North America water treatment grew 14% organically, driven by continued consumer demand for products promoting a safe home.
We believe industry shipments of U.S. residential water heaters, including tankless surge to a record, exceeding 10 million units or 8% growth over the prior year.
Due to construction project delays and postponements in North America as well as pandemic-related weakness in restaurant and hospitality, new construction and replacement demand, we saw commercial water heater and boiler industry volumes declined by 8% to 10%.
In North America, aside from the voluntary closure of our Mexican facility for several weeks in the second quarter, we remained operational throughout 2020 with no significant disruptions within our plants and our supply chain.
North America water treatment grew 14% organically, driven by continued consumer demand for products promoting a safe home.
We believe industry shipments of U.S. residential water heaters, including tankless, surge to a record, exceeding 10 million units or 8% growth over the prior year.
Due to construction project delays and postponements in North America as well as pandemic-related weakness in restaurant and hospitality, new construction and replacement demand, we saw commercial water heater and boiler industry volumes declined by 8% to 10%.
To align our business with current global market conditions, we reduced headcount and incurred other restructuring costs, totaling approximately $6 million after tax in 2020.
We published our second Corporate Responsibility and Sustainability Report in January and great proud of our accomplishments since our first report, particularly in employee engagement, safety, research reduction in our facilities and a product portfolio that both some of the most efficient products in their respective categories.
We strive to reduce GHG emissions by 10% by 2025.
Full year sales of $2.9 billion declined 3% compared with 2019, largely due to significant weakness in the China business in the first half of 2020.
As a result of lower sales, adjusted earnings declined 3% to $351 million or $2.16 per share compared with $370 million or $2.22 per share in 2019.
Sales in our North America segment of $2.1 billion increased 2% compared with 2019.
Rest of the world segment sales of $800 million declined 14% from 2019.
Currency translation of China sales favorably impacted sales by approximately $9 million.
Indian sales were also negatively impacted by the pandemic-related economic disruption and declined to $31 million compared with $39 million in 2019.
On Slide 7, North America segment adjusted earnings of $506 million increased 4% compared to 2019.
The impact to earnings from lower volumes of boilers and commercial water heaters and the mix skew to electric water heaters partially offset these factors.
Adjusted segment earnings exclude $2.7 million in pre-tax severance costs.
As a result, adjusted operating margin of 23% is slightly higher than in 2019.
Rest of the world adjusted segment earnings of $5 million declined significantly compared with 2019.
As a result of these factors, adjusted segment operating margin of 0.6% decline from 4.3% in 2019.
Our corporate expenses of $52 million were higher than in 2019, primarily driven by lower interest income.
Record fourth quarter sales of $835 million increased 11% compared with the fourth quarter of 2019.
As a result of higher sales and cost reduction initiatives earlier this year, fourth quarter earnings of $120 million or $0.74 per share increased significantly compared with 2019.
Record fourth quarter sales in North America segment of $561 million increased 7% compared with the same period in 2019, primarily driven by higher residential water heater volumes.
Rest of the world fourth quarter segment sales of $279 million improved 19% compared with the fourth quarter of 2019.
Currency translation of China sales favorably impacted sales by approximately $14 million.
Constant currency China sales improved 15% driven by mid single-digit growth in end market demand led by water treatment, replacement water treatment filters and gas tankless water heaters and a favorable mix between product categories compared with the fourth quarter of 2019.
On Slide 10, record fourth quarter North America segment earnings of $138 million increased 7% from the same period in 2019.
As a result, fourth quarter segment margin of 24.6% was slightly higher than 24.5% in 2019.
Rest of the World segment earnings of $31 million improved significantly from $1.5 million in the same quarter in 2019.
As a result of these factors, fourth quarter segment margin improved to 11.2% compared with 0.6% in 2019.
Our corporate expenses of $16 million in the fourth quarter were higher than the same period of 2019, primarily due to an increase in long-term incentives and lower interest income in the 2020 fourth quarter.
Cash provided by operations of $562 million during 2020 was higher than 2019.
Our cash balances totaled $690 million at the end of 2020 and our net cash position was $576 million.
