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Operationally, orders were up more than 15% year-over-year, driven by a sales pace that was up more than 40%. From a supply perspective, our industry has delivered far fewer homes in the last 10 years, than job growth and household formation would have predicted. We think this cumulative deficit is conservatively well above 1 million homes, which means that a few good quarters are unlikely to exhaust the need for new homes. That's because the dollar value of our backlog is up nearly 60% compared to last year. In numeric terms, it means all of our homes will achieve a Home Energy Rating System or HERS rating of 45 or less, which is an energy conservation standard that is far beyond most existing Building and Energy codes. Underscoring this commitment, we're a proud builder partner of the Department of Energy's Zero Energy Ready Homes Program and we're the first national production builder to commit to building 100% of our homes in accordance with the program. To fund this ambition, last year we started a title insurance agency called Charity Title, that will donate 100% of its profits to charity. Looking at the first quarter compared to the prior year, new home orders increased 15% to 1,442, despite a lower community count. Sales pace was up over 40% to 3.5 sales per community per month. Homebuilding revenue increased about 2% to $424 million on flat closings. Our gross margin, excluding amortized interest, impairments and abandonments was 22.1%, up approximately 230 basis points. SG&A was down approximately 60 basis points as a percentage of total revenue to 12.7% driven by controlling overhead expenses. This led to adjusted EBITDA of $43.6 million in the quarter, up nearly 50% and exceeding 10% of revenue. Total GAAP interest expense was down about 3%. Our tax expense for the quarter was about $4.1 million, for an effective tax rate of 25.5%. Taken together, this led to $12 million of net income from continuing operations or $0.40 per share, up over 3 times versus the same period last year. Closings are likely to be up 10% to 15%. Our ASP is expected to be approximately $390,000. SG&A as a percentage of total revenue should be down at least 50 basis points, reflecting the benefit from top-line leverage. We expect EBITDA to be up more than 20%. Our tax rate is expected to be about 25%, and combined, this should drive net income and earnings per share up more than 60%. This improvement is largely driven by increased profitability, as we expect gross margin to be up at least 50 basis points versus the prior year in the second half of fiscal 2021. At the low end this would have represented earnings per share of less than $2 per share. We now expect earnings per share of at least $2.50. And finally, we committed to reduce debt by more than $50 million last quarter. We now intend for that to be closer to $75 million. We expect to end fiscal 2021 with a book value per share in excess of $22. Our expected level of profitability, our return on average equity for the full year should be approximately 12%, and if you exclude our deferred tax assets, which don't generate profits, our ROE should be over 17%. During the quarter, we spent $110 million on land acquisition and development and ended with nearly $500 million of liquidity, up more than $200 million versus the prior year. We expect land spending to accelerate in the remaining quarters of 2021, ultimately exceeding the $600 million we initially anticipated, funded by our cash from this liquidity and cash from operations. The initial results of this effort were evident in the first quarter as we grew our active lots by about 8% to over 18,000, and importantly, we control 42% of our active lots through options at quarter end, a 7 point sequential increase.

Looking at the first quarter compared to the prior year, new home orders increased 15% to 1,442, despite a lower community count. Taken together, this led to $12 million of net income from continuing operations or $0.40 per share, up over 3 times versus the same period last year.

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Our team delivered sales growth of 17%, expanded our operating profit margin by 160 basis points, and increased diluted earnings per share by 57%, despite global supply chain challenges and unpredictable market conditions. Net sales were $926 million, an increase of 17% compared to the prior year. Gross profit was $386 million, an increase of $53 million or 16% over the prior year. Gross profit as a percentage of sales was 41.7%, a decrease of 30 basis points from 42% in the prior year, a significant achievement given the cost environment. Reported operating profit margin was 12.4% of net sales for the first quarter of fiscal 2022, an increase of 160 basis points over the prior year. Adjusted operating profit margin was 14.4% of net sales, an increase of 120 basis points over the prior year. The effective tax rate for the first quarter of fiscal 2022 was 19.6%. In the same period of 2021, the rate was 24.7%. We expect our tax rate for the full year of 2022 to normalize to around 23% absent these discrete items. Diluted earnings per share of $2.46 increased $0.89 or 57% over the prior year. And adjusted diluted earnings per share of $2.85 increased $0.82 or 40% over the prior year. Our share repurchase program favorably impacted adjusted diluted earnings per share by $0.07 and the tax impact was approximately $0.16. During the quarter, our Lighting and Lighting Control segment saw sales increase 17% to $884 million versus the prior year. This was driven by improvements within our independent sales network, which grew 14%, and the direct sales network, which grew about 12%. Our corporate accounts channel saw an increase in sales of approximately 62% compared to the prior year, as large accounts began previously deferred maintenance and renovations. Sales in the retail channel declined approximately 16% in the current quarter. ABL operating profit for the first quarter of fiscal 2022 increased 30% to $128 million versus the prior year, with operating margin improving 160 basis points to 12.4%. Adjusted operating profit of $138 million improved 28% versus the prior year, with adjusted operating margin improving 140 basis points to 15.6%. For the first quarter of 2022, sales in spaces increased approximately 14% to $46 million versus the prior year, reflecting continued demand primarily across our building and HVAC controls. Spaces' operating profit in the first quarter of 2022 increased approximately $2 million to $2 million versus the prior year. Adjusted operating profit of $6 million increased approximately $2 million versus the prior year as a result of the strong sales growth. The net cash from operating activities for the first three months of fiscal 2022 was $84 million. This was a decrease of $40 million or 32% compared to the prior year and reflects an increased investment in inventory to drive growth. We invested $9 million or 1% of net sales in capital expenditures during the first three months of fiscal 2022. During the quarter, we continued to execute on our capital allocation strategy and repurchased approximately 300,000 shares of common stock for around $53 million at an average price of $176 per share. We have approximately 3.5 million shares remaining under our current board authorization. The addition of OSRAM contributed over 300 basis points to our sales growth in this quarter.

Diluted earnings per share of $2.46 increased $0.89 or 57% over the prior year. And adjusted diluted earnings per share of $2.85 increased $0.82 or 40% over the prior year.

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Revenue, while down year-over-year due to the unprecedented market conditions, was up nearly $70 million on a sequential basis. Adjusted EBITDA of $161.2 million included $13.3 million in government programs, primarily from the revised CEWS legislation in Canada. The high level of EBITDA supported by controlled capital spending resulted in adjusted free cash flow of $123.5 million, a quarterly record for the company. Environmental Service revenues declined 10% from a year ago but were up 6% from Q2. As many of our service businesses bounced back from the early days of the pandemic, adjusted EBITDA grew 16%. The two government programs accounted for $10 million of adjusted EBITDA in this segment. Revenue from our COVID-19 decon work totaled $29 million and our team has now completed a total of more than 9,000 COVID-19 responses. Though incineration utilization dipped to 80% due to the timing of turnarounds and a production lag from some of our customers, we continue to execute on our strategy to capture high-value waste streams across our network. This resulted in an average price per pound increase of 5% from the year earlier period. Landfill volumes declined 6% as strong base business largely offset the lack of remediation and waste project opportunities. Safety-Kleen revenue was down 18% from a year ago, but up 17% sequentially due to the recovery in both the branch and the SK Oil businesses. Given the declining market value of waste oil, we maintained high charge-for-oil rates used for motor oil and increased our collection volumes to 50 million gallons. That is 16% ahead of Q2. Safety-Kleen's adjusted EBITDA declined 15%, mostly due to the lower revenue. This decline was partly offset by our cost reduction initiatives, as well as the government assistance programs that provided $2.5 million to this segment in Q3. Parts washer services we're off 10% in the quarter, which was promising given that we originally expected the SK branch business to be at 85% of normal levels in Q3. Field Services remains on track for a phenomenal year due to the COVID-related revenues, which we expect to exceed $100 million. Revenue declined 13% year-over-year, but on a sequential basis, was up nearly $70 million. These comprehensive efforts, combined with assistance we received from government programs, mostly Canada this quarter, resulted in a 310 basis point improvement in gross margins. Adjusted EBITDA increased to $161.2 million from a year ago. Excluding the government assistance, adjusted EBITDA would have been $147.9 million, down only 6% year-over-year, despite revenues being 13% lower. Adjusted EBITDA margins of 20.7% was 310 basis points -- was up 310 basis points from last year's third quarter, which speaks to the effectiveness of our actions. We have now improved our adjusted EBITDA margins on a year-over-year basis for 11 consecutive quarters. We lowered SG&A by nearly $16 million or 13% in Q3. Of that total, $2.8 million was related to the impact of CARES and CEWS. For full year 2020, we are targeting SG&A of approximately 14.5% of revenue, continuing a positive trend that began several years ago. Depreciation and amortization in Q3 was up slightly at $74.5 million. For the full year, we continue to expect depreciation and amortization in the range of $285 million to $295 million, which is slightly below last year. Income from operations increased by 4%, reflecting the higher gross profit and our overall effectiveness at managing the business. Earnings per share was $0.99 in Q3 versus $0.65 a year ago or $0.90 versus $0.72 on an adjusted basis. Cash and short-term marketable securities at September 30 exceeded $530 million. Our liquidity increased even though we paid back the remaining $75 million of funds we had drawn on the revolver under the abundance of caution when the pandemic began. Our debt obligations decreased to below $1.56 billion with the paydown of the revolver. Leverage on a net debt basis now sits at 1.9 times for the trailing 12 months ended 9/30, which is our lowest level in nearly a decade. Our weighted average cost of debt remains at an attractive 4.2% with a healthy blend of fixed and variable debt. We put a new five-year $400 million lending facility in place. Cash from operations in Q3 was nearly flat with prior year at $143.9 million. Capex, net of disposals, was down more than 60% to $20.4 million, reflecting our COVID response plan to be extremely cost prudent with our capital. The result was record adjusted free cash flow in Q3 of $123.5 million, which is 35% ahead of 2019. For the year, we continue to target capex, net of disposals and excluding the purchase of our headquarters, in the range of $155 million to $175 million. During the quarter, we stepped up our share repurchases as we bought back 400,000 shares at an average price of just over $55 for a total buyback of $22.2 million in Q3. Year-to-date, we have we repurchased slightly above 700,000 shares. Of our authorized $600 million share repurchase program, we have $245 million remaining. We now expect 2020 adjusted EBITDA in the range of $530 million to $550 million. This also -- this guidance also assume $3 million to $5 million of government subsidy money in Q4. In Environmental Services, we expect adjusted EBITDA to grow in the low-teens percentage above 2019's level of $446 million. Growth and profitability within incineration, contributions from the expected $100 million-plus of decontamination work, government assistance programs, and a rebound in the majority of our services business and comprehensive cost measures, are driving this positive result. For Safety-Kleen, we anticipate adjusted EBITDA to decline in the high-teens percentage from 2019's $282 million. In our Corporate segment, we expect negative adjusted EBITDA to be up a few percentage points from 2019's $188 million due to increases in 401(k) contributions, environmental liabilities, severance and bad debt, mostly offset by lower incentive compensation and cost savings. Based on our current EBITDA guidance and working capital assumptions, we now expect 2020 adjusted free cash flow in the range of $250 million to $270 million.

Earnings per share was $0.99 in Q3 versus $0.65 a year ago or $0.90 versus $0.72 on an adjusted basis.

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Given the challenging operating environment as a result of COVID-19 and we are very pleased with our results to this point in the 2020-2021 ski season across our 34 North American resorts. While our results for the second quarter continued to be negatively impacted by COVID-19, total visitation across our North American destination mountain resorts and regional ski areas were down approximately 5% compared to the same period in the prior year. Despite the travel challenges associated with COVID-19, which compares to 57% in the same period in the prior year. with destination guests, including international visitors, declining to 15% of Whistler Blackcomb visits, excluding complimentary access, which compares to 48% in the same period in the prior year. Our season pass unit sales growth of 20% for fiscal year 2021, created a strong baseline demand heading into the season across our local and destination audience and will be one of the most important drivers of our performance and relative stability for the season. For the fiscal 2021 second quarter, 71% of our visitation came from season pass-holders compared to 59% of visitation in the same period in the prior year. Our growth in pass-holders this past year also positions us well as we head into the 2021/2022 season. We are excited to launch our 2021/2022 lineup of Epic Pass products on March 23, 2021. Resort reported EBITDA margin for the fiscal 2021 second quarter was 40.3% compared to the prior year period of 40.9%, while resort net revenue decreased $240.1 million over the same period. Net income attributable to Vail Resorts was $147.8 million or $3.62 per diluted share for the second quarter of fiscal 2021, compared to net income attributable to Vail Resorts of $206.4 million or $5.04 per diluted share in the prior year. Resort reported EBITDA was $276.1 million in the second fiscal quarter, which compares to resort reported EBITDA of $378.3 million in the same period in the prior year. Fiscal year 2020 season pass revenue was adjusted to exclude the impact of the deferral in Pass product revenue as a result of pass-holder credits offered to 2019/2020 North American pass-holders. Fiscal Year 2021 season pass revenue does not include the Pass product revenue recognized in the first quarter of fiscal year 2021 as a result of unutilized pass-holder credits. This approach results in a year-over-year comparison of season pass revenue, exclusive of the impact of discounts provided to our 2019/2020 pass-holders. Season-to-date total skier visits were down 8.2% compared to the prior year season-to-date period. Season-to-date total lift revenue, including an allocated portion of season pass revenue for each applicable period, was down 8.9% compared to the prior year season-to-date period. Season-to-date ski school revenues decreased 43.2%. Dining revenue decreased 56.9%, and resort retail and rental revenue decreased 31.6%, all compared to the prior year season-to-date period. We expect net income attributable to Vail Resorts to be between $204 million and $247 million, and Resort Reported EBITDA is expected to be between $560 million and $600 million, assuming current regulations, health and safety precautions and the levels of demand and normal conditions persist through the spring, consistent with current levels. revolver availability under the Vail Holdings Credit Agreement and $179 million of revolver availability under the Whistler credit agreement. As of January 31, 2021, our net debt was 4.2 times trailing 12 months total reported EBITDA. As previously announced, the company raised $575 million of 0% convertible notes in December 2020, which provides added flexibility in terms of our ability to pursue high-impact acquisitions as well as reinvest in our resort portfolio. We have increased our core capital plan by approximately $5 million based on our updated outlook and now expect to invest approximately $115 million to $120 million, excluding onetime items associated with integration of $5 million and $12 million of reimbursable investments in real estate-related capital. We also plan to add a new four-person high-speed lift at Breckenridge to serve the popular Peak 7, replace the Peru lift at Keystone with a 6-person high-speed chairlift, and replace the Peachtree lift at Crested Butte, with a new 3-person fixed-grip lift. These investments will greatly improve uphill capacity, further enhance the guest experience and complete our $35 million capital plan for Triple Peaks. We will also continue to invest in ongoing maintenance capital to support our infrastructure across our resorts, including onetime items associated with integrations of $5 million and $12 million of reimbursable investments in real estate related capital we expect our total capital plan to be approximately $135 million to $140 million.

Net income attributable to Vail Resorts was $147.8 million or $3.62 per diluted share for the second quarter of fiscal 2021, compared to net income attributable to Vail Resorts of $206.4 million or $5.04 per diluted share in the prior year. Fiscal Year 2021 season pass revenue does not include the Pass product revenue recognized in the first quarter of fiscal year 2021 as a result of unutilized pass-holder credits. We expect net income attributable to Vail Resorts to be between $204 million and $247 million, and Resort Reported EBITDA is expected to be between $560 million and $600 million, assuming current regulations, health and safety precautions and the levels of demand and normal conditions persist through the spring, consistent with current levels. We have increased our core capital plan by approximately $5 million based on our updated outlook and now expect to invest approximately $115 million to $120 million, excluding onetime items associated with integration of $5 million and $12 million of reimbursable investments in real estate-related capital.

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In addition, noting our confidence in the business, we are pleased to announce a $0.06 increase in our quarterly dividend and an increase in our share repurchase authorization, which will continue to support our ongoing share repurchase program. For example, we believe we are the largest provider of artificial intelligence services to the federal government with 60% year-over-year revenue growth in our AI services portfolio, albeit from a small base. With less than one-quarter remaining in the three-year time horizon of our investment thesis, we are on track to deliver greater than 80% growth in ADEPS against an already ambitious 50% goal we originally set in June of 2018. Revenue and revenue excluding billable expenses increased 3% and 6.2%, respectively, compared to the same quarter last year. Revenue in defense grew 6% year-over-year, against a challenging third quarter comparable. In civil, revenue growth was 7% in the third quarter. Revenue from our intelligence business declined 3% in the third quarter. Lastly, Q3 revenue in global commercial, which accounted for approximately 3% of our total revenue, declined 35% year-over-year. Now let me step through the supply side dynamics as well as our expectations for the rest of the year. We ended the quarter with 27,566 employees, an increase of 390 or 1.4% year-over-year. Excluding the impact of the 110-person workforce transferred as a part of the army-related contract divestiture, we would have ended the quarter with 1.8% headcount growth year-over-year. On Slide 7, you'll see that total backlog increased 6.1% to $23.3 billion. Funded backlog was up 2.8% to $3.6 billion, unfunded backlog grew 12.5% to $6 billion and price options rose 4.3% to $13.7 billion. Our book-to-bill for the quarter was 0.3 times, and our last 12 months book-to-bill was 1.2 times. Adjusted EBITDA for the third quarter was $205 million, up 7.7% year-over-year. Adjusted EBITDA margin was 10.8%. Third quarter net income and adjusted net income grew 29% and 28% year-over-year to $144 million and $145 million, respectively. Diluted earnings per share and adjusted diluted earnings per share each increased 30% to $1.03 and $1.04, respectively. We generated $233 million in operating cash during the third quarter, an increase of 133% over the prior year. Cash ended the quarter at $1.3 billion. Capital expenditures for the quarter were $16 million. During the quarter, we repurchased $27 million worth of shares at an average price of $83.76 per share. Including dividends and the minority investment, we deployed a total of $142 million in the third quarter. As of January 26, with the $400 million increase, we now have a total authorization of $747 million. In addition, the company has authorized a dividend of $0.37 per share payable on March 2 to stockholders of record on February 12. With $1.3 billion in cash on hand, we continue to view our balance sheet as a strategic asset. For the full fiscal year, revenue growth is now expected to be in the range of 4.8% to 6%. Our revised range reflects $150 million to $250 million of revenues tied to the second half uncertainties we outlined earlier, the election, the budget and COVID-19. Temporary programmatic shifts of $50 million to $100 million, $50 million of risk tied to a material incremental step down in staff utilization, and lastly, lower than forecast billable expenses of $50 million to $100 million, largely from lower pandemic-related travel. We expect adjusted EBITDA margin for the year to be in the mid-to-high 10% range. We have raised the range for adjusted diluted earnings per share by $0.10 to between $3.70 and $3.85. On operating cash, we have raised the range by $25 million to between $625 million and $675 million for the full year. And finally, our outlook for capital expenditures is unchanged at $80 million to $100 million. We have confidence in exceeding 80% ADEPS growth over the three-year period. This growth is supported by 6% to 9% annualized revenue growth since fiscal year 2018 at mid-to-high 10% EBITDA margins in fiscal year 2021. We also are proud of our option value initiatives over the period and our progress toward $1.4 billion in capital deployment.

With less than one-quarter remaining in the three-year time horizon of our investment thesis, we are on track to deliver greater than 80% growth in ADEPS against an already ambitious 50% goal we originally set in June of 2018. Now let me step through the supply side dynamics as well as our expectations for the rest of the year. Diluted earnings per share and adjusted diluted earnings per share each increased 30% to $1.03 and $1.04, respectively. In addition, the company has authorized a dividend of $0.37 per share payable on March 2 to stockholders of record on February 12. For the full fiscal year, revenue growth is now expected to be in the range of 4.8% to 6%. We have raised the range for adjusted diluted earnings per share by $0.10 to between $3.70 and $3.85.

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For us, this decreased GAAP earnings in Q3 by $16 million. We received more than $1.7 billion in cash under our hedge contracts since their inception more than five years ago. Sales grew 21% year over year to $3.6 billion, a new all-time high. Gross margin expanded 50 basis points sequentially and 70 basis points year over year to 38.3%. EPS grew 30% year over year to $0.56. And free cash flow of $0.5 billion brought cumulative free cash generation for the first nine months of 2021 to $1.3 billion. Auto production in the third quarter is estimated to be down nearly 20% year over year and 9% sequentially. Broadband usage for September was up 32% versus pre-pandemic levels and up 9% versus September 2020, when remote work and school were largely in play. Global 5G subscriptions have grown to almost $0.5 billion this year. More applications are moving to the cloud and global data creation is expected to grow at 23% compound annual growth rate from 2020 to 2025. Versus 2020, cloud revenue industrywide is up nearly 50%. We are working toward passing 5 million homes per year. France recently shared that they plan to reach 10 million more homes with fiber by the end of 2025 with their CEO saying, "Our future is fiber". Microsoft CEO said that over the past year, they've added new data center clusters in 15 countries across five continents in support of their cloud business. And we're pursuing $100 per car content opportunity across emissions and auto glass solutions. Since 2017, our auto sales are up more than 40%, while global car sales are down 20%. Second, the market for large-sized TVs is projected to grow at a double-digit compound annual growth rate through 2024. And we're the leader in Gen 10.5, which is the most economical approach for larger sets. We've all seen the declines in panel pricing, and we're beginning to see panel maker utilization adjustments. Corning continues to support the pandemic response and its portfolio of advanced vials and pharmaceutical glass tubing has enabled the delivery of more than 3 billion doses of COVID-19 vaccines. Paint with Guardiant has been proven to kill 99.9% of bacteria and viruses, including the 1 that causes COVID-19. We are on track to reach $14 billion in sales and over $2 in EPS. During the third quarter, sales increased 21% year over year to $3.6 billion, led by the strength in Optical Communications and the strong performance in our other businesses. EPS grew 30% year over year to $0.56. The impact to Corning's results was approximately $40 million in sales and $0.02 of EPS. Gross margin percent expanded 50 basis points sequentially and 70 basis points year over year to 38.3% despite a net impact of 150 basis points from supply chain challenges and inflationary headwinds. Free cash flow grew to $497 million with cash generation of $1.3 billion for the first nine months of the year. For example, we were able to offset a significant portion of elevated freight costs, but resin prices increased again. Given this ongoing inflationary environment, we have price increases underway across all of our businesses. In Display Technologies, sales were $956 million, up 2% sequentially and 16% year over year. Since LCD televisions emerged as a mainstream technology in 2004, LCD TV units have only been down three times and never two years in a row. Since 2014, TV sell-through units are typically range-bound between 225 million and 235 million, which average screen size grows about 1.5 inches a year. In 2020, global television units increased 4% above the trend line to about $242 million. Screen size growth was about 1.2 inches, about 20% below trend. Entering this year, we expected and continue to expect the market to revert the trend, implying a decrease in TV units, especially smaller televisions, and for normal screen size growth of 1.5 inches to return. Television units declined by about 10% year over year while average screen size growth is in line with the 1.5 inches per year trend. Unit volume for TVs 65 inches and larger increased by a mid-teen percentage, and smaller TVs were down by a mid-teen percentage. So three quarters through the year, our expectation for TV units being down year over year and screen size growing approximately 1.5 inches are playing out. That means television units will be within the typical range of 225 million to 235 million units and average screen size will grow about 1.5 inches. We would expect the average screen size to once again grow 1.5 inches next year. And since glass pricing is primarily driven by glass supply demand balance, we expect the pricing environment to remain favorable in Q4 and also throughout 2022. We saw strong growth across the business with sales exceeding $1.1 billion, up 24% year over year and 5% sequentially. Net income was $139 million, up 21% year over year. Net income declined 6% sequentially as increased raw material and shipping costs significantly impacted profitability. In environmental technologies, our third-quarter sales were $385 million, up 2% year over year and down 5% sequentially. At the start of 2021, global vehicle production was expected to be about 88 million. By July, the industry was projecting below 85 million. And given continued chip and component constraints, forecasts now anticipate auto production around 75 million for the year. We estimate an impact on earnings per share in the third quarter of about $0.02, and we expect additional impact in the fourth quarter. Specialty materials delivered sales of $556 million, up 15% sequentially and in line with the strong third quarter in 2020 when we introduced Ceramic Shield. Over that five-year period, we've almost doubled our sales on a base of more than $1 billion. During the quarter, our glass innovations were featured in 30 new devices, including smartphones, wearables, and laptops. Life Sciences third-quarter sales were $305 million, up 37% year over year, driven by ongoing demand to support the global pandemic response, continued recovery in the academic and pharmaceutical research labs and strong demand for bioproduction vessels and diagnostic-related consumables. Our Life Sciences segment is outpacing the overall industry as evidenced by a sales CAGR of 9% over the last three years. As we look ahead to Q4, we expect core sales to be in the range of $3.5 billion to $3.7 billion and core earnings per share in the range of $0.50 to $0.55. Since 2019, sales have grown at a 10% CAGR and ahead of the 6% to 8% target. Our most recent capacity expansions or as we like to call them, build investments are fully ramped, have enabled the $2.5 billion of sales we've added since 2019, and are delivering more than 20% ROIC. Our aggregate free cash flow generation for 2020 and 2021 is expected to be more than $2.5 billion. Finally, we remain steadfast in our commitment to investing in growth and extending our leadership while returning excess cash to shareholders through share repurchases and a 10% annual increase in our dividend. In April, we resumed share buybacks with the Samsung transaction where we repurchased 4% of our fully diluted shares.

EPS grew 30% year over year to $0.56. Second, the market for large-sized TVs is projected to grow at a double-digit compound annual growth rate through 2024. We've all seen the declines in panel pricing, and we're beginning to see panel maker utilization adjustments. We are on track to reach $14 billion in sales and over $2 in EPS. EPS grew 30% year over year to $0.56. The impact to Corning's results was approximately $40 million in sales and $0.02 of EPS. For example, we were able to offset a significant portion of elevated freight costs, but resin prices increased again. Given this ongoing inflationary environment, we have price increases underway across all of our businesses. In Display Technologies, sales were $956 million, up 2% sequentially and 16% year over year. And since glass pricing is primarily driven by glass supply demand balance, we expect the pricing environment to remain favorable in Q4 and also throughout 2022. In environmental technologies, our third-quarter sales were $385 million, up 2% year over year and down 5% sequentially. As we look ahead to Q4, we expect core sales to be in the range of $3.5 billion to $3.7 billion and core earnings per share in the range of $0.50 to $0.55.

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But not only did we do that, but in a very short period of time, we had almost 15,000 people that had to go from office work to work from home, and this is a true testament of the hard work and the dedication of our team. Sean has been a valued member of our team since 2007. Fourth quarter sales were $8.45 billion. Sales increased 13% year-over-year on a non-GAAP basis. The average euro-dollar exchange rate for the quarter was $1.19 to EUR1 compared to the rate of a $1.16 we've used for forecasting. Strengthening of the euro relative to the dollar boosted sales by approximately $50 million compared to what we had anticipated in our prior guidance. Global component sales were $5.92 billion. Global component's non-GAAP operating margin was 4%, up 40 basis points year-over-year. Enterprise computing solutions sales of $2.53 billion were above the midpoint of our prior expected range. Global enterprise computing solutions non-GAAP operating income margin increased by 30 basis points year-over-year to 6.3%, the highest level since 2017. For the full-year 2020, our effective tax rate was near the low-end of our long-term range of 23% to 25%. We continue to see 23% to 25% as our appropriate target range going forward. Non-GAAP diluted earnings per share were $3.17, it's $0.44 [Phonetic] above the high-end of our prior expectation, approximately $0.04 of the upside to prior guidance was attributable to more favorable exchange rates. Turning to the balance sheet and cash flow, operating cash flow was $200 million, despite substantially stronger demand than we anticipated. Our cash cycle improved by two days compared to the third quarter and 11 days compared to last year. Ending 2020, debt decreased by $715 million compared to 2019. We returned approximately $100 million to shareholders during the fourth quarter through our share repurchase plan. The remaining authorization under our existing plan is approximately $463 million.

Fourth quarter sales were $8.45 billion. Non-GAAP diluted earnings per share were $3.17, it's $0.44 [Phonetic] above the high-end of our prior expectation, approximately $0.04 of the upside to prior guidance was attributable to more favorable exchange rates.

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Now let's discuss our second quarter results, in which we achieved a $1.54 in adjusted EPS, an 86% increase over Q2 of 2019, and adjusted EBITDA of $92 million, an increase of 62%. Average paid worksite employees declined by just 1.8% from Q2 of 2019 compared to our forecast of 1% to 5% decline that took into account the impact of the COVID-19 pandemic on our clients and prospects. Worksite employees paid from new client sales were approximately 20% above forecasted levels, driven by 15% increase in trained Business Performance Advisors and success in our mid-market segment. Client retention held up at our historical high level of just over 99% during Q2. So let's move on to gross profit, which increased by 27% over Q2 of 2019. These credits totaled approximately $12 million and were accrued in the second quarter. These deferrals and credits totaled approximately $45 million during Q2 and were reported as both a reduction to revenue and direct costs. So in total, these two items reduced Q2 reported revenues by approximately $57 million and gross profit by approximately $12 million. Second quarter operating expenses increased by 9% and included continued investments in our growth, including costs associated with the increase in the number of Business Performance Advisors. Our effective tax rate in Q2 came in at 27%, and we expect a similar rate over both the latter half of this year and for the full-year 2020. Adjusted cash totaled $269 million at June 30, up from $108 million at December 31, 2019, while borrowings totaled $370 million at the end of Q2, up from $270 million at December 31, 2019. Over the first half of this year, we have repurchased 879,000 shares of stock at a cost of $61 million, paid $31 million in cash dividends and invested $39 million in capital expenditures. In more than 30 years, I've never seen a quarter where clients experienced more of what we are designed to offer in such a compressed time period. On our last call, we indicated our objective in new account sales operating in this virtual selling environment would be to fall within a range of 60% to 80% of our original 2020 pre-COVID sales budget. Our entire sales organization, both core and mid-market performed remarkably well, achieving total booked sales above 70% of our original 2020 pre-COVID sales budget and in the higher end of our own revised targeted range. During the quarter, we worked with vendors and negotiated $12 million in fee reductions to pass along to clients. Now in the second quarter, layoffs due to COVID drove a 6% reduction in paid worksite employees from March, reaching a low point at the end of May. Now since then, we've recovered approximately 40% of this reduction, primarily due to the return to work of just over 50% of furloughed employees. At the same time, approximately 17% of furloughed or temporarily laid off employees have been reclassified to permanent layoffs, so the number of potential rehires has been reduced by two-thirds. Our full year guidance for 2020 implies a range of minus 1% to minus 3% unit growth in paid worksite employees. We expect a range of adjusted EBITDA growth that straddles to the level we achieved last year at minus 6% to plus 2%. Based upon the details that Paul just shared on our expected worksite employee levels, we are now forecasting a 1% to 3% decrease in the average number of paid worksite employees for the full-year 2020. This is a substantial improvement over our previous guidance of a 1% to 6% decrease and reflects the more favorable starting point for the second half of the year. For the full-year 2020, we are raising our earnings guidance and now forecasting adjusted EBITDA of $235 million to $255 million, ranging from a decrease of 6% to an increase of 2% when compared to 2019. This compares to our previous guidance, which ranged from a decrease of 14% to flat with 2019. Finally, our updated earnings guidance assumes a reduction of approximately $3 million in net interest income from our previous guidance due to the recent decline in interest rates. As for the full year 2020 adjusted EPS, we are now forecasting a range of $3.67 to $4.04, up from our previous guidance of $3.19 to $3.86. Now as for Q3, we are forecasting average paid worksite employees in a range of 227,500 to 230,000, which is a small sequential increase over Q2. We are forecasting adjusted EBITDA in a range of $29 million to $38 million and adjusted earnings per share in a range of $0.37 to $0.54.

Now let's discuss our second quarter results, in which we achieved a $1.54 in adjusted EPS, an 86% increase over Q2 of 2019, and adjusted EBITDA of $92 million, an increase of 62%. Our full year guidance for 2020 implies a range of minus 1% to minus 3% unit growth in paid worksite employees. We are forecasting adjusted EBITDA in a range of $29 million to $38 million and adjusted earnings per share in a range of $0.37 to $0.54.

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U.S. GDP is growing at 4.3%, over 1.6 million jobs were created in the first quarter. Weekly jobless claims are in decline and unemployment has dropped to 6%, only 2.5 percentage points above pre-pandemic levels of February last year. U.S. retail sales surged 9.8% in March and air travel, as measured by TSA checkpoints, is up 10 times over a year ago, but still only 50% of pre-pandemic level. While new COVID-19 cases have remained sticky at around 60,000 per day since late February, all data, including three million daily vaccinations, 43% of Americans having received at least one shot and the J&J vaccine reinstatement suggest the trajectory for a highly vaccinated population and fewer new COVID infections remains positive. In the first quarter, we completed 592,000 square feet of leasing, 84% of the leasing volume we achieved in the first quarter of last year and 46% of our longer-term first quarter average. These leases had a weighted average term of 7.6 years. Our leases that commenced this quarter demonstrated a 15% roll-up of net rent for second-generation space. More broadly, tenant requirements in our target markets in March, based on data provided by VTS, were up 33% versus the prior month and 51% versus the prior year, though we're only down -- though are still down 40% from pre-pandemic levels. Now moving to private equity market conditions, there were $15 billion of significant office assets sold in the first quarter, though volumes were down 37% from the first quarter of last year. There were again several deals of note completed in our markets, including in San Francisco The Exchange on 16th located in the Mission Bay district sold for $1.1 billion or $1,440 per square foot, a record price per square foot in San Francisco and it represented a 4.9% cap rate. This 750,000 square foot recently developed building is 100% leased to a tenant trying to sublease the entire building. In Seattle, 300 Pine, the Macy's building sold for $600 million or $779 per square foot and a 4.4% cap rate. The majority of this 770,000 square foot asset was recently converted to office space, which is 100% leased by Amazon, and the remainder is undergoing further renovation. And in the Washington, D.C. CBD, a 49% interest in Midtown Center was sold to an offshore buyer. The building comprises 870,000 square feet and is substantially leased to Fannie Mae as its headquarters. The gross sale price was $980 million, $1,129 a square foot and a 4.7% cap rate. We recently received one million square feet of new entitlements at Kendall Center in Cambridge, and our joint venture at Gateway Commons is in discussions with local authorities in San Francisco to increase entitlements by 1.5 million square feet. 180 CityPoint, a 330,000 square foot ground-up development and part of our larger CityPoint campus in Waltham with strong visibility from I-95. Second, 880 Winter Street is a 224,000 square foot Class A office asset we acquired in 2019 for $270 a square foot, and we'll redevelop into a lab building. And 751 Gateway, a 229,000 square foot ground-up lab development as part of our Gateway Commons joint venture in which we own a 49% interest. A large portion of our active development pipeline is now lab and currently comprises 920,000 square feet and $560 million of projected investment for our share with projected cash yield at stabilization approximately 8%. We delivered into service this quarter, 159 East 53rd Street with 195,000 square feet of office fully leased to NYU as well as the HU, which will open after Labor Day and serve as a unique culinary amenity for our three building, 53rd in Lexington Campus. We remain on track to deliver our 100 Causeway development in Boston later this year, which is pre-leased to Verizon, and we have four additional and significant projects slated to deliver in 2022. This pipeline is 86% pre-leased with aggregate projected cash yield stabilization projected to be approximately 7%. To maintain our external growth, in addition to adding the three life science projects, we also are investing approximately $182 million into an observatory redevelopment project on the top of the Prudential Tower in Boston. When complete, the observatory will have three levels, comprise 59,000 square feet and will be a world-class attraction, featuring both indoor and outdoor, 360-degree viewing decks as well as exhibit an amenity spaces. Net of all these movements, our active development pipeline currently stands at 10 development and redevelopment projects comprising 4.3 million aggregate square feet and $2.7 billion in total investment for our share. We expect these projects, along with the lease-up of two residential buildings delivered in 2020 as well as 159 East 53rd Street to contribute 3.5% of annual and external growth to our NOI over the next three years. The partners, including BXP, will commit up to $1 billion and we'll have the opportunity to invest 1/3 of the equity in each identified deal at their discretion. We believe this venture with approximately $2 billion of investment capacity provides us the financial resources and return enhancements to be an even more nimble and competitive participant in the acquisitions market. We recently completed the sale of our 50% interest in Annapolis Junction, Buildings six and 7, our last two remaining properties in the Fort Meade, Maryland market. The buildings totaled approximately 247,000 square feet and sold for a gross price of $66 million, which is $267 a square foot. We have under contract three buildings in our VA 95 Business Park in Springfield, Virginia for a gross sale price of $70 million. And we also have under letter of intent, the sale of several stabilized suburban buildings for another approximately $190 million. Additional asset sales are being evaluated, and we believe our gross disposition volume in 2021 will exceed $500 million. Leasing volumes and requirements are rising, office collections exceed 99%. Our $30 million per quarter of lost variable revenue is poised to return with offices reopening. Although just yesterday, as an example, we had our meeting for our California parking, and we had 67 requests for additional monthly spaces, 42 of them which are hard. And to give you a perspective, we actually lost more than half of our monthly parking over 800 monthly spaces in Embarcadero Center. In Boston, we had a 50,000 square foot tenant, two floors in our CBD portfolio list their entire space. And yesterday, JLL came out with a report saying there was about 1.5 million square feet of New York City sublet space that was brought -- pulled from the market by those subtenants. So the average gross rent on our expiring office space portfolio in 2021, 2022 and 2023, so the next almost three years, totals about 5.8 million square feet and the average expiring rent is about $65.50 per square foot. So if you believe that pre-pandemic market rents on that space were $70 a square foot, and I'm just using that as an example but it's close, and you wanted to measure the impact of some kind of a decline. And this is an example, not a statement of where I think -- what we think is going on with rent, so let's use 10% as an example, then you would get to about a 4% roll down in rent or $2.50 a square foot or approximately $4.8 million per year over three years. And as a point of reference, the change in second-generation gross lease rents this quarter was positive 9.5%. Our in-service portfolio occupancy includes a 100% of our JVs, ended the quarter 140 basis points down or 640,000 square feet. Now 50% of that space that was added to our vacancy this quarter provided no revenue over the last 12 months. That's a 66,000 square foot lease at the hub on Causeway joint venture. Also this quarter, we took back 62,000 square feet in a recapture, so we could expand a growing tenant that we are negotiating a lease extension on and expansion at Colorado Center. We did have one disappointment, which was the 200,000 square foot departure at the Santa Monica Business Park. We, however, today, as I sit here talking to you, have 640,000 square feet of signed leases that have yet to commence, and they are not included in our occupied in-service portfolio. So let's start in Boston, which, by the way, represents over 1/3 of the company's total revenue. So during the first quarter in the Boston CBD, we did five leases totaling 37,000 square feet. And in every case, the starting rent represented a gross rent roll-up of between 12% and 25%. We continue to have additional activity in the CBD portfolio, albeit it's with a preponderance of smaller tenants since we don't have much in the way of blocks available, and we are working on eight leases totaling over 60,000 square feet. Of the 13 leases we have done this quarter or in the works, none of those customers are contracting and five are expanding and more than doubling their footprint. In the suburban portfolio, we completed 124,000 square foot of new leasing. The cash rent on those leases was up by 50%. In Waltham, we're negotiating six more transactions totaling over 60,000 square feet. But we will be gaining occupancy with new tenants coming into the BXP portfolio, like our new tenants at 20 CityPoint and 195 West Street in Waltham. We announced our plans to reposition 880 Winter Street in early March and have had significant tour activity and have begun making proposals. This 220,000 square-foot building will be available for tenant build-out in the second quarter of '22. We completed three leases during the quarter totaling just 38,000 square feet, including a full floor expansion by a tenant at 399 Park. In total, the growth rents on this space was about 5% higher than the in-place rents. Now I said, New York City is our second most active region, and we're negotiating 14 office leases totaling over 170,000 square feet, including a full floor lease at Dock 72 in Brooklyn. We also have two other active proposals at Dock 72, each in excess of 100,000 square feet. five of the 14 active deals represent tenants that are negotiating expansions. We're negotiating leases for food outlets at our 53rd Street, are eagerly anticipating the opening of the HU Culinary Collective at 601 Lex later this year, and we have a new lease negotiation for our vacancy on The Street at -- in Times Square Tower. In Princeton, during the quarter, we completed four transactions and we executed a fifth at the beginning of April for a total of 28,000 square feet, and we're negotiating leases for another 29,000 square feet, all new tenants. Activity in the D.C. region was light during the quarter with only 50,000 square feet of office leasing. But as the calendar moved to April, we signed another 170,000 square feet. 210,000 square feet of this total leasing was completed on currently vacant space and included two large leases at Met Square in the district and an expanding tenant in Reston Town Center. We have another 68,000 square feet of leases in process in the D.C. region, including 25,000 square feet in Reston from another expanding tenant. In the Town Center, rents are basically flat to slightly down 1% to 2% since the relet rents have been adjusted by the fact that the current rents have been increasing contractually by 2.5% to 3% for the last five to 10 years. We're negotiating leases with new food outlets totaling 27,000 square feet. The markup on these three deals totaling 125,000 square feet was 46%. Tour activity for small tenants, a floor or under, has picked up and grown about 40% sequentially month-to-month from January to April. But large tenants have started to begin to look for space. We see the activity and the proposals on the available sublet space we have at 680 Folsom. In South San Francisco, we signed a lease of 61,000 square feet at 601 Gateway. That's going to absorb about 50% of the expiration that's going to occur in the second quarter. We are under way at 751 Gateway, our first lab facility development in South San Francisco and have begun responding to proposals for this early 2023 delivery. 651 Gateway will be taken out of service in the second quarter of '22 when the final tenant vacates, and we will commence a lab conversion of that 293,000 square foot building. We're in renewal discussions with 24,000 square foot tenant and has commenced lease negotiation with a second tenant for 30,000 square feet on market-ready vacant space, and we have a tenant ready to go on a remaining floor of 18,000 square feet at 2440 El Camino. There are some large tech tenants in the market down in the valley today looking for expansion space, and we are certainly chasing those tenants if the timing were to match for our potential delivery at Platform 16. In spite of the challenging COVID conditions in California and Santa Monica, we continue our renewal negotiations with a 260,000 square foot tenant at Colorado Center. And as I said at the outset, we've recaptured about 60,000 square feet that's going to roll into that tenant's expansion. We've also signed a lease for 72,000 square feet at Colorado Center with Roku, who's new to the portfolio. As we guided last quarter, we redeemed the $850 million of our expiring unsecured bonds that had a 4% and 8% coupon using available cash. But in addition to that and not part of our prior guidance, we issued another $850 million of new 11-year unsecured green bonds at an attractive coupon of 2.55%. The proceeds were used to repay our $500 million unsecured term loan that was due to expire next year and we redeemed at par an expensive $200 million, 5.25% preferred equity security. We incurred noncash charges during the quarter of approximately $7 million or $0.04 per share related to writing off unamortized financing costs. Our next bond expiration is not until early 2023, when we have $1 billion expiring at an above-market interest rate of 3.95%. In advance of that in early '22, we have a $626 million mortgage expiring on 601 Lexington Avenue in New York City. This loan also carries an above-market interest rate of 4.75%. For the first quarter, we reported FFO of $1.56 per share, that was $0.01 above the midpoint of our guidance range. The variances to our guidance were comprised of $0.04 per share of higher NOI from the portfolio and $0.01 per share of higher fee income, partially offset by the $0.04 per share noncash charge related to our refinancing activity. The portfolio NOI outperformance included $0.02 per share of lower operating expenses during the quarter, much of which will be incurred later in the year. These collections drove a significant portion of our $0.02 revenue beat. At the midpoint, this is $0.04 per share better sequentially from the first quarter. And as Doug explained, our occupancy declined by 140 basis points this quarter, which was expected, but results in a sequential drop in portfolio NOI from the half that was paying rent before. Doug described 640,000 square feet of signed leases that have yet to commence occupancy. 460,000 square feet of this will take occupancy later this year, representing over 100 basis points of occupancy pickup. First, our financing activities during the first quarter have a net impact of increasing interest expense by $5 million for the year. Second, we have a loss of rental revenue from taking 880 Winter Street out of service for redevelopment into a life science facility. This has a negative impact of about $2 million. And lastly, the additional $260 million of dispositions that Owen described are expected to result in a loss of about $7 million of NOI. In aggregate, these items are expected to reduce FFO for the rest of 2021 by approximately $14 million or $0.08 per share. We anticipate delivering 100 Causeway Street in Boston and 200 West Street in Waltham late in 2021, representing $315 million of investment at our share that is collectively 95% leased. This includes our building for Google in Cambridge; Reston Next for Fannie Mae in Volkswagen; the Marriott Headquarters in 2100 Pennsylvania Avenue. This represents delivery of $1.7 billion of investment in 2022 at our share and 2.7 million square feet that is currently 85% pre-leased. This $2 billion of investment in conjunction with the recovery of our ancillary income sources and improved leasing activity post-pandemic sets us up for occupancy improvement in a period of solid future earnings growth. This will be Peter Johnston's last earnings call as he's retiring from Boston Properties next month after 33 years of service.

But large tenants have started to begin to look for space. For the first quarter, we reported FFO of $1.56 per share, that was $0.01 above the midpoint of our guidance range.

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Yesterday, we declared a $1 per share special dividend to demonstrate our commitment to returning cash to shareholders. Combined with a regular dividend, we expect to return $1.5 billion to our shareholders through dividends in 2021. This quarter, we generated a quarterly record $1.1 billion of free cash flow and earned $1.62 per share of adjusted net income, the second-highest quarterly earnings in company history. In 2016, during the last downturn, we established our premium investment strategy which requires a 30% direct after-tax rate of return at $40 oil and $2.50 natural gas. It is the reason we entered 2020 in a position of operational and financial strength, which enabled us to generate positive adjusted net income and free cash flow in a year of unprecedented oil volatility and prices that averaged just $39. This year, we increased the return hurdle once again, doubling it to 60% at $40 oil and $2.50 natural gas. 5,700 double-premium locations is more than 10 years' worth of inventory at our current pace of drilling and is more than we had when we made the transition of premium five years ago. Our exploration program is focused exclusively on prospects that will improve on that 60% median return. In fact, our anticipated return on the current slate of new exploration plays is more than 80%. As we replace our production base by drilling locations with higher well level returns, the price required to earn 10% return on capital employed continues to fall. Prior to establishing premium, EOG required oil prices upwards of $80 to earn a 10% ROCE. As the premium strategy matured, the oil price needed to earn 10% ROCE came down and averaged just $58 the last four years. For 2021, that price is just $50 and we're not stopping there. We more than doubled the dividend over the last four years and improved our balance sheet, reducing net debt by nearly $3. As a result, net debt to total capital at the end of last year was just 11%. As a result, our first-quarter daily production declined just 3% compared to the fourth quarter last year. Our capital for the quarter came in under our forecasted target by 6%, mainly due to improvements in well costs across the company. The savings realized during the first quarter are in addition to the tremendous 15% reduction last year. EOG is on track to reduce well costs another 5% this year despite some potential inflationary pressure as industry activity resumes. The savings we realized by installing water-reuse pipelines and facilities saves about 7% of well costs compared to third-party sourcing and disposal. The number of wells one lease operator can maintain has increased by as much as 80% by optimizing the use of innovative software designed and built by EOG. Since 2017, the dividend has grown from $0.67 per share to a $1.65 per share. Now, an annual commitment of almost $1 billion. Since the shift to premium, we have also retired bond maturities totaling about $2 billion with plans to retire another $1.25 billion in 2023 when the bond matures. Net debt to total capitalization was 8% at the end of the first quarter. Strong balance sheet extends to ensuring ample liquidity, which we have also secured with no near-term debt maturities, $3.4 billion of cash on hand, and a $2 billion unsecured line of credit. The $1 per share special dividend falls through -- these consistent long-tailed priorities. At $600 million, the special dividend is a meaningful amount while also aligning with our other priorities. After paying the special dividend, we will have $2.8 billion of cash on hand, a full $800 million above our minimum cash target. This is a healthy down payment on the $1.25 billion bond maturing in two years.

This quarter, we generated a quarterly record $1.1 billion of free cash flow and earned $1.62 per share of adjusted net income, the second-highest quarterly earnings in company history.

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Orders were up double digits in all three of our business segments, and backlog was up 23% organically. Both Western Europe and emerging markets delivered exceptional organic revenue growth, with Western Europe up 11% and emerging markets up 33% year on year and with momentum up strong sequentially. demand also continued to recover with orders up 18%. Revenue grew 8% organically versus the same period last year with performance better than our expectations across the board. Geographically, emerging markets in Western Europe both grew double digits, while the U.S. was down 1%. But in short, utilities were up 3%; industrial was up 14%; commercial, up 5%; and residential was up 31%. Organic orders grew 19% in the quarter as all three business segments contributed double-digit order gains. Margins were above our forecasted range with EBITDA margin coming in at 17.1% and operating margin at 11.4%. The 480 basis points of EBITDA expansion came largely from volume and productivity, partially offset by inflation. Earnings per share in the quarter was $0.56, which is up 143%. Water infrastructure orders in the first quarter were up 14% organically versus last year with revenues up 11%. EBITDA margin and operating margin for the segment were up 430 and 490 basis points, respectively, as strong productivity and volume leverage offset inflation. In the applied water segment, orders were up 25% organically in the quarter, driven by recovery in demand in North America and strength in Western Europe. Revenue was up 13% in the quarter with growth in all end markets and geographies. Residential and industrial grew 31% and 15%, respectively, while commercial grew 5%. By contrast, improving commercial demand in Western Europe contributed 15% growth with additional strength in residential. Emerging markets were up 51% due to the timing of prior-year COVID shutdowns, as well as commercial recovery in Middle East and Africa. Segment EBITDA margin and operating margins grew 250 and 280 basis points, respectively. In M&CS, orders were up 19% organically in the quarter with double-digit growth across both water and energy applications, driven by large metrology projects. Segment backlog is up 29%. Emerging markets were up 8%, and Western Europe grew 9% from metrology project deployments and demand in the test business. Segment EBITDA margin and operating margins in the quarter were up 770 and 600 basis points, respectively. We closed the quarter with $1.7 billion in cash. Net debt-to-EBITDA leverage was 1.6 times at the end of the quarter. You've already heard about our emerging markets team's exceptional first-quarter performance with revenue and orders up 33% and 21%, respectively. The result was solid margin expansion with incremental margins coming in at 55%. We'll be reporting, for example, that, in 2020, we helped our customers prevent 1.4 billion cubic meters of polluted water from entering local waterways. For Xylem overall, we now see full-year 2021 organic revenue growth in the range of 5% to 7%, up from our previous guidance of 3% to 5%. For 2021, we expect adjusted EBITDA margin to be at 90 to 140 basis points to a range of 17.2% to 17.7%. For your convenience, we are also providing the equivalent adjusted operating margin here, which we now expect to be in the range of 12% to 12.5%, up 120 to 170 basis points. Benefits from restructuring savings remain unchanged, and this yields an adjusted earnings per share range of $2.50 to $2.70, an increase of 21% to 31% over last year. We continue to expect free cash flow conversion of between 80% to 90%, as previously guided, putting our three-year average right around 130%. And we expect to continue delivering cash conversion of greater than 100% going forward. Our balance sheet will remain very strong even after $600 million of senior notes are retired in the fourth quarter, which clearly offers considerable room for capital deployment. Those assumptions are unchanged from our original guidance, including our euro to dollar conversion rate of 1.22. We anticipate total company organic revenues will grow in the range of 8% to 10%. We expect second-quarter adjusted EBITDA margin to be in the range of 16.7% to 17.2%, representing 140 to 190 basis points of expansion versus the prior year.

Earnings per share in the quarter was $0.56, which is up 143%. For Xylem overall, we now see full-year 2021 organic revenue growth in the range of 5% to 7%, up from our previous guidance of 3% to 5%. Benefits from restructuring savings remain unchanged, and this yields an adjusted earnings per share range of $2.50 to $2.70, an increase of 21% to 31% over last year.

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The world has two challenges to grow our global energy supply by about 20% in the next 20 years and to reach net zero emissions by 2050. Our reasonable estimate for global oil and gas investment from these IEA scenarios is at least $400 billion each year over the next 10 years. Last year, that number was $300 billion. This year's estimate is $340 billion. Based upon the most recent sell side consensus estimates, our cash flow is estimated to grow at a compound annual growth rate of 42% between 2020 and 2023, which is 50% above our peers and puts us in the top 5% of the S&P 500. As of September the 30th, we had $2.4 billion of cash on the balance sheet. In July, we prepaid half of our $1 billion term loan maturing in March 2023 and we plan to repay the remaining $500 million in 2022. This debt reduction combined with the start up of lease of Phase 2 early next year, is expected to drive our debt to EBITDAX ratio under 2% and also enable us to consider increasing cash returns to shareholders. In August, we completed the sale of our interest in Denmark for total consideration of $150 million effective January 1, 2021, and received $375 million in proceeds from Hess Midstream's buyback of Class B units from its sponsors Hess Corporation and Global Infrastructure Partners. Earlier this month, our company also received net proceeds of $108 million from the public offering of Hess-owned Class A shares of Hess Midstream. On the Stabroek Block, where Hess has a 30% interest and ExxonMobil is the operator, we announced the 19th and 20th of significant discoveries during the third quarter at Whiptail and Pinktail. We see the potential for at least six FPSOs on the Stabroek Block producing more than $1 million gross barrels of oil per day in 2027, and up to 10 FPSOs to develop the discovered resources on the block. On October 7th, we increased the gross discovered recoverable resource estimate for the block to approximately 10 billion barrels of oil equivalent, up from the previous estimate of more than 9 billion barrels of oil equivalent. In terms of our current Guyana developments, gross production from the lease of Phase 1 complex average 124,000 barrels of oil per day in the third quarter. The lease of Phase 2 development is on track for start-up in early 2022 with a gross production capacity of 220,000 barrels of oil per day and the leasing Unity FPSO arrived in Guyana on Monday. Our third development on the Stabroek Block at the Payara field is on track to achieve first oil in 2024 also with a gross capacity of 220,000 barrels of oil per day. Our three-sanctioned oil developments have a breakeven Brent oil price of between $25 and $35 per barrel. Pending government approvals, the project is envisioned to have a gross capacity of approximately 250,000 barrels of oil per day with first oil in 2025. Earlier this month, our company received a AAA rating in the MSCI ESG ratings for 2021 after earning A ratings for the previous 10 consecutive years. That is not only industry leading, but which we believe will rank among the best in the S&P 500. Companywide net production averaged 265,000 barrels of oil equivalent per day excluding Libya in line with our guidance. In the fourth quarter and for the full year 2021, we expect companywide net production to average approximately 295,000 barrels of oil equivalent per day excluding Libya. Turning to the Bakken, third quarter net production averaged 148,000 barrels of oil equivalent per day. This was above our guidance of approximately 145,000 barrels of oil equivalent per day and primarily reflected strong execution of the Tioga Gas Plant turnaround and expansion, no small task in a COVID environment that required strict adherence to extensive safety protocols to keep more than 650 workers safe. For the fourth quarter, we expect Bakken net production to average between 155,000 and 160,000 barrels of oil equivalent per day. For the full year 2021, we forecast our Bakken net production to average approximately 155,000 barrels of oil equivalent per day, compared to our previous guidance range of 155,000 to 160,000 barrels of oil equivalent per day. In the third quarter, we drilled 18 wells and brought 19 new wells online. In the fourth quarter, we expect to drill approximately 19 wells and to bring approximately 18 new wells online. And for the full year 2021, we continue to expect to drill approximately 65 wells and to bring approximately 50 new wells online. In terms of drilling and completion costs, although we have experienced some cost inflation, we are maintaining our full year average forecast of $5.8 million per well in 2021. In the deepwater Gulf of Mexico, third quarter net production averaged 32,000 barrels of oil equivalent per day, compared to our guidance range of 35,000 to 40,000 barrels of oil equivalent per day. In the fourth quarter, we forecast Gulf of Mexico net production to average between 40,000 and 45,000 barrels of oil equivalent per day. For the full year 2021, our forecast for Gulf of Mexico net production remains approximately 45,000 barrels of oil equivalent per day. In Southeast Asia, net production in the third quarter was 50,000 barrels of oil equivalent per day in line with our guidance of 50, 000 to 55,000 barrels of oil equivalent per day, reflecting the impact of planned maintenance shutdowns and lower nominations due to COVID. Fourth quarter net production is forecast to average approximately 65,000 barrels of oil equivalent per day and our full year 2021 net production forecast remains at approximately 60,000 barrels of oil equivalent per day. In the third quarter, gross production from Liza Phase 1 averaged 124,000 barrels of oil per day or 32,000 barrels of oil per day net to Hess. Net production from Liza Phase 1 is forecast to average approximately 30,000 barrels of oil per day in the fourth quarter and for the full year 2021. Liza Phase 2 development will utilize the 220,000 barrels of oil per day Unity FPSO, which arrived in Guyana Monday evening. The overall project is approximately 60% complete. The Prosperity will have a gross production capacity of 220,000 barrels of oil per day, and is on track to achieve first oil in 2024. The Yellowtail project will utilize an FPSO with a gross capacity of approximately 250,000 barrels of oil per day. In July, we announced that the Whiptail 1 and 2 wells encountered 246 feet and 167 feet of high quality oil bearing sandstone reservoirs respectively. This discovery is located approximately four miles southeast of well 1 and 3 miles west of the Yellowtail. In September, we announced that the Pinktail 1 well located approximately 22 miles southeast of Liza 1 encountered 220 feet of high quality oil bearing sandstone reservoirs. And finally earlier this month, we announced a discovery of Cataback located approximately 4 miles east of Turbot 1. The well encountered 203 feet of high quality hydrocarbon bearing reservoirs, of which approximately 102 feet was oil bearing. These discoveries further underpin future developments and contributed to the increase of estimated gross discovered recoverable resources on the Stabroek Block to approximately 10 billion barrels of oil equivalent. Exploration and appraisal activities in the fourth quarter will include drilling [Indecipherable] exploration well located approximately 11 miles northwest of Liza 1. Appraisal activities in the fourth quarter will include drill-stem tests at Longtail 2 and Whiptail 2 as well as drilling the Tripletail 2 well. We had net income of $115 million in the third quarter of 2021, compared with a net loss of $73 million in the second quarter of 2021. On an adjusted basis, which excludes items affecting comparability of earnings between periods, we had net income of $86 million in the third quarter of 2021, compared to net income of $74 million in the second quarter of 2021. Third quarter earnings include an after-tax gain of $29 million from the sale of our interest in Denmark. On an adjusted basis, E&P had net income of $149 million in the third quarter of 2021, compared to net income of $122 million in the previous quarter. Higher realized crude oil NGL and natural gas selling prices increased earnings by $110 million. Lower sales volumes reduced earnings by $147 million. Lower DD&A expense increased earnings by $37 million. Lower cash costs increased earnings by $14 million. Lower exploration expenses increased earnings by $10 million. All other items increased earnings by $3 million. For an overall increase in third quarter earnings of $27 million. In Guyana, we sold three 1 million barrel cargoes of oil in the third quarter, up from two 1 million barrel cargoes of oil sold in the second quarter. For the third quarter, our E&P sales volumes were under lifted compared with production by approximately 175,000 barrels, which had an insignificant impact on our after-tax results for the quarter. The Midstream segment had net income of $61 million in the third quarter of 2021, compared with $76 million in the prior quarter. Midstream EBITDA before noncontrolling interest amounted to $203 million in the third quarter of 2021, compared with $229 million in the previous quarter. Turning to our financial position at quarter-end excluding Midstream, cash and cash equivalents were $2.41 billion and total liquidity was $6 billion, including available committed credit facilities, while debt and finance lease obligations totaled $6.1 billion. During the third quarter, we received net proceeds of $375 million from the sale of $15.6 million Hess-owned Class B units of Hess Midstream and proceeds of approximately $130 million from the sale of our interest in Denmark. In July, we prepaid $500 million of our $1 billion term loan and we plan to repay the remaining $500 million in 2022. In October, we received net proceeds of approximately $108 million from the public offering of 4.3 million Hess-owned Class A shares of Hess Midstream. Our ownership in Hess Midstream on a consolidated basis is approximately 44% compared with 46% prior to these two recent transactions. In the third quarter, net cash provided by operating activities before changes in working capital was $631 million, compared with $659 million in the second quarter. In the third quarter, net cash provided by operating activities after changes in operating assets and liabilities was $615 million, compared with $785 million in the second quarter. Net cash provided by operating activities by $16 million compared with an increase of $126 million in the second quarter. First for E&P, our E&P cash costs were $12.76 per barrel of oil equivalent including Libya and $13.45 per barrel of oil equivalent excluding Libya in the third quarter of 2021. We project E&P cash cost excluding Libya to be in the range of $12 to $12.50 per barrel of oil equivalent for the fourth quarter and $11.75 to $12 per barrel of oil equivalent for the full year, compared to previous full year guidance of $11 to $12 per barrel of oil equivalent. DD&A expense was $11.77 per barrel of oil equivalent including Libya and $12.38 per barrel of oil equivalent excluding Libya in the third quarter. DD&A expense excluding Libya is forecast to be in the range of $13 to $13.50 per barrel of oil equivalent for the fourth quarter and the full year is expected to be in the range of $12.50 to $13 per barrel of oil equivalent. This results in projected total E&P unit operating costs excluding Libya to be in the range of $25 to $26 per barrel of oil equivalent for the fourth quarter and $24.25 to $25 per barrel of oil equivalent for the full year of 2021. Exploration expenses excluding dry hole costs are expected to be in the range of $50 million to $55 million in the fourth quarter and approximately $160 million for the full year, which is at the lower end of our previous full year guidance of $160 million to $170 million. The Midstream tariff is projected to be approximately $295 million for the fourth quarter and approximately $1.95 billion for the full year. E&P income tax expense excluding Libya is expected to be in the range of $35 million to $40 million for the fourth quarter and the full year is expected to be in the range of $135 to $140 million, which is up from previous guidance of $125 million to $135 million, reflecting higher commodity prices. We expect non-cash option premium amortization will be approximately $65 million for the fourth quarter. For the year 2022, we have purchased WTI collars for 90,000 barrels of oil per day with the floor price of $60 per barrel and a ceiling price of $90 per barrel. We have also entered into Brent collars for 60,000 barrels of oil per day with a floor price of $65 per barrel and a ceiling price of $95 per barrel. The cost of this 2022 hedge program is $161 million, which will be amortized ratably over 2022. During the fourth quarter, we expect to sell two 1 million barrel cargoes of oil from Guyana. Our E&P capital and exploratory expenditures are expected to be approximately $650 million in the fourth quarter. Full year guidance remains unchanged at approximately $1.9 billion. For Midstream, we anticipate net income attributable to Hess from the Midstream segment to be approximately $70 million for the fourth quarter and the full year is projected to be approximately $280 million, which is at the midpoint of our previous guidance of $275 million to $285 million. Turning to corporate, corporate expenses are estimated to be in the range of $30 million to $35 million for the fourth quarter and the full year is expected to be in the range of $125 million to $130 million, which is down from our previous guidance of $130 million to $140 million. Interest expense is estimated to be in the range of $90 millon to $95 million for the fourth quarter and the full year is expected to be in the range of $375 million to $380 million, compared to our previous guidance of approximately $380 million.

Companywide net production averaged 265,000 barrels of oil equivalent per day excluding Libya in line with our guidance. Turning to the Bakken, third quarter net production averaged 148,000 barrels of oil equivalent per day. In the deepwater Gulf of Mexico, third quarter net production averaged 32,000 barrels of oil equivalent per day, compared to our guidance range of 35,000 to 40,000 barrels of oil equivalent per day. We had net income of $115 million in the third quarter of 2021, compared with a net loss of $73 million in the second quarter of 2021. On an adjusted basis, which excludes items affecting comparability of earnings between periods, we had net income of $86 million in the third quarter of 2021, compared to net income of $74 million in the second quarter of 2021. Third quarter earnings include an after-tax gain of $29 million from the sale of our interest in Denmark.

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Our strong performance across a number of key business metrics helped deliver revenue growth of 30% in the fourth quarter and 17% for the full year. Diluted earnings per share for the quarter was $2.18 and $10.02 for the full year. In the near term, we expect full-year revenue growth to remain at elevated levels, reaching 18% to 20% in 2022, driven by the execution of our growth plan and the recovery tailwinds we anticipate from continued improvement in the macroeconomic environment. We expect earnings per share of between $9.25 and $9.65 in 2022. Looking further out, as we return to a more steady-state economic environment, we aspire to achieve revenue growth in excess of 10% and earnings per share growth in the mid-teens under our new growth plan for 2024 and beyond. Spending growth reached a record quarterly high, driven by continued increases in goods and services spending, which was 24% above pre-pandemic levels. Global Consumer goods and services spending in the quarter grew 26% versus 2019. And we saw continued robust growth in small business B2B spending, which increased 25% over Q4 2019 levels. Overall, T&E spending also continued to improve, reaching 82% of pre-pandemic levels, driven by stronger consumer travel spending. For example, retention rates in Global Consumer are above 98%. New card acquisitions reached 2.7 million in Q4, driven by strong demand for our premium fee-based products, where we saw acquisitions nearly double year over year. In Consumer, millennials and Gen Z customers are driving the growth in acquisitions, representing around 60% of the new accounts we acquired globally in 2021. You see the growth momentum that Steve just discussed in our summary financials on Slide 2, with fourth-quarter revenues of $12.1 billion, up 31%, and full-year revenues of $42.4 billion, up 17%, both on an FX-adjusted basis. In understanding our full-year net income of $8.1 billion and earnings per share $10.02, I would point out that we had around $3.5 billion of significant impacts from items that we do not expect to repeat in the same magnitude going forward, including a $2.5 billion credit reserve release benefit in provision, as well as a few sizable net gains on equity investments. You'll notice in the several views of volumes on Slides 3 through 9 that we continued to show 2021 volume trends on both a year-over-year basis and relative to 2019. To start, we saw record levels of spending on our network in both the fourth quarter and full year 2021, with total network volumes and Billed business volumes both up more than 10% relative to 2019 on an FX-adjusted basis in the fourth quarter, as you can see on Slide 3. This growth in Billed business, as shown on Slides 4 and 5, is being driven by continued momentum in spending on goods and services, which strengthened sequentially and grew 24% versus 2019 in Q4. Importantly, this 24% growth versus 2019 in Q4 represents a cumulative growth rate over the past two years that is well above the growth rate we were seeing pre-pandemic. In our Consumer business, our focus on attracting and engaging younger cohorts of Card Members through expanding our value propositions and digital capabilities is fueling the 50% growth in spending from our millennial and Gen Z customers you see on Slide 6. Global SME spending, particularly B2B spending on goods and services, has been driving the growth of our Commercial Billed business throughout 2021 and reached 25% above pre-pandemic levels in Q4. You can see on Slide 8 that it continues to recover in line with our expectations, with overall T&E spending reaching 82% of 2019 levels in the fourth quarter. But even with that modest slowdown, U.S. Consumer T&E was not only fully recovered in the fourth quarter but actually grew 8% above 2019 levels. Finally, on Slide 9, you see that our Billed business momentum continues to be led by the U.S., where spending improved sequentially throughout 2021 and grew 16% above 2019 levels in the fourth quarter. Turning next to credit and provision on Slides 11 through 13. The strong credit performance, combined with continued improvement in the macroeconomic outlook throughout 2021, drove a $1.4 billion provision expense benefit for the full year as the low write-offs were fully offset by the reserve releases, as shown on Slide 12. As you see on Slide 13, we ended 2021 with $3.4 billion of reserves, representing 3.7% of our loan balances, and 0.1% of our Card Member receivable balances, respectively. In 2022, we will be growing over the $2.5 billion reserve release benefit we saw in 2021 since I would not expect to see reserve releases of the same magnitude going forward. Total revenues were up 30% year over year in the fourth quarter, up 17% for the full year. You see it grew 36% year over year in Q4 and 25% for the full year on an FX-adjusted basis. Net card fee revenues have grown consistently throughout the pandemic and, for the full year of 2021, were up 10% year over year and up 28% versus 2019, as you can see on Slide 16. You can see that it was up 11% year over year in the fourth quarter. Looking forward into 2022, we expect to see revenue growth of 18% to 20%, driven by the continued strong growth in spend and card fee revenues and the lingering recovery tailwinds from net interest income and travel-related revenues. Putting all these dynamics together, I'd expect variable customer engagement costs overall to run at around 42% of total revenues in 2022. Operating expenses were just over $11 billion for full year 2021 and in line with 2020. Understanding our opex results, however, it's important to point out that we benefited from $767 million in net mark-to-market gains in our Amex Ventures strategic investment portfolio in 2021 and that these gains are reported in the opex line. For 2022, we expect our operating expenses to be a bit over $12 billion, and we see these costs as a key source of leverage relative to our much higher level of revenue growth. Last, our effective tax rate for 2021 was around 25%. You can see on Slide 20 that we invested around $1.6 billion in marketing in the fourth quarter and $5.3 billion for the full year as we continue to ramp up new card acquisitions while winding down our value injection efforts. We acquired 2.7 million new cards, up 54% year over year. Steve emphasized the critical point, however, that, in particular, we see great demand for our premium fee-based products, with new accounts acquired on these products almost doubling year over year and representing 67% of the new accounts acquired in the quarter. Looking forward, we expect to spend around $5 billion in marketing in 2022. We returned $9 billion of capital to our shareholders in 2021, including common stock repurchases of $7.6 billion and $1.4 billion in common stock dividends on the back of a starting excess capital position and strong earnings generation. As a result, we ended the year with our CET1 ratio back within our target range, 10% to 11%. In Q1 2022 and another sign of our growing confidence in our growth prospects, we expect to increase our dividend by around 20% to $0.52 and to continue to return to shareholders the excess capital we generate while supporting our balance sheet growth. In the near term, we expect our revenue growth to be significantly higher than our long-term aspiration due to the range of pandemic recovery tailwinds that I've talked about throughout my remarks, which is why we have given 2022 guidance of 18% to 20% revenue growth. We've also given earnings per share guidance for 2022 of $9.25 to $9.65. Longer term, as we get to a more steady-state macro environment, we have an aspiration of delivering revenue growth in excess of 10% and mid-teens earnings per share growth on a sustainable basis in 2024 and beyond.

Diluted earnings per share for the quarter was $2.18 and $10.02 for the full year. Looking further out, as we return to a more steady-state economic environment, we aspire to achieve revenue growth in excess of 10% and earnings per share growth in the mid-teens under our new growth plan for 2024 and beyond. You see the growth momentum that Steve just discussed in our summary financials on Slide 2, with fourth-quarter revenues of $12.1 billion, up 31%, and full-year revenues of $42.4 billion, up 17%, both on an FX-adjusted basis. To start, we saw record levels of spending on our network in both the fourth quarter and full year 2021, with total network volumes and Billed business volumes both up more than 10% relative to 2019 on an FX-adjusted basis in the fourth quarter, as you can see on Slide 3. Net card fee revenues have grown consistently throughout the pandemic and, for the full year of 2021, were up 10% year over year and up 28% versus 2019, as you can see on Slide 16. Looking forward into 2022, we expect to see revenue growth of 18% to 20%, driven by the continued strong growth in spend and card fee revenues and the lingering recovery tailwinds from net interest income and travel-related revenues. As a result, we ended the year with our CET1 ratio back within our target range, 10% to 11%. Longer term, as we get to a more steady-state macro environment, we have an aspiration of delivering revenue growth in excess of 10% and mid-teens earnings per share growth on a sustainable basis in 2024 and beyond.

