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In a challenging global supply chain environment, we grew sales 11% and expanded our gross profit and operating profit margins. We have made significant progress by reaching carbon neutrality in our operations and by committing to the reduction of 100 million metric tons of carbon from our put in place products and services by 2030. We have the talent and the tools to build upon the operating strength we have developed over the last 18 months. Net sales were $192 million, an increase of 11% compared to the prior year. This performance was driven by strong customer demand, improved execution across our go-to-market channels, and the addition of the OSRAM acquisition, which added approximately 200 basis points. Gross profit margin was 42.2% for the fourth quarter of fiscal 2021, an increase of 10 basis points over the prior year, despite rising costs from raw materials, electrical component supply chain interruptions and a significant escalation of freight costs. Reported operating profit margin was 13.4% of net sales for the fourth quarter of fiscal 2021, an increase of 150 basis points over the prior year. Adjusted operating profit margin was 15.8% of net sales for the fourth quarter of fiscal 2021, an increase of 110 basis points over the prior year. The effective tax rate for the fourth quarter of fiscal 2021 was 21.9% compared with 24.5% in the prior year due to the impact of several discrete items. Diluted earnings per share of $2.72, increased $0.85 or 46% over the prior year and adjusted diluted earnings per share of $3.27 increased $0.92, or 39% over the prior year. Our share repurchase program favorably impacted diluted earnings per share by $0.24 versus the prior year. Net sales were $3.5 billion, an increase of 4% compared to the prior year, driven by improved sales performance in the second half of 2021. We delivered a full year gross profit margin of 42.6%, an increase of 40 basis points over the prior year. Reported operating profit margin was 12.4% of net sales for fiscal 2021, an increase of 180 basis points over the prior year with adjusted operating profit margin at 14.6% for fiscal 2021, an increase of 90 basis points over the prior year. The effective tax rate for fiscal 2021 was 22.7% compared with 23.5% in the prior year. We expect this rate to be approximately 23% for the full year in fiscal 2022, excluding any unusual or discrete items and assuming no change to the corporate tax rate. Diluted earnings per share of $8.38, was 34% increase over the prior year and adjusted diluted earnings per share of $10.17 was a 23% increase over the prior year. We had 36.6 million diluted shares outstanding during fiscal 2021, with our share repurchase program favorably impacting diluted earnings per share by $0.07 versus the prior year. During the quarter, the Lighting and Lighting Controls segment delivered a sales increase of 11% versus the prior year. This was driven by improvements within our independent sales network, which grew approximately 10% and the direct sales network, which grew about 15% in the current quarter as a direct result of our strong go-to-market efforts as well as recovery in the construction market. Our corporate accounts channel continued the positive momentum and saw an increase in sales of 16% compared to the prior year, as large retailers move forward with previously deferred renovation spend. Sales in the retail channel declined approximately 20% as compared to the prior year and will continue to be impacted through the remainder of the calendar year as a result of a customer inventory rebalancing. The acquisition contributed around 200 basis points of growth to ABL revenue and we expect a similar level of impact in 2022. Now moving to ABL operating profit for the fourth quarter of 2021, which increased 23% to $149 million versus $122 million in the prior year, with operating profit margin improving 150 basis points to 15.8%. Adjusted operating profit for the fourth quarter of 2021 improved 21% versus the prior year with adjusted operating profit margin improving 140 basis points to 16.8%. To summarize the full year the ABL business saw sales growth of 3% to $3.3 billion versus the prior year and an improvement across profitability metrics. Operating profit for the full year increased 12% to $476 million versus the prior year with operating profit margin improving 110 basis points to 14.5%. Adjusted operating profit for fiscal 2021 improved 10% to $515 million versus the prior year and adjusted operating profit margin improved 100 basis points to 15.7%. For the fourth quarter of 2021 sales in spaces increased approximately 24% to $51 million, reflecting continued demand with strength across our building and HVAC controls. Spaces operating profit for the fourth quarter of 2021 increased $3.6 million to $2 million versus the prior year. Adjusted operating profit for the fourth quarter of 2021 of $6 million was $3.9 million greater than the prior year as a result of continued sales growth. The team ended fiscal 2021 with sales growth of 21% to $190 million versus the prior year. Operating profit increased $13.8 million to $9.9 million versus the prior year and operating profit margin of 5.2% for fiscal 2021 improved 770 basis points versus the prior year, with adjusted operating profit margin improving 400 basis points to 13.5%. The net cash from operating activities for fiscal 2021 was $409 million. This was a decrease of $96 million or 19% compared to the prior year, largely due to the increase in working capital needed to support the higher level of sales. We invested $44 million or 1.3% of net sales in capital expenditures during fiscal 2021 and we continue to believe that capital expenditures of around 1.5% of net sales is an appropriate annual level as we head into 2022. During the year, we repurchased approximately 3.8 million shares of common stock for $435 million at an average price of $114 per share. We have around 3.8 million shares still remaining under our current Board authorization. We expect 42% plus annualized gross profit margin for the full year of 2022.

Diluted earnings per share of $2.72, increased $0.85 or 46% over the prior year and adjusted diluted earnings per share of $3.27 increased $0.92, or 39% over the prior year.

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We reported revenue of $267 million during the first quarter of 2022, which represents an increase of 16%, compared to $230.1 million during the first quarter of 2021. More specifically, we realized net sales growth of 14.5% in our North American fenestration segment, 15.5% in our North American cabinet components segment, and 18.6% in our European fenestration segment, excluding the foreign exchange impact. We reported net income of $11.2 million or $0.34 per diluted share for the three months ended January 31st, 2022, compared to $7.9 million or $0.24 per diluted share during the three months ended January 31st, 2021. On an adjusted basis, net income increased by 25.9% to $11.3 million or $0.34 per diluted share during the first quarter of 2022, compared to $9 million or $0.27 per diluted share during the first quarter of 2021. On an adjusted basis, EBITDA for the quarter was essentially flat year over year at $24.4 million, compared to $24.3 million during the same period of last year. Cash used for operating activities was $21.7 million for the quarter, compared to $3.4 million for the same period of last year. Our liquidity position is solid, and our leverage ratio of net debt to last 12 months adjusted EBITDA was at 0.4 times as of January 31st, 2022. Net sales of $1.13 billion to $1.15 billion, adjusted EBITDA of $135 million to $140 million; depreciation of approximately $31 million, amortization of approximately $15 million; SG&A of $115 million to $120 million, interest expense of $2 million to $2.5 million, tax rate of 28%, capex of $30 million to $35 million; and free cash flow of $55 million to $60 million. Volume growth in our fenestration segments and higher prices in all segments, mostly related to the pass-through of raw material cost inflation resulted in revenue growth of 16% year over year. On a consolidated basis, we estimate that revenue growth for the quarter was weighted approximately 10% due to an increase in volume and approximately 90% due to an increase in price. The rate of raw material cost inflation remains a challenge, as we typically see a 30 to 90-day time lag in passing these increases through to our customers. This segment generated revenue of $146.6 million in Q1, which was $18.5 million or 14.5% higher than prior year Q1. We estimate that revenue growth in this segment was weighted approximately 45% due to an increase in volume and approximately 55% due to an increase in price. Adjusted EBITDA of $16.3 million in this segment was essentially flat versus prior year Q1. The improved pricing, volume-related efficiency gains, and productivity-related improvements were more than offset by inflationary pressures on raw materials, which caused margin erosion of approximately 170 basis points for the quarter. Our European fenestration segment generated revenue of $58.9 million in the first quarter, which was $9.8 million or 20% higher than prior year. Excluding foreign exchange impact, this would equate to an increase of 18.6%. We estimate that revenue growth in this segment was weighted approximately 20% due to an increase in volume and approximately 80% due to an increase in price. As such, adjusted EBITDA came in at $10.4 million for the quarter, which was $300,000 less than prior year and yielded margin compression of approximately 420 basis points. Our North American cabinet components segment reported net sales of $62.4 million in Q1, which was $8.4 million or 15.5% higher than prior year. Adjusted EBITDA was $2 million for the quarter, which was $1.2 million less than prior year and resulted in margin compression of approximately 280 basis points. Again, we expect to generate revenue of $1.13 billion to $1.15 billion and adjusted EBITDA of $135 million to $140 million.

We reported revenue of $267 million during the first quarter of 2022, which represents an increase of 16%, compared to $230.1 million during the first quarter of 2021. We reported net income of $11.2 million or $0.34 per diluted share for the three months ended January 31st, 2022, compared to $7.9 million or $0.24 per diluted share during the three months ended January 31st, 2021. On an adjusted basis, net income increased by 25.9% to $11.3 million or $0.34 per diluted share during the first quarter of 2022, compared to $9 million or $0.27 per diluted share during the first quarter of 2021. Net sales of $1.13 billion to $1.15 billion, adjusted EBITDA of $135 million to $140 million; depreciation of approximately $31 million, amortization of approximately $15 million; SG&A of $115 million to $120 million, interest expense of $2 million to $2.5 million, tax rate of 28%, capex of $30 million to $35 million; and free cash flow of $55 million to $60 million. Again, we expect to generate revenue of $1.13 billion to $1.15 billion and adjusted EBITDA of $135 million to $140 million.

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For over 40 years, ProAssurance and its predecessors have navigated the peaks and valleys of the long-cycle characteristics of our businesses. Given this reserve strengthening, we reported a net loss of $59.4 million for the quarter or a loss of $1.10 per share, and net income of $1 million for the year or net income of $0.02 per share. Our consolidated operating loss was $68.3 million for the quarter or a loss of $1.27 per share. For the year, we reported a consolidated operating loss of $43.8 million or a loss of $0.81 per share. For the quarter, our consolidated current accident year net loss ratio increased by 20.4 percentage points to 109% and the full-year ratio was 90.3%, an increase of 6.6 percentage points. Excluding the reserve adjustments related to the large national healthcare account, these ratios were 93.5% and 86.4% respectively. We experienced unfavorable development in our prior accident year reserves of $30.4 million for the quarter, which drove the calendar year net loss ratio to 123.2%. However, for the full year, we recorded favorable development of $11.8 million and our calendar year net loss ratio was 89%. Our underwriting expense ratio was 31.5% for the fourth quarter and 29.9% for the year. This brings us to a combined ratio of 154.7% for the quarter and 118.9% for the year. In our Corporate segment, we reported net investment income of $21.6 million in the quarter and $87.1 million for the full year. Due to the reserve adjustments recorded in the fourth quarter, we recognized a consolidated pre-tax loss for the year, which resulted in the recognition of $21.9 million tax benefit from tax credits, which was the primary driver of the total tax benefit of $29.8 million for both the full year, as well as the current quarter. The Specialty P&C segment recorded year-end 2019 operating loss of $147.9 million. I want to be clear that the Specialty P&C segment has favorable loss reserve development of $45.8 million exclusive of the large national account during 2019. We established four operating regions with regional hubs and reduced the number of offices from 20 to 10 across our operating territories. Gross premiums written were essentially unchanged as compared to 2018, finishing 2019 at $577.7 million. Premium retention for the segment was 86% for the year, 3 percentage points lower than the prior year, reflecting our focus on underwriting discipline and our willingness to walk away from business that does not fit our risk appetite or longer-term profit objectives. As a result, premium retention in our healthcare facilities business was 62% for the year and 47% for the quarter. Exclusive of the facilities, business premium retention was 88% in each of our physicians, medical technology and legal liability businesses for the year. We are also encouraged by renewal rate increases of 14% in our healthcare facilities and 6% in physicians, our largest portfolio business. We wrote $42.6 million of new business in 2019 compared to $47.9 million in 2018, reflecting our disciplined underwriting evaluation of the business presented to us. Our physician new business was a driver at $25.1 million of writings during 2019. The increase in the current accident year loss ratio to 105.5% was due to the previously mentioned underwriting loss for a large national account, and to a lesser degree, adverse loss trends in our excess and surplus lines of business. For 2019, the prior-year adverse loss development related to the large national account was $51.5 million, which was entirely responsible for the $5.7 million of adverse development recorded in the segment for 2019. As previously stated in my opening comments, excluding the impact of the large national account, loss reserves developed favorably by $45.8 million. The Workers' Compensation Insurance segment produced operating income of $12.5 million and a combined ratio of 94.7% for the 2019 year in a highly competitive marketplace. During 2019, gross premiums written, which includes traditional and alternative market business ceded to the SPC Reinsurance segment, decreased 5% to $278.4 million, compared to $293.2 million for 2018. Correspondingly, new business writings for 2019 were $30.8 million, compared to $51.5 million in 2018. However, it's important to note that 2018 includes $11.7 million of new business related to the Great Falls renewal rights transaction. Audit premium was $5.7 million in 2019, compared to $5.9 million in 2018. Renewal price decreases were 4% and premium renewal retention was 83% for the 2019 year. The increase in the calendar year loss ratio reflected an increase in the current accident year loss ratio from 68% in 2018 to 68.4% in 2019. Net favorable reserve development was $7.8 million for the year. The claims operation enclosed 65.7% of 2018 and prior claims during 2019, the best claim closing result in Eastern's history and indicative of the short-tail strategy embedded in our Workers' Compensation business model. The full-year 2019 underwriting expense ratio increased to 30.4%, compared to 29.9% in 2018, primarily due to an increase in policy acquisition and employee benefit-related costs. The Segregated Portfolio Cell Reinsurance segment operating result was $3.5 million for the 2019 year, which represents our share of the net operating profit of the Segregated Portfolio Cell captive programs, in which we participate to varying degrees. Gross written premium in the SPC Reinsurance segment increased to $87.1 million for 2019, from $85.1 million in 2018. This includes premium renewal retention in 2019 of 91%, new business writings of $3.8 million, and audit premium of $2 million, offset slightly by renewal rate decreases of 5%. The 2019 calendar and accident year loss ratios were impacted by $10 million reserve recorded in the second quarter of 2019 for an errors and omissions liability policy assumed by one of Eastern Re's Segregated Portfolio Cells. Year-over-year, the SPC Reinsurance 2019 calendar year loss ratio increased to 54.4% excluding the impact of the $10 million E&O reserve driven by an increase in the current accident year loss ratio, partially offset by net favorable loss reserve development of $10.1 million in 2019, compared to $9.0 million in 2018. And as a result, we have decreased our participation in Syndicate 1729's operating results for the 2020 underwriting year from 61% to 29%. Although in NORCAL will not follow its year-end 2019 annual statutory statements for its group of companies with the California Department of Insurance until March 1, it maybe helpful for you to know that when they do, we expect it will show consolidated statutory surplus of approximately $575 million as of December 31, 2019. We expect this transaction to deliver multiple strategic and financial benefits, including enhancements to our scale and capabilities, expanded access to the high quality California physician market, and an expected $18 million in pre-tax synergies. With this transaction, ProAssurance gains a truly national platform in healthcare professional liability with operations in all 50 states.

Given this reserve strengthening, we reported a net loss of $59.4 million for the quarter or a loss of $1.10 per share, and net income of $1 million for the year or net income of $0.02 per share. Our consolidated operating loss was $68.3 million for the quarter or a loss of $1.27 per share. And as a result, we have decreased our participation in Syndicate 1729's operating results for the 2020 underwriting year from 61% to 29%.

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We recently released our 2019 annual report that we prepared during the first quarter of 2020 prior to the COVID-19 pandemic. Last night, we reported first quarter 2020 FFO of $0 56 per share and net income attributable to common stockholders of $0.20 per share for the first quarter. At the time we withdrew our 2020 guidance, we believe that we are on track, approximately a $7.6 million reduction in our dividend distribution from Q1. Office is 49% of our cash NOI, and we had collected approximately 90% of April billings. Retail is 31% of our cash NOI, and we had collected 43% of our April billings. Multifamily is 12% of our cash NOI. And and we had collected 92% of our April billings. We have won 369 room hotel in our portfolio, which has been the number one performing Embassy Suites hotel in the world since we opened the doors in December 2006. The Embassy Suites Waikiki is 5% of our cash NOI, which is currently running on a skeleton crew with a minimal occupancy ranging from 5% to 15% based on Hawaii shelter in place order that has been issued through May 31. When you add these percentages up, it is approximately 68% of cash NOI and applied to a $0.30 dividend, it supports a revised dividend of approximately $0.20 per share. Such that we have now collected approximately 94% of office rents, 47% of retail rents, including the retail component of Waikiki Beach Walk and 94% of multifamily rents that were due in April 2020. Other than our One Embassy Suites hotel that represents approximately 5% of our NOI, our retail sector, which represents approximately 31% of our NOI is obviously feeling the most impact with approximately 47% of April billings collected. Approximately 24% of our retail tenants are considered to provide essential services and remain open during this period of time, and the balance of tenants are considered to provide nonessential services, which we are working with to create a positive outcome for both parties. As we look at our balance sheet and liquidity at the end of the first quarter, we had approximately $402 million in liquidity comprised of $52 million of cash and cash equivalents and $350 million of availability on our line of credit, and only one of our properties is encumbered by our mortgage. Our leverage, which we measure in terms of net debt-to-EBITDA was 5.6 times at the end of Q1. Our focus is to maintain our net debt-to-EBITDA at 5.5 times or below. Our interest coverage and fixed charge coverage ratio ended the quarter at 4.3 times. Additionally, in early April, we drew down $100 million out of the $350 million revolving line of credit, under our line of credit for working capital and general corporate purposes and to ensure future liquidity given the COVID-19 pandemic. And finally, with respect to the $250 million of unsecured debt maturities that come due in 2021, we have options to extend the $100 million term loan up to 3 times with each such extension for one year period, subject to certain conditions. And the remaining $150 million unsecured Series A notes do not mature until October 31, 2021. We ended the quarter at over 94% leased with only 9% of the office portfolio expiring through the end of 2021. City Center Bellevue remains 99% leased, but we continue to expand and extend our existing customers at much higher rates. We completed a full floor renewal with a major financial firm at a starting rate that is approximately 66% above the ending rate. Our Lloyd District office buildings remain 100% leased. We recently completed a full floor lease with an energy-related company with a start rate approximately 28% above the ending rate of the prior customer. Similar to the 830 building at Oregon Square, we are currently redeveloping the 710 building, a 33,276 square-foot building that we hope to deliver in early 2021. The fully renovated approximately 102,000 square-foot building will provide an 85,000 square foot contiguous opportunity to hopefully be delivered in mid-2021. Finally, our San Diego portfolio stands at approximately 92% leased versus the overall Class A market at 89% leased. two of the 14 buildings at Torrey reserve represents 65% of our San Diego vacancy. Solana crossing now stands at over 95% leased. And Torrey point is on track to be 97% leased with a recent expansion of one customer, a pending expansion of another and AAT's move later this year. The two existing towers of La Jolla Commons stay 99% leased. Direct vacancy in Class A buildings in UTC is just 3.3%, with only 0.5% of sublease space vacant, and we expect continued significant new demand driven by both life science and technology users.

We recently released our 2019 annual report that we prepared during the first quarter of 2020 prior to the COVID-19 pandemic.

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Net income in the second quarter was $3.4 billion, up from $68 million a year ago. Strong net income drove book value per share, excluding AOCI, other than FCTA growth, of 8%. Adjusted earnings in the second quarter were $2.1 billion or $2.37 per share, up 186% from $0.83 per share a year ago. We reported private equity gains of 9.7% in the second quarter compared with a negative 8.2% a year ago. Our decision to sell most of our $2.5 billion hedge fund portfolio and increase the allocation to private equity has provided a better match for our long-dated liabilities, while creating significant value for our shareholders. In the quarter, the Group Life mortality ratio was 94.3%, below the 106.3% from last quarter but still above the top end of our guidance range. In Latin America, we had $66 million of COVID losses, again, below the $150 million of COVID losses from Q1, but still above normal. In the U.S. Group business, sales through the first half of 2021 are 39% higher than they were in the first half of 2020 and if current trends hold, 2021 will be a record sales year. In Latin America, sales are up 55% year-over-year. On a year-over-year basis, Asia sales are up 42%, while EMEA sales are up 20%. Versant has now been part of our results for two quarters and in Q2, it contributed 6 points of year-over-year growth in U.S. Group premiums, fees and other revenues, consistent with our expectations. Year-over-year request for vision care proposals are up more than 20% among our national account customers. More than 500 employers now offer MetLife pet insurance as a voluntary benefit to their employees and we believe our best-in-class product will continue to make gains in this highly attractive and underpenetrated market. In early April, we also closed on the sale of our Auto and Home Business to Farmers Insurance for $3.94 billion in cash. The 10-year strategic partnership we forged allows each company to focus on its core strengths: Farmers' 90 years of P&C underwriting and service excellence and MetLife's unrivaled distribution reach in the U.S. Group Benefits space. In the quarter, we delivered a direct expense ratio of 11.4% and we now expect to beat our 12.3% target ratio, not only for all of 2021, but for 2022 as well. What we have instead is a publicly disclosed direct expense ratio target that we have brought down by 200 basis points over the past five years and promise to keep there. Our strategic decision to sell Auto and Home contributed to a $6.5 billion cash buffer as of June 30, well above our target range. We repurchased $1.1 billion of common shares in the second quarter and another $248 million of common shares so far in the third. And yesterday, our Board approved a new $3 billion share repurchase authorization. This is on top of the $475 million we have remaining on our December 2020 authorization. As we did over 100 years ago with our visiting nurses program, MetLife has mobilized to make a positive contribution to advance public health. In Nagasaki, Japan, we've opened 6,500 square feet of our headquarters as a free vaccination site. MetLife Foundation has committed $500,000 to delivering vaccines to underserved communities across the U.S. and our medically trained staff are volunteering to administer doses at vaccine sites. At our 2019 Investor Day, we said our Next Horizon Strategy would generate tangible benefits for shareholders: a 12% to 14% adjusted ROE; $20 billion of distributable cash over five years; and an additional $1 billion of operating leverage to self-fund growth. Please note, in the appendix, we have also provided an updated 25 basis points sensitivity for our U.S. long-term interest rate assumption. Starting on Page 3. Net income in the quarter was $3.4 billion or approximately $1.3 billion higher than adjusted earnings. This variance was primarily due to the net investment gains of $1.3 billion, of which $1.1 billion relates to the sale of our Property & Casualty business to Farmers Insurance. Additionally, adjusted earnings include one notable item of $66 million related to a legal reserve release. On Page 4 you can see the year-over-year comparison of adjusted earnings by segment excluding notable items. As I previously noted, there was one notable item of $66 million in 2Q of '21 and no notable items for the prior year period. Adjusted earnings per share, excluding the notable item, was $2.30, benefiting from strong returns in our private equity portfolio but show most of the year-over-year variance. Regarding non-medical health, the interest adjusted benefit ratio was 73.8% in 2Q of '21, within its annual target range of 70% to 75%, but higher than the prior year quarter of 58.5%, which benefited from extremely low dental utilization and favorable disability incidence. Group Benefits sales were up 39% year-to-date, primarily due to higher jumbo case activity and remain on track to deliver a record sales year in 2021. Adjusted PFOs were $5.6 billion, up 29% year-over-year. Several factors contributed to the strong year-over-year growth, including a $500 million impact relating to dental premium credits and the establishment of a dental unearned premium reserve, both reducing premiums in the second quarter of 2020, which collectively contributed 13 percentage points to the year-over-year growth rate. In addition, 4 percentage points were related to higher premiums in the current quarter from participating contracts, which can fluctuate with claim experience. After considering these factors, underlying PFO growth for Group Benefits was roughly 12%, driven by solid volume growth across most products, including continued strong momentum in voluntary and the addition of Versant Health. Retirement and Income Solutions or RIS adjusted earnings were $654 million, up $462 million year-over-year. RIS investment spreads were 224 basis points, up 199 basis points year-over-year, primarily due to higher variable investment income. Spreads, excluding VII, were 98 basis points, up 13 basis points year-over-year due, in part, to sustained paydowns in our portfolios of residential mortgage loans and residential mortgage-backed securities, a partial recovery in real estate equities and lower LIBOR rates. RIS liability exposures, including U.K. longevity reinsurance, grew 8% year-over-year due to strong volume growth across the product portfolio, as well as separate account investment performance. Adjusted earnings were up 103% and 91% on a constant currency basis, primarily due to higher variable investment income. Asia's solid volume growth also contributed to the strong performance driven by higher general account assets under management on an amortized cost basis, which were up 7% and 6% on a constant currency basis. Additionally, while against a weak 2Q of '20, Asia sales were up 42% year-over-year on a constant currency basis, demonstrating the resiliency in the business. Latin America adjusted earnings were down 27% and 38% on a constant currency basis, primarily driven by unfavorable underwriting and unfavorable equity markets related to the Chilean encaje, which had a negative 1.5% return in the quarter versus a positive 14% in 2Q of '20. The impact on Latin America's second quarter adjusted earnings was approximately $66 million after tax. Latin America adjusted PFOs were up 12% year-over-year on a constant currency basis and sales were up 55% driven by solid growth in all markets. EMEA adjusted earnings were down 19% and 23% on a constant currency basis, primarily driven by higher COVID-19-related claims in the current period compared to low utilization in the prior year period. The current quarter has also benefited from a favorable refinement to an unearned premium reserve positively impacting adjusted PFOs and adjusted earnings by approximately $15 million after tax. In addition, Poland increase contributed roughly 10% to run rate earnings that will be reported in divested businesses beginning in the third quarter. EMEA adjusted PFOs were up 8% on a constant currency basis and sales were up 20% on a constant currency basis, primarily due to higher credit life sales in Turkey and solid growth in U.K. employee benefits. MetLife Holdings adjusted earnings were up $515 million year-over-year. The life interest adjusted benefit ratio was 47.1%, lower than the prior year quarter of 59.1% and below our annual target range of 50% to 55%. Corporate and Other adjusted loss, excluding the favorable notable item of $66 million related to a legal reserve release, was $126 million. This result compared favorably to the adjusted loss of $289 million in 2Q of '20 due to higher net investment income, lower expenses and lower preferred stock dividends. The company's effective tax rate on adjusted earnings in the quarter was 21.6% and within our 2021 guidance range of 20% to 22%. Now, I will provide more detail on Group Benefits mortality results on Page 5. The Group Life mortality ratio was 94.3% in the second quarter of 2021, which is above our annual target range of 85% to 90%. COVID reported claims in 2Q of '21 were roughly 4.5 percentage points, which reduced Group Benefits adjusted earnings by approximately $75 million after tax. Additionally, the quarter included a higher level of life claims above $2.5 million and an additional level of excess mortality that appears to be COVID-related. These, collectively, impacted the ratio by an additional 2.7 percentage points or $40 million after tax. There were approximately 50,000 COVID-19-related deaths in the U.S. in the second quarter of '21. Now let's turn to Page 6. This chart reflects our pre-tax variable investment income over the last five quarters, including approximately $1.2 billion in the second quarter of 2021. This very strong result was mostly attributable to the private equity portfolio, which had a 9.7% return in the quarter. While all private equity asset classes performed well in the quarter, our venture capital funds, which accounted for roughly 22% of our PE account balance of $11.3 billion with the strongest performer across subsectors with a roughly 19% quarterly return. On Page 7, second quarter VII of $950 million post-tax is shown by segment. As we have previously noted, RIS, MetLife Holdings and Asia generally account for approximately 90% or more of the total VII and are split roughly one-third each, although it can vary from quarter-to-quarter. Turning to Page 8. This chart shows our direct expense ratio over the prior five quarters and full year 2020, including 11.4% in the second quarter of '21. But as Michel noted, we expect full year '21 and '22 direct expense ratio to be our 12.3% guidance. Now I will discuss our cash and capital position on Page 9. Cash and liquid assets at the holding companies were approximately $6.5 billion at June 30, which is up from $3.8 billion at March 31 and well above our target cash buffer of $3 billion to $4 billion. The sequential increase in cash at the holding companies was primarily due to the proceeds received from our P&C sale to Farmers Insurance of $3.9 billion. In addition, HoldCo cash includes the net effects of subsidiary dividends, payment of our common stock dividend, a $500 million redemption of preferred stock, share repurchases of $1.1 billion, as well as holding company expenses and other cash flows. For our U.S. companies preliminary second quarter year-to-date 2021, statutory operating earnings were approximately $2.8 billion, while net income was approximately $1.6 billion. Statutory operating earnings increased by approximately $1.2 billion year-over-year, driven by lower variable annuity rider reserves and an increase in investment margin. Year-to-date 2021, net income decreased by $286 million as compared to the first half of 2020. We estimate that our total U.S. statutory adjusted capital was approximately $18.5 billion as of June 30, 2021, up 9% compared to December 31, 2020 when excluding our P&C business sold to Farmers. Finally, the Japan solvency margin ratio was 873% as of March 31, which is the latest public data. The sequential decline in the Japan SMR from 967% at December 31 reflects seasonal dividends and the rise in U.S. interest rates in the quarter ending March 31.

Adjusted earnings in the second quarter were $2.1 billion or $2.37 per share, up 186% from $0.83 per share a year ago.

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Net sales for the first quarter of 2021 were $726.8 million, which is a 27.1% increase on a reported basis versus $571.6 million in Q1 of 2020. On a currency-neutral basis, sales increased 23.4%. The first quarter year-over-year revenue growth was impacted by a tough compare of about $10 million revenue carryover to Q1 of 2020 related to the December 2019 cyber-attack. Generally, we are seeing most academic and diagnostic labs now running about 90% capacity, which is an improvement to what we saw in Q4. We estimate that COVID-19-related sales were about $94 million in the quarter. Sales of the Life Science Group in the first quarter of 2021 were $366.5 million compared to $227.2 million in Q1 of 2020, which is a 61.3% increase on a reported basis, and a 56.9% increase on a currency-neutral basis. Excluding Process Media sales, the underlying Life Science business grew 56.2% on a currency-neutral basis versus Q1 of 2020. Sales of the Clinical Diagnostics Group in the first quarter were $358.5 million, compared to $340.3 million in Q1 of 2020, which is a 5.4% growth on a reported basis, and a 2.2% growth on a currency-neutral basis. We started to see a recovery of market demand for non-COVID business, with diagnostics labs returning to about 90% of pre-COVID levels. The reported gross margin for the first quarter of 2021 was 55.1% on a GAAP basis, and compares to 55.5% in Q1 of 2020. Amortization related to prior acquisitions recorded in cost of goods sold was $4.6 million compared to $3.9 million in Q1 of 2020. SG&A expenses for Q1 of 2021 were $225.9 million or 31.1% of sales compared to $193.7 million or 33.9% in Q1 of 2020. The year-over-year SG&A expenses increased mainly due to expenses associated with the restructuring initiative and higher employee-related expenses, and it was offset slightly by a $5 million cybersecurity insurance settlement related to the 2019 cyber-attack as well as lower discretionary spend. Total amortization expense related to acquisitions recorded in SG&A for the quarter was $2.4 million versus $2 million in Q1 of 2020. Research and development expense in Q1 was $73.9 million or 10.2% of sales compared to $49.3 million or 8.6% in Q1 of 2020. Q1 operating income was $100.9 million or 13.9% of sales compared to $74.4 million or 13% in Q1 of 2020. The change in fair market value of equity securities holdings added $1.179 billion of income to the reported results, which is substantially related to holdings of the shares of Sartorius AG. During the quarter, interest and other income resulted in net other income of $16.9 million compared to $3.3 million of expense last year. Q1 of 2021 included $19 million of dividend income from Sartorius, which was declared this year in Q1. The effective tax rate for the quarter was 24.7% compared to 23.7% in Q1 of 2020. Reported net income for the first quarter was $977.4 million, and diluted earnings per share were $32.38. In cost of goods sold, we have excluded $4.6 million of amortization of purchased intangibles, $24 million of restructuring-related expenses and a small legal reserve benefit. These exclusions moved the gross margin for the first quarter of 2021 to a non-GAAP gross margin of 59% versus 55.9% in Q1 of 2020. Non-GAAP SG&A in the first quarter of 2021 was 25.4% versus 33.3% in Q1 of 2020. In SG&A, on a non-GAAP basis, we have excluded restructuring-related expenses of $34.7 million, legal-related expenses of $4.4 million, and amortization of purchased intangibles of $2.4 million. In R&D, we have excluded $16.9 million of restructuring-related expenses. The non-GAAP R&D expense in Q1 was consequently 7.9%. The cumulative sum of these non-GAAP adjustments result in moving the quarterly operating margin from 13.9% on a GAAP basis to 25.8% on a non-GAAP basis. This non-GAAP operating margin compares to a non-GAAP operating margin in Q1 of 2020 of 13.9%. We have also excluded certain items below the operating line, which are the increasing value of the Sartorius equity holdings of $1.179 billion, and $1.8 million of loss associated with venture investments. Our non-GAAP effective tax rate for the quarter was 23.6% versus 25.7% in Q1 of 2020. And finally, non-GAAP net income for the first quarter of 2021 was $157.4 million, or $5.21 diluted earnings per share compared to $57.6 million and $1.91 per share in Q1 of 2020. Total cash and short-term investments at the end of Q1 were $1.025 billion, compared to $997 million at the end of 2020. During the first quarter, we purchased 89,506 shares of our stock for a total of $50 million at an average price of approximately $559 per share. For the first quarter of 2021, net cash generated from operations was $114 million, which compares to $63 million in Q1 of 2020. The adjusted EBITDA for the fourth quarter of 2021 was $232 million or 31.9% of sales, and excluding the Sartorius dividend, was 29.3%. The adjusted EBITDA in Q1 of 2020 was $107.4 million or 18.8% of sales, which did not include the 2020 Sartorius dividend. Net capital expenditures for the first quarter of 2021 were $19.5 million, and depreciation and amortization for the first quarter was $32.7 million. We began the year with a projection of between 4.5% and 5% non-GAAP sales growth, and a non-GAAP operating margin of between 16% and 16.5%. Even though we continue to be uncertain about the duration and impact of the COVID-19 pandemic, given the results of the first quarter and our current outlook, we are now guiding currency-neutral revenue growth in 2021 to be between 5.5% and 6%. This includes COVID-related sales, which we estimate to be between $170 million and $180 million versus our prior estimate of about $150 million and $160 million. Full year non-GAAP gross margin is now projected between 56.5% and 57% versus our previous guidance of 56.2% and 56.5%. And full year non-GAAP operating margin to be about 17%, and full year adjusted EBITDA margin to be about 22% versus previous guidance of 21%.

Net sales for the first quarter of 2021 were $726.8 million, which is a 27.1% increase on a reported basis versus $571.6 million in Q1 of 2020. Reported net income for the first quarter was $977.4 million, and diluted earnings per share were $32.38. And finally, non-GAAP net income for the first quarter of 2021 was $157.4 million, or $5.21 diluted earnings per share compared to $57.6 million and $1.91 per share in Q1 of 2020. Even though we continue to be uncertain about the duration and impact of the COVID-19 pandemic, given the results of the first quarter and our current outlook, we are now guiding currency-neutral revenue growth in 2021 to be between 5.5% and 6%.

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We ended fiscal year 2020 in a strong position and in the first quarter of fiscal 2021, continued to build on that momentum, delivering strong results. This past quarter, we reduced our leverage ratio by approximately 0.5 turn to 2.2 times net debt-to-EBITDA. The 30% growth at Batesville in the quarter was well above our expectations. Our MTS backlog increased 100% year-over-year on a pro forma basis, driven primarily by continued strength in orders for injection molding equipment. Total company backlog increased over 32% year-over-year on a pro forma basis, to a new record of $1.4 billion a real sign of continued strong demand for our highly engineered solutions and applications expertise. We delivered total revenue of $693 million, an increase of 22%. Excluding the impact of foreign exchange, total revenue increased 19%. On a pro forma basis revenue increased 6%, driven by strong burial casket demand at Batesville and hot runner systems sales in MTS. Adjusted EBITDA of $138 million increased 50% and adjusted EBITDA margin of 19.9%, increased 370 basis points. On a pro forma basis adjusted EBITDA of $137 million, increased 51% and adjusted EBITDA margin was 20%. With the benefit of additional volume along with the actions, we've taken to contain costs across all segments we expanded our adjusted EBITDA margin, 600 basis points over the prior year on a pro forma basis. We reported GAAP net income of $76 million or $1.01 per share, an increase of $1.06 over prior year, primarily driven by a decrease in acquisition and integration costs related to Milacron, the gain on the sale of Red Valve and higher volume within Batesville. Adjusted net income of $72 million resulted in adjusted earnings per share of $0.96, an increase of 28%, mainly driven by strong Batesville and MTS performance. The adjusted effective tax rate for the quarter was 28.5%, an increase of 650 basis points from the prior year. Hillenbrand generated cash flow from operations of $66 million, an increase of $48 million compared to the prior year. Capital expenditures were approximately $6 million in the quarter, slightly lower than anticipated. We also paid down $157 million of debt and returned $16 million to our shareholders, in the form of cash dividends. We recognized $6 million of incremental synergies in the quarter. And we expect to deliver $20 million to $25 million of synergies this year. We remain on track to achieve the three-year $75 million total run rate synergies, related to the Milacron acquisition. Moving to segment performance Batesville's revenue of $165 million, increased 30% year-over-year, driven by higher volume, as a result of increased deaths associated with COVID-19 and higher average selling price, partially offset by an estimated increase in the rate at which families opted for cremation. Adjusted EBITDA margin of 31.7%, improved 1,360 basis points over the prior year and more than offset inflation in the quarter. Turning to Advanced Process Solutions, APS revenue of $291 million decreased 5%. On a pro forma basis, revenue of $283 million also decreased 5%. Excluding the impact of currency, revenue decreased to 9%. Adjusted EBITDA margin of 16.7% was down 10 basis points, and down 30 basis points on a pro forma basis. Order backlog excluding Red Valve reached a new record high of $1.1 billion at the end of the first quarter, an increase of 21% year-over-year on a pro forma basis. Excluding the impact of foreign currency exchange, backlog increased to 12%. Sequentially backlog increased to 10% on a pro forma basis from the previous record high. These projects are expected to contribute to revenue over the next several quarters including about 28% of the backlog expected to convert to revenue beyond the next 12 months. MTS revenue of $237 million increased 78% and 7% on a pro forma basis in comparison to the prior year. Excluding the impact of foreign exchange, revenue increased 5%. Sales of hot runner systems increased double digits on continued solid demand in medical and packaging end markets and sales of injection molding and extrusion equipment were roughly flat year-over-year, but improved 20% on a sequential basis. Adjusted EBITDA of $48 million increased 84% and 47% on a pro forma basis with adjusted EBITDA margin of 20.4% increasing 560 basis points compared to the prior year on a pro forma basis. Order backlog of $292 million increased 100% compared to the prior year on a pro forma basis and 20% sequentially, primarily driven by an increase in injection molding equipment orders. Turning to the balance sheet; net debt at the end of the quarter was $1.1 billion and the net debt to adjusted EBITDA ratio fell by half a turn sequentially to 2.2 times. As of the quarter end, we had liquidity of approximately $1.1 billion including $266 million in cash on hand and the remainder available under our revolver. In the quarter, cash proceeds from the sale of Red Valve were $59 million. We paid down $157 million of debt including prepayment of our term loan due in 2022 with cash on hand and revolver borrowings. We expect Hillenbrand's total second quarter revenue to increase year-over-year in a range of 12% to 16%. We expect adjusted EBITDA in the range of $126 million to $137 million and adjusted earnings per share in the range of $0.85 to $0.95 for the second quarter, an increase of 29% on a year-over-year basis at the midpoint of the range. Starting with Batesville; in the second quarter, we expect revenue to increase 20% to 25% year-over-year based on a continued trend of elevated burial casket volumes due to the pandemic. We're targeting adjusted EBITDA margin of 29% to 30%, an increase of 590 to 690 basis points over the prior year. In Advanced Process Solutions, which includes mid and long-cycle capital systems equipment and aftermarket parts and service, we expect second quarter revenue in a range of flat to down 4% year-over-year, primarily due to customer-driven delays with the timing of long-cycle, large polyolefin projects. We expect adjusted EBITDA margin of 17.5% to 18% to be modestly lower from a year-over-year perspective, down 60 to 110 basis points, as the headwind from lower volume, project mix and certain targeted investments is partially offset by our continued cost containment and productivity initiatives. Turning to Molding Technology Solutions, which includes mid-cycle injection molding equipment, short-cycle hot runner systems and aftermarket parts and service, we expect strong second quarter revenue growth in a range of 37% to 40% over prior year as demand continues to be strong in both hot runner and injection molding product lines. We are targeting adjusted EBITDA margin of 18.8% to 19.2%, an improvement of about 320 to 360 basis points, as the benefit of higher volume and continued productivity improvements flow to the bottom line. We're on track to deliver $20 million to $25 million in year two synergies, and we remain confident in achieving year three run rate synergies of $75 million.

We ended fiscal year 2020 in a strong position and in the first quarter of fiscal 2021, continued to build on that momentum, delivering strong results. We delivered total revenue of $693 million, an increase of 22%. We reported GAAP net income of $76 million or $1.01 per share, an increase of $1.06 over prior year, primarily driven by a decrease in acquisition and integration costs related to Milacron, the gain on the sale of Red Valve and higher volume within Batesville. Adjusted net income of $72 million resulted in adjusted earnings per share of $0.96, an increase of 28%, mainly driven by strong Batesville and MTS performance. We expect Hillenbrand's total second quarter revenue to increase year-over-year in a range of 12% to 16%. We expect adjusted EBITDA in the range of $126 million to $137 million and adjusted earnings per share in the range of $0.85 to $0.95 for the second quarter, an increase of 29% on a year-over-year basis at the midpoint of the range.

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That said, we still reported a loss for the quarter of $0.06 per share. On an earnings per share basis, as I mentioned earlier, we lost $0.06 per share versus our guidance range of a loss between $0.23 and $0.30. This quarter, favorable metal prices provided a benefit of over $20 million or about $0.19 per share in total and $0.08 more than the metal price assumptions used for our Q1 guidance. As I mentioned earlier, we're seeing continued modest demand recovery for our jet engine forgings and the first signs of recovery for our other jet engine materials. First quarter 2021, year-over-year decremental margins were 16% for ATI overall, marking a significant improvement from prior quarters. It's worth noting that we've maintained this key metric below 30% in each pandemic-impacted quarter to date. We were awarded a contract for roughly $40 million of specialty nickel alloy sheet materials for use in a pipeline off the coast of South America. Although jet engine sales declined significantly versus a robust prior year quarter, they grew nearly 30% sequentially. As I noted earlier, we recently won a contract worth roughly $40 million for nickel alloy clad pipe materials to be produced and shipped in the second half of 2021. As a whole, ATI lost $0.06 per share in Q1, well ahead of our expected loss range heading into the quarter. But as an encouraging sign that we have seen the bottom, HPMC sales increased nearly 10% sequentially. This growth was led by nearly 30% gain in commercial jet engine sales and a 17% pickup in defense sales. We're encouraged by these trends and expect them to continue expanding across 2021, and as domestic travel rates increase. Within our jet engine sales, highly profitable next-generations forgings and materials comprised over 40% of the Q1 total, up from 35% and 19% in the prior two quarters, respectively. Turning to AA&S, segment revenues decreased 16% year-over-year largely due to a 25% decrease in Specialty Rolled Products, or SRP, business unit sales. Sales at our STAL JV increased by over 50% year-over-year, fueled by demand for consumer electronics and elevated automotive production in China. Looking at the sequential revenue change, AA&S sales improved 4%, largely due to SRP's 15% increase in standard value stainless products, which generate minimal profit. It's important to note that nearly 75% of the SRP Q1 EBITDA was due to rising nickel and, to a lesser degree, ferrochrome prices in the quarter. If this unpredictable benefit is removed, SRP earned an EBITDA margin of about 2% and generated a loss after appropriately considering depreciation and interest charges. Before jumping to the balance sheet, I want to highlight that we've limited year-over-year decremental margins to 16% this quarter. During the market chaos, we've maintained a strong total liquidity, ending the first quarter with roughly $540 million in cash and about $360 million of ABL availability. Despite not being able to provide Q2 earnings guidance, we remain confident in our full year 2021 free cash flow guidance range of $20 million to $60 million, excluding pension contributions. Last quarter, we announced that we anticipated contributing $87 million to the pension plans in calendar 2021.

That said, we still reported a loss for the quarter of $0.06 per share. On an earnings per share basis, as I mentioned earlier, we lost $0.06 per share versus our guidance range of a loss between $0.23 and $0.30. As I mentioned earlier, we're seeing continued modest demand recovery for our jet engine forgings and the first signs of recovery for our other jet engine materials. As a whole, ATI lost $0.06 per share in Q1, well ahead of our expected loss range heading into the quarter. We're encouraged by these trends and expect them to continue expanding across 2021, and as domestic travel rates increase.

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By the end of 2021, we had one of our most successful years ever with return on capital employed approaching 10%, our highest since 2014; the successful integration of Noble Energy, while more than doubling initial synergy estimates; and record free cash flow, 25% greater than our previous high. 2021 was also the year when Chevron accelerated our efforts to advance a lower carbon future by forming Chevron New Energies, an organization that aims to grow businesses in hydrogen, carbon capture and offsets; introducing a 2050 net zero aspiration for upstream scope one and two emissions and establishing a portfolio carbon intensity target that includes scope three emissions and more than tripling our planned lower carbon investments. Our record free cash flow enabled us to strongly address all four of our financial priorities in 2021: a higher dividend for the 34th consecutive year; a disciplined capital program, well below budget; significant debt paydown with a year-end net debt ratio comfortably below 20% and another year of share buybacks, our 14th out of the past 18 years. The Noble acquisition and increasing capital efficiency enabled us to maintain a five-year reserve replacement ratio above 100%. We reported fourth quarter earnings of $5.1 billion or $2.63 per share. Adjusted earnings were $4.9 billion or $2.56 per share. The quarter's results included three special items: asset sale gains of $520 million, primarily on sales of mature conventional assets in the U.S.; losses on the early retirement of debt of $260 million, which will result in significant future interest cost savings and pension settlement costs of $82 million. Full year earnings were over $15 billion, the highest since 2014. Compared with 3Q, adjusted 4Q earnings were down $770 million. Adjusted earnings increased over $15 billion compared to the prior year, primarily due to increased realizations in upstream as well as improved refining and chemicals margins. 2022 production is expected to be flat to down 3% due to expiration of contracts in Indonesia and Thailand. Excluding contract expirations and 2022 asset sales, we expect a 2% to 5% increase in production led by the Permian and lower turnaround activity in TCO and Australia. We reaffirm our prior long-term guidance of a 3% production CAGR through 2025, and we'll share more about our long-term outlook at our upcoming Investor Day. Affiliate dividends are expected to be between $2 billion and $3 billion, depending primarily on commodity prices and margins.

We reported fourth quarter earnings of $5.1 billion or $2.63 per share. Adjusted earnings were $4.9 billion or $2.56 per share.

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Finally, on the liquidity front, we finished fiscal 2020 in a strong position with cash increasing to $66 million from $52 million at the end of fiscal 2019, and no borrowings outstanding at the end of either year. The improvement in our liquidity position was attributable to $84 million of cash flow from operations, which funded capital expenditure investments in data, digital marketing and omni-channel technologies, share repurchases, dividends, and minority investments in smaller branded businesses. Lilly finished the year with 63% growth in full price e-commerce, which helped drive a 12% operating margin. Tommy's pre-pandemic direct-to-consumer business was split roughly 75% stores outlets and restaurants, and 25% e-commerce. More importantly, leveraging its 25 years of expertise in food and beverage, we believe that the concept delivers our wonderful brand in a way that is highly relevant for today's guests. Amongst our three smaller brands, Southern Tide, The Beaufort Bonnet Company and Duck Head, The Beaufort Bonnet Company was a standout, delivering both top and bottom line growth in fiscal 2020 and operating margin expansion, finishing the year at almost $21 million in sales with two-thirds coming from e-commerce. Fiscal 2020 sales decreased 33% to $749 million, with a meaningful shift in the composition of our revenue. In fiscal 2020, e-commerce sales were $324 million, growing 24% and making up 43% of our total sales, compared to 23% in fiscal 2019. We're particularly hard hit in California and Hawaii, where we have a large presence with 34 stores and seven restaurants. In fiscal 2020, our adjusted gross margin was 55.1% compared to 57.6% in fiscal 2019. In total, adjusted SG&A was $93 million lower than in fiscal 2019 and cost-saving measures included a $63 million reduction in employment costs, a $10 million reduction in occupancy costs, and reductions in variable and other expenses. We expect SG&A to be approximately 5% lower in fiscal 2021 than in fiscal 2019, as reductions in employment and variable expenses are partially offset with increased investments in marketing. First quarter sales are expected to increase from $160 million in fiscal 2020 to a range of $220 million to $240 million in fiscal 2021. The full year sales increasing from $749 million in fiscal 2020, to a range of $940 million to $980 million in fiscal 2021. Our fiscal 2021 effective tax rate for the first quarter is expected to be approximately 15%, and for the full year, is expected to be approximately 20%. On an adjusted basis, we returned to profitability in the fourth quarter of fiscal 2020, and expect adjusted earnings per share in a range of $0.95 to $1.15 in the first quarter of fiscal 2021, and $2.80 to $3.20 in the full fiscal year. Inventory decreased 19% to $124 million at the end of the fourth quarter, compared to $152 million in the prior year with double-digit percentage decreases in each operating group. Our liquidity position is strong, with no debt and $66 million of cash at the end of fiscal 2020. Capital expenditures in 2020 were $29 million, and we expect capital expenditures to be approximately $35 million in fiscal 2020. Our Board of Directors increased our quarterly dividend payout from $0.25 per share to $0.37 per share, returning us to our pre-COVID level.

First quarter sales are expected to increase from $160 million in fiscal 2020 to a range of $220 million to $240 million in fiscal 2021. The full year sales increasing from $749 million in fiscal 2020, to a range of $940 million to $980 million in fiscal 2021.

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In the $10.5 billion backlog we have built, which increased 10% on a year-over-year basis. Additionally, there are significant actions underway across the organization to optimize the efficiency of our cost structure, and we remain on track to deliver $230 million in productivity savings this year. We received our eighth consecutive ranking in the Corporate Knights Global 100 most sustainable corporations in the world. We were recognized by Sustainalytics for managing material ESG issues, and we are one of 45 companies globally to receive his Royal Highness, The Prince of Wales' inaugural Terra Carta Seal. Overall, service revenues in the quarter were up 5% with broad-based growth across all regions. Orders were up 7%, led by low double-digit growth in North America with strength across our applied commercial HVAC and fire & security platforms. We expect a 400 to 500 basis point improvement in our attach rate for the full year and ended Q1 at approximately 41%. We were pleased to see the recent announcement from the Biden administration forming a new National Building Performance Standards Coalition consisting of more than 30 state and local governments across the U.S., incentivizing the development of healthier, lower carbon emitting buildings. The official adoption of these standards would represent an important step toward the formation of the $240 billion decarbonization industry, we expect through of 2035. In North America, we are partnering with the University of Windsor on their 2030 carbon reduction plan as well as their 2050 carbon neutrality objectives. Sales in the quarter were up 8% organically above our original guidance for mid-single-digit growth and led by strong outperformance across the global product portfolio. Our longer-cycle field businesses also performed well, up 6% with solid growth in both service and install. Segment EBITA increased 13% versus the prior year, with margins expanding 30 basis points to 12.3%, including a 100-basis-point margin headwind from price/cost and significant operational inefficiencies related to ongoing supply chain disruptions and worsening labor constraints. Additionally, ongoing supply chain disruptions and labor shortages impacted our field operations, where we were dealing with, not only our own disruptions, but those of our customers as well versus our guidance for Q1, this was an incremental headwind of 40 basis points. EPS of $0.54 was at the high end of our guidance range and increased 26% year over year, benefiting from higher profitability as well as lower share count. Free cash flow in the quarter was just over $250 million, primarily the result of a continued focus on working capital management. Overall operations contributed $0.10 versus the prior year, including a $0.06 benefit from our COGS and SG&A productivity programs. Underlying segment earnings were a net $0.04 tailwind year over year, which we view as a significant achievement in the current environment. Excluding the headwinds from price cost, underlying incremental in Q1 were approximately 40%. Orders for our field businesses increased 8% in aggregate, with fairly balanced growth between service and install activity. Backlog grew 10% to nearly $10.5 billion, with service backlog up 4% and installed backlog up 11%. Sales in North America were up 5% organically, led by 7% growth in service. Install sales increased 4%. Performance Infrastructure declined high single digits, given the tough prior year comparison of plus 20%. Segment margin decreased 90 basis points year over year to 11.6%, including an 80 basis point impact from lower absorption given the operational inefficiencies related to material and labor availability. Orders in North America were up 11% versus the prior year with high teens growth in commercial applied, including a significant increase in HVAC equipment orders driven by very strong demand in the data center and healthcare verticals. Backlog of $6.5 billion increased 12% year over year. EMEALA revenue increased 3%, led by continued strength in the fire & security business, which grew at mid-single-digits rate in Q1. Segment EBITDA margin expanded 50 basis points, underlying margin performance improved as positive price/cost and the benefit of SG&A. Orders in EMEALA were up 3% in the quarter with high single-digit growth in fire & security and low single-digit growth in commercial HVAC. Backlog ended the quarter at $2.2 billion, up 12%. Sales in Asia Pacific increased 12% organically led by mid-teens growth in commercial HVAC in Controls. China continued to outperform with revenue up nearly 30%. EBITDA margin declined 260 basis points year over year to 10.1%, driven by headwinds from price costs as well as unfavorable business and geographic mix. APAC orders were up 5% with continued strength in commercial HVAC, driven by a strong rebound within the industrial vertical in China as well as the benefit of a large infrastructure development project currently underway in Japan, which would include a significant deployment of OpenBlue and digitally enabled services. Backlog of $1.8 billion was up 2% year over year. Global product sales increased 14% organically in the quarter, with broad-based strength across the portfolio led by mid-teens growth across our HVAC equipment platforms. Global residential HVAC sales were up 11% overall in Q1. North America resi HVAC grew 17% in the quarter benefiting from both higher growth in our power business and strong price realization. So far, we had about 30% capacity and still on track for full run rate later in the year. Strength in light commercial was driven by strong performance at Hitachi which was up over 50% as well as mid-teens growth in North America unitary equipment and high single-digit growth in VRF. EBITA margin expanded 240 basis points year over year to 14.5% as volume leverage, higher equity income and the benefit of productivity actions more than offset headwinds from price/cost. Corporate expense was up slightly year over year to $70 million. We ended up Q1 with $1.2 billion in available cash and net debt at 1.9 times, one tick higher versus year-end, but still below our target range of two to two and a half times. On cash, we generated a little over $250 million in free cash flow in the quarter, down year over year due to the absence of prior year tax credits and other COVID-related benefits as well as nearly a 50% increase in capex spend year over year. We had another quarter of strong trade working capital management, down 140 basis points as a percentage of sales. With a continued focus on working capital, we remain confident that we will sustain 100% conversion over the next several years. We repurchased approximately 7 million shares for just over $500 million, deploying roughly $100 million toward bolt-on acquisitions and increased our quarterly cash dividend payment by 26%. As George mentioned, we are reaffirming our full year adjusted earnings per share guidance range of $3.22 to $3.32, which represents year-over-year growth of 22 to 25%. Given the continued inflationary environment, we are increasing our organic revenue growth assumptions to a range of 8 to 10%, mainly driven by our increased price expectation. An additional point of price on the topline we create an incremental margin headwind of approximately 20 basis points. However, the inflated level of pricing will bring our full year price cost margin headwind to approximately 60 basis points. Therefore, we now expect 50 to 60 basis points of segment EBITA margin expansion for the year. There was no change to underlying margin expansion of 110 to 120 basis points. Additionally, the strengthening U.S. dollar has created an earnings per share headwind of $0.03, since we first provided guidance back in November, and we are absorbing this incremental headwind with our reaffirmed adjusted earnings per share guidance range. We expect continued strong performance with high single-digit organic revenue growth, improved segment EBITDA margin expansion and adjusted earnings per share of $0.62 to $0.64, which represents a year-over-year increase of 19 to 23%. Antonella has been one of my constants, really, since I first joined back -- Tyco back in 2006.

In the $10.5 billion backlog we have built, which increased 10% on a year-over-year basis. EPS of $0.54 was at the high end of our guidance range and increased 26% year over year, benefiting from higher profitability as well as lower share count. As George mentioned, we are reaffirming our full year adjusted earnings per share guidance range of $3.22 to $3.32, which represents year-over-year growth of 22 to 25%. We expect continued strong performance with high single-digit organic revenue growth, improved segment EBITDA margin expansion and adjusted earnings per share of $0.62 to $0.64, which represents a year-over-year increase of 19 to 23%.

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For the quarter, the company's net income rose to $38.2 million as compared to $5.3 million in the second quarter of 2020. On an earnings per share basis, that is $0.75 per diluted common share in 2021 as compared to $0.11 for the quarter in 2020. Here we have a net income of $35.2 million on a year-to-date basis. That compares to a net loss in 2020 of $15 million. And on a per share basis, we have earnings of $0.69 per share in 2021 and that compares to a loss of $0.31 in 2020. And for the year-to-date, the capital investments, I will highlight $138.5 million of capital investments as compared to $133.5 million of capex in 2020. Capital spending is on track to our target, which is between $270 million and $300 million for the year. And I'll talk a little bit more extensively about the unbilled revenue accrual because that's giving us a big pop for the quarter and the market value of our -- some of our pension assets reduced our earnings per share by about $0.03 on the quarter. The unbilled revenue is adding $0.17 on the quarter and I guess I can talk about that now, it's also on the next slide. As I mentioned, in Q3 of 2020, we recognized $43 million of net income, which was attributable to Q1 and Q2 of 2020 and that was because of the delayed California General Rate Case, we had not booked interim rates and we had not booked the regulatory mechanisms because we weren't sure of the probability of recovery and we did end up booking those in the third quarter. Once again, our authorized rate base for all operations in total is $1.82 billion. This rate case, the largest in our history, is requesting approval of just over $1 billion in capital expenditures during the three-year rate case cycle. We worked very hard on addressing customer affordability when preparing this case and have been able to keep increases under $5 per month for the median residential customer in all of our service areas. This has led to a 6% lower sales forecast than in our last adopted, but also an innovative rate design, which provides significant discounts for the first 6 units of water used each month and increases the amount of revenue collected in our fixed monthly service charge. Two areas I want to provide operational updates on, starting off on Page 12, talking about the recently declared droughts and I say droughts as plural, given the approach the state has set forth early on in the second quarter and by doing so they were evaluating drought conditions on a county by county basis. As we wrapped up the second quarter, the drought kind of quickly spread and we have 51 of the 58 counties in the State of California now under a declared drought emergency. Accordingly, as part of our planning process and rate case process with the Public Utilities Commission, we filed, what's called, Rule 14.1, which is our water supply master plans in June and within that water supply master plans is something called Schedule 14.1, which is our water supply contingency plans, which cover the various stages of drought. Very happy to share that on July 14, the Commission approved our Rule 14.1 plan, as well as our Schedule 14.1 water supply contingency plans. We are officially in a Stage 1 drought in all the districts that we operate in. We have asked our customers for a voluntary 15% reduction over the summer months and we're utilizing the same model that we developed during the last drought, which is really doing a -- what we call the customer-first approach, trying to give our customers as many options as we can to help them hit their reduction targets. The foundation has been laid for our contingency plans as we move throughout the stages of the drought and we're going to take the same approach that we had in the last major drought, which all of our customers said then, what was the 25% reduction targets. Remember that 90% of our employees have been at work every day throughout the pandemic so the one's we phased back in, most of them are corporate staff and jobs that could be worked on remotely during the pandemic. Again, despite the pandemic, we have been at work every day, 365 days a year, 24 hours a day. Bills outstanding increased slightly to $12.5 million. We have continued to increase our reserve for doubtful accounts from $5.7 million now to $6.3 million and within the budget for the State of California, which is our largest operating entity, the states that we operate in and California is the largest, the State of California has reserved a $1 billion for water utilities arrearage management relief. The incremental cost of COVID-19 for the second quarter continued to run about $200,000 a quarter. So we're up to about $1.3 million total since the beginning of the pandemic. It's interesting to note that water sales in California are at 103% of the adopted numbers that were approved in the last General Rate Case. And year-over-year, residential consumption is up 4% and that's been offset by lower business in industrial sales and, of course, as the economy was slowed and stalled out there for a little bit. Liquidity remained strong at the end of the quarter with over $66 million cash on hand and additional borrowing capacity of $405 million on the line of credit, subject to various borrowing conditions, but liquidity remained strong, as we move into the warmer summer months. Also, in May, we closed on our acquisition of the Kapalua Water and Kapalua Wastewater Company and added a 1,000 new Maui customers to our Hawaii Water Service Company. Last month, in June, we announced the execution of a definitive agreement to acquire a wastewater utility on the island of Kauai in Hawaii, which will bring 1,800 Equivalent Dwelling Units to our Hawaii Water Service Company, and we will be filing the application with the Hawaii Public Utilities Commission shortly for its approval of this purchase. And next week, we anticipate that the California Public Utilities Commission at its August 5 open meeting will approve our newest California utility known as The Preserve at Millerton, which is a greenfield or new development, water, wastewater and recycled water utility, which will ultimately bring about 2,800 customer connections to California Water Service Company. We have approximately 2,500 customers and customer commitments today in these -- among these four utilities and anticipate that their combined service areas could build out to over 60,000 customers. I'm looking now at Slide 17, and as promised in the first quarter, we've updated Slide 17 and 18 which are capex and our rate base slides to reflect the proposal that's been made in the California General Rate Case. But what it does show for 2022 through 2024 is that we would anticipate our combined capex with California and the other states to be in the range of $355 million to $365 million a year and that corresponds to the $1 billion proposal that Paul's group put to the CPUC plus the capex that we're spending in our other states. And once again, our current rate base is about $1.82 billion for 2021. But the proposal that Paul has put forth to the CPUC, his team, would increase our rate base to the point of $2.2 billion, $2.5 billion and $2.75 billion combined, again with the other states, if that proposal were adopted as proposed. One is the drought, and as I said, we are officially in a Stage 1 drought for our customers.

On an earnings per share basis, that is $0.75 per diluted common share in 2021 as compared to $0.11 for the quarter in 2020.

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Better market conditions combined with significant cost control resulted in a 40% adjusted EBITDA increase. In addition, we generated $73 million of year-to-date free cash flow, bringing our leverage ratio back to pre-pandemic levels. Our Board authorized a $50 million share repurchase program. Starting with the liquid-cooled business, it's averaged about $300 million in revenues over the last several years. This business represents approximately $100 million of revenue and it's currently running at a lower rate due to the global pandemic. CIS sales were down 14% from the prior year, primarily due to COVID-related declines in our commercial HVAC and refrigeration markets along with lower data center sales. Adjusted EBITDA was down 7% on lower sales. But I'm pleased to report the margin improved 70 basis points despite lower revenue. In fact, if we adjust for the negative effect of lower data center sales, the margin would have improved by approximately 300 basis points versus the prior year and lower sales. The Building HVAC segment had another great quarter with sales up 11% from the prior year. We'll finish the fiscal year up more than 50%. I want to highlight that adjusted EBITDA increased 42% from the prior year, primarily due to higher sales volume and favorable product mix. This resulted in a 500 basis point improvement in EBITDA. Sales in the HDE or heavy duty equipment were down 12% from the prior year but a significant improvement from Q1 as markets continue to stabilize. Adjusted EBITDA was up 42% on a 460 basis point margin improvement despite lower sales. Sales were down 5% from the prior year, which also represents a large sequential improvement from the first quarter. Adjusted EBITDA improved significantly, up $5.7 million from the prior year, primarily due to cost reductions and other temporary COVID-related savings actions. Second-quarter sales declined by $39 million or 8% compared to the prior year, driven mostly by the global pandemic and associated economic conditions. I'm very pleased to report our gross profit was $81 million, which was higher than the prior year by $5 million on lower sales. And the gross margin increased by 240 basis points to 17.5%. SG&A was $17 million or 25% lower than the prior year. Adjusted EBITDA of $55 million was better than the prior year by $16 million or 40%. Our second quarter adjustments totaled $7.6 million including $5.5 million from CEO transition costs, mostly related to severance and benefit-related expenses owed to the previous CEO. We also incurred $1.5 million of restructuring expenses related to plant consolidation activities. And our adjusted earnings per share was $0.43, higher than the prior year by over 200%. I'm pleased to report our free cash flow for the first six months of fiscal '21 was $73 million, which represents a $97 million improvement over the prior year. And I'm very pleased to report that our resulting leverage ratio was 2.2, back to pre-pandemic levels and within our target range. We expect slightly positive cash flow for the remainder of the year, resulting in full year free cash flow of $70 to $80 million. For example, we have approximately $20 million in pension contributions along with the phase-out of payroll tax deferral under the care of that. We also expect higher capital spending in the second half of the fiscal year along with some working capital growth in-line with the recovery. We expect our net sales to be down between 7% and 12% from the prior year. And for adjusted EBITDA to be in a range of $155 to $165 million.

Second-quarter sales declined by $39 million or 8% compared to the prior year, driven mostly by the global pandemic and associated economic conditions. And our adjusted earnings per share was $0.43, higher than the prior year by over 200%. We also expect higher capital spending in the second half of the fiscal year along with some working capital growth in-line with the recovery. We expect our net sales to be down between 7% and 12% from the prior year. And for adjusted EBITDA to be in a range of $155 to $165 million.

