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For the second quarter, we achieved consolidated earnings of $0.72 per share versus $0.69 last year. After excluding from both periods, gains on investments held to fund one of the company's retirement plans, earnings per share increased by 7.8% on an adjusted basis. The second quarter contributed to a strong 2021 year-to-date, where we've achieved 12.1% earnings growth over last year on an adjusted earnings per share basis. In addition, we announced a 9% increase in the quarterly dividend last week, marking our 67th consecutive calendar year of dividend increases. Excluding gains earned on investments of $0.03 per share and $0.05 per share from the second quarter of 2021 and 2020, respectively, adjusted earnings for the second quarter increased by $0.05 per share, or 7.8%, as compared to adjusted earnings last year. Our water segment's earnings were $0.57 per share as compared to $0.54 per share. Adjusting for the gains on investments incurred in both quarters, earnings at water segment increased by $0.05 per share due to a higher water gross margin generated from new rates authorized by the California Public Utilities Commission and a lower effective income tax rate due to certain flow-through and permanent tax items. Our electric segment's earnings for the quarter were $0.04 per share as compared to $0.03 per share for the same period in 2020 due to an increase in electric gross margins resulting from higher rates as approved by the CPUC. Earnings from our contracted services segment decreased $0.01 per share for the quarter due to higher construction costs incurred on certain projects. Our consolidated revenue for the quarter increased by $7.1 million as compared to the same period in 2020. Water revenues increased $4.5 million due to full third year step increases for 2021 as a result of passing earnings tax. Contracted services revenue increased $2.2 million, largely due to increases in construction activities and increases in management fees due to the successful resolution of various economic price tests. Our water and electric supply costs were $28 million for the quarter, an increase of $1.7 million from the same period last year. Looking at total operating expenses other than supply costs, consolidated expenses increased to $3.5 million as compared to the second quarter of 2020. Interest expense, net of interest income and other increased by $2 million due in part to higher interest expense resulting from overall increase in borrowings and lower gains generated on investments held for retirement plans during the second quarter as compared to last year, as previously discussed. This slide reflects our year-to-date earnings per share by segment as reported fully diluted earnings for the six months ended June 30, 2021, were $1.24 as compared to $1.07 for the same period in 2020. When the $0.04 per share gain on investments held to fund a retirement plan is removed from 2021 year-to-date earnings, this resulted in a 12.1% increase in the adjusted EPS. Net cash provided by operating activities was $41.1 million for the first six months of 2021 as compared to $46.3 million in 2020. Our regulated utility invested $75 million in the company-funded capital projects during the first six months. We estimated our full year 2020 company-funded capital expenditures to be $125 million to $135 million. The Governor of California has proclaimed the state of emergency for 50 of the 58 counties within the state and signed an executive order asking all Californians to voluntarily reduce water usage by 15% as compared to 2020. As a result, rate increases are expected to generate an additional $11.1 million in the adopted water gross margin for 2021 as compared to the adopted water gross margin in 2020. Regarding our cost of capital proceeding, which was filed in May of this year, we requested a capital structure of 57% equity and 43% debt, which is our currently adopted capital structure, a return on equity of 10.5% and a return on rate base of 8.18%. Among other things, Golden State Water requested capital budgets of approximately $450.6 million for the 3-year rate cycle and another $11.4 million of capital projects to be filed for revenue recovery through advice letters when those projects are completed. The weighted average water rate base has grown from 752.2 million in 2018 to $980.4 million in 2021, a compound annual growth rate of 9.2%. ASUS' earnings contribution decreased by $0.01 per share to $0.11 during the second quarter of 2021 as compared to the same quarter last year, largely due to higher construction costs incurred on certain projects. For the year-to-date June 30, 2021, and ASUS' earnings contribution is $0.04 per share higher than last year due to an overall increase in construction activity and management fee revenue as well as a decrease in overall operating expenses. We reaffirm our projection that ASUS will contribute $0.45 to $0.49 per share for 2021. Board of Directors, last week, approved a 9% increase in the dividend increasing the annual dividend from $1.34 per share to $1.46 per share. This increase is comparable to the compound annual growth rate of 9% achieved by the company in its quarterly dividend over the last five years. Our long and consistent history of dividend payments date back to 1931 in addition to an unbroken 67-year history of annual calendar year dividend increases. Currently, our dividend policy is to provide a compound annual growth rate of more than 7% over the long term.

For the second quarter, we achieved consolidated earnings of $0.72 per share versus $0.69 last year. Board of Directors, last week, approved a 9% increase in the dividend increasing the annual dividend from $1.34 per share to $1.46 per share.

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I'm pleased with our Q2 fiscal 2022 performance with revenue of $3.1 billion and non-GAAP earnings of $1.75 per share. And IDC ranked VMware Number 1 in worldwide IT automation and configuration management 2020 market share, as well as ranking VMware Number 1 in software-defined compute for 2020 market share. In Q2, we received recognition in support of our ESG efforts including ranking in the top 1% in emissions intensity versus industry peers on the ISS Climate Scorecard for the fiscal year 2020. SpringOne takes place September 1 and 2, and is optimized for developers, DevOps pros and software leaders looking to build scalable apps and learn more about the Spring framework, Kubernetes, app modernization and more. VMworld, which takes place October 4 through 7, will again be a virtual event where attendees will hear more about our multi-cloud strategy and offerings, while also engaging in over 600 educational and technical content sessions while networking and connecting with peers. We remain on track to spin-off from Dell in early November of this year. Total revenue for Q2 was $3.1 billion, with combined subscription and SaaS and license revenue growth of 12% year-over-year to $1.5 billion, which was above our expectations for the quarter. Subscription and SaaS revenue grew 23% year-over-year, with ARR up 26% to $3.2 billion. License revenue exceeded our expectations in Q2 with growth of nearly 3% year-over-year to $738 million. Our largest contributors to sub and SaaS were VCPP, modern applications, EUC, Carbon Black and VMware Cloud on AWS, which grew revenue nearly 80% year-over-year. Our non-GAAP operating income for the quarter of $924 million was stronger than expected, driven by higher revenue and lower-than-expected expenses. Non-GAAP operating margin for the quarter was 29.4%, with non-GAAP earnings per share of $1.75 on a share count of 423 million diluted shares. We ended the quarter with $10.3 billion in unearned revenue and $5.9 billion in cash, cash equivalents and short-term investments. Q2 cash flow from operations was $864 million, and free cash flow was $777 million. RPO was $11.2 billion, up 8% year-over-year, and current RPO was $6.2 billion, up 11% year-over-year. Total backlog was $66 million, substantially all of which consisted of orders received on the last day of the quarter that were not shipped and orders held due to our export control process. License backlog at quarter-end was $19 million. Core SDDC product bookings increased over 20% year-over-year, with Compute also increasing over 20% and Cloud Management up over 30%. In Q2, we repurchased 2.2 million shares in the open market at an average price of $160 per share. Through the end of Q2, we have utilized $2.2 billion from our current repurchase authorization of $2.5 billion. We successfully completed a $6 billion bond offering in preparation for a special dividend payout to all stockholders associated with our planned spin-off from Dell Technologies in early November of this year. We are reiterating our expectation for total revenue of $12.80 billion, a growth rate of approximately 9% year-over-year. We expect to generate $6.27 billion from the combination of subscription and SaaS and license revenue or an increase of approximately 11.5%, with approximately 51.5% of this amount from subscription and SaaS. We're increasing guidance for non-GAAP operating margin for the full year to 29% and non-GAAP earnings per share to $6.90 on a diluted share count of 423 million shares. We're maintaining our cash flow from operations guidance of $3.9 billion, which now includes nearly $100 million in debt issuance costs and estimated costs associated with the planned spin-off. And we're also maintaining free cash flow guidance of $3.52 billion. For Q3, we expect total revenue of $3.12 billion or a growth rate of approximately 9% year-over-year. We expect $1.47 billion from subscription and SaaS and license revenue in Q3 and or an increase of nearly 12% year-over-year, with approximately 56% of this amount from subscription and SaaS. We expect non-GAAP operating margin to be 27% for Q3, with non-GAAP earnings per share of $1.53 on a diluted share count of 422 million shares.

I'm pleased with our Q2 fiscal 2022 performance with revenue of $3.1 billion and non-GAAP earnings of $1.75 per share. We remain on track to spin-off from Dell in early November of this year. Total revenue for Q2 was $3.1 billion, with combined subscription and SaaS and license revenue growth of 12% year-over-year to $1.5 billion, which was above our expectations for the quarter. Non-GAAP operating margin for the quarter was 29.4%, with non-GAAP earnings per share of $1.75 on a share count of 423 million diluted shares.

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And as we noted in our SIP our portfolio is about 15% occupied with variances between the different operations but we can certainly provide more color on that during the Q&A. Additional details on our approach to this crisis are outlined in our COVID-19 insert found on Pages 1 to 4 of the supplemental package. We are 100% complete on our speculative revenue target. And while the volume of executed leases was down a bit quarter-over-quarter, as you might expect, during the summer it -- regardless of the pandemic, our overall pipeline increased by over 330,000 square feet. For the third quarter, we also posted very strong rental rate mark-to-market of 17.1% on a GAAP basis and 9% on a cash basis. In addition, the core portfolio did generate positive absorption of 102,000 square feet, which includes 47,000 square feet of tenant expansions. Also included in those absorption numbers was the full building delivery of our 426 Lancaster Avenue redevelopment in Pennsylvania suburbs, that was 55,000 square feet and 112,000 square feet of the occupancy backfilling of the SHI space again in Austin, Texas. We did experience during the quarter 58,000 square feet of COVID-related terminations. The primary one of that was Philadelphia Sports Club in our Radnor complex of 42,000 square feet and a couple other small hospitality and medical offices. For this quarter, the numbers were consistent with our business plan and were primarily driven, as you might expect, by the 9/30/2019 move out of KPMG in 183,000 square feet and the SHI move out on 3/31/20. We've collected over 99% of our third quarter billings and our October collection rate continues to track very, very well with over 97% of office rents collected as of yesterday. Retention was 60% and slightly above our full year range. As Tom will articulate in more detail, we did post FFO of $0.35 per share, which is in line with consensus estimates. Rent deferrals, we did frame that on Page 1 of our SIP we had a total $4.5 million of deferrals with $4.1 million scheduled to repay those deferrals within the next 18 months. Now interestingly, to-date we've already collected 14% or $536,000 of those deferrals, including a $100,000 of early prepayments. The results of those efforts are framed out on Page 2 of the SIP and have resulted in 82 active tenant renewal discussions totaling over 920,000 square feet, that to-date have resulted in 45 tenants totaling 300,000 square feet executing renewals. These leases had an average term of 24 months with about a 2.6% cash mark-to-market and a sub 5% capital ratio. And speaking of pipelines, our leasing pipeline stands at 1.6 million square feet including approximately 400,000 square feet in advanced stages of lease negotiations. As I mentioned, the overall pipeline increased by 331,000 square feet. This -- the expansion of the pipeline was driven by over 444,000 square feet of tours during the quarter, which as we noted is up 115% from last quarter. From a liquidity and dividend standpoint, Tom will certainly talk about it some more detail, but the company is in excellent shape from a liquidity and capital availability standpoint as we've outlined on Page 3. After factoring in the full repayment of the Two Logan Square mortgage, we're still projecting to have about $530 million of our line of credit available by year end. We're also anticipating paying off the small mortgage during the fourth quarter of $9 million. We have no maturities in '21 and no unsecured bond maturities until '23 and have a very good 3.75% weighted average interest rate. Dividend remains incredibly well covered with a 56% FFO and a 76% cap ratio. First of all, on the development front, all four of our production assets that's Garza and Four Points in Austin, 650 Park Avenue and 155 in Pennsylvania are all fully improved, fully documented, fully ready to go subject to pre-leasing. 405 Colorado remains on track for completion in Q2 of next year at a very attractive 8.5% cash-on-cash yield. We have a pipeline of almost 200,000 square feet on that project, again moving slow, but again we're pleased with the breadth of that pipeline. 3000 Market, that's the 64,000 square foot life science conversion that we're doing within Schuylkill Yards, construction is under way. That building will -- is fully leased to Spark Therapeutics on a 12-year lease commencing later in the second half of 2021 at a development yield of 8.5%. We are advancing Block A, which is a mixed-use block consisting of a 350,000 square foot office building and 340 apartment units that's going through final design and final approvals from the City of Austin. As mentioned last quarter and we've outlined in more detail in the supplemental package, the overall master plan for Schuylkill Yards is we can do at least 2.8 million square feet of life science space, so we have an excellent long-term opportunity to really create a scalable life science community. 3000 Market and the Bulletin Building were the first steps and their conversions to create a life science hub. We are also well into the design development and marketing process for a 500,000 square foot life science building located at 3151 Market Street. We have a leasing pipeline on that project totaling about 580,000 square feet and our goal is to be able to start that by Q2 '21 assuming of course market conditions permit. Our Schuylkill Yards West project, which is our life science, office and residential tower is fully approved and ready to go, subject to finalizing our debt and equity structure, that project consists of 326 apartments and a 100,000 square feet of life science and office space. We currently have an active pipeline of over 300,000 square feet for those in commercial uses and based on this level of interest, we are contemplating starting that projects without a pre-lease. Similar to our approach on 3000 where we looked at existing assets, we have commenced the construction and conversion of three -- floors three through nine within Cira Center to accommodate life science uses, that will be done in two phases. We have 34,000 square feet already pre-leased and we currently have a pipeline of 125,000 square feet. Another interesting point on both Schuylkill Yards and Broadmoor that we can't lose sight of is that based on current approvals and the master plans in place between those two sites, they can accommodate about 5,000 multi-family units. Our third quarter net income totaled $274.4 million or $1.60 per diluted share and FFO totaled $60 million or $0.35 per diluted share. Core -- property operating income we estimated $74 million, it came in slightly above that at $74.4 million, which was a good result. We expected that -- it ended up at 1.3 below projections, primarily due to the timing of certain anticipated transactions that we believe will occur in the fourth quarter. And then interest expense was also lower by $1.7 million over forecast, primarily due to the interest expense reduction from the loan assumption recapitalization of Two Logan Square, which resulted in a one-time non-cash reduction in interest expense totaling $2 million. Our third quarter fixed charge and interest coverage ratios were 3.5 and 3.8 respectively. As expected, our third quarter annualized net debt-to-EBITDA started to decrease to 6.7, was primarily due to the sequential EBITDA remaining similar to the second quarter and the reduced debt levels from the Commerce Square joint venture. As Jerry mentioned, cash collections were 99%. Additionally, if we included third quarter deferrals, our core portfolio would have been very strong 97%. Collections for October are currently 97% however, one vendor payment anticipated to be received in the next day or so will bring us up to 95% -- 99%. Write-offs in the quarter were approximately $0.005 and primarily due to retail-related tenants. Same store, as outlined on Page 1 of our supplemental, we have included $1.1 million and $3.8 million of rent deferrals in our third quarter and year-to-date results. Property level operating income will total about $74 million and will be sequentially lower by about $500,000. The decrease is primarily due to the Commerce Square being in our numbers for part of the third quarter and they will not be in our numbers for the fourth quarter that totals about $1.5 million. Offsetting that decrease is a sequential increase in the portfolio, which will improve NOI by $1 million. FFO contribution from our unconsolidated joint ventures will total $7.5 million for the quarter, which is up $0.3 million from the third quarter, primarily due to the full quarter inclusion of Commerce Square, offset by reduced NOI at our MAP joint venture. For the full year 2020, the FFO contribution is estimated to be about $20 million. G&A will be about $7 million for the fourth quarter and full year will be about $31 million. Interest expense will be sequentially higher by $0.8 million compared to the third quarter and will total $17 million for the fourth quarter. Capitalized interest will be $1.1 million for the fourth quarter and full-year interest expense will approximately $74 million. The mortgage payoff was approximately $79.8 million. That loan had an interest coupon of 3.98%. We anticipate an early prepayment of a wholly owned mortgage at Four Tower Bridge with an effective interest coupon of 4.5%. Termination and other income, we anticipate that to be $4.5 million for the fourth quarter. That's up from $0.9 million in the third quarter. And net income leasing and development fees, quarterly NOI will be $2.6 million and will approximate $8.5 million for the year. There will be $0.5 million in the fourth quarter as it relates to land sales while we -- our $272 million gain represented 100% of the gain for reporting purposes, we only recognized 30% of that gain for tax purposes, and with some tax planning, we will not require a special dividend in 2020. With the acquisition of the land parcel being anticipated fourth quarter, we only have the building acquisition located at 250 King of Prussia Road for $20 million. No NOI will be generated in 2020. Based on the above, our 2020 CAD will remain in a ratio of 71% to 76% as lower capital will offset deferred rent that is repaid beyond 2020. Uses for the remainder of the year is $185,000, comprised of $25 million in development and redevelopment, $33 million of common dividends, $8 million in revenue maintaining capital, $10 million in revenue creating capital and the repayment of the mortgages at Two Logan and Four Tower Bridge as well as the acquisition of 250 King of Prussia Road. Primary sources will be cash flow after interest of $45 million, use of the line of $68 million, use of our current cash on hand at the end over the quarter of $62 million, and $10 million in land sales. Based on the capital plan outlined above, our line of credit balance will be about $68 million. We also project that our net debt-to-EBITDA will remain in a range of 6.3 to 6.5. In addition, our net debt-to-GAV will approximate 38%, which is down sequentially from the 43% in the prior quarter primarily due to the Commerce Square joint venture. In addition, we anticipate our fixed charge ratio will continue to approximate 3.9 on interest coverage and will be 4 -- 3.9 on debt service fixed charge and 4.1 on interest coverage.

We've collected over 99% of our third quarter billings and our October collection rate continues to track very, very well with over 97% of office rents collected as of yesterday. As Tom will articulate in more detail, we did post FFO of $0.35 per share, which is in line with consensus estimates. Our third quarter net income totaled $274.4 million or $1.60 per diluted share and FFO totaled $60 million or $0.35 per diluted share. Additionally, if we included third quarter deferrals, our core portfolio would have been very strong 97%. Collections for October are currently 97% however, one vendor payment anticipated to be received in the next day or so will bring us up to 95% -- 99%. No NOI will be generated in 2020.

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Yesterday, we reported record earnings of $0.79 per share, compared with $0.61 in the prior year's quarter and $0.76 sequentially. Revenue was a record $125.8 million for the quarter, compared with $105.8 million in the prior year's quarter and $116.6 million sequentially. Our implied effective fee rate was 57.3 basis points in the first quarter, compared with 57 basis points in the fourth quarter. Excluding performance fees our fourth quarter implied effective fee rate would have been 56.3 basis points. Operating income was a record $53.2 million in the quarter, compared with $40.4 million in the prior year's quarter and $49.4 million sequentially. Our operating margin decreased slightly to 42.3% from 42.4% last quarter. The fourth quarter included a cumulative adjustment that reduced compensation and benefits to reflect actual incentive compensation that was paid, which increased our fourth quarter operating margin by 153 basis points. Expenses increased to 8% compared with the fourth quarter, primarily due to higher compensation and benefits, distribution and service fees and G&A. The compensation to revenue ratio for the first quarter was 35.5%, consistent with the guidance provided on our last call. Our effective tax rate was 27.25% for the first quarter, in line with the guidance provided on last quarter's call. Our firm liquidity totaled $118.8 million at quarter end, compared with $143 million last quarter. Total assets under management was a record $87 billion at March 31, an increase of $7.1 billion or 9% from December 31. The increase was due to net flows of $3.8 billion and market appreciation of $4 billion, partially offset by distributions of $690 million. Advisory accounts which ended the quarter with a record $20.3 billion of assets under management, had record net inflows of $1.7 billion during the quarter. $1.1 billion, of which were included in last quarter's pipeline. We recorded $968 million of inflows from five new mandates and $799 million of inflows into existing accounts. Japan subadvisory had net outflows of $204 million during the quarter, compared with net inflows of $83 million during the fourth quarter. Subadvisory excluding Japan had net inflows of $97 million, primarily from the new Taiwanese mandate into a blended next-gen REIT digital infrastructure portfolio. Open-end funds, which ended the quarter with a record $38.6 billion of assets under management had record net inflows of $2.2 billion during the quarter, primarily to US real estate and preferred funds. Distributions totaled $238 million, $193 million of which was reinvested. With respect to compensation and benefits, which includes the cost of our newly formed private real estate group that we announced earlier this week, we expect that our compensation to revenue ratio will remain at 35.5%. We expect G&A to increase by about 9% from the $42.6 million we recorded in 2020, which is higher than where we guided to on our last call. We expect that our effective tax rate will remain at 27.25%. And finally, you will recall that on our last call, Bob Steers mentioned the termination of an institutional global real estate account of approximately $900 million that was expected to be withdrawn in the next quarter or two. So markets continued their strength in the first quarter as evidenced by US and global equities being up 6.2% and 4.7% respectively. Second, underneath the surface, the market has increasingly taken on a reflationary tone as reflected by repricing of medium-term inflation prospects and a strong performance in our more inflation sensitive investment areas, such as commodities, which were up 6.9% for the quarter and are now up 35% over the last 12 months. Last, with a higher growth and higher inflation as the context, we saw a repricing of Fed policy expectations, which partially drove the meaningful rise in the US 10-year treasury yield, ending the quarter at around 1.7%. That said, this flattish performance still far outpaced traditional fixed income in both income rate and total return with the Barclays Global Ag down 4.5%. In the first quarter six of nine core strategies outperformed their benchmark, but for the last 12 months seven of nine core strategies outperformed. As measured by AUM, 93% of our portfolios are outperforming on a one-year basis, an improvement from 84% last quarter, mostly due to our preferred portfolios. On a three and five year basis 99% and 100% respectively are outperforming, which is marginally better than last quarter. US and global real estate returned 8.3% and 5.8% respectively in the first quarter, both outpacing their respective equity indices. Preferred securities returned minus 0.6% in the first quarter and we outperformed in both our core and low duration preferred strategies. After one quarter of underperformance last year, our highly experienced and accomplished team has now outperformed the last four quarters and 10 of the last 13 quarters. We have also been communicating to our clients for the last three to six months that interest rates were more likely to move up over time, while the 10-year has trickled down since quarter-end, our expectation is that the 10-year will move more toward 2% by the end of 2021 and 2.25% by the end of 2022. Banks have just come off an earning season in the US where they announced their releasing nearly $10 billion in loan loss reserves, as the pandemic-related losses they had accounted for have not been realized. The first quarter returned 3.5%, which slightly lagged global equities. President Biden recently proposed over $2 trillion in spending and tax credits, which we see as a clear positive for listed infrastructure, tying into key themes we've highlighted over the past year. Disappointingly, we underperformed our benchmark during Q1 and while our three-year excess return is still attractive, we have underperformed over the last 12 months, so improving our performance here is a key focus area. I also want to mention that our real assets multi-strategy portfolio was up 6.6% in the quarter, outpacing US and global equities. We had very good relative performance of plus 100 basis points, with strong alpha contribution from asset allocation and natural resource equities. Number one, they're cheap and at the lowest valuations versus financial assets since 1925. Importantly with 93% and 99% of our AUM outperforming over one and three years respectively, we are in a terrific position to retain assets and compete for new allocations which continue at a good pace. Our AUM set a record $87 billion at quarter-end with all three of our investment vehicles setting firm records. Starting from a record $7.5 billion of gross inflows in the first quarter, firmwide net inflows were $3.8 billion and annualized growth rate of 19%. Open-end funds led the way on net inflows with a record $2.2 billion, driven primarily by US REITs and secondarily by preferreds. We were awarded $460 million asset allocation model placement in US REITs from a wealth advisory firm. Institutional advisory had record net inflows of $1.7 billion. Subadvisory ex-Japan had net inflows of $97 million, relatively quiet, but importantly included a mandate combining two of our recently developed strategies. For perspective, Japan subadvisory peaked in the third quarter of 2011 at 33% of our AUM, but is now just 11% of our AUM as assets have declined by 34% in Japan, while the firm's AUM and other channels has grown by 69%. Our current won unfunded pipeline stands at $1.4 billion. Working from last quarter's $1.8 billion pipeline, we had $1.1 billion of fundings in the quarter and won $940 million in seven new mandates and account top-ups across global real estate, infrastructure and a multi-strategy blend of US REITs and preferreds. Our strategic rationale is to create another growth driver through private investment in the $15 trillion universe of real estate in the US that is not owned by listed REITs. Leading the group is Jim Corl, who previously worked with us from 1997 to 2008, in his last four years as Chief Investment Officer of our listed real estate team. Jim spent the last 11 years at Siguler Guff & Company, where he helped build and led an opportunistic real estate investment business.

Yesterday, we reported record earnings of $0.79 per share, compared with $0.61 in the prior year's quarter and $0.76 sequentially. The increase was due to net flows of $3.8 billion and market appreciation of $4 billion, partially offset by distributions of $690 million. Starting from a record $7.5 billion of gross inflows in the first quarter, firmwide net inflows were $3.8 billion and annualized growth rate of 19%.

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The $25 billion of government payments late in 2020 certainly helped move these indexes in a favorable manner combined with of course strong commodity prices with corn hovering around $550 and soybeans up above $14. During the quarter, our adjusted gross margin of 11.8% was the strongest margin achieved over the previous ten quarters. Also, our adjusted EBITDA over $17 million was our highest since the first quarter of 2019. However, I don't think I have found anyone that can recall a time when we've see steel go from $445 a ton to $1,200 in such a short duration and then also be in short supply as well. First, our cash position was [Phonetic] $117 million for the year, up $51 million from last year-end and we accomplished this through strong operating cash flow in Q4 and for the full year, along with our efforts to secure liquidity through non-core asset sales and related transaction. Operating cash flow for the fourth quarter was $10 million, which pushed full-year operating cash flow to $57 million. As anticipated, we completed further transactions in non-core -- of non-core assets of $16 million in Q4 and for the full year, it's up $53 million. Second, related to the cash improvement, our net debt position at the end of the year was $347 million, down from $366 million at the end of last quarter and $433 million at the end of last year. Second, we also continued our strong adjusted gross margin trend with 11.8% for the quarter, best margin performance, we've seen in ten quarters. First, we broke down certain equipment to fair value related to our entire recycling operations in Canada and this resulted in a charge of $11.2 million. Secondly, we wrote off intangible assets related to our customer relationships from our acquisition of the Australian operation many years ago and it resulted in a charge of $6 million. In October, we sold our facility in Brownsville, Texas garnering net proceeds of approximately $11 million and a gain on sale of $4.9 million. And finally, in November we received further recovery related to an insurance claim from the fire in our Canadian Tire recycling operation from 2017 of $3.6 million. Net sales for the fourth quarter were up over 8% from Q4 2019 representing a nice turnaround in a year where we saw an overall decrease in sales of 13%. What is even more impressive is on a constant currency basis, total sales was up nearly 15% from Q4 last year or $45 million. The negative currency impact was approximately $19 million or 6% with most of the impact coming in Latin America and Russia, as we saw throughout 2020. Our overall sales volume on a consolidated basis was up over 20% from last year and price and mix in the fourth quarter was down about 6%, mostly reflecting lower raw material costs and related material pricing mechanisms with our OE customers. Consolidated net sales in the agriculture segment improved by 15% in the fourth quarter, with growth coming from all parts of the world. On a constant currency basis, agricultural sales were -- would have been up 25% in Q4, led by North America, Latin America and Europe. For the full year, the agricultural segment experienced growth on a constant currency basis of 4% on the healthy turnaround in the second half of the year. These trends are accelerating as we progress into 2021. During Q4, the EMC segment showed growth of 4.5% on a reported basis and on a constant currency basis, it grew by over 6%. Our overall North American sales were up over 6% relative to last year, all of this growth coming from agriculture, while the EMC segment was down slightly reflecting a slower recovery. Reported sales for Latin America in Q4 were up almost 16% while on a constant currency basis, sales would have increased by over 41%. Adjusted gross profit for the fourth quarter was $38 million versus $18 million in the fourth quarter of 2019, representing a 110% improvement. Our adjusted gross profit margin in the fourth quarter was 11.8% versus only 6% last year. Our agricultural segment net sales were up $21.5 million or 15.3% from Q4 2019. Currency translation was significant in the fourth quarter and affected sales by 9.4%, particularly in Latin America and to a lesser extent the Russia. Volume in this segment was up 32% while we had a decline in pricing of 7.6%, relating primarily to lower raw material costs. Overall Ag sales in North America were up 16%, our Russia ag sales were up somewhat [Phonetic] from a year ago, and on a constant currency basis. And our European Ag sales were up almost 30% from Q4 2019. Reported Ag sales in Latin America were up 22% from last year, and while on a constant currency basis they were up 47%. The agricultural segment's adjusted gross profit for the fourth quarter was $21 million, up from $9.2 million years ago -- a year ago, representing a 127% increase. The gross profit margins in Q4 were 13% for Ag, which was a significant improvement from the margin we saw in Q4 2019 of 6.6%. Overall, the EMC segment experienced an increase in net sales in Q4 of $6 million or 4.5% from last year, and on currency -- constant currency basis, net sales was an increase by 6.3% versus a year ago. Which meant that currency was only a minor impact of 1.8% for the quarter. Volume was up in the EMC segment by a 11% while the impact of price and mix was negative at 4.6%. ITM's undercarriage business saw an increase in EMC sales by almost 12% from the fourth quarter of last year. Now, on a constant currency basis, the increase was almost 14%. Adjusted gross profit within the EMC segment for the fourth quarter was $14 million representing an improvement of $6.9 million or 109% from Q4 2019. The entirety of the TTRC impairment of $11.2 million was recorded in this segment in the fourth quarter. The adjusted gross profit margin in the EMC segment was 10.4% versus 5.2% of last year. Consumer segments, Q4 sales were down 7.7% from last year. The negative impact from currency translation was 13%. So volume increased by 8% and price and mix was down by almost 3%. The segments gross profit for the fourth quarter was $3.2 million, a healthy improvement from Q4 2019 and gross margins were 11.5%, which was an improvement from 7.6% in the fourth quarter of last year, reflecting improved production efficiencies from the increased volume. Selling, General and Administrative and R&D expenses for the fourth quarter were $39.3 million, but this includes $6 million in impairment charges related to the Australian customer relationships I described earlier. Excluding this, we spent about $33 million in the quarter, which was a bit higher than our Q3 level. Costs related to investments improving our supply chain and logistics processes totaled approximately $1.3 million in the quarter. For the full year, excluding the unusual charges in 2020 of $11 million, our SG&A and R&D costs were $129 million coming in below the low end of our range of expectation about $130 million to $135 million. Foreign currency revaluation was less of a factor on the results in Q4 and a $1.3 million loss in fourth -- but for the full year, the total negative impact from foreign exchange revaluation totaled $11 million compared to a gain of $4 million in 2019. We recorded tax expenses in the quarter of $4.6 million on a pre-tax loss of $14.9 million during the fourth quarter. For the full year, tax expense was $6.9 million on a pre-tax loss of $58 million. Again cash improved another $18.5 million in Q4 versus Q3 and for the year it improved by almost $51 million. We generated approximately $57 million in operating cash flow for the full year of 2020, a strong improvement over 2019, and again this came from our focus on working capital management. With the Company back to strong operating cash flow and those non-core transactions, we generated $89 million of free cash flow for 2020. Capital expenditures for the fourth quarter were $8.3 million, which was more in line with our quarterly historical levels for capital spending. For the full year of 2020, we've spent nearly $22 million on capex, again reflecting the needs to control our investments in amid the pandemic. This compares to $36 million spent in 2019. We anticipate spending to increase in 2021 to roughly $35 million to $40 million, but we will carefully calibrate these investments to work closely with our cash flow from operations through the year. Our overall debt level at the end of the year was in a stable position relative to the end of the third quarter and while for the year debt declined by $35 million from the end of 2019. Short-term debt at the end of the December was $31 million, which is down over $30 million since last year end. At the end of December, the borrowing capacity, when you take away the letters of credit and adjusting for the borrowing base calculations of AR and inventory was at $51 million on the ABL line. We also anticipate some letters of credits to expire in the first half of the year which could free up an additional $8 million to $13 million in capacity and we also anticipate additional capacity coming on as our borrowing base grows with the business activity.

These trends are accelerating as we progress into 2021. We anticipate spending to increase in 2021 to roughly $35 million to $40 million, but we will carefully calibrate these investments to work closely with our cash flow from operations through the year.

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Overall, we are pleased with the start of the year as adjusted revenues for the quarter increased 29% and adjusted EBITDA increased 37%. Organic constant-currency revenues increased 1.3% as strength in international was partially offset by the final quarter of COVID-19 headwinds and Data.com in North America. Total company revenue retention was 96.3% and we now have approximately 48% of our business under multiyear contracts. As we reach the two-year anniversary of our cost savings program, we finished the quarter with $246 million of annualized run-rate cost savings. Despite COVID-19 delaying some of our planned cost savings initiatives, we exceeded our original target by 23%, which ultimately contributed to the expansion of adjusted EBITDA margins by over 800 basis points from when we took the company private. We're pleased with the ongoing success we're having with our strategic clients as they renew near 100%, while continuing to expand their relationships with us. In the first quarter, we rolled out a Global 500 account program simultaneously with the close of Bisnode, prioritizing the most strategic accounts. Our U.K. team is working with Generali, a Global 500 global insurance and asset management provider with a leading position in Europe and a growing presence in Asia and Latin America, to help them identify ways to improve consistency of screening across their global, corporate, and commercial businesses, as well as reduce risk. Another Global 500 company, Linde Region Europe North, member of Linde PLC, is a leading global industrial gas and engineering company that wanted to improve their credit checks and risk monitoring of B2B customers in a more data-driven way. Today, we have 22 partner datasets, including healthcare reference data from IQVIA and commercial fleet data from IHS Markit, and we're adding more partners monthly. While inside the portal, we offer personalized offerings of our and our partner's solutions, which has already resulted in a 60% increase in cross-sells during the first quarter. Bank of America became the first major financial institution to offer millions of small businesses the ability to get ongoing insights into their D&B business credit score directly through their Business Advantage 360 banking platform. In the first quarter, subscriptions to our freemium products were up 43% from the prior year. After 20 new product launches in 2020, we continued the momentum in the first quarter, introducing the Finance Analytics platform in the U.K., Data Vision in Greater China and India, and data blocks in three additional worldwide network partner markets. Overall, we have actioned approximately $12 million of annualized run-rate savings and continue to see significant efficiencies through the combination of our two companies. On a GAAP basis, first-quarter revenues were $505 million, an increase of 28% or 27% on a constant-currency basis compared to the prior-year quarter. This includes the net impact of a lower purchase accounting deferred revenue adjustment of $17 million. Net loss for the first quarter on a GAAP basis was $25 million or a diluted loss per share of $0.06, compared to a net income of $42 million for the prior-year quarter. First-quarter adjusted revenues for the total company were $509 million, an increase of 28.6% or 27.7% on a constant-currency basis. This year-over-year increase includes 22 percentage points from the Bisnode acquisition and 4.4 percentage points from the net impact of lower deferred revenue purchase accounting adjustments. Revenues on an organic constant-currency basis were up 1.3%, driven by growth in our International segment, partially offset by the final quarter of headwinds in North America from COVID-19 and the Data.com wind down. Excluding these headwinds, the underlying business grew approximately 3%. First-quarter adjusted EBITDA for the total company was $186 million an increase of $50 million or 37%. First-quarter adjusted EBITDA margin was 36.5%. Excluding the impact of the deferred revenue adjustment and the net impact of Bisnode, EBITDA margin improved 220 basis points. First-quarter adjusted net income was $98 million or adjusted diluted earnings per share of $0.23, an increase from first quarter's 2020 adjusted net income of $50 million. In North America, revenues for the first quarter were $339 million, an approximate 1% decrease from prior year. Excluding known headwinds, North America grew approximately 2%. The growth in these solutions was offset by approximately $3 million of lower revenues attributable to COVID-19 and $1 million of revenue elimination from the Bisnode transaction. And while data sales also had another solid quarter, the overall growth in sales and marketing was partially offset by $5 million from the Data.com wind down. North America first-quarter adjusted EBITDA was $151 million, an increase of $7 million or 5% primarily due to lower operating costs resulting from ongoing cost management efforts. Adjusted EBITDA margin for North America was 44.5%, up 220 basis points versus prior year. In our international segment, first-quarter revenues increased 137% to $179 or 131% on a constant-currency basis, primarily driven by the net impact from the acquisition of Bisnode and strong growth in our sales and marketing solutions. Excluding the impact from Bisnode, International revenues increased approximately 9%. Finance and Risk revenues were $107 million, an increase of 83% or an increase of 78% on a constant-currency basis primarily due to the Bisnode acquisition. Excluding the net impact of Bisnode, revenue grew 7% with growth across all markets, including higher worldwide network cross-border sales and higher revenues in Greater China from our risk and compliance solutions and newly introduced API offerings. Sales and marketing revenues were $63 million, an increase of 382% or an increase of 359% on a constant-currency basis, primarily attributable to the Bisnode acquisition. Excluding the net impact of Bisnode, revenue grew 18% due to new solution sales in our U.K. market and increased revenues from our worldwide network product loyalty. First-quarter international adjusted EBITDA of $52 million increased $28 million or 114% versus first-quarter 2020 primarily due to the net impact of Bisnode acquisition, as well as revenue growth across our international businesses, partially offset by higher net personnel costs. Adjusted EBITDA margin was 30.3% or 37.8%, excluding Bisnode, which is an increase of 430 basis points versus prior year. At the end of March 31, 2021, we had cash and cash equivalents of $173 million, which when combined with full capacity of our $850 million revolving line of credit through 2025, represents total liquidity of approximately $1 billion. As of March 31, 2021, total debt principal was $3,674 million, and our leverage ratio was 4.8% on a gross basis and 4.6% on a net basis. The credit facility senior secured net leverage ratio was 3.6%. And finally, on March 30, we executed $1 billion floating to fixed swaps at an all-in rate of 46.7 bps. These are three-year slots and bring our fixed floating debt ratio to approximately 50-50. I'll now walk through our outlook for full-year 2021. Adjusted revenues are expected to remain in the range of $2,145 million to $2,175 million, an increase of approximately 23.5% to 25% compared to full-year 2020 adjusted revenues of $1,739 million. Revenues on an organic constant-currency basis, excluding the net impact of the lower deferred revenues, are expected to increase between 3% to 4.5%. Adjusted EBITDA is expected to be in the range of $840 million to $855 million, an increase of 18% to 20%. And adjusted earnings per share is expected to be in the range of $1.02 to $1.06. Additional modeling details underlying our outlook are as follows: We expect interest expense to be $200 million to $210 million; depreciation and amortization expense of approximately $90 million, excluding incremental depreciation and amortization expense resulting from purchase accounting; an adjusted effective tax rate of approximately 24%; weighted average shares outstanding of approximately $430 million; and finally, capex, we anticipate, of around $160 million, including $7 million due to a small asset acquisition we completed in the first quarter.

Net loss for the first quarter on a GAAP basis was $25 million or a diluted loss per share of $0.06, compared to a net income of $42 million for the prior-year quarter. First-quarter adjusted net income was $98 million or adjusted diluted earnings per share of $0.23, an increase from first quarter's 2020 adjusted net income of $50 million. I'll now walk through our outlook for full-year 2021.

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As we turn to Page 5, we got off to a better start than we expected. In addition, we continue to see accelerating software recurring revenue growth, growing approximately 6% on an organic basis. The growth in cash flow performance in the quarter allowed us to continue our rapid deleveraging with about $500 million in debt pay-down during the quarter. Turning to Page 6 and covering the Q1 financial highlights. Total revenue increased 13% to $1.53 billion, which was an all-time record for any Roper quarter. Organic revenue for the enterprise declined 1% versus last year's plus 4% pre-pandemic comp. EBITDA grew 20% to $561 million. EBITDA margin increased 220 basis points to 36.7%, on really great incrementals across the portfolio. Adjusted DEPS was $3.60, 18% above prior year. Free cash flow was $543 million, up 54%. Our results were enhanced a bit by approximately $40 million of accelerated payments that were the result of wins at our UK-based CliniSys laboratory software business. Aided by our outstanding cash flow performance, we reduced our debt by approximately $500 million in the quarter. Turning to Page 7, an update on our deleveraging. In the first quarter, we reduced our debt by approximately $500 million. Over the first three months of the year, our EBITDA growth, combined with debt reduction, enabled us to lower our net debt to EBITDA ratio from 4.7 to 4.2. As we turn to Page 9, revenues in our Application Software segment were $578 million, up 2% on organic basis. EBITDA margins were an impressive 44.9% in the quarter. Across this segment, we saw organic recurring revenue, which is about 75% of the revenue for this segment, increase approximately 6%. CliniSys has approximately 85% market share in the UK and is now recognized as one of four critical IT vendors for the entire National Health Service. Turning to Page 10. Revenue in our network segment were $440 million, flat versus last year and down 3% on an organic basis. EBITDA margins were 40.9% in the quarter. Our software businesses in this segment, about 65% of the revenues were up 4% on an organic basis. This revenue was broad based among our software businesses and driven by organic recurring revenue growth of approximately 6%. Our non-software businesses in this segment were down 13% for the quarter; a touch better than we anticipated. As we turn to Page 11, revenues in our MAS segment were $381 million, up 2% on an organic basis. EBITDA margins were 34.8% in the quarter. As we turn to Page 12, revenues in our Process Technology segment were $131 million, down 10% on an organic basis, EBITDA margins hung in at 31% in the quarter. Now, please turn to Page 14, where I'll highlight our increased guidance for 2021. Based on strong Q1 performance and our increased confidence for the balance of the year, we're raising our full-year adjusted DEPS to be in the range of $14.75 and $15 per share and organic growth to be in the 6% to 7% range. The 6% to 7% organic growth is against a 1% organic decline in 2020. Our tax rate should continue to be in the 21% to 22% range. For the second quarter, we're establishing adjusted DEPS guidance to be between $3.61 and $3.65 and expect second quarter organic revenue growth to be in line with the full-year organic growth rate. Turning to Page 15 and our closing summary. EBITDA margins expanded nicely and free cash flow grew 54% to $543 million, which enabled us to continue our rapid deleveraging in the quarter. Bill has been a Roper Director since 1997 and has reached our mandatory Board retirement age.

Total revenue increased 13% to $1.53 billion, which was an all-time record for any Roper quarter. Adjusted DEPS was $3.60, 18% above prior year. Based on strong Q1 performance and our increased confidence for the balance of the year, we're raising our full-year adjusted DEPS to be in the range of $14.75 and $15 per share and organic growth to be in the 6% to 7% range. For the second quarter, we're establishing adjusted DEPS guidance to be between $3.61 and $3.65 and expect second quarter organic revenue growth to be in line with the full-year organic growth rate.

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Having passed the midpoint of 2021 and looking forward, we made a second set of positive revisions to our West Coast market forecast, which can be found on page S-17 of the supplemental. Driving the changes is an increase in 2021 GDP and job growth estimates to 7% and 5%, up from 4.3% and 3.2% respectively from our initial forecast. As a result, we now expect our average 2021 net effective rent growth to improve to minus 0.9% from minus 1.9% from the beginning of the year. To put this into perspective, consider that our net effective rents were down about 9% year-over-year in Q1 2021. Given our current expectation of minus 0.9% rent growth for the year, year-over-year net effective market rents are now forecasted to increase about 6% in the fourth quarter of 2021. Cash delinquencies were up modestly on a sequential basis at 2.6% of scheduled rent for the quarter and well above our 30-year average delinquency rate of 30 to 40 basis points. Only about $7 million of the $55 million in delinquent rent shown on page S-16 of the supplemental has been recorded as revenue. The unemployment rate was still 6.5% in the Essex markets as of May 2021 underperforming the nation. Employment in the Essex markets dropped over 15% in April 2020 and while job growth in our markets outpaced the nation in the second quarter, we are still 7.9% below pre-pandemic employment, compared to 4.4% for the U.S. overall. Our survey of job openings in the Essex markets for the largest tech companies continues to be very strong as we reported 33,000 job openings as of July, a 99% increase over last year's trough. As we highlight on page S-17.1 of our supplemental, this transition has already started in recent months as our hardest hit markets in the Bay Area once again experienced net positive migration from beyond the NorCal region. In particular, since the end of Q1, the submarket surrounding San Francisco Bay have seen positive net migration that represents 18% of total move-outs over the trailing three months compared to minus 8% a year ago. On the supply outlook, we provided our semi-annual update to our 2021 forecast on S-17 of the supplemental with slight increases to 2021 supply as COVID-related construction delays shifted incremental yields from late 2020 into 2021. Multifamily permitting activity in Essex markets also continues to trend favorably, declining 200 basis points on a trailing 12 month basis as of May 2021 compared to the national average, which grew 230 basis points. Median single family home prices in Essex markets continued upward in California and Seattle, growing 18% and 21% respectively on a trailing three-month basis. Turning to apartment transactions, activity is steadily accelerated since the start of the year, with the majority of apartment trades occurring in the low-to-mid 3% cap rate range based on current rents. Our operating strategy during COVID to favor occupancy while adjusting concessions to maintain scheduled rents enabled us to optimize rent growth concurrent with the increase in demand resulting in same-store net effective rent growth of 8.3% since January 1 and most of this growth occurred in the second quarter. I would like to provide some context for why sequential same-property revenues declined by 90 basis points compared to the first quarter. The two major factors that drove the decline were 50 basis points of delinquency and 50 basis points in concessions. As expected in the second quarter, delinquency reverted back to 2.6% of scheduled rent versus the 2.1% in the first quarter. Although concessions have generally improved in the second quarter, they remain elevated ranging from 2.5 to 3 weeks in certain CBDs such as CBD, LA, San Jose and Oakland. As of this June, our same-store average net effective rents compared to March of last year was down by 3.1%. Since then, we have seen continued strength and based on preliminary July results, our average net effective [Indecipherable] are now 1.5% above pre-COVID levels. it is notable that this 1.5% portfolio average diverged regionally with both Seattle and Southern California up 5.8% and 9.3% respectively while Northern California has yet to fully recover with net effective rents currently at 8% below pre-COVID levels. On a sequential basis, net effective rents on new leases have improved rapidly throughout the second quarter and preliminary July rent increased 4.7% compared to the month of June, led by CBD San Francisco and CBD Seattle, both up about 11%. Currently San Jose has 8.1% of total office stock under construction and similarly Seattle has 7.7% of office stock under construction. Notable activities include Apple leasing an additional 700,000 sqft and LinkedIn announced recent plans to upgrade our existing offices in Sunnyvale. In the Seattle region, Facebook expanded their Bellevue footprint by 330,000 sqft and Amazon announced 1400 new web services jobs in Redmond. I'm pleased to report core FFO for the second quarter exceeded the midpoint of the revised range we provided during the NAREIT conference by $0.08 per share. Of the $0.08, the $0.03 relates to the timing of operating expenses and G&A spend, which is now forecasted to occur in the second half of the year. As such, we are raising the full year midpoint of our same-property revenue growth by 50 basis points to minus 1.4%. In addition, we have lowered our operating expense growth by 25 basis points at the midpoint, due to lower taxes in the Seattle portfolio. All of this resulted in an improvement in same property NOI growth by 80 basis points at the midpoint to minus 3%. Year to date, we have revived our same-property revenue growth at the midpoint, up 110 basis points and NOI by 160 basis points. As it relates to full year core FFO, we are raising our midpoint by $0.09 per share to $12.33. Year-to-date we, have raised core FFO by $0.17 or 1.4%. During the quarter, we received $36 million from an early redemption of a subordinated loan, which included $4.7 million in prepayment fees, which have been excluded from Core FFO. Year-to-date, we have been redeemed on approximately $150 million of investment and expect that number to grow to approximately $250 million by year-end. This is significantly above the high end of the range we provided at the start of the year. As for new preferred equity investments, we have a healthy pipeline of accretive deals and we are still on track to achieve our original guidance of $100 million to $150 million in the second half of the year. However, the timing mismatch between the higher level of early redemptions coupled with funding of new investments expected later this year has led to an approximate $0.10 per share drag on our FFO for the year. Moving to the balance sheet, we remain in a strong financial position due to refinancing over 1/3 of our debt over the past year and a half taking advantage of the low interest rate environment to reduce our weighted average rate by 70 basis points to 3.1% and lengthening our maturity profile by an additional two years. We currently have only 7% of our debt maturing through the end of 2023.

On the supply outlook, we provided our semi-annual update to our 2021 forecast on S-17 of the supplemental with slight increases to 2021 supply as COVID-related construction delays shifted incremental yields from late 2020 into 2021. This is significantly above the high end of the range we provided at the start of the year.

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Earlier today, we reported the highest adjusted fourth-quarter earnings per share in company history at $11.39 per share, 109% increase over last year. Our full-year adjusted earnings per share was also a record, coming in at $40.03, 120% increase over last year's $18.19 per share. Record annual revenues of $22.8 billion were driven by contributions from acquired businesses, our growing e-commerce platform and successful navigation of the supply and-demand environment. SG&A as a percentage of gross profit decreased to 57.2%, 730 basis points better than last year, resulting in SG&A generating over $1.8 billion in adjusted EBITDA for the year. 18 months ago, we launched our plan to grow from just under $13 billion in revenue and $12 in earnings per share to $50 billion in revenue and $50 in EPS. The transformation of our company into a diversified omnichannel retailer leveraging our nationwide network and over 7 million annual customers is now well underway. to grow from just under $13 billion in revenue and $12 in earnings per share to $50 billion in revenue and $50 in EPS. The transformation of our company into a diversified omnichannel retailer leveraging our nationwide network and over 7 million annual customers is now well underway. Through these efforts, we are de-linking the historical relationship of each $1 billion of revenue producing only $1 of earnings per share as follows: We just completed a year where, despite inventory constraints, we generated nearly $23 billion in revenue and earned $40 in EPS. Including a full year of performance from 2021 acquisitions, our annual run rate is well beyond $25 billion in revenue. Next, we have acquired businesses that will contribute $11.1 billion in annualized steady-state revenues and entered the Canadian market. Our physical footprint now reaches 95% of consumers within a 250-mile radius. In January, the 13th month since the inception of Driveway, we achieved over 2,000 transactions. In addition, 28,000 of our Lithia channel sales in Q4 were e-commerce, representing a combined annual revenue run rate of $6 billion in LAD e-commerce revenues. Driveway Finance or DFC's portfolio stands at over $700 million as of December 31. When we reach $50 billion in revenue in 2025, we now believe that every $1 billion in revenue will produce $1.10 to $1.20 in earnings per share or $55 to $60 in EPS. Sales volumes reflect a blended 2.5% new and used vehicle U.S. market share; next, continued investment to scale Driveway and GreenCars is included; total vehicle GPUs returning to pre-pandemic levels; improvements in personnel productivity, increased leverage of our underutilized network and economies of scale in marketing from national brand awareness, driving SG&A as a percentage of gross profit toward 60%; acquiring a further $9 billion to $10 billion in annual revenues to complete the build-out of our North American footprint of 400 to 500 locations. Next, an investment-grade rating and utilization of free cash flows for M&A and internal investment, driving decreased borrowing costs; flexibility and headroom and capital allocation for share buybacks in the event of valuation disconnect; continued drag on DFC's profitability due to building of CECL reserves as we scale from our current penetration rate of approximately 4% to a targeted 15%; and finally, early benefits from adjacencies with higher pre-tax margins that also carry structurally lower SG&A costs. market share, we see opportunity for each $1 billion of revenue to produce up to $2 in EPS. Our future state contemplates the following additional drivers: up to 20% of units are financed with DFC, and there is no headwind from recording the CECL reserves outpacing the recognition of interest income; our cost structure is optimized to below 50% SG&A as a percentage of gross profit; and finally, our horizontals, such as fleet and lease management, consumer insurance and new verticals, are further developed. Since the end of the third quarter, we have completed acquisitions that are expected to generate $1.4 billion in annualized revenues, adding critical density to the North Central Region 3 and the Southeast Region 6. Looking forward, we have $1.1 billion in annualized revenue under contract or LOI. In addition, our active deal pipeline has grown to over $13 billion. We remain confident in our ability to find deals that build out our physical network and that are priced at 15% to 30% of revenues or three to seven times EBITDA. This discipline ensures that we will meet our after-tax return threshold of 15% in a post-pandemic profit environment. LAD is known in the industry as the buyer of choice due to smooth manufacturer approvability, timely, confidential and certain completion of transactions and retaining over 95% of its employees. Last month, we shared that Driveway had significantly outperformed its December volume target by 32% with 1,650 transactions. This momentum continued into January with over 2,000 transactions, taking us one step closer to our 2022 target of over 40,000 transactions or an estimated $1 billion in revenue. Over 97% of our transactions were incremental to Lithia or Driveway and have never transacted with us in the past 15 years. In addition, our average shipping distance was 932 miles, though we believe once the network is fully built out and inventories return to normal, shipping distances will be meaningfully less. For 2022, the expected $1 billion in revenues contributed by Driveway represents the amount generated from shop transactions, along with the revenue associated with the subsequent retailing or wholesaling of vehicles procured by Driveway. Under his leadership, we completed the inaugural offering and today have grown the DFC portfolio to nearly $0.75 billion. Sustainable vehicles appear to have lower repair and maintenance needs than comparable ICE vehicles through their first seven to 10 years of ownership. Now that we are approaching the expected battery replacement windows for Gen 1 DEV and paid PHEVs, ultimate affordability will become much clearer. LAD has a track record of exceeding targets through strong execution in any environment, as demonstrated in the 18 months since the launch of its 2025 plan, the 25 years since becoming a high-growth public company and our 75-year history since our inception here in Southern Oregon. During 2021, DFC originated over 21,000 loans, penetrating approximately 4% of our retail units and in Q4 became LAD's largest retail lender. Of the loans originated in 2021, the average loan amount was $33,000, the average interest rate was 8%, and the average FICO score was 670. In our future state, however, DFC's contribution is clear, assuming a 15% to 20% penetration rate on 1.5 million units sold, DFC could originate between 225,000 and 300,000 loans and contribute up to $650 million of pre-tax earnings annually. New vehicle sales volumes continue to be impacted in the fourth quarter by the current supply demand environment with same-store revenues decreasing 8% and volumes decreasing 21% compared to last year, consistent with the decrease in national SAAR. Volume declines were offset by higher gross profit per unit, including F&I, which increased 84% over last year. Our teams excelled in increasing used vehicle volumes to offset the decline in new volumes with same-store sales revenues up 39% and volumes up 11% compared to last year. Used vehicle gross profit per unit, including F&I, increased 37% over last year. For the fourth quarter, we saw 74% of used vehicles direct from consumers and 26% were from other channels, such as auctions, other dealers, or wholesalers. In the fourth quarter, we increased the percentage of vehicles we source from consumers by 8%, earned over $1,400 more in gross profit and turn them 14 days faster. Same-store revenues grew 12%, which was driven by an 18% increase in customer pay work and a 27% increase in wholesale parts, offset by a 9% decline in warranty and a 2% decline in body shops. Same-store SG&A as a percentage of gross profit for the fourth quarter was 58.2%, a 320-basis-point improvement over last year. The $45 million incurred during the quarter are a headwind to our SG&A but lay the foundation for significantly increasing profitability in the future that Bryan shared with you. For the quarter, we generated $538 million of adjusted EBITDA, a 118% increase over 2020; and $304 million of free cash flow, defined as adjusted EBITDA plus stock-based compensation, less the following items paid in cash: interest, income taxes, dividends, and capital expenditures. We ended the quarter with $1.5 billion in cash and available credit, which is deployed today would support network growth of up to $6 billion in annualized revenues. As of quarter end, our ratio to net debt -- of net debt-to-adjusted EBITDA was 1.35 times. Our targets for the deployment of our free cash flows remain unchanged at 65% toward acquisitions; 25% toward internal investment in Driveway and DFC, along with capital expenditures, modernization, and diversification; and 10% toward shareholder return in the form of dividends and share repurchases. In the fourth quarter and to date in 2022, we've repurchased approximately 912,000 shares, representing 3% of our outstanding shares at an average price of $284. In November, we obtained an additional $750 million repurchase authorization from the board, and as of today, have a remaining availability of $679 million. We remain well-positioned for accelerated disciplined growth on the path toward achieving our plan to reach $50 billion of revenue and $55 to $60 of earnings per share by 2025 with even more significant upside into the future.

Earlier today, we reported the highest adjusted fourth-quarter earnings per share in company history at $11.39 per share, 109% increase over last year. 18 months ago, we launched our plan to grow from just under $13 billion in revenue and $12 in earnings per share to $50 billion in revenue and $50 in EPS. to grow from just under $13 billion in revenue and $12 in earnings per share to $50 billion in revenue and $50 in EPS. Sales volumes reflect a blended 2.5% new and used vehicle U.S. market share; next, continued investment to scale Driveway and GreenCars is included; total vehicle GPUs returning to pre-pandemic levels; improvements in personnel productivity, increased leverage of our underutilized network and economies of scale in marketing from national brand awareness, driving SG&A as a percentage of gross profit toward 60%; acquiring a further $9 billion to $10 billion in annual revenues to complete the build-out of our North American footprint of 400 to 500 locations. Same-store revenues grew 12%, which was driven by an 18% increase in customer pay work and a 27% increase in wholesale parts, offset by a 9% decline in warranty and a 2% decline in body shops.

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So today, we reported revenue of $617 million, that's down 12%, and cash earnings per share of $3.01, that's down 5% versus last year. These results both better than anticipated, volume recovered a bit more in the quarter than we forecasted and we did manage operating expenses down 14% against the prior year. Organic revenue growth overall minus 8%. Sales strengthened to over 90% of last year's level. Same-store sales or client-volume softness improved to minus 6%. Credit loss is $6 million, although held by a reserve release and retention continued steady at 92%. We added 175,000 new urban or city users in Q4. That represents 30% of all the new tags we sold in the quarter. If you look at Page 7 of our earning supplement, you can see that every Q4 metric is improving from the Q2 low. Revenue up from $525 million to $617 million, cash earnings per share up $2.28 to $3.01, sales up from 55% to now over 90% of last year's level. Same-store sales volume getting better from minus 17% to minus 6%, credit losses from $21 million to $6 million, and then lastly retention holding steady at 92%. Revenue finished at approximately $2.4 billion, that's down 10% versus $19 billion, and cash earnings per share finishing at $11.09, down 6% against 2019. COVID and the shutdowns did manage the vanquish over $400 million of revenue that we planned in 2020, really in three ways. And lastly, the demand for our service is clearly recovering as sales reached 90% of prior-year levels. Expenses, tough times but we did manage expenses down over 10% in Q2, 3, and 4. So if we get that, that recovery would provide about 4% to 5% of incremental revenue lift in the second half. Revenue of $2,650,000,000 at the midpoint that reflects an 11% increase. Overall organic revenue in the same range kind of 9% to 13% but I do want to emphasize that assumes 3% to 4% of softness recovery from today's level. We're anticipating significant sales growth over 30% this year, which would be a record-level sales for the company and profit guide at the midpoint $12.40 of cash earnings per share for the core business. We are planning about $0.10 of dilution from the Roger acquisition, so that would put our consolidated number at $12.30 at the midpoint. Lastly, assuming now May 1 close for the AFEX acquisition, accretion could be approximately $0.20 for the year. So if that happens on time, that could take consolidated cash earnings per share to $12.50. Chuck will speak further about how the guidance rolls out across the quarters, but I do want to point out that our guidance outlooks Q2, 3, and 4 revenue and profit growth to be back into the high-teens. So if you look at Page 11 of our earnings supplement, you'll see the current Beyond initiatives for each of our four businesses. We now settled 25% of all proprietary hotel payments with our virtual card in which we earn interchange. So that's up from literally from 0% a few years ago. You can see that on Pages 11 and 12 of our supplement. So a large global SMB client base numbering in the hundreds of thousands, we've got working SMB sales channels, they historically have acquired 30,000 new clients per quarter. We've got scaled virtual card processing capability, we generated over $30 billion in annualized spend last year, we've got a very large merchant database that allows us to monetize virtual card, and now we've got some modern cloud software to provide the bill-pay functionality, along with a pretty cool user interface. For the fourth quarter of 2020, we reported revenue of $617 million, down 12%. GAAP net income down 11% to $210 million, and GAAP net income per diluted share down 6% to $2.44. Adjusted net income for the fourth quarter of 2020 decreased 10% to $258 million, and adjusted net income per diluted share decreased 5% to $3.01. Organic revenue in the quarter was down 8% overall, primarily due to same-store sales being down 6% year-over-year. Our fuel category was down organically about 10% versus Q4 last year. The corporate payments category was down approximately 6% in the fourth quarter. Approximately 6 points of decline was again driven by the 100 most-affected customers we discussed last quarter. Lower spending on our T&E product drove another 2 points of organic drag. Virtual card volumes were up 12% for the quarter, which was an improvement from flat last quarter as continued political spend and the benefit of new customers offset the drag from the highly affected customers. Cross-border or FX-related volumes were down 1% as payment volumes are still being affected by lower invoice levels, specifically in manufacturing and wholesale trade. Full AP continued to perform very well, with volume up 14%. We continue to invest here and have enabled 10 new ERP integrations in 2020, with plans for another 10 or so in 2021. Tolls continue to be our most resilient business and grew organically 7% in the fourth quarter, up 4% from last quarter. Active toll tags were up 6% in the quarter, with urban tags accounting for 25% of all new tags sold during 2020. The lodging category was down 25% organically in the fourth quarter, with 20 points of drag caused by the inclusion of acquired airline Lodging businesses in the year-ago period. Our total operating expenses were down 14% for the fourth quarter of 2020 to $323 million. As a percentage of total revenues, operating expenses were approximately 52.4%, or roughly 240 basis point improvement from last quarter. Bad debt expense in the fourth quarter of 2020 was $6 million or 2 basis points, which includes a reserve release of $5 million. Bad debt was only 4 basis points excluding the reserve release. Interest expense decreased 13% to $30.3 million, driven primarily by decreases in LIBOR related to the unhedged portion of our debt. Our effective tax rate for the fourth quarter of 2020 was 20.3%, with the reduction from last year, driven primarily by incremental excess tax benefit on stock option exercises. As of December 31, 2020, we have approximately $1.9 billion of total liquidity consisting of available cash on the balance sheet and our un-drawn revolver at quarter-end. We ended the quarter just shy of $1.5 billion in total cash, of which approximately $542 million is restricted and consists primarily of customer deposits. We had $3.6 billion outstanding on our credit facilities and $700 million borrowed in our securitization facility. In the quarter, we repurchased roughly 181,000 shares in-connection with employee sales. In total for 2020, we spent $850 million on share buybacks. For the quarter, we had approximately $23.4 million of capital expenditures and we finished with a leverage ratio of 2.67 times trailing-12 month EBITDA as of December 31st. Looking ahead, we're expecting Q1 2020 adjusted net income per share to be between $2.60 and $2.80, which at the midpoint is approximately $0.31 or 10% lower than what we reported in Q4 of 2020. Roughly a third of the difference is due to the normalization of certain expenses, for example in Q4 of 2020, we released $5 million of our bad debt reserve, which we do not expect to repeat in Q1. Additionally, when the impact of the COVID-related shutdowns became clear in 2020, we proactively reduced our annual incentive target payouts by 50% and accrued to those lower targets for the remainder of the year. We also expect our effective tax rate in Q1 of 2021 to be about 80 to 100 basis points higher than the rate we reported in Q4 of 2020. For 2021, we are guiding revenues to be between $2.6 billion and $2.7 billion and adjusted net income per diluted share to be between $11.90 and $12.70 inclusive of the Roger acquisition. We're also making incremental investments in sales, marketing, and IT to support our growth aspirations and to deliver a 2021 sales production plan, that's more than 30% higher than 2020's results. As such, the fully loaded acquisition will be an estimated $0.10 drag to adjusted net income per diluted share in 2021.

So today, we reported revenue of $617 million, that's down 12%, and cash earnings per share of $3.01, that's down 5% versus last year. Revenue up from $525 million to $617 million, cash earnings per share up $2.28 to $3.01, sales up from 55% to now over 90% of last year's level. GAAP net income down 11% to $210 million, and GAAP net income per diluted share down 6% to $2.44. Adjusted net income for the fourth quarter of 2020 decreased 10% to $258 million, and adjusted net income per diluted share decreased 5% to $3.01. Looking ahead, we're expecting Q1 2020 adjusted net income per share to be between $2.60 and $2.80, which at the midpoint is approximately $0.31 or 10% lower than what we reported in Q4 of 2020. For 2021, we are guiding revenues to be between $2.6 billion and $2.7 billion and adjusted net income per diluted share to be between $11.90 and $12.70 inclusive of the Roger acquisition.

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Our teams executed very well in the quarter, and the result was a strong financial performance. For Q3, we reported earnings of $1.11 per share versus $1.27 in the prior-year quarter. Excluding a small restructuring and impairment charge, we generated $1.13 in the quarter versus $1.36 in the prior year, after adjusting for restructuring and a small gain on our investment in Nikola. In the quarter, we had inventory holding losses estimated to be $25 million or $0.37 per share. In the prior-year quarter, we had inventory hoarding gains of $31 million or $0.44 per share. Consolidated net sales in the quarter of $1.4 billion were up significantly compared to $759 million in Q3 of last year. Gross profit for the quarter decreased to $143 million from $164 million in the prior-year quarter, and gross margin was 10.4% versus 21.6%, primarily due to the swing from inventory holding gains to losses, which were partially offset by increases in both consumer, and building products. Adjusted EBIT in Q3 was $112 million, down slightly from $126 million in Q3 of last year, and our trailing 12 months adjusted EBIT is now $662 million. And I spend a few minutes on each of the businesses, In steel processing, net sales of $1.1 billion more than doubled from $504 million in Q3 of last year, are mainly due to the average selling prices being higher, and the inclusion of both Tempel Steel and Shiloh BlankLight business. Total ship tons were down 2% compared to last year's third quarter despite the recent acquisitions which contributed 80,000 tons during the quarter. Excluding the impact of acquisitions, total ship tons were down 9% year over year. Direct tons in Q3 were 51% in mix compared to 48% in the prior year. And market demand is good, and the war in Ukraine, and its impacts on the steel supply chain pricing, and end-market demand are difficult to predict. In Q3, steel generated an adjusted EBIT of $7 million compared to $62 million last year. Large year-over-year decrease was driven by the inventory holding losses I mentioned earlier, estimated to be $25 million in the quarter compared to inventory holding gains of $31 million last year. An unfavorable swing of $56 million. Inventory holding losses for the current quarter included a $16 million charge to write inventory down to net realizable value, and to the expected future decline of steel prices at year-end, at quarter-end. In consumer products, net sales in Q3 were $162 million, up 41% from $115 million in the prior year. Adjusted EBIT for the consumer business was $27 million and the EBIT margin was 16.5% in Q3, compared to $15 million and12.7% last year. Building products generated net sales of $133 million in Q3, which was up 38% from $96 million in the prior year. Building products adjusted EBIT was $50 million, and adjusted EBIT margin was 37.3%, up significantly from $27 million and 28.4% in Q3 last year. ClarkDietrich's results improved by $15 million year over year, while WAVE was down slightly from a year ago. ClarkDietrich and WAVE contributed equity earnings of $21 million and $19 million respectively. In Sustainable Energy Solutions', net sales in Q3 were $31 million, down slightly from $32 million in the prior year, despite significantly lower volumes through the divestiture of our LPG gas business. Excluding the divestiture, net sales were up 31% in Q3 versus last year. Business reported an adjusted EBIT loss of $3 million in the quarter compared to break-even results in the prior year, as higher average selling prices were more than offset by the impact of significantly increased input costs. Cash flow from operations was $74 million in the quarter, with free cash flow totaling $51 million. We started to see our operating working capital levels decrease during the quarter, primarily due to lower steel prices, which added $49 million cash flow. During the quarter, we received $29 million in dividends from our unconsolidated JVs', spend $270 million on the acquisition of Tempel, invested $24 million in capital projects, paid $14 million in dividends, and spent $54 million to repurchase a million shares of our common stock at an average price of $54.26. Following the Q3 purchases, we have slightly over $7 million shares remaining under our share repurchase authorization. Funded debt at quarter end of $813 million increased $111 million sequentially, primarily to fund the acquisition of Tempel. Interest expense of $8 million was up slightly due to higher average debt levels, and we ended Q3 with $44 million in cash and $396 million available under our revolving credit facility. Yesterday, the board declared a $0.28 per share dividend for the quarter, which is payable in June of 2022. Most of you on the call know there was a precipitous decline in steel prices during the quarter from an all-time high for hot roll of $1958 per ton. During the quarter, it fell briefly below $1 thousand per ton. However, the recent events in Ukraine have reverse this trend significantly, as hot roll now sits around 1300 in upward pressure.

Our teams executed very well in the quarter, and the result was a strong financial performance. For Q3, we reported earnings of $1.11 per share versus $1.27 in the prior-year quarter. Excluding a small restructuring and impairment charge, we generated $1.13 in the quarter versus $1.36 in the prior year, after adjusting for restructuring and a small gain on our investment in Nikola. Consolidated net sales in the quarter of $1.4 billion were up significantly compared to $759 million in Q3 of last year. And market demand is good, and the war in Ukraine, and its impacts on the steel supply chain pricing, and end-market demand are difficult to predict.

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We reported third quarter revenue of $88.6 million and earnings per share of $0.85. For the year-to-date, we had revenue of $200.8 million and earnings per share of $0.55. Revenue for the year-to-date is up 17% from the same period last year. Our compensation ratio of 50% for the quarter brought down the year-to-date ratio to 65%, and our objective is to bring that ratio down further by year-end, while still paying our team increased compensation in absolute dollars. We continue to expect our annual tax rate to be in the mid-20% range before adjusting for charges relating to changes in the value of restricted stock upon vesting. We ended the quarter with $100.4 million in cash and $291.9 million of debt. And after the quarter end, we made an additional voluntary debt repayment of $10 million. During the quarter, we repurchased more than 637,000 shares and share equivalents for a total cost of $9.5 million. And in October, we repurchased an additional 194,000 shares for a cost of $3.1 million. For the year-to-date, we've used our cash flow to repay $45 million of debt and repurchased $36.4 million of shares and share equivalents. In addition, we declared our usual quarterly dividend of $0.05 per share.

