the Fab 5. Upon completion of our refinancing, management and the board will continue to assess our capital allocation strategies on a periodic basis as we have done historically. Yesterday, we reported on a consolidated basis, second quarter revenues of $208.8 million, which represented a decrease of $65.9 million or 24% versus the prior year. The year-over-year revenue decline was driven primarily by the conversion of a net 1,447 company-owned salons to the company's franchise portfolio over the past 12 months and the closure of 172 salons, of which the majority were cash-flow negative and not essential to our future plans. The headwinds in the quarter were partially offset by a $5.8 million increase in franchise revenues and $33.6 million of rent revenue recorded in connection with the new lease accounting guidance adopted in the first quarter of fiscal 2020. Second quarter consolidated adjusted EBITDA of $17 million was $3.6 million or 17.5% unfavorable to the same period last year, and was driven primarily by the elimination of the EBITDA that had been generated in the prior period from the net 1447 company on salon that have been sold and converted to the franchise portfolio over the past 12 months. The decline in adjusted EBITDA was partially offset by a $5.6 million increase in the gain associated with the sale of company-owned salons. Excluding discrete items and the income from discontinued operations the company reported decreased second quarter 2020 adjusted net income of $4.6 million or $0.13 earnings per diluted share as compared to adjusted net income of $8 million or $0.18 earnings per diluted share for the same period last year. The year-over-year decrease in adjusted net income was driven primarily by the elimination of adjusted net income that had been generated in the prior year from salons that were sold and converted to the company's asset-light franchise portfolio over the past 12 months. On a year-to-date basis, consolidated adjusted EBITDA of $46.8 million was $1.1 million or 2.3% favorable versus the same period last year. The year-over-year favorability was driven primarily by a $24.7 million increase in the gain, excluding noncash goodwill derecognition related to the year-to-date sale and conversion of 988 company-owned salons to the franchise portfolio. Excluding the impact of the gains second quarter year-to-date adjusted EBITDA totaled $5.6 million, which was $23.7 million unfavorable year-over-year and like the second quarter results, this unfavorable variance is also driven largely by the elimination of EBITDA related to the sold and transferred salons over the past 12 months. Looking at the segment-specific performance and starting with our franchise segment second quarter franchise royalties and fees of $29.3 million increased $6.7 million or 29.8% versus the same quarter last year, driven primarily by increased franchise salon counts. Product sales to franchisees decreased to $1 million year-over-year, to $16.9 million, driven primarily by a $6.5 million decrease in products sold to TBG, partially offset by increased franchise salon counts. As a reminder, franchise same-store sales are calculated in a manner that is consistent with how we calculate our same-store sales in our company-owned salon portfolio and represents the total change in sales for salons that have been a franchise location for more than 12 months. As we are in this transition phase, salons are leading company-owned comps but not entering franchise comps for 12 months, which adds temporary noise to same-store sales comparisons. Second quarter franchise adjusted EBITDA of $13.1 million grew approximately $4.6 million year-over-year, driven by growth in the franchise salon portfolio and better leverage of our cost structure, partially offset by lower margins on franchise product sales. After adjusting for the noncontributory revenue associated with ad fund revenue, franchisee rent revenue and TBG product sales EBITDA margin was approximately 37.5%, which is approximately 4.2% favorable year-over-year and is in line with where we would expect it to be. Year-to-date, franchise adjusted EBITDA of $24.9 million grew approximately $6.6 million or 36% year-over-year. Now looking at the company-owned salon segment, second quarter revenue decreased $105.3 million or 45% versus the prior year to $128.9 million. This year-over-year decline is driven and consistent with the decrease of approximately 1,598 company-owned salons over the past 12 months, which can be bucketed into two main categories. First, the