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On behalf of the, say, 204 or 205 Comstock employees and the board of directors, I'll make a few opening comments, and then we'll go to the results. First, Comstock's shift, I think as Ron Mills has talked about to the analysts, I think Comstock's shift to longer laterals, the 10,500-foot laterals in 2022 versus the 8,800-foot laterals in 2021, you should all know that it's expected to create a great value on a per well basis going forward. We'll use the free cash flow to pay off the revolver and redeem the remaining $244 million of the 2025 bonds. We do have a target, continue to have this leverage ratio at 1.5 or less. Because in 2021, we made great strides in extending our lateral length per location by 25% from our average lateral length at the end of 2020 it was 6,840 feet, and today, it's about 8,520 feet. If you look at that, 25 years' worth of drilling inventory based upon our 2022 activity, we've got 1,633 net locations. 53% of those were Haynesville, 47% were Bossier. And just think, I mean 902 net locations with lateral lengths 8,000 feet or longer. On the operational front, which is I think that's the nucleus of this company, on that front we increased our drilling footage per day by 25%. We went from 800 feet to 1,001 feet per day, and that's how you make money. Our average lateral length at the wells in the fourth quarter, 11,443 feet. And the reason is we drilled four 15,000-foot lateral wells, two Haynesville, two Bossier. In the fourth quarter, we generated $105 million of free cash flow from operating activities, increasing our total free cash flow generation for 2021 to $262 million. Including the impact of our acquisition and divestiture activity, our total free cash flow for the year was $343 million. For the quarter, we reported adjusted net income of $99 million or $0.37 per diluted share. Our operating cash flow for the quarter was $250 million or $0.90 per diluted share. Our revenues, including our realized hedging losses, increased 37% to $380 million. Our adjusted EBITDAX in the fourth quarter was $297 million, 41% higher than the fourth quarter of last year. Our production increased 12% in the quarter to 1.348 Bcf a day. In the fourth quarter, we completed two 15,000-foot Haynesville wells, which had IP rates of 48 million and 41 million cubic feet equivalent per day, both of which are new corporate records that Dan Harrison will review in a moment. During the quarter, we also closed on the sale of our Bakken properties and closed a bolt-on acquisition for $35 million. We significantly reduced our cost of capital by refinancing $2 billion of our senior notes in March and June, which saved us $48 million in cash interest expense and extended our average maturity from 4.7 years to 7.1 years. We also reduced the amount outstanding under our bank credit facility by $265 million with our free cash flow and asset sale proceeds and improved our leverage ratio to 2.2 times as compared to 3.8 times in 2020. With another successful year in our Haynesville Shale drilling program, we drilled 64 gross or 51.9 net wells, including four 15,000-foot laterals. On the wells we put to sales at an average IP rate of 23 million cubic feet equivalent per day, we grew our SEC proved reserves by 9% to 6.1 Tcfe with a PV-10 value of $6.8 billion. We replaced 199% of our production at a low all-in finding cost of $0.60 per Mcfe. Highlighting our attractive cost structure, we achieved a 78% EBITDAX margin, one of the highest in the industry. In addition, we achieved a 12% return on average capital employed and a 27% return on average equity. In 2021, we added 49,000 net acres to our acreage position prospective for the Haynesville and Bossier through a leasing program and acquisitions totaling $57.7 million or $1,178 per acre. Flip over to Slide 5 and we recap the bolt-on acquisition in East Texas that we did close late December for a purchase price of $35 million. The acquisition included 18.1 net producing wells and 17,331 net acres in Harrison Leon, Panola, Robertson and Rust counties. With the acquisition, we added 57.9 net drilling locations which represents approximately one year's worth of our drilling inventory. The acreage is 94% held by production, but the acquisition also added the lateral lengths on 44 of our existing drilling locations to be increased. Our production increased 12% to 1.35 Bcfe a day. Adjusted EBITDAX grew 41% to $297 million. We generated $250 million of discretionary cash flow during the quarter, 62% higher than 2020's fourth quarter. And our adjusted net income totaled $99 million during the quarter, a 186% increase from the fourth quarter of 2020. We generated $105 million of free cash flow from operations in the quarter or $204 million if you include the impact of the acquisition and divestiture activity, which most of that occurred in the fourth quarter. This free cash flow contributed to an improvement in our leverage ratio, which improved to 2.2 times, down from 3.2 times at the end of 2020. Our cash flow per share during the quarter was $0.90 per share, up from $0.56 in the fourth quarter of 2020, and adjusted earnings per share was $0.37 per share as compared to $0.14 in the fourth quarter of 2020. Production growth has averaged 117% over the last three years. EBITDAX has gone from $287 million to $1.1 billion at a compounded annual growth rate of 97%. Cash flow has grown from $206 million back in 2018 to $908 million this year in 2021, averaging 114% over the last three years. Adjusted net income has grown from $29 million to $303 million at a compounded annual growth rate of 319% and free cash flow from operations has grown to $262 million, and our leverage ratio has improved from four and a half times to 2.4 times. On a per share basis, cash flow has gone from $1.96 to $3.29 and earnings has gone from $0.27 to $1.16. During the fourth quarter, there was a very significant difference between the quarter's NYMEX settlement price of $5.83 and the average Henry Hub spot price of $4.74. During the quarter, we nominated 67% of our gas to be sold at index prices, which are more tied to the contract settlement price or the final price that the contract comes off the market at. And then we also sold 33% of our gas in the daily spot market. If you use those percentages, the approximate NYMEX reference price for looking at our activity in the fourth quarter would have been $5.47, not $5.83. Our realized pricing from the fourth quarter averaged $5.22, which reflects a $0.25 differential from that reference price, which is fairly in line with our historical results. In the fourth quarter we were also 72% hedged, so that reduced our final realized gas price to $3 per Mcf. Operating costs per Mcfe averaged $0.67 in the fourth quarter. That was $0.02 higher than the third quarter rate. Our lifting cost and gathering costs were both up by $0.01, but production taxes were down by $0.03. Higher G&A costs of $0.08 was also higher in the quarter, and that's primarily related to year-end adjustments for bonuses. We do expect our G&A to go back to average somewhere between $0.06 to $0.07 per Mcfe in 2022. Our EBITDAX margin including hedging came in at 78% in the fourth quarter, unchanged from our third quarter margin. In the fourth quarter, we spent $140 million on development activities, $114 million of that related to our operated Haynesville and Bossier Shale properties. We also spent $8 million on non-operated wells, and we had $15 million that we spent on other development activity in the Haynesville, in our Haynesville operations. We spent an additional $3 million for our properties outside of the Haynesville. For the full year, we spent $628 million on development activities. $554 million was related to our operated Haynesville and Bossier Shale properties. We also spent $74 million on non-operated activity and for other development activity outside of just drilling and completion. We drilled 51.9 net operated Haynesville horizontal wells, and we turned 54.2 net wells to sales in 2021. We also had an additional 2.2 net wells from our non-operated activity. In addition to funding our development program, we also spent $58 million on acquisitions. We grew our SEC proved reserves from 5.6 Tcfe to 6.1 Tcfe in 2021, and we replaced 199% of our production. Our 2021 drilling activity added 797 Bcfe to proved reserves, and we had about 89 Bcfe of positive price-related revisions. We also added 203 Bcfe of proved reserves through our acquisition activity. The reserve additions were offset by a divestiture of 100 Bcfe, which is primarily our Bakken shale properties. Our all-in finding costs for 2021 came in at a very attractive $0.60 per Mcfe. Our drill pit finding costs for '21 came in at $0.71 per Mcfe. Our reserves are almost 100% natural gas following the sale of our Bakken properties. The PV 10 value of our proved reserves at SEC pricing was $6.8 billion at the end of last year. In addition to the 6.1 Tcfe of SEC proved reserves, we have an additional 2.4 Tcfe of proved undeveloped reserves which are not included in that number as they are not expected to be drilled within the five-year window required by the SEC rules. We also have another 4.4 Tcfe of 2P or probable reserves, and we have 7.2 Tcfe of 3P or possible reserves for a total overall reserve base of 20.1 Tcfe on a P3 basis. We had $235 million drawn on our revolving credit facility at the end of the year after repaying $265 million during 2021. The reduction in our debt and the growth of our EBITDAX drove a substantial improvement to our leverage ratio, which was down to 2.2 times in the fourth quarter on a stand-alone basis as compared to 3.8 times in 2020. We plan on retiring $479 million of debt in 2022. We are targeting to be below 1.5 times levered in 2022, and we ended 2021 with financial liquidity of almost $1.2 billion. In 2017, our average lateral length was 6,233 feet as we were drilling primarily a mix of 4,500-foot and 7,500-foot laterals, and we had just started drilling our first 10,000-foot laterals. In subsequent years through 2020, we slowly increased the number of 10,000-foot laterals that we were drilling, which allowed us to gradually increase the average lateral length. In late 2020, we successfully drilled and completed our first lateral exceeding 12,500 feet, and our average lateral length in 2020 had increased to 8,751 feet. Now, through the end of 2021, we have successfully drilled and completed four 15,000-foot laterals with two drilled to the Haynesville and two drilled into the Bossier. In 2021, our average lateral length increased to 8,800 feet. Our record longest lateral to date is 15,155 feet and was drilled and completed in the Haynesville in late 2021. Building on the success of our 15,000-foot laterals, we now anticipate our average lateral length to increase by 19% in 2022 up to 10,484 feet. In 2022, we anticipate drilling approximately 21 wells with laterals longer than 11,000 feet and nine of these being 15,000-foot laterals. In 2020, our drilling performance improved 15% to 800 feet a day. And in 2021, our drilling performance improved an additional 25% to just over 1,000 feet per day, while our record fastest well to date was drilled last year at an average rate of 1,461 feet a day. These are wells with an average lateral length greater than -- with a lateral greater than 8,000 feet. Our D&C cost averaged $1,027 a foot in the fourth quarter, which is a 2% decrease compared to the third quarter and flat compared to our full year 2020 D&C costs. Breaking this down, our drilling costs remained essentially unchanged for the quarter at $413 a foot, while our completion costs were down 4% quarter over quarter to $615 a foot. Our average lateral length for the quarter was 11,443 feet. This is the longest quarterly average lateral length we've achieved to date and was accomplished primarily due to the completion of our first two 15,000-foot laterals that were turned to sales during the fourth quarter. Since the last call, we have completed and turned 16 new wells to sales. The wells were drilled with lateral lengths ranging from 8,504 feet to 15,155 feet with an average lateral of 10,508 feet. The wells were tested at IP rates that range from 12 million up to 48 million a day with a 23 million cubic feet per day average IP. The results this quarter include our first two planned 15,000-foot Haynesville laterals, the Talley 32-29-20 HC number one and number two wells. These wells were completed with laterals of 14,685 feet and 15,155 feet and tested at rates of 41 million and 48 million cubic feet a day. The high BTU gas in this area will generate a yield of 25 to 40 barrels of plant products, which will enhance the economics from a dry gas well with similar production by 20% to 30%. Also during the quarter, we successfully drilled two additional 15,000-foot laterals into the Bossier as mentioned earlier. We've got our short laterals up to 5,000 feet, median laterals at 5,000 to 8,000 feet, our long laterals at 8,000 to 11,000 feet, and we've got a new extra-long category now for the wells beyond 11,000 feet. Our total operated inventory currently stands at 1,984 gross locations, 1,420 net locations, which represents a 72% average working interest across the operated inventory. Based on -- our non-operated inventory currently stands at 1,425 gross locations and 213 net locations and this represents a 15% average working interest across the non-operated inventory. Based on the recent success of our new extra-long lateral wells, we've modified the drilling inventory to take advantage of our acreage position, and where possible, we have extended our future laterals out further to the 10,000 to 15,000-foot range. In our new extra-long lateral bucket, we capture all our wells that now extend beyond 11,000 feet long, and in this bucket, we currently have 397 gross operated locations and 287 net operated locations. These are split 50-50 between the Haynesville and the Bossier. To recap our total gross inventory, we have 436 short laterals, 392 medium laterals, 759 long laterals, and now 397 extra-long laterals. The total gross operated inventory is split 53% in the Haynesville and 47% in the Bossier. Also, by extending our laterals, we have increased the average lateral length in the inventory from 6,840 feet now up to 8,520 feet, which is a 25% increase. In summary, our current inventory provides us with over 25 years of future drilling locations based on our planned 2022 activity levels. We expect our 2022 drilling program to generate 4% to 5% production growth year over year, and we would expect to generate in excess of $500 million of free cash flow at current commodity prices. In 2022, the lateral length of the wells in this year's program is expected to be 19% longer than the 2021 wells. In 2022, our operating plan is focused on repaying $479 million of debt, including redeeming our 2025 senior notes. At the end of 2021, we had financial liquidity of almost $1.2 billion, which is expected to increase further in 2022 as we repay the remaining borrowings outstanding on our bank facility. As shown on the slide, first quarter production guidance of 1.24 to 1.29 Bcf a day, and the full year guidance is 1.39 to 1.45 Bcf a day. During the first quarter, we only plan to turn to sales about 15% of the planned wells to be turned to sales for the year. Development capex guidance is $750 million to $800 million, which is based on a similar number of turned to sales wells as last year, and incorporates an expected 10% increase in service costs and the impact of our average lateral lengths being 19% longer this year. As a result, if you factor in the 10% inflation and the 19% longer laterals, the midpoint of our guidance would actually represent about 3% to 5% of an improvement in efficiencies, mostly related to the longer laterals. We've also budgeted for $8 million to $12 million of additional leasing costs. Our LOE expected to average $0.20 to $0.25 in the first quarter and $0.18 to $0.22 for the full year, while our gathering and transportation costs are expected to average $0.23 to $0.27 in the first quarter and $0.24 to $0.28 for the year. Production and ad valorem taxes expected to average $0.10 to $0.14 a year based on current price outlook. Our DD&A rate is expected to average $0.90 to $0.96 per Mcfe. Cash G&A is expected to total $7 million to $8 million in the first quarter and $29 million to $32 million in 2022, with noncash G&A expected to average almost $2 million a quarter. Cash interest is expected to come in around $38 million to $45 million in the first quarter and $152 million to $162 million -- $160 million in 2022, and that incorporates the planned redemption of our 2025 notes later this year. From a tax standpoint, the effective tax rate of guidance of 22% to 27% is in line with what we've been reporting. And going forward, we expect to defer 90% to 95% of the taxes with the cash taxes being related to state taxes.

For the quarter, we reported adjusted net income of $99 million or $0.37 per diluted share. Our revenues, including our realized hedging losses, increased 37% to $380 million. Our cash flow per share during the quarter was $0.90 per share, up from $0.56 in the fourth quarter of 2020, and adjusted earnings per share was $0.37 per share as compared to $0.14 in the fourth quarter of 2020.

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Our total revenue of $6.8 billion was down 3% from the prior year. Importantly, our non-GAAP gross margin of 33.7% is up 30 basis points year over year and 300 basis points sequentially. Our non-GAAP operating profit of 11.3% is up 130 basis points year over year, and our non-GAAP earnings per share of $0.52 is up 4% year over year and significantly above the high end of our outlook. We generated a record Q1 free cash flow of $563 million, the highest achieved in the first fiscal quarter in the history of Hewlett Packard Enterprise. Based on the strong start to fiscal-year '21, we are raising our fiscal-year '21 non-GAAP earnings per share outlook to $1.70 to $1.88 and free cash flow to $1.1 billion to $1.4 billion. In our prioritized areas of growth, our Intelligent Edge business had an outstanding quarter, with revenue of $806 million, up 11% year over year. Finally, we introduced a new class of cloud-native and fully automated data center switching products specifically designed for the edge cloud data centers, which represents a $12 billion TAM expansion opportunity for Hewlett Packard Enterprise. In Q1, revenue was down 9% from the prior year. We remain very confident in this high-growth segment based on our backlog of our awarded business, which now exceeds well over $2 billion of exascale contracts and a robust pipeline of multimillion-dollar sized deals. We are on track to deliver the 8% to 12% annual growth rate communicated at our Security Analyst Meeting last fall. We recently introduced HP GreenLake Cloud Services for HPC to accelerate enterprise Main Street adoption or high-performance computing, targeting a $3 billion to $4 billion TAM. In Q1, we won two major HPC awards, one with the National Center of Atmospheric Research, a contract worth $35 million, to build a supercomputer for extreme weather research; and another that expands NASA's HP Akin Supercomputer. We also completed the installation of the Dammam 7 supercomputer for Saudi Aramco, which immediately became one of the top 10 supercomputers in the world. Finally, on February 20, you may have seen that HPC Spaceborne Computer 2 was launched into orbit for use on the International Space Station. In Compute, our operating margins of 11.5% increased 80 basis points year over year and 490 basis points quarter over quarter. Our revenue declined 2% from the prior year but was up low single digits sequentially when normalized for the backlog in Q4. In Storage, revenue was down 6% from the prior year, with operating margins of 19.7%, which is above the target profitability range we discussed at SAM. Our overall HPE All Flash Array portfolio grew 5%, driven by both HPE Primera and HP Nimble storage. Our annualized revenue run rate of $649 million was up 27% year over year. In Q1, we gained more than 70 new HP GreenLake cloud services logos. Our HP GreenLake Cloud services customer retention rates are above 95%, and the average customer usage of our cloud services currently running at 120% of original commitment, driven by customer expansion in their capacity utilization. We are excited about this long-term opportunity, and I'm very confident in our 30% to 40% CAGR target by fiscal-year '22. Q1 revenue stabilized with improved collections to deliver a return on equity of 16.5%. We delivered Q1 revenues of $6.8 billion, down 3% from the prior-year period, but better than our typical historical sequential seasonality when normalizing for Q4 backlog. I am particularly proud of the fact that our non-GAAP gross margin returned to above pre-pandemic levels and was up 30 basis points from the prior-year period and up 300 basis points sequentially. Our non-GAAP operating margin was 11.3%, up 130 basis points from the prior year, which translates to an 11% year-over-year increase in operating profit. As a result of our strong execution, we ended the quarter with non-GAAP earnings per share of $0.52, which was up 4% from the prior year and significantly above the higher end of our outlook range. Q1 cash flow from operations was close to $1 billion, driven by better profitability and strong operational discipline, as well as working capital timing benefits. Q1 free cash flow was $563 million, which was up approximately $750 million from the prior year and a record level for any first HPE first quarter. Finally, we paid $155 million of dividends in the quarter and are declaring a Q2 dividend today of $0.12 per share payable in April 2021. In Intelligent Edge, we accelerated our momentum with rich software capabilities, delivering 11% year-over-year growth, our third consecutive quarter of sequential growth. Switching was up 5% year over year with double-digit growth in North America. And wireless LAN was up 11% year over year with double-digit growth in both North America and APJ. We are also seeing the significant operating profit potential of this business with operating margins in Q1 of 18.9%, up 680 basis points year over year as we drove greater productivity from past investments and operational leverage benefits kick in. Finally, I am pleased to say we recognized our first full quarter of revenue from the acquisition of Silver Peak, the premium growth SD-WAN leader, which contributed approximately 500 basis points to the Intelligent Edge top-line growth. In HPC and MCS, revenue declined 9% year over year, primarily due to the inherent lumpiness of the business, which is linked to the timing of deals and customer acceptance milestones. We remain very confident in the near-term and longer-term outlook for this business and are reaffirming our full-year and three-year revenue growth CAGR target of 8% to 12%, respectively, as highlighted at SAM. We have an extremely strong order book of over $2 billion worth of awarded exascale contracts with another $5-plus billion of market opportunity over the next three years. In Compute, revenue stabilized to a 2% year-over-year decline, but was up low single digits sequentially when normalizing for Q4 backlog, which attest of a strong order momentum in the quarter. We ended the quarter with an operating profit margin of 11.5%, up 80 basis points from prior-year period and at the high end of our long-term margin guidance for this segment provided at SAM. Within storage, revenue declined 6% year over year, driven by difficult prior-year compare, but with strong growth in software-defined offerings. We also saw notable strength in overall Nimble, up 31% year over year, and total all-flash arrays were up 5% year over year. The mix shift toward our more software-rich platforms helped drive storage operating profit margins to 19.7%, well above our long-term outlook for this segment presented at SAM last October. With respect to Pointnext operational services, including Nimble services, revenue stabilized and was flat year over year, driven by the increased focus of our BU segments on selling products and services as bundles, improved services intensity and are growing as-a-service business, which I remind you, involves service attach rates of 100%. Within HPE Financial Services, revenue stabilized and was slightly down 1% year over year. As expected, we are seeing sequential improvements in our bad debt loss ratios, ending this quarter at approximately 0.9%, which continues to be best-in-class within the industry. As a result, our non-GAAP operating margin was 9.8%, up 110 basis points on the prior year. And our return on equity is back to a pre-pandemic high teens level of 16.5%. Similar to last quarter, we are making great strides in our as-a-service offering this quarter with over 70 new GreenLake logos added in Q1. I am very pleased to report that our Q1 21 ARR came in at $649 million, representing 27% year-over-year reported growth. Total as-a-service orders were up 26% year over year, driven by very strong performance in Europe and Japan. Based on strong customer demand and recent wins, I am very happy with how this business is executing and progressing toward achieving its ARR growth targets of 30% to 40% CAGR from fiscal-year '20 to fiscal-year '23, which I am reiterating today. We delivered a non-GAAP gross margin rate of Q1 -- in Q1 of 33.7% of revenues, which was up 300 basis points sequentially and 30 basis points from the prior-year period. You can also see we have expanded non-GAAP operating profit margins, which is up 280 basis points sequentially and 130 basis points from the prior-year period. Cash flow from operations was approximately $1 billion, and free cash flow was $563 million for the quarter, up approximately $750 million from the prior-year period. As of our January 31 quarter end, we had approximately $4.2 billion of cash on hand. Together with an undrawn revolving credit facility of $4.75 billion at our disposal, we currently have approximately $9 billion of liquidity. We now expect to grow our fiscal-year '21 non-GAAP operating profit by over 20% and expect to deliver fiscal-year '21 non-GAAP diluted net earnings per share between $1.70 to $1.88, which is a $0.10 per share improvement on the midpoint of our prior earnings per share guidance of $1.60 to $1.78. This still represents double-digit year-over-year growth from the $6 billion trough of Q2 of fiscal-year '20. For Q2 '21, we expect GAAP diluted net earnings per share of $0.02 to $0.08 and non-GAAP diluted net earnings per share of $0.38 to $0.44. Additionally, given our record levels of cash flow this quarter and raised earnings outlook, I am very pleased to announce that we are also raising fiscal-year '21 free cash flow guidance from our SAM guidance of $900 million to $1.1 billion to a revised outlook of $1.1 billion to $1.4 billion, a $250 million increase at the midpoint.

Based on the strong start to fiscal-year '21, we are raising our fiscal-year '21 non-GAAP earnings per share outlook to $1.70 to $1.88 and free cash flow to $1.1 billion to $1.4 billion. Our revenue declined 2% from the prior year but was up low single digits sequentially when normalized for the backlog in Q4. We delivered Q1 revenues of $6.8 billion, down 3% from the prior-year period, but better than our typical historical sequential seasonality when normalizing for Q4 backlog. For Q2 '21, we expect GAAP diluted net earnings per share of $0.02 to $0.08 and non-GAAP diluted net earnings per share of $0.38 to $0.44. Additionally, given our record levels of cash flow this quarter and raised earnings outlook, I am very pleased to announce that we are also raising fiscal-year '21 free cash flow guidance from our SAM guidance of $900 million to $1.1 billion to a revised outlook of $1.1 billion to $1.4 billion, a $250 million increase at the midpoint.

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And as you can see, we posted an all-time record for adjusted earnings per share of $1.75. Supply chain constraints did have an impact on our revenue, but we still posted 8% growth in the quarter. And for the third quarter in a row, we delivered record segment margins at 19.9% in Q3. It was an all-time record and an increase of 230 basis points over prior year. On top of record margins, we're also pleased with our incremental margins, which were 46% in the quarter, due to actions that we took to mitigate inflationary costs, the portfolio changes that we have undertaken, and savings from restructuring programs. For the Electrical businesses overall, orders were up 17% on a rolling 12-month basis, and our backlog was up more than 50%, another all-time record. First, on 9% revenue growth, we increased our operating profit by 23%, which reflects strong operating leverage and benefits from our portfolio actions. Second, our acquisitions increased revenues by 7%, which was fully offset by the sale of Hydraulics. And last, our margins of 19.9% were well above our guidance range of 19% to 19.4% as our team did an outstanding job of executing despite the lower-than-expected revenues. Revenues were up 9%, including 1% organic and 8% from the acquisition of Tripp Lite. Operating margins continue to be strong at 21.7% and were up 40 basis points from Q2. On a rolling 12-month basis, orders were up 17% organically, and this was an acceleration from up 13% in Q2. The strongest segments were utility and residential markets and the backlog is up more than 50% from last year and up 9% from Q2. Organic growth was 18% with broad strength in really all end markets and currency added 1%. We also posted all-time record operating margins of 20.1% and had very strong incremental margins of nearly 40%. Orders were very strong, up 17% organically on a rolling 12-month basis, with particular strength in the quarter in industrial, commercial and institutional markets. Like our Americas segment, the backlog is up more than 50% and at record levels. When you add the two together, they delivered solid organic growth of 8%, built a sizable backlog, which strengthens our outlook for future quarters and they improved margins by 110 basis points. Revenues were up 38%; 4% organic and 33% from the acquisition of Cobham Mission Systems and 1% from currency. Operating margins were 22%, up 350 basis points from last year and 100 basis points sequentially. This strong performance gives us confidence that as aerospace markets continue to recover, we'll meet or exceed the 24% margin targets that have been set for this segment. On a rolling 12-month basis, orders were up 4%, primarily with strength in the business segment and our backlog has increased by 5%. Organic revenues increased 11% with solid growth in North America Class A truck business and strength in South America that more than offset the weakness in North America light vehicle markets. Operating margins were 18% and we generated very strong incremental margins of more than 50%. Specifically of note, North America, the truck business benefited from strong aftermarket, where sales were up some 40% and attractive aftermarket margins. You'll see the financial results of our eMobility segment, where revenues increased 6% organically. Operating margins were a negative 9.5%, once again due to heavy R&D investments and start-up costs associated with new programs. We continue to be pleased with the progress in this business, which is one program is worth nearly $600 million of mature year revenue. And we expect to see a significant ramp up in revenues in 2023, which positions us well to achieve our long-term revenue target of $2 billion to $4 billion by 2030. On page 10, we provide an update at our organic growth and operating margins for the year. With supply chain constraints in Q3 continuing into Q4, we now expect overall organic revenue growth of 9% to 11% for 2021. For Electrical Americas, we expect 5% to 7% growth. And you'll note the implied guidance for Q4 is actually 7% to 9%, which is a solid step-up from the 1% in Q3. Despite slightly lower organic revenue growth outlook, we're increasing our operating margin guidance by 20 basis points from 18.6% to 19%. And I'd note that with this guidance, we're on track to generate strong incremental margins of approximately 40% for 2021, which we see naturally is outstanding performance given the current inflationary environment. Moving to page 11. We expect full year adjusted earnings per share between $6.59 to $6.69. At the midpoint, this represents 35% growth over 2020. We're also delivering significant margin improvement, up 240 basis points from last year at the midpoint of our increased margin guidance. Next, given more active M&A activities, we now expect share repurchase to be between $375 million and $425 million. And lastly, our Q4 guidance includes earnings between $1.68 and $1.78, organic revenue growth between 7% and 9%, and segment margins between 18.8% and 19.2%, an increase of 160 basis points at the midpoint versus prior year. Next, on page 12, we did want to provide some preliminary assumptions for our end markets for 2022. And lastly, on page 13, we provide just some summary thoughts here. And with strong year-to-date performance, we're well on our track to deliver a very strong 2021 with double-digit organic revenue growth and 35% adjusted earnings per share growth. And you'll recall that at the beginning of the year, we set medium-term targets of 4% to 6% organic revenue growth annually, 400 to 500 basis points improvement in margins and 11% to 13% annual growth in adjusted EPS.

Supply chain constraints did have an impact on our revenue, but we still posted 8% growth in the quarter. Revenues were up 9%, including 1% organic and 8% from the acquisition of Tripp Lite. When you add the two together, they delivered solid organic growth of 8%, built a sizable backlog, which strengthens our outlook for future quarters and they improved margins by 110 basis points. With supply chain constraints in Q3 continuing into Q4, we now expect overall organic revenue growth of 9% to 11% for 2021. And lastly, our Q4 guidance includes earnings between $1.68 and $1.78, organic revenue growth between 7% and 9%, and segment margins between 18.8% and 19.2%, an increase of 160 basis points at the midpoint versus prior year.

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We were able to conclude 2020 with $365 million of revenue and $32 million of adjusted EBITDA. We estimate that this, combined with our other e-Series technology products, will save operators approximately $5 million per well and five days of rig time. First, it allowed us to offer our customers the latest subsea controls technology without having to make the significant research and development investment of $8 million to $10 million per year over the next three years, as well as eliminated the associated operating costs of maintaining that product line. This strategy led us to the difficult decision to transition and consolidate our subsea tree manufacturing from Aberdeen to Houston as we saw the subsea tree market decline from close to 300 subsea trees to a little over 100 tree awards in 2020. In total, the productivity initiatives executed in 2020 reduced our costs by approximately $20 million on an annualized basis and helps us to continue on maintaining profitability and a strong balance sheet. A large part of these commitments, in some cases, as high as 70% reduction in carbon emissions, will come from the vendors who supply these companies. For example, the combination of our e-Series technologies can help reduce roughly 40 tons of steel from traditional operations. The elimination of this component alone reduces carbon emissions by approximately 70 tons as the process needed to produce the steel is no longer required. Revenue for the fourth quarter fell slightly from the prior quarter to $87 million. This decline was mainly due to lower manufacturing production hours related to increasing levels of quarantines from rising COVID-19 cases, seen mainly in the U.S. Adjusted EBITDA for the fourth quarter was $9 million, a decrease of $1 million from the prior quarter. For the full year 2020, our revenues were $365 million, a decrease of $50 million versus 2019. Adjusted EBITDA for the full year 2020 was $32 million, a decrease of $22 million from the previous year. We met our $20 million cost reduction target in 2020. But given the environment, it held up falling by only 3%. We saw EBITDA margins improve 3% from the first half to the second half 2020 after normalizing for mix and the impact of disruptions related to COVID-19. For the fourth quarter of 2020, SG&A was $26 million, an increase of $5 million compared to the third quarter. For the full year 2020, SG&A expenses decreased by $8 million to $90 million after excluding these short-term legal expenses. On the engineering R&D side, we saw a modest increase in 2020 to $19 million as we work to bring the VXTe to market. After approximately $388 million in bookings during 2019, the uncertainty surrounding the pandemic and its impact on commodity prices led to customers holding off or delaying decisions to book orders for their upcoming projects. We now see one or two orders being the difference between a $40 million or a $60 million bookings quarter. We are taking actions related to our productivity initiatives driven by our LEAN management philosophy and are targeting a $10 million cost improvement on an annualized basis. The timing of these productivity actions will take place over the course of the year and is expected to deliver roughly $5 million of realized benefit in 2021. In the fourth quarter of 2020, our capex totaled just under $2 million. And for the full year, it was around $12 million. We are, however, anticipating an increase in capex to range in between $15 million to $17 million in 2021. At year-end, we had cash on hand of $346 million and a further $40 million of availability in our ABL facility. This results in approximately $386 million of available liquidity. Free cash flow for the fourth quarter was a negative $18 million. For the full year, it was negative $33 million. In the current environment and given the initiatives I just mentioned, we expect to be able to generate 5% free cash flow yield. Based on the current view and the conversations with customers, we expect 2021 bookings to be around $200 million for the year. We are forecasting 40% decremental margins for any given decline in revenue as we hold costs critical to address a recovery. As I mentioned earlier, we are forecasting a free cash flow yield around 5% in 2021.

We now see one or two orders being the difference between a $40 million or a $60 million bookings quarter.

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Last night we reported adjusted operating earnings per share of $1.19, which we consider another solid quarter in the context of the pandemic. In this quarter, we were able to absorb estimated total COVID-19 related claim costs of $300 million globally and delivered profitable earnings due to the underlying strength in many of our businesses. We completed a number of transactions in the quarter and deployed approximately $100 million of capital. Our investment portfolio held up well, and we ended the year with a strong balance sheet, an excess capital of $1.3 billion. As I step back and consider our full year results, we reported adjusted operating earnings per share of $7.54. This includes absorbing estimated total COVID-19 related claim costs of $720 million globally. And when adjusted for COVID-19 related offsets, including longevity and reduced expenses, we estimate the full year impact of COVID-19 to be roughly $6.80 on adjusted operating EPS. For the quarter, we reported premium growth of approximately 9%, somewhat higher than recent quarters as we saw good business growth in some areas in addition to some client catch-ups have benefited the reported premiums. The effective tax rate on pre-tax adjusted operating income was 18.3% for the quarter. Below the expected range of 23% to 24%, as a result of utilizing foreign tax credits and tax benefits associated with differences in bases and foreign jurisdictions. The US and Latin America Traditional segment reported pre-tax adjusted operating loss of $89 million in the quarter. Approximately $230 million of claims are attributed to COVID-19, including $100 million of IBNR claims. I would also note that our 1999 to 2004 business, excluding COVID-19 continues to perform in line with our mortality expectations as we set back in 2015. Additionally, as we've seen in the US, there's significant level of excess mortality experience in the population in South Africa, over and above reported COVID-19. Australia experienced a loss of approximately $26 million. The Corporate and Other segment reported a pre-tax adjusted operating loss of $24 million, relatively in line with the average run rate. The nonspread portfolio yield for the quarter was 4.2%, a significant improvement relative to that in the third quarter, primarily due to above average run rate for variable investment income as we experienced a high level of commercial mortgage prepayments and some realizations in our various private partnerships. RGA's leverage ratios remained stable at the end of the year, following the second quarter senior debt issuance and our liquidity remains strong with cash and cash equivalents of $3.4 billion.

Last night we reported adjusted operating earnings per share of $1.19, which we consider another solid quarter in the context of the pandemic. In this quarter, we were able to absorb estimated total COVID-19 related claim costs of $300 million globally and delivered profitable earnings due to the underlying strength in many of our businesses. Additionally, as we've seen in the US, there's significant level of excess mortality experience in the population in South Africa, over and above reported COVID-19.

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Third quarter earnings per share of $0.15 repr-+esent the companies best third quarter performance since 2016 and demonstrates the extraordinary progress we continued to make in our turnaround strategy. The robust year-over-year third quarter comparable sales increase of 28% was driven by significant digital and store outperformance across all three brands propelled by the meaningful quality, fit, and fabrication enhancements in our products. Dramatic improvement is continuing at Chico's and White House Black Market as indicated by our third quarter comp sales increase of 23% and 33% respectively on significantly lower inventory levels. Soma posted a 30% comp sales increase over last year's third quarter on top of an 11% comp sales increase in the third quarter of 2019. Approximately 3 million customers representing nearly half of our active customer file are now enrolled in file connect. Year over year bra revenues was up 38% in the quarter boosted by the fact that our customers returned to the stores or in-person fittings. In the third quarter, our apparel brand had over 2.3 million views in social selling live videos and real. We continue to acquire new customers with the customer count up nearly 8% from the prior-year third quarter. We have successfully opened 64 Soma shop-in-shop inside Chico's stores, which are exceeding expectations, driving new customers to both brands, lifting store productivity, and further expanding our digital business. For example, at the beginning of the year, we expected to close 45 to 50 locations. This fiscal year but have reduced that number to 37 due to a combination of favorable store performance and successful lease negotiation. Our momentum continued in Q3 and we posted another quarter of profitable growth with diluted earnings per share of $0.15 for the quarter, compared to a $0.48 loss per share in last year's third quarter and a $0.7 loss per share for the third quarter of fiscal 2019. I will note that on a non-GAAP basis before onetime charges diluted earnings per share for the quarter was $0.18. Third quarter net sales totaled $453.6 million, compared to $351.4 million last year. This 29% increase reflects a comparable sales increase of 28% and is driven by meaningful improvement in product and enhanced marketing efforts, which drove full-price selling partially offset by 31 net store closures in the last 12 months. At the brand level, Chico's comparable sales grew 23%, White House Black Market comp sales grew 33.4%, and SOMA comp sales grew 30.2% over 2020. Looking at the third quarter compared to 2019, our comparable sales continue to improve reaching close to 97% of pre-pandemic 2019 levels with Soma increasing 44% in Chico's and White House Black Market down 16% and 5% respectively. I would note that this level of sales growth was achieved with much lower on-hand inventories compared to 2019 with Chico's inventories down 46% and White House Black Market inventory is down 39%. The third quarter gross margin was 40.7%, compared to 22% last year, and 35.3% in 2019. The current year gross margin rate was our best performance in 18 consecutive quarters and reflected higher full-price sales and improved occupancy leverage. Moving down the P&L, SG&A expenses for the third quarter totaled $162.5 million or 35.8% of sales, compared to 43.6% of sales in 2020, and 37.3% of sales in 2019. On a year-to-date basis, we generated $89 million of EBITDA through the third quarter, which is significantly higher than EBITDA of $65 million for all of fiscal 2019. For the current year nine months, we posted earnings per share of $0.29, compared to a loss of $2.43 per share in the prior year nine months, and a loss of $0.7 for the same period in 2019. We ended the quarter with cash and marketable securities of $137.5 million. A slight increase over the second quarter balance even after reducing borrowings on our long-term credit facility by a third with a $50 million debt repayment. On hand inventories for the quarter remain very lean down 13% relative to 2020 and down 19% relative to 2019. Our inventory has never been more productive and delivered a very high gross margin for us especially in the apparel brands where on-him inventory was down 38% to last year and down 43% to 2019. In the third quarter, we continued our lease renegotiation initiative with A&G Real Estate Partners securing incremental commitments of $7 million bringing our total year-to-date commitments to $22 million in rent reductions from landlords. This is in addition to the 65 million introductions negotiated last year for a total savings of $87 million since we commenced the renegotiation program in 2020. We have flexibility with approximately 60% of our leases coming up for renewal for kick-outs available over the next two to three years. During the third quarter, we closed five stores bringing our year to date closing to 23 and we ended the quarter with 1,279 boutiques. We expect fourth quarter total sales to continue to accelerate closer to 2019 and reach $495 million to $510 million. We expect fourth quarter gross margin rate as a percent of sales to be a part of 2020 and 2019 and in the range of 33% to 34.5%. We are continuing to manage our expense structure and expect that the SG&A rate as a percent of sales to be in the range of 32.3% to 32.8%. We expect our effective tax rate to be approximately 33% for the quarter, which will give us a rate of 24% for the full year. And we expect to deliver dilutive earnings per share a flat to $0.5 for the fourth quarter putting us well above 2020 and 2019 for both the quarter and the full year.

Third quarter earnings per share of $0.15 repr-+esent the companies best third quarter performance since 2016 and demonstrates the extraordinary progress we continued to make in our turnaround strategy. Our momentum continued in Q3 and we posted another quarter of profitable growth with diluted earnings per share of $0.15 for the quarter, compared to a $0.48 loss per share in last year's third quarter and a $0.7 loss per share for the third quarter of fiscal 2019. I will note that on a non-GAAP basis before onetime charges diluted earnings per share for the quarter was $0.18. Third quarter net sales totaled $453.6 million, compared to $351.4 million last year. We expect fourth quarter total sales to continue to accelerate closer to 2019 and reach $495 million to $510 million.

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After initial concerns of drought in Connecticut just a few months ago, we have since seen nearly four times the normal amount of precipitation just this month, more than 19 inches of rain has fallen in one of our communities. We belong to a collaborative that created a plan to protect nearly 1,000 acres of forests in the Santa Cruz Mountains. The collaborative was awarded a $7.5 million CAL FIRE Grant to fund a plan, which is designed to protect water sources, establish fire resilient ecosystems and promote the long-term sequestration of carbon. In Connecticut, we're in discussions with six communities about the preservation of more than 100 acres of land as protected open space. On June 9, Valley Water, our wholesale water supplier declared a water shortage emergency and asked its retailers including San Jose Water to reduce consumption by 15% compared to 2019 usage. On June 18, we asked the California Public Utilities Commission or CPUC to activate Stage 3 of our water shortage contingency plan, which calls for 15% mandatory conservation. Connecticut Water will now be able to encourage conservation by charging a higher tariffs for water when residential customers use more than an average of 200 gallons per day. It still provides for a 15% reduction on the water bill for qualifying customers. More than $1.1 billion federal will be available to states to pay water and wastewater bills on behalf of low-income residents. Second quarter revenue was $152 million, a $5 million or 3.4% increase over reported second quarter 2020 revenue of $147.2 million. Net income for the second quarter was $20.8 million or $0.69 per diluted share. This compares with $19.7 million or $0.69 per diluted share for the second quarter of 2020. Diluted earnings per share for the quarter is primarily driven by cumulative rate increases of $0.14 per share, $0.11 per share due to release of the $3 million TWA purchase price holdback and increased usage of $0.05 per share. These increases were partially offset by an increase in administrative and general expenses of $0.15 per share, a decrease in California surface water production of $0.07 per share and increased production costs of $0.07 per share due to higher customer usage. Turning to our comparative analysis for the quarter, the $5 million increase in revenue was primarily due to $3.6 million in cumulative rate increases, 1.3 million in increased customer usage and $0.7 million from new customers. Water production expense increased $2.8 million compared to the second quarter of 2020. The expense increase includes $1.9 million for the purchase of additional water supply necessary to replace the low volume of California surface water and $1.8 million due to higher customer usage. These increases were partially offset by a $700,000 decrease in lower average unit water production costs. As stated in our first quarter earnings call, in 2021, we anticipated producing 2.5 billion gallons of surface water from our California Watershed, which is representative of our 10-year average surface water production and consistent with the volume authorized in our 2019 California general rate case. For the first half of 2021, we experienced minimal rainfall and produced less than 260 million gallons of surface water. The incremental cost to supplement this shortfall was approximately $4.6 million per billion gallons. This replacement cost estimate includes the 9.1% July 1 rate increase implemented by Valley Water. Other operating expenses increased $5.6 million during the second quarter, primarily due to a $3.6 million increase in general and administrative expenses, a $1.3 million increase in higher maintenance expenses and depreciation expense of $800,000. Other income includes the $3 million purchase price holdback received from CBRE in the 2021 second quarter upon satisfaction of remaining conditions on the Company's 2017 sale of TWA. The effective income tax rate for the second quarter was 14% compared to 18% for the second quarter of 2020. Turning to the first six months of 2021, revenue was $267 million, a 2% increase over the same period last year. Net income for the first six months of 2021 was $23.4 million or $0.79 per diluted share, compared to $22.1 million or $0.07 per diluted share during the same period a year ago. Diluted earnings per share for the year was primarily due to rate increases that contributed $0.23 per share, the TWA purchase price holdback that contributed $0.11 per share, non-regulated income of $0.06 per share and tax benefits that contributed $0.05 per share. These increases were partially offset by an increase in general and administrative expenses of $0.11 per share, a decrease in California surface water production of $0.10 per share, an increased depreciation expense of $0.10 per share and a decreased production cost of $0.06 per share due to lower customer usage. Our 2021 year-to-date increase in revenue was primarily due to $6.4 million in cumulative rate increases and $1.1 million from new customers. This increase was partially offset by a decrease in customer usage of $1.5 million, winter storm customer credits in our Texas service area of $800,000 and a decrease in the recognition of certain regulatory mechanisms in Connecticut and Maine of $800,000. Water production expenses increased $2.6 million in the first half of 2021. The increase was primarily due to $2.7 million from decreased surface water in California and $1.7 million in higher customer usage. These increases were partially offset by a $1.5 million decrease in lower average per unit water supply costs. Other operating expenses increased $7.2 million in the first half of 2021, primarily due to a $2.8 million increase in depreciation expense, $2.8 million in higher general and administrative expenses and $1.4 million in higher maintenance expenses. Turning to our capital expenditure program, we added $53.4 million in company-funded utility plant in the second quarter of 2021, bringing total funded additions for the first half of the year to a $100.1 million. We are on track to add approximately $239 million to utility plant in 2021, consistent with our 2021 construction budget. Our first half 2021 cash flows from operation increased approximately $34.8 million over the same period in 2020. The increase was primarily due to an increase in collections from accounts receivable and accrued unbilled utility revenue of $15.3 million, payments of amounts previously invoiced and accrued of $7.3 million and an increase due to net changes in balancing and memorandum accounts of $5.7 million. In addition, we made an upfront payment of $5 million in the prior year in connection with our city of Cupertino service concession agreement that did not recur in the current year and general working capital and net income adjusted for non-cash items increased $1.5 million. At the end of the quarter, we had $121.5 million available on our bank lines of credit for short-term financing of utility plant additions and operating activities. The average borrowing rate on the line of credit advances during the first six months of 2021 was approximately 1.39%. As Jim just mentioned, we've already invested approximately 42% of our planned 2021 capital spending through the end of the second quarter. We're seeking a modest revenue increase of $6.4 million. The application also includes an increase in the return on equity from our currently authorized 8.9% to 10.3%, an increase in the equity portion of our capital structure and the proposed decrease in our cost of debt. The CPUC see continues to process our 2022 to 2024 general rate case application that requests a $435 million capital program and $88 million increase in revenues over three years. If approved by the CPUC, we anticipate a capital program of approximately $100 million spread over the next four years. The California Commission also authorized a revenue increase of $17.3 million effective on July 1, 2021 to recover our wholesaler's water rate increase of 9.1%. About 48 hours ago, the Connecticut PURA approved an increase of $5.2 million in annual revenues, which is an increase of about 5.1%. The $40 million in capital investments that were removed from this case were done so on the basis of timing, not prudence. Our next WICA filing is planned now for October 2021 and is expected to include approximately $18 million of completed projects. The statute allows for filings every six months, up to a 5% increase in the annual surcharge with a 10% cap between general rate cases. There are other aspects of the decision that were favorable and significant such as the authorization of the capital structure, consisting of 53% equity. Taking into account the current decision, our forecasted earnings remain within our guidance of $1.85 to $2.05 per share, but are trending toward the lower half of the range. There has been significant progress on both the construction and the regulatory treatment for Maine Water's $60 million water treatment project. The new facility along the Saco River will replace its 1884 vintage drinking water treatment plant. The utilities provide water service to approximately 4,000 people through 1600 service connections in Bandera and Medina counties. If approved by the Texas Commission, this would be the 14th acquisition for SJWTX since 2006. Through organic growth and acquisitions, we have more than tripled the number of our service connections to over 21,000.

Net income for the second quarter was $20.8 million or $0.69 per diluted share. This compares with $19.7 million or $0.69 per diluted share for the second quarter of 2020. Taking into account the current decision, our forecasted earnings remain within our guidance of $1.85 to $2.05 per share, but are trending toward the lower half of the range.

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I'm pleased to report 4% consolidated adjusted local currency revenue growth. Our Flavors & Extracts Group reported 9% adjusted local currency revenue growth, more than 20% adjusted local currency operating profit growth, and 130 basis points adjusted operating profit margin improvement in the quarter. Our Asia Pacific Group reported 5% adjusted local currency revenue growth and over 30% adjusted local currency operating profit growth. Our balance sheet is strong, and our debt-to-EBITDA is now at 2.4, down from 2.9 a year ago. The Flavors & Extracts Group had another strong quarter with 9% adjusted local currency revenue growth and 21% adjusted local currency profit growth. Overall, the group's adjusted operating profit margin increased 130 basis points in the quarter compared to last year's first quarter. We are well on track to achieve our 50 to 100 basis point operating profit margin improvement for the year and our mid-single digit revenue growth goal for the year. The Color Group's adjusted operating profit was down approximately 13% in local currency in the first quarter. Our Asia Pacific Group had another strong quarter with 5% adjusted local currency revenue growth and over 30% adjusted local currency profit growth. Our first quarter GAAP diluted earnings per share was $0.75. Included in these results are $3.1 million, or $0.07 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 $0.05 of earnings related to the results of the operations targeted for divestiture, which represents approximately $25.6 million of revenue in the quarter. Last year's first quarter GAAP results include $10.9 million, or approximately $0.26 per share, of costs related to the divestitures. In addition, our GAAP earnings per share in the first quarter of 2020 include $0.03 of earnings per share from the operations to be divested and approximately $36.6 million of revenue. Excluding these items, consolidated adjusted revenue was $334.1 million, an increase of 4% in local currency compared to the first quarter of 2020. This revenue growth was primarily a result of the Flavors & Extracts Group, which was up 8.9% in adjusted local currency, and the Asia Pacific Group, which was up 4.7% in adjusted local currency. The Flavors & Extracts Group reported 21.2% adjusted local currency operating income growth, and the Asia Pacific Group reported 31.4% adjusted local currency operating income growth. Adjusted local currency operating income in the Color Group was down 13.3%, primarily as a result of the personal care performance. Our adjusted local currency EBITDA was up approximately 2% for the quarter. We are executing on our capital expenditure plan and have identified a number of attractive investment opportunity projects, which will bring us to the top end of our previously stated capital range of $55 million to $65 million for the year. During the first quarter, we bought back approximately $12 million of company stock. 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 $0.30 of divestiture-related costs, operational improvement plan costs, and the impact of the businesses to be divested. 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. Our adjusted local currency EBITDA to grow at a mid-single digit rate. And based on current exchange rates, we expect our earnings to benefit by approximately $0.10 due to currency for the year.

Our Asia Pacific Group reported 5% adjusted local currency revenue growth and over 30% adjusted local currency operating profit growth. Our Asia Pacific Group had another strong quarter with 5% adjusted local currency revenue growth and over 30% adjusted local currency profit growth. Our first quarter GAAP diluted earnings per share was $0.75. 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 adjusted local currency EBITDA to grow at a mid-single digit rate. And based on current exchange rates, we expect our earnings to benefit by approximately $0.10 due to currency for the year.

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Building on the better-than-anticipated results of the first quarter, second quarter materially exceeded our expectations with comparable 17-hotel portfolio revenues of $104 million, and RevPAR of $96. RevPAR at all of our open hotels, including Montage Healdsburg, was $107, made up of an average daily rate of $235 and an occupancy of 45.6%. While the comparison to the second quarter of 2020 is of little value, the open hotel RevPAR of $107 in the second quarter was more than double the open hotel RevPAR of nearly $48 achieved in the first quarter of this year. Furthermore, our occupancy, ADR and RevPAR have each increased meaningfully on a sequential basis every month this year, and our June RevPAR of almost $130 was nearly 5 times that of the $27 comparable RevPAR achieved this past January. While special corporate demand for the portfolio is still only around 20% of normal levels in the second quarter, several of our hotels, including Hilton San Diego Bayfront, Embassy Suites La Jolla, Hyatt Regency San Francisco and Hyatt Centric Chicago, witnessed a meaningful acceleration in special corporate room nights. Even more encouraging is the strength of transient pricing with our second quarter transient rate at $253. Despite several urban markets still lagging compared to pre pandemic levels, our resort hotels, specifically Wailea Beach resort and Oceans Edge, each achieved higher RevPAR than in the same time in 2019, up 4% and 79%, respectively. The performance of these hotels was driven by occupancy approaching pre-COVID levels with significantly higher room rates compared to '19, running 30% higher at Wailea Beach Resort and up a staggering 91% at Oceans Edge. Additionally, our recent acquisition, Montage Healdsburg, has performed favorably to our initial estimates, running at an average rate of over $1,000 in the second quarter. Group business contributed approximately 80,000 room nights in the second quarter, up from 51,000 room nights in the first quarter, and the outlook for the third and fourth quarters indicate significant sequential improvement. Several of our larger group of hotels, including Hyatt San Francisco, Boston Park Plaza and Renaissance Orlando, had several groups that picked up over 90% of the contracted blocks in the second quarter, which was substantially higher than we forecasted. But rooms revenue was not alone and growing substantially on a sequential basis, Food and Beverage revenues increased by 2.5 times in the second quarter representing a 22% increase in food and beverage spend per occupied room and other revenues doubled as higher occupancy drove ancillary revenues such as parking. Catering revenue per group room night also increased by over 2.5 times as corporate group and associations returned. As a result of these factors, our comparable total revenue per available room, or TREVPAR, increased from nearly $60 in the first quarter to over $138 in the second quarter. For example, travelers on TripAdvisor recently ranked Oceans Edge as one of the top 10 hotels in Key West, up from 24 at the end of 2019, even with a massive increase in ADR. These factors give us confidence that the rate increase is sustainable, and additional growth is achievable. Through July 29, our 17 open hotels generated RevPAR of approximately $165, made up of a 62% occupancy and a $266 average daily rate. Our July RevPAR represents a $35 increase from June and is $138 higher than that experienced this past January. The citywide calendar in many of our primary markets are very encouraging over the next several quarters and over 30% of our group room nights on the books for the fourth quarter are for citywide events. As previously mentioned, several recent groups have picked up 90% to 100% of their room blocks, which was well in excess of our forecast. Our trailing six-week booking trends are now down only 10% to 15% compared to the same time in 2019, which marks a substantial improvement from the 80% to 90% declines we saw in the first of the year and the 40% to 50% declines we saw going into the second quarter. During the quarter, the hotel ran an occupancy of 61% at an average rate over $1,000 and in July, the hotel ran at over 70% occupancy at a rate of nearly $1,250. As of the end of the quarter, we had approximately $210 million of total cash and cash equivalents, including $47 million of restricted cash. Adjusting for the issuance of our Series I preferred stock and the expected redemption of our Series F, our pro forma total cash balance at the end of the quarter would have been approximately $235 million. In addition to cash on hand, we also maintained full availability on our $500 million revolving credit facility. As John mentioned, since our last earnings call, we also executed upon two additional balance sheet enhancing transactions through the issuance of both our 6.125% Series H preferred and our 5.7% Series I preferred. Proceeds from these two transactions, both of which were record-setting low coupons at the time of issuance, are being used to redeem higher cost existing preferred equity and will reduce our comparable preferred dividends by $1.5 million per year. Second quarter adjusted EBITDAre was $15 million, and second quarter adjusted FFO per diluted share was a loss of $0.01.

Second quarter adjusted EBITDAre was $15 million, and second quarter adjusted FFO per diluted share was a loss of $0.01.

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Flowserve's adjusted earnings per share of $0.28 increased over 47% compared to last year's first quarter. And our bookings for the first three months of 2021 were up by over 16% compared to the average of last year's final three quarters. With an improving environment, combined with our Flowserve 2.0 growth initiatives, we were encouraged to book $945 million in the first quarter, which represented over 15% growth sequentially and was driven primarily by increased MRO and aftermarket activity. In addition to increased aftermarket and MRO-related activity, we were pleased that project bookings levels approached approximately 85% of 2020's first quarter. We saw a number of smaller projects get awarded with the largest of these in the $10 million to $15 million range. But we did see increased repair and replacement work in the storm's aftermath which drove an estimated $20 million of incremental repair in replacement business as we supported more than 30 customer installations in the region. Currently, our project funnel is about 12% higher than a year ago, and the compare period includes many of the projects that were placed on hold due to the pandemic. Our adjusted earnings per share was up significantly compared to last year, and the margins we delivered in our SG&A levels continue to reflect the benefit of the decisive cost actions we took in 2020 and the ongoing Flowserve 2.0 transformation program. For the first quarter, we delivered solid results, including an adjusted earnings per share of $0.28, which represents an increase of nearly 50% versus prior year. On a reported basis, earnings per share of $0.11 included $0.08 of realignment, $0.04 of costs related to early retirement of debt and $0.05 of below-the-line FX currency impact. First quarter revenue of $857 million was down 4.1% versus the prior year primarily driven by the 10% sales decline in original equipment, including FPD's 15% original equipment decrease. We were pleased to see modest aftermarket sales growth as revenue of $450 million increased 2%, with both FPD and FCD contributing. Our first quarter performance was largely driven by the significant cost actions we took in the middle of 2020 as well as ongoing transformation-driven operational improvements and a 400 basis point mix shift toward higher-margin aftermarket revenue, partially offset by increased under-absorption. Adjusted gross margin of 30.4% was roughly flat versus prior year and the sequential quarter, driven by FPD's 60 basis point increase offset by FCD's 170 basis point decline, both as compared to 2020's first quarter. On a reported basis, first quarter gross margin decreased 50 basis points to 29.3% due primarily to absorption headwinds and higher realignment costs versus the first quarter of 2020. First quarter adjusted SG&A decreased $34 million to $194 million versus prior year and was largely flat on a sequential basis. As a percent of sales, first quarter adjusted SG&A declined 290 basis points year-over-year. Reported SG&A decreased $47 million versus prior year, where in addition to cost action benefits, adjusted items were down $13 million compared to the first quarter of 2020. We delivered a $20 million increase in adjusted operating income in the first quarter, a strong performance considering the $36 million decrease in revenue. As a result, adjusted operating margin improved 250 basis points versus last year to 8.1%, driven by the previously mentioned cost actions, ongoing operational progress and the mix shift to higher-margin aftermarket products and services. FPD and FCD improved 230 and 60 basis points to 10.3% and 10.4%, respectively. First quarter reported operating margin increased 380 basis points year-over-year to 6.5%, including the roughly $12 million reduction of adjusted items. Our first quarter adjusted tax rate of 23.2% is in line with our full year guidance of 22% to 24%. Our first quarter cash balance of $659 million decreased $436 million compared to the year-end 2020 level. The primary use of cash was for debt reduction, with the $407 million payment to retire the remaining portion of our euro notes. Additionally, we returned over $30 million to shareholders through dividends and share repurchases. Total debt at quarter end was $1.3 billion compared to over $1.7 billion at year-end. Compared to last year's first quarter, gross debt is down over $50 million, while the cash balance is up over $35 million. Flowserve's quarter end liquidity position remained strong at over $1.4 billion, including $742 million of availability under our undrawn senior credit facility. First quarter free cash flow was approximately $25 million. And for the second year in a row and only the third time in the last 15 years, Flowserve delivered positive free cash flow in the first quarter. As is typical, working capital was a use of cash in the first quarter of $40 million driven primarily by a reduction in accounts payable. Inventory was also a use of $17 million, but I was pleased that our focus and improved processes to control inventory drove a 60% reduction versus last year's first quarter use. Taking a look at primary working capital as a percent of sales, we saw 110 basis point sequential increase to 29.6%, again, driven primarily by accounts payable and a lower top line. Although our backlog increased over $30 million, we were pleased that inventory, when including contract assets and liabilities, decreased $4 million versus the fourth quarter of 2020. And importantly, we remain confident in achieving free cash flow conversion in excess of 100% in 2021. Based on our strong first quarter bookings and visibility into improving end markets, Flowserve increased and tightened our adjusted earnings per share guidance range for the full year to $1.40 to $1.60 per share and reaffirmed all other guidance metrics. Based on the expected increase in short-cycle activity, we now expect the revenue decline in the 3% to 5% range versus our initial guide of down 4% to 7%. The adjusted earnings per share target range continues to exclude expected realignment expenses of approximately $25 million as well as below-the-line foreign currency effects and the impact of potential other discrete items which may occur during the year. On a quarterly basis, we expect our adjusted earnings per share to increase sequentially over the course of 2021 as we see the benefit of our first quarter bookings flow through and from the expected increase in short-cycle activity. With our Flowserve 2.0 transformation program and its elements now embedded in our operations and functional teams, we expect 2021 transformation expenses of roughly $10 million, representing a decline of over 50% versus the prior year. Additional guidance components remain unchanged with expected net interest expense in the range of $55 million to $60 million and an adjusted tax rate between 22% and 24%. Major planned cash usages this year include the recently completed retirement of our euro notes and an expectations to return over $100 million to shareholders through dividends and share repurchases. We also intend to invest in our business as we return to the growth aspects of our Flowserve 2.0 program, including capital expenditures in the $70 million to $80 million range which includes spending for enterprisewide IT systems to further consolidate our ERP platform and support our transformation-driven productivity improvements. Our ongoing Flowserve 2.0 transformation and how Flowserve will support energy transition. Let me first provide an update on our Flowserve 2.0 transformation progress. All of these enhancements support the new Flowserve 2.0 operating model. As we look to fully embed the transformation into our operations by the end of 2021, I am confident that our Flowserve 2.0 process improvements will continue to provide benefit to Flowserve and our customers for years to come. Since introduction, we have already received over $30 million of orders for the product, and we see growing demand for years to come. After three years of hard work on our Flowserve 2.0 transformation program, we are now operating at a higher level and we are well positioned to transition to growth.

Flowserve's adjusted earnings per share of $0.28 increased over 47% compared to last year's first quarter. For the first quarter, we delivered solid results, including an adjusted earnings per share of $0.28, which represents an increase of nearly 50% versus prior year. On a reported basis, earnings per share of $0.11 included $0.08 of realignment, $0.04 of costs related to early retirement of debt and $0.05 of below-the-line FX currency impact. Based on our strong first quarter bookings and visibility into improving end markets, Flowserve increased and tightened our adjusted earnings per share guidance range for the full year to $1.40 to $1.60 per share and reaffirmed all other guidance metrics. On a quarterly basis, we expect our adjusted earnings per share to increase sequentially over the course of 2021 as we see the benefit of our first quarter bookings flow through and from the expected increase in short-cycle activity.

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Seneca had a great quarter with production up nearly 50% on the strength of last year's acquisition and its 2021 drilling program. That growth in production, along with higher commodity prices, drove nearly 70% increase in EBITDA from our combining Upstream and Gathering operations. This will allow us to more fully utilize our Leidy South capacity from the start and capture some of the valuable winter premiums in the Transco Zone 6 market. Almost 90% of the pipe has been strung on the right away and nearly 40% is in the ground. It increases revenues on our regulated pipelines by $50 million a year and when combined with Seneca capacity [Phonetic] on Transco's companion Leidy South project will allow for higher E&P production volumes and gathering throughput; the perfect example of the power of our integrated approach to the business and positions National Fuel to deliver solid near-term growth and sustainable free cash flow. Consistent with prior years, our goal is to replace 150 miles of older pipeline, and the team is right on track to hit that mark. To-date, our program has been the driver of a 64% reduction in emissions from our delivery system compared to 1990 levels. Looking to next year on the strength of the FM100 project, our preliminary guidance for fiscal 2022 is $4.40 per share to $4.80 per share and to mid-point a 12% increase from our expected 2021 earnings. In addition NYMEX pricing of $3.50, we expect about $250 million in free cash flow, which is well in excess of our expected dividend payments and which positions us well to continue to improve our investment grade balance sheet. The goal of that program is to be between 50% and 80% [Indecipherable] at the beginning of a fiscal year, and we typically layer in those hedges over the preceding three to five years. Every $0.25 change in realized prices impacts cash flows by about $20 million and earnings by about $0.15 per share. Switching gears, as we all know, natural gas has been a significant, if not the biggest driver of greenhouse gas emissions reductions since 2005. We're also enhancing our emissions disclosures to include full Scope 1 and 2 CO2 and methane emissions. We produced 83.1 Bcfe, an almost 50% increase from last year, driven by increased Tioga County volumes from our acquisition, which closed in late July 2020, combined with solid results from our Appalachian development program. We continued to see the benefits of our increased scale with per unit cash operating expenses dropping $0.06 per Mcfe versus the prior year to a $1.13 per Mcfe driven by a significant year-over-year decrease in our per unit G&A expense. During the quarter, we drilled 12 new wells, five in the WDA and another seven in the EDA. Further, given the contiguous nature of this acreage and continued operational success, we expect most of our Tioga Utica Wells will exceed 10,000 feet treated lateral link generating outstanding returns. Seneca holds a 25% working interest in this pad. However, 100% of the production will flow through National Fuel's wholly owned gathering system, driving throughput growth and revenues for our sister company. Moving to fiscal 2022, our operations plan is right on track, as we expect to turn in line about 40 wells during the first half of the fiscal year and another ten or so wells over the balance of the year. Our increased completion base, along with our plans to operate two drilling rigs throughout fiscal 2022 is projected to drive an increase in our capital expenditures by $45 million year-over-year, which is consistent with our prior expectations. With firm sales contracts in place for approximately 93% of our expected fiscal 2022 production volumes, minimizing our exposure to invasive spot pricing. However, with prices north of $3.50 per MMBtu for our fiscal 2022 and $3 for fiscal 2023, the caveat will be whether this capital constraint will continue over the coming months and whether producers will stick to their current focus on free cash flow generation and maintenance production levels. Moving to California, we expect to invest $10 million to $15 million a year, generating substantial free cash flow or moderating production declines, and we'll look for ways to increase our activity to the extent oil prices remain at current levels. Upon completion of these projects, approximately 20% of our power needs in California will be met with solar. National Fuel's third quarter GAAP earnings were $0.94 per share and after adjusting for an unrealized gain on our non-qualified benefit plan investments, operating results were $0.93 per share. Starting with fiscal 2021, we're increasing and tightening our earnings guidance to a range of $4.05 per share to $4.15 per share. Moving into fiscal 2022, we are projecting a 12% increase in earnings at the mid-point with our preliminary guidance in the range of $4.40 per share to $4.80 per share. Starting first with the Pipeline and Storage segment, the direct benefit of the project will be approximately $50 million per year of incremental revenues. Given the late calendar [Technical Issues] we expect approximately $30 million to $35 million of revenue from this project during fiscal 2022. Seneca's expected production range for next year is 335 to 365 Bcfe. This nearly 8% increase relative to fiscal 2021 will also benefit our gathering business, driving higher throughput and related revenue. For fiscal 2022, we're assuming $3.50 per MMBtu with spot prices of $2.85 in the winter months, and $2.25 in summer period. On the oil side, we're assuming $65 per barrel. For reference, a $0.25 change in natural gas prices is expected to impact earnings by $0.15 per share, a $5 change in oil by $0.03 per share. In our utility for the first three quarters of this year, we averaged about 13% warmer than normal -- warmer than normal weather. For fiscal 2022, we're forecasting a return to normal weather, and as a result, we expect margins to be higher by approximately $10 million year-over-year, particularly in our Pennsylvania jurisdiction where we don't have a weather normalization clause. This will be largely offset by modestly higher expected O&M expense, which we anticipate to increase 3% to 4% compared to fiscal 2021 driven by higher personnel costs, principally related to negotiated wage increases with our collective bargaining units along with normal inflationary increases to labor and other items that we see each year. In the Pipeline and Storage business, we expect O&M to increase by 4% to 5% versus fiscal 2021. This was principally driven by a one-time favorable benefit to O&M expense of approximately $4 million in fiscal 2021 that will not recur in fiscal 2022. Lastly, from a guidance standpoint, we're expecting a modestly lower effective tax rate next year at 25% to 26% to stem from our ability to take advantage of tax credits related to our enhanced oil recovery activities at our California facilities for fiscal 2022. Turning to our capital plans for next year, we're projecting a roughly 10% decrease relative to fiscal 2021. This is driven by the completion of the $280 million FM100 project early in the year. We started the year with a modest amount of short-term borrowings and well, we've had roughly $120 million of cash on hand at the end of June. As we look to fiscal 2022, assuming a $3.50 NYMEX natural gas price we expect funds from operations to exceed capital expenditures by roughly $250 million. This more than covers our dividend and is expected to leave us nearly a $100 million of excess cash flow positioning as well going into fiscal 2023. We would have stepped over the course of fiscal 2022 to trend toward 2.5 times debt to EBITDA and with sustainable free cash flow beyond next year to seek further improvement beyond that level.

Looking to next year on the strength of the FM100 project, our preliminary guidance for fiscal 2022 is $4.40 per share to $4.80 per share and to mid-point a 12% increase from our expected 2021 earnings. National Fuel's third quarter GAAP earnings were $0.94 per share and after adjusting for an unrealized gain on our non-qualified benefit plan investments, operating results were $0.93 per share. Starting with fiscal 2021, we're increasing and tightening our earnings guidance to a range of $4.05 per share to $4.15 per share. Moving into fiscal 2022, we are projecting a 12% increase in earnings at the mid-point with our preliminary guidance in the range of $4.40 per share to $4.80 per share.

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On March, 13, we suspended our operations in response to the COVID 19 pandemic and local government mandates. These efforts have been very successful as we limited our net cash outflow in the second quarter to approximately $25 million per month, a significant improvement compared to the average $30 million to $35 million per month that we projected on our last earnings call. With our new operating protocols and technology in place, we have resumed limited operations at 14 of our parks. We expect daily attendance to be approximately 25% to 30% of prior year levels for the foreseeable future. Fourth, almost 90% of our gas come within driving distance. Finally, our parks generate cash flow in excess of their variable costs and significantly less than 25% of their maximum capacity. I have 25 years of financial strategy experience, primarily in consumer facing businesses. As Mike mentioned, we were able to limit our net cash outflow for the second quarter to $76 million. This was excluding the costs associated with our financing initiatives are approximately $25 million per month. This represented an improvement compared to the previously projected net cash outflow of $30 million to $35 million per month during the last nine months of 2020. Total attendance for the quarter was 433,000, half of which came from our drive thru Safari and our Park in New Jersey, which was our first attraction to open. As a result, revenue declined by $458 million or 96% to $19 million. The reduction in revenue included $29 million of membership revenue from our members that have completed that initial 12 month commitment period that we diverted to future periods. But nearly when our members entered a 13 month membership, we recognize the revenue on a monthly basis, according to their cash payments. As a result, for those members who have completed their initial 12 month commitment period, we will recognize revenue at the end of their membership term, whenever those members utilize their additional months. The decrease in revenue was also partially attributable, to a $29 million reduction in sponsorship, international agreements and accommodations revenue. Guest spending per capita in the quarter decreased 15% to $35.77. Admissions per capita increased 5%, primarily due to a higher mixer single day pay tickets. In parks spending per capita decreased 43%, primarily due to the large proportion of attendance from our drive thru Supply Park, where there is no opportunity for in park spending. On the cost side, cash operating an SGA expenses, increased by $141 million or 60%, primarily due to proceedings measures we took, after we suspended operations. In addition we increased our legal reserves by $8 in the quarter. Adjusted EBITDA for the quarter was a loss of $96 million, compared to income of $180 million in the prior period. We now have 14 of 26 parks open. These parks generated more than 50% of our 2019 attendance on a full year basis. Month to-date in July, we are averaging approximately 30% of Prior attendance at the parks that are open. Our Active Pass Base as of the end of the second quarter was down 38% and compared to the prior year quarter. This includes 2.1 million members compared to 2.6 million at the end of calendar year 2019 and 2.4 million at the end of the first quarter 2020. However, we were pleased with the retention of our existing members as we retained 81% of our members since the start of the year through the second quarter. Since we opened our parks, we have begun to sell new memberships and season passes. And third, we offer the pause payments for any member requesting to do so. We are taking members on pause as we open our parks, and we anticipate that most of our pause members will return to active paying members once we reopen our remaining parks. In response to our curtailed operations, we continued to take actions to reduce operating expenses and to defer or eliminate at least $50 million to $60 million of capital expenditures. We now expect to spend $80 million to $90 million on capital expenditures in 2020, $10 million lower than our previous projections. Based on all the cost savings measures we have implemented, the retention of most of our membership base and positive cash flow from the parks that are currently open, we estimate that our net cash outflows will average between $25 million to $30 million per month through the end of 2020. Note that partnership park distributions occur only in the back half of the year and represent an average run rate of $7 million per month for the last six months of the year. We believe we have adequate liquidity to the end of 2021 even if we need to close our parks. However, if operations remain curtailed, we will likely need a further amendment to our senior secured leverage ratio covenant. We also incurred approximately $6 million of costs on the strategic work related to the transformation initiative that Mike will discuss. However, we will not finalize the cost of associated savings until we complete the work. We anticipate that a portion of the work will be completed by the fourth quarter of 2020, and the remaining portion will be completed when the parts are again operating at more normal capacity. Deferred revenue of $182 million was down $53 million or 22% to prior year, driven by fewer membership and season pass sales, while our parks have been closed. Our liquidity position as of June 30 was $756 million. This included $460 million of available revolver capacity, net of $21 million of letters of credit and $296 million of cash. This compares to a pro forma liquidity position of $832 million as of March 31, 2020, a reduction of $76 million or approximately $25 million per month. We will focus on revenue generation and cost efficiency programs in our base business as we become a more agile, commercially driven and technology savvy organization. The purpose of this element is to enhance the guest and team member experience while creating cost efficiencies. We are conducting robust training on diversity and inclusion for all of our team members, including dedicated sessions with our top 200 leaders on understanding the business rationale, identifying unconscious biases, and learning how to lead open and honest conversations with our team members. We will pledge up to $5 million cumulatively in investments and ticket value by the end of 2022 toward programs dedicated to equality and the socioeconomic advancement of people of color.

As a result, revenue declined by $458 million or 96% to $19 million. Guest spending per capita in the quarter decreased 15% to $35.77. Our Active Pass Base as of the end of the second quarter was down 38% and compared to the prior year quarter. Since we opened our parks, we have begun to sell new memberships and season passes. And third, we offer the pause payments for any member requesting to do so. We are taking members on pause as we open our parks, and we anticipate that most of our pause members will return to active paying members once we reopen our remaining parks. We believe we have adequate liquidity to the end of 2021 even if we need to close our parks. However, if operations remain curtailed, we will likely need a further amendment to our senior secured leverage ratio covenant. However, we will not finalize the cost of associated savings until we complete the work. We anticipate that a portion of the work will be completed by the fourth quarter of 2020, and the remaining portion will be completed when the parts are again operating at more normal capacity. This included $460 million of available revolver capacity, net of $21 million of letters of credit and $296 million of cash. We will focus on revenue generation and cost efficiency programs in our base business as we become a more agile, commercially driven and technology savvy organization. The purpose of this element is to enhance the guest and team member experience while creating cost efficiencies.

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These results were above our internal expectations for the current quarter and align with our ability to achieve our 2021 full year earnings guidance range of $3 to $3.30 per share. The IRP outlines our plans to further transform Minnesota Power's energy supply to 70% renewable by 2030 and to be coal-free and 80% lower carbon by 2035. All of these plans lay the strong foundation for our vision to provide 100% carbon-free energy to customers by 2050. While we advance our vision of a carbon-free energy supply by 2050, we will continue to make affordability a priority. Minnesota Power has completed only three rate cases in the past 25 years, with our last completed rate case back in 2016, five years ago. The land is not required to maintain operations and has an estimated value of approximately $100 million. Turning to our second largest business in the ALLETE family, ALLETE Clean Energy with 100% renewable generation is making progress on its multifaceted strategy focused on portfolio optimization, new projects, and plans for expanding service offerings beyond wind to include solar and storage solutions. Today, ALLETE reported third quarter 2021 earnings of $0.53 per share on net income of $27.6 million. Earnings in 2020 were $0.78 per share and net income of $40.7 million. The third quarter results for 2021 did exceed our internal expectations by approximately 25%. ALLETE's regulated operations segment, which includes Minnesota Power, superior water light and power, and the company's investment in the American Transmission Company recorded net income of $32.9 million compared to $42.4 million in the third quarter of 2020. In addition, the recording of income tax expense resulted in a negative impact of approximately $5 million or $0.10 per share for the quarter as compared to 2020. ALLETE Clean Energy recorded a net loss of $800,000 in the third quarter of 2021, compared to net income of $1.1 million in 2020. As foreshadowed in the second quarter disclosures, ALLETE Clean Energy's wind facilities continued to be impacted by lower wind resources than expected and were 7% below expectations for the quarter. Our corp and other businesses, which includes BNI Energy and ALLETE properties recorded a third quarter net loss of $4.5 million in 2021, compared to a net loss of $2.8 million in 2020. I'll now turn to our 2021 earnings guidance, which remains unchanged from our original range of $3 to $3.30 per share. Consistent with our disclosures in the second quarter, we anticipate our regulated operations segment will be at the higher end of our guidance range of $2.30 to $2.50 per share. We continue to expect that ALLETE Clean Energy and our corporate other businesses to be at the lower end of our guidance range of $0.70 to $0.80 per share. This is primarily due to the negative impacts of the extreme winter weather event in the first quarter of 2021 at the Diamond Spring wind energy energy facility of approximately $0.10 per share and lower than expected wind resources and availability throughout 2021. These negative impacts are partially offset by a 16% after tax gain recorded in the fourth quarter of 2021 for the sale of a portion of the Nemadji Trail Energy Center by South Shore Energy, ALLETE's non-rate regulated Wisconsin subsidiary. We estimate that approximately $3 million or $0.6 per share is expected to reverse in the fourth quarter. On November 1st, Minnesota Power filed the retail rate increase request with the MPUC seeking an increase of $108 million in total additional annual revenue. The filing seeks a return on equity of 10.25% and a 53.81% equity ratio. Interim rates of $87 million would begin January 1, 2022, with approval by the MPUC. The rate case assumes taconite production of approximately 34 million tonnes, which is in alignment with the long-term average production levels for taconite. I'm pleased to report that our trajectory for improved earnings per share growth remains on track and I'm confident in our ability to achieve our long-term annual average earnings-per-share growth objective of within a range of 5% to 7%. Our planned expansion of our 550 megawatt DC transmission line, participation in the grid North partners initiative, and our increasing investment in the American Transmission Company are clearly of significant strategic value to ALLETE. In addition to strategic position in initiatives gaining traction at our regulated business, ALLETE Clean Energy is on the verge of completing its construction of Caddo wind project located in Oklahoma, which will serve additional Fortune 500 customers under long-term contracts, and is comfortably on track to be online before the end of this year. In total, Oklahoma-based Caddo and Diamond Spring projects represent over $800 million of investment and will provide its large C&I customers with over 2.1 million megawatt hours of carbon-free wind generation. Regarding optimization initiatives underway, the 92 megawatt Red Barn build order transfer project with Wisconsin Public Service Corporation and Madison Gas and Electric will utilize some of our Safe Harbor turbines while expanding our customer base and presence in another geographic region of the country. An extension of this project and a testimony to our strong relationships with optionality to serve the C&I and/our utility space, the approximately 68 megawatt whitetail development project is advancing with its advanced transmission Q position, landowner relationships, and for either a long-term PPA or build order transfer project. Speaking of strengthening our development pipeline to leverage is ACE's safe harbor turbines, we continue to advance the 200 megawatt [Inaudible] wind project in North Dakota and are working with state regulators and the Federal Aviation Administration on permitting and siting for this facility. We are encouraged by North Dakota Governor Burgum's call for the state to be carbon neutral by 2030. Regarding the up to 120 watt -- megawatt Northern Wind project with Xcel Energy, construction will begin upon receiving permitting approval from the MPUC. The fact that Minnesota Power serves these customers with 50% renewable energy today directly contributes to the sustainability of their current operations.