We reported third quarter revenue of $88.6 million and earnings per share of $0.85.

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I'm particularly pleased with our results as quarterly total fee revenue exceeded $2.5 billion for the first time in the Company's history. Second quarter earnings per share was $2.07 or $1.97 excluding notable items. Despite the impact of interest rates on our NII, earnings per share ex-notables reached the highest level since 4Q '19 when quarterly NII was notably higher more than 35% more than it was in 2Q '21. Relative to the year-ago period, quarterly total fee revenue exceeded $2.5 billion for the first time, increasing 6% year-over-year, driven by solid servicing and management fee growth, which increased 10% and 14% year-over-year respectively, as well as better securities finance results. While second quarter total expenses were up 1% relative to the year-ago period, they were down almost 0.5 percentage point year-over-year, excluding notable items and currency translation as our productivity improvements continued to yield results. Our strong fee revenue performance coupled with continued cost discipline, delivered a 200 basis point improvement to our pre-tax margin year-over-year which reached nearly 30% in the second quarter excluding notable items. Further, return on equity was 12.6% or 11.9% excluding notable items in the second quarter. AUC/A increased to a record $42.6 trillion at quarter-end, supported by higher period-end equity market levels and new business onboardings. New asset servicing wins increased to $1.2 trillion for the quarter, including the large Alpha mandate with Invesco announced in April. We reported two new Alpha wins in the second quarter, taking the total number of Alpha clients to 15. It will provide investors with extensive reach into more than 100 markets around the world. At CRD, annual recurring revenue increased 11% year-over-year to $230 million and we remain pleased with how the business is performing while also enabling and propelling our Alpha strategy. AUM increased to $3.9 trillion and management fees increased to $504 million, both records, benefiting from strong second quarter flows of $83 billion across the ETF, institutional and cash businesses as we continue to leverage the strengths of our asset management franchise. Turning to our balance sheet and capital, we returned over $600 million of capital to our shareholders during the second quarter, inclusive of $425 million of common share repurchases, consistent with the limit set by the Federal Reserve. As examples, yesterday, we announced that our Board of Directors has approved a 10% increase of our third quarter common dividend to $0.57 per share and authorized a common share repurchase program of up to $3 billion during the third quarter of 2021 through the fourth quarter of 2022. We reported earnings per share of $2.07, or $1.97 excluding the $0.10 positive impact of notable items which was driven by a previously announced sale of a majority stake in a legacy business. Period end AUC/A increased 27% year-on-year and 6% quarter-on-quarter to a record $42.6 trillion. At Global Advisors, AUM increased 28% year-on-year and 9% quarter-on-quarter to $3.9 trillion, also a record. Second quarter servicing fees increased 10% year-on-year, including currency translation, which was worth approximately 3 percentage points year-on-year. AUC/A wins totaled $1.2 trillion in the second quarter, substantially up from recent quarters, primarily as a result of the large Alpha client mandate announced last April that Ron just mentioned. AUC/A won, but yet to be installed also amounted to $1.2 trillion at quarter-end as we smoothly onboarded over $400 billion of client assets this past quarter. This quarter, we had strong growth in the EMEA region, aided by our intense coverage efforts, which now extend to approximately 350 overall of our top clients. We continue to estimate that we need at least $1.5 trillion in gross AUC/A wins annually in order to offset typical client attrition and normal pricing headwinds and we've clearly exceeded that mark this year. At this time, we expect the current won but yet to be installed AUC/A will be converted over the coming 12 to 24-month time period with the associated revenue benefits beginning in 2022 and the majority occurring in 2023. Second quarter management fees reached a record $504 million, up 14% year-on-year inclusive of a 2 percentage point impact from currency translation and were up 2% quarter-on-quarter resulting in an investment management pre-tax margin approaching 35%. These benefits were only partially offset by the run rate impact from the previously reported idiosyncratic institutional client asset reallocation, as well as about $25 million of money market fee waivers this quarter. While we previously estimated that money market fee waivers on our management fees could be approximately $35 million per quarter, as a result of the recent improvement in short-end rates following the June FOMC meeting, we now expect that they will be about $20 million to $25 million per quarter for the rest of the year, which is about a third lower than we had previously expected. Global Advisors recorded solid flows across institutional, ETFs and cash for the quarter with the total amount -- amounting to $83 billion. Relative to a strong second quarter in 2020, FX revenue fell 12% year-on-year as declining FX market volatility compared to the COVID environment last year more than offset higher client volumes. FX revenue was down 17% quarter-on-quarter, driven by a moderation of client volumes from index rebalances experienced in the first quarter and lower market volatility. Our securities finance business recorded strong revenue growth with fees increasing 18% year-on-year and 10% quarter-on-quarter, mainly as a result of higher enhanced custody and agency balances as client leverage rebounded. Finally, second quarter software and processing fees were down 12% year-on-year, largely due to the absence of prior-year positive mark-to-market adjustments. Software and processing fees increased 24% quarter-on-quarter, mainly as a result of higher CRD revenues. The more durable SaaS and professional services revenues continued to grow nicely and were up 10% year-on-year resulting in an increase in stand-alone annualized recurring revenue to $230 million. Although Alpha deals usually take somewhat longer to implement given the size and scope, the pay-off outweighs the longer implementation period as we are able to further expand share of wallet to generate attractive revenue growth rates and increase the contract lengths which can be up to 10 years in length for Alpha services that span the front and middle office. Turning to Slide 10, second quarter NII declined 16% year-on-year, mainly as a result of the effects of lower interest rate environment on our investment portfolio yields and sponsored member repo product. Total average deposits increased by $16 billion in the second quarter or an increase of 7% quarter-on-quarter, reflecting the continued impact of the Federal Reserve's expansionary monetary policy. While we continue to remain mindful of OCI risk in the current rate environment, we tactically added about $5 billion quarter-on-quarter to our investment portfolio a few months ago, before the recent downdraft in rates. We also increased our average loan balances by approximately 5% quarter-on-quarter to over $29 billion, driven by higher utilization by asset managers and private equity capital call client. Second quarter expenses, excluding notable items, increased 2% year-on-year, mainly driven by the weaker dollar. Excluding the impact of notable items and currency translation, total expenses were down nearly 0.5 percentage point year-on-year as productivity savings for the quarter more than offset higher revenue related expenses and targeted investments in client onboarding costs. Information systems and communications were up 5% due to continued investment in our technology estate. Transaction processing was up 10%, primarily driven by higher revenue related expenses for sub-custody balances and market data costs. Occupancy was down 13% reflecting benefits from our footprint optimization efforts and some timing benefits. And other expenses were down 11% primarily driven by lower-than-usual professional services fees. We are pleased with our performance under this year's CCAR with the calculated Stress Capital Buffer well below the 2.5% minimum, resulting in a preliminary SCB at that floor. For example, yesterday, we announced a 10% increase to our third quarter common dividend to $0.57 per share and our Board has authorized a common share repurchase program of up to $3 billion from the third quarter of 2021 through year-end 2022. In addition, we are also pleased that the Federal Reserve has provided State Street with one additional year until January 1, 2024, to retain its current G-SIB surcharge of 1%. To the left of the slide, we show the evolution of our CET1 and Tier 1 leverage ratios. As of quarter-end, our standardized CET1 ratio improved by 40 basis points quarter-on-quarter to 11.2% as we had expected and sits above the upper end of our 10% to 11% CET1 target range. Our Tier 1 leverage ratio remains well above the regulatory minimum, but declined by 20 basis points quarter-on-quarter to 5.2%, primarily as a result of the further increase in average client balances as the Fed's quantitative easing continues. We continue to think that a Tier 1 leverage ratio in the 5s as appropriate for our business model. Total fee revenue was up almost 6% year-on-year and exceeded $2.5 billion for the first time with double-digit growth in servicing and management fees, despite the year-on-year headwind from the strong FX trading services results we had in the second quarter of last year during COVID. In terms of the third quarter of 2021, we expect overall fee revenue to be up 7% to 8% year-over-year with servicing and management fees each expected to be up 7% to 9% year-over-year. Regarding NII, despite the recent flattening in the yield curve, we have seen an increase in short-end market rates and we now expect a modestly improved quarterly NII range of $460 million to $470 million per quarter for the rest of the year, assuming rates do not deteriorate and premium amortization continues to attenuate. We expect that third quarter expenses ex-notable items will be flattish, plus or minus 0.5 percentage point year-over-year in 3Q. These fee and expense guides for 3Q include approximately 1 point of currency translation year-over-year. On taxes, we expect that the 3Q '21 tax rate will be in the middle of our full-year range of 17% to 19%.

Second quarter earnings per share was $2.07 or $1.97 excluding notable items. As examples, yesterday, we announced that our Board of Directors has approved a 10% increase of our third quarter common dividend to $0.57 per share and authorized a common share repurchase program of up to $3 billion during the third quarter of 2021 through the fourth quarter of 2022. We reported earnings per share of $2.07, or $1.97 excluding the $0.10 positive impact of notable items which was driven by a previously announced sale of a majority stake in a legacy business. Period end AUC/A increased 27% year-on-year and 6% quarter-on-quarter to a record $42.6 trillion. At Global Advisors, AUM increased 28% year-on-year and 9% quarter-on-quarter to $3.9 trillion, also a record. Second quarter servicing fees increased 10% year-on-year, including currency translation, which was worth approximately 3 percentage points year-on-year. For example, yesterday, we announced a 10% increase to our third quarter common dividend to $0.57 per share and our Board has authorized a common share repurchase program of up to $3 billion from the third quarter of 2021 through year-end 2022.

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Dustin has been with Wabash National for 14 years and brings with him broad leadership experience across the areas of finance, manufacturing and supply chain from roles at Wabash and Ford Motor Company. Because of backlog strength in our DPG and FMP segments, our order book saw the less than normal seasonality, it would indicate an overall backlog remained up 77% year-over-year. Couple that with a changing logistics landscape, knowing that our customers are uniquely positioned to grow capacity and 10 years of continued growth and overall trailer demand and it's time for Wabash National to move to increase our ability to capitalize on this profitable opportunity. Therefore, we are announcing the transition of existing manufacturing floor space to produce dry vans beginning in 2023 and we expect to be able to produce incremental 10,000 dry vans annually. To put these numbers in context that is roughly a 20% increase in our dry van capacity, but only a 5% increase for the industry. To facilitate this move, we will be ramping down manufacturing of our conventional refrigerated van product and converting that floor space to dry van production over the next 18 months. Molded structural composite technology refrigerated vans have over 10 million miles on the road and show better thermal efficiency combined with its lighter weight design. In 2020, we posted the best cycle to trough performance in the company's history by generating over $100 million of free cash flow. On a consolidated basis, second quarter revenue was $449 million with consolidated new trailer shipments of approximately 11,590 units during the quarter. Gross margin was 12.4% of sales during the quarter. Operating margin came in at 5% or 4.6% on a non-GAAP adjusted basis. Operating EBITDA for the second quarter was $35 million or 7.8% of sales. Finally for the quarter, net income was $12.3 million or $0.24 per diluted share. On a non-GAAP adjusted basis, earnings per share was $0.21. From a segment perspective, Commercial Trailer Products generated revenues of $296 million and operating income of $32.3 million. Diversified Products Group generated $77 million of revenue in the quarter with operating income of $5.8 million or $4 million on a non-GAAP adjusted basis when we take out the gain on the sale of Extract Technology. Final Mile products generated $81 million of revenue during the second quarter. FMP experienced an operating loss of $3.2 million but a gain of $1.3 million in EBITDA. Operating cash flow during the second quarter was $9.3 million. we invested roughly $6.9 million via capital expenditures, leaving $2.4 million of free cash flow. We are increasing our capex guidance by $20 million to an anticipated range of $55 million to $60 million in capital spending for 2021. With regard to our balance sheet, our liquidity our cash plus available borrowings, as of June 30, was $304 million with $136 million of cash, cash equivalents and restricted cash. And $168 million of availability on our revolving credit facility, which is fully untapped. Through these non-core asset sales, we have raised a total of approximately $40 million and also structured our portfolio in a manner that aligns with our strategy for growth. The second quarter was a very active on for capital allocation as we used $30 million for debt reduction. $22 million to repurchase shares, $7 million for capital projects and $4 million to fund our quarterly dividend and we still ended the quarter with over $134 million of cash on the balance sheet and net debt leverage of only 2.6 times. Moving on to the outlook for 2021, we expect revenue of approximately $1.9 billion to $2 billion. SG&A as percent of revenue is expected to be in the low 6% range for the full year. Adjusted operating margins are expected to be in the high 3% range at the midpoint, which resulted in an earnings per share midpoint of $0.72 with a range of $0.67 to $0.77. Turning to the third quarter, we expect revenue in the range of $510 million to $540 million, up 17% at the midpoint sequentially versus Q2 with new trailer shipments of 12,500 to 13,500 as we look to continue increasing production throughout the year. Given our material cost headwinds will intensify as we move through the remainder of this year, we expect operating margins in the high 3% range in Q3. Expanding our dry van production capacity is an exciting investment that underpins our First to Final Mile strategy and will further enable performance and will strengthen our push toward 8% operating margin, which is a target we continue to expect to achieve by 2023.

Finally for the quarter, net income was $12.3 million or $0.24 per diluted share. On a non-GAAP adjusted basis, earnings per share was $0.21. Diversified Products Group generated $77 million of revenue in the quarter with operating income of $5.8 million or $4 million on a non-GAAP adjusted basis when we take out the gain on the sale of Extract Technology. Adjusted operating margins are expected to be in the high 3% range at the midpoint, which resulted in an earnings per share midpoint of $0.72 with a range of $0.67 to $0.77.

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Our adjusted FFO of $0.85 per share, and our funds available for distribution of $0.81 per share allowed us to maintain our quarterly dividend of $0.67 per share. The payout ratio is 79% of adjusted FFO and 83% of funds available for distribution. Over the last six months, we have issued $1.4 billion in bonds, and we have recast our $1.5 billion bank credit facility with a four-year maturity in 2025. With an estimated $24.5 billion remaining in the Provider Relief Fund and the likelihood of provider funding requests well in excess of this amount, we expect certain providers in the industry may have shortfalls. Based on operators representing over 90% of our facilities reporting in, the vaccination rate for residents is approximately 81% with the vaccination rate for staff at approximately 49%. This is a vast improvement over what we reported last quarter of 69% and 36% for residents and staff, respectively. Our NAREIT FFO for the quarter was $170 million or $0.71 per share on a diluted basis as compared to $181 million or $0.77 per share for the first quarter of 2020. Revenue for the first quarter was approximately $274 million before adjusting for nonrecurring items. The revenue for the quarter included approximately $12 million of noncash revenue. We collected over 99% of our contractual rent, mortgage and interest payments for the first quarter, as well as for the month of April. Our G&A expense was $10.4 million for the first quarter of 2021, in line with our estimated quarterly G&A expense of between $9.5 million and $10.5 million. Interest expense for the quarter was $56 million. In March, we issued $700 million of 3.25% senior notes due April 2033. Our note issuance was leverage neutral as proceeds were used to repurchase through a tender offer, $350 million of 4.375% notes due in 2023 and to repay LIBOR-based borrowings. As a result of the repurchase, we recorded approximately $30 million in early extinguishment of debt cost. At March 31, we had $135 million in borrowings outstanding under our $1.25 billion credit facility, which matured at the end of the month, and $50 million in borrowings under a term loan facility that had a maturity in 2022. On April 30, we closed a new $1.45 billion unsecured credit facility and a $50 million unsecured term loan facility that both mature in April of 2025. In March of 2020, we entered into $400 million of 10-year interest rate swaps at an average swap rate of 0.8675%. The repurchase of 50% of our 2023 bonds and the completion of the credit facility and term loan transactions extended our debt maturities, improved our overall borrowing cost and reinforced our liquidity position. In the first quarter, we issued 2 million shares of common stock through a combination of our ATM and dividend reinvestment and common stock purchase plan, generating $76 million in cash proceeds, but we believe our actions to date provide us with flexibility to weather a potential prolonged impact of COVID-19 on our business. At March 31, approximately 97% of our $5.5 billion in debt was fixed, and our funded debt to adjusted annualized EBITDA was approximately 5.2 times, and our fixed charge coverage ratio was 4.5 times. When adjusting to include a full quarter of contractual revenue for new investments completed during the quarter, as well as eliminating revenue related to assets sold during the quarter, our pro forma leverage would be roughly 5.1 times. As of March 31, 2021, Omega had an operating asset portfolio of 954 facilities with over 96,000 operating beds. These facilities were spread across 70 third-party operators, located within 41 states and the United Kingdom. Trailing 12-month operator EBITDARM and EBITDAR coverage for our core portfolio as of December 31, 2020, stayed relatively flat for the period at 1.86 times and 1.5 times, respectively, versus 1.87 times and 1.51 times, respectively, for the trailing 12-month period ended September 30, 2020. During the fourth quarter, our operators cumulatively recorded approximately $115 million in federal stimulus funds as compared to approximately $102 million recorded during the third quarter. Trailing 12-month operator EBITDARM and EBITDAR coverage would have decreased during the fourth quarter of 2020 to 1.38 and 1.04 times, respectively, as compared to 1.53 and 1.18 times, respectively, for the third quarter when excluding the benefit of the federal stimulus funds. EBITDAR coverage for the stand-alone quarter ended 12/31/2020 for our core portfolio was 1.33 times, including federal stimulus, and 0.78 times, excluding the $115 million of federal stimulus funds. This compares to the stand-alone third quarter of 1.44 times and 0.97 times with and without the $102 million in federal stimulus funds, respectively. Cumulative occupancy percentages for our core portfolio were at a pre-COVID rate of 84% in January 2020. While they flattened out to around 75% throughout the fall months, they subsequently fell to 73.3% in December and further in January to 72.3% before starting to show signs of recovery at 72.6% in February and 73.1% in March. Based upon what Omega has received in terms of occupancy reporting for April to date, occupancy has continued to improve, averaging approximately 73.4%. As previously announced, on January 20, 2021, Omega closed on the purchase of 24 senior housing facilities from Healthpeak for $510 million. The portfolio primarily consists of assisted living, independent living and memory care facilities with a total of 2,552 units located across 11 states. The master lease with Brookdale will generate approximately $43.5 million in contractual 2021 cash rent with annual escalators of 2.4%. Additionally, during the first quarter of 2021, Omega completed an $83 million purchase lease transaction for six skilled nursing facilities in Florida. The facilities were added to an existing operator's master lease for an initial cash yield of 9.25% with 2.25% annual escalators. Omega's new investments for the quarter totaled $610 million, inclusive of $17 million in capital expenditures. During the first quarter of 2021, Omega divested 24 facilities for total proceeds of approximately $188 million. As Taylor previously mentioned, there is approximately $24.5 billion left in the provider relief fund. Additionally, $8.5 billion was allocated to rural providers with the passing of the American Rescue Act on March 11, 2021. There has been a substantial reduction in resident and employee cases since the rollout with our current reporting as of last week, showing less than 550 cases, resident and employee, across less than 250 of our buildings, which low numbers have not been seen since April of last year. The final project cost is expected to be approximately $310 million. Lease-up momentum has been solid with 35 move-ins through April, the first full month of operations. By example, our Maplewood portfolio, which is concentrated in the early affected Metro New York and Boston markets, saw meaningful census erosion early in the pandemic with second-quarter census hitting a low of 80.4% in early June. That said, their portfolio occupancy level had returned to 85.6% in the month of November. Including the land and CIP, at the end of the first quarter, Omega Senior housing portfolio totaled $2.2 billion of investment on our balance sheet. This portfolio, excluding the 24 Brookdale properties, on a stand-alone basis had its trailing 12-month EBITDAR lease coverage fell 4 basis points to 1.08 times in the fourth quarter of 2020. We invested $16.8 million in the first quarter in new construction and strategic reinvestment. $9.4 million of this investment is predominantly related to our active construction projects. The remaining $7.4 million of this investment was related to our ongoing portfolio capex reinvestment program.

Our adjusted FFO of $0.85 per share, and our funds available for distribution of $0.81 per share allowed us to maintain our quarterly dividend of $0.67 per 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. The net effect of the pandemic and the government's actions was to allow VITAS to report an increase in adjusted net income of 25.7% in 2020. But VITAS had a patient base and its median length of stay fell to 11 days. Residential revenue totaled $144 million in the first quarter of 2021, an increase of 32% when compared to the prior year quarter and a 7.2% sequential growth when compared to the fourth quarter of 2020. Commercial revenue totaled $46.9 million in the quarter, an 8.4% decline when compared with the first quarter of 2020. Although our Commercial demand has not yet normalized to pre-pandemic levels, this decline has shown significant improvement when compared to the Commercial unit-for-unit revenue declines of 29.1%, 11.6% and 9.8% in the second, third and fourth quarters of 2020, respectively. Aggregate Roto-Rooter activity, which includes branch operations, independent contractors, as well as franchise fees and product sales, Roto-Rooter generated consolidated first quarter 2020 revenue of $212 million, an increase of 18.9%. VITAS' net revenue was $316 million in the first quarter of 2021, which is a decline of 6.5% when compared to the prior year period. This revenue decline is comprised primarily of a 7.1% decline in days of care. Our days of care was negatively impacted 111 basis points by the 2020 leap year. Our first quarter 2021 revenue included a geographically weighted average Medicare reimbursement rate increase, including the suspension of sequestration on May 1, 2020, of approximately 2.8%, offset by acuity mix shift, which reduced revenue by approximately $9.1 million or 2.7% in the quarter when compared to the prior year revenue and level of care mix. In addition, the combination of a lower Medicare cap and other counter-revenue changes offset a portion of the revenue decline by approximately 50 basis points. Our average revenue per patient per day in the first quarter of 2021 was $198.95, which, including acuity mix shift, is basically equal to the prior year period. Reimbursement for routine home care and high acuity care averaged $170.14 and $991.77, respectively. During the quarter, high acuity days of care were 3.5% of our total days of care, 71 basis points less than the prior year quarter. In the first quarter of 2021, VITAS accrued $1.5 million in Medicare Cap billing limitations. This compares to a $2.5 million Medicare Cap billing limitation we recorded in the first quarter of 2020. Of VITAS' 30 Medicare provider numbers, 27 of these provider numbers currently have a Medicare Cap cushion of 10% or greater. One provider number has a cap cushion between 5% and 10%. One provider number has a cap cushion between 0% and 5%. VITAS' first quarter 2021 adjusted EBITDA, excluding Medicare Cap, totaled $58.3 million in the quarter, which is a decrease of 3.3%. Adjusted EBITDA margin in the quarter, excluding Medicare Cap, was 18.4%, which is a 66 basis point improvement when we compare it to the prior year period. Roto-Rooter generated quarterly revenue of $212 million in the first quarter of 2021, an increase of $33.7 million or 18.9% over the prior year quarter. As Kevin noted earlier, total Roto-Rooter branch commercial revenue totaled $46.9 million in the quarter, a decrease of 8.4% over the prior year. This aggregate commercial revenue decline consisted of drain cleaning revenue, declining 5.8%, plumbing revenue, declining 5%, and excavation, declining 19.5%. Water restoration for commercial increased 8.8%. Our total Roto-Rooter branch residential revenue in the quarter totaled $144 million, an increase of 32% over the prior year period. This aggregate residential revenue growth consisted of drain cleaning, increasing 29.5%, plumbing expanding 34.9%, excavation increasing 35.8% and water restoration increasing 28.7%. In the first quarter, our average daily census was 18,050 patients, a decline of 6.1% over the prior year. In the first quarter of 2021, total admissions were 18,135. This is a 2.5% decline when compared to the first quarter of 2020. However, These 18,135 admissions in the first quarter of 2021 compared favorably to the sequential admissions of 16,822, 17,973 and 17,960 in the second, third and fourth quarters of 2020. In the first quarter, our home-based preadmit admissions decreased 1.5%. Hospital directed admissions expanded 2.4%. Nursing home admits declined 26.2%. And assisted living facility admissions declined 13.1% when compared to the prior year quarter. Our average length of stay in the quarter was 94.4 days. This compares to 90.7 days in the first quarter of 2020 and 97.2 days in the fourth quarter of 2020. Our median length of stay was 12 days in the quarter, which is two days less than the 14-day median in both the first quarter of 2020 and the fourth quarter of 2020.

The net effect of the pandemic and the government's actions was to allow VITAS to report an increase in adjusted net income of 25.7% in 2020.

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In fiscal 2021 full year net sales grew 10%, gross margins exceeded 50% and adjusted earnings per share was up over 97%. Additionally, we generated strong cash flow from operations of $382 million. In our most recent quarter, Sally U.S. and Canada stores fulfilled 34% of e-commerce sales as BOPIS fulfilled the 34% of e-commerce sales, as BOPIS comprised 22% and ship from store accounted for 8%. Rapid two-hour delivery was launched in the middle of the quarter and represented 4% of Sally U.S. and Canada E-commerce sales. As we continue to scale and optimize a full suite of omnichannel services for both our Sally and BSG customers, we believe e-commerce can reach 15% or more of sales in the coming years. In fiscal 2021, global e-commerce sales penetration was just over 7%. Importantly, we know that an omnichannel customer at Sally U.S. and Canada spends approximately 75% to 80% more with us annually than a brick and mortar customer. At Sally U.S. and Canada, approximately 74% of our fourth quarter sales came from our loyalty program. At BSG, because stylist have to register a shop with us, we have data on 100% of our customers. Additionally, approximately 8% of our BSG's sales in the quarter came from our Rewards Credit Card that was launched about a year ago. We believe that our initiatives underneath four growth pillars will allow us to drive top line growth of 3% to 4% and generate strong operating cash flows this year. Net sales increased 3.4% and same-store sales rose 2.1% reflecting strong consumer demand with only some minor impact from pandemic related restrictions in Europe. Global e-commerce sales were $71 million, representing 7.1% of total net sales as compared to $63 million in the prior year. Looking at gross profit, we achieved fourth quarter gross margin of 50.6%, reflecting our ability to maintain solid performance above our 50% target level. On a year-over-year basis, gross margin deleveraged by 50 basis points, reflecting a higher mix of BSG sales, which carried a lower margin profile in the quarter. Moving to operating expense, fourth quarter SG&A totaled $387 million, up 5% versus a year ago, primarily reflecting higher labor costs and planned increases in marketing spend. Adjusted operating margin came in at 11.7%, adjusted EBITDA margin was 14.5% and adjusted diluted earnings per share increased to $0.64. At Sally Beauty, we saw strong consumer demand in the U.S. Same-store sales increased 2.3% and e-commerce sales totaled $29 million for the quarter. For Sally U.S. and Canada, the color category increased 4%, while vivid colors grew 5%, representing 28% of our total color sales as comparisons normalized to prior year. Styling tools increased by 31% and textured hair was up 16%. Segment operating margin increased to 18.1% compared to 18% in the prior year. In the BSG segment, same-store sales increased 1.7% as salons returned to more normalized capacity levels in virtually all of our U.S. markets. E-commerce sales totaled $42 million for the quarter. The color category grew 9%, hair care was up 5% driven by Olaplex and styling tools increased 9%. Segment operating margin was down slightly versus prior year at 13.3%. For the full fiscal year, we generated $308 million of free cash flow and retired approximately $420 million of debt. We ended the quarter with $401 million of cash and cash equivalents and a zero balance outstanding under our asset-based revolving line of credit. Inventories at September 30th totaled $871 million, up 7% versus a year ago as we reinvested in our inventory levels coming out of the disruptions from the pandemic. In addition, we were pleased that our strong performance over the course of fiscal 2021 helped drive our net debt leverage ratio down to 1.69 times at the end of September. We are confident about how the business is positioned heading into 2022 and we expect to achieve the following: net sales growth in the range of 3% to 4%, net store count to decrease by approximately 1% to 2% driven primarily by Sally U.S. stores as we continue to optimize our portfolio. Gross margin expansion of 40 to 60 basis points, GAAP operating margin growth of 90 to 110 basis points, and adjusted operating margin approximately flat to 2021. The business has demonstrated remarkable resilience during the past 18 plus months and our teams have done a terrific job of navigating the dynamic macro environment. As a reminder, during the fourth quarter, our Board of Directors approved an extension of our share repurchase program through September of 2025, which currently has over $700 million remaining under the authorization. Beginning in fiscal 2022, we will be replacing our same-store sales metric with comparable sales, which will include sales from our full-service divisions and franchise operations including any related e-commerce sales.

We believe that our initiatives underneath four growth pillars will allow us to drive top line growth of 3% to 4% and generate strong operating cash flows this year. Net sales increased 3.4% and same-store sales rose 2.1% reflecting strong consumer demand with only some minor impact from pandemic related restrictions in Europe. Adjusted operating margin came in at 11.7%, adjusted EBITDA margin was 14.5% and adjusted diluted earnings per share increased to $0.64. We are confident about how the business is positioned heading into 2022 and we expect to achieve the following: net sales growth in the range of 3% to 4%, net store count to decrease by approximately 1% to 2% driven primarily by Sally U.S. stores as we continue to optimize our portfolio. Gross margin expansion of 40 to 60 basis points, GAAP operating margin growth of 90 to 110 basis points, and adjusted operating margin approximately flat to 2021. Beginning in fiscal 2022, we will be replacing our same-store sales metric with comparable sales, which will include sales from our full-service divisions and franchise operations including any related e-commerce sales.

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We remain diligent in controlling our discretionary spend and used our 80/20 principles to allocate resources to our most promising opportunities. With that, I'll turn to our outlook for our segments on Page 7. fourth quarter orders of $795 million were up 17% overall and up 13% organically. For the year, orders were up 26% overall and up 21% organically. We experienced a strong rebound in demand for our products across all our segments and steadily built our backlog in each quarter of 2021 totaling $266 million for the year. Relative to full year 2019, organic orders were up 15%. Q4 sales of $715 million were up 16% overall and up 11% organically. full year sales of $2.8 billion were up 18% overall and up 12% organically. We saw favorable results across all our segments and again, strong performance relative to full year 2019 with organic sales up 4%. fourth quarter gross margins expanded 20 basis points to 44%. For the full year, gross margins expanded 60 basis points, and adjusted gross margins expanded 80 basis points to 44.7%, primarily driven by strong volume leverage. Q4 operating margin was 22.7%, up 10 basis points compared to prior year. Adjusted operating margin declined 60 basis points, driven by a rebound in discretionary spending, targeted resource investments, and the dilutive impact of acquisition-related intangible amortization, partially offset by volume leverage. full year operating margin was 23%, up 90 basis points compared to the prior year. Adjusted operating margin was 23.9%, up 110 basis points compared to prior year. Our fourth quarter effective tax rate was 22.5%, relatively flat compared to the prior-year ETR of 22.2%. Our full year effective tax rate was 22.5% compared to 19.7% in the prior year due to lower tax benefits associated with executive compensation and the nonrepeat of benefits associated with the finalization of the global intangible low-income tax regulations in 2020. Q4 net income was $119 million, which resulted in earnings per share of $1.55. Adjusted net income was also $119 million with adjusted earnings per share of $1.55, which was up $0.18 or 13% over prior-year adjusted EPS. full year net income was $449 million, which resulted in earnings per share of $5.88. Adjusted net income was $482 million, resulting in an adjusted earnings per share of $6.30, up $1.11 or 21% over prior-year adjusted EPS. The tax rate movement I mentioned drives a $0.23 differential in earnings per share as compared to the prior year. Said differently, our earnings per share would have expanded by $1.34 or 26%, had 2021 been taxed at the 2020 rate. Finally, free cash flow for the quarter was $136 million, 115% of adjusted net income. For the year, free cash flow was $493 million, down 5% versus last year, and was 102% of adjusted net income. We spent over $70 million on capital projects this year, an increase of over $20 million versus 2020. Adjusted operating income increased $125 million for the year compared to 2020. Our 12% organic growth contributed approximately $106 million flowing through at our prior year gross margin rate. We reinvested $35 million back into the businesses, taking the form of a partial rebound in discretionary spending to pre-pandemic levels, higher variable compensation expenses, and targeted reinvestment and resources to drive growth. Despite this incremental spend and a challenging supply chain environment, we achieved a solid 38% organic flow-through for the year. Flow-through is then negatively impacted by the dilutive impact of acquisitions and FX, getting us to a reported flow-through of 30%. Our fourth quarter adjusted earnings per share under this definition would have been $1.71 per share, while our full year 2021 adjusted earnings per share would have been $6.87 per share. Under this new definition, for the first quarter of 2022, we are projecting GAAP earnings per share of $1.57 to $1.60 and adjusted earnings per share to range from $1.73 to $1.76. We expect organic revenue growth of 6% to 7% for the first quarter and operating margin of approximately 23%. The first quarter effective tax rate is expected to be approximately 22.5%. We expect FX to be unfavorable to our topline by 1% and acquisitions to provide a 4% benefit. Corporate costs in the first quarter are expected to be around $19 million. We project GAAP earnings per share of $6.70 to $7 and adjusted earnings per share to range from $7.33 to $7.63. We expect full year organic revenue growth of 5% to 8% and operating margins to be around 24%. We expect FX to be unfavorable to our topline by 1% and acquisitions to provide a 2% benefit. The full year effective tax rate is expected to be around 22.5%. Capital expenditures are anticipated to be around $90 million, an increase over 2021 as we continue to identify opportunities to reinvest in our core businesses. Free cash flow is expected to be approximately 105% of adjusted net income, and corporate costs are expected to be approximately $80 million for the year. Therefore, we are projecting organic revenue for the year to be up 5% to 8%, which translates to an earnings per share impact of $0.60 to $0.95 depending on the topline results. This will drive $0.20 to $0.25 of favorability next year. These investments will reduce earnings per share by $0.20 to $0.25 and are funded by the productivity gains I mentioned previously. The unfavorability impacts earnings per share by $0.20 to $0.25. I'll note that we are ramping spend to pre-pandemic levels, but with 20% higher revenues. We expect the acquisitions to contribute $54 million of revenue and $0.08 of EPS. The incremental amortization that we see in 2022 versus 2021 is largely related to these acquisitions and will provide an additional $0.05 of EPS. Second, we expect a 1% headwind from FX, providing $0.07 of earnings per share pressure. So in summary, we are projecting organic revenue growth of 5% to 8% for the year, adjusted earnings per share expectations in the range of $7.33 to $7.63, a 7% to 11% growth over 2021. Implied in our guidance is mid- to high 20s year-over-year flow-through on the low end and 30% on the high end. First and foremost, we are a portfolio of great businesses that leverage 80/20 with an obsessive focus to serve our customers. We must continue to utilize our 80/20 toolkit to create efficient, innovative, value-creating businesses.

Q4 sales of $715 million were up 16% overall and up 11% organically. Q4 net income was $119 million, which resulted in earnings per share of $1.55. Adjusted net income was also $119 million with adjusted earnings per share of $1.55, which was up $0.18 or 13% over prior-year adjusted EPS. Under this new definition, for the first quarter of 2022, we are projecting GAAP earnings per share of $1.57 to $1.60 and adjusted earnings per share to range from $1.73 to $1.76. We project GAAP earnings per share of $6.70 to $7 and adjusted earnings per share to range from $7.33 to $7.63. So in summary, we are projecting organic revenue growth of 5% to 8% for the year, adjusted earnings per share expectations in the range of $7.33 to $7.63, a 7% to 11% growth over 2021.

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Global Client top line performance, which grew at 11% on a constant currency basis was once again driven by strong demand for Transformation Services, made up of analytics, digital and consulting. This quarter, we achieved the milestone of crossing the threshold of $1 billion in quarterly total revenue for the first time. For the third quarter 2021, we delivered: total revenue of $1.02 billion, up 8% on a constant currency basis; Global Client revenue of $921 million, up 11% on a constant currency basis; adjusted operating income margin of 16.6% compared to 17.1% during the third quarter of 2020; and adjusted diluted earnings per share of $0.66 per share, up 18% year-over-year. As we deepen our role as a trusted advisor to our clients, we have seen sole-sourced deals, which was, for many quarters, above 50% of our bookings, now rising above 60%. Global Client Transformation Services continues to grow at a 30%-plus rate and now accounts for more than 35% of total Global Client revenue, including the contribution from the Enquero acquisition. Year-to-date, approximately 70% of Global Client bookings include a component of analytics, digital or consulting in them. Analytics is not only the largest component of Transformation Services, contributing more than half of its revenue over the last several quarters, but is also its fastest-growing component, consistently growing well above 30%. Our intelligence platform, Genpact enterprise 360 enables clients to do just that. Genpact enterprise 360 harnesses the power of data and insights from our operations built on proprietary metrics and benchmarks we have deployed and developed over the past 20 years in our digital Smart Enterprise frameworks. As the world continues to adapt to the changes that I've seen over the last 18 months, companies across every industry are intensely competing for talent across the globe. To date, Almost 70% of our employees are enrolled with more than 43,000 fully trained and tested. We are delighted to have had a state of recent recognitions for being a great destination for talent in the market, such as: Forbes 2021 World's Best Employers List; the Refinitiv's 2021 diversity and inclusion top 100; a total of 28 excellent awards from Brandon Hall Human Capital Management; International SOS' Duty of Care award for diversity and inclusion; Aptar's top 10 best companies for women in India. For example, being named to Fortune's Change the World List as one of 100 companies celebrated for having a positive societal impact. We also recently concluded our annual green-a-thon event with more than 25,000 participants to sponsor the planting of more than 14,500 tree saplings, underscoring our commitment to environmental sustainability. For example, in our largest delivery ecosystem, India, approximately 80% of our workforce has received at least one dose of a COVID vaccine, and we continue to encourage participation for the rest of our population. Total revenue was $1.02 billion, up 9% year-over-year or 8% on a constant currency basis. Global Client revenue that expanded to 91% of total revenue increased 12% year-over-year or 11% on a constant currency basis primarily driven by ongoing movement in Transformation Services led by analytics that grew more than 30% in the quarter as we continued underlying strength in our Intelligent Operations business. For example, during the 12-month period ended September 30, we grew the number of Global Client relationships with annual revenue over $5 million from 129 to 142 or a 10% year-over-year increase. This included clients with more than $25 million in annual revenue, increasing from 23 to 26 or 13% year-over-year. GE revenue declined 15% year-over-year driven by our delivery of committed productivity and the overall macroeconomic impact on GE. Excluding the effect of revenue related to divested GE businesses I mentioned earlier, GE revenue would have declined 6% during the quarter, which is in line with our expectations. Adjusted operating income margin at 16.6% declined from the first half of the year largely due to the increase in investment activity that we discussed with you last quarter as well as higher travel expenses. Gross margin in the quarter was 35.6% compared to 35.2% during the same period last year largely due to increased productivity from higher revenue and a more favorable mix. We continue to expect our full year gross margin to expand 70 to 75 basis points year-over-year. SG&A as a percentage of revenue was 21.3%, up 10% year-over-year and 60 basis points sequentially as we dialed up investment activity to be able to take advantage of long-term growth opportunities. Adjusted earnings per share was $0.66, up 18% year-over-year compared to $0.56 in 2020. This 10% -- $0.10 increase was primarily driven by higher adjusted operating income of $0.04, lower taxes of $0.03, a $0.02 impact related to FX remeasurement and a $0.01 impact related to lower year-over-year share count. Our effective tax rate was 17.3% compared to 22.6% last year largely due to discrete benefits in the quarter as well as a nonrecurring prior period tax refund-related items. Excluding this onetime tax benefit that equates to $0.03 per share, our effective tax rate for the quarter would have been 21.4%. During the third quarter, we generated $210 million of cash from operation that corresponds to free cash flow being almost two times higher than net income. This helped drive cash flow from operations of $252 million during the third quarter last year. Our days outstanding have remained in a consistent range with third quarter 2021 at 84 days. Cash and cash equivalents totaled $922 million compared to $753 million at the end of the second quarter of 2021, and includes $350 million related to the 1.75% bond that we issued in the first quarter. We continue to closely monitor market conditions for the optimum timing of the pay down of our 3.7% bond that is scheduled to mature in April 2022. Our net debt-to-EBITDA ratio for the last four rolling quarters was 1.1 times. With undrawn debt capacity of approximately $500 million and existing cash balances, we continue to have ample liquidity to pursue growth opportunities and execute on our capital allocation strategy. Given our year-to-date spending, we now anticipate capital expenditures as a percentage of total revenue for the full year to be in the range of 1.5% to 2%. We continue to expect total revenue between $3.96 billion and $4 billion, representing year-over-year constant currency growth of 5.5% to 6.5%. For Global Clients, the expected growth remains in the range of 10.5% to 11.5% or 9% to 10% on a constant currency basis. There is also no change to our full year GE outlook of approximately 20% year-over-year decline. Excluding the effect of approximately $40 million in revenue related to the GE divested businesses, we continue to expect GE full year revenue to decline 10% to 12%. We continue to expect our adjusted operating income margin to expand to 16.5% for the full year. To be clear, our approximate 16.5% adjusted operating income full year margin remains the baseline for which we think about our trajectory for 2022. As a result of the nonrecurring tax benefit in the third quarter I referred to earlier, we now expect our full year 2021 effective tax to be approximately 22.5% to 23.5%, which compares to the prior year range of 23.5% to 24.5%. Given the outlook I just provided, we now expect full year adjusted earnings per share to be in the range of $2.40 to $2.43, up from the prior $2.36 to $2.39 range due to the favorable impact of the nonrecurring tax benefit as well as the balance sheet remeasurement gains during the quarter. Additionally, given our year-to-date performance, we can now expect our full year operating cash flow to be at least $550 million, up from our earlier outlook of $500 million, and we continue to anticipate free cash flow from operations of approximately 1.2 times to 1.3 times net income, above our historical 1:1 ratio. This secular trend plays to our strengths in Transformation Services that continues to power our revenue growth led by its largest segment analytics that have been consistently growing more than 30%.

For the third quarter 2021, we delivered: total revenue of $1.02 billion, up 8% on a constant currency basis; Global Client revenue of $921 million, up 11% on a constant currency basis; adjusted operating income margin of 16.6% compared to 17.1% during the third quarter of 2020; and adjusted diluted earnings per share of $0.66 per share, up 18% year-over-year. Total revenue was $1.02 billion, up 9% year-over-year or 8% on a constant currency basis. Adjusted earnings per share was $0.66, up 18% year-over-year compared to $0.56 in 2020. We continue to expect total revenue between $3.96 billion and $4 billion, representing year-over-year constant currency growth of 5.5% to 6.5%. Given the outlook I just provided, we now expect full year adjusted earnings per share to be in the range of $2.40 to $2.43, up from the prior $2.36 to $2.39 range due to the favorable impact of the nonrecurring tax benefit as well as the balance sheet remeasurement gains during the quarter.

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Our net sales grew 6% in the quarter, organic sales growth of 5% was driven by 0.5% organic volume growth and a 4.5% increase in pricing. Foreign exchange was a 1% tailwind in the quarter. While the tough comparisons, particularly impacted our trends in developed markets, which were flat on an organic sales basis in the quarter, we delivered double-digit organic sales growth in emerging markets with volume up 5.5% and pricing up 6%. In the first quarter, our gross profit margin was 60.7% on both a GAAP basis where we were up 50 basis points year-over-year, and a base business basis where we were up 40 basis points. For the first quarter, pricing was 170 basis points favorable to gross margin, while raw materials were 310 basis point headwind. Productivity was a 180 basis point benefit. Our SG&A was up 90 basis points as a percent of sales for the first quarter on both a GAAP and base business basis. This was primarily driven by a 50 basis point increase in advertising to sales as we drove strong activation on brand building, innovation and e-commerce. For the first quarter, on a GAAP basis, our operating profit was up 5.5% year-over-year, while it was up 5% on a base business basis. Our earnings per share was down 4% on a GAAP basis and up 7% on a base business basis. Latin America net sales were up 2% as 9.5% organic sales growth was mostly offset by the negative impact of foreign exchange. Europe net sales grew 6% in the quarter. Organic sales were down 2%. Volume declined 3.5% in the quarter as we lap strong shipments in the year ago period, which was driven by COVID-related demand and pantry loading. Pricing was plus 1.5% as we took pricing across all categories to help offset raw material inflation. We delivered 16.5% net sales and 11% organic sales growth in Asia Pacific led by volume growth across our biggest markets; Greater China, India and the Philippines. Africa/Eurasia net sales grew 8.5% as we delivered strong organic sales growth throughout the division. Volume grew 5% in the quarter, while pricing was up 8%. Foreign exchange was a 4.5% headwind. Emerging markets grew organic sales greater than 20% in the quarter through a combination of volume and pricing growth. We still expect organic sales growth to be within our 3% to 5% long-term target range. All in, we still expect net sales to be up 4% to 7%. Our gross margin guidance remains unchanged as we expect our gross profit margin to be up year-over-year in 2021 on both the GAAP and base business basis. Our tax rate is expected to be between 23.5% and 24.5%. Obviously, we're really pleased with our performance in the first quarter. We just discussed, we're battling the cost inflation across the board.

Our net sales grew 6% in the quarter, organic sales growth of 5% was driven by 0.5% organic volume growth and a 4.5% increase in pricing. Our earnings per share was down 4% on a GAAP basis and up 7% on a base business basis. We still expect organic sales growth to be within our 3% to 5% long-term target range. All in, we still expect net sales to be up 4% to 7%. Our gross margin guidance remains unchanged as we expect our gross profit margin to be up year-over-year in 2021 on both the GAAP and base business basis. Obviously, we're really pleased with our performance in the first quarter. We just discussed, we're battling the cost inflation across the board.

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For commercial customers, we implemented an easy to use 100% digital service for applying, processing, disbursing, and forgiving PPP loans. After that, it was COVID-related donations and securing more than $100,000 in grants for non-profits in Puerto Rico and the U.S. Virgin Islands. Please turn to Page 4. I am particularly pleased with the 50,000 online appointments made through our digital platforms and our online bill and loan payment solution. Please turn to Page 5 to review our fourth quarter results. We reported earnings per share of $0.42. It is important to note that this included three major items; $6.4 million in merger and restructuring charges [Indecipherable] Scotiabank systems conversion and integration; $3.7 million in merger and restructuring charges for branch consolidation in 2021; and $1.5 million in COVID-related spending. Also keep in mind, our tax rate was 22%, that's higher than the third quarter because of the greater proportion of higher tax income, but it is also lower than our estimated tax rate in 2021, which we currently anticipate being in the 30% to 32% range. Total core revenues were a record $133 million. Net interest income was $99 million, similar to the third quarter. Banking and wealth management revenues were a record $34 million. Wealth management included $4 million in annual insurance commissions, approximately $3 million of that was from additional insurance business that came with the Scotia acquisition. Mortgage banking included $2 million in revenues from secondary market sales of mortgages that were held back from the third quarter due to our systems conversion. Non-interest expenses were $89 million. Excluding the merger restructuring charge and COVID-related costs, non-interest expenses amounted to $77 million. Regarding the balance sheet, total assets were under $10 billion as we had anticipated. Loan production continued to be solid at $485 million and capital continued to build with the CET1 ratio increasing to 13.08%. Please turn to Page 6 for our financial highlights. At close to $17, it increased more than $1 year-over-year and by $0.46 from the third quarter. The efficiency ratio increased [Phonetic] sequentially to 67%. When you adjust for mergers and COVID expenses, it improved about 400 basis points to 58%. Return on average assets and tangible common equity was close to 1% and 10% respectively on a reported basis. Please turn to Page 7 for our operational highlights. As Jose mentioned, loan generation was a solid $485 million. That included commercial lending of $224 million, auto lending of $138 million, and mortgage lending of $98 million. Average loan balances declined slightly from prior quarter due to paydowns and loan yields stood at 6.55%. Average core deposits increased, but end of period balances declined $170 million on a linked quarter basis. As a result, the cost of core deposits continued to fall to 53 basis points. Average cash balances increased $162 million during the quarter. The result was a 6-basis point sequential decline in net interest margin to 4.24%. Please turn to Page 8 to review credit quality. The net charge-off rate increased to 2.67%. Provision was $14.2 million. This includes $4.7 million to cover the two chargers [Phonetic] of commercial loans acquired from the Scotiabank that I just mentioned. Fourth quarter 2020 loan deferrals fell to 1.4% of total loans from 2% in prior quarter and 3% in the second quarter of 2020. The non-performing loan rates for non-PCD loans remained fairly steady at 2.35%, while non-performing loan rates for PCD loans decreased from 4.26% to 2.11%. Turning to capital, stockholders' equity increased 2% sequentially and 4% year-over-year. The tangible common equity ratio increased to 9%, ahead of both the prior quarter and the year-ago period when we made the acquisition of Scotiabank. Please turn to Page 8. With the completion of the system conversion, we realized $32 million in annualized savings, exceeding our original estimate of $35 million by about 9%. Our objective is to return to an efficiency ratio in the mid-50% range. Please turn to Page 10. We believe our history, culture -- please turn to Page 10.

Please turn to Page 4. We reported earnings per share of $0.42. Wealth management included $4 million in annual insurance commissions, approximately $3 million of that was from additional insurance business that came with the Scotia acquisition. Turning to capital, stockholders' equity increased 2% sequentially and 4% year-over-year.

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We achieved $0.91 and adjusted earnings per share and $60 million of adjusted EBITDA with our growth rebounding ahead of plan from the pandemic lows a year ago. As for our growth metric, the average number of paid worksite employees increased by 7% over Q2 of 2020 above the high end of our forecasted range of 5% to 6%, and this was a sequential increase of 4.3% over Q1 of 2021. Both worksite employees paid from new client sales and net gains from hiring in our client base exceeded our targets and second quarter client retention came in at our historical high levels of 99%. Now along with worksite employee growth, our revenue per worksite employee, which included a 6% increase in pricing and the non-recurrence of the 2020 FICA deferral and customer service fee credits exceeded our expectations. In spite of these three factors, we experienced a decline in gross profit of 9% from Q2 of 2020 related to the dynamics associated with the pandemic. Now, another positive outcome in the payroll tax area during Q2 was the receipt of $11 million of federal payroll tax refunds related to prior years. During the quarter, we repurchased 98,000 shares of stock at a cost of $9 million, raised our dividend rate by 12.5% paying out $17 million in cash dividends and invested $9 million in capital expenditures. We ended Q2 with $213 million of adjusted cash and $370 million of debt. As the year began, we were optimistic we would achieve this growth rate by year end or early 2022, despite the loss of our largest client, which represented just under 3% of our worksite employee base. Outperformance in paid worksite employees from previous booked sales combined with stronger than expected hiring within the client base and historically high client retention to produce a rapid acceleration in our unit growth; in fact, paid worksite employees were up 9% in four months by the end of June over our low point of the year in February. New sales in the second quarter met our targets with booked sales for new clients and worksite employees up 39% and 30% respectively over last year. Another highlight from our sales organization this quarter was booked sales for our traditional employment solution, Workforce Acceleration, which achieved 94% of forecast. We saw some of these effects in our own data this year with average wages and bonuses up 7% and 44% respectively. We expect to begin ramping up the number of Business Performance Advisors at a rate of approximately 10 per month and go into 2022 at around 700 BPAs across country. My optimism for the long-term future is rooted in a different dynamic than I've seen in the 35 years building our company and industry. We are now forecasting 5.5% to 6.5% worksite employee growth for the full year, an improvement over our previous guidance of 4% to 6% growth. We are forecasting Q3 paid worksite employee growth of 9.5% to 10.5% over Q3 of 2020, so it's coming off the 7% year-over-year growth in the prior quarter. When considering this factor and the investment of a portion of the earnings upside for the first half of the year, we are now forecasting adjusted EBITDA in a range of $258 million to $288 million. This is up from our previous guidance of $250 million to $280 million. As for full year 2021, adjusted EPS, we are now forecasting a range of $4 to $4.59 up from our previous guidance of $3.83 to $4.40. As for Q3, we are forecasting adjusted EBITDA in a range of $52 million to $62 million and adjusted earnings per share from $0.74 to $0.93.

We achieved $0.91 and adjusted earnings per share and $60 million of adjusted EBITDA with our growth rebounding ahead of plan from the pandemic lows a year ago. As for full year 2021, adjusted EPS, we are now forecasting a range of $4 to $4.59 up from our previous guidance of $3.83 to $4.40. As for Q3, we are forecasting adjusted EBITDA in a range of $52 million to $62 million and adjusted earnings per share from $0.74 to $0.93.

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We're pleased to say that March marked a return to volume levels seen in March of 2019 prior to the pandemic. It's important to note that the path to a full recovery remains asynchronous around the world. Strong performance in India and Southwest Asia was driven by effective marketing across brands, affordable solutions, and distribution expansion with 250,000 new outlets and 45% more new coolers. In Eurasia and the Middle East, brand Coke recruited 4.4 million consumers through affordability packages and a focus on at-home occasions. Cost of express machines continue to deliver strong performance. For instance, we've taken a scaled, digitized approach to buying trade materials resulting in up to 15% cost reduction and improved user experience, all while offering more consistent, better quality, and sustainable alternatives. Local experiments like Aquarius with functional benefits and Ayataka Cafe Matcha Latte in Japan, Fanta's exciting mystery flavor innovation in Europe, and package innovations like the 13.2-ounce recycled PET bottle in North America could all be lifted and shifted globally over time. And in markets like Turkey, where the channel is still developing with more than tripled sales and gained almost 10 points of share versus last year. We're using our network to deliver 700,000 doses with vaccine information to more than 350,000 mom-and-pop stores. This includes our 2025 and 2030 packaging goals, our 2030 climate goal, and our new 2030 water security strategy with more details to come later this year. 2021 is off to a good start, with the quarter showing steady sequential monthly improvement. Our Q1 organic revenue was up 6%, driven by concentrate shipments up 5% and price/mix improvement of 1%. First-quarter comparable earnings per share of $0.55 is an increase of 8% year over year and was driven by top-line growth, margin improvement, and some contribution from equity income, offset by currency headwinds. Since we embarked on a journey toward best-in-class working capital performance, we've made great strides in extending our payment terms, generating a working capital improvement of more than $1 billion over two years. And as we noted in our release, we now expect currency to be a tailwind of approximately 1% to 2% to the top line and approximately 2% to 3% to comparable earnings per share in 2021 based on current spot rates and our hedge positions. For the full year, we now expect an underlying effective tax rate of 19.1%. Putting it all together, our quarterly performance and the momentum we saw in March give us confidence in our ability to achieve our 2021 guidance.

We're pleased to say that March marked a return to volume levels seen in March of 2019 prior to the pandemic. It's important to note that the path to a full recovery remains asynchronous around the world. Cost of express machines continue to deliver strong performance. 2021 is off to a good start, with the quarter showing steady sequential monthly improvement. Our Q1 organic revenue was up 6%, driven by concentrate shipments up 5% and price/mix improvement of 1%. First-quarter comparable earnings per share of $0.55 is an increase of 8% year over year and was driven by top-line growth, margin improvement, and some contribution from equity income, offset by currency headwinds. And as we noted in our release, we now expect currency to be a tailwind of approximately 1% to 2% to the top line and approximately 2% to 3% to comparable earnings per share in 2021 based on current spot rates and our hedge positions. Putting it all together, our quarterly performance and the momentum we saw in March give us confidence in our ability to achieve our 2021 guidance.

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We provided care for approximately 9,500 inpatient COVID admissions in the first quarter. This compares to approximately 8,000 COVID admissions during the third quarter and another 14,000 COVID admissions during the fourth quarter of 2020. In the first quarter on the topline, same-store net revenue growth increased 9.8%. For the fourth quarter year-over-year same-store admissions were down 4.9%, adjusted admissions were down 7.2% and surgeries were essentially flat. ER visits continue to lag other volume metrics with same-store ER visits down 17%. Adjusted EBITDA was $495 million which increased 60% compared to the prior year. Adjusted EBITDA margin of 16.4% improved 620 basis points year-over-year. During the quarter, $82 million of pandemic relief funds were recognized. If we exclude the pandemic relief funds from the quarter's results, adjusted EBITDA was $413 million with an adjusted EBITDA margin of 13.7%. Excluding pandemic relief funds, first quarter 2021 adjusted EBITDA of $413 million, increased 6% compared to the first quarter of 2019, despite operating 21 fewer hospitals as a result of our portfolio rationalization program. In the medium term, we continue to target 15% plus adjusted EBITDA margin, positive annual free cash flow generation and reducing our leverage below 6 times. And over the past three years, we've added nearly 300 new beds to the core portfolio, along with more than 50 new surgical and procedural suites to meet increased demand and to drive higher acuity. We are seeing good initial results, including volume improvement with nearly 600 providers not being served by the centralized scheduling centers. Net operating revenues came in at $3,013 million on a consolidated basis, down 0.4% from the prior year due to divestitures. On a same-store basis, net revenues increased 9.8%. This was the net result of a 7.2% decrease in adjusted admissions and an 18.3% increase in net revenue per adjusted admission. Adjusted EBITDA was $495 million, up 60.2%. This included $82 million of pandemic relief funds. Adjusted EBITDA, excluding the pandemic relief funds was $413 million, an improvement of 34% over the prior year and an improvement of 6% over the first quarter of 2019. Our adjusted EBITDA margin was 13.7% versus 10.2% in the prior year and 11.6% in the first quarter of 2019. Cash flows provided by operations were $101 million for the first quarter of 2021. This compares to cash flows from operations of $57 million during the first quarter of 2020. Looking at the quarter-over-quarter increase, cash interest payments were approximately $60 million lower in the first quarter of 2021. The company repaid approximately $18 million during the quarter related to Medicare accelerated payments due to divestitures and other increases and decreases including improved EBITDA and working capital changes were offset. Our capex was $105 million compared to $99 million in the prior year, keeping in mind that we are operating fewer hospitals than a year ago. At the end of the first quarter, the company had $1.3 billion of cash on the balance sheet. At March 31, the company had no outstanding borrowings and approximately $633 million of borrowing base capacity under its ABL with the ability for that to increase up to $1 billion. At the end of 2020, we had $104 million of unrecognized pandemic relief funds of which we recognized approximately $82 million during the first quarter of 2021. At the end of the first quarter we had approximately $11.9 billion of total debt, which was approximately $300 million lower compared to the prior quarter. On the capital structure side, as a reminder, through 2020 and the first quarter of 2021, we lowered our debt by over $1.3 billion, reduced our leverage ratio by over 2 turns down to 6 times levered compared to over 8 times last year and lowered our annual cash interest by approximately $190 million. In January, we extended $1.8 billion second lien notes to 2029 and $1.1 billion first lien notes to 2031. Following these transactions, we call the remaining $126 million of 2022 unsecured notes paying that with cash on hand. Net operating revenues are anticipated to be $11.7 billion to $12.5 billion, unchanged from our previous guidance and adjusted EBITDA is anticipated to be $1.65 billion to $1.8 billion, which does not include pandemic relief funds.

Net operating revenues came in at $3,013 million on a consolidated basis, down 0.4% from the prior year due to divestitures.

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We continue to believe we are on track for our ingredients businesses to meet our previously announced goal of representing 10% to 20% of our results in fiscal year 2022. Net income for the quarter ended June 30, 2021, was $6.4 million or $0.26 per diluted share compared with $7.3 million or $0.29 per diluted share for the quarter ended June 30, 2020. Consolidated revenues of $350 million for the first quarter of fiscal 2022, increased by $34.2 million compared to the same period in fiscal year 2021. Operating income for the Tobacco Operations segment increased by $3.8 million to $8.9 million for the quarter ended June 30, 2021, compared with the quarter ended June 30, 2020. Operating income for the Ingredients Operations segment was $4.3 million for the quarter ended June 30, 2021, compared to an operating loss of $0.7 million for the comparable quarter in the prior fiscal year. Our targets were recently approved by the science-based targets initiative and reflect our commitment to reduce our global greenhouse gas emissions by 30% by 2030.

Net income for the quarter ended June 30, 2021, was $6.4 million or $0.26 per diluted share compared with $7.3 million or $0.29 per diluted share for the quarter ended June 30, 2020. Consolidated revenues of $350 million for the first quarter of fiscal 2022, increased by $34.2 million compared to the same period in fiscal year 2021.

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We had a very strong quarter from a cash flow perspective, which led to full year free cash flow of $544 million, an 80% increase over 2019. Despite numerous challenges related to the COVID-19 pandemic and $280 million in revenue headwinds from foreign currencies. Our organic revenue growth of 7% and our 2% EBITDA growth shows how aggressively we manage costs and implemented price increases to offset as much of that FX headwind as possible. We plan to launch seven new active ingredients and four new biologicals this decade, which we expect will contribute a combined $1.8 to $2.1 billion in Incremental sales by 2013. We reported $1.15 billion in fourth-quarter revenue, which reflects a 4% decrease on a reported basis and 2% organic growth. Adjusted EBITDA was $290 million, a decrease of 9% compared to the prior year period. EBITDA margins were 25.2%, a decrease of 150 basis points compared to the prior year. Adjusted earnings were $1.42 per diluted share in the quarter, a decrease of 19% versus Q4 2019. Q4 revenue decreased by 4% versus prior year, driven by a 5% FX headwind and a 3% volume decrease. Price increases contributed a positive 4% impact, and offset 80% of the FX headwind, the highest in the past few quarters to deliver a positive 2% organic growth. Sales in EMEA increased 45% year-over-year and 42% organically. In Asia, revenue increased 11% year-over-year, driven by broad volume growth in India, China, Japan and Australia. And the strength we saw in Q4, exemplifies this potential, with India growing over 20% organically in the quarter. Sales decreased 9% year-over-year, but grew 4% excluding significant FX headwinds. Pricing actions across the region offset about 50% of the currency headwind at the earnings level in Q4, substantially more than in the prior 2 quarters. The Brazil season was delayed by at least 30 days due to hot dry weather and this delay meant many numerous crops missed applications that will not return. For Latin America, overall we estimated the drought reduced sales by about $30 million. In Argentina, we also had about $10 million of product held in bonded warehouses that was not released by customs officials in a timely manner. In North America, sales decreased 34% year-over-year, roughly $40 million of this decline was due to supply chain disruptions, including COVID related factors associated with logistics and a toll manufacturing partner, impacting our ability to meet demand late in December. An additional $30 million of the decrease was due to reduced volume and some lower value pre-emergent herbicides. We had a $50 million contribution from higher pricing, which was nearly double what we realized in Q3. We also aggressively managed costs to offset nearly all the $30 million year-over-year headwind we had anticipated. We reported $4.64 billion in revenue, which reflects a 1% increase on a reported basis and a 7% organic growth rate. Adjusted EBITDA was $1.25 billion, an increase of 2% compared to 2019 even with nearly $270 million in headwinds from FX. EBITDA margins were 26.9%, an increase of 40 basis points compared to the prior year. 2020 Adjusted Earnings was $6.19 per diluted share, an increase of 2% versus 2019. Overall volume contributed 4% to revenue growth while price increased sales by 3%. About $50 million of the 2020 revenue growth came from product launches within the year. In Asia, sales increased 6% year-over-year and 9% organically, market expansion and share gains in India, coupled with a very strong market rebound in Australia were the primary drivers. Sales in EMEA grew 4% versus in 2019% and 6% organically. Latin America posted a 1% year-over-year revenue growth but high single-digit volume growth and solid price increases led to 17% organic growth. North America sales decreased 8% as we had channeled destocking in the first half and then a tough Q4 as described earlier. Volume contributed 9% of the growth, while the combination of stringent cost controls and price increases offset 70% of the impact of foreign currencies. FMC full-year 2020 earnings are now expected to be in the range of $6.65 to $7.35 per diluted share, a year-over-year increase of 13% at the midpoint. 2021 revenue is forecasted to be in the range of $4.9 to $5.1 billion, an increase of 8% at the midpoint versus 2020%, and 9% organic growth. EBITDA is expected to be in the range of $1.32 billion to $1.42 billion, which represents a 10% year-over-year growth at the midpoint. Guidance for Q1 implies year-over-year sales contraction of 7% at the midpoint on a reported basis and 5% organically. We are forecasting an EBITDA decline of 15% at the midpoint versus Q1 2020, and earnings per share is forecasted to be down 18% year-over-year. Revenue is expected to benefit from 7% volume growth with the largest growth in Asia and a 2% contribution from higher prices. FX is forecasted to be a 1% top line headwind. We are forecasting a $40 million increase in R&D to bring us to a level of funding that keeps all projects on a critical path to commercialization. These headwinds will be partially offset other realization of the final $15 million of SAP synergies which will give us a cumulative SAP synergies of approximately $65 million. On the revenue line, volume is expected to drive a 6% decline, while a 1% contribution from higher prices largely offset the FX headwind. We expect the benefit of approximately $25 million in sales from Q4, supply and logistics delays to be captured in Q1. First, we are facing a particularly difficult comparison in Latin America where sales increased 26% year-over-year and 38% organically in Q1 2020. Brazil's cotton business is very strong for as a year ago, this will not be repeated this season as cotton acreage is down 15%. In EMEA, we are facing continued headwinds from discontinued registrations, and the $15 million in Q4 sales related to Brexit that would normally have been sold in the first quarter. While pricing is forecast to offset the FX headwind, costs are expected to be higher by $12 million, driven primarily by the increased R&D investments, we mentioned earlier. FX was a 5% headwind to revenue in the quarter, as expected, with the impact of higher than anticipated local currency denominated sales in Brazil, offset in part by a modest tailwind in the Eurozone. For full year 2020 FX was a 6% headwind to revenue. Interest expense for the fourth-quarter was $34.2 million dollars, down $8.7 million from the prior year period, benefiting from lower debt balances and lower LIBOR rates. Interest expense for full year 2020 was down $7.3 million from the prior year with the benefit of lower interest rates, partially offset by changes in debt outstanding. Our effective tax rate on adjusted earnings for 2020 was 13.7%, well within our expectations and up from the very low 2019 rate due to shifts in the geographic mix of taxable earnings and inter-related impacts on the US minimum tax and [Indecipherable]. The tax rate in the fourth-quarter was 14.4% to true up with the full year actual rate. We expect our effective tax rate to be in the range of 12.5% to 14.5% in 2021 similar to 2020. Gross debt at year-end was $3.3 billion, essentially flat with the prior quarter with nearly $600 million of cash on hand. As such, gross debt to trailing 12 month EBITDA was 2.6 times at the end of the year, while net debt to EBITDA was 2.3 times. Free cash flow for 2020 was $544 million with free cash flow conversion from adjusted earnings at 67%. Both metrics up 80% percent from the prior year period. Adjusted cash from operations increased by about $170 million in 2020 with growth in working capital, more than offset by lower non-working capital factors and increased EBITDA. Capital additions were down $60 million due to project delays and deferrals related to COVID-19 pandemic. Legacy and transformation spending was down $14 million with relatively stable legacy spending and transformation spending lower as we completed our SAP implementation. We anticipate full year 2021 free cash flow to be in the range of $530 to $620 million, an increase of 6% at the midpoint, with free cash flow conversion 63% at the midpoint. Excluding these impacts, 2020 free cash flow would have been about $500 million, in cash conversion about 62%. Adjusting for this timing shift, 2021 free cash flow would be about $600 million, in cash conversion 65%. So, on a more comparable basis, free cash conversion steps up from 38% in 2019 to 62% in 2020, and 65% in 2021, getting closer to our 70 to 80% target range for 2023. In 2020, we deployed nearly $350 million of cash flow, while maintaining excess liquidity throughout the pandemic. We deployed $65 million to acquire the remaining rights to the fungicide [Indecipherable]. We paid nearly $230 million in dividends and we repurchased $50 million in FMC shares in the fourth-quarter. We are planning to repurchase between $400 and $500 million worth of FMC shares in the year with purchases in every quarter of the year, though more heavily weighted to the second half. We expect to pay dividends approaching $250 million and we will continue to look for attractive opportunities to make additional modest inorganic investments to complement our organic growth and expand our technological capabilities. We captured over $50 million in synergies in 2020 having moved aggressively to accelerate $30 million in planned savings from 2021 to 2020. We now expect to deliver $15 million in SAP enabled synergies in 2021, the benefit of which is reflected in our full year guidance for a total of $65 million in synergies from implementing the new system. We plan to return about $700 million to shareholders this year through dividends and buybacks.

Our organic revenue growth of 7% and our 2% EBITDA growth shows how aggressively we manage costs and implemented price increases to offset as much of that FX headwind as possible. We reported $1.15 billion in fourth-quarter revenue, which reflects a 4% decrease on a reported basis and 2% organic growth. Adjusted earnings were $1.42 per diluted share in the quarter, a decrease of 19% versus Q4 2019. We reported $4.64 billion in revenue, which reflects a 1% increase on a reported basis and a 7% organic growth rate. 2021 revenue is forecasted to be in the range of $4.9 to $5.1 billion, an increase of 8% at the midpoint versus 2020%, and 9% organic growth. Guidance for Q1 implies year-over-year sales contraction of 7% at the midpoint on a reported basis and 5% organically. Revenue is expected to benefit from 7% volume growth with the largest growth in Asia and a 2% contribution from higher prices. We anticipate full year 2021 free cash flow to be in the range of $530 to $620 million, an increase of 6% at the midpoint, with free cash flow conversion 63% at the midpoint. We are planning to repurchase between $400 and $500 million worth of FMC shares in the year with purchases in every quarter of the year, though more heavily weighted to the second half.