conversion of 1,498 company-owned salons to our asset-light franchise platform over the course of the past 12 months. These net company-owned salon reductions were partially offset by 51 salons that were brought -- bought back from franchisees over the last year and 21 new company-owned organic salon openings during the last 12 months, which we expect to transition to our portfolio in the month's end. Second quarter company-owned salon segment adjusted EBITDA decreased $17 million year-over-year to $4.2 million. Consistent with the total company consolidated results, the year-over-year variance was driven primarily by the elimination of the adjusted EBITDA that had been generated in the prior year period from the company-owned salons that were sold and converted into the franchise platform over the past 12 months. On a year-to-date basis, company-owned salon consolidated adjusted EBITDA of $15.7 million was $33.2 million unfavorable versus the same period last year. The unfavorable year-over-year variance is driven by the elimination of the adjusted EBITDA related to the sold and transferred salons over the past 12 months, partially offset by management initiatives to rightsize the source structure in the field. Second quarter adjusted EBITDA of $0.3 million increased $8.8 million and is driven primarily by the $15 million of net gains excluding noncash goodwill derecognition from the sale and conversion of company owned salons, the net impact of management initiatives to eliminate noncore, nonessential G&A expense and lower year-over-year incentive and equity compensation. In January, based on the improved visibility into the speed of our transition, we began meaningful reductions in our expenses. By eliminating approximately 290 positions, including 15 contractors across the U.S. and Canada, which is expected to result in approximately $19 million of annualized G&A savings as the company accelerates into its multiyear transformation. Lastly, I wanted to point out that vendition cash proceeds during the second quarter were approximately $71,000 per salon compared to approximately $69,000 per salon in the first quarter of our fiscal 2020, which is consistent quarter-over-quarter. At the end of the quarter, we made a decision to pay $30 million toward our outstanding debt, which decreased our cash balance to $49.8 million as of December 31, 2019. When looking at the cash flow statement, the single largest use of cash is approximately $17 million use of working capital. In addition to change in working capital, when reconciling the adjusted EBITDA to operating capital, you will need to take into account the fact that the $41.2 million net gain from the conversion of our company-owned salons to the franchise platform are included in our net income and adjusted EBITDA but not included in cash from operations as the proceeds are reported as inflows in the investing section of the cash flow statement. At the end of December, TBG transferred back to Regis 207 of its North American mall-based salons, a roughly 10% of the company's portfolio. The remaining lease liability associated with the TBG salons is approximately $30 million and Regis will operate the salons until lease end date or until a new franchise owner is identified. As a reminder, when we executed the original transaction with TBG back in October of 2017, the lease liability for the mall-based portfolio was approximately $140 million, and as noted, is less than $30 million today.

In that regard, I was honored to be asked to chair our company's Board of Directors, in addition to my continuing role as President and Chief Executive Officer. In the first half of fiscal 2020, we have converted 988 salons to franchise owners, with line of sight to the sale of approximately 900 additional salons. Upon completion of our refinancing, management and the board will continue to assess our capital allocation strategies on a periodic basis as we have done historically. Yesterday, we reported on a consolidated basis, second quarter revenues of $208.8 million, which represented a decrease of $65.9 million or 24% versus the prior year. Excluding discrete items and the income from discontinued operations the company reported decreased second quarter 2020 adjusted net income of $4.6 million or $0.13 earnings per diluted share as compared to adjusted net income of $8 million or $0.18 earnings per diluted share for the same period last year. In January, based on the improved visibility into the speed of our transition, we began meaningful reductions in our expenses.