These results were above our internal expectations for the current quarter and align with our ability to achieve our 2021 full year earnings guidance range of $3 to $3.30 per share. Today, ALLETE reported third quarter 2021 earnings of $0.53 per share on net income of $27.6 million.

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Revenue grew 8% with organic growth of 6% and earnings per share of $2.02 was up 10%. At the segment level, organic growth was led by welding at plus 22%; food equipment at plus 19%; Test & Measurement and Electronics at plus 12% and specialty products at plus 8%. And as a result, our auto OEM segment revenues were down 11% in Q3 versus the minus 2% we were expecting as of the end of June. In Q3, our people leveraged the combination of ITW's robust and highly flexible 80/20 front-to-back operating system. And as a result, we were able to fully offset input cost increases on a dollar-for-dollar basis in Q3, resulting in 0 earnings per share impact from price cost in the quarter. And, by the way, our teams also managed to continue to drive progress on our long-term strategy, execute on our Win the Recovery positioning initiative and deliver another 100 basis points of margin improvement benefit from enterprise initiatives. As Scott said, demand remained strong in Q3 with total revenue of $3.6 billion an increase of 8% with organic growth of 6%. Growth was positive in six or seven segments, ranging from 3% to 22% and in all geographic regions, led by North America, up 9%; Europe, up 1% and; Asia, up 5%. China was up 2% versus prior year and up 6% sequentially. GAAP earnings per share of $2.02 was up 10% and included a onetime tax benefit of $0.06. Operating income increased 7% and operating margin was flat at 23.8% despite significant price cost headwinds. Enterprise Initiatives were real positive again this quarter at 100 basis points, as was volume leverage, which contributed more than 100 basis points. After-tax return on invested capital was 28.5% and free cash flow was $548 million. Free cash flow conversion was 86% as our businesses have been very intentional about adding inventory to both support our growth and to mitigate supply chain risk and sustained world-class service levels for our customers. Excluding our auto OEM segment, given the issues affecting that market right now, the rest of the company collectively delivered organic growth of 11%. Operating income growth of 14% and an operating margin of 25% plus in Q3. As you can see on this slide, if you eliminate the price/cost impact, our core incrementals were a very strong 52% in the third quarter, which points to the quality of growth and profitability leverage that define the core focus of our business model and strategy. Organic revenue was down 11%, with North America down 12%, Europe, down 18%; and China, up 2%. Turning to slide five for Food Equipment, and organic revenue growth was very strong at 19% and the Food Equipment recovery that began in Q2 continues to gain strength. North America was up 18% with equipment up 20% and service up 14%. Institutional revenue, which is about 1/3 of our revenue, increased more than 20%, with strength in education, up over 40% and healthcare and lodging growth of around 20%. Restaurants were up almost 50% with strength across the board. Strong demand is evident internationally as well with Europe up 20% and Asia Pacific, up 23%. Equipment sales led the way up 26% with service growth of 8%. Test & Measurement and Electronics organic revenue was strong with growth of 12%. Test & Measurement was up 15%, driven by continued strength in customer capex spend and in our businesses that serve the semiconductor space. Electronics grew 8% and operating margin was 26.8%. Welding demand continued to be very strong with organic revenue growth of 22%. Equipment revenue was up 25% and consumables grew 18%. Our industrial businesses increased 32% in the commercial business, which sells to small businesses and individual users grew 18%. North America was up 24% and international growth was 12% with continued recovery in oil and gas, which was up 9%. Welding had an operating margin of 30% in the quarter. Polymers & Fluids organic growth was 3%, with demand holding steady at the elevated levels that began in Q3 of last year. And as such, had a tough comp of plus 6% a year ago. In Q3, growth was led by the Polymers business, up 8% with continued strength in MRO and heavy industry applications. Automotive aftermarket grew 4% with sustained strength in the retail channel. And Fluids was down 5% due mostly to a decline in pandemic-related hygiene products versus prior year. Margins were 24.2% with more than 250 basis points of negative margin impact from price cost driven by significantly higher costs for resins and silicone. And a similar situation with construction, where organic growth was also up 3% and also on top of a strong year-ago growth rate of plus 8%. All three regions delivered growth with North America up 2%, with residential renovation up 1%, on top of a plus 14% comp a year ago and commercial was up 10%. Europe was up 8% and Australia and New Zealand was up 2%. Specialty organic revenue was up 8%, driven by continued recovery in North America, which was up 15%, and international was down 4%. Equipment sales were up 10% with consumables up almost 8%. We now expect the Automotive OEM segment revenue to be down about 15% in the second half, including being down 20% in Q4 versus the forecast of roughly flat second half auto OEM revenues that was embedded in our previous guidance. Our $8.40 midpoint equates to earnings growth of 27% for the full year. We now expect full year revenue to be in the range of $14.2 billion to $14.3 billion, which is up 13% at the midpoint, with organic growth in the range of 11% to 12%. Of that organic growth rate of 11% to 12% volume growth, including share gains are 8% with price of 3% to 4%. For the full year, we expect operating margin of approximately 24%, which is up 100 basis points versus last year. And the fact that we're expanding margins at all in this environment is pretty strong performance, considering that we now expect raw material costs to be up 9% or more than $400 million year-over-year, which is more than four times our expectation coming into this year. As raw material costs and consequently, price have gone up more than what we predicted in our previous guidance, we now estimate margin dilution percentage impact from price cost for the full year at about 150 basis points versus our previous expectation of 100 basis points. These margin headwinds though, will be offset by strong volume leverage of about 250 basis points and another solid contribution from enterprise initiatives of more than 100 basis points. Free cash flow is expected to be approximately 90% of net income as we continue to prioritize sustaining our world-class service levels for our customers in this challenging environment, and as such, we will continue to invest in additional working capital to support our growth and mitigate supply chain risks. And as per usual process, our guidance excludes any impact from the previously announced acquisition of the MTS Test and Simulation business. So in summary, this will be a record year for ITW with double-digit organic growth, margin expansion, strong cash flow and earnings per share growth of 25% plus.

Revenue grew 8% with organic growth of 6% and earnings per share of $2.02 was up 10%. As Scott said, demand remained strong in Q3 with total revenue of $3.6 billion an increase of 8% with organic growth of 6%. GAAP earnings per share of $2.02 was up 10% and included a onetime tax benefit of $0.06. We now expect full year revenue to be in the range of $14.2 billion to $14.3 billion, which is up 13% at the midpoint, with organic growth in the range of 11% to 12%. And as per usual process, our guidance excludes any impact from the previously announced acquisition of the MTS Test and Simulation business.

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Yesterday, we reported third quarter 2021 GAAP earnings of $0.85 per share. Our operating earnings were $0.82 per share, which is above the top end of our guidance range. As we've discussed, over the last 12 months, our Board and management team acted quickly and decisively, adding additional independent board members, making changes in our management structure, establishing effective controls, reinforcing our culture change and building a best-in-class ethics and compliance program. As a part of that transition, later this year, we plan to file with the West Virginia Public Service Commission for 50 megawatts of utility scale solar generation. As we close out the year, we are raising and narrowing our operating earnings guidance from $2.40 to $2.60 per share to $2.55 to $2.65 per share. The midpoint of this range represents a 9% increase over 2020 operating earnings results. Yesterday, we announced GAAP earnings of $0.85 per share for the third quarter of 2021 and operating earnings of $0.82 per share. In our distribution business, results for the third quarter of 2021 as compared to last year reflect the absence of Ohio decoupling and lost distribution revenue, which totaled $0.04 per share as well as lower weather-related usage. Comparing our results to the pre-pandemic levels in the third quarter of 2019, weather-adjusted residential usage was nearly 6% higher this quarter. Weather-adjusted commercial deliveries increased 3% while industrial load was up nearly 4% compared to the third quarter of 2020. For the first nine months of 2021, operating earnings were $2.10 per share compared to $2.07 per share in the first nine months of 2020. These items more than offset the $0.17 of decoupling and lost distribution revenues recognized in the first nine months of 2020. Our strong results and financial discipline have resulted in year-to-date adjusted cash from operations of $2.4 billion, which represents an increase of $600 million versus last year. While we expect a few offsets in the fourth quarter, we now expect cash from operations of approximately $2.8 billion for the year, which includes approximately $300 million of investigation and other related costs, the largest of which is associated with the $230 million EPA settlement. Earlier this month, we successfully restructured our revolving credit facilities from a 2-facility model to 6, fulfilling our commitment to complete this action before the end of the year. The 2021 credit facilities provide for aggregate commitments of $4.5 billion and are available until October of 2026, with two separate 1-year extensions. We are also pleased that following the restructuring of these facilities, S&P issued a one notch upgrade to the 10 distribution companies and the three transmission companies. We previously communicated that we were targeting FFO to debt in the 12% to 13% range. We're raising that target to be solidly at 13%, which will provide ample cushion to the new Moody's threshold of 12%.

Yesterday, we reported third quarter 2021 GAAP earnings of $0.85 per share. Our operating earnings were $0.82 per share, which is above the top end of our guidance range. As we close out the year, we are raising and narrowing our operating earnings guidance from $2.40 to $2.60 per share to $2.55 to $2.65 per share. Yesterday, we announced GAAP earnings of $0.85 per share for the third quarter of 2021 and operating earnings of $0.82 per share.

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We delivered double-digit sales and earnings growth in a challenging year. Our retail core business lines which include our iconic brands Tyson, Jimmy Dean, Hillshire Farm and Ball Park have driven strong share growth in the retail channel delivering 13 quarters of consecutive growth. The construction of the 12 new plants that we've mentioned previously are progressing well and once complete will enable Tyson to address capacity constraints and growing global demand for protein. In parallel to our actions to improve volume, we have also work to recover inflation through pricing, achieving a 13% price improvement for the fiscal year and a 24% increase for the fourth quarter. Sales improved 20% in the fourth quarter and 11% during the full year. Volumes were up 3% for the second half or nearly 350 million pounds. We delivered solid operating income performance, up 26% during the fourth quarter and 42% for the full year. Overall, our operating income performance translated to earnings per share of $2.30 for the fourth quarter, up 35% and $8.28 for the full year, up 53%. We expect to grow our total Company volumes by 2% to 3% next year, outpacing overall protein consumption growth. We have raised wages and across our business today, we pay an average of $24 per hour, which includes full medical, vision, dental and other benefits like access to retirement plan and sick pay, and we will continue to explore other innovative benefit offerings that remove barriers and make our team members lives easier. The program is targeted to deliver $1 billion in recurring productivity savings by the end of fiscal '24 relative to fiscal '21 cost baseline. The first is operational and functional excellence and is targeted to deliver greater than $300 million in recurring savings. The second is digital solutions, which is targeted to deliver more than $250 million in recurring savings. We continue to execute against our roadmap to bring operating income margin to at least the 5% to 7% range on a run rate basis by mid fiscal '22. By reconfiguring and optimizing our existing footprint, we can increase our harvest capacity by more than 10% without building another plant. From Q3 to Q4, we again reduced our rate of outside purchases this time by nearly 30%. Tyson's branded value-added product offerings have continue to gain share during both the fourth quarter in the latest 52 weeks and new capacity expansions will help us maintain momentum. This starts by returning our operating margin to the 5% to 7% level by the middle of fiscal 2022. On capital loan, we expect to invest $2 billion in fiscal year '22 with a disproportionate share focused on new capacity and automation objectives. Sales were up approximately 20% in the fourth quarter largely a function of our successful pricing initiatives that we've pursued to offset inflationary pressures. Volumes were down 4% during the fourth quarter primarily due to labor challenges hampering our efforts to fully benefit from strong retail demand and recovery in foodservice. Fourth quarter operating income of nearly $1.2 billion was up 26% due to continued strong performance in our beef business. For the full year, operating income improved to nearly $4.3 billion up 42%. Driven by the strength in operating income, fourth quarter earnings per share grew 35% to $2.30 with the full year up 53% to $8.28. Looking at our channel result, sales of retail drove over $1 billion of top line improvement versus last year even after exceptionally strong volumes in the comparable period. Improvements in sales through the foodservice channel drove an increase of $1.6 billion and our fiscal year export sales were nearly $1 billion stronger than the prior year as we leveraged our global scale to grow our business. Slide 12, bridges year-to-date operating income which was about $1.3 billion higher than fiscal 2020. Our pricing actions and strength in the beef segment led to approximately $5.6 billion of sales price mix benefit, which more than offset the higher COGS price-mix of $4.6 billion. Incremental direct COVID-19 costs were favorable by approximately $200 million during the year although our total spending at $335 million was still substantial. And finally, SG&A was over $100 million favorable to prior year, which was largely a result of a net benefit associated with the beef supplier fraud [Phonetic]. Segment sales were over $5 billion for the quarter, up 26% versus the same period last year. Offsetting higher sales prices were higher cattle costs, up more than 20% during the fourth quarter. We delivered segment operating income of $1.1 billion or 22.9% for the fourth quarter. Segment sales were over $1.6 billion for the quarter, up 30% versus the same period last year. Average sales price increased more than 40%, our volumes were down relative to the same period last year. Segment operating income was $78 million for the quarter down 52% versus the comparable period. Overall, operating margins for the segment declined to 4.7% for the quarter. Sales were $2.3 billion for the quarter, up 7% relative to the same period last year. Total volume was down 5.7% in the quarter with strength in the retail channel and continued recovery in food service more than offset by labor challenges. Operating margins for the segment were 1.7% or $39 million for the fourth quarter. For the full year, operating income margin was 7.6% or $672 million. Sales of $3.9 billion for the fourth quarter, up 21%. Volumes improved 1.3% in the quarter as strong consumer demand offset both labor challenges and the detrimental impact of a fire at our Hanceville rendering facility. Average sales price improved over 20% in the fourth quarter and 11.4% for the fiscal year, compared to the same periods last year. Chicken experienced an operating loss of $113 million in the fourth quarter. The segment earned $24 million representing an operating margin of 0.2% for the fiscal year 2021. Operating income was negatively impacted by $945 million of higher feed ingredient cost, grow-out expenses and outside meat purchases. For the fourth quarter, feed ingredients were $325 million higher than the same period last year. Segment performance also reflects net derivative losses of $75 million during the fourth quarter, which was $120 million worse than the same period last year. In pursuit of our priority to build financial strength and flexibility, we have substantially de-levered our business over the past 12 months, reducing leverage to 1.2 times net debt to adjusted EBITDA as we paid down $2 billion of debt while growing our earnings and cash flow. We're pleased to announce that last week our Board approved $0.06 increase to our annual dividend payment now totaling $1.84 per Class A share. We currently anticipate total Company sales between $49 billion and $51 billion which translates to sales growth of between 5% and 7%. We expect 2% to 3% volume growth on a year-over-year basis as we work to optimize our existing footprint and run our plants full. Our new productivity initiative is expected to deliver $300 million to $400 million of savings during fiscal '22 driven by operational and functional excellence initiatives, the rollout of digital solutions across the enterprise and extensive automation projects that are currently underway. We currently anticipate capex spending of approximately $2 billion during fiscal '22, an increase of roughly $800 million. Excluding the impact of changes from potential tax legislation, we currently expect our adjusted tax rate to be around 23%. We anticipate net interest expense of approximately $380 million because of intentional deleveraging during fiscal '21. Liquidity is expected to significantly exceed our target, while net leverage is expected to remain well below 2 times net debt to adjusted EBITDA. Prepared Foods is expected to deliver margins during fiscal '22 of between 7% and 9%. We expect the beef segment to continue to show strength due to prolonged industry dynamics leading to segment margins of between 9% and 11%. In chicken, our operational turnaround is working and we still expect to achieve run rate profitability of 5% to 7% by the middle of the year. We expect this will be achieved through sequential quarterly margin improvements during the first half of the year resulting in full year margins that fall between 5% to 7% although expected at the lower end of that range. In pork, we expect similar performance during fiscal '22 to what we accomplished during fiscal '21 equating to a margin of between 5% and 7%. In International and other, we expect margins of 2% to 3% as capacity expansions and strong global demand support volume growth and improved profitability.

We delivered double-digit sales and earnings growth in a challenging year. Overall, our operating income performance translated to earnings per share of $2.30 for the fourth quarter, up 35% and $8.28 for the full year, up 53%. We expect to grow our total Company volumes by 2% to 3% next year, outpacing overall protein consumption growth. The program is targeted to deliver $1 billion in recurring productivity savings by the end of fiscal '24 relative to fiscal '21 cost baseline. On capital loan, we expect to invest $2 billion in fiscal year '22 with a disproportionate share focused on new capacity and automation objectives. Driven by the strength in operating income, fourth quarter earnings per share grew 35% to $2.30 with the full year up 53% to $8.28. In pursuit of our priority to build financial strength and flexibility, we have substantially de-levered our business over the past 12 months, reducing leverage to 1.2 times net debt to adjusted EBITDA as we paid down $2 billion of debt while growing our earnings and cash flow. We currently anticipate total Company sales between $49 billion and $51 billion which translates to sales growth of between 5% and 7%. We expect 2% to 3% volume growth on a year-over-year basis as we work to optimize our existing footprint and run our plants full. We currently anticipate capex spending of approximately $2 billion during fiscal '22, an increase of roughly $800 million. Liquidity is expected to significantly exceed our target, while net leverage is expected to remain well below 2 times net debt to adjusted EBITDA. In International and other, we expect margins of 2% to 3% as capacity expansions and strong global demand support volume growth and improved profitability.

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We accelerated our synergy realization and exceeded our goal for the year, achieving approximately $30 million of incremental cost savings, bringing our total synergy realization to date to nearly $60 million. We remain confident in achieving our target of $75 million in run rate synergies by the end of year three. Over the past 12 months, we completed the divestitures of three businesses from our APS segment. As we continue to grow our industrial product platforms, Batesville is becoming a smaller part of the portfolio, now comprising only about 20% of the company revenues. Batesville's strong execution over the last two years has delivered over $200 million of free cash flow paying -- playing a key role in the actions we took to aggressively pay down debt, accelerate growth investments in our industrial platforms and return cash to shareholders. This allowed us to reinvest in the business for growth and productivity to strengthen our balance sheet and to return over $180 million in cash to shareholders through share repurchases and quarterly dividends. Since acquiring Milacron two years ago, we've reduced our leverage by nearly 2.5 turns. During the fiscal fourth quarter, we delivered total revenue in the quarter of $755 million, an increase of 12% on a pro forma basis or a 11% excluding the impact of foreign currency. Adjusted EBITDA of $140 million increased 2%, while adjusted EBITDA margin of 18.5% decreased 180 basis points, as cost inflation, unfavorable mix and an increase in strategic investments more than offset operating leverage from higher volume, favorable pricing and productivity improvements, including approximately $7 million of year-over-year synergies realized in the quarter. We had approximately 70% price/cost coverage in the quarter, which was more favorable than we had expected, primarily due to better pricing realization in some of our shorter cycle injection molding products and in Batesville. We reported GAAP net income of $55 million, or $0.74 per share, which increased from a loss of $0.09 per share in the prior year. Adjusted net income was $74 million, or $1.00 per share, an increase of $0.08 or 9%. And the adjusted effective tax rate for the quarter was 29.2%. We had cash flow from operations of $86 million in the quarter, which was better than our expectations coming into the quarter, but lower than last year, primarily due to timing of working capital requirements. Capital expenditures were approximately $18 million. We repurchased approximately 1.8 million shares for $78 million in the quarter and returned $16 million to shareholders in the form of quarterly dividends. APS revenue of $340 million increased 9% on a pro forma basis, driven by higher volume of large plastics projects and separation equipment. Aftermarket revenue was relatively flat year-over-year, but up 6% sequentially. Adjusted EBITDA of $69 million increased 8% on a pro forma basis, while adjusted EBITDA margin of 20.3% was higher than expected, down only 30 basis points from the prior year. Order backlog of $1.3 billion increased 41% year-over-year on a pro forma basis, primarily driven by large plastics projects. While backlog declined 2% sequentially, it remains at a high level, providing us a strong foundation for growth in fiscal '22 and beyond. Revenue of $260 million increased 20% compared to the prior year. Adjusted EBITDA of $54 million increased 6%, while adjusted EBITDA margin of 20.6% decreased 270 basis points, as higher volume and productivity were more than offset by unfavorable mix due to an increased proportion of injection molding equipment, which comes at a lower margin compared to hot runners, cost inflation, not fully offset by price, and higher labor and manufacturing premiums, including outsourcing. Order backlog of $366 million increased 51% compared to the prior year and decreased 6% sequentially as order volumes normalized, in line with our expectations. Revenue of $155 million increased 5%, due to higher average selling price and an estimated increase in deaths associated with the pandemic. Adjusted EBITDA margin of 21.6% declined 270 basis points compared to the prior year, primarily due to cost inflation and higher transportation and manufacturing cost premiums required to respond to the increased demand driven by the ongoing COVID-19 pandemic. Consolidated pro forma revenue of $2.8 billion increased 13% or 10%, excluding the impact of foreign currency exchange. Pro forma revenue for APS of $1.2 billion increased 5% compared to the prior year, including a 4% contribution from the impact of foreign currency. MTS revenue of $996 million grew 25% on a pro forma basis or 22% excluding the impact of foreign currency. Batesville revenue of $623 million increased 13%. Pro forma adjusted EBITDA of $534 million increased 20% compared to the prior year, while pro forma adjusted EBITDA margin of 18.8% improved 100 basis points, primarily driven by operating leverage from higher volume in Batesville and MTS and productivity improvements, including synergies. We accelerated the timing of our synergy capture in the year, realizing approximately $30 million of incremental cost savings, which exceeded our target of $20 million to $25 million, and we remain on track to achieve our three-year run rate synergy target of $75 million. GAAP net income of $250 million resulted in GAAP earnings per share of $3.31. Adjusted net income of $286 million resulted in adjusted earnings per share of $3.79, an increase of $0.60, or 19% compared to the prior year. And our adjusted effective tax rate was 28.7% for the full year. We generated record operating cash flow for the year of $528 million, up $174 million compared to the prior year, and our free cash conversion rate was 171% of adjusted net income for the year. Capital expenditures for the year were $40 million, which was lower than originally expected due to longer lead times from suppliers. Net debt at the end of the fourth quarter was $767 million, and the net debt to adjusted EBITDA ratio of 1.4 times was down from 2.7 times at the beginning of the fiscal year. As of quarter end, we had liquidity of approximately $1.3 billion, including $446 million in cash on hand and the remainder available under our revolving credit facility. Moving to capital deployment, we returned approximately $185 million to shareholders during the year through the repurchase of 2.8 million shares for approximately $121 million and $64 million through our quarterly dividend. Subsequent to the year end, we repurchased an additional 620,000 shares for $29 million, and we have $50 million remaining under our share repurchase authorization. We expect full-year revenue of $2.8 billion to $2.9 billion, an increase of 1% to 4%, driven by our strong backlog and solid underlying growth in our industrial end markets, partially offset by Batesville, the impact of supply chain disruptions and foreign currency translation. We expect adjusted earnings per share in the range of $3.70 to $4.00 for the full year. Total material and supply chain inflation for the year is expected to be approximately $95 million. We expect inflation to be more of a headwind in the first half of the year with price/cost coverage of approximately 70% improving to approximately 100% in the second half. For our fiscal first quarter, we expect adjusted earnings per share in the range of $0.87 to $0.94, down versus the prior year, primarily due to lower volume in Batesville, higher inflation and supply chain costs, and the impact of the divestitures. We expect free cash flow as a percent of adjusted net income to be approximately 100% for the year. Including capex of approximately $75 million. Turning to Advanced Process Solutions, we expect full-year revenue to be up 8% to 12%, primarily due to continued strength in large plastics projects as well as solid growth in aftermarket revenue. This growth includes an anticipated currency headwind of 3%. We expect adjusted EBITDA margin of 21% to 21.5%, up 150 basis points to 200 basis points. Turning to Molding Technology Solutions, we expect full-year revenue to be up 2% to 5% with modest growth in both hot runners and injection molding equipment. We expect adjusted EBITDA margin of 20% to 21% compared to 20.3% in fiscal '21. Finally, with Batesville, we expect revenue to be down 11% to 13%, due to an anticipated decline in burial demand as just normalized during the year. While we anticipate price/cost coverage will be better than it was in fiscal '21 due to the pricing actions we have taken, we expect adjusted EBITDA margin of 19% to 20% to be down 570 basis points to 670 basis points, primarily due to lower volume as well as supply chain premiums and inflation, not fully covered by price. We expect price/cost coverage to be approximately 60% in the first half of the year, and we anticipate this will improve in the second half. Finally, it's been a great honor and privilege to serve at Hillenbrand over the last 28 years.

We reported GAAP net income of $55 million, or $0.74 per share, which increased from a loss of $0.09 per share in the prior year. Adjusted net income was $74 million, or $1.00 per share, an increase of $0.08 or 9%. APS revenue of $340 million increased 9% on a pro forma basis, driven by higher volume of large plastics projects and separation equipment. We expect adjusted earnings per share in the range of $3.70 to $4.00 for the full year. For our fiscal first quarter, we expect adjusted earnings per share in the range of $0.87 to $0.94, down versus the prior year, primarily due to lower volume in Batesville, higher inflation and supply chain costs, and the impact of the divestitures.

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Nationally, just 40% of college students earn a certificate or degree within six years of beginning their post-secondary studies, yet at UTI nearly 70% of our students graduate within two years. While only 47% of those who attend traditional post-secretary of institutions are working in their field of study today, approximately 80% of UTI's graduates go to work in their chosen field after graduation. As we've outlined in past updates, the Bureau of Labor Statistics projects the year there are nearly 160,000 new technicians annually needed in our subject areas over the next 10 years. While technician training will only provide the market with a combined set of credentials of about 50% of those needed to go out into the workforce, this disconnect underscores that the jobs are there, students just need programs designed to match their interest and talents, industrial training that provides the hard and soft skills and credentials employers require and connections to industry opportunities. In the last three years, we brought innovative agreements with over 4,500 employers offering a range of incentives to attract and retain our graduates. Over 3,500 of them offer lucrative tuition reimbursement programs up to $25,000. Valerio itself here, he was among one of the top students in this program, and only one of 12 students Nationwide selected to participate in the most recent Porsche advanced training program. We've seen similar results during the pandemic for our recent graduating classes coming out of other manufacturer specific advanced training programs, including 98% employment for the Volvo graduates, a 100% employment for Peterborough program, who graduated on October 30. Candidly, there were times in 2020 where it felt like just staying on our feet was a Herculean task, yet due to the hard work and discovery of new and innovative approaches, all of our 12 campuses in eight states are fully operational and have been serving our students throughout the entire quarter. Since resuming hands on labs last quarter, we graduated over 2,770 technicians and continue to see high employment rates as the transportation industry continues to serve the nation as critical infrastructure. To date with the assistance provided by CARES Act funding we've distributed over 12,000 computers and we'll be continuing the program going forward. It's important to note, that combining the $17.1 million that we've now distributed directly to students in CARES Act emergency grants, with the funds utilized to purchase the laptops for students, $23 million or approximately 70% of UTI's Higher Education Emergency Relief Fund allocation has been distributed directly to students in the form of cash and technology. On average, once fully ramped, each new welding site launch increases overall student starts by about 1.5%. The U.S. Bureau of Labor Statistics projects that there will be more than 400,000 total job openings for welding over the next decades. As of October, nearly 80% of our students are on regular course schedules, which means they are no longer making up labs. This is a dramatic improvement from last quarter, when that figure was running at 40%. Now nearly 3% of our population are exclusively participating online; again, a significant improvement over the last quarter. Media inquiries were up 25% in both Q3 and Q4 compared to 2019. Now, we did see some slowdown due to the election, as the campaigns poured millions, and if not billions of dollars into the marketplace seeking that much coveted 18 to 24-year-old voter. Not only are increase increasing as noted above, but conversion rates for those increase in the last few months were up nearly 30%. As far as student starts in the fourth quarter, overall starts trailed 2019, yet were up 1.1% on a comparable basis. As part of this exercise, we're evaluating in collaboration with the UTI Board of Directors, the opportunity to replace our stock repurchase plan, which was initially set at $25 million and had approximately $10 million of authorization remaining. As I outlined today in the form of metrics, examples and outcomes, at UTI, we've held ourselves to a high standard in delivering for our students and industry partners for 50 years. We started 5,772 new students in the fourth quarter, which increased 1.1% year-over-year when adjusting for the extra start that occurred in the 2019 fiscal fourth quarter and was down 10.3% year-over-year including it. New students scheduled to start increased 6.9% year-over-year for the fiscal fourth quarter, excluding the prior year extra start. We're looking at start dates from August 31 through the end of September, when over 3,200 new students started the program. We saw a 14.8% year-over-year increase and exceeded our pre-COVID expectation by almost 7%. New students scheduled to start for this period increased almost 20% year-over-year and exceeded our pre-COVID expectations by almost 15%. For fiscal year 2020, we started to 11,283 new students. While this was down 2.4% as compared to fiscal 2019, I'll point out that we started two-thirds of these students during the pandemic directly into our new blended learning model. In the fourth quarter we saw improved show rate performance versus the third quarter, with the show rate down 360 basis points year-over-year versus down 400 basis points from the prior quarter. Similar to starts, we saw markedly better results from the August 31 start date through September with the year-over-year show rate down only 180 basis points for that period. So far in the first quarter of fiscal 2021, the overall show rate for our most recent start has improved 140 basis points versus the same prior-year pre-COVID period. For fiscal 2020, show rate was down 220 basis points, with the decline all due to COVID impact in the third and fourth quarters. We attribute the impact primarily to the fact that roughly 50% of our students relocate to attend our programs, but this increases to 55% to 60% in the fourth quarter, when we start more than half our students for the year, most of them from the high school channel. During the fourth quarter, we graduated approximately 1,900 students and as of the completion of the most recent course rotation, the percentage of students fully current and not be in makeup labs was 78% versus 40% at the time of our last earnings call. The percentage of students who were exclusively participating online decreased to 3% versus 13% at the time of our last earnings call. This progress allowed us to recognize approximately $8 million of the $11 million revenue deferral from last quarter. However, the net deferral as of the end of the quarter stood at approximately $6 million and reflects additional deferrals during the quarter based upon the varying stages of progression for students who are still at makeup lessons. As of the end of the quarter, the total number of students on LOA was approximately 700 or 5% total students and are at a consistent level currently. This compares to approximately 12% at the end of the June quarter and 9% at the time of our last earnings call. Given the dynamics of COVID, we will likely remain around 5% to 6% of total students in the near term, which is a few points above pre-COVID levels. Average students for the quarter were 11,251, an increase of 2.9% versus the same period last year. Total end of period active students was 12,524, a 1.3% increase versus the comparable period. Revenues for the fourth quarter decreased 12.9% year-over-year to $76.3 million and increased approximately $22 million or 40% sequentially versus the third quarter. The year-over-year change was primarily driven by the patient student progress in completing in-person labs due to disruptions from the pandemic, which drove the decrease in the average revenue per student of approximately 15%, inclusive of the revenue deferral. Sequentially, we saw an approximately 13% increase in the average revenue per student. For the full year, revenues decreased 9.3% to $300.8 million, also primarily driven by the revenue deferral, the overall pace of student progress in completing in-person labs, as well as lower average students due primarily to the COVID-related LOAs in the third quarter. We prudently controlled costs throughout the quarter, with operating expenses for the quarter decreasing 14.7% versus the prior year to $70.2 million. Operating expenses for the fiscal year were $304.6 million and decreased 10.2% versus the prior year. Operating income for the quarter was $6.2 million compared to an operating loss of $5.4 million in the prior year quarter. Net income for the quarter was $6.5 million, an 18% increase versus the prior-year period. For fiscal year 2020, net income was $8 million compared to a net loss of $7.9 million in 2019. As previously noted, our full-year net income includes a $10.7 million tax benefit resulting from the application of revised net operating loss carryback rules from the CARES Act. Basic and fully diluted earnings per share were $0.10 and $0.09 for the fourth quarter, respectively, and both were $0.05 for the full year. Total shares outstanding as of the end of the quarter were 32,647,000, slightly higher than the prior quarter. Adjusted EBITDA was $9.7 million for the quarter as compared to $10.4 million in the prior-year period. For fiscal year 2020, adjusted EBITDA was $14 million compared to $17 million for fiscal year 2019. Taking this into account, full-year adjusted EBITDA increased by approximately $2 million year-over-year on a comparable basis. This is despite $31 million of lower revenue and is a very strong outcome, considering all that transpired in fiscal 2020. Our balance sheet strengthened further in the quarter with available liquidity of $114.9 million as of September 30, which includes $76.8 million of unrestricted cash and cash equivalents and $38.1 million of short-term held to maturity securities. This is a $23 million quarter-over-quarter increase, which is consistent with the increase in liquidity we generated in the fourth quarter of fiscal 2019. For the fiscal year, operating cash flow was $11 million, while adjusted free cash flow was $4.3 million, including $9.3 million of capex. We estimate that cash flow was negatively impacted by $10 million to $15 million for the year due to the timing of tighter fund flows tied to COVID related delays and student progression through the curriculum. You can see this impact and increase in our tuition receivables versus this time last year, most of which we expect we realized in fiscal 2021. During the quarter, we completed disbursing the $16.6 million of emergency student funds. We also allocated $600,000 of the institutional funds for emergency grants to students. For the remaining institutional funds, we utilized $9.1 million of these funds in the fourth quarter. Of this amount, $5.7 million was for our student laptop PC program. We have approximately 900,000 in institutional funds remaining. To recap the actions completed in fiscal 2020, we completed our Exton campus rightsizing of 71,000 square feet in the first quarter and our home office relocation in 16,000 foot reduction in June. We gave back the remaining 152,000 square feet for the Norwood campus after closing it in July, and we signed a new lease for our Sacramento campus in September, which will reduce that campus by 128,000 square feet at the end of calendar 2021. Combined these actions reduce our annual occupancy cost by over $8 million, with all that Sacramento captured in our Q4 run rate. Our total lease facility portfolio currently stands at 1.85 million square feet. The net effect of this distribution was to reduce Coliseum's direct and indirect holdings to 24.9% of total UTI outstanding shares on an as-converted basis. This ownership threshold is important to the Company, at any action involving 25% or more of the Company's total outstanding shares would require a change in control review by the Department of Education. The shares held by Coliseum and their affiliates are currently limited by a 9.9% voting and conversion cap which can be lifted through further actions by then, and the Company. Lastly, for the terms governing the preferred shares, the Company has the option to require to conversion of any or all outstanding preferred shares, if the volume weighted average price of the Company's common stock equals or exceeds $8.33 for 20 consecutive trading days. For both new student starts and revenue, we expect year-over-year growth of 10% to 15%. For net income, we expect a range of $14 million to $19 million. For adjusted EBITDA, we expect a range of $30 million to $35 million. For adjusted free cash flow, we expect a range of $20 million to $25 million, which assumes capex of $15 million to $20 million, approximately two-thirds of the planned capex support high ROI investments, including the two welding programs we are launching in fiscal 2021, enhancements to our online curriculum and our campus optimization efforts.

Revenues for the fourth quarter decreased 12.9% year-over-year to $76.3 million and increased approximately $22 million or 40% sequentially versus the third quarter. Basic and fully diluted earnings per share were $0.10 and $0.09 for the fourth quarter, respectively, and both were $0.05 for the full year. You can see this impact and increase in our tuition receivables versus this time last year, most of which we expect we realized in fiscal 2021.

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It's worth noting that the out-of-home industry has consistently accounted for 5% to 6% of global advertising spend, and was one of the only growing traditional mediums pre-COVID. Longer term, the digital out-of-home sector is projected to grow at 13% compound annual growth rate from 2022 to 2025, according to data published by MAGNA Global in December 2020. We hope to capture a significant share of this growth, and we believe the actions we've taken during the past 12 months from strengthening our liquidity and implementing cost restructuring efforts, to the adjustments we've made to our sales approaches, to the continued expansion of our digital platform and data analytics product, put us in a stronger position to return to revenue growth as the recovery ultimately takes hold. This includes the recent refinancing of a portion of our debt through the issuance of $1 billion senior notes, which extended our maturity profile and reduced our cash interest expense going forward. We delivered consolidated revenue of $541 million, down 27% compared to the prior year. Excluding China and FX, the decline would have been 25% in the fourth quarter, an improvement over the third quarter. We believe this reflects both the premium locations of our roadside inventory, as well as the success of our digital screens which generated close to 70% of our fourth quarter revenue in the UK. Based on the information we have as of today, we expect Americas segment revenue to be down in the high 20 percentage range as compared to the prior year. Due to this, for the first quarter of 2021, with the Europe segment revenue to be down in the mid 30% range, as compared to prior year. In the Americas segment, while year-over-year revenue was down 25%, we continue to show a sequential improvement, which was better than expected. As a reminder, in 2019 National revenue was up 9%. We've built a robust set of SSP partners and a rich network of more than 20 DSPs, providing avenues to sell our inventory alongside other digital media. Europe's fourth quarter revenue, adjusted for foreign exchange, was down 23%. During the quarter, we continued to benefit from our strategic focus on roadside locations, which accounted for about two-thirds of our total European revenue and are far less affected by COVID-19 driven restriction than the transit environment which has historically accounted for just over 10% of our European revenues. As I mentioned, we expect the Americas to be down in the high 20 percentage range as compared to the prior year. As a reminder, in last year's first quarter, Americas segment revenue was up 8.5% on 2019. We added seventeen new digital billboards in the fourth quarter for a total of 74 new digital billboards in 2020, giving us a total of more than 1,400 digital billboards across the United States. So advertisers can now understand how each of our display impacts more than 100 B2B audience segment, making targeting the B2B customer more accessible and measurable. The brand reported that the campaign was responsible for 65% of website traffic and achieved a take through rate that was twice the industry average. As we noted last quarter, the 12 year deal is the largest airport advertising contracts in the US, panning JFK, LaGuardia in Europe, and Stewart Airports. As I noted earlier, we expect Europe revenues to be down in the mid 30 percentage range as compared to 2020. The Disney Plus campaign is for the many theories one division and targeted in 18 to 45-year-old demographics with interest in comic, cinema and video games. And the CaixaBank campaign was for their Young ID products and targeted 14 to 30-year-old with interest in music, museums and other cultural locations in Barcelona. We're also rolling out a programmatic offering in Europe, similar to the Americas, our programmatic offering will build over time, simplifying the buying process, providing us with additional revenue stream and a growing avenue to leverage our scale and technology to target new advertising partners. We added 545 digital displays in the fourth quarter and 1,244 in 2020 for a total of over 16,000 screens now live. In the fourth quarter, consolidated revenue decreased 27.4% to $541 million. Adjusting for foreign exchange, revenue was down 29.3%. If you exclude China and adjust for currency, the decline in revenue was 24.5%. Consolidated net loss in the fourth quarter was $33 million compared to net income of $32 million in the fourth quarter of 2019. Consolidated adjusted EBITDA was $101 million, down 51.1%. Excluding FX, consolidated adjusted EBITDA was down 52.1% compared to the fourth quarter of 2019. For the full year consolidated revenue decreased 30.9% to $1.9 billion, excluding foreign currency exchange impact, consolidated revenue for 2020 declined 31.4%. Consolidated net loss for the full year was $600 million compared to $362 million in 2019. And consolidated adjusted EBITDA for 2020 was $120 million, down 80.8% compared to 2019. Excluding FX, adjusted EBITDA was down 82% for the full year. The Americas segment revenue was $258 million in the fourth quarter, down 25.3% compared to $345 million last year. Total digital revenue which accounted for 32% of total revenue was down 29.6%. Digital revenue from billboards and street furniture was down 15.4%. Digital revenue as compared to the prior year improved sequentially over the third quarter, which was down 34.8% and print continues to perform a bit better than digital due to our [indecipherable] inventory. National was down 27% and accounted for 37% of total revenue, with local down slightly less at 24%, accounting for 63% of revenue. Direct operating and SG&A expenses were down 16.8%, due in part to lower site lease expenses related to lower revenue and renegotiated fixed-site lease expense, as well as lower compensation costs from lower revenue and operating cost savings initiatives. Adjusted EBITDA was $94 million, down 34 -- 35.4% compared to the fourth quarter of last year with an adjusted EBITDA margin of 36.5%. Europe revenue of $268 million was down 17.9% and excluded -- excluding foreign exchange, revenue was down 23% in the fourth quarter. The level of restrictions varied by country, with seven of our top 10 European markets posting sequential revenue improvements in the quarter, with the majority showing topline declines, less than half of what we saw at the outset of the pandemic and last year's second quarter. Digital accounted for 34% of total revenue and was down 18.8% excluding the impact of foreign exchange. Adjusted direct operating and SG&A expenses were down 17% compared to the fourth quarter of last year, excluding the impact of foreign exchange. And adjusted EBITDA was $35 million, down 46.9% from $65 million in the year ago period, excluding the impact of foreign exchange. As discussed above, Europe and CCIBV revenue decreased $59 million during the fourth quarter of 2020 compared to the same period of 2019 of $268 million. After adjusting for $16.5 million impact from movements in foreign exchange rates, Europe and CCIBV revenue decreased $75 million during the fourth quarter of 2020 compared to the same period of 2019. CCIBV operating income was $0.8 million in the fourth quarter of 2020 compared to operating income of $38 million in the same period of 2019. Latin American revenue was $15 million in the fourth quarter, down $11 million compared to the same period last year. Direct operating expense and SG&A from our Latin American business were $15 million, down $4 million compared to the fourth quarter in the prior year due in part to lower revenue, as well as cost savings initiatives. Latin America adjusted EBITDA was $1 million, down $6 million compared to the fourth quarter in the prior year due to the impact on revenue from COVID 19, partially offset by cost savings initiatives. CapEx totaled $31 million in the fourth quarter, a decline of $62 million compared to the prior year period as we continued to focus on preserving liquidity, given the current operating conditions. For the full year, total CapEx was $124 million, down $108 million compared to the full year 2019. Clear Channel Outdoor's consolidated cash and cash equivalents totaled $785 million as of December 31st, 2020. Our debt was $5.6 billion, an increase of just over $500 million during the year as a result of our drawing on the cash flow revolver at the end of March and issuing the CCIBV notes in August. Cash paid for interest on debt was $22 million during the fourth quarter and $324 million during the full year ended December 31st, 2020. Our weighted average cost of debt was reduced from 6.8% in 2019 to 6.1% in 2020. In our Americas segments we completed our restructuring plans in the fourth quarter and we expect annualized pre-tax cost savings of approximately $7 million to begin in 2021. In conjunction with and in addition to these plans, we expect an additional annualized pre-tax cost savings of approximately $5 million in our corporate operations. Additionally, as I mentioned in my remarks on both the Americas and Europe segments, we continue to work on negotiating fixed-site lease savings and have achieved $28 million in rent abatements in the fourth quarter for a total of $78 million year-to-date. Also, we received European government support in wage subsidies in response to COVID 19 of $1 million in the fourth quarter and $16 million year-to-date. Moving onto our financial flexibility initiatives, earlier this month we successfully completed an offering of $1 billion of 7.75% senior notes due 2028. Proceeds from the offering will be used to redeem $940 million of our 9.25% senior notes due 2024, as well as to pay transaction fees and expenses including associated call premium and accrued interest. In addition, we've de-risked our maturity profile by refinancing approximately half of our 9.25% notes which were unsecured and represent our next nearest material maturity. Our weighted average maturity is now 5.6 years, up from 4.9 years with a run rate cash interest savings of approximately $10 million per year, due to lower coupon rate. As William mentioned, Americas first quarter 2021 segment revenue is expected to be down in the high 20% range as compared to the prior year. With the first quarter of 2020 when revenue increased 8.5% over the prior year, as well as the continued impact of COVID 19. In our Europe segment we expect revenue to be down in the mid 30% range in the first quarter, historically the first quarter of the year is the smallest quarter for revenue. Latin America bookings continued to be severely constrained. Additionally, we expect cash interest payments in 2021 of $362 million and $335 million in 2022. As we exit the first quarter and the environment continues to improve, we remain committed to executing against our growth strategy and delivering year-on-year growth in 2021.

Based on the information we have as of today, we expect Americas segment revenue to be down in the high 20 percentage range as compared to the prior year. Due to this, for the first quarter of 2021, with the Europe segment revenue to be down in the mid 30% range, as compared to prior year. We've built a robust set of SSP partners and a rich network of more than 20 DSPs, providing avenues to sell our inventory alongside other digital media. As I mentioned, we expect the Americas to be down in the high 20 percentage range as compared to the prior year. As I noted earlier, we expect Europe revenues to be down in the mid 30 percentage range as compared to 2020. We're also rolling out a programmatic offering in Europe, similar to the Americas, our programmatic offering will build over time, simplifying the buying process, providing us with additional revenue stream and a growing avenue to leverage our scale and technology to target new advertising partners. In the fourth quarter, consolidated revenue decreased 27.4% to $541 million. As William mentioned, Americas first quarter 2021 segment revenue is expected to be down in the high 20% range as compared to the prior year. In our Europe segment we expect revenue to be down in the mid 30% range in the first quarter, historically the first quarter of the year is the smallest quarter for revenue. Latin America bookings continued to be severely constrained. As we exit the first quarter and the environment continues to improve, we remain committed to executing against our growth strategy and delivering year-on-year growth in 2021.

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After an exceedingly strong Q1 followed by the transition to remote work in Q2, the W&D team adapted to selling, underwriting and closing financings and property sales in Q3 and Q4 to generate record total transaction volume of $41.1 billion for the year, up 29% from 2019. We closed out 2020 with record Q4 revenues of $350 million, up 61% over -- year-over-year pushing our annual total revenues to $1.1 billion. And in 2015, established the goal of more than doubling our revenues to $1 billion by 2020. As you can see on this slide, we grew total revenues an impressive 18% compound annual growth rate over the five-year period and grew debt financing volumes by a 17% compound annual growth rate to end 2020 at $35 billion. And our servicing portfolio more than doubled over the five-year period to $107 billion, a 16% compound annual growth rate. Finally, we grew our property sales business at a compound annual growth rate of 32%. And even with the pandemic-induced shutdown of property sales for most of Q2 and Q3, we increased our volume to $6.1 billion in 2020, a truly spectacular 14% growth rate over 2019. All of this growth and record transaction volume generated 2020 diluted earnings per share of $7.69, up 41% over 2019. As you can see on this slide, we have grown earnings per share at an impressive compound annual growth rate of 24% over the past five years, while maintaining our weighted average diluted share count at around 31 million shares with less than 1% increase in diluted shares over the period due to prudent management of our share count. And this consistent and dramatic growth in EPS, combined with our annual increase to our dividend that Steve will mention momentarily, has driven total shareholder return of 46% over one year, 107% over three years and 241% over five years, handily beating the market and our peer group. We just hired employee number 1,000 at Walker & Dunlop. And while we have had headcount over the past several years, in conjunction with our dramatic growth in transaction volumes and servicing portfolio, we have maintained our industry-leading metric of over $1 million in revenue per employee. The combination of big company capabilities with small company touch and feel is a competitive advantage in the marketplace, which we aim to maintain going forward, whether we have 1,000 employees or 5,000 employees. Our website traffic grew by 80% in 2020. Our email list grew by over 500% and our PR media hits grew by over 400% last year, including an upswing in top-tier and broadcast media. Compared to last year, we are reaching an audience that is 8 times larger overall, bolstering our brand as the premier commercial real estate finance company in the United States. While many of our competitor firms were refinancing their own loan portfolios as interest rates dropped at the onset of the pandemic, 66% of our 2020 refinancing volume was new loans to Walker & Dunlop, 66%. And while technology and talented bankers and brokers generated that growth with existing clients, it was the combination of great bankers and brokers, technology and our expanding brand that allowed us to have 23% of our total transaction volume in 2020, be with new clients to Walker & Dunlop who had never worked with us before. We ended 2020 with fantastic fourth quarter financial results, including record total transaction volume of $14.2 billion, up 45% year-over-year and record earnings of $2.59 per share, up an astounding 93% over Q4 of 2019. Our full year transaction volume of $41.1 billion is 29% higher than 2019, while record full year earnings per share of $7.69, increased 41% over the prior year. Operating margin in Q4 was 34%, well above our target range of 27% to 30%, leading to full year operating margin of 30% for 2020. Return on equity was 29% for the quarter and 23% for the full year, well above our annual goal of 18% to 20%. Personnel expense for the quarter was 45% of revenue in line with Q4 of last year and was 43% for the full year, just slightly higher than 2019's 42% due to growth in commission and bonus expense resulting from our phenomenal performance in 2020. Total transaction volume for the quarter included $2.8 billion of property sales volume, a 44% increase over last year and a quarterly record. Our fourth quarter debt financing volume was led by agency financing including a record quarter of $844 million of lending with HUD. Debt brokerage volume totaled $3.8 billion, down 3% from Q4 '19, but up significantly from the second and third quarters of 2020. Based on the strength of our debt financing volume in 2020, we grew our servicing portfolio by nearly $14 billion or 15% to $107 billion as of December 31, 2020. As the portfolios continue to grow, the contractual cash servicing fees have grown along with it to $236 million in 2020, up 10% from 2019. That growth rate accelerated as the year went on, with Q4 servicing fees increasing by 15% over last year to $63 million for the quarter. This acceleration was due in part to the strong volumes in the second half of the year, but is primarily the result of a sizable increase in the average servicing fee for the portfolio to 24 basis points from 23.2 basis points at the beginning of the year. This increase is significant when you consider the overall size of our portfolio, and is worth more than $8.5 million of additional annual cash revenue on a portfolio of $107 billion. In addition, the mortgage servicing rights related to the portfolio now have a fair value of over $1 billion, reflective of the significant future cash flow streams we will receive from the portfolio beyond just the next year. Consequently, we ended our planned conversion to a new servicing system, resulting in a $5.8 million charge to expense either we took during the quarter related to the write-off of previously capitalized software costs and a termination payment on the contract. During the fourth quarter, we recorded additional provision for credit losses of $5.5 million. We delivered record earnings in a year in which we have taken provision expense of $37 million, $30 million more than in all of 2019. 2020 adjusted EBITDA of $215.8 million was down 13% from 2019, primarily due to a significant year over decrease in escrow earnings, resulting from historically low interest rates during the year. 2020's low interest rate environment reduced our annual escrow earnings to $18 million compared to $57 million in 2019. As a reminder, we currently hold escrow deposits on loans that we service with an average balance of $2.8 billion, and we earn interest income tied to short-term rates on those deposits. Every 25 basis point increase in the deposit rate translates into approximately $7 million of additional pre-tax earnings per year. We ended the year with $321 million of cash on the balance sheet. To that end, our Board of Directors voted yesterday to increase our quarterly dividend payment to $0.50 per share, a 39% increase. This is our third annual increase since we initiated the dividend in February of 2018 at $0.25 per share. This results in a cumulative increase of 100% since we started the dividend. The current annualized dividend of $2 represents a payout ratio of 26% on 2020 net income and 29% on 2020 adjusted EBITDA, a level that we feel is appropriate given our expectations for continued growth in earnings and strong cash flow going forward. Finally, our Board authorized a share repurchase plan in the amount of $75 million to be executed over the next 12 months, giving us the ability to continue opportunistically buying back our stock. We're raising our operating margin target range to 29% to 32% for 2021 and our return on equity range to 19% to 22% for the year. With respect to the first quarter of 2021, remember that last year included $2.1 billion of the Southern Management transaction. And that while the annual projection for 2021 is in line with 2020 around 50%, leisure travel could snap back quickly once herd immunity is thought to be achieved. And while Walmart is working hard to compete with Amazon and online retail, John underscored the fact that in Q2 of 2020, at the height of the pandemic shutdown, only 16% of total U.S. retail sales were online, and that 84% of sales still ran through bricks-and-mortar stores. We established the mission to become the premier commercial real estate finance company in the United States when we went public in 2010 with less than $100 million in revenues and a market capitalization of $220 million. 10 years later, we have revenues of over $1 billion, a market cap close to $3 billion, and yet the mission remains the same. The components of the Drive to 2025 are to grow revenues to $2 billion, by expanding our annual debt financing volumes to $65 billion, grow our servicing portfolio to over $160 billion, grow annual property sales volume to $25 billion, grow our fund management business to over $10 billion in assets under management and the continued development of three new growth businesses: small balance lending, our appraisal business surprise and investment banking. To achieve $65 billion in annual debt financing, we will first become the largest multifamily lender in the country. Our $35 billion of debt financing in 2020 included $24 billion of direct multifamily lending. As shown on this slide, in 2019, we held the number five spot in the multifamily lender rankings with $16.7 billion. As you can see, our 2020 volume of $24 billion would advance us to the number one spot, if the other lenders stood still or moved back in their lending volumes during the year. Our 2025 property sales goal of $25 billion is very ambitious. Part of our investment banking strategy will involve continuing to grow our asset management business, Walker & Dunlop investment partners to $10 billion in AUM by 2025. If we achieve the component parts of the Drive to 2025 over the next five years, we will grow revenues to $2 billion and diluted earnings per share from $13 to $15. It is incredibly exciting for me, having worked with our team over 15 years to establish three incredibly ambitious five-year growth plans that we all achieved to reset our sights on a new set of objectives that our team is already pursuing. Before we conclude the call, I'd like to offer my sincerest gratitude to my 1,000 colleagues at Walker & Dunlop, for making 2020 the incredibly successful year that it was.

We closed out 2020 with record Q4 revenues of $350 million, up 61% over -- year-over-year pushing our annual total revenues to $1.1 billion. We ended 2020 with fantastic fourth quarter financial results, including record total transaction volume of $14.2 billion, up 45% year-over-year and record earnings of $2.59 per share, up an astounding 93% over Q4 of 2019. To that end, our Board of Directors voted yesterday to increase our quarterly dividend payment to $0.50 per share, a 39% increase. Finally, our Board authorized a share repurchase plan in the amount of $75 million to be executed over the next 12 months, giving us the ability to continue opportunistically buying back our stock.

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Last evening, H.B. Fuller reported strong fourth quarter results, including 15% year-over-year revenue growth, a $134 million of EBITDA at the high end of our guidance and $1.09 of adjusted EPS. Organic revenue was up 15% versus 2020 and increased 20% compared with the pre-COVID fourth quarter of 2019. We also saw significant margin recovery with gross margin up 340 basis points versus the third quarter as a result of decisive pricing actions taken during the year. And we continue to pay down debt in the quarter to substantially reduce our debt-to-EBITDA ratio to 3.3 times from 4.1 times a year ago. Our global team of 6,500 employees again demonstrated outstanding operational execution in this environment. In 2021, we implemented over $450 million of annualized price adjustments overcoming the annualized value of raw material cost inflation. In 2019, we reorganized into three global business units centered on 30 end markets, each focused on the needs of customers within that segment. Fuller roofing adhesives led the way to a 29% increase in this segment sales over the fourth quarter last year as we help customers deal with labor shortages. Strong performance continued in our hygiene, health and consumables segment, where organic revenues increased by 13% year over year with double-digit growth in most of our end markets and very strong results in packaging applications, tapes and labels, tissue and towel and health and beauty. HHC organic revenues also increased 18% versus the pre-coated fourth quarter of 2019, demonstrating strong underlying consumer demand and share gains. HHC segment EBITDA margin of 13.6% reflected the absorption of significantly higher raw material costs, as well as increased variable compensation compared with last year, offset by strong pricing. EBITDA margin was up 160 basis points sequentially versus the third quarter, as strong pricing gains are driving higher margins as we exit the year. Construction adhesives had an extremely strong quarter, with organic revenues up over 29% versus the prior year and up 31% compared with Q4 of 2019. Construction adhesives EBITDA margin of 16.3% increased significantly year over year, up by 390 basis points. CA's EBITDA margin also improved by 390 basis points over the third quarter of this year, driven by volume leverage and pricing gains. Organic revenue increased 13% year on year, led by strong double-digit growth in new energy, recreational vehicles, insulated glass, woodworking, technical textiles and footwear. Engineering adhesives EBITDA margin remained strong at over 15% and up slightly versus Q3 on strong pricing execution, offset by higher raw material costs and higher variable compensation expense. We have over $100 million in pricing actions taking effect in Q1, and we will take whatever pricing actions are necessary in 2022 to fully offset raw material cost increases and enable us to restore margins. For the quarter, revenue was up 15.4% versus the same period last year. Currency had a positive impact of 0.5%. Adjusting for currency, organic revenue was up 14.9%, with volume up 1.4% and pricing having a favorable impact of 13.5% year on year in the quarter. Adjusted gross profit margin was 27.1%, down 40 basis points versus last year as pricing more than offset raw material increases from a dollar standpoint in the quarter, but not from a margin standpoint. However, gross profit margin was up 340 basis points versus the third quarter of this year, driven by pricing execution. For the full year, adjusted SG&A as a percentage of revenue was 17.2%, down by 130 basis points versus 2020. Adjusted EBITDA for the quarter of $134 million was up 9% versus last year and at the high end of our planning assumptions for the quarter, reflecting strong top-line performance, driven by good pricing execution and construction adhesives market share gains. Adjusted earnings per share were $1.09, up versus the fourth quarter of 2020, despite a higher tax rate in Q4 2021, which drove a negative year-on-year impact of about $0.10 per share. Full year organic revenues grew 15% versus fiscal 2020. Adjusted EBITDA increased by 15% year on year, and adjusted earnings per share was up 22%. And we continued to reduce debt in the quarter, paying off about $40 million of debt driving our net debt to EBITDA to 3.3 times as of the end of the year. Based on what we know today, we anticipate full year double-digit organic revenue growth in the range of 10% to 15%, and we estimate that currency will have a negative impact on revenue of about 2% to 3%. We expect adjusted EBITDA to be between $515 million and $535 million, representing a 10% to 15% year-on-year increase, as pricing leverage and operational efficiencies more than offset higher raw material costs. We expect our 2022 core tax rate to be between 27% and 29%, compared to our 2021 core tax rate of about 27%. We expect full year interest expense to be between $65 million and $70 million and the average diluted share count to be about 55 million shares. These assumptions would result in full year adjusted earnings per share in the range of $4 to $4.25. We estimate that the extra week will have a favorable impact on full year revenues of approximately 2% compared with full year 2021 and a favorable impact on full year EBITDA of approximately $8 million to $10 million versus 2021, all occurring in the fourth quarter. Taking the extra week into consideration, as well as the typical seasonality of the business, we expect to realize 20% to 21% of full year EBITDA dollars in the first quarter. In 2022, we are positioned to again deliver double-digit organic revenue growth and nearly 20% earnings per share growth as we build upon the momentum we created in the last couple of years. Full year 2021 organic revenue increased by 15%, led by 10% volume growth and strong contributions from pricing. Full year EBITDA dollars also increased 15% as we mitigated bottom-line impacts from the extreme raw material inflation. In 2010, we were a $1.3 billion company with a sizable portion of our sales in non-specified applications. In 2021, we're a $3.3 billion company with less than 10% of our sales in non-specified applications.

Last evening, H.B. Fuller reported strong fourth quarter results, including 15% year-over-year revenue growth, a $134 million of EBITDA at the high end of our guidance and $1.09 of adjusted EPS. We have over $100 million in pricing actions taking effect in Q1, and we will take whatever pricing actions are necessary in 2022 to fully offset raw material cost increases and enable us to restore margins. For the quarter, revenue was up 15.4% versus the same period last year. Adjusted earnings per share were $1.09, up versus the fourth quarter of 2020, despite a higher tax rate in Q4 2021, which drove a negative year-on-year impact of about $0.10 per share. Based on what we know today, we anticipate full year double-digit organic revenue growth in the range of 10% to 15%, and we estimate that currency will have a negative impact on revenue of about 2% to 3%. We expect adjusted EBITDA to be between $515 million and $535 million, representing a 10% to 15% year-on-year increase, as pricing leverage and operational efficiencies more than offset higher raw material costs. These assumptions would result in full year adjusted earnings per share in the range of $4 to $4.25. Full year 2021 organic revenue increased by 15%, led by 10% volume growth and strong contributions from pricing.

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As a result of the improved execution in both segments, year-over-year operating margins of the company improved by 800 basis points. Our intense focus on net working capital management and improved profitability drove $40 million of positive free cash flow in the quarter, which is an excellent start to the year. Our SG&A cost reduction initiative, with a target of full year 2021 of approximately 12.5% or better SG&A to sales remains on track. For example, our new Genie E-Drive scissors are designed to offer significant performance improvement and reduce maintenance cost by 35% over the life of the machine. Overall, revenues of $864 million were up 4% year-over-year. Notably, our Materials Processing segment's revenues were up almost 20% year-over-year. For the quarter, we recorded an operating profit of $62 million compared to an operating loss of $7 million in the first quarter of last year. We achieved an operating margin of over 7% through disciplined cost control and meeting strengthening customer demand. Improved gross margins and lower SG&A as a percent of sales allow Terex to expand operating margin by 800 basis points year-over-year. Interest and other expense was approximately $4 million lower than Q1 of last year, because of several factors, including lower interest expense and a $3 million mark-to-market gain recognized in other income. Our first quarter 2021 global effective tax rate was approximately 16%, driven by two favorable discrete items in the quarter. Our tax rates estimate for the remainder of the year remains 19%, consistent with our previous outlook. Finally, our reported earnings per share of $0.56 per share includes the nearly offsetting operating impact and the favorable benefits in other income that I just discussed Turning to slide nine, and our AWP segment financial results. AWP sales of $477 million were down 7% compared to last year, driven by a decline in North America, offset by improvement in Europe and Asia-Pacific. AWP delivered 680 basis points improvement in operating margin, which includes $3 million of severance and charges for the closure of our Oklahoma City facility. First quarter bookings of $961 million were up to dramatically compared to Q1 2020, while backlog at quarter-end was $1.3 billion, up 82% from the prior year. MP had another strong quarter, achieving 13% operating margins, as end markets are strengthening is a testament to the MP team's operational strength to deliver these consistent positive operating margins. Sales were higher at $378 million, driven by improving 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 incremental margin performance of 38%. Backlog of $713 million more than doubled from last year and was up 36% sequentially. MP saw its businesses strengthened through the quarter, with bookings up more than 100% year-over-year. We continue to plan for incremental margins, which meet or exceed our 25% target for the full year 2021. These transactions will result in Q2 charges of $25 million, which were not previously included in our 2021 financial outlook. Including $0.30 per share of costs for refinancing of our capital structure, our earnings per share outlook is increased to $2.35 to $2.55 per share, based on sales of approximately $3.7 billion. For the full year 2021, we are estimating free cash flow of approximately $150 million, reflecting another year of positive cash generation. We continue to plan for capital expenditures, net of asset dispositions of approximately $90 million. And finally, reduced interest expense and one-time capital structure charges of approximately $27 million, representing $0.30 per share. Turning to page 13, and I'll review our disciplined capital allocation strategy. The strong positive free cash flow of $40 million in the quarter demonstrates the hard work of our team members to tightly manage net working capital. Terex has ample liquidity of approximately $1.2 billion available to us, with no near term debt maturities. As discussed during the Q1 earnings call, the proceeds from the sale of the TFS on book portfolio and our strong liquidity position allowed us to prepay $196 million of term loans in early February. This prepayment resulted in reducing outstanding debt, lowering, leverage, and saving annual cash interest expense of approximately $7 million. Our refinancing included successfully renewing our $600 million revolving credit facility and placing 600 million of new bonds with a 5% coupon. These new bonds replaced our 5.625% bonds due to mature in 2025 and reduce annual cash interest expense by approximately $4 million.

Finally, our reported earnings per share of $0.56 per share includes the nearly offsetting operating impact and the favorable benefits in other income that I just discussed Turning to slide nine, and our AWP segment financial results. Including $0.30 per share of costs for refinancing of our capital structure, our earnings per share outlook is increased to $2.35 to $2.55 per share, based on sales of approximately $3.7 billion.

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We finished the second quarter with record adjusted earnings per share from continuing operations of $1.83, up 205% compared to last year and record adjusted operating margins of 17.6%. We delivered core sales growth of 19% with a number of strong leading indicators reflected in core order growth of 45% and core backlog growth of 7% compared to last year. Based on this performance, we are raising our adjusted earnings per share from continuing operations guidance by $0.30 to a range of $5.95 to $6.15, which is effectively our fourth guidance increase so far this year. The midpoint of the updated guidance at $6.05 is above our prior peak pre-COVID adjusted earnings per share of $6.02 in 2019. While we expect to exceed that $6.02 prior peak this year, there are some notable differences this year compared to 2019. In particular, the $6.02 in 2019 included earnings from Engineered Materials, which is now classified as discontinued operations and excluded from our 2021 guidance. As we have mentioned previously, this is about $0.44 of earnings per share now excluded in discontinued ops. And thinking about 2022 and beyond, it is worth noting that the commercial side of our Aerospace & Electronics business will still be almost $200 million below 2019 levels this year and a recovery to pre-COVID levels in this business alone would add more than $1 per share to EPS. At Payment & Merchandising Technologies, the core non-currency business will be slightly more than $200 million below pre-COVID levels, with more than half of that amount in our very high margin core Payment Solutions business. And as mentioned many times before, we have delivered on margins and free cash flow while maintaining 100% of our investments in strategic growth initiatives throughout the entirety of the pandemic, because of their importance in our ability to sustainably drive long-term, profitable growth. At our May Aerospace & Electronics investor event, we showed you numerous examples of how we continue to effectively drive above-market growth, expecting 7% to 9% compound average growth over the next 10 years. At Aerospace & Electronics, sales of $158 million were flat with the prior year. Adjusted segment margins, however, improved 420 basis points to 19.6%. In the quarter, total aftermarket sales turned positive, growing 3% after a 29% decline in aftermarket sales last quarter. Commercial OE sales increased 4% in the quarter after a 32% decline last quarter. Defense OE sales declined 4% in the quarter and are flat on a year-to-date basis. More specifically, we are seeing North American airlines bring a substantial number of aircraft back into service to meet expected domestic demand levels, with the in-service fleet now at about 90% of mid-2019 levels. On the international side, traffic continues to improve, albeit a little more slowly, with substantial room for recovery-further recovery as global ASKs are now a little better than 50% of 2019 levels. Taken together, and as we explained at our Aerospace Investor Day in May, we expect a long-term overall compound annual growth rate of 7% to 9% through 2030. Process Flow Technologies sales of $311 million increased 30% driven by a 22% increase in core sales and an 8% benefit from favorable foreign exchange. Process Flow Technologies operating profit increased by 83% to $49 million. Adjusted operating margins increased 450 basis points to 15.7%, reflecting the higher volumes, strong execution and benefits from last year's cost actions. Sequentially, trends improved across the board with FX-neutral backlog up 5% and FX-neutral orders up 8%. Compared to last year, FX-neutral backlog increased 11% and FX-neutral core orders increased 28%. And remember that the chemical market is our most important market, where we have the strongest position and the most differentiated offering, and generated more than 35% of sales on the process side of this business. However, remember that collectively, upstream oil and gas and conventional power are a small part of this business and less than 10% of segment sales. We now expect high single-digit core sales growth, with approximately 5% of favorable foreign exchange on a full year basis. At Payment & Merchandising Technologies, sales of $328 million in the quarter increased 31% compared to the prior year driven by 26% core sales growth and a 5% benefit from favorable foreign exchange. Our Currency business core sales increased in the mid-teens range with the Crane Payment Innovations business inflecting to a positive 34% of core growth, but still well below pre-COVID levels. Segment operating profit increased 285% to $78 million. Adjusted operating margins increased 1,500 basis points to 23.7%. As we explained last quarter, we do expect margins to moderate further over the course of the year given timing and mix, with full year margins likely toward the high-end of our long-term target of 18% to 22%, with core sales growth this year now approaching mid-teens with a 4% favorable foreign exchange benefit. Turning now to more detail on our total company results and guidance, we had extremely strong cash flow performance in the quarter, generating $141 million in free cash flow compared to $102 million in the second quarter of last year. Year-to-date, free cash flow was $184 million compared to $62 million last year. During the second quarter, we also received approximately $9 million from the sale of a property in Arizona following receipt of $15 million last quarter from the sale of another property. Since 2017, we have received proceeds from real estate and other asset sales made possible by restructuring activities of approximately $56 million, which means that much of our restructuring has been self-funded. As a reminder, on May 24, we announced that we had signed an agreement to sell our Engineered Materials segment for $360 million. When the transaction closes, we expect proceeds, net of tax, to be approximately $320 million. As we discussed in May, we believe we will have approximately $1 billion of M&A capacity by the end of this year. The adjusted tax rate in the quarter was 18.4%, which included an excess tax benefit of approximately $4 million or $0.07 per share related to stock options exercised during the quarter. For the full year, we now expect an adjusted tax rate of 20.5% rather than the previous 21% guidance. As Max explained, we are raising our adjusted earnings per share guidance by $0.30 to a range of $5.95 to $6.15, reflecting the strong second quarter performance and our expectation that end markets and execution will be ahead of where we forecasted them earlier this year. Remember that our original guidance for 2021 was $4.90 to $5.10, and that guidance included $0.44 of earnings contribution from Engineered Materials. That means we have effectively raised guidance about $1.50 on an operational basis since the beginning of the year. Our revised guidance assumes core sales growth of 7% to 9%, which is 200 basis points higher than our prior May 24 guidance. Favorable foreign exchange is also now expected to contribute 3.5%, up 100 basis points from late May. Free cash flow guidance was increased to $320 million to $350 million, up $20 million from prior guidance, reflecting higher earnings and slightly lower capex at $70 million. Corporate expense is now expected to be $80 million, up $3 million compared to prior guidance.

We finished the second quarter with record adjusted earnings per share from continuing operations of $1.83, up 205% compared to last year and record adjusted operating margins of 17.6%. Based on this performance, we are raising our adjusted earnings per share from continuing operations guidance by $0.30 to a range of $5.95 to $6.15, which is effectively our fourth guidance increase so far this year. The midpoint of the updated guidance at $6.05 is above our prior peak pre-COVID adjusted earnings per share of $6.02 in 2019. At our May Aerospace & Electronics investor event, we showed you numerous examples of how we continue to effectively drive above-market growth, expecting 7% to 9% compound average growth over the next 10 years. Taken together, and as we explained at our Aerospace Investor Day in May, we expect a long-term overall compound annual growth rate of 7% to 9% through 2030. As Max explained, we are raising our adjusted earnings per share guidance by $0.30 to a range of $5.95 to $6.15, reflecting the strong second quarter performance and our expectation that end markets and execution will be ahead of where we forecasted them earlier this year. Our revised guidance assumes core sales growth of 7% to 9%, which is 200 basis points higher than our prior May 24 guidance.