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Dana delivered $2.2 billion of sales, representing an increase of $210 million over this time last year as our customers continue to see strong demand despite several headwinds. Diluted adjusted EBITDA for the quarter was $210 million, a $9 million improvement over last year. Free cash flow was a use of $170 million as the semiconductor shortage drove significant and unplanned OEM demand reductions which, of course, led to substantial downstream component inventory accumulation across the company. Diluted adjusted earnings per share was up slightly compared with last year at $0.41 for the quarter. Please turn to page 5 and we'll begin our discussion with the ongoing supply chain challenges and how it is impacting our markets. For example, the current Class 8 truck sales backlogs have reached pre-pandemic levels, and finished vehicle inventory levels for construction and agriculture equipment are at the lowest levels in the last three years, resulting in unfulfilled end-customer demand. The combination of our past successes, present capabilities, application know-how, and clearly demand [Phonetic] strategy for the future enables us to partner with and create value for our customers at any stage of their electrification progression, ultimately leading to us winning our share of nearly $19 billion addressable market by the end of the decade. In the third quarter of this year, sales were $2.2 billion, a $210 million increase over last year, primarily driven by improved demand in our heavy-vehicle end-markets and the recoveries of raw material cost inflation in the form of higher selling prices to our customers. Adjusted EBITDA was $210 million for a profit margin of 9.5%, which was 60 basis points lower than last year despite the higher sales as margin compression from raw material cost inflation more than offset the margin expansion from organic sales growth. Diluted adjusted earnings per share was $0.41, a $0.04 improvement from the prior year. And finally, free cash flow though was a use of $170 million, which was significantly lower than the third quarter of last year due to higher working capital requirements this year as recent customer schedule volatility and supply chain challenges have mandated higher inventory levels to ensure on-time delivery. First, the organic growth increase of over $100 million was driven by improved demand for heavy vehicles in both our commercial vehicle and off-highway equipment segments. The elevated incremental conversion of 40% was the result of targeted cost containment and cost recovery actions in the quarter, which helped to offset operational inefficiencies brought on by volatile customer production schedules, supply chain disruptions, and labor shortages. Second, foreign currency translation increased sales by about $20 million as the dollar weakened against a basket of foreign currencies, principally the euro. During the quarter, gross commodity cost increased by more than $100 million compared to last year. We recovered nearly 70% of these cost increases in the form of higher selling prices to our customers. Free cash flow was a use in the quarter of $170 million. Inventory levels increased by more than $100 million sequentially and more than $400 million versus the same time last year as, at the time, the industry was just ramping the supply chain back up coming out of the pandemic containment-related shutdowns in the second quarter of 2020. We now anticipate full-year sales to be $8.9 billion at the midpoint of our revised range, down about $100 million from the indication we provided during our Q2 earnings call as lower-than-expected market demand of, approximately, $170 million will be partially offset by $70 million in additional commodity recoveries. Full-year adjusted EBITDA is now expected to be about $845 million at the midpoint of the revised range, which is down about $115 million from our previous indication. Loss contribution margin from lower end-market demand and higher operating costs make up, approximately, $70 million of this profit headwind and increased commodity costs will further lower profit by about $45 million. Profit margin is expected to be, approximately, 9.5% and free cash flow margin is expected to be about 1%. Diluted adjusted earnings per share is expected to be a $1.85 per share at the midpoint of the range. First, organic growth is now expected to add nearly $1.4 billion in sales. Incremental margins are expected in the mid-20s providing nearly 300 basis points of margin expansion. Third, we anticipate the impact of foreign currency translation to now be a benefit of, approximately, $150 million to sales and about $15 million to profit with no material impact to our profit margin. And finally, we now expect gross commodity cost increases to be about $350 million compared to last year as steel prices have continued to escalate. We anticipate recovering about $235 million, or just below 70% of the increase, from our customers in the form of higher selling prices leaving a net profit impact of $115 million, which will compress margins by about 170 basis points. The quarterly sales and profit cadence of our revised full-year guidance for 2021 is atypical where we now expect second-half margins to be about 200 basis points lower sequentially. We now anticipate full-year free cash flow margin to be comparable with last year at about 1%, which represents a modest improvement of about $30 million as $0.25 billion of higher profits are invested in working capital to navigate the current environment and higher capital spending to fuel our future growth. Please turn with me now to page 16 for our perspective on the near-term challenges on the backdrop of the long-term outlook for our business. This is illustrated by the chart in the upper right of the page where we affirm our conviction that our business will exceed $10 billion of sales in 2023, and this represents 45% growth over three years and will lead to substantial profit and cash flow margin expansion as we progress toward our long-term financial potential. We expect the sales of our electrified products to double in the next two years contributing to the greater than $10 billion of sales in 2023, but then quadruple by the end of the decade to deliver a $3 billion business that will expand our profit and cash flow margins and reposition the business for the future. This bright future is made possible by the highly skilled and extremely dedicated team of more than 38,000 around the globe who day in and day out embody the spirit of our company, people finding a better way.

Dana delivered $2.2 billion of sales, representing an increase of $210 million over this time last year as our customers continue to see strong demand despite several headwinds. Diluted adjusted EBITDA for the quarter was $210 million, a $9 million improvement over last year. Diluted adjusted earnings per share was up slightly compared with last year at $0.41 for the quarter. In the third quarter of this year, sales were $2.2 billion, a $210 million increase over last year, primarily driven by improved demand in our heavy-vehicle end-markets and the recoveries of raw material cost inflation in the form of higher selling prices to our customers. Diluted adjusted earnings per share was $0.41, a $0.04 improvement from the prior year.

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Revenue grew 4.9% to $583.7 million compared to $556.5 million for the same quarter in 2019. Net income rose to $79.6 million or $0.24 per diluted share compared to $44.1 million or $0.13 per diluted share for the third quarter of last year. Revenues for the first nine months of the year were $1.62 billion, an increase of 7.6% compared to $1.51 billion for the same period last year. Net income for the first nine months increased to $198.2 million or $0.60 per diluted share compared to $152.6 million or $0.47 per diluted share for the comparable period last year. Residential pest control grew 10.5% during the quarter, reflecting the resiliency of this service and its strong demand. John joined the company in 1996 and has been an integral part in developing and executing Rollins strategic initiatives over the years. Jerry started his career in the pets control industry in 1991 and came to Rollins in the HomeTeam acquisition in 2008. And I've watched him over the last 13 years improve every operation he has touched. Looking at the numbers, the third quarter revenues of $583.7 million was an increase of 4.9% over the prior year's third quarter revenue of $556.5 million. Our GAAP income before income taxes was $108.9 million or 136% above 2019. Net income was $79.6 million, up 80.6% compared to 2019. Our GAAP earnings per share were $0.24 per diluted share. On a non-GAAP basis, our income before taxes was $115.6 million this year compared to $96 million last year, a 20.4% increase. Our 2020 income before taxes was impacted by $6.7 million for the vesting of our late Chairman's Rollins shares. Additionally, 2019 was reduced by $49.9 million for our divesting of the pension plan off of our Rollins books. Our non-GAAP net income was $86.3 million this year compared to $70.6 million in Q3 of 2019, a 22.1% increase. Looking at the first nine months revenue of $1.625 billion, that was an increase of 7.6% over the prior year's third quarter revenue of $1.509 billion. Our GAAP income before income taxes was $267.8 million or 41.6% above 2019. Net income was $198.2 million, up 29.9% compared to 2019. Our GAAP earnings per share were $0.60 per diluted share. Our non-GAAP financials, taking the share vesting and pension plan into consideration, were income before taxes of $274.5 million, up 14.8% and net income was $204.9 million this year compared to $179.2 million in 2019, a 14.4% increase. Our non-GAAP earnings per share for the nine months were $0.63 compared to $0.55, which is a 14.5% increase. As the cost of these materials have moved lower from the peak, we took a $2 million onetime charge to revalue our inventory. With pricing moving lower, we anticipate spending $1 million per quarter, down from the $2 million that we shared on previous calls. Our total revenue increased 4.9%. That included 1.4% from acquisitions and the remaining 3.5% was from pricing, which was a small portion of that, but mostly from organic and new customer growth. In total, residential pest control, which made up 47% of our revenue, was up 10.5%; commercial, ex-fumigation pest control, which made up 34% of our revenue, was down 1.9%; and termite and ancillary services, which made up approximately 18% of our revenue, was up 6.2%. Again, total revenue less acquisitions was up 3.5% and from that, residential was up 9%; commercial, ex-fumigation, decreased 3.7%; and termite and ancillary grew by 5.9%. In total, gross margin increased to 52.8% from 51.7% in the prior year's quarter. Depreciation and amortization expenses for the quarter increased $714,000 to $22.4 million, an increase of 3.3%. Depreciation increased $1 million due to acquisitions, vehicles acquired and equipment purchases, while amortization of intangible assets decreased $286,000 due to the full amortization of customer contracts from several acquisitions, including HomeTeam and tuck-ins related to Orkin. Sales, general and administrative expenses for the third quarter increased $838,000 or 0.5% to $168 million or 28.8% of revenues, down from 30% last year. As for our cash position for the 9-month period ended September 30, 2020, we spent $79.9 million on acquisitions compared to $431.2 million in the same period last year, which included the acquisition of Clark Pest Control. We paid $91.7 million on dividends and had $17.7 million of capital expenditures, which was slightly lower compared to 2019. We ended the period with $95.4 million in cash, of which $62.9 million is held by our foreign subsidiaries. Yesterday, the Board of Directors approved a large regular cash dividend of $0.08 per share plus a special dividend of $0.13 that will be paid on December 20, 2020, to stockholders of record at the close of business November 10, 2020. In addition, they also announced a 3-for-2 stock split that will take effect December 10, 2020, for stockholders of record at the close of business on November 10, 2020.

Revenue grew 4.9% to $583.7 million compared to $556.5 million for the same quarter in 2019. Net income rose to $79.6 million or $0.24 per diluted share compared to $44.1 million or $0.13 per diluted share for the third quarter of last year. Our GAAP earnings per share were $0.24 per diluted share.

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Companywide revenues were $1.304 billion in the fourth quarter of 2020, down 15% from last year's fourth quarter on a reported basis, and down 16% on an as-adjusted basis. Net income per share in the fourth quarter was $0.84, compared to $0.98 in the fourth quarter one year ago. Cash flow before financing activities during the quarter was $85 million. In December, we distributed a $0.34 per share cash dividend to our shareholders of record, for a total cash outlay of $39 million. We also acquired 1.1 million Robert Half shares during the quarter for $63 million. We have 9.9 million shares available for repurchase under our Board-approved stock repurchase plan. Return on invested capital for the Company was 31% in the fourth quarter. As Keith noted, global revenues were $1.304 billion in the fourth quarter. This is a decrease of 15% from the fourth quarter one year ago on a reported basis and a decrease of 16% on an as-adjusted basis. On an as-adjusted basis, fourth quarter staffing revenues were down 24% year-over-year. US staffing revenues were $723 million, down 25% from the prior year. Non-US staffing revenues were $219 million, down 23% year-over-year on an as-adjusted basis. We have 326 staffing locations worldwide, including 88 locations in 17 countries outside the United States. In the fourth quarter, there were 61.7 billing days, equal to the number of billing days in the fourth quarter one year ago. The current first quarter has 62.3 billing days, compared to 63.1 billing days in the first quarter one year ago. The billing days for 2021 by quarter, are 62.3 days, 63.4 days, 64.4 days and 61.7 days for a total of 251.8 days, which is approximately one day less than 2020 due to it being a leap year. Currency exchange rate movements during the fourth quarter had the effect of increasing reported year-over-year staffing revenues by $8 million. This increased our year-over-year reported staffing revenue growth rate by 0.7 percentage points. Temporary and consultant bill rates for the quarter increased 2% compared to a year ago, adjusted for changes in the mix of revenues by line of business. This rate for Q3 2020 was 3.1%. Global revenues in the fourth quarter were $362 million; $294 million of that is from business within the United States, and $68 million is from operations outside the United States. On an as-adjusted basis, global fourth quarter Protiviti revenues were up 18% versus the year-ago period, with US Protiviti revenues up 23%. Non-US revenues were down 2% on an as-adjusted basis. Exchange rates had the effect of increasing year-over-year Protiviti revenues by $3 million and increasing its year-over-year reported growth rate by 1 percentage point. Protiviti and its independently owned Member Firms serve clients through a network of 86 locations in 28 countries. In our temporary and consultant staffing operations, fourth quarter gross margin was 38.5% of applicable revenues, compared to 38% of applicable revenues in the fourth quarter one year ago. Our permanent placement revenues in the fourth quarter were 9.7% of consolidated staffing revenues versus 10.3% of consolidated staffing revenues in the same quarter one year ago. When combined with temporary and consultant gross margin, overall staffing gross margin increased 10 basis points compared to the year-ago fourth quarter, to 44.4%. For Protiviti, gross margin was $96 million in the fourth quarter or 26.5% of Protiviti revenues. This includes $5 million, or 1.5% of Protiviti revenues, of deferred compensation expense related to increases in the underlying trust investment assets. One year ago, gross margin for Protiviti was $90 million or 29.7% of Protiviti revenues, including $2 million of deferred compensation expense or 0.7% of Protiviti revenues, related to investment trust activities. Companywide selling, general and administrative costs were 32.6% of global revenues in the fourth quarter compared to 32.8% in the same quarter one year ago. Deferred compensation expenses related to increases in underlying trust investments had the impact of increasing SG&A as a percent of revenue by 2.7% in the current third quarter and 1.2% in the same quarter one year ago. Staffing SG&A costs were 39.7% of staffing revenues in the fourth quarter versus 36.7% in the fourth quarter of 2019. Included in staffing SG&A costs was deferred compensation expense related to increases in the underlying trust investment assets of 3.7% and 1.5%, respectively. We ended 2020 with 7,800 full-time internal staff in our staffing divisions, down 32% from the prior year. Fourth-quarter SG&A costs for Protiviti were 14.1% of Protiviti revenues, compared to 17.1% of revenues in the year-ago period. We ended 2020 with 7,300 full-time Protiviti employees and contractors, up 34% from the prior year. Operating income for the quarter was $89 million. This includes $41 million of deferred compensation expense related to increases in the underlying investment trust assets. Combined segment income was therefore $130 million in the fourth quarter. Combined segment margin was 9.9%. Fourth quarter segment income from our staffing divisions was $79 million with a segment margin of 8.4%. Segment income for Protiviti in the fourth quarter was $51 million with a segment margin of 13.9%. Our fourth-quarter tax rate was 27% for both the current and prior period years. Accounts Receivable at the end of the fourth quarter, accounts receivable was $714 million, and implied days sales outstanding or DSO was 49.4 days. Our temporary and consultant staffing divisions exited the fourth quarter with December revenues down 20.8% versus the prior year, compared to a 23.8% decrease for the full quarter. Revenues for the first three weeks of January were down 23% compared to the same period one year ago. Permanent placement revenues in December were down 25.4% versus December of 2019. This compares to a 28.5% decrease for the full quarter. For the first three weeks of January, permanent placement revenues were down 20% compared to the same period in 2020. Revenues; $1.29 billion to $1.37 billion, income per share; $0.74 to $0.84. The midpoint of our guidance implies a year-over-year revenue decline of 11.7% on an as-adjusted basis, including Protiviti and earnings per share returning to prior-year levels. Revenue growth on a year-over-year basis, staffing down 19% to 21%, Protiviti, up 23% to 25%, overall, down 11% to 13%. Gross margin percentages; temporary and consultant staffing, 37% to 38%, Protiviti; 25% to 26%, overall; 38% to 39%. SG&A as percent of revenues, excluding deferred compensation investment impacts: staffing: 35% to 36%, Protiviti: 14% to 15%, overall: 29% to 30%. Segment income, staffing: 8% to 9%, Protiviti: 10% to 12%, overall: 8% to 10%. 2021 capital expenditures and capitalized cloud computing costs for the year: $85 million to $95 million, with $15 million to $20 million in the first quarter. Tax rate: 27% to 28%, shares: 113 million. The collaboration between Protiviti and staffing is at an all-time high as evidenced by the 82% year-on-year growth rate this quarter from the unique blend of consulting and staffing solutions.

Net income per share in the fourth quarter was $0.84, compared to $0.98 in the fourth quarter one year ago. As Keith noted, global revenues were $1.304 billion in the fourth quarter. Revenues; $1.29 billion to $1.37 billion, income per share; $0.74 to $0.84.

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Our COVID inpatient numbers remain low, roughly 4% of our total cases as of now. The new project to be carried out over the next year and a half will include the addition of 30 elementary units, a third cath lab equipped to provide a higher level of care for patients with stroke symptoms, enhanced capacity to the NICU, and continued efforts to expand trauma services and robotics. And with USPI, we've added more than 570 physicians joining our medical staffs during this quarter, bringing the number now that have joined to 1,100 year-to-date. Florida remains a very important part of our portfolio as our five Palm Beach hospitals, which continue to grow and improve, coupled with more than 40 Florida ambulatory assets ensures a very strong, viable network in our continued -- in this continually growing area. Strategically, the Miami transaction also continues the objective of diversifying our EBITDA further to our Ambulatory segment, which we project to be approximately 43% or so by the end of the year. Our hospital portfolio is now positioned as the number one or two in 70% of our markets and with the Miami sale, that number will edge higher. USPI has in-house, a very advanced service line and development team, and in the second quarter, for example, we added 25 new starts for service lines across the range of specialties bringing that total to 45 year-to-date. Following a strong first quarter, we produced another very good quarter as we generated adjusted EBITDA in the quarter of $834 million which was $109 million better than the midpoint of our expectations. Looking back to the second quarter of 2019, our consolidated adjusted EBITDA this quarter represents a compounded annual growth rate of about 12% and our adjusted EBITDA margin increased 170 basis points, excluding grants. Substantially, all of our 20 hospital markets exceeded our expectations for the quarter, including 14 markets that exceeded our internal EBITDA forecast by more than 10%. Our case mix index in the quarter was about 10% higher than the second quarter of 2019. Our hospital adjusted EBITDA margin, excluding grants, was 10.9% in the second quarter, which was 50 basis points higher than in the first quarter of this year and 150 basis points higher than the margin we reported in the second quarter of 2019. USPI generated EBITDA of $295 million in the quarter, which included $20 million of grant income. USPI's EBITDA in the second quarter, excluding grants, represents a compounded annual growth rate of about 15% looking back to the second quarter of 2019. Surgical volumes this quarter recovered to 100% of pre-pandemic levels, patient acuity, and revenue yield remained strong, and cost continue to be well managed. USPI's EBITDA margin, excluding grants, of 41.4% was 190 basis points higher than the second quarter of 2019. Also, we anticipate approximately 43% of our consolidated adjusted EBITDA in the second half of 2021 will be from our USPI business, demonstrating further progression toward our goal of approximately 50% by 2023. Turning to our revenue cycle management business, Conifer generated $90 million of adjusted EBITDA and continue to deliver strong margins of 28.2%, which was 50 basis points higher than the first quarter. We ended the quarter with about $2.2 billion of cash on hand and no borrowings outstanding on our $1.9 billion line of credit. We generated $123 million of free cash flow in the quarter or about $275 million before the repayment of over $150 million of Medicare advances we received last year at the outset of the pandemic. Year-to-date, we've produced $536 million of free cash flow or about $688 million before the Medicare advance repayments. Our leverage ratio at the end of the second quarter was 4.17 times adjusted EBITDA and 4.86 times adjusted EBITDA minus NCI expense. Also, we refinanced $1.4 billion of notes during the quarter, which will result in $13 million of future annual cash interest savings and we realized over $100 million of cash proceeds during the quarter from the sale of our urgent care centers, a medical office building, and some other property. As you can see on the slide, we raised our guidance, $100 million after the first quarter due to our strong performance and grain income that we were able to recognize, which was not assumed in our original guidance. The other item to call out is that we are assuming the sale of our Miami-area hospitals will be completed during the third quarter which will result in about $55 million of earnings being removed from our previous guidance. Our adjusted EBITDA outlook for 2021 is now projected to be $3.200 billion at the midpoint, which is $200 million higher than our original outlook at the beginning of the year. Since we are assuming that the sale of our Miami hospitals will occur on August 1st this year, we removed approximately $22 million of Miami EBITDA from our Q3 EBITDA outlook and approximately $167 million of revenue. For the last five months of the year, we removed $55 million of EBITDA from our outlook due to the planned sale and we removed about $418 million of revenue from our outlook due to the planned sale. And to reiterate, we've raised our full-year 2021 guidance for the second time this year with our full-year EBITDA midpoint now $200 million higher than the start of the year. I want to point out that our updated outlook includes a pre-tax book gain of about $400 million for the anticipated sale of the Miami hospitals, but this gain is not -- it's not included in our adjusted EBITDA or adjusted earnings per share guidance. As for cash flows for the year, at the midpoint, we anticipate generating free cash flow of about $1.275 billion and adjusted free cash flow of $1.400 billion this year at the midpoint before taking into consideration the repayments we anticipate making in 2021 of approximately $700 million for Medicare advances and the deferred payroll tax match. Free cash flow for the year of $1.275 billion before the repayment of the advances and the taxes, less expected cash NCI payments of $470 million results in positive net cash flows of about $800 million this year. Also, I wanted to mention our income tax payments for 2021 are anticipated to be approximately $150 million. The increase in expected tax payments in the back half of the year is due in large part to the about $50 million of federal and state taxes related to the gain on sale of our Miami hospitals. I do want to remind you that utilization, net operating loss carry-forwards for -- from the two most recent years are limited to 80% of taxable income for 2021 tax filing purposes.

Our adjusted EBITDA outlook for 2021 is now projected to be $3.200 billion at the midpoint, which is $200 million higher than our original outlook at the beginning of the year.

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Our organic sales growth for the year was 3%. Our segment operating margin was an exceptionally strong 11.8%, which increased 40 basis points compared to 2020 with performance more than offsetting mix and COVID-related headwinds. We grew our transaction adjusted earnings per share by 8% and generated a $3.1 billion of transaction adjusted free cash flow. Regarding capital deployment, we returned a record $4.7 billion to shareholders through dividends and share repurchases, including a $500 million accelerated share repurchase that we announced in November of 2021. We strengthened our balance sheet, retiring over $2.2 billion of debt during the year and achieving an increased credit rating in the process. And we continue to invest in our business with over $1.4 billion in capital expenditures to create new technologies and support franchise programs. The National Defense Authorization Act contained a $25 billion increase to the defense budget that represents 5% growth compared to fiscal year 2021, which we expect to also be supported in the appropriations bill. In the NDAA, there is continued support for our major programs, and several of our programs received incremental funding above the President's budget request, including Triton, E-2D F-35, F-18 and G/ATR, among others. Webb will peer more than 13.5 billion years into the past when the first stars and galaxies were formed, ushering in an exciting new era of space observation and expanding our understanding of the universe. In the fourth quarter, the space sector received a $3.2 billion award to support Artemis missions IV through VIII. In the fourth quarter, MS received an accelerated award for F-16 SABR for approximately $200 million, and full year awards of approximately $700 million. We have now received total contract awards for near 1,000 radars for this program in support of the U.S. Air Force and National Guard, as well as several international customers. In addition, our network information systems business area within Mission Systems received approximately $1 billion in awards for advanced processing solutions. Northrop Grumman is a leader in conservation activity with a 44% reduction in greenhouse gas emissions since 2010. In the fourth quarter, S&P released its Global Corporate Sustainability Assessment scores, and we ranked in the 96 percentile. As we previewed in prior quarters, the divested IT services business, the equipment sale at AS and four more working days in Q4 2020 represented over $1.6 billion of sales when compared to Q4 2021. The Q4 decline in AS sales was partially driven by fewer working days and the 2020 equipment sale, and it also included a $93 million unfavorable EAC adjustment on F-35. Organic sales were down 9% in Q4 and 4% for the full year, driven by the completion of our contract at the Lake City ammunition plant, which generated almost $400 million of sales in 2020. Mission Systems organic sales were down 3% in the fourth quarter, primarily due to the reduction in working days and up 6% for the full year. And lastly, Space Systems Q4 and full year organic sales rose by 6% and 24%, respectively. We continued to ramp significantly on franchise programs, including a $1.1 billion increase on GBSD in 2021. AS operating margin rate decreased to 8.4% in the quarter and 9.7% for the full year due to the unfavorable EAC adjustment on F-35. Defense Systems operating margin rate increased 90 basis points to 12.1% in the quarter and 80 basis points to 12% for the full year. As a result of higher EAC adjustments and business mix changes, operating margin rate grew to 15.9% in the fourth quarter and 15.6% for the full year. And at Space Systems, operating margin rate was 9.6% in the quarter and 10.6% for the full year. At the total company level, segment operating margin rate in the fourth quarter was the same as Q4 2020, even with the F-35 charge in 2021. And it increased 40 basis points for the full year to 11.8%. Our transaction adjusted earnings per share declined 9% from Q4 2020 to Q4 2021, primarily due to lower sales volume from the factors I described earlier. Transaction-adjusted earnings per share grew 8% in 2021 due to strong segment performance and lower corporate unallocated costs. Lower corporate unallocated was driven by two items we've discussed in prior quarters: the $60 million benefit from an insurance settlement related to the former Orbital ATK business, and lower state taxes. Regarding our pension plans, asset performance was strong again in 2021 at nearly 11%, the third year in a row of double-digit asset returns. Our FAS discount rate increased 30 basis points to 2.98%. These factors resulted in a mark-to-market benefit of roughly $2.4 billion in 2021. In addition, our net pension funding status has improved by over $3 billion and on a PBO basis, is now over 93% funded. Our CAS prepayment credit is approximately $1.7 billion as of January 1 of this year. We generated nearly $3.6 billion of operating cash flow and $3.1 billion of transaction-adjusted free cash flow in 2021, in line with our expectations. In the fourth quarter, we made our final federal and state tax payments associated with the IT services divestiture of almost $200 million. We also made our first payment of roughly $200 million of deferred payroll taxes from the CARES Act legislation. At aeronautics, we expect sales in the mid- to high $10 billion range. As we noted last quarter, we're projecting headwinds in our HALE portfolio, as well as lower sales on JSTARS, F-18 and our restricted business. Sales on F-35 are expected to be slightly higher in 2021 due to the EAC adjustment we booked in Q4. We expect an AS margin rate of approximately 10%, which is up 30 basis points year over year. For Defense Systems, we expect sales to be in the high $5 billion range as this business returns to modest organic growth following the IT services divestiture and the completion of our Lake City contract. Operating margin rate is expected to remain very strong in the high 11% range. Mission Systems sales are projected to be in the mid-$10 billion range, up from $10.1 billion of organic sales in 2021, reflecting continued strength in demand for our products. Operating margin rate is expected in the low 15% range. Sales are projected in the mid-$11 billion range, up from -- up about $1 billion from 2021 with a margin rate in the low 10% range. Our total revenue guidance is $36.2 billion to $36.6 billion, representing a range of 2% to 3% organic growth, consistent with the rate we estimated in October 2021. This growth is enabled by our strong backlog, which stands at over $76 billion, and covers more than two years of annual sales. The 2021 book-to-bill of 0.9x was lower than our prior expectation due to the AS F-35 award shift to 2022. More importantly, our three-year trailing average book-to-bill is approximately 1.22, and remains the foundation of our current and future growth. As COVID-related headwinds that we experienced late in 2021 continue into early 2022, we anticipate that first quarter 2022 sales will be less than 25% of the full year. We have increased the segment operating margin rate outlook that we provided in October as we now expect a rate roughly consistent with 2021 in the range of 11.7% to 11.9%. Altogether, we expect transaction adjusted earnings per share to be between $24.50 and $25.10, based on approximately 155 million weighted shares outstanding. As shown on Slide 11, this includes roughly $2 of year-to-year earnings per share headwinds from lower net pension benefits driven by the reduction in CAS recoveries and higher corporate unallocated expense due to the one-time benefits in 2021. We project 2022 transaction-adjusted free cash flow of $2.5 billion to $2.8 billion, assuming the R&D tax amortization law is deferred or repealed. We continue to project about $1 billion of higher cash taxes should current tax law remain in effect. As I mentioned, our cash tax outlook includes the final payroll tax payment from the CARES Act of approximately $200 million. The midpoint of our 2022 transaction-adjusted free cash flow guidance is $2.65 billion, and includes roughly $375 million of lower CAS recoveries than 2021. Speaking of taxes, we're projecting an effective tax rate of approximately 17% going forward, roughly consistent with 2021, excluding the divestiture or mark-to-market pension effects. With that in mind, our board of directors recently approved an increase in our share repurchase authorization of $2 billion. And based on our outlook today, we plan on returning at least $1.5 billion to shareholders via share repurchase in 2022.

The Q4 decline in AS sales was partially driven by fewer working days and the 2020 equipment sale, and it also included a $93 million unfavorable EAC adjustment on F-35. At aeronautics, we expect sales in the mid- to high $10 billion range. We expect an AS margin rate of approximately 10%, which is up 30 basis points year over year. Mission Systems sales are projected to be in the mid-$10 billion range, up from $10.1 billion of organic sales in 2021, reflecting continued strength in demand for our products. Sales are projected in the mid-$11 billion range, up from -- up about $1 billion from 2021 with a margin rate in the low 10% range. Our total revenue guidance is $36.2 billion to $36.6 billion, representing a range of 2% to 3% organic growth, consistent with the rate we estimated in October 2021. Altogether, we expect transaction adjusted earnings per share to be between $24.50 and $25.10, based on approximately 155 million weighted shares outstanding.

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At 11 a.m., we cut the ribbon in the transcendence room, high above One Vanderbilt with the most incredible and amplified views of New York City. As a result, we are now more than 90% leased despite COVID, and despite every dire prediction of the city's demise. On certain days of the week, we are reaching nearly 40% physical occupancy in our portfolio, a substantial increase that's been building up over the past few weeks. With over 450,000 square feet leased in the third quarter in our portfolio and nearly 1.4 million square feet leased in SL Green portfolio to date, we are tracking well ahead of our leasing goals for the year. And we're doing that at rental levels that are ahead of expectations and almost flat with expiring escalated rents. It's a 56,000 square foot lease to one of the best operators of fitness, wellness and health in New York City. And that really bodes well for one Madison, which otherwise is already about six to seven weeks ahead of schedule on construction and significantly under budget, even beyond the numbers that we discussed back in December of last year, the buyouts, which now stand at close to 92% of the total project, have resulted in over $12 million of additional contingency savings. Most significantly, the consummation of the sale of about a 50% interest to institutional -- overseas institutional investor in the News Building. That, of course, enabled us to repurchase about an additional $80 million of stock in the fourth quarter, which brings us close, but not completely rounded out -- I'm sorry, in the third quarter, my mistake. $80 million of stock in the third quarter.

And we're doing that at rental levels that are ahead of expectations and almost flat with expiring escalated rents.

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As we review our results, please note that in our comments today and in the accompanying slides, we reference a certain non-GAAP measures, specifically in accordance with our 52/53 week calendar. Revenue was $750.7 million, an increase of 1.8%. Organic revenue excluding $5.7 million of storm restoration services in the quarter declined 6.2%. As we deployed 1 gigabit wireline networks, wireless/wireline converged networks and wireless networks, this quarter reflected an increase in demand from one of our top five customers. Adjusted gross margins were 14.3% of revenue, reflecting the continued impacts of the complexity of a large customer program. Adjusted general and administrative expenses were 8.5%, and all of these factors produced adjusted EBITDA of $45.7 million or 6.1% of revenue, an adjusted diluted loss per share of $0.07, compared to a loss of $0.23 in the year ago quarter. Liquidity was strong as cash and availability under our credit facility was $570.5 million. Finally, during the quarter, we repurchased 1.32 million shares of our common stock for $100 million, representing just over 4.15% of common stock outstanding. Even after the substantial repurchase, notional net debt only increased by $14.6 million during the quarter. In sum, over the last four quarters, we have reduced notional net debt by over $275 million, increased availability under our credit facility by a similar amount and meaningfully reduced shares outstanding. As our most recent share repurchase authorization has been exhausted, our Board has newly authorized $150 million in share repurchases. These wireline networks are generally designed to provision 1 gigabit network speeds to individual consumers and businesses, either directly or wirelessly using 5G technologies. We are providing program management, planning, engineering and design, aerial, underground and wireless construction, and fulfillment services for 1 gigabit deployments. During the quarter, we experienced increased demand from one of our top five customers, organic revenue decreased 6.2%. Our top five customers combined produced 69.4% of revenue, decreasing 15.5% organically, while all other customers increased 25.3% organically. Comcast was our largest customer at 18.8% of total revenue or $140.9 million. Comcast grew 28.8% organically. Revenue from AT&T was $126.2 million or 16.8% of revenue. Verizon was our third largest customer at 15.7% of revenue or $117.8 million. Lumen was our fourth largest customer at $100.5 million or 13.4% of revenue. And finally revenue from Windstream was $36 million or 4.8% of revenue. Of note, fiber construction revenue from electrical utilities was $44.1 million in the quarter or 5.9% of total revenue. This activity increased organically 125% year-over-year. In fact, over the last several years, we have meaningfully increased the long-term value of our maintenance and operations business, a trend which we believe will parallel our deployment of 1 gigabit wireline direct and wireless/wireline converged networks as those deployments dramatically increase the amount of outside plant network that must be extended and maintained. Backlog at the end of the fourth quarter was $6.81 billion versus $5.412 billion at the end of the October 2020 quarter, increasing approximately $1.4 billion. Of this backlog, approximately $2.787 billion is expected to be completed in the next 12 months. Headcount increased during the quarter to 14,276. Contract revenues for Q4 were $750.7 million and organic revenue declined 6.2%. Q4 '21 included an additional week of operations due to the company's 52/53 week fiscal year. Adjusted EBITDA was $45.7 million or 6.1% of revenue compared to $44.5 million or 6% of revenue in Q4 '20. Non-GAAP adjusted gross margins were at 14.3% in Q4 and increased 10 basis points from Q4 '20. Gross margins were within our range of expectations for the quarter, but approximately 80 basis points below the midpoint of our expectations. This variance reflected approximately 100 basis points of pressure from a large customer program offset in part by approximately 20 basis points of improved performance for several other customers. G&A expense increased 25 basis points, reflecting higher performance-based compensation offset in part by lower administrative costs, compared to Q4 '20. The Q4 '21 non-GAAP effective income tax rate was 30%, including incremental tax benefits related to recent tax filings. For planning purposes for fiscal 2022, we estimate the non-GAAP effective income tax rate will be approximately 27%. Non-GAAP adjusted net loss was $0.07 per share in Q4 '21, compared to a net loss of $0.23 per share in Q4 '20. During Q4, we repurchased 1,324,381 shares of our common stock at an average price per share of $75.51 in the open market for $100 million. Our Board of Directors has approved a new authorization of $150 million for share repurchases through August 2022. Over the past four quarters, we have reduced notional net debt by $276.4 million. We ended the quarter with $11.8 million of cash and equivalents, $105 million of revolver borrowings, $421.9 million of term loans and $58.3 million principal amount of convertible notes outstanding. As of Q4, our liquidity was strong at $570.5 million, cash flows from operations were robust at $102.4 million, bringing our year-to-date operating cash flow to $381.8 million from strong conversion of earnings to cash and prudent working capital management. The combined DSOs of accounts receivable and net contract assets was at 136 days, reflecting the impact of a large customer program. Capital expenditures were $20.4 million during Q4 net of disposal proceeds, and gross capex was $21.9 million. Looking ahead to fiscal year 2022, we expect net capex to range from $150 million to $160 million. Telephone companies are deploying fiber-to-the-home to enable 1 gigabit high speed connections, increasingly, rural electric utilities are doing the same.

Adjusted general and administrative expenses were 8.5%, and all of these factors produced adjusted EBITDA of $45.7 million or 6.1% of revenue, an adjusted diluted loss per share of $0.07, compared to a loss of $0.23 in the year ago quarter. Non-GAAP adjusted net loss was $0.07 per share in Q4 '21, compared to a net loss of $0.23 per share in Q4 '20.

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Year-to-date, gross profit increased to $927 million and adjusted earnings before interest, taxes, depreciation and amortization or adjusted EBITDA surpassed the $1 billion mark. Third quarter financial highlights as compared with the prior year period included consolidated gross margin increased 100 basis points to a record 30.6%, despite a 7% reduction in revenues, demonstrating the resiliency of our business and our focus on cost control. Selling, general and administrative, or SG&A, expenses as a percentage of total revenues improved 10 basis points to an industry-leading 5.4%. Adjusted EBITDA was $502 million, inclusive of $70 million of nonrecurring gains. And diluted earnings per share was $4.71. For clarity, the nonrecurring gains contributed $0.87 per diluted share. Aggregate shipments declined nearly 9% versus a robust prior year comparison. As anticipated, given the widespread COVID-19 disruptions across the United States, shipment declines were experienced across our footprint, with the East Group down 9% and the West Group down 8%. Aggregates average selling price increased 2.7% or 4% on a mix-adjusted basis, underscoring this product line's resilient pricing power. By region, the East Group posted a 4.4% pricing increase with strength in our key geographies of North Carolina, Georgia, Iowa, Indiana and Maryland. On a mix-adjusted basis, the West Group average selling price improved nearly 4%. As a reminder, we anticipate overall full year 2020 aggregates pricing growth of 3% to 4%. Third quarter cement shipments, however, decreased 4%, reflecting continued energy sector headwinds. Reported cement pricing increased 1%. While average selling prices for our core cement products, namely, type one and type two cement were up $4 over the prior year period. As a reminder, specialty cements can sell for over $200 per ton. On a mix-adjusted basis, overall cement pricing increased 3.4%. Ready-mixed concrete shipments decreased 4% and excluding acquired shipments and third quarter 2019 shipments from our Southwest division's concrete business in Arkansas, Louisiana and Eastern Texas, which we divested earlier this year. Favorable geographic mix from robust Colorado shipments was the primary driver of the 2% increase in third quarter concrete pricing. Asphalt shipments for our Colorado asphalt and paving business decreased 3% following near record levels in the prior year period. Asphalt pricing increased 6%, reflecting a higher percentage of attractively priced specialty asphalt mix sales. For the third quarter, the Building Materials business delivered products and services revenues of $1.2 billion, a 6% decrease from the prior year period. And product gross profit of $384 million, a 3% decrease. Aggregates product gross margin expanded 130 basis points to 36.4%, an all-time record despite lower shipment volume. Strong mix-adjusted pricing gains, disciplined cost management and lower diesel fuel costs contributed to the 6.5% growth in aggregates unit profitability. Cement product gross margin was 40.2%, a 40 basis point decline. For our downstream businesses, ready-mixed concrete product gross margin declined 90 basis points, 9.7%, attributable to higher costs for raw materials. Asphalt and paving achieved record gross profit of $32 million and a 140 basis point improvement in margin despite lower revenues. Magnesia Specialties' third quarter product revenues increased $10 million to $55 million, reflecting lower demand for chemicals and lane products. Lower revenues and reduced fixed cost absorption resulted in a 240 basis point decline and product gross margin to 38%. Our consolidated results included $7 million of gains on surplus, noncore land sales and divested assets. Since 2016, we have sold nearly $200 million of excess land that was not used for operations and did not contain operating assets. We anticipate adjusted EBITDA to range from $1.35 billion to $1.37 billion, inclusive of the $70 million of nonrecurring gains for full year 2020. We have widened our full year capital expenditures guidance and now expect it to range from $350 million to $400 million. Since our repurchase authorization announcement in February 2015, we have returned $1.8 billion to shareholders through a combination of share repurchases and in meaningful, sustainable dividend. Our Board of Directors recently approved a 4% increase in our quarterly cash dividend paid in September, underscoring its continued confidence in our future performance and cash generation. Our annualized cash dividend rate is now $2.28. With a debt-to-EBITDA ratio of 2 times, we are at the lower end of our target leverage range of two to 2.5 times. We remain confident in our balance sheet strength, with $1.2 billion of total liquidity. We're confident that our favorable pricing dynamics will continue and that attractive underlying fundamentals and long-term secular growth trends across our key geographies will remain intact. For example, Texas DOT scheduled lettings for fiscal year 2021, which began September 1, and are currently planned at $10 billion, an increase of 35% over the comparable fiscal year 2020 lettings. As a reminder, these three key states represent over 60% of our Building Materials business revenues. Notably, both bills provide the first sizable increase in federal transportation funding in more than 15 years. Regardless of the upcoming election outcomes, increased infrastructure investment should provide volumes stability and drive aggregate shipments closer to 45% of our total shipments, moving us toward our 10-year historical average. For reference, aggregate shipments to the infrastructure market accounted for 38% of third quarter shipments. Importantly, we have purposely shifted our nonresidential exposure over the last 10 years or so to be more heavily industrially focused as we've expanded our geographic footprint along major commerce carters. Aggregate shipments of the nonresidential market accounted for 33% of third quarter shipments. Importantly, single-family housing is two to 3 times the aggregates intensity of multifamily housing given the ancillary nonresidential and infrastructure needs of new suburban communities. Aggregate shipments to the residential market accounted for 24% of third quarter shipments.

And diluted earnings per share was $4.71. While average selling prices for our core cement products, namely, type one and type two cement were up $4 over the prior year period. We're confident that our favorable pricing dynamics will continue and that attractive underlying fundamentals and long-term secular growth trends across our key geographies will remain intact.

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Our MRO job inductions metrics, which serve as an early indicator for carrier traffic recovery, increased 37% for the quarter with a 6% sequential increase overall led by engine accessories and the sales structures. Aftermarket spares and repairs, sales were up overall more than 70% for the quarter. Orders for the A320 and 737 MAX have seen new highs since the beginning of the pandemic. I want to congratulate Boeing for completing the first flight of the 737 MAX-10 on June 18, which was followed by June 29 order from United Airlines for 150 aircraft. Orders for commercial transport aircraft are up in 2021 as Airbus and Boeing have reported 721 new orders, offset by 476 cancellations. Bright spots include United's June order for 737 MAX and A321neo aircraft, the FedEx order for 767, and the May Southwest Airlines orders for the MAX. Commercial transport backlog now stands at approximately 12,000 aircraft. Boeing recently announced a slowing of the 787 production rate. Triumph had already de-risked its twin-aisle build rates with our 787's percentage of sales and inventory, reflecting conservative assumptions. After 18 months of uncertainty, we have more clarity on near-term OEM and MRO demands as markets continue to stabilize, and we see lift from military and cargo demand. Triumph has launched an energy conservation project in our largest production facility, which will reduce electrical power use by 25% annually. We are on track to complete our final 747 production components this month, and in the last of our significant loss-making programs. First, organic growth was 11%, led by improved MRO and aftermarket spare sales within our core Systems and Support business. OEM sales were driven by Airbus A320, 321 shipments, Bell 429 gearboxes and E2D actuation. Systems & Support revenues for our third-party MRO increased 19%, while proprietary spare sales, primarily for military rotorcraft and commercial narrow-body production rates, more than offset commercial widebody declines. Shipments to FedEx and UPS are up 52% for the quarter as cargo aircraft returned for deferred maintenance. Military sales now comprise 53% of our sales in Systems & Support helping to offset the temporary commercial aerospace decline. Military platforms such as the E2D, UH-60 and CH-47 contributed to the sequential sales growth driving a 12% increase in our military sales year-over-year. As mentioned, we will deliver our final 747 structures this month, at which point Triumph will fulfill our program obligations. We will close the second of two large structures facilities dedicated to the 747 in December, ending a long period of losses. Early indicators within the aviation industry indicate steady progress in the quarter toward 2019 levels with airline travel bookings improving from 46% to 69% and corporate bookings up from 18% to 40% as strong summer bookings benefited domestic carriers. Reflecting a return to airline normalcy and profitability, average airfare prices, weekly load factors and TSA throughput continue to recover in the U.S. Parked fleets have declined substantially with over 1,800 aircraft returned to service since March. As you know, the single-aisle segment will lead the aviation recovery, gratifying the OEM single-aisle deliveries for both Boeing and Airbus increase each month within the quarter, culminating in strong June numbers with Airbus delivering 62 single aisles and Boeing delivering 36. We are upgrading heat exchangers on the F-22 F119 engine for Pratt & Whitney, where we have significant IP. 95% of our heat exchangers are designed and developed by Triumph engineering teams. We secured orders from GE for the F/A-18 E/F, F414 aircraft-mounted accessory drives. This complex gearbox builds on the legacy of our F/A-18 C&D gearbox for the F404 engine. Sales are up 11% organically. Q1 adjusted operating income was $31 million. Adjusted operating margin was 8%, up 477 basis points from the prior year. With respect to the segment results, on slide 11, net sales in Systems & Support were up 8%, and benefited from continued recovery in the aftermarket. This segment sales were 53% military this quarter, up from 51% in the prior year quarter. Adjusted operating margins for Systems & Support was 14%, 235 basis point improvement from the prior year, and benefited from increasing MRO demand. First quarter net sales for structures increased 15%, largely due to the prior year's impacts of the pandemic after adjusting for divestitures and the sunsetting 747 and G280 programs. The continuing business is stable and improving as evidenced by the 10% adjusted operating margin compared to 1% in the prior year. During the quarter, I visited our Grand Prairie, Texas facility and saw the significant progress our team has achieved to successfully complete the production of the 747 later this month. In Q1, we retired $100 million of discrete cash obligations related to advances, settlements, restructuring and wind down of 747 production. Excluding these sunsetting uses of cash, we used $51 million of cash in the first quarter on modest working capital growth in support of anticipated production rate increases, primarily on commercial narrow-body platforms. Our net debt at the end of the quarter was approximately $1.4 billion, and our combined cash and availability was about $263 million. In the quarter, we completed the mandatory paydown of approximately $112 million of first lien notes and redeemed the remaining $236 million of outstanding 22 notes. Based on anticipated aircraft production rates, and excluding the impacts of potential divestitures, for FY '22, we expect revenue of $1.5 billion to $1.6 billion. We expect adjusted earnings per share of $0.41 to $0.61. Cash taxes, net of refunds received, is expected to be approximately $4 million for the year, while interest expense is expected to be approximately $140 million, including approximately $137 million of cash interest. After approximately $150 million of free cash use in the first quarter, we expect in total to generate free cash flow over the balance of the year, with about $40 million to $60 million of use in Q2, approximately breakeven in Q3 and solidly cash positive in Q4. For the full year, we expect to use $110 million to $125 million of cash from operations with approximately $25 million in capital expenditures, resulting in free cash use of $135 million to $150 million.

Based on anticipated aircraft production rates, and excluding the impacts of potential divestitures, for FY '22, we expect revenue of $1.5 billion to $1.6 billion. We expect adjusted earnings per share of $0.41 to $0.61.

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I'll note, that includes over 140 call center associates who we moved very quickly to seamlessly continue to provide customer service from their homes, and that includes the oversight folks as well, an incredible job by the IT group there, as well as our field employees who continue to prepare for our peak summer season. The refueling outage had a reduced scope to allow the completion of the essential work, with 40% less contractors than normal. We were able to quickly secure 3,000 masks for APS, including an expedited quantity of 300 for Palo Verde employees at a time when masks were harder to come by. As with many other aspects of our operations, mitigation plans are in place to minimize any potential supply chain disruptions. At the request of the commission staff, that date has been extended to August 3, and the hearing is now scheduled to begin on September 30. On May five and 6, the commission held open meetings discussing our rate comparison tool, how to refund or collect the demand-side management funds and treatment for cost associated with COVID-19. As a result of the discussion, the commission voted to return $36 million of overcollected demand-side management funds to customers through a onetime bill credit in June. Following that workshop, Chairman Burns, Commissioner Kennedy and Commissioner Marquez Peterson all publicly expressed support for a 100% clean by 2050 standard. We've never experienced anything like COVID-19, but we've been through many challenging times in our 136 years of service to Arizona. 2020 started out strong, earning $0.27 per share compared to $0.16 per share in the first quarter of 2019. We also experienced 2.2% customer growth and 0.8% weather-normalized sales growth in the first quarter compared to the same period in 2019. Excluding the last two weeks of March, weather-normalized sales for the quarter were within our original 2020 annual guidance range of 1% to 2%. From March 13, the date when many Arizona schools and businesses closed, through April 30, we have seen an approximate 14% reduction in weather-normalized commercial and industrial load compared to the same period last year, partially offset by an approximate 7% increase in weather-normalized residential load. The reduction in C&I load equates to an earnings decrease of around $0.14 per share, while the increase in residential usage contributes about $0.04 per share for a net reduction of approximately $0.10 compared to our original expectations for this period. Despite the fact that Arizona has already started to reopen, if we assume the trend we experienced from March 13 through April 30 continues through the end of the second quarter, we would anticipate a net weather-normalized sales decrease of approximately 7% compared to the second quarter 2019 and an earnings per share decrease of approximately $0.20 compared to our original second quarter 2020 expectations. Historically, approximately 56% of our annual earnings comes from Q3, 28% from Q2 and only 6% from the first quarter. As we saw last year, with the weather impact of negative $0.25 per share, weather alone can play a significant factor in our annual earnings. This year, Phoenix reached triple-digit temperatures already in April, setting record highs, and we've maintained above 100 degrees every day this week with excessive heat warnings already in effect. For example, by the end of this year, we'll have deployed 28 bots across the enterprise as part of our digital transformation program. The use of technology to automate this process will save employees about 1,800 hours per year. Just five of the automations planned for the first part of this year are expected to produce an NPV benefit of $1.8 million over the next five years. According to the Arizona Technology Council's quarterly impact report, Arizona tech sector is growing at a rate 40% faster than the U.S. overall. Through February, employment in Metro Phoenix increased 3.2% compared to 1.5% for the entire U.S. Construction employment in Metro Phoenix increased by 5.4%, and manufacturing employment increased by 2.1%. This data reflects pre COVID-19 conditions, and we expect to see the 2.2% customer growth rate we experienced in the first quarter to slow in the near term. In regard to our future capital investments, we remain committed to the $4.7 billion capex forecast for the 2020 through 2022 time frame, largely driven by clean energy investments. Similarly, we continue to believe 2020 Pinnacle West consolidated earnings of $4.75 to $4.95 per share remain achievable, assuming the impacts for COVID-19 dissipate by the end of the second quarter, and customer and sales growth resumes once the economy normalizes. We currently have $1.2 billion in revolver capacity with an option to increase by another $500 million. As of May 1, we have drawn down $310 million on our revolvers. In addition, all remaining Pinnacle West long-term debt maturing in 2020 will occur in November and December, and APS's $200 million term loan matures in August. Further, at year-end 2019, our pension was 97% funded. With our liability driven investment strategy, our pension was 96.4% funded as of March 31, 2020, highlighting our resilience to the market volatility. Last week, we proudly celebrated 136 years of service to Arizona customers and communities, and we've been through plenty of challenges before.

As with many other aspects of our operations, mitigation plans are in place to minimize any potential supply chain disruptions. 2020 started out strong, earning $0.27 per share compared to $0.16 per share in the first quarter of 2019. Similarly, we continue to believe 2020 Pinnacle West consolidated earnings of $4.75 to $4.95 per share remain achievable, assuming the impacts for COVID-19 dissipate by the end of the second quarter, and customer and sales growth resumes once the economy normalizes.

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1 priority, which has always been protecting the health and safety of our associates and communities. And with that in mind, in Q1, we invested nearly $60 million in support of COVID safety protocols. Our outstanding performance continued this quarter with total company comparable sales growth of 25.9%. comps were 24.4% with broad-based growth across all geographic regions and divisions. In fact, for the quarter, comp sales for all 15 U.S. regions exceeded 18% and all U.S. divisions exceeded 20%. During the quarter, operating margin expanded 313 basis points on an adjusted basis, leading to diluted earnings per share of $3.21, which is an 81% increase on an adjusted basis over the prior year. On Lowes.com, sales grew 36.5% on top of 80% growth in the first quarter of 2020, which represents a 9% sales penetration this quarter and a two-year comp of 146%. Pro comps outpaced DIY comps with over 30% comps in the quarter. In addition to the strength in Pro, we delivered over 60% comps along with significant increase in customer satisfaction in our installation services business. In the first quarter, I had an opportunity to visit stores in nine of our 15 geographic regions. I'm also pleased to announce that for the fifth consecutive quarter, 100% of our stores earned a winning together profit-sharing bonus, a record $152 million payout to our frontline hourly associates. This represents an incremental $70 million above the target level. We delivered U.S. comparable sales growth of 24.4% in the first quarter. In fact, 13 of 15 merchandising departments generated comps over 15% and all merchandising departments were up more than 20% on a two-year comp basis. In addition to lumber, we delivered comps exceeding 30% in electrical, decor, kitchens, and bath, and seasonal and outdoor living. 1 position in outdoor power equipment and truly complements the leading brands we carry such as John Deere, Honda, Husqvarna, Aaron's, and CRAFTSMAN. As Marvin mentioned, we delivered strong sales growth of 36.5% and a two-year growth of 146% on Lowes.com. As Marvin mentioned, 100% of our stores earned a "Winning Together" profit-sharing bonus, a record $152 million payout to our frontline hourly associates. This quarter, we expanded our contact with shopping options by completing the rollout of BOPIS lockers to 100% of our U.S. stores in April. Having built these lockers in 100% of our U.S. stores will allow us to expand our omnichannel capabilities, further improve customer satisfaction, and limit customer congestion at our service desk. As Marvin mentioned, Pro outpaced DIY in the quarter with over 30% comps. As Marvin mentioned, we are seeing terrific momentum in our installation business, with over 60% comps this quarter. In Q1, we generated $4 billion in free cash flow, driven by improved operational execution and continued strong consumer demand. We returned $3.5 billion to our shareholders through both a combination of dividends and share repurchases. During the quarter, we paid $440 million in dividends at $0.60 per share. We also repurchased 16.8 million shares for $3.1 billion at an average price of approximately $182 a share. We have approximately $17 billion remaining on our share repurchase authorization. Capital expenditures totaled $461 million in the quarter as we invest in our strategic initiatives to drive the business and to support our growth. We ended the quarter with $6.7 billion of cash and cash equivalents on the balance sheet, which includes proceeds from our $2 billion notes offering in March. In addition, we entered into a $1 billion term loan facility in April, which remains undrawn. Our balance sheet remains extremely healthy with adjusted debt to EBITDA at 2.07 times at the end of the quarter, well below our long-term target of 2.75 times. In Q1, we generated diluted earnings per share of $3.21, an increase of 81% compared to adjusted diluted earnings per share last year. Q1 sales were $24.4 billion, driven by a comparable sales increase of 25.9%. This was a result of a balanced contribution from both ticket and transactions as comparable average store ticket grew 14.1% and transaction count grew 11.8%, with strong repeat rates from both new and existing customers. While a little difficult to measure, we estimate that the March government stimulus checks drove 300 basis points of growth, while commodity inflation benefited comps by 460 basis points in the quarter. U.S. comp sales were up 24.4% in the quarter, consistent with results from the past few quarters. Our U.S. comps were 24% in February, 35.9% in March, and 13.9% in April. Looking at U.S. comp growth on a two-year basis from 2019 to '21, February sales increase 30.3%, March increased 48.1%, and April increased 37.1%. Gross margin was 33.29%, up 19 basis points from last year and up 183 basis points as compared to Q1 of '19. Product margin rate improved 165 basis points. However, results pressure gross margin by 15 basis points versus last year. These benefits to product margin rate were partially offset by 90 basis points of pressure from product mix shifts due to lumber inflation and a less favorable product mix, 20 basis points of pressure from supply chain costs as we continue to invest in our omnichannel capabilities, and 20 basis points of pressure from credit revenue. SG&A of 18.4% levered 288 basis points, compared to adjusted SG&A in LY, driven primarily by lower COVID-related costs, as well as operating costs leverage resulting from strong sales and our ongoing productivity from our PPI initiative. As anticipated, we incurred nearly $60 million of COVID-related expenses, as compared to approximately $320 million of COVID-related expenses last year. The $260 million reduction in these expenses generated 140 basis points of SG&A leverage. Additionally, strong sales and a focus on efficiency and productivity allowed us to generate leverage of 100 basis points in operating salaries, 35 basis points in occupancy expense, and 5 basis points in advertising. Now, operating profit was $3.2 billion, an increase of 63% over LY. Operating margins of 13.3% of sales for the quarter was up 317 basis points to the prior year, driven by both improved operating leverage and improved gross margin rate. The effective tax rate was 23.5%. At quarter-end, inventory was $18.4 billion, up $2.2 billion from Q4 levels, in line with seasonal patterns. This reflects an increase of $4.1 billion from Q1 of 2020 when inventory levels were pressured due to unexpected spikes in demand, as well as COVID-related supply disruptions. Of note, this includes a year-over-year increase of $780 million related specifically to inflation. Our year-to-date results are tracking ahead of the robust market scenario that we covered in our December Investor Update. Those factors build our confidence in our ability to deliver strong results on top of an exceptional year in 2020, including 12% operating margins and flat gross margin rates for the year. We plan to invest $2 billion in capex this year to drive future growth and returns as we continue our disciplined approach to capital allocation with $9 billion in planned share repurchases this year while also supporting our dividend.

Our outstanding performance continued this quarter with total company comparable sales growth of 25.9%. During the quarter, operating margin expanded 313 basis points on an adjusted basis, leading to diluted earnings per share of $3.21, which is an 81% increase on an adjusted basis over the prior year. In Q1, we generated diluted earnings per share of $3.21, an increase of 81% compared to adjusted diluted earnings per share last year. Q1 sales were $24.4 billion, driven by a comparable sales increase of 25.9%. Our year-to-date results are tracking ahead of the robust market scenario that we covered in our December Investor Update. We plan to invest $2 billion in capex this year to drive future growth and returns as we continue our disciplined approach to capital allocation with $9 billion in planned share repurchases this year while also supporting our dividend.

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Core revenue growth excludes the impact of currency and the acquisitions and divestitures completed within the past 12 months. We posted revenues of $1.48 billion during the quarter. Revenues are up 8% on a reported basis and up 6% core. Operating margins are a healthy 24.9%. EPS of $0.98 is up 10% year-over-year. Overall, COVID-19 tailwinds contributed just over 2 points of core growth. Our Life Sciences and Applied Markets Group generated $671 million in revenue, up 8% on a reported basis and up 4% core. The Agilent CrossLab Group came in with revenues at $518 million. This is up a reported 9% and up 7% core. For the Diagnostics and Genomics Group, revenues were $294 million, up 9% reported and up 7% core. Growth was broad based, with NASD oligo manufacturing revenues up roughly 40%. We generated $5.34 billion in revenue, up 3% on a reported basis and up nearly 1% core. In Q1, we delivered 2% core growth, as you saw the first impact of COVID-19 in our business in China. With 6% core growth, 8% reported in Q4, we're seeing business and economies start to recover. In a very tough capex market, our LSAG instrument business declined only 2% for the year and returned to growth in the final quarter. Full-year earnings per share grew 5% during fiscal 2020 to $3.28. The full-year operating margin of 23.5% is up 20 basis points over fiscal 2019. In total, the cell analysis business generated more than $300 million in revenue for us during the year, with double-digit growth in Q4 and continued strong growth prospects. Similar to last year, I was talking about ramping up our new Frederick site facility, a $185 million capital investment. We also recently announced additional $150 million investment to our future manufacturing capacity. For the quarter, revenue was $1.48 billion, reflecting core revenue growth of 5.6%. Reported growth was stronger at 8.5%. Currency contributed 1.7%, while M&A added 1.2 points to growth. From an end-market perspective, pharma, our largest market, showed strength across all regions and delivered 12% growth in the quarter. The food market also experienced double-digit growth during the quarter, posting a 16% increase in revenue. And as Mike noted earlier, our chemical and energy market exceeded our expectations, growing 3% after two quarters of double-digit declines. Diagnostics and clinical revenue grew 1% during Q4, led by recovery in the U.S. and Europe. For the quarter, China finished with 13% growth and ended the full year up 7%. The Americas delivered a strong performance during the quarter, growing 5% with results driven by large pharma, food, and chemical and energy. And in Europe, we grew 2% as we saw lab activity improved sequentially, benefiting from our on-demand service business in ACG, as well as from a rebound in pathology and genomics as elective procedures and screening started to resume. Fourth quarter gross margin was 55%. This was down 150 basis points year-over-year, primarily by a shift in revenue mix and an unfavorable impact of FX on margin. In terms of operating margin, our fourth quarter margin was 24.9%. This is down 20 basis points from Q4 of last year, as we made some incremental growth-focused investments in marketing and R&D, which we expect to benefit us in the coming year. The quarter also capped off in full-year operating margin of 23.5%, an increase of 20 basis points over fiscal 2019. Now wrapping up the income statement, our non-GAAP earnings per share for the quarter came in at $0.98, up 10% versus last year. Our full-year earnings per share of $3.28 increased 5%. In Q4, we had operating cash flow of $377 million, up more than $60 million over last year. And in Q4, we continued our balanced capital approach, repurchasing 2.48 million shares for $250 million. For the year, we repurchased just over 5.2 million shares for $469 million and ended the fiscal year in a strong financial position with $1.4 billion in cash and just under $2.4 billion in debt. For the full year, we're expecting revenue to range between $5.6 billion and $5.7 billion, representing reported growth of 5% to 7% and core growth of 4% to 6%. We expect operating margin expansion of 50 basis points to 70 basis points for the year, as we absorb the build out costs of the second line in our Frederick, Colorado NASD site. And then helping you build out your models, we're planning for a tax rate of 14.75%, which is based on current tax policies and 309 million of fully diluted shares outstanding, and this includes only anti-dilutive share buybacks. All this translates to a fiscal year 2021 non-GAAP earnings per share expected to be between $3.57 and $3.67 per share, resulting in double-digit growth at the midpoint. Finally, we expect operating cash flow of approximately $1 billion to $1.05 billion and an increase in capital expenditures to $200 million, driven by our NASD expansion. We have also announced raising our dividend by 8%, continuing an important streak of dividend increases, providing another source of value to our shareholders. For Q1, we're expecting revenue to range from $1.42 billion to $1.43 billion, representing reported growth of 4.5% to 5.5% and core growth of 3.5% to 4.5%. And first quarter 2021 non-GAAP earnings are expected to be in the range of $0.85 to $0.88 per share.

We posted revenues of $1.48 billion during the quarter. EPS of $0.98 is up 10% year-over-year. Now wrapping up the income statement, our non-GAAP earnings per share for the quarter came in at $0.98, up 10% versus last year. For the full year, we're expecting revenue to range between $5.6 billion and $5.7 billion, representing reported growth of 5% to 7% and core growth of 4% to 6%. For Q1, we're expecting revenue to range from $1.42 billion to $1.43 billion, representing reported growth of 4.5% to 5.5% and core growth of 3.5% to 4.5%. And first quarter 2021 non-GAAP earnings are expected to be in the range of $0.85 to $0.88 per share.

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Tom has almost 30 years of CFO experience and deep roots in brands and retail, most recently in footwear at Deckers brands. In the U.S., there was nothing normal about the cadence of back to school. Stores were open for about 95% of the possible days in the quarter compared to about 70% during the second quarter. New customers continued to deliver increased volumes as new website visitors were up almost 40%, driving an almost 60% in new customer purchases. The combination of these drivers led to a total revenue decrease of 11% year over year. This result was better than we expected due mainly to stronger sales at Journeys and represents a meaningful improvement from last quarter's 20% decline. The drop in-store volume was partially offset by another strong quarter of digital growth with comps up over 60%. Equally encouraging was the health of our inventories which were down more than 20%, allowing for fresh receipts of holiday merchandise. E-commerce generated almost 45% of Schuh's sales in the quarter, even with most stores being opened. In addition to store traffic being down over 50% for the quarter, some of J&M's airport and street locations have yet to reopen which further impacted retail sales. Highlighting the traction we've already made, casual and casual athletic represented about 60% of footwear during our last fiscal year and apparel and accessories drove 40% of total sales. Looking forward to the coming year, J&M has focused 90% of new product development on the expansion of its casual offering to include casual athletic, leisure, rugged outdoor and performance which follows upon its highly successful reentry into Gulf this spring. And as a result, we're closed for more than 10% of the possible operating days in the month. With the ability to fulfill online orders via our distribution centers or from any of our almost 1,500 store locations, we're well-positioned to meet the surge in demand. In Q3 sequential improvement compared to the prior two quarters in both revenue and gross margin, along with a lower tax rate and a small pickup in SG&A drove results back to nicely positive levels with adjusted earnings per share of $0.85 compared to $1.33 last year. For the third quarter, ending cash was $115 million, with borrowings of $33 million for a net cash position of $82 million. We entered the quarter with $299 million of cash. And during the quarter, operations generated $5 million while we spent $8 million on capital projects and paid down $178 million in borrowings using $184 million in total. As a reminder, early this year, we increased our North American ABL borrowing capacity to $350 million. Consolidated revenue was $479 million, down 11% compared to last year driven by a lower back-to-school revenue, continued pressure at J&M and the impact from store closures during the quarter. Robust e-commerce comp of 62% was offset by a decline in-store revenue of 22% driven by a comp decline of 18%, while our stores were closed for 5% of the possible operating days during the quarter. Digital sales increased to 21% of retail business from 11% last year. Overall, sales were down 10% for Journeys with comp sales down 6% while store traffic was down well into double digits, much higher conversion and transaction size lifted Journeys' comps. At Schuh, overall sales were down 3%, while sales were up 1%. At J&M, overall sales were down 45%, and comp sales were down 43%. Our licensed brands, overall sales were up 91% due to Togast acquisition. Consolidated gross margin was 47.1%, down 210 basis points from last year, 100 basis points of which was related to J&M. Consistent with last quarter, increased shipping to fulfill direct sales pressured the gross margin rate in all of our businesses, totaling 50 basis points of the total overall decline. Journeys' gross margin increased 110 basis points driven by lower markdowns. Schuh's gross margin decreased 320 basis points, more than half of which was due to increased e-comm shipping expense with the balance due to higher penetration of sale products. J&M's gross margin decrease of 1,370 basis points was due to more close outs at wholesale, incremental inventory reserves and higher markdowns at retail. Adjusted SG&A expenses were down 11%. And as a percentage of sales, leveraged 10 basis points to 44.1% as we realized the collective benefits of our organization's disciplined actions to manage expenses and relief from government programs. In addition to the rent abatement savings, we have negotiated 58 renewals year-to-date and achieved a 28% reduction in cash rent or 27% on a straight-line basis in the U.S., this was on top of an 11% cash rent reduction or 8% on a straight-line basis or 160 renewals last year. These renewals are for an even shorter-term, averaging approximately one and a half years compared to the three year average we saw last year, with almost a third of our fleet coming up for renewal in the next 24 months, we should make substantial progress here. In summary, the third-quarter's adjusted operating income was $13.9 million versus last year's adjusted operating income of $26.7 million. Our adjusted non-GAAP tax rate for the third quarter was 4% reflecting the impact of foreign jurisdictions for which no income taxes were recorded. Q3 total inventory was down 22% on sales that were down 11%. Journeys' inventory was down 28% on sales that were down 10%. Schuh's inventory was down 22% with sales that were down 8% on a constant currency basis. J&M's inventory was down 3% on sales that were down 45% reflecting the pack-and-hold inventory and the level of reserves we believe will be adequate to better rightsize the current inventory levels. Capital expenditures were $8 million as we -- as our spend remains focused on digital and omnichannel and depreciation and amortization was $11 million. For the month of November, stores were open for about 88% of the possible operating days and currently, 97% of our stores are open. While the annual tax rate is expected to be approximately 18%. I'd like to highlight that in the fourth quarter, we expect it to be approximately 40%.

In the U.S., there was nothing normal about the cadence of back to school. In Q3 sequential improvement compared to the prior two quarters in both revenue and gross margin, along with a lower tax rate and a small pickup in SG&A drove results back to nicely positive levels with adjusted earnings per share of $0.85 compared to $1.33 last year. Consolidated revenue was $479 million, down 11% compared to last year driven by a lower back-to-school revenue, continued pressure at J&M and the impact from store closures during the quarter.