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We reported adjusted net income of $110 million or $3.27 per share in the first quarter, up from an adjusted net income of $83 million or $2.47 per share in the fourth quarter of 2019 and $15 million or $0.44 per share in the first quarter of 2019. Teekay Tankers' first quarter earnings per share was the highest in more than 10 years, resulting in an industry-leading 20% earnings per share yield for the quarter based on our closing share price yesterday at an annualized earnings per share yield of 80%, clearly demonstrating the earnings power of our business. We have continued to strengthen our balance sheet with strong free cash flow from operations of $140 million and the completion of three vessel sales totaling $60 million during the first quarter. This allowed Teekay Tankers to reduce its net debt by $200 million or over 20% and increased our liquidity position to $368 million during the quarter. Our net debt-to-total capitalization declined to 40% at the end of March compared to 48% at the end of the fourth quarter of 2019 and it remains our intention to continue reducing this leverage and increasing our long-term financial flexibility and resilience. Subsequent to the first quarter, we are continuing to generate significant free cash flow and also closed the $27 million sale of the non-US portion of our ship-to-ship transfer business. Approximately $14 million of cash payment was received on closing with the balance due in August. Crude tanker spot rates were the highest in more than 10 years during the first quarter and second quarter rates are also expected to be very positive based on firm quarter-to-date bookings. We were well prepared to manage any potential spares shortages as the team identified critical items and made advance purchases early in the outbreak where given our experiences from 2003 SARS epidemic, we anticipated challenges related toward manufacturing and logistics. By April, Saudi Arabia pushed its oil production to a record high of just under 12 million barrels per day, creating significant additional tanker demand. According to the IEA, global oil demand declined by around 25 million barrels per day year-on-year in April as demand for transportation fuel collapsed. As shown by the chart on the slide, around 100 crude tankers are currently being used for floating storage, which we define as being in storage for at least 30 days with over 100 additional ships sitting in ports on demurrage for periods of between seven days to 30 days. All told, around 10% of the crude tanker fleet is currently being used for some form of floating storage, thereby reducing the number of ships available for transporting cargo. As a result, mid-size tanker spot rates during the first quarter were the highest in over 10 years. Based on approximately 69% and 64% of spot revenue days booked, Teekay Tankers' second quarter-to-date Suezmax and Aframax bookings have averaged approximately $52,100 and $33,200 per day, respectively. For our LR2 segment with approximately 58% spot revenue days booked, second quarter-to-date bookings have averaged approximately $34,300 per day. Over the past eight months, Teekay Tankers has taken advantage of strong spot tanker market spikes and opportunistically secured fixed time charter coverage for 10 Suezmaxes and three Aframax size vessels at attractive rates. The current tanker order book, when measured as a proportion of the existing fleet, is the lowest we have seen it in 23 years, at just under 8%. This is significantly lower than the almost 50% of the fleet size in 2008 and 20% seen in 2015, proportions which meaningfully weighed on the ability of the tanker market to recover the demand return. Looking at the mid-size tanker fleet specifically, around 370 vessels are aged between 15 years and 20 years old compared to our current order book of just 140 ships. Since the end of Q3 2019, utilizing very strong cash flows from operations and proceeds from asset sales, we have transformed our balance sheet, reducing net debt by approximately $270 million or 27% and increasing our liquidity position by almost four times to $368 million. In fact, in Q1 alone, we reduced our debt by approximately $200 million or over 20% and more than doubled our liquidity position. I'm pleased to report that the strong cash flows achieved in April, further reduced our net debt by approximately $60 million and increased our liquidity position to $420 million. In addition, the 13 fixed rate contracts that Kevin touched on earlier, have lowered our cash breakeven by over $4,000 per day for the next 12 months, further increasing our resilience to potential medium-term market weakness. Starting with the graph on the left side of the page 10, TNK's free cash flow increased from a very high $102 million in Q4 2019 to $141 million in the first quarter of 2020 for total of over $240 million in just two quarters. To put TNK's free cash flow during the first quarter into perspective, on an annualized basis, it equates to a free cash flow yield of approximately 100%, based on our closing share price yesterday of $16.05. Referring to the graph on the right side, TNK continues to maintain significant operating leverage with approximately 80% of spot exposure over the next 12 months, while reducing its free cash flow breakeven by locking in time charters at significantly higher rates. TNK is expected to generate strong free cash flow in the second quarter and generate positive free cash flow at average midsize tanker spot rates above approximately $10,500 per day. We capitalized on the strong market with majority of our fleet trading spot while opportunistically fixing our 13 vessels on time charter at the peaks of the time charter market.

We reported adjusted net income of $110 million or $3.27 per share in the first quarter, up from an adjusted net income of $83 million or $2.47 per share in the fourth quarter of 2019 and $15 million or $0.44 per share in the first quarter of 2019.

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Second quarter revenue was $516 million, an increase of 44% compared to the second quarter of the prior year. We delivered net income of $16 million in the second quarter versus a loss of $8 million in the second quarter of the prior year, and adjusted EBITDA was up $30 million year-over-year with the related margin up 640 basis points. At PeopleManagement revenue is down just 1% versus Q2 2019 supported by a doubling of new client wins through June versus this time last year. Revenue for PeopleScout was down only 2% versus Q2 2019 as the travel and leisure segment rebounded strongly growing over 200% during the quarter. Revenue for PeopleReady was down 19% versus Q2 2019. We are seeing both dynamics in certain industries, such as commercial construction, which is 12% of our mix and has only recovered 60% of Q2 2019 revenue. To reengage, we launched a campaign in states eliminating the federal unemployment programs targeting those who have not worked over the last 18 months. PeopleReady is our largest segment representing 58% of trailing 12 month revenue and 64% of segment profit. PeopleReady revenue was up 43% during the quarter versus down 13% in Q1. PeopleManagement is our second largest segment representing 32% of trailing 12 month revenue and 16% of segment profit. PeopleManagement revenue is reaching pre-pandemic levels with year-over-year growth of 28% in the second quarter versus growth of 7% in Q1. Turning to our third segment, PeopleScout represents 10% of trailing 12-month revenue and 20% of segment profit. PeopleScout revenue is also nearing pre-pandemic levels with year-over-year growth of 106% in the second quarter versus a decline of 13% in Q1. Since rolling out JobStack to our associates in 2017 and our clients in 2018, digital fill rates have increased 3 times to nearly 60% with 788,000 shifts filled via the app during the quarter. Our JobStack client user count ended the quarter at 27,100, up 12% versus Q2 2020. A heavy client user has 50 or more touches on JobStack per month, whether it's entering an order, rating a worker or approving time. JobStack heavy client users continue to post better year-over-year revenue growth rates compared to the rest of the customer base, with the Q2 2021 growth differential exceeding 40 percentage points on a same customer basis. Heavy client users are becoming more material in our overall results as they now account for 46% of PeopleReady US on-demand revenue compared to 30% in Q2 2020. The service centers increase our accessibility as they operate 85 hours per week versus 60 hours for a typical branch. We are seeing strong results as PeopleManagement secured $63 million of annualized new business wins so far this year compared to $32 million this time last year. These efforts are already delivering results as shown by the $33 million of annualized new wins secured by PeopleScout so far this year versus $9 million this time last year. Total revenue for Q2 2021 was $516 million, representing growth of 44%, driven by new business wins and higher existing client volumes. We posted net income of $16 million, or $0.45 per share, an increase of $24 million compared to a net loss of $8 million in the prior year. Adjusted net income was $16 million, or an increase of $21 million, which is less than the increase in GAAP net income, primarily due to $11 million of workforce reduction charges in Q2 2020 that are excluded from adjusted net income. We delivered adjusted EBITDA of $25 million, an increase of $30 million, and adjusted EBITDA margin was up 640 basis points driven by the same items previously mentioned for net income. Gross margin of 26.4% was up 320 basis points. Our staffing segments contributed 70 basis points of margin expansion aided by lower workers' compensation costs due to favorable development of prior year reserves. PeopleScout contributed 250 basis points of expansion with 170 basis points associated with operating leverage from higher volumes. The remaining 80 basis points was due to non-repeating workforce reduction costs incurred in Q2 2020, which are excluded from our adjusted net income and adjusted EBITDA calculations. SG&A was up 14% but as a percentage of revenue was down 570 basis points. Excluding the workforce reduction charge in Q2 last year, SG&A was up 24%, which was roughly half the rate of revenue growth, and was down 340 basis points as a percentage of revenue. Our effective income tax rate was 19% in Q2. Turning to our segments, PeopleReady revenue increased 43% with segment profit margin up 590 basis points. Year-over-year revenue in our three largest verticals, construction, transportation and manufacturing, improved by over 30 percentage points versus Q1 results. California, our hardest hit geography and largest market was up 66% versus a decline of 18% in Q1, and hospitality, our hardest hit vertical doubled in Q2 versus a decline of 34% in Q1. PeopleManagement revenue increased 28%, while segment profit increased 79% with 60 basis points of margin improvement driven by operating leverage. PeopleManagement had $63 million of annualized new business wins through June, primarily in the retail and transportation industries, with $7 million of new business revenue recorded this quarter and $26 million expected over the remainder of the year. PeopleScout revenue increased 106% after being down 13% in Q1, with segment profit of $11 million yielding a 16.9% margin versus a loss of $3 million in Q2 last year. Revenue benefited from strong recovery in our hardest-hit industries, including travel and leisure, which grew 200%. New business wins also contributed to revenue growth as PeopleScout delivered $33 million of annualized new wins through June this year versus $9 million in the comparable prior year period. New wins generated $4 million of revenue in Q2 with $20 million expected over the remainder of the year, coming from a variety of industries, including retail, healthcare and transportation. We finished the quarter with $105 million in cash, no outstanding debt, and an unused credit facility. Our cash balance will drop in Q3 due to a repayment of $60 million in government payroll taxes that the government allowed businesses to defer last year and about $35 million of additional working capital from sequential revenue growth associated with the seasonal nature of our business and year-over-year revenue growth.

Second quarter revenue was $516 million, an increase of 44% compared to the second quarter of the prior year. We posted net income of $16 million, or $0.45 per share, an increase of $24 million compared to a net loss of $8 million in the prior year.

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These statements, including those describing our beliefs, goals, expectations, forecast and assumptions, are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. We generated $25 million of free cash flow and adjusted EBITDA of $182 million. We were able to identify and capture two significant acquisitions that fit as perfectly, adding more than 40,000 acres in Howard and Western Glasscock counties. These deals initially added about 250 locations, but importantly, recent drilling success has added an additional 125 locations across areas where we ascribe no value at the time of the acquisition. Second, we grew improved oil reserves by nearly 80%, and oil now makes up nearly 40% of our total reserves. The benefits of increased oil reserves paired with the sale of lower margin gas-weighted assets is apparent in our margins and a 260% increase in the SEC PV-10 value. Added WTI price of $75 more reflective of the current environment, we estimate our reserve value would increase by almost $1 billion from the SEC PV-10 to approximately $4.6 billion. We issued $400 million of senior notes at an attractive rate and raised $73 million with the issuance of common stock through our ATM program. Our investments have been disciplined, allowing us to reduce our 4Q annualized net debt to adjusted EBITDA ratio to 1.9 times at year-end 2021, compared to a 2.4 times a year ago. Additionally, we included EEO-1 data in our 2021 ESG report providing clarity into the diversity of our workforce. We expect to generate about $300 million in free cash flow in 2022 of the current commodity prices. We understand the importance of leverage reduction, $300 million of free cash flow is equivalent to about $17 per share. We expect our leverage ratio will be 1.5 times by the third quarter, and we have line of sight to 1 times by midyear 2023. In Western Glasscock County, we completed the 10 well books package at the end of the fourth quarter. Results of the 8 wells in the lower Sprayberry and Wolfcamp A and B formations are benefiting from our optimized completion design, and are outperforming the previous package we completed in Western Glasscock County by approximately 38%. These recent acquisitions in Howard and Western Glasscock counties, and our subsequent appraisal activities have extended our all weighted inventory runway to approximately 8 years at current activity levels with a breakeven oil prices of $55 or below. Returns and efficiencies benefit from the fact that our acreages contiguous, and in many areas we can drill extended laterals and we plan to drill 18 15,000-foot lateral wells in 2022. To optimize our capital efficiency for the year and synchronize our drilling and completion crews, we are currently operating 3 drilling rigs and 2 completions crews, and planned to release 1 rig and 1 crew by the end of the first quarter. After that, we will maintain 2 rigs and 1 crew through the end of 2022. From fourth quarter actuals, we have factored in an approximately 15% inflation into our 2022 capital budget, and had locked in much of our pricing for services through the first half of the year, including frac services, sand and casing cost. For 2022, we expect to generate about $300 million of free cash flow at current commodity prices, and this cash flow will be directed toward leverage reduction. Turning to our capital budget, for 2022 investment program is approximately $520 million. Our budget also includes ESG focused investments of about $10 million to work toward the company's achievement of our announced 2025 emissions targets. This will generate full year oil production growth of 24% to 34%. Our free cash flow and leverage ratio projections are supported by our current hedge positions, covering about 75% of our projected oil production in 2022. With 8 years of high-margin oil weighted inventory, we are now in a position for sustainable long-term free cash flow generation. This means we believe that we can meet our leverage target of 1.0 times by midyear 2023 and begin to return capital to shareholders in 2023.

To optimize our capital efficiency for the year and synchronize our drilling and completion crews, we are currently operating 3 drilling rigs and 2 completions crews, and planned to release 1 rig and 1 crew by the end of the first quarter.

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In the fourth quarter, we grew gross written premiums by 13% and net written premiums by 16%, with strong growth across both segments. Our underlying combined ratio was 86.3%, a 4 point improvement over the fourth quarter of 2019, with both segments showing significant improvement in loss and expense ratios. Net investment income was very strong at $222 million compared to $146 million in the prior-year quarter. For 2020, Everest grew gross written premiums of 15% and net written premiums 17% year-over-year. We delivered $514 million in net income and $300 million in operating income despite the COVID-19 loss provision, the prior year reserve strengthening, and an active Cat year. Our dividend adjusted book value per share grew over 11%. The underlying combined ratio improved almost a point to 87.5% year-over-year, with our insurance segment improving 2.3 points to 94.2%. Underwriting profitability remains at the core of everything that we do As previously announced, in the fourth quarter, we strengthened prior accident year reserves in our Reinsurance segment by $400 million. In the fourth quarter, we also added $76 million primarily for third-party lines to our COVID-19 loss provision. Despite a high frequency of storms in the fourth quarter, our manageable catastrophe losses of $70 million resulted from disciplined underwriting and the purposeful reduction of volatility over the last two years in our reinsurance portfolio. Gross written premiums grew 12% in the quarter and 15% in 2020. The attritional combined ratio ex-COVID was 83.9%, an improvement from 87.4% in the prior fourth quarter. Gross written premiums grew 15% or 18%, excluding terminated programs, with gross written premium of $872 million in the quarter and over $3.2 billion for 2020. Everest Insurance delivered an improved attritional combined ratio of 93.8% for the fourth quarter, a 4.3 point improvement over the fourth quarter of 2019 and 94.2% for the full year 2020, a 2.3 point improvement over 2019. We achieved record renewal rate increases of 21% in the fourth quarter, excluding workers' compensation, and up 14% including workers' compensation, where we are seeing rates flatten. Consistent with prior quarters, these increases are led by property, up 21%; excess casualty, up 50%; D&O, up 35%; and commercial auto, up 17%. We are also seeing widespread increases in other lines of business, which had been slower to turn, most notably, general liability, now up 9%. The positive quarterly net income result was achieved despite a prior year reserve strengthening charge of $400 million, a COVID provision of $76 million, and catastrophe losses of $70 million. Everest reported net income of $64 million for the quarter and $514 million for the year, resulting in a return on equity of 5.8% for 2020. We had a $44 million operating loss for Q4, given the charges, and generated an operating income of $300 million for the year. Our net income in the quarter reflect strong investment income performance and improved attritional loss and combined ratios, offset by Cat, COVID and reserve charges, the catastrophe losses of $70 million are pre-tax and net of reinsurance, with $60 million from reinsurance and $10 million from insurance, driven by hurricane Delta, Zeta, and the Australian Queensland hailstorm. The estimate implied market share of industry losses, is just over 60 basis points for Everest. Year-to-date, the results include catastrophe losses of $425 million compared to $576 million during 2019. In the fourth quarter, we added $76 million to our COVID loss provision, reflecting the ongoing nature of this event and our consistent reserving philosophy. This amount includes $56 million in the Reinsurance segment and $20 million in the insurance segment, and is in addition to the $435 million of pandemic losses estimated in the first nine months of 2020. For the full year 2020, the total pandemic loss provision is $511 million, of which more than 80% is classified as IBNR. Everest had an underwriting loss in Q4 of $219 million due to the prior year reserve adjustment charge as compared to an underwriting loss of $29 million for Q4 2019. As Juan mentioned, we booked $400 million prior year reserve strengthening in the fourth quarter exclusively for the Reinsurance Division, primarily within long tail casualty segments, such as GL, auto liability, and professional lines for accident years 2015 through 2018. Turning to Everest's market position and growth on a year-to-date basis, gross written premium was $10. 5 billion, up $1.3 billion or 15% compared to 2019. This reflects strong and diversified growth in both segments with reinsurance up 15% and insurance up 15% compared to 2019. Our underlying attritional loss and combined ratios are strong and improving, excluding the catastrophe losses and impact from the COVID-19 pandemic, the attritional combined ratio was 87.5% for 2020 compared to 88.4% for 2019. Excluding the pandemic loss estimate, the group attritional loss ratio for 2020 was 60.1%, down from 60.2% for 2019, with insurance improving from 66% the 64.8%. For reinsurance, the 2020 attritional combined ratio, excluding the pandemic loss estimate and prior year reserve charge was 85.2%, down from 85.5% in 2019. For insurance, the 2020 attritional combined ratio, excluding the pandemic loss estimate was 94.2% compared to 96.5% in 2019. The group commission ratio of 21.6% year-to-date was down from 23% in 2019, largely due to business mix, a one-time significant contingent commission in the Reinsurance segment during 2019, and higher ceding commission in the Insurance segment. The group expense ratio remains low at 5.8% for 2020 versus 6% for 2019, as we benefited from premium growth and continued focus on expense management. Q4 investment income had a strong performance of $222 million compared to $146 million for Q4 2019. For the full year, pre-tax investment income was $642 million versus $647 million for 2019. The fixed income portfolio generated $542 million of investment income year-to-date compared to $520 million for the same period last year. Limited partnerships recorded $91 million of income quarter-to-date, largely due to fair market value adjustments. Invested assets grew 23% to $25.4 billion versus $20.7 billion last year end. This strong invested asset growth was due to $2.9 billion of operating cash flow and the proceeds of our debt issue. The pre-tax yield to maturity on the investment portfolio was just under 3%, down from 3.4% one year ago. Approximately 80% of our invested assets are comprised of a well diversified, high credit quality bond portfolio with duration of 3.6 years. Our effective tax rate on operating income for 2020 was 7.7% and 12.1% on net income. For 2021, we expect our tax rate to be approximately 12%, which reflects an annual Cat load of about 6 points of loss ratio. Everest generated record operating cash flows of $2.9 billion compared to $1.9 billion in 2019, reflecting the strength of our growing premiums in 2020 year-over-year and a more modest level of claims paid. Shareholders' equity was $9.7 billion at year-end 2020, up from $9.1 billion at year-end 2019. Net book value per share stood at $243.25, up 11% versus year-end 2019, adjusted for dividends. Everest's strong balance sheet was further strengthened by the 30-year $1 billion senior notes offering completed in early October 2020. This is long-term capital for Everest and enhances the efficiency of our capital structure, with our debt leverage now standing at 16.4%.

In the fourth quarter, we grew gross written premiums by 13% and net written premiums by 16%, with strong growth across both segments. Everest reported net income of $64 million for the quarter and $514 million for the year, resulting in a return on equity of 5.8% for 2020.

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An extensive list of these risks and uncertainties are identified in our annual report on Form 10-K for the fiscal year ended August 31, 2020 and other filings. In stepping back and reflecting for a moment, it's hard to believe that 12 months have passed since we first encountered COVID. The team delivered core earnings per share of $1.27 and revenue of $6.8 billion, resulting in a core operating margin of 4.2%. Moving to Slide 7, I'll address our updated outlook for the year. We now believe core earnings will be in the neighborhood of $5 a share, an increase of 25% from what we anticipated back in September, with top-line revenue coming in around $28.5 billion. This incremental revenue improves our portfolio as evidenced by another 10-basis-point increase to core operating margin, which we now forecast to be 4.2% for the year. Lastly, we remain committed to generating a minimum of $600 million in free cash flow, a testament to how we're managing our capital investments. Given the additional revenue, I am particularly pleased with the strong leverage we achieved during the quarter which enabled us to deliver a strong core operating margin of 4.2%. Putting it all together on the next slide, net revenue for the second quarter was $6.8 billion, $300 million above the midpoint of our guidance range. On a year-over-year basis, revenue increased by $700 million or 11%. GAAP operating income was $236 million and the GAAP diluted earnings per share was $0.99. Core operating income during the quarter was $285 million, an increase of 78% year over year, representing a core operating margin of 4.2%, a 160-basis-point improvement over the prior year. Net interest expense in Q2 was $33 million and core tax rate came in at approximately 23%. Core diluted earnings per share was $1.27, a 154% improvement over the prior-year quarter. Revenue for our DMS segment was $3.6 billion, an increase of 26% on a year-over-year basis. Core margins for the segment came in at an impressive 5.1%, 210 basis points higher than the previous year. Revenue for our EMS segment was $3.2 billion, also reflecting strong broad-based demand. Core margins for the segment were 3.1%, 80 basis points over the prior year. Cash flows provided by operations were $20 million in Q2 and capital expenditures net of customer co-investments total $152 million. We exited the quarter with a cash balance of $838 million. We ended Q2 with committed capacity under the global credit facilities of $3.8 billion. With this available capacity, along with our quarter-end cash balance, Jabil ended Q2 with access to more than $4.6 billion of available liquidity, which we believe provides us ample flexibility. During Q2, we repurchased approximately 1.9 million shares or $82 million. At the end of the quarter, $254 million remain outstanding in our current stock repurchase authorization and we intend to complete this authorization during the second half of FY '21 as we remain committed to returning capital to shareholders. DMS segment revenue is expected to increase 19% on a year-over-year basis to $3.5 billion. EMS segment revenue is expected to be $3.4 billion, an increase of 1% on a year-over-year basis. We expect total company revenue in the third quarter of fiscal '21 to be in the range of $6.6 billion to $7.2 billion for an increase of 9% on a year-over-year basis at the midpoint of the range. Core operating income is estimated to be in the range of $220 million to $270 million. Core diluted earnings per share is estimated to be in the range of $0.90 to $1.10. GAAP diluted earnings per share is expected to be in the range of $0.69 to $0.89. Today, electric vehicles account for less than 2% of total vehicles in the market. Jabil's long-standing capabilities and over 10 years of experience and credibility in this space has positioned us extremely well to benefit from this ongoing trend. We now expect core operating margins to be 4.2% on revenue of approximately $28.5 billion. This improved outlook translates to core earnings per share of approximately $5. And importantly, despite the stronger growth, we remain committed to delivering free cash flow in excess of $600 million for the year.

The team delivered core earnings per share of $1.27 and revenue of $6.8 billion, resulting in a core operating margin of 4.2%. Moving to Slide 7, I'll address our updated outlook for the year. We now believe core earnings will be in the neighborhood of $5 a share, an increase of 25% from what we anticipated back in September, with top-line revenue coming in around $28.5 billion. GAAP operating income was $236 million and the GAAP diluted earnings per share was $0.99. Core diluted earnings per share was $1.27, a 154% improvement over the prior-year quarter. We expect total company revenue in the third quarter of fiscal '21 to be in the range of $6.6 billion to $7.2 billion for an increase of 9% on a year-over-year basis at the midpoint of the range. Core diluted earnings per share is estimated to be in the range of $0.90 to $1.10. GAAP diluted earnings per share is expected to be in the range of $0.69 to $0.89.

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The third quarter of 2020 revenues decreased to $116.6 million compared to $293.2 million in the third quarter of the prior year. Operating loss for the third quarter was $31.8 million compared to an adjusted operating loss of $21 million in the third quarter of the prior year. EBITDA for the third quarter was negative $12.3 million compared to adjusted EBITDA of $22.8 million in the same period of the prior year. For the third quarter of 2020, RPC reported a $0.09 adjusted loss per share compared to an $0.08 adjusted loss per share in the third quarter of the prior year. Cost of revenues during the third quarter was $100.9 million or 86.5% of revenues compared to $225.2 million or 76.8% of revenues during the third quarter of 2019. Selling, general and administrative expenses decreased to $32.4 million in the third quarter of 2020 compared to $42.6 million in the third quarter of the prior year. These expenses decreased due to lower employment costs, primarily the result of cost reduction initiatives during previous quarters, partially offset by $3.3 million of accelerated amortization of restricted stock related to the passing of our Chairman. Depreciation and amortization decreased to $18.7 million in the third quarter of 2020 compared to $44.7 million in the third quarter of the prior year. Our Technical Services segment revenues for the quarter decreased 60.2% compared to the same quarter in the prior year. Segment operating loss in the third quarter of 2020 was $24.9 million compared to $18.2 million in the third quarter of the prior year. Support Services segment revenues for the quarter decreased 61% compared to the same quarter in the prior year. Segment operating loss in the third quarter of 2020 was $3.8 million compared to an operating profit of $1.6 million in the third quarter of the prior year. On a sequential basis, RPC's third quarter revenues increased 30.6% to $116.6 million from $89.3 million in the prior quarter. Cost of revenues during the third quarter of 2020 increased by $20.8 million or 26% due to expenses, which increased with higher activity levels such as materials and supplies, and maintenance expenses. As a percentage of revenues, cost of revenues decreased from 89.6% in the second quarter of 2020 to 86.5% in the third quarter due to more efficient labor utilization and the leverage of higher revenues over direct costs, which are relatively fixed during the short term. Selling, general and administrative expenses during the third quarter of 2020 increased 12.5% to $32.4 million from $28.8 million in the prior quarter, primarily due to the $3.3 million accelerated vesting of restricted stock. RPC incurred an operating loss of $31.8 million during the third quarter of 2020 compared to an adjusted operating loss of $35.9 million in the prior quarter. RPC's EBITDA was negative $12.3 million in the third quarter of 2020, compared to adjusted EBITDA of negative $17.8 million in the prior quarter. Our Technical Services segment revenues increased by $28.7 million or 35.7% to $109.3 million in the third quarter due to increased activity levels in several service lines. RPC's Technical Services segment incurred a $24.9 million operating loss in the current quarter compared to an operating loss of $34.1 million in the prior quarter. Our Support Services segment revenues decreased by $1.5 million or 16.6% to $7.3 million in the third quarter. Operating loss was $3.8 million compared to an operating loss of $1.8 million in the prior quarter. At the end of the third quarter of 2020, RPC's pressure pumping capacity remained at approximately 728,000 hydraulic horsepower. Third quarter 2020 capital expenditures were $13.7 million and we currently estimate the full-year capital expenditures to be approximately $60 million to $70 million and comprised primarily of capitalized maintenance of our existing equipment as well as upgrades of selected pressure pumping equipment for dual fuel capability. At the end of third quarter, RPC's cash balance was $145.6 million and we remain debt free.

The third quarter of 2020 revenues decreased to $116.6 million compared to $293.2 million in the third quarter of the prior year. For the third quarter of 2020, RPC reported a $0.09 adjusted loss per share compared to an $0.08 adjusted loss per share in the third quarter of the prior year.

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Taking into account our year-to-date results and based on what we can see now in the forward curves, we are increasing our outlook for the year and expect to deliver adjusted earnings per share of at least $8.50 for the full year 2021. So in our June 2020 business update, we outlined our earnings baseline of $5 per share. With the changes we've made in our business as well as the fundamental shifts in the marketplace, we're taking that baseline earnings per share up to $7, and that's a $2 increase. Our reported second quarter earnings per share was $2.37 compared to $3.47 in the second quarter of 2020. Our reported results include a negative mark-to-market timing difference of $0.24 per share. Adjusted earnings per share was $2.61 in the second quarter versus $1.88 in the prior year. Adjusted Core segment earnings before interest and taxes for EBIT was $550 million in the quarter versus $564 million last year, reflecting lower results in Agribusiness partially offset by improved performances in Refined Specialty Oils and Milling. Prior year results were negatively impacted by approximately $70 million in foreign exchange translation losses on U.S. dollar-denominated debt of the joint venture due to significant depreciation of the Brazilian real. For the six months ended Q2, income tax expense was $242 million compared to an income tax expense of $113 million in the prior year. Net interest expense of $48 million was below last year, primarily driven by lower average variable interest rates, partially offset by higher average debt levels due to increased working capital. We have achieved underlying addressable SG&A savings of $20 million, of which approximately 80% is related to indirect costs. For the most recent trailing 12-month period, our cash generation, excluding notable items and mark-to-market timing differences, was strong with approximately $2 billion of adjusted funds from operations. This cash flow generation was well in excess of our cash obligations over the past 12 months, allowing us to strengthen our balance sheet. Shortly after quarter end, we closed on the sale of our U.S. grain interior elevators, receiving additional cash proceeds of approximately $300 million and another $160 million for net working capital. After allocating $76 million to sustaining capex, which includes maintenance, environmental, health and safety and $17 million to preferred dividends, we had approximately $800 million of discretionary cash flow available. Of this amount, we paid $141 million in common dividends and invested $57 million in growth and productivity capex, leaving over $600 million of retained cash flow. For the trailing 12 months, adjusted ROIC was 18.4%, 11.8 percentage points over our RMI adjusted weighted average cost of capital of 6.6%. ROIC was 13%, seven percentage points over our weighted average cost of capital of 6% and well above our stated target of 9%. For the trailing 12 months, we produced discretionary cash flow of approximately $1.7 billion and a cash flow yield of nearly 24%. As Greg mentioned in his remarks, taking into account our strong Q2 results and our outlook, we have increased our full year adjusted earnings per share from $7.50 to at least $8.50, above last year's record of $8.30. In Agribusiness, full year results are expected to be up modestly from the previous expectations but still down from a very strong 2020. Additionally, the company expects the following for 2021: an adjusted annual effective tax rate in the range of 17% to 19%, which is down from our previous outlook of 20% to 22%; net interest expense in the range of $220 million to $230 million, which is down $10 million from our previous expectation; and capital expenditures in the range of $450 million to $500 million, which is up $25 million from our previous forecast; and depreciation and amortization of approximately $420 million. Consistent with our approach in June 2020, we introduced -- when we introduced our $5 baseline, we were defining our long-term average oilseed crush margin range by using the weighted average of our footprint over the past four years plus the trailing 12 months. This increases our average soy crush margin by $1 a metric ton to a range of $34 to $36 per metric ton and, more significantly, it increases our average softseed crush margin, which is more sensitive to oil demand, by about $10 a metric ton to a range of $48 to $52 per metric ton. The approximate 30% increase in Refined and Specialty Oils earnings is driven by a higher capacity utilization in North American refining and increased contribution from specialty oils due to improvement initiatives that are underway. Net interest expense is reduced by approximately $25 million compared to the $5 baseline, reflecting debt paydown from strong cash flow in 2021 and normalized working capital. It's important to note that our earnings baseline of $7 is not earnings powered. At a $7 per share baseline, we should generate approximately $1.4 billion of adjusted funds from operations. After allocating capital to sustaining capex and preferred and common dividends to shareholders, we should have about $800 million of discretionary cash available annually for reinvestment in the business or returns to shareholders. This is an increase of approximately $200 million of cash per year from our $5 baseline.

Taking into account our year-to-date results and based on what we can see now in the forward curves, we are increasing our outlook for the year and expect to deliver adjusted earnings per share of at least $8.50 for the full year 2021. With the changes we've made in our business as well as the fundamental shifts in the marketplace, we're taking that baseline earnings per share up to $7, and that's a $2 increase. Our reported second quarter earnings per share was $2.37 compared to $3.47 in the second quarter of 2020. Adjusted earnings per share was $2.61 in the second quarter versus $1.88 in the prior year. For the most recent trailing 12-month period, our cash generation, excluding notable items and mark-to-market timing differences, was strong with approximately $2 billion of adjusted funds from operations. As Greg mentioned in his remarks, taking into account our strong Q2 results and our outlook, we have increased our full year adjusted earnings per share from $7.50 to at least $8.50, above last year's record of $8.30. In Agribusiness, full year results are expected to be up modestly from the previous expectations but still down from a very strong 2020. Additionally, the company expects the following for 2021: an adjusted annual effective tax rate in the range of 17% to 19%, which is down from our previous outlook of 20% to 22%; net interest expense in the range of $220 million to $230 million, which is down $10 million from our previous expectation; and capital expenditures in the range of $450 million to $500 million, which is up $25 million from our previous forecast; and depreciation and amortization of approximately $420 million.

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In Q4, we saw growth of over 95%, which translates to 19% growth for the fiscal year. We saw broad-based growth this quarter, led by North America at over 140%. Greater China's currency-neutral growth of 9% was impacted amid marketplace dynamics with improving trends as we exited the quarter. The apps augmented reality lenses featuring yoga, dance, and [Indecipherable] led to more than 600 million Gen Z impressions in just the first two weeks. In Q4 sneakers grew over 90% in demand and saw nearly 80% growth in monthly active users. For the full year, our women's business drove outsized growth of 22% versus the prior year. Consumer insight from our female consumer drove the new Pegasus 38, which kept the best cushioning innovations from this popular franchise while improving and tailoring comfort and fit that she wants. The Peg 38 has sold extremely well and we continue to be energized by the potential we see in footwear for her. In fiscal '21, Jordan brand grew 31% propelling the business to nearly $5 billion. This growth was driven by continued energy for Jordan's most coveted icons including the AJ1 and AJ11 as well as new product dimensions. We are also increasingly are excited about our delivery of exclusive access for women through [Indecipherable] AJ1, which drove over 40% female buyers, more than 10 points higher than average AJ1 buyer profile. In Q4, Jordan also launched Zion Williamson's first signature shoe, the Zion 1 as well as the apparel collection. In running, this includes our Vaporfly NEXT% 2 for distance runners as well as our best-in-class track spikes. As I said earlier, our owned digital business has more than doubled over the past few years to over $9 billion. And at the center of our digital ecosystem is our suite of apps, which in Q4 reflected over 40% of our owned digital business. In Q4, we continue to see growth and member demand outpace total digital growth hitting a new record of $3 billion. In this fiscal year, we met the goals we set at our last Investor Day around membership of full year early and now have more than 300 million NIKE members. The combination of owned and partner digital revenue is now nearly 35% of our total business, more than three years ahead of our prior plan. In fact, we believe we will achieve 50% digital mix of business across owned and partnered in fiscal '25. Over the past 15 months we have navigated through this challenging environment with outstanding execution of our operational playbook. In the fourth quarter, we delivered over $12 billion of reported revenue, our largest quarter ever. Our NIKE Direct business is now approaching 40% of total NIKE brand revenue. NIKE Digital represents 21% of total NIKE brand revenue, a milestone we have reached several years ahead of our prior plan. And finally, our fiscal '21 EBIT margin reached 15.5%, reflecting more than 300 basis points of expansion when compared to fiscal '19. NIKE Inc. revenue increased 96% and 88% on a currency neutral basis. Even as physical retail reopened, we continue to see strong growth in NIKE Digital of 37% versus the prior year. Gross margin increased 850 basis points versus the prior year, driven by favorable NIKE Direct margins and the anniversary of higher costs including actions taken to manage supply and demand in the face of the COVID-19 pandemic. SG&A grew 17% versus the prior year due to higher levels of brand activity connected to return of sport. Our effective tax rate for the quarter was 18.6% compared to 1.7% for the same period last year due to decreased benefits from discrete items in the prior year and a shift in earnings mix primarily related to pandemic recovery. Fourth quarter diluted earnings per share was $0.93 and full year diluted earnings per share was $3.56, up 123% versus the prior year. In North America, Q4 revenue grew 141%. This also marked the first ever $5 billion quarter for North America, driven by notable improvements in full price sell through as the marketplace reopened and sport activity returned. NIKE Direct grew over 120% as NIKE owned stores returned to positive sales growth versus pre-pandemic levels. More importantly, NIKE Digital grew over 50% while physical traffic continued to improve across the marketplace. Member demand nearly doubled versus the prior year and the number of buying members grew roughly 80%. NIKE owned inventory declined 7% with double-digit declines in closeout inventory. In EMEA, Q4 revenue grew 107% on a currency neutral basis with strong growth across the region, including the UK and Ireland, France, Germany and Italy. NIKE Direct grew 57% despite government restrictions requiring nearly half of our NIKE owned stores to remain closed for the first two months of the quarter. NIKE Digital grew nearly 30% versus the prior year. In the fourth quarter, we also expanded the NIKE mobile app to more than 10 new countries across the region. During our last earnings call, I shared our expectation that inventory in EMEA would normalize in the first quarter of fiscal '22. In Greater China, Q4 revenue grew 9% on a currency neutral basis. NIKE Direct grew 2% in Q4, with strong growth in NIKE owned stores, partially offset by declines in NIKE Digital. And for the 6.18 consumer movement, our flagship store on Tmall ranked number one driving the highest demand across the sports industry. Q4 revenue grew 76% on a currency neutral basis with growth across all territories led by Japan, SOKO and Mexico. And Korea, grew double-digits this quarter on top of the 8% growth they delivered in the fourth quarter of last year. NIKE Digital grew more than 50% enabled and amplified by our membership offense. Earlier I mentioned NIKE Direct is approaching 40% of our brand business today. And we expect it to represent approximately 60% of the business in fiscal '25, led by growth in digital. And as John said earlier, we expect owned and partnered digital to achieve 50% business mix in fiscal '25 with NIKE own digital to represent 40% of the business. Our longer-term revenue outlook reflects higher growth expectations across several operating segments. Having said that we expect to invest in SG&A at a rate that drives leverage versus pre-pandemic levels, which averaged roughly 32% to 33% of revenue. We expect to deliver strong growth in free cash flow, maintain annual capital expenditures at roughly 3% of revenue, drive returns on invested capital above prior guidance at the low 30% range. In fiscal '22, we expect revenue to grow low double digits and surpassed $50 billion, reflecting strong consumer demand across our operating segments, as we lead with digital, scale NIKE owned physical retail concepts and grow with our strategic partners. We expect gross margin to expand 125 basis points to 150 basis points, reflecting our continued shift to a more profitable NIKE Direct business and sustained strong full price realization, partially offset by higher product costs, supply chain investments and the annualization of certain one-time benefits in fiscal '21. Foreign exchange is estimated to be a tailwind of roughly 70 basis points.

NIKE Inc. revenue increased 96% and 88% on a currency neutral basis. Gross margin increased 850 basis points versus the prior year, driven by favorable NIKE Direct margins and the anniversary of higher costs including actions taken to manage supply and demand in the face of the COVID-19 pandemic. Fourth quarter diluted earnings per share was $0.93 and full year diluted earnings per share was $3.56, up 123% versus the prior year. During our last earnings call, I shared our expectation that inventory in EMEA would normalize in the first quarter of fiscal '22. Our longer-term revenue outlook reflects higher growth expectations across several operating segments.

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Across our 27 million square foot portfolio, we estimate utilization is approximately 25% on average, which has increased since the end of the summer, but is below our first COVID revised outlook we provided in April. Plus, we further strengthened our fortress balance sheet this quarter by raising $400 million of 10.5 year bonds at an attractive rate. Nashville came in at number three, Charlotte number five, Tampa number six and Atlanta number 11. These five markets constitute more than 75% of our NOI. In the third quarter, we delivered FFO of $0.86 per share, which included a cumulative $0.05 impact from a debt extinguishment charge and noncash write-offs of straight-line rent due to the conversion of certain leases from fixed rent to percentage rent. Adjusting for these items, our FFO would have been $0.91 per share, a solid performance given the challenging economic environment. In-place cash rents are up 5.2% compared to a year ago, which helped drive same-property cash NOI of 2.2%, excluding the impact of temporary rent relief deals, even with average occupancy down. This performance was consistent with last quarter's 2.4%. As expected, occupancy dipped sequentially to 90.2%, driven predominantly by T-Mobile's expiration in Tampa. We expect occupancy to hold firm around 90% in the fourth quarter. We leased 660,000 square feet of second-gen office space with GAAP rent growth of 12.5% and cash rent growth of 5% and this was done with limited leasing capex, which drove net effective rents 7.2% higher than our prior 5-quarter average. New leasing volume rebounded to 190,000 square feet. And while still below our normal quarterly volume of 200,000 to 250,000 square feet, we're encouraged by the sequential uptick and improved level of prospect activity over the past month. We collected 99.7% of our rents in the third quarter and have collected 99.7% of October rents. Temporary rent deferrals equate to 1.2% of annual revenues, unchanged from last quarter, and repayments are occurring on schedule. To date, we've received repayment of approximately 25% of total deferrals and remain on track to be largely repaid by the end of 2021. These sales will bring Phase two dispositions to $151 million for the year at prices that are in line with our pre pandemic expectations. We're actively looking for opportunities to deploy capital, which is why we've kept our 2020 acquisition outlook range unchanged at $0 to $200 million. Our 1.2 million square foot $503 million development pipeline remains on budget and on schedule. We funded 73% to date and expect to fund most of the remaining $138 million by the end of next year. These deals bring our overall pre-leased rate to 79%. Upon stabilization, our pipeline will provide more than $40 million of NOI, of which more than $32 million is already secured through signed leases. Now to our updated 2020 FFO outlook of $3.59 to $3.61 per share. As I mentioned earlier, we incurred $0.05 of expenses this quarter due to debt extinguishment charges and noncash straight-line rent write-offs. In addition, fourth quarter dispositions will be dilutive by $0.01 per share. These items, which negatively impact our full year results by $0.06 in the aggregate were not in our prior outlook of $3.59 to $3.68. Excluding these items, the midpoint of our updated range is up $0.025 compared to the last quarter. During the quarter, we signed 660,000 square feet of second-generation leases with GAAP rent spreads of a positive 12.5%, cash rent growth of 5% and net effective rents that were 7% above our prior 5-quarter average, just short of the record set in the fourth quarter of 2019. With regard to new leasing, activity picked up in the third quarter with 190,000 square feet of new deals and 8,000 square feet of expansions. The renewal of the Federal Aviation Administration in Atlanta during the quarter finalized our last remaining expiration over 100,000 square feet during the next 2-plus years. With this renewal in hand, we now have only 18% of our portfolio expiring over the next nine quarters, which is down over 500 basis points compared to this point a year ago and our long-term historical average. As Ted discussed, rent relief deals held steady at 1.2% of our annual revenues. To that end and as a testament to the quality of our customers, our collections are strong with 99.7% of all rents collected in the third quarter and for the month of October. To this end, 25% of new deals in the quarter are new to market, coming from the West Coast, Midwest and the Northeast. Vacancy increased 20 basis points across our markets for the quarter. Specifically, in 2020, we've had seven customers ranging in size from 1,200 square feet to 4,300 square feet who did not renew leases in favor of working from home. To Charlotte, where after five years straight of positive quarterly absorption, the market recorded its first negative quarter in Q3, with the footnote that rents are up 3% and major inbound announcements, such as Centene's one million square feet and 3,000 new job announcements are just now getting going. Our portfolio there held firm and we signed 167,000 square feet. Let's now go down to the home of the Stanley Cup winners, the World Series competitors at the very least, Super Bowl hosters in Tampa, where rents have increased 4% year-over-year, and the market saw over 200,000 square feet of inbound inquiries from out of market prospects this quarter. The team signed 80,000 square feet of leases and toured several prospects through Avion and Midtown Tampa, where the mixed-use development is racing toward delivery next year and where our new 150,000 square foot office building is rising directly above an REI, next door to Whole Foods and luxury apartments and down the block from Shake Shack and two new hotels. In the third quarter, we delivered net income of $40.3 million or $0.39 per share and FFO of $91.7 million or $0.86 per share. As Ted mentioned, the quarter included a debt extinguishment charge and noncash straight-line credit losses, which reduced FFO by $0.05 per share. Excluding these two items, our FFO would have been $0.91 per share which compares favorably to $0.88 per share in last year's third quarter, also after excluding onetime items associated with the market rotation plan from a year ago. To put this in context, clean FFO is up about 3.5% year-over-year, with leverage essentially unchanged, while we've entered Charlotte with a trophy building, exited the majority of our Greensboro and Memphis properties and operated during a pandemic and severe recession. We issued $400 million of 10.5 year bonds with an interest rate of 2.65%. We used some of the proceeds to retire $150 million of our 2021 bonds early and repaid a $100 million term loan due in early 2022. After repaying the balance outstanding on our revolving line of credit and continuing to fund development, we ended the quarter with $119 million of cash on hand. Our net debt-to-adjusted EBITDAre ratio was steady at five times, and our leverage ratio including preferred stock is 36.6%. We have $138 million left to spend to complete our development pipeline and no debt maturities until June 2021. The combination of more than $700 million of current liquidity and projected fourth quarter disposition proceeds puts us in a strong position to fund our remaining capital obligations while leaving us ample room for future growth opportunities without the need to raise additional capital. We've updated our FFO range to $3.59 to $3.61 per share. This includes $6.5 million or $0.06 per share of dilution from the following items that weren't in our prior outlook: $3.7 million debt extinguishment charge, a $1.5 million noncash straight-line rent credit losses mostly due to conversion of leases from fixed rent to percentage rent and $1.3 million net impact of lower FFO from fourth quarter dispositions. Excluding these items, our FFO outlook would have been up $0.025 at the midpoint. Last quarter, we detailed $0.01 of dilution from items that weren't in our original FFO outlook. When adjusting for these nonoperational or noncash items that were not in our original outlook, the midpoint of our revised range would be $0.01 per share above the midpoint of our original FFO outlook that we provided in early February. As Ted mentioned, we expect to close $123 million in dispositions before year-end, which will bring 2020 dispositions to $151 million, excluding the $338 million of phase one market rotation dispositions we completed in the first quarter. We have maintained our original acquisition outlook of $0 to $200 million as we're currently evaluating certain opportunities. Third, we expect $40 million of NOI from our development pipeline upon completion and stabilization.

In the third quarter, we delivered FFO of $0.86 per share, which included a cumulative $0.05 impact from a debt extinguishment charge and noncash write-offs of straight-line rent due to the conversion of certain leases from fixed rent to percentage rent. Now to our updated 2020 FFO outlook of $3.59 to $3.61 per share. In the third quarter, we delivered net income of $40.3 million or $0.39 per share and FFO of $91.7 million or $0.86 per share. We've updated our FFO range to $3.59 to $3.61 per share.

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And earlier the -- earlier this week, we entered into a new outpatient rehab joint ventures with Cedars-Sinai in Los Angeles, California, contributing our 26 outpatient clinics in that market to the joint venture. 4 in the country, it's 29th consecutive year of being named among the nation's best. 13, Emory Rehabilitation Hospital in Atlanta at No. 26 and OhioHealth Rehabilitation Hospital in Columbus, Ohio at No. Overall, for the second -- revenue for the second quarter increased 26.9% to $1.56 billion and for year to date has increased 17.5% to $3.11 billion. Revenue in our critical illness recovery hospital segment in the second quarter increased 4.7% to $544 million, compared to $520 million in the same quarter last year. Patient days were down 1.4%, compared to the same quarter last year with 273,000 patient days in the quarter. Occupancy in our critical illness recovery hospital segment was 69% in the second quarter, compared to 72% in the same quarter last year and 69% in the second quarter of 2019. Revenue per patient day increased 6.4% to $1,986 per patient day in the second quarter. Case mix index in our critical illness recovery hospitals was 1.33 in the second quarter, compared to 1.32 in the same quarter last year. This cap in census represents a reduction of occupancy of approximately 1.5%. Revenue in our rehabilitation hospital segment in the second quarter increased 26.1% to $213 million, compared to $169 million in the same quarter last year. Patient days increased 24.8%, compared to the same quarter last year, with almost 105,000 patient days. Occupancy in our rehab hospitals was 85% in the second quarter, compared to 71% in the same quarter last year and 75% in the second quarter of 2019. Revenue per patient day increased $0.01 to $1,840 per day in the second quarter. Revenue in our outpatient rehab segment in the second quarter increased 67.8% to $280 million, compared to $167 million in the same quarter last year. Patient visits were up 79.2% with 2.4 million visits in the quarter, compared to 1.3 million visits in the same quarter last year and 2.2 million visits in the second quarter of 2019. Our revenue per visit was $102 in the second quarter, compared to $106 per visit in the same quarter last year. Revenue in our Concentra segment in the second quarter increased 46.1% to $456 million, compared to $312 million in the same quarter last year. For the centers, patient visits were up 40.9% to 3 million visits, compared to 2.15 million visits in the same quarter last year and 3.1 million visits in the second quarter of 2019. Revenue per visit in the centers increased to $125 in the second quarter, compared to $124 in the same quarter last year. I also want to recognize $98 million in other operating income in the second quarter related to the fund we received under the CARES Act Provider Relief for incremental costs and lost revenues incurred as a result of the COVID pandemic. Last year, we recognized $55 million in other operating income related to these funds. Adjusted EBITDA results for our Concentra segment included recognition of this income, including $32.3 million in the second quarter of this year and $800,000 in the same quarter last year. Total company adjusted EBITDA for the second quarter increased 91.3% to $342 million, compared to $178.8 million in the same quarter last year. Our consolidated adjusted EBITDA margin was 21.9% for the second quarter, compared to 14.5% for the same quarter last year. Our critical illness recovery hospital segment adjusted EBITDA was $72.9 million in the second quarter, compared to $89.7 million in the same quarter last year. Adjusted EBITDA margin for the segment was 13.4% in the second quarter, compared to 17.3% in the same quarter last year. Our rehabilitation hospital segment adjusted EBITDA increased 83.9% to $50.8 million in the second quarter, compared to $27.6 million in the same quarter last year. Adjusted EBITDA margin for the rehab hospital segment was 23.9% in the second quarter, compared to 16.4% in the same quarter last year. Our outpatient rehab adjusted EBITDA was $45.6 million in the second quarter, compared to adjusted EBITDA loss of $6.3 million in the same quarter last year. Adjusted EBITDA margin for the outpatient segment was 16.3% in the second quarter. Our Concentra adjusted EBITDA increased 230.3% to $137.1 million in the second quarter, including the $32 million in CARES Act payments recognized in the quarter. This compares to $41 million in the same quarter last year, which included $800,000 in CARES' payment recognition. Adjusted EBITDA margin was 30% in the second quarter, compared to 13.3% in the same quarter last year. Excluding the $32.3 million of CARES Act payments, the adjusted EBITDA margin would have been 23% for the quarter. Earnings per common share increased 213% to $1.22 for the second quarter, compared to $0.39 for the same quarter last year. Excluding the CARES Act income, earnings per share would have been $0.72 in the second quarter this year and $0.09 per share in the same quarter last year. The final rule includes a 2.3% increase in the standard payment amount, which is slightly less than the 2.5 % included in the proposed rule. In addition, the high-cost outlier threshold increased by 20%, which was slightly worse than what was in the proposed rule. The final rule included a 2.2% increase in the federal base rate, again, slightly less than the 2.5% increase outlined in the proposed rule. The high-cost outlier threshold was increased 21% and the MS-LTC-DRG relative weights and expected length of stays were also updated in the final rule. For the second quarter, our operating expenses, which include our cost of services and general administrative expense were $1.33 billion or 84.9% of revenue. For the same quarter last year, operating expenses were $1.12 billion and 90.5% of revenues. Cost of services were $1.29 billion for the second quarter. This compares to $1.08 billion in the same quarter last year. As a percent of revenue, cost of services were 82.6% in the second quarter. This compares to 87.8% in the same quarter last year. G&A expense was $35.7 million in the second quarter. This compares to $33.5 million in the same quarter last year. G&A as a percent of revenue was 2.3% in the second quarter, compared to 2.7% of revenue for the same quarter last year. As Bob mentioned, total adjusted EBITDA was $342 million, and adjusted EBITDA margin was $21.9 million for the second quarter. This compares to total adjusted EBITDA of $178.8 million and an adjusted EBITDA margin of 14.5% in the same quarter last year. Excluding the CARES Act income recognized in the quarter, adjusted EBITDA margins would have been 15.6% in the second quarter this year and 10% in the same quarter last year. Depreciation and amortization was $51 million in the second quarter. This compares to $52.3 million in the same quarter last year. We generated $11.8 million in equity and earnings of unconsolidated subsidiaries during the second quarter. This compares to $8.3 million in the same quarter last year. Interest expense was $33.9 million in the second quarter. This compares to $37.4 million in the same quarter last year. We recorded income tax expense of $65.7 million in the second quarter this year, which represents an effective tax rate of 25.1%. This compares to the tax expense of $23.3 million and an effective rate of 25.7% in the same quarter last year. Net income attributable to noncontrolling interest were $31.3 million in the second quarter. This compares to $15.8 million in the same quarter last year. Net income attributable to Select Medical Holdings was $164.9 million in the second quarter and earnings per common share were $1.22. At the end of the second quarter, we had $3.4 billion of debt outstanding and over $800 million of cash on the balance sheet. Our debt balance at the end of the quarter included $2.1 billion in term loans, $1.2 billion in 6.25% senior notes and $70 million of other miscellaneous debt. Net leverage based on the credit agreement EBITDA dropped to 2.51 times at the end of the second quarter. This is down from 3.02 times at the end of the first quarter and 3.48 times at the end of the year. We increased the availability on Select's revolving loan from $450 million to $650 million and simultaneously canceled the $100 million Concentra revolving loan, which was set to mature in March of next year. Operating activities provided $123.1 million of cash flow in the second quarter. Our days sales outstanding, or DSO, was 54 days at June 30, 2021. This compared to 56 days at both March 31, 2021 and December 31, 2020. During the second quarter, we repaid $73 million of Medicare advances. And as of June 30, 2021, we have $251 million remaining on the balance sheet. Investment activities used $35.7 million of cash in the second quarter. The use of cash included $36.7 million in the purchase of property and equipment and $8.4 million acquisition and investment activity in the quarter. We also generated $9.4 million in proceeds from the sale of assets in the quarter. Financing activities used $34.3 million of cash in the second quarter. This included $16.9 million in dividend payments, $9.8 million in net payments and distributions to noncontrolling interest, and $6 million in repayments of other debt in the quarter. Our total available liquidity at the end of the second quarter was almost $1.4 billion, which includes the $800 million of cash, and close to $595 million in revolver availability under the Select credit agreement. For the full year of 2021, we now expect revenue in the range of $5.85 billion to $6.05 billion. Expected adjusted EBITDA to be in the range of $970 million to $1 billion and expected earnings per common share to be in the range of $2.91 to $3.08.

Earnings per common share increased 213% to $1.22 for the second quarter, compared to $0.39 for the same quarter last year. Net income attributable to Select Medical Holdings was $164.9 million in the second quarter and earnings per common share were $1.22. For the full year of 2021, we now expect revenue in the range of $5.85 billion to $6.05 billion. Expected adjusted EBITDA to be in the range of $970 million to $1 billion and expected earnings per common share to be in the range of $2.91 to $3.08.

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After being separated for more than 100 days from her husband, Steve, who is suffering from early onset Alzheimer's, Mary Daniel was focused on finding a way to reunite with him. Senior Lifestyle's total orderly rental obligation to LTC is approximately $4.6 million. For the quarter ended June 30th, 2020, we received a total of approximately $1.8 million. In July, we received approximately $1.1 million. While recent rent payments have been trending up, at June 30th, Senior Lifestyle owed us $2.8 million for the second quarter of 2020, which is reflected in our receivable balance as of that date and is covered by an undrawn letter of credit that we hold. In cooperation with Senior Lifestyle, we are evaluating our options for the portfolio, which may include seeking new operators for the 23 properties and/or pursuing sales of some of the 23. Our current Senior Lifestyle is one of only two operators where income and asset concentration exceeds 10%. Primarily due to this write-off, total revenues decreased $17.8 million from last year's second quarter. Interest income increased $469,000 in the 2020 second quarter due to the funding of additional loan proceeds and expansion and renovation projects. Income from unconsolidated joint ventures decreased $128,000 in 2Q 2020 due to mezzanine loan payoffs and reduced income from our preferred equity investment in a joint venture with an affiliate of Senior Lifestyle. During the fourth quarter of last year, we recognized a $5.5 million impairment charge related to our $25 million investment in the joint venture. Accordingly, we received partial liquidation proceeds of $17.5 million and recognized a loss on liquidation of unconsolidated joint ventures of $620,000. We have a receivable balance of $1 million related to additional proceeds that we anticipate receiving throughout the second half of 2020. Interest expense decreased $164,000 due to lower outstanding balances and lower interest rates under our line of credit in 2Q 2020 partially offset by the sale of $100 million of senior unsecured notes in the fourth quarter of 2019. Net income available to common shareholders decreased $18.6 million due primarily to the write-off of Senior Lifestyle straight line rent receivable and lease incentive balances as well as the loss on the liquidation of our unconsolidated JV. NAREIT FFO was $0.31 per diluted share for the second quarter of 2020 and $0.75 per diluted share for the same period last year. Excluding the non-recurring items already discussed in the current period, FFO per share was $0.76 this quarter compared with $0.75 in last year's second quarter. During the 2020 second quarter, we received $17.5 million from the sale of the properties in the JV with an affiliate of Senior Lifestyle as previously discussed and $2.1 million related to the partial paydown of an outstanding mezzanine loan. We funded $2 million of additional proceeds under an existing mortgage loan with an affiliate of Prestige Healthcare, which is secured by four skilled nursing centers with a total of 501 beds. The additional proceeds bear interest at 8.89% increasing 2.25% annually thereafter. We also funded $7.4 million in development and capital improvement projects on properties we own, $200,000 under mortgage loans and paid $22.4 million in common dividends. At June 30, we own one property under development with remaining commitments of $7.4 million. We also have remaining commitments under mortgage loans of $2.7 million related to expansions and renovations on four properties in Michigan. At June 30, we had $50.4 million in cash and cash equivalents. We currently have over $510 million available under our line of credit and $200 million under our ATM program providing LTC with total liquidity of approximately $760 million. At the end of the 2020 second quarter, our credit metrics compared favorably to the healthcare REIT industry average with net debt to annualized adjusted EBITDA for real estate of 4.3 times and annualized adjusted fixed charge coverage ratio of 4.9 times and a debt to enterprise value of 32%. The effect of the economic fallout from COVID-19 on the real estate capital markets has resulted in our debt to enterprise leverage metric being higher than our long-term target of 30%. However at 4.3 times, we are still comfortably below our net debt to annualized adjusted EBITDA for real estate target of below 5 times. For the second quarter, rent deferrals were less than $1 million or approximately 2% of second quarter rent. Approximately $277,000 of this deferred rent has been repaid. Accordingly, at June 30, there were $653,000 in rent deferrals outstanding or about 1.5% of rent. In July, we received two deferral requests from operators and granted one in the amount of $80,000 for July and the other totaling $280,000 for August and October rent. Our Brookdale leases, which cover 35 properties in eight states are the only significant lease renewals through 2022. We have extended a $4 million capital commitment to Brookdale, which is available through December 31st, 2021 at a 7% yield. Q1 trailing 12-month EBITDARM and EBITDAR coverage using a 5% management fee was 1.39 times and 1.17 times respectively for our assisted living portfolio and 1.76 times and 1.31 times respectively for our skilled nursing portfolio. Excluding Senior Lifestyle from our assisted living portfolio, EBITDARM and EBITDAR coverages increased to 1.49 times and 1.26 times. For our private pay portfolio, occupancy is as of that date specifically and for our skilled portfolio, occupancy is the average for the month-to-date and because our partners have provided July data to us on a voluntary and expedited basis before the month has closed, the information we are providing encompasses approximately 72% of our total private pay units and approximately 93% of our skilled nursing beds. Private pay occupancy at March 31 was 83% and 77% at June 30 and July 17th. For skilled nursing, average monthly occupancy for the same dates respectively was 80%, 72% and 71%. Lynne started Juniper in 1988 and has grown the company to one of the premier regional senior living companies in the United States. Today, Juniper operates 21 communities in three states, Colorado, New Jersey, and Pennsylvania. Of these 21, Juniper leases two in Colorado and three in New Jersey from LTC. On March 11th, they were 1,100 confirmed cases in the U.S. and it was on that day that the WHO declared COVID-19 to be a global pandemic. By the end of March, there were 164,000 confirmed cases with over 3,100 deaths. Four months later, as you all know, we stand at 150,000 Americans dead with just 1,200 -- with an additional 1,200 being added yesterday. I want to now tell you a little bit about our 30,000 foot view of our strategy. Roughly 50% of the people tested were positive, but most notably, of these, 70% to 94% were asymptomatic. 72% of residents to be specific and 94% of our associates. I want to also note that the majority of our communities tested 100% negative and in those communities, what we did is essentially sheltered everyone, including our staff in place. In terms of disinfecting, we went green, which is something that Juniper has done repeatedly over our 30 years. As of July 17th, we had communicated 1,980 different times with all of our residents families and their powers of attorney as appropriate. Well, in terms of digital leads, which is major source of leads at this point in time, our July 2020 digital leads are up 33% over April of 2020 and our July 2020 digital leads are up 48% over July 2019. We have expanded telehealth for mental healthcare as well and we've continued to increase access to the Internet and smart devices and just so you know, we have done over 12,000 virtual visits with family since the start of the pandemic. We've added a variety of different ways for people to meet with their healthcare providers online and have done over 1,400 window visits.

NAREIT FFO was $0.31 per diluted share for the second quarter of 2020 and $0.75 per diluted share for the same period last year.

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E-commerce led the way, growing 84% during the quarter as our global digital strategy continued to deliver results. Our two largest brands exceeded expectations with Merrell up nearly 25% year-over-year, and Saucony up nearly 60% in the quarter. Both brands easily beat their 2019 Q1 revenue levels with Saucony up over 75% versus 2019. The Company's international business was up 40% with every region growing over 35%. As we look to the rest of the year, demand for our brands is very strong and we've raised our full year guidance on the strength of this demand and robust outlook. In the first quarter, the Wolverine Michigan group revenue was up 20.1% on a reported basis and up 18.2% on a constant currency basis. The Wolverine Boston group revenue was up 10.3% on a reported basis and up 8.2% on a constant currency basis. Saucony grew revenue nearly 60% and expanded operating margin nearly 800 basis points in Q1, a great start to what we anticipate will be a spectacular year for the brand. Saucony.com revenue increased by over 150% driven by compelling digital storytelling and impactful product launches. The new Guide 14 and Kinvara 12 drove significant growth with the Guide more than doubling year-over-year. Saucony also grew its trail running business with the launch of the Peregrine 11, which received the coveted Runner's World Editors' Choice Award. The new Jazz Court, a sneaker made with 100% natural materials and zero plastic launched at the end of Q1, driving substantial buzz in social media and immediately becoming the brand's top-selling product on Saucony.com. Both the new Ride 14 and Freedom 4 launched within the last few weeks and are off to a fast start. The brand will also introduce the new Triumph 19, a follow up to the award winning predecessor. Revenue grew nearly 25% in the quarter. North America grew double-digits, including DTC with Merrell.com up approximately 135% and Merrell stores comping up 30%. Merrell kicked off its Future 40 campaign at the start of the quarter, celebrating the brand's 40th anniversary and amplifying its inclusive commitment to sharing the power of the outdoors with everyone. The brand announced a significant partnership with Big Brothers Big Sisters of America aiming to provide greater accessibility to the outdoors for nearly 200,000 youth. In Q1, performance footwear grew by nearly 30% as the brand continued to advance its vision of faster and lighter footwear for the trail. The Antora 2 and Nova 2 trail runners also continued to perform exceptionally well in the quarter. Merrell's lifestyle business grew approximately 20% in the quarter driven by the growth of the classic Jungle Moc and newer hydro Moc which more than tripled year-over-year. Our work business, which represented almost 20% of our revenue in Q1 also delivered significant growth led by Wolverine, up nearly 30% and Cat footwear up over 30% with strong contributions from a couple of our smaller brands. Revenue was down approximately 10% in Q1, a continued sequential improvement compared to prior quarters. Despite more than $10 million of expected revenue which slid into Q2. During the quarter, Sperry.com was up 40% and Sperry stores grew more than 20%. The brand's full price business remains very healthy with gross margin expanding nearly 500 basis points in Q1. First quarter revenue of approximately $511 million represents growth of 16% compared to last year. Adjusted gross margin improved 290 basis points versus the prior year to 44.3%, due to our continued e-commerce expansion and favorable wholesale product mix. Adjusted selling, general and administrative expenses of $174.4 million in the quarter were about $23 million more than last year, primarily due to the higher mix of DTC revenue, $8 million of additional investment in digital e-commerce marketing and more normalized incentive compensation costs. Q1 adjusted operating margin was 10.2%, an improvement of 330 basis points over last year, as a result of healthy operating leverage. Net interest expense was up $1.9 million and the effective tax rate was 16%. Adjusted diluted earnings per share were $0.40 compared to $0.28 in the prior year. Reported diluted earnings per share were $0.45 versus $0.16 last year, and reflect a partial settlement of certain insurance claims related to our ongoing legacy litigation, offset by a legal defense costs and specific COVID related costs. At the end of the quarter, inventory was down approximately 21% year-over-year. In Q1, we generated $26.3 million of cash flow from operating activities. The Company finished the quarter with $506 million less debt compared to the prior year and total liquidity of approximately $1.2 billion, including $365 million of cash on hand and nearly $800 million of revolver capacity. Our bank defined leverage ratio continued to improve, ending the quarter at a low 1.5 times. As a result the Company now expects fiscal 2021 revenue in the range of $2.24 billion to $2.30 billion. Growth of 25% to 28% compared to the prior year. At the high end of the range, this is a raise of $50 million from our original outlook and nicely exceeds 2019 revenue. We now expect reported diluted earnings per share in the range of $1.70 to $1.85 and adjusted diluted earnings per share in the range of $1.95 to $2.10. First, the brand's new product and marketing stories are resonating well with consumers including Sperry's Float, Merrell's Moab Speed and Moab Flight and Saucony's Guide 14, new Endorphin collections and several other new launches. Second, our ongoing investments in digital capabilities continues to fuel e-commerce growth, which is exceeding our expectations at this early stage in the year as we track toward our bold revenue goal of $500 million through our brands.com in 2021. The Company's strong position is a testament to our team's tremendous vigilance, focus and hard work over the last 15 months.