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Net income for the third quarter of 2021 included the after-tax impairment loss on internal-use software of $9.6 million or $0.05 per diluted common share, the after-tax amortization of the cost of reinsurance of $15.5 million or $0.08 per diluted common share, the net after-tax reserve decrease related to reserve assumption updates of $143.3 million or $0.70 per diluted common share, and a net after-tax realized investment loss on the Company's investment portfolio of $100,000 or a de minimis impact on earnings per diluted common share. Net income in the third quarter of 2020 included after-tax costs related to an organizational design update of $18.6 million or $0.09 per diluted common share, and a net after-tax realized investment gain on the Company's investment portfolio of $3.8 million or $0.01 per diluted common share. Excluding these items, after-tax adjusted operating income in the third quarter of 2021 was $210.5 million or $1.03 per diluted common share compared to $245.9 million or $1.21 per diluted common share in the year ago quarter. On a year-over-year basis in the third quarter, Unum US generated an increase in premium income of 1.2%. To put it in context, in the third quarter, the U.S. experienced a significant increase in national COVID mortality counts to approximately 94,000 lives, which is almost double the 52,000 in the second quarter. In fact, just 90 days ago, most experts were estimating a third quarter mortality count of approximately 44,000 deaths, an estimate that has more than doubled over the course of the quarter. Beyond the higher mortality counts in aggregate, data from the CDC also shows that the third quarter working-aged individuals comprised approximately 40% of the COVID-related mortality, double that of the fourth quarter of 2020 and first quarter of 2021 before vaccinations began to widely be available. We start first with a capital position that remains very healthy with holding Company cash of $1.6 billion and weighted average risk-based capital ratio for our traditional U.S. -- U.S.-based life insurance companies at approximately 380%. Last week, we were pleased to announce the $250 million share repurchase authorization approved by our Board, which we intend to initiate in the fourth quarter with an execution of an accelerated share repurchase of $50 million. The biggest component of the actuarial reserve review was the release of $215 million before tax in the Unum US long-term disability line. For the Closed Group Pension Block, policy reserves were increased by $25.1 million before tax. For the Closed Disability Block, claim reserves were increased by $6.4 million before tax. And finally for Long-Term Care, claim reserves were increased by $2.1 million before tax. Although the net of these reserve updates are excluded from adjusted operating income, they did contribute $0.70 per share to the Company's book value. For the third quarter in the Unum US segment, adjusted operating income was $88.5 million compared to $179.3 million in the second quarter. Within the Unum US segment, the group disability line reported adjusted operating income, excluding the reserve assumption updates of $39.5 million in the third quarter compared to $59.9 million in the second quarter. The primary driver of the decline was an increase in the benefit ratio to 78.9% in the third quarter compared to 74.7% in the second quarter, which was primarily driven by increased claims in the short-term disability line related to the COVID Delta variant and the current external environment. Premium income declined slightly on a sequential quarter basis, but we were pleased to see an uptick in growth to 2.6% on a year-over-year basis. Adjusted operating income for Unum US group life and AD&D declined to a loss of $67.1 million in the third quarter from income of $5.2 million in the second quarter. This quarter-to-quarter decline of roughly $70 million was largely driven by the changing impacts from COVID that Rick described in his comments. We were impacted by the deterioration in COVID-related mortality from our reported 52,000 national deaths in the second quarter to approximately 94,000 in the third quarter along with the age demographic shifting to higher impacts on younger working-aged individuals. Estimated COVID-related excess mortality claims for our Group Life Block increased from approximately 800 claims in the second quarter to over 1,900 claims in the third quarter. Accordingly, our results reflect mortality to level that represents approximately 2% of the reported national figures compared to a 1% rate experienced through 2020 when mortality was more pronounced in the elderly population. With a higher percentage of working-age individuals being impacted, we also experienced higher average benefit size, which increased from around $55,000 in the second quarter to over $60,000 this quarter. Looking ahead to the fourth quarter, our current expectation is for U.S. COVID-related mortality to continue to worsen to approximately 100,000 deaths. Now looking at the Unum US supplemental and voluntary lines, adjusted operating income totaled $116.1 million in the third quarter compared to $114.2 million in the second quarter, both very good quarters that generated adjusted operating returns on equity in excess of 17%. The uptick in the benefit ratio in the third quarter to 46.6% from 44.2% in the second quarter was driven by increased COVID-related life insurance claims, which offset generally favorable results in the other VB product lines. Finally, utilization in the dental and vision line improved, leading to an improvement in the benefit ratio to 75% this quarter from 77.1% in the second quarter. Looking now at premium trends and drivers, total new sales for Unum US increased 7.7% in the third quarter on a year-over-year basis compared to the declines that we experienced in the first half of the year. For the employee benefit lines which do include LTD, STD, group life, AD&D and stop-loss, total sales declined by 2.5% this quarter, primarily driven by lower sales in a large case market and generally flat sales in the core market, which are those -- which are those markets under 2,000 [Phonetic] lines. Sales trends in our supplemental and voluntary lines rebounded strongly in the quarter, increasing 21.8% in total when compared to the year ago quarter. We saw sharp year-over-year increases in the recently issued individual disability line up 22.9% and in the dental and vision line up 48.2%. Voluntary benefit sales also recovered following lower year-over-year comparisons in recent quarters, growing 13.7% in the third quarter. Our group lines aggregated together showed a slight uptick to 89.4% for the first three quarters of 2021 compared to 89.1% last year. We had very good -- we had a very good quarter with adjusted operating income for the third quarter of $27.4 million compared to $24.8 million in the second quarter, a continuation of the improving trend in income over the past several quarters. The primary driver of these results is our Unum UK business, which generated adjusted operating income of GBP18.4 million in the third quarter compared to GBP16.8 million in the second quarter. The reported benefit ratio for Unum UK improved to 79.2% in the third quarter from 82.5% in the second quarter. Looking at the growth on a year-over-year basis and in local currency to neutralize the benefit we saw from the higher exchange rate, Unum UK generated growth of 2.9% with strong persistency and the continued successful placement of rate increases on our in-force block. Additionally, sales in Unum UK rebounded in the third quarter, increasing 40.2% over last year. Unum Poland also generated growth of 12.5%, a continuation of the low double-digit premium growth this business has been producing. Next, results for Colonial Life are in line with our expectations for the third quarter with adjusted operating income of $80.1 million compared to the record quarterly income of $95.8 million in the second quarter. As with our other U.S.-based life insurance businesses, Colonial's life insurance block was negatively impacted by COVID-related mortality, which was the primary driver in pushing the benefit ratio to 55.9% in the third quarter compared to 51.7% in the second quarter. We estimate that adverse COVID-related claims experienced in the life block impacted results by approximately $16 million, the worst impact we have seen from COVID throughout the pandemic and a level that is likely to persist through the fourth quarter. Additionally, net investment income increased 25% on a sequential basis in the third quarter, largely reflecting unusually large bond call activity this quarter. We do not expect the benefit from bond calls to net investment income to continue at this level in the fourth quarter. Driving this improving trend in premiums is a continuing rebound in sales activity at Colonial Life increasing 28.6% on a year-over-year basis this quarter and now showing a 21.1% increase for the first three quarters of 2021 relative to last year. Persistency for Colonial Life continues to show an encouraging trend at 78.9% for the first three quarters of 2021, more than a point higher than a year ago. In the Closed Block segment, adjusted operating income which does include -- which excludes the reserve assumption updates and the amortization of cost of reinsurance related to the Closed Block individual disability reinsurance transaction that did fully close earlier this year was $109.8 million in the third quarter and $111.2 million in the second quarter, both very strong results driven by favorable overall benefits experience in both the Long-Term Care line and Closed Disability Block, and strong levels of investment income to -- due to higher than expected levels of miscellaneous investment income, which I will cover in more detail in a moment. The interest adjusted loss ratio in the third quarter was 74.8% and over the past four quarters is 71.8%, which are both well below our longer-term expectation of 85% to 90%. In the third quarter, we continue to see higher mortality experience in the claimant block, where accounts were approximately 5% higher than expected which is similar to our experience in the second quarter. For the Closed Disability Block, the interest adjusted loss ratio was 58.2% in the third quarter compared to 69.6% in the second quarter, both very favorable results for this line. Looking ahead, we estimate the quarterly adjusted operating income for this segment will over time run within a range of $45 million to $55 million, assuming more normal trends for investment income and claim results in the LTC and Closed Disability lines. We recorded approximately $20 million in higher investment income from bond calls this quarter relative to our historic -- our historical quarterly averages. Second, we continue to see strong performance in our alternative investment portfolio, which earned $38.2 million in the third quarter, following earnings of $51.9 million recorded in the second quarter. Both quarters are well above the expected quarterly income on the portfolio of $12 million to $14 million. The weighted average risk-based capital ratio for our traditional U.S. insurance companies improved to approximately 380%, and holding company cash was $1.6 billion as of the end of the third quarter, both of which are well above our targeted levels. In addition, leverage has trended lower with equity growth and is now 25.7%. We began to roll our plans out last week with the announcement of the authorization by our Board of Directors and to repurchase up to $250 million of our shares by the end of 2022. We plan to begin this program with the execution of an accelerated share repurchase of $50 million in the fourth quarter. With this additional deployment of capital, we continue to project having a very solid capital position at the end of 2022 with holding company cash around $1 billion and an RBC ratio well above our target. Now shifting topics, I wanted to give you a brief update on our progress in adopting ASC 944 or Long Duration Targeted Improvements. With COVID-related mortality expected to increase further in the fourth quarter to approximately 100,000 nationwide deaths, we expect to see similar, if not slightly worse trends for mortality impacts on our life insurance businesses in the fourth quarter than we did experience in the third quarter.

Excluding these items, after-tax adjusted operating income in the third quarter of 2021 was $210.5 million or $1.03 per diluted common share compared to $245.9 million or $1.21 per diluted common share in the year ago quarter. We do not expect the benefit from bond calls to net investment income to continue at this level in the fourth quarter.

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For the third quarter, net income from continuing operations was $0.65 per common share. Importantly, we delivered positive operating leverage this quarter. Total revenues were up 8% compared to the same period last year. Our return on tangible common equity for the quarter was 18.6%. Average PPP loans declined $3.3 billion this quarter as we help clients take advantage of loan forgiveness. The sale impacted our third-quarter average results by approximately $800 million and $3.3 billion on an ending basis. Compared to the prior quarter, average loans were down 0.7%. Adjusting for the sale of the indirect auto portfolio, our loans were up approximately $100 million on average and up over $1 billion on an ending basis. Adding to the comments on our core loan growth, adjusting for both the indirect auto loan sale and PPP loans our linked quarter total loan growth would have been 4.3%. Average deposits totaled $147 billion for the third quarter of 2021, up to $12 billion or 9% compared to the year-ago period and up 2% from the prior quarter. We continue to have a strong, stable core deposit base with consumer deposits accounting for approximately 60% of our total deposit mix. Taxable equivalent net interest income was $1.025 billion for the third quarter of 2021, compared to $1.006 billion a year ago and $1.023 billion from the prior quarter. Our net interest margin was 2.47% for the third-quarter 2021, compared to 2.62% for the same period last year and 2.52% for the prior quarter. Compared to the prior quarter, net interest income increased $2 million and the margin declined five basis points. For the quarter, total loan fees from PPP loans were $45 million, compared to $50 million last quarter. In the third quarter, our sensitivity to rising rates moved higher and we ended the period with over $25 billion in cash and short-term investments. Noninterest income was $797 million for the third quarter of 2021, compared to $681 million for the year-ago period and $750 million in the second quarter. Compared to the year-ago period, noninterest income increased 17%. We had a record third quarter for investment banking and debt placement fees, which reached $235 million driven by broad-based growth across the platform, including strong M&A fees. Additionally, corporate services income increased $18 million and commercial mortgage fees increased to $16 million. Compared to the second quarter, noninterest income increased by $47 million. We total noninterest expense for the quarter was $1.112 billion, compared to $1.037 billion last year and $1.076 billion in the prior quarter. The quarter-over-quarter increase in expenses was primarily driven by two areas: the first, personnel expense related to one additional day of salary expense in the quarter and slightly higher employee benefits; the second was an increase in other expense of $18 million, largely related pension settlement charge and higher charitable contributions. For the third quarter, net charge-offs were $29 million or 11 basis points of average loans. Net charge-offs in the current quarter included $22 million related to the sale of the indirect auto loan portfolio. Our provision for credit losses was a net benefit of $107 million. Nonperforming loans were $554 million this quarter or 56 basis points of period-end loans, a decline of $140 million or 20% from the prior quarter. We ended the third quarter with a common equity tier one ratio of 9.6%, which places us above our targeted range of nine to 9.5%. We repurchased $593 million of common shares during the quarter our board of directors approved a third-quarter dividend at $0.185 per common share. Of the 593 million in common share repurchases, $468 million were related to the initial settlement of our accelerated share repurchase program, representing 80% of the $585 million authorization. The remaining $125 million were purchased in the open market. The remaining 20% of the ASR will be settled in the fourth quarter. We expect our net charge-offs to be below 20 basis points for the fourth quarter. And our guidance for our GAAP tax rate has remained unchanged at 20%.

For the third quarter, net income from continuing operations was $0.65 per common share. Importantly, we delivered positive operating leverage this quarter. Total revenues were up 8% compared to the same period last year. For the third quarter, net charge-offs were $29 million or 11 basis points of average loans. Our provision for credit losses was a net benefit of $107 million.

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Protiviti's revenues grew 35% year-on-year reflecting continuing momentum across its wide array of service offerings, including very strong managed solutions with staffing. Our staffing operations significantly outperformed their historical sequential trends, led by small and medium-sized businesses and permanent placement, which grew 22% sequentially. Companywide revenues were $1.398 billion in the first quarter of 2021, down 7% from last year's first quarter on a reported basis, and down 8% on an as adjusted basis. Net income per share in the first quarter was $0.98, increasing 24% compared to $0.79 in the first quarter a year ago. Cash flow from operations during the quarter was $68 million. In March, we distributed a $0.38 per share cash dividend to our shareholders of record, for a total cash outlay of $44 million. We also acquired approximately 797,000 Robert Half shares during the quarter for $61 million. We have 9.2 million shares available for repurchase under our Board approved stock repurchase plan. Our return on invested capital for the company was 37% in the first quarter. As Keith noted, global revenues were $1.398 billion in the first quarter. On an as adjusted basis, first quarter staffing revenues were down 18% year-over-year. U.S. staffing revenues were $759 million, down 19% from the prior year. Non-U.S. staffing revenues were $242 million, down 15% year-over-year on an as adjusted basis. We have 322 staffing locations worldwide, including 86 locations in 17 countries outside the United States. In the first quarter, there were 62.3 billing days compared to 63.1 billing days in the first quarter one year ago. The current second quarter has 63.4 billing days equivalent to the second quarter one year ago. Currency exchange rate movements during the first quarter had the effect of increasing reported year-over-year staffing revenues by $17 million. This impacted our year-over-year reported staffing revenue growth rate by 1.4 percentage points. Global revenues in the first quarter were $397 million. $316 million of that is from business within the United States, and $81 million is from operations outside the United States. On an as adjusted basis, global first quarter Protiviti revenues were up 35% versus the year-ago period, with U.S. Protiviti revenues up 37%. Non-U.S. revenues were up 26% on an as adjusted basis. Exchange rates had the effect of increasing year-over-year Protiviti revenues by $6 million and increasing its year-over-year reported growth rate by 2 percentage points. Protiviti and its independently owned member firms serve clients through a network of 86 locations in 28 countries. In our temporary and consultant staffing operations, first quarter gross margin was 38.8% of applicable revenues compared to 37.8% of applicable revenues in the first quarter one year ago. Our permanent placement revenues in the first quarter were 11.2% of consolidated staffing revenues versus 9.9% of consolidated staffing revenues in the same quarter one year ago. When combined with temporary and consultant gross margin, overall staffing gross margin increased 160 basis points compared to the year-ago first quarter to 45.6%. For Protiviti, gross margin was 26.5% of Protiviti revenues compared to 27.6% of Protiviti revenues one year ago. Adjusted for the effect of deferred compensation expense related to changes in the underlying trust investment assets as previously mentioned, gross margin for Protiviti was 26.9% for the quarter just ended compared to 26.3% one year ago. Companywide SG&A costs were 30.3% of global revenues in the first quarter compared to 29.4% in the same quarter one year ago. Changes in deferred compensation obligations related to increases in underlying trust investments had the impact of increasing SG&A as a percent of revenue by 0.8% in the first quarter and decreasing SG&A by 2.4% in the same quarter one year ago. When adjusted for these changes, companywide SG&A costs were 29.5% for the quarter just ended compared to 31.8% one year ago. Staffing SG&A costs were 37.3% of staffing revenues in the first quarter versus 32.3% in the Q1 -- in Q1 2020. Included in staffing SG&A costs was deferred compensation expense related to increases in the underlying trust investment assets of 1% in the first quarter compared to income of 3% related to decreases in the underlying trust investment assets in the same quarter one year ago. When adjusted for these changes, staffing SG&A costs were 36.3% for the quarter just ended compared to 35.3% one year ago. First-quarter SG&A costs for Protiviti were 12.5% of Protiviti revenues compared to 17.3% of revenues in the year-ago period. Operating income for the quarter was $139 million. This includes $12 million of deferred compensation expense related to increases in the underlying trust investment assets. Combined segment income was therefore, $151 million in the first quarter. Combined segment margin was 10.8%. First quarter segment income from our staffing divisions was $93 million with a segment margin of 9.3%. Segment income for Protiviti in the first quarter was $57 million with a segment margin of 14.4%. Our first quarter tax rate was 26% compared to 32% a year ago. At the end of the first quarter, accounts receivable was $800 million, and implied days sales outstanding or DSO was 51.4 days. Our temporary and consultant staffing divisions exited the first quarter with March revenues down 12.5% versus the prior year, compared to an 18.9% decrease for the full quarter. Revenues for the first two weeks of April were up 9% compared to the same period one year ago. Permanent placement revenues in March were up 24.2% versus March of 2020. This compares to an 8.1% decrease for the full quarter. For the first three weeks of April permanent placement revenues were up 154% compared to the same period in 2020. Revenues $1.435 billion to $1.515 billion. Income per share $1 to $1.10. The midpoint of our guidance implies a year-over-year revenue increase of 31% on an as adjusted basis including Protiviti. Midpoint earnings per share of $1.05 would represent an all-time high for the company. Revenue growth on a year-over-year basis, staffing up 23% to 26%, Protiviti up 47% to 49%, overall up 30% to 32%. On the gross margin percentages, temporary and consultant staffing 38% to 39%, Protiviti 27% to 29% and overall 40% to 41%. SG&A as percent of revenues, excluding deferred compensation investment impacts, staffing 35% to 37%, Protiviti 12% to 14%, overall 29% to 30%. And segment income, staffing 9% to 10%, Protiviti 14% to 15%, and overall 10% to 11%. Full year capital expenditures and capitalized cloud computing costs, $85 million to $95 million with $15 million to $20 million in the second quarter. Our tax rate, 26% to 27% and shares at 112 million. The NFIB recently reported that 42% of small businesses had job openings they could not fill, which was a record level. These are Fortune's 100 Best Companies to Work for in 2021 and Forbes' Best Employers for Diversity 2021.

Net income per share in the first quarter was $0.98, increasing 24% compared to $0.79 in the first quarter a year ago. As Keith noted, global revenues were $1.398 billion in the first quarter.

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On Tuesday of last week, our Board of Directors increased our quarterly dividend by 9%. We delivered $674 million of revenue, growing 8.9% in total and 4.3% organically. Our EBITDAC margin was 32.8%, which is up 130 basis points from the third quarter of 2019. Our net income per share for the third quarter was $0.47, increasing 14.6% on an as reported basis. On an adjusted basis, which excludes the change in acquisition earn-out payables, our net income per share was $0.52, an increase of 33.3% over the prior year. During the quarter, we completed another six acquisitions with annual revenues of approximately $31 million. From a capital perspective, we issued $700 million of 10.5-year bonds in September. We're very pleased with a coupon of 2.375%, particularly considering that we issued bonds in March of 2019 with a coupon of 4.5%. For the most part admitted market rates are up 3% to 7% across most lines. Commercial auto rates were the exception, as they remain up 10%. From an E&S perspective, most rates are up 10% to 20%. Coastal property, both wind and quake are up 15% to 25%. Professional liability is generally up 10% to 25%, depending on the coverage in the industry. We've been active in the M&A space closing six transactions during the quarter with annual revenues of approximately $31 million. During the first three quarters, we closed 16 transactions with annualized revenues of approximately $117 million. Our retail segment, organic revenue grew by 4.1% in the third quarter. Our National Programs segment grew 8.4% organically, delivering another impressive quarter. Our Wholesale Brokerage segment grew 8.2% organically for the quarter. The organic revenue for our services segment decreased 13.1% for the quarter. For the third quarter, we delivered total revenue growth of $55.3 million or 8.9% and organic revenue growth of 4.3%. Our EBITDAC increased by 13.2%, growing faster than revenues as we were able to leverage our expense base and further manage our expenses in response to COVID-19. Our income before income taxes increased by 4.3%, growing at a slower pace than EBITDAC. This was driven primarily by the $21 million year-over-year increase in the change in estimated acquisition earn-out payables. Our net income increased by $18.4 million or 15.9% and our diluted net income per share increased by 14.6% to $0.47. Our effective tax rate for the third quarter was 15.5%, compared to 23.9% in the third quarter of 2019. Our weighted average number of shares increased slightly compared to the prior year and our dividends per share increased to $0.085 or 6.3% compared to the third quarter of 2019. During the third quarter of 2020, the change in estimated acquisition earn-out payables was about $15 million, representing an increase of approximately $21 million as compared to the third quarter of 2019. On a year-to-date basis, the net impact of the change in estimated earn-out payables that they charge of about $5 million as compared to a credit of approximately $7 million for the same period last year. Excluding the change in acquisition earn-out payables in the third quarter of both years, our income before income taxes, grew $27.2 million or 18.6% growing faster than EBITDAC due primarily to lower interest expense. Our net income on adjusted basis increased by $35.3 million or 31.6% and our adjusted diluted net income per share was $0.52, increasing 33.3%. For the quarter, our total commissions and fees increased by 8.7% and our contingent commissions and GSCs were substantially flat. Our organic revenues, which exclude the net impact of M&A activity increased by 4.3% for the third quarter. Our Retail segment delivered total revenue growth of 6.5%, driven by acquisition activity over the past 12 months and organic revenue growth of 4.1%, which was driven by growth across most lines of business and slightly lower contingent commissions and GSCs. For the quarter, retail realized about a 100 basis points of incremental organic revenue growth from the timing of new business and certain renewals we expected to recognize in the fourth quarter of this year. Our EBITDAC margin for the quarter increased by 250 basis points and EBITDAC grew 16.2% due to higher organic revenue growth and cost savings achieved in response to the pandemic, both of which were partially offset by a prior year gain on disposals, higher non-cash stock compensation cost and higher inter-company IT cost. Our income before income tax margin increased 50 basis points and grew slower than EBITDAC, due primarily to a change in estimated acquisition earn-outs. Over to slide number 10. Our National Programs segment increased total revenues by $25.1 million or 17.6% and organic revenue by 8.4%. EBITDAC growth of 12.7% was slower than total revenue growth due to the write-offs of certain receivables in one of our programs. Income before income taxes increased by $600,000 or 1.3% with the growth primarily impacted by increased acquisition earn-out payables and higher intercompany interest expense. Over to slide number 11. Our Wholesale Brokerage segment delivered total revenue growth of 16.2% and organic revenue growth of 8.2%. EBITDAC grew by 21.1% and the margin improved by 160 basis points as compared to the prior year due to strong organic growth and the delivery of reduced variable expenses in response to COVID-19, which more than offset higher inter-company IT charges and higher non-cash stock-based compensation cost. Our income before income taxes, grew by 21.1%, substantially in line with EBITDAC growth. Over to slide number 12. Total revenues and organic revenues for our services segment declined by 13.1%, driven by the items Powell mentioned earlier. For the quarter, EBITDAC declined by 22.8%, driven by lower organic revenue and higher inter-company IT expenses. Income before income taxes decreased 59.5% due to a credit of $6.3 million recorded in the third quarter of 2019 for the change in estimated acquisition earn-out payables and there was no adjustment in the third quarter of this year. Regarding cash flow from operations, as a percentage of revenues, it decreased as expected for the third quarter due primarily to about $50 million of second quarter taxes that were paid in the third quarter as permitted by the Cares Act. Our cash flow from operations as a percentage of revenue was approximately 27% as compared to 25% realized at the same period of the prior year. Regarding liquidity and interest expense, Powell mentioned earlier that we issued $700 million of 10.5 year senior notes in late September with spread decreasing materially and the receptivity of the debt markets we thought it was prudent to access the additional capital at long-term rate materially below our prior issuances. Our incremental debt is $500 million as we repaid $200 million on the revolving line of credit. With the additional debt, our interest expense will increase by approximately $3 million per quarter. Through 10 months, we've seen 6.4 million acres burn in California, Oregon, Washington and Colorado with 4.3 million of those acres in California alone. There have been 27 tropical storms and 10 hurricanes with five of these hurricanes hitting the Gulf Coast region and one may hit this week. For the first nine months, we grew our business 3.5% organically, delivered improving EBITDAC margins of 32.4%, adjusted earnings per share was up 21.4%. Quite honestly, I didn't think our cost of borrowing for 10-year money would ever be 2.375%.

We delivered $674 million of revenue, growing 8.9% in total and 4.3% organically. Our net income per share for the third quarter was $0.47, increasing 14.6% on an as reported basis. Our net income increased by $18.4 million or 15.9% and our diluted net income per share increased by 14.6% to $0.47.

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We reported revenue growth of 15% with the western segment accounting for approximately 40% of our revenue. We also improved our operating margin by 260 basis points to 12.1%, which contributed to our reported 42% earnings-per-share growth. First, building on our heritage of developing innovative products and leveraging our leading position in beauty device systems, we will be introducing connected device systems as we personalize our product offerings and deepen our relationships with more than 1.4 million registered customers. And third, we will enable all of this through our enhanced digital ecosystem that improves our ability to attract, connect and nurture customers, which currently makes up more than 90% of Nu Skin's revenue. These beauty device systems now make up approximately 30% of the company's total revenue. This proprietary formula is our entry into the rapidly expanding $40 billion beauty supplement market. At Nu Skin, we are leveraging our global team of micro influencers in nearly 50 markets who utilize the power of their personal brand and relationships to provide authentic product recommendations and personalized customer engagement via social media. Grand View Research is projecting social commerce to grow from an estimated $474 billion in 2020 to $3.3 trillion by 2028 with Asia currently accounting for 68% of the total social commerce revenue. Our customers remained relatively flat due to the surge in the prior year while sales leaders grew 15% related to new product introductions and enhanced new leader qualification programs. We are strongly focused on growing this region, and we were excited to hold trainings in July with more than 10,000 sales leaders in preparation for social commerce and the rollout of our enhanced digital tool set, including WeShop personal storefronts. In Korea, a strong promotion of our TR90 weight management system in the quarter led to solid 6% growth in local currency. For the second quarter, revenue increased 15% to $704.1 million. Quarterly revenue was positively impacted 6% due to favorable foreign currency. Earnings per share improved 42% to $1.15 and benefited nicely by improved gross margin and overall cost containment. Gross margin for the quarter improved 80 basis points to 75.6% due to product mix, product cost focus and supply chain efficiencies. Gross margin for the core Nu Skin business was 78.3% compared to 77.6% in the prior year. Moving on to selling expense, which, as a percent of revenue, was 39.5% compared to 40.6% in the prior year. For the Nu Skin business, selling expense was 42.4% compared to 43.3%. As a reminder, selling expenses often fluctuate quarter-to-quarter, plus or minus 1%. General and administrative expenses as a percent of revenue were 24% compared to 24.7% year-over-year as we continue to carefully manage expenses and gain leverage as we grow revenue. I am very pleased with our operating margin improvements during the quarter, which improved 260 basis points to 12.1% compared to 9.5% in the prior year quarter. This is another strong step toward our stated goal of a 13% operating margin. The other income expense line reflects a $4 million expense compared to a $1.6 million gain in the prior year. Cash from operations was $20 million for the quarter as we continued our strategic investment in inventory to meet customer demand for our new products, shipped more product via ocean to reduce freight charges and built some protection from global supply chain constriction in this period of uncertainty. We paid $19 million in dividends and repurchased $10 million of our stock with $265.4 million remaining in authorization. Our tax rate for the quarter was 27.1% compared to 29.8%. Our manufacturing partners had another strong quarter, growing 27% with steady momentum heading into the back half of the year. Our annual revenue guidance is $2.81 billion to $2.87 billion. And based on ongoing efficiencies we are driving in the business, we are now raising our annual earnings per share guidance by $0.20 to a range of $4.30 to $4.50. This guidance assumes a positive foreign currency impact of 3% to 4% and a tax rate of 25% to 29%. Our third quarter revenue guidance is $700 million to $730 million, assuming a positive foreign currency impact of approximately 2% to 3%. Q3 earnings per share guidance is $1.10 to $1.20 and assumes a tax rate of 25% to 29%.

We reported revenue growth of 15% with the western segment accounting for approximately 40% of our revenue. We also improved our operating margin by 260 basis points to 12.1%, which contributed to our reported 42% earnings-per-share growth. For the second quarter, revenue increased 15% to $704.1 million. Earnings per share improved 42% to $1.15 and benefited nicely by improved gross margin and overall cost containment. Our annual revenue guidance is $2.81 billion to $2.87 billion. And based on ongoing efficiencies we are driving in the business, we are now raising our annual earnings per share guidance by $0.20 to a range of $4.30 to $4.50.

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Revenue was up 17% from the prior quarter, also a record; reflecting double-digit growth in both loans and deposits as well as broad-based growth of our fee-based businesses, driven by strength in our capital markets businesses, cards and payments businesses and consumer mortgage. Our consumer mortgage business demonstrated continued momentum with record second-quarter performance: originations of $2.2 billion were up 100% year over yeaR and consumer mortgage fee income of $62 million more than tripled from last year. We were the seventh overall lender in the program and processed over $8 billion in funding to support our clients. Net charge-offs for the third quarter were 36 basis points. Our allowance to loan losses as a percentage of period-end loans now stands at 1.61% or 1.73%, excluding PPP loans. In the second quarter, our common equity Tier 1 ratio increased to 9.1%, which is within our targeted range of 9% to 9.5%. Earlier this month, our Board of Directors declared a dividend of $0.185 per share for the third quarter, and that is consistent with our second-quarter level. As Chris said, we reported second-quarter net income from continuing operations of $0.16 per common share. Notable this quarter was our provision expense that exceeded net charge-offs by $386 million or $0.34 per share. Turning to Slide 6, total average loans were $108 billion, up 19% from the second quarter of last year, driven by growth in both commercial and consumer loans. Commercial loans reflected an increase of over $8 billion in PPP balances or $6 billion on an average basis. Laurel Road originated $700 million of student consolidation loans this quarter, and we generated $2.2 billion from residential mortgage loans. Linked-quarter average loan balances were up 12%. Average deposits totaled $128 billion for the second quarter of 2020, up $18 billion or 17%, compared to the year-ago period, and up 16% from the prior quarter. Total interest-bearing deposit costs came down 39 basis points from the prior quarter, reflecting the impact of lower interest rates and the associated lag in pricing. We would expect deposit costs to continue to decline approximately 15 basis points in the third quarter. We continue to have strong, stable core deposit base with consumer deposits accounting for over 60% of our total deposit mix. taxable equivalent net interest income was $1.025 billion for the second quarter of 2020, compared to $989 million in both the year ago and prior quarter. Our net interest margin was 2.76% for the second quarter of 2020, compared with 3.06% in the same period a year -- last year, and 3.01% from the prior quarter. Compared to the prior quarter, net interest income increased $36 million, driven by higher earning asset balances, partially offset by a lower net interest margin. Liquidity levels negatively impacted the margin by 12 basis points. Noninterest income was $692 million for the second quarter of 2020, compared to $622 million for the year-ago period and $477 million in the first quarter. Compared to the year-ago period, noninterest income increased $70 million. The primary driver was an increase of $47 million in consumer mortgage business with a record level of loan originations and related fees in the second quarter of 2020. Cards and payments income also increased $18 million related to prepaid card activity from state government support programs, and operating lease expense increased $16 million, driven by gains from leveraged leases. Service charges on deposit accounts declined $15 million from the year-ago period, reflecting lower activity levels and a larger number of fee waivers. Compared to the first quarter of 2020, noninterest income increased by $215 million. The largest driver was -- of the quarterly increase was an improvement in other income, primarily driven by $92 million of market-related valuation adjustments in the first quarter of 2020. Other significant drivers of the quarter-over-quarter increase included the record consumer mortgage quarter and leveraged lease gains that I had already discussed as well as a $40 million increase in investment banking and debt placement fees, driven by strong commercial mortgage and debt capital markets activity. Total noninterest expense for the quarter was $1.013 billion, compared to $1.019 billion last year and $931 million in the prior quarter. The year-ago quarter included $52 million of notable items, primarily personnel-related costs associated with our efficiency initiatives. Excluding these, expenses were up $46 million from the year-ago period. The increase is primarily related to two main drivers, $25 million of payments-related expenses incurred in the current quarter as well as $13 million of COVID-19-related costs due to steps that the company has taken to ensure the health and safety of our teammates. Compared to the prior quarter, noninterest expense increased $82 million. Other drivers of the linked-quarter increase included $25 million of payments related to cost and other COVID-19-related expenses. Our provision for credit losses exceeded net charge-offs by $386 million or $0.34 per share. Net charge-offs were $96 million or 36 basis points of average total loans. Nonperforming loans were $760 million this quarter or 72 basis points of period-end loans, compared to $632 million or 61 basis points in the prior quarter. Additionally, delinquencies remained relatively stable, with less than a 1% increase in our 30- to 89-day past dues and the 90-day plus category declining quarter over quarter. As of June 30th, loans subject to forbearance terms were around 2% based on a number of accounts for both commercial and consumer loans, and about 4.5% when using outstanding balances. This quarter, our common equity Tier 1 ratio increased from 8.9% to 9.1%, which places us back in the targeted range of 9% to 9.5%. As Chris mentioned earlier this month, our Board of Directors approved a third quarter common dividend of $0.185 per share, which was consistent with our second-quarter dividend level. Net charge-offs are expected to be in the 50 to 60-basis-point range.

Our allowance to loan losses as a percentage of period-end loans now stands at 1.61% or 1.73%, excluding PPP loans. As Chris said, we reported second-quarter net income from continuing operations of $0.16 per common share. Average deposits totaled $128 billion for the second quarter of 2020, up $18 billion or 17%, compared to the year-ago period, and up 16% from the prior quarter. Our provision for credit losses exceeded net charge-offs by $386 million or $0.34 per share. Net charge-offs were $96 million or 36 basis points of average total loans.

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During the second quarter of fiscal-year 2021, we generated over $170 million of cash, allowing us to return over $57 million in dividends to shareholders. We have an exciting pipeline of innovative solutions that will generate both medium and long-term value for our customers, with an industry-leading IP portfolio, including over the 6,000 patents and designs. We now have over 8 billion nights of respiratory medical data in our cloud-based Air Solutions Platform. We have sold over 13.5 million 100% cloud connectable medical devices into the market from ResMed, and we have over 15 million patients enrolled in our AirView Solutions in the cloud. To be clear, the spectrum of chronic diseases that we look out here at ResMed are, of course, including our core focus areas of sleep apnea, COPD, and asthma, but it also includes biological systems interaction with cardiovascular disease, with cancer, with type 2 diabetes, with neuromuscular disease, Alzheimer's and beyond. We're seeing 70% to 90% of the pre-COVID patient flow coming through our biggest market in the United States, and to take an example of a European country, in Germany, we're already back to 85% to 90-plus percent in some states of Germany of pre-COVID patient flow. Even in countries like China, in our large Asia region, where we saw the sharpest declines at the start of this crisis with very severe lockdowns in Asia and particularly in China, we're now back to already seeing around 70-plus percent, 70% to 75% of pre-COVID patient flow coming through the mainly hospital clinics in our China market. It also showed the converse side in that not treating sleep apnea leads to a significantly higher incidence of heart attack, type 2 diabetes, and ischemic heart disease, leading to significantly higher healthcare costs treating those diseases and ultimately leading to earlier death. We make the smallest, quietest, and most comfortable devices on the market and they are all 100% cloud connectable. We entered the POC market in 2016 as a way to engage with Stage 2 and Stage 3 COPD patients. Since then, in these last five years, we have acquired Propeller, giving us access to COPD patients even earlier in their COPD disease progression, including Stage 1 and Stage 2 COPD patients. We have pharmaceutical drug delivery management through Propeller to support COPD patients in Stage 1 and Stage 2 COPD, we have the emergence of high flow therapy for Stage 2 and Stage 3 COPD and we have growing use of noninvasive ventilation and life support ventilation to support patients in Stage 3 and Stage 4 COPD. We were able to pivot our whole team and our HOT business to provide over 150,000 ventilators during the peak needs of the pandemic and get them to where they needed based upon a humanitarian epidemiology model. And that's where ResMed competes for more than 90% of our business. With over 1.5 billion people worldwide suffering from sleep apnea, COPD, and asthma combined, we see incredible opportunities for greater and greater adoption of these scalable technologies. We are poised to continue relentless innovation and development, as well as to provide the global scale that's needed to drive this technology to the 140 countries that we operate in and beyond. Before I hand the call over to Brett for his remarks, and then we get to the Q&A, I want to once again express my sincere genuine gratitude to the more than 7,500 ResMedians, whose perseverance, hard work, and dedication during the incredibly challenging circumstances of 2020 allowed our partners in healthcare to save the lives of many hundreds of thousands of people around the world with emergency need for ventilation, literally given the gift of breath and the gift of life to many during COVID. Group revenue for the December quarter was $800 million, an increase of 9% over the prior-year quarter. In constant-currency terms, revenue increased by 7%. Taking a closer look at our geographic distribution and excluding revenue from our Software as a Service business, our sales in U.S., Canada, and Latin America countries were $427 million, an increase of 5%. Sales in Europe, Asia, and other markets totaled $281 million, an increase of 17%, growing constant-currency terms an increase of 10%. By product segment, U.S., Canada, and Latin America device sales were $205 million, an increase of 1%. Masks and other sales were $222 million, an increase of 8%. In Europe, Asia, and other markets, device sales totaled $188 million, an increase of 16% or in constant-currency terms, a 10% increase. Masks and other sales in Europe, Asia, and other markets were $93 million, an increase of 18% or in constant-currency terms, an increase of 12%. Globally, in constant-currency terms, device sales increased by 5%, while masks and other sales increased by 9%. Software as a Service revenue for the second quarter was $92 million, an increase of 6%. On a non-GAAP basis, SaaS revenue increased by 5%. Our non-GAAP gross margin improved by 20 basis points to 59.9% in the December quarter compared to 59.7% in the same quarter last year. Our SG&A expenses for the second quarter were $169 million, a decrease of 1% or in constant-currency terms, SG&A expenses decreased by 3%. SG&A expenses as a percentage of revenue improved to 21.2% compared to the 23.3% we reported in the prior-year quarter. R&D expenses for the quarter were $55 million, an increase of 10% or on a constant-currency basis, an increase of 7%. R&D expenses as a percentage of revenue was 6.9% compared to 6.8% in the prior year. Total amortization of acquired intangibles was $19 million for the quarter and stock-based compensation expense for the quarter was $15 million. Non-GAAP operating profit for the quarter was $254 million, an increase of 16%, reflecting strong top-line growth, expansion of gross margins, and well-contained operating expenses. On a GAAP basis, our effective tax rate for the December quarter was 14.8%, while on a non-GAAP basis, our effective tax rate for the quarter was 15.2%. We continue to expect our effective tax rate for the full fiscal-year 2021 will be in the range of 17% to 19%. Non-GAAP net income for the quarter was $206 million, an increase of 17%. Non-GAAP diluted earnings per share for the quarter were $1.41, also a 17% increase. Our GAAP diluted earnings per share for the quarter were $1.23. We recognized that restructuring expenses of $13.9 million associated with the closure. Cash flow from operations for the quarter was $170 million, reflecting robust underlying earnings, partially offset by increases in working capital. Capital expenditure for the quarter was $35 million. Depreciation and amortization for the December quarter totaled $41 million. During the quarter, we paid dividend of $57 million. We recorded equity losses of $2.6 million in our income statement in the December quarter associated with the Verily joint venture. We expect to record equity losses of approximately $5 million per quarter in the second half of FY '21 associated with the joint venture operations. We ended the second quarter with a cash balance of $256 million. At December 31, we had $826 million in gross debt and $570 million in net debt. At December 31, we had a further $1.4 billion available for drawdown under our existing revolver facility. Our board of directors today declared a quarterly dividend of $0.39 per share, reflecting the board's confidence in our strong liquidity position and operating performance. Note, as a reminder, we recorded $35 million in COVID-generated ventilator revenue in our March quarter last year and $125 million in COVID-generated ventilator revenue in our June quarter last year.

Group revenue for the December quarter was $800 million, an increase of 9% over the prior-year quarter. Non-GAAP diluted earnings per share for the quarter were $1.41, also a 17% increase. Our GAAP diluted earnings per share for the quarter were $1.23.

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And before turning the call over, I want to remind everyone that even though the auction -- FCC Auction 103 has ended, we are still in the assignment phase and we are unable to respond to any questions related to any FCC auctions. While I cannot comment on Auction 103, I do want to point to the success we've had in Auctions 101 and 102 where we secured an important spectrum for our 5G plans. Turning to 2019, slide 6, we worked hard in 2019 to protect our customer base and smartphone connections grew by 71,000 during the year. We reported a 2% increase in service revenues for the year driven by a 2% increase in postpaid average revenue per customer, and a 6% increase in prepaid average revenue per customers. Also contributing to the growth in service revenues was a 13% increase in roaming revenue. In fact, for the year, cash operating expenses rose just four-tenths of 1%. Key to this was a company wide initiative that has provided $500 million of cumulative cost savings over the last three years, and we believe we have more opportunities in 2020. To put this in perspective for the full-year, data usage grew 39% while systems operation expenses were essentially flat, quite an accomplishment. The combined result of all these actions as we grew adjusted EBITDA 5% in 2019. We ended the year with VoLTE technology available to nearly 70% of our customers and deployment to the final markets is expected to be largely completed in 2020. Postpaid handset gross additions for the fourth quarter were 130,000, down from 136,000 a year ago due to aggressive industry wide competition on both service plans and devices. Postpaid handset net additions for the fourth quarter were positive 2,000. This was down from 20,000 last year, driven by the decline in gross additions and higher churn. As you can see on the graph on the right side of this slide, including the upgrades, total smartphone connections increased by 27,000 during the quarter and by 71,000 over the course of the past year that helps to drive more service revenue given that ARPU for a smartphone is about $22 more than ARPU for a feature phone. Postpaid handset churn depicted by the blue bars was 1.11% for the fourth quarter of 2019, higher than last year, driven primarily by aggressive industry wide competition. Total postpaid churn by handsets and connected devices was 1.38% for the fourth quarter of 2019 higher than a year ago and flat sequentially. Total operating revenues for the fourth quarter were $1 billion, essentially flat year-over-year, while service revenues increased $9 million. Retail service revenues increased by $3 million to $666 million. Inbound roaming revenue was $42 million that was an increase of 11% or $4 million year-over-year, driven by higher data volume. Finally, equipment sales revenues decreased by $8 million or about 3% year-over-year. Average revenue per user or connection was $46.57 for the fourth quarter, up $0.99, or approximately 2% year-over-year. 43% of our postpaid connections are now on unlimited plans versus 27% a year ago. Looking through this change, ARPU on a comparable basis increased by a $1.39 year-over-year versus the reported increase of $0.99, a pretty strong result. On a per account basis, average revenue grew by $1.39 year-over-year. Excluding the USF impact that I just discussed, ARPU increased by $2.42, or 2%. As shown at the bottom of the slide, adjusted operating income was $181 million, up 6% from a year ago. Correspondingly, the margin as a percent of total operating revenues was up 1 percentage point to 17%. For those watching service revenue margins, the current quarter result was 24%, an increase of 1 percentage point year-over-year. As I commented earlier total operating revenues of over $1 billion were essentially flat year-over-year. Total cash expenses were $871 million, decreasing $10 million or 1% year-over-year. Excluding roaming expense, system operations expense decreased by 2% despite a 47% growth in total data usage on our network. Roaming expense decreased 4% year-over-year primarily due to lower rates, partially offset by a 50% increase in off-net data usage. SG&A expenses increased 1% year-over-year due to higher selling and marketing costs. Adjusted EBITDA for the fourth quarter was $222 million, up 4% from a year ago. As a result, depreciation, amortization and accretion expense was up 10% from a year ago. Total operating revenues were $4 billion, an increase of $55 million or 1% year-over-year. Total cash expenses were $3.2 billion, an increase of $13 million year-over-year. System operations expense was essentially flat despite a 39% increase in data usage on our network, and a 33% increase in off-network data usage. Adjusted operating income and adjusted EBITDA grew 5%. In terms of revenue growth, unlimited plans are still only 43% of our base. We also expect customers to purchase additional services like device protection and we still have 396,000 future phones on our network, which provides us the opportunity to migrate these customers to smartphones also. For total service revenues, we expect a range of approximately $3.0 billion to $3.1 billion. We expect adjusted operating income to be within a range of $775 million to $900 million and adjusted EBITDA within a range of $950 million to $1.075 billion. For capital expenditures, the estimate is in the range of $850 million to $950 million. We now have approximately 230 fiber service addresses in the hopper. To address the broadband needs of our most rural markets, we advocated relentlessly and then secured over $1 billion in A-CAM funds over the program period. We also secured over $30 million in State Broadband Grants over the past five years. Over the past five years, our cable segment generated $1 billion in revenue and $289 million in adjusted EBITDA, helping to drive growth and offset secular declines in our legacy business. During that period, we improved our cable adjusted EBITDA margin from 24% to 33%. Cash expenses increased 1%, as we redeployed spending from our legacy businesses to our growth initiatives. Adjusted EBITDA was effectively the same as last year at $313 million. TDS Telecom grew consolidated revenues 1% due to $4 million of growth in cable revenues, which was partially offset by the decline in wireline revenues. Cash expenses increased 2%, mostly in the cable operations, which incurred closing costs related to the Continuum acquisition. As a result, adjusted EBITDA in the fourth quarter decreased 3% to $75 million from a year ago. Capital expenditures increased 35% to $124 million as we continued to invest in our fiber deployment. From a broadband perspective, residential connections grew 3%, driven by significant growth in our out-of-territory markets. We are offering up to 1 gig broadband speeds in our fiber market. Across our wireline residential base, 30% of all broadband customers are now taking 100 megabit speeds or greater compared to 24% a year ago, helping to drive a 4% increase in average residential revenue per connection in the quarter. Wireline residential video connections grew 8% compared to the prior year. Approximately 40% of our broadband customers in our IPTV markets take video, which, for us, is a profitable product. As a result of our fiber deployment strategy, over the last several years, 30% of our wireline service addresses are now served by fiber. Our current fiber plans include roughly 230,000 service addresses, of which about 50,000 were turned up in 2019. Total revenues decreased 1% to $171 million. Residential revenues increased 3%, due to growth from video and broadband connections as well as growth from within the broadband product mix, partially offset by a 4% decrease in residential voice connections. Commercial revenues decreased 10%, primarily driven by lower CLEC connections, and wholesale revenues were flat compared to 2018. Wireline adjusted EBITDA decreased 6% to $54 million, due primarily to the reduction in commercial revenues. Total cable connections grew 10% to 371,000, which included 31,000 from the acquisition and a 6% organic increase in total broadband connections. Organic broadband penetration continued to increase, up 100 basis points to 44%. On slide 27, total cable revenues increased 7% to $64 million, driven primarily by growth in broadband connections for both residential and commercial customers. Our focus on broadband connection growth and fast reliable service has generated a 17% increase in total residential broadband revenue. Also driving this growth is an 8% increase in average residential revenue per connection, driven in part by customers rolling off promotions, higher product mix and price increases. Cash expenses increased 8%, due primarily to additional costs related to the acquisition and plant maintenance. As a result, cable adjusted EBITDA increased 4% to $21 million in the quarter. We are forecasting total telecom revenues of $950 million to $1 billion compared to $930 million in 2019. Our recently completed acquisition will add an excess of $20 million to revenue. Adjusted EBITDA is forecast to be within a range of $290 million to $320 million compared to $313 million in 2019. Capital expenditures are expected to be between $300 million and $350 million in 2020 compared to $316 million in 2019. Wireline capex guidance includes $150 million dedicated to in and out-of-territory fiber deployments, a 50% increase over 2019 spending as well as $60 million in success-based spending for both wireline and cable and approximately $30 million allocated to the A-CAM program.

We are forecasting total telecom revenues of $950 million to $1 billion compared to $930 million in 2019. Adjusted EBITDA is forecast to be within a range of $290 million to $320 million compared to $313 million in 2019.

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All our brands had impressive holiday results as guests got more comfortable coming together in groups, which helped us deliver a better than expected quarter with positive sales of 17.7% and adjusted earnings per share of $0.71 cents. We've responded with appropriate pricing actions and with our most recent price increase, our menu price is now up over 4%. Just last week, when I was out in restaurants, managers were saying that they're where they used to see only two or three applicants for a job and now getting 10 or more. With this system, we're experiencing a 20 percent retention improvement for new hourly team members. We're already seeing an average of 15% higher server earnings and significant improvements in guest metrics. The operators are getting comfortable with it now, and restaurants that have fully adopted are generating 15 to 20 point improvements in guest metrics. We've ramped up Chili's development plans and currently have in excess of 20 new full size restaurants in the pipeline. It's Just Wings continues to perform well, and as of this week, Maggiano's Italian Classics is up and running in over 700 restaurants. For the second quarter of fiscal 2022, Brinker reported $0.71 of adjusted diluted earnings per share, up from $0.35 in last year's second quarter. Brinker's total revenues were $926 million for the quarter, and our comparable restaurant sales were positive 17.7%. Chili's comparable restaurant sales were 12.1% for the second quarter. Their comp sales were negatively impacted approximately 1.5% by Christmas, shifting back into the quarter from Q3 prior year, and close to 0.5% from closing early on Christmas Eve. This reaction reduced company sales by approximately $4 million. Maggiano's reported net comp sales for the quarter of a positive 78.1%. The team has also done a nice job maintaining their elevated carry-out business, which appears to have stickiness in the mid 20% range, even as the other business channels improve. During the quarter, Chili's inclusive of the virtual brands took several incremental price increases and exited the quarter carrying approximately 3% menu price compared to the prior year. In addition, as Wyman mentioned, we have taken further pricing actions in January, resulting in Chili's now carrying price of over 4% and Maggiano's adding 5% price with their latest menu rollout. Brinker increased its consolidated restaurant operating margin to 11% in the second quarter versus 10.7% a year ago. Food and beverage costs were unfavorable, 120 basis points driven by commodity inflation, partially offset by price. Labor for the quarter was then favorable 60 basis points versus prior year. Restaurant expense was favorable 210 basis points year-over-year, as the improved sales performance effectively leverage the fixed cost included in this category. As we work to further build our sales channels, we should see this leverage dynamic continue, and how balanced the inflationary aspects, and other parts of [Inaudible] Our cash flow for the second quarter remain strong with cash from operating activities of $67 million and EBITDA of $88 million. Our total funded debt leverage was 2.6 times and our lease adjusted leverage was 3.6 times.

All our brands had impressive holiday results as guests got more comfortable coming together in groups, which helped us deliver a better than expected quarter with positive sales of 17.7% and adjusted earnings per share of $0.71 cents. For the second quarter of fiscal 2022, Brinker reported $0.71 of adjusted diluted earnings per share, up from $0.35 in last year's second quarter. Brinker's total revenues were $926 million for the quarter, and our comparable restaurant sales were positive 17.7%. Chili's comparable restaurant sales were 12.1% for the second quarter.

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Our growth businesses are delivering strong client flows and nearly $14 billion of inflows in the wealth management and asset management businesses in the quarter. So with these positive flows and markets, assets under management and administration are up 21% to $1.2 trillion. Adjusted operating results for the quarter excluding unlocking, revenues came in strongly at $3.5 billion, up 17%, fueled by continued organic growth and attractive markets. Earnings rose 32% with earnings per share up 38% reflecting strong business growth and capital management and ROE is exceptional at nearly 48% compared to 35.5% a year ago. In fact, Investor's Business Daily recently named Ameriprise the number 1 most trusted wealth manager. Total client inflows were up 64% to $10 billion continuing the positive trend we've seen over the past several quarters. wrap net inflows were excellent at $9.4 billion, up 65%. Transactional activity grew for another quarter up nearly 16% over the last year with good volume across a range of product solutions. Advisor productivity reached another new high up 18% adjusted for interest rates to a record $766,000 per advisor. In the quarter, recruiting picked up nicely and another 104 experienced advisors joined us. Let's turn to the bank with total assets grew to nearly $11 billion in the quarter. Pretax income was $459 million, up 43% and margin was strong at 22.4%, up 320 basis points, which compares very well in the industry. Assets under management increased 17% to $583 billion. That's across equity, fixed income, and asset allocation strategies with more than 85% of our funds above the medium on an asset weighted basis on a 3 year, 5 year, and 10 year basis. We had net inflows of $3.9 billion in the quarter. This is an improvement of nearly $5.5 billion from a year ago. Global retail net inflows were $1.8 billion driven by North America, while overall industry sales were a bit weaker in the quarter given the summer months, overall, our flow traction is good. In terms of global institutional excluding legacy insurance partners net inflows were $3.5 billion. The team is working hard to generate wins across equity and fixed income strategies in each of our 3 regions. Sales increased 28% and have shifted to both our structured variable annuity product and our RAVA products without living benefits. On the insurance side, Life and Health insurance sales increased 77% driven by our VUL product, appropriate given the current low rates. In fact we consistently returned nearly all of our operating earnings to shareholders annually and if you look at that over the last 5 years we reduced our average weighted diluted share count by 28%. This is driving our business mix shift with Wealth and Asset Management representing about 80% of earnings. Combined this allows Ameriprise to consistently return substantial capital to shareholders with 95% of adjusted operating earnings returned in the quarter, putting us on track to achieve our 90% target for the full year. We are seeing excellent AUM growth of 21% to $1.2 trillion from flows and markets. Flows in these businesses have improved substantially up over 200% from a year ago and up nearly 140% on a year-to-date basis, representing the successful execution of our growth strategies in each of these businesses. Revenues in Wealth and Asset Management grew 23% to nearly $3 billion with pre-tax operating earnings of $744 million, up 44%. Importantly, earnings growth from wealth and asset management outpaced revenue growth, demonstrating the operating leverage of the business and the blended margins for these 2 businesses expanded 370 basis points from last year, with wealth management up 320 basis points and asset management up 500 basis points further illustrating our ability to deliver profitable growth. This chart clearly illustrates our success executing our growth and business mix shift strategy, specifically the wealth and asset management businesses are driving about 80% of the earnings over the past 12 months. This is coupled with a stable $700 million contribution from Retirement and Protection Solutions. Total client assets were up over 25% to $811 billion over the past 2 years. Revenue per advisor reached a new high of 766,000 in the quarter up 24% over the past 2 years. Importantly over the past 2 years, the annualized organic growth rate for Wealth Management flows improved to 6% compared to 4% in 2019. On page 10, you can see that we are delivering growth, as well as excellent financial results in Wealth Management, in fact revenue and earnings for Wealth Management also reached record levels this quarter. Adjusted operating net revenues grew 23% to over $2 billion fueled by robust client flows, a 16% increase in transactional activities and market appreciation. Wealth management pre-tax adjusted operating earnings increased 43% to $459 million. In total, the bank has nearly $11 billion of assets after moving in an additional $1.1 billion of sweep cash onto our balance sheet in the quarter. In the quarter, the average spread on the bank assets was 144 basis points compared to off-balance sheet cash earnings of 28 basis points. Expenses remain well managed, G&A expense increased 1% as higher activity based expenses and performance-based compensation are largely offset by expense discipline. In the quarter, our pre-tax adjusted operating margin was 22.4%, an increase of 320 basis points from the prior year and 100 basis points sequentially. Over the past 2 years, asset under management increased 18%. We also saw a net flow shift from outflows in 2019 to a 5% organic growth rate this year. The operating leverage in asset management is significant with margins put a trailing 12 months of 44.6%, up 830 basis points over the past 2 years. Turning to Page 12, you see these trends generated excellent financial performance in Asset Management. Adjusted operating revenues increased 24% to $915 million, a result of the cumulative benefit of net inflows, market appreciation, and performance fees on a sequential basis, revenues grew 4%. Importantly, our fee rate remained strong and stable at 53 basis points, expenses remain well managed in line with expectation giving to revenue growth. G&A expenses were up 14% primarily from compensation expense and other variable costs related to strong business performance as well as foreign exchange translation. Pre-tax adjusted operating earnings grew 44% to $285 million and we delivered a 49% margin. Moving forward, we expect strong financial performance to continue and anticipate that margins will remain in the mid 40% range over the near term driven by the continued flow momentum and equity markets at these levels. Let's turn to page 13. Pre-tax adjusted operating earnings were $192 million excluding unlocking down from $206 million a year ago. During the quarter, the variable annuity sales increased 28% from last year with 72% of sales and products without living benefit guarantees. Account value with living benefits represent only 62% percent of the overall book now down another 200 basis points in the past year. We have similar trends in protection with sales up 77% driven by higher margin VUL sales. You will observe, that the business continues to perform in line with expectations from a claims perspective, the policy count continues to decline as the book ages and we are garnering additional premium rate increases, now approximately 90% of the book has extensive or substantial credible experience and I will note that we did not incorporate recent improvements in mortality and morbidity related to COVID-19 into our long-term assumptions. And our economic hedging program has performed well across market cycles with 97% effect in this over the past 5 years. Finally, we have taken prudent and appropriate actions to manage the risk profile of the business, for example we stopped sales of LTC in 2002 and have successfully implemented premium rate actions and increased protection with our LTC reinsurance partner. This consistent and prudent approach has resulted in a stable earnings with 24% percent margins and a pre-tax return on capital exceeding 50% with consistent free cash flow generation. It is now only 20% of our earnings, we have demonstrated that the exposure profile is well managed, and we completed our annual unlocking with very minor updates. We had holding company available liquidity of $3.7 billion, an excess capital of 2.7 billion at the end of the quarter. As I mentioned, we returned 95% of earnings to shareholders in the quarter and we are on track to hit our 90% target for the full year. Our share count declined 28% over the past 5 years, even with issuing shares to fund share based compensation programs. Over the past year alone, the share count declined 5%.

So with these positive flows and markets, assets under management and administration are up 21% to $1.2 trillion. We are seeing excellent AUM growth of 21% to $1.2 trillion from flows and markets.

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First, our second quarter revenue of $372 million was down 27% from a year ago, which was in line to slightly better than my expectations. Our GAAP earnings per share for the quarter was $0.12 compared to an adjusted earnings per share for the quarter of $0.15, which includes a $0.03 adjustment primarily from the loss on extinguishment of our partially owned subsidiaries debt. In the quarter, cash flow from operations totaled $265 million, and free cash flow or excess cash after all investments and dividends was $269 million. First, as you know, consumer confidence is very strong, and that activity has begun to ripple into our markets as we are seeing increasing railcar loads which are now running roughly 8% above 2020. Railcars and storage declined 5% compared to a quarter ago, which has also been aided by strong scrapping market I mentioned. As a result, our future lease rate differential or FLRD metric, which is the average of the rates transacted in the current quarter as compared to the average of the next 12 months expiring rates improved to a minus 2.5% compared to last quarter's minus 14.8%, continuing the recovery that we believe began in the third quarter of last year. Lastly, the demand is beginning to show up in orders, which were up 224% compared to last quarter. Over the last few years, our service capacity has increased from roughly 1/3 to over half of our maintenance events, achieving a target we set out at the end of 2018. With our current footprint, we have the ability to get to 70%, which will continue to reduce the effective maintenance cost of our fleet and improve our railcar serviceability for our customers. As a good indicator of our progress, year-to-date 2021, over 60% of our fleet maintenance spend was internal. What is most exciting is what we are seeing in our orders, which totaled 4,570 in the quarter, up 224% compared to last quarter. In total, Trinity has issued and refinanced approximately $2.3 billion of debt since the onset of the pandemic, including our partially owned subsidiaries. In aggregate, we have lowered the company's borrowing cost by 100 basis points over that time. In the quarter, Trinity repurchased $68 million of stock in the open market and also completed a $223 million block purchase from ValueAct as they monetized a portion of their investment. These repurchases accounted for just under 10% of the company's shares. Over the quarter, trading was active in the secondary markets and booked gains on lease portfolio sales of $11 million. Our second quarter consolidated revenue totaled $372 million, which was down 27% compared to a year ago. Specifically, over 64% of deliveries in the quarter were for our lease portfolio compared to 41% in Q2 2020. Overall, our adjusted earnings improved sequentially to $0.15 from $0.07, driven by a combination of better fundamentals, gains on lease portfolio sales and our share repurchase activity. Our second quarter earnings and included an $11 million gain on lease portfolio sales, consistent with our ongoing lease fleet optimization efforts aided by the broadening secondary market. We did incur an expense of $11.7 million related to the early extinguishment of debt in our partially owned leasing entities. In regards to cash flow, year-to-date cash flow from operations totaled $335 million. Cash flow from operations in the second quarter was $265 million, which reflects the collection of $207 million of our income tax receivable during the second quarter. As a result of these factors, we are revising our cash flow from operations range to $600 million to $650 million, which was previously $625 million to $675 million. Our net investment for leasing in the quarter was approximately $72 million, consisting of $144 million of additions and betterments, reduced by portfolio sales of $72 million. Our manufacturing capex was $9 million for the second quarter. For the year, our expectations for net leasing and manufacturing capex is $200 million to $250 million and $45 million to $55 million, respectively. Our range for net leasing capex for the year was reduced $100 million, primarily to a shift in deliveries from the lease portfolio to direct sale. Total free cash flow after investments and dividends totaled $269 million in the second quarter. Additionally, free cash flow was aided by the debt financing accomplished in the quarter, which increased the loan to value on our wholly owned lease fleet to 62.5%. Trinity remains in a strong financial position and our liquidity at the end of the second quarter was $918 million. Over the past quarter, Trinity access to debt markets for approximately $1.6 billion, which included refinancing over $1.25 billion of debt for our partially owned leasing entities and issuance of $325 million of green asset-backed securities at a rate of 2.31% and anticipated seven-year life. The aggregate effect of our financing activities over the past 12 months has lowered trades borrowing costs approximately 100 basis points. We sold 700 railcars, yielding the gain I mentioned earlier. We also purchased 155 railcars, which we were able to deploy at attractive returns immediately. As highlighted in our release, Trinity purchased 10.5 million shares at a cost of $291 million in the quarter, which includes a direct purchase from our largest shareholder. Additionally, our dividend in the quarter totaled $24 million, bringing the total year-to-date capital return to shareholders to $375 million.

Our GAAP earnings per share for the quarter was $0.12 compared to an adjusted earnings per share for the quarter of $0.15, which includes a $0.03 adjustment primarily from the loss on extinguishment of our partially owned subsidiaries debt. Our second quarter consolidated revenue totaled $372 million, which was down 27% compared to a year ago.

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These uncertainties include economic conditions, market demands and competitive factors. Net sales for the year were $898 million and adjusted earnings per share was $6.14. In addition, we delivered record cash from operations of $161 million and strong free cash flow of $110 million for the year. For the fourth quarter, net sales were $194 million and below our guidance range, primarily due to a greater than anticipated pause in the 5G build out and lower 4G demand. Q4 adjusted earnings per share was $1.14, which was near the high-end of our guidance range. Recent estimates from third party experts project that nearly 4 million 5G base stations will be installed globally by 2023 with around 880,000 deployed in 2020. With these changes, we expect that our opportunity for 5G content will be around three times that of 4G or approximately $175 to $225 per base station. Industry experts project that through 2024 sales of EVs and HEVs will continue at a compounded annual growth rate of approximately 30%. In 2019, ACS net sales were $317 million, an increase of 8% compared to 2018, or 10% on a constant currency basis. Wireless Infrastructure as highlighted on slide five, accounted for about 14% of total Rogers revenue in 2019. Aerospace and Defence grew at double digit rates in 2019 and has delivered consistent growth over the past three years, with a compounded annual growth rate of about 10%. ADAS grew at a solid rate in 2019 and has also demonstrated a strong multi-year growth profile with a three year compounded annual growth rate of more than 15%. EMS net sales were $362 million, an increase of 6% versus 2018 or 8% on a constant currency basis. This growth was partially offset by weakness in general industrial and traditional automotive markets. 2019 PES net sales were $199 million, a decrease of 11% as compared to 2018 or 7% on a constant currency basis, double-digit growth in mass transit, power interconnects and power semiconductor substrates for EV/HEV were areas of strength. With the business environment remaining challenging and near term uncertainty related to the impact of the coronavirus, we see the timing of attaining these financial targets as being extended beyond this year. However, as a company we remain committed to achieving annual revenue growth of 15% driven by both organic and synergistic M&A opportunities. We also remain committed to achieving a greater than 20% adjusted operating margin as we drive top line growth and continue to execute on operational improvements. Turning to slide 12, fourth quarter revenues as previously noted, were $193.8 million, below our Q4 guidance range of $200 million to $210 million. A slowdown in demand for products serving the Wireless Infrastructure market for both 4G and 5G applications and seasonal weakness in the portable electronics market were the primary drivers of the lower revenues in Q4. Gross margin for the fourth quarter was 33.1%. The gross margin was within our guidance range of 33% to 34% despite the lower revenues, as we took steps to reduce our manufacturing spending in all business segments to compensate for the adverse impact of significantly lower volumes. Adjusted operating income for Q4 2019 was $22.5 million or 11.6% of revenues, down sequentially due to the lower revenues in the quarter. The company had a GAAP loss in the fourth quarter of $28.8 million or $1.55 per share, that included a $43.9 million or $2.35 per share non-cash after tax charge, which resulted from terminating a pension plan in the fourth quarter. On an adjusted basis, the company delivered earnings per share of $1.14 per fully diluted share within our guidance range of $1 to $1.15. The company generated $32.9 million of free cash flow in the fourth quarter and $109.7 million for all of 2019 compared to $19.7 million in 2018. Turning to slide 13, revenues for calendar year 2019 of $898.3 million were 2% higher than 2018 due to organic growth of just under 3% on a constant currency basis. Acquisitions added approximately 2% and currency had a negative impact of just over 2%. Adjusted operating income for 2019 of $141.4 million or 15.7% of revenues was 10 basis points lower than 2018, the lower adjusted operating margin resulted from a 40 basis point decline in 2019 gross margin versus 2018 due primarily to operational challenges to add capacity and wrap new products in our PES business throughout the year and incremental costs for integration of EMS acquisitions in the first half of 2019. In addition, trade tensions between U.S. and China resulted in tariffs that decreased gross margin by 66 basis points in 2019. EPS for 2019 was $2.43 per fully diluted share compared to $4.70 per fully diluted share in 2018. Adjusted earnings per share per fully diluted share of 2019 of $6.14 was $0.37 higher than 2018, due primarily to a decrease in the effective tax rate to 14.2% in 2019 from 20.7% in 2018. Adjusted EBITDA of $188.2 million or 21% of revenues in 2019 was slightly higher than the $184.8 million or 21% of revenues in 2018. Returning to the fourth quarter on slide 14, our Q4 2019 revenues of $193.8 million decreased 13% compared to the third quarter of 2019. The sequential decrease was experienced in our ACS business segment down 18% and our EMS business segment down 16% while the PES business segment saw its revenues increase 2% over the third quarter. Currency exchange rates negatively impacted fourth quarter revenues by $1.1 million compared to Q3. As a result, our Wireless Infrastructure revenues declined 34% sequentially. 4G revenues ended the year 23% below 2018 revenues. The 5G revenues for the year 2019 resulted in Wireless Infrastructure revenues growing 10% over 2018 levels. Fourth quarter revenues from Aerospace and Defense programs grew 4% sequentially over a strong third quarter and increased 16% for the year. ADAS revenues were down 8% sequentially but are up 7% annually compared to 2018 in the face of a weak auto market. Revenues in our EMS segment decreased sequentially due to weakness in our end user applications in all markets led by an expected seasonal softness in portable electronics, which declined 19% in the fourth quarter. Despite the fourth quarter demand decline revenues for portable electronics, which comprised greater than 27% of the segment revenues grew 16% in 2019 compared to 2018 due to our strong product portfolio, which led to share gains in new handset and tablet designs. General industrial application revenues, which comprise approximately 40% of the business segment's revenues were down 9% compared to the third quarter and down 5% annually compared to 2018 reflecting ongoing weakness in certain industrial markets. These revenues which represent close to 20% of the segment revenues increased 42% compared to the third quarter and grew 14% annually. Power semiconductor substrates, for general industrial applications, which comprise over 30% of the segment revenues grew 2% in the fourth quarter, principally from the completion of inventory corrections in the quarter. For the year revenues from general industrial applications were down 16% as demand for factory automation capital was weak, particularly in the second half of 2019. Revenues from conventional vehicle electrification applications showed continued weakness in the fourth quarter, declining 11% sequentially and 21% for the year as a result of weak auto sales, particularly in Europe. In our power interconnect business revenues for mass transit applications grew nicely in 2019 due to strong first half demand from a couple of key customers increasing 35% for the year. Turning to slide 15, our gross margin for Q4 2019 was $64.2 million or 33.1% of revenues, significantly lower than our third quarter gross margin. Tariffs were $1.6 million lower in the quarter due primarily to reduced Wireless Infrastructure production. The improvements led to a significant progress on the business segment profitability, increasing PES gross margins by over 600 basis points resulting in over 100 basis point improvement to the company gross margin. While encouraged, we still have significant work to realize the additional expected improvement and incremental 600 basis points improvement at PES driven primarily from increased yields and continue to believe it will take us through the first half of 2020 to realize the majority of the remaining improvements. The impact to gross margins was approximately $0.8 million or 41 basis points, a decrease of 65 basis points sequentially. Slide 16 details the changes to adjusted net income for Q4 2019 of $21.3 million compared to adjusted net income for Q3 of $28.2 million. Adjusted operating expenses for Q4 of $41.7 million or 21.5% of revenues were $1 million lower than Q3 adjusted operating expenses, 19.2% of revenues. The company had lower interest expense in the fourth quarter as a result of paying down $65 million of debt in the third quarter. Rogers effective tax rate for 2019 was 14.2% compared to 20.7% in 2018. Turning to slide 17, we ended 2019 with a cash position of $166.8 million, an increase of $26.1 million from September 30 and a decrease of $0.9 million from December 31, 2018. In Q4 the company spent $12.8 million on capital expenditures, we spent $51.6 million in 2019 with significant expenditures to increase capacity at both ACS and PES. The company paid down $7.5 million if debt in the quarter and paid down $105.5 million of debt in 2019 and ended the year in a net cash position of $43.8 million. The company generated $45.7 million from operating activities in Q4, including a decrease in working capital of $17.4 million. For 2019, the company generated a record $161.3 million from operating activities including $13.4 million from a decrease in working capital. Cash generation in 2019 compares favorably to the cash generation in 2018 of $66.8 million from operating activities, net of the $46.2 million used for increases in working capital and $25 million to fund a pension plan. As a result, we believe the coronavirus will reduce our revenues in the first quarter by approximately 7% to 10%. Therefore, revenues for Q1 are estimated to be in the range of $185 million to $200 million. As a result, we are guiding gross margin in the range of 32.5% to 33.5% for Q1. We guide a GAAP Q1 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 $0.75 to $0.95 per share for the first quarter. In 2020, we expect the effective tax rate to be 20% to 21% excluding the impact of discrete items, which have historically lowered the effective rate. Lastly, we expect to spend $40 million to $45 million on capital expenditures in 2020.

These uncertainties include economic conditions, market demands and competitive factors. Q4 adjusted earnings per share was $1.14, which was near the high-end of our guidance range. This growth was partially offset by weakness in general industrial and traditional automotive markets. With the business environment remaining challenging and near term uncertainty related to the impact of the coronavirus, we see the timing of attaining these financial targets as being extended beyond this year. A slowdown in demand for products serving the Wireless Infrastructure market for both 4G and 5G applications and seasonal weakness in the portable electronics market were the primary drivers of the lower revenues in Q4. The company had a GAAP loss in the fourth quarter of $28.8 million or $1.55 per share, that included a $43.9 million or $2.35 per share non-cash after tax charge, which resulted from terminating a pension plan in the fourth quarter. On an adjusted basis, the company delivered earnings per share of $1.14 per fully diluted share within our guidance range of $1 to $1.15. Returning to the fourth quarter on slide 14, our Q4 2019 revenues of $193.8 million decreased 13% compared to the third quarter of 2019. As a result, we believe the coronavirus will reduce our revenues in the first quarter by approximately 7% to 10%. Therefore, revenues for Q1 are estimated to be in the range of $185 million to $200 million. We guide a GAAP Q1 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 $0.75 to $0.95 per share for the first quarter. Lastly, we expect to spend $40 million to $45 million on capital expenditures in 2020.

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This compares to $1.4 billion or $2.01 per share in the third quarter of 2020 despite the network and global supply chain challenges our quarterly operating ratio of 56.3% improved 240 basis points versus last year and represents a third quarter record. This represented a 1% improvement versus 2020 and helped our customers eliminate 5.7 million metric tons of greenhouse gas emissions. Those gains were offset by declines in our premium business group as our served markets continue to be impacted by semiconductor chip shortages and global supply chain disruption, however, freight revenue was up 12%, driven by higher fuel surcharges, strong pricing gains and a positive mix. Revenue for the quarter was up 14% compared to last year, driven by a 4% increase in volume and a 9% increase in average revenue per car, reflecting strong core pricing gains and higher fuel surcharge revenue. Coal and renewable carloads grew 9% year-over-year and 17% from the second quarter. Grain and grain products were down 1% compared to last year and down 9% from the second quarter, due primarily to lower US grain stocks. Fertilizer carloads were up 10% year-over-year due to strong agricultural demand and increased export potash shipment. Moving on to industrial, industrial revenue improved 22% for the quarter, driven by a 14% increase in volume. Average revenue per car also improved 6% driven by higher fuel surcharge core pricing gains and positive mix. Energy and specialized shipments were up 16% compared to last year and up 5% versus the second quarter, the gains were due to an increase in petroleum products as demand recovers from this time last year, and new business wins from Mexico energy reform. Volume from forest products grew 15% year-over-year primarily driven by demand for brown paper used in corrugated boxes along with strong housing starts driving lumber shipments. However, compared to the second quarter volume was down 2% due to the impact of the lot of fire in Northern California. Industrial chemicals and plastic shipments were up 6% year-over-year due to strengthening demand and business wins that production rate for plastic improved from 2020. Metals and minerals volume was up 21% compared to 2020 and up 3% versus the second quarter, primarily driven by our business development effort along with strong steel demand as industrial markets recover coupled with favorable comps for frac sand. Turning now to premium revenue for the quarter was up 1% as a 9% decrease in volume was more than offset by higher average revenue per car. ARC increased by 11% from higher fuel surcharges and core pricing gains. Automotive volume was down 18% compared to last year and down 4% versus the second quarter. Intermodal volume decreased 6% year-over-year and 8% compared to the second quarter. Our reported weekly metrics show the time required to recover the network from these events. While we made improvement from our freight car velocity weekly low of 184 in August, to 210 miles per day in the last 2 weeks of September, our goal remains to return freight car velocity toward and 220 miles per day. Our intermodal trip plan compliance results improved and on August the low of 61% to gain 12 points in September to 73%. Our manifest and auto trip plan compliance results improved from 57% in August to 61% in September. Locomotive productivity declined 8% compared to a year ago as we deployed additional resources to handle traffic reroutes. We continued our focus on increasing train length, achieving a 4% improvement from the 3rd quarter 2020 to approximately 9,360 feet. Now that the bridge has been restored, the team is again driving productivity through increasing train length as evidenced in our September train length growth to over 9,500ft. Our ability to grow train length is also enabled by the completion of 9 sidings to date in 2021 with an additional 26 under construction or in the final planning stages. We also produced a record quarterly fuel consumption rate improving 1% compared to last year. As you heard from Lance union Pacific achieved strong 3rd quarter financial results with earnings per share of $2.57 on an operating ratio of 56.3%. As noted in an 8-K last month, we incurred additional expense this quarter related to wildfires, and weather the full impact of those events including loss revenue negatively impacted our operating ratio of 50 basis points and earnings per share by $0.05. Rising fuel prices throughout the quarter, negatively impacted operating ratio by 140 basis points. However, the year-over-year impact of our fuel surcharge programs added $0.05 to EPS. Setting aside these exogenous issues, UP's core operational performance drove operating ratio improvement of 430 basis points and added $0.56 to EPS. The comparison of 2021 to 2019 most clearly illustrates the efficiency we've achieved over the past 2 years, as we generated 9% higher operating income on 4% less volume. For 3rd quarter 2021, the operating revenue up 13% and operating expense only up 9%. We generated 3rd quarter record operating income of $2.4 billion, net income of $1.7 billion and earnings per share also with 3rd quarter records. Freight revenue totaled $5.2 billion in the 3rd quarter, up 12% compared to 2020 and 1% compared to second quarter. On a year-over-year basis, those gains were further supplemented by a positive business mix, driving 650 basis points in total improvement. Fuel surcharges increased freight revenue 600 basis points compared to last year as our fuel surcharge programs continue to chase rising fuel prices. Looking at freight revenue sequentially, lower volume versus the second quarter decreased rate revenue 250 basis points, highlighted by the factors that Kenny highlighted. Increased freight revenue 75 basis points on a sequential basis, driven by that same combination of higher industrial carloads and lower intermodal shipments. Finally, rise in fuel prices and the resulting uptick in sequential fuel surcharges increased freight revenue 125 basis points. Now let's move on to Slide 17 which provides a summary of our 3rd quarter operating expenses, which increased 9% in total versus 2020. The primary driver of the increase was fuel expense, up 81% as a result of a 74% increase in fuel prices, a small offset to the higher prices was a 1% improvement in our fuel consumption rate. Compensation and benefits expense was up 3% versus 2020. Third quarter workforce levels were down 1% compared to last year despite our train and engine workforce growing 3%. Management, engineering and mechanical workforces together decreased 3%. Wage inflation along with higher recrew and overtime costs associated with our network issues increased cost per employee 4% while still a tad elevated this level of per employee compensation increase is more in line with future expectations. Equipment and other rents was flat consistent with volume. Other expense decreased 10% or $29 million this quarter, driven primarily by lower write-offs of in progress capital projects in 2021. Recall that last year we incurred a one-time $278 million non-cash impairment charge in this expense category. Looking now at our efficiency results on Slide 18 operating challenges during the quarter, again impacted our productivity, which totaled $45 million. In total for 2021 productivity is at 280 million dollars led by our train length improvement and locomotive productivity offset by roughly $55 million of weather and incident related headwinds. Our incremental margins in the quarter were a very strong 94% driven by solid pricing gains, positive business mix as well as continued efficiency. Turning to Slide 19, year-to-date cash from operations increased to $6.5 billion from $6 billion in 2020, a 9% increase. Our cash flow conversion rate was a strong 95% and year-to-date free cash flow increased $728 million or 38% driven by higher net income and lighter year-to-date, capital spend compared to last year. Supported by our strong cash generation and cash balances, we've returned $7.9 billion to shareholders year-to-date through dividends and share repurchases. Actions taken during the year include increasing our industry-leading dividend by 10% in May and repurchasing $27.5 million shares, totaling $5.9 billion. We finished the 3rd quarter with a comparable adjusted debt-to-EBITDA ratio of 2.8 times, which is on par with second quarter. So, balancing these variables and with just over 2 months left in the year, we now expect volume to be up closer to 5% for full year 2021. We are also adjusting our productivity guidance for the year, down to $350 million as the weather impact and related network challenges impede the progress we expect to make with our efficiency in 2021. To put that in context, however, at the end of this year we will have generated almost $1.8 billion of productivity since our implementation of PSR in late 2018. In fact, over the last 30 days, barrel prices have increased around $10 with spot diesel prices up over $0.25 per gallon. So, all in, we now expect our full year operating ratio improvement to be in the neighborhood of 175 basis point or not quite to the high end of the guidance range we established back in January, we view that level of improvement as another great milestone on our journey to 55. Our service product has shown improvement over the past 60 days.