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From a financial perspective, total sales in the quarter were $388 million, an increase of about 9% sequentially, but still at lower levels compared to last year. We generated $52 million of operating income and earnings per share were $0.92. In addition, we delivered $54 million in cash from operations, continuing our solid cash generation profile. At the end of the third quarter, our Metalcasting facilities were operating at about 95% of last year's levels, a noticeable improvement from the reduced levels seen earlier. In addition, penetration of our pre-blended products remains on a strong growth trajectory in China as sales increased 20% over last year and this momentum should continue moving forward. Sales in our portfolio of consumer products which includes Pet Care, Personal Care, and Edible Oil Purification remained resilient, led by an 11% year-over-year growth in Pet Care. As we indicated on our last call, July volumes were trending approximately 15% higher compared to June, and these dynamics continued through the third quarter. Of note, Paper PCC sales in China continue to deliver a solid performance with 18% growth over last year. And in our Refractories business, we see steel utilization rates increased in the U.S. from a low of 50% in the second quarter to 65% at the end of September. The commissioning of two new PCC satellites scheduled for the fourth quarter continue to move ahead, currently ramping up production at our 45,000 ton facility in India, our 150,000 ton satellite in China should be operational by December. In our Refractories business, we signed two new five-year contracts to supply our refractory and metallurgical wire products in the U.S. These contracts total approximately $50 million or about $10 million of incremental revenue on an annual basis. We commercialized 36 value-added products so far in 2020 with contributions from each of our businesses. 12 of these products were introduced in the third quarter. Third quarter sales were $388.3 million, 9% higher sequentially and 14% below the prior year. Earnings per share, excluding special items was $0.92 and we incurred special charges of $3.2 million after-tax in the third quarter or $0.09 per share. Our effective tax rate for the quarter was 19.8% versus 19.1% in the prior year and 16% in the prior quarter. Going forward, we expect our effective tax rate to be approximately 20%. Third quarter sales were 13% lower than the prior year on a constant currency basis. On a sequential basis, we saw significant improvement in demand with sales up 7% adjusting for currency and up 9% overall. On our last call, we told you that sales rates in July were trending approximately 5% higher than June, and this trend accelerated through the rest of the third quarter. Daily sales rates in August were 6% higher than July and September was 7% higher than August. Operating income increased 18% sequentially on a constant currency basis, primarily due to the improvement in our end markets and continued cost control. Operating margin was 13.3% in the quarter versus 13.2% in the prior year, and 11.8% in the second quarter. Starting with the prior year comparison, our pricing and cost actions contributed 190 basis points of improvement, which more than offset the unfavorable volume impact. On a sequential basis, we leveraged additional volume into 60 basis points of margin improvement and our continued cost control contributed another 70 basis points of favorability. Another margin related highlight for the third quarter was that EBITDA margin improved by 70 basis points versus both the prior year and the prior quarter. Performance Materials sales increased 10% sequentially and were 8% lower than the prior year. Metalcasting sales grew 26% sequentially as foundry production improved in North America and demand remained strong in China. China Metalcasting sales grew 11% sequentially and 20% versus the prior year on continued strong demand from our customers and continued penetration of our specially formulated blended products. Household, Personal Care and Specialty Product sales remained resilient, up 7% sequentially and flat with the prior year on continued strong demand for consumer-oriented products. Operating income for the segment was $28.2 million, up 34% sequentially and up 5% versus the prior year. Operating margin was 14.8% of sales, up 270 basis points from the second quarter and up 180 basis points from the prior year. Specialty Minerals sales were $125.1 million in the third quarter, up 14% sequentially and 13% below the prior year. PCC sales increased 14% sequentially as paper mill capacity came back online in the U.S. and India, following temporary COVID-19-related shutdowns. Paper PCC sales in China grew 11% sequentially, and 18% over the prior year on continued penetration and strong customer demand. Specialty PCC sales increased 16% sequentially as automotive and construction demand improved through the quarter and consumer-oriented products remained strong. Processed Minerals sales increased 13% as end market steadily improved through the quarter. Operating income excluding special items was $18 million, up 18% sequentially and 17% below the prior year and represented 14.4% of sales, which compared to 13.9% in the second quarter and 15.2% in the prior year. Refractories segment sales were $59.3 million in the third quarter, up 6% sequentially as steel mill utilization rates gradually improved from second quarter levels in both North America and Europe. Segment operating income was $7.3 million, up 24% from the prior quarter and represented 12.3% of sales. As a result, sales were $13.3 million and operating income was breakeven for the third quarter. As Doug noted, third quarter cash from operations totaled $54 million and free cash flow was $40 million. We continued our balanced approach in deploying cash flow, paying down $30 million of debt and we resumed our share repurchases acquiring $3 million of shares in the quarter. We continue to repurchase shares in October and completed the expiring program with $50 million of shares under the $75 million authorization. As noted earlier, the Board of Directors has approved a new one-year $75 million repurchase program. Our net leverage ratio is 2.1 times EBITDA and we have $682 million of liquidity including over $375 million of cash on hand. Specifically, we're growing our portfolio of premium Pet Care products in both North America and Europe with the expansion of new online retail channels with larger customers, and the introduction of new products such as our 100% carbon-neutral Eco Care product in Europe, an example of how we're satisfying customer preferences, while also contributing to our sustainability efforts. Noted earlier, we expanded our customer base in China through the continued penetration of our higher value blended products, which led to sales growth of 20% over last year. Overall, we're bringing online 285,000 tons of new PCC capacity over the next three quarters. For the Refractories segment, current steel utilization rates in North America and Europe are around 70% and 65%, respectively, and we expect these rates to gradually improve in the upcoming quarters. As I mentioned earlier, we've recently signed two five-year contracts totaling $50 million to supply our broad portfolio of refractory and metallurgical wire products, which will start to accrue to revenue growth in 2021.

From a financial perspective, total sales in the quarter were $388 million, an increase of about 9% sequentially, but still at lower levels compared to last year. We generated $52 million of operating income and earnings per share were $0.92. Earnings per share, excluding special items was $0.92 and we incurred special charges of $3.2 million after-tax in the third quarter or $0.09 per share.

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95% of our people around the world right now are working from home. On one assignment, our real estate group worked 23 consecutive days to meet an aggressive deadline to help key players in a mortgage REIT industry avoid liquidation. So yes, we may, this year, have some puts and takes. Revenues of $604.6 million were up $53.3 million or 9.7% compared to revenues of $551.3 million in the prior-year quarter. Worth noting, while revenues in EMEA and North America increased 22.8% and 8.1% respectively in the quarter, revenues in Asia Pacific which represented 6.6% of our overall revenues in 2019, declined 14.8%. GAAP earnings per share was $1.49 compared to $1.64 in the prior-year quarter. GAAP earnings per share included $2.2 million of noncash interest expense related to our convertible notes which decreased earnings per share by $0.04. First-quarter adjusted earnings per share of $1.53 which excludes the noncash interest expense, compared to $1.63 in the prior-year quarter. Our convertible notes had a potential dilutive impact on earnings per share of approximately 433,000 shares and weighted average shares outstanding for the quarter. As our share price on average of $117.71 this past quarter was above $101.38 conversion threshold. Net income of $56.7 million compared to $62.6 million in the prior-year quarter. The year-over-year decrease in net income was primarily because the 9.7% growth in revenues did not adequately offset increased compensation expense related to the 18 and a half percent increase in head count, higher variable compensation and an increase in SG&A expenses. SG&A of $127 million was 21% of revenues. This compares to SG&A of $113.2 million or 20.5% of revenues in the first quarter of 2019. First quarter of 2020 adjusted EBITDA of $83.2 million compared to $96.1 million in the prior-year quarter. Our adjusted EBITDA margin of 13.8% compared to 17.4% in the first quarter of 2019. Our first-quarter 2020 effective tax rate of 22 and a half percent compared to 24.1% in the first quarter of 2019. For the balance of 2020, we now expect our effective tax rate to range between 25% and 27%. This benefited our first quarter of 2020 adjusted earnings per share by $0.07. Billable headcount at the end of the quarter increased by 716 professionals or 18 and a half percent compared to the prior-year quarter. Sequentially, billable headcount increased by 156 professionals or 3.5% again with every business segment growing. In Corporate Finance & Restructuring, revenues increased 29.1% to $207.7 million compared to the prior-year quarter. Adjusted segment EBITDA of 48.9% or 23.6% of segment revenues compared to $37.4 million or 23.2% of segment revenues in the prior-year quarter. Sequentially, revenues increased 14.7% driven by higher demand for both our business transformation and transactions and restructuring services in North America and EMEA. Revenues increased 6.2% to $147.6 million compared to the prior-year quarter. Adjusted segment EBITDA of $21.2 million or 14.4% of segment revenues compared to $31.8 million or 22.9% of segment revenues in the prior-year quarter. Sequentially, revenues decreased 1.8% primarily due to engagements being delayed by both court closures and travel restrictions resulting from the COVID-19 outbreak, particularly in Asia. Our economic consulting segment reported revenues of $132.1 million which declined 7.1% compared to the prior-year quarter. Adjusted segment EBITDA of $12.7 million or 9.6% of segment revenues compared to $24 million or 16.9% of segment revenues in the prior-year quarter. Sequentially, revenues decreased 13.7% primarily driven by lower demand and realization for our international arbitration services due to arbitration hearings being postponed in light of the COVID-19 pandemic and lower demand for our financial economic services driven by large engagements that were rolling off. In technology, revenues increased 14.4% and to $58.7 million compared to the prior quarter. Adjusted segment EBITDA of $14.5 million or 24.7% of segment revenues compared to $12.7 million or 24.8% of segment revenues in the prior-year quarter. Sequentially, revenues increased 14%. Strategic communications revenues increased 1.2% to $58.4 million compared to the prior-year quarter. Adjusted segment EBITDA of $8.8 million or 15% of segment revenues compared to $11.5 million or 20% of segment revenues in the prior-year quarter. Sequentially, revenues decreased 12% primarily due to a $4.4 million decline in pass-through revenues and lower project-based revenues in EMEA and Asia. So net cash used in operating activities of $123.6 million this quarter compared to $102.1 million used in operating activities in the prior-year quarter. During the quarter, we spent approximately $50.3 million to repurchase 450,198 shares of our common stock at an average price of $111.73 per share. As of the end of the quarter, approximately $116 million remained available for stock repurchases under our $500 million stock repurchase authorization. Total debt, net of cash, of $143.2 million at March 31, 2020, compared to $137 million at March 31, 2019, and a negative $53.1 million at December 31, 2019.

So yes, we may, this year, have some puts and takes. Revenues of $604.6 million were up $53.3 million or 9.7% compared to revenues of $551.3 million in the prior-year quarter. GAAP earnings per share was $1.49 compared to $1.64 in the prior-year quarter. First-quarter adjusted earnings per share of $1.53 which excludes the noncash interest expense, compared to $1.63 in the prior-year quarter.

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We were particularly pleased with the strength of our permanent placement and Protiviti operations, which grew year-over-year by 102% and 62%, respectively. Companywide revenues were $1.581 billion in the second quarter of 2021, up 43% from last year's second quarter on a reported basis, and up 40% on an as adjusted basis. Net income per share in the second quarter was $1.33, increasing 227% compared to $0.41 in the second quarter a year ago. Cash flow from operations during the quarter was $165 million. In June, we distributed a $0.38 per share cash dividend to our shareholders of record, for a total cash outlay of $42 million. We also acquired approximately 717,000 Robert Half shares during the quarter, for $63 million. We have 8.4 million shares available for repurchase under our Board-approved stock repurchase plan. Return on invested capital for the company was 49% in the second quarter. As Keith noted, global revenues were $1.581 billion in the second quarter. On an as adjusted basis, second quarter staffing revenues were up 33% year-over-year. U.S. staffing revenues were $855 million, up 34% from the prior year. Non-U.S. staffing revenues were $267 million, up 31% on a year-over-year basis as adjusted. We have 322 staffing locations worldwide, including 86 locations in 17 countries outside the United States. In the second quarter, there were 63.4 billing days, unchanged from the same quarter one year ago. The current third quarter has 64.4 billing days, compared to 64.3 billing days in the third quarter one year ago. Currency exchange rate movements during the second quarter had the effect of increasing reported year-over-year staffing revenues by $24 million. This impacted our year-over-year reported staffing revenue growth rate by 2.9 percentage points. Temporary and consultant bill rates for the quarter increased 3.7% compared to one year ago, adjusted for changes in the mix of revenues by line of business, currency and country. This rate for Q1 2021 was 3.4%. Global revenues in the second quarter were $459 million. $366 million of that is from business within the United States, and $93 million is from operations outside the United States. On an as adjusted basis, global second quarter Protiviti revenues were up 59% versus the year ago period, with U.S. Protiviti revenues up 63%. Non-U.S. revenues were up 43% on an as adjusted basis. Exchange rates had the effect of increasing year-over-year Protiviti revenues by $8 million and increasing its year-over-year reported growth rate by 2.8 percentage points. Protiviti and its independently owned Member Firms serve clients through a network of 86 locations in 28 countries. In our temporary and consultant staffing operations, second quarter gross margin was 39.7% of applicable revenues, compared to 37.1% of applicable revenues in the second quarter one year ago. Our permanent placement revenues in the second quarter were 12.8% of consolidated staffing revenues, versus 8.6% of consolidated staffing revenues in the same quarter one year ago. When combined with temporary and consultant gross margin, overall staffing gross margin increased 490 basis points compared to the year-ago second quarter, to 47.4%. For Protiviti, gross margin was 29.1% of Protiviti revenues, compared to 23.4% of Protiviti revenues one year ago. Adjusted for the effect of deferred compensation expense related to changes in the underlying trust investment assets as previously mentioned, adjusted gross margin for Protiviti was 30% for the quarter just ended versus 25.7% one year ago. Transitioning to Selling, General and Administrative Costs, company SG&A costs were 30.9% of global revenues in the second quarter, compared to 36.7% in the same quarter one year ago. Changes in deferred compensation obligations related to increases in underlying trust investments had the impact of increasing SG&A as a percent of revenue by 1.5% in the current second quarter and increasing SG&A by 3.8% in the same quarter one year ago. When adjusted for these changes, companywide SG&A costs were 29.4% for the quarter just ended, compared to 32.9% one year ago. Staffing SG&A costs were 38.4% of staffing revenues in the second quarter, versus 44.2% in the second quarter of 2020. Included in staffing SG&A costs was deferred compensation expense related to increases in the underlying trust investment assets of 2.1% in the second quarter, compared to an expense of 5.1% related to increases in the underlying trust investment assets in the same quarter one year ago. When adjusted for these changes, staffing SG&A costs were 36.3% percent for the quarter just ended, compared to 39.1% one year ago. Second quarter SG&A costs for Protiviti were 12.5% of Protiviti revenues, compared to 15.1% of revenues in the year-ago period. Operating income for the quarter was $177 million. This includes $28 million of deferred compensation expense related to increases in the underlying trust investment assets. Combined segment income was therefore $205 million in the second quarter. Combined segment margin was 12.9%. Second quarter segment income from our staffing divisions was $125 million, with a segment margin of 11.1%. Segment income for Protiviti in the second quarter was $80 million, with a segment margin of 17.4%. Our second quarter tax rate was 27%, compared to 20% one year ago. Outstanding or DSO was 51.6 days. Our temporary and consultant staffing divisions exited the second quarter with June revenues up 34% versus the prior year, compared to a 27% increase for the full quarter. Revenues for the first two weeks of July were up 35% compared to the same period one year ago. Permanent placement revenues in June were up 83% versus June of 2020. This compares to a 97% increase for the full quarter. For the first three weeks in July, permanent placement revenues were up 83% compared to the same period in 2020. Revenue $1.61 billion to $1.69 billion. Income per share $1.35 to $1.45. Midpoint revenues of $1.65 billion are 37% higher than 2020 and 5% higher than 2019 levels on an as adjusted basis. Midpoint earnings per share of $1.40 is 110% higher than 2020 and 39% higher than 2019. The major financial assumptions underlying the midpoint of these estimates are as follows; revenue growth on a year-over-year basis; staffing up 33% to 35%; Protiviti up 46% to 48%; overall up 36% to 38%. Gross margin percentage, temporary and consultant staffing, 39% to 40%. Protiviti, 29% to 31%. Overall, 41% to 43%. SG&A as percent of revenues, excluding deferred compensation investment impacts: staffing, 35% to 36%; Protiviti, 12% to 13%; overall, 29% to 30%. Segment income for staffing, 10% to 11%; Protiviti, 17% to 18%; overall, 12% to 13%. A tax rate up 26% to 27% and shares outstanding 111.5 million. 2021 capital expenditures and capitalized cloud computing costs, $65 to $75 million, with $15 million to $20 million incurred during the third quarter. The National Federation of Independent Business, NFIB, recently reported that 56% of small businesses had few or no qualified applicants for open positions, and 46% had job openings that could not be filled. Approximately $100 million in revenue this quarter resulted from work related to these programs, or approximately $0.07 of our earnings per share. Growth in this public sector business contributed 32 points to Protiviti's year-on-year growth rate of 62%, while the core business accelerated to a growth rate of 30%.

Net income per share in the second quarter was $1.33, increasing 227% compared to $0.41 in the second quarter a year ago. As Keith noted, global revenues were $1.581 billion in the second quarter.

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We are proud of our successful focus on base business activity over the last five years, which now accounts for more than 90% of our revenues. After an 18-month competitive process, LUMA Energy, our joint venture with ATCO, was selected for a 15-year operation and maintenance agreement to operate, maintain and modernize PREPA's more than 18,000 mile electric transmission and distribution system in Puerto Rico. We grew our communication services revenue by more than 40%, meaningfully improved profit margins and ended the year with a total backlog of approximately $900 million. We invested approximately $400 million in strategic acquisition of seven high-quality companies with great management teams that expand or enhance our ability to provide solutions to our customers, are additive to our base business and advance our strategic initiatives. These companies add to our self-perform capabilities, which typically accounts for approximately 85% of our work and are key to providing cost certainty to our customers. We strengthened our financial position with the closing of our $1 billion investment-grade senior notes offering, which we believe points to the resiliency and sustainability of our business model and positive multiyear outlook. We demonstrated our commitment to stockholder value and confidence in Quanta's financial strength and continued growth opportunities through the acquisition of approximately $250 million of common stock and a 25% increase in our dividend. Our utility customers, who account for more than 70% of our 2020 revenues, are leaders in the effort to reduce carbon emissions with aggressive efforts to modernize and harden their systems, expand their renewable generation portfolios and implement new technologies for current and future needs. A number of utilities have committed to providing 100% of their power by clean energy or achieving net-zero carbon emissions by 2050. According to a report from the WIRES Group, increased electrification and electric vehicle adoption in the United States could require 70 to 200 gigawatts of new power generation by 2030. The majority of which is expected to be renewables and could require incremental transmission investment of $30 billion to $90 billion by 2030. We expect to generate approximately $700 million in revenue this year, which would represent approximately 30% growth over 2020. This fund provides more than $20 billion to bridge the digital divide that exist for millions of people living in rural America without access to adequate broadband connectivity. Quanta is actively engaged in collaborative conversations with many of our customers about their multiyear, multibillion-dollar programs extending as far as 10 years, regarding how Quanta can provide solutions throughout our customers' value chain to meet their strategic infrastructure investment goals and support of these initiatives. Today, we announced fourth quarter 2020 revenues of $2.9 billion. Net income attributable to common stock was $170.1 million or $1.17 per diluted share and adjusted diluted earnings per share, a non-GAAP measure, was $1.22. Our Electric Power revenues, excluding Latin America, were $2.11 billion, a 15.7% increase when compared to the fourth quarter of 2019. This increase was driven by mid single-digit growth in our base business, increased contributions from the timing of certain larger projects and $75 million in revenues from acquired businesses. Contributing to the base business growth was approximately 13% growth from our communications operations and record fourth quarter demand for our emergency restoration services of approximately $150 million, primarily associated with efforts to restore infrastructure in the Southeastern and Midwestern United States, although it came at the expense of certain other work in progress. Electric segment margins in 4Q '20 were 11.6%. And excluding our Latin American operations, segment margins were 12.9% versus 9% in 4Q '19. Of note, our communications margins continue to improve against the prior year with a margin of 9% during the quarter. As a reminder, we currently receive no tax benefit for losses in Latin America, so the $27 million in losses impacted the quarter by approximately $0.19. Revenues from our underground utility and infrastructure Solutions segment were $806 million, 36% lower than 4Q '19. Operating margins for the segment were 5.1%. these margins were 190 basis points lower than 4Q '19, primarily due to reduced revenues as well as some degree of execution challenges during the quarter and costs associated with the exit of certain ancillary pipeline operations. Our total backlog was $15.1 billion at the end of the fourth quarter, slightly higher than 4Q '19 and comparable to the third quarter of 2020, yet remains at record levels. 12-month backlog of $8.3 billion is an increase from both the fourth quarter of 2019 and the third quarter of 2020. However, assuming an operating margin profile consistent with our Electric Power operations, LUMA's contribution over the 15-year operation and maintenance agreement would imply a backlog equivalent of more than $6 billion for Quanta. For the fourth quarter of 2020, we generated free cash flow, a non-GAAP measure of $200 million. And although $381 million lower than 4Q '19, it was higher than we anticipated, driven by stronger profits in the quarter and a cash cycle consistent with our third quarter results. For the year, we generated record free cash flow of $892 million. Days sales outstanding, or DSO, measured 83 days for the quarter, which was comparable to the third quarter of 2020 and fourth quarter of 2019. Cash flows in the fourth quarter and full year 2020 did partially benefit from the deferral of $37 million and $109 million of employer payroll tax payments permitted by the CARES Act with the payments due in equal installment at the end of 2021 and 2022. We had $185 million of cash at the end of the year with total liquidity of $2.2 billion and a debt-to-EBITDA ratio, as calculated under our credit agreement, of approximately 1.2 times. Electric segment revenues grew to $7.8 billion at the end of 2020, and we continue to see our base business providing mid-single to double-digit growth opportunities, coupled with some degree of increased contributions from larger projects, primarily associated with previously announced projects in Canada. In the aggregate, we expect Electric Power revenues to range between $8.3 billion and $8.5 billion, which includes expected revenues from our communications operations of around $700 million. As it relates to Electric Power segment revenue seasonality, we expect revenue growth in each quarter of '21 compared to 2020, with quarter-over-quarter growth in the first and second quarters, potentially exceeding 10%. We expect 2021 operating margins for the Electric Power segment to range between 10.1% and 10.9%, which includes contributions of approximately $29 million or $0.20 per share from the LUMA joint venture and earnings from other integral unconsolidated affiliates. LUMA is expected to contribute around $9 million in the first half of the year and then increasing in the back half of the year as we exit the front-end transition services period. Although we are proud of our overall Electric Power performance in 2020, our 11.6% margins, excluding Latin America, are above historical averages and are the highest since 2013, due in part to record annual emergency restoration service revenues of $450 million. As outlined in our accompanying slides, our 2021 expectation for margins for this segment are consistent with historical averages and are also based on expectations for more normalized emergency restoration service revenues of approximately $200 million, also in line with historical averages. As is typically the case, we expect that first quarter operating margins will be the lowest for the year, possibly slightly below 10%. However, we are anticipating upper single-digit to double-digit revenue growth off of 2020 with full year revenues expected to range between $3.65 billion to $3.85 billion. Over 90% of our revenue expectations for 2021 represent base business with larger projects representing their lowest level of contributions in the last seven years. From a seasonality perspective, we see first quarter revenues being our lowest for the year, likely more than 20% lower than the first quarter of 2020. We see segment margins ranging between 5.5% and 6%, led primarily by continued execution within our gas LDC operations. However, to put our current segment margin guidance in context, if our industrial operations contributed at historical pre-COVID margin levels, our segment margin guidance would increase by over 100 basis points. These segment operating ranges support our expectation for 2021 annual revenues of $11.95 billion to $12.35 billion, and adjusted EBITDA, a non-GAAP measure, of between $1.09 billion and $1.19 billion. This represents 8% growth at the midpoint of the range when compared to 2020's record adjusted EBITDA. With these operating results, we estimate our range of GAAP diluted earnings per share attributable to common stock for the year to be between $3.16 and $3.66, and anticipate non-GAAP adjusted diluted earnings per share to be between $4.02 and $4.52. We expect free cash flow for 2021 to range between $400 million and $600 million with the standard disclaimer that quarterly free cash flow is subject to sizable movements due to various customer and project dynamics that occur in the normal course of operations. Included in our free cash flow expectation is the anticipated payment of $54 million in the fourth quarter related to payroll taxes that were deferred in 2020. For instance, a large driver of our significant free cash flow in 2020 was reduced revenues of approximately $900 million compared to 2019, decreasing working capital needs. Looking back on our 2020 performance, although there were headwinds to the year, we ended the year with $11.2 billion in revenues, which represents an 8.1% revenue CAGR since 2015. More importantly, we ended the year with slightly over $1 billion of adjusted EBITDA, a record for Quanta and equal to our goal established five years ago, which represents a nearly 15% CAGR since 2015. Lastly, our record adjusted earnings per share of $3.82 represents a 28% CAGR since 2015, with our adjusted earnings per share growing faster than profits, which are growing faster than revenues. Over the last five years, we have deployed approximately $1.4 billion in cash for M&A and strategic investments and $760 million for stock repurchases. While we acquired $250 million of common stock in 2020 and $7 million of common stock through February 24, 2021, we have approximately $530 million of availability remaining on our current stock repurchase program. Our $1 billion bond offering in 2020 established a fixed level of debt that nicely complements our current EBITDA profile, which we believe is a repeatable, sustainable baseline of earnings.

Net income attributable to common stock was $170.1 million or $1.17 per diluted share and adjusted diluted earnings per share, a non-GAAP measure, was $1.22. These segment operating ranges support our expectation for 2021 annual revenues of $11.95 billion to $12.35 billion, and adjusted EBITDA, a non-GAAP measure, of between $1.09 billion and $1.19 billion. With these operating results, we estimate our range of GAAP diluted earnings per share attributable to common stock for the year to be between $3.16 and $3.66, and anticipate non-GAAP adjusted diluted earnings per share to be between $4.02 and $4.52.

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In Q4, we delivered revenue of $521 million, which was at the midpoint of our guidance for the quarter. With improving higher-value sector revenue mix and better operational efficiency, we achieved non-GAAP gross margins of 9.6%, which was above our target of 9%. Even with slightly higher SG&A expenses in the quarter due to higher variable compensation and higher-than-anticipated COVID-related expenses at $1.6 million or about $0.04 per share, the resulting non-GAAP operating margin was 3.4%, and non-GAAP earnings were $0.34 per share. Our team's effort to bring down inventory and better manage working capital are bearing fruit with cash conversion cycles coming in at 71 days, which enabled $84 million of free cash flow for the quarter. When I joined the company, we set a goal of consistently achieving over $200 million of new bookings per quarter, and I'm proud to report that even in the face of the global pandemic, we achieved over $800 million in new bookings for the 2020 calendar year. Our regrettable loss measure has improved significantly in the last 18 months. To that end, we experienced annual revenue growth of more than 33% in semi-cap and 11% in medical sector. Through improved processes, G&A centralization activities and investment prioritization, we managed our SG&A expense to $122 million for the year, which was lower than forecasted. Total Benchmark revenue was $521 million in Q4, which was in line with the midpoint of our Q4 guidance and similar to our Q3 revenue of $526 million. Semi-cap revenues were up 2% in the fourth quarter and up 24% year-over-year from continued strength for wafer fab equipment to support growth in DRAM and logic demand across our semi-cap customers. A&D revenues for the fourth quarter increased 6% sequentially due to strong revenue from radar communications and land-based vehicle systems. Conversely, commercial aerospace demand, which was about 25% of 2020 revenues, remained muted and continue to decline on certain platforms during the quarter. Overall, the higher-value markets represented 81% of our fourth quarter revenue. Our traditional markets represented 19% of fourth quarter revenues. Our top 10 customers represented 38% of sales in the fourth quarter. Our GAAP earnings per share for the quarter was $0.21. Our GAAP results included restructuring and other onetime costs, totaling $4.4 million related to reduction in force and other restructuring activities around our network of sites. Our Q4 -- for Q4, our non-GAAP gross margin was 9.6%, a 90 basis point sequential increase. During the quarter, gross margin was positively impacted by overall sector mix, improved absorption and a number of customer recoveries, which represented 30 basis points of the 90 basis point increase. We estimate that we incurred approximately $1.6 million or approximately $0.04 per share of COVID costs in the quarter versus $1.3 million in Q3. Our SG&A was $32.4 million, an increase of $2.7 million sequentially and $8.2 million year-over-year. Non-GAAP operating margin was 3.4%, an increase from 3% in Q3 due to the increased gross margin. In Q4 2020, our non-GAAP effective tax rate was 17.5%, which was lower as a result of the mix of profits between the U.S. and foreign jurisdictions. Non-GAAP earnings per share was $0.34 for the quarter, and non-GAAP ROIC was 6.2%. Total Benchmark revenue for 2020 was $2.1 billion, a decrease from $2.3 billion in 2019 from lower demand from pandemic-impacted customers in commercial aerospace, oil and gas and elective medical subsectors. For the full year, higher-value markets were up 3%, primarily from semi-cap and medical, which increased 33% and 11%, respectively, year-over-year. As a reminder, for 2020, the A&D sector was approximately 75% defense and security related and 25% commercial aerospace. Overall, medical revenues grew 11% from new and existing programs. Industrial revenues were down 18% year-over-year, primarily from softness in the oil and gas industry, with additional impacts from the commercial and building infrastructure markets where investments in many large projects remain delayed. Overall, the higher-value markets represented 81% of our 2020 revenue compared to 71% in 2019. Revenues in the traditional markets were down 41% from 2019, primarily from our exit of the legacy computing contract in Q3 2019 and program transitions in telco. Our traditional markets represented 19% of 2020 revenues compared to 29% in 2019. Our top 10 customers represented 41% of sales for the full year 2020. We have one customer, Applied Materials, that was greater than 10% of revenue for the full year. Our GAAP earnings per share for fiscal year 2020 was $0.38. Our GAAP results included restructuring and other onetime costs totaling approximately $19 million. These costs included $13 million of costs related to site consolidation efforts, reduction in workforce activities and other restructuring-type activity around our network, approximately $7 million in asset impairment, offset by $1 million in net insurance proceeds. Our 2020 non-GAAP gross margin was 8.4%, a 20 basis point sequential increase. We estimate that we incurred approximately $7 million of net COVID costs in 2020. Our non-GAAP SG&A for 2020 was $122 million, an increase of $3.8 million from 2019. Non-GAAP operating margin for the year was 2.5%, a decrease from 3% in 2019, due primarily to the effects of the pandemic on our operational efficiencies and the incurrence of COVID-specific costs. In 2020, our non-GAAP effective tax rate was 19.4%. Non-GAAP earnings per share in 2020 was $0.95, and non-GAAP ROIC was 6.2%. Our cash conversion cycle days were 71 in the fourth quarter, an improvement of 10 days from the third quarter. Our cash balance was $396 million at December 31 with $189 million available in the U.S. At December 31, 2020, we had $137 million outstanding on our term loan with no borrowings outstanding on our available revolver. We generated $95 million in cash flow from operations in Q4 and generated $120 million for the full year 2020. Our free cash flow was $84 million in Q4 and $81 million for the full year 2020. In Q4, we paid cash dividends of $5.8 million and repurchased shares of $5.9 million. In fiscal year 2020, we repurchased $25.2 million, which represented approximately one million shares. As of December 31, 2020, we had approximately $204 million remaining on our share repurchase authorization. From 2018 to 2020, we executed $359 million in share repurchases and paid $67 million in dividends to our shareholders. We expect revenue to range from $480 million to $520 million, which reflects normal seasonality for some sectors. We expect that our gross margins will be 8.1% to 8.3% for Q1, and SG&A will range between $29 million and $31 million. We do expect that as we continue throughout fiscal year 2021, gross margins will increase, and we expect gross margins for the full year to be at least 9%. Implied in our guidance is 2.2% to 2.4% non-GAAP operating margin range for modeling purposes. We expect to incur restructuring and other nonrecurring costs in Q1 of approximately $1 million to $2 million. Our non-GAAP diluted earnings per share is expected to be in the range of $0.18 to $0.22 or a midpoint of $0.20. We estimate that we will generate approximately $60 million to $80 million of cash flow from operations for fiscal year 2021, and capex for the year will be approximately $45 million to $50 million as we prioritize investments to support new customers and expand our production capacity through revenue growth. Other expenses, net, is expected to be $2.5 million, which is primarily interest expense related to our outstanding debt. We expect that for Q1, our non-GAAP effective tax rate will be between 19% and 21% because of the distribution of income around our global network. The expected weighted average shares for Q1 2021 are $36.3 million. We remain well positioned in this sector with both our advanced precision machining and electronics manufacturing services and now expect revenues to grow greater than 10% over 2020 levels. We expect the higher-value markets to again represent over 80% of our total annual revenue. We are targeting gross margins for the full year to be at least 9% as we offset headwinds from continued COVID costs and a number of new program ramps with benefits from our operational excellence programs. We are also targeting SG&A for the full year to be below 6% from effective expense management and continued progress with shared services consolidation. For your information, we have been monitoring and tracking energy reduction programs for almost 10 years in support of the environment. On the governance front, we have a diverse corporate Board with 22% of directors represented by women, but we can and will do more.

In Q4, we delivered revenue of $521 million, which was at the midpoint of our guidance for the quarter. Even with slightly higher SG&A expenses in the quarter due to higher variable compensation and higher-than-anticipated COVID-related expenses at $1.6 million or about $0.04 per share, the resulting non-GAAP operating margin was 3.4%, and non-GAAP earnings were $0.34 per share. Total Benchmark revenue was $521 million in Q4, which was in line with the midpoint of our Q4 guidance and similar to our Q3 revenue of $526 million. Our GAAP earnings per share for the quarter was $0.21. Non-GAAP earnings per share was $0.34 for the quarter, and non-GAAP ROIC was 6.2%. We expect revenue to range from $480 million to $520 million, which reflects normal seasonality for some sectors. Our non-GAAP diluted earnings per share is expected to be in the range of $0.18 to $0.22 or a midpoint of $0.20.

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During the fourth quarter of 2021, the company generated revenues of $161 million and adjusted consolidated EBITDA of $13.4 million representing sequential increases of 15% and 57%, respectively, despite global challenges associated with the COVID-19 pandemic, supply chain disruptions, and a modest seasonal decline in U.S. customer completion activity. Highlighting our fourth quarter was a 34% sequential increase in our Offshore/Manufactured Products segment revenues, coupled with another quarter of strong orders booked into backlog yielding a 1.1 times book-to-bill ratio for the period and a full-year ratio of 1.2 times. During the fourth quarter of 2021, the industry experienced a 9% sequential quarterly increase in the average U.S. frac spread count compared to the same period in 2020, the average U.S. frac spread count has doubled. During the fourth quarter, we generated revenues of $161 million adjusted consolidated EBITDA of $13.4 million and a net loss of $19.9 million or $0.33 per share. These quarterly results were burdened by a $9.3 million reclassification of unrealized foreign currency translation adjustments and $2.2 million of noncash inventory and fixed asset impairment charges due to the decision to exit certain nonperforming regions and service lines. In addition, we recorded $0.8 million or $800,000 of severance and restructuring charges in the quarter. Excluding these charges, our adjusted net loss was $0.14 per share. We ended the year with $53 million of cash on hand, compared to $68 million at the end of the third quarter. The quarterly decrease in cash was attributable to a $24 million build in working capital, essentially all of which related to trade receivables associated with the sequential increase in revenues in our Offshore/Manufactured Products segment. As of December 31, no borrowings were outstanding under our asset-based revolving credit facility and amounts available to be drawn totaled $49 million, which, together with cash on hand, resulting in available liquidity of $102 million. At December 31, our net debt totaled $126 million, yielding a net debt-to-capitalization ratio of 15%. We spent $6.5 million in capex during the fourth quarter, which was substantially offset by proceeds received from the sale of assets totaling $5.4 million. In 2022, we expect to invest approximately $25 million to support the expected market expansion. For the fourth quarter, our net interest expense totaled $2.6 million, of which $0.5 million was noncash amortization of debt issuance costs. Our cash interest expense, as a percentage of average total debt outstanding, was approximately 5% in the fourth quarter. In terms of our first quarter 2022 consolidated guidance, we expect depreciation and amortization expense to total $18.2 million, net interest expense to total $2.7 million, and our corporate expenses are projected to total $9.3 million. Our Offshore/Manufactured Products segment reported revenues of $92 million and adjusted segment EBITDA of $13.7 million in the fourth quarter of 2021, compared to revenues of $69 million and adjusted segment EBITDA of $8.6 million reported in the third quarter of 2021. Segment revenues increased 34% sequentially, driven primarily by increases in project-driven and service revenues of 72% and 17%, respectively. Adjusted segment EBITDA margin in the fourth quarter of 2021 was 15%, compared to 12% in the third quarter of 2021. Backlog totaled $260 million as of year-end, a 4% sequential increase culminating in our highest backlog level achieved since the first quarter of 2020. Fourth quarter 2021 bookings totaled $105 million yielding a quarterly book-to-bill ratio of 1.1 times and a year-to-date ratio of 1.2 times. During the fourth quarter, we booked one notable project award exceeding $10 million. Approximately 11% of our fourth quarter bookings were tied to non-oil and gas projects, bringing our full-year non-oil and gas bookings to 10%. For nearly 80 years, our Offshore/Manufactured Products segment has endeavored to develop leading-edge technologies, while cultivating the specific expertise required for working in highly technical deepwater and offshore environments. In our Well Site Services segment, we generated revenues of $43 million in the fourth quarter of 2021, and adjusted segment EBITDA increased sequentially to $6.2 million, excluding severance and restructuring charges in the comparable periods. Adjusted segment EBITDA margin in the fourth quarter of 2021 increased to 14%, compared to 13% reported in the third quarter of 2021. During the most recent quarter, we made a strategic decision to exit certain nonperforming service offerings within this segment, resulting in $2.2 million in noncash inventory and fixed asset impairment charges and $300,000 in severance and restructuring charges. In our Downhole Technologies segment, we reported revenues of $26 million and adjusted segment EBITDA of $0.1 million in the fourth quarter of 2021, compared to revenues of $26 million in adjusted segment EBITDA of $1.4 million reported in the third quarter of 2021. We expect 2022 full-year consolidated EBITDA to range from $60 million to $70 million with roughly 60% of the total generated in the second half of 2022. crude oil inventories have now drawn down considerably with expanding economic activity, leaving the U.S. at 411.5 million barrels in inventory as of February 11, which was about 10% below the five-year range. Crude oil prices have responded with spot WTI crude oil over $90 per barrel, setting up a very favorable outlook for 2022.

During the fourth quarter, we generated revenues of $161 million adjusted consolidated EBITDA of $13.4 million and a net loss of $19.9 million or $0.33 per share. Excluding these charges, our adjusted net loss was $0.14 per share.

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We opened over 3,300 Shaka accounts since its launch in early November. It has a strong value proposition that includes getting your paycheck up to two days early, no ATM fees and 24/7 digital convenience, among other benefits. We were pleased to have a strong visitor holiday travel season with the daily average air arrivals over 25,000 in November through December. Our statewide unemployment rate continued to decline and was at 6% in November 2021. And while we were not immune to the COVID case spike related to the Omicron variant, our state has been able to manage through it, particularly as our vaccination rate is strong at approximately 75%. The housing market in Hawaii remains very hot with our median single-family home price holding at just over $1 million. Our asset quality continues to be very strong with nonperforming assets at just 8 basis points of total assets as of December 31. Finally, during the quarter, we had net recoveries of $900,000. In the fourth quarter, our core loan portfolio increased by $183 million or 4% sequential quarter, which was offset by PPP forgiveness paydowns of $127 million. Year over year, our core loan portfolio increased by 10%. Our residential mortgage production continued to be very strong, with total production in the fourth quarter of $354 million as several large condominium projects in Honolulu were completed during the quarter, with CPB leading the takeout financing for the homeowners. Total net portfolio growth in residential mortgage and home equity was $146 million in the fourth quarter. For all of 2021, we once again had record residential mortgage production, totaling $1.2 billion, putting us near to top of all residential mortgage lenders in Hawaii. PPP forgiveness continues to progress well with 99% of the loan balances originated in 2020 and 73% of the balances originated in 2021 forgiven and paid down through December 31. The purchases during the quarter all were within our established credit limits and had a weighted average FICO score of 750. As of December 31, total Mainland consumer unsecured and auto purchase loans were approximately 5.7% of total loans. Our target range for total Mainland loans, including commercial and consumer is around 15% of total loans. On the deposit front, we continue to see strong inflow deposits with total core deposits increasing by $66 million or 1% sequential quarter growth. On a year-over-year basis total core deposits increased by $1 billion or 20%. Additionally, our average cost of total deposits in the fourth quarter was just 6 basis points. We will be expanding our relationships with the new-to-CPB Shaka account holders, which represented over 50% of the new accounts and explore further complementary product offerings using the Shaka brand. Net income for the fourth quarter was $22.3 million or $0.80 per diluted share, an increase of $1.5 million or $0.06 per diluted share from the prior quarter. Return on average assets in the fourth quarter was 1.22% and return on average equity was 16.05%. For the full 2021 year, net income was $79.9 million or $2.83 per diluted share. This compares to $37.3 million or $1.32 per diluted share in 2020. Net interest income for the fourth quarter was $53.1 million, which decreased by $3 million from the prior quarter due to less PPP fee income as the forgiveness process winds down. Net interest income included $4.7 million in PPP net interest income and net loan fees compared to $8.6 million in the prior quarter. At December 31, unearned net PPP fees was $3.5 million. The net interest margin decreased to 3.08% in the fourth quarter compared to 3.31% in the prior quarter. The NIM normalized for PPP was 2.87% in the third quarter compared -- I'm sorry, in the fourth quarter compared to 2.96% in the prior quarter. Fourth quarter other operating income increased to $11.6 million from $10.3 million in the prior quarter. Other operating expense for the fourth quarter was $42.2 million, which included nonrecurring expenses of $1.1 million of severance payments, $0.4 million branch consolidation costs and $0.3 million in promotion expenses related to our Shaka digital checking launch. We anticipate $0.8 million in annualized savings from this consolidation. The efficiency ratio increased to 65.6% in the fourth quarter due to lower net interest income and nonrecurring expenses. At December 31, our allowance for credit losses was $68.1 million or 1.36% of outstanding loans excluding PPP loans. In the fourth quarter, we recorded a $7.4 million credit to the provision for credit losses due to continued improvements in the economic forecast and our loan portfolio as well as net recoveries during the quarter of $0.9 million. The effective tax rate was 25.4% in the fourth quarter. And going forward, we continue to expect an effective tax rate to be in the 24% to 26% range. And during the fourth quarter, we repurchased 305,000 shares at a total cost of $8.4 million or an average cost per share of $27.64. Yesterday, our board of directors approved a new share repurchase authorization of up to $30 million. Finally, our board of directors also declared a quarterly cash dividend of $0.26 per share, which was an increase of $0.01 or 4% from the prior quarter. We increased our quarterly cash dividend by 4%. We will continue share repurchases under our new $30 million board-approved authorization.

Net income for the fourth quarter was $22.3 million or $0.80 per diluted share, an increase of $1.5 million or $0.06 per diluted share from the prior quarter. Net interest income for the fourth quarter was $53.1 million, which decreased by $3 million from the prior quarter due to less PPP fee income as the forgiveness process winds down. Yesterday, our board of directors approved a new share repurchase authorization of up to $30 million. Finally, our board of directors also declared a quarterly cash dividend of $0.26 per share, which was an increase of $0.01 or 4% from the prior quarter. We will continue share repurchases under our new $30 million board-approved authorization.

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For over 43 years, with the last five years as CFO, Jim has been a trusted partner to me and many of my predecessors. Jim helped complete over $5 billion in strategic acquisitions, including Justin's, Fontanini, [Indecipherable] Columbus, Sadler's, and our largest acquisition ever, Planters. Additionally, Jim has overseen the distribution of over $2 billion in dividends to our shareholders. We achieved record sales in fiscal 2021, exceeding both $10 billion and $11 billion in sales for the first time. For the full year, sales were $11.4 billion, representing 19% sales growth. On an organic basis, sales increased 14%. Adjusted diluted earnings per share for the full year increased 4% to $1.73, in spite of inflationary pressure and supply chain challenges. Diluted earnings per share was $1.66. Sales increased 43% and organic sales increased 32%. Volume increased 14% and organic volume increased 8%. Compared to pre-pandemic levels in 2019, all channels grew by over 25%, driven by strong demand and pricing action in almost every category. Our foodservice teams across the organization posted 72% sales growth for the quarter, 33% higher than pre-pandemic levels. This followed second quarter growth of 28% and third quarter growth 45%. We also saw a strong recovery in our noncommercial segments, including college and university and K through 12 institutions. Retail and international sales both increased 34% and deli sales increased 24%. From a bottom line perspective, fourth quarter earnings were a record $0.51 per share, a 19% increase compared to 2020, an acceleration in our top line results and the addition of the Planters business led to the earnings growth. This is a similar to the successful strategy we have executed in Refrigerated Foods over the past 15 years. As a result, we will close the Benson Avenue plant located in Willmar, Minnesota in the first half of fiscal 2022. Finally, we made additional progress on optimizing our pork supply chain by signing a new five-year raw material supply agreement with our supplier in Fremont, Nebraska. This new agreement more closely matches our pork supply with the needs of our value-added businesses, while simultaneously reducing the amount of commodity pork lease out. This agreement should result in a reduction of approximately $350 million of commodity fresh pork sales at very low margin. The contract will be effective at the start of calendar year 2022. Looking at fiscal 2022, we expect net sales to be between $11.7 billion and $12.5 billion, and for diluted earnings per share to be between a $1.87 and $2.03 per share. The company achieved record fourth quarter and full year sales of $3.5 billion and $11.4 billion respectively. Organic sales increased 32% for the quarter and 14% for the full year. Planters contributed $411 million in sales for the full year. Earnings before taxes increased 26% for the fourth quarter, strong results in Refrigerated International and the inclusion of Planters led to the strong finish to the year despite ongoing inflationary pressures. Earnings before taxes increased 1% for the full year compared to fiscal 2020. Diluted earnings per share of $0.51 was a record. This was a 19% increase over last year. Adjusted diluted earnings per share for the full year was $1.73, a 4% increase from last year. Diluted earnings per share was $1.66. SG&A as a percentage of sales was 7.5% compared to 7.9% last year. Advertising investments increased 12% compared to last year. Segment margins expanded from last quarter by 136 basis points to 10.7% with increases in each segment. The effective tax rate for the year was 19.3% compared to 18.5% last year. We paid our 373rd consecutive quarterly dividend effective November 15th at an annual rate of $0.98 per share. We also announced a 6% increase for 2022, marking the 56th consecutive year of dividend increases. During 2021, the Company repurchased 500,000 shares for $20 million. Capital expenditures were $232 million. The Company ended 2021 with $3.3 billion in debt or approximately 2.5 times EBITDA, although no mandatory debt repayments are required until 2024. We remain committed to maintaining our investment grade rating and deleveraging to 1.5 times to 2 times EBITDA by 2023. The USDA composite cut out averaged 33% higher compared to last year, supported by strong demand for pork and historically low cold storage levels. Hog prices averaged 62% higher than last year, but were down 27% compared to the third quarter. The latest estimates from the USDA indicate pork production for the year to decreased 2% compared to 2020, and remain relatively flat in 2022. The cost increased over 60% from last year in the fourth quarter. We anticipate growth from all four segments, driven by continued elevated demand for our products, the impact from our pricing actions, improve production throughput, new capacity for key categories such as pizza toppings and dry sausage, and the full-year contribution of the Planters business. The Company's target for capital expenditures in 2022 is $310 million. Pivoting to innovation, we achieved our 15% goal in 2021. Taking all of these factors into account, as Jim has mentioned, we are setting our full year sales guidance at $11.7 billion to $12.5 billion and our diluted earnings per share guidance at $1.87 to $2.03. Additionally, this guidance reflects the Benson Avenue facility closure, our a new pork raw material supply agreements and and effective tax rate between 20.5% and 22.5%. Fiscal 2022 will be 52 weeks. We're taking purposeful actions to transform our Company as we embark on our most ambitious corporate responsibility journey yet, our 20 by 30 challenge, which is certainly important from an ESG standpoint.

For the full year, sales were $11.4 billion, representing 19% sales growth. From a bottom line perspective, fourth quarter earnings were a record $0.51 per share, a 19% increase compared to 2020, an acceleration in our top line results and the addition of the Planters business led to the earnings growth. As a result, we will close the Benson Avenue plant located in Willmar, Minnesota in the first half of fiscal 2022. Finally, we made additional progress on optimizing our pork supply chain by signing a new five-year raw material supply agreement with our supplier in Fremont, Nebraska. This new agreement more closely matches our pork supply with the needs of our value-added businesses, while simultaneously reducing the amount of commodity pork lease out. This agreement should result in a reduction of approximately $350 million of commodity fresh pork sales at very low margin. The contract will be effective at the start of calendar year 2022. Looking at fiscal 2022, we expect net sales to be between $11.7 billion and $12.5 billion, and for diluted earnings per share to be between a $1.87 and $2.03 per share. The company achieved record fourth quarter and full year sales of $3.5 billion and $11.4 billion respectively. Diluted earnings per share of $0.51 was a record. We anticipate growth from all four segments, driven by continued elevated demand for our products, the impact from our pricing actions, improve production throughput, new capacity for key categories such as pizza toppings and dry sausage, and the full-year contribution of the Planters business. Taking all of these factors into account, as Jim has mentioned, we are setting our full year sales guidance at $11.7 billion to $12.5 billion and our diluted earnings per share guidance at $1.87 to $2.03.

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Wharf led the pack and achieved its second highest operating cash flow and free cash flow since we acquired the operations 6.5 years ago. Palmarejo and Kensington were largely on plan and are on track to deliver strong fourth quarters and Rochester's results reflect steady progress despite devoting 38.5 days, or about 45% of the quarter, to crushing and hauling over-liner material to the new Stage VI leach pad before winter. It's worth pointing out that Rochester's year-to-date results reflect 2.5 months of essentially no stacking on the legacy Stage IV pad as they prioritize activities to support the POA 11 expansion. We invested $20 million in exploration during the quarter alone. We anticipate investing $70 million in exploration in 2021, which is nearly 40% higher than the record we set last year and is one of the largest programs in our sector. Switching over to our expansion projects, I want to walk through some updates starting with the Rochester POA 11 expansion. Overall progress stood at 42% complete at the end of the third quarter. We're trying to mitigate some of these impacts by rescoping and rebidding unawarded contracts, but we currently estimate that we're likely to see a 10% to 15% overall increase to the POA 11 construction costs. To take advantage of such a high-grade and significant resource, a 1,750 ton per day processing facility isn't likely large enough to maximize Silvertip's value. We're going to take some additional time to evaluate what a larger design and footprint could represent in terms of economics and overall flexibility. This approach will give us time to continue drilling and hopefully keep growing the resource, allow for the dust to settle on many of these current macroeconomic factors and allow us to focus on delivering POA 11 while not straining the balance sheet. We now have almost 3.5 kilometer of potential growth defined based on step-out drill holes or more than triple what we knew in 2017, as highlighted on Slide 8. Impressively, Silvertip accounts for roughly 25% of our $70 million overall budget at Coeur. The site team led by Ross Easterbrook has done an outstanding job managing the 1,000-meter drill program. We also expect to continue with three surface rigs testing resource growth to the south in the 1.5-kilometer gap between Southern Silver and Tour Ridge zones. The team reported last week they've cut the best hole ever with 11 mineralized manto horizons. The hole is located under Silvertip Mountain about 500 meters or 1,500 feet south of the Southern Silver and Camp Creek zones in an area with no resource shapes at this time. Quarterly operating costs remain within guidance helping to counterbalance lower realized prices and generate $15 million of free cash flow. We crushed just under 1.3 million tons of over-liner for the new Stage VI leach pad during the quarter, completing the necessary requirements for POA 11. The Kensington team did an excellent job balancing multiple priorities and maintaining solid cost controls throughout the quarter, which helped generate nearly $15 million of free cash flow. Gold production was up 17% and cash flow figures was the second highest since Coeur's acquisition back in 2015. We wrote off $26 million of Mexican VAT refunds, to which we strongly believe we are entitled, but like many other multinational companies doing business in Mexico, we have experienced significant challenges from SAT in the Mexican courts in obtaining these payments. Revenue of $208 million was driven by relatively stable metal sales and a lower average realized silver price versus the second quarter. Operating cash flow totaled $22 million, which was lower than last quarter but also negatively impacted by changes in working capital. Removing working capital, operating cash flow improved by more than 10% quarter-over-quarter. Turning over to Slide 12 and looking at the balance sheet, we ended the quarter with approximately $330 million of liquidity, including $85 million of cash and $245 million of availability under our revolving credit facility. Also, it's worth highlighting that these numbers do not include the $140 million of equity investments on our balance sheet. We ended the period with a net debt to EBITDA leverage ratio of 1.4 times. We will continue adhering to our disciplined capital allocation framework and remain focused on our goal of keeping net leverage below 2 times and maintaining liquidity of at least $100 million throughout the entire Rochester construction period.

We anticipate investing $70 million in exploration in 2021, which is nearly 40% higher than the record we set last year and is one of the largest programs in our sector. We're going to take some additional time to evaluate what a larger design and footprint could represent in terms of economics and overall flexibility. Revenue of $208 million was driven by relatively stable metal sales and a lower average realized silver price versus the second quarter.

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Organic revenue was up over 6%, with growth across our key end markets and all four business segments. Funded book-to-bill was 1.0 for the quarter and 1.05 year-to-date. Margins increased to 18.6%, resulting in earnings per share of $3.26, up 15%. We had solid free cash flow of $685 million, which contributed to shareholder returns above $1 billion, including repurchases of $850 million in the quarter and over $1.5 billion year-to-date. Our government businesses were up 6% in the second quarter, driven by double-digit growth internationally. Our space business strategy is working as we grew 10% in the quarter, capturing classified awards totaling over $300 million for ground and responsive satellite solutions. These awards are also part of the revenue synergy capture efforts and bring awards to date to over $700 million on a win rate of 70% from our growing $7 billion-plus pipeline. Turning to our Commercial Aerospace and Public Safety businesses, they were up over 5% in aggregate and were led by our Commercial Aerospace business up double digits off a low base and from strength in product sales. Backlog increased 7% organically year-over-year to over $20 billion, with notable award activity across all domains. With a three year space pipeline of nearly $20 billion, there's more opportunity for continued growth. Within the air domain, we strengthened our existing F-35 franchise with initial production awards for the Aircraft Memory System and the Panoramic Cockpit Display Electronic Unit under the TR3 program. This brings total orders year-to-date on the platform to about $500 million. We're progressing on all three TR3 systems through integration and qualification this year, and in support of the planned lot 15 cut in of the production hardware. We are also secured a roughly $100 million IDIQ with SOCOM for infrared EO sensors on rotary platforms furthering our modernization opportunities across L3Harris. First, we received a $3.3 billion five year IDIQ for foreign military sales to a range of partner countries from our new broader portfolio of products, including radios and SATCOM terminals. This replaces our prior five year $1.7 billion contract, which supports and validates the continued modernization across geographies and expands our product scope. Second, in the U.K., we received a logistic support contract covering legacy Bowman and future Morpheus radios, positioning us well for a $1 billion modernization opportunity in that country. This undersea warfare training range program, called U.S. litter, has an award value of nearly $400 million and further builds our credibility to pursue additional domestic international opportunities. In the cyber domain, while limited to what we can say due to the classified nature, our $1 billion Intel & Cyber business received over 250 million in orders for complex mission solutions and specialized communications for both domestic and international markets, leading to another quarter of book-to-bill above 1.0 for this business. We also had a key award in an adjacent market with our Public Safety business with a 15-year $450 million contract from the state of Florida to upgrade and continue operating its law enforcement system for first responders. For example, at SAS, the team completed a successful preliminary design review for an advanced EW solution called Viper Shield that can deliver self-protection capability for Block 70 F-16s. And financially, we had another quarter of strong margins as the team continues to offset mix impacts from early stage programs with three key initiatives, including program excellence and factory productivity, allowing us to flow through cost synergies totaling an incremental $27 million in the quarter. In addition, the first half synergy run rate is now $350 million, driven by progress on facilities, consolidation and IT efficiencies. We see this as the minimum level we'll deliver on this year, up from the $320 million to $350 million range we discussed in April and still a year ahead of schedule. On margins for the year, this leaves us at about 18.5% for the top end of the prior guide and a level we'll look to build on in the years ahead. Today, we announced the sale of two small businesses within our Aviation Systems segment for $185 million in cash, and these should close before year-end. When combined with the roughly $2.5 billion divested under our portfolio shaping initiative, total gross proceeds are set to be $2.7 billion. We have now divested nearly 10% of our revenues. Our expectation now is for buybacks to be roughly $3.4 billion this year, up versus our prior guide of $2.3 billion. When combined with dividends, capital returns will be about $4.2 billion in 2021. Organic revenue was up 6.2%, with a return to growth in all four segments. IMS led the way up 12%, followed by a return to growth at AS of 4.7%. Margins expanded 40 basis points to 18.6%, primarily from E3 productivity, program performance and integration benefits, partially offset by higher R&D. These drivers, along with our share repurchases, led to earnings per share being up 15% or $0.43 to $3.26, as shown on Slide five. Of this growth, volume, synergies and operations contributed $0.18, a lower share count contributed another $0.18 and pension, tax and interest accounted for the remaining $0.07. Free cash flow was $685 million, while working capital days stood at 57 due to receivables timing. And shareholder returns of over $1 billion were comprised of $850 million in share repurchases and $207 million in dividends. Of note, our last 12 months of share repurchases have totaled over $3 billion at an average price of $195 per share, well below our current share price. Integrated Mission Systems revenue was up 12%, led by double-digit growth in ISR aircraft missionization on a recently awarded NATO program. Operating income was up 2%, while margins contracted 150 basis points to 15.3%, reflecting expected mix impacts, including a ramp on growth platforms and programs. Pointed book-to-bill was 0.81 in the quarter and 1.06 for the first half with strength across the segment. In Space and Airborne Systems, organic revenue increased 3.2% from our missile defense and other responsive programs, driving 10% growth in space, along with mid-single-digit classified growth in Intel & Cyber. This strength outweighed the impact from modernization program transitions in our airborne businesses, the F-35 Tech Refresh three program within Mission Avionics and F-16 Viper Shield advanced electronic warfare system. Operating income was up 7.7%, and margins expanded 90 basis points to 19.7% as operational excellence, including program performance, increased pension income and integration benefits more than offset higher R&D investments. Next, Communication Systems' organic revenue was up 3.2% with mid-single-digit growth in Tactical Communications that included international up double digits, driven primarily by modernization demand from Asia Pacific and Europe and an anticipated decline in DoD from last year's second quarter 40%-plus growth. And public safety was down 7% from residual pandemic-related impacts. Operating income was up 8.3% and margins expanded 170 basis points to 25.5% from higher volume, operational excellence and integration benefits. And funded book-to-bill in the quarter and first half were about 1.3% and 1.1%, respectively. Finally, in Aviation Systems, organic revenue increased 4.7%, driven primarily by our commercial aerospace business that was up 20% from recovering training and air transport OEM product sales. Operating income was up 17% and margins expanded 200 basis points to 14.5% from operational excellence, integration benefits and higher volume. Funded book-to-bill was about 0.9 for the quarter and first half. Overall, organic revenue growth is unchanged at 3% to 5%, with our top line trending as expected at 4% for the first half and supported by a 1.05 funded book-to-bill year-to-date. We have raised our outlook to approximately 18.5%, a 25 basis point increase to the top end of the previous range, due to our strong performance to date and confidence in our ability to execute on cost synergies, E3 and program deliverables. On EPS, we're raising our full year guide to a range of $12.80 to $13, with the midpoint now toward the upper end of our previous range and reflecting 11% growth from 2020, delivering on our double-digit commitment in spite of dilution from divestitures. As shown on Slide 11, the increase of $0.05 from the prior midpoint is driven by $0.13 improvement in operations and synergies and $0.19 from a lower share count at 203 million shares, along with a lower tax rate of about 16%, all of which more than offset divested earnings of $0.31. On a stand-alone basis, we expect about $0.15 of net dilution from divestitures. Our guide of $2.8 billion to $2.9 billion is intact, despite divestiture-related headwinds are roughly $80 million. It continues to reflect the three day working capital improvement from year-end to around 49 and 50 days. capex is expected to be about $365 million, $10 million lower versus the prior guide due to completed divestitures. Our guidance also now reflects approximately $3.4 billion in share repurchases, an increase of $1.1 billion from our prior guide to account for net proceeds from recently closed divestitures. All told, we expect to return about $4.2 billion to shareholders this year.

Margins increased to 18.6%, resulting in earnings per share of $3.26, up 15%. On margins for the year, this leaves us at about 18.5% for the top end of the prior guide and a level we'll look to build on in the years ahead. IMS led the way up 12%, followed by a return to growth at AS of 4.7%. These drivers, along with our share repurchases, led to earnings per share being up 15% or $0.43 to $3.26, as shown on Slide five. On EPS, we're raising our full year guide to a range of $12.80 to $13, with the midpoint now toward the upper end of our previous range and reflecting 11% growth from 2020, delivering on our double-digit commitment in spite of dilution from divestitures.

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Following the successful completion of the sales of our Korea and Taiwan insurance businesses, which produced $1.8 billion in proceeds, we reached agreements to divest our full-service business and a portion of our traditional variable annuities. We are on track to close both of these transactions in the first half of 2022 and generate additional proceeds of over $4 billion. We continue to advance our cost savings program and are on track to achieve $750 million in savings by the end of 2023. To date, we have already achieved $635 million in run-rate cost savings, exceeding our $500 million target for 2021. We currently plan to return a total of $11 billion of capital to shareholders between 2021 and the end of 2023. This includes $4.3 billion returned during 2021 through share repurchases and dividends. As part of this plan, the board has authorized $1.5 billion of share repurchases and a 4% increase in our quarterly dividend beginning in the first quarter. We also reduced debt by $1.3 billion in 2021. Our capital deployment strategy is supported by a rock-solid balance sheet which includes $3.6 billion in highly liquid assets at the end of the fourth quarter and a capital position that continues to support our AA financial strength rating. We committed to achieve net-zero emissions by 2050 across our primary global home office operations, with an interim goal of becoming carbon-neutral in these facilities by 2040. We are also reviewing our general account investment holdings and have restricted new direct investments in companies that derive 25% or more of their revenues from thermal coal. On the social front, the Prudential Foundation surpassed $1 billion in grants to partners primarily focused on eliminating barriers to financial and social mobility around the world. This achievement follows another milestone that we reached in 2020 when our impact investment portfolio exceeded $1 billion. Our governance actions reflected a shared commitment to diversity and inclusion, beginning at the top with over 80% of our independent board directors being diverse. In 2021, we enhanced our diversity disclosures by publishing EEO-1 data and the results of our pay equity analysis for our U.S. employees. For 2021, pre-tax adjusted operating income was $7.3 billion or $14.58 a share on an after-tax basis. Results for the year included a benefit from the outperformance of variable investment income that exceeded target returns by about $1.6 billion, reflecting market performance, strategy, and manager selection. In the fourth quarter, pre-tax adjusted operating income was $1.6 billion or $3.18 a share on an after-tax basis, while GAAP net income was $3.13 per share. Of note, our GAAP net income includes realized investment gains and favorable market experience updates that were offset by a goodwill impairment that resulted in a charge of $837 million net of tax. PGIM, our global asset manager, had record asset management fees driven by record account values of over $1.5 trillion. Results of our U.S. Businesses increased 13% from the year-ago quarter and reflected higher net investment spread, including a greater benefit from variable investment income, higher fee income, primarily driven by equity market appreciation, partially offset by higher expenses driven by a legal reserve and less favorable underwriting experience due to COVID-19-related mortality. Earnings in our international businesses increased 5%, reflecting continued business growth, lower expenses, and higher net investment spread. PGIM continues to demonstrate the strength of its diversified capabilities in both public and private asset classes across fixed income, alternatives, real estate, and equities as a top 10 global investment manager. PGIM's investment performance remains attractive with more than 95% of assets under management outperforming their benchmarks over the last three, five- and 10-year periods. This performance has contributed to third-party net flows of $11 billion for the year, with positive flows across U.S. and non-U.S.-based clients in both public and private strategies. We continue to expand our global equity franchise to grow our alternatives and private credit business, which has assets in excess of $240 billion across private credit and real estate equity and debt and benefits from our global scale and market-leading positions. Notably, PGIM's private businesses deployed nearly $50 billion of gross capital, up 33% from last year. Our product pivots have worked well, demonstrated by continued strong sales of our buffered annuities, which were nearly $6 billion for the year, representing 87% of total individual annuity sales. Our individual life sales also reflect our earlier product pivot strategy with variable products representing 71% of sales for the year. Our retirement business has market-leading capabilities, which drove robust international reinsurance and funded pension risk transfer sales, including a $5 billion transaction, which was the fourth largest in the history of the market during 2021. With respect to Assurance, our digitally enabled distribution platform, total revenues for the year were up 43% from last year. Pre-tax adjusted operating income in the fourth quarter was $1.6 billion and resulted in earnings per share of $3.18 on an after-tax basis. To get a sense for all our first quarter results might develop, we suggest adjustments for the following items: first, variable investment income outperformed expectations in the fourth quarter by $440 million. Next, we adjust underwriting experience by a net $90 million. This adjustment includes a placeholder for COVID-19's claims experience in the first quarter of $195 million, assuming 75,000 COVID-19-related fatalities in the U.S. While we have provided this placeholder for COVID-related claims experience, the actual impact will depend on a variety of factors such as infection and fatality rates, geographic and demographic mix and the effectiveness of vaccines. Third, we expect seasonal expenses and other items will be lower in the first quarter by $105 million. Fourth, we anticipate net investment income will be reduced by about $10 million, reflecting the difference between new money rates and disposition yields of our investment portfolio. These items combined get us to a baseline of $2.73 per share for the first quarter. I'll note that if you exclude items specific to the first quarter, earnings per share would be $3.17. The key takeaway is that the underlying earnings power per share continues to improve and has increased 9% over the last year, driven by business growth, the benefits of our cost savings program, capital management and market appreciation. Our cash and liquid assets were $3.6 billion and within our $3 billion to $5 billion liquidity target range and other sources of funds include free cash flow from our businesses and contingent capital facilities.

In the fourth quarter, pre-tax adjusted operating income was $1.6 billion or $3.18 a share on an after-tax basis, while GAAP net income was $3.13 per share. Pre-tax adjusted operating income in the fourth quarter was $1.6 billion and resulted in earnings per share of $3.18 on an after-tax basis.

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Overall for the company, revenue was up 3% and hit a new fourth quarter high of $914 million. GAAP operating income was $139 million compared to $192 million in the prior year quarter that included $93 million net gain from insurance recoveries. GAAP earnings per share from continuing operations was $2.91 compared to $2.92 in the prior year quarter that included $93 million in insurance benefit I mentioned and a $39 million pre-tax pension settlement. As reported, total segment profit was a fourth quarter record, a $139 million, up 5% from the prior year quarter that included $25 million of insurance recovery. Total segment margin was a fourth quarter record 15.2%, up 10 basis points. Adjusted earnings per share from continuing operations rose 18% to a fourth quarter record of $2.89. From an operating perspective excluding the $25 million of insurance benefit in the prior year quarter, total segment profit was up 29%, and segment margin expanded 300 basis points. Residential revenue was up 11% on double-digit growth in both replacement and new construction business. Residential indoor air quality revenue was up more than 30% in the quarter. Segment profit rose 18% and segment margin expanded 130 basis points to 20.9%. From our operational perspective, adjusting for the $25 million of insurance benefit in the prior year quarter, Residential profit rose 58% and margin expanded 630 basis points. In Commercial, fourth quarter revenue was down 13% and profit was down 11%. Segment margin expanded 40 basis points to a fourth quarter record 19.4%. Our team added six new National Account equipment customers in the quarter to bring the total to 32 for the year. In Refrigeration for the fourth quarter, revenue was up 7% as reported and up 3% at constant currency. Refrigeration segment profit declined 28% and margin contracted to 360 basis points to 7.5% on the timing of expenses in the quarter and unfavorable mix with the strong growth in Europe HVAC. We expect revenue growth of 48% this year and GAAP and adjusted earnings per share from continuing operations, up $10.55 to $11.15 for the full year. Given the outlook and the company's strong balance sheet and cash generation, we are restarting our stock purchase program in 2021 and plan to buyback 400 million this year. Overall for the company, revenue for 2020 was $3.63 billion, down 5% on a GAAP basis and down 4% on an adjusted basis, excluding the impact from the divestitures in the prior year. GAAP operating income was $479 million compared to $657 million in the prior year, that included a $179 million net gain from insurance recoveries. GAAP earnings per share from continuing operations was $9.26 compared to $10.38 in the prior year, that included the $179 million insurance benefit and $99 million in pre-tax pension settlements. Total adjusted segment profit for the full year was $507 million compared to $610 million in the prior year, that included a $99 million of insurance recovery. Total adjusted segment margin was 13.9% for the year compared to 16.2% in the prior year with the insurance benefit. Adjusted earnings per share from continuing operations was $9.94 compared to $11.19 in the prior year with the insurance benefit and pension settlements. From an operational perspective, excluding the $99 million of insurance benefit in the prior year, total segment profit was down 1% and total segment margin was up 40 basis points. In the fourth quarter, revenue from Residential Heating & Cooling was a fourth quarter record $553 million, up 11%. Volume was up 10%. Price was up 1%, and mix was flat, with foreign exchange neutral to revenue. Residential profit was a fourth quarter record $116 million, up 18%. Segment margin was a fourth quarter record 20.9%, up 130 basis points. And as Todd mentioned, operationally profit was up 58% and margin expanded 630 basis points. Partial offsets included $25 million of non-recurring insurance proceeds in the prior year quarter, the COVID-19 pandemic, and higher tariffs, freight distribution, and warranty. For the full year, Residential segment revenue was a record $2.36 billion, up 3%. Volume was up 2%. Combined price and mix was up 1% with both up. Residential profit was $429 million, down 8% from the prior year that had been $99 million of insurance recovery. Segment margin was 18.1%, down 220 basis points as reported. Operationally, excluding the insurance recovery in the prior year, segment profit was up 17% and margin expanded 210 basis points. In the fourth quarter, Commercial revenue was $226 million, down 13%, volume was down 8%, price was flat, and mix was down 5%. Commercial segment profit was $44 million, down 11%. Segment margin was a fourth quarter record 19.4%, up 40 basis points. For the full year, Commercial revenue was $801 million, down 15%. Volume was down 14%. Price was flat, and mix was down 1%. Segment profit was $137 million, down 17%. Segment margin was 17.1% down 40 basis points. In Refrigeration, revenue was $135 million, up 7%. Volume was up 3%, price was up 1%, and mix was down 1% and foreign exchange had a favorable 4% impact on revenue. Refrigeration segment profit was $10 million in the fourth quarter, down 28%. Segment margin was 7.5%, down 360 basis points. For the full year, Refrigeration revenue was $472 million, down 12%. Volume was down 14%. Price was up 1%, and mix was flat. Foreign exchange had a favorable 1% impact. Segment profit was $33 million, down 47%. And segment profit margin was 7%, down 470 basis points. Regarding special items in the fourth quarter, the company had net after-tax gain of $800,000 that included a net gain of $3.4 million for insurance recoveries related to damage at the Company's manufacturing facility in Iowa, a benefit of $2.3 million related to environmental liabilities, a benefit of $1.5 million for excess tax benefits from share-based compensation. For charges we had $2.7 million for asbestos related litigation, $1.5 million for special product quality adjustments, $1.4 million for personal protective equipment and facility deep cleaning expenses incurred due to the COVID-19 pandemic, and a net change --charge of $800,000 in total for various other items. Now looking at special items for the full year, the company had net after-tax charges of $26 million and they included a charge of $8.5 million for other tax items, $8.4 million for restructuring activities, $6.2 million for personal protective equipment and facility deep cleaning expenses incurred due to the COVID-19 pandemic, $4.2 million for asbestos related litigation, a net loss of $2.3 million related to damage of the company's manufacturing facility in Iowa, a net charge of $600,000 in total for various other items, and a benefit of $4.2 million for excess tax benefits from share-based compensation. Corporate expenses were $30 million in the fourth quarter, and $92 million for the full year. Overall, SG&A was $143 million for the fourth quarter or 15.7% of revenue, down from 16.3% in the prior year quarter. For 2020 overall, SG&A was $556 million or 15.3% of revenue, down from 15.4% on an adjusted basis in the prior year. For 2020, the company had cash from operations of $612 million compared to $396 million in the prior year. Capital expenditures were approximately $78 million for the full year compared to $106 million in the prior year. And proceeds for damage to property and disposal of property were $1 million compared to $81 million in the prior year. Free cash flow was $535 million for the year compared to $371 million in the prior year. In 2020, the company paid $118 million in stock -- in dividends and repurchased $100 million of company stock. Total debt was $981 million at the end of the fourth quarter, and we ended the year with a debt to EBITDA ratio of 1.7, and cash and cash equivalents were $124 million at the end of the year. Our guidance for 2021 revenue growth is 48% with neutral foreign exchange impact. We still expect GAAP and adjusted earnings per share from continuing operations in a range of $10.55 to $11.15, with about half of the earnings in the first half of the year and half in the second half of the year. We expect a benefit of $50 million in price for the year. We expect a benefit of $25 million from sourcing and engineering led cost reductions, and a $20 million benefit from factory productivity. For the headwinds in 2021, we expect a $30 million headwind from commodities. Freight is expected to be a $5 million headwind. We will be at more -- at a more normal run rate with distribution investments this year with 30 new Lennox stores planned. Tariffs are expected to be a $5 million headwind. We are planning for SG&A to be up approximately 7% for the year or headwind of about $45 million. Corporate expenses are targeted at $90 million. Net interest in pension expense is expected to be approximately $35 million. We expect an effective tax rate of approximately 21% on an adjusted basis for the full year. We are planning capital expenditures to be approximately $135 million this year, about $30 million of which are for the third plant and our campus in Mexico. We expect nearly $10 million in annual savings from the third plant. Free cash flow is targeted at $325 million as we reinflate working capital to support strong growth. And finally, we expect the weighted average diluted share count for the full year to be between 37 to 38 million shares, which incorporates our plans to repurchase $400 million of stock this year.