As we look to the rest of the year, demand for our brands is very strong and we've raised our full year guidance on the strength of this demand and robust outlook. Adjusted diluted earnings per share were $0.40 compared to $0.28 in the prior year. Reported diluted earnings per share were $0.45 versus $0.16 last year, and reflect a partial settlement of certain insurance claims related to our ongoing legacy litigation, offset by a legal defense costs and specific COVID related costs. As a result the Company now expects fiscal 2021 revenue in the range of $2.24 billion to $2.30 billion. Growth of 25% to 28% compared to the prior year. We now expect reported diluted earnings per share in the range of $1.70 to $1.85 and adjusted diluted earnings per share in the range of $1.95 to $2.10.

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Though our new car inventory levels continue to be challenged due to the chip shortage, our team delivered strong results and enabled us to deliver an impressive gross margin of 20%, an all-time record and an expansion of 180 basis points versus the third quarter last year. We've also stayed disciplined in managing expenses, resulting in adjusted SG&A as a percentage of gross profit of 55.3%, a 580 basis point improvement versus prior year. Our total revenue for the quarter was up 30% year-over-year, and total gross profit was up 43%. Our net leverage ratio ended this quarter at 1.2 times. Same store revenue growth, assuming 2020 annualized revenue for Park Place, is up 10% and is exceeding expectations. With another acquisition still under contract and expected to close in the fourth quarter as well, in total, in 2021, we anticipate that we will close on $6.6 billion of annualized revenue from acquisitions. Our new average gross profit per vehicle was $4,808 up $2,369 or 97% from the prior year period. At the end of September, our total new vehicle inventory was $121.9 million, and our day supply was at 12 days, down 35 days from the prior year. Our used retail volume increased 27%, while gross margin was 8.4%, representing an average gross profit per vehicle of $2,402. As a result of our performance, our gross profit was up 45%. Our used vehicle inventory ended the quarter at $236.4 million, which represents a 28-day supply, down seven days from the prior year. Our used to new ratio for the quarter was 113%. Our strong, consistent and sustainable growth in F&I delivered an increase of $155 to $1,955 per vehicle retail from the prior quarter. In the third quarter, our front-end yield per vehicle increased $1,400 per vehicle to an all-time record of $5,487. Our parts and service revenue increased 10% in the quarter. Though warranty revenue dropped 18%, our customer paid revenue continues its healthy recovery, posting a 13% growth. Overall, our total fixed gross profit increased 10%, while total fixed margin was 60.9%. In Q3, we had over 6.3 million unique visitors, a 12% increase versus Q3 2020. We achieved over 143,000 online service appointments, an all-time record and a 12% increase versus Q3 2020. We sold 6,000 vehicles through Clicklane in Q3, of which 47% of them were new vehicles and 53% used. 93% of our transactions this quarter were with customers that were new to Asbury's dealership network. Average transaction time continues to be consistent with previous quarter, eight minutes for cash deals and 14 minutes for finance deals. Total front-end yield of $5,400. Total front-end yield of $4,396 on trades taken through Clicklane. We continue to expect annualized volume through Clicklane of approximately 30,000 vehicles by year-end. Overall, compared to the third quarter of last year, our actions to manage gross profit and control expenses resulted in a third quarter adjusted operating margin of 8.5%, an increase of 109 basis points above the same period last year and an all-time record. Adjusted operating income increased 69% to $204.5 million, a third quarter record. And adjusted net income increased 81% to $143.6 million, another third quarter record. Net income for the third quarter 2021 was adjusted for acquisition expenses of $3.5 million or $0.13 per diluted share and a gain on dealership divestitures of $8 million or $0.31 per diluted share. Net income for the third quarter of 2020 was adjusted for a gain on dealership divestiture of $24.7 million or $0.96 per diluted share, acquisition costs of $1.3 million or $0.05 per diluted share and $700,000 or $0.03 per diluted share for a real estate-related charge. Our effective tax rate was 23.7% for the third quarter of 2021 compared to 24.8% in 2020. Floor plan interest expense for the quarter decreased by $1.5 million over the prior year, driven by lower inventory levels. With respect to capital deployed this quarter, we acquired a Subaru store in Colorado, utilizing approximately $16 million of our cash on the balance sheet. In addition, we spent approximately $15 million on capital expenditures, and we repaid approximately $9 million of debt. Also as part of our strategy to optimize our portfolio, we divested of our BMW store in Charlottesville, resulting in proceeds of $18 million, net of its mortgage payoff. As a result of our operational performance, our balance sheet is quite healthy as we ended the quarter with approximately $780 million of liquidity comprised of cash, floor plan offset accounts and availability on both our used line and revolving credit facility. Also, at the end of the quarter, our net leverage ratio stood at 1.2 times, well below our targeted net leverage of three.

Our total revenue for the quarter was up 30% year-over-year, and total gross profit was up 43%. We sold 6,000 vehicles through Clicklane in Q3, of which 47% of them were new vehicles and 53% used. With respect to capital deployed this quarter, we acquired a Subaru store in Colorado, utilizing approximately $16 million of our cash on the balance sheet.

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Earnings for the quarter were $1.57 per share compared to $0.65 in the prior year quarter. Adjusted earnings per share increased to $1.83 in the quarter compared to $1.13 in 2020. Net sales in the quarter were up 12% from the prior year, primarily due to increased volumes across all segments, favorable foreign currency translation and the pass through of higher material costs. Segment income improved to $433 million in the quarter compared to $298 million in the prior year, primarily due to higher sales unit volumes, favorable price cost mix and the non-recurrence of charges for tinplate carryover costs that we saw in 2020. As outlined in the release, we currently estimate second quarter 2021 adjusted earnings of between $1.70 and $1.80 per share. We are maintaining our full year adjusted earnings guidance of $6.60 to $6.80 per share. Assuming the sale of the European tinplate business closures at the beginning of the third quarter, we expect that the earnings dilution impact over the balance of the year of about $0.50 per share will be offset by improved results in the remaining operations as compared to our original guidance. Our expected tax rate for the year remains at 24% to 25%. As detailed in last night's release, we expect to commercialize 6 billion units a beverage can capacity in 2021 with further investments being made to bring on at least that much more in 2022. Before reviewing the operating segments we thought it would be well to remind you that delivered aluminum in North America sit around $1.28 a pound versus $0.75 a pound last year at this time, so an increase of 70%. In Americas Beverage, demand remained strong across all of the markets we serve with overall segment volumes up 9% in the first quarter. While the CMI no longer publishes industry volumes, we can tell you that our North American volumes increased 12% in the first quarter compared to the same prior year period. Unit volumes in European Beverage increased 6% in the first quarter as growth across Northwest Europe and the Mediterranean offset softness in Saudi Arabia. Sales unit volumes in European Food increased 6% in the first quarter as the business continues to benefit from strong consumer demand for packaged food. $5 million of favorable foreign exchange and the negative impact of tinplate carryover included in the prior year first quarter. Asia-Pacific reported 8% volume growth in the first quarter as both Southeast Asia up 5% and China up more than 30%, continue to show recovery from the pandemic related shutdowns. Excluding foreign exchange, results for Transit Packaging were in line with the prior year with industrial demand surging, activity remains extremely strong in Transit and we expect this segment will post full year segment income growth of approximately 25% in 2021 over 2020.

Earnings for the quarter were $1.57 per share compared to $0.65 in the prior year quarter. Adjusted earnings per share increased to $1.83 in the quarter compared to $1.13 in 2020. As outlined in the release, we currently estimate second quarter 2021 adjusted earnings of between $1.70 and $1.80 per share. We are maintaining our full year adjusted earnings guidance of $6.60 to $6.80 per share. Asia-Pacific reported 8% volume growth in the first quarter as both Southeast Asia up 5% and China up more than 30%, continue to show recovery from the pandemic related shutdowns.

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Briefly reviewing our operating results for the 4th quarter, revenue grew 10% as reported, 7% on a constant currency basis and adjusted, adjusted earnings per share grew 14%. For the full year, revenue declined 2% and adjusted earnings per share was up 1%. Our largest market category pharma was the primary growth driver in the quarter with 15% growth. Our industrial market grew 5% while academia and government declined 15%. On a constant currency basis, sales in Asia were up 12% with China, up 19%. Meanwhile, sales in the Americas grew 3% for the US growing 4% and European sales grew at 6%. From a product perspective, our Waters branded products and services grew approximately 8% while TA declined by around 1% on a constant currency basis. Services grew 10% while consumables business grew approximately 14% driven largely by global pharma strength, including sales of our recently launched PREMIER Columns, which performed exceedingly well in the first quarter on the market. Combined these, comprised approximately 10% to 15% of TA's total revenues. Now for the year, our pharmaceutical market category achieved 1% growth with the US, Europe, and India all seeing positive growth. Industrial declined 3% for the full year and academic and government declined 16%. Notably, our pharma market category grew 10% in the second half compared to the first half decline of 8% owed in part to strength in small molecules, the industry recovered from lock-downs. Industrial also grew in the second half at 4% while academic and government declined 12% compared to the first half declines of 10% and 22% respectively. Geographically for the year, Asia sales were down 4% with China -- China sales down 8%. Sales in Americas were down 4%; for the US, down 2%. Europe sales were up 2%. Notably, all our major geographies grew in the second half of the year with the US up 4% and Europe up 6% following first half declines of 9% and 3% respectively. China market grew in the second half, up 11%, reversing much of its sharp 31% decline in the first half of the year. This peaked in the 4th quarter were COVID revenues contributed an estimated 1 to 2 percentage points to the growth, driven by those pharmaceutical customers developing COVID vaccines and therapeutics who saw meaningfully higher growth than manufacturers that don't have COVID-related programs. In the 4th quarter, we recorded net sales of $787 million, an increase of approximately 7% in constant currency. Currency translation increased sales growth by approximately 3% resulting in sales growth of 10% as reported. For the full year, sales declined about 2% in constant currency and as reported. Looking at product line growth, our reoccurring revenue, which represents the combination of precision chemistry products and service revenue increased by 11% in the quarter while instrument sales increased 4%. For the full year, reoccurring revenue grew 3% while instrument sales declined 9%. Chemistry revenue were up 14% in the quarter, driven by strong pharma growth. On the service side of our business, revenues were up 10%, as customers continue to reopen labs, catch up on performance maintenance in professional services, and repair visits. Breaking 4th quarter product sales down further, sales related to Waters' branded products and services grew 8% while sales of TA-branded products and services declined 1%. Combined LC and LCMs instrument sales were up 5% while TA system sales declined 4%. Gross margin for the quarter was 59.2%, an increase compared to the 58.2% in the 4th quarter of 2019, primarily due to the higher sales volume in FX. On non -- on a full year basis, gross margin was 57.4% compared to 58% in the prior year on lower overall sales volumes in 2020. Moving down the 4th quarter P&L, operating expenses increased by approximately 6% on a constant currency basis and 8% on a reported basis. For the year, operating expenses were 1% lower before currency translation and flat after. In the quarter and for the full year, our effective operating tax rate was 14.9% and 14.8% respectively, an increase from last year at the comparable period included some favorable discrete items. Net interest expense was $7 million for the quarter, a decrease of about 3 million, as anticipated on lower outstanding debt balances. Our average share count came in at 62.5 million shares, a reduction of approximately 3% or about 2 million shares lower than in the 4th quarter of last year. Our non-GAAP earnings per fully diluted share for the 4th quarter increased 40% to $3.65 in comparison to the $3.20 last year. On a GAAP basis, our earnings per fully diluted share increased to $3.49 compared to $3.12 last year. For the full year, our non-GAAP earnings per fully diluted share were up 1% at $9.05 per share versus $8.99 last year. On a GAAP basis, full year earnings per share were $8.36 versus $8.69 in 2019. In the 4th quarter of 2020, free cash flow grew 52% year-over-year to $240 million after funding $47 million of capital expenditures. Excluded from free cash flow was $19 million related to the investment in our Taunton precision chemistry operation. In the 4th quarter, this resulted in $0.30 of each dollar of sales converted into free cash flow. For the full year in 2020, free cash flow generation was $726 million after funding $172 million of capital expenditures. This represents a 26% increase and $0.31 per dollar of sales converted into free cash flow. Excluded from free cash flow was $70 million related to our investment in our Taunton chemistry operations and a $38 million transition tax payment related to the 2017 US tax reform. In the 4th quarter, accounts receivables days sales outstanding came in at 70 days, down seven days compared to the 4th quarter of last year. Inventories decreased by 16 million in comparison to the prior quarter -- prior year quarter, reflecting stronger revenue growth in revised production schedules. We ended the quarter with cash and short-term investments of $443 million and debt of 1.4 billion on our balance sheet at the end of the quarter. This resulted in a net debt position of $913 million and a net debt to EBITDA ratio of about 1.1 times at the end of the 4th quarter. As of today, we have 1.5 billion remains available credit program for share repurchases. We had a 1% tailwind from COVID-related revenue in 2000, three-quarters of which was in the second half of the year. We expect a similar revenue impact in 2021, including a 1% to 2% growth tailwind in Q1. These dynamics support full-year 2021 guidance for constant currency sales growth of 5% to 8%. At current rates, the positive currency translation to 2021 sales growth is expected to be 1 to 2 percentage points. Gross margin for the full year is expected to be in the range of 57, 5% to 58.9%. Accordingly, we expect 2021 operating margins of 28% to 29% based on a combination of growth investments, normalization of COVID-related cost actions, and disciplined expense controls. Moving now below the operating income line, other key assumptions for full-year guidance are net interest expense of 35 million to 38 million, a full year tax rate of between 15% and 16%, which includes our new five-year tax agreement with Singapore that will expire in March 2026, a restart of our share repurchase program in 2021 that will result in an average diluted 2021 share count of 61 to 61.5 million shares outstanding. Rolling all of this together and on a non-GAAP basis, full year 2021 earnings per fully diluted share are projected in the range of $9.32 to $9.57, which assumes a positive currency impact on full year earnings-per-share growth of approximately 3 percentage points. Looking at the first quarter of 2021, we expect constant currency sales growth to be 7% to 10%. At today's rate, currency translation is expected to increase first quarter sales growth by approximately 3 percentage points. First quarter non-GAAP earnings per fully diluted share are estimated to be in the range of $1.50 to $1.60. At current rates, the positive currency impact on first quarter earnings-per-share growth is expected to be approximately 15 percentage points.

Briefly reviewing our operating results for the 4th quarter, revenue grew 10% as reported, 7% on a constant currency basis and adjusted, adjusted earnings per share grew 14%. In the 4th quarter, we recorded net sales of $787 million, an increase of approximately 7% in constant currency. Our non-GAAP earnings per fully diluted share for the 4th quarter increased 40% to $3.65 in comparison to the $3.20 last year. On a GAAP basis, our earnings per fully diluted share increased to $3.49 compared to $3.12 last year. These dynamics support full-year 2021 guidance for constant currency sales growth of 5% to 8%. Rolling all of this together and on a non-GAAP basis, full year 2021 earnings per fully diluted share are projected in the range of $9.32 to $9.57, which assumes a positive currency impact on full year earnings-per-share growth of approximately 3 percentage points. Looking at the first quarter of 2021, we expect constant currency sales growth to be 7% to 10%. At today's rate, currency translation is expected to increase first quarter sales growth by approximately 3 percentage points. First quarter non-GAAP earnings per fully diluted share are estimated to be in the range of $1.50 to $1.60.

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On a consolidated basis, first quarter revenue was $392 million, with consolidated new trailer shipments of 9670 units during the quarter. Gross margin was 12% of sales during the quarter, while operating margin came in at nine -- at 2.9%. Additionally, I'd like to reference the 2020 initiatives to lower our cost structure by $20 million, of which $15 million was SG&A. SG&A was lower year-over-year in Q1 by $4.7 million. Additionally, about 25% of our savings initiatives are being realized as reductions in cost of goods sold. Operating EBITDA for the first quarter was $26 million or 6.7% of sales. Finally, for the quarter, net income was $3.2 million or $0.06 per diluted share. From a segment perspective, commercial trailer products generated revenue of $248 million and operating income of $20.9 million. Average selling price for new trailers within CTP was roughly $26,000, which represents a 7.5% decrease versus Q1 of 2020 as a result of meaningfully higher mix of pump trailers, where prices tend to be significantly lower than 53-foot driving trailers. Diversified Products Group generated $74 million of revenue in the quarter with operating income of $6.1 million and segment EBITDA margin that hit 14.3%; which was the best level since 2016. Average selling price for new trailers within DPG was roughly $72,000, which represents a 4% increase versus Q1 of 2020. Final mile products generated $77 million of revenue as this business ramps to meet stronger market demand. FMP experienced an operating loss of $4 million, which was expected in our prior quarterly guidance. We are encouraged that FMP's EBITDA moved back to positive territory during the first quarter with a gain of $621,000 as improved volumes allowed us to better leverage our fixed cost during the quarter. Year-to-date operating cash flow was negative $22 million. We invested roughly $4 million via capital expenditures, leaving negative $27 million of free cash flow. We continue to target $35 million to $40 million in capital spending for 2021. With regard to our balance sheet, our liquidity or cash plus available borrowings as of March 31 was $337 million of $169 million of cash and $168 million of availability on our revolving credit facility; which is fully untapped. For capital allocation during the first quarter, we utilized $18.2 million to repurchase shares, pay our quarterly dividend of $4.3 million and invested $4.2 million in capital projects. Furthermore, in April, we made a voluntary $15 million payment on our term loan. We expect revenue of approximately $1.95 to $2.05 billion. SG&A as a percent of revenue is expected to be in the lower six range for the full year, and we remain on track to sustain the reduction in our cost structure by $20 million relative to 2019, with around $15 million of that cost out, residing within SG&A. Operating margins are expected to be in the high 3% range at the midpoint. We expect revenue in the range of $450 million to $480 million, up 17% at the midpoint sequentially versus Q1, with new trailer shipments of 10,500 to 11,500 as we look to keep increasing production throughout the year. Given our expectations for operating margins in the low 3% range in Q2, this implies earnings per share in the range of $0.10 to $0.15 for the quarter.

On a consolidated basis, first quarter revenue was $392 million, with consolidated new trailer shipments of 9670 units during the quarter. Finally, for the quarter, net income was $3.2 million or $0.06 per diluted share. We expect revenue of approximately $1.95 to $2.05 billion.

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We also announced the pending divestiture of our 50% ownership in the flexible products and service business for outstanding value, solidified our net leverage position, and increased our profit expectations for fiscal 2022. Mission 1, creating thriving communities. Mission 3, protecting our future. Global large plastic drums and IBC volumes grew by roughly 8% and 11% per day, respectively, versus the prior-year quarter. Global steel drum volume fell by 4% per day versus the prior year due to customer supply chain and labor issues despite strong underlying demand. Similar to quarter 4, the biggest volume shortfall was in APAC, reflective of our decision to implement strategic pricing actions and supply chain disruptions that negatively impacted our customers' operations. The business' first quarter adjusted EBITDA rose by roughly $35 million due to higher sales, partially offset by higher raw material costs. It possesses a very minimal cross-border exposure and contributes less than 3% to total company operating profit annually. In January, we announced an agreement to divest our 50% ownership in FPS. Although we have worked closely with our joint venture partner in the last 12 years, we evolve to have differing views on the future of this business. The sale of our 50% stake in flexibles will generate net cash proceeds of approximately $123 million, subject to customary closing conditions. Until we refine this further, you can assume FPS ballpark annual adjusted EBITDA contribution to be roughly $35 million. Paper packaging's first quarter sales rose by roughly $129 million versus the prior year due to stronger volumes and higher published containerboard and boxboard prices. Adjusted EBITDA rose by roughly $24 million versus the prior year due to higher sales, partially offset by higher raw material, transportation, and utility costs, including a significant $42 million drag from significantly higher OCC costs. First quarter volumes in our CorrChoice [Inaudible] system were up roughly 0.5% per day versus the prior year. First quarter [Inaudible] core volumes were up by 4.6% per day versus the prior year, with demand strong across almost all end markets. First quarter adjusted EBITDA rose by $58 million year-over-year despite an OCC index headwind of $42 million and roughly $33 million of nonvolume-related transportation and manufacturing labor inflation. Absolute SG&A dollars rose $17 million versus the prior-year quarter, mainly due to higher health, medical, and incentives costs, but fell 200 basis points on a percentage of sales basis. Below the line, interest expense fell by $8 million versus the prior-year quarter, due primarily to refinancing our 2021 euro notes with a low rate bank debt. We expect interest expense to fall further as we utilize proceeds from the flexes divestment on debt repayment and also benefit from having refinanced on Tuesday, our 6.5% 2027 senior notes with additional bank debt, utilizing a mix of floating and fixed rates below 3.5%. Our first quarter non-GAAP tax rate was roughly 31% and significantly higher year-over-year due to increased pre-tax income, with a higher proportion of that income in the U.S., and less positive discrete items than the prior year. Even with significantly higher tax expense, our first quarter adjusted Class A earnings per share was still more than double to $1.28 per share. Finally, first quarter adjusted free cash flow was $19 million cash outflow and lower year-over-year, primarily due to higher capex-related maintenance and organic growth investments in IBCs, plastics, and specialty corrugated products. Our core capital priorities remain unchanged: reinvest in the business to create value and support growth; return excess cash to shareholders via an attractive and growing dividend; and maintain a compliance leverage ratio between 2 times to 2.5 times. We have overcome that headwind and increased the midpoint of our adjusted earnings per share guidance by $0.45 to $6.60 per share for fiscal '22, reflective of solid first quarter performance, announced paper price increases, and lower interest expense. We now anticipate generating between $380 million and $440 million of adjusted free cash flow in fiscal '22.

Even with significantly higher tax expense, our first quarter adjusted Class A earnings per share was still more than double to $1.28 per share.

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It was $12 million higher than our previous record. I went back and looked at the last 30 years, and about 20 of the 30 were the lowest. There were about 10 where the first quarter wasn't the lowest cash flow for the year. Our silver-linked dividend payment that occurs at $25 will be increased by 50% to $0.03 per share annually, and Russell's going to speak more about that. We're returning about 28% of our free cash flow in the first quarter to shareholders. And despite the good performance, we were able to maintain our low all-in frequency rate about 1.71 for the first quarter. Hecla continued to strengthen its balance sheet as we ended the first quarter with $140 million in cash aided by record margins from higher prices and strong operating performance. With cash almost doubled since the second-quarter 2020 from consecutive quarters of strong free cash flow, we delivered a net debt to adjusted EBITDA ratio of 1.4 times, well below our target of two times, while providing the liquidity position at $390 million. If you look at the gold portion of the bar, you see that our margin this quarter was about double the second and fourth quarter of last year, and about 50% more than the third quarter. First-quarter free cash flow was $16.5 million after negative working capital changes of $29.3 million using interest payments of $18.4 million and the timing of incentive compensation payments related to 2020 performance and higher accounts receivables from timing of concentration. But maybe more important is the trailing 12 months free cash flow $121 million. We see the future 12 months of having the same or better free cash flow the current prices. Moving to Slide 8 with the growth anticipating our free cash flow over the remainder of the year, the board has approved an increase to our silver-linked dividends of $0.01 per share. This equates to a 50% increase in the dividend rate at the $25 per ounce threshold to $0.03 per year. At $25 per ounce realized price, the enhanced dividend policy has an implied yield of 7.4% to the silver price. Our teams continue their exemplary safety performance, and our all injury frequency rate in the first quarter was 1.71, which is a reduction of 72% since implementing a revised safety and health management system in 2012. On slide 11, at the Green Creek mine, we produced 2.6 million ounces of silver and 13,200 ounces of gold at an all-in sustaining cost of $1.59 per ounce for the quarter. With these changes, updated cash cost guidance for Greens Creek is lowered to $1.50 to $2.25 per ounce and all-in sustaining cash costs are lowered to $6.50 to $7.25 per ounce. Going to slide 12, the Lucky Friday achieved full production in the fourth quarter of 2020 and produced 0.9 million ounces of silver in the first quarter of 2021. Production at the mine is expected to exceed 3.4 million ounces this year. We anticipate the grades to improve as we mine deeper, increasing the projected production to around 5 million ounces annually by 2023. At the Casa Berardi mine, shown on slide 13, we had a strong first quarter with production of 36,200 ounces of gold at an all-in sustaining cost of $1,272 per ounce. And the mill has maintained greater than 90% availability since October of 2020. Our 2021 guidance for Casa Berardi remains unchanged and production is expected to exceed 125,000 ounces at all-in sustaining costs of $1,185 to $1,275 per ounce. Moving to Slide 14, at the Nevada Operations, we produced about 2,500 ounces of gold from a stockpiled bulk sample of refractory ore that was processed at a third-party roaster. For the rest of the year, production is expected to be in the range of 17,000 to 19,000 ounces of gold, from the processing of oxide ore at the Midas mill and an additional 22,000 tons of refractory ore through third-party facilities. Roughly 12,000 tons will be sent to a roaster and about 10,000 times to an autoclave. And in addition to the exploration spend in Nevada, we'll be investing in other $5 million in pre-development activities this year at Hollister to access the Hatter Graben. Now this new guidance, if you look at this, it adds about $3 an ounce to our expected margin. So at current prices, we think we have about $10 an ounce of free cash flow generation just from the silver operations. The other thing to point out is that with the consistency that we have at Greens Creek and Lucky Friday at full production, and the increasing grade that we see at Lucky Friday that our U.S. silver production's expected to reach about 15 million ounces by 2023. If you think about it, the photographic demand decline, which was a governor on total demand over the last 20 years is now long over. Industrial demand has been growing at a 2% growth rate for the last decade. Industrial demand has generally been strong for the last 20 years and looks to be even stronger with the current fiscal and monetary policies. We actually mined 110 million ounces less than the high of 2016. Now it's just industrial demand continues to grow at the same rate as the last decade so that 2% growth rate. The world's going to need 70 million more ounces of silver per year. Now this doesn't sound like much, because it's only 7% of the current market, until you realize that to meet that demand, even if no mines are exhausted, you need seven new mines a year that are the size of Greens Creek, which is the United States largest silver mine or you needed to produce about 150% more or you need Codelco who has a substantial byproduct of silver production to produce three times as much silver. And I'm struck, if you look at what happened in 2020, when ETF and coin demand rose dramatically, prices rose 50% over the roughly average silver price of 2018 and 2019. We don't think we'll have lows for any significant period of time to be below $18 to $20 an ounce. So to see a $50 plus silver price is not unreasonable. And silver is like gold, but unlike gold, only about 20% of the demand for silver is an investment. And for gold, only about 10% is industrial demand.

Our silver-linked dividend payment that occurs at $25 will be increased by 50% to $0.03 per share annually, and Russell's going to speak more about that. This equates to a 50% increase in the dividend rate at the $25 per ounce threshold to $0.03 per year.

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Leasing volume for the quarter was up 16%. This drove blended pricing achieved during the quarter up 2.7%. This is even with the very strong start we had in the first quarter of 2020 and up 200 basis points from the fourth quarter. In addition, we were able to maintain strong average daily occupancy of 95.7%, and all-in place rents or effective rent growth on a year-over-year basis improved to 1.3% in the first quarter. We collected 99.1% billed rent in the first quarter. In April of last year, we had 5,600 residents on relief plans. The number of participants has decreased to just 325 for the April of this year rental assistance plan. This represents only 20 basis points of April billed rent. We completed 964 redevelopment units and 13,975 Smart Home packages. For the full year of 2021, we expect to complete just over 6,000 interior unit upgrades and install 22,000 Smart Home packages. As of April 27, we've collected 98.7% of rent billed, which is at least 10 basis points ahead of each of the comparable numbers for January, February and March of this year. New lease-over-lease pricing in April is running close to 4% of rent on the prior lease. Renewal lease pricing in April is running 6.5% ahead of the prior lease. Our resident satisfaction scores remained strong and are actually ahead of last year by 120 basis points, which should support continued strong renewal lease pricing. We still have a few down units in April as a result of the winter storm, and including the impact of those, average daily occupancy for the month of April is currently 96.1%, which is 100 basis points better than April of last year. Exposure, which is all vacant units plus notices through a 60-day period, is just 7.2%. This is 180 basis points better than the prior year and supports our ability to continue to prioritize our focus on rent growth. Led by job growth, which is expected to increase 4.9% in 2021 versus the negative 5% in 2020 for our markets, we expect to see the broad recovery in our region of the country continue. This robust investor demand supported by continued low interest rates has further compressed cap rates, which are frequently in the mid-3% and low 4% range for high-quality properties in desirable locations within our markets. Transaction cap rates on closed projects that we underwrote were down 25 basis points from last quarter and down 50 basis points from first quarter of 2020. Core FFO per share performance of $1.64 for the first quarter was $0.05 per share ahead of the midpoint of our guidance. As expected, operating trends continued to improve through the quarter, producing same-store revenue and NOI performance that was slightly ahead of our forecast, providing about $0.01 per share on favorability for the quarter. But keep in mind that only about 20% of our leases were effective in the first quarter, and we still have the majority of our leases to be signed during the summer leasing season in the second and third quarter. Net earnings impact to MAA during the quarter was only about $765,000, primarily related to down units. During the quarter, we paid off the $118 million of secured mortgages at an expiring rate of 5.1%. We also funded an additional $64 million of cost toward completion of our development pipeline, which, at quarter end, included seven communities with total projected cost of $528 million, of which $193 million remains to be funded. And as discussed previously, we expect our development pipeline to grow to around $800 million by year-end, which is well within our development autonomous limits. We funded a total of $22.7 million toward these programs during the first quarter, which are expected to begin contributing to our growth more strongly in late 2021 and 2022. We ended the quarter with low leverage, debt-to-EBITDA of only 4.9 times and with $644 million of combined cash and borrowing capacity under our line of credit. And finally, in a way to reflect the first quarter earnings performance, we increased our full year guidance range for core FFO by $0.05 to a range of $6.35 to $6.65 per share.

Core FFO per share performance of $1.64 for the first quarter was $0.05 per share ahead of the midpoint of our guidance. And finally, in a way to reflect the first quarter earnings performance, we increased our full year guidance range for core FFO by $0.05 to a range of $6.35 to $6.65 per share.

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Year-to-date 57% of our global facilities remain injury free. In the third quarter, while we continue to perform at a high level with a recordable incident rate of 0.73, this result was above our third quarter 2019 performance and reminds us of the daily focus we must have on safety in order to achieve an injury free workplace. Revenues were $1.9 billion, up 1% compared with the same period last year and adjusted EBIT was $289 million, up 4%. In composites, volumes also continue to improve throughout the quarter with revenues down just 2%. And in insulation, revenues also finished down 2% with EBIT margins of 11% driven primarily by the additional growth we saw in our North American residential fiberglass business. As I stated earlier, we continue to see the U.S. housing market strengthening with demand around 1.4 million units on a seasonally adjusted basis for the last three consecutive months. In the third quarter, given our cash flow, we were able to execute on all these areas, finishing the quarter with more than $1.7 billion of liquidity. While only on day number 50, I'm already impressed with the resilience of the company and the dedication of our people. For the third quarter, we reported consolidated net sales of $1.9 billion, up approximately 1% over 2019. Adjusted EBIT for the third quarter of 2020 was $289 million, up $12 million compared to the prior year, highlighted by the continued recovery in residential end markets, primarily in the U.S. All three businesses achieved double-digit EBIT margins as a result of the company's market-leading positions and continued focus on our key operating priorities. Net earnings attributable to Owens Corning for the third quarter of 2020 was $206 million, compared to $150 million in Q3 of 2019. Adjusted earnings for the third quarter were $186 million or $1.70 per diluted share compared to $176 million or $1.60 per diluted share in Q3 2019. Depreciation and amortization expense for the quarter was $120 million, up $8 million as compared to last year. Our capital additions for the third quarter were $68 million, down $114 million versus 2019. On Slide 6, you see adjusted items reconciling our third quarter 2020 adjusted EBIT of $289 million to our reported EBIT of $296 million. During the third quarter, we recognized $7 million of gains on the sale of certain precious metals. We've adjusted out a $13 million non-cash income tax benefit related to regulations that were issued during the third quarter associated with U.S. corporate tax reform. Adjusted EBIT of $289 million increased $12 million as compared to the prior year. Roofing EBIT increased by $53 million, insulation EBIT decreased by $11 million and composites EBIT decreased by $12 million. General corporate expenses of $35 million were up $18 million versus last year, primarily due to higher incentive compensation expense associated with our improved financial outlook. Insulation sales for the third quarter were $681million down 2% from Q3 2019. EBIT for the third quarter was $73 million, down $11 million as compared to 2019. For the Insulation business overall, our sequential operating leverage from Q2 to Q3 was 48%, in line with the outlook provided on the Q2 call. Sales in composites for the third quarter were $521 million, down 2% as compared to the prior year due to lower selling prices and unfavorable product mix. EBIT for the quarter was $55 million, down $12 million from the same period a year ago but up significantly from EBIT of $6 million reported in Q2 of 2020. Sequentially, from Q2 to Q3, we generated operating leverage of 40%. Roofing sales for the quarter were $761 million, up 7% compared with Q3 of 2019, driven by 12% volume growth, which was partially offset by lower year-over-year selling prices and lower third-party asphalt sales. EBIT for the quarter was $196 million, up $53 million from the prior year, producing 26% EBIT margins for the quarter. As a result of disciplined actions taken and the recovery of U.S. residential markets, our third quarter free cash flow reached a record quarterly level and our year-to-date free cash flow of $514 million was $232 million higher than the same period last year. Based on our strong cash flow performance and deleveraging activities, we're operating within our target debt to adjusted EBITDA range of 2 to 3 times with ample liquidity. During the quarter, we repaid the remaining $190 million that was drawn on our revolver at the end of the first quarter. We also repaid the remaining $150 million balance of the term loan in advance of the February 2021 due date. We maintained our dividend in the third quarter and have returned $159 million to shareholders so far this year through dividends and share repurchases. As of September 30th, the company had liquidity of more than $1.7 billion, consisting of $647 million of cash and cash equivalents and nearly $1.1 billion of combined availability on our revolver and receivable securitization facilities. We continue to focus on maintaining an investment grade balance sheet and are evaluating additional U.S. pension contributions in the range of $50 million to $100 million to further delever the balance sheet and improve our credit metrics. However, we continue to face uncertainties with the pandemic and potential government responses and expect our financial performance to be impacted by market disruptions caused by COVID-19. As we move into 2021, we recently announced an 8% price increase for our U.S. residential Insulation business effective January 11th. In Roofing, third quarter industry shingle shipments were up about 25% with our volumes tracking below the market due to supply constraints driven by low inventories entering the quarter. Similar to the last several years, we expect to see our overall fourth quarter revenue and EBIT performance similar to what we saw in the first quarter with an additional $5 million headwind related to rebuild costs. We expect corporate expenses for the company to be approximately $125 million, primarily due to additional incentive compensation tied to our earnings outlook. And we expect capital investments to be at the high end of the range we previously provided of $250 million to $300 million. In terms of our capital allocation, we remain committed to generating strong free cash flow into our target of returning at least 50% to investors over time. So far this year we have returned $159 million through share repurchases and dividends and we'll pay our third quarter dividend of approximately $26 million next week. In our last call, we said we would focus on deleveraging the balance sheet and maintaining our dividend, we increased liquidity to over $1.7 billion, paid down the revolver and term loan and paid our dividend in the quarter.

For the third quarter, we reported consolidated net sales of $1.9 billion, up approximately 1% over 2019. Adjusted earnings for the third quarter were $186 million or $1.70 per diluted share compared to $176 million or $1.60 per diluted share in Q3 2019. However, we continue to face uncertainties with the pandemic and potential government responses and expect our financial performance to be impacted by market disruptions caused by COVID-19.

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In the period we delivered adjusted earnings per share of $1.18 compared to $1.22 last year. While our revenues were 23% below last year and in line with our expectations, our digital businesses accelerated more than what we had anticipated, posting a 38% revenue increase in North America and Europe and our licensing business also outperformed. In spite of the revenue decline we managed our business well and delivered an adjusted operating margin of 11.4% in the period, only 70 basis points below last year. The main driver of the outperformance for the quarter was our gross margin, which increased 240 basis points versus last year. While we experienced a significant revenue contraction of 30% in the year due to the pandemic, we were very proactive and lead the business carefully managing inventories well and controlling expenses tightly. All considered, we were able to reverse our first quarter adjusted operating loss of $109 million to close the year with an adjusted operating profit of $20 million. We also returned value to our shareholders via dividends and we purchased $39 million of our shares. We closed the year with a strong balance sheet with $469 million in cash. Our capacity to adapt to each and every change in the industry and the business has been validated by the multiple business model changes our Company has endured successfully over the last 40 years. With revenue in line with our outlook, but margin significantly higher than expected, we were able to deliver $74 million in adjusted operating profit. We also saw a nice momentum in our e-commerce business, which was up 38% for the quarter in North America and Europe versus 19% in Q3 and 9% in Q2. Fourth quarter revenues were $648 million, down 23% in US dollars and 26% in constant currency. The impact of temporary store closures on our sales versus prior year for the total Company during the quarter was about 10%, mostly in Europe, but also in Canada. We had some anticipated shifts in European wholesale shipments which were worth about 6% of total Company sales to prior year. Excluding these two factors, the 23% Q4 sales decline would have been a decline of about 7%. In Americas Retail revenues were down 24% in constant currency where negative store comps and temporary and permanent store closures were partially offset by growth in our e-commerce business. Store comps in the US and Canada were down 21% in constant currency, slightly better than Q3, which was down 23% as continued sequential improvement in US sales was offset by softening in Canada due to traffic declines as a result of the pandemic. In fact, if we remove the five super high-volume days in Q4 from the sales calculation, our Q4 store sales comp in the US and Canada would have been about 5% better than what we reported. In Europe, revenues were down 32% in constant currency. Store comps for Europe were down 26% in constant currency, significantly impacted by the increase in COVID levels in that region. In Asia store comps were down 22% in constant currency driven by a resurgence of the virus in some of those markets like Korea. Our Americas Wholesale business was down 14% in constant currency compared to down 34% last quarter and 49% in Q2, still under pressure from the deceleration in demand, but showing vast improvement quarter-to-quarter. Licensing revenues were strong, up 12% to prior year in Q4, driven by continuing recovery in the business, but also some timing in sales. Gross margin for the quarter was 42.6%, 240 basis points higher than prior year. Our product margin increased 140 basis points this quarter primarily as a result of higher IMU, as well as lower promotions. Occupancy rate decreased 100 basis points as a result of rent relief and business mix, partially offset by deleverage on sales. This quarter we booked roughly $15 million in rent credits for fully negotiated rent relief deals across Europe, North America and Asia. Adjusted SG&A for the quarter was $202 million compared to $237 million in the prior year, a decrease of $35 million or 15% and better than our expectations. Adjusted operating profit for the fourth quarter was $74 million versus $102 million in Q4 of last year. Our fourth quarter adjusted tax rate was 7%, down from 17% last year, driven by the mix of statutory earnings. Inventories were $389 million, down 1% in US dollars and down 5% in constant currency versus last year. We ended the year with $469 million in cash versus $285 million in the prior year and we had an incremental $272 million in borrowing capacity. Capital expenditures for the year were $19 million, down from $62 million prior year. Free cash flow for the year was $183 million, an increase of $50 million versus $133 million last year. In addition, last year's outflow included the non-recurring payment of the $46 million European Commission fine. For the fiscal year, we lost almost $800 million or 30% of our sales versus prior year as a result of the pandemic. However, we were still able to maintain positive adjusted operating profit of $20 million, $130 million lower than prior year, allowing for only 16% of those lost revenues to flow through to our bottom line. This year we expanded product margins, executed over $30 million in rent abatement and relief, cut SG&A by over 20% and managed our capital very tightly, all the while we had our eye on the future of our brand, positioning this Company to win as we emerge from the pandemic. We returned value to our shareholders reinstating our dividend in Q3 and completing $39 million of share repurchases at an average price of $10. I'm going to anchor our comparisons to the pre-COVID Q1 of fiscal year 2020, which ended May 4th, 2019 as this past year's fiscal first quarter is clearly not a normalized comparison. Quarter-to-date, we have seen sales comps at our retail locations of down 4% in the US and Canada, down 19% in Europe, and down 22% in Asia. Currently, we have over 240 stores closed with approximately 400 additional stores with reduced operating hours. E-commerce growth has continued to accelerate and is up 58% to prior year for the quarter-to-date in North America and Europe. In terms of profit, adjusted gross margin in the first quarter is expected to be around 200 basis points better than fiscal quarter 2020, driven primarily by business mix as well as improved IMUs. For full fiscal year 2022, we expect revenues down in the high single digits to the fiscal year 2020 barring COVID shutdowns past Q1. Furthermore, we remain committed to delivering net revenues of $2.9 billion and an operating margin of 10% by fiscal year 2025. I am confident that we have an opportunity to more than double our earnings per share to $3 and increase our free cash flow by 65% by fiscal 2025 respect to fiscal 2020. As a result, we plan to more than double our return on invested capital to 26% by fiscal 2025 from 12% in fiscal 2020. For example in Europe, we have a faster platform with a homepage download over 3.5 times faster, a 13% lower bounce rate and an 18% increase in mobile conversion rate from our previous site. During the year, we were able to rationalize our store portfolio closing over 125 underperforming stores and renegotiating 290 leases at favorable terms. brand into our GUESS Factory business in the US, converting almost 60 of our stores which have already shown very encouraging results. While we are currently in approximately 100 countries, we have whitespace in multiple markets where we are underdeveloped. We have big goals to improve our environmental agenda and deliver 100% denim to be equal and 100% recycle synthetic materials and packaging by 2030. Today we are at 25%. On the heels of our sales force and omnichannel capability rollout, we are implementing Customer 360, a fully integrated suite developed by salesforce. We have a rich global base with almost 5 million customers in all three regions and we see big opportunities to put the Customer 360 tool to work on this and grow this program in the next few years. We have been very successful in rationalizing our global store fleet over the last few years and still have significant flexibility to optimize our portfolio as 80% of our leases worldwide are expiring in the next three years. We made the decision to exit more than 15 unprofitable flagship locations, some of which have already been closed while others are planned to close later this year. All together, we estimate that our plan will contribute to 200 basis points of operating margin improvement by fiscal year 2025 versus fiscal year 2020. In fact, over the last two years we have reduced our number of suppliers by over 60%. As Carlos mentioned, we are confirming the commitment that we presented in December of 2019 to deliver 10% operating margins by fiscal year 2025. And while we still believe in sales growth for our brand over the next few years, I get particularly excited that the meat of our path to double earnings per share from fiscal year 2020 to $3 in fiscal year 2025 lies in the middle of the P&L, where we have the most control. In terms of revenue we anticipate that we will reach $2.9 billion in fiscal 2025 versus $2.7 billion in fiscal 2020. As a result, we see our e-commerce penetration of direct to consumer sales growing from 13% in fiscal year 2020 to 23% in fiscal year 2025. I'll mention that e-comm penetration was 22% this past year, but that was inflated a bit with the pandemic induced store closures. In terms of adjusted operating margin, we see 440 basis points of growth over the next few years. The vast majority, 400 basis points, is coming from operational efficiencies with the remaining 40 basis points coming from leverage on higher sales. Store portfolio optimization represents a large portion of the margin expansion, about 200 basis points. We expect 90 basis points of supply chain efficiencies primarily from better IMUs. We anticipate 70 basis points of margin expansion from fiscal 2020 in this area. Lastly is logistics which is expected to contribute 40 basis points of operating margin improvement. We see the 400 basis points of operational efficiency falling roughly equally over the next four fiscal years as some of the initiatives require some lead time. We believe we can generate higher free cash flows over the next four years as we continue to remain disciplined on managing working capital and driving operating margin to 10%. At the same time, we believe we can support our strategic plan with investment levels flat to 2020 of roughly $65 million. This should result in $220 million of annual free cash flow by fiscal 2025, 1.7 times that of our fiscal 2020. As we exit underperforming stores, optimize our working capital and migrate to a capital-light model where appropriate, our goal is to more than double return on invested capital to 26% by fiscal 2025, that is 12% in fiscal 2020. As a reminder, we repurchased slightly over 25% of our shares over the last two years at an average price of $15.76.

In the period we delivered adjusted earnings per share of $1.18 compared to $1.22 last year. The impact of temporary store closures on our sales versus prior year for the total Company during the quarter was about 10%, mostly in Europe, but also in Canada. We returned value to our shareholders reinstating our dividend in Q3 and completing $39 million of share repurchases at an average price of $10. I'm going to anchor our comparisons to the pre-COVID Q1 of fiscal year 2020, which ended May 4th, 2019 as this past year's fiscal first quarter is clearly not a normalized comparison. For full fiscal year 2022, we expect revenues down in the high single digits to the fiscal year 2020 barring COVID shutdowns past Q1. Furthermore, we remain committed to delivering net revenues of $2.9 billion and an operating margin of 10% by fiscal year 2025. As Carlos mentioned, we are confirming the commitment that we presented in December of 2019 to deliver 10% operating margins by fiscal year 2025. We believe we can generate higher free cash flows over the next four years as we continue to remain disciplined on managing working capital and driving operating margin to 10%.

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We generated $418 million of adjusted EBITDA this quarter, an increase of 4% as compared to last year. Profitability for the quarter was held back by factors I mentioned earlier, energy inflation was a significant $30 million headwind. Unit diesel prices were up over 50%, leading to $14 million of additional expense. The cost of liquid asphalt was over $100 per ton higher than last year. This sharp increase impacted our results by $16 million. Even with these headwinds, we improved our aggregate cash gross profit per ton by 3% and to $7.74. This strong performance and the momentum it provides sets us up well for 22, especially with respect to pricing. Total aggregate volume, including U.S. Concrete, increased by 8% versus last years quarter. On a same-store basis, volume was up 5%. Same-store prices were up 3.1% in the quarter and mix adjusted prices increased by 3.5%. On a same-store basis, our aggregates unit cost of sales in the quarter increased by only 1.7% as compared to last year. Now excluding the diesel effect, unit cost of sales actually decreased by 1%. Quarterly gross profit in the segment fell from $30 million to $7 million. Higher liquid asphalt costs accounted for $16 million of this difference. Asphalt volume declined by 8% as volume growth in California was more than offset by lower Arizona volumes due to extremely wet weather. Average selling prices improved by almost 2% year-over-year and better than 2% sequentially, evidence that pricing actions are beginning to ease some of the illiquid asphalt inflation. In the Concrete segment, gross profit increased by 18%, reflecting our ownership of U.S. Concrete for one month. Same-store volumes declined by 7% due to the completion of large projects in Virginia and the availability of drivers to make up for any lost shipping days. For the quarter, same-store prices increased by 2%. We are confident in our ability to generate at least $50 million of synergies on a 12-month run basis beginning midyear next year, when most of the integration is complete, but more to come. But at this stage, I would be surprised if next years price increases are not at least 5%. Due to our strong cash generation, we were able to reduce our net debt-to-EBITDA leverage ratio to 2.7 times following the U.S. Concrete acquisition. This is just above our stated range of two to 2.5 times and we will be focused on getting back within that range in the near term. For Legacy Vulcan, the return was 14.7%, up 240 basis points from three years ago, with the inclusion of one month of U.S. Concrete earnings, and a 1-quarter impact of the acquisition on average invested capital, our return was 14.2%. Our adjusted EBITDA guidance range for the full year is now $1.43 billion to $1.46 billion. This includes $50 million to $60 million of EBITDA from the acquisition, but excludes $115 million gain on a land sale completed in the first quarter.

Higher liquid asphalt costs accounted for $16 million of this difference.

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The bottom line is we have at least 12 more months of this incredible demand for ResMed products. I'm very proud of 8,000 ResMedians serving patients in 140 countries worldwide. 1 priority will always be patients, doing our best to help those who suffer from sleep apnea, COPD, asthma and other respiratory chronic diseases, as well as those who benefit from our out-of-hospital healthcare software solutions. We are still seeing a divergence in the total patient flow from 85% to 100% of pre-COVID levels in most countries and above 100% of pre-COVID levels in a few locations. 1 is to grow and differentiate our core sleep apnea, COPD and asthma businesses; No. 2 is to design, develop and deliver world-leading medical devices as well as digital health solutions that can be scaled globally; and No. 3 is to innovate and grow the world's best software solutions for care delivered outside the hospital and especially in the home. launch of our next-generation device platform called AirSense 11 continues to go very well. We expect to introduce the AirSense 11 platform into additional countries throughout calendar year 2022. In parallel, we will continue to sell our globally available market-leading platform, the AirSense 10, to maximize the total volume of CPAP, APAP and bilevels available for sale. In fact, the only product that the AirSense 10 is inferior to is the AirSense 11. As you saw in our results with double-digit growth this quarter, the ongoing adoption of both the AirSense 10 and AirSense 11 platforms remains very, very strong. With the AirSense 11 platform and our digital health technology ecosystem, we are engaging patients in their therapy digitally like never before in the industry. We have peer-reviewed published evidence showing that combining AirSense platform with myAir software and AirView software, we see over 87% adherence to positive airway pressure therapy. This was in the study with over 85,000 patients. On our latest and greatest platform, the AirSense 11, we are driving even higher adoption rates of the myAir app than ever before. We saw this demonstrated in the Alaska study in partnership with the French healthcare systems, where we showed in a study with over 176,000 patients that those patients who had adhered to CPAP therapy had a 39% relative reduction in mortality rates versus control. Let me now turn to a discussion of our Respiratory Care business, focusing on our strategy to better serve the 380 million patients with chronic obstructive pulmonary disease or COPD worldwide, and the 330 million patients that suffer from asthma worldwide. 1 issue reported across our customer base, which is staffing challenges. And we are set up for sustainable growth through ongoing investments in R&D to the tune of 7% of our revenues, commercial excellence in partnerships with CVS, Verily and beyond, as well as future acceleration through strategic M&A, as well as tuck-in M&A as we move forward. We are transforming out-of-hospital healthcare at scale, leading the market in digital health technology with over 10.5 billion nights of medical data in the cloud and over 16 million 100% cloud connectable medical devices on bedside tables in 140 countries worldwide, we are unlocking value by using de-identified data to help patients, providers, physicians, payers and in entire healthcare systems. Our mission to improve 250 million lives through better healthcare in 2025, drives and motivates ResMedians every day. Before I hand the call over to Brett for his remarks, I want to once again express my sincere gratitude to more than 8,000 ResMedians for their perseverance, hard work and dedication during these ongoing unprecedented times. Group revenue for the December quarter was $895 million, an increase of 12%. In constant currency terms, revenue increased by 13%. In relation to the impact of our competitors' recall, we estimate that we generated incremental device revenue in the range of $45 million to $55 million in the December quarter. For the first half of FY '22, this reflects incremental revenue in the range of $125 million to $145 million. We continue to expect component supply constraints will limit the total incremental device revenue opportunity to somewhere between $300 million and $350 million for the full fiscal year 2022. Looking at our geographic revenue distribution and excluding revenue from our Software as a Service business, sales in U.S., Canada and Latin America countries increased by 14%. Sales in Europe, Asia and other markets increased by 12% in constant currency terms. By product segment, Globally, in constant currency terms, device sales increased by 16%, while masks and other sales increased by 10%. Breaking it down by regional areas, device sales in the U.S., Canada and Latin America increased by 19%, as we benefited from incremental revenue due to a competitor's recall and favorable product mix as we sold an increased proportion of higher acuity devices. Masks and other sales increased by 9%, reflecting solid resupply revenue and achieved despite the challenging device supply environment, which continues to limit new patient setups. In Europe, Asia and other markets, device sales increased by 13% in constant currency terms, again reflecting the benefit from incremental revenue due to a competitor's recall. Masks and other sales in Europe, Asia and other markets benefited from improved patient flow relative to the prior year and increased by 11% in constant currency terms. Software as a Service revenue increased by 8% in the December quarter. As I stated earlier, we continue to expect component supply constraints will limit the incremental device revenue resulting from our competitors' recall to somewhere between $300 million and $350 million for fiscal year '22. Our non-GAAP gross margin declined by 230 basis points to 57.6% in the December quarter. G&A expenses for the second quarter increased by 9% or in constant currency terms increased by 10%. Importantly, SG&A expense as a percentage of revenue improved to 20.7% compared to 21.2% in the prior year period. Looking forward and subject to currency movements, we expect SG&A expense as a percentage of revenue to be in the range of 20% to 22% for the second half of FY '22. R&D expenses for the quarter increased 14% on both a headline and a constant currency basis. R&D expenses as a percentage of revenue was 7% compared to 6.9% in the prior year quarter. Looking forward and subject to currency movements, we expect R&D expenses as a percentage of revenue to be in the vicinity of 7% for the second half of FY '22. Our non-GAAP operating profit for the quarter increased by 5%, underpinned by strong revenue growth, partially offset by the contraction of our gross margin. On a GAAP basis, our effective tax rate for the December quarter was 15%, while on a non-GAAP basis, our effective tax rate for the quarter was 15.6% compared to the prior year quarter of 15.2%. Looking forward, we estimate our non-GAAP effective tax rate for the full fiscal year '22 will be in the range of 19% to 20%. Our non-GAAP net income for the quarter increased by 5% and our non-GAAP diluted earnings per share for the quarter increased by 4%. Our cash flow from operations for the quarter was $220 million, reflecting robust underlying earnings, partially offset by higher working capital. Capital expenditure for the quarter was $30 million. Depreciation and amortization for the quarter totaled $41 million. During the quarter, we paid dividends to shareholders totaling $61 million. We recorded equity losses of $1.9 million in our income statement in the December quarter associated with the Primasun joint venture with Verily. We expect to record equity losses of approximately $2 million per quarter through the balance of fiscal year '22 associated with the joint venture operation. We ended the second quarter with a cash balance of $194 million. At December 31, we had $680 million in gross debt and $486 million in net debt. And at December 31, we had approximately $1.6 billion available for drawdown under our existing revolver facility. Our board of directors today declared a quarterly dividend of $0.42 per share, reflecting the board's confidence in our operating performance.

Group revenue for the December quarter was $895 million, an increase of 12%.

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Total sales rose 10% to last year and were up 5% to Q3 2019 and we achieved our highest Q3 sales since 2014 despite industry wide supply chain constraints and removal of 1.1 million gross square feet from our store base last year. Our largest and most established market, the U.S. outperformed with sales up 17% on a one-year and 12% on a two-year basis. In addition, we also acquired roughly 2 million new customers globally, all very positive signs regarding the health of our brands. By channel, store sales rose 11% from last year and declined 20% from 2019. Digital, which for us, carries a significantly higher four-wall margin than stores grew 8% on a one-year and 55% on a two-year basis, representing 46% of total sales. In spite those pressures, we grew our operating margin rate by 80 basis points on a one-year basis and 640 basis points on a two-year basis. Hollister sales, which includes Gilly Hicks and Social Tourist rose 10% to last year and 1% to 2019. In the U.S., sales rose 17% on a one-year and 7% on a two-year basis. The launch, which generated over 20 million PR impressions included the bilingual made for TikTok album produced by the collective music creators. The announcement made waves across the gaming new cycles garnering over 125 million PR impressions. At the same time, our existing customers continue to come to us for her must haves including Go Active, which grew to over 20% of sales. Hollister also partnered with Hulu on an ad by which drove roughly 90 million ad impressions. Turning to Abercrombie, which includes kids, Q3 sales rose 12% compared to last year and 10% to 2019, representing our highest sales volume since 2015 and best gross margin since 2013. In the U.S., sales rose percent on a one-year and 18% on a two-year basis. After receiving thousands of submissions, which was 10 customers and brand fans to help drive fit and design decision and to be predominantly featured in our denim your way marketing. Throughout the quarter, we also continue to leverage our relationship with TikTok, a highlight was our women's fall outfitting campaign, flashes of fall, which generated over 140 million impressions. We are ready to compete and win for holiday and I'm confident in our ability to deliver an operating margin between 9% and 10% this fiscal year, which will be our best annual operating margin since 2008. For Q3, total net sales were $905 million, up 10% to last year and up 5% to pre-pandemic levels. Store sales rose 11% on a one-year basis and were down 20% on a two-year basis. At the same time, total digital sales increased 8% compared to last year and grew 55% from 2019, representing 46% of total sales this quarter, compared to 31% in 2019. By brand, net sales increased 10% for Hollister, which includes Gilly Hicks and Social Tourist and 12% for Abercrombie, which includes Kids. As compared to Q3 2019, net sales increased 1% for Hollister and 10% for Abercrombie. By region, we continue to see strong results in the U.S. with net sales up 17% and 12% on a one and two-year basis respectively. Despite having roughly 140 fewer stores and over 20% less square footage in our U.S. store base as compared to Q3 2019. In the U.S., Hollister was up 17% to 2020 and up 7% to 2019, while Abercrombie was up 19% and 18% respectively. Outside of the U.S., we continue to see a slower recovery with EMEA down 6% to last year and 7% to Q3 2019. In APAC, sales were down 12% to last year and down 32% to 2019 as we face traffic headwinds due to ongoing COVID cases inside China and Hong Kong and slow vaccination progress in Japan. Our rate of 63.7% was down 30 basis points to last year and up 360 basis points to 2019. The result exceeded our expectations and included approximately 300 basis points of impacts from higher freight costs and air utilization, which was at the low end of our 300 to 400 basis point expectation. Excluded from our non-GAAP results are approximately $6.7 million and $6.3 million of pre-tax asset impairment charges for this year and last year respectively. Operating expense excluding other operating income was up 8% compared to last year and up 1% to 2019, coming in at the low end of our expectation of up low-single digits. In Q3, we saw an increase in store and distribution expense of 2% compared to 2020 and a reduction of 7% compared to 2019. Compared to 2019, store occupancy was down approximately $43 million related to square footage reductions and renegotiated leases. Marketing, general and administrative expenses rose 21% from last year and 28% to Q3 2019, primarily driven by increased marketing investments. We delivered operating income of $79 million compared to operating income of $65 million last year and $27 million in 2019. The effective tax rate was approximately 25%. Net income per diluted share on an adjusted non-GAAP basis was $0.86 compared to $0.76 last year. We ended the quarter with cash and cash equivalents of $866 million and funded debt of $308 million. During the quarter, we repurchased approximately 2.7 million shares for $100 million, bringing year-to-date total share repurchases to about 6.1 million shares and $235 million. Recently, our Board of Directors approved a new share repurchase authorization of $500 million, replacing the February 2021 share repurchase program. In the fourth quarter, we expect to repurchase at least $100 million worth of shares pending market conditions and share price. We continue to expect fiscal 2021 capex to be approximately $100 million, with about half of that related to digital and technology and the other half related to real estate and maintenance items. During the quarter, we opened five new stores, bringing the total to 23 for the year-to-date period and closed three stores for a total of 23 year-to-date. I'll finish up with our thoughts on Q4, which we are planning as follows using 2019 as our comparison period: net sales to be up 3% to 5% from 2019 level of approximately $1.185 billion. Gross profit rate to be around flat to the 2019 level of 58.2%, including an expected negative impact of approximately $75 million of freight cost pressure due to rising ocean and air rates as well as higher air deliveries necessary to catch up on the Vietnam factory closures. Operating expense excluding other operating income to be up low to mid single digits to 2019 adjusted non-GAAP level of $565 million. Assuming we deliver against these expectations, we expect the full-year operating margin to be in the 9% to 10% range, our highest since 2008.

For Q3, total net sales were $905 million, up 10% to last year and up 5% to pre-pandemic levels. At the same time, total digital sales increased 8% compared to last year and grew 55% from 2019, representing 46% of total sales this quarter, compared to 31% in 2019. Net income per diluted share on an adjusted non-GAAP basis was $0.86 compared to $0.76 last year. Recently, our Board of Directors approved a new share repurchase authorization of $500 million, replacing the February 2021 share repurchase program.

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Our sales were very strong, up almost 9% as we saw the ongoing market strength continue from the second half of last year. Sales in our Engine Management division were up more than 5%. We inherited $12 to $14 million business with blue chip customers but almost more importantly, we acquired the intellectual property and complex manufacturing capabilities to court more business in this fast-growing product category, and new opportunities are already presenting themselves. Overall, the OE channel accounted for over $150 million in sales last year and is the fastest-growing part of our business. To begin, as you have seen in our release, our first-quarter gross margins in both segments reflected some of our best results in the last 10 years. Fortunately, our global manufacturing footprint has been of benefit as compared to our peers sourcing 100% from Asia, recall our low-cost manufacturing facilities are in Mexico and Poland with other highly skilled and less labor-intensive operations in the US and Canada. Looking first at the P&L, consolidated net sales in the first quarter were $276.6 million, up $22.3 million or 8.7% versus Q1 last year with increases coming from both of our segments. Looking at it by segment,, Engine Management net sales in Q1, excluding wire and cable sales were $173.7 million, up $9.1 million versus the same quarter last year. This 5.6% increase is partly reflective of the softness we experienced in Q1 last year but also reflects continued growth in sales with the ongoing customers that they are noted for. Wire and cable net sales in Q1 were $38.4 million, up $1.8 million or 4.7%. While the sales in the wire and cable business continued to be steady, the product category remains in secular decline, and we believe sales will ultimately resume a trend line of declines in the range of 6% to 8% on an annual basis. Temperature Control net sales in Q1 2021 were $62.5 million, up 21.4% versus the first quarter last year and increased primarily as a result of stronger pre-season ordering by our customers. Turning to gross margins, our consolidated gross margin in the first quarter was 30.3% versus 27.7% last year, up 2.6 points with both of our segments reporting increases for the quarter. Looking at the segments, first-quarter gross margins for Engine Management was 30.7%, up 2.5 points from Q1 last year and for Temperature Control was 25.6%, an increase of 2.1 points from 23.5% last year. While we expect the impact of higher sales and higher costs will have somewhat offsetting effects, gross margins will vary across quarters, and we continue to forecast full-year 2021 gross margin of 29% plus for this segment. For our Temp Control segment, we continue to target a gross margin of 26% plus for the full year in 2021. Moving now to SG&A expenses, our consolidated SG&A expenses in Q1 declined by $1.4 million to $54.5 million ending at 19.7% of sales versus 22% last year. Looking at our SG&A cost for the full year in 2021, we expect expenses to be about $54 million to $58 million each quarter, a slightly higher range that noted on our last call as we'll see some higher expenses as a result of higher sales. Consolidated operating income before restructuring and integration expenses and other income net in Q1 2021 was $29.3 million or 10.6% of net sales up 4.9 points from Q1 2020. As we note on our GAAP to non-GAAP reconciliation of operating income, our performance resulted in first-quarter 2021 diluted earnings per share of $0.97 versus $0.43 last year. Turning now to the balance sheet, accounts receivable at the end of the quarter were $174.1 million, up $21.9 million from March 2020, but down $23.9 million from December 2020. Our inventory levels finished the quarter at $390.9 million, up $20 million from March 2020 reflecting the need to carry higher balances to support higher sales levels. As compared to December 2020, our inventory was up $45.4 million, mainly due to our effort to restock our shelves to normal levels. Looking at cash flows, our cash flow statement reflects cash used in operations in the first quarter of $11.4 million as compared to cash used of $32.8 million last year. The $21.4 million improvement was driven by an increase in our operating income as noted earlier and by changes in working capital. Turning to investments, we used $5 million of cash for capital expenditures during the quarter, which was slightly more than the $4.4 million we used last year. We also used $2.1 million to purchase the SIP Sensor business from Stoneridge that was discussed earlier. Financing activities included $5.6 million of dividends paid and $11.1 million paid for repurchases of our common stock. Financing activities also included $31 million of borrowings on our revolving credit facilities, which were used to fund operations, investments in capital, and returns to shareholders through dividends and share buybacks. We finished the quarter with total outstanding borrowings of $42.5 million and available capacity under our revolving credit facility $206 million.

Looking first at the P&L, consolidated net sales in the first quarter were $276.6 million, up $22.3 million or 8.7% versus Q1 last year with increases coming from both of our segments. As we note on our GAAP to non-GAAP reconciliation of operating income, our performance resulted in first-quarter 2021 diluted earnings per share of $0.97 versus $0.43 last year.