This compares to $1.4 billion or $2.01 per share in the third quarter of 2020 despite the network and global supply chain challenges our quarterly operating ratio of 56.3% improved 240 basis points versus last year and represents a third quarter record. Our reported weekly metrics show the time required to recover the network from these events. As you heard from Lance union Pacific achieved strong 3rd quarter financial results with earnings per share of $2.57 on an operating ratio of 56.3%. Rising fuel prices throughout the quarter, negatively impacted operating ratio by 140 basis points. For 3rd quarter 2021, the operating revenue up 13% and operating expense only up 9%. Equipment and other rents was flat consistent with volume.

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We've taken great measures to ensure the safety of our employees and their families, and we are pleased to report that we are operating at 100% capacity and that our employees are well. The information received from our staff during the Chinese New Year was very disconcerting as the virus was reported to be similar to the SARS virus of 2003. Despite the challenges we faced, we demonstrated the flexibility inherent in our business model to produce financial results that were within our guidance range in our fiscal third quarter, with revenue of $411 million and non-GAAP net income of $0.92 per share. Our high-level business mix was relatively consistent with our recent history, with 75% of revenue from optical communications and 25% from non-optical communications. Optical communications revenue of 309 million was down 4% from the second quarter but up 3.5% from a year ago. Within optical communications, telecom revenue was 224 million, down 10% from the second quarter but up 3% from a year ago, reflecting some inventory adjustments associated with certain next-generation programs. Datacom revenue of 85 million rebounded nicely and was up 14% from the second quarter and up 5% from a year ago. By technology, silicon photonics-based optical communications revenue increased 5%, both from the second quarter and from a year ago, to 86 million and represented 21% of total revenue. Revenue from QSFP28 and QSFP56 transceivers also continued to grow and was up 7% from the second quarter and 17% from a year ago at 51 million or 12% of total revenue. By data rate, 100-gig programs grew 1% from the second quarter and 10% from a year ago to 161 million. Products rated at speeds of 400-gig and above declined 41% from the second quarter but grew 25% from a year ago to 29 million. Revenue of 103 million was essentially flat from the second quarter and up 2% from a year ago. Demand for industrial lasers was also flat sequentially with revenue of 46 million. As such, automotive revenue was 31 million and other revenue was 22 million. Sensor revenue was 3 million. Because of this, we now expect our gross margin to be in the range of 11.5 to 12% or slightly below our target range of 12 to 12.5% for the full year. More than 90% of our costs are variable, with components and materials making up the greatest portion of our costs. From a balance sheet perspective, we remain very well capitalized with over $465 million in cash and investments and total debt of approximately $55 million. Total revenue in the third quarter of fiscal year 2020 was 411.2 million, within our guidance range and slightly below our record second-quarter performance as anticipated. Recall that in our last call, our revenue guidance incorporated an 8 million to $10 million impact from COVID-19. During the quarter, we have demonstrated our extreme flexibility to produce financial results that were within our guidance changes even though the actual impact on revenue from the pandemic was 12 to $15 million or 4 to $5 million more than we originally anticipated. Non-GAAP net income was $0.92 per share, which was at the lower end of our guidance range, even after the greater-than-expected effects on both revenue and expenses that Seamus discussed. Combined with the revenue impact, gross margin was below our target range at 11.2% in the third quarter. Non-GAAP operating expense was $12.2 million in the third quarter, flat with Q2. As a result, non-GAAP operating income was 33.7 million, and non-GAAP operating margin was 8.2%. Taxes in the third quarter were 1 million and our normalized effective tax rate was 2.4%. With revenue streams coming from more advantageous tax jurisdiction, we now expect our effective tax rate to be below 5% for the full year. Non-GAAP net income was 34.8 million in the third quarter or $0.92 per diluted share, as I indicated earlier. On a GAAP basis, which includes share-based compensation expenses and amortization of debt issuance costs, net income for the third quarter was 28.3 million or $0.75 per diluted share, also within our guidance range. At the end of the third quarter, cash, restricted cash and investments were 465.2 million, up from 450.5 million at the end of the second quarter. Operating cash flow in the quarter was 51.8 million. And with capex of $12.1 million, free cash flow was $29.8 million in the third quarter. On a year-to-date basis, operating cash flow was 104.4 million and free cash flow was 77 million. During the quarter, we repurchased 355,000 shares at an average price of $58.27 for a total cash outlay of 20.7 million. At the end of the quarter, we have 41.5 million remaining in our share repurchase program. That said, we are not immune from the broader factors that are impacting some of our customers, and this is reflected in our revenue guidance, which calls for a sequential decline of 6% at the midpoint. For the fourth quarter, we anticipate revenue to be in the range of 370 to 400 million, including a 25 to 35 million impact from COVID-19-related uncertainties. We are also reflecting in our guidance an approximately 15 million impact as a result of an inventory correction from one of our customers. As you'd anticipate from the factors that impacted our gross margin in the third quarter, many of which will extend into upcoming quarters, we expect gross margin to be in the range of 11.5 to 12%, slightly below our target range of 12 to 12.5% for the full year of fiscal 2020. From an earnings perspective, we anticipate non-GAAP net income per share in the fourth quarter to be in the range of $0.80 to $0.92 and GAAP net income per share of $0.64 to $0.76, based on approximately 27.6 million of fully diluted shares outstanding.

Despite the challenges we faced, we demonstrated the flexibility inherent in our business model to produce financial results that were within our guidance range in our fiscal third quarter, with revenue of $411 million and non-GAAP net income of $0.92 per share. Total revenue in the third quarter of fiscal year 2020 was 411.2 million, within our guidance range and slightly below our record second-quarter performance as anticipated. Non-GAAP net income was $0.92 per share, which was at the lower end of our guidance range, even after the greater-than-expected effects on both revenue and expenses that Seamus discussed. Non-GAAP net income was 34.8 million in the third quarter or $0.92 per diluted share, as I indicated earlier. On a GAAP basis, which includes share-based compensation expenses and amortization of debt issuance costs, net income for the third quarter was 28.3 million or $0.75 per diluted share, also within our guidance range. For the fourth quarter, we anticipate revenue to be in the range of 370 to 400 million, including a 25 to 35 million impact from COVID-19-related uncertainties. From an earnings perspective, we anticipate non-GAAP net income per share in the fourth quarter to be in the range of $0.80 to $0.92 and GAAP net income per share of $0.64 to $0.76, based on approximately 27.6 million of fully diluted shares outstanding.

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As you can see on Slide 4, total sales for the fourth quarter were $112.3 million compared to $107.6 million in the same period last year, an increase of 4%. In utility water, overall sales increased 8% against a difficult comparison in Q4 last year, which was also up 8% over 2018. The acquisition of s::can completed in November 2020 contributed approximately 3 points of the current quarter's revenue growth, with core organic revenues in utility water up 5% year-over-year. As anticipated, flow instrumentation sales were sequentially less worse, down 10% year-over-year compared to the 18% decline experienced in Q3 2020, although activity levels continue to reflect the broadly challenged markets and applications served globally. Operating profit as a percent of sales was 15.1%, a modest 10-basis-point decline from the prior year's 15.2% with a number of moving parts at the gross profit and SEA line that I will dissect in more detail. Gross margin for the quarter was 39.2%, up 100 basis points year-over-year. Currently averaging around $3.60 per pound, this represents over a 30% increase year-over-year. To give you some level of sensitivity, if copper prices stay in this range for the entire year, it could be a potential cost headwind of about $4 million to $5 million year-over-year. So these two months, as expected, totaled approximately $2.5 million in revenues. As we look to 2021, the combination of s::can and ATi, with total acquired revenue of approximately $37 million, we expect to be earnings per share accretive. Now that these plans appear more firm, we have taken this provision, which reduced gross margins in the quarter by approximately 300 basis points to cover future radio upgrades for these early cellular customers. These first networks had been in service nearly 20 years at that point. The fourth quarter's spend of $27.1 million increased $2.3 million from the prior year. Including both s::can and ATi in 2021, we expect ongoing SEA as a percent of sales to average in the 25% to 26% range. The income tax provision in the fourth quarter of 2020 was 22.6%, slightly lower than the prior year's 24.3% rate. In summary, earnings per share was $0.45 in the fourth quarter of 2020, an increase of 7% from the prior year's earnings per share of $0.42. Working capital as a percent of sales was 26%, with about 1% of that associated with the addition of s::can. On an organic basis, primary working capital as a percent of sales declined about 200 basis points year-over-year. Our full-year free cash flow of $80.5 million was 10% higher than the prior year's $73.2 million and represents approximately 163% conversion of net earnings. Our cash flow focus will not abate and we anticipate free cash flow conversion to exceed 100% in 2021. We ended the year with approximately $72 million of cash on the balance sheet after taking into account the s::can acquisition. In early January, we deployed $44 million net of cash acquired for ATi, remaining in a net cash positive position. Along with the continued full access to our untapped $125 million credit facility, we have ample financial flexibility to continue executing on our capital allocation priorities. From a geographic standpoint, where ATi is strong in the US and UK, s::can has an installed base in 50 countries. The combined acquired annual sales of approximately $37 million with EBITDA margins in the mid-teens will be earnings per share accretive to our results. Despite the unprecedented backdrop of a health and economic crisis, we have delivered utility water revenue growth, SaaS revenue as a percent of sales growth to now 5%, strong EBITDA margin expansion, robust working capital management and cash flow and successful execution of two accretive acquisitions.

As you can see on Slide 4, total sales for the fourth quarter were $112.3 million compared to $107.6 million in the same period last year, an increase of 4%. In summary, earnings per share was $0.45 in the fourth quarter of 2020, an increase of 7% from the prior year's earnings per share of $0.42.

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Our sales were up $41 million or 17% with both divisions contributing record numbers. Engine Management was up 15% and was far and away our largest fourth quarter on record. Temperature Controls also had a record, up 30% though the fourth quarter is the lowest sales period of this highly seasonal category. At mid-year we were down nearly 15% due to the sales drop off and the pandemic. After the first half our earnings from continuing operations were down almost 37% and with the record third and fourth quarters, we ended the year up 16%. At the time of the announcement we knew that the annualized impact was an approximate loss of $140 million that we had yet to finalize any details including timing. We now know that this business is phasing out over the course of the first quarter of this year during which we expect approximately $20 million in revenue and it will then be totally absent beginning in the second quarter and thereafter. Included in this is our recent Pollak acquisition of which 75% is OE and largely commercial vehicle. As of now about 30% of what we sell out of these JVs is for in-country OE. Among them average age of vehicles has hit a record 12 years. We endured wild demand swings dropping 30% to 40% followed by positive swings up 10% to 20%. Another supply chain challenge has been the logistics of moving product primarily from the Far East to the U.S. Fortunately we have a very large manufacturing footprint in North America and Poland and are less exposed than others who source a 100% from Asia. For over 100 years SMP has nurtured a culture focused on all our stakeholders including our employees, customers and our communities. Looking first at the P&L, consolidated net sales in Q4 2020 were $282.7 million, up $41.5 million or 17.2% versus Q4 last year. Our consolidated net sales for the full year were $1.13 billion finishing down just 0.8% after recovering in the last half of the year as Eric noted earlier. Looking at it by segment, Engine Management net sales in Q4 excluding Wire and Cable sales were $193.5 million, up $26.2 million versus the same quarter of last year. This 15.7% increase was driven mainly by catching up on a large order backlog we've carried into the fourth quarter that stemmed from the sharp rebound in business activity after COVID lockdowns were lifted. For the full year, Engine Management's net sales were down 2% to $691.7 million, a strong second half volume helped offset the pandemic induced declines we saw earlier in the year and brought the segment's full year sales to a level just slightly below 2019. Wire and Cable net sales in Q4 were $38.3 million, up $3.7 million or 10.6% but for the full year were relatively flat finishing up 0.6% at a $144 million. While the Wire and Cable business performed very well in 2020, the business remains in secular decline and we believe sales will be lower by 6% to 8% on an annual basis. Our Temperature Control net sales in Q4 2020 were $47.7 million, up 30% versus the fourth quarter last year driven by an extended selling season as weather stayed warm well into the fourth quarter across most of the U.S. Like Engine Management, Temp Controls full year sales were more in line with last year ending the year up 1.3% at $282 million as the strong seasonal sales helped the segment finish slightly ahead of 2019. Looking now at gross margins, our consolidated gross margin in Q4 2020 was 33.3% versus 30.2% last year, up 3.1 points and for the full year it was 29.8% versus 29.2% last year, up 0.6 points. Looking at the segments, fourth quarter gross margin for Engine Management was 33%, up 2.4 points from Q4 last year. And for Temperature Control was 30%, an increase of 7.3 points from 22.7% from last year. Engine Management gross margin was up 0.5 points to 30.1% while Temp Control was up 1.5 points to 26.7%. Moving now to SG&A expenses, our consolidated SG&A expenses in Q4 were $61 million ending at 21.6% of sales versus 22.5% last year. For the full year, SG&A spending was $224.7 million, down $10 million at 19.9% of net sales versus 20.6% last year. Consolidated operating income before restructuring and integration expenses and other income net in Q4 2020 was $33.2 million or 11.7% of net sales, up 4 full points from Q4 2019 and for the full year it was 9.9% of sales, up 1.4 points from last year. As we note on our GAAP to non-GAAP reconciliation of operating income, our performance result in fourth quarter 2020 diluted earnings per share of $1.08 versus $0.59 last year and for the full year diluted earnings per share of $3.61 versus $3.10 last year. Turning now to the balance sheet, accounts receivable at the end of the quarter were $198 million, up $62.5 million from December 2019 with the increase over last year due both to higher sales in the fourth quarter and management of our supply chain factoring arrangements. Inventory levels finished the quarter at $345.5 million, down $22.7 million from December 2019 with the decrease from last year mainly reflecting the sharp recovery in sales we experienced in the second half of the year after having lower production levels earlier in the year. Our cash flow statement reflects cash generated from operations for the year of $97.9 million as compared to a generation of $76.9 million last year. The $21 million improvement was driven by an increase in our operating income as noted earlier but also by changes in working capital. During the year we continued to invest in our business and used $17.8 million of cash for capital expenditures which was more than the $16.2 million used in 2019. Financing activities included $11.2 million of dividends paid and $13.5 million paid for repurchases of our common stock. Financing activities also included $46.7 million of payments on our revolving credit facilities. We finished the year with total outstanding borrowings of $10 million and available capacity under our revolving credit facility of $237 million. To that end our Board of Directors has approved the quarterly dividend of $0.25 per share on common stock outstanding, which is payable on March 1. Further, our Board has also authorized an additional $20 million common stock repurchase plan. This new authorization is on top of the $6.5 million remaining under our existing plan and when added together will allow us to repurchase up to 26.5 million of additional shares. While gross margins will vary across the quarters we expect full year 2021 gross margins for Engine to be 29%-plus. For our Temp Control segment we continue to target gross margins of 26%-plus for the full year in 2021. Looking at our SG&A cost in 2021, we expect expenses to be in the range of $52 million to $56 million each quarter.

Looking first at the P&L, consolidated net sales in Q4 2020 were $282.7 million, up $41.5 million or 17.2% versus Q4 last year. As we note on our GAAP to non-GAAP reconciliation of operating income, our performance result in fourth quarter 2020 diluted earnings per share of $1.08 versus $0.59 last year and for the full year diluted earnings per share of $3.61 versus $3.10 last year.

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And we are now in a much stronger competitive position today than we were 18 months ago, and that trend continues. Our brands' deep connection with the consumer is driving strong holiday sales, most notably with North American Digital leading the industry over Black Friday week, with close to 40% growth. And our Singles Day performance showcased our brand strength in greater China as we added 13 million new members, and Nike was again the number one sport brand on TMall. Following the exciting end of the WNBA and MLB seasons, the energy around sport continues with the NBA, NFL, European soccer and upcoming college football bowl season, where 16 of the top 20 teams and three out of the four Playoff participants are Nike teams. And congratulations to Cristiano Ronaldo for reaching yet another remarkable milestone by becoming the first player in recorded history to score 800 career goals in official matches. This continues the progress made by our Cosmic Unity sustainable basketball shoe by reaching more than 50% total recycled content by weight. Megan's content drove record high engagement, drawing 2 times increase in daily active users in NTC, and her curated looks saw more than double the demand, compared to any other product content viewed during that same time period. As a result, the Nike Flagship store on TMall was the number one brand for new member recruitment across sport, driving a 20 point increase in member demand penetration this year. As a result, our consumer engagement is 3 times the industry average for livestreams. Nike's second quarter financial results were in line with the expectations we established 90 days ago, fueled by continued Brand momentum, the strength of our product franchises with extraordinary levels of full price realization, and strong season-to-date Holiday sales, offset by lower levels of available inventory supply relative to marketplace demand. As John mentioned, we had an incredible Black Friday week with Nike Direct in North America and EMEA increasing over 20% versus the prior year, on top of last year's meaningful gains. As of today, all factories are operational and employee attendance rates have improved, with weekly footwear and apparel production now at roughly 80% of pre-closure volumes. In total, Vietnam factory closures caused us to cancel production of roughly 130 million units due to three months of lost production volume and several months to ramp back to full production. Nike Digital grew 11% in the quarter, on a currency neutral basis, setting the pace for the industry. Nike Digital is now 25% of total NIKE Brand revenue, up 3 points versus the prior year and more than double the digital mix in fiscal '19. Member engagement grew 27% and repeat buyers grew 50% versus last year, driving overall higher AUR, AOV and member buying frequency. 40% of total digital demand this year is coming from our mobile apps, highlighting the strength of our digital platform. We now have over 79 million engaged members across our Nike ecosystem. Over the past four years, North America has reduced the number of wholesale accounts by roughly 50%, while delivering strong growth and recapturing consumer demand through Nike Direct and our strategic wholesale partners leading the way for Nike. In the second quarter, North America Digital grew 40% versus the prior year, pushing Nike Digital to 30% of total North America marketplace, bringing Nike Direct to 48% of total. On automation, we have added more than 1,000 robots in our distribution centers to handle the digital growth. In our digital distribution center in Memphis, robots handled more than 10 million units that would have otherwise required manual labor. NIKE, Inc. revenue grew 1% and was flat on a currency neutral basis, led by 8% growth in Nike Direct offset by a 6% decline in wholesale, due to optimization of available inventory supply. Nike Digital grew 11% and Nike-owned stores grew 4% with significant improvements in traffic and higher conversion rates. Gross Margin increased 280 basis points versus the prior year, driven primarily by higher Nike Direct margins due to lower markdowns, higher full price mix and foreign currency exchange rates, partially offset by increased freight and logistics costs. SG&A grew 15% versus the prior year primarily due to normalization of spend against brand campaigns, digital marketing investments to support heightened digital demand, strategic technology investments and wage related expenses. Our effective tax rate for the quarter was 10.9% compared to 14.1% for the same period last year. Second quarter diluted earnings per share was $0.83, up 6% versus the prior year. North America and EMEA finished the first quarter with high levels of in transit inventory, resulting in prior season supply that was arriving late due to longer transit times, which could be sold in the second quarter. However, Greater China and APLA, located closer to our sourcing base with shorter standard transit times, experienced a decline in units sold in the second quarter due to lost production and lower available inventory supply. In North America, Q2 revenue grew 12% and EBIT grew 21%. Nike Direct had an outstanding quarter, growing 30% versus the prior year. As I mentioned earlier, Digital maintained its momentum growing 40% and setting holiday records on Black Friday week. Despite strong retail sales momentum in the wholesale channel, revenue declined 1% as marketplace inventory levels remain lean, and Vietnam factory closures and longer transit times disrupt the flow of inventory supply to meet marketplace demand. In EMEA, Q2 revenue grew 6% on a currency neutral basis and EBIT grew 22% on a reported basis. Wholesale revenue grew 6% on a currency neutral basis as we comp prior year market closures. Nike Direct also grew 6% led by double digit growth in Nike-owned stores as we comp prior year store closures, with traffic improvement due to tourism picking up and back to school holidays. Nike Digital was down 1% as we compare to extraordinary levels of off price sales in the prior year, as the geography leveraged digital in the prior year to liquidate excess inventory. This quarter, our full price Digital business grew over 20%, resulting in a 30 point improvement in full prices sales mix, double-digit growth in AUR and improvement in markdown rates and promotions. In Greater China, Q2 revenue declined 24% on a currency neutral basis and EBIT declined 36% on a reported basis, however, season-to-date holiday retail sales across the total market have trended more favorably. We saw disproportionate impacts to our wholesale revenue, which declined 27% on a currency neutral basis. Nike Direct declined 21%, with declines in both digital and physical retail channels. Digital declined 27%, partially impacted by delay in product launch timing on Sneakers. Over the 11.11 consumer moment, we drove stronger digital performance with significant member acquisition and higher AOV through better engagement with consumers. To support this activity and normalize our marketing investment levels, we increased our investment in demand creation in the second quarter by more than 40% versus the prior year. Q2 revenue declined 6% on a currency neutral basis and EBIT declined 8% on a reported basis. Nike Direct grew 6%, led by Nike Digital growth of 25%. The Dia De Los Muertos footwear pack saw 100% sell through and this story was extended to the world through our new partnership with Roblox. Specifically for fiscal '22, we continue to expect Revenue to grow mid single-digits versus the prior year, in line with guidance from 90 days ago. We are raising our gross margin guidance to expand 150 basis points versus the prior year. We are also planning for supply chain cost for the full year to increase relative to our estimates 90 days ago, with a greater impact in the second half. Last, we now expect foreign exchange to be a 55 basis points tailwind versus prior year.

NIKE, Inc. revenue grew 1% and was flat on a currency neutral basis, led by 8% growth in Nike Direct offset by a 6% decline in wholesale, due to optimization of available inventory supply. Gross Margin increased 280 basis points versus the prior year, driven primarily by higher Nike Direct margins due to lower markdowns, higher full price mix and foreign currency exchange rates, partially offset by increased freight and logistics costs. Second quarter diluted earnings per share was $0.83, up 6% versus the prior year. North America and EMEA finished the first quarter with high levels of in transit inventory, resulting in prior season supply that was arriving late due to longer transit times, which could be sold in the second quarter. However, Greater China and APLA, located closer to our sourcing base with shorter standard transit times, experienced a decline in units sold in the second quarter due to lost production and lower available inventory supply. In North America, Q2 revenue grew 12% and EBIT grew 21%.

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These steps include plant accommodations and reconfigurations to maintain social distancing mask availability to all employees deep cleaning quarantining individuals with positive tests or potential exposure to the virus for 14 days and restricting access to facilities among others. The stability afforded by the replacement component in residential and commercial water heater and boiler demand which we estimate at 85% of the U.S. unit volume puts us in a position of strength as we navigate through this pandemic. We estimate replacement demand is 40% to 50% in China. While we are in a position of strength similar to 2008 and 2009 time frame we expect to see lower demand for the majority of our products and have been proactive in managing costs. A. O. Smith is in a solid financial position with positive cash flow and a strong balance sheet. We have reprioritized and reduced our capital spend plans for 2020 by approximately 20%. Through April we have completed $200 million of dividends out of China and we have repatriated $125 million to the U.S. As of April 30 2020 we had approximately $850 million in liquidity consisting of cash cash equivalents marketable securities and borrowing capacity on our credit facility which remains in place throughout 2020 and 2021 expiring in December 2021. We have achieved a 20% headcount reduction compared with December 2018 and we will continue to assess the need for additional workforce reduction. We are targeting 1000 net store closures this year in China along with further cuts in advertising and other costs. Total savings are expected to total $55 million an increase of $10 million from our estimate in January of which $30 million was achieved in 2019. Our leverage ratio is 17.5% gross debt to total capital at the end of March was significantly below the 60% maximum dictated by our credit and various long-term facilities. First quarter 2020 sales of $637 million declined 15% compared with the first quarter of 2019. The decline in sales was largely due to a 56% decline in China local currency sales driven by the COVID-19 pandemic. As a result of lower sales in China first quarter 2020 net earnings of $52 million and earnings per share of $0.32 declined significantly compared to the same period in 2019. Sales in our North America segment of $533 million increased 2% compared with the first quarter of 2019. Incremental sales of $16 million from the Water-Right acquisition purchased in April 2019 organic growth of 17% in North America water treatment products and higher water heater volumes drove sales higher. Rest of the World segment sales of $110 million declined 53% with the same quarter in 2019. China sales declined 56% in local currency related to weak consumer demand driven by the pandemic. On slide eight North America segment earnings of $127 million were 10% higher than segment earnings in the same quarter in 2019. As a result first quarter 2020 segment margin of 23.9% improved from 22.2% achieved in the same period last year. Rest of the World loss of $42 million declined significantly compared with 2019 first quarter segment earnings of $12 million. As a result of these factors the segment margin was negative with compared with 5.3% in the same quarter in 2019. Our corporate expenses of $15 million and interest expense of $2 million were essentially flat as last year. Our effective tax rate of 23.6% in the first quarter of 2020 was higher than the 20% tax rate in the first quarter of 2019 primarily due to geographical differences in pre-tax income. Cash provided by operations of $54 million during the first quarter of 2020 was higher than $22 million in the same period of 2019 as a result of lower investment in working capital including timing of certain volume incentive payments which was partially offset by lower earnings compared with the year ago period. We had cash balances totaling $552 million and our net cash position was $209 million at the end of March. During the first quarter of 2020 we repurchased approximately 1.4 million shares of common stock for a total of $57 million. Commercial average order rates in April were down 30% to 35%. 50% of our sales volume occurred before the Chinese New Year shutdown on January 24. And as a result we continue to suspend our 2020 full year guidance. We believe replacement demand for water heaters and boilers in the U.S. is approximately 85%. In 2006 through 2009 which captured the Great Recession peak to trough industry shipments of residential water heater volumes declined 18%. The decline was primarily driven by a $1.5 million decline in new homes constructed. At 1.3 million new homes in 2019 we do not anticipate the new home construction impact will be as great as the Great Recession. In North America we have previously experienced in weathering through difficult economic conditions most recently in the 2008 recession. However with the massive and abrupt impact to jobs and end markets like restaurants hotels and hospitals it is difficult to predict this current state of shelter-at-home and state-by-state closures will play out similarly to the 2008 recession. We estimate replacement demand represents approximately 85% of U.S. water heater and boiler volumes.

A. O. Smith is in a solid financial position with positive cash flow and a strong balance sheet. First quarter 2020 sales of $637 million declined 15% compared with the first quarter of 2019. As a result of lower sales in China first quarter 2020 net earnings of $52 million and earnings per share of $0.32 declined significantly compared to the same period in 2019. Our corporate expenses of $15 million and interest expense of $2 million were essentially flat as last year. And as a result we continue to suspend our 2020 full year guidance.

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On a seasonally adjusted basis, Q3 was 14% better than Q2, down 11% versus 25%. In addition, we saw sequential improvement within the quarter, as daily Mineral Fiber sales improved from down 15% in July to down 11% in September. Overall, sales of $247 million were down 11% a quarter versus prior year. Volume was down 10% and Mineral Fiber AUV was slightly negative. Adjusted EBITDA in the quarter of $92 million was down 19% from 2019. Despite the challenges in the market, our strong cash flow performance continues, and we remain on track to deliver over $200 million in adjusted free cash flow. Based on this continued strong cash flow generation and our confidence to continue to do so, our Board has approved a 5% increase in our regular quarterly dividend to $0.21 per share and we are restarting our share repurchase program. The previously discussed, acquisition of Chicago-based Turf Design, the leading provider of custom felt-based ceilings and walls and then on August 24, we acquired Moz Designs. Beginning on slide 4, for our overall third quarter results, sales of $246 million were down 11% versus prior year, a significant sequential improvement from the second quarter when year-over-year sales were down 25%. Adjusted EBITDA fell 19% and margins contracted 370 basis points, again a substantial sequential improvement from the second quarter when year-over-year EBITDA was down 36% and margins contracted 590 basis points. Adjusted diluted earnings per share of $1.07, fell 22% and adjusted free cash flow declined by $53 million versus the prior year. Our cash balance at quarter-end was $139 million, and coupled with $315 million of availability on our revolver, positions us with $454 million of available liquidity, down $33 million from last quarter as we completed the Turf and Moz acquisitions during this past quarter, and down $24 million from the third quarter of 2019. Net debt of $542 million is $4 million higher than last year as a result of our acquisitions, partially offset by cash earnings and the receipt of $19 million from the sale of our Qingpu plant in China, which was idled. As of the quarter-end, our net debt to EBITDA ratio was 1.5 times versus 1.6 times last year as calculated under the terms of our credit agreement. Our covenant threshold is 3.75 times, so we have considerable headroom in this measure. Since the inception of the repurchase program, we've bought back 9.6 million shares at a cost of $596 million for an average price of $62.13. We currently have $604 million remaining under our share repurchase program, which now expires in December of 2023. In the quarter, sales were down 14% versus prior year, but sequentially improved from the prior quarter when year-over-year sales declined 26%. Adjusted EBITDA was down $20 million or 21% as the volume decline fell through to the bottom line and AUV was a drag. Moving to Architectural Specialties segment on slide 6, sales were up 1% as the acquisitions of Turf and Moz contributed almost $8 million in the quarter and offset COVID-driven organic sales decline of 12% which were sequentially better than the 22% decline we experienced in the second quarter. Cash flow from operations was down $48 million, largely driven by volume due to COVID-19. Also in the quarter despite lower income in Q3 2020, we actually paid $14 million more in cash taxes than in the third quarter of 2019. In the quarter, we applied a $27 million tax refund related to the sale of our international operations. And we received $19 million from the sale of our closed Qingpu facility in China. We have received an additional $2 million from the sale in October and this transaction is now complete. As you can see sales were down 12%, adjusted EBITDA is down 18%, and adjusted free cash flow is down 16%. We now anticipate full year revenues in the range of $920 million to $935 million or down 10% to 11%. EBITDA will be in the range of $320 million to $330 million as the sales decline drops down and is partially offset by productivity and the impact of our cost containment actions. Actions are in place to drive $40 million to $45 million of savings in manufacturing and SG&A down slightly by $5 million from our previous outlook as we invest for future growth. 92% of architects and designers surveyed said they are having conversations with their clients on how to make their spaces healthier and safer. And it's a universally known fact that we spend 90% of our lives indoors. I'm very pleased to introduce a new family of products called 24/7 Defend. Our 24/7 Defend product family already includes infusion partitions and CleanAssure disinfectable products, which are proven cleanable products. When placed in our standard grid system, AirAssure gasketed ceiling panels form a tight seal and reduce air flow leakage into the plenum by 300% over standard ceiling panels. These new products are just the beginning of 24/7 Defend family as we have solutions in our innovation pipeline that we will add to this family in the coming quarters.

Adjusted diluted earnings per share of $1.07, fell 22% and adjusted free cash flow declined by $53 million versus the prior year. We now anticipate full year revenues in the range of $920 million to $935 million or down 10% to 11%. EBITDA will be in the range of $320 million to $330 million as the sales decline drops down and is partially offset by productivity and the impact of our cost containment actions.

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The daily arrival count have averaged about 30,000 per day since June, which is nearly at pre-pandemic level. Nearly 60% of our state population is fully vaccinated as of July 21, 2021. The state of Hawaii's unemployment rate declined to 7.7% in the month of June and is forecasted by the University of Hawaii Economic Research Organization to decline to 4.8% in 2022. The housing market in Hawaii remains hot with the median single-family home price at $979,000 in the month of June. As of June 30, we have just $3.5 million in loans remaining on deferral, the majority of which are residential mortgages. Additionally, our classified assets declined during the quarter to $42 million, and our nonperforming assets remain near historic lows at just nine basis points of assets. As part of this program, we selected our first cohort of 20 women entrepreneurs from seven different business sectors that will participate in a 10-week series of workshop on financial management, marketing, and leadership and receive free advertising and networking benefits. In the second quarter, our core loan portfolio decreased by $103 million or 2.3% sequential quarter, which was offset by PPP paydown of $163 million. Year-over-year, our core loan portfolio increased by 3.7%. Our residential mortgage production continues to be very strong, with total production in the second quarter of nearly $280 million and total net portfolio growth in residential mortgage and home equity of $48 million from the previous quarter. We ramped up 2021 new PPP originations during the second quarter with over 4,600 loans totaling more than $321 million. PPP forgiveness is also progressing well with 70% of the loans originated in 2020 already forgiven and paid down through June 30. On the deposit front, we saw a strong inflow of deposits with total core deposits increasing by $279 million or about 5% sequential quarter growth. On a year-over-year basis, total core deposits increased by $705 million or 13.8%. Net income for the second quarter was $18.7 million or $0.66 per diluted share. Return on average assets was 1.06% and return on average equity was 13.56%. Net interest income for the second quarter was $52.1 million, which increased from the prior quarter, primarily due to greater recognition of PPP fee income due to higher forgiveness. Net interest income included $7.9 million in PPP net interest income and net loan fees compared to $5.2 million in the prior quarter. At June 30, unearned net PPP fees was $15.9 million. Net interest margin decreased to 3.16% compared to 3.19% in the prior quarter. The net interest margin normalized for PPP was 2.93% compared to 3.12% in the previous quarter. Investment MBS premium amortization increased by $900,000 sequential quarter due to an acceleration of prepayments in the second quarter. To mitigate the prepayment risk going forward, we executed a sovereign coupon MBS bond swap totaling $175 million. Second quarter other operating income remained relatively flat at $10.5 million. Other operating expense for the second quarter was $41.4 million compared to $37.8 million in the prior quarter, with much of the increase in the salaries and benefits line. The current quarter increase in salaries and benefits was primarily due to $1.2 million in nonrecurring reductions in the prior quarter and $2.8 million in higher incentive compensation and commission accruals, strategic hires to drive forward performance, and annual merit increase. The efficiency ratio increased to 66.2% in the second quarter due to higher other operating expenses. Net charge-offs in the second quarter totaled $0.8 million, with the majority of charge-offs coming from the consumer loan portfolio. At June 30, our allowance for credit losses was $77.8 million or 1.68% of outstanding loans, excluding the PPP loans. In the second quarter, we recorded a $3.4 million credit to the provision for credit losses due to improvements in the economic forecast and our known portfolio. The effective tax rate was 23.9% in the second quarter and going forward, we expect the effective tax rate to be in the 24% to 26% range. Our capital position remains strong and as Paul noted earlier, we resumed share repurchases this quarter with repurchases of 156,600 shares at a total cost of $4.3 million. We've also repurchased an additional 78,000 shares of common stock month-to-date through July 20 at an average cost of $24.93. Finally, our Board of Directors declared a quarterly cash dividend of $0.24 per share, which was consistent with the prior quarter.

Net income for the second quarter was $18.7 million or $0.66 per diluted share. Net interest income for the second quarter was $52.1 million, which increased from the prior quarter, primarily due to greater recognition of PPP fee income due to higher forgiveness.

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Demand, while down from unprecedented levels in the second quarter of last year was up over prepandemic levels of Q2 2019 by 14%. PG&A sales were up 35% during the quarter. We grew sales 64% as the economies outside North America continued to improve in Q2. On a two-year basis, our retail is up 14%, reflecting continued growth in powersports, driven by strong underlying consumer demand. As expected, our second quarter North American retail sales were down 28% from the 57% increase reported in the second quarter of 2020. Our ORV business gained over 1 percentage point of market share in both ATVs and side-by-sides. Motorcycle retail sales also continued to grow, increasing 22% during the quarter. Dealer inventory levels ended the quarter down 57% on a year-over-year basis and were also down sequentially. Pre-pandemic presold orders accounted for roughly 3% of our retail. Exiting Q2, ORV presold orders were approximately 80% of retail. These audits have found less than 1% where the names changed at registration and where there were changes, the majority had valid reasons for the change. Lastly, we have analyzed shipping patterns to our dealers by tiers, volumes and regions and were all within 1% of pre-pandemic levels. As indicated in our last call, we are also adding capacity later this year and into 2022 that will bring on 30% more production capability between ORV boats and motorcycles. New customer growth in the first half of 2021, while down slightly from the robust rates in the first half of 2020 remains comfortably ahead on a comparable two-year pre-COVID basis with approximately 300,000 new customers coming into the Polaris family over the first half of 2021. The mix of new to existing customers has remained high at over 70% of the total customers for ORV, motorcycles, snowmobiles and boats. Second-quarter sales were up 40% on a GAAP and adjusted basis versus the prior year. Second-quarter earnings per share on a GAAP basis was $2.52. Adjusted earnings per share was $2.70, which was up 108% for the quarter, exceeding our expectations. Adjusted gross margins were up approximately 310 basis points year over year, primarily due to lower promotional and floor plan financing costs driven by low dealer inventory and strong demand, which requires minimal promotional dollars to drive retail. Adjusted operating expenses were up 33% in the quarter relative to Q2 2020, which was heavily impacted by short-term cost actions taken to offset COVID-19 shutdowns. ORV/Snowmobile segment sales were up 38%. Motorcycles were up 50%, Adjacent markets increased 98%, Aftermarket was up 15% and Boats increased 49% during the second quarter relative to Q2 2020, which was adversely impacted by COVID-19 closures. Average selling prices for all segments were up, ORV increased about 13%, Motorcycles were up approximately 8%, Adjacent markets increased 10% and Boats were up 14% for the quarter. Our International sales increased 64% during the quarter, with all regions and segments growing sales as the heavily pandemic impacted countries began to open their economies again. Currency added 15 percentage points to the International growth for the quarter. And lastly, our parts, garments and accessories sales increased 35% during the quarter, driven by increased demand across all segments and categories of that business. Moving on to our guidance for 2021. Given the stronger-than-anticipated performance in the second quarter, we are increasing our full-year adjusted earnings per share guidance for 2021 and now expect earnings to be in the range of $9.35 to $9.60 per diluted share. We are narrowing our total company sales growth guidance by holding the upper end of our sales guidance range at 21% and raising the lower end of the range to 19% given our sales growth performance to date. Adjusted gross profit margins are now expected to be down in the range of 40 to 70 basis points. Adjusted operating expenses are now expected to improve 90 to 120 basis points as a percentage of sales versus last year given the higher sales growth expectations. Our first half 2021 earnings per share finished at $4.99, a 228% increase over the first half of 2020. Given our full-year revised guidance, the second half earnings per share equates to a range of $4.36 to $4.61 per diluted share, a decrease of 26 to 30% on a year-over-year basis and an 8 to 13% decline on a sequential basis from the first half of 2021. On a two-year basis, our second half earnings per share results at the high end of the range are expected to be up over 30% compared to the second half of 2019. I would also add that the quarterly cadence for earnings per share in the second half of 2021 is more heavily weighted toward the fourth quarter with approximately 60% of our second half earnings per share occurring in Q4. Motorcycle sales are anticipated to be up low 30%, down slightly from prior guidance. Year-to-date second quarter operating cash flow finished at 196 million, down 37% compared to the same period last year, driven by an increase in factory inventory due to the supply chain inefficiencies. Our expected full-year cash flow performance remains unchanged at down mid-30% compared to last year. During the second quarter, we spent $111 million on share repurchases.

Second-quarter sales were up 40% on a GAAP and adjusted basis versus the prior year. Second-quarter earnings per share on a GAAP basis was $2.52. Adjusted earnings per share was $2.70, which was up 108% for the quarter, exceeding our expectations. Moving on to our guidance for 2021. Given the stronger-than-anticipated performance in the second quarter, we are increasing our full-year adjusted earnings per share guidance for 2021 and now expect earnings to be in the range of $9.35 to $9.60 per diluted share. We are narrowing our total company sales growth guidance by holding the upper end of our sales guidance range at 21% and raising the lower end of the range to 19% given our sales growth performance to date. On a two-year basis, our second half earnings per share results at the high end of the range are expected to be up over 30% compared to the second half of 2019.

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The storm highlighted the need for safe, reliable natural gas utilities and reliable generation capacity when our customers experienced temperatures as low as 27 degrees below zero, setting numerous all-time record lows across our communities. As an example, Lincoln, Nebraska reported 11 straight days of temperatures below zero in February with lows of the minus 20s. Given the unprecedented and unforeseeable market pricing for natural gas in February, we immediately supplemented our liquidity with additional short-term financing by securing an $800 million term loan on favorable terms. We also reaffirmed our 2022 earnings guidance and we remain confident in our long-term growth targets, including 5% to 7% earnings growth for 2023 through 2025 and at least 5% annual dividend growth. We plan on capital investments in more than $3 billion through 2025 and we expect to identify and develop incremental projects. We delivered earnings per share of $1.54 compared to $1.59 as adjusted in Q1 2020. The net storm impacts were $0.15 per share, which more than offset weather favorability and the benefit of new rates. We estimate weather benefited earnings by $0.07 per share compared to normal. For the quarter, heating degree days were 4% higher than normal at our electric utilities and 3% higher than normal at our gas utilities, attributable primarily to extreme cold in February, offsetting warmer than normal weather in January and March. Compared to Q1 2020, the weather impact was favorable by $0.11 per share, given a warmer than normal first quarter heating season last year. In the first quarter, we incurred approximately $571 million of incremental cost to serve our customers. This includes $559 million of deferred utility fuel costs we booked as a regulatory asset. In the first quarter, we booked storm-related net expenses of $12.55 million pre-tax or $0.15 per share after tax. The largest contributor was $8.2 million of non-recoverable incremental gas purchase costs at Black Hills Energy Services, which serves 52,000 of our regulated utility customers in Nebraska and Wyoming through the Choice Gas program. For our electric businesses, the impact to our wholesale power margin sharing of $3.2 million was partially offset by $1.7 million of power generation benefits. We also incurred $2.1 million of fuel costs that are outside of our regulatory cost recovery mechanisms, primarily in Montana, where we serve two industrial customers pursuant to contracts. In February, we immediately implemented strategies to mitigate the $0.15 earnings per share impact from Uri over the remainder of the year through cost management, ongoing wholesale power marketing opportunities and identified regulatory proceedings. We credited over $9 million of tax reform benefits, which lowered revenue and had an offsetting income tax benefit, resulting in minimal overall impact to first quarter results. At the end of April, we had approximately $530 million of available liquidity on our revolving credit facility. In February, we entered into an $800 million, nine-month term loan to bolster our liquidity in light of the increased fuel costs related to Storm Uri. We repaid $200 million of that term loan at quarter-end and are developing the appropriate refinancing strategy for the remaining $600 million as we finalized Storm Uri recovery mechanisms. New debt and deferred recovery of fuel cost temporarily increased our debt to total capitalization ratio to 62% at the end of March. We expect to issue $100 million to $120 million in 2021 and $60 million to $80 million in 2022 through our at-the-market equity offering program. In 2020, we proudly marked 50 consecutive years of annual dividend increases, one of the longest track records in our industry. Since 2016 we have increased our dividend at an average annual rate of 6.6%. Looking forward, we anticipate increasing our dividend by more than 5% annually through 2025 while maintaining our 50% to 60% payout target.

We also reaffirmed our 2022 earnings guidance and we remain confident in our long-term growth targets, including 5% to 7% earnings growth for 2023 through 2025 and at least 5% annual dividend growth. We plan on capital investments in more than $3 billion through 2025 and we expect to identify and develop incremental projects. We delivered earnings per share of $1.54 compared to $1.59 as adjusted in Q1 2020. For the quarter, heating degree days were 4% higher than normal at our electric utilities and 3% higher than normal at our gas utilities, attributable primarily to extreme cold in February, offsetting warmer than normal weather in January and March.

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I will also briefly touch on the 1/1 reinsurance renewal season. We produced strong liquidity throughout 2021, which provided flexibility and allowed us to return $3.7 billion to shareholders through share repurchases and dividends. We also repurchased $4 billion of debt, which reduced our debt leverage by 380 basis points to 24.6%. Notwithstanding these actions, we ended 2021 with $10.7 billion in parent liquidity. To give you a sense for the magnitude of what we needed to do, we reduced gross limits by over $1 trillion in our property, specialty, and casualty businesses. As a result of this strategy, since 2018 and through 2021, we've been able to grow net premiums written in commercial by over $3 billion, while ceding an additional $2 billion of reinsurance premium to further reduce volatility and protect the balance sheet. At the same time, we improved the combined ratio, excluding CATs by 1,000 basis points. Return on adjusted segment common equity was 14.2% for the full year. We're executing on multiple workstreams to operationally separate the business, and we closed on the sale of 9.9% equity stake and transferred $50 billion of assets under management to Blackstone. Additionally, we achieved significant milestones at AIG 200 and remain on track to deliver $1 billion in run-rate savings by the end of 2022 against the spend of $1.3 billion. In the fourth quarter, general insurance net premiums written increased 8% overall on an FX-adjusted basis, with another strong quarter of 13% growth in commercial, which was tempered somewhat by a slight contraction in Personal, with a 1% reduction in net premiums written. The growth in commercial lines was balanced with 11% in North America and 16% in international. Personal lines net premium growth contracted by 1% in the quarter due to a 5% reduction in international, driven by our repositioning of the Personal Property portfolio in Japan, offset by 17% growth in North America, which largely reflects less year-over-year ceded reinsurance. Looking at fourth quarter profitability, I'm very pleased with the accident year combined ratio ex CATs, which improved 310 basis points year over year to 89.8%, the first sub-90% quarterly result since the financial crisis. This improvement was driven by commercial, which achieved an accident year combined ratio ex CATs of 87.9%, a 380 basis point improvement year over year and the third consecutive quarter below 90%. Personal report 130 basis points of improvement in the accident year combined ratio ex CATs to 94.3%. Net premiums written grew 11% on an FX-adjusted basis, driven by global commercial growth of 16%. Growth in commercial was particularly strong in both North America at 18% and international at 13%. We had very strong retention in our in-force portfolio with North America improving by 300 basis points and international improving by 500 basis points for the full year. Gross new business in Global Commercial grew 27% year over year to over $4 billion, with 24% growth in international and 30% in North America. Overall, global commercial saw increases of 13%, and strong momentum continued in many lines. In global personal, we had some growth challenges in this segment, but accident and health performed very well, and overall, we had a solid year with net premiums written up 1% on an FX-adjusted basis. Turning to underwriting profitability for full year 2021. general insurance's accident year combined ratio ex CATs was 91%, an improvement of 310 basis points year over year. The full year saw 140 basis point improvement in the accident year loss ratio ex CATs and 170 basis point improvement in the expense ratio, split evenly between the GOE ratio and the acquisition ratio. These positive results were driven by our improved portfolio mix, net earned premium growth, achieving rate in excess of loss cost trends, continued expense discipline, and the benefits we are receiving from AIG 200. Global commercial achieved an impressive accident year combined ratio ex CATs of 89.1%, an improvement of 410 basis points year over year. The accident year combined ratio ex CAT for North America commercial and international commercial were 91% and 86.7%, which reflected improvements of 450 basis points and 340 basis points, respectively. In global personal, the accident year combined ratio ex CATs was 94.9%, an improvement of 120 basis points year over year, driven by improvement in the expense ratio. It's important to keep in mind that we placed over 35 treaties at 1/1, with over 65 discrete layers and over $12 billion of limit placed and we cede over $3 billion of premium in the market. For the North America per occurrence property CAT treaty, we lowered our attachment point to $250 million for all perils, which is a reduction from our core 2021 program that had staggered attachment points, depending on apparel, that range from $200 million to $500 million. And we maintained our per occurrence attachment points in international, which are $200 million for Japan and $100 million for the rest of the world. For our global shared limit aggregate cover, we were able to reduce our attachment point in every region across the world, most notably, $100 million reductions in the attachment point in North America. Our global shared limit, each and every deductible remain the same or reduced in every global region, most notably $25 million reductions in North America-named storms. On our proportional core North America placement, we maintained the same session amount while improving our ceding commission by 400 basis points, which represents an 800 basis point improvement over the last 24 months, reflecting our significantly improved underwriting and recognition from the reinsurance market. Lastly, we renewed our cyber structure at 1/1, with additional quota share seed increasing from 60% to 70% and the aggregate placement attaching at 85% versus a 90% loss ratio. It was the sixth warmest year on record since NOAH began tracking global temperatures in 1880. Hurricane Ida estimated at $36 billion of insured loss was the third largest hurricane on record. In North America, $17 billion of winter weather losses was the largest on record for this peril. And $13 billion of insured loss for European flooding was the costliest disaster on record for the continent. When analyzing the portfolio over the last five years, we've seen catastrophe levels that are 10 times the level the portfolio dealt with in the prior 10 years for losses in excess of $50 million. In addition, when you consider the increased exposure in most peak zones in the United States over the last few years, with significantly increased total insured values, in some cases, greater than 100%, more density, supply chain issues, reinsurance availability, and increased reinsurance costs, and all this with heightened complexity the pandemic has caused, along with the impact of demand surge post-CATs, not being tested, the business model simply needs to change. Adjusted pre-tax income in the fourth quarter and full year was $969 million and $3.9 billion, respectively. The full year growth of 11% was driven by strong alternative investment and fee income. Full year sales were strong with premiums and deposits increasing 15% year over year to $31.3 billion. Sales within our individual retirement segment grew 34% across our three product lines for the year. Assets under management were $323 billion, and assets under administration increased to $86 billion, benefiting both from strong sales activities and favorable economic conditions. We also made excellent progress with Blackstone in the fourth quarter, completing the initial $50 billion asset transfer, incorporating them into our asset-liability management process, finalizing the investment guidelines, and developing initial product offerings based on Blackstone's origination platform. In addition to closing Blackstone transactions, we also continue to make significant progress on operationally separating life retirement from AIG, both with respect to what can be done by the IPO and longer-term to transition service agreements. We are applying the same rigor and discipline to our separation workstreams as we have with our AIG 200 transformation program, but with a clear focus on speed to execution. We continue to work toward an IPO in the second quarter of this year, subject to regulatory approvals and market conditions. We continue to expect to retain a greater-than-50% interest immediately following the IPO and to continue to consolidate life retirement's financial statements at least until such time as we fall below the 50% ownership threshold. We expect that over time, this business will sustain a payout ratio to shareholders of 60% to 65% between dividends and share repurchases on a full calendar year basis. We also expect that post IPO, life and retirement will pay an annual dividend in the range of $400 million to $600 million, which equates to roughly a 2% to 3% yield on book value. Additionally, as part of the separation process, in the fourth quarter of 2021, life and retirement declared a dividend payable to AIG in the amount of $8.3 billion, which will be funded by life and retirement debt issuances and paid prior to the IPO. Post deconsolidation, we expect life retirement to maintain a leverage ratio in the high 20s, with AIG maintaining a leverage ratio in the low 20s. Regarding our current capital management plan for AIG, ending 2021 with $10.7 billion in parent liquidity provides us with a significant amount of flexibility. With respect to share buybacks, we have $3.9 billion remaining under our current authorization and expect to complete this amount in 2022, weighted more toward the first half of this year. We do not expect the life retirement IPO to impact AIG's dividend and expect to maintain our current annual dividend level at $1.28 per share. Diluted adjusted earnings per share were $1.58, representing 68% growth over the prior year. This material improvement in adjusted earnings per share was driven by an over 1,000 basis point reduction in the general insurance calendar quarter combined ratio; 9% growth in net earned premiums, led by global commercial with 13% net earned premium growth; and an improvement in the underlying accident year combined ratio ex CATs to 89.8%, as Peter mentioned, our first sub-90% quarterly results since before the financial crisis, which also represented a 310 basis point improvement from the prior-year quarter. Life and retirement delivered another quarter of solid returns and remained well-positioned, with a 13.7% return on adjusted segment common equity for the fourth quarter and 14.2% for the full year 2021. The strength of our operating earnings and capital actions in the quarter helped drive a near 10% adjusted annualized ROE and growth in adjusted tangible book value per share of nearly $7, which represents a sequential increase of 12% and a full year increase of 23%. We fulfilled our capital management commitments and finished the year with a GAAP leverage ratio of 24.6%, a reduction of 150 basis points in the quarter and 380 basis points over the course of the year, which is another milestone, as we stated, our goal was to be at or under 25% on this important metric. This improvement was driven by approximately $4 billion of debt and hybrid retirement, along with $2.6 billion of share repurchases, nearly $2.1 billion of which occurred in the second half of 2021, which was slightly above our guidance. Moving to general insurance. Catastrophe losses of $189 million were significantly lower this quarter, compared to $545 million in the prior-year quarter. Prior year development was $44 million favorable in the fourth quarter compared to unfavorable development of $45 million in the prior-year quarter. As usual, there was net favorable amortization from the ADC, which was $45 million this quarter. On a full year basis, net favorable development amounted to $201 million relative to $43 billion in net loss and loss adjustment expense reserves. In 2020, we released $76 million of net favorable development. Overall global commercial Insurance net premiums grew 13% on a reported and constant dollar basis for the quarter, and growth in North America commercial was 11%, driven by casualty, which increased 50%; Lexington, which increased 14%; and financial lines, which increased over 10%. In international commercial, growth was 16% on an FX-adjusted basis. And by line of business, global specialty, which is booked in international, grew over 25%. Talbot had 20% growth, and property grew by 13%. Commercial retention improved by 300 basis points year-over-year in North America to 80% and by 400 basis points in international to 86% in the period. Commercial new business grew by 33% in the fourth quarter with 41% growth in North America and 25% growth in international. Turning to rate, where overall global commercial Lines saw increases of 10% in the quarter, we achieved the third straight year of double-digit increases. North America commercial's overall 11% rate increases were balanced across the portfolio and led by financial Lines, which increased by 15%; excess casualty, which increased by 14%; retail property, which was up 13%; and Lexington, which increased by 11%. International commercial rate increases in the aggregate were 9%, driven by EMEA, which increased by 18%; the U.K., which increased by 12%; financial lines, which increased 18%; and energy, which was up 11%, which is also its 11th consecutive quarter of double-digit rate increases. General insurance produced a 95.8% combined ratio for 2021, an improvement of 850 basis points over 2020 and nearly 1,600 basis points better from 2018's 111.4% calendar year combined ratio. Peeling back a bit more, the combined CAT and prior period development improvement has been 720 basis points since 2018, indicating both a material CAT exposure reduction, in line with the movement we have shown in our PMLs, and a much stronger loss reserve position than three years ago. With the level of rate that we have achieved in just the last 12 months, we expect that margin expansion will continue at least through 2022 and likely into accident year 2023. In North America commercial, for example, excess casualty business that focuses on our national and corporate accounts has achieved an approximate earned rate increase approaching 40% in 2021 over 2020's earned rate level, as has cyber. International financial Lines achieved a 23% earned rate increase over 2020's earned rate level. The international property book achieved an 18% earned rate increase, and the energy book achieved earned rate increases in the mid-20s. North America commercial across all lines of business had a 47% cumulative written rate increase, and international commercial's cumulative written rate increase during that same time period was 40%. Premiums and deposits grew 19% in the fourth quarter, excluding retail mutual funds, relative to the comparable quarter last year. Growth was driven by individual retirement and $2.1 billion of pension risk transfer activity. APTI for the quarter was $969 million, down 6%, driven primarily by lower net investment income and unfavorable COVID-19 base mortality, although non-COVID-19 mortality returned to being better than pricing expectations. On a full year basis, APTI increased to $3.9 billion, reflecting higher net investment income and fee income, partially offset by adverse mortality. Composite base spreads across individual and group retirement, along with institutional markets, compressed 12 basis points during 2021 within the sensitivity guidance we've previously provided. Within individual retirement, Index Annuities continued to be the net flows growth engine with $880 million of positive net flows for the quarter and $4.1 billion of the full year. APTI was essentially flat for full year 2021 over full year 2020, but premiums and deposits were up 34% and AUM was up 2% year over year to $159 billion. Group retirement had APTI of $314 million for the fourth quarter, virtually flat with last year's comparable quarter, but was up 27% on a full year basis, with premium and deposits up roughly 4% and assets under administration up over 7.5% on a full year basis to $140 billion. Life insurance APTI was a negative $8 million in the fourth quarter, but had a gain of $106 million for the full year. Premiums and deposits grew 4% from fourth quarter of 2020 and over 5% for the full year to $4.7 billion. Additionally, total insurance in-force grew to $1.2 trillion, representing over 3% growth. Institutional markets grew premiums and deposits by 74% relative to last year's comparable quarter, primarily due to the significant pension risk transfer sales. The adjusted pre-tax loss before consolidation and eliminations was $178 million, a $250 million improvement versus the prior-year quarter, with the primary drivers being higher net investment income of $237 million; a lower corporate interest expense on financial debt of $51 million, resulting from our debt redemption activities; partially offset by higher corporate GOE of $12 million, which include increases in performance-based compensation. Heading to Peter's comment about AIG 200, $810 million of run-rate savings are already executed or contracted toward the $1 billion run rate savings objective, with approximately $540 million recognized to date in our income statement and $645 million of the $1.3 billion cost to achieve having been spent to date. Total cash and investments were $361 billion, and fourth quarter net investment income on an APTI basis was $3.3 billion, which was essentially the same both sequentially and year over year and was aided by higher alternative investment income, particularly within private equity. NII for the full year of $12.9 billion was up over $600 million from 2020. Private equity returns were nearly 32% for the full year, up from approximately 10% last year. Hedge funds returned approximately 14% each year, and mortgage loan returns were stable at 4.2%. We ended the year with our primary operating subsidiaries being profitable and well capitalized, with general insurance's U.S. pool fleet risk-based capital ratio for the fourth quarter estimated to be between 460% and 470%. And the life and retirement [Inaudible] is estimated to be between 440% and 450%, both well above the upper bound of our target operating ranges. With respect to share count, our average total diluted shares outstanding in the fourth quarter were 847 million, a reduction of 2%, as we repurchased approximately 17 million shares in the quarter. The end-of-period outstanding shares for book value per share purposes was approximately 819 million at year-end 2021. As this continues to be a work in progress for us and the industry at large, I'd like to provide a range toward the transitional balance impact at January 1, 2021, as being between $1 billion and $3 billion decrease to shareholders' equity, with our current point estimate being toward the lower end of this range. Once again, life and retirement's breadth of product offerings provides value as the LDTI impact of old traditional products covered by FAS 60 involving mortality are roughly offset by the elimination of historical AOCI adjustment associated with certain longevity products. When you also factor in our global platform, our marketplace actions and impact, the strength of our loss reserves, a robust reinsurance program, and massive portfolio reconstruction AIG is exceedingly well-positioned as we look to the separation of L&R, completing AIG 200, maintaining our path toward increasing profitable growth and for whatever else the future holds.

We're executing on multiple workstreams to operationally separate the business, and we closed on the sale of 9.9% equity stake and transferred $50 billion of assets under management to Blackstone. Turning to underwriting profitability for full year 2021. When analyzing the portfolio over the last five years, we've seen catastrophe levels that are 10 times the level the portfolio dealt with in the prior 10 years for losses in excess of $50 million. Adjusted pre-tax income in the fourth quarter and full year was $969 million and $3.9 billion, respectively. We also made excellent progress with Blackstone in the fourth quarter, completing the initial $50 billion asset transfer, incorporating them into our asset-liability management process, finalizing the investment guidelines, and developing initial product offerings based on Blackstone's origination platform. In addition to closing Blackstone transactions, we also continue to make significant progress on operationally separating life retirement from AIG, both with respect to what can be done by the IPO and longer-term to transition service agreements. We continue to work toward an IPO in the second quarter of this year, subject to regulatory approvals and market conditions. We continue to expect to retain a greater-than-50% interest immediately following the IPO and to continue to consolidate life retirement's financial statements at least until such time as we fall below the 50% ownership threshold. We expect that over time, this business will sustain a payout ratio to shareholders of 60% to 65% between dividends and share repurchases on a full calendar year basis. We also expect that post IPO, life and retirement will pay an annual dividend in the range of $400 million to $600 million, which equates to roughly a 2% to 3% yield on book value. Additionally, as part of the separation process, in the fourth quarter of 2021, life and retirement declared a dividend payable to AIG in the amount of $8.3 billion, which will be funded by life and retirement debt issuances and paid prior to the IPO. Post deconsolidation, we expect life retirement to maintain a leverage ratio in the high 20s, with AIG maintaining a leverage ratio in the low 20s. With respect to share buybacks, we have $3.9 billion remaining under our current authorization and expect to complete this amount in 2022, weighted more toward the first half of this year. We do not expect the life retirement IPO to impact AIG's dividend and expect to maintain our current annual dividend level at $1.28 per share. Diluted adjusted earnings per share were $1.58, representing 68% growth over the prior year. The strength of our operating earnings and capital actions in the quarter helped drive a near 10% adjusted annualized ROE and growth in adjusted tangible book value per share of nearly $7, which represents a sequential increase of 12% and a full year increase of 23%. Moving to general insurance. Catastrophe losses of $189 million were significantly lower this quarter, compared to $545 million in the prior-year quarter. Overall global commercial Insurance net premiums grew 13% on a reported and constant dollar basis for the quarter, and growth in North America commercial was 11%, driven by casualty, which increased 50%; Lexington, which increased 14%; and financial lines, which increased over 10%. On a full year basis, APTI increased to $3.9 billion, reflecting higher net investment income and fee income, partially offset by adverse mortality. Premiums and deposits grew 4% from fourth quarter of 2020 and over 5% for the full year to $4.7 billion.

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In fact, 90% of the top brands at Nordstrom are also sold at the Rack. Rack's top 50 brands represented approximately 50% of sales in 2019. Year to date, these brands represented only 42% of sales, highlighting the outsized gap in merchandise availability. Second, our mix has skewed too far to lower prices at the Rack, with AURs declining 4% versus 2019. In response to macro-related supply chain challenges, we have identified various ways to improve our internal network and processes by diversifying our carrier capacity, gaining better end-to-end visibility of inventory as it moves through our supply chain, increasing velocity and throughput in our distribution and fulfillment centers, and better positioning our inventory to get it closer to the customer. Nordstrom banner sales returned to 2019 levels in the third quarter. In the southern portion of the U.S. where 44% of our stores are located, Nordstrom comparable store sales grew 8% over the third quarter of 2019. As a result, our suburban Nordstrom locations outperformed our urban locations by 1,300 basis points in the third quarter. In our top 20 markets where our market strategy continues to gain traction, order pickup accounted for 12% of digital demand, versus 4% in other markets. Since we launched order pickup at the Rack last year, we have seen 70% growth in the program. For example, the average customer that shops across both banners, in-store and online, spends over 12 times more than a customer utilizing a single channel. This quarter, digital sales increased 20% over the third quarter of 2019. Digital sales represented 40% of our business in Q3, and we continued to drive growth over 2019 while store traffic improved sequentially. Notably, the gross margins of our private label brands are, on average, 500 basis points higher than our third-party brand product. This quarter, we continued to see strength in pandemic-related categories, particularly home and active, where our sales increased 95% and 57% respectively compared to 2019 levels. Q3 loyalty sales grew 5% versus 2019, and loyalty penetration increased 2 percentage points to 65% of sales. As we evolve our merchandising approach, our alternative partnership models have gained approximately 3 percentage points of total sales share since 2019 to nearly 8% today. With Fanatics, we'll scale to 90,000 new customer choices on nordstrom.com, an increase of over 20% in our total choice count without a corresponding increase in owned inventory or labor. Overall, net sales decreased 1% in the quarter compared to the same period in fiscal 2019. The timing shift of the anniversary sale, with roughly one week falling into the third quarter of 2021, positively impacted third quarter sales by approximately 200 basis points. Nordstrom Rack sales declined 8% as inventory procurement and flow challenges negatively impacted performance. For the third quarter, digital sales increased 20% over 2019 and 16% after adjusting for the timing of the anniversary sale, reaching $1.4 billion. Gross profit as a percentage of net sales increased 80 basis points compared with the same period in fiscal 2019, primarily due to leverage in buying and occupancy costs and higher merchandise margins. Ending inventory increased 13% compared with the same period in fiscal 2019. Looking ahead, we anticipate elevated inventory levels through the end of the fiscal year as we position product to meet customer demand and invest in pack-and-hold inventory for the Rack. Total SG&A as a percentage of net sales increased 260 basis points compared to the same period in fiscal 2019 as a result of continued macro-related fulfillment and labor cost pressures, partially offset by continued benefit from resetting the cost structure in 2020. We expect revenue growth of more than 35% versus fiscal 2020, and we are still projecting slight sequential top-line improvement from Q3 to Q4. We expect to deliver EBIT margin of approximately 3% to 3.5% for the full year. We're planning capital expenditures at normalized levels of 3% to 4%, with an emphasis on supporting supply chain and technology capabilities. We made progress toward our goals, with strong digital growth and improving trends in our Nordstrom banner stores, and remain on track to deliver our fiscal 2021 targets and the commitments we set forth at our investor event, delivering EBIT margins greater than 6% and annual operating cash flow greater than $1 billion.

In response to macro-related supply chain challenges, we have identified various ways to improve our internal network and processes by diversifying our carrier capacity, gaining better end-to-end visibility of inventory as it moves through our supply chain, increasing velocity and throughput in our distribution and fulfillment centers, and better positioning our inventory to get it closer to the customer. Nordstrom banner sales returned to 2019 levels in the third quarter. In our top 20 markets where our market strategy continues to gain traction, order pickup accounted for 12% of digital demand, versus 4% in other markets. For example, the average customer that shops across both banners, in-store and online, spends over 12 times more than a customer utilizing a single channel. This quarter, we continued to see strength in pandemic-related categories, particularly home and active, where our sales increased 95% and 57% respectively compared to 2019 levels. Looking ahead, we anticipate elevated inventory levels through the end of the fiscal year as we position product to meet customer demand and invest in pack-and-hold inventory for the Rack. We expect revenue growth of more than 35% versus fiscal 2020, and we are still projecting slight sequential top-line improvement from Q3 to Q4. We made progress toward our goals, with strong digital growth and improving trends in our Nordstrom banner stores, and remain on track to deliver our fiscal 2021 targets and the commitments we set forth at our investor event, delivering EBIT margins greater than 6% and annual operating cash flow greater than $1 billion.

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Reported sales growth was 13.9% and adjusted earnings per share was $0.70. Organic sales grew 9.9%, driven by higher consumption. In Q3, our online sales increased by 77% as all retailer.coms have grown. In 2019, 8% of our full year sales were online. This year, we expect full year to be about 14% online. Recall, we began the year targeting 9% online sales as a percentage of global consumer sales. In Q1, it was 10% online; Q2, 13%; and Q3, also 13%. So we expect the full year to be actually close to 13% as well. If we look at year-to-date shipment and consumption patterns, our brands remain generally in balance in the 15 categories in which we compete. In Household, our laundry business consumption was up 4% and ARM & HAMMER cat litter was up 8%. BATISTE dry shampoo remains impacted by social distancing, with consumption down 10%, but improved sequentially compared to Q2 when consumption was down 22%. TROJAN consumption was down 6% in Q3, but also improved sequentially when we were down 15% in Q2. VITAFUSION and L'IL CRITTERS gummy vitamins saw the greatest consumption growth of any of our categories in Q3, up 49%. At a recent investor conference, you may have heard me cite consumer research that suggests it takes 66 days to form a new habit. After three consecutive quarters of growth, our Specialty Products business contracted 3.4% in Q3, primarily due to the poultry segment. We've launched ARM & HAMMER CLEAN & SIMPLE, which has only six ingredients plus water compared to 15 to 30 ingredients for typical liquid detergents. And in the second half, we launched ARM & HAMMER ABSORBx clumping cat litter, a new litter, which is 55% lighter than our regular litter. We now expect full year adjusted earnings per share growth of 13% to 14%, which is far above our evergreen target of 8% annual earnings per share growth. Given our strong performance, we have raised our full year outlook for sales growth to be approximately 11% and organic sales growth to be approximately 9%. Third quarter adjusted EPS, which excludes an acquisition-related earnout adjustment, grew 6.1% to $0.70 compared to $0.66 in 2019. Reported revenue was up 13.9%, reflecting a continued increase in consumer demand for our products. Organic sales was up 9.9%, driven by a volume increase of 10.2%, partially offset by 0.3% of unfavorable product mix and pricing, primarily driven by new product support. Organic sales increased by 10.7%, largely due to higher volume. This quarter, tracked consumption was 7.7% for our brands compared to an organic sales increase of 10.7%. We had 400 basis points of help from strong growth in untracked channels, primarily online, and 100 basis point drag from couponing to support new products. Consumer International delivered 11.6% organic growth due to higher volume, offset by lower price and product mix. For our SPD business, organic sales decreased 3.4% due to lower volume, offset by higher pricing. Our third quarter gross margin was 45.5%, 110 basis point decrease from a year ago. Gross margin was impacted by 110 basis point drag from tariffs and a 90 basis point impact from acquisition accounting. In addition, to round out the Q3 gross margin bridge is a plus 100 basis points from price/volume mix; plus 160 basis points from productivity programs, offset by a drag of 80 basis points of higher manufacturing costs, inflation and higher distribution costs; as well as a drag of 90 basis points for COVID costs. Marketing was up $45.7 million year-over-year as we invested behind our brands. Marketing expense as a percentage of net sales increased 230 basis points to 13.8%. For SG&A, Q3 adjusted SG&A decreased 30 basis points year-over-year, primarily due to leverage from strong sales growth. Other expense all in was $12.3 million and $3.9 million decline due to lower interest expense from lower interest rates. And for income tax, our effective rate for the quarter was 17.3% compared to 21.6% in 2019, a decrease of 430 basis points, primarily driven by higher tax benefits related to stock option exercises. For the first nine months of 2020, cash from operating activities increased 29% to $798 million due to significantly higher cash earnings and an improvement in working capital. As of September 30, cash on hand was $549 million. Our full year capex plan continues to be approximately $100 million as we begin to expand manufacturing and distribution capacity, primarily focused on laundry, litter and vitamins. As I mentioned back at the Barclays conference in September, we do expect a step-up in capex over the next couple of years to approximately 3.5% of sales for these capacity-related investments. For Q4, we expect reported sales growth of approximately 9%, organic sales growth of approximately 8%. We previously called 150 basis point contraction in the second half. Now we're saying down 190 basis points. As a result, we expect Q4 adjusted earnings per share to be $0.50 to $0.52 per share, excluding the acquisition earnout adjustment as we exit 2020 with momentum. And now for the full year outlook, we now expect approximately 11% for the year 2020 sales growth, which is above our previously 9% to 10% range. We're also raising our full year organic sales growth to approximately 9%, up from our previous 7% to 8% outlook. We raised our cash from operations outlook to $975 million, which is up 13% versus year ago. We expect gross margin to be down 20 basis points for the year, primarily due to the impact of acquisition accounting, COVID costs, incremental manufacturing and distribution capacity investments and the higher tariffs on WATERPIK. Previously, I have said the first half of the year was plus 150 basis points on gross margin and the second half was down 150 basis points on gross margin. Now we're calling down 190 basis points for the back half or down 20 basis points for the year, and that implies down 250 basis points for the quarter. So our full year tax rate expectations are 19%, and we also raised our adjusted earnings per share growth to 13% to 14%. As you saw in the release, we had an earnout benefit of approximately $50 million in the quarter in reported earnings. As a backdrop, we bought that business for $475 million upfront and a $425 million earnout tied to year-end 2021 sales. That sales target represented in excess of 15% CAGR for three years off of a baseline of $180 million of trailing sales. The revised 3-year CAGR for this business is closer to 8%.

Reported sales growth was 13.9% and adjusted earnings per share was $0.70. Recall, we began the year targeting 9% online sales as a percentage of global consumer sales. We now expect full year adjusted earnings per share growth of 13% to 14%, which is far above our evergreen target of 8% annual earnings per share growth. Given our strong performance, we have raised our full year outlook for sales growth to be approximately 11% and organic sales growth to be approximately 9%. Third quarter adjusted EPS, which excludes an acquisition-related earnout adjustment, grew 6.1% to $0.70 compared to $0.66 in 2019. For Q4, we expect reported sales growth of approximately 9%, organic sales growth of approximately 8%. And now for the full year outlook, we now expect approximately 11% for the year 2020 sales growth, which is above our previously 9% to 10% range. We're also raising our full year organic sales growth to approximately 9%, up from our previous 7% to 8% outlook. We raised our cash from operations outlook to $975 million, which is up 13% versus year ago. So our full year tax rate expectations are 19%, and we also raised our adjusted earnings per share growth to 13% to 14%.