Overall for the company, revenue was up 3% and hit a new fourth quarter high of $914 million. GAAP earnings per share from continuing operations was $2.91 compared to $2.92 in the prior year quarter that included $93 million in insurance benefit I mentioned and a $39 million pre-tax pension settlement. Adjusted earnings per share from continuing operations rose 18% to a fourth quarter record of $2.89. We expect revenue growth of 48% this year and GAAP and adjusted earnings per share from continuing operations, up $10.55 to $11.15 for the full year. Given the outlook and the company's strong balance sheet and cash generation, we are restarting our stock purchase program in 2021 and plan to buyback 400 million this year. Overall for the company, revenue for 2020 was $3.63 billion, down 5% on a GAAP basis and down 4% on an adjusted basis, excluding the impact from the divestitures in the prior year. In Refrigeration, revenue was $135 million, up 7%. We still expect GAAP and adjusted earnings per share from continuing operations in a range of $10.55 to $11.15, with about half of the earnings in the first half of the year and half in the second half of the year. We are planning capital expenditures to be approximately $135 million this year, about $30 million of which are for the third plant and our campus in Mexico. And finally, we expect the weighted average diluted share count for the full year to be between 37 to 38 million shares, which incorporates our plans to repurchase $400 million of stock this year.

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Trends were strongest in March and have sustained positive momentum into the early part of our fiscal fourth quarter with organic sales through the first 19 days of April up approximately 10% over the prior year. Consolidated sales increased 1.2% over the prior year quarter. Acquisitions contributed 1.8 points of growth, and foreign currencies increased quarter sales by 0.6%. This was partially offset by one less selling day over the prior year period, typically impacted sales by 1.6%. Net these factors, sales increased 0.4% on an organic daily basis. Average daily sales rates increased over 8% sequentially on an organic basis versus the prior quarter, which was higher than our normal seasonal trends. Sales in our Service Center segment increased 0.4% year-over-year on an organic daily basis when excluding the impact from foreign currency and one less selling day in the quarter. The segment's average daily sales rate has now improved over 18% from the fiscal '20 June quarter. Within our Fluid Power & Flow Control segment, sales increased 4.5% over the prior year quarter with our recent acquisitions of ACS and Gibson Engineering contributing 5.9 points of growth. On an organic daily basis, segment sales increased 0.2%. As highlighted on Page eight of the deck, gross margin of 29.4%, improved 43 basis points year-over-year or 29 basis points when excluding noncash LIFO expense of $0.8 million in the quarter and $2 million in the prior year quarter. On a sequential basis, gross margins improved over 50 basis points. On an adjusted basis, distribution and administrative expenses declined 3.4% year-over-year or approximately 6% when excluding incremental operating costs associated with our ACS and Gibson Engineering acquisitions. Adjusted SG&A excludes $2.6 million of nonroutine income recorded in the third quarter of fiscal 2021 and $3.9 million of nonroutine expense in the prior year quarter. As a result, adjusted EBITDA grew over 14% year-over-year and 27% sequentially, while adjusted EBITDA margin was 10.3%, up 119 basis points over the prior year. On a GAAP basis, we reported earnings per share of $1.42, which includes the previously referenced nonroutine income. On a non-GAAP adjusted basis, excluding this item, we reported earnings per share of $1.37, which compared to $1.02 in the prior year quarter. Our adjusted tax rate during the quarter of 18%, was below prior year levels of 23.3% and our guidance of 23% to 25%. Excluding this benefit, as we move into our fourth quarter, we believe a tax rate of 23% is an appropriate assumption near term. Cash generated from operating activities during the third quarter was $44.1 million, while free cash flow totaled $40.3 million. Year-to-date, we have generated record free cash of $191 million, which is up 25% from prior year levels and represents 150% of adjusted net income. Given the strong cash flow performance of the quarter, we ended March with approximately $304 million of cash on hand. Net leverage stood at 1.9 times adjusted EBITDA at quarter end below the prior year level of 2.5 times in fiscal '21 second quarter level of 2.1 times. In addition, our revolver remains undrawn with approximately $250 million of capacity and additional $250 million accordion auction. Based on month-to-date trends in April and assuming normal sequential patterns, we would expect our fiscal fourth quarter 2021 organic sales to increase by 12% to 13% on a year-over-year basis. As a reminder, we will be fully lapping prior year weakness from the pandemic, which resulted in an 18.4% organic sales decline in last year's fiscal fourth quarter. Based on the 12% to 13% organic sales growth assumption, we believe a low double-digit to mid-teen incremental margin is an appropriate benchmark to use for our fourth quarter. We remain confident in our cash generation potential and reiterate our normalized annual free cash target reach to 100% of net income over a cycle. Considering our embedded customer base, and addressable market exceeding $70 billion and growing, we believe this initiative represents a significant opportunity that should expand our share across both legacy and emerging market verticals in coming years.

Consolidated sales increased 1.2% over the prior year quarter. On a GAAP basis, we reported earnings per share of $1.42, which includes the previously referenced nonroutine income. On a non-GAAP adjusted basis, excluding this item, we reported earnings per share of $1.37, which compared to $1.02 in the prior year quarter. Based on month-to-date trends in April and assuming normal sequential patterns, we would expect our fiscal fourth quarter 2021 organic sales to increase by 12% to 13% on a year-over-year basis. Based on the 12% to 13% organic sales growth assumption, we believe a low double-digit to mid-teen incremental margin is an appropriate benchmark to use for our fourth quarter.

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Regarding our Q3 performance, our revenues were $4.09 billion compared to $4.03 billion in Q2. Organic revenue continued to improve as we progressed from minus 2.4% in Q2 to minus 1.4% in Q3. I see this as a significant improvement as only a year ago, our organic revenues were minus 9.7%. I was also very pleased to see the organic revenue growth in GBS accelerate, from positive 3.4% in Q2, to positive 7% in Q3. Our adjusted EBIT margin was 8.7%, up 170 basis points as compared to last year driven by our operational work that we are doing to optimize our business. Our non-GAAP diluted earnings per share was $0.92 in the quarter, which is up 10% as compared to $0.84 last year. While the quarter was strong across the board, the 2 strongest financial results were book-to-bill and free cash flow generation. We delivered $5 billion in bookings for a book-to-bill of 1.23 times. This gets us to a book-to-bill of 1.08 times on a trailing 12-month basis. And in Q3, we delivered $550 million in free cash flow. In the quarter, we increased our headcount by 3% and increased project work by 13%. Currently, our 12-month rolling NPS score is at the upper end of the industry best practice range of 20 to 30. We have identified businesses with roughly $500 million in revenues that are not strategic and will not help us grow. We expect the sale of these businesses to result in an additional $500 million in proceeds within the next 12 months. We had a strong quarter of bookings, totaling $5 billion and a book-to-bill of 1.23 times. 58% of the bookings were new work and 42% were renewals. Our strong 12-month book-to-bill of 1.1 times gives us confidence that, like ITO, we can take this business from double-digit to low single-digit decline in the next 12 months. Analytics and Engineering is a great story as we are converting our strong book-to-bill of 1.29 times on a 12-month basis and growing this business 18.7% in Q3, which is helping us consistently grow our GBS business. Organic revenue improved 100 basis points from Q2 to a decline of 1.4%. Adjusted EBIT margin is up to 8.7%. Year-over-year, our adjusted EBIT margin expanded 170 basis points, while we substantially reduced our restructuring and TSI expense. Q3 book-to-bill was 1.23 times and 1.08 times on a trailing four quarters. Non-GAAP diluted earnings per share was $0.92, up $0.08 compared to the prior year. Our earnings per share expanded despite $0.23 of headwinds from taxes. GBS continued its strong performance, accelerating organic revenue growth to 7%, our third consecutive quarter of organic revenue growth. Our GBS profit margin was 16.2%, up 200 basis points compared to the prior year. GIS organic revenue declined 8.3%. GIS profit margin was 4.8%, an improvement of 110 basis points compared to prior year. Analytics and Engineering revenue was $545 million and organic revenue was up 18.7%. Applications organic revenue increased 4.8%, also accelerating. BPS, our smallest layer of the enterprise technology stack, generated $116 million of revenue, and organic revenue was down 8.3%. For our GBS layers of our technology stack, our book-to-bill was 1.28 times and 1.17 times on a trailing 12-month basis. Cloud and Security revenue was $471 million and organic revenue was down 12.2%. IT Outsourcing revenue was $1.11 billion and organic revenue was down 1.9%. Let me remind you that this business declined 19% in Q3 FY '21. We expect IT Outsourcing to continue to decline in low single digits, ideally 5% or better. Lastly, Modern Workplace revenue was $561 million, and organic revenue was down 16% as compared to prior year. And our strong book-to-bill of 1.11 times over the trailing 12 months is expected to stabilize Modern Workplace as we move through FY '23. For our GIS layers of the technology stack, our book-to-bill was 1.18 times and 1.01 times on a trailing 12-month basis. We reduced our debt from $12 billion to $4.9 billion and are now below our targeted debt level. We have reduced our quarterly net interest expense to $23 million, a $31 million reduction as compared to prior year. We expect to continue the lower interest expense at approximately $25 million per quarter. This reduction contributed $195 million to cash flow during the quarter as compared to the prior year. Lastly, as you can see, we have also reduced operating lease cash payments from $156 million in the third quarter of the prior year to $117 million in the third quarter of FY '22. Moving to Chart 16. Our capital expenditures were reduced from $219 million in Q3 FY '21 to $146 million in Q3 FY '22. In FY '20, we had a $270 million quarterly run rate for originations while our last two quarters averaged less than $60 million. We made $207 million of capital lease payments in Q3 last year, which is now down to $184 million in the current quarter. For Q4, we expect a further reduction of capital lease payments to approximately $140 million. We are now tracking at 5.2% for two consecutive quarters, down from roughly 10% in FY '20. Cash flow from operations totaled an inflow of $696 million. Free cash flow for the quarter was $550 million, an increase of $956 million as compared to prior year and moves our year-to-date free cash flow to $650 million or $150 million above our full year guidance. Further, cash in the quarter was negatively impacted by two previously disclosed payments, totaling approximately $130 million. Our progress in Q2 and Q3 gives us confidence as we work toward delivering our longer-term FY '24 guidance of $1.5 billion in free cash flow. We are targeting a debt level of approximately $5 billion and a cash level of $2.5 billion. With debt at our target debt level, cash over $2.5 billion is excess cash, which we expect to deploy. Based on this formula, we expect to self-fund stock repurchases of $1 billion over the next 12 months. The $1 billion in repurchases will be funded from a combination of cash generated from operating our business as well as proceeds from our portfolio-shaping efforts. We recently executed a number of sale agreements and expect to divest businesses and assets with approximately $500 million of revenue and will generate $500 million of proceeds in the next 12 months. As you will see in our 10-Q, we entered into an agreement to sell our German financial service subsidiary that includes both of our banks for approximately $340 million. The current cash balance related to these deposits is $670 million. We also announced an agreement for the sale of our Israeli business for $65 million. In Q3, we repurchased $213 million of common stock, bringing our FY '22 year-to-date repurchases to $363 million or 10.6 million shares. As noted, we expect to repurchase $1 billion of our common stock over the next 12 months as we firmly believe our stock is undervalued. Revenues between $4.11 billion and $4.15 billion. If exchange rates were at the same level as when we gave guidance last quarter, our fourth quarter revenue guidance range would be $20 million higher. Organic revenue declined, minus 1.2% to minus 1.7%. Adjusted EBIT margin in the range of 8.7% to 9%. Non-GAAP diluted earnings per share of $0.98 to $1.03 per share. For Q4, we expect a tax rate of approximately 26%. Based on the strengthening U.S. dollar, our revenues are expected to be negatively impacted by approximately $40 million. We now expect to come in at approximately $16.4 billion. Organic revenue growth range of minus 2.2% to minus 2.3%, which is slightly lower than our previous range. Adjusted EBIT margin, 8.5% to 8.6%. We continue to expand margins while significantly lowering restructuring and TSI expense and are now guiding to $400 million for FY '22. To put this all in context, we expect to spend $500 million less on restructuring and TSI spend than last year, while expanding margins by over 200 basis points. Non-GAAP diluted earnings per share of $3.64 to $3.69. Lastly, we are increasing free cash flow guidance to over $650 million, $150 million improvement to our prior FY '22 guidance. Fourth quarter cash flow is expected to be impacted by timing, which boosted Q3 cash flow and in addition, a $100 million payment in Q4 to terminate a financial structure put in place a number of years ago. Our trailing 12-month average is now 1.08 times. Our debt is now at $4.9 billion, and our refinancing has significantly lowered our interest expense. Achieved organic revenue growth of minus 1% to minus 2% in FY '22. This is where we're coming up a little short, anticipating negative 2.2% to negative 2.3% organic revenue growth. We have taken it from over $900 million to roughly $400 million in FY '22. We exceeded the $500 million guidance for FY '22. We have repurchased $363 million and plan to do another $1 billion over the next 12 months. Our portfolio-shaping is anticipated to drive $500 million in excess cash in the next year.

Regarding our Q3 performance, our revenues were $4.09 billion compared to $4.03 billion in Q2. Our non-GAAP diluted earnings per share was $0.92 in the quarter, which is up 10% as compared to $0.84 last year. Non-GAAP diluted earnings per share was $0.92, up $0.08 compared to the prior year. Based on this formula, we expect to self-fund stock repurchases of $1 billion over the next 12 months. The $1 billion in repurchases will be funded from a combination of cash generated from operating our business as well as proceeds from our portfolio-shaping efforts. As noted, we expect to repurchase $1 billion of our common stock over the next 12 months as we firmly believe our stock is undervalued. Non-GAAP diluted earnings per share of $3.64 to $3.69. Achieved organic revenue growth of minus 1% to minus 2% in FY '22. We have repurchased $363 million and plan to do another $1 billion over the next 12 months.

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Methode's first quarter sales decreased 29.3%. Our net income decreased 26.9%. And our diluted earnings per share decreased 28% for the fiscal quarter ended August 1st of 2020. The resulting decremental net income margin of 10% was helped by cost reductions and operational efficiency initiatives. The net income in the quarter was also aided by discrete tax benefit of $7.8 million. Adding back the discrete tax benefit, the decremental net income margin would have been 19%. We received award of a total annual expected sales of approximately $30 million. Operationally, we took significant S&A cost saving actions in the quarter to help mitigate the impact from the pandemic despite incurring $1.5 million in S&A restructuring costs, S&A expenses were reduced by $5.8 million year-over-year. The awards identified here represent a cross-section of the business wins in the quarter and represent over $36 million in annual business. In electric vehicles, we won awards for lighting, overhead console and busbar programs totaling over $22 million annually. In hybrid vehicles, we were awarded lead frame and busbar programs totaling approximately $9 million annually. Looking forward, we're only providing sales guidance and only for our fiscal 2021 second quarter due to the market risk and uncertainty from the ongoing pandemic. First quarter sales decreased 29.3% or $79.3 million to $190.9 million in fiscal '21 from $270.2 million in fiscal '20. First quarter net income decreased $7.6 million to $20.7 million or $0.54 per share from $28.3 million or $0.75 per share in the same period last year. First quarter net income benefited from a discrete tax benefit of $7.8 million and higher other income of $3.4 million, primarily due to COVID-19 assistance of $2.9 million. The sales drivers from fiscal '20 first quarter to fiscal '21 first quarter were a net $92 million sales reduction due to the impact of COVID and other lower volumes, partially offset by $14 million of new launches. Foreign currency translation reduced sales by $1 million. Product mix was also unfavorable as 26.6% decrease in sales in the higher-margin industrial segment negatively impacted consolidated gross margins. Fiscal '21 first quarter margins were 23.6% as compared to 28.1% in the first quarter of fiscal '20. The fiscal '21 first quarter margins included $1.9 million of restructuring expense. Without the restructuring expense, fiscal '21 first quarter gross margins would have been 24.6%. First quarter selling and administrative expenses as a percentage of sales increased 190 basis points year-over-year to 13.9% compared to 12% in the fiscal '20 first quarter. The fiscal '21 first quarter figure was attributable to decreased sales and restructuring expense of $1.5 million, partially offset by lower stock-based compensation expense, lower wages and associated benefits due to salary reductions and four-day work weeks and much lower travel expense. Without the $1.5 million of restructuring expense, the selling and administrative expense as a percentage of sales for the first quarter of fiscal '21 would have been 13.1%. In addition to the $3.4 million incurred in the first quarter from actions taken in the first quarter, the company currently expects an additional expense of $2 million in the second quarter from those first quarter actions. Net income was $20.7 million in the first quarter of fiscal '21 as opposed to $28.3 million in the first quarter of fiscal '20. The main drivers between the fiscal years were lower sales due to COVID, a favorable change in discrete tax items of $9.1 million, an unfavorable change in restructuring expense of $3.4 million and the receipt of $2.9 million of foreign government assistance due to COVID. Shifting to EBITDA, a non-GAAP financial measure, fiscal first quarter '21 EBITDA was $29.3 million versus $50.3 million in the same period last year. EBITDA was negatively impacted by the significant headwinds from the COVID-19 pandemic and included $3.4 million of restructuring expense. Year-over-year depreciation and intangible asset amortization expense increased slightly in the first quarter of fiscal '21 to $12.1 million from $11.8 million in the first quarter of fiscal '20. In the first quarter of fiscal '21, we invested approximately $11.6 million of capex as compared to $13.2 million in the first quarter of fiscal '20. The first quarter investment represents an approximate $45 million run rate for the current fiscal year, but it is too early to tell if the rate will be maintained throughout the remainder of the year. We had an income tax benefit of $5.1 million as compared to a tax expense of $7.3 million in the fiscal '20 first quarter. The main driver of the benefit in fiscal '21 was $7.8 million of discrete tax items recorded during the quarter, mainly due to investment tax credits and other credits earned in foreign jurisdictions. In the fiscal first quarter of '20 -- fiscal year '20, there was a discrete tax expense of $1.3 million. Without the discrete tax items, the fiscal '21 first quarter effective tax rate would have been 17.2% as compared to 16.6% in the same period last year. As shown on Slide 12, we did leverage gross debt by $2.3 million in the first quarter. Since our acquisition of Grakon when adjusting for the $100 million precautionary credit facility draw in March of 2020, we have reduced gross debt by nearly $108 million. Net debt increased by $4 million in the first quarter of fiscal '21 as compared to the fiscal '20 year end. We ended the first quarter with $211 million in cash, which includes $100 million precautionary draw on the credit facility in March. Our debt-to-EBITDA ratio, which is used for our bank covenants, is approximately 1.9. This figure includes the impact of the precautionary $100 million draw. Without the draw, the ratio would have been approximately 1.3. For the fiscal '21 first quarter, free cash flow was $4.8 million as compared to $5.9 million in fiscal '20. The revenue range for the second quarter will be between $230 million and $250 million.

Looking forward, we're only providing sales guidance and only for our fiscal 2021 second quarter due to the market risk and uncertainty from the ongoing pandemic. First quarter sales decreased 29.3% or $79.3 million to $190.9 million in fiscal '21 from $270.2 million in fiscal '20. First quarter net income decreased $7.6 million to $20.7 million or $0.54 per share from $28.3 million or $0.75 per share in the same period last year. The revenue range for the second quarter will be between $230 million and $250 million.

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Alexandria is at the vanguard of meeting the historic and high unprecedented demand from many of our more than 750 tenants for growth needs now and a critical path for future growth very importantly. We're very proud that we've got almost 7% quarter-to-quarter per share FFO growth, more than 40% rental rate growth, almost 18% NOI growth, almost 8% same-store NOI growth and a $1.3-plus billion annual NOI run rate, not to mention about $545 million in incremental revenue in our development and redevelopment pipeline. There is a proposal right now to increase the fiscal year '22 NIH budget up to $51 billion, nearly a 20% boost over fiscal year '21. The FDA Center for Drug Evaluation and Research, better known as CDERS approved 23 new molecular entities in the first half of 2021, putting it on the pace to exceed 2020's near-record approval high of 53. Following a historic year of 2020, venture capital in Life Science continues at a very strong pace of almost $36 billion already raised in the first half of 2021, on pace to eclipse 2020's all-time high of $46 billion. Following a record 2020 for IPOs and follow-on offerings, the first half of this year have continued to reach new highs, with over $8 billion raised in 52 IPOs and over $17 billion raised in many follow-ons, positioning 2021 for an all-time record year of public market investment in life science. We only produce now about 11% to 13% and self-sufficient in next-gen manufacturing of complex medicines. A total of 3.7 billion vaccine doses have been administered worldwide with nearly 10% of these doses in the U.S. alone. Roughly 57.5% of the vaccine-eligible population in our country, that's 12 and over have been fully vaccinated by either tenant Pfizer or Moderna's 2-shot mRNA-based vaccine or tenant Johnson & Johnson's single shot. This is just over 49% of the total U.S. population, and we hope this number of fully vaccinated individuals will continue to steadily rise. The fact that our tenants Pfizer, Moderna and Johnson & Johnson were able to develop, run robust clinical trials, manufacture and distribute billions of vaccines at scale in less than 12 months is absolutely unprecedented. These vaccines achieved such astounding safety and efficacy in the 90-plus percent range when the FDA has set the original bar at 50%, with an amazingly low incidence of side effects reported from the millions of people who have now received that is truly astounding. It's been just over 18 months since the first U.S. COVID case was reported on January 21, 2020. In the U.S., this highly continuous Delta variant, approximately 50% more transmissible with 1,000 times higher viral load account for at least 83% of COVID cases. Average daily confirmed COVID case count now exceed 50,000, which is guide x that of the mid-June lows with hospitalization and deaths rising as well. More than 95% of people hospitalized for COVID-19 are unvaccinated, and the vaccine still remain effective even against the Delta variant. With regards to children, Pfizer has an emergency use authorization for children over 12, and the FDA is urging Pfizer and Moderna to expand their studies in children aged five to 11. At Alexandria's Annual Investor Day during December 2017, we presented a bold framework to nearly double the company's annual rental revenues from a little more than $800 million to $1.5 billion by the end of 2022. We are pleased to share those annualized revenues for Q2 2021 are, in fact, in excess of $1.5 billion. The company has also grown from a mission-critical operating asset base and development pipeline of 29 million square feet at the end of 2017, to a total of 62 million square feet at the end of Q2 2021. And as we fielded questions during the 2020 as to whether the healthy leasing activity for Alexandria's mega campus platform was perhaps a short-term blip driven by COVID-19, the second quarter of this year's leasing volume of more than 1.9 million square feet, the highest quarterly leasing volume in the history of the company is again evidence of the company's unique position as a trusted partner to the growing life science industry, providing a durable and sustainable competitive advantage in the market. As we just stated, the 1.9 million square feet lease represents the highest quarterly leasing activity during the 27-year history of the company. I'll direct you to page two of the supplemental, where it indicates the 3.4 million square feet under construction is 80% leased and the additional 3.6 million square feet anticipated to commence construction during 2021, 2022 is 89% leased and negotiating. So robust leasing and our growth pipeline provides exceptional clarity, and these projects in total will drive incremental revenues in excess of $545 million. Cash increases this quarter of 25.4% and GAAP increases of 42.4%. Occupancy remained very solid at 94.3% and the operating portfolio, which would have been 98.1% if were not for the 1.4 million square feet of vacancy in recently acquired properties, which provide for near-term incremental annual rental revenues in excess of $55 million. We're closely evaluating Greater Boston's ground-up pipeline, which is 56% leased. In the second quarter, we delivered 755,565 square feet, spread over five assets located in South San Francisco, San Carlos, Long Island City, San Diego and the Research Triangle. This is double what we delivered in the first quarter, and these deliveries will provide more than $31 million in annual rental revenue over the next year. Assets contributing notably to this outcome include 840 Winter Street and Waltham Mass, which is a testament to our ability to capture demand from companies needing facilities for next-gen manufacturing. 3160 Porter Drive in Palo Alto, a joint effort with Stanford to commercialize the University's most innovative science. And 5505 Morehouse in Sorrento Mesa, which is benefiting from Alexandria's place-making expertise and strong demand drivers in San Diego. In addition, we expect to have another 3.6 million square feet in 19 properties commenced construction this year, and next that are already 89% leased or under negotiation. As Steve also mentioned, these properties will cumulatively add approximately $545 million of annual rental revenue once fully delivered. A year ago, lumber was $500 per thousand board feet, which was about $100 above its historical norm. It climbed to $1,700 per thousand board feet in early May, but has since dropped back down to $600 per thousand board feet, and is still dropping. Thus, prices remained very high with metal studs up 75% since January. I discussed our record 4% cap rate at 213 East last quarter, but I want to add that in addition to achieving that cap rate, we also achieved an unlevered IRR of 9.6%. And a value creation margin, which is calculated by dividing our gain by gross book value of 56%. We achieved a 12% unlevered IRR on this sale and a value creation margin of 61%, a truly remarkable outcome, and it's very reflective of the high-quality assets we've developed and continue to develop in the Seattle region and elsewhere. In Sorrento Mesa, an asset known as The Canyons, which contains a little over 1/3 of lab and manufacturing space with the balance being office, sold at a 4.48% cap rate and a value of $575 per square foot. 9615 Medical Center Drive, located in the Shady Grove submarket and adjacent to a number of Alexandria properties was sold to a U.S. insurance company for a 5.18% cap rate and a valuation of $610 per square foot. Revenue and net operating income for the second quarter was up 16.6% and 16.8% over the second quarter of 2020, respectively. And NOI for the second quarter was up 6.9% over the first quarter of '21. Now venture investment gains included in FFO per share were $25.5 million for the second quarter and was consistent with the first quarter of '21. Now looking back over the last two quarters, we raised our outlook for FFO per share, $0.03 when we reported first quarter results. And during the second quarter, we raised our outlook for FFO per share again by another $0.02. Now this $0.02 increase was announced in connection with our Form 8-K filing date at June 14, when we were substantially through the second quarter and had solid visibility into the strength of core results for the quarter. Same-property NOI growth for the first half of '21 continue to benefit from our high-quality tenant roster, with 53% of our annual rental revenue from investment-grade rated or large-cap publicly traded companies. Same-property NOI growth for the first half of '21 was very strong at 4.4% and 7.4% on a cash basis. High rental rate growth on lease renewals and releasing the space was the key driver for the improvement in our outlook for 2021 same-property net operating growth to 2% to 4% and 4.7% to 6.7%, an increase of 30 basis points and 40 basis points, respectively. It's important to highlight that the lease-up of 1.4 million rental square feet of vacancy at these properties will provide further growth in annual rental revenue in excess of $55 million. Now occupancy that we reported for June 30 was 94.3% and 98.1% on a pro forma basis, excluding vacancy from recently acquired properties. And it's also important to highlight that if we set aside recently acquired properties, our occupancy is on track to improve by 100 basis points in 2021. We have one of the highest adjusted EBITDA margins in the REIT industry at 69%. We reported our lowest AR balance since 2012 at $6.7 million, truly amazing when you consider that our total market capitalization was over $26 billion as of June 30. And we continue to consistently report high collections at 99.4% for July. We reported record leasing velocity at over 3.6 million rentable square feet executed in the first half of this year. And this run rate is significantly exceeding the strong leasing volume for 2020 and on track for exceptional rental rate growth in the range of 31% to 34% and 18% to 21% on lease renewals and releasing the space the last figures on a cash basis, by the way. Now as a trusted partner with access to over 750 tenants in our portfolio, we are well positioned to capture the tremendous demand from our tenant roster and life science industry relationships. We have a super exciting pipeline of projects under construction, aggregating 3.4 million rentable square feet, 80% lease negotiating. Near-term projects starts 89% leased were under negotiations, aggregating 3.7 million square feet. Now this aggregates about 6.9 million square feet, 90% of which is related to space requirements from our existing relationships. These projects will generate an amazing amount of incremental annual rental revenue exceeding $545 million or a 34% increase above the second quarter rental revenues annualized of $1.6 billion. As of June 30, unrealized gains were $962 million on an adjusted cost basis of $990 million. Realized gains on our venture investments for the second quarter were $60.2 million, including $34.8 million of realized gains excluded from FFO per share. Now for the first half of '21, we realized gains aggregating about $57.7 million that related to significant gains in three investments that were excluded from FFO per share as adjusted. We remain on track for net debt to adjusted EBITDA of 5.2 times by year-end. We continue to maintain significant liquidity of $4.5 billion as of June 30. We're in a solid position with debt maturities with our next maturity representing only $184 million comes due in 2024. Now to date, in 2021, we have completed $580 million at cap rates in the 4% to 4.2% range. And we have about $1.4 billion in process at various stages and expect to move along other dispositions that will push us well above the top end of our range for dispositions, which are currently at $2.2 billion. Now we are targeting about $1 billion in dispositions to close in the third quarter and the remainder in the fourth quarter. We narrowed the range of guidance from $0.10 to $0.08 for both earnings per share and FFO per share. EPS was updated to a range from $3.46 to $3.54 and FFO per share as adjusted was updated to a range from $7.71 to $7.79 with no change in the midpoint of FFO per share diluted as adjusted of $7.75. Now as a reminder, since our initial FFO per share guidance for 2021, we have increased the midpoint of our guidance by $0.05 for growth in 2021, representing an increase of 6.1% over 2020.

EPS was updated to a range from $3.46 to $3.54 and FFO per share as adjusted was updated to a range from $7.71 to $7.79 with no change in the midpoint of FFO per share diluted as adjusted of $7.75.

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We are pleased to have made meaningful progress on that front where we began the pandemic initially collecting approximately 40% of retail rents in April to collecting approximately 80% retail rents in the third, quarter a number that we expect to get better. Additionally, we are pleased to report that 100% of our properties continue to remain open and accessible by our tenants in each of our markets and anecdotally the majority of our employees are voluntarily working in person at our properties or at our corporate offices each week while taking absolutely all prudent safety precautions, despite having the flexibility to work from home. Of course, we are firmly against Prop 15 which would eliminate Prop 13 Taxpayer Protection. And also, we are against Prop 21 which we believe is a flawed measure that would implement a significant amendment to existing rent control laws on the multifamily side, limiting landlords' rights and likely making the housing crisis in California even worse. While the challenges we face today are complex, whether relating to the pandemic, racial, [Indecipherable] technology or legislative matters to name a few, we do believe that we are well positioned to navigate through and manage these challenges with, as Ernest mentioned our best-in-class assets, our 200 talented and dedicated employees and the strength of our balance sheet. Last night we reported third quarter 2020 FFO of $0.44 per share and net income attributable to common stockholders of $0.08 per share for the third quarter. Number one, our collections of monthly recurring billings continue to improve in Q3 over Q2 with total collections of approximately 89% in Q3 versus 80% in Q2. We prepared for the worst-case scenario by modeling a $50 million quarterly burn rate at the beginning of this pandemic, not knowing what we were going into and in Q2, our actual burn rate was approximately $6 million. In Q3, we ended up with a cash surplus of approximately $9 million and this is after the operating capital expenditures and the dividend. We started Q3 with approximately $146 million of cash on the balance sheet and ended Q3 with approximately $155 million of cash on the balance sheet, primarily as a result of increased cash NOI, quarter-over-quarter due to our successful collection efforts outlined earlier by Adam. Number three, we have additional liquidity of $250 million available on our line of credit, combined with an entire portfolio of unencumbered properties with the exception of our only mortgage which is on City Center Bellevue. Number four, we believe we have embedded growth in cash flow in our office portfolio with approximately $30 million plus of growth in the office cash NOI between now and the end of 2022 as Steve will discuss later. On October 15, Hawaii allowed tourists to come back to the island as they can demonstrate that they have had a negative COVID tests within the last 72 hours. On the first day, there were approximately 10,000 tourists that landed in Hawaii, we expect that tourism inflow to continue to increase each week and to start benefiting our Hawaiian properties over the coming quarters. Office properties excluding One Beach Street in San Francisco, which is under redevelopment were at 96% occupancy at the end of the third quarter, an increase of approximately 2% from the prior year. More importantly, same-store cash NOI increased 13% in Q3 over the prior year, primarily from increases in base rent at La Jolla Commons, Torrey Reserve campus, City Center Bellevue and the Lloyd District portfolio. Our retail properties continue to be significantly impacted by the pandemic, although the occupancy at our retail properties remain stable for the third quarter at 95% occupancy which was a decrease of approximately 3% from the prior year our retail collections have been challenging during the pandemic, as reflected in our negative same store cash NOI. Our multifamily properties experienced a challenging quarter, as same-store cash NOI decreased approximately 5.4% due primarily from the increase in average occupancy -- or I'm sorry, due primarily from the decrease in average occupancy at Hassalo in Portland, offset by favorable master lease signed with a private university in San Diego area at the beginning of the quarter. On a segment basis, occupancy was at 87.5% at the end of the third quarter, a decrease of approximately 3% from the prior year. With these adjustments, in the last 10 days we have already seen leasing traffic increase from a weekly average of four to six tour's per week, to 10 to 12 tours per week. We have captured a total of 11 new leases in just the last week. The Embassy Suites' average occupancy for the third quarter of 2020 was 66% compared with the average occupancy in the second quarter of 2020 of 17%. The average daily rate for the third quarter of 2020 was $209, which is approximately 40% of the prior year's ADR. Waikiki Beach Walk Retail suffered considerably with virtually no tourists on the island until recently. We had COVID-19 adjustments amounting to 2% of what was billed in Q3 to our tenants and the balance of approximately 9% is the amount outstanding of what was billed in Q3. This is compared to the second quarter collections of 81%, COVID-19 adjustments of 5% and Q2 amounts that were billed and still outstanding of 14%. This is compared to a bad debt expense accounts receivable of approximately 14% of the outstanding uncollected amounts at the end of Q2 and bad debt expense of straight-line rent receivables of approximately 7% at the end of Q2. However, from a big picture perspective, at the end of the third quarter, our total allowance for doubtful accounts, which reflects the cumulative bad debt expense charges recorded totals approximately 39% of our gross accounts receivable and approximately 3% of our straight-line rent receivables. Let's talk about liquidity; as we look at our balance sheet and liquidity at the end of the third quarter, we had approximately $405 million in liquidity, comprised of $155 million of cash and cash equivalents and $250 million of availability on our line of credit, and only one of our properties is encumbered by mortgage. Our leverage, which we measure in terms of net debt to EBITDA was 6.7 times on a quarterly, annualized basis. On a trailing 12 month basis, our EBITDA would be approximately 6.0 times. 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 3.6 times on a quarterly annualized basis and 3.9 times on a trailing 12 month basis. As Bob said earlier, at the end of the third quarter, net of One Beach, which is under redevelopment our office portfolio stood at over 96% leased with just under 6% expiring through the end of 2021. The weighted average base rent increase for our nine renewals completed during the quarter was 6.7% and it's also as Bob pointed out earlier, with leases already signed, we have locked in approximately $30 million of NOI growth in our office segment priced at approximately [Indecipherable] in 2020, $14 million in $2021 and $10 million in 2022. We anticipate significant additional NOI growth in 2022 and 2023 through the redevelopment of leasing of 102,000 square feet at One Beach Street in San Francisco and 33,000 rentable square feet at 710 Oregon Square in the Lloyd submarket in Portland. In addition, we have the ability to organically grow our office portfolio by up to an additional 768,000 square feet or 22% on sites we already own by building Tower 3 at La Jolla Commons, a 213,000 square foot tower that's currently into the city for permits and Blocks 90 and 103 at Oregon Square with two configuration options, one at 392,000 square feet and the other at 555,000 square feet, which we recently received the entitlements on from the Portland Design Review Commission.

Last night we reported third quarter 2020 FFO of $0.44 per share and net income attributable to common stockholders of $0.08 per share for the third quarter. Number one, our collections of monthly recurring billings continue to improve in Q3 over Q2 with total collections of approximately 89% in Q3 versus 80% in Q2.

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For the fourth quarter of 2020, the Partnership recorded net income of $83 million, adjusted EBITDA was $159 million compared to $168 million in the fourth quarter of 2019. Volumes of 1.8 billion gallons were relatively unchanged from the third quarter, but remain down about 12% from levels seen a year ago. Fuel margin was $0.092 per gallon and included approximately $8 million of one-time write-offs associated with prior period fuel tax and inventory-related items. Fourth quarter margin also included approximately $9 million of unfavorability related to inventory valuation and associated hedges. For the full-year 2020, the impact of this inventory valuation and hedging activity resulted in approximately $2 million of margin favorability. Fourth quarter distributable cash flow, as adjusted, was $97 million, yielding a coverage ratio of 1.1 times. We ended the full-year 2020 with the coverage ratio of 1.5 times. On January 28, we declared an $0.8255 per unit distribution, the same as last quarter. Our full-year 2020 accomplishments include the following: adjusted EBITDA of $739 million, a record for SUN and up 11% from 2019 levels; distributable cash flow, as adjusted, was $517 million, also a record for SUN and up 14% from 2019. We improved our already strong coverage ratio to 1.5 times, up from 1.3 times in both 2018 and 2019. Our cost reduction initiatives resulted in total operating expenses of $448 million, which was a reduction of 11% from 2019 levels. Our fuel margin increased $0.018 per gallon from 2019 to $0.119 per gallon. We successfully refinanced our 4.875% Senior Notes due 2023, with new 4.5% Senior Notes due 2029, thereby lowering interest expense, while significantly expanding the weighted average maturity of our debt. And finally, we improved our leverage to 4.18 times, or 4.1 times when adjusted for total cash on hand from 4.6 times at the end of 2019. Our liquidity remains strong, with an undrawn $1.5 billion revolving credit facility and $97 million in cash at year-end. In December, we provided guidance for 2021 for adjusted EBITDA of between $725 million and $765 million. Underpinning this guidance are the following: fuel volumes in a range of 7.25 billion to 7.75 billion gallons; annual fuel margin between $0.11 per gallon and $0.12 per gallon; total operating expenses of between $440 million and $450 million; maintenance capital of $45 million; and growth capital of at least $120 million. We will be financially disciplined with the target coverage ratio of 1.4 times, which is up from our prior target of 1.2 times and a target leverage ratio of 4 times, which is down from our prior target of 4.5 times to 4.75 times. First, during our last conference call, I shared the volumes were off around 12% for October. Year-over-year, J.C. Nolan volume reductions accounted for 3% of total volume for the fourth quarter. So that would put our volumes down only 9%, if you remove the impact of J.C. Nolan. If you look back at our history, that would have likely resulted in margins close to $0.09 a gallon, maybe even dipping a little lower. And we still feel like a floor in the $0.095 to $0.10 range is reasonable for these tough market environments, excluding one-time issues in the quarter. Over that time period, New York Harbor RBOB has gone up around $0.75 per gallon.

Volumes of 1.8 billion gallons were relatively unchanged from the third quarter, but remain down about 12% from levels seen a year ago. In December, we provided guidance for 2021 for adjusted EBITDA of between $725 million and $765 million. Underpinning this guidance are the following: fuel volumes in a range of 7.25 billion to 7.75 billion gallons; annual fuel margin between $0.11 per gallon and $0.12 per gallon; total operating expenses of between $440 million and $450 million; maintenance capital of $45 million; and growth capital of at least $120 million.

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We saw better-than-expected sequential improvement from quarter to 2 quarters and from quarter 3 to quarter 4. Quarter four revenues totaled $711.2 million, which represents an increase of 2.3% as compared to the prior year period on a constant currency basis. Growth in the quarter was aided by 2 additional selling days, which we estimate contributed approximately 3% points. Excluding the impact of the additional selling days, we estimate that our constant currency revenues declined approximately 1%. The days adjusted declines reflect continued recovery progression relative to the 4% decline we experienced during the third quarter of the year and the 12% decline we experienced during the second quarter of the year and it was ahead of the expectations we had at the time of the third quarter earnings call. During the fourth quarter, we estimate that headwinds associated with COVID-19 caused a net negative impact of approximately $61 million or approximately 9%. if we were to normalize for the negative impact, we estimate that our underlying business grew by approximately 11% on a constant currency basis, or 8% when normalizing for the selling day impact. Quarter four revenue grew 2.3% on a constant currency basis and 4.4% on an as reported basis. From a margin perspective, we had generated adjusted gross and operating margins of 58% and 26.6% respectively. This translated into a year-over-year declines of 120 basis points at the gross margin line and 50 basis points at the operating margin line. However, from a sequential standpoint, this represented an improvement of[Phonetic] AZ[/Phonetic] and 150 basis points respectively compared to quarter three levels. On the bottom line, adjusted earnings per share was $3.25. The Americas delivered revenues up $419.5 million in the fourth quarter, which represents an increase of 5% over the prior year period. We estimate that the Americas would have grown approximately 12% excluding the impacts that COVID-19 had on the region. EMEA reported revenues of $161.4 million in the fourth quarter, representing growth of 4.1%. During the quarter, EMEA benefited from a one-time order of tracheostomy products and from the [Phonetic]extra [/Phonetic]selling days, the combination of which more than offset our estimated 1% COVID headwinds. Revenues totaled $78.6 million in the fourth quarter, which represents a decline of 7.2%; however, we estimate that we would have had positive constant currency revenue growth in the mid-single digits, if not for the impact of COVID-19. And lastly, our OEM business reported revenues up $57.7 million in the fourth quarter, which was down 6.9% on a constant currency basis. Excluding the impact COVID-19 had, the business grew roughly 31%, which includes a benefit of approximately 13% from the acquisition of HPC. Starting with Vascular Access, fourth quarter revenue increased 16% to $182.5 million. We estimate that COVID-19 positively impacted the growth rates of our vascular products during the fourth quarter by approximately 5%. Key drivers of revenue growth included PICC, which increased approximately 20%, CVCs which increased approximately 16% and EZ-IO which grew approximately 14%. Moving to Interventional Access, fourth quarter revenue was $106.7 million or down 6.9% as compared to the prior year period. We estimate that the recall and distributor issue impacted our business negatively by approximately $3 million. In addition, we are pleased that Manta grew 33% globally in quarter four. Now turning to Anesthesia, revenue was $86.1 million, which is lower than the prior-year period by 2.1%. We estimate that COVID had an approximate 1% negative impact in the quarter, implying flattish performance on an underlying basis. Revenues declined by 5.7% to $92.3 million driven by lower sales of our ligation portfolio. We estimate a 9% headwind from COVID during quarter 4 indicating recovery as compared to the estimated 13% COVID headwind in quarter three. Quarter four revenue increased by 5.3% to $93.9 million, which represents a new high watermark in terms of revenue dollars in any given quarter. On a year-over-year basis, the business faced a difficult growth comparison but sequentially, it grew by 15% versus quarter three. We estimate an approximate 28% COVID-19 related headwind during quarter four. Additionally, we are encouraged that we trained approximately 130 new urologists in quarter four moving to a cadence that is consistent with our expectations prior to COVID and a positive leading indicator for future growth. And finally, our other category, which consists of our respiratory and urology care products grew 6.1% totaling $98.1 million. The strategic role of DTC is important as about half of the 12 million men being treated for BPH believe prescription medications are their only solution. Key statistics include a doubling of brand awareness among men age 45 are higher post campaign versus pre-campaign levels. Approximately 150% increase in visits to UroLift.com during the campaign and direct response numbers that exceeded our internal projections by a wide margin. We have completed the market acceptance test and received positive feedback across more than 100 procedures completed by 20 urologists. Regarding Japan, we remain on track for reimbursement decision in 2021 and view the approximate $2 billion addressable market as an incremental growth driver, that will be a positive catalyst for seeable future. This is a prospective, single-arm IDE study of 150 patients across 13 sites to evaluate the performance of the entire range of Teleflex coronary guidewires and specialty catheters in chronic total occlusion percutaneous coronary intervention procedures, which is the most demanding PCI environment. Once the study results are finalized, we anticipate updated labeling for our Guidewire and Specialty Catheter products which can address an estimated 100,000 CTO-PCI procedures. We recently performed a market assessment update and still see a $100 million initial market opportunity for EZPlas. One difference is that Z-Medica is growing into a $600 million addressable market while Vidacare is addressable market was closer to $250 million. Z-Medica only reinforces our ability to get to those goals, and we remain committed to delivering constant currency revenue growth of at least 6% to 7% on an annual basis and reaching 60% to 61% and 30% to 31% adjusted gross and operating margins once we return to a more normalized environment. For the quarter, adjusted gross margin was 58%, a decrease of 120 basis points versus the prior year period. In total, we estimate that COVID negatively impacted our adjusted gross profit by approximately $44 million in the quarter. As a result of the efforts, we estimate that operating expenses were reduced in the fourth quarter by approximately $13 million. For full year 2020, we managed opex lower by an estimated $78 million. Fourth quarter operating margin was 26.6%, were down 50 basis points year-over-year. Net interest expense totaled $18.5 million, which is an increase of 10% year-over-year and reflects higher average debt balances versus the prior year period due to the acquisitions of HPC and Z-Medica. Moving to taxes, for the fourth quarter of 2020, our adjusted tax rate was 10.1% as compared to 7.7% in the prior year period. fourth quarter adjusted earnings per share declined modestly to $3.25 from $3. 28 a year ago. Included in this result is an estimated adverse impact from COVID of approximately $0.55 and a foreign exchange tailwind of approximately $0.05. In 2020, cash flow from operations was flat as compared to 2019 totaling $437.1 million. At year-end, our cash balance was $375.9 million as compared to $301.1 million as of December 2019. Over the course of the year, we deployed more than $750 million for external business development opportunities. Inclusive of Z-Medica financing, we net leverage ended 2020 at [Phonectic]2.98 times[/Phonetic ], which remains well below our 4.5 times covenant. Lastly from a selling day perspective, we will have 2 fewer selling days in the first quarter as compared to the year-ago period, we will have one additional day in the 4th quarter as compared to the year-ago period, and there will be no differences in the number of days during the second and third quarters. In 2021, we project constant currency revenue growth between 8% and 9.5% as compared to 2020. We also expect our Interventional Urology business to increase at least 30% over 2020 levels. Additionally, Z-Medica is expected to contribute $60 to $70 million of revenue or approximately 2.5 points of growth. We expect foreign currency exchange rates will be a tailwind to revenue growth of approximately 2%. As a result, we expect our as-reported revenue to increase between 10% in 11.5% over 2020 and this would equate to $1 range of between $2.791 million and $2.829 million. During 2021, we anticipate that adjusted gross margin will increase between 130 and 230 basis points to a range of between 8% and 59%. We expect gross margin expansion will be driven primarily by a favorable mix of high margin products primarily, Interventional Urology as well as the acquisition of Z-Medica which will add approximately 50 basis points to gross margin. During 2021, we anticipate that adjusted operating margin will increase between 110 and 210 basis points to a range of between 26% and 27%. Given the relatively higher opex cost structure of Z-0Medica versus Teleflex, operating margin accretion from Z Medica will be less than the 50 basis points of gross margin accretion. This slide serves as a bridge for our full-year 2020 adjusted earnings per share results to our full-year 2021 adjusted earnings per share outlook, beginning with the 2020 adjusted earnings per share of $10.67. From an operating standpoint in 2021, we project additional earnings between $1.58 and $1.66 per share or an increase of approximately 15%. Our 2021 earnings per share guidance also assumes the following: Foreign exchange is planning to [Indecipherable] for key currencies including a full year euro to dollar exchange rate of $1.21. For 2021, foreign exchange is expected to provide a tailwind of approximately $0.35. We now project Z-Medica to contribute between $0.21 and $0.26 of adjusted earnings per share in 2021, and this is an increase from our original expectation, which call for contribution of between $0.07 and $0.15. In 2021, we expect interest expense to range between $63 and $65 million/. The year-over-year reduction in interest expense is expected to contribute between $0.17 and $0.19 of earnings accretion if you would exclude the incremental financing costs for Z-Medica. During 2021, we project that our adjusted tax rate will be in the range of 13.5% and 14% and will result in adjusted earnings per share headwind of between $0.33 and $0.38. We estimate that weighted average shares will increase to $47 million for full year 2021 which is diluted by approximately $0.10. Despite several headwinds, our adjusted earnings per share outlook of $12.50 to $12.70 is robust, representing growth of between 17.2% and 19% versus 2020.

Quarter four revenues totaled $711.2 million, which represents an increase of 2.3% as compared to the prior year period on a constant currency basis. On the bottom line, adjusted earnings per share was $3.25. We estimate that COVID had an approximate 1% negative impact in the quarter, implying flattish performance on an underlying basis. fourth quarter adjusted earnings per share declined modestly to $3.25 from $3. As a result, we expect our as-reported revenue to increase between 10% in 11.5% over 2020 and this would equate to $1 range of between $2.791 million and $2.829 million. Despite several headwinds, our adjusted earnings per share outlook of $12.50 to $12.70 is robust, representing growth of between 17.2% and 19% versus 2020.

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The unique combination of these elements allowed us to deliver 31.9% growth in core FFO per share during the third quarter, and exceeded the high end of our guidance. The speed [Phonetic], along with a positive outlook for the remainder of the year, once again led us to raise our core 2021 FFO guidance by $0.16 at the midpoint, for range of $6.44, at $6.50 per share. And we're expecting the same community NOI growth for the full year at 70 basis points, a range of 10.9% to 11.1%. For the quarter, same community NOI grew 12.4% over last year, driven by our favorable strategic positioning to capture the sustained demand in RVs. In the RV segment, same community NOI increased by 30.6% for the quarter, as transient RV continued to deliver exceptionally strong results. Manufactured home sales were another bright spot in the quarter, with total home sales volume up nearly 64% from the prior year, and brokered home sales up over 15% for the quarter compared to the third quarter of 2020. In the third quarter, through the date of this earning's call, we had 22 properties across our three segments, deploying over $500 million of capital and adding over 7,400 sites. Our recently acquired four lease portfolio of nine manufactured housing communities in the Midwest, comprises of over 2,500 high-quality sites with expansion growth opportunities and ample room for existing vacancies. To that end, in the third quarter, we completed the disposition of six assets or total sales price of 162 million, representing a blended cap rate, the low fours, that further demonstrates the value of Sun's portfolio. For the third quarter, combined same community manufactured housing and RV NOI increased 12.4% from the third quarter 2020. The growth in NOI was driven by a 12.8% revenue gain, supported by a 150 basis point increase in occupancy, to 98.9% and the 3.7% weighted average rental rate increase. Our expenses were up 13.7% from the prior year. Same community manufactured housing NOI increased by 2.6% from 2020, and same community RV NOI increased by 30.6%. And our RV growth was 15.2% for the quarter as a result of a 5% rental rate increase and the effect of over 100 conversions to annual leases over the trailing 12 months. Our retransient revenues were up 29% compared to last year. This is on top of the 5% transient growth we experienced in the third quarter of 2020 over 2019 when we began to see the benefits of travelers who are seeking drive-through vacation options and took advantage of our resorts in desirable destinations. When we issued second quarter results in late July, we shared the transient RV revenue for the second half of the year was 15.2% ahead of the original budget. Today, an accounting for the third quarters actual contribution, it has accelerated to 18.3% ahead of original budget. As of this earnings call, our fourth quarter transient RV revenue is 19.6% ahead of the original budget. Year-to-date, RV website traffic is up 10% compared to last year and 120% compared to 2019. And we have seen our social media following and interaction continue to grow with more than 1.4 million followers on the three major platforms; Instagram, Facebook and TikTok. In the third quarter, we gained 576 revenue producing sites. Of our revenue producing site gains, over 430 were transient RV sites converted to annual leases, with the balance being added to our manufactured housing expansion communities. We have now converted almost 1,200 transient RV sites to annual leases year-to-date, which exceeds any prior full year figure and demonstrates the successful execution of this internal growth lever. The RV site conversions result in an average 50% increase in site revenues during the first year of conversion, with an additional benefit of transient site scarcity pushy [Phonetic] rates. In the third quarter, we delivered over 320 new sites, approximately 70% of which were Greenfield ground up developments, and the remainder were expansions to existing communities. The first phase of 82 sites has been filling up rapidly since opening a year ago, and we anticipate this next phase to continue to see the high demand for attainable housing in the area. Home sales volume was up 64% year-over-year as we sold more than 1,100 homes in the quarter. Applications to live in a Sun community are up 13.2% year-to-date and we anticipate we will continue to see strength in our manufactured housing business, given the tight housing market and the demand for quality attainable housing. Turning to the marina business, we ended the quarter with 120 properties comprising nearly 45,000 wet slips and dry storage spaces, which includes the acquisition of six properties for approximately $250 million completed in the third quarter. Same marina rental revenue growth for the portfolio of 75 properties owned and operated by Safe Harbor since the start of 2019, with 17.8% for the nine months of 2021 over 2019. This is a CAGAR increase in rental revenue of 9.9% for the quarter and 8.5% year-to-date through the end of September 2021. Our total image portfolio stands at approximately 97% occupancy, providing us with more than 200 basis points of occupancy upside, as well as additional growth potential by adding further expansion sites over time. We have an inventory of 7,500 expansion sites, a portion of which we intend to strategically deliver each year targeting 10% to 14% unlevered IRRs. For the third quarter, Sun reported core FFO per share of $2.11, 31.9% above the prior year and $0.05, ahead of the top end of our third quarter guidance range. During its subsequent to quarter end, we acquired approximately $500 million of operating properties, bringing our year-to-date total to $1.1 billion, adding 38 properties, totaling nearly 12,000 sites. Subsequent to the end of the third quarter, we issued 600 million of senior unsecured notes in our second bond offering of the year across seven and 10-year maturities. Additionally, we utilized our ATM program and completed the sale of 21.4 million of forward shares of common stock. We ended the second quarter with $4.7 billion of debt outstanding at a 3.3% weighted average rate, and a weighted average maturity of 9.6 years. As of September 30, we had $72 million of unrestricted cash on hand and a net debt to trailing 12 months recurring EBITDA ratio of 4.9 times. We are raising our full-year 2021 core FFO guidance to a range of $6.44 to $6.50 per share, a $0.16 increase at the midpoint from our prior range. We expect core FFO for the fourth quarter to be in the range of $1.24 to $1.30 per share. We are also increasing full year same community NOI growth guidance to a range of 10.9% to 11.1%, up 70 basis points from the previous midpoint of guidance of 10.3%. The fourth quarter same community NOI growth guidance is 7.2% to 8%.

For the third quarter, Sun reported core FFO per share of $2.11, 31.9% above the prior year and $0.05, ahead of the top end of our third quarter guidance range.

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We had an outstanding performance in the second quarter, generating $0.78 per share. Two, Puerto Rico has managed well the COVID pandemic and today vaccination levels are in the top quartile of US states and territories with 55% of the population fully vaccinated and 63% with at least one dose. Total core revenues were $133 million, an increase of more than 4%, results were enhanced by a 12% reduction in cost of funds. Interest income grew more than 2%. Banking and financial services revenues rose more than 5% due to increased economic activity. As a result, provision for credit losses was a net benefit of $8.3 million. Earnings also benefited by our recent deployment of excess capital to redeem all three of our outstanding series of preferred stock, which eliminated $1.6 million in quarterly preferred dividends. Customer deposits increased $350 million to $9.1 billion, reflecting even greater liquidity on the part of both commercial and consumer customers. Loans declined 1.2% to $6.4 billion mainly due to pay-downs in our residential mortgage portfolio and forgiveness of our first round of PPP loans. New loan origination increased 28% from the first quarter to $674 million. Originations now total more than $1.2 billion as of the first half of the year. Please turn to Page 4. During the second quarter, for our customers, we quickly process forgiveness for about 75% of our first round of our PPP loans, once again, using our proprietary all digital solutions. Online and mobile banking 30 and 90 day utilization continue well above pre-pandemic levels. As of Monday, 81% of our team members are already fully vaccinated. We expect to reach 90% vaccination levels during the third quarter. This year, we are proud to announce that we increased the average scholarship awarded by 19%. Please turn to Page 5 to review our financial highlights. Total core revenues were $133 million. That's an increase of about 4% from both the first and year-ago quarters. Net interest income also benefited by approximately $7,000 due to one extra day compared to the first quarter. Revenues from banking services grew 11% from the first quarter and 34% year-over-year. Revenue from financial services increased 12% from the first quarter and 30% year-over-year. Non-interest expenses totaled $83 million. That is an increase of $5 million from the first quarter and a decline of $2.9 million year-over-year. Second quarter expenses reflect that our previously announced cost savings; a $2.2 million technology write down and a higher variable expenses related to increase cost savings. Our goal by the end of 2022 is to continue to improve our efficiency ratio to the mid to lower 50% range. Return on average assets was 1.58%. This also exceeded -- it also exceeded our baseline target of more than 1%. Return on average and tangible common equity was 17.8%. This was also up significantly from the first year -- for the first and year-ago quarters and also exceeded our baseline target of more than 12%. Tangible book value per share was $18.13. There is an increase of 4% from the first quarter and 13% from the year ago quarter. Please turn to Page 6 to review our operational highlights. Average loan balances total $6.6 billion. That's a decline of $37 million from the first quarter, due primarily to residential mortgage pay downs and PPP forgiveness as I have mentioned before. The change in mix enable us to expand loan yields to 6.69%, eight basis point higher than in the first quarter. During the second quarter, we added $54 million of these Ginnie Mae securities into our investment portfolio. Total new loan origination was $674 million. That is an increase of 28% from the first quarter. Approximately 50% of new commercial orders were for new money to expand business operations; building new store, warehouses, buying inventory, or making acquisitions, Our core deposits totaled $8.96 billion. That's an increase of 5% or $427 million from the first quarter. They were 38 basis points in the second quarter. As a result of the increase in deposits average cash balances totaled $2.5 billion. That is an increase of 14%, offset $350 million from the first quarter. Net interest margin was 4.22%, a decline of only four basis points from the first quarter. They increased amount of cash, reduce NIM by 13 basis points. Our net charges hit a historical low of only 13 basis points. The yearly and total delinquency rates at 1.86% and 3.90% respectively were at their lowest level in five quarters. Non-performing loan rates at 2.06% was also its lowest level in five quarters if you exclude the effects of our pandemic related deferral program. As a result of these provision for credit losses, was a net benefit of $8.3 million. This is based on $2.1 million in net charge-offs and $10.4 million net reserve reviews. Our [Technical Issues] service was 2.95% on a reported basis and 3.06% excluding PPP loans. The CET ratio continues to climb, reaching 13.95%. The stockholders' equity was $1.8 billion, a decline of $28 million from the first quarter. The tangible common equity ratio continues to trend to 9.06%. Please turn to Page 8 for our conclusion.

We had an outstanding performance in the second quarter, generating $0.78 per share.

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We are pleased today to announce two strategic acquisitions for approximately $1 billion in total that further are software-driven technology enabled strategy and deepen our presence in the most attractive markets globally we expect to continue to gain market share and extend our lead. In combination with the roughly $1 billion in share repurchases we've affected since returning to our capital allocation strategy at the end of last year, we continue to balance appropriately reinvestment in the future growth of our business with efficient return of capital. Real estate is the contestants of the type of market that we seek, sizable, global in scope, fragmented and right for further software digital commerce and payments penetration, and COVID-19 has accelerated the underlying changes that make this $6.5 billion target addressable market so attractive. Zego is a leading software and payments technology company with significant scale delivering a comprehensive real estate technology platform to 7300 customers representing more than 11 million residential units in the United States. Through its integrated payments offering, legal processes approximately $30 billion in payments annually in a market with a volume opportunity that exceeds $1 trillion, the company delivers its full value stock through cloud native SaaS platform to enable seamless digital property management and best-in-class resident engagement and omni-channel experiences. We intend to leverage Global Payments scale and digital expertise to further payments penetration into Zego's base, generate incremental property and software partner referrals to more than 3500 sales and sales support professionals expanded footprint outside the United States and generate meaningful cross-selling opportunities into its vertical market including innovative products we already deliver into our merchant business like payroll, data and analytics and replication management. Second, we are excited to have reached an agreement to our Erste joint venture to purchase Worldline's PAYONE business in Austria consisting of roughly 8,000 primarily SMB merchant customers in Erste banks home market. We entered Austria through organic market expansion of our Continental European joint venture roughly 18 months ago. Today, we have 12 letters of intent with financial institutions worldwide, six of which are competitive takeaways. Since late December 2020, we have processed more than 2 million deposits accounting for over $3.5 billion in stimulus payments disbursed by the IRS to American consumers, and this was done days in advance of many of our traditional financial institution and financial technology peers. In combination with the 2020 stimulus payments, we have disbursed more than $5 billion in aid to customers through the first quarter of 2020. For example, we are seeing rapid adoption of our tips solution and we've reached a new agreement with Flynn Restaurant Group for its Pizza Huts and Wendy's franchise locations, which will drive additional PayCard and potential tips opportunities across our combined footprint in more than 1000 restaurants. Specifically, we delivered adjusted net revenue of $1.81 billion representing 5% growth compared to the prior year and marking an 800 basis point improvement relative to the performance we reported in the fourth quarter of 2020. Adjusted operating margin for the first quarter was 40.6%, a 160 basis point improvement from the prior year that was achieved despite the return of certain cost we temporarily reduced at the onset of the pandemic. On a comparable basis, underlying margin trends would have improved approximately 300 basis points. Adjusted earnings per share were $1.82 for the quarter, an increase of 15% compared to the prior year period and was especially impressive in light of the difficult year-on-year comparison due to COVID-19. The pandemic did not begin to impact our business meaningfully until the second half of March of last year and that as a reminder, we delivered 18% adjusted earnings-per-share growth in the first quarter of 2020. Taking a closer look at our performance by segment, Merchant Solutions achieved adjusted net revenue of $1.15 billion for the first quarter and 4.4% improvement from the prior year which marked a nearly 900 basis point improvement from the fourth quarter. We delivered an adjusted operating margin of 463% in this segment, an increase of 90 basis points from the same period in 2020 as we continue to benefit from our improving technology enabled business mix. Global Payments Integrated produced a stellar quarter generating in excess of 20% adjusted net revenue improvement, which is ahead of the levels of growth this business was delivering pre-pandemic. Additionally, our worldwide e-commerce and omni-channel businesses excluding T&E delivered roughly 20% growth as our value proposition that seamlessly spans both the physical and virtual worlds continues to resonate with customers. Moving to Issuer Solutions, we delivered $439 million in adjusted net revenue for the first quarter, which was roughly flat versus the prior year period and exceeded our expectations given traditional fourth quarter to first quarter sequential trends. Notably, our Issuer business achieved record first quarter adjusted operating income and adjusted segment operating margin expanded 370 basis points from the prior year also reaching a new first quarter record of 43.2% as we continue to benefit from our efforts to drive efficiencies in the business. Finally, our Business and Consumer Solutions segment delivered record adjusted net revenue of $244 million, representing growth of nearly 20% from the prior year. Gross dollar volume increased 26% or $2.5 billion as we benefited from the stimulus we disbursed to our customers. Trends within our DDA products were also very strong helped by the stimulus and we realized an acceleration in active account growth of more than 45% compared to the prior year. Adjusted operating margin for this segment improved an impressive 750 basis points to a record 33.2% as the benefits of the stimulus and long-term cost initiatives post-merger took effect. We are also pleased that our integration continues to progress well and we remain on track to achieve our increased goals from the TSYS merger of annual run rate expense synergy of at least $400 million and annual run rate eevenue synergies of at least $150 million within three years. From a cash flow standpoint, we generated adjusted first quarter free cash flow of roughly $583 million after reinvesting $86 million in capital expenditures. We expect adjusted free cash flow of more than $2 billion and capital expenditures to be in the $500 million to $600 million range for the full year. In mid-February, we successfully issued $1.1 billion in senior unsecured notes maturing in 2026 at an attractive interest rate of 1.2%. The transaction was credit neutral with the proceeds used to redeem $750 million of notes outstanding with a rate of 3.8% due in April 2021. We are pleased to have repurchased roughly 4 million of our shares for approximately $783 million during the first quarter, which includes the execution of the $500 million accelerated share repurchase program we announced last quarter. We ended the quarter with roughly $3 billion of liquidity and a leverage position of roughly 2.6 times on a net debt basis, and we are excited to announce that we have reached agreements to make additional investments in our technology enabled strategy and market expansion. As Jeff highlighted, we executed a definitive agreement to acquire Zego and Worldline's PAYONE business in Austria for an aggregate of approximately $1 billion. Based on our current expectations for continued recovery from the COVID-19 pandemic worldwide, we have increased our guidance for adjusted net revenue to now be in a range of $7.55 billion to $7.625 billion reflecting growth of 12% to 13% over 2020. We expect adjusted operating margin expansion of up to 250 basis points compared to 2020 levels. This outlook is consistent with an adjusted operating margin expansion of up to 450 basis points on a normalized basis given the operating leverage in our business and expense synergy actions related to the TSYS merger. Regarding segment margins, we expect the up to 250 basis points of adjusted operating margin improvement for the total company to be driven largely by Merchant Solutions while we expect Issuer and Business and Consumer to deliver normalized margin expansion consistent with the underlying profiles of these businesses. This follows the 500 and 400 basis points of adjusted operating margin expansion delivered by Issuer and Business and Consumer respectively in 2020. Putting it all together, we now have increased our expected adjusted earnings per share for the full year to a range of $7.87 to $8.07 reflecting growth of 23% to 26% over 2020. As a result of our team members terrific efforts, 20 bookings have begun to translate into 2021 outside revenue gains.

Adjusted earnings per share were $1.82 for the quarter, an increase of 15% compared to the prior year period and was especially impressive in light of the difficult year-on-year comparison due to COVID-19. Based on our current expectations for continued recovery from the COVID-19 pandemic worldwide, we have increased our guidance for adjusted net revenue to now be in a range of $7.55 billion to $7.625 billion reflecting growth of 12% to 13% over 2020. Putting it all together, we now have increased our expected adjusted earnings per share for the full year to a range of $7.87 to $8.07 reflecting growth of 23% to 26% over 2020.