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We've also been exploring emerging opportunities in blockchain, NFTs, and Web 3.0 gaming. We also began implementing new assortment strategies within our stores, including an expansion of PC gaming merchandise across approximately 60% of U.S. locations. Over the course of 2021, we have made more than 200 senior hires from some of the top technology companies. Our expanded network is continuing to help us improve shipping times to customers across the U.S. Additionally, we recently announced a plan to hire up to 500 associates at our new customer care facility in South Florida. Lastly, we've further strengthened our financial position by securing a new $500 million ABL facility, which closed early in November and includes improved liquidity and terms. Net sales increased 29.1% to just under $1.3 billion, compared to just over $1 billion during the same period in 2020. SG&A was $421.5 million, or 32.5% of sales, compared to $360.4 million or 35.9% of sales in last year's third quarter. We reported a net loss of $105.4 million, or $1.39 per diluted share, compared to a net loss of $18.8 million or loss per diluted share of $0.29 in the prior-year third quarter. Turning to the balance sheet, we ended the quarter with cash and cash equivalents of over $1.4 billion, nearly $1 billion higher than the end of the third quarter last year. At the end of the quarter, we had no borrowings under our ABL facility and no debt other than a $46.2 million low-interest unsecured term loan associated with the French government's response to COVID-19. Total liabilities compared to the third quarter of last year were down $262.1 million. Capital expenditures for the quarter were $12.5 million, bringing year-to-date capex to $40.7 million. In the third quarter, cash flow from operations was an outflow of $293.7 million, compared to an outflow of $184.6 million during the same period last year. In order to meet customer demand and drive sales growth amid the tight supply chain, we grew our inventory to $1.14 billion as of the close of the quarter, compared to $861 million at the close of the prior year's third quarter.

We reported a net loss of $105.4 million, or $1.39 per diluted share, compared to a net loss of $18.8 million or loss per diluted share of $0.29 in the prior-year third quarter.

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Our acquisition of this business will create a new manufacturing base for us in India, where we have leading market position and have been active for more than 20 years. Q3 revenue was up 29% compared to the third quarter of 2020 to a record $200 million. Excluding acquisitions and the favorable impact of FX, revenue was up 18% compared to the same period last year. Our aftermarket parts consumables revenue was up 28% to a record $131 million in Q3. Solid execution contributed to boosting our adjusted EBITDA margin to 20.5%, which led to our excellent operating cash flow of $38 million in Q3. Bookings were exceptional in the quarter, up 71% to a record $245 million. Excluding acquisitions and FX, bookings were up 57%, with contributions from all three of our operating segments. Flow Control segment achieved its fifth consecutive increase in quarterly revenue, reaching a record $76 million in the third quarter, up 34% compared to Q3 of last year. Aftermarket parts revenue was exceptionally strong and made up 72% of total Q3 revenue. Bookings were also a record at $77 million, up 55% compared to last year. Organic bookings, which excludes acquisitions and FX, were up 32% compared to the same period. Improved operating leverage led to record adjusted our adjusted EBITDA margin of 29.1%. Our Industrial Processing segment continued to experience strong demand with bookings nearly doubling from the same period last year to a record $119 million. Revenue in this segment increased 31% to $82 million with strong performance in aftermarket parts and capital business. Adjusted EBITDA was up 24%, while adjusted EBITDA margin declined compared to Q3 of last year when we received employee retention benefits related to the pandemic. Revenue was up 17% to $42 million with parts revenue, making up 59% of total revenue in the quarter. Bookings in this segment were up compared to same period last year to a record $49 million in Q3. Solid execution of our buying businesses, including our recent acquisition, helped boost adjusted EBITDA by 26% and adjusted EBITDA margin by 120 basis points compared to the same period last year. Consolidated gross margins were 44.9% in the third quarter of 2021 compared to 44.2% in the third quarter 2020. Our consolidated gross margins in the third quarter of 2021 were negatively affected by the amortization of acquired profit and inventory related to the Clouth and Balemaster acquisitions, which lowered consolidated gross margins by 110 basis points. In the third quarter of 2020, government assistance benefits increased consolidated gross margins by 110 basis points. Excluding the impact from both of these consolidated gross margins were approximately 43% in both periods. Our parts and consumables revenue represented 66% of revenue in both periods. SG&A expenses were $52.3 million in the third quarter of 2021, an increase of $8.5 million compared to $43.9 million in the third quarter 2020. Third quarter of 2021 SG&A includes $3.4 million in SG&A from our acquisitions. There was an unfavorable foreign currency translation effect of $0.9 million in the quarter and a reduction in government assistance benefits of $0.7 million. We also incurred acquisition-related costs of $1.3 million in the third quarter of 2021 compared to $0.4 million in the third quarter 2020. As a percentage of revenue, SG&A expenses decreased to 26.2% in the third quarter of 2021 compared to 28.4% in the prior year period. Our effective tax rate was 24.6% in the third quarter of 2021, lower than we anticipated, primarily due to tax benefits from acquisition-related expenses, employee equity awards and the reversal of tax reserves associated with uncertain tax positions. Our GAAP diluted earnings per share was $1.75 in the third quarter, up 37% compared to $1.28 in the third quarter 2020, and our adjusted diluted earnings per share increased 50% to $1.97. Adjusted EBITDA increased 36% to $40.9 million or 20.5% of revenue compared to $30 million or 19.4% of revenue in the third quarter of 2020 due to strong performance in our Flow Control segment, which was up 42% with a large portion attributable to organic growth. This is the second quarter in a row that our consolidated adjusted EBITDA, as a percentage of revenue, has exceeded 20% and we expect to also achieve this for full year 2021. Operating cash flow increased 56% to $37.9 million in the third quarter of 2021 compared to $24.4 million in the third quarter 2020. Free cash flow increased 53% to $34.6 million in the third quarter of 2021 compared to $22.6 million in the third quarter of 2020. We paid $141.4 million for the acquisitions of Clouth and Balemaster and we borrowed $63.1 million related to these acquisitions. Despite the significant acquisition activity in the quarter, we were able to utilize our strong cash flows to pay down our debt by $26 million. We also paid $3.4 million for capital expenditures and paid a $2.9 million dividend on our common stock. In the third quarter of 2021, our GAAP diluted earnings per share was $1.75. And after adding back acquisition-related costs of $0.22, our adjusted diluted earnings per share was $1.97. In the third quarter of 2020, our GAAP diluted earnings per share was $1.28, and our adjusted diluted earnings per share was $1.31. As shown in the chart, the increase of $0.66 in adjusted diluted earnings per share in the third quarter of 2021 compared to the third quarter 2020 consists of the following: $0.90 due to higher revenue; $0.09 from acquisitions, net of interest expense and acquisition borrowings; and $0.05 due to lower interest expense. These increases were partially offset by $0.21 due to higher operating expenses, $0.15 due to a decrease in the amounts received from government assistance programs. $0.01 from higher noncontrolling interest expense and $0.01 due to higher weighted average shares outstanding. Collectively, included in all the categories I just mentioned, was a favorable foreign currency translation effect of $0.07 in the third quarter of 2021 compared to the third quarter of last year due to the weakening of the U.S. dollar. Our cash conversion days, which we calculate by taking days in receivables plus days in inventory and subtracting days in accounts payable, decreased to 113 at the end of the third quarter of 2021 compared to 140 at the end of the third quarter of 2020. Working capital, as a percentage of revenue, was 13.5% in the third quarter of 2021 compared to 15.6% in the third quarter 2020. Our net debt, that is debt less cash, increased $115 million sequentially to $231 million at the end of the third quarter of 2021. We borrowed $63 million in the quarter to fund our acquisitions, and we were able to pay down $26 million of debt in the quarter. Our leverage ratio, calculated in accordance with our credit agreement, was 1.69 at the end of the third quarter 2021 compared to 1.71 at the end of the second quarter of 2021. Our net interest expense decreased $0.3 million to $1.3 million in the third quarter of 2021 compared to $1.6 million in the third quarter of 2020. At the end of the third quarter of 2021, we had $105 million of borrowing capacity available under our revolving credit facility, which matures in December of 2023. Although we had record bookings of $245 million in the third quarter, which is the fourth record quarter in a row. We ended the third quarter with a record backlog of $299 million, the current headwinds from supply chain and logistical constraints have caused us to reduce our revenue expectations for the fourth quarter. We now anticipate revenue of $210 million to $215 million, down from $220 million to $225 million that we noted in the July call. For the full year 2021, we now anticipate revenue of $778 million to $783 million revised from $783 million to $793 million. This change in the revenue range includes $13 million of revenue that has been moved into 2022 and as a result of supply chain issues or customer requested changes to the shipping dates. We anticipate fourth quarter gross margins will be 42%, which includes the impact of amortizing the acquired profit and inventory. Our current estimate for the amortization of acquired profit and inventory in the fourth quarter is $2.1 million or $0.13. We anticipate SG&A expenses will be approximately $55 million to $56 million, and R&D will be a little over $3 million in the fourth quarter. The SG&A expense includes backlog amortization of approximately $600,000 or $0.04. We anticipate our net interest expense will be approximately $1.4 million in the fourth quarter of 2021, and we anticipate the tax rate for the quarter will be 27% to 28%.

Q3 revenue was up 29% compared to the third quarter of 2020 to a record $200 million. Bookings were exceptional in the quarter, up 71% to a record $245 million. Our GAAP diluted earnings per share was $1.75 in the third quarter, up 37% compared to $1.28 in the third quarter 2020, and our adjusted diluted earnings per share increased 50% to $1.97. In the third quarter of 2021, our GAAP diluted earnings per share was $1.75. And after adding back acquisition-related costs of $0.22, our adjusted diluted earnings per share was $1.97. We ended the third quarter with a record backlog of $299 million, the current headwinds from supply chain and logistical constraints have caused us to reduce our revenue expectations for the fourth quarter. For the full year 2021, we now anticipate revenue of $778 million to $783 million revised from $783 million to $793 million.

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Engine Management sales were up 6.7% for the quarter, clawing back about a third of our sales shortfall in the first half. It fits older vehicles and is relatively easy to install which are two hallmarks of DIY business, and while this line has recently been trending down 7% or so per year due to varied [Indecipherable] in lifecycle, it spiked up 10% in the quarter, which we have to assume is a temporary phenomenon. Our Temperature Control Division was up 25% in the quarter driven by two dynamics. In fact, our first half was down almost 20%. Our baseline was a 40% decrease in volume in April. Engine Management was 31.5% and Temperature Control was 29.2%. Our longer-term gross margin targets would be Engine Management, 30% plus and Temperature Control 26% plus. Looking now at the results in the P&L, our consolidated net sales in Q3 2020 were $343.6 million, up $35.9 million or 11.7% versus Q3 last year. Our net sales for the first nine months of the year were $845.9 million, down $50.8 million or 5.7%. By segment, our Engine Management net sales in Q3 excluding wire and cable sales were $190.9 million, up $10.1 million or 5.6%. But for the first nine months of the year were down $40.5 million or 5.7%, finishing at $498.2 million. Wire and cable net sales in Q3 were $38.7 million, up $3.5 million or 10% and for the first nine months were $105.6 million down $2.9 million or 2.6%. While the wire and cable business continues to be in secular decline and we still believe it will decline 6% to 8% on an annual basis, sales this year have been positively impacted by an increase in DIY sales as consumer stayed at home during the pandemic. Our Temperature Control net sales in Q3 2020 were $110.4 million, up $22.1 million or 25%. However, for the first nine months, sales were down $7.4 million or 3.1% versus last year, ending at $234.2 million. Our consolidated gross margin in Q3 2020 was 31.4% versus 29.9% last year, up 1.5 points, for the first [Technical Issues] 28.7% [Phonetic] [Indecipherable] versus 28.9% last year, down 0.2 points. Looking at the segments, Engine Management gross margin in the third quarter was 31.5%, up 0.8 points from Q3 last year, while for the first nine months of 2020, it was down 0.3 points to 29%. Temperature Control gross margin in Q3 2020 was 29.2% up 3.2 points from 26% last year and for the first nine months, it was up 0.5 points to 26%. Consolidated SG&A expenses in Q3 were $59.5 million, down $0.4 million in Q3 '19 and came in at 17.3% of sales versus 19.5% last year. For the first nine months, SG&A spending was $163.7 million, down $16.8 million at 19.4% of net sales versus 20.1% last year. Our consolidated operating income before restructuring and integration expenses and other income net in Q3 of '20 was $48.3 million or 14% of net sales, up 3.6 points from Q3 '19 and for the first nine months was 9.3% of net sales, up 0.5 points from last year. As we note on our GAAP to non-GAAP reconciliation of operating income, our performance resulted in third quarter 2020 diluted earnings per share of $1.59 versus $1.02 last year and for the first nine months, diluted earnings per share of $2.53 versus $2.51 in 2019. Turning now to the balance sheet, accounts receivable at the end of the quarter were $238 million up $102.5 million from December 2019 and up $69 million from September 2019. Inventory levels finished the quarter at $311.4 million, down $56.8 million from December 2019 and down $28.8 million from September 2019. Looking at the cash flow statement, it reflects [Phonetic] the cash generated from operations in the first nine months of 2020 of $78.6 million as compared to a generation of $43.1 million last year. During the first nine months, we continue to invest in our business and use $13.2 million of cash for capital expenditures, which was higher than the $12.3 million used in the first nine months of 2019. Financing activities included $5.6 million of dividends paid and $8.7 million of repurchases of our common stock, both of which occurred during the first quarter. Financing activities also included $44.9 million of payments on a revolving credit facility. We finished the third quarter with total outstanding borrowings of $12 million and available capacity under our revolving credit facility of $238 million. I believe this is an appropriate and a proper move after 53 glorious years, where I had the privilege of being part of the Company's growth from roughly $20 million in our core business when I began to well over a $1 billion today.

Our Temperature Control Division was up 25% in the quarter driven by two dynamics. Looking now at the results in the P&L, our consolidated net sales in Q3 2020 were $343.6 million, up $35.9 million or 11.7% versus Q3 last year. Our Temperature Control net sales in Q3 2020 were $110.4 million, up $22.1 million or 25%. As we note on our GAAP to non-GAAP reconciliation of operating income, our performance resulted in third quarter 2020 diluted earnings per share of $1.59 versus $1.02 last year and for the first nine months, diluted earnings per share of $2.53 versus $2.51 in 2019.

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Also in the quarter, Unify Square signed contracts with nearly 20 new logo clients, including consulting contracts and Power Suite software subscriptions focused on migrating to or managing Zoom and Microsoft Teams, UCaaS environments. Revenue growth continued during the third quarter in C&I with Cloud revenue specifically growing 26% year-over-year. We recently signed a contract with New Zealand's Waka Kotahi NZ Transport agency to extend our engagement to manage IT infrastructure on the ClearPath Forward platform that supports systems processing approximately 25 million driver's license and 60 million motor vehicle transactions per year. Our total company TCV was up 13% year-over-year in the third quarter, and total ACV was up 30% year-over-year. Total company pipeline was also up 5% sequentially, supported by growth in our proactive experienced DWS solutions and Cloud solutions pipelines, which increased sequentially, both on a dollar basis and as a percent of total pipeline. Our last 12-month voluntary attrition was 15.3%, which is significantly below the pre-pandemic level of 17% for the third quarter of 2019. The demand for open roles filled internally as a percent of total, increased six points for the year-to-date versus 2020 to 36%, reflecting the effectiveness of our internal development, mobility programs and upskilling and referrals represent over 20% of total hiring on a year-to-year basis. Overall, our year-to-date performance is in line with our internal expectations, and we are reaffirming all full year 2021 guidance metrics as a result. Our ongoing enhancements to our Cloud capabilities and efforts to increase awareness with industry analysts and clients continue to yield results with C&I revenue growth of 1.7% year-over-year to $118.9 million in the third quarter. This was supported by Cloud revenue growth within the segment of 26% year-over-year. ECS revenue grew 1.8% year-over-year. ECS services revenue grew 1% year-over-year. As we've previously noted, we had expected the third quarter to be the lightest of the year in terms of license revenue, which we still expect to be split approximately 55% and 45% between the first and second half of the year. As a reminder, the prior year first half/second half split was 40% -- 60%, with 40% of the full year segment revenue coming in the fourth quarter. We also saw some impacts related to supply chain shortages, and both of these items impacted revenue, which was down 4.7% year-over-year to $141.3 million. As a result of all of this, the total company revenue was down 1.5% year-over-year in the third quarter to $488 million. As I noted, though, this does not change our expectations for revenue for the full year as this quarterly cadence was anticipated and was embedded in our guidance, as was our expectation for year-over-year decline in the fourth quarter revenue due to the timing issues I mentioned, which is why we're reaffirming that guidance at 0% to 2% year-over-year revenue growth. As a result, total company backlog was $3 billion as of the end of the third quarter relative to $3.3 billion as of the end of the prior quarter. Of the $3 billion in backlog, we expect approximately $380 million will convert into revenue in the fourth quarter. C&I gross profit increased 116.3% year-over-year to $9.3 million, and gross margin improved 410 basis points to 7.8%, driven by the improvements to margin in both Cloud and traditional infrastructure work. ECS gross profit increased 28.8% year-over-year to $97 million, and gross margin improved 1,360 basis points to 65%, helped by the higher revenue I mentioned earlier. DWS gross profit was $16.8 million relative to $21.6 million in the prior year period, largely driven by the flow-through impact of lower revenue. DWS gross margin was 11.9% relative to 14.6% in the prior year period. As with revenue, our year-to-date non-GAAP operating profit margin results are roughly in line with internal expectations, and accordingly, we're reaffirming our full year 2021 guidance for this metric at 9% to 10%. As a result, total company non-GAAP operating profit margin was 5.7% relative to 8.6% in the prior year period. The annualized savings associated with this program are at the high end of the targeted range we provided, which was $130 million to $160 million. Our net loss from continuing operations was $18.7 million or $0.28 per diluted share versus $13.3 million or $0.21 per diluted share in the prior year period. Non-GAAP net income was $6.9 million versus $36.8 million in the prior year period, and non-GAAP diluted earnings per share was $0.10 versus $0.51 in the prior year period. As with revenue and non-GAAP operating profit margin, our year-to-date adjusted EBITDA results are generally in line with our expectations, and so we are reaffirming full year 2021 guidance for this metric at 17.25% to 18.25%. Adjusted EBITDA in the quarter was $74.6 million relative to $82.3 million in the prior year period, and adjusted EBITDA margin in the quarter was 15.3% versus 16.6% in the prior year period based on similar drivers as non-GAAP operating profit and margin. Our capital expenditures declined year-over-year again in the third quarter, down 18.4% to $26.1 million. We now expect capex to be between 100 and $110 million for the full year 2021, which is lower than our previous expectations. Free cash flow and adjusted free cash flow also continued to improve, with free cash flow up 14.9% year-over-year to $39.4 million and adjusted free cash flow up 36.3% to $69.9 million. In continuing our efforts to further derisk our balance sheet, we completed a transfer of additional gross pension liabilities in October through a $235 million annuity contract. We expect a onetime noncash pre-tax settlement charge in the fourth quarter associated with this liability transfer of approximately $130 million or $1.94 per share. Mike will be taking on the role of President and Chief Operating Officer, effective upon the hiring of a new CFO. At that point, he will transition to President and Chief Operating Officer.

Overall, our year-to-date performance is in line with our internal expectations, and we are reaffirming all full year 2021 guidance metrics as a result. As a result of all of this, the total company revenue was down 1.5% year-over-year in the third quarter to $488 million. As a result, total company backlog was $3 billion as of the end of the third quarter relative to $3.3 billion as of the end of the prior quarter. Of the $3 billion in backlog, we expect approximately $380 million will convert into revenue in the fourth quarter. Our net loss from continuing operations was $18.7 million or $0.28 per diluted share versus $13.3 million or $0.21 per diluted share in the prior year period. Non-GAAP net income was $6.9 million versus $36.8 million in the prior year period, and non-GAAP diluted earnings per share was $0.10 versus $0.51 in the prior year period. Mike will be taking on the role of President and Chief Operating Officer, effective upon the hiring of a new CFO. At that point, he will transition to President and Chief Operating Officer.

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For the second quarter 2021, Stewart reported, net income of $95 million and diluted earnings per share of $3.50 on total operating revenues of $802 million. Compared to last year, total title revenues for the quarter increased $248 million or 50% due to strong performances from our residential agency and commercial operations. The title segment generated $126 million of pre-tax income, an increase of $71 million from last year's quarter. Pre-tax margin for the segment also improved to 17% compared to 11% from Q2 2020. With respect to our direct title business, residential revenues increased $76 million or 47% from increased purchase and refinancing transactions. Residential fee per file for the second quarter was approximately $2,100, a 15% improvement over last year's fee per file due to a higher purchase mix this year. Domestic commercial revenues improved $30 million or 97% due to increased transaction volume and higher average fee per file, which was $12,600 versus $9,800 for last year's quarter. Total international revenues increased $29 million or 118%, primarily due to improved volumes in our Canadian operations. Total open orders increased 8%, while closed orders improved 27% compared to the last year, primarily due to the strong housing market. Similar to our direct title business, our agency operations generated a solid quarter with revenues of $390 million, which was $113 million or 41% higher than last year. The average agency remittance rate was settled or at 17.5%. On title losses, total title loss expense increased $12 million or 56%, primarily as a result of increased title revenues as a percentage of title revenues, title loss expense was 4.5% compared to 4.3% last year. Employee cost as a percent of operating revenues improved to 24% from 27% last year while other operating expenses increased to 17% from 15% last year, primarily due to the pass-through appraisal and service costs in our increased appraisal services businesses, excluding these businesses overall other operating expense ratios would have been 12% for the second quarter 2021. Our total cash and investments on the balance sheet are approximately $600 million over regulatory requirements and we have approximately $225 million available on our line of credit facility. Shareholders' equity attributable to Stewart increased to $1.13 billion with book value per share of approximately $42. And lastly, net cash provided by operations for the second quarter increased to $103 million compared to $61 million from last year's quarter.

For the second quarter 2021, Stewart reported, net income of $95 million and diluted earnings per share of $3.50 on total operating revenues of $802 million.

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These comments are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Gross profit margin increased 400 basis points, 35.6% for the third quarter of this year. As a result of the gross margin expansion, our adjusted operating margin increased 500 basis points to 11.8%. And our adjusted EBITDA margin increased 370 basis points to 14.8%. We generated solid free cash flow of $16.2 million during the third quarter and as a result we had $84 million of cash on hand as of September 30th. We also had $194 million available under our credit facility and our debt to EBITDA ratio was only 1.1 times. Net sales for the third quarter were $132 million, an increase of 5% compared with the third quarter of 2019. Gross profit margin increased 400 basis points to 35.6%. Also gross profit in 2019 included a $3.5 million charge for estimated product replacement costs. Our adjusted operating income increased 83%, the $15.6 million for the quarter. Adjusted EBITDA increased 40% to $19.6 million and adjusted EBITDA margin was 14.8%. Adjusted diluted earnings per share was $0.30 compared with $0.15 for the third quarter of 2019. In the Material Handling segment, net sales increased 3%. Sales of fuel containers in our consumer end market were up nearly 40% primarily as a result of increased storm activity. Sales in our vehicle end market were down double-digits as higher sales to RV customers were more than offset by lower sales to automotive OEMs. Material Handlings adjusted operating income was up 59% to $16.5 million due to higher sales volume, lower depreciation and amortization expense and favorable price cost margin. Also in 2019 adjusted operating income included a $3.5 million charge for estimated product replacement costs. In the Distribution segment, sales increased 10% due to $2.9 million of incremental sales from the August 2019 Tuffy acquisition, and higher domestic sales in the legacy business. Distribution's adjusted operating income increased 41% to $5.1 million primarily as a result of higher sales volume and lower SG&A expenses. For the third quarter of 2020, we generated free cash flow of $16.2 million compared with $22.1 million last year. Working capital as a percent of sales at the end of the third quarter was 9.2%, which was up compared to Q3 of last year but was lower than last quarter. Cash on the balance sheet at the end of the third quarter was $84 million and our debt to adjusted EBITDA ratio was 1.1 times, which is consistent with previous quarters. That said, we do not expect the increased demand we experienced in the second and third quarters to continue into the fourth quarter. Turning to slide eight, you can see our guidance for 2020. On a consolidated basis, we now anticipate full year sales to decline in the low to mid single-digit percentage range, which is a slight improvement from our previous expectation of the decline in the mid to high single-digit range. We continue to expect depreciation and amortization to be approximately $21 million. Net interest expense to be approximately $4 million. A diluted share count of approximately $36 million shares. And capital expenditures to be roughly $15 million. Lastly, we anticipate that the adjusted effective tax rate will be approximately 26%. The experience we gained from completing the bolt-ons and Horizon 1, will prepare us to successfully execute larger acquisitions under Horizon two. I can see a path to grow Myers to approximately $2 billion in revenue while largely staying in the United States.

Adjusted diluted earnings per share was $0.30 compared with $0.15 for the third quarter of 2019. That said, we do not expect the increased demand we experienced in the second and third quarters to continue into the fourth quarter. Turning to slide eight, you can see our guidance for 2020. On a consolidated basis, we now anticipate full year sales to decline in the low to mid single-digit percentage range, which is a slight improvement from our previous expectation of the decline in the mid to high single-digit range.

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We have reached deferral modification agreements with the vast majority of our top 100 retailers who we deem nonessential and are forced to close in some capacity. In Q2, we executed 52 new leases totaling 256,000 square feet at a positive 22.9% spread and renewed 180 leases, covering 959,000 square feet at a positive 10.7% spread. Combined, our spreads were a strong plus 12%. New leasing and tenant retention efforts helped occupancy finish at 95.6% for the quarter. Anchor occupancy was even stronger at 98.2%, and small shop occupancy was 88%. This program provides our small shop retailers with a free legal advisor to help navigate the numerous state and federal programs available for small businesses, which, by our account, has potentially resulted in over $20 million of PPP funding for our small shop tenant. For the month of April, we collected cash-based rent totaling 68%. In May 66%, June 76%, and July is currently at 82%. During the second quarter, we granted rent deferrals totaling 18.5% of base rent. We fielded rent deferral requests for July that amounted to only 8% of scheduled rent and have worked out deferral plans for four basis points of total rent. This is a significant improvement from the start of the pandemic when in April, we fielded deferral request that amounted to 39% of ABR. Currently, 94% of our tenants are open with only 3% of ABR subject to mandated closures. Our goal is to entitle an additional 5,000 multifamily units in the next five years that will provide us with a total of 10,000 units by 2025. At Dania Pointe, we recently completed construction and now 15 tenant fit-outs under way, including Urban Outfitters and Anthropologie. We have our entire untapped $2 billion line of credit at our disposal, limited maturities on the horizon and received a further cash infusion from our Albertsons investment. Multi-tenant strip center transactions were down by 80% to 90% from April through July. This is coming off a vibrant and active January and February, which was up 30% and 16% year-over-year. For the second quarter 2020, NAREIT FFO was $103.5 million or $0.24 per diluted share as compared to $151.2 million or $0.36 per diluted share for the second quarter last year. The reduction was mainly due to an increase in credit loss reserves of $51.4 million as compared to the second quarter last year, resulting from the ongoing COVID-19 pandemic. On a positive note, we delivered incremental NOI of $1.9 million from our recently completed development projects at Lincoln Square, Grand Parkway, Mill Station and Dania Pointe. We also reduced our financing costs by $3.5 million, achieved with $8.2 million of savings from the previous redemptions of $575 million of preferred stock, offset by higher interest expense of $4.7 million due to increased debt levels. It is worth noting, although not included in NAREIT FFO but included in net income, we recognized realized gains totaling over $190 million or $0.44 per diluted share from the partial monetization of our Albertsons investment and an unrealized gain of $524.7 million on our remaining ownership stake in Albertsons. We received over $228 million in cash from these transactions and used the proceeds to reduce debt. So those tenants now on a cash basis, we reserved 100% of their outstanding accounts receivable. We recorded a $40.1 million credit loss reserve against accrued revenues during the quarter and an additional $11.6 million reserve against noncash straight-line rent receivables. As of June 30, 2020, our total uncollectible reserves stand at $56.1 million or 32% of our pro rata share of accounts receivable. Of the total credit loss reserve, $22.5 million is attributable to tenants on a cash basis. At the end of 2Q 2020, approximately 6.4% of our annual base rents are from cash basis tenants. In addition, we have a reserve of $21.6 million or 12.5% against straight-line rent receivables. Our liquidity position remains strong with over $200 million of cash and $2 billion available on our recently closed revolving credit facility with a final maturity in 2025. During the second quarter 2020, we obtained a fully funded $590 million term loan, further enhancing our liquidity position. We subsequently repaid $265 million of this term loan with proceeds from the partial Albertsons monetization during the second quarter. We finished the second quarter 2020 with consolidated net debt to EBITDA of 8.6 times and 9.4 times on a look-through basis, which includes our preferred stock outstanding and pro rata JV debt. However, if we include the realized gains from the partial monetization of the Albertsons investment, the consolidated net debt to EBITDA would be 6.5 times and the look-through metric would be 7.3 times, the level similar to first quarter 2020 results. Our weighted average debt maturity profile as of June 30, 2020, was 10.6 years, one of the longest in the REIT industry. Subsequent to quarter end, we issued a 2.7%, $500 million green bond. Pending investment in eligible green projects, the proceeds were used to repay in full the remaining $325 million outstanding on the April 2020 term loan and the early redemption of $200 million of the $484.9 million of bonds due in May of 2021. We will incur an early redemption charge of approximately $3.3 million during Q3 2020. Our consolidated debt maturities for 2021 of $425 million and our joint venture debt maturities of $195 million are quite manageable, given our liquidity position and availability on our $2 billion revolver and availability on the $150 million revolver in our KIR joint venture. Regarding our common dividend, during 2020, we have so far paid dividends of $0.56 per common share.

For the second quarter 2020, NAREIT FFO was $103.5 million or $0.24 per diluted share as compared to $151.2 million or $0.36 per diluted share for the second quarter last year.

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We have improved our end to end cycle times by 25% and since the beginning of the year, which is a significant improvement. Total revenue for the third quarter was $875 million and declined 2% from prior year. When we compare this year's third quarter to the third quarter of 2019, in other words, pre-COVID, our 2021 revenue grew over 10%, which illustrates that the bulk of the top line gains we made last year remain intact. Adjusted earnings per share was $0.08, and GAAP earnings per share was $0.05. EPS includes a $0.02 net tax benefit offset by a $0.03 charge related to a specific pricing assessment in Global Ecommerce, which I will discuss momentarily. Free cash flow was $30 million, and cash from operations was $71 million, down from prior year, largely due to higher Capex and changes in working capital, which are in line with our previous commentary on this topic. During the quarter, we paid $9 million in dividends and made $6 million in restructuring payments. We spent $57 million in Capex, as we continue to enhance our Ecommerce network and drive productivity initiatives in both our Ecommerce and Presort businesses. We ended the quarter with $743 million in cash and short-term investments. During the quarter, we redeemed our 2022 notes for $72 million. Notably, total debt has declined about $225 million since year-end 2020 to $2.3 billion. When you take our finance receivables, cash and short-term investments into consideration, our implied operating company debt is $556 million. Equipment Sales grew 4%. We had declines in Business Services of 1%, Support Services and Supplies of 4%, Rentals of 5% and Financing of 17%. Gross profit was $286 million and improved across our Ecommerce and Presort segments. Gross margin of 33% was flat to prior year. SG&A was $225 million and approximately $14 million lower year-over-year. SG&A was 26% of revenue, which is a 100 basis point improvement over prior year. Within SG&A, corporate expenses were $49 million, $4 million lower than prior year largely due to variable employee-related costs. R&D was $11 million or 1% of revenue. EBITDA was $92 million, and EBITDA margin was 10.5%, both of which were relatively flat to prior year. EBIT of $50 million was down about $4 million from prior year, while EBIT margin of 6% was flat to prior year. Total interest expense was $36 million, down $3 million year-over-year. Our tax rate of 1% includes net benefits associated with the resolution of tax matters. Shares outstanding were approximately 179 million. Within Ecommerce, revenue in the quarter declined 4% to $398 million. If you compare this quarter to third quarter of 2019, revenues for the Ecommerce segment are up over 40%. Domestic Parcel volumes were 41 million in the quarter, down from prior year on a tough compare, but up from 2019 levels. Demand for our services continues to be strong, as we signed over 130 client deals in the quarter and were able to bundle additional services with 40% of those signings. Gross margin improved 100 basis points from prior year despite higher labor and transportation cost and inclusive of the previously mentioned pricing assessment. EBITDA for the quarter was breakeven, which is an improvement of $3 million versus the same period last year. EBIT was a loss of $21 million. As I referenced earlier, our results in the quarter include an $8 million charge associated with a pricing assessment, which was mainly caused by lower-than-anticipated volumes that originate outside of the U.S. for our domestic delivery services. It is also important to highlight that since the beginning of the year, there has been a 25% improvement in our end-to-end cycle time from induction into our system to the actual delivery of the parcels. We have increased our PB fleet by 42% over prior year, which reduces our reliance on third-party transportation including use of the spot market. Revenue was $139 million, 9% better than prior year. For the quarter, Presort EBITDA was $27 million, and EBITDA margin was 20%. EBIT was $21 million, and EBIT margin was 15%. SendTech revenue was $338 million, which was down 5% from prior year. Last year's investment gains represent about 200 basis points of the year-over-year revenue decline for SendTech in the quarter. For the quarter, Equipment Sales saw 4% growth despite some supply chain challenges in obtaining product. In North America, more than 25% of our revenue comes from these new products, and we have begun to launch these products in select international markets. We are also seeing strong demand for our SendPro mailstation product, which we launched in April 2020 and have shipped over 40,000 of these devices to date. Our SaaS-based Subscription revenue grew 21%, and paid subscribers for our SendPro online product were up 58% over prior year. SendTech EBITDA was $107 million, and EBITDA margin was 32%. EBIT was $99 million, and EBIT margin was 29%. We still expect annual revenue at constant currency to grow over prior year in the low to mid-single-digit range. We still expect adjusted earnings per share to be in the range of $0.35 to $0.42.

Total revenue for the third quarter was $875 million and declined 2% from prior year. Adjusted earnings per share was $0.08, and GAAP earnings per share was $0.05. We still expect annual revenue at constant currency to grow over prior year in the low to mid-single-digit range. We still expect adjusted earnings per share to be in the range of $0.35 to $0.42.

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For over 80 years, Dollar General has served our customers [Technical Issues] through a unique combination of value and convenience. We remain committed to being part of the solution during these difficult times, and believe we are uniquely positioned to continue supporting our customers through our expansive network of nearly 17,000 [Technical Issues] within 5 miles or more than 75% of the US population. As announced in today's release, we invested approximately $13 million in employee appreciation bonuses during the quarter, bringing our total incremental investment in appreciation bonuses to about $73 million through the end of Q2. Additionally, we expect to invest up to $50 million in additional financial incentives in the second half of the year. To further advance these efforts, we recently expanded our diversity and inclusion team and announced the combined $5 million pledge with the Dollar General Literacy Foundation to support racial and social justice and education. In terms of our monthly comp cadence, sales increased 21.5% in May, 17.9% in June and 17.2% in July. Overall second quarter net sales increased 24.4% to $8.7 billion driven by comp sales growth of 18.8%. During the quarter, our highly consumable market share trends as measured by syndicated data continued to exhibit strength, including strong double-digit increases in both units and dollars over the 4-week, 12-week, 24-week and 52-week periods ending July 25th, 2020. We're particularly pleased that we once again delivered significant operating margin expansion, which contributed to second quarter diluted earnings per share of $3.12, an increase of 89% over the prior year. Gross profit as a percentage of sales was 32.5% in the second quarter, an increase of 167 basis points. SG&A as a percentage of sales was 20.4%, a decrease of 205 basis points or 161 basis points compared to Q2 2019 adjusted SG&A. As I mentioned, we also recorded expenses of $31 million in Q2 2019 reflecting our estimate for the settlement of certain legal matters. Moving down the income statement, operating profit for the second quarter was $1 billion, an increase of 80.5% or 71.3% compared to Q2 2019 adjusted operating profit. As a percentage of sales, operating profit was 12%, an increase of 373 basis points or 329 basis points compared to Q2 2019 adjusted operating profit. Operating profit in the second quarter was positively impacted by COVID-19 primarily through higher sales. The benefit from higher sales was partially offset by approximately $38 million of incremental investments that we made in response to the pandemic, including additional measures taken to further protect our employees and customers and approximately $13 million in appreciation bonuses for eligible frontline employees. Our effective tax rate for the quarter was 21.5% and compares to 22.9% in the second quarter last year. Finally, as Todd noted earlier, earnings per share for the second quarter was $3.12, which represents an increase of 89% or 79% compared to Q2 2019 adjusted EPS. Merchandise inventories were $4.4 billion at the end of the second quarter, essentially flat overall, and down 6% on a per store basis. Year-to-date through Q2, we generated significant cash flow from operations totaling $2.9 billion, an increase of $1.8 billion or 157%. Total capital expenditures through the first half were $424 million and included our planned investments in new stores, remodels and relocations and spending related to our strategic initiatives. As a result, we finished the quarter with $3 billion of cash and cash equivalents and $1.1 billion of availability under our undrawn revolving credit facility. During the quarter, we repurchased 3.2 million shares of our common stock for $602 million and paid a quarterly dividend of $0.36 per common share outstanding at a total cost of $90 million. With today's announcement of an incremental share repurchase authorization, we have remaining authorization of approximately $2.5 billion under the repurchase program. As a result, we are not providing guidance for fiscal 2020 sales or earnings per share at this time. With regards to share repurchases, we now expect to repurchase approximately $2.5 billion of our common stock this year, reflecting our strong liquidity position and confidence about the long-term growth opportunity for our business. Overall, we now expect to open 1,000 new stores, remodel 1,670 stores and relocate 110 stores representing 2,780 real estate projects in total. Finally, we are increasing our expectations for capital spending in 2020 to a range of $1 billion to $1.1 billion as we accelerate key initiatives and continue to invest in our core business to support and drive future growth. Since the end of Q2 and through August 25th, we have continued to experience elevated same-store sales, which have increased by approximately 15% during this timeframe. Finally, we expect to make additional investments in the second half as a result of COVID-19 including up to $50 million in employee appreciation bonuses which Todd mentioned, as well as investments in additional safety measures. During the first half we added more than 30,000 cooler doors across our store base. In total, we now expect to install more than 60,000 cooler doors this year compared to our previous target of 55,000 cooler doors in 2020. This offering is now available in approximately 6,400 stores with plans to expand more than 7,000 stores by year-end. This convenient, package pick up and drop off service is now available in over 8,000 locations. We now expect to complete our initial rollout to more than 8,500 stores by the end of Q3, further advancing our long track record of serving rural communities. Over the past year, we've increased the number of items tagged by more than 40%, and we continue to focus on leveraging technology to drive even higher levels of in-store execution. During the first half, we opened 500 new stores, remodeled 973 stores including 704 in the higher cooler count DGTP or DGP formats and relocated 43 stores. We also added produce in more than 120 stores, bringing the total number of stores which carry [Phonetic] produce to more than 870. As John noted, we now expect 2,780 real estate projects in total this year, as we continue to deploy capital in these high return investments while delivering an expanded assortment offering to an additional 200 communities in 2020. In total, for fiscal 2020, we now expect to invest up to $123 million in appreciation bonuses for eligible frontline employees to provide them with further support and demonstrate our continued appreciation for their exceptional efforts during these difficult times. As a reminder, these bonuses follow our 2017 investment of nearly $70 million in store manager compensation and training, as well as prior and continued investments in employee training, benefits and wages. We also held our annual leadership meeting earlier this month, and I was amazed by the team's ability to seamlessly transition to a virtual event resulting in continued development for more than 1,500 leaders of our Company. The NCI offering was available in approximately 4,300 stores at the end of Q2, and we continue to be very pleased with the strong sales and margin performance we are seeing across our NCI product categories. In fact, this performance is contributing to an incremental 8% comp sales increase in total non-consumable sales compared to stores without the NCI offering, as well as a meaningful improvement in gross margin rate in these stores. As a result of our strong performance in learnings to date, our plans now include accelerating the rollout of our NCI offering to more than 5,400 stores by the end of 2020. By incorporating a lite [Phonetic] version of this initiative into approximately 400 stores. We are pleased with the success we are seeing on this front, driven by higher overall in-stock levels and the introduction of more than 55 additional new items including both the national and private brands in select stores being serviced by DG Fresh. In total, we were self-distributing to more than 12,000 stores from eight -- excuse me, from eight DG fresh facilities at the end of Q2. Given our success and strong execution to date, we now expect to capture benefits from DG Fresh in approximately 14,000 stores from at least ten facilities by the end of this year. This compares to our previous expectation of approximately 12,000 stores by year's end. During the quarter, we accelerated the rollout of DG Pickup, our Buy Online Pickup in the Store offering to more than 2,500 stores compared to about 40 stores at the end of Q1 with plans for even more aggressive expansion as we move ahead. Self checkout is currently available in approximately 400 stores compared to more than 30 stores at the end of Q1.

Overall second quarter net sales increased 24.4% to $8.7 billion driven by comp sales growth of 18.8%. We're particularly pleased that we once again delivered significant operating margin expansion, which contributed to second quarter diluted earnings per share of $3.12, an increase of 89% over the prior year. Operating profit in the second quarter was positively impacted by COVID-19 primarily through higher sales. Finally, as Todd noted earlier, earnings per share for the second quarter was $3.12, which represents an increase of 89% or 79% compared to Q2 2019 adjusted EPS. Merchandise inventories were $4.4 billion at the end of the second quarter, essentially flat overall, and down 6% on a per store basis. As a result, we finished the quarter with $3 billion of cash and cash equivalents and $1.1 billion of availability under our undrawn revolving credit facility. During the quarter, we repurchased 3.2 million shares of our common stock for $602 million and paid a quarterly dividend of $0.36 per common share outstanding at a total cost of $90 million. As a result, we are not providing guidance for fiscal 2020 sales or earnings per share at this time. Since the end of Q2 and through August 25th, we have continued to experience elevated same-store sales, which have increased by approximately 15% during this timeframe.

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We enable 97%, as of now, 97% of our employees are working from home. And this is 97% of our nonbranch employees, of course. We are also -- I think as of last night, are close to $700 million or maybe over $700 million in loans that we've done through the PPP program. And our estimates are that we've helped retain about 85,000 or 86,000 jobs in our footprint through this program. By the way, while all this is happening, I just want to clarify, when I say 97% of the employees, nonbranch employees are working remotely, 76% of our branches are still open. And in other segments, we have reached out to everyone over $5 million in exposure to understand this exactly what the impact will be to our balance sheet. We are committed to our dividend, which we very recently increased by 10%. We were very -- we had an authorization from I guess -- I think it was the fourth quarter, it was authorized $150 million. We executed about $101 million, and we stopped that, and we're going to put it aside at least until the dust settles on the economy. So for example, right now, I'm talking about Page 4 in the slide deck, which then takes the DFAST severely adverse scenario for 2018 and 2020 and runs that on the March 31, 2020, portfolio to see what the losses would be. And by the way, not just 9 quarters of losses, but lifetime losses. We are -- we currently have over $8 billion, I think it's $8.5 billion of liquidity, safe liquidity available. We reported a net loss of $31 million, $0.33 a share. The provision for this quarter was $125 million. This increased our credit losses to $251 million, which is 1.08%. So we used to be, at December 31st, we were at $109 million or 47 basis points. On January 1st, under CECL, that number bumped up to $136 million or 59 basis points and now in the end of March, we were at 1.08% or $251 million. And that obviously was the biggest driver in the $31 million loss that we are posting this quarter. So $2.5 trillion and counting in fiscal stimulus and God knows how much on the monetary side. This forecast assumes an approximate 20% decline in GDP in Q2, unemployment reaching about 9% in Q2, the VIX approaching 60 and year-over-year decline in the S&P 500 approaching close to 30%. Another thing that I want to point out about our CECL estimate at 3/31, we did not make a qualitative overlay. I just got a text from someone saying that the call cut off for about 20 seconds, and they couldn't hear you for the first 20 seconds. That forecast assumes an approximate 20% decline in GDP in Q2, unemployment reaching about 9% in Q2, the VIX approaching 60, and year-over-year decline in the S&P 500 approaching close to 30%. I also want to mention briefly that we did not incorporate in our CECL estimates at 3/31 any significant qualitative overlay related to the impact of the government direct assistance, PPP, deferral programs that we may put in place. At 3/31, we felt we just didn't have enough data to properly dimension the impacts of those, so we did not reduce our reserve levels to take those into account. And Slide 9 provides for you a visual picture of what changed our reserve form 12/31/19 to 3/31/20. We started at $108.7 million. You can see here the $27.3 million impact of the initial implementation of CECL. The most significant driver of the increase in the reserve from January 1st after initial implementation to March 31st is not surprisingly, the change in the reasonable and supportable forecast, which increased the reserve by about $93 million. We've also taken an additional $16 million in specific reserves this quarter, the majority of this related to the franchise finance portfolio. I want to reemphasize that we ended at -- for the quarter at 3/31/20 with a reserve of 1.08% of loans, and we certainly don't think that's outside in comparison to other banks whose results we've seen released. So you can see that our reserves at March 31, 2020, stand at about 44% of severely adverse projected losses under 2018 DFAST and about 56% of some severely adverse projected losses under the 2020 DFAST severely adverse scenario. It came in at $85 million this quarter, and that compares to $104 million last quarter. So what was that delta of that $19 million? First, NII was down by $5 million. NII really is for two reasons; one, our margin contracted by 6 basis points from 2.41% to 2.35%. I think it's a good thing that we did not have that business but that creates little bit of asset growth and NIM that compressed 6 basis points leads to a $5 million reduction in NII. Last quarter, we had $7.5 million or so of securities gains. Well, this quarter, we've had $3.5 million of securities losses. So that's an $11 million-or-so swing in fee income. By the way, in the $3.5 million securities losses in this quarter, it includes a $5 million of unrealized losses on equity securities. HSA contributions, the 401(k) contribution, and all that stuff hits in the first quarter, so that is what drove expenses higher. To give you a little comparison, we have an SBA business where we probably do roughly about 200 units of business in a year. We are now in the process of trying to do over 3,000 loans through the SBA in less than a month or so. And so far, we've already close to $700 million of loans that we've done and we're not done yet. As you can see, deposits grew for the quarter by $606 million, and just over 50% of that or $305 million was noninterest DDA, which now stands at the 18.4% of total deposits, compared to 15.9% a year ago. The cost of total deposits declined by 12 basis points this quarter from 1.48% to 1.36%. To give you a better idea of this, the spot rate on total interest-bearing deposits, including our certificates of deposit, declined by 36 basis points of December 31, 2019, to March 31, 2020, and then by another 27 basis points through April 17th of 2020. So a total of 63 basis points decline during that period of time. On the loan side, Raj mentioned, loans that are relatively flat for the quarter with net growth of $29 million. The C&I business had total growth of $353 million, which was a good quarter for that segment. Mortgage warehouse outstandings have also increased by $84 million, but really offsetting that, our CRE book declined by $315 million, which is pretty much in line with what we expected, primarily driven by the continued decline in New York multi-family, which was $249 million. I would like you to flip to Page 16. So in total, it's about 14% of our portfolio. NPLs were also down a few basis points from 88 basis points to 85 basis points. So really just keep that in mind that the criticized classified this quarter went up by $269 million, $207 million of that $269 million was in the franchise portfolio. And 90% of that $207 million was really attributable to COVID as that kind of play itself out in the month of March. Charge-offs were 13 basis points. So more detailed metrics are toward the end of the slide deck, Page 22, 23, 24 and 25. But through April 20, we have received request for deferrals from almost 800 commercial borrowers and approved modifications for about 500 of those borrowers, totaling a little over $2 billion. We've also processed about $500 million in residential deferrals, excluding the Ginnie Mae that's early buyout portfolio, which would represent about 10% of that portfolio. Now we'll obviously be reassessing each of these loans at the end of the 90 days and looking in making the best decisions we can at that point in time. As you can see, the large amount of commercial deferrals is in the commercial real estate portfolio, particularly the hotel subsegment, where 90% of the borrowers, by dollars, have requested and been approved for deferrals, followed by the retail subsegment. We have also received a high level of deferral requests from borrowers in the franchise finance portfolio, as we've mentioned, where 74% of the borrowers have been approved for deferrals. At this point, and as of today, modification requests appear to be slowing over the last 10 to 15 days. We estimate that about 60% of the CRE retail exposure is supported by businesses that we would categorize as essential or moderately essential and the remainder we would categorize as nonessential businesses. Within this segment, LTVs averaged 57.5%, and 84% of the total are below the 65% level. We saw over a $200 million increase in criticizing classified assets in this segment during the first quarter. Approximately 90% of these downgrades were directly related to the COVID-19 crisis. LTVs in this segment averaged 54% and 78% of this segment has LTVs under 65%. I'll remind you that these unrealized losses do not impact regulatory capital, and I'll be referring to Slides 26 and 27 in the deck for this part of the discussion. The available-for-sale securities portfolio was in a net unrealized loss position of $250 million at March 31st. As you can see on Slide 26, 90% of the available-for-sale portfolio is in governance, agencies or is now rated AAA. At March 31st, we stressed the entire nonagency portfolio at the individual security level, modeling collateral losses that we believe to be consistent with levels reflecting the trough of the 2008 global financial crisis. The NIM declined by 6 basis points this quarter from 2.41% to 2.35% compared to the immediately in the proceeding quarter. To get a little bit into the components of that, the yield on interest-earning assets declined by 18 basis points. That reflects a decline of 9 basis points in the yield on loans and a 37-basis-point decline in the yield on investment securities. The decline in the yield on securities reflects the very short duration of that portfolio and to an extent, increases in prepayment speeds, which contribute about 5 basis points to the decline. The cost of interest-bearing liabilities declined by 14 basis points quarter over quarter. Our largest contributor of the $6.8 million decline in the other noninterest income line compared to the immediately preceding quarter was a reduction in income related to our customer swap program, and this was really attributable just to lower levels of activity in that space during the quarter. Employee compensation in benefits actually increased by $3 million compared to immediately our preceding quarter. So, a better comparison might be to the first quarter of the prior year, and compensation expense declined by $6.3 million compared to the first quarter of 2019. We generally have a pretty good idea of what we're seeing in the business and the economies where we operate or we can look out about 6 months or so. Like I said, -- rough, so somewhere in the $800 million number is what will people end up with. So whether it's BankUnited 2.0 or all the other things that we're working on, they continue. Some of the initiatives around BankUnited 2.0, especially around revenue might get pushed out by a couple of months because it's new products that are being launched.

We reported a net loss of $31 million, $0.33 a share.

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Before we begin, let me remind you that the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 apply to this conference call. Roto-Rooter is well positioned post-pandemic, and we anticipate continued expansion of market share by pressing our core competitive advantages in terms of brand awareness, customer response time and 24/7 call centers and Internet presence. VITAS' net revenue was $312 million in the second quarter of 2021, which is a decline of 4.7% when compared to the prior year period. This revenue decline is comprised primarily of a 6.3% reduction in our days of care, offset by a geographically weighted Medicare reimbursement rate increase of approximately 1.8%. Acuity mix shift did have a net impact of reducing revenues approximately $3.8 million in the quarter or 1.2%. The combination of a lower Medicare Cap billing limitation and other contra-revenue charges offset a portion of the revenue decline by roughly 90 basis points. VITAS did accrue $2 million in Medicare Cap billing limitations in the second quarter of 2021, and this compares to a $5.7 million Medicare Cap billing limitation in the second quarter of 2020. Of our 30 Medicare provider numbers, right now 27 of these provider numbers have a Medicare Cap cushion of 10% or greater. One of our provider numbers has a cap cushion between 0% and 5%, and two of our provider numbers currently have a fiscal 2021 Medicare Cap billing limitation liability. Roto-Rooter generated revenue of $220 million in the second quarter of 2021, which is an increase of $45.6 million or 26.1% over the prior year quarter. Total Roto-Rooter branch commercial revenue totaled $50.3 million in the quarter, an increase of 31.8% over the prior year. The aggregate commercial revenue growth consisted of our drain cleaning revenue increasing 39.8%, plumbing increased 32.4% and excavation expanding 25.8%. Water restoration also increased 8.3% on the commercial side. On the residential side, total residential revenue in the quarter totaled $149 million, an increase of 23.7% over the prior year period. The aggregate residential growth consisted of drain cleaning increasing 20.6%, plumbing expanding 30.7% and excavation increasing 22.4%. Water restoration also increased 23.1%. During the quarter, Chemed repurchased 250,000 shares of stock for roughly $122 million, which equates to a cost per share of $487.53. As of June 30, 2021, there was approximately $312 million of remaining share repurchase authorization under this plan. We've also updated our 2021 earnings guidance as follows: VITAS' full year 2021 revenue prior to Medicare Cap is estimated to decline approximately 4.5% when compared to 2020. Our average daily census in 2021 is estimated to decline approximately 5%. VITAS' full year adjusted EBITDA margin prior to Medicare Cap is forecasted to be 18.3%, and we are currently estimating $7.5 million for Medicare Cap billing limitations in calendar year 2021. That's an improvement from the initial $10 million of Medicare Cap we estimated at the start of this year. Roto-Rooter is forecast to achieve full year 2021 revenue growth of 15% to 15.5%. Roto-Rooter's adjusted EBITDA margin for 2021 is estimated to be between 28% and 29%. So based upon this discussion, our full year 2021 adjusted earnings per diluted share, excluding noncash expense or stock options, any tax benefits we receive from stock option exercises as well as costs related to litigation and other discrete items, is estimated to be in the range of $18.20 to $18.50. The revised guidance compares to our initial 2021 guidance of adjusted earnings per diluted share of $17 to $17.50. In the second quarter, our average daily census was 17,995 patients, a decline of 6.3% over the prior year. In the second quarter of 2021, total VITAS admissions were 16,840. More importantly, admissions in the second quarter of 2021 exceeded discharges by 315 patients. In the second quarter, our hospital directed admissions expanded 7.8% and emergency room admits decreased 9%. Total home-based preadmit admissions decreased 9.3%, nursing home admits declined 9.9%, assisted living facility admissions declined 17.5% when compared to the prior year quarter. Our average length of stay in the quarter was 94.5 days. This compares to 90.9 days in the second quarter of 2020 and 94.4 days in the first quarter on 2021. Our median length of stay was 14 days in the quarter, which is equal to the second quarter of 2020 and is a 2-day improvement when compared sequentially to the first quarter of 2021.

So based upon this discussion, our full year 2021 adjusted earnings per diluted share, excluding noncash expense or stock options, any tax benefits we receive from stock option exercises as well as costs related to litigation and other discrete items, is estimated to be in the range of $18.20 to $18.50.

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Operating cash flow was positive for the quarter and our owned and leased segment adjusted EBITDA improved over $40 million from the first quarter. System wide RevPAR grew 58% in the second quarter compared to the first quarter. Systemwide RevPAR was trending approximately 50% of 2019 levels just prior to Memorial Day and it's grown to nearly 75% of 2019 levels for the month of July with RevPAR ending at approximately $100. RevPAR growth in the United States was the primary driver of the jump in systemwide RevPAR improving 75% in the second quarter over the first quarter and more than double a 30% aggregate growth rate for the remainder of the world. To give you a sense of the disparity as of mid-July, geographic areas such as Europe, Southeast Asia and the Middle East are trending at less than 50% of fully recovered RevPAR levels, while the United States, Mainland China and the Caribbean are over 80% recovered. In January, comparable US resort RevPAR was down 75% versus 2019. In June, just five months later, RevPAR was 11% above 2019 with strong average rate growth in June of over 25% compared to 2019 levels. This trend has only accelerated further in July with leisure transient nearly 20% ahead of 2019 levels in the United States and even stronger in Mainland China. Notably, we RevPAR performance is now trending at 60% at 2019 levels at the end of June compared to just 40% two months prior. Business transient remains approximately 40% recovered globally and demand varies significantly by market. In the United States, dense urban markets such as New York, Washington D.C., Chicago and San Francisco are still only 20% to 30% recovered, while the majority of other urban markets are trending at a 50% recovery level or higher. Group revenue booked in June for events that will occur in 2021 has reached approximately 90% of 2019 levels in our Americas full service managed properties with the rate of cancellation diminishing to only a fraction of the levels we experienced just a couple of months ago. As we look to 2022, while group is down in the mid-teens compared to 2019, our leads are tracking 30% higher, which suggests that our pace deficit should improve. Additionally, we're pleased to see group business booked in the second quarter for 2022 at an average rate that is 5% higher than the same period in 2019. We've opened 100 hotels over the trailing 12 months, a record level of organic expansion leading to net room growth of 7.1% in the second quarter. Even with our rapid rate of hotel openings, we've maintained our pipeline of signed deals in a challenging environment, closing the second quarter with a development pipeline of 100,000, 101,000 rooms representing over 40% of our existing lease base. Already through the first half of the year, the number of hotels in these four brands have expanded by 20% and we expect to end the year with growth of 30% or more. It's exciting to see how these brands have been so quickly adopted by our loyal guests with the World of Hyatt program driving over 40% of room nights. RevPAR index for comparable former Two Roads hotels is up 13% versus 2019 through the first half of this year. In the span of just three years, we tripled the number of lifestyle insofar properties from approximately 50 to 150, accounting for nearly 40% of total hotel openings over that time frame. Since 2017 we've grown our resort room count by 45% with well over 80% of that growth in the luxury segment. Our base of loyalty members is the largest, it's ever been and has grown 14% since the same point last year. Our co-brand credit card spend is trending well above 2019 levels and our enhancements to our digital platform are driving hi.com booked revenue more than 20% higher than 2019 levels which is outpacing OTA channels. During the quarter we announced the disposition of higher agency loss times for approximately $275 million a price that was above our pre-COVID-19 expectations. We also acquired Ventana Big Sur, an Alila resort for $148 million securing our brand presence in a highly sought after resort destination. With the completion of these asset transactions, we've realized net proceeds of approximately $1.1 billion since the time of our announcement in March of 2019. In addition to these transactions, I'm pleased to note that we are in advanced stages for the disposition of two other assets in the aggregate amount of $500 million. Should we successfully close these two transactions, we will exceed our $1.5 billion asset sell-down commitment and do so well before our target date and at an aggregate multiple in the high teens. In total, from the outset of our asset sell-down strategy announcement in November of 2017, and assuming the closing of the sale of the two properties in process, we will have sold over $3 billion of assets at an average EBITDA multiple of just under 17.5 times, demonstrating the valuations realized in our disposition efforts are materially in excess of the implied valuation, the market has placed on our owned and leased business. Late yesterday, we reported a second quarter net loss attributable to Hyatt up $9 million and a diluted loss per share of $0.08. Adjusted EBITDA was $55 million for the quarter, a sharp improvement from the adjusted EBITDA loss of $20 million in the first quarter of this year. Systemwide RevPAR was $72 in the second quarter, representing a 50% decline compared to the same period in 2019 on a reported basis and a 58% increase compared to the first quarter of 2021. Both occupancy and rate contributed meaningfully to the sequential RevPAR growth with roughly 60% of the improvement coming through occupancy and 40% strip rate. Leisure transient was a key driver of our improved results for the quarter, leading to a material increase in our base, incentive and franchise fees, which totaled $77 million in the second quarter, a notable acceleration of $49 million in the first quarter. In June, systemwide comparable occupancy eclipsed 50% and as of June 30, only 18 hotels or less than 2% of hotel inventory remained closed. Our management and franchising business delivered a combined adjusted EBITDA of $63 million, improving over 90% to $33 million in the first quarter. Our owned and leased hotel segment, which delivered $12 million of adjusted EBITDA for the quarter improved spend more than $40 million from the first quarter of 2021. Owned and leased RevPAR was $87 for the second quarter, experiencing strong acceleration throughout the quarter with RevPAR improving from $73 in April to $107 in June, nearly doubling the rate of improvement of our systemwide portfolio. And this was most pronounced in June, our strongest month in the quarter, as group room nights accounted for 25% of the total room night mix, up from just 18% in May. Preliminary RevPAR for the owned and leased portfolio in July is approximately $135, up nearly 30% from June, and nearly 85% recovered versus the same month in 2019. Our comparable owned and leased operating margins improved to 13.9% in June -- second quarter of June finishing above 19% a sharp improvement from the negative margins last quarter. This is evidenced by our ability to quickly realize stronger rates, which were up 20% at our owned and leased resorts compared to 2019 in the second quarter. Our cash investments in this area have remained in the same approximate range as the prior two quarters about $10 million to $15 million per month. As of June 30, our total liquidity inclusive of cash, cash equivalents and short-term investments and combined with borrowing capacity was approximately $3.2 billion with the only near-term debt maturity being $250 million senior notes maturing this month. We received a $254 million US tax refund in July related to 2020 net operating losses carried back to prior years under the CARES Act. Consistent with our communication in the first quarter, we continue to expect adjusted SG&A to be in the approximate range of $240 million excluding any bad debt expense. Further, we continue to expect capital expenditures to be in the range of $110 million. Turning to net rooms growth, earlier this quarter in connection with the pending our agreement with Service Properties Trust, which extended our management of 17 high-place hotels that we previously forecasted to exit the system, we increased our net rooms growth projection to approximately 6%, up from greater than 5% as previously reported in the first quarter of 2021. We're updating this expectation of net rooms growth to be greater than 6% for the year. Our previously communicated earnings sensitivity levels illustrated that a 1% change in RevPAR level using 2019 RevPAR as a baseline resulted in an impact of approximately $10 million to $15 million in adjusted EBITDA. As the relationship between owned and leased systemwide RevPAR has formalized, the earnings sensitivity is now expected to improve toward the midpoint of the $10 million to $15 million range of adjusted EBITDA, reflecting our ability to mitigate the adjusted EBITDA downside impact relative to our 2019 results.

Late yesterday, we reported a second quarter net loss attributable to Hyatt up $9 million and a diluted loss per share of $0.08. As of June 30, our total liquidity inclusive of cash, cash equivalents and short-term investments and combined with borrowing capacity was approximately $3.2 billion with the only near-term debt maturity being $250 million senior notes maturing this month. We received a $254 million US tax refund in July related to 2020 net operating losses carried back to prior years under the CARES Act. Consistent with our communication in the first quarter, we continue to expect adjusted SG&A to be in the approximate range of $240 million excluding any bad debt expense. Further, we continue to expect capital expenditures to be in the range of $110 million.

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For example, in North America, Irrigation, this year we've raised price five times on irrigation systems, totaling more than 30% inclusive of upcoming increases. Record sales of $894.6 million increased $205.8 million or nearly 30% compared to last year, an increase more than 26% on a constant currency basis. Starting with Utility, sales of $267.9 million grew $36.5 million or 15.8% compared to last year. Moving to Engineered Support Structures, record sales of $269.4 million increased $16 million or 6.3% compared to last year. Global lighting and transportation sales grew 3.3% as pricing improved in all regions, and international markets benefited from increasing stimulus and infrastructure investments, especially in Europe and Australia. Wireless communication products and components sales grew 7.2% compared to last year. Turning to Coatings, sales of $98.2 million grew $18.2 million or 22.7% compared to last year and improved sequentially from last quarter due to improving end market demand, favorable pricing and currency impacts. Moving to Irrigation, record global sales of $282 million grew $131.3 million or 87.2% compared to last year with sales growth across all served markets, including more than 35% growth in our technology sales. In North America, sales of $156.1 million grew 57.6% year-over-year. International sales of $125.9 million grew 1.4 times compared to last year, led by the ongoing delivery of the Egypt project, strong European market demand and record sales in Brazil. Regarding our project pipeline in Africa, we recently were awarded more than $20 million of additional projects from new customers in Egypt, Sudan and Rwanda demonstrating our market leadership, global operations footprint and project management capabilities. Their technology is currently being used on over 5,300 fields on a variety of crops including corn, soybeans, potatoes, wheat, onions, alfalfa and tomatoes. With this acquisition, we expect those particular sales to grow more than 50% per year over the next three to five years. Prospera brings the strongest team in the industry and we are fortunate to have 100 highly talented and motivated employees on board, including experts in data science and machine learning. We also completed the acquisition of PivoTrac, the subscription based AgTech company that provides remote sensing and monitoring solutions for the southwest U.S. market, helping grow our technology sales to $50 million year-to-date. In the second quarter, we were awarded projects totaling $47 million. Additionally, over the past 18 months, we received more than 30 orders for the North American market. In the second quarter, we were awarded three projects, totaling $25 million. Our environment and social quality scores have improved significantly this year from a 6 to a 2 for environment and from a 6 to a 3 for social, while governance has held steady at a solid 2. Operating income of $90.9 million or 10% of sales grew $25.2 million or 38% compared to last year driven by higher volumes in irrigation, improved operating performance and a favorable pricing notably in Engineered Support Structures. Diluted earnings per share of $3.06 grew more than 50% compared to last year, primarily driven by very strong operating income and a more favorable tax rate of 22.5%. On Slide 10, in Utility Support Structures, operating income of $21.2 million or 7.9% of sales decreased $4.1 million or 300 basis points compared to last year. Record operating income of $31.9 million or 11.9% of sales increased $9 million or 290 basis points compared to last year. In the Coatings segment, operating income of $14.7 million or 14.9% of sales was $4.3 million or 190 basis points higher compared to last year. In the Irrigation segment, operating income of $42.9 million or 15.2% of sales nearly doubled compared to last year and was 80 basis points higher year-over-year. We delivered positive operating cash flows of $37 million and positive free cash flow this quarter despite continued inflationary pressures, increasing our working capital needs. This quarter we closed on Prospera acquisition for a purchase price of $300 million, funded through a combination of cash on hand and short-term borrowings on our revolving credit facility. We also acquired 100% of the assets of PivoTrac for $12.5 million, funded by cash on hand. Capital spending in first half of 2021 was $49 million and we returned $42 million of capital to shareholders through dividends and share repurchases, ending the quarter with just over $199 million of cash. Our balance sheet remains strong with no significant long-term debt maturities until 2044. Our leverage ratio of total debt to adjusted EBITDA of 2.3 times remains within our desired range of 1.5 times to 2.5 times. Net sales are now estimated to grow 16% to 19% year-over-year driven primarily by very strong agricultural market fundamentals. Further, we now expect Irrigation segment sales to grow 45% to 50% year-over-year and continue to assume a foreign currency translation benefit of 2% of net sales. 2021 adjusted earnings per share is now estimated to be between $10.40 and $11.10. In Utility Support Structures, we expect a meaningful sequential improvement to the quality of earnings, beginning in the third quarter driven by margin improvement as pricing becomes more aligned with steel cost inflation. Demand for wireless communication products and components remains strong and we expect sales growth in line with expected market growth of 15% to 20%. Moving to Irrigation, we expect a very strong year 45% to 50% sales growth based on strength in global underlying Ag fundamentals, the estimated timing of deliveries of the large Egypt project and another record sales year in Brazil. Overall, we continue to see strong demand and positive momentum across all businesses, evidenced by backlog of more than $1.3 billion at the end of second quarter and the demand drivers are in place to sustain this momentum into 2022. As we discussed at our Investor Day, we remain focused on the execution of our strategy, which is fueled by our dedicated and talented team of 10,000 employees and our differentiated business model.