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We earned an adjusted $1.44 per diluted share for the second quarter. Adjusted operating income margins for the second quarter were a strong 5.47% [Phonetic]. Operating cash flow is excellent at $276 million on a year-to-date basis. We accomplished this in an environment where we had 15.5% negative organic revenue growth for the quarter just ended. Our Mechanical Construction segment performance was exceptional with operating income growth of 24% and 8.5% operating income margins. Our Electrical Construction segment had strong operating income margins of 7.2%, despite having a 20.17% [Phonetic] decrease in revenues as they were more significantly impacted by the mandated shutdowns than our Mechanical Construction segment was, and further the Electrical Construction segment is more exposed to the volatility caused by our oil and gas exposure in this segment. Our US Building Services segment had a very strong quarter with 5.6% operating income margins, despite a 9.8% revenue decrease. We cut executive pay 25% in the quarter, cut other salary employees pay in the quarter, furloughed staff, permanently laid off salary staff, cut almost all travel and entertainment expenses, and reduced any additional discretionary expenses. We reduced $21 million in the quarter versus the year-ago period, and when removing incremental SG&A for businesses acquired, we cut $28 million on an organic basis. With all that said, we leave the quarter with a strong RPO position of $4.6 billion [Phonetic], our balance sheet has strengthened through the quarter despite adverse conditions and an even more competitive cost structure than we already had. Consolidated revenues of $2 billion, were down $310.2 million or 13.3% over quarter two 2019. Our second quarter results include $50.2 million of revenues attributable to businesses acquired, pertaining to the time that such businesses were not owned by EMCOR in last year's second quarter. Excluding the impact of businesses acquired, second quarter consolidated revenues decreased approximately $360.4 million or 15.5%. United States Electrical Construction segment revenues of $445.9 million, decreased $123.5 million or 21.7% from 2019 second quarter. United States Mechanical Construction segment revenues of $790.4 million, decreased $32.7 million or 4% from quarter two 2019. Excluding acquisition revenues of $47.9 million, this segment's revenues decreased organically 9.8% quarter-over-quarter. Second quarter revenues from EMCOR's combined United States Construction business of $1.24 billion, decreased $156.2 million or 11.2%. United States Building Services quarterly revenues of $472.4 million, decreased $51.3 million or 9.8%. Excluding acquisition revenues of $2.3 million, this segment's revenues decreased 10.2% from the record results achieved in the second quarter of 2019. As a result, our Industrial Services segment's second quarter revenues declined $212.2 million from the $295.5 million reported in 2019 second quarter. This represents a reduction of $83.3 million or 28.2%. United Kingdom Building Services revenues of $93.1 million, decreased $19.4 million or 17.3% from last year's quarter. This segment's quarterly revenues were also negatively impacted by $3.4 million of foreign exchange headwinds. Selling, general and administrative expenses of $205.2 million, represent 10.2% of revenues and reflect a decrease of $21.1 million from quarter two 2019. SG&A for the second quarter includes approximately $7.2 million of incremental expenses from businesses acquired inclusive of intangible asset amortization, resulting in an organic quarter-over-quarter decrease of approximately $28.3 million. During the second quarter, we identified certain indicators of impairment within those of our businesses that are highly dependent on the strength of the oil and gas and related industrial markets. The combination of lower forecasted revenue and profitability along with the higher weighted average cost of capital has resulted in the recognition of $232.8 million non-cash impairment charge during the quarter. $225.5 million of this charge pertains to a write-off of goodwill associated with our Industrial Services reporting unit, while the remaining $7.3 million relate to the diminution in value of certain trade names and fixed assets within our United States Industrial Services and our United States Electrical Construction segments. As a result of the non-cash impairment charge just referenced, we are reporting an operating loss for the second quarter of 2020 of $122.6 million, which represents a decrease in absolute dollars of $242.6 million when compared to operating income of $120 million reported in the comparable 2019 period. On an adjusted basis, excluding the impact of the non-cash impairment loss, our second quarter operating income would have been $110.1 million, which represents a period-over-period decrease of $9.8 million or 8.2%. For the second quarter of 2020, our non-GAAP operating margin was 5.5% compared to our reported operating margin of 5.2% in the second quarter of 2019, reflecting strong operating conversion within most of our reportable segments. Our US Electrical Construction Services segment operating income of $32.2 million, decreased $11.6 million from the comparable 2019 period. Reported operating margin of 7.2%, represents a 50 basis point decline over last year's second quarter. Second quarter operating income of our US Mechanical Construction Services segment of $66.9 million, represents a $13 million increase from last year's quarter. Operating margin of 8.5%, improved 190 basis points over the 6.6% operating margin generated in 2019, primarily due to a more favorable revenue mix than in the year-ago quarter. Our total US Construction business is reporting $99.1 million of operating income and an 8% operating margin. This performance has improved by $1.4 million and 100 basis points of operating margin from 2019 second quarter. Operating income for US Building Services is $26.4 million or 5.6% of revenues. And although reduced by $1.6 million from last year's second quarter, represents a 30 basis point improvement in operating margin. Our US Industrial Services segment operating income of $3 million, represents a decrease of $13.1 million from last year's second quarter operating income of $16 million. Operating margin of this segment for the three months ended June 30, 2020 was 1.4% compared to 5.4% for the three months ended June 30, 2019. UK Building Services operating income of $5.4 million was essentially flat with 2019 second quarter, as foreign exchange headwinds accounted for the modest period-over-period decline. Operating margin of 5.7%, represents an 80 basis point increase over last year as a result of improved maintenance contract performance as well as the implementation of cost containment measures which resulted in SG&A expense reductions. Quarter two gross profit of $315.3 million is reduced from 2019 second quarter by $31.1 million or 9%. Despite this reduction in gross profit dollars, we did experience an improvement in gross profit as a percentage of revenues with the reported gross margin of 15.7%, which is 80 basis points higher than last year's quarter. We are reporting a loss per diluted share of $1.52 as compared to earnings per diluted share in last year's second quarter of $1.49. On an adjusted basis, after adding back the impairment loss on goodwill, identifiable intangible assets, and other long-lived assets, non-GAAP diluted earnings per share is $1.44 as compared to the same reported at $1.49 in last year's quarter. This represents a modest reduction of $0.05 or just over 3%. Revenues of $4.31 billion, represent a decrease of $169.1 million or 3.8% when compared to revenues of $4.48 billion in the corresponding prior-year period. Year-to-date gross profit of $648.3 million is lower than the 2019 six-month period by $6.8 million or a modest 1%. Year-to-date gross margin is 15%, which favorably compares to 2019's year-to-date gross margin of 14.6%. Selling, general and administrative expenses of $432.2 million for the 2020 six-month period, represent 10% of revenues compared to $432.4 million or 9.6% of revenues in 2019. We reported a loss per diluted share of $0.14 for the six-month ended June 30, 2020, which compares to diluted earnings per share of $2.77 in the corresponding 2019 period. Adjusting the results for the current year to exclude the non-cash impairment loss on goodwill, identifiable intangible assets, and other long-lived assets, results in a non-GAAP diluted earnings per share of $2.78. When comparing this as adjusted number to last year's reported amount of $2.77, we are reporting a $0.01 increase. I would like to remind everyone on the call that our performance for the first six months of 2019 set records for most financial metrics with earnings per share in particular, exceeding the prior benchmark by almost 30%, not to marginalize the sizable impairment charge taken this year, but the fact that on an adjusted basis, we were able to slightly exceed our previous year record. As noted on the slide, EMCOR's tax rate for the six months ended June 30, 2020 was 59.4%. So with that said, at this time, our full-year estimated tax rate is between 58% and 59%. With strong operating cash flow through June, we have paid down the $200 million revolving credit borrowings outstanding as of March 31, 2020 and our cash on hand has increased to $481.4 million from the approximately $359 million on our year-end 2019 balance sheet. Goodwill and identifiable intangible assets have decreased since December 31, 2019, largely as a result of the impairment charges previously referenced, in addition intangible assets have decreased as a result of $29.4 million of amortization during the year-to-date period. EMCOR's debt to capitalization ratio of 13.5%, is essentially flat when compared to our position at 2019's year-end and is reduced from 19.9% at March 31, 2020. We have just over $1.2 billion of availability under our revolving credit line and anticipate that we will continue to generate positive operating cash flow during the last six months of calendar 2020. Total RPOs at the end of the second quarter were just about $4.6 billion, up $365 million or 8.6% when compared to the June 2019 level of $4.23 billion. RPO has also increased $167 million from the first quarter of 2020, reflective of the continued demand as we are seeing for market -- continued demand we are seeing for our services in our markets. So for the first six months of 2020, total RPOs increased $555 million or 13.8% from December 31. With all this growth, only $11 million relates to a tuck-in acquisition. Domestic RPOs have increased $346 million or 8.4% since the year-ago period, driven mainly by our Mechanical Construction segment. Additionally, both of our Industrial Services and EMCOR UK segments increased RPO level by roughly 15% respectively from June 30, 2019. On the right side of the page, we have, on 12, we show RPOs by market sector. Commercial project RPOs comprise our largest sector -- market sector to over 40% of the total. This is a 19% increase from year-end, spurred by our data center projects. Other very active markets for us are healthcare, and water and wastewater, with these sectors being up 25% and 49% respectively from year-end 2019. So now I'm going to close on Pages 13 to 14. Subject to that main caveat, we are likely going to earn $5 to $5.50 diluted earnings per share this year on an adjusted basis adding back the impact of impairment. I think revenues will likely be $8.6 billion to $8.7 billion.

We earned an adjusted $1.44 per diluted share for the second quarter. During the second quarter, we identified certain indicators of impairment within those of our businesses that are highly dependent on the strength of the oil and gas and related industrial markets. We are reporting a loss per diluted share of $1.52 as compared to earnings per diluted share in last year's second quarter of $1.49. On an adjusted basis, after adding back the impairment loss on goodwill, identifiable intangible assets, and other long-lived assets, non-GAAP diluted earnings per share is $1.44 as compared to the same reported at $1.49 in last year's quarter. Subject to that main caveat, we are likely going to earn $5 to $5.50 diluted earnings per share this year on an adjusted basis adding back the impact of impairment. I think revenues will likely be $8.6 billion to $8.7 billion.

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They have continued to amaze me with their dedication, perseverance and resilience as we found innovative ways to safely entertain nearly 7 million guests as a preferred entertainment choice. First, on a comparable period basis, attendance trends in open parks have increased from 20% to 25% of 2019 levels in the second quarter to 35% in the third quarter to 51% in the fourth quarter. Total attendance for the quarter was 2.2 million guests, 338,000 of which came from the four parks that offered modified Holiday in the Park lights without rides and our drive-through safari in New Jersey. Revenue in the quarter was down $152 million or 58% to $109 million as a result of a 65% decline in attendance. Sponsorship, international and accommodations revenue in the fourth quarter declined by $8 million due to the deferral of most sponsorship revenue and the suspension of the majority of our accommodations operations. Guest spending per capita in the quarter increased 17% driven by a 16% increase in admissions spending per capita and a 19% increase in in-park spending per capita. Attendance from our Active Pass Base in the fourth quarter represented 55% of total attendance versus 71% for the fourth quarter of 2019 demonstrating our success in attracting visitation of single-day guests. On the cost side, cash, operating and SG&A expenses decreased by $30 million or 18%, primarily due to the following: first, cost saving measures, primarily related to reduced salaries and wages and lower Fright Fest and Holiday in the Park related costs due to the restricted operating environment and our organization redesign completed in October; second, lower advertising costs; third, savings in utilities and other costs related to the fact that several of our parks were not operating or were operating with a reduced product offering. These cost savings were offset by a charge of $19 million due to an increase in legal reserves. Excluding the litigation charge, cash costs decreased by $49 million or 29%. While we have taken measures to reduce our variable costs, we retained 90% of our full-time members and maintained their benefits in order to position ourselves to reopen parks as safely and as soon as possible. We reduced salaries of all employees by 25% during 2020 in order to preserve cash and our Directors also deferred their compensation for the last three quarters of 2020. Adjusted EBITDA for the quarter was a loss of $39 million which included a $19 million increase in legal reserves compared to income of $72 million in the prior year period. Attendance of 6.8 million guests was down 79% from prior year. Total revenue of $357 million was down 76% driven by lower attendance due to park closures, limited operations. Total guest spending per capita increased more than $6 or 14% due to a higher percentage of single-day guests and the positive revenue impact from members who have remained past their initial 12-month commitment period. Attendance from our Active Pass Base for the full year represented 56% of total attendance versus 63% for full year 2019. Cash, operating and SG&A expenses were down 35% for the year due to cost savings measures taken immediately after we suspended operations. This cost reduction offset a portion of the revenue decline resulting in an adjusted EBITDA loss of $231 million. Fully diluted GAAP loss per share was $4.99, a decline of $7.10 primarily due to the lower attendance in our parks. As of today, only about 20% of current members have chosen to pause their membership. We are pleased with the retention of our very large Active Pass Base, which included 1.7 million members and 2.1 million season pass holders at the end of 2020. Our Active Pass Base was approximately flat compared to the end of the third quarter 2020 when we had 1.9 million members and 1.9 million season pass holders. Our Active Pass Base at the end of 2020 is down 51% compared to the end of 2019. That being said, because we extended our 2020 season passes through the end of 2021, our Active Pass Base, as of today, is down less than 10% versus the same day last year, which preceded the pandemic's impact. Deferred revenue as of December 31, 2020 was $205 million, up $61 million or 42% to prior year as we expect to recognize most of this deferred revenue in 2021. Total capital expenditures for the year were $98 million, a reduction of 30% from 2019. Our liquidity position, as of December 31, was $618 million. This included $460 million of available revolver capacity, net of $21 million of letters of credit and $158 billion of cash. This compares to a liquidity position of $673 million as of September 30, 2020. Net cash outflow for the quarter was $56 million, representing an average of $19 million per month. As a reminder, our net cash outflow in the fourth quarter included partnership park distributions that represented an average of $7 million per month. Our fourth quarter cash flow benefited by $8 million from the sale of some excess land in New Jersey, which was not in our prior estimates. Without the landfill, our net cash outflow was $21 million per month, an improvement from our prior estimates of $25 million to $30 million. We estimate that our net cash outflow in the first quarter of 2021 will be higher than normal or approximately $53 million to $58 million per month. Second, the timing of interest payments on our newly issued $725 million of senior secured debt. I would now like to give you an update on the progress of our transformation plan. Executing the transformation plan will require one-time cost of approximately $70 million through 2021, including $60 million of cash and $10 million of non-cash write-offs. So far, $35 million has been incurred through the end of 2020, including the non-cash write-offs of $10 million. We expect to incur the remaining $35 million by the end of 2021. We expect the transformation plan to unlock $80 million to $110 million in incremental annual run rate EBITDA once fully implemented and the company is now operating in a normal business environment. In 2021, we expect to achieve $30 million to $35 million from our organization redesign and other fixed cost reductions. In January alone, we realized more than $2 million of fixed cost value due to transformation, so we are well on track to achieve our estimated savings for 2021. We expect to ramp up to the full amount of benefits as attendance grows to 2019 levels. First, as we announced last fall, we reduced our full time headcount costs by approximately 10%. As we announced last December, we are changing our method of determining our fiscal quarters and fiscal years, such that each fiscal quarter shall consist of 13 consecutive weeks ending on a Sunday. Each fiscal year shall consist of 52 weeks or 53 weeks and shall end on the Sunday closest to December 31. During the years when there are 53 weeks, the fourth quarter shall consist of 14 weeks. As Sandeep mentioned, we have moved quickly to streamline our organization and reduced other fixed costs and we expect to realize $30 million to $35 million of fixed cost savings in 2021. We expect our transformation initiatives to create a new adjusted EBITDA baseline of $530 million to $560 million once our plan is implemented and we are operating in a more normal business environment. We expect to maintain our annual capital expenditures at 9% to 10% of revenue. Second, use free cash flow to pay down debt and return our net leverage ratio to between 3 and 4 times.

Revenue in the quarter was down $152 million or 58% to $109 million as a result of a 65% decline in attendance. We estimate that our net cash outflow in the first quarter of 2021 will be higher than normal or approximately $53 million to $58 million per month. I would now like to give you an update on the progress of our transformation plan. In January alone, we realized more than $2 million of fixed cost value due to transformation, so we are well on track to achieve our estimated savings for 2021. We expect to ramp up to the full amount of benefits as attendance grows to 2019 levels. We expect to maintain our annual capital expenditures at 9% to 10% of revenue.

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Since much of our commentary today will include our forward expectations, they may constitute forward looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. In the first quarter, we generated $60 million. We generated adjusted EBITDA of $108 million. By early March, WTI exceeded $66. The price held back has been in the tight range around $60 since. The EIA reports global inventories of approximately 185 million barrels during the quarter. Comparing the first quarter and fourth quarter averages, the Baker Hughes Lower 48 land rig count increased by 28%. According to Inverness, from the beginning of the first quarter through the end, the Lower 48 rig count increased by 116 or approximately 30%. The growth rate among smaller clients outpaced the growth of the larger operators at 39% versus 13%. In comparison, with our focus on larger midsized companies, our own average working rig count increased by 21%. Once again, we surveyed the largest Lower 48 clients. This group accounts for approximately 40% of the working rig count. Total adjusted EBITDA was 108 million in the quarter. With this performance, we generated approximately $60 million in free cash flow. In our Lower 48 business, reported daily big margin of 8,466 was in line with our guidance. Daily margin at 12,917 was near the upper end of our guidance range driven by expert performance in the field. Our installations on Nabors' Lower 48 rigs increased by nearly 25% versus the fourth quarter. Overall, NDS penetration of five or more services, our Nabors' Lower 48 rigs increased versus the prior quarter. It now stands at more than 70%. A year ago, this penetration rate was 60%. In the first quarter, clients utilized RigCLOUD on nearly all of our working rigs in Lower 48. On a related note, we now have two rigs running advanced battery-based hybrid energy management solutions in the Lower 48. A third Lower 48 system is expected to deploy in the near future. The Lower 48 industry has added 197 rigs, or 87% since its low in August. We have rigs working for three customers in Colombia, and five in Argentina, where we hold 38% of the market. The net loss from continuing operations of $141 million in the first quarter represented a loss of $20.16 per share. First-quarter results compared to a loss of $112 million, or $16.46 per share in the fourth quarter of 2020. The fourth quarter included $162 million of pre-tax gains from debt exchanges and repurchases partially offset by charges of $71 million, mainly from asset impairments for a net after tax gain of $52 million or $7.40 per share. Excluding this unusual item, the net loss improved by 23 million, primarily reflecting lower depreciation and interest expense. Revenue from operations for the first quarter was $461 million, a sequential gain of 4%. In the Lower 48, drilling revenue of $110 million increased by 6.2 million, or 6%, as a rig count improved by 5%. Despite some deterioration in the average pricing for a fleet, revenue per day increased by $700, reflecting a significant reduction in the number of rigs stacked on rate. Lower 48 average rig count at 56.2 was up sequentially by 2.6 rigs in line with our expectations. International drilling revenue at $247 million increased by 1.7 million or 1%. Despite the absence of 4 million in early termination revenue from the prior quarter. Average rig count of 64.8 increased by 2.2 rigs or 3.5% matching our expectations for the quarter. Canada drilling revenue was $21 million, an increase of $6.2 million or 42%. Daily revenue increased by nearly $400. Nabors drilling solutions revenue was $35.7 million, up 3.7 million or 12%, primarily driven by improved performance software and manage pressure drilling. Rig technologies revenue of $25.7 million increased by $1.6 million or 6% due to lower capital equipment sales and fewer rentals. Total adjusted EBITDA for the quarter was $108 million in line with the fourth quarter, and somewhat ahead of our expectations. US rolling adjusted EBITDA of $58.8 million was down by 3.4 million or 5.4%. Lower 48 performance was in line with our expectations. As we expected daily rig margin came in at $8,466, a $1,000-impact compared to the fourth quarter. For the second quarter, we expect daily rig margins are between $7,000 and $7,500 drew mainly by the signing of renewals or new contracts with current day rates, which are lower than the average for a fleet. We forecast as six to seven rig increase for the second quarter, or an 11 to 12% sequential improvement. Our rig count in the Lower 48 currently stands at 64 rigs or about 7.8 rigs higher than the average for the first quarter. International adjusted EBITDA decreased by $1.9 million to $62.6 million in the first quarter, or 2.9% sequentially. Daily gross margin for the quarter was $12,917, a $600 reduction as compared to the prior quarter. The fourth quarter included approximately $700 per day in early termination revenue. Turning to the second quarter, we expect an international rig count increase of three to four rigs, or 5 to 6% driven by units that return to work in Latin America and Saudi Arabia over the course of the prior quarter. We expect gross margin per day of approximately 12,500 reflecting a long rig move in Mexico and general strikes in Argentina. Current rig count in the international segment is 69 rigs, which translate into a 6.5% increase over the average of the first quarter. Canada adjusted EBITDA of $9.7 million increased by $6.2 million. Rig counts at 13.7 rigs was four higher sequentially. Gross margin per day of 8160 also increased due to the higher activity level and the receipt of $3.5 million in governmental wage subsidies. In the second quarter, we expect the effects of the seasonal spring breakup to impact results, with average rig count around six rigs and daily margins between $5,500 and $6,000. We currently have six rigs operating in Canada Drilling solutions adjusted EBITDA of $11.5 million was up $1.2 million in the first quarter, or 12%. Rig technologies reported negative adjusted EBITDA of $500,000 in the first quarter, a decrease of roughly $1 million. Now, before I turn to liquidity and cash generation, let me remind you that the mandatory convertible preferred shares will be converting next Monday May 3, approximately 668,000 common shares will be issued and a final dividend will be paid on the conversion. In the first quarter, free cash flow totaled $60 million. This compares to free cash flow of approximately $66 million in the fourth quarter. I would like to point out that in the first quarter of 2020, we delivered $8 million in free cash flow. As in the past, the first quarter was marked by the semi-annual interest payments and a senior note of over $70 million and by approximately $25 million in several annual payments that we incur at the beginning of the year. Our capital expenditures of $40 million in the first quarter included $7.5 million in payments related to SANAD newbuilds. During the second quarter, we expect to incur $80 million in capex, of which 30 million will be paid by SANAD for the new bill program. Our target remains at 200 million for the full year 2021 excluding in Kingdom newbuilds for SANAD. Given the recent awards, and additional rig purchase orders by SANAD, we now expect SANAD's total payments for these new rigs to approach $100 million for this year assuming milestones are met. In January, SANAD distributed a combined 100 million of the excess cash it had accumulated to its partners. As a result, the net debt reduction for the quarter was limited to $6 million. During the quarter, we retired approximately 40 million in senior notes, including convertibles, which resulted in a 30-meter reduction in our total debt as reported. We also reduce the amount of standing on a revolving credit facility by an additional $40 million. Our total debt reduction for the quarter was $70 million. At the end of the first quarter, the amount drawn in our credit facility was $633 million and our cash balances stood at $418 million. For the second quarter, we are targeting approximately $50 million in free cash flow.

The net loss from continuing operations of $141 million in the first quarter represented a loss of $20.16 per share. Revenue from operations for the first quarter was $461 million, a sequential gain of 4%.

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Through the quarter, we operated thoughtfully with the physical and mental well-being of our employees the top priority as our 50,000-plus GPC teammates are the core of our success. Total sales for the quarter were $4.5 billion, up 9% from last year and significantly improved from the 1% sales decrease in the fourth quarter of 2020. These results drove a 41% increase in operating profit and an 8.1% operating margin, which is up 180 basis points from the first quarter of last year. Our strong operating performance drove net income of $218 million and diluted earnings per share of $1.50, up 88%. Automotive represented 66% of total sales in the first quarter and Industrial was 34%. By region, 73% of revenues were attributable to North America with 16% in Europe and 11% in Asia-Pac. Total sales for Global Automotive were $3 billion, a 14% increase from 2020 and much improved from a 1% increase in Q4 of 2020. Comp sales were up 8%, improved from a 2% decrease in the fourth quarter and segment profit margin was up 250 basis points, driven by strong operating results in each of our automotive operations. Sales were driven by positive sales comps across all our operations with 15% comps in Europe and Asia-Pac, 7% comps in the US and 3% comps in Canada. Retail sales, which represent over 40% of our total sales volume through our Repco stores continued to outperform posting a 33% increase in March and plus 24% in the quarter. In North America comp sales in the US were up 7% helping this business post a 180-basis point increase in profit margins. Comp sales were up 3% and operating margin was up 130 basis points. This is notable as this region of the US has been most affected by the COVID-19 lockdowns over the past 13 months. We would also call out our ongoing omnichannel investments and the increase in B2C online sales, which reached record levels in the quarter and were up 150% from the prior year. We expect further improvement in aftermarket fundamentals such as increased miles driven, a growing vehicle fleet and an increase in vehicles aged six to 12 years, all favorable for the industry. Total sales for this group were $1.5 billion, flat with last year. Comp sales were down 2%, improved from the 4% decrease in Q4 and reflecting the third consecutive quarter of improving sales trends. March was a breakout month with the North American Motion team posting a 7% increase in average daily sales and achieving record sales volumes. For perspective, PMI was 64.7% in March, an increase of 4.2 points from December 31st. In addition, industrial production increased by 2.5% in the first quarter, the third consecutive quarter of expansion, following the significant downturn in the second quarter of 2020. The strengthening sales environment, along with our initiatives to drive growth and control cost produced an 80 basis point margin improvement with segment profit margin at 8.3% versus 7.5% last year. That said, we are seeing more pricing activity and expect another year of 1% to 2% price inflation from our suppliers. Since 1928, we have been giving back to communities and causes that make a difference and that legacy continues in 2021. In addition, in 2021, the US automotive team adjusted compensation programs to better align incentives with profitable growth. One solid example is the success the US Industrial team enjoyed with recent facility automation investments that delivered a 500% labor productivity improvement. A few select highlights include the alignment of talent 100% dedicated to developing and executing EV strategies, product and category management strategies with existing and new SKUs, global supplier councils with existing strategic partners, advisory groups leveraging our 25,000 global repair center relationships and partnerships with strategic EV market participants. Total GPC sales were $4.5 billion in the first quarter, up 9% from last year and improved from the 0.7% decrease in the fourth quarter. Gross margin was 34.5%, a 60-basis point improvement compared to 33.9% in the first quarter last year. Our selling, administrative and other expenses were $1.2 billion in the first quarter, up 4.6% from last year, or up 5.3% from last year's adjusted SG&A. This reflects an improvement to 26.8% of sales this year, which is down nearly 100 basis points from 27.7% last year. Our total operating and non-operating expenses were $1.3 billion in the first quarter, up 2.2% from last year or up 2.1% compared to last year's adjusted expenses. First quarter expenses include the benefit of approximately $20 million related to gains on the sale of real estate and favorable retirement plan valuation adjustments that are recorded to the other non-operating income line. All in, our total expenses for the quarter improved to 28.1% of sales, down 190 basis points from 30% in 2020. Total segment profit in the first quarter was $361 million, up a strong 41% on the 9% sales increase. And our segment profit margin was 8.1% compared to 6.3% last year, a 180 basis point increase. In comparison to 2019, our segment profit margin has improved by 100 basis points. Our net interest expense of $18 million was down from $20 million in 2020 due to the decrease in total debt and more favorable interest rates relative to last year. The corporate expense line was $31 million in the quarter, down from $55 million in 2020 due primarily to the favorable real estate gains and retirement plan adjustment discussed earlier. Our tax rate for the first quarter was 23.8% in line with the reported rate last year and improved from the prior year adjusted rate of 26.5%. Our first quarter net income from continuing operations was $218 million with diluted earnings per share of $1.50. This compares to $0.84 per diluted share in the prior year or an adjusted diluted earnings per share of $0.80 for an 88% increase. Our Automotive revenue for the first quarter was $3 billion, up 14% from the prior year. Segment profit of $236 million was up a strong 65% with profit margin at 8% compared to 5.5% margin in the first quarter last year. The 250 basis point increase in margin was driven by the continued recovery in the Automotive business and the execution of our growth and operating initiatives. In addition, we're encouraged that our first quarter margin also compares favorably to the first quarter of 2019, up 120 basis points. Our Industrial sales were $1.5 billion in the quarter, flat with last year and improved sequentially for the third consecutive quarter, which is consistent with the strengthening industrial economy. Our segment profit of $125 million was up 10% from a year ago and profit margin was up 80 basis points to 8.3% compared to 7.5% last year. The improved margin for Industrial reflects the third consecutive quarter of margin expansion in both our North American and Australasian industrial businesses and it's also up by 90 basis points from the first quarter of 2019. At March 31st, total accounts receivable is down 27% from last year, which is primarily a function of the $800 million in receivables sold in 2020. Our inventory was up 6% from the prior year and accounts payable increased 14%. And our AP to inventory ratio improved to 124% from 116% in the last year. Our total debt is $2.6 billion at March 31, down $1 billion or 28% from last March and down $60 million from December 31st of 2020. With these positive changes to our debt structure, our total debt to adjusted EBITDA has improved to 1.8 times from 2.5 times last year. Additionally, we closed the first quarter with $2.6 billion in available liquidity, which is up from $1.1 billion at March 31st last year and in line with December 31st. We also continue to generate strong cash flow, generating $300 million in cash from operations in the first quarter, which is up from $28 million in the first quarter last year. With a strong start to the year, including the increase in net income and the improvement in working capital, we continue to expect cash from operations to be in the $1 billion to $1.2 billion range and free cash flow of $700 million to $900 million. We invested $48 million in capital expenditures in the first quarter, an increase from $39 million in 2020. We continue to expect total capital expenditures of approximately $300 million for the year. In the first quarter we paid a cash dividend of $114 million to our shareholders. The Company has paid a cash dividend to shareholders every year since going public in 1928 and our 2021 dividend of $3.26 per share represents our 65th consecutive annual increase in the dividend. We have actively participated in a share repurchase program since 1994. While there were no repurchases in the first quarter, the Company is currently authorized to repurchase up to 14.5 million additional shares and we will resume share repurchases in the months and quarters ahead. With these factors in mind, we expect total sales for 2021 to be in the range of plus 5% to plus 7%, an increase from our previous guidance of plus 4% to plus 6%. By business, we are guiding to plus 5% to plus 7% total sales growth for the Automotive segment, an increase from plus 4% to plus 6% and a total sales increase of plus 4% to plus 6% for the Industrial segment, an increase from plus 3% to plus 5%. On the earnings side, we are raising our guidance for diluted earnings per share to a range of $5.85 to $6.05, which is up 11% to 15% from 2020. This represents an increase from our previous guidance of $5.55 to $5.75.

Our strong operating performance drove net income of $218 million and diluted earnings per share of $1.50, up 88%. In addition, in 2021, the US automotive team adjusted compensation programs to better align incentives with profitable growth. Total GPC sales were $4.5 billion in the first quarter, up 9% from last year and improved from the 0.7% decrease in the fourth quarter. Our first quarter net income from continuing operations was $218 million with diluted earnings per share of $1.50. With a strong start to the year, including the increase in net income and the improvement in working capital, we continue to expect cash from operations to be in the $1 billion to $1.2 billion range and free cash flow of $700 million to $900 million. With these factors in mind, we expect total sales for 2021 to be in the range of plus 5% to plus 7%, an increase from our previous guidance of plus 4% to plus 6%. By business, we are guiding to plus 5% to plus 7% total sales growth for the Automotive segment, an increase from plus 4% to plus 6% and a total sales increase of plus 4% to plus 6% for the Industrial segment, an increase from plus 3% to plus 5%. On the earnings side, we are raising our guidance for diluted earnings per share to a range of $5.85 to $6.05, which is up 11% to 15% from 2020.

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The results for our first quarter were largely as we anticipated, with consolidated revenues growing 8.8% and an overall adjusted operating margin for our core laundry operations of approximately 10%. In our first quarter of 2022, consolidated revenues were $486.2 million, up 8.8% from $446.9 million a year ago, and consolidated operating income decreased to $44.8 million from $56 million in -- or 20.1%. Net income for the quarter decreased to $33.7 million or $1.77 per diluted share from $41.9 million or $2.20 per diluted share. Our financial results in the first quarter of fiscal 2022 included $5.9 million of costs directly attributable to the three key initiatives that Steve discussed. Excluding these initiative costs, adjusted operating income was $50.7 million, adjusted net income was $38.1 million, and adjusted diluted earnings per share was $2. Our core laundry operations revenues for the quarter were $428.8 million, up 9.1% from the first quarter of 2021. Core laundry organic growth, which adjusts for the estimated effect of acquisitions as well as fluctuations in the Canadian dollar, was 8.6%. Core laundry operating margin decreased to 8.5% for the quarter or $36.5 million from 12.4% in the prior year or $48.9 million. And excluding these costs, the segment's adjusted operating margin was 9.9%. Energy costs increased to 4.3% of revenues in the first quarter of 2022, up from 3.6% in prior year. Revenues from our specialty garments segment, which delivers specialized nuclear decontamination and cleanroom products and services, increased to $39.5 million from $38.1 million in prior year or 3.5%. The segment's operating margin increased to 21.9% from 18.8%, primarily due to lower merchandise costs as a percentage of revenues. Our first aid segment's revenues increased to $17.8 million from $15.5 million in prior year or 14.8%. However, the segment had an operating loss of $0.3 million during the quarter primarily due to continued investment in the company's initiative to expand its first aid van business into new geographies. We continue to maintain a solid balance sheet and financial position with no long-term debt and cash, cash equivalents, and short-term investments totaling $478.1 million at the end of our first quarter of fiscal 2022. Capital expenditures for the quarter totaled $31.1 million as we continued to invest in our future with new facility additions, expansions, updates, and automation systems that will help us meet our long-term strategic objectives. As a result, the capitalization of costs related to our CRM project in the quarter totaled only $1.7 million. During the first quarter of fiscal 2022, we repurchased 22,750 common shares for a total of $4.8 million under our previously announced stock repurchase program. At this time, we now expect our full-year revenues for fiscal 2022 will be between $1.94 billion and $1.955 billion. These acquisitions are expected to add approximately $10 million to our fiscal 2022 revenues. We further expect that our diluted earnings per share for fiscal 2022 will now be between $5.50 and $5.80. This earnings per share guidance assumes an effective tax rate of 24% and continues to include an estimate of $38 million worth of costs directly attributable to our key initiatives that will be expensed during the year. Core laundry operations adjusted operating margin at the midpoint of the range is now 9.2%, which reflects continued pressure from costs that trended lower during the pandemic and the current inflationary environment. Our assumed adjusted tax -- our assumed adjusted tax rate for fiscal 2022 is 24.25%. Adjusted diluted earnings per share is expected to be between $7 and $7.30.

In our first quarter of 2022, consolidated revenues were $486.2 million, up 8.8% from $446.9 million a year ago, and consolidated operating income decreased to $44.8 million from $56 million in -- or 20.1%. Net income for the quarter decreased to $33.7 million or $1.77 per diluted share from $41.9 million or $2.20 per diluted share. At this time, we now expect our full-year revenues for fiscal 2022 will be between $1.94 billion and $1.955 billion. We further expect that our diluted earnings per share for fiscal 2022 will now be between $5.50 and $5.80. Adjusted diluted earnings per share is expected to be between $7 and $7.30.

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Our fourth quarter earnings were strong, as we successfully completed our systems integration of SB One and met both our expense savings estimate of over 30% and came in under our projected one-time merger-related charges. Fourth quarter earnings were strong at $40.6 million or $0.53 per share, including $3.2 million in merger-related charges. Net interest income was up 22% quarter-over-quarter. Total assets at December 31st, 2020 stood at $12.9 billion, which resulted in an annualized return on average assets of 1.25% for the quarter and an annualized return on average tangible equity of 14.1%. Included in total assets were $473 million in PPP loans, which will continue to be submitted to the SBA for forgiveness throughout Q2 of this year. Credit line usage is down to 41.6% at December 31st, 2020 versus 55.7% in 2019. Competition for loan growth remains extreme and our loan pipeline is $1.2 billion, with $295 million approved awaiting closing, and a 47% pull-through rate expected on the remainder. Deposits for the year increased $2.7 billion, including $1.76 billion acquired from SB One. Core deposit growth continued throughout the year and represented 88.9% of total deposits at December 31st. We ended the year with a loan-to-deposit ratio of 99.8%, and we continue to interact with our customers to further solidify deposit relationships. Non-interest income was up $2.7 million versus same quarter last year, which is primarily the result of $1.8 million contributed by our new fee revenue source from SB One Insurance, accompanied by an increase in the net gain on sale of residential mortgage loans of $757,000 and wealth management income increasing $561,000. These increases were partially offset by decreases in prepayment fees of $882,000. Non-operating expenses increased $4.8 million for the quarter, which included $3.2 million of non-recurring costs related to the acquisition of SB One. Our operating expenses to average assets was 1.82% for the quarter and our efficiency ratio was 54.12%. As an example, we have seen an increase in daily usage of 945% versus our previous person-to-person platform. We repurchased 1.3 million shares in 2020 at an average cost of $16.59 per share, which leaves PFS with only 262,000 shares remaining in our existing program. Yesterday, our Board authorized the adoption of a new 5% repurchase program, which will commence upon the completion of the existing one. As Chris noted, our net income was $40.6 million or $0.53 per diluted share, compared to $27.1 million or $0.37 per diluted share for the trailing quarter. Earnings for the current quarter included $6.2 million of negative provisions for credit losses on loans and off-balance sheet credit exposures, while the trailing quarter reflected provisions of $5.8 million. The remaining non-recurring merger integration costs of $3.2 million were recorded in the fourth quarter, outperforming our expectations as disclosed at the transaction's inception by about $800,000, and helping tangible book value per share to recover and surpass pre-acquisition levels. Core pre-tax pre-provision earnings, excluding provisions for credit losses on loans and commitments to extend credit, merger-related charges and COVID response costs were $50.1 million for pre-tax pre-provision ROA of 1.54%. This compares favorably with $44.4 million or 1.48% in the trailing quarter. Our net interest margin expanded 3 basis points versus the trailing quarter, as we reduced funding costs and grew non-interest bearing deposits, while earning asset yields held steady. Including non-interest bearing deposits, our total cost of deposits fell to 31 basis points this quarter from 33 basis points in the trailing quarter. Non-interest bearing deposits averaged $2.38 billion or 24% of total average deposits for the quarter. This was an increase from $2.21 billion in the trailing quarter, reflecting a full quarter contribution from SB One. Average borrowing levels decreased $82 million and the average cost of borrowed funds decreased 3 basis points versus the trailing quarter to 1.16%. Quarter end loan totals increased $66 million versus the trailing quarter or an annualized 2.7%, reflecting growth in C&I, construction and consumer loans, partially offset by net reductions in CRE, multi-family and residential mortgage loans. Loan originations, excluding line of credit advances totaled $868 million for the quarter. The pipeline at December 31st decreased $138 million from the trailing quarter to $1.2 billion. However, the pipeline rate increased 2 basis points since last quarter to 3.57% at December 31st. Our provision for credit losses on loans was a benefit of $2.3 million for the current quarter, compared with an expense of $6.4 million in the trailing quarter. We had annualized net charge-offs as a percentage of average loans of 10 basis points this quarter, compared with net recoveries of less than 1 basis point for the trailing quarter. Non-performing assets increased to 71 basis points of total assets from 42 basis points at September 30th. Excluding PPP loans, the allowance represented 1.09% of loans, compared with 1.16% in the trailing quarter. Loans that have been or expected to be granted short-term COVID-19-related payment deferrals declined from their peak of $1.31 billion or 16.8% of loans to $207 million or 2.1% of loans. This compares with $311 million or 3.2% of loans at September 30th. This $207 million of loans consists of $9 million that are still in their initial deferral period; $51 million in the second 90-day deferral period; $121 million required additional deferrals and $26 million that have completed their initial deferral periods, but are expected to require ongoing assistance. Included in this total are $49 million of loans secured by hotels with a pre-COVID weighted average LTV of 43%; $36 million of loans secured by retail properties with a pre-COVID weighted average LTV of 58%; $30 million of loans secured by multi-family properties, including $21 million that are student housing related with a pre-COVID weighted average LTV of 61%; $5 million of loans secured by restaurants with a pre-COVID weighted average LTV of 50%; and $30 million secured by residential mortgages with the balance comprised of diverse commercial loans. Non-interest income decreased $268,000 versus the trailing quarter to $20 million as growth in loan and deposit fee income, bank-owned life insurance income and gains on loan sales was more than offset by a decline in net profit on loan level swaps, gains on sale of REO and a small reduction in wealth management income. Excluding provisions for credit losses on commitments to extend credit, merger-related charges and COVID-related costs, non-interest expenses were an annualized 1.82% of average assets for the quarter, compared with 1.92% in the trailing quarter, as the benefits of greater scale and planned acquisition cost saves were achieved. Our effective tax rate decreased to 23.3% from 25.5% for the trailing quarter as a result of an increased proportion of income coming from tax exempt sources in the current quarter. We are currently projecting an effective tax rate of approximately 24% for 2021.

Fourth quarter earnings were strong at $40.6 million or $0.53 per share, including $3.2 million in merger-related charges. As Chris noted, our net income was $40.6 million or $0.53 per diluted share, compared to $27.1 million or $0.37 per diluted share for the trailing quarter.

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For the third quarter, we delivered revenue above the high end of the range of the outlook we provided with total revenue ending the quarter at $181.3 million. Third quarter adjusted EBITDA was $75.3 million, representing an adjusted EBITDA margin of 42%, exceeding just the high end of our outlook. Our Q3 maintenance and annual rate of 88% was above the low to mid-80% renewal rate we noted we expected in 2021. In Q3, our subscription revenue grew at a 20% year-over-year rate with subscription ARR growing 23% year over year. That execution led to another quarter of better-than-expected financial results for the third quarter with total revenue ending at $181.3 million, above the high end of our total revenue outlook of about $176 million to $180 million. Total license and maintenance revenue was $149 million in the third quarter, which is a decrease of 6% from the prior year period. The maintenance revenue was $120 million in the third quarter, which is up slightly from the prior year. On a trailing 12-month basis, our maintenance renewal rate is 89%. Also consistent with recent quarters, we want to provide the in-quarter renewal rate for the third quarter, which currently stands at approximately 88%, which again is above our expectations at the start of the year. For the third quarter, license revenue was $29.2 million, which represents a decline of approximately 26% as compared to the third quarter of 2020. Third quarter subscription revenue was $32.3 million, up the 20% year over year. Total ARR have reached approximately $624 million as of September 30, 2021, reflecting year-over-year growth of 9% and is up slightly from our ending Q2 2021 ARR balance of $621 million, which is the corrected amount included in our 8-K filing from earlier this month. Our subscription ARR of $130.2 million increased 23% year over year and 9% sequentially from the second quarter. So we finished the third quarter of 2021 with 786 customers that have spent more than $100,000 with us in the last 12 months, which is a 4% improvement over the previous year. Third quarter adjusted EBITDA was $75.3 million, representing an adjusted EBITDA margin of 42%, exceeding the high end of the outlook for the third quarter despite continuing to invest in our business. Excluded from the adjusted EBITDA are onetime costs of approximately of the $2.9 million of cyber-related remediation, containment, investigation, and professional fees, net of insurance proceeds. Net leverage at September 30 was approximately 3.8 times our pro forma trailing 12-month adjusted EBITDA. We retained the full amount of the $1.9 billion in term debt that the company had at present. During the third quarter, we completed a two for one reverse stock split and declared a dividend of $1.50 per share on this post-split basis, which was paid in August. In addition, N-able repaid $325 million of inter-company debt. As a result of this repayment, our cash balance is $709 million at the end of the third quarter, bringing our net debt to approximately $1.2 billion. For the fourth quarter of 2021, we expect total revenue to be in the range of $180 million to $184 million, representing a year-over-year decline of negative 3% to negative 1%. Adjusted EBITDA for the fourth quarter is expected to be approximately $72 million to $74 million, which also implies an approximately 40% adjusted EBITDA margin. Non-GAAP fully diluted earnings per share is projected to be $0.25 to $0.26 per share, assuming an estimated 160.7 million fully diluted shares outstanding, which reflects the reverse stock split completed on July 30. And finally, our outlook for the fourth quarter assumes a non-GAAP tax rate of 22%, and that we expect to pay approximately $8 million in cash taxes during the fourth quarter of 2021. For the full year, we expect total revenue to be in the range of $712 million to $716 million, representing a year-over-year decline of negative 1% to flat with prior year. So our adjusted EBITDA for the full year is expected to be approximately $297 million to $299 million, which implies an approximately 42% adjusted EBITDA margin for the year. Non-GAAP fully diluted earnings per share is projected to be $1.14 to $1.15 per share, assuming an estimated 160.5 million fully diluted shares outstanding.

That execution led to another quarter of better-than-expected financial results for the third quarter with total revenue ending at $181.3 million, above the high end of our total revenue outlook of about $176 million to $180 million. For the fourth quarter of 2021, we expect total revenue to be in the range of $180 million to $184 million, representing a year-over-year decline of negative 3% to negative 1%. Non-GAAP fully diluted earnings per share is projected to be $0.25 to $0.26 per share, assuming an estimated 160.7 million fully diluted shares outstanding, which reflects the reverse stock split completed on July 30. For the full year, we expect total revenue to be in the range of $712 million to $716 million, representing a year-over-year decline of negative 1% to flat with prior year. Non-GAAP fully diluted earnings per share is projected to be $1.14 to $1.15 per share, assuming an estimated 160.5 million fully diluted shares outstanding.

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Although the business represented approximately 2% of our total sales, it was not central to our core strength in professional, industrial and commercial floor cleaning. And in 2020, managed a 35% reduction in our core Tennant legacy product portfolio along with a 20% reduction in product options. Through an engineering redesign effort across our large scrubbers and sweepers, we introduced new tires that reduced our cost, improved traction and performance for our customers and reduced our tire SKUs by over 50%. For the fourth quarter of 2020, Tennant reported net sales of $273 million, down 7.4% year-over-year as a result of the pandemic-related slowdown, while our organic sales, which exclude the impact of currency effects, declined 8.9%. Sales in the Americas declined by 11.6% year-over-year and were down 10.5% organically. Sales in the EMEA region increased by 3.7% year-over-year due to currency effects, but were down 3.4% organically, primarily due to pandemic-related restrictions in the U.K., the Netherlands and the Iberian Peninsula. Sales in the Asia Pacific region declined by 10.4% year-over-year and were down 13.9% organically. Adjusted gross margin in the fourth quarter of 2020 was 41.3% compared with 40.5% in the year ago period, increasing due to the positive effect of pricing actions and cost out initiatives driven by our enterprise strategy, which more than offset regional mix and strategic investments we made during the quarter related to our employees. During the fourth quarter, our adjusted S&A expenses were 33.9% of net sales compared with 30.4% in the year ago period. As for the profitability, we reported net earnings of $2.5 million or $0.13 per share, down from $10.9 million or $0.59 per share in the prior year. Adjusted EPS, which excludes non-operational items memorization expense totaled $0.48 compared with $0.86 in the prior year. In terms of adjusted EBITDA, our results decreased to $25.4 million or 9.3% of sales compared with $34 million or 11% of sales in the year ago period, driven by our lower year-over-year revenue and the incremental investments in the quarter mentioned a moment ago. As for our tax rate, in the fourth quarter, Tennant had an adjusted effective tax rate excluding the amortization expense adjustment of 32.3% compared to 23.3% in the year ago period. In the fourth quarter, Tennant generated $36.3 million in cash flow from operations, primarily driven by business performance and improved working capital levels. We also reduced outstanding debt by $15.2 million and paid $4.2 million in cash dividends to shareholders. In 2020, net sales totaled $1 billion compared to $1.14 billion in 2019, reflecting a decline of 11.8% on an organic basis driven by market weakness due to the global pandemic. As Chris mentioned, our ability to quickly respond to the pandemic and manage costs and ensure liquidity allowed us to deliver an adjusted EBITDA for full year 2020 of $119.4 million or 11.9% of sales compared with $136.9 million or 12% of sales in 2019. These actions also allowed Tennant to generate cash flow from operations of $133.8 million, reduce outstanding debt by $31.1 million and pay $16.3 million in cash dividends to the shareholders. Net sales of $1.05 billion to $1.08 billion with organic sales rising 5% to 8%. GAAP earnings of $3.30 to $3.75 per share. Adjusted earnings per share of $3.50 to $3.95 per share, which excludes certain non-operational items and the amortization expense. Adjusted EBITDA in the range of $130 million to $140 million. Capital expenditures of $20 million to $25 million. And an effective tax rate of 20%. Our guidance also incorporates the divestiture of our coatings business, which we estimate having $20 million to $25 million impact to sales. I have been at Tennant for almost 18 years, including 15 years as President and CEO. They are the lifeblood of this great organization and the reason it has thrive for 150 years and will continue to flourish for the next 150.

For the fourth quarter of 2020, Tennant reported net sales of $273 million, down 7.4% year-over-year as a result of the pandemic-related slowdown, while our organic sales, which exclude the impact of currency effects, declined 8.9%. As for the profitability, we reported net earnings of $2.5 million or $0.13 per share, down from $10.9 million or $0.59 per share in the prior year. Adjusted earnings per share of $3.50 to $3.95 per share, which excludes certain non-operational items and the amortization expense.

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Q4 revenue decreased 1.5% to $709 million. Segment operating income increased 11.6% to $120 million. And reported earnings per share was a net loss of $0.16. This is principally driven by a $137 million charge related to the successful termination of our U.S. pension plan and other items, including tax charges totaling $17 million, partially offset by $52 million asbestos insurance settlement benefit. We generated adjusted segment operating income growth of 8% with margin expansion of 150 basis points on a 4% organic sales decline. For the full year, our decremental margin was 22% at the low end of our range. As a result, we delivered adjusted earnings per share of $1.01, a sequential and as well as a year-over-year increase. We generated free cash flow of $102 million for Q4 and $372 million for full year. These drove a free cash flow margin of 15% at the high end of our guidance that we increased just last quarter. On capital deployment, in 2020, we increased our dividend by 15%. We repurchased ITT shares totaling 73 million and we increased our majority stake in our Wolverine China joint venture as we continued to expand our market share in Asia. In 2020, we reduced the number of recordable incidents by 25% and implemented safer workplace protocols globally. From a commercial perspective, sales in Friction outpaced global auto production rates by more than 600 basis points for the full year. We increased market share by almost 400 basis points in North America, more than 200 basis points in China and almost 100 basis points in Europe. And when it comes to EVs, we secured position on 42 new electric vehicle platforms during the year. Industrial Process delivered 15.1% adjusted segment operating margins this quarter. We anticipate full year organic sales growth of 2% to 4% driven by continued share gains in Motion Technologies, as well as the broader auto market recovery. We plan to expand adjusted segment margins by 130 to 180 basis points. The increased sales volume and the carryover impact of our 2020 cost actions, coupled with the strong productivity from 2021 initiatives, we'll generate adjusted earnings per share in the range of $3.45 to $3.75%, which equates to 8% to 17% growth versus prior year. First, we would invest in our businesses with approximately $100 million of capital expenditures, up over 55% versus 2020. And finally, we are planning to repurchase ITT shares totaling $50 million to $100 million reducing the full year weighted average share count by approximately 1%. From a top-line perspective, Motion Technologies delivered a strong performance, growing over 10% organically, driven by continued share gains and double-digit growth in auto in North America and China. Motion Technologies expanded margins over 400 basis points to 19.5%. Industrial Process grew margin 90 basis points to 15.1% despite a 10% organic sales decline. First, working capital as a percentage of sales continues to decline and we saw 70 basis points of improvement in 2020, excluding the impact of FX. Second, free cash flow increased 40% versus prior year despite the challenges posed by the global pandemic. We hit the high end of our full year target for free cash flow margin, while also investing in the business through growth capex of more than $35 million for the year. And we drove an increase in our insurance assets of $52 million in the fourth quarter and $100 million for the full year. As a result, our net asbestos liability that we have recently brought to a full-horizon valuation is now $487 million. In Industrial Process, our redesigned between-bearing API pump has seen new orders increase over 50% this year. Finally, in Connect and Control Technologies our Enidine business is teaming with Bell Textron to produce passive vibration control technology for the 360 Invictus. Our Q4 organic growth of 10% was primarily driven by strong performance in our Friction OE business. We delivered 640 basis points of outperformance in 2020 on a global basis; further evidence that the MT machine continues to win in the marketplace. For the quarter, Friction sales in North America were up 43% and sales in China, up 19%, while growth in our Wolverine business was over 12% with strength in Europe and Asia-Pacific as we gained market share in both brake shims and sealings. Segment margins were incredibly strong again expanding 410 basis points on incremental margins of 46%. However, our short-cycle orders in the quarter were up 1%, driven by aftermarket demand. IP margins expanded 90 basis points on 7% decremental margins. Furthermore, IP's working capital as a percent of sales improved 590 basis points versus prior year and we still see further opportunities to optimize inventory as we consolidate footprint and enhance materials planning. IP finished the quarter with less than 20% working capital as a percent of sales. Sales in aerospace and defense were down over 30%, driven by lower passenger traffic and lower build rates from airframers. Connected sales were down over 10%, mainly due to North America aerospace and defense. These contributed to a book-to-bill of more than 1 in Q4. While this year was challenging for CCT, we are encouraged by the productivity, which was over 400 basis points this quarter and the full year. First, we generated productivity of 230 basis points. For the full year, that number was over 300 basis points. For the full year, we achieved cost reduction savings in excess of $100 million, including $40 million in the fourth quarter. We delivered approximately $65 million of structural reduction in fixed costs for the full year, with the remainder comprising temporary savings, which will partially reverse in 2021. We expect that the carryover impact of actions in 2020 will generate approximately $10 million to $15 million of additional savings in 2021. As a result of these measures, our decremental margins improved every quarter since Q2 and we finished the year at 22% at the lower end of our target, given the strong performance in Q4. In 2021, we expect incremental margins north of 35% as volumes recover and we leverage our optimized cost structure. We expect total revenue will be up 5% to 7% versus 2020 and up 2% to 4% on an organic basis. We expect adjusted segment margins to expand by a 150 basis points at the midpoint, driven by higher volumes, continued productivity and the incremental benefits from structural reductions to our cost structure in 2020. We're guiding to adjusted earnings-per-share growth of 8% to 17%. This assumes an approximate 1% reduction in our full year weighted average share count from repurchases and an effective tax rate of 21.5%. Free cash flow will be in a range of $270 million to $300 million and we expect free cash flow margin to be 10% to 12%. This is lower than the 15% delivered in 2020 as we expect to increase capex spending, including $5 million to $10 million of investments into green projects and increase working capital dollars to support top-line growth. At these levels, adjusted free cash flow conversion will approximately be a 100% aided in part by working capital optimization. Foreign exchange is expected to contribute positively to earnings and tax rate is expected to be slightly higher than 2020 at 21% -- 21.5% with a variance of 20 basis points around the mean, depending on the jurisdictional mix of our income. Our planning rate currently implies a $0.02 earnings per share headwind. Lastly, as Luca highlighted, we expect to repurchase $50 million to a $100 million in ITT shares, which will generate a $0.01 to $0.03 tailwind. This will be partially offset by growth in connectors, given the strong beginning backlog after over 30% sequential order growth in Q4.

Q4 revenue decreased 1.5% to $709 million. And reported earnings per share was a net loss of $0.16. We generated adjusted segment operating income growth of 8% with margin expansion of 150 basis points on a 4% organic sales decline. As a result, we delivered adjusted earnings per share of $1.01, a sequential and as well as a year-over-year increase. We anticipate full year organic sales growth of 2% to 4% driven by continued share gains in Motion Technologies, as well as the broader auto market recovery. The increased sales volume and the carryover impact of our 2020 cost actions, coupled with the strong productivity from 2021 initiatives, we'll generate adjusted earnings per share in the range of $3.45 to $3.75%, which equates to 8% to 17% growth versus prior year. We expect total revenue will be up 5% to 7% versus 2020 and up 2% to 4% on an organic basis. Free cash flow will be in a range of $270 million to $300 million and we expect free cash flow margin to be 10% to 12%. This will be partially offset by growth in connectors, given the strong beginning backlog after over 30% sequential order growth in Q4.

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We had a record setting second quarter highlighted by a 97% increase in net income, a 23% increase in homes delivered a 35% increase in revenue, and a return on equity of 27%. All of this is a result of a high level of performance across all 15 of our housing operations, as well as from our mortgage and title business. Our gross margins improved by 320 basis points over last year, and improved sequentially by 70 basis points from the first quarter to a second quarter level of 25.1%. Our overhead expense ratio improved by 110 basis points from a year ago to 10.4% of revenues, reflecting greater operating leverage. And most importantly, our pre tax income percentage improved significantly to 14.7% versus 10% a year ago. Since 2013, our revenues have grown at a compounded annual rate of 19%. And our pre tax income has grown at an even more impressive annual rate of 43%. And as reflected in our year to date new contracts increasing by 24%. And our record set second quarter new contracts just slightly better than a year ago, with 2267 homes sold during the quarter. We achieved record second quarter sales notwithstanding that we are operating in nearly 20% fewer communities than a year ago. For EMI homes, we sold 31% more homes and last year second quarter, aided by the strength of last May in June. As you all recall, as we moved into last year's third quarter, where our sales grew by 71% over 2019. Smart Siri sales in the second quarter accounted for just under 40% of total company sales compared to about 35% a year ago. We are selling our smart series homes and 35% of our communities compared to 30% of the communities a year ago. The average price of our smart series Homes is now just under $350,000 compared to roughly $330,000 at the end of the first quarter. Our backlog sales value at the end of the quarter was $2.5 billion and all time quarterly record and 70% better than last year. units in backlog increased by 49%. To an all time record 5488 homes with an average price of homes in backlog equal to $454,000. This is 15% higher than a year ago. As I mentioned at the beginning of the call, we experienced strong performance from each of our 15 homebuilding divisions, with substantial income contributions for most of our markets led by Orlando, Tampa, Minneapolis, Dallas, Columbus, and Cincinnati. Our deliveries increased by 18% over last year in our southern region, reminding you that our southern region consists of our four Texas markets, three Florida markets and two North Carolina markets. Deliveries in the southern region increased to 1297 homes, or 57% of the total. The northern region, which is the balance of our markets, six to be exact in Ohio, Indiana, Illinois minutes Soda in Michigan contributed 961 deliveries, which is roughly 31% better than a year ago. new contracts in our southern region increased by 3% for the quarter and decreased by 4%. In our northern region, our owned and controlled lot position in the nine markets representing our southern region increased by 35%, compared to last year, and increased by 15%. And the six markets that comprise our northern region 34% of our owned and controlled lots are in the north, with the balance roughly 66%. company wide, we own approximately 18,300 lots, which is roughly a two year supply. On top of that, we control the option contracts, and additional nearly 26,000 lots. So in total, are owned and controlled lots are slightly slightly more than 44,000 lots, which is just below a five year supply. Perhaps most important 59% of those near 44,000 lots are controlled under an option contract, which gives me my home's significant flexibility to react to changes in demand or individual market conditions. First, our financial condition is very strong with one and a half billion dollars of equity at June 30, and a book value slightly over $50 a share. We ended the second quarter with a cash balance of $372,000,000.00 borrowings under our $550 million unsecured revolving credit facility. This resulted in a very healthy net debt to cap ratio of 16%. This replaces our existing $50 million share repurchase authorization which had roughly $17 million of remaining availability. The $100 million share repurchase authorization reflects our expectation of the ongoing strength in our business and our commitment to creating long term shareholder value, while always maintaining low debt leverage. new contracts and second quarter increased to 2267. A second quarter record 2261 for last year second quarter. And last year second quarter was up 31% versus 2019. Year today, we have so 5376 homes 24% better than last year. Our new contracts were up 103% in April, down 11% in May and down 33% in June. Our sales pace was 4.2 in the second quarter compared to last year is 3.4. And our cancellation rate for the second quarter was 7%. We continue to manage sales to closely align ourselves with our ability to start and deliver our homes along with focus on our margins, especially given our record backlog of 5500 houses. About 51% of our second quarter sales were to first time buyers, compared to 56% in the first quarter. In addition 43% of our second quarter sales for inventory homes, the same percentage as the first quarter. Our community count was 175 at the end of the second quarter compared to 220 at the end of last year second quarter, and the breakdown by region is 79 in the northern region and 96 in the southern region. During the quarter we opened 16 new communities while closing 20 During last year of second quarter we opened 22 new stores and close 25. We delivered an all time quarterly record of 2250 and homes in the second quarter. And year today we have delivered 4277 homes, which is 28% more than last year. And we have started over 5000 homes in the first half of this year, which is 1500 more homes than the first half of last year. revenue increased 35% in the second order, reaching an all time quarterly record of 961 million. And our average closing price for the quarter was 411,008% increase compared to last year second quarter average of 379,000. Our second quarter gross margin was 25.1%. Up 320 basis points year over year. And our second quarter SG and a expenses were 10.4 revenue, improving 110 basis points compared to 11.5 a year ago. Interest expense decreased 2.1 million for the quarter compared to last year. Interest incurred for the quarter was 10 point 1 million compared to 10 point 3 million a year ago. Our pre tax income was 14.7 versus 10 last year, and our return on equity was 27% versus 17%. And during the quarter we generated 156 million of EBITDA compared to 86 million in last year second quarter. we generated 174 million of positive cash flow from operations in the second quarter compared to generating 83 million a year ago. And we have 22 billion in capitalized interest on our balance sheet about 1% of our assets. And our effective tax rate was 24% in the second quarter, same as last year, second quarter, and we estimate our annual rate for the year to be around 24%. And our earnings per diluted share for the quarter increased to $3.58 per share from $1.89 per share last year. Our mortgage and title operations achieved record second quarter results in pre tax income, revenue and number of loans originated revenue was up 50% to $28.6 million due to a higher volume of loans closed and sold, along with higher pricing margins. Pre tax income was $18 million, which was up 66% over 2000 and 22nd quarter. The loan to value on our first mortgages for the second quarter was 84% compared to 83%. 78% of loans closed in the quarter were conventional, and 22%, FHA or VA. This compares to 77% and 23%, respectively, for 2000 and 22nd quarter. Our average mortgage amount increased to $336,000 in 2021 second quarter compared to $311,000. Loans originated increased to a second quarter record of 1704 loans 24% more than last year, and the volume of loans sold increased by 48%. Our borrower profile remains solid, with an average down payment of over 16% and an average credit score of 747 up from 746 last quarter. Our mortgage operation captured over 84% of our business in the second quarter, compared to 83% last year. at June 30, we had $134 million outstanding under the MIF warehousing agreement, which is a $175 million commitment that was recently extended and expires in May 2022. And we also had $34 million outstanding Under a separate $90 million repo facility, which expires in October of this year. Both facilities are typical 364 day mortgage warehouse lines that we extend annually. As far as the balance sheet we ended the second quarter with a cash balance of 372 million and no borrowings under our unsecured revolving credit facility. And during the second quarter, we extended the maturity of our credit facility to July 2025, and increased the total commitment to 550 million. Total homebuilding inventory at June 30, was 2.1 billion, an increase of 250 million from last year, and our unsold land investment at June 37 or 82 million compared to 810 million a year ago. We had 497 million of raw land and land under development, and 285 million of finished unsold lots. We owned 3872, unsold finished lots, with an average cost of 74,000 per lot. And this average lock cost is 16% of our Foreign Earned 54,000 backlog every sale price. And during the second quarter, we spent 150 million on land purchases, and 87 million on land development for a total of 237 million, which was up from 156 million in last year, second quarter. And in the second quarter, we purchased about 4000 lots of which 78% were all in 2,022nd quarter, we purchased about 2100 lots of which 67% were all in general, most of our smart series communities are rolling deals, and have above average company pace and margin. And at the end of the quarter, we had 59 completed inventory homes, and 169 total inventory homes. Another total inventory 498 are in the northern region in 371 are in the southern region. And at the end of the first quarter, we had 98 completed inventory homes, and 708 total inventory homes.

We had a record setting second quarter highlighted by a 97% increase in net income, a 23% increase in homes delivered a 35% increase in revenue, and a return on equity of 27%. Our backlog sales value at the end of the quarter was $2.5 billion and all time quarterly record and 70% better than last year. units in backlog increased by 49%. The northern region, which is the balance of our markets, six to be exact in Ohio, Indiana, Illinois minutes Soda in Michigan contributed 961 deliveries, which is roughly 31% better than a year ago. The $100 million share repurchase authorization reflects our expectation of the ongoing strength in our business and our commitment to creating long term shareholder value, while always maintaining low debt leverage. revenue increased 35% in the second order, reaching an all time quarterly record of 961 million. And our earnings per diluted share for the quarter increased to $3.58 per share from $1.89 per share last year.

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Headlines in the past 90 days have been a testament to the value of resilient supply chains. Starting with our proprietary metrics with our view of the market, space utilization is 84.5%, up 100 basis points from the last 90 days. Lease proposals reached 93 million square feet in the first quarter, a new high watermark and are up 30%[Phonetic] from 2020 adjusted for the size of our portfolio. Lease signings were 60 million square feet, our second highest quarter on record. Much of this activity is in new leasing, and as a result, retention was 69% for the quarter as we're optimizing the credit and rents. Given our high volume of lease signings, our portfolio -- operating portfolio was 96.4% leased at quarter end. Our leasing mix continues to broaden with strong demand continuing from space sizes above 100,000 square feet and small spaces demand is improving. E-commerce demand remains elevated, representing 25% of new lease signings in the first quarter. In the U.S., we now expect net absorption of 300 million square feet in 2021, which would be the highest in history. This strong demand is being masked by supply, and we expect 300 million square feet of deliveries this year. Vacancies are below 2% in many of our top markets such as Southern California, Toronto, Germany's main markets and Tokyo. Houston, Madrid, Poland and West China, which taken together account for just over 5% of our NOI. In the U.S., we expect replacement cost to increase 20% to 25% over the two-year period through 2021, the fastest rate ever. For example, the team has procured steel for 5.2 million square feet of starts at pricing roughly 5% below market and providing us with the 10-week to 20-week schedule advantage. Rent growth for the quarter, which was up 2.4% in the U.S., outperformed our expectations. We are raising our 2021 rent forecast to 6.5% in the U.S. and 6% globally. Our in-place to market rent spread now stands at 13.6%, up 80 basis points sequentially. This represents future annual incremental organic NOI growth potential of more than $600 million. Turning to valuations, logistics assets values are up a record 7.5% over the last two quarters. Applying the valuation uplift to our $148 billion owned and managed portfolio, we estimate that the value of our real estate rose by more than $10 billion over the past two quarters. For the quarter, core FFO was $0.97 per share, which includes net promote expense of $0.01. Net effective rent change on rollover was 27%, led by the U.S. at 32%. Occupancy at quarter end was 95.6%, down 60 basis points sequentially, in line with the normal first quarter seasonality. Our share of cash same-store NOI growth was 4.5%, driven by the U.S. at 4.8%. For strategic capital, our team raised $1.4 billion in the first quarter as investor demand remains robust. Equity cues for our open-ended vehicles are at an all-time high, at more than $3 billion at quarter-end. Looking at the balance sheet, we continue to maintain excellent financial strength with liquidity and combined leverage capacity between Prologis and our open-ended vehicles now totaling $14 billion. We were able to get in front of the recent increase in interest rates and issued $3.5 billion of debt with a weighted average rate of 96 basis points and a term of 11 years. This activity included the issuance of a 10-year U.S. dollar bond with the spread of 55 basis points, the lowest 10-year REIT bond spread ever and the completion of our 15th green bond offering. Subsequent to quarter end, we closed on a green revolving credit facility, adding $500 million more capacity to our already exceptionally strong liquidity position. We are increasing our cash same-store NOI growth midpoint by 75 basis points and narrowing the range to 4.5% to 5%. We now expect bad debt expense to be in line with our historical average at approximately 20 basis points in gross revenues, down from our prior guidance midpoint of 30 basis points. We're increasing our average occupancy midpoint for our operating portfolio by 50 basis points to 96.5%. Strategic capital revenue, excluding promotes, will now range between $450 million and $460 million, up $12.5 million at the midpoint. We are increasing development starts by $400 million, and now expect a midpoint of $2.9 billion. Build-to-suits will comprise more than 40% of the volume. Our land portfolio today comprised of land auctions and covered land place supports approximately $17 billion of future development. We're increasing the midpoint for dispositions and contributions by $800 million in total. Consistent with the rise in asset value and higher contributions, we're increasing realized development gains by $200 million with a new midpoint of $750 million. Net deployment uses are now expected to be $50 million with leverage remaining effectively flat in 2021. Putting this all together, we're increasing our core FFO midpoint by $0.06 and narrowing the range to $3.96 per share to $4.02 per share. Core FFO, excluding promotes, will range between $3.98 per share and $4.04 per share, representing year-over-year growth at the midpoint of 12%. Our efforts over the past 10 years to reposition the portfolio and balance sheet have set us up to outperform in 2021 and beyond.

For the quarter, core FFO was $0.97 per share, which includes net promote expense of $0.01. Our share of cash same-store NOI growth was 4.5%, driven by the U.S. at 4.8%. We are increasing our cash same-store NOI growth midpoint by 75 basis points and narrowing the range to 4.5% to 5%. Putting this all together, we're increasing our core FFO midpoint by $0.06 and narrowing the range to $3.96 per share to $4.02 per share.

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Some folks could look at the $5.99 of adjusted EBITDA -- sorry, the adjusted earnings per share for 2020 and point out, it's another record year, another record year of adjusted earnings per share for the company. We increased our billable headcount by 14.5%. We seized the opportunity created by disruptions in the market to attract 36 terrific SMDs laterally. Revenues of $2.461 billion increased $108.6 million or 4.6%. GAAP earnings per share of $5.67 compared to GAAP earnings per share of $5.69 in 2019. Adjusted earnings per share of $5.99 compared to adjusted earnings per share of $5.80 in 2019. As Steve mentioned, our GAAP and adjusted earnings per share included a significant tax benefit that boosted full-year 2020 earnings per share by $0.30. And adjusted EBITDA of $332.3 million was down from $343.9 million in 2019. In 2020, our total billable headcount for the company grew 14.5%, on top of the 17.8% growth in 2019. For the quarter, revenues of $626.6 million increased $24.4 million or 4%. GAAP earnings per share of $1.57 compared to $0.76 in the prior-year quarter. Noteworthy during the quarter, we recorded an $11.2 million tax benefit from the use of foreign tax credits in the United States and a deferred tax benefit arising from an intellectual property license agreement between our U.S. and U.K. subsidiaries, which boosted both GAAP earnings per share and adjusted earnings per share by $0.32 for the quarter. Additionally, the impact of lower WASO from share repurchases increased earnings per share by $0.11. Adjusted earnings per share of $1.61, which excludes $0.04 of noncash interest expense related to our 2023 convertible notes compared to adjusted earnings per share of $0.80 in the prior-year quarter. Net income of $55.6 million compared to $29.1 million in the fourth quarter of 2019. Adjusted EBITDA of $82.3 million or 13.1% of revenues compared to $58.3 million or 9.7% of revenues in the prior-year quarter. These increases were only partially offset by higher compensation related to a 14.5% increase in billable headcount. In Corporate Finance & Restructuring, revenues of $219.8 million increased 21.4% compared to Q4 of 2019. Acquisition-related revenues contributed $19 million in the quarter. This increase was partially offset by a $7.6 million decline in pass-through revenues due to a decline in billable travel and entertainment expenses. Adjusted segment EBITDA of $35.4 million or 16.1% of segment revenues compared to $24.8 million or 13.7% of segment revenues in the prior-year quarter. This increase was due to higher revenues, which was partially offset by an increase in compensation, primarily related to 38.6% growth in billable headcount and higher variable compensation. Of note, the net year-over-year increase of 461 billable professionals includes continued organic hiring, 147 professionals from the acquisition of Delta Partners and the transfer of 66 professionals from our FLC segment into Corporate Finance, which occurred in the second quarter of 2020. On a sequential basis, Corporate Finance & Restructuring revenues decreased 7.1% due to the decline in restructuring activity. Revenues of $127.2 million decreased 15.4% compared to the prior-year quarter. Adjusted segment EBITDA of $7.6 million or 6% of segment revenues compared to $17.4 million or 11.6% of segment revenues in the prior-year quarter. Sequentially, FLC revenues increased 6.8% due to higher revenues in North America particularly driven by higher demand for our dispute services. Economic Consulting's record revenues of $160.5 million increased 4.9% compared to Q4 of 2019. Adjusted segment EBITDA of $31.3 million or 19.5% of segment revenues was a record and compared to $17.3 million or 11.3% of segment revenues in the prior-year quarter. Sequentially, revenues in Economic Consulting increased 3.5% as we continue to see higher demand for our non M&A-related antitrust services. In Technology, revenues of $58.6 million increased 13.8% compared to Q4 of 2019. Adjusted segment EBITDA of $10.2 million or 17.3% of segment revenues compared to $7.8 million or 15.1% of segment revenues in the prior-year quarter. Lastly, in strategic communications, revenues of $60.5 million decreased 8.8% compared to Q4 of 2019. The decrease in revenues was primarily due to a $4.8 million decline in pass-through revenues. Adjusted segment EBITDA of $11.7 million or 19.4% of segment revenues compared to $9.9 million or 14.9% of segment revenues in the prior-year quarter. Sequentially, revenues in Strategic Communications increased 14.2%, primarily due to higher demand for corporate reputation and public affairs services in the EMEA region. Net cash provided by operating activities; of $327.1 million compared to $217.9 million in the prior year. Free cash flow of $292.2 million in 2020 compared to $175.8 million in 2019. In 2020, we repurchased 3.3 million of our shares for a total cost of $353.4 million. In Q4 alone, we repurchased 1.6 million shares at an average price per share of $105.84 for a total cost of $169.2 million. Despite using $353.4 million for share repurchases, a 14.5% increase in billable headcount and the acquisition of Delta Partners, we ended the year with our total debt, net of cash, up only $74.4 million compared to December 31, 2019. We estimate that revenues for 2021 will be between $2.575 billion and $2.7 billion. We expect our GAAP earnings per share which includes estimated noncash interest expense related to our 2023 convertible notes of approximately $0.20 per share to range between $5.60 and $6.30. We expect full-year 2021 adjusted EPS, which excludes the impact of the noncash interest expense, to range between $5.80 and $6.50. We currently expect our full-year 2021 tax rate to range between 23% and 26%, which compares to 19.7% in 2020. Our CAGR for revenues in EMEA since 2017 is a 23.9%.

For the quarter, revenues of $626.6 million increased $24.4 million or 4%. GAAP earnings per share of $1.57 compared to $0.76 in the prior-year quarter. Adjusted earnings per share of $1.61, which excludes $0.04 of noncash interest expense related to our 2023 convertible notes compared to adjusted earnings per share of $0.80 in the prior-year quarter. We expect our GAAP earnings per share which includes estimated noncash interest expense related to our 2023 convertible notes of approximately $0.20 per share to range between $5.60 and $6.30. We expect full-year 2021 adjusted EPS, which excludes the impact of the noncash interest expense, to range between $5.80 and $6.50.