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He literally started work here the day we went public in 1993 and took over as our CIO in 2020. We acquired these two properties for $96 million, and approximately, a 3.9% cap rate and about $195,000 per unit. SkyHouse South in Midtown for $115 million with a 3.6% cap rate. We acquired this new property for $135 million, and it is about half occupied. And once it completes lease-up, we expect it will stabilize at a 4.1% cap rate. We also continued adding to our Denver presence by purchasing an asset in the suburban Central Park area of Denver for $95 million. We expect this property, which is also in lease-up currently, to stabilize at a 4.2% cap rate. We're also pleased to add to the portfolio of property each in the suburbs of Boston and Washington, D.C. The Boston property is located in Burlington, Massachusetts, and is a new asset that we acquired for $134.5 million at a 4.1% cap rate. The D.C. asset is located in Fairfax, Virginia, and is a 2016 asset that we acquired for $70 million at a 4.3% cap rate. Year-to-date, we have bought $645 million of properties and expect to close on another $850 million in acquisitions, a good number of which are in various states of advanced negotiation by the end of the year. And our current estimates are that these three projects will stabilize at a development yield of approximately 5%, considerably higher than prevailing acquisition cap rates. Portfoliowide, physical occupancy is currently 96.5%, which is back to 2019 levels. At this point, we expect to run the portfolio above 96% through the remainder of the third quarter. From March to December of 2020, pricing trend, which includes the impact of concessions, declined approximately $500 per unit. From January 2021 to today, pricing trend has grown $660, and is now not only above prior year levels in all markets but every market, except for San Francisco is also above 2019 peak pricing trend levels. Today, the portfolio is approximately $100 higher per unit than our peak 2019 levels. At the end of the first quarter, about 20% of applications were receiving on average four weeks in concessions. As of July, we are now running with less than 3% of our applications receiving on average just over two weeks, and we expect this to continue to drop-off even further. To give you perspective, the total dollar of concessions granted peaked in the month of February at just north of $6 million for the same-store portfolio. For July, we will be at $1.5 million for the month, and August should be less than $750,000. Last week, only 12 properties had any concessions being offered. The percent of residents renewing has stabilized around 55%, which is very much in line with historical averages but below the record high 60% levels that we had in 2019 and early 2020. That said, occupancy is 95.4% today in San Francisco and is growing as is pricing trend. As we've discussed on previous calls, approximately $50 billion in rental assistance for those impacted financially by the pandemic was made available in the various relief bills. Processing to date has been relatively slow in our markets, but we were able to recover approximately $5 million in the quarter. The continued strong operating momentum from this leasing season has led us to raise our annual same-store revenue guidance from negative 6% to negative 8% to negative 4% to negative 5%, an improvement at the midpoint of 250 basis points. Strong expense controls and favorable real estate tax outcomes, which I will talk about in a moment, also allowed us to reduce our same-store expense guidance range to an increase of 2.75% to 3.25%, resulting in an NOI range of negative 7.5% to negative 8.5%, which is a 400 basis point improvement at the midpoint relative to our prior guidance. Drivers of our revenue guidance increase of 250 basis points are roughly 150 basis points of improving operating fundamentals that Michael just outlined; 60 basis points or $15 million for the full year in related lower bad debt, primarily due to anticipated rental assistance collections; and the remaining 40 basis points is due to improved performance in our nonresidential business. The back half of the year has about $10 million of additional assumed rental assistance collections on top of the $5 million we've already received. On the expense side, we have also seen improvements versus prior expectations, which led us to center the midpoint of expense guidance at 3%, which was the low end of our prior guidance range. We expect that 2021 will be our third consecutive year of low payroll growth, having delivered a three-year average below 1%, while keeping other controllable expenses like repairs and maintenance in check. As a result of these same-store guidance changes, we raised the midpoint of our normalized FFO from $2.75 to $2.90. Despite unprecedented pressure on operations, our credit metrics have remained well within our stated net debt-to-EBITDA leverage policy of between 5.5 times to 6.5 times.

Strong expense controls and favorable real estate tax outcomes, which I will talk about in a moment, also allowed us to reduce our same-store expense guidance range to an increase of 2.75% to 3.25%, resulting in an NOI range of negative 7.5% to negative 8.5%, which is a 400 basis point improvement at the midpoint relative to our prior guidance.