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However, the remainder of the system had a very solid third quarter with pipeline earnings up nearly 45% on the strength of Supply Corporation's recent rate settlement and stable utility earnings, in spite of the COVID pandemic. In fact, earlier this week Seneca's gross natural gas production crossed the 1 Bcf per day threshold. With the added scale, we expect to realize immediate cost synergies and you can see that in our guidance on cash operating costs, which we expect will be down about $0.05 per Mcfe in '21. As I described a few months ago, the plan was to finance the deal with roughly 50-50 debt and equity, and I'm happy to say that we achieved that objective. In May, we issued $500 million of bonds, the proceeds from which were used to fund the debt component of the acquisition and to term out our revolver. We also raised just under $175 million through a common equity offering that was done at a better price than we would have received under the equity backstop arrangement available to us under the Shell purchase-and-sale agreement. And lastly, earlier this week, we signed an agreement to divest substantially all of our Appalachian timber properties for approximately $116 million, which will fund the remaining equity needed for the transaction. Reinvesting the proceeds from the sale allows us to avoid issuing another roughly 2 million common shares at the midpoint of our fiscal 2021 guidance. That saves approximately $0.08 per share of dilution. As you can see in last night's release, the midpoint of our production guidance is 320 Bcfe, a 32% increase over our expected production for fiscal 2020. In addition with the NYMEX strip in the $2.65 to $2.75 area, there is cause for optimism on natural gas prices and we've been aggressive with our hedging program. On top of that, as a result of moving to a single rig program, capital spending at Seneca and NFG midstream is expected to decrease by $105 million or about 25%. So, putting it all together, assuming the current strip, next year we expect more than $150 million in free cash flow from our E&P and gathering businesses. Once it's fully in service, which we expect will occur by the end of September, this project will add $25 million in annual revenues. And as a reminder the expansion portion of this project is expected to add $35 million in annual revenue. As I discussed on last quarter's call, new rates went into effect this past February and are expected to add $35 million in annual revenues. On the later of the in-service date of that project or April 2022, a step up in rates will go into effect, providing an incremental $15 million in annual revenues. In total, the expansion projects and rate case settlement are expected to provide in excess of $100 million of incremental annual revenues for our pipeline business by mid-2022. To put that in perspective, our fiscal 2019 pipeline revenues were $288 million. At the time of closing these shallow declining properties were producing around 220 million cubic feet per day net. This additional scale is expected to be immediately accretive to Seneca's cost structure and to put this into context our G&A expense as a result of the Shell acquisition is expected to increase, less than 5% in fiscal '21, while our net production is expected to increase by over 30%. In addition, we've also acquired valuable low cost pipeline capacity, including 200 million a day of firm transport on National Fuel's Empire system and 100 million a day on Dominion. Turning to our third quarter, Seneca had strong operational results, producing 56 Bcfe, an increase of around 2% compared to last year's third quarter despite 7.3 Bcf price related curtailments. In response to sustained, low natural gas prices, we reduced our activity to a single rig in June and have since curtailed an additional 2 Bcf of production in the month of July. We have now curtailed around 13 Bcf of our gas production so far this year. We continue to drive down our well costs and have seen an 18% to 20% improvement this year compared to last. In California, we produced around 584,000 barrels of oil during the third quarter, an increase of 2% over last year's third quarter. Fortunately, with approximately 80% of our oil production hedged for remainder of the year at an average price of about $60 per barrel. Taking into account our price-related natural gas production curtailments, we are decreasing our fiscal '20 production guidance slightly to range between 240 to 245 Bcfe. We are reiterating our capex range of $375 million to $395 million around 20% lower than fiscal '19 at the midpoint. We are currently planning to remain at a one rig pace in Pennsylvania, due to our lower activity level with only a single rig and completion crew operating in Pennsylvania, our $290 million to $330 million range of capital expenditures for the year represents a 20% decrease at the midpoint of our fiscal '20 guidance and a 35% decrease from fiscal '19. Fiscal '21 net production is expected to be in the range of 305 to 335 Bcfe, a 32% increase versus fiscal '20. With only a single rig operating in Pennsylvania, we plan to bring to production 32 wells next year, 16 Marcellus and 16 Utica. As to production cadence, 27 of the 32 wells are to be brought on line during the first seven months of our fiscal year. In California, we have deferred our development program until oil prices improve and therefore we are only currently forecasting to spend around $10 million in capex next year. However, if prices improve we will move to quickly return to our development program and with approximately 49% of our oil production hedged in fiscal '21 at an average price of $58 per barrel, we will continue to generate free cash flow even at today's low prices. In fiscal '21 through physical firm sales contracts, as well as our firm transport capacity, we have secured marketing outlets for around 91% of our expected Appalachian production and two-thirds protected with price certainty where the downside production -- protection of callers with a floor at $2.37. That leaves only 9% available for sale onto the spot market. GAAP earnings per share were $0.47 for the third quarter, adjusting for items impacting comparability, including the ceiling test impairment charge recorded in our E&P segment, adjusted operating results were $0.57 per share, a decrease of $0.14 from the prior year. As it relates to fiscal '20 our updated earnings guidance is $2.75 to $2.85 per share, a decrease of $0.10 at the midpoint. As John mentioned, the largest decrease can be attributed to price related curtailments during the third quarter and approximately 6 Bcf of additional curtailments expected during the fourth quarter. We are initiating preliminary guidance in the range of $3.40 to $3.70 per share, an increase of nearly 27% at the midpoint. For reference, a $0.10 change in natural gas prices is expected to impact earnings by $0.11 per share, a $5 change in oil by $0.04 per share. Production is expected to be up nearly 80 Bcfe at the midpoint, in excess of 30% from fiscal '20, the bulk of which comes from the acquired assets. All of this incremental production will flow through our gathering systems and is expected to lead to $185 million to $200 million in revenue for our Gathering segment. This is an increase of approximately $50 million from fiscal '20 or approximately 35% of the midpoint. A portion of this revenue growth will be offset with slightly higher expenses related to the acquisition, where we now expect O&M expense in the segment to be approximately $0.08 to $0.09 per Mcfe of gross throughput. We generally assume a 25 year depreciable life on these assets, which will drive an $8 million to $9 million increase in depreciation in the Gathering segment. For the first nine months of fiscal '20 weather was 8% to 11% warmer than normal across our service territory. This reduced margin by about $5 million, the majority of which was in our Pennsylvania service territory, where we do not have a weather normalization costs. In addition to normal weather, we are forecasting a continued increase in margin related to our system modernization tracker in New York, which we expect will add approximately $3 million to margin in fiscal '21. Going to the other direction is a modest 1% to 2% increase in O&M expense in line with inflation. Touching briefly on the Pipeline and Storage segment, we expect revenues to increase approximately 10%, driven by the full year impact of the supply rate case, of which we only saw eight months of impact in fiscal '20 on the Empire North project, both of which Dave touched on earlier. Collectively, these items will add approximately $35 million in revenue next year. On the expense side, we expect O&M to increase by approximately 3% to 4%, partially driven by general inflationary assumptions and the remainder due to expenses from the operation of two new compressor stations associated with the Empire North expansion project. From a financing perspective, given our relatively flat capital spending forecast and 25% plus forecasted earnings growth, we anticipate generating in-excess of $100 million in consolidated free cash flow in fiscal '21, exclusive of our dividends.

GAAP earnings per share were $0.47 for the third quarter, adjusting for items impacting comparability, including the ceiling test impairment charge recorded in our E&P segment, adjusted operating results were $0.57 per share, a decrease of $0.14 from the prior year. We are initiating preliminary guidance in the range of $3.40 to $3.70 per share, an increase of nearly 27% at the midpoint.

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And regarding COVID-19, we currently have about 13% or 265 employees testing positive with rates dropping significantly over the past six weeks. We're scheduling vaccine clinics at our facilities when possible and offering a $250 incentive to those who are fully vaccinated. Now, despite my pleased employees, at this point, I only have about 40% of our US employee base as been vaccinated. And has been back up and running for a few weeks now, and while it was a major inconvenience operationally and commercially, The impact on our consolidated results for the first and second quarter is expected at less than 5% and already baked into our full-year guidance. I want to congratulate the team at L'Anse for earning the President's Award and to the 10 other impressive teams in locations listed in the finalists' category. Moving to Slide 11 that recognizes our L'Anse's facility going for three years without any serious injuries and our plant in Nyborg, Denmark, recently completing 365 days, an entire year, without any serious injuries which includes keeping their employees and contractors safe, while managing a number of major projects. We opened up participation in the event to customers, suppliers, and the community, and had approximately 1,200 people join this virtual event to encourage positive change. As shown on Slide 18, consolidated sales were $408 million, which was a first-quarter record for Koppers and also an increase from sales of $402 million in the prior year. Sales for RUPS were $192 million, up slightly from $190 million. PC sales rose to $124 million, up from $111 million, and CM&C sales came in at $92 million, down from $101 million. On Slide 19, adjusted EBITDA for the quarter was $55 million or 13.5% and this is a first-quarter record and also up from $38 million or 9.4% in the prior year. Adjusted EBITDA for RUPS increased to $16 million, up from $13 million. PC EBITDA rose to $28 million, up from $17 million and CM&C EBITDA was $10 million compared with $7 million. On Slide 20, sales for RUPS were $192 million, slightly higher than the $190 million in the prior year. In Q1 crosstie procurement decreased 27% from the prior year due to a continuing tight supply for untreated ties as well as unfavorable weather. Crosstie treatment in the first quarter was higher than prior year by 6%, driven by increased volumes from Class I railroad customers. Adjusted EBITDA for RUPS was $16 million in the quarter compared with $13 million in the prior year, and this was driven by a favorable product mix and stabilization in our maintenance of way businesses, offset in part by lower commercial crosstie volumes. On Slide 22, sales for PC were $124 million compared to sales of $111 million in the prior year. Adjusted EBITDA for PC was $28 million compared with $17 million in the prior year. This shows CM&C sales at $92 million compared to sales of $101 million in the prior year. On Slide 25, adjusted EBITDA for CM&C was $10 million in the quarter compared to $7 million in the prior year. In terms of carbon pricing and cost trends compared with the fourth quarter, the average pricing of major products were higher by 15%, while average coal tar costs went up by 11%. Compared with the prior-year quarter, the average pricing of major products was lower by 2%, while average coal tar cost decreased by 7%. As seen on Slide 27, at the end of March, we had $766 million of net debt, with $326 million in available liquidity. We continue to project $30 million of debt reduction for 2021 and we expect to be at 3.1 times to 3.2 times with our net leverage ratio at year-end. As March 31 -- at March 31, our net leverage ratio was 3.4 times, which was a significant decline from 4.5 times just a year ago. Longer-term, our goal continues to be between 2 times and 3 times. According to the National Association of Realtors, existing-home sales rose 12.3%, year-over-year, in March 2021, but fell 3.7% from prior month because of nearly historic lows in housing inventory. The Leading Indicator of Remodeling Activity says home repair and improvement expenditures are expected to increase 4.8% and reach $370 billion by the first quarter of next year as homeowners take on larger discretionary renovations deferred during the pandemic. The Index in April came in at 121.7, up from 109 in March, which marked a significant rise from the 90.4 index in February. The Railway Tie Association forecast 2.7% growth in 2021% and 3.6% in 2022 for crossties, primarily driven by the commercial market while Class I volumes are seeing holding at similar year-over-year levels. [Technical Issues] raw material availability is slightly constricted according to the RTA, but their view for the next six months to 12 months is ideal, which is probably a little more optimistic than our view at this moment. Total US carload traffic decreased 2.6% year-over-year, while intermodal units increased 3.2%. Combined, year-over-year, the US traffic was up by 5.6%. In the backlog, the railroad structures project this year is 50% higher than a year ago, pointing to increases in profitability from a full pipeline of incoming work. According to IHS Markit automotive group, light vehicle production is projected to grow about 14% in 2021, globally, with US production expected to increase 24%. Pulling everything together, on Slide 37, our sales forecast for 2021 remains in the range of $1.7 billion to $1.8 billion, compared with $1.637 billion in the prior year. On Slide 38, we're increasing our EBITDA projections for 2021 to a range of $220 million to $230 million compared with $211 million in the prior year. The EBITDA estimate translates to an increase in our adjusted earnings per share guidance, which is seen on Slide 39, and is now $4.35 to $4.60 per share, compared to the prior guidance of $4 to $4.25 per share, and prior-year adjusted earnings per share of $4.12. Finally, on Slide 40, our capital expenditures were $24.2 million in the first quarter or $19.5 million net of $4.7 million in cash proceeds from asset sales. We remain on track to spend a net amount of $80 million to $90 million on capital expenditures this year with half of that dedicated to growth and productivity projects that are expected to generate $8 million to $12 million of annualized benefits. Beyond 2021, I remain excited about the many opportunities that we have to further build upon our integrated business model, focused on wood and infrastructure, and look forward to sharing the details of how we believe we can take Koppers to over $300 million of EBITDA generation by the end of 2025 at our upcoming September 13 Investor Day.

Pulling everything together, on Slide 37, our sales forecast for 2021 remains in the range of $1.7 billion to $1.8 billion, compared with $1.637 billion in the prior year. On Slide 38, we're increasing our EBITDA projections for 2021 to a range of $220 million to $230 million compared with $211 million in the prior year.

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I do want to introduce Andy Tometich, who will become CEO on December 1 Andy joined Quaker Houghton on October 13 and we are in the midst of a detailed transition process over the seven week period until we become CEO. Andy has over 30 years of experience in the specialty chemicals industry with a strong track record of accomplishments and a passion for the customer intimate business model. They increased nearly 10% from the second quarter to the third quarter, which was considerably higher than our expectations. We saw good organic volume growth between 7% and 9% for our three largest segments, which was the Americas, EMEA and Asia Pacific. Higher prices of around 10% were also a major factor in our sales growth. In addition, we saw a benefit from acquisitions of 4% and from foreign exchange of 2%. While we did see growth in some of our end markets, sequential growth was muted by both seasonality and certain segments as well as the semiconductor shortage which we estimate cost us approximately 2% points of growth in the quarter. I also want to point out that our ability to gain new piece of the business and take market share continued to contribute to our strong performance as we estimate total organic sales growth due to net share gains was approximately 3% in the third quarter of 2021 versus the third quarter of 2020. So we continue to feel good about our ability to deliver on our historical performance of consistently growing 2% to 4% points above the market due to share gains and looking forward, we continue to feel good about delivering these levels given the opportunities we have recently won or are actively working on. So in summary, the big picture on organic volume growth for us was approximately 3% was due to market share gains. About 4% due to growth in our underlying markets, which we estimate would have been 2% higher, if it wasn't for the semiconductor shortage. Overall, our cost of raw materials have increased nearly 10% sequentially in the third quarter. Our trailing 12 months adjusted EBITDA of $279 million is an all-time high as 25% higher than our $222 million from last year. However, our leverage ratio of net debt to adjusted EBITDA continues to be at 2.7 which is the low point since the combination two years ago, and down from 3.4 one year ago. In total, they're adding 15 million in revenue and $2 million in EBITDA. And also there are reconciliations between US GAAP measures and non-GAAP measures provided in our call charts on pages 11 to 22 for reference. Our record net sales of $449.1 million increased 22% from the prior year, driven by 6% organic volumes, 10% from our pricing initiatives, 4% percent from acquisitions and 2% from foreign exchange. When looking sequentially, we were up 3% from the second quarter, largely due to increases from our pricing initiatives on flat volumes. Our third quarter margin ended at 32.3%, given the upward trend of generally all input costs in the world, we knew this quarter would declined compared to the 35.5% level we had in second quarter and also signaled that this quarter would be the lowest of the year. SG&A was up $7 million compared to the prior year, as we add additional direct selling costs due to our increase in sales and related margin higher labor and other costs that were directly impacted by COVID last year and additional costs associated with our recent acquisitions. Sequentially, we benefited from $5 million of lower SG&A costs, which were primarily due to lower incentive compensation and some lower professional and other similar fees. The net of this performance resulted in adjusted EBITDA of $66.2 million for the quarter, which was up 3% compared to the prior year of $63.9 million. As you can see in chart nine, this increased our trailing 12 month adjusted EBITDA to a record $279 million. The net of these impacts resulted in a 16% increase in EMEA earnings compared to prior year generally flat performances in Americas and GSP and a decline in Asia-Pacific earnings which was due to a solid performance last year as China was less impacted by COVID 19 in the prior year, as well as a decline in gross margin in the current quarter due to the continued increases in raw material costs. From a tax perspective, we had low effective tax rates in the current and prior year quarters of 2.6% and 8.1% due to various one-time non-cash related items. Excluding these items in each period, our tax rate would have been relatively consistent at 25% for the current quarter compared to 24% in the prior year. To note, we expect our fourth quarter effective tax rate to be a little higher in the range of 26% to 28%. But our full year effective tax rate will be more consistent with past estimates in the range of 24% to 26%. Our non-GAAP earnings per share of $1.63 grew 5% compared to the prior year as our solid adjusted EBITDA coupled with over a million of interest savings due to lower borrowing rates and average borrowings were partially offset by a slightly higher tax expense. As we look to the company's liquidity summarized on chart 10, our net debt of $759 million was flat compared to the second quarter. This was primarily driven by $12 million of operating cash flow, offset by $7 million of dividends paid and $6 million of additional investments in normal capital expenditures. The company's liquidity and leverage still remain healthy with a reported leverage ratio at 2.7 times as of the third quarter compared to 3.2 times entering the year. I want to emphasize we are committed to prudent allocation of our capital and remain committed to reducing leverage to our target of 2.5 times, which we still are targeting to be near by year-end. This is evidenced by our most recent tuck-in acquisitions of [Indecipherable] and industries, which were acquired for 13 million or a rough multiple of seven times EBITDA and bring with them a wealth of opportunity in technology and product reach. And I appreciate those remarks, it's really been an honor and a privilege to work for Quaker Houghton for 23 years and to work with such a great people throughout this company that really deliver solutions for our customers every day and really make this a very special place to work.

In total, they're adding 15 million in revenue and $2 million in EBITDA. Our record net sales of $449.1 million increased 22% from the prior year, driven by 6% organic volumes, 10% from our pricing initiatives, 4% percent from acquisitions and 2% from foreign exchange. Our non-GAAP earnings per share of $1.63 grew 5% compared to the prior year as our solid adjusted EBITDA coupled with over a million of interest savings due to lower borrowing rates and average borrowings were partially offset by a slightly higher tax expense.

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We are pleased to report third quarter adjusted earnings of $0.58 per share. Demand for glass containers is strong yet our shipments were down about 1% in the quarter due to choppy demand patterns stemming from low inventory levels and ongoing global supply chain issues. We now anticipate 2021 adjusted earnings will range between $1.77 and $1.82 per share and we expect at least $260 million of free cash flow. We expect 4th quarter adjusted earnings will approximate $0.30 to $0.35 per share and with elevated cost inflation pending price recovery starting in early 2022. I'll touch base on each of our 3 platforms. We have targeted $50 million of initiative benefits as well as continued performance improvement in North America. As you can see, we have already achieved our full-year initiative target and now expect benefits with total around $60 million in 2021. Next, we seek to Revolutionize Glass, our new Magma Generation 1 line has been commercialized in Germany and our Generation 2 line in Streator, Illinois is being piloted in the second half of 2021. Regarding our divestiture program, we have entered into agreements for over $1 billion of asset sales to date including the recently announced intent to sell our Le Parfait brand and business in Europe. As laid out during our Investor Day, we are investing up to $680 million over the next 3 years that include up to 11 Magma lines to enable profitable growth. As John will expand upon, year-to-date free cash flow is quite favorable compared to past trends and we continue to advance other important efforts including the Paddock Chapter 11 process. Reflecting these tail winds, global market growth is anticipated to rise 1.6% a year and higher in the principal regions where we operate. I'll start with a review of our 3rd quarter performance on page 6. O-I reported adjusted earnings of $0.58 per share. As noted during our Investor Day, we expected results would be at the high end or slightly exceed our guidance of $0.47 to $0.52. Segment operating profit was $243 million, which significantly exceeded prior year. While demand remains strong, sales volumes dipped 1% due to choppy demand and ongoing supply chain challenges in several markets we serve. Likewise, favorable cost performance was driven by an 8% improvement in production levels as the prior year was impacted by forced curtailment due to lockdown measures. Moving to page 7, we have provided more information by segment. In the Americas segment profit was $133 million, up from $113 million last year, despite significant cost inflation pressures, favorable net price reflected timely pass-through on cost and the benefits of our revenue optimization initiatives. Sales volume was down 3%. On the other hand production rebounded 9% and earnings benefited from good ongoing operating performance as well as our margin expansion initiatives, which offset elevated freight costs. In Europe, segment profit was $110 million compared to $88 million last year. Sales volume was up nearly 2% with strong growth in the wine category, while higher selling prices, partially mitigated elevated cost inflation. Significantly lower operating cost reflected an 8% improvement in production levels very good operating performance and benefits from our margin expansion initiatives. I'm now on page 8. as illustrated on the chart, our 3rd quarter free cash flow was $213 million. Year-to-date cash flows approximated $181 million, so we are well positioned to achieve our full year guidance of at least $260 million of free cash flow. Second, we preserved our strong liquidity and finished the 3rd quarter with approximately $2.1 billion of committed liquidity well above the established floor. At the end of the 3rd quarter, our net debt was $4.3 billion, the lowest level since 2015 and our BCA leverage ratio was around 3.6 times. So far this year, we have entered into agreements to sell $128 million of assets as part of our portfolio optimization effort. This includes today's announcement of a binding commitment from a subsidiary of Berlin Packaging to acquire our Le Parfait brand and business for EUR72 million or about $84 million. The EBITDA for this business was EUR7.5 million in 2020 with a similar performance on a 12 month trailing basis. This represents a compelling valuation in excess of a 9 multiple. Finally, we intend to de-risk legacy liabilities as we advance the Paddock Chapter 11 process. As previously announced, we have an agreement in principle for a consensual plan of reorganization where O-I will support Paddocks funding of a 524 (g) trust. Total consideration is $610 million to be funded at the effective date of the plan. I'm now on page 9. We have increased our full year earnings guidance to between $1.77 and $1.82 per share reflecting favorable 3rd quarter results. We now expect free cash flow will be at least $260 million. We anticipate 4th quarter adjusted earnings will approximate $0.30 to $0.35 per share.

We are pleased to report third quarter adjusted earnings of $0.58 per share. We now anticipate 2021 adjusted earnings will range between $1.77 and $1.82 per share and we expect at least $260 million of free cash flow. We expect 4th quarter adjusted earnings will approximate $0.30 to $0.35 per share and with elevated cost inflation pending price recovery starting in early 2022. Reflecting these tail winds, global market growth is anticipated to rise 1.6% a year and higher in the principal regions where we operate. O-I reported adjusted earnings of $0.58 per share. We have increased our full year earnings guidance to between $1.77 and $1.82 per share reflecting favorable 3rd quarter results. We anticipate 4th quarter adjusted earnings will approximate $0.30 to $0.35 per share.

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In the second quarter, we closed over $460 million of new loans, an increase of 57% from the prior quarter. This solid production in part, it was offset in part by a decline in line of credit utilization of approximately $161 million over the average for fiscal 2020. Consequently, we saw a net decrease in our commercial loan portfolio of about $49 million for the quarter. At quarter end, our pipeline remains strong at approximately $1.7 billion. Nevertheless, I'd like to point out that the largest percentage of our growth is a non-interest-bearing demand deposits, which grew at an annualized rate of 17% and presently comprised 24% of our deposits. Our total cost of those deposits is about 26 basis points and is among the best in our peer group. SB One Insurance had a strong second quarter with new business that resulted in a 60% increase from the same quarter last year. Beacon Trust also had a very good quarter with assets under management increasing approximately 24% annualized and revenue being up 32% over the same quarter last year. Our net income for the quarter was $44.8 million or $0.58 per diluted share compared with $48.6 million or $0.63 per diluted share for the trailing quarter. Earnings for the current quarter benefited from $8.7 million of net negative provisions for credit losses on loans and off balance sheet credit exposures, while the trailing quarter reflected negative provisions of $15.9 million. Pre-tax pre-provision earnings were $51.4 million or an annualized 1.56% of average assets. This is an improvement from $48.9 million or 1.52% of average assets in the trailing quarter as revenue increased quarterly -- to a quarterly record $112 million and operating expenses declined by $2 million. Our net interest margin compressed 6 basis points versus the trailing quarter. We were able to reduce the cost of interest-bearing liabilities by 5 basis points versus the trailing quarter through reductions in deposit costs. Including non-interest bearing deposits, our total cost deposits fell to 26 basis points this quarter from 30 basis points in the trailing quarter. Average non-interest bearing deposits increased to $100 million or an annualized 17% to $2.48 billion, or 24% of total average deposits for the quarter. Average borrowing levels decreased $146 million as we shifted funding to lower costing brokered demand deposits. The pull-through adjusted loan pipeline at June 30th increased $250 million in the trailing quarter to a record $1.1 billion. However, the pipeline rate decreased 35 basis points since last quarter to 3.28% reflecting the current competitive rate environment. Our provision for credit losses on loans was a benefit of $10.7 million for the current quarter compared with a benefit of $15 million in the trailing quarter. The current quarter benefit was attributable to $6 million of net recoveries on previously charged off loans, improved asset quality, a favorable economic forecast and a decrease in loans outstanding. We had annualized net recoveries as a percentage of average loans of 25 basis points this quarter compared with net charge-offs of 4 basis points for the trailing quarter. Non-performing assets decreased to 62 basis points of total assets from 65 basis points at March 31st. Excluding PPP loans, the allowance represented 88 basis points of loans compared with 92 basis points in the trailing quarter. Loans granted short term COVID-19 related payment deferrals have declined from their peak of $1.3 billion to just over $7 million. This compares with $132 million at December 31st. Non-interest income was stable versus the trailing quarter at $21 million, as increased loan prepayment fees and growth in wealth management insurance agency income were offset by decreased bank-owned life insurance income and reductions in net profits on loan level swaps and gains on loan sales. Excluding provisions for credit losses and commitments to extend credit, operating expenses were an annualized 1.84% of average assets for the current quarter compared to 1.95% in the trailing quarter and 1.86% for the second quarter of 2020. The efficiency ratio improved to 54.12% in the second quarter of 2021 from 56.19% in the trailing quarter and 57.35% in the second quarter of 2020. Our effective tax rate was 25.4% versus 25.1% for the trailing quarter. And we are currently projecting an effective tax rate of approximately 25% for the remainder of 2021.

Our net income for the quarter was $44.8 million or $0.58 per diluted share compared with $48.6 million or $0.63 per diluted share for the trailing quarter.

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Total sales grew 22%, including a 2% favorable impact from currency. In constant currency, we grew total sales 20%, with increases in both segments. In addition to our top line growth, adjusted operating income increased 35%, including a 3% favorable impact from currency, and adjusted operating margin expanded by 160 basis points. Our first quarter adjusted earnings per share was $0.72 compared to $0.54 in the prior year, driven by our strong operating performance, partially offset by a higher adjusted tax rate. In our Consumer segment, we grew sales by 35%; on constant currency, 32%, with double-digit increases across each of our three regions. Our Americas constant currency sales growth was 30% in the first quarter, with incremental sales from our Cholula acquisition contributing 5%. Excluding Cholula, our total McCormick US branded portfolio, as indicated in our IRI consumption data and combined with unmeasured channels, grew 15%, which reflects the strength of our categories as consumers continued to cook more at home. Our constant currency sales rose 26%, with broad-based growth across the region. In the Asia-Pacific region, our constant currency sales grew 55%. Constant currency sales in our Flavor Solutions segment grew 3%, driven by our Americas and APZ regions. In the Americas, we drove constant currency sales growth of 2%, driven by our FONA and Cholula acquisitions as well as growth with our consumer packaged food customers or our at-home base. Our sales growth in the Asia Pacific region was outstanding, up 18% in constant currencies. In China, consumer consumption remains strong, and we continue to see recovery in foodservice, which, in China, is in our Consumer segment, with approximately 90% of restaurants open during the Chinese New Year period. For example, approximately 50% of the consumers surveyed indicated they are cooking more now because they want to try new recipe, ingredient, cooking method or tool or simply just cook from scratch, and approximately 40% also indicated they're trying to recreate restaurant meals at home. In the first quarter, we delivered over 90% global e-commerce growth, with particular strength in omnichannel. We continue to increase our investments across our entire portfolio as evident in our 17% increase in the first quarter and plan for another significant increase in the second quarter. We're launching Just 5 dry recipe mixes in the US, dips and dressing mixes in flavors like French onions and Homestyle Ranch, the clean and short ingredient statements, five simple ingredients delivering a classic flavor experience. We're also advancing on our sustainable packaging commitment with sachet packaging that is 100% recyclable. We've been at the forefront forecasting emerging flavors for 21 years. In our Flavor Solutions segment, the execution of our strategy to migrate our portfolio to more technically insulated and value-added categories will continue in 2021. Following being named by Corporate Knights in their 2021 Global 100 Most Sustainable Corporations Index as number one in the packaged food and processed foods and ingredients sector, McCormick was also recently named to Barron's 2021 100 Most Sustainable Companies list for the fourth consecutive year. As we continue our sustainability journey, I'm excited to announce that later this week we will begin using 100% renewable electricity in all our Maryland and New Jersey-based facilities. This includes our manufacturing operations, distribution centers, offices and technical innovation center and will result in an 11% reduction in our global greenhouse gas emissions. As seen on slide 18, we grew sales 20% in constant currency during the first quarter. Our organic sales growth was 16%, driven by our Consumer segment, and incremental sales from our Cholula and FONA acquisitions contributed 4% across both segments. The Consumer segment sales grew 32% in constant currency, with double-digit growth in all three regions. On slide 19, Consumer segment sales in the Americas increased 30% in constant currency versus the first quarter of 2020, with 5% of the increase from the acquisition of Cholula. In EMEA, constant currency Consumer sales grew 26% from a year ago, with double-digit growth in all countries and categories across the region. Consumer sales in the Asia Pacific region increased 55% in constant currency, driven primarily by the recovery from the disruption in China consumption last year, as Lawrence mentioned. We grew first quarter constant currency sales 3%. In the Americas, Flavor Solutions constant currency sales grew 2%, driven by the FONA and Cholula acquisitions, a 7% increase, as well as pricing to offset cost increases. In the Asia Pacific region, Flavor Solutions sales rose 18% in constant currency, driven by higher sales to QSRs in China and Australia, partially due to our customers' limited time offers and promotional activities as well as the China recovery impact from last year's COVID-19 related lockdown. As seen on slide 26, adjusted operating income, which excludes transaction and integration costs related to the Cholula and FONA acquisitions as well as special charges, increased 35% or, in constant currency, 32%, in the first quarter versus the year ago period. The Consumer segment adjusted operating income grew 59% to $190 million. The 54% constant currency growth from higher sales, favorable mix and CCI-led cost savings more than offset COVID-19 related costs and a 17% increase in brand marketing. In the Flavor Solutions segment, adjusted operating income declined 4% to $73 million with minimal impact from currency. As seen on slide 27, adjusted gross profit margin expanded 60 basis points in the first quarter versus the year ago period due to favorable mix, both within the Consumer segment and due to the sales shift between segments. Our selling, general and administrative expense as a percentage of net sales was down year-on-year by 100 basis points from the first quarter of last year. With the gross margin expansion and SG&A leverage, adjusted operating margin expanded 160 basis points from the first quarter of 2020. Our first quarter adjusted effective tax rate was 22.7% compared to 18.4% in the year ago period. Income from unconsolidated operations increased 28% in the first quarter of 2021 due to strong underlying performance of our joint venture in Mexico. At the bottom line, as shown on slide 30, first quarter 2021 adjusted earnings per share were $0.72 as compared to $0.54 for the year-ago period. Our cash flow from operations was an outflow of $32 million for the first quarter of 2021 compared to an inflow of $45 million in the first quarter of 2020. In February, we raised $1 billion through the issuance of five year 0.9% notes and 10 year 1.85% notes. We also returned $91 million of cash to our shareholders through dividends and used $49 million for capital expenditures this quarter. Now I would like to discuss our 2021 financial outlook on slides 32 and 33. We also expect there will be an estimated 2 percentage point favorable impact of currency rates on sales, adjusted operating income and adjusted earnings per share. At the top line, due to our first quarter results and robust operating momentum, we are increasing our expected constant currency sales growth to 6% to 8% compared to 5% to 7% previously, which continues to include the incremental impact of the Cholula and FONA acquisitions at the projected range of 3.5% to 4%. Our estimate for COVID-19 costs remains unchanged at $60 million in 2021 as compared to $50 million in 2020 and weighted to the first half of the year. Our adjusted operating income growth rate reflects expected strong underlying performance from our base business and acquisitions projected to be 11% to 13% constant currency growth compared to 10% to 12% previously. This is partially offset by a 1% impact from increased COVID-19 costs compared to 2020 and a 3% impact of the estimated incremental ERP investment. This results in total projected adjusted operating income growth rate of 7% to 9% in constant currency, increase from 6% to 8% previously. This projection reflects the inflationary pressure I just mentioned as well as our CCI-led cost savings target of approximately $110 million. We also reaffirm our 2021 adjusted effective income tax rate projected to be approximately 23%. This outlook versus our 2020 adjusted effective tax rate is expected to be a headwind to our 2021 adjusted earnings-per-share growth of approximately 4%. We are increasing our 2021 adjusted earnings per share expectations to growth of 5% to 7%, which includes a favorable impact from currency. Our guidance range for the adjusted earnings per share in 2021 is now $2.97 to $3.02 compared to $2.91 to $2.96 previously. This compares to $2.83 of adjusted earnings per share in 2020. This growth reflects strong base business and acquisition performance growth of 11% to 13% in constant currency, partially offset by the impacts I just mentioned related to COVID-19 costs, our incremental ERP investments and the tax headwind.

Total sales grew 22%, including a 2% favorable impact from currency. Our first quarter adjusted earnings per share was $0.72 compared to $0.54 in the prior year, driven by our strong operating performance, partially offset by a higher adjusted tax rate. In our Flavor Solutions segment, the execution of our strategy to migrate our portfolio to more technically insulated and value-added categories will continue in 2021. At the bottom line, as shown on slide 30, first quarter 2021 adjusted earnings per share were $0.72 as compared to $0.54 for the year-ago period. This results in total projected adjusted operating income growth rate of 7% to 9% in constant currency, increase from 6% to 8% previously. We are increasing our 2021 adjusted earnings per share expectations to growth of 5% to 7%, which includes a favorable impact from currency. Our guidance range for the adjusted earnings per share in 2021 is now $2.97 to $3.02 compared to $2.91 to $2.96 previously.

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Let's not turn to Page 6 and jump into our Q4 results. According to Golf Datatech, U.S. retail sales of golf equipment specifically hard goods were up 59% during Q4, the highest Q4 ever on record. rounds were up 41% in Q4. And despite the shutdowns earlier in the year delivered 14% growth for the full year. 1 hardwoods brand in that market. 1 for the full year in total hardwoods. 1 hardwoods brand in this market as well. 2 ball company in the U.S., third-party research showed our brand to be the No. 1 club brand in overall brand rating as well as the leader in innovation and technology. 1 putter and the No. 1 driver on global tours. 1 golf apparel brand in that market based on market share. These investments enabled our apparel business e-com to deliver 64% year-over-year growth in Q4. And although the pandemic delayed our efforts, we still believe we'll be able to deliver 15 million synergies in the segment over the coming years. Despite 2021 starting out with more COVID restrictions than we expected, strong walk-in traffic is allowing this business to continue to perform at a level consistent with achieving our total venue full-year same venue sales target of 80% to 85% of 2019 levels. Our container shipping costs alone are estimated to be up approximately 13 million for the full year as these processes have surged, but we do not see this as a long-term issue, just a short-term anomaly associated with the pandemic. Our available liquidity, which includes cash on hand plus availability under our credit facilities increased to $632 million on December 31, 2020, compared to $303 million on December 31, 2019. Implementation costs related to the new Jack Wolfskin IP system, severance costs related to our COVID-19 cost reduction initiatives, and costs related to the proposed Topgolf merger; Fourth, the $174 million non-cash impairment charge in the second quarter of 2020 is non-recurring and did not affect 2019 results. Today, we were reporting record consolidated fourth quarter 2020 net sales of $375 million, compared to $312 million for the same period in 2019, an increase of $63 million or 20.1%. This increase was driven by a 40% increase in the golf equipment segment resulting from the high demand for golf products late into the year as well as the strength of the company's product offerings across all skill levels. The company soft goods segment continued its faster than expected recovery with fourth-quarter 2020 sales increasing 1% versus the same period 2019. Changes in foreign currency rates had a $9 million favorable impact on fourth-quarter 2020 net sales. The gross margin was 37.1% in the fourth quarter of 2020, compared to 41.7% in the fourth quarter of 2021, a decrease of 460-basis-points. On a non-GAAP basis, the gross margin was 37.2% in the fourth quarter, compared to 42.4% in the fourth quarter of 2019, a decrease of 520-basis-points. Operating expenses were $171 million in the fourth quarter of 2020, which is an $18 million increase, compared to $153 million in the fourth quarter of 2019. Non-GAAP operating expenses for the fourth quarter were $152 million, a $14 million increase compared to the fourth quarter of 2019. Other expenses were $15 million in the fourth quarter of 2020, compared to other expense of $9 million in the same period the prior year. On a non-GAAP basis, other expenses with $13 million in the fourth quarter of 2020, compared to $9 million for the comparable period in 2019. The $4 million increase in other expenses primarily related to a net decrease in foreign currency-related gains as well as interest expense related to our convertible notes. Pre-tax loss was $48 million in the fourth quarter of 2020, compared to a pre-tax loss of $32 million for the same period in 2019. Non-GAAP pre-tax loss was $35 million in the fourth quarter of 2020, compared to a non-GAAP pre-tax loss of $25 million in the same period of 2019. Loss per share was $0.43, or 94.2 million shares in the fourth quarter of 2020, compared to a loss per share of $0.31 on 94.2 million shares in the fourth quarter of 2019. Non-GAAP loss per share was $0.33 in the fourth quarter of 2020, compared to a loss per share of $0.26 for the fourth quarter of 2019. Adjusted EBITDA was negative 12 million in the fourth quarter of 2020, compared to negative 6 million in the fourth quarter of 2019. Net sales for full-year 2020 were $1.589 billion, compared to $1.701 billion in 2019, a decrease of $112 million or 6.6%. The decrease in net sales reflects a decrease in our soft good segment, which decreased 15.9%t and our golf equipment segment increased slightly year over year. Changes in foreign currency rates positively impacted 2020 net sales by $11 million versus 2019. The gross margin for full-year 2020 was 41.4%, compared to 45.1% in 2019, a decrease of 370-basis-points. Gross margins in 2020 were negatively impacted by the North American warehouse consolidation, and in 2019 were negatively impacted by a non-recurring purchase price inventory step-up associated Jack Wolfskin acquisition. on a non-GAAP basis, which is good and they were not referring item, gross margin was 41.8% in 2020, compared to 45.8% in 2019, a decrease of 400-basis-points. Operating expense with $763 million in 2020, which is a $129 million increase compared to $634 million in 2019. This increase is due to the $174 million of the non-cash impairment charge, related to the Jack Wolfskin goodwill and trading, excluding the impairment charge and other items previously mentioned, non-GAAP operating expenses for 2020 were $570 million, a $47 million decrease, compared to $670 million in 2019. Another expense was approximately $22 million in 2020, compared to other expense of $37 million in 2019. On a non-GAAP basis, other expenses $15 million for 2020, compared to $33 million for 2019. Those $18 million improvements are primarily related to a $19 million increase in foreign currency-related gains period over a period, including the $11 million gain related to the settlement of the cross-currency swap arrangement. Pre-tax loss of $127 million in 2020, compared to pre-tax income of $96 million in 2019. Excluding the impairment charge in the other non-GAAP items previously mentioned, non-GAAP pre-tax income was $79 million in 2020, compared to non-GAAP pre-tax income of $130 million in 2019. Loss per share was $1.35, or 94.2 million shares in 2020, compared to fully diluted earnings per share of $0.82, or 96.3 million shares in 2019. Excluding the impairment charge in the other non-GAAP item previously mentioned, non-GAAP full-year earnings per share were $0.67 in 2020, compared to fairly good earnings per share of $1.10 for 2019. Adjusted EBITDA was $165 million in 2020, compared to $210 million in 2019. As of December 31, 2020, available liquidity, which represents additional availability under our credit facilities plus cash on hand, was $632 million, compared to $303 million at the end of the fourth quarter of 2019. We had total net debt of $406 million, including $442 million of principal outstanding under our term loan B facility that was used to purchase Jack Wolfskin. Our consolidated net accounts receivable was $138 million, a decrease of 1.4% compared to $140 million at the end of the fourth quarter of 2019. Days sales outstanding decreased to 45 days on December 31, 2020, compared to 53 days on December 31, 2019. Also displayed on Slide 12, our inventory balance decreased by 22.8% to $353 million at the end of the fourth quarter of 2020. Capital expenditures for 2020 were $39 million, which is right in line with the range provided during our Q3 update. This amount is down substantially from our $55 million of planned capital expenditures at the beginning of the year due to our cost reduction actions. In 2021, we expect our capital expenditures to be approximately $50 million for the current Callaway business. Depreciation and amortization expense was $214 million in 2020. D&A expense excluding the $174 million impairment charge was $40 million in 2020, compared to $35 million in 2019. In 2021, we expect non-GAAP depreciation and amortization expense to be approximately $45 million for the current Callaway business. The freight container shortage alone is estimated to have a negative $13 million impact on freight costs in 2021, with the substantial majority of the impact occurring during the first half. On a premerger basis, full-year 2021 non-GAAP operating expenses are estimated to be approximately $70 million to $80 million higher compared to full-year 2019 non-GAAP operating expenses. In addition to the negative impact of changes in foreign currency rates estimated to be approximately $20 million and inflationary pressures, the increased operating expenses generally reflect continued investment in the company's current business. In 2020, the company realized gains from certain foreign currency hedges in the aggregate amount of approximately $25 million.

Today, we were reporting record consolidated fourth quarter 2020 net sales of $375 million, compared to $312 million for the same period in 2019, an increase of $63 million or 20.1%. Loss per share was $0.43, or 94.2 million shares in the fourth quarter of 2020, compared to a loss per share of $0.31 on 94.2 million shares in the fourth quarter of 2019. Non-GAAP loss per share was $0.33 in the fourth quarter of 2020, compared to a loss per share of $0.26 for the fourth quarter of 2019. Gross margins in 2020 were negatively impacted by the North American warehouse consolidation, and in 2019 were negatively impacted by a non-recurring purchase price inventory step-up associated Jack Wolfskin acquisition.

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The Company's cash flow from operations increased over 23% and we reduced debt by over $90 million in 2020. Flavors and Extract Group had a great year in 2020 and finished with a very strong fourth quarter with adjusted local currency revenue growth of 14% and adjusted local currency profit growth of 55%. Overall, the Flavors & Extract Group's operating profit margin was up over 300 basis points in the quarter and 50 basis points for the year. Over the long-term, we expect to maintain our EBIT margin at or above 20% for the Color Group. Overall, the Group's local currency adjusted revenue was up 3% for the year and local currency operating profit was up over 14% for the year. Our operating profit margin within the Color Group continues to be around 20%, which is a good long-term level for the Group. The operating profit margin for our Flavors & Extract Group continues to grow and we expect a 50 basis point to 100 basis point improvement in 2021. The cost of this payment is approximately $3 million. Our fourth quarter GAAP diluted earnings per share was $0.59, included in these results are $3.2 million or approximately $0.07 per share of costs related to the divestitures; the cost of the operational improvement plan and the one-time COVID payment. In addition, our GAAP earnings per share this quarter include approximately $0.06 of earnings related to the results of the operations targeted for divestiture, which represents approximately $25.2 million of revenue in the quarter. Last year's fourth quarter GAAP results include approximately $0.01 of earnings per share from the operations to be divested and approximately $33.7 million of revenue. Excluding these items, consolidated adjusted revenue was $309.5 million, an increase of approximately 7.9% in local currency, compared to the fourth quarter of 2019. This revenue growth was primarily a result of the Flavors & Extracts Group, which was up approximately 14% in local currency. Consolidated adjusted operating income increased 19% in local currency to $36.8 million in the fourth quarter of 2020. This growth was led by the Flavors & Extracts Group, which increased operating income by 54.9% in local currency. The Asia-Pacific Group also had a nice growth in operating income in the quarter, up 7.8% in local currency. Operating income in the Food and Pharmaceutical business in the Color Group was, up nearly 15% in local currency. Our adjusted local currency EBITDA increased 16.9% in the quarter and 3.2% for the full-year of 2020. Our cash flow from operations was extremely strong in 2020, up 53% for the quarter and up 23% for the year, due to our strong earnings growth and significant efforts to reduce our inventory levels. Capital expenditures were $52 million for 2020 and our free cash flow increased 58% in the quarter and 21% for the year. We have reduced debt by approximately $90 million, since the beginning of the year. Our debt to adjusted EBITDA is now 2.4%, down from 2.9% at the start of the year. We expect GAAP earnings per share to be up mid to high single-digits, compared to our 2020 reported GAAP earnings per share of $2.59. Our full-year guidance for 2021, includes approximately $0.25 to $0.30 of divestiture-related costs, operational improvement plan costs and the impact of the businesses to be divested. On an adjusted basis, we expect our 2021 adjusted local currency earnings per share to be up mid single-digits, compared to our 2020 adjusted earnings per share of $2.79. Our reported results include the impact of currency and based on current exchange rates, we expect our earnings to benefit by approximately $0.10, due to currency. We anticipate our capital expenditures to be in the range of $55 million to $65 million in 2021.

Our fourth quarter GAAP diluted earnings per share was $0.59, included in these results are $3.2 million or approximately $0.07 per share of costs related to the divestitures; the cost of the operational improvement plan and the one-time COVID payment. We expect GAAP earnings per share to be up mid to high single-digits, compared to our 2020 reported GAAP earnings per share of $2.59. On an adjusted basis, we expect our 2021 adjusted local currency earnings per share to be up mid single-digits, compared to our 2020 adjusted earnings per share of $2.79. Our reported results include the impact of currency and based on current exchange rates, we expect our earnings to benefit by approximately $0.10, due to currency.

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Adjusted diluted earnings per share was $0.23, compared to $0.21 last quarter and $1 a year ago. Loan balances increased $1.7 billion or 4.3%, compared to the prior quarter. Growth in Paycheck Protection Program loans of $2.7 billion was offset by a reduction in C&I line utilization of $775 million. In the consumer book, loans were down approximately $700 million as reductions in lending partnership balances were partially offset by mortgage balance increases of $200 million. Total deposits grew $4.4 billion or 11% from the prior quarter. Growth was largely split between DDA and interest-bearing core deposits, which grew $2.9 billion and $1.2 billion, respectively. We continued the strategy of allowing higher-priced CDs to run off, which led to a decline of $655 million in time deposits. Net interest income was up $3 million for the quarter. This included a full quarter of the 150-basis point reduction in short-term rates from March along with offsets, including over $9 million in fee recognition associated with P3 loans. The net interest margin declined 24 basis points to 3.13%. Adjusted non-interest revenue of $95 million was greater than expected largely due to outperformance in mortgage. Net mortgage revenue was $24 million, up $11 million from the prior quarter led by secondary mortgage production of $635 million, up $380 million from the prior quarter. Adjusted non-interest expense totaled $276 million, up $5 million from the previous quarter. This included $7 million of COVID-related expenses and $7 million in fees associated with the implementation of certain Synovus forward initiatives. Commission expense was $7 million higher than the prior quarter, largely resulting from record mortgage production. Provision for credit losses was $142 million and resulted in an allowance for credit losses ratio of 1.74%, excluding the P3 balances. That's an increase of 35 basis points from the previous quarter and incorporates a more stressed economic outlook. Credit quality metrics remain stable with the nonperforming loan ratio and net charge-off ratio of 37 basis points and 24 basis points, respectively. Our CET1 ratio increased 20 basis points to 8.90% and our total risk-based capital ratio increased 41 basis points to end at 12.70%, a two-year high. While it's too early to know exactly how deferrals will play out in the second half of 2020, reviews of customer cash flows, client surveys, and conversations and interactions with customers to date lead us to believe that somewhere between 3% to 5% of total loans will have a round two deferral granted for a 90-day deferment of principal and interest. As we shared in May, we funded $2.9 billion in P3 loans for approximately 19,000 customers, quite an undertaking, which required a coordinated effort across our bank. The average P3 loan was approximately $150,000 and the customers that received those loans employ over 335,000 employees. An offset to the C&I growth from P3 loans, which ended the quarter with a balance of $2.7 billion was a decrease in loan balances from C&I line utilization. We ended the second quarter at a record low of 41% that resulted in balance sheet declines of $775 million. We expect C&I line utilization to normalize in the mid- to upper 40% range as the economy improves. Highlights in the consumer portfolio include mortgage loan balance increases of over $200 million on a production of a record $800 million. Our total exposure limit remains $1 billion for the relationship, but you'll see a shift of loan balances from held for investment to held for sale. In the second quarter, we moved $266 million in loans to held for sale under this new arrangement. The other meaningful item to highlight within partnership lending is a disposition of approximately $535 million in student loans. In June, we moved those loans to held for sale, which contributed to the decline in consumer balances and resulted in an allowance release of approximately $12 million. On Slide 5, you can see that we had unprecedented growth in deposits with DDA balances, up $2.9 billion and total deposits, up $4.4 billion in the second quarter. However, we also saw broad-based growth across interest-bearing transaction balances with money market and NOW up 11% quarter-over-quarter while savings balances increased by 14% quarter-over-quarter. At that time, total interest-bearing deposit costs were roughly 35 basis points. Slide 6 shows net interest income of $377 million, an increase of $3 million from the previous quarter. This benefited from $9 million in fee accretion from our P3 loan portfolio. P3 processing fees totaled $95 million. In terms of net interest margin, we ended the quarter at 3.13%, down 24 basis points from the first quarter. Beyond the anticipated impact associated with the lower rate environment, the significant inflow of deposits throughout the quarter resulted in an excess cash position, which while not impactful to net interest income, diluted the margin by approximately 8 basis points, as compared to the prior quarter. The impact of these recent transactions is approximately 9 basis points to the margin. We were pleased with non-interest revenue of $173 million or $95 million adjusted, shown on Slide 7. We realized investment gains of $78 million which includes $70 million from repositioning the securities portfolio. While these transactions were primarily focused on agency mortgage-backed securities, part of the repositioning included the disposition of our remaining $150 million in collateralized loan obligations in the investment portfolio. Total net mortgage revenue was $24 million which was $11 million more than the previous quarter. This is the result of an all-time high of $635 million in secondary mortgage production and an elevated gain on sale. Noninterest expense of $284 million or $276 million adjusted is shown on Slide 8. As expected, we had approximately $7 million in COVID-related expenses in the second quarter. Adjustments for the quarter of $8 million included expenses of $3 million related to branch closures and restructuring of corporate real estate, as well as, $5 million in expenses related to the Global One earnout liability. Adjusted expenses included the $7 million in COVID-related expenses, as well as, an increase in commission expense of $7 million higher than the prior quarter due to elevated mortgage production. The second quarter also had $7 million in upfront expenses related to efforts we've made to implement and execute certain Synovus forward initiatives. The net charge-off ratio was 24 basis points, up 4 basis points from the prior quarter. Net charge-offs of $24 million largely resulted from a single credit that was moved to nonaccrual last quarter. Provision for credit losses of $142 million resulted in an allowance build of nearly $120 million from the current expectation for longer-term economic headwinds. After adjusting for P3 loans, the ACL ratio increased 35 basis points to 1.74%. The economic assumptions for the current quarter include the estimated impact of stimulus and an unemployment rate declining to around 10% by the end of the year, and remaining elevated throughout 2021. CET1 improved 20 basis points to 8.9% and total risk-based capital rose 41 basis points to 12.7%, the highest level in two years. Actions included student loan sales and the settlement of security trades in July will further reduce risk-weighted assets and will benefit CET1 by approximately 20 basis points in the third quarter. To achieve those objectives, a total long-term payout ratio of 70% to 80% is appropriate, with approximately half of that coming from common shareholder dividends. From December 31st to June 30th, we increased our allowance by approximately $400 million while maintaining a stable CET1 ratio. Balances totaled $4.7 billion in these industries which is stable with the prior quarter. As these deferrals end, we have once again taken a proactive approach and conducted thorough cash burn analyses on our customers to determine who will continue to see reduced levels of cash flows over the next 90 and 180 days. I'll start with the hotel industry which continues to see a 40% to 60% decrease in occupancy and revenue per available room. Given the reopenings in the southeast and the increase in occupancy in various drivable vacation destinations, we expect cash flows to increase somewhat in the coming months, and as a result, the overall deferral rate of the hotel portfolio to range between 30% and 40% in the next 90 days. As we shared last quarter, this portfolio maintains a strong loan value, slightly over 50%, and it entered the downturn with almost 2 times debt service coverage. For non-grocery-anchored shopping centers, we expect to see deferments in the range of 20% to 30% as certain types of retail are performing well such as home improvement and electronics, while other retail reopens and resumes their sources of revenue. And therefore, we expect 10% to 20% of the portfolio to pursue a second round of principal and interest deferments. Our oil-related segment, totaling approximately $300 million in outstandings was initially of greater concern due to the negative oil futures and the impact of less travel. Another notable segment that is often discussed as a COVID-impacted industry that is not on this list is our senior housing portfolio, which is over $2 billion in outstandings. The reason for exclusion is supported by the fact that we have only seen 4% of the outstanding balances deferred in round one, which was comprised of five loans, and the expectation at this time is that we will have no further deferments in the portfolio during round two. As of July 14th, 2.3% of the total loan portfolio was in a 90-day deferral status. But based upon current conditions, activity to date and ongoing discussions with our customers, as Kessel mentioned earlier, we believe this percentage could increase into the range of 3% to 5% this quarter. Our customers overall have experienced improved cash flows since the trough in April, with the month of June exhibiting only a 6% reduction in cash inflows relative to the same month last year. Yes, the low-rate environment helped drive volume, but it's important to also note that mortgage loan originators recruited since January 2018 have produced 42% of the year-to-date volume. With mortgage and wholesale banking leading the way, second-quarter funded loan production was up 43% versus the same quarter last year and deposit production with increases in all of our lines of business, was up 37% versus second-quarter 2019. As a result, production revenue of $2.9 million in the quarter, was up 210% versus the second quarter of 2019. Our financial objective of an incremental $100 million in pre-tax income remains intact with the efficiency benefits being realized early in 2021 while the revenue benefits will continue to build throughout next year. This work stream was accelerated and has proven to be quite fruitful with the identified savings from the renegotiation and demand management efforts yielding savings of around $25 million. We have also completed Phase 1 of our branch consolidation and corporate real estate optimization efforts and are diligently working on subsequent opportunities that will result in additional savings in 2021. We remain confident in our ability to generate $45 million to $65 million in expense savings through this program. While we have focused more intently on the efficiency initiatives out of the gate, we have also turned our attention to the revenue opportunities that were identified during the diagnostic phase with the total potential pre-tax income of between $35 million and $55 million.

Adjusted diluted earnings per share was $0.23, compared to $0.21 last quarter and $1 a year ago. Loan balances increased $1.7 billion or 4.3%, compared to the prior quarter.

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I am pleased to announce earnings available for distribution for the third quarter came in at $0.10 per share. Book value ended the quarter at $3.25 per share, which represents an increase of 1.2%. This increase in book value combined with our $0.09 dividend produced an economic return of 4% for the quarter. The portfolio remains predominantly agency focused with substantially all of our entire $8.8 billion portfolio plus $1.5 billion notional in TBA invested in agency mortgages. Our liquidity position remains strong as we held $788 million of unrestricted cash and unencumbered investments at quarter end. As indicated by the light blue line, the third quarter ended with interest rates largely unchanged with a modest flattening twist at the 10-year portion of the curve resulting in the difference between the yield on the 30-year and five-year U.S. treasuries falling by 12 basis points. Improving economic data, increased inflation expectations, indications of a peak in COVID cases, and clear signals from the Federal Reserve on the time line for tapering asset purchases at the September FOMC meeting led to a reversal in rates during the last couple of weeks of the quarter with a 10-year largely unchanged at 1.49% at quarter end. Despite short-term funding rates remaining attractive, the decline in interest rates in the first half of the quarter and increase in interest rate volatility led to a reduction in commercial bank demand for agency mortgages with monthly purchases of approximately $28 billion per month compared to the $46 billion per month average in the first half of the year. In the upper left-hand chart, we show year-to-date agency mortgage performance versus swap hedges in generic 30-year 2%, 2.5% and 3% coupons, highlighting the third quarter in gray. As you can see, lower coupon 30-year 2% and 2.5% coupons modestly underperformed during the quarter, while 30-year coupons 3% and higher outperformed. Implied financing in the TBA market, shown in the lower right-hand chart remains attractive in lower coupons with financing rates drifting modestly lower, while still volatile, higher up the coupon stack, as indicated by the purple line representing the 30-year 3% TBA. While our overall allocation to the sector was largely unchanged, we modestly reduced exposure to lower coupons through paydowns and invested the proceeds in 30-year 3.5% specified pools, increasing our coupon diversification and higher coupon allocation by approximately $300 million. We continue to actively manage our specified pool holdings, rotating $2.1 billion into more attractive alternatives within the sector while mitigating our exposure to elevated pay-ups. Our specified pool holdings had a weighted average payout of 0.9 points as of September 30, an increase from 0.6 points as of June 30. As noted on the previous slide, we have seen a reduction in demand for prepayment protection so far in the fourth quarter as our weighted average pay up has declined back to the June 30 average of 0.6 points. The weighted average yield on our Agency RMBS holdings improved seven basis points to 2.11% as of quarter end, while prepayments on our holdings remained low at 7.3% CPR for the quarter. We believe the strength of the dollar roll market and wider spreads represent attractive investment opportunities with ROEs on lower coupon dollar rolls in the mid-teens and 9% to 11% on specified pools. Our remaining credit investments are detailed on slide seven with non-Agency CMBS representing nearly 60% of the $108 million portfolio. Our $73 million of remaining credit securities are high quality with 90% 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, we believe these assets are attractive holdings at 100% are held on an unlevered basis and provide attractive unlevered yields. Repurchase agreements collateralized by Agency RMBS remain unchanged at $7.9 billion as of September 30. Given the modest decline in our holdings and hedges associated with those borrowings also remain unchanged at $5.3 billion notional of pay fixed received floating interest rate swaps. The weighted average interest rate on our hedge book remained unchanged at 41 basis points, while a modest extension in the maturities of our repurchase agreements led to a two basis point increase and the average funding rate to 12 basis points. In order to hedge additional exposures further out the yield curve, we continue to hold $1.3 billion notional of forward starting interest rate swaps with starting dates in 2023. Our economic leverage when including TBA exposure ticked modestly lower during the quarter to 6.5 times debt to equity as we remain conservatively positioned. Spread widening of nearly 30 basis points since May supports an attractive investment environment in the Agency RMBS sector with ROEs ranging from high single digit on specified pools to mid-teens on TBA.

I am pleased to announce earnings available for distribution for the third quarter came in at $0.10 per share. Book value ended the quarter at $3.25 per share, which represents an increase of 1.2%.

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During the quarter, we generated $73.6 million in net income or $0.35 per diluted share and importantly, I think a record $104.9 million in adjusted pre-tax pre-provision income. Asset quality continued to trend the improvement trend that we had during the year, now non-performing assets reaching a decade low of 0.76% as a percent of total assets, driven by repayment of several non-accrual loans and REO sales and obviously less migration. The ratio of the ACL for loans and finance leases to total loans decreased to 2.43% during the quarter driven by combined factors such as reduction in the residential mortgages as well as reductions associated with improvement in macroeconomic factors and their impact on qualitative reserves. In terms of expenses, the efficiency ratio continued to trend down now to 52%. I have to say this is a historical low compared to 53% registered during the third quarter. During the fourth quarter, we raised the common dividend by 43% to $0.10 per share. We repurchased 4.6 million common shares amounting to $63.9 million. And we also executed the announced redemption of $36.1 million of outstanding preferred shares. Happy to say that we ended the year with a very strong capital position, 17.8% common equity Tier-1, leaving ample room for further capital deployment initiatives during 2022. The loan portfolio slightly decreased in the quarter by $75 million, mostly driven by $73 million reduction in SBA PPP loans. Also, we have four -- we experienced four large commercial repayments of relationships from Florida and Virgin Islands, which amounted to $125 million. And we also experienced a reduction of $112 million in the residential mortgage loans that sit in the portfolio. And despite this slight repayment, the commercial portfolio grew by $59 million, turning the corner, hopefully, as we continue to move on into 2022. Loan originations for the fourth quarter were also quite strong with $1.4 billion, including credit card utilization activity. Over the next few quarters, we expect a reduction of approximately $150 million of government deposits from the recent bankruptcy settlement. Excluding brokered and government deposit, core deposit did register an increase of $64 million during the quarter. We generated $281 million of net income or $1.31 per diluted share compared to 102.3 in prior year. We registered a 30% increase in adjusted pre-tax pre-provision income. And we grew total loan originations and renewals by 20%, excluding PPP and credit card activity when compared to 2020. I think moreover, new money, commercial and originations, including closed and unfunded commercial and construction loans grew by 50% when compared to prior year. I think it's important to comment that over 75% of the construction loans that we already made in 2021 are expected to partially fall in 2022. And importantly, during the year, we returned capital equivalent to 112% of earnings, again in the form of repurchase of common, redemption of preferred and dividends. Net income was $281 million, $1.31 a share. That good results included improvements of $130 million in net interest income and $10 million increase in other non-interest income. We went from about $300 million in 2020 to $392 million in 2021, so a significant pickup. We also made reference to $73.6 million in net income, $0.35 a share. We had a $12.2 million benefit, very similar to the $12.1 million we had in the third quarter. The expenses for the quarter were $2.6 million lower than in the third quarter. And effective tax rates went up by 7 basis points for the full year, resulting in an increase in taxes on the -- throughout the year. Net interest income for the quarter was $184.1 million. It's slightly lower than last quarter, but margin improved 1 basis point to 3.61%. The yield on the portfolio, the GAAP yield on the portfolio was 6.34% for the quarter, very similar to the 6.33% we had last quarter. And loans, if we look at the mix of earning assets, loans continue to represent approximately 55% of average interest-earning assets. The overall cost or the cost of interest-bearing deposits, excluding broker, it's now 30 basis points, which is 3 basis points lower than last quarter. Approximately 40% of our commercial portfolio is tied to LIBOR and another 19% is tied to prime. If we look at current rates versus what we were reinvesting, we foresee an increase of somewhere between 40 and 50 basis points on reinvested money as compared to the fourth quarter. On the expense side, expenses for the quarter were $111 million -- $100.5 million, which compares to $114 million in the third quarter. In the fourth quarter, merger expenses were $1.9 million. Last quarter, merger and restructuring expenses were $2.3 million. The impact of that increase will be approximately $1.4 million per quarter starting now in this first quarter of 2022. Once vacancy levels are normalized, compensation expense should increase somewhere in the neighborhood of $1.5 million per quarter. In fact, we achieved $2.3 million net gain in OREO in the third quarter and additional $1.6 million net gain this quarter. That's why we still believe that on a normalized basis, expenses will be in that $117 million to $119 million range. Efficiency ratio in the quarter as a result -- that Aurelio made reference was 52%, which is lower than anticipated. However, even normalized expense levels will take us to our target ratio of 55%. On asset quality, just to touch up on Aurelio made reference to, the non-performing asset decreased by $14 million, as you saw, continued the trend. On NPA, the non-performing assets in total, that stand below 1% at 76 basis points of assets. And then $6.8 million of that reduction was in nonaccrual commercial construction loans. We ended up selling a $3.1 million non-performing construction loan in Puerto Rico. They were $2 million lower than last quarter, $15 million this quarter as compared to $17 million last quarter. On the allowance, Aurelio also made reference to the allowance, at the end of the quarter was $180 million. It's $20 million down from the third quarter. Looking at allowance just on loans and finance leases was $269 million, which is $19 million down. Aurelio mentioned that we stand at 2.43% in the last quarter. For the fourth quarter, common stock repurchases and the redemption of the preferred shares were $100 million. Throughout 2021, we have repurchased 16.7 million common shares and redeemed the $36 million in preferred, totaling $150 million in capital actions for the year on top of the $65 million that were paid in dividends. As you saw in the chart, Tier-1 common equity moved slightly up from 17.7 at the end of the first quarter, which is just before we started with the capital repurchase to 17.8 at the end of the year. And Tier-1 capital just decreased 2 basis points from 18% to 17.8%.

During the quarter, we generated $73.6 million in net income or $0.35 per diluted share and importantly, I think a record $104.9 million in adjusted pre-tax pre-provision income. We also made reference to $73.6 million in net income, $0.35 a share. Net interest income for the quarter was $184.1 million.

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We are pleased to have treated over 3,000 patients in 2021 with our differentiated portfolio of TMTT therapies, gaining valuable learnings through both our clinical and commercial experiences. Underlying sales increased 18% to $5.2 billion, driven by balanced organic sales growth in each region. We achieved 19% growth in adjusted earnings per share, while also increasing R&D, 19%. Fourth quarter sales of $1.3 billion increased 13% on a constant currency basis versus the year ago period. Growth was driven by our portfolio of innovative technologies, although at the lower end of our October expectations due to the pronounced impact of Omicron on hospital resources in December, especially in the U.S. Full year 2021 global TAVR sales of $3.4 billion increased 18% on an underlying basis versus the prior year. Despite intermittent challenges associated with the pandemic throughout the year, sales were in line with our original guidance of 3.2 to 3.6 billion and were driven by increased awareness of the benefits of TAVR therapy with our SAPIEN platform. In the fourth quarter, our global TAVR sales were $872 million, an increase of 13% on an underlying basis, with impressive strength outside the U.S. In the U.S., our TAVR sales grew 10% year over year in the fourth quarter, and we estimate that our share of procedures was stable. Outside the U.S., in the fourth quarter, our sales grew approximately 20% year over year on an underlying basis, and we estimate total TAVR procedure growth was comparable. It's worth noting that a recent cost-effectiveness study demonstrated that TAVR with SAPIEN 3 was economically dominant when compared to surgical aortic valve replacement in treating French patients with severe symptomatic aortic stenosis who are at low surgical mortality -- who are at low risk of surgical mortality. We're also encouraged by the recently published guidelines from the European Association of Cardiothoracic Surgery, which now definitively recommend TAVR for patients over 75. Additionally, in Q4, we received FDA approval to use SAPIEN 3 with our Alterra adaptive pre-stent for congenital heart patients. In summary, despite a slower-than-expected start to the year, we continue to anticipate 2022 underlying TAVR sales growth of 12 to 15%, consistent with the range we shared at our December investor conference. We remain confident in this large global opportunity will double to $10 billion by 2028, which implies a compounded annual growth rate in the low double-digit range. At the PCR London Valves conference in Q4, PASCAL 30-day outcomes from our MiCLASP post-market approval study of more than 250 patients in Europe were presented. Fourth quarter revenue of $25 million grew sequentially from the third quarter as we saw increased adoption of the PASCAL system despite the negative COVID impact in December. Full year 2021 global sales more than doubled to $86 million. Despite the COVID impact so far this year, we continue to expect TMTT sales of 140 to $170 million for 2022. We estimate the global TMTT opportunity will grow to approximately $5 billion by 2028, and we remain committed to bringing our groundbreaking portfolio of therapies to patients with these life-threatening diseases. In Surgical Structural Heart, full year global sales were $889 million, up 15% on an underlying basis versus the prior year. Fourth quarter 2021 global sales of $221 million increased 9% on an underlying basis over the prior year. Full year global sales of $835 million increased 14% on an underlying basis versus the prior year. 2021 growth was driven by balanced contributions from all product lines led by HemoSphere sales as capital spending resumed. Fourth quarter Critical Care sales of $212 million increased 8% on an underlying basis, driven by strong demand for HemoSphere. Sales in the fourth quarter increased 12.6% on an underlying basis. Adjusted earnings per share was $0.51, and GAAP earnings per share was $0.53. Our fourth quarter sales were negatively impacted by the wave of COVID that began late in the quarter, especially in the U.S. Earnings per share in the quarter was below our expectations as it was impacted by weaker-than-expected sales and we accelerated certain spending into the fourth quarter of 2021 that we had planned to incur during 2022, including preparation for TMTT product launches. For the full year 2021, we are pleased with our performance as sales increased 18% on an underlying basis to $5.2 billion and adjusted earnings per share grew 19% to $2.22. For the fourth quarter, our adjusted gross profit margin was 76.8%, compared to 75.3% in the same period last year. We continue to expect our full year 2022 adjusted gross profit margin to be between 78 and 79%. Selling, general and administrative expenses in the fourth quarter were $424 million or 31.9% of sales, compared to $339 million in the prior year. We continue to expect full year 2022 SG&A as a percent of sales, excluding special items, to be between 28 and 30%. Research and development expenses in the quarter grew 19% to $233 million or 17.5% of sales. For the full year 2022, we continue to expect R&D as a percentage of sales to be in the 17 to 18% range as we invest in developing new technologies and generating evidence to support TAVR and TMTT growth. During the fourth quarter, we recorded an $18 million net reduction in the fair value of our contingent consideration liabilities, which benefited earnings per share by $0.03. This gain was excluded from the adjusted earnings per share of $0.51 I mentioned earlier. Our reported tax rate this quarter was 10.9% or 12.7%, excluding the impact of special items. This rate included an approximate 3 percentage point benefit from the accounting for stock-based compensation. Our full year 2021 tax rate, excluding special items, was 12.6%. We continue to expect our full year rate in 2022 to be between 11 and 15%, which includes an estimated benefit of 3 percentage points from stock-based compensation accounting. Foreign exchange rates decreased fourth quarter reported sales by approximately 1% or $10 million compared to the prior year. At current rates, we now expect an approximate $100 million negative impact or about 2% to full year 2022 sales as compared to 2021. Foreign exchange rates positively impacted our fourth quarter gross profit margin by 140 basis points compared to the prior year. Free cash flow for the fourth quarter was $284 million, defined as cash flow from operating activities of $374 million, less capital spending of $90 million. Full year 2021 free cash flow was $1.4 billion, up from $734 million in 2020. We continue to expect full year 2022 free cash flow to be between 1.2 and $1.5 billion. In 2022, we expect our cash flow will be reduced by approximately $200 million due to a change in tax regulations involving the timing of the deductions for research and development expenses. We have a strong balance sheet, with approximately $1.5 billion in cash, cash equivalents, and short-term investments at the end of the year. Consistent with our practice of opportunistically repurchasing shares, we purchased approximately $100 million during the fourth quarter. We still have remaining share repurchase authorization of $1.1 billion. Average shares outstanding during the fourth quarter were $632 million, relatively consistent with the prior quarter. We continue to expect average diluted shares outstanding for 2022 to be between 630 and $635 million. For total Edwards, we continue to expect sales to grow at a low double-digit rate to 5.5 billion to $6 billion. For TAVR, we expect sales of 3.7 to $4 billion. And for TMTT, we expect sales of 140 to $170 million. We expect Surgical Structural Heart sales of 870 to $950 million and Critical Care sales of 820 to $900 million. For full year 2022, we continue to expect adjusted earnings per share of $2.50 to $2.65. For the first quarter of 2022, we project total sales to be between 1.27 and $1.35 billion and adjusted earnings per share of $0.54 to $0.62. 1 largest health burden, we believe the opportunity to serve our patients will nearly double between now and 2028.