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Our portfolio remains about 15% to 20% occupied, which is comparable to our occupancy levels as of our October call. Additional details on our COVID-19 approach are outlined on pages 1 to 5 of our Supplemental Package. We exceeded our speculative revenue target by $400,000, executed lease volumes increased quarter-over-quarter, and our pipeline increased by 229,000 square feet. For the fourth quarter, we posted strong rental rate mark-to-market of almost 19% on a GAAP basis, and 11% on a cash basis. For the full year '20, our mark-to-market was a very strong 17.5% on a GAAP basis, and 9.3% on a cash basis. In addition, we had 59,000 square feet of positive absorption during the quarter, which included 33,000 square feet of tenant expansions with no tenant contractions. Our tenant cash collection efforts continue to be among the best in the quarter, in the sector rather, and we have collected over 98% of fourth quarter billings, and our January collection rate continues to track very well with 98.5% of office rents collected as of yesterday. Tenant retention came in at 52%, slightly above our full year forecast, and our core occupancy and lease targets were below our ranges simply due to pandemic-related delays and targeted move-ins, and lease executions and negotiations sliding into early '21. We did post FFO of $0.36 per share, which was in line with most consensus estimates. Portfolio stability remains top of mind, and our progress on several key factors can be found on pages 1 to 3 of the SIP. Those efforts have resulted in 79 active tenant renewal discussions, totaling about 750,000 square feet and to date have resulted in 62 tenants, aggregating 500,000 square feet actually executing leases. These leases had an average term of 30 months with a roughly 4% cash mark-to-market and 4% capital ratio. An important point to note is that this early renewal activity, when we exclude the large known roll-outs at 2340 Dulles and the retirement of 905 Broadmoor, we've reduced our remaining '21 rollover to just 4.2%. Our cash mark-to-market range is between 8% and 10%, and our GAAP mark-to-market range is between 14% and 16%. We do have several larger blocks of space to fill, particularly at Barton Skyway in Austin, 1676 International in Tysons, and several others. But looking forward, achieving our leasing objectives on those spaces can be significant revenue boosters, and our '21 plan only has about $1 million of revenue coming in from those larger spaces. Our GAAP same-store NOI growth of 0 to 2% and our cash same-store of 3% to 5% is primarily driven by Austin up about 8%, Pennsylvania suburbs close to 5% increase, and Philadelphia around 2%. Our Metro D.C. region will continue to be negative, while the 1676 International Drive continues through its reabsorption phase. With that renovation now complete, our overall leasing activity has really accelerated, and our pipeline is up significantly to about 600,000 square feet this quarter versus around 370,000 square feet last quarter. And also, we will be retiring 905 Broadmoor permanently as part of our Broadmoor master plan development. Spec revenue will range between $18 million and $22 million. We have $14.7 million achieved or 74% achieved at this point. This is the first time we're providing a spec revenue range versus $1 target, but given the lack of real forward visibility on the acceleration of leasing, we felt that it was warranted. Occupancy levels, we think, will be between 91% and 93% at year-end and with leasing percentages being between 92% and 94%. Capital will run about 11% of revenues, which is below our 2020 target range and we are forecasting a debt-to-EBITDA being between 6.3 and 6.5 times, and Tom will certainly talk about that. It stands at 1.3 million square feet, including about 88,000 square feet in advanced stages of negotiations and as I mentioned before that pipeline is up about 230,000 square feet. Interestingly too knowing that physical tours have yet to fully return for a variety of pandemic-related reasons, we have launched a virtual tour platform for all of our availabilities and to date, we're generating close to 300 tours per month with over 500,000 square feet being inspected. We anticipate having $562 million on our line of credit available year-end. The dividend remains extremely well covered with a 53% FFO and 68% CAD payout ratio. We did execute a joint venture with an institutional partner on 12 properties totaling 1.1 million square feet. The portfolio has added $193 million. We retained a 20% ownership stake. In addition to the $121 million first mortgage finance we put in place, we also elected to provide seller financing in the form of a $20 million preferred equity position that has a 9% current pay. As a result of that, we did receive about $156 million of net cash proceeds and with all of our -- as with all of our ventures, we will generate an attractive fee stream by retaining property and asset management as well as leasing and construction management services. On our previous calls, we had highlighted that we had about $250 million of remaining non-core assets in our wholly owned pool. This partnership, similar to others we have done, did create a different capital structure that more than doubles our return on invested equity from a mid-single digit return to mid-teen return on our remaining invested capital and also avoids about a $20 million of direct capital investment by Brandywine. It's interesting as well too, with this transaction, we now have over 80% of our revenue stream coming in from submarkets that are ranked A+ or A++ by Green Street's recent office Market Snapshot. We had also made a preferred investment in 90% of lease to building portfolio, totaling 550,000 square feet in Austin, near the airport. That preferred investment totaled $50 million, also has a 9% current pay, excellent cash coverage and a several year term, and this was similar to the type of transaction we did a number of years ago at Commerce Square here in Philadelphia. This investment increases our revenue contribution from Austin toward our 25% goal and will enable us to take advantage of the market knowledge and position we have to create a structured well covered financial instrument. Our partner will have a 45% preferred interest in the joint venture with Brandywine holding the remaining 55% equity interest. The project will be built with 7% blended yield that will consist of 326 apartment units, a 100,000 square foot -- feet of life science and 100,000 square feet of innovative office along with underground parking and 9,000 square feet of street level retail. We do have an active pipeline totaling over 300,000 square feet for the life science and office space component of this project and based on this level of interest, we do plan a construction start in March of '21. We are currently sourcing construction loan financing and plan to have a loan in place for the next 90 days at a targeted 55% to 60% loan-to-cost, and given the front-loading of the equity commitment of about $115 million assuming a 60% loan-to-cost construction financing. Our share of the equity will be about $63 million of which about $35 million is already invested. As we've noted every quarter, each of these projects can be completed within four to six quarters and cost between $40 million to $70 million. The pipeline on those production assets is around 450,000 square feet and we are continuing actively our marketing efforts along those lines to hopefully get some pre-leasing done there as the market recovers. And looking at the two existing development projects, 405 Colorado is on track for a Q1 '21 completion. We have a pipeline that has built since our last call that approaches 360,000 square feet, including 53,000 square feet in advanced discussions. We've increased our cost by approximately $6 million, primarily due to additional TI and leasing commissions, a bit longer absorption schedule, which has resulted in our targeted yield being reduced to 8%. 3000 Market construction is under way on this building, which will be fully occupied by Q4. The building is fully leased for 12 years and will deliver a develop yield of 9.6%. The commencement date did slide one quarter due to COVID-related construction delay, but we have increased our yield on the project by 110 basis points due to some design scope modifications and success on the buyout. The overall master plan is about 3 million square feet, it can be life science space, so we can really build on the work we've done at 3000 Market, The Bulletin Building, and now Schuylkill Yards West. Plans for 3151, which is our 500,000 square foot life science dedicated building is well under way. We do have a leasing pipeline of over 500,000 square feet for that project and the goal would be to start that later this year, assuming if pre-leasing market conditions permit. In Broadmoor, we are advancing Blocks A and F, which is a total of 350,000 square feet of office and 870 apartments. Block A had $164 million, 350,000 square foot office as part of that phase, along with 341 multi-family units at a cost of $116 million. Our fourth quarter net income totaled $18.9 million or $0.11 per diluted share and our FFO totaled $61.4 million or $0.36 per diluted share. Portfolio operating income fell about $75.5 million and exceeded our $74 million previous estimate, primarily due to lower operating costs benefited by lower tenant physical occupancy. Termination and other income totaled $1.6 million or $3 million below our third quarter guidance. FFO contribution from unconsolidated joint ventures totaled $6.3 million or $1.2 million below our third quarter guidance number primarily due to some co-working tenant write-offs, and that was slightly offset by the JV announced at the end of the year. Our cash and GAAP same-store results came at 126[Phonetic] basis points lower, again due to lower parking revenue and some tenant leasing slides, all of which have commenced. Our fourth quarter fixed charge and interest coverage ratios were 3.8 and 4.1 respectively. Our fourth quarter annualized net debt-to-EBITDA decreased to 6.3 at the lower end of our 6.3 to 6.5 range. Our overall collection rate continues to be very strong above 38 -- 98%. Additionally, our fourth deferred billings were less than $100,000. For cash same-store is outlined on Page 1 of our Supplemental. At the midpoint, net income will be $0.37 per diluted share and FFO will be $1.37 per diluted share and that includes roughly $0.04 of dilution related to the fourth quarter transactions we announced. Portfolio operating income, our property level GAAP income will be roughly $285 million or a decrease of about $30 million compared to 2021 due to the following items. 2340 Dulles Corner and the retirement of 905 Broadmoor will generate about $10 million reduction from '20 to '21. The Mid-Atlantic portfolio JV results in another $17 million decrease. The full year effect of Commerce Square results in a $19 million decrease, those are partially offset by the full year effect of one Drexel park and Bellet Building being about $4 million, the 2021 completions of 405 Colorado and 3000 Market for about $3 million and about $3 million increase in our same-store portfolio GAAP NOI. FFO contribution from our unconsolidated joint ventures will total $20 million to $25 million. G&A will be between $31 million and $32 million. Interest expense will decrease to approximately $67 million to $68 million, that's primarily due to the payoff of our two remaining mortgages as higher interest rates. Capitalized interest will approximate $4 million as we complete the 405 Colorado building but also commence Schuylkill Yards West. Investment income will increase to $6.5 million, primarily due to the new structured finance investment in -- at Austin, Texas. Land sales and tax provision will net to about $2 million as we anticipate selling some non-core land parcels. Termination and other income totaling $7.5 million, which is above the 2020 amount primarily due to one-time items, and again, were being moved from the fourth quarter of 2020 into the first half of '21. Net management leasing and development fees will be $16 million, which is just above our 2020 actual due to the full year effect of Commerce Square and the JV for the Mid-Atlantic properties. Looking close -- more closely at the first quarter, we anticipate portfolio of property NOI totaling about $70 million and will be about -- sequentially about $5.5 million lower primarily due to 2340 Dulles as well as the Mid-Atlantic JV. FFO contribution from our unconsolidated joint ventures will be $6.5 million. G&A for the first quarter will increase from $6.3 million to $8 million. Interest expense will approximate $16 million, capitalized interest will be roughly $1.5 million, termination and other income, we continue to anticipate that to be $4 million with some of those transactions moving to '21. Net management fee and development fee income will be $4.5 million with investment income being $1.6 million. We expect some land gains potentially in the first quarter of about $0.5 million. Our capital plan is very straightforward and totals to $350 million. Our 2020 CAD ratio is between 75% and 81%, the main contributors to the lower coverage ratio is going to be the property level NOI reductions, as well as anticipated lease up in upcoming -- with the upcoming rollovers. Using that as a guide, our uses in 2021 will be $145 million of development and redevelopment. That does include the additional cash that is going to be necessary to complete our equity contribution into Schuylkill Yards West, $130 million of common dividends, $35 million of revenue maintain and $40 million of revenue creating capex. The primary sources will be $185 million of cash flow after interest payments, $99 million use of the line, $46 million of using the cash on hand and roughly $20 million in proceeds from land in other sales. Based on the capital plan outlined, our line of credit balance will be 5 -- roughly $500 million. We have projected that our net debt-to-EBITDA range of 6.3 to 6.5 with the main variable being timing and scope of our development activities. In addition, our net debt-to-GAV will approximate 14%. In addition, we anticipate our fixed charge ratio and -- to be 3.7 and our interest coverage ratio to be 3.9.

Our fourth quarter net income totaled $18.9 million or $0.11 per diluted share and our FFO totaled $61.4 million or $0.36 per diluted share.

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For 2021, net sales were $730.7 million and diluted earnings were $8.78 per share. For 2020, net sales were $568.9 million and diluted earnings were $5.09 per share. For the fourth quarter of 2021, net sales are $168.0 million and diluted earnings were $2.14 per share. For the corresponding period in 2020, net sales were $169.3 million and diluted earnings per $1.78 per share. Diluted earnings per share in the fourth quarter of 2021 were increased by $0.18 due to a reduction in the effective tax rate for the year, which was recognized in the quarter. T-bills, total $221 million. Our current ratio was 4.3 to one, and we had no debt. At December 31, 2021, stockholders equity was $363.7 million, which equates to a book value of $20.67 per share, of which $12.56 per share was cash and short-term investments. In 2021, we generated $172 million dollars of cash from operations. We reinvested $29 million of that back into the company in the form of capital expenditures, primarily related to new products. We estimate that 2022 capital expenditures will be approximately $20 million, predominantly related to new product development. In 2021, we returned $59 million to our shareholders through the payment of dividends. Our board of directors declared an $0.86 per share quarterly dividend for shareholders of record as of March 11, 2022, payable on March 25, 2022. As a reminder, our quarterly dividend is approximately 40% of net income and therefore, varies quarter to quarter. Our 28% increase in sales would not have been possible without the 30% increase in production at our factories. And this 30% increase was achieved with a manpower increase of less than 10%. The manufacturing efficiency gains drove a 109% return on net operating assets for the year, which is a remarkable feat. Following a 44% increase in 2020, the sell-through of our products from distributors to retailers increased again in 2021, this time by 4% despite the 12% reduction in the National Instant Criminal Background Check System background checks as suggested by the National Shooting Sports Foundation. Led by the award-winning Ruger-5.7 pistol, the MAX-9, and the LCP MAX pistol, our new product sales in 2021 represented $155 million, or 22% of firearm sales, an increase of $45 million from $111 million, or 22% of firearm sales in 2020. The model 1895 SBL, chambered in 45-70 government in December. During the past year, our team completed a thorough design and production review of the 1895 focused on ensuring the highest quality, accuracy, and performance standards. Distributor inventories of our products increased 125,000 units in 2021, but remained below the level needed to support rapid fulfillment of retailer demand for most products.

For 2021, net sales were $730.7 million and diluted earnings were $8.78 per share. For the fourth quarter of 2021, net sales are $168.0 million and diluted earnings were $2.14 per share.

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net2phone subscription revenue growth accelerated in the fourth quarter increasing 46% year over year. Our subscription revenue margin remained robust, increasing 10 basis points to 83.5%. Within our fintech segment, NRS revenue increased by 76% year over year, led by increased sales of merchant services and specifically NRS Pay payment processing. At July 31, NRS had over 14,000 active terminals and over 5,600 payment processing accounts, more than double the number of accounts a year earlier. Average revenue per terminal exclusive of terminal sales increased from $126 in the year-ago quarter to $169 in the fourth quarter of 2021. Also within our fintech segment, money transfer revenue decreased 49% compared to the year-ago quarter. Absent that impact, fourth-quarter fiscal 2021 revenue would have increased by 36% compared to the year-ago quarter. Sequentially, money transfer revenue increased by over 6%. Traditional Communications revenue in the fourth quarter increased 10% year over year. Within Traditional Communications, Mobile Top-Up revenue increased by 41%, powered by increases in sales in its B2B channel. Fourth-quarter earnings per diluted share increased to $1.46 from $0.82 in the fourth quarter last year. Cash generation during the quarter helped to drive an increase in cash and current investments of $34 million during the quarter and $52 million during the fiscal year to $161 million as of July 31, and we have no debt. Following the quarter close, our NRS business sold a 2.5% stake to a private investment fund for $10 million, implying a $400 million valuation for that business. That was based on approximately 19 times NRS' trailing 12-month revenue at the end of our third quarter.

Fourth-quarter earnings per diluted share increased to $1.46 from $0.82 in the fourth quarter last year.

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Excluding our two idle but contracted rigs, our current US FlexRig activity has improved to 80 rigs and we expect our active rig count will exit the first quarter at approximately 90 rigs. As we anticipated, our rig count growth has exceeded that of our peers coming off of the bottom, allowing us to recoup 4 to 5 points of market share. Today, H&P owns more than a third of the estimated 635 super-spec rigs in the US market. With many rig count forecasts ranging from 450 to 550 rigs over the next couple of years, we see significant further super-spec FlexRig market share growth and opportunities for improved pricing. Excluding our two idle but contracted rigs, our current US FlexRig activity has improved to 80 rigs and we expect our active rig count will exit the first quarter at approximately 90 rigs. As we anticipated, our rig count growth has exceeded that of our peers coming off of the bottom, allowing us to recoup 4 to 5 points of market share. Today, H&P owns more than a third of the estimated 635 super-spec rigs in the US market. With many rig count forecasts ranging from 450 to 550 rigs over the next couple of years, we see significant further super-spec FlexRig market share growth and opportunities for improved pricing. The company generated quarterly revenues of $208 million versus $317 million in the previous quarter. Correspondingly, total direct operating costs incurred were $164 million for the fourth quarter versus $207 million for the previous quarter. General and administrative expenses totaled $33 million for the fourth quarter, lower than our previous guidance. During the fourth quarter, we closed on the sale of a portion of our real estate investment portfolio comprised of six industrial developments in Tulsa, Oklahoma for $40.7 million, which had an aggregate net book value of $13.5 million. The resulting gain of $27.2 million is reported as the sale of assets on our consolidated operations. Our Q4 effective tax rate was approximately 28% as we recognized an Oklahoma tax benefit related to the sale of our industrial properties in the state net operating losses. To summarize this quarter's results, H&P incurred a loss of $0.55 per diluted share versus a loss to $0.43 in the previous quarter. Absent these select items, adjusted diluted loss per share of $0.74 in the fourth fiscal quarter versus an adjusted $0.34 loss during the third fiscal quarter. For fiscal 2020 as a whole, we incurred a loss of $4.60 per diluted share. This was driven largely by the $563 million non-cash impairment announced in our second quarter as well as other select items, including restructuring charges and mark-to-market losses on our legacy securities portfolio. Collectively, these select items constituted a loss of $3.74 per diluted share. And absent these items, fiscal 2020 adjusted losses were $0.86 per diluted share. Capital expenditures for the full fiscal 2020 totaled $141 million, below our previous guidance due to the combination of ongoing capital efficiency efforts as well as the timing of a small amount of supply chain spending that crossed into fiscal 2021. This annual total is a reduction of $145 million from our initial fiscal 2020 budget and a reduction of over $315 million from fiscal 2019 capex. H&P generated $539 million in operating cash flow during fiscal 2020, representing a decrease of approximately $317 million. I will note that our cash and short-term investments balance increased by $176 million sequentially year-over-year, which I will discuss more in detail later in my remarks. We averaged 65 contracted rigs during the fourth quarter, approximately 15 of which were idle but contracted on some form of cold or warm stack rate. This contracted average was down from an average of 89 rigs in Q3. During the fourth quarter, we bottomed to 62 rigs contracted with about 16 IBC rigs resulting in 46 active rigs at the low activity point. We exited the fourth quarter with 69 contracted rigs, of which 11 were IBC. Revenues were sequentially lower by $105 million due to the aforementioned activity decline as well as the IBC count. Included in this quarter's revenues were $12 million of early termination revenue. North America Solutions operating expenses decreased $43 million sequentially in the fourth quarter, primarily due to reduced activity and to the proactive operating initiatives at the field level that I discussed during the third quarter call. The activity level has continued to grow as operators add rigs with oil hovering around $40 per barrel. As of today's call, we have 82 rigs contracted with only two IBC rigs remaining. We expect to end the first fiscal quarter of 2021 with between 88 and 93 contracted rigs and we also expect the remaining two IBC rigs to return to work in late December or early January. And of the approximately 21 rigs we have added or expecting to add to the active H&P rig count, after September 30 through December 31, just over 30% are working under performance contracts. In the North America Solutions segment, we expect gross margins to range between $40 million to $50 million with approximately $1 million of that coming from early termination revenue. Our current revenue backlog from our North America Solutions fleet is roughly $554 million for rigs under term contract, but importantly is not inclusive of any potential performance bonuses. This amount does not include the aforementioned $1 million of early terminations expected in Q1. Regarding our International Solutions segment, International Solutions business activity declined from 11 active rigs during the third fiscal quarter to five active rigs at fiscal year-end. In the first quarter, we expect to have a loss of between $5 million to $7 million, apart from any foreign exchange impacts. Offshore generated a gross margin of $4.6 million during the quarter, below our estimates, in part due to unfavorable adjustments to self-insurance reserves related to a prior period claim. The previously mentioned gross margin also includes approximately $1 million of contribution from management contract rigs. As we look toward the first quarter of fiscal 2021 for the Offshore segment, we expect that offshore rigs will generate between $5 million to $7 million of operating gross margin with offshore management contracts contributing an additional $1 million to $2 million. Capital expenditures for the full fiscal 2021 year are expected to range between $85 million to $105 million, which is a reduction of approximately 33% to fiscal 2020 capex. As you may recall, in fiscal 2019, we had bulk purchases in capex to scale up rotating componentry [Indecipherable] 200 plus working super-spec FlexRig count. As such, we expect fiscal 2020 year maintenance capex will range between $250,000 to $400,000 per active rig in the North America Solutions segment, well below our prior year guidance of $750,000 to $1 million. We estimate walking conversions to approximately $6 million to $7 million per rig. Depreciation for fiscal 2021 is expected to be approximately $430 million. This is approximately $50 million less in fiscal 2020, primarily due to the second quarter impairments of non-super-spec rigs and associated capital spares. Our general and administrative expenses for the full fiscal 2021 year are expected to be approximately $160 million. We expect R&D expenditures to be approximately $30 million in fiscal 2021. The statutory US federal income tax rate for our fiscal 2021 year end is 21%. In addition to the US statutory rate, we're expecting incremental state and foreign income taxes to impact our tax provision, resulting in an expected effective income tax rate range of 19% to 24%. Helmerich & Payne had cash and short-term investments of approximately $577 million at September 30, 2020 versus $492 million at June 30, 2020. Including our revolving credit facility availability, our liquidity was in excess of $1.3 billion. Our debt to capital at quarter end was about 13% with a positive net cash position as our cash on hand exceeds our outstanding bond. We earned cash flow from operations in the fourth quarter of approximately $93 million versus $214 million in fiscal Q3. Our trade accounts receivable at fiscal year end was approximately $150 million with the preponderance being less than 60 days outstanding. Our inventory balance is reduced $9 million sequentially from June 30 to $104 million at September 30 as we have leveraged consumables across the entirety of US basins and have reduced our min/max carrying targets to reflect the new activity levels. Based on our budget for 2021 fiscal year, we expect to end fiscal 2021 with cash and short-term investments of approximately $450 million to $500 million.

To summarize this quarter's results, H&P incurred a loss of $0.55 per diluted share versus a loss to $0.43 in the previous quarter. We expect R&D expenditures to be approximately $30 million in fiscal 2021.

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Granite portion of the settlement is insurance is $66 million and we expect it to be paid from existing cash on hand. In 2020, we had over 200 interns, and more than half were diverse. In addition, 1/3 of our executive team and nearly half of our Board of Directors are diverse. The extension of the FAST Act, the $13.6 billion infusion to the Highway Trust Fund for 2021 and the enactment of Coronavirus relief bills have combined to provide direct and indirect support for transportation funding. As a result, water segment cap remains strong as of the end of the first quarter at $339 million. This figure does not include the recently awarded Leon Hurse Dam project in Texas for approximately $160 million, which will be included in our second quarter cap. This award is a component of the overall Lake Ralph Hall project, which will be one to Texas newest lakes and one of the state's biggest water projects in the last 30 years. All levels of the government recognize the critical need to repair and support water infrastructure across the country, as seen in the ongoing discussion with the federal infrastructure bill and the Senate recently passed $35 billion water infrastructure bill. Our team has turned in a solid quarter and ended with a record cap of over $1 billion. In the first quarter, we added to cap a significant new $267 million tunnel project in Columbus, Ohio. As of the end of the first quarter, our consolidated cap is $4.5 billion, an increase during the quarter of over $170 million compared to year-end levels. First quarter consolidated revenue grew 5% year-over-year to $670 million with gross profit increasing 166% year-over-year to $63 million with a gross profit margin of just under 10%. Within our transportation segment, revenue was up slightly year-over-year to $351 million, led by an increase from the California Operating Group, which offset a revenue decrease from the Heavy Civil Operating Group. Transportation gross profit for the quarter increased 41% to $36 million, resulting in a gross profit margin of 10%. Losses from the Old Risk portfolio in the first quarter of 2021 under $1 million, compared to losses of $13 million in the first quarter of 2020. The Old Risk portfolio, backlog decreased by nearly $100 million during the quarter, which is on pace to meet our estimated project burn of $425 million to $475 million during 2021 that I mentioned in our last call. In our water segment, first quarter revenue was down 2% year-over-year as the segment continued its recovery from the COVID-19 pandemic. Water gross profit for the first quarter decreased to 8% to $9 million, resulting in a gross profit margin of 9%. First quarter revenue increased 17% year-over-year to $156 million. Specialty gross profit increased 262% to $17 million with a gross profit margin of 11%. Finally, the Materials segment completed an exceptional first quarter with a revenue increase of 26% year-over-year to $63 million in 2021. Materials gross profit increased to $2 million, resulting in a gross profit margin of just under 3% as compared to breakeven in the prior year. Adjusted EBITDA for the first quarter increased $35 million year-over-year to $17 million, resulting in an adjusted EBITDA margin of over 2% for the quarter. Our first quarter resulted in an adjusted net loss of $5 million, which was a $27 million improvement from an adjusted net loss of $32 million in the prior year. We had another strong cash quarter with cash from operations of $38 million and a net increase in cash during the quarter of $17 million compared to year-end. We ended the first quarter with cash and marketable securities of over $464 million and our teams remain focused on working capital management. With the completion of the first quarter, we are reiterating our guidance for the full fiscal year 2021. SG&A increased $2.5 million year-over-year to $76 million, which was 11.3% of revenue for the first quarter. This increase was primarily attributable to a change in the fair market value of our non-qualified deferred compensation plan liability of $5 million year-over-year. For the full year, our guidance is unchanged with an expected SG&A expense of 8.5% to 9% of revenue. We expect this execution will allow us to achieve an adjusted EBITDA margin range of 5.5% to 7.5%.

With the completion of the first quarter, we are reiterating our guidance for the full fiscal year 2021.

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Third quarter sales were $1.3 billion, which was a 3.9% decrease from the prior year but a 78.3% increase over the second quarter, a significant accomplishment and an encouraging sign of the health of our brand. Our domestic wholesale business returned to growth in the quarter, rising 6.3% a result of pent-up demand and the relevance of our product. The more than 3,770 Skechers stores e-commerce sites and availability in many of the leading retailers worldwide gave us the opportunity to fulfill demand and satisfy customers as the markets reopen. Our joint venture business was up 14% led by an increase of 23.9% in China where our e-commerce business was particularly strong. Our European subsidiaries were up 18.1% overall led by fantastic growth in Germany as well as in France and Central Eastern Europe. In the quarter we also opened 24 pre-COVID planned stores including flagship locations on Rue de Rivoli, the premier shopping street in France Oxford Circus in London and Shinjuku in Tokyo. And two stores in Colombia and another 19 domestic and international locations. In the third quarter, our direct-to-consumer business decreased 16.9%, as consumer traffic remained challenged mostly in tourist and destination concept stores as well as continued store closures in some markets. However, our domestic e-commerce business continued to grow significantly, even as our retail locations reopened increasing 172.1% in the quarter. And are now connected with our e-commerce channel, allowing consumers to shop our product online and pick up in one of our more than 500 U.S. locations, either in-store or curbside. In addition to the 24 company-owned stores, 189 new third-party Skechers stores opened around the world and 48 closed bringing our total company-owned third-party store count to 3,770 worldwide, at quarter end. Our new 1.5 million square foot China distribution center remains on track. And we are working diligently on the expansion of our North American distribution center, which we expect to be completed in the second half of 2021 bringing our facility to 2.6 million square feet. We also completed the expansion of our European distribution center, bringing it to 2.1 million square feet and expect to open our first U.K.-based distribution center by the end of this year. This quarter was a stark improvement over last quarter, as sales improved in each of our segments and total sales grew 78.3%. Our sales were down only 3.9% year-over-year, which we view as a major accomplishment. Sales in the quarter totaled $1.3 billion, a decrease of $53.1 million or 3.9% from the prior year quarter. On a constant currency basis, sales decreased $65.6 million or 4.8%. Domestic wholesale sales increased 6.3% or $18.8 million, fueled by consumer demand for multiple categories, across men's, women's and kids. International wholesale sales decreased 0.5% in the quarter. Our distributor business decreased 43.7% in the quarter, reflecting continuing challenges, in distributor-led markets. But our subsidiaries were up 1.5%. And our joint ventures grew 14%. China sales grew 23.9% for the quarter, as demand rebounded, especially in e-commerce channels. Direct-to-consumer sales decreased 16.9%, the result of a 15.3% decrease domestically and a 19.6% decrease internationally, reflecting both challenged consumer traffic trends and the impact of temporary store closures. However, these results were partially offset by another robust increase in our domestic e-commerce business of 172.1%. Gross profit was $625.1 million, down $28 million compared to the prior year on lower sales volumes. Total operating expenses increased by $24.3 million or 4.7%, to $536.2 million in the quarter. Selling expenses decreased by $11.6 million, or 11.9%, to $85.9 million, primarily due to lower global advertising and trade show expenditures. General and administrative expenses increased by $35.9 million, or 8.7%, to $450.3 million, which was primarily the result of an $18.2 million one-time non-cash compensation charge related to the cancellation of restricted share grants associated with the recent legal settlement, as well as volume-driven increases in warehouse and distribution expenses for both our international and domestic businesses. Earnings from operations was $92.1 million versus prior year earnings of $147.4 million. Net income was $64.3 million, or $0.41 per diluted share, on 155 million diluted shares outstanding. However, adjusting for the one-time non-cash compensation charge previously mentioned, net income was $82.6 million, or $0.53 per diluted share. These compare to prior year net income of $103.1 million, or $0.67 per diluted share, on 154 million diluted shares outstanding. Our effective income tax rate for the quarter decreased to 15.4% from 15.8% in the prior year. We ended the quarter with $1.5 billion in cash, cash equivalents and investments, which was an increase of $468.2 million or 45.4% from December 31, 2019, primarily reflecting the drawdown of our senior unsecured credit facility in the first quarter. Trade accounts receivable at quarter end were $709 million, an increase of 9.9%, or $63.6 million from December 31, 2019, and an increase of 7% or $46.6 million from December 30, 2019. Total inventory was $1.05 billion, a decrease of 1.5% or $16.5 million from December 31, 2019, but an increase of 18.3% or $163 million from the September, 30, 2019. Total debt, including both current and long-term portions, was $812 million compared to $121.2 million at December 31, 2019. Capital expenditures for the third quarter were $63.6 million, of which $24.6 million related to the expansion of our domestic distribution center, $19.2 million related to new store openings and remodels worldwide, as well as a new point-of-sale system and $11.4 million related to our new corporate offices in the United States. We now expect total capital expenditures for the remainder of the year to be between $100 million and $125 million, inclusive of the aforementioned projects. However, we will not be providing revenue and earnings guidance this quarter, as the environment remains too unpredictable to forecast reliably.

Our joint venture business was up 14% led by an increase of 23.9% in China where our e-commerce business was particularly strong. Sales in the quarter totaled $1.3 billion, a decrease of $53.1 million or 3.9% from the prior year quarter. China sales grew 23.9% for the quarter, as demand rebounded, especially in e-commerce channels. Net income was $64.3 million, or $0.41 per diluted share, on 155 million diluted shares outstanding. However, adjusting for the one-time non-cash compensation charge previously mentioned, net income was $82.6 million, or $0.53 per diluted share. However, we will not be providing revenue and earnings guidance this quarter, as the environment remains too unpredictable to forecast reliably.

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Just last month, we announced our agreement to sell a 20% equity interest in that business to KKR and it's an important step for two reasons: first, bringing in a new strategic partner allows Sempra Infrastructure to strengthen its own balance sheet while also position the business to self-fund its future growth; and second, this transaction sends a clear market signal about the value and expected growth of our Infrastructure platform. In the first quarter alone Oncor connected approximately 19,000 new premises, greater than the connections in the first quarter of 2020, again validating the underlying strength of economic and demographic growth in the region. At Sempra LNG, we have begun engineering, construction of ECA Phase 1 and continue to progress our LNG development projects. At Cameron Phase 2, we continue to work with our Cameron partners on the technical design of the project and to advance commercial discussions. In March, we expanded the renewable energy platform by finalizing the acquisition of the remaining 50% equity interest in ESJ and placing the Border Solar project into operation. With the announced sale of a 20% equity interest in Sempra Infrastructure to KKR, we've gained a strategic partner to help fund future growth. The $3.37 billion in proceeds is expected to be used to fund growth at our US utilities and to strengthen our balance sheet, and also establishes an implied enterprise value of approximately $25.2 billion. This compares to first quarter 2020 GAAP earnings of $760 million, or $2.53 per share. On an adjusted basis, first quarter 2021 earnings were $900 million, or $2.95 per share. This compares to our first quarter 2020 adjusted earnings of $741 million, or $2.47 per share. The variance in the first quarter 2021 adjusted earnings compared to the same period last year was affected by the following key items: $73 million of lower losses at parent and other, primarily due to net investment gains, lower net interest expense, lower retained operating costs and lower preferred dividends; $62 million of higher equity earnings from Cameron LNG JV, primarily due to Phase 1 commencing full commercial operations in August of 2020; $35 million of higher CPUC base operating margin at SoCalGas, net of operating expenses; and $30 million of higher equity earnings at Sempra Texas Utilities, primarily due to increased revenues from rate updates to reflect invested capital and customer growth and higher consumption due to weather. This was partially offset by $56 million of lower earnings due to the sales of our Peruvian and Chilean businesses in April and June of 2020, respectively.

On an adjusted basis, first quarter 2021 earnings were $900 million, or $2.95 per share.

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Consolidated revenues for the quarter were $446.9 million, down 4% from our fiscal 2020 first quarter. Fully diluted earnings per share for the quarter was $2.20, which exceeded our expectations as many variable expenses trended lower than our projections. Overall, the outlook continues to be difficult to forecast. As Steve mentioned, in our first quarter of 2021, consolidated revenues were $446.9 million, down 4% from $465.4 million a year ago and consolidated operating income decreased to $56 million from $60.1 million or 6.7%. Net income for the quarter decreased to $41.9 million or $2.20 per diluted share from $48.2 million or $2.52 per diluted share. Our effective tax rate in the quarter was 25% compared to 22.1% in the prior year which unfavorably impacted the earnings per share comparison. Our Core Laundry operations revenues for the quarter were $393.2 million, down 5.6% from the first quarter of 2020. Core Laundry organic growth, which adjusts for the estimated effect of acquisitions as well as fluctuations in the Canadian dollar, was also 5.6%. Core Laundry operating margin decreased to 12.4% for the quarter or $48.9 million from 12.9% in prior year or $53.8 million. Energy costs decreased to 3.6% of revenues in the first quarter of 2021, down from 3.9% in prior year. Revenues from our Specialty Garments segment, which delivers specialized nuclear decontamination and cleanroom products and services, increased to $38.1 million from $33.4 million in the prior year or 14.2%. Segment's operating margin increased to 18.8% from 14.6%. Our First Aid segment's revenues were $15.5 million compared to $15.7 million in prior year. However, the segment's operating profit was nominal compared to $1.4 million in the comparable period of 2020. We continue to maintain a solid balance sheet and financial position with no long-term debt and cash, cash equivalents and short-term investments totaling $473 million at the end of our first quarter of fiscal 2021. For the first three months of fiscal 2021, capital expenditures totaled $41.8 million as we continue to invest in our future with new facility additions, expansions, updates and automation systems that will help us meet our long-term strategic objectives. Our quarterly capex spend was elevated primarily due to the purchase of a building in New York City for $14.1 million, which will provide us a strategic location for a future service center. During the quarter, we capitalized $2.9 million related to our ongoing CRM project which consisted of license fees, third-party consulting costs and capitalized internal labor costs. As of the end of our quarter, we had capitalized a total of $25.5 million related to the CRM project. Eventually, the depreciation of the system combined with additional hardware we will install to support our new capabilities, like mobile handheld devices for our route drivers, will ramp to an estimated $6 million to $7 million of additional depreciation expense per year. During the first quarter of fiscal 2021, we repurchased 41,000 common shares for a total of $7.2 million under our previously announced stock repurchase program. As of November 28, 2021 [Phonetic], the Company had repurchased a total of 355,917 common shares for $59.5 million under the program. Throughout December, the weekly rental billings in our Core Laundry operations have been trending down compared to the comparable weeks in prior year by approximately 3.5% to 4%.

Consolidated revenues for the quarter were $446.9 million, down 4% from our fiscal 2020 first quarter. Fully diluted earnings per share for the quarter was $2.20, which exceeded our expectations as many variable expenses trended lower than our projections. Overall, the outlook continues to be difficult to forecast. Net income for the quarter decreased to $41.9 million or $2.20 per diluted share from $48.2 million or $2.52 per diluted share. We continue to maintain a solid balance sheet and financial position with no long-term debt and cash, cash equivalents and short-term investments totaling $473 million at the end of our first quarter of fiscal 2021.

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This significant free cash flow is being dedicated to shareholder capital returns in the form of an increased quarterly dividend to $0.15 per share, continued focus on debt reduction and resumption of our $1 billion share repurchase program. During the second quarter, we generated a company record-breaking $634 million of free cash flow, reducing net debt by $284 million ending the quarter with $4.59 billion. Year-to-date, we've generated $1.34 billion in free cash flow, while reducing our net debt by $892 million. We distributed $40 million to shareholders with our previous $0.11 quarterly dividend. We exceeded our production guidance for the quarter, delivering 167,000 BOE a day and just over -- barrels of oil a day and just over 1 billion cubic feet of gas per day. On gas, we have about approximately 50% of our volume hedged through year-end with a combination of swaps and collars that provide a flow around three powertrain retaining price upsize of over $5. We're announcing the potential to generate approximately $2.4 billion of free cash flow at current strip prices this year, which equates to an approximately 19% free cash flow yield. Given our discipline response to rising commodity prices, our capex budget for 2021 has not changed and our reinvestment rate is trending toward 35%. With regard to strengthening the balance sheet, our net debt reduction is tracking toward $1.8 billion in 2021, which will bring our year-end net debt close to $3.7 billion. Our intention is to reduce absolute debt to one-time at $50 to $55 WTI, which equates to approximately $3 billion in debt. We're generating strong corporate returns and projecting to deliver 18% return on capital employed in 2021. That is why we increased our quarterly fixed dividend by 36% versus last quarter to $0.15 a share. This has tripled our original dividend rate and equals to an approximately 1.7% annualized dividend yield, which we believe is competitive with industry peers and shows ongoing growth in cash returns. We are resuming our share repurchase program of $1 billion, which began in 2019 with $317 million of purchases previously executed $683 million of capacity remains. The combined shareholder capital returns in the form of the annualized dividend and projected net debt reduction by year-end 2021 alone would equate to 53% of the company's projected full year 2021 cash flow from operations, and 16% of the current -- company's current capital market. Natural gas production in 2021 is now expected to range between 900,000,001 BCF a day. Production expense is projected to be $3 to $3.50 per BOE better than the original guidance of $3.25 to $3.75. First, our assets are performing with remarkable consistency and predictability, delivering their terms in excess of 100% from our Bakken and 60% to 80% from our Oklahoma drilling programs, assuming $60 WTI and $3 NYMEX gas. Second, we are on track to reduce our weighted average cost per well year-over-year by approximately 10%, and 70% to 80% of these savings are structural. Third, our capital efficiencies are reaching record levels and we expect to deliver a projected return on capital employed of approximately 18% for 2021. For example, the decision to focus up to 70% of our rigs on our Oklahoma natural gas assets in the second quarter of last year has proven to be very strategic. Our second quarter 2021 natural gas production in Oklahoma was up approximately 10% over the first quarter of 2020, while NYMEX natural gas prices, more than doubled over this same period of time. With today's improved crude prices, we are exercising this optionality once again in migrating up to 75% of our rigs to a more oil weighted portfolio in the back half of this year. During the quarter, we brought on 108 gross operated wells with 70 in the Bakken and 38 in Oklahoma. This chart compares the average performance of our 2021 wells with average performance of 488 Continental operated wells completed over the prior four years, grouped by program year. Over the last four years, we have also reduced our cycle time for putting Bakken wells online by 50% and dropped our completed well costs by approximately 30% driving our capital efficiencies in the Bakken to record levels. Today, we are producing approximately 45% more BOE per $1,000 spent in the first 12 months than we did in 2018. Our Bakken differentials are also improving, driven by demand for Bakken crude and the expansion of DAPL, which was put into operation on August 1. With this expansion, there is approximately 1.6 million barrels of pipeline and local refining takeaway capacity from the Bakken excluding rail. Before leaving the Bakken, I should point out that 11 of our second quarter Bakken completions were located in our Long Creek unit. These 11 wells are excellent producers as shown on Slide 9, equally impressive by the well costs that are coming in below original estimates at approximately 6.1 million per well. Recent results are bellwether for things to come, as we continue developing a total of 56 wells in this unit, and we expect to complete about 30% of these wells by year-end 2021, 50% in 2020 and the remaining 20% in early 2023. These charts show the average well performance by year in all four of our SpringBoard project areas over the last 2.5 years. This includes 155 operating wells of which 70% were oil well and 30% were condensate wells. The chart includes seven Woodford and four Sycamore wells that we completed over the last 2.5 years. Even more impressive is that we're on track to reduce our completed well cost by approximately 17% year-over-year. Since 2018, our teams have reduced completed well costs in Oklahoma by a total of 40%, which as in the Bakken has driven our capital efficiencies to record levels in Oklahoma. As shown on Slide 11, we are producing approximately 80% more BOE per $1,000 spent in the first 12 months than we did in 2018. In the fourth quarter, we are projecting a December exit rate of approximately 165,000 barrels of oil per day.

We're announcing the potential to generate approximately $2.4 billion of free cash flow at current strip prices this year, which equates to an approximately 19% free cash flow yield. As shown on Slide 11, we are producing approximately 80% more BOE per $1,000 spent in the first 12 months than we did in 2018.

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During the year, we maintained high monthly rent collections and stable occupancy in our portfolio, acquired 34 properties and completed six redevelopment projects. The net result was the continued growth of both our revenues from rental properties, which increased by 3.5% for the quarter and 5% for the year. And our adjusted funds from operations per share, which grew by 12% for the quarter and 7% for the year. We saw the rent collection rate increase to 98.7% and we collected substantially all of the deferred rent and mortgage payments that were due to us in the fourth quarter. For the quarter, Getty acquired 10 properties for $45.1 million and for the year, we acquired 34 properties for $150 million, which represents significant growth over the Company's acquisition activity in the prior year. We are closing in on completing 20 projects since the inception of our redevelopment strategy further demonstrating the value of the real estate we hold in our portfolio. Our balance sheet also ended 2020 in excellent condition as we successfully issued a $175 million, 3.4% debt private placement in December and we issued approximately $65 million of equity under our ATM program during the year. Our leverage continues to be less than 5 times and with a revolver that is almost completely undrawn, Getty has significant capacity to fund its growth plans. As we enter 2021, we feel encouraged about our portfolio of nearly 1,000 properties. Our rents 65% of which come from the top 50 MSAs in the US continue to be well covered. In fact, despite COVID-related challenges, our rent coverage ratio remained stable throughout the year and ended 2020 at a healthy 2.6 times. For the year, we reviewed approximately $2.1 billion of opportunities, which met our initial screen process. Convenience store opportunities represented 62% and other automotive represented 38% of the total. To review a few highlights of our investment activities, for the fourth quarter, we invested $45.1 million in 10 highly -- high quality convenience store and car wash assets. In this transaction, Getty acquired six properties for $28.7 million, all of located throughout the state of Texas. They have an average lot size of 2.7 acres and an average store size in excess of 5,300 square feet, which reflect that the assets we acquired have all the attributes of today's modern full service convenience store. In addition, we acquired four car wash assets in individual transactions with Go Car Wash and Zips Car Wash for $16.4 million in the aggregate. For the year, we acquired 34 properties for $150 million. Our weighted average initial return on acquisitions for the year was 7%. Finally, the weighted average initial lease term of the properties acquired for the year was 14.6 years. For the year, we invested approximately $2.9 million in both our completed projects and sites which are in progress. In the fourth quarter, we returned one redevelopment project back to the net lease portfolio bringing our total for completed rent commencement projects to six in 2020 and 19 since the inception of our program. In this project, we invested $0.2 million and we expect to generate a return on our investment of more than 45%. In terms of redevelopment projects, we ended the quarter with 10 signed leases or letters of intent, which includes six active projects and four signed leases on properties, which are currently subject to triple-net leases, but which have not yet been recaptured from the current tenants. On the capital spending side, we have invested approximately $1.8 million in the 10 redevelopment projects in our pipeline and estimate that these projects will require total investment by Getty of $5.8 million. We remain committed to optimizing our portfolio and continue to anticipate redevelopment opportunities over the next five years, possibly involving between 5% and 10% of our current portfolio with targeted unlevered redevelopment program yields of greater than 10%. We sold 11 properties during 2020 realizing proceeds of approximately $6 million. In addition, during the year, we exited 10 properties, which we previously leased from third-party landlords. The net result is our portfolio is now 35 states plus Washington DC and 65% of our annualized base rent comes from the top 50 national MSAs. We ended the year with 946 net lease properties, six active redevelopment sites and seven vacant properties. Our weighted average lease term is approximately 9.5 years, and our overall occupancy, excluding active redevelopments, increased to 99.3%. AFFO, which we believe best reflects the Company's core operating performance, was $0.48 per share for the fourth quarter and $1.84 per share for the full year, representing year-over-year increases of 12% and 7% respectively. FFO was $0.91 per share for the fourth quarter and $2.32 per share for the full year. Our total revenues were $37.1 million in the fourth quarter and $147.3 million for the full year, representing year-over-year increases of 3.3% and 4.7% respectively. Rental income, which excludes tenant reimbursements and interest on notes and mortgages receivables grew 3.9% to $31.8 million in the fourth quarter and 7.1% for the full year to $128.2 million. As previously mentioned, in the fourth quarter, we had a non-recurring benefit of $20.5 million as a result of the settlement of a litigation matter. During the fourth quarter, we issued $175 million of new 10-year unsecured notes at 3.43% via direct private placements at three life insurance companies. We used the proceeds to retire the full $100 million outstanding under our 6% Series A notes, which were coming due in early 2021 and to repay borrowings under our credit facility. As a result of this transaction, we incurred a $1.2 million debt extinguishment charge which is included in GAAP net earnings and FFO. We are also active with our at-the-market equity program during the quarter, raising $25.1 million at an average price of $28.45 per share. For the full year, we raised $64.4 million through the ATM at an average price of $29.16 per share, which helped to fund our growth and maintain our low leverage profile. As of December 31, we had total debt outstanding of $550 million, including $25 million outstanding under our credit facility and $525 million of long-term fixed rate unsecured notes. Our weighted average borrowing cost was 4.1% and the weighted average maturity of our debt is 7.3 years. In addition, our total debt to total market capitalization was 32%, our total debt to total asset value was 40% and our net debt to EBITDA is 4.9 times. With respect to our environmental liability, we ended the quarter and year at $48.1 million, which was down $2.6 million from the end of 2019. For the fourth quarter and full year, net environmental remediation spending was approximately $1.6 million and $6.4 million respectively. And finally, we are introducing our 2021 AFFO per share guidance at a range of $1.86 to $1.88 per share.

AFFO, which we believe best reflects the Company's core operating performance, was $0.48 per share for the fourth quarter and $1.84 per share for the full year, representing year-over-year increases of 12% and 7% respectively. FFO was $0.91 per share for the fourth quarter and $2.32 per share for the full year. Our total revenues were $37.1 million in the fourth quarter and $147.3 million for the full year, representing year-over-year increases of 3.3% and 4.7% respectively. And finally, we are introducing our 2021 AFFO per share guidance at a range of $1.86 to $1.88 per share.

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For the first quarter, Hilltop reported net income of $120 million or $1.46 per diluted share, representing an increase from the first quarter 2020 of $71 million or $0.91 per diluted share. Return on average assets for the period was 2.9% and return on average equity was 20.6%. These results do include a $5.1 million reversal of provision compared to the first quarter of last year when we had a provision expense of $34.5 million as we introduced CECL and the outlook for credit and the economy look to be deteriorating. Notwithstanding higher long-term interest rates and refinance volumes slowing, the overall mortgage market remains strong, and our origination business was able to deliver $6.2 billion in volume, a 71% increase from Q1 2020. Driven by PPP loan balances, the bank's average loans for the first quarter increased 7% from prior year. And average deposits grew by $2.4 billion or 26% from prior year as well. In the public finance business, efforts to improve productivity and growth are showing positive returns as net revenue increased 8% from the first quarter 2020. During the period, Hilltop returned $50 million to shareholders through dividends and share repurchases. The $5 million of shares repurchased are part of the $75 million share authorization the Board granted in January. Liquidity and capital remained very strong, with a Tier 1 leverage ratio of 13% and a common equity Tier 1 capital ratio of 19.6% at quarter end. This portfolio, which at the end of June 2020 was $968 million, is now down to $130 million as of March 31. Our allowance for credit losses as of March 31 totaled $144.5 million or 1.98% of the bank's loan portfolio. This reflects a reduction in the reserve balance of $4.5 million from the fourth quarter, which was driven primarily by positive shifts in the economic outlook. PlainsCapital Bank had a solid quarter with a pre-tax income of $65 million, which includes the aforementioned provision recapture of $5.1 million, also contributing to the increased pre-tax income from Q1 2020 was higher net interest income from lower deposit costs and PPP loan fees and interest income. and as of March 31, had funded approximately 1,100 loans totaling $178 million as part of the second round, bringing the total PPP loan balance to $492 million at period end. PrimeLending had another outstanding quarter and generated pre-tax income of $93 million, an increase of $53 million from Q1 2020. That was driven by both a $2.6 billion increase in origination volume and a gain on sale margin of 388 basis points. For HilltopSecurities, they had a good quarter with pre-tax income of $18 million. I'll start on Page 5. As Jeremy discussed, for the first quarter of 2021, Hilltop reported consolidated income attributable to common stockholders of $120 million, equating to $1.46 per diluted share. During the first quarter, revenue related to purchase accounting was $4.9 million and expenses were $1.3 million, resulting in a net purchase accounting pre-tax impact of $3.6 million for the quarter. During the first quarter, provision for credit losses reflected a net reversal of $5.1 million and included approximately $600,000 of net recoveries of previously written off credits. Hilltop's quarter-end capital ratios remain strong with common equity Tier 1 of 19.63% and Tier 1 leverage ratio of 13.01%. I'm moving to Page 6. Net interest income in the first quarter equated to $106 million, including $7.5 million of previously deferred PPP origination fees and purchase accounting accretion. Versus the prior year quarter, net interest income decreased by $4.7 million or 4%. Further, net interest margin declined versus the fourth quarter of 2020 by 2 basis points. Further, PCB's excess cash levels held at the Federal Reserve increased by $365 million from the fourth quarter, putting an additional 5 basis points of pressure on net interest margin. During the quarter, new loan commitments including credit renewals, maintained an average book yield of 4%. Total interest-bearing deposit costs declined by 8 basis points in the quarter as we continue to lower customer deposit rates and returned broker deposits during the first quarter. Turning to Page 7. Total noninterest income for the first quarter of 2021 equated to $418 million. First quarter mortgage-related incoming fees increased by $131 million versus the first quarter of 2020. Versus the prior year quarter, purchase mortgage volumes increased by $561 million or 24% and refinance volumes improved substantially, increasing by $2 billion or 156%. While volumes during the first quarter were strong relative to traditional seasonal trends, gain on sale margins did decline versus the fourth quarter of 2020 as a combination of lower linked-quarter market volumes, principally purchased mortgage volumes, competitive pressures and product mix yielded a gain on sale margin of 388 basis points. We expect pressures on margin to persist throughout 2021, and we continue to expect full year average margins to move within a range of 360 to 385 basis points contingent on market conditions. Other income increased by $12 million, driven primarily by improvements in the structured finance business as the prior year period included a $16 million negative unrealized mark-to-market on the credit pipeline. Turning to Page 8. Noninterest expenses increased from the same period in the prior year by $85 million to $367 million. The growth in expenses versus the prior year were driven by an increase in variable compensation of approximately $63 million at HilltopSecurities and PrimeLending. I'm moving to Page 9. Total average HFI loans grew by 5% versus the first quarter of 2020. As we've noted on prior calls, we are planning to retain between $30 million and $50 million per month of consumer mortgage loans originated at PrimeLending to help offset soft demand from our commercial clients. During the first quarter of 2021, PrimeLending locked approximately $146 million of loans to be retained by PlainsCapital over the coming months. These loans had an average yield of 287 basis points and an average FICO and LTV of 779 and 61%, respectively. I'm moving to Page 10. As of March 31, we have approximately $130 million of loans on active deferral programs, down from $240 million at December 31. Further, the allowance for credit losses to end of period loan ratio for the active deferral loans equates to 13.4% at March 31. As is shown in the graph at the bottom right of the page, the allowance for credit loss coverage, including both mortgage warehouse lending as well as PPP loans at the bank, ended the first quarter at 1.98%. Excluding mortgage warehouse and PPP loans, the banks' ACL to end-of-period loans held for investment ratio equated to 2.38%. Turning to Page 11. First quarter average total deposits were approximately $11.4 billion and have increased by $2.4 billion or 26% versus the first quarter of 2020. At 3/31, Hilltop maintained $639 million of broker deposits that have a blended yield of 34 basis points. Of these broker deposits, $284 million will mature by 6/30 of 2021. These maturing broker deposits maintain an average yield of 47 basis points. I'm moving to Page 12. During the first quarter of 2021, PlainsCapital Bank generated solid profitability, producing $65 million of pre-tax income during the quarter. The bank benefited from the reversal of credit losses of $5.2 million and the recognition of $7.5 million in previously deferred PPP origination fees. During the quarter, the bank's efficiency ratio dropped below 50% as the focus on managing expenses, improving fee income streams through our treasury management sales efforts and working diligently to protect net interest income is proving to be a successful combination. While we do not expect that the efficiency ratio will remain below 50%, we do expect that the bank's efficiency will operate within a range of 50% to 55% over time. Moving to Page 13. PrimeLending generated a pre-tax profit of $93 million for the first quarter of 2021, driven by strong origination volumes that increased from the prior year period by $2.6 billion or 71%. Further, the purchase percentage of the origination volume was 47% in the first quarter. As noted earlier, gain on sales margins contracted during the first quarter, yet we continue to expect the full year average range of 360 to 385 basis points is appropriate given our outlook on production, product mix and competition. During the first quarter, PrimeLending closed on a bulk sale of $53 million of MSR value. Somewhat offsetting the impact of the bulk sale, the business continued to retain servicing at a rate of approximately 50%, which yielded a net MSR value at 3/31 of $142 million, roughly stable with 12/31 levels. We expect to continue retaining servicing at a rate of 30% to 50% of newly created servicing assets during 2021, subject to market conditions. Moving to Page 14. HilltopSecurities delivered a pre-tax profit and margin of $18 million and 16.2%, respectively in the first quarter of 2021, driven by structured finance and the public finance services businesses. Moving to Page 15.

For the first quarter, Hilltop reported net income of $120 million or $1.46 per diluted share, representing an increase from the first quarter 2020 of $71 million or $0.91 per diluted share. As Jeremy discussed, for the first quarter of 2021, Hilltop reported consolidated income attributable to common stockholders of $120 million, equating to $1.46 per diluted share.

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We delivered over 30% organic top line growth, 25% operating margins and $1.4 billion in free cash flow, just an outstanding performance and a testament to our ServiceNow strong culture. According to IDC, worldwide digital transformation investments will total more than $7.4 trillion by 2044. We're also proud to be supporting NHS Scotland in their efforts to vaccinate 5.5 million citizens. Within 12 hours of rollout, NHS Scotland booked over 220,000 appointments. We grew billings by more than 40% year over year organically. We delivered 89 deals greater than $1 million and now have close to 1,100 customers paying us over $1 million annually. Our renewal rate remained best in class at 99%. The bank has seen a 70% efficiency and improvement of payment processing by integrating the Now Platform into its core banking systems. With ServiceNow, this bank implemented new automated processes in 60 workdays. In one case, employees went from managing 10 requests an hour to 1,000 requests in three minutes on the Now Platform, better experiences for people. ITSM delivered 17 deals over $1 million. ITSM Pro penetration is now over 20%. ITOM was included in 16 of the top 20 deals and had 15 deals over $1 million. Customer workflows is our next $1 billion-plus market opportunity for ServiceNow, and Q4 showed strong momentum. Customer workflows were included in 11 of our top 20 deals, driving such wins as AT&T. Ten of our customer workflow deals were greater than $1 million. In Q4, 11 of our top 20 deals included employee workflows. In fact, more than 900 organizations now have downloaded the suite already. I'm excited to announce that the state of North Carolina Department of Health and Human Services is already leveraging the ServiceNow platform to power its COVID vaccine management system to help quickly and efficiently vaccinate 10 million North Carolinians. In 2020, we grew our global workflows by 26%, hiring 3,000 people in 25 countries, with most hired and onboarded digitally. We delivered 70% more features and innovations on the platform in 2020. Together, we're bringing the innovation speed of a start up with the scale and reach of a rapidly growing $5 billion-plus pure-play SaaS company. And our RPO is nearly double that at $9 billion. And we have a clear path to achieve our $10 billion revenue target. I'm incredibly proud of our just announced $100 million investment in an impact fund benefiting underserved communities. Q4 subscription revenues were $1.184 billion, representing 32% year-over-year growth, inclusive of a three-point tailwind from FX. Q4 subscription billings were very strong at $1.828 billion, representing 41% year-over-year growth and $183 million beat versus the high end of our guidance. Adjusted growth was 38% year over year. The outperformance was driven by tremendous execution from our sales team, which resulted in significant net new ACV upside for the quarter as well as $80 million of billings pulled forward from 2021 due to early customer payments. Excluding these early payments, normalized Q4 billings would have grown 35% year over year, still well ahead of our guidance. Remaining performance obligations, or RPO, ended the quarter at approximately $8.9 billion, representing 35% year-over-year growth. And current RPO was approximately $4.4 billion, representing 33% year-over-year growth. It's this attention to our customers' needs that's driving our best-in-class renewal rate of 99%, demonstrating the stickiness of our business as the Now Platform remains a mission-critical part of our customers' operations. We closed 89 deals greater than $1 million in ACV in the quarter, with average deal sizes up 18% year over year. In 2020, we added nearly 700 net new customers, ending the year with almost 6,900 enterprises. The number of customers paying us $5 million or more in ACV grew over 40% in fiscal 2020. Q4 operating margin was 22%, a 100-basis-point beat versus our guidance, driven by our strong top line outperformance. Our free cash flow margin was 45%, up 900 basis points year over year, driven by lower T&E spend and strong collection. For full year 2020, operating margin was 25%, up 300 basis points year over year. And free cash flow was 32%, up 400 basis points year over year. The highly affected industries we outlined early last year, which represented about 20% of our business, continue to see macro headwinds but remained resilient. Three of our top 20 deals in the quarter were from highly impacted industries, including retail, automotive and energy. First, as I noted earlier, we saw $80 million in early payments from customers in Q4, which was an approximately 200-basis-point tailwind to full year subscription billings growth in 2020. These result in a more significant headwind of about 350 basis points for 2021 billings growth. And as Bill noted, we recently announced our first ever $100 million investment in a racial equity fund to build equitable opportunity for Black communities. With that in mind, for Q1, we expect subscription revenues between $1.275 billion and $1.28 billion, representing 28% to 29% year-over-year growth, including a four-point FX tailwind. We expect subscription billings between $1.31 billion and $1.315 billion, representing 24% to 25% year-over-year growth. Excluding the early payments from customers in 2020, our Q1 normalized subscription billings growth outlook would be 32% year over year. We expect CRPO growth of 32% year over year, including a five-point FX tailwind. We expect an operating margin of 25% and 202 million diluted weighted outstanding shares for the quarter. For the full-year 2021, we expect subscription revenues between $5.48 billion and $5.5 billion, representing 28% year-over-year growth, including a three-point FX tailwind. We expect subscription billings between $6.205 billion and $6.225 billion, representing 25% year-over-year growth. Excluding the early customer payments in 2020, our 2021 normalized subscription billings growth outlook would be 28% to 29% year-over-year growth. We expect subscription gross margin of 85%, reflecting some federal and public sector customers moving to our newly launched Azure offering as well as increased support for customers impacted by new and evolving data residency requirements. We expect an operating margin of 23.5%, representing 150-basis-points expansion off of our pre-COVID 2020 run rate. I would note that this is also an incremental 50 basis points more than the 100 basis points of expansion we target each year. Finally, we expect free cash flow margin of 30% and 202 million diluted weighted outstanding shares for the year. We're well on our way to becoming a $10 billion revenue company on the strength of incredible organic innovation.

Q4 subscription revenues were $1.184 billion, representing 32% year-over-year growth, inclusive of a three-point tailwind from FX.

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Strong demand continued in the third quarter across all our businesses, but global supply chain and COVID-19 disruptions to production and labor availability negatively impacted our financial results; approximately a $75 million impact to revenue and $75 million to operating profit in the quarter. Company revenue was up slightly to a third quarter record of $1.06 billion with the benefit of strong price in the shipment constrained environment. GAAP operating income was down 3%. GAAP earnings per share from continuing operations was relatively flat at $3.41 compared to $3.42 in the prior year quarter. Total segment profit was down 7% and total segment margin was down 120 basis points to 15.5%. Adjusted earnings per share from continuing operations was down 4% to $3.40, including approximately $0.55 of negative impact from the global supply chain and COVID-19 disruptions. Residential revenue was down 2% and segment profit was down 6%. Segment margin was down 90 basis points to 20.3%. For 2005 to 2010, 60% of air conditioners and heat pumps sold were R22. Third quarter revenue was up 2%. Commercial profit was down 42%. Segment margin declined 800 basis points to 10.7%. Within this, replacement revenue was up low-single-digits with planned replacement up more than 20% and emergency replacement down more than 30%. The team won two National Account equipment customers in the third quarter to total 11 year-to-date. VRF revenue was up more than 30%. In Refrigeration, for the third quarter, revenue was up 10%. North America revenue was up more than 20%. Refrigeration segment profit was up 12% as margin expanded 20 basis points to 10.6%. Backlog is up approximately 60% for Refrigeration and 90% for Commercial and order rates continued to be strong. We currently expect a similar negative financial impact to our business as we saw in the third quarter, approximately $75 million of revenue and $25 million of operating profit. The company yielded 4% price overall in the third quarter, including 5% in residential. Our Refrigeration business has announced a price increase of 8% in North America effective for December 1. Likewise, our European business has recently announced another round of increases generally from 5% to 10% to drive price in 2022. Our Commercial business has announced a price increase of up to 13% effective January 1. We are narrowing 2021 guidance for revenue from 12% to 16% to new range of 13% to 15%. Foreign exchange is still expected to be a 1% favorable to revenue. We are narrowing 2021 guidance for adjusted earnings per share from continuing operations from $12.10 to $12.70 to a new range of $12.10 to $12.30. Our free cash flow guidance remains $400 million for the year. The company yielded 4% in the third quarter, which had just one month of benefit from the third price increase this year. In the third quarter, revenue from Residential Heating & Cooling was $711 million, down 2%. Volume was down 6%, price was up 5% and mix was down 1% with foreign exchange neutral to revenue. Residential segment profit was $144 million, down 6%. Segment margin was 20.3%, down 90 basis points. In the third quarter, Commercial revenue was $212 million, up 2%. Volume was down 6%, price was up 1% and mix was up 6%. Foreign exchange had a positive 1% impact to revenue. Commercial segment profit was $23 million, down 42%. Segment margin was 10.7%, down 800 basis points. In Refrigeration, revenue was $137 million, up 10%. Volume was up 9%, price was up 2% and mix was down 1%. Refrigeration segment profit was $15 million, up 12%. Segment margin was 10.6%, which was up 20 basis points. Regarding special items in the quarter, the company had net after-tax benefit of $0.5 million that included a benefit of $2.7 million for excess tax benefits from share-based compensation and a net charge of $2.4 million in total for various items excluded from segment profit, including personal protective equipment and facility deep cleaning expenses incurred due to the COVID-19 pandemic and a net benefit of $0.2 million for other items. Corporate expense was $16 million in the third quarter, down from $28 million in the prior year quarter, primarily due to lower incentive compensation. Overall, SG&A was $134 million compared to $152 million in the prior year quarter. SG&A was down as a percent of revenue to 12.7% from 14.4% in the prior year quarter. In the third quarter, cash from operations was $222 million compared to $440 million in the prior year quarter. Capital expenditures were $23 million in the third quarter compared to approximately $12 million in the prior year quarter. Free cash flow was $199 million in the third quarter compared to $428 million in the prior year quarter. The company paid $34 million in dividends and repurchased $200 million of stock in the quarter. Total debt was $1.28 billion at the end of the third quarter and we ended the quarter with a debt to EBITDA ratio of 1.8. Cash, cash equivalents and short-term investments were $44 million at the end of the third quarter. For the company, we are now narrowing guidance for 2021 revenue growth from 12% to 16% to a new range of 13% to 15% and we still expect a 1% benefit to revenue from foreign exchange. We are narrowing guidance for 2021 GAAP earnings per share from continuing operations from $11.97 to $12.57 to a new range of $11.97 to $12.17. And we are narrowing 2021 guidance for adjusted earnings per share from continuing operations from $12.10 to $12.70 to a new range of $12.10 to $12.30. And as previously mentioned, the fourth quarter of 2021 will have a headwind of 6% from fewer days than the prior year quarter. The first quarter of 2021 had a 6% benefit from more days in the prior year quarter. We now expect a benefit of $130 million from price for the year, up from prior guidance of $110 million benefit. We continue to -- with continued inflation in components, we are reducing our net savings from sourcing and engineering-led cost reduction to neutral, down from prior guidance to be a $5 million benefit. We now expect LIFO accounting adjustments to be approximately $20 million this year, up from a prior guidance of $15 million due to higher material costs from inflationary pressures. About 40% of that was in the third quarter and about 40% is expected in the fourth quarter. Factory productivity is now expected to be a $10 million headwind, down from prior guidance to be a $10 million benefit. Residential mix is swinging from a $10 million headwind -- excuse me, swinging to a $10 million headwind from a $10 million benefit. And corporate expense is now expected to be $95 million, down from prior guidance of $100 million on lower incentive compensation. Overall, SG&A is now expected to be approximately a $40 million headwind, down from prior guidance of $45 million. For headwinds that are unchanged from our prior guidance, commodities are still expected to be a headwind of $80 million and freight is still expected to be a $5 million headwind with tariffs still expected to be a $5 million headwind as well. Foreign exchange is still expected to be a $10 million benefit. We still expect a net interest and pension expense to be approximately $35 million. The effective tax rate guidance remains approximately 20% on an adjusted basis for the full year. And we still expect capital expenditures to be approximately $135 million this year, about $30 million of which is for the third plant at our campus in Saltillo, Mexico. And we expect nearly a $10 million in annual savings from that third plant. Free cash flow is targeted to be approximately $400 million for the full year. In the third quarter, we repurchased $200 million of stock to complete our target of $600 million for the full year. And then guidance for our weighted average diluted share count for the full year remains between 37 million to 38 million shares.

Company revenue was up slightly to a third quarter record of $1.06 billion with the benefit of strong price in the shipment constrained environment. GAAP earnings per share from continuing operations was relatively flat at $3.41 compared to $3.42 in the prior year quarter. Adjusted earnings per share from continuing operations was down 4% to $3.40, including approximately $0.55 of negative impact from the global supply chain and COVID-19 disruptions. We are narrowing 2021 guidance for revenue from 12% to 16% to new range of 13% to 15%. We are narrowing 2021 guidance for adjusted earnings per share from continuing operations from $12.10 to $12.70 to a new range of $12.10 to $12.30. For the company, we are now narrowing guidance for 2021 revenue growth from 12% to 16% to a new range of 13% to 15% and we still expect a 1% benefit to revenue from foreign exchange. We are narrowing guidance for 2021 GAAP earnings per share from continuing operations from $11.97 to $12.57 to a new range of $11.97 to $12.17. And we are narrowing 2021 guidance for adjusted earnings per share from continuing operations from $12.10 to $12.70 to a new range of $12.10 to $12.30. And we still expect capital expenditures to be approximately $135 million this year, about $30 million of which is for the third plant at our campus in Saltillo, Mexico.

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We will no longer be providing an update on temporary store closures as we ended Q4 with less than 1% of our stores temporarily closed. While the last two years have been the most challenging operating environment we've ever navigated, we exit 2021 stronger than ever with over 53,000 global restaurants. System sales have grown over $5.5 billion, and operating profit has grown over $200 million. Additionally, since 2019, we've added another iconic brand and closed on three technology acquisitions, all while launching our global Unlocking Opportunity Initiative with a $100 million commitment over five years investing in equity and inclusion, education and entrepreneurship, the cornerstones of our Recipe for Good. In 2021, we opened 3,057 net new units, driven by 4,180 gross unit openings, with meaningful contributions from each of our brands, marking the strongest growth year in our history and setting an industry record for unit development. Even as dining room sales recovered throughout the year, we continued to grow our digital sales that reached a record $22 billion in fiscal 2021, an increase of approximately 25% over 2020, suggesting a more permanent shift to digital channels. We ended the year with over 45,000 restaurants offering delivery, representing more than a 25% increase year over year. To begin, full year 2021 system sales grew 13% with same-store sales growth of 10% or 3% on a two-year basis and 6% unit growth. Full year core operating profit increased 18%, driven by same-store sales growth and the impact of unit development throughout the year. However, our sales momentum remained strong with continued global recovery as evidenced by our two-year global same-store sales excluding Asia up 10% on a two-year basis, accelerating sequentially from last quarter. I'll begin with KFC, which accounts for 52% of our divisional operating profit. KFC full year 2021 system sales grew 16%, driven by 11% same-store sales growth and 8% unit growth. Q4 system sales increased 10% with 5% same-store sales growth or 3% on a two-year basis. We continue to see ongoing recovery in emerging markets as evidenced by the fact that more than half of our 13 global KFC regions delivered system sales growth in excess of 25% for the full year. KFC International Q4 same-store sales grew 6% or 2% on a two-year basis. Q4 same-store sales grew 4% or 12% on a two-year basis. The chicken sandwich continues to perform well for the business and now makes up roughly 9% of our sales mix as of Q4, a strong improvement from a 1% mix last year. Next, Taco Bell, which accounts for 32% of our divisional operating profit. 1 in the Franchise 500 for the second year in a row, beating our peers, as well as impressive concepts in other industries. Taco Bell full year 2021 system sales grew 13%, driven by 11% same-store sales growth and 5% unit growth. Fourth quarter system sales grew 11% with same-store sales growth of 8% or 9% on a two-year basis, reflecting an acceleration from Q3. Additionally, the team kept value front and center with the launch of a new Crave More Value Menu featuring the $2 burritos. Moving on to Pizza Hut, which accounts for 16% of our divisional operating profit. Full year 2021 system sales grew 6%, driven by 7% same-store sales growth and 4% unit growth. Q4 system sales grew 4% with same-store sales growth of 3% or 2% on a two-year basis. Pizza Hut International Q4 same-store sales grew 4% while same-store sales declined 3% on a two-year basis. Pizza Hut U.S. Q4 same-store sales grew 1% or 10% on a two-year basis. Lastly, the Habit Burger Grill achieved full year 2021 system sales growth of 24%, driven by a 16% same-store sales growth and 11% unit growth. Q4 system sales increased 20% with 11% same-store sales growth or 5% on a two-year basis. We announced science-based targets to reduce greenhouse gas emissions nearly 50% by 2030 and pledged to achieve net zero emissions by 2050. We finished the year strong, opening a record-breaking 4,180 gross units or 3,057 net new units, resulting in 6% unit growth for full year 2021. A robust 10% same-store sales growth helped us achieve 13% system sales growth, driving full year core operating profit growth of 18%. System sales grew 9%, led by same-store sales growth of 5% or 4% on a two-year basis, accelerating from Q3. To that end, full year 2021 Taco Bell company-owned restaurant margins were in line with our historical range of 23% to 24%, virtually unchanged relative to 2019 levels. First, we recorded a $35 million pre-tax gain on our investment in Devyani International Limited. We opened 1,678 gross units in the quarter or 1,259 on a net new unit basis, resulting in nearly 4,200 gross units opened for the full year, which is a record for Yum! That equates to over 100,000 jobs created worldwide last year alone. However, we continue to see broad-based strength across our portfolio, evidenced by over 2,500 restaurants opened outside of China this year. In fact, we saw new restaurants built in over 110 countries this year, a step-up from prior years, signaling our development engine is diversified and stronger than ever. Overall, KFC International opened over 2,400 gross units and nearly 2,000 net new units during 2021. In the U.S., Taco Bell reached an impressive milestone, ending the year with over 7,000 restaurants and ample white space for future developments. During the fourth quarter, Taco Bell celebrated más international expansion as Spain was the first market to surpass 100 units. Finally, The Habit Burger Grill restarted their development engine this year with 23 net new units. We expanded our digital ordering channels, including chat ordering via Tictuk, to nearly 2,000 stores at year-end, an increase of roughly 60% since our acquisition in the first quarter. We also saw digital sales at KFC U.S. grow approximately 70% year over year, fueled by our delivery service channel and e-commerce platform that launched nationwide in early 2021. Additionally, the Dragontail order and delivery platform is now live in 2,800 stores in 21 markets across KFC and Pizza Hut, up from 13 markets last quarter and nine markets from the end of 2020. We ended the year with HutBot live in over 6,000 Pizza Hut locations in 70 markets. When we acquired Kvantum, a leading AI-based consumer insights and marketing performance analytics business, in the first quarter, it was operating in 13 markets. We have since tripled Kvantum's footprint to over 45 markets. We ended the year with cash and cash equivalents of $486 million excluding restricted cash. Capital expenditures, net of refranchising proceeds, were $55 million during the quarter and $145 million for the full year. The full year consisted of $230 million in gross capex and $85 million in refranchising proceeds. We paid a healthy quarterly dividend of $0.50 per share or approximately $600 million for the full year. With respect to our share buyback program, during the quarter, we repurchased 5.6 million shares at an average share price of $128, totaling $720 million. For the full year, we have repurchased 13 million shares at an average price of $122, totaling $1.6 billion. We remain committed to maintaining our asset-light business model of at least a 98% franchise mix. Capitalizing on these opportunities, we expect net capital expenditures for full year 2022 to be approximately $250 million, reflecting up to $350 million of gross capex and $100 million of refranchising proceeds. But in the near term, new store investments may exceed refranchising by $50 million to $100 million annually, primarily driven by our strategy to accelerate growth of The Habit equity estate. We were pleased to announce earlier this week an increase in our quarterly cash dividend of 14% to $0.57 per share in 2022. I'm pleased to share that we expect to deliver full year growth in line with our long-term growth algorithm, which includes 2% to 3% same-store sales growth and 4% to 5% unit growth, culminating in mid- to high single-digit system sales growth leading to high single-digit core operating profit growth which excludes FX. We expect our full year G&A to be approximately $1.1 billion but our G&A spend will return to a more balanced quarterly cadence relative to 2021. Although it's difficult to forecast with precision at this time, we continue to believe 21% to 23% is the appropriate range, but there are factors that could move us toward the high end of the range.