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In 2020, CNA had an underlying combined ratio of 93.1% compared to 94.8% in 2019 and 95.4% in 2018. That represents a more than 2 point improvement over two years reflecting progress in both the expense and loss ratios. Earlier today, CNA declared a special dividend of $0.75 in addition to raising its quarterly common dividend to $0.38 per share. CNA paid total dividends of around 90% of its 2020 earnings. Boardwalk has completed the recontracting of its pipelines originally put into service between 2008 and 2010. During 2020, the Company added approximately $1.3 billion of new contracts and the contractual backlog ended the year at over $9 billion or seven times Boardwalk's annual 2020 revenues. Boardwalk reported EBITDA of $819 million for the year, essentially flat from 2019. In February, the Company had occupancy rates of around 80% for its owned and joint venture hotels. By April, only three of these hotels were operational and occupancy rates had plummeted to about 9%. During December of 2020, occupancy rates for owned and JV hotels that were operational had risen to almost 38% with 22 out of 27 Loews Hotels once again welcoming guests. Loews, CNA and Boardwalk each issued $500 million in bonds between May and August of 2020, taking advantage of the low rates available in the credit markets. Altium Packaging completed a debt recapitalization in January of 2021, which resulted in a $199 million payment to Loews basically returning a third of our equity and we still own a 100% of the business. We provided about $150 million to Loews Hotels in 2020 to help it right out the effects of COVID on the hospitality industry. During the fourth quarter, we purchased almost 6 million shares of Loews stock for about $244 million while preserving ample liquidity and ending the quarter with about $3.5 billion in cash. Over the course of the year, Loews repurchased nearly 22 million of our own shares for an average cost of below $42 per share, which is lower than Loews' current market price and considerably lower than what we believe to be the intrinsic value of the company. Today we reported fourth quarter net income of $397 million or $1.45 per share compared to $217 million or $0.73 per share in last year's fourth quarter. For the full year, we reported a net loss of $931 million or $3.32 per share while in 2019 our net income was $932 million or $3.07 per share. CNA's net income contribution to Loews rose 42% to $346 million making up the bulk of our consolidated fourth quarter net income of $398 million. Net written premium grew 12% year-over-year. The combined ratio improved 2.1 points to 93.5 driven by lower expense and underlying loss ratios as well as reduced cat losses. Boardwalk pipelines net income contribution rose from $48 million in last year's fourth quarter to $83 million which included $26 million after-tax of settlement proceeds related to a customer bankruptcy. Fourth quarter net revenues excluding these proceeds were up 4% driven by growth projects recently placed into service. Loews Hotels posted a net loss of $68 million in Q4 2020 versus a net loss last year of $59 million. This year's net loss was caused by the continuing revenue challenges stemming from the pandemic with operating revenue, down 81% year-over-year. In last year's fourth quarter, Loews Hotels incurred a $69 million after-tax charge from the impairment of two hotel properties as well as some pre-opening expenses on properties under development. The fourth quarter of 2019 included a $38 million net loss from Diamond Offshore. We reported a net loss of $931 million or $3.32 per share. Diamond filed for a Chapter 11 bankruptcy protection on April 26, 2020. Through that date, Diamond had contributed net losses of $476 million to Loews mainly attributable to rig impairment charges. Further because of the bankruptcy filing, in the second quarter, we deconsolidated Diamond, wrote down the carrying value of our investment in the Company and booked a $957 million after-tax investment loss. In total, Diamond accounted for $1.43 billion of net losses to Loews in 2020. Loews Hotels has been severely impacted by the COVID-19 pandemic with operating revenue, down 71% for the full year. Similarly, income in joint ventures swung from positive $69 million in 2019 to a $73 million loss in 2020. This dramatic change in Loews Hotels operating environment caused the Company to incur a net loss of $212 million for the year. CNA booked pre-tax catastrophe losses of $550 million in 2020, up from $179 million in 2019. Weather related events comprised 50% of the year's cat losses with COVID-19 and civil unrest making up the remainder. The negative year-over-year impact to Loews of CNA's unusually elevated catastrophe losses was $262 million after-tax. This accounted for $148 million decline in Loews' net income. Similarly, the Loews parent company's net investment income declined $141 million after-tax, driven mainly by lower returns on LP and equity investments. This swing reduced our net income by $60 million. In total, these items, cat losses net investment income at CNA and Loews and CNA's net investment losses accounted for a year-over-year decline in Loews' net income of $611 million. Net written premium increased 6% on the back of new business growth, solid retention and rate increases averaging 11%. The underlying combined ratio for the full year, which excludes cat losses and prior year development was $93.1 million down from $94.8 million in 2019, with improvement in both the loss and expense ratios. All of this led to a 38% increase in pre-tax underlying underwriting income. Net operating revenues excluding the settlement proceeds from a customer bankruptcy in each year were down less than 1% reflecting the last vestiges of expirations and renewals at lower rates of long-term contracts put in place 10 plus years ago. Altium Packaging, which is included in our corporate segment had a strong year operationally with revenues up almost 10% driven by organic growth, new business, exceptional results in its recycled plastics business, the full year impact of acquisitions made in 2019 and higher year-over-year resin prices. Last week, Altium completed a recapitalization, issuing a $1.05 billion seven-year secured term loan. The proceeds of which went to refinance its existing debt and pay Loews' a dividend of $199 million. As a reminder, our initial equity investment in Altium was slightly more than $600 million. The parent company portfolio of cash and investments stood at $3.5 billion at year-end, with about 77% in cash and equivalents. During the fourth quarter, we received $192 million in dividends from our subsidiaries, $90 million from CNA, and $102 million from Boardwalk, which represented Boardwalk's only dividend to Loews in 2020. For the full year, we received total dividends of $947 million from CNA and Boardwalk. Today, CNA declared a $0.75 per share special dividend and a regular quarterly dividend of $0.38 per share up a penny from $0.37. Combining the two, Loews will receive $275 million in dividends from CNA this quarter as well as the $199 million received from Altium last week. We repurchased 5.8 million shares in the fourth quarter for $244 million and 22 million shares during the full year for $917 million. Since year-end, we have repurchased an additional 2.2 million shares for a total of $100 million.

Today we reported fourth quarter net income of $397 million or $1.45 per share compared to $217 million or $0.73 per share in last year's fourth quarter.

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Our cash position increased to more than $105 million as of September 30, 2021, up from approximately $93 million at June 30, 2021. So with that, let's turn to the restructuring and cost reduction plan we announced earlier today. Again, our plan retains our core strategies while further optimizing our operations, improving efficiencies and reducing costs. The plan will be implemented in phases, and we expect we will be completed in about 18 months. Key elements of the plan include, first, consolidating our manufacturing footprint from two facilities to 1. This includes reducing headcount and eliminating development formerly dedicated to the Carmel site and discontinuing future development programs targeting liquid generic medications as we no longer see adequately scaled returns in that sector. Ultimately, the plan is expected to result in a workforce reduction of approximately 11% from current levels. Another 3% or so of the workforce, mainly at the plant, we expect not to replace as attrition occurs. In total, we anticipate cost savings approximately $20 million annually. We currently have approximately 12 ANDAs pending at the FDA, including partner products, plus three additional products that are approved and pending launch. We also have more than 20 products in development and expect to add more from both external and internal efforts. With regard to our large, durable partnered product pipeline, I'll provide an update on two of the 5, starting with our generic ADVAIR DISKUS product. We have revised down our fiscal 2022 guidance to reflect the increasingly competitive environment for a base oral generics portfolio. The plan is expected to be completed in approximately 18 months and generate annual cost savings of approximately $20 million. For the 2022 first quarter, net sales were $101.5 million compared with $126.5 million for the first quarter of last year. Gross profit was $20.6 million or 20% of net sales compared with $34.4 million or 27% of net sales for the prior year first quarter. Interest expense increased to $12.8 million from $11.2 million. Net loss was $10.6 million or $0.27 per share versus net income of $2.2 million or $0.06 per diluted share. Adjusted EBITDA was $10.0 million. At September 30, 2021, cash and cash equivalents totaled approximately $105 million, up from $93 million at June 30. Accordingly, we expect to maintain a healthy cash position of $80 million plus through the end of fiscal 2022. As for our liquidity, we also have access to our $45 million credit facility, which to date, we have not drawn upon. For fiscal 2022, we now expect net sales in the range of $370 million to $400 million, down from $400 million to $440 million. Adjusted gross margin, as a percentage of net sales, of approximately 19% to 21%, down from approximately 23% to 25%. Adjusted R&D expense in the range of $25 million to $28 million, down from $26 million to $29 million. Adjusted SG&A expense ranging from $55 million to $58 million, down from $58 million to $61 million. Adjusted interest expense of approximately $52 million, unchanged. The full year adjusted effective tax rate in the range of 22% to 23%, up from 21% to 22%. Adjusted EBITDA in the range of $22 million to $32 million, down from $40 million to $55 million. And lastly, capital expenditures to be approximately $10 million to $14 million, down from $12 million to $18 million.