Fourth quarter sales of $1.3 billion increased 13% on a constant currency basis versus the year ago period. In the fourth quarter, our global TAVR sales were $872 million, an increase of 13% on an underlying basis, with impressive strength outside the U.S. 2021 growth was driven by balanced contributions from all product lines led by HemoSphere sales as capital spending resumed. Adjusted earnings per share was $0.51, and GAAP earnings per share was $0.53. Our fourth quarter sales were negatively impacted by the wave of COVID that began late in the quarter, especially in the U.S. Earnings per share in the quarter was below our expectations as it was impacted by weaker-than-expected sales and we accelerated certain spending into the fourth quarter of 2021 that we had planned to incur during 2022, including preparation for TMTT product launches. We still have remaining share repurchase authorization of $1.1 billion. For the first quarter of 2022, we project total sales to be between 1.27 and $1.35 billion and adjusted earnings per share of $0.54 to $0.62. 1 largest health burden, we believe the opportunity to serve our patients will nearly double between now and 2028.

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Core revenue growth excludes the impact of currency and the acquisitions and divestitures completed within the past 12 months. Q3 revenue of $1.59 billion is up a reported 26% and is up 21% core. This is against the mass decline of 3% in Q3 of last year, so we are well above fiscal year 2019 pre-pandemic levels. Our Q3 operating margin is 26%, this is up 230 basis points from last year. EPS is $1.10, up 41% year-over-year. We continue to perform extremely well in pharma, our largest market growing 27% with strength in both small and large molecule segments. Our large molecule business grew roughly 52% in the quarter and now represents 36% of our overall pharma revenue, up from the mid 20s just a few years ago. In chemical energy, our business is recovering faster than expected, expanding 23% in the quarter. Looking at our performance by business unit, The Life Sciences and Applied Markets Group generated revenue of $680 million. LSAG is up 22% on a reported basis, this is up 18% core, off just a 4% decline last year. Our performance is led by strength in pharma, which is up 22% and chemical energy up 31%. All businesses delivered strong growth led by Cell Analysis at 38% growth and our LC and LCMS businesses, which grew 22%. The Agilent CrossLab Group posted revenue of $560 million, this is up a reported 21% and up 15% on a core basis. These results are on top of 1% growth last year. All end markets grew mid teens or higher with the exception of environmental and forensics, but still grew 9%. The Diagnostics and Genomics Group produced revenue of $346 million, up 44% reported and up 37% core, compared to an 8% decline last year. The quarterly results exceeded our expectations, easily surpassing the $30 million revenue milestone, while one quarter does not make a trend, our team has done a tremendous job increasing the output in a high quality manner. This gives us increased confidence in our ability to exceed the $200 million annual run rate of revenue with existing capacity. While still less than 10% of DGG revenue, our China business grew 50% in the quarter. Revenue was $1.59 billion, reflecting reported growth of 26%, core revenue growth was 21%. Currency added 4.5% for the quarter and M&A added 0.5 point. Our largest market pharma grew 27% during the quarter, after growing 2% last year. The performance was led by the continued strength in our Large Molecule business growing 52%, while our Small Molecule business grew mid teens, and all regions in the pharma market grew double-digits. Chemical and energy also performed well this quarter with 23% growth. Even after accounting for the comparison against the 10% decline last year, this was clearly our best quarter since the onset of the pandemic. The diagnostics and clinical market grew 28% against the decline of 10% a year ago, our softest quarter last year. On a regional basis, all regions grew with China up 41% and Americas delivering 38% growth. In the academia and government market, we delivered 12% growth as most research labs continue to open globally and expand capacity. The food market continued its double-digit performance growing 12% on top of growing 1% last year. Rounding out our key markets, environmental and forensics came in with 5% growth. On a geographic basis, all regions demonstrated solid growth led by the Americas at 32% and Europe at 23%, both exceeding our expectations. And as expected, China was up 8% on top of 11% growth last year. Now turning to the rest of the P&L, third-quarter gross margin was 55.9%, up 80 basis points from a year ago despite roughly 40 basis points of headwind from currency. Gross margin improvement -- performance along with continued operating expense leverage resulted in operating margin for the third quarter of 26%, improving 230 basis points over last year. Putting it all together, we delivered earnings per share of $1.10, up 41% versus last year. Our tax rate was 14.75% and share count was 306 million shares, as expected. We delivered $334 million in operating cash flow during the quarter, showing a strong conversion from net income and up more than 15% from last year while crossing the $1 billion mark in nine months. During the quarter, we returned $172 million to our shareholders, paying out $59 million in dividends and repurchasing roughly 800,000 shares for $113 million. Year-to-date, we've returned $829 million to shareholders in the forms of dividends and share repurchases. And we ended the quarter with $1.4 billion in cash, $2.9 billion in outstanding debt and a net leverage ratio of 0.8. We are increasing our full-year revenue projection to a range of $6.29 billion to $6.32 billion, up $125 million at the midpoint from previous guidance and representing reported growth of 17.8% to 18.4% and core growth of 14.5% to 15%. In addition, we are on track to deliver roughly $100 million in COVID-related revenue in fiscal 2021, in line with our expectations from the beginning of the year and flat to last year. We expect to continue our strong operating leverage, and so we are increasing our fiscal 2021 non-GAAP earnings per share to a range of $4.28 to $4.31 per share, up 30% to 31% for the year. This translates the fourth quarter revenue ranging from $1.63 billion to $1.66 billion. This represents reported growth of 10% to 12% and core growth of 8.5% to 10% on top of the 6% growth in Q4 of last year when we started to see early signs of recovery from the strict lockdowns. So, our core growth excluding COVID would be comparable to 9.5% to 11%. We are forecasting higher expenses in the fourth quarter as we invest to maintain our strong momentum, but expect continued operating leverage in excess of 100 basis points. Non-GAAP earnings per share is expected to be between $1.15 and $1.18 with growth of 17% to 20%.

EPS is $1.10, up 41% year-over-year. Revenue was $1.59 billion, reflecting reported growth of 26%, core revenue growth was 21%. Putting it all together, we delivered earnings per share of $1.10, up 41% versus last year. We are increasing our full-year revenue projection to a range of $6.29 billion to $6.32 billion, up $125 million at the midpoint from previous guidance and representing reported growth of 17.8% to 18.4% and core growth of 14.5% to 15%. We expect to continue our strong operating leverage, and so we are increasing our fiscal 2021 non-GAAP earnings per share to a range of $4.28 to $4.31 per share, up 30% to 31% for the year. This translates the fourth quarter revenue ranging from $1.63 billion to $1.66 billion. Non-GAAP earnings per share is expected to be between $1.15 and $1.18 with growth of 17% to 20%.

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And we are confident that the strategic plan as outlined will deliver a directional earnings range between $3 and $3.50 per share by 2024. We ended the year with a backlog of $25.6 billion and full year new awards of $9 billion. Approximately 35% of our infrastructure revenue will come from zero-margin work in 2021. With respect to our two challenged government projects, I'm pleased to report that on the Radford project, we have turned overall 113 systems to our clients, and we are essentially complete. As David said, Radford is essentially complete with all 113 systems turned over to BAE, while Warren will flow through at zero margin until its completion. For 2020, Fluor reported a net loss from continuing operations attributable to Fluor of $294 million or a loss of $2.09 per diluted share. During the year, we recognized the following significant charges, most of which were recorded in quarter one: $298 million for impairments of goodwill and tangible assets, investments and other assets; $60 million for current expected credit losses associated with Energy & Chemicals clients; $146 million for impairments of assets held for sale included in discontinued operations, of which $12 million related to goodwill; as well as significant forecast revisions for project positions due to COVID-19-related schedule delay and associated cost growth. Corporate G&A expenses for 2020 was $241 million, up from $166 million a year ago. For the full year, $47 million was due to foreign exchange currency losses predominantly driven by the weakening of the U.S. dollar, and $42 million was attributable to the professional fees associated with the 2020 internal review. We achieved an estimated run rate savings of $140 million annually in our overhead expenses due to actions taken in 2020. As I mentioned last month, we expect to achieve an additional $100 million of annual savings over the next three years as we rationalize overhead to the new shape of our business. During the fourth quarter, we exited two of our European infrastructure P3 investments and received cash of approximately $20 million. Our ending cash balance was $2.2 billion, up from 2019. Domestic available cash represented 32% of this total. We expect to see our cash holding steady around $2 billion through the year, with debt retirement being offset by divestitures and the liquidity improvement measures we have discussed in the past. Operating cash flow for the full year was $186 million, which included approximately $375 million of cash to fund our legacy projects. Additionally, our debt-to-capitalization requirement on this amendment facility was expanded to 0.65 times, which gives us more flexibility in current borrowing capacity as we assess our capital needs moving forward. We are introducing our 2021 adjusted earnings per share guidance of $0.50 to $0.80 per diluted share for continuing operations. Our assumptions for 2021 include: a slight decline in revenue as compared to 2020, adjusted G&A expense of approximately $40 million to $50 million per quarter and a tax rate of approximately 28%. We anticipate average full year margins of 2% to 3% in Urban Solutions, 2.5% to 3% in Mission Solutions and margins of 2.5% to 3.5% in Energy Solutions and improving as the year progresses. We also anticipate 2021 capital expenditures to be below $100 million as we divest our AMECO business this year. As David reaffirmed, we maintain our long-term guidance of $3 to $3.50 of earnings per share by 2024.

We ended the year with a backlog of $25.6 billion and full year new awards of $9 billion. We are introducing our 2021 adjusted earnings per share guidance of $0.50 to $0.80 per diluted share for continuing operations.

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On the balance sheet, we retired a significant majority of the 2021 convertible notes, leaving just over $1 million maturing in February of next year. Additionally, adjusted EBITDA improved year-over-year and grew nearly 50% sequentially, driven by higher net sales and lower SG&A expenses. With 95% of our sales in Northern Hemisphere, we anticipate continued elevated demand as winter weather forces more people indoors with pandemic blues occurring as a result. As a result, reported net sales in Europe improved over 38% sequentially, although still lower than third quarter 2019. We saw a similar type of recovery in North America in the form of higher quote volumes in the third quarter, which we anticipate will lead to increase sales through the end of the year. This consolidates operations across Germany and is expected to generate approximately $5 million in annual cost savings beginning in 2021. Reported net sales declined 10.1%, primarily due to lower sales of mobility and seating and lifestyle products, partially offset by growth in respiratory products. Gross profit was lower by 40 basis points to 28.3% due to unfavorable manufacturing variances as a result of the lower sales volume. To offset this, we were able to drive constant currency SG&A down 12.5% or $7.8 million through reduced employment cost, lower commercial expenses and favorable foreign exchange. As a result, operating income improved by 21.2% or $500,000 and adjusted EBITDA was $9.8 million, up 2.5%, including the benefit of reduced SG&A expenses. Free cash flow usage was $1.8 million, unfavorable to the third quarter 2019 by $14.1 million due to working capital needed to support operating activities. Sequentially, reported net sales increased 8% and constant currency net sales increased 4.3%, driven by higher sales of mobility and seating products, including a 30% increase in Europe. Gross profit was lower by 60 basis points to 28.3% due to unfavorable manufacturing variances as a result of lower sales volume and the expected mix of lower acuity products as elective care resumed. Constant currency SG&A decreased 6% or $3.4 million, driven by lower stock compensation expense, which is typically higher in the second and fourth quarters of the year. Operating income improved by $5.2 million, and adjusted EBITDA improved 48.7% or $3.2 million, driven by higher net sales and lower SG&A expenses. As a result of the initial easing of public healthcare restrictions, constant currency sequential net sales increased by 8%, driven by a 30.4% increase in sales of mobility and seating products, reflecting an early rebound in demand, particularly in France. Gross profit was 230 basis points lower due to the reduced net sales and unfavorable manufacturing variances, both impacted by the pandemic, which affected sales volume and product mix. Operating income was lower by $3.8 million due to reduced gross profit from lower net sales, partially offset by actions reducing SG&A expenses, such as furloughs and reduced work hours. Constant currency net sales increased 1.2%, with growth in respiratory products partially offset by lower sales of mobility and seating and lifestyle products. Sequentially, constant currency net sales of mobility and seating products increased 0.2%. Gross profit increased 170 basis points or $2.6 million, driven by higher net sales and lower material and freight costs from prior transformation initiatives, partially offset by unfavorable variances and higher warranty expense. Operating income was $3 million, an improvement of $4.7 million, driven primarily by actions which lowered SG&A expense. Turning to Slide 13, all other, which includes the sales of the Asia-Pacific region, decreased by 3.1% on a constant currency basis, driven by lower sales of mobility and seating products, partially offset by higher sale of lifestyle products. Operating loss increased by $500,000 due to lower operating profit as a result of the dynamic control divestiture in the first quarter 2020 and improved $1.6 million sequentially, primarily driven by lower stock compensation expense. As of September 30, 2020, the company had total debt of $273 million, excluding operating and finance lease obligations. As of September 30, 2020, the company had $87 million of cash on its balance sheet, which was sequentially lower, primarily as a result of proactively repurchasing $24.5 million of convertible notes in the third quarter. We are pleased to have retired the significant majority of these notes, which increased our financial flexibility, reduced ongoing interest expense and leave a balance of less than $1.3 million maturing in February of 2021. For the full year 2020, the company now expects reported net sales of at least $840 million, up from the previous range of $810 million to $840 million, driven by the expected recovery of sales based on the recent trends we've seen in the early part of the fourth quarter. Adjusted EBITDA in the range of $28 million to $32 million, up from the previous range of $27 million to $30 million due to the benefit of prior transformation actions and our continued ability to optimize cost. And free cash flow usage in the range of $8 million to $12 million, changed from the previous range of 7% to 10%, given the timing of the recognition of sales during the fourth quarter delaying the collection of cash into the first quarter of 2021.

We saw a similar type of recovery in North America in the form of higher quote volumes in the third quarter, which we anticipate will lead to increase sales through the end of the year. For the full year 2020, the company now expects reported net sales of at least $840 million, up from the previous range of $810 million to $840 million, driven by the expected recovery of sales based on the recent trends we've seen in the early part of the fourth quarter. Adjusted EBITDA in the range of $28 million to $32 million, up from the previous range of $27 million to $30 million due to the benefit of prior transformation actions and our continued ability to optimize cost. And free cash flow usage in the range of $8 million to $12 million, changed from the previous range of 7% to 10%, given the timing of the recognition of sales during the fourth quarter delaying the collection of cash into the first quarter of 2021.

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With this in mind, Oxford is making a $1 million commitment of additional support over the next four years to help our local communities address economic and racial inequality through education. Our stores and restaurants, which make up 47% of our overall sales in 2019 just began to reopen in early May, and we expect to have almost all of our locations open by the end of June. But we don't expect revenue from stores to reach prior year levels at anytime during 2020. In 2019, wholesale sales at Tommy Bahama decreased to 20% of revenue, and at Lilly Pulitzer 21% of revenue. E-commerce, which was 23% of our revenue in 2019 grew by 12% in the first quarter and the positive momentum has continued into the second quarter as we reap the benefits of the long-term investments we have made in digital and e-commerce, such as upgrades and redesigns of websites, enhanced search engine optimization and new enterprise order management systems. In the first quarter, adjusted gross margins declined 220 basis points due to higher inventory markdowns and a modest increase in promotional activities. We have made significant strides in reducing expenses in the first quarter with the reductions across most spending categories, reducing SG&A by $17 million compared to last year. Employment costs were reduced by $11 million in the first quarter as we made the difficult decisions affected our employees. We furloughed substantially all of our retail and restaurant employees, eliminate positions throughout the organization, reduced salaries for certain employees, and we suspended our bonus and 401(k) match programs. Managing inventory is a critical component of ensuring the health of our brands, and we have taken meaningful actions to reduce and defer our inventory orders, with approximately a 25% reduction in forward orders. By repurposing some of Tommy Bahama spring-summer collection, we've taken about $25 million of inventory, moved it out to Tommy Bahama's resort line in December, and we have been working with our vendors to extend payment terms. We are pleased with our efforts and inventory at quarter end increased only 8% despite the significant sales decline. We have ample liquidity to meet our ongoing cash requirements, reflecting the strength of our balance sheet entering the pandemic, as well as the recent actions we have taken to mitigate the COVID-19 impact. During March 2020, as a proactive measure to oyster cash, and we drew down $200 million of our $325 million asset base revolving credit facility. At the end of the first quarter, we had $208 million of borrowings outstanding, an additional $114 million of unused availability and $182 million of cash and cash equivalents. Our cash flow from operations used $46 million in the first quarter compared to a use of $6 million in the prior year period. Our assessments included at the fair values of the Southern Tide goodwill indefinite-lived intangible assets as of May 2, 2020 did not exceed their respective carrying values, resulting in a $60 million non-cash impairment charge. Last quarter, the Board of Directors reduced our quarterly dividend from $0.37 per share to $0.25 per share. The Board has determined that it's appropriate to keep the dividend payable on July 31 at $0.25 per share. The Board has also elected to reduce its cash compensation by 50% for the remainder of the fiscal year.

Our stores and restaurants, which make up 47% of our overall sales in 2019 just began to reopen in early May, and we expect to have almost all of our locations open by the end of June. But we don't expect revenue from stores to reach prior year levels at anytime during 2020. E-commerce, which was 23% of our revenue in 2019 grew by 12% in the first quarter and the positive momentum has continued into the second quarter as we reap the benefits of the long-term investments we have made in digital and e-commerce, such as upgrades and redesigns of websites, enhanced search engine optimization and new enterprise order management systems. We are pleased with our efforts and inventory at quarter end increased only 8% despite the significant sales decline. We have ample liquidity to meet our ongoing cash requirements, reflecting the strength of our balance sheet entering the pandemic, as well as the recent actions we have taken to mitigate the COVID-19 impact.

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AAM's fourth quarter 2020 sales were $1.44 billion compared to $1.43 billion in the fourth quarter of 2019. For the full year 2020, AAM's sales were $4.7 billion. From a profitability perspective, AAM's adjusted EBITDA in the fourth quarter of 2020 was $261.5 million or 18.2% of sales, a fourth quarter record for AAM. For the full year 2020, AAM's adjusted EBITDA was $720 million or 15.3% of sales. AAM's adjusted earnings per share in the fourth quarter of 2020 was $0.51 per share. And for the full year 2020, AAM's adjusted earnings per share was $0.14 per share. AAM's adjusted free cash flow in the fourth quarter 2020 was $173 million. And for the full year 2020, AAM's adjusted free cash flow was $311 million. We also reduced our gross debt by nearly $200 million in 2020, paying down approximately $100 million just in the fourth quarter alone. Operationally, we completed 17 program launches. We received 13 customer quality awards and multiple Supplier of the Year awards from customers such as General Motors and Hyundai. AAM expects our gross new business backlog, covering the three-year period of 2021 through 2023, to be approximately $600 million. We expect the launch cadence of this backlog to be $200 million in 2021, $150 million in 2022, and $250 million in 2023. About 70% of this new business backlog relates to global light trucks, including crossover vehicles, and another 15% relates to hybrid electric powertrains. AAM is targeting full year sales between $5.3 billion and $5.5 billion in 2021. AAM is targeting adjusted EBITDA of approximately $850 million to $925 million in 2021. And AAM is targeting adjusted free cash flow in 2021 of approximately $300 million to $400 million, which contemplates capital spending of approximately 4.5% of sales. From an end market perspective, we see production at approximately 15.5 million to 16 million units for our primary North American market. Light trucks made up 74% of the production in North America in 2020, and we see no signs of that changing or slowing down in 2021. In the fourth quarter of 2020, AAM sales were $1.44 billion, compared to $1.43 billion in the fourth quarter of 2019. First, we stepped cut down our fourth quarter 2019 sales by $119 million to reflect the sale of the US casting business unit that was completed in December of 2019. Then we account for the unfavorable impact of COVID-19 on our fourth quarter of 2020 sales, which we estimate to be approximately $40 million. On a year-over-year basis, we are also impacted by GM's exit of its Thailand operations by approximately $10 million. And the transition from a rear beam axle to a new lightweight and highly efficient independent rear drive axle for GM's new full-size SUV impacted sales by about $35 million in the quarter. Other volume and mix was positive by $38 million, mainly driven by strong light truck mix in North America. Pricing came in at $19 million on year-over-year impact. And metal market pass-throughs and foreign currency accounted for increase in sales of about $7 million year-over-year. For the full year of 2020, AAM sales were $4.71 billion as compared to $6.53 billion in the full year of 2019. Gross profit was $236.5 million or 16.4% of sales in the fourth quarter of 2020 compared to $183.4 million or 12.8% of sales in the fourth quarter of 2019. Adjusted EBITDA was $261.5 million in the fourth quarter of 2020 or 18.2% of sales. This compares to $193.5 million in the fourth quarter of 2019 or 13.5% of sales. For the full year of 2020, AAM's adjusted EBITDA was $720 million and adjusted EBITDA margin was 15.3% of sales. SG&A expense, including R&D, in the fourth quarter of 2020 was $83 million or 5.8% of sales. This compares to $90 million in the fourth quarter of 2019 or 6.3% of sales. AAM's R&D spending in the fourth quarter of 2020 was $31.1 million compared to $39.8 million in the fourth quarter of 2019. For the year, SG&A expense was down about $50 million, due mainly to our cost reduction actions, both temporary and structural. Net interest expense was $52.3 million in the fourth quarter of 2020 compared to $53.4 million in the fourth quarter of 2019. In the fourth quarter of 2020, we recorded income tax expense of $13.9 million compared to a benefit of $11.5 million in the fourth quarter of 2019. As we head into 2021, we expect our effective tax rate to be approximately 20%. Taking all of these sales and cost drivers into account, our GAAP net income was $36 million or $0.30 per share in the fourth quarter of 2020 compared to a loss of $454.4 million or a loss of $4.04 per share in the fourth quarter of 2019. Adjusted earnings per share for the fourth quarter of 2020 was $0.51 per share versus $0.13 per share in the fourth quarter of 2019. Net cash provided by operating activities in the fourth quarter of 2020 was $208 million. Capital expenditures, net of proceeds from the sale of property, plant and equipment, for the fourth quarter was $69 million. Cash payments for restructuring and acquisition-related activity in the fourth quarter of 2020 were $33.6 million. Reflecting the impact of this activity, AAM generated adjusted free cash flow of $172.7 million in the fourth quarter of 2020. For the full year of 2020, AAM generated adjusted free cash flow of $311.4 million compared to $207.8 million in the full year 2019. From a debt leverage perspective, we ended the year with net debt of $2.9 billion and [Indecipherable] adjusted EBITDA of $720 million, calculating a net leverage ratio of 4 times at December 31. In the fourth quarter of 2020, we prepaid over $100 million of our term loans. AAM ended 2020 with total available liquidity of $1.5 billion, consisting of available cash and borrowing capacity on AAM's global credit facilities. As for sales, we are targeting a range of $5.3 billion to $5.5 billion for 2021. This sales target is based upon a North American production of 15.5 million to 16 million units, a new business backlog of $200 million and attrition of approximately $100 million. From an EBITDA perspective, we are expecting adjusted EBITDA in the range of $850 million to $925 million. At the midpoint, this performance would represent EBITDA margin growth of over 100 basis points versus last year. As you can see on the walk-down on Page 15, we expect volume and mix to positively contribute as well as continued productivity benefits. We also expect approximately $40 million in pricing and $15 million in higher R&D spending, as we continue to invest in electric propulsion. From an adjusted free cash flow perspective, we are targeting approximately $300 million to $400 million in 2021, and the year-over-year walk is very simple. And while on a dollar basis, capex is slightly higher than 2020, we are targeting capex as a percent of sales of approximately 4.5%.

AAM's fourth quarter 2020 sales were $1.44 billion compared to $1.43 billion in the fourth quarter of 2019. AAM's adjusted earnings per share in the fourth quarter of 2020 was $0.51 per share. AAM expects our gross new business backlog, covering the three-year period of 2021 through 2023, to be approximately $600 million. We expect the launch cadence of this backlog to be $200 million in 2021, $150 million in 2022, and $250 million in 2023. AAM is targeting full year sales between $5.3 billion and $5.5 billion in 2021. AAM is targeting adjusted EBITDA of approximately $850 million to $925 million in 2021. And AAM is targeting adjusted free cash flow in 2021 of approximately $300 million to $400 million, which contemplates capital spending of approximately 4.5% of sales. From an end market perspective, we see production at approximately 15.5 million to 16 million units for our primary North American market. In the fourth quarter of 2020, AAM sales were $1.44 billion, compared to $1.43 billion in the fourth quarter of 2019. Pricing came in at $19 million on year-over-year impact. Taking all of these sales and cost drivers into account, our GAAP net income was $36 million or $0.30 per share in the fourth quarter of 2020 compared to a loss of $454.4 million or a loss of $4.04 per share in the fourth quarter of 2019. Adjusted earnings per share for the fourth quarter of 2020 was $0.51 per share versus $0.13 per share in the fourth quarter of 2019. As for sales, we are targeting a range of $5.3 billion to $5.5 billion for 2021. This sales target is based upon a North American production of 15.5 million to 16 million units, a new business backlog of $200 million and attrition of approximately $100 million. From an EBITDA perspective, we are expecting adjusted EBITDA in the range of $850 million to $925 million. From an adjusted free cash flow perspective, we are targeting approximately $300 million to $400 million in 2021, and the year-over-year walk is very simple.

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With sequential growth in all of the end markets that we track, total revenue was $479.3 million. Non-GAAP operating margins of 9.5% were at the highest level in two years and helped produce record non-GAAP earnings of $1.21 per share. Revenue of $479.3 million was above our guidance range, and non-GAAP earnings of $1.21 also exceeded our guidance. Optical communications was $361.7 million or 75% of total revenue, up 4% from Q2. Non-optical communications revenue was $117.6 million or 25% of total revenue and increased 11% from Q2. Within optical communications, telecom revenue was $283.5 million, up 4% from last quarter. Datacom revenue was $78.3 million, up 5% sequentially. Silicon photonics remains an important revenue driver at 22% of total revenue or $105.4 million, up 4% from Q2. Revenue from 100G products increased 8% sequentially to $138.6 million but remains below peak levels as growth from faster data rate products continues to accelerate. Revenue from 400G and faster was $105.1 million, up 1% from last quarter and more than tripled from a year ago. Automotive has grown to become the largest category for the third quarter in a row with record revenue of $52.5 million in the third quarter, up 12% sequentially, driven primarily by growth from new automotive programs. Industrial laser revenue was $36.1 million, up 7% from Q2. Sensor revenue was $4.1 million and other non-optical communications revenue was up 10% to $24.8 million. Gross margin was 12.2%, up from 12.1% in Q2 and in line with our target range of 12% to 12.5%. Operating expenses in the quarter were $12.7 million or 2.6% of revenue, reflecting our ability to grow revenue without meaningful increases in operating expenses. This produced record operating income of $45.6 million or 9.5% of revenue, the highest level in two years. Taxes in the third quarter were $1.6 million and our normalized effective tax rate was 4%. We continue to anticipate an effective tax rate of about 4% for the year. Non-GAAP net income was a record at $45.4 million or $1.21 per diluted share. On a GAAP basis, net income was also a record at $27.5 million or $1 per diluted share. At the end of the third quarter, cash, restricted cash and investments were $508.9 million. Operating cash flow was a strong $23.8 million. With capex of $6.4 million, free cash flow was $27.5 million in the third quarter. During the quarter, we repurchased approximately 15,000 shares at an average price of $80.64 for a total cash outlay of $1.2 million. We expect total revenue in the fourth quarter to be between $475 million and $495 million and earnings per share to be in the range of $1.18 to $1.25 per diluted share.

With sequential growth in all of the end markets that we track, total revenue was $479.3 million. Non-GAAP operating margins of 9.5% were at the highest level in two years and helped produce record non-GAAP earnings of $1.21 per share. Revenue of $479.3 million was above our guidance range, and non-GAAP earnings of $1.21 also exceeded our guidance. Non-GAAP net income was a record at $45.4 million or $1.21 per diluted share. We expect total revenue in the fourth quarter to be between $475 million and $495 million and earnings per share to be in the range of $1.18 to $1.25 per diluted share.

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Sysco's sales for the quarter across all of our businesses were up 82% versus 2020 and up 4.3% versus 2019. Our sales results in our U.S. business were up 7.7% versus 2019. The U.S. foodservice industry in total is now within 5% of 2019 levels. During the fourth quarter, we won another $200 million of business with national customers bringing the cumulative total to $2 billion of net new wins since March of 2020. As you can see on Page number 12 of our slides, in addition to the large national account wins we have delivered, we have grown our local customer account by about 10%, which is a pace of 2.5 times greater than the broadline industry. In June, we increased our market share by 60 basis points and posted our sixth consecutive month of market share gains. During the fourth quarter, our inflation rate was approximately 9.6%. Notably, our international segment broke even for the quarter, reflecting a $92 million profit improvement over the third quarter. Our pricing system is now live in over 25% of our regions, and we remain on track to complete the implementation by the end of this calendar year. We are on track to deliver $750 million of structural cost reductions inclusive of what we delivered in fiscal 2021. We mentioned in a previous earnings call that we would hire over 6,000 associates in the second half of fiscal 2021. During fiscal 2022, we expect to achieve growth at a rate of 1.2 times the industry. That rate of growth is expected to accelerate across the three years of our long-range plan and we intend to deliver 1.5 times the market growth in fiscal 2024. As Kevin noted, fourth quarter sales were $16.1 billion, an increase of 82% from the same quarter in fiscal 2020 and a 4.3% increase from the same quarter in fiscal 2019. Please note that this year, our fiscal year had a 53rd week, which included 14 weeks in the fourth quarter as compared to only 13 weeks in the fourth quarter of each of fiscal 2020 and fiscal 2019. That additional week was worth just under $1.2 billion in sales. Sales in U.S. foodservice were up 88.4% versus the fourth quarter of fiscal 2020 and up 7.7% versus the same quarter in fiscal 2019. SYGMA was up 45.3% versus fiscal 2020 and up 20.9% versus the same quarter in fiscal 2019. For the quarter, local case volume within a subset of U.S. FS, our U.S. Broadline operations increased 74.3% while total case volume within U.S. Broadline operations increased 71.4%. Given the interest in the recovery curve from COVID-19, today we are disclosing that our July fiscal 2022 sales were also quite strong. Sales were more than $4.9 billion, an increase of 44.3% from the same period in fiscal 2021 and a 7% increase over the same period in fiscal 2019. The headline is that inflation during the quarter was up 9.6% for total Sysco. Gross profit for the enterprise was $2.9 billion in the fourth quarter, increasing 86.2% versus the same quarter in fiscal 2020. Most of the increase in gross profit was driven by year-over-year increases in sales, the 53rd week in fiscal 2021 worth about $208 million and marginal rate improvement at our largest business U.S. FS. Gross margin as a percentage of sales during the quarter actually increased 41 basis points versus the same period in fiscal 2020 and finished at a rate of 18.1%. Importantly, the enterprise margin rate improvement was also driven by 17 basis points of margin rate improvement in our largest business. For the fourth quarter, international sales were up 83.4% versus fiscal 2020, but down 14.6% versus fiscal 2019. Foreign exchange rates had a positive impact of 2.9% on Sysco's sales results. Turning back to the enterprise, adjusted operating expense increased 44.5% to $2.3 billion with increases driven by the variable cost that accompanies significantly increased volumes, one-time and short-term expenses associated with the snap-back, and investments against our Recipe for Growth. Our expense performance reflects the great progress we have made against our $350 million cost-out savings goal as well as the need to invest in both the current demand recovery and the long-term issues that Kevin mentioned earlier. In fact, we exceeded our $350 million cost-out goal during the full year. During the fourth quarter, we estimate that we spent more than $36 million against the snap-back including incremental investments against recruiting, training, retention and maintenance. We also estimate that we spent more than $50 million against our transformation initiatives such as our customer-centered growth, pricing, supply chain and technology strategic initiatives. Even with those significant investments, our adjusted operating expense as a percentage of sales improved to 14.3% from fiscal 2020 and moved to within 30 basis points of fiscal 2019's 14% as a percentage of sales for the fourth quarter. If we adjust out the purposeful snap-back and transformation investments we are making as temporary, we can better see the savings as our opex as a percentage of sales would have been 13.8% on an adjusted basis. Recall that we raised our objective to $750 million with the incremental savings coming largely over the course of fiscal '23 through fiscal '24. Remember, it is these capabilities that are generating the market share gains of 1.2 times to 1.5 times through fiscal 2024. Finally, for the fourth quarter, adjusted operating income increased $639 million to $605 million for the quarter. Our adjusted effective tax rate was 20.2%. Adjusted earnings per share increased $1 to $0.71 for the fourth quarter. Let me just wrap up the income statement by observing that for the year, all in, we delivered $1.02 of GAAP earnings per share and $1.44 of adjusted EPS. Cash flow from operations for the fourth quarter was $424 million. Net capex for the quarter was $180 million or 1.1% of sales, which was $79 million higher compared to the same quarter in the prior year. Free cash flow for the fourth quarter was $244 million, significantly above our anticipated free cash flow, even while we grew and maintained inventory at a level $400 million higher than Q4 fiscal '19. At the end of fiscal 2021, after our investments in the business, our significant reductions in debt and our dividend payments, we had $3 billion of cash and cash equivalents on hand. During the year, we generated positive cash flow from operations of $1.9 billion, offset by $412 million of net capital investment, resulting in positive free cash flow of $1.5 billion for the year. $2.3 billion of deleveraging already accomplished during the fiscal year through May 2021. Plans for an additional $1.5 billion will further debt reductions by the end of fiscal year '22. Because we have sized the headline on our Q4 tender offer to $1 billion, we are already tracking $150 million ahead of our debt repurchase commitments. Lastly, we returned almost $1 billion of capital to shareholders in fiscal year '21 in the form of our quarterly dividends. We were pleased to announce at Investor Day a $0.02 per share increase to our dividend, on which we made the first payment in July. This brings our dividend to $1.88 per share for the full calendar year 2022 and enhances our track record of increasing our dividends and our status as a Dividend Aristocrat. In May, I laid out our growth aspiration of growing at 1.2 times to 1.5 times the market. Also recall that we said, in fiscal year '22, we expected adjusted earnings per share of $3.23 to $3.43. We also called out that in fiscal year '24, we expect adjusted earnings per share of 30% more than our high point in fiscal year 2019, call it more than $4.65. That means that to hit our 1.2 times market growth in fiscal year 2022, we have to grow faster and we are. As a result, we are raising our sales expectations and now expect sales for the enterprise to exceed fiscal '19 sales by mid-single digits, adding roughly $2.5 billion to our top line guidance. From a tax perspective, we expect our overall effective rate to be approximately 24% in fiscal 2022, as we are not assuming changes to federal tax rates in this guidance. And based on the early strength of the recovery that Kevin mentioned during his remarks, as impacted by inflation and our continued progress against managing through the snap-back and investing for growth, we are increasing our guidance on adjusted earnings per share by $0.10 for fiscal year 2022 by moving the range up to $3.33 to $3.53. Capital expenditures during fiscal 2022 are expected to be approximately 1.3% of sales, reflecting the increased sales levels. And finally, recall that in May, we announced the conditions to the initiation of share repurchase, resulting from the new $5 billion share repurchase authorization.

As Kevin noted, fourth quarter sales were $16.1 billion, an increase of 82% from the same quarter in fiscal 2020 and a 4.3% increase from the same quarter in fiscal 2019. Given the interest in the recovery curve from COVID-19, today we are disclosing that our July fiscal 2022 sales were also quite strong. Adjusted earnings per share increased $1 to $0.71 for the fourth quarter. And based on the early strength of the recovery that Kevin mentioned during his remarks, as impacted by inflation and our continued progress against managing through the snap-back and investing for growth, we are increasing our guidance on adjusted earnings per share by $0.10 for fiscal year 2022 by moving the range up to $3.33 to $3.53.

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1 CRM just got better. And from a business perspective, well, I'd say it's been an absolutely extraordinary 18 months for Salesforce, I know for all of you and certainly for all the CEOs I met with today. And you can see we delivered our first $6-billion-quarter, about $6.3 billion, and continue to maintain our very strong growth rate, our profitability, our cash flow, our margin growth, continue to execute our new operating margin model. And you can see right now, revenue and the growth in the quarter, you can see $6.34 billion, up 23% year over year. And I guess I'm -- as excited as I am about the revenue, I'm also very excited that as we're executing this new operating margin model, we can see the margin in the quarter was also a very healthy, 20.4%, up 20 basis points year over year, and also delivered $386 million in operating cash flow. For fiscal year '22, we are raising again our guide to $26.3 billion, which is now at the high end of our range. It's a raise of $300 million, and it's going to represent about 24% projected growth year over year and just really reflects, I think, how well the company is doing in its core, not just through the Slack acquisition, but you can see organically, especially when you look at the numbers over the last five quarters. And we're raising our operating margin to 18.5%, up 80 basis points year over year. One is in our core products, our focus on customer success, the Customer 360 now with the Slack user interface and everything being Slack first, but also our core values. And as we start to head toward the Fortune 100, I think that -- a lot of the companies that I met with today were mostly Fortune 100 CEOs. And I'll tell you, I'm very excited that five out of the last five quarters that we've had that 20% or greater revenue growth. And three out of the last five quarters, we're having greater than 20% operating margin. So, we are really quite confident and remain on our path to generate $50 billion in revenue by fiscal year '26, which doesn't seem very far away from right now.

And you can see right now, revenue and the growth in the quarter, you can see $6.34 billion, up 23% year over year. For fiscal year '22, we are raising again our guide to $26.3 billion, which is now at the high end of our range. And we're raising our operating margin to 18.5%, up 80 basis points year over year.

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In 2021, our America's order levels were 16% higher than 2020, and 17% higher than pre-pandemic levels in 2019. With approximately 150,000 banking self-service devices connected to the solution, which represents approximately 122% year-on-year growth in connected devices. This customer relies on us for flawless execution and service excellence, and has over 25,000 checkout lanes. I'm pleased to report that this past year we delivered a 100% availability of point-of-sale, and self-checkouts states on a two most demanding shopping days of the year. Currently, there are over 40 relevant [Inaudible] or chargepoint operators globally, and we are working on in talks with many of them. The team has set a target to service over 30,000 charging stations by the end of 2022. Who is this partnership deal will provide a full range of managed services for initially over 1,000 of Compleos DC fast charging stations in public locations across Germany with the potential for expansion. I'm proud to note that in 2021, females accounted for over 60% of our senior hires, at the vice president and above level. And we made important strides environmentally, reducing our scope one and two carbon emissions by $0.06. He has been leading a global banking segment with responsibility for approximately 70% of the company's revenues, and he's deeply passionate about our customers and our business. When I initially joined the [Inaudible] I worked closely with our Latin American customers, and then managed or American banking customer segment, and for the past 18 months have been working closely with our global banking customers. In the fourth quarter, total revenue was $1.6 billion, a decrease over fourth quarter 2020 of approximately 4% as reported, and a decrease of approximately 1%, excluding the foreign currency impact of $22 million and $13 million impact from divested businesses. Adjusted for foreign currency and divestitures, product revenue increased approximately 4%, services revenue decreased the approximately 6%, and software revenue increased approximately 3% over fourth quarter 2020. This primarily impacted the US, Latin America, and certain iAPAC countries, and increased our revenue deferral to 2022 by $30 million to a total of $150 million. On a sequential basis, total revenue increased the approximately 11%. Full year 2020 revenue was $3.905 billion that was driven by demand for our DN series ATMs, especially our cash recyclers, our self-checkout devices, and the tax services offset by approximately $150 million of deferred revenue due to supply chain and logistics challenges. On a year-over-year basis, 2021 revenue was approximately flat as compared to 2020 as reported, and also flat excluding a foreign currency benefit of $74 million, and the $60 million impact from divested businesses. Adjusted for foreign currency and divestitures, product revenue increased approximately 4%, services revenue decreased approximately 4%, and software revenue increased approximately 2% for the full year 2020. For the fourth quarter, we reported adjusted of $126 million, and adjusted EBITDA margin of 11.9%. Fourth quarter adjusted EBITDA results reflect a reduction in operating expenses fully offset by the decline in gross profit due to the revenue deferral and non-billable inflation of approximately $30 million. Full year 2021 adjusted EBITDA was $450 million, the lower-end of our guidance range primarily due to supply chain challenges, which increases deferral of revenue, as I mentioned earlier to approximately $150 million, non-billable for the year was approximately $15 million. Last week we delivered free cash flow of $407 million for the fourth quarter, resulting in $101 million for the fiscal year 2021. Our revenue guidance for the full year 2022 is $4 billion to $4.2 billion, which reflects approximately $150 million in revenue deferral from 2021 to 2022, and organic growth and pricing growth, partially offset by model divestitures and terminated low-profit service contracts, and the potential ongoing logistics and supply chain disruptions. Our adjusted EBITDA outlook is $440 to $460 million, taking into account gross profit growth due to increased revenue and a model gross margin expansion of approximately 100 basis points, partially offset by an increase in operating expenses. Our free cash flow outlook is $130 to $150 million, reflecting our EBITDA outlook, normalization of working capital, and combination of the DN Now transformation and restructuring program and related payments.

And we made important strides environmentally, reducing our scope one and two carbon emissions by $0.06. Our revenue guidance for the full year 2022 is $4 billion to $4.2 billion, which reflects approximately $150 million in revenue deferral from 2021 to 2022, and organic growth and pricing growth, partially offset by model divestitures and terminated low-profit service contracts, and the potential ongoing logistics and supply chain disruptions.

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Overall restaurant traffic in the US was resilient by holding steady at around 90% of pre-pandemic levels for much of the quarter. Traffic at full service restaurants was 70% to 80% of the prior year levels for much of the quarter. Traffic and demand at non-commercial customers, which includes lodging, hospitality, healthcare, schools and universities, sports and entertainment, and workplace environment was fairly steady at around 50% of prior year levels for the entire quarter. In retail, consumer demand continued to be strong with weekly category volume growth between 15% and 20% versus the prior year. In Europe, which is served by our Lamb Weston Meijer joint venture, fry demand during much of the quarter was similar to last year, but softened the 75% to 85% of prior year levels during the latter part of the quarter as governments reimposed social restriction and as the weather turn colder. As you may recall, unlike in the US, QSRs in Europe generally have only limited drive-through capabilities. For the quarter, net sales declined 12% to $896 million. Sales volume was down 14% largely due to fry demand at restaurants and foodservice being negatively impacted following government imposed restrictions to contain the spread of COVID, as well as colder weather beginning to limit outdoor dining across many of our markets. Overall, as Tom described earlier, restaurant traffic and our sales volumes in the US stabilized at approximately 90% of pre-pandemic levels, although performance varied widely by sales channel. Price mix increased 2% driven by improved price in our Foodservice and Retail segments as well as favorable mix in retail. Gross profit declined $62 million as lower sales and higher manufacturing costs more than offset the benefit of favorable price mix and productivity savings. Since we typically carry upwards of 60 days of finished goods inventory, we realize the impact of these costs in our second quarter income statement as we sold that inventory. We expect to continue to incur COVID-related costs through at least the remainder of fiscal 2021. SG&A declined by nearly $8 million in the quarter, largely due to lower incentive compensation expense accruals and a $3.5 million reduction in advertising and promotional expense. The decline was partially offset by investments to improve our operations and IT infrastructure, which included about $5 million of non-recurring consulting and training expenses associated with implementing Phase 1 of our new ERP system. Equity method earnings were $19 million, which is up $4 million versus last year. Excluding the impact of unrealized mark-to-market adjustments equity earnings increased about $2 million due to better performance by our European joint venture. EBITDA, including joint ventures was $213 million which is down $48 million. Diluted earnings per share in the quarter was $0.66, down $0.29 largely due to lower income from operations. Sales for our Global segment, which generally includes sales for the top 100 North American based QSR and full service restaurant chains, as well as all sales outside of North America were down 12% in the quarter. Volume was down 11% due to softer demand for fries outside the home, especially in our international markets. Shipments to large chain restaurant customers in the US of which approximately 85% are to QSRs approach prior year levels as QSRs leveraged drive-through and delivery formats. International sales, which historically comprised about 40% of segment sales, we're at about 80% of prior year levels in the aggregate, but vary by market. Price mix declined 1% as a result of negative mix. Global's product contribution margin, which is gross profit less A&P expense declined 28% to $93 million. Sales for our Foodservice segment, which services North American foodservice distributors and restaurant chains generally outside the top 100 North American restaurant customers, declined 21% in the quarter. Segments to smaller chain and independent full service and quick service restaurants tracked around 70% to 80% of prior year levels through much of October, but slowed to 60% to 70% in November, following government's reimposing, social restrictions and as colder weather tempered restaurant traffic in some of our markets. Shipments to non-commercial customers improved modestly since summer but remain at around 50% of prior year levels, with strength in healthcare more than offset by continued weakness in the other channels. Price mix increased 4% behind the carryover benefit of pricing actions taken in the latter half of fiscal 2020. Foodservices product contribution margin declined 21% to $88 million. Sales for our Retail segment increased 7% in the quarter. Price mix increased 7%, primarily reflecting favorable mix benefit of selling more of our higher margin branded portfolio of Alexia, Grown in Idaho and licensed restaurant trademarks. Sales of our branded products were up about 30% which is well above category growth rates, which ranged between 15% and 20%. Retail's product contribution margin increased 6% to $30 million. In the first half, we generated nearly $320 million of cash from operations, which is down about $25 million versus last year, due to lower sales and earnings. We spent $54 million in capex, including expenditures for our new ERP system. We paid $67 million in dividends and a few weeks ago, announced a 2% increase in our quarterly dividend. As we discussed in our previous earnings call, in September, we amended our credit agreement to put in place a new three-year $750 million revolver. At the same time, using a portion of the more than $1 billion of cash on hand, we prepaid the approximately $270 million outstanding balance on the term loan that was due in November of 2021. At the end of the second quarter, we had more than $760 million of cash on hand and our new revolver was undrawn. Our total debt was $2.75 billion and our net debt to EBITDA ratio was 3.1 times. Specifically, US shipments in the four weeks ending December 27, were approximately 85% of prior year levels. In our Global segments, shipments to our large QSR and full-service chain customers in the US, were more than 95% of prior year levels. In our Foodservice segment, shipments to our full service restaurants regional and small QSRs and non-commercial customers in aggregate were 60% to 65% of prior year levels. Shipments to non-commercial customers, which have historically comprised about 25% of the segment's volume were roughly half of prior year levels and will likely remain soft for the remainder of the quarter. In Europe, shipments by our Lamb Weston Meijer joint venture were approximately 85% of prior year levels, continuing the softer demand that we realized during the latter part of the second quarter. With respect to contract pricing, after completing discussions for contracts that were up for renewal, we expect pricing across our domestic large chain restaurant portfolio in aggregate to be flat versus prior year. We believe that the restaurant traffic will gradually recover to pre-pandemic levels by the end of calendar 2021.

As you may recall, unlike in the US, QSRs in Europe generally have only limited drive-through capabilities. For the quarter, net sales declined 12% to $896 million. Sales volume was down 14% largely due to fry demand at restaurants and foodservice being negatively impacted following government imposed restrictions to contain the spread of COVID, as well as colder weather beginning to limit outdoor dining across many of our markets. Price mix increased 2% driven by improved price in our Foodservice and Retail segments as well as favorable mix in retail. We expect to continue to incur COVID-related costs through at least the remainder of fiscal 2021. Excluding the impact of unrealized mark-to-market adjustments equity earnings increased about $2 million due to better performance by our European joint venture. Diluted earnings per share in the quarter was $0.66, down $0.29 largely due to lower income from operations. We paid $67 million in dividends and a few weeks ago, announced a 2% increase in our quarterly dividend. With respect to contract pricing, after completing discussions for contracts that were up for renewal, we expect pricing across our domestic large chain restaurant portfolio in aggregate to be flat versus prior year. We believe that the restaurant traffic will gradually recover to pre-pandemic levels by the end of calendar 2021.

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In the quest to sharpen our focus on core operations, we recently announced the sale of our Italy commercial services and payments business at a very attractive multiple, over 15 times 2021 EBITDA. Beginning with global lottery segment, where same-store sales were up over 20% compared to both 2020 and 2019 levels. In the markets served by IGT's iLottery platform, our lottery same-store sales increased over 60% in 2021, including nearly doubling in the U.S., where iLottery penetration reached 12% in the fourth quarter. Instant ticket Services had a record year, fueled by a more than 35% increase in standard units produced. Our PlaySports solution powers over 60 venues in more than 20 states and was recently recognized as the Platform Provider of the Year at the SBC Awards North America. In addition, casino GGR trends and our sales funnel remains strong in North America, which represents about 70% of our global gaming segment. In the quarter, we generated over $1 billion in revenue, up 19% year over year on solid global same-store sales growth in lottery, higher replacement unit shipments and ASP in gaming and 25% growth in digital and betting, propelled by continued market expansion and customer demand for our products and technology. Strong profit flow-through and operating leverage drove adjusted EBITDA to $387 million and the associated margin to 37%, up 31% and 400 basis points, respectively. The solid financial performance and our rigorous approach to invested capital led to record level cash flow generation with cash from operations of nearly $400 million and free cash flow totaling $326 million, inclusive of favorable working capital performance, part of which is timing with Q1. In 2021, we delivered over $4 billion in revenue with significant growth across segments versus the prior year. Strong operating leverage, bolstered by structural cost savings, drove significant increases in profit with over $900 million in operating income and nearly $1.7 billion in adjusted EBITDA, exceeding both prior year and 2019 results. As we continue to recover from the extreme measures taken during the pandemic, our cost structure is benefiting from the execution of our OPtiMa program, where we overachieved our $200 million cost savings target. As a reminder, about 3/4 were achieved in our P&L, while 1/4 of that was achieved with structural efficiency in our capital expenditure. Cash flow generation exceeded our expectations with cash from ops of over $1 billion and free cash flow more than doubling to over $770 million, both record levels. Revenue increased 30% to $2.8 billion as strong customers' demand drove global same-store sales up over 20% year on year and versus 2019. As a reminder, extremely high play levels in the first half of '21 were bolstered by certain discrete items, including gaming hall closures in Italy, elevated multi-stage productivity and LMA performance in the U.S. These items contributed about $165 million in revenue and around $140 million of profit. The high flow-through of same-store sales growth and a positive geographic mix also led to record profit levels with operating income rising nearly 70% to $1.1 billion. Adjusted EBITDA increasing over 40% to $1.5 billion and operating income and adjusted EBITDA margins of 39% and 55%, respectively. Revenue rose 33% to $1.1 billion, driven by solid increases in active units, yields, number of machine units sold and ASPs. Unit reductions in this market of about 840 units year over year and 650 units sequentially were partly offset by increases in the balance of the portfolio. In the rest of the world, the installed base rose over 380 units year on year and 180 units sequentially, primarily driven by increases in Latin America and plus two units in South Africa. Global unit shipments increased 62% year on year as operators began increasing capital budgets in the midst of the market recovery. Shipments totaled 57% of pre-pandemic levels during 2021, indicating there is still some runway to a full recovery in this area, which we don't expect to happen completely until 2023, although we expect North America unit shipments will get close to 2019 levels in 2022. IGT sold over 23,800 units globally during 2021 compared to about 14,700 units in the prior year and at higher average selling prices. 2021 ASP of over $14,000 exceeded both prior year and 2019 levels on an improved mix of products and new cabinets. Strong operating leverage, which was accentuated by savings realized from the OPtiMa program, drove a substantial recovery in operating income and adjusted EBITDA with contributions of over $40 million and $170 million, respectively. Operating income margins in the fourth quarter reached 11%, nearly matching the 12% pre-pandemic level achieved in the fourth quarter of 2019 and are expected to continue to improve in 2022. The digital and betting segment continues to grow at a fast pace, generating revenue of $165 million in 2021 with double-digit growth achieved in both iGaming and sports betting. We completed the successful launch of iGaming in both Michigan and Connecticut, and so our sports betting footprint expand to over 60 sports books. Operating income grew to $33 million, and the operating margin reached 20%, a solid profit contribution from an emerging business and a nice profit flow-through even with increased investments in talent and resources to fund future growth. Adjusted EBITDA increased to $48 million, more than double the prior-year level. As I mentioned earlier, exceptional operational performance and disciplined capital management led to a record level of cash generation which, in addition to approximately $900 million in net proceeds from the strategic sale of our Italy gaming business, allowed us to reduce net debt by $1.4 billion. Leverage is down to 3.5 times, the lowest leverage in company history, and reaching the 2022 year-end leverage target 12 months early. In Q4, we reinstated a quarterly dividend and implemented a $300 million share repurchase program, the first in company history. We delivered over $80 million to shareholders during the quarter, including about $40 million in the purchase of 1.5 million shares at an average price of just about $27 per share. Based on recent SEC filings, you can see we continued repurchasing shares in Q1 with another 570,000 shares repurchased through February 9. Proactive management of our capital structure continued during the year, as evidenced by the redemption of nearly $1 billion of euro notes. The refinancing of another $1 billion in U.S. dollar notes at a lower interest rate and the successful amendment and extension of our term loan facility. The reduced debt, increased liquidity and extended maturities have greatly improved our credit profile and lower interest expense by about $60 million during the year. Based on the strong performance of 2021 and despite the recent headwinds, we are reaffirming the 2022 full year guidance we provided at the recent investor day. We currently expect to deliver revenue of approximately $4.1 billion to $4.3 billion, operating income margins of 20% to 22%, cash from operations of between $850 million and $1 billion and capital expenditures ranging from $400 million to $450 million. Leverage is expected to remain around 3.5 times x in '22 with some variability quarter to quarter. On a pro forma basis, we see a further improvement in our leverage ratio to the tune of 1/4 of a turn. In order to provide some indications with respect to the first quarter of 2022, we expect to achieve revenue of $1 billion to $1.1 billion and operating income margins of 20% to 22% in the quarter.

Based on the strong performance of 2021 and despite the recent headwinds, we are reaffirming the 2022 full year guidance we provided at the recent investor day. We currently expect to deliver revenue of approximately $4.1 billion to $4.3 billion, operating income margins of 20% to 22%, cash from operations of between $850 million and $1 billion and capital expenditures ranging from $400 million to $450 million. In order to provide some indications with respect to the first quarter of 2022, we expect to achieve revenue of $1 billion to $1.1 billion and operating income margins of 20% to 22% in the quarter.

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Occupancy has been slightly lower, but collections have been strong in the mid '90s and we expect a meaningful uptick in occupancy in August 1, as a local private university takes possession of approximately 130 units and our San Diego multi-family portfolio, at good rents by a master lease that has recently been executed. Each one is a negotiation and we try to make sure that we're getting something fair in return for anything less 100% on time collection of our contractual rents. Lastly, I want to mention that our Board of Directors has approved increasing the quarterly dividend 25% over the second quarter 2020 dividend of $0.20 to $0.25 for the third quarter based on higher rent collections in the second quarter than we had expected, combined with the significant embedded growth that we continue to expect in our office portfolio and the recent master lease signed in our multifamily portfolio. We remain hyper-focused on the safety and well-being of our personnel tenants and vendors, as 100% of our properties remain open and accessible by our tenants. Like SB 939 in California, which did not pass. In the proposed repeal of Prop 13 for commercial properties in California, which we believe is essentially a targeted tax increase on business, which would ultimately be passed on to tenants and customers most of whom can absorb such increases and could lead to even more business failure. Last night, we reported second quarter 2020 FFO of $0.48 per share and net income attributable to common shareholders of $0.13 per share for the second quarter. We're at 96% occupancy at the end of the second quarter, an increase of approximately 3% from the prior year. More importantly, same-store cash NOI increased 16% in Q2 over the prior year, primarily from City Center Bellevue in Washington, Lloyd District Campus, Office Campus in Oregon and Torrey Reserve Campus here in San Diego. Retail properties were at 95% occupancy at the end of the second quarter, a decrease of approximately 2% from the prior year. Additionally, due to COVID-19, we have taken reserve for bad debts against the outstanding retail accounts receivable and straight-line rents receivable at the end of the second quarter of approximately 14% and 7% respectively. From a dollar perspective, this translates into approximately $2 million and $1.4 million respectively, for a total of $3.4 million reserve related to our retail sector, which is approximately $0.045 of FFO. Our multifamily properties we're at an 85% occupancy at the end of the second quarter, a decrease of approximately 8% from the prior year as also reflected in our negative same-store cash NOI. But as Ernest mentioned, we expect this to increase back into the low to mid 90% occupancy once our master lease with a local private university commences on August 1. The Embassy Suites average occupancy for the second quarter of 2020 was 17%, compared with the prior year's second quarter average occupancy of 92%. A good rule of thumb in our view is that a hotel without any leverage on it needs to have approximately a 50% to 60% occupancy to breakeven. Our team in Hawaii forecasted earlier this month of 46% to 50% occupancy by year-end 2020. To our pleasant surprise, we ended June with a 29% occupancy, much higher than the average occupancy of 17% for the quarter. Additionally, in the last 15 days, we have been seeing occupancy ranging from 45% to 55% with our team in Hawaii expecting to end the month of July at 62% occupancy. On a companywide basis, we collected approximately 83% of the total second quarter billings, which primarily consists of base rent and cost reimbursements. We have also collected approximately 83% of July's billings as of the end of last week. In Q2, our office rent collections were approximately 98%. Our retail rent collections excluding Waikiki Beach retail were approximately 62%. And by the way -- so far in July is about 70%, and our multifamily collections were approximately 95%. Waikiki Beach Walk Retail had an approximately 30% collection rate in Q2. As Ernest noted earlier, the Board of Directors has decided to increase the quarterly dividend from $0.20 to $0.25 per share. Using the same 83% collection rate applied to our initial targeted dividend of $0.30 per quarter, it gets you to approximately $0.25 per share per quarter. As we look at the liquidity on our balance sheet, at the end of the second quarter, we had approximately $396 million in liquidity, comprised of $146 million of cash and cash equivalents and $250 million of availability on our line of credit. Our leverage which we measure in terms of net debt to EBITDA was 6.4 times on a quarterly annualized basis, resulting from the lower EBITDA from the added reserves that we took in the retail sector during Q2. On a trailing 12 month basis, our EBITDA would be approximately 5.8 times. 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 3.8 times on a quarterly annualized basis and at 4.1 times on a trailing 12 month basis. And finally with respect to $250 million of unsecured debt maturities that come due in 2021, we expect to extend the $100 million term loan up to 3 times with each extension for a one-year period subject to certain conditions and the remaining $150 million Series A Notes does not mature until October 31, 2021, which we would expect to refinance at lower rates. Our office portfolio stood at approximately 96% leased, with approximately 6% expiring through the end of 2021. We were fortunate to renew the IRS and veterans benefits administration leases early in 2020, the First & Main in Portland in a total of 131,000 feet at start rates nearly 20% above the rates of exploration. With leases already signed, we have locked in approximately $29.6 million of NOI growth comprised of $6 million in 2020, $14 million in 2021 and $9.6 million in 2022 in our office segment. We anticipate significant additional NOI growth in 2022 through the redevelopment and leasing of One Beach Street in San Francisco and 710 Oregon Square in the Lloyd submarket Portland, along with the repositioning of two buildings at Torrey Reserve in the Del Mar Heights submarket of San Diego. In addition, we can grow our Office portfolio by up to 768,000 rentable square feet or 22% on sites we already owned by building Tower 3 at La Jolla Commons, which is 213,000 feet and Blocks 90 and 103 at Oregon Square totaling up to 555,000 square feet. Tower 3 at La Jolla Commons is into the city of San Diego for permits and we continue evaluating market condition, prospective tenant interest and hopefully decrease in construction costs, leading to are upcoming commencing construction. Next, schematic design has completed for Blocks 90 and 103 at Oregon Square with design development of 50% complete. We are scheduled for our first hearing with the design review committee in Portland on August 20. We currently have two active request for proposals from prospective tenants for Blocks 90 and 103 totaling 422,000 square feet, but again we will be evaluating market conditions, tenant interest and construction cost prior to commencing construction.

Last night, we reported second quarter 2020 FFO of $0.48 per share and net income attributable to common shareholders of $0.13 per share for the second quarter.

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We believe the pandemic not only accelerated some existing purchase intent within the recreational vehicle and marine markets these last 15 months, but we are equally convinced there has been, is and will be a meaningful expansion of interest and engagement in the outdoors that will benefit our business and industries for many years, even through when avoidable cyclical periods that have been and will be a part of the outdoor economy for decades. With 10.1 million households having camped for the very first time in 2020 and another estimated 4.3 million households undergoing their own rookie camping experience as well in 2021, our team is helping to meet increased demand for our products and brands while delivering record financial performance. In the third quarter, Winnebago Industries grew net sales to a record $960.7 million, representing a 139% growth year over year and an organic ex-Newmar growth of 53% over our pandemic fiscal third quarter in 2019. As of April 2021, our RV fiscal year-to-date market share is now 12.5%, up 40 basis points from the same period last year. Winnebago Industries top-line performance in the third quarter also represented 14% sequential growth over our fiscal 2021 second quarter. Sales increased by 81.6% as compared to two years ago for third-quarter 2019, representing strong organic growth of our brands and also benefiting from the acquisition of Newmar. Sales increased by 14% in Q3 as compared to Q2, representing the continued efforts by our supply chain and our team to generate increased output to meet the very strong demand that our dealers and end customers are exhibiting for our products. This is also demonstrated by the record backlog related to dealer orders, up an additional 18.2% versus Q2. Gross margins of 17.7% increased 130 points versus the 16.4% of third quarter two years ago, driven by cost savings initiatives, product mix and productivity improvements. Gross margins declined modestly in Q3 compared to Q2; 17.7% in Q3, as compared to 18.6% in Q3 -- Q2, excuse me, driven by labor productivity impact from some of the supply chain inconsistencies, timing of investments in the business and higher material costs. Margins of 17.7% in Q3 were well above our historical run rate and reflect primarily, the improvement in the motorhome segment. Net income increased to $71.3 million in Q3, which is up 97% or almost double what was delivered two years ago. Net income increased 3%, compared to the $69.1 million in Q2. Reported diluted earnings per share of $2.05 in Q3 compares to a reported diluted earnings per share of $0.37 in the prior-year period and sequentially compares to a reported diluted earnings per share of $2.04 in Q2. Adjusted diluted earnings per share of $2.16 in Q3 compares to $2.12 in Q2. Diluted earnings per share was $1.14 Q3, two years ago. Revenues for the towable segment were $555.7 million for the third quarter and increased 26.5% sequentially versus the second quarter, driven by elevated output and supported by strong consumer demand for our Grand Design and Winnebago-branded products. Winnebago Industries' unit share of the North American towable market on a trailing three-month basis through April 2021, was 11.4%, reflecting an increase of 90 basis points over the same period last year. Segment adjusted EBITDA was $80.1 million, up 28.5% sequentially or compared to the second quarter. Adjusted EBITDA margin was a strong 14.4%, increasing from 14.2% in Q2, as continued leverage and pricing, combined with lower discounts and allowances, helped to offset rising costs driven by inflation. Backlog increased to a record $1.5 billion, an increase of 17% versus the second quarter, reflecting continued strong consumer demand, combined with extremely low levels of dealer inventory. In the third quarter, revenues for the motorhome segment were $385.3 million, up 1% sequentially compared to the second quarter. Segment adjusted EBITDA was $37.5 million, compared to a loss of $10.8 million in the same period last year. EBITDA in Q2 was $51 million. EBITDA margins of 9.7% remained very strong relative to the 4% to 5% recorded historically, and is down from a record Q2 due to a different product mix, lower productivity due to the supply chain inconsistencies and also investments in the business, including the very successful dealer meeting held by the Newmar business. The Newmar EBITDA margin of 9.7% was well ahead of EBITDA in Q3 of 2019 at 0.2%, reflecting the significant improvements from our cost savings, productivity and product mix. Backlog in the motorhome segment increased to a record $2.2 billion, an increase of 323.3% over the prior year and an increase of 21.2% versus Q2 as dealers continue to experience significant reductions in inventories due to extremely high levels of consumer demand. While we are experiencing inflationary pressures and remain conscious of competitive dynamics that may impact our net pricing equation, as well as continued supply chain inefficiencies caused by certain chassis or component constraints, we continue to expect to achieve a level of sustained profitability that is notably above the 4% to 5% EBITDA margin we've delivered in this segment historically. Driven by consistent levels of gross debt, growing levels of cash and consistent growth in adjusted EBITDA, our leverage ratio or net debt to adjusted EBITDA, is now 0.5 times. Our liquidity, including our currently untapped ABL, is just short of $600 million. Cash flow from operations was $148 million in the first nine months of fiscal 2021, a decrease of $14.5 million from the same period last year. On a quarterly basis, cash flow from operations was $81 million in Q3, which is an increase of $11.4 million versus the $69.6 million in Q2. Our effective tax rate in our fiscal third quarter decreased to 22.8%, compared to 25.3% in the same period last year. For the full year, we currently expect our tax rate to approximate 23% to 24%, excluding all discrete items from year-to-date results and those that may occur in the remainder of the year. During the third quarter, we paid a dividend of $0.12 per share on May 19, 2021, and, and our Board of Directors just approved a quarterly cash dividend of $0.12 per share payable on June 30, 2021, to common stockholders of record at the close of business on June 16, 2021. We joined over 12,000-plus global signatories, including several others in the outdoor recreation industry in supporting United Nation Global Compact's 10 principles and integrating these principles into our company's strategy. In the immediate future over the next 12 to 18 months, we will add capacity in many ways, building new facilities, as well as reengineering existing business processes operational flow or building redesigns. We believe industry wholesale shipments will grow approximately 50% annually in our 2021 fiscal year, and we are aligned with the RVIA forecast of approximately 34% more shipments for the industry for the full 2021 calendar year.

In the third quarter, Winnebago Industries grew net sales to a record $960.7 million, representing a 139% growth year over year and an organic ex-Newmar growth of 53% over our pandemic fiscal third quarter in 2019. Reported diluted earnings per share of $2.05 in Q3 compares to a reported diluted earnings per share of $0.37 in the prior-year period and sequentially compares to a reported diluted earnings per share of $2.04 in Q2. Adjusted diluted earnings per share of $2.16 in Q3 compares to $2.12 in Q2.

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We grew our sales to $761 million, sales were up 20% and earnings per share was up 26% versus last year. We closed this transaction on November 1 with a purchase price of $4 million. While the company only generates a little under $4 million in revenue today, this acquisition allows us to support our Industrial segment with the addition of a services business. With that said, we are raising our top and bottom line guidance for fiscal 2022 based on a few factors; first quarter results, higher sales expectations driven in part by incremental pricing and operating expense leverage. Total sales were $761 million, which is up 20% from last year, due in part to last year's softness related to the pandemic. In Engine, total sales were $527 million, up 21% with our first-fit businesses leading the charge once again. Sales in Off-Road were $94 million, up 45%. The exception was in the Asia Pacific region where we compared against the sales increase of nearly 40% in the prior year. In On-Road, first quarter sales were $32 million or down 1.5% year-over-year. Importantly, excluding this impact, total On-Road sales would have been up about 12% globally and up 7% in North America. In Engine Aftermarket, sales in the first quarter were $374 million, an increase of 18% from the prior year. These products accounted for about 30% of total Aftermarket sales and grew about 20% year-over-year. In the first quarter, sales of these products were up in the mid-20% range and they now account for nearly 40% of our Aftermarket OE channel sales. Included in these figures is PowerCore, which achieved another quarterly record for Aftermarket sales and increased more than 18%. Moving to Aerospace and Defense, first quarter sales of $28 million were up 23% year-over-year as the commercial aerospace industry rebounds from the pandemic-related pressure a year ago. Engine sales were down about 6% in the quarter. However, this is against a 40% increase last year. The Industrial segment had another solid quarter with total sales increasing 17% to $234 million. Sales of Industrial Filtration Solutions or IFS, grew 23% to $166 million with two-thirds of the increase coming from industrial dust collection. Process Filtration sales, which serve the food and beverage market, grew over 30% due to growth in new equipment and replacement parts in Europe. First quarter sales of Special Applications were $52 million, up 23% with strong contributions across our product portfolio, including notable increases in our disk drive and membranes businesses. Also within Special Applications, first quarter sales of venting products grew 19%. First quarter sales of Gas Turbine Systems or GTS were approximately $17 million, down 28% to almost entirely to timing of orders. First quarter sales grew 20%, operating income was up 23% and earnings per share of $0.61 was 26% above the prior year. First quarter operating margin increased 40 basis points to 14.1%. The increase was from leverage on higher sales, which was partially offset by gross margin pressure. First quarter operating expense as a percent of sales was favorable by approximately 160 basis points, driven primarily by volume leverage. Other expense was favorable this quarter by $1.5 million, mostly due to a pension curtailment charge we took in the first quarter of last year. Our first quarter cash conversion ratio was 32%, down meaningfully from last year, driven primarily by investments in inventory to further support our increasing demand. Inventory this quarter were up $60 million sequentially and $115 million year-over-year, mainly due to the impact of inflation, a commitment we made to increased levels of inventory to ensure we're adequately prepared to meet demand and supply chain challenges we have had internally with our customers on order deliveries. As a result, working capital was $71 million, net use of cash this quarter versus a $33 million benefit last year. First quarter capital expenditures were $18 million as we invested in various projects, including PowerCore capacity expansion in North America. We repurchased 1.3% of our outstanding shares for $103 million and we paid dividends of $27 million. We ended the quarter with a net debt to EBITDA ratio of 0.7 times. We are now expecting fiscal 2022 sales to be up between 8% and 12% with the nominal impact from currency translation. This increase from our previous guidance of 5% to 10% is driven by Q1 results as well as benefits from additional pricing actions that will be implemented and rolling over the balance of the year. For the Engine segment, we expect the revenue increase between 8% and 12%, up from our previous expectation of between 5% to 10%. We are still forecasting low-double-digit growth for the year, due in large part to comping against the COVID-related market weakness in fiscal '21. We expect sales to be up between 7% and 11%, which brings up the bottom end of our previous guidance range of 6% to 11% by a point. Special Applications revenue is forecasted to be up low-single-digits versus our initial guidance of down low-single-digits, reflecting stronger than expected growth across the portfolio in the first quarter. We maintained our expectation for a full year rate between 14.1% and 14.7%. As a reminder, last year's adjusted operating margin was 14%. And we now expect gross margin to be down 50 to 100 basis points from the prior year. To expand further on this point, last quarter we said we expected to pay 8% to 10% more for our raw materials this year, which equated to about 300 basis points. That estimate is now 12% to 14% or a little shy of 400 basis points. Additionally, freight and labor costs have now become a more significant headwind than we anticipated, which results in additional 100 basis points of gross margin pressure. Based on our updated forecast, we plan for a new earnings per share record of between $2.57 and $2.73, implying an increase from last year's adjusted earnings per share of 11% to 18%. In terms of capital expenditures, we are lowering our planned spend for this year to a range of between $90 million and $110 million. So essentially, a $10 million reduction to the range we provided in September of $100 million to $120 million. Given supply chain uncertainty and other variables, the timing of execution on some of our capacity expansion projects could be slowed. In terms of free cash flow, increased inventory levels, partially offset by the lower capex, result in a reduction to our free cash flow conversion forecast to between 70% and 80%, down from our initial guidance of 80% to 90%. On share repurchases, we still plan to repurchase about 2% of our outstanding shares this fiscal year. We previously invested $15 million for our materials research center, which will enable further development of our polymer-based chemistry solutions. It is also important to note, we increased our R&D budget this fiscal year by 10% over last year. We are well on our way of reducing CO2 emissions by 6,000 metric tons by the end of fiscal 2022.