Record sales of $894.6 million increased $205.8 million or nearly 30% compared to last year, an increase more than 26% on a constant currency basis. Operating income of $90.9 million or 10% of sales grew $25.2 million or 38% compared to last year driven by higher volumes in irrigation, improved operating performance and a favorable pricing notably in Engineered Support Structures. Diluted earnings per share of $3.06 grew more than 50% compared to last year, primarily driven by very strong operating income and a more favorable tax rate of 22.5%. Further, we now expect Irrigation segment sales to grow 45% to 50% year-over-year and continue to assume a foreign currency translation benefit of 2% of net sales. 2021 adjusted earnings per share is now estimated to be between $10.40 and $11.10. In Utility Support Structures, we expect a meaningful sequential improvement to the quality of earnings, beginning in the third quarter driven by margin improvement as pricing becomes more aligned with steel cost inflation.

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Adjusted segment operating profit was $1.15 billion, 12% higher than the fourth quarter of 2019. For the full year, we delivered record adjusted earnings per share of $3.59, $3.4 billion in adjusted segment operating profit, 12% higher than 2019, four straight quarters of year-over-year segment operating profit growth, and trailing four-quarter adjusted ROIC of 7.7%, almost 200 basis points above our weighted cost of capital. The team managed a wide variety of risks superbly and we achieved our strategic initiatives, exceeding our $500 million to $600 million guidance and driving our ability to deliver a steady, sustainable earnings growth. Beyond that, for the year, our Ag Services and Oilseeds team delivered more than $300 million in capital reduction initiatives. We achieved our 15x20 environmental goals ahead of schedule and launched Strive 35, an even more ambitious plan to reduce greenhouse gas emissions, energy, water and waste by 2035. And we are partnering with farmers in their efforts to pull better outcomes, supported by the 6.5 million acres we had in sustainable farming programs over recent years. Finally, I'm proud to say we surpassed by about 10% our stretch goal of $1.3 billion in readiness runway benefits by the end of the year. This dividend will be our 357th consecutive quarterly payment, an uninterrupted record of 89 years. As Juan mentioned, adjusted earnings per share for the quarter was $1.21, down from $1.42 in the prior-year quarter. As a reminder, the fourth quarter of last year was positively impacted by the recognition of about $0.61 per share for the retroactive biodiesel tax credits. Absent this, earnings would have grown by about 49%. Our trailing four-quarter average adjusted ROIC was 7.7%, almost 200 basis points higher than our 2020 annual WACC. And our trailing four-quarter adjusted EBITDA was about $3.7 billion. The effective tax rate for the fourth quarter of 2020 was approximately 8% compared to a benefit of 1% in the prior year. The calendar year 2020 effective tax rate was approximately 5%, down from the approximately 13% in 2019. Absent the effect of earnings per share adjusting items, the effective tax rate for the fourth quarter was approximately 11% and for the calendar year 2020 was approximately 9%. Looking ahead, we're expecting full-year 2021 effective tax rate to be in the range of 14% to 16%. We generate about $3.1 billion of cash from operations before working capital for the year, significantly higher than 2019. Return of capital for the year was $942 million, including more than $800 million from dividends. We finished the quarter with a net debt to total capital ratio of about 32%, up from the 29% a year ago due to higher working capital needs due to rising commodity prices. Capital spending for the year was about $820 million, in line with our guidance and well below our depreciation and amortization rate of about $1 billion. For 2021, we expect capital spending to be in the range of $900 million to $1 billion. Captive insurance results were negatively impacted by $15 million more in net intracompany settlements compared to the prior-year quarter. In the corporate lines, unallocated corporate costs of $278 million were higher year-over-year due primarily to increased variable performance-related compensation expense accruals, increased IT and project-related expenses and centralization of certain costs, including from Neovia. Ag Services results were significantly higher year-over-year. Approximately $80 million of prior timing effects reversed in the quarter as expected. There was approximately $125 million in net negative timing in the quarter, driven by basis impacts and improved soft seed margins. For the full year, Ag Services and Oilseeds delivered exceptional results of $2.1 billion, 9% higher than 2019. Considering the impact of lockdowns in both driving miles and the food service sector, we're extremely proud of our Carbohydrate Solutions team for delivering full-year results of $717 million, 11% higher than 2019. They acted decisively by temporary idling production at our 2 VCP dry mill plans, helping address industry supply and demand balances. The Nutrition team delivered 24% year-over-year growth in the quarter. For the full year, Nutrition results were $574 million, 37% higher than 2019. The Nutrition team grew revenue 5% on a constant currency basis and continued to expand EBITDA margins. We expect solid profit growth for the year for Carbohydrate Solutions. Based on our current organic growth plans, we expect the Nutrition team to deliver solid revenue expansion and enter a period of an average 15% per annum operating profit growth, consistent with our strategic plan. With the strong execution of these strategic initiatives and improving market conditions as the year progresses, we expect to build on a record 2020 with a strong growth in segment operating profit and another record year of earnings per share in 2021.

Adjusted segment operating profit was $1.15 billion, 12% higher than the fourth quarter of 2019. As Juan mentioned, adjusted earnings per share for the quarter was $1.21, down from $1.42 in the prior-year quarter. Ag Services results were significantly higher year-over-year. We expect solid profit growth for the year for Carbohydrate Solutions. With the strong execution of these strategic initiatives and improving market conditions as the year progresses, we expect to build on a record 2020 with a strong growth in segment operating profit and another record year of earnings per share in 2021.

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Adjusted earnings of $0.87 per share in the fourth quarter equaled that of prior year. In 2020, GAAP earnings were adjusted to exclude $6 million of expense or $0.28 per share and included a non-cash impairment of a small overseas investment. 2019 fourth quarter adjusted results excluded a net gain of $1.2 million or $0.05 per share, mostly related to a post retirement plan settlement. In the fourth quarter, adjusted operating income of $21 million and corresponding earnings per share of $0.87 both equaled the prior year. With the combination of a strong market demand, new product launches and efficient manufacturing, technical product sales increased an impressive 11% versus 2019 and adjusted operating income of $18 million reached the highest quarterly level in recent history. Market demand in Fine Paper & Packaging, as expected, has a more extended recovery curve and we remain on track for this business to recover 90% of its pre-COVID quarterly run rate of $90 million this year. We aggressively reduced costs and working capital, resulting in free cash flow of $75 million, one of our highest years ever. Versus the third quarter sales increased 8%; adjusted operating income was up by more than 30%; and adjusted earnings per share jumped almost 60%. These results were led by our Technical Products segment, which now makes up almost 65% of our total revenue. Sales of $137 million in the quarter were up from quarter three, and more impressively, grew 11% versus last year. The increase was driven primarily by volume growth and helped by currency translation as the stronger euro increased the top line by about $5 million. Our filtration business has continued to perform extremely well and fourth quarter revenues were up almost 30% to a record $66 million. Transportation, filtration media sales grew strongly in Europe and the U.S. and sales of industrial filters increased by more than 20%. Quarterly revenues also included about $4 million for face mask media, which we began selling in 2020. Outside of filtration, our Industrial Solutions business also performed well with almost 20% growth in backings, primarily due to increased tape revenue with new products introduced at some of our most strategic customers earlier in the year. Segment adjusted operating income of $18 million was up from $10 million in the fourth quarter of 2019 and operating margins also increased from 8% to 13% of sales. Turning to Fine Paper & Packaging, net sales of $70 million increase from the prior quarter and, as expected, due to COVID, were below sales in the fourth quarter of 2019. Segment adjusted operating profit was just under $8 million, up 15% from the third quarter, but below prior year due to lower sales and production volumes and a less favorable mix. Consolidated SG&A was $21.5 million, down almost $2 million from last year. In 2021, with the resumption of more normalized spending, we expect quarterly SG&A of approximately $25 million with unallocated corporate costs of $5.5 million. Interest expense was $3.1 million in the quarter, up from $2.8 million in 2019. Our income tax rate in the fourth quarter was 15% compared to 19% in the prior year. On an ongoing annual basis, we expect our tax rate to be approximately 22%. With $37 million of cash on hand and no borrowings against our revolver, year-end liquidity was over $175 million and remains in excellent shape. Cash generated from operations in the fourth quarter was $13 million, and while down from the fourth quarter of 2019, it decreased for the right reasons. In addition, as noted in our last call, we accelerated $6 million of retirement plan cash contributions into 2020. Fourth quarter capital spending was $7 million. For the full year, capital spending was only $19 million as we cut or deferred non-critical items. In 2021, we expect to resume more normal spending to around $35 million. Input costs in 2021 could be more than $20 million higher than in 2020. With the euro currently over $1.20, it's more than $0.05 above the 2020 average. Each $0.05 is worth about $10 million to annually of sales and a little less than $2 million of operating income or $0.10 per share. Publishing is a relatively small category with sales of less than $30 million and mid-single digit operating margins. The Neenah Operating System will also be an important contributor with incremental value creation of over $20 million annually when fully implemented.

Adjusted earnings of $0.87 per share in the fourth quarter equaled that of prior year. In the fourth quarter, adjusted operating income of $21 million and corresponding earnings per share of $0.87 both equaled the prior year.

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First quarter was another example of steady execution, and it's illustrated by us generating $101 million in free cash flow. So for the quarter, we repurchased 1.5 million shares at an average price of $12.26 per share at a total cost of $18 million. We still have ample capacity of around $240 million under our existing stock repurchase program, which, as a reminder, that's not subject to an expiration date. Also in the quarter, we upped our free cash flow guidance by $25 million to $450 million. That's $2.04 per share compared to the previous guidance of $1.93 per share. Our steady performance drives our confidence in continuing to execute upon our seven year free cash flow plan, and we continue to expect will generate over $3 billion over those seven years. While our Q1 result of $0.66 is up roughly $0.05 quarter-over-quarter, we're still more than $0.11 better than our next closest competitor. It's also worth noting that, that $0.05 increase was driven predominantly by some reworking of our FT book, which allowed us to eliminate some unused FT and exchanges for some FT that is better matched up with our production locations. That is how we generate, on average, $500 million per year of free cash flow over the next six years at strip pricing. We are expecting around $10 million of unused firm transportation to roll off in 2021, a modest amount next year in 2022 and then another $20 million rolling off across -- through 2023 through 2025. So with these changes, and assuming all future free cash flow goes toward debt repayments, we would expect fully burden cost to decrease to around $0.90 per Mcfe and then lower in years beyond 2021. During the quarter, we turned in line five Marcellus wells, and we're in the process of drilling out another 13 that will be turned in line within the next two weeks. Those 18 wells had an average lateral length of just over 13,000 feet and has an average all-in cost of less than $650 per foot per lateral foot. Also during the quarter, we brought online two Southwest PA Utica wells, the Majorsville 12 wells. Deep Utica have continued to come down with the all-in capital cost for these two wells averaging $1,420 per lateral foot. As we've really discussed, we only have four additional SWPA Utica wells in our long-term plan through 2026, but based on what we're seeing so far at Majorsville 12, we're excited about the deep Utica's potential as either a growth driver if gas prices improve or as a continuation of our business plan for years and into the future. Speaking of our hedging program, during Q1, we added 136 Bcf of NYMEX hedges, 15.5 Bcf of index hedges and 61.3 Bcf of basis hedges. For 2021, we are now approximately 94% hedged on gas based on the midpoint of our guidance range and after backing out 6% to liquids. That 94% includes both NYMEX and basis hedges or fully covered volumes, which are hedged at $2.48 per Mcf. Our confidence in future execution supports a $25 million increase in our 2021 free cash flow guidance and our continued expectation to generate over $3 billion across our long-term plan. As you can see, CNX has an incredibly low reinvestment rate, which supports our expectation to generate average annual free cash flow of $500 million across our long-term plan. In the quarter, we reduced net debt by approximately $70 million. Lastly, as you can see on the slide, our public debt continues to trade in the 4% to 5% range. We also increased our NGL realization expectations by $5 per barrel as a result of the increase in expected NGL realizations. As we have already highlighted, we are increasing free cash flow for the year by $25 million. First, we proactively reduced Scope one and two CO2 emissions over 90% since 2011, something that a few, if any, of any public company had claimed. This resulted in historical mitigation of cumulatively over 700 Bcf of methane emission that would have otherwise been vented into the atmosphere. The elimination of diesel fuel in this operation is equivalent to taking 23,000 passenger vehicles off the road for a year. We recycled 98% of produced fluid in our core operation. These are the strategies that have allowed CNX to thrive for over 150 years and will continue to drive our success. We've committed to make substantial multi-year community investment of $30 million over the next six years to widen the path of the middle class in our local community, while growing the local talent pipeline. 100% of our new hires will be from our area of operation, and we will maintain at least 90% local contract workforce. We committed 6% of our contract spend to local, diverse and businesses in 2021 and dedicated 40% of the total CNX small business spend to companies within the Tri-State area. Finally, while you will hear more about this in the weeks and months ahead, I want to take the opportunity to announce that CNX is developing an innovative proprietary solution in combination with a few commercial solutions that allows us to significantly minimize from a blowdown and pneumatic devices, which make up about 50% of our emission source.

Also in the quarter, we upped our free cash flow guidance by $25 million to $450 million. Lastly, as you can see on the slide, our public debt continues to trade in the 4% to 5% range.

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The fast pace of orders growth that we saw in the first half of the year has continued with orders up 20% in the quarter, driving our backlog up 34%. A month ago, we indicated a probable $100 million impact on full year revenue, driven by the global supply chain environment. Having raised guidance at the end of the first and second quarters, we now anticipate that the constraints on volume will moderate our full year revenue growth to between 3% and 4%, and bring adjusted earnings per share into a range of $2.40 to $2.50, which represents roughly 20% earnings per share growth over last year. Revenue grew 2% organically compared to the prior year. Utilities, our largest end market, was down 5% despite continuing strong demand. Industrial was up 11%, led by our continued growth in the emerging markets and Western Europe. Commercial grew 10%, led by the ongoing recovery in the United States. While residential, our smallest end market, was up 4%. As Patrick has mentioned, the team delivered exceptional organic orders growth of 20%, which was broad-based across all segments and regions. M&CS led the way with nearly 40% -- 42% orders growth, driven by large smart metering contract wins, the impact of longer lead times, and pent-up demand from the COVID-19-impacted prior year. We're exiting the quarter with an overall backlog of about 34%. Margins were above our forecasted range with EBITDA margins coming in at 17.9%, reflecting strong productivity and good cost control by the team. Year over year, EBITDA margin contracted 30 basis points as inflation and strategic investments were largely offset by productivity, price realization, and cost containment. Our earnings per share in the quarter was $0.63. In Water Infrastructure, orders were up 9% on strength in wastewater transport applications in the U.S. and Western Europe. Revenues were up 2% organically. In Applied Water, orders were up 17% organically in the quarter on broad industrial strength and commercial recovery. Revenue grew 8% in the quarter from continued commercial momentum and industrial growth in most regions. and Western Europe both contributed 6% growth due to the uplift from commercial and industrial. Emerging markets were up 13% on continued strength in China and gains in Eastern Europe. Segment EBITDA margin contracted 60 basis points compared to the prior year as inflation and the investments to -- more than offset productivity benefits and price realization. In M&CS, orders were up 42% organically, as I mentioned a moment ago. Our M&CS backlog now stands at roughly $1.6 billion. And organic revenue was down 5%, which is a tangible effect of chip shortages. By geography, Western Europe was up 1% while emerging markets was flat. Segment EBITDA margin in the quarter was down by 60 basis points compared to the prior year as volume declines from component shortages and higher inflation offset productivity and price realization. We closed in the quarter with $1.3 billion in cash after paying down $600 million of debt in the third quarter. Free cash flow conversion was 57% in the quarter, in line with our expectations, and we continue to expect full year of free cash flow conversion of 80% to 90%. Net debt-to-EBITDA leverage was in 1.3 times at the end of the quarter. One more thing to mention, albeit with a slightly greater time horizon, there's been a lot of discussion about cross-border supply chains. Just here in last week, we had about 500 of our customers join us at our annual Xylem Reach User Conference. More than 65 water utilities around the world have already done so and it's a movement that's gaining momentum, which is just one reflection of the trend toward technologies that we affordably decarbonize water systems. On the clean water side, demand for smart water solutions and digital offerings continues to be robust. For Xylem overall, we now see full year organic revenue growth in the range of 3% to 4%, down from the previous range of 6% to 8%. We are now expecting EBITDA margins in the range of 17.1% to 17.4% compared to our previous guidance range of 17.2% to 17.7%. This guidance represents full year margin expansion of just roughly 100 basis points. Our adjusted earnings per share guidance is now $2.40 to $2.50 which, at the midpoint, reflects a 19% increase in earnings per share over last year. Full year 2021 free cash flow conversion is in line with previous guidance at 80% to 90%, putting our three-year average right around 130%. We have updated our euro to dollar conversion rate assumption for the fourth quarter from 1.18 to 1.16. We anticipate total company organic revenues will be down roughly 4% to 6% in the quarter. We expect fourth quarter adjusted EBITDA margin to be in the range of 16% to 17%. Xylem's total shareholder returns have been nearly double the S&P 500 over the decade.

Having raised guidance at the end of the first and second quarters, we now anticipate that the constraints on volume will moderate our full year revenue growth to between 3% and 4%, and bring adjusted earnings per share into a range of $2.40 to $2.50, which represents roughly 20% earnings per share growth over last year. Our earnings per share in the quarter was $0.63. Free cash flow conversion was 57% in the quarter, in line with our expectations, and we continue to expect full year of free cash flow conversion of 80% to 90%. One more thing to mention, albeit with a slightly greater time horizon, there's been a lot of discussion about cross-border supply chains. On the clean water side, demand for smart water solutions and digital offerings continues to be robust. Our adjusted earnings per share guidance is now $2.40 to $2.50 which, at the midpoint, reflects a 19% increase in earnings per share over last year. Full year 2021 free cash flow conversion is in line with previous guidance at 80% to 90%, putting our three-year average right around 130%.

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Growth continued in the first quarter of 2021, with net organic sales increasing 2% year-over-year. Notably, this follows a very strong first quarter of 2020, where net organic sales growth was 7%. Over the last 12 months, we've exceeded our targets, delivering 3% net organic sales growth. Importantly, we continue to have confidence in our 100 to 200 basis points goal for annual net organic sales growth established with Vision 2025. As we look out specifically at the year to the anticipated volume from our innovation pipeline, coupled with return to growth in foodservice, we expect 2021 net organic sales growth will be at the high end of our 100 to 200 basis point range. Adjusted EBITDA in the quarter of $240 million met our expectations before the $29 million of costs we incurred associated with winter storm Uri. Also during the quarter, we made further progress on the Vision 2025 goal of achieving 80% to 90% paperboard integration across our consolidated business. We exited the first quarter of 2021 at 71%, improving from 70% in the full year of 2020 and 68% in 2019. Our partnership with International Paper continue to wind down during the quarter as we acquired another $400 million of minority partnership interest, reducing their interest to 7% from the initial 21% held at the inception of the partnership. We have entered into an agreement to acquire Americraft Carton for approximately $280 million. The company is one of the largest remaining independent converters in North America, with over $200 million in annual sales, operating seven well-capitalized and high-quality converting facilities. The company has a great reputation with customers, has been in business for over 100 years and generates approximately $30 million of annual EBITDA. We see 300 basis points of paperboard integration opportunity across all three substrates and expect an additional $10 million of synergies over 24 months following the close. With the launch of the PaperSeal in 2020, we targeted a $1 billion addressable market opportunity to replace foam trays and shrink wrap alternatives commonly found in the grocery store meat departments around the world. Providing packaging enhancements for consumers that include 100% recyclability and reduced carbon footprint will be the key to our new product development road map moving forward. We are confident in the pipeline in front of us to achieve a 100 to 200 basis of annual net organic sales growth and expect to be at the high end of that range in 2021. Net sales increased 3% from the prior year to $1.65 billion, driven by 2% net organic sales growth and positions. Adjusted EBITDA declined from the prior year quarter, primarily related to $29 million in costs associated with winter storm Uri and maintenance downtime. As a result, adjusted earnings per share were $0.23 as compared to $0.31 in the first quarter of 2020. Total liquidity remained significant at $1.44 billion. Solid sales performance was driven by continued strength food, beverage and consumer markets, where sales before acquisitions increased 5%. Partially offsetting this performance was our foodservice business, where sales declined 10% versus the prior year period. On Slides 11 and 12, you'll see our year-over-year revenue and EBITDA waterfall. Net sales increased $50 million in the first quarter of 2021, driven by $33 million of improved volume mix, resulting from a combination of 2% organic sales growth and acquisitions, partially offset by fewer selling days when compared to leap year observed in the prior year quarter as well as $20 million of favorable foreign exchange. Adjusted EBITDA decreased $55 million to $240 million in the first quarter of 2021. Adjusted EBITDA benefited from $21 million in improved net productivity and $5 million from favorable foreign exchange. EBITDA was unfavorably impacted by $3 million of pricing, $2 million of unfavorable volume mix, $34 million of commodity input cost inflation, $13 million of other inflation and $29 million of costs related to winter storm Uri. Excluding storm-related costs, adjusted EBITDA was $269 million, consistent with our expectations. AF&PA industry operating rates at the end of Q1 for SBS and CRB were 92% and 94%, respectively. Our CUK operating rate was over 95%, as we remained in an oversubscribed environment. We ended the quarter with net leverage at 3.7 times. While leverage is above our long-term targeted level of 2.5 times to three times and our 2021 target of three times to 3.5 times, we remain confident in our cash flow generation commitments and increase in expected cash flow generation in 2022. We issued $800 million in two senior secured notes offerings. What is notable about these transactions are the annual interest rates of the 2024 notes at 0.8% and the 2026 notes at 1.5%. We also retired $425 million of maturing higher interest rate bonds, with an attractive farm credit system loan. And earlier this month, we completed an amend and extend to our bank credit facility, which notably extended the maturity date from January 2023 to April 2026 and increased the availability under the domestic revolving line of credit by $400 million. Turning now to guidance on Slides 13 and 14. As Mike mentioned, we expect 2021 net organic sales growth to be at the high end of our 100 to 200 basis points target range. While some components of adjusted EBITDA have changed given the operating environment we are managing, our full year adjusted EBITDA guidance range of $1.09 billion to $1.15 billion provided at the beginning of 2021 remains unchanged due to the numerous pricing, volume and productivity initiatives we are committed to successfully executing throughout the remainder of the year.

We have entered into an agreement to acquire Americraft Carton for approximately $280 million. The company is one of the largest remaining independent converters in North America, with over $200 million in annual sales, operating seven well-capitalized and high-quality converting facilities. Net sales increased 3% from the prior year to $1.65 billion, driven by 2% net organic sales growth and positions. As a result, adjusted earnings per share were $0.23 as compared to $0.31 in the first quarter of 2020. As Mike mentioned, we expect 2021 net organic sales growth to be at the high end of our 100 to 200 basis points target range.

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Our second quarter revenue grew 22.6% as we achieved double-digit growth across all of our business units. And our e-commerce sales grew nearly 43%. Second quarter adjusted EBITDA increased 28.8% driven by higher volumes and improved efficiencies from our Global Productivity Improvement Program. But despite these headwinds, our stellar first half performance and our continued organic growth give us confidence in again raising our earnings framework to reflect mid-teens net sales and adjusted EBITDA growth, adjusted free cash flow of $260 million to $280 million. Our balance sheet this quarter improved sequentially, ending the quarter with net leverage of 3.2 times and over -- and maintaining over $860 million in total liquidity. Our actions earlier this quarter to refinance our debt are expected to reduce our annual interest expense by $18 million a year. As a reminder, we issued $900 million of total debt with a mix of Term Loan B and a new 10-year three 7/8 senior notes, which will lower our cost of capital. We will continue to target a net leverage ratio in the three to 4 times range. Net sales increased 22.6%. Excluding the impact of $18 million of favorable foreign exchange and acquisition sales of $26.8 million, organic net sales increased 18% with double-digit growth across all four business units. Gross profit increased $75.1 million, and gross margin of 35.1% was in line with the year ago driven by higher volumes in all business units, improved efficiencies from our Global Productivity Improvement Program and favorable mix, offset by higher freight and input cost inflation and last year's retrospective tariff excluding benefits. SG&A expense of $262.2 million increased 13.1% at 22.8% of net sales, with the dollar increase driven by improved volumes, higher advertising and marketing investments and incentive and distribution costs. Operating income of $116.8 million was driven by improved volumes, improved productivity and lower restructuring costs partially offset by input cost inflation, marketing and advertising investments and incentive costs. Adjusted diluted earnings per share improved to $1.76 driven by operating income growth along with lower shares outstanding. Adjusted EBITDA increased 28.8% from the prior year primarily driven by growth across all business units. Q2 interest expense from continuing operations of $65.5 million increased $30 million due to the debt refinancing costs. Cash taxes during the quarter of $11.9 million were $4.4 million lower than last year. Depreciation and amortization from continuing operations of $38.7 million was $2.3 million higher than the prior year. Separately, share- and incentive-based compensation decreased from $14.6 million last year to $8.5 million this year driven by the change to incentive compensation payout methodology we talked about last year. Cash payments for transactions were $3.1 million, down from $6 million last year. And restructuring and related payments were $7.6 million versus $12.8 million last year. The company had a cash balance of $290 million and approximately $577 million available on its $600 million cash flow revolver. At the end of the quarter, total debt outstanding was approximately $2.6 billion, consisting of approximately $2.1 billion of senior unsecured notes, $400 million of term loans and approximately $159 million of finance leases and other obligations. Additionally, net leverage improved sequentially and was approximately 3.2 times. During the quarter, we sold off our remaining Energizer shares for proceeds of $12.6 million. Capital expenditures were $16.2 million in Q2 versus $13 million last year. We now expect mid-teens reported net sales growth in 2021, with foreign exchange expected to have a positive impact based on current rates. This includes benefits from higher volumes; our GPIP program; approximately 11 months of results from the recent Armitage transaction in Global Pet Care, offset by net tariff headwind of about $30 million to $35 million driven by the expiration of previously disclosed retrospective tariff exclusions in 2020. In addition, as David mentioned, we have also now factored in $120 million to $130 million of input cost inflation compared to a year ago. Fiscal 2021 adjusted free cash flow for continuing operations is now expected to be between $260 million and $280 million, up from the previous range of $250 million to $270 million. Depreciation and amortization is expected to be between $180 million and $190 million, including stock-based compensation of approximately $30 million to $35 million. Full year interest expense is now expected to be between $130 million and $135 million. This meaningful step-down compared to our prior range of last year is driven by our successful $900 million refinancing in February of our senior notes due 2024 and partial refinancing of our senior notes due 2025. On a full run rate basis, as David mentioned, we expect annualized savings of approximately $18 million. Restructuring and transaction-related cash spending is now expected to be between $70 million and $80 million. Capital expenditures are expected to be between $85 million and $95 million. And cash taxes are expected to be between $35 million and $40 million, and we do not anticipate being a significant U.S. federal cash taxpayer during fiscal 2021 as we continue to use net operating loss carryforwards. We ended fiscal 2020 with approximately $800 million of usable federal NOLs. For adjusted EPS, we use a tax rate of 25%, including state taxes. Regarding our capital allocation strategy, we continue to target a net leverage range of 3 times to 4 times adjusted EBITDA. First, we continue to plan for incremental advertising investments of over $20 million in fiscal 2021 as we continue to raise awareness, consideration and purchase intent with consumers. Third, we continue to manage through inflationary pressures, which are currently expected to be $120 million to $130 million higher than the prior year. Second quarter reported net sales increased 18.4%, and organic net sales increased 17.4%. Adjusted EBITDA increased 5.6% primarily driven by positive volumes and productivity improvements that were materially offset by last year's significant benefit from retrospective tariff exclusions as well as higher freight and input cost inflation, distribution costs, COVID-19-related costs and higher marketing investments. Excluding last year's tariff exclusions, adjusted EBITDA improved 20.1%. In our Kwikset business, we are focused on driving demand for Microban, which incorporates antimicrobial technology on the surface of our hardware; also SmartKey technology, which allows users to rekey their own locks to any Kwikset key in about 15 seconds; and finally, our exciting Halo Touch Smart Lock product, which includes biometric- and WiFi-enabled technology along with voice-assist capability through Alexa and Google Assistant. Reported and organic net sales increased 28% and 24.3%, respectively. Adjusted EBITDA more than doubled to $25.4 million. Q2 represented another strong quarter of financial performance with reported net and organic sales growth of 23.9% and 10%, respectively. Adjusted EBITDA grew 39%. Second quarter reported net sales increased 21.4%, and adjusted EBITDA increased 22.7%. Last year's net sales were over $60 million with growing sales and margins over the past three years. Our F '21 savings are running ahead of previous projections, and we are now raising our total gross savings target of $150 million to at least $200 million by the end of fiscal 2022. During our call last quarter, we indicated these headwinds were $70 million to $80 million higher than we had originally planned for the year or in other words, $100 million to $110 million higher than fiscal 2020 levels. Based on current rates as well as our improved expectations for top line growth for the year, these inflationary headwinds are now expected to be $120 million to $130 million higher in fiscal 2020 levels. This quarter, e-commerce grew by nearly 43% and represented more than 16% of our total net sales. Second, our second quarter financials reflect another quarter of operating leverage, with adjusted EBITDA increasing 28.8% from the prior year with growth across all businesses. Thirdly, our balance sheet improved sequentially, ending the quarter with net leverage of 3.2 times with over $860 million in total liquidity.

Our second quarter revenue grew 22.6% as we achieved double-digit growth across all of our business units. But despite these headwinds, our stellar first half performance and our continued organic growth give us confidence in again raising our earnings framework to reflect mid-teens net sales and adjusted EBITDA growth, adjusted free cash flow of $260 million to $280 million. Adjusted diluted earnings per share improved to $1.76 driven by operating income growth along with lower shares outstanding. We now expect mid-teens reported net sales growth in 2021, with foreign exchange expected to have a positive impact based on current rates. Fiscal 2021 adjusted free cash flow for continuing operations is now expected to be between $260 million and $280 million, up from the previous range of $250 million to $270 million.

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An important gene sale of EnerBank at 3 times book value, moving from noncore to the core business with a strong focus on regulated utility growth. Furthermore, with the filing of our integrated resource plan, you can see the path for more than $1 billion into the utility, again, without equity issuance. All of this supports our long-term adjusted earnings per share growth of 6% to 8%, and combined with our dividend, provides a premium total shareholder return of 9% to 11%. As I mentioned, our integrated resource plan provides the proof points to our investment thesis, our net zero commitments and highlights our commitment to the triple bottom line by accelerating our decarbonization efforts, making us one of the first utility in the nation to exit coal or increasing our renewable build-out, adding about eight gigawatts of solar by 2040, two gigawatts from the previous plan. It is also thoughtful and that is not a 40- to 50-year commitment that you would get with a new asset, which we believe is important, as we transition to net zero carbon. It will generate $650 million of savings, essentially paying for our transition to clean energy. Our current five-year plan, which we'll update on our year-end call includes $13.2 billion of needed customer investment. The IRP provides a clear line of sight to the timing and composition of an incremental $1.3 billion of opportunity. Our backlog of needing investments is as vast as our system, which serves nearly seven million people in all 68 counties of Michigan's Lower Peninsula. For 2021, we are focused on delivering adjusted earnings from continuing operations of $2.61 to $2.65 per share, and we expect to deliver toward the high end of that range. For 2022, we are reaffirming our adjusted full year guidance of $2.85 to $2.87 per share. We are reaffirming again no change to the $1.74 dividend for 2021. As we move forward, we are committed to growing the dividend in line with earnings with a target payout ratio of about 60%. Finally, I want to touch on long-term growth rate, which is 6% to 8%. Historically, we've grown at 7%. For the second quarter, we delivered adjusted net income of $158 million or $0.55 per share, which excludes $0.07 from EnerBank. For comparative purposes, our second quarter adjusted earnings per share from continuing operations was $0.09 above our second quarter 2020 results, exclusive of EnerBank's earnings per share contribution last year. Year-to-date, we delivered adjusted net income from continuing operations of $472 million or $1.64 per share, which excludes $0.19 per share from EnerBank and is up $0.37 per share versus the first half of 2020, assuming a comparable adjustment for discontinued operations. For the first half of 2021, rate relief has been the primary driver of our positive year-over-year variance to the tune of $0.36 per share given the constructive regulatory outcomes achieved in the second half of 2020 for electric and gas businesses. As a reminder, these expenses align with our recent rate orders and equate to $0.06 per share of negative variance versus 2020. We also benefited in the first half of 2021 from favorable weather relative to 2020 in the amount of $0.06 per share and recovering commercial and industrial sales, which coupled with solid tax planning provided $0.01 per share of positive variance in aggregate. As always, we plan for normal weather, which in this case, translates to $0.02 per share of negative variance, given the absence of the favorable weather experienced in the second half of 2020. We'll continue to benefit from the residual impact of rate relief, which equates to $0.12 per share of pickup. We also continue to execute on our operational and customer-related projects, which we estimate will have a financial impact of $0.21 per share of negative variance versus the comparable period in 2020 given anticipated reinvestments in the second half of the year. I'm pleased to highlight our recent successful issuance of $230 million of preferred stock at an annual rate of 4.2%, one of the lowest rates ever achieved for a preferred offering of its kind. This transaction satisfies the vast majority of funding needs of CMS Energy, our parent company for the year and given the high level of equity content ascribed to the security by the rating agencies, we have reduced our planned equity issuance needs for the year to up to $100 million from up to $250 million. As a reminder, over half of the $100 million of revised equity issuance needs for the year are already contracted via equity forwards. Glenn announced his retirement earlier this year after serving admirably for nearly 25 years at CMS, which included him signing over 75 quarterly SEC filings during his tenure.

For 2021, we are focused on delivering adjusted earnings from continuing operations of $2.61 to $2.65 per share, and we expect to deliver toward the high end of that range. For 2022, we are reaffirming our adjusted full year guidance of $2.85 to $2.87 per share. For the second quarter, we delivered adjusted net income of $158 million or $0.55 per share, which excludes $0.07 from EnerBank.

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In fact, to give you some month-by-month numbers, March tenant sales were up 8.6%, April sales were up 9.9%, May and June were both up a strong 15%. Traffic is still lagging a bit at around 90% of pre-COVID levels on average. Because of the robust leasing environment, and it feels much better to us than when we emerged from the great financial crisis in 2009 and 2010. So some of these second-quarter highlights include, on a sequential basis, occupancy gains of 90 basis points. We saw same-center NOI growth in 11.5%. Since our last earnings call, we issued 6.4 million shares at an average price of $18.20. We raised $114 million of capital, and that was used to reduce debt. Trading was good for us in the quarter and in June, and ended the second quarter as the second best performing REIT, up 58%. Net proceeds expected to be in the $100 million range. Year-to-date, we've paid down over $1.3 billion of debt. A great example of the latter is that during this past quarter, we announced a 222,000 square foot SCHEELS sporting goods lease in the former Nordstrom's box at Chandler Fashion Center. This store will be their first in the Arizona and will feature 16,000 gallons of saltwater aquarium, a wildlife mountain, a restaurant and more. For the most part, in the U.S., with 58% of the population vaccinated, the worst of the pandemic is now behind us. Her dedication to the company started within just a few months after Macerich's IPO in 1994, and we sincerely appreciate her contributions, her partnership, and her friendship over these many, many years. Same-center NOI rebounded very well in the quarter, increasing 11.5% relative to the second quarter of 2020, including our lease termination income. If we were to exclude lease termination income, same-center NOI growth still increased 10.4%. Funds from operations for the second quarter of 2021 was $0.59 per share, up $0.20 or 51% from second-quarter 2020 at $0.39 per share. EBITDA margin has increased over 6% to 63.9% relative to 57.7% at the end of the second quarter in 2020 and is approaching pre-COVID EBITDA margin of 65.3% at the end of the second quarter in 2019. To expand on those, the primary factors contributing to these NOI and FFO gains are as follows: On the NOI front, one, the quarter increased in the -- the quarter increases include a $0.06 increase in percentage rents resulting from the dramatic increase in sales that we reported earlier today. And two, common area income has contributed another $0.04 of NOI and FFO, including from our urban parking garages. And three, our bad debt expense represents a comparative $50 million or $0.23 improvement quarter-over-quarter, including a $40 million bad debt expense incurred during the second quarter of 2020 at the onset of COVID and a net $10 million bad debt reversal within last quarter, the second quarter of 2021. Offsetting these NOI factors were: one, $46 million or $0.21 in reduced minimum rent and recovery income from reduced occupancy as well as approximately $15 million retroactive rent abatements and rent relief of primarily 2020 rents. To pause on this point, the previously mentioned $10 million bad debt reversal in the quarter should be viewed in tandem with a negative $15 million impact of rent abatements from our second quarter. In other words, the net impact of COVID workout deals on same-center NOI in the second quarter was a negative $5 million when considering both line items. And so if you want to normalize same-center NOI for what is essentially the majority of the remaining COVID workout deals, then add back $5 million or 3% roughly to same-center NOI. Secondly, the shopping center expenses increased by approximately $0.06. And lastly, a few other factors included: one, second quarter included increases of positive $0.09 in valuation adjustments, net of provision for income taxes from our indirect investments in various retailers that we at Macerich have previously invested in through a venture capital firm. And two, the second quarter also included an increase in land sale income totaling approximately $0.05, which was factored into our original guidance and planning as we entered into 2021. 2021 FFO is now estimated in the range of $1.82 to $1.97 per share, which represents a $0.03 increase at the midpoint. And in fact, we have increased the midpoint by $0.03 per share, which is also $0.04 or 2% greater than consensus estimates. And then as for our balance sheet, within the first-quarter filings, again, we disclosed that we had sold $732 million of common equity through our ATM programs again last quarter. Since then, we sold an additional $116 million at an average price of $18.20. As part of our continuing commitment to deleveraging our balance sheet, since the end of our first quarter and through today, we have repaid approximately $1.3 billion debt. And as previously stated on many occasions, we still do expect to harvest positive operating cash flow after recurring capex and dividends of well over $200 million per year from 2021 through 2023, which supports a path to continued leverage reduction in the range of 8x by the end of 2023. Including undrawn capacity on our revolving line of our credit, of which $200 million of the $525 million aggregate capacity is currently outstanding, we have approximately $500 million of liquidity today. June small shop sales were up 15% when compared to June 2019. Looking at the quarter, the second-quarter small shop sales were up 13% over the second quarter of 2019. And year-to-date through June, small shop sales were up 5% when compared to the same period in 2019. Occupancy at the end of the second quarter was 89.4%. This is up 90 basis points from 88.5% in the first quarter. The other was a small tenant that had eight locations with us to a total of just 9,000 square feet. Our trailing 12-month leasing spreads were negative 0.2%, and that's an improvement from negative 2.1% last quarter. Average rent for the portfolio was $62.47 as of June 30, 2021, and that's flat for a year-over-year basis. To date, we have commitments on 81% of our 2021 expiring square footage with another 19% or the balance in the letter of intent stage. And with -- well on our way into 2022 business with 27% of the expiring square footage committed and 64% at the letter of intent stage. In the second quarter, we opened 251,000 square feet of new stores, resulting in this total annual rent rate of $6.5 million. We also opened 7 locations with Charming Charlie and 4 locations with FYE. We opened a 24,000 square foot office for the county of San Bernardino at Inland Center. So lastly, we opened the 95,000 square foot Shoppers World at Fashion District Philadelphia in the former Century 21 space, which we lost last year due to a bankruptcy liquidation. And let me be clear, and when I say that in recent history, I'm not talking about the 16 months we've been dealing with COVID. In the second quarter, we signed 223 leases for 692,000 square feet, resulting in $37 million in total annual rent. In the first half of this year, we signed 488 leases for some 1.9 million square feet, resulting in $88.7 million in total annual rent. Now this represents 18% more leases, 34% more square footage and 11% more rent during the same period from 2019. These and others bring the total square footage of new to Macerich deals either signed or in lease in the last 12 months to just over 530,000 square feet. In addition to Shoppers World opening at Fashion District Philadelphia, which I mentioned earlier, we signed a second lease with the -- to take over the 72,000 square foot location at Green Acres Mall that Century 21 also rejected to bankruptcy. So by the end of this year, we will have filled the two Century 21 boxes that we lost in the bankruptcy, and this totals approximately 170,000 square feet, an impressive feat considering Century 21's liquidation occurred just 10 months ago. At the end of the second quarter, we had signed leases for just over 500,000 square feet of new stores still to open in 2021. And looking into 2022 and 2023, we have signed these leases for another 935,000 square feet of new stores to open. In addition to these signed leases, we're currently negotiating leases for new stores totaling 1.1 million square feet. In total, that's over the 2.5 million square feet of signed and in-process leases for new store openings throughout the remainder of this year and into 2022 and 2023.

We saw same-center NOI growth in 11.5%. Same-center NOI rebounded very well in the quarter, increasing 11.5% relative to the second quarter of 2020, including our lease termination income. Funds from operations for the second quarter of 2021 was $0.59 per share, up $0.20 or 51% from second-quarter 2020 at $0.39 per share. To expand on those, the primary factors contributing to these NOI and FFO gains are as follows: On the NOI front, one, the quarter increased in the -- the quarter increases include a $0.06 increase in percentage rents resulting from the dramatic increase in sales that we reported earlier today. Secondly, the shopping center expenses increased by approximately $0.06. 2021 FFO is now estimated in the range of $1.82 to $1.97 per share, which represents a $0.03 increase at the midpoint.

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Our capital allocation in the first quarter, we repaid $108 million of debt and we returned $331 million to shareholders, including $129 million of share repurchases. The vast majority of our 48,000 team members work in our mills and conversion plants each and every day, and their health and safety remains our most important responsibility. Our team is also making strong progress to develop and deliver multiple streams of earnings initiatives to achieve the $350 million to $400 million in incremental earnings and accelerated growth by the end of 2023. We delivered EBITDA of $730 million and free cash flow of $423 million despite the $80 million pre-tax earnings impact from the winter storm in the Southern U.S. Revenue increased by more than $100 million sequentially, primarily driven by price realization in our Packaging and Global Cellulose Fibers businesses. First quarter operating earnings were $0.76. The winter storm impacted pre-tax earnings by $80 million or a $0.15 impact to operating EPS. Mill and box system performance was solid and helped mitigate the impact of the winter storm, which was a cost headwind of $55 million to operations. Maintenance costs increased sequentially, and we expect to complete about 65% of our maintenance outages in the first half of the year. Input costs were unfavorable, which included a $20 million cost impact from the storm, mostly for energy and raw materials such as starch and adhesives. We lost 145,000 tons of containerboard production due to the winter storm. We had nearly 30 box plants in Texas, Louisiana and Mississippi affected by the storm, which impacted our box shipments in the quarter. Our November increase is essentially implemented fully with the $131 million first quarter realization. Operations and cost includes about $55 million impact from the winter storm, about half of which is due to unabsorbed fixed costs and the balance is related to repairs and higher distribution costs. We did defer about $30 million of maintenance outages from the first to the second quarter due to the significant production loss resulting from the winter storm. We expect to complete about 75% of our planned maintenance outages for packaging in the first half of the year. Input costs were a significant headwind in the quarter, including about $20 million related to the winter storm due to higher energy, distribution and raw materials in our mill system and box plants. Nondurables, excluding food and beverage, represents about 30% of U.S. box demand across a wide range of consumer and industrial products. In the first quarter, we improved adjusted EBITDA by nearly $20 million compared with last year. After the sale, the EMEA packaging business will have two recycled containerboard mills, 21 box plants and two sheet plants. Operations and costs improved sequentially, driven by the nonrepeat of the $20 million write-off in the fourth quarter as well as solid operations and good cost management. These improvements were partially offset by about $10 million of higher seasonal energy consumption and an FX loss at our mill in Canada. Operations and costs improved on solid operations and good cost management, as well as a favorable FX in Brazil of about $10 million. Fixed cost absorption improved with economic downtime decreasing by 40,000 tons sequentially across the system. The joint venture delivered $49 million in equity earnings in the first quarter with an EBITDA margin of nearly 35%, driven by higher average pricing. And lastly, in April, we saved a $144 million dividend payment from Ilim, which is $44 million higher than the estimate we provided last quarter. We expect price and mix to improve by $75 million on realization of our March 2021 price increase. Volume is expected to decrease by $10 million on lower seasonal demand in Spain and Morocco as the citrus season winds down. Operations and costs are expected to improve by $15 million, with the full recovery of the winter storm impact partially offset by higher incentive compensation accruals related to a stronger outlook. Staying with Industrial Packaging, maintenance outage expense is expected to increase by $77 million. And input costs are expected to increase by $20 million due to higher OCC, energy, raw materials and distribution costs. In Global Cellulose Fibers, we expect price and mix to increase by $100 million on realization of prior price movements. Volume is expected to increase by $5 million. Operations and costs are expected to decrease earnings by $10 million. Maintenance outage expense is expected to decrease by $10 million, and input costs are expected to be stable. We expect price and mix to increase by $25 million. Volume is expected to increase by $5 million. Operations and costs are expected to decrease earnings by $10 million due to the nonrepeat of foreign currency gain in Brazil during the first quarter. Maintenance outage expense is expected to increase by $22 million, and input costs are expected to increase by $5 million. And in the first quarter, we reduced debt by $108 million. We also returned $331 million to shareholders, including $129 million of share repurchases, which represented about 2.6 million shares at an average price of $50.28. And lastly, in the first quarter, we monetized about $400 million of our stake in Graphic Packaging. After that transaction, we now hold about 7.4% ownership in the partnership.

First quarter operating earnings were $0.76.

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For 2020, net sales were $568.9 million and diluted earnings were $5.09 per share. For 2019, net sales were $410.5 million and diluted earnings were $1.82 per share. For the fourth quarter of 2020, net sales were $169.3 million and diluted earnings were $1.78 per share. For the corresponding period in 2019, net sales were $105.1 million and diluted earnings were $0.46 per share. The substantial increase in profitability for the fourth quarter and the full year is attributable to the significant increase in sales, 61% for the fourth quarter and 39% for the full year. At December 31, 2020, our cash and short-term investments, which are invested in US T-bills, totaled $141.2 million. Our current ratio is 2.9 to 1 and we have no debt. At December 31, 2020, stockholders' equity was $264.7 million, which equates to a book value of $15.13 per share, of which $8.07 per share was cash and short-term investments. In 2020, we generated $144 million of cash from operations. We reinvested $24 million of that back into the Company in the form of capital expenditures, primarily related to new products. In addition, the Company acquired substantially all of the Marlin Firearms assets for $28 million in November of 2020, which included machinery and equipment, tooling, fixtures, and inventory. We estimate that 2021 capital expenditures will be approximately $20 million, predominantly related to new product development. In 2020, we returned $114 million to our shareholders through the payment of dividends, reflecting our customary quarterly dividends and a special dividend of $5 per share that was paid in August. Our Board of Directors declared a $0.71 per share quarterly dividend for shareholders of record as of March 12, 2021, payable on March 26, 2021. As a reminder, our quarterly dividend is approximately 40% of net income and therefore varies quarter to quarter. Since 2015, the company has paid $225 million in dividends to its shareholders, just less than $13 per share. Additionally, during that time, we repurchased more than 1.7 million shares of our stock for $84 million, at an average price of $48.36 per share. The estimated sell-through of the Company's products from the independent distributors to retailers, in 2020, increased 44% from 2019. For the same period, the National Instant Criminal Background Check System or NICS background checks, as adjusted by the National Shooting Sports Foundation, increased 60%. In 2020, new product sales represented $111 million or 22% of firearm sales, compared to $102 million or 26% of firearm sales in 2019. We remain committed to new product development as evidenced by our strong roster of our new products in 2020, which included the extremely popular Ruger-57 pistol, which is awarded the 2020 Caliber Award for best overall new product by the Professional Outdoor Media Association in conjunction with the NASGW. 22 Long Rifle, which is based on the venerable LCP platforms and utilizes our Lite Rack system for easier slide manipulation and reduced recoil. And the PC Charger and AR-556 pistol, two pistol configurations based on established rifle platforms that have found widespread popularity. As a result, the combined inventories in our warehouses and at our distributors, decreased 290,000 units during 2020. By mid-summer, we began to accelerate our hiring process, and as a result, since the middle of 2020, our workforce has been strengthened by 250 folks. This allowed us to realize a 30% increase in production during the latter half of the year. As many of you are aware, in November, we purchased substantially all of the Marlin assets for $28.3 million. These actions which cost approximately $3.6 million, in 2020, mitigated the adverse financial impact on our business, resulting from Covid19. These expense reductions and deferrals approximated $2.9 million in 2020. We estimate that Covid-related costs will total between $1.5 million and $3 million in 2021. Included in this estimate is a $200 bonus for every employee who receives a Covid vaccination.

For 2020, net sales were $568.9 million and diluted earnings were $5.09 per share. For the fourth quarter of 2020, net sales were $169.3 million and diluted earnings were $1.78 per share.

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The need for senior care hasn't abated and states in which we have some of our highest concentration of properties are also states with the highest projected increases in the 80-plus population cohort over the next 10 years. Last month, the federal public health emergency declaration related to the corona's pandemic was extended through April 20, keeping in place the temporary 6.2% increase in federal Medicaid matching funds, including the three-day hospital stay waiver. In addition to the new stimulus package being negotiated, about $30 billion of prior earmarked aid remains unallocated, which will hopefully provide some incremental support to operators in the industry. Fourth quarter rent and mortgage interest income collections were strong at 98%. The rent credit is expected to have an approximate $530,000 impact on our 2021 GAAP revenue and an approximate $1.3 million impact on our 2021 FAD. Next, I'll discuss our Senior Lifestyle portfolio, which is currently a main area of focus for us as we work to transition the 23 communities they have operated for LTC. So far in the first quarter, we have transitioned 11 assisted living communities to two operators. Total revenue declined $190,000 compared with last year's fourth quarter. Mortgage interest income increased $226,000 due to the funding of expansion and renovation projects. Interest expense decreased $490,000 due to lower outstanding balances and interest rates under our line of credit in the fourth quarter of 2020 and scheduled principal payments on our senior unsecured notes. Property tax expense decreased $809,000, primarily due to the timing of Senior Lifestyle property tax escrow receipts and the payment of related taxes. G&A expense increased $675,000 compared with the fourth quarter of 2019 due to the reimbursement of legal fees from Senior Care in the prior-year period as well as the timing of certain expenditures. Income from unconsolidated joint ventures decreased $270,000 due to a dissolution in 2019 of a preferred equity investment in a joint venture, offset by two preferred equity investments we made in 2020. During the fourth quarter of 2020, we recorded a $3 million impairment charge associated with a memory care community in Colorado operated by Senior Lifestyle, the impairment related to our release efforts of this property. During the fourth quarter of 2019, we recognized a $5.5 million impairment charge related to the Senior Lifestyle joint venture. Accordingly, we received liquidation proceeds of $17.5 million and recognized a loss on liquidation of unconsolidated joint ventures of $620,000. During the fourth quarter of 2020, we recognized an additional loss of $138,000 related to the final liquidation of this unconsolidated joint venture. In the fourth quarter of 2019, we recognized a $2.1 million gain from insurance proceeds related to a close skilled nursing center in Texas. This property sustained hurricane damage and rather than rebuild it, we sold it and two other properties in the fourth quarter of 2019, resulting in a cumulative loss of $4.6 million. We provided Senior Lifestyle deferred rent in the amount of $394,000 in April of last year. As a result, we wrote off a total of $17.7 million of straight-line rent receivable and lease incentives related to this master lease and transitioned rental revenue recognition to a cash basis effective July 2020. During the fourth quarter of 2020, we applied their letter of credit and deposits totaling $3.7 million to accrued second quarter 2020 rent receivable of $2.5 million and notes receivable of $125,000 with the remaining $1.1 million to third and fourth quarter 2020 rent. At December 31, 2020, Senior Lifestyle's unaccrued delinquent rent balance was $1 million. Net income available to common shareholders for the fourth quarter of 2020 increased by $5 million, primarily resulting from acquisitions and completed development projects, rent increases, lower interest expense, the prior year's loss on sale, and the fourth quarter of 2019's $5.5 million impairment charge. Offsets included the $3 million impairment charge, decreased rent related to the Preferred Care property sales, abated and deferred rent net of repayment, a decrease in property tax revenue, the 2019 receipt of 2018 past due rent from Senior Care, and the fourth quarter 2019 gain from insurance proceeds. NAREIT FFO per fully diluted share is $0.78 in the fourth quarter of 2020 and $0.81 in the prior-year fourth quarter. Excluding the gain from insurance proceeds in the fourth quarter of 2019, FFO per fully diluted share was $0.76. The $0.02 increase in FFO excluding the gain was due to lower weighted average shares outstanding in 2020, resulting from the purchase of shares in the first quarter of 2020 under our share buyback program. Moving now to our investment activity, during the fourth quarter of 2020, we invested $5 million under our previously announced $13 million preferred equity commitment related to the development of a 267 unit independent and assisted living community in Vancouver, Washington. Our investment earns an initial cash rate of 8% and a 12% IRR. We expect to fund our remaining $8 million investment before the end of the first quarter of 2021. We also funded $6.3 million in development in capital improvement projects at a weighted average rate of 8% on properties we own and paid $22.4 million in common dividends. Our 2020 FAD payout ratio was 77%. We currently have remaining commitments under mortgage loans of $1.7 million related to expansions and renovations on three properties in Michigan. We also paid $7 million in regular scheduled principal payments under our senior unsecured notes. Subsequent to the end of the quarter, we borrowed at $9 million under our unsecured line of credit. Including this borrowing, we have $7.8 million in cash, $501.1 million available on our line of credit, under which $98.9 million is outstanding, and $200 million under our ATM program, providing LTC with liquidity of approximately $709 million. At the end of the 2020 fourth quarter, our credit metrics remained favorably compared with the healthcare REIT industry average, with net debt to annualized adjusted EBITDA for real estate of 4.3 times and annualized adjusted fixed-charge coverage ratio of 5.3 times and a debt to enterprise value of approximately 30%. We collected 98% of fourth-quarter rent and mortgage interest income including the application of Senior Lifestyle's letter of credit and deposit. Of the rent not collected, $360,000 related to rent abatements and $369,000 related to rent deferral, net of repayment, which were provided to three private pay operators Clint mentioned on our previous earnings call. As I mentioned earlier, Senior Lifestyle remains delinquent in their 2020 contractual rent by $1 million, and they have paid no rent so far in 2021. For all of 2020, we collected 98% of contractual rent including the application of Senior Lifestyle's letter of credit and deposits. Of the 2% we did not collect, 0.7% was abated, 0.7% was net deferred, and the remaining 0.6% was delinquent. To date so far in 2021, rent deferrals totaled $689,000, net of $14,000 of deferred rent repayments. Excluding the rent credit related to the rent escalation reduction already discussed, abated rent to date in 2021 is $360,000. As Wendy said earlier, thus far in the first quarter of 2021, we have transitioned 11 of the 23 assisted living communities under their master lease. Combined, these communities contain 344 units. Incremental cash rent under the amended lease is $2.7 million for the first year, $3.7 million for the second year, and $3.9 million for the third year, escalating by 2% annually thereafter. On February 15, we transferred five communities, all in Wisconsin with a total of 374 units to Encore Senior Living. Encore, founded in 2011, is a major player in the Wisconsin market, operating 34 locations [Indecipherable] these communities. Cash rent under the lease is $2.6 million for the first year, $3.3 million for the second year, and $3.4 million for the third year, escalating by 2% annually thereafter. There are now 12 buildings remaining in the Senior Lifestyle portfolio. The four remaining properties have a net book value of approximately $4.5 million. As of February 15, occupancy was 23%, up from 10% on October 23. We have agreed to provide them $1.3 million of additional free rent. At February 15, occupancy was 64%, up from 23% on October 20. In 2020, we extended a $4 million capital commitment to Brookdale, which is available through December 31, 2021, at a 7% yield. To date, we have funded $2 million of this commitment. Q3 trailing 12-month EBITDARM and EBITDAR coverage using a 5% management fee was 1.14 times and 0.94 times respectively for our assisted living portfolio. Excluding Senior Lifestyle from our assisted living portfolio, EBITDARM and EBITDAR coverages would increase to 1.25 times and 1.04 times, respectively. For our skilled nursing portfolio, EBITDARM and EBITDAR coverage was 1.85 times and 1.39 times, respectively. Excluding stimulus funds, EBITDARM coverage was 1.58 times and EBITDAR coverage is 1.23 times. Because our partners have provided January data to us on a voluntary and expedited basis, the information we are providing includes approximately 71% of our total private pay units and approximately 93% of our skilled nursing beds. Private pay occupancy was 79% at September 30%, 72% at December 31, and 71% at January 31. For skilled nursing, average monthly occupancy for the same time periods respectively was 70%, 66%, and 66%.

NAREIT FFO per fully diluted share is $0.78 in the fourth quarter of 2020 and $0.81 in the prior-year fourth quarter.

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Turning to Slides 3 and 4. My comments are summarized across Slide 6 and 7 in the deck accompanying the call. This option exercise is valued at approximately $182 million and requires all doses to be delivered by the end of this calendar year. This quarter, we also secured the next option exercise for our smallpox therapeutic VIGIV product valued at approximately $56 million. COVID-HIG leverages our polyclonal hyperimmune platform and continues to show neutralizing activity against variants of SARS-CoV-2 virus in, in vitro models. We anticipate in the near-term, the initiation of a Phase 3 study led by NIAID assessing the effect of hyperimmunes on patient populations that have not yet progressed to severe disease to determine the progression can be impacted. In addition, as we have previously discussed, the U.S. circuit court of appeals has scheduled the oral argument for NARCAN U.S. appeal for August 2 on the ongoing Patent Infringement Litigation. We still expect to initiate a Phase 3 trial for Chikungunya virus VLP vaccine in 2021. In addition, and then supported this important development program, we recently announced positive two-year persistence data from a Phase 2 clinical study that indicated that our vaccine candidate appears to generate a rapid and durable immune response. We also plan to initiate a Phase 1 study in late 2021 and early 2022, related to a number of vaccine candidates in the pipeline, including our Shigella, Lassa and universal flu vaccine candidates. As you can see, we expect that the remainder of 2021 will be busy for our product development teams, including clinical regulatory and quality as our pipeline continues to mature. On the personnel front, we recently issued an 8-K announcing the reorganization of my direct reports, Rich Lindahl, our Chief Financial Officer; Karen Smith, our Chief Medical Officer and Katy Strei, our Chief Human Resources Officer continued to report directly to me. We have a deep appreciation for Sean's 18 years of service at Emergent and wish him the very best for him and his family going forward. A quick run through of key highlights include, total revenues of $398 million, an increase of $3 million versus the prior year and in line with our guidance and adjusted EBITDA $50 million and adjusted net income of $18 million both decreases versus the prior year due to a variety of one time and other expenses, which we will discuss in a moment. Breaking down quarterly revenue into its components, anthrax vaccine sales were $52 million lower than the prior year due to timing of deliveries. NARCAN nasal spray sales were $106 million, an increase over the prior year, driven by continued strong demand for this critical drug device combination product for opioid overdose reversal across both the retail and public interest channels in the U.S., as well as increased Canadian sales. Other products sales were $24 million consistent with the prior year and CDMO services revenue came in at $191 million, an increase over the prior year and reflecting contributions from all three service pillars, primarily for our government and innovator partners response to the COVID-19 pandemic. As Bob noted in his remarks, earlier in July, the U.S. government exercised the next ACAM2000 contract option that is valued at $182 million. Looking beyond revenue, the quarterly results also include cost of goods sold of $228 million, a $98 million increase over the prior year. And reflecting the increased costs associated with a substantial increase in CDMO services revenues, as well as $42 million of inventory write-offs, which I will return to in a moment. Gross R&D expense of $49 million consistent with the prior year, reflecting our continued commitment to investing in our pipeline of development programs across our three product focused business units. Net R&D expense of $24 million or 6% of adjusted revenue consistent with the prior year, SG&A spend of $91 million or 23% of total revenues, an increase over the primary prior year, and primarily reflecting the impact of higher costs to support and defend our corporate reputation and combined product and CDMO gross margin of $144 million or 39% of adjusted revenue, a decline of $97 million and reflecting the impact of $42 million of inventory write-offs due to raw materials and in-process batches at the Bayview facility that the company plans to discard as they were deemed unusable. $43 million associated with the product and service revenue mix, which was weighted more heavily to lower margin products and services and $12 million associated with costs incurred to remediate and strengthen manufacturing processes at our Bayview facility, many of which are temporary in nature. In the second quarter, we continue to obtain incremental contract awards resulting in secured new business of $53 million. However, this outcome was significantly offset by $108 million of negative contract modifications. As of June 30, the backlog is $1.1 billion. And lastly, as of June 30, the opportunity funnel was $672 million down from $807 million at March 31. Moving onto Slide 13 for a review of our balance sheet and cash flow, we ended the second quarter in a strong liquidity position with $448 million in cash and $262 million of accounts receivable resulting in aggregate current liquid assets of nearly $710 million. This compares with approximately $732 million of aggregate current liquid assets as of the end of the first quarter. We also still have undrawn revolver capacity of just under $600 million. Finally, at the end of the second quarter, our net debt position was $416 million. And our ratio of net debt to trailing 12 month adjusted EBITDA remained below one times. One consideration that has been revised is that our expectation for gross margin for the full year is now approximately 61% to 63% on a GAAP basis, a reduction of 200 basis points from the prior range of 63% to 65%. This change reflects the impact of the Q2 2021 performance as well as expectations for the remainder of the year. Lastly, we are providing third quarter total revenue guidance of $400 million to $500 million. On a year-to-date basis, our revenues of $741 million represent approximately 41% of our full year 2021 forecasted total revenues at the midpoint, a similar waiting between first half and second half total revenues as has occurred in each of the last four years.

As you can see, we expect that the remainder of 2021 will be busy for our product development teams, including clinical regulatory and quality as our pipeline continues to mature. On the personnel front, we recently issued an 8-K announcing the reorganization of my direct reports, Rich Lindahl, our Chief Financial Officer; Karen Smith, our Chief Medical Officer and Katy Strei, our Chief Human Resources Officer continued to report directly to me. This change reflects the impact of the Q2 2021 performance as well as expectations for the remainder of the year. Lastly, we are providing third quarter total revenue guidance of $400 million to $500 million.