So with that, let's turn to the restructuring and cost reduction plan we announced earlier today. Again, our plan retains our core strategies while further optimizing our operations, improving efficiencies and reducing costs. The plan will be implemented in phases, and we expect we will be completed in about 18 months. This includes reducing headcount and eliminating development formerly dedicated to the Carmel site and discontinuing future development programs targeting liquid generic medications as we no longer see adequately scaled returns in that sector. Ultimately, the plan is expected to result in a workforce reduction of approximately 11% from current levels. In total, we anticipate cost savings approximately $20 million annually. We also have more than 20 products in development and expect to add more from both external and internal efforts. We have revised down our fiscal 2022 guidance to reflect the increasingly competitive environment for a base oral generics portfolio. The plan is expected to be completed in approximately 18 months and generate annual cost savings of approximately $20 million. Gross profit was $20.6 million or 20% of net sales compared with $34.4 million or 27% of net sales for the prior year first quarter. Net loss was $10.6 million or $0.27 per share versus net income of $2.2 million or $0.06 per diluted share. For fiscal 2022, we now expect net sales in the range of $370 million to $400 million, down from $400 million to $440 million. The full year adjusted effective tax rate in the range of 22% to 23%, up from 21% to 22%. And lastly, capital expenditures to be approximately $10 million to $14 million, down from $12 million to $18 million.

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We beat consensus by $0.09 per share on somewhat lower revenue than anticipated by the sell side. However, operating margin is up about 40 basis points more than anticipated. Revenue is up 1.5% against the third quarter last year. Operating earnings were up less than 1%. Net earnings are up 3.1% and earnings per share are up 5.9%. Here, we beat last quarter revenue by 3.8%, operating earnings by 12.6%, net earnings by 16.7%, and earnings per share by 17.6%. On a year-to-date basis, revenue is up $733 million or 2.7%. Operating earnings are up $137 million or 4.8%, net earnings are up $140 million, and earnings per share are up $0.64, a strong 8.5%. Cash flow from operating activities was $1.47 billion, that is 171% in net earnings. Free cash flow was $1.275 billion, 148% of net income. We had anticipated renewed post-COVID demand in the second half of this year and planned increased production for the second half with 32 planned deliveries in the third quarter and 39% in the fourth quarter. Aerospace had revenue of $2.07 billion and operating earnings of $262 million, with a 12.7% operating margin. We managed delivery of 31 aircraft as opposed to the 32 planned, one slipped into the fourth quarter on customer preference. Revenue is $91 million more than the year-ago quarter, up 4.6% on one fewer aircraft delivered. On the other hand, operating earnings are down $21 million, on a 160 basis point degradation in margins. This was the result of an additional $28 million in G&A expenses driven by higher R&D expense and around a $20 million settlement of a supplier claim related to the allocation of warranties after the end of G550 production. In dollar terms, aerospace had a book-to-bill of 1.6:1. Gulfstream alone had a book-to-bill of 1.7:1. We continue to experience a high level of interest activity and a solid pipeline. We have delivered 131 of these aircraft to customers through the end of the quarter with 20 scheduled for delivery in the fourth quarter. The G700 has approximately 1,800 test hours on the five test aircraft. As I mentioned earlier, we had planned 32 deliveries in the third quarter and came up on short. We implanted for 39 in the fourth and LAD-1 that slipped into the quarter. If everything goes as planned, we will deliver 40 aircraft in the fourth quarter. Combat systems had revenue of $1.745 billion, down 3.1% from the year-ago quarter. However, earnings are up 2.2% over the year ago quarter on the strength of an 80 basis point improvement in operating margin, yet another example of strong operating leverage from Combat systems. Further that theme on a year-to-date basis, Combat system