In 2021, we opened 3,057 net new units, driven by 4,180 gross unit openings, with meaningful contributions from each of our brands, marking the strongest growth year in our history and setting an industry record for unit development. To begin, full year 2021 system sales grew 13% with same-store sales growth of 10% or 3% on a two-year basis and 6% unit growth. Q4 system sales increased 10% with 5% same-store sales growth or 3% on a two-year basis. Taco Bell full year 2021 system sales grew 13%, driven by 11% same-store sales growth and 5% unit growth. Pizza Hut U.S. Q4 same-store sales grew 1% or 10% on a two-year basis. Q4 system sales increased 20% with 11% same-store sales growth or 5% on a two-year basis. We finished the year strong, opening a record-breaking 4,180 gross units or 3,057 net new units, resulting in 6% unit growth for full year 2021. System sales grew 9%, led by same-store sales growth of 5% or 4% on a two-year basis, accelerating from Q3. I'm pleased to share that we expect to deliver full year growth in line with our long-term growth algorithm, which includes 2% to 3% same-store sales growth and 4% to 5% unit growth, culminating in mid- to high single-digit system sales growth leading to high single-digit core operating profit growth which excludes FX.

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We are confident in our ability to continue executing well in the face of COVID-19 uncertainties and are raising our full-year guidance for organic growth to 6% to 9%, and earnings per share to $9.70 to $10.10. In the second quarter, we delivered total sales of $8.9 billion. We posted organic growth of 21% versus a 13% decline in last year's second quarter, along with earnings of $2.59 per share. We expanded adjusted EBITDA margins to over 27% and increased adjusted free cash flow to $1.6 billion with a conversion rate of 103%. Strong cash flow allowed us to further strengthen our balance sheet while returning $1.4 billion to shareholders through dividends and share repurchases. In home improvement, we are building out a suite of innovations to help consumers personalize their homes, including our fast-growing line of command damage-free hanging solutions, $500 million franchise that leverages our world-class adhesive platform with even greater opportunities ahead. Since the onset of the pandemic, we have increased our annual respirator production fourfold to $2.5 billion by activating idle surge capacity and building additional lines, while shifting 90% of distribution into healthcare to protect nurses, doctors and first responders. Companywide second-quarter sales were $8.9 billion, up 25% year on year or an increase of 21% on an organic basis. Sales growth, combined with operating rigor and disciplined cost management, drove adjusted operating income of $2 billion, up 40%, with adjusted operating margins of 22%, up 240 basis points year on year. Second-quarter GAAP and adjusted earnings per share were $2.59, up 44% compared to last year's adjusted results. A strong year-on-year organic volume growth, along with ongoing productivity, restructuring efforts and other items, added 4.1 percentage points to operating margins and $0.89 to earnings per share year on year. This favorable ruling added $91 million to operating income of 1 percentage point to operating margins and $0.12 to earnings per share. Next, as you will see later today in our 10-Q, we increased our other environmental liability by nearly $60 million and our respiratory liabilities by approximately $20 million as part of our regular review. And finally, during the second quarter, we incurred a pre-tax restructuring charge of approximately $40 million as part of the program we announced in Q4 of last year. Second-quarter net selling price and raw materials performance reduced both operating margins and earnings per share by 140 basis points and $0.17, respectively. As a result of these increasing cost trends, we now forecast a full-year raw materials and logistics cost headwind in the range of $0.65 to $0.80 per share versus a prior expectation of $0.30 to $0.50. However, given the pace of cost increases, we currently expect a third-quarter net selling price and raw materials headwind to margins in the range of 50 to 100 basis points, which we anticipate will turn to a net benefit in the fourth quarter as our selling price and other actions start catching up to the increased costs. The lost income from the sale of drug delivery in May of last year was a headwind of 10 basis points to operating margins and $0.02 to earnings per share. Foreign currency, net of hedging impacts, reduced margins 20 basis points while benefiting earnings by $0.08 per share. This result included a $0.06 earnings benefit from lower other expenses, that was offset by higher tax rate and diluted share count, which were each a headwind of $0.03 per share versus last year. We delivered another quarter of robust free cash flow with second-quarter adjusted free cash flow of $1.6 billion, up 2% year on year, along with conversion of 103%. Our year-on-year free cash flow performance was driven by strong double-digit growth in sales and income, which was mostly offset by a timing of an income tax payment of approximately $400 million in last year's Q3, which is traditionally paid in Q2. Through the first half of the year, we increased adjusted free cash flow to $3 billion versus $2.5 billion last year. Second-quarter capital expenditures were $394 million and approximately $700 million year to date. For the full year, we are currently tracking to the low end of our expected capex range of $1.8 billion to $2 billion, given vendor constraints and the pace of capital projects. During the quarter, we returned $1.4 billion to shareholders through the combination of cash dividends of $858 million and share repurchases of $503 million. Year to date, we have returned $2.5 billion to shareholders in the form of dividends and share repurchases. We ended the quarter with $12.7 billion in net debt, a reduction of $3.5 billion since the end of Q2 last year. As a result, our net debt-to-EBITDA ratio has declined from 1.9 a year ago to 1.3 at the end of Q2. I will start with our safety and industrial business, which posted organic growth of 18% year on year in the second quarter, driven by improving industrial manufacturing activity and prior pandemic impacts. Within our respiratory portfolio, second-quarter disposable respirator sales increased 3% year on year but declined 11% sequentially as COVID-related hospitalizations declined. Safety and industrial's second-quarter operating income was $718 million, up 15% versus last year. Operating margins were 22.1%, down 130 basis points year on year as leverage on sales growth was more than offset by increases in raw materials, logistics and ongoing legal costs. Moving to transportation and electronics, which grew 24% organically despite sustained challenges from semiconductor supply chain constraints. Organic growth was led by our auto OEM business, up 76% year on year, compared to a 49% increase in global car and light truck builds. Second-quarter operating income was $546 million, up over 50% year on year. Operating margins were 22%, up 340 basis points year on year, driven by strong leverage on sales growth, which was partially offset by increases in raw materials and logistic costs. Turning to our healthcare business, which delivered second-quarter organic sales growth of 23%. Our medical solutions business grew mid-teens organically or up approximately 20%, excluding the decline in disposable respirator demand. I am pleased with the performance of Acelity, which grew nearly 20% organically in the quarter as it helps us build on our leadership in Advanced Wound Care. The separation and purification business increased 10% year on year due to ongoing demand for biopharma filtration solutions for COVID-related vaccine and therapeutics, along with improving demand for water filtration solutions. Health care's second-quarter operating income was $576 million, up over 90% year on year. Operating margins were 25.3%, up 880 basis points. Lastly, second-quarter organic growth for our consumer business was 18% year on year with strong sell-in and sell-out trends across most retail channels. Consumer's operating income was $311 million, up 12% year on year. Operating margins were 21%, down 160 basis points as increased costs for raw materials, logistics and outsourced hard goods manufacturing, along with investments in advertising and merchandising more than offset leverage from sales growth. As mentioned earlier, we expect demand for disposable respirators to wane and negatively impact second-half revenues by approximately $100 million to $300 million year on year. As noted, we anticipate a year-on-year earnings headwind of $0.65 to $0.80 per share for the full year or $0.40 to $0.55 in the second half due to rising cost pressures. As part of this program, we expect to incur a pre-tax charge in the range of $60 million to $110 million in the second half of this year. Organic growth is estimated to be 6% to 9%, up from the previous range of 3% to 6%. We now anticipate earnings of $9.70 to $10.10 per share against a prior range of $9.20 to $9.70. Also, as you can see, we now expect free cash flow conversion in the range of 90% to 100% versus a prior range of 95% to 105%. Global smartphone shipments are expected to be down high single digits year on year, while global car and light truck builds, I expect to be down 3% year on year. Relative to disposable respirators, we anticipate a year-on-year reduction in sales of $50 million to $100 million due to continued decline in global demand. As mentioned earlier, we are anticipating a third-quarter year-on-year operating margin headwind of 50 to 100 basis points from selling prices, net of higher raw materials and logistic costs. On the restructuring front, which I previously discussed, we expect a Q3 pre-tax charge in the range of $50 million to $75 million as a part of this program.

We are confident in our ability to continue executing well in the face of COVID-19 uncertainties and are raising our full-year guidance for organic growth to 6% to 9%, and earnings per share to $9.70 to $10.10. In the second quarter, we delivered total sales of $8.9 billion. We posted organic growth of 21% versus a 13% decline in last year's second quarter, along with earnings of $2.59 per share. Second-quarter GAAP and adjusted earnings per share were $2.59, up 44% compared to last year's adjusted results. Year to date, we have returned $2.5 billion to shareholders in the form of dividends and share repurchases. Organic growth is estimated to be 6% to 9%, up from the previous range of 3% to 6%. We now anticipate earnings of $9.70 to $10.10 per share against a prior range of $9.20 to $9.70.

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Home sales revenues of $2.23 billion were up 37% compared to the prior year period. Adjusted gross margin of 25.6% was up 170 basis points compared to last year. Both our pre-tax income of $303.4 million and our earnings per share of $1.87 more than doubled compared to last year. We signed 3,154 net contracts for approximately $2.98 billion, up 11% in units and 35% in dollars compared to the prior year period. In addition, our contracts per community at 10.2 were 20% above last year and our highest third quarter ever. Our average selling price in the quarter was approximately $945,000, up $70,000 compared to the second quarter and up $163,000 year-over-year. We've averaged over 300 non-binding deposits per week in the first three weeks of August, a pace that is consistent with May through July. Not surprisingly, our deposits were down 15% compared to the same three weeks last August when demand surged following the lifting of COVID lockdowns. However, compared to the same three weeks of August 2019, deposits were up 29%. From August 1 to September 15, 2020, the first half of our fiscal 2020 fourth quarter, net signed contracts were up 110% in units, and for the full quarter, they were up 68%. In light of the pricing embedded in our backlog and our focus on managing costs, we are confident that our gross margin in fiscal 2022 will significantly exceed the 25.6% margin we project for fiscal 2021's fourth quarter. Backlog was $9.4 billion on 10,661 units, up 55% in dollars and 40% in units compared to last year. We reaffirm these expectations, including a return on beginning equity for fiscal 2022, well above 20%. At quarter-end, we owned or optioned approximately 79,500 lots. Our option lots represented 53% of our total lots controlled at third quarter end compared to 49% one quarter earlier and 43% one year ago. We have already made significant progress in moving toward the 60% optioned and 40% owned goal we set last quarter. At quarter-end, we were selling from 314 active communities. We continue to project growth to 340 communities at fiscal year-end and an additional 10% community count growth in fiscal 2022. Affordable luxury comprised 44% of deliveries in the quarter ended July 31, up from 40% last year. First-time homebuyers who are the primary buyers in our affordable luxury segment accounted for 29% of our deliveries this quarter compared to 27% one year ago. With about 550 owned and controlled lots, this acquisition allows us to quickly expand our affordable luxury offerings in the Las Vegas market. Yesterday, we announced a new strategic partnership with Equity Residential, a world-class S&P 500 company focused on luxury apartment rentals to jointly acquire and develop sites into new rental apartment communities in key US markets of metro Boston, Atlanta, Austin, Denver, Orange County, Seattle and Dallas. Over the next three years, we expect Equity Residential to invest 75% of the equity for each selected project with our apartment living unit investing the remaining 25%. We expect these projects to be financed with approximately 60% leverage. We are targeting an initial minimum co-investment of approximately $750 million in combined equity between the companies or nearly $1.9 billion in total capacity, assuming the 60% leverage. The total anticipated cost of these three projects is approximately $242 million. We delivered 2,597 homes at an average price of approximately $860,000, generating third quarter homebuilding revenue of $2.23 billion. Deliveries were up 28% in units and 37% in dollars compared to one year ago. Our third quarter pre-tax income was $303.4 million compared to $151.9 million in the third quarter of 2020. Net income was $234.9 million or $1.87 per share diluted compared to $114.8 million and $0.90 per share diluted one year ago. Third quarter adjusted gross margin was 25.6% of revenues compared to 23.9% in fiscal year 2020's third quarter and 80 basis points better than projected. SG&A as a percentage of home sales revenue in the quarter was 10.5% or 110 basis points better than our guidance. Joint venture, land sales and other income was $29 million in the third quarter compared to $3.6 million in the same quarter last year. Our projection was approximately $20 million. We ended our third quarter with approximately $2.7 billion of liquidity, including $946 million of cash and approximately $1.8 billion available under our $1.9 billion revolving bank credit facility. In the third quarter, we invested approximately $200 million in land acquisition and another $230 million in land development. We expect to generate $750 million in cash from operating activities in fiscal year 2021. We will continue to use our cash to invest in the growth of our business, return cash to shareholders and further reduce our debt, including retiring $410 million of our 5.875% public notes that are due in February 2022. Our net debt to capital ratio stands at 33.1 at third quarter end, and we expect it to drop to the mid to upper 20% range at fiscal year-end. In our third quarter, we repurchased approximately 1.7 million shares at an average price of $57.66 for an aggregate amount of $95.4 million. In April we increased our quarterly dividend by 55% to $0.17 per share. Due to the production delays impacting our industry, we now we expect full year deliveries of approximately 10,100 homes compared to the midpoint of our previous guide of 10,300 homes. These 200 deliveries, which are sold and have substantial deposits from our buyers, are now projected to settle in the first quarter of fiscal 2022. So we now project our fourth quarter deliveries to be approximately 3,450 homes. We estimate an average delivered price for the fourth quarter of approximately $840,000 per home and approximately $830,000 for the full year. This is an increase of $15,000 per home compared to our previous fiscal year guidance. We are projecting a fourth quarter adjusted gross margin of 25.6% of revenues and a full fiscal year 2021 adjusted gross margin of 24.9%. This is an increase of 30 basis points compared to our previous full year guidance. Based on the composition of our backlog, we are confident that our full year fiscal 2022 adjusted gross margin will significantly exceed the 25.6% margin we are projecting for the fourth quarter of fiscal 2021. We expect interest and cost of sales to be approximately 2.3% of home sales revenues for the fourth quarter and full year. This full year guidance is 20 basis points better year-over-year and reflects the impact of debt reductions made earlier this year. We expect SG&A as a percentage of revenue to be approximately 9.8% in the fourth quarter and 11.3% for the full year. This full year guidance is 50 basis points better than previously projected. As Doug mentioned, we expect community count to be 340 at fiscal year-end, with 10% growth from there by fiscal year 2022. Our full year guidance for fiscal year 2021 other income, income from unconsolidated entities and land sales is now $140 million for the full year, with approximately $40 million projected for the fourth quarter. This is a $30 million increase from our projection last quarter and is driven by more sales projected in our apartment living division. Our third quarter tax rate was 22.6%, which includes approximately $12 million in energy tax credits. Our fourth quarter effective tax rate is projected to be approximately 26% and our full year guidance is 24.6%, 90 basis points better than our previous full year guidance. Taking this all into account, we have increased our projected return on beginning equity for fiscal year 2021 to 15.9%, over 700 basis points better than fiscal 2020. As Doug noted, we expected to exceed 20% in fiscal year 2022 and we believe our capital efficiency initiatives and the structural changes in our land acquisition strategy will keep it above 20% long-term.

Both our pre-tax income of $303.4 million and our earnings per share of $1.87 more than doubled compared to last year. Backlog was $9.4 billion on 10,661 units, up 55% in dollars and 40% in units compared to last year. Net income was $234.9 million or $1.87 per share diluted compared to $114.8 million and $0.90 per share diluted one year ago. So we now project our fourth quarter deliveries to be approximately 3,450 homes.

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A transcript of this earnings conference call will be available within 24 hours at investor. Organic net sales increased 5% with continued demand across both divisions, fueled by accelerating in-market results including positive share progress across most of the portfolio and a strong holiday period. Taking everything into account, we had 8% adjusted EBIT growth and 17% adjusted earnings per share growth, leading to a very good quarter. By segment, Meals & Beverages posted 6% net sales growth, punctuated by a very successful soup season and the continued strong performance of brands like V8 and Prego. The Snacks business delivered another solid quarter with sales growth of 4%, largely driven by our power brands in salty snacks including Kettle Brand potato chips, Late July snacks and Cape Cod potato chips as well as Pepperidge Farm Farmhouse bakery products. Nearly 75% of our portfolio held or increased share in the second quarter versus the prior year. E-commerce continued to be an important growth channel for us with in-market dollar consumption increasing 89% over the prior year. Turning to Slide 7, within the Meals & Beverages division, we had another strong quarter with consumption growth of 9%, principally due to volume gains. In fact, U.S. soup sales grew 10% with strength across all categories. With a 0.7 share increase, condensed had its 8th consecutive quarter of share gains, an amazing run that started well before the pandemic. Chunky had an exceptional quarter with double-digit net sales gains and in-market consumption growth, outpacing competition and increasing share nearly 2 points with growth among all cohorts, including millennials. In the second quarter, Pacific Soup and Broth outperformed the category posting dollar consumption growth of 25%, the 5th consecutive quarter of share gains driven by brand strength and a meaningful increase in household penetration. Beyond soup, a stand out in the Meals & Beverages portfolio was Prego which maintained its Number 1 share position in the Italian sauce category for the 21st consecutive months and has widened the gap against competitors. Prego sales growth came primarily from the gain of an additional 4 million new households across all demographic cohorts. Our performance was, again, fueled by our power brands, which grew dollar consumption by 8% over the previous year. On the Snyder's of Hanover brand, the combination of successful innovation, fundamental execution and brand activation led to share growth, double-digit dollar consumption and nearly 5 million new households, turning around what had been a challenging share period. Our Pepperidge Farm Farmhouse products also delivered exceptional results across bakery and cookies, growing dollar consumption by 41% and household penetration by 1.5 points. Our top line growth of 5% reflected healthy in-market consumption of approximately 8% in the quarter, tempered by declines in Foodservice and some COVID-19 related supply challenges that Mark discussed. Adjusted EBIT increased 8% as higher sales volumes were only partially offset by higher adjusted administrative expenses. Adjusted earnings per share from continuing operations increased by 17% to $0.84 per share, reflecting an increase in adjusted EBIT as well as lower adjusted net interest expense. Year-to-date, our organic net sales which excludes the impact from the sale of the European chips business increased 7% driven by strong end market consumption growth in both Meals & Beverages and Snacks. Adjusted EBIT increased 13%, reflecting higher sales volume, improved adjusted gross margin performance, and higher adjusted other income, offset partially by increased adjusted administrative expenses. Year-to-date, our adjusted EBIT margin increased year-over-year by 110 basis points to 18.5%. Adjusted earnings per share from continuing operations increased 23% to $1.86 per share, reflecting the increase in adjusted EBIT and lower adjusted net interest expense. Breaking down our net sales performance for the quarter, reported and organic net sales increased 5% from the prior year. This performance was largely driven by a 4 point gain in volume across the majority of our retail brands, partially offset by declines in foodservice and in partner brands within the Snyder's-Lance portfolio. And those actions, net of price and sales allowances, contributed 1 point to net sales growth. Our adjusted gross margin decreased by 10 basis points in the quarter to 34.3%. While product mix was slightly negative in the quarter we're estimating a 50 basis point gross margin improvement from better operating leverage within our supply chain network as we increased our overall production. Net pricing drove a 90 basis point improvement due to lower levels of promotional spending in the quarter. Inflation and other factors had a negative impact of 330 basis points, a little over half of the increase was driven by cost inflation as overall input prices, on a rate basis, increased approximately 3% which we expect to continue to be a headwind for the rest of the fiscal year. Inflation in the quarter was partially offset by our ongoing supply chain productivity program which contributed a 140 basis point improvement and included initiatives, among others, within procurement and logistics optimization. Our cost savings program, which is incremental to our ongoing supply chain productivity program, added 50 basis points to our gross margin. Moving on to other operating items; adjusted marketing and selling expenses decreased $3 million or 1% in the quarter. This decrease was driven primarily by the benefits of cost savings initiatives and lower marketing overhead cost, largely offset by an 8% increased investment in A&C. Adjusted administrative expenses increased $17 million or 13%, driven primarily by higher benefits related costs and higher general administrative costs, partially offset by the benefits from our cost savings initiatives. Overall, our adjusted marketing and selling expenses represented 10.2% of net sales during the quarter, a 70 basis point decrease compared to last year. Adjusted administrative expenses represented 6.7% of net sales during the quarter, a 50 basis point increase compared to last year. This quarter, we achieved just over $20 million in incremental year-over-year savings. We expect an additional $40 million to $50 million evenly spread over the balance of fiscal 2021, on track to deliver $75 million to $85 million of cost savings for the fiscal year with the majority of the savings from the Snyder's-Lance integration. We remain on track to deliver our cumulative savings target of $850 million by the end of fiscal 2022. As discussed, adjusted EBIT grew by 8%. This was driven by the increase in demand for our products with sales gains contributing $40 million of EBIT growth, which was partially offset by the previously described adjusted gross margin decline. Our adjusted EBIT margin increased year-over-year by 40 basis points to 17.2%. Adjusted earnings per share increased $0.12 from $0.72 in the prior year quarter to $0.84 per share. Adjusted EBIT had a positive $0.07 impact on adjusted EPS. Adjusted net interest expense declined year-over-year by $17 million delivering a $0.04 positive impact to adjusted EPS, as we have used proceeds from completed divestitures in fiscal 2020 and our strong cash flow to reduce debt. The impact from the adjusted tax rate was nominal, completing the bridge to $0.84 per share. In Meals & Beverages, net sales increased 6% to $1.3 billion, primarily reflecting strong volume growth, driven by in-market consumption for many of our U.S. retail products, including gains in U.S. Soups, V8 beverages, Prego pasta sauces, and Campbell's pasta; partially offset by declines in Foodservice driven by COVID-19 related restrictions. Net sales of U.S. Soup, including Pacific Foods, increased 10% compared to the prior year, primarily due to volume gains in condensed soups and ready-to-serve soups. Operating earnings for Meals & Beverages increased 7% to $258 million. Within Snacks, net sales increased 4% driven by volume gains fueled by the majority of our power brands and lower levels of promotional spending on supply constrained brands. Operating earnings for Snacks increased 6% driven by sales volume gains and lower selling expenses, partially offset by higher marketing investment, administrative expenses and a lower gross margin. Fiscal year-to-date cash flow from operations decreased from $663 million in the prior year to $611 million, as changes in working capital were only partially offset by higher cash earnings. Our year-to-date cash from investing activities was largely reflective of the cash outlay for capital expenditures of $132 million, which was $35 million lower than the prior year, primarily driven by discontinued operations. Our year-to-date cash outflows for financing activities were $405 million, reflecting cash outlays due to dividends paid of $215 million, which were comparable to the prior year, reflecting a quarterly dividend of $0.35 per share. In December, we announced an increase in the quarterly dividend to $0.37 per share or an increase of 6%, which from a cash flow perspective, will be reflected in the third quarter. Additionally, we reduced our debt by $176 million. We ended the quarter with cash and cash equivalents of $946 million. We expect to utilize the majority of this cash during the second half of the fiscal year for repayment of upcoming debt maturities of $721 million and $200 million in March and May respectively. We expect net sales for fiscal 2021 to declined 3.5% to 2.5%. Excluding the impact from the 53rd week in fiscal 2020 and impact of the European Chips divestiture, we expect organic net sales to decline 1.5% to 0.5%. We expect adjusted EBIT of minus 1% to plus 1% as we will lap that initial COVID-19 demand surge in the second half of our fiscal year, combined with headwinds from increased promotional activity, partially offset by lower year-over-year COVID-19 related expenses and last year's one-time marketing investments. We continue to expect net interest expense of $215 million to $220 million and an adjusted effective tax rate of approximately 24%. As a result, we expect adjusted earnings per share of $3.03 to $3.11 per share, representing year-over-year growth of 3% to 5%. The earnings per share impact of the 53rd week in fiscal 2020 was estimated to be $0.04 per share. Regarding capital expenditures; in light of the current operating environment with limited access to our factories, we now expect to spend 10% below the $350 million we had previously indicated for the full year, largely driven by the impacts from COVID-19 on the operating environment. The first is our Snacks business which, as I mentioned earlier, consists of a unique and differentiated portfolio of brands that represent approximately 50% of the Company's annual revenues. Nearly 13 million new households purchased Campbell Soup since the initial peak of the pandemic, of which almost a third are millennials, outpacing both key competitors and the category average. We have also seen macro behaviors like quick-scratch cooking take root and our research indicates more than 30% of the consumers are cooking more with Soup since the start of the pandemic. Beyond the role that our Meals & Beverages offerings play in the lunch occasion, snack-foods accompany nearly 30% of all lunches, which bodes well for our entire portfolio. Even more importantly, 70% of the consumers surveyed told us our brands better met their needs than competitive products. Given the cash generative nature of our business and our reduce leverage, which is now below 3 times, we are well positioned to generate significant cash flow, well above our ongoing commitment to base capital investments and dividends in the next three years. Number one, sustain or accelerate our historical Snacks growth while improving margins; number 2, solidify our Meals & Beverages business as a steady and stable contributor behind recent transformational consumer trends and trial; and number 3, deploy what will be significant capital to fuel this growth and create differentiated value.

The Snacks business delivered another solid quarter with sales growth of 4%, largely driven by our power brands in salty snacks including Kettle Brand potato chips, Late July snacks and Cape Cod potato chips as well as Pepperidge Farm Farmhouse bakery products. Prego sales growth came primarily from the gain of an additional 4 million new households across all demographic cohorts. Adjusted earnings per share from continuing operations increased by 17% to $0.84 per share, reflecting an increase in adjusted EBIT as well as lower adjusted net interest expense. Adjusted earnings per share from continuing operations increased 23% to $1.86 per share, reflecting the increase in adjusted EBIT and lower adjusted net interest expense. Breaking down our net sales performance for the quarter, reported and organic net sales increased 5% from the prior year. This performance was largely driven by a 4 point gain in volume across the majority of our retail brands, partially offset by declines in foodservice and in partner brands within the Snyder's-Lance portfolio. We remain on track to deliver our cumulative savings target of $850 million by the end of fiscal 2022. Adjusted earnings per share increased $0.12 from $0.72 in the prior year quarter to $0.84 per share. The impact from the adjusted tax rate was nominal, completing the bridge to $0.84 per share. Within Snacks, net sales increased 4% driven by volume gains fueled by the majority of our power brands and lower levels of promotional spending on supply constrained brands. We expect net sales for fiscal 2021 to declined 3.5% to 2.5%. Excluding the impact from the 53rd week in fiscal 2020 and impact of the European Chips divestiture, we expect organic net sales to decline 1.5% to 0.5%. As a result, we expect adjusted earnings per share of $3.03 to $3.11 per share, representing year-over-year growth of 3% to 5%.

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Our adjusted earnings per share of $1.06 is up from $0.32 a year ago. And our streaming services ended Q1 with 196.4 million total subscriptions after adding 17.4 million in the quarter, including 11.8 million Disney+ subscribers. In the midst of a global pandemic, fast-changing consumer expectations and a leadership transition, we reimagined our parks business, substantially increased our investment in content creation and executed a reorganization that will facilitate our ongoing transformation. In short, our collection of assets and platforms, creative capabilities, and unique place in the cultural zeitgeist give me great confidence that we will continue to define entertainment for the next 100 years. The quality content from our teams was recognized just yesterday with a fantastic 23 Oscar nominations, including three of the five best animated feature films: Pixar's Luca; Walt Disney Animation's Raya and the Last Dragon; and our newest franchise, Walt Disney Animation's Encanto, which received three nominations. And Q1 saw 10 of their shows achieve a 100% critic score on Rotten Tomatoes. That includes Abbott Elementary, the first freshman broadcast comedy to earn the 100% Certified Fresh score since ABC's own Modern Family in 2009. In fact, six of the 10 most-watched programs across our services are general entertainment titles produced by our own team. Sporting events continue to be the most powerful draw in television, accounting for 95 of the 100 most-watched live broadcast in 2021. We'll debut two Marvel series, Ms. Marvel and She-Hulk; fresh new shorts from Disney Animation and Pixar featuring the worlds of Big Hero 6 and Cars; a live-action reimagining of the Disney classic Pinocchio, starring Tom Hanks as Geppetto; and one of the most anticipated sequels in some time, especially in the Chapek household, Hocus Pocus 2. As I've said before, we continue to manage our services for the long term and maintain confidence in our guidance of 230 million to 260 million total paid Disney+ subscribers globally by the end of fiscal 2024. With outstanding music from Lin-Manuel Miranda, it became the fastest title to cross 200 million hours viewed on Disney+ and took social media by storm. People around the world expressed their fandom through their own content and conversation, and the Encanto hashtag has been viewed more than 11 billion times. 197 on the Billboard 200 chart, reached No. 1 shortly after debuting on Disney+. And eight of the film's songs hit the Hot 100 chart, including We Don't Talk About Bruno, which became the first Disney song to reach No. 1 since Aladdin's A Whole New World in 1993. That number rose to more than 50% during the holiday period. Excluding certain items, diluted earnings per share for the quarter were $1.06, an increase of $0.74 from the prior-year quarter. Fiscal 2022 is off to a good start as evidenced by our first-quarter results and our continued progress toward more normalized operations across our businesses. At parks, experiences, and products, operating income was up $2.6 billion year over year as all of our parks and resorts around the world were open for the entirety of the fiscal first quarter. Per capita spending at our domestic parks was up more than 40% versus fiscal first quarter 2019 driven by a more favorable guest and ticket mix, higher food, beverage and merchandise spending and contributions from Genie+ and Lightning Lane. First-quarter operating income decreased by more than $600 million versus the prior year as revenue growth across our lines of business was more than offset by higher programming and production costs. Revenue growth in the quarter was primarily driven by increased subscription fees from our direct-to-consumer services. At linear networks, you may recall that we guided to a decrease in operating income of nearly $500 million for Q1 versus the prior year. Operating income of $1.5 billion came in better than expected, primarily driven by our international channels, which I'll discuss in a minute. ESPN advertising revenue in the first quarter was up 14% versus the prior year and second quarter-to-date domestic cash advertising sales at ESPN are currently pacing up. Total domestic affiliate revenue increased by 2% in the quarter. These results came in more than $200 million better than our prior guidance primarily due to lower programming and production costs as well as better-than-expected advertising and affiliate revenues. At direct-to-consumer, first-quarter operating results decreased by $127 million year over year, driven by higher losses at Disney+ and ESPN+, partially offset by improved results at Hulu. Operating losses at Disney+ increased versus the prior year as growth in subscription revenue was more than offset by higher programming, technology, and marketing costs. We ended the quarter with nearly 130 million global paid Disney+ subscribers, reflecting over 11 million net additions from Q4. We added 4.1 million paid domestic Disney+ subscribers, including a benefit of approximately 2 million incremental subscribers from our strategic decision to include Disney+ and ESPN+ as part of a Hulu Live subscription. In international markets, excluding Disney+ Hotstar, we added 5.1 million paid subscribers, primarily driven by growth in Asia Pacific and European markets. Finally, we were able to resume growth in Disney+ Hotstar markets with 2.6 million paid subscriber additions in the quarter. At ESPN+, we ended the first quarter with over 21 million paid subscribers versus 17 million in Q4. Hulu ended the first quarter with 45.3 million paid subscribers, inclusive of 4.3 million subscribers to our Hulu Live digital MVPD service. Moving on to content sales/licensing and other. Results decreased in the first quarter versus the prior year to an operating loss of $98 million, driven by lower theatrical results and higher film impairments, partially offset by improved TV SVOD results. As I noted last quarter, while theaters have generally reopened, we are still experiencing a prolonged recovery to theatrical exhibition, particularly for certain genres of films, including non-branded general entertainment and family focused animation. At direct-to-consumer, we expect programming and production expenses to increase by approximately $800 million to $1 billion, including programming fees for Hulu Live. At linear networks, we expect programming and production expenses to increase by approximately $500 million, reflecting factors including COVID-related timing shifts. As a result, we expect operating income to be adversely impacted by more than $200 million versus the prior-year quarter.

Our adjusted earnings per share of $1.06 is up from $0.32 a year ago. And our streaming services ended Q1 with 196.4 million total subscriptions after adding 17.4 million in the quarter, including 11.8 million Disney+ subscribers. In the midst of a global pandemic, fast-changing consumer expectations and a leadership transition, we reimagined our parks business, substantially increased our investment in content creation and executed a reorganization that will facilitate our ongoing transformation. Excluding certain items, diluted earnings per share for the quarter were $1.06, an increase of $0.74 from the prior-year quarter. Fiscal 2022 is off to a good start as evidenced by our first-quarter results and our continued progress toward more normalized operations across our businesses. Revenue growth in the quarter was primarily driven by increased subscription fees from our direct-to-consumer services. Operating losses at Disney+ increased versus the prior year as growth in subscription revenue was more than offset by higher programming, technology, and marketing costs. Hulu ended the first quarter with 45.3 million paid subscribers, inclusive of 4.3 million subscribers to our Hulu Live digital MVPD service. Moving on to content sales/licensing and other. As I noted last quarter, while theaters have generally reopened, we are still experiencing a prolonged recovery to theatrical exhibition, particularly for certain genres of films, including non-branded general entertainment and family focused animation.

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Today, our Wealth Solutions business supports $4.1 trillion in assets, in nearly 13 million investor accounts. And our data and analytics infrastructure is unmatched with more than 17,000 data sources, 450 million linked consumer accounts and more than 33 million users in the most recent quarter. In fact, 17 of the 20 largest banks in the U.S. work with Envestnet. 47 of the 50 largest wealth management and brokerage firms work with us. 3,000 RIA firms, including many of the nation's largest and more than 500 FinTech companies rely on investment to help them meet the growing demand and expectations from their customers. We continue to see accelerated use of our overlay solutions and a 35% year-to-date increase in use of our direct index portfolios. Our paid user count has increased 28% versus last year, driven by new logos and user growth in both our financial institutions and our FinTech channels. Today, 10 insurance carriers among the the largest providers representing more than half of the variable annuity market in the U.S., while they're participating in the exchange. Adjusted revenue for the quarter was $253 million, well above the guidance we provided as we saw outperformance in asset-based and subscription-based revenue as well as professional services. Operating expenses overall came in around $5 million lower than our expectations for the quarter. As a result, our adjusted EBITDA of $67.6 million was up 24% compared to last year. This translated to similarly strong performance in adjusted earnings per share of $0.72, 20% above last year. We now expect adjusted revenue for the year to be between approximately $991 million and $993 million, up 9% year-over-year. Adjusted EBITDA to be between $238 million and $239 million, up 23% to 24%, and we are raising adjusted earnings per share to be between $2.51 and $2.53. To add some context to the full year, our EBITDA, EBITDA margin and earnings per share this year are meaningfully higher than we expected at the beginning of the year, with revenue growth expected at 9% and EBITDA growth expected at 23% to 24%. We ended September with $363 million in cash and debt of $863 million, including the convertible notes we issued in August. Our net leverage ratio at the end of September was 2.1 times EBITDA, down from the 2.3 times at the end of June. With $500 million available on the revolver, meaningful cash on the balance sheet and positive cash flow generation, we are comfortable that we have the liquidity and flexibility as we balance managing the business in the current environment with continuing to invest in growth opportunities, both organically and through strategic activities.

This translated to similarly strong performance in adjusted earnings per share of $0.72, 20% above last year. Adjusted EBITDA to be between $238 million and $239 million, up 23% to 24%, and we are raising adjusted earnings per share to be between $2.51 and $2.53.

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It's clear that WestRock is a great company with 50,000 dedicated employees who work tremendously hard every day. In the quarter, sales of $5.1 billion were up 14% year over year. Adjusted segment EBITDA also improved significantly, rising to $878 million or 22% year over year, and adjusted earnings per share of $1.23 increased 68% compared to prior year. Packaging sales increased by 8% year over year, driven by the implementation of price increases across our business. Packaging volumes were down 1.6% year over year, with box volumes down 1%. Paper volumes increased 13% year over year on strong demand across all grades. Our Corrugated adjusted segment EBITDA margins of 18.4% increased sequentially and year over year. The Brazil business generated 35% EBITDA margins driven by strong demand and the positive impact of the ramp-up of our Tres Barras Mill after the completion of the expansion project. Our Consumer Packaging segment performed very well with adjusted segment EBITDA margins of 15.9%, up 220 basis points from prior year and 40 basis points sequentially. Overall, WestRock adjusted segment EBITDA margins of 17.2% were up 110 basis points versus prior year and 40 basis points sequentially. This adjusted segment EBITDA includes $5 million of proceeds from business interruption insurance. In the quarter, we generated adjusted free cash flow of $372 million. As part of our balanced capital allocation strategy, we repurchased $122 million of stock and redeemed $400 million of bonds that would have matured in March 2022. Net sales for the year increased to $18.7 billion, and we reported adjusted segment EBITDA of $3 billion. Net sales and adjusted segment EBITDA were both up an impressive 7% year over year. Adjusted earnings per share of $3.39 was up 23%, and we generated record adjusted free cash flow of $1.5 billion. We also hit our net leverage target of two and a quarter times to two and a half times ending the year at 2.38 times. Our innovation pipeline continues to grow, and we have reached an annual run rate of more than $280 million of sales from plastic replacement opportunities. We generated $1.5 billion in adjusted free cash flow in fiscal 2021, the sixth straight year that WestRock has generated more than $1 billion in free cash flow. During fiscal 2021, we invested $816 million into our business through capital investments that maintained our assets and support our growth in the future. Given our consistent cash flow generation over multiple business cycles, we increased our dividend, raising it 20% in May, and then again, as announced in October, for a total increase of 25% since February. We further strengthened our balance sheet as we reduced adjusted net debt by $1.3 billion to $7.7 billion and returned to our targeted leverage ratio. We repurchased $122 million of stock or 2.4 million shares. This channel makes up approximately 13% of our packaging volume, and our e-commerce remains a key driver of overall box demand. Sales to the beauty and healthcare markets are 12% of our packaging volume. And these are just a few examples that have generated our current $280 million run rate of incremental sales from plastics replacement. We continue to believe this opportunity is in excess of $500 million incremental sales annually. We also won 12 additional awards for sustainability, innovation and design. This commodity cost inflation combined with our seasonal increase in healthcare cost is forecasted to be approximately $100 million higher than the fourth quarter. And due to delays in mill maintenance earlier in fiscal 2021, along with our originally planned outages, we have approximately 200,000 tons of scheduled downtime across our system that will negatively impact earnings by approximately $75 million. We have 10 major mill maintenance outages in the first fiscal quarter, one of the largest amounts in one quarter in WestRock's history. These assumptions, combined with three fewer shipping days and the normal seasonality in our consumer business, results in forecasted adjusted segment EBITDA of $660 million to $700 million and adjusted earnings per share of $0.56 to $0.67 per share. Our planned mill maintenance outage schedule declines throughout the fiscal year, but will still be approximately 100,000 tons higher than in fiscal 2021. Given these assumptions, we forecast adjusted segment EBITDA to be in the range of $3.3 billion to $3.7 billion. As CFO, Ward has been instrumental in the growth and development of our company, overseeing more than 20 mergers and acquisitions, including the merger of MeadWestvaco and RockTenn, the spinoff of Ingevity, the sale of our Home, Health and Beauty Plastics business, and the disposition of our land and development business.

In the quarter, sales of $5.1 billion were up 14% year over year. Adjusted segment EBITDA also improved significantly, rising to $878 million or 22% year over year, and adjusted earnings per share of $1.23 increased 68% compared to prior year.

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Capital spending for the quarter came in at $115 million, below the bottom end of guidance, which was also lowered with the recent guidance update. We recently completed a strategic consolidation transaction in the Delaware Basin, increasing our footprint to 110,000 net acres in the basin. The acquisition of the Primexx assets, which we announced along with our second quarter earnings, closed at the beginning of October, and we are well on our way with the integration process. Early time productivity has been evident with average peak oil rates of over 1,200 barrels of oil per day across 19 wells in the Wolfcamp A and B, and longer-term performance has also been attractive with 180-day average cumulative oil production of approximately 120,000 barrels of oil, which represents over 72% of the hydrocarbon mix on a two-stream basis. The combined well package is responding favorably to the modification with all three wells performing ahead of the project type curve through the first 20 days online. The scale and scope of our Permian position and associated core inventory of over 1,100 locations in the Delaware alone enable us to establish a durable program that builds on substantial project-level returns on capital to support a robust free cash flow profile through mid-cycle commodity pricing. As part of that execution, multiple noncore monetizations have produced cash proceeds of roughly $210 million in 2021. We expect that these last few transactions announced since early October, including a smaller monetization of select water disposal assets, to close by year-end, which will put us near the top end of our guidance range of $125 million to $225 million of proceeds for the year. These proceeds, combined with our 2021 free cash flow generation expectations have established a tangible path to bring leverage under two times by mid-2022 and subsequently drive to our next round of targets of debt-to-EBITDA below one and a half times and absolute leverage of under $2 billion.

The acquisition of the Primexx assets, which we announced along with our second quarter earnings, closed at the beginning of October, and we are well on our way with the integration process.

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As a note, due to the significant impact COVID-19 had on fiscal 2020 financial results, our first quarter fiscal 2021 results are compared to the first quarter of fiscal 2019, which we believe is a more meaningful comparison. We had record first quarter revenue of over $1 billion and the highest first quarter operating income in our history of $133 million, which was up 170% from 2019. Starting with our first pillar, accelerating Aerie to $2 billion, this quarter provided even more evidence that Aerie is the most exciting brand in retail today. On nearly 90% revenue growth, operating earnings rose well over 700%. At this pace, we expect to hit our $2 billion target faster than expected, fueling significant earnings growth. We are reducing water, utilizing more sustainable raw materials and reducing energy to ultimately achieve carbon neutrality in our own facilities by 2030. We know sustainability is important to our customers and [Indecipherable] on our commitment to social responsibility and I&D, this month we awarded our first 15 Real Change scholarships for Social Justice. At this pace, we expect to achieve our 2023 goal of $550 million of operating income way ahead of schedule. Sales rose an incredible 89% from 2019. As aerie.com becomes a go-to destination for our customers, the online business more than doubled, posting a growth of 158%. Store revenue increased 36% with about one-third from new store opening. Aerie's active customer file expanded approximately 40% as we entered new markets, and we increased engagement on social channels, including TikTok where we saw tremendous response. Sales metrics were strong across the board, and notably our AURs were up 50%. A significant reduction in promotions contributed to an over 700% increase in operating profit and a 23.5% operating margin. This quarter, we saw a 39% increase in operating profit, with operating margins rising 20.8%. We are also pleased with the improvement in sales, led by a 20% increase in the digital business. Customer engagement was up 2% with new digital acquisitions up 17%. Our revenue rose 57% from 2019, producing incremental revenue of $150 million in the first quarter. Further fueling an already highly profitable channel, digital penetration increased to 40% of total revenue, up from 30% in 2019. We improved our mobile experience and redesigned our app, resulting in 70% increase in revenue from total mobile. Fleet optimization work is under way and we are pleased with the initial transfer rates from recent store closures, which are running well ahead of our 40% goal. Nearly 1 million new customers have been added since 2019. In the first quarter, we leveraged e-commerce delivery expense, had fewer shipments per order and delivered to customers 1.5 days faster than in the first quarter of 2019. Revenue of over $1 billion and operating income of $133 million marked all-time highs for the Company. Consolidated first quarter net revenue increased 17%. Across brands and channels, sales metrics were exceptionally strong with our average unit retail up over 20% fueling a healthy transaction value. Digital revenue rose 57%, with Aerie up 158% and AE up 20%. Online sales for the quarter represented approximately 40% of our total mix, increasing significantly from 30% in the first quarter of 2019. At a brand level, AE revenue increased slightly to $728 million. AE's operating profit jumped 39% to $151 million and the operating margin expanded 570 basis points to 20.8%. Revenue increased 89% to $297 million. Operating income hit $70 million, rising over 700%. The operating margin expanded to 23.5% from 5.3% in 2019. Total consolidated AEO gross profit dollars were up $111 million or 34% compared to the first quarter of 2019 and gross margin expanded 550 basis points to 42.2%. SG&A leveraged 40 basis points as a rate to sales. The dollar increase of $34 million from the first quarter 2019 was due to compensation in line with our performance-based incentive program, an increase in corporate salaries and higher variable selling expenses, partly offset by lower travel expense. Operating income of $133 million increased 170% compared to $49 million in adjusted operating income in the first quarter 2019. The operating margin of 12.9% expanded 730 basis points, marking a 14-year high for the Company. Corporate unallocated expense increased 29% to $88 million, primarily due to incentive compensation. Adjusted earnings per share was $0.48 per share in the quarter, marking a record first quarter outcome for us. Our diluted share count was 207 million and included 34 million shares of unrealized dilution associated with our convertible notes. Ending inventory was up 2% compared to the end of the first quarter of fiscal 2019. American Eagle inventory was down 15% due to continued inventory optimization initiatives and significantly reduced clearance levels. Aerie's inventory increased approximately 50% versus 2019, supporting the strong sales growth, new stores and product expansion, including OFFLINE by Aerie. We ended the quarter with $792 million in cash and short-term investments. Even excluding proceeds from the convertible bond issuance, our liquid, cash balance is up $36 million versus 2019. Capital expenditures totaled $37 million in the quarter. For 2021, we continue to expect capital expenditures of $250 million to $275 million, in line with the average annual target we shared at our investor meeting. The vast majority of our 2020 renewals were short term, resulting in almost 450 leases coming to term in 2021. This year, we plan to open approximately 60 Aerie stores and over 30 OFFLINE by Aerie stores, which will be a mix of stand-alones and Aerie side-by-side locations. There is still uncertainty ahead, but as we reflect on our 2023 targets provided back in January of $5.5 billion in revenue and $550 million in operating profit, we believe we are on pace to achieve the profit goal this year, obviously well ahead of expectations. As a reminder, our reported second quarter 2019 results included a $40 million benefit to revenue and $38 million benefit to operating profit from the termination of our licensing partnership with a third party operator in Japan.

As a note, due to the significant impact COVID-19 had on fiscal 2020 financial results, our first quarter fiscal 2021 results are compared to the first quarter of fiscal 2019, which we believe is a more meaningful comparison. Digital revenue rose 57%, with Aerie up 158% and AE up 20%. Adjusted earnings per share was $0.48 per share in the quarter, marking a record first quarter outcome for us. For 2021, we continue to expect capital expenditures of $250 million to $275 million, in line with the average annual target we shared at our investor meeting.

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We had another period of strong financial results in the third quarter, with earnings of $1.1 billion after-tax or $3.54 per share. Total sales were up 27% over 2019 levels with strong momentum across all categories, even travel sales increased, and while they dropped a bit in August due to concerns related to the Delta variant, travel has steadily improved since then. While the competitive environment has intensified, new accounts are now up 17% over 2019, reflecting the strength of our value proposition. While some of our peers had to reinvigorate their rewards offerings and substantial cost, our rewards costs were up only 6 basis points year-over-year and nearly all of this increase was driven by higher consumer spending as evidenced in our strong discount revenue. PULSE saw a meaningful increase in debit volume with 9% growth year-over-year and a 26% increase over the third quarter of 2019, demonstrating both the impact of the recovery and an increase in debit used through the pandemic. Our Diners business has also started to see some improvement from the global recovery with volume up 12% from the prior year as the global economy recovers, we will continue to look for opportunities to expand our international reach. Looking at our financial summary results on Page 4, there are three key things I want to call out. First, our total revenue, net of interest expense is up 8% from the prior year, excluding $167 million unrealized loss due to market adjustments on our equity investments. Including this, revenue is up 2% for the quarter. Net charge-offs were down $343 million from the prior year, which supported a $165 million reserve release this quarter. We saw the return to growth this quarter with ending loans up 1% over the prior year and up 2% sequentially. Card loans were the primary driver and we're also up 1% year-over-year and 2% over the prior quarter. Sales growth continued to accelerate and was up 27% over the third quarter of 2019. Year-to-date, new accounts were up 27% from the prior year and up 17% over 2019 levels. The payment rate was approximately 500 basis points over pre-pandemic levels. Organic student loans increased 4% from the prior year with originations up 7% as most schools have returned to the normal in-person learning model. Personal loans decreased 4% driven by high payment rates. Moving to Slide 6, net interest margin was 10.8%, up 61 basis points from the prior year and 12 basis points from the prior quarter. Card loan yield was up 1 basis point sequentially as lower interest charge-offs were offset by the increased promotional balance mix. Yield on personal loans declined 15 basis points sequentially due to lower pricing. Average consumer deposits were flat year-over-year and declined 1% from the prior quarter. Late in September, we executed our first ABS issuance since October 2019 consisting of a $1.2 billion security with a three-year fixed rate coupon of 58 basis points and a five-year $600 million security with a fixed coupon of 103 basis points. Total non-interest income increased $90 million or 20% over the prior year excluding the unrealized loss on equity investments. Net discount and interchange revenue was up $61 million or 26% driven by strong sales volume. This was partially offset by increased rewards costs due to high sales in the 5% category, which was restaurants and PayPal, both this year and last. We continue to benefit from strong sales through our partnership with PayPal, while restaurant sales were up 62% year-over-year as dining activity recovered. Loan fee income was up $21 million or 21%, primarily driven by lower late fee charge-offs and higher non-sufficient funds and cash advance fees. Total operating expenses were up $185 million or 18% from the prior year. Employee compensation increased $12 million driven by a higher bonus accrual in the current year. Excluding bonuses, employee compensation was down 3% from their prior year from lower headcount. Marketing expense increased $70 million supporting another quarter of strong new account growth. Other expense included a $50 million legal accrual. Professional fees were up $47 million, primarily due to higher recovery fees. Year-to-date, recoveries were up 20% compared to the prior year. Total net charge-offs were a record low at 1.46%, down 154 basis points year-over-year and 66 basis points sequentially. Total net charge dollars decreased $343 million from their prior year and were down $131 million quarter-over-quarter. This quarter, we released $165 million from reserves and our reserve rate dropped 35 basis points to 7.7%. The impact of these was partially offset by a 2% increase in loans from the prior quarter. Our economic assumptions include an unemployment rate of approximately 5.5% by year-end and GDP growth of just over 6%. Our common equity Tier 1 for the period was 15.5%, well above our 10.5% target. We repurchased $815 million of common stock and as we had previously announced, increased our dividend payable by 14% to $0.50 per share. On funding, we continue to make progress toward our goals of having deposits be 70% to 80% of our funding mix. Deposits now make up 68% of total funding, up from 62% in the prior year.

We had another period of strong financial results in the third quarter, with earnings of $1.1 billion after-tax or $3.54 per share. Including this, revenue is up 2% for the quarter.

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Before turning the call over, I want to remind everyone that due to the FCC's anti-collusion rules related to Auction 107, which are still in effect, we will not be responding to any questions relating to that auction. At UScellular, we executed on two $500 million bond transactions, increased the size of our term loan in EIP securitization program, and extended the term of our revolver. I also want to highlight that in 2020, the CARES Act provided a unique opportunity to carry back tax losses from 2020 against profits made in prior years when the federal tax rates were 35%, which is 14% higher than the current rate. The net effect of all this activity was an expected cash refund of approximately $180 million, the majority of which we expect to receive in the first half of 2021, which includes a permanent tax benefit of $60 million. For GAAP accounting purposes, this yielded an unusually low effective tax rate of 6.4%. If we flip to Page 6, just to state the obvious, 2020 was a challenging year. We saw over 50% increases in data usage year-over-year. Our traffic was down almost 30% in the fourth quarter, and that's just a little bit less impact than the retail industry in general over that same time period. We realized increased income from our equity method investments and all of that together drove adjusted EBITDA to increase 5% year-over-year. As I mentioned earlier, we experienced a 54% year-over-year increase in daily usage, but we managed our systems operations expenses to only a 3% year-over-year increase. We ended the year with 5G capability at 24% of our cell sites. And those cell sites handle 50% of our overall traffic. Total smartphone connections increased by 47,000 over the course of the past 12 months. That helps to drive more service revenue, given that smartphone ARPU is about $21 higher than feature phone ARPU. As mentioned, we saw connected device gross additions increase by 12,000 year-over-year. During Q4, we saw an average year-over-year decline in store traffic of around 30% related to the impacts of COVID-19. Postpaid handset churn, depicted by the blue bars, was 1.01%, down from 1.11% a year ago. And about 60% of the customers that were on the pledge at June 30 are actively paying. Total postpaid churn, combining handsets and connected devices, was 1.21% for the fourth quarter of 2020, also lower than a year ago. Total operating revenues for the fourth quarter were $1.073 billion, a modest increase year-over-year. Retail service revenues increased by $17 million to $683 million. Inbound roaming revenue was $33 million. That was a decrease of $9 million year-over-year, driven by a decrease in data volume. Other service revenues were $60 million, an increase of $5 million year-over-year, partially due to a 9% increase in tower rental revenues. Finally, equipment sales revenues increased by $8 million year-over-year due to an increase in average revenue per unit for new smartphones, partially offset by lower accessory sales. Average revenue per user or connection was $47.51 for the fourth quarter, up $0.94 or 2% year-over-year. On a per account basis, average revenue grew by $3.88, or 3% year-over-year. Fourth quarter tower rental revenues increased by 9% year-over-year. As shown at the bottom of the slide, adjusted operating income was $178 million, a decrease of 2% year-over-year. As I commented earlier, total operating revenues were $1.073 billion, a 2% increase year-over-year. Total cash expenses were $895 million, increasing $24 million or 3% year-over-year. Excluding roaming expense, system operations expense increased by 7%, driven partially by costs associated with our network modernization and 5G deployment, including higher maintenance and support costs for network operations, higher cell site rent expense and an increase in costs to decommission network assets. Note that total system usage grew by 36% year-over-year. Roaming expense increased $3 million, or 9% year-over-year, due to a 68% increase in off-net data usage, partially offset by lower data rates. Cost of equipment sold increased $14 million, or 5% year-over-year, due primarily to an increase in the average cost per unit for new smartphones, partially offset by a decrease in accessory sales. Selling, general and administrative expenses decreased $4 million, or 1% year-over-year, driven primarily by a decrease in bad debts expense. Bad debts expense decreased $10 million, due to lower write-offs, driven by fewer non-pay customers as a result of a better credit mix and improved customer payment behavior. Adjusted EBITDA for the quarter was $222 million, flat year-over-year. Equity and earnings of unconsolidated entities increased by $4 million, or 11%. Total operating revenues were $4 billion, a modest increase year-over-year. Total cash expenses were $3.2 billion, a decrease of $29 million year-over-year. System operations expense increased by 3%, despite a 54% increase in total system usage on our network and a 59% increase in off-network data usage. Adjusted operating income and adjusted EBITDA grew by 5%. For total service revenues, we expect a range of approximately $3.025 billion to $3.125 billion. We expect adjusted operating income to be within a range of $800 million to $950 million, and adjusted EBITDA within a range of $975 million to $1.125 billion. For capital expenditures, the estimate is in a range of $775 million to $875 million. Despite the many challenges we had to overcome, we grew revenues 5% and reinvested savings from operational efficiencies into our growth initiatives, while still modestly improving adjusted EBITDA. We have been extremely active in deploying fiber by investing a $130 million during 2020. In addition to the expansion of fiber-to-the-home infrastructure, we connected over 67,000 service addresses to our network, bringing total fiber addresses to 307,000, both in existing markets and our growing expansion markets. In our fourth year of investment under the A-CAM program, we spent $30 million and have exceeded our subscriber gross add and revenue projections for the year. We are upgrading the existing plant to DOCSIS 3.1, and are deploying fiber in neighborhoods not previously built. Now turning to slides 19 and 20. Our goal for the year is to generate overall revenue growth of around 3%, with new market growth offsetting wireline commercial and wholesale erosion and cable continuing its strong performance. We plan to deliver 150,000 new fiber service addresses by the end of 2021, more than doubling last year's address delivery and increasing our wireline footprint by nearly 20%. Revenues increased 6% from the prior year, as growth from our fiber expansions, increases in broadband subscribers and the Continuum cable acquisition exceeded the declines we experienced in our legacy business. Cash expenses increased 8%, due to additional spending from our growth initiatives and increases in facility maintenance. Adjusted EBITDA declined 2% to $74 million. Capital expenditures increased to $147 million, as we continue to increase our investment in fiber deployment and success-based spend. Broadband residential connections grew 9% in the quarter, as we continue to fortify our network with fiber and expand into new markets. From a broadband speed perspective, we are offering up to 1 gig broadband speeds in our fiber markets as 13% of our wireline customers are taking this product where offered. Across our wireline residential base, including our new out-of-territory markets, 40% of broadband customers are taking 100 megabit speeds or greater compared to 33% a year ago, helping to drive a 5% increase in average residential revenue per connection. Wireline residential video connections grew 8%. And at the same time, we expanded our IPTV markets to 55, up from 40 a year ago. Approximately 40% of our broadband customers in our IPTV markets take video. Our IPTV services in total cover 41% of our wireline footprint today, leaving opportunity to further leverage our investment in video. As a result of this strategy, over the last several years, 307,000 or 36% of our wireline service addresses are now served by fiber, which is up from 30% a year ago. This is driving revenue growth, while also expanding the total wireline footprint 7% to 845,000 service addresses. These additional markets bring our fiber program, which began in 2019, to 430,000 service addresses, which will expand our total footprint -- our total fiber footprint to 620,000 service addresses by 2024. Total revenues increased 1% to $173 million, largely driven by the strong growth in residential revenues, which increased 8% due to growth from broadband and video connections as well as growth from within the broadband product mix, partially offset by a 2% decrease in residential voice connections. Commercial revenues decreased 8% to $37 million in the quarter, primarily driven by lower CLEC connections. Wholesale revenues decreased 3% to $46 million due to certain state USF timing support. In wireline, cash expenses increased 3% on higher video programming fees, maintenance expense and advertising, partially offset by the capitalization of new modems previously expensed. In total, wireline adjusted EBITDA decreased 8% to $50 million. Total cable connections grew 2% to 379,000, driven by 8% increase in total broadband connections. Broadband penetration continued to increase, up 200 basis points to 46%. On Slide 26, total cable revenues increased 18% to $76 million, driven in part by the acquisition. Without the acquisition, cable revenues grew 9%, driven by growth in broadband connections for both residential and commercial customers. Our focus on broadband connection growth and fast reliable service has generated a 27% increase in total residential broadband revenue, including organic growth of $5 million or 18%. Also driving the revenue change is a 6% increase in average residential revenue per connection, driven by higher-value product mix and price increases. Cash expenses increased 19%, including those from the acquisition, or 12% excluding acquisition due to increased employee expense. As a result, cable adjusted EBITDA increased 14% to $23 million in the quarter. Revenues increased 5%, about half of which was due to the cable acquisition. Cash expense also increased 5%, again, mostly due to the acquisition, but also as we redeploy spending from our legacy businesses to our growth initiatives and expansion into new markets. Adjusted EBITDA grew 1% from last year to $317 million. We are forecasting total Telecom revenues of $975 million to $1.025 billion in 2021, compared to $976 million in 2020. This reflects our goal of 3% top line growth, driven by continued improvements in both the wireline and cable segments. This includes contributions from our new fiber markets growing to $22 million in 2020 to nearly $50 million in 2021, offsetting declines in the legacy parts of our business. The increase in revenue will contribute to an adjusted EBITDA that we expect will be between $290 million to $320 million in 2021, compared to $317 million in 2020. Capital expenditures are expected to be between $425 million and $475 million in 2021 compared to $368 million in 2020. Wireline capex guidance includes $240 million for fiber deployments, nearly double our 2020 spending as well as nearly $90 million in success-based spending in both wireline and cable and approximately $25 million for the A-CAM program.

As I commented earlier, total operating revenues were $1.073 billion, a 2% increase year-over-year. For capital expenditures, the estimate is in a range of $775 million to $875 million.

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Our year-over-year backlog is up 21% as a result of general recovery trends across the portfolio, a meaningful increase in the DFRE segment backlog and some recognition from our customers that raw material costs and supply chain constraints are becoming more challenging into 2021 driving preorders in some markets. Revenue of 1.8 billion was flat versus the comparable period. Adjusted segment operating margin at 7.1% was flat despite unfavorable revenue mix during the quarter. For the full year, revenue was down 6% and adjusted segment margins up to 16.7% as a result of structural cost savings centered around strategic initiatives, tight cost controls, offsetting the impact of fixed cost under-absorption[Phonetic]. As we discussed at length in Q3, we are driving toward a strong cash flow performance in the 4th quarter, and we got it with full year free cash flow increasing 24% over 2019 achieving 14% of revenue. With that, we are initiating full year guidance of 5% to 6% organic revenue growth and adjusted earnings per share of $6.25 to $6.45. Sales and imaging and identification declined 3% organically. The 4th quarter closed off a solid margin performance in this segment with margins expanding a 150 basis points in Q4 and 220 basis points for the full year. Refrigeration and food equipment posted 13% organic growth with all businesses except food service equipment delivering the increase. Absolute earnings increased 71% in the quarter of the comparable period. FX benefited the topline by 2% or 34 million, driven principally by strengthening of the Euro against the Dollar. Acquisitions, more than offset[Phonetic] dispositions in the quarter by 12 million. The US, our largest market, posted a 1% organic decline in the quarter, an improvement over the 4% decline in Q3 and progressively improving order rates and a strong quarter in biopharma, marking and coding, food retail, and can making among others. Europe declined 3% organically driven by retail fueling and a difficult comparable quarter in vehicle services, though partially offset by continued strength in several of our pumps and process solutions businesses. All of Asia was down 11% organically driven principally by China, which was down 16% organically. Bookings were up 2% organically, reflecting the continued momentum we see across our businesses. Overall, our backlog is currently up approximately 300 million or 21% higher compared to this time last year, positioning us well as we enter 2021. Going to the bottom chart, the adjusted net earnings declined 1 million, as higher taxes in corporate expense offset improved segment EBIT. The effective tax rate excluding discrete tax benefit was approximately 21.4% for the year compared to 21.5% in the prior year. Discrete tax benefits were 8 million in the quarter and 22 million for the year or approximately 4 million lower than in 20 -- than in 2019. As we move into 2021, excluding the impact of discrete taxes, we expect the effective tax rate remain essentially the same as 2020 at about 21.5% rightsizing and other costs were 21 million in the quarter or 17 million after tax relating to several new permanent cost containment initiatives and other items that we executed at the end of 2020. We are pleased with the cash performance in 2020 with full year free cash flow of 939 million, a 181 million or 24% increase over last year. Free cash flow conversion stands at 21% of revenue for the 4th quarter, historically our highest cash flow quarter and 14% for the full year, a significant increase over the prior year. I'm on page 9. , the head count involved a center led enterprise capabilities will have increased by over 50%. We have over 100 e-commerce connected product and software experts dedicated to this endeavor. For example, this year we target to reach a run rate of $1 billion of revenue processed through digital channels, much of which is service parts and catalog items compared to 100 million in 2019. And lastly moving to slide 3, the India Innovation Center is more than 600 person strong team that our operating companies can leverage for product engineering, digital solutions development, data information management, research and development, and intellectual property services. Moving to 15, where does this leave this going into 2021. I'll step off the soapbox and let's move on to 16, we expect demand in engineered products to rebound in 2021.

With that, we are initiating full year guidance of 5% to 6% organic revenue growth and adjusted earnings per share of $6.25 to $6.45.

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Simply put, we have asked a lot of our employees over the past 1.5 years, and the team has risen to the occasion every time, especially in the third quarter. In the third quarter, we successfully delivered on our key pillars of Vision 2025, including driving organic growth in excess of 5%. In the third quarter, we delivered over 19% organic growth for the company. As a reminder, buildings account for approximately 30% to 40% of annual global greenhouse gas emissions. Blueskin prevents uncontrolled air leakage and can yield up to 30% savings on heating and cooling costs. Despite closing on Henry, which was the largest acquisition in Carlisle's history, we continue to repurchase shares, spending $25 million during the third quarter and bringing our total repurchases year-to-date to $291 million. As a reminder, since 2016, we have had over $1.8 billion in share repurchases. Throughout 2021, we have added LEDs and motion controls at many factories, saving more than 3.5 million kilowatt-hours of electricity, which translates into a reduction of close to 1,300 metric tons of greenhouse gases. In an exciting new program, we plan to upgrade our expanded polystyrene facility in Dixon, California, to enable production using 100% recycled materials by the end of next year. We'll have the ability to recycle as much as 150 tons of our production and customer scrap annually, which avoids significant waste from entering landfills. Revenue increased 25% year-over-year with organic revenue up over 19%. Adjusted earnings per share increased 27% year-over-year to $2.99 as higher volumes and price and cost discipline more than offset inflation during the quarter. CCM's organic growth in the third quarter was over 23% year-over-year. And notably, organic sales were close to 14% higher than the third quarter of 2019. CCM continues to benefit from a growing backlog fueled by the strong reroofing cycle in the U.S., which we estimate will grow from a market size of $6 billion to $8 billion in the next decade and with an ever-increasing emphasis on the energy efficiency of buildings, our proactive pricing actions and our investments in expanding our presence in the Building Envelope. With similar cultures around innovation, pricing to value, focus on customers and continuous improvement and strong results out of the gate, we are increasingly confident in Henry's ability to exceed our preliminary forecast of $1.25 in adjusted earnings per share accretion in 2022. Architectural Metals and polyurethanes were both up over 35% in the quarter and continue to progress well on profitability improvements. At CIT, third quarter revenue grew 6% year-over-year, evidence of continued progress in both CIT's Commercial Aerospace and Medical Technology platforms. On CFT, given its reenergized commitment to new products, improved operational efficiencies, price realization from earning the value of innovation and an improved customer experience, CFT generated revenue growth of 9% year-over-year and adjusted EBIT growth of 16% year-over-year in the third quarter. Revenue was up 25% in the third quarter, driven by volume growth at all of our businesses, price and the acquisition of Henry. Organic revenue was up 19%, driven by CCM, which delivered 23.3% organic growth. Acquisitions contributed 4.8% of sales growth for the quarter, and FX was a 30 basis point tailwind. We can see third quarter adjusted earnings per share was $2.99, which compares to $2.35 last year. Volume, price and mix combined accounted for $2.15 of the year-over-year increase. Raw material, freight and labor costs were a $1.75 year-over-year headwind. Interest and tax together were a $0.05 tailwind. Share repurchases contributed $0.06. And higher opex was an $0.11 headwind year-over-year. At CCM, the team again delivered outstanding results, with revenues increasing 29%, driven by volume, price, contributions from Henry, along with a 10 basis point foreign currency translation tailwind. Adjusted EBITDA margin at CCM was 22.6% in the third quarter, a 240 basis point decline from last year, driven by higher raw material prices, labor inflation and a return to more normalized SG&A spending, partially offset by volume, price and COS savings. Adjusted EBITDA grew 16.6% to $240.5 million, again demonstrating the earnings power of our CCM business. CIT revenue increased 6.1% in the third quarter. CIT's adjusted EBITDA margin improved year-over-year 13%, driven by Commercial Aerospace and Medical volume recovery, along with COS, partially offset by raw material and labor inflation. CFT's sales grew 9.4% year-over-year. Organic revenue improved 6.3%. Additionally, acquisitions added 0.9% in the quarter, and FX contributed 2.2%. CFT is well positioned to accelerate through the recovery due to continued stabilization in end markets, driven by an improved industrial capital spending outlook, coupled with new product introductions, which have included $12.4 million of incremental new product sales in 2021 year-to-date, along with pricing results. Adjusted EBITDA margins of 15.3% or 40 basis point decline year-over-year. On slide s 14 and 15, we show selected balance sheet metrics. We ended the quarter with $296 million of cash on hand and $1 billion of availability under our revolving credit facility. In the quarter, we repurchased 124,000 shares for $25 million, bringing our 2021 year-to-date total to 1.7 million shares for $291 million. We paid $28 million in dividends in the third quarter, bringing our '21 total to $84 million. We invested $34 million of capex into our high-returning businesses to drive organic growth, bringing our 2021 total to $89 million. Finally, we had a successful debt issuance of $850 million of senior notes at a weighted average coupon of 1.6%, which lowered Carlisle's cost of debt from 3.35% to 2.85%. In addition, as has been noted, we completed the purchase of Henry Company for $1.575 billion. Henry is expected to deliver approximately $100 million in free cash flow on our first full year of ownership. We expect meaningful cost synergies of $30 million annually by 2025. Finally, we expect Henry to be immediately accretive to Carlisle's EBITDA margin, adding over $1.25 of earnings per share in 2022. Free cash flow for the quarter was $82 million, a 55% decline year-over-year due to increased working capital usage related to our 25% revenue growth in the quarter. Corporate expense is now expected to be approximately in the $120 million to $122 million range, slightly lower than our previous estimate of $125 million. We expect depreciation and amortization expense to be approximately $230 million, which now reflects the Henry acquisition. We expect free cash flow conversion to be in the 105% to 110% range, slightly lower than our previous estimate, primarily due to high-cost raw materials that we are holding in inventory. We now expect capital expenditures of approximately $125 million, lower than previous estimates mostly due to timing. Net interest expense is now expected to be approximately $94 million for the year, higher than previous guidance due to our debt issuance in the quarter. We continue to expect our tax rate to be approximately 25% for the year. And finally, we expect restructuring expense to be approximately $15 million to $20 million in 2021. Considering this momentum, we are increasing our anticipated revenue growth to mid-20% in 2021. Taken together and coupled with significant restructuring at CIT over the past 18 months, CIT is now positioned to take advantage of the ongoing recovery. We remain committed to our Vision 2025 goals of $8 billion in revenues, 20% operating income and 15% ROIC, all driving to exceed $15 of earnings per share by 2025.

Adjusted earnings per share increased 27% year-over-year to $2.99 as higher volumes and price and cost discipline more than offset inflation during the quarter. We can see third quarter adjusted earnings per share was $2.99, which compares to $2.35 last year.

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Second, we continue to advance our cost-savings program and remain on track to achieve $750 million of savings by the end of 2023. This divestiture, which is expected to close in the first half of 2022, represents approximately 20% of our traditional individual annuities account values and significantly advances our goal of cutting in half the earnings contribution of legacy variable annuities products through a mix of strategic transactions and natural runoff. As a result of these divestitures to date, we expect to generate net proceeds of approximately $6 billion by the first half of 2022. We are progressing well and remain on track to achieve our $750 million cost-savings targets by the end of 2023 as we look to reduce expenses while improving both the customer and employee experience. To date, we have achieved $590 million in run-rate cost savings, exceeding our $500 million targets for the full year. These savings include 145 million achieved in the third quarter for a total of $385 million this year. Year to date, we returned $3.5 billion to shareholders, including 2.1 billion of share buybacks and 1.4 billion in dividend payments, reflecting a 5% increase in our quarterly dividend compared to last year. And we're targeting to return $11 billion of capital to shareholders by the end of 2023. During the third quarter, we also took steps to enhance our financial flexibility by redeeming $900 million of outstanding debt. This reduced financial leverage and generated 30 million in annual interest savings going forward. For example, this quarter, we completed a $5 billion funded pension risk transfer transaction, which is the fourth largest transaction in the history of the PRT market and demonstrates our expertise, ability to execute at scale, and commitment to this market. Our capital deployment is supported by our balance sheet strength, including highly liquid assets of $3.8 billion at the end of the third quarter and a capital position that continues to support a AA financial strength rating. Earlier this week, we announced our commitment to achieve net-zero emissions across our primary global home office operations by 2050, with an interim goal of becoming carbon-neutral by 2040. Separately, on the social front, the Prudential Foundation achieved an important milestone during the quarter, reaching $1 billion in funding to partners aimed at eliminating barriers to financial and social mobility around the world since making its first grant in 1978. This milestone by the foundation follows the $1 billion investment mark achieved in our impact investing portfolio in 2020. Our pre-tax adjusted operating income was $1.8 billion or $2.78 per share on an after-tax basis and reflected the benefit of strong markets and business growth, which exceeded the net mortality impacts from COVID-19. PGIM, our global asset manager, had record-high asset management fees driven by record account values of over $1.5 trillion that were offset by lower other related revenues relative to the elevated level in the year-ago quarter as well as higher expenses supporting business growth. Results of our U.S. businesses increased approximately 29% from the year-ago quarter and reflected higher net investment spread, driven by higher variable investment income, and higher fee income primarily driven by equity market appreciation, partially offset by less favorable underwriting experience driven by COVID-19-related mortality. Earnings in our international businesses increased 14%, reflecting continued business growth, higher net investment spread, lower expenses, and higher earnings from joint venture investments. PGIM continues to demonstrate the strength of its diversified capabilities in both public and private asset classes across fixed income, alternatives, real estate, and equities as a top 10 global active investment manager. PGIM's investment performance remains attractive with more than 94% of assets under management outperforming their benchmarks over the last three-, five- and 10-year periods. Third-party net flows were 300 million in the quarter, including institutional net flows of 700 million, primarily driven by public fixed income flows. Modest retail net outflows of 400 million were due to equity outflows from sub-advised mandates and client reallocations due to rising rates and inflation concerns. PGIM's asset management fees reached another record, up 13% compared to the year-ago quarter as a result of strong flows driven by investment performance and market depreciation. PGIM's alternatives business, which has assets in excess of 250 billion, continues to demonstrate momentum across private credit and real estate equity and debt, benefiting by our global scale and market-leading positions. As an example, PGIM's private businesses deployed almost $12 billion of capital this quarter, 28% more than the year-ago quarter. In addition, our product pivots have worked well, demonstrated by continued strong sales of our buffered annuity products, which were $1.3 billion in the third quarter, representing 88% of total individual annuity sales. Since the launch of FlexGuard in 2020, sales have exceeded $6 billion. Our retirement business reflected strong sales in the quarter, including a 5.2 billion funded pension risk transfer transaction and 1.6 billion of international reinsurance transactions, demonstrating our market-leading capabilities. With respect to Assurance, our digitally enabled distribution platform, total revenues, our primary financial metric as we concentrate on scaling the business, were up 47% over the prior-year quarter. Pretax adjusted operating income in the third quarter was $1.8 billion and resulted in earnings per share of $3.78 on an after-tax basis. First, variable investment income outperformed expectations in the third quarter by 570 million. Third, we expect seasonal expenses and other items will be higher in the fourth quarter by 140 million. Fourth, we anticipate net investment income will be reduced by about 10 million, reflecting the difference between new money rates and disposition yields of our investment portfolio. These items combined get us to a baseline of $2.27 per share in the fourth quarter. I'll note that if you exclude items specific to the fourth quarter, earnings per share would be $3.05. Our cash and liquid assets were $3.8 billion, which is greater than three times annual fixed charges, and other sources of funds include free cash flow from our businesses and contingent capital facilities.

Pretax adjusted operating income in the third quarter was $1.8 billion and resulted in earnings per share of $3.78 on an after-tax basis.

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