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Consolidated revenues for our second quarter were $449.8 million, down 3.2% from the prior year and fully diluted earnings per share was $1.71, down 6% from the prior year. As Steve mentioned, our second quarter of 2021's consolidated revenues were $449.8 million, down 3.2% from $464.6 million a year ago. And consolidated operating income decreased to $40.7 million from $44.1 million or 7.8%. Net income for the quarter decreased to $32.6 million or $1.71 per diluted share from $34.7 million or $1.82 per diluted share. Our effective tax rate in the quarter was 22.7% compared to 24.2% in the prior year which favorably impacted the earnings per share comparison. Our core laundry operations revenues for the quarter were $398.2 million, down 3.4% from the second quarter of 2020. Core Laundry organic growth which adjusts for the estimated effective acquisitions as well as fluctuations in the Canadian dollar was negative 3.6%. However, during the quarter, our top line performance was impacted by approximately $2 million from the effect of severe winter storms in Texas and the surrounding states on our operations as well as our customer locations. Core Laundry operating margin decreased to 8.9% for the quarter or $35.4 million from 9.3% in prior year or $38.4 million. In addition, the lost revenue and additional expense we incurred from the severe winter storms in Texas and the surrounding states reduced our operating income by approximately $2.6 million or $0.10 on EPS. Energy costs increased to 4.2% of revenues in the second quarter of 2021, up from 4.1% in prior year. Excluding those elevated expenses, energy costs would have been 3.9% of revenues as the benefit that we have been seeing over the last several quarters started to moderate with the price of fuel increasing nationally. Revenues from our Specialty Garments segment, which delivers specialized nuclear decontamination and cleanroom products and services, decreased to $35.2 million from $36 million in prior year or 2.1%. The segment's operating margin increased to 14.9% from 12.9%, primarily due to higher gross margin on its direct sales as well as lower travel related costs. Our First Aid segment's revenues were $16.3 million compared to $16.4 million in the prior year. However, the segment's operating profit was nominal compared to $1.1 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 $509.6 million at the end of our second quarter of fiscal 2021. For the first half of fiscal 2021, capital expenditures totaled $66.9 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. As a reminder, capex spend is elevated primarily due to the purchase of a $14.1 million building in New York City in our first quarter of 2020 which will provide us a strategic location for a future service center. During the quarter we capitalized $2.2 million related to our ongoing CRM project which consisted of license fees, third-party consulting costs and capitalized internal labor costs. As at the end of our quarter, we had capitalized a total of $27.7 million related to our CRM project. As a result, we will start to depreciate the system over a 10 year life in our third fiscal quarter of 2021, with depreciation in the second half of the year approximating $1.5 million to $2 million. [Technical Issues] for 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 second quarter of fiscal 2021, we repurchased 12,200 shares of common stock for a total of $2.3 million under our previously announced stock repurchase program. As of February 27, 2021, the Company had repurchased a total of 368,117 shares of common stock for $61.8 million under the program. We expect our fiscal 2021 revenues to be between $1.793 billion and $1.803 billion, which at the midpoint of the range assumes an organic growth rate in our core laundry operations of 3.5%. As a reminder, the prior year comparison for the second half of fiscal 2021 will be negatively impacted by a $20.1 million large direct sale to a healthcare customer that we recorded in our third fiscal quarter of 2020. Full year diluted earnings per share is expected to be between $7.30 and $7.65. This outlook assumes an operating margin in our core laundry operations for the second half of the year of 10.4% and reflects additional expense we expect to incur related to the deployment of our CRM system of approximately $5 million.

Consolidated revenues for our second quarter were $449.8 million, down 3.2% from the prior year and fully diluted earnings per share was $1.71, down 6% from the prior year. As Steve mentioned, our second quarter of 2021's consolidated revenues were $449.8 million, down 3.2% from $464.6 million a year ago. Net income for the quarter decreased to $32.6 million or $1.71 per diluted share from $34.7 million or $1.82 per diluted share. We expect our fiscal 2021 revenues to be between $1.793 billion and $1.803 billion, which at the midpoint of the range assumes an organic growth rate in our core laundry operations of 3.5%. Full year diluted earnings per share is expected to be between $7.30 and $7.65.

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Third quarter net income of $34.1 million produced core earnings per share of $0.36, accompanied by core return on assets of 1.43% and core pre-tax pre-provision ROA of 1.79%. Other headlines for the quarter include first, excluding PPP loan payoffs, we're pleased with loan growth of 8.2% or $132.3 million in the third quarter with ongoing strength in indirect lending, home equity lending, commercial lending and mortgage lending. Second, the loan growth and improved margin enabled a $2.4 million quarter-over-quarter increase in net interest income to $70.9 million. Third, non-interest income or fees grew $1.2 million quarter-over-quarter to $27.2 million on the strength of improvement in SBA and mortgage gain on sale income as well as higher wealth management income. Importantly, our card-related interchange business generated $7.1 million in fee income. Fourth, our efficiency ratio increased to 55.27% as core non-interest expense rose some $3.7 million, primarily due to higher personnel expense, including higher incentive accruals based upon increased production, higher wages, particularly in entry level positions driven by inflationary pressure, higher hospitalization expense and then the hiring of the management team of the equipment finance division. The third quarter represented our lowest loan charge-offs in nine quarters, a decrease in specific reserves for troubled credits coupled with general improvement in economic conditions led to a provision of just $330,000 down from $5.4 million in the second quarter. Our reserves now represent 1.3% of total loans, excluding PPP and a 247% of non-performing loans. The level of non-performing loans improved significantly from $52.8 million in the second quarter to just $38.1 million in the third quarter or 56 basis points of total loans. Similarly, non-performing assets of $39 million at quarter end now stand at 41 basis points of total assets. Subsequent to quarter end in early October a $6.9 million troubled credit was resolved and will be reflected in Q4 results. We continue to be pleased with our adoption of our new mobile banking app, which is growing at an annualized rate of 18%. We expect the average ticket size to be about $80,000 and an average term of 60 months. Based on the historical performance of this team, we expect yields in the mid-5% range and spreads in the mid-4% range with charge-offs typically ranging from 55 basis points to 75 basis points. If all goes according to plan, we believe that we can generate some $200 million to $250 million of equipment finance assets on our books by the end of 2022 before really hitting our stride in '23 and '24. The GAAP net interest margin expanded by 6 basis points this quarter to 3.33%. Net expansion was driven by strong organic loan growth of just over 8% annualized. Total PPP income in the third quarter was $5.7 million, up by only $200,000 from last quarter. As of September 30, we had $152 million of PPP remaining on the books with $6.3 million in fee income that remains to be recognized. The core NIM which we calculate to exclude the effects of PPP and excess cash fell from 3.20% last quarter to 3.16% this quarter because we purchased $134 million of securities in the quarter. Had we not purchased the securities and just let the money sit in cash, we would have excluded that cash from the core NIM calculation based on the way we calculate it and the core NIM would have dropped by only 1 basis point to 3.19%. Our cost of deposits in the third quarter was down to only 6 basis points. I'm pleased to report that our last remaining tranche of high cost deposits totaling $52 million at a cost of 1.65% repriced on October 13 subsequent to quarter end. That alone will save us nearly $1 million a year in interest expense at about a point of NIM. With that behind us, we're down to about $400 million in time deposits remaining at a cost of 36 basis points, three quarters of which will mature by the end of 2022. In light of unprecedented levels of liquidity, we are revising our interest rate risk assumptions to reflect the ability to lag deposit rate increases for the first two 25 basis point rate hikes. You'll see this in our IRR tables once we published our 10-Q but to give you a preview a 100 basis point parallel shock will show an increase in the first year net interest income of over 5%. Turning now to fee income; fee income of $27.2 million in the quarter remains a bright spot and seems to be one aspect of our company that is consistently underappreciated. There's been talk of slowdown in mortgage all year but our mortgage gain on sale income actually increased by $400,000 over the last quarter. SBA is another fee income engine that continues to gain momentum now that PPP is mostly behind us with SBA gear and sale income up by $700,000 from last quarter to $2.4 million. Card related interchange income continues at new record levels for us of approximately $7 million a quarter, and deposit service charges after the off pace for much of the pandemic due to heightened cash levels and customer accounts have returned to more normalized levels. Turning to non-interest expense, last quarter, our guidance was $53 million to $54 million, and we came in at $55 million for the reasons Mike described. Finally, we repurchased 997,517 shares of stock during the third quarter at an average price of $13.35. While we ended the quarter with approximately $10.3 million remaining of our $25 million share repurchase authorization we are also pleased to announce that our board authorized an additional $25 million share repurchase authorization yesterday.

Third quarter net income of $34.1 million produced core earnings per share of $0.36, accompanied by core return on assets of 1.43% and core pre-tax pre-provision ROA of 1.79%. Second, the loan growth and improved margin enabled a $2.4 million quarter-over-quarter increase in net interest income to $70.9 million. In light of unprecedented levels of liquidity, we are revising our interest rate risk assumptions to reflect the ability to lag deposit rate increases for the first two 25 basis point rate hikes. While we ended the quarter with approximately $10.3 million remaining of our $25 million share repurchase authorization we are also pleased to announce that our board authorized an additional $25 million share repurchase authorization yesterday.

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Operating earnings were $0.59 per share, which is above the top end of our earnings guidance. I'll start our call today with an update on the DOJ and other investigations related to House Bill 6 and John Somerhalder will join us for a brief discussion on board activity and the progress of our compliance program. Under the three-year deferred prosecution agreement, we agreed to pay $230 million, which will be funded with cash on hand. We also continue to strengthen our leadership team with two more new hires, Michael Montaque joined us earlier this month as Vice President, Internal Audit and yesterday we announced that Soubhagya Parija has been named Vice President and Chief Risk Officer effective August 16. Yesterday, we published our updated internal Code of Business Conduct, The Power of Integrity, which will be supported by ongoing education around behaviors and the importance of reporting ethical violations and we have continued to strengthen our policies, processes and internal controls including those around 501(c)(4)s, other corporate engagement and advocacy and business disbursements. The program is expected to deliver value and resilience including cumulative free cash flow improvements of approximately $800 million from 2021 through 2023 and an annual run rate capex efficiencies of about $300 million in 2024 and beyond. First, in July, the PUCO approved our filing to return approximately $27 million to our Ohio utility customers, representing all revenues that were previously collected through the decoupling mechanism plus interest. Finally, in April, the New Jersey BPU approved JCP&L's three year $203 million energy efficiency and conservation plan, which includes a return on certain costs, as well as the ability to recover lost distribution revenues. We are reaffirming our 2021 operating earnings guidance of $2.40 to $2.60 per share and we expect to be at the top half of that range. We are also introducing third quarter guidance of $0.70 to $0.80 per share. Yesterday, we announced GAAP earnings of $0.11 per share for the second quarter of 2021 and operating earnings of $0.59 per share. Second quarter 2021 weather-adjusted residential sales were 6% lower than the same period last year when many of our customers were under strict stay at home orders. However, as we look at trends, weather-adjusted residential usage over the past few quarters has been on average about 4% higher than pre-pandemic levels and in fact, the second quarter of this year was close to 8% higher than weather-adjusted usage we saw in the second quarter of 2019. Weather-adjusted deliveries to commercial customers increased 8% and industrial load increased 11% as compared to the second quarter of 2020. Despite the increase in commercial activity this spring, weather-adjusted demand in this customer class continues to lag pre-pandemic levels by an average of about 6%. Our transmission investments drove year-over-year rate base growth of 7%. For the first half of 2021, operating earnings were $1.28 per share compared to $1.23 per share in the first half of 2020. This increase was the result of continued investments in our transmission and distribution systems, weather-related sales and lower expenses and consistent with our second quarter results, the positive drivers for the first half of this year more than offset the absence of $0.13 of decoupling and lost distribution revenues that were recognized in the first half of 2020 that are no longer in place this year. Additionally, our continued focus on financial discipline together with strong financial results helped drive a $196 million increase in adjusted cash from operations versus our internal plan and a $264 million increase above the first six months of last year, building on the improvements we noted on our first quarter earnings call. In May, we issued a $150 million in senior notes at Toledo Edison and MAIT with pricing at 2.65% and 2.55% respectively. And in June, we issued $500 million in senior notes at JCP&L that priced at 2.75%. In addition, we made progress on our commitment to reduce short-term debt during the second quarter by repaying $950 million under our revolving credit facilities bringing our borrowings down to $500 million as of June 30. And earlier this week, we repaid the remaining $500 million under these facilities.

Operating earnings were $0.59 per share, which is above the top end of our earnings guidance. We are reaffirming our 2021 operating earnings guidance of $2.40 to $2.60 per share and we expect to be at the top half of that range. We are also introducing third quarter guidance of $0.70 to $0.80 per share. Yesterday, we announced GAAP earnings of $0.11 per share for the second quarter of 2021 and operating earnings of $0.59 per share. In May, we issued a $150 million in senior notes at Toledo Edison and MAIT with pricing at 2.65% and 2.55% respectively.

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We delivered strong results marked by another record quarter of earnings per share of $1.30. Sales for the quarter were $473 million or 17% higher on an organic basis and up 22%, including sales from the recent Normerica acquisition. For more perspective on our organic growth, the projects we've initiated and I've discussed with you over the past year contributed approximately 5% to our organic growth in the quarter. Said another way, about 5% of our growth was delivered from new projects and technologies initiated over the past year, 12% from market growth and 5% from the acquisition of Normerica. Strength of our operating capabilities is reflected in how we successfully managed through the external conditions we faced this quarter, which enabled us to generate $63 million of operating income, a 22% increase over last year. Cash flow remains strong and, through the first nine months of the year, cash from operations is up 10% compared to 2020. Last week, we initiated a new one-year $75 million program. I'll start with our household and personal care and specialty product line, where our broad portfolio of consumer-oriented businesses continues to perform very well, resulting in organic sales growth of 13% year-to-date and 20%, including the recent addition of Normerica. Our global Metalcasting business remains on its consistent growth track with sales up 30% year-to-date, driven by strong demand from both North America and Asia foundries, serving a diverse customer base in automotive, heavy truck and agriculture markets. Specifically, penetration of our blended products continues to expand in Asia as sales increased 30% compared to last year with 29% growth in China alone. In India, which is the second largest gray and ductile iron casting market globally, sales of our blended products are up 50% over 2020. Sales were up 17% year-to-date as uncoated freesheet paper demand continues to improve in all regions. We've also benefited from the ramp up of 200,000 tons of new capacity that we've brought online over the past year, which includes a 150,000-ton facility in China and another 50,000-ton satellite in India. Production at our 40,000 ton expansion for a packaging application in Europe was also just commissioned in the third quarter. For perspective, sales realized from these latest satellites were responsible for 5% of the 17% PCC growth so far this year. In addition to the capacity I just mentioned, another 40,000 ton satellite in India will start up this quarter and we've begun building another 50,000 ton satellite in China, which should be operational in the first half of next year. We've also just reached an agreement and expect to sign a contract over the next couple of weeks with a new customer in India for another 22,000 ton satellite. It will be our ninth satellite in India after entering the market with our PCC technology 10 years ago. In total, with the satellites just commissioned and ramping up, combined with these three new satellites, we see the 5% growth rate from new satellites continuing through next year. It's been a very impressive year for this segment with growth of 22%, marked by steel utilization rates noticeably improving over last year. Over the past six months, we've secured seven contracts worth $100 million over the next five years, two of which were signed during the third quarter. Sales mix has evolved over the past few years with 30% of our revenue now coming from stable and growing consumer-oriented markets. Specifically for next year, we see our sales growth moving north of 10% and this sales trajectory, along with our strong operating capabilities, provides a powerful combination for significant long-term value generation. Sales in the third quarter were 22% higher than the prior year and 4% higher sequentially. Organic growth for the company was 17% versus the prior year and the acquisition of Normerica contributed the remainder of the growth in the quarter. Operating income excluding special items was $63.2 million, up 23% versus the prior year and was relatively flat versus the second quarter. Operating margin was 13.4%. It's worth noting that excluding Normerica, operating margin was 13.8% for the quarter. The year-over-year operating income bridge on the top right of this slide shows volume and mix contributed $14.9 million, driven by our strategic growth initiatives and the broad-based volume growth we've seen across our end markets. You can also see the significant inflationary cost we experienced, $18.4 million in the third quarter alone, driven by energy, freight and raw materials such as lime and packaging. To give you some perspective, we saw energy pricing go up by anywhere from 50% to 400% depending on the location and power source with the most dramatic increases in the UK and Europe. We offset $10.7 million of these inflationary costs with continued price increases, including contractual pass-through mechanisms in paper PCC and negotiated price actions in the rest of the business. The sequential bridge on the bottom right shows how inflation accelerated from the second quarter to the third quarter by $10 million, more than half the total year-over-year impact. However, this bridge also shows how quickly we acted to implement pricing, offsetting nearly 70% of the sequential increase. Meanwhile, we continue to control overhead expenses with SG&A as a percent of sales at 10.6%, 150 basis points below the prior year and 70 basis points lower sequentially. Earnings per share, excluding special items, was $1.30, the second consecutive record quarter for the company and represented 41% growth versus the prior year. Third quarter sales for Performance Materials were $250.4 million, 23% higher than the prior year and 5% higher sequentially. The acquisition of Normerica contributed 10% growth versus the prior year and organic sales contributed an additional 13%. Household, Personal Care and Specialty Products sales were 30% above the prior year, driven by Normerica and continued strong demand for consumer-oriented products. Sales were 19% higher sequentially, primarily driven by the acquisition. Metalcasting sales were 10% higher than the prior year, driven by stronger demand globally and continued penetration of green sand bond technologies in Asia. Sales were 9% lower sequentially, primarily due to typical seasonal foundry maintenance outages. Environmental Products sales grew 32% versus the prior year on improved demand for environmental lining systems, remediation and wastewater treatment. Building Materials sales grew 18% versus the prior year and 3% sequentially on higher levels of project activity. Operating income for the segment was $32.6 million and operating margin was 13% of sales. Operating margin, excluding Normerica, was 13.9%. Specialty Minerals sales were $146.9 million in the third quarter, 17% higher than the prior year and 3% higher sequentially. SPCC sales grew 17% versus the prior year and 3% sequentially on recovering Paper PCC demand, the continued ramp up of three new satellite plants and higher SPCC demand from automotive, construction and consumer end markets. Process Minerals sales grew 18% versus the prior year and 2% sequentially on continued strength in residential construction and consumer end markets. Process Minerals sales, as I just spoke about, did grow 18% and segment operating income was $18.4 million and operating margin was 12.5% of sales. This segment has seen the most acute impact from energy and raw material cost increases with inflationary cost increases of $9 million, partially offset by $5 million pricing in the third quarter alone. Refractory segment sales were $75.9 million in the third quarter, 28% higher than the prior year and 2% higher sequentially as demand remained strong for refractory and metallurgical products. Segment operating income was $13.2 million, a quarterly record and 81% higher than the prior year and 13% higher sequentially. Operating margin was strong at 17.4% of sales and was also a record performance. However, we expect slightly lower sales and operating income to be down approximately $2 million. Cash flow from operations was $163.1 million year-to-date compared to $148.4 million in the prior year, up 10%. Capital expenditures were $63 million year-to-date versus $45.8 million in the prior year as we continue to invest in high return projects. The company used a portion of free cash flow to repurchase $63 million of shares year-to-date and the share repurchase authorization from the prior year was completed in October. The Board of Directors authorized a new $75 million one-year share repurchase program on October 20, 2021. As of the end of the third quarter, total liquidity was over $500 million and our net leverage ratio was 2.2 times EBITDA. We expect strong cash flow generation to continue in the fourth quarter with free cash flow in the $150 million range for the full year. And overall for the company, we expect another strong performance with operating income around $60 million.

We delivered strong results marked by another record quarter of earnings per share of $1.30. Sales for the quarter were $473 million or 17% higher on an organic basis and up 22%, including sales from the recent Normerica acquisition. Earnings per share, excluding special items, was $1.30, the second consecutive record quarter for the company and represented 41% growth versus the prior year.

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Revenue for the third quarter of fiscal year 2021 was $1.24 billion, and diluted earnings per share were $1.51. The company's operating margin was 11.2% for the quarter. Excluding the amortization expense, results in an operating margin of 12.2%. COVID response work contributed an estimated $460 million of revenue in the quarter, which was approximately $185 million higher than our projection for the third quarter. COVID response work has contributed $860 million of revenue on a year-to-date basis, and our full year estimate is approximately $1 billion. The estimated organic revenue growth for fiscal 2021 adjusted to exclude the Census contract and COVID response work is 2.6%, assuming the midpoint of our new guidance range disclosed today. The attained federal revenue for the three months ended June 30, 2020, was $56 million, which equates to approximately $224 million on an annualized basis. VES contributed $46 million of revenue, beginning from the acquisition date of May 28, 2021, which equates to approximately $515 million of revenue on an annualized basis. At June 30, 2021, and we had gross debt of $1.71 billion, and we had unrestricted cash and cash equivalents of $96.1 million. At June 30, 2021, our receivables were $1.13 billion resulting from the inclusion of VES acquired receivables and a substantial increase in revenue in the quarter. The DSO of 77 days includes VES on a pro forma basis and was skewed by the high level of revenue in June as compared to April and May. DSO was 75 days at December 31, 2020 and 70 at March 31, 2021, which included Attain Federal on a pro forma basis. Cash from operations of negative $33 million and free cash flow of negative $41.6 million for the three months ended June 30, 2021, were significantly impacted in the quarter due to this additional investment in working capital. Assuming the midpoint of our new revenue guidance range and assuming 72 days DSO, we expect the cash from operations to be in the range of $425 million to $455 million for the full year. Cash flows from investment activities report significant activity, including almost $1.8 billion of cash outflows for the two acquisitions. Cash flows from financing activities showed the draw of $1.7 billion on our new credit facility in May. The credit facility is flexible and at $2.1 billion in total provides us an additional $400 million for liquidity and to fund smaller acquisitions. This pro forma assumes Attain Federal and VES had been acquired on July 1, 2020, and therefore, included for a full 12 months in our operating results. The operating income and operating margin for the 12-month period, excluding amortization of intangible assets, was $591.3 million and 12.7%, respectively, for the combined company inclusive of Attain Federal and VES. As for the remainder of fiscal 2021, our expectation for the full year is for revenue to range between $4.2 billion and $4.25 billion and for diluted earnings per share to range between $4.65 and $4.75. We expect cash from operations to range between $425 million and $455 million and free cash flow between $375 million and $405 million for the fiscal year 2021. The midpoint of guidance implies an operating income margin of 9.8%. Our best estimate for fiscal 2021 amortization expense is $44 million and reflects the increase due to the two acquisitions. The operating income margin, excluding the amortization of purchased intangible assets, implied by the guidance for the full fiscal year ending September 30, 2021, is 10.9%. The fourth quarter results for fiscal 2021 will be negatively impacted by the start-up contracts outside the U.S., which are expected to have operating losses in the range of $13 million to $15 million within the fourth quarter. Our effective income tax rate for the full year ended September 30, 2021 is expected to be between 25% and 25.5%. We expect interest expense to be approximately $14 million for fiscal 2021 and approximately $10 million in the fourth quarter. The fiscal '21 diluted earnings per share guidance would be $0.53 higher, excluding the projected amortization of intangible assets. Both scopes of work created significant learning opportunities for us as well as our gaining significant new customer relationships, including this year's projection, inception-to-date census and COVID response work combined revenues are estimated to be approximately $2 billion. The cash realized from the Census contract and the COVID response work was significant to our ability to acquire both Attain Federal and VES and still maintain a total debt to adjusted EBITDA ratio below 3:1. Third quarter fiscal 2021 revenue in the U.S. Services Segment increased to $436.3 million, driven by an estimated $164 million of COVID response work. The segment operating income margin was 14.3%, reflecting the negative impact on some core programs, including those impacted by the pause of Medicaid redeterminations as well as push out of non-COVID planned new work. These factors also impact our fiscal 2021 full year expectations for the U.S. Services Segment operating income margin, which is expected to range between 16% and 17%. Revenue for the third quarter of fiscal 2021 for the U.S. Federal Services Segment increased to $617.6 million from $450.1 million in the prior year period due to particularly strong COVID response work and contributions from the two acquisitions offset by the lower revenue from the Census contract. COVID response work contributed an estimated $280 million of revenue to the Segment. The operating income margin for U.S. Federal was 13.9%. Our full year fiscal 2021 guidance for the U.S. Federal Services Segment is between a 10% and 11% segment operating income margin. For the fourth quarter of fiscal 2021, we expect a margin between 11% and 12% for the segment. Turning to Outside the U.S. Segment, revenue for the third quarter of fiscal 2021 was $189.6 million, Operating income was $8.3 million, resulting in a margin of 4.4%. As a reminder, the profitability for each of these Outside the U.S. start-up contracts is expected to exceed 10% operating income margin, and we expect significant improvement to the financial contribution from these contracts in the second half of fiscal 2022. The ratio of debt, net of allowed cash to pro forma EBITDA for the 12 months ended June 30, 2021, calculated in accordance with our credit agreement is 2.4:1. Our stated aim is to use most of our free cash flow over the next few quarters to push this ratio closer to 2:1. We target a dividend yield between 1% and 2% of our stock price. Based on our stock price over the last several months, the current annual dividend of $1.12 per year has ranged between 1.2% and 1.4% yield. On the plus side, we feel less uncertainty going into fiscal 2022 as compared to this time last year, which gives visibility to the following: number one, we expect the acquired businesses of Attain Federal and VES to deliver approximately $750 million of revenue in fiscal 2022. This compares to $320 million to $330 million forecasted for the two acquisitions in fiscal 2021. Number two, we currently expect the revenue in fiscal 2022 from COVID response work to be in the range of $150 million to $200 million. Number three, our expectation is that revenue from the star-tup contracts Outside the U.S. will be at least $150 million higher in fiscal 2022 as compared to fiscal 2021. Number four, we expect amortization expense to be between $80 million and $85 million. Number five, we expect interest expense to be between $30 million and $33 million, and the effective income tax rate, assuming no change in U.S. Federal rates, should be between 25% and 26%. With two months left to go in fiscal year 2021, it's natural for us to be looking toward next year when we expect to see not only macro trends, bringing improvement to our core programs, but also momentum through new programs, such as the UK Restart and additional clinical and digital IT services work afforded by Attain Federal and VES. Prior to VES, 15% of our work was clinical in nature, whereas it now accounts for approximately 25% of our portfolio. I'm also pleased to share the recent award of two modernization contracts from the Internal Revenue Service were a combined $151 million awarded on the GSA Alliant two contract vehicle. We have a long-standing relationship with the IRS, which initially began in 1991 and are uniquely positioned to support the agency as they focus on modernization projects and build solutions to meet their mission-critical needs. Outside the U.S., as Rick noted, our margin profile for Restart UK will improve over the next several quarters with OUS start-ups collectively anticipated to achieve 10% or higher operating income margin over the life of the contracts and provide us at least $150 million of additional revenue in FY '22. For the third quarter of fiscal year 2021, year-to-date signed awards were $3.2 billion of total contract value at June 30. This includes the UK Restart Award that we announced on April 26 and the CDC Vaccination Hotline Award for which we have assumed a $300 million total contract value. Further, at June 30, there were another $1.38 billion worth of contracts that have been awarded, but not yet signed. Our total contract value pipeline at June 30 was $33.6 billion compared to $35.6 billion reported in the second quarter of fiscal 2021. The June 30 pipeline is comprised of approximately $4.2 billion in proposals pending, $6.8 billion in proposals and preparation and $22.6 billion in opportunities tracking. Of the total pipeline, 63.6% represents new work opportunities. Approximately $1 billion of the pipeline reduction is due to the UK Restart program award with the remainder largely a result of government delays or cancellation of work that pushes opportunities out past the 2-year horizon for pipeline reporting. Illustrating the capabilities we demonstrated during the pandemic, we quickly ramped up approximately 13,000 agents on one contract alone, which required initially hiring nearly 20,000 prospective staff. We saw our largest starting class ever on one day, comprising more than 12,500 remote agents as part of this effort. The cloud-based telephony infrastructure built and stress tested for this same contract was among the largest ever constructed for government, capable of handling up to 0.5 million calls per hour or 160 calls per second. As Rick and I have cautioned this year, the COVID-19 work is tapering off quickly, while, with some exceptions like Australia, our core programs have not yet returned to their prepandemic activity levels.

Revenue for the third quarter of fiscal year 2021 was $1.24 billion, and diluted earnings per share were $1.51. COVID response work has contributed $860 million of revenue on a year-to-date basis, and our full year estimate is approximately $1 billion. Assuming the midpoint of our new revenue guidance range and assuming 72 days DSO, we expect the cash from operations to be in the range of $425 million to $455 million for the full year. As for the remainder of fiscal 2021, our expectation for the full year is for revenue to range between $4.2 billion and $4.25 billion and for diluted earnings per share to range between $4.65 and $4.75. We expect cash from operations to range between $425 million and $455 million and free cash flow between $375 million and $405 million for the fiscal year 2021. The cash realized from the Census contract and the COVID response work was significant to our ability to acquire both Attain Federal and VES and still maintain a total debt to adjusted EBITDA ratio below 3:1. The ratio of debt, net of allowed cash to pro forma EBITDA for the 12 months ended June 30, 2021, calculated in accordance with our credit agreement is 2.4:1. Our stated aim is to use most of our free cash flow over the next few quarters to push this ratio closer to 2:1. We target a dividend yield between 1% and 2% of our stock price. With two months left to go in fiscal year 2021, it's natural for us to be looking toward next year when we expect to see not only macro trends, bringing improvement to our core programs, but also momentum through new programs, such as the UK Restart and additional clinical and digital IT services work afforded by Attain Federal and VES. Approximately $1 billion of the pipeline reduction is due to the UK Restart program award with the remainder largely a result of government delays or cancellation of work that pushes opportunities out past the 2-year horizon for pipeline reporting. As Rick and I have cautioned this year, the COVID-19 work is tapering off quickly, while, with some exceptions like Australia, our core programs have not yet returned to their prepandemic activity levels.

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For the third quarter of 2021, the partnership recorded net income of $104 million. Adjusted EBITDA was $198 million compared to $189 million in the third quarter of 2020. Volumes were approximately two billion gallons, a sequential increase of 2% from the second quarter. Year-over-year volumes increased 6.4%. Fuel margin was $0.113 per gallon versus $0.121 per gallon in the third quarter of 2020. Total operating expenses in the third quarter were up as expected compared to the second quarter at $113 million versus $102 million and were flat to the third quarter of 2020. Third quarter distributable cash flow as adjusted was $146 million, yielding a current quarter coverage ratio of 1.68 times and a trailing 12-month coverage ratio of 1.43 times, consistent with our long-term target of a minimum of 1.40 times. On October 25, we declared an $0.8255 per unit distribution, consistent with last quarter. Leverage at the end of the quarter was 4.05 times, which we expect to increase minimally with the closing of the NuStar acquisition. Leverage is expected to trend lower toward our 4.0 times target as we move into next year. Our 2021 full year EBITDA guidance remains $725 million to $765 million, excluding the NuStar and Cato acquisitions. We are reducing full year 2021 operating expense guidance to $425 million to $435 million compared to our previous guidance of $440 million to $450 million. Finally, we continue to expect maintenance capital of $45 million and growth capital expenditures of approximately $150 million. In October, we issued $800 million of 4.5% senior notes due 2030, using the proceeds to redeem $800 million of our existing 5.5% senior notes due 2026. The transactions lower our interest rate on this debt by 100 basis points while extending the maturity date by approximately four years. Volume for the quarter was up over 6% from last year, but the more relevant comparison continues to be performance relative to 2019. On that basis, we were off about 7% from the third quarter of 2019. Fuel volumes grew roughly 2% versus the second quarter of this year, while our fuel margins remained very healthy.

Our 2021 full year EBITDA guidance remains $725 million to $765 million, excluding the NuStar and Cato acquisitions.

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I'm pleased to announce that core earnings came in at $0.10 per share for the quarter, exceeding our recently increased dividend of $0.08 per share. Book value was $3.86 at quarter end, which represents an increase of 11.2% for the quarter. The combination of the increased dividend and our book value appreciation produced an economic return of 13.5% for the quarter. The improvement in book value has continued since quarter-end, as we estimate that book value was up approximately 5% through last Friday, with those gains concentrated in January and relatively flat performance so far during February. At IVR, we have largely completed our reallocation to Agency MBS, ending the year with 98% of our assets in agencies. We continue to take advantage of the strong demand for credit assets by further reducing our credit book by $336 million, resulting in a credit portfolio of $161 million at quarter end. Our liquidity position remains strong as we ended December with a $745 million balance in cash and unencumbered assets. Earlier this month, we successfully completed a common stock offering with net proceeds of approximately $103 million that was deployed into additional agency mortgages. I'll begin on slide four, which details the changes in the US Treasury yield curve over the past 12 months in the upper left hand chart. As the short-end remained anchored, while the 10-year and 30-year both increased approximately 20 basis points during the quarter. Lastly in the bottom right chart, we detailed the growth in both US Bank and Federal Reserve Holdings of Agency RMBS, which had a significant impact on Agency RMBS valuations, as we entered 2021, despite net issuance close to an all-time record at $210 billion in the quarter. The combination of the Federal Reserve with the prescribed $120 billion of net purchases and commercial banks with over $200 billion of net demand during the quarter, produced impressive hedged returns in the asset class. Particularly in lower coupon 30 years, as the primary beneficiary of the demand from both entities. These totals resulted a net demand for the year of over $600 billion for the Fed and $500 billion from banks, overwhelming the historically high $500 billion of net supply. Finally, the lower right-hand chart shows the implied financing rate for dollar roll transactions and 30-year, 2%, 2.5% and 3% TBAs. As indicated in the chart, volatility in dollar roll attractiveness increased during the quarter, as implied financing rates improved for higher coupon 30 year, 2.5% and 3%'s and were weaker for 30 year 2%'s. Dollar rolls trading with implied financing rates below 0% indicate a particularly attractive environment for investors and while lower coupon TBAs are not rolling quite as well as they were late in the third and early in the fourth quarters, they still provide investors with improved funding levels for Agency RMBS relative to short-term repo in a highly liquid securities. As indicated in the upper left hand chart, in addition to the 18% allocation to Agency TBA, our Agency RMBS portfolio is well diversified across specified pool collateral types. We remain focused on lower price collateral stories, mitigating our exposure to elevated payoffs, at historically tight spreads, as our specified pool holdings had a weighted average pay up of 0.8 points as of 12/31. We purchased $3.1 billion of lower coupon 30 year specified pools during the quarter, while rotating out of $491 million of underperforming pools, underscoring our active management strategy within the portfolio and the superior liquidity of the asset class. In addition, we added $800 million notional of lower coupon 30 year TBA, increasing our allocation from 14% at the end of the third quarter to 18%, and dollar rolls remain an attractive and highly liquid alternative to holding specified pools in financing them via short-term repo. Our specified pool holdings paid 3.9% CPR, during the quarter, as our relatively newly issued pools at a weighted average loan age of five months at quarter end. We remain focused primarily in 30-year, 2% and 2.5% coupons, and those coupons provide the most attractive combination of lower prepayment speeds and strong support via consistent, Federal Reserve and commercial bank demand. Our remaining credit investments are detailed on Slide 7 with non-Agency CMBS representing nearly 70% of the $161 million portfolio. As John referenced on Slide 3, we sold $336 million of credit investments during the quarter, a strong demand for our assets provided attractive exit opportunities. Our $121 million of remaining credit securities are high quality, with 72% rated single A or higher and we remain comfortable with the credit profile of our remaining holdings. Although, we anticipate limited near term price appreciation, given the significant improvements experienced inflows we reached in the second quarter of 2020, we believe these assets are attractive holdings as 100% are held on an unlevered basis and provide attractive unlevered yields. Repurchase agreements collateralized by Agency RMBS grew to $7.2 billion as of December 31 and hedges associated with those borrowings also grew during the quarter to $6.3 billion notional of fixed to floating rate interest rate swaps. We continue to take advantage of low interest rates further out, the yield curve to lock in lower funding costs, via longer maturity hedges with a weighted average life of 6.7 years at year-end. While rates on our repo borrowings continue to drift lower during the quarter and into 2021, with one month repo rates for our Agency RMBS holdings averaging 21 basis points at year-end. Our economic leverage, when including TBA exposure increased from 5.1 times debt-to-equity on September 30 to 6.6 times debt-to-equity as of December 31, indicating further progress toward the transition to an agency focused strategy. Economic leverage since year end is modestly higher, estimated 7.1 times as of Friday and deployment of proceeds from our February capital raise into Agency RMBS investments financed via short-term repo, increased company leverage to our current target.

I'm pleased to announce that core earnings came in at $0.10 per share for the quarter, exceeding our recently increased dividend of $0.08 per share.

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Our overall packaging volumes increased by 5% in the first fiscal quarter, including e-commerce volume growth of 23% on a per-day basis. North American corrugated box shipments increased more than 11% per day in December and over 8% for the quarter. Consumer shipments of packaging were also very strong, up 2.4% year over year. We successfully started up our 710,000-ton paper machine at Florence that has replaced three older obsolete paper machines. We generated $562 million of adjusted free cash flow in the quarter. We used the vast majority of this cash flow to reduce our net funded debt by $489 million. Our net leverage ratio declined sequentially from 3.03 times to 2.86 times. We have increasing line of sight toward returning to our targeted leverage ratio of 2.25 to 2.5 times. We recognized each one of our teammates in the quarter with a one-time payment that accumulated to a total of $22 million. Sales of $4.4 billion, adjusted segment EBITDA of $670 million, and adjusted earnings per share of $0.61 per share in the quarter were all in line with the prior-year quarter. Packaging volumes measured in tons were 5% higher compared to the prior year. Offsetting this were declines in shipments of export containerboard, especially SBS and pulp, that totaled 470,000 tons. This was a decline of approximately 180,000 tons or 27% lower than last year. 73% of our sales were packaging sales, an increase of 5% or approximately 100,000 tons compared to last year. Shipments of paper declined by 10% or 180,000 tons compared to last year. This included a reduction of 125,000 tons in shipments of export containerboard. The pricing environment has improved and record a RISI published pricing increases across several of our major grades, including a $50 per ton North American containerboard price increase in November and a $40 per ton unbleached kraft price increase in December. We placed more than 100 machinery solutions in the quarter, bringing our total machinery replacements to more than 4,150. By replacing plastic with fully recyclable fiber-based packaging, Kraft Heinz will remove over 500 tons of plastic from supermarket shelves and reduce their CO2 footprint by 18%. Corrugated Packaging segment delivered adjusted EBITDA of $458 million in the first quarter. Corrugated box demand was strong across most end markets, highlighted by e-commerce year-over-year growth of 23%, as well as strength in beverage, industrial, and distribution through our Victory Packaging business. Our export shipments fell by 125,000 tons compared to the prior year, and our integration rate increased to 80% in the quarter. Offsetting this favorable business mix was the continued flow-through of the total of $40 per ton of containerboard index price declines that occurred in late 2019 and early 2020, as well as the $36 per ton increase in recycled fiber cost as compared to last year. We've been implementing the $50 per ton containerboard index price increase that PPW published in November. We completed the KapStone acquisition just over two years ago and have achieved our target of $200 million in annual run-rate synergies. In Brazil, mill outage reduced total mill production by approximately 48,000 tons. The Consumer Packaging segment's adjusted EBITDA in the first quarter was $234 million, so a $50 million increase from the prior year. Adjusted segment EBITDA margins increased by 270 basis points to 14.7% compared to the prior year. Strong demand across our core food, beverage, and healthcare packaging end markets drove 2.4% higher converting shipments and $18 million higher EBITDA by shifting shipments away from lower-margin SBS and pulp markets. Cost reductions and efficiency improvements contributed $40 million of productivity and operational improvements in the quarter. We took 39,000 tons of economic downtime primarily in the first two months of the quarter. This compares to 87,000 tons in our fiscal 2020 fourth quarter. Over the past three quarters, the plan has contributed an additional $600 million in cash. We are on track to achieve our goal of approximately $1 billion in additional cash available for debt reduction through the end of calendar year 2021. Each of the past five years, we have generated more than $1 billion of adjusted free cash flow, and we have generated over $1.6 billion of adjusted free cash flow during the past 12 months. With our ability to generate strong free cash flow, we have a road map to return our net leverage ratio to the targeted range of 2.25 to 2.5 times. Over the past 12 months, we've reduced our adjusted net debt by more than $1.3 billion, and our net leverage ratio has improved from 3.01 times to 2.86 times. Capital investment plans remain unchanged, and we still expect fiscal 2021 capital investments of $800 million to $900 million. These strategic investments, combined with our KapStone synergy realization, will contribute approximately $125 million of EBITDA in fiscal year '21 and a similar amount in fiscal year '22. Longer term, we expect normal capital investment levels will be between $900 million and $1 billion. We have minimal near-term debt maturities and approximately $3.4 billion of liquidity, and a road map to return our leverage to our targeted range of 2.25 to 2.5 times.

Sales of $4.4 billion, adjusted segment EBITDA of $670 million, and adjusted earnings per share of $0.61 per share in the quarter were all in line with the prior-year quarter.

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For the full year 2020, GTS contract value grew 4%. Client engagement continue to be strong with both content and analyst interactions up 30% versus 2019. GBS contract value continued to perform well throughout the year with contract value growth of 7%. New business growth was a very strong 26% in the quarter, driven by our GxL product line. Our consulting segment was also impacted by the pandemic with revenues down 12% in Q4 and 5% for the full year 2020. For example, we've signed contracts for our Stamford headquarters and our U.K. hub to be powered by 100% renewable energy. Our board authorized an additional $300 million for repurchases, bringing the total available to around $860 million. Reviewing our year-over-year financial performance, for the full year 2020, total contract value increased 4%, total FX-neutral revenue was down 3%, FX-neutral adjusted EBITDA increased 20%, diluted adjusted earnings per share was a strong $4.89 and free cash flow was $819 million, up almost 100% from 2019. Fourth quarter revenue was $1.1 billion, down 8% as reported and 9% FX-neutral. Excluding conferences, our revenues were up 2% year-over-year FX-neutral. In addition, total contribution margin was 68%, up more than 580 basis points versus the prior year. EBITDA was $245 million, up 13% year-over-year and up 10% FX-neutral. Adjusted earnings per share was $1.59, and free cash flow in the quarter was a robust $237 million. Research revenue in the fourth quarter grew 5% year-over-year as reported and 4% on an FX-neutral basis. Fourth quarter research contribution margin was 72%, benefiting in part from the temporary cost avoidance initiatives we put in place starting in the first quarter of 2020. Total contract value grew 4% FX-neutral to $3.6 billion at December 31. For the full year 2020, research revenues increased by 7%, both on a reported and FX-neutral basis. The gross contribution margin was 72%, up about 240 basis points from the prior year. Global Technology Sales contract value at the end of the fourth quarter was $2.9 billion, up almost 4% versus the prior year. While retention for GTS was 98% for the quarter, down about 600 basis points year-over-year, a majority of our industry groups saw retention improve from the third quarter. GTS new business declined 5% versus last year, an improvement from both the second and third quarters. Global Business Sales contract value was $696 million at the end of the fourth quarter. That's about 20% of our total contract value. CV increased 7% year-over-year. All practices contributed to the 7% CV growth rate for GBS with the exception of marketing, which was impacted by discontinued products. Wallet retention for GBS was 101% for the quarter, down 43 basis points year-over-year. GBS new business was up 26% over last year, led by very strong growth in HR, finance and legal. We held 13 virtual conferences in the fourth quarter. Conferences revenue for the quarter was $93 million. Contribution margin in the quarter was 78%. For the full year 2020, revenue decreased by 75%, both on a reported and FX-neutral basis. Gross contribution margin was 48%, down about 290 basis points from 2019 as we maintained some of our cost of service as well as SG&A despite the lower revenue. Fourth quarter consulting revenues decreased by 10% year-over-year to $94 million. On an FX-neutral basis, revenues declined 12%. Consulting contribution margin was 26% in the fourth quarter, down about 160 basis points versus the prior year quarter due to lower contract optimization revenue, which usually flows through at high margins. Labor-based revenues were $73 million, down 10% versus Q4 of last year or 12% on an FX-neutral basis. Labor-based billable headcount of 730 was down 10%. Utilization was 63%, up about 300 basis points year-over-year. Backlog at December 31 was $100 million, down 14% year-over-year on an FX-neutral basis. Our contract optimization business was down 9% on a reported basis versus the prior year quarter. Full year consulting revenue was down 4% on a reported basis and 5% on an FX-neutral basis and its gross contribution margin of 31% was up 68 basis points from 2019. SG&A decreased 6% year-over-year in the fourth quarter. For the full year, SG&A decreased 3% on a reported and FX-neutral basis. EBITDA for the fourth quarter was $245 million, up 13% year-over-year on a reported basis and up 10% FX-neutral. Depreciation in the quarter was up approximately $4.5 million from last year, including expense acceleration from facilities-related charges. Amortization was down about $800,000 sequentially. Net interest expense, excluding deferred financing costs in the quarter was $26 million, flat versus the fourth quarter of 2019. The Q4 adjusted tax rate, which we use for the calculation of adjusted net income, was 25% for the quarter. The tax rate for the items used to adjusted net income was 28.4% in the quarter. The adjusted tax rate for the full year was 21%. Adjusted earnings per share in Q4 was $1.59. For the full year, adjusted earnings per share was $4.89. EPS growth for the year was 25%. Note that about $7 million of equity compensation expense, which we normally would have incurred in the fourth quarter, has shifted into the first quarter of 2021. That was a benefit to fourth quarter adjusted earnings per share of about $0.07. Operating cash flow for the quarter was $260 million compared to $83 million last year. Capex for the quarter was $23 million, down 57% year-over-year. Free cash flow for the quarter was $237 million, which is up about 700% versus prior year. Free cash flow as a percent of revenue or free cash flow margin was 20% on a rolling four quarter basis, continuing the improvement we have been making over the past few years. Adjusted for timing and one-time benefits, 2020 normalized free cash flow margin is around 13%. Our December 31 debt balance was $2 billion. At the end of the fourth quarter, we had about $1 billion of revolver capacity. Our reported gross debt to trailing 12 month EBITDA is about 2.5 times. At the end of the fourth quarter, we had $713 million of cash. We resumed our share repurchases after pausing earlier in the year, buying back $100 million in stock at an average price of $156 per share. The board recently increased our share repurchase authorization by $300 million because we have significant capacity for buybacks from cash on hand and expected free cash flow. As of February 8, we have around $860 million available for open-market repurchases. We expect research revenue of at least $3.815 billion, which is growth of at least 5.9%. We expect conferences revenue of at least $160 million, which is growth of at least 33%. We expect consulting revenue of at least $390 million, which is growth of at least 3.6%. The result is an outlook for consolidated revenue of at least $4.365 billion, which is growth of 6.5%. Based on current foreign exchange rates and business mix, the consolidated growth includes an FX benefit of about 200 basis points. We expect full year adjusted EBITDA of at least $760 million, which is a decline of about 7% and reported margins of at least 17.4%. We expect our full year 2021 adjusted net interest expense to be $102 million. We expect an adjusted tax rate of around 22% for 2021. We expect 2021 adjusted earnings per share of at least $4.10. For 2021, we expect free cash flow of at least $630 million. Our 2020 ending contract value at 2021 FX rates is $2.9 billion for GTS and $706 million for GBS. Finally, we expect to deliver at least $200 million of EBITDA in Q1 of 2021.

Fourth quarter revenue was $1.1 billion, down 8% as reported and 9% FX-neutral. Adjusted earnings per share was $1.59, and free cash flow in the quarter was a robust $237 million. Adjusted earnings per share in Q4 was $1.59.

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We achieved sales of over $340 million in the quarter, up 38% from the prior year with both divisions having all-time highs. However, when comparing to a more normalized 2019, we are favorable by 12%. Our top line sales remained quite strong, up 35% versus last year, but also up 7% over 2019. Second, we have been aggressively pursuing new business wins with our existing customers, and we are very pleased with our results as our new business awards recover over 1/3 of the lost business on an annualized basis. And when combined with the return of miles driven and the associated vehicle maintenance, we enjoyed a record-setting quarter for sales, up nearly 50% from last year and up over 25% compared to 2019. However, similar to Engine Management, here too, we are facing difficult third quarter comparisons to 2020, which was up 25% from '19 and was far and away the biggest third quarter we had ever had in Temperature Control. All of these elements combined for record profits as we posted earnings per share of $1.26, which is more than 140% greater than 2020 and nearly 40% greater than 2019. However, looking forward, it is important to point out that the cadence of the last 18 months was very unusual, making the future difficult to predict. The past 12 months have seen outsized market expansion, which likely includes a certain amount of pent-up demand, and at some point, it will not be a sustainable rate of growth. We acquired Trombetta, a worldwide leader in mechanical and electronic power switching and power management devices, generating about $60 million in annual sales. Trombetta is headquartered in Milwaukee, Wisconsin, is run by a strong and seasoned management team and employs approximately 350 associates globally in four locations. When combined with previous activities, including organic business wins such as our compressed natural gas injection program and other acquisitions, such as the Pollak deal in 2019, we have grown this business to an annual run rate of around $250 million. Consolidated net sales in Q2 '21 were $342.1 million, up 94.8% versus last year, and our consolidated net sales for the first six months of 2021 were $618.6 million, up $116.4 million or 23.2%. Engine Management net sales in Q2 were $233.2 million, up $60.1 million versus the same quarter last year. And for the first six months, were up $71 million to $445.2 million. These large increases of 34.7% and 19% for the quarter and first six months, respectively, largely reflect the softness we experienced in Q2 last year in the midst of the pandemic. Given the volatile results in 2020, it's better to compare our results through 2019, where Engine is up 7% for the quarter and up 3.2% for the first six months despite the loss of a large customer. Additionally, the acquired Trombetta and soot sensor businesses provided approximately $9 million of revenue in the second quarter of 2021. Temperature Control net sales in Q2 '21 were $106.5 million, up 47.1% versus the second quarter last year and were up 36.4% to $168.9 million for the first six months. And on that basis, Temp Control sales were up 10.2% for the first six months, with the increases mainly reflecting an earlier-than-usual start to the summer selling season, as Eric alluded to before. Our consolidated gross margin in Q2 '21 was 29% versus 26% last year, up three points. And for the first six months, it was 29.6% versus 26.8% last year, up 2.8 points with increases for both the quarter and year-to-date periods coming from both of our segments. Second quarter gross margin for Engine Management was 28.9%, up 2.2 points from Q2 last year. And for Temperature Control, was 26.9%, an increase of 4.1 points from 22.8% last year. For the first six months, Engine Management gross margin was up 2.3 points to 29.8%, while Temp Control was up 3.3 points to 26.4%. Our consolidated SG&A expenses in Q2 increased by $14 million to $62.3 million, ending at 18.2% of sales versus 19.5% in Q2 last year. For the first six months, SG&A spending was $116.8 million, up $12.6 million, but ending lower at 18.9% of net sales versus 20.7% last year. Our consolidated operating income before restructuring, integration and acquisition expenses and other income net in Q2 was $37.7 million or 11% of net sales, up 4.5 points from Q2 last year. And for the first six months was 10.8% of net sales, up 4.7 points from the first six months last year. As we note on our GAAP to non-GAAP reconciliation of operating income, our performance resulted in second quarter 2021 diluted earnings per share of $1.26 versus $0.52 last year. And for the first six months, diluted earnings per share of $2.23 versus $0.95 last year. Accounts receivable at the end of the quarter were $211.8 million, up $48.8 million from June 2020 and up $13.7 million from December 2020. Inventory levels finished the quarter at $404.9 million, up $51.6 million from June last year and up $59.4 million from December 2020. Our cash flow statement reflects cash generated from operations in the first six months of 2021, $23.2 million as compared to cash used of $0.9 million last year. The $24.1 million improvement was mainly driven by an increase in our operating income. We used $11.7 million of cash for capital expenditures during the first six months, up from $9 million last year. We also used $109.3 million to fund our acquisitions of the aforementioned Trombetta and soot sensor businesses. Financing activities included $11.1 million of dividends paid and another $11.1 million paid for repurchases of our common stock. Financing activities also included $127.3 million of borrowings on our revolving credit facilities, which were used mainly to fund our acquisitions, but also for investments in capital and returns to shareholders through dividends and share buybacks. And while after making significant acquisitions in the first six months, we still finished the quarter with total debt of less than 1 times EBITDA given our strong operating performance and ended Q2 with total outstanding borrowings of $137 million and had more than sufficient remaining available capacity under our revolving credit facility of $112 million.

Consolidated net sales in Q2 '21 were $342.1 million, up 94.8% versus last year, and our consolidated net sales for the first six months of 2021 were $618.6 million, up $116.4 million or 23.2%.

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The record sales and earnings growth we delivered was driven by solid 6% same-store sales growth, which is on top of a robust 37% same-store sales growth a year ago. From a nine month perspective, same-store sales growth was up 21% on top of a 22% a year ago. We built on our prior quarter's profitability and increased our operating margin to over 12%. The gross margin strength we produced in the first half of the year accelerated in the June quarter to 30.7%. In the quarter, gross margin expansion and good expense control led to outstanding operating leverage of over 20% and record earnings per share of $2.59. For the quarter, revenue grew 34% to over $666 million due largely to same-store sales growth of 6%, which was on top of 37% a year ago, plus the strong results from the acquisitions we have completed, namely SkipperBud's, Northrop & Johnson and Cruisers Yachts. Our gross profit dollars increased over $81 million, while our gross margin rose 590 basis points to 30.7%. Our operating leverage in the quarter was over 20%, which drove very strong earnings growth, setting another quarterly record with pre-tax earnings of over $80 million. Our record June quarter saw both net income and earnings per share rise more than 60%, generating $2.59 in earnings per share versus $1.58 a year ago. Our revenue exceeds $1.6 billion, driven by a 21% increase in comparable store sales. Gross margins exceed 30%. Our operating leverage is around 20%. Our earnings per share is at $5.33 and our EBITDA is over $180 million, a very impressive nine months. We continue to build cash with over $200 million at quarter end. Our inventory at quarter end was $209 million. Customer deposits almost tripled to over $86 million due to the demand we are seeing setting a new record. Our current ratio stands at 2.20, and our total liabilities to tangible net worth ratio is below one. Our tangible net worth is $386 million. Turning to guidance for 2021. Given the strength of earnings in the June quarter and the demand-driven visibility, we are raising our estimates for earnings per share guidance to the range of $6.40 to $6.55. In summary, we do expect our pre-tax earnings to rise in the fourth quarter, which gets dampened a bit by a higher tax rate of around 25% this year as well as higher outstanding shares which results in the earnings per share guidance range. Our updated 2021 guidance implies an EBITDA level well in excess of $200 million.

In the quarter, gross margin expansion and good expense control led to outstanding operating leverage of over 20% and record earnings per share of $2.59. Our record June quarter saw both net income and earnings per share rise more than 60%, generating $2.59 in earnings per share versus $1.58 a year ago. Turning to guidance for 2021. Given the strength of earnings in the June quarter and the demand-driven visibility, we are raising our estimates for earnings per share guidance to the range of $6.40 to $6.55.

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We are very pleased to report first quarter core income $699 million or $2.73 per diluted share, both up from the prior-year quarter, despite our highest ever level of first quarter catastrophe losses. Underlying underwriting income of $735 million pre-tax was nearly 25% higher than in the prior-year quarter driven by an increase in net earned premiums to $7.4 billion and an underlying combined ratio, which improved almost 2 points to an excellent 89.5%. Turning to investments, our high-quality investment portfolio continued to perform well, generating net investment income of $590 million after-tax for the quarter, up 14% from the prior-year quarter. These results together with our strong balance sheet enabled us to grow adjusted book value per share by 9% over the past year after making important investments in our business and returning excess capital to shareholders. During the quarter we returned $613 million of excess capital to shareholders, including $397 million through share repurchases. In recognition of our strong financial position and confidence in our business, I'm pleased to share that our board of directors declared a 4% increase in our quarterly cash dividend to $0.88 per share, marking 17 consecutive years of dividend increases, with a compound annual growth rate of 9% over that period. Our board also authorized an additional $5 billion of share repurchases. During the quarter, we grew net written premiums by 2% to $7.5 billion. In Business Insurance, renewal premium change increased to 9.2%; its highest level since 2013 and 4 points higher than the prior year quarter, while retention remained strong. Bond & Specialty Insurance, net written premiums increased by 9%, driven by a renewal premium change of nearly 11% in our management liability business, while retention remained strong. Net written premiums increased by nearly 7%, driven by renewal premium change of almost 8% in our homeowners business and strong retention and new business in both auto and home. New business for both auto and home combined was up 17% compared to the prior year quarter, which is the ninth consecutive quarter of double-digit growth in new business, demonstrating the ongoing success of our product, distribution, and customer initiatives. Core income for the first quarter was $699 million, up from $676 million in the prior year quarter, and core return on equity was 11.1%. The increase in core income resulted primarily from a higher level of net favorable prior year reserve development, improved underlying underwriting results, and increased net investment income, largely offset by a much higher level of catastrophe losses. Our first quarter results include $835 million of pre-tax cat losses, an all-time high for our first quarter cats and an increase of $502 million compared to last year's first quarter. This quarter's cats include $703 million from the February winter storms which impacted Texas and a number of other states. Prior year reserve development, for which I'll provide more detail shortly, was net favorable $317 million pre-tax in the quarter. Our pre-tax underlying underwriting gain of $735 million was 24% higher than in the prior year quarter, reflecting higher levels of earned premium and an underlying combined ratio, which improved by 1.8 points from a year ago to 89.5%. After-tax net investment income increased by 14% from the prior year quarter to $590 million as higher returns in our non-fixed income portfolio were partially offset by the impact of the expected decline in fixed income yields. Consistent with our comments on the fourth quarter earnings call and in our 10-K, we continue to expect that for the remainder of 2021, fixed income NII, including earnings from short-term securities, will be between $420 million and $430 million per quarter after-tax. Total net favorability of $317 million pre-tax in the quarter included a $72 million benefit from a subrogation settlement with Southern California Edison related to the Woolsey fire of 2018. $62 million of that benefit was recorded in Personal Insurance with the remainder recorded in Business Insurance. Regarding reinsurance, as discussed during our fourth quarter results call, we renewed our underlying property aggregate catastrophe XOL Treaty for 2021 providing aggregate coverage of $350 million, part of $500 million of losses [Indecipherable] an aggregate retention of $1.9 billion. Through March 31st, we have accumulated $915 million of qualifying losses toward the aggregate retention. Operating cash flows for the quarter of $1.2 billion were again very strong. All our capital ratios were at or better than target levels, and we ended the quarter with holding company liquidity of approximately $1.8 billion. Our net unrealized investment gain decreased from $4.1 billion after-tax at year end to $2.8 billion after-tax at March 31st as interest rates rose during the quarter. Adjusted book value per share, which excludes unrealized investment gains and losses, was $101.21 at quarter end, up 2% from year end and up 9% from a year ago. We returned $613 million of capital to our shareholders this quarter comprising share repurchases of $397 million and dividends of $216 million. Following this quarter's share repurchase activity, we had a little more than $800 million remaining under the previously authorized repurchase program. In order to provide the appropriate capital management flexibility and reflecting its confidence in our business, the board authorized an additional $5 billion for share repurchases. And as Alan also mentioned, our board authorized an increase in the quarterly dividend to $0.88 per share. Business Insurance produced $317 million of segment income for the first quarter, a 10 increase over the first quarter of 2020 driven by higher levels of underlying underwriting income, net favorable prior year reserve development, and net investment income, which more than offset higher catastrophe losses. We're particularly pleased with the underlying combined ratio of 93.7%, which improved by 3.6 points. A little less than 2 points of that resulted from earned pricing that exceeded loss cost trends. Turning to the top line, net written premiums were down 2% primarily due to lower net written premiums in the workers' compensation product line as a result of the impact of the pandemic on payrolls. Renewal rate change remained strong at 8.4%, up 2.5 points from the first quarter of last year, while retention remained high at 83%. As for the individual businesses, in select, renewal rate change increased to 4.5%, up almost 3 points from the first quarter of 2020. Retention of 78% reflects deliberate execution as we pursue improved returns in certain segments of this business. New business of $95 million was down $24 million from the prior year quarter, also driven by our focus on improving profitability as we remain disciplined around risk selection, underwriting, and pricing. As an example, in previous quarters, we've highlighted our completely redesigned BOP 2.0 small commercial product, which includes industry-leading segmentation and a fast, easy quoting experience. During the last three months, we rolled out the new product in an additional seven states, bringing the cumulative total to 30 states, representing approximately 60% of our CMP new business premium. In middle market renewal rate change was strong at 9.1%, up almost 3 points from the first quarter of 2020, while retention remained high at 86%. Additionally, we achieved positive rate of more than 80% of our accounts this quarter, a 10-point increase from the first quarter of last year. New business was down $12 million driven by certain business units and geographies where returns are not meeting our thresholds. Segment income was $137 million, an increase of 12% from the prior year quarter driven by an improved underlying underwriting margin and higher business volumes. The underlying combined ratio of 84.2% improved by a 1.5 due to an improved expense ratio, primarily reflecting higher earned premiums. Net written premiums grew 9% in the quarter, primarily reflecting strong management liability production. In our management liability business, we are pleased that the renewal premium change remained near historic highs of nearly 11% while retention was a strong 87%. Management liability new business for the quarter decreased $8 million, primarily reflecting our disciplined underwriting in this elevated risk environment. Segment income was $314 million and net written premiums grew 7%. The combined ratio of 90.3% rose about 2 points from the prior year quarter primarily due to higher levels of catastrophe losses, partially offset by higher net favorable prior year reserve development. On an underlying basis, the combined ratio was a strong 85.4%. Automobile delivered another very strong quarter with a combined ratio of 81.8%, an improvement of more than 9 points compared to the first quarter of 2020. The improvement comprises 5 points of higher net prior year reserve development and an underlying combined ratio that is 4 points better than the prior year quarter. In homeowners and other, the first quarter combined ratio of 99.4% increased by 15 points relative to the prior year quarter, driven by catastrophe losses of 22 points, up over 11 points, with most coming from the February winter storm and freeze events, and an 8 point increase in the underlying combined ratio primarily due to a comparison to unusually mild winter weather in the prior year quarter, along with about 2 points of elevated fire losses, many of which relate to extreme winter weather often resulting from the use of alternative heating sources. The increases were partially offset by 5 points of higher net favorable prior reserve development, which included the subrogation benefits of the Woolsey wildfire that Dan mentioned. Automobile net written premiums grew 3% with 14% growth in new business while retention remained strong at 84%. We are very pleased with our ongoing balanced execution in this line which has resulted in 4% year-over-year policies in-force growth at attractive returns. Homeowners and others delivered another strong quarter with net written premium growth of 12%. New business was up 21% from the prior year quarter, retention remained strong at 85%, and renewal premium change was 7.7%. Our ongoing new business success is driven by a combination of strategic investments and initiatives, including Quantum Home 2.0, IntelliDrive, and new and expanded partnerships and distribution relationships.

We are very pleased to report first quarter core income $699 million or $2.73 per diluted share, both up from the prior-year quarter, despite our highest ever level of first quarter catastrophe losses. In recognition of our strong financial position and confidence in our business, I'm pleased to share that our board of directors declared a 4% increase in our quarterly cash dividend to $0.88 per share, marking 17 consecutive years of dividend increases, with a compound annual growth rate of 9% over that period. During the quarter, we grew net written premiums by 2% to $7.5 billion. The increase in core income resulted primarily from a higher level of net favorable prior year reserve development, improved underlying underwriting results, and increased net investment income, largely offset by a much higher level of catastrophe losses. Our first quarter results include $835 million of pre-tax cat losses, an all-time high for our first quarter cats and an increase of $502 million compared to last year's first quarter. In order to provide the appropriate capital management flexibility and reflecting its confidence in our business, the board authorized an additional $5 billion for share repurchases.