revenue was up $201 million or 3.8%, while operating earnings are up a significant 7.4% on a 50 basis point improvement in operating margins. Revenue of $2.64 billion is up $232 million, above 9.6% over the year ago quarter. Year-to-date revenue was up 7.5%. In fact, revenue in this group has been up for the last 16 quarters on a quarter over year ago quarter basis. Operating earnings are $229 million in the quarter, up $6 million or 2.7% on an operating margin of 8.7%. On a sequential basis, operating earnings are up $19 million, on a 40 basis point improvement in margins. This segment had revenue of $3.120 billion in the quarter, down $130 million from the year ago quarter or 4%. On the other hand, information technology grew revenue against the year ago quarter at a rate of 1.4%. Operating earnings of $327 million are up $13 million or 4.1% on a 10.5% operating margin. EBITDA margin is a truly impressive 14.4%, including state and local taxes, which are a 50 basis point drag on that result. This quarter revenues decrease will impact the year, and we now expect revenue to be around $12.6 billion or $400 million less than our second quarter update. So good order activity in the quarter with a book-to-bill of 1:1 and good order prospects on the horizon. The book-to-bill at GDIT was a little better than 1:1 and somewhat less emission systems. Operating cash flow was $1.5 billion in the quarter, once again on the strength of Gulfstream orders and from continued strong cash performance from our technology segment. Including capital expenditures, our free cash flow was $1.3 billion or a 148% net earnings conversion. Through the first nine months, our conversion rate is 91%, approaching our full-year outlook for free cash flow conversion in the 95% to 100% range. Capital expenditures were $196 million in the quarter or 2% of sales. That puts us a little under the 2% of sales for the first nine months, so trending somewhat below our forecast for the year. We're still projecting full year capex in the range of 2.5% of sales. We also paid $332 million in dividends and spent $117 million on the repurchase of 600,000 shares in the quarter. That brings year-to-date repurchases to 8.5 million shares at an average price of just under $174 per share. We repaid $500 million of notes that matured in July. And although there were no new issuances, we ended the quarter with $2 billion of commercial paper outstanding. So we ended the third quarter with a cash balance of just over $3.1 billion and a net debt position of $10.5 billion, down more than $800 million from last quarter and down $1.4 billion from this time last year. With the scheduled CP repayment in the fourth quarter, we expect to end the year with a net debt balance below $10 billion for the first time since 2018. As a result, net interest expense in the quarter was $99 million, down from $118 million in the third quarter of 2020. That brings the net interest expense for the first nine months of the year to $331 million, down from $357 million for the same period in 2020. The tax rate in the quarter was 15.3%, bringing our rate to 15.9% for the first nine months, consistent with our full-year outlook, which remains around 16%. Order activity and backlog were once again a strong story in the third quarter with a 0.9 times book-to-bill for the company as a whole, bringing us to a 1:1 ratio for the first nine months and a 1.2 times ratio for the trailing 12 months. As Phebe mentioned, the order activity in the Aerospace group led the way with a 1.6 times book-to-bill in the quarter, while technologies recorded a book-to-bill of one-to-one. Foreign exchange rate fluctuation resulted in a $300 million reduction in backlog in the quarter, with the majority of that impact in Combat Systems. We finished the quarter with a total backlog of $88.1 billion, that's up 8% over this time last year, and total potential contract value, including options and IDIQ contracts was $129.6 billion.

We continue to experience a high level of interest activity and a solid pipeline. Revenue of $2.64 billion is up $232 million, above 9.6% over the year ago quarter. We finished the quarter with a total backlog of $88.1 billion, that's up 8% over this time last year, and total potential contract value, including options and IDIQ contracts was $129.6 billion.

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