With that said, we are raising our top and bottom line guidance for fiscal 2022 based on a few factors; first quarter results, higher sales expectations driven in part by incremental pricing and operating expense leverage. First quarter sales grew 20%, operating income was up 23% and earnings per share of $0.61 was 26% above the prior year. First quarter operating margin increased 40 basis points to 14.1%. The increase was from leverage on higher sales, which was partially offset by gross margin pressure. We are now expecting fiscal 2022 sales to be up between 8% and 12% with the nominal impact from currency translation. For the Engine segment, we expect the revenue increase between 8% and 12%, up from our previous expectation of between 5% to 10%. We are still forecasting low-double-digit growth for the year, due in large part to comping against the COVID-related market weakness in fiscal '21. Special Applications revenue is forecasted to be up low-single-digits versus our initial guidance of down low-single-digits, reflecting stronger than expected growth across the portfolio in the first quarter. Additionally, freight and labor costs have now become a more significant headwind than we anticipated, which results in additional 100 basis points of gross margin pressure. Based on our updated forecast, we plan for a new earnings per share record of between $2.57 and $2.73, implying an increase from last year's adjusted earnings per share of 11% to 18%. Given supply chain uncertainty and other variables, the timing of execution on some of our capacity expansion projects could be slowed.

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First, we expanded the adjusted EBITDA margin to 16.7% in the first quarter, which represents an increase of 420-basis-points from the first quarter of 2020. Second, we delivered 9% recurring revenue growth in the quarter. That brings recurring revenue to 57% of total revenue. We continue to make steady progress increasing our recurring revenue, which is consistent with our 80/60/20 goals. We generated $98 million of free cash flow in the quarter, which represents the first time in many years that NCR has generated positive free cash flow in the first quarter of the year. We have continued to progress executing our strategy and remain focused on our transition to drive NCR as-a-Service and achieve our 80/60/20 strategic goals. We have made significant progress against these goals, particularly as we accelerate margin expansion toward our 20% adjusted EBITDA margin target. In Banking, we continue to have positive momentum in our digital banking platform, with 11 new deals signed in the first quarter. We recently signed a new NCR Emerald deal with Brookshire Grocery, a Texas-based super-regional grocery with more than 180 stores across three states. During the first quarter, over 90% of all Aloha sites sold through our direct offices were sold as subscription bundles. The payment attaches rate is also strong at roughly 85% of sales into new sites. NCR and Steak 'n Shake recently entered into an agreement for NCR to support Steak 'n Shake for over 500 restaurants globally with the subscription-based point of sale software, hardware, and end-to-end IT services in support of their restaurants. Starting on the top left, consolidated revenue was $1.54 billion, up to $41 million or 3% versus the 2020 first quarter, driven by solid growth in our retail and hospitality segments. Revenue was down $87 million or 5% sequentially. This year's Q1 sequential decline in revenue compares to an average step down of over $300 million from Q4 to Q1 over the last four years. Recurring revenue was up 9% and comprised 57% of our revenue in the quarter. In the top right, adjusted EBITDA increased $70 million or 37% year over year to $258 million. Adjusted EBITDA margin rate expanded 420-basis-points to 16.7%. On our last call, we detailed the more permanent productivity improvements that accumulated to more than $150 million in recurring annual cost savings. The flat performance from the fourth quarter of 2020 compares to an average Q1 sequential decline of roughly $90 million in the first quarters of each of the last four years. In the bottom left, non-GAAP earnings per share was $0.51, up to $0.20 or over 65% from the prior year's first quarter. The tax rate of 28.2% was higher than the 2020 Q1 tax rate of 13.5% and our full-year guidance of 26%, up in both cases due to higher income and a decrease in discrete tax benefits. And finally, and maybe most importantly, we generated $98 million of free cash flow in the quarter. This compares to a use of cash of $20 million in the first quarter of 2020 and represents the first time in many years that NCR has generated positive free cash flow in our first quarter. The $60 million declines from the fourth quarter of 2020 compared to an average Q1 sequential decline of roughly $425 million in the first quarters of the prior four years. Banking revenue decreased by $7 million or 1% year over year, with more than all of that decline attributable to lower ATM hardware sales. Banking adjusted EBITDA increased $14 million or 10% year-over-year despite the lower revenue. As a result, the adjusted EBITDA margin rate expanded by 210-basis-points to 20.4%. On a sequential basis, revenue was down 5%, while adjusted EBITDA increased 17%, and the adjusted EBITDA margin rate expanded 380-basis-points. On the left, while the conversion of current quarter wins that Mike described will have a typical 9-month lag to conversion and eventual revenue generation, prior period wins at digital banking drove a 6% year-over-year growth rate in the first quarter. Digital banking registered users increased 13% compared to Q1 2020, and despite the decline in total banking revenue, we did grow in the right places. Recurring revenue in the Banking segment increased 8% year over year. Retail revenue increased $60 million or 13% year over year, driven by strong self-checkout and services revenue. Retail adjusted EBITDA increased $36 million or 97% year over year, while adjusted EBITDA margin rate expanded by 590-basis-points to 13.7%. This first-quarter performance demonstrates the impact of double-digit revenue growth accompanied by cost discipline, with incremental EBITDA conversion of $0.60 on the dollar. Self-checkout revenue increased 31% year over year, driven by broad-based demand both by the customer and by geography. Platform lanes increased 51% compared to the prior-year first quarter. And importantly, recurring revenue in this business increased 14% versus the first quarter of 2020. Hospitality revenue increased by $10 million or 6% as we are beginning to see restaurants reopen, rework existing locations, and expand. First-quarter adjusted EBITDA increased $18 million or more than tripled from the first quarter of 2020 due to higher revenue and lower operating expenses. Aloha Essentials sites, which bundle software, services, hardware, and payments into a single offering grew 61% when compared to the prior year's first quarter and grew 21% sequentially. Recurring revenue in this business was down 1% from last year and was flat sequentially. We provide our first-quarter results for 80/60/20 strategic targets that are now very familiar to you. We strive to generate 80% of our revenue from software and services or, described as the inverse, less than 20% of our revenue from discrete hardware sales. In the first quarter, software and services represented 72% of our revenue, which is an increase from 71% in the fourth quarter. The decline from 74% in the first quarter of 2020 was driven by higher SCO revenue this year. We aim for 60% of our revenue to be recurring, to drive more resilient, more predictable, and more valuable revenue. Recurring revenue represented 57% of total revenue, compared to 54% in the fourth quarter, and 53% in the first quarter of 2020. And we aspire to a 20% adjusted EBITDA margin rate. As I've already emphasized, we made significant progress in this metric with an adjusted EBITDA margin rate of 16.7%, compared to 12.5% in the first quarter of 2020, and 15.8% in the fourth quarter. Free cash flow of $98 million in this quarter, compared to free cash outflow in last year's same quarter of $20 million. Versus Q1 of 2020, all categories of inventory were down an aggregate of 17%, with days on hand down seven days operationally. Receivables were down 11%, with a 9-point improvement in those longer than 90 days, and days sales outstanding improved by nine full days. This slide also shows our net-debt-to-adjusted-EBITDA metric, with a leverage ratio of 3.2 times. We ended the first quarter with $319 million of cash and remain well within our debt covenants. We ended the first quarter with credit facility leverage of approximately 3.3 times, well under our debt covenant maximum of 4.6. We amended and extended our senior secured credit facility which provided an incremental $1.3 billion of new Term Loan A, and issued new $1.2 billion in the 8-year senior notes. The weighted average interest of these transactions is about 3.7%, which is significantly lower than our original model. At the eventual close of the transaction, these funds will all become available, and our total leverage covenant will widen to 5.5 times to allow us to execute our plan to delever rapidly from a forecasted post-close level of 4.5 times. So for Q2, for NCR is currently comprised, and relative to 2020's results, we expect revenue growth of 9% to 10%. On profitability, we expect the adjusted EBITDA margin rate to expand by 250-basis-points to 300-basis-points to more than 16%. We remain very excited about the transaction as the addition of Cardtronics will accelerate our NCR as-a-Service strategy and is expected to be accretive to non-GAAP earnings per share for the first year by 20% to 25%. It will enhance our scale and cash flow generation while advancing our 80/60/20 strategic targets by roughly two years. Looking forward, our key priorities are clear; First, we will continue to accelerate our NCR as-a-Service and 80/60/20 strategy.

Starting on the top left, consolidated revenue was $1.54 billion, up to $41 million or 3% versus the 2020 first quarter, driven by solid growth in our retail and hospitality segments. In the bottom left, non-GAAP earnings per share was $0.51, up to $0.20 or over 65% from the prior year's first quarter.

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With earnings per share of $7.28, our third quarter performance surpasses our previous record of $5.04 set in the second quarter of this year and nearly matches our full year earnings record of $7.42 that we set back in 2018. Since our founding 56 years ago, sustainability has been at the core of Nucor's business model. Our use of recycled scrap-based EAF technology enables us to operate at 70% below the current GHG intensity for the global steel industry. Econiq steel will further advance our leadership position by applying credits from 100% renewable electricity and high-quality carbon offsets to negate any remaining Scope one or two emissions from our steelmaking process. With coil width of up to 84 inches, a tandem cold mill and initially two galvanizing lines, the new sheet mill will position Nucor to grow its market share in value-added products from automotive, appliance, HVAC, heavy equipment, agricultural, transportation and construction applications. The mill's product mix will be approximately 2/3 cold rolled and galv. Our investment in this greenfield sheet mill represents a continuation of Nucor's balanced approach to capital allocation, investing in projects and acquisitions expected to generate returns that substantially exceed our cost of capital, while also continuing to return at least 40% of our net income to stockholders through a combination of dividends and share repurchases. This facility will have the capacity of 600,000 tons annually. Our bar mill group is where our steelmaking started over 50 years ago, and it continues to generate very attractive returns on capital. We are proud to report our third quarter of 2021 earnings of $7.28 per diluted share, establishing a new quarterly earnings record. This quarter's results also compare favorably with year-ago third quarter earnings of $0.63 per diluted share. Due to higher-than-expected inventory profit eliminations, third quarter earnings were slightly below our guidance range of $7.30 to $7.40 per diluted share. Year-to-date earnings of $15.34 per diluted share are more than double 2018's record annual earnings of $7.42 per diluted share. Our results reflect strong returns from consistent reinvestment in our operations over the years and outstanding execution by our team by significant organic growth investment projects, representing approximately $1 billion in aggregate capital investment, completed start-up and full product commissioning over the 2019 to 2020 period. During this past quarter, these projects together generated EBITDA exceeding $180 million. Just two years after beginning operations in September of 2019, the Gallatin, Kentucky hot band galvanizing lines cumulative EBITDA exceeds the project's $200 million investment. At 72 inches wide, this line is the widest hot rolling galvanizing line in North America and is uniquely positioned to serve value-added markets, such as automotive, solar tubing, grain storage, culverts and cooling towers. The facility ran at 112% of design capacity in the third quarter of 2021. This facility also ran at 112% of rated capacity in the third quarter of 2021. As most of you are aware, two more major capital projects also totaling approximately $1 billion are on schedule to begin start-up during the fourth quarter. Looking into 2022, our team constructing the $1.7 billion Brandenburg, Kentucky state-of-the-art plate mill is on track for start-up late next year. Project-to-date capital spending totaled about $570 million. Located in the middle of the largest U.S. plate-consuming region and able to produce 97% of plate products consumed domestically, this mill positions Nucor to support domestic production of wind towers, while securing a market leadership position in plate. Cash provided by operating activities for the first nine months of 2021 was approximately $3.6 billion. Nucor's free cash flow, or cash provided by operations minus capital spending of $1.2 billion, was about $2.4 billion. For full year 2021, we now estimate capital spending of approximately $1.7 billion. At the close of the third quarter, our cash, short-term investments and restricted cash holdings totaled $2.3 billion. This is a decline of about $900 million from the second quarter level. During the third quarter, Nucor funded significant uses of cash totaling approximately $3.6 billion, including acquisitions of $1.3 billion, capital spending of $505 million, share repurchases of $858 million and cash dividends of $120 million and a net working capital expansion on inventory, receivables, payables and accruals totaling $766 million. The cash and short-term investments drawdown, plus the receipt of $197 million from the issuance of green bonds tied to the Brandenburg project. At the close of the third quarter, total long-term debt, including current portion, was approximately $5.6 billion. Gross debt as a percentage of total capital was approximately 29%, while net debt was about 17% of total capital. We remain committed to returning capital through cash dividends and share repurchases a minimum of 40% of our net income over time. For the first nine months of 2021, cash returned to shareholders totaled $2.1 billion. That represents approximately 47% of Nucor's net income for this period. The year-to-date capital returns consisted of dividends of $367 million and almost $1.8 billion of share repurchases. During the third quarter, we repurchased 8.2 million shares at an average cost of approximately $105 per share. Year-to-date repurchases totaled 20.35 million shares at an average cost of just over $87 per share. Over the first nine months of 2021, Nucor's shares outstanding have decreased by about 5.5%. We have paid and increased our regular quarterly dividend every year since dividends were instituted in 1973. Issued and outstanding shares have been reduced by more than 10%, moving from 318 million shares at the end of 2017 to approximately 286 million shares at the end of the third quarter. Over that same period, we have grown our steel bar production capacity by about 13% to 9.6 million tons. We are having a remarkable year in 2021, but it should not be missed that Nucor's ability to generate higher earnings per share is continuing to grow. In fact, order backlogs at most of our businesses suggest strength well into 2022. Compared to third quarter, we expect earnings growth at our steel mills and steel products segments.

With earnings per share of $7.28, our third quarter performance surpasses our previous record of $5.04 set in the second quarter of this year and nearly matches our full year earnings record of $7.42 that we set back in 2018. With coil width of up to 84 inches, a tandem cold mill and initially two galvanizing lines, the new sheet mill will position Nucor to grow its market share in value-added products from automotive, appliance, HVAC, heavy equipment, agricultural, transportation and construction applications. We are proud to report our third quarter of 2021 earnings of $7.28 per diluted share, establishing a new quarterly earnings record. Over the first nine months of 2021, Nucor's shares outstanding have decreased by about 5.5%. We are having a remarkable year in 2021, but it should not be missed that Nucor's ability to generate higher earnings per share is continuing to grow. In fact, order backlogs at most of our businesses suggest strength well into 2022. Compared to third quarter, we expect earnings growth at our steel mills and steel products segments.

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For the fourth quarter of 2020, revenues decreased to $148.6 million compared to $236 million in the fourth quarter of the prior year. Adjusted loss for the fourth quarter was $11.3 million compared to an adjusted operating loss of $17.3 million in the fourth quarter of the prior year. Adjusted EBITDA for the fourth quarter was $7.8 million compared to adjusted EBITDA of $23.2 million in the same period of the prior year. For the fourth quarter of 2020, RPC reported a $0.03 adjusted loss per share compared to a $0.07 adjusted loss per share in the fourth quarter of the prior year. Cost of revenues during the fourth quarter of 2020 was $117.9 million or 79.3% of revenues compared to $176.9 million or 75% of revenues during the fourth quarter of 2019. Selling, general and administrative expenses decreased to $26 million in the fourth quarter of 2020 compared to $36.8 million in the fourth quarter of the prior year. Depreciation and amortization decreased to $18 million in the fourth quarter of 2020 compared to $40.3 million in the fourth quarter of the prior year. Technical Services segment revenues for the quarter decreased 36.5% compared to the same quarter in the prior year. Segment operating loss in the fourth quarter of this year was $11.3 million compared to $17.2 million operating loss in the fourth quarter of the prior year. Our Support Services segment revenues for the quarter decreased 43.6% compared to the same quarter in the prior year. Segment operating loss in the fourth quarter of 2020 was $2.6 million compared to an operating profit of $1.2 million in the fourth quarter of the prior year. And on a sequential basis, RPC's fourth quarter revenues increased 27.5%, again to $148.6 million from $116.6 million in the prior quarter, and this was due to activity increases in most of the segment service lines as a result of higher completion activity. Cost of revenues during the fourth quarter of 2020 increased by $17 million or 16.9% to $117.9 million 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 86.5% in the third quarter of 2020 to 79.3% in the fourth quarter due to the leverage of higher revenues over certain costs including more efficient labor utilization. Selling, general and administrative expenses during the fourth quarter of 2020 decreased 19.6% to $26 million from $32.4 million in the prior quarter. RPC recorded impairment and other charges of $10.3 million during the quarter. These charges included a non-cash pension settlement loss of $4.6 million and the cost to finalize the disposal of our former sand facility. RPC incurred an operating loss of $11.3 million during the fourth quarter of 2020 compared to an adjusted operating loss of $31.8 million in the prior quarter. RPC's adjusted EBITDA was $7.8 million in the current quarter compared to adjusted EBITDA of negative $12.3 million in the prior quarter. Technical Services segment revenues increased by $29.7 million or 27.2% to $139 million in the fourth quarter due to increased activity levels in several service lines. RPC's Technical Service segment incurred an $11.3 million operating loss in the current quarter compared to an operating loss of $24.9 million in the prior quarter. Support Services segment revenues increased by $2.3 million or 32.1% to $9.7 million in the fourth quarter. Operating loss narrowed slightly from $3.8 million in the prior quarter to $2.6 million in the current quarter. At the end of the fourth quarter, RPC's pressure pumping capacity remained at approximately 728,000 hydraulic horsepower. Fourth quarter 2020 capital expenditures were $12.8 million. We currently estimate 2021 capital expenditures to be approximately $55 million. However, while we expect activity levels to continue to improve as the year progresses, we remain committed to capital discipline. At the end of the fourth quarter, RPC's cash balance was $84.5 million and we remain debt free.

For the fourth quarter of 2020, revenues decreased to $148.6 million compared to $236 million in the fourth quarter of the prior year. For the fourth quarter of 2020, RPC reported a $0.03 adjusted loss per share compared to a $0.07 adjusted loss per share in the fourth quarter of the prior year. However, while we expect activity levels to continue to improve as the year progresses, we remain committed to capital discipline.

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Today, we reported organic revenue growth of 6% and adjusted earnings per share of $0.50, up $0.04 or 9% compared with the first quarter of the prior year. Chad is a business builder who has been an integral part of Haemonetics for 12 years. Our goal was to achieve $80 million to $90 million in gross savings by the end of fiscal '23. I am proud to share that despite the headwinds in the past two years, we are planning to meet our savings target and save an additional $35 million by extending this program through the end of fiscal '25. Plasma revenue increased 6% in the quarter as the pandemic and the associated government subsidies continued to have a pronounced effect on the U.S. source plasma donor pool. North America disposables revenue increased 3% in the quarter driven by improvement in collections volume partially offset by price adjustments including the expiration of fixed term pricing on a historical PCS2 technology enhancement. Sequentially, U.S. source plasma collection volumes declined 6% compared with about 6% seasonal improvement historically as additional economic stimulus hindered recovery. We had double-digit growth in our plasma software revenue in the quarter supported by additional recovery in plasma collection volumes and our Donor 360 app, which enables plasma donors to register at home and streamline the pre-collection process with enhanced safety, efficiency, and convenience. We've made significant progress with our Persona technology and early adopters are benefiting from an additional 9% to 12% plasma yield per donation. As the industry recovers from the pandemic, we expect to return to the long-term 8% to 10% growth of U.S. sourced plasma collections and we see potential to grow in excess of that as customers strive to replenish depleted plasma inventories. As we approach the midpoint of our second quarter, collections have improved 21% compared with the 14% improvement in the first quarter. We remain vigilant about potential disruptions caused by new COVID variants and recent reinforcement of the U.S. border policy, but we anticipate strong plasma collection recoveries in the second half of the year and a firm fiscal '22 organic revenue growth of 15% to 25%. Moving to hospital, revenue grew 26% in the quarter primarily due to continued improvements in hospital procedures driving increased utilization of disposables, strong capital sales in North America, and new business opportunities in Europe. Hemostasis Management revenue grew 31% in the quarter. Cell Salvage revenue was up 27% in the quarter with double-digit growth across all of our key markets. Transfusion Management grew 11% in the quarter primarily driven by strong growth in SafeTrace Tx as we completed new account installations in the U.S. BloodTrack also showed significant growth in the U.S. with a slight decline in international markets as new COVID concerns delayed implementation. We affirm our expectation for 15% to 20% organic revenue growth in hospital including Hemostasis Management organic revenue growth in the mid-20s. Our newly acquired VASCADE vascular closure business delivered $22 million in revenue in the first quarter, exceeding our expectations. We are increasing our fiscal '22 revenue guidance from $65 million to $75 million to $75 million to $85 million as we look to accelerate additional growth through further investments. Blood center revenue declined 6% in the first quarter. Apheresis revenue declined 3% in the quarter and was impacted by unfavorable order timing and lost revenue from the previously announced customer loss included in our first quarter fiscal '21 results. We also experienced strong market demand for platelets in China driven by our expansion in Tier 2 markets. Whole blood revenue declined 14% driven by lower collection volumes and discontinued customer contracts in North America. Our expectations for the blood center business are unchanged and our fiscal '22 revenue guidance is a decline of 6% to 8%. So I will start with adjusted gross margin, which was 54.7% in the first quarter, an increase of 750 basis points compared with the first quarter of the prior year. Adjusted operating expenses in the first quarter were $87.1 million, an increase of $23.4 million or 37% when compared with the prior year. As a percentage of revenue, adjusted operating expenses increased by 550 basis points and were at 38%. Our first quarter adjusted operating income was $37.9 million, an increase of $9.4 million or 33% compared with the prior year. Our adjusted operating margin was 16.6% in the first quarter, an increase of 200 basis points compared with the same period in fiscal '21. We affirm adjusted operating margin guidance of fiscal '22 to be in the range of 19% to 20%. Our adjusted income tax rate was 24% in the first quarter compared with 4% in the same period of fiscal '21. We now expect our fiscal '22 adjusted tax rate to be 22%. First quarter adjusted net income was $25.4 million, up $1.7 million or 7% and adjusted earnings per diluted share was up was $0.50, up 9% when compared to the first quarter of fiscal '21. The adjusted income tax rate in the first quarter of fiscal '22 had a $0.13 downward impact on adjusted earnings per diluted share when compared with the prior year. Our Vascular Closure business is exceeding original expectations and we expect this business to be net neutral to adjusted earnings per diluted share in fiscal '22 compared with our original expectation of $0.15 to $0.20 dilution in the first year following the acquisition. Today we announced a revised operational excellence program with total gross savings of $115 million to $125 million that will deliver $80 million to $90 million in gross savings by the end of fiscal '23, which is in line with our original expectations with an additional $35 million in savings by the end of fiscal '25 with the return of volume back to pre-pandemic levels. Additionally, we expect to incur $95 million to $105 million in restructuring and restructuring related costs over the course of this program. In addition to updating the total estimated gross savings for this program, we accelerated the pace of these savings in fiscal '22 and now expect this program to deliver gross savings of approximately $33 million, an increase of $11 million or 50% when compared with our previous guidance. Due to increasing inflationary pressures and investments in manufacturing, we anticipate about 25% of these savings will benefit adjusted operating income in fiscal '22. We expect fiscal '22 adjusted earnings per diluted share to be in the range of $2.60 to $3.00. Cash on hand at the end of the first quarter was $173 million, a decrease of $19 million since the beginning of the fiscal year. Free cash flow before restructuring and turnaround costs was $2 million compared with $11 million in the same quarter of the prior year. We affirm our previous guidance and continue to expect free cash flow before restructuring and turnaround expenses in fiscal '22 to be $135 million to $155 million.

Today, we reported organic revenue growth of 6% and adjusted earnings per share of $0.50, up $0.04 or 9% compared with the first quarter of the prior year. First quarter adjusted net income was $25.4 million, up $1.7 million or 7% and adjusted earnings per diluted share was up was $0.50, up 9% when compared to the first quarter of fiscal '21. We affirm our previous guidance and continue to expect free cash flow before restructuring and turnaround expenses in fiscal '22 to be $135 million to $155 million.

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Before we discuss our results, I encourage you to review the cautionary statement on slides 2 and 3 for our customary disclosures. Envestnet achieved strong adjusted revenue growth of 23% in the quarter and 70% year-to-date. The number of advisors on the Envestnet platform is now almost 108,000 with 14 million accounts that make up $5.2 trillion in assets. Our data aggregation business serves over 500 million aggregated accounts each day. New accounts are being opened at a faster pace and we are averaging well more than 10,000 new accounts every week. During the second quarter, we serviced almost 15 million trades and completed 1.8 million service requests. We're also generating more than 8 million data driven recommendations a day for our clients to better connect and better serve all of their clients. As we mentioned on Investor Day, we are on our way to 10 million recommendations a day by year-end and over a billion, a day by 2025. As you overlay these trends across the current business that we serve today, which is $5.2 trillion in assets. We believe we can increase our revenue by roughly 10 basis points on average on 10% to 15% of this asset base. Our developer portal enables over 625, third party FinTechs to leverage APIs embedding our capabilities and data into their environments. This usage has grown by 1700% since the beginning of January 2020. Adjusted revenues for the second quarter grew 23% to $289 million compared to the second quarter of last year, adjusted EBITDA grew 27% to $71 million compared to the second quarter of last year. Adjusted earnings per share was $0.67. Turning to the balance sheet; we ended June with approximately $370 million in cash and debt of $860 million. Our $500 million revolving credit facility was undrawn as of June 30, making our net leverage ratio at the end of June 1.8 times EBITDA. We continue to expect the investments to account for roughly $30 million of operating expense during the year. We expect the investments to ramp up throughout 2021 with most of the impact in the second half of the year and annualizing to a run rate of approximately $40 to $45 million in 2022, growing at the same rate of operating expenses thereafter. Adjusted EBITDA to be between $61 million and $63 million as we further ramp up the investments and earnings per share to be $0.58 per share. For the full year, we expect adjusted revenues to be between $1.169 million and $1.174 million, up 17% to 17.5% compared to 2020. Adjusted EBITDA to be between $253 and $257 million, representing growth of 4% to 6% for the full year, and earnings per share to be between $2.30 and $2.35, which is $0.31 higher than the original guidance we gave back in February. Second, our data and analytics segment has grown subscription revenue around 4% in the first-half of the year compared to the first-half of last year. As we continue to execute on our strategy in the coming years and begin to benefit from the investments were making now, we will capture more of the opportunity we've identified positioning us to attain our longer-term targets of mid-teens growth in revenue and adjusted EBITDA margin of 25% by 2025.

Adjusted earnings per share was $0.67. Adjusted EBITDA to be between $61 million and $63 million as we further ramp up the investments and earnings per share to be $0.58 per share. Adjusted EBITDA to be between $253 and $257 million, representing growth of 4% to 6% for the full year, and earnings per share to be between $2.30 and $2.35, which is $0.31 higher than the original guidance we gave back in February.

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We'll continue to leverage our 80/20 principles as we align around our best customers, our best prospects for growth, and our critical business priorities. Our backlog is now $186 million higher than it was at the end of last year. Both are executing well in the challenging operating environment as they come up to speed on our 80/20 playbook. With that, I'll turn to our market outlook on Page 7. It impacted FMT's organic sales by 8%. In other words, excluding the impact of Flow MD, FMT organic sales would have grown 15% instead of 7% as reported. Q3 orders of 774 million were up 36% overall and up 28% organically. We built 62 million of backlog in the quarter, and all three segments had strong organic performance versus last year as well as versus the third quarter of 2019. Third-quarter sales of 712 million were up 23% overall and up 15% organically. Excluding Flow MD, organic sales would have been up 18% overall. Q3 gross margin expanded 50 basis points to 43.8%. Excluding the impact of a $9.1 million pre-tax fair value inventory step-up charge related to the Airtech acquisition, adjusted gross margin was 45%, and improved sequentially. Third-quarter operating margin was 22.6%, flat compared to prior year. Adjusted operating margin was 24.3%, up 120 basis points compared to prior year, largely driven by our gross margin expansion and fixed cost leverage, offset with some pressure from targeted reinvestments and the dilutive impact of Airtech and ABEL acquisitions due to their intangible amortization costs. Our Q3 effective tax rate was 23.4%, which was higher than the prior-year ETR of 14.4% due to the finalization of tax regulations enacted in the third quarter of 2020 as well as a decrease in the excess tax benefit related to share-based compensation in the current period. Third-quarter net income was $116 million, which resulted in an earnings per share of $1.51. Adjusted net income was $125 million, resulting in an adjusted earnings per share of $1.63, up $0.23 or 16% over prior-year adjusted EPS. The tax rate movement I mentioned drives a $0.27 differential in earnings per share as compared to the prior-year quarter. Said differently, our earnings per share would have expanded by $0.50 or 35% had 2021 been taxed at the 2020 rate. Finally, free cash flow for the quarter was 142 million, up 5% compared to prior year, and was 113% of adjusted net income. Adjusted operating income increased 39 million for the quarter compared to the prior year. Our 15% organic growth contributed approximately 29 million, flowing through at our prior-year gross margin rate. This reinvestment back into the business, higher variable compensation, and targeted increases in discretionary spending drive the year-over-year pressure of $15 million. Despite the incremental spend, inflation, and supply chain-driven operational efficiencies, we still achieved a solid 37% organic flow-through. Flow-through is then negatively impacted by the dilutive impact of acquisitions and FX, getting us to a reported flow-through of 30%. For the fourth quarter, we are projecting adjusted earnings per share to range from $1.55 to $1.58. We expect organic revenue growth of nine to 10% and adjusted operating margins between 23.5% and 24%. The Q4 effective tax rate is expected to be approximately 23%. We expect about 0.5% of top-line benefit from FX, and corporate costs in Q4 are expected to be around 19 million. We are narrowing our full-year earnings per share guidance from a range of $6.26 to $6.36 to $6.30 to $6.33. We are also maintaining our full-year organic growth of 11 to 12%. We expect operating margins of approximately 24%. We expect FX to provide 1.5% benefit to top-line results. The full-year effective tax rate is expected to be around 23%. Capital expenditures are anticipated to be around 65 million, in line with our previous guidance. Free cash flow is expected to be around 105% of net income, lower versus our last guide primarily due to working capital investments. And corporate costs are expected to be approximately $73 million for the year. Bill and I both joined IDEX around the same time in 2008, and I've learned a great deal from him over the years.

Third-quarter sales of 712 million were up 23% overall and up 15% organically. Third-quarter net income was $116 million, which resulted in an earnings per share of $1.51. Adjusted net income was $125 million, resulting in an adjusted earnings per share of $1.63, up $0.23 or 16% over prior-year adjusted EPS. For the fourth quarter, we are projecting adjusted earnings per share to range from $1.55 to $1.58. We are narrowing our full-year earnings per share guidance from a range of $6.26 to $6.36 to $6.30 to $6.33.

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As we announced last night, first quarter adjusted earnings per share was $1.66, a 44% increase from the prior year. Our chopper pump introduced in 2018 has been proven to reduce maintenance costs by 75%. Together, these two products are on track to drive $30 million of incremental sales by 2025. In February, we presented, in addition to our triple offset valve line, the FK Tri-X product that is true breakthrough focused on replacing other valve technologies and expanding our addressable market by another $500 million for this product line. This valve is completely new in the industry and delivers four to 6 times better flow than the competition, while maintaining the superior sealing technology of a triple offset valve, and therefore, reducing the total cost of ownership by 50%. This product provides more resistance to delamination and corrosion and lasts over 10 times longer than competing products. We just exited our best quoting month ever for this product, which was introduced in 2019, and we are on track to deliver sales approximately 4 times last year's levels. To date, 147 denominations of specified Crane Currency's technology and 10 new denominations over the last 12 months, including the first for our new BREEZE product introduction. For example, paper yields in our Swedish substrate operation are up 8% over the last 12 months, a material improvement that directly improves profitability. When we announced this acquisition in late 2017, we targeted $1 of earnings per share accretion by 2021. Based on where we ended the quarter, I am very confident we will exceed that $1. Balancing these factors, we are raising our adjusted earnings per share guidance by $0.65 to range of $5.65 to $5.85. At the midpoint, that reflects 50% adjusted earnings per share growth. We are raising our core sales growth forecast by two points to a range of 4% to 6%. Sales of $288 million increased 12% driven by a 6% increase in core sales, a 5% benefit from favorable foreign exchange and modest acquisition benefit. Fluid Handling operating profit increased by 24% to $39 million. Adjusted operating margins increased 120 basis points to 13.4%, reflecting strong execution on productivity, benefits from last year's cost actions and the higher volumes. Sequentially, trends in Fluid Handling improved across the board with foreign exchange neutral backlog up 4% and foreign exchange neutral orders up 15%. Compared to the prior year, backlog increased 5% and orders increased 2%. In February, we guided to core growth of 0.5%, which is now expected to be in the mid-single-digit range. Our original guidance for favorable foreign exchange of 2% is now running closer to 4%, and we still expect an incremental acquisition benefit of approximately $5 million this year from I&S. Margins should also exceed our original 12.5% guidance. At Payment & Merchandising Technologies, sales of $338 million in the quarter increased 13% compared to the prior year, driven by 8% core sales growth and a 4% benefit from favorable foreign exchange. Segment operating profit increased 176% to $85 million. Adjusted operating margins increased 1,500 basis points to 25.3%. And while currency core sales increased 52%, our high-margin Payment business core sales declined 12% and is still several quarters away from a full recovery. Given all those favorable trends for 2021, core sales growth is likely to reach the high single digits this year, somewhat better than the 6% we originally guided to, with favorable foreign exchange now, a little above 3% benefit for the year. Margins are now likely to be above 20% on a full year basis, but we certainly expect margins to moderate somewhat as the year progresses. At Aerospace & Electronics, sales declined 20% to $154 million with segment margins of 16.9%. In the quarter, total aftermarket sales declined 29%, driven by a 43% decline in the commercial aftermarket and a 5% decline in military aftermarket sales. Commercial OE sales declined 32%, but the defense OE business remained solid with sales up 4%. On a full year basis, the core sales decline should be a couple of points better than the 8% decline we guided to earlier this year. We still expect segment margins to recover back to north of 20% fairly quickly after 2021 as the commercial markets continue to recover on a substantially lower cost base. For this year, we expect margins modestly better than the 15% that we guided to in January. Engineered Materials sales increased 6% in the quarter to $54 million with 11.8% margins. We had very strong cash flow performance in the quarter, generating $45 million in free cash flow compared to negative $43 million in the first quarter of last year. During the quarter, we also received $15 million from the sale of a property in Long Beach, California that is excluded from free cash flow given required classification of an investing activity. Since 2017, we have received proceeds from real estate and other asset sales made possible by restructuring activities of approximately $47 million, which means that much of our restructuring has actually been self-funded. At Investor Day in February, I told you that we had very limited acquisition capacity today growing to about $750 million by the end of this year. The adjusted tax rate in the quarter was 22.2%. For the full year, we now expect an adjusted tax rate of 21% rather than the 21.5% prior guidance with the fourth quarter tax rate likely the lowest of the year. As Max explained, we are raising our adjusted earnings per share guidance by $0.65 to a range of $5.65 to $5.85, reflecting the strong first quarter performance and our expectation that end markets and execution will be ahead of where we forecast them earlier this year. For core sales, we now expect core growth of 4% to 6%, up two points from our prior guidance. Foreign exchange has also become more favorable over the last several weeks, and we now expect favorable foreign exchange translation of 2.5%, up from 1.5% in our prior guidance. Free cash flow guidance was increased to $300 million to $330 million, up $35 million from prior guidance, reflecting higher earnings. Corporate expense is now expected to be $77 million, up $12 million compared to the prior guidance, reflecting a number of changes, including some timing items, some legal fees and higher bonus accruals. Remember, last quarter, we discussed about $0.06 of earnings that we shifted from the end of last year into our first quarter given timing and logistics issues.

As we announced last night, first quarter adjusted earnings per share was $1.66, a 44% increase from the prior year. Balancing these factors, we are raising our adjusted earnings per share guidance by $0.65 to range of $5.65 to $5.85. Compared to the prior year, backlog increased 5% and orders increased 2%. As Max explained, we are raising our adjusted earnings per share guidance by $0.65 to a range of $5.65 to $5.85, reflecting the strong first quarter performance and our expectation that end markets and execution will be ahead of where we forecast them earlier this year.

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We are pleased with our third quarter performance highlighted by the number of records including record revenue of $904 million, revised record third quarter pre-tax income of $116.2 million, 22% better than a year ago and a very strong return on equity of 27%. We sold 1,964 homes during the quarter, a decline of 33% from the record sales reported during last year's third quarter. Our decline in sales is due to the fact that we are operating in 15% fewer communities than the year ago and we continue to limit sales in the majority of our communities in order to better manage deliveries and control costs. Our third quarter monthly sales pace was 3.7 homes per community other than last year, this is the highest monthly per community sales pace we've seen in over 10 years and reflects the underlying strength of demand. Year-to-date, we have sold 7,340 homes, 1% ahead of last year's record, despite as noted, community count being down 15% and continuing to limit sales in the majority of our communities. We ended the quarter with 176 active communities. Specifically, we expect to grow our community count next year by 15% or more and end 2022 with between 200 and 220 communities. We closed 2,045 homes during the quarter, a 4% decrease from last year. On average, it is taking us 45 days longer to get homes closed. We ended the quarter with an all-time record backlog of $2.5 billion, 40% better than last year. And units in backlog increased by 20% to a third quarter record of 5,407 homes with an average price and backlog of $471,000 which is 17% higher than a year ago. Gross margins improved by 160 basis points year-over-year to 24.5%. And our SG&A expense ratio improved by 90 basis points to 10.7%. Excluding the one-time charge for debt extinguishment, our pre-tax income percentage improved from 11.2% last year to nearly 14%. And as noted all of this resulted in a very strong return on equity of 27%. Our deliveries decreased 8% from last year in the southern region to 1,169 deliveries or 57% of the total. The northern region contributed 876 deliveries, an increase of 1% over last year. Our owned and controlled lot position in the southern region increased by 11% compared to last year and increased by 5% in the northern region compared to a year ago. 34% of our owned and controlled lots are in the northern region, while the balance roughly 66% is in the southern region. Companywide, we own approximately 22,700 lots, which equates to a roughly two and a half year supply. On top of that we control the option contracts and additional 20,300 lots. So in total, our owned and controlled lots are approximately 43,000 lots or about a five year supply. Our financial condition is strong with $1.5 billion of equity at September 30th and a book value of $53 per share. We ended the quarter with a cash balance of $221 million and zero borrowings under our $550 million unsecured revolving credit facility. This resulted in a net debt to net cap ratio of 24%. New contracts for the third quarter decreased to 1,964 compared to 2,949 for last year's third quarter. And in last year's third quarter our new contracts were a record and we're up 71% from the prior year. Our new contracts were down 32% in July down 41% in August and down 24% in September and our cancellation rate was 8% in the third quarter. As to our buyer profile about 50% of our third quarter sales were the first time buyers compared to 51% in the second quarter. In addition, 39% of our third quarter sales were inventory homes compared to 43% in the second quarter. Our community GAAP was 176 at the end of the quarter, compared to 207 at the end of last year's third quarter and the breakdown by region is 85 in the northern region and 91 in the southern region. During the quarter, we opened 26 new communities while closing 25 and during last year's third quarter we opened 12 new communities. We have opened 63 new communities in the first nine months of this year compared to 51 last year. We delivered 2,045 homes in the third quarter, delivering 37% of our backlog compared to 58% a year ago. Year-to-date, we delivered 6,322 homes, which is 16% more than a year ago. We now have 5,300 homes in the field, which is 20% more than the 4,000 we had this time last year. Revenue increased 7% in the third quarter reaching a third quarter record $904 million. Our average closing price for the quarter was $430,000, a 13% increase when compared to last year's third quarter average closing price at $380,000. And our backlog average sale price is an all-time record of $471,000 up from $404,000 a year ago and our backlog average sale price for our smart series is $374,000. Our third quarter gross margin was 24.5%, up 160 basis points year-over-year. And our third quarter s SG&A expenses were 10.7 of revenue improving 90 basis points compared to 11.6 a year ago, this reflects greater operating leverage and it was our lowest third quarter percentage in our company history. Interest expense decreased $1.3 million for the quarter compared to last year. Interest incurred for the quarter was $9.3 million compared to $10 million a year ago. And during the third quarter we issued $300 million of senior notes due 2030 and used the majority of the proceeds to redeem all of our $250 million of senior notes that were due in 2025. This resulted in the $9.1 million loss on early extinguishment of debt. Our pre-tax income was 13% and 14% excluding our debt charge versus 11% a year ago, and our return on equity was 27% versus 19% a year ago. During the quarter, we generated $132 million of EBITDA compared to $111 million last year's third quarter. And we used $34 million of cash flow from operations for the first nine months compared to generating $197 million a year ago, primarily due to our increased land purchases. We have $23 million of capitalized interest on our balance sheet this is about 1% of our total assets. And our effective tax rate was 22% in the third quarter compared to 23% in last year's third quarter. We currently estimate our annual effective rate this year to be around 22%. And our earnings per diluted share for the quarter increased to $3.03 per share from $2.51 per share last year. During the quarter we repurchase 243,000 of our outstanding common shares for $16 million, and we have $84 million available under our current repurchase authority. Our mortgage and title operations achieved pre-tax income of $9.9 million, compared with $19.2 million in 2020 third quarter. Revenue decreased 28% from last year to $20.8 million. The loan to value on our first mortgages was 82% compared to 84% in 2020 third quarter, 81% of the loans closed were conventional and 19% FHA or VA compared to 76% and 24% respectively 2020 third quarter. Our average mortgage amount increased to $349,000 compared to $314,000 last year. However, loans originated decreased to 1,554 loans down 5% from last year and the volume of loans sold decreased by 8%. Our borrower profile remains solid with an average down payment of almost 18% and an average credit score on mortgages originated by M/I Financial of 751 up from 747 last quarter. Our mortgage operation captured 85% of our business in the third quarter, the same as last year. At September 30, we had $142 million outstanding under the M/I warehousing agreement which expires in May of 2022. We also had $70 million outstanding under a separate $90 million repo facility which we recently extended through October 2020. Both facilities are typical 364 day mortgage warehouse lines that we extend annually. As far as the balance sheet we ended the third quarter with cash of $221 million and no borrowings under our unsecured revolving credit facility. Total homebuilding inventory at 9/30/21 was $2.4 billion, an increase of $0.5 billion from September 30 of last year. And our unsold land investment at 9/30/21 is $991 million compared to $762 million a year ago. At 9/30, we had $663 million of raw land and land under development and $328 million of finished unsold lots. We own 4,343 unsold finished lots with an average cost of $75,000 per lot and this average lot cost is about 16% of our $471,000 backlog average sale price. Our goal is to own a two to three years supply of land and we now own 23,000 lots, which is about a two and a half year supply. During the third quarter we spent $231 million on land purchases and $124 million own land development for a total of $355 million, which was up from $196 million in last year's third quarter. And at the end of the quarter, we had 62 completed inventory homes and 1,042 total inventory homes. And of the total inventory 658 are in the northern region and 384 in the southern region. Last year at 9/30, we had 266 completed inventory homes and 1,113 total inventory homes.

We closed 2,045 homes during the quarter, a 4% decrease from last year. Revenue increased 7% in the third quarter reaching a third quarter record $904 million. And our earnings per diluted share for the quarter increased to $3.03 per share from $2.51 per share last year.

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Overall, restaurant traffic has largely stabilized at about 5% below pre-pandemic levels led by the continued solid performance at quick service restaurants. Demand in U.S. retail channels also remained solid with overall category volumes in the quarter still up 15% to 20% from pre-pandemic levels. Specifically in the quarter, sales increased 13% to $984 million, with volume up 11% and price mix up 2%. Overall, our sales volume in the first quarter was about 95% of what it was during the first quarter of fiscal 2020 before the pandemic impacted demand. Gross profit in the quarter declined $63 million, as the benefit of higher sales was more than offset by higher manufacturing and transportation costs on a per pound basis. The decline in gross profit also includes the $6 million decrease in unrealized mark-to-market adjustments, which includes a $1 million gain in the current quarter compared with a $7 million gain in the prior year quarter. Moving on from cost of sales; our SG&A increased $13 million in the quarter. About $4 million this quarter represents non-recurring ERP related expenses. And third, it includes an additional $3 million of advertising and promotional support behind the launch of new branded items in our retail segment. Diluted earnings per share in the first quarter was $0.20, down from $0.61 in the prior year, while adjusted EBITDA including joint ventures was $123 million, down from $202 million. Moving to our segments, sales for our Global segment were up 12% in the quarter with volume up 10% and price mix up 2%. The 2% increase in price mix reflected the benefit of higher prices charged for freight, inflation driven price escalators and favorable customer mix. Global's product contribution margin, which is gross profit less advertising and promotional expenses declined 45% to $43 million. Moving to our Foodservice segment, sales increased 36% with volume up 35% and price mix up 1%. Overall non-commercial shipments were up sequentially to 75% to 80% to pre-pandemic levels from about 65% during the fourth quarter of fiscal 2021. Foodservices product contribution margin rose 12% to $96 million. Moving to our Retail segments; sales declined 14% with volume down 15% and price mix up 1%. Retails product contribution margin declined 59% to $15 million. Input and transportation cost inflation, higher manufacturing cost per pound, lower sales volumes and a $2 million increase in A&P expenses to support the launch of new products drove the decline. In the first quarter, we generated more than $160 million of cash from operations. That's down about $90 million versus the prior year quarter due primarily to lower earnings. We spent nearly $80 million in capital expenditures and paid $34 million in dividends. We also bought back nearly $26 million worth of stock or about double what we have typically repurchased in prior quarters. During the quarter, we amended our revolver to increase its capacity from $750 million to $1 billion and extended its maturity date to August 2026. At the end of the first quarter, our revolver was undrawn and we had nearly $790 million of cash on hand. Our total debt was about $2.75 billion and our net-debt-to-EBITDA including joint ventures ratio was 2.7 times. We continue to expect our sales growth in fiscal 2022 to be above our long-term target of low to mid-single digits. We expect price mix will be up sequentially versus the 2% that we delivered in Q1 as the execution of pricing actions in all of our segments remain on track. With respect to earnings, we expect net income and adjusted EBITDA including joint ventures will continue to be pressured through fiscal 2022. For the full year, we expect our gross margin may be at least 5 points to 8 points below our normalized annual margin rate of 25% to 26%. First, we've reduced our capital expenditure estimate to $450 million from our previous estimate of $650 million to $700 million. And second, we're reducing our estimated full year effective tax rate to approximately 22%, down from our previous estimate of between 23% and 24%. Our estimates for total interest expense of around $115 million and total depreciation and amortization expense of approximately $190 million remain unchanged.

Specifically in the quarter, sales increased 13% to $984 million, with volume up 11% and price mix up 2%. Diluted earnings per share in the first quarter was $0.20, down from $0.61 in the prior year, while adjusted EBITDA including joint ventures was $123 million, down from $202 million. We continue to expect our sales growth in fiscal 2022 to be above our long-term target of low to mid-single digits. With respect to earnings, we expect net income and adjusted EBITDA including joint ventures will continue to be pressured through fiscal 2022.

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We are currently running at mid-$5 million a year to operate with corporate expenses down 36% year-on-year. On the capital front, we believe we currently have sufficient funds to operate and support the expected needs of our companies over the next 12 months. We selected five companies that are among the top 10 in expected exit values. To be clear, these are not necessarily the top 5 positions in exit value, but they are among the top 10. You heard about meQuilibrium on our webinar, so I won't go into too much detail, but meQuilibrium stock falls in our revenue bucket of $5 million to $10 million with SaaS talent development solution using predictive analytics to support resilient, engaged and agile workforce. Company also closed a $4 million Series C extension funding. Prognos falls in our $15 million to $20 million revenue bucket. Zipnosis falls in the $5 million to $10 million revenue bucket. Clutch falls in the $10 million to $15 million revenue bucket. In Q2, [Indecipherable] COVID-19 plan, they won two new strategic accounts and they have achieved SOC 2 compliance and completed a new release of the platform. Flashtalking is the above $20 million revenue bucket. They successfully rolled out the first of 14 countries for Procter & Gamble, a large new customer. So we hope this helps frame our thinking on some of the companies, what we plan to do is, next quarter we will review the other five companies which sit within the top 10, and estimated exit values to provide you some greater insight into how we're thinking about the companies and what we like about these opportunities as well as how they're performing in the current quarter or, in this case, we'll be choosing Q3 highlights. For the quarter ended June 30th, 2020, Safeguard's net loss was $9.9 million or $0.48 per share compared with a net income of $36.1 million or $1.75 per share for the same period of 2019. Safeguard's cash, cash equivalents and restricted cash at June 30th totaled $13.6 million, and we have no debt obligations. Our funding to existing ownership interest continued this quarter, including $3.8 million to Syapse, which resulted in $4.4 million during the year-to-date period with the Syapse [Phonetic] after considering bridge loans during the first quarter. We made two other small deployments during the quarter, and we continue to expect that deployments for the full year of 2020 will be between $8 million to $12 million. The quarter's results also included impairments of $5.7 million related to the lowering of our estimate of fair value for our ownership interest in Sonobi, T-Rex, Beta and in other ownership interest. Our general and administrative expenses were $2 million for the three months ended June 30th, 2020 as compared to $2.6 million in the second quarter of 2019. Corporate expenses for the second quarter, which represent general and administrative expenses, excluding depreciation, stock-based compensation, severance and retirement costs and other non-recurring or other items, were $1.2 million as compared to $1.9 million in 2019. So approximately $0.1 million of the decline is attributable to this catch-up of the first quarter's portion. As a result, we expect that our corporate expenses for the full year of 2020 will be at the low-end or below our previously disclosed range of $5.6 million to $6.0 million as compared to $7.1 million reported for the full year of 2019. With respect to ownership interests at June 30th, 2020, we have an aggregate carrying value of $61.4 million. Our share of the losses of our equity method ownership interest for the three months ended June 30th, 2020 was $3.1 million as compared to $8.3 million for the comparable period in 2019.

For the quarter ended June 30th, 2020, Safeguard's net loss was $9.9 million or $0.48 per share compared with a net income of $36.1 million or $1.75 per share for the same period of 2019.

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Despite the ongoing headwinds caused by COVID-19, the diversified nature of our business was evident during the quarter as we reported solid second quarter fiscal 2021 adjusted earnings of $1 per diluted share. Due to improving business conditions and our streamlined cost structure, we generated exceptionally strong cash flow during the quarter, enabling an incremental $86 million in net debt reduction to achieve debt leverage of just under 2.1 times. For example, we trialed NexSys iON at a Carpet Mill that runs their fork trucks nearly 24/7, where there is very little time to recharge the batteries. It is worth noting that we have already seen $50 million of 5G-related revenue lift during this year, which we believe is only the tip of the iceberg for this long-term growth driver. As a result, we are projecting steady 6% plus CAGAR of Energy Systems sales over the next five years. In the quarter for example, while Americas flooded lead acid battery sales were down 25% year-on-year; Americas Motive Power TPPL NexSys sales were up 25% in the same period. We are pleased to say that the next generation initiatives growing transportation market share in the Specialty segment has been a resounding success over the past 12 months. While still impacted by shutdowns from COVID, we grew our Transportation business by 64% this quarter with the integration of NorthStar and are currently limited only by TPPL capacity that will increase dramatically when the high speed line is fully operational. Our second quarter net sales decreased 7% over the prior year to $708 million, due to an 11% decrease from volume, a 1% decrease in pricing, net of 1% increase from currency and a 4% increase from acquisitions. On a line of business basis, our second quarter net sales in Motive Power were down 21% to $264 million and Energy System net sales were down 1% at $341 million, while Specialty increased 24% in the second quarter to $104 million. Motive Power suffered a 21% decline in volume, due to the pandemic and a 1% decline in price, net of a 1% increase in FX. Energy Systems had a 4% increase from the NorthStar acquisition and a 1% improvement from currency offset by decreases of 1% and 5% in pricing and volume respectively. Specialty had 17% from the NorthStar acquisition less 9% in volume improvements and 1% increase from FX, net of a 3% decline in price and mix. On a geographical basis, net sales for the Americas were down 8% year-over-year to $481 million with an 11% volume drop and a 1% price decline, net of a 4% increase from acquisitions, offset by 1% decrease from currency. EMEA had a 6% -- was down 6% to $172 million on 13% volume and 2% price declines with 5% improvements in currency and 4% from acquisitions, while Asia was up 3% to $56 million, due primarily to currency. On a line of business basis, specialty increased 17% with NorthStar starting to contribute its capacity for transportation sales, while Motive Power was flat and Energy Systems was down 4% on soft broadband revenues. On a geographic basis, Americas were down 2%, EMEA was up 8%, while Asia was up 1%. On a year-over-year basis, adjusted consolidated operating earnings in the second quarter decreased approximately $9 million to $66 million with the operating margin down 50 basis points. However, on a sequential basis, our second quarter operating earnings improved 70 basis points to 9.35%. Operating expenses when excluding highlighted items were at 15.7% of sales for the second quarter, compared to 16.1% in the prior year as we reduced our spending by $11 million year-over-year and nearly $3 million sequentially. Excluded from operating expenses recorded on a GAAP basis in Q2, our pre-tax charges of $11 million, primarily related to $6 million in Alpha and NorthStar amortization and $3 million in restructuring charges. Excluding those charges, our Motive Power business segment achieved an operating earnings percentage of 9.2%, which was 120 basis points lower than the 10.4% in the second quarter of last year, due to the 21% lower volume mentioned earlier in driving a $11 million drop in operating earnings. On a sequential basis Motive Power's second quarter OE also dropped to 120 basis points from the 10.4% margin posted in the first quarter, due primarily to the reduction of $2.3 million in recovery on business interruption proceeds from the $3.8 million in Q1, down to $1.5 million. We received $5 million in April, which was reflected in last fiscal year's fourth quarter results. We received another $4 million in May, which was recorded in the first quarter of fiscal '21 and we received over $1 million in July, which are reflected in Q2's results. We expect to collect another $2 million on the matter, bringing the total recovered to nearly $13 million. Overall, the claim including property loss and cleanup along with the business recovery, totaled approximately $45 million. Energy Systems operating earnings percentage of 8.8% was up from last year's 8.6% and up from last quarter's 8%. OE dollars decreased $0.5 million from the prior year primarily from lower operating expenses and increased $2 million from the prior quarter on lower commodity costs and operating expenses. Specialty operating earnings percentage of 11.4% was down from last year's 12.3%, but up from last quarter's 6.5%. OE dollars decreased nearly $2 million from the prior year on higher volume -- excuse me, they increased nearly $2 million from the prior year on higher volume and increased $6 million from the prior quarter on higher volume and lower manufacturing variances. As previously reflected on Slide 11, our second quarter adjusted consolidated operating earnings of $66 million was a decrease in $9 million or 12% from the prior year. Our adjusted consolidated net earnings of $43 million was nearly $10 million lower than the prior year. The decline in adjusted net earnings reflect the decline in operating earnings, as well as a $4 million foreign currency loss, primarily on unfavorable exchange rates for intercompany balances. Our adjusted effective income tax rate of 17% for the second quarter was lower than the prior year's rate of 18% and lower than the prior quarter's rate of 21%. Fiscal 2019s full-year tax rate was 17%, while our fiscal 2020 tax rate was just below 18%, which is consistent with our expectations for fiscal 2021. EPS decreased 19% to $1 on lower net earnings. We expect our third fiscal quarter of 2021 to remain near the $43.1 million of weighted average shares outstanding in the second quarter. As a reminder, we still have nearly $50 million of share buybacks authorized, but have no immediate plans to execute any repurchases with perhaps the exception of the modest annual repurchase made to offset employee stock dilution. We have included our year-to-date results on Slides 13 and 14 for your information, but I do not intend to cover these in detail. We now have nearly $414 million of cash on hand and our credit agreement leverage ratio is now 2.1 times, which allows over $600 million in additional borrowing capacity. We expect our leverage to remain below 2.5 times in fiscal 2021. We generated over $87 million in free cash flow in the second fiscal quarter of 2021. Our first half free cash flow generation was very strong at $177 million. Capital expenditures of $40 million were at our expectations for the first half of the fiscal year. Our capex expectation for fiscal '21 of approximately $65 million to $70 million has expanded slightly as the economic outlook has improved. It will cost in excess of $80 million with 75% being cash charges for severance, decommissioning, cleaning and closing open contracts with vendors, but it should payback in under four years and we can handle all expected demand from our other existing factories. We anticipate our gross profit rate to remain near 25% in Q3 of fiscal '21, as the lower utilization in some of our factories over the July to September months will not hit our P&L until this third fiscal period, which we are now in. As Dave mentioned, we still feel the core of our expectations remain intact beyond the nine to 12 month delay due to the pandemic in reaching our previously provided target for an additional $300 million in incremental adjusted net earnings. With some of the uncertainty from our elections in the pandemic behind us, we currently feel we have enough visibility to provide a guidance range of $1.17 to $1.21 in our third fiscal quarter.

With some of the uncertainty from our elections in the pandemic behind us, we currently feel we have enough visibility to provide a guidance range of $1.17 to $1.21 in our third fiscal quarter.

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And as part of those efforts Piedmont and its related foundation has donated over $40,000 to local charities across all our seven markets including Seniors First in Orlando, NYU Langone hospital in New York City; Meals on Wheels in Northern Virginia, and the Emory Hospital COVID-19 impact fund here in Atlanta, among others. We feel fortunate to have limited exposure to some of the industry's most disrupted about 1% of our forecasted 2020 revenues are related to retail tenants and likewise, about 2% of our 2020 budgeted revenues are associated with the co-working sector. So far Piedmont has had 96% of it's tenants submit full rent payment, with many of the remaining seeking some form of rent deferral for the month of April. Piedmont also has a favorable liquidity position with access to our largely unused $500 million line of credit. Further, bolstering our liquidity, we have entered into a binding contract to sell our only asset in Philadelphia, 1901 Market Street for $360 million. We intend to use the proceeds from the sale to repay the properties $160 million mortgage, as well as eliminate the balance on our line of credit, which will result in only one small mortgage remaining in our portfolio, where the other 56 properties being unencumbered. During the quarter we completed approximately 417,000 square feet of leasing, which as well as first across all our operating markets and included approximately 120,000 square feet of new tenant leasing. The first quarter execute leases for recently occupied space reflected a 5% roll up in cash rents and a 15.4% increase in accrual rents. The larger leases for the quarter include the following: In Boston, Advanced Micro Devices renewed to 2028, approximately 107,000 square feet at 90 Central Street. In Orlando the law firm at Greenberg Traurig renewed approximately 37,000 square feet to the year 2031 at CNL Center I and at 200 South Orange Avenue; Jones Lang LaSalle signed a renewal expansion through 2026 totaling approximately 20,000 square feet. Finally in Washington, the Association for Unmanned Vehicle Systems signed a new lease through the end of 2030 for approximately 15,000 square feet at 3100 Clarendon Boulevard. As of quarter end, the portfolio was approximately 90% leased. The leased percentage at the end of the quarter includes the transfer into service of our previously out of service asset, the recently redeveloped now 41% lease to [Indecipherable] Tower in Chicago. Regarding upcoming lease expirations we have low lease expiration over the next 18 months with the only sizable lease being the City of New York at 60 Broad Street, where we remain in discussions for a long-term renewal of substantially all the cities existing 313,000 square foot lease that expired this month. Turning to transactional activity, as we previously announced during the first quarter, we completed the depth purchase in Dallas, Texas, of the Galleria Office Towers, comprising 1.4 million square feet and an adjacent two acre development parcel for a total of $396 million or approximately $273 per square foot, which represents a significant discount to replacement cost. The Galleria Office Towers required to reverse exchange and we match for the disposition of 1901 Market Street in Philadelphia that is expected to close in the middle of the summer. For the first quarter of 2020, we reported $0.47 per diluted share of core FFO, that's a $0.02 increase, compared to the first quarter of 2019. Even with the loss of earnings contribution due to dispositions up to almost fully leased assets during 2019 that's the One Independence Square building in Washington, DC and our 500 West Monroe property in Chicago, we were more than able to offset these sales with newly acquired Sun Belt properties in Atlanta and Dallas, as well as with new lease commitments and with the continued roll-up of rents across the portfolio. AFFO was approximately $19 million for the first quarter, which is lower than typical and impacted by one-time payment of lease commissions on a 520,000 square foot 20-year lease to the State of New York at 60 Broad Street in New York City. With several leases commencing in Atlanta and in Houston late last year, same-store NOI was approximately 2% on a cash basis and 4% on an accrual basis for the first quarter of 2020. Turning to the balance sheet, our average net debt core EBITDA ratio for the first quarter of 2020 was 5.7 times and our debt to gross asset ratio was approximately 38.7% at the end of the quarter. During the quarter, we entered into a new $300 million unsecured term loan and used the proceeds to pay down our $500 million line of credit, leaving approximately $350 million of availability. As Brent mentioned earlier, we plan to pay off the remaining balance on the line, as well as our $160 million mortgage [Technical Issues] the proceeds from the sale of 1901 Market Street, which is expected to close this summer. We are withdrawing our guidance for 2018. While we continue to execute lease renewals, new tenant leasing activity during the second quarter has been slow and we think this trend will continue throughout the quarter, likely pushing all new tenant leasing goals out at least a quarter which will, in all likelihood modestly lower annual operating revenues for 2020 by $1 million to $2 million and lower our originally anticipated year-end leased percentage. We expect most of our transient parking income for the second quarter will not occur, that would equate to a reduction of approximately $1 million of net operating income. And with respect to retail tenant income, which is about 1% of our total 2020 revenues, retail NOI is estimated to decline by approximately $1.5 million. The sale of 1901 Market Street in Philadelphia is expected to close during the summer and while no other deals are under way any other acquisition or disposition during the year will be pricing, property and market dependent. Now as Brent noted for the month of April to-date, we've received 96% of our regular monthly rents, with all of our 20 largest tenants representing over a third of our cash receipts paying their April rents. Of the unpaid 4$amount we do have the number of tenants requesting their leases the restructure. To date, we've agreed to about $1 million of rent deferrals per month for three months for 27 of our tenants, representing approximately 400,000 square feet of leases. Regarding our seven tenants in the co-working sector all the one are under traditional lease structures with standard credit requirements and combined total about 2% of our originally forecasted revenues.

For the first quarter of 2020, we reported $0.47 per diluted share of core FFO, that's a $0.02 increase, compared to the first quarter of 2019. During the quarter, we entered into a new $300 million unsecured term loan and used the proceeds to pay down our $500 million line of credit, leaving approximately $350 million of availability. We are withdrawing our guidance for 2018.

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In the third quarter, Everest produced operating earnings of $3.39 per share, despite experiencing $280 million of cat losses. Our underlying performance continue to be excellent, as our attritional underwriting gain of $250 million nearly offset the cat loss. On a year-to-date basis, our underwriting profit was $365 million and $700 million, excluding cats. When combined with another solid quarter of investment income the year-to-date operating income is at $742 million. By year-end, we will be closing in on $3 billion of annual gross premium, and as you have seen, the profit picture there remains solid. After 8 weeks on the job, I've had the opportunity to start getting deeper into our businesses and to meet our employees, major customers and our key distribution partners in the US and around the world. We are a top 10 global reinsurer with a 47-year history. We also have an entrepreneurial and growing primary specialty insurance business with a 'client first' culture of providing solutions with more than 150 products and services. For the third quarter of 2019, Everest reported net income of $104 million. This compares to net income of $198 million for the third quarter of 2018. On a year-to-date basis, Everest had net income of $792 million compared to net income of $474 million for the first nine months of 2018. The 2019 result represents an annualized net income return on equity of 13%. In the third quarter of 2019, the group incurred $280 million of net pre-tax catastrophe losses compared to $230 million in the third quarter of 2018, the catastrophe losses related to Hurricane Dorian at $160 million and Typhoon Faxai at $120 million. On a year-to-date basis, the results reflected net pre-tax estimated catastrophe losses of $335 million in 2019 compared to $795 million in 2018. Average reported $52 million of favorable prior year reserve development in the quarter. This primarily related to a one-time commutation of a multi-year contract that reduced prior year carried loss reserves by $44 million, which was offset by $44 million of commission paid. Another $4 million of the favorable development was identified through reserve studies completed in the third quarter of 2019. Excluding the catastrophe events and favorable prior year development, the underlying book continues to perform well with an overall current year attritional combined ratio of 87.7% through the first nine months compared to 87% for the full year of 2018. Pre-tax investment income was $181 million for the quarter and $501 million year-to-date on our $20 billion investment portfolio. Investment income was up $60 million or 14% from one year ago. This result is primarily driven by the growth in invested assets coming from our record cash flow, which was $1.5 billion during the first nine months. Before moving into taxes, I'd like to point out that we included for the first time on Page 15 in the financial supplement a split of our net investment income between the Insurance segment and total Reinsurance. This shows an indication of the contribution provided by each segment to pre-tax operating income and reflects $361 million allocated to reinsurance and $140 million of net investment income allocated to the insurance segment. The year-to-date effective tax rate of 9% is an annualized speculation that includes planned catastrophe losses for the remainder of the year. Higher-than-expected catastrophe losses would cause the tax rate to trend lower than the current 9%. Shareholders' equity for the Group ended the quarter at $9 billion, up over $1 billion or 14% compared to year-end 2018. The increase in shareholders' equity is primarily attributable to $792 million of net income and the recovery in the fair value of the investment portfolio. At the same time, the supply of reinsurance capital is relatively flat or down considering trapped capital, given that over 50% of the retro capacity is supported by unrated alternative capital. Year-to-date reinsurance premium is $4.7 billion, up 3% from last year. Year-to-date reinsurance underwriting profits are $310 million, impacted this quarter by the Dorian and Faxai losses mentioned by Craig. Year-to-date reinsurance attritional losses are 57.5% compared to 57% for the full year 2018, due predominantly to shift in mix, increased casualty business as well as overall more proportional business to capture the primary rate movements. As mentioned last quarter, our global fac book is well over $400 million gross written premium in force, and we see continued growth opportunities there, given favorable market conditions. Currently, our annualized mortgage book is about $200 million of gross written premium, including many multi-year deals with future premium that has not yet been recognized. Our gross written premium growth of 29% quarter-over-quarter has once again balanced across all major business segments. Our growth accelerated this quarter beyond our year-to-date trend line of plus 21%, in part reflecting the changing nature of the market, which is impacting nearly all major product lines. This is particularly the case for business originated within the excess and surplus lines market, which accounted for over 1/3 of our premium written in the quarter. The segments I just referenced to make up approximately 75% of our business growth in the quarter and represent the balanced portfolio we seek to build. The combined ratio for the quarter is 96.4%, 3.2 points better than the third quarter of 2018, and year-to-date is 96% or 2.1 points better year-over-year. In the quarter, we experienced pure rate increases, which excludes the impact of exposure, of 7.6%, excluding workers' compensation, and a positive 6.7% year-to-date. Year-to-date, international is showing a 7% improvement. Most importantly, this growth in top line, coupled with improved business metrics, has resulted in Everest Insurance continuing to post an underwriting profit, over two times greater for the year-to-date period and now standing 10 of the past 11 quarters. As Craig mentioned in the new investment disclosure, the pre-tax net investment income per insurance is $140 million year-to-date, plus our pre-tax operating income year-to-date now stands at $195 million. The over 90,000 new business submissions we have received year-to-date in our direct broker operations speak to our relevance and positioning in this market.

In the third quarter, Everest produced operating earnings of $3.39 per share, despite experiencing $280 million of cat losses. Shareholders' equity for the Group ended the quarter at $9 billion, up over $1 billion or 14% compared to year-end 2018.

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