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For the year, we grew revenue $632 million, or 18%; and adjusted earnings per share to $4.57, or 57% compared to the prior year. While we saw 4% comparable funeral volume growth, even growing over a COVID-impacted 2020, the primary drivers of our revenue was mid-20% growth in both preneed and atneed cemetery revenues, combined with a strong 7% increase in our funeral sales average. We generated adjusted earnings per share of $1.17, a 4% increase over the prior year quarter and a 95% increase over a pre-pandemic fourth quarter of 2019. Compared to the 2020 fourth quarter, funeral results drove the earnings per share increase as a healthy 8% increase in the funeral sales average offset slightly lower volumes and cost increases associated with staffing and energy. Total comparable funeral revenues grew $47 million, or about 9% over the prior year quarter, exceeding our expectations as core revenues, non-funeral revenues from SCI Direct and general agency revenues all saw impressive growth in the fourth. Comparable core funeral revenues were $32 million, led by an impressive 8.4% increase in the comparable funeral sales average, The core sales average continues to climb sequentially and is up about 5% over the 2019 pre-COVID fourth quarter. Comparable core funeral volume declined 1.5% compared to the prior year quarter, slightly offsetting the positive impact of the funeral sales average. Keep in mind, the 2020 fourth quarter we were comparing against was acutely impacted by COVID and saw a 17% higher core funeral volume increase over the 2019 fourth quarter. From a profit perspective, general gross profit increased $10 million while the gross profit percentage dropped 60 basis points to 27%. In the fourth quarter of 2020, those costs were actually down 2% versus the 2019 fourth quarter even with 17% more volume as the pre-vaccine era of the virus restricted both the consumers and our ability to provide a full service funeral. In the 2021 fourth quarter, these costs increased by 8% compared to the 2020 fourth quarter. So overall, our fixed costs have increased 6% over the two-year period, or let's say, 3% on a compounded annual basis while we are caring for 17% more customers than we did in 2019. Preneed funeral sales production for the quarter exceeded our expectations, growing $30 million from nearly 14% over the fourth quarter of 2020. Our core preneed funeral average revenue per contract [Inaudible] the backlog now is over $6,300. This is an 8% increase over 2020 and more than $300 higher than our atneed average for the quarter. Comparable cemetery revenue increased $21 million, or 5%, in the fourth quarter. In terms of the breakdown, atneed cemetery revenue generated $13.5 million of the growth, driven by a higher quality core average sale and a modest increase in contract velocity. Recognized preneed revenues generated about $8 million of the revenue growth, primarily due to higher recognized preneed merchandise and service growth. So preneed cemetery sales production grew 30 -- $39 million or 13% in the fourth quarter. This growth is on top of a 2020 fourth quarter, which grew by 16% over 2019. However, we were still able to grow the velocity of contract sold by almost 5%, which accounted for the remainder of the sales production. For the full year 2021, they produced $1.3 billion cemetery preneed sales production. This represents a 28% increase over and above the very strong 15% growth in 2020. Cemetery gross profits in the quarter declined slightly by $1 million and the gross profit percentage dropped 200 basis points to 36.8%. At the midpoint, this represents a 20% increase from our previously mentioned model midpoint $2.80 in our third quarter conference call. The $3 midpoint reflects a $0.165 compounded annual growth rate over the pre-COVID earnings per share base in 2019 of $1.90, well above our historical guidance range. As you think about the cadence for the year as we compare back to a $4.57 2021, we would expect negative comparisons for each quarter. So how are we going to grow earnings per share at a 16.5% compounded annual growth rate from the 2019 base? And finally, we forecast preneed funeral sales production to grow in a 3% to 5% range for the year. We continue to believe that after establishing a new base here in 2022, we will return to earnings growth in the 8% to 12% range in 2023. So operating cash flow is approximately $190 million in the current quarter, compared to $245 million in the prior year with the primary decline due to an increase in cash tax payments during the quarter of $97 million versus the $36 million in the fourth quarter of last year. Excluding cash taxes in both periods, operating cash flow before taxes increased almost $6 million to $287 million in the fourth quarter, driven by modest increases in earnings and favorable working capital, partially offset by $6 million of higher cash interest payments. So as we step back and look at the full year of 2021, we generated $912 million in adjusted operating cash flow, representing a substantial increase of $108 million or 13% over the prior year. Deducting recurrent capex of $260 million, which again represents maintenance, capex and cemetery development capex, we calculate free cash flow for the full year to be an impressive $652 million in 2021, up $33 million from $619 million in 2020. And the fourth quarter was no exception, deploying nearly $500 million, which is the highest quarterly capital deployment we have seen in recent history. We invested $110 million in our businesses with $65 million of maintenance capital and $45 million of cemetery development capital spend during the fourth quarter. So I'm happy to report, as you've seen, that those acquisitions closed, bringing the total investments during the quarter to $112 million and again expecting low double digit to mid-teen IRRs on each of these transactions. These businesses added almost $40 million of full year revenues from 28 funeral homes and two cemeteries in Ohio, California, Illinois, Oregon, and Rhode Island. We also deployed about $16 million toward new builds in Texas, Colorado, Washington, and Florida. This brings total 2021 spend on new builds to $43 million with again low double digit to maintain IRRs, which also helped drive additional earnings and cash flow growth for the company. Finally, we deployed $248 million of capital during the quarter to shareholders through dividends and share repurchases and $700 billion for the full year of 2021. For the last two years alone, we meaningfully reduced our outstanding shares by about 10% through timely execution on our repurchasing strategy. Since the inception of our repurchase program, we have now reduced our shares outstanding by just over 50%. As Tom mentioned, at the midpoint of our earnings guidance range of $3, we expect to meaningfully exceed our 8% to 12% earnings growth framework for earnings per share when comparing back to pre-COVID 2019 base of $1.09. So from a cash flow perspective, our 8% to 12% earnings growth framework generally translate historically into about a 4% growth in adjusted cash flow before cash taxes. So adjusting for $150 million of expected cash taxes in '22, our adjusted cash flow from operations before cash taxes is expected to be about an $850 million at the midpoint. This equates to a 6.5% CAGR over our pre-COVID 2019 adjusted cash flow from operations before cash taxes of $700 million, which is similarly in excess of this normalized 4% annual growth that we normally expect. First, we'll be required to pay the remaining half for about $20 million of payroll taxes that were deferred in 2020 as allowed under the CARES Act. And as I just mentioned, cash tax payments in '22 are anticipated to be about $150 million based on the midpoint of our earnings guidance, or $115 million lower than the $265 million of 2021. And from an effective tax rate standpoint, we continue to model in the range of 24% to 25% in 2022. Now historically, we've guided to around $125 million to $130 million of annual recurring corporate general administrative expenses. As a result of this review that is ongoing, we have identified about $20 million to $25 million of costs, which we believe may be more appropriately characterized as corporate in nature versus field-related expenses that is primarily related to certain technology, risk, and governance areas. Therefore, when you're modeling 2022 at this point, I would expect annual corporate G&A to increase to maybe around $145 million to $150 million per year with the corresponding dollar for dollar decrease in costs and the segment margins. So looking forward to 2023, we expect to return to a normalized cash flow growth trajectory with an expected 4% growth and adjusted cash flow from operations before cash taxes, which again is in line with our 8% to 12% earnings growth framework per share that we just mentioned. Our expectations for maintenance and cemetery development capital spending is $270 million to $290 million for the year. At the midpoint, cemetery development capex comprises about $120 million of this amount, and maintenance capex makes up the remaining $160 million. This maintenance capex of $160 million includes about $110 million of normal routine maintenance capital used at our funeral and cemetery operating locations, as well as another $50 million for field and corporate support capital. This $50 million is primarily being deployed toward technology to not only improve the customer experience with ultimately customer-facing technology, but also toward network infrastructure at our operating locations. In addition to these recurring capital expenditures of $280 million at the midpoint, we expect to deploy $50 million to $100 million toward acquisitions, and roughly $50 million more in new funeral home construction opportunities, which together, as I continue to say, drive meaningful after-tax IRRs, well in excess of our cost of capital. And of course, this strategy is predicated on our stable free cash flow, our robust liquidity, which is over $1 billion at the end of the year, as well as our favorable debt maturity profile. Lending additional support to this strategy, our leverage ratio at the end of the quarter landed just under 2.6 times from a net debt to EBITDA perspective. And as we've noted in the past, looking beyond the impacts of this pandemic, we continue to expect to increase back to our targeted leverage range of 3.5 to 4 times toward the latter part of this year as we lap stronger EBITDA quarters moving forward.

We generated adjusted earnings per share of $1.17, a 4% increase over the prior year quarter and a 95% increase over a pre-pandemic fourth quarter of 2019. This is an 8% increase over 2020 and more than $300 higher than our atneed average for the quarter. At the midpoint, this represents a 20% increase from our previously mentioned model midpoint $2.80 in our third quarter conference call.

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I'm happy to report that Farmer Mac has been successfully operating uninterrupted with 100% of our employees working remotely, and we've been doing that since March 12. We provided $1.3 billion of new credit to rural America that ultimately is to people in the first quarter of 2020. We have remained well capitalized with a strong liquidity position that has been at or above $1 billion for most of the last couple of months. As we have previously noted, we indefinitely suspended our $10 million share repurchase program in early March to preserve capital and liquidity and as additional precautionary measure. More specifically, we have approved 71 payment deferment requests related to COVID-19 through May 1 with a total principal balance of $78.9 million. That's less than 0.5% of outstanding credit. Now, turning to business volume, 2020 is off to a good start for Farmer Mac, as all four lines of business contributed to net outstanding business volume growth of $421.4 million this quarter. This reflects loan purchase net volume growth in Farm & Ranch, USDA and Rural Utilities of a combined $303.3 million, which was partially offset by a sequential decrease in net growth in long-term standby purchase commitments and guaranteed securities of $137.8 million. We also saw increases in institutional credits, which grew $255.9 million, largely driven by our ability to provide short-term liquidity for two of our largest counterparties during the most volatile capital markets environment during the month of March. In our Rural Utilities lines of business, loan purchase net volume grew $118.4 million in the first quarter of 2020 compared to $490.3 million in the same period last year. It is important to note that loan purchase net volume growth in the first quarter of 2019 included one large unique transaction, the purchase of a $546.2 million portfolio of participations in seasoned Rural Utilities loans from CoBank. Loan purchase net volume growth in our foundational Farm & Ranch and USDA lines of business was $184.9 million for the first quarter of 2020 versus a net volume decline of $64.7 million for the same quarter in 2019. Farm & Ranch loan purchases had net volume growth of $142.1 million during the quarter, overcoming one of our largest prepayment quarters of over $260 million, primarily related to the January 1 payment date, as well as increased scheduled principal amortization levels, given our larger portfolio. Approximately 40 animal protein processing plants have temporarily closed for parts of March and April and over 40% of hog and 30% of cattle processing was offline in early May. Ethanol typically consumes between 30% and 40% of annual US corn production. Agricultural exports through March were down from 2019 levels, driven by a 15% drop in corn and soybean sales. In April, USDA announced $16 billion in direct emergency aid, targeting cattle, dairy, hog, specialty crop and grain producers, and an additional $3 billion in food purchases for donation and distribution. Additionally, the CARES Act signed in March authorized a $14 billion replenishment of the Commodity Credit Corporation for possible direct farm and ranch aid later this year. According to data released by the SBA, the first round of Paycheck Protection Program payments delivered nearly $3 billion to small businesses involved in agriculture, forestry, fishing and hunting. The Farm & Ranch portfolio has no direct credit exposure to hog or cattle processing facilities, and only $40 million or 0.5% in hog production and only $21 million or 0.3% in dairy processing as of March 31. We do have exposure to several indirectly affected commodities like corn and soybeans at $2.4 billion or 30% of the Farm & Ranch portfolio, ranch cattle and calves at $672 million or 9% of the portfolio and dairy at $538 million or 7% of the portfolio as of March 31. For example, the corn and soybean portfolio is spread across more than 5,000 loans in 601 counties in 41 states. Loans past due by 90 days or more increased in the first quarter of 2020 to 1.02% of the outstanding Farm & Ranch portfolio or 0.37% across all four lines of business. Individual loan risk ratings held steady in the first quarter of 2020, with substandard loans totaling $317 million across all loans and guarantees. This volume is spread across 56 commodities in 212 counties in 36 states. In fact, one of them was the longest GSE SOFR issuance and $285 million in structures, 10 years of greater, with total medium-term note issuances of approximately $2.5 billion to date. Our strong liquidity position, as Brad mentioned, and market access also enabled Farmer Mac to call higher-cost issuances, provide funding to business lines for new assets and add over $160 million in high-quality liquid assets to our investment portfolio. Core earnings were $20.1 million for first quarter 2020 compared to $22.2 million in first quarter 2019. Net effective spread was $44.2 million in first quarter 2020 compared to $38.8 million in the same period last year. Net effective spread in percentage terms remained stable at 89 basis points for both periods. The $2.1 million year-over-year decrease, though, in core earnings was primarily due to a $3.3 million after-tax increase in the total provision for losses and a $2.7 million after-tax increase in operating expenses. Of the $3.8 million loss provision during the first quarter, approximately $3.5 million was attributable to factors related to COVID-19. Operating expenses increased by 26% in first quarter 2020 compared to first quarter 2019. As of March 31, 2020, total allowance for losses were $19.1 million, an increase of $6.5 million from December 31, 2019. The total allowance for losses represents 9 basis points of Farmer Mac's $21.5 billion portfolio, and we continue to compare very favorably to industry peers. It is therefore important to note that as of March 31, 2020, Farmer Mac's $2.4 billion in outstanding Rural Utilities loan purchases and long-term standby purchase commitments have no historic or current delinquencies. Farmer Mac's $815.1 million of core capital as of March 31, 2020 exceeded our statutory requirement by $165.8 million or 25%. This compares to $815.4 million of core capital as of December 31, 2019, which exceeded our statutory requirement by $196.7 million or 32%. However, from an overall liquidity standpoint, we are comfortable with our current cash position, which is hovering around $1 billion and which was at $1.2 billion on March 31, 2020. This level resulted in 202 days of liquidity and it's far exceeded our regulatory requirements by approximately 112 days. April, likewise, continued to be strong with a daily average cash position also around $1 billion, accompanied by strong levels of liquidity, which have continued through today.

We provided $1.3 billion of new credit to rural America that ultimately is to people in the first quarter of 2020.

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On the balance sheet, we expanded both our total lot position, share of lots controlled by option, while retiring $14 million in debt. With these results and confidence in our expectations for the fourth quarter, we are once again raising full year guidance, highlighted by earnings per share of at least $3.25. First, at the end of our third quarter, we had more than 1,500 homes in backlog scheduled to close next year, nearly double the level at this time last year. This will drive SG&A leverage, pushing SG&A below 11% next year. Next year, we expect at least $5 million in GAAP interest savings with further reductions in subsequent years. Second, the roll out of charity title, our title business committed to contributing 100% of its profits to charity continues to gain momentum. Next year, we expect to provide title for two-thirds of our customers, which should generate philanthropic resources of over $1 million a year on a run rate basis. Looking at our third quarter results compared to the prior year, new home orders decreased approximately 13% to 1,199 as a higher sales pace helped to offset a reduction in average community count. Homebuilding revenue increased nearly 7% to $567 million on 1% higher closings and a 6% higher average sales price. Our gross margin, excluding amortized interest, impairments and abandonments was 24.2%, up approximately 300 basis points to the highest level in more than a decade. SG&A was down 60 basis points as a percentage of total revenue to 11.1% as we benefited from improved overhead leverage. Adjusted EBITDA was $78.8 million, up over 45%. Our EBITDA margin was 13.8%. Interest amortized as a percentage of homebuilding revenue was 4%, down 10 basis points. And net income from continuing operations was $37.1 million, yielding earnings per share of $1.22, more than double earnings per share for the same period last year. We now expect EBITDA to be over $250 million. Our full year EBITDA guidance equates to earnings per share of at least $3.25, up from last quarter's guidance of above $3. We now expect our return on average equity for the full year to be approximately 15%. If you exclude our deferred tax asset, which doesn't generate profits, our ROE would be about 22%. Our ASP should be above $410,000. Gross margin should be up more than 100 basis points year-over-year. SG&A on an absolute dollar basis should be down about 10%. Our interest amortized as a percentage of homebuilding revenue should be under 4%, and our tax rate will be about 25%. Combined, this should drive earnings per share up over 20%. In addition, we expect to repurchase over $55 million of debt, bringing our full year total to at least $80 million. Our increased land spending in the quarter helped us grow our active lot count to over 19,000. We also increased our option percentage in the third quarter and now control nearly half of our active lots through options, up from less than 30% in the same period last year. Given our current pipeline of deals, we expect to continue to grow our land position to over 20,000 lots by the end of fiscal '21. In the third quarter, we spent over $140 million on land and development and we expect to spend around $600 million for the full year, with higher land spending and a big increase in our option lot position, we're creating a framework to sustain profitable growth in the years ahead. We ended the third quarter with over $600 million of liquidity, up about 50% versus the prior year, with unrestricted cash in excess of $360 million and nothing outstanding on our revolver. During the quarter, we retired approximately $14 million of our senior notes. And with two remaining term loan repayments, we're on a clear path to achieve our goal of bringing our total debt below $1 billion before the end of fiscal '22. Our net debt to trailing 12-month adjusted EBITDA fell below 3 times, down from 8 times five years ago. Over the last five years, we've grown EBITDA by more than 60%, improved our return on assets by more than five percentage points and reduced debt by more than $300 million.

And net income from continuing operations was $37.1 million, yielding earnings per share of $1.22, more than double earnings per share for the same period last year.

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During 2021, our team delivered for all stakeholders by, first of all, achieving positive year-over-year identicals, without fuel, against very strong identicals last year and a two-year stack of 14.3%. Also by connecting with customers through expanding our seamless ecosystem and remarkable, consistent delivery of full fresh and friendly customer experience for everyone, plus investing more than ever before in our associates to raise our average hourly rate to $17 and our average hourly rate to over $22 when you include compensation and benefits as well. We balance all of these investments by achieving cost savings of greater than $1 billion for the fourth consecutive year, and alternative profits contributed an incremental $150 million of operating profit as well. We remain confident in our growth model and our ability to deliver total shareholder return of 8% to 11% over time. 1 retailer in many exciting areas, such as specialty cheese, sushi, and floral. As the world's largest florist, we sold over 76 million floral stems for Valentine's Day alone. Our brands continue to resonate strongly with customers and maintains a culture of innovation, launching over 660 new items during the year. We accelerated Home Chef's incredible milestone of becoming a billion-dollar brand, our fourth greater-than-$1 billion brand, which is pretty special. Kroger is focused on delivering a seamless experience that requires 0 compromise by customers, and I think that's a really important point, 0 compromise required by customers. Yael will go into a lot more detail tomorrow on what 0 compromise means for our customers at our business update. During the quarter, we saw new seamless pickup and delivery to household acquisitions increased 25% compared to the third quarter. As part of our Zero Hunger | Zero Waste social and environmental impact plan, last year, Kroger donated 499 million meals, that's right, 499 million meals, to feed hungry families across America. And we continue to make progress toward our goal of 0 waste. As part of our commitments to helping people live healthier lives, we've administrated almost 11 million doses of the COVID-19 vaccine through Kroger Health. For our more than 450,000 associates, we strive to create a culture of opportunity, and we take seriously our role as a leading employer in the United States. Last year alone, we provided more than $5 million to support associates through unexpected hardships through our Helping Hands Fund. This includes providing critical funds for disaster relief for nearly 1,300 associates. These investments were balanced with over $1 billion in cost savings and $150 million of incremental operating profit from alternative profit streams. We delivered adjusted earnings per share of $3.68 per diluted share, up 6% compared to last year. Identical sales, excluding fuel, were positive 0.2% and digital sales on a two-year stacked basis grew by 113%. Our adjusted FIFO operating profit was $4.3 billion, up 6% over 2020. Gross margin was 22% of sales for 2021. The FIFO gross margin rate, excluding fuel, decreased 43 basis points compared to the same period last year. The OG&A rate decreased 61 basis points, excluding fuel and adjustment items, reflecting a reduction in COVID-related costs and cost-saving initiatives, partially offset by significant investments in our associates. Adjusted earnings per share was $0.91 for the quarter, up 12% compared to the same quarter last year. Kroger reported identical sales without fuel of 4%, our strongest quarter of the year, with fresh departments leading the way. Kroger's FIFO gross margin rate, excluding fuel, increased 3 basis points compared to the same period last year. The OG&A rate, excluding fuel and adjustment items, increased 7 basis points. The LIFO charge for the fourth quarter was $20 million, compared to an $84 million credit in the same period last year, and represented an $0.11 headwind to earnings per share in the quarter. Our investment in fuel rewards, which is reflected in our supermarket gross margin, also helps customers stretch their dollars further and allowed us to achieve gallon growth of 5% in the fourth quarter, outpacing market growth. The average retail price of fuel was $3.30 this quarter versus $2.20 in the same quarter last year. Our cents per gallon fuel margin was $0.44, compared to $0.33 in the same quarter in 2020. Kroger's net total debt-to-adjusted EBITDA ratio is now 1.63, compared to our target range of 2.3 to 2.5. In total, Kroger returned $2.2 billion to investors via a combination of share repurchases and dividends. Kroger has invested an incremental $1.2 billion in associate wages and training over the last four years. In addition, we have committed to invest over $1.8 billion during the same time period to help address underfunding and better secure pensions for tens of thousands of associates. Wage, healthcare, and pensions are included in all of the more than 350 collective bargaining agreements that cover approximately 66% of our associates. During the fourth quarter, we ratified new labor agreements with the UFCW for associates in Fred Meyer, King Soopers, and our Michigan division, covering more than 20,500 associates. We have shared previously that we expect to emerge from the pandemic stronger, and our guidance for 2022 creates a new baseline for FIFO net operating profit that is some $900 million higher than the midpoint of our TSR model would have projected when we announced it in 2019. We expect these investments and the impact of cycling COVID-19 vaccine revenue will be fully offset by tailwinds in our model and allow us to grow adjusted net earnings per diluted share to between $3.75 and $3.85. The tailwinds in our 2022 plan includes sales leverage from growing identical sales without fuel between 2% and 3%. We also expect to deliver cost savings of $1 billion, incremental alternative profit growth largely in line with 2021, and underlying improvement in Kroger Health profitability, excluding vaccine income. In terms of quarterly cadence for identical sales of our fuel and earnings per share growth, we expect identical sales without fuel in quarter 1 and quarter 2 will be above the midpoint of our 2% to 3% range as we expect heightened inflation will continue in the first half of the year. Regarding adjusted EPS, we would expect quarter 1 to be above the annual growth rate range of 2% to 5%, quarter 2 to be below the range and the second half of the year to be within the range. At the same time, we expect to generate free cash flow of between $2 billion and $2.2 billion. And finally, we are looking forward to spending more time with you at our business update tomorrow when you will hear from key members of our leadership team about our strategic priorities and our path to deliver total shareholder returns of 8% to 11% over time. And when we do this, we have a clear path to delivering on our commitment of 8% to 11% total shareholder returns over time for our shareholders. As Rob shared at the top of the call, we would like to focus all questions on our quarter 4 and full year 2021 results, as well as 2022 guidance.

Adjusted earnings per share was $0.91 for the quarter, up 12% compared to the same quarter last year. We expect these investments and the impact of cycling COVID-19 vaccine revenue will be fully offset by tailwinds in our model and allow us to grow adjusted net earnings per diluted share to between $3.75 and $3.85.

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I'm extremely pleased with where we stand today by having nearly $700 million of dry powder at our disposal between cash on hand and available credit capacity, while carrying a modest leverage ratio of 0.92. I wish I could tell you that we saw this economic prices coming late in 2019 when we extended our five-year credit facility out to the year 2024 and we increased our debt capacity by an additional $50 million at lower rates, or when we sold the Technical Packaging business and generated over $190 million of gross proceeds to significantly improve our cash and debt positions, but we didn't see it coming. We did not anticipate a pandemic as we executed both of these liquidity enhancements as these were part of our normal financial strategy. Sales increased 5%, led by our Aerospace & Defense segment growing $16 million or 20% driven by the addition of Globe's submarine businesses, coupled with strong aerospace sales at PTI and Crissair, and higher space sales at VACCO. Q2 A&D sales came in approximately $3 million ahead of plan. Entered orders clearly were a bright spot in both Q2 and year-to-date, where we booked $466 million of new business and ended March with a record backlog of $565 million, which is up 25% from the start of the year. During Q2, we generated $34 million of cash from continuing operations with free cash flow of $23 million, which is 127% free cash flow conversion to net earnings during the quarter. Q2 and year-to-date adjusted EBITDA improved from prior year, with Q2 reflecting a 17.4% margin despite the lower contribution from USG, which is our highest margin segment. And finally, Q2 adjusted earnings per share was $0.68 a share, down slightly from the $0.71 a share delivered in Q2 of 2019, which resulted from the noted COVID impact. And as a result of this uncertainty, we're withdrawing our previously issued full-year guidance and will not provide guidance for Q3 at this time. We will survive and prosper.

We did not anticipate a pandemic as we executed both of these liquidity enhancements as these were part of our normal financial strategy. And finally, Q2 adjusted earnings per share was $0.68 a share, down slightly from the $0.71 a share delivered in Q2 of 2019, which resulted from the noted COVID impact. And as a result of this uncertainty, we're withdrawing our previously issued full-year guidance and will not provide guidance for Q3 at this time. We will survive and prosper.

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Our orders were up 26% versus the same period last year, and we ended the first quarter with a backlog of 663 million. Big oil companies are still cautious to invest even as oil is back above $60. In order to meet customer demand, our team in Niella, Italy is in the process of executing several kaizens to increase our production by 30% with minimal capital investment. Our first-quarter orders totaled $474 million, an increase of 26% compared to $375 million of orders in the same period last year. On a currency-neutral basis, Q1 orders were up $78 million or 21%. Our March 31 backlog of $663 million was better by 27% over the prior year and up 23% on a currency-neutral basis. Backlog also increased across all of our segments with over 85% scheduled to ship within the next six months. Compared to year-end, backlog was up 22% and, on a currency-neutral basis, up 25%. Net sales in the first quarter of $354 million increased $25 million or 8% from a year ago. Net sales were favorably impacted by 5% from changes in foreign currency exchange rates. On an adjusted basis, SG&A expenses increased by approximately $1 million year over year. Our adjusted EBITDA for the first quarter was $21 million, an increase of approximately 29% year over year. As a percentage of sales, adjusted EBITDA margin improved to 6%, an improvement of 100 basis points over the prior year primarily due to leveraging of our fixed costs over a higher sales volume. First-quarter depreciation of $10 million increased $1 million compared to the prior year, reflecting the higher level of capital expenditures in the second half of 2020. In 2021, we anticipate total capital expenditures between $35 million and $40 million, which includes the investment in our European rental fleet. Our GAAP diluted loss per share in the quarter was $0.09. On an adjusted basis, diluted loss per share of $0.06 improved by $0.12 from the prior year, driven by increased operating income and partially offset by higher income tax expense. We generated $41 million of cash from operating activities in the quarter compared to a use of $79 million in the prior year. Capital spending in the quarter amounted to $8 million, of which $7 million related to the European tower rental fleet. As a result, our free cash flow in the quarter was $34 million. We ended the quarter with a cash balance of $159 million, an increase of $30 million from year-end. Our total liquidity as of March 31 was $443 million with no borrowings on our ABL. We expect to see costs for steel, logistics, and transportation increased as much as $30 million year over year. With that, we are introducing full-year 2021 adjusted EBITDA guidance of $90 million to $105 million. 1, our European tower crane rental fleet strategy is on track. During the first quarter, we invested approximately $7 million in capex on this initiative, with most of these cranes already rented and in service. We plan to expand the fleet by another $8 million during the year. 2, our Chinese tower crane business continues to move forward. We just launched a fourth new model designed by our China team, the Proton MCT 138. More than 100 customers visit our factory for this product launch and the customer feedback was excellent. 3, in our altering crane business, we are investing an additional $4 million during 2021 in an effort to fill in product gaps. Over the last three years, the main focus of our engineering team and the AT business was to improve our quality on legacy machines while updating designs to meet regulatory requirements, such as Tier 5 emission standards among a few others. 4, last but not least, we continue to pursue acquisition opportunities that will drive substantial long-term growth.

Our GAAP diluted loss per share in the quarter was $0.09. On an adjusted basis, diluted loss per share of $0.06 improved by $0.12 from the prior year, driven by increased operating income and partially offset by higher income tax expense. With that, we are introducing full-year 2021 adjusted EBITDA guidance of $90 million to $105 million.

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To recap, for the first nine months of 2021, our adjusted EBITDA increased 7% to a record $1.1 billion. Specifically, on a consolidated basis, Products and Services revenues increased 18% to $1.5 billion. Adjusted gross profit increased 11% to $450 million. Adjusted EBITDA of $490 million increased 13% on a comparable basis, and adjusted diluted earnings per share of $4.25 grew 11% on a comparable basis. As a reminder, the prior year quarter included $70 million or $0.87 per diluted share of non recurring gains on surplus land sales and divested assets that affect quarter over quarter comparability. Organic aggregate shipments increased 6%, notwithstanding contractor capacity constraints and wet weather in several markets that govern the overall pace of construction activity. Total aggregate shipments, including shipments from acquired operations, increased 10%. Organic aggregates average selling price increased 2%, reflecting a higher percentage of lower-priced base stone shipments during the quarter. That's why we updated our full year 2021 organic pricing growth guidance to now range from 2.5% to 3.5%. Our Texas Cement business established a new quarterly record for shipments, which increased 4% to over one million tonnes. Cement pricing increased 8% as the second round of price increases this year went into effect on September first. Ready mixed concrete shipments increased 23%, driven by large nonresidential projects and operations acquired late last year in Texas. Concrete pricing grew 2% following the implementation of midyear price increases in Texas. Asphalt shipments increased 116% overall, driven by contributions from our Minnesota based operations acquired earlier this year. For the third quarter alone, total energy costs increased $28 million or nearly 50% company wide as compared with last year. Aggregates product gross margin of 34.2% included higher diesel and other production costs as well as a $6 million negative impact from selling acquired inventory that was marked up to fair value as part of acquisition accounting. Excluding the acquisition impact, adjusted aggregates product gross margin was 34.9%, a 150 basis point decline versus prior year. Cement product gross margin declined 250 basis points driven by higher raw material cost and a $6 million increase in natural gas and electricity costs. Ready-mixed concrete product gross margin improved modestly to nearly 10% as shipment and pricing gains offset higher costs for raw materials and diesel. Magnesia Specialties continued to benefit from improving domestic steel production and global demand for magnesia chemical products, generating product revenues of $72 million, a 30% year over year increase. Revenue growth more than offset higher costs for energy and contract services, driving a 100 basis point improvement in product gross margin to 39%. We have raised our full year capital spending guidance to $475 million to $525 million to include anticipated Lehigh West region capital expenditures. Additionally, our Board of Directors approved a 7% increase in our quarterly cash dividend paid in September, underscoring its confidence in our future performance and a resilient and growing free cash flow generation. Our annualized cash dividend rate is now $2.44. Since our repurchase authorization announcement in February 2015, we have returned nearly $2 billion to shareholders through a combination of meaningful and sustainable dividends as well as share repurchases. In early July, we issued $2.5 billion of senior notes with a weighted average interest rate of 2.2% and a weighted average tenor of 15 years, primarily to finance Lehigh West region transaction. Our net debt to EBITDA ratio was 1.9 times as of September 30. Leverage on a pro forma basis, inclusive of reach acquisitions, is modestly above 3 times debt to EBITDA. Consistent with our practice of repaying debt following significant acquisitions, we are committed to return into our target leverage range of two to 2.5 times within the next 18 months. We now expect full year adjusted EBITDA to range from $1.500 billion to $1.550 billion. The Infrastructure Investment and Jobs Act, which contains a five year surface transportation reauthorization and provides $110 billion in new funding for roads, bridges and other hard infrastructure projects passed the United States Senate in August with 69 bipartisan votes. Texas, Colorado, North Carolina, Georgia and Florida, which accounted for over 70% of our 2020 Building Materials revenues, are well positioned from both the DOT funding and resource perspective to efficiently deploy increased federal and state transportation dollars in advance the growing number of projects in their backlogs. Caltrans, California's Department of Transportation, manages a $17 billion annual budget. Additionally, the Road Repair and Accountability Act of 2017, commonly referred to as Senate Bill one or SB1, provides $54 billion or approximately $5 billion annually through 2030 to fund state and local road, freeway and rail projects. For reference, aggregate shipments to the infrastructure market accounted for 36% of third quarter organic shipments, showing sequential growth since this year's second quarter, but still well below our 10 year historical average of 43%. Aggregate shipments to the nonresidential market accounted for 35% of third quarter organic shipments. Aggregates to the residential market accounted for 24% of third quarter organic shipments. In summary, we believe our industry is about to see public and private sector construction activity coalesce for the first time since its most recent 2005 peak, supporting both increased shipments and an attractive pricing environment for construction materials.

Adjusted EBITDA of $490 million increased 13% on a comparable basis, and adjusted diluted earnings per share of $4.25 grew 11% on a comparable basis. Leverage on a pro forma basis, inclusive of reach acquisitions, is modestly above 3 times debt to EBITDA.

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For the quarter, we delivered adjusted diluted net earnings per share of $0.70, an increase of 19% year-over-year as well as total revenue growth of 4.9%, which exceeded the high-end of our guidance and included a return to positive core growth. Despite the continued challenges associated with the COVID-19 pandemic, our disciplined application of the Fortive Business System help drive more than 100 basis points of core operating margin expansion and a 39% increase in free cash flow. The strength of our recurring revenue, which now accounts for approximately 39% of our total revenue provided an important source of stability throughout 2020. The application of FBS customer success tools also continue to deliver improvements in net revenue retention, which climbed greater than 101% for the full year. On January 19th, we disposed-off our remaining 19.9% ownership stake in Vontier through a tax efficient Debt-for-Equity Exchange. With the combination of the Vontier spin proceeds, the Debt-for-Equity Exchange and our continued strong free cash flow, we have reduced our net debt by approximately $3 billion since the beginning of Q4 with a net leverage ratio currently at approximately 1.3 times, we have significant capacity to pursue key capital allocation priorities. Adjusted net earnings were $252.9 million, up 19.3% from the prior year and adjusted diluted net earnings per share was $0.70. Total sales increased 4.9% to $1.3 billion with core revenue up 0.7%, reflecting continued sequential improvement from the prior quarter. Acquisitions contributed 260 basis points of growth and favorable foreign exchange rates increased growth by 160 basis points. We are particularly pleased to deliver adjusted gross margins of 58.5%, representing a new high for Fortive, which highlights the significant portfolio transformation accomplished over the last few years. Adjusted operating profit margin was 23.2% for the quarter. This reflected 130 basis points of core margin, operating margin expansion, including positive core OMX for each of the segments. This was the second consecutive quarter with greater than 100 basis points of core OMX. The Q4 margin performance also contributed to 50 basis points of positive core OMX for the full year 2020. During the fourth quarter, we generated $313 million of free cash flow, representing conversion of 124% of adjusted net earnings and an increase of 39% year-over-year. Including this fourth quarter contribution, our full-year 2020 free cash flow was $902 million, representing conversion of 120% of adjusted net earnings and an increase of 44% year-over-year. Continued strength in China was broad-based, led by mid 20% growth at Sensing, mid-teens growth at Fluke, and high-teens growth at Advanced Sterilization Products. Intelligent Operating Solutions posted a total revenue increase of 3.2% despite a 0.3% decline in core revenue. Acquisitions increased growth by 170 basis points while favorable foreign exchange rates increased growth by 180 basis points. Core operating margin increased 280 basis points. This price realization, improved mix and higher volumes of Fluke resulted in segment level adjusted operating margin of 28.7%. Accruent also continued to apply FBS to drive improvement and churn in the quarter, bringing net retention for the year to greater than 100%. Turning to our Precision Technologies segment, we posted a total revenue increase of 2.3% with a 0.17% increase in core revenue. Favorable foreign exchange rates increased growth by 160 basis points. Core operating margin increased 30 basis points, resulting in segment level adjusted operating margin of 22.2%. Growth in mainstream oscilloscopes continues to be led by the 6 Series line of scopes, which has seen strong demand for the new 6 and 8-channel versions since they were introduced in Q3. Sensing performed well in China with mid 20% growth, driven by gains and critical environment applications etc and increased OEM demand for Hengstler, Dynapar's factory automation offerings. Total revenue increased 12% with a 2.6% increase in core revenue. Acquisitions added 830 basis points to growth while favorable foreign exchange rates increased growth by 110 basis points. Core operating margin increased 50 basis points resulting in segment level adjusted operating margin of 24.1%, up significantly versus Q3 and driven by strong margin lift at ASP, as we continue to exit the transition service agreements. Elective procedure volumes averaged approximately 93% of pre-COVID levels across the company's major markets, but were lower than anticipated and did not see slowing -- and did see slowing toward the end of the quarter. With additional day to closings in Q4 in early 2021, approximately 99% of ASP's global revenue is now fully under our control and off of transition service agreements. FHS continues to see good initial momentum across the two software platforms introduced over the past 12 months. Invetech had another strong quarter with greater than 50% growth. Finally, Fortive employees around the world continue to support our local communities through our efforts in our annual Day of Caring with over 35,000 hours of service in 60 worldwide communities. For the full year, we expect adjusted diluted net earnings per share to be $2.40 to $2.55, representing year-over-year growth of 15% to 22% on a continuing operations basis. The annual guidance assumes core revenue growth of 4% to 7% and an adjusted operating profit margin of 22% to 23% and an effective tax rate of approximately 14%. We also expect free cash conversion to be approximately 105% of adjusted net income. We are also initiating our first quarter adjusted diluted net earnings per share guidance of $0.56 to $0.60, representing year-over-year growth of 22% to 30%. This includes assumptions of 5% to 8% core revenue growth and adjusted operating profit margin of 21.5% to 22.5% and an effective tax rate of 14%. We also expect free cash conversion to be approximately 75% of adjusted net income.

For the quarter, we delivered adjusted diluted net earnings per share of $0.70, an increase of 19% year-over-year as well as total revenue growth of 4.9%, which exceeded the high-end of our guidance and included a return to positive core growth. With the combination of the Vontier spin proceeds, the Debt-for-Equity Exchange and our continued strong free cash flow, we have reduced our net debt by approximately $3 billion since the beginning of Q4 with a net leverage ratio currently at approximately 1.3 times, we have significant capacity to pursue key capital allocation priorities. Adjusted net earnings were $252.9 million, up 19.3% from the prior year and adjusted diluted net earnings per share was $0.70. For the full year, we expect adjusted diluted net earnings per share to be $2.40 to $2.55, representing year-over-year growth of 15% to 22% on a continuing operations basis. We are also initiating our first quarter adjusted diluted net earnings per share guidance of $0.56 to $0.60, representing year-over-year growth of 22% to 30%.

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This is evidenced by several noteworthy accomplishments, so including: we completed another batch of excellent wells in Delaware Basin that drove volumes 5% above our guidance. We maintained our capital allocation in a very disciplined way by limiting our reinvestment rates to only 30% of our cash flow. We're increasing our fixed and variable dividend payout by 71%. We're also improving our financial strength by reducing net debt 16% in the quarter. Although we're now still working to finalize the details of our 2022 plan, I want to emphasize that our strategic framework remains unchanged, and we will continue to prioritize free cash flow generation over the pursuit of volume growth. With this disciplined approach and to sustain our production profile in 2022, we are directionally planning on an upstream capital program in the range of $1.9 billion to $2.2 billion. Importantly, with the operating efficiency gains and improved economies of scale, we can fund this program at a WTI breakeven price of around $30. At today's prices, with the full benefit of the merger synergies and an improved hedge book, we're positioned for cash flow growth of more than 40% compared to 2021. And as you can see on the graph, this strong outlook translates into a free cash flow yield of 18% at an $80 WTI price. As you can see, Devon's implied dividend is not only more than double that of the energy sector, but this yield is vastly superior to us in every sector in the S&P 500 index. In fact, at today's pricing, Devon's yield is more than seven times higher than the average company that is represented in the S&P 500 Index. With our improving free cash flow outlook and strong financial position, I'm excited to announce the next step in our cash return strategy with the authorization of a $1 billion share repurchase program. This program is an equivalent to approximately 4% of Devon's current market capitalization and is authorized through year-end 2022. Beginning on the far left chart of our business is positioned to generate cash flow growth of more than 20 -- 40% in 2022, which is vastly superior to most other opportunities in the market. As you can see in the middle chart, this strong growth translates into an 18% free cash flow yield that will be deployed to dividends, buybacks, and the continued improvement of our balance sheet. Devon's operational performance in the quarter is once again driven by our world-class Delaware Basin assets, where roughly 80% of our capital was deployed. With this capital investment, we continue to maintain steady activity levels by running 13 operated rigs and four frac crews, bringing on 52 wells during the quarter. This project also delivered exceptionally high rates with our best well delivering an initial 30-day production rates of 7,300 BOE per day, of which more than that -- more than 60% of that was oil. Moving a bit east into Lea County, another result for this quarter was the Cobra project, where the team executed on a 3 mile Wolfcamp development. This pad outperformed our predrill expectations by more than 10% with the top well achieving 30-day rates as high as 6,300 BOE per day. With the strong operating results we delivered this quarter, high-margin oil production in the Delaware Basin continue to expand and rapidly advance, growing 39% year over year. These efficiencies are evidenced on the right-hand chart, where our average D&C costs improved to $554 per lateral foot in the third quarter, a decrease of 41% from just a few years ago. Another asset I'd like to put in the spotlight today is our position in the Anadarko Basin, where we have a concentrated 300,000 net acre position in the liquids-rich window of the play. By way of background, in late 2019, we formed a partnership with Dow in a promoted deal, where Dow earns half of our interest on 133 undrilled locations in exchange for $100 million drilling carry. With the benefits of this drilling carry, we're drilling around 30 wells this year, and our initial wells from this activity were brought on during the quarter. Initial 30-day rates averaged 2,700 BOE per day, and completed well costs came in under budget at around $8 million per well. As an example, Williston will generate over $700 million of 2021 free cash flow. Collectively, these assets are on pace to generate nearly $1.5 billion of free cash flow this year. As you would expect, about 70% of our inventory resides in the Delaware Basin, providing the depth of inventory to sustain our strong capital efficiency for many years to come. These are really operated, essentially all long lateral up-spaced wells that deliver competitive returns in a $55 oil environment. Operating cash flow for the third quarter totaled $1.6 billion, an impressive increase of 46% compared to last quarter. This level of cash flow generation comfortably funded our capital spending requirements and generated $1.1 billion of free cash flow in the quarter. Under our framework, we pay a fixed dividend every quarter and evaluate a variable distribution of up to 50% of the remaining free cash flow. So, with the strong financial results we delivered this quarter, the board approved a 71% increase in our dividend payout versus last quarter to $0.84 per share. As you can see on the chart to the left, at current market prices, we expect our dividend growth story to only strengthen in 2022. So far this year, we've made significant progress toward this initiative by retiring over $1.2 billion of outstanding notes. In conjunction with this absolute debt reduction, we've also added to our liquidity, building a $2.3 billion cash balance at quarter end. We have identified additional opportunities to improve our financial strength by retiring approximately $1.0 billion of premium -- excuse me, low-premium debt in 2022 and 2023.

Although we're now still working to finalize the details of our 2022 plan, I want to emphasize that our strategic framework remains unchanged, and we will continue to prioritize free cash flow generation over the pursuit of volume growth. As you can see on the chart to the left, at current market prices, we expect our dividend growth story to only strengthen in 2022.

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The big themes of the second quarter are strong growth in line with our expectations and robust free cash flow, either after the step up in our capex, positive industry indicators, including a strong used-equipment market, where pricing was up 7% year-over-year. This is timed to the broad based recovery in demand and our focus on operational discipline, as we manage the increase in both volume and capacity, while driving fleet productivity of nearly 18%. Another key takeaway our safety performance and I'm very proud of the team for holding the line on safety with another recordable rate below 1, while at the same time managing a robust busy season and on-boarding our acquired locations. When we surveyed our customers at the end of June, the results showed that over 60% of our customers expect to grow their business over the coming 12 months, which is a post-pandemic high. And notably, only 3% saw a decline coming over the same period. It confirms our return to growth, including our 19% rental revenue growth in the second quarter. Our Specialty segment generated another strong performance with rental revenue topping 25% year-over-year, including same-store growth of over 19%. This year, we've opened 19 new specialty branches in the first six months, which puts us well on our way to our goal of 30 by year-end. Rental revenue for the second quarter was $1.95 billion, that's an increase of $309 million or 19%. If I exclude the impact of acquisitions on that number, rental revenue from the core business grew a healthy 16% year-over-year. Within rental revenue, OER increased $231 million or 16.5%. The biggest driver in that change with fleet productivity, which was up 17.8% or $250 million, that's primarily due to stronger fleet absorption on higher volumes in part as we comp the COVID-impacted second quarter last year. Our average fleet size was up 0.2% or a $3 million tailwind to revenue and rounding out OER, the inflation impact of 1.5% cost us $22 million. Also within rental, ancillary revenues in the quarter were up about $65 million or 31% and rerent was up $30 million. Used equipment sales came in at $194 million, that's an increase of $80 million or about 10%. Pricing at retail in the quarter increased over 7% versus last year and supported robust adjusted used margins of 47.9%, and that represents a sequential improvement of 520 basis points and is 190 basis points higher than the second quarter of 2020. Used sales proceeds for the quarter represented a strong recovery of about 59% of the original cost of fleet that was on an average over seven years old. Adjusted EBITDA for the quarter was $999 million, an increase of 11% year-over-year or $100 million, that included $13 million of one-time costs for acquisition activity. The dollar change includes a $141 million increase from Rentals and in that, OER was up $125 million, ancillary contributed $10 million and rerent added $6 million. Used sales were tailwind to adjusted EBITDA of $12 million and other non-rental lines of business provided $6 million. The impact of SG&A and adjusted EBITDA was a headwind for the quarter of $59 million, which came mostly from the resetting of bonus expense. Our adjusted EBITDA margin in the quarter was 43.7%, down 270 basis points year-over-year and flow-through as reported was about 29%. Adjusting for these few items, the implied flow-through for the second quarter was about 46% with implied margins flat versus last year. I'll shift to adjusted EPS, which was $4.66 for the second quarter, including a $0.13 drag from one-time costs. That's up $0.98 versus last year, primarily on higher net income. For the quarter, gross rental capex was a robust $913 million. Our proceeds from used equipment sales were $194 million, resulting in net capex in the second quarter of $719 million, that's up $750 million versus the second quarter last year. Even as we've invested in significantly higher capex spending so far this year, our free cash flow remains very strong at just under $1.2 billion generated through June 30th. Now turning to ROIC, which was a healthy 9.2% on a trailing 12-month basis. Year-over-year, net debt is down 4% or about $454 million. That's after funding over $1.4 billion of acquisition activity this year with the ABL. Leverage with 2.5 times at the end of the second quarter. That's flat to where we were at the end of the second quarter of 2020, and an increase of 20 basis points from the end of the first quarter this year, mainly due to the acquisition of General Finance in May. We finished the quarter with over $2.8 billion in total liquidity. That's made up of ABL capacity of just under $2.4 billion and availability on our AR facility of $106 million. We also had $336 million in cash. We've raised our full year guidance ranges at the midpoint by $350 million in total revenue and $100 million in adjusted EBITDA, as we now expect stronger double-digit growth for the core business in the back half of the year. That increase for acquisitions reflects $250 million in total revenue and $60 million in adjusted EBITDA, which includes $15 million of expected full year one-time costs. To that end, we raised our growth capex guidance by $300 million, a good portion of which reflects fleet we are purchasing from Acme Lift. It remains a robust $1.7 billion at the midpoint and we'll continue to earmark our free cash flow this year toward debt reduction to enhance the firepower we have to grow our business.

I'll shift to adjusted EPS, which was $4.66 for the second quarter, including a $0.13 drag from one-time costs.

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Our global customer base surpassed both the 400,000 RCE and 500,000 meter milestones, powered by expansion in both our domestic markets and overseas books. Here in the US, Genie Retail Energy added a net 20,000 RCEs and 15,000 meters during the quarter. GRE closed the quarter serving 330,000 RCEs comprising 384,000 meters. Overseas, where more of our customer base resides in apartments and average consumption is significantly lower, GRE International added 7,000 RCEs and 20,000 meters to close the quarter serving 72,000 RCEs comprising 148,000 meters. By March 31st, we had increased our global customer base to 401,000 RCEs served and 532,000 meters. During the trailing 12 months, we increased our RCEs served by 20% or just over 68,000 and increased global meters served by 33% or 133,000 meters. Customer churn in the first quarter decreased again to 4.7% per month from 5.3% per month in the first quarter of 2019. For additional perspective, our average churn over the past 12 months is 5.4% versus 6.6% in the 12 months proceeding. We've already added approximately 10,000 in our seasonal Lone Star State. As a result, our outlook remains positive. Our geographically diversified markets, liquid balance sheet and very low level of long-term debt put us in a great position to build on the first quarter's momentum. Last year, in addition to paying $0.30 in aggregate dividends to our common stockholders, we repurchased $5.6 million of common stock. Today, in light of the resilience of our business, its underlying strength and the abundant growth opportunities, Genie's Board of Directors has increased our quarterly dividend to $0.085, a 13% increase. Consolidated revenue in the first quarter increased $17.4 million to $104.1 million. $12.7 million of the increase was contributed by our Genie Energy Services division. Revenue jumped to $18 million on the fulfillment of outstanding solar panel orders by our Prism Solar subsidiary. Genie Retail Energy contributed $79.1 million in revenue, an increase of $2.6 million, compared to the year ago quarter. Robust growth in our electric meter customer base over the past 12 months drove a 17% increase in kilowatt hours sold, more than offsetting a slight decrease in per unit revenue. This was partially offset by a decline in revenue contribution from the gas book as we experienced lower consumption and pricing per therm. At Genie Retail Energy International, revenue totaled $7 million, an increase of $2.1 million from the year ago quarter. Consolidated gross profit in the first quarter increased $3.3 million to $28.9 million, also a record for the company. GRE contributed $27.6 million of that total, an increase of $2.9 million from the year ago quarter, predominantly reflecting the increase in kilowatt hours sold, a modest increase in margin per kilowatt hour and a decrease in cost per therm sold. Increased rates of customer acquisition at GRE drove an increase in consolidated SG&A expense to $19.5 million in the first quarter, $3.7 million higher than the year ago period. Equity and the net loss of investees, which is comprised of our investments in Orbit Energy and our minority stake in Atid, decreased to $379,000 from $797,000 in the first quarter of 2019, as we made no additional investments in either entity during the quarter. Our consolidated income from operations came in at $9.2 million, compared to $9.8 million in the year ago quarter, as the increase in customer acquisition expense narrowly offset the gain in gross profit. Adjusted EBITDA was $10.3 million, effectively even with the year ago quarter. EPS was $0.20 per diluted share, $0.01 below the year ago quarter. At March 31st, we reported $157.2 million in total assets, including $36.4 million in cash, cash equivalents and restricted cash. Liabilities totaled $71.5 million, of which just $2.2 million were non-current. And net working capital totaled $51.5 million, an increase of $10.3 million from our total three months ago. Cash used in operating activities was $2.7 million in the first quarter of 2020, compared to cash provided by operating activities of $7 million in the year ago period. As Michael mentioned, supported by a strong outlook, the Board of Directors has approved an increase in the quarterly dividend to $0.085 a share, a 13% increase. The indicative annual dividend rate is now $0.34 per share.

As a result, our outlook remains positive. Our geographically diversified markets, liquid balance sheet and very low level of long-term debt put us in a great position to build on the first quarter's momentum. Today, in light of the resilience of our business, its underlying strength and the abundant growth opportunities, Genie's Board of Directors has increased our quarterly dividend to $0.085, a 13% increase. Consolidated revenue in the first quarter increased $17.4 million to $104.1 million. This was partially offset by a decline in revenue contribution from the gas book as we experienced lower consumption and pricing per therm. EPS was $0.20 per diluted share, $0.01 below the year ago quarter. At March 31st, we reported $157.2 million in total assets, including $36.4 million in cash, cash equivalents and restricted cash. As Michael mentioned, supported by a strong outlook, the Board of Directors has approved an increase in the quarterly dividend to $0.085 a share, a 13% increase.

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With this strong demand, we achieved average quarterly occupancy that was 420 basis points higher than last year. We grew occupancy 170 basis points during the second quarter. This has allowed us to be more aggressive with rates, which has helped to drive an increase in net effective rates by more than 50% through the end of June. The vast majority of our acquisitions were off market, including 13 stores from our third-party management portfolio through the first half of 2021. We closed on a record $534 million of wholly owned acquisitions through the first half of this year, already matching our total acquisition volume of last year. These acquisitions are expected to generate a blended year one cap rate of 4.5% and represent a nice mix of markets and maturity with almost one-third in lease-up and roughly 70% in the Sunbelt region. In addition to $22 million of closed acquisition subsequent to the quarter end as well as an additional $80 million currently under contract, we have a strong late-stage pipeline of attractive opportunities that our team continues to work on. Our third-party management portfolio totaled 340 stores at quarter end and we added 19 more stores in July as owners and developers are attracted to our operating performance and innovative technology platforms. Including rental income associated with these business customers, Warehouse Anywhere's year-to-date revenue is up almost 30% to a $14 million run rate including $9 million of annualized fee income. We have increased the midpoint of our estimated adjusted funds from operations per share 8.5% to $4.74 this year, which would be 19.4% growth over 2020. Last night, we reported adjusted quarterly funds from operations of $1.20 per share for the second quarter, an increase of 27.7% over the same period last year. Second quarter same-store revenue accelerated significantly to 14.7% year-over-year, more than double the 7.3% growth produced in the first quarter. Revenue performance was driven by a 420 basis-point increase in same-store average quarterly occupancy. In the quarter, our same-store move-ins were paying almost 16% more than our move-outs. This pricing power, along with our ability to push rates on existing customers, contributed to an 8.3% year-over-year growth of same-store in-place rates for the second quarter, up from just 1.3% growth in the first quarter of this year. Discounts as a percentage of same-store rental revenue declined 60% year-over-year to 1.4% in the quarter. Same-store operating expenses grew only 3.9% year-over-year for the quarter. The increases were partially offset by an 11% decrease in Internet marketing expenses. The net effect of the same-store revenue and expense performance was a 320 basis-point expansion in our net operating income margin resulting in 20.2% year-over-year growth in same-store NOI for the second quarter. We supported our acquisition activity and liquidity position by issuing approximately $148 million of common stocks via our ATM program in the second quarter. Our net debt to recurring EBITDA ratio decreased to 5 times, and our debt service coverage increased to a healthy 5.3 times at June 30th. At quarter end, we had $360 million available on our line of credit, and we have no significant debt maturities until April of 2024 when $175 million becomes due. Our average debt maturity is 6.2 years. Specifically, we expect same-store revenue to grow between 10.5% and 11.5%. Excluding property taxes, we continue to expect other expenses to increase between 2.25% and 3.25%, while property taxes are expected to increase 6.75% to 7.75%. The cumulative effect of these assumptions should result in 13.5% to 14.5% growth in same-store NOI. We have also increased our anticipated acquisitions by $325 million to between $800 million and $1 billion. Based on these assumption changes, we anticipate adjusted FFO per share for 2021 year to be between $4.69 and $4.79.

Last night, we reported adjusted quarterly funds from operations of $1.20 per share for the second quarter, an increase of 27.7% over the same period last year.

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At Seneca, production for the quarter was up nearly 20% over last year. Our team has done a great job cracking the code on our Utica development program, both in the WDA and at Tract 007 in Tioga County. It's also worth highlighting our California oil production, which was up about 5% over last year on the strength of our recent Pioneer and 17N development programs at Midway Sunset. Lower Natural Gas prices are obviously a concern. Having said that, as you can see in last night's release, we're raising the midpoint of our gathering capital spending guidance for the year by $10 million. It is expected to add roughly $5 million to $10 million per year in third-party revenues starting in fiscal 2021. Utility segment continues to perform well with earnings up $0.01 a share over last year. For the calendar year, our modernization program replaced over 150 miles of older distribution pipeline, including 113 miles in New York where we have a regulatory tracking mechanism that provides us with timely recovery of this rate base investment. We expect winter heating bills will be more than 10% lower than last year. The Empire North and FM100 projects will add combined $60 million in incremental annual revenue over the next few years. We produced 58.4 Bcfe, an increase of around 19% compared to last year's first quarter, and a slight decrease quarter-over-quarter. We are lowering our fiscal '20 capex guidance around $42 million or 10% at the midpoint to now range between $375 million to $410 million. This reflects approximately $100 million reduction or 20% in Seneca's expected fiscal '20 capital expenditures versus 2019 levels. We still expect to see increased production in our second quarter as we turned in line 12 wells in late January and expect to turn in line another six wells later next month. We have approximately 102 Bcf or 60% of our remaining fiscal '20 East Division gas production locked in physically and financially at a realized price of $2.28 per Mcf. We have another 43 Bcf of firm sales providing basis protection to over 85% of our remaining forecasted gas production that's already sold. In California, we produced around 6,000 barrels of oil during the first quarter, an increase of around 5% over last year's first quarter. These properties are now producing around 800 barrels a day. And finally, over 70% of our oil production for the remainder of the year is hedged at an average price of around $62 per barrel. National Fuel's first quarter operating results were $1.01 per share, down $0.11 per share quarter-over-quarter. Lower natural gas price realizations were the largest driver of the decrease. Looking to the remainder of the year, our earnings guidance has been revised downward to a range of $2.95 per share to $3.15 per share, a decrease of $0.10 at the midpoint. This is primarily related to the reduction in our natural gas price outlook, which now reflects a $2.05 per MMBtu NYMEX price and $1.70 per MMBtu Appalachian spot price assumptions for the remainder of the year. The remainder of our major guidance assumptions are unchanged. The $0.10 change in NYMEX pricing would change earnings by $0.04 per share, a $0.10 change in spot pricing would impact earnings by $0.02 per share, and a $5 change in WTI oil pricing would also impact earnings by $0.02 per share. On the capital side, taking into account our reduced activity level, our new consolidated guidance is in the range of $695 million to $785 million, a decrease of approximately $33 million at the midpoint. Adding our dividend, we expect a financing need of approximately $150 million for the full year. We started the year with nearly $700 million of liquidity available under our revolving credit facility, and we plan to use that as the first source of financing.

Lower Natural Gas prices are obviously a concern. Lower natural gas price realizations were the largest driver of the decrease. Looking to the remainder of the year, our earnings guidance has been revised downward to a range of $2.95 per share to $3.15 per share, a decrease of $0.10 at the midpoint. The remainder of our major guidance assumptions are unchanged.

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consumer was against a 24% comp, and a 39% growth in Hawthorne was against a comp of 64%. But I've been a public company CEO for 20 years now. Our strategic plan assumed a relatively mature core business, and enterprise growth of roughly 4% to 6%, driven by the higher growth at Hawthorne. We sought to achieve a consistent shareholder return of 10% to 12% by leveraging the P&L, repurchasing shares, maintaining a roughly 2% dividend yield. We also set a five-year target of cumulative free cash flow of $1.5 billion. Between the first two pillars, we believe the U.S. consumer segment can achieve sustainable long-term growth of 2% to 4% annually. Our previous strategic plan assumed growth of 0% to 2%. More importantly, it was 21 points better than fiscal '19 and actually got stronger later in the year. Consumer volume during the fourth quarter of fiscal '21, while down seven points from last year's record performance was 35 points higher than the same period in fiscal 2019. POS and units were up 4% in October, compared to last year's record result and up 42% compared to fiscal 2019. A 30-year-old couple buying a home today and entering our category for the first time has the potential to stay with us for 20 years or longer. This area is approaching 10% of our U.S. consumer sales and will only grow higher. In the near term, we do not expect to see an impact from the investment in RIV on our P&L, and the amount of capital we've employed $150 million does not impact our ability to invest in other areas, or return cash to shareholders. I told you last quarter, we had allocated $250 million for that purpose. We now expect to add another $100 million to that total, and we hope to acquire as many of those shares as possible in the next two quarters. U.S. consumer sales did better than we expected, finishing up 11%, compared to the 7% to 9% growth we expected. At $3.2 billion, sales grew by nearly $900 million in the last two years. consumer segment, sales declined 28% in Q4, we were up against a plus-92% comp. Adjusting for that, sales in the quarter would have declined 23%. While year-over-year sales declined 2%, the segment would have been up 5% on an apples-to-apples basis when adjusting for the calendar. And the U.S. Hawthorne business, grew by over 10% last year in Q4 given the same comparison. Finally, recall that Hawthorne was up against a plus-64% comp in the same period a year ago. On a full year basis, Hawthorne grew 39% to $1.4 billion. I'll remind you that number was $640 million in fiscal 2019. On the segment profit line, Hawthorne earned $164 million in fiscal '21, for an operating margin of 11.5%. The profit was up 46% from last year and more than 200% from 2019. On top of a strong harvest from the first turn of crops earlier in the year, many growers harvested their second crop of cannabis earlier this season due to concerns about wildfires drought, and in the case of the legacy market, fear of increased enforcement efforts. In Q4 of fiscal '21, the adjusted gross margin rate was 17.4% compared with 24.3% in 2020. Companywide sales in Q4 of last year were up nearly 80%. If you compare the Q4 gross margin rate in '21 versus '19, you'll see the difference is only 100 basis points, and that difference is a combination of segment mix and higher commodity costs. On a full year basis, the gross margin rate declined 270 basis points to 30.3%. The year-over-year increase in commodity costs of about $85 million nearly all of which was on plan, was the primary reason for the decline, followed by higher distribution costs. SG&A came in 2 percentage points lower in fiscal '21 at $743 million. It declined 21% in the quarter to $161 million. Interest expense was $5 million higher in Q4 compared with a year ago. Remember, we issued $900 million of bonds in the second half of the year, which drove an increase in the quarter. On the bottom line, adjusted net income, which excludes restructuring, impairment, and onetime items, was up 28% to $528 million or $9.23 a share. That's just $0.01 shy of a $2 per share increase in a single year and more than twice the $4.47 a share we earned in 2019. This assumes the U.S. consumer segment is flat to minus 4%, and that Hawthorne grows 8% to 12%. Remember that last year's Q1 was up nearly 150%, as retailers worked hard to remedy depleted inventory levels. As it relates to Hawthorne, we're planning for 8% to 12% growth on a full year basis. We expect to see gross margin rate decline by 100 to 150 basis points on a full year basis. That said, we expect about 65% to 70% of our costs to be locked in by the end of the calendar year. We would expect some leverage out of SG&A, meaning this line can range from a 6% decline year over year to a slight increase, maybe 2%. Below the operating line, interest expense should be roughly $25 million higher, based on the full year impact of our recent bond offering. All of this rolls up to a guidance range for adjusted earnings per share of $8.50 to $8.90. For the year we just completed, free cash flow, that's operating cash flow minus capex, came in at $165 million. That was about a $60 million impact. Second, we increased capex by about $45 million. Third, inventory levels were up $500 million from fiscal '20. As we look to fiscal '22, we're aiming for free cash flow of up to $300 million. We've got a lot of moving pieces right now and several active initiatives that could require us to update our outlook as we move through the year.

Our previous strategic plan assumed growth of 0% to 2%. On top of a strong harvest from the first turn of crops earlier in the year, many growers harvested their second crop of cannabis earlier this season due to concerns about wildfires drought, and in the case of the legacy market, fear of increased enforcement efforts. All of this rolls up to a guidance range for adjusted earnings per share of $8.50 to $8.90. As we look to fiscal '22, we're aiming for free cash flow of up to $300 million. We've got a lot of moving pieces right now and several active initiatives that could require us to update our outlook as we move through the year.

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Merala Nisioh [Phonetic], 58 was a assistant to the plant manager at our Severin, Romanian facility where she worked for over 32 years. We also lost Luis Martinez aged 43. He was survived by his wife and four children ages, 19, 17, 11 and five. We completed our GBX joint venture post quarter with Steve Menzies and funded the first $100 million tranche of railcars from a newly established $300 million non-recourse credit line established for this business. Finally, post quarter and almost all in the month of March, we received orders for another 1,700 railcars with an approximate value of $190 million on top of the 3,800 railcars orders received during the quarter worth $440 million in all 5,500 cars worth about $630 million in the space of four months or more. The added traffic has driven year-to-date rail velocity down by nearly 6% compared to the same period in 2020 or about 2 miles an hour. Consider that about 148,000 cars have been taken out of storage in North America alone since the peak storage levels of last year, storage statistics have fallen now to 378,000 units, well below what we believe to be the frictional level of storage, 400,000 cars. We ended the quarter with over $700 million of liquidity, including nearly $600 million of cash and another $115 million of available borrowing capacity. We expect to add another $100 million shortly. FTR Associates projects the total rail traffic will grow by 5.7% year-over-year in 2021 and intermodal traffic will grow by 6.4%. In North America, that's even more bullish and closer to 7% for 2021. About 30% of our present backlog is in Europe and Brazil. Regarding the second quarter activity, Greenbrier delivered 2,100 units in the quarter, including 400 units in Brazil. We received orders for 3,800 units in the quarter valued at approximately $440 million. Our book-to-bill ratio of 1.8 times resulted in a growing backlog to 24,900 units valued at $2.5 billion. Compared to Q1, our deliveries in Q2 were down 37% and that followed a 45% decline from Q4 to Q1. And then, further if you were to do a year-over-year comparison, you guys like all these year-over-year comparisons of Q2, manufacturing revenue was down 59% on 54% lower deliveries. Our leasing and services team continues to navigate the downturn well with fleet utilization improving sequentially during a time when approximately 25% of the total North American railcar fleet and storage. Greenbrier's capital market team had a relatively quiet quarter with 100 units syndicated. Our Management Services Group added another 38,000 new railcars under management during the quarter, bringing total rail cars under management to 445,000 or about 26% of the North American fleet. GBX Leasing will acquire approximately $200 million of railcars per annum from Greenbrier with the initial portfolio identified from leased railcars on our balance sheet or in backlog. The joint venture will be levered about 3-to-1 debt to equity during the initial $300 million traditional non-recourse warehouse facility, of which we've drawn the first $100 million and those transition to a more traditional asset-backed securities financing as time progresses. And you can see that, particularly with what Bill mentioned, our recent orders for 1,700 railcar units in just the first month of our Q3. The decisive actions we've taken over the last 12 months have positioned Greenbrier to exit the pandemic economy a stronger and leaner organization. A few quarterly items I'll mention include revenue of $296 million; book-to-bill of 1.8 times made up of deliveries of 2,100 units, including 400 units from Brazil and orders of 3,800 new units; aggregate gross margin of 6%; selling and administrative expense of $43 million, flat sequentially and 20% lower than Q2 of fiscal 2020. Net loss attributable to Greenbrier was $9.1 million or a loss of $0.28 per share. EBITDA was negative $1 million. The effective tax rate in the quarter was a benefit of 62%, due to the net operating losses and tax benefits from accelerated depreciation associated with capital investment in our leasing assets. These deductions will be carried back to earlier high tax years under the CARES Act, resulting in a $16 million tax benefit in the quarter and cash tax refunds to be received in fiscal 2022. We also incurred $2.5 million of incremental pre-tax costs specifically related to COVID-19 employee and facility safety. Including borrowing capacity of $115 million, Greenbrier's liquidity remains healthy at $708 million plus another approximately $100 million of initiatives and process. Cash in the quarter ended at $593 million, reflecting $48 million of inventory purchasing to support higher production levels beginning in Q3 and the $44 million increase in leased railcars for syndication. Capital expenditures, net of equipment sales, in the quarter was $9.2 million. Leasing and services capital spending is expected to be about $90 million in 2021, with about 42% of that already occurring in the first half of the year. This capital spending includes GBX Leasing, which began operations in Q3 and approximately $130 million of leased railcar assets were transferred into the JV at that point, including some assets, which were already on our balance sheet at the beginning of the year. An additional approximately $70 million of assets will be newly built or transferred later this year. Manufacturing and wheels repair and parts capital expenditures are still expected to be about $35 million for the year with spending focused on safety and required maintenance. And today, we're announcing a dividend of $0.27 per share, our 28th consecutive dividend. Since the start of our program, the growth of our dividend represents a compound annual rate of 9%.