At the end of 2020, our leverage ratio was 6% as measured by total debt to total capital.
We are in the process of refinancing our $500 million revolving credit facility, which expires at the end of the year.
We expect to repurchase $400 million worth of share in 2021 through a combination of 10b5-1 program and open market purchases.
Recently, our Board increased the authorized shares on our share repurchase authority by 7 million shares.
The midpoint of our range represents an increase of 13% compared with our 2020 results.
We expect cash flow from operations in 2021 to be between $450 million and $475 million compared with $560 million in 2020, primarily due to higher earnings offset by higher investments in working capital than in prior year.
In 2021, capital spending plans are between $85 million and $90 million and our depreciation and amortization expense is expected to be approximately $80 million.
Our corporate and other expenses are expected to be approximately $51 million, slightly lower than in 2020.
Our effective tax rate is assumed to be between 22.5% and 23% in 2021.
Average outstanding diluted shares of 160 million assumes $400 million worth of shares are repurchased in 2021.
We project U.S. residential water heater industry volumes will be down 2% or 200,000 units in 2021.
Steel has increased nearly 50% since we announced our February 1 water heater price increase of 5% to 9%.
We announced a second price increase last week on water heaters effective April 1st, also between 5% to 9% depending on the type of water heater.
We expect commercial industry water heater volumes will further decline approximately 4% as pandemic impacted business delay, order for new construction and discretionary replacement installations.
Those accomplishments include closing of 1,000 stores in Tier 1 and 2 cities, while efficiently expanding in Tier 4 through 6 cities, implementing programs to save $30 million in SG&A, which will carry over into 2021.
We expect year-over-year increases in local currency sales between 14% and 15%.
We assume China currency rates remain at current levels, adding approximately $45 million and $3 million to sales and profits over the prior year respectively.
First, industry growth of 3% to 4%.
The CAGR for commercial condensing boilers, which is over 50% of the boiler revenue, was 5% to 6% prior to 2020.
We believe replacement demand is still 85%.
In 2020, condensing boilers were 39% of the commercial boiler industry that represents our addressable market, which provides continued opportunity for our leading market share commercial condensing boilers.
New product launches including improvements to our flagship CREST commercial condensing boiler with a market differentiating oxygen sensor which continuing measures and optimizes boiler performance and the introduction of be 1 million BTU light duty commercial night FTXL boiler.
We project 13% to 14% sales growth in our North America water treatment products.
We believe the mega trends of health and safe drinking water as well as a reduction of single use plastic bottles will continue to drive consumer demand for our point of use and our point of entry water treatment systems.
We believe margins in this business could grow by 100 to 200 basis points, higher than the nearly 10% margin achieved in 2020.
We project 2021 full year sales to increase over 20% compared with 2020 and to incur a small loss of $1 million to $2 million.
We project revenue will increase by approximately 10% in 2021 as strong North America water treatment and China sales enhanced by growth in boiler sales more than offset expected weaker North America water heater volumes.
Our 10% growth rate projection includes approximately $45 million of benefit from China currency translation.
We expect North America segment margins to be between 23% and 23.5% and Rest of World segment margins to be between 7% and 8%.
We estimate replacement demand represents approximately 80% to 85% of U.S. water heater and boiler volumes.

Summary:
In North America, aside from the voluntary closure of our Mexican facility for several weeks in the second quarter, we remained operational throughout 2020 with no significant disruptions within our plants and our supply chain.
We published our second Corporate Responsibility and Sustainability Report in January and great proud of our accomplishments since our first report, particularly in employee engagement, safety, research reduction in our facilities and a product portfolio that both some of the most efficient products in their respective categories.
The impact to earnings from lower volumes of boilers and commercial water heaters and the mix skew to electric water heaters partially offset these factors.
As a result of higher sales and cost reduction initiatives earlier this year, fourth quarter earnings of $120 million or $0.74 per share increased significantly compared with 2019.
We believe the mega trends of health and safe drinking water as well as a reduction of single use plastic bottles will continue to drive consumer demand for our point of use and our point of entry water treatment systems.