A few quarterly items I'll mention include revenue of $296 million; book-to-bill of 1.8 times made up of deliveries of 2,100 units, including 400 units from Brazil and orders of 3,800 new units; aggregate gross margin of 6%; selling and administrative expense of $43 million, flat sequentially and 20% lower than Q2 of fiscal 2020. Net loss attributable to Greenbrier was $9.1 million or a loss of $0.28 per share.

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We posted $22.2 million of net income or $2.11 of diluted EPS, with very attractive returns of 7.1% ROA and 31.6% ROE. We continue to grow our market share and once again experienced double-digit year-over-year growth in our net finance receivables and quarterly revenue, which were up 24% and 23%, respectively. We generated record sequential portfolio growth of $131 million in the quarter, leading to another all-time high in net finance receivables and quarterly revenue. At the same time, we've derisked the business by investing heavily in our custom underwriting models and shifting more than 82% of our portfolio to higher-quality loans at or below 36% APR, enabling us to maintain a stable credit profile as we grow and deliver predictable superior results for our shareholders. In the third quarter, delinquency increased in line with expectations as government stimulus waned, but it's 4.7%, our 30-plus day delinquency rate is on par with the prior year and 180 basis points below third quarter 2019 levels. Our net credit loss rate during the quarter was 5%, the lowest in our history as a public company, a 280 basis point improvement from the prior-year period and a 310 basis point improvement from the third quarter of 2019. We originated a record $421 million of loans in the third quarter, which was up 35% over last year and 19% above 2019 pre-pandemic levels. This includes $129 million derived from our new growth initiatives. New digital volumes represented 28% of our total new borrower volume, with 57% originated as large loans. Near the end of the quarter, we entered Utah as we expanded our operations to the western U.S. As a reminder, we entered Illinois in the second quarter and as of the end of October, our first branch has reached $2.8 million in receivables in six months, and the four branches in the state have exceeded $9 million in receivables. In the coming months, we expect to enter a new state and open 10 new branches across our network, and we have plans to enter an additional five to seven new states by the end of 2022. To that end, we closed 31 branches in the fourth quarter, where there were clear opportunities to consolidate operations into a larger branch in close proximity, while still providing our customers with the best-in-class service they've come to expect. These branch optimization actions will generate approximately $2.2 million in annual savings, which we'll reinvest in our expansion into new states. In October, we closed a five-year $125 million private securitization transaction at a fixed coupon of 3.875%, which enables us to fund loans above and below 36% APR. Following the October securitization, our fixed rate debt as a percentage of total debt increased from 78% to 87%, with a weighted average coupon of 2.7% and an average revolving duration of nearly three years. Following the transaction, we also maintained $350 million of interest rate caps with strike rates of 25 to 50 basis points, covering $133 million in variable rate debt and future portfolio funding. As of September 30, approximately 87% of our portfolio had been originated since April 2020. Consistent with our loan portfolio growth, we built our allowance for credit losses by $10.7 million in the third quarter. And as a result, our allowance for credit losses reserve rate at the end of the quarter was 11.4%. Our $150.1 million of allowance for credit losses as of September 30 continues to compare quite favorably to our 30-plus day contractual delinquency of $61.3 million and includes a $15.5 million reserve for additional credit losses associated with COVID-19. We released only $2 million of our COVID-related reserves in the third quarter as we continue to maintain a conservative stance as we monitor the impact of the delta variant, the pace of the economic recovery and the health of the consumer as the benefits of government assistance continue to dissipate. Looking ahead, absent any significant changes to the macroeconomic environment, we expect that our fourth quarter and full year 2021 NCL rates will be below 7%. Our allowance for credit losses will increase in the fourth quarter as the portfolio continues to grow, and we now anticipate that the reserve rate will return to pre-pandemic levels of around 10.8% by roughly mid-2022. Assuming the economic recovery remains on track, we believe that credit performance should remain strong into next year and that our 2022 NCL rate will be at or below 8.5% even as delinquencies continue to normalize off the recent historically low levels. Based on our third quarter results, we're raising our expectations for full year 2021 net income to between 85 and $87 million, up from our prior range of $75 million to $80 million. Our revised outlook reflects our strong third quarter core portfolio growth of 25.4% over the prior-year period, which outpaced the broader market. Our outlook also assumes the year-end net finance receivables will be approximately $1.4 billion, providing a strong jump-off point as we enter 2022 and further demonstrating the power of our omnichannel model. We generated net income of $22.2 million and diluted earnings per share of $2.11, driven by significant portfolio and revenue growth, stable operating expenses, low funding costs, and a healthy credit profile. The business continued to produce attractive returns with 7.1% ROA and 31.6% ROE this quarter and 7.8% ROA and 32.4% ROE year to date. As illustrated on Page 4, branch originations were well above the prior year as we originated $268 million of branch loans in the third quarter, 18% higher than the prior-year period and 3% higher than 2019. Meanwhile, direct mail and digital originations also increased nicely year over year to $152 million, 80% higher than the prior year and 66% higher than 2019. Our total originations were a record $421 million, up 35% from the prior-year period and 19% higher than 2019. Notably, our new growth initiatives drove $129 million of third quarter originations and have become a significant factor in our accelerating expansion. Page 5 displays our portfolio growth and mix trends through September 30. We closed the quarter with net finance receivables of $1.3 billion, up $131 million from the prior quarter and $255 million from the prior-year period as we continue to successfully execute on our omnichannel strategy, new growth initiatives, and marketing efforts. Our core loan portfolio grew $132 million or 11% from the prior quarter and $263 million or 25% from the prior-year period as we continue to take market share. Large loans and small loans grew 12% and 10% on a sequential basis. For the fourth quarter, we expect demand to remain strong and to generate healthy quarter-over-quarter growth in our finance receivables portfolio, resulting in year-end net finance receivables of approximately $1.4 billion. On Page 6, we show our digitally sourced originations which were 28% of our new borrower volume in the third quarter as we continue to meet the needs of our customers through our omnichannel strategy. During the third quarter large loans were 57% of our new digitally sourced originations. Turning to Page 7. Total revenue grew 23% to a record $111.5 million. Interest and fee yield increased 50 basis points year over year, primarily due to improved credit performance across the portfolio, resulting in fewer loans and nonaccrual status and fewer interest accrual reversals. Sequentially, interest and fee yield and total revenue yield each increased 40 basis points due to credit performance and the growth in our small loan portfolio in the third quarter. As of September 30, 67% of our portfolio was comprised of large loans and 82% of our portfolio had an APR at or below 36%. In the fourth quarter, we expect total revenue yield to be approximately 70 basis points lower than the third quarter and our interest and fee yield to be approximately 50 basis points lower due to the continued mix shift toward larger loans and the impact of nonaccrual loans as credit continues to normalize. Moving to Page 8. Our net credit loss rate was 5% for the third quarter, a 280 basis point improvement year over year. Net credit losses were also down 240 basis points from the second quarter due to improving economic conditions and our lower delinquency levels. We continue to expect that our full year net credit loss rate will be below 7%. Flipping to Page 9. Our 30-plus day delinquency level as of September 30 was 4.7%, an increase of 110 basis points versus June 30, but comparable to the prior year and 180 basis points below 2019 levels. Our 90-plus day delinquency level increased only 40 basis points sequentially and remains below third quarter 2020 and 2019 levels. And we anticipate that our 2022 NCL rate will be at or below 8.5%, even as the historically low delinquencies continue to normalize. Turning to Page 10. We ended the second quarter with an allowance for credit losses of $139.4 million or 11.8% of net finance receivables. During the third quarter of 2021, the allowance increased by $10.7 million to $150.1 million to support our strong portfolio growth, but the allowance as a percentage of net finance receivables decreased to 11.4%. The allowance increase in the quarter consisted of a base reserve build of $12.7 million to support our portfolio growth and a COVID-related reserve release of $2 million due to improving economic condition. We continue to maintain a reserve of $15.5 million related to the expected economic impact of the COVID-19 pandemic. We expect that the reserve rate at year-end will be comparable to current levels and will normalize to pre-pandemic levels of approximately 10.8% by around mid-2022. Our $150.1 million allowance for credit losses as of September 30 continues to compare very favorably to our 30-plus day contractual delinquency of $61.3 million. Flipping to Page 11. G&A expenses for the third quarter of 2021 were $47.8 million, up $4 million or 9% from the prior-year period, driven by increased investment in our new growth initiatives, personnel, and omnichannel strategy. G&A expenses for the third quarter also included $0.7 million of expenses related to the consolidation of 31 branches as a part of the company's branch optimization plan and the $3 million benefit related to the deferral of digital loan origination costs, of which $1.5 million was incremental to the quarter. On a sequential basis, our G&A expenses rose $1.4 million. Overall, we expect G&A expenses for the fourth quarter to be approximately $54 million as we continue to invest in our digital capabilities, our geographic expansion into new states and personnel to drive additional sustainable growth and improved operating leverage over the longer term. Fourth quarter G&A expenses will include an estimated $0.9 million of branch optimization expenses. Turning to Page 12. Interest expense was $8.8 million in the third quarter or 2.8% of our average net finance receivables on an annualized basis. This was a $0.5 million or 70 basis point improvement year over year. We currently have $450 million of interest rate caps to protect us against rising rates on our variable price debt, which as of the end of third quarter totaled $219 million. $350 million of the interest rate caps at a one-month LIBOR strike price between 25 and 50 basis points and a weighted average duration of 2.3 years. Looking ahead, we expect interest rate expense in the fourth quarter to be approximately $10 million, excluding mark-to-market impact on interest rate caps, with the increase in expense attributable to the growth in our loan portfolio. Page 13 is a reminder of our strong funding profile. Our third quarter funded debt-to-equity ratio remains at a conservative 3.5 to one. We continue to maintain a very strong balance sheet with low leverage and $150 million in loan loss reserves. As of September 30, we had $722 million of unused capacity on our credit facilities and $194 million of available liquidity, consisting of unrestricted cash and immediate availability to draw down our credit facilities. As a reminder, in October, we closed our seventh securitization, a private $125 million transaction that has a five-year revolving period and a fixed coupon of 3.875%. The new securitization enables us to pay down higher cost variable rate debt, provides us with additional fixed interest rate certainty, and allows us to fund multiple product types, both above and below 36% APR. Following the securitization, our fixed rate debt as a percentage of total debt increased from 78% to 87%, with a weighted average coupon of 2.7% and average revolving duration of nearly three years. Our effective tax rate during the third quarter was 23% compared to 27% in the prior-year period. For the fourth quarter, we expect an effective tax rate of approximately 25%, excluding discrete items, such as tax impacts associated with equity compensation. The company's board of directors has declared a dividend of $0.25 per common share for the fourth quarter of 2021. In addition, during the quarter, we repurchased 390,112 shares of our common stock at a weighted average price of $56.32 per share under our $50 million stock repurchase program.

We posted $22.2 million of net income or $2.11 of diluted EPS, with very attractive returns of 7.1% ROA and 31.6% ROE. We generated net income of $22.2 million and diluted earnings per share of $2.11, driven by significant portfolio and revenue growth, stable operating expenses, low funding costs, and a healthy credit profile. Total revenue grew 23% to a record $111.5 million.

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Our first quarter consolidated net sales were strong, growing 22.6% year-over-year to $347.6 million on significantly higher sales volumes. Our gross margin expanded to 46.7% from 45.7% in the prior year quarter, primarily due to lower labor, factory, warehouse and shipping costs, which were partially offset by higher material costs. Our solid gross margin, combined with our diligent expense management and reduced costs due to COVID-19, drove a significant year-over-year increase of 38.6% in our income from operations to $68.4 million and an increase of 39.8% in our earnings per diluted share to $1.16. The increase in sales volume we experienced in the first quarter was primarily a result of the continued momentum in the home center distribution channel, where sales increased over 60% compared to the prior year period. As we generally experience a multiple month lag in demand from the time of the start, in the first quarter, we benefited from strong fourth quarter 2020 housing starts, which grew over 10% year-over-year. As previously announced in early February, we implemented price increases ranging from 5% to 12% depending on the product mix for certain of our wood connectors, fasteners and concrete products in the U.S. in an effort to offset rising material costs. More recently, we announced the second price increase ranging from 6% to 12% primarily for our wood connector products in the U.S. in an effort to further offset rising material costs. If we can accomplish this, we have no doubt we will be able to accomplish ambition Number 4, which is to continue our above-market growth relative to U.S. housing starts. As Karen highlighted, our consolidated net sales were strong, increasing 22.6% to $347.6 million. Within the North America segment, our net sales increased 20.7% to $300.6 million, primarily due to higher sales volumes in our home center distribution channel, which includes our home center and co-op customers. In Europe, net sales increased 35.3% to $44.3 million, primarily due to higher sales volumes in local currency. Europe's sales also benefited by approximately $3.6 million of positive foreign currency translations resulting from some Europe currencies strengthening against the United States dollar. Wood construction products represented 87% of total sales, compared to 86% and concrete construction products represented 13% of total sales compared to 14%. Consolidated gross profit increased by 25.2% to $162.3 million, which resulted in a stronger Q1 gross margin of 46.7% compared to last year. Gross margin increased by 100 basis points, primarily due to lower labor, factory, warehouse and shipping costs, which were partially offset by higher material costs. On a segment basis, our gross margin in North America increased to 48.5% compared to 47.7%, while in Europe, our gross margin increased to 34.4% compared to 32.7%. From a product perspective, our first quarter gross profit margin on wood products was 46.6% compared to 45.4% in the prior year quarter and was 42.5% for concrete products, the same as the prior year quarter. Research and development and engineering expenses increased 9% to $14.6 million, primarily due to increases in personnel costs, professional fees and patent costs. Selling expenses increased 8% to $30.8 million due to increases in stock-based compensation, personnel costs and professional fees, offset by a decrease in travel-related costs. On a segment basis, selling expenses in North America were up 9.1% and in Europe, they were up 2.8%. General and administrative expenses increased 26.2% to $48.6 million, primarily due to increases in stock-based compensation, personnel costs and professional fees and amortization and depreciation expense, offset by a decrease in travel-related costs. Total operating expenses were $94.0 million, an increase of $13.6 million or approximately 16.9%. As a percentage of net sales, total operating expenses were 27%, an improvement of 130 basis points compared to 28.3%. Our solid topline performance combined with our stronger Q1 gross margin and diligent expense management helped drive a 38.6% increase in consolidated income from operations to $68.4 million compared to $49.4 million. In North America, income from operations increased 29.5% to $69.4 million, primarily due to increased gross profit, partly offset by higher operating expenses. In Europe, income from operations increased 35.3% to $2.3 million, primarily due to increased gross profit. On a consolidated basis, our operating income margin of 19.7% increased by approximately 230 basis points. Our effective tax rate increased to 24.3% from 21.3% due to a lower windfall tax credit on the vesting of restricted stock units. Accordingly, net income totaled $50.4 million, or $1.16 per fully diluted share compared to $36.8 million or $0.83 per fully diluted share. At March 31, cash and cash equivalents totaled $257.4 million, a decrease of $44.3 million compared to March 31, 2020. As of March 31, 2021, the full $300 million on our primary line of credit was available for borrowing and we remain debt-free with a small portion of capital leases, mostly unchanged from year-end. Our inventory position of $296.8 million at March 31 increased by $13 million from our balance at December 31, as we continue to see higher levels of construction activity and raw material prices along with the unprecedented demand we've experienced throughout the pandemic. As a result of our improved profitability and effective working capital management, we generated strong cash flow from operations of $18.5 million for the first quarter of 2021, an increase of $5.8 million or 45.5%. We used approximately $10.5 million for capital expenditures during the quarter. In regard to stockholder returns, we paid $10 million in dividends during the first quarter. As of March 31, 2021, we had the full amount of our $100 million share repurchase authorization available, which will remain in effect through the end of 2021. We're updating our operating margin outlook to now be in the range of 19.5% to 22%, compared to our original estimate of 16.5% to 18.5%. In addition, we expect our effective tax rate to be in the range of 25% to 26%, including both federal and state income tax rates. And finally, we are reiterating our capital expenditure outlook to be in the range of $50 million to $55 million, including approximately $10 million to $15 million, which will be used for safety and maintenance capex.

Our first quarter consolidated net sales were strong, growing 22.6% year-over-year to $347.6 million on significantly higher sales volumes. Our solid gross margin, combined with our diligent expense management and reduced costs due to COVID-19, drove a significant year-over-year increase of 38.6% in our income from operations to $68.4 million and an increase of 39.8% in our earnings per diluted share to $1.16. As Karen highlighted, our consolidated net sales were strong, increasing 22.6% to $347.6 million. Accordingly, net income totaled $50.4 million, or $1.16 per fully diluted share compared to $36.8 million or $0.83 per fully diluted share. We're updating our operating margin outlook to now be in the range of 19.5% to 22%, compared to our original estimate of 16.5% to 18.5%.

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Turning to Slide number 4, we have an outline for today's call, I will start reviewing some highlights and recapping the investment thesis for our shareholders at Southwest Gas Holdings'. Moving to Slide number 5, we present a variety of highlights for our combined businesses. We're very excited about this planned acquisition which is forecasted to be accretive to earnings in 2022. Also separately today we filed a 14D-9 response to a tender offer for Southwest Gas Holdings shares presented last month by Carl Icahn. The tender offer seek to secure shares of Southwest Gas Holdings at a price of $75 a share which and consultation with our outside investment bankers and attorneys, our Board has concluded is an adequate. Next at our natural gas distribution company, we continue to see strong growth across our service territory having added 37,000 net new customers over the past year. On the regulatory front, we saw a very promising decision from the Arizona Corporation Commission just this past week authorizing the recovery of $74 million in margin related to our customer owned yard line and vintage steel pipe replacement programs. Also, third quarter operating margin increased by $18 million or 10% and we continued executing on our sustainability goals as seen with our partnership with Pima County in Arizona supporting the harvesting of renewable natural gas at the now operational Tres Rios RNG processing facility and walking the talk on the energy transition with our announced investment as a founding partner in the Energy Capital Ventures Fund. Relatedly, we are excited to see Riggs Distler being selected as general contractor for the 880 megawatt Sunrise Wind offshore wind farm. Overall, we saw Centuri's third quarter revenues increased by $52 million or 9% and we're also eager to explore the opportunities that Centuri may have to capitalize on as part of the federal government's infrastructure spending plans. With the simultaneously announced planned retirements of Mr. Melarkey and Mr. Comer at our May Annual Meeting, year-on-year we anticipate the average tenure of Southwest Gas Holdings Directors will decrease from 10.3 years to 8. A comprehensive Questar Pipeline's asset brings high quality contracted customers with an average relationship length of 49 years. 2020 EBITDA is five times that experience just 10 years ago while this business could have been sold two, four or six years ago it's continued growth under the stewardship of the Holding Board has allowed continued polish of this gem of a business, while EBITDA valuation multiples for the infrastructure services sector have expanded dramatically over those same periods. For the 12 months ended September 30, 2021 net income was $234 million or $4.02 per diluted share compared to net income in the prior-year period of $220 million or $3.97 per diluted share. For the third quarter of 2021, we reported a consolidated net loss of $0.19 per share compared to third quarter earnings per share of $0.32 in 2020. As I previously mentioned current quarter results reflect the impact of a $5 million legal reserve. Operating margin increased nearly $18 million including $13 million associated with rate relief in all three states, as well as $2 million from customer growth, reflecting 37,000 first-time meter sets over the past 12 months. The increase in O&M expenses includes $2.2 million of incremental temporary staffing, training and stabilization cost associated with our new customer information system which we implemented in May 2021. The timing of vacation, other time off and miscellaneous employee benefits were up $2.5 million between quarters. Excluding the $5 million legal reserve, O&M for the third quarter of 2021 only increased 5.2% cumulatively or 2% -- 2.6% annually since the third quarter of 2019, which was pre-COVID. The $9.7 million increase in depreciation, amortization and general taxes reflects the impact of the $574 million or 7% increase in average gas plant in service including the new customer information system. I should note this customer information system is a 100 plus million dollar project with a 15 year depreciable life. The $6 million decline in other income reflects no change in the cash surrender value of company-owned life insurance or COLI policies this quarter compared to net income of $4.5 million in last year's quarter. Centuri our utility infrastructure services segment results for the third quarter were impacted by one-time transaction cost associated with the Riggs Distler acquisition of $13 million. Revenues increased $52.5 million or 9% between quarters including $49.5 million from Riggs Distler following the August 27 acquisition. The $5.8 million increase in depreciation and amortization is primarily attributable to costs added with the Riggs Distler acquisition as other equipment placed and service to support the higher volume of Centuri's businesses. The $4.3 million increase in interest expense reflects the higher level of borrowings under Centuri's expanded credit facility utilized to acquire Riggs Distler. This slide depicts the components of the $26.1 million increase in natural gas operations, net income between 12-month periods. The $72 million or 7% improvement at operating margin reflects $52 million combined rate relief in Arizona, Nevada, and California. Continuing customer growth provided $13 million of the improvement in overall operating margin. The increase in O&M reflects $7.3 million of service related pension costs and $1.1 million of higher bad debt allowances. The $31.9 million increase in depreciation, amortization and general taxes reflects the impacts of $579 million or 7% increase in average gas plant and service and the incremental Arizona property taxes that are ultimately recovered under our regulatory tracking mechanism. Slide 15 shows the components of the $9.9 million decrease in Centuri's net income between 12-month periods. As shown, $14 million of one-time transaction costs associated with the acquisition of Riggs Distler caused the decline in earnings. Revenues increased nearly $188 million or 10% between periods, reflecting $129.5 million of incremental electric infrastructure revenues from both Linetec, which we acquired in November 2018 and Riggs Distler, which we acquired in August 2021. Depreciation and amortization increased $10.7 million primarily attributable to incremental costs related to electric infrastructure including $4.7 million from Riggs Distler following the acquisition. As John mentioned earlier, we anticipate $600 million of revenue growth from Riggs Distler through 2024. On the right side of the slide, are the key terms of Centuri's amended and restated credit facility at $1.145 billion Term Loan B that we utilize to finance the acquisition. Slide 18 highlights our most recent rate case outcomes that will contribute to an increase in revenues of approximately $66 million during the course of calendar year 2021. As part of our most recent rate case decisions Arizona saw a 46% increase in rate base, Nevada at 20% increase, which was also on the heels of an over 30% increase in 2018 and a 73% increase in California. The request includes the proposed increase in revenues of $30.5 million resulting from an increase in rate base of nearly $250 million and almost 20% increase. And we are requesting recovery of over $6 million of revenue related to the deferral of late payment charges, we're requesting to recover this amount over a period of two years. We anticipate the test year ended August 2021, and we plan to request for approval of an adjustment for up to 12 months post test year plan. Based on our proposals, we anticipate a proposed increase to rate base of about 35% to 40%. Last week, the ACC approved 100% of the requested revenue requirement associated with our COYL and VSP filings that John mentioned. The $14 million associated with the COYL program will be recovered over a period of one year starting this month. And the $60 million related to the VSP program will be recovered over three years, beginning March of 2022. In a survey of customers conducted through a third-party research firm, our customer satisfaction scores were an impressive 95% on a 12-month rolling average. These survey results are a testament to the excellent quality of service we provide our customers and a primary reason why 91% of customers surveyed in Arizona, California and Nevada indicated that they want natural gas in their homes. In fact, we added 37,000 first-time meter sets over the past 12 months as people continue to move to the Desert Southwest. We have a $400 million revolving credit facility and a $250 million term loan. As of the end of September, we have nearly $523 million availability of combined borrowing capacity and cash. To serve new customer growth and ensure the safe and reliable natural gas service our customers expect, we anticipate capital spending of approximately $2.1 billion over the 3-year period. We plan to fund the $2.5 billion combined capital investment and stockholder dividends with 50% from operation cash flows. We expect to grow rate base from approximately $4.5 billion at the end of 2020 to $6.5 billion at the end of 2025, which translates into a 7.5% compound annual growth rate. You can see that we have a stockholder dividend of $2.38 per share. The dividend has increased each year for the past 15 years, and we have a compound annual growth rate for the past five years of 5.8%. We target a payout ratio of between 55% and 65%. As we approach the final quarter of 2021, we have refined our previous guidance to a range of $4 to $4.10. At the natural gas operations, we expect operating margin to increase 6% to 8%, pension costs to be relatively flat, operating income to increase 4% to 6%, up from a previous range of 3% to 5%; COLI earnings to be $5 million to $7 million and capital expenditures to be $650 million to $675 million. At the Centuri Infrastructure business, revenues, excluding Riggs Distler for 2021, are expected to be 1% to 3% greater than the record 2020 amount. And operating income, excluding Riggs Distler, is expected to be 5% to 5.4% of revenues. Meanwhile, Riggs Distler is expected to generate revenues of $150 million to $170 million with an operating loss of $11 million to $13 million from the date of acquisition. Total interest expenses increased to a range of $19.5 million to $20.5 million due to the term loan and credit facility in connection with the Riggs Distler acquisition. Finally, we anticipate transaction-related expenses at the corporate and administrative level due to the Questar Pipelines acquisition and activism response of approximately $25 million to $30 million. At the Southwest Gas Holdings level, we are announcing an earnings per share growth range for 2022 and 2023 of 5% to 8% based on adjusted 2021 earnings per share guidance. We also expect equity issuances of $600 million to $800 million over the three years ending in 2023 and as I previously mentioned, a target dividend payout ratio of 55% to 65%. At the regulated natural gas utility, we expect capital expenditures to be approximately $3.5 billion over the five years ending in 2025 and a 7.5% compound annual growth rate for rate base for that same period. At the infrastructure services business, we expect revenues to increase 27% to 33% in 2022 with a full year of Riggs Distler operations. And 2023 revenues are expected to increase 7% to 10% over 2022. Operating income is expected to be 5.25% to 6.25% of revenues during 2022 and 2023. And EBITDA is expected to be 11% to 12% of revenues during that same period. Wrapping up on Page 31, we believe that Southwest Gas Holdings offers a compelling value proposition for our investors.

We're very excited about this planned acquisition which is forecasted to be accretive to earnings in 2022. For the third quarter of 2021, we reported a consolidated net loss of $0.19 per share compared to third quarter earnings per share of $0.32 in 2020. As I previously mentioned current quarter results reflect the impact of a $5 million legal reserve. Revenues increased $52.5 million or 9% between quarters including $49.5 million from Riggs Distler following the August 27 acquisition. As we approach the final quarter of 2021, we have refined our previous guidance to a range of $4 to $4.10.

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In the second quarter, we generated revenue of approximately $3 billion, the highest quarterly sales of any period in our company's history. Our adjusted earnings per share of $4.45 was the highest on record for any quarter. We've delivered almost $95 million of the anticipated $100 million to $110 million in savings for our restructuring initiatives. To alleviate manufacturing constraints, we have approved new capital investments of approximately $650 million to increase our production, with most taking 12 to 18 months to fully implement. In the second quarter, we purchased $142 million of our stock at an average price of $2.08 (sic) $208 for a total amount of approximately $830 million since we initiated the program. For the quarter, our sales were $2.954 million, an increase of 44% as reported and 38% on a constant basis. Gross margin for the quarter was 30.5% as reported or 30.7%, excluding charges, increasing from 21.4% in the prior year. SG&A, as reported, was 16.9% of sales or 16.8% versus 19.7% in the prior year, both excluding charges as a result of strong leverage by the business on the sharp increase in volume. Operating margin as reported was 13.7%, with restructuring charges of approximately $7 million. Our restructuring savings are on track as we have recorded approximately $95 million of the planned $100 million and $110 million of savings. Operating margin excluding charges, 13.9%, improving from 1.7% in the prior year. Interest for the quarter was $15 million. Other income, other expense was $11 million income, primarily a result of a settlement of foreign non-income tax contingency and other miscellaneous items. Income tax rate, as reported, was 16% and 22.5% on a non-GAAP basis versus a credit of 2.5% in the prior year. We expect the full year rate to be between 21.5% and 22.5%. That leads us to a net earnings as reported of $336 million or an earnings per share of $4.82. Earnings per share excluding charges was $4.45 percent -- or $4.45, excuse me. The Global Ceramic segment had sales of just over $1 billion, an increase of 38% as reported or 34% on a constant basis, with strong geographic growth across our business led by Mexico, Brazil and Europe. Operating margin, excluding charges was 13.2%, a significant increase from the low point of 2020 at 0.5%. Flooring North America had sales of just under $1.1 billion for a 35% increase, driven by a strong residential demand with commercial channel continuing its growth versus prior year, but still below historic levels. Operating income, excluding charges, was 11.2% and similar to Global Ceramic, a significant increase from the 2020 margin trough. Lastly, Flooring Rest of the World with sales of just over $830 million, a 68% improvement as reported or 50% on a constant basis, as continued strength in residential remodeling and new home construction drove improvement across all product groups, led by resilient, panels, laminate and our soft surface business in Australia and New Zealand. Operating margin, excluding charges of 19.7%, and similar to our other segments, was a significant increase from prior year's low point of 11.9%. Corporate and eliminations came in at $12 million and expect full year 2021 to be approximately $45 million. Cash and short-term investments are approximately $1.4 billion with free cash flow of $226 million in the quarter. Receivables of just over $2 billion, an improvement in DSO to 53 days versus 64 days in the prior year. Inventories for the quarter were just shy of $2.1 billion, an increase of approximately $160 million or 8% from the prior year or increasing $85 million or 4% compared to Q1 2021. Inventory days remain historically low at 99 days versus 126 in the prior year. Property, plant and equipment were just shy of $4.5 billion and capex for the quarter was $113 million with D&A of $148 million. Full year capex has been increased to approximately $700 million to strengthen future growth with full year D&A projected to be approximately $580 million. Overall, the balance sheet and cash flow remained very strong, with gross debt of $2.7 billion, total cash and short-term investments of approximately $1.4 billion and a leverage at 0.7 times to adjusted EBITDA. For the period, our Flooring Rest of the World segment, sales increased 68% as reported and 50% on a constant basis. Operating margins expanded to 19.7% due to higher volume, pricing and mix improvements and a reduction of COVID restrictions, partially offset by inflation. For the period, our Flooring North America segment sales increased 35%, and adjusted margins expanded to 11.2% due to higher volume, productivity, pricing and mix improvements and fewer COVID interruptions, partially offset by inflation. For the period, our Global Ceramic segment sales increased 38% as reported and 34% on a constant basis. Adjusted margins expanded to 13.2% due to higher volume, productivity, pricing and mix, improvements and fewer COVID disruptions, partially offset by inflation. We are expanding operations in Mexico this quarter, and we have initiated new investments to increase capacity in Brazil. Around the world, flooring sales trends remain favorable, with residential remodeling and new construction at high levels and commercial projects strengthening. Material, energy and transportation inflation is expected to continue and will require further pricing actions to offset. Most of our facilities will operate at high utilization rates, though ongoing material and local labor constraints will limit our production. Given these factors, we anticipate our third quarter adjusted earnings per share to be between $3.71 and $3.81, excluding any restructuring charges. Longer term, housing sales and remodeling are expected to remain at historical high levels. Apartment renovation should accelerate as rent deferment expires, and investments in commercial projects should continue to strengthen.

Our adjusted earnings per share of $4.45 was the highest on record for any quarter. To alleviate manufacturing constraints, we have approved new capital investments of approximately $650 million to increase our production, with most taking 12 to 18 months to fully implement. That leads us to a net earnings as reported of $336 million or an earnings per share of $4.82. Earnings per share excluding charges was $4.45 percent -- or $4.45, excuse me. We are expanding operations in Mexico this quarter, and we have initiated new investments to increase capacity in Brazil. Around the world, flooring sales trends remain favorable, with residential remodeling and new construction at high levels and commercial projects strengthening. Material, energy and transportation inflation is expected to continue and will require further pricing actions to offset. Most of our facilities will operate at high utilization rates, though ongoing material and local labor constraints will limit our production. Given these factors, we anticipate our third quarter adjusted earnings per share to be between $3.71 and $3.81, excluding any restructuring charges. Longer term, housing sales and remodeling are expected to remain at historical high levels. Apartment renovation should accelerate as rent deferment expires, and investments in commercial projects should continue to strengthen.

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Sales, excluding PPE, increased 11.5% over prior year driven by continued point-of-sale strength and broad-based inventory restocking by retailers. We're pleased with the global improvement in Champion as sales increased nearly 130% from the second quarter. Compared to last year, sales declined 9% due primarily to our sports apparel business where COVID-related headwinds have essentially shut down sporting events and college bookstores. Excluding this, sales would have been down 2%. Third, we delivered another strong cash flow quarter, generating nearly $250 million of operating cash flow. While we now expect to end the year with higher-than-anticipated PPE inventory, we continue to expect to generate positive operating cash flow in the second half and for the full year. And the fourth takeaway for the quarter, we further strengthened our liquidity, ending the quarter with $2 billion of liquidity, which we believe provides us with plenty of operating flexibility in this uncertain environment. As expected, margins declined over prior year but less than we were anticipating, and we generated $249 million of operating cash flow, further strengthening our liquidity position. Third quarter sales increased 3% over prior year to $1.81 billion, with foreign exchange rates accounting for 80 basis points of the quarter's growth. Excluding $179 million of PPE sales, apparel revenue declined 7% compared to prior year. This represents a significant improvement from last quarter's 40% decline as each segment experienced a sequential improvement in year-over-year revenue trends. Adjusted gross margin of 36.7% decreased approximately 275 basis points over last year due to increased inventory reserves as well as negative manufacturing variances, which were incurred earlier in the year, rolling off the balance sheet and onto the P&L. Adjusted operating margin declined approximately 170 basis points over prior year to 12.6% as the gross margin pressure and higher operating costs from COVID were partially offset by ongoing SG&A controls as well as benefits from our temporary cost savings initiatives. Restructuring and other related charges were $53 million in the quarter. Approximately $49 million are nonrecurring costs from restarting portions of our manufacturing network that closed for approximately 10 weeks beginning in March due to the COVID pandemic. The remaining $4 million of these costs relates to our previously disclosed supply chain restructuring actions and program exit costs. Our tax rate for the quarter was 17.3%, which was in line with our expectations. And adjusted and GAAP earnings per share decreased 11% and 43% over prior year to $0.42 and $0.29, respectively. For the quarter, U.S. Innerwear sales increased 41% over prior year driven by a 15% increase in basics, a 7% increase in intimates and the inclusion of $166 million of PPE revenue. Excluding PPE, U.S. Innerwear sales increased 11.5% over prior year due to the continued positive point-of-sale trends and inventory restocking by retailers. In our basics business, we experienced growth in each product category, which drove approximately 170 basis points of market share gains in the quarter. For the quarter, Innerwear's operating margin expanded approximately 80 basis points over prior year to 21.7% driven by fixed cost leverage from higher unit volumes as well as favorable product mix. Revenue declined 27% compared to last year, which is an improvement from the second quarter's 52% decline. Activewear's operating margin was 9.1% for the third quarter. Touching briefly on Champion, sales of the Champion brand within our Activewear segment increased approximately 85% from the second quarter. Compared to last year, sales declined 27%, with the vast majority of the decline due to the COVID-challenged sports apparel business. Revenue declined 5% compared to last year on a reported basis and 7% on a constant currency basis. Adjusting for PPE sales, core International revenue declined 7% as compared to prior year, which is a significant improvement from a 44% decline in the second quarter. For the quarter, International Champion sales increased 5% over prior year. International segment's operating margin declined approximately 100 basis points over prior year to 15.2% driven by deleverage from lower sales volumes, which was partially offset by continued tight SG&A cost management. We generated $249 million of operating cash flows in the quarter. Looking at our balance sheet, inventory increased 4% over prior year which was in line with sales growth and includes approximately $400 million of PPE inventory. Excluding PPE, inventory declined 15% compared to prior year. Leverage at the end of the quarter was 3.3 times on a net debt to adjusted EBITDA basis, which was comparable to last year. We further strengthened our liquidity position in the quarter even while reducing debt by approximately $130 million and paying our regular quarterly dividend. We ended the quarter with $2 billion of liquidity above the $1.8 billion at the end of the second quarter. For the fourth quarter, we expect total sales of $1.60 billion to $1.66 billion, which, at the midpoint, implies a 2% decline over prior year. Included in our sales outlook is approximately $50 million of PPE sales, approximately $10 million of foreign exchange benefit and contributions from a 53rd week. We expect adjusted operating profit of $160 million to $180 million, which, at the midpoint, implies an operating margin of 10.4%. We expect interest and other expense of approximately $50 million and a tax rate of approximately 17.5%. Our guidance for adjusted and GAAP earnings per share range from $0.25 to $0.30 and $0.24 to $0.29, respectively. And our guidance for full year 2020 operating cash flow is $300 million to $400 million, which includes the impact from the higher-than-anticipated PPE inventory. Based on our year-to-date cash flow, this implies fourth quarter operating cash flow of approximately $70 million to $170 million.

While we now expect to end the year with higher-than-anticipated PPE inventory, we continue to expect to generate positive operating cash flow in the second half and for the full year. Third quarter sales increased 3% over prior year to $1.81 billion, with foreign exchange rates accounting for 80 basis points of the quarter's growth. And adjusted and GAAP earnings per share decreased 11% and 43% over prior year to $0.42 and $0.29, respectively. For the fourth quarter, we expect total sales of $1.60 billion to $1.66 billion, which, at the midpoint, implies a 2% decline over prior year. Our guidance for adjusted and GAAP earnings per share range from $0.25 to $0.30 and $0.24 to $0.29, respectively. And our guidance for full year 2020 operating cash flow is $300 million to $400 million, which includes the impact from the higher-than-anticipated PPE inventory.

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Year-to-date, we have increased our free cash flow by 26% as compared to last year. Sentinel, a $6 million sales business, provides leak detection solutions mostly to the high-end residential market. Sales of $455 million were up 18% on a reported basis and up 17% organically, driven primarily by the global economic recovery. Foreign exchange and acquisitions combined had a favorable year-over-year impact of $5 million. Adjusted operating profit of $66 million increased 24% and adjusted operating margin of 14.4% increased 60 basis points as volume, price and productivity more than offset the impact of supply chain challenges, logistics inflation, incremental investments, incentives and business normalization costs. Adjusted earnings per share increased by 32% for the reasons just cited in addition to lower interest expense and reduced foreign currency transaction losses. The adjusted effective tax rate of 26.9% is 40 basis points lower year-over-year. For GAAP purposes, we recorded a charge of $0.9 million related to the previously announced restructuring of our Mery facility in France. We expect approximately $1 million more will be incurred in the fourth quarter. We anticipate another $5 million to $6 million in restructuring costs in 2022 with respect to this plant closure upon completion. As Bob noted, year-to-date free cash flow is up 26% to $120 million as compared to the same period last year. We expect to maintain free cash flow conversion at 100% or more of net income for the full year. The gross and net leverage ratios at the end of September were 0.6 times and negative 0.3 times, respectively. Our net debt to capitalization ratio at quarter end was negative 8%. During the quarter, we purchased approximately 25,000 shares of our common stock at an investment of $4 million primarily to offset dilution. In addition, the Americas had approximately $1 million in acquired sales. Americas' organic sales increased 17% during the quarter, with broad growth across all of our major product categories driven by strong repair and replacement and single-family residential markets and price. Americas' adjusted operating margin declined by 30 basis points during the quarter as gross margin expansion from price, volume and productivity was more than offset by inflation, incremental investments, incentives and business normalization costs. Europe sales increased over 14% organically, delivering another solid quarter with expansion in both the Fluid Solutions and Drains platforms. Europe's adjusted operating margin expanded by 420 basis points, benefiting from volume, price and productivity, which more than offset inflation, incremental investments and business normalization costs. APMEA continued its strong performance with sales up 33% organically. Adjusted operating margin expanded by 400 basis points in APMEA in the quarter as trade and intercompany volume and productivity more than offset inflation and business normalization costs. Our expectation for the fourth quarter is sales should expand by 10% to 14% over the fourth quarter of 2020. We anticipate that fourth quarter adjusted operating margin should range from 13.4% to 13.8%. Corporate costs should approximate $11 million to $12 million for the fourth quarter. The adjusted effective tax rate should approximate 26%. As a reference, the average euro-dollar foreign exchange rate for the fourth quarter of 2020 was 1.19. Please recall that for every $0.01 movement up or down in the euro-dollar exchange rate, our European annual sales are impacted by approximately $4 million, and our annual earnings per share is impacted by $0.01. For the full year 2021, we anticipate organic growth to be 14% to 17% or about 350 basis points higher at the midpoint than our previous outlook in August. We have raised our full year 2021 revenue outlook.

Sales of $455 million were up 18% on a reported basis and up 17% organically, driven primarily by the global economic recovery. We have raised our full year 2021 revenue outlook.

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The aviation market continues to recover, with North American commercial passenger activity now back to 80% of pre-pandemic levels, while international activity still has a longer way to a full recovery. At most of our 80 operated locations outside of the U.S., activity was substantially ahead of where we were a year ago. Adjusted second quarter net income and earnings per share were $25 million and $0.39 per share, respectively. Adjusted EBITDA for the second quarter was $60 million. Volume improved significantly, as markets continue to recover, with second quarter consolidated volume up 9% sequentially and 33% year-over-year. And lastly, generating $37 million of cash flow from operations during the second quarter and $500 million over the past 12 months, increasing our net cash position to more than $200 million, further strengthening our balance sheet. Consolidated revenue for the second quarter was $7.1 billion, an increase of $1.1 billion or 19% sequentially and an increase of $3.9 billion or 126%, compared to the second quarter of last year. The year-over-year increase is driven by the significant increase in volume across all of our operating segments, as well as our 130% increase in average fuel prices compared to the second quarter of 2020. Our aviation segment volume was 1.8 billion [Phonetic] gallons in the second quarter, an increase of 230 million gallons or 20% sequentially, and double the volume generated in the second quarter of last year. Although we've continued to experience increased activity with overall segment volume at more than 60% of pre-pandemic levels, at this time, we remain optimistic about the second half of the year and beyond. Volume in our marine segment for the second quarter was 4.6 million metric tons, an increase of 360,000 metric tons or 8% sequentially and an increase of nearly 600,000 metric tons or 15% year-over-year. Our land segment volume was 1.3 billion gallons or gallon equivalents during the second quarter, flat sequentially, but an increase of 120 million gallons or gallon equivalents of 10% year-over-year. Consolidated volume for the second quarter was 3.9 billion gallons, an increase of 310 million gallons or 9% sequentially, and an increase of 960 million gallons or 43% compared to the second quarter of 2020. Consolidated gross profit for the second quarter was $185 million, that's down 4% sequentially and 6% year-over-year. Our aviation segment contributed $88 million of gross profit in the second quarter, an increase of 15% [Phonetic] sequentially or a decline of 3% year-over-year. The land segment generated second quarter gross profit of $23 million, that's a decline of 11% sequentially and 39% year-over-year. Our land segment delivered gross profit of $74 million in the second quarter, a decline of 18% sequentially, but an increase of 8% year-over-year when excluding the profitability related to the multi-service business from last year's results. Core operating expenses, which exclude bad debt expense, were $147 million in the second quarter, which was in line with our guidance for the quarter, as we continue to manage our controllable costs well. Looking ahead to the third quarter, operating expenses, excluding bad debt expense, should remain in the range of $146 million to $150 million. As previously discussed, our team has continued to do an excellent job, managing our receivables portfolio throughout the pandemic, with more than 90% of our portfolio now current. Our team's efforts have been paying off, with no leasing losses of any significance, compounded by successfully collecting certain high-risk receivables, which had been previously reserved for, this resulted in a credit to bad debt expense this quarter of approximately $1 million. Adjusted income from operations for the second quarter was $39 million, that's down 7% sequentially, but up 17% year-over-year, related to the segment activity that I mentioned earlier. Adjusted EBITDA for the second quarter was $60 million, down 3% sequentially, but up 11% compared to last year. Second quarter interest expense was $10 million, that's flat year-over-year, as total interest expense continues to benefit from low average borrowings, as well as low rates, and we get into the quarter with no borrowings on our revolving credit facility, and in a net cash position, again, in excess of $200 million. We expect interest expense for the third quarter to be approximately $9 million to $11 million. Our adjusted effective tax rate for the quarter was 10.3%, which is significantly lower than our tax rate in the second quarter of 2020, and the rate we had previously forecast for this year's second quarter. In a nutshell, our second quarter tax rate was much lower than forecast for the reasons just explained, but the forecast of changes in income mix will also contribute to a lower tax rate, compared to where we started the year, with our tax rate for the second half of the year now expected to be in the range of 29% to 33%. Our total accounts receivable balance increased to approximately $1.8 billion at quarter end, principally related to the increase in volume in our aviation and marine segments, as well as the sequential rise in average fuel prices. We remain focused on managing our working capital requirements, which resulted in operating cash flow generation of $37 million during the second quarter, again, despite a 14% sequential increase in prices and a 9% increase in volume. And despite rising prices and increasing volumes, we again generated healthy operating cash flow, which now aggregates to nearly $750 million over the past six quarters.

Adjusted second quarter net income and earnings per share were $25 million and $0.39 per share, respectively. Adjusted EBITDA for the second quarter was $60 million, down 3% sequentially, but up 11% compared to last year.

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Firstly, we're sustaining our commercial momentum with another strong quarter delivering flat sales growth of 6%, showing solid business performance with minimal COVID tailwinds. In the third quarter, our revenue grew 11% as reported and on a constant currency basis, reflecting continued strength in our pharma and industrial end markets, with balanced demand for our instruments and recurring revenue products. This translates to a 6% stack CAGR for the quarter versus 2019 on a constant currency basis. Year-to-date, revenue has increased 21% with a constant currency tax CAGR versus 2019 also above 6%. Our top line growth resulted in Q3 non-GAAP adjusted earnings per share of $2.66, growing 23% year-over-year. Year-to-date, non-GAAP adjusted earnings per share have grown 39% to $7.54. The Water division grew 9% while DA grew by 27%. By end market, our largest market category, pharma, grew 16%, industrial grew 9%, while academic and government declined by 11%. Turning to academic and government which is about 10% of our business, continued strength in Europe was offset by softer performance in China and other regions. Moving now to our sales performance by geography, on a constant currency basis, sales in the Americas grew 16%, with the U.S. growing 13%. Sales in Europe grew 8%. Sales in Asia grew 8%, with India over 40% and China sales were down 3%. A shipment of approximately $12 million got delayed at an airport in the last few days of the quarter due to a third-party shipping issue and has been delivered in the first few days of the fourth quarter. Overall, instrument sales grew 10% for the quarter, driven by robust demand, our improved commercial execution, new product contribution and instrument replacement. Now for our recurring revenues, chemistry sales grew 13%, driven by an increase in utilization of our pharma customers, as well as strength in our industrial end markets. On a two year stack basis, service grew 7% in constant currency for the quarter and 6% year-to-date. Finally, TA had a great quarter, with sales up almost 30% as demand has rebounded with strong growth across all regions. TA instrument sales have grown at 8% on a two year stack basis so far this year driven by strong demand for our thermal instruments used in the analysis of advanced materials, as well as microcalorimetry instrument demand for our pharma and academic customers. In 2021, we expect our instrument replacement initiative to deliver over $30 million in revenue. In 2022, we expect this to become over $40 million which means an incremental $10 million over 2021. Our focus on commercial execution is positively impacting our service business with planned coverage rates having increased by 2% so far this year compared to the first three quarters of 2019. In 2022, we think a further 100 basis points of expansion in service plan adoption is attainable. Growth in e-commerce adoption also remains strong with chemistry sales through our e-commerce channels approaching roughly 30% versus the 21% we saw in 2019. We expect this to continue reaching over 35% by the end of next year. So far, this year, revenue from contract organizations has grown over 40% versus the comparable period in 2019. Both Arc HPLC and Premier continue to be strong drivers with over $45 million revenue expected from these sources of this year in and separate to the replacement initiative. In 2022, we are expecting this number to be over $60 million. So in all, these initiatives alone should give us approximately 1% over our base business growth for 2022 which reaffirm our belief in market plus growth rates. Resulting configuration will allow direct analysis of bulk substance not just cell culture media, while targeting over 250 cell culture media analytics. As Udit outlined, we recorded net sales of $659 million [Phonetic] in the third quarter, an increase of 11% in constant currency. Reported sales growth was also 11%. Looking at product line growth, our recurring revenue which represents the combination of chemistry and service revenue increased by 11% for the quarter, while instrument sales increased 10%. Chemistry revenues were up 13% and service revenues were up 10%. Gross margin for the quarter was 58.9%, as compared to 55.8% in the third quarter of 2020. The foreign exchange benefit in the quarter was about 1%. Moving down the P&L, operating expenses increased by approximately 17% on a constant currency basis and on a reported basis. In the quarter, our effective operating tax rate was 11.7%, a decrease from last year due to some favorable quarter specific discrete items. Our average share count came in at 61.9 million shares or about 400,000 less than the third quarter of last year as a result of our share repurchase program. Our non-GAAP earnings per fully diluted share for the third quarter increased 23% to $2.66 in comparison to $2.16 last year. On a GAAP basis, our earnings per fully diluted share increased to $2.60 compared to $2.03 last year. In the third quarter of 2021, free cash flow was $140 million after funding $40 million of capital expenditures. Excluded from the free cash flow was $12 million relating to investment in our Taunton precision chemistry. Year-to-date free cash flow has increased to $488 million and at approximately $0.25 of each dollar of sales converted into free cash flow. In the third quarter, accounts receivable DSO came in at 71 days, down five days compared to the third quarter of last year and down two days compared to the last quarter. Inventory DIO decreased by 13 days compared to the third quarter of last year. Given the higher sales volume and our proactive measures to secure supply, inventory increased by 62 million in comparison to the prior year. In terms of returning capital to shareholders, we repurchased approximately 369,000 shares of our common stock for $151 million in Q3. At the end of the quarter, our net debt position was $958 million, with net debt-to-EBITDA ratio about one. This dynamic supports raising full year 2021 guidance to 15% to 16% constant currency sales growth. At current exchange rates, the positive currency translation is expected to add approximately one percentage point, resulting in full year reported sales growth guidance of 16% to 17%. Gross margin for the full year is expected to be approximately 58% to 59% and operating margin is expected to be approximately 29% to 30%. We expect our full year net interest expense to be $34 million and full year tax rate to be 14% to 15%. Average diluted 2021 share count is expected to be approximately $62 million. Rolling all this together on a non-GAAP basis, full year 2021 earnings per fully diluted share are now projected in the range of $10.94 to $11.04. Looking at the fourth quarter of 2021, we expect constant currency sales growth to be 5% to 7%. At today's rates, currency translation is expected to subtract approximately two percentage points resulting in fourth quarter reported sales growth guidance of 3% to 5%. Fourth quarter non-GAAP earnings per fully diluted share are estimated to be in the range $3.40 to $3.50. Over 70 Waters employees were involved, who gave practical exposure and mentorship. We are continuing to track 6% on a two year CAGR [Phonetic] 6% on a two year CAGR for our revenue in constant currency, showing that our core is strong.

Our top line growth resulted in Q3 non-GAAP adjusted earnings per share of $2.66, growing 23% year-over-year. As Udit outlined, we recorded net sales of $659 million [Phonetic] in the third quarter, an increase of 11% in constant currency. Our non-GAAP earnings per fully diluted share for the third quarter increased 23% to $2.66 in comparison to $2.16 last year. On a GAAP basis, our earnings per fully diluted share increased to $2.60 compared to $2.03 last year. This dynamic supports raising full year 2021 guidance to 15% to 16% constant currency sales growth. Rolling all this together on a non-GAAP basis, full year 2021 earnings per fully diluted share are now projected in the range of $10.94 to $11.04. Fourth quarter non-GAAP earnings per fully diluted share are estimated to be in the range $3.40 to $3.50.

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For our full year fiscal 2021, the Company reported revenues of $1.826 billion exceeding fiscal 2020's total of $1.804 billion. From a profit perspective, full year diluted earnings per share was $7.94 compared to $7.13 in fiscal 2020. As part of that review, we announced earlier today, we will be increasing our quarterly dividend by 20% to $0.30 per share of the Company's common stock and $0.24 per share on the Company's Class B common stock. In addition, we have reloaded our share purchase authorization program to allow for the Company to purchase up to $100 million of its outstanding shares. Consolidated revenues in our fourth quarter of 2021 were $465.3 million, an increase of 8.5% from $428.6 million a year ago. Consolidated operating income increased to $44.9 million from $40.8 million or 10.1%. Net income for the quarter increased to $34.6 million or $1.82 per diluted share from $31.6 million or $1.66 per diluted share. Our effective tax rate in the quarter was 22% compared to 26.6% in the prior year. Our Core Laundry operations revenues for the quarter were $415.1 million and increased 7.9% from the fourth quarter of 2020. Core Laundry organic growth which adjusts for the estimated effective acquisitions as well as fluctuations in the Canadian dollar was 7.2%. Core Laundry operating income was $41.8 million for the quarter, up from $38.1 million in prior year. And the segment's operating margin increased to 10.1% compared to 9.9% in 2020. Energy costs increased to 4.2% of revenues in the fourth quarter of 2021, up from 3.5% a year ago. Revenues from our Specialty Garments segment which deliver specialized nuclear decontamination and cleanroom products and services were $33.9 million for the fourth quarter of fiscal 2021, an increase of 22.5% over 2020. The segment's operating income increased to $4.1 million or 12.1% of revenues from $2 million or 7.1% of revenues in the year-ago period. Our First Aid segment's revenues in the fourth quarter of 2021 decreased to $16.3 million from $16.4 million primarily due to elevated PPE sales in the prior year, partially offset by growth in the First Aid van business. In addition, the segment had an operating loss in the quarter of $1 million compared to operating income of $0.7 million in 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 $512.9 million at the end of fiscal 2021. Cash provided by operating activities for the year was $212.3 million, a decrease of $74.4 million from the prior year. Capital expenditures for fiscal 2021 totaled $133.6 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. During the quarter, we capitalized $2.3 million related to our ongoing CRM project which consisted of both third-party consulting costs and capitalized internal labor costs. As of August 28, 2021, we had capitalized $34.2 million related to the CRM project. We are depreciating this system over a 10 year life, including the additional hardware we installed to support our new capabilities like mobile handheld devices for our route drivers, we incurred approximately $2 million in depreciation and amortization in fiscal 2021 [Phonetic]. In 2022, we expect that the amortization of the system and depreciation of the related hardware will approximate $5 million in total and eventually ramp to an estimated $6 million to $7 million per year. At this time, we anticipate our full year revenues for fiscal 2022 will be between $1.92 billion and $1.945 billion. This top line guidance assumes a Core Laundry organic growth rate of approximately 6.1% at the midpoint of the range. For fiscal 2022, we further expect that our fully diluted earnings per share will be between $5.70 and $6.10. This guidance includes $38 million of costs that we expect to incur in the fiscal year directly attributable to the three key initiatives that Steve discussed, our CRM and ERP system initiatives and our branding efforts. Excluding these transitionary investment costs, our Core Laundry operations adjusted operating margin assumption at the midpoint of the range is 9.5%. Based on the current energy prices, we are modeling the energy costs in our Core Laundry operations will increase to 4.6% of revenues in fiscal 2022, up from the previously discussed 4.2% in 2021. Next year's effective tax rate is assumed to be 24% compared to 22% in fiscal 2021. However, the segment's operating income is expected to be down approximately 11%. Our First Aid segment's revenues are expected to be up approximately 10% compared to 2021. We expect that our capital expenditures in 2022 will approximate $125 million. In addition, as I'm sure that you are aware, last month President Biden issued broad sweeping vaccine and or testing requirements for all companies with more than 100 employees.

In addition, we have reloaded our share purchase authorization program to allow for the Company to purchase up to $100 million of its outstanding shares. Consolidated revenues in our fourth quarter of 2021 were $465.3 million, an increase of 8.5% from $428.6 million a year ago. Net income for the quarter increased to $34.6 million or $1.82 per diluted share from $31.6 million or $1.66 per diluted share. At this time, we anticipate our full year revenues for fiscal 2022 will be between $1.92 billion and $1.945 billion. For fiscal 2022, we further expect that our fully diluted earnings per share will be between $5.70 and $6.10. In addition, as I'm sure that you are aware, last month President Biden issued broad sweeping vaccine and or testing requirements for all companies with more than 100 employees.

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Let me start by saying I'm pleased with our achievements in 2021 as our $200 million -- $211 million of adjusted EBITDA slightly exceeded the top end of the adjusted EBITDA guidance range provided at the beginning of the year, exceeding the guidance midpoint by 14%. We delivered robust free cash flow in 2021, which supported our ability to repurchase $100 million of our 2024 senior notes and increased our cash position by $86 million during the year to $538 million on December 31, 2021. Today, I'll focus my comments on our performance for the fourth quarter and full year of 2021, our market outlook for 2022, Oceaneering's consolidated 2022 outlook, including our expectation to generate positive free cash flow of between $75 million and $125 million, and EBITDA in the range of $225 million to $275 million, and our segment outlook for the first quarter and full year of 2022. For the fourth quarter of 2021, our consolidated adjusted earnings before interest, taxes, depreciation, and amortization or adjusted EBITDA was $46.7 million. Fourth quarter 2021 consolidated adjusted operating income of $17 million, was $1.2 million higher than in the third quarter on the strength of increased throughput and margins in our manufactured products segment, which more than offset the decline in our ad tech segment and higher unallocated expenses. We generated $140 million of cash from operating activities. And after deducting $14.4 million of capital expenditures, our free cash flow was $126 million for the quarter. We made additional progress with debt reduction during the fourth quarter with $37 million of open market repurchases of our 2024 senior notes, bringing total repurchases to $100 million for the year. Good operating cash flow, working capital efficiencies, and capital expenditure discipline allowed us to increase our cash position by $90.4 million during the fourth quarter of 2021. As of December 31, 2021, our cash balance stood at $538 million. As a result, we recorded a net loss of $30 million in connection with these Evergrande contracts in our fourth-quarter financial results. In conjunction with these terminations, we reclassified $20 million of contract assets into saleable inventory. SSR EBITDA margin of 31% during the fourth quarter improved as compared to the 29% achieved during the third quarter of 2021 and was consistent with the average margin achieved during the first nine months of 2021. The SSR revenue split was 77% from our remotely operated vehicle or ROV business and 23% from our combined tooling and survey businesses compared to the 79-21 split, respectively, in the immediate prior quarter. Fleet utilization declined to 55% in the fourth quarter 2021 from 63% in the third quarter 2021 and our days on hire decline for both drill support and vessel-based services. Our fleet use during the quarter was 62% drill support and 38% in vessel-based services, compared to 57% and 43%, respectively, during the third quarter. Fourth quarter 2021 average ROV revenue per day on hire of $8,162, was 4% higher than in the third quarter of 2021. Days on hire were 12,747 in the fourth quarter or 12% lower as compared to 14,474 in the third quarter. We ended the quarter and the year just as we began with a fleet count of 250 ROV systems. At the end of December, we had ROV contracts on 75 of the 137 floating rigs under contract or 55%, a slight decrease from September 30, 2021, when we had ROV contracts on 77 of the 133 floating rigs under contract or 58%. Our fourth quarter 2021 revenue of $103 million was 37% higher than in the third quarter of 2021. Adjusted operating income and adjusted operating income margin of 9% were substantially higher sequentially primarily due to better absorption of fixed costs and a favorable project mix. Our manufactured products backlog on December 31, 2021, was $318 million, compared to our September 30, 2021, backlog of $334 million. The backlog decline in the fourth quarter of 2021 reflects a $38 million reduction associated with the Evergrande contract terminations. Our book-to-bill ratio was 1.1 for the full year of 2021 as compared with the trailing 12-month book-to-bill of 1.0 on September 30, 2021. Revenue declined 11% due to seasonality in the Gulf of Mexico and the third quarter completion of the Angola riserless light well intervention project. Fourth quarter 2021 operating income margin of 8% remained consistent with the third quarter 2021 as improved margins from intervention, maintenance, and repair or IMR activity positively offset the fixed cost margin effect of lower revenue. Operating income margin improved to 10% in the fourth quarter of 2021 from 9% in the third quarter of 2021 as the business continues to benefit from operational improvements implemented since the beginning of 2020. Our Aerospace and Defense Technologies, or ADTech, fourth quarter 2021 operating income declined from the third quarter of 2021 on a 6% decline and rapid decrease in revenue. Operating income margin declined as expected to 13% due to changes in project mix. Fourth quarter 2021 unallocated expenses of $36.7 million, were sequentially higher due to a combination of increased accruals for incentive-based compensation higher-than-expected healthcare costs, and increased information technology costs. Adjusted operating income in our energy segments improved by $57.3 million and operating income margin improved by 376 basis points over 2020 results to 9%. Compared to 2020, our 2021 consolidated revenue increased 2% to $1.9 billion with revenue increases in our SSR, OPG, IMDS, and ADTech segments being partially offset by a decline in our manufactured products revenue. Consolidated 2021 adjusted operating income and adjusted EBITDA improved by $51.4 million and $26.3 million, respectively, led by our OPG and SSR segments. Overall, we generated adjusted EBITDA of $211 million, a 14% increase over 2020. we generated $225 million in cash flow from operations and invested $50.2 million in capital expenditures. Significant free cash flow of $175 million, allowed us to repurchase $100 million of our 2024 senior notes while also increasing our cash balance by 86% -- $86 million, excuse me, to $538 million. Our OPG business achieved the most significant improvement of our five operating segments growing revenue by 31% in 2021. Adjusted operating income improved by almost $37 million and operating income margin improved to 8% as compared to an adjusted operating loss margin of 2% and in 2020. Our Subsea Robotics business, a recognized leader in world-class ROV services, continue to achieve best-in-class drill support performance with a 99% plus uptime achieved during the year. We continue to see significant improvement in our IMBS business with adjusted operating income improving by more than $12 million as compared to 2020. Our AdTech business grew its revenue by 8% while maintaining its operating income margin over 16%, leading to a new record annual operating income and EBITDA performance. Our total recordable incident rate, or TRIR, of 0.4 for 2021 remained comparable to the record performance achieved in 2020. Revenue of $1.9 billion was modestly higher than the $1.8 billion achieved in 2020. Adjusted EBITDA of $211 million exceeded the top end of the guidance range from the beginning of the year and was 14% higher than the $184 million generated in 2020. Positive free cash flow of $175 million significantly surpassed the $76 million generated in 2020. We maintained our commitment to capital discipline by reducing capital expenditures for a second year to $50 million as compared to $61 million in 2020. Cash increased by $86 million to $538 million. Outstanding debt decreased to $700 million, following $100 million of open market repurchases of our 2024 senior notes. Net debt-to-adjusted EBITDA ratio decreased from 1.9 on December 31, 2020, to 0.8 on December 31, 2021. Consolidated adjusted EBITDA margin of 11% improved from the 10% margin achieved in 2020. Brent pricing of about $70 per barrel, sustained a modest level of offshore project sanctioning and good IMR activity in 2021. The forecast of nearly $90 per barrel in 2022 and anticipated higher prices in the out years, should support increased levels of E&P, opex, and capex spending in 2022. There were approximately 200 tree awards in 2021 and Rystad forecasts a 55-plus percent increase in 2022 to around 320 and remaining near 300 into 2023. Rystad had -- also forecasts 317 tree installations in 2022 to be essentially flat to 2021. Rystad estimates that offshore wind capex and opex spending will average around $50 billion per year in 2022 and 2023, an 85% increase from the average annual spend between 2016 and 2020. Rystad also sees continued double-digit growth through the end of the decade with spending projected to increase to $126 billion by 2030. We are projecting our 2022 consolidated revenue to grow more than 10% with increased revenue in each of our operating segments, led by manufactured products. For the year, we anticipate generating $225 million to $275 million of EBITDA with increased contributions from each of our segments. At the midpoint of this range, our EBITDA for 2022 would represent an 18% increase over 2021 adjusted EBITDA. We anticipate our full year 2022 to yield positive free cash flow of $75 million to $125 million. For 2022, we forecast our organic capital expenditures to total between $70 million and $90 million. This includes approximately $40 million to $45 million of maintenance capital expenditures and $30 million to $45 million of growth capital expenditures. In 2022, interest expense net of interest income is expected to be approximately $38 million, and our cash tax payments are expected to be in the range of $40 million to $45 million. Survey results are projected to improve on higher survey and positioning activity, and we expect revenue growth in the high single-digit range and EBITDA margins to average in the low 30% range for the full year. For ROVs, we expect our 2021 service mix of 60% drill support and 40% vessel services to generally remain the same through 2022. Our overall ROV fleet utilization is expected to be in the mid-60% range for the year with higher seasonal activity during the third -- excuse me, the second and third quarters. We expect to generally sustain our ROV market share in the 55% to 60% range for drill support services. At the end of 2021, there were approximately 23 Oceaneering ROVs on board 20 floating drilling rigs with contract terms expiring during the first six months of 2022. During the same period, we expect 39 of our ROVs on 33 floating rigs to begin new contracts. For 2022, we anticipate unallocated expenses to average in the mid-$30 million range per quarter as we foresee higher information technology expense and higher cost due to inflation as compared to 2021. For our first quarter 2022 outlook, sequentially, as previously noted, we forecast our first quarter 2022 EBITDA to be significantly lower on lower revenue.

For our first quarter 2022 outlook, sequentially, as previously noted, we forecast our first quarter 2022 EBITDA to be significantly lower on lower revenue.

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